Latin Metals (TSX-V: LMS)(OTC: LMSQF) CEO Keith Henderson on Partner-Funded Drill Programs by Majors Barrick and AngloGold Happening in the Background


Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today for an overdue update is the CEO of Latin Metals — Mr. Keith Henderson. Keith, how are you today? It's been a bit, it's great to have you on, but again, we were definitely overdue.

Keith Henderson: Yeah, it's been a while. It's good to catch up… and happy to be here.

Gerardo Del Real: Well, let's get right into it. You had some news recently and the headline read “Positive Results Reinforce Potential Porphyry and Skarn Mineralization at Blanco and Tinto Zones, [Auquis Project].” 

This, of course, is one of several projects in the Latin Metals portfolio. We talked about the sentiment out there right now, and it's really two types of companies, right? Companies that are working that have some cash and that are happy to add properties and structure deals opportunistically. And then, companies that are just ‘hoping’ that sentiment turns for the sake of their survival.

Latin Metals happens to be in good financial shape. You have some excellent projects in some really good jurisdictions. And let's get right into it. 

Let me start by playing devil's advocate. A part of why you are in such a good financial position… you received a lot of criticism here recently… you had a loan that you structured. And I want to talk about the properties and the merit and the many catalysts. But let's get that out of the way because I've had several shareholders ask about the loan and the way it was structured.

Keith Henderson: Yeah, a few people didn't quite get it or didn't love it. Equally, quite a few people did. So a bit of a mixed reaction. And we tried to be explicit in our news release to explain it… but it's not that easy to be explicit. 

So you're sitting here, let's say, we've all got plans; we plan out our year; we're planning to do a raise. We get to that time when we're planning to do that raise, and the market looks like what it looks like right now. So the share price is getting hammered a little bit just like everybody else. 

And we are not in the same position as all junior companies. We're a prospect generator. It's really, really critically important to us that we prevent shareholder dilution to the maximum extent that we can.

And so we had three choices. Go ahead and do a raise anyway and dilute everybody. Who cares, right? Well, we care, so we're not going to do it. Second option is a loan, which we liked… and I'll talk about that a bit more. And the third option is to just hibernate and do nothing. And that's simply not fair to any of our shareholders… I don't care what the market looks like. There are always opportunities. There's always something you can be doing. And you need a little bit of cash in the bank to move forward with these things.

So for us, a loan was really the obvious choice. If you looked at a financing of the same amount of money, that was going to be about 16.5 million shares of dilution if you count the shares that we would've issued immediately. And it was for sure going to be full warrants if it was going to be done.

Gerardo Del Real: Right.

Keith Henderson: And so counting those full warrants, as well, you get to 16.5 million [shares]. So really, it's about giving yourself a chance to do better than that. And so that's what the loan did for us. 

The loan is no dilution immediately. Mostly large shareholders and insiders put their hands in their pockets and said, ‘We've got faith in this company… we've got faith in where we're going. We're going to write a check and give the company a year of our money to move forward with what it needs to do so that it doesn't find itself in a position of having to dilute like this.’

There are obviously risks that come with issuing a loan to a public company, and that risk is reflected in the warrants. But I think that's perfectly fair. People write a check and they get some warrants in return. And frankly, those warrants, if they're going to be in the money — that's great. And that's a little bit of money coming in later on.

In terms of repaying the loan, really, it gives us a year of runway. We get into better markets, we get a whole bunch of catalysts done, we get a whole lot of things happening that have not quite happened yet. 

And so let's make a leap of faith and say, next year, we are in a way better position. At some point, as part of another financing, we're going to have to pay off the C$600,000. But it's going to be for way less shares than we would've issued if we'd done it by an equity placement right now. 

Just for an example, call it 25 cents [Canadian], it’s 8 million shares. And isn't that great? That's exactly half of the dilution that people would've seen. And of course, there's no guarantee that we can do it that way. There's no guarantee that the market gets better. There's no guarantee that it works out that way. But we're giving ourselves the opportunity to do it better and to see less dilution. 

And I think that's what shareholders should try and focus on because it's way better than just walking out and saying, ‘To hell with everybody… we're just going to do this financing and dilute.’

Gerardo Del Real: No, listen, Keith, that's fair. It's appreciated. I always love when you come on and are willing to take the questions that, for a lot of CEOs, may be uncomfortable. 

Let's talk about why you and the insiders that participated are so optimistic about the future of the company. And that, of course, is the quality of the projects that you have. Specifically, and I know you have some good ones in Peru, but we know Peru is a bit of a juggernaut right now. 

But especially the Agrentinian portfolio where you're doing some really neat things. Can we get to that part… and then, let's talk about how we're going to turn the share price around and how you add value here?

Keith Henderson: Yeah, look, we started the year with three major catalysts coming our way in Argentina, all of which involve drilling of our projects. We have to put our hands in the air and say that those drill projects have not yet commenced. And we can also say that that's not entirely our fault. 

We go down the road of being a prospect generator, and we do that for reasons that we've discussed at length on your show. If there's one downside to being a prospect generator it’s that you don't necessarily control when things happen because your partners, who are spending the money, will have to go along with everyone’s schedule a little bit. 

And so yeah, we had hoped we'd have been drilling by the middle of the year, and we weren't. But that's not to say that we won't. And that means that those catalysts are still ahead of us. So here we are… we're not in a worse position than we were… and those catalysts have not quite happened yet… but they will happen.

Libero is looking for a drill permit at Esperanza. And from what I understand from them, that's going well. And I understand from their news release that they've got nearly all of the signatures; they've got one signature pending on that permit. So that's great news. 

The other really, really great news from San Juan is, although the provincial government in San Juan is pretty much pro-mining, they have had an election. And come December, there's a new administration coming in. That means there's a new governor of San Juan, and there's a new mayor coming into some of the local towns. And the news is great.

These people that are coming in are absolutely pro-mining, pro-investment. So we're not going to see any negative change in San Juan. We're going to see, if anything, positive change. And that's great for the mining industry. 

So Libero hasn't started yet; the project hasn't got drilled yet. But we know that it got drilled in 2018. And we know that when we drilled that project in 2018, we intersected the third-best copper intersection in the world in Q2 of that year. And our intersection was from surface, and it was 400 meters; practically, 387 [meters]. But you get the idea. Big intersections; great grades from surface; waiting for a drill permit; catalyst is ahead of us. There's no bad news there.

And then, we move on to our other partners. We've got AngloGold Ashanti working with us in Salta Province. And we've got Barrick working with us in Santa Cruz. AngloGold has not yet given us the good news that they're about to start drilling but we are talking to them regularly. 

I hope that I'll have an update out on what they are doing in the coming weeks. But I know for sure from the last time I spoke to them that they're planning to fly a heli-borne survey. That's a very expensive undertaking and shows great commitment to the project. I know that they're planning to also fly some hyperspectral data collection, which is also a sizable undertaking. And again, it shows that commitment. And I know that the project is important to them, and I fully expect that they'll be drilling it.

So yeah, it hasn't happened yet. Have I got any concerns? Absolutely zero. And then, thinking about Barrick; it's a similar story there. I'm waiting to hear from Barrick because they're getting through some of their budget meetings in the next few weeks. And once they get through those meetings, we'll have a call and they'll be able to tell me exactly what they're doing. 

But my expectation based on conversations, but not fully confirmed, is that they'll be excavating trenches. And they're deep into a permitting process for that. They're also deep into a permit for drilling. And in that province, we would expect that to be issued without any difficulties or any delays. 

And we also think that they're going to be doing some fairly extensive IP geophysics, and that's a very expensive undertaking as well. So again, great commitment to the project. We know that they're moving towards drilling. We fully expect that that's going to happen.

So here we are in a crappy market with nothing going on in terms of drilling. But we know that it's coming. And we don't know much about what's coming in the market but we fully expect that the market is going to get better. It doesn't stay like this forever. So let's look ahead and keep smiling and say to ourselves, ‘We've got three catalysts ahead of us. We hope that those come to us in a much better market where people are excited to get into the market and excited to buy the shares and get some exposure to that.’

And so, do we have anything going on that we need to be unhappy about? Well, not really. And this market creates nothing but opportunities. And we are looking, just as everybody else is, at some of the companies that have fallen upon really hard times. 

And I feel bad for those companies… but companies that you go on their website and their presentation says ‘September 2021’... you've got to think that they're in some financial trouble and maybe they've got some decent assets that we’d want to have a look at. And that's where the opportunities are. And that's exactly the kind of thing that we spend a great deal of our time doing these days.

Gerardo Del Real: It sounds like there could be the potential for some opportunistic and accretive M&A. It definitely sounds like we still have at least three drilling programs to look forward to. And it also sounds like you and I will likely be chatting in the next couple of weeks with a more detailed update.

Keith, always a pleasure. I always appreciate the time. Anything to add to that?

Keith Henderson: Nope, that covers it for now, Gerardo. I look forward to talking to you next time, and hopefully we'll have a whole lot of good news to talk about. So yeah, looking forward to it.

Gerardo Del Real: Excellent! Keith, thank you so much. Appreciate the time as always, sir.

Keith Henderson: Thanks very much.

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