Kalamazoo Resources (ASX:KZR) to IPO new lithium explorer

Kalamazoo Resources Limited (ASX:KZR) CEO and Chairman Luke Reinehr discusses plans to spin out the company's lithium projects into a new ASX-listed exploration company in an agreement with TSX-listed Canadian gold miner Karora Resources.

Tim McGowen: We're talking with Kalamazoo Resources (ASX:KZR) today, market cap of around $19m. We're joined by Luke Reinehr, who is both the company CEO and Chairman. Luke, welcome to Sydney.

Luke Reinehr: Morning, Tim.

Tim McGowen: Thanks for your time.

Luke Reinehr: Good to be here.

Tim McGowen: Now, for those investors who don't know Kalamazoo, can you tell us the company story?

Luke Reinehr: Yeah, of course. We're a gold company, primarily. We listed on the exchange about four or five years ago, but before that, we were a private company, started by my brother and myself, and so we're still the major shareholders with our management, so it's been a good ride. Focus has been on gold, but just in recent times we've actually had a lot of work in regard to the lithium space, and that's been very interesting for us.

Tim McGowen: Yeah, I was going to ask you about the lithium space. So, you've announced this week plans to spin out your lithium assets to establish a new company, Kali Metals, in a move that involves an agreement with Karora Resources. I think I pronounced that properly. Can you explain how the agreement is structured?

Luke Reinehr: We've entered into an agreement with a Canadian gold company called Karora Resources, who were listed on the Canadian Stock Exchange, the TSX. With Karora, they're also a very large gold producer just south of Kalgoorlie, and they produce almost 200,000 ounces of gold a year. But they've got a very large tenement holding to the south of Kalgoorlie that's surrounded by some of the biggest lithium mines, certainly in Australia, and some great deposits as well. So, as Kalamazoo's got some lithium projects as well, we thought it was appropriate to actually merge the two together and set up and do an IPO of a new company called Kali Metals, which we expect to list probably in about September this year.

Tim McGowen: Now, in December 2021, Kalamazoo entered into an agreement with Chilean lithium producer SQM at your DOM's Hill and Marble Bar lithium projects in WA. How's that partnership progressing?

Luke Reinehr: Oh, it's gone very well, Tim. SQM are the second-largest lithium producer in the world. Based in Chile, but they've moved into Australia over the last couple of years, and they're actually in a JV with Wesfarmers (ASX:WES) at the Mt Holland project. But their first exploration JV was with us, and they certainly liked our ground up in the Pilbara, the lithium. So, we entered into a JV, and it's been going terrifically well. They've got great expertise, as you can imagine, and we've done a number of drilling programs, and we've got another one to kick off just in the next couple of months, which will be quite extensive. So, we think they're a fantastic partner. And, of course, that JV now will go into Kali Metals, so we actually have now managed to move that expertise into Kali, which we think is going to be terrific. When Kali does list in September, we're probably going to raise about $10m or $12m, and, you know, we're looking then to really start some significant exploration programs, not just up in the Pilbara but also then on that Higginsville ground that Karora is vending into Kali.

Tim McGowen: And where does the Lachlan Fold Belt fit in this lithium equation? What potential do you see for lithium in that region?

Luke Reinehr: Yeah, it's a first-mover situation there, Tim. There hasn't been a lot of lithium exploration in the Southern Lachlan Fold Belt, but as you can imagine, you know, there's a big demand for ground that's got lithium potential. We managed to pick up that ground in Kalamazoo probably over the last 12 or 18 months. But there's a lot of tin, tantalum and tungsten in that area historically, and we think that's of great interest because they're pathfinder minerals for lithium. Look, it's a first mover, but we think that it could be very interesting for us.

Tim McGowen: And we touched on gold. Earlier this year, you updated your mineral resource estimate for the Ashburton Gold Project in WA. What were the highlights of that update?

Luke Reinehr: So, that resource now is 1.44 million ounces at about 2.8 grams. So, we increased the grade by about 10 per cent. But more importantly, most of that resource now is in the indicated category, which gives a greater level of confidence. But for us as well, about 75 per cent of that resource is in just one deposit, which is the Mt Olympus deposit. So, economically, then, that's changed the game plan for that. So, we think it's very positive for us going forward.

Tim McGowen: And, of course, you've significantly increased your gold tenure in Victoria by acquiring the Mt Piper project. What do you plan in Victoria following that acquisition?

Luke Reinehr: That's quite a large expansion, Tim. That's about another 1,600 square kilometres. It's more to the east of our historical gold fields at Castlemaine and South Muckleford. Look, we've had two of our geos on the ground there every week now for quite a while, identifying drill targets. So, we think it's very perspective, and we hope to be doing some more work there in the next couple of months.

Tim McGowen: And for Kalamazoo shareholders, what does the spin out of Kali Metals mean for them?

Luke Reinehr: Yeah, of course, Tim. As I mentioned earlier, the Reinehr family and management, you know, we're the largest shareholders in Kalamazoo. So, it's always been our view that we've got to look after the shareholders' interests, and our interests are aligned with all our shareholders. What we've done with Kali Metals is that when it lists, 25 per cent of those shares are actually going to be distributed to Kalamazoo shareholders as an in specie distribution. So, we think that'll create terrific value for them, and it's kind of like a reward or a dividend going forward. So, we think that's very beneficial for all our shareholders.

Tim McGowen: Luke Reinehr, thanks for your time.

Luke Reinehr: Thanks, Tim.