Benchmark Metals Inc. (TSX-V: BNCH) - Yeah, like I pictured, but even better (Transcript)

May 14 2020, 13:53 GMT+01:00

Benchmark Metals Inc. (TSX-V: BNCH)

  • Shares Outstanding: 99M
  • Share price C$0.33 (14.05.2020)
  • Market Cap: C$33M

A really encouraging gold-silver story that investors should be paying attention to. We last spoke with Benchmark Metals in September.

What's changed? Benchmark Metals is a TSX-listed gold-silver advanced explorer in British Columbia, Canada. The company is looking to deliver up to 50,000m of drilling this year, a mineral resource estimate, and a PEA. The track record of the team suggests they know what they need to do and how to do it, and the company has C$10M to ensure they do so..

What is Benchmark Metals going to drill on? The preeminent focus is the Lawyers Project in the 'Golden Horseshoe' of BC. In the heart of the property, there are 5 zones within 3km of one another. Several of these zones produced 30-years ago at a high-grade, but now Greig foresees several open pits at surface. The drilling will build upon data from 2018, 2019, and historical data over 30-years ago. These zones are being extended. Rather than hunting for high-grade veins like companies have done in the past, Benchmark Metals has focussed on mineralisation at a deeper level: up to 150m.

What is the game plan? Benchmark Metals is targeting multi-million ounces after this next round of drilling. In February, the company released an exploration target based on data from 1 of the 5 zones. The company put out a range of 1.7Moz to 1.9Moz at an average grade of 1.7g/t gold. With this next round of drilling, Greig believes he can increase the grade of the zone and bring the other 4 zones into the estimate. He thinks the company can move well beyond the potential of multi-million ounces.

Benchmark Metals is fast-tracking the development of this project, so investors may be able to look forward to an accelerated value event. Because it's a brownfield type of play, there is a footprint to production that has already been mapped out, allowing Benchmark Metals to proceed faster.

Like "any junior with an attractive project," Benchmark Metals would like to exit if a major comes along with an appealing offer. Greig is building something for sale. He knows his skillset and has no intention of going into production. He wants to be taken out. Senior members of the management team have been involved in the full gold cycle, from discovery to development to production, so investors shouldn't be concerned if there is an unexpected change in plan.

What would a potential new suitor be looking into? Access to roads, a large power line, flat topography, no wildlife concerns and signed agreements with the local first nation. Benchmark Metals is fully permitted with a 5-year notice of work. Greig believes that if he manages to sit all these milestones, the company will be vaulting towards a +C$200M market cap. The major milestone events are what shareholders and investors are looking for.

The management team are also big shareholders in the company, so they want to share in the success. The Senior statesman of the company, John Williamson, was the director and founder of Kaminak Gold Corp. Back in 2016, it was sold to Gold Corp. for just over C$500M. Other members of the team have seen similar success, taking a $0.25 company to a $10 company. Lastly, Greig touches on the increasing gold price. An increasing gold price will eventually help Benchmark Metals capture the value it has struggled to attain. Gold producers are reporting estimates over and above expectations. At some point, this will trickle down to the junior miners, such as Benchmark Metals, because producers eventually need to replace gold resources and ounces. The catalyst for a major to takeover a junior comes when the major depletes its resources in the ground.

We Discuss:

  1. 1:37 - Company Overview
  2. 2:46 - Focusing the 50.000m of Drilling: Asset History and Expansion
  3. 5:22 - Game Plan and Strategy: Fast-Tracking into Production
  4. 9:38 - Exit Goal and its Feasibility: Team Experience and Financial Capabilities
  5. 11:42 - What's Included in the Deal: Discussing Infrastructure, Permits, Licences and PFS
  6. 14:38 - Track Record: Assuring They Can Do it Again
  7. 16:07 - Becoming a $200M Market Cap Company: How Will They do it?
  8. 17:08 - Gold Price Increasing and its Benefits for Benchmark Metals

CLICK HERE to watch the full interview.

Matthew Gordon: Hey Jim, how you doing, Sir?

Jim Greig: Very good. Thank you.

Matthew Gordon: Good, good. Thanks for joining us today. We haven't spoken since December. A lot has happened since then, so I guess we better talk about it, but first of all give us that one-minute overview for people new to the story.

Jim Greig: Certainly. So Benchmark Metals is a Gold and Silver advanced explorer in Northern British Columbia, Canada. We about got a road accessible project. Does it need expensive helicopters? We are fully funded for a large program in 2020 with over USD$10M in the budget and we're embarking on up to 50,000m of drilling followed by a new mineral resource estimate. And on the heels of the resource estimate, we will be planning to complete a new scoping study - that's a preliminary economic assessment.

Matthew Gordon: Okay. That's it. That's it. We're done, aren't we? That's a great update.

Jim Greig: That's it. Let's wait for the results and let's watch our market cap move.

Matthew Gordon: There you go. Mining is as simple as that folks. Let's get into it though. Okay. When we spoke, you had USD$5M in the treasury, you're raising another $5M, giving you circa USD$10M, and you were telling me that would see you through to the end of this year, I guess achieve your up to 50,000m of drilling. So let's talk about the drilling: where are you focusing it and why?

Jim Greig: So, in the heart of the property, we have got 5 zones and they are all within approximately 3km apart. Several of these zones were formerly producing over 30-years ago where they were mining very, very high-grade. The difference in the story this time is we believe, and we have shown through current drilling, that there's bulk tonnage material from surface down. So, we foresee what would be several open pits at surface and the drilling builds upon results from 2018, 2019 but also on historical data from well over 30-years ago.

Matthew Gordon: Okay. Again, just a reminder,

Jim Greig: We are extending the zones.

Matthew Gordon: You are extending the zones. But, just remind people of that kind of structure of what was there before, because this is an old mine. People were chasing high-grade veins, but you're coming at it from a different angle, different strategy. So, if you talk us through that,

Jim Greig: That's right. So, when this mine, the Cheni Gold mine was producing, they were mining there 1m to 5m, very high-grade veins that you know, grade coming out of them was approximately half an ounce or larger. And you know, those are narrow subsets. But after a revisit of drilling in 2018 and 2019, we're showing that mineralisation does indeed begin right at surface but can extend for up to over 150m of moderate grade. And when I say moderate grade, I say that loosely and proudly that you know, you can see average grades of anywhere from close to 2g/t over long intersections. But we have also seen 6g of near 36 metres from surface. So, you know, 30-years ago, 1g/t or 2g/t material over large lengths was not economic, but 30-years later, it's very economic in those situations,

Matthew Gordon: And that's because what? The recovery is better these days?

Jim Greig: Recovery of it was actually quite good back then but it was all about Gold and Silver prices. You know, so now we're at a USD$1,700 Gold price. Back in those days, I think you were looking at approximately a USD$300 or USD$400 Gold price. So, multiples on the commodity price compared to when they were operating back then.

Matthew Gordon: Okay, and again, I want to remind myself about what's the game plan here? Because you can, we get the strategy - it's a bulk play with some potential high-grade upside. But you're drilling to 50,000m. What do you expect it to be able to tell you? Because if you're going to put out a resource, you must have a number in mind.

Jim Greig: That's right. So, we're targeting multi-million ounces after this next round of drilling. In February of this year we put out a mineral, or rather an exploration target, and this target was based on data from one of the five zones. And we put out a range of an approximately a 1.7Moz to 1.9Moz in one single zone – Kemess Mine. And that had an average grade of approximately 1.7g/t Gold. We believe with this next round of drilling, we can expand that zone in addition, increase the grade of that zone, but also bring the four other zones into a mineral resource estimate. So, the message in February was this was a baseline, a starter that we were looking to achieve and we think we can move well beyond that potential.

Matthew Gordon: Okay. And you're then, obviously, following that quickly, following on from that a PEA. You're getting a sense of the economics of this thing, especially in a Gold bull environment, people are keen, well, funders are keen for people to get into production early. Are you tempted to try and accelerate it? Because you did talk about a fast track to production scenario with me in December. Is that still the plan?

Jim Greig: That’s right.

Matthew Gordon: So, what does that look like?

Jim Greig: We are indeed fast-tracking. In 2-years, we have advanced this project very, very quickly. Given that it's a brownfield type of play where there's a footprint of former production that allows us to move much quicker towards a production scenario. With that 50,000m of drilling, we're also engaging on completing some metallurgy. We have first nations agreement signed and in place. We're already preparing for additional work in order to complete that Preliminary Economic Assessment. So, all of the boxes that we're ticking are geared towards completing as much as possible in a short timeframe.

Matthew Gordon: Okay. But that's kind of easily said, right? So, the PEA only tells you so much. No one's going to get interested in a company with a PEA unless that's showing something spectacular. There's a big room for error margin in a PEA. Where are you guys taking it through to, and at what point do you exit?

Jim Greig: Like any junior with a very good project, of course we would like to exit if you know, a major company came along and offered an attractive value to shareholders. And so, this is always in the back of our mind; how we create and generate more value for the company. And so, part of that is because we are road accessible and there is a footprint from former production, it allows us to move ahead much quicker in such that you know, we're not cutting new roads. There is some metallurgical numbers from the past, at 93% Gold and 78% Silver is what they achieved 30-years ago. It's a sophisticated area with the first nations. There's a world-class Gold-Copper mine within 45km of our project. So, this is a proven and prolific area where you can build a mine. And we believe that with our treasury sat at just over USD$10M, we can achieve these three milestones within about a 12-month period. And I think that's a remarkable feat given we are working in Northern Canada. And we do not need to go back to the market to acquire or build more capital in order to get this done.

Matthew Gordon: But I guess what I'm trying to get at is that at some point you will, unless you have decided what your exit point is, right? So, you have got enough money to see through to the end of this year and then you will need to go out, and if you are going to develop this yourself, you're going to need to raise some capital. But you're talking the language of someone who's building something for sale. Is that right?

Jim Greig: Correct.

Matthew Gordon: Okay. Yes. So, you know what your skillsets are, and you know where you're going to take this thing through to and you're building it to be attractive for someone else to finish the job.

Jim Greig: No question. That is the response. We are building this to a scenario where we'd like to be taken out. Yes. Look, our skill set within management is very good. Senior management has been involved in new discoveries. We have put mines into production. So, we have gone the full cycle of discovery to development, construction, and then finally, production. But the biggest win for shareholders here is to be on the path where you go from advanced project and then finally building it towards a large resource and then showing economics that are very viable. We think we have got all of those boxes ticked in the short time period. There's some cataclysmic major moments for us. And you know, I've mentioned them several times, but being able to fund and pay for these three events in a 12-month period is quite a success story. And we think you know, shareholders and new shareholders look at the results we have seen over the past two years. You know, it's an example of what can be achieved here; high grade that's embedded within large bulk tonnage type material at surface that can be recovered from very good results at the mill. And you know, we're looking forward to a robust year here with some very good news flow.

Matthew Gordon: Okay. And tell me about what people would be buying. You're going to say, we're going to build a large resource. We're going to have a PEA in place. What are some of the infrastructure components that are there? You have talked about roads, I'm assuming power, water, all of that kind of good stuff, but what would someone be walking into?

Jim Greig: So, for a new suitor to be looking at this project, they would be looking, of course, as you said, access to site with roads that are already established. There's a large power line that goes to the Kemess Copper mine, which is located 45km away, so there's potential for a tie in point there. The topography of the project is very sort of undulating, or flat rolling landscape. There's no trees. There's very little disturbance with environmental and wildlife matters.

As I mentioned, we do have first nations agreement signed. The first nations groups have been very cooperative and working forward with us. Their interest here is simply to have good job training and to have new jobs into the future.

Matthew Gordon: Okay. Any issues with licenses, permits? What are the kind of big red flags here?

Jim Greig: We are fully permitted, with a five-year notice of work that allows us to do all the drilling that's needed. That was granted to us last year in 2019. At the moment, there's no major obstacles other than, you know, we need to show these results. And given the results that we had over the past two seasons, I think this is, you know, this is not a pipe dream. This is a reality right now. This company has a USD$35M market cap. We believe we are undervalued. And if we hit all these milestones, you know, there's a chance for shareholders, you know, not to make a double or triple, but I think we'd be vaulting towards a USD$200M market cap for larger. That's what we're looking for. And that's the entry point in this company. You know, the cash is there and the capital to get in the treasury to get results. When we hit and get news flow and produce these major milestone events, you know, that's what all shareholders are looking for; a major win with multiples. It's a risky game here, but the management are also big shareholders in the company, and we want to share and win with the gains of other people.

Matthew Gordon: Okay. So, you have talked a good game, you have been clear about what you're trying to do. You're saying it's quite attractive in terms of infrastructure and you have listed out what you're going to be able to hand over to someone at the point that they, you know, come and come and talk to you. So, it begs the question, rather than kind of say we have been there and done it before, what have you done? What are the companies where you have created shareholder value before? I want to know about your ability to deliver it rather than just talk about it.

Jim Greig: Sure. So, our senior statesman of the company, John Williamson, who's our CEO and chairman, John originally was a big shareholder. But at Kaminak Resources, he was a director and original founder of the company. Kaminak back in 2016, I believe was sold to Gold Corp for just over USD$500M. You know, that's quite a win there. In my past, years ago, I worked with Keegan resources. I've been with Ivan Bebek and Sean Wallace and company, and we took a company from $0.25 cents to near USD$10. We built a mine in West Africa and created some tremendous wealth for shareholders along that ride. So, and there's other names within our group that have an established track record as well.

So, we're working with a professional group of management here who have built mines and put them into production and all of us participate in the private placements. So, we are indeed large shareholders and we are looking for wins along with the regular retail shareholders.

Matthew Gordon: Okay. When, again, when we spoke last time you were going out and talking to institutional funders, retail is a part of the story, but it wasn't a whole part of the story. You are USD$34, $35M now, you want to get to USD$200M. You talked about how you're going to do that.

Jim Greig: We do, we are at a point here where we have some institutional support. Our raises in the fall of 2019 involved Sprott and Eric Sprott himself. That also involved getting some institutional US involvement in the story. And I believe that's part of the path forward here as we build the market cap at some point in a 12-month timeframe, when we have hit these major milestones, we'll be in a very good position to seed more institutional money into the story. But we will not be doing that until the market cap has achieved a much higher level of course.

Matthew Gordon: Okay. The Gold price has, obviously, significantly enhanced since August, September last year. Do you think it's a much better environment for some of these catalysts to get noticed? I think last year catalysts came and went, no one cared. Do you think now that Gold is back in favour, you're going to be able to capture some of that? You said, you talk about being undervalued, right? So, do you think you're going to be able to recapture some of that value quickly?

Jim Greig: Yes, I think there's a movement of course towards Gold, but you know, the first step to making that happen is investors need to be shown that Gold mining is a real business. And what you're starting to see over the past several quarters is that the Gold miners are producing some exceptionally good earnings estimates, not only estimates, but they truly are reporting earnings that are over and above expectations. And as the Gold pre price increases, well, their earnings only improve because they have kept a very good lid on their costs. And so, they now they've created some good margins, and with more successive earnings of beating expectations, at some point, that trickles down to the junior minor such as Benchmark Metals.

Matthew Gordon: Do you think that? That's what I was getting at because the producers have seen a rerate because they are creating cash, free cash flow in a lot of cases, which is great. But how does it trickle down and affect someone like you?

Jim Greig: Well, I think what happens is that eventually all of these producers need to start replacing resources and Gold ounces. And that actually started years ago. So, you know, the catalyst for a major to take over a company like Benchmark Metals is quite simple. They are a business where they mined Gold and they deplete their Gold resources in the ground. And at some point, they've got to put new ounces back on the shelf to mine. And that's where a company such as ourselves becomes attractive; we're in a low risk jurisdiction, we're advancing the project quickly. It's an open pitable type scenario. The Capex should be well within reason compared to other jurisdictions, and we believe we will indeed be attractive once we complete these milestones over the next 12 months.

Matthew Gordon: Okay. Exciting times, Jim. I guess what you're working towards is being able to show something around the economics to make sure you are as attractive as you hope. So, keep in touch with us. Let us know how you're getting on. It seems to be a quick succession of a news flow, so we'd like to hear from you.

Jim Greig: Very good. Always a pleasure to be speaking with you.

Company Website: https://benchmarkmetals.com/

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