Calidus Resources (ASX:CAI) - Aiming to Double Gold Production

Company Interviews

Interview with David Reeves, MD of Calidus Resources Ltd.

Our previous interview: https://www.cruxinvestor.com/posts/calidus-resources-asxcai-reignites-growth-with-financial-restructuring-production-milestones-5138

Recording date: 20th June 2024

Calidus Resources (ASX:CAI) is positioning itself as an emerging mid-tier gold producer in Western Australia, with a strategic acquisition set to potentially double its annual gold production. The company, which currently operates the Warrawoona gold mine, acquired the Nullagine project in December 2023 in a move that could significantly boost its output and financial performance.

The Nullagine acquisition, secured for a remarkably low upfront cost of A$250,000 with deferred consideration, represents a pivotal moment for Calidus. The project comes with substantial existing infrastructure, including a 1.8 million tonne per annum processing plant that was operational until recently. This acquisition is expected to increase Calidus' annual gold production to over 100,000 ounces, with initial production from Nullagine targeted at 30-40,000 ounces per year.

A key advantage of the Nullagine project is that its production will be unhedged, allowing Calidus to fully benefit from the current high gold prices, which are around A$3,500 per ounce. This is particularly significant given the company's existing hedge book and debt obligations associated with the development of the Warrawoona mine.

Calidus' Managing Director, Dave Reeves, emphasizes the transformative potential of this acquisition: "What we're trying to do is just get cash flow now. We've got a situation with our hedge and our debt over the next 18 months we need to sort, and this provides a massive boost in cash flow for us because it's all unhedged."

The company plans a phased approach to restarting production at Nullagine, focusing initially on two historical mines within the project area - Beatons Creek and Bartons. Beyond these initial targets, Nullagine offers significant exploration upside, with numerous deposits yet to be fully evaluated.

Investors should note that while Calidus presents a compelling growth story, it also faces challenges. The company is working to reduce its hedge book, which currently stands at 73,000 ounces, and manage its debt obligations. However, the increased cash flow from Nullagine is expected to accelerate these efforts.

The broader macroeconomic environment for gold remains supportive, with ongoing geopolitical tensions and economic uncertainties potentially sustaining high gold prices. This context enhances the attractiveness of Calidus' expansion strategy.

Calidus offers exposure to a growth story in the gold sector, with the potential for significant value creation as production expands and financial constraints are resolved. Key factors to monitor include Progress on the Nullagine restart and initial production figures, pace of debt reduction and hedge book unwinding, exploration results, particularly from high-potential targets, overall operational efficiency and cost management.

As Reeves notes, "There is a point where that debt and hedge is gone, and wow, it's a different company then." This encapsulates the potential transformation that Calidus could undergo in the near future, making it an intriguing prospect for investors seeking exposure to the gold mining sector.

View Calidus Resources' company profile: https://www.cruxinvestor.com/companies/calidus-resources-limited

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