KORE Mining Ltd. (KORE) Earnings Call Transcript & Summary

Ladies and gentlemen, hello, and welcome. Next, we'll hear from Mr. Scott Trebilcock and KORE Mining Ltd.. Welcome, Scott.

Thank you very much, and thank you to everybody out there for taking some time to hear more about the KORE Mining value proposition. KORE Mining is a Canadian listed within OTCQB U.S. listing Canadian gold developer and explorer. We have a portfolio of assets in the United States and Canada that we've been -- capitalized by our strategic investor, Eric Sprott, to advance and create value for shareholders. I will be making some forward-looking statements as I go through this presentation. I encourage any investor that is interested by this presentation to visit our website, read our materials and our disclosure and read our AIF and other materials on SEDAR or EDGAR. So first off, KORE is primarily exposed to gold. Our assets are all pure gold. I won't -- I'm not an expert or a pundit in the gold market, but as a large shareholder myself, in KORE Mining, I wanted to get exposure to a portfolio of gold assets that can appreciate with good leverage to the gold price. Typically, you'll see equities, gold equities compared to the gold price outperform. Producers outperforming a little bit and developers and explorers outperforming a lot as you go through a gold cycle. So getting exposure to that leverage was my -- I'm an investor in KORE. And I think KORE, as opposed to the array of other Canadian gold equities, is one of the better stories out there. So KORE has a portfolio of high-quality gold assets. So you have natural diversification inside of KORE. We've got 2 projects with economic assessments that we are advancing into the permitting process. The total value from those 2 economic assessments are about CAD 1 billion at a USD 1,600 gold price, and that's compared to a current about $140 million market cap for KORE Mining. So it's that value differential. The difference between $1 billion in NPV when those projects -- or a construction decision is made to build those mines and the value KORE today that we're trying to unlock by advancing these projects. We also have a great exploration project up in British Columbia that we think is going to emerge as a strong second asset behind a Osisko Development, which is an $820 million market cap company developing a mine right next to our land package. So I think we've got some great leverage to exploration as well inside the company. We've raised 3 rounds of financing from our strategic investor, Mr. Eric Sprott, who owns 26% of the company. We are a very young company. So we've not yet done any distributed financings. We don't have any widely distributed warrants outstanding in the company. There's no 4-month old paper from a deal we did in the spring. We've kept the cap structure very clean with management only 36%, and again, Eric Sprott at 26%. And we've got a significant amount of cash in the bank that was $10 million as of August 1, to advance our development and exploration activities to generate news flow, which for a small-cap company like KORE creates value catalysts, because our shareholders are largely small institutions, high net worth family offices, retail, broker investors in Canada and the United States because we have a reasonably small liquidity compared to that required for a large institutional investment. So the company has only been listed for just over 2 years. In that time, we've hired a management team, obviously, including myself. We've done a lot of work to create great businesses around each of our assets. And I think it's that positioning that's going to set up KORE for an incredible 2021 with some gold price performance. KORE is backed by 4.9 million ounces of gold in the ground. That's 1 million ounces at our FT gold project in British Columbia. That's the one, as I said, that's adjacent to that large development play going with the Cisco Development Corporation, and we can ride the coat tails of this emerging district in British Columbia that create a lot of value. The 2 projects with the PEAs that are heading towards permitting, are the Imperial and Long Valley projects in California. Those 2 projects collectively have about 4 million ounces of gold subject to those preliminary economic assessments that I mentioned earlier. Those economic assessments show a value of almost CAD 1 billion at $1,600 gold. KORE owns 100% of both of these assets. They are simple projects. They are near infrastructure. They have low capital intensity. They have strong economics. They're second quartile cash cost, and they both have great exploration upside. So these are projects in the U.S. deserts that should go into production, and therefore, the Board has taken the decision to immediately move the Imperial project into permitting, and we have built out a great team of U.S.-based professionals in Imperial County, California, to lead us through the process, working with the federal government, the Bureau of Land Management, who is our primary regulator for the project. So we're heading towards building a mine at Imperial. In parallel with that, we're moving the Long Valley project. We're permitting exploration to grow that project at the same time as we explore up in British Columbia. So we've got lots of expiration coming up in the company to generate news flow and excitement to keep retail investors interested in buying KORE stock. Cap structure, I mentioned, has been kept very simple. I think that's been a strategic advantage to KORE because it keeps the share trading very tight in the company. Management still controls 38% of the shares outstanding, again, Eric at 26%. The public float, I think is about 38 million shares, and we have a reasonable amount of liquidity on the on the QB in the United States or up in the TSXV in Canada that gives opportunities for retail investors to buy reasonable positions with some liquidity in the company. For those that have access to research platforms, we have institutional research from Cormark and PI with a $2.40 and a $2.20 target on the shares currently trading in the $1.30 range. And then we're covered by several other of the Canadian brokers. We expect more coverage to emerge on the company as we mature our story in the capital markets in 2021. From a valuation perspective, KORE is very cheap compared to our U.S. developer peers. In this case, I picked a peer group of Canadian listed companies that have U.S. development projects in Nevada, Idaho and as KORE does in California. These are all the southwest deserts. All the projects in this list are on federal land, mostly subject to U.S. for service or Bureau of Land Management permitting. And in this case, we have Liberty Gold Standard, Integra, Corvus and Midas. KORE is somewhat by far the cheapest valuation for all of those companies, and that does not include any value for our great British Columbia exploration play. So the key question, I think, for an incoming shareholder, of course, how does management work to unlock that value? And I think there's 2 pathways. We need to continue to advance and show we can work and move forward with permitting our assets in California. We need to generate news flow on KORE to increase the knowledge of the company and the market because all of those other companies are 3 to 10 years old, and I have that much extra time in the market to market their story. I think we also need to open up KORE to the institutional investor market, of which are invested in all of those peer companies. So a lot of work to do to unlock some of this latent value in KORE in 2021. Management behind the company, the exec Chairman is also the second largest shareholder, Jim Heinz. He founded the company in 2017, buying the U.S. assets that are currently in the company privately and then going public and acquiring the British Columbia assets in late 2018. I came in buying 3% of the company on market and became CEO, I think, in July of 2019, hired out a management team that includes Mark Leduc, our Chief Operating Officer. He's a Denver based heap leach developer, heap leaching is the simple technology we're using to extract gold in the company. Mark has got a long track record in the sector of developing heap leach projects, including the last project permitted in California, the Castle Mountain project, which just went into commercial production. It's owned by Equinox, Ross Beaty's Canadian listed and U.S.-listed gold company. And I think that's a great case study for how you can get a mine permitted and developed in California and create shareholder value by having a mid-tier mining company buyout the junior, which is one of the ways a KORE shareholder may exit the company will be a takeout as we go into and through this gold cycle. Independent directors are Adrian Rothwell, Harry Pokrandt, Don MacDonald and Brendan Cahill. Three 3 of them are CEOs of other junior mining companies and Harry Pokrandt is a prominent ex banker, all based generally in the Vancouver area, where the company is headquartered. Company had a very strong 2021, delivering to our shareholders. Most of what we promised. Again, we hired both a corporate exploration team and a U.S. development team. We restarted permitting of the Imperial project, which is one of the projects subject to the PEA, which we also completed this year. We completed field work, including geophysics to show upside to that project. So I think we've created a real exciting blue sky potential around that Imperial project to backstop and grow that preliminary economic assessment value and keep excitement as we go through the permitting process. Over at Long Valley, we gained a lot of field work with geologists out in the field to develop targets to grow this project. We completed a PEA, and we're currently permitting a drill program to go and grow the oxides, which are the heap leach-able materials of that project and create more value for KORE shareholders with the drill bit. And finally, we have the FG Gold and Gold Creek projects, where we consolidated the land between those projects. So we did a few land deals. We permitted and have been drilling on one of those projects all summer. We're currently drilling down at Gold Creek and the results from that drilling is starting to come out. And we will have news flow from the drill bit on that project well into and through Q1 of next year. So lots of news to come out of KORE, creating some real excitement around the BC project. Let me just get briefly into the assets. I know mining companies tend to get to quite technical in their presentations, but why don't we focus kind of on the big picture and look at pictures. So if you look at the background of this cover slide, this is our Imperial Gold project. This is the location where we've built the heap leach pad. You're looking ahead into where the resource is. This is very -- this is low-use Northern Sonoran Desert. There's not plot and there's not any sensitive species or archeological sites in the mine site. This site has previously been surveyed. We've got access to water. We're close to infrastructure. And I think the most exciting thing about that is we are located 9 miles from an operating gold mine in California. So I mean, that's the key thing. Yes, there is gold mining in California. There are multiple operating cyanide using gold mines in various counties in California, including Soledad Mountain, Castle Mountain and hopefully, in the future, Imperial Gold, but the largest of those is called the Mesquite mine and is located 9 miles from our project. So that means we have a county in Imperial County, California, that is accustomed to mining. In fact, there was 4 mining operations, the 1990s in the county, and gold mining history goes all the way back to -- really, to Spanish Colonial days, but certainly until the rail wall rent through and gold workers discovered gold here in the 1870s. There's also a large U.S. gypsum operation. And all of this means that we have a local bureaucracy, local community, local politicians are all familiar with and enjoy the benefits of the jobs and job creation that mining can bring, and we believe we have strong political support Imperial County to back our permitting process and is ultimately political will, which allows you to be -- have a smooth ride through the bureaucracy, to permits through the Bureau of Land Management, the federal regulator, who we're currently working with to permit the Imperial project. From a time line perspective, we're looking at multiple milestones, a couple of a year to get through the permitting process. While in parallel to that, we're going to be exploring aggressively to grow this project and make new discoveries, heading towards a feasibility study in about 1.5 years. So in the U.S. gold mining time lines, we've got -- we believe we have a relatively quick movement towards production. On the exploration side, we've got 21,000 acres of claims that connects our project up to that Mesquite mine in the northeast, west and over to the east to another old mine. We believe this is a mineralized trend that has a high probability of discovering new mines and new mineralization to enhance the Imperial project. And then we're permitting a bunch of drill pads right now, and we expect another news release with some targeting work before the end of the year at Imperial. I'll spend a little less time just on the other 2 assets in the company for the sake of time, then we'll move into a Q&A. Next asset in the company is Long Valley. You can see that from the picture of this project, very similar situation to the Imperial project. It was drilled in the 1990s. There's 1.7 million ounces of gold. It's currently under -- at a lease on a U.S. Forest Service land, so it's grazed by a farmer in the spring and summer. This is what the project looked like in the wintertime. You can see the old drill roads which are these straight lines going off into the horizon. So again, a low vegetation part of California in the Sonoran -- in the deserts where there is opportunity to build mining projects. This project has great potential upside to grow the mineral resources behind the project, and we're currently permitting a large drill program to go and extend the oxides and test for some new mineralization at the project. This project has never been drilled at depth. The current resource is very, very, very shallow, and our geophysics survey last year shows that there's strong potential for high-grade feeder structures under the project, and we will be testing some of those growth targets as part of our drilling when it's permitted in half 1 2020. Moving up to British Columbia. We're now back at a project that is a great exploration story. This is an area of British Columbia that was subject to a gold rush in the 1870s. It is on infrastructure. It's on roads, power. There's multiple operating large porphyry mines in the region. There's historic gold mines all over this belt. And more recently, a company called a Osisko Development Corporation, which was spun out of a Osisko Gold Royalties is moving forward with a $100 million investment in a large drill program and eventual development of 200,000 ounce producer just to the north of KORE's land package. That company has a valuation of $820 million, and KORE controls the entire south part of that district with 1,000 square kilometers of claims. You can see us down at the brown claims on the south. We've got 2 projects anchoring that land position, FG Gold and Gold Creek. We're currently at Gold Creek to expand that project. And we just recently put out a really exciting hole for that FG gold project. Now that last hole we put out last week for FG Gold significantly extends the mineralized zone of that project, almost 330 meters below historic drilling. That's a very significant change to this project. It opens up underground potential, and it opens up a ton of rock mass to go explore and grow this project to try to create a multimillion ounce underground and open pit mining scenario. I think we've got a real tiger by the tail here, and we'd like to go out and do an aggressive drill program there next year. If we're successful with continuing to show there is that rock mass that's mineralized, we've got a great a 20-kilometer trend to follow-up on and generate a large-scale gold project that'll be, hopefully, the next project developed in the Cariboo after a Cisco gold development. So again, a great emerging story in BC strategic size land position at 1,000 square kilometers exploration potential. That project alone is a company maker, but has not yet seen a lot of value in KORE Mining. Because if you look at back at those analyst reports I mentioned earlier, KORE is primarily valued on the net present value from our development assets in the United States that have tangible numbers behind them, those preliminary economic assessments. So stepping back and reviewing the investment thesis for KORE. KORE is currently a portfolio of high-quality gold assets. We are entrepreneurial by nature. We will monetize, if we can, these assets into the gold cycle to generate value for shareholders, and we're always looking for transactions to generate value for shareholders. We have $1 billion in net present value from our 2 development stage projects, which gives us line of sight to 250,000 ounces of production. We've also got great exploration potential up in British Columbia at our large-scale district project up there plus these 2 projects down in the United States. From that exploration, we create value catalysts for the company. We have a large insider ownership, which aligns us with you, the shareholder. And we currently trade at a low valuation point compared , largely because KORE is a new company in the market, does not have a long trading history, now we need to showcase our assets to the market to continue to attract shareholders and appreciate and close that GAAP valuation gap to our peers. With that, I'm going to turn it over to a Q&A. I see a few questions have come in. We now have sort of 7 in the queue. Let me go through and march through some of those in the remaining 5 minutes that we have.

So first question, impact of the U.S. presidential election on developing your California assets? That's a great question. It's a question I've been asking my team as we've moved through the election process here in the United States. And my team has not been concerned about the election. First off, California, and this county in California is already solidly democratic. So a democratic government does not change anything on the ground politically in this area of California. Secondly, our project is a very small project that is subject to a very well-established permitting process within the Bureau of Land Management. And it is highly unlikely that even making changes and unwinding anything Trump's done at the BLM that Biden will likely do, doesn't change the on-the-ground permitting time lines or process that you follow with the local bureaucracy and the BLM. The project just isn't that strategic enough. Maybe you'd be concerned if you were -- had a big pipeline project or something that's a political lightning rod, but a small mine that's supported by a local community in the local office of the BLM is unlikely to be affected by politics in Washington. A second company question, where do you see gold price going? Certainly, I think we're seeing some volatility in gold trading around the election, the long-term fiscal stimulus, the continual printing of money and debt creation by governments around the world, both related to COVID and general economic behavior is going to continue to bite and create -- and make sure gold is an asset class for a good strong cycle here, and I personally have invested a lot of my personal money in a gold company because I believe we're in a long and strong gold market here that's going to last for several years at least. Next question, what's the exit strategy for each asset? Or will you build these lines? Yes, that's a great question. And KORE has been set up with Mark Leduc leading our U.S. development team to be able to develop our U.S. assets. They're very simple projects that are closer to gravel pits than they are to complex milling operations that you often see in mining. So these are projects that we could build, finance and construct ourselves. That said, we have an entrepreneurial bent to the company. And if we can find good homes for these projects that give our shareholders exposure to another company's equity or to a good cash takeout, we will certainly be constructive for shareholders as we go through the cycle. So just getting through, make sure I get to these last couple of questions. Your presentation show KORE at P/NAV of 0.19 versus your peer group. Why such a huge difference? What is the market missing? Again, a great question. I think part of it is the maturity of KORE's share register with large insider ownership and not having done any large financings. We have not yet tapped the institutional investor market. So there's a large opportunity for KORE to diversified shareholders and find more buyers. It's also a very young equity and assets that have not been marketed over the last cycle. So again, I think the market is still getting comfortable with KORE's assets before making investment decisions. So lots of untapped potential in KORE. How did KORE get the assets? What did the previous owners miss? Assets were acquired privately, Imperial from Gold Corp. and Long Valley by way of a junior from Royal Gold and the BC assets were a part of our go public transition, and we're able to get them simply because the company that own them at the time, it ran out of money. Past operators simply had owned these assets when gold was $400 an ounce, and they were -- projects were uneconomic and they sat inside large companies, untouched for years. And KORE was able to buy them opportunistically in 2017. So I think it's an incredible opportunity to create value for KORE shareholders. And finally, what should we look for in 2021 to move the stock price, KORE has a lot of assay drill holes in the lab in British Columbia. We think there's a really exciting story emerging there. You should see drill results. We've also got some targeting work, which is a field exploration work coming out of Imperial. We're putting an update on the Imperial permitting out in the near term, expect some other news around Long Valley we're excited about. So I think we've got a good back and news flow to come from well into 2021 to create excitement around KORE and try and close that valuation gap. I ran out of time. So thank you very much for taking the time to hear the KORE story. You can contact the company through our website or through the contact information I'll put up from the final slide. Thank you very much for listening, and look forward to having you as a KORE shareholder.

Mr. Trebilcock, thank you for sharing some of your time with us this morning. Have a good day. Ladies and gentlemen, this does conclude the presentation. You may now disconnect.