Gainey Capital (TSX-V: GNC): The Genesis Story of a Mexican Gold Discovery

October 4, 2016

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is CEO and Director of Gainey Capital (TSX-V: GNC)(OTC: GNYPF), Mr. Davd Coburn. As founder, CEO, and Director of Gainey Capital for the past 4 years, Davd has focused on acquiring gold and silver operations in Mexico. David has spent the majority of his business career in the plastics and chemicals industry, developing successful operations with partners such as GE Plastics, GE Capital, Dow Chemical, DuPont Chemical, BASF, and Bayer, primarily in building and acquiring companies with operations in Mexico. Now, Gainey Capital is getting a lot of attention due to results from the first 3 drill holes in the phase 1 drill program. Drill holes that showed near surface gold and silver.

The company, Gainey Capital, is a gold and silver exploration company that owns the El Colomo Gold & Silver Project, and also owns an advanced 300 tonne per day mill in the gold/silver rich Sierra Madre Occidential Trend in Western Mexico. David, that was a mouthful there, but thank you for joining me today and bearing with me.

David Coburn: Gerardo Del Real, thanks for having me, sir. I appreciate your time.

Gerardo Del Real: Well, I appreciate yours because it's exciting times over at Gainey, and before we talk about the exciting results from the first 3 holes, I'd like to talk a bit about your background and how you became involved with Gainey Capital. Can you share with us a bit of that background there?

David Coburn: Yes, yes, absolutely. Well, for many years I was in the plastics/chemical business and heavily invested into Mexico. One of my main partners down there, capital partners as well as supply partners was GE Plastics and GE Chemical, and GE Capital. Having done a tremendous amount of business with GE in Mexico, a lot of successful business with GE in Mexico, we were very familiar with each other. They were presented this project, this mining project in Mexico from a Mexican group and GE primarily at that point in time, was not big in investing in the mining business, but having success with me and knowing my Canadian background and roots, they assumed I was connected in the mining business so they presented the project to me.

I took the project to a group of canadian investment bankers that I was very familiar with and they looked at the project and with their geologists and their analysts, and they were very excited about it. But they wanted to have one other group vet the project, so they sent me down to Tucson, Arizona, to meet with Dr. Peter Megaw of MAG Silver fame. I walked in to meet Peter for the very first time, I sent him down the 43-101 technical report ahead of time, and I walked in to meet with Peter for the first time for lunch. Peter's a great gentleman, and Peter had the 43-101 and he pushed it away on the other side of the table and said he didn't need to discuss it. He had been to the property and they tried to buy the property several times and Peter just really wanted to know how I acquired the property and did I get the whole property because when Peter and company were trying to acquire it for Peter, they could only get bits and pieces of it.

I assured Peter that we acquired the full 50,000 acres and that we had title of it and he was excited about it and excited to hear what our plans were. That in a nutshell is how it came to me and how it came through GE, my friends at GE, who are invested in the project, and went through to an investment bank in Toronto, and how they sent me down to Tucson and how we at that point in time, in conversations and several meetings with Peter Megaw and Cascabel, determined that Cascabel and Peter would be the best group at this point in time to lead the exploration. Their history in Mexico is second to none and they've had great results down there and they know the area very well.

We engaged Cascabel and Peter Megaw and his top senior geologist, Raphael Gallardo, to lead the project. That was 3 years ago and here we are today drilling holes for the first time. We're excited.

Gerardo Del Real: That's fantastic. Now, you mentioned Peter Megaw, and I don't think it's a coincidence that he wanted to know whether you had consolidated the property, but it truly is a large land package and what's exciting to me is it has the potential to become a district scale gold and silver play. Now, there is many very well known people in the industry that know the property and most have always agreed that it has excellent exploration potential. Let's talk about those first 2 sets of results. The first news release from last week showed 70 meters of 1.14 grams per tonne gold equivalent...

David Coburn: Correct.

Gerardo Del Real: as important, there were very good gold and silver values there. Now, you followed that up today by releasing 2 more holes and the headline number was 34.2 meters of 2.39 grams per tonne gold equivalent at what's called the "La Nueva Victoria Zone." Now, the gold and the silver, David, starts in your surface. Can you tell me a bit more about the results and why they're important?

David Coburn: Well, I think those particular results being important, I mean, for our first drill holes out of the gate, I think to show that the mineralization is at near surface, obviously is going to show the ease from an economic standpoint of getting that mineral out of the ground and getting it possibly to a processing plant that we own in the area and/or as we move down the road and we drill more holes and hopefully have more success, it may make more sense to put in a different technology and/or move forward with further drill holes in the area. I think the general sense of it is if we can get more mineralization near surface economically, it's a lot less expensive to mine than something that's much further into the ground.

Gerardo Del Real: Absolutely. You talked about economics and obviously it's early stage. We have 3 drill holes. They're exciting holes, but we talked about how this is potentially a district scale exploration package, the land package is fantastic. I was recently in Durango and I saw many of the infrastructure improvements in what has historically been a very active mining region. How is the infrastructure at the project? I haven't been. I would love to go soon, and hopefully we can arrange for that, but can you give me an idea of the infrastructure surrounding the project?

David Coburn: Yeah. Actually, one of the key selling points, key highlights of the property is the infrastructure. In a lot of the major and mid-tier mining companies that have been on the property, and we've had several big companies on the property multiple times, the number one thing that they write up is the infrastructure. The roads to get there, they're very, very good, they're looked after federally. There's power, there's infrastructure power that goes right into the mining area, there's a tremendous amount of water, there's a river and underground wells all throughout the property and of course, we've got a great relationship with the Indian community up there and we've got great labor force. They've been absolutely incredibly helpful.

We've got a 10 year working agreement with them and the whole community and the whole infrastructure of the 50,000 acres is spectacular. Spending money to expand infrastructure or improve infrastructure is not on the top of our list. We've got great infrastructure as it is right now.

Gerardo Del Real: Excellent. Now, back to the project, the first 3 holes that were released came from what's called the La Nueva Victoria Zone, but there's over 20 zones that are prospective for mineralization and from my understanding, over 97% of those haven't even been explored by modern methods. Is that accurate?

David Coburn: You are correct. There's two parts today that we're excited about. The first part is what we're calling the "Golden Corridor" and the Golden Corridor is a 3 kilometer long, 1 kilometer wide area that hosts 21 mineralized zones and we've run geological assays on all of those 21 zones and they seem to all be very strong targets. Out of those 21 zones, we're only drilling three of those zones right now. Therefore, we've got another 18 zones that we will be targeting and putting drill targets to in the very near future, but within the big picture of the whole 50,000 acres is, we've stream sediment sampled, Cascabel has stream sediment sampled the 50,000 acres. Within those 50,000 acres, we've found 5 or 6 other real strong prospective zones that could very well equal the Golden Corridor.

We could have an opportunity where we've got the Golden Corridor in 5 or 6 other places throughout the 50,000 acres, and that's I think what the team is excited about the most, are the prospects of really having a district play.

Gerardo Del Real: Now, that's exciting. Well, the first 3 holes were exciting, you have lots of targets, you have a large land package. I know some of the shareholders, the larger shareholders are very supportive of the discovery process and they're long term shareholders, and I think that'll be very beneficial to Gainey Capital. You still only have a fully diluted market cap of less than C$18 million. Can you tell me a little bit about what we can expect here in the next few months? Are you going to continue drilling? Is that something we can expect?

David Coburn: Yeah. I think what we can expect from us in the very near future, I think you can expect us to continue to drill. I think there's a high probability that we could extend the phase 1 drilling program now. I think that you could probably expect us adding some real strong technical people to the team. I mean, we've caught the eye of some very strong people out there, and I'll be having some meetings and discussions later this week and early next week of some very strong technically geologically technical people that have great success in the area. I think with our package that we have, with our drill holes that will be coming over the next 2 to 3 weeks and a strong technical team that we're putting together, I think you'll see lots of progress with this company.

Gerardo Del Real: David Coburn, exciting times. I want to thank you again so much, sir, for coming on and sharing the details with us and hopefully we can have you back on soon as we get more results.

David Coburn: Gerardo Del Real, I look forward to it and again, thank you for your time. I appreciate it.

Gerardo Del Real: Absolutely.

David Coburn: All right. 

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