Margaux Resources (TSX-V: MRL) – Investors Love Multiple Liquidity Events, Short-Cycle Focus Strategy (Transcript)

We had the opportunity to interview Steve Letwin of IAMGOLD, Advisor & Shareholder of Margaux Resources (TSX-V: MRL) joins us to discuss their assets, team and their new look strategy.

  • Short-cycle focused – no wasting money on elephant hunts, just steady returns after 2-3 years.
  • Concentrated, shallow deposit – No over burden, practically zero strip ratio.
  • Immediate Resource +1Moz Gold 43-101.
  • Close to all infrastructure required.
  • Own Gold processing Mill.
  • All permits in place on 60,000 hectares.
  • No First Nations issues.
  • Pre-Feasibility can start by end of year.
  • Minimal risk, short-payback, small capital.
  • Will get the Canadian valuation premium.

“You’re going to get your money back very quickly. That’s what Margaux Resources Is”.

Click here to watch the interview.

Matthew Gordon: We are joined today by Steve Letwin. How are you?

Steve Letwin: I’m extremely good Matt. How are you?

Matthew Gordon: Not bad. Not bad. You’re over here. You’re busy with IAMGOLD and also you’re telling the Margaux Resources story.

Steve Letwin: I am.

Matthew Gordon: Why don’t we start off and get a little back drop for people new to the Margaux story. Why don’t you give us a 2 min overview.

Steve Letwin: Sure well Margaux really originated… it was a shell company in the oil and gas side. And just a little background about myself. In the 90s, I sold an oil and gas company to a group of Hong Kong billionaires, five in fact. And that sale went extremely well and they did extremely well. Made a lot of money. I was in about 1992 to 1995. And I stayed in touch with them after that, and when I left Enbridge. I was with the Enbridge companies for 12 years. I ran their international and US. They reached out to me. So these same billionaires who had had this positive experience, said look at we’re looking for some Tungsten, Zinc opportunities. And we wondered if you could give us a hand. I just moved into the mining space with IAMGOLD. And we found this opportunity in Southern BC. near Nelson. A property that had Zinc. It was former Tungsten producer, and we looked at it and we decided to use this old oil & gas shell and created the company called Margaux. And the idea was, these billionaires out of Hong Kong, were looking for supply other than China for some of the South Korean computer companies. So the genesis of Margaux was really tied to Tungsten /Lead /Zinc play. The Tungsten… a couple of years later crashed. The prices dropped from $600 to $200. and the interest in Tungsten waned but the Hong Kong investors had been very supportive had kept the company alive. And we started to look around the property for opportunities to get into precious metals, because it was a very prolific Gold area. So Sheep Creek, as an example, had produced somewhere around 800,000 ounces of high-grade Gold. And so I’d been with IAMGOLD. My brother Jim is the chairman of Margaux. I’m not on the board of directors but I’m a significant investor, have been since day one. In total I think our family now owns around 11% of the company. And the Hong Kong China connection has always been very important to us. They’ve always been extremely supportive. They probably in total own about 38% of the company. And as we developed our properties down in southern BC. We came across this, what I would call extremely attractive opportunity to put the Cassiar property which is located in the North East part of BC., together with Margau. And coincidentally, or not so coincidentally, this property had been driven by real estate investors out of Hong Kong, who had put a lot of money into the drilling in the middle of the Gold bull cycle. So 2007 /2009, they put a lot of money into drilling, had produced a 43-101 and we’re looking obviously forward to probably bringing it into production. Because it was over 1Moz of identifiable Resource  both low-grade bulk tonnage, and high-grade narrow vein, Oregenic formation. So when you look at when you looked at this, and we looked at it, and the fact that post 2012, we went into a bear market for Gold. The investors in Cassiar said, it would probably make a lot of sense to put these two together. And we had pitched this to them. So very fortunately for them, and for us, we now have an extensive land package between the Northern part of BC, the Southern part of BC, with a lot of Gold prospectively. My brother runs a very good organization. He’s a very successful entrepreneur. He ran his own company for 40 years. He’s got a very strong board. He has a very strong technical advisory group including Chris Stewart, who was formerly Kirkland Lake and now with is now with Rob McEwen. So this company is very well managed. Tyler Rice, Linda Caron. Strong technical support. Strong investor support, out of Asia and Canada /US. And when you look at it, it’s in my opinion, it’s got fantastic upside.

Matthew Gordon: So why do you say that?

Steve Letwin: When you look at our Resource compared to some others, and the location. It’s not in a remote area. It’s very accessible by car. It’s right off the highway. Whether you’re looking in the Southern part of BC., or Northern part of B.C.. The infrastructure surrounds it. It had a mill on the property on the Cassiar property. It’s got tailings, which are worth quite a bit of money. They’re running at about 1.2g/t in terms of recoverable Gold. So we’re in this market and you know it well, where it’s very, very difficult to get investor interest in Gold. I just happen to believe that when the US. dollar starts to weaken, because it’s been on a run for like 10yrs and the Gold price starts to move, and we start to see generalist investors coming back into this space, like they were between 2009 and 2012. I think this particular investment, $0.07 a share right now has the opportunity to move up exponentially.

Matthew Gordon: Ok. Thanks for that summary. I’m gonna go step back a bit though.

Steve Letwin: Sure.

Matthew Gordon: You ran a very successful large oil & gas business.

Steve Letwin: I did.

Matthew Gordon: Sold to the Chinese. Right. You retired effectively. I’m told. Maybe not. You’re here.

Steve Letwin: Everybody in the family became better off.

Matthew Gordon: Let’s put it that way.

Steve Letwin: My daughter’s and my son…

Matthew Gordon: Well put. So you need to work again. You then got in IAMGOLD, back in 2011 that sort of timeframe right. That’s a huge Company, a billion dollar.

Steve Letwin: Two.

Matthew Gordon: Two Billion dollar plus company. That’s a very different environment to small cap. So what I’m intrigued by, because with your vast experience of, not only the energy side running big companies, but now IAMGOLD, running big companies. What’s attracted you into the junior mining space? And then why specifically this deal, at this time? I mean surely you’ve done enough?

Steve Letwin: I’ve always been attracted to the… what I would call the entrepreneurial side. And let me be perfectly clear here. There is no greater priority to me than IAMGOLD. Ok. I am the largest independent shareholder of IAMGOLD. I hold 1.4M shares of IAMGOLD. And so I don’t want to mislead anybody. The most important thing to me are IAMGold shareholders. But Margaux is, and will be a huge priority for me. A) My brother is chairman of the Company. B) It’s been an investment with my partners in Hong Kong for about 9yrs now, since I’ve been with IAMGOLD. So this relationship I have with these Hong Kong investors is very important to me. And when they asked me to find these opportunities, and I won’t bore you with details, but this is one of probably 5 things that I’ve done since I did the oil & gas venture. And they have hit home runs with every one of them. So we had an Internet site that.

Matthew Gordon: They being the Hong Kong group.

Steve Letwin: So you know we had an Internet based company. We’ve had investments in infrastructure. We’ve had investments in the hotel business. These individuals have done extremely well. And so have I. When I went to the IAMGOLD board of directors I got approval to basically go out and do other things. They think it’s a good thing. It’s good for self-development. It’d be no different for you Matt, if you had other interests. So I’m very attentive to this. I’m a huge supporter of it. I think it has huge upside. And I put time into it, which I have approval to do so. But I never let it interfere with the objectives of IAMGOLD. I have a lot of skin in the game with IAMGOLD.

Matthew Gordon: That’s well understood and a point well made. And that’s fair enough. What I’d like to get at with regards to Margaux, is you’ve made an intellectual commitment to Margaux. You think this is.. this could be something quite special right?

Steve Letwin: Yes.

Matthew Gordon: And that’s based on what? Feedback from your technical advisors?

Steve Letwin: Well I’m a commercial guy. But let me just describe this for you. You have a huge land package. Where you have a 2009 43-101 Certified Resource. The only reason we have to recertify it, is because we’ve changed the name. So we twin 2-4 holes. We spend probably in total $1M. And we have on the books, probably around 1.2Moz @ 1g/t. Near infrastructure. You compare that to other Resources around the world. Africa, which you said you’ve had some experience with. I have a lot of experience with Africa. This Resource is worth in the hundreds of millions of dollars. So it’s one of those things where I don’t need to be a geologist. I don’t need to be an engineer. I can do the math and say to you, this is territory that’s completely free of any kind of burden. We have no First Nations issues. We are next to infrastructure. We’re next to power and all we have to do right now with new investors, and we’re getting new investors as we speak, is recertify the Resource and we can go to a previous Pre-Feasibility Study (PFS) quickly.

Matthew Gordon: What’s quickly mean?

Steve Letwin: Well I would say as soon as we have the Resource identified here, and recertify in July, we would move to do that in the next three months. So it’s a very attractive opportunity.

Matthew Gordon: It’s an interesting model you’re employing. You know because you’re saying, ‘Okay we’ve got an historic Resource, just over 1Moz at a cut-off grade of 0.5g/t.

Steve Letwin: 0.5g/t.

Matthew Gordon: That’s right. So, and you’ve also got this tailings project which is about 600,000 tonnes of 1.2g/t. You can do the maths on that too. You can work out the potential Nett cash flow contribution could be from that. So there’s some exciting things there, but it’s your view of this district wide asset which interests me. So I know you’ve got commercial acumen. You got it in spades. But who’s the technical adviser saying, ‘well actually I think you’re right. You got 60,000 hectares. It’s a lot of land, in that area well known for producing Gold. Mixture of bulk, low-grade and chasing high-grade veins throughout the properties as well. So who’s telling you that what you think is correct technically.

Steve Letwin: Well we have on our advisory board, Chris Stewart.

Matthew Gordon: Tell me about it bit about him. Obviously some big names there.

Steve Letwin: Chris has had a huge amount of experience, more underground, but certainly open pit experience, which we’d have a combination of here. Table Mountain would be more the underground high-grade mineral vein and then the bulk tonnage would be a Taurus. But Chris has superb technical experience 30yrs of experience. Latest being at Kirkland, now is with Robert McEwan. And then Linda Caron, who is with Kinross for over a decade, is probably one of the strongest technical people that I’ve experienced. And below her, are a number of geologists and engineering types that bring with them probably cumulatively over 100yrs of technical experience. So and we’ve I like to what I call stress test things. So and I trust these people. Totally.

Matthew Gordon: Tell me about a stress test?

Steve Letwin: Stress test means I’ll bring others in to look at it. And so I’ve had some of my own, and not to name names, but they’ve come in and looked at it. And they’ve invested. So and again, they’re quiet investors, so they’re not people that want to see their names in neon-lights. But I would tell you that we’ve done our technical due diligence and this opportunity is one… and I see hundreds.

Matthew Gordon: I bet.

Steve Letwin: Hundreds. This is a phenomenal opportunity for people to get in and  you’re seeing right now, and you see it as well Matt, you see it in the environment right now where people want to believe that that US dollar can’t continue to keep rising. And when it turns, I think you’re going to see a rush of investors coming into this space. And when that happens, and you have a 43-101 compliant Resource,  sitting in a friendly jurisdiction, surrounded by infrastructure, you’re going to see some significant movement in the share price.

Matthew Gordon: You’re obviously bringing connections. The Hong Kongese. Are they following their money?

Steve Letwin: Oh absolutely.

Matthew Gordon: Are you following your money.

Steve Letwin: Absolutely.

Matthew Gordon: OK. Great endorsement.

Steve Letwin: Every raise.

Matthew Gordon: I’ve been there. Right. Okay.

Steve Letwin: And in a significant way.

Matthew Gordon: Right. OK. So if we look at the assets. You mentioned Cassiar which is a recent acquisition… that that’s closed now isn’t it?

Steve Letwin: That’s closes June 20th. So it’s all been approved.

Matthew Gordon: All but for the ink drying on the paper.

Steve Letwin: It’s the TSX.

Matthew Gordon: Got it. Okay. And Sheep Creek. So what’s the focus going to be?Because I don’t know how much cash you’ve got at the moment, but you probably probably got a day some kind of raise to be able to see out the rest of the year?

Steve Letwin: Well we have that on the Cassiar side,we have Shijin which is a large operator.

Matthew Gordon: Well known. So why don’t you tell people about them, because that’s quite a big name.

Steve Letwin: I know Shijin and well. They not only have a fund that they operate out of Hong Kong right. They’re one of the best Chinese operators of Copper and Gold in the world. I’ve known them for as long as I’ve been at IAMGOLD. So they’ve been part and parcel of this Cassiar here. So to ask you where were we sequencing. Well logically the first thing to do is to re-certify the 43-101. So Shijin in has committed to this raise. And I would tell you that it’s a significant participation. We were just in Hong Kong a week ago. Linda Caron was there and they committed. We have another party in Beijing that’s significantly committed. So we have enough funding right now to move to the 43-101 recertification. Once we’ve completed that, then we would move to the next phase of developing the tailings. The tailings have a $22M-$25M top line revenue number. We don’t have enough information Matt to say, what is the $25M.

Matthew Gordon: What’s the net?

Steve Letwin: Right. But let’s just let’s assume that it’s a 20% recovery. OK. So call it $5M Canadian

Matthew Gordon: You’d take that. Right.

Steve Letwin: That will fully fund additional exploration on Taurus, on Table Mountain, on Sheep Creek. And you know go blue sky for a minute. You could easily see somewhere around 3Moz in this region. That we could identify, that we could put through a mill.

Matthew Gordon: Which you have?

Steve Letwin: Well we have a small mill.

Matthew Gordon: But that’s not the right type of mill.

Steve Letwin: It’s not the right size. And it was there to produce cashflow.

Matthew Gordon: Is there any value to that? Book value or otherwise?

Steve Letwin: Honestly transparently I would say very little.  But it’s there, and more importantly, once you’ve produced.. and you know this. Your ability to get permits is much easier. So we’ve had the exploitation permits. We have the exploration permits. We need to do some work to get back to exploitation and to be a producer. But once you’ve done it, and everything’s in place, it’s far easier to get it through than if you were starting greenfield.

Matthew Gordon: I understand that. So just finish off the tailings quickly for me. So is that something that you would do? Or you would outsource? Or JV? How does how do you process that?

Steve Letwin: We have no expertise.

Matthew Gordon: So you bring someone in?

Steve Letwin: We would go outside.

Matthew Gordon: So you’re you’re going to take a revenue share off the back of whatever.

Steve Letwin: Here’s the challenge and here’s the question. We have a third party who has put an offer on the table to develop the tailings. Are we better off going to a third party contractor to do that ourselves with an outsource body. Or are we better off lay the capital associated with the tailings, and let them take most of the profit.

Matthew Gordon: Discussion, discuss.

Steve Letwin: Discussion. But our first priority has to be the 43-101 and again you have 300 juniors out, there that don’t have anything close to having a certified, 1Moz deposit, in friendly jurisdiction, that’s close to infrastructure. So once we have that, our view with a little luck on the Gold price, which may or may not occur, that our ability to raise money at a higher share price, which is obviously less dilutive, will give us the ability A) to explore more there and B) to move ahead of the tailings, which will be a self-funding model, where we don’t have to go out and dilute our current shareholders. We sell the recoverable Gold. We use that to fund the exploration. The G&A for both our sites.

Matthew Gordon: So is if I look examples of other companies that started where you guys are now, Canadian focus. I will look at something like a Osisko. Same place as you, early 2000s. They’ve gone through a process, but as time it’s taken them a long time to get to where they are. I can’t remember what it sold for?

Steve Letwin: Malartic. Four billion!

Matthew Gordon: A big number right. It’s a good day at the office when that happens.

Steve Letwin: Who cares if it was 10yrs, I mean $4Bn, from $0.03.

Matthew Gordon: So you’ve got an understanding of what, you clearly know them, of the strategy that they followed. Is yours literally a cookie cutter approach to that. You say well we can replicate that, because it’s a similar Oregenic ore, it’s in a similar district.. type district, it was Timmins. Are you just following that model, it’s already well established and well done, or have you had to think about how you go about managing and developing this asset, with the cash restrictions that it has on it now. I mean how do you go about that? What’s the thinking?

Steve Letwin: Well Sean Roosen, who I know extremely well, and I’m a huge fan of, is a master after 40 years in the business of being able to raise money and then turn that money into great returns. And I would tell you his focus and it’s the same focus I had in the oil & gas side, it doesn’t matter. I would call it a short-cycle focus.

Matthew Gordon: What does that mean?

Steve Letwin: It means that you’re going to look at paybacks that are in the 2-3yrs range. You’re not out there looking for pachyderms. You’re not elephant hunting. We have an identifiable Resource close to infrastructure. We’re not spending $200M in Argentina, building a road and a power line, like Barrick has to do. We’re looking at a very concentrated, very shallow deposit, 100m to 150m.

Matthew Gordon: So very shallow. Wow. Strip ratio. Fabulous.

Steve Letwin: Close to zero. So boom, boom, boom. Investors don’t want to hear, at least today, about pachyderms. They want to hear, ‘how quickly can you turn this?’

Matthew Gordon: So you’re saying, ‘We’re going to identify a series of baby steps’. It may be in 10 or 15 year, but you say we’re gonna do some baby steps to get to where we need to be. At those points people can make decisions obviously whether they stay in.

Steve Letwin: Yes.

Matthew Gordon: Or cash in.

Steve Letwin: Yeah right. I’m a huge believer in liquidity events. And we want to create, not one liquidity event, we want to create multiple liquidity events. So that Matt as the investor will look at this and say, ‘I’m put in at $0.07…

Matthew Gordon: I got options right. That’s what I want.

Steve Letwin: I put in $0.07 cents at 21 cents during one out. Or do I want to harvest a little bit and leave some in. Get my capital back and take a free ride on that option, given more I think this might go. So that’s the strategy.

Matthew Gordon: Okay. So that you’re clearly a commercial guy, because that’s very much focused on what’s dear to shareholders wants, which is share appreciation. That’s the business right. You just have to be mining.

Steve Letwin: Right.

Matthew Gordon: Now if I look at some other Canadian players who are sitting on large numbers, in terms of Resource and Reserve. And they’ve spent tens, hundreds of millions of bucks, drilling to get those numbers up, but … and they’ve got some cash. You know they’re not strapped for cash, there’s no fire sale imminent. But I don’t see the next step for them. But they’re in the sitting on 5Moz-7Moz. I mean, you’re talk about these people these baby steps, these catalyst events, have you have you thought about what you need to be?

Steve Letwin: Absolutely right. It’s what I outlined. Look you don’t want to have to be sitting waiting for the next bull cycle. And these guys that have these large deposits, with huge capital commitments in front of them, have to wait for the next bull cycle. And if they don’t get the bull cycle, they will…their cash erodes. And right now you know the market better than anybody. Go try and raise equity right now. Unless you’re a cannabis player or a tech player. Nobody’s interested in giving mining guys any kind of money right now. Mean we’re very fortunate because we have Asian investors. When I go to Hong Kong, let me tell you the difference. OK. I go to Toronto. You can’t buy people coming to the conference. You go to the Scotia main conference. And I know it’s a great conference..

Matthew Gordon: Good people.

Steve Letwin: Three people show up. You’re looking through the lights to see who’s in the audience.

Matthew Gordon: But what’s happened? Have people got exhausted or they’ve been burnt too many times? Or is it just as simple as there’s nicer shiny and more profitable projects cannabis etc. out there right now. But what’s what’s gone on?

Steve Letwin: Ten the ten top Gold companies total market cap $121Bn. The top five cannabis companies after two years, $88Bn. You tell me what happened. All the risk capital in Canada has gone into cannabis. Look you can’t find capital… if you put a cannabis play out there right now. Before this used to be like this in Gold, before you walk in the room…

Matthew Gordon: You’re done.

Steve Letwin: They’ve written cheques.

Matthew Gordon: Well I kind of hope so. I’ve an investment myself in the space, but you know asset as a blended portfolio approach to investing, if you’re lucky enough to have some cast invest, you need to kind of look at different options. You can’t put all your eggs in the Gold basket, or necessarily the mining basket. You spread it around bit. And I get the cannabis story in any blockchain and Bitcoin et cetera, and and then will come off a bit. There’s some sanity has prevailed. Do you think that mining is still a relevant investment class? Let’s start with Canada, because you know Canada. So are people still thinking about it, or anything coming back into it?

Steve Letwin: Not yet.

Matthew Gordon: Not yet, still away.

Steve Letwin: Which means it’s a good opportunity. I don’t have a phone here. It’s over there.  I’ll hold my phone up and say there’s Gold in this phone. There’s Tungsten in this phone. There’s didymium in this phone. You name it.. it’s in this phone. What people are not connecting the dots to is, mining is here forever. And the valuations in mining are so attractive right now. You have PNAV’s price. 0.3, 0.2, 0.5

Matthew Gordon: It’s a tough time.

Steve Letwin: You’ve got a cannabis company trading at x800 revenue. I think, I think, to your point do I want a balance here. Because I think I want to hedge. A) I want to hedge against the U.S. dollar. B) I want to hedge against a cannabis investment / a crypto investment. And you can do it pretty easily.

Matthew Gordon: Yeah I think that’s right.

Steve Letwin: That’s the logic to me.

Matthew Gordon: And I would agree with that. And we advocate to our subscribers that they need a blended approach to this because you know the stories aren’t always true, and things don’t always turn out the way that people say they’re going to, so you need to… a bit of hedging is a smart. We’ll bring it back to Margaux if we can. Margaux is a small company. You’ve seen a lot of deals, but you approximately that Hong Kong guys and they said right… And this is the one you picked. And this is the one, I get IAMGOLD is your number one priority, as it should be, it’s a big company, and you hold a lot of stock. But this project is, as far as you’re concerned, is one of the better junior projects that you’ve seen all of its kind in Canada? That’s why you’ve gone for it?

Steve Letwin: Absolutely. And I’m not going to sit here and throw a bunch of hubris. We’ve had five, extremely successful investments with these investors. And they’re very private people. And they don’t come back unless you’re successful. And there’s an old military saying always reinforce success. And what I’m a huge believer in, and I’m a huge believer in Margaux and the people, and the technical support, my brother, who is a fantastic leader, is reinforce success. We will have success here. And this is not like, you’re at the craps table rolling the dice. We have a certified 1Moz deposit. that just needs to be re-enforced. That’s it. And that’s why I think, when you compare it to hundreds of investments out there that require, I would say a challenging permitting, that are far from a 43-101 certificate. This stands out. This stands out.

Matthew Gordon: Yeah. I’d agree because, we finalize this right here. We’ve looked at a lot of moving parts. You, Chris Stewart, Shijin. The fact you’ve got historical Resouerce… it’s not even that historic, it’s 2009 right. Quick, cheap to get that back up. You’ve got the tailings.

Steve Letwin: Correct.

Matthew Gordon: You’ve got a lot of infrastructure sitting there. You’ve got water, power, road you got… in a safe jurisdiction. There’s a lot to like about it. $5M market cap though. Is that just a factor of the spot price for Gold? Or is it just you’ve only just started telling the story? I mean what what do you think’s….

Steve Letwin: What was the market cap of Gold Corp in 2000?

Matthew Gordon: I have no idea.

Steve Letwin: $62Bn.

Matthew Gordon: $62Bn.

Steve Letwin: What was was the market cap when it sold?

Matthew Gordon: Don’t know.

Steve Letwin: $15Bn

Matthew Gordon: $15Bn

Steve Letwin: Ok look.. look this ravaging which has gone on, and is consistent across the board. It doesn’t matter what company you look at. It’s been completely destroyed. And it’s been destroyed, and we haven’t helped as an industry, because there’s been a lot of missteps. We’ve seen value destruction with big projects that have gone South.

Matthew Gordon: What you mean by value destruction… shareholder value …?

Steve Letwin: Yes fair shareholder value because a mine hasn’t been what they thought it was going to be. And big bets were made when the bull market was at its peak. You had a lot of money going after, what I would call stupid things. And you had that happen in the oil business. You’re having it happen in the cannabis business.

Matthew Gordon: It’s been a reset in Canada.

Steve Letwin: And we all remember dot com. So all I’m saying to you Matt is look, we are now being punished for the sins that we committed and we committed sins. And that usually means there are opportunities, and you learn from those mistakes. What did I learn from my 28yrs in oil & gas and 10yrs in mining. Focus on short-cycle economics. Stay away from long-cycle investments that take 10yrs to pay back, huge capital commitments, and as a result of being out there over time, high-risk. Minimize your risk. Short and short-time, short-payback, small capital. And if you do happen to have that bull-cycle start and you’re gonna get your money back very, very quickly. That’s what Margaux is.

Matthew Gordon: That’s I think that’s a fantastic way to end this, because it’s not just the money and the connections you’re bringing that kind of thinking.

Steve Letwin: Right.

Matthew Gordon: I appreciate that summary. Thanks for telling us the story. Next time you through town come on update us.

Steve Letwin: Thanks.

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

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

Click here to watch the interview.

Matthew Gordon: Good morning Linda. How are you?

Linda Caron: I am very well, thank you.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Linda Caron: Yeah sounds great.

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

Linda Caron: Thanks Matt.

Matthew Gordon: Morning Tyler. How are you?

Tyler Rice: Great thanks, and yourself Matthew?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tyler Rice: Hectares.

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

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

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

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

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