Headwater Gold (CSE: HWG)(OTC: HWAUF) CEO Caleb Stroup on Drilling for Gold in Tier 1 Jurisdictions


Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President and CEO of one of the busier gold companies here now and will be in the second half of this year, Headwater Gold CEO, Mr. Caleb Stroup. Caleb, it's great to have you back on. How are you?

Caleb Stroup: Doing good. How are you doing?

Gerardo Del Real: I'm well, I'm well. We chatted briefly for about 20 seconds off air. I mentioned to you that there is very few companies that are going to have what looks like over 20,000 meters of drilling completed, and it's not just on your partner project with Newcrest, which in themselves offer compelling, compelling shots on gold for additional discoveries. You already have a couple. But you're also retaining pure upside from your hundred percent owned and operated projects, which again, I love the hybrid model you're employing. Congrats on another great news release here, this time announcing the proposed 2023 exploration activities on the Newcrest funded earn-in projects. I thought I'd have you back on and let you provide some context because I think the second half is going to be a pretty rewarding one for Headwater shareholders.

Caleb Stroup: Yeah, no, for sure. It's exciting times here and as you say, there's an awful lot of activity that's just about to kick off. And again, as we've talked about before, this is all part of our hybrid business model, which is, in our view, the best way to do exploration at a scale like this, which we all know it takes a lot of shots on goal to have a meaningful chance at success. And that's what we're doing here, both on the partner funded projects and with the bonus of the hundred percent exploration offering shareholders pure upside.

Gerardo Del Real: Let's start with an overview of the drilling at the partner funded projects because obviously anytime a major like a Newcrest comes in and gets involved and commits to the type of funding they've committed to, the due diligence process on that can be absolutely brutal. I have to believe they are chasing a bigger prize than the average junior is chasing and obviously you are manning that and leading that ship. So can you speak to that part of the business model first?

Caleb Stroup: Yeah, so we'll be pretty active on the Newcrest earn in side for sure this year. The focus of those programs will be the Spring Peak project. That's where we made a significant new discovery in drilling last year that we'll be following up on in a much bigger way. So we drilled a new target, well, two new targets actually, at that project where we had some good indications previously of epithermal veining but didn't see the high grade component until we got in there with core last year.

So we only drilled a little over 3,000 meters last year and now we'll be upping that to 11,500 or so, following up on those high grade hits. We hit the last hole of that program, the deepest one down dip hit 35 meters of almost three grams, including a couple of individual veins two, two and a half meters over 10 grams up to about two ounce per tonne gold. So that's a pretty exciting result to be following up on and that'll be the focus of the Spring Peak drilling is stepping off somewhat systematically in 50 meter increments and starting to build that system out down dip and along strike and see what truly we're dealing with. But if it's anything like we saw last year, and it certainly is what we're expecting, we're going to have some good results come out of that program.

Gerardo Del Real: The amount of drilling at Spring Peak is considerably larger, and you note this in the release, than it was before. I got to believe that you're really trying to define the scale. You and Newcrest are trying to define the scale, as you just mentioned, of what's actually there and the potential of how big this thing can be.

Caleb Stroup: So that was a pretty limited first-pass program. That was the first project we ran with them as partners and it was a great success and that's the model. Success is rewarded with bigger budgets and bigger programs and this really does have the potential to be something significant. With this drill program, we'll be able to really put some brackets on what it is we're dealing with here. We know we have the grade, as I said, up to two ounces per tonne in those new veins we discovered. So the question now is how much of it is there, and the only way to find out is to drill.

Gerardo Del Real: Excellent. Spring Peak far from the only project you'll be drilling this year. Can you speak to some of the other projects?

Caleb Stroup: Yeah, so the next one on the list in terms of the size of the program will be our Midas North project. That'll be about 3,500 meters. And this is a very exciting one in particular because there's been no historic drilling. At the surface, we see everything we want to see to demonstrate that there's a big alteration system there of exactly the right character to have good potential for high grade epithermal veins at depth. It's in a great district just north of the famous Midas district in northern Nevada. Really contiguous with that district on the northern end and nobody's drilled it. So these are the things that I really live for as an explorationist, when you get the first crack at something and who knows what's down there. So that'll be a really exciting program that'll be kicking off pretty shortly here.

Gerardo Del Real: Excellent. And then you have Mahogany I believe will see some drilling as well?

Caleb Stroup: Yeah, that'll actually be the first one that we get started on. So we're rolling out over six weeks about seven drill rigs, and so it's a bit of a logistical circus as you can imagine, and there's all sorts of road and path construction on various projects and some of them are just drying out now from a historically wet season, and so it worked out best to send the rigs up to Mahogany first, and so we should be announcing kicking that one off in the next few days here. We're excited to get up and rolling there.

And that's a phase two program, following up on some work that we did immediately after listing in 2021. We drilled five holes up there. That was the first drill we did as a company up there and had some pretty good success, but it had always been just a half a step below Spring Peak and Katey, which were sort of our flagship successes out of that first year.

And Newcrest saw a compelling target up there and we're going to go and test that with I think probably six or seven holes, follow-up holes, looking a little bit deeper and seeing if we can't find that high grade interval down at the right elevation underneath the stuff that we hit in 2021. I mean, we did hit quite a bit of interesting geology and some good gold. We hit, I think it was 0.7 meters of about 10 grams, so that's a pretty good start, but now we need to really define the scale of this thing, and we'll get about, as I said, six holes and I think this one's got a great shot too.

Gerardo Del Real: Excellent. Let's save Lodestar, which is going to see some geological targeting, some geophysics work and some drill permitting, let's save that for another conversation because I think that'll merit its own separate conversation here in the future. We have to talk about the hundred percent owned Katey project because I know for a lot of shareholders, the project generator model is excellent. It provides minimal dilution, you can drill multiple projects, it's partner funded, but you also retain less upside, and so you really need a big win on that side to really move the needle. You've done it beautifully because you have an excellent share structure, but what really gets me personally excited as a speculator in this space when I'm writing a check, when I'm thinking about writing a check, are the hundred percent owned projects, and Katey is that. You mentioned that Spring Peak and Katey were kind of like the co flagships, is the phrase that you used. Can you speak to that?

Caleb Stroup: Yeah. Well, Katey was, recall that was another one we drilled right after listing and we only drilled two holes and one of them hit about two meters of about an ounce per tonne gold. And it's still the only hole that we've drilled in this target area and it's wide open down dip and along strike. We consciously kept that out of the Newcrest earn-in deals because we wanted to pursue that one ourselves and give our shareholders a crack, as you said, at the pure upside that that can deliver. And so that one is also extremely exciting because we know there's high grade gold, we think we understand the geology pretty well. We've done a lot of systematic work defining the targets from that intercept along strike and down dip, and now it's time to go test it.

So that'll be kicking off here concurrently with Mahogany in the next few weeks. So we're going to get back up there with two rigs this time, a core rig and an RC rig, and drill. I think we'll probably get 10 or 12 holes in that at a minimum and then we'll see what we see and can potentially expand that from there.

Gerardo Del Real: A lot of really, really solid work, a lot of drilling. I mentioned the last interview that you're catalyst-rich in the second half of this year. I think our conversation highlights that pretty well. The cherry on top to me are the jurisdictions, where you're located. Can you speak to that for those that may be new to the story that are thinking, "Well, man, I really like the potential for gold to break out in the second half and in 2024, I really like the multiple drill programs, but where are these projects? Are they out in the middle of nowhere? Are they in a dangerous jurisdiction?" This is, to me, really, really the cherry on top with Headwater and the way that you approach the business.

Caleb Stroup: So that was another conscious decision we made. All of these projects are in the Western US. All of them are on excellent infrastructure and in most cases they're within spitting distance of either a historic deposit or an existing mine that's got a mill sitting there in place, so they got a lot going for them. The margin for success is not 5 million ounces like it might be someplace in a dodgy jurisdiction with no infrastructure. Of course that's what we're looking for and we have potential for that on all of our projects, but even if we find million ounce type deposits, they're still going to have a tremendous amount of value in a place like this. Both investors and the major companies are looking for opportunities in safe jurisdictions and looking for high grade opportunities, and that's what we always sought out to deliver.

Gerardo Del Real: Caleb, you have a lot to get to. I'm going to let you get to it. I appreciate the thorough update. I suspect you and I will be having a lot of conversations in the second half of this year, and hopefully we're talking about new discoveries and adding scale to the existing ones. Anything to add to that?

Caleb Stroup: No, let's get to work. That's all there is to be done here. A lot of drilling to get done and a lot of exciting results to get out.

Gerardo Del Real: It's a lot of junior companies out there complaining about a soft market in the summer. Hey, you're quite the opposite. Take some notes out there, y'all. Thanks again, Caleb.

Caleb Stroup: All right, thanks a lot.

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