K2 Gold (TSX-V: KTO) CEO Stephen Swatton on Hitting High-Grade Oxide at Mojave & Permitting Under a Biden Administration

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President and CEO of K2 Gold, Mr. Stephen Swatton. Stephen, how are you today?

Stephen Swatton: Good. Much better for the results that came out today. They're pretty astounding.

Gerardo Del Real: Well, let me read the headline and then I'm going to play devil's advocate with you a little bit. I had an interesting dialogue back and forth with a colleague of mine this morning. I thought this would be a great opportunity to address it. First off, congrats. You drilled 30.5 meters of 7.2 grams per tonne gold. And if that wasn't enough, it came from surface at the Mojave Gold Project. You got to be satisfied. You got to be happy there. There were other intercepts as well that showed very good grades.

And then, let's get right into it. Let me play devil's advocate a bit. You mentioned that off-air you had a shareholder that was a bit disappointed by some of the other results in the release, which seems to me a tough critique, given the numbers that you put up. But let me give you the platform to provide some context around today's news and then we can talk.

Stephen Swatton: We inherited a program from Silver Standard, SSR Mining, in 2018. We were very constricted as to where we could drill. So the first platform where we set up is where we're getting most of these results. They're results based on surface sampling. We drilled underneath the surface sampling. But you got to bear in mind, these are 100 meters away from the BHP holes. The two platforms that we set up are 236 meters apart. We're homing in now with our geological understanding as to what on earth is going on there. What is happening is that we're getting extremely solidified and broken up and brecciated rocks in this distinct fault zone. The second platform was set up right in this fault zone. What happened is when they were drilling down into the rock, we were losing part of the drill string simply because as you're going through a hole, if you imagine a void, a cave, if you're drilling down through it, it is extremely difficult.

Your drilling equipment tries to rip right through down the hole. So these guys were having issues with getting through the zone. And in the end, we had to literally give up. So we knew that we were right on the edge of something really significant there, but we couldn't get through it. But we took the decision to pull out simply because we knew we were going on to Newmont afterwards, which is another two kilometers south, which also has mineralization. So whatever we were going to find in this hole, we knew we're going to have equally as good results from an epithermal gold system further to the south. So we had to pull out. And yeah, I'm very happy with the results that we had. It's, actually, as good as we could expect.

Gerardo Del Real: So just to be clear, where you reached the target depths you got phenomenal results. Where you failed to reach it, the second platform, that's where the other numbers that didn't, obviously, get to where you wanted the drill bit to go, correct?

Stephen Swatton: Yeah, you've got it, Gerardo. That's exactly what happened.

Gerardo Del Real: Perfect. We have holes outstanding from the Newmont zone. That's two kilometers apart from Dragonfly. I mentioned that I had a discussion earlier today with a colleague and the point he brought up I thought was a fair one. The gentleman explained, and something I was aware of but I want you to address it if you'd be so kind, he explained that, "Look, this drilling was done from a helicopter. We have a new administration. We know the perception is that the new administration will be a bit more rigorous and tough on the mining industry. Look, let's be frank, you're in the midst of a permit approval for an expanded drill program." What would you say to that gentleman and to people, frankly, that have what I think is a very valid question?

Stephen Swatton: Okay, I'll get on my soap box and I'll give you the two-minute answer there. So here we have a situation that this approval was actually approved during the Obama and Biden era. It was going backwards and forwards, like a ping pong ball, in 2016. It was approved in 2018. When we took it on, I'll tell you, Trump made no special recommendations or assertions that any of the mining companies would have any special preference over what had happened before. So we've already gone through this process with the BLM and we've actually submitted for our second program. The response that we've had back so far has been very minor. We have a couple of adjustments to make, but as we can see it, there's no issue. Now, if we do have an issue with this Biden administration, which I don't anticipate, so will everybody else.

And if you're going to project the fact that we need a bunch of certain metals and minerals to support the new administration's desire to have battery metals put into the market for all sorts of cost saving devices that would improve the energy efficiency of the United States, in that case the whole industry it's going to happen. It's not just going to be California. So I would say that in answer to your question in a nutshell is I don't see any difference than it was before. We were hoping that under Trump it would get easier, but it made no difference whatsoever. So I imagine that Joe Biden being the Vice-President is not going to make any difference either now he's the President.

Gerardo Del Real: Well said. Walk me through the legal team, because I know that the team that you have dealing with the permitting process is very experienced in this part of the country.

Stephen Swatton: Yes. The lead guy is based in Sacramento and all he's done his whole life is mining permitting. And to enhance our level of expertise, we also have a person based in Tucson. She is tribal. She is a First Nation lady who's helping us navigate our way through, if you like, the idiosyncrasies of not only the legal framework, but also the permitting framework, because she's very much involved with, and knows, the people who are in the new administration, because she's worked with them in the past. So I think we've got the bases covered. Look, there are no assurances in life and there's certainly no assurances in mining, but I think we've got the best team that we could have possible.

Gerardo Del Real: Let's bring it back to the drill bit, which has been extremely kind and generous to shareholders and the project. I mentioned the Newmont zone. We're waiting on assays for an additional nine holes. Can you provide a bit of context as to what you drilled into?

Stephen Swatton: Yes. It was much more competent rock and that much I can tell you, because obviously I was there when they were drilling through it. We didn't have any recovery problems at all. But the issue that we have right now, if there is one, is the assay labs are completely backed up. I'm sure other people have complained on your show as well about this. And not only that, we're getting our results back not in the order in which we sent them. This is causing us some frustration. But all I can say is that we've got a hundred percent recovery of the mineralization intercepts from the Newmont zone and we're expecting them within the next two weeks.

Gerardo Del Real: Stephen, well-put. Thank you for your time. I'm excited for the pending assays and looking forward to having you back soon, hopefully.

Stephen Swatton: Thanks very much. Thanks, Gerardo. Thank you everybody.

Gerardo Del Real: Appreciate it.