Developing Idaho’s Next Multi-Million Ounce Gold Deposit (Alan Roberts & Craig Lindsay: Otis Gold Corp)
Otis Gold Corp. is advancing its Kilgore project with the hopes of becoming a multi-million-ounce gold deposit. The results of the company’s recent drill program show that Kilgore’s gold mineralization extends beyond the known gold resource. This year the company will engage in a significant drill program to prove up more gold ounces and continue to expand the resource. In this interview, VP Exploration Alan Roberts and CEO Craig Lindsay provide an update on the advancement of the company’s Kilgore project in Idaho.
Otis Gold Corp. is focused on the acquisition & development of quality precious metal deposits in the Western USA. The company is currently developing its flagship Kilgore Project and exploring at its Oakley project, both of which are in Idaho. Agnico Eagle is a key strategic investor owning 9% of the company and management owns 27.7%. Otis recently announced a positive preliminary economic assessment for the Kilgore project and the company is looking a number of potential catalysts over the next six to twelve months.
Alan Roberts:
0:15 Introduction
1:56 Kilgore project demonstrates over 90% gold recovery
3:22 Kilgore metallurgical results versus peers
4:16 Run-of-mine processing equates to profitability
4:55 Kilgore known mineralization extended
8:22 More Kilgore step-out drilling to come in 2020
9:27 Understanding the process of exploration
Craig Lindsay:
10:43 Answering investor questions after recent Kilgore press release
16:08 Not all gold ounces in the ground are created equal
18:35 What gold majors want to see in a development project
20:01 Kilgore 2020 drilling
21:05 Discussing USA permitting trends
23:40 Otis has strategic initiatives in the works
www.OtisGold.com TSXV:OOO OTC:OGLDF
Press Releases discussed in this interview:
https://www.miningstockeducation.com/2020/02/otis-significantly-extends-mineralization-at-kilgore/
https://www.miningstockeducation.com/2020/01/kilgore-project-achieves-92-gold-recoveries/
TRANSCRIPT:
Bill Powers: So Alan, tell us what’s going on with the Kilgore Project and perhaps you can start with your press release that talked about some of your recent metallurgical results.
Alan Roberts: Yeah, thanks Bill. It’s great to be on your show. And yeah, in December we concluded nearly a year’s worth of metallurgical testing on some near surface rock and from drill core. And we got some great results. Our a 0.5 crush material for testing, came back with in excess 90% gold recovery, and our other one and a half and three inch crush also came back with very positive recoveries.
We used 80% in the PEA for a metallurgical recovery for half inch crush, and so having greater than 90% will seriously enhance or significantly enhance the economics of the Kilgore deposit, because half the material of the high grade, averaging grade of about 0.72 would be the half inch crushed material at about 15,000 tons a day. So that’s really, really encouraging and it has a significant positive effect on the economics with the current gold price.
Bill: And how do these metallurgical results compare to your fellow gold mining projects in Idaho or even in Nevada and nearby?
Alan: What’s most interesting about the Kilgore Project is how heap leachable the mineralization is in the volcanic hosted rocks. When you get greater than 90% recovery from a leach pad test, these were column tests, these weren’t just desktop, bench top tests. It really puts us up there in, as a direct competitor with any project in the south and western United States in respect to recoveries, both-at-run-of-mine grade and at the half inch crush that we propose for half of the mineralized material.
Bill: Can you explain for listeners that don’t know, when you say run-of-mine, that is something you featured in your PEA, what do you mean when you say run-of-mine?
Alan: What we call run-of-mine is when the rock is drilled and blasted, and then it is literally picked up by a loader, loaded into a truck and it’s taken straight to the leach pad. There’s no ancillary processing of that material. And that is a way of significantly reducing costs for any operating mine.
Bill: Therefore, you can have lower grades of ore and still possibly be profitable, and I think that’s something we want to point out here as we now talk about your most recent press release released on February 5th, which you entitled, “Otis Significantly Extends Mineralization at Kilgore.” Some of the grades weren’t the spectacular grades that everybody oohs and ahs about, but because you’re talking about a run a mine project, you are actually very satisfied with these results. Tell us the significance, what are some of the key takeaways with this most recent release?
Alan: The key takeaway from the release is that we broke it into exploration and away from infill and development drilling. So we had a 14 hole program planned. We completed 11 holes in very difficult weather conditions, and we had some mechanical issues with some of our contractors, but overcoming those, we moved forward, and we produced our exploration results, and we had three holes that produced very interesting results. The most significant was hole 19 OKR 384, which we came back with 185.5 meters of 0.23 grams per ton gold. And to most people those grades, it’s very low grade, but in respect to the metallurgy, and we’re talking of the run-of-mine, the PEA had an average grade for run-of-mine of 0.24 grams per ton. So that interval is right in our run-of-mine grade. You know we’re talking 0.01 gram per ton difference between the intercept in that hole and our average run-of-mine grade, and I point out that’s the average run-of-mine. So we have lower grade material, we have higher grade material, but that hole basically it’s drilled to the west of the current resource shows that we have significant potential, in the near surface, in the volcanic hosts, in the volcanic rocks that we can do further drilling and then directly expand the resource by doing that drilling.
To further the point Bill, the success that Otis had in the courts with the defense of the forest service permit plan of operation for 140 sites, 420 holes being approved means that we can go ahead and advance the project unencumbered by further litigation at this time. The forest service and Otis are both very happy with the result, and I think it shows that if you do good work, and even when you’re taken to the courts having done the good work, and having backed it up, we can go ahead and do the work in a responsible manner.
Bill: And if I recall correctly, you said in our first interview, if it wasn’t in the interview, you told it to me personally, but you became a part of the Otis team and got excited about the Kilgore Project because of the exploration upside that you saw the potential, and now some of that has been confirmed with this drilling.
Alan: We confirmed the exploration potential around immediately around the Kilgore deposit, but in no means does it take away from the target rich environment that the Kilgore caldera, which hosts the Kilgore deposit represents. So I’m still excited to do all of the exploration on the rest of the project area that Otis gold holds.
Bill: This drill program was a smaller drill program, but it’s the first stage of a larger planned drill program that the company announced. Can you put this smaller drill program in the context of the overall plan of development here?
Alan: We were looking to put in a short program, relatively low cost, to make sure that we had exploration potential immediately around the Kilgore deposit, and the program in two areas to the west and the south successfully showed the potential for adding near term resource to the Kilgore deposit. The 70 hole program that we have, of which the 11 holes we drilled was part, we’ll expand that out to the prospect areas around the Kilgore deposit. Most people know have heard of Gold Ridge or Prospect Ridge or Dog bone Ridge, and we hope that the summer, fall of 2020 we can go ahead and start putting exploration holes into some of those extremely attractive targets.
Bill: Alan, as we conclude this segment, is there any other pertinent things you would like to share with the investors listening to us?
Alan: Yeah, Bill, I’d like to just have everybody understand that exploration is a hit and miss business, and that every hole isn’t going to come back with five meters of 50 grams, an intercept of a 158 meters of 0.23 grams in a low grade bulk disseminated target, like the Kilgore deposit is extremely exciting because it is the mineralization that we are principally looking for and forms a large part of the deposit. So I want your listeners, and potential investors, and current investors not to lose faith because these results don’t look impressive or are not significant, because they need to be put in the context of the style of deposit that Kilgore is.
Bill: You’ve been listening to Alan Roberts, he is the vice president of exploration for Otis Gold. Now you’re going to be hearing from Craig Lindsay, that president and CEO. Alan, thanks for coming on the show.
Alan: Thanks Bill. Thanks for having me.
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Bill Powers: Now I am speaking with Craig Lindsay. He is the president, CEO and founder of Otis Gold. Craig, welcome back onto the show, and my listeners just got a geological update from your VP of exploration, Alan Roberts. And with that recent press release regarding some of those step-out holes at Kilgore, I’m curious, what type of feedback have you been getting from investors, calls you’ve received at the office, and what would you like to share with the market?
Craig Lindsay: Thanks, Bill. It’s good to be back on your show. Really appreciate the interest in what we’re doing over at Otis. And yeah, we’ve had quite a bit of feedback and interest in the news that we put out yesterday on our drill program. And I think the elephant in the room is that our big hit was 160 meters long, but it was only 0.23 grams per ton. So, there’s definitely been some conversation with shareholders about what happened to the two gram plus hits that you were getting up at the North end of the deposit. So we have been managing that a little bit. But the reality is, Kilgore is, it’s a volcanic hosted epithermal gold system, and it’s a sub one gram per ton deposit. We’ve got about 950,000 ounces of gold there.
Most of that material is hosted and in an oxide environment, and most of that material has very strong metallurgical characteristics that Alan has talked about, number one. Number two, we’ve got a strip ratio at Kilgore of one to one. So you’re moving one shovel of waste for every shovel of ore, and that’s a very attractive strip ratio. So the fact that it’s oxide, it’s good metallurgy and it’s a low strip ratio environment allows these types of deposits to be economic at much lower grades. And the preliminary economic assessment that we released in August of 2019 supports that notion. Specifically, that deposit is going to be producing gold anything above a grade of 0.15 grams per ton, and people have to get their heads around that.
There’s a lot of deposits out there in the Western U.S. that are open pit, heap leach gold projects that are producing at grades of 0.15, 0.2, 0.3 grams per ton. And you can make money on those types of deposits and the economics can be very good. Our PEA for your listeners, if you recall, it’s using a $1,300 gold price, and our after tax IRRs were over 30% with an average grade of less than 0.6 grams per ton. So, that has been a bit of an education over the last day or two. And so with this, let’s take a step back even further, Bill, and I’ve been out on this project for 10 years. And when you look at the history of Kilgore, in the mid 1990s Echo Bay Mines was going to put an open pit heap leach deposit into production. They had identified about 350,000 ounces of gold, and the average grade was a little over a gram per ton.
So when we first came out here, we were looking for this one gram per ton plus oxide deposit. And so, we didn’t look at a bunch of the lower grade hits that had been drilled historically. And fast forward to the PEA when we demonstrated that anything about 0.15 grams per ton could be economic at Kilgore, Alan, who you just heard from earlier, Alan Roberts, our VP exploration said, Craig, you’ve got to go out and look for instance at hole KG85-5, which hit 100 meters of 0.26 gram per ton material and it was 200 meters west of the existing deposit. And Alan said, Craig, based on our PEA, if we can link up that historic hole with our deposit, there’s the potential to add a significant sea of lower grade material that we’ve proven can be economic because of the low strip ratio and the very good metallurgy that we have. And that’s exactly what Alan did with hole 384 that he drilled, and that’s what he accomplished with that drill hole. And we think going forward with about a 15 hole drill program focused on that new emerging west zone, there is a potential to add 200,000 to 400,000 ounces to the deposit of material that’s going to be mineable potentially. And that is exciting. And for a two and a half million dollar drill program to add 200,000 to 400,000 ounces, your drill discovery cost is extremely low.
Bill: When an investor assesses exploration and development companies, one of the metrics that’s often employed is how many ounces in the ground relative to the enterprise value of the company? And when you dig deeper, as you progress in your knowledge as an investor, you quickly learn that not all ounces are created equal. So, one of the things I hear you communicating here is that you have the excellent metallurgy, that’s one of the key points of what your project offers. And I’m curious, have you compared your metallurgy and the results you’re getting so far with this from being able to extract gold from this low grade material, how does that compare to some of your peers, not just in Idaho, but maybe even in the region at large?
Craig: Well, I think it compares favorably. And what your listeners should be doing when they’re looking at a gold deposit, they shouldn’t just look at the ounces and the grade and kind of go, wow, that’s a lot of gold. It’s well over a million ounces and it’s over a gram per ton, or whatever metric they’re going to use. They need to go and look at whether or not that particular deposit is mineable. So they have to dig down and look really closely at metallurgy, they have to look at processing costs. Can you dig this stuff out of the ground, drill, blast and throw it onto a heap leach pad? Or do you have to crush it down to what some of us in the industry refer to as bug dust, like really crush it down before you can extract any gold from it. And the more crushing you have to do, the higher your processing costs.
And not just how much do you have to crush, but can you throw it onto a leach pad or do you have to process it through a mill? And so, every ounce in the ground is definitely not created equal. And certainly at Kilgore when you’ve got an oxide deposit that you can drill, blast and throw onto a heap leach pad and recover gold at good recovery rates, that is very attractive. And we definitely compare favorably with a lot of the open pit heap leach stories, particularly in Nevada, but also some of our peers in Idaho and elsewhere.
Bill: Previously, if I recall from our conversations, you said that when majors or mid tiers are looking to purchase a project, they’d want minimally 10 years at 100,000 ounces a year production. Based on these new results, and of course it’s a forward looking statement, but can you talk a little bit about the potential you see here? I know you have a drill program planned for the future at Kilgore.
Craig: I mean, definitely one of the big positives of Otis is that Agnico Eagle owns about 8% of our company. They bought into the story coming up on three years ago, and they were really excited about the potential for not just the existing deposit, but finding the second and third deposit out at Kilgore. And they definitely want to see profiles of a million ounce, they really want to see 2 to 3 million ounces with 100,000 ounce a year plus potential. And that’s definitely where we are moving with the drilling that we’ve just recently accomplished. Right now we’re at 110,000 ounces a year with a five year mine life, and we see the potential to start moving closer to a 10 year, 100,000 ounce a year mine life with these new discovery holes that we’ve had out to the west.
Bill: And how many meters of drilling do you expect to put in at Kilgore in 2020?
Craig: We would really like to do, this 2,500 meter drill program that we just accomplished was part of a larger planned 25,000 meter drill program. So we’ve got over 20,000 meters of drilling ahead of us that we would like to do at Kilgore in 2020. As I’ve mentioned, there’s going to be a portion of that is going to be focused on resource expansion at the existing deposit. But the other thing, and that’s the second prong on our approach at Kilgore is going out and doing exploration drilling along the Kilgore caldera at this 15 kilometers of strike length that we have where we’ve got gold and soil anomalies running along that entire distance. And we want to start focusing as a second track at finding the second and third deposits that we think are out there at Kilgore.
Bill: Craig, I know the last year was challenging with the contesting of your exploration permit at Kilgore. And I did mention in the introduction before I spoke with Alan that that was resolved to your favor. So you know very well what it’s like to battle a permit when it’s contested, but you’ve also been the beneficiary of a permit that was issued quicker than some permits have been issued in the past. As a Canadian working in the States, do you have any observation of the mining permitting structure and trends we’re seeing?
Craig: Well, honestly as a Canadian it’s actually refreshing to be working down in the States, because believe it or not, the permitting regimes and environment in the U.S. are, I think somewhat more favorable, because in Canada layered on top of all the regular and environmental hurdles that we have, there’s a significant first nation’s issue that you deal with in permitting in Canada, so there’s a little bit less of that in the United States. But probably one of the things that’s been emerging from a U.S. perspective is the U.S. administration’s focus on accelerating timelines for permitting. And not just in the mining industry, but the oil and gas industry, infrastructure, building roads, highways, bridges, that sort of thing. The administration has brought in a regulatory change where they want environmental assessments completed within 12 months, and they want environmental impact statements (EIS) completed within two years. And right now I think the average in the U.S. is about four and a half to five years for an EIS.
So that is a significant change which is going to affect positively mining exploration and mine development activities in the United States. And I want to caution readers that this is not an effort to reduce environmental burdens in the United States, it’s just getting the Federal Government and the regulatory agencies to work more closely together in what they’re calling a one decision policy. So we’re still going to be up to the very high standards of that the NEPA has in the U.S., it’s just going to be a more efficient permitting system, which is going to significantly accelerate, hopefully permitting in the U.S.
Bill: Craig, as we conclude, the future plans at Kilgore and also your exploration project Oakley requires money. Is there anything you can update the market on at the time being?
Craig: Well, that’s a good question, and we’re in a position where we do need capital to advance our development plans. And all I can say right now is that we’re working on a couple of strategic initiatives to address that issue, and I’m confident we are going to have capital in place to move our projects forward on a timely basis.
Bill: You’ve been listening to Craig Lindsay, president, CEO and founder of Otis Gold Corp, exploring and developing in the Idaho and the United States of America. As we mentioned, the ticker symbol is OOO in Toronto, and O-G-L-D-F in New York, and the website is otisgold.com. Craig, thanks for coming on Mining Stock Education and providing an update. I appreciate it.
Craig: Thank you very much, Bill. Really appreciate it. Good to chat with you.
