Interview with Simon C. Dyakowski, President and CEO of GSP Resource Corp. (TSX-V:GSPR)

This is a classic example of an exploration play for investors. It reveals the extremely high level of risk, the many difficulties management teams face, and the possibility of big returns.

GSP Resources Corp. is a metals explorer, based in the "not top 10, but tier-1" mining jurisdiction of British Columbia, Canada. The company was focussing on its copper project, the iron, palladium and magnesium 'rich' Olivine Mountain Project, but it has since farmed it out, and optioned a past-producing copper mine, the Alwin Mine Project.

The Alwin Mine Project lies in the shadow of the vast Highland Valley Copper project, which produced 101,000t of copper in 2018. The focus moving forward is Alwin Mine. However, with capital at such a premium right now, and with GSP Resource Corp. only holding C$300,000, it remains to be seen how the company can finance Alwin without needing to raise capital soon. Pre-COVID-19, Dyakowski saw June/July as a potential start date for drilling at Alwin Mine, but market conditions have obviously rendered any copper exploration untenable for the time being.

After drilling at Olivine Mountain, GSP Resource Corp. clearly didn't get the results it wanted, or the results necessary to excite the market. Dyakowski explains what happened. It's not unusual in exploration, and a pivot in the business model is often the resolution to such difficulties. The company has farmed out Olivine Mountain to Full Metal Minerals in a 40:60 venture, should the company spend C$250,000 on the property, pay GSP C$250,000, and issue some shares. Does this modest option mean the problem is solved? Dyakowski is hoping the "well-financed" Full Metal Minerals can apply its expertise to bring potential to the surface, with a focus on palladium anomalies. Palladium is hot right now, so could this be helpful for GSP Resource Corp's financing efforts?

New focus, Alwin Mine is a copper project that is more advanced in that it has produced within the last century, with an underground mine constructed in the 1960s leading to 3-years of production. The project was shut down and then reopened in the early 1980s, then shut down, reopened and shut down again in the 1990s. Can modern technologies and favourable copper prices help buck this disappointing trend? The historical data should certainly help, but how will GSP Resource Corp. finance it? The C$300,000 isn't a lot, but Dyakowski thinks that it is sufficient relative to the size of GSP Resource Corp. The cost of core drilling is around C$175 p/m, which would likely necessitate a small equity raise. The share structure is reasonable, will only 12M outstanding, so a raise could be feasible, even if the timing is far from ideal. Dyakwoski calls Alwin Mine low-risk and low-cost, but we heard this about Olivine Mountain. He insists that scout drilling was always going to carry more risk, but was this 100% clear to investors at the time? In hindsight, Dyakowski maintains he made the right decision to go for the bullseye with Olivine rather than farming it out straight away.

What is the long term vision for creating value with Alwin Mine? Dyakowski hopes the Summer phase 1 drill program will deliver favorable results and solidify the copper potential of the resource. After this point, it comes down to the team managing finances effectively, favourable copper prices, and how well GSP Resource Corp. can position itself for a takeout. Is GSP Resource Corp. a buzzing fly in the face of surrounding majors, or can Alwin Mine provide copper investors will more growth than they might realise? As is always the case with exploration, only time will tell.

What did you make of Simon C. Dyakowski? 

Company page: https://gspresource.com/

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Interview with Steve Parson, MD, Bellevue Gold (ASX:BGL)

A really great story in a gold space that is only gaining more momentum.

Bellevue Gold is an Australian gold explorer progressing towards a development phase. Bellevue Gold's primary focus is on advancing the 'historic' Bellevue Gold Mine in Western Australia, which the company 'discovered' just 2 years ago. The company states the mine was one of Australia’s highest-grade gold mines from 1986 to 1997, producing 800,000oz @ 15g/t gold. If there is still similar potential at the site, gold investors are going to be weak at the knees right now.

So, what does the resource look like. Well, Bellevue Gold has a compliant independent JORC inferred resource inventory of 2.2Moz at 11.3 g/t gold with significant exploration potential. Mining licenses have been granted. This appears to be one of the highest grade undeveloped gold discoveries in the world. We were interested to hear about Parson's plan: continue to step out the resource, look at further acquisitions, or a different strategy? Bellevue Gold is currently expanding its 2.2Moz inventory via further exploration and step-out drilling, as the Bellevue Gold Mine continues its journey.

Investors will likely wonder why such a potentially exciting gold project was left unexplored for so long. A smart trait of successful companies that we have noticed during many of our interviews is the ability to locate value where most other companies overlook. This appears central to adding significant value for shareholders. The Bellevue Gold Mine was closed and forgotten for over 20 years, and Parson wants to bring modern exploration and development techniques to a project that has not previously benefited from them.

We were keen to explore Bellevue Gold's recent raise. The company secured US$26.5M from BlackRock Group through a share placement. BlackRock now holds 68.99M shares or 10.17%. The big institutions have clearly been attracted by the exceptional gold grade. This has allowed Bellevue Gold's shareholder register to grow from "pure retail" to c. 60% institutional investors. This is perhaps a sign of the rapid progress of Bellevue Gold. Big players are standing up and taking notice. While the share price has been stagnant for much of the last 2 years (no fresh news?), any investors will be impressed by Bellevue Gold's rise from a share price of just A$0.03 to A$0.55 today. That's some margin by anyone's standards.

What is the plan going forward? The US$26.5M raise means that Bellevue Gold now has over A$30M cash, which should see Bellevue through for the next 18 months. These 18 months seem all about adding certainty to the Bellevue Gold formula. Parson wants to conduct infill drilling and increase confidence levels in the resource. He also wants to bring tried and tested gold mine builders on board. How will the money be split between resource expansion and preparing the resource for production? Parson didn't give a clear figure but appears confident in his management team's ability to split costs effectively.

A fact that will reassure investors is the management team's commitment to growing their holding of shares. Parson himself invested a "fair bit" just a few days ago, and the rest of the board is keen to act on their excitement for this uncommon ore body. Parson remains acutely aware of the importance of retail shareholders and sees them as integral to Bellevue Gold's success.

Moving on to perhaps the most relevant issue: COVID-19, how is it impacting operations? Parson states there has been a minimal impact on operations, and this is the line we're hearing from all Australian mining companies. Lower population density = fewer problems in relation to the containment of COVID-19, and Australia has the lowest population density of any major country in the world.

What did you make of Steve Parson? Is Bellevue Gold a gold miner you'll consider investing in? How will the next 2 years treat Bellevue Gold?

Company page: https://www.bellevuegold.com.au

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Matt talks to Mark Selby, former head of market research at Inco, about parallels between SARS in 2002/2003, the financial crisis in 2008 and today. How can we identify the bottom of the market in order to maximise returns? 

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Interview with Michael Hodgson, CEO of Serabi Gold (LSE:SRB, TSX:SBI)

Hodgson gives us his take on the 2019 figures, the highlight being the cash position of USD$14.23M at the end of the year. Other notable numbers are Net cash USD$5M; the AISC at USD$1,081 up from 2018; EBITDA $17.2M; average gold price received of USD$1,376; total ore mined increased by 8% at average grade of 7%. The company continues to producer free cash flow and the Brazil Real exchange rate is also helping.

We also discuss the Q1/20 Operational Announcement. Feb production was impacted by an unexpected failure of a ball-mill, which was down for 2-weeks. However the new ore-sorter, allebit in a test period, is delivering astonishing results. Hodgson gives us an indication of the sorts of numbers it is delivering and can expect to continue delivering. The quarter ended up only slightly down on production forecast as a result.

Coringa is still progressing. Progress is slow as Greenstone wanted to evaluate the market to ensure that right amount of capital is available for the company. They have agreed a payment plan with Equinox and Greenstone involving a payment plan. All parties are agreed as money is being paid in a manageable way and les Serabi pay down the Sprott debt in full by the end of June. It also means that Serabi has cash on hand at all points. And what it means is that Coringa will, when mining resumes to normal levels, be able to double the production numbers as expected.

Currently it is business as usual for the moment. March figures where above forecast (best aver month on record), and expectation is that April will be similar. COVID-19 precautionary measures have been taken but the company is looking at the situation on a daily basis.

Apologies for not grilling Hodgson, but the line was quite poor, so conversation was difficult to have. They seem on top of things for now and we look forward to resuming normal conversations eventually.  

Company page: https://www.serabigold.com/

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Interview with Chris Reed, CEO of Neometals (ASX:NMT), and Accompanied by Darren Townsend, Chief Development Officer, and David Robinson, General Manager.

Neometals' management team's track record of success extends to the Mt. Marion Lithium Project, where they timed their exit to a tee, selling their 13.8% stake for AU$103.8m. We've interviewed them several times. Each time, they've described a project that fits neatly into a green, profitable narrative. It's a cookie-cutter approach of finding value that's gone under the radar, acquiring it for a steal, and developing it efficiently. We're amazed the market hasn't clocked the potential of Neometals yet, with their market cap valued at less than the cash they currently hold, irrespective of their project portfolio.

We've previously questioned Neometals' marketing strategy; however, today we're questioning its latest in a long line of green projects. As of last week, Neometals has entered an agreement with unlisted (but public) Scandinavian mineral development company, Critical Metals, to consider developing a recycling facility to recover and process high- grade vanadium products from vanadium-bearing steel by-product in Scandinavia. The green component has already been ticked off! The by-product is slag, not tailings, though we'll get into that in a moment.

So, what exactly does the agreement entail? Reed states that what Neometals believes it has acquired is a "call option to acquire what is the world's largest stockpile of high-grade vanadium slags." The 27-month consideration period will allow Neometals to conduct its extensive dude diligence on the potential vanadium plant, which will result in a feasibility study to be completed by 31st December 2022. At this point, a final investment decision will be made. If Neometals agrees to go ahead, the company will enter into a 50/50 arrangement, with the certainty of a supply agreement from SSAP, the largest fuel maker in Scandinavia. Total CAPEX prior to FID will be A$5ML: a figure Neometals can easily afford, and one that fits into the project generator narrative the company has been pushing.

Slag vs tailings? Tailings is the waste rock at a mine after the raw ore has been processed to remove the metal, whereas slag is a glass-like by-product left over after a desired metal has been smelted from its raw ore. The process of dealing with the slag is not only immensely economic but is also a remediation process, as the glass itself will change colour and no longer be a sea-adjacent eyesore.

What is the upside in terms of revenue? The steel slag with vanadium content has a standard benchmark vanadium grade of 3.9% V2O5, 2-3X higher than any producer can make in a concentrate before a similar level of processing. There is no mining cost, no crushing plant, no grinding plant, no magnetic gravity separation plant, and no kilns for the traditional salt-roast-leach process. 50% of the CAPEX had been wiped out straight away. Moreover, while vanadium is a volatile commodity that hasn't had its best few years, the macro story, including fundamental demand for stainless steel, and the potential growth of VRFBs, still places vanadium as a promising commodity.

Once the process is completed, what happens to the inner pile of largely calcium/iron-bearing residues? Reed states Neometals will take ownership and either safely dispose of it, or reinsert it back into the front end of the steelmaking process. The green thematic is consistent throughout Neometals' operations.

Reed actually sees COVID-19 as the element that forced Neometals and Critical Metals to get the deal over the line when it did but also says it will have little impact on operations, especially considering mining is considered an essential service, and the population density of Australia is low.  

Company page: https://www.neometals.com.au/

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Interview with Martin Turenne, President & CEO of FPX Nickel Corp. (TSX-V:FPX)

Gold is the hottest commodity at the moment, but for investors with a little more foresight and patience, the EV revolution is something that is hard to ignore. What battery metal will be central to the future of whirring cars and reduced carbon emissions? Nickel.

FPX Nickel Corp is a junior nickel miner based in Vancouver. The company's exclusive focus is on developing the large-scale Decar Nickel District in central British Columbia. The district hosts the Baptiste deposit, which is currently at a PEA stage. FPX Nickel claims it has the potential to become 'one of the largest nickel mines in Canada.' Strong stuff.

What are the key things to know about the Decar Nickel Project? Turenne refers to it as a 'tier 1 asset,' a phrase we're becoming accustomed to at Crux Investor, but what does that actually mean? Turenne points to "3 main criteria:" scale, jurisdiction, cost.

In terms of scale, Turenne claims the Decar Nickel Project has the potential to be one of 10 largest nickel mines in the world by annual output, with a 35-year life of mine.

Moving over to jurisdiction, British Colombia is undoubtedly a strong mining jurisdiction with a good mining code and superb infrastructure.

Lastly, and perhaps most importantly, Turenne the Decar Nickel Project has economics to make even the most seasoned nickel miner blush. He claims the project can deliver nickel within the lowest quartile of the cost curve. This all looks good on paper. Time to dig into FPX Nickel a bit. What is the background of the management team?

Turenne is a chartered account by background and has been with FPX since 2012 (CEO since 2016). He claims to have seen 'good time and bad times in the nickel market,'. Is there any greater technical nickel experience within the team? Turenne claims the company is "steeped in research" from major providers and independent nickel traders.

FPX Nickel is hoping to capitalise on the long-term structural deficit the nickel market has been running since 2016. This deficit is driven by stainless steel growth and limited supply growth, and the EV revolution could multiply this deficit many times over.

Looking at the Decar nickel ore body itself, it is low-grade, but Turenne was keen to point towards the virtues of his asset. The nickel project isn't conventional. The orebody is comprised of nickel AWARUITE. This is a far cry from the sulphide/laterite projects we are used to hearing about. Nickel awaruite is an alloy of nickel and iron; FPX Nickel is dealing with a ferronickel-styled deposit, where the nickel can be recovered using simple, cheap metallurgy. The grade is substantially lower, but the metallurgical ease of production makes the Decar Nickel Project competitive. The strip ratio is .17:1, and there is very little mining waste. Recoveries stand at 90-95%, as opposed to a common sulfide despite with a higher grade, but a recovery range of just 40-50%.

After touching on FPX Nickel's work with ALS and Sherritt International on metallurgy, we wanted to hear about FPX Nickel's cash position. The company has just over C$2M. The plant expenditure for the remainder of 2020 stands at C$1M. FPX Nickel has some time to wait for a recovery in the market while carrying out desk work. The big focus is updating the PEA (completed in 2013). The study suggests Decar needs a nickel price of US$9-10 to be feasible. Turenne thinks it should be much lower.

Management holds a modest but meaningful 18.9% of FPX. The management team has been principal funders in private placements over the last few years. There are 5 HNWI/family office groups that hold an additional 30% of FPX with "no warrants outstanding."  

Company page: https://fpxnickel.com

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Interview with Larry Reaugh, President & CEO of American Manganese (TSX-V:AMY)

American Manganese Inc. is a critical metals company focussed on extracting cathode materials from lithium-ion batteries via recycling using its RecycLiCo™ Patented Process.

American Manganese segued away from low-grade manganese recovery to battery recycling in 2016. Reaugh claims American Manganese has proven it can get through pilot plant testing. As far as American Manganese's current situation, it has patented technology and is now looking to finance a commercial plant facility. We query him about his plans and process. What did you make of his explanation?

American Manganese has a little over C$500,000; an imminent raise is required? Reaugh says American Manganese has already completely its pilot testing, it's not just lab testing. American Manganese has received material from two "tier-1" companies for testing, and Reaugh is now having conversations about offtake agreements. The existing test facility runs at 2KG/hour, though Reaugh thinks this can feasibly be ramped up to 20KG/hour. Several hundred pounds has been through the process in order for American Manganese to with its hydrometallurgical-produced powder (available to look at on its website). The powder is a cathode material that goes back into the battery. Reaugh also claims the company is working with the DoE in the U.S, and is part of their recycling programme. They are working together on the shredding of material of its cathodes, reducing the battery down to its foils so it can be processed. Would funders be happy with results from a pilot plant this small? Reaugh also comments that American Manganese doesn't yet know where its supply will come from or the economics around the build of the commercial plan as engineer is required (costing $1M).

Reaugh claims the economics are "great," and the process provides a close-loop circuit to battery suppliers' issues. The big risk that Reaugh is clear about is in the negotiation of the deal itself. Does the management team at American Manganese have the know-how, and the funding, to play hardball in the interests of its shareholders? The success of American Manganese will be almost entirely dictated by the quality of its agreements. The business plan (and numbers) has been put together by American Manganese's CTO (Chief Technical Officer).

Reaugh states it's the "only plan you'll find out there." However, Reaugh's claim that American Manganese is the only company that can offer investors exposure to this sector is confusing. Is Reaugh unaware of the competition, or does he see American Manganese as on a different level because of its patents (which must be proved to be economic)? Reaugh claims he doesn't know what the competition is doing because the competition isn't transparent.

However, Reaugh claims Neometals didn't discuss recoveries or purities in its pilot plant result, but he claims American Manganese can present the evidence in front of investors, "what more can a man ask for?" He also claims half of the tier-1 battery manufacturers are testing material with American Manganese.

Reaugh claims American Manganese will look to raise C$15-20M for the build of the commercial plant. Maybe Will investors be willing to front this amount to a company worth C$22.6M with results from a small pilot plant and no supply contract?

Company page: https://americanmanganeseinc.com/

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Interview with Paul Cronin, CEO of Adriatic Metals (ASX:ADT)

Adriatic Metals is a UK-based exploration and development company, listed on the ASX. Adriatic Metals is the owner of the Vareš Mining Concession in Bosnia and Herzegovina.

Adriatic Metals is a brand new company, incorporated specifically to acquire the Bosnia & Herzegovina assets. The project comprises a historical open-cut mine at Veovaca in addition to Rupice, an advanced proximal deposit that exhibits very high grades of base/precious metals. Promising historical data at the polymetallic project has recently been proved, courtesy of a drilling program. Since then, exploration and resource expansion has been the order of the day. A Maiden Resource has been released, in addition to a PFS and the first phase of metallurgical work. The confirmed deposit is now strong and economic; however, the challenge for Cronin is to grow it into a Tier 1 deposit and add value for investors. The story is developing quickly, but now Cronin needs to add a sprinkle of excitement to this recipe of competence.

The grades of the project are extremely high, but does the mining jurisdiction have anything to do with the recent decline in share price, or is it purely caused by the financial reset and COVID-19? Cronin is aware that base/precious metals mines hadn't really been operated in 25 years in Bosnia and Herzegovina, but the region itself is pro-mining with a strong infrastructure and good mining minds.

Cronin has raised A$50M in total (A$45M from public financings). How has that been spent? Drilling, studies/surveys, metallurgical testwork, training and acquiring new concessions is Cronin's answer. Adriatic Metals is fully funded through to completion of a BFS.

Adriatic Metals is not fully permitted yet. Cronin claims that Adriatic Metals is working towards its "exploitation permit," and the "environmental permit" component takes the longest. However, it is still some way off, and requires some preliminary permits before moving forward, and this isn't being helped by COVID-19. What does the timescale look like? Cronin predicts that once the company is able to have a public hearing in May, Adriatic Metals can obtain ts first permit at Veovaca. Then the focus will shift onto the permit at Rupice. Cronin hopes to possess both exploitation permits by October. After that, Adriatic Metals will need to submit its feasibility work to apply for its main mining code. All in all, the timescale looks entirely reasonable, but COVID-19 could be disruptive; it could also impact the situation with additional concessions. COVID-19 is affecting the company in terms of permitting, but it isn't affecting Adriatic's general operations.

Looking at the share registry, 25% is retail, 40% is institutional, and most of the remaining 35% is held by management: a very meaningful figure. How exactly is the management team remunerated? Cronin claims he was paid purely options during the company's 2-year pre-IPO phase, but he is now paid a salary that is "reflective of a junior mining company." Cronin claims he is "thoroughly aligned," and his big payday will be from equity. Cronin then moves into the intricacies of polymetallic ore bodies.

What did you make of Paul Cronin? Are you impressed by how quickly Adriatic Metals is getting things done? What do you make of Bosnia & Herzegovina as a mining jurisdiction?

Company page: https://www.adriaticmetals.com/

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Interview with Scott Williamson, Managing Director of Blackstone Minerals (ASX:BSX)

Blackstone Minerals: a nickel-cobalt-gold (battery/precious metals) company looking to get into production within the next 3 years. Ambitious.

Blackstone Minerals is an ASX-listed junior, exploring the Ta Khoa Nickel Project in Vietnam, the BC Cobalt Project and gold and nickel projects in Western Australia. The primary focus is on Ta Khoa, which previously operated between 2013 and 2016. Williamson claims the previous owners sunk over A$130M into the project; this creates an obvious disparity with Blackstone Minerals' market cap, A$27M, which had been steadily falling away but has made a comeback in the last few weeks. The share price stands at A$0.14 today. Blackstone Minerals is looking to bring the project back into production and take advantage of the inbound EV revolution, by feeding the nickel concentrate into the nickel sulfate for the Li-ion battery industry.

What's the big news recently? A deal between EcoPro, the largest cathode manufacturer in Korea, and second-largest globally, and Blackstone Mineral was announced. The binding share purchase agreement outlines a commitment for A$6.8 million at a 62% premium to Blackstone Minerals’ 30 day VWAP. EcoPro will end up with 17% of Blackstone Minerals shares. Looks like a smart piece of negotiation.

Williamson thinks the market will take a while to process the significance of this transaction and is perhaps a little unaware of how large a player EcoPro is. Williamson sees EcoPro as the "perfect partner," and will reveal its value over time.

Blackstone Minerals is on track for its maiden resource in June/July. This will be followed by a PEA in August/September. Williamson sees this as a catalyst moment where the market will realise just how much nickel has been left behind, and how economic the first ore body will be. The money will also be used to explore other ore bodies, but the main focus is to move all the studies through to a bankable Feasibility Study. Blackstone Minerals is fully funded to this point. The cost structure at the Ta Khoa Nickel Project is impressive; to put this into context, drilling costs A$60 per metre, as opposed to A$300 in Australia and A$500 in Canada. The nickel ore body itself is twice the grade that Blackstone Minerals was expecting at 1% nickel. Williamson describes this nickel as a "significant tonnage..." that will "deliver a 20-year mine."

Williamson is currently conducting metallurgical test work in order to assess the potential monetisation of the byproducts (platinum, palladium, gold, rhodium, copper, cobalt) at Ta Khoa, but he is confident all the metals will be economic and add an extra 20% revenue on top of the nickel.

What is the CAPEX looking like at Ta Khoa? c. US$100M for a downstream processing facility, plus additional capital to upgrade the concentrator. Williamson is confident Blackstone Minerals will "land below" A$200M total. Williamson claims this is very competitive. He also insists that EcoPro will not accept anything less than achieving production within 3 years. Will this additional pressure help or hinder Blackstone Minerals?

What did you make of Scott Williamson? Is Blackstone Minerals in for 2020? When is nickel going to experience the kind of growth that EV/battery metal investors are craving?

Company page: http://blackstoneminerals.com.au/

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