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Peter Bell: Hello, my name is Peter Bell and I'm here with Mr. Douglas Meirelles from Jiulian resources. Hello Douglas!
Douglas Meirelles: Hello Peter.
Peter Bell: Very nice to talk to you for the first time. I've followed Jiulian for a couple years now but haven't had the pleasure to talk to you before. There's a new chapter of the company here with big things in Brazil. I gather you're instrumental in doing that. Thank you! And you're also present in Kelowna with some of the people behind the company. Nice to see this next step for the company. It's new, but it's aligned with what the company has been doing and the people who have been involved. Some people on the street may see a big change heading to Brazil from BC but I don't. Let's discuss that. And please can I ask about your background, too?
Douglas Meirelles: Thanks, Peter. What you've said is really interesting. Jiulian was a company that was focused purely on exploration in Canada. As you know, exploration companies need luck to make discoveries, but the business model of Jiulian has started to change as you mentioned. This came about when I started chatting with management about some opportunities and eventually the management of Jiulian agreed that was time to pivot. It made sense to take Jiulian to this next level and bring on this opportunity from Jaguar. If you look at my background over the last 15 years, you'll see that I've been involved with executive-management, Brazil operations, and investors. I've been fortunate and unfortunate to be that in that middle ground between Brazil , investment and operations.
Peter Bell: You get sacrificed sometimes when you're in those tough positions, right? You're the guy who is held responsible for everything that goes wrong. Both sides are saying it's your fault or something.
Douglas Meirelles: Well, there’s a bright side because I was successful enough during the past 15 years to build a career. I've been involved in tough projects in Brazil - Projects that were in distress or had challenges related to community, permitting, or bureaucratic challenges. Brazil is certainly not for rookies.
Douglas Meirelles: The last project I was involved with was Arizona with Equinox Gold. I was actually involved through the entire life cycle of that one. We were initially expanding the operations with a $60 million dollar budget, then we decided to stop, rethink the geology, and go into care and maintenance. I was right in the middle of this transition. I'm proud to say that we managed a transition where we went from over 2,000 people working on that mine to basically 30 people with zero community issues during that change. We helped everybody understand what was going on through clear communication. And with the government getting involved, as well. I was there through the entire transition from Luna Gold to Trek Mining and then the consolidation when Ross Beaty stepped as the Chairman of the Board. I was there when Equinox Gold was formed and until December 2018. That's when I took an opportunity to move to Canada, bring the family to Canada, and be closer to the other side of the coin -- the investment side and the executive side. It's certainly a different ball game here.
Peter Bell: To look at what you've got for Jiulian now with Pedra Branca -- what a beast of an asset that is!
Douglas Meirelles: Yes, exactly. It is a very interesting asset and it's important to understand the deal, too. It may not be clear, but Jaguar Mining is our partner. They are with us through a possible joint-venture.
Peter Bell: Yes, the deal terms are important. There were a few things in the deal structure that jumped out at me. When you see a bigger company with a back-in right and all these kinds of things, it's clear that they're not ready to let this go. They can't afford to just cut-off this secondary asset, but they also can't afford to let it keep gathering dust on the shelf! Finding people that they trust to run with it is one challenge. Coming up with a deal that works for them to keep a toehold or more can be tough. There's a lot of ego involved. A lot of money involved.
Douglas Meirelles: There are always challenges, but we will get through them. And Jaguar Mining can now focus on opportunities that are more sensible to their current operations.
Peter Bell: And this project didn't really fit in their near-term production profile, right? These are pretty early stage exploration projects.
Douglas Meirelles: Yes and no, Peter. Surprisingly enough, Pedra Branca is not really an early stage exploration project. Consider the mining law in Brazil, their rules are a bit disconnected from the mining legislation here in Canada, which requires reports compliant with NI 43-101. When you look at Pedra Branca, the project is actually on the later stages of exploration based on the Brazilian context. According to the Brazilian requirements, we already had a reserve on established on Pedra Branca. Now, it's our next challenge to align the permits and licenses in Pedra Branca with the NI 43-101 requirements here in Canada.
Douglas Meirelles: It's a good challenge to have! Once we start the additional drilling we have planned to support those established results, it will then be about bringing what's already there at Brazilian standards into a 43-101 standard.
Peter Bell: Will this all be inferred when you get it into the Canadian standards? Do you think it's all going to come in on like the inferred category, or do you have a sense?
Douglas Meirelles: To be honest, it's too early to say. I can't say until we actually do some drilling ourselves. If you look at all the data we have already available from Jaguar, there is certainly much that can be incoporated.
Peter Bell: Yes, and that sounds right from what I saw in a pitch deck from Jaguar. There's this information deck out there that describes things in detail. Jaguar did 9,000 meters of drilling. They've got plan maps showing drill holes in some of these areas. In some areas, I think it's like 20 meter spacing. That's a great setup for you, but was likely not material for Jaguar. There's a lot of information on this project that the investors in Jiulian don't have access to in detail. There are so many questions around all that, Douglas. Are you guys going to be able to press release all the old drilling results? If there are results that were never previously released by Jaguar then I'd like to see you publish them in detail. I expect there are some restrictions on your ability to do that within 43-101 rules, but Jaguar is a Canadian-listed company and they did this work. The chain of custody may be there from QP to QP, which would setup Jiulian to come screaming out of the gate when people start understanding this information.
Douglas Meirelles: Peter, that's our intent. We're studying all the data in detail. It’s too early to say at this point. But we’re definitely going to analyze their core shack more in-depth and all available documentation in detail.
Peter Bell: The chain of custody on the core was there because they did the drilling and now you're getting the project from them so it's not like there's lost core or missing log sheets or anything like that. No, you have all the all the technical information you need to be able to use it in reports for Jiulian.
Douglas Meirelles: Exactly. It's a matter of interpreting what's there. There's nothing missing, but it's a matter of interpreting the data. You may re-catalogue the drill core, study how the data is put together and you may need to re-construct your own databases, so on so forth.
Peter Bell: That's a great advantage, Douglas. You're standing on the shoulders of giants with that a bit.
Douglas Meirelles: That lines up with the team, Peter. Consider our Board right now - There has been two new additions, which are Marc and myself. If you look at what Jiulian were a few months ago versus today, it's already changed. Marc and I have been involved in successfully building mines throughout our careers.
Peter Bell: Yes, it was an exploration company! Greenfield stuff. They had some good properties that I liked, but this is another league.
Douglas Meirelles: Yes, and our intent is to make Pedra Branca our flagship. Pedra Branca is great, but it's not the only project. Consider what Kodiak Copper announced recently. It lit the lights up on our southwestern BC asset Big Kidd.
Peter Bell: That deeper geophysical target at Big Kidd was called Big Brother and I don't think that was adequately tested in the prior drill program. That deep hot spot from the 3D IP looked good, but I don't think they drilled into that area. I think that deep target is still in play. And there's a whole bunch of surface stuff all over Big Kidd that's great -- you could go here and grab some grade, or you could go there and grab some grade. It's promotable!
Douglas Meirelles: That's right, Peter. We may have the opportunity to look at Big Kidd again. We are also exploring opportunities to option or sell the property to create some additional value for our shareholders.
Douglas Meirelles: I’ll tell you something else that's interesting. Kodiak is part of the Discovery Group. Their project is about 15 kilometers away from Big Kidd. Interestingly enough, that's the same distance that Valore is from us at Pedra Branca. And Valore Metals is another company that's part of the Discovery Group. It's an interesting coincidence that both assets are roughly 15 kilometers away from each other, both in Canada and Brazil.
Peter Bell: I love it! I remember one of the first nights after Jiulian released the Pedra Branca news, I was tweeting up a storm about Pedra Branca and Jiulian. Then somebody pinged me back and said, "Did you know Valore is right there?" I did not know that! Thank you! They're great neighbors.
Douglas Meirelles: Think about that in context of business culture in Brazil or South America. There's a lot of opportunity there. But one of the biggest challenges that all of these companies face when going into such projects is tied to local culture. Brazil is the largest market down in South America, but you've really got to be there on the ground. As an example, our partners Jaguar, actually requires their CEO to move to Brazil and live there. There’s a simple reason - if you're not Brazilian then you have to live there to understand how it works.
Peter Bell: I've seen it in the USA and in Canada this year in 2020 with guys who have lots of experience! They've done this or that and now they're doing something similar, but they still find creative ways to screw it up! Somethings that go wrong may be by chance, but others seem to be by design. And that's just on the technical side without even compounding things with cultural side of things. To some degree, this is a young man's game. There's room for people with big names who are experienced, but you get a lot more action if you're starting from a smaller base.
Douglas Meirelles: Now consider Jiulian and how we're structuring this company now. Our company has started to tick all the right boxes to be very successful.
Peter Bell: One thing I wasn't aware of is Eric Sprott's investment in Jaguar. There are some pretty substantial headlines this year with him taking at least two large placements in Jaguar this year.
Douglas Meirelles: I consider Jaguar a success story! If you look at a year ago in 2019, Jaguar was struggling for cash. And today, they have a $600 million market cap. This is a pure combination of ticking all the right boxes; management, investment and market.
Peter Bell: Were they a high-cost producer?
Douglas Meirelles: It was a bit higher before but they're doing okay now and bringing down their costs.
Peter Bell: I believe it. Little things on an operational basis can have a big impact on performance. I joke sometimes that, "Exploration is a terrible business. The only thing worse is production!" You're really spending when you're in production -- you're spending a lot of money. Every day, you're burning cash big time. With exploration, you spend some money too but production is another level. If there's anything buggy in the corporate culture, then it can compound. Little bits of waste here and there can become like really problematic. And it's really hard to diagnose that or fix it. You've got to root it out, like weeds.
Douglas Meirelles: There are some companies having big success in Brazil now, while others are not even in this market. It's certainly not good to see the missed opportunities. The deal with Equinox and Leagold was good for Brazil and South America.
Peter Bell: I invested in the RTO of Cabral Gold with Alan Carter back in 2017-2018 and I think he's really good. I think he's good at finding gold. He's in the Tapajos and there's lots of high-grade gold around and he seems to be capable of finding it. He can work with the locals, too. Is there anything like that for you guys at Pedra Branca?
Douglas Meirelles: No, we don't have the challenge of dealing with artisanal miners. Our challenges are more on the permitting side. As we progress with the exploration and possibly get further down the line, there will be challenges in permitting, engineering, etc.
Peter Bell: Those are more normal challenges to have, but when you've got such a large land package how do you pick what to do first? Do you advance this one to economic study or do you try and drill discovery holes here or there?
Douglas Meirelles: To be honest, right now we are focused on what we already have and the targets already discovered.
Peter Bell: Smart.
Douglas Meirelles: We don't want to take a lot of risk with the cash that we have right now. We want to prove that whatever is already there can be included in a 43-101 resource report. Which will make a huge difference. Then yes we will talk about this large land package we have and potentially add more upside to the asset story.
Peter Bell: And you've got Big Kidd. And I'm sure there is more stuff you could do. But that's the thing -- there's so much that you could do, how do you stay focused on moving the needle and having an impact on something specific so you don't get lost? I like what you say about focusing on what you already know from Jaguar's drilling. Start there and run from there.
Douglas Meirelles: The guys in Star Wars would say - "Stay on target!". We have our targets and now we’re going to make them big.
Peter Bell: There was one small $250,000 financing earlier in 2020 at 2.5 cents. And now there's this financing as part of this property deal. The company's been supported by a core group in the quiet times.
Douglas Meirelles: That's another aspect, Peter -- another huge opportunity for whoever is going to come and invest in Jiulian. Think about it, our stock hasn’t had the time for this new asset to make an effect on our share price because we've been halted. This deal was so considerable for Jiulian that we stop trading the day we announced it. We're still halted and the stock is just sitting there. Effectively speaking, our share price still reflects the previous Jiulian.
Peter Bell: Which was a shell of what it could have been. It's tough to see the wasted potential right. I hate to see things dying on the vine with these exploration projects because sometimes it's just a little bit of money needed to have some big changes, but for whatever reason they can't raise the money. Or they do raise it and don't spend it in the right way. What about the technical team in-country for Jiulian? Are you inheriting some Jaguar people to help manage the drill programs and field work and stuff like this? I'd like to see you piggyback on them some more, if possible. They did all that drilling, and you talk about them as a partner, right?
Douglas Meirelles: Excellent question, Peter. Yes, we got a few of their local technicians that worked on Pedra Branca before. They're with us, which makes a huge difference because they've been around -- they've walked the entire land package, we know who the landowners are and we know who to talk to. The other side to that is that we have a very good relationship with everyone there on the ground. Locals want to see this company succeed. In some areas of Brazil, locals don't want to have this kind of business activity. The area we’re in with Pedra Branca, locals know that if we progress it and we make a mine out of it in a few years, then everybody will benefit from it.
Peter Bell: It's nice that Valore is the other neighbor, too, because you know they're gonna do good business. They're not gonna cause some headaches for you with the community. I think both of you guys are potentially good corporate citizens down there exactly.
Douglas Meirelles: Our Chief Geologist is Marcelo Antonio Batelochi. He is a bit rare in Brazil. If you look at what he has done over 30 years, it's impressive. He's got 30 years of experience as a QP since the 1990’s, been everywhere in Brazil, worked with large companies in Brazil with vast exploration budgets. It certainly makes a difference having senior management like him.
Peter Bell: I look forward to talking to him maybe sometime, too. Showcasing him and some of his knowledge to the world would be great. There are all kinds of people that are joining this company now and if we can help show them to the world then it'll help. There's a bunch of people who'll be looking at this and they won't really know what's going on -- even just getting the information can be a lot of leg work. That's where the opportunity for these junior mining speculators are found because sometimes you can get the information faster than the market responds to it.
Douglas Meirelles: Again, communication and information is paramount. When I look at our website, for example, I see that there's a lot of room for improvement in terms of providing all this information in a more clear and transparent way. There's going to be some improvements there and the way we communicate as well.
Peter Bell: It's really hard, Douglas. Most junior mining companies have problems with this. I don't know why, but it seems really hard to do good information flow consistently. One of my favorites was actually Golden Ridge back in summer 2018. Their stock was trading like mad and they were sharing pictures of core boxes over entire holes or 50-meter intervals at least. Most companies don't show that many pictures of core boxes, but it was great to see them one after another. To scroll through and see the rocks provided a lot of information, and it was still just scratching the surface! All the imaging and core scanning methods you can use to get even more info is just wild. It's daunting for the company to figure out how to share all this information and then for the audience to figure out what to look at. And that's why there are all these newsletter writers and amateur/professional analysts in the junior mining space who look at these companies and try to handicap the odds and opportunities. It seems to me like this company has been quiet without doing a lot of marketing, but I see the potential for them to good work with Mike Blady involved. And I think you will do a good job too, Douglas. Teaming up with Brazilians now is a big deal. There's a lot of money and a lot of people who understand mining in Brazil. Are there any new shareholders down there or any new strategic investors we know of yet?
Douglas Meirelles: There's been some new investment coming from Brazil. They're participating on our current round of financing. Getting Brazilians to invest in Canadian mining companies with projects in Brazil is unusual to some degree.
Peter Bell: And there is this Brazilian mining industry -- it's kind of separate from the Canadian.
Douglas Meirelles: It is an opportunity. We still need to navigate how to make that work for all stakeholders, but there's potential. Recently, there was a successful IPO done in Brazil’s BOVESPA from a company headquartered in Canada, which raised $140+ million dollars in the Brazilian stock exchange.
Peter Bell: Good! There is global capital out there and it's good to access global capital. Anything's possible in a mining bull market. I'm really glad to hear you say it, thank you.
Peter Bell: Mr. Douglas Meirelles, President and CEO of Jiulian Resources. Thanks for talking with me!
Douglas Meirelles: You're welcome, Peter. Thank you very much.
Contact Douglas Meirelles, President and CEO at 1-250-762-5777 for more information.
Study this 2018 presentation from Jaguar Mining on the project here, http://cdn.ceo.ca/1foa6dp-2018-jaguar-pedra-branca-pres.pdf
