Aug. 05, 2015 01:05PM PSTPrecious Metals
Pilot Gold President and CEO Matt Lennox-King spoke with the Investing News Network about why it’s important for junior mining companies to dream big.
At the recent Sprott-Stansberry Vancouver Natural Resource Symposium, the Investing News Network spoke with Matt Lennox-King, president and CEO of Pilot Gold (TSX:PLG), about the company’s gold projects in Turkey and Nevada.
Pilot Gold is currently advancing the Halilaga and TV Tower projects in Turkey, as well as the Kinsley Mountain project in Nevada. It made a key new discovery at the Western Flank target at Kinsley last year, and completed a revised preliminary economic assessment (PEA) for Halilaga in January.
Of course, the falling gold price continues to put pressure on gold projects. However, Lennox-King stressed that Pilot Gold’s Halilaga is still a robust project at the current gold price, and could even stand up to a further decline.
He noted that at base-case prices of $1,200 per ounce for gold and $2.90 per pound for copper, Halilaga has a 43-percent IRR with a 1.3-year payback period, as per the current PEA. “When you plug in spot prices today, you’re still looking at a 25-percent IRR,” he explained. “You’re still paying that capital back in less than two years.”
In terms of Kinsley Mountain, Lennox-King drew attention to metallurgical results for the project. “Typically when people think of a Carlin-type gold system, or a gold system in Nevada, they think you’re dealing with something that’s refractory,” he explained. “You’re going to have a central roaster or an autoclave, so either very high processing costs or very high capital costs to build that infrastructure.”
“What we’ve been able to identify at Kinsley in our metallurgical work to date is that we can produce a concentrate. So we in theory can build a low-tech flotation plant, make a high-grade gold concentrate and sell that to a smelter, a roaster or an autoclave. It’s a huge step up for the project.”
Lennox-King also answered questions about how the company is being proactive about a looming demographic gap in the sector, what to expect next from Pilot Gold and what it takes to attain the sort of exploration success he saw at Fronteer Gold and is now seeing at Pilot Gold. Put simply, the CEO stated that it’s all about “dreaming big.”
“Even as a relatively small group, you can still have a big impact,” he said. “You need to dream big. If you come in with small ideas and be happy with a small success, you’re leaving a lot on the table.”
Watch the video for more of what Lennox-King had to say, and to find out why Pilot Gold has a surfer in Iceland on its website.
INN: Gold prices have dropped fairly dramatically this year. What does that mean for the economics of the Halilaga PEA?
MLK: That is a great question. As prices have dropped we have been able to update our economic model for the proposed mine continuously, and what you see in our base case is a mine with a 43 percent IRR, so that is at $1,200 gold and $290 copper. That pays back capital in about 1.3 years, so it pays $340 million.
When you plug in spot prices today, you’re still looking at a 25 percent IRR. You’re still paying that capital back , in less than two years. So it is still a project that works very very well at these spot prices and can go even lower and still be a very very robust project.
INN: Okay, that is good for investors to hear. And another tough one – Brent Cook is a big fan of yours, but he is very picky. I am wondering what kind of qualms he might have about Halilaga?
MLK: I would say if you look at our two projects in Turkey, we have Halilaga and TV Tower. Collectively they are 180 square kilometers, we have defined resources on both of them. We think fantastic discovery potential, as does Brent, and I’ll put words in his mouth, but I think he would like us to take a more regional view and really look at what the ultimate prize is. And we’re getting there, you just can’t do everything at once. So we are focusing on the Halilaga project itself, we are focusing on a few key targets at TV Tower that look a lot like Halilaga and we ultimately think could make up part of the same mine.
INN: Ok, and same question – what about Kinsley Mountain? It is another really interesting project.
MLK: Absolutely, and I would say at Kinsley it is very different to Turkey, where you can’t always see your targets. A lot of them are blind or conceptual targets. We have been very very successful there, we’ve hit a very exciting new high-grade zone, we’ve grown, we’ve hit another zone over the past month.
But it is more conceptual, so your hit rate is not always as good. So I would say that would be a fair concern.
INN: So you have had quite a bit of success in the past before moving under the Pilot umbrella, people with your group worked at Frontier Gold and you had quite a bit of exploration success there. So, what have you learned from that experience?
MLK: I would say a few things. Part of the biggest thing is dreaming big. Even as a relatively small group, you can still have a big impact. Whether that is drilling off 140 million pounds of uranium in Labrador, whether it is making the Long Canyon discovery and ultimately drilling that out, you need to dream big. If you come in with small ideas and be happy with a small success, you’re leaving a lot on the table. The other thing is perseverance, and a belief in the team and a belief in what you’re doing. But ultimately, everything boils down to the science. So you need to tackle things, tear it right down to the studs and do it right.
INN: That is an inspiring message in a tough market. Also I’m glad you mentioned team. I know that Pilot talks about people a lot, but in a tough market that might deter people from going into geology as a career and maybe when the sector turns around you’ll have a bit of a talent shortage. Is that something you’re worried about? Is that something you’re working to mitigate?
MLK: I wouldn’t say that I am particularly worried, but I do agree that there is a looming demographic gap. As I was making my way through university at UBC, the graduating class ahead of me had four students in it and that was coming into the rising market of the early 2000s, and there is still a gap that exists today.
At Pilot, we identify young talent very early on. So we have, just for example, one out of our US office and one out of our Vancouver office we hired straight out of university. We helped fund them through masters programs and we’ve mentored them. For that matter, we do the same thing in Turkey as well. So it is all about identifying good young talent early on and bringing them into the company, making sure they are engaged, educated and excited.
INN: That’s great. And speaking about exploration and geological work, you have been keeping very busy at Kinsley Mountain this year. Can you give a few highlights?
MLK: Absolutely, so if you look at Kinsley, the big news last year was all about something called the Western Flank. So, it is a big, thick, high-grade zone. It is a brand new discovery – roughly 8 grams over 40 meters would be an average intersection – so that really got Kinsley a lot of the limelight last year. This year we have been working on stepping out and finding the next zone, which we have, to the north of the Western Flank. So that has been very exciting.
But I think also as important has been the success we have had on the metallurgical front. Typically when people think of a Carlin-type gold system or a gold system in Nevada they think you’re dealing with something that is refractory, you’re going to have a central roaster or an autoclave, so either a very high processing cost or very high capital cost to build that infrastructure. What we’ve been able to identify at Kinsley in our metallurgical work to date is that we can produce a concentrate. So we, in theory, can build a low-tech floatation plant, make a high-grade gold concentrate and sell that to a smelter, a roaster, an autoclave. It is a huge step up for the project.
INN: Ok, and what else can investors look for from Pilot for the rest of 2015?
MLK: Really two things. We are going to continue to be active at Kinsley and TV Tower, driving those ahead. We are going to continue to work on optimizing Halilaga and moving that ahead. But also, capital discipline. These are challenging markets, we are well funded right now, but we also recognize that this is a very challenging time in the market and we are going to prudently invest our capital, so at the end of the year and in 2016 we are in healthy shape and investors can look at Pilot as, I would say, an aggressive but very well-funded company.
INN: Ok, and one final question for you – there is a surfer on Pilot’s website. What is the significance of that?
MLK: It all comes down to a metaphor. So if you think of, how do you find the perfect wave? You are going to look at current charts, you’re going to look at coastlines, weather patterns and all the rest of that. And it is really a metaphor for the exploration process, how do you identify the best opportunity? Well, you are going to look at geology maps, political risk and all those things. Then when you add up all those elements, you’re never sure where it is going to lead you. From a surfing point of view, it could end you up in Iceland, which is where the guy on our website is surfing. Or from an exploration point of view, it could end you up in northwestern Turkey or northeastern Nevada – off the main trends but somewhere where there are fantastic opportunities.
INN: Very interesting. Thanks for joining me Matt.
MLK: Thanks for having me.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.