Matthew Gill: Northern Star's recent acquisition of Sumitomo's Pogo gold mine, just 130km to our north-east, I think is further endorsement of the attractiveness of doing business in Alaska. Alaska is a top-10 Fraser Institute ranked jurisdiction, pro-development and supportive of mining, well endowed with tier-one mines and projects and support services, and significantly, under-explored, thus presenting a terrific opportunity for those that venture there. For White Rock, I think NST's acquisition will help allay some of the myths and possible concerns about one's ability to do business in Alaska.
RS: How would you characterise the change in the level of investor interest in Alaska as an exploration/development destination during the course of 2018 - notwithstanding the macro trade-war pall that has descended on mining equities?
MG: I agree that the macro-climate has been poor for investor sentiment in much of the junior mining space - whether that be metal prices and the threats of trade wars, the ‘sexiness' of things like nuggets in the Pilbara, cobalt, lithium, etc, or the very real diversion of attention and drain of money out of the junior sector into cryptocurrencies and cannabis, for example. Nevertheless, you stick to your DNA, and ours is finding and developing projects.
Exploration expenditure in Alaska is already double what it was in 2015.
There is a lot going on in Alaska right now. We had the recent permitting approvals for the 39Moz Barrick/NovaGold Donlin gold project (one of the world's largest and highest grade undeveloped open pit gold resources).
The permitting process has re-commenced with the world-class Pebble project - the world's biggest undeveloped copper-gold-molybdenum porphyry deposit. Teck's been actively exploring at one of the world's largest zinc mines at Red Dog. Kinross is expanding their multi-million ounce Fort Knox gold mine, and we have the presence of some significant Australian majors - South32, with TSX-listed Trilogy, Sandfire Resources, our partner, Evolution, with Alan Kelly's new vehicle, and now Northern Star - all very positive indicators I think. There are many other juniors, ASX, TSX and private, also actively exploring.
RS: Given the positive trajectory of the Australian-dollar gold price, the value of White Rock's Mt Carrington asset in eastern Australia, and the generally positive sentiment around the Australian gold sector at present, what options are you assessing for realising the value in the asset given it doesn't seem to be reflected in White Rock's current market value?
MG: One could argue that our gold and silver project at Mt Carrington is our current market value, with no credit given to our high-grade zinc VMS project, or maybe our market cap is a significantly discounted combination of both.
Recent valuations on our assets - for example, Baillieu's recent research note, the Fundamental Research note, and DJ Carmichael research note - give a range of between $17 million and $29 million for Mt Carrington, and between $42 million and $72 million for Red Mountain, which is hard to understand when our current market cap is just $11.5 million.
I suggest that this might present lots of opportunity for a re-rating.
With Mt Carrington, we continue to conduct the key data-gathering environmental baseline data and maintain our environmental obligations. Advancing this project is subject to funding and we continue to seek out the best way to achieve this. We continue to receive enquiries on this project and have had various groups in our data room. We remain open to how best to extract value with this asset for our shareholders, be that to advance it ourselves, or look at alternatives such as a strategic partnership like we did with Sandfire on our Red Mountain asset with a joint venture, or some other style of M&A arrangement. I agree the financial metrics of this project, with an initial gold first stage then followed by a silver mine plan, are an attractive investment proposition given the asset is in a first-world jurisdiction, on an approved mining lease, with a JORC Resource and a JORC Reserve, has a relatively low capital entry cost [$36M], a payback under two years, and a profit margin of $400/oz.
RS: Back to Alaska and you have wrapped up the maiden drilling season after completing 24 diamond core holes for 4,111m this year. There has been a steady stream of strong results, demonstrating the potential for expanding the existing significant resource at Red Mountain, but also showing the target-rich nature of a VMS district. There are still results to come from seven core holes. Where were they drilled and when are we likely to see those assays?
MG: Drilling wound-up at the beginning of September, and we expect the last of the drill-hole assay results in the next few weeks. It is a very busy time through the labs of North America right now.
These holes were testing newly identified exploration targets away from the known resources. Of more interest in some ways is the significant sampling and mapping program we did with our three recon crews. They collected over 400 stream sediment samples, over 300 rock chip samples and took a further 1,800 soil samples across much of our land holding. We already have drill targets for next year and this body of geochem work will greatly assist to add to that follow-up drill target identification process also.
RS: What have been the main advances/learnings from the drilling to date?
MG: Some suggested we would not be able to manage an exploration program from Australia. Well, with the support of a great team based out of Fairbanks, we were able to do exactly that. We mobilised over 70 tonnes of equipment to site, managed a team of 20, conducting mapping and geochem recon, geophysics and drilling, all completed safely and without incident. That has been a key learning not to be under-estimated.
With the drilling, we achieved some of the best drill-hole intersections ever in this VMS field - over 40% Zn-eq in grade. Drilling also demonstrated a significant extension to the Dry Creek deposit and notably down dip at both the Fosters and Discovery lenses, and we made a brand new VMS discovery - the Hunter prospect, with grades of greater than 20% Zn-plus-Pb, and all in our first exploration season over a four-month period. Further, we were able to successfully apply a geophysics exploration technique - CSAMT - never before used in this VMS field, and which yielded very encouraging results when overlaid with our two known deposits, their location and their grade tenor.
RS: With all the surveying and sampling work done alongside the drilling, what is the focus now in terms of using all that data to refine the exploration model and targeting for next year?
MG: We anticipate the assaying results from our extensive geochem sampling program in November. We will then be collating, analysing and interpreting these, and combined with what we learnt from the drilling campaign and use of the CSAMT geophysics technique, start to plan for the next field season.
RS: When are you likely to resume drilling in 2019?
MG: It is weather-dependent, but as a guide, we commenced this year in May.
RS: What/where will the initial focus be/why?
MG: We have targets already identified from this season's work, mainly in the south-eastern quadrant of our 143km2 strategic tenement package. The geochem work may also highlight prospects for follow-up - probably followed by geophysics and then followed by drilling. This planning is work in progress. We have a whole area in the north-west of our tenement package where we did a lot of the geochem work, but which has had no drilling to date. This will be a key area of interest next year.