Emgold Mining CEO David Watkinson joined the Investing News Network to discuss his company’s progress on its portfolio of resource projects.
According to Watkinson, Emgold has taken a focused approach to project acquisition, generating a pipeline of advanced and early-stage properties in Nevada and Quebec. These are two of the top jurisdictions in the world for mining investment, according to the Fraser Institute in their 2018 annual survey.
Since mid-2018, Emgold has been acquiring quality assets available in a “buyer’s market.” These assets are often located near producing mines or advanced-stage projects, or they have some other characteristic that makes them attractive. Emgold has created a portfolio of properties that offer both opportunities for discovery and resource generation. The projects have been selected so they can be quickly advanced and potentially monetized through sale, joint venture or partnership with other juniors or majors working in the mining industry.
Golden Arrow, the company’s core asset, hosts a measured and indicated resource of approximately 296,500 ounces of gold and 4 million ounces of silver. Emgold recently optioned the New York Canyon property, which hosts what could be a significant copper–molybdenum porphyry deposit. The company has signed a letter of intent to option and acquire the Mindora property in Nevada, a property that hosts gold and silver mineralization similar in nature to the nearby past-producing Santa Fe gold mine. The property also has the potential for copper-molybdenum porphyry mineralization at depth.
Emgold has three properties: one inlying, one adjacent to and one just south of Rawhide Mining’s (RMC) operating Rawhide mine. One of these, Buckskin Rawhide East, the inlying property, is leased to RMC, creating a near-term royalty opportunity for Emgold. The Casa South project in Quebec is a 100 square kilometer early-stage exploration property adjacent to Hecla Mining’s (NYSE:HL) operating Casa Berardi mine. Each of these properties has a unique potential.
Below is a transcript of our interview with Emgold Mining CEO David Watkinson. It has been edited for clarity and brevity.
Investing News Network: Please provide our investor audience an overview of Emgold and its corporate strategy.
Emgold CEO David Watkinson: Emgold is a gold and base metal exploration company. We’re focused on Nevada and Quebec. Nevada is considered the number one mining jurisdiction in the world for mining investment according to the Fraser Institute’s “Annual Survey of Mining Companies” for 2018. Quebec is considered to be number four. We view these two jurisdictions as excellent places to do exploration and successfully develop mining projects.
Emgold has a three-step business strategy, which we adopted in mid-2018. Step one is to acquire properties that are adjacent to operating mines or advanced stage projects. We look for assets that have low acquisition costs in a buyer’s market. We also look for assets that have locational synergy when combined with other nearby projects. We believe the current negative investment cycle in the mining industry is coming to an end. We are acquiring assets we feel will quickly appreciate in value in a more positive mining investment climate.
Step two is to add value to our assets by taking historical information from past operators or other sources, computerize and reinterpret the data and create new modern exploration models for each asset. We then do modern geophysics and additional exploration drilling to add value to the assets. Ideally, our goal is to bring projects into compliance with NI 43-101 and CIM standards and to add value by defining new and/or expanding mineral resources.
Step three is to monetize our assets through sale, joint venture, partnerships, royalty agreements or other business transactions — whatever makes sense for the asset. Using a baseball analogy, we look for singles, doubles, triples and home runs. We look to create multiple opportunities for our shareholders through the acquisition and advancement of a suite of quality assets in two premium mining jurisdictions in North America.
INN: How is Emgold positioned for success?
DW: Since mid-2018, we’ve been doing a number of acquisitions. The first acquisition was the Golden Arrow property in Nevada from Nevada Sunrise Gold (TSXV:NEV). It has a measured and indicated resource of about 296,500 ounces of gold and 4 million ounces of silver. The acquisition cost was less than US$2 per measured and indicated ounce of gold.
We acquired Golden Arrow as a core asset because it has the potential to be developed into an open-pit heap leach operation, subject to additional exploration and technical studies to prove feasibility and financing. The property has a database of soil and rock chip sampling, historic and modern geophysics, over 200,000 feet of drilling and a completed plan of operations and environmental assessment, allowing for a major drilling program for resource expansion.
We just optioned the New York Canyon property in Nevada from Searchlight Resources (TSXV:SCLT). The property has had significant exploration activity on it going back to the 1960s, including over 139,000 feet of drilling. It has a historic copper porphyry inferred resource from the 1970s. An internal report estimated a historical resource of 142 million tons grading 0.35 percent copper and 0.015 percent molybdenum, with other metal credits, at the Copper Queen target. This resource was completed prior to the implementation of NI 43-101; a qualified person has not attempted to re-classify these numbers under NI 43-101 or CIM standards, and Emgold is treating this as a historical resource estimate.
More recent exploration was focused on the Longshot Ridge copper oxide skarn target. Searchlight completed a 2010 technical report that identified an indicated resource of 16.3 million tons grading 0.43 percent copper and an inferred resource of 2.9 million tons grading 0.31 percent copper. Emgold’s geologists have not verified this resource estimate and it is being considered as a historical estimate under NI 43-101 standards.
Our focus for New York Canyon will be to try to unlock the potential of the deeper porphyry mineralization that was identified back in the 1970s and 1980s, but hasn’t been the subject of exploration since the early 2000s. We think the potential is there for a significant copper porphyry deposit, subject to additional exploration.
Emgold is in the process of acquiring the Mindora property in Nevada. There’s synergy between Mindora and New York Canyon, which is located 11 miles away. Mindora has about 43,000 feet of drilling that was done in the 1980s and 1990s by companies that were looking for deposits similar to the nearby past-producing Santa Fe mine. Emgold is consolidating two blocks of claims that are being obtained from two different private companies to form the Mindora property.
Drilling at Mindora indicates the potential for a higher-grade near-surface gold and silver mineralization in vein structures. This is surrounded by a larger bulk disseminated gold and silver target that may be similar in geology to the Santa Fe mine. Historic drilling intersected molybdenum mineralization at depth, and surface sampling returned copper mineralization. We think there’s potential for copper and molybdenum porphyry mineralization at depth below or adjacent to the gold mineralization.
Emgold owns the Buckskin Rawhide East property in Nevada, an inlying property leased to RMC, owners of the Rawhide mine. Initially discovered by Kennecott Exploration, the Rawhide mine has produced about 1.7 million ounces of gold and 14.5 million ounces of silver since 1990. In 2018 and 2019, RMC completed a plan of operations and environmental assessment to expand its operations, including a major exploration program at Buckskin Rawhide East. RMC plans to drill and develop resources on Buckskin Rawhide East. If successful, RMC intends to develop satellite pits where material could be processed at the adjacent Rawhide mine’s facilities.
Buckskin Rawhide East is a royalty opportunity for Emgold, where any gold produced from our property will return bonus payments of US$15 per ounce while the gold price is between US$1,200 and US$1,799 per ounce. If the price of gold goes above US$1,799, the bonus payment goes up to US$20 per ounce. Over 61,000 feet of drilling has been completed at Buckskin Rawhide East to date, but insufficient drilling has been done to define mineral resources or mining reserves that meet NI 43-101 standards or CIM standards.
We have two other early-stage assets that are additional strategic properties. Buckskin Rawhide West is adjacent to the Rawhide mine. Koegel Rawhide is about four miles to the south of the Rawhide mine. We look at advancing exploration on these properties in the future as the Rawhide mine progresses, and we may look for additional resources.
In 2019, Emgold acquired a 100 square kilometer early-stage asset called the Casa South property in Quebec. It’s adjacent to Hecla’s Casa Berardi mine. In 2018, Hecla reported that production at Casa Berardi mine was over 160,000 ounces of gold. Our goal here is to do exploration work to identify mineral resources. One potential opportunity might be to do a deal with Hecla if we are successful in our exploration. But there are certainly other companies in the area that we could potentially monetize this asset with at some point.
We’re looking for additional assets in Nevada and Quebec to add to our portfolio. We’re also looking for opportunities to monetize these assets through sale, joint venture, option, earn-in agreements, royalties or other business transactions.
INN: Why does Emgold operate in mining jurisdictions like Nevada and Quebec?
DW: We want to work in mining-friendly jurisdictions that support the exploration, development and operation of mines. We believe that Nevada and Quebec are essentially two of the best jurisdictions we could pick in North America to work in. Exploration and mining are mostly supported by provincial and state governments in each jurisdiction. The permitting process in each jurisdiction for both exploration and mining is known and defined.
There are several major operating mines in each of these jurisdictions. Each host world-class deposits that have been developed historically, are in development, in operation today or are being developed for future production. If you’re looking for locations where you can discover, unlock resources and create value for shareholders, these jurisdictions are obviously two of the best ones to work in — not only in North America but in the world.
In Quebec, there are several geological structures, like the Casa Berardi fault, that are being explored. Similarly, in Nevada, there are geologic structures like the Carlin trend or Walker Lane. There’s a lot of knowledge that has been developed from historical exploration in these trends that can be obtained from assessment reports or other documents on file with the government. In Quebec, the government has funded regional studies for various geological areas in the province. We can utilize the data that’s produced by government agencies in our exploration efforts. Annual assessment reports on historic exploration completed by companies are also readily available from government sources.
In Canada, they have flow-through funding for exploration. In Quebec, they have what’s called super flow-through, which are tax advantage financings that allow us to raise funds for exploration on properties located in Quebec. Investors get tax credits associated with those investments into Emgold, creating an excellent opportunity to raise funds regularly to advance exploration.
Nevada and Quebec are both jurisdictions that support our business model, allowing us to conduct strategic acquisitions. They’re jurisdictions where you can quickly create value by doing exploration and then recognize the opportunities to monetize the assets. Many mining companies operate successfully in these jurisdictions, including many majors.
INN: What sets Emgold apart from other exploration companies?
DW: Primarily, it’s our strategy. We’re trying to create multiple opportunities for our shareholders. Many junior mining companies focus on one project, which can be hit or miss if your exploration programs are successful or not. One-project companies can also struggle in the permitting process for a project. A company’s survival can be based on getting through the permitting process.
What we’ve tried to do is look at putting multiple quality assets into the company that we think have the opportunity to generate success quickly. It’s a diversified approach, and we’re looking for singles, doubles, triples and home runs. We don’t have to hit one out of the ballpark necessarily, but we can still win by getting a series of multiple hits to get around the bases and get home.
We’re not looking to become a producing company, although we have the ability in the company with current management to permit, construct and operate mines, if necessary. We’re also not a project generator, in the true sense of the term, where we’re going out staking claims on a grassroots property, trying to make a major discovery, advance the asset and sell the project to a major.
Some of our assets may fit that model, but what we’re looking at is more along the line of something similar to a residential property flipper, only with mining properties. We want to acquire assets with undervalued or unrecognized potential, re-engineer and/or reinterpret them, add value through modern exploration and then hopefully flip them for a profit in a relatively short period. It is similar to buying a house, remodeling it and then selling it for a profit. The properties we are acquiring, for the most part, come with extensive databases of information that would take millions of dollars to generate if you were doing exploration from scratch today.
For example, in 2018, we acquired the Troilus North property in Quebec. We completed a technical report, exploration and then within a matter of months, we sold that property to Troilus Gold (TSXV:TLG). It sold for C$250,000 in cash, and we got 3.75 million Troilus Gold shares, which have been trading between C$0.80 and C$0.90 in the last few days. In this instance, we were able to acquire the asset, advance it and quickly monetize it.
The deal gives us exposure, as a major shareholder of Troilus Gold, to the Troilus mine that they are advancing. The Troilus mine is a past-producing gold-copper mine that Troilus Gold is trying to advance back into production. It hosts a 5 million gold equivalent ounce exploration target, based on measured, indicated and inferred ounces that they’ve identified to date through drilling.
We think we have a unique strategy in the mining industry that fits the current investment cycle and offers significant upside if the mining investment cycle becomes more positive.
INN: What is next for Emgold and how does this fit into the company’s long-term goals?
DW: In the last 12 months, we’ve acquired, or are acquiring, three advanced-stage properties: Golden Arrow, New York Canyon and Mindora. Our initial goal for these assets is to review all the historical information that we’ve acquired on each of them from the operators as well as other sources. A lot of that data goes back to the 1960s through the 1990s, so we’re looking at computerizing historical data if it isn’t already.
Next, we will re-evaluate those deposits, creating new exploration models for each of them. Ultimately, we want to do exploration to either define mineral resources for the first time, upgrade existing resources and/or increase the size of the existing resources. The goal is to take historical information, combine it with modern exploration and make projects compliant with NI 43-101 and CIM standards.
For Golden Arrow, our goal would be to try to develop a 500,000 ounce to 1 million ounce gold equivalent size deposit that has the potential to be developed into an open-pit heap-leach mine. We’re looking at expanding the resource, completing internal scoping studies and completing a preliminary economic assessment (PEA) based on the results of the scoping studies. Down the road, our goal is to find a company to acquire the asset or a partner to take it into production, if the economics justify a production decision.
At New York Canyon, we know that Searchlight identified a copper oxide deposit with a recent historic resource. However, there’s a deeper copper porphyry historical resource. We believe it has the potential to be a 150 to 400 million ton copper-molybdenum porphyry target, with other metal credits, subject to exploration success. The short-term goal is to obtain and evaluate all historic data, create a new exploration model and do some confirmation drilling to get a better understanding of the porphyry potential. New York Canyon has the potential to be a large, attractive project to a major mining company. Our long-term goal would be to advance the property to the point where we can attract a major company to partner with us.
Mindora was originally explored by operators looking for a deposit similar to the Santa Fe mine, which is located about 12 miles away. The Santa Fe mine produced close to 350,000 ounces of gold historically when it was in operation in the 1990s. There is no guarantee that the similarity or location of Mindora to the Santa Fe mine will result in mineral resources or reserves being defined at Mindora; however, the existing 43,000 feet of drilling from the 1980s and 1990s is a good starting point for exploration. Our goal for Mindora would be to develop a gold and silver resource with similar size to the Golden Arrow property – a target of 500,000 to one million gold-equivalent ounces.
There’s also porphyry potential at depth at Mindora, so we would also want to test that target to see if there’s something much bigger at depth. A porphyry system at Mindora might have synergy with our New York Canyon property, located 11 miles away — potentially two porphyry deposits located very close together.
For Buckskin Rawhide East, the property’s going to be explored by RMC. RMC will bear holding costs and exploration costs. If they’re successful, the property could generate a royalty cash flow for us. The advantage for this property is that it is an inlying property to Rawhide mine and was subject to an environmental assessment and plan of operations completed in 2018 and 2019, so if mineral resources and reserves can be identified, the permitting requirements to allow for potential mining are minimal.
Buckskin Rawhide West and Koegel Rawhide are early-stage strategic properties. We’re interested in completing rock and soil sampling and geophysics as we try to develop drill targets. The goal would be to try to find drill targets and develop resources that might be developed before entering a transaction with Rawhide mine.
Emgold’s 100 square kilometer Casa South is a large property package south of and adjacent to Casa Berardi mine. Our goal is to take historical and public data and come up with a variety of exploration targets. We will systematically drill those targets in an attempt to identify solid exploration targets and, hopefully, resources. If we’re successful in finding something, there might be potential to do a transaction with Hecla or other companies working in Quebec.
There’s certainly no guarantee that you will be successful in developing resources because you’re adjacent to an existing operating mine. But there’s similar geology and often similar exploration potential. If a discovery is made or resources defined, the opportunity to monetize assets on a property adjacent to an existing mine is greater than assets in a remote location. We think the potential for success is much higher if you’re adjacent to or near an operating mine or advanced-stage property. By having multiple properties in a variety of locations in jurisdictions like Quebec and Nevada, the potential for success rises even higher. There can be no guarantee of success, but Emgold’s strategy is designed to increase the odds.
We also have an extremely talented management team that includes mining exploration, permitting, construction, operations, corporate management and financing activities. Most of the team has 30 years of experience in the mining or exploration fields. We put together quality management with quality projects.
Emgold is looking for additional opportunities for acquisitions and to add value to assets and business transactions where we can monetize our assets down the road. That’s the strategy.
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