Otis Gold (TSX-V: OOO) CEO Craig Lindsay Gives the Details on the Upcoming Exploration & Drilling Programs at the Kilgore and Oakley Projects

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is President and CEO of Otis Gold (TSX-V: OOO)(OTC: OGLDF), Mr. Craig Lindsay. Craig, how are you this afternoon?

Craig Lindsay: Gerardo, I'm doing great. Good to chat with you today.

Gerardo Del Real: It's good to have you back on. You've been busy. You've appointed a new VP of Exploration, Mr. Alan Roberts, who I'd love to talk about a bit. You've added some new gold targets at Kilgore. And you've gotten some excellent exploration results from Oakley. Of course, we're also anticipating that updated resource estimate, which fingers crossed, I’m hoping will be out here in Q2 of this year.

Let's go in order. I'd love to talk about the addition of Mr. Roberts and the experience that he brings, because he's intimately familiar with the types of projects that you have in the portfolio. Can you tell me a bit about Mr. Roberts, Craig?

Craig Lindsay: Sure. A little bit about the background. I've been working with Dr. John Carden and Mitch Bernardi since the inception of Otis. John's now 70, Mitch is 68. They're starting to wind down their careers. They just cannot be out in the field working 24 days a month, so they signaled in the fall a desire to start to slow down their careers, and have caused us a requirement to go out and find a VP Exploration to take over the leadership of the exploration activities at Otis.

We went through a process over the past couple of months, going through and interviewing a whole range of folks. We were looking for a younger guy, a guy who had big project experience, someone who had the ability to run large exploration programs, someone who was based in the United States, and probably most importantly, someone who had specific experience with developing these open-pit heap leach gold projects.

The guy that we settled on was a fellow by the name of Alan Roberts. He was most recently with a company called NewCastle Gold, who were developing the Castle Mountain volcanic-hosted epithermal gold project in California. As you know, NewCastle was part of a merger that became a company called Equinox Gold, and at that time, Alan elected to leave and join us, and it's his first time to kind of step up into the role of VP Exploration. But he's worked around the world with a lot of experience, specifically in the United States. He's just bringing a real wealth of knowledge.

One of the great things about Alan is the fact that Castle Mountain, his last project, was a development stage story. So they had a resource, and he worked with them as they drilled out the edges of that resource and moved it into a PEA/PFS stage. So he's got that range of experience. It's a different skillset than John and Mitch have, so it's a real good compliment to what they've been doing with Kilgore, and it's going to allow us to take the step of moving Kilgore into a development phase.

He's a great addition. He's hit the ground running. He's been spending a lot of time on Kilgore. He's been spending a lot of time on Oakley. He's been spending time with our permitting people, with the Forest Service, with some of our board members, and also developing a relationship with our team on the ground in Idaho. He's got a lot on his plate right now, but he's super energized about Kilgore, about Oakley, and about his new role. It's really a neat addition to the company.

Gerardo Del Real: It should be noted that Castle Mountain Project, if I'm not mistaken, is now up to over 5 to 6 million ounces. Is that correct, Craig?

Craig Lindsay: It is around there. I don't have a specific number on that, but it is that scale of project.

Gerardo Del Real: Excellent. The second point that I wanted to touch on is you've added some new gold targets at Kilgore. Before we touch on that, there were some investor days recently with some very prominent politicians that were there lending their support to development and mining in Idaho. Could you give us some details on those days, and just how everything went, Craig?

Craig Lindsay: Sure. Just last week, we put on something called Idaho Investor Days, and it was focused on taking the Idaho mining story out to institutional investors in Toronto and New York. There's about 10 Idahoan production and exploration development companies focused in a wide range of commodities who got together and organization this event. The keynotes in both Toronto and New York were put on by a guy named Governor Butch Otter, who's the governor of Idaho.

Butch is a wonderful representative of the state of Idaho. He's got a great knack for marketing. He stood up in front of these investors in Toronto and New York, and just did a really, really good job of letting people know that Idaho is open for business. They're doing everything they can to limit regulatory hurdles and burdens, specifically with respect to the mining industry. He spoke loud and clear about what an important part mining is to the Idaho economy, and will be going forward, and the state supports it, and the doors are open for business. It was very well received, I think, by the attendees in both Toronto and New York.

It really allayed certain concerns that some investors have had about Idaho being a difficult place to operate in from a permitting perspective. So I think the message that he shared with the attendees was a very powerful one, and really caused a lot of people to take note and kind of go, "You know what? This state has been overlooked. Some of the challenges that were perceived are really not there. We maybe missed the boat on not getting exposure to some of these Idaho-based companies."

And as we all know, one of the things I shared in my little presentation on Otis was that from a state perspective, you've got Agnico Eagle being involved in Otis. You've got Resource Capital Funds being involved in Liberty Gold. Paulson & Co. has a big investment in Midas Gold. Orion Mine Finance has a big investment in Revival Gold. You've got Integra Resources and some of the Osisko folks are involved in that. There are a lot of quality investors from a strategic/institutional perspective who are taking positions in Idaho now. And I think more will follow.

Gerardo Del Real: I absolutely agree and I think there's great value in a lot of the juniors. You mentioned Revival. You mentioned Midas. Otis, obviously. I think we're going to look back this time next year, and just shake our heads at the fact that the juniors in Idaho were priced at these levels, especially in light of the fact that each company in their own respective fashion is being pretty aggressive about adding to existing resources, which brings me to my next question. You've done some excellent field work at Kilgore, at Oakley as well. Can we talk about that a bit?

Craig Lindsay: Sure. Everyone knows that we did 8,000 meters of drilling at Kilgore on the existing deposit, but what's less well known is that parallel to the drill program that we operated last year at Kilgore, we were out doing soil sampling right across the project, stream sediment sampling, rock chip sampling. We also did a whole range of ground mag work. Historically there’s been 25 line kilometers out there of IP by Placer Dome in the ‘90s. Zonge has done some CSAMT work out there in 2009, about 8.5 line kilometers.

We followed that up with our own very extensive ground-based geophysical survey out there of about 500 line kilometres . So we've done a much better job of targeting somewhat known targets on the existing land package at Kilgore. But we also went out beyond the project boundaries and did some ground mag work and some soils and some chip sampling outside of the claim block. The end result of that is we ended up adding 3,000 acres of land. We increased our land package out there in one season by about 33% through the direct staking of federal mining claims to cover some of these new targets.

One of the key ones that we're referring to now in our literature is Gold Knob, and these are all exciting exploration targets, that we're going to be in a position to start drilling because of the new permit application that we've got in with the US Forest Service. With this new permit, we wanted to make sure that when we're going out and siting our drill holes, that we've got the strongest base of knowledge possible, and that's why we've been out doing all the ground work in the past year. We really solidified some of these targets.

Your listeners should also know that yeah, we've got these targets outside of the existing deposit, but at the end of this year, the existing deposit still does remain open. We have some hits up at the north end of the Kilgore deposit. I think the best one was graded about 85 meters of 2.5 grams, and we have never been able to step out on that because of permit restrictions. And then down at the southeast end of the deposit, we came across some high-grade hits. One was about 27 meters, about 4.5 grams per tonne gold. That is a new extension to the deposit that needs to be followed up on.

It's an exciting time for us because there's still some room to grow the existing deposit. And then, we've got all these other targets that we're going to be in a position to start chasing. It's going to be a multi-year exploration program. We're not going to be able to hit all the targets at once. We're going to have to go after them systematically, but at least with this new permit, we're going to be able to start hitting those targets.

Gerardo Del Real: I mentioned that we're waiting for the updated resource estimate at Kilgore, which leads me to my next question. It's a perfect segue. What can we expect for the rest of year with Otis? What can shareholders look forward to?

Craig Lindsay: Okay, a couple of things. We are updating the resource estimate. And with Alan being appointed as the VP Exploration, he's taken a real good look at that just to make sure that the number we come up with accurately reflects where we're at today. And then in terms of drilling, we're going to be doing some step out drilling to help close off the existing Kilgore deposit, and then we want to start getting out and going after some of the new targets outside of the deposit area at Kilgore. A boring thing that we're going to be doing, there is a coarse gold issue out at Kilgore. We've talked about this publicly in news releases before. One of the really interesting things that we did in 2017 was some tests. I'm going to get into some details here, which might be a little bit boring to some people.

Gerardo Del Real: No, we love the details, Craig. Bring them on.

Craig Lindsay: Okay. There's always been an issue with reverse circulation drill results at Kilgore, and then core drill results out at Kilgore. Some people think reverse circulation results are giving you higher gold grades than some of the core drilling. What we have actually found, we did a study this year on two holes. We took regular HQ size core that is typically split in half and half of that core goes in to get assayed. And then we twin those two holes with PQ sized diameter core, which is much larger core and it's typically core that you use for metallurgical purposes, and we sent 100% of that core in to get assayed.

And then the two tests that we did, there was anywhere between 40 to 200% more gold assayed in the large diameter PQ core where 100% of the core was tested. This creates an issue, where potentially there's a significant under-representation of the gold grades at Kilgore.

One of the things that we're going to be doing this year is some additional testing across the deposit where you're going to be taking smaller core and twinning those holes with a large diameter core, and seeing what kind of grades we get right across the deposit. So we're not relying on these two tests, just so we can get a real good handle on this coarse gold issue, which could create some very interesting opportunities for what's a low-grade gold deposit out at Kilgore.

It's a very technical/scientific question, and it's something that a lot of these types of deposits struggle with, but we want to get our heads around that with the work that we're planning to do this year. And then on top of that, because of the success that we had adding claims outside of the claim block, we're going to be doing some more generative exploration work beyond our project boundaries at Kilgore. We've got a lot in front of us at Kilgore.

And then, we've also talked about some of the work that we've been doing at Oakley. We just announced this week actually, some exploration results from work that we did out at Oakley this year. And at Oakley, again, we didn't do any drilling. It was just all fairly inexpensive ground based work where we were doing a lot of soil and rock chip samples and some stream sediment work, some chip channel sampling at something called Matrix Creek. And Matrix Creek is right adjacent to the existing 160,000 ounce gold resource at what's called Blue Hill Creek at Oakley.

We've come across some very, very strong results out at Oakley. We were hitting gold and silver that, just in chip samples, ran anywhere up to 3 grams per tonne gold, and up to 306 grams per tonne silver in this area called Matrix Creek. That's turning into a very exciting ... The anomaly out there is, I think, 2.3 kilometers long as it stands today, so that's a drill target staring us right in the face. And then at the existing deposit, there's lots of room to step off on that 161,000 ounce resource.

We are going to be doing more ground work out at Oakley. In fact, in about a week and a half, our field crews will be mobilizing out to Oakley. This is a project that has had a bunch of historic work going back to the ‘80s, and we haven't done a lot of work out there ourselves, but we're going to map the entire project. That hasn't been done for 30 years out there, so we're going to get a good geological map in place. We're going to do a lot more soils. We've just staked additional land out at Oakley. We're adding new land in the form of state leases out at Oakley, so that project is expanding as we speak. Again, we also have 100% interest in the project, same as Kilgore.

The neat thing about Oakley is that yes, everyone knows that Kilgore's our flagship, but we want to share the message with our investors that we're not a one trick pony. We are one of the few gold developers in the state that have multiple projects in Idaho. And Oakley, yes it's got a smaller resource than Kilgore, but it's right next door to the old past producing Black Pine Mine. It's got all the hallmarks of a very interesting exploration story, and we're going to be in a position this year to not only do additional ground-based work and add claims to it, but we're going to be able to drill it as well.

This year, we're going to be having drill news flowing out of two projects rather than just one. Yeah, it's an exciting time.

Gerardo Del Real: Exciting stuff. When can we anticipate initial results from this year's program? I know you mentioned the team will get out there in the next few weeks.

Craig Lindsay: You probably won't see any results starting until September. I say that because drilling at Kilgore doesn't start until really August 1^st. And out at Oakley, I don't have quite a timeframe for when drilling will start, but it'll be kind of summer, fall. With Alan ­– Alan runs a pretty tight ship – he has run large programs before. We're hoping to be in a position to get a steady flow of news results coming out of both projects starting in August and we'll have drill news coming right through January, I would think.

Gerardo Del Real: Excellent. Well, with the resource estimate coming up here in the next few months, and then drilling commencing in August, and assays starting in September, you have a lot to look forward to these next couple of quarters. I think they're important quarters for shareholders, and for the company as well. Is there anything else, Craig, that you'd like to add?

Craig Lindsay: No, I think we kind of nailed everything. From an investor perspective, I will say this. I know it's been a really difficult trading environment in terms of valuations in our sector. Institutions are still not scrambling over each other to scratch out checks for junior exploration companies. There's a limited amount of capital available. Everyone talks about strategic investors, those being large, corporate producers like Agnico and Kinross and Goldcorp who juniors are relying on for capital.

All of that said, the market does feel like it's ready to turn, and it's been nice seeing gold sustain itself about $1,300. I don't know what price it's going to take to get the broader market excited about gold, but we've been in a downturn for such a lengthy period of time, I really believe that when we finally do start to turn, we're going to turn hard to the upside. And a bunch of companies, including Otis and many of our competitors are going to be well positioned to take advantage of that.

Gerardo Del Real: You know, I've made the bulk of my money buying when nobody's paying attention, investing in teams and looking for undervalued assets that have anchor assets frankly, and companies like Otis certainly check that box. Again, I think this time next year, we'll look back and we'll marvel at the fact that you had the market cap that you had along with several of your peers, specifically in the Idaho region. You mentioned Revival and Midas earlier. It's going to be a fun couple of quarters I think.

Craig, thank you so much. I really appreciate all of the input and the details. The details are important. We get a lot of feedback, and nine out of ten times, people enjoy the extra details, so I want to thank you for that today.

Craig Lindsay: No worries. Any time. I appreciate you taking the time.

Gerardo Del Real: Absolutely. I look forward to having you back on, Craig. Thank you again.

Craig Lindsay: Thanks, I appreciate it.