Cartier Resources (ECR) – Meticulous Abitibi Gold Explorer Nears PEA

Cartier Resources.
  • TSX-V: ECR
  • Shares Outstanding: 194.89M
  • Share price C$0.30 (21.09.2020)
  • Market Cap: C$58.467M

Interview with Philippe Cloutier, President & CEO of Cartier Resources (TSX-V: ECR)

A mining company with credibility at its core?

Cartier Resources is a CVE-listed gold exploration company situated in the renowned Abitibi Gold Belt. Since we last spoke to Cloutier around a month ago, the share price has doubled. A lot of sceptical investors will put that purely down to the gold bull run, but growth remains impressive. Capital is predominantly being absorbed by gold producers, with some now trickling down to the gold explorers, but the explorers need to be doing the right things in the first place in order to attract interest from the market.

The company’s flagship Chimo Gold Mine is being developed meticulously, and a PEA is just around the corner. Cartier Resources has raised $9.3M of flowthrough capital since we last spoke, and now has around $14M in the treasury to put into the ground and create catalyst moments. The market cap is now around $65M, and Cloutier is pleased to see Cartier Resources finally being valued close to what he thinks it deserves.

We Discuss:

  1. 2:02 – Quick Update
  2. 4:12 – Company Overview
  3. 5:34 – Promises in May: Company Processes and End Goal
  4. 14:07 – Chimo Mine: Average Grade too Average?
  5. 19:52 – Ore Sorter: Costs & Processes
  6. 21:09 – PEA Timings and Clues to Economics
  7. 21:51 – Comparable Peers: Who is Cartier Resources Like?
  8. 23:01 – Benoist: Plans and Goals
  9. 25:33 – Exciting the Market: Why Not Raise More Money?
  10. 30:43 – End Goal and Business Model
  11. 35:01 – Impact of COVID-19

CLICK HERE to watch the full interview.

Matthew Gordon: We speak to you back in May, how have you been since then? How’s life?

Philippe Cloutier: Excellent. We’ve had a terrific summer here. This is mine country, so obviously, a lot of contractors are busy, busy in the Abitibi. And because of COVID issues, obviously, not many people took vacations, and we’ve readjusted the work around that. But it’s been a terrific summer, really nice weather. I’ve been growing a lot of tomatoes; I discovered the journey of tomato growing quite a challenge. We’ve actually dovetailed into more of a corporate development process with Cartier where the consultants that are working with us have had to rearrange their personal lives as well, and all to the benefit of where we’re moving next. And you might’ve seen throughout all that, right in the middle of summer, a pretty important financing.

Matthew Gordon: What do you mean by corporate development? What do you mean by that?

Philippe Cloutier: What I mean by that is that obviously, so far in the last three years, we’ve been focused exclusively on developing the Chimo mine project, exploring it and orienting it towards can this thing fly? Can this thing get off the ground and fly? In the last interview I had with you, we had demonstrated that, yes, this thing is going to work. We’ve completed all that heavy lifting and now we’re in the final stages of setting the table with the third resource estimate and working towards a PEA. That’s the corporate development aspect.

But our corporation is not just Chimo. It’s three other projects, it’s three other deposits. We’ve had to engineer our corporate development around continuing and completing the work efforts on Chimo while emerging dynamic exploration program on Benoist and Fenton.

Matthew Gordon: What it is Cartier Resources?

Philippe Cloutier: Cartier Resources is Gold-centric. We explore for Gold in the Abitibi Greenstone Belt, the Quebec portion. Essentially, we got listed in 2007. By 2012, we redesigned our corporate strategy to focus on projects where Gold endowment had been demonstrated and we had Gold deposits. We picked up from 2012 to 2015, four Gold deposits. One of which was a past-producing mine. In the last few years, we’ve focused most of our exploration work, almost 60,000m of diamond drilling, within 500m of the Chimo mine historical shaft. And we’ve delivered two resource estimates and we’re working on a third, and most likely walking into a PEA. Now we believe it is high time that we migrate towards developing or unlocking the value of our three other deposits: Benoist, Wilson and Fenton.

Matthew Gordon: Why don’t we start off with the money first because that’s was going to be optionality to deliver on some of the other information you’ve been building during that period?

Philippe Cloutier: In the last 4 months, what we’ve discovered is off Chimo is clearly moving towards the end zone. We’ve done the bulk of the heavy lifting, right? And now the game is essentially in the hands of the resource estimate consultants and the engineers to deliver the final value of Chimo. It requires high level supervision on our part, but having seen that, were on the lookout for additional funds to be able to jumpstart rapidly on our other exploration place. And therein lies the reason for the financing; we had at the time of that decision and that epiphany, USD$4.5M hard cash, and we didn’t want to burn through that doing exploration work on Benoist, Wilson and Fenton. So therein lies the rationale for the raise.

Everything that we learnt: the strategy, exploration strategy, the techniques that we learnt on Chimo in the past few years, we’re going to apply in a dynamic or relatively aggressive manner on Benoist and Fenton, and maybe Wilson.

That’s basically what we’ve done in the last four months. And when I said we would come to a decision within those six months, is that well, at Chimo, we’ve decided that we’ve done enough, we could continue exploring at depth, but we wouldn’t be able to capture all that much additional value from deep drilling, for one. For two, it would delay or further delay resource estimate work and engineering work. At one point you have to cap off your work and just roll the dice and let it go and then move on to another project.

Matthew Gordon: Benoist, Wilson and Fenton. Let’s go with what you did there and at the point at which you decided to stop and then we’ll get onto the other three projects.

Philippe Cloutier: It would be fair though to comment to the fact that there’s currently a trend, a very favourable trend for Gold and a window of opportunity, hence our accelerated decision. Perhaps if it was a shitty market, we would continue, but in this environment, we’ve done enough. We know this thing flies, so what have we done at Chimo Mine? The Chimo mine project is a past producer, we’ve had the benefit of being able to anchor or calibrate all of our exploration work on known data, 4,000 diamond drill holes, a layout of underground infrastructure, costs of local access to mills, trucking, et cetera, et cetera. Therefore, were able to focus on the direct exploration at depth of, I think, there were 25 or 27 known Gold zones. Throughout a 3-year program, we were able to target all 27 zones, bring that down to 12 and then 6 and now 3. That doesn’t say that the remaining 24 zones still don’t have potential. It’s just that we felt that we’ve drilled those enough, and they ultimately could be drilled from underground once this thing gets into production. We’ve drilled up to 60,000m, as you’ve seen in recent press release. 60,000m on the zones that are within 500m of the shaft laterally and at depth. We’ve produced two resource estimates.

With this morning’s press release, we’re able to shut the database and launch the third resource estimate process. And then once that reaches a critical aspect, then we can bring in the engineering reports and walk right into a fully-fledged PEA. That’s what we’ve done.

We’re very comfortable with where we’re at, and that’s why we’re also comfortable moving on to the deposits. And the market, the M&A ecosystem or what will happen to Chimo, we’ll see those recommendations emerge from the work that we’ve recently launched.

Matthew Gordon: What was the profile of the assets that you look for? Do you think now that you’ve done work on Chimo, that you’ve got what you sought out to find, and you’ve got a PEA coming up, but you must know enough now?

Philippe Cloutier: Yes – on Chimo we’ve addressed the issue. We believe it’s going to fly. We simply need to rush the ball the last nine yards over the touchdown line. On the other projects, we have the benefit of having been through a process that we know works on the type of deposits that are in the pipeline of our portfolio. What we’ve learned in the last few years, our intention is to apply that more comfortably. I mean, the learning curve on Chimo is way behind us and we’re going to apply that more dynamically on Benoist.

Now, business model, when we built this portfolio was to identify projects that clearly had endowment metal factors. I mean, grades of Gold over widths that demonstrate that the projects have legs to them. For us, we don’t want to be prospecting with a drill or burn through cash trying to make a discovery. We focus our exploration, on stuff that has already been discovered, but were discovered at a period in time where drilling was naturally limited to the first few hundred metres. Now our job is to just pick these things up from what they let were left off and to drill at depth and to continue to explore and build ounces on these things.

As luck would have it, our first asset that we focused our attention on was on that very productive and prospective Cadillac Fault Extension. Now we are going to focus our exploration attention on what everybody’s seeing as an emerging mining district: The Windfall Belt. And so, there’s going to be a lot of bang for the buck because we’ve developed a process that can really benefit the three other assets that we have.

Matthew Gordon: Don’t you feel the average grades there is just that little bit average for the open-pit?  Do you feel that economics are not going to be as good as you thought?

Philippe Cloutier: In today’s press release, in the second table we present high-grade intervals. And we purposely did that because we get the criticism that, this is low grade or average grade. Chimo, much like any other project in the Abitibi, has its sweet headline pockets within the mineralisation panels. We always have tended to focus on the number of ounces or the volumes that generate ounces rather than the teaser headlines. Our focus on Chimo was making sure that the mineralisation that we outlined was amenable to mining with modern techniques. Mining in modern times has migrated towards bolt mining underground, or more so open pit, in some cases. People that look at Chimo or any other project with a 1990s mindset, they’re missing the point. Gold X is a brilliant example, Canadian Malartic is brilliant example, where you take known deposits and you look at them with a modern set of white glasses and you design a program to address that target type, and at Chimo that worked.

That’s why the crucial components of our third resource estimate is to come to an understanding of what is the appropriate cut-off grade for the Chimo-type mineralisation and run various simulations and scenarios. And what I forgot to mention in the previous part of the interview is that throughout the past four months or six months, we’ve stumbled on what I would call technical discoveries. In discussing with the resource estimate people and the engineers they’ve brought to our attention, some technical advantages to the Chimo mineralisation infrastructure.

Matthew Gordon: What are they able to tell you? What are you able to tell us about the way that this could be processed?

Philippe Cloutier: At Chimo, when engineers and resource estimate people look at it as a deposit, they don’t look at it from an exploration geologist standpoint, right? They look at this and they say, why don’t you lower your cut-off? Without any additional drilling, you’re generating a lot more ounces. But the engineers will look at this and say, hold on. Can I wrap wire frames around this? Can I actually come up with a stope design? It’s a lot of back and forth work with the geological team, the resource estimate team and the engineering team. And then in the process you get these Eureka moments, and when you map it out, when you go to the drawing board, that’s what I call technical advantages or technical discoveries that are made that aren’t through the drill bit, but through an understanding and a mapping out of the various scenarios.

For instance, at Chimo, we know that ore sorting works. We know that if you take the mineralisation and you put it through an optical or an electromagnetic sorter, it can sort, the material can be recognised and separated into ore and waste. It either does already, or it doesn’t. If it doesn’t, that’s it, you don’t investigate that path anymore. In our case, it does.

In our case, we’re also very proximal to the to the Val d’Or mining camp. And you could either truck your ore on paved highway, or you could truck your ore on forest roads. You could send it to a lower volume mill, or you could send it to a higher volume mill. And we have the advantage of having locally, I think, six mills by six different owners. You’ve got the LaRonde mill by Agnico. You’ve got the Canadian Malartic mill, which is co-owned by Yamana and Agnico. You have the Goldex mill, which is Agnico. You have the Western mill, which is keynote, which is Western. You have the QMX mill, which has an option on. You have the Eldorado mill, you have a lot of different players, a lot of different mills and all that optionality that goes with it. An important part of the engineering design of the project is to unlock the value of each scenario; to be fully aware of which scenario can give you a revenue of X and which scenario gives you a revenue of Y, and just map it all out.

Matthew Gordon: What does that mean? And how much work have you done on that in terms of engineering? Is it saving you 10% of throughput, 20%, 30%? What’s the increased recovery rates? What’s the cost of it?

Philippe Cloutier: The cost of it is actually low. The ore sorting plants themselves, purchasing them and installing them – that’s low. That’s a low-cost item. It’s not even mentionable in terms of CAPEX and OPEX. The essential point is the trade-off; are you better sorting this thing and high grading your ore, lowering the trucking cost, sending it to more potential mill sites, or are you going to just throughput as much tonnage as you can at the lowest grade possible, just send it to a local mill and let them sort it out? It’s the measure of trade-offs that we’re going through right now. That process is ongoing, but obviously, you can assume that if we’re doing that process it’s got passing grades and therefore, we’re going to deliver on it.

Matthew Gordon: When do we start getting more clues about the economics around this? Do we have to wait for the PEA or is there information that you’re going to be able to share with us before that point?

Philippe Cloutier: Ultimately, the public has to wait for the PEA to be published. The more sophisticated investors will actually wrap their heads around what we have, they’ll go to local other PEAs and 43-101, where you could find in these reports, these cost estimates, these trucking costs, these milling costs, and they could piece together their own napkin study PEA-type thing.

Matthew Gordon: Who do you consider your peers are in terms of similar ore bodies, etc?

Philippe Cloutier: Not in terms of similar ore bodies, but in terms of similar dynamics, there would be Monarch, there would be Radisson. There would be Probe, there would be O3. Listen, even Agnico Eagle, in 2006, developed the Lapa mine, and the Lapa mine ultimately produced 825,000oz of Gold, from 2006 to 2018. Don’t let anybody tell you that senior mining companies don’t tackle million ounce deposits; they do when it makes sense. And so we’re working on Chimo to deliver it. We’re already, at 1.2, we’re working to deliver a minimum of 1.7 that we arm-waved in our corporate presentation. And I’m quite confident that we may even top that.

Matthew Gordon: Let’s talk about Benoist if we may. What are you doing there now with this new money of yours? Or what do you plan to do? Just give us a clue.

Philippe Cloutier: If we dial back to 2016, when Agnico Eagle invested USD$4.5M for a USD$19.9 stake, that USD$4.5 million was to drill Wilson, Fenton, Benoist and Chimo. We never got around to drilling Benoist, so it’s a given that we already have a drill program mapped out for Benoist. However, in light of what we’ve discovered that Chimo, the program at Benoist has now developed into a three-component program, we will be drilling the natural depth extension of the Benoist deposit as known today. We will be drilling the deep-seated ore vision anomalies that are distributed in and around of the Benoist deposit. And we will be drilling the deposit itself. All three parts of the program are directed, or their objective is to rapidly vault Benoist into the limelight and properly evaluate. The drilling of the deposit itself is meant to reflect, whereas at Chimo, we had historical metallurgy in rock production and production reports at Benoist, this is not a past producer so drilling the deposit itself is meant to rapidly jumpstart metallurgical studies on the project. Whereas drilling the extension of the deposit and the ore vision anomalies is meant to build or scope out the potential that this project has to deliver how many ounces in a given time.

Matthew Gordon: What are you going to need to do with Benoist, with Fenton, to really get the market excited? To show that there’s more growth. Doubling is fantastic, but what next? What do you need to give to the marketplace in your opinion?

Philippe Cloutier: In our opinion, the market has only recently started to recognise some value at  Chimo, but zero value at Benoist, Fenton and Wilson, because these are all historical resources, they are not 43-101, given the fact that they were essentially outlined in drilled off before the pre-Bre-X scandal. 43-101 norm and regulation come into play in 2001. What we aim to do is to take the historical resource estimates that we have on these projects and flesh them out. This is our embryo. This is our start number. And look at the program; the program is built to develop rapidly, expand the number. At Benoist, for example, there’s, I think half a million tons, am historical resource assessment mine, not 43-101 on half a million tons at 5g Gold, 12g Silver and 0.3g Copper.

If you take half a million tons 5g, that’s about 90,000oz in the first 100 or 200m, but we’ve drilled down, in 2014, to 750m. We know the system’s there. We have to design a drill program that will clearly show the market the value that we’re building at Benoist, and have it understand the value of Benoist and also at Fenton. And then ultimately, at Wilson.

Right now, we’re getting zero value for the three other deposits. And we’re also only getting partial value from Chimo. Our challenge is essentially, not a technical one, it’s raised awareness of what we’re doing and have the market recognise our value. Have the market recognise that we’re not vulnerable financially; we have the cash. We have the right team to do the right work. And obviously, we have the right assets in the right location. The market valuation will perhaps at one point meet the corporate valuation. And that’s where I think the value proposition is.

Matthew Gordon: Recently you had about USD$14 million in cash? Roughly 13.5M, 14M, right? I’m intrigued by the conversations that the board have and say, right, we’re in a Gold bull market. Money is flying around left, right. And centre. Why 9.3? Why not 25M? Why not take more to accelerate this so you can actually deliver in a very positive Gold bull environment?

Philippe Cloutier: Obviously, there’s a world between investing funds properly and just blowing it out and spending it. USD9M-ish is on the high side of what we can appropriately manage and deliver in the Cartier fashion. Above that, the work would get done. We can manage it, we could deliver, but it wouldn’t respect our signature program. That amount basically reflects the backend interests that that were able to generate. USD$9.3M that you mentioned is flow through. When you raise flow through dollars, it’s a promise to the market that you’re going to invest that money in exploration. You can’t use that money for GNA and stuff like that. The retail investment community should be hearing, wow, we’re going to get USD$9.3 million worth of diamond drilling, because Cartier doesn’t fly airborne surveys or do grab sample trench programs and stuff like that.

The majority, if not, all of it is going to go directly to diamond drilling, some reserved for engineering and 43-101 resource estimate work. It’s going to be a very, very dynamic year for Cartier in terms of news flow, in terms of deliverables.

Matthew Gordon: What’s the end point for you, and how much more money and how much more time is it going take to get to that point?

Philippe Cloutier: We’re looking at 500,000 to 700,000 to complete the work on Chimo, have the market fully appreciate in terms of resource estimates and preliminary economic assessment of the project – the value of Chimo. From that point on, it’s a different ball game; the market comes into play, the corporates come into play. Even at the board level, we have to make a decision of how we’re going to capture that value and monetize it for our shareholders. What remains to be done on Chimo is simply  bringing to the market an evaluation picture of Chimo. And from that point on, we’ve got two elements: we’ve got a defence mechanism, if there’s an opportunistic bid or a delinquent bid on Cartier or Chimo. And then we have the blueprints to build it ourselves, if we have to make that sort of decision. We’ll have covered the basic needs as a team and we’ll have protected what we’ve generated as value, we’ll have protected that for sure.

Matthew Gordon: Whats your business model?

Philippe Cloutier: That’s our business model, and in the best of worlds that’s what you do. Junior companies, a four-man team junior company that says that it’s going to build a deposit in this day and age, with the permitting, with the capital raise, you have got to be credible when you want to do this type of thing. It’s one thing having a four-man team and doing exploration, quite another having 200 men onsite or women, and having health and safety meetings on Monday morning. It’s two different worlds. If you decide to walk the talk and say, you’re going to build this thing that can become scary. You could always have that up your sleeve, but at least with the third resource assessment and the engineering work that we’re doing, and eventually the PEA, that will spell the value for Cartier and the shareholders. Obviously, we’re hoping that all of this is done and delivered while the price of Gold is still going up and the market is favourable. That’s why we’re very content where we’re at right now. I would hate to be delivering when the market crashes.

Matthew Gordon: What are we walking into? Are we in this for some sort of long haul with you, or is there an event coming up soon? 

Philippe Cloutier: There are several events coming up.

Matthew Gordon: It was lovely to catch up with you. I know we’re going to catch up in a few months as things progress and we’ve talked about staying in touch more regularly. I appreciate that. Things are going well. You seem to have delivered everything you told me you were going to deliver, which is unusual. COVID is not making too much impact on moving things forward dates not changing?

Philippe Cloutier: I’ll tell you something: because of what I mentioned earlier on, people not taking vacation time, saying, I can’t travel abroad. I can’t do this and that. I’ll just stay at work and stuff. And then working off site, working from home, we’ve managed to do it quite well. Some of our contractors or some of our other groups that we intervene with, will they manage that the same way? When you have a whole bunch of different moving parts and they try to coordinate meeting times and that falls because things get bullied around a bit. We could answer to our plans and that’s what we aim to continue doing. It hasn’t impacted us yet. What will COVID bring us in the second wave or even third wave? I don’t know, but we have taken the necessary steps here to manage that accordingly. We have the cash, the team and the assets.

Matthew Gordon: You do have the cash. Let’s speak soon. Stay in touch, please. You’ve got a bunch of deliverables. Keep doing what you’re doing. We will speak soon.

Philippe Cloutier: Absolutely, have a nice day, sir.

Company Page:

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.

Canex Metals (CANX) – Early-Stage Gold Explorer Built for Success

Canex Metals.
  • Shares Outstanding: 53.06M
  • Share price C$0.26 (21.09.2020)
  • Market Cap: C$13.53M

Interview with Shane Ebert, President of Canex Metals (TSX-V: CANX)

We like this one. Canex Metals is an early-stage gold explorer with 3 gold exploration tenements in Northern Arizona: a strong mining jurisdiction. With $1.3M in the treasury, and another $490,000 available through warrants at this end of this year, Canex Metals appears to have the credentials to deliver gold in the ground. Canex Metals is a small player, but there is always room for gold early stage exploration in your investment portfolio. The geology is good, the share registry is excellent and the corporate structure is unusually tight. They have taken great care to set themselves up properly. Why is that important? Because it means they can afford to have a couple of dusters, raise additional capital and still have a good share count. Well that’s the way we read it.

The team has a strong track record and Ebert, a geologist, was candid and transparent. Lots of discoveries made by the team and also a record of M&A. They are chasing high-grade gold at surface.

Canex Metals’ c.$13M market cap has recently seen a bump. Canex Metals has started to market itself effectively. The restructured the company a couple of years ago using money from Altius Resources. Talking to us is a good start, but this story needs to be heard by gold bugs. In this gold environment, anything seems possible. With $400,000 to spend on drilling over the next month, the market should have a much clearer idea of the Canex value proposition that is on offer in the near future. If they hit gold they should raise more money.

We Discuss:

  1. 2:34 – Company Overview
  2. 3:22 – The Foundation: History & Track Record
  3. 6:36 – Relationship with Altius Minerals Corp: Raises and Cash Position
  4. 8:11 – Team Experience
  5. 8:42 – Acquiring the Asset: What’s There?
  6. 17:25 – Management Shareholding, Remuneration and Cost Mitigation
  7. 19:19 – Plan for Money Allocation: Drilling and Expectations
  8. 24:22 – Value Creation & Exciting the Market: Means of Minimising Dilution
  9. 28:31 – Thinking of Partnerships

CLICK HERE to watch the full interview.

Matthew Gordon: Why don’t you kick off, give us a one-minute overview of the project and then we’ll pick it up from there.

Shane Ebert: Canex is focused on high-grade Gold, Northern Arizona. We’re into an area with lots of widespread Gold mineralisation, not a lot of past exploration and a lot of good opportunities. We’re excited about getting in there and exploring this new zone. It holds some really good, high-grade, near surface Gold upside for investors. We are putting together some really good targets and now we’re at the drill stage, so this is where we start to test some of those targets.

Matthew Gordon: What’s your history and track record?

Shane Ebert: I’m a geologist. Did degrees in Canada and Australia. I did my studies in Nevada, so a lot of history in the great basin. I worked through Nevada, Mexico from Alaska to South America, quite a bit. I’ve been part of a team that’s had quite a bit of success over the last 20 years. Initially with Tyler resources, our team found and sold a large Copper deposit in Mexico. Since then we went on to discover Gold deposits in Newfoundland. I’ve been involved in Copper-Gold discoveries in British Columbia and a lot of project work throughout the Western U.S. This is an area we’re comfortable with, we are comfortable with and we see a lot of upside.

Matthew Gordon: When did you get involved?

Shane Ebert: I’ve been involved now for about 12-years. After Tyler wrapped up and that company was taken over, we took on new management roles in this company. The precursor was Northern Abitibi Mining, involved in exploration all over the place. A few years back we restructured the company and Altius Minerals came in as a founding partner. They helped us recapitalise and they’ve been a really strong supporter of the company. This new company was looking for projects, and basically an opportunity came up in Northern Arizona that had really good potential. We saw a lot of Gold over a widespread area and a project where we could go in and put things together for low costs and meet our criteria, which are: we’re looking for opportunity, but in this case, Gold, which is a great commodity in a fantastic location. Arizona is clearly one of the premier first-world mining jurisdictions. They’re in the top 10 of the Fraser Institute. It’s a great location. If you look, we have Nevada to the North, we’ve got Northern Mexico to the South. The geology continues through the two, lots of opportunities here. The management team loved the jurisdiction, saw good early-stage opportunity where we could leverage our skill sets and add value quickly through low cost, really good science on the ground, and bring to investors high-grade, near-surface targets that we see the scale to. I mean, it’s exploration, it’s early stage, but we’re seeing what we want to see in terms of checking boxes for size, for potential, for what we need to actually make a real discovery that we can move to the next level, which would be resources and eventually monetising ore.

Matthew Gordon: You’ve been involved with this entity for 12-years, and Altius got involved when? When did they put money in?

Shane Ebert: A couple of years ago, we restructured, they helped us recapitalised and they got behind us as an exploration company.

Matthew Gordon: How much money did they put in?

Shane Ebert: They put in a few hundred thousand initially, to get us off the ground, get us moving. And that was the catalyst. It was at a time when it was hard to raise money. They saw the opportunity. They liked the background. They liked the people involved. They’ve been a strong supporter. I’ve done work for them in the past. They know our group very well. We’ve worked on projects. We made a Gold discovery with Altius in Newfoundland five, six years ago. We have a good working relationship. They liked the way that we put money into the ground. We’re very effective and efficient with the capital that we do raise. It goes mostly into exploration, and they were very happy to support us at a time when it was tough to raise money a few years back. Definitely.

That kept us going, that got us the ability to look for targets, to focus and to move the company before.

Matthew Gordon: How much money have you raised since then and how much money have you got today?

Shane Ebert: Since then, just over USD$1M and a bit. Right now, we have about USD$1.2M cash and equivalents. We’re spending a portion of that on this drilling program, but we’ll come out of this with not as high a bank account as we’d like, but with still a healthy bank account to get us through the next 6 to 12-months.

Matthew Gordon: I just want to finish off with the management team: it’s you and who?

Shane Ebert: The other technical person on the technical team is JP Jutra. He’s a geologist, technical background. We have a couple of directors with a financial background that have really helped with the business side of things. And then we just have some core management teams that are great at capital markets, corporate, the rules and the regs of navigating the system.

Matthew Gordon: When did you then find the asset? How did you find the asset?

Shane Ebert: That’s interesting: about a year ago, I got a call from a prospector who lives part time down in Arizona. We did a deal with a separate company with that group, so he knew us from a different life. He was out metal detecting and he found some course nuggety Gold in place with his metal detector, they ended up taking out about 20oz of Gold from a little pocket that they’d had up. He took a picture, he showed it to me: it was a nice quartz vein with splashy Gold, looks really impressive. And I thought, that’s pretty interesting – new discovery area that hasn’t been looked at under about a foot of cover, looked like lots of upsides. I love Arizona. We’re looking in the Western U.S. for projects. I hopped on a plane, came down, went out, looked at the site with him. It was definitely of interest.

It wasn’t enough exposed to say too much about his discovery, but I spent a few days just walking around and I started to come up with some old workings from the 1880s, starting to trace some bigger structures. All of a sudden, I could see that there’s potential here to put something together with some good, honest boots and hammer work on the ground. Seeing some visible Gold in some of these quartz veins, so you know it’s mineralised before assays, and widths up to 5m. Right off the bat, I had a pretty positive impression. And we ended up doing a deal on a few claims. Since then we’ve grown the claims exponentially. We now have 145 claims, which surrounded that area, we’ve incorporated four or five small-scale past-producing Gold operations dating to the 1880s and including a small-scale heap leach operation dating from the 1980s.

We were able to assemble a land package and start to trace some of these mineralised zones. One of them we’ve traced for over 5km. We’re starting to see the scale that we want in the system and widespread veins. Some of these veins are small. They’re discontinuous. They’re not what they’re looking for, but put together as the whole package, they give us a really good idea of what’s going on structurally, and our focus is to pull out via structure in good geology and geochem and all the typical methods, including geophysics, the bigger zones, the bigger targets, and that’s what we’ve been focused on.

Matthew Gordon: What they do understand is that a lot of companies come to market and 19 out of 20, 95% of them will fail. What I would like to understand is how do we identify? What you think you’ve got there and why this isn’t just a sort of capital promote type project?

Shane Ebert: Most exploration projects don’t pan out. I mean, this is the riskiest stage. Basically, we’re in the business of trying to mitigate risks. We’ve mitigated the political, social risk by being in a good jurisdiction, but how do we mitigate the exploration risk, the geology? How do you separate this from something that’s of interest, but not going to go anywhere? To do that, what I like to do is look at certain criteria and check certain boxes in the exploration stage. One of it is them is, there is grade. We love to see grade.

Matthew Gordon: How do you know that?

Shane Ebert: You can have lots of mineralisation, but grade is hard to replicate. We see grade, we see halos around some of these things, but what we do is we have a picture here that has the potential for a bigger scale system. In nature, there’s tons of small-scale systems. There are only a few bigger scale systems that actually become mines and actually become minable. And the key is just try to recognise that. You want to look for certain things here. We see a genetic model that works for us. It’s got size, it’s got analogies. We see structure, we see a distribution of mineralisation over a large area, and we see the potential to have the right traps to get higher grades zones of high-grade mineralisation, over bigger areas. That’s what we’re focusing on.

Matthew Gordon: But how can you say that? Give me some assurances about how you come to that conclusion?

Shane Ebert: To build those targets, you have to start from scratch. We started from scratch here. We had no information, no assays. So now we have over 2000 soil samples, over 500 rock samples. We use that surface data. We have flown a high-resolution airborne magnetic survey with drones. That survey has been really good, very low cost, but extremely good, high-quality information. We can map the structures and trace them on a surface. We can follow them and extend them with that geophysical survey. We can combine all of these quality datasets and start to develop targets understand the structure, understand the modifications of the mineralised zones, post mineral, which is common in this part of the world and put it all together into a picture where we can say, look, if there’s mineralisation here, we need a few holes in this zone because it has got size potential. It could be this big or not.

But just to back up here, over half of our targets are directly targeting high-grade mineralisation that we see at surface. A lot of our targets are low risk. If we can duplicate what we see at surface, it’s going to be a very good success for us. Then we go out and take a few flyers. Then we look at our model, we look at our structure, we look at the picture that we’re building, and we say, okay, here’s an area that we can’t seem like it’s covered. But if there’s mineralisation there and our structural model suggests that could be a really good trap. We put a few holes into these areas. Maybe we’ve got a big soil anomaly. Maybe we’ve got other criteria that suggests there’s Gold there. But basically, part of the risk exploration is you’re taking some low-risk drill hole bets, but you’re also taking some flyers on things that could maybe make a difference and change the game if they’re successful. But realistically, you’re only going to hit on a few of those if you do, right? That’s the risk of exploration.

Matthew Gordon: What did you see when you were on the ground? What is the data, which is saying to you, this is not just some interim step for me until I find something more decent to go work on?

Shane Ebert: I’s hard to quantify, but in a nutshell, what I see there is, is what I see when I work on other deposits that do have what it takes to become a mine. To make a direct analogy, I’ve worked a lot in the Pogo district in Alaska, and I’ve mapped a lot of these high-grade veins. I’ve mapped so many intrusions around there. I’ve seen some of the sheet and stock works in the intrusion and the distribution of these high grade around vein. By direct analogy, I liked what I saw there. On the ground here in Arizona, the desert has a pretty good memory, but you can go out there and there’s no trenches, there’s no drill holes. This has been gone over by a hundred companies in the past. We’re putting together a new project in this area and testing the guts of it for the first time. It hasn’t been done before.

The analogy that what we’re seeing on the ground here with what I’ve seen in the field, in deposits of this style is very compelling. I like what I see. There’s a lot of good similarities. Basically, analogies are a great way in this business to understand what you’re looking at and move things forward. That’s what we’re doing here. We like what we see, we’re seeing Gold, we’re seeing structure, we’re seeing the right kind of structure, and now we’re moving forward and testing it.

Matthew Gordon: How committed are you? How much of your money is in this?

Shane Ebert: Over the years, I’ve got a few hundred thousand of my own money. It doesn’t sound like a lot, but as someone running and managing and doing this as a career, it’s significant on my end.

Matthew Gordon: What you’re going to do with USD$1M? What’s your GNA? How much are you burning through just in terms of the administrative component?

Shane Ebert: We’re around USD$350,000 to 400,000 p/a in GNA. We run a pretty tight ship. We share offices, we do a lot to control costs, and a lot of that is just regulatory compliance. We don’t have a lot of high overheads. We work project specific and we do everything as cost effectively as we can. We’ve done that for 20 years.

Matthew Gordon: How do you apportion your time between this and those projects?

Shane Ebert: With my other projects, we have teams involved in both. The last few years when things were slow, it’s not an issue. There’s not as much to do as you’d like, and work is good as things get busier as the demand on your time gets higher. It’s basically assembling good quality teams that can do the work, that you have trust in, that can go out and get the job done cost effectively and do it right and move things forward. So, time management is very important.

Matthew Gordon: Are you paying yourself here? How do you remunerate yourself?

Shane Ebert: In terms of renumeration, I take a modest, daily wag and options. I’m in this for the big picture. My shareholdings and the option package I have is basically my compensation.

Matthew Gordon: How are you allocating capital to further develop your understanding of what it is that you have?

Shane Ebert: We’re going to spend about USD$400,000 on this drill program. We’ve spent maybe USD$300,000 getting to this stage with the surface work, the geophysics, all the things that we’ve done. We’ll spend about USD$400,000, then we’ll have half a million, 600,000 in the bank post program. That is very much a results-driven way forward. We’ve got some really good shareholders behind us. We’ve got the ability to raise money when we need it. We can go into that a bit later, but as we have success and move forward like any junior, we need to raise money to keep things going. If things don’t pan out, then you take your next opportunity and move forward with that.

Matthew Gordon: When are you hoping to report back to the market?

Shane Ebert: We will give regular updates now that drilling’s commenced. Hopefully every week or thereabouts we’ll put out an update. We’ve done a ton of surface work, so we’ll be able to start putting out some surface results, but everybody wants to see drill results. That is what we’re in this for. We’re going to start sending complete drill holes to the lab in batches of two or three. Hopefully, depending on lab turnaround, in the next three, four weeks, we can start releasing drill hole results to the market and people can understand what it is that we’re getting.

Matthew Gordon: Do they tend to be a lot harder than diamond drill results, because they are sort of more selective?

Shane Ebert: The drill results are usually more representative.What we’re doing with this program, we have a lot of coarse Gold, so we can see Gold in a lot of the veins. That’s always the hardest material to analyse to get a representative, repeatable result. The nugget effect is well known and it’s challenging. What we’re doing to mitigate that with drilling is doing a big size, taking big samples and prepping them in a way that we get the most representative samples that we can.

We have over 500 chip and grab samples now. You’re right; sometimes you are understating, sometimes you are overstating. In case in point, we did a tranche about six months ago, we took a sample across an interval and we got around 2g p/t Gold. We re sampled the same interval and we got closer to 15g p/t Gold. We know it’s mineralised. We can see Gold in the vein, but the volume and where you sample that vein can make a difference. You have got to do whatever you can to mitigate that. Yes, when you’re, when you’re out there taking chips and grabs, they can be overstated, they can be understated. Hopefully they are somewhere around what’s representative, and you need big samples, but you also need to prep them right. You need to do everything that you can from a technical side to reduce the nugget effect.

Matthew Gordon: How do you go about assessing what is representative for the region or the district and what your expectations are when you start drilling?

Shane Ebert: When we released those samples, we’re including samples of high-grade veins and we’re including samples of the wall rock adjacent to the vein which could have low-grade mineralisation or no mineralisation. When we chip sample is zone, we want to get out of mineralisation. We want to sample the good stuff, but we also want the wall rock. When I say average is over 48 samples, or over 64 samples we’re including zero value and the best value; not always the best way, you should really actually pull out your mineralised veins and take that range for those things. But it just gives people an idea.

We’ve taken lots of samples from the zone, and there’s a lot of Gold in the zone. The drill will really help us determine continuity and grade through that zone. And that’s what we’re going to rely on.

Matthew Gordon: How long is this drill program lasting?

Shane Ebert: If all goes well and smoothly, which almost never happens in a field program, it should be about 21 days and we should have it wrapped up in about three weeks,

Matthew Gordon: Three weeks. And then in terms of your USD$400,000 spent, what period is that?

Shane Ebert: That’s all through the drill program. It’s all through the results that gets us to everything being done and complete and all results in, that will be a month and a half, that’s about what our cash balance will be.

Matthew Gordon: You’ve got some very understanding shareholders, I see LTSS and others who, all things being well, should follow their money. Is that what you’re saying?

Shane Ebert: I think we can raise money, especially in this market. On the back of positive results, it gets a lot easier. Definitely. At some point we’re going to have to look at keeping going, what’s the next stage? What are we going to give to investors after this? A lot of that will depend on what we find. When we’re done on this program, we’ve already got six or eight really good targets to drill test on phase two. So, if we can move forward with a few zones here that we can build resources on, that would be fantastic, because we can move right to the resource building stage and we can also start to bring on our new targets and test our new targets. As this program goes, we move things forward. We’re continually bringing on new targets and as we understand new zones, and as the drill shows us where to go, where not to go, we can act accordingly and start moving forward and start to build value with the drill.

Matthew Gordon: When do you think the real value starts being created? When should people be looking at your company? Where do you think the value lies? People should just sit back and wait for the drill results to come out, shouldn’t they?

Shane Ebert: Typically, the discovery phase with the drill is where you add the most value on any project in any company. We’re at that stage now. With some good drill results, there’s a lot of upside here for investors, definitely,

Matthew Gordon: There’s a lot of dilution coming, because you’re going to need to raise this capital, right?

Shane Ebert: Certainly, dilution is always part of it and we’re trying to manage that by adding value as we go. Two raises ago we raised money at USD$0.05c. The last time was at USD$0.09c. Now we’re up around USD$0.24c. Our cost of capital keeps coming down, we’re heading in the right direction. To exercise our business plan, we need more capital. We’re going to need to continue to raise money through stages as we go and develop the resource as we can, as we get through the exploration stages. Raising capital is part of the business. There are different ways of doing that and we’re going to be as sensitive as we can to keep our share structure as good as we can, as we move forward.

Matthew Gordon: Different ways of raising capital in the exploration phase – how is that?

Shane Ebert: You can bring in partners. You can look at other ways of bringing in capital. Different companies have different business models. We’re very much a true exploration company. We want to identify good targets that we think can add value and we want to move those forward ourselves. Other companies may look for targets and bring in other people’s capital to do the risky drilling and stuff. But we’re an exploration group. We see opportunity. We identify it. If we don’t like the opportunity, we’re going to move on to the next one. But the big way to add value in this business of exploration, which is high risk by nature, is to take those gambles, take your best shots. And those companies with drill discoveries do very well in the market for shareholders.

Another thing I’d like to point out, Matt, is we’ve got more money coming in as we move forward: we’ve got USD$$230,000 worth of USD$0.10c warrants due in October that we expect to be exercised, that money will come in. We’re going to receive about 125,000 shares of Canadian Nickel Corp through a deal we have with Spruce Ridge in holdings in an asset we monetize to Spruce Ridge in Newfoundland. That’s almost USD$500,000 coming in, which will more than cover our drill program. We’re going to have some money in the bank following this to move us to the next level.

Matthew Gordon: You are explorers, pure explorers. At what point do you start seeking partner in whatever form or guise that may be?

Shane Ebert: It’s hard to say at this stage. We are explorers, like you say, we’re not mine builders or developers; very different skillset. We recognise that and we’re not trying to be all things. We’ll focus on what we’re good at, which is identifying, exploring, defining the resource. As we move forward and we get to those decisions that we may or may not need a partner, we will make those decisions. Eventually we’ll potentially try to monetise the asset to a mine development group or other, but as we move forward, we’ll look at those opportunities and do what’s best for shareholders.

Matthew Gordon: Thanks very much for coming and telling us that story. It’s an early-stage project. I’m always intrigued by what’s going on up here with the management team. You seem to have a very clear view of how you’re going to go about doing that. I do appreciate your track record and the involvement of people like Altius, et cetera. Come back on and let us know how the drill results go. Maybe in a months’ time, you should have some good news, right?

Shane Ebert: We’re testing lots of targets. We have five or six different targets. We’re testing multiple holes into each. We’ll see what holds, but I’m excited. I’m excited that the drill is finally turning and that we’re finally going to get a good look at what it is that we’re doing out here. Then we’ve got some new, big ideas coming together, which can add value down the road. Lots of good things to come from Canex.

Company Page:

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.

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:

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.

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:

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.

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:

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.

Ely Gold Royalties (TSX-V: ELY) – Can They Deliver a Re-Rate for Shareholders? (Transcript)

We interviewed Trey Wasser, President and CEO of Ely Gold Royalties (TSX-V: ELY). They are still a young company, having only being around for 3 years and are focused on Gold properties in Nevada. They have a portfolio of 33 Gold Royalties and 20 Gold properties sold on an option programme. There is an additional 25 Gold properties which are available for sale.

A Gold Royalty is a share of the gross revenue off the top line of a mining operation. The most common being the Net Smelter Revenue (NSR).

For us to invest in a Gold Royalty company, we need to believe that they can identify a good project and can write proper contracts. Trey Wasser and his team have come from a traditional Gold exploration background and have a track-record of identifying Gold properties, they have previously sold projects to Newmont and Osisko. This track-record should lend comfort that they understand the technical aspect of mining properties.

They employ a cookie cutter approach. Gold. Nevada. Small Royalties. They have learnt ropes with small exposure and risk. It has allowed them to be very niche and free of competition as the bigger Royalty companies don’t play in this area. However, now the business is starting to grow and the Royalty amounts are growing and the returns are increasing. They will look to raise money as they feel they have the ability to deploy the capital. And they need smooth and consistent revenue. This is going to be driven by the strategy and focus going forward so find out what say they are going to do.

They have a blended approach to the types of properties that they have. Exploration, development and now producing properties. This will allow them to compete at the lower end but we want to see how they intend to deliver growth. At $40M market cap it is still a small company. Shares are up 160% over the last 3 years but how do they continue to grow? What are their plans? At what point do they start to see increased competition?

There are some meaningful investors involved: Eric Sprott, Rick Rule – money is available. Does Ely Gold Royalty have the potential to re-rate soon? And when do they start to pay a dividend? We like Royalty companies but is this one of them?

Interview Highlights:

  • Overview of the Company
  • What are Royalties and Why Should You Invest in a Royalty Company?
  • The Team, Relevant Experience & Remuneration
  • Company Strategy, Growth Plan & Challenges
  • The Market: How do You Stand Out From the Rest? Is There Much Competition?

Click here to watch the interview.

Matthew Gordon: It’s lovely to have you on the programme Trey. We’re quite keen on Royalty companies. I think Micky Fulp mentioned your company to us, so we were keen to get a hold of you. Why don’t you start off with a one-minute summary on the business and then we’ll get stuck into some questions.

Trey Wasser: Ok, Ely Gold Royalties – we transformed the company basically 3 years ago and started building a portfolio of royal properties, mainly in Nevada with the idea of selling the properties and retaining Royalties. We’ve been doing that for about 3 years now. We’ve built up a portfolio of 33 Royalties. We’ve got 20 properties that have we sold under a 4-year option programme and if they continue with the option, those 20 properties will also generate Royalties. We then we have an additional 20-25 properties available for sale, so we control through our Royalty portfolio, our option portfolio and our available property portfolio, over 70 Gold properties, primarily in Nevada.

Matthew Gordon: Thanks for that summary. For people who are new to Royalties, can you explain what a Royalty is?

Trey Wasser: A Royalty is a share of the gross revenue off the top line of a mining operation. So, you have several types of Royalties. The most common would be a Net Smelter Royalty (NSR) which means that the producing company does get to deduct their cost of smelting the ore, which is the final process, which is to take what comes from the mine to make it 49 Gold. But other than that, the Royalty owner is paid right off the top line of the Gold sales.

Matthew Gordon: Right. How did you get into this? Have you been in the Royalty business for a long time?  What’s your experience of it?

Trey Wasser: I’ve been with Ely about 10 years and we were a more traditional Exploration and Development company. And we developed a project in Nevada – the mount Hamilton Project. We took it all the way to Bankable Feasibility Study (BFS) and full permitting and then sold that in 2015. That’s when we changed our business model and we did that by buying out properties from long time prospector in Nevada – Jerry Baughman – and Jerry then came onboard. He runs our Reno office, he’s our main land man and Jerry’s been doing this for 35 years where he stakes properties, very low-cost acquisition on his properties, sells them and retains the Royalties. He built up one portfolio that was sold, ended up with Newmont and it’s now actually a Osisko Royalties, in 2011.

Matthew Gordon: So, tell me a little bit about the team because there’s a couple of things that I would need to believe to invest in a Royalty company. 1. That you know how to identify good projects – projects which will succeed – where the Royalties will be paid or continue to be paid. 2. You’ve an ability around the paperwork around the contracting on a Royalty. I guess sometimes that can be fairly formulaic, but they are quite nuanced at times. So, tell us about the team ability to deliver on those 2 things.

Trey Wasser: Well first of all, the bulk of the team is Jerry and myself. Jerry being the land man and working on the identifying of the properties. As I say he’s been doing it a long time, so we’ve accumulated a database on properties that’s probably second only to Barrick Gold and Newmont in Nevada and the Western United States. So, we’ve very good at identifying the properties, I think the quality of our properties is reflected in our third-party partners. If you go to our website and look at the list of our properties that are in the Royalty portfolio, you’ll see all the major companies listed there. The mid-tier producers, Premier Gold, Barrick, McEwan Mining. The list just goes on and on and they’re top quality companies that are prospecting and producing, especially in Nevada. The beauty of our model is that with our option model, we don’t do joint ventures with our projects. They’re way too hard to handle. So, when you mention from the contract side, because we option the properties 100%, we don’t have any management of the projects once the paperwork is signed. We basically just send them an invoice, follow their news of course and report to our shareholders on the progress on the project. For the most part it’s a very scalable model. And what we have is templates that have been approved by the lawyers. So I do most of the legal and contract work and we work under a template so basically from the time we sign an NDA, it’s our NDA, it’s the same one for everybody (non-disclosure agreement), our term sheets are the same, the same options contract goes to everyone and it’s very easy. So, our Royalty Deeds and Royalty Agreements are, with a few changes, nuances from company to company, basically all the same and you’re right it’s a very good question because you can get jumbled up in a lot of different thing if we accepted everyone else’s contracts, but we don’t do that, we supply the contracts.

Matthew Gordon: That’s fascinating to me. That says to me that you’ve got a cookie cutter approach to this. It’s the same types of companies, same structures and set up. So, 1. You’re focused on Gold, which we’ll come to in a second. 2. It’s Nevada, which I guess we’ll also come to in a second. So, you know what you know, you can replicate it and that’s part of the strategy which you’ve consciously decided to settle on. Is that right?

Trey Wasser: That’s correct. We took Jerrys model and put it on steroids by putting more capital behind it, concentrated more on consolidating claim packages. What you won’t see on the surface is that behind the scenes, to put a property package together, we may go out and stake some claims. We’ll then work on putting all the claims together. The best projects that are unexplored in Nevada, that haven’t seen exploration since the 80’s and 90’s, have claim fragmentation problems where different parties own the claims. The major companies won’t fool with that and take that risk. So, we have been very successful in consolidating claims packages and that’s where the real quality of our projects and our partners comes through. I’d probably add one other thing re. back when you’re talking about the development too is we sensed in that last 6 months that we began to purchase some producing Royalties outside of our Royalty generation program and we can get into a few of those. In the development what we really focus on are projects and Royalties that are in and around producing mines. So, if you look at say Gold Resource, we have a producing Royalty at their Isabella Pearl mine that they just put into commercial production this year. But we also have a larger Royalty on all the exploration ground there at Isabella Pearl, about 7 miles of trend that’s been unexplored. 3 satellites mines or projects, Mena Gold, County Line where there’s been not a lot of production, because of claim fragmentation problems, not a lot of modern exploration. So that’s an example of where our projects are near producing mines so what they need to do is find just more ore, they don’t have to find enough ore to build a brand new mine. That’s the same for the case with Premier Gold at their South Arturo mine, that’s a joint venture with Barrick. We’ve consolidated some claims right in the middle of their mining project. We’ve just approved a sale of some claims right in the middle of McEwan Mining’s Gold Bar mine. So, our properties that are being developed have a very high chance of becoming producers.

Matthew Gordon: So that is to my point. It almost doesn’t matter what projects you’ve got to me as an investor. I just need to know that you’ve looked at them, they meet your criteria, this cookie cutter approach to Gold Royalties in Nevada, and it should be fine. I should just sit back and wait for the dividends, shouldn’t I? That’s the kind of trust level I need to have in you.

Trey Wasser: Well you know I think that having now been at this for 3 years in this business model. Jerry having had more than 10 times that (35 years). We also have on our board Bill Sherriff who’s a long-time prospector in Nevada. We bought all of Bills properties and Royalties a couple of years ago and his database which was huge. He’s on the board advising so we know where the projects, we know who the people are who have them which is why we’re able to do deals to consolidate the properties. But if you look at our website and look at the news flow, you can see we’re pretty prolific at doing deals with quality companies.

Matthew Gordon: You are but also if I go and look at the news flow there’s not a lot of chat around it, no one cares, because it’s fairly formulaic. It’s business as usual which says a lot to me – it says people either trust you or they don’t care. Looking at your share price, it’s heading the right way. Gold price is helping obviously. Just sticking on numbers if I look at market cap, your $40M, you’re a small Royalty company in a sea of quite big precious metal, Royalty and streaming companies in the US. Is that because you’re niche – you’re going to remain niche – you know where you sit in the market or is there room for growth?

Trey Wasser: Oh, absolutely there’s room for growth.

Matthew Gordon: From where?

Trey Wasser: We’re at a point in the market now with a $40M market cap. I’ve always worked around an overall limitation that is we’re looking at deals that would have to be an awfully good deal for it to worth more than 10% of our market cap. So, this time in the first couple of years when we were at a $10M market cap, I was looking at a $1M deals. Last year I was able to start looking at some larger deals and now that our stock, over the last 3 years, has been up 160%, so we are growing. Now we’re looking at deals that are in the $3-5M. They’re flying below the radar of the larger companies for sure and yet we’re at that hockey stick yard with our growth because a $4M Royalty deal to us at that size really moves the needle for us. All of a sudden it can add up to $1M a year in revenue and it’s going to be adding some of these $4M deals that allows us to get to the next step which will be where we can have a predictable income to start paying dividends.

Matthew Gordon: Right, ok. So, you’re going to stick with Nevada, it’s what you know, you’ve got a big data base. This niche means you don’t have to compete with the big guys, because it’s way too small for them so you think there’s enough growth in the next couple of years for you. Is there much competition? Are you competing for these Royalties?

Trey Wasser: Well, yes. We compete for them. Some of them we get a leg up one way or another. Because we are more exploration and development orientated we a look at things that maybe don’t have full Bankable Feasibility Studies (BFS) and necessarily proven and probable reserves especially if they’re with good operators. The big operators they don’t necessarily publish 43-101 reports on their properties. But again, there is some competition. But in the junior Royalty space which there’s probably 4 or 5 companies, I won’t mention them here, but they’re in the area of $100M-$200M market cap, maybe even $300M. That’s what we call the junior Royalty space and that’s what we’re aspiring to right now. We think we have a portfolio, we’re only a Royalty or 2 away from handling the companies that are $100M market cap. You then have a second group – the mid tiers – that would be companies like Sandstorm. They’re closer to $1Bn, they have more predictable revenues, starting to pay more dividends. Then of course the big boys, Franco Nevada, Royal Gold, Wheaton Precious metals. Every time you step up in the Royalty space add to your net asset value you get higher valuation. Franco Nevada’s trade at x25-30 cash flow and x2.5 to 3 Net Asset Value (NAV). The mid tiers are a notch below that, maybe x18-25 cash flow. Then the juniors are a notch below that. So, as you grow you actually get a higher valuation off of the portfolio.

Matthew Gordon: So what’s holding you back?

Trey Wasser: Absolutely nothing. We have been going gang busters. And like I said our stock is performing quite well. We are in this for the long haul. There’s not a secret sauce that says we’re going to magically transform. It’s a long-term game so you will see us continue to acquire more Royalties and do more option and sale deals that create Royalties. And over the next 2 years you’re going to see, we believe, probably 3 of our development Royalties will start production. You were talking about the due diligence before, the one thing, and I use our Lincoln Hill Royalty that we purchased from a third party this year. This is a property that was bought by Core Mining. It’s right next to their Rochester mine. At Rochester they’re building a new 300Mt leach pad that is right next door to the Lincoln Hill deposit. And when they purchased it Core said that this is ore they want to put on the leach pad. It’s 4 times the grade of Rochester. You don’t just have to necessarily just believe what I say. You can go and look at what our partners are saying and look at Core’s press release. They’re saying that they’ll be in production there by 2021, 2022 at the latest.

Matthew Gordon: Coming back to the question, whats holding you back? Is it a case of you can’t deploy capital or you can’t raise capital? What do you see as the hurdles you next need to get over?

Trey Wasser: Well, look we built the portfolio up and this year was really the transformation year for us. We spent the first 2 years mostly working with companies, third party partners, to sell our properties for them to know who we are. To understand our 100% sale option model with the retained Royalty as opposed to the joint venture model. And we were very successful in putting that portfolio together for the first 2 years. It was just last year that we really started doing any work to get out and tell the story to investors. One of our goals for last year, and we completed it right at the end of the year, was to get our first institutional shareholder. So, Rick Rule took us, through one of his Sprott global funds,a  9.5% position, literally right at the 1st of the year this year. And then a couple of months ago in April, we did a deal where we sold a portion of a Royalty we had to Eric Sprott and he took a 5.5% position. Our market cap has doubled this year so we’re looking at bigger deals. We have proven we have the ability to raise the capital, but we want to raise it in conjunction with deals. We currently have about $3.5M in the bank and some marketable securities that puts working capital a little over $4M. But, we have transactions on the table right now where that could be deployed in the near future. But, we do have people wanting put money in the company. We’re not in the mind to go out and to just dilute shareholders at this market valuation to increase the piggy bank. We want to do it in conjunction with deals that are non-dilutive.

Matthew Gordon: So, if we look at where you’ve put yourself in the market, where you’ve slotted yourself in, you’re looking at Explorers and Developers, pre-revenue. So, you’ve got to wait until they get into revenue before you can start issuing dividends to shareholders, right?

Trey Wasser: Well, that’s correct. I mean, as I said we have picked up a couple of producing Royalties, one on Jerritt Canyon this year. That’s going to be a steady, predictable Royalty source. Isabella Pearl has started to pay Royalties and over the next 12 months we think we’ll see a couple more that are better paying. When we have that Royalty income, and we will do about $4M this year. So we more than cover our G&A. We’re not earning capital at all. But a lot of that comes from the property sales, from the option portfolio, which would generate about a $1M-$1.5M this year. Royalty income will be about $1.5M and then we had a gain on the sale of a Royalty too. That is the next step for us, certainly to pay a dividend and I think you can look for that. It’s one of my goals for 2020 is to get this company established to where we have a couple more producing Royalties and that predictable revenue to not just do a one-time dividend program, but on going.

Matthew Gordon: That’s going to be a much more competitive environment where you’re bidding for people who are in production rather than companies which are in expiration and development because you know people want to sort of see there’s money coming shortly.

Trey Wasser: That’s true, but we have a couple of advantages. As I said a $3M-$4M deal for us is significantly it moves the needle. We’re not competing with Franco Nevada and the majors for that. If we sell them once in a while, we’re in the mid-tiers. We might be running into more junior Royalty companies but there’s only a couple of the junior Royalty companies that are actively adding to their portfolio. Some of them just sitting back with the Royalties they already have and maybe you know something here or there but not aggressively out in the market like we are.

Matthew Gordon: We’ve talked about focusing on Nevada. Will you focus on looking outside of Nevada anytime, in terms of this growth story that you want to start telling?

Trey Wasser: Yes, we did purchase this last year and this year. We first purchased a 1% Royalty and then another 2% Royalty on Wallbridge Mining’s Fenelon Project in Quebec. It’s a very exciting project and anybody who is following Quebec mining has probably heard of Wallbridge and this Fenelon Project. It’s just looking very exciting and I think it’s a project that will probably be taken over by a major mid-tier producer. I’m not sure Wallbridge will take it all the way to commercial production. They had been doing bulk sampling there so that’s one example. For producing Royalties, we will look outside of Nevada, if it’s a good jurisdiction. I don’t think you’ll see us buying something in West Africa, but we did look at a producing Royalty in Peru with a very good operator that we know very well. So, if we know the operator and if we view it as a safe jurisdiction, certainly for producing Royalties, we are looking outside of our Nevada comfort zone.

Matthew Gordon: Right and who’s assessing those deals, is that Jerry?

Trey Wasser: No, that’s me.

Matthew Gordon: Ok that’s you. Right so you’ll assess those deals. Ok fine.

Trey Wasser: And I have a couple of outside consultants that I use. One that’s more of a number’s cruncher and he’s worked for hedge funds and bankruptcy and work out kind of situations. I’ve known him a long time. So, he helps on the evaluation of the deals and then we have a couple of outside consultants that are kind of bird-dogging deals and bringing us all the time on an they get paid on a success fee basis.

Matthew Gordon: OK, so we’re Nevada, outside of Nevada if it’s producing, it is Gold. I mean most of the big Royalty companies are precious metal companies in the US. There don’t seem to be many niche Royalty or streaming companies outside of precious metals. Why is that? Is it the sheer size of the market or is it too complicated to do anything else?

Trey Wasser: Well I think if you look at base metals for example they’re not really very exciting , the excitement kind of goes along the electric vehicle, or the battery market. So, you’ve seen some run up there but not really enough opportunities to really exploit. Of course, Franco Nevada has some oil & gas interests that they’ve picked up, so they’ve added a little bit there. Gold Royalty space is the best way to invest in Gold. I mean if you look at the 10-year charts. Franco Nevada, Wheaton and Precious Metals and Royal Gold who’ve out performed SNP. SNP’s been on a pretty good run.

Matthew Gordon: Trey, get into it. To me, I like Royalty companies, everyone’s different. But remind people why you say that? Why do you say they’re the best way to invest in Gold? What are the risks that you’re taking away from the table?

Trey Wasser: Well, look, I love physical Gold and that’s my second favourite way to own Gold. If you just look at the charts and see that Royalty companies have outperformed Gold, handily over the last 10 years. where the regular Gold equities have not. The juniors have underperformed and the GDX is about even. What you get with Royalty company is a very low risk. Like Gold itself but with leverage. The leverage that you get is on the operating business. Because you’re getting the Royalty right off the top. You don’t have development risks as a rule. You don’t have construction risk, you don’t have expiration risk. All of that comes and you have all the expiration upside in an asset without having to pay for it because you’re taking your money off the top, not the bottom after they’ve deducted for exploration cost you know. The big challenge in mining is the CapEx cost that have to be maintained and what your true cost of production is when you look at exploration, the operating expense, the CapEx that’s needed and everything. The Royalty holder isn’t affected by any of that. That’s where the you’re banking on the producer doing a good job and having a good asset. So it’s a very low risk way of getting the leverage of equity in Gold without taking all the risk.

Matthew Gordon: That’s great. And as soon as you guys start paying out a dividend it gets more exciting, right?

Trey Wasser: I think so yeah. Everybody likes to see the dividends.

Matthew Gordon: Everyone loves the dividends. And how are you guys keeping your cost down? It sounds like quite a small compact team, but how do you remunerate yourselves? Do you do it say based on what we’re returning to the company? Are you paying yourself big salaries? How does it work within a Royalty company in the US?

Trey Wasser: Well first of all the way we operate, Jerry and I are the only two full-time employees. We have a part time CFO that is with an accounting firm and we have to give some of our directors’ a small amount for their audit committee work. But Jerry and I are the only two full-time employees. We have a salary plus bonus and the salary is, you can go look at the financials and see it, we both draw up about $150,000 a year in salaries. So for what we’re doing in the shareholder value and then the board decides, based on performance through the year, on both the share price and the portfolio, about paying a bonus. But you know a bonus’ have never been equal even to the salary. We operate very lean, we use outside consultants as I said for a lot of our bird-dogging deals and evaluating deals, and that way we’re not paying a full-time staff. We do have an office manager in Reno whose full time I guess you could say we have a third full time employee there.

Matthew Gordon: I’m very glad to hear it. That’s a very honest – the most honest answer – I’ve had to that question. And I’ve asked a lot of companies, so I appreciate that, I appreciate the low overhead. I can see where you’re at in your development. The rest of this year and the beginning of next year is a big time for you and if you can just get that next deal over the line, it should move the dial considerably. Trey, thank you very much for the introduction to your business. I’d like to catch up with you soon to see how things are going. Sounds like you just as you say started to see the benefit of the hard work over the last 3 years.

Trey Wasser: Listen, I appreciate the chance and the introduction to your viewers and let’s check back with each other here. I think what you see, in our news flow, is several deals that are in the pipeline right now. Different levels and a couple of, as you say, and a couple that could and should move the needle.

Company page:

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.

Anfield Energy (TSX-V: AEC) – A Deep Dive Into This Acquisitive Uranium Explorer’s Strategy (Transcript)

How do junior Uranium explorers survive in this environment and what do they spend their money on? Corey Dias, CEO of Anfield Energy (TSX-V: AEC) believes it is closer to production than any of the currently non-producing uranium companies. They are ready to take advantage for when the market turns. The majority of its Uranium assets are in the USA, both ISR and conventional hard rock Uranium. Their Initial focus is on the Wyoming ISR project and the nearest-term asset which is the Charlie project. Long- term focus is in Utah and Colorado with their conventional Uranium assets.

The topics covered:

  • Detailed strategy discussion.
  • Breakdown of assets and focus.
  • How is Anfield Energy spending its investors money.
  • Section 232 desires and outcomes & expectation of the Working Committee.
  • Price discovery.

Click here to watch the interview.

Matthew Gordon: We usually kick off with a 1-minute summary, so if you don’t mind, give us a 1-minute summary of Anfield Energy.

Corey Dias: Anfield is a company with the majority of its Uranium assets in the United States. We have both ISR assets and conventional hard rock assets. Our near-term focus is on the ISR space and those are the assets that we hold in Wyoming. We recently closed a transaction whereby we acquired what’s called the Charlie property. Charlie property is a near-term production opportunity for us. We had the opportunity to pair that with Uranium One’s existing facility, processing facility, in Wyoming through a resin processing agreement we signed a couple of years ago. So, our near-term focus is Wyoming and ISR. Our longer-term blue-sky focus is the conventional assets that we have in Utah and Colorado.

Matthew Gordon: Right. Okay, perfect. Perfect summary. So, tell us a bit about you. What’s your background? Why are you in the Uranium space?

Corey Dias: Well, I am. My background is actually in finance. I worked as a research analyst for a number of years, for a couple of banks in Canada and some smaller firms. I had the opportunity to move to the other side of the market, on the dark side, as they’d say, to put my money where my mouth is, basically. And the opportunity was given to me by one of our directors. I was running another company at the time. I came in back in 2013 to take the reins of the company. We started off in Copper and then decided that Uranium was a fantastic space to look at because it was unloved and really uncovered at the time. And we’ve been accumulating assets from that point on, from both small companies and large companies. We’ve been able to partner with some pretty significant players in the industry, including Uranium One the fourth largest Uranium producer in the world. And with Cotter Corporation, which is actually a subsidiary of General Atomics, a us weapons defence manufacturer in the U.S., which is a private multi-billion-dollar organisation.

Matthew Gordon: Why don’t we get some of the basic numbers out of the way? Give us the scale of what we’re looking at here in terms of market cap, cash flows…not cash flows, cash in the bank.

Corey Dias: Cash flows…

Matthew Gordon: You wish right!

Corey Dias: We’re not quite in the cash flows here at this point. Our market cap in Canadian dollars is roughly, call it $13M or $14M. Our path to financials or financing is obviously through the equity markets. And we recently closed a $3.7M financing.

Matthew Gordon: Yeah, I saw that. You are a small company, but you’ve got quite a few assets, quite a few moving parts here. Give us some sense of what the strategy, what the thinking is. What are you trying to build out here? Because cash is going to be the restrictor in all of this. The quality of the assets, you’ve got to assess that, work out what you got, what you want to work on, what you perhaps want to park or flip. What’s the thinking?

Corey Dias: So, as I mentioned, we’ve got kind of a two-pronged strategy here. First of all, we have these ISR assets, which are primarily in Wyoming. We’ve recently acquired the Charlie property, but we also acquired 24 other properties from Uranium One back in 2016. So, the plan, and those 24 projects had a historical Resource of about 30Mlbs. Our aim here is to focus first on Charlie and then create a pipeline of produce to follow on from Charlie, behind this resin processing agreement we have with Uranium One in order to create a long-term opportunity in Wyoming.

Matthew Gordon: Okay. Our focus is Wyoming. Great. Charlie, a new asset. Fantastic. 24 assets. That’s a lot of moving parts. Have you any sense of what you’ve got there, you know, outside of what the historic was. Have you spent money on it?

Corey Dias: We’ve spent money. We don’t focus on exploration per se. We look for assets which have a historic Resource, because all we have to do is go back and get an engineering firm to confirm what’s there already. It’s a lot cheaper to do that, to spend $25,000 to $50,000 on a report to confirm the historic Resource as opposed to going out and drilling and spending hundreds of thousands of dollars.

Matthew Gordon: And the math being, there’s what was there, this is what’s come out of the ground, there should be a number which is left behind. Is it as simple as that?

Corey Dias: Or if the historical Resource is a Resource that’s there at the time, it just hasn’t been confirmed through a third party. We get an engineering firm to come in, as a third party, to come and say, yes, the Resource you’ve acquired is actually what is stated there. It’s not about what’s been taken out of the ground yet. It’s actually somebody has done the work already. It just hasn’t been recognised by a third party or by the TSX Exchange, etc.

Matthew Gordon: But at some point, you are going to have to spend the money to actually do a proper 43-101, or more. Is that right?

Corey Dias: Right. And that’s the $25,000 to $50,000 as opposed to getting a greenfield property where you have to go out and start drilling, and spend hundreds of thousands of dollars in order to delineate a Resource. The Resource is there already. We’re just confirming the Resource. Somebody else have done all the work and drilling.

Matthew Gordon: Okay. It seems a nice, cheap way to get to a number which is recognised. So that’s one 43-101 for all 24 assets or?

Corey Dias: No. We do for each individual. So, we’ve completed three already. We’ve done one for Charlie. And we’re now working at a Preliminary Economic Assessment for Charlie.

Matthew Gordon: Right. So, you could be at $1M to do all of them is that right? If you did a simple report.

Corey Dias: Yeah. About $1M. It all depends. And some of the Resources are much easier to delineate or confirm than others. So, you know, we’ll probably won’t go through all 24. We’ll probably look for the best 10 to 12. And then from those, figure out which ones have the best economics in order to create that pipeline that would behind Charlie. So if we get another 10Mlbs, perhaps 15Mlbs pounds out of those 24 projects to sit behind Charlie’s 4Mlbs. We have an agreement in place with Uranium One to process 500,000lbs per year. So that could get us anywhere from 20 to 30 plus years.

Matthew Gordon: Okay. Interesting. Let’s get into Charlie. Tell us tell what precisely you’ve bought. What have you got there?

Corey Dias: Well, essentially, it’s a state lease. And the important idea behind Charlie is that it sits in between two of Uranium One’s existing mines. Uranium One is mined on either side and this property is actually part of the same trend. Uranium One had tried to acquire this asset and was unsuccessful, and actually had a conversation with us about the potential of picking up the asset. And so, we spent 26 months trying to acquire this asset from Cotter and finally closed it this year. The beautiful thing about this asset is that, you know, we’ve got all the infrastructure around because Uranium One has been right there, we understand the property because it’s been mined on either side. We know what’s there. We know how to mine it. And Uranium One’s actually going to partner with us in order to facilitate production.

Matthew Gordon: And why couldn’t they do that themselves? Why did they need you?

Corey Dias: Oh, it’s you know, it’s a very interesting industry when it comes to trying to get deals done. Sometimes a lot of the parties look at it as a zero-sum game. So, we have to win and you’re going to lose in the transaction. Whereas from our perspective, we’re talking about win win. And we always ask, our first question is, what do you need? And what would you like? In order to get this deal done. And it’s worked well for us. We’ve done it with Uranium One twice. And now we’ve done it Cotter? We seem to be doing something right. And I guess Uranium One recognise our ability to get deals done and assets to pursue it.

Matthew Gordon: Okay. And what’s the split between you? How are you sharing that?

Corey Dias: Well, we’re not sharing it, it’s our asset.

Matthew Gordon: But there’s a relationship. How have you engaged with them?

Corey Dias: Well, they’re going to help us with well field development. Uranium One has all the skills. They will look at the ability to make money off of us through well field development. And they could potentially buy some of the pounds that we do end up creating at the site.

Matthew Gordon: Right. Okay. There’s an agreement in place there?

Corey Dias: Yeah, there’s an agreement in place for processing. We have to pay Uranium One to process the materials so there are making money on the property.

Shootaring Canyon Mill

Matthew Gordon: Okay. Talking of which, you’ve also got a mill. Shootaring Canyon?

Corey Dias: Shootaring Canyon.

Matthew Gordon: What is that?

Corey Dias: So actually, it’s one of only three licensed, permitted and constructed conventional Uranium mills in the U.S.

Matthew Gordon: Why is the word conventional important in there?

Corey Dias: Because it’s not an in-situ recovery. It’s a different type of recovery method. It’s a traditional type of mill. It can be used for Copper, Silver. It’s a hard rock underground milling facility, as opposed to processing for ISR is much more, it’s you’re basically shooting water into a well underground and sucking out the fluid and then separating the fluid.

Matthew Gordon: Right, and that was built when?

Corey Dias: That was built back in the early 1980s.

Matthew Gordon: 1980’s. And it ran for how long?

Corey Dias: It ran for four months.

Matthew Gordon: Okay. Talk me through that story.

Corey Dias: It ran long enough to justify final payment on the construction of the property. Then the Uranium prices fell. And nothing happened. The great thing about it only running for four months is that there’s not a lot of environmental liabilities there. So it’s the youngest mill of the three that are in existence the U.S. and it has very little, if any, environmental liability. It’s very clean.

Matthew Gordon: But it also hasn’t run. For a long time.

Corey Dias: It hasn’t run, but it has been staffed since it was built, because it has to be, because it is a Uranium facility.

Matthew Gordon: So, what were those staff doing? I mean, you can’t keep this thing in running order for 30 years.

Corey Dias: Yeah, you know, turning knobs and greasing areas where it needs to be greased and making sure that knobs turn. Making sure that there’s no seepage of anything. And it’s an old facility, and some of the parts have been removed because they haven’t been used but certainly, the building itself is still there. The conveyor belts need to be updated, but they’re still there. The control room looks like something out of Gene Roddenberry’s Star Trek from back in the 1970s, the coloured lights. But it’s still there. Everything turns on. There’s the ability to actually turn on lights but you can actually…there’s no running plant. You can’t turn on and run things all the way through the facility.

Matthew Gordon: Yeah. It’s like nearly 40 years old, right, it’s 35 years old or something like that. But how much money would need to be spent on it actually bring it up to speed. To actually work.

Corey Dias: You’d have to spend $25M to $30M.

Matthew Gordon: That’s $25M to $30M, which you don’t have right now. And obviously, the market being what it is, which we’ll talk about in a minute, you’re aren’t going to get that money anytime soon. There’s a point in the future where you’ve got the option of bringing this thing back on. How much did you pick it up for?

Corey Dias: Well, we bought that property. We bought a number of small mines and picked up some royalties for about $7.5M. And Uranium One had acquired the asset from a company called US Energy for about $100M.

Matthew Gordon: Right. Okay. But back then. When was that?

Corey Dias: That was 2007. 2008.

Matthew Gordon: Okay. Interesting. You’ve got all these various assets, so what’s the what’s the big idea here? You are a finance guy. You’re thinking of numbers. What are you putting together here? And why would investors get excited about that vision that you have? Tell us about it.

Corey Dias: Well, look, I think the important thing here is that ISR is the place where you want to be at a lower price environment when it comes to Uranium. We have and we’ve established a complex there in Wyoming. So, we have properties that we bought. We have the Charlie asset, which is a near-term production opportunity. We have a resin processing agreement in place in Wyoming, which means that we don’t have to build our own facility, which is a time killer and a cost killer. So we’re saving both time and the cost of building our own facility in Wyoming in order to get to production. So there’s a near-term opportunity there.

Matthew Gordon: When you say near-term, it’s all kind of relevant again because the market conditions. But near-term being you’re as near as anyone else is, that’s what you’re saying? But right now, we don’t know when that is.

Corey Dias: Well, look, I think of all the non-producers, we are closer to production than any of them. Other producers that are obviously in production, they have facilities in place, they can produce whenever they like. But anyone who is a non-producer in the U.S., we are further ahead.

Matthew Gordon: Yeah. Okay. Understood. Right. And the blue sky?

Corey Dias: Blue sky. Part of the transaction that we completed with Cotter Corporation included what were called the West Slope Properties. These are nine mines that are in Colorado, number of leases…the Department of Energy leases. We picked those up. They hold 11Mlbs of Uranium and 53Mlbs of Vanadium.

Matthew Gordon: Okay. You’ve got the Vanadium play here. Again, tricky space, variable pricing, etc. But, you know, how do you work out the economics around Vanadium? Given the market, or have you done any work on that?

Corey Dias: We have. We’ve done a little bit of work. I would say we’re very familiar with the battery sector. Actually, as an analyst, I used to cover Clean Tech. So I understand the battery and renewables.

Matthew Gordon: VRFB. Yeah.

Corey Dias: Yeah, so I understand the renewable space quite well. So that’s another opportunity. We can actually strap on a Vanadium circuit to our mill in order to produce at our mill, at some point in the future. So that gives us some optionality. There’s also another mill. The only running conventional mill in the U.S., which has a Vanadium circuit attached to it. There’s an opportunity for us to potentially partner with someone to extract Vanadium.

Matthew Gordon: Have you any sense of what the Vanadium price needs to be for you to to be able to do that.

Corey Dias: I think the Vanadium price, I think it’s around $7 or $8 right now and probably in and around this range, perhaps $10 is probably where we’d like it to be for us to go forward on that.

Matthew Gordon: Okay. But it’s not core focus. But maybe at some point if the price is right, you may be in the raise the capital to put that circuit in. Okay.

Corey Dias: Absolutely. And I think, an important part too, the conventional mill that we have, we have about 7Mlbs of Resource that came along with it, that you go through that mill. This acquisition of West Slope properties actually allows us to create a longer life for the mill potentially, with 11Mlbs of Uranium. We’ve got a 1Mlbs per year facility. So we’re talking about 18 years roughly right of mill life.

Matthew Gordon: Okay, so there’s another nine assets. You’ve got 24…How many assets are you sitting on in total? What’s that number?

Corey Dias: About 34.

Matthew Gordon: 34. Okay, 34. And you’re going through them all trying to work out what’s meaningful, commercial. However, you are defining that and you’re going to work out what to focus on because there’s limited funds- I know just raised another $3.7M and you’ve got to work out what to focus on. What is the focus? What is the use of the $3.7M? What’s that going on?

Corey Dias: Sure. I think that, you know, as I mentioned, our focus is on the ISR properties. The hard rock, the things in Colorado, Utah, Shootaring Canyon mill. Those are all things which are not our near-term focus. Our focus is Wyoming and our primary focus is Charlie. All of our focus is going to be on Charlie. and moving that forward. And that’ll be helped, you know, through our partnership with Uranium One.

Matthew Gordon: Totally. So how does that break down, though? I mean, is it literally all going on? You’ve got some G&A to cover. You’ve got a whole bunch of costs to cover. How much of it’s actually going on the assets and discovery around those assets?

Corey Dias: Well, yeah. I guess there are a couple of things. When we acquired the West Slope properties, there was some reclamation bonds associated with it. We had to spend…we’re using some of the funds that we’ve raised to cover off or to replace the existing reclamation bond. So, you know, we’re probably looking at $500,000 to focus, to use on Charlie in the near-term. So that, including the Preliminary Economic Assessment I mentioned. Some early well field development work that needs to be done and probably a little bit of permitting and licensing. So that’s the near-term focus.

Matthew Gordon: So that’s $500,000. What does the other $3M go on?

Corey Dias: There’s some that’s going to be G&A. And then, they are about $2.5M worth of reclamation bonds that are associated with the West Slope properties.

Matthew Gordon: Oh wow. $2.5M on reclamation bonds, wow. Okay. And that’s something obviously you’ve got to do. You can’t not do it, but you don’t necessarily see $2.5M worth of value. But if you didn’t, there would be a problem. Is that the kind of issue with it?

Corey Dias: Yes. The properties all have reclamation bonds. The state forces you to put money up in order to cover the cost of reclaiming the land should you not move forward with the project or just something happened to your company. They don’t want to be responsible for taking a mine and returning it to fallow field. They want the owners of the property or the lessees of the property to do that.

Matthew Gordon: Yes. I mean, it’s pretty tough on a junior isn’t it. I appreciate there’s a lot of moving parts here and everyone wants a slice of it. But you guys are…we talked about, you aren’t cash flowing. You have to raise equity, expensive dilutive equity every year. If I look at last year, $5.8M in cost. But you’re like $2.5M on G&A. Stock based compensation, $1.9M, which is a chunk of change right. And then gain or loss…well, gain on the exchange rate. In terms of your junior miners’ available cash, you’ve got some big choices to make as to where you spend that. On this $3.6M, you’re going to spend $500,000 developing Charlie, you’ve got the PEA you mentioned, are you going to move that PEA to a PFS?

Corey Dias: No. We’re going to keep it at a PEA. The issue with creating a PFS or a Feasibility Study in the Uranium space is that usually you have to tie it to a long-term contract. In order for us, is always a challenge to get a contract especially in the current environment. Our aim is, you can go forward into production just using a PEA. And I think that’s our plan.

Matthew Gordon: Let’s come back to G&A and your strategy because I imagine they’re intertwined. Your strategy, you’ve got a lot of optionality. Thirty-five different assets. You are working out what’s there, what’s good, what’s not. And that’s taking a lot of time, I guess a lot of bought in consultancy and services. Is that $2.5M…I mean, how does that breakdown? Is that a lot of bought in costs for consultants to tell you what you have? Is that the problem?

Corey Dias: Some of it is, but some of it is, like for example, the share-based compensation are options. They’re not shares. It’s not a cash component that would have to come back into the company in order to get more shares. We do have consultants in place because we have a very small team. Essentially, I’m here and I have a part time CFO. Everybody else comes in as necessary. When it comes to some projects, when we’re trying to close on, for example, the Cotter Corporation transaction. We need, external lawyers to come in to help us with putting together the agreements and things like that. There are some costs associated, but it doesn’t…the times when it ramps up are usually the times when we are looking to close a significant transaction.

Matthew Gordon: Right. Well, at $1.7M, nearly $1.8M of the $2.5M on the G&A was consulting fees paid by the company. Is that all around the M&A type stuff, or the deals? That’s what you’re saying, okay.

Corey Dias: I mean, we are basically an M&A company.

Matthew Gordon: Yeah. Well, that’s what I wanted to understand about your strategy. You are an M&A company. Are you an incubator? Are you saying ‘we’re never going to get into production here? It’s a case of I need to find out what’s good, then maybe someone comes along and partners, JV’s, whatever’. What type of company are you? When investors are looking at you, what are they buying into?

Corey Dias: Well, look, I think there are a couple of things. I think our aim is to get into production. I think we’ve gone a long way around trying to get to an asset that can get into production. We started off in 2015 buying the conventional assets from Uranium One, but the market at the time was actually much stronger than it is today. I think everyone had the expectation that the market would continue to move north and then it didn’t. When we saw that the market was softening and realising the differentials between the cost of producing in an ISR environment versus a hard rock environment, we realised that it would take a very long time for us to get to the point where the hard rock assets are viable. So that’s when we started looking at ISR, because that’s the only place in the nearer-term, you get the opportunity to get into production. We picked up the asset from Uranium One to start moving forward in that direction. Obviously, there’s still a cost associated with trying to get those assets in production. We started looking around to see if there’s anything that’s closer to production status than what we had in our portfolio. And Uranium One facilitated that process by introducing us to Cotter and saying, you know, this would be a perfect asset given where it sits, given the cost to actually move material from this mine to the satellite plant and finally into the final processing plant, given its location, its proximity to our assets. We started off with hard rock, high cost, and we’ve moved all our way, moved way down into ISR near-term production. We’ve kind of gone backwards.

Matthew Gordon: But you said at the beginning, we’re an M&A company and I think that’s what you are today. It is what you are today.

Corey Dias: Absolutely. Look, we’re in a low-price environment and there are assets for sale. In a high price environment, we probably wouldn’t have been able to buy any of this.

Matthew Gordon: Right. People are buying into your ability to do deals, identify deals, which potentially have value. And for you to very quickly and cheaply discount the ones which perhaps don’t meet the required levels that you’re seeking, and for you to then be able to develop those and get into production at some point. And with the mill, you’re looking at being able to have an infrastructure to look at that whole chain. Okay. I just wanted to understand what you were today. That’s okay. One thing that stood out, investor relations – $500,000 last year. What were you promoting? Because that’s a lot of investor relations!

Corey Dias: It is, we have a lot of assets. We have a lot to talk about. We’ve got Vanadium to talk about. We’ve got ISR. We’ve got hard rock. We’ve got a lot of different things that we can focus on and depending on where the market is, we’ve put out news releases on Vanadium because our Utah assets have Vanadium in them. Now we’ve got Colorado, which has significant Uranium. So, you know, we’ve got different ways to skin the cat. Depending where the market is at the time, we will spend our time focusing on one area than another.

Matthew Gordon: So that’s the thing, I’m always intrigued with the junior company mentality. So, I’m looking to you for help here. You’ve not got a lot of cash. You’ve got a skill set. You know, your position, your M&A. You told me you were M&A. You’ve got a lot of optionality, but you must know what’s going to work, and what’s not going to work. I mean, for instance, spending time in Vanadium and the environment which Vanadium sat at, certainly in the last half of last year, that wasn’t necessarily where I would have thought you’d spend your time talking to people. When you’re doing investor relations, what does that involve? Are you traveling the world to have conversations with institutional investors? What does it actually mean?

Corey Dias: Yeah, look, we do spend a lot of time traveling and meeting with investors because it’s…the interesting thing about Uranium space is that it is more of an education at this point. It’s not a well-known space. When people have very little knowledge, it’s usually pretty negative or at least the perception is negative. So, we’re spending a lot of our time trying to overcome that negativity and really explain why is this space actually important. You know, it’s not all Chernobyl. There are real viable businesses which have run for a long, long time. And there’s been no risk.

Matthew Gordon: But that’s not your job. There’re some big guys with some big pockets. We’ve spoken to a few recently. They’ve got tens of millions in their back pocket. Isn’t that their job? You don’t need to do that do you?

Corey Dias: It is their job. But you still have to educate because not everybody is going to be in the same…Not everyone gets access to Cameco. Right. They need to understand from smaller companies. They can get a lot more information from us than they can get from Tim Gitzel over at Cameco. They don’t have access.  You need to talk to others in the space to really get a better understanding and really be able to dig into, you know, what exactly are you try to achieve here. And why.

Matthew Gordon: Ok. Well, let’s finish off in terms of the company bit. Where do you sit in the market? Where do you position yourself in the market when you’re going and doing this world tour of meeting institutions, where are you positioning yourself? And why should new investors looking at you, watching this video today, why should they be looking at you vs., you know, the next guy?

Corey Dias: Well, look, I think as I mentioned, we’re probably now the next company to get the production assuming the Uranium price moves in the direction that we all hope. We’ve got an asset which has been coveted by not only us but other parties in the sector because of, first of all, its proximity to infrastructure. The potential partnership with a significantly large producer in order to move that asset forward. I think that is key. The fact that we do have these relationships are very unique in the sector. Most of the juniors are off on an island, but we’ve managed to build relationships to the point where we can collaborate not only on this asset, but on other projects going forward. I think that’s very important. We have that path to production, which is near-term. And look, that path to production has been validated by our conversations and meetings with utilities. Utilities are looking at us, especially before 232, maybe the conversation might be a bit different now because 232 didn’t quite go the way we’d hoped. But the conversations were very much about looking to secure pounds going forward from junior players, including us. And we were part of that package. I think that’s an important point too, we have a path to production that’s been recognised by the ultimate buyers.

Matthew Gordon: But don’t the rules, the basic rules of mining still apply? You need to be able to mine, not just get into production. Just because it’s Uranium doesn’t make it hallowed ground. The basic rules of mining apply. You’ve got to be able to mine commercially, economically. The numbers need to stack up. Obviously, I’m talking to someone in the Athabasca Basin, they’re going to tell me that they’ve got it made. Whoever they are, the grades are high. Your grades are not so high. They’re a lot lower. But you’re looking, I guess, at the Uranium One guys and saying, well, there’s a nice comp, they are either side of me. That gives me a sense of, for Charlie, where we sit. You’re not there yet with your 24 assets plus 9 assets. You’ve still got to work that out? And right now, you’re a finance guy running a company, where’s the technical team that’s going to help you deliver this?

Corey Dias: If you look at my board, we have over 120 years of Uranium experience. One of our board members actually did the Feasibility Study for Charlie. So he is intimately familiar with the project we have.

Matthew Gordon: Who’s that?

Corey Dias: Steve Lunsford.

Matthew Gordon: Okay. So, Steve, tell us about him.

Corey Dias: Steve Lunsford has been, he’s a local Wyoming guy. He’s been in the business for 40 years, worked for Cameco Resources, which it acquired Power Resources, which owned the asset in the past. He is very familiar with Wyoming, familiar with ISR, intimately familiar with Charlie. He is our go to person on that.

Matthew Gordon: Right. And John Eckersley, who has just joined. He’s been advising you prior to that, though?

Corey Dias: He has been. John is an attorney. He’s worked with junior companies for a number of years and spent a lot of time going through our contracts. Any kind of NDAs that we have to put together, he helps us with that.

Matthew Gordon: And does inform us that there’s going to be more M&A?

Corey Dias: Well, you can interpret it that way. You could. I think that’s probably a good way to look at it. Yes.

Matthew Gordon: Okay. That’s good. Now, let’s talk about this last week.

Corey Dias: Sure.

Matthew Gordon: You ready? Have you got the energy to talk about this last week?

Corey Dias: Yes. Yeah, it’s been a rough week.

Matthew Gordon: It’s ever been a rough week. It’s been a rough week for U.S. companies. Now you’re sitting with U.S. assets. You had a little hit as well. And you used a phrase just now, ‘232 didn’t go the way we hoped’.

Corey Dias: Correct.

Matthew Gordon: Right. I’m guessing which camp you’re in.

Corey Dias: Well, of course, we are in the loser’s camp.

Matthew Gordon: Run us through that, obviously on the run up 232, everyone’s very, very excited about what Trump was going to do. Polarising views. Very, very passionate community, the Uranium community and Nuclear community. Your view was you hoped that there would be some kind of…What? What were you hoping for? What was a good outcome for you?

Corey Dias: I think the outcome that the producers were hoping for, at least the junior producers was, U.S. based producers, was a quota- 25%. You are you compelling the U.S. utilities to buy 25% of its needs from U.S. producers?

Matthew Gordon: But that wasn’t ever realistic, was it? I mean, you can’t go from zero to hundred miles an hour that quickly. What would that of looked like?

Corey Dias: It wouldn’t have been zero to 25%, it would have been a staged step up to 25%. Because certainly, there’s no way to produce 25% of its needs today.

Matthew Gordon: No.

Corey Dias: It would take some time.

Matthew Gordon: Were you buying the security argument? Which bit of the argument were you buying into or do you think it was a conversation that needed to happen? Where were you sitting?

Corey Dias: Well, I think it’s clear that the national security risk is significant. You know, you’ve got Russia, Uzbekistan, Kazakhstan controlling 40% of the market. And we’ve seen what Russia’s done in the past with natural gas over in Europe, turning off the spigot- there’s a big risk. The U.S. uses, you know, is the largest consumer of Uranium today and imports over 95% of its needs. So, if there’s any disruption to that supply, that’s a significant risk to 25% of your power in the United States. There is a national security risk. It was looked at a number of years ago when it came to oil. You had OPEC running and controlling everything. And there was a risk in the U.S. that you wouldn’t be able to receive the oil you needed. The market turned around and focused internally. So now the U.S is an oil exporter.

Matthew Gordon: Remind me about your shareholding. Who are the main major owners of the company?

Corey Dias: The major owners?

Matthew Gordon: Well, major shareholders.

Corey Dias: Yeah. The Cotter Corporation is a significant holder. And that was part of the transaction we closed with Cotter. They became a shareholder because we provided them with shares of our company as part of the compensation for consideration.

Matthew Gordon: And they sit on how much?

Corey Dias: They hold about 11.5M shares.

Matthew Gordon: Okay. And who are the other biggies?

Corey Dias: The other one of note would be a company called Radio Fuels, which is a private Uranium company with assets in Canada. And they wanted exposure to U.S. assets and so they participated in our last financing. Those are the two major ones.

Matthew Gordon: Fantastic. Sorry for that segue. With 232, you think you believe and still believe it is a security issue? Trump disagrees. We move to a 90-day working group. What are your hopes for that?

Corey Dias: Right. Just to clarify. Trump agrees with the national security risk. He doesn’t agree with the quota.

Matthew Gordon: Okay. You didn’t get what you wanted because he didn’t…yeah. Okay. He agrees, but he doesn’t agree. So, what is the 90-day working group going to do for you?

Corey Dias: That’s the big question.

Matthew Gordon: What do you want them to do?

Corey Dias: Well, I’d like them to put the quota in place, but that’s not going to happen. I think at this point, what is more likely is that there might be potential of incentives be provided for the utilities to buy American. I don’t know how significant those incentives would be, whether it’s subsidies or something like that. Perhaps there might be monies available to Uranium producers in order to facilitate production. Whether there are subsidies available to us, or cheap money for us to move assets forward to production? There will be small measures. But I don’t see them being nearly as significant as what it would’ve done for producers.

Matthew Gordon: Right. So again, possibly we’re in another period of uncertainty. Utilities aren’t necessarily going to move forward until they know what’s going on after this working group. And then there’s a period of evaluation. The Uranium equities companies need to get on, don’t they? They’re reliant on the spot price. They’re reliant on hopefully the contract market coming back online at some point, or some line of sight to when it’s going to come back on. But this 90-day working committee, this working group, is to look at the Nuclear industry as a whole, the holistic view of it. And in there, you’ve got the…The reactors are owned by the utilities generally in the U.S? Is that right?

Corey Dias: Yes, that’s right.

Matthew Gordon: Right. And so, they’re sitting there with their mix of presumably still Coal, gas, renewable energy portfolios. Nuclear is just part of that mix. So I guess they’re slightly conflicted in some sense. I mean, they were arguing against the 232.

Corey Dias: That’s right. They were arguing against it because of the potential increasing costs to the utilities when it came to Uranium inputs. But, you know, I think it’s important to note that a lot of the utilities are working on contracts, which were signed a number of years ago, at significantly higher prices then where we sit today. Contracts in that era between the $50 and the $80 a pound. So, you know, an increase to $40 to $50 is not outside of what has been the usual practice in terms of what has been paid. I think there is a little bit of panic and screaming, which was not entirely justified.

Matthew Gordon: Maybe. I mean, there’s a lot of moving parts and a lot of influencers, a lot of people with vested interests in this, obviously. And, ultimately, the utilities don’t necessarily want to pass on the cost to their customers. Or they don’t want their customers to have to stomach the cost of subsidies at a local level. If it’s a security issue, that’s a federal issue. Right? There’s a lot of arguments to be had here. But the bigger picture around Nuclear, it’s not just about the Uranium equity play. There’s the enrichment component, there’s no enrichment facility in the U.S. anymore. There’s a lot of things that need to be discussed. So therefore, are you worried that your bit of a it is going to get parked to one side and you’re going to continue in this vacuum of uncertainty until all of this resolved. It’s a pretty big picture that needs to be looked at.

Corey Dias: It is. But I guess, you’ve got a 90-day window in which to look at it. I’m not sure.

Matthew Gordon: Well what are they going to do in 90 days? Aren’t they just going to say ‘there’s a lot of things we need to look at and we need to kind of create some more secondary working groups to look at each of those components?’. This thing could run on.

Corey Dias: It could. But I think the reality of the market, I think what’s going to happen now, because we’ve had this delay in purchasing, there is a deficit in the marketplace. When it comes to supply and demand. As much as other parties would argue otherwise, it’s clear that there is a supply demand. But I think once now the utilities start to reengage and start to look at whether they’re doing contracting, or they’re going back to the spot market, they’ll realise that the pounds aren’t there. They will have to find a way to get those pounds. And those pounds will not be available at $25 unfortunately in terms of the long-term contract. Whether it is Cameco, whether it’s Kazatomprom. Kazatomprom has now put itself in an interesting position, because for a long time it was a state company, who was not public. And now, its aim as a public company is to show high price contracts to its investors, in order to show they’ll be a profit going forward.

Matthew Gordon: It’s an interesting thing, but it’s a question of who’s going to blink first. It’s going to be, who’s going to be the first guy to go. Is it going to be from supply side or the demand side? Because no one wants to go to have that chat with the boss and say, ‘hey, spot prices at let’s say $25 today, but I’ve got an opportunity to buy it at $50. But on a long-term contract’. No one’s going to do that right?

Corey Dias: No because utilities aren’t incentivised that way. Utilities are incentivised on a quarterly basis. So, you don’t want to be the guy who… it’s like whack a mole. You don’t want to be the guy whose head is above at $50 when everybody else is $25. You want to be in the lowest quartile. Your compensation is based on being in the lowest quartile. It doesn’t fit.

Matthew Gordon: So, who’s going to blink first? It doesn’t fit. But who’s going to be the guy that says, you know what? I’ll take this one for the team.

Corey Dias: Well, that’s a good question. I don’t know who the first guy will be. I mean, I think it’s that’s the challenge. But there will be a first guy because Cameco is not coming back online at $25. Kazatomprom will have a difficult time convincing its investors that it is good sense to sign a contract at $25. So, the price will have to move in order for contracts to start being signed. As much as the utilities are now…what it has now done, is basically turn into a global market. Now, they would’ve been forced to buy U.S. at $50 or $40, whatever the price would have been. But now it’s going to be a global price at those terms, a global market at those terms. There won’t be any more more contracts signed in the near-term, certainly not at $25. I think that the price will be probably +$40 before contracts are signed.

Matthew Gordon: I guess the issue is that there’s no one, not even Kazatomprom, not Cameco, that can on their own, fill that supply demand gap. It’s vast.

Corey Dias: They could probably fill it, but not at this price. It’s all price. Right. You know, Cameco does not make money at $25. Cameco has a long number of long-term contracts in place, probably in the $70 and the $60, that’s it is fulfilling now, but it’s fulfilling those through purchases in the spot market. So even if the utilities want to go into the spot market, they’re competing against Cameco. Cameco is buying old material that’s going into the market. There’ll be no spot market available for the utilities. Then the utilities have to turn to contracts and then nobody signing contracts at $25. They’re going to have to keep pushing that number up higher and higher in to get to the point where somebody on the supply side steps in and says, ‘okay, we’ll do it at $40 or $50’. At $25, it can’t stay here and it won’t stay here because there’s no material available here.

Matthew Gordon: Yeah. It’s such a big discussion around the supply demand curves. You’re a finance guy, an ex-analyst like me. The thing that interests me is there’s got to be a point in that curve where the big guys go, ‘well, we’re happy to keep the margins low enough, for this period of time, because that means we’ll have no new entrants, a lot of these guys was sitting on big assets, won’t be able to raise the cash. We can go pick up some cheap cash and we’ll make hay further down the line because we’ll own some of the better nearer-production assets. There is that thought in my head with regards to, do the big guys think like that? The geopolitics of it all, does it work like that? But I guess one for another day. One which is for today and we’ll finish off on this, is your small company, $13M, $14M Canadian. You just raised a bit of cash. We’ve spoken to a few new entrants into the marketplace and there will be more. If the market goes the way you need it to in the way you want it to go, there will be new entrants into the marketplace. It’s just the way these things work. There’ll be a lot of noise. You’ve got a little bit of a head start, your nearest-term production compared to the rest of the non-producers. Are you concerned about these new people coming into the marketplace and stealing your thunder?

Corey Dias: Absolutely not. As I said, we’ve been able to pick up some pretty decent assets which have near-term opportunity. And our aim is not just out here to promote, we’re here to get into production. As I said, Charlie, having a relation with Uranium One. Having something in place, moves us further ahead of a number of players in the sector. I think that the Shootaring Canyon mill, there won’t be another mill built anytime soon. And obviously with the refurbishment costs, seems, it sounds significant, but when you’ve put in the context of the cost of building a new mill, and the timeframe to build a new mill, and getting over Nimbyism, Not In My Backyard, it’s going to be a big challenge for anybody else to get a mill built. I’m not sure if you know that Western Uranium last year lost his license in Colorado. It had a licensed, had an actual reactive materials license, which, you know, the state pulled away. This shows you how unique these things are and how tough it is to keep them. But the interesting thing about that one is that it wasn’t tied to a facility. So, to get a license on your own without a facility is going to be a challenge. From our perspective, we are feeling very comfortable that we’ve got something of unique value.

Matthew Gordon: But aren’t you going to see some quite big because you haven’t enough money to get into production yet? You’ve got to go and raise some money. Okay. The assets, you’re not quite sure what you’re going to be able to do with these assets yet. And when you are sure, you are going to have to go to raise a stack of money. So today, the bulk of the value of your market cap or enterprise value, whichever one you look at, is the mill and the license for that mill to operate that mill presumably. No one’s giving you value for the assets that you’ve got on the books today. They’re not worth a lot.

Corey Dias: Well, look, I think the way that we have been valued is actually, the ISR Wyoming assets are getting value. I don’t think we are getting any value for the mill.

Matthew Gordon: You don’t think you are?

Corey Dias: I don’t think we are getting any value for our conventional assets as all.

Matthew Gordon: Okay.

Corey Dias: No. We don’t think we are. We think that anybody who’s investing in our story today is focused on Wyoming. They’re like, ‘it’s interesting. What does it cost to get to production? Conventional production, $60. Well, you know, where are we today? $25. Where’s the term price? $35′. Zero value there. I think everything is because everyone who is in production right now is actually in the ISR space. The fact that we have assets in the ISR space is giving us some value. But if we didn’t have these ISR properties, I don’t think we’d have a market cap where we are today.

Matthew Gordon: Well, it’s kind of insignificant. Whether you’re $13M or $30M, you’re no nearer at production and the spot market’s doing what it’s doing. And until contract comes on board, you may as well be worth zero. It’s the same net effect, right? Which is why it intrigues me, the mill intrigues me as a USP, as a differentiator for you when things come good, you would expect to see significant re-rate. Not just because the production or the potential economic assets, but because of what you can then do. Is that part of what you would argue to new people looking at you? That you’ve got a whole bunch of zero-rated or zero-value assets. So therefore, when the clock starts ticking, you’re going to get more of an uplift than others?

Corey Dias: Absolutely. I think that it’s a significant differentiator because, when the market does move in the direction that we all hope it does, we have an asset which is very unique in that sector, which we could turn on right now to give us +1Mlbs production.

Matthew Gordon: And then you need to come up with a solution of ‘where do I get the money? How do I keep dilution down?’ You know, all of that good stuff which finance guys go to bed thinking about. Corey I’ve really enjoyed our chat. That’s a fantastic run through on Anfield Energy. It’s nice to hear the story about where you sit in the marketplace. You’ve clearly got a thought in your mind. You’ve got a bunch of stuff to do. And you’ve got a lot of assets to look at and work your way through. I hope that the market is kind to you. I hope the Uranium market sees a change sometime soon. I’ll be interesting to see how the utility guys react and what time frame they react in. Because obviously you guys need that.

Corey Dias: Absolutely. Absolutely. Well, thank you for your time. I appreciate you having us on. And I love the questions. I think your questions are relevant and insightful. Thanks again.

Company page:

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.

Standard Uranium (TSX-V: STND) – Uranium Junior Sandwiched Between Fission Uranium & NexGen (Transcript)

We spoke to Jon Bey, CEO of Standard Uranium (TSX-V: STND). This Canadian junior exploration company is focused on the Athabasca Basin, in particular the Southwest corner.

They company was started a year and a half ago and they are currently private, with the intention of taking it public. They are on schedule for an August listing on the TSX-V. Since the formation, their seed money has gone into the exploration of the project, getting themselves ready for an initial drill program whilst continuing to raise capital.

Standard Uranium has a summer Exploration program which is going to lead them to drill targets, which they plan to have fully identified and fully permitted for a Winter drill program starting in the February of 2020.

Click here to watch the interview.

Matthew Gordon: So why don’t we kick off with a two-minute summary of the business and we can get stuck into some questions after that.

John Bey: Sure I’d love to. Thanks for asking. So we are Standard Uranium. We are a Canadian junior Exploration company, focused on the Athabasca Basin, and in particular the Southwest corner of the Athabasca Basin. We are private. We started this company about a year and a half ago with the intention of taking it public at a time when we thought the market was going to turn to Uranium and we are on schedule for that right now. So we started the company with some seed money about a year and a half ago. Since then we’ve continued to explore a project getting ourselves ready for our initial drill program. We have now continued to raise capital. Last year we raised $800,000. Right now we’re doing another capital raise of about $1M for which we are oversubscribed. And that is for our go public, which anticipate happening this August on the TSX Venture. Following that we have a summer Exploration program which is going to lead us to our drill targets, which we plan to have fully identified and fully permitted for a winter drill program starting in the winter, February of 2020. We’re Standard Uranium. That is our basic story.

Matthew Gordon: Great stuff. Nice summary. You’re obviously in a very exciting commodity at the moment, certainly very topical in the space of Uranium. However, you’re also an explorer with all the risks that that brings to bare. So if you don’t mind, I wouldn’t mind getting a little bit more understanding about the team, who’ve been brought on board, and then maybe get into the asset and what’s going on, how it came into the company and we’ll kick off from there, so why don’t we start with yourself. What’s your experience background, relative to Uranium exploration?

John Bey: Sure. Thank you, Matthew. So I started in the capital markets and mining specifically about 2000 and since I was brought into a group, a company called The Hamilton Resource Group. Which was a group of companies based in Vancouver of about 8 to 10 companies that we had Gold, Silver, Diamonds, Copper, Oil and Gas and Uranium. The Uranium company that was in that group was one called Forum Uranium which is still around, led by Rick Mazur. So I spent 3yrs getting to know Rick and the Uranium space at his company quite well. Following that I left that group and I started my own firm, which at the time was an investor relations firm called Steel Rose Communications out of Vancouver. I still continue to run that company I started Soros Capital couple years after that, which is a capital markets firm, corporate advisory services and capital raising. And since that time I’ve had a number of clients out of Junior Mining, Oil and Gas, Tech Cannabis and about 2yrs ago I was approached by a group that was really bullish on where Uranium was headed and they asked for this step in and be the CEO of that company. And since I guess October of 2017 I built up that team and built up the company made the acquisition to raise capital and take us to where we are today which is about to go public in about eight weeks right.

Matthew Gordon: So, I do want to talk about the team but you said a few things there that was interesting to me. So the Steel Rose Group of companies, you’ve got the Steel Rose Capital, Steel Rose IR, you’ve got Standard Uranium. What’s your focus?

John Bey: Right now?

Matthew Gordon: Yeah.

John Bey: My focus right now is 100% on Standard Uranium.

Matthew Gordon: What has happened with the other businesses though?

John Bey: So they are basically consulting businesses. And if we get approached by other companies to work with them I will hire teams to let them run that. I am the chairman of those companies and I put teams in place on a, I guess you could say what is required. So if a company comes to us and says ‘look we want to do a marketing program, we want someone to raise capital’, then I will align the staff that I have to go help them with that. Myself, I oversee that but I focus myself primarily on Standard Uranium.

Matthew Gordon: Got it. Okay. You know why I’m asking. We don’t want it to feel like another ‘promote-type’ project in Canada.

John Bey: No not at all. And as we go through this interview, you’ll probably ask me about certain shareholders we brought in and I can tell you about why they’re in and who they are and why they will speak very clearly as to help plan on this project.

Matthew Gordon: Ok. So let’s let’s get back to the team. You’ve got Neil McCallum I noticed there. Next on the list.

John Bey: So Neil is our V.P. of Exploration. He’s been working in the Athabasca Basin for over 10 years. He’s actually, he consults with us. He’s actually an employee of the Dahrouge Geologic. And I can explain to you Dahrouge is and how important they are in this region. But Neil’s been working in this region for junior exploration companies for 10 plus years. So he knows this space quite well.

Matthew Gordon: So is he full time or is he consulted out to you? Contracted out-

John Bey: That’s right. Yes. He consults out to us, that allows us to have his expertise but keep our costs down. We try to keep our burn rate as low as we can and get the work that we need to do.

Matthew Gordon: How much time is the spending on this project?

John Bey: I would say, well we don’t have a lot to do right now. We’re basically lining up our summer exploration work. So he’s probably at 33% of his time with us. So it keeps his burn rate down to about $5000 of $6000 a month.

Matthew Gordon: So he’s the guy with the local experience. You’ve got Garrett Ainsworth as well, an independent director.

John Bey: Garrett is a phenomenal guy and if you talk to people who know the space, he’s sort of a rock star in this region. It was quite a coup for us to bring Garrett into our team. We picked him up basically the day after he retired from NexGen Energy. I’ll give you a little background on Garrett. He’s been in this space for many many years. He worked as the V.P. of Exploration for a group called Alpha, back around 2010 or so. At that time Alpha and Fission Uranium were partners in that southwest corner. And at that time nobody thought there was Uranium in that region, the Southwest Patterson Lake Region. But Garrett was the V.P. of Exploration and he was leading exploration going back and forth to that southwest corner. And he was the exploration guy who actually discovered the boulders that led to the Uranium Triple R discovery. So he won awards for that and it was fantastic discovery for him. Fission then took over Alpha and Garrett left Fission and was recruited to join NexGen Energy. And Garrett also was awarded a quite prestigious award for the PDAC for his discovery and help of…He was the V.P. of Exploration and led the technical team at NexGen. So a lot of those relationships in the Uranium space come to us through Garrett’s previous relationships through NexGen. Now, Garrett left next NexGen because he’s an exploration geologist. He didn’t want to spend his next few years drilling out and doing the type of permitting work that’s going to be required to advance their Arrow project. So he wanted to go after the next highly prospective exploration target which was with the Davidson River project, which we have in our portfolio, which is fantastic for us. For him, he wants to make the next big discovery in that region.

Matthew Gordon: And again, how much time is he spending with you.

John Bey: I would say probably 25% of his time. We bring him in at the high level stuff, when we get targets back from our from our VTEM work and our ZTEM work. He works with Neil and they help identify, where are are those next drill targets we’re going after . He is sort of big picture type of stuff. He analyses the geophysics. He compares it to stuff he saw it NexGen and Fission. Which is pretty exciting for us because he’s seen a lot of stuff that’s really identical to stuff prior to their discoveries.

Matthew Gordon: Is he effectively, semi-retired or…?

John Bey: He started a new company that he is the CEO of, a Copper company in British Columbia as well.

Matthew Gordon: Right. But he will continue to advise you as a…I know it’s not a non-exec at the moment, but it will be a non-exec role going forward?

John Bey: Yeah. He’s an independent director with us.

Matthew Gordon: Right. But will continue to work with you going forward, is the hope.

John Bey: Yes. I can’t speak to how things are going to transpire with the future but there’s going to be a part of this company going forward.

Matthew Gordon: Great. For now, he’s with you. Okay. And what about Blair? He’s another independent director. He’s like a finance guy is that right?

John Bey: Yes. Capital markets and finance guy. I’ve worked with Blair now for over three years on various projects. I met Blair when he was an investment banker with Echelon. He and I worked on a few different projects there. He came from 10 plus years of working with Credit Suisse in New York and London. New York, I think Paris and then Japan prior to getting back to Canada. So he’s great, connected across Canada and globally, and he understands the banking world as well as capital markets.

Matthew Gordon: Why is that relevant now though, with an early stage explorer like yourself?

John Bey: Well someone with capital markets experience and banking experience is always great. We’re constantly, as we go out, we’re constantly raising money and his relationships in the banking world will always help open doors.

Matthew Gordon: But at the moment you’re not raising that much money right. So is the money going to come from the capital markets? Or is it going to come from a strategic partner or high net worths, or retail? Where do you envisage this coming from?

John Bey: Let me walk you through this. So right now, previous raises we’ve done, we’ve gone out to the retail market, we’ve gone out to the institutional market and we’ve talked to the investment banking world. Right now, the last two raises I’ve done have not involved investment banks, we’ve done them on our own. But our next stage when we go and do our drilling program, we’re going to be going back. And I’ve been traveling over the last few months, I’ve been meeting with investment bankers across Canada and the US, looking at who our next banking partners are going to be. Because the next programs we do for drilling will need much significantly larger capital raises.

Matthew Gordon: And I guess we can come on to that in a bit. Let’s just finish off with your CFO, if we may.

John Bey: Sure. So, Martin Bajic is our CFO. He works with a group out of Vancouver called Northbay Capital. He is a shared CFO, so we have him part time. We probably have around 20% which once again allows us to keep our burn rate down. We don’t need a full time CFO at this point. We’re still very early stage and the amount of CFO work being done is minimal.

Matthew Gordon: Yeah. Absolutely. And the group that approached you. I think I had it somewhere. Is it Vela Minerals? They’re the ones that own the assets right?

John Bey: That’s close. So the group that approached me was Northbay Capital. And the founder is an individual named Talal Yassin. He had been instrumental in starting another company with these two other individuals that brought Vela, and that’s Anthony Alvaro and Al Risen. So those two guys had the shell of Vela. The concept in 2018 was we were going to take Standard Uranium as a private company and do an RTO into Vela, and do our listing that way. As we walked that path we looked at various things. Last year we decided that we were going to go do a direct listing instead in 2019. The market last fall wasn’t really excited about Uranium, twelve months ago it wasn’t easy to raise capital and taking it public at that point wouldn’t of been a good decision.

Matthew Gordon: So what does the structure look like now? Who’s involved? We talked about shareholders, maybe now’s a good time to get into that and the structure of the company. That’s really important for juniors when they’re starting off and it’s also important for people coming in slightly later, they want to make sure they’re not going to get caught out by people dumping stock in the market. So, how have you structured that?

John Bey: Sure, so right now, I think you reviewed our presentation, there is a slide towards that walks through our capital structure and who our shareholders are. So we started the company, $500,000 was put out by the three founders. That was at a $0.05 raise and those came with warrants as well at $0.05. So that gave us our first $500,000. Then we acquired the Davidson River Project, which was acquired for 23 million shares. So we had 10 million from the original seed money. Then we had 23 million. So we had that 32 million shares out. Then in the last fall, in basically October and November, we went out and raised $860,000 dollars. That came in through some retail and one big institutional fund. And it’s quite publicly known that fund is Sachem Cove out of New York, Mike Alkin’s group. Mike doesn’t doesn’t like speaking about how much he invests in the company so I’ll leave it at that, but we have a great relationship with Mike. I believe he’s one of the smartest guys in the industry and we’re really fortunate to have him supportive of our company. So right now, we’re going back to the market we’re raising. We wanted to raise another $1M for go public process and to continue our summer exploration to help us define our drill targets. And I can say we completed that capital raise, we are oversubscribed already. And on top of Sachem Cove support, we have another fund coming in which I won’t announce until that’s actually finalised.

Matthew Gordon: To get Mike Alkin says there’s something about the company. What do you think that something is though? People can read the presentation and get into the details of what you have done last year, what you’re going to be doing this year. But what is it you think you’ve got? You’re in the right postcode. You’re surrounded by all the big names. Okay. But if we look back to the last cycle, you went from 50 companies to 500 companies and back down again to 50. Right. So where do you where do you think you fit in the mix? Obviously the excitement in the market about…well, excitement in everything but the share prices of the equities. Where do you think you fit? What do you bring to the party?

John Bey: Well we talked to investors about this for the first time. We’d like to compare ourselves to an early stage NexGen and an early stage Fission. We’re in that southwest corner of the basin and we’re at a point where we are pre-discovery. So shareholders who see us right now, they have the opportunity to invest in a company that’s about to go public or soon after we are public, and they have an opportunity to get involved before we make our first discovery. And it’s easy to say ‘you’re in the neighbourhood, you’re an area play’, and I could say that. But what’s really exciting to us, is the exact structure of what we’ve got on our project. So if you were to look at a map of where NexGen and Fission say compared to the Davidson River project, you can see that we are directly west. And before we got into our exploration work last summer, our big thing that we were trying to prove out was the conductors that actually host the Arrow and the Triple R discoveries, actually we wanted to prove that those same conductors run right through our project. So they’re on the eastern side of an area called the Clear Water domain, which we believe is the host and the source of the Uranium and the fluids that brought the Uranium to that region. We believe those fluids and that Uranium can be and will be found on the western side of the Clear Water domain. So we did VTEM work last winter, and we’ve had that analysed and that’s helped us identify graphitic conductors that run through our project. And if you go onto our website at, you can see our 43-101 technical report, and even more exciting is the actual VTEM report. That breaks down and shows which conductors we’ve identified and most excitingly, the conductor that the PLS that hosts the Arrow and the Triple R, we believe that conductor runs right through our project and that’s what is exciting.

Matthew Gordon: Yeah. OK. People should look at the 43-101, plus or minus 30% accuracy to that. But what has Mike Alkin bought into? The fact that you are sitting on a large swathe of land in the right postcode, obviously, there is something to that, the neurology component, there is something to that. But, was he buying into you? Was he buying into Garrett’s involvement? Or was it just the fact that, because you’ve got this asset anyone can make this work. How did you sell it to him?

John Bey: Well, I’m not going to speak for myself and obviously he’ll speak for himself. But when I talked to Mike, the things that I really wanted to put forward to him was we’ve got a team. We’ve got Garrett and Neil who’s been in this region. Garrett who’s made, and been part of the discovery of Triple R and the discovery of Arrow. Those discoveries were made by looking at geophysics primarily and the geophysics we are seeing now with our ZTEM and VTEM study, we’re seeing those and they are very similar to what he saw over there which is exciting. Quite often when you see conductors run through projects they can be in nice straight lines. One of the things we’re really looking for is conductors that have brakes and folds and cross cutting structures. That is where Uranium would actually drop out and actually make deposits. So we are very excited about getting those that drill targets moving and drilling that in the winter of this year.

Matthew Gordon: So why have you you got it? Why did one of the big guys take the opportunity to pick it up?

John Bey: Great, great, great question. So up until 2012 or so, that region, south of that PLS area, was all…you couldn’t stake it. It was held for gas and oil reserves. When they took that region off, you’ve got to realise, nobody was exploring over there. Everybody that was there, the Urano’s and the Cameco’s, they were on the northeast side of the basin, or they were up on the northwest side of the basin and they said ‘you’ll ever find any Uranium there’. Until Uranium was found there by Alpha and Garrett and Fission who came in and made that first discovery. At that point there was a bit of a staking rush. And staking was all, at the same point, was all moved to, from physical staking to actual online staking. So people could do staking and take up big chunks of land. Now the individual who staked this project is a guy named Jody Dahrouge. At the time, he was the President of Fission Uranium. He was also a staking guy, he’d been staking in that region for many years and what happened was he staked that Davidson River Project and offered it to Fission and they didn’t want it at that point. So when he departed Fission, Fission wanted that project back and it was kind of messy and ended up in court, he was tied up in court for three years. And the judges decided that it was 100% owned by Jody Dahrouge and Dahrouge Exploration. So at that point, Jody had another junior work on it for a bit and timing wasn’t great. They couldn’t raise money. They didn’t get a lot of work done. So the project came back to Jody. He then went over to NexGen and offered that project to Garrett at NexGen. And Garrett fell in love with the project, he knew what the potential was there. He wanted it, but his CEO Leigh Curyer said we’ve got enough land right now, we’ve made our discovery and we’re going to focus on that. So NexGen passed on it. So at that point, Jody offered it to the individuals who founded our company, Talal Yassin at Northbay Capital who locked it up and then he decided let’s build a Uranium company. He approached me and here we are today.

Matthew Gordon: Interesting. So how much did all that cost? He’s tied it up which is was great. How much money has he spent on it? How much money has been spent on it? And coming back to your structure, you’ve rolled that in…he’s rolled that asset in, what does he get out of it?

John Bey: So for his time he was given an X-amount of shares and an X-amount of of dollars. So he’d spent about a $1M on that project over the years, keeping the planes in good standing, doing some basic exploration work. One of the exciting things is the Davidson River has never been drilled. So we are going to be the first company to ever drill this project, which is a highly prospective area. Jody has, I believe it’s 4 million shares in Standard Uranium for that. And he’s got a couple million dollars.

Matthew Gordon: Right. I’m just trying to work out, at some point in the future if I’m going to be able to work out whether or not that was an expensive mistake from NexGen or not.

John Bey: Well let’s hope so from our perspective yeah.

Matthew Gordon: Yeah for sure.

John Bey: Not only did they lose the project, they lost Garrett Ainsworth as well, who came out, who wanted to go work on that project.

Matthew Gordon: Right. Okay. So that’s kind of interesting. I’m intrigued by what your model is. You’ve talked through the finances. You’ve got a bit of money in the Treasury but at some point soon you’re going to have to go… you are going public in August?

John Bey: Yeah that’s correct. So we are doing a direct listing on the TSX Venture this August. Everything is lining up beautifully. That will complete. We’ve got the capital raised and then we’re going on the heels of that, we’re going to do it OTC listing in the US right about that…Well we can start that 30 days after we’ve list on the TSX-V.

Matthew Gordon: Just two things there John. One is how much you raising when you go public? Or, how much have you raised already?

John Bey: Right now, we’re in the middle of a capital raise which was…we’re going to be about a $1M Canadian.

Matthew Gordon: Okay. But that’s enough. That’s all you need?

John Bey: That’s all we need. We don’t want to dilute our shareholders too much right now at this valuation. This capital raise is being done at $0.15 with a $0.25 warrant.

Matthew Gordon: Right. Okay.

John Bey: That will take us up to between 45 to 50 million shares out, depending on the amount we close on.

Matthew Gordon: So where will that put you in terms of total cash available? I’m looking at page 16 of your current presentation which I think may be a little out of date.

John Bey: We will have a we’ll have about a $1M…$750,000 to $1M available to us. We’ll spend probably $400,000 to $500,000 on exploration work this Summer. Which will give us, we will have half a million to a bit more going into the Fall. And what that means is when we go to do our proposed drill program in the Winter of 2020, we’ll be going back to the market to raise capital specifically for the drill program. I’ll tell you what we are looking at, we’re looking at raising around $3M. That’s going to give us about 6000 meters of drilling, about 20 drill targets, drill holes. Those are about 400 meters in depth. We believe our project is based but hosted and it’s going to start somewhere between 50 to 100 meters down. So those drill will be going on angles, so we’ll angle that about 400 meters which should allow us to go through the structure and identify. We want to see that we go through the graphictic structures there, and hopefully identify Uranium in those structures.

Matthew Gordon: Ok we’ll come back to that technical component in a second. My second question was why the OTC as well, at this stage?

John Bey: For us, we are finding through our road shows, that we’re getting a lot more interest right now from American investors than Canadian. And that is I think because the state of where the capital markets are in junior mining and Uranium right now, the share prices still haven’t moved. We’re not seeing the Canadian investor get excited yet and jump into Uranium. But we know that when that does happen, they’re going to flood in just like more companies is going to flood into the Uranium space. So we are preparing for both. And for the OTC listing in the US, it also gives U.S. retail investors and institutions just another easier step to get in and trade our shares. So we’re trying to make it as easy as we can for U.S. investors to be a part of our company.

Matthew Gordon: Yes they’re a very passionate bunch, the American Uranium investor. We’ve had some exposure to them recently. Can we come back to the position of the company. You are going to go do this listing on the TSX-V. You have some $750,000 to $1M in the kitty to go and do a program which will get you through to a further raise of $3M. That’s all good. You’re an early stage exploration company, with all the risks. Typically people talk about ’19 out of 20 of these things don’t work out’. You happen to be in quite a…I’ll use the word ‘sexy commodity’ at the moment in terms of the production versus the production deficit at the moment. Why do you think you’re going to survive? Why do you think you’re still going to be around in a year’s time, 2 years time, being able to talk about this.

John Bey: That’s a good question. If you look at the numbers of where things are and where things potentially could go, it’s a daunting task to be a junior exploration company period. We’re very bullish on where Uranium is going. We believe if it’s not the end of this year, it’s we believe 2020 is going to be a very exciting year for the Uranium market to come back. That’s based primarily on supply and demand and what’s being produced right now, where the demand is headed. So we see Uranium being quite a quite a bullish space to be in. As for us, the work we’ve done on our projects so far, the Davidson River specifically, we’ve got 26 conductors there. We’ve got 4 that are very highly prospective. We believe we’ve got some good shareholders we’ve brought in who understand our space and our story. And we’ve got more that are waiting to come in once we go public. There are a number of new Uranium funds globally that are around. We’ve been talking to them all. We know them. For many of them our story is too early but they’re waiting for us to go public, have our first drill program and then if we have some success they’re going to be supporters as well. So I’m really excited as to what the future lies for our company.

Matthew Gordon: Say again but touching on some of the market factors here, which is well covered with a lot of our previous interviews. But let’s just touch on some of those now. So obviously the 232 decision. Everyone’s waiting for it. Utilities and waiting for it. Investors are waiting for it. The companies are waiting for it. For you, if that drags on more than another 12 months, obviously that becomes problematic. What are the options for you? You’ve talked about some of the Uranium specific funds and even maybe some of the generalists who are looking at the market and going ‘this is crazy’. Do you think that if the market, retail, doesn’t support you, you’ve got options?

John Bey: We do. So right now, the funds we have in place if we do not complete or go forward with the drill program or if the Uranium market tanks over the next six months, we’ve got enough cash that we can basically maintain our position for about a year and a half to two years. So probably 24 months. Which for us, we’ve got to a Plan A and a Plan B. We know if the market takes off, we’ve built a fantastic investor relations capital markets outreach program. We’ve been interviewing and meeting with various vendors in this space and we know that we have got cash put aside to basically flip the switch and go hard when the market turns, which we anticipate it will. It might not be in the next three to six months but hopefully it will be.

Matthew Gordon: Yeah. I don’t mean to labour the point, it’s just interesting to me the position the Uranium space finds itself in. Obviously a lot of the juniors, perhaps a long way from production because these things do take a while to go from where you are to producing, doesn’t mean there’s no value there. Because if you can give people a sense of what’s under the ground, people think the money potentially could be there. Certainly with some of the institutions I’m guessing. But do you also have strategic options? You’re surrounded by people. Great, huge names, they’re in the same boat until the spot price comes back, they’re in the same boat. But they do have cash. Is that a consideration?

John Bey: I can tell you that we have been meeting with some of those strategic people in the space. At this point we do not want to give up our secrets of our project to order 100% and we want to continue to advance that. Should we go down the road where we have capital and we’re drilling out our program and we don’t have success? I think at that point we’ll look at strategic partners to come in and perhaps fund a future drilling programs. But at this point, we want to keep all this success for our shareholders.

Matthew Gordon: Yeah of course. But you also want that optionality if push comes to shove. So when you go public TSX-V, Retail are going to be interested in that. You think there is less interest in Canada than there there is in the U.S. Which is interesting, which may or may not be the case by the end of the year, because there’s a lot of positive momentum for Uranium companies, certainly the Uranium stories with the nuclear zero carbon et cetera. It’s all good. But do you think that, even people coming in this early point with you that their money is safe because of the license that you got, the package that you got? Even if you don’t drill.

John Bey: Oh yeah. We think our package is phenomenal. We love where we are. We love the corner of the region we are in, the Athabasca Basin. And we also think the team that we put together are world class. And that region of the space, people are looking to that and they’re looking at the people we have, they’re looking at this Davidson River. When they dig into the technical side of it, there is a huge upside there. And we could be working this project for years and years to come. Now one more comment back to the retail space, as you know I live in Vancouver, and Canada is probably the epicentre of a the Cannabis world right now. And with Canada legalising Cannabis last year, the retail market has been…If it’s not 100% Cannabis, it’s about 90% Cannabis. So we’ve seen a massive amount of retail funds and retail investors putting their funds directly into the Cannabis space. Now thankfully for us, the junior mining, that market has come down significantly in the last six months. And we’re hoping some of that retail money is going to come back looking to putting it into the junior resource space again. So that’s a big key piece of why the retail market in Canada is not in junior mining, it’s all shipped to Cannabis. But with our talks in the last few months, we kept traveling across Canada, we’re finding from the banks with a meeting with and the brokers, they’re finding some of those investors are now looking to deploy some of their Cannabis funds back into junior mining. So we’re hoping that Uranium is going to be a big part of that. And we are hearing that it is, it’s going to be a sexy space to be in. So we’re continuing to build those relationships, speak to those brokers, those bankers, those retail funds, High Net Worth and position ourselves. So that when we do go public and we start our exploration program, the drilling ,people have heard of us and they know who we are they, they know what our plan is. They want to see us hit those milestones, continue to advance our project. Then hopefully they’ll come along for the ride.

Matthew Gordon: Ok. Well John I’ve enjoyed that summary. The market is the market. You’ve got a team, you’ve got an asset. The team are experienced, and relevant experience at that; in a postcode which is I think highly relevant with an asset. We seem to be surrounded by the right guys. You’ve got a tough few months ahead. I think you’ve got to get that listing done and see if you can raise some capital after that. But my sense is even if you don’t, it’s not too bad in terms of timing. The Uranium market is looking like it’s ramping up for something quite soon. So thanks for your time, I appreciate that. Is there anything else that you want…that perhaps I haven’t asked you that you wanted the public to know.

John Bey: No I think he did a great job of drawing out the information from my company. I do encourage all your viewers to go to our web site: On there is my contact information, you can get my cell number, you can get our office number. You can email me and I’m quite often…I’m on Twitter a fair bit and when you look at Standard Uranium on Twitter, that’s myself personally. The CEO talking to people.

Matthew Gordon: We should we should follow each other, if we haven’t already we should. I’ll hold you to that. You’ve got a letter to shareholders on the website, which I think perhaps not completely up to date, and the presentation itself there’s a few things as well. Are you going to be updating those soon?

John Bey: There will be a future letter to shareholders, probably coming out in August. Sort of an update as to where we are, completing our capital raise, outlining where we are in the Summer exploration program. And our plans for the Winter 2020.

Matthew Gordon: Right. Okay. And the powerpoint?

John Bey: The powerpoint is…it’s the one I’m using currently as I’m on the road, as of last week. So it’s pretty up to date.

Matthew Gordon: Okay John, appreciate your time. Thanks for running through that. And best of luck and do keep us up to date.

John Bey: Thank you Matthew, appreciate the opportunity to share our story and thanks for the interview, we will talk again soon.

Company page:

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.

Orezone Gold Corp (TSX-V: ORE) – Getting it Right in West Africa and Look at Imminent Re-rate (Transcript)

President and CEO of Orezone (TSX-V: ORE), Patrick Downey, is very optimistic about what they have and how they can drive this business going forward. The technical aspect has been de-risked significantly, they have lots of drill data, a much more simplified mine plan from the one they inherited, good jurisdiction to work in, a small CapEx, short time to production, and possible about to re-rate when the imminent debt component is finalised. One we have a lot of comfort with and take great interest in Orezone Gold.

A great West African gold story, with a very simple and effective approach to mining. The management team has a long track record of making shareholders money by creating meaningful mining businesses. They have increased their NPV by $140M since we last spoke to $360M.

Their project in Burkina Faso is surrounded by large Gold companies such as B2 Gold, West African Resources, Endeavour, Semafo. They also have large gold investment funds such as RCF, VanEck, Equinox and Sun Valley invested.

We discuss these topics and more:

  • Recent News and Updates: What caused the Share Price to Spike?
  • Simplification of Processes
  • The Management Team & Remuneration
  • Company Financials and CapEx
  • Will investors make money and what should they know?
  • Managing leaks in to the market
  • Debt and Remodelling the Drill Program

Click here to watch the interview.

Matthew Gordon: Hi Patrick, how are you?

Patrick Downey: Very well. How are you?

Matthew Gordon: Not bad. Now we saw each other back in May at the 121 Conference.

Matthew Gordon: And you were doing the rounds there.

Patrick Downey: That’s correct.

Matthew Gordon: One or two things have happened since then. Perhaps we should talk about those.

Patrick Downey: Yeah. I think when we talked at 121, we were just at about the final stages of our updated Feasibility Study. It came out actually better than we originally thought it would. We said in January that we were going to build a 1.2Mt Sulphide plant. It turned out that we were capable of building a 2.2Mt. A little extra capital but significantly better economics.

Matthew Gordon: Well we should talk about that because obviously your share price when we met was at $0.39. It’s now at $0.62, you’ve had a nice bump there. I’d love to take all the credit for that but I think it’s down to the Feasibility. So we better talk about it. So why don’t you give us the highlights there. Because the the NPV is changed significantly. Some great numbers in there.

Patrick Downey: So essentially, in 2018, the NPV was around $220M. What we did was we really planned this on the basis that we could build the Sulphide expansion from the cash flow of the first couple of years of oxide. The oxide in the first 2.5 years are really high cash flow because there’s really no pretty stripping, low strip-ratio. And it’s the highest-grade oxides right out front. So that’s a pretty simple circuit build. So we looked at the Sulphide. We expected to be able to build a 1.2Mt per annum plant there. But once the Reserves started coming together, it became pretty obvious to us that we were going to run out of oxides before we ran out of Sulphide, so we married the two flow sheets together to come up with a 2.2Mt per annum Sulphide circuit. So that comes in in year three, and it adds around about 700,000oz of recovered Gold. So we had about a 1Moz in the first of the oxides, we’re now at 1.7Moz. The margins, as we had in those ounces, are significantly better than the margins of the oxides at that time.

Matthew Gordon: So what’s the additional cost to you for doing that?

Patrick Downey: There’s a small resettlement program at the bottom end, which is an area right to the south. Including that we’re around about $65M. And we could have built this for significantly less, probably $10M or $12M less by integrating the Sulphide circuit into the oxide circuit. But we made the conscious decision to build a separate circuit so that we could operate the oxides fully independently from the Sulphide. So when you crushing Sulphide, grinding them, you’re not interfering with the oxide circuit. They only actually blend once you put them into the CIL circuit.

Matthew Gordon: So that’s getting a wee bit technical. Okay. You could have saved $10M to $12M, but you chose not to because you can keep them separate. That’s got to be an economic decision at some point. It’s not just about what you’re saving?

Patrick Downey: It’s an economic decision from an IRR or an NPV point. And also purely from an operational viewpoint. The oxides are no crushing. So you don’t have any of that. It’s very simple grinding. It’s significantly less cost. You add in a Sulphide mix there and you can have…we believed you could have operational issues going forward. So this just allowed us to completely separate that and make it a much simpler circuit.

Matthew Gordon: That sounds more like what the decision is based on, in terms of it is simpler. Because the IRR hasn’t moved much. You’ve moved 1.2%, you’ve gone from 42.6% to 43.8% so it’s not a significant shift but obviously the NPV, over $140M more. So it’s impressive. You used a phrase with me last time, what you bought was overly complicated and you’ve tried to simplify it. Would you say that’s the secret sauce?

Patrick Downey: That’s the way we want to keep it. We’ve always made this so that…really when you put in a Sulphide, a big SAG mill which we’ve got there, a Semi-Autogenous Grinding  mill, you do have periods of time of about a week where you have to do complete re-lining of that SAG. Your plant’s down. And that’s fine. But the way we’ve done this, when that’s happening, the oxides can continue running. We don’t interrupt them. It’s a very simple circuit in places like Africa that’s a real bonus. And we do it because the CapEx for the for the oxide is reasonable. And the CapEx for the Sulphide is very reasonable because we’re not adding CIL, we’re not adding tailings. We’re just adding a bolt on section. And that’s what that’s what really drives the the NPV.

Matthew Gordon: So again I want to talk about a few things. We can talk about the project as a whole, you’re in the right postcode. You’ve got B2Gold, West African Beso, Semafo. Everyone you need to be around to endorse, this is for people new to this story, you’re in the right place. You also talked us last time about de-risking and you spent a lot of time in terms of talking about the de-risking of the project. So why don’t you tell people some of those things. I’m trying to give them a sense of the type of management team that you are.

Patrick Downey: Well, we’re a very operational focused team. Generally when we look at a project, we look at it from ‘how will we will we operate and maintain this and make it simple’. We visited a lot of projects, not just Gold mining projects. For the oxide, we looked at it from the point of view of handling this sort of material. It’s fine grained, it’s got great properties in the sense that you don’t need to crush it, minimal grinding. But it’s Clay, it’s sticky in the rainy season, how do we get around that? So we designed the front end with a little bit more capital to allow us a simpler operation. We visited Nickel laterite projects, we visited Bauxite laterites. And we came up with some great ideas from those operations that we’ve been cooperated into this. On the Sulphides, we looked at it and said ‘well look, this has to be a crushing grinding circuit’. So if we blended in with the oxides, now we’re adding a level of complexity there that we don’t need to add to the oxides. We’re going to need it for the Sulphides. So we looked and said ‘how do we simplify this from an operational point of view’. So we made it totally separate. We can look after it. It’ll only ever deal with Sulphide rock. So when we have to maintain it and line the SAG mill etc. we don’t interfere with any other part of the operation. It can all be done with a small specialist crew that do not have to worry about getting back up in two days or things like that. And when we talked to our operating team about going forward, they loved that aspect of it. Doing this gives them that flexibility.

Matthew Gordon: I just want to point out, your AISC is low. You’re at about $730 you’ve talked about and I’m sure you will refine it over time. You’ve reduced technical risk, you’ve got…the thing that interests me is the small CapEx number. It is a relatively small CapEx number which I suspect you’re going to deal with using debt? You’ve said you’ve had some debt conversations? So how are they going? What’s happening?

Patrick Downey: They are progressing very well. One of the aspects of adding the Sulphide to the  project is that you still only have to borrow the money in debt terms for the oxide project. But you’re adding significantly more ounces against that and you’re not having to go to increase your debt load for the Sulphide. So we believe that gives us much more debt carrying capacity on the front end. So it really, essentially reduces the amount of equity we would have to issue at the front end going forward. So that’s a very, very important part of this project. Even when we built this Sulphide project, we never go cash flow negative during that period of time. We’re still cash flow positive. So we can build the Sulphides out of cash flow and we can continue to pay the debt for the oxides right through that. And we have a longer mine life of which to amortise that debt against.

Matthew Gordon: Yeah some really, really interesting, what people call Catalyst moments, hopefully for you. And when we talked last you said once we get this debt in place, I think we’ll get a re-rate, because people will have some sort of level of comfort as to when we’re going to get into production. Do you think, the way the market’s going with obviously being Gold up and you’ve seen a bit of a bump since the Feasibility Study has come out, or maybe partially because Gold is up as well, we don’t know who’s going to take credit there entirely. Do you think you’re going to get this re-rate?

Patrick Downey: Yes. I think when we’re able to announce the quantum of debt that we can carry against the project, and that the project can pay back, then people will know what your equity piece will be and then they’ll know that it’s not one of those equity pieces that will end up crushing you. The NAV per share is is really badly affected.

Matthew Gordon: You’re about $0.2 on your EV/NAV ratio which is obviously quite low. You’d hope to be nearer $1, wouldn’t you?

Patrick Downey: Yeah. So what we want to do there, is go out and in generally August, September, probably September to get the story out more. Get people to recognise the story. I think hopefully we’ll be able to make a few moves to show people where things are going. And at that point we would essentially look at where we put the pin in on the debt at that stage. So the debt is proceeding very well. We’re going through the technical due diligence now. We would expect that to be complete sometime in late August, early September. And then at that point we’ll start to see what level of debt we can carry.

Matthew Gordon: Are you getting any pressure… obviously things are moving along and the share price that has taken a bump recently, going up which is great. Are you getting any pressure from people like RCF, who we talked about them a very technical partner and committed partner. But they came in at $0.80, they must have some degree of comfort as to where this is going. Probably long term players, maybe they were never worried. What are they talking to you about?

Patrick Downey: I would frankly say they really, really like our project. It is one of their key projects. They tell us. They’re a great supporter, we have been very communicative with them, we have monthly updated management meetings with them. They’ve been to the project, they’ve now seen the study. They’re now taking all of the technical data from the study to see what it means for them. But I can tell you, they would be more than happy to add to their ownership at this point. When we sat down with our RCF, and we knew each other from a long time before on other projects. When we sat down with them, had a program and a plan as to how we would execute and I think they’ve seen that we have absolutely executed to that plan. Which doesn’t always happen for various reasons, and that gives them that great degree of comfort.

Matthew Gordon: That’s interesting point, I’m sorry to segue off of your company because we’re here to talk about you and what you’ve done Patrick, but it’s an interesting point. We were talking to a bunch of investors around this component of how do you keep information, reports whether it be an FS or otherwise, secret. How do you stop leaks from happening? As a CEO, how do you manage that process? In my view is, there must between 10 and 100 people touching that before it comes public knowledge. What’s the process?

Patrick Downey: Well the engineers are generally very focused and doing the engineering. They’re not focused about leaks or telling people. And they’re not generally market minded really.

Matthew Gordon: I know that but it just, it gets out you know.

Patrick Downey: Well when we set out to do this, our technical group…internally we did a fair amount of work to figure out was this worthwhile going forward and doing. So we put out a press release in January that was very detailed in what we were doing and how we were going to do it and what we felt it was going to look like et cetera. And it was all based on on technical fact, that was already generally in the market. We weren’t telling anything that we were guessing at or whatever. And then when we walked through it with our shareholders, we generally…if you just give them ‘look we think things are going well, things are on track, we should have the study by Q2’. We think it allowed something in the region of $80M to $100M to our NAV. It obviously turned out to be better than that. And so you’re on track. Generally people can read. When you’re sitting in front of investors and they say ‘well when you when you talked about this a few weeks ago you were saying $80M to $100M, do you still think that?’. If you hesitate they’re going to go ‘oh that’s not good’. If you’re confident and say ‘well at this stage, yes I would believe that’, that’s what we’ve said in the public market. We have no reason to change it, so you keep it in that way. So there is a fine balance between keeping people continually informed, your disclosure and making sure that you’re not saying anything that’s not in the public market. We are generally very conservative about how we go about it, and we take a conservative viewpoint. We generally don’t actively market during the critical phases of the study. We only go out when we’re ready to talk about it as we’re going through it, but not when we’re in the critical phase. We do not market. We do not talk about it..

Matthew Gordon: Would you agree that sometimes in the market it perhaps doesn’t go that way? I appreciate how you manage it.

Patrick Downey: Oh yeah absolutely. There’s times when you go ‘well that wasn’t right or how come you said this’. So things do get leaked out but I would say from our point of view, we were very, very close. I mean even my directors, I kept them informed but until I knew where the numbers were almost absolutely right. It was only then that I said to the directors this is where I believe we’re going to be and we’re going to be ready to put the pin in it in two weeks.

Matthew Gordon: I appreciate that from you, we like your story and we like the way that you run a very tight ship. You’re one of the most active retirees I’ve ever met, as you said last time.

Patrick Downey: My wife says that as well!

Matthew Gordon: Because it touches on one of other subjects which we keep getting asked about, which is around salaries and remuneration and so forth. You guys have put your money where your mouth is and you’re remunerated along with the shareholders. So you are one of the few companies where you say we are aligned with our shareholders and mean it. We have been getting lots of questions about highly paid mining executives. But I think you don’t perhaps fall into that category, which is great. Let’s talk about one last thing if I may. You are going through a resettlement program at the moment, which we think is quite important obviously. Again another thing where you can cut costs, but you haven’t. Want to tell us about that?

Patrick Downey: No. And I think I really have to give a lot of praise or praises to the guys down there on the ground who have been running with it and doing all of the work in the background, they did a fantastic job. We approached this again in a very systematic manner. When you are building a mine, you are upsetting other people’s livelihoods. And generally you have to move and it’s very well controlled and managed in Burkina because there’s been a lot of mines built. But we went about it whereby, we didn’t go cheap on the houses, we got everybody to sign off. But one of the key things that we felt was like, these guys are signing off on drawings and maybe they don’t fully understand. Let’s build sample houses, it is going to cost us a little more. Let’s build sample houses in each village of the type of house we’re building, let the communities come inside, look at the finished product. Give us any changes or issues out there that they’re concerned with. We did that. We did have a couple of changes actually. It was around capturing water and stuff that they were going to use and they were extremely happy. That got out to the authorities in the sense that the mayor, the ministers; we had a wrap opening ceremony in May. Sort of unprecedented in that part of the world. We allowed for a thousand people to attend, three thousand people attended. That’s all of the communities. Everybody turned up. It was a fantastic day, a fantastic celebration. And it goes to show you the work that we’re doing, not just in building houses but in the livelihood restoration that we’re doing, the work that we’ve put into community programs, water, schools, restoration, all of those things. I got to say I’m extremely proud of that. I’m extremely proud of what the guys have done and how well it has been managed and executed on the ground.

Matthew Gordon: It’s very very important. It means a lot to people there for sure. OK. We are going to finish up. Can you tell me, you’ve extended the life of mine, 10 year life of mine. 133,000oz near 134,000oz over that period of time. You’ve done your FS, you are looking at the debt position at the moment. Will get into production. You are $130M market cap today. Something wrong with that picture. What should investors know?

Patrick Downey: Well I think that we had to little bit of the legacy of what occurred in the past, and we were getting out of that as we move forward here. I think also as they see us continuing to develop the project, the confidence level will come back to it. We are getting a lot more inquiries about the project and the company. The other key thing that I think will happen and it would be a catalyst here, we have been drilling reasonably quietly, but we decided that there was a model here that we should focus on particularly in what’s called the hanging wall of the project, the Maga Footwall zone is very continuous. That drilling was very successful, the modelling is coming up, it’s very exciting. Some of the grades that we have there are seven eight times the average grade of the deposit. It’s wide open at depth. So that’s going to be I think a very exciting catalysts going forward. We are going to put aside some money for that over the next year to do more drilling. And I think once that people understand what that means, drilling still gets people excited about a project. And it’s not just building it, it’s also showing that it’s got a long life and it’s got great upside. And so we’re just about to finalise that model and then we go to the board with a proposal to set aside a certain amount of money to drill it over the next 12 to 18 months. And I think that would be another big catalyst for us.

Matthew Gordon: In the short-term?

Patrick Downey: In the short-term, getting the debt in place and showing what the debt carrying capacity is. Maybe some other moves on the debt which we’ve got a lot of irons in the fire here that we’re looking at. That will reduce the level of equity that we have to put in. And as you rightly said, we are in there alongside our shareholders. We are big shareholders of this company. So NAV per share for us as employees and management is extremely important. It’s not building just for the sake of building a project. It’s building a profitable project that returns equity to the investors, and that’s what we’re looking at.

Matthew Gordon: Patrick, I appreciate your time today. It’s a great summary. Great to speak to you again. I think it’s a really, really strong project in West Africa. People should be looking at it. We look forward to speaking to you again soon sir.

Patrick Downey: Yeah. I hope the next time I speak to you, we will have double the share price again.

Matthew Gordon: That would be lovely. That would be lovely.

Patrick Downey: And I will give you credit!

Matthew Gordon: Finally, finally! Well thanks again for your time. We’ll speak to you soon.

Company page:

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

Blue Sky Uranium (TSX-V: BSK) – What is the Investor Upside? (Transcript)

CRUX interviewed Nikolaos Cacos, the CEO of Blue Sky Uranium. They are a Uranium and Vanadium explorer based in Argentina. Their management has been working and operating in the area for 25 years and are part of the Grosso Group. This is potentially a very low-cost production project with a district wide deposit. They are yet to get a permit but the Argentine government is very supportive of Uranium with 3 reactors already with another one on the way. Hear what Nikolaos has to say.

Click here to watch the interview.

Matthew Gordon: Good morning Niko, how are you?

Nikolaos Cacos: Good morning. I’m doing very well thank you.

Matthew Gordon: Thanks for making the time to be with us. Let’s go to a summary of the projects. So we get some sense of what they’re like. I’ve been through it so maybe if I may ask some questions as we go along and not be helpful. Thank you.

Nikolaos Cacos: We have not just a deposit of Uranium / Vanadium but we have an entire district. And that’s really where the upside is. And this district spans one hundred and 45km in length over 50km wide. So again it speaks volumes to the undiscovered potential that lies within a country like Argentina. And recently just about a year ago, we announced our first deposit, 43-101 deposit, and our PEA. was announced about a month ago. So what we have, is just under 23Mlbs of Uranium, 11Mlbs of Vanadium and that’s all within a 3km by 3km area. And again this this has the potential to expand to grow to become amongst the largest deposits of Uranium in the world. And what’s key here is, the way that this deposit lies, it lies right up on surface. It’s within the first 25m from surface down and it’s also not in hard rock, it’s sort of a compressed gravel. So it means in terms of cost, this is very cheap to extract and to separate. And in fact are PEA, our preliminary economic assessment, indicates that we can produce this at $16 a pound which ranks us amongst the lowest cost producers in the world. Like those we see in Kazakhstan. And we’ve only started scratching on the surface. We wanted first to prove two things in this. 1. One that we can be amongst the lowest cost in the world. And the 2. second point to be amongst the largest. So I think we’ve been able to demonstrate now that we are amongst the lowest cost. And we’re about to embark now on an exploration campaign that can demonstrate that this 23Mlbs deposit can grow, you know 2 fold, 3 fold, 4 fold…can be over 100Mlbs.

Matthew Gordon: So let’s say even if we have a kind of +/-30% on a PEA. Which is fairly industry standard, that’s still pretty pretty low. I should say as low the Kazakh number. It’s still not quite economic at today’s prices. So you need some help though with the pricing.

Nikolaos Cacos: It’s it’s break even at today’s spot prices, around £30. But when there is… when you have a production, you don’t sell it spot. Most of the contract prices are $50 or $60.

Matthew Gordon: And you selling this into the Argentine market?

Nikolaos Cacos: Well the Argentine market is a very interesting market because Argentina, unlike other countries in Latin America, actually has a Nuclear regime. They’ve been active since the 50s. They’ve got three Nuclear reactors that they’ve got going right now. And they import all the Uranium for that. They have a number of research reactors. And they control every aspect of the Nuclear industry except for production. So they currently have to import all their all their Uranium and they’re paying between $75 and $85 a pound for that.

Matthew Gordon: Why?

Nikolaos Cacos: Because that’s the best thing… you have to remember that Nuclear reactors. The cost of Uranium is actually quite negligible to the cost of actually shutting down a reactor and keeping it on care and maintenance. So to have assurety of that import, of that price, they will pay a higher price because it becomes quite negligible. And because also that they ship it, they’re probably paying $10 to $15 in shipping costs for every pound of Uranium. So Argentina right now has definitely, it is very much encouraging would like to have a domestic source of Uranium. And we’ve been talking to them. They were very aware of who we are and what we have. They are very keen … we know we are the largest and most advanced deposit in Argentina. And we have a lot of support to become the next supplier for that country.

Matthew Gordon: But it a relatively small … we’re talking about three Nuclear plants, another one on a construction.  We’re not talking a massive amount of product.

Nikolaos Cacos: They would probably right now they import about half a million pounds a year, probably in the next couple of years that will probably be up to about a million. They likely would stockpile some Uranium. So they the way the law is written is that Argentina has first right to acquire any Uranium that’s produced, at international market prices. So there wouldn’t be anything special. So that would be a first supply and then anything left of course would be for export market. The other thing that’s interesting that we have within our Uranium deposit, is we have the occurrence of Vanadium. And Vanadium as of late, for those attuned to the mining metals markets, would know that you know we’ve seen the price of Vanadium for the last few years being $3  or $4 a pound and now it’s trading about $15 a pound. So there’s a big demand for that. And again it’s a battery metal just like lithium. It’s used for storage but that’s not the main driver. The main driver of course for Vanadium is its use as a steel hardner. And China’s recently has have mandated an increasing amount of Vanadium in steel production and that’s brought up,is currently sustaining at the higher price of Vanadium. Now Argentina has also a huge need for Vanadium, because they have an active oil and gas industry in Southern Argentina and they’re costing manufacturing pipelines and these pipelines require Vanadium to make them hard. So there would be another market there for that metal as well.

Matthew Gordon: And what I would say the Vanadium market pricing is erratic, to say the least, does the PEA. include the Vanadium component was just focused on the Uranium.

Nikolaos Cacos: It’s inclusive of the Vanadium component.

Matthew Gordon: Right. And what can you tell me about… when say significant what do you mean?

Nikolaos Cacos: Well the Vanadium contributes you know quite a bit to help offset some of the costs. And for every pound of rock that we extract to make it that much more valuable. And it’s no additional cost for us to extract it. The metallurgical process involves just scooping up the gravel, putting it through a sieve, removing the larger rocks, because the mineralization is in the dust. And then basically we we were able to reduce that by… get rid of 75%, 80% of the waste rock, which is clean. And then we put the rest of it on the leach pad and a simple alkaline solution, which is cheap and well proven throughout the world, extracts both the Vanadium and the Uranium. So it’s a very simple, low cost way to get it out. And as we expand our deposit, we’re going to see all our costs begin to come down.

Matthew Gordon: Fantastic. So hearing Argentina is a very friendly jurisdiction, in terms of not any mining now, but also it goes to Uranium. It’s seen as possibly a strategic Resource for them.

Nikolaos Cacos: Yes. I mean we have been active in Argentina like I said at the outset for 26yrs now. So I guess we can call ourselves experts in operating in that country. And no matter what country you operate in when you’re a foreigner, it takes a while. You have to acquire and understand the local needs, the local misgivings and so forth and develop your contacts and people that to a place within this industry, government. And we’ve always recognized that and we’ve been very successful at establishing… being good guests, so to speak in a country like Argentina. So Argentina right now has a government run by Mauricio Macri, a businessmen. He’s very pro-business. They very much want to see the development of the mining industry a lot further than that it has come. They want to see it as a larger component… contributing to their economy. They have approached us. They have indicated that if there’s any roadblocks or red tape that gets in a way, let them know, they’re going to do whatever they can to facilitate. And we like working in Argentina. It’s a safe country in which to work with. It’s abundant with natural resources. And with respect to the Uranium that we have, because they have the entire framework for dealing with Nuclear materials and so forth. It makes it that much easier. They already understand the language, they understand the fears, they’re members of all of the international agreements. So it’s just much much more fluid and much easier for us in which to operate.

Matthew Gordon: Tell me a little bit about this this board that you’re working with?

Nikolaos Cacos: The management team has three members on the board myself. Joe Grasso, one of the early pioneers of Argentina. He’s been recognized and awarded in Argentina. As one of the Mining Hall of Fame. One of the key persons to to open up mining in Argentina with our success. And with them our method of operating, in terms of being able to deal effectively and with respect, not just levels of government but at a community level. That’s been our modus operandi for some time. The other person on our board is Dr. David Terry, he’s a PHd geologist. Again he has an extensive experience in a number of industries, including Uranium. And most recently joining our team as a vice president of Exploration has been Guillermo Pensado, he has been very key to help us advance and crystallize the discovery that we have in the Uranium. He is Argentinian, has a long track record of mining in specializing Uranium in Argentina, which is not an easy thing to find. And he has a master’s degree from Queen’s University in Toronto. So in economic geology, so he’s been able to bring this project together. And just last September, he was awarded this Explorationist of the year in Argentina. So we have a top, top tier working for us. Also working with us is Chuck Edwards, as our technical advisor. Chuck works at a Saskatchewan and Research Council is a process engineer and a metallurgist and you know one of he’s been a consultant with the International Atomic Energy Agency. In the Uranium world he’s very well-known. I think there’s hardly any Uranium mine that doesn’t pass his fingerprints on process engineering and metallurgy. So we’re very proud to be working with him. And of course another local in Argentina is Jorge Berizzo who’s retired from the Argentinian Atomic Energy. And he headed the Exploration in Argentina and he was and still is very instrumental in being able to point us in the right direction there. So we truly have a very solid solid award winning team. And you know any any company is really the product of its people is.

Matthew Gordon: So you’re based in Vancouver?

Nikolaos Cacos: Yes.

Matthew Gordon: But working in Argentina for the last 25yrs.

Nikolaos Cacos: Yes.

Matthew Gordon: And do you sit on any other boards? Is this your core focus?

Nikolaos Cacos: I sit on this board. And we have another company called Golden Arrow, which is a Grosso Group managed company. And I sit on that board. Then that’s it. And then we have a Lithium company also in Argentina. And I sit on that board. We focus on… we manage our own shops.

Matthew Gordon: Report card for 2018. What does it look like for Blue Sky Uranium?

Nikolaos Cacos: 2018 was the year that we announced our making Resource, at that time was just under 20Mlbs. And it also that was the year that we we completed all our studies for the PEA. That got annouced actually in late February of 2019. So that was a truly a big landmark. I think we’re able to demonstrate to the Uranium world that ‘hey there is a deposit in Southern Argentina, that’s amongst the lowest cost’. It’s very similar to what they have in in Africa. Langer Heinrich or Kazakhstan Inc. Deposit. And so that’s been a really a landmark year for us going forward. If I can add, what we’re planning the next six months, we plan now to invest in exploration. Exploration is relatively cheap. So the next $2-3M worth of exploration we hope to grow our deposit, from 22Mlbs to wherever it may be. We were thinking, it has the potential to double or triple. And then by the end of the fourth quarter of this year, we’re planning to begin our engineering studies and Feasibility Studies to begin to take our project towards production.

Matthew Gordon: Fantastic. Fantastic. And what did the PEA. announcement do for your share price?

Nikolaos Cacos: The PEA announcement… it didn’t have an effect on our share price. It …we’re able to raise you know from from sub $0.15 to about close to $0.20. So you know it hasn’t been a huge huge move. The price of Uranium, although we’re seeing that in the hasn’t had last year has made a move about almost 50% has had a bit of a pull back in the first quarter and I think that’s what we’re sailing against the wind here. But we’re going to see the price of Uranium continue to pick up going forward and I think we’re good. The projects that are near production or very near production are going to be those that are going to get the biggest lift. And I think Bluesky is very well positioned for that. In the last Uranium bull market, I think one of the worst producing Uranium companies had over 2,000% appreciation. So Uranium can be a very, very profitable way to make money.

Matthew Gordon: Ok so let’s talk about the Uranium market a bit. In your PowerPoint page 5 you think. You quote a number, $65. It doesn’t say when I said I think you have. Have you and you’re going to stick your neck out and make a forecast in terms of when you think that will happen?

Nikolaos Cacos: Well I’m not a forecaster. There are others much smarter than me that read all those you know all the details that are involved in that. But I read what they write and and see what’s happening in the current Uranium market. And I think we’re going to see a Uranium price maybe not $6–$65 this year but I think once it crosses north between $30 and $35, I think there’s going to be a real rush to invest in Uranium companies. And I think that’s going to happen sometime this year.

Matthew Gordon: Well I suspect the rush will be to companies that are producing at levels which allow them to be economic at $30 or $35 because not everyone…

Nikolaos Cacos: That’s right and there isn’t that many there is that maybe most companies I think in Canada in Althabasca require a $60, $65 price at that price we would be making a very handsome profit. So we know that if we were in production today and we had an agreement with Argentina, we would be making money today. At current prices probably at best, at worst break even.

Matthew Gordon: Right. So just just help me out and help some of the viewers out here, perhaps a little bit near to this than than you. Give us a potted history. It’s been a very turbulence last 10, 15 years obviously with various events. Can you to some describe the Uranium market from then to where it is today?

Nikolaos Cacos: Sure. I mean we’ve seen the Uranium market reach about a decade ago was trading about $135 a pound. And then in 2011 there was earthquake and tsunami in Japan which knocked out the Fukushima old Nuclear power plant. And since then and what that had the effect in Japan it caused them to shut down all their reactors in the entire country so that they could examine the safety issues associated with each one so they don’t have another such type of disaster. So the effect since 2011 to now, has been that the Uranium market has been depressed because it’s been in ..the market has been in oversupply. We’re seeing a lot of the acceleration right now and a number of Japanese reactors coming back to the market. So that supply is coming. It’s been used up quite a bit. And we’re also seeing in China and India being the main drivers for new Nuclear reactors being built. I think there’s over 43 Nuclear reactors being built just in China. But beyond that, even in most emerging countries, it’s becoming very well recognized that Nuclear reactors are the best bet for creating a sustainable secure and safe supplies of energy. It’s a very efficient way how to produce electricity. So we’re seeing that in countries like even in oil producing countries like Emirates and in Saudi Arabia. So I truly believe that Argentina is another one too. So I truly believe that the price of Uranium is going to continue to rise. I think we’re going to see over $30,  $35 by the end of this year and next year there’s going to be a scramble at some point for the new Nuclear reactor utilities to acquire a steady supply of Uranium contracts. And at that point like you said, those that are either at production or very near production or those that are going to benefit the most of it. And blue sky where we’re getting very close to that stage right now.

Matthew Gordon: The Japanese market came off line after Fukushima. There was an oversupply in the marketplace, Japan coming back on line. So it wasn’t really a conception issue or a reputational issue around Nuclear per say, it was just an oversupply in the market that has effect a price in your opinion.

Nikolaos Cacos: That’s right. It was because it wasn’t… the supply became oversupply because the demand had shut down. Japan shut down, and then Germany shut down. But we’re seeing new openings now. In fact, just last week, I think even in the United States, there was an affirmation by the current government that they’d like to see Nuclear play a larger role in the US than, to bring back that  role back to a leadership role to where it used to be. So we’re seeing that if you want to produce a carbon free energy, right now, new wind and solar aren’t quite there in the efficiencies quite yet. A few years and quite a few years away, if they are going to get there. But Nuclear is definitely there. And also the cost of Nuclear building and operating Nuclear reactors is come down substantial. And they are becoming more much more viable alternatives for countries to create electricity.

Matthew Gordon: That said, you still got people here campaigning and going ‘Oh this is what we do with Nuclear waste etc..’ How do you how do you how do you counter those sorts of people?

Nikolaos Cacos: Well I mean there’s waste produced in everything. Coal produces a  byproduct of waste. There are companies that deal with that. Oil and gas produces waste their companies to deal with that. Nuclear industry produces waste. And there are new improving technologies to reduce the size of the lot of waste. They are recycling a lot of the radioactive elements and using them back into as inputs in the Nuclear reactors. There are ways to deal with that and treat with waste that are safe and secure. I think Nuclear energy is going to be playing a much bigger role in our global electricity generation in the future.

Matthew Gordon: Ok. So you have got a lot planned for this year. A few big deliverables coming… you’ve delivered a couple of things obviously with the Resource and the PEA. Got a few bit more exploration to do and then your fourth quarter activity. Do you hope that each of those things will have an effect on your share price, and positive effect on your share price, or do you think ultimately it is going to come down to the price of the commodity, the price of Uranium in the marketplace?

Nikolaos Cacos: Well the price of the commodity is going to be important. But I think as we move forward here it we demonstrate that this and prove that this deposit can grow substantially. I think when we begin our engineering studies and actually go into production at some point, irrespective of the price of the commodity, as even if the commodity is at $30, $35 dollars. But if we have a contract, and we’re producing Uranium and selling it at $50 or $60 or $70 dollars, we’re going to be priced by the earnings that we have at that point. So and I think that point will come very very soon and very quick. So all I know is yes, the environment for the Uranium price is going to be improving over the short term, over the near term. But more importantly I can’t control that. What I can control, is what we do with the company and I think we’re stepping the company in the right direction and creating definitely creating good value for shareholders.

Matthew Gordon: Have you got enough cash to deliver that activity this year?

Nikolaos Cacos: No, we’re going to have to raise funds to to embark on our Exploration. That’ll take us down to the Q3 and then at that point we’ll be raising additional funds for our engineering studies.

Matthew Gordon: And so the timing of that is what Q3, Q4.

Nikolaos Cacos: Yeah Q4 for Engineering. Yes.

Matthew Gordon: And then the fund raise itself sometime before that I guess sometime?

Nikolaos Cacos: Yeah it’s sometime probably the next month or so..

Matthew Gordon: And have you let the market and what sort of quantum are you looking for? You’re going to be raising.

Nikolaos Cacos: Oh I mean we’re we’re still putting together by their stuff but our estimates are between CAD$2-$3M. So it’s not a substantial amount of funds.

Matthew Gordon: No it’s not substantial. And obviously, the board is your significant holders. Between you you hold a big chunk of this.

Nikolaos Cacos: Yes we do. We own… between the board members insiders our families and close friends. We’ve got about 65% of the company and which is really substantial, because we’ve been funding this through a period where a lot of investors have been shunning Uranium. And we completely believe in what we’re doing. We wanted to move this along. So the biggest source of funds has been ourselves and we’ve been very good at that. I think we’ve brought it up to a very good point. I think we’re continuing to be investors and going forward. We think we’re on to something truly world class here, a new Uranium district. This is important not just Argentina, but I think in the global Nuclear world, what we have is going to be important and substantial and I think people are beginning to listen and we’re beginning to see a lot more interest from my various investors at this point.

Matthew Gordon: So yeah I think it’s you’re after the right things. You want the size of the Resource and it’s a district wide Resource, that’s what you know hopefully a world class asset. To fund that going forward that’s always going to be the difficult bit in terms of constant being on the road to raise capital and hopefully not to in a too dilutive manner. Whose the team on board that does the the hunting of the cash?

Nikolaos Cacos: It’s all that is all been internal. We have our own team here. We’ve been able… I’m confident we can raise the funds. We’ll raise the money to do the exploration program and then when we get to the engineering studies, I think at this point the engineered companies themselves will actually help fund it. Because that …the more money you raise the easier it gets. And I think we can do a combination of debt at that time and of course we’ll just look at the context of the market and see what’s best. We’re very keen I think to keep the company undiluted as much as possible because we are in turn large shareholders. I’m a very substantial shareholder of the company. We keep all our costs down. Our overhead costs. You know we don’t pay executives big salaries. My salary is absolutely negligible. You know our win is going to be showing the stock appreciation. So our interests are truly lined up with the interest of shareholders. And I think we’re getting very close to getting to that point.

Matthew Gordon: Great. And just even if you guys are sitting on 65%, there’s not a 35% floating. Is that mainly retail and Canadian retail?

Nikolaos Cacos: It’s all retail at this point. We haven’t been approaching any institutional shareholders, pre for the PEA. And I think now that we’ve got the PEA out, we’re beginning to both receive contact from certain institutions, and we’re out there marketing and making them aware of what we have. Because there are Uranium funds and other institutions that are beginning to take positions in Uranium as they can see that there’s a forecast of a near-term increase in Uranium valuation for Uranium assets. So we’re beginning to get on their radar map and I think as that continues I think we’re going to begin to see the market get cleaned up and see better valuations for our company. I mean our PEA. indicates that our current deposit has a net present value of USD$135M. Our company is valued at less than $15M million dollars so there’s almost a 10 fold disparity there. Ands I attribute a lot of that with with just being unknown at this point.

Matthew Gordon: Right. That’s interesting actually. So you think the institutional guys are starting to wake up to Uranium again and understand that the potential obviously people sort about the Section 232 in the States and I think that will have a benefit to the US Uranium producers. I can think of a couple at this point but it’s not having much of an impact elsewhere? I mean is that something which is you know it’s raising awareness in the market for companies like yourself?

Nikolaos Cacos: Well we’re starting to see that. Just last week I put participated in the town hall where there was a Rick Roll Sprott Securities. Was talking about the price of Uranium and very much a believer and some some other smart people on there talking about taking a position in Uranium now. So we’re beginning to hear more about that and beginning to see that. There’s a Uranium fund, I think that’s getting listed in London. That’s buying 10 or 20 million pounds of Uranium and stockpiling it. So we’re beginning to see these kinds of things happen right now. And so the Uranium market is definitely on the move.

Matthew Gordon: It just no one knows how quick it will move same.

Nikolaos Cacos: Well that’s that’s a million dollar question isn’t it.

Matthew Gordon: So okay you’ve got district wide asset, you’re going to raise the cash to get through to the end of the year. You think there’s a kind of general movement in the marketplace, appreciation of Uranium is this a hot topic for 2019. Hopefully the price moves along with that. You’ve got an experienced team, you’ve been in the country for a long time and you know what you’re doing and not what you know to work there. But why should anyone care about BlueSky vs. the other Uranium Explorers, whether it be Africa or elsewhere in the world. And why Blue Sky versus them?

Nikolaos Cacos: I think Blue Sky has a much better opportunity here, not just for appreciation, because we’ve got the support of the government and we can get promoted very quickly. But we plan to be in production in next year and a half to two years. So this is something that will go into production very, very quickly, relative to other markets. If you have a Uranium discovery, whether it be in an African country or even in another country like Peru or Colombia, it’ll take a long time to get permitted for production. Because the regulatory framework for Nuclear industry just simply isn’t there. Argentina has a need, a domestic need, and in fact we can we can begin to move to go into production now. But I think it’s prudent to show that we’ve got some expansion potential and then begin the move towards production very quickly. Also like we said earlier, those companies that are very, very near production or production of those that are going to get the best valuation and I think we’re very, very quickly positioning who’s Blue Sky for that. And the best time to buy Blue Sky is not at the end of the year, if the price of Uranium is moved up. Now is a great time because you know it’s undervalued. It’s unknown. I think as the year goes by and our marketing activities pick up in the price for grading picks up, Blue Sky will be on the go so.

Matthew Gordon: Well whether there’s a line this often so explain to me why you say you’re undervalued. In what context do you think you’re undervalued.

Nikolaos Cacos: Visa V are rather be the projects where we have, at the stage that we’re at and we’d PEA indicates $135M value for that. Even if it was as a PEA. if you discount that by 50% that still puts it at $60M, $65M valuation and we’re trading at $15M. That’s assets. It’s very low right now and I think we do hope to change that very quickly as you know as our marketing activities begin to pick up.

Matthew Gordon: Niko, as I said first time first time meeting you and hearing the story about the company, that’s great to hear what you’re doing down there in Argentina. Fantastic that it’s such a low cost project. I mean that’s quite exciting for you, especially with  the Uranium prices as it is. I’d love to catch up with the next couple of months see how things go, as you go for the next fund raise, and obviously moving into a bit more drilling and Exploration. So do stay in touch. And thank you for today.

Nikolaos Cacos: Great. Thank you.

Company page:

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.