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Mawson Resources (TSX: MAW) CEO Michael Hudson on Cobalt Kicker to Rajapalot Gold Project & Managing Cyclicality in the Junior Resource Space

August 8, 2018

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is Chairman and CEO of Mawson Resources (TSX: MAW)(OTC: MWSNF), Mr. Michael Hudson. Mike, how are you?

Michael Hudson: All well. Thanks, Gerardo.

Gerardo Del Real: Well listen, Mike, I wanted to take a different approach to this conversation. The last time you and I spoke, and I want to start here, we talked about the importance of the cobalt assays that you had received to date. I'd love to start with an update on where we are with assays, and why the cobalt's so important. And then I'd like to pivot and talk a bit about the junior resource space.

You obviously are Chairman and CEO of Mawson Resources. You have three to four decades of experience in this space. But at heart, you're also an entrepreneur. And I'd love to get your take on the cyclicality of the junior resource space, and then how you've managed to do well for so long, in a space that frankly gives you two or three good years, maybe every decade or so, if we're lucky.

Let's start with the cobalt assays. How are things progressing there?

Michael Hudson: We've got thousands of assays that are banking up behind us, literally, Gerardo. We'll make some announcements over the coming weeks, as we pull all the data together. But the cobalt adds ­– you asked, what's it do?

It's got two specific aims. One technically, of course. Technically, it adds to the known gold intersections, on average around 20% in situ value. So that's a lovely kicker to have in any project. But more importantly, it adds continuity. So if you go from a high-grade gold to a low-grade gold to a high-grade gold, what we're starting to see is that cobalt is consistent between those three different zones. So, it brings continuity and it will add, eventually, tonnes to the system. So we really like what we're seeing there.

Of course it's relatively early days. We're re-assaying all the old core that we didn't assay for multi-elements when budgets were a bit tight and we were just looking for gold. It's been a lovely surprise to see the cobalt extend across the whole project, at significant grades and in a mineralogical form that looks like it's potentially extractable. But we're going down met test work as we speak for the cobalt.

And secondly, it will deliver politically, if you like. This is a strategic resource for Finland now. As a gold project of course it has significant value for that northern part of Finland. But with the addition of the cobalt, only sitting 400 kilometers away from what is the largest cobalt refinery in the world, in Finland. It produces half the non-Chinese refined cobalt in the Western world. And the Finns have got themselves what looks like a significant cobalt project very close to that.

So that's the two ends of the cobalt. We look forward to releasing more information soon.

Gerardo Del Real: Well, I look forward to having you back on when you release that information. Now let's get to part two, and I'm excited for this part of it. I mentioned that you have, I believe we're going on four decades now in this space, whether involved as a geologist, exploration financier, entrepreneur – a combination of hats that you've worn over many many decades.

How have you managed? What advice would you give to speculators that maybe started speculating in the resource space, specifically the junior space, a couple of years ago in 2016 where many of us thought that we were ready to break out. And then we've seen again a consistent bottoming that just hasn't allowed for the juniors to really break out, with few exceptions.

Share some of your wisdom with us, Mike, about how you've navigated the very rough waters here recently.

Michael Hudson: Okay, for full disclosure, I'm in my third decade and soon to start my fourth, I suppose. So you're making me older than what I feel like I want to be.

Gerardo Del Real: The intent was wiser, Mike. Wiser.

Michael Hudson: But I suppose, this is a cyclical business, as you mentioned, and investors need to understand that. You can get all the ingredients right, but if you don't get the timing right, then it's a tough business. So, at the end of the day, you've got to have the wherewithal to ride the cyclicality, or get out of the business and come back when it's hot, and you're playing a lot more with fire, of course.

But if you're backing some very good people in this business, the right people ­– fundamentally, because the geology will always be variable, you can't always get the geology right, we're second-guessing nature. So if one project doesn't work, good people will always make a company work somehow, by finding a different angle, or finding another project, or just being entrepreneurial, I suppose, around the project. So you want the right people who will manage a company, and then the right people to make the discovery. It's only a very small handful of people in our technical world that make the discoveries and then advance them.

So you want the right people to be undertaking those exploration programs. And really, from my point of view, running exploration companies, the only companies that have been successful are those that back their technical people. And what does that mean? That means, not only backing their judgment, but giving them the drill money essentially to go out there and drill. And if you're not drilling, you’re not finding anything and that's the really tough thing about these markets. They're not really set up to make discovery for the most part with dollars turning on and off.

I suppose over the last decade, we have been very fortunate to find shareholders who understand that to develop projects, you need that consistency of funding. So we've been pretty well placed to continue advancing projects outside the cycle, I suppose. So you must back your technical people and drill and be prepared to spend that money.

Equally, be prepared to walk when the project's not working. And once again, the capital markets aren't great for promoting that, because everybody wants to see continued drill holes, with results. And people or some companies get into the cycle of continuing to prove that a mineral system is not there, rather than trying to prove it is there.

So they're the key aspects. And the capital markets really don't promote consistent funding and then walking away if something doesn't work. And being technically rigorous enough to state that and do something else. Of course it will decimate a share price, often, but it's the right thing to do rather than spending funds when they shouldn't be spent. So that's the technical management, I suppose, and trying to weather the storm of the cycles.

Gerardo Del Real: As far as allocating capital, Mike, I consider myself a contrarian. I've used this bottoming here in 2018, I've called it a contrarian's dream. And I've used it, frankly, to write as many checks as I possibly can in companies and teams that I believe in, because I think it's a once in every decade opportunity that we have this year. I can see where zinc, copper, the price of gold, the price of silver, I can see where in a year or two, we're absolutely headed higher and the juniors right now are just depressed price wise, share price, market cap wise.

Do you take that same approach and philosophy of using depressed capital markets to add the better names and the better assets and hold onto them and sell later, or do you wait for that tide to turn, and then get on the boat?

Michael Hudson: The one thing about this business, it's all about psychology. And one thing I've learned is that it's the hardest thing to find people to buy your stock when it's at the very bottom. Nobody wants to touch it, and then it's most amazing when people are buying at the very top of the market. And of course, it should be absolutely flipped on its head and the psychology around buying low, holding and waiting for the turn, which we all know will come.

Of course this is a cyclical market. Volatility is a great thing in many respects, right, for the speculator because we know it will turn, it's not going to stay low forever of course, and the fundamentals behind mining are actually superb. Metal prices are all pretty healthy across the board. The majors are now putting huge investments into their mines and are very, very hungry for the next generation of discovery. So all the fundamentals are right, and it will turn.

But what you need in any investing that anybody does and there's a lot smarter investors out there than me who will be listening to this, but, have the wherewithal to pick the right people, the right project, the right jurisdiction, invest what you can afford to invest over the timeframe, and then wait.

And these markets can turn on a pin. When they turn, they run, and that's the most exciting and exhilarating thing. And it's more exhilarating if you're heavily invested at the very low end and you're seeing your wealth increase dramatically during those times, rather than trying to chase it up.

Gerardo Del Real: Well put, Mike. Anything that you'd like to add as far as Mawson? What can we expect here in the next couple of months? Obviously, a lot of assays.

Michael Hudson: Mawson's extremely well placed. We've got 60% majors, institutions, and of course that includes Goldcorp, who came in earlier this year with 13% of the company. We've got more than $10 million dollars in the bank. We're funded for this summer season, we're funded for next winter season. And we've got a project that really is just coming off a huge program also, so lots of assays still to come from the cobalt space. You'll see an update soon on all the work we're doing on the ground. We've been beavering away doing lots of geophysical work. Drilling will restart sometime in the next month or so, diamond drilling. We've developed a hell of a lot of targets across this large property that we've got and following up on some known areas.

So you'll start to see in the public domain the news flow crank again. That being said, we've been very busy behind the scenes, all through this slower summer period.

Gerardo Del Real: Well said, you've got to stay busy during the down times to deliver when things get hot again, right?

Michael Hudson: Precisely. Even though the market might not care, we care.

Gerardo Del Real: Perfect. Mike, thank you so much, I really appreciate you taking the time.

Michael Hudson: Thanks, Gerardo.

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