Chilean Metals (TSX-V: CMX) Chairman Terry Lynch on the Kickoff of Drilling at the Large Bass River Target in Nova Scotia & Working with Southern Rock Geophysics to Identify IOCG System Targets at Zulema in Chile
Geraldo Del Real: This is Geraldo Del Real with Resource Stock Digest. Joining me today is the Chairman of Chilean Metals (TSX-V: CMX)(OTC: CMETF), Mr. Terry Lynch. Terry, how are you this morning?
Terry Lynch: I'm doing great, Geraldo. How about yourself?
Geraldo Del Real: Doing excellent, thank you so much for asking. I reached out to catch up. You know, I was reading a report from Fundamental Research and they initiated coverage on Chilean, and they have a buy rating on the stock with a fair value estimate of about $0.30 per share. You're currently trading – I'm looking now – you're at about $0.08 per share and I've got to believe that a large reason for that target price is some of the targets that you've developed, both in Chile and Nova Scotia. You had some news out of Nova Scotia, can we talk about the target you just outlined there?
Terry Lynch: Absolutely. We're super excited. Obviously, it's great to get that research report out and I think it will help people understand the full depth of assets that we got in the company and that near-term catalysts that are happening.
In respect to Nova Scotia, we just announced yesterday that we're really advancing on the drilling and we'll probably be in the ground next week, certainly in early February for sure. Drilling this tremendous target we've got in our Bass River joint venture. We use Minotaur Exploration, who is one of our stockholders and they don't really do geophysics for anybody. But when they have a major stake in you, sometimes they will do that and they have certainly done that for us and we thank them for their service because these guys have been tremendous. Obviously, they have discovered Prominent Hill, and some other big discoveries in Australia and Southeast Asia, and these guys are proven mine finders – billion dollar mine finders – and we're hoping they are going to get number three here.
So, this target was a big airborne VTEM that identified it, and then we just shot a PEM over the target, just over the last month or so and now we've identified this 500 meter by 500 meter open target that's going to be drilled in the next coming weeks.
They have previously drilled it before they had made the deal with us on a smaller target and had mineralized lead-zinc-silver, but didn't was sub-economic but it was trending northwest and looked exciting. So they went out and got the next tract of land there and shot that airborne VTEM and had the biggest bump in Nova Scotia according to the DNR, the Department of Natural Resources. It was at that time that we made the deal with them on the land, and now we're subsequently drilling it. It looks like there's a formation. So, geologically you've got all the right elements. Geophysically you've got all the right elements. We were just at the show in Vancouver and had a stream of top geologists and geophysicists through and not a single guy said this was a crap route. They were all saying, “Wow, that's a hot one.” Of course, it's exploration and you have exploration risks, but we're super psyched about this. It's a company maker for sure.
Geraldo Del Real: You know something that was interesting to me about the model and the target model is that they said the groundwork in the modeling suggested that the target extended to the north off of the survey grid. Don't get me wrong, a strike length of 540 meters and a depth of 467 meters, that in and of itself, if it’s mineralized, is very consequential but the fact that the target could extend to the north off of the survey grid leads me to believe that it's probably a bigger target.
Terry Lynch: That's what we're thinking. That's what the geophysics firm said, that comment. What they could see on the ground, they thought there was a lot of room for it heading northwest again and we've got the land, we just didn't cover it in that particular pattern. But yeah, if it's big, it's probably super big.
Geraldo Del Real: Now, as far as the access goes, I understand access to the area is very good so if you're successful with the first few holes, expanding a program would not be difficult. Is that correct?
Terry Lynch: Yes. I think we talked just before we got on the radio here that resource industries turned up. Getting these PEM suppliers or drilling suppliers is sometimes a challenge now.
In Nova Scotia drilling is super economic. I think we're going to be paying $55 dollars a meter, which is ridiculous. In most other cases, I'm sure you're hearing, $150 to $200, etc. So, that's a real bargain and no problem to ramp up the drill programs if it's justified, for sure.
Geraldo Del Real: Excellent. Now, you also had news back in late November and I know with the holidays, it often gets lost in translation because everybody's busy. You had news out of Chile on your Zulema property. Can we talk about that a bit because that's also a big major potential catalyst and that's a property that I have to believe, in light of this base metal bull market, you have to be getting some attention from some of the mid-tiers and possibly even majors in the business.
Terry Lynch: That's exactly what happened. So, in November we announced we're going to do the next stage of exploration in Zulema, which is in Chile but just for people's perspective, they are probably aware of the mine disaster that happened in a town called Copiapo, it's in the middle of the country, close to the coast, about 300,000 people there so it's a major mining town. So, the big mine near there would be Candelaria. So, this is basically 25, 30 kilometers away from Candelaria, which would be our analog. That's what we're looking for, our big ISOG.
We did an initial drill program, had nice, very high-grade lenses, you know 1 gram and 1% cooper, but just not big enough in terms of the section. So, we were on a system but we hadn't found the source. So, we went back to basics for this project which is the size of the city of Toronto, so it's a mammoth of a piece of ground, to do some additional geophysics. We employed a friend called Southern Rock, who Lundin is using to advance their Candelaria deposit. They recommended something to us strongly saying, “These are guys that really understand exploration in this area from a geophysics perspective.”
Chile, with the sandy environment, has some unique challenges. So, we're using Southern Rock and they just did the first space for us and we just got it back literally just before the Vancouver show. And basically we did a magnetic survey over the entire property at sort of 200 meter spacing, which is good detail, and identified four major kilometer or larger highs that will be subject to our next step, which will probably be IP over these. And if there's an IP high and magnetic high then the next step will probably be a drilling program. So, now the brain work, the geophysics and the IP, is reasonably cost attainable for juniors like ourselves. Drilling them may be where it is a bit more of a challenge, because obviously, you know, at a stock price of $0.08, it's really tough to justify raising capital with those prices. And as you said, because of the bull market and the fact there's been such a dearth of exploration, now we're getting serious knocks on the door from majors and mid-majors on that project.
So, we'll see. We're putting together a data room and we're beginning to pursue it as if we will be drilling it. But we're also cognizant that sometimes you get a major in and if the deal terms are right then that can be the most value creation for your shareholders and that's really what we're all about.
Geraldo Del Real: Well it helps to have people with a great reputation like Minotaur, like Southern Rock, that you had come in to do a lot of this work. I've got to believe that lends a lot of credibility to what you're finding, right?
Terry Lynch: 100 percent. 100 percent. You know you're as good as your scientific team, really. Storytellers like me are useless. It’s the scientists that do the important things in terms of de-risking these things. It is a risk business and you can never eliminate it completely. It seems like the guys that know how to find stuff continue to find stuff so it's always good to work with guys that have had success and have a track record. That's what we've tried to do, and just enhance the odds in our favor and be as favorable as possible.
Geraldo Del Real: Wonderful. So, just to be clear, drilling at Bass River with your partner Highlander should commence here in the next week or two. Is that correct?
Terry Lynch: That's correct, yes.
Geraldo Del Real: Excellent. Well, Terry, hopefully you'll come back on as those assays start trickling in and if there's any developments between now and then with the properties in Chile, please, please, keep us up to date.
Terry Lynch: Will definitely do that, Gerardo, and thank you so much for catching back up with us and keeping your viewers informed. Hopefully they will see an opportunity to add a little bit of CMX to their portfolio. I don't think it'll look bad on them.
Geraldo Del Real: It's a fully diluted market cap of $8 million in a base metal bull market with drills turning here soon, everyone. So I encourage everyone to go to the website and do your due diligence. It's an interest, pretty compelling value proposition.
Terry Lynch: Gerardo, if I can make one last point?
Geraldo Del Real: Absolutely.
Terry Lynch: Let's not forget that Fundamental Research report basically said, “Hey, they're worth that based on the value of their royalty alone.”
Geraldo Del Real: And are royalties with Teck?
Terry Lynch: We have a royalty with Teck that because of the booming market, it's probably going to come into play sooner as opposed to later. It's a 3% royalty, they can buy back 1% for $3 million, then we get 2% on sales of that project. They are currently –last year I think it was around $240 million. In the peak, they were doing close to $700 million. So potentially, 2% of that is a big number for us.
People ask me, “What's special about Chilean Metals?” I say, “Show me a company, a junior, that has the prospects we do in terms of exploration risk upside but has a royalty downside.” Not many, I don't know of any. So, that's the thing I put on the table and say, “Hey, I don't get it. How can you not have some of this?”
Geraldo Del Real: It's a lot of irons in the fire, absolutely, and for anybody that wants to read that report they can go to either resourcestockdigest.com, this site, or chileanmetals.com. Terry, thank you again. I really appreciate your time.
Terry Lynch: Okay, great. Great, man. Take care.
Geraldo Del Real: You too, now.
Terry Lynch: Bye.
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