Categories: Precious Metals
Topics: Gold Stocks

Sirios Resources (TSX-V: SOI)(OTC: SIREF) Director Laurence Farmer on Targeting 5 Million Gold Ounces at the Cheechoo Gold Project

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Director for Sirios Resources (TSX-V: SOI)(OTC: SIREF), Mr. Laurence Farmer. Laurence, been trying to get you on for a bit. It's great to have you on. How are you today?

Laurence Farmer: Great, Gerardo. How are you?

Gerardo Del Real: I am well. I am well. I'm excited to chat with you. Listen, you really helped quarterback the recent $25 million, the fully subscribed $25 million of financing here for Sirios that puts it in the driver's seat for what I think is going to be one of the more exciting resource expansion and exploration programs here in the second half of the year. So I want to talk about that.

But I want to start with the recent M&A in the space. When I look at Cheechoo and I look at three million gold ounces and the quality of those ounces, and then I look at the exploration target and how quickly there appears to be a path towards, in my view, at least five million ounces, and then I look at the recent comps for deposits and projects that have been bought that have a similar profile of four, five, six million gold ounces, quality ounces, and I look at the market cap at Sirios. I say, "One, there's a heck of an opportunity there." I'm a biased shareholder, let's start there. But there's a disconnect between where Sirios is valued now and some of its peers. Can you speak to that just a bit?

Laurence Farmer: Yeah, you're absolutely right. There is a disconnect. Even with the rerate following the combination, Sirios is trading right around that 20 bucks an ounce on NAV to resource basis. And when you look at that compared to the benchmark peer group average, you're up around 50 bucks an ounce. So there's at least just a rerate to the benchmark. And we can talk about why I think Sirios, and we all believe Sirios has the ability to be one of the clear winners in the space. But even when we're just talking about the benchmark, there's at least a 2x there just to get that rerate out of the way. Part of that is down to some warrants that are now in the money, that are clearing through the market. And once we get through that clearing, we should see some real tailwinds in the stock price, I believe.

Gerardo Del Real: Yeah. No, look, couldn't agree more. Can you speak to the enthusiasm of the people that came in on that $25 million financing? Because I remember you and I having conversations and me mentioning that if need be, we were happy to help raise some of that. And I think before we even had the conversation, the thing was fully subscribed, right?

Laurence Farmer: Yeah. Look, I think the quality of the asset in Cheechoo speaks for itself. And there is a lot of interest in institutions that are close to our group, being the Osisko group, coming a little bit more down market into earlier stage assets. And the uptake for the capital raise was incredible. We had really, the register was fully populated with long only strong leading institutions, so thought leaders in the industry from real blue chip funds, and that was the register. It was a really strong group of long only funds that came in.

We had far more demand for the deal than we expected and that we took at the end of the day. So that $25 million capital raise could have easily been double or even triple that, but we wanted to be very careful with the level of dilution. And we understood what capital we needed to meaningfully advance the asset without overdiluting it at these prices. So rather than fill the book with some names that may have been shakier, we made sure to populate that register with really strong, long-term fundamental institutional supporters. And those names will stay with the story through the development cycle.

So yeah, we couldn't be happier with the type of capital that came in. Prior to the capital raise, the register was really retail heavy, which is great. You need a strong retail component to drive a story at this stage of growth, but it was lacking institutional support and we did get that with this raise.

Gerardo Del Real: How important do you think that's going to be moving forward to get that institutional attention? Because it's not something that Cheechoo has benefited from in the past. And I have to believe that when you have as strong an exploration target as Sirios has for Cheechoo ... And I should mention, by the way, there are other really, really exciting exploration projects that are going to see some attention this year as well, but I want to save that conversation just for another time because I think Cheechoo has merit to deserve its own conversation today. But how important do you think those institutions are going to be as you prove out that exploration target and do the resource expansion, along with some of the exploration drilling that's going to happen?

Laurence Farmer: Yeah. Simply put, it provides a floor on the share price. These institutions provide capital in a way where they hold capital back to support the stock through its volatility. And again, speaking to the stock price, you see support at a very strong level right now. And even with the geopolitical instability and the volatility in the market as a whole, Sirios' stock price has held up really strong on considerable volume as well, and that's a function of the institutional support, really that capital supports its own capital.

And we'll continue to see that and these institutions are, again, long-term holders who understand the mining space and understand the pathway through the development cycle. And if we can, and which I believe we absolutely can, shepherd this asset along with efficient capital raises and strong management, these supporters will continue to stand their corner and fund into the story.

So if you're a retail investor looking for a stock with a bottom support, you have it in this one because the institutions are there. They're at a good price and they know it, and they will continue to support that price floor as we move through, before we start getting the good news in, which will be the drilling results, which will come in the following quarters. So absolutely a great entry point, in my mind, for someone looking to come in, especially in a volatile market here.

Gerardo Del Real: You have JF now leading the charge along with the rest of the team at Sirios. How much due diligence went into the Osisko group really lending its stamp and getting behind this? Because it's not something that that group done, by that group, I mean, you're a part of that group obviously, but it's not something that the Osisko group does lightly, right?

Laurence Farmer: Yeah, we come from, I mean, at least I come from the royalty world where you really have to take an objective view on assets before you make an investment decision. You try to take emotion out of it and your initial gut is right most of the time, but you have to back that up with real work. And we spent the better part of six months doing a technical deep dive into Cheechoo, understanding the fundamentals, the technical fundamentals. And when the new resource got put out, we were already on second base with our thinking and it obviously was further informed by the new resource and discussions with management.

But we did a lot of work. Technically, we brought in bench strength from across the group to help us understand what this asset is and what it could be. And what came out of that was, you want something that's consistent and easy to mine and easy to understand from a geological perspective, then this is it. This is low strip, near surface, consistent and homogeneous geology, next into structure with a very strong upside and district scale potential. So we had that validated through very detailed technical analysis.

And that's why we're standing behind it. And that's why you see Sean and I on the board. That's why you see JF coming in and jumping in with both feet. And that's why we combined it with two exceptional, albeit earlier stage assets that could stand easily in their own right as company makers, and that arguably aren't receiving really a read through value in the market today. But we were willing to take that on because of the quality of Cheechoo and the work that Dominique and his team has done over the years.

Gerardo Del Real: Second half of the year, the weeks here, away from the drill starting to turn, what comes next, Laurence?

Laurence Farmer: Drill results. Drill results, drill results. So that's the fun part. JF and the team, with Dominique, have done some really good targeting work and they're preparing to drill. So resource expansion, targeting those new zones in the metasediments and just growing what we already know to be a great resource. So there's a real renewed vigor and focus on expansion, expanding the resource, and that's what this year is going to be all about, is growing Cheechoo and showcasing it for the asset that it is.

And the raise is transformational. It's orders of magnitude more capital than the company has seen in the last five to 10 years. So the ounces that we'll get back and the time that it'll take to get those ounces back will be truly game changing, we hope and fully expect.

Gerardo Del Real: Couldn't be more excited for those results for the program to get underway. Looking forward to having JF and the team back on to speak on that once the drills get going. Laurence, thank you so much for your time today. I really, really appreciate it.

Laurence Farmer: Pleasure, Gerardo. Always a pleasure. Thanks to you.

Gerardo Del Real: Chat soon.

Laurence Farmer: Okay. Cheerio.

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