Ascot Resources: Leveraging Current Infrastructure for the Pending Feasibility Study

Trevor Hall [00:00:01] Good Friday, everybody, welcome back to Mining Stock Daily. This is Trevor Hall welcoming you once again to another in-depth interview here on the show. Boy, it has been quite the week, right? A lot of red tape everywhere across the board. Lots of volatility. Gold was down, juniors are down, miners were down. I don't even know what was up anymore. And be honest with you. There's any finding any sort of green up on the board is hard to come by. But we will we will persist, won't we? Sure will. I've got a great interview with Derek White from Ascot Resources coming down the pipeline here in just a quick moment. Ascot Resources is a corporate sponsor here, a mining stock daily. They do join a great group of other sponsors are full sponsors for mining stock daily include Pacific Empire Minerals, Corvus Gold, Western Copper and Gold and Integra Resources. We also have another round of corporate sponsors. You can find the list of all those companies at miningstockdaily.com. And speaking of such a volatile week, just a reminder that we'll be joining Mickey Fulp this afternoon after the market closed for the Metals, Money and Markets Weekly. That will be syndicated on Kitco. Be sure to find it there. And you'll also probably be able to find a link on Twitter once it's published and I share it on my Twitter feed. A lot of information be covered this week, obviously, after everything that's been going on both out further do I am going to hand it over to my conversation with Derek. We have a lot to cover as well. Ascots got a feasibility study coming down the pipeline that was should be released pretty soon. We also talk about their financing that was close. Not too long ago. And also, we talked about a history of building mines up in the Golden Triangle and kind of piggybacking off of what Brucejack has accomplished up there as in terms of infrastructure. So here we are. Here's Derek White myself from the PDAC Conference from last week.

Trevor Hall [00:01:57] Have a great weekend, everybody. Be healthy, be vigilant and be well.

Trevor Hall [00:02:06] Trevor Hall, mining stock deal here once again from PDAC 2020. Pleasure to be joined by Derek Whyte, CEO of Ascot Resources, which trades on the TSX with the symbol AOT and also on the OTCQX with AOTVF. Derek. Good to see you. How's PDAC goig for you?

Derek White [00:02:22] Yeah. Thanks, Trevor. It's busy, you know, and it's always great to come to PDAC because we get to see a lot of different people. Investors fuel from the market. Mining professionals, geologists and and all the other mining companies. So it's a big, happy family.

Trevor Hall [00:02:37] How many years he would come to PDAC?

Derek White [00:02:39] I first started coming to PE back in 1990. Well, so if you see a couple cycles here, I have well, you know, a long time ago in the old days, I used to really have PDAC more in the Royal York Hotel. And some things got a little out of control back then. So I guess they had to bring it over here.

Trevor Hall [00:02:55] I'm sure you got plenty of stories to tell, but let's, uh, let's continue this to tell me Ascot story and what's going on with the premier. There's a couple of things that we want to follow up on from our conversation we had at Roundup. Obviously, we did a little bit more a high level look at the project and what's coming down to 2020. One of the things that's really pressing right now is the feasibility study. You think that should be coming out here within weeks?

Derek White [00:03:21] You know, we've kind of said to people that we would make the press release on the feasibility study by the end of March. Sometimes engineers have a disappointing on time frames. But, you know, either at by the end of March or very closely after that, we're pretty confident. We're pretty close now. So we're we're ready to go in. The big advantage we have is, look, we're not really building anything. We're refurbishing something. So, you know, we've got a lot of work done on the mill, the underground mine planning, putting the connecting up the infrastructure. So I think we're feeling pretty good about it.

Trevor Hall [00:03:51] Has the weather been a detriment to getting this thing going at all?

Derek White [00:03:55] No. You've been worried. You know, the the premier mill is probably about 700 feet because it's really just sitting above the sea level. So you do get snow, but it isn't it isn't really detrimental to what we're doing. We're underground mining. So it doesn't really matter. And in the past, you know, in the 1970s, there's a road that passes through or we are called the Grand Duke Road that used to run up to the Grand Duke mine. And they were bringing people back and forth from Stuart for almost 10 years. And then when the western time when they were running this mill, the same thing. So not really a big problem.

Trevor Hall [00:04:27] This morning, I was able to kind of sit in on about the last 10 minutes of about updates from Bruce Jack. And it made me think a lot about Premier and where you are in the process now. And I'm just kind of curious. Let's simply just first off, talk about power. Sure. You know, because I think every mine needs power. And obviously, Brucejack did a lot of infrastructure when they were up and going in developing that mine. Are you able to use some of that infrastructure that Bruce Jack in an absolutely no go?

[00:05:03] Premier, you know, the the really big advantage about this project over something like Bruce Jack is that we're close to Steward and the infrastructure was in place. And when Bruce Jack started up in 2017, an insurance company, Manulife subsidiary, built a new power plant on our property. And so they put a hydroelectric dam in and generate about 32 megawatts of power, which Brucejack was probably taking, about twelve to 14 in that range. That's 700 meters from our mill. And so Bruce Jack had to put a big power line to that power plant. But we have just like a clothesline. It's very, very close. And so we were able to use that power plant. And it was just, I think, purchased by Connor Clark in London. But the government of British Columbia was very interested in independent power. Now, on top of that, we have another power line that goes directly to Stuart, which is running our water treatment plant and used to run the mill. So we're blessed with basically two sources of power if we need it, if you need it.

Trevor Hall [00:05:59] So can you just seize one or the other? Well, we probably will use.

Derek White [00:06:03] The existing brand new power plant was built in 2013, which is closest to the mill. And we'll just keep the other one as a backup. Ultimately, you have to remember that power is tied into the grid. And so even though this power plant is next to our mill, power is sold back into the grid. And ultimately the line comes from Mosaddeq junction down to Stuart. It's all connected in one way or another. But we do have two areas where we could potentially take power from in our feasibility. We're planning to take power from the same plant that Bruce Jack takes power from. We'll put in a transformer. And, you know, he's just lucky that it's right next to where our mills.

Trevor Hall [00:06:38] Yeah. If you've built my house before and have you ever had an option of the two options of power?

Derek White [00:06:44] No, I've never had that. And, you know, typically it's just you're just not used to being so close to infrastructure. I think the other thing, you know, and obviously we've seen Bruce Jack in the news lately and they've had some difficulty with their grade variability. And, you know, that's come over the Ascot people. Are you guys exactly the same and whatever. And the answer is no we're not. You know, there's really two big discerning. Factors that I would say that differentiates us. Number one is when Brucejack estimated their resources for their long term mine plan, these things called multiple, multiple kriging, which is very different than what we're doing. We're doing a kind of more standard take kriging. And so that allows us to, I think, have a little more certainty about what we're doing. It's not quite as what I would call geo statistically done. And the second one is that although the geology is similar, our gold has followed a course breccia, which is a marker. And so you can see in our cross-sections, we don't go very far away from the courts breccia at Bruce Jack. They really can't see what they're doing. I mean, it's it's it's built into the stock work. So, you know, it's not that we're completely different. We still have some negative effect, but we do have a lot more controls over how we're going to mine. I think the other thing is that, you know, I can't say for Bruce, Jack, it's a tremendous deposit. They're making a lot of money. It's all very good. I don't think we're trying to set that expectation that we're fifteen grams a tonne or we we've kind of our resources are around eight. And that's kind of what we generally see in this area. So I think, you know, when we build our mine plan and our feasibility study will be around that great. And we'll we'll make all our estimates based on that.

Trevor Hall [00:08:20] So I have two follow up questions. I do want to ask you about the grid. But first, for people like myself who are not technically savvy, what is kriging?

Derek White [00:08:28] So the way a mining engineer and in simple terms, the way a mining engineer. So mining engineers have to think in three dimensions in volume. And so they need three dimensional space. And what we have is a bunch of drill holes that are basically points in space and we have to connect those points in space. And how many drill holes we have close to a certain point in space determines what influence they're going to have on that volume. And think of kriging a mathematical model that basically is determing using probability a distance from that point in space to that volume. So if I have three points in space, they're going to influence that volume because we mine volumes. So it's it's it's the mining engineering nerding way of basically doing a lot of math to say, hey, this is most likely what's inside this fall. OK. I think there's many methods of doing that. And the more complicated it gets, the more kind of mathy it gets into the pipe possibility. It just gets too complicated. OK.

Trevor Hall [00:09:25] Thank you. I didn't know. My other question is, I didn't want to ask you about the grade because you're looking at like maybe 8 grams per ton.

Derek White [00:09:33] Well, that's what's in our resource as well. That's when the resources know. And that's where you're seeing Bruce Jack mine right now to before an underground mine. You kind of want six, seven, eight grams per day. I mean, anything over five in gold prices are pretty good right now. So you can always trusted be said by the gold price, which means I can't. You can't. And so it isn't just dependent on the grade. It's also dependent on the mining method. And so it really depends on what's the cost of mining. But ideally for this part of the world right now, for the kind of mining methods we use, anything above five grams is generally OK. OK? And seven is great and above eight is really great. And if you're above 10, that's super.

Trevor Hall [00:10:10] So you say you don't lose any sleep over. No. OK, very good. With the with the feasibility study coming down the line, I'm sure you've taken a lot of questions about that here at PDAC.

Derek White [00:10:24] Yeah. People answer. Well, you know, you got to have to step back a little bit and you have to remember where we've come from. So two years ago, we had no resources, zero high grade resources. We had a big open pit, which is not what we're doing at all. So we've had to create those resources. And it's not very common that you're going to go from zero. No resources to a fulfills ability study in two years. And and, you know, we have to remind people that, you know, we have to build the resources first. Then we have to infill, drill those resources. And then we have to basically take the confidence level from a resource up to up to a reserve to get a feasibility study. And we completed the infill drilling in September and it would be normal to take at least 3 3 months to do all the block modeling and wire framing and then handed over to an independent engineering group that would take another three months. So although people want to have it happen, I have to remind them that we already are going at lightning speed. And even if we can get this done by the end of March, that's fairly quick.

Trevor Hall [00:11:24] Does it like going this fast? Does it make you nervous at all? Because, I mean, you are the head honcho. I mean, anything's going on you. Right? And we know if faster people go liklihood mistakes can be out.

Derek White [00:11:34] I think I think the answer is yes and no. So, of course, we don't want to make mistakes and we have to check stuff. We have to have adequate time to optimize things. But the reality is, we're not really designing anything here. And this isn't a greenfields feasibility study. This is a refurbishment of something that already existed. So I don't really have to worry about where the plant design is, right or not. It already worked for 100 years. We don't need to do anything. It's already laid out. I don't have to decide where the ball mill or the SAG mill or whether I have to remove certain types of of. The to set up the mill that's already done so that that takes a lot of the risk out of it. I think the second thing is when you have 100 years of metallurgical history, there's nothing you can do all the metallurgical tests you want for a feasibility study, but there's nothing like running a real plant at full scale. And when you have all that data, that also takes a lot of the risk out of it. So probably the area where I probably feel the most nervous is, you know, in our mine planning because we have different geometries in our mine plan. Can we actually make that mine plan work in the right way at a low cost method? And we've done a lot of work on that. And I guess we're going to have to see. But I you know, I'm the independent engineering group that we have working with, which is a group called Anabolics Board of about their come back, a very, very good underground mining engineer. So, you know, I think they feel confident that wouldn't be able to make that happen.

Trevor Hall [00:12:49] It's interesting, you were working with a company out of Quebec when you know Vancouver is filled with those people. Yeah.

Derek White [00:12:55] But, you know, there's a lot of underground mining, especially shaft mining in Quebec. Sure. And we have some. But, you know, there's probably more in Quebec. Just a bigger province and vale door. And that's an equal eagles home. But there's there's a lot of good mining people from there.

Trevor Hall [00:13:11] You know what? I'd like to take a step back away from the project, Natalie. Just talk a little bit about the gold market right now. Sure. I mean, last week was crazy. I mean, I've never seen so much volatility in my life in one way. I mean, I literally on Friday, after the market closed, I put out a tweet saying this was the most intense week in the market I've ever been through myself. Yeah. You know, as you're watching gold, as you're watching the share price of Ascot, I mean, like, do you know better to just not even pay attention to it anymore? Yeah. I mean, I think look, you have to pay attention to it. Look, pay attention to it.

Derek White [00:13:46] But I mean, I think there are certain events that are going to happen and where the entire market is coming down. And then you have to, you know, kind of you have derivative effects of those events. So margin call, LP liquidity calls people having, you know, stopgaps where they basically have to blow out stuff. And so, you know, I think what happens is it's nice to see diversification is a great thing, but it also works against you when everything's crashing. And I would say that last week. You know, I was at the BMO conference and just watching a sea of red by about Wednesday and Thursday. I feel lucky that we just completed a financing about just before this all happened. And I do think it's a short term phenomena. Generally speaking, when this kind of panic happens, gold goes the other way. But you have to remember that a lot of funds are going to be liquidating everything they have. And gold's obviously very liquid. And so they're just going to go and you're going to get a negative effect on that in the short run. I'm hopeful that the gold price is still reasonably high, especially in Canadian dollar terms. And you're going to see a kind of a fear trade probably coming in in play soon. And that generally bodes well for gold, because what you're seeing is governments and especially in the states where they're having an election and they want to stimulate the comedy economy. They don't have a lot of tools to do that. The interest rate is already very low, but they're cutting it even more potentially to stimulate the comedy. Generally, when we see low interest rates like that and kind of fear going on at the same time, gold prices do well.

Trevor Hall [00:15:11] You know, the financing was pretty good timing on your part.

Derek White [00:15:14] In hindsight, I can't tell you that we were planning on that happening, but it was nice to just get it done before this all happened. It was 10 million, ten point three million, ten point three million.

Trevor Hall [00:15:23] And then but half of that is flow through, correct? Yeah. So you hear about it flow through. You've got to go in and do more exploration where one of those exploration targets now there's four there's four key targets for us that really are nothing to do with us doing the feasibility study. Sure. And there's three targets on the premier property and one target basically on the on the Red Mountain. And the first one of those targets, as you may be aware. Back in September, we drill the hole for an Eskay Creek style target, high silver grade, which is a little different than what we've been doing in the north east corner of our property. Has the geology that's similar to Eskay Creek and our neighbors Pretium and other people into the east have been looking for these kind of things with quite good results. We put a big geophysics target up there where we laid some geophysics down. We've got a big anomaly sitting up there. It's all vectoring towards that point and that would be a summer project for us. We have to line up the drillers by the end of March. And so that is definitely one target that we're going after because it looks very exciting for us. We have capacity in a part of our mill. We're not doing that as part of the feasibility. But you're talking about grades here for my thousand ten thousand grams a ton. And there has been a number of smaller deposits to the south of us. One called Porter, Idaho, American Creek, Esti Creek itself, where they were mining just crazy, crazy, crazy, were direct shipping some of this stuff. So we have a space to put in what's called a Maral crow circuit. If we needed to aim for successful. It's a Hollywood problem to have. It's not part of this feasibility study, but we're hoping that we're gonna be able to drill that such one. The second target at the silver coin mine, you know, most of the drilling here had been to zero to 300 meters. And it's all side hill access and you generally come in at the lower point. So we're coming in about to. And 50 meters down from where the mountain is. And there would be no deep drilling. So last summer we drilled a couple one deep hole, really one good deep hole and we had three new court spread your horizons. We didn't hit really high grade, but given what we've seen on this on our own deposits, that we've got to put some more holes in there and we have an opportunity to put three new horizons on which you are very accessible for us cause we're already down 300 meters. These are about 500. Yes, I'd say 50.

Trevor Hall [00:17:32] How deep are you gonna go? Five hundred meters. Yeah. We've drilled about five meters.

Derek White [00:17:35] That's only 200 meters from where the portal is. So. So it's a it's a good opportunity for us. So we need to do some more work there and explore that, because we do believe this is kind of like layered pancakes. And we do have some deeper opportunities. The third area, sometimes we are doing exploration. It comes in a weird way. So we were doing a geotech hole for putting one of our new ramps into the premier mine and we hit some very, very good grades and thick intersections to the west of where we thought the deposit ended. And that's clearly not the case. So we need to go back and do some exploration holes there and we can get in there really probably by the end of April or early May. So that's an area that we want to go after because it's right next to where we're mining. So it's a good opportunity for us to add additional feet. And then the last the fourth area is on the Red Mountain project. There was an area south of where Red Mountain mine is, where the glacier had receded. And we've done some channel sampling on the surface and had some 30 odd foot wide veins with graded up to 20 grams a ton and looked pretty good. And so we've got to put some drill holes in there and have a look where those go and we need to do some more geophysics there. So really, the program is to kind of go after those four areas where we see pretty good upside. It won't affect a feasibility study, but it does affect all ultimately new flow as we expected to happen in 2020 and in the longer term, you know, obviously affects our ability to increase our resources.

Trevor Hall [00:18:55] So how about the other half of of financing just general working capital? Yeah.

Derek White [00:19:01] I mean, it's probably two things. So, you know, just because we do the feasibility doesn't mean the engineering stops. Right. We have got to keep going on the engineering. We're hoping to submit our minds act amendment permit. You know, we have to have some more discussions with the nation. But generally speaking, you know, as soon as possible after the feasibility study. So we have a little more work to do there. So it kind of tides us over for that kind of work that it's going to take us through the remaining part of 2020.

Trevor Hall [00:19:26] Are you in a position here with with premier were basically costs. Are you going to get more just as the development of the project ramps up mean where it you know, how do you foresee the costs of getting it to the end of 2020, let's say? I mean, do you think you're gonna have to go back and raise again twenty, twenty one?

Derek White [00:19:45] No. I think the next big thing for us is to raise the capital, to build the mine. And so once we create a feasibility study that opens up the door for debt, financiers, royalty players and equity players as well. Would you do like a 60/40 type? Yeah. Typically, you know, project financing or 60/40, this is a low level of capital, so we'd probably require less equity. We want to train. We have an opportunity to explore, you know, a pretty good reasonable levels of debt. And we have been exploring that with a number of debt players and they're really waiting for the feasibility to happen. And then we have a we have a 5 percent MSR on the premier project, which we can buy back for about 14 million Canadian. The whole 5 percent. Yeah. And so we want to buy that back because for this type of mine, that's an awful lot of holds that believe in a lot of people that own the whole place. And we would like to buy that back. And, you know, if we are going to royalty finance, we would drop the royalty to a lower level because it's worth more than the 14 million and use some of that as the. And then the remaining part as equity.

Trevor Hall [00:20:48] Yeah. I interviewed Tony Jenson at Royal Gold a couple of weeks ago. And they have you know, he basically is retiring or he did retire. And I asked him like, quote, What would you like companies with projects who need financing to know? And he said, don't turn your back on royalties because he said they're a great, healthy tool for financing projects. And you've built lots of projects before in your career. What's your thoughts on royalties?

Derek White [00:21:11] Well, I think it's it's a you know, it's a kind of a two edged sword because, you know, you're effectively deluding the shareholders at the project level. Right. But you don't have the default risk of debt. So debt has a limited upside, but it also has a very punitive downside, meaning the whole project is going to go over. So, you know, I think royalties have their place. And if you depending where your share prices, you know, you have to kind of work out. Am I willing to delude at the project level or at the shareholder level? Because you're you get a to issue a lot of shares and your share prices low. That's also going to do your shareholder. So you're kind of trying to have to match that up. The nice thing about the royalties, when you're doing them, they're not so dependent on where your share prices. They're dependent on what the projects like and what how many ounces you're going to have and what you're expiration. And they can be tailored. So some royalty, you know, some shareholders get really worried that while you're just selling it on the whole. Project, while there's many royalties are restructured, only certain sections of the lands or, you know, they have wireframes around them. So you've got to kind of go through negotiate. But they have their place for sure.

Trevor Hall [00:22:14] What about locking down future gold production sales? So what do you want? I can remember what the financial terminology is.

Derek White [00:22:23] One of the things that I've experienced in my career is what's called a gold loan. And now what they call a gold pre-tape. And so if you think of it in one of the considerations that we do in the debt is consider a gold loan. And this try and explain the gold loan in a second. So a gold loan is where instead of paying back with money, I pay back with gold and I effectively sell my gold today and I pay back in gold. So if the gold price drops in the future, I do well because I'm paying back less in dollar value. But it's really tied to my production. And if the gold price goes up, I do not as well because I'm paying back with more expensive. I think, you know, it's again, it's a balance because right now gold prices in Canadian dollar terms are actually pretty good. And if I you know, in our case, if we have enough gold production, we're talking about maybe ten or fifteen thousand ounces a year. We're still exposing the shareholder to a huge amount of upside. And you know, it you know, some people say, well, I want you to sell all your gold at the absolute highest price possible, you know, whatever. And that's fine. But I don't have a crystal ball and predict exactly when the gold price is going to do that. So it's in a pretty good shape. And people the margin that we would get by selling our gold today would be pretty good. And if it falls, it doesn't really hurt us. So, yeah, you know, I think that a gold loan is something we're narrow. What we call gold prepay is something we're going to have a hard look at all over here. All right. Well, you know, you've seen a few of them needs to do them a lot in the 80s and 90s. They've become more sophisticated because the streamers, you know, have more interesting ways of doing them now. But the entity is still gold.

Trevor Hall [00:23:53] All right. Well, let's have a conversation again sometime. OK. Derek, thanks again. Yeah, you're very. Yeah. Thanks for having me on your show. Yeah. Yeah. And enjoy the rest of PDAC. That's Derek White. He's the CEO of Ascot Resources. Ascot is a corporate sponsor of mining stock daily.

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