Palamina Corp. (TSX-V: PA) President Andrew Thomson on High-Grade Sampling Results at the Coasa Gold Project & the Changing Mining Landscape in Peru

December 12, 2018

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President of Palamina Corp. (TSX-V: PA)(OTC: PLMNF), Mr. Andrew Thomson. Andrew, how are you?

Andrew Thomson: Very good, thanks. Best of the season to everybody.

Gerardo Del Real: I appreciate it. There's lots to talk about. You released some more sampling results this morning. Again, some highlights. It's all high grade. It's 123 grams per tonne gold over a meter, 26.3 grams per tonne over 1.7 meters, I could go on, 18.3 grams per tonne gold over 1.7 meters. This is all at the Coasa Gold Project. This follows multiple releases that demonstrate a pretty robust system.

I'd love for you to provide some context for people that are not familiar with the property. What today's release means, and then let's talk about looking forward in 2019.

Andrew Thomson: So, our Coasa Project, really our campaign started based on a deposit within a shear zone, where we saw volume potential, where the shear zone on our project, which we staked looked like it had volume potential. So, what we've done is identified this new Veta Zone. The parameters of it are 800 by 500 meters. Within that, today's results are over a 400-meter strike length, but we keep going back to this area. When we sample in outcrop, we then go back and resample to try and extend it. There's actually two campaigns here that we're reporting, 236 samples. Of the 236, I would say 95% were channels. Again, we've got over 25 above a gram, so it's pretty exciting.

Really, what people should take away from today's release is the high grade's great, but we're seeing it in numerous areas. And if you actually look at the extent of it within the release, it's over 400 meters, and they're very good values. At one end, you've got 13 and 26 grams. At the other end of that 400 meters, you've got 123 and some fairly consistent numbers. At the end of year, we'll put together all of these campaigns that we've reported on. We're going to kind of do a summary.

The guys just came off what is the last campaign for this year. Again, we've flown the project. That data's been processed. We're still in the process of receiving that data, and then we just had a structural expert out. So, we feel very strongly.

We've now got all our permits basically completed. We're going to submit them by year end. Again, that's to do trenching and drilling. So, we're very confident moving forward that this is our robust gold project, and that we should be able to get a drill program running mid-next year after we process this data. But we're spending probably a month and a half in the office just compiling and layering all the data to get there.

Gerardo Del Real: You mentioned in the release that the gold mineralization is predominantly associated with structurally controlled quartz veins. Can we talk about that and how you're going to approach that as you get closer to permitting and drilling? Then, I want to talk about community relations and permitting because there's a lot going on in Peru. I'd love to hear your approach to that as well. But let's talk about the structurally controlled quartz veins, Andrew.

Andrew Thomson: Well, mesothermal systems are all just structure, structure, structure. Where they can get exciting, is they tend to be fairly thin-veined quartz systems. Again, one of the reasons we’ve flown it is because it's associated with pyrrhotite. In terms of what we're seeing, again, our team members drilled off a deposit on Ollachea, which is about 50 kilometers to the west. We're seeing a lot of similarities, and we just had a structural expert, Dr. Tony Starling, out that's confirmed what we were thinking and that these are steeply dipping structures. And he's given us a whole series of things to look for, which is pointing our geologists in the right direction.

But again, we're very confident that we have a good understanding of how these systems work and their trajectories and this again, is all good stuff. There's still some work to be done, but with the airborne that we have, we think we can see it because it's associated with pyrrhotite. Once we compile it all, we're very confident we're going to have some pretty substantial drill targets and the extent of it is quite significant.

Gerardo Del Real: Now, let's switch gears and talk permitting. I know that there's a lot politically going on in Peru, a lot of changes. Very simple breakdown, some good, some perceived as not so good. You're obviously permitting for first pass trenching and drilling sometime in Q1, early Q2 of 2019, if I'm not mistaken.

How are you approaching the ever changing landscape politically in Peru, and have you been affected at all? And how are you approaching community relations? I know there's a lot there, but I'll let you unpack it.

Andrew Thomson: Well, we have a transparency policy. We work with an outfit called Greenprint. They've been very good and we've actually been running radio ads locally. And the project we're obviously permitting is Coasa. We're applying for a DIA, which is a fairly extensive permit, as opposed to the lesser permit. The concept really is that we had about a fifth to a third of the community come out to these things. We've done things at the social events. We have a little booth where we give food to the communities.

But, our approach is going to be very transparent and let everyone know what we're up to and what we're doing as opposed to showing up and people wondering who we are. So we've established some fairly significant relationships in the community. We’ve also got an engineer that we've hired, who speaks Quechuan. In Coasa, specifically, it's Quechuan, higher elevation native groups. They tend to deal more with informal miners as opposed to sophisticated groups. So, there is a bit of a learning curve for them and to date we've had no issues.

I think Vizcarra, the new President – again he used to be Canadian ambassador – he's very anti-corruptions. There were some political issues in Peru where Fujimori’s been put in jail, and there's this big anti-corruption going on. So, my perception is again, that Peruvian ground is as good as the boom in Ecuador and Colombia. I can tell you based on the Lima conference, we're seeing a lot more groups coming from those areas into our area trying to buy because it's cheaper. So, when you think about the groups that are going drilling, I think in actually six months, it will be pretty self-evident that the last two years of pain, where they've reorganized the mine's departments, so things go faster, and the fact that Peru is so endowed with mineralization, that I actually don't think the political climate is getting worse, I think it's getting better.

Peru needs to do a little better job of getting people to understand it. In our particular department, there's sort of an anti-mining guy that was elected. We don't feel he's going to have any influence. And when I say that, from what we understand, his full focus is to bring more to the people. So again, he's Lowland as opposed to Highland. So, for us, at least on the project we’re permitting we don't perceive there's going to be any issues. But, very generally, Peru looks like it wants to boom next year.

If you look at the, I think it was the PDAC, they quoted $58 billion in investment by the majors. I can tell you that the majors, because of the mining conditions in Peru, are very comfortable. They've really been waiting for these sorts of changes. For me it's always a bit of a moving target in Latin America. Mexico, Peru, and Chile are kind of the best jurisdictions in Latin America. I have to say that Mexico, as someone who used to be in Mexico, it's been a lot more difficult, so I'm very bullish on Peru right now.

Gerardo Del Real: Well, I can tell you, my parents both live in Mexico. I have dual citizenship, and I tell people when it comes to the politics, everything is local. It's kind of like real estate, right? One municipality can be very different from the next, and you can't paint with a broad brush. So, with that being said, you're not the only one that believes in the prospectivity. I know Fresnillo, the big major, has staked lots of ground around you. I believe you were a first mover, Andrew, and I believe they paid up a whole lot to get the ground around you. Can you talk about that a bit?

Andrew Thomson: Well, Fresnillo has been very active throughout Peru and not a lot of people can figure out what they're doing, particularly in the area we're in. We're above 77,000 hectares as they are. They just staked 9,000 hectares around and within our Cori-Gaban play. In the remates, the auctions we've been going to, their per hectare pricing is a bit astounding, to be honest, in terms of what they're willing to pay. So, I don't want to create more demand, because I'm still working on stuff, but at the end of the day, it's good and it's bad, I guess.

Fresnillo aren't as active as you'd like them to be, but at the end of the day I think what they're doing as a strategy, is they recognize how inexpensive Peru has become. And I think when it comes to their focus, their staking in Peru versus other jurisdictions, have become very aggressive, because their perception is that over time, the per hectare rate's going to pay for all the ground that they've bought.

It's really a pretty simple formula. In fact, I think it's pretty sophisticated. If you know anything about Fresnillo, they're kind of like the Chinese, they've got a very long time frame on this stuff. Their strategy, at the beginning isn't apparent, but over time it will become very apparent, because they're staking in areas where ground hasn't been available for a long time and they know they're good areas. So, it just lends itself to the fact that the team that we have has done a good job in terms of deciding on where to go staking.

Gerardo Del Real: You mentioned that they're staking in areas and you've done this as well, where ground previously was not available. Again, for people new to this story and the region, can you explain why that ground wasn't available?

Andrew Thomson: Well, the area that we're in, is known as the purest gold in Peru and has a long informal mine tradition dating back to Incas for some time. And I think that every cycle, it comes open and then a lot of it gets dropped. But, particularly in our area, a lot of it has been withheld for say 15 years by development companies. And some of the groups that have helped previously are what I would call more sophisticated, i.e, the Newmont crowd, including Newmont. And so we actually bought a database recently where an ex-Newmont guy had gone in and they got ahold of the database, which was compiled over two and half years and a fair amount of money was spent, which really lends itself to the fact that we're in the right areas. So, I'm encouraged by that.

But when you look at maps that were from even 10 years ago, you can see that in terms of being able to grab the actual property positions and the hectares we have, it would have been very difficult, because it was a patchwork. So we got very lucky. When we went in there just was this purge of ground and now some of those same groups or people that are associated are sort of coming back in and grabbing smaller positions. It's just a timing thing at the end of the day, but I really feel strongly that the groups that are going to go drilling next year, mid-May. By September, I think you're going to see a lot of stories, particularly in Peru, that are going to launch and do quite well, and I'm hoping we're one of them.

Gerardo Del Real: So, let's talk about 2019. What can we look forward to? I'm biased, I'm a shareholder. You're a sponsor on the website. Put that out there. Everybody I talk with. Everybody should know I'm biased or I wouldn't be talking with them. So, what can I expect as a shareholder in 2019?

Andrew Thomson: I still want to bolster my board of directors and management team. I think it's going to get a lot more difficult over the next three years, because I’m bullish on gold to get quality people and quality things. So there's some of those opportunities that are fairly interesting. I've done a fair amount of marketing in Europe. We've been fairly quiet because we're still in, to some extent, acquisition mode, but we're coming out of that now. So I'm really hoping we can attract some partners for some of our other projects. We've talked to a lot of groups about being involved on the senior level. We're hoping to be able to get that put behind us in terms of getting something done.

So again, obviously we want to go drilling, so somebody asked me at the Lima conference that we attended – we saw a lot of interest in the copper, gold space, which is sort of battery-precious – but, they asked me if we could compete with them and I said, "You know, I need three drill holes." So, I really feel confident that the Coasa project will be something that we get some results out of. So it really is a question of how it hangs together and you know what we say about it, in terms of the work up on it. But, I'm pretty confident that we've got a very good prospect on our hands.

Gerardo Del Real: I like it. Andrew, have a great end of the year, New Year, holiday season. We'll chat on the other side of 2019, hopefully.

Andrew Thomson: Okay, sounds good. Well, best of season to everybody. Again, don't forget about us exploration mining guys. I think the tech boom is coming off and I think it's a very good time to be averaging down on the sense that I think we're at the bottom. So, onwards and upwards. Thanks.

Gerardo Del Real: Well said. Thanks, Andrew.

Andrew Thomson: Okay, bye.

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