Palamina Corp. (TSX-V: PA) President Andrew Thomson on Compiling District-Scale Land Packages During a Modern Day Gold Rush in Peru’s Puno Gold Belt
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is President of Palamina Corp. (TSX-V: PA)(OTC: PLMNF), Mr. Andrew Thomson. Andrew, thank you so much for joining me this morning. How are you?
Andrew Thomson: I'm pretty good, thanks.
Gerardo Del Real: You're very welcome. I was speaking with a director of the company, Hugh Agro, of course, of Revival Gold who just recently published a very robust resource for the company the other day. We joked about how enthusiastic I get for real stories. And I told him with Revival that enthusiasm was validated with that 2 million ounce resource across all categories.
I'm very excited about Palamina, and I would love for you to explain to the people a little bit about what you're doing, because you literally have been tying up district-scale land packages in a part of Peru, southeastern Peru, that has seen very little exploration, modern day. Frankly, there's a modern day gold rush going on down there, so I'd love for you to put some context to that.
Andrew Thomson: Well, there's a belt in southeastern Peru known as the Puno Gold Belt. It's really two orogenic belts that are east of the Andes. One is Pataz, where there is in excess of 40 million ounces that's been proven up. We're looking at a belt that's 75 kilometers by 175 kilometers long. In January of 2018, a lot of the ground came open that hadn't been open for some time. We staked up a great deal of it. We're up to just under 80,000 hectares, we've got five district plays, and we've been carrying out systematic exploration in areas that have been ground trooped by informal miners. So the area really hasn't seen a lot of modern day exploration, if any.
What Palamina has done is we've acquired a team that had proven up a fairly large million ounce plus deposit known as Ollachea, who have 35 years community experience in the belt. And as the ground’s been coming open we've been staking it. We really have had very little competition which is somewhat surprising. But what's really intriguing about this area for me, is that there's a deposit known as La Rinconada. Sleeping Beauty's the name of the mountain range. It's at the same elevation as Everest and there's 35,000 informals mining there, which is pretty astounding. But it's what I call a glacial deposit, and again, we feel there's been a fair amount of material come out of there.
And then there's 700 square miles of alluvial deposits sitting at Madre de Dios at the bottom of our range, where they're up to 30 meters deep in some of the pits. So, there's a lot gold coming out of these areas on an informal basis. And there's also Untuca, which is a Horizonte play that's producing in the area. But these are all either private, and/or informal. There aren't any major companies in this area producing. It was hard to get to at one point, it was Shining Path so it's an area that has its different permutations. But we feel very strongly that it's a significant orogenic gold belt and all the work we've done to date is proving that up.
Gerardo Del Real: Now you mention that this area is very hard to get to, traditionally there hasn't been a lot of infrastructure which was a benefit to you because you were able to stake, again, five districts. Can you talk a bit about how that's developing now?
Andrew Thomson: Well as an example our Gaban property is on the newly built intercontinental highway that connects the coast of Peru with the coast of Brazil. It's four and a half hours from Puerto Maldonado, which is a fairly significant airport. It sits right above these illuminative deposits but there are three hydroelectric dams, there's five proposed, but two have been built, the third one is being built. So there's infrastructure at that property that the majors would be in use of. These informal minors are getting pretty sophisticated and they're putting in their own roads, and there is a lot of electricity going through these areas as a result of the hydroelectric dam.
From our perspective, it’s really got very low geologic risk and as it opens up it's becoming quite intriguing. The one thing that we can take away from the team that's been exploring in this belt, is the gold often occurs with pyrrhotite. So we are planning a 3,000 plus kilometer airborne, well it's underway at the moment. Where we are going to fly it, we should be able to pick out areas. It is all structurally controlled and within the slate and the quartz, the gold occurs with pyrrhotite so we should be able to see it, which is pretty exciting.
So in these areas, such as Gaban, where it is really difficult exploration from the point of view that it is jungle it's locating the shear zones that's really key. At Gaban there's eleven sets of alluvial miners mining coarse gold, so we are pretty close to source we believe. We're pretty sure we'll be able to see the structures. We just hope there aren't a lot of, what I would call, benign structures with metallic signatures where it will cloud our vision, if you want. At least we'll be able to pick up the areas so when we are doing ground reconnaissance it's a little different than some of the stream sed programs that are going on with other companies, where they're just looking for snips of gold. So for us, we think we can advance that particular property very quickly. So that just gives you an indication of what we are doing. More recently we staked another 20,000 hectares to tie up key areas that we think based on satellite imagery has structural features that we want to hold.
Gerardo Del Real: And just to be clear, again, the total land package, looking at all the projects, the five projects thus far. What does that look like again?
Andrew Thomson: It's about 77,000 hectares or just under 80,000 hectares that have been staked and applied for, titled and acquired.
Gerardo Del Real: Wow. That's impressive. Now you also touched on the fact that the majors have shown interest, and we're not talking about the majors have shown interest by talking about moving into the area. I understand Fresnillo has been in the neighboring area to some of your projects. Is that accurate, Andrew?
Andrew Thomson: Well Peñoles and Fresnillo are very active in the area. Peñoles has actually defined a significant gold deposit, no one is really sure because it is internal. We are sure it’s above a million ounces, it’s one called Capacorko, which is in one of the systems that we are dealing with. And then Fresnillo has been very aggressive throughout Peru, especially in this Puno Belt, on acquiring ground and they're paying fairly big dollars in terms of going to remate or auction on a per hectare basis.
It's not that Newmont and Barrick and the groups that have been active on the gold side in Peru are unaware of this area. There just hasn't been a discovery of size to push them to next level to actually start developing something. It really speaks to the fact that Peru, for the most part, has not been systematically explored. They tend to go to production very quickly. And again, for us the exploration that we're looking at here really has to do with finding where the informal miners are producing and going into those areas.
Gerardo Del Real: Let’s talk about the team, Andrew, because the team’s going to be critical. I mean you're looking for million ounce plus deposits in each one of these districts. That's the goal, correct?
Andrew Thomson: The goal is to find something of substance, yes.
Gerardo Del Real: Perfect.
Andrew Thomson: We think that these systems run for kilometers for the most part. The focus of the current airborne geophysical program is to identify the zones where we can see the structures worthy of that sort of target.
Gerardo Del Real: Who do you have helping lead those efforts in country? Because we know that when you're operating in a country that's not your home country you definitely want boots on the ground and people familiar with the local politics, with the community, and with the culture. Who do you have leading those efforts?
Andrew Thomson: So, in our last company we were known for putting money in the ground, and in this case our team is all in country Peruvians. So we limit our expenditure where we are not flying people in, there isn't a big education, because again they have 35 years’ experience in the belt and have found a million ounce plus deposit. So, there's a company called Minera IRL that had a fairly sophisticated geologic team. Ollachae, which is the gold deposit that they defined within the belt, they completed 81 plus kilometers of drilling. So they have a very good understanding of the geology and the signatures. They went through the Aha! moment, in terms of trying figure out – often with these deposits there's a moment where you really figure out the path finders and how the systems work – they've gone through that.
So Palamina first acquired that team, and then went on to acquire a lot of the ground that it now currently holds. It’s led by Don Mc Iver, who's an expat from South Africa who's lived in Peru for, I'm not exactly sure how much time, he's spent at least 18 years looking at this belt. Then there's Yury Valdivieso and beyond that there's three other geologists, two geotechs, the GIS guy, and a few supplemental people on the ground full time, operating out of Lima primarily.
Unlike countries like Ecuador, that is kind of stealing some of Peru's thunder in terms of it being one of the big exploration places, we're not flying a group of people in. There's lots of drills in country, and more importantly, if you look at Southern Copper’s decision to put in billions in investment in Peru, there's a lot of established producers. From our perspective we think Peru is a very underrated jurisdiction for the moment. I think it’s one of the best countries in the world for finding gold deposits, which is what we're after and we feel we're onto that. So that gives you some idea. In terms of the team, again, we're not putting people up in hotels. Everyone is established, they're around their families. It really is a good environment for continuing what really is a look at this belt that started 20 years ago.
Gerardo Del Real: Now you're pretty well-known in the junior resource space. But for those that are new to the story, and may not be familiar with you can we talk a bit about your background, Andrew, and your success in the past?
Andrew Thomson: Yeah, so I'm entrepreneurial. I take a pretty vanilla, black and white approach to it. I don't fall in love with assets. In the last round I ran a company that was chasing district scale plays in Jalisco. We had quite a few joint venture partners from Sumitomo to Gold Reserve, Timmins Gold. Looking at some of our projects we did bill ourselves as a project generator, but we had a lot of money spent on our project by other groups. I think the one that we chose to take forward ourselves was one in the El Barqueno district called El Rayo, but it was a silver play. We eventually sold that company to Agnico Eagle and we spun out Palamina. We've had success, we found what I would call a fairly significant deposit, and we're now trying to repeat that on the gold basis in Peru.
Gerardo Del Real: Perfect. Moving forward, you mentioned the geophysical surveys, the airborne. When do we anticipate being able to learn about how that went in the results and what you're seeing?
Andrew Thomson: Today we've got the fuel set up, we've got the areas picked for the helicopter where they're going to be based. We're flying at elevation, in terms of our Coasa play. Then we're flying at a lower elevation at the bottom of the mountain range on the east side. Depending on the weather, at elevation we're still seeing a bit of a mist. The best time to fly is in July, so it will be well underway then. It's not going to take very long, its only about a four week program. We may extend it. There's another area that we've seen some good results where we may extend it, but I'm hoping to have all the data back by the beginning of August.
Just to be clear, New-Sense, the group that are carrying it out, have an online platform where as they're gathering the data we're able to see it and make decisions in-house. It is kind of intriguing, the geochemical companies that allow you to go in and look at the assays as they come out and if you're like me you like to see what's happening. We're getting pretty excited. We're getting to the point now that Coasa's liking going to be the first property we drill. We've just applied for permits in environmental. We're undergoing environmental applying for drill permits, but you know with the new laws, we think we'll get there by year’s end. We're just trying to make a decision on what target areas we're going to drill on that property.
Gerardo Del Real: Andrew, you have a tiny market cap of just over $11 million Canadian. We know it's a tough market in the junior recourse space which is the best time to go out there and put together these colossal land packages, frankly. Without going into too much detail, are you still looking?
Andrew Thomson: Looking at more ground?
Gerardo Del Real: Yes.
Andrew Thomson: Well, what we're trying to do, we do have other properties. We did a study on the batholith, also in southern Peru but on the western side where we staked some ground. There is one area, near Ica, that we'd like for potential IOCG. I'm a big believer that copper is going to go a little nuts with the new electrical age. You know at the end of the day, people forget if you have electricity you need copper, and it should drive things.
We've tied up some ground there with the view to aggregation. So we do have other irons in the fire, but we're 98% focused for the moment on this belt. Because we really believe strongly, that you know again, informals are mining to possibly 40 to 100 meters, if that. A lot of areas it’s only down about 30 meters when they start running into caving issues. From our perspective, these orogenic systems, as you know with the Revival deal these things can go down a kilometer, two kilometers. You know you've got some in the world now where they're down 2.5 kilometers, and they're still mining.
From our perspective, a lot of areas Peru that haven't been drilled, this one screams drill. The focus here is going to be drill an existing property, which should shine the light on the other properties. More importantly, the amount of visible gold and gold being mined currently, we estimate, there's about 2 million ounces, but there's 28% of Peru's gold is produced by these informal workers, who in this belt, where they don't report a great deal of the gold that's sold to Bolivia. So when you start to think of it in the context of Peru being the 6th largest producer of gold in the world, you know it really speaks to the fact that this belt is probably producing a lot.
It has the capability to hold a lot more than what it’s showing. When it gets down to it, mother nature is not very accommodating. We think, in this particular case, she's going to be very generous. It’s just a matter of doing the work to be able to put together the formula. We've got a team that has that experience. It’s an overnight success story, possibly, from the perspective that we've got a team of guys that really understand it. All of our staking and everything that we're doing is based on their understanding of the belt. We're just really continuing with that, and I think it's the right moment in Peru's history to be able to bring this belt forward.
Gerardo Del Real: Now when you mention miners mining, and I describe it as a modern day gold rush. I encourage everybody to go to the Palamina website, Palamina.com, and just look at some of the pictures in the gallery. It's not an exaggeration, and I think that'll lend some credence to why I'm so excited to see exploration results from these multiple districts that you've managed to put together. I mentioned the tiny market cap, what does the share structure look like, Andrew?
Andrew Thomson: Well on a very macro basis, in terms of shares of outstanding, there's just under 30 million. And on a fully diluted basis, it’s 40 million. So it's a pretty straight forward share structure.
Of note, we have Ernesto Echavarria who was a big supporter of Soltoro, our last company. He holds just under 10%, I hold over 10%, and if you look at my insider trading, I buy very regularly. So I'm still a believer in the sense that I'm buying in the market actively. Directors and management hold about 15%. Just those two groups are at about 25%, and we've got a lot of loyal shareholders, so it’s fairly tight. A lot of people, I think in terms, if you look at the fact that it's a fairly new company with a tight structure you've got a lot of legs in the sense that it isn't.
I would encourage people to read the President’s letter, because what we're seeing a lot of in the marketplace, to be honest there's a lot of groups that have been active on projects for many years, but they have, what I would call, legacy problems where they've got either too many shares out or the project’s been walked around a little too much. Even though it's a competing project, the way I put it in my newsletter or President’s letter, is we're attracting attention because we've got new product, it’s very fresh. There's a lot of guys, it’s like going in the hardware store and seeing something that's been repackaged and taped together. No matter how good that wrench might be, you're still going to buy the one in the new package.
So from my perspective, not only are we more appealing from that perspective, even if these other projects are as good, but really I think this company is designed to fulfill the needs of the majors. I would encourage people to look at the board of directors we've put together, the amount of money that's been raised, the deals that it’s done, and understand that these are not so much the advisory board but the board itself, is made up with guys under the age of 55, that all have very proven track records. This really speaks volumes for where we want to take this.
Gerardo Del Real: Full disclosure, I'm a shareholder, I eat my own cooking, everybody knows that. So yes, you should absolutely consider me biased, I'm biased with my checkbook. But I'm a happy shareholder, and a long-term one at that. I think this is a story that has legs for years and years. This isn't a four-month, five-month story that is going to go away anytime soon. I absolutely believe that once you start getting some of these results in and public that the joint ventures are going to start happening. Andrew, is there anything else that you'd like to add? Can we talk about the cash position and how you plan on managing that?
Andrew Thomson: Well effectively, it's a fairly tightly held stock, and we have had interest from senior companies. It’s a little early to do with royalty deal. At the end of the day, one of the ways to keep the share structure tight is to get a big brother and/or a goaltender involved. We're sort of working towards that. The debate really is whether to go drilling before or after. We're not having issues raising money, we're over-subscribed. It speaks to the board and the team.
You know again, I think this company in terms of its trajectory is really designed to fulfill the needs of the majors that are running out of ore and need to replace it with things that are going to meet their tonnage demands. The company’s been designed to tie up enough ground where they see the district scale of potential. It’s sort of the old-world Barrick model from the junior point of view, where you're trying to do shadow headframe exploration in districts that have huge potential. Again I would implore people to look at Rinconada, where there's 35,000 informal mining at 5,300 meters. When I talk about being under a glacier, that's the base camp of Everest, and it’s getting bigger every year.
Then there's the 700 square kilometers or equally 35,000 people who are doing alluvial mining at the base of the mountain range, where again it’s expanding every year and encroaching on the parks, the government parks have been trying to keep them out. And last November CNN did a full expose on the troubles with those areas in terms of the environmental problems it's causing. Really what it amounts to, all this gold is coming from somewhere, we believe a big portion of the source is this orogenic belt, so candidly we've been pretty quiet about what we're doing. We haven't been shouting from the rooftops, because we're still in acquisition mode, in terms of the ground.
I'm comfortable now with the land position that we have to be able to start promoting it. The webpage was only updated two months ago, in terms of putting the pictures up and kind of trying to show people what we are doing. We are at a stage now where we are starting to bring it out of the box where we've got the ground position that we wanted. I think, if we look back, this moment will be an inflection point where we're flying this ground because it’s never been flown. There's been no geophysics on the ground that we're working. I think we're going to be able to see the structure based on the fact that the gold occurs with the pyrrhotite and it will really be a big revelation. That's the sort of thing that again, the majors are attracted to. If they can see structure that run for kilometers when there's visible gold in these structures, then it starts to get pretty exciting.
Gerardo Del Real: Fascinating stuff. One last point that I think it’s important to make, Andrew, is the fact that near-surface or at surface gold is important, but people should understand that these systems tend to extend downwards for over 1,000 meters at depth. Is that accurate, Andrew?
Andrew Thomson: Yeah, orogenic systems are telescopic. Yeah, they tend to continue to depth, and again they tend to be higher grade. To be clear, at Gaban we've got guys mining gold in the streams locally. The corridor that we stake through is a three kilometer trend with 1,800 guys mining coarse visible gold. Underground, Bendi, same thing. Up at Coasa, where we're probably going to run our first drill program. GoldMining now holds Crucero, but they've already defined a million ounces indicated, a million ounces inferred in the structure that we're interested in pursuing that is at the same elevation, same exact geology as Ollachae that our guys spent 10 years defining a significant deposit. So there's a lot of reasons why we think we can take all this stuff to the next level.
Gerardo Del Real: Excellent. Andrew, thank you so much for your time. Again, I encourage everybody to go to Palamina.com. Go through the corporate presentation, look at some of the pictures. It really is fascinating stuff. Thank you, Andrew.
Andrew Thomson: I appreciate it. Okay, thanks very much, Gerardo.