East Star Resources (LSE:EST) - Drilling Through 2027 on Kazakhstan Copper and Gold Assets

Matt (0:00)

Hello, everyone.

Alex Walker (0:00)

My name is Alex Walker, and I'm the CEO of East Star Resources.

East Star is a London listed copper and gold explorer and developer based in Kazakhstan. We have two joint ventures on copper development in the East region of Kazakhstan, and we have an exploration joint venture for gold with Endeavour Mining.

Matt (0:20)

Nice, good to see you, mate. Right, update from Kazakhstan.

Let me tell you what, let's start with explaining to people what your business model is. Talk about these partners that you've got. How you get structuring and building the business? Yeah.

Alex Walker (0:35)

Well, the business models changed a little bit, but I guess over the last couple of years, but it's started to develop into something that I'm incredibly comfortable with. Funnily enough, doing junior mining, you think you're quite a risky person, but inherently, I'm not.

Being more of a manager than a geologist, I look to de-risk a company from an exploration development perspective.

The way that the portfolio has evolved, particularly over the last 12 months, has been a partnership-driven approach. So it started with our copper deposit. We had a JORC-inferred resource of about 20 million tons at roughly 1.2% copper called Verkhuba. And we partnered with a group called Xinhai Hong Kong Mining Services Limited on that, where the job of them is to advance the project all the way through to production and carry East Star for that entire period. So that joint venture means that if it executes to the end, we will have a 1 million tonne per annum plant and East Star will have 30% of that production with no debt repayment, capital repayment back or waterfalls or anything like that. So for us, that's fantastic. It obviously takes a huge liability or future liability off the table in terms of development financing and risk from that regard. And it gives us very, very good see-through economics for what that means for shareholders today, not what the share register is going to look like because we don't know what the dilution is. And so that was our first joint venture. The next one that we signed was really off the basis of us being part of BHP Explore in 2024, which was a fantastic program and really pushed us in terms of developing our database and our mineral systems framework for exploration targeting. And we were able to secure an exploration joint venture with Endeavour Mining. These are a little bit more common in the mining space and exploration space. Although admittedly, usually it's a farm in for a particular license that a junior already holds. This one is a farm in with areas of interest defined with Endeavour. So we've selected two significant regions of Kazakhstan, highly prospective for gold, gold endowment, particularly intrusive related and origenic gold deposits and Endeavour are financing the stages of production, initially $5 million and then $20 million. And there's management fees and BITUS incentives for discovery. But ultimately, they carry us through to a pre-feasibility study result. So our hope is that exploration success there will bring another feather to our cap for a gold deposit in the portfolio as well. And obviously, working with a group that's in global major, also de-risks development financing and so on. So really, we think that's a fantastic approach for us to be able to do belt scale exploration with a major's budget while being a junior. And then, the last joint venture we signed was for Rulikar, again, for a slightly different reason, but another historic deposit like Verkhuba in the East region of Kazakhstan. It's a VMS deposit. It had different levels of information. We hadn't drilled this deposit and certainly, we were looking at it from it being a slightly more complex development scenario due to its proximity to a village and a few other things. So we've partnered with a local group that's built two mines, two copper mines in Kazakhstan.

Highly credible group that are assisting with permitting and now moving out into production. So that's a bit more of a detailed summary. Your question was about strategy. The strategy really evolved from the first one being we weren't being given much market value to take that Verkhuba project forward. And as it turned out, it started to really resonate very well with us, the ability to spend other people's money whilst retaining a meaningful percentage of each of these projects. So it's not quite a prospect developer model because we obviously have advanced these deposits considerably further, so we're not relying on defaulting back to a 1% royalty and potential income 10 years from now. It's more like a 10% or 15% royalty on these deposits because of the retained ownership.