Corvus Gold is a junior miner advancing the North Bullfrog and Mother Lode projects in Nevada, which contain 1.8M ounces of gold and 7M ounces of silver in oxide deposits. The projects have strong baseline economics and have acquisition potential.
Please note, I was compensated to prepare and disseminate this material. This document contains forward-looking statements.
The company has working capital of approximately $6.0M as at July 7 th , 2017. The current trading price is approximately $0.71 and average financing price over the life of the company is $0.85 per share. The company has 99.5M shares issued and outstanding, with no warrants. The fully-diluted share count is 106.5M. The market cap is approximately $75M. You can find more on the company website: www.corvusgold.com
Peter: Hello Mr. Pontius, nice to be talking with you here today.
Jeffrey: Hello, Peter. Great to be with you. Thanks to Anil from Stockpools for putting us in touch.
Peter: Thanks, Anil! Well, letâ€™s jump into it here, Jeff. Whatâ€™s the backstory here?
Jeffrey: I started a company called International Tower Hill Mines (ITH) back in 2006 and we made a big discovery called Livengood, located north of Fairbanks in Alaska. While that was going on, we acquired a fair number of other assets and the thinking behind those properties was influenced by my experience as managing exploration for AngloGold Ashant. I ran the North American division of that company for several years.
Jeffrey: As things progressed into late 2010, we were picking up early stage assets for ITH while trying to drive the Livengood Project down the production path. We looked around and decided that it would be best to get a more production-type management team for that single project, so I took all these early stage assets within the ITH portfolio in Alaska, Nevada, Quebec, and other places â€“ bundled them up and spun out Corvus Gold at the end of 2010 as anther exploration-focused company.
Jeffrey: As my expertise is in exploration, I transitioned over to run Corvus Gold as new management was brought in to run ITH. Corvus decided to focus on Nevada, which fit well with my prior experience in Nevada. The North Bullfrog Project is one of our projects in Nevada and it has come together nicely. We added a new asset a couple months ago called Mother Lode, which is in close proximity to North Bullfrog. Mother Lode looks like itâ€™s going to be a nice addition.
Peter: OK, thanks Jeff. That sounds pretty straight forward. Iâ€™m sure there is more to it, but I will mention that I was impressed by the management team at Corvus. It looks pretty stacked with â€œbig company peopleâ€.
Jeffrey: Yes, there are a lot of â€œbig company peopleâ€. They are people who Iâ€™ve worked with for long periods of time and are very supportive. These people know how things are going, how they should go, and what it takes to push the projects forward.
Jeffrey: That said, you donâ€™t want to push just for the sake of it. You always have to make sure the project makes sense. We spend a lot of our effort on making sure that we're putting the assets together in the right way so that they will be attractive to a potential producer.
Peter: And you know what it looks like from the other side of the table there.
Jeffrey: Thatâ€™s right. I used to work in the M&A group at AngloGold Ashanti. That was not always the most successful acquisition group, but I learned a lot there on the thought process of a producer from the purchasing side. At least, I learned that you can get outbid for a project.
Peter: Wow, what a lesson. Iâ€™ve seen people get outbid in the public markets, but it hasnâ€™t been the order of the day lately. I have no idea what it is like to sit down with a major and strike deals for acquisitions. It seems that must be a really hard job.
Jeffrey: There is a lot of hurry up and wait. Acquisitions have to be driven by some fundamental need within the company for certain types of assets, whether for the stage of asset, jurisdiction of asset, or so on. All those things come together beyond just purely the economic potential of an asset. These attractive features often persist for quite some time, as well, and it means that things can take longer than expected.
Jeffrey: There's a lot of other moving parts in big companies and metals producers generally. Some parts of this are attractive and others are unattractive. It's not all driven by a spreadsheet or information from a news release. There has to be a need within one company that can be filled in some way by assets of another.
Jeffrey: My perspective at Corvus is influenced by my own experience, as are the others on our team who have gone through similar things. Mr. Steve Aaker is on our Board of Directors and he was Chief Operating Officer for Franco Nevada for many years. He went through many acquisitions there.
Jeffrey: Ms. Catherine Gignac is the Chairman of our Board of Directors. Catherine is great. She ran Northland Capital, so she's actually been on the banking side of acquisitions. She went through things like St. Andrews and other events in the space.
Jeffrey: Mr. Ed Yarrow is a longtime friend of mine. He and I worked together in the Anglo-American Group. Ed ran the Northern Hemisphere for Anglo-American, if you can imagine that. It was more of a base metals group at the time. He went through a number of acquisitions within that group.
Peter: Amazing. I see that he recently retired as VP Exploration.
Jeffrey: Yes, that's why he came onto the board with us. Ed and I weâ€™re on the board of Anglo-American Exploration North America, which had the Pebble Project up in Alaska. We've seen a lot of stuff go by and have a good sense of what it is going to take to make Corvus into a highly attractive takeover target.
Peter: The M&A groups from the majors sometimes get a bad reputation. Do you think you've learned something from what you've been through yourself or watching others?
Jeffrey: (Laughs). Thanks, Peter. We could talk for hours about that.
Jeffrey: I think the mining sector is great. If you hang around long enough, then you see a lot of things. I've been here a long time and it's been great to see things from both sides of the street and then to have that skillset on the Board really challenges me to bring my best to Corvus. These board members are highly effective people we have brought in to lead the company and are also great friends. We have some candid conversations about just these sorts of things and what we should do about it in the future.
Peter: Great, thank you Jeffrey. I will also give a brief shoutout to Mr. Anil Mall, who is the President of Stockpools that you mentioned earlier. I know Stockpools benefits very much for your sponsorship. Thank you, Jeff.
Jeffrey: Youâ€™re welcome, Peter. Best of luck to everyone participating in the Stockpools stock picking contents.
Peter: It is funny to consider all of us out on the internet talking about companies like Corvus, trying to figure out what you guys are doing in the boardrooms and in the field.
Jeffrey: Well, we have found that things move smoothly in both the boardroom and the field for us.
Jeffrey: We started with the discovery of a low-grade deposit at North Bullfrog back in 2011, which looked really good when gold price was in $1,400-$1,500 range. In 2013, we found a higher-grade part of the system. It had quite good grade, over 2 grams per tonne of gold. We believe that has good potential as an open-pit mine with very low strip. To put this in perspective, the average open-pit gold grade in the world now sits under 1 gram per tonne.
Jeffrey: As the gold price continued to drop, we found that the higher-grade part of the system helped make the whole project look good. Then, we found some regional opportunities.
Jeffrey: The Mother Lode is one of these regional opportunities and it has worked out great. That project went through mine closure at both the State and Federal in the USA. Once it came out of closure, we were able to get the property. We negotiated a deal with Goldcorp that made sense for us and they liked it. This is going to be a great asset for us to bolt-on to our existing mine plans.
Jeffrey: Our real goal is to get out there with a project that can produce about 200,000 ounces a year with the lowest quartile cost below $600 an ounce and do it for about eight years. We think this new asset is going to give us that kind of production profile and we think we can probably extend the mine life beyond that.
Peter: So much that comes up in your few comments there, Jeff. Iâ€™m very interested to hear about you acquiring a closed mine there at Mother Lode. What an interesting approach. It is not a strategy that I have seen anywhere else before, but I like it.
Jeffrey: It is a unique opportunity. We had our eye on it for about three years and it has a large resource associated with it that was never mined. It was a unique opportunity. The mine was closed because gold price dropped into the $250 range and they couldn't make it work. It went through a couple big acquisitions, where Rayrock was purchased by Glamis and then Glamis was purchased by Goldcorp. Throughout that, the property got into that closure circuit, which meant the exploration guys couldnâ€™t look at the project. It was kept in the closure circuit because they didnâ€™t want to take on reclamation liabilities and things like that.
Jeffrey: We needed the project to go through full closure and sign off on both the State and Federal level. As soon as that happened, we approached Goldcorp and made the acquisition of the property. Itâ€™s a terrific exploration opportunity. It hasnâ€™t been drilled since the 1980s. I actually did a lot of that drilling myself back in those days. We drilled vertical holes and only ever drilled down 500 feet because nobody would ever mine anything deeper than 500 feet. There is quite a bit of mineralization that sits below the drill pattern that we have observed at Mother Lode.
Jeffrey: There's a high grade structural zone that goes right through the deposits and off to the north and we'll be able to really accentuate that part of the deposit with new drilling that goes in at an angle, which is typical. We're also going to drill down and look for multiple zones at depth. This is a wonderful old property that really has not seen any modern-day exploration since the 1980s.
Peter: It is amazing to hear that Glamis Gold owned the Mother Lode property. What an interesting piece of history there.
Jeffrey: Yes, they got it when they purchased Rayrock. It was an orphan property back then as it was in closure mode. As I mentioned, once projects get into closure mode they don't often come back to the exploration guys within the same company. They want to establish full closure on the site. They don't want geologists in there mucking around. drilling more holes, and making more mess. We look for unique opportunities like this, we look for them all the time. There are not many out there, but this was a great one. The average grade in the historical resource estimate is 1.6 grams per tonne of gold, which is a very good grade for an open-pit target.
Peter: With all your team's experience in the producers, you know the ins and outs of full closure. You know that it means it would not have received any exploration attention for quite a while and there may be some crumbs still laying around. Interesting.
Jeffrey: Thatâ€™s right. These can be great opportunities if you can find them. They don't come along very often but if you can find one you really need to jump on it.
Peter: And did you say that Glamis was the one who first put it onto the closure track, or was that done by Goldcorp?
Jeffrey: The original owners were Rayrock and they scheduled it for closure, but never had the money to do it. When Glamis purchased Rayrock, this Mother Lode project went right into Glamisâ€™ closure group. It never really received any exploration by the Glamis exploration teams. If it had, then I'm sure there would be a bigger pit there right now.
Peter: Did that closure process start of around 30 years ago?
Jeffrey: I believe it started in 1996 when Glamis purchased Rayrock. As Then Goldcorp bought Glamis Gold back in 2006. Mr. Kevin McArthur was CEO of Glamis at the time and he ran Goldcorp after the acquisition. The mining business is quite a small world â€“ Kevin and I worked together back in the 1980s when he was the engineer and I was the geologist at the Alligator Ridge Mine.
Peter: Was that the one that you were saying you drilled yourself in that area?
Jeffrey: Well, that was one of them. Iâ€™ve drilled dozens of projects in this area. As I mentioned, we previously drilled vertical holes in the 1980s looking for tabular sediment-hosted deposits and would rarely drill deeper than 500 feet. That was just the way things were then, back when gold was $300 an ounce and mining wasnâ€™t always very lucrative.
Peter: But this new technology of heap leaching changed the economics to a great degree at that time.
Jeffrey: Thatâ€™s right. Heap leaching is why we could mine open-pit deposits at gold prices of $300 an ounce. Large-scale, open-pit mining that could take advantage of the economies of scale.
Peter: Have you focused mostly your work in Nevada yourself?
Jeffrey: Some of it, yes. I'm a typical geologist â€“ I've worked all over the world on different projects. I would say that a lot of my success has come in Nevada, although I was involved with the discovery and development of the Cripple Creek Project in Colorado, which is now about 35 million ounces. It's a big discovery and that was with a company called Nerco and then after that a company called Minorco, which was a large company similar to Anglo-American. Of course, I was also involved in Livengood up in Alaska, which is about 20 million ounces now. That was a big discovery. And I have been involved with a few smaller deposits in Nevada, one called Elder Creek and another one called Yankee South in the Alligator Ridge area.
Peter: Your North Bullfrog project is located in the Walker Lane area, which is a pretty interesting geological area as I understand it.
Jeffrey: Yes, it's a very productive area. Particularly for open-pit, heap-leach oxide-mill type targets. There have been around 50 different mines developed in that belt. It's been very prolific.
Jeffrey: Its Miocene age, which means the gold deposits in that belt are roughly 10-15 million-years old. There are big ones in there, like Round Mountain with 25 million ounces and the Comstock, which is well over 30 million ounces gold equivalent. It hosts some big deposits. The biggest one in our area is the old Bullfrog deposit. A little less than three million ounces were mined from Bullfrog by Barrick and that provides us with a great model. The mineralization we have at North Bullfrog and also the Mother Lode are both very similar to the Bullfrog deposit. That's an important analogy for us to have in the area as it was a great deposit. It was a real winner.
Peter: Only 10-15 million years old?
Jeffrey: Yes, that is the age of the gold mineralization. For comparison, the big trends in northern north central Nevada, which host 100-200 million ounces of gold, are more around 40-million years old. They are a little bit different than what we have in the Walker Lane geologically, but also very lucrative deposits.
Peter: I didn't realize they were that young.
Jeffrey: Yes, the mineralization is fairly young. Cripple Creek here in Colorado in the middle of the Rockies is also 40-million years old.
Peter: That seems so young compared to some of the mountains in the area, like the Rockies.
Jeffrey: Yes, there are some intrusive rocks in the Rockies that are 1.6-2 billion years old, but the actual mountain range itself is 40-50 million years old. It's not eally that old, especially in comparison to places like the Abitibi in Canada that produces a large amount of Canadaâ€™s overall gold production from rocks that are 2.6-2.7 billion years old. There's definitely some older-type mineralization in that region.
Peter: And for your projects in the Walker Lane trend, I suppose that there have been good pathways for the fluids to come up near surface?
Jeffrey: The deposits in our area around Beatty are 10-15 million years old. Just about everything is at the same age in that area. At that point in time, the Walker Lane was a crystal boundary between North America and the Pacific Plate. As these two big plates of rock move, there's a big fault zone â€“ that is the Walker Lane. As that fault zone moves, it creates a lot of subsidiary structures. There is a lot of movement on that fault zone at about 10-15 million years ago. Some of that movement even created significant volcanic activity and the volcanics are the host rocks for this mineralization. They are both about the same age.
Jeffrey: You have volcanoes going off and creating a lot of heat, which enables solutions to circulate within big structures created by this big fault zone. In the structural zones, there are quite high gold grades from 1-5 grams per tonne. In the surrounding volcanic rock, which is a spongy kind of rock that has good permeability, the solutions move out and create lower grade halo of mineralization around these higher grades zone. It's a pretty simple model that we have to chase.
Peter: And I would imagine that ties into the low strip ratio, as well?
Jeffrey: It helps that everything is happening very near-surface. It always helps when the gold is easier to access, but our projects also benefit from the fact that we have oxidation to very deep levels. That oxidized material could be put on a heap leach pad and likely provide good recoveries. This type of heap leach is one of the cheapest ways to extract the gold.
Peter: I believe that Iâ€™ve heard the clays can be a problem with oxidized materials. Is that an issue here?
Jeffrey: Well, it is something to watch for. It does happen in the broader area, but the main alteration event in our specific area was not a clay alteration event. It was an alteration event, which creates a hard and almost like porcelain-like material. The rock is hard and durable. It creates a great product to go in the heap leach pad with good permeability. You don't have to agglomerate it, which means you don't have to make it into little balls with cement so that solutions can keep going down through the leach pad. All of that is an important, favorable feature of the deposit that allows us to have a very low cut-off grade for the heap leach pad.
Peter: Great, thanks for addressing that. I had encountered some people who said that your assumption of a cutoff at 0.1 g/t gold was unreasonable.
Jeffrey: Well, it is similar to the operating grade that we see at some of the other surrounding deposits like at Round Mountain and other similar low-grade places like that. In other parts of the Walker Lane, you also get high extraction rates for gold from this type of material. You can get a lot of the original gold in the ore out with this heap leach method, you have a very low strip ratio to begin with, and it doesn't cost you very much to move a tonne of rock to actually put it on the pad to get the gold out of it. It's all a function of economics at that point.
Jeffrey: The real gem out of all of this is the higher-grade part of these deposits. They are the things that can really make a deposit work and give you great return. In some cases, you move the low-grade material to get at the higher-grade material. You may make a little bit of money on the lower-grade, but what you're really doing is deferring the strip ratio for the higher-grade material.
Peter: Now, I'm looking at a cross section from the technical report â€“ Figure 7-12 from page 80. It's a geological cross section through the structural zones and it seems to show mineralization starting at 50 meters from surface there.
Jeffrey: In that area, it varies somewhere between about 20-50 meters of fairly barren low-grade type material over top before we get into the better grade mineralization.
Peter: And it appears to be steeply plunging. Would you call that a chute?
Jeffrey: There are chutes within that zone where you have quite high grades 5-10 g/t gold. Those are the good parts of the system and will be targeted first when you start mining. You try to mine the highest-grade material first.
Peter: And it looks like some of the deeper holes that you have there are ending approximately 250 meters below surface â€“ I am looking at holes NB-14, 385 and 343.
Jeffrey: Yes, that is about as far down as we've drilled so far. We certainly have an opportunity to extend the system at depth with some deeper drilling, but we have not done that yet as we had good success moving along strike. We decided that we could make a lot more progress by drilling shallower holes along strike rather than drilling deeper holes and extending the system at depth. We do have a plan to see how deep that system goes in the future.
Peter: Thanks, Jeff. Great to hear that you have been able to establish continuity along strike as these areas along the Walker Lane can get chopped up by all the geological movement.
Jeffrey: Yes, it was critical for us to establish good continuity. These stockwork-type systems can have significant fault dislocations. It can be quite a complicated venture to try and put it all back together. We were very fortunate in this case, as we were able to put the deposit together and show that it held together well long strike.
Jeffrey: We did some additional drilling last year to look for an extension to the north and test a couple other structural zones that looked similar, and we had good luck there. We're coming out with a new revised resource and PEA that should be out around the middle of October. It will incorporate about 20,000 meters of additional drilling.
Peter: OK, thanks for that information. I was not aware of that. Looking at the â€œHistoryâ€ section of the existing report there and I see there are over one-hundred years of activity in the area. You guys have a large property there, it looks to be approximately 10 kilometers wide.
Jeffrey: Our property is about 72 square kilometers, which is a big land package. We've done surface exploration over most of it now and have identified a number of structures that look quite attractive. We will consider drilling some of those, but the first order of business for us right now is to work on our new acquisition â€“ Mother Lode.
Jeffrey: Right now, there is a historic resource of about 430,000 ounces at Mother Lode. With this next drill phase, we believe we will demonstrate that we can establish and possibly expand the resource. Then there's another opportunity to drill below the system into another mineralized zone that is about 100 feet or so below the bottom of the existing drilling. We have a few scattered holes that indicate there could be mineralization hosted by the carbonates underneath the current deposit. If that's the case, then it could be a much larger deposit.
Jeffrey: Sometimes we refer to this sort of mineralization as the drippings off a roast. Seeing as it is only 100 feet below our other holes, it represents some low-hanging fruit as an exploration opportunity. We'll be going after that first and foremost as we move the Mother Lode project forward. At this point, that lower area looks like an exciting way for us to add a lot of ounces at quite good grade.
Peter: â€œThe drippings,â€ eh? I like it. Afraid I have not heard that before. Is that a standard deposit type?
Jeffrey: It is more typical of the mineralization that we see in north-central Nevada, which is called sediment-hosted or Carlin-style mineralization.
Peter: Great, thank you.
Jeffrey: And there is some precedent for the same type in our area. There was some drilling done to the south of our property that intercepted a favorable carbonate unit. It was mineralized and had good gold intercepts in it.
Jeffrey: The structural picture in the Mother Lode there is similar to North Bullfrog, where we have a deep thrust fault or low-angled fault that underlies the whole mineralization. We refer to that thrust as a detachment-type fault. The lower plate or rock unit below that big fault is this carbonate unit. It is a thinly-bedded, silty carbonate unit, which is very favorable for this type of mineralization.
Jeffrey: In the Mother Lode area, the carbonate is at relatively shallow depths and is called the Roberts Mountain Formation. It is quite a large structure in Nevada and is very favorable rock. Millions of ounces have been found in this rock in the north part of Nevada. If we have a well-mineralized section of it here, then it will be a big story in Nevada.
Peter: These are such large-scale phenomenons that you are talking about here. The detachment faults can be very interesting.
Jeffrey: They are one of the main structural features that contain mineralization as we go from our area of Nevada to the south into Arizona and southern California. Those big detachment faults give us things like the Picacho Mine and other significant mines to the south of us. As a geologist in this part of the world, they are really the things that you have to hone in on. We are getting a handle on those structures on our property. We have a very good sense of the ones at our North Bullfrog property and we believe we can now transfer that knowledge to our Mother Lode property as well.
Peter: And the town of Homestake is right in there as well in Arizona. Is that the namesake for the Homestake Mine?
Jeffrey: No, the Homestake Mine you are probably referring to is located in South Dakota. It's a whole different scenario â€“ a much older gold deposit, maybe a couple of billion years old. It is a very different style of mineralization than what we have down here.
Peter: Thanks, I keep hearing about the â€œTown of Homestakeâ€ here and there or the â€œHomestake Mineâ€. There seem to be a few of those out there. Regardless, I have heard some interesting things about the geology of Dakota. It seems to be flying under the radar for most people, but is broadly prospective.
Jeffrey: One of the companies that recently invested in us, Coeur Mining, has a new project up there that they're working on. It is at the old Wharf Mine and they are having very good luck up there. They are very active in that area.
Peter: Great, thanks. Looking at the list of investors in Corvus Gold mentioned in the presentation deck is quite impressive. Tocqueville is always a compelling name with their long-term vision for the gold markets.
Jeffrey: Yes, we are definitely fortunate to have received investment from these distinguished institutional investors. However, the large holdings by institutional and long-term investors decreases our liquidity. The liquidity in Corvus stock is only about 15 to 18 million shares a year. Thatâ€™s a good problem to have, but it can still be an issue.
Jeffrey: You mentioned Tocqueville, Peter, and I can't say enough about them. The support John Hathaway has given me over the years has been very meaningful to me. He has bet on the jockey in some ways.
Jeffrey: AngloGold Ashanti is my old company and they have been great supporters as well. They have written checks every time weâ€™ve asked them to do so, for which we are eternally grateful. They are shareholders, but are not involved in the company beyond that. They have no special rights or representation on the Board â€“ they are just waiting to see what I come up with next!
Jeffrey: The Resource Capital Funds have also been supportive. They are based here in Denver, which is where our headquarters is located. VanEck is another good group and it is specifically Joe Foster's managed fund that invested in Corvus. Osisko Mining are another good group that are very focused on exploration. Of course, Goldcorp has a small position in us from our acquisition of Mother Lode.
Jeffrey: Now, Coeur Mining has invested into Corvus and has an option to take a much larger position that could take them over 10%. This a very good group of people invested in the company and we continue to have a lot of sophisticated investors looking closely at the projects.
Peter: Interesting to see Goldcorpâ€™s ownership in Corvus is at 1%. What were the terms when you acquired Mother Lode from them?
Jeffrey: When we purchased the project, Goldcorp wanted shares in Corvus rather than cash. We gave them one million shares for the Mother Lode project, which was quite a good acquisition for us. We basically bought a historic resource for under $1.50 per ounce of gold. That was a really good deal for Corvus.
Peter: I am pleased to hear that they did not take a large equity position in Corvus. I would imagine you could end up in a tough position if they had a large stake but weren't as committed to the story as much as some of the new names like Coeur coming in.
Jeffrey: Well, Peter, we will see how it all goes. At this point, I would like to have the mining companies as shareholders. It's helpful in many ways for both parties. It keeps them fresh with the news because they pay attention. The M&A business is all about making sure that you get your story to the right guys at the right time.
Peter: That sounds a bit different from my experience with public markets, which seems to be more about getting your story out to everybody!
Jeffrey: Well, we definitely try to do that as well. Ultimately, Corvus is not a mining company. We are not going to be building or operating a mine. My experience over the years, which is mostly with big companies, was that building and operating a mine are both very unique skill sets. We've seen a lot of juniors that have tried to do that and failed, and it has been disastrous for their shareholders.
Jeffrey: Our skill set is to find gold deposits and bring them to the point where we can prove that these are compelling development stories. Then, we need to pass this project on to groups who can take the project to the next level so that our shareholders can benefit from their skill sets.
Peter: Youâ€™ve been advancing things through some pretty tough times over the last years here.
Jeffrey: Yes, but we just keep doing what it takes to build that trust and support among your shareholder base. Particularly, it has been important to bring in new shareholders to keep the story moving forward so that we can get to the point where somebody comes in with a nice offer for the shareholders that makes everybody happy.
Peter: I am looking at a picture of the historic Bullfrog Mine in the presentation on slide 11 and it's just beautiful. And there was another picture that shows a highway and electricity lines running nearby.
Jeffrey: From the start of Corvus, we had a particular idea about how to deliver value for shareholders by creating a compelling transaction story, an exit strategy if you will. This is an important thing that some juniors seem to overlook.
Jeffrey: When an M&A group looks at an asset like North Bullfrog, they need to tick a lot of boxes. Does it have water? Does it have access, power, local support? What's the permitting environment like? What are the cultural clearances like? What are the characteristics of the rock? We know what that process looks like, so we basically did that ourselves when we vetted the project.
Jeffrey: We have already started to move along the permitting pathway so that this project is pretty much a turnkey deal that can come online within about three years. That is key for a potential acquirer because one of the main motivations of these M&A groups is to find assets that will fit into the companyâ€™s larger production profile at the right point in time.
Jeffrey: They need to take advantage of these ounces at this date because they are planning to reduce production by some percentage at another mining project. They need to fill those holes and they want to see projects that can come online quickly. There are a lot of holes appearing in the production profiles for major mining companies right now. We are aware of that and have used that to guide our choice of projects. We want to be in the right place at the right time with this project as an attractive transaction for just such a scenario.
Peter: And to have a high degree of certainty around the production profile for your particular project is very important in all of that.
Jeffrey: Yes. We believe that these projects will offer a high degree of certainty around permitting and operations, which will help make them great candidates to help support another companyâ€™s production profile.
Peter: I am looking at slide 13 from the deck and I have a few questions. I see a few red stars marking new drill targets for 2017 and several more blue stars for pending drill targets. My first thought is â€“ wow, that's a lot of exploration work. A question of clarification, though, is this map referring to the North Bullfrog project area?
Jeffrey: Yes, this is just at North Bullfrog. This is the Eastern area, which is a steam-heated area that is fairly new for us. The deposits are outcropping in the western part or the left-hand side of that graphic, so that has been a bit easier for geologists to work on. It's a lot easier to go explore in those areas as you can sample gold mineralization at the surface in those areas, so that's where we focused initially.
Jeffrey: As we got to the Eastern area, we found that there is alteration covering the exploration targets and that makes it a little more difficult to determine what is going on. We get little cracks every now and then where solutions will come close to the surface, which we can sample to show that there is gold in those systems. We will drill those showings at some point, but there are a lot of targets yet to be explored on this part of the project area. We are working our way through them.
Peter: And where are the planned mine site in relation to these exploration targets?
Jeffrey: There are a belt of deposits that run along that western side of the property, which is the left-hand side of that graphic where you see the green and blue colors, and that is where most of the current pits that we have planned right now are located.
Peter: OK. Around Sierra Blanca.
Jeffrey: Yes, Sierra Blanca is one of the larger ones with around one million ounces of gold. Then there is Jolly Jane, which has 43-101 estimate of around one-quarter million ounces. Mayflower down to the south has about 100,000 ounces, as well. It's not very large, but it looks like we'll be expanding things to the north of Jolly Jane and at the Savage area. We're also working on some mineralization out in this Cat Hill & Connection area and will see if we can turn that into a deposit.
Peter: I saw a mine plan diagram in the technical report that seemed to suggest the mining would occur in a pretty localized area, but we have talked about how you've been able to establish that mineralization along strike. As you just said with Jolly Jane and others, there quite a few areas you can expand into. Do you expect for a few of these areas to be included in the mine planning scenarios at this point?
Jeffrey: No, not yet. Anything thatâ€™s an exploration target still requires more drilling. How we're going to expand the current resource with the new study is by focusing on the north end of the Sierra Blanca deposit. That's where we found a couple new vein systems and those will get incorporated into the resource estimate. We plan to expand that pit to the north by maybe another half-kilometer or so and make it wider. Most of our drilling was focused right around the existing deposit and that will allow us to capture most of the ounces there.
Jeffrey: Some of these new things will require more drilling before we can eventually assess whether there are deposits there and how big they are. We are working on several levels right now. The district is going to get a lot bigger. The mineable ounces are going to get a lot bigger. Typically, these things start with one project that has a couple million ounces and then continue to grow through the life of that project. You end up with projects that have lives of 10-30 years and end up being a lot bigger than they started out.
Peter: Great, thank you. I put this very question to Chris Hinde recently in an email exchange after a S&P Global web conference event that they hosted. Some people will be concerned about the apparent short mine life for a particular project, but I've heard others say that there have been mines in operation for the last 50 years that only ever had 5-10 years of mine life at any one point in time.
Jeffrey: That is typical for some projects in the mining business. A big part of that is the mathematics of the project valuation. After 8-10 years, the net present value of an asset drops substantially. You might have many more ounces out there, but they don't really bring any value into the project because they are heavily discounted. We typically try to put projects together with an 8-year life, which we have found to be an optimum from the perspective of the mine development professionals. However, the development teams know that there will be additional exploration done at the site over the years and it has the potential to keep growing.
Peter: It is amazing to see the mine plan, the heap leach pad, and that conveyor belt in your proposed mine plan. It looks like that conveyor belt is almost a kilometer long! That is not something Iâ€™ve encountered before, but seems like an interesting example of subtle, sophisticated engineering decisions. I wonder if it also ties into increased technological sophistication of the project in the USA. A topic for another day.
Peter: I am also looking at a map that puts these exploration projects into context with the broader land package you have. It seems like you may have something big there.
Jeffrey: And for the producers with operations in Nevada, there may be operational synergies that make these projects much more lucrative than would be reflected in a PEA or 43-101 study. We are obligated in those studies to assume that all important assets will be purchased new at full price. Mining companies that are active in the area have an opportunity to bring significant cost savings.
Peter: And looking at the map from the presentation showing a couple historic mines on the border with California. Are there any active mines nearby North Bullfrog?
Jeffrey: The nearest project to us that is currently active is a small one to the north operated by Scorpio Gold. Then, there's the Golden Queen mine down in California to the south of us. They are also redeveloping the Sterling mine as we speak right now, which is only about 20 miles away from us.
Peter: And just to clarify for me the history of Corvus Gold. When it was spun out from International Tower Hill, did it include North Bullfrog at that time?
Jeffrey: Yes, it did. Corvus received North Bullfrog, a series of projects in Alaska, a project in Quebec, and another project in northern Nevada. There were a number of projects at the start, but we have now focused on the North Bullfrog project. We believe thatâ€™s the one that is really going to make it.
Peter: And the Mother Lode was an acquisition from Goldcorp after they had gone through the closure process with the government?
Peter: I believe you said there was a resource at Mother Lode, is that 43-101 compliant at this point or not?
Jeffrey: No, it's not. It's an historic resource. We will be doing a drill program starting September to confirm that resource. That program has a big exploration component as well, where we think we will be able to expand the known deposit. We expect the drilling to bring the estimate up to 43-101 standards and will be completed over six months.
Peter: Great, I see a photo of that timeline on slide 16. Your deck is full of good information, thank you. I also see that there is an existing pit at Mother Lode, which is fairly small. I believe you mentioned earlier that the mine was stopped because of low prices.
Jeffrey: Yes, thatâ€™s right. They were only able to operate it for about two years. They produced for about a year-and-a-half and produced about 35,000 ounces in total. As the gold price dropped, they had to shut down. The company went bankrupt and then Rayrock came in and bought them. Before Rayrock was able to start re-developing the asset, Rayrock was then purchased by Glamis and then the project went into closure mode. Gold prices were projected to remain low, so it just stayed in the closure track. When Goldcorp took it over from Glamis, they probably increased the pace of closure work and really got the job done. They did a great job closing that mine site.
Peter: And a good opportunity for you that they would close it! Looking at all the dots of exploration in the area, is that 172 existing holes in one area?
Jeffrey: Yes, it was a heck of a transaction for us. We bought basically what today would cost us probably 20 million dollars to get done. We benefit from all that drilling. It's going to be great.
Peter: And looking at another map, I see that they are very close to each other. I didn't realize how close Bullfrog and Mother Lode are.
Jeffrey: In a direct line, they are about 10 kilometers apart. By road, it looks to be approximately 25 kilomteres from Mother Lode to where we plan to locate our mill facility. We may reduce that as we can set it up for big haulers to use overland travel, which would mean that we don't have to use the highway. If we choose to move ore from Mother Lode to the north, then we can do that. If we choose to move the higher-grade ore from North Bullfrog project to the south, then we could do that as well. There could be more ounces at Mother Lode. Either way, it will be very efficient to transport it.
Peter: Thanks, that helps tie it all together for me. What a great acquisition Mother Lode is.
Jeffrey: It's the right grade, it's the right place. It has tremendous exploration potential and I think there is going to be some very good news flow over the next nine months as we drill this thing off, get the resource done, and prepare an integrated PEA. I believe it is going to be very compelling at that point.
Peter: Looking at a district map, I see some dotted lines indicating faults. I see it is sweeping around, in-line with the highway there. Simply to say that it is good to see some bends in the structures around where your properties.
Jeffrey: Yes, those are the big detachment faults we discussed before. These are big features that go for miles and miles. These are great master structures to be around because they really break a lot of rock up in between.
Peter: There's seems to be no shortage of fault activity in the area. Is there any sense of a regional connections between North Bullfrog and Mother Lode at this point?
Jeffrey: Not really, other than the fact that the main controlling structure is a north-south structure for North Bullfrog and the high-grade mineralization at Mother Lode. We have not yet seen any way to connect these different properties but, as you say, there is a lot of structure that cuts the area up. With both areas having the same style and age of mineralization, they are certainly similar.
Peter: Great, thanks Jeff. We are at the 56-minute mark here so I will bring it to a close.
Jeffrey: Youâ€™re welcome, Peter. I do this kind of thing a fair bit and am happy to discuss any aspect of the project with anybody. These things are all complicated and I may not have the answers, but I usually have an opinion at least. This is Mother Nature weâ€™re messing with, after all.
Peter: Well, it has been unique for me to talk to someone who has worked in an M&A division of a major mining company. Iâ€™m sure I picked up a few subtle things.
Jeffrey: Keep in mind, Peter, my thing is exploration! Thatâ€™s what I've done most of my career â€“ I got roped into doing M&A work for a while, but my passion is to be out there beating on the rocks. Thatâ€™s what I am most comfortable with.
Peter: Wonderful, thank you Jeff.
This interview was recorded on July 7, 2017. The transcript was originally published at the following address: