Hannan Metals (TSX-V: HAN)(OTC: HANNF) CEO Michael Hudson on Basin Scale Copper-Silver-Gold Potential in Peru
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Hannan Metals, the next Reconnaissance Energy Africa, Mr. Michael Hudson. I'll explain that in a bit, but how are you, Mike?
Michael Hudson: Very well, thank you Gerardo. I look forward to the explanation.
Gerardo Del Real: Well, we chatted a bit off air and I think something that gets lost in the massive scale and scope of the land package that you've been able to put together for Hannan Metals in Peru. And we'll talk politics in a second, but I think what gets lost is just the amount of opportunity. We're not looking at Hannan as, hopefully we make a discovery, type of play. This is a basin. And I thought that Reconnaissance Energy Africa, in the oil and gas space is a really good analog, because this is a company that put together a massive basin scale project that was supposed to be prospective for oil and gas.
This is a company that was 50, 60, 70 cents not too long ago. And what they were able to do is prove up the fact that yes, indeed, this basin is prospective for discoveries for both oil and gas. And that stock has shot up to as high as over $10 Canadian and currently trades for a little over $8 Canadian. And so I see a similar scenario developing if and when Hannan is able to demonstrate with the drill bit, because we already have outcrop discoveries, we already have samples, we already have all of this confirmation. We know there's copper, we know there's silver. We speculate there's likely gold, but we just don't know the continuity, the geometry, it's early stage. So that's why I believe Hannan could be the next Reconnaissance Energy Africa.
Michael Hudson: Very good. Well, of course that's a lovely analogy to make, so thank you. But it's, fundamentally, I think it's a reasonable position to take. I mean, we're one of the top 10 holders of ground in Peru. One of the couple of juniors, I think the average market cap's $50 billion. So big companies take big positions to make big discoveries. And that's certainly what we're doing. We've got over 2,000 square kilometers of ground and people can't get that in their head. It's basically 2,000 kilometers by a kilometer wide. Right now, of course, we've got wider zones, but that's just the scale of this thing. We've got hundreds of kilometers of strike potential in two very different styles, the sediment hosted copper and then the porphyry copper gold. And, and then we've got the Japanese government on a third of our ground, fully funding the exploration and we're working, we're getting there.
We're de-risking it. So you'll see a whole series of news flow over the coming month or two, where we start to demonstrate that continuity question further, where we'll start discussing drill permitting, and what we're doing on that front, which is all our next step. So it's a compelling story. I'm certainly very excited that we're doing something very different in the frontiers of Peru, where through various reasons, through safety and access and social issues over the last 50 years, people haven't really been able to make a go of it, but it seems now's the time, certainly from a safety point of view and a logistical point of view. And I think our work on the ground is demonstrating it's possible, from a social point of view.
Gerardo Del Real: I wanted to get into this morning's news in just a second. You announced a $2 million US JOGMEC JV annual budget at San Martin. That's a third of the land package and the exercise of $1.1 million Canadian, in warrants. But before we get to that, I would be doing my listeners, and subscribers, and the audience a disservice if, I didn't ask you about the sentiment around the election in June with the very left leaning Castillo and the complete opposite on the other side with Ms. Fujimori. How has the rhetoric from the left and the political environment affected Hannan in the field? And what's your take on everything that's going on, Mike?
Michael Hudson: Well, I'm a geologist, so I'm not a political commentator, first of all, but I have had 25 years or more experience in Peru and I've seen the ups and downs. It's never boring, is Peru. I think you can say that around the politics, but since the mid 90's mining and exploration have been a fundamental base to their economy and they certainly know and understand that. And even though, left-wing politicians have come and gone, that the business has continued. So that would be my hope that the return to sense continues. But Castillo, who is very popular, he's 15 points ahead of Keiko Fujimori, the righters cannibalized their vote, it seems, and allowed this uber left wing politician to take the running. Very much a sign of the times, like we see around the world, it's black and white, it's binary, it's the provinces here that are supporting Castillo and the cities do not.
So let's see where it goes. His rhetoric now is returning to the center and saying that the initial comments that were attributed to him were not true, around nationalization of industry, but that's of course where he needs to go to secure that center vote. So it is a concern I think, but we've seen Peru go through these machinations over the years and well, my hope is that we'll be business, maybe with some differences, but still a business that is very viable, and from an on the ground perspective, it has meant very little to us. I think what it really means is that you've got to have those social relationships with the people on the ground, and that provincial people will be empowered more and more as the world is changing. And we've seen that dramatically. When I was first in Peru, the local people had very little power and were really disenfranchised, and it's just the swing to that balance I think. So that's what we're seeing.
Gerardo Del Real: Well said, a measured response. Let's get into the news from this morning. The $2 million US annual budget at the JV portion of the San Martin project. I would love to know where that's going to go. This is the part of the curve that excites me, because this is what sets up future drilling, correct?
Michael Hudson: Correct. Absolutely. So everyone wants us to drill, we want to drill, JOGMEC wants to drill, but there's a hell of a lot more work to do at all different scales of exploration, to de-risk the project, as well as, the permitting work that is required to drill in Peru. That whole swing to empower local people has led to a very convoluted and long permitting to get anything done on the ground in Peru. And that's not new and everyone faces that. So you've just got to plan for that over the long-term. So we've got a $2 million US budget that JOGMEC confirmed, which is a very healthy budget for a grass roots, earlier stage property. We'll continue to work at the very large scale with large scale geochemical sampling. We're going to fly a very extensive LiDAR survey, which we can talk about at another time, but that really is industry groundbreaking in terms of the application of this technology over such large areas in these terrains.
And then we'll be continuing with lots of field teams on the ground. And then working up prospects at the prospective drill scale. And we'll look at starting to permit three different districts. So big scale areas for drilling, that will set the project up for next year and beyond, that sort of having a chain of areas in which we will be able to drill. So, that's really the plan. And we're very thankful of the support that JOGMEC has continued to show on the project as we move into year two of our agreement, even though it was only four months ago. You may recall they back paid us, back to April last year. And as a consequence, we're second year into a four year exploration, first phase, already.
Gerardo Del Real: Sounds like an excellent partner, Mike.
Michael Hudson: They're the best, really in many respects. A very good deal for Hannan, $35 million US to take it to feasibility, 75% ownership for JOGMEC. There's an ability for them to get a little more percentage, but they pay market rates for that percentage, very supportive of exploration. And, and it's costing shareholders, not one cent, to have and carry through on this project where we'll eventually have 25%. Of course, we'll have... We've got a hundred percent today and we'll have for the next three years until they spend those initial funds on exploration, which is a total of $8 million US, over the four-year period of which we're only in the early days into that spend.
Gerardo Del Real: It's worth pointing out that the joint venture on just a third of the land that Hannan has been able to piece together. There's a up to $35 million US commitment. I think it's important to note that Hannan's entire market cap, for the over 2,000 square kilometers of land package, is $33 million Canadian. I think it's also important to point out that, although you had $1.1 million exercised in warrants, that there's also potentially another $1.6 million, potentially there, $1.65 million from further exercise of warrants that expire on July the 6th of this year. And so there's a combination of multiple different dates. I own some of those warrants. I'm a happy shareholder. Anything on that front, Mike?
Michael Hudson: Well, we're in a pretty good spot actually Gerardo, and you found a way to say that around a junior exploration company. But being fully funded with JOGMEC on San Martin and then shareholders supporting us with these warranty exercises. It's just means that we don't need to go back to the market for funds. Shareholders are not going to be diluted by additional financing. So if you want in on Hannan, you need to buy in on the market and we can continue to fund the exploration from these warranty exercises over the next year or so, is really the plan as we go forward.
Gerardo Del Real: Mike, looking forward to the exploration in the field. Looking forward to everything that 2021 looks to be promising and really excited about what you described in the news release as a large scale and, I believe, aggressive drilling program in 2022.
Michael Hudson: Well, we'll talk before then Gerardo, no doubts, and we're very, very excited until we can say that.
Gerardo Del Real: Thanks again Mike, appreciate you taking the call from the field as always.
Michael Hudson: You're welcome Gerardo, thank you.
Gerardo Del Real: You as well. Thanks Mike.