K2 Gold (TSX-V: KTO) CEO Mr. Stephen Swatton: “We are the Best Undervalued Project in the Yukon with a Significant Discovery in the Last Few Years”
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is President and CEO of K2 Gold (TSX-V: KTO)(OTC: KTGDF), Mr. Stephen Swatton. Stephen, thank you for joining me this morning.
Stephen Swatton: Thank you for having me.
Gerardo Del Real: Exciting times at K2 Gold, you're commencing your 2017 exploration program. Well, let me correct myself, the exploration has commenced but drilling will commence here soon at your flagship Wels gold property. Can you share the details? I know it's an exciting milestone for K2 Gold.
Stephen Swatton: Yeah absolutely, Gerardo. I was up there last week myself to just make sure that the arrangements for flying the fuel in and the drill were as I suspected. The air strip where we're flying everything in from is in perfect shape. We have a drill on site, we have a mechanic who's fixing the drill up at the moment because it's been on site for two years. He said there's absolutely no problems, we're bringing in some more rods, we expect to be starting drilling Friday. We have two geologists on site and our prospector guy has already found what he said interesting - I don't know what that really means - rocks to the south of the drilling zone where we're planning to start drilling. So yeah, exciting times.
Gerardo Del Real: Excellent, excellent. Well I know that geologically a lot of things can get interesting. What's interesting to me as a lay man and as a non-geologist is this property has seen limited drilling but there are some pretty, pretty significant intercepts that had been returned from assays in the past. In 2015, you had an intercept in hole DDH01 which returned 97.5 meters of 0.76 grams per tonne gold, including 19.5 meters of 3.1 grams per tonne gold. And that started at pretty much near the surface at 31.5 meters. Can we talk about that hole and where the drilling that's going to be commencing soon will start from?
Stephen Swatton: Absolutely. We're going to commence from that same general area. The best to look for success is where you've had past success. We're going to be exploring that whole zone, which is called the Saddle Zone. The Saddle Zone, by the way, is 2 kilometers by about 200 meters, 300 meters wide, which just for references sake, that's exactly the same size as the Eagle Deposit, which Victoria Gold are developing in Yukon. Just one of our zones is the same size as what is going to be 2.6 million ounce mine in the Yukon. But having said that, going back, yes what we're going to be doing is interrogating that one zone, which we intersected last year. Stepping back maybe 60 to 80 meters and drilling underneath the previous area of mineralization and stepping to one side and the other, to try and locate the full extent of this zone. We are still working on the orientation of the mineralization but we think it's probably west to east and so we'll be drilling from the south to the north.
Gerardo Del Real: Excellent. This initial drill program, can you fill in the details there? How many meters and approximately how much will it run you?
Stephen Swatton: Yeah absolutely. We're planning on a minimum of 1,000 and maybe 1,200. We're slightly restricted, Gerardo, by the number of man days we can have in the field as part of our class one license, we're allowed 250 man days, which means to say 250 days which an individual can be on site overnight. We are very cognizant of the fact that if we have success, we want to keep our days to a minimum at the start and then we may fly in people from a neighboring camp for the day and then back, but we expect that it'll be somewhere 1,000 and 1,200 meters. If we are having success, we will negotiate and chat with White River First Nation if we can continue but at this stage we don't plan to continue past that without their approval.
Gerardo Del Real: Excellent. You mentioned the First Nations and something that Kaminak Gold, who John Robins was a founding chairman of, was very successful in doing was establishing great relations with the First Nations there. And I think we've spoken off the record how Allison played a big part in that. Allison is somebody obviously that is on the K2 Gold team. Can we talk about that a bit and her role and just some of her experiences in the past?
Stephen Swatton: Yeah, Allison was the First Nation negotiator and she is somebody who the government of the Yukon also uses as negotiator for First Nations situations and she's doing a larger infrastructure project. Extremely well known. You go to any conference, Allison is known by literally everybody. So we're very lucky to have her as our lead person on the interaction with the White River First Nation. I must say that the legacy that Kaminak left is first class. Myself, obviously I'm new to this. I've been in it for a year. Allison's been, at least five to six years, speaking with First Nations and she's been related to this type of work for at least 15 to 20 years of her life. She knows intimately what needs to be done and I certainly see that inside of all the meetings and so far we have an extremely positive relationship with White River First Nation.
Gerardo Del Real: Excellent, excellent. Now do you have a scheduled turnaround time for the assays? You mentioned drilling will start here in a couple of days, I expect the turnaround to be three to four weeks, would that be accurate?
Stephen Swatton: That would be accurate. But as you know, Gerardo, there's been a lot of activity in the Yukon just now and it seems everybody seems to be staking properties up there. In fact one of our other properties, Flume, we noticed that two companies have staked around us now. So everybody's thinking the same as we are up in that general area that it's a hot area, too. Reality is although the assay companies are giving us a two to three week turnaround my spider sense tells me that we may be waiting a little longer from time to time but hopefully we can get to the front of the queue because Al Doherty, 36 year veteran of the Yukon, can pull a little bit of clout I think.
Gerardo Del Real: Excellent. Can we talk a bit about the Russian investment there in the Yukon? Obviously, your team has been very successful in the past. Mid-tiers and majors have moved in recently with pretty significant investments in the area. Can we talk a bit about that, because I know you mentioned the Flume property and some of those other properties that are not the flagships are also seeing some exploration work this year.
Stephen Swatton: That's right. White Gold have announced that on their Dime property, which is east of the Flume property, which is a property we've acquired 60 kilometers south of Dawson. It's seen a lot of activity in the past through various groups. Freeport were the original discoverers of the area and there was some drilling done with interesting intercepts of a meter, several intercepts of one meter with multi-gram material but nothing that really held together. We've got to take a long hard look at it and I'm a good friend of Rob Cameron, the guy who has lended the property to us, and we think that maybe the previous operators may have slightly misinterpreted the geology. We're not sure yet, but we're going to do a complete reinterpretation of what they've done before. The great thing about that is the geochemistry lights up like a beacon, so there's definitely a lot of mineralization, a lot of fluids going in the area.
It's a different type of geology to what we're dealing with the Wels, but it's equally interesting that to the east of us, we know for a fact that White Gold are going to be drilling several thousand meters on their property and that's on strike from ours. so we'll be looking very keenly to what they're doing and seeing how we can apply later in the season to what we're doing on our property.
Gerardo Del Real: Excellent, now the Flume property, if I'm not mistaken was staked by Phelps Dodge back in the late nineties, is that correct?
Stephen Swatton: Correct.
Gerardo Del Real: And I think Ryan Gold did some work did some work in probably mid-2012, if I recall correctly.
Stephen Swatton: Yeah that's absolutely right. And various different parties have looked at it and then we've had Commander more recently have a look at it and a company, Bearing, had it before them. So yes, it's been one that you say a little bit picked over, but I flew over that one last week and landed on site and looked at the drill course. It’s an absolutely fresh state, it's in good shape in terms of regarding infrastructure. You can get quite close to it, there's plenty of roads around it, so I think we can probably hit that property fairly hard. But the interesting thing for us about it is to the west of it, left of it as you look at it on the map, is a property we've taken called the Storck claims. Storck claims has joined the Flume and there is some untested surface geochemistry and rock analysis that Freeport, which was obviously Phelps Dodge before, recognized but have never been followed up. That's going to be the key part of our exploration strategy on that area for this year. Keeping half an eye on what's going on to the east with our friends at White Gold.
Gerardo Del Real: Well, Stephen, it sounds like it's going to be a busy second half of the year. A lot of news flow, a lot of action. I look forward to hopefully having you back on to share the details as we start receiving assays and as you start getting results from some of these other properties, which are very prospective as well. I think it's going to be an exciting second half of the year. Can you just provide a little bit of context and share with everybody the current market cap of K2 Gold, because I think given the experience of the team and the area that you're drilling in and the past work that's been done, I think there's a pretty compelling risk reward proposition that K2 Gold presents right now.
Stephen Swatton: It’s interesting, Gerardo. Our market cap is approximately five million. When you look at the competitors that we have in the region - Triumph Gold, Goldstrike, ATAC, White Gold, Western Copper - these all trade significantly higher market cap evaluation than ourselves. We think that we have one of the most significant discoveries in the last five years. A lot of these names that I've just mentioned, they’re projects that they've been working on for a while and yes there's been some resources generated. But it way outstrips our market cap, based on the fact that we haven't got any huge amount of interest from the majors and the reason for that is we've been very careful to keep a tight structure. Yes we've had a lot of inquiries, but we're quite keen to drill our property ourselves and see what we have first before we invite the majors in. Getting a major in is obviously a great backstop, but it's also a little bit of a chain around your foot if you think that you're on to something really significant.
On the other hand, when you are on something significant and you know you need to build it, and I know this only too well having worked at BHP in the past, it's nice to have that security but at this stage we're too early. What we propose here, Gerardo, is we are the best undervalued project in the Yukon with a significant discovery in the last few years. But at five million market cap I don't think you can really see any downside right now.
Gerardo Del Real: I agree 100%. Stephen, I want to thank you again for your time. I really look forward to having you back on, this is one of those drill programs that I'm very excited about and I can’t wait to see the initial results.
Stephen Swatton: Gerardo, just one further point I'd like to make is I'm actually seriously looking at some projects further south of the border. The reason for that is I think it's quite important that at some point that K2 diversify. Not only out of Yukon. Yukon is our focus and we remain our focus, but it's interesting that I recognize we need continual news flow throughout the year. So I am working hard to bring another project into the company that will provide us a little bit of sustenance during the winter period.
Gerardo Del Real: Well I think that'll definitely be important. In the meantime we're going to have plenty of news from the Yukon. But again, I would love to hear further details as you can share those with us about the other projects that you're looking at. I think that presents a definitely exciting plan B for the rest of 2017.
Stephen Swatton: Thank you very much for having me on your show, Gerardo.
Gerardo Del Real: Stephen, come back on soon.
Stephen Swatton: I will do. Thank you.
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