General Precious Metals
Latin Metals (TSX-V: LMS)(OTC: LMSQF) CEO Keith Henderson on Delivering Shareholder Value Via Key Partnerships with Barrick and AngloGold Ashanti on Gold-Copper Projects in Argentina & Peru
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Latin Metals — Mr. Keith Henderson. Keith, it's great to have you on. How are you today?
Keith Henderson: I'm super, thanks. Great to be here as well. Thanks very much.
Gerardo Del Real: Let's get right into it. Latin Metals is a company that I had followed for quite a bit, and then you and I were able to have a really good thorough conversation at the New Orleans Investment Conference.
And the more I dug into the share structure, the insider ownership, the partners you've been able to bring in, the model, the jurisdictions that you're working in, and the commodities that you're exploring for, the more I asked myself… ‘Why is Latin Metals trading at the market cap that it's trading at?’
And so I'm glad that you're on. I'm glad that we're having this discussion. Let's get right into it. Can you provide a brief overview of the company and the prospect generator model that it operates under? And then, we can get into the share structure and the asset base and the many, many catalysts that you have coming up here — not just for the rest of this year but for 2023.
Keith Henderson: Sure, yeah… easy stuff. We're a prospect generator, and we are doing it properly. And I say that because a lot of companies kind of start off as a prospect generator and then manage to do it a different way, and they manage to dilute their shareholders.
We're so, so focused on lack of dilution. We're running the company cheap. We spend something at the order of C$1.3 to C$1.5 million each year. That's it. We're using that money to create a huge amount of value in acquiring projects really cheaply. We add value to those projects by doing very, very cost effective surface work. We don't do any drilling because it's really expensive and really dilutive.
And once we have a project with great targets, we go and find a nice partner, someone that we think will add value to the project, someone that we think has the capability to spend the right money in the right places, and then we let those projects go. We always maintain a minority interest. We always maintain the right to revert to a royalty if we want to.
Royalty companies do very well, and having royalties is extremely valuable — and that's how we roll. We just don't get into dilution at all. We're huge shareholders ourselves. We've got 49% of the company sitting with management and board. I think that's critically important for investors to understand.
I know it's a very big position but it means that we are completely and utterly aligned with shareholders, and we care about the shareholders, and we care about the share price much more than we care about picking up a salary.
Gerardo Del Real: Let's get right into the projects, and, listen, it's been an impressive 2022 for a company that hasn't received the attention that I think it deserves. You've secured, just in Q1 and Q2 of 2022, up to — and correct me if I'm wrong — but I believe it's up to C$15 million in exploration expenditures between two partners on two projects; one partner being Barrick, and the other partner being AngloGold Ashanti.
That doesn't get into the up to C$2 million in exploration expenditures that you secured back in 2021 at a copper-gold project and your other Mina Angela gold project as well, which you have. But let's talk about the projects that I have to believe are your flagships, right, which are the Cerro Bayo and the La Flora projects and the Organullo and Ana Maria gold projects that you've partnered with AngloGold Ashanti. Can we speak to those and the commodities that you're looking to find and discover there?
Keith Henderson: Yeah, look, we focus on gold and copper for the most part in this company because we understand those commodities really well, and they've got long-term value for shareholders. We've got three projects under option in total. In total, the agreements that we have in place account for up to C$35 million of investment over the coming years.
And you start to look at that compared to the small amounts of money that we're actually spending, and you see how much value we create — and that's really just the beginning. We hope to continue finding good partners. We hope to continue partnering other projects and, over time, our aim ultimately is to get to a situation where we can have investment coming in of around C$25 million each year. And that translates into roughly 70,000 to 75,000 meters of drilling. Drilling is where it's at. If you don't drill projects — you don't find something.
If you don't have a lot of projects, you minimize your chances. We have a lot of projects; we're going to have a lot of meters drilled on them. That increases our chances of success many, many times over compared to other companies. And it can be statistically shown that prospect generators do a much better job of finding significant deposits.
The partners you're speaking about, Barrick and AngloGold, we really believe in securing partners where we can; we want partners who’ve got big yellow trucks driving around and big mineral deposits and companies with very significant revenues. They're companies that have the financial capability to see these projects and these agreements through to the end. They have the financial capability to develop these projects if they find something and probably, most important for investors, their hurdle rate in terms of what they're looking for is so, so high.
These companies don't do very many deals. Everyone thinks that junior companies are doing deals with big companies all day long. When you start to look at these early stage prospect generator type projects, big companies don't do these deals very much. A Barrick might do two or three deals in a year, and AngloGold might do one or two deals in a year.
They’re rare things, and we've done two of them this year so far, and we are extremely proud of that. What they're looking for is what the investors need to think about. A company like AngloGold, a very major gold producer, the third biggest gold producer in the world, they're not looking for half a million ounces. They're looking for projects where they think they've got a chance to discover 5 to 10 million ounces.
These are really major tier-one deposits, the kinds of deposits that actually don't come along very often. But they're looking at our projects, they've done their due diligence, and they think there's a chance that they could find something on our projects.
And that, for me, is a huge piece of reassurance, really, for an investor, and investors, who are looking at projects all day long. They get bombarded with news releases from all kinds of companies, and every company's got ‘the best project in the world,’ apparently, if you read the news releases.
But when you look at the projects that companies like Anglo are picking up, these are good projects and, in the sense these companies are doing due diligence, it's almost a proxy for the due diligence that an investor would like to do but really would never be in the position to do.
Gerardo Del Real: I think that's an important point. The amount of due diligence and the technical expertise that a Barrick or an Anglo brings to optioning these projects is gruesome — is how it's been described to me. And so I think it speaks to the caliber of the assets.
Let's talk about the jurisdictions that you're working in. The agreement with AngloGold, it's a project in Argentina which is seeing a lot of investment capital right now. The agreement with Barrick, the joint venture there with the definitive option is in Peru.
Can you speak to those two regions and how it's been working there? I know you're familiar… I know that you've been there for quite some time. How are things in each of those countries? And I know they're two separate places, obviously, with different dynamics. Let's start out with Argentina.
Keith Henderson: Yeah, you're quite right. Those are the two countries we're working in. Actually, both of those projects that you spoke to, Barrick and AngloGold, they're both in Argentina. Argentina is seeing a huge amount of investment right now. I've been working in Argentina since, kind of, early-2000s off and on and have a lot of experience there.
It's had a mixed history. There's been times when Argentina wasn't necessarily the best place in the world. But I can tell you right now, every single major company and many, many of the mid-tier companies are looking for investments in Argentina… and suddenly it is the place to be. Can I explain exactly why that is?
Gerardo Del Real: Absolutely… I would like for you to get into it. There's a reason why there's so much capital going in, right?
Keith Henderson: Yeah, like, BHP invested US$100 million in the Filo del Sol project, and that's essentially their first investment in the country. They weren't there before. Imagine just turning up someday and that's your investment… that's your entry into the country… and you can imagine that they're going to be getting busy looking for other projects as well.
Anglo and Barrick are both producing in the country. They've both got significant revenue. They're deploying a good deal of that revenue towards exploration for additional projects. It's just a really fantastic place to be. One has to be careful where you work in Argentina. Some provinces are a little bit more favorable to mining than others.
We obviously focus our efforts in those provinces where we know we're going to get a good political reception for the mining industry and for exploration in general — and it's just really a great place to work.
Peru is another place that I've worked for many, many years. We entered in there probably about two and a half years ago. And at that point, strangely, there were not that many people actually working on early stage projects in the way that we wanted to. And so as we identified projects that we wanted to acquire, we found that they were basically available for staking, which is just the best possible result for us.
It's so cheap. You can pick up ground… you don't have to go and pay some guy that already owns it, and you get in there for 100% ownership for a minimal investment. And from there, you do your work at surface and you develop those properties the best you can — and we've been really successful in doing so. I hope our luck never runs out. The first two projects that we've looked at have been really good… it's as close to being a full on discovery as you can find without drilling holes.
We've done everything at surface. It looks really fantastic. We've had fantastic trench intersections, rock sampling, etc., and that's gone really well with excellent relationships with the communities. It's a very integral part of what we do. And with that, we believe that we are very, very close to getting a drill permit. We think that we'll be able to find a partner for this project in the next, kind of, three to six months.
We've got a second project called Auquis, which is just a little bit earlier stage. We're not quite finished with the surface work but it's looking just as good — if not better. And again, I think we're going to be able to walk into a partnership on that one pretty quickly.
And of course, having the partnerships we already do, Gerardo, it really helps. People look at this small little company called Latin Metals and go, ‘Who are these guys?’ And, ‘Oh, they're working with Barrick; they're working with AngloGold… maybe they've got something… maybe they know what they're doing.’ And it just gives you a little bit of credibility, and it means that suddenly people want to look at your other projects.
Gerardo Del Real: The project's option to Anglo and Barrick and Libero are all in Argentina, and I don't think that's a coincidence right now with some of the political volatility that's going on in Peru. But with that being said, you have some very, very attractive projects that you're conducting active exploration on and are ripe for joint venture. Can you speak to the Peruvian part of the portfolio because there's a lot of copper-gold projects there that I really like.
Keith Henderson: Yeah, we're focused on copper-gold. We've got projects that are ready to go for partnerships. It's been going really, really well. We've picked them up through staking. We're delighted with that.
You mentioned that Peru is politically not the hottest place right now. That might be true but it's still a very, very significant producer of metals. It's the second biggest producer of copper in the world. This is an economy that relies very, very heavily on mining, and politicians come and go.
We are with early-stage projects; we're getting into early-stage exploration and drilling on those projects with our partners. The political environment, the exact political regime at any point in time, particularly at this point in time, is not terribly important to us. It's important if you're a producing company; you've got to care about the politics right now.
But for us, discoveries are a few cycles out in terms of government so as long as the country remains pretty focused on mining, we're in a pretty good place and we think those are the great opportunities to go and pick up ground.
Gerardo Del Real: Agreed. You have, as you mentioned, up to C$35 million in potential commitments there. Where's the market cap today?
Keith Henderson: We are around C$10 million.
Gerardo Del Real: That's a heck of a disconnect.
Keith Henderson: It is. We keep a very careful track of peer companies; companies that we consider are doing what we are doing and doing it well. Companies have been around for a little bit longer. And we track the performance of those peers so that we can show and speak to what value we think we should be or could be in the company just based on what we have right now.
And we believe that in a decent market, what we've got on our plate right now with the catalysts that we have ahead, we think that a company like Latin Metals could potentially support a market cap of C$45 million to C$50 million. That's certainly what a lot of the peer companies have been supporting over the last couple of years.
That speaks to value today. And the value is what the value is… but you know what everyone's in this for is for a re-rating. Everyone's in this for a discovery. And when you have the kind of quality of projects that we have and the right partners doing the exploration, you have to hope that there's a potential for a big discovery there. And if that happens, then, obviously, you also hope you're going to get a complete re-rating on the stock.
So yeah, we're a C$10 million company today. We're relatively new to the market. I know we've been around for a few years but it takes real time and effort to pull together portfolios of properties to get the work done, to get you to partnerships, to get those partnerships signed up.
And so we didn't focus on marketing over the first, kind of, two to two and a half years of our history. Now that we're kind of there and we're moving forward and we're in the right place now, we are marketing. That's why you met me at New Orleans, and we're doing a lot of that kind of marketing, and I think that's the right thing to do.
Many people are saying, ‘Well, it's not a great market right now; why would you even bother?’ But when people get around to thinking about investments, when things turn around and everybody's in the mood to invest, we want them to be thinking about us… we want them to know who we are… and nobody ever invested in a company they’ve never heard of.
Gerardo Del Real: You have a tiny market cap, you have some major league heavy hitting partners, you have a great technical team. You've been very, very prudent in selecting the projects. And you have, again, some of these projects have already delivered spectacular results. When do you anticipate we'll see some drills turning and results from some of these projects, Keith?
Keith Henderson: So all three of our option agreements in Argentina, in all three cases, we've got partners who are aiming to drill in Q1 next year. The exact timing is obviously out of my control, and, in a sense, it's out of everyone's control. There's always some steps; there's some permitting. Everyone's got to have a drill permit; everybody's got to be ready to go.
But let's hope that they're being conservative in their estimates… worst case scenario, some of these projects will be drilling in Q2. So this is very, very imminent. We've got lots of really good news flow coming. And remember that with all of these partnerships, we get data from these companies on a quarterly basis.
So going forward, each one of these partnerships generates news and catalysts and news flow on a quarterly basis. We've carefully planned out the year in terms of the news that we know is going to be coming, the news that we hope is going to be coming in terms of drilling, the news that we hope is going to be coming in terms of additional acquisitions, additional partnerships.
And we've really sat down and thought about what the next 12 months looks like, and we think we've got about 30 news releases ahead of us. Recognizing that some of those are just not quite under our control. But if things go well, that's what we're going to be delivering to market. And that's what people love to see is just consistent news flow so they know what's going on. They can feel they can rely on the company and that the company is doing what it's supposed to be doing.
Gerardo Del Real: Look, I have to say, Latin Metals is as much of a no-brainer in the space as there is right now. Again, like I said, it's major partners, it's a lot of commitment to spending, it's the right commodities — copper-gold. Argentina is on absolute fire. You have a great portfolio in Peru.
I know you're busy behind the scenes with other potential partners that have been seeking you out. It's a lot to like for a company with a tiny market cap of just around C$10 million.
Keith, thank you for your time. I know this was a bit more involved than we anticipated but I thought it absolutely merited the attention. And I'm really looking forward to, hopefully, having a continuous dialogue on all of the projects here with Latin Metals. Anything to add to that?
Keith Henderson: Absolutely… I look forward to talking to you again. Let's do this regularly, and, yeah, we've got a lot to talk about… so look forward to talking to you again.
Gerardo Del Real: Looking forward to it. Thanks again.
Keith Henderson: Thanks, Gerardo.Click here to see more from Latin Metals