Categories: Energy / General Market Commentary / Precious Metals
Topics: General Energy / General Market Commentary / General Precious Metals

Mawson Resources (TSX: MAW) CEO Michael Hudson on New High-Grade Zone at Rajapalot Gold-Cobalt Project in Finland: “We're Building Scale and Grade Beneath the Existing Resources”

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Chairman and CEO of Mawson Resources (TSX: MAW)(OTC: MWSNF), Mr. Michael Hudson. Mike, how are you this morning?

Michael Hudson: Top of the world, even though I'm down under.

Gerardo Del Real: That's good to hear. I imagine you're sitting back smiling because you had some pretty impressive news this week. I'm going to read the headline and then we'll get into the details. There is a lot there. The headline reads, Mawson intersects new high-grade zone, 19.5 meters at 7.1 grams per tonne gold, 1,006 PPM cobalt. That includes an intersection of 7 meters at 17 grams per tonne gold and 2,168 PPM cobalt. 

This is, of course, part of the recent 14.1 kilometer drill program at the flagship in Finland. We're going to talk Australia later on just a bit, but this is the flagship for a reason. Can we go over these results and the main takeaways?

Michael Hudson: Well, the main takeaways are that we're building scale beneath some initial resources that we put out in December 2018. We're building scale and grade beneath the existing resources, which is what we wanted to do. This project is simply building nicely. This result we put out had context with the result we put out three or four weeks ago. 

We're starting to find these high-grade shoots developing within the areas that we're drilling, which is nice to see, of course. What it simply means is what you see, that this project can develop some very high grades. Of course, that's a great thing economically. That's a great thing potentially economically when and if this thing is mined. 

The resource will come out in some time, the new updated resource, and it will be interim again. The resource will come out sometime in August or the start of Q3.

Gerardo Del Real: It's important to note that the mineralization is relatively shallow from these results, right? I believe that hole 228, that 19.5 meters of 7.1 grams per tonne gold, you're finding that right at about 241.8 meters. Another important point is this is 120 meters from the 2018 inferred resource. Is that correct?

Michael Hudson: That's correct. That number that you just quoted in terms of depth is downhole depth and our holes are angled so that's sub-200 meters vertical. So it's all relatively close to surface here. We're not talking about drilling areas that will only be accessible by underground methods. 

Now, this looks like from a technical point of view, it starts from surface or within a few meters of surface. So, these things will be open pittable. When I say these things, we've got a number of different resource areas. We've got three so far and we're building up another two more very nicely that will be drilled at the end of this year. 

So, more near surface resources. So, open pits going to underground and that's how we saw Kittila up about 150 kilometers north of us, Europe's largest gold mine operated by Agnico Eagle. That's exactly how that operation was started and now it's progressing and it started with a small resource of 300,000 ounces and now it's north of 7 [million]. If you follow the trend that is going to a plus-10 million ounce system. And you can see the same development, we're crafting this resource hole by hole here and it's playing out very well.

Gerardo Del Real: Can you talk a bit about the true thickness of the intervals, right? Oftentimes you see a news release and you see a flashy number, 15 meters of 10 grams per tonne gold. Then you look and true width, true thickness is something like 10% or 15% and then it makes it all irrelevant, right? Can you speak to that a bit?

Michael Hudson: Well, we think we've got a fairly good handle on orientation and the morphology, or the shape of these bodies and what controls them. So, that's a critical thing in terms of being able to explore for them and explore for more. I think that's demonstrable by how we're coming out with news release after news release over the last two or three months. It's just bang, bang, bang, bang. That plays out to understanding that the thicknesses and controls on the mineralization. 

We think we're around about the 90% true thickness of mineralization. So, we're not drilling those, what they call “director's holes” that look stunning, but in reality are only thin little zones that you're drilling parallel to. That's not the case here. We orientate all drill core. We have a very firm understanding of our structures and the thicknesses of mineralization. This is ridgy-didge.

Gerardo Del Real: The upcoming resource estimate, Mike. Can we speak to what will be included in that resource estimate? I know in my back of the napkin calculations, I'm looking for somewhere around a million ounces, right? Is that a reasonable assumption on my part?

Michael Hudson: It's within the ballpark of the exploration target that we put out there, Gerardo. We've talked about the exploration targets around the range of 1 to 1.2. It will come in, I believe. Assay results are still coming in, still with the program essentially ongoing. It's very hard to pick what grades will be, of course, until we get them. But that's more or less, we started with just under half a million ounces and we're looking to double that basically is the aim. 

The key point though to remember is that that resource that we put out in December 2018 had approximately 15 kilometers of drilling. That was about 420,000 ounces constrained and 480,000 ounces gold equivalent unconstrained, which means that there was no mining shapes around it. So it was in that ballpark, correct. It was a good good start, but that had 15 kilometers of drilling. We've now completed another 30 kilometers of drilling on top of that resource. So this new resource will include drilling that will in total be around 45 kilometers. So it will be a tripling of the information into the resource.

Gerardo Del Real: And we're talking to three main areas that are going to comprise this resource update, correct?

Michael Hudson: Correct. We have, I mentioned, two other areas that are starting to develop that have got high-grade hits at surface with coincident geophysical anomalies. They're two new areas that we're building up. 

We may get some smaller tonnage from one of these areas that we've put a number of holes in called Rumajärvi. That may start as a fourth resource area, it just depends on basically the continuity and the geostatistics and the modeling to see if that will fall into the resource. But there's certainly grade and volume there and we'll just see how that works out in the resource. But it's close, if not this year, it will be next year.

Gerardo Del Real: Excellent. And we still have approximately 13 holes, 13 assays pending, right? So, this is hopefully not the end of the good news. There's hopefully some more to come.

Michael Hudson: Absolutely. We had 37 holes, of which we've reported 24 of those and still got 13 left. So there's approximately a third or thereabouts of the program still to come and we'll see what it holds. Each drill program actually has over-delivered and exceeded our expectations internally in many respects. Of course, there's always surprises on the upside and downside in any exploration program, but this always seems to exceed on the upside than the downside. So, let's hope that trend continues

Gerardo Del Real: Outside of these three areas. You know the market, and I'm guilty of this myself, I'm excited to see somewhere about around a million ounces. That would be great. My immediate question to you after I congratulate you that morning, Mike, when you announce that in July hopefully, is going to be okay, what's next? What are the next targets? How do we take this resource and then expand on it? I know you're not short on targets. Can you speak to the exploration upside?

Michael Hudson: Yeah, this is very much a start, Gerardo, with what we're defining here. We converted from an exploration project, if you like, with gold everywhere and lots of gold near surface to drilling these resources as we've been talking about. Our job this year was to expand those resources. That will continue to be the main focus for this project. 

But there's something like 60 kilometers of the host trend within the area that we're looking at. Now, not all of that is going to be mineralized, but there's a dozen decent targets that need testing. As we understand more about this mineralization, we can target it better. That's been proven in how this project's growing. So, this is a multimillion ounce discovery in the making. 

As I talked about, Kiittila, I think in terms of how that project went, you can see the trajectory being similar here. Kiittila started with 300,000 ounces in their initial resource, lots of drilling. Agnico bought them, they published a resource just after Agnico bought them of 2 million ounces. Then they've crafted that discovery, they made a decision to start mining. It's over 7 million ounces now and they've just put in an internal shaft and hundreds of millions of dollars of capital to add infrastructure to go deeper. It's going to go north of 10 million ounces, in my opinion, and will continue to grow. 

So, that's Agnico's biggest mine. That's how these orogenic gold systems tend to be, right? They tend to be continuous and not like planes of mineralization where you drill gold, gold, gold. It comes and goes of course, and that's the nature of mineralization, but they just continue to get bigger in the general sense. That's what's happening here at a much earlier stage than Kittila.

Gerardo Del Real: You mentioned that asset was bought out at around the 2 million ounce range. Was that correct, Mike?

Michael Hudson: That's correct. It didn't have a resource of 2 million ounces, but of course Agnico saw those 2 million ounces there, I'm sure, and that it was going to be able to get a lot bigger.

Gerardo Del Real: Do you recall what that take out price was?

Michael Hudson: Yeah, it was around $150 million US, but that was in a very different market at the start of the last bull cycle around early 2000. It also had some metallurgical issues, which it still does, but Agnico sorted those. So Agnico took the punt on that asset there. It should be pointed out that we don't have those metallurgical issues. Different times, right? The asset values that have sold since then around the world have been a lot higher still, but Agnico are smart operators.

Gerardo Del Real: So, I'll interpret and translate for everybody. What that means folks is he believes 2 million ounces here would be better than 2 million ounces there at the time. Of course, that asset has grown. I kid a bit, but it's cleaner metal for sure. Mawson's market cap, even after the good reception the market had to the news, it is still a tiny $56 million, which is going to bring me to my next question. 

Let's talk Australia a bit. A group that I'm familiar with, Fosterville South. I'm familiar with Bryan Slusarchuk. Like that team, I think it was a heck of an acquisition. They're out the gate, they just started trading about a week and a half or so ago. They have a market cap of approximately $72 million. Congratulations to that team, I am rooting for them and keeping an eye on it and largely in part because of the fact that there are a lot of similarities – there's differences – but a lot of similarities in the address of where Fosterville South's land is. I believe some of it is actually right next to the ground that you just picked up. 

Can you speak a bit about the projects in Australia and when that will come into play? Because frankly, if Mawson has a market cap of $58 million, Fosterville South has a market cap of approximately $72 million. And then we throw in Finland, there's a lot of compelling upside in Mawson just from the exploration potential if we believe that the market – and the market's always right – has assigned a fair valuation to the projects at Fosterville South. Can you speak to that a bit?

Michael Hudson: Well, I'm rooting for Fosterville South every day. I know some of that team well. In fact, the main people here in Australia who are running it, I've worked with before and respect highly. They've done a fantastic job of building a market cap out the gate that is quite impressive. You mentioned it's around $70 million today. I like to think that that's the hidden $70 million in Mawson, right? That's what we've got in our back pocket. 

We closed on an acquisition in Australia around three weeks ago. On any technical basis, I think if you wish to compare Fosterville South's projects with what we have in Mawson, they're comparable. They're different in slightly different ways, but they're pretty comparable in every different aspect.

We've just closed on that acquisition. We've just put out a few press releases about closing. We're pulling together all that data now. We've got high grades of drilling that stand up very similar to the grades we've been talking about in Finland over the last 10 minutes. We've got long strike extensions from existing mines. We've got clear Fosterville-style mineralization that just hasn't been tested to depth below 50 meters. We've got the first right of refusal on the largest land package in the state. That's over 3,000 square kilometers. 

It's just a package that really is just waiting to be talked about and we're just about to start doing that. So, there's your hidden market cap in Mawson if you like, if you want to play any comps with companies that are doing so well like Fosterville South.

Gerardo Del Real: Fantastic. Anything else you'd like to add Mike? I know we're eagerly anticipating more assays, I know those are coming soon. Anything else you want to add to that?

Michael Hudson: Well, it's just going to be huge news flow coming out of Mawson over the next four or five months with more assays from Finland. The resource imminence at the start of Q3. We'll start demonstrating data and plans for Australia. Hopefully, around the time of that resource or a little bit after, we'll be in a position to start drilling in Australia and keeping the news flow going. There'll be certainly a lot of activity on the ground in Finland, looking in summer permitted areas for extensions of the mineralized system. If we have success there, we'll be drilling there. And when we have a gold market, right? So, it's all playing out very well.

Gerardo Del Real: Treasury is still healthy. You have approximately what, $3 million or so in cash?

Michael Hudson: Yeah, just a bit shy of $3 million in cash. So, of course with all that work that I said, it will need a top up at some point if we are to execute on all that work. But healthy enough to do the early stage stuff and keep the company going now very actively.

Gerardo Del Real: Mike, pleasure as always. Look forward to chatting again soon.

Michael Hudson: Thanks, Gerardo.

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