Investor Update

Mar 30, 2021

Slides

Hello everyone and welcome to the Burgundy Diamond Mines Webinar. Managing Director Peter Ravenscroft will be presenting on the company's recent activities and future strategic direction. There will be a Q and A session following the conclusion of the presentation and you could submit a question via the text box on this platform which will be queued up to be answered by Peter during the Q and A session. I hand over to you now, Peter. Thanks, Adrian, and good morning from sunny Perth in Western Australia. Thank you for joining us. It's been a while since we've had one of these webinars, a few months, And I'd like to assure you we've been pretty busy during that period. We haven't been sitting on our hands. And what we're going to talk to you about today is to give you a brief update on what we've been doing, but focus more on our recent announcement of an acquisition of the Ellendale Diamond Project, give you a little bit of detail on that and talk about our future plans. I'll try and keep this fairly brief to about 15 minutes. And then from the looks of it, we'll have a fairly healthy question and answer session. And I think that will be very useful to tease out some of the detail behind this. So looking forward to getting into it. And thank you once again for joining us. We are, of course, very much a forward looking company. So I will be making a number of forward looking statements. And I think you understand the implications of that. And we will be trying to give you the best picture we can of where we're going in the future. So I'd like to just talk about the progress we've made since we started in Burgundy. And I've been saying quite a while now that our vision is to build the world's leading midcap diamond company. What do we actually mean by that and how are we doing on that path? The graph you see here on this slide is a representation of the current market capitalization of a range of listed diamond companies. It may not be a completely exhaustive list, and if I've left somebody off, I apologize for that. But what we've done is compared all of the companies in a common currency of Australian dollars, and it shows how the junior companies at the bottom of the graph, leading up to the operating companies at the top of the graph. And I'll make this point to you. When we started out, we were at the bottom of the list. And we've been going less than 18 months, and we're up at number 5. Now that doesn't mean we're the leading mid cap diamond company. And to be frank, I don't know what the leading mid cap diamond company really means. But it's a vision we have to be amongst the leaders of our industry, a vision we have to be a diamond company that our investors get a lot of return from and that we can be doing things in the diamond space that haven't been done before. So I'm really pleased with the progress we've made and where we've gotten to. And I guess the flavor of this presentation is about what we've done more recently, but I'll keep coming back to the point that there is a lot more to come. A quick update on where we are corporately. So this is the detail we listed on the ASX. We now have 263,000,000 shares up. Our market capitalization as of Friday was around AUD 97,000,000 and I think it's over AUD 100,000,000 today last time I looked. We have around $8,000,000 cash on hand. Our investors will remember we raised around $10,000,000 back in the middle of last year. We've been very prudent in the expenditure of that money and we still have some left. And these numbers are after the recent acquisition. We still have a fairly tight ownership of the company, and the insider holding is a healthy 18.5%. I've got some words there about the history and background. And as I say, it's very presumptuous to be talking about the history of a company that's less than 18 months old. But we have made a number of steps, both in the areas of project acquisition, in the areas of building a team, very experienced management team and a very powerful Board. And we've been managing our capital very carefully in that process. I'm using this slide talking about our portfolio strategy to really reiterate what we've been saying all along. The whole concept of Burgundy Diamond Mines is to be building a diverse portfolio of holdings in what we believe to be the world's best diamond projects. I'm also using the slide to demonstrate how we're doing against that with our recent acquisition. So very subtly, you'll notice the yellow boxes relate to the project with the yellow diamonds, and they show how the Ellendale project is actually matching that strategy. I'm not going to dwell on the detail. We walked through a lot of that before. But our portfolio focus is about the style of projects, and we're talking about colored diamonds. And Ellendale ticks that box. We're talking about location in 3 leading diamond jurisdictions, in Canada, Botswana and Australia. We have projects in Canada, we have projects in Botswana and we now have a project in Australia. And lastly, in terms of how the portfolio what are the key objectives of the portfolio, we still believe the future is developing the world's next diamond mines. And that's a slightly longer term play. And it's the example of that is our Naya project in Canada, which we are fully confident will be Canada's next diamond mine. We also have longer term players in terms of keeping the pipeline full. And our Botswana Exploration Alliance is filling that gap. And recently, we turned our attention to how can we bring on something in the near term that will provide cash flow, operation and diamonds. And the Allendale project ticks that box. So I'm going to go into a bit more detail about Allendale. I'm sure we'll come back in the Q and A to some of the questions around the other projects and what the portfolio is going to look like in the future. So the Allendale Diamond project, I'll start just by recapping the transaction. We announced this last week to the ASX. It is an option agreement over a 2 year period with a series of staged payments. Those are listed on the slide. We've made the first payment, which was AUD1.7 last week, and we've issued 4,000,000 shares to Gibral of Diamonds from whom we're doing the acquisition. 12 months anniversary from there, we make a further payment of AUD 1,000,000 and issue AUD 5,000,000 Burgundy shares. And if and when we exercise the final option at the end of 2 years, there'll be a final payment of $4,000,000 7,000,000 Burgundy shares. The reason it's an option agreement is because this is our way of mitigating risk and managing our capital carefully. I have no doubt that we will exercise the option. We've done the work on this project. We're fully confident that we want to exercise the option, but this is a way of staging it and making sure of it as we go along. Gibber River Diamonds, at the end of this, will have a healthy shareholding in Burgundy Diamonds. And I think from what I've shown you on recent slides, the performance indicates that that's going to be a very good investment for Gibb shareholders. And we'll also be receiving a 1.5% gross royalty, a gross revenue royalty on all the Diamonds and Leasingotenables. As part of the agreement, Burgundy and Giberiva are going to work very closely through this transition phase. And particularly, they're really important area of continuing and developing the relations with the local communities and particularly in negotiating native title over some of the tenements. You have done a wonderful job up to now of bringing the project to where it is. And we believe the best way to continue that momentum is to be working closely with them. A little bit more detail about the Ellendale project. Ellendale has quite a history. It's been an operational diamond mine for some time. The key points I'd like to bring out are it's famed for the yellow diamonds. Yellow diamonds are not that uncommon around the world. There are many projects, many diamond mines that produce yellow diamonds. But everybody I talk to who's seen an Ellendale yellow diamond thinks this is the best call to yellow diamonds. And we believe that the deepness of the color and the potential of the unique nature of these particular diamonds is what's led us to this project and what underpins our hopes for the future. Another important point I'd like to make is, Gibbard Diamond acquired the tenements over the Ellendale properties via process with the Western Australian government. The mine had actually been closed and formed part of what is called the abandoned mines policy in Western Australia. Gib River Diamond restaked the grant on invitation from the government over the same area. And in doing so, there are no legacy environmental liabilities. So the site has essentially been cleaned, essentially has been closed, and we are inheriting via gear essentially a clean sheet of paper. The question I'm often asked by people is, this has had an operating history. It's had a number of owners and some of them have been more successful than others. And the question people ask is, why do you think you can do this better than other people managed to do? Well, we're going to be adopting a very different operating approach. We're going to keep it as a very small footprint. We're going to use a low capital approach. And we're going to be using a fit for purpose set of equipment and processes. And things that we've been talking about on other projects, for example, focusing on the course fraction of diamonds, which is where the value all lies. We're going to be introducing new technology or new technology for this project. In mining, we're trialing a very interesting process in Canada this summer on our Nalya project, which will allow us to do in pit screening of the coarse material. And if that works, we'll be deploying that in Ellendale as well. We're also bringing in XRT plants. As I will point out later, we've already ordered our first XRT plant, which is already under fabrication. And we're hoping to get that onto site in the Q4 this year operating. We'll be using a modular approach. So we start small. And as we gain traction and start getting some cash flow, we can expand that in a stepwise fashion, again, using small plants, mobile plants. These are containerized units, which we can move around and which we can deploy very easily into that environment. And as being the market end of things, I talked about the value of the yellow diamonds. They already had a very, very high value relative to other diamonds under previous operations. We believe we can do even better than that. We're looking right now at ways that we can move downstream, ways that we could potentially brand these diamonds differently, perhaps getting into cutting and polishing and taking it all the way to market. So there are lots of thoughts, lots of things we need to do, but we're confident we can make this project something that's never been before. This slide shows a number of the different target areas. And I guess what I'd like to I'd make a point upfront here. There have been previous resource numbers published on the Ellendale project area. And the last one was published by the last owners, in fact, in 2015. We need to do some work on those numbers. We need to understand them. We need to validate them before we can report them. So I'm not in a position yet when I can talk about what those numbers are, although they are available in the public domain. But I would leave you with this thought on that. From the work we've done already, the in situ value of the diamonds in this project area is some 2 orders of magnitude higher than our entry cost. It's a very significant price. The range of target areas is shown on this slide. And we will be basically looking at this in 2 separate but connected steps. The Bliner Illuvials, which have been owned by Guber River Diamonds for many years, represents a ready made target. There is a mining lease on them. They've been fully permitted. There's a fairly straightforward path to being able to sample those, and that's where we'll go first. There's a lot of geological work needed to be done there, some sampling, some bulk sampling to define that into a resource so we can move forward from there. But that's where we'll go first. Concurrently with that, we'll be looking very hard at the various sources of diamond difference material on the Ellendale leases. Now as shown on this map and on the slide, that ranges from additional alluvial deposits. There are e alluvial deposits on the edges of the pit. There are stockpiles. There are coarse tailings potential resources. There are a range of areas and we might even look at extending the previous mining operation either in the pits or beyond the pits. So there's a lot of work to be done, a lot of understanding to be developed by our team, but we're into it already. We started work on this last week and we're making progress as we go. Importantly, as I said earlier, over the Ellendale mine tenements, so the ones that aren't lined up on this map, we still need to negotiate native title in order to get a mining lease on that. We've started that process. It's been started by Ghibruvo, and it's a process that we're getting into almost immediately. And we're really looking forward to engaging with traditional owners over the coming months and hoping we can end up with a shared value on this project, which is going to be meaningful for everybody. So brief summary of what the outlook is and what we're planning to do. As I said, we're only a week into this, but we've already started getting stuck into the work. On Blynar, we'll be doing a lot of geological work. First thing I want to do is validate some of the work done by Gebruhe. They've done some work on ground penetrating radar looking for thicker portions of the channel, looking for potential upgraded areas. And we will do some work to back that up. And that will target where we want to go for our initial bulk sampling. We'll be doing the assessment work I talked about on the Ellendale tenements, and we'll be very quickly wanting to reestablish the resource statement on the overall project area. As I said, the plant is on order and fabrication is underway, and we're hoping to be able to be running these bulk samples through that plant within the Q4 of this year. So in summary, we're very pleased with this acquisition, as you might be able to tell. I point out on the slide, there are a couple of pictures there. The picture down on the bottom right is the Ellendale Mine Mine as it used to be. And I'd like to emphasize that shows what it used to be and it will never look like that again. It is the site has been cleared, but more importantly, that's the example of a 1990s, 2000s mine. Big footprint, large capital expenditure, large operating cost based on a much bigger mine than we're planning to build. So we won't have anything that looks like that. It will be much smaller. It will be much lower footprint, much more easily manageable remotely and we're looking at deploying all sorts of technologies that will change the way it operates. This project for us represents another step in the execution of our strategy as I said at the outset. It's a good building block. It takes us into mining and it takes us into producing diamonds. And it's an entry point into where we're going further downstream with this project and other future projects. So it may sound like a small step, and we've been promising something for a while, and I know the shareholders have been anticipating it. You may initially think this is a small step, but it's bigger than you think. And Burgundy itself is much bigger than this. There is plenty more to come, and we're looking forward to bring you more opportunities as we go forward from here. That's really all I want to say at the moment. So I'd be happy to take some further questions on that. We do have a number of questions in already. I know Adrian is gathering some more. So let's turn it over to you and I look forward to hearing some of your thoughts. Thank you very much. Thanks, Peter. Moving on to the Q and A. Our first question is, as a shareholder concerned about dilution, do you plan on including big parcels of shares in future acquisitions as you have done recently? It's only where it makes sense. So in this particular case, we were looking for a way of providing upside to GoodRover. We have ended up with a process that would give us 100% ownership. So the way of providing upside potential to their shareholders was in a share issue. It made sense from that perspective. It also made sense from the position we're in, where we do have a reasonable value on our shares. We saw that that was a way of capitalizing on that. But it's not a standard approach. We'll not be diluting for the sake of diluting. Where it's an effective way of doing it, we may do it again. Thanks a lot, Peter. Our next question. Generally speaking, small to mid cap resources companies get the greatest uplift from not only stewarding capital efficiently but by gaining S and PASX 200 or 300 index inclusion. What are the key strategies that beggar these management to obtain greater interest and sustain rerate versus retail interest? Well, I think we're doing what we said we would do. We're building a much bigger company than we started with and I've demonstrated we're on well on the path of doing that. It's all about being able to raise capital at the appropriate time and then deploy that capital in a sensible and a diligent way, which is what we've been doing. So we're looking, as I've said all along, to grow into a much bigger company. And the way we're going at the moment, I'm very pleased with the way it's going. And I think there's plenty of opportunity for us to continue down this path. The opportunities themselves may differ. We may get into other parts of the diamond business that we hadn't originally anticipated, but there are plenty of opportunities across the diamond space and we think we're on the path to becoming one of those companies. In regards to the updated resources numbers, will these be out before NTA for Allendale? I can't put a date on that yet. We have a fair amount of work to do, and we've only spent 3 days on it so far. So we'll do it as fast as we can. We understand the importance of getting a firm base on which to build this operation, and we'll be doing the correct work. Most of my team and myself included, this is our bread and butter. This is the kind of stuff we've done all of our lives. So we know how to do this, we know what's required, and we'll get on and do it. Just queuing up the next questions now. You've made 4 acquisitions in the space of just over a year with significant future development costs required for them with potential for future acquisitions in the future. You last raised $10,000,000 in August. Can we expect a big capital raising announcement soon? I really can't disclose that kind of information about where we're going on that. But what I can say is we for the acquisitions we've made so far, as I've said, they've been fully funded. In terms of the money that we need to put into Elmdale to develop it, as I said, we're starting small and we're building from there. We're looking very carefully at what we have left in the tin and what we will need to be deploying in the future. And at some stage, we will be growing the company. But at the moment, we have no definitive plans for that. We're well funded through for most of the rest of this year. Our next question is, are you in a position to provide a brief update on the Canadian operations, next steps and timing, etcetera? Sure. I kind of skim past our other projects because I anticipated there may be some questions. So, Nayak, the project we have in and earn an agreement with North Arrow Minerals, as we've said before, the bulk sample at Nayak, the first phase of that bulk sample will be starting in the middle of this year. So sometime in June, we will be deploying people to the site and the bulk sampling process will start pretty immediately. We did some excellent work with our partners last year in getting some of the sampling materials and the fuel shipped up north. So it's all ready, it's waiting for us. And in Canada, you're dependent on the weather for when you can start, but that's the plan. Middle of the year, that sampling program will run through towards the end of the year, and we should have results in the Q1 next year. So that one's on program. The other Canadian project, Nanook, we've really not done an awful lot of that. We've been looking at some of the information and planning where we can go with that. But we do have other priorities at the moment, and we think we have bigger prizes. So we're not ignoring our previous projects in making future acquisitions. We've always said that we're going to manage a balanced portfolio. And managing a portfolio is about making sure that you're refreshing that portfolio but also managing the projects you already have. And that's exactly what we're doing. The final question we have that has come through. In early March, you said due to COVID related delays, results from drilling results at Botswana were expected in 3 to 4 weeks. When can we expect results back considering that time line is passing? Yes. I realize the time line is passing. It's frustrating for all of us. The point is, Southern Africa has had 2 things happen in the Q1 this year. It's been an extraordinary rainy season, which impacted our drilling program initially, but then more importantly, impacted the transportation of sample material away from the site. Coupled with that, the pandemic in Southern Africa has had more effect than a lot of people realize in the news. Things like borders getting sampling material across the border took an awful long time. So we had a lot of delays on getting the sample to South Africa where it needs to be processed. I spoke to people this morning. The samples are in Cape Town, where they've been prepared for heavy mineral analysis, which will take place in Johannesburg. The forecast number now is about 10 days. I'd say about 2 weeks from now, we should be reporting those results. I understand the frustration and believe you, the most frustrated person is actually myself because I'm really keen to see what we've managed to do there. But the results are on their way. We have no further questions that have come through at this stage. Okay. Well, that's great. Thank you, Adrian, for those questions. And thank you, everybody, for tuning in and listening. We'll do more of these regularly. I'm hoping we'll have some more news for you in coming months. In the meantime, please have a look at our website to keep up to date with what we're doing. And we're trying to communicate with as many people as possible because this is an exciting story, and we believe it's something that's going to transform the diamond industry, which is what we set out to do. Thank you very much for your time. Goodbye.