Hannan Metals (TSX-V: HAN) CEO Michael Hudson on Kilbricken Zinc Project: “The Right Project, at the Right Time, in the Right Place”

June 20, 2017

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is CEO and Chairman of Hannan Metals (TSX-V: HAN)(OTC: HANNF), Mr. Michael Hudson. Mike, how are you?

Michael Hudson: Fantastic. Thanks, Gerardo.

Gerardo Del Real: Well, Hannan had some news, milestone news actually. You successfully completed the first step out drill hole at your project in Ireland, and I want to get to that, but beforehand I'd love for you to tell us a little bit about the company.

Michael Hudson: Sure, Gerardo. This is a new company with some gray hair behind it. Hannan is a zinc exploration company, it's got an advanced asset in Ireland. It came only public earlier this year, and really the last four months has been pulling it all together, employing people, getting drill rigs turning, and developing the story. But we've got a discovery and $25 million dollars sunk exploration capital in the ground to leverage from.

Gerardo Del Real: Excellent. Now you started your career, if I'm not mistaken, with Pasminco, right? You were there for like three years underground. Is that correct?

Michael Hudson: I was three years underground and then another seven or eight years exploring for zinc around the world, so I cut my teeth for the first decade or so with the world's largest zinc integrated company of its time during the 90s. I haven't had much of a chance in my career to utilize that zinc experience, because zinc is one of those commodities that tends to go into over supply over fairly long periods, and for little windows when it's in under supply, which is one of those periods now. However, we know zinc very well.

Gerardo Del Real: Now the project is located in Ireland and a lot of people may not know this but Ireland is actually a leading global jurisdiction for zinc mining and exploration. Is that right?

Michael Hudson: Absolutely. It ties into the Canadian market, actually quite neatly, and the quick 30 second story is that in the 50s there was a gentleman called Pat Hughes, who was a bricklayer who went across to Canada to work and lay bricks, but he soon got the bug for exploration and he ended up working laying bricks in Beaver Lodge and some of the uranium areas at the time. He soon learned that prospecting was a much more viable and more exciting business to go into.

So he made his money in the mid 50s and came back to Ireland with the idea of developing an industry in Ireland.  The thinking at the time everyone was that Ireland just didn't have minerals even though there was a very rich historic mining history there.

It was a damn good idea (by Pat), and since then there's been no more zinc found in the world on a per kilometer basis than Ireland. It's a top ten producer, it has a world class mine still operating there in Navan called Tara Mines, operated by Boliden. And there's still a lot more to be discovered.

Gerardo Del Real: Excellent, now this is definitely an advanced stage project. I believe there's been over 222 drill holes for 118 thousand meters, if I remember correctly. And I want to get to that here in just a second, Mike, but could we talk a bit about the group that's involved because you have a track record of putting together very experienced and knowledgeable people that know how to take an asset, develop it, and monetize it. Who do you got on board as far as the team goes, Mike?

Michael Hudson: So that refers back to the gray hair behind the team. A new company, with experienced people, with myself and Mark Saxon who's working behind the scenes and my long term business partner. He and I came out of Pasminco. We have David Henstridge and Nick DeMare on the board who are long term business associates and in the last upturn we took three companies through discovery to half a billion market cap maximum at the pinnacle which shows that we know how to monetize and add value through exploration.

We also have Georgina Carnegie who is a very experienced World Bank, Harvard trained OECD person who'll help us navigate through the social licensing parts of this project. So it's not just about the rocks, and we've got a fairly good mix from the financial, technical, and social licensing point of view.  The board is rounded out by Mike Iannacone who is an independent director.

Then, importantly, on the ground, is Lars Dahlenborg who is a geologist who's worked with me for the last ten years around the world and he stepped up excellently into the VP Exploration role. And then we've hired part of the Ex team of Lundin, who knew this asset very well, to work it on the ground. So from the ground up I think we're pretty well positioned now. And then we are using some Irish experts who consult to us on a regular basis. So it's a technical group with experience in the financial markets.

Gerardo Del Real: Excellent, now I mentioned that this is an advanced stage project, and let me just give an example.  There was a historic intercept of 20.5 meters of 7.5% zinc and interestingly, 74.6 grams per tonne silver. Are the silver grades higher at this project than the typical Irish base metal deposits?

Michael Hudson: Well you forgot to mention that that intersection had 10% lead as well, Gerardo. So it's a high-grade system. The Irish systems are typically high-grade, and it's drilled out over 1500 meters. The silver here is higher than most Irish deposits, geologically it looks like we've got slightly different formation in terms of the temperature of the fluid, to get technical, and that's brought more copper-silver into the system. This will add a nice credit to this deposit if it's ever mined. It's certainly got a couple of ounces of silver through the deposit.

Gerardo Del Real: Excellent, and just some other intercepts here, just looking at the graph here, 21.3 meters of 11% zinc. 11.8 meters of 9.8% zinc. 9.4 meters of 4.1% zinc. I could just keep going. But I understand that the hard rock size technology that you're using is a game changer for you, and if I read it correctly you own the only 3D seismic survey that's been completed in Ireland to date. Is that accurate?

Michael Hudson: That is accurate, actually. Seismic is a hundred year old technique for the oil business and really commercially just taking off through computing power and the ability to collect a lot more data in these type of environments, in hard rock mining environments. And we inherited $25 million dollars worth of data from Lundin, who we purchased this asset from. The search space in Ireland has got deeper, our deposit at the moment is down at 400 meters so being able to be predictive at depth becomes important. So you can drill more holes with more predictability at less cost. So the seismic is really a game changer in terms of understanding where the ore bodies or the mineralization may form. And then being able to be predict it at depth. And certainly for me it's a huge learning curve and a wonderful technique. Especially in Ireland, for the style of mineralization we have.

Gerardo Del Real: Wonderful, now I mentioned at the start of the interview that you've finished your first step out drill hole today, actually. You announced today that the first step out drill hole was completed. Drilling commenced in early May. What's the plan as far as the drill program from here on out? Are you looking to establish a resource here in the near future? Are you looking to expand what's there? Is it a multi-phase approach? What are you looking to do with it Mike?

Michael Hudson: It's a three-phase approach, essentially, to drilling. We've got a very large land package that is underexplored that adds to the drilled out area that has had the 118 kilometers of drilling that you talked about.

So stage one is to work with the existing data and we plan to put a resource around that. This project's never had a resource quoted and our new resource will come out in the next month or two. We've got qualified independent people working on that now.

In terms of drilling we've got three phases, in terms of drilling. We're going to extend the internal tonnages around the deposit and that's what this first drill hole was part of, as well as collecting metallurgical samples. We've got another two holes with this one rig over the next couple of months planned. And that's further step outs internally in the drilled out area.

And then the second aim is, to add more rigs and step out beyond that resource area as well. So continued drilling with one rig in the internal resource area and then step out to the five or six kilometers where we have that seismic coverage and look for repeats of the mineral system. 

Then at the very larger scale, the third scale is to look for the first order controls to this system that may exist.  A great example is Boliden at Navan that I talked about. That's been a 40 year mine and they've just applied seismics there over the last year or two and literally just this year, they've announced results that show the first order controls and mineralization to that system. So after 40 years of mining, they found a part of the ore body that's nearly 3-4 times as thick and it will make it, it looks like it's going to make it into a huge ore body, even though it's a world class system now. So, we're applying that same knowledge with those same experts to look for that larger scale at that 40 kilometer area around the drilled out area.

So internal tonnes, five to six kilometers looking for repeats and then looking at that 40 kilometer area for the regional remakes if you like, or perhaps the larger parts to the system. So it's very methodical drill exercise and we're looking to increase the rigs and not stop drilling. This is a drill exercise and there'll be news flow continuous with the resource coming, as I said, and metallurgical test work. And ideally we have success at the drill bits and can upgrade that resource and work towards economic studies next year.

Gerardo Del Real: Wonderful, now you mentioned the metallurgical test work and that's important. What's that look like, historically?

Michael Hudson: No red flags is the simple answer. There was some mineralogical work that Lundin completed and it looks traditional. Flotation, traditional recoveries, traditional grades, and Irish deposits are known for that, so at this stage no red flags but there's always more work required and that's why we're using these first holes to do some lock cycle float tests, and really advance on that understanding.

Gerardo Del Real: Now you and I had a chance to catch up in New York a few weeks back at the 121 Investment Mining Conference and frankly when I was out there, one of the goals was to find base metal companies that had attractive share structures. Now, there's not very many to be perfectly honest with you. Hannan stands out on that front. Could you explain the share structure for us, Mike?

Michael Hudson: Sure, Gerardo. It's a new company, and we're fairly tight, early days so we've got 27.4 million shares issued, fully diluted 33 million. So, at around $0.40, market cap of $10, $12 million at that price. And we've got around $1 million in the bank, obviously with these grand drill plans that need to be completed this project demands that we'll be looking for more financing this year, to build and grow the company. But fairly tight, early days, and because it's a new company, we're very aware of where a majority of that share base is held amongst friends and family. Insiders have 33% and we'll be looking to bring new partners in as we go forward.

Gerardo Del Real: Excellent, excellent. So you have a tight share structure, you have a high-grade project, a lot of exploration upside and you've done this before. Is there anything else that you'd like to add, Mike?

Michael Hudson: I suppose the way to summarize that, and everyone who's been around me for the last few months hears this all the time, Kilbricken is the right project at the right time in the right place. In my view point, how to play this business is to have an advanced project advancing at the right time of the market. We haven't talked much about the zinc market, but certainly, it's one of those moments where zinc is in dramatic under supply. We need to bring in new deposits. This is a new discovery, it has less than a 10 year history. It's been sitting on the books of a mid-tier major mining company since 2012 and just demands more work.

It's in a jurisdiction that we can do what we say we're going to do. Ireland is very workable, has good mining history and good strong laws around exploration and working with communities. So the right project, at the right time, in the right place.

Gerardo Del Real: Excellent, Mike. I want to thank you so much for your time. I hope to have you back on. It sounds like you're going to have an exciting year of news flow, an exciting second half of the year, so hopefully we can have you back on to chat more about the drill results.

Michael Hudson: I look forward to it, Gerardo. Thanks for your time.

Gerardo Del Real: Thank you. 



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