AuMEGA Metals Ltd (AAM) Earnings Call Transcript & Summary

Welcome back to the webinar. We've got a double act now. We've got Matador Mining, ASX code is MZZ, and they are exploring up in Newfoundland, one of my favorite parts of the world, Newfoundland in Canada. I have Adam Kiley, who's Corporate Development and also Warren Potma, who is the Exploration Manager, to take you through the story. Over to you, guys. Welcome.

Excellent. Thanks very much, [ Kerry ]. I'm Adam, by the way. And this is Warren. Ian Murray, the Exec. Chairman, sends his apologies. He can't attend today. He's actually traveling. Anyway, to just go through first off, who is Matador Mining. We have the Cape Ray gold project, which is in Newfoundland in Canada. It's an extremely exciting jurisdiction, and Newfoundland has really become the go-to place in all of Canada in recent times. We were one of the first movers to actually go there, which allowed us to gain 120 kilometers of strike along the Cap Ray shear, which is actually the largest continuous landhold in Newfoundland along this highly prospective shear, which we know is a multimillion ounce shear. It does contain those deposits within there, which is proven, just 50 kilometers up from us with Marathon Gold. We've already established a resource of 840,000 ounces at 2 grams per tonne. And importantly, with that resource, it's -- the 90% of it is located less than 200 meters from surface. So it's highly amenable to open pit mining. We're currently working through a pretty aggressive exploration program this year. So we've got a 10,000-meter program. We started a little bit later in the season, so the program is a little bit smaller than what we first anticipated, just obviously due to COVID. But it's been great results which have come through thus far. We made the first new discovery of the Cape Ray project in over 20 years with the Angus discovery, where we drilled approximately 20 meters at about 2.4 grams per tonne from around 80 meters, and that was a 1 kilometer step out from the known deposit. As part of that program as well this year, we've had a much greater emphasis on greenfield targeting. Warren will go through it in quite a bit more detail. But from the work he's done in only starting a few months ago, we've already identified 33 highly prospective greenfield targets, the first one of those that we identified was Angus and they came back with, obviously, a new discovery. And we're planning to test a couple more of them before the -- with the results coming through before the end of this season, but it's going to be a much more aggressive program going through those targets next year. Earlier in the year, which sort of underpins the project that we have at the moment, we did a scoping study. The scoping study is basically what a scoping study should be. Scoped out what's the potential of the project and are there any fatal flaws. That came back with really strong results. We came back with 80,000 -- just under 90,000 ounces of production a year during the first 4 years at 2.6 grams per tonne head grade. That came back with an extremely strong payback period as well as very robust IRRs as well as NPVs. And it came back with a very strong operating cost as well. But what we know we need to do based on that now, we need to go out and find more gold. What the company is aiming for is to be a 100,000-ounce produce a minimum with a 10-year mining life before we put this through to production. Just in terms of Newfoundland for the listeners in a bit more detail, it really is a fantastic jurisdiction to operate in. We're 25 kilometers away from an established town. We've got massive support with the government. We've got grid power, some of the lowest in Canada at $0.06 a kilowatt hour. And as I mentioned, Newfoundland has really become the go-to place in all of Canada recently. There's a new exploration IPO, they've only released 3 drill holes, New Found Gold. They've got a market cap of circa $700 million at the moment. And then you got Marathon, which has a 4 million ounce gold deposit and just recently made a new discovery as well. They've got a market cap of circa $500 million, and they are located just 50 kilometers up the shear from us. So we know there are these multimillion ounce deposits within the system, and from the program we're doing now as well as in the future, we're really hoping that we'll be able to find them going forward. We've got a very strong cash balance at the moment with $12.5 million in the bank, this is at the end of September. That will see us, obviously, through this exploration season and the next one as well. But unfortunately, when you look at this on a valuation compared to our peers, we see significant upside potential. We're at a large discount to the market. And hopefully, when we have further results coming through, we'll be able to close that gap as we go through. Just in terms of the Board, there's been a whole new Board, which has been appointed over the last few months, which is just really starting to get established. Ian Murray took charge of the company in May of this year, just around the timing of the scoping study. And just speaking for Ian, the reason why Ian was so attracted to the company, he basically saw this as a Gold Road mark too, massive potential all up and down the shear, just needed the exploration and the time to actually prove it up. Ian's first appointment to bring on board was Justin Osborne, who was central to helping him develop and grow Gold Road, who's still an Executive Director of the company there. We've got Mick Wilkes on Board, who is President and CEO of OceanaGold for the best part of the decade, who started just after Justin. And more recently, we've just appointed Dr. Nicole Adshead-Bell. She's a North American director. She's based in Vancouver, very experienced in fund management as well, and she's also a geologist by background. So we've now established the first rate Board for what is only a $60 million market cap company at the moment. Just a little bit more in Newfoundland. As I mentioned, it's -- for long, it's been the sort of forgotten jurisdiction of Canada, just off to the side on the large island on the East Coast, but it really has become the go-to place. As I mentioned, with New Found Gold and Marathon, we've also seen more exploration companies pop up all over the place on the TSXV with guys just picking lands throughout the jurisdiction. So it really has become the go-to place in Canada, and we're the only ASX-listed company there. We also have with us, as I mentioned, the largest tenure along that -- the Cap Ray shear where the majority of gold has been discovered today. Only 25 ks away from an established town with a population of 10,000 people, excellent conditions, as you'd expect for anywhere in North America as well as some of the lowest power cost in the world at $0.06 a kilowatt hour. That's really going to make this when this eventually 1 day goes through to an operation to mean we're going to have some of the lowest power costs going through. Just as a comparison, if you're on the grid power in Canada, you're looking at $0.12 a kilowatt hour. If we're a diesel operation in Western Australia, looking at about $0.25 a kilowatt hour. So it's a massive advantage that we're going to have with this project in the long term. Just the next slide before I let Warren take over from here. One of the key things when Ian came through from -- looking at the company, we had a good solid start with a resource of 840,000 ounces, and we consolidated a large portion of the Cap Ray shear with 120 kilometers a strike. But what we didn't have was those next projects coming through that we're going to graduate up and be the new advanced prospects and new discoveries. So as part of Warren's mandate when he came on board was really take a closer look at some of the prospects that we actually had. Take a look at a lot of the historical information, which have been unconsolidated at such a large portion of -- for such a large period of time. Work first began on the project in the 1970s, but it's been all unconsolidated and just has been poorly tested with the drill bit. Warren has come through, he's already identified 33 highly prospective targets with the discovery of the first one with -- which was the first target we've actually drilled. So we really see fantastic potential and further discoveries along the way. And from there, I'll let Warren take over to go through the Angus discovery in a bit more detail as well as some of the other exploration work we have planned.

Thanks, Adam. I guess I just want to kick off with a big picture slide to start with. You see 2 images there of our tenement package. The top gray outline shows the outline of all of our existing tenements, the 120 kilometers from Southwest to Northeast. The pink dots within that are all the drill holes within the entire tenement package. If you look at the callout box, you can see the main resources sit there with Central Zone, Window Glass Hill, Big Pond and a little northeast of that to Isle aux Morts. If you put that box all the way out to Isle aux Morts, there are only 20 drill holes outside of that 15 kilometers of strike length for the entire project. If we then go and look at the existing gold and rock-chip callouts, the dark blue callouts in the bottom diagram, you can see that there are many, many plus 10 gram per tonne rock-chip samples along the length of the project. And when we look at the surface sampling that's been done, combined with the existing magnetics and other geological data, we've been able to identify, as I said, 33 targets along the strike length of the project. Those targets are delineated there with the colored boxes. The pink and red targets are the priority 1, priority 2, the highest priority 12 targets that we're going to hit. We're already drilling and working on them this year, but we'll hit between this year and next year with first-pass exploration. So for me as an exploration manager, 105 kilometers of this tenement package is effectively untested. It sits under between 0.5 meter and 5 meters of transported cover, very little outcrop, less than 5% to 10% outcrop across the length of the project but pretty easy to get through that cover since we've now implemented a new basement sampling tool. It's a person-portable backpack drill that enables us to effectively get hand-drilled diamond core from below the basement till as well as till samples to help us with our exploration to recover. For those of us working -- that used to working in Australia, we're using this person-portable backpack drill like you use an aircore rig in Australia to sample the basement below cover. If we look at the Angus discovery, we've zoomed in now in the area just southwest of Window Glass Hill. We've got results back now for 12 holes at Angus. The discovery hole initially was 20 meters at 2.38 grams, but we went back and sampled some shoulder material on either side that which has actually helped us to grow that width. The key thing there is it has a core of 9 meters at 4.99 or 5 grams per tonne. So really good grades within that discovery hole. But across that area now, we've drilled, as I said, 12 holes at Angus, 4 of those initial broad-spaced holes have come back with better than 10-gram meter drill hole intersections of gold, and then we drilled another section to the East. We've just reported in the last couple of weeks, hole 143. It's 300 meters east of the Angus discovery hole, and that's another 23-gram meter hole. It's exactly the same style of mineralization we see at Angus. This is a new style of mineralization for the project. It's a stockwork style, which means we get bulk broad domains of low-grade punctuated by some nice high-grade hits like that 47-gram meter hit in 126. And what it means is that we're no longer seeing what we see in the Central Zone, which is a high-grade plunging shoots within the plain of a structure. This is a granite hosted stockwork vein system, which has the potential for bulk-style mineralization. The 2 are really complementary, 2 styles of mineralization are really complementary to the project in the long term. In terms of what we've been doing so far this year, the focus has been around Window Glass Hill and Isle aux Morts in terms of drilling. We've done extension drilling as well as infill drilling at Isle aux Morts and Window Glass Hill and the exploration drilling at both of those, which led to the Angus discovery. The second target being drilled and effectively being rolled into the Angus discovery, giving us 300 by 400 meters of area there that we've demonstrated as mineralized, requires more drilling. But at Isle aux Morts, we stepped out 500 meters towards the Southwest and drilled a new exploration target there with results pending before the end of this season as well. Additionally, we're looking at the regional opportunities along this 120 kilometers of strike length. We've put ground teams in at Benton and at Otter Pond to do the first pass mapping, detailed ground mag surveys at Benton. The ground mag was instrumental in helping us along with the IP to select the Angus target for drilling, which worked out to be quite successful, and we're hoping to recreate or to repeat that success at our other regional targets, like I said, 12 real high priority targets that we're going to be hitting in the coming 12 months. So the approach to exploration here is we have a number of high priority targets. We now have a method of -- combined method or detailed ground magnetics, person-portable backpack drilling that enables us to get down to basement and most importantly, the use of detailed lithogeochemistry and alteration mineralogy that map the alteration footprints that we can see have halos on the order of 300 to 400 meters around the mine mineralization. And when we're drilling through the cover and getting basement samples, we can see those alteration footprints and pathfinder mineral element footprints in the basement with the backpack drilling.

Okay. Thanks, Warren. I suppose this slide here, just very briefly, sort of speaks for itself. When you look at our valuation compared to a lot of our peers at the moment, we really are lagging. When you consider the prospectivity of the ground that we've got, what we already have existed and what we know about the project, which was highlighted in the scoping study as well as the resource, as well as finding new discoveries, we really think we're lagging in terms of valuation at the moment. I'd like to think as the results start flowing through from exploration program this year as well as into the future as well, we'll start catching up on some of our peers there, but we really see a heck of a lot of upside in terms of our valuation at the moment. And it should be remembered as well, we definitely [ have some ] raised. We've got $12.5 million in the bank to see us through this program as well as next year's program as well. So I suppose just to summarize on the opportunity and what investors could be looking for from Matador over the next -- the rest of this year as well as into early next year. For the rest of this year, it's really going to be exploration coming through. We're continuing on with the drill program at the moment. We'd expect more drill results coming through before the end of the year. Those results will continue through January as well as February, possibly then as well, depending on the speed of the lab getting the final results back. We'll also have further greenfield results coming through during those first couple of months as well. And that's really going to set the company up for what's our strategy in terms of targeting some of these highly prospective greenfield targets going into the future, and then we'll come up with the exploration strategy thereafter for the new year before we hit the ground much, much earlier next year. Yes, the expectation at the moment will be on the ground and drilling in the second quarter of next year and with a much larger program going through as well. So just to summarize the opportunity. We're in a first-world location. Newfoundland has really become the go-to place in Canada. It's not being picked up by the Australian market at the moment. So unfortunately, but hopefully, when results start coming through, we could quickly catch up on that. We've released the scoping study which highlights we've already got an economic project. What we're looking to do now is really grow that and make that much larger in the future, so we've got a long sustainable mine life. We're fully funded for the next 2 exploration seasons and our valuation is significantly lagging both on an EV metric as well as on a P9 metric compared to all of our peers. So thanks very much, [ Kerry ]. And we're more than happy to take any questions from investors.

I was muted. Sorry about the boys. Warren, Adam, thank you very much indeed. And the only ASX player up in Newfoundland, very interesting. And my congratulations to you guys, what a very strong management and Board team you've got. Let's kick in with some of these questions. Does Matador have any plans in the future to extend its footprint further globally? I think you have enough work on your hands where you are.

Yes. Listen, I suppose with the 120 kilometers of continuous strike at the moment, with 33 greenfield targets already identified and probably more to come as well, I think we've probably got enough on our plate for the time being, just up and around Newfoundland.

You know what, and I think that's absolutely right, you got to stay focused. You've got -- next question is you've got more than 30 targets ready to drill at Cape Ray. How do you decide which one is a priority? And also, they want to ask, how much drilling can we expect to see over the coming months?

Okay. Well, maybe I'll take that one, [ Kerry ]. In terms of deciding the priority of these targets, we've got a wealth of historical information from previous surface rock chipping, previous soil and till sampling. We've got complete coverage of the tenement for aeromagnetics at 100 to 200 meters scale. So we get basic structure there and some mapping. We're utilizing that information to prioritize the targets. We're looking for multi-element geochemical signatures as well as, obviously, gold as well as the preferred structural host. Not all of the data sets are complete. But we basically take an approach to looking at all of the multiple variables, and where we get a lot of anomalies lining up in my area, of course, you become far more interested. Now if you recall back to the initial slide, that said, we can do all of the smart exploration, but there's 10 to 191 gram per tonne rock chip samples out there that have never been followed up. So there's also the really obvious easy low-hanging fruit. So it's a combination of really good integrated geoscience, weighting the value proposition for each of our high-priority targets and doing a really simple stuff, which is going and testing these high-grade surface rock chip samples.

[Operator Instructions] We've got one that's just come in. When can we expect the PFS and another resource upgrade? Well, another resource upgrade, I think you've got your work cut out for you right now.

Yes. Listen, I suppose just in regards to the PFS, it's probably going to be not next year, a bit a year after that. There would no need to come out with the PFS next year because the resource is only going to grow through a certain sort of size. So you're probably looking at 2022 before the PFS comes out to make sure it's significant in terms of the changes that we have. But in terms of a lot of the work we did in the scoping study, that was done to a high degree of certainties as well. We spent a lot of time going through that. In terms of the resource upgrade, listen, in terms of the strategy that we've taken this year in terms of the exploration program, it's been much more strongly focused on greenfield as new discoveries along the way as well. Obviously, with Angus being the first one, we're also testing the new areas up around Isle aux Morts as well. So you're not going to have sufficient drilling to actually delineate resources off those areas yet. I'd just say putting out a resource just for the sake of putting out a resource would potentially be cutting it off too early as well. So I dare say you're not going to be coming out with a resource off the back of this exploration program. You probably want to get through next seasons as well, which, as I mentioned, next season will be a much larger program that we'd been anticipating to come through with -- compared to this year.

Guys, is COVID impacting you at all? Obviously, I'm speaking to you in Australia, in Perth and the project is up in Newfoundland. Has that given you any challenges?

Well, it's impacting Warren because he wants to get out and have a look a the rocks as quickly as possible.