Thanks to Alan Pangbourne, CEO of Chesapeake Gold TSXV: CKG, for this interview. What fun to go through Rick Rule's interview questions for junior mining stocks.

Learn more about the company online here,

Rick Rule 10 Questions: 

Peter Bell: Hi, I'm Peter Bell, and I'm here with Mr. Alan Pangbourne, CEO of Chesapeake Gold. Hello Alan!

Alan Pangbourne: Hi Peter. How are you?

Peter Bell: Excellent, thanks. Nice to talk to you. A friend sent me your way and said talk to Alan, talk to Alan, talk to Alan. He's been telling me this for months, and I just had the pleasure of joining an investor group for a video call that he does. It was 8 A.M Eastern today, and I’m keen to follow up by learning about the Chesapeake. I don’t know your story, but I am keen to jump into it with you. To start, maybe I could show you a list of questions from Rick Rule that we can try going through. The questions sound simple and easy, but they're wild cards, in my opinion. I'll share my screen. These are the questions here.

Rick Rule: It's very difficult for an exhibitor in particular but also for most presenters to turn down an interested appeal for a one-on-one discussion with somebody who has done that presenter the favour of having listened to what they had to say and assimilated it. The probability increases that you can obtain a second meeting, which could be much more beneficial to you than simply listening among others among 800 other people. The possibility of that is high, so ask for it. The other thing that you do after the conference is to pay particular attention to the arguments presented by presenters that make sense to you and follow up with the original research to determine whether you believe those claims are true.

Peter Bell: What are the company's goals, and what strategies will it use to reach them?

Alan Pangbourne: The company goal is to effectively become a producer in the next-sort-of five years or so. If you go back a bit, the company has existed as Chesapeake Gold for longer. And the Matates project has existed for a long time, and it used to be a Cambior project back before they went broke. In more recent history, some other investors and I had a private company where we'd gone looking for a technology that allows you to heap leach sulphides in the gold systems. Not just for copper systems. Part of my history is that I used to be in BHP Copper for a long, long time. The copper world has slowly worked out how to heap leach oxides.

Alan Pangbourne: People leach secondary sulphides, and now there are a couple of companies running around claiming they can heap leach primary sulphides. I was involved in some of that development and built one of the largest copper-sulphide-heap-leach operations in the world.

Alan Pangbourne: After leaving BHP and SSR, I looked for more opportunities. Why can't we do this in the gold space? We found the technology that should allow us to do that. We then went looking for an asset and a vehicle we could use to put that technology into and move forward. That gave us a market advantage because heap leaching is dramatically cheaper capital-wise, operating-cost-wise, power-wise, and water-wise. It's got a lot of advantages. If you can treat the refractory ore body, you get away from autoclaves which are damn expensive, and you could build a company around that by aggregating other assets where the technology should work as well. Then you've got a significant market cap and market advantage versus everybody else because nobody else knows how to do it.

Peter Bell: Does that count as new things in old places or old things in new places?

Alan Pangbourne: The analogy I use is that you throw all the pieces out of the box, and then you put them back together again to come up with a different way to achieve the same result. We want to make and sell gold bars for revenue and all the rest. There are ways that people do it today. You can ask yourself why or why not half a dozen times or look around the rest of the industry. You find that someone is doing one piece of what I want to do over here, and they're doing that piece of what I want to do over there. You put the pieces together into the jigsaw, and you get a different picture right.

Peter Bell: Should we expect to see conventional consulting studies and the typical stages of a junior mining company? Do we expect to see resource estimates and feasibility studies and for you to jump through all the hoops?

Alan Pangbourne: We've done a PEA. We put a resource update out three or four weeks ago. We're working vigorously on the metallurgical test work to support our move to do a PFS. We hope to start this towards the end of this year or early next year.

Peter Bell: The proof of the pudding is in the eating, right? And that is when you sit at the table and build these things.

Rick Rule: I changed from my corporate regalia to blue jeans and a polo shirt, and I was wandering around the floor, and there was a particularly aggressive promoter, the typical sort of white shoe guy -- excellent salesman. At any rate, I attempted to get past his Booth unmolested but was unsuccessful and dragged into the booth. He was just loud in his company's exploration potential and an extraordinarily aggressive program to drill It off. I remarked that this program is highly aggressive, and I understand what you're saying about news flow. How about money? How will you accomplish this? I'll never forget Tekoa. He looked at me and said well, money is unimportant, and I couldn't help but take the bait I said my money's important explain to me why money isn’t important...

Peter Bell: How will you make me money on this deal, and when will I make it?

Alan Pangbourne: It's about getting in on the ground floor of a technology that will change the industry and how they look at sulphide refractories. As confidence and understanding in the industry grow, the company's value will continue to increase. In the case of Matates, you've still got a massive ounce-in-the-ground story. Your worst-case scenario is that we continue to trade as a levered play against the gold price if that's what you like in investing. That’s why some of our big vital investors are here. That's what they invest in.

Peter Bell: And there is this wave of mergers and acquisitions rolling down the beach, as well. It’s getting closer to us, closer to us, and it's coming our way. It's going to be here one of these days. We've seen the mega-mergers. We're seeing the mid-tier stuff happening down lower in the food chain. And you look around at how desperate it is with the actual small juniors -- I don't see guys making discoveries. So, sure, there's some. But to have a resource already established is bullish. There are a lot of hurdles to get there.

Alan Pangbourne: Show me how the likes of Newmont and Barrick will replace four million ounces a year.

Peter Bell: It's cheaper to buy than find!

Alan Pangbourne: Would they prefer to buy four different 1-million-ounce deposits every year and mine them in a year?

Peter Bell: And which are they? Where are those deposits?

Alan Pangbourne: Yes, and they've got to look bigger. We are one of the largest undeveloped gold and silver resources known in the world today. Say 19 million ounces of gold and 480 million ounces of silver. My view is that our worst-case scenario is for our stock to trade as a gold-in-the-ground story. The upside is that the technology works. We've put out our proof of concept, and we just got to do the work now to fully understand it and go through all the appropriate steps and toll gates. After that, we will do a feasibility study. I do not believe in building off of pre-feasibility. That's a guaranteed way to get yourself.

Alan Pangbourne: That's how you make money -- if you come into this deal, then you've got two ways.

Peter Bell: What a question, eh? I remember I continuously spin my wheels to answer it. Well, it depends on when you buy and sell it. And your decisions are your responsibility... Stop, Peter! Way too complicated. Serve them up on a platter is what they want. You've got a base case, and the upside is the technology changes the industry. I can't even tell you what that's worth. I have no idea.

Peter Bell: Totally. And nobody knows. You're looking around the corner there, and it's hard to see. The crystal ball is cloudy.

Alan Pangbourne: I can't remember who it was. It might have been Pierre Lassonde as one of the keynote speakers at a conference -- Beaver Creek at lunchtime. He made statements to look at the amount of gold needed to keep coming. Somebody asked him how much of that gold today is refractory and costly to mine with current processes.

Peter Bell: Nothing's cheap anymore!

Alan Pangbourne: And it’s relatively expensive. No margin on these one-gram ore bodies doesn't work as an autoclave.

Peter Bell: It blows my mind that guys in the USA are mining $15 per tonne rock.

Alan Pangbourne: I used to have one! I was the COO at SSR, and Marigold is one of the lowest-grade gold mines operating in the world. We were making money at thirteen hundred dollar gold, let alone nineteen or two thousand dollar gold now.

Peter Bell: There's nothing like scale, eh? Really.

Alan Pangbourne: We used to move 83 million tonnes a year at 0.35 to 0.4 grams a tonne. We were getting a +70% recovery, and we made money. We're making 200,000 ounces a year at the time with sub one thousand dollars cash cost.

Peter Bell: That's a lot. That's a lot. That's a big operation.

Rick Rule: I said, My money is important to me. Please explain why money wasn't important? He said a hot west coast broker named Rick Rule likes my project. He obviously didn't recognize me, and he was going to give me all the money I needed, but see, here's the opportunity. With the stock selling at 50 cents now, he will only finance under two dollars. So when I get this stock to two dollars from 50 cents, Rick Rule will finance it, and you will be able to leverage off Rick's money at two dollars. At that point in time, I pulled out my wallet and pulled out my driver's license. I showed it to him and said I know this Rule guy pretty well. The probability of you solving your financing problems with him is extraordinarily low. So when I say listen to these stories but verify -- that's what I mean. This is a capital-intensive business, and if the company has no capital, then they have no business.

Peter Bell: I'll jump to the next one. What can go wrong? How will I know what is going wrong, and what will you do if it goes wrong?

Alan Pangbourne: What could go could go wrong? The obvious answer to that is that technology doesn't work. And how will you know -- well, when we put the press releases out. What are we doing to make sure it doesn't go wrong -- as I mentioned, I worked for BHP for a long time, and I have been through multiple mega-project reviews, both on the receiving end and on the reviewing end. Such a company like that has a very structured process and system.

Peter Bell: That makes the public company audit experience feel fairly innocuous.

Alan Pangbourne: Yes, and we fully understand the expectations of the investors and the technical people who review it before they give me the money to build it. What are they going to need? All of our work is being done in a third-party, independent lab. We're running duplicates. We're running replicas. We're running all the QAQC stuff around the test work. We are sampling and assaying everything that moves. What happens with these processes and what can go wrong is that something in the ore or in the solution is building up as you circulate it over time -- but you need to be made aware of it. That could be copper -- a common issue in the gold industry because it consumes cyanide. In the copper industry, manganese is a problem in electrowinning. These things can build up. Part of what we're doing is a very extensive and extremely complete investigation of not just gold and silver, but what else is in there that may cause me problems further down the track.

Peter Bell: Well, it's so complicated, right? Different domains in the orebody, mineralogy, grind size, temperature, chemistry -- so many variables.

Alan Pangbourne: Great comment. I'll address that particular comment about domains. We have a three or four-stage process that we're working through to reach the endpoint. Stage one is a test for proof of work -- proof of concept. In the lab in the column, does it work? Today, the answer is yes. We improved the gold recovery from pre-oxidation to post-oxidation from 30 to 60 percent and silver recovery from fifteen or twenty percent to 50 percent works. What variables do what to it?

Alan Pangbourne: Stage two is what we're working on at the moment, and that's about all the things you just mentioned -- temperature, crush size, reagent strengths, time, and everything else.

Alan Pangbourne: Stage three is how much under a set of standard conditions you will use for your design. Does the ore body vary from location to location, from domain to depth to mineral type? We use all of those things to build a proper geometallurgical model. Most of the gold industry never does that. But, again, that comes from some interesting times in BHP. You build a geometallurgical model, then make a decision when you've got all of that done. Do I build from there, or do I need to build a pilot plant?

Alan Pangbourne: I'm not the biggest fan of pilot plants because they give you a false sense of security.

Peter Bell: And it worked once, so we're good? Ha!

Alan Pangbourne: And it worked once, right? If you've also built a geomet model, then the two complement each other. One without the other is risky. But the geomet model gives you more value than the pilot plant because it tells me by time, by phase, by location -- what should I expect?

Peter Bell: If you're not measuring it, you can't manage it! If you don't have that in your block model, then you're flying blind as far as those parameters go.

Alan Pangbourne: If you've got a blanket recovery that you don't know if you're going to achieve it…

Peter Bell: Estimated from a blended composite sample taken from across the deposit?

Alan Pangbourne: That doesn't exist!

Peter Bell: And never will be mined -- stop.

Alan Pangbourne: Anyway. That's how you know what can go on and what we will do.

Peter Bell: And then you’ve got all the little company problems that can go wrong, too. Those things you mention are big company problems, like operational, production, and real performance stuff. Then there are all the little things.

Alan Pangbourne: There is only one thing that can seriously go wrong that kills a company, and that is the project you built didn't work.

Alan Pangbourne: The industry is littered with projects that didn’t work. BHP put such a rigorous system in place because they had half a dozen of them in a row! And if you go back in time to ‘90, the early 1990s, then I can rap them off. The Escondida sulphide concentrate leach didn't work. HVI didn't work. Hartley Platinum didn't work. There was a Beach Sands project that didn't work. The Magnma acquisition was a freaking disaster. After that, they put a system in place, and, I tell you what, we didn't have one project go bust after that. That was from 1995 until 2006, when Ravensthorpe didn't do what it was supposed to do. That was the first one. For a decade, we were able to build projects safely, on time, and budget, and as I said, most importantly, they worked! They delivered what they were supposed to deliver.

Peter Bell: There were some bullish years in there too. The early 2000s was bullish for the gold market, at least. Very impressive. Fascinating stuff. I'm so interested in how much of that you bring over to the juniors. How much of that is internalized within you? What does that checklist for those the big company even look like? It's a fascinating rabbit's nest in there.

Rick Rule: Please help me assimilate your story into a framework I can use. The first question would go something like this, what is your company's liquidation value? I know how many shares outstanding you have and what they sell for -- that's the price. What I'm worried about is the value. And I don't want you to talk about your assets in terms of the market cap that they might compete if owned by a competitor. What I'm interested in is what's the liquidation value of your company -- the blowdown value if you took the projects out and sold them for cash to a competitor. What's it worth? I'm not suggesting, by the way Tekoa, that if you can't buy companies for dimes on the dollar in terms of liquidation value you don't do it, I'm just suggesting that knowing the liquidation value or downside is important as knowing the upside. The second thing that you ask them is to please distill for me…

Alan Pangbourne: Liquidation value is the value that we're prepared to sell it for. One of the interesting things about Chesapeake is that between three large shareholders, we can stop anything. In one way, I like that because it means that I believe the technology has significant value, and the current asset is trading at four bucks an ounce, which is way too cheap. On the other hand, thanks to the gold price today, our market cap is finally going through $200 million Canadian or USD 150 million.

Alan Pangbourne: Yes, $185 million today. Is it worth more than that? If so, is it worth more than four dollars an ounce? I don't know. The market says it is because the share price is tracking the gold price better than anything else. Part of that is because people don't know the story. Is the technology worth more than that? It depends on who is looking at you. Technology is potentially more valuable to the acquirer than the seller.

Peter Bell: If it works right and they can apply it across their portfolio of operating mines, then I agree!

Alan Pangbourne: Exactly. And then you get into how the value of the technology is indeterminate because it very much depends on the eye of the beholder.

Peter Bell: And there are no comps -- there are no comparable market stats for the technology. And how do you strip out your resource endowment valuation to isolate the implied value of the technology? That needs to be clarified.

Alan Pangbourne: I know what I rolled it into the company for.

Peter Bell: That is the most salient stat.

Alan Pangbourne: If you sit there and say four dollars an ounce for the gold gives you what we've got today, then I rolled the technology in at the time for shares in Chesapeake worth 45 million Canadian. Do you take the $45 million off the $185 market cap, or do you add to it? It takes two to tango. It's all about who's prepared to buy what.

Alan Pangbourne: I'll give you an example. Before this role, I was the CEO of Guyana Goldfields for a grand total of eight months. I inherited a mess, and we put it on the market. The first offer, which we accepted and signed a non-binding bid, was 60 cents a share. We finally sold it for a buck 85. So what's it worth? Well, it's worth a buck 85. Of course, it is. Somebody paid for that. We would have accepted 60 cents because the alternative was ugly. What's it worth?

Peter Bell: Isn't that amazing? People can get all bulled up in a hurry, right? Sometimes they see that other person go first and they say no, I need that!

Alan Pangbourne: We had 60 cents, 90 cents, a buck 10, a buck 30, a buck 85 -- all from February through to August when we closed.

Peter Bell: What a busy year, eh! Isn't that a fun six months?

Alan Pangbourne: When somebody asks what's liquidation? It depends on what somebody's prepared to pay for it.

Peter Bell: Do you guys have property, plant and equipment? Is there much tangible assets or property on the books?

Alan Pangbourne: You've got all the leases, which is property. There are intangibles with the technology. Another asset we own is the 60-something percent of Tallapoosa in the US.

Peter Bell: There are assets within the company and presumably some cash, too.

Alan Pangbourne: We've got $26 million Canadian in the bank. I'm not looking to issue more equity to get more cash now. We're in a strong position. We burn about five to six million dollars a year, so I'm good for a while. Would I raise money at this price? I don't need to.

Peter Bell: Maybe if there was some strategic shareholder or some person who needs a seat at the table? But then you have to be mindful of this control block of stock that you have in place now. That control is worth a lot, especially if you've been through these situations where you've had these competitive bids coming in on something that becomes sought after. If you don't have a steady hand on the wheel during that process, watch out because they'll take the first offer and close it before the second one even appears. Whoops! There are many ways to make mistakes in this business, and selling projects like that is a tightrope walk that only a few people get to do very often, at all or ever. Relevant experience for you there. Wild stories. Amazing!

Rick Rule: The most dramatic example I can give you of personal benefit that occurred in maybe 1998 or 1999 at an obscure conference in Western Australia called Diggers And Dealers. Diggers And Dealers are very colourful. It's held in a mining town in Western Australia called Kalgoorlie, and the theme of the title is the name suggests that the financial interests in Australia meet with the mining people hence Diggers and Dealers. To put this in contract in context, Kalgoorlie is like a thousand kilometres from anywhere. It's a town that, in those days, produced a million ounces of gold a year from within city limits. The Kalgoorlie Super Pit approached the town from the Northwest. And when I say Super Pit -- the pit was a mile across. A truly spectacular hole. At any rate, the most dramatic who else can you tell this story to? How will you know them?

Alan Pangbourne: I've been telling anybody and everybody that will listen to me the story about the technology and what we're trying to do and why it's different because I had to overcome the historical baggage of this massive four billion dollar project that was previously in the market and never got built and didn't go anywhere. So I've had to overcome that. We're obviously also trying to improve our profile in front of investors. We're improving our market cap as people become more attuned to what we're trying to do and understand how this is a unique opportunity in the gold and silver space. It's not a royalty story like everybody's copying because several of them have got very large margins. It's not an expiration story because I already know where the elephant is located -- it's dead. It's lying there. We just got to work out how to fix it, and how to extract the value out of it is a very unique story. Nobody else is marketing anything like this in the gold space. Two others are marketing a technology story in the copper space, but they need assets.

Peter Bell: And they're not public! Jetti is not.

Alan Pangbourne: Okay. If that is the case, then neither of them are public. So when it comes down to this metallurgical technology that will change a market, we're a unicorn to use the tech company's language. I heard, what was it, I don't know, six months ago or something I want to say, when I heard some stories about methods to deal with arsenic from people in Peru who had things that they said were important breakthroughs so refractory ores I guess, again asked by profession as you can probably tell, I enjoy tracking all sorts of Technologies because when you put the puzzles back together again, somebody may have solved a problem yep somewhere else that you can steal and use over here science and science.

Alan Pangbourne: R&D does not stand for research and development, it stands for rob and duplicate.

Alan Pangbourne: One of the failings in our industry is people need to look around at what everybody else is doing and learn from where somebody's done something unique. I can apply that over here because I've got the same problem well.

Peter Bell: Is that a reason to build a pilot plant so you can have a demonstration facility? Or are you bringing smart people out to see what you do? Or is the paperwork enough for them to see the reports and the numbers that come from it?

Alan Pangbourne: When I get to the point that I'm comfortable with where it's all going, and we understand more and more about all the various levers, we'll sit down, we'll organize an investor toward to the lab for argument's sake and say look what about there are all my little soldiers standing in a row and do you want to bring in any of the big nasties early too like do you bring in the BHP type companies to see what you're doing or I wouldn't mind BHP because they won't try and take me out because I know they're not particularly into gold. There could be knock-on effects on what we're doing for other assets in their portfolio. I hadn't thought about them much, but bringing in a major is a double-edged sword, and I can tell you that for a fact from my past when I was with SSR. One of the first things we did when looking at single asset companies was to look at the share register and see if there was a big nasty already on the share register. If we went and bid for that company, all we were doing was supplying a better benchmark price. And if he didn't pay up, it's because he didn't believe it was worth that much.

Peter Bell: He knows more than you do!

Alan Pangbourne: He knows more than I do, and if he did pay up, I can't compete. It's a double-edged sword. It brings credibility. The flip side is it potentially brings credibility in the eyes of investors if one of the majors is prepared to come and take a 9.9 stake in us. And if they open their technical development crew to us, that also brings credibility. It's a double-edged sword, but that's the answer for everyone and anyone.

Peter Bell: Do you guys have an IR person?

Alan Pangbourne: We are very close to announcing a new IR person, and that's all I can say today.

Peter Bell: Getting all that stuff straightened out on the Venture is challenging. There are a lot of hoops, and doing it properly can be difficult as many guys want to skirt the rules. So let's just do it the right way! I imagine that with your team’s background, you have pretty high standards.

Rick Rule: The second thing that you ask them is, please distill for me the most important unanswered question right now what's the thing that you can do right now that will deliver me the quantum increase in value that is required to induce me to take the risk to invest in your shares I understand that you're trying to prove a 5 million ounce gold deposit, but what's the first step what's the most important unanswered question right now it might be that the company has done surface sampling and established a grid and what they need to do now is trench to see how deep that gold mineralization goes it might be that they have in fact trenched it, and they've developed a drill Target so the next thing that they need to do is shoot geophysics,

Peter Bell: Please tell me about your management team directors, especially their past success in mining and markets.

Alan Pangbourne: Sure. The difference is when you truly believe you're going to build it, and if you've ever built anything before, you better get it right before you start rather than trying to fix it afterwards. It brings a level of conservatism. It brings a level of caution. It brings a level of respect for why you're doing what you're doing. You don't do the Earthworks on 10-meter contours because if you're out by five, it's a lot of muck. There's a reason you go through each of the steps. There's a reason you do all of this work beforehand, and it's all because of the same thing: your boss never likes surprises. Investors never like surprises. Do the work, and keep them from surprises.

Alan Pangbourne: Management -- our team is really small at the moment. Some of the management team comes from a company called Francisco Gold, including the Executive Chair and my VP of exploration down in Mexico. They successfully found some assets in Guatemala and Mexico, which they sold to Glamis, which became Goldcorp. It went into Newmont, and they spun it out. The Francisco Gold guys got hold of Chesapeake after they sold Francisco Gold, so they were looking to do the same thing and do it again. Unfortunately, this one didn't flip as easily. It didn't flip for a couple of reasons. One is that the grade for an autoclave plant is challenging.

Alan Pangbourne: Secondly, the majors or those who think they are majors in the gold space stubbed their toe on two or three projects and learned that buying these large deposits and then trying to build them wasn't as easy as people think. I had the experience where I built projects anywhere from four million dollars through to billions and I can tell you when you jump into that billion range it is a totally different game totally different the last one I did was The Spence project which was this copper project in Chile at the time this was 2002 when it was when it was approved it had a billion dollar budget that was when a billion dollars still bought you something and so to give you an idea of the dimensions it was a 250 000 ton a day mine that's 80 million tons a year it's actually a bit more it was a 60 000 ton a day crushing plant which people go oh that's not that big, but it actually is we have we peaked at 10 000 people on site during construction to put that into perspective you're in Victoria I'm in Vancouver in the middle of cruise season that is the peak day of the number of people that show up in Vancouver or Victoria when there's three or four cruise ships in imagine managing that many of people every day getting them to their work site from their work site feeding them three squares a day okay I did I think of the stupidity I see with the micro caps and I can't even imagine you really have to have standards at that point because you have to have people who know what they're doing, and you have to have some enforcement of standards as they say because this little stuff Creeps in on the edges and this guy's doing it wrong and then five guys down the line they're completely backed up because this guy whatever it just I can't even the little the little things as you said food supply and rubbish disposal because what goes in comes out right it doesn't matter which way it comes out, but it comes out somewhere. If you're 10% short on your camp when you've got 200 people, that's only 20 beds. When you've got 10,000 people, that's a thousand beds you've got to come up with. To give you a crazy idea, we used to have six serving lines the in the canteen. We used to program the buses with 10-minute arrival slots to six lines. That was six buses every ten minutes, and they kept the schedule because if they didn't, they went to the back of the queue. We had penalties on the catering contract if the guy stood in line for more than 10 minutes waiting to get his food. All sorts of little things that suddenly aren't so little. When you build something, the team has to know how to do it, and in my background, I've done it before at every scale you can think of, including the large project that existed here before. I know how to build it. We're not doing it because I never knew how we could fund it.

Peter Bell: It helps to have that experience in the early stages because you're making decisions now that you're pruning a decision tree in the future. What you're doing now affects what they can choose from down the line. Having somebody who's been through some of those battles and the stress of all that helps. Someone who knows where you need flexibility and what kinds of things constitute stupid mistakes -- you can see those far off in the distance.

Alan Pangbourne: At this stage, when things are relatively quiet, we're putting in place processes and systems that when you get to the day all hell breaks loose, you don't have to worry about those things. Bills come in, get approved, and get paid, so you don’t have a bunch of grumpy people ringing you up every day. Why haven't I been paid 60 days, 90 days, or 120 days late? It helps to sort out your processes so the back office will just work.

Peter Bell: Let alone permitting. Let alone community engagement.

Alan Pangbourne: Start early, Peter. Understand what promises have been made and what you're going to make, and keep them because the community doesn't go away.

Peter Bell: No, you're their guest.

Alan Pangbourne: Management comes, and management goes. Boards come, and boards go. Companies come, and companies go. However, a local community will still be there, and if somebody made them a promise 20 years ago, then I will guarantee you that when the rubber hits the road, somebody will show up and ask for it.

Peter Bell: Investors are the same way, right? Think about how investors track performance and how obsessive they can be about guidance versus results. The analyst community in proper stocks as opposed to us gold bugs -- it’s essential stuff.

Alan Pangbourne: The analysts never look behind them. It's always forward-looking.

Peter Bell: No management scorecards?

Alan Pangbourne: The only time I've seen that is this report from Scotia. I have yet to read it all, but it's a report by Scotia regarding how high gold prices plus easing costs equals better operating performance. It goes through company-by-company to compare share performance and guidance. Look at their share performance when they hit guidance versus when they miss guidance. Who was the CEO at the time? Unfortunately, SSR isn't on there. It would have been nice if they were because we hit guidance every quarter I was there.

Peter Bell: Like a clock!

Alan Pangbourne: As I said, I am the CEO, and the team's background is as follows. Doug Flegg helps us with the marketing and the investors. As I mentioned, the VP of Exploration of Francisco Gold and Gary Parkinson was with Cambior, so he knows the asset upside down and inside out. He knows where all the skeletons are and what's in what closet. Alberto was with Randy at Francisco. Erick Underwood was my CFO until recently, and he worked with me back in Chile when we built that project. He was doing a lot of the financial assistance stuff back then, and Bernie's our corporate secretary. So with the board and management, we've got a pretty strong team. As time moves forward and we get to different steps, we start building out. Currently, I have there are two other people who helped me a lot that need to be added to the website -- one is a guy called Carl Edmonds, who was the Chief Geologist at SSR. He was the guy that said Marigold was fine. He was the guy that said Seabee was a higher grade than they thought. He got it right at least three times that are publicly known. In my books, if a geologist can get it right consistently, you hire the guy.

Peter Bell: Even once, and I'm listening!

Alan Pangbourne: He is the guy that redid our resource estimate for us. Him and a guy called Mark Dutra in Vancouver.

Peter Bell: People think the geostats are so arcane, and people get scared. With the interpolations and all the parameters, there's a lot of discretion in the work that gets done. From my statistics background, there's always a lot of discretion.

Alan Pangbourne: Lies, damned lies, and statistics! Nine out of ten people use Colgate, you've just got to find the right ten people.

Peter Bell: Some people have that eye and can see something different about a deposit or make guesses others don't dare to make for whatever reason.

Alan Pangbourne: If you want a huge ounce large deposit, then all you've got to do is expand your search radiuses, and you can smear it or spread it everywhere. We reported a 16% increase in gold, but the silver didn't move. How we got there was that we drilled five holes to get met samples -- that's what we drilled them for. When we got the answers back of those first five holes and compared them to the block model, they were 18-20% above the grade in the block model. Well, that ain't right! So we drilled another 18 holes, and the same thing happened. At that point, I got Carl and said, what's wrong? Something is wrong. I shouldn't be able to put pins in the cushion and consistently pull out material that is higher grade than the cushion says it is. So we redid it all. We went through all of the search radii, hard boundaries, soft boundaries, leaky boundaries, and all of that stuff that the geo-statisticians love. Is this population the same as that population and all this stuff? I get lost after a little while. My stats are reasonable, but I still need to catch up. And we found that when we redid it, the grade went up by 15.8 percent, call it 16%. Let's not get overly excited, and that's good because 16% of the same rock goes to the bottom line. So we end up with the increase in grade, which now agrees closer to the drill holes we put into it. It probably suffered from smearing where the high grade was diluted, and the low grade was lifted, but it didn't change much else. All that goes to the bottom line, and that will be the next block model that we will use for the economics.

Peter Bell: Was it a capping story?

Alan Pangbourne: It wasn't the capping. It was the domains -- the search radiuses and leaky domains. If you go back and compare A to B, we lost a total of some ounces, but they were all in on the edges. The grade of what was left in inferred came up to the average grade of the rest of the sets around it, which means that you're not pulling in waste, and it's just pulling it above the cut-off. If somebody what they're looking at, they'll just say yes, I know what that means.

Peter Bell: Have you ever considered making the data room publicly available?

Alan Pangbourne: It depends on what you mean by the public. Will I sign a CA and share the information with somebody? Sure.

Peter Bell: People have the reports and things like that, but there is an audience for the data. I find more and more people out there who want it all -- if they can look at the full geological model in LeapFrog or something themselves, then it increases their confidence. And those people compare notes with other investors -- look at this screenshot.

Alan Pangbourne: That would be an extremely competent investor.

Peter Bell: There's not many of them out there, but they do exist. It happened with Lundin Mining with that project where they have some big drill holes. They were putting out fairly detailed information on their website.

Alan Pangbourne: The copper thing in Argentina -- they went straight down a breccia pipe. They published a database with lithology, grade, trace, and coordinates -- the whole thing to make it easy for people to look at it and study it. From what I've heard, there wasn't much talk about the breccia pipes. It's always about the next hole a few kilometres away.

Alan Pangbourne: With the geology up and down that mountain range, those sorts of grades to those sorts of depths are one thing where they've gone down a breccia pipe.

Peter Bell: I love drilling down the throat and talking about drilling down the throat of things to establish continuity. But that leads to a high-grade underground story rather than an open pit mine, from my perspective.

Alan Pangbourne: No, it could be a pit. I'll give you an example. Initially, Los Bronces and then Dina are actually the same deposit mined by two different companies. It is a massive breccia pipe. It's two percent copper, and it is thousands of meters deep. Dina is further down the deposit, and Los Bronces is above. Los Bronces was an open pit at the top, which is what was Bronces was mining from the surface and Dina from underground. They exist, don't get me wrong, and when you find a good one, they are impressive!

Peter Bell: The pictures of the cemented sulphides the on the edge of the flow pipe or whatever it’s called are amazing. Cemented with chalcopyrite -- wow!

Rick Rule: If I can't verify it, then obviously, I can't speculate on this occurring. I wouldn't have enough information. You're with me so far? Another thing that's very important that you can do at conferences is you can say to the person, whoever it is, if I invest in your company, I'm going to read the quarterlies, I'm going to read the press releases, I'm going to read the filing statements, and I am going to be looking for how to understand your incremental process up to getting a yes or no answer in that unanswered question who specifically in the company can I talk to give me human colour on these filing statements. Where will I get my information? I'm not asking you for material non-public information; I'm asking for your help deciphering the corporate speak that I will see.

Alan Pangbourne: So much fun stuff, Alan, thanks. Who owns the company, how much did they or will they pay for it, and when can they say when can they sell? It's a Rick Rule question that covers warrants and financing. There are a couple of million options out. There are no warrants out. There are 67 million and three hundred thousand odd shares issued. Eric Sprott is our largest shareholder. He came in the financing in August of 2020 at around five bucks a share. There he is at 8.7 million shares. He's our biggest shareholder by a reasonable amount. I'm actually the second-largest shareholder as I own seven point four five million shares. Peter Palmetto is the next largest one. With Peter, you've got to be careful as you've got to put A plus B plus C plus D together to get the right count. We're the top three shareholders.

Peter Bell: Is that a fairly old stock holding for you?

Alan Pangbourne: No, it was part of the deal when we brought the technology and took over management in 2021. They won't show up as there's no filing for that, but it was press-released and everything. I don't know why it's not on SEDI.

Peter Bell: Or maybe this app made a mistake with what data they catch.

Alan Pangbourne: It's public information with 7.4 million shares through a company, a private investment company and 56,000 between my wife and me. And the last fundraising round was around five or six dollars back in August 2020. That's who owns it. And I'm locked up for up to seven years on my shares. There's a public schedule of what comes out and when.

Peter Bell: That's a lengthy escrow!

Alan Pangbourne: Tell me about it. No Take-the-Money-and-Run on that one.

Rick Rule: What’s the most important unanswered question right now? What's the thing that you can do right now that will deliver me the quantum increase in value required to induce me to take the risk?

Alan Pangbourne: How much money? I think I covered that. We've got about 26 million bucks in the bank. How much money do I need to succeed? Oh, 360-400 million dollars.

Peter Bell: Round up to a billion if Rick's listening!

Alan Pangbourne: If he’s listening and wants to give me some money, then that piece is a fair way off. We have 26 million dollars, as I mentioned earlier, and we're burning five to six million a year. Predominantly, the work going forward is metallurgical test work, more metallurgical test work, and more metallurgical test work to make sure we get it right. The PFS will cost about a million dollars, and the FS will probably cost two million. I believe we've got enough to get us through all of that. It depends on what it all looks like when we get there, and we haven't got there yet, but by that stage, I expect that more and more people will understand the story, and we won't be trading at four bucks an ounce because I'll have put enough information out there that people start to understand that it might work. There will be people that believe today, and there will be people that won't even believe after it's been running for a year pouring gold bars. I've already had people tell me it can't be that simple, that it can't be done.

Peter Bell: Don't say it can't be done to the guy who's busy doing it!

Alan Pangbourne: Now it's my turn.

Peter Bell: Please do as you wish!

Alan Pangbourne: Thanks. Please remember cautionary notes and forward-looking statements. This summarizes what it was and where we're going -- same resource but a different process. When we took over the company, we had to find a realistic, deliverable, financeable, and expandable project that we could do.

Peter Bell: Right? I'm afraid you're not building the half million ounces a year mine.

Alan Pangbourne: I agree. I know how to do it! And I know that I can only do it if somebody's going to write me a big check. If somebody wants to buy me for that one and pay me the NPV, then I'm sure my shareholders will agree to sell it.

Peter Bell: Or at 60% of NPV? Or 50%? It's a big number!

Alan Pangbourne: You might even get the controlling guys to go over at that level. This is what we're focused on doing that gets me in the game. We can take advantage of any spikes in the metal price and all of those good things. You prove it up, and you've got an expandable asset because 31 years of mine life is more than plenty. That's the fundamental concept behind this -- it’s a completely different project.

Peter Bell: Yes, comparing those two tables is a tremendous change. Amazing.

Alan Pangbourne: This is my proof. This is oxidation happening right in front of you. Give this to a geologist, and it looks like oxide ore, but it wasn't! That's my proof of concept test. We're doing a lot of work to determine what variables you want. And these are the results that go behind it. We put these out in September last year. It's a two-step process: oxidize it first, then leech the gold and silver. That's all I'm going to tell you. It'll cost you to find out the rest because there's a bunch of IP. We almost got to 30% oxidation in 128 days. When we rinsed it and switched it over to lime and cyanide, we had almost 60% gold and 50% silver recovery on a 90-day leech. That was a significant improvement from 30% and 20%.

Peter Bell: And it doesn’t look like the rate of oxidation was levelling off.

Alan Pangbourne: No, it doesn't.

Peter Bell: And do you need higher oxidation?

Alan Pangbourne: I would like higher oxidation. When we did the PEA, these were the PEA results. We assumed 70-75% recovery, but that is not 70-75. It's going to take more. As you rightly pointed out, that is a straight line. Can I keep it going to 35 or 40% oxidation, and will that increase that gold recovery by another 10% and the silver recovery by another 20%? If the answer is yes, then there's an answer that supports the PEA.

Peter Bell: Is that 30% of all the rock from the other side oxidized? What is that percentage of oxidation? Is it at a mineralogical level?

Alan Pangbourne: We put it in a column and then rinsed it to remove the sulphate, so this is a measure of the sulphate coming out. We oxidize 30% of the pyrite from iron sulphide to iron hydroxide carbonate and whatever else, which precipitates as an iron oxide hydroxy-oxide of some sort, and sulphate comes out the bottom in the solution. You assay for sulphate. Depending on the amount of sulphate coming out and your head grade going in, you know how much sulphate has come out.

Peter Bell: Okay. So you're not changing the bath during the oxidation process.

Alan Pangbourne: No, it’s an irrigation process. It's dripping water down the top, not just water. And it blows air up from below. The fundamental concept behind the whole thing is that sulphides don't want to be sulphides -- if you make them wet and give them air, then it's called Acid Rock drainage. It's natural. It does it, I don’t need to kick it. And the other concept behind all of this is that size is inversely proportional to time. If you've got a boulder the size of your office, then it's going to take a long time for solutions to get all the way to the middle and for products to get all the way out. If you break it in half, then it's going to take less time. If you grind it to bug dust, then you can do it in 30 minutes because you've got a lot of surface exposure, and that’s usually called an autoclave -- put it under a bit of pressure and warm it up, then anything will get stressed out. Or wait for God to do it in nature and come back in a billion years. The obvious point we are looking for is somewhere between the natural process and the autoclave -- faster than natural but not as fast and not as energy intensive as the autoclave. We crush to 13 millimetres -- why 13 millimetres? Because I looked over the fence, and that's what we did in the copper industry, and it seemed to work well at that size.

Peter Bell: Wow, that's a coarse crush. That's nice that you’re not facing huge energy costs for crushing. The energy cost and infrastructure for fine crush are expensive.

Alan Pangbourne: We did a PEA around those assumptions, and it basically said you've got a project you should keep looking at. $750M all-in sustaining capital with a strip ratio of 2.2 to 1 and 150,000 ounces a year for the first 15 years where the gold equivalent is at sixteen hundred dollars? That is around $500 off the gold price at the moment. And we used $22 silver, which is three or four bucks off the silver price today. That’s a $1.4 billion NPV with a two-and-a-half-year payback. That says keep going, Alan. Right? It doesn't say to build it tomorrow, Alan! It justifies us to spend more money to go to the next stage and do the subsequent test work to keep working on it. So you have a concept that's potentially economic. Pick your pair for gold and silver prices. With $2,000 gold and $25 silver, it's a $2.2 billion NPV with around a 47-48% rate of return on today's spot prices.

Alan Pangbourne: This is my “We're cheap!” slide. This is the other thing you mentioned -- energy. Everybody talks about green gold or green copper, or green lithium. Our alternative process is an autoclave or a heap bleach. I went to Barrick’s sustainability report because I knew that, internally, it would be coherent. They would have used the same spreadsheet they with the same questionnaire at different mines. It would be the same measurement of kilos per ton of diesel or whatever. And Pueblo Viejo is a hundred percent autoclave with diesel power and diesel trucks, versus Veladero, which is a heap leach with diesel power and diesel trucks. The only difference between the two processes is the autoclave. Without the autoclave, the mine has 90 percent less power and 90 percent less water. No tailings. It is environmentally friendly. It should be easier to permit because nobody wants to live near a tailings dam. It has fewer CO2 emissions, and we're not sucking their water wells dry. It's almost Nirvana. If I could do it a bit quicker, then that would help.

Alan Pangbourne: I've covered everything that's on this slide. It's a big deposit, and your downside is that we continue to trade at four dollars per ounce. Nevertheless, we can show a financeable, deliverable, and expandable project, and we can show that the technology is working. It is greener than the alternatives. We're in Durango, Mexico, which is a decent place to work. I've worked there before. And we're cheap! The one thing I wanted to show you is the flow sheet -- nothing on that flow sheet has not been built elsewhere in the world. The key is this heap here -- the oxide heap. It is a direct copy of what they do in the copper industry. I know it is because I've built it! And here is the layout and a bunch of other information.

Peter Bell: What a treat, thank you. Thanks for your time. And thanks to my friend for telling me to talk to you! Very impressive. Goodbye.