Aztec Minerals (TSX-V: AZT) CEO Simon Dyakowski on Initial Drill Results & Plans for a Phase 2 Program at the Tombstone Gold-Silver Project in Arizona

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Aztec Minerals (TSX-V: AZT)(OTC: AZZTF), Mr. Simon Dyakowski. Simon, how are you?

Simon Dyakowski: Hey, Gerardo. I'm well. Thanks for having me on. We just reported our first batch of drill results so we're super excited to get investors up to speed on what we're doing at Tombstone and how we're advancing the project.

Gerardo Del Real: Let's talk about it because I think there was a bit of misunderstanding, or a better word is a disconnect, between what you reported, which was better than anticipated and hoped for, and how the market reacted to it. The headline reads, "Aztec Receives Initial RC Drill Results from the Tombstone Project in Arizona, Including 0.94 gpt Gold and 42.1 gpt Silver (1.6 gpt Gold Equivalent) over 77.7 Meters.". 

I would love a brief overview of the results and then I want to get into why, if you're actually looking, as the company is, to put this in production one day or lead this towards a production decision for somebody to come in and buy this, why this was extremely positive as a start to an initial drill program here?

Simon Dyakowski: Yeah, great. We did have a bit of a sell-off on the news yesterday. I think that is driven in part by the market. Gold did run up to almost $2,100 an ounce and silver was up to $29 an ounce just 6, 8 weeks ago. That generated a very frothy market where investor expectations were set to exceed those levels. They have certainly pulled back, in that some would consider it to be a corrective phase of the gold trade down to under $1,900.I think a little bit of the sell-off is driven by that. It's a different market. Had we had these results in the middle of the summer in July, for example, we would've gotten a better valuation. But here we are today. We're at just under $1,900 an ounce as we're speaking. It's off its near low of the last few weeks. 

Let's put it into context. When Aztec acquired the option to acquire Tombstone, gold was trading between $1,200 and $1,300 an ounce. So we're many hundreds of dollars higher than that level today. So still in a great gold environment, but the market didn't love the results. We did bounce back quite a bit later in trading, and maybe I'll just touch on what we saw and why we're so excited about this result. 

As you mentioned, our headline hole TR20-02 returned 77.7 meters of 1.6 grams of gold equivalent. The Tombstone Project, the shallow epithermal gold silver mineralization that we're targeting with this 20-hole initial RC drill program is mainly concentrated around what's known as the Contention Pit. This is an old open pit mine that was in operation between 1980 and 1985. This mine is what is known as a heap leach mine. So it's a low-cost, low-grade, gold-silver mine, very common in Northern Mexico and in the Southwestern United States. 

These mines are typically mining gold grades of around 0.4 to 0.6 grams per tonne gold. So when we got an intersection back from the assay lab of 0.94 grams gold and 42 grams silver over 77 meters, we were thrilled because obviously that is almost on the higher end range, if you will, of what's heap leachable in that part of the world. 

So we're excited. We're confirming drill holes that were put in in the early '90s by USMX and we're expanding on them. I'll note that the USMX drilling that we're confirming was limited to the center and the north of the pit. Our first 4 holes were drilled in the center of the pit. We still have results pending from the north of the pit, the south of the pit and some exploration targets. 

Again, I think the expectation for investors is to look to see what we get at the north and the south. We note that we're building on USMX drilling that was limited regionally to the north and the center and, also, in the length of the drill holes. They drilled a number of drills that were quite a bit shorter. They were about 80 to 120 meters. Our holes are going considerably longer than that. Specifically in hole TR20-02, we did prove the concept that mineralization at the bottom of the pit from surface is looking to be of a very good grade for heap leaching.

I'll say it again, 77 meters, long intersection of 1.6 grams gold equivalent. If investors cared to look at the news release or on our website to inspect the sections, you'll see that the near-surface mineralization was some of the highest grade. That includes a section of 9 meters of 3.18 grams gold, 135 grams silver, or 4.87 grams gold equivalent. So really encouraged by that result. 

We also note that the Contention open pit, when it was in operation in the 1980s, it was really based on sampling of old underground mines in the region that were mined at very high bonanza grades by the old timers, starting in the 1880s through to the 1940s. When they started mining and heap leaching this material in the '80s, and of course in a different metals pricing environment, they were relying on sampling of tunnels and trenching. They did not have a robust drill program. 

So we really have our work cut out for us here to prove out a resource. We're off to a really great start. Again, we're fortunate to be guided by the USMX drilling, but we are cognizant that it was a limited program in the early '90s. In our opinion, there's very good exploration upside to the south, to the north and also west of the project. While investors at first blush might not appreciate that, I think over the coming news releases and over the coming months and quarters, that business plan will come into focus for everyone.

Gerardo Del Real: How are the labs doing in regards to pending assays? I know that they've been busy with everyone I speak with everywhere due to COVID delays. We've seen things take a week, two weeks, three weeks, four weeks longer than anticipated. You actually turned around your assays in a relatively short amount of time and pretty closely in line with expectations. I think you were off by maybe a week and a half or so if I'm not mistaken, but how is that coming along? Are you in touch?

Simon Dyakowski: Yeah, we're doing quite well compared to other companies. It's really driven by the specific labs. We ship our samples down to Mexico and then they're shipped up to Canada. We found a way to hasten the turnaround time somewhat. But as you point out, we are at the mercy of the busyness of the lab. We're doing our best. I suppose we could be considered to be slightly delayed from what we had anticipated when we commenced this drill program, but I think all else equal, we're doing quite well. We have no reason to stray from that guidance going forward. It does look like we're not encountering delays that are too punitive right now.

Gerardo Del Real: Excellent. Once this program has concluded and you have all the assays, what are the next steps? I know you have a busy rest of the year and a busy fourth quarter in line.

Simon Dyakowski: Yeah. This program is going to get us very close to the work commitment that we owe to complete the option agreement. We'll look to, in the fourth quarter of 2020, complete the option agreement in terms of spending. We will form a joint venture with our partners, a 75%-25% joint venture. We'll sit down, we'll analyze the results specifically from the three spokes of drilling and then determine the best next steps for a Phase 2 drill program, which could include infilling between those spokes and, as well, testing other targets once we have results from those. 

Then later into the year and early into next year, we will look to start drilling core holes. Your listeners will recall that we are pre-collaring two core holes to test deeper targets. Those will be drilled not with an RC rig, but with a core rig.

We anticipate having that program kicking off by the end of the year or early into next year. That's to test a different target from the shallow epithermal gold-silver heap leachable mineralization that we're drilling right now. That is to test for massive sulfides for CRD, a Taylor style target. Taylor being the deposit residing 40 miles to the southwest of us, that is famous for vaulting Arizona Mining from pennies to a buyout at several dollars when they had drilling success there. 

We have a target that's based upon that discovery model below the unconformity in the limestone, below the sandstone formations, quite a bit deeper to drill. We will be testing that early next year. So a lot of news flow around the shallow drilling to come, a Phase 2 program there, as well as a deeper drill program with the core rig. So lots to look forward to. We'll be busy. We have our work cut out for us at Aztec.

Gerardo Del Real: I'll let you get to it, Simon. Thank you so much for your time. I appreciate it.

Simon Dyakowski: Thanks very much. Great to chat with you again, Gerardo.

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