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Karora Resources: 2022 EPS Estimates Could Rise 50% Over Next 20 Months

Apr. 09, 2021 9:03 AM ETKarora Resources Inc. (KRRGF), KRR:CA41 Comments
ActiveEurope profile picture


  • 2022 consensus analyst EPS numbers could be upgraded by 50% over the next 20 months as mill capacity upgrades, higher gold grade, and added Nickel production come through.
  • A potential Australian listing later in 2021 should act as a positive catalyst in getting new investors on board.
  • Trading at only 7*2021 PE on current consensus earnings with a net cash balance sheet, the shares are already excellent absolute value.

I would like to start by taking a look at analyst’s consensus estimates for Karora Resources (OTCQX:KRRGF) (KRR.TO). For 2021 estimates are for sales of C$285.25m, EBITDA of C$138.2m and EPS of C$0.588, based on 5 analysts. Somewhat surprisingly the numbers for 2022 are roughly flat on the 2021 numbers as some production growth is modeled but with a little lower gold price is keeping the progress around flat. We think these 2022 numbers could be SIGNIFICANTLY TOO LOW, in fact most likely 2021 numbers are conservative but it’s the 2022 that could be massively beaten.

Simple points first.

  1. The existing mill capacity will be upgraded by around 15% and this comes through in second half 2021 with a full year in 2022.
  2. Management have been clear grade should improve through 2021, especially as Spargos deposit comes on line starting in Q2 but with stronger affect in 2H, this is embedded in current guidance for 2021.
  3. Beta Hunt begins to mine the Nickel late 2021 (our timing estimate) and this really feeds into 2022 production cost credit.

Karora Management on Q4 2020 Results - Earnings Call Transcript references the above 3 points. Note for point 3 is the Larkin zone which contains both Gold and Nickel.

Mill de-bottlenecking

So 15% extra capacity at the mill should come with relatively low extra P&L costing. It’s described as de-bottlenecking and single digit capex needs. Hence one would expect it to be very nicely margin enhancing. It should ramp in 2H2021 so for 2022 we crudely say 15% extra on group EBITDA as it’s a full year but maybe 4Q 2021 it’s already up to speed so like for like in 4Q 2022 is compensated with conservative assumption of no margin rise improvement.

Grade improvements

Grade for 2020 was 2.33% and for 2021

This article was written by

ActiveEurope profile picture
Active European Investor since mid 1990's both long and short. Worked at large, medium and small buy side only firms. Preference to focus on small/mid size companies to own for at least 3 years that can compound growth rapidly and have a multiple expansion.

Analyst’s Disclosure: I am/we are long KRRGF.

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