Categories: Precious Metals
Topics: General Precious Metals

Kingsmen Resources (TSX-V: KNG)(OTC: KNGRF) CEO Scott Emerson on Consolidating an Entire Mexican Silver District at a C$7 Million Market Cap

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the president of one of my favorite silver, gold, and base metals plays in the space right now — I am a biased shareholder; I will start with that disclaimer — Mr. Scott Emerson, president of Kingsmen joining me today. 

Scott, how the heck are you? It's great to finally have you on.

Scott Emerson: Great, thanks for inviting me on your program, Gerardo.

Gerardo Del Real: Well, let me get right into it. It's very rare that with gold near the US$2,000 level, copper near US$4, and silver near US$24 that you find a company that has consolidated a historic past-producing mining district with numerous silver, gold, lead, zinc, copper targets nearby in a Mexican silver belt that is historically one of the richer ones as it relates to mineralization in Mexico. 

You've managed to do that. You also have a ton of data to work with. And yet, you sit here at a C$7 million market cap. I know we want to get into all of that and why we're so excited about Kingsmen. But before that, I'd love to get a little bit of background on you for those that may not be familiar with your story there, Scott.

Scott Emerson: Oh, great. Thanks, Gerardo. So just to give you a little bit of background, I have been in the mining industry for the past 27 years. I was fortunate enough to be part of a company called International Mahogany, which was a brownfields discovery in Saskatchewan that eventually went on to have the Jolu Gold Mine. 

It was put into production; it had International Corona as a joint venture partner. And to this date, it is one of the most successful mines ever to be put into production in Canada. So that's kind of some background on me.

We can go into the team of individuals that I’ve got that surround me. But they're all of the same ilk and caliber. So we've all been in the business a very long time. And some of us have stepped away from the business and then reentered the business thinking that we could be entering into another bull market here for the commodities sector. So that got our attention, and we've come back into the space. 

And in particular, we've looked at a number of jurisdictions. And out of the work that we did over the past two and a half years, we identified Mexico as a mining-friendly jurisdiction; one that you could still get work done in. And we set our focus and our attention in Mexico. 

What I'd also like to say is that led us to our current project, which is the Las Coloradas project, which is located in Chihuahua State in Mexico, which is a mining-friendly state. It is about an hour and a half plane ride from Mexico City, and access is easy. And again, the community where we are is mining-friendly. So hopefully that answers your question.

Gerardo Del Real: Absolutely, Scott. I want to touch on that just briefly because I'm really excited about Las Coloradas, its location in the Parral Mining District of the Central Mexican Silver Belt. I think that's key there.

But you touched on jurisdiction a bit. And I know that, recently, there's been rumblings from the government and some situations that have not been so mining-friendly. And I think it's really important for us to provide some context as to how mining-friendly Chihuahua is specifically in the region that the project is in. Because one part of Mexico — it's like real estate — can be very different from another part of Mexico. And I think you’ve happened to hit the jackpot as it relates to jurisdiction within Mexican ground.

Scott Emerson: Right. So just to give some reference to your listeners, Parral is located, like I said, in a mining-friendly jurisdiction. It is actually built around an old silver mine called La Prieta. And La Prieta produced silver for 340 years. 

That particular region was basically built around the silver mining industry. And in our case, we're located 38 km from Parral. And again, it's a past-producing mine. I can say that all of the claims that we have acquired are all in good standing, meaning their property taxes have been paid and have been paid up to current. We continue to pay those. We have 50-year mining leases on all of our claims.

So when you talk about these changes in the mining law, these changes that they're implementing and will be implemented — I'm pretty confident of that — are positive in one sense and negative in another. And they're positive in the sense that any junior, or any company operating in Mexico, if you've paid your taxes you've done everything properly according to their mining laws, I don't think these changes are going to pose a big issue. 

They've really identified the companies that have been in Mexico and have neglected to pay those taxes and, therefore, stalemating those properties. Because you can't acquire a property in Mexico without paying those taxes. So in the past, operators have just basically held the properties; never staked them. That basically stalemated the payment of taxes until it got rectified. And Mexico is now saying, ‘Well, hold up here. If you haven't paid your taxes, we have the right to take those claims back. You're going to lose them.’

So some companies with a big land position have in excess of $100,000 or $500,000 worth of taxes due. And they can't pay them. So they're going to lose those properties or those claims. So I think that's the fear that's been put into the marketplace. I don't think it's going to change. But for those of us that are operating properly — ‘correctly,’ if you want to use that word — these changes aren't dramatic; it's just normal course of business.

Gerardo Del Real: No, that's perfect context.

Scott Emerson: We'll leave it at that.

Gerardo Del Real: Yep, perfect context. I love it. Let's get into the exciting part. I mentioned the C$7 million market cap. You have a very, very solid share structure. I know several of the large shareholders, including myself, are long-term committed shareholders that want to see this company advance, for the first time ever, targets that have never been consolidated under one banner. 

You just had some sampling results that were very, very positive. You mentioned in that release where you published the results that they aligned well with the reported historic silver and gold production grades, which were just great numbers: 300 to 518 grams per tonne silver; 0.6 to 0.8 grams per tonne gold; 6.2% to 10.9% lead, and 6.5% to 10.3% zinc.

Now, with that commodity mix, Scott, tell me what the primary commodity that you're chasing at the project is going to be.

Scott Emerson: The project we’re chasing right now is the silver project. That's where our attention is. But all of those other minerals that you bring up are all important components of potential. You have to have that mix; the gold, the zinc, which, obviously, adds value, the lead. Those are all primary components of what you need for potential. We'll just call it potential for now.

So what we did and what we're currently doing is we are conducting a surface sampling program over the entire project area. These samples that you have seen in the press release are just from the southeast part of the project. Right now, we're systematically moving across the entire project area sampling… so we'll have more results to come here in the near term. 

And really, that’s basically giving us confirmation of why the ‘old-timers’ were there, we'll call them, why Asarco was there in this district. So extremely positive; we're encouraged with the results.

You touched a little bit on the company. The company, for all intents and purposes, is a new company. It was what we would call a shell company. I got involved when the company had other assets in Sweden and other parts of the world. I essentially dissolved or sold those assets which could be sold. I then consolidated it. And right now, I'm going to say that this is like a brand new company, Gerardo. 

There are only 19.5 million shares outstanding. It's got a strong shareholder base. The company is well-financed with C$1.3 million currently in working capital… so we're not out in the marketplace right now looking for capital. What we're trying to do is add value to the project through the work we're currently doing.

Gerardo Del Real: Let me touch on that structure because I think it's a primer for a lot of other companies in the space that, frankly, maybe shouldn't exist, right? You have no debt; there are no options issued that I know of.

Scott Emerson: No.

Gerardo Del Real: You mentioned the cash position. You mentioned the 19 million shares outstanding. I mentioned the long-term committed shareholders. And you also have no warrants. 

That is almost as good as it gets in this space, folks. And it really, really does wonders on not capping the upside with dilutive warrants that may be in the money that are going to somewhat limit the upside in the near term; don't have to worry about any of that here.

Let's talk about what comes next and what you have planned to get that market cap from the measly C$7 million that it's at now to a much more, I think, accurate reflection of the value of being able to consolidate a historic mining district for the first time ever.

Scott Emerson: I think, too, Gerardo, just before we get to that, in addition to what you just mentioned, the company has a 1% net smelter royalty on a project in Mexico we sold to a company called GoGold. And I think that's important because GoGold is roughly spending close to C$85 million developing that project of which we have a small piece of through an NSR. So I think that also adds value to the company.

But just moving forward, this is new, Gerardo. It took me approximately 18 months to put this together. We've now started a sampling program over the surface on one part of it. Our plan, over the next three to six months, is to do a program over the entire project area. 

So we're going to be creating that story. Nobody really knows the story because nobody's ever had this project. What our plans are moving forward is we'll systematically sample; we'll start to release news over the coming weeks and months. We have applied for our drilling permit, which we expect we'll receive. And then, we'll drill. 

It's that simple. This is a drill-ready project. Your listeners aren't going to have to go through geophysics and airborne geophysics and all of this stuff to get it to a drill-ready stage. This project is drill-ready.

Gerardo Del Real: Sticking to silver just to simplify things a bit for the audience… what kind of potential do you hope Las Coloradas is able to demonstrate as it relates to millions of ounces of silver? How big a target do you envision chasing?

Scott Emerson: Give me one moment and I will tell you just what we're thinking.

Gerardo Del Real: And I'll caution that this is speculative at this point because this is why you're doing the surface work; it's why the drill bit is going to have to prove that up. But clearly, when you get involved with a group of claims that you consolidate, you're doing that with a target in mind, right?

Scott Emerson: Correct. And what I'm going to share with you now is, again, just something that we've done, sort of, back of the envelope, of what we think is there and why we're so excited and why we want to move forward. And I'm just going to pull it up.

Gerardo Del Real: We love accurate numbers around here, Scott, so thank you for that.

Scott Emerson: Well, okay, so we think with our first phase drilling program, we're going to test for a potential of close to half a million ounces of gold, 119 million ounces of silver… and it could be in excess of a billion ounces of lead and 2 billion pounds of zinc. So when we talk about that, collectively, we say the total potential would be over 200 million ounces of equivalent silver on site.

Gerardo Del Real: And you believe you can demonstrate that with your first phase of drilling once all of the surface work is complete?

Scott Emerson: That's correct. I'm not going to say ‘first phase’ of drilling. That's what we think of the potential of that area. Let's be clear about that, Gerardo.

Gerardo Del Real: Got it.

Scott Emerson: But that's what we feel is the potential. That's why we're excited. We want to be the story in that district. 

Gerardo Del Real: I’ve got to say, Scott — and, again, this is me as a biased, excited shareholder — 200 million silver equivalent ounces is going to be worth a whole heck of a lot more than C$7 million. So I think that sets the table well. 

You mentioned applying for the permits. You mentioned the work. I'm looking forward to having you back on as more results from different parts of the land package come in. Anything else to add to that, Scott?

Scott Emerson: No, that's it. Stay tuned! That's what I'll say; that's how I'll end it.

Gerardo Del Real: Love it! Drilling for silver in Mexico; tons of upside. I think we're in for a pretty special precious metals market that’s really going to ramp up in the second half of this year. I think you're positioned perfectly and happy to be along for the ride. Appreciate your time, Scott.

Scott Emerson: Thanks, Gerardo.

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