Categories: Base Metals / Mining Stocks
Topics: General Base Metals / Copper Stocks

Power Metallic Mines (TSX-V: PNPN)(OTC: PNPNF) CEO Terry Lynch on High-Grade Maiden Resource at Lion Averaging ~3.9% CuEq, with >85% Indicated and Significant Expansion Potential

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Power Metallic Mines (TSX-V: PNPN)(OTC: PNPNF), Mr. Terry Lynch. Terry, it is great to have you on. How are you today? I know it's been a heck of a week for you.

Terry Lynch: Yeah, no, it's been a busy week, been an exciting week. Lots of good news. Obviously, lots of conversations to be had with investors. And so it's been great. And obviously, I'm at home right now, first time I've been home in about two months, but I'm going out on Saturday night to Europe. I think between now and the end of December, I'm here for four weeks or something like that. So it's going to be a busy road warrior season, because we got lots of exciting stuff to talk to people about, and we want to get the word out for sure.

Gerardo Del Real: Well, let's talk about it. Let's talk about the good and let's talk about what clearly the market is asking for more of. You clearly have a high-grade maiden resource estimate that's got the grade, that is a greater than 85% indicated and that's got the expansion potential. And by the way, it's like near surface, open-pittable resource. So all of that is fantastic.

The metallurgy, 98% copper recovery, fantastic. You have five rigs going, fantastic. The not-so-fantastic part, and the part that the market is deeming as not so fantastic was the tonnage. I think the market obviously clearly expected more. So I want to touch on the good and I want to touch on what you do now to prove the scale because you clearly have checked a lot of the important boxes. And frankly, I don't think you're getting the credit for doing some of that work. I think you did a lot of that work early on, and maybe put yourself in a position where the market just expected more on the tonnage side, even though there was so much more.

Terry Lynch: Yeah. I think a couple things I would say. We moved the MRE up from Q1 of 2027 to now, because we did that when the stock was around too low. I think it broke to $0.90. It had gotten to $0.90 or something, we thought that was ridiculous given what we've already done. And so we said, "Hey, maybe we obviously need to give them the proof."

And so our pitch right now is we've raised the floor, but we haven't limited the ceiling. And the floor has been raised substantially. Now, we thought we were going to raise it even more. And so, that's what the market's reacting to. That being said, we never got paid for what we thought we were going to produce. Had we been doing that, the stock would have been 5 bucks. So what we did produce, very clearly in our mind, is we're at two and a half, three times where we're at today. That's what the analysts are saying. And it's justified by the economics of the project, which we'll get into in a second.

So yeah, the thing sold off because guys wanted more right now. But I think what's interesting... People sell stocks for lots of reasons. Maybe they bought them as a trade and they had a timeline, and they were moving on to another trade. You never know what people are selling. You know why people are buying? To make money.

So the guys that sold got replaced by 7, 10 million shares of buying from, I would say, long-term investors that see the asymmetric nature of this investment. They recognize that, "Wow, what a great entry point. We got this floor that's substantially above where we're at right now."

And by the way, they got a lot of cool exploration stuff that's coming in the very near future, like within September. And that looks exciting. And they got a bunch more happening through the fall, and obviously a broader program over the course of time. So I think you have to accept the market's verdict in these things such as it is, but the market isn't always right.

And what happens is the guys that bought, they obviously see a lot of potential, and we think they're the ones that are right. And we're going to get the story out here over the next... Obviously, we're ending the very busy season for marketing in our space as you know. And I think a lot of the institutions are going to eat this up. And so we'll be happy to present that to them over the next coming days and weeks.

Gerardo Del Real: Yeah. No, look, I think you're in good shape. There's a part in the news release that was curious to me and I want to get a better understanding of what the team thinks about this. You ask the question in the news release, "Where is the nickel? Where did it go?" And what's your approach to finding that?

Terry Lynch: Yeah. So we're doing a number of cool geoscientific techniques to do that. SQUID and Muon being the two big ones, and the borehole EM. And that's led to a lot of nickel. Now, one of the things that slowed us down on the nickel side is the recoveries from the Nisk main deposit were not fantastic. They were okay. They're adequate, I guess, 70% on the nickel, less for the copper and the PGEs. But when you compare that with 98.9% for the copper and 96 for the palladium and stuff like that, it's just not in the same ballpark. And it also impacts your concentrate and payabilities and everything. So we high graded the Nisk nickel project to make it a contributor to what will be the PEA that we're putting together, but it's not a huge contributor such as it exists. Now that being said, it's interesting. You've heard of the project Sakatti right?

Gerardo Del Real: Absolutely.

Terry Lynch: It's Anglo-American orthomagmatic that they discovered in Finland 18 years ago. Do you know what their maiden resource was? Probably not. So it was two million tonnes at 4%. That's copper. Today it's basically a nickel and copper project, 157 million tonnes at 0.75%. So what they've done is they found that they could blend the copper with the low-grade nickel and be able to extract the nickel profitably. And that's why they're making it a much bigger project.

And one of the interesting observations going through the MRE with SGS was they said, "Terry, one of the things we recommend you do is let's do another metallurgical where we mix the nickel and the copper and see what we get. I think we'll be surprised that we're going to, as a result, get still the recoveries that we're getting at Lion, but we're going to now drive recoveries at Nisk because there's a lot more sulfur in the system, the chemistry will work and we'll drop the nickel out."

So it's interesting. So that may be where we begin to have more interest in exploring for the nickel and driving the nickel forward. We think at the end of the day, that the Nisk main discovery, not the parent of this. I think we've talked in the past about how we visualize the positive as almost like a hand and the fingers are the pipes and the Lion zone is one of the pipes and the other pipes haven't discovered yet. And the palm, it's this nickel sulfide parent that would have been there at the start.

And in these orthomagmatic discoveries, there's basically, for every tonne of copper you find, you'll find between three to seven tonnes of nickel. So right now at Lion, it's almost one and a half to two tonnes of copper to one of nickel. So we've been focusing on the copper because that's where the better economics are at the moment. But over time it's probable that the nickel economics will come back around and we'll find a lot more nickel. And then the nickel that we find is probably going to be much higher grade than what we currently have. The parent of this thing, when it started way back when, hundreds of millions of years ago, is probably in the 2 to 3% nickel and 2 to 3% copper, and a couple grams of PGEs.

That's what it would take to have produced a Lion. There's a mathematical relationship to the pipes to the parent and we've been able to track that. So I think we've got some interesting thoughts on where that might be. It's obviously deeper in the system. One of the things is drill down the Lion, which is what we're doing. We said in our release that the current true depth of the deposit from an MRE perspective is 610 meters. Now exploration-wise, we're down to 900 meters, over 900 meters and we're still hitting the massive sulfides. Now the exploration results haven't come out yet. They'll come out before the end of December. We're hoping, honestly, I know we'll see you at Beaver Creek.

Gerardo Del Real: Absolutely.

Terry Lynch: We're hoping we can get them out there for Beaver Creek. Obviously it'd be a great spot to drop it. So we'll see if the labs cooperate with us in that respect. That would be great because it will show people that yeah, indeed the resource is growing and then there's a number of ways that it can continue to grow obviously by expanding at depth. The rule of thumb on these types of deposits, if the width is X, the depth will run typically times the width, and as much as 20 times. So right now we're talking, we're at two times. We're now drilled down to three. We'll probably, between now and November, go to 1,200 meters, but it probably won't go any deeper than that because it really gets cost prohibitive to drill, and a bit dangerous because when you're down that deep, you can miss these things.

It's a river of nickel that's 5 to 50 meters thick. And if you're just a shade too high or too low, you miss it. You know what I mean? And so it's one thing to miss it at 100 meters, it's another thing to miss it at 1,200 meters. So I think we'll probably get there. We've gone down and we'll do some wedge holes off these deep structures to add more tonnage and bring it in, but probably that'll be the limit, but that'll add a pile of resource.

And then we obviously left some resource in the open pit area that this wasn't contiguous enough to enter it. That was just the verdict at the time. Yet we think it probably is connected and we have the Muon program, which is that program where we have the geophysics, which is like the subatomic particle, the Muons, which are cosmic rays coming through the earth back in. The only thing that slows it down is the density of the rock. So we'll be able to configure or compare the specific gravity that we know exists in our massive sulfide three and a half or so SG versus the host rock being maybe 2 or 2.25.

So we'll know that, hey, with the Muon, we'll be able to see what we've already discovered and the Muon shows out. And then we'll identify a bunch of other spaces that have the similar signature of the 3.5 SG, specific gravity, that hasn't been drilled. And we'll drill that and that could help connect a bunch of ground up, that top part.

Fireweed doubled its resource using this methodology. So it's a pretty exciting process and we're looking forward to ramping that up. So I think there's a lot of really near and low-lying exploration fruit that will be added to solve that initial market reaction.

Although I would argue that we believe that they overreacted and they missed the point. The point is now the analysts are out saying the open-pit mine will cost only 200 million to put in production and it'll pay for itself in a year. So think about that. When's the last project you worked on that cost that was paid in a year?

Gerardo Del Real: Yeah. And again, it bears mentioning, you've done a lot of great work, but it's early days. You have a lot ahead of you. So I think the pullback's a great opportunity for people to go and get familiar with the potential economics of the project. I would also encourage people to look at the price assumptions used. I would say you were pretty conservative with the price assumptions. Do you want to speak to that a bit?

Terry Lynch: Yeah. I mean, again, we don't pick them. It's something that the engineers pick, independent engineering study. So we just respect that that's the way it is. But we know that when you think about this, this is the economics today. We all know copper's in a dramatic shortage situation that's growing and it's going to get worse before it gets better because it's being impacted in two ways.

The supply side is getting worse. Old mines are shutting in, grades are going down. Supplies are on the downside, not on the upside. There's not a lot of new supply coming on the market and yet the demand is going through the roof because, as Robert Friedland said, I was texting him last night, he sent me a great chart on the copper stuff. He said, "This thing's really going to get serious in 2027 and beyond." And I think he's quoted as saying, "All the world's copper that's been produced to now we're going to need in the next 10 years."

And there's just no way we can produce that. So the demand side's skyrocketing, supply side's being impacted by just lack of exploration, and not a lot of new projects coming on stream and/or permitting and community relation issues. So these shortages are going to get jacked. So price in copper is probably going to go a lot higher. We use $4.80. I think today it's $6.50, $6.75, something like that. And what might it be in 2032, 2031 when this thing gets out is probably double digits, I believe. So lots of upside.

Gerardo Del Real: Terry, I'm glad we had the update. It's timely. Again, if you want exposure to high grade, at surface, clearly economic with significant growth potential, you might want to take a look at Power Metallic. Thank you so much for your time, Terry. Anything to add to that?

Terry Lynch: No. The other thing to add is we're coming to America. We're already, obviously, in the OTC, but I'm talking about NASDAQ. We basically have applied there. The last remaining thing on the NASDAQ list was the updated technical report, which obviously this is it. It'll get filed and we'll update that. And we're looking at a timeline October 15th to November 15th, in there. We do it through the American Depository Receipts Program. So it'd be like a trade as a 5 pack or a 10 pack of Power Metallic stock, so no consolidation. And that'd be cool because we think there's a lot of interest in the US for critical mineral stocks. And obviously we want to get to a much better exchange there that would be much more eligible for both the institutions and individual investors to get into it. So I think that'll be another inflection point for us in the fall.

Gerardo Del Real: Agreed. Lots of catalysts. Look forward to seeing you at Beaver Creek. Thanks again, Terry.

Terry Lynch: Cheers. Take care. Bye.

Gerardo Del Real: All right. Cheers. Bye now.

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