Golden Arrow Resources – Leveraging the price of Silver in Argentina and Chile

Golden Arrow Resources  – Leveraging the price of Silver in Argentina and Chile


Welcome to Crux Investor. We’re going to be
speaking in a minute with David Terry. He’s a director of Golden Arrow Resources. They
have projects in Argentina and in Chile. Hello David. How are you? I’m fine. Good morning. Fantastic thanks for taking the time to talk
to us. I know it’s early there. So David I thought we’d kind of kick off by introducing
Golden Arrow to our audience over here in Europe. Perhaps you can start by telling us
a little bit about yourself and your relevant experience. Well I’m one of the directors of the company
and I’ve been with Golden Arrow since it was formed in 2004. Golden Arrow is an Exploration
company has been mainly focused in Argentina over most of its life, although it’s just
recently branched out into Chile and acquired two advanced stage projects in Chile. But
we’ve been fairly focused on Argentina for most of the company’s life. I’m a geologist
by background, and so I’ve been involved in a lot of the property, review, acquisition,
Exploration program, management and that sort of thing. Great. What were you doing before that? Where
it have you worked? I started off my career working for several
large mining companies. My first work actually as a student and then went on after university
was with the old Consolidated Goldfields, which was a large company back in the day.
Worldwide scope and I worked for the North American subsidiary of that. And I will work
several other large companies including Kamenco, Hemlow Gold and finally Westmin Resources,
more of a medium sized company acquired Boliden, the Swedish mining company, in the late nineties
and worked for them for a while too before sort of starting to focus on on smaller companies. Right. You’ve been around the world, been
around the block. And how has in which which aspects of that is most relevant to what you’re
doing at Golden Arrow Resources. Well it’s all a cumulative thing with when
you’re when you’re a geologist focus on exploration. The more projects you work on and the more
different areas, the more types of geology and mineralization you see. It all adds to
your experience and helps making there hopefully the right decisions, when you’re working on
a project. But you’re an explorer not necessarily a developer
or producer? That’s correct. I focus on I find find find the metals. Find the models, good. Now tell us a little
bit more about the team that you’re working with. Obviously you’ve got quite extensive
team there. I mean who are the most active and relevant members of the team in terms
of where you’re right now? Well Jo Grasso, the CEO and founder of the
company, has been an entrepreneur, who’s been focused in Argentina for the whole time he’s
been in the mining sector, more than 25 years now. And so he’s the is the founder and leader
of the company and certainly one of the largest shareholders. We’ve got Brian McEwen, who’s
the Vice President of exploration. Again very experienced mining professional running the
exploration and he did a lot of the work on six years which is now part of the operations
of bringing that along through all the different exploration and development stages people
carcasses. He’s a vice president with the company he’s been there since the beginning.
After a lot of the administration and and business deals and that sort of thing. In
the company, we’ve got Alf Hills on the board, who’s very experienced mining engineer. It’s
been a big help since we’ve sort of transition from being solely an exploration company to
having this production profile. And John Gammon and other very experienced geologist on the
board. Lou Salley, a very well known legal Mining lawyer based out of Vancouver here.
We’ve got a very well rounded and experienced team, and especially we’ve got an excellent
staff in South America, based in Argentina. Yeah I guess that’s critical. Working in South
America. South market generally it’s not easy unless you’ve got a local team with local
expense. I mean before you can get into the projects themselves, can tell us a little
bit about the Grosso Group as a whole. It’s a relatively new enterprise is it or has been
around for a while? Greg Graff the group has been around since
the early 1990s and so it’s since it’s a management group that has several public companies within
its portfolio. And and Gold Arrow is one of them and other one is Bluesky Uranium right
now that’s quite active. Bluesky has discovered a Uranium Vanadium deposit also in Argentina. But tell me about the Grosso Group. They they
have other companies in the group say what is their focus? I mean are they are they large
enough to be able to focus on four different projects at the same time or is this project
their number one focus? They Golden Arrow right now it’s been the
flagship company, if you want to put it that way. But the idea with with the Group sort
of set up is to share overhead costs between companies. Obviously there is some similarity
between the boards and management of some of these these companies, but there’s also
differences as well. And so it’s really a much more efficient way to run public exploration
company. Yeah. But I guess with my investor hat on
you also need to or you want to see focus. You want to know that the time, money and
effort is being spent on the project that you’ve invested on. It’s just interesting
to understand the approach there. Yeah I mean for Gold Arrow. For instance,
Brian McEwen, the VP of Exploration, on Golden Arrow is focused entirely on Golden Arrow.
Joe Grasso is the CEO of Golden Arrow. He’s not the CEO of any other companies, and he
sits on the board of several of the other companies in the Group. Okay so you’re saying the team on Golden Arrow
is focused on the project, but the holding group as it were has a number of teams which
work on individual basis. Okay. And again so just on the whole Argentinean,
Chile, South American component of this. It has been a difficult place to work. It can
be a difficult place to work. So what are the components that you look out for? Your
job is risk mitigation so who manages that process in country? Well we’ve got several people that work on
that in country and we like… in Argentina for example, we work with the government of
the day and obviously some may be easier to work with than others. Argentina itself is
regulated into the mining industry provincially like Canada is. So you’re you’re often dealing
with provincial governments and then also federal oversight and and relationships that
have to be built there as well. But that’s an ongoing process and I think we’ve worked
very hard at establishing good relationships with all levels of stakeholders and governments
in the areas that we work in and we put a lot of effort into that. And I think we’ve
been quite successful in terms of working in Argentina. If you’re in the good mining
jurisdiction, like good province for mining, then it’s actually a great place to work. That begs the question are you going to get
province? Yeah well Jujuy is the province where put
operations is in and I think our record there speaks for itself. We discovered the Chinchillas
Silver Lead Zinc deposit in 2012, and started drilling it off and put out 2 Resource estimates,
2 PEA’s on the backs of those Resource estimates and then entered into a JV and then maybe
I’m getting ahead of myself here, with us. Well. Let’s go into that because there’s two
components your business. You know we made a decision to construct the
mine Chinchillas in March of 2017 and and by the end of 2017, early 2018, we had a permit
to construct a large open pit mine. And there’s not many places in the world where you could
get a permit in that sort of time. We didn’t have to permit a new tailings facility or
processing plant. We’re just building the mine site. By any standard that’s impressive. But tell
us about that relationship with SSR. You’ve got a 25% stake. What does that mean? 25%
of what? The equity but what else does that give you? It’s a participating interest, 25%, participating
interest in Puna Zinc which is a holding company which owns 100% of the Chinchillas Silver
Lead Zinc deposit that came for Gold Arrow that we discovered. And the Pirquitas mine/
mill complex in remaining mineral resources that Pirquitas. So it really combines the
assets, formerly held by the two individual companies, into one entity and we own it 25%
interest in it and SSR owns 25%. So what what stage is that? They are the operator. They’re the operator
obviously they own 75%. They announced that the project had reached commercial production
in December the 1st of 2018. And so we’re in really the first quarter, and approaching
the end of the first quarter of commercial production on Chinchillas. Right. And what what could that mean for your
organization? Obviously commercial production means cash flowing, but in terms of… I don’t
know what is the debt situation there? When is there free cash flow? When do you actually
get to see the upside? Well all of these are all very questions,
and obviously, I can’t answer all of them right now. The situation… we owe… we’ve
built up some debt with SSR that helped us fulfil our portion of the capital expenditures.
Some of that came from cash that we had on hand and some of that came from earnings out
of processing stockpile material, that the operation is doing ever since we formed a
joint venture. So the commercial production was started in December. We’re into the first
quarter right now of production. We’re trucking upwards of 3,600, 3,700, 3,800 tons per day
between Chinchillas and Pirquitas. The forecast for 2019 is 6Moz-7Moz of Silver, in addition
to Silver & Lead production, And the forecast cash cost of that production is $8-$10 per
oz of Silver. And so in terms of answering your question, is when will we see the cash
flow, well we’re going to see what we get what the books look at the end of the first
quarter here and then go from there. I guess the plan like like all things like
this he want to build out the Resource and make this a sizable operation. It is a sizeable operation. I mean producing
more than 8Moz ounces of Silver equivalent on an annual basis, is a significant size
Silver mine. It is one of the top producers. You always want more don’t you? And the Reserve is quite a significant Reserve,
of more than 80Moz ounces of Silver equivalent. In addition to the Reserve, there is significant
mineral resources which are not currently in the mineral Reserve. Some of those could
potentially be added to the Reserve in the future, depending on metal prices or potentially
further drilling and that sort of thing. And there’s other options for for expanding things
in the future as well. In terms, of there’s already existing mineral Resources, higher
grade mineral resources at for Pirquitas. Underground Resources that the joint ventures
evaluating, potentially bringing on stream at some point to supplement or from Pirquitas.
We’re ramping, we’ve ramped up to 4,000 tonne of day sort of benchmark from trucking ore
from Chinchillas / Pirquitas which is a distance of 45km by road. There’s excess capacity already
in the mill. So that can be brought up to 5,000 tonnes a day. Oh what does all this mean? David what does
it what does all this mean for your investors? What’s the plan for it? Are you looking to
run it for cash or are you looking to sell it? I mean how do you assure shareholders
benefit? Well I mean obviously, if We decide to transact
at some point in the future then you know that they’ll benefit from that in terms of
having a company with a large amount of capital, whatever that is. But going forward in terms
of our participating interest, the mine plan obviously calls for more production of 8Moz
ounces of Silver on an annual basis, and depending on what the Silver price is, that could be
a significant revenue generator. And if the Silver price performs well and and everything
comes in on budget and on plan as it has so far with with Puna s operations then there’ll
be some cash flow coming. And and do SSR have an option to take you
out at some point, if certain hurdles are reached? What’s the relationship? Right now it’s just a participating interest.
I mean obviously… THere’s nothing built in? There’s no prearranged route for them to do
that. What I’m hearing is you’re going to assess
this as you go along and… We’re really just getting going on it. Right. Needed to deal with that because I
needed to understand how that fits in with what I think you’re more excited about I guess
is the exploration potential. You wanna tell us a little bit about that. Gold narrow has obviously been an exploration
company up until recently, through most of its life exclusively, and we’ve assembled
quite a large portfolio of five potential projects in Argentina, over the timeframe
we’ve been in existence. And some of those are located next to large projects in some
of the prime mineral belts in Argentina. But once we made that transition, with Puna operations
and formed the joint venture and they became the operator, we started looking a bit further
afield for opportunities to take advantage, I guess of the situation in the mining industry
in general right now. With companies having a challenge raising money and access to capital
and so forth. And so we acquired two options on two advanced stage projects in Chile that
are in the same area North of Copiapó. Both have what would be all historic mineral Resources
on them right now and we think that there’s good avenues on both of those to add significant
value. Okay. So I mean I mean tell us a bit about
those properties what what are you expecting them to be? Obviously you’ve got a team exploration
team there and that’s their expertise. What do you what are you buying into? And what
are you hoping to create with them? Well I’ll start off with Indiana. It’s a Gold
Copper vein system, north of Copiapó. It’s got a whole array of Gold Copper veins with
two primary orientations. It’s between two strands of the Atacama fault and had some
work on in the past, some artisanal type mining. And a fair bit of exploration, fairly recent
done by the group that we acquired the property from. And they’ve completed drilling, surface
sampling, mapping, trenching and so forth. And had a Resource estimate completed on the
property it was done 43-101 standards but historical resource. But it totals 600,000
ounces of Gold equivalent. With a little bit more value in that equipment equivalency calculation
coming from Gold and Copper but more or less similar values. And that’s just really on
one small part of the of the vein system. So we think that there’s potential for expansion
of that, and we have to do a bit of work to confirm it. And bring it up to what we would
consider to put out a Resource estimate. The property is also permitted for production.
It has two ramps, which access the key parts of the vein system underground. And so it
has the potential for some relatively near-term production and that this area has a lot of
mining infrastructure in Copiapo., And there’s processing plants, and that sort of thing
within easy driving distance. So we’re we’re really at the point right now where we’re
putting together the information on it, into a 3D model. Of planning out how we would approach
the exploration on it, and also evaluating potential for relatively near-term production. So I mean you’ve got to be really confident
in that. You know, I’m looking at the terms here. $100,000 on payment on signing, $15M
over the next four years and prior to the payment of the last $7M and MSA he’s got the
option of retaining 25% of the project on a pro-rata basis. You’ve got to be fairly
confident walking into a project like this to commit to $15M before knowing really what
you’ve got. So is that the case? What’s lengthy this this confidence? Well we’ve done quite a bit of due diligence
on it. Obviously we’ve got a great technical team down there working on it. And house here
and and you’re right it’s not a expensive property, and so this is a property that will
have to be moved forward and in a rapid manner, in order to to justify… Where’s the where’s the money coming from? Where’s the money coming from? Well we’ve
just raise some money. How much have as you’ve just raised? We’ve just raised the $4.7M. So just understanding it. So $15M over the
next 48 months. How does that break down? Is that a quarterly or on your payment? How
long basically does your $4.7M last. We’re just working on our budgets right now.
So you know all the different pockets where there has to go. But yeah I mean we will…
We’re working on the alternatives to fund this going forward. And they are annual payments. And their annual payments. Okay. So spread
equitably presumably? Well they’re back backloaded. SO they’re backloaded. OK. That’s Indiana.
So that’s your best target. And then you’ve got Alantida as well? Yeah. Which is 35km 40km to the East of Indiana.
It’s a bit of a different type of project. It’s larger in surface area. It contains a
very large, relatively low-grade Copper Gold porphyry deposit that was discovered by InMet
and drilled by InMet and further worked on by First Quantum. After the takeover of InMet.
But the historical Resource, and again this is historical, not a 43-101 compliant Resource
but it was completed by those large companies. Total 427Mt of 0.43% Copper Equivalent. So that’s a very different project? A different project but we we acquired this
basically because on the periphery of this large deposit which is which is fairly deep
where it is there’s some near surface Gold copper scarring mineralization. And the eastern body of Scotland mineralization
has got some drilling in it but the western one was actually not part of this property
when in that first quantum where we’re working on it and we basically what we really sort
of added to the picture here is we’ve consolidated land owned by three different parties and
turn it in Kinross was one of those. And so we’ve consolidated this larger land position
that incorporates the Gold upper rich garden area to the west which is exposed it surface
has quite a large lateral extent and has had no really modern exploration that we’re aware
of. There’s some historical workings in that sort of thing on it and. And so that’s our initial focus on this property
is this area that we can basically surface and and the graves that we’ve gotten from
our due diligence sampling in that area shows that there’s quite widespread upper escarpment
right. Okay. So you’ve got a bit of work to do there
and it’s relatively early stage so it can. But just looking at the terms that you’re
committing to another six million bucks over the next four years says twenty one billion
bucks in both of those projects is the recent raise going to pay for the development of
this asset as well. In terms of moving it to the next stage. Well initially it’ll it’ll it’ll start to
help us with that but again and we we’ve got to you know obviously bring in other capital
to really advance this forward as we want to. Right. And what’s the timing on this with this taking
a slight backseat or is this in terms that you’re waiting you’re not aware we’re working
you know sort of right now in our planning stages really on both there they’re very very
close and we actually operate them out of the same camp. Okay. Yeah it’s quite close. Yeah yeah yeah. Okay we’ve got the same team that can deploy
to either one in terms of your business plan per say for for driving this forward. You guys are still working on your budget.
That’s what I’m hearing and you will work out how you apportion your time, well time
is money, and money across the projects to advance things. Yeah. Yeah that’s the idea. Okay great. You’ve also
got another project Antofalla in Argentina. Is that is that something that’s on the ‘To
Do list’ or is that just an option? It’s an option and again we, I guess that’s
the only other option that we have right now. The other projects that we have are all owned
100%. And that’s the thing with Argentina, is the actual cost for keeping properties
current, in terms of the fees or however you want to call it, is relatively low comparable
to other jurisdictions. But there is an expectation from them that
you will get on and start drilling, and start spending money, developing these things out? Basically the way it works there, is when
you acquire these initial packages of land, you have to either have to downsize them over
time, and continually work on them. Okay well maybe maybe that’s something which
you can, that project Antofallo. You can tell us a little bit about you know as things progress. Well we acquired Antofalla, because it had
geological similarities to Chinchillas. You know, it’s a dome complex of these young intrusive
volcanic complexes coming up through through older sedimentary rocks. And and we just we
saw a strong similarity there and so we’ve done a little bit of initial drilling. And
we’re just deciding if we’re gonna continue on with that or or go some other route with
that project. Yeah. So just just to help the our investors
understand the process. Because exploration it’s high-risk, high-return but you’ve got
to lift up a lot of rocks to find what you want? So what has attracted you to this area
what are you looking to achieve? You’ve optioned, sorry you’ve more than optioned, you’ve got
3 projects, 4 include producing Silver at Puna. What are you hoping to achieve? And
what’s the process you’re engaged with to do that? Well our our goal is to find new deposits
and make discoveries which are gonna be attractive to people who want to develop mines. And like
larger mining companies. And you know we’ve done that with our deal with SSR. And with
the projects that we’ve entered into agreements on, and obviously their options, and if we
get a bit further down the road on number one of these, or any one of these, and they
don’t meet up to our expectations, then we will we’ll move on. I mean that’s something
that I feel quite strongly about, is you know you can’t get married to a project. You have
to continually assess it on its merits. And so you know what I look for on a project is
something that’s got significant size and it’s something that could be developed in
the lower quartile of costs, for or for that category of deposits. Because if you’ve got
something that’s relatively low-cost compared to other comparable projects or mines and
then you’re gonna be able to weather through the ups and downs of the commodity cycle. And what is the indication? I mean you’ve
said there’s a lot of other mines in the area. I mean what sort of quartile performance,
cost curve performance, are they operating in the lowest somewhere in the middle. I mean I think it’s all over the place. And
when I said other mines, I mean you’re talking about an area Copiapo in Chile, there’s a
lot of those that are advanced exploration projects. Understood but obviously, underground mining
a a bit more expensive open pit. So it’s you know the economics are important to understand
and as you say don’t get wedded to a project if it’s not going to work out. So I got it.
But the other thing that you guys have to do is find the money to be able to do all
of this, presumably to take it to a stage where you, either can go and raise more money,
or you do an SSR type deal, where you bring in a partner right. So is that all part of
your thinking? Yeah I mean obviously where we’re continually
working on financing the company, as most people in this business are, but you’ve always
got to be open to all the alternatives, like whether it’s forming a joint venture or doing
a corporate transaction, or a project transaction. Obviously all those things are always on the
table for the right terms and the right situation. I guess again, I just I keep coming back to
what investors need to understand about exploration mining. It’s can expensive and unrewarding,
but it can also be extremely rewarding if you get it right. And I guess that’s what
people are looking for. Part of the philosophy behind going and firing
these option deals, and they are option deals that start off with the lower payments and
escalate over time. So as I said before they’ve gotta live up to our expectations as we go
forward and that’s you know all those deals are usually structured that way, so you have
time to get your feet wet and do the work that you want to do to test out your theories,
and see if you have the projects hold up. But you know both of those projects have have
a lot of mineralization on them, and widespread mineralization, and both of them have the
potential for further discoveries, right on those properties. And as you know the best
places to find new deposits and larger deposits is on properties that have had work demonstrate
that there’s already significant mineralization. Right. Okay. So some easy questions for you
now. 2019. What are the targets that you’ve set yourself? And how are you going to achieve
those? Well I mean certainly we hope to see Puna
performing as planned, and continuing on with sort of at least 4,000 tonnes a day being
trucked between Chinchillas and Picitas mill. And produce a 6-6Moz of Silver. And so we’re
hoping that that gets achieved obviously. That’s going to be very important to us. And
and then moving forward on these other projects and starting to execute the plan and carry
out the the work that’s needed to assess them. And we’re continually working at that and
looking at all of our portfolio and the opportunities that are within it, and how to how to best
manage that for the benefit of shareholders. The company is controls a lot of the shares,
and so we’re certainly aligned with the interests of shareholders. How many shares to the management and board
own? Well between insiders, friends and extended
group, it’s close to 50%. I’m not sure exactly what the number is but it’s very large. Okay maybe a tough one for you. What do you
think the five reasons that investors should be looking at Golden Arrow Resources? Five reasons. OK. Any order you like. Well I think you know experts in exploration
in Argentina. And got a great team of people that have mentioned this at the beginning
but the Grasso Group of Companies has found 4 significant deposits over the last twenty
five years. And there’s not many other group groups that can have that sort of a track
record. There is a lot of experience there. We certainly have a good ability to finance
the company, and we’ve always been able to do that. How many am I up to now? Three. We’ve got a great portfolio of projects that
we’ve put together. You know we’re always looking for partners to help us come in and
help help advance them. And you know we feel that we’re undervalued in the market right
now. So I thin… you and everyone else I’m afraid. And we’ve leveraged the price of Silver as
well. True, it looks like a good year for Silver
and Gold. Well and copper. David thanks very much for your time. I appreciate you giving
us that insight into the company. It’s the first time we’ve actually spoken with Golden
Arrow. So I appreciate that and we will look forward to getting an update with you in a
few months time. Thank you very much for watching our video.
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