On Thursday 5th April, I sent an email to KRR with several queries. The following day, I received a reply prompting for my phone number. After providing it, Tony called me, but regrettably, I missed his call. Upon returning his call, we engaged in a discussion that lasted over 30 minutes, addressing the various queries I had raised.
To be fair to Tony, I must acknowledge, he was very courteous and patient and took the time to discuss all the queries.
Below is a summary of the key insights:1. During the course of our conversation, I was subtly told that management perceives the majority of the 3000 to 4000 shareholders as satisfied with the current progress, with dissatisfaction primarily stemming from 8-10 shareholders as evidenced by HotCopper posts.
a. I see no reason why the management shouldn’t think otherwise. Therefore, it is imperative, if you have any concerns or are unhappy with the current state of affairs then you should communicate your concerns via mail or phone to KRR. Else, the management will continue to assume the shareholders are happy with the current progress.
2. The possibility of drilling multiple sites concurrently was discussed. The primary challenge cited was the hardness of the rock in NT, necessitating geologist supervision to ensure accurate targeting. Once a drill deviates from its target, reorientation becomes difficult due to the rock's hardness. Consequently, drilling multiple sites concurrently would demand hiring additional geologists, leading to increased cash burn.
a. The company seems to be mindful of the operation cost and does not want to rush in and hire more geologist and increase the cost. The example I was give is with the current rate they could manage with 2 geologists. However, if multiple concurrent drilling had to be done, they would need additional geologists and that would increase the monthly expenditure.
b. I am not completely sold on the merits of this argument. While not hiring additional staff keeps the monthly operating costs low, the cost per activity is still high. For example, in the last 5 months we only had one round of drilling so even though the cost per month of having 2 geologists is say 25,000. The cost of geologist per activity is 125,000. Wouldn’t it be better if we spent that money earlier and had more drill results? Should the company also look at cost per activity rather than cost per period (month/quarter etc)? Let me know what you guys think about it and make a note of it in your communications with the management.
c. I would love to see a major up tick in drilling frequency, but unfortunately, I am not sure if we can expect that to happen. At least not till the management releases a schedule of drillings to come this year.
3. I was informed that the buyback plan remains active and would be triggered if the stock price falls below a certain threshold.
a. Upon reflection, it appears that the buyback initiative, being conditional on specific price thresholds, may not significantly influence stock price increases. Nonetheless, it should serve as a safeguard against the stock price dipping below a predetermined level for a certain duration.
Let me know your thoughts and don’t forget to reach out to the mgmt. if you are not happy or would like to see changes in the way company is going about the drillings
