Copper Prices on the Rise…Now at 10-Year Highs!

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me is the CEO of Surge Copper — Mr. Leif Nilsson. Leif, how are you?

Leif Nilsson: I'm doing well, Gerardo! Thanks for having me on. How are you doing?

Gerardo Del Real: I'm doing well. Thank you for asking, and thank you for coming on. This is a new story to our audience but it isn't a new story to the market. The company has seen a refresh here over the last several quarters.

It's been impressive to see the focus with which the company has come in, and the new team has come in, and really turned things around. For those that aren't familiar with your background, could you give us a little bit of insight as to that because I think it's important?

Leif Nilsson: Yeah, sure. I've just come out of about a 15-year career in investment banking — focused in the mining sector; most recently, with a pretty well-known company in the mining sector called Macquarie Capital. That's part of the big Australian investment bank, Macquarie Group.

I spent the last eight years with that firm based out of Toronto. Before that, I was at a couple of different firms. I did a stint in London as well as here in Toronto. Beforehand, with a Canadian Bank. And I guess before all of that, I have a background in exploration geophysics. And so that was really my foray and entrance into the mining business was through that sort of technical side of things. I did some research and consulting work in that space before migrating over to the advisory and investment banking side of things.

So I guess I've, for a long time, had an interest in doing something like what we're doing at Surge now. And I've been waiting for robust market conditions in the base metals to come to the forward to look for the right opportunity. And we're in the early innings of that now. And it was certainly instrumental in me identifying the opportunity with Surge and wanting to jump on it when I did last year.

Gerardo Del Real: You're that rare executive that actually knows the capital markets and the technical side of things. You don't get that too often, and I don't think it's a coincidence that your market timing is excellent.

Leif Nilsson: I'd agree and I appreciate the comment. I think I wanted to do something more principle-oriented like this for a long time. I think the opportunity at Surge both in terms of the people involved and the assets that we have and we're progressing. And then the bigger schematic market backdrop, not only in terms of where copper prices are today and where we think they're going… but there's just so many macro tailwinds behind the metal markets in general, and copper in particular, that I think are really exciting.

And they have got a long runway in front of them. And it's encouraging to see lots of developments in the electrification of vehicles happening with pretty much every OEM manufacturer in that business. Of course, there's a lot of stimulus on the backend of the global pandemic that has lots of infrastructure pieces attached to it. And I think all of those things bode very well for copper in particular.

Gerardo Del Real: Tell me about the team that you've been able to bring together because I think that's going to be critical to advancing the asset base in the resource space that you've identified thus far.

There's a lot of upside there as well, and we'll talk about that in just a second. But can you give us a bit of a primer on the team that you’ve put together?

Leif Nilsson: Sure. I wouldn't quite use the term that “I’ve” put it together; we are in the process of adding people to the team. Probably start with my main management partner in the venture who’s a guy named Shane Ebert, PhD Geologist. He's quite important on the project side of things. He's got over 10 years of continuity on the Ootsa Project, which is our main asset. He's a pleasure to work with and a very talented geologist and a smart guy with regard to the assets that we have.

In terms of the management and board refresh that you alluded to that started in earnest last year, the names there that I'll bring to your attention are a few guys: Christian Kargl-Simard and Craig Parry are two gentlemen that joined the board. And then, a third individual named James Hynes joined in the capacity as an advisor to the board. All three of these guys are individuals that in their day jobs have worked with quite successful junior exploration and development companies.

All of us, I suppose, are on the younger end of the generational spectrum in terms of mining executives. So yeah, a pretty fresh-faced entrepreneurial team of individuals. All of us, in terms of those individuals I mentioned, have geoscience backgrounds. So in the case of Christian, he's a metallurgical engineer by training. Craig is a geologist. And James is a geological engineer by training. And as I mentioned, I've got a background in geophysics.

So really, between all of us, a pretty good mix of geoscience training and experience. And then lots of years and time put in our careers in terms of some of the capital market side of things and running successful juniors. So that would span capital raising, marketing, and M&A, etc. So really, really awesome, good team of people to be working with.

Gerardo Del Real: Let's talk about the assets. You have a very dominant land position in the Huckleberry District. A lot of copper; a lot of silver. Can we go over the resource base? A lot of gold; a lot of moly…

Leif Nilsson: Yeah, for sure. So, yeah, you mentioned we're in what we call the Huckleberry District, named in reference to a mine which we effectively surround on three sides. That mine is called the Huckleberry Mine, owned by a Canadian company called Imperial Metals. That mine was placed on care and maintenance back in 2016 due to depressed copper prices.



I can't speak for that company, of course, but I would contend that it's been very economic to look at restarting that for a number of years. But they have some other priorities and stuff going on in their business that has prevented them from doing so. But we think the district as a whole has quite a lot of potential to be uncovered. And that is really the core of our strategy.

So the assets that we have are, today, referred to as two separate projects. The first one is called Ootsa. It sits to the south of the Huckleberry Mine. On that Ootsa project are three copper porphyry deposits called East Seel, West Seel, and Ox.

And then, back in December, we did a transaction with a counterparty called Centerra Gold to form a 70% earn-in transaction and ultimate JV [70%-30% JV] with them on what we call the Berg Property. And Berg has a deposit on it called the Berg deposit.

Between all of those four porphyry deposits, we control about 834 million tonnes of copper resources in the M&I category; so those are the Measured & Indicated category. So quite advanced resources with a lot of historical investments through drilling put in over the years.

I'd also say, on the exploration side, that there is quite a lot of… these are big land packages; about 120,000 hectares between the two properties which are contiguous. And if you include Huckleberry in that district, it's a 30 km strike length belt with five known porphyry deposits; well over a billion tonnes that's been delineated over the years. And a fairly concerted lack of modern exploration that's been done on large swaths of that property. So pretty encouraged about the potential to make additional discoveries in the area.

Gerardo Del Real: Fantastic! Walk me through the share structure a bit.

Leif Nilsson: Sure. As of today, it's an all-equity cap structure; no debt in the business, which is, I guess, typical for junior companies. But as of today, we've got 133 million basic shares outstanding and additional options and warrants of about 58.4 million. So a total fully-diluted shares outstanding count of 191.6 [million], roughly.

The vast majority of those options and warrants are in-the-money. So the share price has performed very well over the last 12 months. So a lot of warrants that have been put in place in previous financings are quite well in-the-money.

In terms of the ownership breakdown of that cap structure, it's predominantly retail owned. So probably over 50% of the company today is owned by retail holders. The next category from that would be management and insiders. So among the board members and management team members, there's about 17% of the register that's owned by that group. And then, the third bucket after that would be what we call close associates. So that's family and friends and business partners of the insiders. That's about 15% of the register.

And then, by virtue of the transaction we did with Centerra on the Berg Property, they're on our register with about 5.3%. And the rest, I would say, are institutions and other sophisticated investors that are pretty supportive of what we're doing.

Gerardo Del Real: Excellent! And remind me of the cash position.

Leif Nilsson: So we ended the last quarter that we reported with C$6.2 million in the treasury. Our drilling program continued from that point until the end of March so we're probably a bit closer to C$4 million at this point.

Gerardo Del Real: Excellent. And so the next two quarters, obviously, there's drilling, there's results… but I understand you also want to update the resource estimate for both properties. Can you walk me through the next couple of quarters and what catalysts look like there?

Leif Nilsson: Yeah, absolutely. We always stop at this time of the year for spring breakup and snow-melts, which is also a good time to step back and let all of the results come in from the 20,000 meter program that we concluded at the end of March.

We do want to see the bulk of those results and spend some time with our engineering consultants looking at some of the context around those results before we put a pin in planning our follow-up programs in the summer. So we will have drill programs at both projects this summer.

We will have probably a more modest program at Ootsa over the summer months. And then, this will be our first season as operators of the Berg project. So it'll probably be in the latter half of the summer that we'll be able to get drill rigs up there and start focusing there. So the objective, I guess, between both of those… at Ootsa, it's really to finish our efforts of drilling out the West Seel deposit; so that will all be in service of a resource update to come toward the end of this year.

And then at Berg, we've talked about before that our focus there is on some of these higher grade zones that are quite near-surface at that deposit. And it's going to be some infill drilling and more focused drilling to better understand the characteristics of those zones. And then, really, between both properties, we do want to do some additional exploration target drilling.

I talked about the broad prospectivity of the ground. We're planning some geophysical surveys in the early part of the summer and expect to have some pretty promising targets come out of that. We want to apply a budget to some generative target drilling exercises as well.

Gerardo Del Real: Excellent! And just to be clear, Ootsa is 100%-owned. And Berg, you have the option to earn up to 70%, correct?

Leif Nilsson: Yeah, that's right. And there's just one layer down of nuance. We also recently announced some further consolidation in the Berg area. So probably what we would characterize as the next-most advanced exploration target in the Berg district or the Berg area, other than the Berg deposit itself, is a target called Bergette… and there were a couple of claims that were owned by third parties. We announced the transaction to consolidate our ownership of that.

So indeed, 70% earn-in on the larger Berg property, which refers or contains the Berg deposit. But there are some pretty important exploration targets on that ground that we effectively will own 100% of now. And then, as you say, Ootsa is 100%-owned by us as well.

Gerardo Del Real: How involved are you with the local First Nations communities? We know how important that social license is, right? How are things on that front?

Leif Nilsson: Good. In the context of the level of activity that this company has been in for a number of years, it’s been a few years since we've had an active drill program. So levels of employment have obviously ebbed and flowed with levels of activity.

But broadly speaking, the main First Nations groups that we have in our area are supportive of our activities. We have communication and engagement agreements in place with a few of them that have been refreshed and reiterated over the years. And quite regularly we have both local business opportunities for contractors as well as direct employment opportunities that we offer to a number of those groups.

Gerardo Del Real: Leif, given the market cap, given the resource space, the experience of the team — there is a lot of upside. I want to thank you for your time today. Is there anything else that you'd like to add?

Leif Nilsson: No, I think that's it. Other than to say, we think BC as a district for copper is really going to be on-the-rise for a number of different reasons; just the quality of the jurisdiction and some of the environmental aspects that are going to come more in focus among them and users in the copper market in general.

And we think that we have a very large opportunity that we have control over that we're very excited to add value to through the drill bit and are very excited about the future.

Gerardo Del Real: Excellent! Leif, thank you so much for your time. I appreciate it!

Leif Nilsson: Likewise!