Has Aton Resources Just Discovered the Legendary Mountain of Gold? (Mark Campbell Interview)

Mark Campbell is the CEO of Aton Resources, a gold exploration company exploring their large 738 square kilometer Abu Marawat concession in Egypt’s Arabian-Nubian Shield.  Located on the Abu Marawat concession is the Rodruin project which Aton believes could be one of the largest gold discoveries in Egypt to date.  There was a story/legend about an area that was known to be the “mountain of gold” and Mark Campbell suspects this could be Aton’s Rodruin project.  Rodruin is a very large hill and Aton had to build a road 4.5km long up to it just to begin drilling.  Channel samples thus far have been impressive with the most recent yielding 39m @ 3.62 g/t Au and 5.44% Zn, and it was mineralized along its whole length.  Furthermore, Aton has also discovered on Rodruin the remains of extensive ancient underground workings indicating mining has taken place there before.  Reverse circulation drilling begins at Rodruin on August 27, 2018 with the results expected this Fall.  It is worth noting that Sandstorm Gold Royalties thought so much of the prospects of the Abu Marawat concession that they purchased a 1.0% NSR recently.

0:05 Introduction of topic and guest

1:25 History of mining in Egypt

3:56 Overview of Aton’s 738 square kilometer Abu Marawat concession and projects

12:19 Egypt as a mining jurisdiction

21:10 Community support for Aton’s projects

22:11 Aton’s management & directors’ past successes

27:39 Sandstorm Gold Royalties’ investment in Aton Resources

28:49 Aton’s burn-rate & treasury

29:58 Why investors should consider investing in Egyptian mining companies & Aton Resources

BEGIN TRANSCRIPT

Bill: You are listening to Mining Stock Education, I’m Bill Powers, your host, thanks for tuning in ladies and gentlemen. Today’s episode will be a CEO spotlight interview profiling a junior miner striving for Africa’s next major gold discovery. This company possesses some first mover advantages in the under-followed jurisdiction of Egypt. I’m speaking of Aton Resources. Aton trades on the TSX-V under the ticker symbol AAN, and on the OTC markets in the States, under the ticker symbol ANLBF. I’m speaking today with Mark Campbell, who’s the CEO of Aton Resources. Mark, thanks for joining me today and welcome to the program.

Mark: Well, thank you for having me, Bill.

Bill: Let’s begin by talking about this under-followed jurisdiction of Egypt. If you could briefly describe the history of gold mining in the Arabian-Nubian Shield in Egypt as well as the current day gold mining activities that are occurring in Egypt.

Mark: Egypt at the moment is pretty under-explored. We have one operating gold mine and that’s Centamin, Sukari Mine down at Marsa Alam, which, of course, is a world-class mine. But, outside of that, there are really only two exploration companies working here, ourselves and we’ve been here for 11 years, and another company called Thani Stratex. The history of mining in Egypt goes back a millennium. You know, we have a concession area of 732 square kilometers. Within that, we have evidence of mining going back to the Old Kingdom of the Pharaonic Period through the Romans, right up through the early Arabs. And then jump forward to when the British were here, which predominantly ended right around the beginning of the First World War. But we have three old British mines still in existence, underground mines, two were gold, one was high-grade Tungsten. And so, there has been activity here. You know, you can see the results of Egyptian mining going back to the ancient times even if you just look at King Tut’s household effects.

Most of all that gold, copper, zinc all came from Egypt, and Egypt has a history of mining all of those materials, as well as gemstones in the past. So it has a very rich history but it really stopped when the 52 revolution came and oil took off in the late 50’s, early 60’s, and mining really became moribund. And it wasn’t to really kick start again until Centamin came in the early 1990’s and went on to discover Sukari and build that mine. We came here in 2006, we have a concession called Abu Marawat, and Abu Marawat, on that, we have at the moment, about 19 identified targets. But the biggest exploration target that we have and that we’ll start drilling on Monday August 27^th is Rodruin, a discovery we made back in December of last year. We also have a development project, which is a project we’ve been working on for several years, which is Hamama and we’re starting off on the Western end which is a supergene-enriched oxide cap. And we’re looking at developing a heap leach there, an operation that we would like to see come into production by the end of 2019, beginning of 2020. But Rodruin, at the moment, we think, could be one of the bigger discoveries made in Egypt to date.

And given an idea of history of mine, it’s an interesting story.  It’s a very large hill, we had to build a road four-and-a-half kilometers up it just to get to where we’re going to start drilling, and it’s got two ridges separated by a valley between them. And really, the story goes, that for many years, there were a husband and wife team called Klemm and Klemm, who wrote a book about the history of gold mining in Egypt and it’s really the definitive work on this subject. And in there, they discuss an area called Eradiya and Eradiya is a large Wadi where there were the remains of ancient processing works and they looked around, they couldn’t find anything else. But there would always been this legend that there was a mountain of gold somewhere but nobody could find it. We sampled around Eradiya, there were tailings there that had fairly high grades in them, but in the rest of the Wadi and the area around it, we couldn’t find really much of anything, it was pretty barren, so we weren’t sure why they were out there.

We did some satellite imagery and on that satellite imagery, we’d found in various areas, carbonates that when we went and sampled them,

in some cases, they had a small amount of mineralization but most were barren and so was the case at Rodruin. But then, looking at Google Earth, we saw the remnants of old paths going up the side of this thing, it’s very steep, getting up to some place is 70% gradient. And the geologists went up there and looked, and sure enough, when they got to the top, there were the remnants of extensive ancient workings. Underground, we found old clay lamps with wicks still in them, ancient ropes. And we’re pretty sure nobody’s been up there for 1600 years and that’s really…that’s that mountain of gold. And that’s what we’ve done extensive channel sampling on, now we’re gonna drill it starting on Monday.

Bill: With ancient mining methods, how deep could they go back in that time period?

Mark: Well, I mean, they got down in one area which we will drill to begin with, which we call “Aladdin’s lot,” that goes down 40 meters. And just in the area that we’re gonna be drilling, we’re gonna drill about 4,000 to 6,000 meters up there. It’s about 700 by 400 aerial extent and then down to 40 meters. Now, we found another area which could go down deeper but it’s filled in with rubble, where the tunnels have all collapsed over the years. So it’s hard to tell how deep that may be, at the moment, it goes down to about 15 meters. But, you know, it could be deeper, as I said, because a lot of it has collapsed in on itself.

Bill: And the Rodruin drilling program, I believe that’s reverse circulation, so are you looking at an open-pitiable project right now, conceptually?

Mark: Yeah, conceptually, that would be a large bulk open pit operation. Yeah, we’ve contracted an RC drill and we don’t have a lot of water and RC, it’s faster, it’s cheaper. But this is a multi-purpose rig, so at some point, we will come back for structure

and drill diamond and the same rig can do that. With that, we don’t have to bring in a separate rig.

 

 

Bill: Let’s talk about the scale of your land package so listeners can get an idea of that. And then could you also talk about your NI 43-101 compliant resource that you already have in this land package?

Mark: Well, we have actually two 43-101’s, we have one at Abu Marawat, which is quite small and then one at Hamama, which is roughly about 400,000 ounces of gold equivalent and that’s the oxide cap. Although Hamama runs…their strike length is about six kilometers, it is mostly sulfide. So we couldn’t heap leach those, we’d have to go and take a second step of building a CIL plant. But the area is quite large, even having cut it down from its initial size, we’re still at 732 square kilometers. Over the last two years, we’ve done extensive regional exploration work, as well as working at Hamama, and in that, we have identified, as I say, up to 19 legitimate exploration targets, some of which are drill-ready. But in December, as I mentioned, we found Rodruin and the scale that we see at Rodruin and its potential to be is such that that really has become our major focus. One of the things that makes it interesting is that it is strange geology, we’ve never seen anything like this, and from what we can see, we can’t find any record of anything like it in Egypt.

So it’s really very interesting, it’s all the mineralization is in sentiments, and basically mineralized slates, which are associated with the carbonates there. And so, it’s an interesting animal. We’ve also identified…we have various styles of geology, we have a, sort of, VMS epithermal style geology, which you find at Hamama. But we also have replacement intrusive type geology that you find at some of the other areas, plus, some, you know, orogenic structurally controlled type geology that you find at say places like Abu Gaharish. So, it’s quite an interesting area. One of the things about Egypt that makes it so interesting is that it really is underexplored and so a lot of what we do is working out the geology and the environment that we work in, as well as working to find, you know, an economically viable deposit. So it makes it very interesting, especially, if you’re an explorationist, it’s, sort of, an exploration Disney world out there.

Bill: As a mining speculator who looks at Aton Resources, will the Rodruin drill program be the main catalyst for the share price that we would see upcoming and when can we expect those drill results?

Mark: Yeah. I think that Rodruin is the one to watch without a doubt and I say we’re gonna start, so you’re gonna be looking for the first drill results coming out probably around the backend of September.

Bill: Let’s get back over to discussing Egypt as a mining jurisdiction because it’s so underfollowed. Can you talk about Egypt as a mining jurisdiction as it specifically relates to the potential viability of bringing whatever deposit you may find into actual production?

Mark: One of the issues that people always talk about with Egypt is the mining regime. Egypt, as I say, had really lost its way, in terms of mining, and oil and gas became the main focus. And in the early 80’s, having gone to a production sharing agreement in the oil and gas business, they decided, “Well, if it works for oil and gas, it’ll work for mining.” And that’s…yes and no, is the answer to that. Production sharing agreement was set up back in the 70’s and it really was so that a lot of countries felt that they weren’t getting their true benefit out of their own natural resources in oil and gas. And so, they went ahead and they…basically, the premises of it is that you come in, you take an expiration concession license, you have an agreement with the government, whereby if you make a commercial discovery, you form a 50/50 joint venture company with the government, so the government owns 50% of it. You then are allowed to recover all the costs that…recover your costs on exploration and development, and once you’ve done that, then that’s when you start sharing the profits.

The government, and this is through the state oil company, then sells the oil and gas on behalf of the joint venture company. And this has been a model that works from Algeria to Indonesia and, you know, it works very well in the oil and gas industry, not so much… And really, this is from the government’s point of view, or it should be from the government’s point of view, is from the government. Because, you know, in oil and gas, all your costs are up front, you have very low operating costs, whereas in mining, you have very low exploration cost and very high backend development costs. So it can take the government a long time to actually end up sharing anything with you. In our case, that’s the situation and it has…and plus we have a 3% Net Smelter Royalty that we pay as well. The difference really, between, you know, tax and the royalty and how it affects us economically with the cost recovery mechanism is not that big, it’s, sort of, 22.5 % versus roughly 24% for the PSA.

But it’s the… What a lot of people dislike is this 50/50 joint venture because you already have a 50% partner, it’s also laborious, and in the case of mining, the government doesn’t sell the gold, you have the right to sell your own gold. So in the case of Centamin, Sukari sells their doré to a refinery in Canada. But, the good news is that the government has realized that mining has really lagged in the development here, that there are very few players. And so, roughly six months ago, earlier this spring, they employed Wood Mackenzie, who are a large consulting firm who specifically work in natural resources, and who had done the same thing. They had redefined the mining regime, revamped the mining law in Ecuador, and I think you can see over the last several years, the explosive growth that has occurred in Ecuador and they are working now with the government, the government seems very willing to accept these changes.

And we think that this will happen in a relatively short period of time, you know, the implementation may take some time. But what is good from our perspective, is that under the amendments to the 2015 mining law, we are able to move ourselves under that new regime, if we see that it’s economically attractive to us. So we think the two big catalysts for the share price are Rodruin and also mining reform which we think is coming and I feel pretty confident. Resolute Mining, out of Australia, had picked up two concession agreements last year here in Egypt, and as you know, recently, took a stake in Orca. So they’re very keen on the Arabian-Nubian Shield and they’re holding on to those, looking forward as well to a change into the mining regime here.

Bill: What about road access, labor force, water, electricity, things like that for your projects?

Mark: Orca’s got some great ground, and, you know, I’m very keen on what they’re doing. But the huge difference between us and Orca, and really anyone working in Egypt, is infrastructure. The government, over the years, has spent a lot in infrastructure, we have high power lines running through our concessionary, we have a brand new four-lane highway. Our camp is 32 kilometers into the desert, so we have…32 kilometers away, we have that. Water is an issue, in the sense that you either have to pump it from the Nile or the Red Sea or you will you have to find aquifers that can supply you. Now, we have a cement company near us that has a bore field that supplies it with water so the water is, although an issue, it’s not a major one and even to pump it from the Nile is not overly expensive. And we’ve got two major airports nearby, we have a good supply of low-cost labor in the area and are finding cost of Hamama below $10 an ounce.

So, you know, as far as a cost-effective area, we don’t have to go and build a huge amount of infrastructure to be successful and, you know, you couple that with… And this is across the eastern desert, almost overall, is that most areas are mineralized from surface. So again, coupled with all the infrastructure, you don’t have a lot of overburden to takeaway. The Eastern desert is barren rock, nobody lives out there, there’s no running water, there’s no vegetation, there’s no cover. And so, you know, you have very, very limited environmental issues, you know, almost to the point that you really don’t have any environmental issues. So, as far as an operating environment, Egypt is good and it’s politically stable. And so, you know, it is actually a very good place to be as an exploration company, you’ve got a lot of, as I say, unexplored areas that offer a lot of opportunity. And yet on to the other side, you know, it’s not like you’re out in the middle of…you’re really not out in the middle of nowhere.

Bill: Is there community support for your projects right now?

Mark: Absolutely. We have five experts, geologists, who work down in the desert and me, and everybody else that works for us, which is about 50 people in Egypt are Egyptian. So we have a very low foreign footprint here, we have Egyptian geologists as well, that are part of the exploration team and they do a good job, and they’re learning, we train people, we take graduate geologists and train them up. And so, you know, we have a lot of support from the local villages and towns that are near us because, obviously, we provide jobs, plus, we have food suppliers, fuel suppliers, water suppliers, you know, all the various businesses that benefit from our being there.

Bill: Could you please discuss Aton’s management and directors and how you’ve been able to create value for shareholders in your past?

Mark: One of the things that I think is a strength of Aton is really our people. We have very, very good people. And we go through some of the… I’ll talk a little bit of myself first. I’ve been working in Egypt nearly three decades. I came in… I’m from Texas, and I came into the oil and gas business, the drilling, and I had a successful ore field service company here and also worked in Sudan. I got involved in mining here back in 1995 with Centamin, so I was there in the early days, up until our declaration of commerciality in 2001. Aton originally was called Alexander Nubia and I was asked to join…I joined the board there in 2009, 2010, we went public. So I’m the longest-serving director here and then I took over as CEO back in 2015.

And so I spent a lot of my career working in Egypt, and I’m familiar with business here, and so my experience is as well suited. And then, in terms of our exploration team, Rick Caveney, who’s our VP of exploration, I knew at Centamin, he was the original exploration geologists at Sukari and is really one of the peoples credited with discovering Sukari. And he knows this part of the world very, very well, he’s got a wealth of experience. Javier Orduña, Tim Neall, Paul Angus, all have experience here.

And, you know, I think we have, as far as our area, we have one of the best exploration teams, certainly, that you could ever hope to have. And they’re the key to actually unlocking a lot of this stuff and they’ve done an excellent job of doing that. In terms of our directors, well, I mean, Bill Koutsouras, Giles Baynham, and David Laing, all were at Endeavour. David Laing was previously a CEO of True Gold which was sold to Endeavour for 300 million. Bill Koutsouras was the CFO of Endeavour, and Tony Clements has been involved as a broker in London for many years and raised money for many companies successfully. And actually, in fact, arranged a financing back in the 80s for Sami El Raghy who brought Centamin to Egypt, for companies that he was very successful with, one of which became Normandy Mining. Tonno Vahk is an Estonian…as you probably know, we have two Estonians investors who own just under 50%, so out of 267 million shares, 190 of them are held by insiders. And he and his partner have built up a very successful business in telecommunications and real estate in Estonia.

And then our advisors, I think that we have an outstanding group of advisors who are active, Tookie Angus, people will know as the ex-chairman of Nevsun and K92. Ian Stalker, again, was with K92 and then, also ran UraMin, which is a very successfully uranium mining company. Tom Maher was the country manager VP in charge of this area for Apache. Apache is a US oil company that is the largest oil producer in Egypt, it is also the largest foreign investor in Egypt. And then, he and a group of ex-Apache executive set up a new company which has been funded by private equity called Apex, and they’ve picked up two blocks in the western desert. And then James Leahy, again, very successful company, Bacanora Minerals, which is a lithium play out of Mexico and has done very well. And then, Ahmed Mehelmy, who is a long time banker and financier here in Egypt and has worked for the largest bank here, and now has run for the last 25 years, his own investment banking firm. So I think that, overall, we have a very, very, not only, executive management team, but an actual…the operational management team as well, and especially our exploration geologists.

Bill: You mentioned the partnership you have with the Egyptian government, which all mining companies do. Is there anything more you can share about any joint venture partnerships you have and/or any streaming or royalty agreements?

Mark: We don’t have any joint venture but this past spring, in a financing, Sandstorm invested $2.1 million in us and that gives them a 1% overriding royalty on our production, from any of our projects within our license area. And they’ve been very, very supportive and they…you know, obviously, they think that what we have has great potential, so that was a very encouraging investment for us.

Bill: Did Sandstorm’s geologists…I know they have a team of geologists, do they come out and look at your projects firsthand before they made that investment?

Mark: No, they made that investment by looking at…we sent them a lot of data and they reviewed it, but they did not come out and look at it per se.

Bill: What about your burn rate and your treasury of the company right now? Can you talk about that?

Mark: Our burn rate, on an average, if you take it over a year and we’re not drilling all the time, but our burn rate is somewhere around usually $260,000/$270,000. Now, when we’re drilling, that goes up and it can go up during those periods of drilling, you know, to around half a million a month and that’s predominantly the drilling contractor. If you take it per meter, diamond drilling here cost us approximately $250 a meter all in, RC is about $150 a meter all in. And when you look at it, most of it…80% of all the money that we raise or we spend goes into the ground. Our overheads here and in Vancouver are very, very nominal.

Bill: What else would you like to share? This has been a very thorough overview of Aton Resources. Is there anything you’d like to share to the mining investors that are listening before we conclude?

Mark: Well, I think that it’s an area that I think really needs to have…people need to take a closer look at. I think that they’re things that…it does take a bit of understanding because it does have a slightly different economic regime than, you know, you would find in most places. To be honest with you, it’s not a killer, if you’re here… But it certainly is one that has put off others from coming and I think most people know that. But the potential here is huge. I mean, one of the reasons that we like being here and we really focus on here is because we are, you know, one of the, you know, the first people here. We know the geology, our projects are far more developed than anyone else, obviously.

And so, we think that, you know, for us and, in particular, our shareholders, you know, what we’re doing here and what the potential holds is huge. And I think that, as I say, I mean, the new government here is really set…bent on developing foreign investment, encouraging foreign investment, creating a very investment-friendly environment that attracts people into the country. And they realize that that’s an important part of developing Egypt, overall, and they see mining as being one of those that really fits Egypt well. Egypt has a large unemployment rate, mining creates non-exportable jobs, it creates an environment where you have other industries, businesses, welders, builders, truck drivers, all benefit. So I think the geology, the opportunity, and the reform of the mining industry all make this place one of the more exciting places to be at the moment.

Bill: For investors wanting to learn more, you can go to atonresources.com and take out your finance app on your smartphone and type in the ticker symbol, AAN, if you’re following it on the TSX-V. Or if you’re in the U.S., type in ANLBF. When you go to Aton’s website, make sure you sign up for their email list, they got the drill results coming out this fall. And if you want to follow that, you’ll be notified right away by signing up for the email list. Mark, I want to thank you for your time today and giving us a thorough overview of Aton Resources, I appreciate your time, and thanks for joining me.

Mark: Thank you very much, Bill. Take care.