Notes from The Sunday Roast Podcast - 10 May 2022

[DipSard]

Notes from The Sunday Roast Podcast - 10 May 2022

Interview: https://audioboom.com/posts/8081114-mid ... ld-aim-ggp

* Progress since last podcast in Feb, plenty of RNS’s and seen a new drilling grant in the Paterson Range (Note: Rudall related RNS)?
- A positive piece of news, we now have a grant around the Rudall tenement in the Paterson, think of it as part of the Havieron opportunity
- It’s to the south of Hav and we plan to get drill pads out there this year or early next year at the latest, present intention is to do this in the back half of 2022
- Have some high priority targets there and for this kind of regional exploration you try and set out a coherent program and demonstrate some potential so you can potentially access some dollars as the government does want to see regional development, it was there and helps us prioritise the Rudall tenement which is great for shareholders.

* Any idea of the size of the tenement, any previous drilling or gravity/magnetic surveys etc?
- Been a number of previous surveys in the past and that’s how we’ve effectively prioritised our targets so we have a good understanding of the gravity and mag formations
- Similar to Scallywag in terms of tenement size, a very meaningful footprint as you do in these remote areas where you tend to get pretty sizeable blocks and we have a number of targets the geo team have prioritised
- We’ve got some grav and mag targets there as good as at Hav, but I always tend to think it’s very hard to rank your targets in exploration under cover
- You can rank them, but at the end of the day you have to systematically test all of those targets and anomalies
- You can have targets that look better on paper than Hav but they aren’t when you drill them and of course Hav took 45 years to discover post Telfer because even though it was an anomaly, it never quite percolated to the surface
- No substitute for the structure of a disciplined program but clearly there are a couple of targets we wanted to prioritise hence we put in an application to drill this season.

* More detail on why the Australian government wants to offer grants for these kinds of areas?
- In terms of support for the sector, Australia has a very meaningful mining component to its economy, exploration is the lifeblood of that to continue through target generation and discoveries to maintain sustainability of the sector
- In terms of where they want you to drill, it’s generally around new areas as you’re typically not going to get a grant to do a brownfield extension of an existing project
- It’s about new project generation, I think the government feels if they can sponsor those initial targets that once you tag something, then the market will fund the development
- Kind of putting the money forward for some encouragement and risk sharing and can potentially deliver substantial benefits
- And there are a number of programs, there is a limited scale tax deduction program for citizens on exploration that needs application and then you go to somewhere like Canada where exploration dollars are fully deductible through to the shareholder, don’t have a system in Australia that sympathetic so a little step towards support towards eth sector but not as generous as other places.

* Not to do with the specific area, more to do with exploration to support the mining sector?
- It’s both, you put in an application describing why it’s prospective and a genuine new opportunity
- These are competitive, not guaranteed so we’re really pleased at the outcome and the team did a really good job at describing and documenting the opportunity there

* How close is Rudall to Havieron?
- About 20km south of Hav so quite close
- On structure, so we like it, sometimes being on structure is more important than proximity and if you have both like Scallywag, that’s perfect
- This is a long structure, we like the area and high priority targets there and nice to get a drill pad on the ground
- Even by Australian standards the region is remote and large so the distance can be a bit misleading but it’s in that tenement package and something we like and enjoy and we want to keep that tenement.

* From a processing point of view, if there is Gold then you’ll be very close just as you were at Havieron.
- Again, would have thought that’s within a truckable distance to Telfer, slightly more to the South East while Hav is more due East but the radius of distance from Telfer is not dissimilar
- If you have a good discovery there, it’s near to infrastructure so you give yourself an additional opportunity
- When we target new tenements, we are mindful of trying to bring these online and the closer you are to infrastructure the higher the probability, or the lower threshold of success required to turn it into a an economically viable project.

* How did all of this gold get there in the first place (Telfer, Havieron etc.)?
- Fundamentally these are instrusive’s and what you’re seeing especially at Havieron is this dolerite structure which is a subsequent post mineralisation event showing a weakness through that structure, all part of this general brecciated area
- You’re getting the intrusive’s up and because you’ve got those cracks in the rock, that’s effectively forming a trap and what we’re typically seeing is there is a very strong correlation at Hav between the volume of brecciation and the amount of grade carried so when you start getting out to the less brecciated areas they may still carry mineralisation but there’s less room, less volume is trapped so your grade is lower
- I’ll add to that, somewhere along that SE Crescent, it is a different temperature movement that has carried a higher degree of grade of gold and copper so that’s not just a function of breccia, that is a really rich intrusive or metal aid event
- Generally looking for that combination of brecciated rocks associated with the magnetic and gravity targets.

* In layman’s terms the molten rock has come up which is carrying the gold into the bedrock and then solidified and that’s where the gold is laid as it couldn’t go any further?
- That’s a nice description.

* An overview of where GGP is at?
- As in previous discussions I’ve referred repeatedly to a ‘transition process’, I’ve come into what was a really successful exploration company and we should celebrate the discover of Hav and important to talk about Callum and the rest of the team that gave shareholders this platform
- Now really tried to shift gear and there are some transition issues through that JV agreement such as the 5% Option agreement with NCM
- GGP wants to maximise that value and you could argue that NCM wants to buy that at a lower price and to be honest I’ll be glad when we get past that and have better structural alignment with NCM because you don’t ever want a JV where there is a win/loss scenario
- Fundamentally we’ve come into that where NCM have wanted to try and transact around that PFS proposal and GGP have gone out and done its own Resource and Reserve and I think that the quality of that work by the team is a credit to them
- Really justified the investment we’ve made in people to give us that capacity, not just in geology but in resource geology, mining, processing and corporate capacity and think that’s made us better owners of Hav and better able to articulate and justify its value in a process
- Like to think that through that we’ve shifted the paradigm value because the valuation date of that 5% is the 15/12/21 which is really just two months after the PFS, so in a very short amount of time I like to think that we’ve added a lot of value
- Now, time will tell as there’s an independent expert we expect to be appointed shortly but I think we’ll deal with that and show this compounding average growth rate for this asset which I think is going to be quite spectacular
- Albeit off the low base that the PFS set and that GGP set at the transaction that it sold 70% on, but I think what that will show you is how quickly we’re adding value to Hav, you can do that because it’s world class and it will show you what Hav will be in the next 12 months, it will give you a very good indication of where we are going
- And I think that is finally why I am excited to get through this transition and be fully funded as I think that is a huge catalyst in terms of people having confidence we can now maintain our share of the project and take it through to production
- And during all this time we have the advantage of leveraging existing infrastructure and already because we’ve brought in the strength of NCM, we’re already starting the decline
- Every week and month that goes by, we’re that much closer to the commencement of mining, to the commencement of cashflow
- And normally to think this was discovered in mid 2018 and we literally expect to be in production in about 18 months’ time from now is extraordinary, this is all testament to the quality of Hav and if NCM does exercise its 5%, and regrettably I really think they will because I’d love to hold more of it but regrettably let’s assume NCM are going to exercise their 5% it’s testament to the fact that Hav belongs in the portfolio of a major
- And what are major’s looking for, lowest CAPEX, multi decade large volume assets and I think that’s the opportunity at Hav and it’s becoming more and more apparent as we move through the cycle
- You know, it’s good fun when you get to sell a Havieron, you don’t get too many in your career, it’s a good fun asset to talk about.

* Whatever price this 5% settles at, what’s the right words….it’s going to be business changing for GGP so you can quibble over the amount but the reality is it’s going to change the face of the company in terms of being able to fund things, being able to do all the things required to bring Hav into production. So, it’s not a bad thing no matter what happens, so yes be nicer to keep 30% but pretty sure that’s not going to happen and I think you are as well. What timescale do you expect this will all be sorted at?
- No definitive timeframe in the JV agreement, having said that the relationship is good and strong and engaging between NCM and GGP
- When you have that kind of relationship, these kind of matters can be progressed quicker, doesn’t mean that GGP isn’t fighting very hard in its corner to get a great outcome and doesn’t mean NCM isn’t doing exactly the same to us
- We respect that and understand their obligations to their shareholders just as ours are to our own but I think that I’d like to finish this transition period and get past the distractions of the 5%, get the bank funding in, be past that distraction and have this platform where we just focus about the movement to free cash flow, the organic growth of the asset and the potential augmentation from exploration success on a Rudall, on a Scallywag and the big option value in the portfolio to try and tag another Havieron and we’re in the right postcode to do that
- Maybe the last thing I’d talk too, shareholders should have confidence that we continue to look at adding prospective tenements or exploration licenses in that postcode
- I think we’re seen as a technically strong team which means significant companies in that postcode are willing to talk to us about working with us which again is a credit to us and a lovely insight that within the sector our team has established its credentials as a capable and confident operator and technically strong
- And the other one is the third pillar to our growth strategy, deliver Havieron, continue to try to unlock the option value in the exploration portfolio and also contemplate inorganic opportunities to grow, financially disciplined ways to add another leg to the stool
- And if we can diversify and grow, I think that’s also really important and again we’ve established a good reputation as explorers, also bring with us and have further enhanced reputations as people who are financially disciplined and good counterparties to transact
- We have a tremendous platform, I see it and our shareholders see it, but other companies see it too, Hav is a bit special and we should celebrate that.

* How on earth is gold not increasing rapidly in this inflationary environment, partly because of the strength of the US dollar perhaps but very bizarre?
- As someone who did a little bit of economics when younger and certainly a bit rusty but gold is traditionally a good hedge against inflation so I think that’s positive but in the research I’ve read in the last couple of years there is an ongoing and stronger correlation with the US dollar so can have short term impacts where gold turns around
- When you look at gold in an Australian dollar set (and remember that is what will determine our margin), AUD gold price is still fantastic, still tremendous and we’ll be having a $!500 announced profit margins, that’s outrageously good
- One of the beauties of being an Ozzy AUD gold producer is often that currency is your friend; when the AUD appreciates typically the gold price offsets that and vice versa
- So you tend to have a slightly more protected margin given that the Ozzy currency is a bit of a commodity and risk on currency, so it is a lovely hit
- And the other element is we’re 20% copper, it’s a beautiful stablemate, the best gold mines have copper and I love the diversification, I love the copper story and the outlet to EV's and we continue to consider base metal opportunities within Havieron
- In due course we'd like to talk about perhaps other base mineral opportunities within Havieron
- So, I'm really attracted to diversification and I think Havieron brings that and in future metals which is a unique place to be
- To have a combination of gold and copper and maybe some other metals, you couldn't script a better platform.

END.