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Peter Bell: Hello, I'm Peter Bell and I'm here with Mr. James Longshore of Xtra-Gold. Hello James!

James Longshore: Hey Peter. How are you? Thanks for having me.

Peter Bell: Pleasure to talk to you for the first time here. Xtra-Gold's been on my radar for at least a year. A friend from CEO.ca wrote an article in October 2019 about the company and really surprised me. It's got elements that I'm familiar with from other stories but then some things are completely new to me. I'm still in the early days of understanding what you're up to and what you've been doing but the more I study it, the more impressed I continue to be. From the start, please can I ask when and where did the vision for this business come from? Where did the plan, the drive, and these ideas -- where did they all come from?

James Longshore: That's a good question, Peter. I mean we are truly unique for a gold exploration company -- one of the only companies I know of that's doing what we're doing. For a short history, I staked the land with my co-founder in 2003 when gold was $300, simply looking to have gold in my portfolio as an investment. I believed that, in my lifetime, gold would have a value so we tied the land up and inventoried it. We didn't go public until November 2010 on the Toronto Stock Exchange. Having said that, we tied up the whole KIBI GOLD BELT in Ghana, which was always known as the richest source of alluvial gold at the base of the gold ridge. A river called the Brim River that wrapped around the belt, near the world-famous ASHANTI GOLD BELT that's produced probably about +130 million ounces of production today and is still producing -- it ranks in one of the top 10 gold belts in the world. We staked it's smaller cousin belt next door. We went public by IPO, drilled the first gold shoot, and put about 200 holes in +30,000 meters. We came out with a respectable resource in 2012 of 425,000 ounces grading over 2 grams per tonne. Having said that, the gold market fell apart. The spot gold price crashed and nobody wanted to fund the expansion. That first gold shoot was open-ended in all directions, but we had to button-down the hatches for another nine years. Now, we're back at it and we're getting close to, I believe, a million ounces. And that's our short-term target. Then, our longer-term target is to get it to 2 million and look to put it in production with a partner or ourselves.

Peter Bell: Beautiful. Well done. Well done! Figure it out as you go is an important part of the tool kit -- to be able to find a win out of all the mess that happens in the mining cycles. Look back across a cycle and think about the things that went well or the things that went badly. You probably missed disaster by not trying to swim upstream in those intervening years. It might have been really frustrating in some cases for some people to watch the story at that time. But then, there's this aspect of the placer and the alluvial gold mining that's helped offset dilution for you!

James Longshore: That's another thing truly unique about our company. At the base of that gold ridge, the locals have been mining alluvial gold that came down through water erosion and land erosion. We're up high in on our gold ridge, looking for the hard rock sources of that alluvial gold in the BIRIM RIVER and in the old flood plain at the base. Locals are mining that and we were looking for the hard rock source. We started in 2011 with those +200 drill holes in the maiden resource and we went to the locals -- I went to them and contracted six of the big miners to monetize that asset to see if we could generate some cash flow. That was fairly unique for a foreign gold explorer to do that. The only one that I've known that's seen it done successfully. It generates four to five million of free cash flow for us. We use that to plow back into the exploration. It's fairly material and we were fortunate to have this big alluvial deposit, which is not 43-101 compliant but is a historical deposit at the base of our gold ridge, and the local contractors do what we call "COMMUNITY MINING". They're down there working hard and we're up finding the sources. We're employing hundreds of local Ghanaians. The government's happy with us and we're up there building the hard rock source that will bring future jobs to Ghana. Also, a lot of revenue and taxes for the government. That's why we're fairly unique -- we don't need any outside financing.

Peter Bell: And is that the number four to five million, is that Canadian or US dollars free cash?

James Longshore: I'm giving you all US numbers. In Ghana, everything is priced in US dollars. All the numbers I give you today will be in US dollars.

Peter Bell: That's stunning. There's a lot of juniors I invest in James that couldn't raise that much money in a year if they tried.

James Longshore: We do that every year. You can see our cash balance when our Q3 comes out shortly. We're growing the treasury. We have excess alluvial money that we don't spend. We put that in our treasury for a rainy day to help us if we ever have any difficulty. Last quarter, we had USD 7M seven million liquid cash and securities on our balance sheet from excess alluvial that we didn't spend yet on drilling. We're building a nice buffer. I suspect we'll close the year with no less than about USD 9M nine million by the end of the year because the gold price moved up. The alluvial cash flow we generate is net after we're running two drill rigs.

Peter Bell: March 2nd, 2020 Xtra-Gold purchases its second diamond drill rig and announces warrant exercise. There are a couple of interesting things in that headline. One is the purchase of your second diamond drill rig -- amazing that you have two rigs. Again, this is an example of how different you are. Some juniors have a rig sitting in another country that they don't use -- it's hard to understand why they'd do that. It's certainly a rare situation, but I have seen it in the public markets. To hear about you having two drill rigs and using them is just so bullish. That news flow in March of this year was also very bullish. Can I ask about the exercise of the warrants that you announced in March there? Having been so long since doing a financing, what's the deal with the warrants?

James Longshore: They were there from a prior round. When we did our IPO in November 2010 on our land position, we raised CAD 10 million at CAD 1.35 and had just under 47 million shares outstanding. Today we still have that same number outstanding, just under 47 million. Having said that, in 2016 we raised about one point two million dollars Canadian. We had a half-warrant in there at 50 cents. Those were all the founders and original investors on the IPO -- friends and family who averaged down one time on this placement. We did 2.5 million shares and there was a half warrant at 50 cents. They were long-term shareholders and most of those guys had bought the stock on the IPO. We only raised that because we found a gold shear at the surface that was five meters in true width called COBRA CREEK and it graded 10 grams per tonne. We put like +20 drill holes in it, but it pinched out. We've got to go back and find that. It's about three kilometers due south of our maiden resource. That's another big target we have to go back and drill.

James Longshore: One unique thing is that we generate free cash flow from our alluvial community mining project, but the other thing is that we own our drill rigs. We have those drilling 24-7. We own those. Most junior exploration companies contract rigs. And in Africa, the average cost all-in for drilling is about USD 200-250 per meter.

Peter Bell: What?

James Longshore: Oh, yeah. If you're doing a 5,000m drill program then you're looking at no less than USD 1 million to do that if you count the drill rig costs, the fuel, and the assays. It might be closer to $250 a meter all-in. That's true in South America. It's true in any developing country.

Peter Bell: I've been spoiled looking at RC drilling in Nevada for too long. Where drill costs are USD 30-40 and lab costs are the same again.

James Longshore: If you add the lab and the fuel, I bet you're at USD 50 for RC.

Peter Bell: Probably!

James Longshore: And if you go to a diamond drill rig even in Nevada, then you're going to add more than double on that. I know that in northern Ontario then you're going to be up around CAD 200 a meter to drill in remote areas because the infrastructure is not there and you've got to fly everything in by helicopter.

James Longshore: When we did our IPO, we contracted the drilling like every other junior.

James Longshore: The thing that we've done that shareholders should pay attention to now, which the big ones do, is that we, by owning our own rigs, have cut that cost down all-in to $50 fifty dollars a meter. We've reduced our cost by almost 70-80% from contract drilling. And the other good thing is that those rigs don't disappear. They're on our site!

Peter Bell: Yes, the availability is 100% assuming no downtime on maintenance or whatever.

James Longshore: We have our own drill crew and we have our own rigs. We started that process in 2019. It allows us to control our own destiny. The rigs don't get pulled from us. We have our own workers -- we hired all those guys from the big drillers when the markets went down and they didn't have jobs. They love it because they're contracted directly by the gold explorer and we have millions of ounces to find, so they know they have a long-term job.

Peter Bell: And they don't have to mobilize and de-mobilize, or move to a camp they don't know -- reduces traveling. Also lets them get the drilling gear dialed and focus on getting the meters done!

James Longshore: Another thing that's important is that when they do drilling contracts, the drillers usually have down-time between contracts. They get a very low base pay at that time. They like us because they get a standard pay rate that's uniform. And it's a good rate. They like it because they're continually paid. In bear markets, like we just had, there are some smaller drillers in Ghana who didn't have contracts for five years. If you're an exploration driller and you get no contracts, then that's not good. I know a few of the smaller drilling companies that didn't have contracts for several years. The gold exploration market went through tough times and we lost a lot of people from the last cycle.

James Longshore: We have our own cash flow, we don't need to finance, and we own our own drill rigs so we drill per meter lower than anyone else that I know of in the industry. Our gold belt is showing that it's going to be a multi-million-ounce discovery.

Peter Bell: We can talk about the regional geology at some point. There are some good maps on your website showing the area where you are working. All the other mines in the area -- the biggest is Obuasi with 55 million ounces. And I see over 150 million ounces of gold discovered in neighboring geologically analogous Birimian greenstone belts. Here you are at KIBI WINEBA -- no big mines found out there yet! To put your name as a junior on the map would be a really big accomplishment.

James Longshore: That's what we're heading for. If we get to two million ounces, then our shareholders are going to have significant leverage. There is upside potential in the stock. It will be a home run for us and I just want to note that Newmont is the closest mine to us, coming very close to the KIBI belt. About 50 kilometers away, Newmont has a mine called the AKYEM MINE. That's a granitoid deposit like ours and it's 10 million ounces. They're pulling that out for a cash cost of $575 an ounce right now. These granitoid deposits are very profitable to mine because they're intrusive systems where the gold is disseminated in a stockwork throughout the granite rock. It's not a vein system, it's more of a vein system within the granite rock itself. They're very profitable and there's actually four or five of them that are newer discoveries. There are four or five of them and they're on the lower end of cash costs. That the other exciting part.

Peter Bell: A new discovery in the lowest quartile of costs on the cost curve in the gold space right now? What a bullish place to be.

James Longshore: Agreed. If you prove up these granitoid deposits and they're low cash costs, then the gold price can go down a lot further and you're still making good money. At 1,500 gold, you should have about 100% gross profit margin. Costs shouldn't be more than $700 an ounce right now to pull out this type of rock.

Peter Bell: And that's classic! If you talk to some of the guys who've been through decades of cycles in mining then one of the targets or rule of thumb is that you want to be selling it for twice what it costs you to make it. At a 550-600 cash cost, you're great! There is more to it with the accounting measures of non-cash costs. It can get a bit nuanced in terms of non-cash costs, but the reality is you are an exploration company. You've got some pictures of some drill core right on the KIBI GOLD PROJECT page. Seeing an interval here of maybe half a meter with quartz and a bunch of metal shot through it. There's this disseminated gold, but it looks like there's potential for some high-grade gold too.

James Longshore: Yes, and in our last press release we announced that we hit a zone we called Double 19. We're focusing on that right now. It was a +50 meter zone, which is fantastic, grading 2.4 grams per tonne gold. In that 50 meter zone, there was a 20-meter zone within it that was 5 grams per tonne. If that goes to depth and keeps continuity to depth, then it would be very economic to go underground after you're done with the open pit. You can double your tonnage from there.

James Longshore: Newmont and Kinross have a deposit in the granite and they're mining that underground at 2.5 grams. If you're at 5 grams then that's going to be very profitable.

Peter Bell: Hole 46 in the Double 19 target -- that's one of the holes we're talking about here. It had a 60-meter interval of 2.4 grams starting at 18 meters. It's right at the surface. Beautiful!

James Longshore: That's what we're chasing. It's a fold nose or hinge fold with a couple of limbs. If we can maintain those grades, then that's impressive. One gram is very economic at surface like that. And by "at surface", I mean from the surface down to about 150 meters to 200 meters. If it goes straight down, then that'll be a nice little open-pit even at one gram. At 2.4 grams, well it's super economic.

Peter Bell: Yes, and you've got a nice map showing the area with hole 46 that we're talking about. I see it traced off, pointing to the northwest in the Double 19 area. There are no other holes around it -- there's one pointed to the southeast in the other direction. That's a discovery, fair to say?

James Longshore: The original, maiden resource was at Zone Two on that map you're looking at. We've stepped out to Zone Three. We just stepped out about 1.5 kilometers. We knew there was gold in the system but we had no idea where it was. The pink on the map is the granite. We hit the Boomerang zone, which was a zone of about 30 meters of 1.25 grams. And we've stepped in halfway to Double 19 and we hit that, which was more than double the grade as you highlighted. We're focusing on that, but we're gonna go back and drill Boomerang, too, because it's all gonna be part of the mine plan. At Zone Three, we should be able to match the tonnage we did in Zone Two. That's what we're focused on now --drilling that whole Zone Three to see how that will tie into the mine plan. I could see finding three or four, maybe even five new zones in Zone Three. And if we do that, then we'll be well on our way to one million-plus ounces -- if we can do that and the grades are economic. So far, they look fantastic.

Peter Bell: Beautiful. I see the map showing Atewa Range Forest Reserve off to the west and then the UPAM mining lease. What's the permitting status?

James Longshore: We touched on two things that make us unique from other juniors. And the third thing that makes us truly unique is all these five mining leases that we own are all permitted to mine. The APAPAM MINING LEASE is the one where we have the KIBI gold project where the maiden resource is located in a 33-kilometer square concession. These aren't exploration leases -- these are mining leases. If someone like a major wanted to come in and help us develop a mine, then this means they could open the mine right away. They don't have to permit it at all, it's already permitted to mine. They're long-term 15-year mining permits and you can have them up to 30 years with renewals on a mining plan. As long as you keep finding gold, you can keep submitting renewals on the resource upgrades.

Peter Bell: Stunning. Very impressive. There's another map that shows a project-wide area and I wanted to say thanks for the soil geochem! Really glad to see that you've covered so much of the area with at least first pass lines. Thank you for doing that.

James Longshore: Well, Peter, these are not just first-pass. We've done the whole 226 square kilometers of our land. We've done the whole belt. We did that in the bear market. We've done a VTEM, we've done IP, and we have this soil geochemistry. A couple of the majors that have come to our property looked at it all and say they loved what we've done. All that work makes their job easier if they end up becoming a partner. That work is very time consuming, but it's already done. Now, we have six other targets outside the maiden resource that are already drill-ready because of all that work our exploration team did the last seven years in the bear market.

Peter Bell: And you didn't have to finance that with equity?

James Longshore: Correct. That was done with the alluvial project.

Peter Bell: That's brilliant, James. If you had to go to the street for that money, then they'd give you such a hard time about "Nobody cares about soils. The stock's not going to go up..." but you did the right thing! And you did it at the right time. Nobody may have cared when you did it, but fast forward five years or ten years and it could have a big difference.

James Longshore: If you talk to veterans and geologists and gold exploration there's another nothing better than to have the soil samples on the whole property. The other thing we haven't really talked about is that we've done hundreds of kilometers of trenching down to bedrock to tie into those soil samples. We haven't just done soils, but we've actually done these huge trenches. We did like 100-200 meter trenches through those soils to actually map all the veining and the grade. That saves millions of dollars in drilling because you're narrowing down where your gold veins are when you drill. And the drilling is the most expensive part! Any veteran exploration geologist will tell you that with that work done, it really can save you a lot of money in your drilling. And time in pinpointing these vein systems below the ground.

Peter Bell: The hand-to-wallet reflex for the majors, too. People think about how the stock responds to drill results, but what about how the majors respond to all this prep work? It can be the difference between them wanting to do a deal with you quickly or not at all. If they have to come in and redo all your work prior to them getting involved, then it's a headache for them. Continuity on the technical side of things is really essential for success.

James Longshore: And the fourth thing I'll add is Yves Clement, our geologist, did all the work. He's out of Sudbury and was an early project geologist on Lakeshore Gold, which was a couple million-plus ounce deposit in northern Ontario. He's done that work before. The major companies that have come to look at our database and look through our work have said that the work is impeccable. Hats off to ease Yves and our exploration team. The work's been reviewed by several of the big companies geologists and they say the work has been very well done. I come from the business side so it's always nice to hear that validation from an independent third party because if it was crap then they'd tell me.

Peter Bell: They would! Knowing that it's been Yves Clement there as QP from 2006 increases confidence that it's not just the recent program that was done right. Scroll back to the start and it's the same all the way through -- maybe there's been some learning internally within the company but the foundation was there.

James Longshore: And for those hundred-plus employees involved in that alluvial gold community project, we kept all the management and all the key people on. We have not lost one of our key workers since we hired them. Most of the people were hired for this project in 2006. We grew a little bit after our IPO. All the younger people have been with us for +10 years. The old guys like Yves have been there for 14 years. That's obviously very important when you're stepping on the accelerator to grow your resource.

Peter Bell: One last headline I'll read from February 2019, Xtra-Gold announces 2019 normal course issuer bid and results of 2018 bid. The benefits of being cash-rich and for a junior right is the potential to talk about buybacks! Very rare for a pre-production junior exploration stock to have that conversation. Is that ongoing?

James Longshore: In the bear market, the stock traded around 30 cents between 2013 to 2019. Over those five years, the company canceled approximately four million shares. Our average cancel price was about 35 cents a share. I thought it was going to be really accretive, but I got some flack from some people about that. I haven't seen many companies do it and I didn't want to go crazy, but I didn't think the stock should be below a dollar in a normal gold market. I took ten percent of that alluvial cash flow and dedicated it to buying back stock, which was found money for the shareholders anyway. It turned out that I think I was correct on that.

Peter Bell: And another four million shares lined up in 2020 here to be bought and canceled. What a stunning set up, James. Well done.

James Longshore: We've laid off a bit on buying the shares back, but don't rule it out. At 50 cents and under, we were aggressive buyers but we're being prudent now. I think it's better to use the cash flow now to actually take the resource to a million-plus ounces, but we haven't ruled out buying back more securities if the stock fluctuates and comes back down.

Peter Bell: And you, as management, have shown that you're willing to do it! Even if it's an unpopular decision, you're gonna run your company and live with the consequences. You're doing that.

James Longshore: I think it will prove to be very accretive for the existing shareholders and that's why we did it. We weren't risking a lot of money.

Peter Bell: Well done! Mr. James Longshore of Xtra-Gold Resources, thanks very much.

James Longshore: Thanks, Peter. I enjoyed the call and hopefully we can circle back when we get close to those million ounces. 


Xtra-Gold Resources Corp. is a gold exploration company focused on defining a potentially significant resource on its Kibi Gold Discovery located in the Republic of Ghana, West Africa.