Interview with Dale Verran, CEO of Fortune Bay Corp. (TSX-V:FOR) Fortune Bay Corp. is a gold-focused exploration and development company with 100% ownership in two advanced gold exploration projects in Canada, Saskatchewan (Goldfields Project) and Mexico, Chiapas (Ixhuatán Project), both with exploration and development potential.
The Company has a goal of building a mid-tier gold exploration and development Company through the advancement of its existing projects and the strategic acquisition of new projects to create a pipeline of growth opportunities. Fortune Bay's corporate strategy is driven by a Board and Management team with a proven track record of discovery, project development and value creation.
Matthew Gordon: Give us that 1-minute overview and I'll pick it up from there.
Dale Verran: Fortune Bay is a Gold-focused exploration and development company. We are listed on the TSX-V under the symbol FRR, and in Frankfort under the symbol 5QN. Across the categories we have 3Moz of Gold across our 2 projects in Saskatchewan and Mexico. Our near-term focus is advancing our Goldfields project in Saskatchewan, where we've recently completed a new mineral resource estimate for the project and just started a maiden drilling program.
Matthew Gordon: Let's talk about Mexico: circa 1Moz there. Remind us what that project is.
Dale Verran: In Mexico we have across the categories, 1.7Moz of Gold. It's down in Southern Mexico Chiapas State and it's got the resource on it and lots of exploration potential. We are really excited about that project. Although we’re focused at the moment on Goldfields, we see this as a significant asset for the company, both as a pipeline opportunity or something to arrange into with the right partner.
We took a deep dive on the project technically last year, and our new technical team really dug through the data and created new models for the project. It’s a very exciting asset. Its geologically outstanding in terms of its setting. The magnetic data shows this deep-buried porphyritic intrusive, and that's given rise to the epithermal system at Campamento, which is the resource. There is a prospect on the property called Cerro La Mina, which is owned by Kinross, that’s a porphyry system.
We’ve had exceptional results in terms of drilling that was done and there are numerous other exploration targets on the property, some are of a scarring-type nature, so it's a really good geologic property. It does come with community challenges where one needs to get access with the local Ojitos to work the project. It's been done successfully in the past. We know it can be done again, but it's obviously more difficult to operate there, especially in the Covid climate. Thus, our immediate focus is on Goldfields in Saskatchewan.
Matthew Gordon: Are you restricted from working there or are you choosing not to work there - let's be clear.
Dale Verran: We choose not to work there. We have a guy in Mexico who has worked with the communities there. He stays in touch with him and he's visited the project recently. We can definitely get down there if we need to, but obviously, focusing on Saskatchewan makes a lot of sense for us because it's easier to operate. We have people in Saskatchewan and Goldfields is a more advanced project.
Matthew Gordon: And with a market cap of USD$30M, and how much cash do you have?
Dale Verran: We have USD$3.7M in cash.
Matthew Gordon: How much did you pay for the Mexican asset? And how much is it costing you to maintain?
Dale Verran: That was a predecessor company that took that project on back in the early 2000s. They made the discovery and it's worked. It stayed with the group of companies and when she came into Fortune Bay, the holding cost of the property is around CAD$100,000/year. That's mostly mineral title and we have a core storage facility there which we keep under lock and key, a valuable resource of information for us.
Matthew Gordon: How much value of your CAD$13M is being ascribed to that asset?
Dale Verran: It’s tough to say; we not covered by an analyst, but it is a significant part of our resource base and has as a tremendous amount of exploration potential, so the market decides that. We see it as an important asset for us.
Matthew Gordon: The reason I’d like you to have some view on that, and you must do at a board level, is there some or none, realistically?
Dale Verran: There's definitely some. You can look at us on an EV per ounce basis, and then say, well, we're not really treating Ixhuatan as material. We’re focused on Goldfields so it's definitely going to get discounted on that basis. You could look at it as 1/3 Mexico, 2/3 Goldfields, in that region. Maybe more at Ixhuatan as it has a slightly bigger resource. It’s really hard to say.
Matthew Gordon: As a management team, you have to mitigate the risk profile. Country risk - 2 countries – great. Commodity risk? Is it Gold-Silver in Mexico?
Dale Verran: Gold-Silver and there's also Copper in the porphyry system.
Matthew Gordon: Have you considered other ways of monetising it: farm-ins for example, is that part of it or are you just going to wait?
Dale Verran: No, absolutely. We see the benefit of getting that story moving in the shorter term. We can't see ourselves doing that given how we treat our capital which is valuable to us. We’re definitely looking at a potential partner, someone who's got the operational and financial capabilities to actually go work that project and unlock the value that's on the project. There's no doubt; we've been talking to people about the project, and given the asset and its geological setting and potential, there's certainly interest.
Matthew Gordon: Let's go back to Goldfields because that's the flagship, the focus. You've increased the mineral resource, or have been doing a bit of work on the mineral resource there. Is that what you've been doing since September, is that why we haven't seen you?
Dale Verran: We have been very busy doing that. It's been a big job. I won't lie about that. The project has a tremendous amount of historical data. We've got over 800 drill holes across these 2 deposits. The drilling data, some of it dates back to the 1930s, 1940s. There was drilling in the 1980s and early 2000s, so there's a substantial legacy of data. For us coming onto this project, we realised that it needed something new. It needed to be relooked at in the right way and the real opportunity here was that there was never a geological model for either of these deposits. If you go back to the historical 2011 PFS, there was simple mineralized wireframes capturing all the grade information, but no representation of the geology whatsoever. When we got boots on the ground last year we realized these are orogenic Gold deposits. They have a strong structural control. And if you're going to turn these things into real assets and get the most from an exploration point of view, you need to create proper geological models that best represent reality.
And there's a lot of data: both deposits, Box and Athona, there's outcrop. You can take structural measurements, there is trenching, there is a lot of historical underground data from the historical mining. There's this core that's available. We spent a significant amount of time both in the field and office understanding the controls on these deposits, the structural controls, the geology, and from the ground up, we built new geological models to start with and then mineralization models. Those were the basis for this new mineral resource estimate, which we've now completed and we're very satisfied with the results. We know this is a solid foundation. We can move the project forward. We know that any mining project needs a good resource estimate. That's the foundation for an asset that's going to really make it in the long term.
Matthew Gordon: People sometimes know that they’ve got a rubbish project and they keep working at it. They have to get a salary and raise money and they hope something happens. When you say you're happy with it as the basis of a good foundation, what do you know? Talk to us about the actual new resource?
Dale Verran: One of the most important things for us is that we all know the ultimate judge of a resource estimate is when you go to mine it, is that amount of Gold actually in the ground? In our case, we have some historical production data that dates back to the 1930s-40s, but we have no reason to suggest that that's incorrect. There's a lot of reports that all seem to be consistent. When we ultimately completed our models and ran this resource estimate, we ended up with a reconciliation to those mined-out volumes, and it reconciled to within 1% - without us running iterations to make it fit, it fit., and that just gave us the confidence that this is the right model, and this is something that represents what's in the ground and we can now move it forward.
The project is a good project, if you go back to 2011, they did a PFS on the project, based on a resource that was of a similar size. It didn't necessarily have the right models, but it produced positive economics. NPV of USD$144M, IRR of 19.6%. That was a Canadian Gold price of $1,250/oz, and today, obviously Gold's come off a little bit recently, but we’re still seeing Canadian Gold price above CAD$2,100. So it's still robust in that sense. And we now have the base to move it forward using this new model.
The new model tells us, not initially the total amount of Gold, it tells us that but it tells us where that Gold is and in what structures the higher grades are. Firstly, from an open-pit mining perspective. We know where those grades are situated. We can better control the cut-off grade. We can do more selective open-pit mining to improve economics further, and from an exploration point of view, both deposits are open. With these new models we have a control on where the high grades are, what the structure orientations are. We can now step out and chase those higher grades that's going to allow you to potentially expand the resources, but it also give us the opportunity for underground potential at both deposits where we see grades that we think would be amenable to underground mining.
Matthew Gordon: People don't understand what it is that you are: $30M market cap. It's a development company. You've got a resource. You should be doing way more than this. You should be getting noticed. What's the problem?
Dale Verran: We're going down 2 paths here: there's a project development path and we are a developer. We are going down that path. Step 1 was getting a mineral resource estimate. You need current 43-101 estimates to advance and we wanted to do that properly and I've explained that process. We’re now in a position to advance to a Pre-Feasibility Study based on that resource, but we’re sitting with 2 deposits and they both are open. The Gold mineralization is open. We definitely want to, concurrently with our project development, is continuing to explore. We're going to keep marching down, doing mining studies, we're going to do scoping work, but we're going to concurrently do exploration at both deposits to realize that true potential. We're going to be taking step outs to see if these resources can get bigger. Those can be brought into the project at a Feasibility level and should demonstrate that this project is even bigger and better than it was historically.
Matthew Gordon: PFS next, which is great.
Dale Verran: We've got this mineral resource estimate. We need to do some internal scoping on that, look at the numbers, and then we'll make a decision on whether to advance to a PFS right away, or there may be a little bit of a hiatus if we decide to see how the exploration results are looking. But we have a resource that we can act on and advance to Pre-Feasibility Study. Given that 85% of our resource is in the indicated category.
Matthew Gordon: The share price has moved sideways. Can we expect to see more from you this year? Do you understand the importance of that?
Dale Verran: Absolutely. We've come to this process of getting familiar with this project with a substantial legacy of data, doing a new mineral resource estimate, putting the company together. We only got going last year, the teams in place, the resource is in place. Now we’re in a position to really get momentum in this market and move things forward, both from a project development point of view, where we will be doing internal scoping toward a Pre-Feasibility study, and with an exploration program that's currently in progress; we've got drill rigs in the field.
It takes time to set up these companies and get our story moving but we’re now in a position where we really can deliver catalysts. We’re expecting to have a really busy year with our project development side as well as an exploration program, both in the winter, which is currently in progress, plus in the summer.
Matthew Gordon: How many ounces are we talking about and what grades?
Dale Verran: In the indicated category, we've got 975,000 oz, so just short of 1Moz indicated at a grade of 1.34g/t. In our main deposit, the Box deposit is a great of 1.5g/t. Good metallurgy, open-pitable targets.
Matthew Gordon: What you're saying: we want to take it from nearly 1Moz to X number. That's when we can start making some interesting decisions. So why only 1 drill?
Dale Verran: We've got some select targets at both these deposits. We want to make sure we step out and test the concepts first before we deploy more drills on the project. Obviously, I want to look after the capital as well. Thus, we've got some very select targets where we’re chasing, not these average grades of 1.5g/t, but we get grades of up to 18g/t over several metres down below the Box deposit, and we want to test these in these higher-grade vein sets to see what potential they have. We've seen the deposit, the grades tend to increase with depth and the mineralized unit is much thicker. We think there's a lot of potential down there. The first phase is really just to test these targets on an initial and somewhat conceptual basis, and once we have proof of that concept we will go in there with more rigs and start to delineate.
Matthew Gordon: How do you define what size of project you need to get to before you think you can go and raise money to actually move this through the Scoping Studies and get more interest from the marketplace? Because 1Moz is the bare minimum.
Dale Verran: We are around the 1Moz indicated. We've got 200,000oz in inferred, and these are open pitiable targets. Remember - it's not just the technical advantages of this project, it's also Northern Saskatchewan: the infrastructure’s good, we've got a power line to site. We have a valid development permit, granted in 2008 that is still valid today. Hence, the project is approved EIS, in other words, it's done its environmental screening. It's de-risked to a large degree so there's some distinct advantages there, but we do feel that there's definitely exploration upside, and, of course, we're going to look at that to see how much bigger we can get. We think, based on the existing resource and the factors around the project, the infrastructure location, permitting, etc, we think it can move forward down the development path on its own with the existing resource. We've seen the positive economics from a 2011 study at a lower Gold price. It's much higher now. We think it can move on its own, we want to realize the full potential of this project, and there clearly is potential which we intend to realize through some additional exploration drilling around these 2 deposits which are open pit.
Matthew Gordon: There are a few orogenic stories around your size. You guys don't want to become miners, do you?
Dale Verran: We’re not miners - I'll be open about that: I'm a geologist, my background is in exploration and development. I've got a history working at Dennison, also on the development side in Saskatchewan. We see ourselves taking this project down the development path, de-risking it, showing it's a project that's going to move and then looking to partner up or look for a suitable company to take us out. Companies do also evolve over time where needed. A good project is going to create a lot of favourable outcomes and we're going to create that good project and we've got the team in place to do that.
Matthew Gordon: People are going to look at 3-5Moz. I'm trying to work out the length of journey we're going to go on if I invest in your company.
Dale Verran: You’ve certainly seen mid-tier miners take out smaller companies, around the 1Moz where there is exploration potential, and I think there's definitely an appetite for projects that don't have a high capex hurdle, which is our case, in favourable jurisdictions that are safe, with precedents for mining and in our case we have a valid development permit. That's a huge advantage. We think we can make this project much bigger.
If you look at Box and Athona, if you're talking about how big can these things get? They sit within the same structure. There's possibly a connection to these deposits at depth, so it really could be a big system we’re exploring here. Obviously, grade is important. We're going to go deeper. You have to keep an eye on grade. There's no point drilling 1-2g/t at depth, but we see the grades at both deposits at depth that could lead to also underground potential. We want to realize that in addition to our open-pit story which is in the region where we believe it's got the legs to go in this market.
Matthew Gordon: You are at CAD$3.5M today. $30 million market cap, going raising money is expensive, shareholders don't want the dilation, etc. Thus, you have to be smart with the way that you spend your money. Talk to me about how the $3.5M gets spent.
Dale Verran: We have got this drill program on the go at the moment. That's going to be about $1.7M, so we're going to have about USD$2M left after our phase 1 drilling program. Then we'll be looking at a Pre-Feasibility study plus what we call a phase 2 drilling program, which will really be follow-up of that phase 1 drilling program. We will need to raise some money for that. We'll be looking toward the spring for a raise. It could be in the region of CAD$4m, but we are well-funded now.
Our last raise was in December when we raised CAD$2M, and we could have gone out for more money. We didn't. We are looking to minimize dilution and do things in an incremental stepwise fashion to make sure we advance the project sensibly and in a disciplined approach.
Matthew Gordon: It’s about how you position the company in a sea of other companies saying the same thing, and get that stand out from retail investors, which is going to give you the liquidity you need. You plan to work to do more communication this year, are we going to see more of you?
Dale Verran: Absolutely, we really got reactivated last year as a company when I came on board. We built up the team. We got deeply familiar with the Goldfields project, we got things moving. We are now in a position to move and start delivering on those catalysts we spoke about last year. We are now increasing our visibility, working with an IRR firm. We’re getting our story out there. It's been very much under the radar, but now that we've got news, now that we've got traction on our project. You can definitely expect more from us.
Matthew Gordon: You just need to tell us more often about what you're doing. Congratulations on the resource. That's good news indeed. Stay in touch, tell us how you’re getting on. I will definitely take that phone call when it's received.
Dale Verran: I just want to leave you with the following thoughts: Fortune Bay has been essentially under the radar for the last while. We are now getting traction as a company. We've recently completed a new mineral resource estimate for our Goldfields project. We're going to be looking to move that into a Pre-feasibility Study. Concurrent to that we've started our exploration program, a phase 1 drilling program is currently underway on site. We are expecting assays in the coming weeks. We also have a project in Mexico where we’re really excited about the geological potential, that we looking to advance as an asset with a partner in the nearer term. So we're really excited about where we’re going. Our company now some significant traction and the market can expect to hear a lot more from us.
To find out more, go to Fortune Bay's Website.
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