Revival Gold (TSX-V: RVG)(OTC: RVLGF) CEO Hugh Agro on PFS, Drilling & Adding Value for a Gold Bull Market


Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today, once again is the President and CEO of Revival Gold, a significant shareholder I should add of Revival Gold. I was reminded of that here in an off-air conversation. Mr. Hugh Agro. Hugh, how are you this morning?

Hugh Agro: Well, I'm feeling good and thank you for reminding me of that share position I hold in Revival Gold. It's been a painful past couple years as we've watched this gold sector come together, but boy am I excited about what we've delivered here with this resource update today and PFS, and I know we're adding value on the project.

Gerardo Del Real: Well, let's get right into the value that was added. And just to be clear, do you want to disclose what that position and Revival is? Because I know for me personally as a shareholder and someone that writes checks for different companies, it really, really puts me at ease when I see a dedicated team with a history of success, a major history of success leading the ship and actually putting their money with their mouth as opposed to just raising money from shareholders like myself. If you want to disclose it, great. If not, it's fine, but it is significant.

Hugh Agro: About 5% of the total shares outstanding, which is in total our management team and board and advisors hold about 10% of the company. So we do care about where our share price goes and we're focused on delivering value.

Gerardo Del Real: Well, let's get right into the news today. You announced the results from the open pit heap leach restart plans with the PFS. There were two parts to this release and I could tell by the chatter out there and some of the feedback that I've received that a lot of people focused on the PFS portion of it. And I can tell you that as someone that really is attracted to exploration and adding value via the drill bit, it was the resource update that really got me excited. The PFS is a great de-risking step and I think is prudent at this time in Revival Gold's life cycle, but I want to start with the mineral resource increase because it was pretty significant.

Hugh Agro: I mean, 4.6 million ounces, second-largest discovery of gold, new discovery of gold in the US in the last decade and all gold. It's very impressive. And you think about it, it’s just been one year or just over a year since our last resource update, so this is pretty impressive stuff. $6 an ounce finding cost... less than $6 an ounce finding cost since we got started. When you first walked the property, Gerardo, we had nothing. We had no resource on that property. You were eyeing the heap leach pads with some interest and wondering what might be still remaining in those pads. But since then we’ve, through the drill bit, taken the resource up to 4.6 million ounces, 2.4 million of which are in the measured and indicated category and 2.2 million in the inferred category. I'd love you to ask me about some of the details underlying that.

Gerardo Del Real: No, let's get right into it. Let's start with the grade on both the measured and indicated and then let's talk inferred, but let's start with measured and indicated.

Hugh Agro: Before we get to grade, I want to talk about where the numbers went. Within that measured and indicated, we've now got almost a million ounces of heap leach material. That's a two and a half times increase over our prior resource. We did a lot of infill drilling with the express purpose of bringing that into M&I for the purpose of getting ourself to PFS, the de-risking steps you talked about with respect to the PFS. Our total measured and indicated heap leach materials, about 42 million tonnes at 0.7 grams per tonne gold for just under a million ounces. And then within that, or including the mill resource on top of that, we have now 86 million tonnes at just under 0.9 grams per tonne gold for 2.4 million ounces. Big increases here in terms of the de-risking and the confidence building on the resource and the M&I category. In the inferred category, I want to highlight the underground mineral resource, which as you know is a big part of our future development. We've increased that now almost three times to 900,000 ounces of gold.

That's a big increase and not only have we increased the amount of underground material, but we've increased it with a higher grade, about a one third higher to four grams per tonne, and these are big stopes with horizontal widths of three to 25 meters across the resource. The total inferred number is 44 million tonnes at 1.5 grams per tonne gold in the mill category for 2 million ounces. And there's another additional piece there in the inferred about 6 million tonnes of 0.5 grams, a hundred thousand ounces in the heap leach category. Again, 4.6 million ounces, 2.4 million in the measured and indicated, and 2.2 million in the inferred.

Gerardo Del Real: Let's talk about the exploration upside and let's talk about why that underground resource is important because of the optionality of a second phase mill operation. I want to get into that because I know that is, as you mentioned, going to play a big consideration in the future. I know the discussions that have been had with companies that are interested in a near term production story with exceptional exploration upside, if there's been a critique of the project initially it was that the heap leach resource was too small. You clearly, clearly have taken big steps to remedy that, and again, I want to talk about the exploration upside there. But also the other critique was that a lot of the underground material, there just wasn't enough of it to really make a case and justify pursuing that. You've grown that resource pretty significantly over the last couple of years, and again, I do want to speak to the exploration upside there because I think this is but a peek and we'll talk economics in a bit. I think this is but a peek of what's to come.

Hugh Agro: In the first instance, let's talk about the heap leach material. A million ounces in the M&I category, that's pretty impressive number right there, and especially when you consider the low capital hurdle for us to get into production and start producing free cash flow. If you think about it from a big picture point of view, you want to have limits on the amount of capital. You want to have a defined and achievable capital cost to get into production, and you want to have unlimited NAV growth potential, which is what I think we have in this project. We start with a low capital, but we got unlimited NAV growth potential with lots of ounces in resource to come into NAV down the road. That's a much better place to be than having a very large capital with no room to grow the NAV. We've got lots of room to grow the NAV and we've got an achievable first phase, if you will, heap leach CapEx of $109 million. That's a great place to be with the measured indicated heap leach resource.

With respect to the underground resource, it's open. It's open along strike to the north, it's open to the south, it's open at depth. There is nothing constraining this except the drilling. And we want to be careful about not spending too much money on drilling ahead of getting value for that underground asset. This is four grams per tonne gold, big stopes, twice the grade of what they're mining at GoldEx in Agnico's operation in Quebec, or the Young-Davidson mine in Ontario that Alamos operates. These are good grades, big stope situations and lots of potential to continue to grow, but we want to be careful about not drilling ahead of market recognition of that asset. Job one with this resource out now is to get out and tell the story about that underground and to be able to demonstrate it with an existing inferred resource of almost 900,000 ounces. That's a great place to be.

You did ask me about the exploration in the inferred material. That's what we're focused on... sorry, the heap leach material. That's what we're focused on right now. In fact, we started drilling again this week. We're up at the Roman’s Trench target. We're going to go back to the Haidee target and then onto a new exploration target on the project called Ridge. Very exciting for the geologists, all high grade open pit heap leach targets to continue to expand on that heap leach phase of the project.

Gerardo Del Real: What would you say to... and I got this from a few subscribers that wrote in and I saw it on a couple of boards, but what would you say to critics that kind of down talk the NPV at a 5% discount rate given where rates are right now? I for one, again, looked at that 109 million of pre-production capital. I thought, well, that that's exceptional because I know what the upside is exploration wise there. So to me, this is again, but a peek at what's to come. But for those that are just fixated on the PFS highlights and that portion of it, what would you respond to that?

Hugh Agro: Look, there's been a long history of discussion about what's the appropriate discount rate for gold projects. Is it 5%, is it 9%, is it 0%? All kinds of discussion on that, and we could debate that from here till the cows come home. The reality is this is a 24% IRR after tax, IRR project in the domestic United States with a $109 million CapEx. It is a very low risk project. I want to point out that most of the capital is associated with mechanized equipment, which is relatively low risk to finance because you can move that equipment. It's not like digging a hole in the ground doing pre-strip or putting a road in that you can't move. Financiers love that. In effect, our CFO, Lisa Ross and I have been in discussions with the various different advisory firms and debt providers around what is possible with a domestic US project with a low capital like this one and the kind of risk profile where we're working from an existing brownfield site with a team that's operated this mine before and there's a track record of performance on these grades and on these recoveries.

This is about as good as you can get in terms of a risk profile, and again, I emphasize that 24% after tax return on proven and probable reserves that excludes any inferred material or any exploration beyond that inferred material, which is a bonus still. Look, I think this is a financeable project and I think there's lots of opportunity for equity holders to make money on this kind of project.

Gerardo Del Real: I absolutely agree. I know it's the summertime. I know people are out and about, not in the office for the most part, not the case for Revival. You're drilling away. I know you have trips upcoming and discussions about that equipment and other potential deals that could be a credo for the company, but in the very near term, Hugh, you mentioned the drilling, what comes next?

Hugh Agro: Roman’s Trench. This is a project area we didn't get a chance to get you up to last time around, but we're really excited about this area. There's a couple of RC drill holes from the '90s that were drilled by a prior operator and not followed up. We're getting in there with core drilling. We're going to see what we can make of that. Then we'll be back to the Haidee deposit area. You may recall that last year, at the end of last year, we had a high grade intercept at Haidee. There's some shallow structures, and then they plunge deeper and we think there may be a feeder zone under Haidee, so we're going to chase that. Then up to the ridge zone, which as I mentioned earlier, is a new target area just west of Haidee. These are all open pit heap leach targets that are going to be complimentary. And this is exciting year for us because it's the first genuine exploration we've done beyond the main bear track deposit area, and so we're pretty excited about it.

Gerardo Del Real: Looking forward to all of that. I'm really looking forward to the second half of this year. I think we're going to have a great September, October, November, December going into 2024. Anything to add to that, Hugh?

Hugh Agro: Thank you. Just, thank you. And appreciation on the part of Revival Gold for the involvement of Resource Stock Digest and the interest of your subscribers.

Gerardo Del Real: No, look, everybody knows the business model around here. We try to vet quality stories, we try to provide ideas for people to further their due diligence. We're paid for that, obviously, right? Because there's bills to pay all the way around, but it's rare to have a project that's this de-risked, a brownfield project with exceptional, and I can't overemphasize how exceptional the infrastructure is, in the US, a pure gold project with a ton of exploration upside. I mean, the market cap and the peer comps just don't make a lot of sense to me right now. I know that there's whispers of a significant previous shareholder kind of blowing out some shares in an unruly way, and I understand from talking to several broker dealers that there's a few of those left. Do you care to comment on that at all?

Hugh Agro: Yeah. Look, I think we do have an overhang in the stock right now, and I think the savvy investors will watch that trading volume and look for an opportunity to ride the uptrend when we get over that overhang. And the story is intact, we are de-risking, we are adding value. The team's excited, we're funded. It's summer doldrums, but as you point out, we're working hard for our shareholders and I think we're going to continue to have good news ahead.

Gerardo Del Real: Now, absolutely agree, and I bring up the overhang because I do think that at current levels, anything around current levels, it's an exceptional opportunity for those of you out there that believe that the gold space is headed for a much, much better second half of the year as I do. Hugh, thank you as always for that thorough update.

Hugh Agro: You bet. Thank you, Gerardo.

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