Maritime Resources (MAE) - Gold Explorer Targets 100,000oz pa (Transcript)

September 30 2020, 16:17 GMT+01:00

Maritime Resources (MAE)

  • TSX-V: MAE
  • Shares Outstanding: 236M
  • Share price C$0.16 (18.09.2020)
  • Market Cap: C$39M

Maritime Resources is a gold explorer with gold exploration assets in Newfoundland and Labrador, Canada. This includes the Green Bay project, Whisker Valley and Orion. Maritime Resources claims that these gold properties are strategically located on the Baie Verte and Springdale Peninsulas, an allegedly 'prolific' gold/base metals mining district. The area does appear to exhibit plenty of geological potential. It hosts as many as 15 past-producing gold and base metal mines. 2 additional mines are currently producing, with up to 371 gold and base metals prospects.

Maritime Resources also makes the claim that this region is underexplored. Maritime Resources doesn't have a large gold resource right now, but it is aiming to build one at an accelerated pace via systematic exploration and various bankable studies. Having raised $8.7M in a bought deal private placement in August, Maritime Resources is a gold explorer with sufficient cash to push through a feasibility study for the 'high-grade' gold asset, Hammerdown. The February 2019 PEA threw up some nice numbers: a LoM AISC of $939/oz and an average 57,900oz gold pa over the 9-year LoM. Expect to see a PFS further clarify this potential in the near future as Maritime Resources targets 100,000oz gold per year.

We Discuss:

  1. 2:09 - Company Overview
  2. 2:49 - Business Plan & Strategy
  3. 4:43 - The Project: Acquisition, Data, & Plans
  4. 7:06 - Confidence for Success: Team Experience, Infrastructure, & Reliance on Price
  5. 11:44 - Where is the Value Proposition for Shareholders?
  6. 15:35 - Cash Position & Plans for Raises
  7. 17:22 - PFS & Economics: What Numbers are They Expecting?
  8. 20:30 - Mitigating Costs: Management Remuneration and Shareholding
  9. 23:23 - Differentiation: Why Choose Maritime Resources?
  10. 24:50 - Emulating Success: Timeline for Deliverables

Matthew Gordon: Let’s get that 1-minute overview of the business and I'll pick it up from there.

Garrett Macdonald: Maritime resources - we're listed on the TSX-V. Our focus is Gold, and we have a singular focus ion Newfoundland, Labrador. We have the Hammerdown Gold project. That's our key asset. It's a former high-grade producing mine, previously owned by Richmont for 4-years in the early 2000s. We're looking to restart that mine and we have a lot of potential around the mine, as well as the new projects called Whisker Valley just located north of Hammerdown.

Matthew Gordon: Perhaps we can talk about your business plan and the business model. What is it that you're trying to be?

Garrett Macdonald: The overall business plan for the company is to get into production and to explore for new resources. About 18-months ago, the new team came into Maritime, backed by Dundee Goodman, Merchant Partners, Sprott and 1832 Asset Management. Those are our 3 main shareholders. The idea was that were hopefully going to be able to bring the Hammerdown mine back into production during this high Gold price cycle that we’re in, using existing facilities that are in the area. There's a process plant, a nugget pond metallurgical facility that we might be able to use. It is the former plant that actually processed all the ore from Hammerdown when it was running before and it's sitting there? We're looking at a low-capital, high-grade, high-margin start-up, roughly around 70,000oz pa from a high-grade deposit that was already mined once before, so it's a well-known entity. It's a very clean milling ore: high-grade narrow veins. That's the business plan to get started.

Ultimately, we would like to get up to 100,000oz pa or more. We see that potential in Newfoundland, but to start with we're looking at that 70,000oz at Hammerdown.

Matthew Gordon: What gave you the confidence that you could go back in here and do that? What data have you inherited? How did you actually come across this project?

Garrett Macdonald: Maritime is on this asset for over 10-years and in the last probably 2-3-years there's been a lot more drilling, a lot more interest in the project. When we came in about 1.5-years ago, we started with an infill program update at the resource, we looked at a new mine plan, we came up with the new PEA study in February with some really attractive economics: USD$1,375Gold, we were looking at a USD$111M NPV. 50% IRR after-tax. As a Scoping Study, it looked good, it gave us the confidence that we could move on to the next step. We're doing some more work now, more risk, more technical work.  Drilling came up with a new resource and my plan again, just to tighten things up even further, as we go into Feasibility.

What we noticed with Richemont mining here was they were mining with a cut-off grade of around 8-9g cut-off grade. In this Gold price, their average grade of the time was around 16g, so very high-grade mine. Richmond was really not that well known for duration, they were well known for underground mining which they were very good at, and we found putting through the core and the historic drilling is that they didn't sample outside of the main veins that they were mining. We started looking at it. We started to see grades in the 3-4. This would not be considered ore to them back then, but for us in this price environment, it certainly is.

We saw the potential to start with an open pit versus underground railway using the facilities that are in the area to keep the capital cost down and basically that gives us a starter project to work from and we can use the cashflow from that to then bootstrap ourselves up into 100,000oz.

Matthew Gordon: What was the history there, where have you guys come in from?

Garrett Macdonald: I'm a mining engineer. My background is I was with GDs energy and Mining as a VP of project development. The main work that I did was focused Dalradian in Northern Ireland. I led the Feasibility Study on that one. That's really what got me interested in this one because we did hear about the project in Newfoundland that looked a lot like Dalradian, at least geologically. It is a smaller resource at 1Moz compared to the 5-6Moz they have. But when I went to check it out, it looked very similar: high-grade narrow veins and wide open for exploration as well.

I came in about 1.5-years ago. We started building up the team. We announced a new vice president for sustainability from Kirkland Lake Gold -Perry Blanchard. We also brought on an advisor to the company as well as the CEO of Dalradian currently, Eric Tremblay. We started to notice there was a lot of potential here that needed to be fleshed out. We really spent the last year and a half just doing the work, getting the resource tightened up through the drilling, technical programs, environmental programs, community relations getting the whole package together to be ready to go to that next step for Feasibility

Matthew Gordon: What level of confidence do you have about this bull market that were in at the moment?

Garrett Macdonald: We had a really good result at USD$1,375. Anything above that is gravy as far as I'm concerned. We're not relying on a higher Gold price to make the project work. At spot price it's a USD$300M project, of course rising tides lift all boats, but we're focused on developing a high-quality project. We have high grades: the Hammerdown open-pit measured and indicated is over 9g - that's a pretty rare thing. We have an average life of mine grade through the PEA study of nearly 8g through the mill, so it is a high-grade resource. We think we can bolt on a low-capital cost solution to give us that starter project that pays back the capital in maybe 1-2-years.

Matthew Gordon: Have you done anything like this before in terms of a low-CAPEX start-up-type project? Where are you getting the confidence from to think that you can deliver a low-CAPEX solution?

Garrett Macdonald: The confidence comes from the jurisdiction that we're in we in the Beaver Mining District of Newfoundland. It's a mining area so we're not in remote situation by any chance. We have fantastic local labour available. Well-skilled individuals. We have services suppliers nearby, road access, power lines. We are only 1km away from power. The whole business plan for Hammerdown is take an existing high-grade resources, a Brownfield site with veins exposed at surface, to send these veins to there are sorting plant on site, move the dilution as best we can and truck the order to a mill that's already there with the tailings pond that's already built and permitted. That's why I think we can keep the capital costs low.

Matthew Gordon: This your pre-concentration process, so who owns the mill?

Garrett Macdonald: The mill right now is owned by Rambler Metals and Mining; they are a UK Copper company. We came up with an agreement with them after our PEA in March that basically gives us 1 year to evaluate the plant for use for Hammerdown. We're just still doing some test work on that to go and negotiate a deal that will allow the ore from Hammerdown to go through the plant and nugget pond.

Matthew Gordon: You produce cash which you're then going to plough back into the ground. Is that right?

Garrett Macdonald: That's right. 

Matthew Gordon: Where does the value come from for shareholders?

Garrett Macdonald: Value for shareholders - this thing will spin off significant cashflow every year. We think that the value certainly would come from the additional deposits we have in the area. We have 2-3 resource potential deposits that should be developed as we get more drilling into them. This area hasn't been explored well over the years. Last week we announced the results from our new projects called Whisker Valley. We're seeing 1oz material in veins in bedrock with significant Copper and Silver credits as well, so we think there's potential to grow our resources in this region to get to that 100,000oz pa production profile or more. The 1-year payback, roughly at these prices I think is a pretty compelling investment considering we are now sitting at a USD$250M         market cap with USD10M in cash.

Matthew Gordon: Someone takes you out or the share price goes up? These are things which you know until the beginning of this year didn't really matter. Why do you expect it to now?

Garrett Macdonald: If you look at our price to NAV ratio, we are on the very end of the low side and that's the upside for us. As we move into a producing company to get up to that 0.5, 0.6 or even closer to 1 ratio, where we should be as a producer, that's the rerating that investors should look for at the moment. We're on the very low side of where we should be.

Matthew Gordon: Where where's the real growth? Where's the real excitement come from? Where's the sex and the sizzle?

Garrett Macdonald: 2 things from our exploration potential - Richemont at the time when they were there looking at Hammerdown, they were mining these veins are trying to keep their mill going in a USD$300 p/oz Gold environment. They stepped away from it in 2004 and left it there. With Gold prices where they are now, we think there's potential all around Hammerdown. It's a pure shadow of the headframe story. There are deposits that we have on site that haven't been fully explored, limited exploration below 250m anywhere on our project so we think there is potential of depth as well. We're working on that. Now; we've got two diamond drills turning at site right now, so we'll be drilling all the rest of the year at Hammerdown with 2 drills searching for the other parts of Hammerdown look-alike deposits. It is very structurally controlled: dozens of veins have shown up at the connection of several different faults. We think that that could repeat again along strike and also at depth. That's where one of our major upsides will be if we’re able to find a new deposit at Hammerdown.

The second one is this new riskier-value project, we're finding high-grade veins the look like Hammerdown. It's early days yet, but you know so far so well. We're finding 1oz veins in bedrock - that's exciting but more work to do.

Matthew Gordon: You've raised about USD$12M since May this year. How much cash have you got today?

Garrett Macdonald: We're sitting right now at around USD$10M in working capital. That'll take us through probably until next year this time. We're really well-financed at the moment. Our main focus is exploration, Feasibility and permitting. I look for those 3 things to happen over the next 12-months.

Matthew Gordon: Why move so slowly? Why 2 drill bits? Why not more?

Garrett Macdonald: I don't think we're moving slowly at all. We just added a third drill at Whisker Valley this week, so we have 3 drills running. They're going to be drilling all fall, up until the end of the year. We're working already on our Feasibility Study and we've already submitted our application for project permitting. Project registration was submitted this summer so over the next 12-months these are the catalysts that we see for the company. Number 1 -project permitting that we hope to receive by this time next year. Number 2 -Feasibility Study which is important as that's the key you need for project financing. When we look to spring of next year, we'll be looking at ways to raise the money to build the project.

Matthew Gordon: What other targets are you going for?

Garrett Macdonald: For the Feasibility Study, and you are right -the PEA Studies are your snapshot in time +/- 30% It's just a Scoping Study to get you comfortable enough to move to the next step and spend some more money to derisk the asset even more. One of the big things that we did this summer to support that was an infill, grade control program at Hammerdown. We investigated over 10,000m of drilling, very close, basically getting our drilled spacing down to 12m or less in some cases.

In my experience as well - I was mining engineer with Placer Dome and I am very used to narrow vein mining, and the more data you have the better. To support a good quality resource to go into Feasibilities we invested 10,000 of infill and grade control work in the project so that will be the basis for an updated resource later this year. That forms the basis then for our mine plan and the capital estimation that'll come in the first half of next year.

The same goes for metallurgical test work; more test work on the ore sorting. People sometimes have questions about preconcentration and the effectiveness of ore sorting. I can tell you that you need ore-sorting to make this project work. It's a nice to have so if you remove ore sorting from the PEA Study completely and you just ship mined ore, it's still a very attractive project. We want to make sure that we don't rely on something brand-new.

The other thing I can say about sorting is that it works really well on the right deposit and Hammerdown is like that sorting on density by looking with x-rays for pyrite very effective at doing the same test program that we did on Dalradian and had very similar results. That seems to work really well. The other main thing on the Feasibility that we want to look at, of course, is capital costs. We're talking all the time with local contractors, pricing in door designs. We're doing all the work now to get ready for that Feasibility with good quality information. The best thing you can do right now is de-risk, focus on the detail. We're not looking to sell the company. We're focused on just de-risking the asset, and if something happens and a bid comes in, we will look at it, but I honestly think that's probably the right thing to do is just stick to your knitting, get the details done and dialled in so you're ready either to go it alone or do something else if the opportunity is the right one.

Matthew Gordon: There's a lot of Senior Management involved, how many are paid and how many are actually doing the work?

Garrett Macdonald: On the on the board we have 3 other directors other than me. John Hayes, Peter Mercer and Mark Ashcroft, so we have a small board fee for them annually. On the management team we have 2 advisors as well: Jeremy and Eric. We have a CFO, Corporate secretary and a new VP of environment and sustainability. Tania is our IR manager. We just added Perry Blanchard. He's our VP of environment and sustainability. We think that's a key hire for us. Perry will be in charge of all thing’s health and safety, all things community, government relations, permitting, environment and sustainability. He's a local resident of Kings Point. He's literally 5 minutes away from the site. He was formerly the manager of health and safety and environment at Kirkland Lake Gold.

Matthew Gordon: Why is it that so important now? Why are you so concerned about ESG?

Garrett Macdonald: I think you have to be. If you think you're going to build this project and we do, then I don't think you want to wait. The sooner we have someone in place for that the better. That's my experience. It's never too early. We already have a very good relationship with the local communities. I want to make sure that that is strengthened further. Perry is a great hire; he’s local, he knows the people, he knows the area. If you're going into a production decision here, you have to have that position place. He's actually the one of the first executives we've hired for the project, that's how important we feel about ESG.

Matthew Gordon: How do you continue to be remunerated yourself? Are you buying shares in the open market, what are the options you've got?

Garrett Macdonald: That information is available on SEDAR. We don't have a bonus plan. We have stock options; all management and board participated in the last 3 finances. I own 1.3M shares myself. If we are asking investors for their money, we want to put ours in too. We haven't had any raises; it's been pretty steady since we joined.

Matthew Gordon: How do you differentiate? Why you and not the 200 other companies saying the same thing all around the world?

Garrett Macdonald: I hear that too. I think the differentiating factors for us are several things: 1 is grade. We have a very high-grade deposit. It was mined once before. We have a process plant that we could use nearby. We are in a province that actually wants mining, which is really important. Our great local support from our communities and we have great support from our major shareholders, Sprott and 1832 are well-known investors. I think if you wrap it all up together, adding in the exploration potential that we have, now that we're well-financed and able to run with 3 drills, push ahead through Feasibility and permitting in a province that wants mining investment. It's not 1 thing, it's a collection of all of those, and starter project that looks really attractive.

Matthew Gordon: And you will be in production soon

Garrett Macdonald: Correct. 2022.

Matthew Gordon: What are the next big moments we should be looking for?

Garrett Macdonald: We'll have drill results coming out throughout the year, with 3 drills we will probably have results come in every couple of weeks for the next several months. We have the permitting decision on the project and the province, so that could be another catalyst. I think we'll start getting news out on some more results on our test work that supports the Feasibility.

It's definitely shifting more from drilling for Feasibility to drilling for exploration discovery right now. That's the recent change in our focus from the drill point of view. We're really branching out and testing all of our targets that we've been working on for the past 2-years.

Matthew Gordon: I know you are trying to compare yourself to what's been happening at Pure Gold, in what sort of timeframe?

Garrett Macdonald: If we can get Hammerdown up and running in 2-years, within the next 5 I'd like to be at 100,00oz or more, which would be a Pure Gold-type company.  It's funny - Darren and I used to work together at Placer Dome, so we'd like to emulate the success they have had, which has been really great.

Newfoundland is a special place. We have so much potential for new discovery there. It's been an area that's been really well-prospected but not well explored so we're definitely interested in exploring, adding to what we have, and we can get Hammerdown off the ground then I think we'll have success to get over 100,000pa.

Matthew Gordon: What land package is sitting there at the moment? Is there scope for more?

Garrett Macdonald: It is huge. We have over 300 square km of land. We have lots of land that we need covering Hammerdown and Whisker Valley so everything we need for our facilities, for our site plan for the mine and a huge area to explore.

Matthew Gordon: Let's stay in touch. We'll speak to you soon.

Garrett Macdonald:  Thanks very much.

Company Website: https://www.maritimeresourcescorp.com/

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