Compass Gold Corporation (CVB) Earnings Call Transcript & Summary

Hello and welcome. Good afternoon. We hope that you are well, and thank you for joining us today for this webinar on Compass Gold. My name is Jacob Willoughby, and I'm the Vice President of Research and an analyst at Red Cloud Securities Inc. Joining me remotely today are Larry Phillips, President and CEO; and Dr. Sandy Archibald, Technical Director of Compass Gold; as well as 2 other members of the technical team that we'll hear from in the question-and-answer part. So we'll begin today the webinar with a presentation on the company by Larry and Sandy, followed by the question-and-answer period. [Operator Instructions] But before we begin, I'd like to note that there may be some forward-looking statements made on this webinar. I would direct listeners to the cautionary notes on Page 2 of Compass Gold's corporate presentation located on their website. For Red Cloud Securities Inc., I would highlight that this webinar is for information purposes only and should not be considered as a solicitation to purchase or sell securities or a recommendation to buy or sell securities. Also, we note that this webinar does not take into account the particular situation or needs of individual investors. Participants rely on their own investigations and seek their own professional advice before investment. Company-specific disclosures for Red Cloud are the following. In the last 12 months, preceding the date of issuance of the research report recommendation, Red Cloud Securities Inc. has performed investment banking services and has been retained under a service or advisory agreement by the issuer. In the last 12 months, a partner, a director or an officer of Red Cloud Securities or the analyst involved in the preparation of the research report has received compensation for investment banking services from the issuer. And now I'm very happy to introduce them to you, Larry Phillips and Dr. Sandy Archibald from Compass Gold.

Jacob, thank you very much and appreciation to Red Cloud for hosting this, our first webinar of the 2021 year. I know that there are some listeners who are new to the company and Compass Gold as well as shareholders and investors who are familiar. Today, we'll provide a little bit of information about the company and our background and then focus in on our most recent drilling results, updating everyone and describing what our next steps are going to be in the weeks and months ahead. Exploration that we're doing is in the perspective and highly prolific southern region of Mali, West Africa, and that's where our presentation will take us. Next slide. Our forward-looking statement, I guess some of the same information that Jacob alluded to. And on to the next slide and summarizing where we believe the advantage for Compass Gold shareholders sits, we are focusing on our people, an experienced team both at the corporate and management level and, in particular, at the exploration level. We have a significant ground package, really one of the largest ones in this prolific area, never before drilled on in Southern Mali. And we've already provided some excitement with several discoveries, trends, mineralized zones that we've been following up on. And the drilling most recently is going to illuminate our confidence in a couple of these particular trends. And this is work for the first 6 months of the year that's been fully funded. The drilling that we've been doing and that we'll be talking about is based on 2 well-funded, successful financings in 2021 -- or sorry, in -- yes, in 2020. All right. Next slide. Here's our experienced team both on the management and Board level. I'm very blessed to have groups of people that have had success not only in corporate development and success in building companies in this region. Many of us from the IAMGOLD company that began back in 1990. And Dr. Madani Diallo, who heads up our technical program in Mali has over 30 years of experience in multiple discoveries in this region. And we're very proud to have such a strong corporate team in this junior company looking to repeat our success in this region. Beyond our corporate team, really, our discovery team in Mali is the pride of the company. Just in these top 5 individuals, led by Dr. Madani Diallo, you have more than 120 years of cumulative experiences. Discovery success in this region, their participation and success in discovery spans multiple major gold resources not just at IAMGOLD, but AngloGold Ashanti within Mali and beyond the borders of Mali as well. So this is a team that's on the ground doing the work, and their experience and track record for this area is second to none. The next slide. Just a quick snapshot on the capital structure of the company. It's important to note that we are a closely held company between the ownership position of management and Board, various private placements. So as a result, this represents a very opportune time for investors to be looking at Compass Gold. Current share price is well below our 52-week high. And we're now moving into the exploration, drilling and results that should drive that share pricing value in the months to come. We are cashed up, as I said, and we're -- for the first 6 months of the year, and we're ready to go. Just a quick snapshot on the next slide of where we're working. The red boxes outlined there represent this total of over 850 square kilometers of ground, handpicked by Madani Diallo and his team, never before drilled on before it came into the Compass company. And our property is not just in one single block, but they've been carefully located across 3 separate greenstone belts. You'll also notice a number of existing commercial deposits, deposits that are in development in production. And significantly, we're within trucking distance of known gold deposits. In particular, south of the Yanfolila was south block where we've been drilling, we have one of our largest shareholders, Endeavour Gold, holding the Kalana deposit of more than 5.2 million ounces. So we're not just located -- in a geographic sense, well located, but strategically, looking forward to the development of any resources, deposits that we discover. We're in the midst of some of the best-known and most successful producing companies in the world. So that's where we are. Next slide. Yes. Just a snapshot of where we're focused on. We've identified 3 major gold trends. Each of the more than 10 kilometers in length. The work that we've been doing this past year and most recently in our drilling has built upon initial exploration metrics, geochemical anomalies at surface, artisanal workings as well as drilling. And we're showing bedrock mineralization in all 3 of these large trends, Tarabala, Samagouela and GLIA and Farabakoura. And in this most recent drilling, you'll hear about our results at the Tarabala and Samagouela trends. But just to emphasize that we're on to these large, significant structures, these are the initial sections that we've focused our drilling on. Over time, there may be many other sections of these trends that will undergo drilling in order to identify the best opportunity for near-surface, open-pitable gold for drill holes that are located and to be able to move through the rainy season with a continued drilling program. And that's -- I'll turn it over to Dr. Sandy Archibald. He is our Technical Director, and he'll take you through some of the results that we've had, what they tell us and what that means in terms of next steps over these next few weeks and months. Sandy?

Thank you very much, Larry. Good afternoon, everyone. The -- I'm just going to [ Steve ] for a second on this slide. This is the Hummingbird Resources come on a waste pit. And it shows you the sort of target we're looking for. We're looking for an open-pitable, near-surface resource and target. The diagram, the picture also shows the relative scale of the structure. There's a bit of a brownish smudge just right at the center. That's a mineralized structure in that pit. It's 25 to 35 meters in width. So that gives you an appreciation of the sort of target we're looking for. Near-surface, wide, most Malian deposits are relatively low grade with high-grade zones within it. So you have to be of that in mind as we go through the presentation. High-grade zone is nice, but we're in an environment where low-grade bulk tonnage is really the key. So Larry touched upon the mineralized trends. And there were 3 identified trends just now. We -- with an emerging fourth trend. When we talk about a trend, we are talking about those faults, these major faults the mines are on. That's one component to the trend. There's the presence of artisanal workings that shows there's gold in the trend for the local miners, there's soil geochemical and normalism. So that shows that, that trend, the plumbing, the fault, the plumbing, can contain gold as well. And the geophysics also ties into the structure. So when we talk about a trend, we are seeing is proof that we have a gold-bearing system there. Really, the proof in the pudding is in the eating. And in exploration geology, that is in terms of drilling. So the first trend we're looking at is the Tarabala trend, as it says in the top. And it's a 10-kilometer trend. You see it stretches from Massala in the north, if you look at the figure on the left. Massala in the north, it goes through Tarabala, smaller workings at Yala and to the south at Assama. Okay. So these are all on this Tarabala fault are on a split. And there's also parallel structures. So Sodala to the east is a parallel structure. We'll come back to that a bit later on. But I'm going to talk about the exciting results that we've received for Tarabala in the press release yesterday. And we have got -- we targeted in December a 2.3-kilometer segment of this 10-kilometer long fault zone. Earlier drilling last year provided the grades in the wedge that we see on -- in the body of the text there. So we get 15 meters plus of mineralization. It's low grade. They are 0.5 or higher, that will be low grade. There's parts within -- intervals within that drilling, which would be considered high grade, like there's 4 meters at 5 grams per tonne. So we're getting the sort of mineralization that we see in the rest of Mali. We've got good wedge there. And we wanted to follow up that drilling that we performed in May with additional drilling that we did in December. And that was released yesterday and -- the results yesterday. And just a summary at the bottom, that was a 1,500-meter drilling program. Positive results that allows us to plan 1,700 and change program for later on this month and in February. That's scheduled. And moving ahead, it looks like things are working out that RC -- additional RC drilling is warranted in this area. Now moving on to the next slide, we can see I haven't the press release yesterday provided all the intervals, the wedge. We're getting wedge up to 31 meters of low-grade mineralization. We're getting 4, 5, 6, even 8 meters of mineralization with higher grade. We're getting grades over 1 meter of 12, 13 grams per tonne. And I've summarized that in the figure on the left here. And we can see that within the 2.3-kilometer zone we tested, we got 1.1-kilometer zone of what we would consider really interesting, approaching the sort of grades wedge that you'd like to prove up to determine if resource definition drilling is warranted. It's near surface. And the colored dots are really showing is that in the southern part and the northern part, we've got minor mineralization, and we've got this 1.1-kilometer zone of much better mineralization. We have to remember that a typical mine -- what's a footprint of an open-pit mine in Mali. We're looking at a length of about 650 to 750 meters in length. Typically, the wedge is about 400 to 450 meters in width. So we could easily put, if it's economic and open-pitable, resource in this panel of mineralization that we're investigating. So we've got a wide zone. And if we look on the cross-section on the right, we can -- there's a few takeaways here. It's shallow. We are -- we've tested mineralization within about 50 meters -- 40, 50 meters of the surface. We can see that the mineralization is concentrated in a defined dipping structure. That structure is -- varies between 15 meters to the north all the way to 31 meters in width. We've got higher grade zones in it. It seems to be getting -- the only section we have done with RC is this section that's on the screen. It's indicating that the width is increasing with depth. The structure is open at depth as well. So this is only 1 section on that 1.1-kilometer strike length of prospective structure. That is the focus of our next phase of drilling that will start before the end of the month. So we're -- I'm very pleased. It's a technical success. It's given us really exciting numbers, good grades, good wedge and it's open. So the next slide is...

Sandy, just before you leave that slide, you're indicating how it's open at depth or potentially open at depth. I think it's worth noting that what you're showing there is really only the top 60, 70 meters. And in fact, these -- a structure like this could go down 150 or 200 meters and still be open pitable, depending on the grade and continuity. So it is significant that we'll be looking at a deeper level with follow-up drilling and still be within that open-pit target zone.

Yes. Absolutely. Yes. So highly prospective, that's just 1 zone right in that hole. We are seeing similar with 20 meters -- 400 meters to the north of that section and 400 meters to the south of the section. So our previous drilling, you can see it on the left here with these little black and white dots along the target structure shown in red, that's a 200-meter spacing. Our next phase of drilling is the 100-meter infill spacing. To give us the confidence and the comfort that, that structure continues, we are also drilling some RC -- deeper RC holes in that area to tell us what the depth extension is like. These 100-meter infill holes are in yellow. We've revised the target model to the north. We don't think we hit the structures properly up there with the December drilling, and we've included some extra drilling in that area in the green dots we see. So that might open up the structure beyond the 1.1 kilometer. So I'm very happy with the way the program is going. The style of mineralization is you have a string of pearls of mineralization. The structure now continuous. It opens up where it tends to open up maybe every 1, 2 kilometers. That's where you can concentrate the mineralization. That's what we think we have at Tarabala. We see evidence for that 5 kilometers to the north, that prospect called Massala; and we see it 4 kilometers to the south at a prospect called Assama. So this trend is far from being a 1 short deal. It's got lots of potential. And that's typically what we see on all the prospects, on all the trends that we have in this portfolio. Okay. We also released some data in Samagouela. This is -- we drilled this area in the first half of 2020. We had some really interesting, nice results and some structural information for near-surface mineralization. We were getting grades 9 meters at nearly 6 grams per tonne. And the question was, what structures are hosting that mineralization? Shear zones are notoriously difficult because you have different structures coming in. The figure on the left shows we've got little red blocks of mineralization there. We believe that the dominant structure was the north-south trend. We tested it by drilling over a distance of 1.4 kilometers or -- sorry, 1.5 kilometers. This is a blind target other than the artisanal pits. What we found was that the geophysics identified the structures. We drilled the structures. We got [ Kourou's bending ] precisely the way geophysics suggest that the mineralization would be. But the gold results that we expected in these north-south structures did not come through. We ended up with evidence that the orientation in mineralization, hindsight, it looks like it's northeast, southwest. And we're always refining our models here. That's just the way exploration geology works. We know that 9 meters at nearly 6 grams per tonne didn't fall out of the sky. It must have come up from the ground. It seems to be in a northeast-southwest trend. That opens up this area to the west that's actually beneath the legend. We have to look at that. We have to do infill soils. We have a geophysical team on this area now doing additional geophysics because the shear zone is composed of numerous faults. Any one of those faults could host mineralization that's low-grade, high-grade pockets, near surface, precisely our target. Okay. Now that's where we are at Samagouela. That Samagouela, that's 1 prospect on the 10-kilometer long Samagouela trend that you see in the upper top left-hand corner. We have Samagouela, another prospect, 2 kilometers away down trend. Old Sam, we've got soil anomalous in going down the trend. And then we've got a very strong soil anomaly at a prospect 10 kilometers away called Ourou Ourou, and we can see that in the slide. We can see if -- where the Samagouela workings are. Beneath the word Samagouela in the figure of that green box is the site of our Gradient IP targeting this parallel structure. We've got some strong pronounced soil geochemistry in this block shown by red. Old Sam is sitting on that shear zone. It's got good structure as defined by the geophysics we did. It's on the fault zone. There's artisanal workings there. That will be the focus in Q2 of additional drilling work there. And the main target really when you see how broad the soil anomaly is, it's up to 4 kilometers wide, it covers a distance of 6 kilometers at Ourou Ourou. So it looks like at this location, we have the Samagouela trend joining a potential north, northeast trend, the Kourou trend. And as we come down, it breaks into different branches. And we can see those artisanal workings in the area. We can see soil anomalism. We have a multitude of targets there. So we've got a conveyor belt of targets. We've got targets where we're talking about 100-liter infill drilling and deeper drilling at Tarabala. We've got targets. Like in this case, clear the soil anomalism. We're needing -- we need some geophysics to back it up, those artisanal workings there. So we have numerous targets, some of them are more advanced than other targets. These 2 targets at Ourou Ourou and at Old Sam will be drilled. Samagouela, we are coming back there once we reprocess our new data. Okay. Now we're moving north again. So we're moving about 40 kilometers north. I've talked about the Kourou trend, the potential Kourou trend. If we draw a straight-line from Ourou Ourou, it comes up through this prospect here, Sodala. It's parallel to the Tarabala trend. You can see it in the map. And what we have here is some of the highest grade soil anomalism encountered in Southern Mali. It's the second highest grade of a soil sample, 31 grams per tonne. The only sample I know that's greater is 36 grams per tonne, and that's also on one of our other permits that I'm not talking about today. So this is the second highest soil sample. On the left, you can see the location of Sodala. You can see it's a small permit, but I put in a schematic diagram there showing a typical Malian open pit with this 30-meter wide structure that I gave an example at Kalana, the picture at the start of my section here. And we've got mineralization over a kilometer. We've got soil anomalism over 1 kilometer. We've got a strong geophysical target. You can see in the geophysics that multicolored layer or that lithography. We can see north south structures coming in. We can clearly see a northeast trend following an -- marked by the yellow target on left side. And we are in the final stages of locating the drill holes, 20 drill holes, approximately 1,000 meters on this target. Very strong target. The discovery team in Mali, the technical advisers over here in Canada Board are very upbeat about this target. That will be drilled in Q1. We're looking at February. And like most of our work, any follow-up work is contingent on the results of [ the Board's work ]. We might do additional -- probably do additional air core work from the near-surface environment. But again, proof in the pudding is deeper drilling, and we've also budgeted a 10-hole deeper drilling program to see what the depth potential is in this area. So that's Sodala. And this is a summary figure here that we're coming back to the trends. You can see our scheduled or budgeted program, the air core drilling prospects. We have Tarabala in the center. That's following up these excellent results. Massala to the north, Assama to the south, we will be drilling that in Q1. Sodala, it's very close to Tarabala. But logistically, we have to go through it, run through the 1,000-meter drilling there. We have a trend that we do -- we looked at early on in Compass, the Farabakoura trend. We have a new target there. It's funny how things change. Within the last year, a new set of shallow workings have been developed by the artisanal miners. It's in an area where we thought had a very strong soil anomaly. We performed geophysics in that area before the rains in June last year, and we've got a pronounced geophysical anomaly as well. And we budgeted 1 line, 750 meters of drilling at Dialéké on this Farabakoura trend. Again, it's looking good. And then while we are working up, completing the rest of the data in Samagouela trend, working up that geophysics, the geochemistry, doing additional prospecting, we have to drill test the targets at Old Sam, Ourou Ourou and back to Samagouela. So we're in the final stages of determining if we have to drill at Old Sam and Ourou Ourou. But we do have a plan there. And as I've said, there's follow-up drilling, there's follow-up geophysics. And the overall plan at the start of my section was we want to be in a position by Q3 that pads are prepared, that when the rainy season comes along, there is no hiatus in drilling because we have a lot of quality drilling targets in our portfolio.

All right. Thank you, Sandy. Clearly, there's a lot of work going on at -- I want to make sure that all of our investors and shareholders to understand that we're not going in several different directions or moving in tangents. This is very much focused, as Sandy referred, to having a pipeline. I think the image I would also refer to is it's really a funnel. We have 3, perhaps 4 of these trends that we're going to be drilling on. The idea is to be able to focus down, funnel down before the end of this year on where we think is the shortest distance between here and getting to obviously a commercial resource at an open-pit target. And so this is a process that's going to continue. The results will advance our understanding of these trends. We're trying to bring our shareholders along through the process. So our commitment to regular updates and news on the drilling, where the priorities are taking us, where the drill results are taking us, that's part of the reason that we're working with the Red Cloud Group to help bring this information to the marketplace clearly, regularly. And we think that's going to be beneficial for the appreciation of what our team is doing and the value that's being created within Compass Gold here. So it may be every 2 to 3 weeks that there'll be updates available. We're certainly not going to wait for all of this work to be completed and then come back and say, "Here's what we found." We want folks to understand the steps that we're taking along the way. So it's an exciting year. A lot of great opportunities in these target zones and the trends that have been identified. And every 2, 3 weeks, we expect additional drilling results to help tell the story. All right. With that, I thank Sandy, and I'll turn it over to Jacob. I will note that also available online to help respond to any questions is Dr. Madani Diallo, one of our largest shareholders and a Director of all of the exploration in Mali, leading the team. He's available along the line as well as Lou Nagy, our CFO. So with that, Jacob, I'll turn it back to you.

Okay. Great. That was an excellent presentation. There's a few questions to go through. So let's dive right in. First question from a participant is asking, what do you think the minimum number of ounces would be needed for a near-surface, open-pit mine to be viable in this part of Southern Mali?

Yes. That's a good question. We've seen deposits of less than 2 million ounces, 1.5 million ounces going into production. It will obviously depend on grade, the processing of ore, how simple, how complicated that is. What I can say is most of the deposits that have gone into production in Mali have grown after the initial feasibility in construction has occurred. In fact, in the case of Sadiola, when we found our first about 2.8 million ounces, our partner at that time AngloGold said, "Okay. We're ready to sign off on a feasibility and start building." And our response was, "Well wait a minute. There's more gold here to be found, if we drill deeper and extend that pit." And they said, "Yes. We'll do that, and we'll find it, but we've got enough to start production." And indeed, many millions of ounces of that deposit were not discovered until the line went into production. So I would say that 1.5 million -- 1 million to 1.5 million would be -- at these gold prices would probably be the threshold for a stand-alone mine. But having said that, 0.5 million ounces that's within trucking distance to an existing mine that's up and running and has gone through all that capital expenditure also represents a commercial opportunity for a company like ours.

Right. Yes. And I would agree with that as well. Another question from a participant, asking specifically about gold lines in Mali and if there are any that have ceased operations in the last few years. And if so, what was the reason for them stopping?

I'll start with an answer, and I'd be interested to get Madani Diallo's perspective on that as well. In the case of Morila and Sadiola, those are 2 large open-pit operations that have recently been vended to new owners. And the new owners have plans that are a combination of extending some of that open pit at a different processing level and so forth. In some cases, there are -- there's clearly underground potential. As we talked about some of these structures, they start from surface, they go down to 200, 300 meters for an open pit. Now lower than that or deeper than that, there's open -- or sorry, underground potential. But it's a different kind of rock, it's a different kind of processing. So there's a fresh capital investment required. We've seen that in the case of Syama. But really, it's a matter of reaching the end of an economic sort of mine plan for a type of processing an open pit. Madani, I don't know if you have anything to add on a specific example for when operations cease. Some of the -- I mean in case of Sadiola, it was well over 25 years of operation. There's very few that have been less than 5 to 10 years in operation. Madani, what would you say?

Thank you, Larry. Of the I guess the 12 operating mines, only 1 has stopped. It's the Yatela Gold Mine. That mine was planned for 6 years. It was an addition to -- yes, to Sadiola. And mine life was planned to be 6 years, and I think it's run for 13 years, I believe. That was the only one, which I'm sure is still ongoing. IAMGOLD and AngloGold has sold it, but the mine is still producing. And the new owners are thinking at least 10 years production ongoing. Morila, which was a [ Jack ] mine is still producing. And yes, that's the only mine which closed.

Okay. Great. One of the things that might be quite striking to some of our participants is that this is -- these are all basically undrilled properties in Southern Mali, which is pretty unusual for such a prolific gold belt. Maybe you could tell us a bit about how you came across these properties and what drew you to them.

All right. Well, to answer that question, I will turn it over to Madani. He and his group had done the initial work in plotting and selecting for 2, 3 years before they were brought into Compass. So Madani, how would you best respond to that?

I would say that both properties came from work we did in the 1990s on behalf of BHP Minerals when we did a regional exploration for that area between 1993 and 1997, then BHP sold the properties to Randgold. Right now we took over them in the -- recently, and we decided to go further on the work we produced -- on the results we had at hand.

I think it's also worth noting, there's a lot of outcrops or visible signs at surface. So there had not been drilling on any of this ground. More recently in the last, I guess, 5 to 6 years, artisanal working cropped up. So in a sense, that's a surface or a visible sign of gold being present beneath the surface. I think that's what Sandy was referring to when he talked about blind targets. They're underground, and there's nothing at surface geologically that you would see to indicate the presence of a mineral system.