Corporate Update with Contact Gold (Recorded from Beaver Creek)
Trevor Hall Welcome back to Mining Stock Daily from the Beaver Creek Precious Metals Summit. Sitting with me now is Matthew Lennox-King from Contact Gold. Contact Gold trades on the TSX Venture with the symbol C and on the U.S. markets with CGOL. Matt, good to speak with you. Once again welcome to Colorado, how's the first couple of days treating you?
Matthew Lennox-King Thanks for having me. First couple days--I'd say really positive. I think most years this is the best conference that we go to. I'd say this year, the fact that we've had the great run up in the gold price over the last three months in the lead up to the conference actually gives some of that buzz some legitimacy over previous years.
Trevor Hall So we've got a number of things we want to talk about this morning. But you know it is kind of a slow start to the exploration season in Nevada because there was quite the winter and a lot of snow cover. But we've seen some more drill results come in. There's some good results. Shallow, good oxidized gold and I wanted to chat about some of the misconceptions. But can you kind of run us through some of those numbers and what your thoughts are on those drill results that have come in and leading up to what's happening here in the fall.
Matthew Lennox-King Yeah absolutely, so at Pony Creek as you mentioned, we drilled roughly 4700m. We split that between three target areas--being the Bowl Zone, where we have the historic resource, the Stallion Zone which is the big, really large oxide discovery we made last year. And then what we call the North Zone of the Appaloosa Zone. So the drillers to date, that we've been releasing of all being from the Bowl Zone, and the goal in that program was to offset and grow the footprint of oxide gold mineralization. So we've been targeting 50m and 100m step-outs and we've been targeting that shallow environment to zero to really 150m. And to date, roughly 50% of all the gold we've intercepted in drilling at Pony Creek has been less than 50m from surface. So still really really shallow especially in today's context and for the most part it's been strongly oxidized as well. And that's really key.
Trevor Hall So I will preface this next question with saying I am a shareholder of Contact Gold and when those drill results came out, I was definitely enthused about them because of how shallow they were. But I do think the market at a time where is definitely rewarding high-grade results may be misinterpreted those results a little bit. Am I correct in maybe thinking that way or what do we know-- what does Contact need to do to really communicate that because of the shallowness, because of the type of oxidation that these results were really spectacular.
Matthew Lennox-King That's a really good question. And on your first point I absolutely agree that it's companies like Great Bear Resources, who were who are drilling high-grades who were getting the market love, if you will, market attention. I think in Nevada specifically, you know there are a lot of operations mining at 0.35, 0.40, 0.45 type of grades and making fantastic cash flow off that. Most of our drill results have been significantly above those. And I think at the end of the day it comes down to what are your project economics, right? You can have a gold deposit that's running 0.50 g/t, or you could have one that's running 5 g/t. And at the end of the day, they could very well have exactly the same economics.
Trevor Hall So what type of drilling results should we expect to see coming down the pipeline?
Matthew Lennox-King Yeah exactly, so we will see results from the Stallion Zone, which is the big broad oxide gold target to over 2km strike length. We've been extending that off the Northern Zone northern end. So again, we'll see, call it typical Nevada oxide grades, over big widths 30, 40, 50, 60 meters and straight from surface. So really amenable to a straightforward potential heap leach operation in the future. And then from the North Zone again, we'll see shallow oxide gold results. And I think that's really key is that we have done some deeper drilling at Pony Creek, but it really looks to us as though the gold potential is in that near-surface environment.
Trevor Hall And that's a real positive, because I mean down the line I know this is way down the line but there might be an opportunity to get the project into development and start heap leaching some of that and get some cash flow and that's one of the things I want to talk to you about is--we've had a couple of conversations with people over the last couple of days about the differences between a company in this industry and a business. And in a business you need cash flow. And so I don't want to get too forward-thinking but, as the CEO of this company do you see an opportunity down the line to actually generate cash flow or is Pony Creek something that you would better be suited kind of merging somewhere else?
Matthew Lennox-King Absolutely. There's the opportunity because you've got the shallow oxide. And at the end of the day really comes down to what's the best answer for the shareholders. Do you need to raise so much capital, even put in a small operation that it becomes dilutive and you're better off looking for a bid. But, I do I do think your point on the difference between a company and a business is really a valid one. And I would add in one other aspect to that is--not just cash flow but how do you grow and sustain your cash flow. Right, so how do you go from a single small single-asset producer, slightly larger multi-asset producer. So yeah in the right environment with the right I guess bits of success behind us, yeah, that's something that could be very interesting to us.
Trevor Hall So let's move on and we want to talk about your plan of operations and kind of what the company is planning on doing with that and just kind of fill in the investors with what your thoughts are.
Matthew Lennox-King Absolutely. So our plan of operations, we anticipate having that in the next 30 to 45 days. All the study work is done. It's in for final review with the BLM and that'll give us approximately 100 acres of disturbance. And simply put that will allow us to go anywhere that we see fit to go with the drill at Pony Creek, meaning it opens up for drilling a number of the new target areas that we just haven't been able to get to. These targets like the Palomino where you have soil samples up to half a gram of gold, Elliott Dome, which is in the very northern part of Pony Creek and is entirely surrounded by gold standard venture. So it's certainly a really key catalyst for us and we certainly intend once that's in hand to be a lot more aggressive at Pony than we have been.
Trevor Hall So if you receive that within a month or two months at the most. That puts you almost the beginning of winter, will you be able to hit those targets at that time or will that have to wait until after the winter?
Matthew Lennox-King So it's a great question. Typically, in the Pinion Range, so in that part of Nevada you can get in and safely drill really through December, with the big snows typically coming in January.
Trevor Hall Which is what we saw this year.
Matthew Lennox-King Which is what we saw this year, right. And this year, I think to your earlier point we had 200% of annual average snowpack, right, in that range, meaning a later start. Yes, so we certainly intend to get back. And then as a sidecar to Pony Creek we picked up a project called Green Springs in a low-cost purchase option. Green Springs is interesting in that it's a former--it's a past producer, small heap leach operation in the early 90s mined by USMX. And what's really attractive to us, is the geologic story there. Right, so the mining was shallow, only focused on really the first 50m and there are a number--dozens of on-mine drill intercepts ranging from 1g to 4g over tens of meters, so 10, 20, 30, 40 meters.
Trevor Hall Are those 43-101 compliant?
Matthew Lennox-King So there's no compliant resource there. Some of those drill holes are from the 80s, however some of them are from the mid-2000s, like 2005-2006. So, we have the data, we have the RC chips and it's an exciting story. It's a property that you can drill year-round, it's 10km east of Fiore's Gold Rock deposit which forms part of their Pan Mine development plan and we're genuinely excited. There's a really compelling geologic story there. There's great existing drill results and we think with really the team's expertise in these types of systems that suddenly we can use to create a lot of value as a sidecar.
Trevor Hall And it seems like it's good leverage because a lot of Juniors do not have the privilege of having more than one project, right?
Matthew Lennox-King Correct.
Trevor Hall And so, but that's a little extra work on your plate, you know, like how you prioritize where the exploration of where the drilling is and all that stuff. But it also, I think is a testament to the company looking to diversify a little bit more right?
Matthew Lennox-King Yeah, I think you know it's --diversification to a certain point it is really key. If you get hung up on permitting, access, whatever it might be--to have that one project, I think is very important. You obviously don't want to get yourself spread too thin trying to explore 10 projects at once but having that safety valve or other high-quality opportunity to create value I think it's very very important.
Trevor Hall And so--Are you there now and will you be drilling or what's the what's the process with Green Springs?
Matthew Lennox-King With Green Springs, beyond the exploration potential and sort of the regional picture that it's down there, one thing that was very attractive to us about Green Springs is it does have a valid plan of operations. So, we're going through the amendment or review process with the regulators right now and we anticipate having that in-hand realistically next week. So it is drill ready. The team is finishing up the final drill program designs and recommendations and all things being equal we'd like to be drilling there within the month.
Trevor Hall Well now that you have Green Springs and if you're going to drill it, it just means you've got more operational expenses, right? So can you tell us what your cash position is right now and how much you're looking--you're going to be spending up until the end of the year?
Matthew Lennox-King Yeah for sure. So our cash position is just over $2 million Canadian. That Green Springs program will range between $100,000-$125,000. It's low cost. It's RC drilling, it's shallow, it's fast, so that's really not a big burn at all. And then Pony Creek really depends on the timing of the plan of operations and essentially access to what the weather's doing and can we get drill crews in there safely.
Trevor Hall So you could go drill at Green Springs right now while you're waiting for the Pony Creek plan and just then transition while those assays are in the lab.
Matthew Lennox-King That's exactly right. That's exactly right.
Trevor Hall You've got a very busy couple months.
Matthew Lennox-King We do we do. But you know our shareholders are investors and we have a great institutional following. You know they entrust us with their capital to allocate it wisely and ultimately make discoveries, right. And that's what they're investing in us for.
Trevor Hall Can you fill us in about Pony Creek and GSV in that area of it as a jurisdiction. It seems like it's finally hitting the news--you and I had a conversation earlier this summer actually, in your office just about how it almost seemed like it was really quiet. And I think a lot of it was because of the harsh winter that was going on in the area. But do you feel like there's more eyes coming in that trend now or do you still think there's maybe a little ways to go yet?
Matthew Lennox-King I think it's a bit of both to be honest. I think--so the neighbors GSV, Gold Standard Ventures put out their prefeasibility study yesterday which is a solid study, shows really nice costs. So I think that'll help draw some eyes. But I think that really that part of the Carlin Trend from the interstate or Elko, down south to Bald Mountain, still doesn't have the attention it deserves, right?
Trevor Hall Do you think a lot of it has to do with Newmont-Barrick joint venture there in the state?
Matthew Lennox-King I think that has slowed down some things. I think certainly -- that's a massive operation, they need to merge together. And I do think some folks are waiting to see what happens. There are some smaller mines just to the north of Gold Standard Ventures being Rain and Emigrant, two Newmont Mines--one still in production, one currently on care and maintenance, that could be really really attractive to some folks.
Trevor Hall Matt, what else am I forgetting to ask that you wanted to make sure listeners know.
Matthew Lennox-King Look, I think that's been pretty comprehensive. I think--you know the run up in the gold price, I think seeing the Seniors and intermediate producers move and as you pointed out the select explorers who are getting high-grade results, I think those are all really positive signs. And I think the best is really yet to come in this in this nascent recovery if you will.
Matthew Lennox-King I know some analysts are thinking that after this correction in precious metals prices might be the first time when the Juniors really do move. So, we'll see if that holds true or not. But Matt, thank you so much for your time. Enjoy the rest of your trip here in Colorado. Thank you. Absolutely I will and again always pleasure to chat. Thank you.
Trevor Hall That's Matthew Lennox King he's the CEO of Contact Gold which trades on the TSX Venture with the symbol C and then the US OTC markets with CGOL.