Categories: Precious Metals / Mining Stocks
Topics: Gold Stocks / Copper Stocks

Latin Metals (TSX-V: LMS)(OTC: LMSQF) CEO Keith Henderson on JV Funded Drilling in a Copper-Gold Bull Market

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO for Latin Metals (TSX-V: LMS)(OTC: LMSQF), Mr. Keith Henderson. Keith, it is great to have you on. We just both got back from the New Orleans Investment Conference, which was busy and productive. How are you doing?

Keith Henderson: I'm doing well. We're a wee bit tired. That was quite the marathon this week, but yeah, it was good. Really great show.

Gerardo Del Real: Good, good, good. Well, listen, there has been zero shortage of news from Latin Metals. You positioned well for the bull market. Let me put it that way, Keith. And now there is a lot going on. I want to start with the announcement plan to spin out the Peruvian copper assets because I've had a lot of questions about the approach there and just how that will come about. So I will let you provide the context on that.

Keith Henderson: Yeah, sure. The context is simple. We are running a prospect generator. We're laser focused on not causing any unnecessary dilution to our shareholders. And we've been running this model for a number of years. We have not wavered. We have not raised money to drill lots of holes. We haven't done anything that would really damage the share structure of the company. And now as we get into this bull market, we find ourselves potentially not having to go back to market at all. So the structure is the structure and that's great. So what on earth is the spin out about? Well, several reasons really, mostly because we find ourselves looking at opportunities that if we were to act upon them in Latin Metals would require us to raise quite a lot of money, and that would be lots of dilution. I'll just give you an example. Last year I had access to a tender process for a really nice resource in Argentina, a gold resource.

It was a little over a million ounces, but I thought it had very significant upside. And so I did put a bid together, but the bid reflected my need to not cause unnecessary dilution, and so I didn't win it. And then that's when I really started to think about this. And then as this market has continued and as gold prices have gone up and up and up, a lot of projects surface again and a lot of things surface again that maybe have been a bit dormant for a while and you start looking at projects. But when you think about things that have got resources attached to them, they're not very cheap to acquire, especially not in this market. And I just cannot do it within Latin Metals.

So I thought, well, why don't we just create a spin-out that's actually capable of acting upon these opportunities? And for Latin metal shareholders, if they're really married just to a prospect generator and they really don't want to participate in another type of explorer co, then take the shares, stick them in your account, keep them, sell them, doesn't matter. They're free, have a good time. If you like the idea, take your free shares and potentially participate as well. And you get this kind of parallel exposure to the prospect generator model, which works well and which we're just not wavering from. And then secondly, to the projects that we're spinning out for drilling, plus what we might acquire in that spin going forward.

Gerardo Del Real: Listen, that seems straightforward enough. I think that should answer and put the rest of any questions that there may be. And I absolutely love the approach to provide essentially exposure to two different types of business models. You can pick one, the other, or both, and get a lot of shots on goal. Speaking of shots on goal, there was an option on the Organullo Gold project, a project which I really like that AngloGold Ashanti recently terminated for strategic reasons that have to do more with the region than the project specifically. And I think is going to open up a heck of an opportunity for someone to come in and quickly likely joint venture this thing. But can you speak about the 100% owned, and by the way, fully drill permitted gold project and AngloGold Ashanti's decision to walk away and what comes next?

Keith Henderson: Sure. Yeah. A bit of a shocker, I have to say. That news turned up at 5:30 in the morning, and the next morning we had a news release out, and I'm sure any of our shareholders who were very excited about drilling were pretty shocked by that. To remind you of the sequence of events, AngloGold's been working there for three years. They got the drill permit settled in June. We put a news release out September 29th to say that AngloGold were about to start drilling. And what's that? Three, four weeks later, we're out. Yeah, that was a big shock for me, I have to say. And these things happen among bigger mining companies sometimes, decisions that are just related to bigger picture things that are not related to a grassroots project, but it was still surprising.

Like this project, we've been told by AngloGold repeatedly that this is their number one grassroots exploration project in the world in terms of pure prospectivity. So why on earth would they be walking away? Well, it's not even public information, but it's somewhat well known, I think, or at least rumored to be known that that AngloGold are leaving Argentina entirely. And so that's really what's at the root of this. It's a decision at the highest level of the company for reasons that are entirely unrelated to the project. And for six or seven hours after I was sitting there digesting that news, I was like, "Oh, oh, what the heck?" But then you start to think about it rationally and you go, "Well, this is great." And it might sound strange for me to say this is a big opportunity, but it is like... When AngloGold came into this project, we agreed terms in some point in 2021. We signed an agreement in 2022.

Gerardo Del Real: You have a better market now.

Keith Henderson: Oh my God, yeah. Gold was $1,800. Yamana had done some very strange drilling. They hadn't been successful. They'd terminated. The project was kind of going nowhere and it was a tricky time for us. And Anglo walked in, we made an agreement and after we made the agreement, they sat us down and they walked through this fabulous presentation and they explained to us what they actually thought that we had here. And we've talked about this many times on the show, but for anyone that's not aware, they were looking for a high sulfidation gold target that's a high grade big ounce tier one deposit.

They have three very high quality targets on the project, which were never there before they turned up. So they've materially improved the project for us. They've come up with things that no previous operator ever saw before. They've got really excellent evidence as to why this is a really great target. They've got 12,000 meters of drilling permitted, and they had been just about to drill 6,000 meters as their initial phase one. Now we have the project back. It's still 100% ours, just as it was before. It's got these fabulous targets on it. It's also got some porphyry targets on it that are also untested, and we've got $4,000 gold. So what do you think happens now?

Do you think we got a few phone calls? Because we did. And of course we did. So we've had some incoming calls and some meetings. I've done quite a bit of outreach as well because people aren't necessarily looking at Latin Metals news releases every day. So I'm just making sure that people I know in the industry working for other companies are aware of this. And the only thing I expect to get out of this is a much better deal than I had before and I expect to get it done relatively quickly. Speed is important. The thing that I can't put a spin on here is that this is a delay.

So we were expecting to be drilling right now and we're not drilling right now. We're going to be drilling realistically if things went really well, February, right? Maybe March. So for sure it's a delay and that is disappointing, but in the context of probably a much better commercial deal for the company. I think that slight delay is just okay. I'm fine with it and I'm looking forward to get something else done here.

Gerardo Del Real: No, completely agree. And look, speaking of setting the company up in shareholders to benefit from this bull market, let's talk Cerro Bayo and La Flora, which are projects that you just agreed to option terms on with Daura Gold. And so I would love to get your take on that. Congrats on getting those projects joint ventured. And again, two more shots on goal, right?

Keith Henderson: Yeah. And this is a second deal on this project again and again, to my point on Organullo, we have got better terms on this. So this is something that previously Barrack had optioned into and their earning was $8 million US. My estimate on Daura is earn in for the work commitments that they've made to us and to cash payments and everything else is around 16 million US dollars. So that's what I think it's going to cost then. So that's 100% better than the deal that we had with Barrick. Daura are a great company and I've got a real soft spot for this company and for the management team. I am a shareholder. I'm a shareholder not because of this deal, but because of the property that they have in Peru. I don't want to speak for Daura, but I think my interpretation on Peru would be very, very high potential, but requiring quite a bit of work before they get to drilling.

So I'm estimating maybe a year or so for them to get to drilling in Peru, which means the company needs to be doing something else. And Cerro Bayo is a really great choice for them to have made. This is the perfect project. This one's drill permitted. We've got an agreement in place to get to 100%, just a couple more payments to be made. This thing is perfect. It's basically a high quality, high grade vein gold and silver project in Santa Cruz in Argentina. It's a fabulous province. It's got lots of mining operations. Most of the big players in the world are there in some shape or form.

This is a really large property and it's drill permitted. It's a fantastic opportunity for Daura. The best thing that happened recently with Daura is that they employed a new VP EX and this is... I had a hand in this too, because I knew they were looking for someone and I made this introduction. It's Stuart Mills, who was a co-founder with me on Velocity Minerals back in the day. Stuart's got an incredible amount of experience across many major mining companies and some of the mid-tiers. He's got an incredible track record. He's literally millions and millions of ounces of gold that have been attributed to the work that he did for these various companies.

He's had lots and lots of success and he couldn't wish for a better geologist to be actually in charge of and looking at this project. The targets that he ultimately picks and the target that they ultimately drill will be a great opportunity and the best possible targets, I'm sure of it. So they've signed this agreement. They've got a bit of a short timeline to getting work done. The way we ended up structuring it, they've got a phase one here, which ends in April 30th, 2026. Prior to that, they've got to do a whole lot of geophysics that's induced polarization or IP. That's designed to just ultimately really pin them down in terms of the best possible places to drill along these structures that we know to be mineralized.

And then they've got to drill 1,500 meters before that date as well. And of course, they're going to want the results before they get to that date too. So really in reality, they probably need to start drilling early January, and that's great for us. With the disappointing delay on the AngloGold side, at least we know we've got a drill project starting right away in January, and that's great. And then if we can get a partner into Organullo to get started February, March, then the delay will not have been too bad. And at least we've got plenty of additional catalysts coming through the company.

Gerardo Del Real: Well, look, you're going to have an entire year of drilling very, very high potential projects in a gold and copper bull market. So again, I know that we've had delays in the past. This is a minor hiccup. I think it's going to end up having a lot of silver lining with a much better, more shareholder-friendly deal on the project. So good work as always, Keith. I suspect there will be more news here in the coming months before the year is out. Thank you for making time. Anything else to add to that?

Keith Henderson: No, I think that's good for today. I just wanted people to be aware that this is some of the news. There's been great news and there's been the Anglo news, which must have been a little bit shocking for some of the shareholders. I wanted to acknowledge that that delay is disappointing, but to reassure people that this is going to lead to a better deal and really ultimately, hopefully, it's going to be something to be happy about.

Gerardo Del Real: That's it. And look, I'll say one last thing. This is why when we vet deals, it's important on our end of it to make sure that the shareholder base is a sticky long-term shareholder base, right? Obviously there was some selling on the news, but the strong shareholders, the Jeff Phillips, the Rick Rules of the world and several others, it was a blip for them. It was a, "Okay, we have to wait a couple of months before drilling commences there. What else is going on? " And so that's the importance of making sure that your shares are in strong hands. And again, I don't mean to minimize the selling that did happen, but I don't think it's a coincidence that the stock has started to recover in pretty short order.

Keith Henderson: Well, yeah, there was some selling, but it wasn't terrible. And the share price went from 25 to 21 here in Canada, and we had warrants that were expiring the next day on Friday at 20 cents. We ended up getting $1.1 million worth of warrants exercised on the Friday, the day after that happened. And the feedback I got from some of those people that exercised was this, "We are here for the long term. We believe in what you guys are doing." Yeah, sure. Maybe we could get it one cent cheaper in the market, but it's better for the money to go into the company and to benefit the future of the company. So there is some justification for those warrants being exercised and I was happy to have them exercise. I thought that was great. Under the circumstances, I was surprised and very pleasantly surprised.

Gerardo Del Real: Again, speaks to your shareholder registry. Keith, thank you so much.

Keith Henderson: Yeah, exactly. Cool. Thank you so much, sir. Talk to you soon.

Gerardo Del Real: All right. We'll chat soon. Cheers.

Keith Henderson: Cheers. Bye.