Calibre's capital conundrum

Following consecutive quarters of record gold production, the company's cash balance has grown to US$100 million, which means it could engage in acquisitions to add to its development pipeline and further diversify its asset base or advance its Gold Rock project in Nevada, US, into production.

"We are not in any hurry to get Gold Rock into production. We could spend $60-80 million building Gold Rock, but would it be the best use of capital? Why build a new ADR plant there when we could haul ore from Gold Rock to our Pan mine? Said Hall.

With many gold developers struggling for cash and other under-capitalised junior producers in the space trading at relatively low valuations, mergers and acquisitions are also an investment option, but with their own potential drawbacks

"Even if we find the best asset at the best price, and it is really accretive, we could get crucified because we would take on a commitment to fund something else, and the market would look at that as another drain on our cash. People are looking for the negative rather than the positive," said Hall

Hall believes optimisation "around the edges" is the real opportunity for Calibre at the current time to maximise margins and free cash flow generation rather than headline production growth.

"Doing nothing is not an option, but we are not looking at production growth at any cost. The best value creation opportunity is delivering cash that allows us to do things with that cash," said Hall.

For example, the Palomino target near its Pan mine has a higher grade than Pan's 0.4gpt, which could boost its economics. "If we can increase the heap leach grade at Pan to 0.6gpt, that is a 50% increase in the metal placed on the pad, which would be very accretive from a cash flow perspective as costs are not proportional to grade," said Hall.