CEO: Bill Pearson
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Juan Costello: Good day from Wall Street. This is Juan Costello, Senior Analyst with the Wall Street Analyst and joining us today is Bill Pearson, the CEO of Castillian Resources. The company trades on the TSX venture, ticker symbol is CT as well as on the OTCQX, ticker symbol is TIIF. Thanks for joining us today Bill.
Bill Pearson: My pleasure.
Juan Costello: Great and now starting off, give us a brief history and overview of the company for some of our listeners that are new to your story.
Bill Pearson: Sure. We pleased to – well Castellian is the junior gold exploration and development company. We are focused on gold projects in Canada and our flagship property is the Hope Brook Gold Project, which is in Newfoundland in Southwestern Newfoundland very mining friendly jurisdiction. Last year, we produced our maiden resource on the property and which we updated in October and recently, we did a 6000 meter drill program in the fall which I’m pleased to update you on.
Our second asset which I think is of interest to investors is the Canadian Creek property in Yukon, it’s adjacent Kaminak’s Coffee property, which recently reported a 3.2 million ounce, inferred NI 43-101 resource. We have a very strong management and technical team. I’m a geologist by background almost 40 years in the business and fortunate in working on several major success including Jacabina which was with Desert Sun that was sold to Yamana for 735 million in 2006 and I also put together all the expiration picture and expanded the resources in Nicaragua and Libertad that was taken over by B2 and they are now $1.6 billion company. So, we think we have an excellent project, a great team and we are also in a very good political jurisdiction and we have substantially moved Hope Brook forward and we think that we are certainly one of the juniors that people should look at us being a very under valued situation.
Juan Costello: Certainly. Well, yeah in terms of Hope Brook can you bring us the speed on the recent JV with Ryan Gold and some of the intersect at the connector your zone?
Bill Pearson: Yeah, absolutely. This was really a great opportunity for us. Ryan Gold basically what the deal was they had the right to earn a 10% interest in the Hope Brook property for funding 2 million expiration program. It – because it was a flow through funded program, we had to do this work by the end of last year and our team did an extraordinary job executing this program in a short period. We started on November 3rd and we finished on December 21 pulled out all the cruise on 22nd before Christmas. Now it was a much different program than we have done previously because we really stepped out and we explored by drilling 6 meter target zones, we had identified over a strike link of 3.4 kilometers. So, 80% of this drilling was outside of our current resource. So the idea was to figure out which of these targets warranted further drilling and we were looking for the potential for a major expansion of our resources.
And the program was very, very successful in outlining a very expensive near surface target zone that’s about 900 meters Southwest of the former mine. I should point out it actually too in all of these targets we did 21 holes, we had 2 holes that unfortunately came short of the target but 19 of those hit the mineralized structures within meters where we predicted it. So, we really got from our geological and geophysical interpretation we have this zones wired. So, we are really looking where to go within this extensive structure. So, this near surface zone it’s very interesting because one of the things that had puzzled us is there was shallow historical drilling over this general area but the holes is not very much. But what we discovered from our new drilling and our geophysical work was there is actually a big fold structure in there and this fold structure never got the surface in fact it basically closes about 50 to 75 meters below surface.
So, all this historical holes that everyone assumed had tested the zone, In fact, we are too shallow and probably too for north. And if any of your investors are interested, have a look at our presentation and look at the long section and you’ll see what is significant here is this is above a target area we call the 240 zone and essentially it’s undrilled until our current drilling. And we had several; good holes in there with one and a half grams of 14 meters, 2 grams over 8 meters, 1.44 over 2.9, 1 gram over 8.5 which one you’re looking at a potential open pit hole concrete are 0.5 are very good. And also its important to remember too that with this wide space holes our focus is making sure this was wide zones there and we certainly accomplish that in spades.
So, what’s the big up sight here? Well, right now our constraining shell in terms of indicated in incurred resource has about 800,000 ounces. There is actually quite a lot of outer pit resource which is above 0.5 grams but of course doesn’t show up in the resource statement because it’s outside the constraining shell. So, if we have success in this near surface target zone there is good potential to outline substantially more potentially open pit resource and in fact, it certainly wouldn’t be unreasonable to believe that it could potentially as much as double that. And then obviously in addition to that there is the underground potential.
I think the other thing is–that is really important is we really advanced our geological thinking—remember our previous drilling we focused on the former mine area principally, this time we stepped out so that we have holes over almost three and a half kilometers. So, we now have a better appreciation for the overall structure, we’ve been able to use our geophysics combined with the drilling to more accurately outline where we think the specified zones go and in particular we’ve got some very good ideas on what’s controlling the high grade.
So, I think that bottom line is, if you ask me where do we go from here? You know I think realistically we are probably one drill program 8 or 10,000 meters away, we have success in this near surfaced target zone and obviously all the other targets were opened, you know, we can substantially boost this resource and it will certainly make this project bring it to a stage where I think it will be able to support PA.
So, this was a huge program for us and right now we are busy compiling all the information, we’re redoing all our geological model, doing a detailed interpretation of the whole thing and we will be planning the next phase of drilling and it will be even better targeted than what we did in November, December.
Juan Costello: Well, certainly a lot going on there and last time we didn’t speak much about the Canadian Creek project. Can you talk about that and which you have a 60% interest?
Bill Pearson: Yeah. We’re running a 60% interest into that. We’ve completed the expiration requirements and we have a couple of payments left. What we did, we didn’t do any work last year but we did quite an extensive program in 2011. We filled out all the soil to your chemical coverage, that’s of course been the very successful technique in Yokun, that’s how ones like underworld in Kaminak were we discovered by Shaun Ryan and it’s because the Yukon, this area in Yukon is rather unique in Canada and that is not glaciated. So, when you find a geochem anomaly it usually hasn’t move very far. So, we covered filled out all the soil to your chem coverage we did a detailed magnetic survey.
And we also did some limited IP in depolarization and the pits are like came out is very exciting and basically have a soil to your chemical and normally that’s about seven and a half kilometers long by about couple of kilometers wide. The magnetic indicate there is a major structure running through the middle of the property where this anomaly is surround and the structure of course runs right through a casino which is just the east of us. And, you know, it certainly looks like we’ve got a very, very interesting gold environment, just to the north of us Kaminak did some limited drilling on their sugar trend, hit some low grade result. It shows there is some gold around and my understanding is that it will do some more work in there next year. So, the entire environment there is very prospective geologically, there is some hole drilling there that had some narrow intersections couple of meters with two, three grams and also some wide lower grade intersections of half a gram over 50 meters. So, there is definitely gold around and there is also some significant oxide gold over there in casino.
So, it’s a very, very interesting project obviously big news in the area was Kaminak coming out with his first resource which was just over three million ounces inferred and I think with the recent change in management there you’ll see them moving more from a potential production point of view casino to the east came out with a new feasibility study that looks more attractive. So, this project is been bit of a sleeper in our portfolio. I’m very enthusiastic about it and I’m hoping next year or this year I should say that will be able to do some work because I certainly like what I see geologically and in terms of and all the mineralization already recognized as well as the scale the system. Its certainly a major, major system there.
Juan Costello: Certainly and so in terms of some of the trends right now, can you expand on some of the market trends in the sector and what makes you guys uniquely positioned to capitalize on them?
Bill Pearson: Well, I think that as everyone knows it’s been a very, very tough market and we really most of 2012 everyone have the same problem that anytime you put out news your stock price went down. I think for investors looking in the sector now it certainly been beaten down so that you see there are a number of companies with good assets we certainly count ourselves as one of them that I think are the ones to watch. And the companies that have solid projects, have the management and technical wherewithal to move these projects forward and are in good political jurisdictions ultimately this sector will turn around the global demand for resources is not going down. Certainly the demand for gold isn’t, we’re in a unusual period here where the economic indicators such as gold price is really nothing wrong with the $1650 gold price. It’s actually a very good compared to even just a few years ago, the Dow is just over 14000. So, it seems very much that the US economy is starting turn around and of course that has tremendous significance for us in Canada.
So, I think it’s a good time for investors to have a hard look at the juniors and say well who in here is going to be the one that’s going to pop when things inevitably turn around. And I’m not predicting necessarily an immediate turn around. I think we maybe looking at things slowly getting moving and perhaps by the summer in the fall. But we certainly think that we’re well positioned in terms of our asset. We have a standard resource already, we have a lot of infrastructure advantages at Hope Brook, we have power, we have a good road network around tide water, we have tailing ponds and I think above all we are also in a very good mining friendly political jurisdiction. We have a lot of local support for the project, a lot of local work for us, we use a lot of local suppliers and this had become an increasingly significant issues for mining companies around around the world.
So, and, you know, it’s interesting in the last three or four weeks, I’ve had a number of investors call me about the project and giving them an update this is I’m doing to you and, you know, they recognize it as a solid project, they recognize the management team here has a solid track record of doing this and mining is a tough business. You really need people to know what they are doing and they like the fact that is in Canada in New Foundland and a good jurisdiction. So, I think it’s a good time for people to look at companies like Castillian, do your home work, we have lots of information on our website, everything is on SEDAR but those are the companies I think that in the next three to six months we’ll start moving. And, you know, you’re that’s where the leverage is and the smart investors, you know, I think looking at things now very seriously. They are not jumping in but they are definitely going through and looking at it and putting their list of companies that they feel have an opportunity to move forward and we certainly hope to be that investors will have a hard look at Castillian and put it on their list.
Juan Costello: And what are some of the goals and milestones you and the team are hoping to accomplish over the course of the next year?
Bill Pearson: Well, the biggest thing that we would like to do is to put ourselves into position where we can get that next eight to ten thousand meter drill program, drill of that near surface target zone as well as filling the drilling to the north and little below it. So, that we can outline a significantly expanded resource on which we can base the PA. There is also a number of targets that we have identified in the existing resource, we have where we can upgrade it, in fact in the last program one of them that was on our list there was a stope in the upper part of the mine in the southern part that appeared to be broken but never pulled but we couldn’t decide which it was based on the old records. So, we left it in there as waste in the last resource. Well, we drilled two holes in there and got two and a half grams over 20 meters, 15-20 meters. So, obviously it’s there. So, there is things like that, that will certainly add to the resource but also it will take away waste.
The other thing that we planned to do is we’ve been moving along the technical work needed for a PEA we did quite a bit of meteorological testing last fall, you know, we’ve confirmed an 86% recovery which is little better than the average recovery at the old mine. We think we can do some more work on that and get it up to hopefully close to or at 90%. We also have to do some geo technical and environmental work. Again we’ve already done some baseline environmental study. So, we’re gradually moving this along and the intent is get into a position I hope I sort of certainly by the fall it will depend on available financing obviously but that we’ll have all the technical pieces in place and a substantially expanded resource. Although we already have a very substandard resource that will allow us to move forward and do a PA and at the same time continue expiration because the one thing that continuous to be shown when we do the work here. This is a huge system far bigger than anyone previously has appreciated. And its typical of Protozoic gold systems worldwide. These are huge systems in big risk long lived and certainly all the flames and technical work we’re doing continues to build on that. So, if you want to find a big deposit get in a big system. This is a big system.
I think the other thing too is that, you know, we’ve only done 36,000 meters of drilling so far, which is a relatively modest amount. Yes we have the advantage of some of the historical drilling but lot of that frankly wasn’t as valuable as we had hoped largely because of recovery issues that occur. Kaminak for example has done 120,000 meters to their resource, remarkable down in Hail in South Carolina which is deposits that’s got some geological comparisons to Hope Brook, they’ve done over 300,000 meters. So, you know, honestly we’ve really scratched the surface here but with the technical work we’ve done, our recognition of these fold structures and drill meter predicts where this mineralized silicified zone go, it means that we can do very focus, very surgical drill program as going forward which will allow us to expand the resource quite rapidly.
So, I think we’re very, very well positioned. I’m very pleased where we are technically, obviously I wish we had a better market but certainly there is no doubt that I see all the pieces in place and I think one more drill program we can get to their PA’s territory. And then we’ve got so many infrastructure advantages, we have a Province that would really like to see is build a mine there. So, you know, we have a lot of positives here that will continue to impact on project and obviously increase it’s value which is where the leverage is for any investor looking at our company.
Juan Costello: Sure. And so perhaps you can walk us through your background and experience Bill and talk a little bit about the management.
Bill Pearson: Sure. I’d be happy to, you know, my background is a geologist I went to school in originally in UBC where I did my bachelors, I did my master PhD at Queens. I’ve been working continuously since I graduate with my Bachelor’s, I’m near 39 now. I have worked all over the world and not just visiting properties but actually working on running programs and I’ve worked and everything from grass roots expiration through advanced development feasibility studies and production. I spent a lot of time in mines and I think that’s important experience when you’re in expiration, ultimately goal is find a mine and get the ore to the mill and predicted accurately, you know, as I mentioned earlier, you know, I was the first guy in the ground in Jacabina for Desert Sun. Lot of parallels between Jacabina and Hope Brook actually because Jacabina everybody thought it was a, it didn’t have any potential that everything had been found, you know, was too low grade and we ended up working away. We did the same process I’m doing and we put all the data together, we re-interpreted the geology, we had a huge success when we hit the big south extension of Canaberas.
We had some fantastic values in that and eventually and we just kept building and building the resource and then Peter Tagliamonte was the CEO, was busy building the mine and the whole thing came together and we pour the first gold bar at the end of March 2005 and then we were bought by Yamana a year later and all that work we had done initially the market didn’t really give us much value but once they realize hey this things going to work it took off. And similarly when I was down to Nicaragua the old Green Stone property everyone thought they had no potential, they were really poor grade blah, blah, blah. But the reality was the technical work was exceedingly poor and we turned out around built a strong team.
So, here I am in Hope Brook working on my hat-rick here I see the same parallels. Everybody thinks the mine was exhausted. Well, it was mine that sub 400, they were mining at a two and a half gram cut off that gold price now is 1650. People think after 10 years you should have done all the expiration around the mine. Well, the fact is the deep drilling was too short, never hit the zone and as we demonstrated in our last program even the shallow drilling didn’t hit the target properly, they didn’t know where they should be drilling.
So, this thing is actually wide open and but like anything else finding resources, developing mine take some time but, you know, we’ve only been out there for about two years, it’s pretty fast in the mining thing. So, that’s the kind of skills that I bring to the table, I built very strong team in New Finland, Dave Koplan came on last year, a 20 year veteran knows the eastern part of the country extremely well. I’ve got a number of skilled geologist and technicians built up a very strong local team and the fact we were able to do 6000 meters in less than two months. A test the high level that we operate at and we also is part of the force group, we have access to some very good engineering expertise, I’ve got two very experienced engineers on my board, Mike Hoffman who I known for years, work with him in Bardy Engineering, he worked with gold core Rio Algo He also worked with Desert Sun with me and Brian Penny who is currently CEO of Capex which just issued an amazing 7 billion ton resource. He is a metallurgist by background, so we have a very, very strong team here and we also have the support of some excellent consultants.
So, one of the message I always give to share holders is you want to look at the project, what kind of project, look at the people running it. Do they know the mining business? Do they know how to define a resource, take that resource and move it into a PA and taken on to pre-fease and feasibility and build a mine.
And certainly I’ve been through all that a number of times, I know it’s required and it’s essential that management have those skill sets because it’s mining is not an easy business but if you do your work properly you build a strong team and you’re in a really great mineralizing system like we are at Hope Brook then you greatly increase the odds of success.
So, anyway that’s just a kind of a, you know, a snapshot. But I’m very enthusiastic about this project and it’s actually got a lot of remarkable parallels to Jacabina, I mean for the first two years in Jacabina everyone thought we were nuts that we didn’t we’re crazy, this wouldn’t work yadayadayada, and in fact I was don in Jacabina in August courtesy of Humana, they will be mining there for 25 years or more. The whole vision we had for Canbaris that’s what they are developing right now. So, I’m bringing those that same skill set to Hope Brook, I see a lot of the same indications and I think this year will be an exciting one because I think investors will see or further work how the picture is really coming together and that will really reflect and being able to further built the resource and as well as, you know, move the engineering side along and show the world that hey Hope Brook can be a really, really good mine which I certainly think it has a potential to me.
Juan Costello: Sure. And so once again joining us today is Bill Pearson, CEO of Castillian Resources which trades on TSX venture, ticker symbol CT and on the OTCQX, ticker symbol is CTIIF. And before we conclude here Bill just to briefly recap some of the key points from the interview, in less than a minute, you can you talk about why investor should consider the company as a good investment opportunity today?
Bill Pearson: Yeah, absolutely. Well, there is a couple of things, number one we have a great project in Hope Brook our flagship, you know, we already have a substandard resource there, we have 590,000 indicated and 548,000 ounces of gold of which the bulk of that is potentially open pit-able. Our last drill program outlined a major near surface target zone which we think has a potential to substantially increase the resource. We’re in a huge system that really has been remarkably under a spot but it did produce over 750,000 ounces in the past. We have a lot of excellent infrastructure, we’re in a great jurisdiction and we have the management and technical team to move this forward and as an added bonus we also have a very interesting project up in the Yukon in Canadian Creek right next to Kaminak which is recently announced of substantive resource. So, we think we’ve got the asset, we’ve got the team and we think we’re one of the companies that investors should have a hard look at because when this market turns around which is inevitably well, we think there is a lot of up side in our stock.
Juan Costello: Well, we certainly look forward to continue to track the companies growth and report on your upcoming progress and we like to thank you for taking the time to join us today and update our investor audience on Castellan.
Bill Pearson: My pleasure, always a pleasure to talk to you.