Karora Resources Delivers Strong Q3 Results, Well Positioned to Meet 2023 Guidance

About Karora Resources

Karora Resources Inc. is a Canada-based multi-asset gold mining company focused on increasing gold production at its integrated Beta Hunt Gold Mine and Higginsville Gold Operations in Western Australia. Karora has a strong board and management team focused on operational excellence and delivering shareholder value through responsible mining.

Q3 2023 Highlights

• Gold production of 39,548 ounces, with 120,198 ounces produced in the first 9 months of 2023. On track to meet full year guidance of 145,000-160,000 ounces.
• Quarterly gold sales of 41,278 ounces. Cash balance strengthened to $84.2 million, an increase of $13 million compared to end of Q2 2023.
• Exciting exploration results announced during Q3 from Beta Hunt, indicating potential for significant mineral resource additions.
• Remains on track with growth plan to double gold production to 185,000-205,000 ounces by 2024. Progressing planned capital outlays at Beta Hunt focused on increasing throughput to 2Mtpa.

Strong Operational Performance Positions Karora for a Stellar 2023

Karora's gold production came in at 39,548 ounces for Q3 2023, bringing total production for the first 9 months of the year to 120,198 ounces. This keeps the company firmly on track to reach the upper end of its full year production guidance of 145,000-160,000 ounces.

The consistent quarterly production Karora has delivered this year is a result of optimized mining operations at Beta Hunt and Higginsville. Ramping up underground production at Beta Hunt while mining at multiple open pits across Higginsville has provided blended feed at optimal grade for the Higginsville treatment plant.

With Karora's mills running at capacity, the focus has been on cost control and operational efficiency to maximize mine output and profitability. Management emphasized this would continue to be the strategy over the coming year amidst inflationary pressures.

Strong Cash Position Funds Growth

Karora strengthened its balance sheet during the quarter, with cash increasing by $13 million to $84.2 million at September 30. Operating cash flow funded capital expenditures related to the company's growth plan while still allowing cash reserves to grow.

This robust cash position provides financial flexibility for Karora's plan to double gold production from 99,249 ounces in 2021 to 185,000-205,000 ounces by 2024. The growth will be driven by increasing mill throughput at Beta Hunt to 2Mtpa.

During the quarter, Karora invested capital into development and earth works to open up additional stoping areas and expand mill capacity at Beta Hunt. Management stated they were pleased with progress on construction activities and underground development, with Karora remaining on schedule to deliver the production ramp up.

Exciting Exploration Results Augur Well for Resource Growth

In Q3 Karora announced encouraging exploration drilling results from Beta Hunt, particularly the Fletcher shear zone and new Mason zone discovery. The company noted mineralization remains open along multiple target zones near existing underground mining areas.

Recent drilling intercepted high grade gold mineralization outside of the main Beta Hunt A Zone and Western Flanks shear. This points to significant potential for new gold discoveries and mine life extensions at Beta Hunt beyond currently defined reserves.

Management was optimistic about quickly being able to add new mineral resources given the proximity to active mining zones and existing infrastructure. Karora is guiding for an updated mineral resource estimate at Beta Hunt by the first quarter of 2024.

At Higginsville, the focus has been on upgrading and expanding open pit resources through targeted infill and extensional drilling around mines like Baloo and Aquarius. This has supported the increase in open pit production this year.

Karora's exploration results and potential for new resources discovered near existing mining areas is encouraging for the long term growth profile. The company can leverage its infrastructure, plant capacity, and internal technical expertise to efficiently bring new deposits into production over time.

Maintaining Cost Control and Optimizing Operations

With inflationary pressures persisting globally, Karora management emphasized the focus for the remainder of 2023 would be on cost control initiatives and optimizing productivity. By maximizing output across its mining operations and closely monitoring expenses, Karora aims to continue generating strong cash flow through the end of the year.

Initiatives are in place to reduce costs for key consumables like cyanide and power. Karora is also working to build up stockpiles to insulate against potential supply chain issues.

While all-in sustaining costs guidance remained unchanged at US$1,100-US$1,200 per ounce for 2023, management acknowledged mining cost inflation remained a challenge. Karora has demonstrated an ability over the past year to successfully manage costs amid a volatile environment.

Throughput expansion at Beta Hunt is expected to drive lower unit costs through greater economies of scale. However, inflation could place some pressure on capital costs associated with the growth plan.

Overall the company is in a strong position to fund operations and complete planned investments. Karora's AISC guidance would remain among the lowest costs for an intermediate gold producer globally.

Optimizing Portfolio for Reliable Production and Cash Flow

During Q3 Karora completed the acquisition of the Lakewood Mill located near its Higginsville operations. This acquisition was targeted to provide production flexibility and backup capacity.

The 1Mtpa mill can provide supplementary processing capacity and reduce risks associated with unplanned outages. With minor re-commissioning the Lakewood Mill could be operational within a very short timeframe as needed.

Beyond the value as a contingency, management sees potential to optimize Karora's asset portfolio over time. This could involve shifting resources between mills or repurposing facilities as mining centers change. The optionality from owning multiple plants close in proximity provides significant operational advantages.

Karora also has potential to process material from third parties through open capacity at its treatment plants to generate added revenue. Building a toll milling business with nearby mines could leverage the infrastructure in place to create immediate cash flow.

Strong Shareholder Returns Expected in 2023 and Beyond

With a stable production base and growth fully funded, Karora expects to generate strong cash flows supporting shareholder returns over the next year and longer term. At the current gold price, Karora would produce roughly $175 million in annual operating cash flow after royalties at the mid-point of 2023 guidance.

Considering Karora's sound balance sheet and increasing output, the potential is there to provide a meaningful dividend or share buyback program starting in 2024. This would allow investors to realize a direct return on their investment in addition to share price appreciation.

Karora offers leverage to the upside in gold prices given the company's low AISC that leads to high profit margins. Cash flow would increase by about C$85 million annually for every US$100 per ounce rise in gold. This provides torque to earnings from higher gold prices.

Given progress ramping up Beta Hunt production and expected growth ahead, Karora continues to look attractively priced trading at only about 4x 2023 cash flow. Shares represent a compelling value proposition, with gold producers typically trading at 7-10x cash flow multiples.

As Karora delivers on doubling output to above 200koz by 2024, demonstrates resource growth, and initiates cash returns to shareholders, the market should re-rate the stock closer to mid-tier producer multiples. This provides significant re-rating potential and over 100% upside from current levels over the next 12-24 months.

Conclusion

With another solid quarter of operational execution, Karora remains firmly on track to deliver a record year of production in 2023. Strong gold output has driven cash flow generation allowing the company to fund its internal growth plan while improving its balance sheet.

Encouraging exploration results point to resource expansion potential that can extend Beta Hunt's mine life. Karora is establishing a clear path to achieve lower costs and increased production.

The company's strong management team has demonstrated prudent capital allocation and ability to drive shareholder value. Investors have an opportunity to gain leverage to higher gold prices with a stock providing both low-risk cash flow generation and significant growth upside.