Part of the Stock Digest group of websites: Visit Tech Stock Digest  

Cordoba Minerals (TSX-V: CDB) CEO Mario Stifano on the HPX Financing & New Targets at the San Matias Project in Colombia

August 10, 2018

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is President and CEO of Cordoba Minerals (TSX-V: CDB)(OTC: CDBMF), Mr. Mario Stifano. Mario, how are you this afternoon?

Mario Stifano: Very good, Gerardo. Thank you for having me on again, really appreciate it.

Gerardo Del Real: Thanks for coming back on. You had some news today that I think is important to contextualize the district-scale potential of San Matias. You have the Alacran Deposit, which is a standalone deposit, a great starter deposit. But I've always said that the land potential is district scale. It's exciting to me. The rocks are exciting. The scale of it is exciting.

What hasn't been exciting, and it wouldn't be fair to my readers and listeners and subscribers, frankly, is if we didn't address the deal with HPX, the recent financing. You just closed on that. Last time you and I spoke, I voiced my displeasure with the dilution and frankly again, with this closing, I've been pretty open and frank with you both privately and publicly with my readers and my listeners. I have to the address the elephant in the room. Can you explain the reasoning behind the $1.3 million private placement with HPX where they now own, I believe, it is approximately 72% of Cordoba. Is that correct?

Mario Stifano: Right, that is correct. And to your readers’ benefit, you have clearly voiced your displeasure to the financing structures that we have undertaken. But the $1.3 million US financing that we just did with High Power Exploration, from our perspective we are an exploration company and we need to continue exploring. And we were incurring some debt to continue our program at San Matias, which we think is an extremely prospective district. I'll get into a little more detail on why we continue to think that, but as an exploration company we felt that continuing to take on more and more debt would have been detrimental to the interest of all shareholders.

Exploration companies don't generate revenue, and the board felt uncomfortable having our debt level start to approach $3, $4, $5 million dollars. Anything can happen, particularly in a bear market. The worst thing you want is a scenario where the company – even though HPX is our largest shareholder – where our largest shareholder is a big debt holder and a repayment of that debt becomes a problem in the future, which then really hurts the minority shareholders. The board and management felt the right way to have a capital structure and exploration company is equity based. In the market we're currently in, we did approach various institutions, but institutional financing whether you're a big company, small company in development or production is just more or less limited in this kind of market.

HPX was the only shareholder willing to step up to the plate, which I think speaks volumes for what Friedland and HPX see as the potential here in Colombia. They were the ones that provided us with the financing, and the board felt it was best to clean up the balance sheet and get some additional equity into the company so we can continue to do what we do best, which is explore in Colombia and, maybe in the future, elsewhere.

Gerardo Del Real: Let's talk frankly, Mario. It's a tough junior resource market right now. Let me tell you the two big issues that I had with the financing. The first was the price. I felt it was at a market bottom. It's at $0.105 cents per share. My second, frankly, was converting the existing debt of $1.75 million U.S. into common shares, and then also a separate debt to HPX of $425,000 U.S. into an additional 5 million shares, which totals about 27 million shares.

To be perfectly frank, those were the two issues that were really thorns on my side and, frankly, continue to be. I love the project. I think the exploration side is definitely there. I think we're going to get to that here in just a second. But just to be clear, those were my two biggest issues and, frankly, groups that I'm involved with and shareholders that I've spoken with, they were clear that those were their two biggest gripes as well.

Mario Stifano: Yeah, we always hope that the market is going to continue to improve. When we took on that debt the market just wasn't there for equity financings and HPX recognized we needed capital so they agreed to lend us some capital. But what we weren't able to do with success in the current market was raise equity. The board continued to feel that building up a debt position in an exploration company in the long run, because nobody knows what the market is going to look like, even though we're all bullish year.

There's no certainty to anything. Having a sizeable debt position on the balance sheet, we felt would have potentially been a detriment to all shareholders. We wanted to clean everything up and just be sure that Cordoba continues to be well financed. As we stand today, we have some cash, about $1.7 Canadian or $1.3 US, and we have no debt on our balance sheet.

HPX's position, overall, didn't move too much, they moved a bit obviously. They went from a 67-68% ownership to about 72% ownership of the company. So they didn't materially change the overall profile of our shareholder base. But, as you pointed out, yes, we did have to accept dilution in order to bring additional capital. I would have loved to have done a financing at $0.30, $0.40, $0.50 or $1 because I think the company is grossly undervalued. But our view was ensuring that the company is financed so we can continue to create shareholder value in the long run.

Gerardo Del Real: Let's talk about how the company is going to turn things around. At one point this was a triple digit winner. It's, frankly, nearly a triple digit loser at this point, right? You had a news release today that, for me, is exciting because we've talked in the past, Mario, and we've agreed that the best systems are very complex. You've gone through a team of geologists that have come in and looked at this thing from all different angles, and it sounds like you finally have a group, with the prior group’s help of course, that understands the complexity of the system and knows how to follow it find possibly the potential source of mineralizing fluids, for not just for Alacran, but other portions of the district. Can we talk about that?

Mario Stifano: You're exactly right, Gerardo. A good rule of thumb with new discovery, sometimes it takes the fifth or seventh operator of a particular deposit to really discover the potential of the deposit. In Cordoba's case, it's probably the fifth or seventh geologist that's really been able to piece this all together. And as you point out getting all the information that all the other geos had and really taking a high-level view of what's happening in our district geologically. It is very complex.

Northern Colombia has never really been explored for minerals. In the 80s, Cerro Matoso, the big open-pit nickel mine was discovered. But, since then, very little exploration to no exploration has been done in this northern part of Colombia. What we've been doing in the past, we've been looking at the deposits slightly different, and we weren't looking at them in the right way.

I'm going to use Alacran now as a first example. With Alacran, when we would drill, when you hit around that 250 to 600 meters below surface the deposit would cut up. And we never really understood what happened to the rest of the deposit. Was it deeper? Where was it? We sort of started to assume that maybe what we saw at Alacran was what we had, but what we do know that, based on our drilling, that the north was still open, and it was opened downdip. That's an area we thought was prospective for additional tonnage at Alacran.

However, remember that beautiful high-grade gold hit that we had, Hole 36, which was a spectacular hole where we had 4,400 grams gold, the 10% copper, 25% zinc, plus silver. The artisanal miners opened up an area around that hole, just above that hole, 90 meters above the hole, and what they exposed was a very large breccia. And that breccia made us really start to understand what Alacran is really all about.

It's now clear that Alacran has come from a source. What we need to do now is start figuring out where did that source come from? Gene Schmidt, who's our current VP of Exploration is an extremely experienced individual. He worked as Vice President of Southern Peru Copper, which is one of the biggest copper mines in the world which is part of the Grupo Mexico group. He's worked at Freeport, Agnico Eagle. He's worked for small mining companies including Hecla and Dia Bras. He knows how to work for a big company and a small company.

After we discovered the breccia, we went and relogged all the core. We also saw a fault in that breccia that we really couldn't pick up in a very small core drill hole. What we now think has happened with Alacran is there's a thrust fault. What it did is it moved the Alacran ore body up and to the east. What that means is that the rest of Alacran is not at depth, it is moved just to the west of Alacran.

That's really important because now we have no idea, if our theory is correct, we have no idea how deep Alacran is. This could be a very deep ore body. More importantly than that, this is a replacement system. That means the source for Alacran is there as well. These porphyries are usually much bigger than these replacement systems. We're pretty excited now, based on the geology that we've been seeing, what is the real potential of Alacran. We think now it could be significantly, significantly bigger than what's currently been drilled. It's already a big size at 79 tonnes.

The way Gene and our geos on the ground help piece this together is stop looking at assays. We ended up panning for gold. The most old-fashioned way to look for gold and look for mineralization is panning for gold. We followed the mineralization, didn't pay attention to rocks. Step by step, we kept following the mineralization from the streams to the soils. We found some nice rocks to the west of Alacran which you saw in the news release. Those rocks look exactly like what the artisanal miners put through their mill, and they told us that. They were pretty excited. When the artisanal miners were helping us pan for gold, because this is their specialty, when they found those rocks, they took them, a couple of them, and we cracked them open. We saw gold there, so there's definitely gold in those rocks, but that looks like Alacran. We're extremely excited now with what's on the western side of Alacran.

That's just one piece of the puzzle that we have in the San Matias district. The other one, and I've talked many times on your show about Montiel and how complex it is. And we're trying to figure out Montiel and why can't we find the rest of this porphyry. Well, it looks like we were looking at this all wrong in the past when we were doing exploration at Montiel. Montiel is an outcrop where we hit some great grades, 100 meters of 1% copper and 0.26 grams gold.

To the west of Montiel is another area we call Montiel West. They're about 700 meters apart. We always thought these two porphyries were related somehow, maybe it's in between or somewhere to the north or the south. We drilled to try and find it, but we could never really piece where this Montiel porphyry is.

Well, Gene, as I said, is very, very old fashioned. And if you really look back in history, all the biggest mines in the world were found without geophysics. It was done by simple geological methods such as panning. He was sitting on the hillside at Montiel looking out to the western area. We have Montiel West and just to the north there's another quartz vein that we call Pepita that the artisanal miners are mining. When you start looking at some of the core at Montiel, you notice there's actually a quartz vein at Montiel as well. Well, as he started thinking more and more about it, he started thinking, "Well, maybe Montiel is not the porphyry. It's not at the roots of a system, which could explain why the rest of Montiel is not there.”

What he figured out is Montiel is leakage. What it was is with the thrust fault that you had that moved Alacran, with the same faulting you had the intrusion to the north of Alacran which we call our Way Out West target. The mineralization ran through the faults and it created the Montiel West and Montiel East outcrops. It's leakage. It's not the actual porphyry. We're drilling for a porphyry where there is no porphyry. It's just leakage from a porphyry. If you now look at this Way Out West target and if you look at the news release, it's a very large silver soil anomaly.

Again, he was looking at metal zoning quite differently than all our other geos. He was looking at other minerals, including silver in particular. We got a 2.5 by 3 kilometer silver soil anomaly. In the Way Out West target, we've been walking that area, we found gold in streams, we found gold in soils, and now we've even discovered disseminated chalcopyrite copper in the area.

Everything is pointing us to Way Out West being the source and the center of mineralization for our district, in addition to what we think is to the west of Alacran. This is pretty exciting for us because all of a sudden, now we opened up a whole new exploration target at Way Out West and a whole new exploration target at Alacran. If we're right, the size of these targets are quite large.

Gerardo Del Real: That all sounds great, Mario. It would have been even greater at $0.50. But that's behind us, right?

Mario Stifano: Of course, of course. We always want to do things at better share prices, but when you're entering into a new district, it takes time. We always knew it takes time. We always would have wished we figured this out a little bit earlier, but unfortunately in our case, now fortunately with Gene, looking at things a little differently.

That different experience that he had in Latin America and the different experience he had working at small mines, including mining quartz veins. So he's looking at different things. He was able to really piece together what was happening in this whole area. We didn't have geophysics in this Way Out West target. We didn't have any geophysics west of Alacran. It's an area that would have never showed up with any of our geophysical targets. Because of that, I guess, a lot of modern geologists rely quite heavily on geophysics.

Sometimes you have to put pen to paper just like a mathematician. You can use a calculator, but sometimes you have to put pen to paper to figure out a problem. In this case, Gene put pen to paper to help figure out what was happening in our area, including manually drawing the breccias in his concept of what's happening at Alacran. This helped us all piece this all together. Thankfully we got Gene on our team. We got a great concept now that we're pretty excited about to test out.

Gerardo Del Real: Well, the best geologists always like to be in the field and out in the sun, not in air conditioned board rooms. So it's good to hear that Gene is out there and, frankly, the results that he's been able to get to are pretty impressive. How do we test whether or not Gene, you, and the team are correct about this hypothesis?

Mario Stifano: To your point about Gene being out in the field, because this is really important, you hit the nail on the head with this one. We've had lots of geos, but most of the geos would spend three to four days on the site and then go back up to site just to review data. Even Eugenio, who was our prior VP of Ex, his focus was doing the infill drilling at Alacran and that was really what he focused in on. Nobody that we've ever had had spent three to four weeks at a time in the field looking at rocks, looking at new areas, and just scratching their head, trying to figure out what is going on, and just bringing all that experience that they've been able to gain to try to understand what is happening in this district. Gene is one that loves to spend time in the field. In fact, you almost got to pull him away and say, "Go home for a week, Gene, because you need to rest for a bit." We're quite lucky to have that.

To your point, now we believe that we've figure out, and these are, again, hypothesis in terms of what we think is happening here geologically, but we're seeing quite a bit of evidence now to support our theories here. What we're doing now is we're going to continue to do the soil sampling, because we do have some pretty large land packages to test our theories. From there we're going to do mapping and we're going to do some auger drilling, which will get ourselves below the saprock into the sapline, hopefully a little bit of fresh rock. Because the hard part we always had in Northern Colombia is there is a lot of cover.

There's just not a lot of outcropping to just walk up to and say, "Oh yeah, there it is." It's taken a lot of different techniques to try and figure out what is happening in Northern Colombia. We never figured panning for gold would be one of the best techniques to understand what is happening in Northern Colombia, but it ended up being the technique to use to help us find the source of mineralization in this area. We're going to do some more mapping, we're going to do a little bit of shallow drilling to get to some fresh rock and then from there, we are going to drill some holes because we have to test this theory. Both at Alacran and at Montiel.

Gerardo Del Real: Excellent. Mario, thank you for coming on, thank you for your time. And hopefully I can have you back as soon as you start getting some of those mapping results back and as you get closer to testing the theory, right?

Mario Stifano: Oh, for sure. Our focus is now solely the northern part of Colombia because it's quite obvious what's happened here. Continue to pay attention, because we've put a little bit on hold what's happening in our southern part of our land package, but we actually think we have another mineralizing source in this Caño Pepo-Betesta-Buenos Aires area that we started working on and is starting to piece together as well. But when we discovered what is happening in the north, rightly so, we put that on hold to really focus on this northern area because it's a potentially easier win for us in the very near future. I'm happy to keep you and the readers up to date on this. Continue to pay attention. I think, if we're right, Cordoba is grossly undervalued.

Gerardo Del Real: Well, I'm looking to the truth machine figuring that out, Mario. Thank you again.

Mario Stifano: It's the drill holes, exactly. Thank you.

Gerardo Del Real: Perfect.

View Interview Archive

Subscribe to the RSD email list and get the latest resource stock activity directly to your inbox, for free.

MARKET SUMMARY

INDICES

Name Last Change
DOW 25250.60 0.35%
S&P 500 2750.79 0.59%
NASDAQ 7430.74 0.89%
TSX 15409.47 0.03%
TSX-V 711.36 0.00%

Resource Commodities

Name Last Change
Gold 1227.28 0.03%
Silver 14.71 0.14%
Copper 2.79 0.000
Platinum 842.50 0.07%
Oil 71.34 0.52%
Natural Gas 3.16 1.93%
Uranium 27.50 0.29%
Zinc 1.21 0.00%

@RSDigest ON TWITTER

Part of the Stock Digest family of websites
Small Cap Stock Digest