Golden Minerals (AUMN) – Generating Cash Flow to Fund Development

Golden Minerals.
  • TSX/NYSE: AUMN
  • Shares Outstanding: 1.48M
  • Share price C$0.45 (21.09.2020)
  • Market Cap: C$67.85M

Interview with Warren Rehn, President & CEO of Golden Minerals Co. (TSX/NYSE: AUMN)

Golden Minerals was formed in 2009. Golden Minerals is a gold-silver exploration and development company that is based in Colorado. With gold and silver both going on remarkable bull runs at this moment, Golden Minerals hopes to give investors leverage to rising gold and silver prices.

Golden Minerals is a multinational player, with gold-silver projects in Mexico, Argentina and the US. There are 3 core projects: Velardeña, El Quevar, and Rodeo. Velardeña is definitely the flagship but bringing the small (2-year life-of-mine) but economic Rodeo into production will give the company the cash it needs to develop Velardeña. Developing Velardeña has been a rather protracted process, with issues resolving metallurgy, but now it looks like Golden Minerals could be primed to pull the trigger. The cash flow doesn’t end there; the company smartly opted to lease out an oxide mill at Velardeña for the last 4-years or so, and an earn-in agreement at El Quevar with Barrick Gold was signed in April; that one will be a little longer in the making.

The share price has been quite volatile, but for the most part, it has been gradually heading North. Can this gold-silver mining story give investors returns or is it too small to capture the attention?

We Discuss:

  1. 2:44 – Company Overview
  2. 3:30 – US Project: Sand Canyon Update and Plans
  3. 4:21 – Projects in Argentina: El Quevar Update and Plans
  4. 6:35 – Debt Turns Into Bought Deal: Why & What Do The Shareholders Think?
  5. 10:06 – Mexico Projects: Santa Maria and Rodeo. Overview, Plans and Deals
  6. 16:02 – The Velardena Project: Financing, Acceleration, and Economic Potential
  7. 26:06 – Blue Sky Potential and Upside to Look Forward to

CLICK HERE to watch the full interview.

Matthew Gordon: Can you give us a one-minute overview of the business and then we’ll pick it up from there?

Warren Rehn: We’re a publicly listed company. We’re in the Gold and Silver exploration and mining business. We have been a production company before and we’re getting ready to go back into production with a Gold asset in Mexico. Most of our assets are in Northern Mexico, Durango State, but we do also have a major asset in Northern Argentina and some exploration property in Nevada. It’s a transition period for the company, moving back into production early next year.

Matthew Gordon: The US project in Nevada – San Canyon, are you doing anything with that? Has anything changed since we last spoke?

Warren Rehn: Nothing new, we had the first round of drilling. It was interesting, not compelling. We’re looking at where else we will focus within that large property position, but nothing immediate. It’s still a property we are maintaining and we’re doing some surface work on, but no big spend in the immediate future. And frankly, we’ve met our commitments until 2021.

Matthew Gordon: Argentina, El Quevar is something that you have got, well, Barrick has got an option on it, what have they been able to do? Are they encouraged? Are you getting any feedback? What do you know?

Warren Rehn: Yes, they haven’t really been able to sink their teeth into it yet based on the COVID restrictions in Argentina. Argentina shut down early and completely, and they really have not yet been able to get back up on the project. We’re delayed a bit on that and that’s been delayed since April. We expect that they’ll be able to start work now the southern hemisphere spring. But we don’t have any news to follow up on that yet, but they are still ready to go as soon as they can.

Matthew Gordon: Remind me exactly what their commitment is to that project?

Warren Rehn: They’re committed to exploration work totalling at least USD$1M over the first 2 years. They’re going to start with surface work. They’re very interested in the high-sulfidation epithermal system there, they think they can find a big Gold deposit. We’ve found a reasonably-sized Silver deposit that just wasn’t quite big enough to make it work for us. It was a great opportunity for us to get a big company here, a company who really knows the ropes in these types of systems to come in and see if they can be successful. They’ve got up to 8 years to complete their process. In order to invest, they have to come out with a PFS, Pre-feasibility Study on a deposit that has at least 2Moz of Gold or Gold equivalent in it in order to invest. And they need to spend USD$10M in a minimum spend over that 8-year period. We expect them to move a lot faster than that.

Matthew Gordon: And you’ve got no liabilities, there’s no expenditure required from your part?

Warren Rehn: No, they’ll cover all the costs. We merely have to make the basic structure in Argentina, and they’ll cover the camp costs, property costs and all their costs moving forward until they invest, and we are carried at 30% once they do. So that’s us covered.

Matthew Gordon: You were talking about raising some debt, you’ve ended up doing a bought deal instead. What happened?

Warren Rehn: We looked hard at the debt possibility moving forward and the terms were not attractive. When we got to a point in capital markets where we could do an equity deal without warrants at a reasonable discount, we moved that way instead. Our share price had increased quite a bit since the April deal that we did, a small deal. And so, it gave us the opportunity, which was better in our mind for the company and the shareholder to do it on an equity basis than a debt basis. The problem is, these companies are asking for way too much collateral for the debt that you’re acquiring

Matthew Gordon:What were they asking for? What were the terms?

Warren Rehn: Actually, the collateral that they’re asking for was basically all of our assets in Mexico which are potentially worth USD$100M, more or less, just discounted. And that was for a USD$4M debt deal. You look at that and you say, well, what could go wrong here? We didn’t have a permit in hand, you don’t know what’s happening out there in the world beyond your control. It was much more favourable to the company and to the shareholder, in my opinion, to do the bought deal. It’s a matter of limiting risk here. So that’s what we were doing.

Matthew Gordon: If you’re looking for USD$4M and they want USD$100M of coverage. I guess they didn’t value your assets the same way you did.

Warren Rehn: From their perspective, it’s a matter of having a part of a company that would be able to produce the kind of money that they needed to recover in a worst-case scenario. The problem is their worst-case scenario is pretty drastic and it doesn’t take into account the shareholder or the company. It would have basically left us in an untenable position moving forward if for some reason we’d had to give collateral up instead of repaying the loan. So that level of risk just wasn’t acceptable to me and to the board, so we’ve moved the other way.

Matthew Gordon: What was the feedback from the shareholders? Because I guess people go, ah, dilution again, come on. Have you been able to get any feedback?

Warren Rehn: Yes, the feedback was no, not again more dilution. It was perhaps a 15 to 20% dilution to the shareholder, but it gave us clear runway moving forward and we could move forward on more than just a Rodeo. We could also move forward on other exploration projects. We can move forward on plans at Velardeña earlier than we otherwise could. So, a bit of pain, but long-term gain and it completely de-risks our position moving forward, in terms of money in the bank. We have plenty of cash to do what we need to do. Now I can say categorically that we will not have to raise more money before Rodeo is in production.

Matthew Gordon: Let’s talk about Santa Maria first because you have, again, you’ve got an option where another junior company looking at that. What’s that deal look like and why have you done it?

Warren Rehn: Yes. Santa Maria was a focus for us since 2014, earlier on we thought we could build a production centre in the Parral area of Chihuahua, and that was going to be the basis. It didn’t get big enough fast enough. And we spent a fair bit of time and money moving it forward. It wasn’t quite big enough to capture our complete interest and get the board on the side and make a production decision. So we tried to find some partners in it, and we finally found a group, Fabled Copper, run by a guy who has had success in getting in the capital markets and getting things funded. Makes great sense for us as being too small a project for us to farm it out to a company that it’s the right size for. We’re pleased with the deal they’re going to pay us about USD$4M in cash over 2 years, USD$500,000 on signing and then we have a Royalty interest on top of that, which could, over the life of the mine, produce another USD$2M or USD$3M. More than pays us back. It’s a great little project for a smaller company and it removes a distraction from us. It’s just the way to go forward.

Matthew Gordon: Let’s talk about Rodeo, what you’re trying to do, then I’m going to get into the detail of it?

Warren Rehn: Rodeo is a Gold deposit within trucking distance to our Velardeña oxide mill. That’s an oxide mill that we’ve had leased out to Hecla mining company for 5 years. Their lease is ending in November of this year. And then we would obviously like a way to use that mill to make money. The best way forward for us with that asset right now with an oxide source is the Rodeo Gold deposit. It’s a small deposit, it’s close by. It’s about 90km from the mill. Haulage cost is low and it’s a high-grade open pit, low capital project that we can put together rapidly. We’re well on our way to getting permits to go ahead with it. It’ll produce about 44,000oz of Gold over about two and a quarter year at a cash cost of around USD$800 p/oz. So huge margin, very low capital, USD$1.5M capital cash before we actually make money. So that’s the spend going into the production period and we can gear up to have it running in January of 2021.

Matthew Gordon: But it is a 2-year life of mine, there’s not any exploration upside around it – this is purely to produce cash.

Warren Rehn: That’s the main, there is some upside and we will do some more work around it. But the key here is that you have to have a grade that allows you to truck and mill process. You can’t heap leach this stuff. It has to be milled, given the type of ore that we’re talking about. But then the milling recoveries are good. They’re in the 80% range. There is upside, I will do some more work on it but this gives us, the PEA was anticipating about USD$25M free cashflow net after tax. That was at $1,600 Gold, now with the sensitivities and looking at the increased Gold price that we’re talking north of USD$30M net after tax income over a couple of years period. So, a great way to cash up the company and move us forward to bigger things, including Velardeña and possibly additional exploration in Rodeo and our other projects.

Matthew Gordon: Let’s say USD$20M+ free cash flow, but that’s going straight back in the ground on your other projects, mainly Velardeña, right? I mean, that’s the intention.

Warren Rehn: Yes. And we don’t need that much. It gives us float to do what we need to do at Velardeña and do additional work and look at additional opportunities, which is really the way to grow the company. Velardeña is a great asset. It’s not a huge mine either, a narrow vein so you can’t produce it very quickly, but it does have a high value that we’ve unlocked using the bio-oxidation test work that we’ve done. We do need a bit of cash to make that go about USD$5 to USD$6M is what we think that’s going to cost us. And then a couple of millions just for working cap to get it going. But with the money we’re making from Rodeo, we’ll have more than enough there to move that forward and continue to move forward with our exploration plays:  Yoquivo, Sand Canyon, other opportunities, and there are many,

Matthew Gordon: Can we talk about Velardeña, there were some metallurgy issues for quite a while, which have been resolved? You have leased out the oxide mill for a period. Can you just tell us about that? The structure of that deal?

Warren Rehn: Yes. The lease out to Hecla mining company, they started that in 2015 and it’s been a 5-year run and we’ve been making about USD$5M p/an on the lease, free cash coming out after expenses. It’s been quite attractive to us. It’s helped us limit the amount of other cash we needed to raise, even though we have had to raise more capital to be a going concern. It’s been a very successful relationship with Hecla. They’re apt to have no additional needs going forward to use that mill again sometime, we’ll probably see some future relationship. We haven’t nailed that down yet. They’re still getting their permits for their oxide deposit together, or their additional oxide deposit. But meanwhile, the Rodeo fits in perfectly in the gap period after a Hecla leaves, until we have an additional source of oxide material, either from Velardeña, possibly, from additional material that Hecla wishes to run and, very significantly, from the bio-oxidation products that we will be able to produce from the sulphide mining at Velardeña.

So that has to be signed ideally then that would go to that oxide mill as well. It just doesn’t fill it up. We’d like to have additional feed sources down the road.

Matthew Gordon: Velardeña with Hecla, you mentioned the number USD$5M, is that per year or is that over the 5-year term?

Warren Rehn: Velardeña needs a capital investment to build the bi-oxidation plant of USD$5M to 6M.

Matthew Gordon: No, I got that bit. I was referring to the leasing component.

Warren Rehn: That was 5M p/a that we were getting from Hecla on that, so they started production in 2016, about half a year pre-production period there, but we’ve netted USD$20M from that lease since 2015.

Matthew Gordon: Obviously, covering GNA and so forth. But what were you spending that money? What was it going on?

Warren Rehn: We’ve moved forward on exploration projects over that period of time, including the Santa Maria, the work we did at Yoquivo, which was significant work at Sand Canyon. Our exploration folio in general, that has been invested in, including the work we’ve done on Rodeo, getting that ready. Frankly, people don’t realise it, but it costs a lot of money to run a small public company in the US, more in the US than in Canada. So, if you’re US-domiciled, you’ll spend more money than you will if you’re Canadian domiciled, by far.

Matthew Gordon: Have you changed your plan with regards to Velardeña yet?

Warren Rehn: Yes, we have. And in my mind, this is still tentative, needing board approval and things like that, but the board is well behind this effort, we can accelerate the Velardeña restart. The question is understanding exactly how far we can accelerate, how fast we can accelerate and to make sure that we could be profitable selling the other two concentrates. We make three concentrates from the sulphite material coming out of the Velardeña. A Lead concentrate, which contains most of the Silver values, a Zinc which is fairly low value. And then the pyrite con, which contains all of the Gold value essentially. We’d have to be able to make money on the Lead con, Zinc con. And I think we can in this environment. I need to do a bit more work, just confirming that we can do that with the change in processing to get all of the Gold that we can get into the pyrite concentrate because of the better payable.

Then it’s a question of how long can we stockpile that material until we have the bio-oxidation facility built? So that’s the open question right now. I think we can start and stockpile, then once we have the bio-oxidation facility built, then process. That would potentially allow us to start Velardeña sulphide mining in 2021, accumulating the pyrite concentrate with all the Gold values and then process that bio-oxidation plant, once we have it built, which will take about a year and a half from today’s date through engineering studies, through design studies, construction plans to actually get that facility. There are some time things here.

Matthew Gordon: What confidence do you have that you’re going to be able to accelerate the Velardeña effort?

Warren Rehn: The big-time consumer was figuring out which way to go; so you look at every possibility, we looked at and all the different options from autoclaves to some sorts of fine grinding oxidation roasters. Now, having selected with two independent, separate tests over a period of years showing essentially the same result, I have a lot of confidence that we know what we’re doing now and the way to move forward. Now it’s a matter of just getting the details of what’s the sulphur content, how much material are we going to produce? What the tank sizes have to be to make this work before you start to build, you just don’t want to build the wrong size facility. You have to build the one that works for you best, otherwise, you overspend. I’m quite confident that we know how to go about it. It’s just a matter of getting these steps organised and in place. And we have a contract from the local engineering company here, is headed up by probably the best bio-oxidation expert in the country. I’m very pleased with the work that’s been going on there. And then the support we’ve had from Tetra Tech, who has championed the process, I’m very confident that we know doing and that we can excel.

Matthew Gordon: Remind me of some of the numbers.

Warren Rehn: The PEA that we put out earlier this year, using three-year trailing prices, which are quite low, this is a $1,300 Gold price and a $16 Silver price, that study showed a net present value of around USD$80M for a 10-year project at Velardeña. When you factor that up with the sensitivities on the new pricing, that’s over USD$100M, well over USD$100M and almost double what the PEA was suggesting at current prices. It’s a very dramatic prize for us to go after, for a company with a market cap of USD$65M. You see what we’re looking at here. We’ve got Rodeo in production; it gives us the cash we need to go forward on Velardeña. We move Velardeña forward as rapidly as we can, but being conscious and careful at every step, not overspend and not to waste money,

Matthew Gordon: What’s the next step with regards to Scoping Studies? what’s happening next after the PEA, again, timing in terms of accelerated timing, how do you drive this?

Warren Rehn: We’ve engaged the engineering company to do the studies. They’ve done a gap study to see what we need to do to actually make it to the next step. Our next step will be getting new material out to do flotation separation studies, to further characterise the exact characteristics of that iron ore and our senior pyrite concentrate. We know what size plant to build and what we’ll need to neutralise acids and keep the oxygen or the air moving through it. So that gives us the construction plans and the blueprint, basically, of what we need to build. And then we can move forward. If you don’t have the blueprint, you can’t build it, so it’s that series of steps.

From today’s date to completion, a realistic time schedule is about a year and a half to having that bio-oxidation facility built. Then the question is, how soon before that, do we start the sulphide production in the stockpile? We can process more of this material faster, basically, while still taking advantage of the sulphide production from Velardeña in the current price environment. To me, it works.

Matthew Gordon: Velardeña – there’s a lot of work to come, but it’s going to be self-financed. Where’s the blue sky coming from, because this is all a little bit small. Where is the blue sky upside coming from and can you fund it?

Warren Rehn: Yes, there’s a couple of obvious things with the current projects. One is exploration potential at Rodeo, we’ll carry that forward. As we’re producing, we’ll do the exploration. We’ll see exactly how much that can be increased in size – that would be the low hanging fruit. We’ll do that for sure. But the Velardeña resource is open at depth, it’s a small property, but these veins go deep, and we have evidence that there is another more than 500m of the vertical extent to the system based on drilling in hand. We know we can make that bigger and it’ll last longer, that increases value.

Then we have our portfolio of exploration projects, one of which we’ll be able to drill this fall; the Yoquivo district. It’s an epithermal vein district in Chihuahua, just on the East side of the Sierra Madre, great location, veins that are known, they’ve produced in the past in a historical fashion and we’re ready to go. We know of grade material on the surface, we have the drill permit in hand. We’ll have results on that by the end of the year. And we’ll know if that’s going to be a potential, big focus for the company after Velardeña, or to bring on next in the pipeline.

We will also continue in Nevada with the Sand Canyon project, great location, great project, interesting results, but nothing compelling, but we know there’s more to be done there as well. We also have an exploration portfolio in Argentina. As soon as we can move forward in Argentina. This is outside of El Quevar? That also looks quite attractive and frankly, one of the better properties I’ve seen in my career down there that we’re trying to move forward. So, there is exploration upside in the company and significant and that’s going to be basically able to be explored, self-financed from the cash flow from Rodeo and Velardeña. So that’s the model and that’s the blue sky.

In addition to that, Barrick success would change this company overnight into a very different beast. They find the 5Moz Gold deposit that they’re looking for, our 30% will be worth well more than any of these projects put together. There’s great blue sky there.

Matthew Gordon: If things happening in the right order for you. What I want to see from you is some accelerated delivery plan to take advantage of the current environment.

Warren Rehn: That’s exactly what we’re putting together. We will do that now. There is no question in my mind, we’ll be able to accelerate. And as we continue to get news flow from Rodeo, get the permits in hand, which I expect this fall, we get that put together and we go from there. We have our contractor in place. We start preparing to mine and we’ll be ready to get that ore moving to the mill early next year, January, and then be pouring Gold in late January, which would be a great step forward for us.

Matthew Gordon: Beautiful, Warren. Thanks very much for the update. Lovely to speak to you again. It’s great hearing what you’re up to. Give us a call when things start happening and especially looking forward to seeing if we can’t hit those deadlines. Appreciate it. Thanks again.

Warren Rehn: Thank you, Matt. Great talking to you.

Company Page: https://www.goldenminerals.com/

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Salazar Resources (TSX-V: SRL) – Cause We’ve All Been Painted by Numbers (Transcript)

Interview with Merlin Marr-Johnson, Director of Salazar Resources (TSX-V: SRL).

We really like this business model and we like Marr-Johnson. Both are smart. They have farmed out the first copper-gold asset, the El Domo Curipamba VMS discovery, and received a Royalty payment, ongoing management fees and can lease out their 3 drills. Plus they are fully carried for 25%. That takes them to c.$5M in the bank to continue exploring other portfolio assets. Salazar has 4 additional copper-gold assets and other licences in the hopper.

In addition, they have a zinc-exploration JV that contains two projects, Pijili and Santiago with Adventus (80%) funding all activities in the Alliance up to a construction decision on any project.

Geologist Fredy Salazar, ex-Newmont team leader in country, has been exploring and discovering major copper-gold assets in country for 20 years. Listen to Marr-Johnson’s numbers. He paints a very exciting picture. You have to work out if you like this model and if you think he can deliver it.

Ecuador is a country that major mining companies are rushing to because it is under explored but is already showing its potential for big, big projects. Salazar will continue to farm out some of the projects , but are very keen to 100% develop one or more of their own.

Interview highlights:

  • Company Overview
  • Background Story: What Interested Merlin to Get Involved?
  • Team Experience and Ecuador – a Mining-Friendly Jurisdiction?
  • Business Model and Creating Value: What Have They Done so far?
  • Assets and Focus
  • Managing Finances: Where are They Spending Money and Where Will They Look for More?
  • VMS Deposits: What’s Special About Them?
  • The Future: What are They Excited About for Next Year?
  • Why Should You Invest in Salazar Resources?

Click here to watch the interview.


Matthew Gordon: Hi Merlin. You are involved with Salazar Resources, this Ecuadorian miner. I had a look, fascinated by the business model and that’s really what I want to talk to you about today. But let’s kick-off if you can give us a one minute summary of the business for people who are new to this, and then we’ll pick it up from there.

Merlin Marr-Johnson: Salazar Resources is an exploration company listed on the Venture Exchange in Toronto and Vancouver. It’s got a market cap around USD$15M and it is a prospect generator in some ways, it’s got an asset that its been fully carried on through to production, and its got its own portfolio that its looking to explore and develop.

Matthew Gordon: Right, we’re going to get into the model in a second, but maybe lets start with how did you get involved? Who did you know in Ecuador to get involved with this project?

Merlin Marr-Johnson: Arlington Asset Management bought a stake in Salazar Resources last year, in the middle of 2018. I was invited down on a site visit at the end of last year, I’m a geologist, I speak Spanish, and I was potentially going to be asked on as a non-executive director. When we looked at the company we were very impressed by the geology and by the team and the model, what they didn’t have as much strength in was a capital markets presence, and at that point they asked me to join as a director. So, I’m actually an executive director of the company, responsible for Corporate Development.

Matthew Gordon: Right, so Arlington Funds which are based here in London is the introductory point.

Merlin Marr-Johnson: Yes.

Matthew Gordon: So, let’s talk about some things you mentioned there. So you met the team, you had a look at the geology, so can we start with the team. Ecuador is quite a nascent country for mining, is it not? What can you tell us about it?

Merlin Marr-Johnson: Just a little bit on Ecuador before we get onto the team, if that’s okay?

Matthew Gordon: Okay, let’s do that.

Merlin Marr-Johnson: Ecuador as you know, right on the Andes, and the mineral deposits of the Andes are prolific; the Copper production in Chile through Peru, and the geology doesn’t stop at the border, it carries right through Ecuador and into Colombia. But over time there’s never really been a development of a mining industry in Ecuador, principally because the fiscal regime has been insufficiently attractive to get the miners in there, and they’ve been really promoting the tourist agenda.

There was a socialist government that came in, in 2010, that was very-very pro the environment and pro tourism, they want to be the greenest economy in the world, the problem was they couldn’t fund it. That socialist government over the course of its 7-year administration turned Ecuador into a proto-mining economy; they realised that to fund their deficit, to fund their budget they needed to bring in foreign direct investment, and they needed to bring in export earnings, and the only industry that was left for them to grow in was mining. The ex-growth of agriculture, the ex-growth of tourism, the oil industry, and they had this phenomenal geology but no mining industry. So they really started reforming the mining code, they dropped the windfall tax which had been put in earlier, and they did a review of all the mining codes across South America and looked at the tax regimes, and then they brought Ecuador in line with that.

So, that’s an ongoing process, and from that basis the country is opening up and yet it hasn’t had the exploration that all the other countries have had, and that combination of the same geological potential but without the advanced exploration, means if you want to find Copper-Gold assets in the world anywhere now, you go to Ecuador.

Matthew Gordon:  Do miners have to find a different way of working in an environment like that? Is it going to be more costly to work in an environment like that, or is there a dose of realism within the mining code which is being constructed at the moment?

Merlin Marr-Johnson: I’d say there are three elements to that question. 1. Is that all the miners are looking to come into Ecuador, everybody is looking for Copper-Gold assets, so all of the majors are suddenly interested in Ecuador. There’s competition for assets and there’s competition for ground, and there’s competition for good people that know the country.

Matthew Gordon: But from meaningful companies, sizeable companies?

Merlin Marr-Johnson: Rio Tinto, BHP, Newcrest, Anglo-American, all the big guys are in.

The other thing is, it is evolving slowly, so you can’t just build the mining industry overnight. The government regulations have changed, for example the mining cadastre, the mining department closed in 2018 or maybe late 2017, and it’s not going to reopen until Q3 next year.

Matthew Gordon: Why?

Merlin Marr-Johnson: There was a flood of money that came into Ecuador, they were just trying to work out how to handle it. People on the explorational licencing were promising too much money in a four year term. Their investment plans were unrealistic and it was viewed that perhaps some companies were doing a land grab, and they weren’t going to follow through the exploration expenditure. So now they’re just in regulation that we believe, so that the mining companies that take out an explorational licence will have to spend the money, and be accountable for it, and if you don’t spend a certain proportion in the first year, you lose your licence.

Matthew Gordon: Which happens the world over.

Merlin Marr-Johnson: They’re tinkering, they’re changing the mining code. So, just coming back to question, the three things. 1) All the big guys are there. 2) Its an evolving industry. 3) That there will be winners and losers in Ecuador. It’s one of those countries where because you don’t have a history of large scale mining, or industrialised mining, there’s a lack of awareness. There are communities that don’t want mining, or don’t know what mining comes, and change is difficult to assimilate on any level in any society, and in Ecuador its no different; you say, ‘We’re going to build the mine’, and people say, ‘Is that going to affect me negatively?’ So you have to go through this education process, and the winners will be the ones that can manage their community relations properly.

Matthew Gordon: I think these are common problems, common threads through different countries around the world, but I agree with you. Can we talk specifically about what you think you’ve come into, like I’ve said, this is the exciting bit for me; the model that you have employed, or the company has employed to move forward excites me, I’ve seen this work elsewhere. Can you explain what you’ve done.

Merlin Marr-Johnson: Well, the reason why I got excited about it, is that I’ve worked on the by-side for 5-years, and I worked as a mining analyst for 6-years, and I run exploration companies. One of the things which is a real differentiator in a company is, when you have an income stream and when you’ve got an asset of significant value that de-risks the downside to your investment.

Matthew Gordon: Right, so what have you done?

Merlin Marr-Johnson: Salazar Resources made a discovery in 2008 called the Curipamba VMS deposit, it’s a volcanogenic mass of sulphide, they drilled it out and they’ve farmed it out. They farmed it out to a partner who is investing USD$25M to take it to a Feasibility Study by 2021, and then they’re going to continue to fund it, all the way through to production. So, Salazar Resources is carried on a 25% stake, all the way through to production.

Matthew Gordon: What does that mean in terms of dollars, what’s the income?

Merlin Marr-Johnson: The income up until it gets into production is based on advanced Royalties, and a management fee of 10% on the basis of a minimum of USD$3.5M a year. So, we’re talking hard numbers, USD$600,000 minimum a year income to the company. In addition to that, Salazar Resources owns three drill rigs which it contracts out to the partnership, and to third parties, and we anticipate about a USD$1M coming in from that, on an annual basis.

Matthew Gordon: On top of your $600,000?

Merlin Marr-Johnson: On top of the USD$600,000.

Matthew Gordon: Interesting.

Merlin Marr-Johnson: So, the base position is, we’ll be income generating USD$1.6M, possibly up to USD$2M on an annual basis.

Matthew Gordon: For a small company, an exploration company, that allows you to do what?

Merlin Marr-Johnson: That allows us to fund on a discretionary basis our 100% owned portfolio. We are an Ecuadorian team, the headquarters is in Quito, and we can do extremely low-cost effective exploration in Ecuador for a small amount of money. So, that USD$1.6M goes a long way, and I should add that we’ve got about USD$3.7M in treasury anyway, which is a function of previous income, and sale of some shares that we got as part of the farm-out deal.

Matthew Gordon: That’s interesting, that’s a very good start. So, you’ve got some 100% owned portfolio assets, are there any which would take the lead there? Are you focusing on one, or several at the same time? How do you intend to spend your time and money?

Merlin Marr-Johnson: At the moment we’ve got four licences which are 100% owned by us. I want to say, we’re not just stopping there at that four. Before the Mining Cadastre closed we applied for five or six permits beforehand, and we hope to get a couple of those through, they’re in process. We’ve also done prospecting over the last couple of years, we want to apply for another 10 to 12 licences afterwards. So, we know that we actually want to grow our licence portfolio.

Now, in terms of where we want to put our money, and how we want to do it, it all slightly depends on how we can trade our cards, because if for example, we can do a farm-out on one licence area that comes with a cash payment upfront, and is fully carried, then we can use that money to invest into one of the other projects, so we can play things around. But if I was to pull out a priority asset I would focus on the Rumiñahui porphyry target, which is in the northern portion of Ecuador, and there’s a line of porphyry’s. It goes the SolGold Cascabel deposit, which as we know is a billion tonnes here or there at around 0.6% Copper equivalent. Then you travel 55Kms to an asset called Yurimaguas which is owned by Codelco, and that’s over USD$1Bn, and that’s at 0.8% Copper equivalent combined.

Then 22Kms on from that is Rumiñahui which is the asset that Fredy Salazar has been looking at for over 20-years. We’ve got the licences over that, and the preliminary work that we’ve done on that indicates that it’s a porphyry, and that its Gold-rich, and that it’s a large system.

Matthew Gordon: Okay, we’ll come onto that. I want to stay on the, how do people make money bit, which is I think is why people watch this. So, you’ve got a model you’ve employed which is identifying a target-rich property, you farm it out, retain or you’re carried for…?

Merlin Marr-Johnson: 25%.

Matthew Gordon: 25% of that. You may get a lump sum cash amount for that, or not? But you will get some income in the shape of management fees, perhaps leasing out your drill rigs, and what was the other…?

Merlin Marr-Johnson: Advance Royalties, but that’s all within the USD$600,000.

Matthew Gordon: So replicating that model kind of keeps you ticking over and developing more and more of your portfolio as you build this out.

Merlin Marr-Johnson: Yes.

Matthew Gordon: So you’re an incubator as such.

Merlin Marr-Johnson: We are an incubator but talking about making money and where the share price could go to, or where it should be for example, the Curipamba VMS that we’ve farmed out is at the PFS stage. Earlier this year we produced a PEA that gave an NPV of USD$288M on base case. So, our base case NPV was USD$288M and we are 25% fully carried on that. Now, obviously there has to be a discount applied to that because we’re a few years away from production, so what is the right price for our 25%?

One way of looking at it is to look at the value of our partner, which is pretty much a single asset company, and its earning into the Curipamba Project, and they’ve got a market capitalisation of USD$75M, but they have to keep funding the entire – they have to carry the whole thing. So, one could say that our 25% should be at least USD$25M, if not more, because their 75 for 75%, and our 25 to make the 100%.  

Another valuation yardstick is a Royalty that was bought on that VMS project, 2% Royalty was bought for USD$10M earlier this year, and I use a rule of thumb equity to Royalty of around three times, which puts our 25% at a value of about USD$42M. So, we’ve got these yardsticks, let’s call it more than 25 because we don’t have to be diluted, and within USD$40M, so, let’s call it in the $30’s. Our current market cap is $15-16m, so in a sense just on the value of the 25% stake you’re looking at a 50% discount to fair value.

Matthew Gordon: Okay, I’ll buy that.

Merlin Marr-Johnson: So, a potential double on the share price right there. Then you throw on top of that the fact that Ecuador is the hottest country globally at the moment, because of the way the government is going, the fiscal terms, and the geology. The fact that we are an exploration team with a really good footprint of licences within Ecuador, and the fact that Fredy Salazar who is head of the company is recognised and renowned as probably the best explorer in Ecuador.

Matthew Gordon: Yeah, I think there are people who will give you credit for that, and some people who will see it in the opposite direction, because Ecuador is early stages. So I think just to be fair in all of this I think you’ve got some great things, and you’ve got some unknown things.

Merlin Marr-Johnson: Oh yes.

Matthew Gordon: Again, it comes back to this model for me, I’ve seen this work extremely well elsewhere, and I like that you’re employing it, and you’ve actually done Stage 1, you’ve got advance payment, and in terms of Royalty you’re getting management fees, and you’re getting the rig fees, and you’ve got this portfolio of assets where you can replicate, replicate, replicate. Accumulatively, it could be very meaningful for you without necessarily needing to go and raise significant cash or dilute shareholders. So, that’s the bit that interests me.

So, Fredy’s knowledge of country, he’s been in country I’ve read 20-odd years, and has worked for…

Merlin Marr-Johnson: Newmont.

Matthew Gordon: Newmont, so again it’s not amateur local stuff, this is a significant global leadership player that he worked for and led the team for. So, I like that his knowledge is extensive, I like the fact you’re picking up these licences; the question is, when are you going to be able to start moving this thing at a pace? You will have circa USD$5M available to you, can you break that down for me a little bit more, I know you’ve kind of touched on it but break that down for me, how do you create value? How do you take that USD$5M and create significantly more value for shareholders?

Merlin Marr-Johnson: We’ve got four licences that we are taking up the value curve through exploration, three of those are in Ecuador, one is actually just over the border in Columbia. Our plan for 2020 will be to drill 2 or 3 of those licences in Ecuador, we’ve got a budget for 8,500m of drilling, and 3,500 of those will be at Rumiñahui. We are waiting for water permits in all our licences, and that has actually been a delay across Ecuador throughout 2019, and the Mines Ministry is on it. The Head of the Water Board was blocking the issue of water permits for exploration drilling, there’s been a change in the Water Board, the new Head of the Water Board is someone with environmental and mining experience, he’s an engineer within environmental credentials, and a mining engineering degree.

So, the water permits are coming through more quickly. We expect to have our first water permits through in Q1, which will enable us to start drilling. We anticipate drilling Rumiñahui in the second half of the year.

Matthew Gordon: For how long, is it seasonal there?

Merlin Marr-Johnson: It’s not seasonal. We’ve budgeted a meterage of 8,500m as a total plan for the year. What then will happen, it will be slightly dependent on Copper prices and what we discover.

Matthew Gordon: And these are your own drills, so the cost must be relatively low, presumably.

Merlin Marr-Johnson: Yes.

Matthew Gordon: So, where are we with this $5m after you’ve done all of this? How much have you spent?

Merlin Marr-Johnson:  Our plan is around USD$2M, and its discretionary, so the smaller amount of work is about USD$2.1M and it dials up to USD$3M depending on what we find. Now, we don’t of course want to run the treasury down to below USD$2M, so we’ll always tailor our expenditure carefully with what we can see in terms of the deal flow.

Matthew Gordon: Are you having conversations now with companies about Rumiñahui? Or, are you going to wait until you know a little bit more? And what’s your expectations of what a deal could look like, what type of deals are you looking for from whoever you’re going to be speaking to?

Merlin Marr-Johnson: Yes, yes, yes, all of the above. Because Ecuador is a country of great interest to all the major mining companies, the eyes are on Ecuador and people are looking for the next Cascabel. Fredy Salazar is well-known, and if you are the exploration director for a major company one of the first things you do when you come into a country like Ecuador is, you call up the team that knows what’s going on. So, we get a lot of inbound from the guys saying, ‘Hey Fredy, what are you up to?’ He’s well respected within industry, and critically its not just him, so between him and his two colleagues, we’ve got three geologists who between the three of them have made a lot of the discoveries in Ecuador over the last 20-30 years.

Matthew Gordon: Anything we’ve heard of?

Merlin Marr-Johnson: Fruta del Norte, and the Lundin Gold asset. Success has many fathers, he was involved in that, there are a number of other assets you might not have of as well, and of course Curipamba which is the VMS project. You mustn’t forget that Rio Tinto got started on a VMS, Agnico Eagle got started on a VMS, Lundin Gold got started on a VMS, old Lundin Mining, these are…

Matthew Gordon: Explain to people why they possibly should look at VMS-type projects, because we’re looking at a few, and its all down to the reporting what you can and can’t report, but VMS projects tend to be a lot bigger than exchanges that allow you to report. Tell us about what you know about the VMS structures in Ecuador.

Merlin Marr-Johnson: VMS is globally, they tend to come in clusters, and so what happens is, you drill off one of the pods, and that is really where you are restricted in your reporting, because you will drill off a pod and it might be 2-3M/t of ore. It’s high-value ore, but it’s still only 2-3M/t. In fact, if you look at it in the distribution base, most are 2-3M/t.

Matthew Gordon: And it’s restricted why? Because in terms of the depth that you’re allowed to report on?

Merlin Marr-Johnson: They are fossil black smokers on an ocean floor, and they just form in a oner, it’s a unit, but there are several of those in the cluster. Now the Curipamba one is we’ve got 9 M/t in measured and indicated resources at 2% Copper, and 2.6g/t Gold. It’s 5% Copper equivalent at surface, which means that the NPV is high, the capital is low, the margins are great, and that’s where you make money on your VMS’s.

Now the other thing is, that if you look at the discovery of VMS’s globally, they’re very dense and they appear on gravity. So people do mag surveys and then they sometimes come back and do a gravity survey, and if you look at the Iberian Pyrite Belt, Southern Spain and Portugal, all the big discoveries are made by gravity. So Lundin got going on Neves-Corvo, Rio Tinto, on Rio Tinto it’s the name of the deposit down there, and we’ve just flown the geophysics at Curipamba, it’s a 9M/t core to that deposit, it’s a much bigger licence area. Watch this space.

Matthew Gordon: Okay, so you’re excited by that, but what else are you thinking the end of next year? You’re answering the question of, yes, yes, yes, talking to lots of people, optionality, but what are you hoping for?

Merlin Marr-Johnson: The first stage is to get CEAs with the right groups. The first met farm-out we did was with Aventis Mining which was a start-up company, obviously now for something like Rumiñahui which is potentially a very large porphyry target, you’d want to be going higher up the food chain in terms of capability and size. So, we would want to have signed a number of CEAs with majors, and potentially we want to do the first phase of drilling by ourselves.

Now, if a major comes in with an offer beforehand, which is sufficiently attractive in terms of an equitable funded approach to the development, or the exploration of Rumiñahui, we might consider it. We’re not drilling it until the second-half of the year, so we’ve actually got some space to talk to some of the majors whether they really are serious about striking up some kind of farm-out.

Matthew Gordon: I guess what investors would want a sense of is, your ability to preserve cash, create value, and that means making sure you’re not spending more money than you need to, whilst having these conversations, because its all in the negotiation if you’ve got enough data to have that discussion.

Merlin Marr-Johnson: Yes. The amount of data we’ve got is relatively limited.

Matthew Gordon: That’s my point.

Merlin Marr-Johnson: We’ve got geological context, we’ve got outcrop, in one of the riverbeds we’ve got 55m at 2.7g/t, it’s a great outcrop. We’ve got a lot of Gold, we’ve got a lot of Copper, we’ve got a lot of context.

Matthew Gordon: Yes, but negotiations are done, effectively with more information.

Merlin Marr-Johnson: Yes.

Matthew Gordon: So that’s what I’m saying, I’m intrigued in how much you’re going to spend. Will you have enough cash to get to the point you need to…

Merlin Marr-Johnson: Yes.

Matthew Gordon: …without diluting shareholders at any point soon?

Merlin Marr-Johnson: There are precedents of good at farm-outs in Ecuador on slightly more advanced assets. We also know that there are groups out there looking for relatively earlier stage joint venture programmes on areas of interest, and Rumiñahui certainly falls within that. It changes the tenure of the conversation, how advanced your asset is or not.

What I would say is that we’ve got the capital, the drill rigs, and the time to do our first 100% owned drilling programme on Rumiñahui. And I would just add in that, is that we always want to have a flagship asset that we control, and that we can take on 100%. We’ve got Los Osos which is a high-grade Copper-Gold project on a much smaller licence area, that we’ll be drilling on 100% basis. We’ve got a Macara project which is a Gold target, and of course if the mining cadastre opens in Q3, and we get some of the licences that we’ve applied for 2-years ago, then suddenly we’ve got more properties with which we can trade. And so if there’s a bit drill out on Rumiñahui that perhaps is not within our budget to fund, we’d be more willing to take it on.

Matthew Gordon: You said right at the beginning, you’re a markets guy. I know you’re a geologist, you run companies, and you’ve been an analyst, and so you’re a markets guy compared to the team that is currently there.

Merlin Marr-Johnson: Yes.

Matthew Gordon: So, is there expectation that you’re going to go and raise some capital? Are you going to need to, or is this just about helping them construct better deals with these farm-out opportunities?

Merlin Marr-Johnson: We’re not planning on raising capital, as we’ve got almost USD$4M, we’ve got USD$1-USD$1.5M coming in, maybe up to USD$2M. At the end of next year it depends on what our opportunity suite offers, and ideally we will have structured a farm-out whereby we can continue to fund our main assets, and we continue to earn money from our drill rigs, and we continue to earn income from advanced Royalties and the management fee, we may not need to raise capital. If we suddenly decide that the best use of shareholder funds would be to drill an asset 100%, then of course we would consider it, but its not in the plan.

Matthew Gordon: Okay. So, I’m excited, you’ve said you’re excited about the opportunity here. We’ve done a lot of work on this before we came to speak to you today, why do you think shareholders should be excited? So let’s talk about the financial side of things, you’re a public company, $15m market cap, inconsequential in the scheme of things, there’s lots of companies in and around your level, why you guys?

Merlin Marr-Johnson: We’ve got two things, we’ve got risk protection, and we’ve got upside potential. So, the risk protection is the income from the advanced Royalties, the drill rigs, and the management fees, and the other side of the risk protection is, the fact that we’ve got 25% stake in a fantastic asset that is marching on the way to production, and our share is going to grow in value from USD$35M to USD$100M, as a ballpark trajectory. 

Matthew Gordon: Without necessarily needing to dilute?

Merlin Marr-Johnson: We don’t have to invest a single cent in that, that’s all carried, we’re fully carried in that asset, and that’s Curipamba in the joint venture, and that is an investment case on itself. Now in addition to that we offer the sex and violence of exploration, the opportunity to have a transformational discovery on any one of our four properties, and knowing the interest that we’ve got in country, and from the majors that are in country, we’ve got the opportunity to do that on a funded basis as well, if we can get a farm-out.

Matthew Gordon: Interesting. So, to make sure I understand this, you’re saying with Curipamba, with Rumiñahui potentially, and the others in your portfolio, from those that covers your G&A, you’ve got income coming through, so no need to dilute.

Merlin Marr-Johnson: No need to dilute.

Matthew Gordon: Then on top of that, if one of these JV partners hits it big with any of those assets, you’ve got that 25% free carry there, that’s the big uplift. No one’s investing in this but G&A right? This is what the big uplift could be, plus if I understand you correctly, if you develop one of these 100% owned assets yourself, then potentially you’ve got control of your own destiny there to a degree, well in the context of mining.

Okay, I understand that, you’ve painted quite a nice picture there for shareholders, and you’re putting a number on that, are you? What does that look like? Without dilution, where do you think you can move to if you were able to deliver this model?

Merlin Marr-Johnson: Well, lets just say that our value in Curipamba is USD$30M today, and it should be at USD$50M at the end of next year, end of 2020. That’s a trebling of the share price right there, doubling or trebling that would be fantastic, at $0.16 to $0.17 cents depending on the bid after the spread at the moment. So if you could get that up to $0.50 that’s a tremendous result, and I think we could do that just on growing awareness of what we’ve actually got, and the deal we’ve already done, and an asset that we’ve already got.

Now, if we get a good drill hole on any of the other projects, particularly if we open up Rumiñahui as a real palfrey target, then things get much more exciting, if that’s not already exciting enough.

Matthew Gordon: Merlin, thank you very much, nice introduction. Let’s catch up in the New Year, I want to get into some of the detail around the numbers, and your plans for the year. But as the first passing that’s quite nice for some of our viewers to be introduced to what is quite a small story now, but again, I do like the model so I’m encouraged.


Company page: https://www.salazarresources.com/

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Margaux Resources (TSX-V: MRL) – 1Moz Maiden Gold Resource + 600kt Tailings @+1g/t (Transcript)

We caught up with with Tyler Rice, President and CEO of Margaux Resources , as well as comments from Linda Caron, VP of Exploration, Kaesy Gladwin, Senior Geologist and Scott Zelligan, a Consultant who worked on the historic resource update.

This is probably one of our favourite small mining projects. It’s a gold bulk tonnage play with some high-grade upside and a lot of historic drill data. We’ve seen these work but the management will need to be cognisant of how to develop it without large dilatory financings. We typically don’t spend much time looking at this end of the market but there is the sheer scale here. The G&A is low and the team is experienced in Orogenic Gold systems. This opportunity is something that we are interested in. It has been described as the next Barkerville Gold and an early stage Osisko. Nice parallels and the early signs are good, but still a lot of work to do – one to watch for sure as it is still cheap.

Also, their tailings project (600,000t @ 1.2g/t) could potentially net them $4M-$5M cash if they outsource the processing. Tyler indicates that they are evaluating this but do not expect it to happen in the next 12 months. The recent Maiden Resource of +1Moz puts them on a firm footing but what next?

Interview Highlights:

  • Recent News: Funding and Announcing The Maiden Resource
  • Company Financials: What is Their Cash Position and What Are They Going to Do With The Money?
  • Gold Market Conditions
  • Tailings Project: When Are They Moving it Forwards?
  • The Expert’s View: Geologists Explain Their Excitement Over the Projects

Click here to watch the interview.


Matthew Gordon: It’s been a while since we spoke. I wanted to catch up and see how things are going. This is one of our favourite smaller exploration stories in Canada. I notice a couple of things had come up. Obviously, you’ve updated the historic resource like you said you would. And also, there’s this raise. Can you tell us a little bit about what’s going on? Seems to be quite busy.

Tyler Rice: Very busy, indeed. We’re very excited about the recent announcement with regards to our 1Moz Resource, at 8.7g/t cut off, which results in an average rate of 1.43g/t. In addition to that, we recently announced the financing of $750,000, which will go towards our winter season of interpreting our field season data that was obtained by Kaesy and Linda.

Matthew Gordon: We’ve arranged to speak with Kaesy and Linda later. We’re going to catch up with them and find out what’s been going on in the field. What else is the money going to be used for? Obviously looking at some of the samples that you’ve picked up in the summer which is great. What else are you doing in terms of driving that share price? Since we last spoke, you were at $0.05 cents. You’re now up to $0.09 cents. Things are moving the right direction.

Tyler Rice: In this bull run that we’re seeing for gold and expected continued run for the price of gold, having two major properties in a safe jurisdiction in British Columbia, Canada; One being in the south at the Sheep Creek and one being in the North at the Cassiar property, which have both been identified by Dr.Murray Alan’s report through BC Geoscience as comparable to Barkerville, from a geological plumbing perspective. Most recently, we focused our field season up at the Cassiar property, which is 60,000 hectares of land. We inherited a substantial amount of data and our field crews went through the data. They went out to the field. And not only did they look at the work that was done previously, they expanded the thinking of lower-grade, bulk tonnage type deposits within the past great high-grade veins. And so, Linda and Kaesy will speak directly to that. And the excitement from our geos is second to none.

Matthew Gordon: I’m looking forward to that conversation. We spoke with Steve Letwin a couple of months ago. He was really excited about what you’ve got.  He’s really excited about what’s going on there. He compared you guys to early stage at Osisko. That’s kind of high praise and which is why we’re following this story. Can I ask about market conditions, obviously last couple of months, gold has moved. I think that’s clearly going to have an impact for gold producers. Has it has done much for you guys as junior explorers?

Tyler Rice: Some of the sentiment that has come out of Beavercreek recently is that the momentum that we’ve seen for the run up of the majors hasn’t quite hit the junior sector yet. And so, we are in a right position with the announcement of our Resource to get consumed by that vacuum that’s going to be coming down the pipe as the communication of the successes in the gold space contribute in the mainstream media .And with majors calling for $2,000 gold and beyond there’s going to be that vacuum that we’re going to get sucked up into.

Matthew Gordon: You’ve kind of got to work out where you fit in the cycle. Are you going to hit this gold cycle or are you preparing yourself for the next gold cycle? And I guess your data analysis will tell you that. There was one project which I was really excited about when we spoke last, which was this tailings project. You had something like 600,000 tons of tailings. And I think previous data suggested it was circa 1g/t or just over a gram. Have you managed to move that forward any or has that not been a focus for you?

Tyler Rice: For the field season this year that wasn’t a primary focus. We continue to evaluate that as a near-term cash flow opportunity. And that’s going to be part of our winter work from a permitting perspective to evaluate that launch in the next couple of years.

Matthew Gordon: That’s kind of an interesting strategy if you think about the amount of money that’s sitting there on the surface, ready to go. What are the things the needs a look at to make that decision? I appreciate you’ve got to fit it in around available money that you’ve got today to be able to do that, finding strategic partners to be able to maybe do that and working out what the plan is, but it seems to be a lot of money to be left on the ground.

Tyler Rice: But relative to proving up a 43-101 compliant Resource of 1Moz which definitely migrates us into a new category. That was our primary focus. And there is further associated low-hanging fruit around that that will position us for a bigger picture opportunity as we see this rising gold price. We continue to work on that initiative and the focus there is looking at the recoverability of that historically processed material.

Matthew Gordon: When do we expect to hear some news about how you’re going to move that forward?

Tyler Rice: Over this winter.

Matthew Gordon: And then I guess with 60,000 hectares to go and explore, there is this need to maybe do a second… I know you’re doing a financing now, but you’re going to have to go back out to market at some point, presumably next year, at some point after the winter analysis. Any sort of sense of how much money you think you’re going to need to raise for that?

Tyler Rice: We haven’t finalized the budget for next season because we’ve gotten so many new opportunities and targets that have been identified from this field season. As we get the results back from the chip sampling, soil samples, other field work that’s been conducted. Then we can articulate the drill program for next season.

Matthew Gordon: I managed to catch Linda briefly on a call. She seems very, very excited about what’s going on up there. New discoveries every day. Thanks very much for that update. Keep in touch with us. We’re keen to see how this goes. You’re one of the smaller companies that we look at, but a very exciting story. And like I say you’re delivering for shareholders. You’ve got to keep doing that.

Tyler Rice: Having a million-ounce resource in a bull market, having strong supporters such as Steve Letwin, who will be participating in this financing and having a Resource up North at the Cassiar property that has so much infrastructure. One of the new discoveries is 30 meters from our camp, which means it’s 30m off Highway 37. Our field crews literally walk to that location from our office and the opportunity is so great.

Linda Caron: Bottom line, I would say this is an outstanding potential, huge upside potential. The thing that sticks with me most is the size and the strength of the gold system there. Literally 15km over one mountain range, through the valley, up another mountain range. And you’re still in the same mineralizing system. Not that it’s mineralizing absolutely everywhere in that 15km, but you can see that you’re still part of that same system.

Kaesy Gladwin: We’re not just looking at the gold veins. That’s a nice little upgrade. We want to see a big system. It’s going to have lower grades, but it’s going to be more exciting because it’s bigger and it’s shallow. And it’s got these exciting quartz veins that have gold in them all through. But that’s an upgrade. That’s a sweetener.

Scott Zelligan: There’s a really good system there. And they have a ton of data that’s in pretty good shape. There’s a bit of work to kind of organize it all.

Kaesy Gladwin: There’s been a lot of operators. They’ve been taking a different approach. They had a different focus. They did some great work. But to have one company holding the entire property, as Margot does, really opens things up to look at a regional scale and say, OK, we’ve got these high-grade veins. We’ve got these smaller targets, these tight, confined things. But how does the system as a whole fit in? Because you’re looking at such a large area, you’re talking about 15km or 16km, much of the area has not been examined for a bulk tonnage targets. And I think this is a huge opportunity. When I started looking at the data, I thought this is something I’d like to really get into.

Linda Caron: There’s a lot of value in that data. The Taurus area is in the valley, not a lot of outcrop. So back in the mid-90s, they did IP. 25 years have passed since that that work was done. It was really good quality data, but the processing techniques have changed. So, we just took three lines of data right over the Taurus zone and we had that digitized and re processed. And within those three lines, we can see new targets that look just like the Taurus signature that don’t have a drill. So that’s what the old data does for us. It’s just generating new places for us to look.

Kaesy Gladwin: What you see in the resource model or in the mine maps or in the surface outcrops is all the same story. It’s a high-grade vein and that’s got alteration that’s very visible, very standardized across all these properties, so previously differently held properties. It’s easy to recognize the alteration, it’s easy to follow it and it’s easy to pick up pieces that are high-grade. Of course, those are the ones we get excited about. I know talked-about visible gold before. That’s a wonderful thing to see. But in terms of a bulk tonnage model, you really have to incorporate those at the margins of the veins. And in a lot of cases, historically, those areas weren’t even sampled because it’s not the focus. It wasn’t the mandate at the time.

Scott Zelligan: It’s a huge system. So, there’s a lot that hasn’t been explored. So, on top of the existing resources that are hopefully easy to exploit, there’s a lot of potential for new stuff.

Linda Caron: One of the really interesting targets is called Wings Canyon. I’m not exaggerating. It’s about 500m from the east side of the tourist deposit. You walk across to this zone, you don’t cross a single outcrop. There’s not a drill hole in that 500m zone. You get to the edge of this canyon and as far as you can see, east, west, up, down in all directions is alteration and veining. And there is no drilling between that and the Taurus zone. So, I think the potential for expansion for new areas, for new discoveries is really very, very good.

Kaesy Gladwin: This is a really great opportunity. The access on the property is really good. There’s a lot of historic roads.

Scott Zelligan: All the trails, you can get everything by the truck. You don’t have to use a helicopter or anything expensive to mobilize. Once you get to extraction, build any roads or anything.

Kaesy Gladwin: It’s not like you’re clinging to the side of a mountain slope or anything like that. You can move things and you can get your fuel cheaply. You can get your personnel to site. You can get your samples in and out and your equipment moved. And that’s exciting as far as controlling costs and also being able to test more targets.

Linda Carron: Table Mountain, half of the project, they never even looked at the bulk tonnage possibilities. All they were doing was following high-grade veins. So, there’s 2,000 drill holes on Table Mountain. We’ve got all the logs, we’ve got all the data in the database. Mostly they didn’t sample what looked like low-grade and we’ve got that drill core. We can assess some of these areas very cheaply. We don’t have to drill a new hole. We just have to go to a hole that’s already been drilled and sampled.

Kaesy Gladwin: Everything holds together really well, both geologically and in terms of the database. It’s a really well compiled project that we’re excited to take. I’m excited. We’re all excited to take it to the next level.


Company website: https://margauxresources.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. We provide paid for consultancy services for Margaux Resources. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Vimy Resources (ASX: VMY) – Production in 2 Years with 2.9Mlbs! (Transcript)

Interview with Mike Young, CEO of Vimy Resources (ASX:VMY). Vimy is on a non-deal roadshow in London meeting investors and potential investors. They report that the mood in the market is good because the macro story is well understood.

Mike Young is great value entertainment but he also knows a lot and is very well connected. He does a very good job of explaining the short-term micro and how the financing in the space operates. As well as what is happening with the supply deficit.. Do both sides of the Demand/supply equation understand each other? Mikes doesn’t think so.

Vimy is doing a refresh on the cost-side and they have been talking to debt providers. How are the conversations going? How are they going to market to finance their project? Mike says they are looking for strategic partners, but where? And what does that look like?

Interview Highlights:

  • Mood at The WNA
  • Overview of Vimy Resources
  • DFS: Going to Market and Transport Costs
  • When Will Vimy Resources Go Into Production? When Will We See Contracts Being Signed?
  • Some Juniors Aren’t Going to Make It: Why and How is Vimy Different?
  • Message to Investors

Click here to watch the interview.


Matthew Gordon: You’re here at the WNA Symposium London. What are you here for?

Mike Young: We’re here for the World Nuclear Association Symposium. But we’ve also spent a couple of days on the road with Bacchus Capital.

Matthew Gordon: You’ve been talking to a few institutions, family offices about the potential of raising some money?

Mike Young: Well, it’s called a non-deal roadshow. So basically, what you’re doing is just introducing Vimy to these people in the event at some point the future you might raise money. What’s been good is that the calibre of people we’re seeing is high.

Matthew Gordon: And what’s the mood?

Mike Young: The mood is actually good. I think we’ve come out of a couple of years where the mood’s been bad. And what’s interesting is that the mood of the investors is quite independent of the WNA, because most of these people won’t be at the WNA. But the WNA itself is releasing the WNA Nuclear Fuel Report is the best one that’s come out in the last seven.

Matthew Gordon: But back to these investors.

Mike Young: These investors are people who understand the uranium macro story. Some of them already own uranium shares, and some of the people we saw have small uranium funds. We picked Bacchus Capital on purpose because they did the Yellow Cake float. So, they understand uranium.

Matthew Gordon: So, these investors that you’re seeing, they understood the macro situation, the supply / demand and the economics. What were most of the questions about?

Mike Young: When’s the price going to go up? The constant theme was when are you going to write a contract? They understand the uranium macro. But unless you live in the industry, you don’t understand the micro and there’s a lot of different micros that are pushing in different directions.

Matthew Gordon: Like what?

Mike Young: Well, for example, contracting. I think people expected the Section 232 petition decision to have some sort of effect on the spot price, like it would have in, say, gold, copper, nickel, where there’s a market in a speculative market and it just didn’t. The spot price is basically a reflection of the contracting that’s going on. There was just no contracting. Nobody wrote contracts the day after the Section 232 petition. Now, part of the reason was it was August and it was North America. I mean, the place closes down.

Matthew Gordon: Did you have to explain that to them? Or were they aware of what had been going on there?

Mike Young: A lot of the discussion revolved around exactly how the utilities operate. Why they’re taking their time. The timing and what our expectations were. And as we explained to them, the early contracts aren’t going to be much more than the current term price. And that’s because you’ve got lower cost producers. There’s definitely demand, and we know that open requirement has to be filled.

Matthew Gordon: Well, you say there’s definitely demand, but there’s still timing issues on that. There is no demand today.

Mike Young: No, they’re burning material they bought three years ago.

Matthew Gordon: Demand is coming. The demand story is understood. But did these investors understand that?

Mike Young: No. A lot don’t. A lot of investors are commodity investors. And I made the same assumptions when I started in this space that there’s more immediacy in most other commodities than there is in the uranium.

Matthew Gordon: There’s a lot more understanding of other commodities than uranium?

Mike Young: Correct. And uranium is more like LNG (liquefied natural gas), which are long term contracts. In fact, I was having a discussion in Perth with someone in government and I remember one of the policy advisers say, ‘hey, that sounds just like LNG’. And I went, ‘well, it’s kind of like LNG’. There’s a very small spot market and there’s this time lag. So, I think I think there’s a couple of things at play. People have uranium fatigue. I heard it all before. It’s going to come. It’s going to come. And this is what I mean about the micro. So, some of the things like Yellow Cake, for example, we’ve never seen that before, where a group comes in and buys that much uranium and sequesters it. It’s basically parked. Because they trade on net asset value. You’ve got KazAtomProm which is now Westernised, so two years ago they were behaving…

Matthew Gordon: Partially westernised, surely?

Mike Young: Well, but they still have they still have an accountability to their guidance. They never had before.

Matthew Gordon: Ok, let’s say that’s true.

Mike Young: Well, Riaz Rizvi who’s their chief commercial officer and does the marketing says that’s true. He says that we have to be careful now because we have a responsibility. But not only that, they have westernised their accounting. I mean, when Riaz went in there, they had old Soviet style accounts and they were just churning out the pounds. That’s how they measured it, they weren’t looking at margins. So that’s different. I think the utilities; their buying habits may change. They used to write these 10-year contracts. I think I think that may change. The contract cycles may come down lower. So, there’s a lot of a lot of different things that are interconnected, and some aren’t that are different this time. But the thing is, the Section 232 really focused everyone’s attention here or outside the industry on it, because it was got a lot of airplay. But in terms of the contracting cycle, what will happen over the next 18 months as they fill their forward requirements? The early bird will get the worm, right? The early contracts will get the cheaper prices and they’ll basically climb up the price curve. And because we sit in the third quartile, happily, we’ll be one of the people getting contracts as they creep up the curve and the price increases, because as they continue to write contracts, the lower price material will start to disappear. And as Julian will talk about, the long-term macro. There is a supply deficit. We can see it. We talk about investors not getting part of the or any market. What’s interesting is people in the uranium side don’t get investment side now. What people on the buy side of uranium are missing is just how long it takes to put new production into the marketplace. And that’s really fascinating that both sides don’t quite get the other.

Matthew Gordon: I want to talk about you. You’ve got a couple of assets, Mulga Rock etc. Where are you with those very quickly for people, because I want to talk about them.

Mike Young: Ok, Mulga Rock, DFS finished. We’re looking at a refresh. We want to try and get our capital costs down. Particularly on the mining fleet side. So, there’s S100M there of Australian mining fleet. And we think we’ve got a solution to that. So, we’re working with people on that.

Matthew Gordon: Solution to do what?

Mike Young: In the DFS, we assumed that we would manage and own the mining fleet. Now, that has inherent risk. It’s the cheapest option on paper. But if you have problems in your mining fleet or mining, then it becomes a more significant problem. Whereas you can you can put that risk onto an earthmoving contractor, but you pay a bit more. And it goes onto your operating side. So, things like that, you know, staffing levels, cost of people. 18 months ago, a mine manager was different price than he is today. Things like that. So, we’ve called it a refresh, if you will, that we’re doing that. There’s not much else to do on that. That’s just going to be market driven. So, you know, you get the contracts, you get the debt. We have talked to debt providers on this trip.

Matthew Gordon: This is what I want to talk about. I want to get into the numbers, because you’ve got a couple of good assets. You’re at DFS stage. You know what you’ve got you got a sense what you’ve got your refreshing that. But you’re in this waiting period, this twilight zone, like everyone.

Mike Young: No man’s land.

Matthew Gordon: You’ve now got a sense of the economics of this project. Have you made decisions about how you’re going to go to market? You’ve got lots of options. The DFS tells you a lot of stuff. It doesn’t necessarily mean you’ve got to follow that path as laid out because the market changes, prices change and financing will drive this, the type of financing you get can drive this. You’re having some debt conversations at some point and have some equity partner, strategic partner type conversations too.

Mike Young: We’re having those.

Matthew Gordon: So, tell us about those.

Mike Young: We have put feelers out there saying, if you would like to partner with us coming on as a JV partner.

Matthew Gordon: Where have you gone to?

Mike Young: Everywhere and anywhere you can imagine. China mainly. The US utilities don’t do that. That’s off the table. They just don’t take that risk. They tried it once. They took some shares, but they don’t do that sort of partnership. So, you know, China’s the main one for strategic partners. But we’ve basically started the process of just letting people know that if you’re looking for a strategic partnership, that could be a large equity group, it could be a PE fund. I mean, they do that in gold.

Matthew Gordon: Is this a case of I’m going to hand the keys over this is a strategic partner?

Mike Young: Yes. For example, you earn into 40% of the project through a sale on a fair evaluation and then you have 40% of the offtake.

Matthew Gordon: So where are you with these conversations??

Mike Young: We’re not that far down. In terms of pure debt, we did announce some time ago that we had SOC Gen doing some work for us. Nataxys is now upping their presence in Australia. They’ve just done a merge with a boutique advisement firm. They’re a French bank so they get uranium. We talk to Australian banks all the time. And then there’s some non-traditional style debt here in the city that we’ve said, look, this is our model. We have a minimum contract price. We’ve made it public. It’s fifty-five dollars. We need 55. That’s our floor. We get more. The study was done at 60. The feedback from the utilities is that your price expectations for 2023, when you would likely be in production, are realistic. That’s the feedback. Now, they’re not signing contracts today for that, but they do the maths as well. So, what we do with that is we say, here’s our financial model. Here’s the numbers that we’re inputting. This is the debt we need. And then we sort of flex, how much offtake will you have? Will it be 50%, 75%? And the answer is, well you tell me because you’re lending me the money, we need to know what they payback is. And they’re not things that are announceable. Anybody who understands the space would assume I’m having those conversations.

Matthew Gordon: So, help me understand a little bit of it technically around what DFS has got in it. I imagine it tells you what it’s going to take to get the uranium out of the ground in terms of cost in terms of cost, economics around that. Does it factor in transportation from port to end user? He’s nodding. He says yes. That’s the economics guy.

Mike Young: That’s right. So, he that you’re pointing at, Julian Tapp. He’s sitting way over there because his brain is too big. We couldn’t fit him at the table. So basically, the ownership transfer is at the converter. So, we deliver to the converter and then they take possession and pay us.

Matthew Gordon: And that’s your $55?

Mike Young: Yes.

Matthew Gordon: So how do you do that? Surely it depends where they are in the world and what the cost of getting there right?  Like, you can’t say it’s $55 if you’re selling to China. It’s going to be different price if you’re selling to…

Mike Young: There’s only three places it can go. And that’s France, Blind River Ontario, which it’s delivered at Halifax and then railed.

Matthew Gordon: There’s got to be some variation but not meaningful.

Mike Young: There is a little bit.

Matthew Gordon: I know you’re keeping a really tight ship. You’re not hiring people. You don’t need to hire now, you’ll hire them when you need them. If the price hits $55 and you can get some contracts in place and you can press the big green button, how quick are you to production?

Mike Young: Two years. FID to production is two years.

Matthew Gordon: Build and spitting out product at the other end?

Mike Young: Yeah. So, I think the first year 2.9Mlbs, in year one and then we ramp up to 3.5Mlbs by the end of year two.

Matthew Gordon: So that’s kind of quick into production, there’s no kind of ramp up stage?

Mike Young: To me It’s not. There is a ramp up but it’s because we pre-dig some of the pits and stockpile because the pits will become the tailings facilities. So as part of a build, we actually dig some of the pits and we have stockpiles sitting on the surface so that that assists with your ramp up. So, we’ve got the ore ready to go. So, two years to me, it seems really long, because when I ran that iron ore company, we went from our very first drill hole to ship in four years. Our previous COO, who’s still on our board, Tony Chamberlain, shook his head at me and said, this isn’t an iron ore mine.

Matthew Gordon: He’s right.

Mike Young: I know he is. But, you know, we have to build a camp. The plant’s relatively small. It’s a big mine. It’s 8KM long, 2.5KM across at its widest. We’ll mine it a strip mine. You know, since there’s a lot of dirt to move. But the plant itself is actually relatively small because the front end, we do beneficiation. We wash sand at of the ore, reduce the volume by 50% with no loss in uranium. And so suddenly you’re dealing with a relatively small amount of material.

Matthew Gordon: Relatively compared to a lot of people, two years is a short time just to let you know I haven’t heard anyone today say less. And for some of the juniors who are not producers, it’s three years. So, you’re ahead of the curve there, that’s actually something people should take note of. But what does that tell you in terms of timing for the conversations that you do need to have? I know you’re speaking to utilities, but you can have a different conversation with them today than you will maybe in a year’s time. They’re giving indications about what makes what makes sense to them. But at what point do you actually start talking about contracts?

Mike Young: We’ve been doing that for two years.

Matthew Gordon: No, I mean meaningfully talking about contracts.

Mike Young: Let me let me take you through the process. Let’s go back to our strategy. So, we had to think about where do we want to sell uranium? So, you look around the world, you go, ‘who are the five top countries using this stuff?’. Well, it’s the US, France, China, South Korea and Russia. So, of those five, Korea only buys at spot. And they have some pretty arduous contract requirements, so they’re gone. China and Russia, they’re sourcing their material from the stands. So, they’re not real unless you have a strategic partnership. You’re not going to be selling a lot of material there. And China’s probably going to buy on the spot anyway. So, to be frank, the two countries you want to be looking at are France and US. EDF fuel buyers have told us we’re only going to buy from people in production. So, now you’ve got the US. What’s interesting about that is they’re about 28% of the market. So that’s a big part of the market. So we’re going to do the US. Is there a market for our material? The way the US utilities manage their portfolios is they like to spread the risk and they actually layer cake it. They baseload it with a Cameco and then they’ll actually have these little tranches that are that are absolutely set for juniors from Australia. So, what we did, we went around to all utilities and we said, price being no object, what’s your requirement from Vimy?

Matthew Gordon: Who’s your guy in the states?

Mike Young: Scott Hyman.

Matthew Gordon: He’s full time? You have been thinking about this. You have been having these conversations. You’re readying yourselves.

Mike Young: Correct. And one of the things we’ve addressed previously is our DNA and our overheads. And what was interesting is that conversation came up. What’s your spend? What’s your burn rate? And what we did recently was we had an AGM where we voted. We got permission to do salary sacrifice. The reason for that is I wanted to buy shares in the company, but I don’t want to reward someone for selling them. And this keeps money in the Treasury. And some of our staff, some of our directors have gone to 50%. So that’s one way of saving money.

Matthew Gordon: 50% of what?

Mike Young: Of their salary, they actually receive in shares. So, we’ve done that as a way of saying to people, you can buy shares in the company, but the money stays in the company, which is a really good win-win. It’s a way of saving money. One of the things we had to look at was, how ready do we want to be? To answer your question, when can you push the big green button? You can’t downsize to a point where it’s going to take you two years just to person up again right before you press the button. You want to have your team ready. So, we that’s why we’ve got Scott on board. That’s why we’ve got Julian working part-time. Scott’s working part-time. So, we’ve sort of struck a balance. We downsized the office. We’ve done a lot of cost-cutting, cost savings. We’ve got the team ready to go because this is the sort of market that’ll flip very quickly. One day we’ve got a contract and they’ll cascade.

Matthew Gordon: It may well flip quickly, but the point at which it flips is undetermined at the moment. Today I’ve heard very different views as to where it’s going to go from people inside the industry. And you’d think they would have a bit more of an insight. What’s your take on when this thing starts to motor because some junior companies won’t be able to make it through to the end, because either they need to raise money and can do that, or, because investors are getting better at understanding of the fundamentals of uranium, perhaps that company had their moment in the sun when they could raise money, may not be able to do now.

Mike Young: That’s a really interesting question. And one of the things that Fuel Report does talk about is who is ready. Think of a Formula One race, who’s in grid, who’s in pole. And when you look at that, there’s not very many. And that’s our point of difference. That we have kept the guys on board ready to go. We’ve got no reserve. We’re going through those secondary approvals, the building permits, if you like. Those will be done well before we have all the contracts we need for the debt. My window is the next 18 months. We get contracts and we move into if FID towards the end of next year. That’s my working hypothesis.

Matthew Gordon: We’ve been asking people of the 55 old companies which are around. Do you think many will be around if this thing does go on another 12 months, let alone 18 months? What do you think?

Mike Young: I think some people will fall by the wayside, partly because they were in it for a speculation, not to build a long term mine. And we’re about building a mine and building long term value. When I ran BC Iron that was a $13M listing. And by the time I left, it was a $650M company and it got up to $800M before the iron price fell. We generated a lot of value and that was by getting into production, paying dividends. You just bring on a different class of shareholder. So, we’ve got some major shareholders in Andrew Forest, Sachem Cove, Mike Elkin, Paradise. They’re all there all long. They’re not in this to make a quick buck.

Matthew Gordon: What’s your message to existing shareholders?

Mike Young: Thank you for supporting us and continuing to support us. And we’ve always said this is a long story. And you know, the people that are in, they get that. We’d like to get some share appreciation along the way. That’s what Alligator River does for us. So that’s a shorter-term exploration play with a longer-term development play. So that was part of the reason we brought that in. Because I know through my experience that if you’re building a project, there’s two years of not a lot of news. Isn’t that sexy?

Matthew Gordon: But your point is, so existing shareholders, they’re in it for the long haul. It’s going to be fine. You may get a bump with Alligator River or not, depending on how the market reacts to what’s going on. And it is a question of waiting for this price discovery. That’s the only way you can affect share price, because the reality is it’s out of your control.

Mike Young: It’s existential. Absolutely. Thanks mate.

Matthew Gordon: Good to see you. We love talking to you every single time we speak to you, over here.

Mike Young: Well, hopefully it’ll be more because I hope we get some of these London groups to come in and that’ll give me an excuse to pop by.


Company website: https://www.vimyresources.com.au/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

IsoEnergy (TSX-V: ISO) – What are they doing in the Next 12 Months? (Transcript)

IsoEnergy

We spoke with Craig Parry, CEO of Uranium explorer IsoEnergy (TSX-V: ISO) to give us his view of the WNA Nuclear Fuel Report. He agrees the Demand story is growing and performing but that the Supply side is lagging. Cameco needs to buy 12Mlbs by the end of the year. Or if they delay, they will need to buy 22Mlbs in 2020. Expectation is that this may drive the the price discovery in the uranium space.

IsoEnergy is an Athabasca basin project. NexGen is a major shareholder, as is Cameco. For NexGen, IsoEnergy is effectively an exploration arm. Whilst Cameco may just see them as optionality.

They have done some drilling and defined a mineralised zone with good grades. Next year they will have 2 drill rigs operating, will look at Uranium exploration and also infill work. We wait to see how they tackle the work programme and what results look like. With only $2M in the bank they will have to dilute shareholders some more to raise cash. NexGen will put some money in which helps. But this will be an expensive dilution given the lack of movement in their share price. The money will allow them to assess results and work out what to do next. Craig says they could look to add properties to their portfolio. We aren’t sure this should be core focus given capital constraints. Their share price is static. He feels he can raise money easily. They haven’t got a clear plan yet but they will be working out what they want to do in the next couple of months. So far 30 holes drilled; 17 holes recently. This a very early stage project. They want to spend $5M on drilling in the next 12 months. So they will need to raise at least that. Useful data for investors to calculate dilution vs. upside. Craig says IsoEnergy is constantly talking to institutional investors about raising capital. Or they could sell some of their non-Athabasca Basin Uranium assets for cash. This would be low cash contribution or will, dependent on structure of the deal, take a while before cash comes so it is not realistically going to contribute to the next raise.

Click here to watch the interview.


Matthew Gordon: You’re at the WNA Symposium London meeting people. What are you trying to get out of it?

Craig Parry: The WNA Symposium is the premiere industry event. You’ve got everyone from explorers through to operators and customers here. It’s the event to be at. And there are different dinners and social events to attend. Also being in London, we take the opportunity to go and see some of our investors here.

Matthew Gordon: What are people talking about?

Craig Parry: I suppose on the supply side, there’s a sense of cautious optimism.

Matthew Gordon: Did you see the WNA Fuel Report be presented?

Craig Parry: We saw the WNA Fuel Report. And at the heart of that is that the supply side is probably pretty challenged at the moment. Demand continues to grow very strong, So that’s a real positive. But the supply side is where the challenge is and where the issues are.

Matthew Gordon: The macro story is understood. That’s coming very, very quickly. On the supply side, there are some games being played in terms of price discovery. The market is working out how they deal with that. We we’re talking, before the cameras started rolling, about Cameco’s need to supply quite a large number of pounds to customers.

Craig Parry: That’s right. That’s one of the great reasons to come to the WNA is that you hear so much of what’s going on in the marketplace. And Cameco has confirmed to us yesterday that they need to buy 12Mlbs before year end. And in the last half of last year, they bought 4Mlbs and that was enough to drive the price from $17 a pound to $29 a pound. So, this year, they’ve got to buy four times that. The spot price of uranium is currently $25 a pound. So, I think at some point late this year or early next, assuming they go ahead with that program, which we know they have to because they do have long term contracts that they need to put that product into, we should see a much higher price. And if they delay that, they’ve got to buy 22Mlbs next year on the open market. Because it’s a very shallow market at the moment, there’s been very little trading there for the last six months. So, that’s probably the most positive thing I’ve seen for a long time.

Matthew Gordon: Let’s talk about you. When we last spoke, some good things going on but still fairly early days. You spun out of NexGen. You’re in the right part of the part of the world. What have you been doing since we last we spoke?

Craig Parry: When we started the company, we cast the net far and wide all around the world looking for uranium deposits and assets.

Matthew Gordon: And ended up next door!

Craig Parry: That’s right! We keep coming back to the Athabasca Basin because it’s home to the highest-grade uranium deposits, the biggest uranium mines in the world. So, we always end up back there. And in May last year, we acquired our La Rocque property from Cameco.

Matthew Gordon: They are a shareholder?

Craig Parry: Yes, they are a shareholder. At the end of this interview, I’m off to see a couple of guys there. Big shareholder, 5.4% of the company. And they got that holding through deals we’ve done with them. So, they’ve been willing to do deals with us. We acquired that La Rocque property in May last year. We had a drill rig out there. Six weeks later, we announced the discovery hole two weeks after that. So, we went from sort of conceptualization deal to discovery within eight weeks, which is a tremendous outcome. And we’ve been there drilling ever since and putting out some very, very good results. We just completed our summer campaign. We drilled another 17 holes on the property, some very, very good results. Probably the best of those holes was 7m of 5.4% so really spectacular high-grade Athabasca style uranium mineralization. So we’ll just keep working away at that. We’ve now defined a mineralized zone there. That’s 500m long, 40m wide. On average in 5m thick. So very much typical of those sort of conformity related deposits. And the plan going forward, come winter, we’ll have probably another drill rig out. This will go from moving up from one drill rig program to two drill rig programs.

Matthew Gordon: You’ve identified targets. Are they near each other or are they separate?

Craig Parry: Good question. We’ve got some infill drilling to do. We haven’t closed off many of those sections. And we’ve got a 250m gap between the eastern-most hole in the heart of the deposit. So, we’re going to do all of that infill work. So one rig will be working on that. And then very nice to my mind, possibly the most promising thing we saw from the program. We got the results of a resistive survey back, we which we did earlier in the year, and that shows about 500m to the East of the hurricane deposit, a very large conductive anomaly, typically associated with the graphite that hosts these deposits. We drilled one hole on the edge of that, got some very elevated radioactivity 50m up above the sandstone. And very strong geochemistry, very strong alteration all the way up the sandstone in that hole. So, we’re very excited about that. And we think we could be on the edge of something very, very significant. That hole looks a little bit like the discovery hole at Hurricane.

Matthew Gordon: So how much cash are you sitting on at the moment?

Craig Parry: We’ve got about $2M in the bank.

Matthew Gordon: What does that mean for you?

Craig Parry: We finish the year with a little bit under $1M in the bank. At some point we’ll have to come back to the market and raise some money. At this point in time we’re pretty well funded. We’ve still got NexGen there supporting us. NexGen is the mother ship, if you like, with 54% shareholder.

Matthew Gordon: They’ve got their own priorities, though haven’t they?

Craig Parry: They’ve got their own priorities. But plenty of cash as well.

Matthew Gordon: So, NexGen will follow their money, they’ll retain their current position? And then you’re going to go to market or are you going to Cameco?

Craig Parry: We’ll certainly talk to them, Lee from NexGen likes to say that ISO Energy will pay for the CapEx of the Arrow development. That’s a $1Bn. Lee’s very, very happy with what we’ve got here. And of course, when we started Next Gen, we wanted to become a major player in the space. You need more than one deposit to do that. So, having sort of options and alternatives is important.

Matthew Gordon: You’ve got to raise some cash. Have you any sort of sense of what you might do next? What’s the plan for the next six months?

Craig Parry: Good question. We have to sit there and assess those results we’ve got from this project. We only just put out our final announcement from that last week. So, we will look at all of that data and then work on a plan and a budget that approaches the deposit optimally. Between a mix of infill resource delineation, drilling and then on to exploration to find out some of those other targets. That’s the focus for us at the moment. We’ll continue to try and pick up other properties in the…

Matthew Gordon: I’m trying to get an idea of how do small companies survive? Either by keeping drilling. How do they pay for that? Do they rein things in until the price discovery comes back in the market place? Because you’re nowhere near exploration, you’re going to have to raise capital, but it’s going to be slightly cheaper if you get some sort of bump in your stock. So what are you doing to influence share price that reduce your cost of raising capital?

Craig Parry: Very good question. And I guess in our corporate presentation, you’ll see one of the most prominent slides early in the deck is NexGen share price chart, we started that company to $0.05 capital rise and it’s now trading around $2 a share. The point of all of that is discoveries still matter. And I think ISO Energy is one of the very few uranium companies that is in positive territory in terms of share price for the last 52 weeks off the back of that discovery. So, it’s not going too bad on that front. We’ve got to get out there and explain what we’re doing to the market. There’s a little bit of apathy…

Matthew Gordon: They’re going to ask the same questions I’m asking you, which is what are you going to do to be able to capitalize your program. Whatever you decide, is that for the next six months, or if you want to raise enough for 12 months, because there is no certainty about price discovery. It could be 3-6 months, maybe 18 months. No-one knows. What are you planning to do to get you through, or to be able to raise capital to get through to whatever point in time you think price discovery comes back to market.

Craig Parry: We’re in a fortunate position in that because of our association with NexGen and the fact we’ve got Lee on the board, we don’t have much trouble raising capital. We’ve got very good support by the market. So, we’re okay on that front.

Matthew Gordon: So, you can go into the market regularly, so you’re not diluting unnecessarily. Now, that’s expensive. And you’ve got NexGen in there for circa 50%? So, that’s good and Cameco’s a good brand. You’ve got all these good brands and you’ve made a discovery. So, lots of good things. I want you to tell me what you’re thinking is for the next 12 months to help people understand why you versus someone else.

Craig Parry: We’ve got to assess all of that information before we have a clear plan. So, you’ve got to do that work before you start coming up with that.

Matthew Gordon: How long does that take?

Craig Parry: We’ve got the full exploration team coming to Vancouver in a couple of week’s time. We’ll sit down and go through everything in detail and work out an exact plan and budget. We’ve now drilled about 30 holes on the property. We did 17 holes this last program, that program costs us about $2.2M.

Matthew Gordon: These are all quite shallow holes?

Craig Parry: Quite shallow, down to 350m or thereabouts, 400m max. We drill a little bit deeper into the basement than some of our competitors because we are looking for that basement hosted arrow type of deposit below everything that we’ve got. Another one of those would be fantastic. But I’d say, look, we want to have two rigs on the ground. I would think that, you know, a two-rig program, we probably want to spend somewhere of the order of $5M over the next 12 months on exploration through to the end of next year. So, we’ve got to raise that sort of level of money at some point.

Matthew Gordon: That gives us a sense of the quantum involved. Clearly there is dilution involved, that’s what people are looking at. But at the same time, you’re talking about the opportunity of creating value. Are you entirely independent of NexGen. I know you speak with NexGen, you’re ex-NexGen, but what you decide to do, that’s your decision?

Craig Parry: We are yes.

Matthew Gordon: Even though they’re 54% shareholder?

Craig Parry: Completely independent, arm’s length. Notwithstanding the fact that we’ve got a number of board members in common. Lee Courier our chairman, is the CEO of Next Gen. We’ve got Chris McFadden, Richard Patricia, Trevor Healy, all on the board of Next Gen. I’m a senior adviser to NexGen. I stepped off the board to focus on ISO Energy. There’s a little bit of crossover there. But we are we operate completely independently. We present our plan and what we’re doing to the board, every board meeting. That gets supported and quick queried and supported on an independent basis. We have all of those correct governance structures in place. Having NexGen there and being part of that brand and following those processes, that helps.

Matthew Gordon: Have those fund-raising conversations started?

Craig Parry: Well, they’re happening all the time.

Matthew Gordon: You’re talking to people about raising money all the time?

Craig Parry: You’re always out there talking to the banks and investors. That’s what we’re doing in part in London. One of our more significant shareholders is CQS. We’ll be seeing them tomorrow. So, you’re out there talking to people all the time on that front.

Matthew Gordon: So they know this is coming?

Craig Parry: Yes. There’s always that expectation. We do have a number of other opportunities. And I think when we last spoke, we talked about ‘are we at all concerned that when the uranium prices rise and equities start to bounce back that you’ll see a flood of other junior companies, ex cannabis companies change their name to Uranium ‘Something. And as I said then, we look forward to that. We’ve got a bunch of other properties, both in the Athabasca and another deposit outside the Athabasca that’s up in the Northern part of Canada. And, there’s an opportunity to sell those projects for cash and stock and sort of taken a less dilutive approach to raising capital there as well. We’re thinking about all of those things all the time.

Matthew Gordon: Juniors uranium Explorers need to show that they can build a mining business and develop it in to a uranium company. With Cameco and NexGen as shareholders, is that why you feel it’s going to easy to go to raise money because the market appreciates your connection with these guys?

Craig Parry: No, it’s never easy to raise money. I guess we look forward to a time when it becomes easy to raise money.

Matthew Gordon: That’s what I’m asking because you said earlier, “we find it easy”. But the truth is it’s difficult. I want to understand what you’re saying that other companies can’t say.

Craig Parry: You just got to do all of that prep work. And, it helps if you’ve got a discovery. It helps if you’ve got a team with a track record. There’s a bunch of challenges to do to get be able to get there. We’ve all personally supported the rights of financing. So, we’re all involved. And as Richard and Patricia was telling me last night, when you see the CEO writing a check for financing, something’s going on. You want to you want to back that one.

Matthew Gordon: Have you been writing cheques?

Craig Parry: I certainly have been writing cheques.

Matthew Gordon: For this company?

Craig Parry: For this company.

Matthew Gordon: Just checking…

Craig Parry: So, you’ve got the major shareholder there doing the same. So, Lee and the team of NexGen have backed us heavily, which is fantastic. And with all of that going on, we’ve got tremendous relationships with some of the Canadian banks, so Cormark and PI Financial, they gave us some $5.5M bought deal. First bought deal of any size in the junior uranium space for some years. Apart from having the capital to do what we need to do. That was a bit of a feather in our cap.

Matthew Gordon: Do you think you are moving on from the shadow of your big brother NexGen? You’ve now got to stand on your own two feet. You’ve now got to start showing that you’re capable of doing this yourself. I know you’ve told me some things that you’ve got planned. You want to make two-rigs out this year. What’s your expectation of where you need to be at the end of next year? What would you need to prove?

Craig Parry: Very good question. I would expect that we want to see that deposit grow substantially. We want to be well on the way, with all of that resource delineation drilling well on the way to having a resource defined. And then it wouldn’t hurt to see a bit more scale to what we’ve got there. So, we’ve done some aggressive step outs that support the next phase of work. I’d like to see us where we’d really need to be is well on our way to having a resource.

Matthew Gordon: And do you get that for $5M?

Craig Parry: A really good question. This sort of Athabasca unconformity related mineralization is typically quite drill intensive, a little bit like vein gold deposit. You do have to have a lot of tight sized drilling. But with about $5M of drilling we’re going to know very clearly where we stand. And hopefully we’ll have another discovery. Of course, these deposits occur along structures in a sort of string of pearls. You’ve got down to our South, West Cameco’s, La Rocque zone, very high-grade. They drill a hole there, 7m at 30%. You’ve then got a La Rocque North zone. Our Hurricane deposit and then these other mineralized intercepts along that structure. So, we want to get out and test some of those as well.

Matthew Gordon: You’ve only just started. Usually it takes 10 years to build a mine.

Craig Parry: You can do it quicker than that. We were talking before. We built a coal mine in Far Eastern Russia. We took that from discovery to production in 4 years. So, you can you can do it faster than that.

Matthew Gordon: Coking coal. Different. Different ballgame!

Craig Parry: Well look, uranium, that’s sort of a bit of a controversial topic at the moment because, you’ve got some of our competitors, NexGen’s competitors, out there saying it will take 10 years to permit and build that mine. I think that that project will get built a lot faster anyway.

Matthew Gordon: Let’s say 7 years.

Craig Parry: I think it’ll be faster than that.

Matthew Gordon: But you’re only at exploration stage. You’ve got a lot of things to prove to the market by the end of this coming year. $5M might get you there. But before then you’ve got to explain to shareholders the process of how you are going to get from where you are today to production. It’s a long time away. So why should investors come in now? Why look at ISO Energy when they are lots of other Athabasca juniors at the same place as you?

Craig Parry: Good and tough question. You see what the guys are doing are at Arrow. That’s our approach. We’re following that NexGen template, plus It took about two years to get the Maiden Resource on it. Then another year or so before they moved into that development phase. We’ve been working on this project for six or seven months now. So, we’re at the earliest stages. The deposit has to stack up as something that is an ore body that can be mined. So, we’ve got to get to that point before we understand that. But we know beyond that, those next steps, I’ve done it before. I’ve got a track record with every company I’ve been involved with and started and we’ve always taken the approach that we’re not only explorers, we are developers and operators. And that’s what we did at the coal mine in Eastern Russia, now in production. So, we take that approach. We’ve got that track record of doing that. So, we’re pretty well positioned to do well.

Matthew Gordon: That is a differentiator for sure compared to some of the people we’ve been speaking to who have not done it before. Mining is mining, but uranium mining is something where you need a team who have been there, learned what works, and you’ve got a lot of the right people around you because of NexGen. I think that’s what a lot of people are giving you a lot of credit for.

Craig Parry: We I think our track record speaks for itself. The reason to come on board as an investor now is that we’ve got a $35M market cap and we’re the only junior with a high-grade uranium discovery in recent years. Look at that NexGen share price chart, $0.05 and got as high as $4.60. That’s the ride we’re taking investors on.

Matthew Gordon: What are you at the moment, trading at $0.50?

Craig Parry: Trading about $0.50.

Matthew Gordon: How many shares did you say?

Craig Parry: 68 million.

Matthew Gordon: You’re going to have to dilute a bit to get through the next 12 months.

Craig Parry: Probably a little bit.

Matthew Gordon: Price appreciation will do a little bit for you. And then you’ve got to deliver results. So your message is you’re happy with the asset that you’ve got. You need to understand more. You are going to raise some money to get you through the next period. You still got the support of the big guys, NexGen and Cameco. This outlook is quite positive!

Craig Parry: Very, very positive. The thing I’m most excited for and we’ve got a little bit of news flow to come out over the next couple of months. So, we’ve still got some more assays to come out. And then, the rest of the news flow for the year will be about planning for that next drill program. And then look out for some more results early next year.

Matthew Gordon: We like your approach and we like the people you’re surrounded by and the fact you’ve been there done it before. Why don’t we get back in contact when you’ve got your plans laid out, had some of those results back through. We’d love to hear from you again.


Company page: www.isoenergy.ca

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IsoEnergy

Noble Mineral Exploration Inc. Announces Creation of Canada Nickel Company

Mark Selby, former CEO of RNC Minerals, and the owner of Dumont Nickel project in Quebec, has resurfaced at a new Nickel company called Canada Nickel Company. To us it looks like Dumont 2.0 but with a $12.5M market cap versus comps at $20M-$200M. Selby says it is potentially the first new large-scale Nickel resource in more than a decade, which will command a much higher valuation in the coming bull nickel market. Highlights are:

  • Located 10km north of Timmins adjacent to all major infrastructure
  • Multi-kilometre anomaly with potential for Dumont scale resource 
  • Mineralogy and geology similar to Dumont so they could leverage some of the work done there
  • What is most exciting is potential for similar or higher grade zone 
  • The new entity will be created with just 50M shares outstanding
  • It’s early stage exploration and has 4 holes in a multi-kilometre anomaly and if anything like Dumont, the geophysics results could allow them to put together large resource relatively quickly.

Continue below to read the full press release.


  • Mark Selby Appointed Chairman and CEO of Canada Nickel Company
  • 100% Consolidation & Spin-out of Crawford Nickel-Cobalt Sulphide Project
  • Fully-subscribed $5 Million Private Placement in Canada Nickel Company

September 30, 2019 – Noble Mineral Exploration Inc. (TSX-V NOB) (“Noble” or “the Company”) today announced its plan to:

  • create the Canada Nickel Company (“Canada Nickel”), which will own a consolidated 100% interest in the Crawford nickel-cobalt sulphide project, and
  • distribute a significant portion of Noble’s interest in Canada Nickel to Noble shareholders and qualify Canada Nickel as a new public entity.

Canada Nickel will be led by Mark Selby, who will be appointed Chairman & CEO. The Company also announced the plan to complete a fully-subscribed $5 million private placement into Canada Nickel, subject to regulatory approval, to fund the cost of the Crawford project consolidation and continue exploration and mineralogical work to advance the project.

“I am delighted to welcome Mark Selby to lead Canada Nickel through the next phases of exploration and development to unlock the massive potential of Crawford. Mark is a recognized leader in the global nickel industry given his experience and network successfully advancing the Dumont nickel project,” said Mr. Vance White, Chairman & CEO of Noble. “I am very proud of the team that made the Crawford nickel discovery, which is one of the few nickel discoveries in many years with large scale potential.

With the planned consolidation of ownership in Crawford and private placement, Canada Nickel is well- positioned for the next exciting phase of growth and value creation for Noble shareholders.”

Mark Selby was most recently President & CEO of RNC Minerals, where he led the development of the Dumont nickel-cobalt project through to a fully permitted, construction ready project. Before RNC, he held senior management roles at Quadra and Inco and he is recognized as a leading authority on the nickel market.

“I am pleased to lead Canada Nickel and advance Crawford, which is an exciting project. While it is still early days, the promising drill assay results and the encouraging initial mineralogical work demonstrate many similarities to the Dumont project. Coupled with the close proximity to significant infrastructure near Timmins, I believe this will allow me to leverage all the experience and insights we learned in advancing Dumont,” said Mr. Selby. “The timing of this discovery is excellent. We are in a robust nickel market increasingly driven by demand for nickel from the electric vehicle (EV) market which will require new nickel projects to be built over the coming decade. I am encouraged by the strong support we have received from a number of new and existing investors who have committed to $5 million in financing which will allow us to execute the next phase of drilling and metallurgical work for the project.”

Crawford Nickel-Cobalt Sulphide Project

The recent drilling program by Spruce Ridge (TSX-V SHL) and its Joint Venture partners, a group of private investors, Dr. K. Sethu Raman, Robert Hirschberg and Sam Sehota, was focused on the Crawford Ultramafic Complex, a 3.5-kilometre long body of peridotite, dunite and their serpentinized equivalents. The target, entirely under cover, was defined by a helicopter-borne magnetic and electromagnetic
survey and an airborne gravity survey, both conducted over of the entire project area of 100 sq. km. An Artificial Intelligence (A.I.) review of data, provided by Albert Mining Inc. (TSX-V AIIM), also identified the area as being prospective for nickel. All four discovery holes totaling 1,818 metres intersected multi- hundred metre intervals of serpentinized dunite with persistent nickel values with two of the four holes ending in mineralization. (see Noble release March 4, 2019)

Highlights from the drilling:

  • Hole CR18-01 intersected 558 m of 0.26% nickel, 0.013% (127ppm) cobalt, (ended in mineralization)
  • Hole CR18-03 intersected 318 m of 0.25% nickel, 0.013% (126 ppm) cobalt
  • Hole CR18-04 intersected 208.5 m of 0.32% nickel, 0.013% (135 ppm) cobalt (ended in mineralization)

Drilling on the project has resumed both east and west of the existing drilling and to infill the existing drilling to test the southern contact.

Table 1 – Recent Drilling Results

Crawford Nickel-Cobalt Location

Initial Mineralogical Results (see Noble release dated June 11, 2019)

Twelve samples of drill core were selected from 1.5-metre analyzed intervals from the recent 1,818- metre, four-hole drill program, to cover a range of nickel, cobalt and palladium contents as well as differing degrees of serpentinization and a range of sulphur contents. Polished thin sections were made from the core samples and were examined under reflected-light microscope and a scanning electron microscope (SEM), which provided chemical analyses of individual mineral grains to aid in their identification. The following minerals were identified as carrying most of the nickel and cobalt (in order of decreasing abundance): pentlandite (nickel-iron sulphide – 50%), heazlewoodite (nickel sulphide – 35%), awaruite (nickel-iron alloy – 15%) and minor godlevskite (nickel sulphide with minor iron). In addition to the mineralogical identification study, an analysis was performed on pulp samples of the 12 core intervals from which the mineralogy samples were taken. Table 2 shows a comparison between the Peroxide Fusion analysis and the Aqua Regia analysis for cobalt and nickel and establishes the potential percentages of ‘Liberation” of these key elements.

Table 2 – Peroxide Fusion vs. Aqua Regia Analysis for Nickel & Cobalt

100% Crawford Project Consolidation

The planned consolidation of the Crawford properties will be implemented under the terms of a binding letter of intent that has been entered by Noble, Mr. Selby, Spruce Ridge Resources Ltd. (TSX-V SHL) (“Spruce Ridge”) and certain private investors (the “Investors”) under which, subject to certain specified conditions including required regulatory and shareholder approvals:

  • Noble will receive 12 million common shares of Canada Nickel (representing a 24% interest in Canada Nickel post-financing) and $2 million in cash; 10 million of the Canada Nickel common shares will be distributed to Noble shareholders;
  • Spruce Ridge will relinquish its joint venture interest in the Crawford project (the current joint venture arrangements are described below) on the following terms:
    • Noble will pay $1 million to Spruce and cause Canada Nickel to issue 20 million common shares of Canada Nickel to Spruce;
    • Spruce will issue 2 million common shares to Noble;
    • Noble will issue 10 million units to Spruce, each unit to be comprised of one common share of Noble and one-half of a common share purchase warrant of Noble (exercisable for three years at $0.15 per share); and
    • Noble will transfer certain assets to Spruce (unrelated to the Crawford project) subject to 25% earn-in rights.
  • The Investors have agreed to relinquish their joint venture interest in the Crawford project (the current joint venture arrangements are described below) on the following terms:
    • Spruce will transfer 10 million common shares of Canada Nickel received from Noble (representing a 20% interest in Canada Nickel post-financing) to the Investors; Spruce will hold the remaining balance of 10 million shares of Canada Nickel (also representing a 20% interest post-financing); and
    • Spruce will issue 10 million units to the Investors, each unit to be comprised of one common share of Spruce and one-half of a common share purchase warrant of Spruce (exercisable for three years at $0.10 per share).

Noble and Spruce Ridge are parties to a joint venture agreement dated May 4, 2018 (the “Crawford JV Agreement”) under which Spruce has the right, subject to the terms and conditions thereof, to earn up to a 75% undivided interest in the Crawford project. Spruce and the Investors entered into an agreement relating to the Crawford JV Agreement, dated September 9, 2018 under which the Investors have the right to earn up to a 37.5% undivided interest in the Crawford project (with Spruce retaining a 37.5% undivided interest therein). For a description of the existing joint venture agreements between Noble, Spruce Ridge and the Investors, please refer to Noble news release dated May 8, 2018 and Spruce Ridge release dated September 27, 2018 (both available under the applicable corporate profiles on www.sedar.com).

Canada Nickel – $5 million Private Company Financing

A $5 million private placement of common shares and flow through common shares into Canada Nickel has been fully subscribed and is expected to close on or before October 15, 2019. Under this private company financing, it is expected that Canada Nickel will issue 13 million common shares at $0.25 per share and 5 million flow through shares at $0.35 per share. The proceeds of the private placement will be used to fund the joint venture consolidation described above, mineral exploration of the Crawford project, and working capital requirements ancillary thereto. This financing will be completed by way of a private placement to qualified investors.

Special Meeting – Distribution of Canada Nickel Shares

A special meeting of the shareholders of Noble is expected to be called to approve the distribution of the Canada Nickel common shares received as part of the transactions described and other matters relating thereto.

Timing – Property Consolidation, Share Distribution & Canada Nickel Qualification as Public Entity

Subject to the receipt of regulatory and shareholder approval, it is expected that the consolidation of the Crawford properties will be completed on or prior to October 31, 2019, and that the distribution of the Canada Nickel common shares to Noble shareholders and qualification of Canada Nickel as a public entity will be completed on or prior to December 31, 2019.

It is expected that Canada Nickel will have 50 million shares outstanding following the transactions and private placement described above.

Qualified Person

Randy S C Singh PGeo (ON), PEng (ON), VP Exploration & Project Development of Noble and a “qualified person” as such term is defined by National Instrument 43-101, has verified the data disclosed in this news release, and has otherwise reviewed and approved the technical information in this news release on behalf of Noble Mineral Exploration Inc.

Contacts (Noble):

H. Vance White, President

Phone: 416-214-2250 Fax: 416-367-1954 Email: info@noblemineralexploration.com Investor Relations Email: ir@noblemineralexploration.com

Contacts (Canada Nickel Company):

Russell Starr
Phone: 647-669-9801

email: RussellStarr@canadanickel.com

About Noble Mineral Exploration

Noble Mineral Exploration Inc. is a Canadian-based junior exploration company which, in addition to its shareholdings in in Spruce Ridge Resources Ltd. and MacDonald Mines Exploration Ltd., and its interest in the Holdsworth gold exploration property in the area of Wawa, Ontario, holds in excess of 79,000 hectares of mineral rights in the Timmins – Cochrane areas of Northern Ontario known as Project 81.

Project 81 hosts diversified drill-ready gold, nickel-cobalt and base metal exploration targets at various stages of exploration. More detailed information is available on the website at www.noblemineralexploration.com.

Noble’s common shares trade on the TSX Venture Exchange under the symbol “NOB”.

Forward-Looking Statements

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. This News Release includes certain “forward-looking statements” which are not comprised of historical facts. Forward-looking statements include estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur. Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Although these statements are based on information currently available to the Company, the Company provides no assurance that actual results will meet management’s expectations. Risks, uncertainties and other factors involved with forward- looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information. Forward looking information in this news release includes, but is not limited to, the intention to complete the transactions and the expected expenditure of the proceeds of the private placement, and the Company’s objectives, goals or future plans. Factors that could cause actual results to differ materially from such forward-looking information include, but are not limited to an inability to complete the Transactions, failure to identify mineral resources, failure to convert estimated mineral resources to reserves, delays in obtaining or failures to obtain required regulatory, governmental, environmental or other project approvals, political risks, inability to fulfill the duty to accommodate First Nations and other indigenous peoples, uncertainties relating to the availability and costs of financing needed in the future, changes in equity markets, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects, capital and operating costs varying significantly from estimates and the other risks involved in the mineral exploration and development industry, and those risks set out in the Company’s public documents filed on SEDAR. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information, which only applies as of the date of this news release, and no assurance can be given that such events will occur in the disclosed time frames or at all. The Company disclaims any intention or obligation to update or revise any forward- looking information, whether as a result of new information, future events or otherwise, other than as required by law.

This news release does not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of any of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful, including any of the securities in the United States of America. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933 Act”) or any state securities laws and may not be offered or sold within the United States or to, or for account or benefit of, U.S. Persons (as defined in Regulation S under the 1933 Act) unless registered under the 1933 Act and applicable state securities laws, or an exemption from such registration requirements is available.

Exore Resources (ASX: ERX) – Gold Explorer with $10M in cash. Maiden Resource in September (Transcript)

Interview with Justin Tremain, Managing Director of Gold explorer Exore Resources (ASX: ERX).

How does Exore Resources stand out in a busy field of Gold Explorers? The Birimian Greenstone Belt has over 60 +1Moz Gold Resource companies. Which one should investors choose? Exore is in the right region but also leads to a challenge about how to get investors to notice them. We listen to what Justin Tremain has to say on the matter. One of the big plus points is that they have $10M in cash to be able to choose what to do next. We find out how Exore intends to spend their money to create actual shareholder value. What’s the exit?

They are looking to deliver a maiden Resource in the next few weeks. Hoping to deliver 400,000-5000,000 oz. What is Exore doing about promoting their company to retails and what are they saying? We want to find out how they are differentiating themselves in front of institutional shareholders. All licences and permits in place for now and hitting comparable grades for the region if not slightly higher.

Interview Highlights:

  • The Overview of the Company
  • Mining in West Africa and Companies of Côte d’Ivoire
  • Promotion: How Do You Stand Out From the Rest?
  • Cash is King and They’ve Got It
  • Strategy of the company: Why Put Out a Maiden Resource Now?
  • Share Price and Shareholders
  • Assets, Drilling and Permits – Do They Know What They Have?
  • Management Team and Relevant Experience
  • Are the Markets Treating Them Fairly?

Click here to watch the interview.


Matthew Gordon: Could you give us a one-minute a summary of the company and then we could look into some questions after that? 

Justin Tremain:  Exore is a very new company in its current form. It’s only been around for less than one year. We’re a gold exploration company listed on the Australian Stock Exchange with a head office here in Perth in Australia. But our project and our sole focus is on a gold expiration project in the Northern part of Cote d’Ivoire, which we acquired in December last year. So we’ve be aggressively exploring that project over the last 7-8 months, we’ve had a lot of success as our drilling results will show over the last 6 months. 

Matthew Gordon: You’ve been in the current form for less than a year. What was it before? 

Justin Tremain: Before it was just a cash shell, going back some time and had some lithium assets and that’s where the cash came from and then I joined the company. When I joined the company last year it was just a well-funded cash vehicle without a project and looking for a project. We had a $15MIL market cap with $15MIL in the bank.  

Matthew Gordon: Cote d’Ivoire, West Africa, well-known gold producing area, lots of companies in the area. I assume that’s why you decided to go there? How did you get into the project? How did you find it? 

Justin Tremain: It was really the project that attracted us first and foremost. It was a project that I was familiar with, when we looked at the project, we could say that there’d been a lot of early reconnaissance exploration work done by the previous explorer, but not a lot of drilling. And there was a really stellar walk up drill targets, and obviously we had the money to be able to do the project justice. And then when we looked at the country, we really saw a huge opportunity in Cote d’Ivoire. It really is the most stable place in West Africa now. And there’s long been an argument that it’s got the greatest opportunity because it has a very large percentage of the Birimian greenstone belts situated in Cote d’Ivoire, but it just hasn’t had the same exploration focus of the neighbouring countries. Yet it is that now over the last five or six years, the more stable countries now. So, it was really a project that got us that interested first. But then when we looked at the country, we could really see a lot of activity and a lot of interest building in Cote d’Ivoire of the next couple of years. 

Matthew Gordon: I noticed a very interesting chart at the back of your power point, ranking for terrorist activity. I see Cote d’Ivoire is actually below the UK and the US which I thought it was quite amusing. 

Justin Tremain:  It’s a very topical issue for West Africa and really for the world. But in West Africa, in some of the Northern countries, it’s becoming a major issue and it becomes very difficult to take exploration when you have those security issues. And unfortunately, Cote d’Ivoire did have one incident a number of years ago, but it hasn’t had any recent experiences. 

Matthew Gordon: You must get that question a lot with regards to safety. I think there are some countries slightly further North of you that perhaps do have that consideration. Cote de ’Ivoire, great country, I’ve worked there, nice people as well. So, if we look at the Birimian greenstone, it is prolific. In your PowerPoint you say there are over 60  +1Moz businesses there already so it is prolific. But isn’t that part of the problem? It’s all it’s very attractive but isn’t that part of your problem too in that you are one of many gold explorers in the region and you’re trying to stand out. Do you agree that’s a problem? And if so, what are you doing about it? 

Justin Tremain: I don’t really see it as a problem. At the end of the day, large gold discoveries are going to get interest from the market. The issue is getting a land position in the country because all of West Africa is highly sought after. But the ground we have managed to put our foot on, it’s very difficult to get a position like that. We have over 1,000km2 under tenure now and we’re very fortunate that the exploration company prior to us spent 4 years in putting together that package and spent 4 years before they could get on the ground and do any exploration, which obviously becomes a very frustrating and costly period. And when it was done we were able to step in and get started straight away with our exploration. So, the challenge there is more just getting that ground position and we’re able to do that in one transaction. 

Matthew Gordon: That’s a factor of getting land and being able to do mining. But your team also needs to worry about financing, share price…. You have a lot of cash in the bank, and we’ll come onto that in a second, because that’s your plus point. But in terms of promoting the company, is it not a concern of yours that you’ve got lots of people going around telling pretty much the same story and they’re sitting with Resource as well? 

Justin Tremain: For us it’s all about just adding value to the project and undertaking exploration in a very financially prudent and efficient manner. And then drilling results, as we’ve being put out over the last 6 months, will ultimately attract the attention of investors. Then obviously as an exploration company you are beholden to your share price. Do you need to raise further funds at some point in the future? And therefore, it’s important to be able to set yourself apart. But ultimately, that’s just in drilling results and then being able to find Resources. So, I think new discoveries, which we think we’re on to 2 such new discoveries, are always going to generate quite a lot of excitement. 

Matthew Gordon: You do have to do those things, but there’s a bunch of other companies doing exactly the same thing and they’re going to be going back to the ASX or AIM  and reporting the same story as you. So how do you stand out? What is the plan going forward? I know you are early stages, but I’m just interested in your think thinking. 

Justin Tremain: It’s a good question. What actually got me interested in Exore as a company before we had a project was its cash position. I mean, most junior exploration companies don’t have the benefit of having $15M in the bank that they can put to work and therefore really are beholden to exploration results and market conditions over the next 6 months. Whereas we were able to not worry about that, well-funded and not having to worry about raising any capital in the future and able to go about our business. 

Matthew Gordon: Let’s talk about the cash position, because I think that the two things in your favour I think, Aussie gold price. 

Justin Tremain: I mean, really, it’s the US gold price that is generating up interest for us with as we’re sort of US dollar environment in Cote de ‘Ivoire.  

Matthew Gordon: And so, cash. You’ve got what, $10M? 

Justin Tremain:  Yeah, that’s right. I’m just under $10M now, right around doing very active exploration programs. 

Matthew Gordon: So how are you going to spend that? When will that last you through to? You’re going to $30M-ish market cap today. You’re going to spend $10M. What do you want to see at the end of that? 

Justin Tremain:  Well, what got us interested in this project is we wouldn’t be here if we didn’t see the potential for a multimillion-ounce gold project ultimately. And for us that’s 2Moz-3Moz plus, which is a standalone project, which you could then take through to feasibility and ultimately development and production. So that’s our goal, where we sit today. It’s been 6 months and we’ve spent about $5M. I believe we’ll come out with a Maiden Resource in the next few weeks. And that should be a stepping stone towards that ultimate goal of a 2Moz-3Moz project. And I think it would be quite a significant stepping stone towards there and we’ve been able to achieve that with about $5M of expenditure. And so hopefully we can continue to continue to grow that Maiden Resource going forward over the next 12 months. And then when we next come back to the market, we’ll be based on a project that has a Resource firstly, and a much more substantial Resource, than what we’ll be putting out in the next few weeks. And a far more advanced project. 

Matthew Gordon: A Maiden Resource. That’s good. And so, you’re expecting what sort of level? 

Justin Tremain: Oh, it’s difficult to say until we put it out as an announcement. But I think, for us to say it is a material milestone, we’d be really looking for an initial position of for 400,000-500,000oz of gold. And that to us would be a pretty significant milestone to achieve in just 6 months of exploration. 

Matthew Gordon: And why did you feel the need to put out a Maiden Resource now? Shouldn’t you just be drilling, drilling and drilling and put out a meaningful Maiden Resource, 1Moz plus, that sort of level? You’ve got the cash. You’re not under any pressure. Why do it? 


Justin Tremain: Once again, that’s a very good question and something of much debate. We are an exploration company. So, going back to what you’re touching on before, what sets us apart is we want to be able to show that we’ve achieved something tangible in the first 6 months rather than just a whole lot of drilling results and be able say, what does this mean? And that sort of leads us to putting a Maiden Resource out, albeit very much an interim position, that then allows the analyst to say, well, they’ve actually achieved what they said they were going to do in the first 6 months and gives people confidence in what we’ll do in the next 6 months. 

Matthew Gordon: But it’s a very conventional response to mining, is to do it the way that you’ve done it. So, there’s nothing wrong with it because it’s conventional. But if we look at companies like Great Bear in Canada, they’re just drilling. There’s no Resource being put out because they’re hitting the grades. They’re drilling, drilling, drilling. But the analysts understand that. Again, coming back to the thinking of management team.

Justin Tremain: Again, I think it’s a slightly different model for TSX listed companies vs. ASX listed companies. TSX listed companies just like to drill, drill, drill until they have a very substantial Resource, a Maiden Resource. Whereas ASX companies tend to try and show a little bit more progression as the project ways forward. Really for us, we started out as a cash shell, no institutional shareholders, no analysts following. And I think just putting a Resource out allows us to attract some more institutions and we’ve been able to do in the last 6 months, but hopefully attract further institutions to our register, on the back of also some analysts picking up coverage of the company going forward. 

Matthew Gordon: You’ve got all this cash, so you’ve got all the optionality. You can decide how you’re going to spend it, how quickly you going to spend it, how many drills you’ve got running at the same time. But you’re conscious of the share price. What are you, $0.07 cents, something like that? 

Justin Tremain: Yeah, we’re trading around 8-8.5 cents. I wouldn’t say we’re too conscious about the share price over the next 6 months. But we are conscious where the share price may be in a years’ time the share price, it doesn’t happen overnight. So, gaining exposure doesn’t happen overnight. It’s a gradual process. 

Matthew Gordon: But it’s something that you’re conscious of, that you need to be speaking to institutions and Retail. You’ve got about 50% Retail following, mostly Australian. 

Justin Tremain: Yeah, look I think all expiration companies are conscious of the share price because it is ultimately the way they fund the company going forward. And the most critical thing for an exploration company is to try and minimise dilution for its shareholders going forward and therefore the share prices are always a critical thing for our junior exploration company. 

Matthew Gordon: How are you differentiating yourself with your story to those analysts who’ve seen a lot of gold stories out there, there’s a lot of West African gold stories out there, you’re an explorer, high risk stage of  Exploration.

Justin Tremain:  Well, there’s 2 things the really that differentiate us. One is our cash position and therefore, if therefore people who invest in Exore today they are unlikely to be facing dilution in the short term. And then secondly, and ultimately the most important, is the drilling results that we’ve been able to put out which shows that we’ve made a discovery of what we call the Antoinette area and looks like we’re making a second discovery in emerging discovery at Veronique. And that really differentiates us and the grade of those intercepts. And ultimately that’ll come out in our Maiden Resource, we think we’ll be able to show a modest start in terms of quantum. It should be at a pretty good grade for our Resource, which is sitting at surface. 

Matthew Gordon: Right. If I’m looking at comps, like at Cardinal next door, Ghana. They’re sitting up 5Moz, heading towards 7Moz, market cap $130MIL… They’ve been drilling, but they haven’t got the response in the market that they had hoped for. So, are you nervous about the current strategy delivering for you? Or do you have some degree of confidence? If so, where do that come from? 

Justin Tremain: We have a lot of confidence because what we’re talking about is an initial step, it’s just on one very small area at Antoinette. We’ve been drilling elsewhere, step out on that particular area that we’re looking at putting a Resource around within the broader Antoinette area. But also, at this new discovery, Veronique, which we’re not featuring any Maiden Resource but at some point in the future we hope that that will provide a step change to the project in terms of scale. 

Matthew Gordon: You’ve got all the licenses and permits that you currently need to be doing this drilling and you are drilling without any interference or obstruction. 

Justin Tremain:  Correct, actually, it’s a very important point. So, obviously tenure is always topical in a developing country and in Africa. And so it is part of the acquisition of this project at the end of last year, one of the critical conditions was the government approving the transaction, which they did, but also to renewing the permit which happened in the beginning of December. And that was really the final condition to the application. So, in Cote d’Ivoire, we had our permits renewed as part of the mining code for 3 years. And then we have the right to renew those for a further 2 periods, subject obviously to meeting our work commitments. But given the amount of drilling that we’ve been doing over the last 6 months, there is no question of meeting our work commitments.   

Matthew Gordon: You’re hitting similar grades to lots of companies in that Birimian greenstone belt. They’re good grades. Your focus going forward is about understanding how much of it you’ve got, right? Because at the moment, you don’t quite know what you’ve got. 

Justin Tremain: That’s right. I think the grades we’re hitting are at the upper end of some of the other round operating gold mines and just deposits around us. So, I think the grades is reasonably good, reasonably high-grade for surface mineralization. But you’re absolutely right. It’s all about how much gold we can define and the scale of the soil anomalies that we’re drilling definitely demonstrate that potential for that multimillion-ounce discovery. And the area that we’ve been drilling at Antoinette, represents probably, I think 10-15% soil anomaly within that area there. And as I said, we have a number of other very large-scale soil anomalies and one of which we’ve started to drill and have some success there. 

Matthew Gordon: So, let me just understand it better. You’ve started a process. You’ve got a land package, got the licenses, permits, the grades are at the upper end of the Birimian type usual numbers. But where’s this thing going once you’ve kind of built out some scale to it? Where’s the exit point for you guys? Because all of the mid-tier or the big boys are looking for ounces in the ground. And you must be conscious of that. So, what are you doing about it? How do you stand from the 60 other explorers in that region? 

Justin Tremain: My view is, you take the project forward. We’re at the stage of exploration, which I think is really where the value is created, is discovery and defining a Resource. But once we have the critical mass, which in my view is 2Moz-3Moz of gold Resource, then the company will evolve. The team will evolve. And we take that that Resource and project through Feasibility and ultimately develop. That’s where we’ll go. Now, if there’s interest along the way, so be it. But if we’re not taking the project forward and adding value to the project, then we’re not going to attract any interest in the future. So that that would be our strategy. But also, the area that we’re operating in, there is 2 existing operations in close proximity to us already, which have reasonably limited mine life as well, which when we look to these projects was always a little bit of a fall-back position, that there are 2 operating mills in close proximity, which in the next couple of years we’ll probably need additional mill feet. 

Matthew Gordon: And from what perspective? Go and buy those mills or just offer feedstock? 

Justin Tremain: We’d be way too early to tell at this stage. As I said, that’s very much a fall-back position for us. Our current strategy is to go into line and discover a Resource that has the economies of scale to development as a standalone project. 

Matthew Gordon: Have you seen any examples of companies being taken out with 2Moz-3Moz? Is that a normal scenario in West Africa? 

Justin Tremain: You know, there’s a lot of cases of West Africa companies getting to that 2-3MIL ounces and then being taken out. No question about that. I mean, it was a recent transaction within Cote d’Ivoire a few months ago, it was only 0.5MIL ounce Resource. Not a company, but a project held by the company, Newcrest, which Rosco came in and bought. So, that’s an example of a transaction I think that pays from maybe $20M with another $20M to come for 0.5Moz Resources. So, you can put that sort of that as the benchmark against Exore. 

Matthew Gordon: That’s a good one. I think there’s a lot of data that came with that project as well. So that’s a fair point. So let’s talk about the management team, track record and experience in the region and creating shareholder value ie making people money. Tell us a bit about the team.

Justin Tremain: Yes. So the county is chaired by John Fitzgerald. He’s a very well-known mining financier here in Australia. He sits on the board of Northern Star, which is obviously one of the most successful gold company in Australia over the last 10 years. Then myself, I joined the company 12 months ago really with the mandate to secure a project for the company, to put money to work on a project that offered a lot of upside in terms of our exploration potential. Prior to joining Exore, I founded and ran a company that defined and completed a feasibility study on the first gold mining project in Cambodia, so another developing jurisdiction. That company got taken over in 2016 and that company is now taking that project through development. And I remained at that for 12 months before coming across into Exore. And then on ground we have an Exploration Manager who is highly experienced in West Africa, spent the last 12 years purely in West Africa on a gold projects and has been involved in 2 quite significant gold discoveries in the Burkina Faso and some exposure in Cote d’Ivoire. He saw the potential of our projects and that’s why he was keen to join us on the ground as our exploration manager. 

Matthew Gordon: What’s the shareholding structure look like? There’s a big retail component to this, but how much of the management sitting on? 

Justin Tremain: On a diluted basis it’s just under 10% of the company.. A lot of that has been actual shares bought on market. 

Matthew Gordon: Any significant shareholders or significant parties that we should be aware of?

Justin Tremain: As I touched on before, as a cash shell had no institutions on our register yet, in December last year and now we have a number of institutions on our register which our drilling results have attracted that interest and that sort of set us apart from these companies that you refer to. We’ve been able to attract these institutions on our registry in a market that’s reasonably challenging still for exploration. One of those is a North American institution that’s a very active gold fund. It owns over 6% of the company. Then we have a number of Australian institutions sitting below that 5% disclosure level. 

Matthew Gordon: And do you think the market’s giving you fair value at $30M for what you have? 

Justin Tremain: I don’t think too many managing directors would think that. But look, as I said before, there’s a reasonably recent corporate transaction, where hard cash is being paid for fairly modest size Resources of I think 430,000 ounces at the time, which was a transaction at higher than our current value. But ultimately, we’re well-funded. So the share price is what it is. We just keep going and stepping out and producing the drilling results that we’ve been putting out over the last 6 months, which show these projects grow and grow. And ultimately, I think the share price will react accordingly. 

Matthew Gordon: You’ve got 4 projects – there’s  a great chart on page 16 of your most recent presentation. Antoinette, Veronique, Liberty and Project Wide. So they’re all at different stages. You’ve got to allocate your $10M somehow. So where’s it mostly being focused and directed?

Justin Tremain: Really, we have 2 permit areas, the Northern one we call Bogoe project and then the southern one, the Liberty Project. And whilst we call them different project names, they’re actually only about 35km apart. So if we define Resources, depending on the grade, obviously, on either of those projects, they definitely are complementary to each other. 90% of our focus has been on the Bogoe project which within that sits the Antoinette Prospect and discovery and also about 12km to the South, the Veronique new emerging gold discovery. So that that’s definitely our focus and both those areas are quite large. They’re about 7-8km, by 3-4km in width and we’ve really just touched the tip of the iceberg on both of those areas.

Matthew Gordon: And these are relatively shallow deposits as well. Is that right? 

Justin Tremain: Everything we’re drilling is. Open pittable Resources is what we’re targeting. So really in the top 150m. Everything is mineralization, is outcropping at surface there. And our priority is actually drilling the at the top 100m, which is predominantly where the oxide material is, which has also metallurgical and mining benefits. And that is actually one of the advantages of this part of the well in Northern Cote d’Ivoire, the weathering is very, very deep. So to be talking about 60m or 70m of weathering, which is very deep. 

Matthew Gordon: The other thing that’s an important point for people to understand about the gold in this region in the Birimian, is it does make it easier and cheaper to mine. So you’re expecting reasonably good ASIC numbers when you get to that point of understanding it. There are 60 other explorers and developers there who we can use some of their data to extrapolate from.

Justin Tremain: I would say about Cote d’Ivoire as well, which is surprising, is the infrastructure is very good, which then has some advantages particularly in capital cost. We’re no more than 30 kilometres off Silk Road. There’s high voltage power lines throughout northern Cote d’Ivoire, probably no further than 30 kilometres from a high voltage power line, so they have some cost advantages as well and the ground is all very open and the ground is very flat. So we have all these significant advantages when we get to that point. But ultimately, grade is king and what we are defining is pretty good grade when we compare ourselves to other deposits in the region. 

Matthew Gordon: I think I think that’s fair to say. Justin, thank you very much for your time today. That’s been a wonderful introduction to Exore. Very interesting indeed. That’s a fantastic part of the world. We look forward to hearing more from you as things develop.

Justin Tremain: Thanks for your time today and look forward to chatting further in the future. 


Company page: http://www.exoreresources.com.au/

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Fission 3.0 (TSX-V:FUU) – The Strategy for Uranium Explorer Spin-off from Fission Uranium (Transcript)

Interview with Ross McElroy, Uranium COO and Chief Geologist of Fission 3.0 (TSX-V: FUU). Another small Uranium explorer speaks to us and tells us how they think they can make it. Fission 3.0 are in the Athabasca basin and believe they have picked up some quality assets.

We interrogate them about how long it has taken to get to where they are today and why they think that investors should think about investing on this Uranium exploration play.

Interview Highlights:

  • Overview of the Company & Birth of Fission 3.0
  • Relevant team experience with Uranium exploration.
  • What’s been done in the 5 years the Company’s been running?
  • M&A and their financing options.
  • Their strategy for growth and their model to make it attractive to shareholder.
  • Targeting projects: uranium winners vs picking up scraps in the Athabasca basin.

Click here to watch the video.


Matthew Gordon: So, tell us about Fission 3.0.

Ross McElroy: You know, really it was all about still wanting to be able to be an explorer. Fission Uranium, the big company, is really all about developing the PLS project, RRR deposit. That’s a project that the legs and the ability to go through to, ultimately, a production story, quite different than the exploration arm. Really that’s why Fission 3.0 was set up several years ago, and was spun out of Fission Uranium Corp. Just to be simple about it, what we did is we’ve acquired a lot of grassroots projects, primarily in the Athabasca Basin. Our goal in Fission 3.0 is really to go out and make a new discovery, similar to what we’ve already done several times.

Matthew Gordon: So, let’s say this is a new story to everyone here. Tell us a bit about you. What’s your background? What’s your skill set relative to this exploration play?

Ross McElroy: I’m a geologist. I started working in the industry back in the mid-1980s. Interesting enough and relevant for this story. My first job was with what’s now Cameco. So, I worked with a uranium major. That was my first real job out of school. I’ve spent the good part of my early career in the Athabasca Basin hunting for uranium, looking for those high-grade deposits with Cameco. I ended up working with the French conglomerate as well, currently called Orano, and they were really in the same space and looking for deposits in the Athabasca Basin. So, that’s really where I got started. I spent about 14 years with BHP, mostly in gold exploration – gold and diamonds. So, I’ve been a mining geologist with them. So, I guess you could say my career has really spanned everything from grassroots exploration, through to mining and multiple commodities. But really, uranium is my main focus.

Matthew Gordon: Tell us a little bit about Paul Charlish, what does he do?

Ross McElroy: Paul Charlish is our CFO. He’s been the CFO with Fission Uranium Corp and has the same role with Fission 3.0.

Matthew Gordon: Dev’s the market guy. You’re the technical guy and you’re driving the business, but you’ve been doing this for five years. So what’s happened in five years?

Ross McElroy: What we’ve done and probably I guess the whole history of the company, really, since I got involved working with Dev back in 2007. We’ve been acquiring our own ground. So, we’re kind of set up to do our own staking. Do our own investigating of where we want to be. Staking ground organically. So, we haven’t done any acquisition deals. We like to pick up the ground early because that’s the least expensive, but you have to have the expertise to do it. We’ve got a team that been acquiring good ground that way and we’ve been successful. And ultimately, if we are successful, we’ve been able, at least in the past, we’ve sold projects. We’ve been a project generator. We’ve been able to get other people to invest in our products. And really, that’s been the model that we that we do.

Matthew Gordon: I’m looking through the presentation. There’s a lot going on in there, there’s a lot of ground. What’s the strategy? You’re looking at a lot of optioning or building out a lot of options here. At some point, you’ve got to make decisions because you need to finance this.

Ross McElroy: It is, very much so. You know, first of all, we start with the Athabasca Basin. That’s the premium uranium district in the world. Certainly, the home of the highest-grade deposits. It’s where I spend a good deal of my career looking for deposits. I’ve been very successful at it. What we’ve been able to do is build a team of experts, geochemists, geophysicists, structural geologists looking for these deposits because although the rewards are tremendous, when you find a high-grade uranium deposit probably more valuable than any other commodity. They’re hard to find as well. So, you have to apply the sciences of geochemistry, geophysics. So that’s really what our team is built around. And that’s how we go about starting to explore and make these discoveries.

Matthew Gordon: Not all uranium plays are born equal. Even in the Athabasca Basin. So, what is the process that you’re going through to identify the targets which you’re going to focus on? We’ve spoken to a lot of juniors in the Athabasca Basin and they’re saying because we’re here, it’s a home run, no problem.

Ross McElroy: And that’s not true. I mean, it’s a home run if you make that discovery. But the failure rate has been pretty high among juniors. Even with the majors. If you make a significant discovery in the Athabasca Basin, about 1 in every 5-10 years. That’s sort of when you look at it as a whole. I’ve been fortunate enough when I first started, I was working with Cameco. We made the discovery of McArthur River, which is the world’s largest high-grade uranium deposit. So, that was a pretty good experience. You learn the things that you’re looking for. Because these are deposits that occur below the surface, with no surface exposure. So, you’re really trying to use the science of vectoring in with geochemistry and geophysics. And so, it does take a pretty multidiscipline team in order to be successful at it. And I think that, having spent time with the majors, learning how they do it, I think that’s boded very well for us and that’s why we’ve been successful at what we do. So, there’s nothing easy about it. There’s nothing fast about it. But if you learn how to select the right ground, you’d know the techniques to go through discovery. You sort of know when you’re in the right area. That’s what’s important.

Matthew Gordon: So how many projects have you got at the moment?

Ross McElroy: Fission 3.0 has 16 projects.

Matthew Gordon: That’s a lot of projects. So, you’ve got to know what you’re looking for or else you’re going to spend a lot of money. So, how quickly do you get to the point we can decide and 16 goes down to 10, goes down to 8 etc. How do you play that? How does it actually work?

Ross McElroy: That’s always it’s a bit of an iterative process. You have a land tenure, sort of always in a state of flux. We picked up new ground. We shed other ones. That’s part of the overall strategy. Because you’re right, otherwise you’ll be spending money where you don’t need to. And I think what we try to do is, first of all, we have a pretty good idea where the key areas are. And one of the strategies that we’ve used successfully with other companies in the past, Fission Uranium being a good example, Fission Energy, the predecessor of that, is we pick ground that’s very shallow, where we expect to make a discovery within about 3 or 4 hundred metres of the surface. In the high-grade uranium business, that’s shallow. It decreases your cost., it makes exploration actually somewhat easier and less expensive. And it’s just that the whole process is really about evaluating. Ultimately, you want to get to a drill target, so you do your geophysics, you do some chemistry studies, understand soils etc. If you get to the point where you do a drill target, then you’re really looking for the subtle clues. You’re trying to read the tea leaves that allow you to vector, vector, vector, vector, vector. What we’re always looking for at the beginning is “smoke”. All these high-grade uranium deposits have an aura around them of what we call “smoke”. And we’re really looking for the fire, which is the prize, right in the middle of that is the high-grade uranium. The dimensions of it are probably not big, they never are. Even the biggest, best mines have relatively small deposits, a lot of uranium packed into that. So, you’re really trying to get yourself focused, focused, focused and make that hit.

Matthew Gordon: Obviously, market cap at $14M. It’s not huge. You’ve been going at this for 5 years. How long have you been going at it properly in terms of this, Fission 3.0, proper?

Ross McElroy: Well, we spun Fission 3.0 out of Fission Uranium back in 2014. But at that time really the market in uranium had been very slow. So, one of the things that we did during that period from 2014-2017 is we’ve been quietly getting ground, staking ground, picking areas where nobody’s looking. And a lot of companies have not been all that active, because the uranium market’s been slow. So, it’s given us an opportunity to pick the best the best places. So, we’re picking the best fruit off the tree in the slow times. And then towards the end of 2018 we were starting to raise money into the company that allowed us to get those dollars into exploration, money into the ground. And so very quiet, lean time for the first few years. Now we’re starting to get to work.

Matthew Gordon: People will say “they’ve been going 5 years and they’ve not done anything” but the reality is, it’s only been just over a year. When you raised money, the share price was around $0.30, people got excited. It’s around $0.09-$0.10 cents today. I’m sure you’ll say “undervalued”. But I’m more interested in the stage that you’re at and it really is about these projects and understanding what’s there and vectoring in on which ones are more important to you than others before you the move the company forward to the next stage.

Ross McElroy: Yeah, that’s right. My kind of group are projects, although we’re in the Athabasca Basin, where all of the products are fairly shallow and kind of go around the edge of the Basin, where you would expect the shallowest deposits to be as you move toward the middle of the basin, deposits could be there, but they tend to be pretty deep. So, our ground is around there, but we are focused in areas where you would have historic mining district in the Key Lakes side in the southeast part of the basin, there’s been a lot of discoveries and activities for the last 40 years there. We have property in and around there, using new models to look for uranium that people haven’t really used before. But in a historic area of known uranium. We also have a really good land package up in the Beaver Lodge, Uranium City district in the North West corner of the Basin. And that’s where uranium mining first gets started in the province of Saskatchewan. Everybody forgot about it. That was in the 1950s-60s. And we went chasing stuff around Key Lake and forgot about those areas. So, they’re really under explored by modern exploration techniques. The third area that we focus on is around in the South West part, around our PLS project. This is where the newest, best discoveries in the Basin have been in the last 10 years. In Fission uranium we’ve made the RRR discovery. NexGen made the Arrow discovery. These are big high-grade deposits in a brand-new area. And so, our land package sort of focuses mostly in those key areas.

Matthew Gordon: I’m trying to work out was the timing from where you are today to that point where you’re just creating DFS, BFS? What’s that timeframe? So, do I come in now, get in early? Do I wait? Do something else and come back to you later? What do I do?

Ross McElroy: Well, let me give you some perspective. With Fission Uranium in the PLS project, for example, that was a grassroots play, very similar to the sort of projects we have in Fission 3.0. In 2010, we did our first airborne survey of radium metrics and we found radioactive anomalies. In 2011 we made the discovery to figure out what those were, that was a high-grade boulder. In 2012 we were drilling along the trend and made the discovery. So, it was really a 2-3 year period of starting to look at that project to making that discovery that was an absolute game changer. I think that’s the kind of model that we’re looking at. When we start looking at these projects, to me it’s probably about at least a 2-4 year window for when you start getting something really interesting that you might tag into. It generally never happens in your first pass on a project. I’ve never seen anyone stake ground and make a discovery the first year just started. It doesn’t happen that way.

Matthew Gordon: And you’ve also got something in Peru?

Ross McElroy: We do. It dates back to the predecessor of all of them, Strathmore minerals. That was the first project in the Strathmore in the 1990s. Now, Strathmore was various versions of Fission out of that. That was a first project put into the company back then, the government released ground. Prior to that, you couldn’t stake for uranium as a public company. So, it was government’s held strategic mineral titles. So, they opened it up and we acquired some ground down in that area. There has been an interesting history down in Peru. We’ve focused more on the Athabasca, in our life. But others have made some great advancements down in Peru and the Machu Stanley Plateau Energy

Matthew Gordon: Are you parking that for now?

Ross McElroy: No and the reason we don’t park is it because we’re also a project generator. We’ve been able to attract an investment group that’s interested in advancing properties down there. So, we’re looking for uranium and lithium in a partnership with a private company right there. So that really follows our preferred model of a business that we do in Fission 3.0, which is we acquire the ground, bringing in others to spend money and jointly together we explore and make discoveries.

Matthew Gordon: There will be other starters there. It happened that last cycle. It’s going to happen again. There’ll be more people coming to the party. Do you think that you’ve hit this at the right time? Do you think that people coming in are going to be left with scraps? If you’ve spent five years looking at stuff, surely you and others will have picked up the good stuff. What does it mean for all of these new entrants coming in?

Ross McElroy: Well, you’re absolutely right. We saw that in the last bull run, that started in 2003 & 2004. I remember seeing the entire Athabasca Basin stake dust. Prior to that, the whole eastern side of the Basin was state that had been sold for 30 years and that was mostly Cameco’s holding. You’re right, there wasn’t a whole lot of ground available, but even the big guys dropped ground. The ground that we picked up in the old Fission Energy was a throw away from Cameco called Waterbury Lake. And it’s just part of the process. They hadn’t made a discovery there, they shaved off some ground. You could look at it as scrap. We picked up a significant package in there, made a discovery, right beside where a company called Hathor Uranium had made their discovery. That was part of the same thing. So that deposit crossed the boundary. So, you can still look at these same areas, 40 and 50 year out, exploration and still make a significant discovery. So that does happen. I think the key to everything is not thinking whether you got the scraps or not, but it’s whether you have a technical team capable to look at something in a new way and make a new discovery and have the guts and the capital to be able to go out and explore. I’ve seen that too often. Now, PLS is another example where we just used a brand-new idea, thinking outside the box, doing something that majors hadn’t even done, nobody had really done, which was look for uranium in a new area outside of the Basin and we were successful. So, you know, you can win both ways.

Matthew Gordon: Sounds like you’ve got a great team there. You’re in the right part of the world so it’ll be interesting to see how these projects develop. You’ve got to stay in touch with us and let us know.

Ross McElroy: We’d love to. Where we think that this is just the start of a new uranium market. And now that we do have an established land package, we’re not new to the game. I think that really gives us a leg up on what everybody else is doing. We’ve got the team, we’ve got the land. We know what to do. We know you start bringing people back into the uranium market and it will become a bull market again, once the price of the commodity continues to work its way upwards. I’m not going to get into the supply demand story, but once the price of the commodity moves up and there is every reason to believe it. Well, that does create excitement for exploration companies in the uranium sector. We’re so well positioned to take advantage of that.

Matthew Gordon: We look forward to hearing all about it over the next few months. Appreciate your time, Ross. We’ll speak to you again real soon. Thanks again.

Ross McElroy: Thank you very much. A pleasure.


Company page: https://www.fission3corp.com/

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Aura Energy (ASX: AEE, AIM: AURA) – Uranium Cash Flow to Support their World Class Vanadium Exploration (Transcript)

See our interview with Peter Reeve, Executive Chairman of Uranium & Vanadium Explorer, Aura Energy (ASX: AEE, AIM: AURA). Peter worked with Robert Friedland at Ivanhoe so he explains how the big company experience translates to the smaller junior side. He explains the thinking behind their Uranium and Vanadium strategy and how they intend to deliver growth for shareholders.

Interview highlights: 

  • Overview of the Company
  • Mentality and Company Strategy: Choosing Two Very Different Assets
  • Junior vs Big Company Mentality & Experience of the Team
  • Company Financials, Raising Money & Director Remuneration
  • Lack of Marketing: Reasons and Solutions going forward
  • Three Projects and strategy for them
  • Wishful thinking for the Vanadium Story?
  • Views on the Uranium and Vanadium Markets

Click here to watch the interview.


Matthew Gordon: Why don’t we kick off with a summary of the business and then we’ll get stuck into some questions.

Peter Reeve: Aura’s got three major parts to its business.  The first one is the Tiris Uranium project in Mauritania where we’ve just released the Feasibility Study.  We’ve got a Vanadium project called Haggan up in Sweden and we have some fantastic Gold and Base Metal and Battery Metal tenements for exploration down in Mauritania.  Quite a lot of work’s been done on those and that’s an interesting situation, a third off the rank, if you like, before two development projects.  We are focusing on getting cash flow out of Tiris, and with that cash flow help to build the other projects, but we’re also considering each one of these businesses to be essentially separate entities, so we’re trying to fund them separately.  So we do talk about an IPO separately for Haggan and we talk about some form of separate funding for the Gold, base and battery metal exploration. 

Matthew Gordon: What was the big idea when you put this together?  If I look at your track record, there’s some big names in there.  Big company experience, but this is a start-up.  So what are you looking to do?

Peter Reeve:  If I talk to the management team for a start, the majority of the management team and a couple of the Directors came from BHP Billiton.  In fact one of my Directors was my boss back in BHP Billiton when we were 30.   So we’re essentially from big companies and what big companies do really, really well is they do a lot of good, boring, technical stuff but they fail to capitalise on it all the time and commercialise it because big companies don’t have the financial imperative that little companies have. I left BHP Billiton and went out… I did a lot of things.  I became a fund manager, I went to a lot of other mining companies, did some big IPOs and then one of the Directors asked me to come back in.  The reason why I came back in after having run some large companies was because I believed and I still believe that these assets can deliver a very, very large company over time when we get those projects in cash flow.  So that’s probably the core thinking.  Very, very good technical people, very experienced technical people, but hand in hand probably as much commercial impetus as we needed to get these things driving. So what we want to do with the projects is we don’t want to trade shares on the stock market.  We don’t want to flip projects.  We want to cut the ribbon on production for our projects, but obviously it’s a Director’s decision.  If somebody else has a lot of money for projects, of course we’ll sell them, but what we really want to do, we believe the best way to get best value for shareholders, is by cash flow receipts.   You can do it by takeover, you can do it via other methods, but we believe cash flow receipts will ultimately give you the highest valuations.  So we want to get these things into production and make them very valuable for the shareholders.

Matthew Gordon:  That’s about what you want to do.  I’m more interested in the strategy.  You’ve selected Uranium.  You’ve selected Vanadium and Battery Metals.  They’re quite volatile, certainly in the case of Vanadium.  Uranium’s in a tricky position at the moment, but obviously people expecting that story to bear fruit, and Battery Metals, flavour of the month.   Why did you pick on those very different commodities in Mauritania and Sweden?  Two very different types of environments.  Was it a case of they were there or was it case of actually we specifically identified these commodities or these jurisdictions?

Peter Reeve:  Going back to the first comment I made about the fact that the company started and was based on highly technical people well before I joined, we had very, very intrepid geos.  They see rocks and mineralisation.  So it was 2007 / 2008 and they thought Uranium was a very good idea.  So they went and discovered Uranium in Mauritania.  A survey had been sitting there without any work, a radiometric survey without any overview of anybody external for five or six years.  Managed the expedition, went out into the desert and found the first Uranium out there. 

Similarly one of our Directors, had done some work in the Scandinavian countries as a younger geo, and knew that the alum shale ran into Sweden and eventually a long story short, that became a piece of ground they picked and cut the first Resource for Uranium and Vanadium. So the very nice thing again about our company, both those projects were virgin discoveries to us.  They haven’t cost us a lot of money.  We found them out of real geology, so we selected it.

The Swedish government about 18 months ago banned the Uranium mining, as you’re probably aware.   We had done a lot of study on Vanadium in the past.  The Vanadium price had been through low and so we put that in the background, but there are a lot of other metals in it.  When Uranium looked like it was going to be problematic in Sweden, we recut the Resource immediately on the Vanadium side.  Of course, the Vanadium price for a period of time looked sensational and frankly for good projects, it’s still okay now.  And so we recast that project, which we discovered in 2009 / 10.  We recast that as a Vanadium project with some by-product credits.

And then just to flick onto the Gold side of it. Slightly more complicated.  We had a parallel sister company called ‘Drake Resources.’  Drake Resources, under our principle geologist, had put together this Gold package in Mauritania.  Some years ago they raised $10M.  They spent $3M of that on the project and Neil Clifford, who’s my principle geo, conceived that project when he was principle geo for Drake and when Drake decided to do other things corporately, we quickly picked that project up.

So again, it goes back.  Every one of our projects is a technical genesis of our people over a long period of time and we rank our technical people very highly.  Neil Clifford, regardless, is probably one of the best geos in Australia and nobody knows his name.  He’s fantastic.  He found 20Moz of Gold in Australia.  Essentially found the Sun Rise deposit. Our technical people, have driven what we’ve done.

Matthew Gordon:  But to finish off with the strategy.  These projects have been identified and pegged by your technical team.  Was that all done before you arrived?

Peter Reeve:  Discoveries were done before I arrived here. The shift to Vanadium was done under my direction.  I sort of drove a fair bit of that.  The pickup of the Gold and Base Metals and Battery Metals was done under my time as well.

Matthew Gordon:  So on the Uranium project, would you have chosen to do that if you were starting today? 

Peter Reeve:  I’m still a believer in the Uranium price. Absolutely, definitely.  I do believe its something to do, but what I recognised really quickly was the Uranium price. You couldn’t guarantee anybody that the Uranium price was going to go up in the next 12 months, two years or three years, and that’s been right. So we quickly started to diversify.  So what you’re seeing, if you’re trying to get to where we are on strategy, is what we did decide to do, is don’t put our eggs in one basket.  Let’s broaden this out.  We started with pure Uranium.  We’ve not got Uranium, Vanadium, and we’ve got Gold, base and battery metal exploration.  We’ve broadened it right out.

Matthew Gordon:  Juniors have got lots of challenges, but you’re making sure that you’re mitigating that country risk. You talked about the team being technical.  I hear that loud and clear, a very technical team, a very good team, but what about all the other experience or skill sets required?  You guys have come from big companies.  Is there anyone in there who’s been used to running junior companies because it‘s got a whole bunch of different needs?

Peter Reeve:  Well, quite a few of us have been involved in junior companies.  Let’s just say we all came out of large companies, but five or six junior companies are mixed amongst all our experience.  Since 2006/ 2007 Bob Beeson, one of our Directors, junior mining companies.  Neil Clifford, our geologist has done a lot of consulting and worked in junior mining companies.  Will Goodall, our principle metallurgist.  I’ve probably worked now in something of the order of say, five or six junior mining companies.  I’ve been a Director of most of those, maybe investments from Ivanhoe into junior mining companies.  So we’ve got a lot of junior mining experience as well.  Nothing prepares you for a bad time in a junior mining company.  All the experience in the world you tend to run those things because the biggest bucking bull you’ll see in our rodeo is a cakewalk compared to a junior mining company in the sector.

Matthew Gordon:  So let’s talk about some of those things.  Let’s talk about finance first of all.  Obviously with the Ivanhoe you were associated with Robert Friedland.  He could open a lot of doors in terms of the finance, but how are you finding it now going from big boy stuff down to juniors and are some of those doors shut or just polite conversations? 

Peter Reeve:  Robert will go into his grave as one of the world’s best mining CEOs that’s probably set foot on the earth.  And I say that simply by the score card for the number of great operating projects that he will have to his name out there, still putting dirt through the mill.  Nobody at the top of Rio or BHP has done what he has done. 

Going with that, is Robert’s ability.  He’s got a magical offer bottle in his coat jacket and he pulls it out and he passes this little bottle and the investors just hand over money.  It’s fantastic. He’s got some magic about him where he raises money and he does it very, very well, and I haven’t got a clue how he does it.  As much as I sat next to him for five or six years, haven’t got a clue.

Matthew Gordon: So what are you going to do now?  How are you going to raise money?  How do you go about it?

Peter Reeve:  We’ve got to do it more incrementally.  We had a strategy to get the Gold and Base Metals moving through the DFS period for Tiris, but we couldn’t get those tenements granted quick enough for that strategy to come off.  We thought that would be a good strategy to sort of go parallel with that boring sort of development phase because we know investors and share prices go to sleep when you’re trying to develop a project.  But now we’re in a situation where with Tiris in particular, the strategy we are pursuing is export credit agency finance.  Not completely well known but I think perfect for what a junior mining development company does and that’s obviously where a sovereign nation lends the junior money and the quid pro for that is that buy the equipment for its project from that country.

Matthew Gordon:  So you’ve had to look at alternative financing, alternative structures to be able to get this going.  How are you funded now?  How much cash have you got today? 

Peter Reeve:  According to yesterday we’ve got $830,000 in the bank.  We are essentially equity funding all our projects via a corporate.  That’s how we’re doing it. We are looking at various deals.  The IPO for Haggan is another way to relieve Aura corporate from having to fund all their programmes.  If I could find – and we are looking for a royalty interest in the Gold and base metal part of the business in order to keep the funding off there.  So as I said initially, we’re trying to look at Aura at the moment as three distinct businesses and each need their distinct form of funding.

Matthew Gordon:  So is Aura potentially an incubator or a hold co for these assets, which may be spun out into their own vehicles?

Peter Reeve:  It’s not quite as direct as that as a strategy because if I was doing that I would have started the conversation and say, ”Hey, we’re a company incubator and we’re going to spin those things out.”  But you’re right.  It’s a correct pick up, that’s essentially what we’re trying to do.  We don’t want to keep on making shareholders who are here for our Uranium asset fund Vanadium when it might not be their flavour of the month.  We don’t necessarily think everybody’s interested in more primary exploration in Gold base metals and battery metals.  So if we can fund it separately we’ve got less criticism from shareholders.

Matthew Gordon:  So corporate, ie, your shareholders who have invested into Aura Energy are paying for this.  How do you Directors remunerate yourselves?  Are you on big salaries and big warrants, big options? 

Peter Reeve:  The Directors are just on moderate and normal Director’s salaries.  I’m on a salary that I’ve taken for quite a lot of time between cash and shares.  I’ve got performance rights.  It’s just a mix of the norm.

Matthew Gordon:  So your $800,000 is going to last you till when and what’s that being spent on?  Is that mostly G&A?

Peter Reeve:  Oh, no, it’s G&A.  We did a $2million financing, only about two and a half, three months ago, and we were very focused on putting all that money into getting the Tiris BFS finished.

Matthew Gordon:  And that’s been the bulk of the money that you’ve spent since then till now, is it?

Peter Reeve:  Yes, that’s right.  And also the work we’re doing on Haggan.  So we drilled for about three or four months in Haggan.  We’ve now been cutting the core, doing the assays because we’re trying to get a measure, an indicator Resource up for Haggan, a Resource estimate done, a mining plan done so we can release the scoping study very shortly.  So really all are corporate and that money we raised is really focused on getting the DFS done and that’s now ticked off.

Matthew Gordon:  So when do you need to go and raise more capital? 

Peter Reeve: I’m not going to answer that question in an interview because that’s a selective briefing so I’ve got to be very careful with stuff like that.  So we wouldn’t answer when we’re going to run out the money,  We wouldn’t answer when we’re going to raise money again.  We put it out in the quarterly yesterday.  We put out forecasts, the amounts of cash we’re going to spend over a period of time.  So people can make their own decisions on that. 

What we’re trying to do is make sure that every single bit of money we spend is ticking off some form of technical box in one of the projects. So really the money we raised recently was about the DFS and Haggan to that scoping study stage.  And out of that and no money on the Gold, out of that everything’s really got to flow.  Everything’s got to fund itself.  I’m not going to take any more money out of Aura Corporate to fund Haggan.  Not going to take any money out of Aura to fund the Gold and base battery metals.  We’ve got to find alternative sources of funds for that.

Matthew Gordon: You’ll find alternative funds for those two, but Tiris, you think with this export agency finance should also fund itself?  Everything’s fully funded.

Peter Reeve:  The export credit agency finance is a combined package for both Haggan and Tiris, but Haggan’s there’s a time lag so yes, it’s more focused on Tiris at the front end.

Matthew Gordon:  And then just to finish off on the team’s experience.  Uranium’s very different from Gold, Battery Metals, Vanadium.  What’s the relevant experience in the team in those commodities?

Peter Reeve:  Neil was a part of the discovery team for Tiris Uranium.  He‘s a geologist.  He found a fantastic Gold deposit as well.  So good geo’s can do both.  Tiris wasn’t particularly… It was sitting there essentially.  It was a very good survey. I’ve worked in Uranium in Australia 20 years ago. Will is a very, very good metallurgist across many disciplines.  He works for First Quantum.  He works for BHP, so yeah, we’ve got enough experience in the different areas, but what we do and we do it really well, we’ve got a great technical network.  We basically employ 60 year old people wherever we can because they’ve got the best experience and they come on per diom’s and they work for us for a period of time.  So if we need a Gold expert, a Vanadium expert, we go and find it.

Matthew Gordon:  But what about your commitment?  Are you sitting on any other Boards?  How do you spend your time?  How much time is spent on Aura?

Peter Reeve:  I’m full time, but I’m one other Board which I was on before I left. 

Matthew Gordon:  The other thing that I noticed from one of your previous interviews, you said, I think it was in November last year – “We haven’t spent enough on marketing steps, but we’re going to make positive changes.”  Think you’ve done that?

Peter Reeve:  Have we done enough on marketing?

Matthew Gordon:  You said in November that you were going to make positive step changes.

Peter Reeve:  Did I really? 

Matthew Gordon:    On film.

Peter Reeve:  I’ve been around long enough to know that when the Uranium price is sitting still at $24, $25 a pound, it’s pretty hard to go open market Uranium.  I would have said that and I do say that on the basis of commodities doing some good work.  Really at the moment the commodities aren’t doing good work.  Gold’s doing some good work.  Uranium’s not.  Vanadium’s not.  But we still believe in our projects. 

I’m a little bit of the mind where we’ve sort of tucked our baton under our arm for the last 200m, and in tucking our arm under, what I’m really saying is we’ve got all the technical steps done.  We’ve come across the finish line and now is the time to really get out and talk very broadly about getting the Tiris project understood out in the market.  But that said, again, I’ve done thousands of investor meetings in my time, you can imagine, with Robert and people like that, and I’m not going to get a super warm, “Oh yeah, come on, let’s have a talk about Uranium, it’s a fantastic commodity,” because at the moment it’s not.  But we also know the way Uranium moves, that if a few utilities decide to walk through the door at the wrong time, ie together at the same time and sign big long-term contracts, the Uranium price will pop and things will change within a week.

So my favourite saying in business is “Success is where preparation meets opportunity” and that’s what we’ve been trying to do.  We wanted to get prepared and we are so happy and relieved and getting these DFS materials completed and we’re so happy that it’s in such a great condition and it’s got such good stats, and it sits there as something we can now, if you like, park technically and now really push our mind towards the financing and getting out and marketing that completed document.  Being modestly hard to go out and market Tiris without a completed DFS.  Now we really can, nothing holds us back.

Matthew Gordon:  So that’s a long way of saying you’ve consciously decided not to do any marketing because you don’t think the market’s right.  Money’s tight, but now you will up your game in that department.  Is that what you’re saying?

Peter Reeve:  In November when I made that statement, we were looking at… if you go back then, you’ll probably see our presentation we were going to release the DFS probably in about February or March.  It was actually a February date, okay.  What happened was we came across, as you are meant to do in technical studies, we came across a clay issue within the ore and that affected the processing and that delayed the scoping study, much to the chagrin of our shareholders, but that delayed the study by another three or four months.  But it’s the same story.  I wanted to get the study done in February, then get out and market.  Now we’ve belied that by three or four months.

Matthew Gordon: In the interview I watched you were talking about a July release.  So I think it was slightly prior to that.  Let’s just finish off on that thought, which is around the importance of marketing, the importance of talking to the market because especially for juniors who need that liquidity, that increased volume of trading, that comes from retail.  I know with the Aussie market it’s a big retail market and I know you’re obviously listed on AIM as well.  Those are two very large retail markets.  So is your idea to do more promotion now?  Do you believe in it or are you just a technical team?

Peter Reeve:  I was a metallurgist originally, but I’m a very rusty metallurgist now, I like to say.  I did a dozen years out of my 35 in the field and I’ve been really pushing corporate finance since then.  I’ve done a huge amount of marketing.  I think I know how to do it. 

The issue, I suppose, around marketing for us has just been getting a really good sell of a story and I think we’re getting there with both of them.  We’ve made a change to our London broker as well.  We’ve taken on SP Angel, who’s very Resource focused and they are at the moment our joint broker and there’ll be another change coming up to put them more in the box seat for helping us.  So that’s one big change.

Matthew Gordon:  Have they produced any broker reports for you? 

Peter Reeve:  They are in the process of getting a broker report together because we only signed them up about eight or nine weeks ago.  Seven or eight weeks ago, whatever it was, quite recently.  It’s one of our announcements.  But they’ve put some quite good value reports out on us, a full research piece is in the pipeline. 

Matthew Gordon:  Again, just in summary. So you value promotion, the question was timing?

Peter Reeve:  We value promotion very much.  I learned it all the way back when I was a fund manager.  I said that western mining, I’d describe – which under Hugh Morgan was a company that essentially was a little shop front window with the blinds pulled down and we could never get the information out of them, and so that’s what made you really have to have your windows cleaned, your blinds up and your door open.  So now I’m a big believer in promotion.  I would never have been a part of Robert’s group had I not believed in promotion.  I really believe it.

Your only customers for Resource companies, I don’t care what size you are and what commodity you are, your only customers in the world are your shareholders.  We’re all in commodities. Commodities walk out the door.  The only customers we have are our shareholders.

Matthew Gordon:  Glad you said it.  Not many people recognise that. 

Peter Reeve:  It’s number one.  I mean, I’m not saying I always do it as best as I could. I’m sure I can do things better at different times, but I’m a serious believer in it.

Matthew Gordon:  The last presentation on your website is from March, it’s now August.  We’re getting an update on that soon, getting a broker report soon and you’re going to get into the market more?

Peter Reeve:  Yes, absolutely. 

Matthew Gordon:  Shall we talk about your projects?  Let’s start with Tiris.  Again, like to understand the thinking.  Everyone’s got different business models.  Yours is get into production first and then we’ll worry about building out the Resource.  Is that it?

Peter Reeve:  That’s a big part of it, absolutely.

Matthew Gordon:  Tell me more.

Peter Reeve:  We said to our shareholders on Tiris quite some ago – we’ve got a 52Mlbs Inferred Resource there.  We’ve just put basically 13Mlbs into mineable Reserve plus a little bit of inventory, but we’ve got a much bigger conversion to come from that.  But I said to them, “I haven’t got any interest in spending a lot of your precious money on pushing that Resource out to be 30Mlbs or 40Mlbs of Reserve when I can only spend 1Mlbs of it a year.” 

You think of Tiris as 52Mlbs Inferred, 13Mlbs in the reserve mining inventory for the DFS.  We have got a 1Mlbs per annum project call at the moment, 800lbs and something on average, but call it a one million pound per annum project in a production sense.  And we’ve already got some pretty interesting plans to look at expanding that to 3Mlbs per annum over time when we get more of that reserve conversion done.

Matthew Gordon:  So let’s understand where that sits in your strategy.  That’s not a big project.  It’s not particularly high-grade.  It’s Mauritania, with all that kind of risk, but it potentially gives you cash flow to focus on a project that you want to focus on, which is slightly further north, up in Sweden.  Is that right? 

Peter Reeve:  When it comes down to it, just on Tiris, we came out the other day and said that in Australian dollar terms we could make 27 million dollars per annum of after-tax cash flow.  Put that on a 10 to 20 times multiple, which are part of the cycle you’re in, and you can start seeing what a project with a good Uranium price and working could do.  So it will go some way to funding what you do on Haggan absolutely, but Haggan will then stand on its own for a proportion of…

Matthew Gordon:  Eventually it will stand on its own, but right now it’s not at that point.  Again, I’d love to understand junior mining management mentality.  That’s not a bad strategy.  Not the first time we’ve seen it.  It’s worked elsewhere.  Nothing wrong with it, not criticising it.  I just want to understand if that’s your thinking.

Peter Reeve:  That has been our thinking all the way all the way along.  However, at the moment we’re varying that a little bit by bringing in this concept of doing the IPO to fund Haggan in its own right.

One of the other issues with Haggan is that when the Swedish sun rises, we go to sleep.  That’s a pretty good analogy for what happens to projects like that.  I think unless you have a really well paid, engaged and active management team in Sweden, it’s difficult to make projects come alive.   A part of the Haggan IPO strategy is to get enough cash to set up a permanent management team who speak Swedish, who like pickled herrings, who do all the right stuff in Sweden to make projects get ahead and that’s really a part of where we are now.  We want the Swedish project to live in Swedish daylight hours, not try and make it live in Australian daylight hours.

Matthew Gordon:  We talk to management teams who think they can manage projects from the other side of the world.  It’s tougher.  It’s not impossible, it’s just a lot tougher and creates problems.

Peter Reeve:  Really hard.

Matthew Gordon:  So Tiris is in the Uranium space.  Uranium spot price is doing what it’s doing.  The utilities aren’t fully engaged yet.  I think you’ve got to buy into the macro story to get behind Uranium.  You talked about roughly 1Mlbs a year over a 15 year life of mine (LOM), but that depends on the price you can get in the market.  There’s a Resource and then there’s mineable ore and depending on the price that will determine the scale of this opportunity.  So what is your DFS telling you?

Peter Reeve:  In terms of the range of size of the project?

Matthew Gordon: Yes

Peter Reeve:  The conversion of Resource to reserve is very high and the reason is our deposit is, call it an evacuative surface deposit.  Average mine depth is about five metres.  So we aren’t looking at a pit wall which looks like a cone with the gem of a Gold deposit down the bottom and all that sort of thing.   We are in a really good situation where every piece of our ore is accessible, and I believe it’s the sort of operation that, you know, it’s one thing for us to devise us what we do in the DFS – and that’s a step you must go through for all sorts of reasons, the market, events, and Directors and everybody – but when we unleash our operating team on that project, they’re going to do it exactly the way they see the ore in the ground. 

My strong belief, and the geo’s strong belief, is that we will expand each of the Resources in the area now.  I mean, to get a reserve of course, they’ve got them off as nice square blocks because mine engineers like working in nice square blocks.  They don’t like shapes.  And so once we can start showing that there is shape to it and it does go a little deeper, it does go a little further, I think we’ll expand the Resource more than contract it.  A lot of it will convert to reserve or mineable, whatever we want to call it.  Mineable Resource.  And we still haven’t really started to do inspiration outside of the core discovery areas, and I think when we do that …

You know how it is.  You’ve got a plant built.  You’ve got a team there.  You ‘ve got everything set up. The marginal cost of then going out to get that extra bit of ore, which might just be a pot of 5Mlbs, three or four kilometres out, is a lot lower. 

We understand what happens to projects once you get them there and we’re pretty excited about what that will look like, but yeah, I would be hoping one day we’re going to mine 75Mlbs of this thing at least.

Matthew Gordon:  It’s low tech, low CapEx, low OpEx. 

Peter Reeve:  It’s not just low CapEx, by the way.  It’s sensationally low cap ex.  You want to get the odds of marketing.  You go and look at any other junior mining company or any other Uranium hopeful at the moment, and their capitals are mostly measured in the hundreds of millions of dollars.   So to get something sub a hundred with the C1 cash cost of 25, and an all in sustaining cost under 30, there’s not many of us around.  That’s why I make this nice marketing line.  I say that this is currently one of the most compelling Uranium development projects in the world as we speak.  As small as it is, it’s one of the most compelling projects because of that capital and that op ex.

Matthew Gordon:  Let’s talk about Haggan.  You’ve previously said this is the most valuable asset in your portfolio currently.  Tell us why you say that.  You’ve done some drilling recently.  How are you moving that forward?

Peter Reeve:  There’s a lot of metal in that system, just for one.  As I said, the Vanadium concentration has been equivalent almost to the Uranium for a long period of time, probably even higher than the Uranium.  We had to make this change from Uranium because the Swedish government decided that nuclear in 2040’s going to fall out of their energy balance, so they don’t need Uranium.  There was a bit of political stuff going on as you can imagine as well.

But we were fortunate that we had done enough work, we understood enough.  We’ve done a lot of good drilling, so within two or three weeks of that all happening, we recapped the Resource into Vanadium and we had it ready to go.  So now we’ve got cut off grads for our Vanadium deposit and we found what we call a high-grade zone, but it would be better to call it a higher-grade zone.  And that’s a higher-grade zone of about 90Mt of 0.42 per cent of V205. 

But again we’re fortunate.  Alum shale largely comes to surface and so that Resource will be encapsulated in a pit that starts at about 20m from surface and finishes by about 90m.  So again, a very manageable operation. 

Before we were talking about a heap leach, a Uranium heap leach that was going to be 25Mt to 30Mt per annum.  We’re now talking about a project which is Aura Clubs, and about 2.7Mt per annum.  So quite a modest scale project.   We did the capital and operating estimates last year, so again we spent our $80,000 to get one of the independent engineering firms to do the capital and operating estimates for Haggan.  ASX will not let us release that until we have the measured and indicated Resource.  We cannot release that unfortunately with an inferred Resource.  So again, it’s where preparation leads to opportunity.

We’ve got a lot of internal numbers and the project looks very, very good.  We are quite aligned to the idea of the whole battery push, but we’ll sell our Vanadium to anybody who wants it.  But I think the battery push in Vanadium is pretty interesting and when we start to look at the scale of this project, without giving too much away because I’m not allowed to, we’ve contemplated at the moment a 7,500Mt per annum V205 project, that’s about five per cent of the world’s Vanadium.  We sized it because five per cent sounded like a pretty non-disruptive sort of thing to do, but we could double the size of that if we had the right market.  We can make our cash costs go through the floor, and there’s all sorts of interesting technical things that I sort of kind to allude to just at the moment.

There’s a few proprietary things that are pretty interesting about some by-products we’re playing with there which really help that, and make it a really commercially robust project as well.  But what I’m saying is accelerate all our Vanadium, where it’s fallen to, it’s clearly not as good as $33 Vanadium.  But we can make money out of $7-$8 Vanadium and we can make a lot of money out of $7-$8 Vanadium if we expand our project.

And therefore all that then goes back to what are you doing as far as your linkages?  Who are you talking to?  Who do you want to get into bed with?  And we’ve made no secret of the point that we are talking to battery manufacturers, we’re talking to people who can be a part of us in whatever way that is. 

Matthew Gordon:  But how real is that?  All Vanadium producers are talking the battery story.  90% of the market is rebar. That’s the reality and it’s early days in terms of the VRFB.  And again, we have this conversation a lot with Vanadium producers and talk the battery story because it sounds great to shareholders, but you’ve got to have the prerequisite skills in house or you’ve got to have the right partners on board, strategic partners with the right balance sheet to be able to do that.  You’re early stages, so is this wishful thinking or is this actually a reality of what you can do because you think the scale of this will allow you to do that?

Peter Reeve:  Well, so far I’ve had three sort of pretty serious full day conversations in three different locations in the world on this particular battery initiative that we’re talking about, and we’re taking it pretty seriously. 

The Vanadium battery market, and people know that they have a cap on the Vanadium price before they say it doesn’t really work.  I think there’s some really smart things you can do in terms of partnerships to ensure that goes on. 

Matthew Gordon:  You may be treating this seriously, but what does that actually mean?   Are you at latter stage discussions with people, or is it just a process you’re going through?

Peter Reeve:  There is a particular party who we are talking to in some detail.  I would still put it at the… it’s gone beyond the concept stage.  We’re talking how things could work.  We haven’t stayed in each other’s laps yet,  we haven’t gone… You know how these things move along progressively, but it’s quite serious.  We like the story.  I’d like to make it happen. 

There’s a chart that I have in my presentation for March which you might have read.  It’s a battery storage …  At the moment I think that chart says that there’s something in the order of 15Gw to 20Gw of storage capacity.  And in 11 years, they’re saying  now 2030, and they’re saying that might be 300Gw of storage.  Now if that chart isn’t even half wrong, if it’s two thirds wrong, if that was the beer market or the underwear market, you’d want to be in that sector.  So I would just say that if that’s storage graph is even a third right, then it’s not a bad market to be in.  

So I’m a big believer, whether it’s Vanadium Redox Flow Batteries (VRFB) or not, the flow batteries are the ones that do store power for a long period of time, and that’s what interests me.  So I’m a bit of a believer in it.

Matthew Gordon:  That’s the macro.  That’s got nothing to do with you right now.  You’re at the point where you’ve got a scoping study coming out later this month, potentially end of August. 

Peter Reeve:  Yes

Matthew Gordon:  So you’re going to have an idea of what you’ve got then and you’ve got to then work out how you move that forward.  So what are your hopes for between now and the end of year in terms of what you can do, in terms of understanding what you’ve got and then what are you going to do with it?

Peter Reeve:  To push you back a little back there, we found this project ten or eleven years ago.  We spent $20 million on it.  Yes, a lot of it went onto Uranium.  We spent a lot also on Vanadium.  So we really understand this project.   We do know Sweden pretty well, very well.  We know the region, we know the local people, so this is more than just a concept project.  This is a pretty serious thing. So I do believe the next step is do something where we start to get a tie up with some of these people.

Like I say, I would be equally happy to tie up with a steel producer who needs the Vanadium.   I’ve got some people who are interested in that.  They are less interested now that the Vanadium price has gone down, clearly because they don’t feel they need it.  But no, I want to move this to a corporate stage.  I do want to get the IPO done.  I do want to do something with the battery tie up if that’s possible, and I want to do that within a reasonably short period of time.

Matthew Gordon:  So just on the IPO you’re looking to IPO on ASX or AIM?

Peter Reeve:  Because of the waking up in Swedish daylight hours, it’s got to be European time.

Matthew Gordon:  So those are the two projects.  Can you quickly go through the Mauritian Gold, battery metals project?

Peter Reeve:  What we’ve got there is greenstone belts.  All of Kalgoorlie and you’ll notice similar stuff in Canada, is greenstone belt. This is really, really an unusual set of greenstone belts because the only discovery on this greenstone belt is Kinross’ Tazius mine at 21Moz deposit.  Greenstone belts are renowned for not having a single discovery and they are renowned for once you have one discovery and you find another, there’s a raft of different sizes.

Neil, our Geo, talks about something called Zipf’s Law.  Zipf’s Law is that you have a curve from a 20Moz deposit all the way down to a one million ounce and everything in between.  So when you do Zipf’s Law on the Kalgoorlie field, you see 30 or 40 different deposits of varying size.  We’ve got one on this field and it’s Tazius and it’s 20Moz.  

We got our tenements granted and we then did a deal with another party, so we have now tied up about half of that greenstone belt.  All but for one tenement we’ve tied up half the greenstone belt and Kinross has the other half.  We’ve hit mineralisation.  As I said, we bought this for $100,000 in a royalty, but previously Drake had spent $3 million on the greenstone belt, on these tenements.  So we’re not going in there cold and the guy who conceived it and did the work is now my principle geo.

We found mineralisation – what you’ve got to get is you’ve got to get systems size and you’ve got to get grade.  We’ve hit system size with a little bit of grade and we’ve hit grade with not much system size.  We’ve just got to get the two together, but we’re talking about one drill hole.  For the money we’ve spent we’ve drilled one drill hole for every 20sq.m so far.  We’ve got a lot more work to do. 

One of the more exciting parts of it – and the reason why I put on the battery metals, is we did a fence of drilling, 1.6km long.  Again, if you go through that presentation, it’s the bright pink slide.  It was equal holes.  They were about 6m-7m deep.  Pretty well every one of them hit near per cent nickel. So we assayed one in ten and we found Cobalt and the Cobalt was as high as 0.58%. So pretty exciting to get back and look at. 

Matthew Gordon:  So again, early stages but the potential there, greenstone belts in West Africa.  So let’s go a little bit more macro.  What’s your view on the Uranium market? When’s it going to turn?  Is it your area of expertise?  What do you know?

Peter Reeve:  I don’t know anything about the Uranium market at all with respect to how a Uranium market expert knows about the Uranium market, but I make it my job to talk to… We’ve got an off-take agreement for Uranium from a group in London and I talk to them quite often and I talk to other players in London on that.

Matthew Gordon:  That’s Yellowcake presumably?

Peter Reeve:  No, no, that’s a ETF.

Matthew Gordon:  So you’re relying on them but you kind of don’t care.  If the price is right, you’re going to get into production and you’ll start producing.

Peter Reeve:  The big thing at the moment with the market for me, it’s really simple.  I seriously don’t make a habit of trying to count how many reactors are getting built and how many pounds goes into each reactor.  I let other people with a digital mind do that sort of stuff.  What I am focusing on is this big concept  of what happened in 2005.  If you look at, there’s again a chart that I use. 2005 there was about 50 – or maybe it was 2004, there was 50Mlbs of long term contracting in place and with Finn by the next year they had put 250Mlbs of contracting in place.  And that lasted for seven or eight years.  It wasn’t a fluke. 

The current coverage in 2021 and 2022 for long term contracts is four and three per cent.  They will get nervous.  I don’t know when it’s going to be, but they will get nervous.  It doesn’t matter the cost they pay for this stuff, as you well know, but they definitely cant run out of it.  So at some stage they will move. Look, the February results of Cameco, I always read the Cameco stuff.  Their marketing stuff is brilliant.  They’re fantastic at it.  They’ve got teams and teams of people who are much smarter than me focused on it all day long – read their stuff.  They also know these comments about the utilities looking like they’re coming back to the table to start with the balance of doing long term contracting. 

So what happened in 2004, 2005 that leaned to that big explosion in price was seven or eight of the utilities all decided to squeeze through the door at once and of course… I always remember I asked one of the guys in London.  I said, “What happened with that?  What was the max price paid in that clique?” He thought it was about $138 a pound.  And I said, “Do you know the guy who did it?”  And he said, “Yeah, I do. I know him.”  I said, “What sort of guy is he?”  And he said, “Well, he’s a nuclear physicist.  He’s sitting there and he basically had a manila folder and said he needed this much Uranium, and on the day when his boss had walked down the corridor and said “How’s that contracting going?” and he said, “I haven’t got much.”  Well, you’ve got to fix that.  First to bid, first to bid, and kept on going.  So a nuclear physicist running a plant is also looking at nuclear… So these are the sort of things that might happen.  I’m a believer that it’s the utilities charging through the door at once which will give us the…

Matthew Gordon:  What is your outlook on the Vanadium market?

Peter Reeve:  Outlook on the Vanadium market is probably confused, but I would say that getting up to $33 there was clearly a lot of speculation, and I think falling back down to $7, I’d say there’s a lot of play.  Some of the people who need Vanadium, they have confided to me that I don’t think they think it’s going to stay down here, but it’s not going to race back up to $33 either.  We always thought somewhere in the $10 to $15 range was more likely for it to sit and that’s what I think it will go back to at some stage.  But I don’t expect to see, $20 or $25.

Matthew Gordon:  Can you summarise your thoughts on where Aura Energy is going and why you think new investors should be looking at Aura Energy. From what you’ve told me today there’s a lot of things that you’re going to be doing. 

Peter Reeve:  Primarily start with what we’ve got in Tiris.  We’re putting together a very interesting chart just comparing the CapEx on our project, it’s C1 cash cost and the All In Sustaining cash Cost (ASIC) against our market cap.  There is no doubt about it.  We are the most undervalued of the junior mining companies in this Uranium space with a development project, with the low capital and with the low OpEx. 

For me, there’s three things.  The low CapEx means the project’s doable and the low OpEx means you’ll make cash flow and the low market cap means we’ve got room for the share price to go up.

So that’s a good enough reason for any shareholder.  If they can believe that we will deliver what we say we are, that’s a good enough reason for the shareholders to get in.  Then add on to it that if we do an IPO and we retain 70%-80% of that, we’ll get an independent counter attributed into our share price.  That’s number two.

And then number three, when we discover a 3Moz deposit on the greenstone belt in Mauritania, everybody will want to own our shares.  So that’s going to happen as well.

Matthew Gordon: I appreciate your time.  That was a great first introduction to your company.  I know the guys on Twitter are going to be really happy about the fact that we’ve spoken.  Please stay in touch.  Keep us up to date with how things are moving, perhaps later in Q4.  Thank you very much.

Peter Reeve:  Thanks for the time.


Company page: http://www.auraenergy.com.au/

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Premier Gold Mines (TSX: PG) – Increasing Production, Strategy, M&A, Gold Price and Share Price (Transcript)

We interviewed Ewan Downie, CEO of Premier Gold Mines. This team are capable of making deals, partnering with big companies and getting access to non-dilutory cash. Despite giving guidance to the market about depleting production at South Arturo mine, their share price has been punished. They need to focus on delivering +100,000oz. Lots of Exploration assets at different stages. Where did it start?

Click here to watch the interview.


Matthew Gordon: Thanks very much for taking the time out. We always get people to start off with a two minute summary of the business.  Then we get stuck into a few meaningful questions after that, so if you don’t mind?

Ewan Downie: Premier Gold Mines is an exploration development and producing company, a company that’s been around for just over a decade and has been one of a few mining companies that’s made the transition from explorer to producer. Currently we have two operating mines and several near development or development stage projects within our extensive portfolio of project.

Matthew Gordon: I think the obvious observation I had when going through the material was that you look like deal makers, as well as miners.  You’ve put together some packages, you’ve done some joint ventures, you’ve got some big names involved – Barrick Gold Corp.  Tell us a little bit about you and the team and perhaps that might explain the deal maker / miner perception that I have of you.

Ewan Downie: Well, Premier started, as I mentioned earlier, an exploration company, and as an explorer and one of the team that we started the company with were essentially geologists, etc.  And as a geological group and an exploration company we are a team that recognise that very few projects actually go from being a concept exploration effort to full production.  In fact, probably more than 99% of mineral properties don’t become mines.  So by having multiple projects gives us more options, so to speak, and we’ve always been a company that has a moral of ‘don’t always think that we have is the best.’  There could be something better and if we find something that’s as good or better than our current portfolio, we should own it.

So we’ve always been open to trading opportunities, if we found the right opportunities.

Matthew Gordon: This is for an audience perhaps who haven’t come across Premier Gold.  I know you’re a big company.  $400M market cap now, and you’re a producer.  Can you explain the process that you’ve been through in terms of where did you start? Which assets did you start with and talk about some of these joint ventures that you’ve managed to deliver?

Ewan Downie: We started in 2006.  We were Spiona, the company I founded in the late 90s called Wolfbein.  So at the time Premier was a free share to our shareholders.  We started in the Red Lake camp, one of the most prolific high-grade Gold camps, I think you’ll find anywhere in the world, and we established a fairly strategic land positioning amongst the two producers, which at the time were Gold Corp and Plasser Dome. 

We started by there by realising at some point that to our grow our company we couldn’t just sit around and wait for Gold Corp to do something with us.  So we identified the Hardrock project, our Greenstone Gold joint venture now with Centerra as a potential acquisition candidate that could host a significant open pit deposit and luckily we were very successful at delineating that open pit deposit.  In between open pit and under ground that project is now a 9Moz, but it’s expected to be a large open pit.  It’s in full company right now and the market hasn’t been at its highest for several years and we recognise that to build a project of its scale, that it would be a very tough task for a company outside to Gold mine.  And so we set out looking for a partner and were able to secure Centerra Gold as our partner who was solely funding that project.

They paid us a cash payment and with that cash payment when they came in, we continued to identify other opportunities and our two producing projects – the South Arturo in Nevada and Mercedes in Mexico – were acquired with or partially with the funds that we received from Centerra as they came in.  So we’ve been able to, I’d say, make some strategic acquisitions to grow our business with that joint venture.

Matthew Gordon: So you’ve kind of leapfrogged the process to getting to be a producer using cash from an exploration asset which you developed through with someone else’s money.  It enabled yourself to take their cash and buy producing assets which perhaps didn’t meet their profile, but were good enough for you to start. You’re not quite at 100,000 ounces.  How many ounces are you producing at the moment?

Ewan Downie: This year will be under 100,000 ounces.  Probably in the range of 80 – 85,000 ounces.  89,000 ounces this year mainly because the South Arturo project in Nevada we depleted our first pit and we’re not constructing a second pit, and in underground from the bottom of our first mining pit.  So the South Arturo mine is going through a bit of a rebirth stage with two new mines being constructed as we speak.

Matthew Gordon: You’ve also got four exploration assets at various stages of development and funding. You’re filling the hopper?

Ewan Downie: Yes.  We take the view that we’re not looking out just for next month.  What are we going to do next month or next quarter?  We recognise that if we’re going to build a successful long-term mining company, you can’t do it one asset, and unfortunately mining is a depleting commodity industry and if you don’t replace reserves or find additional reserves at other projects ultimately you won’t be a producer anymore.  So we’re always looking out for what will be the next project that we may be able to integrate to become our next production centre for the company. 

Currently we’re curating two projects that we hope we’re going to develop and open in the next couple of years.

Matthew Gordon: Well, that leads us nicely on to strategy.  I’ve got a sense of the mentality in terms of the way you go about doing business, and it seems there’s some deal making acumen there.  But I want to talk about the strategy now, which is these exploration assets presumably are going to follow a very similar model to that you’ve already employed successfully with Greenstone, for instance.  Is that true to say?

Ewan Downie: Yes. We’re quite open to developing our own deposits.  In fact, later this year we expect to start developing our Cove property, one of our high grade projects in Nevada, and that will be the first project that we initiated the development on our own and built Mercedes, our producing mine, was acquired from New Manor, was already operating, and our South Arturo project where the two mines are under construction is operated by our partner, Barrick. We are participating in the construction, but we’re not actually… Our strategy is to continue to grow our portfolio, such that we continue to hopefully maintain a steady production profile in the future and steady cash flow so that ultimately we can give back to shareholders.

Matthew Gordon: If I look at your share price, you have been as high as $5, back in July of 2016 and you’re around circa $2 today.  It’s been a bumpy ride.  At which point do you think the market investors have given you credit for your strategy?  Obviously the Greenstone project or getting Barrick involved, finding new exploration assets… what do you think they’re rewarding you for? Or is it all of the above?

Ewan Downie: I think right now we’re being somewhat penalised for being in a development stage.  Even though we do have the one producing asset and some Gold being still produced from stockpiles at South Arturo, given that you mentioned back in ’16 we were up at five dollars, that was when South Arturo was in full swing.  So we had the two mines operating, we generated a huge amount of cash flow in that year and in 2017 I think Premier was one of the top performing Gold stocks in all of the TSX, but then that Phase 2 open pit, as we called it, as South Arturo was depleted, and since then we’ve been processing some lower Gold stockpiles but our production profile dipped as we’ve been constructing the two new mines.

At the end of this year we expect the underground to come online and I’d like to think then we start to get rewarded for our future production growth.  However, right now I think we’re being somewhat penalised because we’re in that development stage and you’re spending a lot more cash than you’re making.

Matthew Gordon: Well, that’s true.  If you look back to that period, what are the key takeaways there?  Mining is cyclical.  Commodity prices are cyclical.  There are ups and downs and it’s a tough business, understand that.  What would you have done differently looking back to that period?

Ewan Downie: I don’t think we would have done anything really differently.  There’s maybe an acquisition or two we looked at that we passed on that turned out better than we thought.  You look at those opportunities.  We always had an internal mentality that we’re going to see this production gap and what we call it, we need to fill that gap, and we’re looking for producing or near producing opportunities that would have smoothed down our production profile.  All of the assets we looked at either sold for significantly more than we were willing to pay or were solar power and we viewed them as being really not profitable or not really economic. 

I think we made a lot of good decisions on what we passed on, but there’s maybe one or two that we did pass on that turned out to be better than we expected.  So really I think we wouldn’t have done anything really differently.  Just the only thing I wish is that we would have been more successful in finding something to bridge that gap.  Now the gap is closing, so we should outperform in my view going forward.

Matthew Gordon: So if I look at your share price It’s $400M. About a hundred of that in the last month or so with the price of Gold going up. That’s obviously a very welcome addition to the mix for everyone in the Gold space at the moment.  What are you going to do during that period?  Do you need money?  Do you need to go and raise cash?  It depends what your plans are.  What have you told the market?  What are you thinking?

Ewan Downie: We ended the last quarter with approximately $45M in cash, so we’re in great financial shape.  During the first half of the year we secured a credit facility for an additional $50M which provides us with the ability to fully fund the building of the Phase 1, El Nino underground mines at South Arturo and the advanced stage development at Cove. 

So currently for these projects that are near term, expectations we have for cash outflow we’re well funded to do those.  That will mean drawing from our facility.  However, Hard Rock, our Greenstone Gold joint venture, if we do make a production decision for that project, even though we have joint ventured half and we’re currently being free carried, ultimately once it goes into construction we will have to contribute and some time in the future we will look at different means of how we would finance that project. 

However, at present we haven’t made a decision whether to go ahead with that property and don’t expect to do so until late this year or early next year.

Matthew Gordon: Even with the Gold price rising?  Well, tell us, what’s your expectation of the Gold price?  I guess, If I’d asked you two months’ ago, it would be a very different answer.  Now what are your thoughts on that because that’s got to effect the timing of when you’re even considering raising capital, because it’s going to be cheap money now.  If the price drops again, money gets more expensive.  Your decision making gets harder. 

Ewan Downie: I believe that we’ve assembled a number of assets that would be on the lower side on the production cost scale.  So we should generate good cash no matter where the price of Gold goes.  Over the last four or five, six years, we’ve seen Gold test the $1,350 several times and not break it, so after several attempts sometimes you lose a bit of your gung-ho.

Matthew Gordon: Maybe that’s a wise stance to take, certainly. But on that, you say whatever the price is you’ll make money.  If I look at Mercedes, you’re indicating AISC of $900 – $950.  Is that what you’re going to be expecting at South Arturo as well or is it a different price point?

Ewan Downie: I’d expect South Arturo will be a lower cost operation.  The Phase 2 pit, the all-in sustaining when that was in production was less than $400 an ounce.  Very high margin ounces.  We’re not expecting Phase 1 in El Nino to be quite as low cost but we expect them to be quite low cost.

Mercedes, last year and this year continue to be transition years as we are developing several new deposits.  However, the new deposits that we develop, the largest of those, Diluvio, is one of our lower grade deposits.  Has a bit better wind span, lower grade, and we’re currently drilling off Marianus, which is our higher grade – and what we anticipate to be our higher grade – zone at Mercedes, but we won’t see the benefits of Marianus until late this / early next year, and then we should see hopefully the analysis grow slightly because of the influence of higher grade material and with that, we’d hope the cost can get down. But Mercedes is a moderate grade, a moderate cost operation and we are optimistic in Marianus we’ll be able to improve on the operations starting next year and we continue to focus on exploration with the hopes of identifying new higher grade deposits than the current operation.

Matthew Gordon: That gives me a sense of what the management team’s focused on – the hot topics in your monthly meetings that you’re discussing.  You want to make sure it’s a much more smoother ride going forward.  With South Arturo coming onboard, you expect obviously one) start to be cash flowing from that, 2) you’ve got cash reserves, $45M, plus a facility of you said $50M, something like that. You feel that you’ve got enough in the armoury to move the exploration assets, which have possibly got the biggest chance of shareholder enhancement.  Is that the way your mind’s working or are there things that more than that are keeping you awake at night? If so, what are they?

Ewan Downie: Now with the new Barrick Newmont joint venture in Nevada, once that’s consummated – and I believe it was just announced yesterday that the deal has been consummated – Barrick, who’s the operator, will have to look at all of their operations and how are they going to fill the mill and all of those facilities and what deposits are going to go where?  We haven’t provided, I would say, very good guidance in terms of the future at South Arturo even though we’re constructing two new mines because of a bit of the unknown that’s coming with this joint venture.

However, we are building two new mines because we expect them to be good new mines, and so that’s going to be a big part of our future this year – seeing those new operations come online.  For Hard Rock part of the main deposit at Greenstone, our feasibility study was completed in 2016 and a substantial amount of work has been completed since then, including several drill campaigns and we are expecting in the second half of this year, a number of catalysts to come out of Hard Rock because of what we’ve been doing over the past two or three years at that property.

And then lastly, we are going to be drilling at a property that we’re acquiring from Barrick, called Rye, in Nevada, that we’re quite optimistic is going to return some really good – some of that sex appeal type thing you were taking about for shareholders. “Hey, what’s the next new thing, more than maybe a production coming.”

Matthew Gordon: If I look in chat rooms and forums and online platforms, people aren’t talking about you very much.  There’s not a lot of conversation, not a lot of chatter, and what there is, is not a lot of new information. I just wonder what you’re going to be doing to…  I guess, talking to people like me to start, but what’s the plan here in terms of explaining what is…?  There’s a lot of moving parts and it’s trying to break that down for investors to help them understand where the upside’s going to come from.   You mentioned the word ‘catalyst’ a second ago.  A lot of the regular catalysts that you and I have been used to over the past 10, 15 years, weren’t working last year.  Why are they going to work now?

Ewan Downie: I think one thing, we’re trying to simplify our story.  As you said, there’s a lot of moving parts.  Some people may get a little confused of where is this company going and how is trying to achieve?  I liken ourselves to what Agnico Eagle was years ago.  They grew several projects to go from being a small pay stock to a major producer.  To do that they went through their trials and tribulations over the years and built out operations.  We’re trying not to have anything that really…  We’re trying to smooth out our growth profile going forward rather than try to see the spikiness that you might see as an explorer.  Everybody’s excited about the exploration beyond the chat rooms, but ultimately if nobody buys you, then reality sets in and how much money do you need to build that etc?  You know, that rises up in exploration and development and then when you get into mining and hopefully profitable mining, then you should actually see your highest growth in your share price through that initiative.

So we try to be somewhat humble and steady on how we deliver news.  Obviously if we make a major discovery somewhere, we’ll talk about it, but our main thrust is saying we have one operating mine, two in construction, with one coming online later this year, the other one in 2020, and two additional projects in full permitting for future development.  So in terms of long-term production growth, I think there’s very few companies who offer the opportunity that Premier Gold does.

Matthew Gordon: So you think that all things being equal, the assets that you’ve got will allow you to deliver meaningful growth over the next couple of years.  That’s the message to investors, retail and institutional? Tell me, how do you balance worrying about the share price – because that’s got to be a key driver for you – and running a business.  How do you manage that?  Which is more important to you?

Ewan Downie: We have some very large shareholders.  We have several in the 5% to 12% range, so we’ve got some long-term steady shareholders.  Keeping those shareholders informed of what we’re doing and how developments are is very important.  We don’t want to lose our bigger shareholders, but we do spend a lot of time on the road marketing to new institutions, new retail groups. 

We’re trying more and more to get retail interest in our stock, given so many institutions have potentially closed their doors over the last few years.  I think we’re a bit more of an institutional star historically because of our growth profile and production rather than just being out there screaming our exploration results.  We kind of tuck the exploration behind the production growth rate.

So just trying to simplify the story. Instead of telling different stories in a presentation, trying to make it maybe a bit more like Barrick and Newmont are doing in Nevada, making Nevada in mind, rather than talk about Turquoise Ridge, Gold Strike and Lea Vale individually.  So we’re trying to package up our projects so that Nevada is a production centre, growth centre, for us.  Ontario is separate and then Mexico.  So really dumbing it down to three stories rather than eight stories.

Matthew Gordon: It would be interesting to see how you do that because I think right now when I was researching this, it just felt like there’s a lot of moving parts and mapping it out was more difficult than I think it perhaps needed to be. What I did like was the team’s attitude to building.  How do you get Barrick involved in a conversation with you?  When that happened? You were a small company.  How did you do it?

Ewan Downie: We identified, and we really found a relationship with some of the people in Barrick through the Greenstone or the Hard Rock acquisition.  Back in 2008, more than 10 years ago, we spent a lot of time approaching Barrick over and over.  I’d say very persistently we pestered them and they sold us a project not too far from our Head Office here in north western Ontario. 

So we got to know some of the people there and then formulated an even stronger relationship with Barrick when we acquired Gold Corp’s interest in South Arturo, and founded the building of a mine with Barrick, I think Barrick started to give us some credibility.  And since then we’ve done a joint venture with them at McCoy Cove, at the property surrounding our Cove deposit and we’re acquiring the Rye project from Barrick subject to a backing.

So right now we have essentially four projects that we’re moving for on sort of relationship, but it grew from an early acquisition ten years ago.  What we’ve made an effort to do is stay in touch with these people whom we work because you never know what future opportunities may come out of these major producers going forward.

Matthew Gordon: It’s a very reassuring name to have there, and obviously with their recent merger there may be more spin offs to be had if they open the door to you. I’ve really enjoyed that as a first run through your company.  It was a pleasure talking to you and understanding a little bit about the thinking and mentality here.  I’m very much looking forward to seeing how South Arturo develops and Greenstone because that sounds key to the growth component of what you’re doing.  So thank you very much for your time.

Ewan Downie: Thanks for having me on and hopefully we can talk again in the near future.


Company page: www.premiergoldmines.com

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