Interview with Carnavale Resources Ltd.
Interview Carnavale Resources: Good cards for long-term success
time to read: 10 minutes | The interview was conducted by Nico Popp on June 9th, 2021 in Mount Hawthorn (AUS).
CEO, Managing Geologist | Carnavale Resources Ltd.
Level 2, Suite 9 389 Oxford Street, WA 6016 Mount Hawthorn (AUS)
Table of contents:
New demand from trending industries
news|financial: "You are pursuing four projects in Australia with a focus on precious metals and industrial metals. What role does the growing demand for electromobility and renewable energy play for your projects?"
Renewable energy and electromobility are now important growth drivers for the commodity markets, especially nickel and copper. Projected demand for these elements will overtake production causing supply problems and high commodity prices. We are pursuing two projects that will potentially play a part in filling the supply gap. One is the Barracuda Project, which contains platinum group metals, nickel and copper, and the Grey Dam Nickel Project. Both projects are located in Western Australia, as are our two gold projects.
Projects at a glance
news|financial: "What stage are your projects at, and how do you plan to advance them in the coming months?"
"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
Our projects are at the initial, high reward exploration stage. We will continue our exploration work on the projects that are showing promise and develop them further. We have just completed our third drilling program at the Kookynie gold project. This drilling program is building on very promising results from our earlier drilling programs. These high grade intercepts include two meters with exceptionally high gold grades of 16.25 g/t plus additional intercepts that include two meters at 3.34 g/t gold. There are many more examples of these high-grade results. We are eagerly waiting for the results of the third round of aircore drilling, which has been designed to infill the wide spaced earlier drilling and expand the footprint of the previously identified mineralised gold zones with high grade intercepts. For the market to determine an overall picture of the Kookynie gold project, these upcoming results are very important.
At our second gold project, Ora Banda, we completed a detailed review of previous work and have taken initial soil samples over the residual soil profile to test them for gold anomalies. From that, we then derive targets for drilling that we can undertake based on workload and urgency. We are excited about exploring this project as it has an identical geological setting to the recently discovered, important +2.5 million oz Invincible mine owned by Goldfields in the St Ives district of Western Australia.
At our Grey Dam Nickel Project, we use a special technique called ultra-fine fraction soil sampling. In this process, we examine the smallest particles and interpret them in light of influencing factors, such as the natural movements of groundwater. In this way, we can obtain indications of nickel sulfides and elements of platinum metals and consequently orient our future work accordingly. With this technique we are searching for nickel sulfides under transported cover that was impossible for earlier explorers to find.
Our Barracuda Project is characterized by an extensive mafic/ultramafic magmatic system that has proven platinum group metals. Early work has revealed high grades within soil samples and rock chips, so we are very confident of success here as well. We are planning further exploration work at the Barracuda project in September, the Company has contracted an airborne VTEM survey to identify sulfides at depth. However, we also see it as our mission to acquire other promising projects related to gold, platinum and nickel that fit the portfolio.
news|financial: "You are focusing on early-stage projects. What are the advantages of such an approach for investors?"
"[...] It is important to channel knowledge and experience in the search for raw materials to achieve a lot with little resources. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
At an early stage, we can achieve a lot with comparatively few resources. Often, the potential of a project can become apparent at the very beginning of the exploration work. Thanks to our experienced team, we can deploy capital precisely and move the projects forward. Just take our Barracuda Project: We acquired it for AUD 50,000 and will carry out our initial exploration work for AUD 90,000. If the results are promising and justify further drilling, these investments will have paid off many times over. It is important to channel knowledge and experience in the search for raw materials to achieve a lot with little resources. This is often achieved by breaking new ground and searching where no one has looked before or by applying new methods.
Kookynie Gold Project
news|financial: "A few weeks ago, you discovered high-grade gold deposits at your Kookynie gold project. How do you assess the results, and where do you go from here? Why do you think the market has not yet interpreted the results positively?"
I believe that the market has very much taken note of the results that we have achieved so far. Our market capitalization speaks to the fact that investors believe that we have good exploration prospects. At this stage, however, further exploration work must confirm what the results to date indicate. We are very confident that this will happen. We expect further good results for Kookynie in the next three weeks. Then the picture the market has of the project will become clearer.
news|financial: "How much capital have you budgeted for exploration this year, and what is your funding status?"
At the end of March, we had AUD 4.1 million in cash. This allows us to implement our exploration targets for this season and continue to develop the projects. The exploration targets already indicate that we can make great progress on our projects to make the best use of our capital. At Kookynie, we are prospecting for gold beneath transported material where no one has looked for it before. At Ora Banda, we found a geological system similar to Goldfields' Invincible mine, representing 2.5 million ounces of gold. We are also being innovative in our other metal projects, applying new methods and using new models. The chances are therefore good that our investments will pay off in the end.
Option agreements as an opportunity
news|financial: "To stick with the question of financing, which is important for exploration companies: What options do you have besides classic private placements? Can you also imagine selling projects?"
"[...] If a property proves to be less promising, we can quickly part with it again and redirect our focus to other projects. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
We operate our projects under option agreements. That means we have every opportunity to continue exploring, but we do not initially have to invest large sums to purchase the properties. That offers us great advantages. We can look at the respective properties, explore them in more detail and, if necessary, take out the purchase option at the end. If a property proves to be less promising, we can quickly part with it again and redirect our focus to other projects. We operate at an early stage but do so in a very planned and rational way. Exploration work in the early stages offers the opportunity for large increases in value but can also be unsuccessful. Therefore, it is essential to keep expenditure as low as possible and replace projects that no longer have any potential with new ones. We always have a full pipeline of potential new projects. If a project has great results then we continue to explore there on a larger scale, we expect that the market will also value us accordingly, giving us better financing options. The current environment for this is good.
news|financial: "You have now mentioned several times that you can imagine taking on further projects under option. Isn't the market already fiercely competitive?"
The market is very competitive and is currently playing very well into our hands. If you are looking for new raw material projects and want to develop them further, you need to have a compelling reason for the market to support you. We are fortunate that in our case, we have a convincing team. Our Non-Executive Director Andrew Beckwith is very experienced in the development of early stage resource projects, He has previously worked for AngloGold Ashanti, Acacia Resources, Normandy NFM and Westgold Resources. Allan Kneeshaw, our exploration consultant, has also been in the resource sector for many years and, like me, has worked for AngloGold Ashanti. As a team, we are in a position to be able to identify promising projects. We continue to target precious and industrial metals associated with renewable energy and electromobility. The market greatly appreciates our approach to acquiring and developing promising properties. Demand for raw materials is high, and both landowners and established raw material producers are interested when properties are turned into raw material projects.
news|financial: "How do you want to proceed in concrete terms?"
"[...] We have already been dealt a very good hand with our existing projects. But, if we get the chance to pick up or swap for better cards, we will do so. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
Structured and planned. You can describe our approach as analogous to a deck of cards: We have already been dealt a very good hand with our existing projects. But, if we get the chance to pick up or swap for better cards, we will do so. Specifically, we are looking for projects that can be expanded in terms of size and scale to provide best value for shareholders.
Many metals in one project
news|financial: "Let's talk about your approach to industrial metals. Is there an advantage to a project offering multiple metals that complement each other, such as nickel and copper?"
In commodity projects, geology determines the composition. Where there are platinum metals, there is often also nickel, silver or even gold. For us, the combination of different metals means the prospect of more robust sales. In such a situation, one is less dependent on the development of one metal.
Number of shares
news|financial: "You have issued more than 2.3 billion shares. Do you plan to consolidate your share count?"
We currently have no plans to do so. Australian companies have almost traditionally issued a lot of shares to fund their exploration plans. As a result, the share price is very low from a visual point of view. But at the end of the day, the valuation of the Company is what counts. Our anchor shareholders also see it that way: Carnavale Resources' twenty largest shareholders hold just over 50% of the Company. Management also has a decisive stake. These numbers reinforce that all stakeholders at Carnavale are pulling in the same direction to move the Company forward. Should we ever need to collectively raise fresh capital, for example, to acquire a new project, we might consider consolidating our share count.
news|financial: "You mentioned your anchor shareholders. How do they support the Company?"
Our largest shareholders believe in our strategy, projects and business model. This is important and means that we, as a technical team, can work in peace. Also, many investors have been with us for years and have participated in several financing rounds. It is the repeated funding support that shows us that we are on the right track together.
From explorer to mine developer?
news|financial: "Can you imagine building a mine yourself, or would you rather find a strong partner and sell the project?"
"[...] We would always weigh up all the options and ultimately decide in the interests of the shareholders. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
That depends. Many junior companies have already successfully taken this path. In Western Australia, this path is also already well-paved and quite viable. But it depends on the specific project. Very large mines also require high investments. In such cases, a sale to a larger company is an option. Often, such a step is also best for the shareholders. We would always weigh up all the options and ultimately decide in the interests of the shareholders.
Here is what will be important in the coming weeks and months
news|financial: "Looking ahead to Carnavale Resources, what should investors keep in mind over the next few months?"
"[...] We are continuously developing all four of our projects and thus ensuring a continuous news flow to the market. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
From our Kookynie Gold Project, our third program of aircore drilling results are expected towards the end of this month. This involves infill drilling, which could be highly informative. Soon, we will also have results from initial gold exploration work at our Ora Banda gold project. Our platinum-nickel-copper project Barracuda will be examined more closely from the air by helicopter in September, and results from the nickel sulphide exploration work just started at Grey Dam are pending. We are continuously developing all four of our projects and thus ensuring a continuous news flow to the market.
news|financial: "Thank you very much for talking to us."