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Gold Mountain Mining (TSX-V: GMTN) CEO Kevin Smith on Phase-1 Drill Program at the Elk Gold Project in British Columbia, Canada
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Gold Mountain — Mr. Kevin Smith. Kevin, how are you?
Kevin Smith: I'm very good, Gerardo. Thank you for having us today.
Gerardo Del Real: Listen. You actually are a new story to our audience but it's one that I'm excited to help tell because you're developing an asset and you're doing it rather aggressively that I'm very, very familiar with.
So for those that aren't aware of the plan, I want to make sure that we articulate that well in this interview. And we'll get into Elk in just a second. But before we get into all of that — can you provide our audience just a brief overview of your background?
Kevin Smith: So most of my business has been done in commercial, residential, and industrial real estate. I started on the construction side of things; eventually got into the development side, and sort of am still involved in the lending end of it. I took a little bit of a step back from it a few years ago, and we were starting to focus on other projects that we had on our plate.
And I was approached by a gentleman named Tookie Angus. We were introduced by a mutual business partner but we'd never met before. We had always heard about each other. So we had lunch, and we decided to sort of kick off some projects together and try and work together.
And for the past 18 months, him and I have been putting a few different mining projects together — and this is one of them that's coming out of the gate first.
Gerardo Del Real: Let's talk about that. You're coming out of the gate rather quickly. You just closed a C$4.7 million financing. You've already initiated Phase-1 of your diamond drill program. And, as I mentioned up top, you have a very aggressive vision for getting the Elk Gold Project into production.
Can you give us a brief history on the project? Then let's talk about how you're going to get this thing spitting some cashflow for everybody.
Kevin Smith: Yeah. So when you say aggressive timeline, I guess aggressive when you take a look at the project from when we started trading — which is December 31st of last year. I could see how it could come across as that. But this is actually a very methodically put together business plan from a couple of operational guys on our side, Ronald Woo and Grant Carlson — both mining engineers. They've been working on this for about three years, and they've had possession of it for about two.
And as soon as they took possession after buying it from Equinox Gold Corp., they went directly into getting all of the environmental baseline work up to speed… getting all of the metrics you require for a PEA in order, and really building this out privately, correctly. And then taking it public once it was at a point where we thought it was ready and we could have that aggressive timeline with all of our different aspects in order… and it would allow us to come out of the gate hard and hopefully be successful on delivering value to our shareholders.
Gerardo Del Real: Walk me through the 2020 PEA. And then, we'll talk share structure and where I think the opportunity is here relative to the value of the project, right?
Kevin Smith: Absolutely. So we completed a PEA in August of last year. Really pleased with the results; NPV after-tax with a 5% discount came back at C$191 million. That's off of a 10-year mine life. And the all-in sustaining costs came in at US$735 an ounce.
So initially, we come out of the gate with sort of a small-scale toll milling scenario. We'll be doing 70,000 tonnes a year, and that's a strategic number. And then, we’ll also toll mill offsite so that we don't have that huge capex. And it allows us to get into cashflow relatively quickly. So those are kind of two highlights that make this project unique.
And when you start looking at some of the grades of 5.33 grams per tonne as our head grade over the 10-year mine life, our metallurgy suggesting a 92% gold recovery rate. And then in year four, that ramp-up to 50,000 ounces a year with our own custom mill onsite… once we've completed the environmental assessment point of the process… it starts to become a very exciting story, right?
To have a mine that could get into cashflow, kick off about C$43.5 million in free cashflow in the first three years, and use that money to build yourself a little hot rod plant specifically designed for our ore so we can maximize recovery.
We can also continue to drill this asset. It's got 127,000 meters of historic drilling. We're relogging all of that core right now using the latest and greatest technology. We've had some really interesting finds that we've sent into the assay lab. Those will be ready at the end of January .
When you look at the metrics in the PEA and the fact that it can feed the expansion case in a non-dilutive fashion, I think that's what's really going to get people excited. But again, as you said, it's an aggressive timeline and not a lot of people think we can do it!
We're hoping with the contracts that we've been able to organize that last the first three years, people are going to see that we've built cost-certainty into this now. We're even toying with an updated PEA at the moment after this Phase-1drill program is done.
Frankly, we're looking to drag more ounces in, increase the resources, and we'll mine less out of the backside of this thing. So it's kind of a little bit of a two-headed monster in that, not only does it have the cash flow but it has that exploration upside, too.
Gerardo Del Real: You have a fully diluted market cap right now in the ballpark of C$50 million. It's important, I think, to point out that that C$191 million net present value, the post-tax NPV at 5%, uses a $1,600 [per ounce] long-term gold price. So there's actually a lot of upside already built in, right?
Kevin Smith: Absolutely. In our PEA, now that we've gone out and negotiated the contracts, everything is a little bit more now that it's locked in at fixed costs. But as you just highlighted with that gold price, where it is today, it wipes out all of those little extras that came in – by fixing and getting cost-certainty – it wipes those out, and it actually comes out, we're thinking, a little bit ahead at the moment.
So we're really looking forward to updating that PEA as well with the updated resource with the more ounces that we're anticipating off of this drill program.
Gerardo Del Real: Walk me through Phase-1 of the diamond drill program. Is it intended just for infill drilling and confidence or are you actually looking, as you mentioned, I think you referenced, you touched on it lightly — to bring in more ounces into the plan?
Kevin Smith: Yeah, well, with the 127,000 meters, we can be very efficient with the way that we use this drill program. Phase-1 is a lot of infill drilling just to get the density so that we can define some inferred resources. But on the other side of that, Phase-2 is where we go out and we really look to start defining… let's call them new resources.
There's pockets on this property… there's seven known mineralized zones that all have been drill tested; are all showing similar grade and structure. And Phase-2 of this program, in the second half of the year, is about going out and starting to define new resources.
This first phase of the program, we do step out a little bit from the current pit, which seems to be having pretty solid results at the moment. But we are also infilling with a goal to try and get this resource, over the two programs, up to a million or hopefully over a million ounces.
Gerardo Del Real: The project is located in British Columbia. Tell me a bit about the infrastructure.
Kevin Smith: So this property has been around, and a lot of people are familiar with it. It's had two bulk samples done. Now, in order to get the permit, the M199 permit, they had to put a bunch of infrastructure in. And because they were working, the pits are in-place; the permit is in-place, which is extremely important.
All of the driveway, all of the access is there. There's an ore stockpile area, which is the eight inches of limestone already built in-position. The water management system, the waste rock management system… all of this stuff has been pre-established.
And that's the nice part about going in, instead of with a fresh permit, we’re going into a site that's already permitted and has a current permit. And we're just looking for an amendment so that we can get into that initial 70,000 ounce production profile.
So being on a four-lane, all-season highway halfway between Merit, which is 50 kilometers, and Kelowna, which is 55 kilometers, it also allows us to avoid the necessity of a big camp and keeping guys onsite, feeding guys. Guys can go home at night and sleep in their own beds… and you attract a different kind of worker as well when you're in that scenario.
The current mine plan is engineered at a five-day a week mine rate. And being able to provide these jobs to local communities where they can still commute home I think is going to be attractive for a lot of operators in the region.
So we're two and a half, three hours from downtown Vancouver. I pop up there multiple times a week as do other members of management. We're able to keep an eye on this thing. And it's a really unique opportunity to be able to put a mine together with all of this stuff sort of prebuilt and, on top of that, all of the infrastructure surrounding it.
Gerardo Del Real: You own 100% interest in the project. What's the cash position look like? I mentioned the financing that you recently closed.
Kevin Smith: Yeah, so we went out to the market and announced that we were going to raise up to C$10 million. We were kind of told by the market it was aggressive; the price that we went out at. We still managed to finance C$4.7 [million] of it. Our business plan only required C$4 million of that — so we raised an additional C$700,000.
That money is being used to finalize the permit, kickoff Phase-1 of this drill program, as well as put the property payment that we have due May 16th to Equinox Gold Corp. for C$3 million — to put that off to the side as well.
Then, the company is also toying with the idea right now of opening up an additional financing just due to some feedback that we've had from, not only participants in the round, but also some new faces that have come around now that they're starting to see the economics and the contracts that we've put together.
The cash position is… we're solid right now. We intend to raise more money, and we're confident that we can do that. We're raising it at levels that are extremely non-dilutive for current shareholders, and it's actually pretty exciting to see how well things are coming together on the financing side.
When we initially started this, we were told it's a great story if it works, but it's really hard to make this sort of stuff work. We've gone out and really delivered to early supporters and shareholders and also the naysayers who said we couldn't do it.
And it's interesting because you're starting to see a lot of those people start to come back around the deal now that it's de-risked a little bit more. It's more within their profile, and we're extremely excited about some of the partners that are looking to come on and join us in this build-out of the project.
Gerardo Del Real: It's amazing how that works, huh, Kevin?!
Kevin Smith: Yeah, it's that execution, right?! You say you're going to do something and you do it! And all of a sudden — people take you a little bit more seriously.
Gerardo Del Real: Agreed. You have a lot to do. I do believe that you've delivered beautifully, frankly, behind the scenes. Again, I was familiar with the asset prior to the public listing here. So congratulations on that front. And I'm excited to see you execute throughout the year and start checking things off that list because it's a long one.
Kevin Smith: Thank you very much… and I appreciate the support and encouragement on that. It's an ambitious task, and we've been told that before. But we have a group of extremely talented technical people and operators within management and sort of surrounding the deal. That's actually the side of it where we're feeling the most confident.
I think when some people look at the management of this company, they're going to say, "Oh, I haven't really heard of these guys or seen these guys before." And that's okay! We're looking to make a name for ourselves as this is the first deal for many of us.
We're going to do a proper deal here. We're going to build a mine, and hopefully we're going to become BC's next gold producer.
Gerardo Del Real: Exciting times, Kevin! Thank you so much. Look forward to chatting here soon.
Kevin Smith: Alright. Thank you, Gerardo.Click here to see more from Gold Mountain Mining Corp.