Hannan Metals (TSX-V: HAN) CEO Michael Hudson Talks Zinc Bull Market and Expansionary Discoveries at Kilbricken Zinc Project

October 11, 2017

Gerardo Del Real: This is Gerardo Del Real, with Resource Stock Digest. Joining me today is CEO and Chairman of Hannan Metals (TSX-V: HAN)(OTC: HANNF), Mr. Michael Hudson. Mike, how are you this morning? Where you're at?

Michael Hudson: I'm at Australia, Melbourne to be precise, and it's morning time, and tops of the world. Thanks, Gerardo.

Gerardo Del Real: Excellent, excellent. Well, good morning to you. You had some excellent news today. The news release reads, “Hannan Discovers Large Drill Ready Soil Anomaly Up-dip from Kilbricken Zinc Deposit, in Ireland.” I want to talk about that because it's important, but before that, I'd love to get your thoughts on the zinc market. We're clearly in breakout mode. It's clearly a bull market. I believe zinc today closed at $1.51 a pound. We've seen recent 10 year highs. I think that's going to continue.

You came up and cut your teeth, obviously, early in your career, with one of the companies that I believe was the largest zinc producer at the time. I'd love to get your feedback and thoughts on what you're hearing and what you think.

Michael Hudson: Yeah, I had 10 or 11 years with Pasminco, which was the largest integrated zinc producer through the '90s. I've seen a number of these cycles, and zinc is one of those metals that goes through these times. I suppose that's what makes it exciting. Volatility is where money can be made in our markets, I suppose, and zinc certainly is volatile. We've doubled the price since the lows of 2016, so it's been quite a dramatic rise.

Clearly, it's all fundamentally driven too. This is nothing about speculation. This is driven by Glencore shutting down 3% of the market around that time. The market's now in deficit. Inventories are down, and there is a real shortage of supply of zinc. That, step one, step back, is because we just haven't been putting the money into exploration and finding these new deposits. I suppose that's the segue of what we're doing now, with the right project, right time, right place, which we've talked about.

This is an advanced project we have, and this is the time to develop these projects in these markets, when the metal is needed. This is one of those few discoveries in the space that was made during the down cycle. So now this is the time to benefit, when zinc is going absolutely gangbusters.

Gerardo Del Real: No, I absolutely agree. I think the entire statement, obviously, because Michael Hudson said it, is very important, but there were two parts that I think stood out. One is that the money is made getting the cycles right. The volatility that follows the resource market is good if you position yourself correctly. Secondly, you mentioned that the money coming into the zinc space is fundamentally driven. It's not a result of speculative dollars, and I think that's important, and it's going to contribute to this bull market that we're clearly in.

Now, you did an amazing job of positioning Hannan with the Kilbricken project during the downturn, and it's a company that just IPO’d earlier this year. You're off to the races with the project. I want to talk about today's news release. You discovered a large drill ready soil anomaly, which is up-dip, which is important. Can you speak to that a bit, Mike, and explain why it's important?

Michael Hudson: Sure. Gerardo, we've had $25 million dollars spent on Kilbricken by Lundin over the last, well, during the last 10 years, I suppose. It was two or three years of exploration, where they put a lot of money in the ground. The project sat there for the last three or four years. Well, it's a top 10 project in Ireland. Ireland's one of the top 10 jurisdictions for zinc in the world, in terms of tonnage, so we've got a great start. It's not an economic amount of tonnage yet. This is all about resource expansion.

That's where this news release is so important, and I urge listeners to go to that release of today, and look at the figure. Ignore the words as much as you wish, but it's the figure that really tells the story. You can see that soils, the soil anomalies, form bigger and broader than the known mineralization. This new anomaly that we've defined is what we call up-dip to the north of the known mineralization. It's bigger than the known mineralization. Soils work pretty well in Ireland.

It's not one-to-one, in terms of you've got a mineral body at depth, and it will have an anomaly at surface. I'm not trying to lead that story, but it's a very good indicator for what may lie below. Not only do we have a good soil anomaly, we knew this was a great area before, because it had the right structure. It's got the right stratigraphic position developed there, which is the two key ingredients for Irish style deposits. There's some historic mining further north of this deposit. Remember, Kilbricken was found under a historic mine, a Victorian age mine.

With all the right ingredients, and there was never soil sampling in this area, critically. There was never soil sampling, because the thinking by earlier workers was that the controlling structure to the immediate north of mineralization was the start or end of mineralization. But this data goes to prove that it isn't. We've generated many, many targets from this, and it shows that the resource expansion potential remains very high. I've been banging on about that for the last year about this project, but this is just another tool in our kit to demonstrate that.

Gerardo Del Real: Excellent. Now, you mentioned the data, and I believe the data also shows that some of these targets may be closer to surface than where the current resources and the current targets that are being drilled, and we'll talk about the drilling in a second. Some of these anomalies are target depths of less than 300 meters. Is that accurate?

Michael Hudson: Absolutely correct, and you've looked at the figure, Gerardo, because we've got the depth to the target horizon on that map as well. The mineralization at Kilbricken is 4 to 5 to 6 hundred meters depth, but this mineralization is shallow, so it's where the rocks are coming closer to their surface. That's good for a junior. That's great for us, because we can get basically two holes for the price of one, by drilling shallower. If all things being equal, in terms of the prospectivity of the area, we'd be crazy not to test the shallower targets with priority. That's why we love this target as much as all the other reasons I outlined.

Gerardo Del Real: Perfect. Well, let's talk about the drilling that's going on now, and then we'll talk about when we'll actually be able to test that target with a rig. I understand there's two diamond drill rigs turning 6 days a week right now. Is that accurate?

Michael Hudson: Yes. We've got two rigs turning, and they turn 12 hours a day. In Ireland it's hard to get away from population. It's a densely populated country, so we don't turn the rigs during the evenings, to keep the noise down, and of course, never on a Sunday in a Catholic country. Two rigs are going gangbusters. We've got great drill crews operating in Ireland, and the two rigs will continue to operate into the new year.

Gerardo Del Real: Excellent. Now, I understand that Hole DH221, which is in progress, is testing a soil anomaly 250 meters east of the Fort Zone, which is a pretty significant distance away, obviously. Can we talk about that a bit?

Michael Hudson: Yeah. Just let me step back one step, I suppose. What we tried to do initially, with the initial drilling, with the first four holes, was to extend the known zones, and step 50 meters out, and demonstrate that the resource wasn't closed off. I think we've demonstrated that already, even just with the first two holes that we've put out in the public domain. We took a last hole step-out, and extended this zone by 50 meters, but the big difference for this project is not making those 50 meters step-outs, even though that's important to build tonnes.

Point number one, ticked and proven that we can extend and there's still a lot more expansion opportunities around the known resources. It's to find new mineralized bodies, and these Irish systems form multiple mineralized bodies. If you look at any of the analogs in the country, there's 6 to 8 generally. We've got two so far, so we are obviously looking for analogs where we are finding other mineralized parts of the system, other mineralized bodies. That 250 meter step-out is looking for the new big body, if you like, another one of these mineralized bodies, and that's what we think the new soil anomaly is, at least one or two of these also.

Drilling will only prove whether they are or not, but that's where the drilling's gone over the last few months, from sort of staying closer, and now we're taking the bigger step-outs.

Gerardo Del Real: Excellent. Now, I understand that one rig will be moved to test that new soil anomaly at month's end. Can we talk a bit about that? We have the one 250 meters east of the Fort Zone, looking for that repeat mineralized body, and another rig here, at the end of the month, that will be testing this up-dip anomaly.

Michael Hudson: Yeah. Scheduling, and land access, and agreeing with the farmers at what point we can go into specific farms, and when they cut their hay, and all the details around those kind of scheduling issues. And we want to work and do work very closely with the farmers that we work with. Just in terms of getting that rig, it looks like we've got one more haul ahead of us, with one of the rigs, and then we'll move that up to the north, and start drilling this area.

I should point out that this anomaly is not small. It's something like three quarters of a kilometer long, so it's not a one hole test. This is a multiple hole test, and we probably need to put half a dozen holes into it, the truth be known, to test it, because it is so large.

Gerardo Del Real: Excellent, excellent. Mike, now you mentioned that Lundin, when they had the project, they spent approximately $25 million dollars on it. You've spent approximately how much, Mike?

Michael Hudson: We are just into our first few million now, Gerardo. We've raised about $4.5 million dollars. We had some property payments to make to Lundin, around the $1 million dollar mark, and I estimate we're somewhere between one and a half to two million expenditure on it yet. We've gone a long way with meager dollars at the moment, but the drill rigs won't stop on this project. It's a drill exercise, and we'll start developing the story along strike, also. It's very important to know there's a much bigger story here than even just bringing tonnes together, to try to get an economic quantity of tonnes for this prospect.

We've got 40 kilometers of untested Waulsortian Limestone, and the Waulsortian is the host of the majority of mineralization in Ireland. There's not many kilometers left of untested Waulsortian in Ireland, and we've got 40 kilometers of it, so there's a much bigger story here to play out, also.

Gerardo Del Real: Excellent. Well, you're working with a project that's seen approximately $26 to $27 million dollars spent between you and the Lundin group. And I think your market cap today, in Canadian terms, was $11.8 million if I'm not mistaken, Mike. A lot of upside there.

Michael Hudson: The story needs to be told further and further I think, and this is a great opportunity in this market.

Gerardo Del Real: Mike, I appreciate your time today. I encourage everybody to go to Hannan's website, which is hannanmetals.com. Mr. Michael Hudson, I want to thank you for your time. Is there anything that you'd like to add?

Michael Hudson: We've covered it all for today, Gerardo. Always a pleasure.

Gerardo Del Real: I appreciate your time, and I'm looking forward to getting out there and seeing the project firsthand.

Michael Hudson: We look forward to hosting you.

Gerardo Del Real: Thank you, Mike.

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