Margaux Resources (TSX-V: MRL) – Parallels to an Early Osisko? (Transcript)

CRUXinvestor interviews Margaux Resources (TSX-V: MRL) President & CEO Tyler Rice, and Linda Caron, the Vice President of Exploration. Lots of near term deliverables with a huge project. Speaking to Linda Caron, who is currently in the field, she seems very excited about what they are seeing: “Everyday we are coming back with new finds. We could be working on this for the next 10 years and we’d still be making new discoveries. This is a very big project”. IAMGOLD’s Steve Letwin himself said in a recent interview with CRUX that “This is Osisko in the early days, it’s that good”.

Click here to watch the interview.


Matthew Gordon: Good morning Linda. How are you?

Linda Caron: I am very well, thank you.

Matthew Gordon: Wonderful. We haven’t spoken for a few weeks. What are you up to the moment? I know you’re out in the field which is why we’re speaking by phone. What’s happening?

Linda Caron: I’m up in camp. I’ve been here for about a week this stint and the crews…we’re on our second rotation of crew. Making great progress. Seeing a ton of stuff. Really exciting times. Every day, people are coming back with new finds. We’re doing mapping and sampling. Just trying to get our head wrapped around this project. It’s a very big project and it’s something with a lot of historic work. But it was focused in a very narrow area. We’re trying to just do a first pass visit to some of the other areas, to look and see what’s there. A lot of the historic work was on the Table Mountain side where there’s the high-grade veins. That’s not our primary focus right now. We’re really more interested in the bulk tonnage target. So just re-looking at known areas where people had been. They noticed something interesting but they maybe didn’t evaluate it from the point of view of the bulk tonnage mineralisation.

Matthew Gordon: We interviewed Steve Letwin recently. He was very excited by what you guys have got. So that’s Steve Letwin of IAMGOLD, CEO. He obviously has a position in your company. You’ll have been talking and when he talked to us 2-3 weeks ago, he seemed to feel that this was the equivalent of Osisko in the early days. Which is high praise indeed. What are you seeing there whilst you’ve been up in camp?

Linda Caron: It just blows my mind at the size of this system. The Taurus area which is where we have the 1Moz Inferred Resource. That’s about a 2km x 1km footprint. And not all of that is part of the Resource, but you can see the alterations continue. But if you go a kilometre away there’s another system that’s the same size, that’s really had…there’s no Resource for it. Had very little drilling. And right now, we’re working up on a target called The Lucky which has a similar footprint size. All the same things we’re seeing. We visited another one yesterday, totally different area. I’m just seeing big legs to this system. I think that the focus has been on Taurus and I’m confident that’s real. There’s Gold there. But I think that there’s a whole number of other Taurus’ out there just waiting for us to develop them. And obviously that’s a long-term plan and it takes a lot of drilling. I was saying to Tyler last week, I think we could be working here for the next 10 years and we’d still be making new discoveries. It’s just that big of a system.

Matthew Gordon: That’s really interesting. My guess, if it’s the size and scale that you think it is, you’re going to need some help sometime down the line in terms of partnerships, joint ventures. Is that part of the consideration? Or are we just focused on trying to identify what’s there now?

Linda Caron: I think for now we’re just trying to get boots on the ground and get a really good understanding of what’s going on. And then, obviously it’s going to take it’s going to take a bunch of money, to really fully test this area. And it’s a long-term proposition.

Matthew Gordon: Well I mean talking of which, and we’re going to speak to Tyler in a bit. You guys have just raised the next tranche of money and you’re doing it in small amounts, steady, and spending that frugally as you told me last time. What are you planning on doing with that money?

Linda Caron: I Think for now, we don’t want to be too dilutive and we really think the shares are undervalued. They’re trading at $0.11 today. So things are starting to move in the right direction. But I think for this season, what we’ll be doing is updating the 43-101 Resource for The Taurus. We’re going to be doing a lot of mapping and rock sampling, just to identify other targets that we may want to drill next year. And we’re taking care of some of the outstanding reclamation issues that the previous operators, of which there have been many, really didn’t do a great job of cleaning up after themselves and that’s become a problem with the ministry. And we wanted to come in and do things right from day one.

Matthew Gordon: And take the hit on the cost of that. Are we talking a lot of money? Or are we going to make sure that the most the money’s going into the ground?

Linda Caron: One of the things is there’s a whole bunch of old equipment. There are some assets that are really no value to us. The specific tyres for a specific piece of machinery that we don’t own anymore, that are probably worth a couple of grand apiece. And the idea is just to sell some of that stuff and that should cover the cost of a lot of the reclamation.

Matthew Gordon: Okay. You really are being quite frugal. And obviously-

Linda Caron: We really are! We’ve got an accountant as a President!

Matthew Gordon: I’m going to have to ask Tyler about this – his possible Scottish roots. So when we last spoke the shares were at $0.07 and they’re now at $0.11. Obviously, that’s very positive. Is that factor of the Gold Spot price going up or is that a factor of people starting to listen to your message?

Linda Caron: I think it’s a messaging issue. I still think we’re tremendously undervalued but I think we’re starting to get recognition. People didn’t know who we are. It’s a new project for us. And you can talk all you want but until you’re on the ground, it’s just talk. A lot of people were waiting for that June 20th shareholder vote from Wildsky Resources because that was sort of the final piece we needed to say that the deal was done. So since that day, we’ve had that news release you saw which had some of the historic drill results. And we just searched the database and we were looking for anything that was bigger than, thicker than 100 meters and better than a gram. And there are a whole bunch of those. And that’s a really good quality intercept and it’s a sign that the system is robust. It’s not just little veins with mineralisation spread over a big interval. We’re talking long continuous mineralised intercepts. And that’s what you need in these bulk tonnage systems. We’ve been waiting on that news release until we knew we had the property for sure. After that June 20th shareholder vote went through, we put that news release out. And I just think we’re starting to get attention. People are watching now, people are listening.

Matthew Gordon: I think that’s right actually. We’ve certainly had a few questions thrown at us with regards to what you’ve done after the last interview we did with you. People are keen to know more and we should arrange to speak when you are perhaps you back from the field with more of a view of what’s going on. But let me ask you about the announcement from last week, which was the Cassiar Drill data review. What were you trying to achieve and what picture has that been able to paint for you?

Linda Caron: What we were trying to achieve is to show people that this is a big robust system. And I think that those intercepts do that. Now the first one in the list, and I don’t have it in front of me, but we did two columns of data. One is actual assays, composited assays over the interval. And then sometimes there are very high-grade values because there is coarse Gold in this. If you happen to get a flake of coarse Gold in the core sample, the value is very high. If you don’t, the value is lower. One of the things that the industry typically does, is take that very high value and cut it way back to a more appropriate number. So we chose 30 grams to cut it back. And you can see the first interval in that table, the grade just about goes in half because it’s being weighted by a couple of really high-grade intervals. But the second one in the table doesn’t change at all. We’re quite confident that the Gold is there. The average grade is right and we may actually get an upgrade in values. One of the things we want to do when we drill it, is to use a larger core size. If we use HQ core, which is quite a large diameter, you capture a bigger sample. You have more of a chance of capturing those Gold flakes so getting a better representative estimate of the Gold’s value. All the previous drilling was much smaller. I think that by using bigger drilling we’ll actually see the Gold grade go up in that in that Resource.

Matthew Gordon: Well that’s exciting. That infers additional costs. Is that part of your planning in terms of your cost going forward?

Linda Caron: It’s not that big a deal. We’ve put out some tenders for drilling. We just told the guys what we wanted for core size and we got some really competitive bids in. I think the industry is a little slow right now. Drillers are hungry and people want to get in on the first program with us, on a project that’s going to go on for many years.

Matthew Gordon: Can we just talk about James Maxwell? Obviously, we know him from Sabina Gold & Silver. How did he get introduced? Why we brought him on board? What’s he going to do? What’s the value that he’s going to bring to the table?

Linda Caron: So that’s probably a better question for Tyler. I can speak briefly about it. But he and Tyler have a relationship. He’s certainly somebody that is known to our  technical team. We’ve all followed the successes in his career. He’s a technical guy. He’s very experienced in the junior sector. Sometimes we get complaints from shareholders that we’re not as tuned into the junior markets. We’ve got the big guys that can help us develop the deposit. But the process to get there is lacking and I think James is going to be a tremendous asset. He’s well connected in the industry. He’s well-respected and he’s got experience on this style of deposit.

Matthew Gordon: A note from the press releases, he’s responsible for finding 5Moz with Sabina which obviously helps. And of course, it’s quite easy to forget your ex-Kinross. You’ve got Kirkland Lake there and you’ve got IAMGOLD. It is big boy experience which I guess is very useful. But as you say, no bad thing to have someone like James come in and help at this stage. Okay Linda. Well thanks for the update. Let’s try and get something in the diary for when you’re back from your field trip and maybe have a proper chat then, and you can tell us about what you found.

Linda Caron: Sure. Let me give you one little anecdote before we close. So visible Gold in rocks is hard to find. And many geologists would go their career and not find samples with visible Gold. So yesterday, we’ve got a young fellow working with us and we’ve had him on some of these reclamation tasks. He’s just been here for a week now. And yesterday was his first day out with one of the geologists mapping. And they’re up at this new prospect, never been drilled and they come back at the end of the day, his first day in the field, and they found visible Gold. So super exciting. And it’s just every day is like that. Every day somebody is coming back with a new discovery, new alteration, new veining, new area. It’s just a really, really upbeat camp because it’s just so exciting.

Matthew Gordon: Well that’s genuinely fantastic. I’m very pleased for you. Long may that continue. We look forward to hearing more about it when we speak to you next.

Linda Caron: Yeah sounds great.

Matthew Gordon: Linda thanks very much. We’ll let you get back, I know it’s the start of your day there and you’re about to go and discover more Gold by the sounds of it today. We’ll let you do that. Thanks again for your time. Appreciate it.

Linda Caron: Thanks Matt.


Matthew Gordon: Morning Tyler. How are you?

Tyler Rice: Great thanks, and yourself Matthew?

Matthew Gordon: Not bad. It’s been a while. Good to catch up.

Tyler Rice: It has, lots of going on here.

Matthew Gordon: You’ve had some exciting news since we spoke. You’ve had James Maxwell join you, the Sabina Exploration Manager. That’s a great addition to the team. So why has he come on board? How do you know him? Who put you together?

Tyler Rice: I’ve known James for a number of years through mutual contacts. I connected with him at a number of mining conferences and as I got to know him in greater depth, and realising that he was a significant contributor to the growing of over 5Moz of Resource for Sabina and other properties that he’s been involved in. And having 20 years of experience as a manager and a professional geologist, he just really tweaked one of the gaps that we have within our organisation, from the junior mining perspective. Given that we’ve got Kirkland Lake, we’ve got IAMGOLD. We’ve got some great, big, strong names associated with our organisation, so we were able to fortunately invite James Maxwell to our special Advisory Committee, and he joins us Steve Letwin on that. And then rounds it out with Chris Stewart who is on our Board of Directors, who is the President of McEwen Mining.

Matthew Gordon: Pretty punchy Board and Committee you’ve got there now. I spoke with Linda earlier. She seems very excited with what she’s seeing in the field. Anecdotal at this point but she said she’ll come back on and tell us a little bit more about that in the next couple of weeks when she gets back. But to that point, you’ve raised a bit of money recently, for the next phase. Can you tell us how much you’ve raised? What are you allocating that to?

Tyler Rice: The second tranche that we’ve just recently closed of $550,000, Canadian of hard and $160,000 of flow-through is going towards mostly field work, mapping and getting our geos up to speed with the property, prior to dropping drill bits in. In addition to that, we’ll be updating our historic Resource that’s on the property for a million ounces of Resource. And we’ll also be working on a number of the reclamation matters that we inherited with the property. And that’s some low hanging fruit that we can clean up and move forward to build stronger community relationships, but also to demonstrate to the ministry that we are attending to the matters that were left behind by our predecessors.

Matthew Gordon: You’re having to stump up the cost for that. Are we talking significant money? We talking tens of thousands, hundreds of thousands, how much?

Tyler Rice: This year our budget is going to be around $78,000. Environmental costs associated with water monitoring and policy preparation with regards to some of the matters that were left behind. And the reason why we were able to get the property so cheap is because we have an ability to demonstrate our attention to dealing with these matters. And that’s part and parcel to the tailings remediation work that we’ve done in the past as well.

Matthew Gordon: Is that all going to come out of this current raise or whatever cash flow you’ve got left? Or is that going to maybe move over into the next raise, whenever that is?

Tyler Rice: That’s coming out of our current raise.

Matthew Gordon: And what else are you planning to do? Where’s the value coming from in terms of the next spend as it were?

Tyler Rice: The value for the next spend is really the lift on going from not having a Resource to having to a compliant 43-101 Resource. And that’s been engaged and kicked-off so that we can start the requisite QA/QC to move that forward so we can exit this calendar year with a compliant 43-101. And that’s to me the biggest value. We’re supplementing that with having our geos in the field doing the mapping, cataloguing historic information and going through some of the equipment on site that has substantial value but not necessarily to us. For example, there’s a number of wheels on site but we don’t even have the unit that is correlated to said tyres. So we’re looking at liquidating some of the assets on site that doesn’t have immediate value to our organisation. And that cash can then be turned around and utilised to create further shareholder value.

Matthew Gordon: It’s all small stuff in the scheme of things. The core focus has got to be the identifying where you’re going to drill. A bit more sense of what you’ve got. Obviously, you’ve been doing a little bit of this, a little bit of storytelling in the marketplace. Share price went from $0.07 from when we last spoke to $0.11 at the moment. Where do you think that’s come from? Do you think that’s just because the price of Gold has gone up or do you think it is because you’re better at telling the story in the marketplace? What’s happening?

Tyler Rice: June 20th was a strategic day for Margaux Resources as that was the day when the shareholders of Wildsky voted and approved the transaction. A lot of our ability to tell the story and get our message was subject to that approval. And now that we’ve bypassed that, we’re seeing Gold back into the spotlight it’s a combination of both. But given our ability to now state that we unequivocally have the Cassiar property, that gives us a stronger message.

Matthew Gordon: I think since we’ve been talking, you have always done what you said you were going to do. Which is great. We have talked in the past about identifying other M&A activity, and targets. Are those sorts of conversations happening?

Tyler Rice: Right now we’re looking at our current acquisition at the Cassiar and triaging the properties that were inherent with that acquisition. And as you’ll note from Linda, every day we’re coming back with new opportunities within the 60 ,000 hectares of land that we just inherited with the transaction. And so yes, we keep our eyes open for other alternatives in British Columbia. But we do have a bit of a blinder until we have fully triaged our recent acquisition.

Matthew Gordon: What have got, you’ve got 60,000 acres, or is it hectares?

Tyler Rice: Hectares.

Matthew Gordon: My goodness, that’s a small country. I guess you’ve got a lot on your plate as it is. But that would be interesting to see how that develops out. So what are you excited about for the next quarter?

Tyler Rice: For the next quarter, getting everything ground truth. Having our geos continue their mapping. When we have geos coming back with visible Gold, it’s exciting every day. And identifying where we’re going to plunk down that first drill hole. And then ultimately, looking at our 43-101 complaint Resource. I truly believe that’s the ultimate piece that’s going to move our needle more strongly.

Matthew Gordon: Tyler thanks for the update. Appreciate it. I look forward to getting the next piece of news from you. Let’s catch up in the next few weeks when things have moved long a bit.

Tyler Rice: Absolutely. Thank you for your time Matthew.

Company page: www.margauxresources.com

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