Karora Resources keeping up the momentum down under and poised to improve output and costs in 2021

A quality gold producer in Western Australia Robust financial position driven by strong free-cash-flow generation A large and expanding resource base What Karora Resources does: Karora Resources Inc (TSE:KRR) (OTCMKTS:KRRGF) (FRA:5RN1) is now a "top tier" junior gold producer in Western Australia having started its transformation - when known as RNC Minerals - with its purchase in 2019 of the Higginsville Gold Operations (HGO). The group is focused on growing gold production and reducing costs at the integrated Beta Hunt Gold Mine and the Higginsville mine and its associated treatment facility. At Beta Hunt, a robust gold mineral resource and reserve is hosted in multiple gold shears, with gold intersections along a 4 kilometre strike length remaining open in multiple directions. Meanwhile, Higginsville has a substantial historical gold resource and highly prospective land package totaling approximately 1,800 square kilometers (sq km). The Higginsville treatment facility is a low-cost 1.4 million tonnes per annum (Mtpa) processing plant which is fed at capacity from the underground Beta Hunt mine and open-pit Higginsville mine. In August 2020, Karora further expanded its portfolio after completing its acquisition of the Spargos Reward project tenements, which cover 33 square kilometres located in the Eastern Goldfields of Western Australia, 35 minutes by road from the Higginsville gold operation. On top of the existing historical resource, there are a number of historic workings within the project, the most notable of which is the historic Spargos Reward Gold Mine which produced 105,397 tonnes at an average grade of 8.56 grams per ton (g/t) of gold in the 1930s and 1940s, with limited gold extraction since that time. The Spargos gold project contains a historical JORC (2012) Mineral Resource Estimate of 112,000 ounces (785,800 tonnes at 4.4 g/t) indicated resource and 19,000 ounces (151,000 tonnes at 4.0 g/t) inferred resource. How is it doing: In August, Karora reported record-setting 2Q gold production of 29,831 ounces and gold sales for the same period of 30,412 ounces in its financial results for the 2Q and 1H of 2021, both of which ended on June 30. The company said the profitable quarter has maintained its ability to deliver full-year consolidated 2021 gold production guidance of 105,000 to 115,000 ounces. The gold miner ended the second quarter of 2021 with a strong cash position of $82.2 million and working capital of $64.8 million, up by $5.5 million and $1.6 million, respectively, from March 31, 2021. Karora's all-in-sustaining-costs (AISC) of US$985-$1,085 per ounce and a 5% reduction for 2Q also fit within the company’s forecasted range, and were lower than the 1Q AISC which was US$1,049 per ounce. There was also an 18% year-over-year uptick in cash flow from operating activities in 2Q 2021 to $26.4 million, which was $7.7 million higher than the first three months of 2021. Meanwhile in June, Karora announced plans to double its annual gold production from 99,249 ounces in 2020 to a range of 185,000 to 205,000 ounces in 2024 at an all-in sustaining cost (AISC) of between US$885 and US$985 per ounce. The company said its growth will be driven by increased output from its Beta Hunt underground mine plus production from its Spargos Reward and Higginsville Central areas, adding that it expects to begin mining ore at Spargos in 3Q 2021. At the Spargos Reward gold project, more strong drilling results were reported, including 6.1 g/t over 14m in one hole, which confirmed the interpreted high-grade gold plunging shoot thesis by extending the shoot to over 300m down-plunge, which remains open. In late 2020, the company unveiled a first consolidated reserve and resource estimate for its two main assets - Beta Hunt and Higginsville - which showed an increase to the proven and probable (2P) gold reserve of 334% to 1.33 million ounces. The consolidated measured and indicated (M&I) gold resource, meanwhile, was boosted by 167% to 2.52 million ounces. The estimates did not include the Spargos Reward project, for which it has said a resource and reserve will be completed in the first half of 2021, to include the new high-grade zone. What the broker says: In a note to clients on August 9, Canaccord Genuity analysts called Karora’s 2Q 2021 financial results “solid, solid, solid” at first look. “We believe that with KRR’s clear, self-funded growth plan established, along with its top-tier jurisdiction (Western Australia), the company should trade at a premium to peers,” the analysts said. “We also believe that ongoing aggressive exploration could help unlock the district, which has long been capital- and royalty-constrained with only sporadic drilling,” they added. The Canaccord analysts also noted the “dark horse nickel upside” emerging at Beta Hunt could help rejuvenate what was once a top producing nickel asset in the region and further help offset operating expenses at Beta Hunt. Analysts at Canaccord Genuity maintained their ‘Buy’ rating on Karora Resources with a target price of C$6.75 per share. Inflection points: Resource and reserve update for Spargos open-pit  Improvements to Higginsville mill capacity More exploration results What the boss says: Commenting on the company’s record 2Q 2021 gold production, Karora Resources CEO Paul Andre Huet said in a statement: “Overall, the second quarter built on the foundation we laid during the first quarter, placing us well on track to deliver on our 2021 production and cost guidance.”   Huet added: “Moving forward, we look forward to executing on our fully funded organic growth plan which we believe to be one of the most robust growth plans in the junior gold mining sector.” Contact Sean at sean@proactiveinvestors.com