As Good As Gold: A Conversation with Brien Lundin

0:08 Hi, everyone. Welcome to our conversation as good as gold, in which I will talk over a lot of things, really macroeconomic situation, the metals markets, the mining share markets, with 4 really very experienced, very knowledgeable executives in the mining industry. And To kind of set the table for what we're going to discuss today, I kind of picked our panelists today because we're in a, and really wanted to do this presentation because we are at an extraordinary, I think, crossing point in the markets, a crucial point in the markets. We have right now a short-term, kind of a summertime down cycle that's superimposed on top of a longer term, more fundamentally based down cycle in the metals and in the mining stocks.

1:06 And these are combined to create, I think is really an extraordinary opportunity. If you're involved in this sector and have been involved in this sector, it's many years maintenance and these individuals, these gentlemen have as well. You know that you have to make the cycles in these markets work for you. You have to be willing to have the courage to buy at the bottom. Hopefully you also have the cash to buy at the bottom, but you want to have the cycles work for you and not against you. And right now we're in a down cycle. And another reason why I wanted to have these 4 companies on board is that they not only have great management teams, of course, well-managed, well-positioned in the markets, in great projects, but they not only offer the potential for great value creation, but they have already attained great value creation.

2:02 They represent value that is essentially on the sale or really bargain levels. So what we're going to do is, I'm gonna talk about the broader market to start with. Then we're going to get into some more detailed discussion of where the markets are, where these companies are, and give you an overview of each company in particular. Today we have with us Paul Hewitt, Chairman and CEO of Karora Resources.

2:29 We have Doug Ramshaw, President and Director of Manera Alamos. We have Brett Richards, who is the CEO and Director of Goldshore Resources. And Rick Von Neuenheis, President and CEO of Contango Ore. Gentlemen, I am very familiar with all of you and your companies. Doug and Rick, I've known you since, both of you, since the dark ages. I think we were mining the stone axes when we were first introduced together. And Brett and Paul, I've come to expose your companies in more recent times, and I'm very excited about the potential for those companies. So what I'm going to do is start off with some commentary on the markets, and I'm going to go in clockwise order to begin with with the people as they appear on my screen.

3:23 So the big question that everybody, that I get asked at every conference, every virtual presentation, anything that has any kind of audience feedback. The first question I ever get is why in the hell is he cold? Aren't gold and silver trading much higher? I mean, we have perhaps

3:46 the greatest fundamental, most favorable fundamental story, macroeconomic story for metals that we've ever seen. We have high inflation, real rates lower than anything seen since 1970s and greater debt loads than perhaps ever before. So why aren't gold and silver trading much higher? Doug, you're first on my screen. Why don't we get your views right off the bat? Doug Nobles I think, Yeah, I've known you since the dark ages. I think we're still living in them, aren't we?

4:23 I mean, to some extent, you're right. I think all the ingredients are there and it's probably got a lot of people scratching their heads. Gold, the ultimate inflationary hedge. I mean, despite the fact that I'd say 20 years ago, you'd look at everything that was supply-demand related. And so but over time, gold hasn't reacted to how it used to on geopolitical times. It hasn't reacted to central bank buying and selling,

4:53 but the one thing that you expected it to kind of react to was inflation. And so it's probably got a lot of people scratching their heads. The signs were there even last year prior to the obviously rapid inflation rate pressures we're seeing right now that all those ingredients were there last year and yet gold gradually kind of declined,

5:19 causing pressure on the equity market, contractions in margins, which just means headline indices for some investors like the GDX and GDXJ are underperforming when there's other opportunities out there. And it just costs a pull over all sentiment. Now, that being said, I mean, at some point, I don't want to be in the gold prediction business. I'm in the gold mining business and trying to make money at lower gold prices. We are. This is a healthy gold price. You know, 50 percent, 60 percent up off the lows. You know, Obviously, there's a lot of people that need higher gold prices to make sense of business models and everything else. But I don't want to be in the gold prediction business. That being said, I would agree that at some point the rubber's got to meet the road, like, you know, we're either we're either going to see a gold price that's static and inflationary pressures affecting operations, then operations having to go into care and maintenance that will at least send signals that, you know, some uneconomical mine supply is coming off.

6:28 Or yeah, we're gonna wake up 1 day and the market's dynamic has shifted and we'll suddenly see 100, $150 pop in gold price. We should all be preparing our business models or our investment thesis to protect on the downside, but offer opportunity should gold prices have those kinds of moves. But yeah, it's a bit of a head scratcher for sure. Yeah. You know, my views on that is that the markets don't really care where the gold price is. I mean, this is a healthy gold price for most miners. They care where the gold price is headed. So it's really the direction that matters and it gets people excited about it. The other thing, though, is that gold and inflation hedge, it's really a barometer of people's concerns over the future purchasing power of their currency. It's more of a freakout barometer than a concern barometer. If people really get worried about where their currency is and their purchasing power is going, then they buy gold. You can see that on the charts. It's only a period periods where they really get worried that gold makes up the lost time and then even overshoot equilibrium.

7:41 Brett, what do you think about all this?

7:45 Yeah, I think you guys are kind of right on the mark at the end of the day. And I think if we look back, you know, gold has a 3000 year track record as an insurance policy to unrest. And, you know, if we want to compare the macro today to other, other major points in the last 50 years, I would say 2022 ranks up there, going back to the depression.

8:11 You hold gold because there's an inverted return to normal investments, normal equity investments, And it's an insurance policy against crisis. And quite frankly, it's tangible. So that's a really wide goal. But then when you look at the macro drivers of what really drives us to this place, they are, you know, almost every box is ticked. If it's geopolitical between, you know, the situation between Russia and Ukraine, China and Taiwan, North Korea popping its head up every once in a while. But The Russia-Ukraine thing has led to other types of, I'll say, depressive events, like the energy crisis that's going to happen. It's happening now, the energy crisis that's going to happen this winter in Germany and the rest of the EU.

9:01 And then the lack of wheat production and potash, which is going to, you know, emanate in a food crisis, mostly in Africa and India, partially in Europe. But these are all calaminal events that, you know, just geopolitical uncertainty. You've got socioeconomic uncertainty, and certainly because of inflation and because of global monetary policy. And you've got environmental uncertainty with climate change and the impacts it has as well. So we've got a world right now that has political and social disorder.

9:38 And quite frankly, I think we need a bit of a moral revolution in the US, Maybe in the next election, we'll see. But today, in 2022, we tick all the boxes for gold to be at a much, much higher level. And it's not. And, you know, that is that because of the illiquidity in the market is because people are sitting on cash and uncertain about what they hear in fake news and fake politics. And there's really this polarizing, this polarizing,

10:11 I'll say, views of various political stances. And Yes, in the US, which is the world's largest economy and should be taken that seriously. But all of these geopolitical and socioeconomic environmental factors have led to supply chain issues and we're at a commodities plateau. I just feel like we're in a bit of a paralysis. Now, do I do I feel like gold's going to tank and go lower? You know, I we can't predict that, but it certainly feels like it should be stronger given kind of the macro situation of the world today? Yeah, you know, Brett, of all those geopolitical and macroeconomic factors that you listed, I didn't see one of them that was disinflationary.

10:59 It's All of those will add to inflationary pressures as to why gold isn't trading higher. My view, and it's more of an excuse than a view, or what I think probably is behind it, is that the price of gold and silver and really about everything now is set by Wall Street traders trading in the futures markets. And

11:20 all they're looking for is what is going to be the next thing to drive Fed policy, central bank policy. What's the next headline? And right now the Fed is tightening and it's saying there is no Fed foot and it's going to break everything in the house as long as it takes, whatever it takes to get inflation down. So that's what they're trading. I think that all the factors you listed mean that inflation will be high, if not as high as it has recently, it will still remain stubbornly high. I think very soon the Fed is going to be proven to be impotent in fighting inflation because it can't get rates high enough to really kill off inflation

12:04 because of the debt load. And I think that's going to happen at some point over the next couple of months. When that happens, you see an environment where we'll have high inflation and a Fed powerless to act against it. And I don't think that's good for equities, but I do think it's good for precious metals. So we might have a situation where, for a chain, the policies are beneficial or bullish for metals, but not as bullish or even bearish for the other alternative assets. Rick, you look like you're chomping at the bits. At least nodding at me. You're still a part of my thunder there, Brian. But, and you've said this many times before, but just to pick up on some of the conversations that have happened here already. But we live in a very confusing post COVID time and we've got California passing laws to make us all buy electric vehicles, but then you don't have enough power to charge them.

13:04 We have a Biden administration that uses the Department of Defense, 1950s version of the Department of Defense Act to say we got to go mine critical metals in the United States, while there's 4 or 5 major copper nickel projects that are on hold specifically because of actions taken proactively by the Biden administration. So, Yeah, we live in very confusing times and very concerning times with what's going on in the Ukraine and Taiwan and we have Korea now selling old Soviet bullets to back to Russia. I mean, These are weird times. I think you're absolutely dead on right. We're in this 1970s version of an inflationary environment.

13:54 The big difference, and you've pointed this out many times, Brian, is the debt load. It's a much larger percentage of GDP than back then. We had a strong Fed and Paul Volcker who finally sort of brought inflation to its knees. I

14:09 don't know that we have the will to do that anymore so I suspect we're going to be living in a stagflation inflationary environment for quite some time. Because as you say, the fence has to pivot at some point. And when it pivots, I think, you know, the emperor has no more clothes. So it's, you know, How long does that take? Is that happening in the next few months or does this kind of grind on for a year or more? I don't know. As Doug said, we're just in the mining business. We don't predict these things. Yeah, you know, you mentioned whether they have will. I think That's a moot point. They may have the will to fight inflation, but they just don't have the same tools that Paul Volcker had. When Volcker was fighting inflation, the federal debt was 30% of GDP. Today it's closer to 130% of GDP. So it just can't happen.

15:06 And I don't think they even need to do it. I don't think they need to completely do an about-face and start cutting rates again. I think the moment they stop is kind of an admission that there's nothing more they can do without literally murdering the U.S. Economy and U.S. Budget. So I think that's really all of them. I think that's coming up. Paul, you've been nodding your head in agreement. Did we steal all of your thunder or do you have anything else to add to this? Yeah, Brian, thanks. Actually, the whole team kind of did steal just about everything here. Look, we've got a perfect recipe here for gold to increase. There's no doubt. And everybody said that. Everything that's going on in the world today certainly poises us for people to put gold in their portfolios to hedge against this inflation that we're into. We're coming off the worst pandemic the world's ever seen.

16:04 But as a gold operator, a gold miner, gold prices aren't completely unhealthy. They're not at the worst I've seen. I've been in this for 35 years. Mining in Australia has its advantages because of the current effects in the current situation. We're sitting in $2,500 gold. So if I was to sit here quite honestly, Brian, and complain, I think I would

16:27 be lying. Gold is quite healthy in Australia at $2,500 an ounce, but there's no doubt in my mind, none whatsoever. When I'm speaking to people here in North America, when I'm marketing and I'm doing a lot of marketing coming up, that I fully believe that there's a lot of room for growth to go to grow from this position. Absolutely. We have everything in place for it to grow from this position. There's no doubt about that. Well, let's drill down a little bit. We talked about the metals. Let's talk a bit about mining in the state of the market. The mining shares, surprisingly, have followed the metals price down this summer. And you know, it looks like we tested in gold, at least the bottom of it that in July.

17:17 And, you know, who knows where we go from here. I know we don't want to predict necessarily but what's the state of the mining market you know. And I guess an intermediate on down the juniors. Are our companies and I know none of your companies are in this position, but are companies starting to get starved for money at this point? What's the financing environment look like? Are we going to see companies starting to pull in their horns and curtail their operations a bit because of that. Doug, you've got a great handle on that. What do you think? We're in a, definitely we're in a closed financing market. I mean, you're seeing very selective financings being done on good drill holes and and certain M&A. But in reality, it's been a closed market since kind of late June.

18:11 Everyone is crossing their fingers that, you know, September and conference season kicks off maybe a window.

18:19 I feel blessed that, you know, from our business model perspective, it's about self-funding itself rather than having to access the equity markets. But I feel for my peers of companies that routinely on the exploration side, you know, They do a financing and I've got friends of mine who are CEOs and the first thing they're thinking of is when they have to do their next financing. And shareholders need to think about that too because this closed financing market we're in is bad. I think on top of that, I mean, this has been, I said before we started March, 2020, I mean, despite obviously the implications on the world stage of what happened then from the mining market was very healthy relative to the last 2 years, because it was a real band-aid ripped off moment. And stocks were posting new highs within 6 weeks of that collapse.

19:17 But this has been death by 1000 cuts. The top of the market was August, September 2020. We're there, we're 2 years on. That top was marked by maximum margin expansion amongst the majors that have been suffering margin contraction ever since. You've now got inflation coming through which is hitting developers because who wants to put out a study now? You know, PFSs probably feel like PAs. No one's going to believe the numbers because there's inflation coming already there. You're seeing projects that are

19:56 seeing 50, 60 percent moves in CapEx numbers from 18 months ago to now. And that kind of dovetails into that group of developers almost have to have a plan to build themselves because the size of projects they've gone through these studies for doesn't move the needle for the majors and the mid-tiers are gun-shy. And probably thinking about, you know, is there safety in numbers of going to the MOE, merger of equals kind of M&A that doesn't have the same benefit to the kind of trickle-down effect of cash M&A, which we always like to think, is that marking the bottom of the market or it's marking the top of the market? I think we're going to have a much more limited M&A window that can benefit kind of downstream resource sector. So it's not a healthy equity market out there right now. But I also think that it will prove to make a healthier equity market.

21:02 Because not to repeat what I said in a panel a month ago, we have too many companies trying to do too much with too little capital and really a culling of the herd is actually healthy for the broader market. Investors are blasted with hundreds of new, I mean, we're creating new companies every week when we haven't even solved the ones that are existing out there right now. So to some extent, you know, this current environment should hopefully allow investors to see which companies are doing well. Maybe they're still not providing absolute returns

21:46 in this market, it's very hard. Very few companies have shown that over the last year. But relative performance against the sector, I think, should help investors at least direct their attentions to where they should be conducting their due diligence for the companies which should fare better as market conditions improve?

22:07 Good points there, Doug, and you know, especially the creation of companies. You know, one thing that the market can do is it can create new winning companies, but it can't create new projects. There are a limited number of really good projects out there and you all are fortunate that you all have really good projects, which brings me to Brett. And another point that I'd like to make, a lot of companies out there or executives are bemoaning their share prices right now, but from an investor standpoint, they should be looking at their chops. These are extraordinary entry points for companies with real assets.

22:46 Really world-class assets in many cases are trading at fractions of their Hame's. So even if the market just normalizes, I mean, we don't have to have a rollicking bull market. Even if we have just normal market situation, You have the potential to

23:03 have a company with real assets go up to 3, 4 times in value or similar to what a drill hole plate would return, possibly return with much more risk. But, Brett, you seem to be right in the crosshairs of that kind of an environment, that kind of an opportunity with a really great project and multi-financed and funded and a lot of news coming up. Are you seeing a market where I guess it pays for you to put out a lot more, I mean, you don't a lot of drilling right now. It seems like the market's really kind of ignoring results from just about every company on every strike. Are we getting the kind of response that you should be getting on the market right now? Yeah, Brian, I think I think you've hit it on the head.

23:50 Where we were seeing kind of polar volatility, you know, 6 months ago and up until, you know, maybe May, June. And prior to that, we had a fairly normalized market. We could go out there and raise money back in 2021, 2020, 2019

24:11 was also an open market and there was capital available. I concur with Doug. I think there's too many companies out there and too little capital goes to the ones that need capital and can expedite their programs and bring these projects to production faster.

24:34 You've heard me say this many times, speed to market is absolutely crucial as an investor. And I wanna know, I want visibility on cashflow on every project. If it's a greenfield project where you're doing soil chems, I still want to get an understanding of when your project is, you know, what do you think this is going to take to get it to production? So yes, I

24:59 completely closed right now. Yes, as Doug said, you can pick and choose and there's companies that do that to raise a little bit of capital. But when really good projects, and I think we have a very good project and you'll hear the squealing in the background as to where our share price is today. It's a share price where I'm going to be in the market next week buying shares of my own company because they are at an all-time low. We're trading

25:30 at where Greenfield project should be. We have a large historical resource and there's been a lot of work done on the property. We're putting out good results. To your point about is the market responding, we put out our last 5 press releases, the very last one. We didn't trade a share that day until about 02:00 in the afternoon. And it was great news. We had great intercepts, step out from our existing historical resource. These are great, great news. These are things that would typically move the needle 10% or 15% in 1 day. And nothing, Market doesn't care. The market, there is no market. There's no liquidity. Throughout this summer, it's been very difficult. Do I think things are going to change? That's a self-fulfilling prophecy. I would love for them to change, but I don't see it coming anytime soon. I think we're in this calamitous environment of capital raising for some time to come. And when great, you know, great potential and great projects and good projects can't capitalize themselves properly and then start to use their capital as a strategy to get to the next capital raising, that's not right. So there is a, Again, there's a disorder in the capital markets and it's because of this macro crisis and this political and social and environmental disorder I talk about. It's not a great place to be.

26:58 Rick, what are your views on that? Is money drying up in the sector. And again, the 4 companies here are in a relatively good position for the rest of the market as far as finance and resources, or financial resources. But your view in the market, is we reaching a point where it's gonna get to a crisis level for the junior market where they're going to have to raise money and won't be able to? You know, I think there's a flight to sort of quality in this kind of a market. I think, by and large, the market is not very interested, but it does get interested when you have sort of superlative results. And we've seen a number of cases where people have put out really good drill holes or they've had a good series of drilling.

27:56 And that gets rewarded. I've seen a number of cases, not a lot, because frankly, there's not a lot of high quality things out there. I think there is recognition in the market of extra high quality stories. I do think and agree totally with Doug and Brett that there are way too many damn companies out searching all doing the same thing, telling a story. And then we live in a period of time when the level of marketing that you have to do in this competitive marketing space to get attention just keeps kind of ratcheting up. And I think it's very hard for investors in that environment to sort of figure out what's real. And we have a lot of young investors coming into the space that don't know the difference between 1 gram and 8 grams. What does that really mean in terms of your ore body? So I think there's probably an educational step that needs to be happening here along with the marketing. And it'll probably take some time for young investors in particular. People who've been following this space for 20, 30 years know this, but a lot of young investors don't.

29:09 And so the glam and the glitz, they have to start seeing through the glam and the glitz in the marketing world. But I think that'll all sort itself out. I do believe we need to have about 0.5 as many companies as we do. And I suspect there will be a great thinning of the herd before this period of time is over here in the market. Good points. You know, the exchange has made it very easy over the last 3 or 8 companies, but they have yet to figure out how to kill them. The problem is, Brian, that ever since the exchange went public, it's now TMX Group, the issuers pay them.

29:55 You don't necessarily wanna kill that golden goose. So I think that's part of the problem. Yeah, it is. And Rick mentioned something as well. When we get new investors to the sector, they don't really know. It is a sector that demands some education. What I tell newbies, and I've had the pleasure of the last few years of doing presentations to a lot of people outside the mining sector trying to explain metals and mining. And what I tell them is that this is a very inefficient market. And what that means is if you can work harder than other people, if you can dedicate the time, the money, the effort to learn it and go to the best conferences like the New Orleans Investment Conference and subscribe to the best newsletters, then you can get an idea of how it works. You can learn the difference between 1 gram and 8 gram and the context that those matter.

30:55 But you need to put in the work, you need to put in the money and the time to do it. You just do it. Otherwise, you should just buy the industries and forget about it. Just allocate. So as a company that's operating in Australia and listed in North America, you have a different perspective on all of this. I mean, just looking at it from a different angle, perhaps, does it give you any more insights? Yeah, look, Brian, there's no doubt the comments from the rest of the panel are actually really true in the sense that the market is, it's really dry right now, the equity market is dry. However, I will say specifically to Karora, our company, and this is why I'm here, we did do a financing this year. There's a lot of money out there sitting on shelves that needs to be put to use.

31:42 There's a strong argument for a good use of proceeds. You can get some money. It's harder than normal. It's going to take a lot more effort. For example, this year in June, we went out with a bought deal to buy a second mill. That was really a big step for us, getting that second mill, because it mitigated a big part of our growth plan. And we were successful in not only raising the money but it was over subscribed. Followed by that we restructured our debt. We had a debt originally when I joined here at 10%, we restructured that in 0.5 and then put a line of credit behind it. So the best time I've ever found to raise money is when I don't need it. And we're in a very unique situation now as a producer that we're fully self-funded to our growth plan from getting that 120 to 135 this year, we're pushing the boards, getting to that 180 to 200,000 ounces in the coming years.

32:43 That's gonna come from our operations. So we're in a very unique situation. I agree though that the markets are tough right now. You've got to have a strong use of proceeds. We've been putting out information as well and it falls into this big sand pit or in quicksand where you have some amazing drill results and you're thinking, wow, this is going to move the needle and nothing happens. Even some strong production results. We've had a record in the second quarter. It was a record for the company since I've joined since we've been in production And it's been challenging. So a tough market, but if you have a strong use of proceeds, there's no doubt there's money out there. You just you got to be doing a lot more work and it's not as easy as it was a couple of years ago. It's not that easy. You've got to make sure you're knocking on a lot of doors.

33:35 Yeah, and it's a great point. After a few decades of ever easier monetary policies from the world's central bank, there are literally oceans of liquidity out there. I guess there's just super typically oceans of liquidity out there that are searching for a home and sloshing about from 1 market to another. So there is money out there. And if you're fortunate enough to have the projects in a good network of investors, you can attract that. And I wanted to get into each individual company story. So Paul, it's good you started. I mean, for all of you, when they put back the reverse order, and they get productive from everybody in there. In a brief description of your company and its context, Paul, you have rapidly growing gold production and profitable gold production, which is an enviable position.

34:27 And that was a great purchase. I mean, a real value add, it's highly creative to purchase mills. So you're in a different position now than you were recently. And also you have nuclear production, something you don't often see, make gold companies. So how does all this blend to make an investment argument or to our right now? Look, Brian, it certainly puts us in a very unique situation and provides us with optionality that I haven't had quite often in my career. I don't think there's anybody in the world. If you ask right now, if you ask anybody, where do you think Nickel is going? Our opening question was where's Gold? Why isn't it higher? Where do you think Nickel is going? I think you're going to get a very strong response with the electric vehicles coming up with the need for batteries going forward.

35:17 Nickel, Lithium, those battery metals are a huge, huge requirement and they're going to be more in demand. We've seen Nickel prices skyrocket in 2022. Having Nickel as an optionality, as a by-product for us is a tremendous, tremendous add-on for us. We're a Gold miner. We are, with that second mill, looking at growing our production to that range of 180,000 to 200,000oz. And just by way of background, for those who don't know Karora, We're based in Australia. We have the Beta Hunt mine. We started off with a single mill, with the Higginsville mill. We just recently bought our second mill. That was always part of our growth strategy to go from 100,000oz to that 200,000oz range. Buying that second mill really mitigated that and that's what that financing was for.

36:07 When you add on the luxury of that Nickel, we're producing 400 to 500 Nits this year, Brian. We just recently put out a new PEA and This is the tip of the iceberg here. You have to remember we're in a jurisdiction here with the Beta Hunt mine. It was a Nickel mine for 40-plus years. That mine ran everything, G&A costs, everything was run on the revenue from the Nickel. We're using Nickel as a by-product. We're looking at, with that PEA, growing our Nickel production almost 3 to 4 times from where it is today. We have a tremendous advantage of having BHP just open the concentrators 4km away from our Beta Hunt mine. We're looking at generating the Gold from our underground operations and our open pits, sending it to both of our mills. Then we have that Nickel that we get to help reduce our operating costs, that we continue to grow exponentially here. All the infrastructure that we're putting in this year, the ventilation, the second decline is for the Gold production, but it has tremendous synergies for the Nickel production as well. For us to grow our Nickel production, we needed that added air, the extra tunnels that we're putting in this year.

37:27 It gives us multiple accesses and again, I'll say it again, provides us that optionality. If we can get to a point where we're seeing $150 to $250 per ounce, every ounce of Gold in savings from Nickel, that's certainly a target that we're going to be trying for and really working hard to achieve here. And it's certainly doable from that jurisdiction, given that it was a Nickel mine forever. The thing about Beta Hunt was that when it was being mined with the Nickel before, the people didn't have the Gold rights. So Now we have both the Gold and the Nickel rights and we have a tremendous advantage. At times, we encounter some of the coarse Gold that we've witnessed that has been in some museums at the Perth Mint right now. We encounter some specimens, we press release some this month, in fact, I think we're gonna put out a press release on our production on a recent course goal. So Beta Hunt is a very unique operation.

38:32 Karora is a very unique company. Having that nickel as an optionality for sure. Yeah. And again, an opportunity to buy a company that is well set up, is profitable, has a gold per at a fraction of the height levels, it is again the kind of exploration potential in a company that isn't going anywhere, that's going to be around long term. So That's the kind of opportunity you have at these cycle roads. Rick, you're in a bit of a different position here with a project that's moving ahead with really the time-popping economics, where a lot of the castles, building a mine, et cetera, are just not there.

39:21 And a lot of the capital expense of that just aren't there. Describe for our audience the unique proposition that Contango creates with its initial project. Yeah, thanks, Brian. So Contango discovered an ore body in Alaska on land zoned by Tetland tribe. And What was unique about this ore body was it was very high-grade and for Alaska had great infrastructure being right next to the Alaska highway. It's turned into an 8g per ton open pit reserve now. We partnered the project with Kinross 2 years ago in the 70-30 joint venture, so Contango has 30% ownership.

40:11 The tribe receives the royalty. And The whole reason we did this agreement with Kinross was to utilize their mill at Fort Knox, which is processing very low-grade ore, averaging something around 0.4 to 0.5 or something like that from the Fort Knox operation. We can mine it at the Moncho site, load the ore, run up mine ore into highway trucks, transport the ore up the highway to the Fort Knox mill, and then on a batch basis process the ore through the Fort Knox mill. So that, as you say, we don't have to build a mill and a tailings facility, and probably as important, don't have to permit those things. That obviously reduces the total amount of capital that we would need to put the mine into production.

41:02 But as importantly, it sort of shortens the timeline because there's not a whole lot to permit, frankly. In North America, permitting a tailings facility is a big deal. It takes, there's a lot of work that has to go into doing that and it does take time. I would say it probably would take you 2 to 3 years to do that. And we get to bypass all that because Fort Knox has been operating for over 25 years now and so we don't have all the startup issues from a building a mill that usually occur. When you build a new mill, there's always start-up issues. This mill has been operating for 25 years, so we kind of forego all that. That's the main event.

41:48 This project will produce on average about 225,000oz of Gold. Our share is 67,500oz per year. It's a short mine life. It's a 4.5-year mine life right now, but we think there's great exploration upside. It's the private lands owned by the Tetlin tribe are basically the size of the state of Rhode Island. We have a lot of exploration work to do to continue to find new ore bodies in an area that is again just right off the highway. So again, relatively easy to explore and inexpensive to explore. So I think all those things are, you know, have a good future with Moncho and it's a project that's very important to Kinross and to Kinross Fort Knox specifically to keep that mill running.

42:38 And then on our own, we've got a large land portfolio in Alaska. And the project that we're most excited about is our Lucky Shot project, a historic high-grade underground mine that was mined from the late 20s up until 1942, when President Roosevelt used the War Act to shut down all Gold mining in North America. And that's the last time that mine was in production. They averaged 40g per tonne, about 1.5oz per tonne, the average ore grade they did there. And we're basically simply exploring the down-dip projection of that vein. We're underground now. We're drilling pilot holes to determine exactly where we're going to put the footwall drifts and then we're going to drill the heck out of the vein from the footwall. Relatively short holes, we'll be able to do this all winter long.

43:27 We're basically all set up for winter operations. I think that's a great follow-on project for shareholders and for investors to keep an eye on as we develop another mine in Alaska. Again, great infrastructure. You can drive a pickup truck right up to the mine portal. It's on the road system, on the rail system. We're going to stay focused on smaller scale projects for right now. I think things that you can raise capital to build and get into operation quickly and things that don't require 5-10 years of permitting. The big projects always do. My involvement with Donland, we discovered that 25-years ago, the larger projects in North America and it's still not permitted.

44:20 So, I'm sticking close to the road system and looking at higher quality projects that don't require billions of dollars of capital to put in production. Yeah, Thank you, Rick. And what we shot is interesting. It's been a puzzle for a lot of people over the years. You seem to have solved the puzzle by just going after the ultra high gold and following it. Who would have thought of that? So it's really looking good. And It's an extraordinary project as well. Brett, you have an extraordinary project that really was just banking for a proper-fitted drill program, well-financed, and you're certainly doing that. 4 million ounces so far, lots of potential looking for the economic starter pit and the like.

45:07 Tremendous drill program underway right now. Describe if you would, for us the project and where you are in the drill program and what you're discovering. For sure, thanks, Brian. Our project is called Moss Lake, and we are about 120 kilometers west of Thunder Bay on the Trans-Canada Highway. So when you start to look at, just first of all, project doability, Are we in the middle of the Arctic where, you know, everything has to be flown in and there's no power. We're on the TransCanada Highway. We have access 100 kilometers away to a major city, a major international port, major international airport. We have 10 cent kilowatt hour power going through our property. So it has all the makings to see a district being built up in the Chabandawan.

46:02 That was one of the biggest actions for me. On the actual project, as you said, we've got 1.5Moz of historical resource of indicated Gold and we've got 2.5Moz of inferred historical, it's a historical resource. And we are combining infill drilling with some step out drilling to really test the extent and size and scale of this deposit. We went into this with the mindset this could be something like detour lake and it may well turn out to be something of that magnitude, over 10 million ounces, given the size of the mineralogy we're seeing and the mineralization that we have detected and all the other exploration work we've done indicates that this region is very mineralized.

46:55 But I think that may not be what the market wants today. We've just talked about the macro, we've talked about inflation, we've talked about the industry standards on gold prices, what they use for their studies, and low-grade bulk tonnaged projects are probably well down the, I'll say the interest queue. But we're not going to be in this environment forever. Our view, our house view, is that yes, we're getting a lot of high-grade intercepts and a feeder system in Moss Lake and let's try and test that to see if we can develop a phase 1 approach to this where we can get a couple of million ounces economic over 2g.

47:41 We put out a press release this morning illustrating a step-out hole from the historical resource, 29m at 3g. That's going to be very commercial And I think those are the types of holes that we need to continue to explore. And when we model this, I think we're going to see a number of possible permutations. And it is what the market doesn't want to see multiple billion dollar CapEx projects as Rick alluded to. They want to see something digestible. They want to see cash flow. They want to see and Gold Shore will go through its exercise. As you mentioned, we have a 100,000 metre drill program underway. We're over the halfway mark now. We'll continue drilling. We'll do an in-house resource estimate this year. We'll do an external independent resource estimate when we're done our program and then look at what project permutations we should be considering to get this again speed to market what can get us into cash flow as soon as possible because I'm very sensitive about the hyperinflationary CapEx numbers we're seeing, hyperinflationary OpEx numbers we're seeing in certain parts of Canada and the US.

48:55 So we really need to kind of put the scope together accurately And we have the team to do it. Yeah, and you're trading at a great level right now, as we've alluded to. And it's good that you recognize all those challenges, because that's the only way to surpass those challenges, is to recognize them. If you're looking for a lot of capitalists, you certainly have a lot coming up, plenty of drill results, resources and the like. So a great long-term play at current level. Doug, we're coming to you here. You know, a lot of companies want to see their mining sector trying to build a rocket ship to the moon in their garage. And yours is somewhat different. You're taking a very steady stair-step approach.

49:44 Stairs with rails on them, so that's just a slow but steady ride in value and taking a steady approach in mining projects. You've got a lot ahead of you right now and you're a lot behind, Give us an update on where you are in that approach in that business model and what we can look forward to in the weeks and months just ahead. Sure. Thank you, Brian. We unashamedly build low-cap X projects. It was the plan before this inflationary environment we're in, but I kind of embrace the challenging times facing the sector right now, because I think it shines a spotlight on a business model that always made sense, but makes even more sense now.

50:31 Our first mine, Santana, we should have commercial production there in Q4 this year. We built that for 10 million US in the middle of the pandemic. It was meant to be the starter operation that would allow us to kind of self-fund the company, which we're now doing. But we had a pipeline behind it of equally low-cost projects to build. I have to be a little careful because in terms of catalysts, our second mine that we hope to be constructing in the second half of next year, Cerro de Oro, also in northern Mexico, like all our projects, will have an economic initial PEA out on that project.

51:18 I believe we're going to push for Denver. I was hoping I'd have it for Beaver Creek, but I want to be able to talk about that to the wider investment community at Denver. And I think it's again going to show in a world where capex costs are out of control and off costs are out of control, that our projects and our ability as an initial small scale producer that scales up in that stepped, ramped up approach can be nimble and flexible, which sometimes is very hard for companies building large CapEx projects. They get pot committed on their spend and then hit a period of inflation and suddenly there's huge funding shortfalls to deliver on a project that they're committed on.

52:04 We don't suffer that problem. Our costs between Q1 and Q2 this year barely moved at the operating cost level. Everything we try to do in our company is about appropriate capital management. When you're in a sector where there isn't a lot of capital sloshing around, You have to ensure that the capital that you're lucky enough to receive, you spend wisely. And I think we have a very good track record of doing that. We went to the market recently for a little strategic $5 million or $4.5 million financing. It was the first time we'd gone to the market in almost 2 years.

52:53 It was a closed market. We got it done because 1 existing institutional shareholder bought 7 million shares and I bought 500,000 dollars myself. It was just us 2 placees. But the point of that was we haven't needed to constantly go to the market. And that should be a blessing to any shareholder that's worried about how their stake in a company is dilutive. And this being management with big stakes ourselves, we feel very aligned with those shareholders. So everything about our business is trying to deliver top quartile performance in multiple metrics, but at lower quartile cost. I think our business model is absolutely set for the kind of environment we're in.

53:39 If gold price takes off, great, we'll take it. It's gravy. But we can survive capex issues, op cost issues, because our numbers are so small. And with the first mine up and running, even if there's, say our next mine is $30 million and it goes to $35 million, by having a mine up and running, you're not creating some immediate funding shortfall that gets punished by the market. And so whilst we've suffered like everyone else over the last couple of years, last year the GDXJ was off 20%, we were off 20%. Completely unsatisfactory to me. I've always said I want to be up 10% in a year that the GDXJ is down.

54:27 But this year we've outperformed on a, Not in absolute terms. And I think that that is an indication that the market understands that our business model is actually very well suited for the challenging times that we have. And I'm proud to present it today and at any time I get to tell the story. And we are a little behind Paul in terms of production profile, but we share the same goals of, you know, in the next few years, I think we have a direct line of sight on, you know, a 200,000 ounce a year producer, And I won't rest until I've at least achieved that goal for the company. Yeah, Doug, Manera Alamos and we're fortunate in that all of the companies here represented today are should be in kind of a hall of fame of well-managed, well-run, ethically run companies that do right by their shareholders.

55:25 But we have time for a couple of questions that at least a couple of many that have come in. And this brings us to one of the questions that I think is a really good one. It starts off blame government, blame the dollar, blame inflation. How about we shine a little light on the lack of trust the mining industry afford outside financing through constant capex blowouts? And the point being that these capex blowouts preceded the inflationary issues that we're seeing today, that we've seen PEAs in particular, But even more advanced economic studies in recent years actually not reflect reality. So rather than the whole mining sector, maybe we take a look on this or a proactive look. What can investors, retail investors do to avoid that?

56:22 Should they trust these economic studies coming out? And how do they make the right choice with that? That's a thought that I'd rather want to take it. Yeah, Brian, I think, you know, we have to caveat things and I don't want to say, you know, caveat emptor and buyer beware. People need to understand our business. They can't invest in our business blindly. So they rely on the specific management to deal with the specifics, but they need to understand our business and what we do. But in fairness to the retail and the institutional investors who bring up these issues, Let's face it, when we've all agreed that there's too many companies out there, there's probably 20% of the companies out there that are marginal at best, and they extend the assumptions to levels that make their projects quasi-economic, when in actual fact, they'll never perform like that when they actually get into production. So, I think there is a degree of, I'll say, accuracy to what they're saying, to what the question is. But I think people have to understand our business. And that way they'll know the difference between surface mining and underground mining. They'll know the grade variations and the risks associated with it. So this

57:53 is a very risky business. Our job is to mitigate risk. Our job is to mitigate risk for investors so there's no surprises and do the things necessary to mitigate those risks and ask ourselves the right questions so that we have the answers as best as possible. When you go into these things and are just trying to create a bunch of shiny buttons, you're waving the market so you can get the next drill result out there and raise some more money and then do it again and do it again. You have to follow those who are building real projects and building real value at the end of the day and they're doing things right. That's the combination of management, it's a combination of the project, the risks associated with project and the execution at the end of the day.

58:39 Yes, I guess management, management, management, focus on the management teams that have done it before and done it without surprises. Anybody else? It seems like the surprises in economics are always negative, never positive. Go ahead Doug. By all means, Rick, you go ahead. I was just going to say really simply, to me it's always 2 things that investors should try to focus on. And that's it's quality of the asset. So 8 grams versus 1 gram, there's a big difference there. And also just simplicity, how complicated is the project? And particularly if you're talking about the junior explorer developer space, when I hear companies describe these monstrous projects that are refractory gold and silicon encapsulated or require high pressure rolls to crush and grind the rock. These are not projects for junior companies.

59:41 If you're a junior and you want to be a producer, you do what Doug's done. You have a good quality project and you keep the cap ex low and you put these things into production quick. Talking about a big project that is complicated that needs big pipelines and all this other stuff, You need to be partnering with a big company if that's what you have, and you need to do that sooner than later so that you're not constantly going to the market and begging for money from the investors. Yeah, I agree on that, Rick. I know we're running short of time, so it was something I wanted to say earlier and it's actually relevant to what Brett and Rick are saying in response to the questioner, and that is we are suffering in this sector, not just commodity price, cost overrun, whatever. We're suffering on a brain drain that means there really aren't the operating teams wanting to build stuff, but also there aren't the independent consultants, And without wanting to offend them, I won't do air quotes on the independent. They are, and they're classed as independents. But in reality, a lot of these studies have a lot of input from the companies.

1:01:04 There's a desire to try to come up with some numbers, which will allow them to finance and everything else. I don't believe that they are stress tested anywhere near as much as they should be. And as a result, especially now we're seeing huge overruns, but even beforehand, before inflation, before the problems in the world, there were routinely problems with technical reports. And part of it is the people writing them don't actually have real world experience. They're putting numbers together, which aren't actually, you talk to a lot of mining engineers, they say, there is no way you can get that kind of mining grade underground on that project, it just is not happening at the cost they're talking about.

1:01:53 But in a lot of cases, there isn't that real world experience. That's gonna be an ongoing problem as we've had a brain drain from this sector. So you can get the A team from 1 particular independent consultant, but if you're stuck with the B or the C team, because they're busy on lots of these projects, I think the margin of error increases dramatically. We need to be stress testing stuff far more to give comfort to the investment community that the management base case is workable. So I think that's incumbent on us as companies to be better educators to the sector at large and not talk the glowing numbers.

1:02:42 I have a fight every time I want to put out a PEA. I got away with it last time in 2018. I said, I want to use a 7.5% discount rate. And an analyst said to me, we can't do that. Everyone uses 5%. I asked him, would you give me money at 5%? He said, no. I go, well, Thank you for making my point. But we've got these industry standards now which warp reality and situations. And then of course, the big bugbear of inflation comes around and everything's in a tailspin. So there are lots of issues with reports. It is right. There have been lots of issues with reports for a long time. Unfortunately, I think that there's too much company involvement in getting kind of back, back creating what IRR and MPB, they wanna put in a press release. And there is influence at a company level, and I think it has limited the ability for projects to be properly stress tested. So you see a lot of money raised on things that should never be built.

1:03:50 Great. Great question and great answers. And sum up looking for, you know, simple simple project and economic studies that have thick cash discount rates, ample contingency allocations, et cetera. And if it's too good to be true, it probably is. So, but you know, we are officially in overtime here, but We have a couple of questions. Paul, did you have something you wanted to add to that? Yeah, no, I was just gonna say the devil's in the detail when it comes to these reports, right? When we look at these reports, I don't disagree with some of the retail investors or the institutions that look at ourselves in the mirror and and what what can we do about this? Never mind blaming inflation, metal prices. What do we do about it?

1:04:38 Ourselves? Brett said it right. Our job is to mitigate risk. We've we've gotta be able to look look at a team that has a track record. Look at a team that's delivered 0.25 after 0.25, after 0.25, after 0.25. And it actually becomes boring, shareholders go, well, it's almost like it's boring, but that is important, that consistent delivery. In our case, specific at Karora, we looked at the CapEx for our mill expansion. We had an original hard bid from a consultant that was $65 million. That thing escalated to well over $100 million, with maybe going to $120 million. That's why buying the mill mitigated that risk. We had to pivot. We just said, look, we're not gonna go out and ask our shareholders, explain that this thing is double the cost because of inflation. What are we gonna do about it? We said something to the market.

1:05:29 How do we continue to deliver and maintain that reputation we have had about consistently delivering. So we pivoted and bought the second plant, which ended up in our case much better because it was closer to the mine. But the devil's in the detail and sometimes It's a lot of homework. It takes a lot of homework to look at the detail. And some people have a shorter window. How long do you want to invest in? You know, because we have coarse Gold, we have some people that go, well, I'm looking at a 3 month window. A lot of our institutions are looking at a 3 to 5 or 7 year window. So it depends on what kind of investors in there. But I don't disagree that we need to look at ourselves often and say, all right, can we trust these reports? And are we comfortable putting them out ourselves? Yeah, And another great point that if you find a management team that has built a reputation and values that reputation, then they have another incentive not to be looked, not to be made fool by putting out an economic study that doesn't prove to be true.

1:06:32 As I was saying, we are an overtime here, but there have been a few questions on the dollar. One person is saying, there's a huge elephant in the room. The Wall Street commons are ignoring the rush to the dollar is a burden on the day's immense debt by increasing rates. Another person simply put, what will end the US dollar rally? I would answer that would be when other central banks try to catch up to the US and start raising rates themselves at a similar pace. That said, the ECB, great, great three quarters of a point today, and the dollar index is up. Despite that, anybody have any views on what would, in the dollar and how big of an impact that has been on on really everything on on your cost. I would tell you our guests, but on cost in the sector and on the gold price.

1:07:31 Oh, so is that for me or for anyone? Anyone. I mean, doesn't it say something about how messed up the world is that the US dollar can be rallying as strongly as it is? It's like, you know, I would agree that, you know, the moves on interest rates in Europe are playing into the US dollar strength right now. Like Paul, two thirds of my operating costs are in Mexican pesos. It's not a bad time to be operating down in Mexico. It was probably a good part of why our cost structure has been able to be maintained during this. But I mean, when I look at the US dollar rally, and I'm not, you know, an economist, I'm not going to speak for 1, you know, it does always kind of just have me thinking, wow, everywhere else must be really messed up. And then you look across and you look at what's going on in Europe now and elsewhere, and it's like, yeah, it is.

1:08:41 It really is. And that's the dark, you know, going full circle back to the life we've lived together, Brian, and the dark ages continue. And they're darker than when I first met you, you know, by a country mile. Maybe just to add to that, it seems like the solution to debt is more debt until it's not a possibility anymore. So I think at some point, you know, that you got to pay the piper. But I think that's what we're experiencing. Yeah. And if anyone's read any of or watching my interviews or reading my publications recently, you know that I think the US is in the endgame of a long term trend. And in fact, in a debt spiral right now where we're going to be paying close to 1 trillion dollars a year just at the interest on the federal debt.

1:09:36 It's already soared to record levels at around 600 billion, yet very little of the Fed's rate hikes are yet factored in to those numbers. So we're headed straight up, And I think that's going to be what's going to stop the Fed. And the day's just ahead, really, just over the next couple of months. So, guys, interesting comments. Really appreciate it. This has been a wonderful panel. One of our participants put it well, he said, kudos to all. You truly are the knights of the mining table. Well done. So I appreciate your participation in this. Look forward to talking to you all soon. Some of you will be down at New Orleans Investment Conference in mid-October. Hope to see many of our listeners there. And we will, I'm sure, be talking in the future.

1:10:24 And again, I think this is an extraordinary long-term opportunity for investors to buy at a cyclical bottom in the sector. These companies are all great options for that, for long-term value creation.