Mawson Resources (TSX: MAW) CEO Michael Hudson on Entry into Tier 1 Goldfields in Central Victoria, Australia Via Agreement with Nagambie Resources: “We're in the Heart of the Hottest Ground in the World”
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the chairman and CEO of Mawson Resources (TSX: MAW)(OTC: MWSNF), Mr. Michael Hudson. Mike, you have been a very, very busy man. I know you always are, but as of late it's really starting to show.
I must say first off, congratulations into not a pivot to Australia, but an addition to the flagship. Big news today. I want to talk about it in just a sec, but first off, congratulations on the deal you announced today.
Michael Hudson: Thanks, Gerardo. Look forward to fleshing it out a bit.
Gerardo Del Real: And the deal actually was announced yesterday. You had a very early conference call that made it feel like it was all one day. So let me be accurate for accurate's sake here.
Let's talk about the entry into what you described as the Tier 1 goldfields of central Victoria, Australia via a multifaceted agreement with a major landholder. I want you to set the table and explain to us the basics of it, and then we'll get into some detail as to why the addition to the portfolio and the plan moving forward. First things first, give me a brief overview of the acquisition and the joint ventures.
Michael Hudson: Well, I can hear from the accent that I'm afflicted with that I'm Australian by birth. I still live here. It took me with interest over the last few years that the hottest ground in the world literally was 100 kilometers north of me with Fosterville rewriting the story of the central Victorian goldfields.
Now let's go back over the history of Australia, essentially from the 1850s, these goldfields literally built Melbourne and a great part of Australia. Melbourne was the biggest city then, and 80 million ounces has come out since then. There's been basically three booms during that period; the 1850s, then pre-World War I, and now is when the Victorian goldfields have really been pumping. So a premier district, without a doubt, 80 million ounces is just a phenomenal number. But there's a bit of a detail around that.
There's two different styles of mineralization. One we call mesozonal, one we call epizonal as geologists. The mesozonal is the Bendigo and the Ballarats, huge systems but nuggety and almost impossible to deal with in a modern sense. These are deposits that the old timers would know, they'd follow a quartz vein and the gold would come and go like very rich raisins in the plum pudding. But when you try and drill these things out, you can't. So that's not what we're looking for, and that's what a lot of commercial failures in the modern day have been based around in Victoria.
It's this epizonal system, or the Foster-ville style, that we're focused on here in the assets that we've picked. So that's a key point. And the other key point is that Victoria has really been forgotten in many ways over the last decades, 50 years or something like that. Right?
Gerardo Del Real: Sure.
Michael Hudson: Whereas Western Australia has become one of the largest producers of gold in the world. Victoria was seen to have been there, done that. But Fosterville, again I talk about Fosterville, has put it on the map. Fosterville's one of the highest grade, most profitable mines in the world, and that's really changed in the last two or three years.
So what has changed? Well, I suppose Fosterville was only a heap leach operation, an oxide operation back in the start of the 2000s. Nobody had looked at depth. And essentially there's a number of these historic ore fields, very high grades, multi-ounce production from the old days that haven't been looked at beyond that oxide potential.
So that puts us into a really new dynamic where there's a new search space opening up for high grade, epizonal, Fosterville-style deposits at depth. They just haven't been looked at, and they're in one of the most fertile gold locations in the world.
That's the background there. I just wanted to go into that. And of course I know this area very well, having been educated in this state and then my first foray was actually picking up a series of these epizonal projects and vending them into a company that has actually become this company we've now bought back into 18 years later. I was long gone from that company for the last 12 years, but now we've formed a strategic alliance. We know them well and we've got a three-pronged agreement. So that's the background, Gerardo. Shall I go into just what we've got now?
Gerardo Del Real: A quick point and a follow-up question before we get into to the rest of the details of the actual structure of the deal. The point being, I noticed a couple of comments earlier that the press release was very heavy on mentioning Fosterville, and the point I want to make is there is a reason for that geologically, and as far as the exploration approach, there are simply lots of analogs. These aren't pie in the sky dreams that Michael Hudson or the company has, these are very much based in fact. The rocks, the geology, the structures.
Can you expand on that just a bit, Mike? For the naysayers out there that say, "Oh, here it goes, Mr. Hudson, just using the Fosterville name because of course it's the hottest land on the planet.” Right?
Michael Hudson: It is the hottest land on the planet, and it took me by surprise to be in my backyard without a doubt. The Geological Survey of Victoria, God bless them, have done some fantastic work from a geodynamic perspective, rewriting the history, basically the geological history of Victoria and putting the context of the mineralization of all the mineralized styles here in Victoria into a new framework.
Now that sounds very academic and scientific, but what it actually means is that companies are making lots of drill discoveries now based on that new thinking, based on the untested old mining districts that haven't been looked at at depth. But there's a framework and an understanding to test these with.
There are two very distinct styles of mineralization that I spoke about, the mesozonal and the epizonal. The epizonal are shallow orogenic Fosterville-type systems. They're very characteristic. They're very definitive in what they and how they differ from the other style. And that's exactly what we looked at.
So of course Fosterville is a fantastic analog, but there doesn't need to be any naysayers or uneducated cheap shots here. This is very much a very real style that has been under-explored. And because Fosterville's made such a name for itself, people wouldn't assume that this district is unexplored. That just goes against conventional wisdom.
Gerardo Del Real: Absolutely. Which brings me to my next question, my question being how do you pull off a right of first refusal on a little over 2,000 square kilometers. Why Michael Hudson? Why the Mawson team? I know the answer. It's a rhetorical question, but I want to make sure that we're clear about how you ended up with this just phenomenal and massive land package.
Michael Hudson: So this wasn't a relationship that's been made just very recently. Like I said, I was one of the co-vendors of the properties that went into this company originally. Some of the properties, not all of them. So we've known the people for a long time behind Nagambie. Nagambie Resources is an ASX listed company that we've done this deal with. So a long-held relationship and it's a people business, like any business. So I could say that is one thing.
But then you look at strategy. Nagambie's strategy in the first 10 years of its operation, say from 2006 to ... well maybe less than 10 years, 2013 or '14, was to look for heap leachable gold, near-surface oxide gold. So they only looked down to 50 meters and tested their projects like that. Then they pivoted in strategy, and in Australia you can obtain a tax refund on genuine, bonafide grassroots exploration.
So they then went looking for big new systems where there was no historic work, no historic mining, no existing drill holes. That's what they need to do to qualify for this tax break, or the refund. So they've been looking for big crustal scale structures, they've been running big scale geophysics, and then drilling very deep holes under thin cover into this Melbourne domain looking for Fosterville-type deposits and they'll continue to do that. But that left a real gap in the historic ore fields. Projects that had been drilled and they weren't focusing on those.
So that's how we were able to get three of those projects, one outright purchase and two joint venturable. And then secondly, what we were able to do was invest 10% in Nagambie, the company, with Mawson stock. We gave them a 30% premium that was backfilled yesterday in the market here in Australia. So their stock was up 30% on the deal. But the premium gave us the right of first refusal to deal with any discoveries they made, or any of the ground they have where they want to start to partner that.
And that's very much their strategy today is to continue to run this R&D tax refund style of exploration. And if they make a hit, then we've got the first and last right of refusal on those projects. So that really is the background, the history, the strategy and how the two companies have developed this relationship, mutually benefiting each other.
Gerardo Del Real: Let me ask you one last question as to strategy. How does this tie in with the flagship in Finland? I believe that you're on your way because of the newly developed understanding of the geologic controls there. I think you're on your way to 2, 3 million ounces equivalent including the cobalt kicker there, if you want to call it that.
How does this, again just massive land package, tie in with what you're doing in Finland and how will the company, Mawson, operate moving forward to make sure that attention is being paid where you're going to unlock the most shareholder value?
Is this a pivot away from Finland in any way? Again, another rhetorical question. I know you have five rigs turning, so obviously not. But I think it's a fair question. How do you move forward with both operations?
Michael Hudson: Yeah, the danger of doing something like this was always you'd get people saying, "Well, what's wrong with Finland? Why are you going elsewhere?" Which is very much just optics rather than a fact. Finland is the basis of the strategy for the company. It continues to be. It's what's creating the $50 million worth of market cap today. This added $4 million to the market cap today on trading. So that's I think how you can think about it. Five rigs turning, and turning for the next three or four months and spending $5 million is far from a pivot.
But this is an opportunity, a natural fit in many ways because it sits in our backyard. It's another very safe, highly prospective jurisdiction to augment to our existing portfolio. The deal we've done is not cash intensive, so we can fund it out of treasury. It's not taking dollars away from Finland. We've got a very strong team in Finland who operate and we overview, basically. They're very autonomous now after many years of being together. So it's not going to take people or dollar resources.
The question was, where should this go? The opportunity was there, and I spoke to many shareholders and the emphatic view was that Mawson shareholders should benefit from this opportunity. And given the nature of the deal and the structure of the deal and the cost of the deal, it was just an opportunistic no-brainer basically to put it into Mawson, rather than put it into a new vehicle and Mawson shareholders would not benefit.
Now where it goes is a question. Let's see where the market takes us. Let's see where our drilling this year and the 15 kilometers of drilling that we've just started literally in Finland. Let's see where that takes us. But there's lots of optionality.
We've done it before, we've spun out public companies out of Mawson with our assets. We spun out our Peruvian assets that have eventually become Tinka Resources down there. We brought management and shareholders to that company and shareholders made a nice bonus out of that.
Now this may happen here, let's see, or equally we may spin Finland into a Finnish listed company, which makes a lot of sense in many ways too because Finland needs to become more and more Finnish to succeed, as does any project anywhere. You must make it more local, rather than less local at any point.
So it creates an option, it's far from a pivot. Five rigs in Finland is not a pivot and we've got all of our results to come. So yeah, that's very important to get the optics right. But the strategy, we are very confident in the strategy here, and it is a bit of a no-brainer.
Gerardo Del Real: It's a lot of options. Mike, I couldn't let you go without asking you about the brush fires in Australia. I know that it's been out of the news now here the last week or so as the coronavirus has dominated headlines. But I wanted to ask, because obviously this is home to you. How are things back home?
Michael Hudson: Well, much better. We're still in a very hot and dry summer. It's going to be a 40 degree [Celsius] day down here in Melbourne today as I speak to you. So the conditions still exist, but we've also had an incredible rain in between, which has basically brought most of the fires under control. But everyone's still very wary. The conditions are just ripe for further fire. So let's hope and pray that doesn't exist. But right now we're fine. We're living in clearer skies again, and out of that smoke.
Gerardo Del Real: Good to hear. I encourage everyone to go to mawsonresources.com to go over a more extensive history of these projects. These aren't greenfields projects. These are projects that I think the Mawson team, and the group that is going to be working them I should say, understands very well. And I for one am very excited to see how this develops through 2020.
Is there anything else that you'd like to add to that, Mike?
Michael Hudson: Yeah, we didn't talk about the deal or the projects, but the detail is on our website. All I can say is that one of the three projects that we've got is within a 10 by 20 kilometer triangle from Fosterville, from Costerfield, which is Mandalay's deposit. And then our third one is called Redcastle there. The two are mines. Redcastle hasn't been looked below 50 meters, and Redcastle was bigger than Fosterville in the day, right? So there's a lot of work to be done but pretty exciting. We're right in the heart of the hottest ground in the world.
Gerardo Del Real: I definitely want to have you back on to go over each project individually as news comes out of each of those individual projects. This way we can get into more depth of the merits of each project and what you hope is there and how you're going to try to unlock that value. Right?
Michael Hudson: Precisely. This will take three or four months to get on top of this data. We will be having the five rigs turning and Finland and with lots of information. We're running lots of geophysics too in Finland, which is very important because that's a direct detector for our gold there with the sulfides, the pyrrhotite intimately associated with the gold.
So by the time we finish up in Finland, we should be ready to kick off in Australia. And that's one of the strategic benefits here that we can operate all year round now with the duality of these projects.
Gerardo Del Real: Excellent. Mike, thank you so much for the update. I appreciate it.
Michael Hudson: Thanks, Gerardo.
Gerardo Del Real: Chat soon.
Michael Hudson: Cheers.