Stephen Swatton, John Robins, Craig Roberts & Gary Freeman Team Up to Advance the Wels Gold Project via K2 Gold (TSX-V: KTO)
Gerardo Del Real: This Gerardo Del Real with Resource Stock Digest. Joining me today is president and CEO of K2 Gold (TSX-V: KTO), Mr. Stephen Swatton. Mr. Swatton has been in the mining and exploration business for 30 years and has held positions such as institutional mining analyst for Yorkton Securities, CEO of several successful junior companies including Brazil Resources, which is now GoldMining Incorporated, and Fortress Minerals.
He was also global head of business development for the BHP Billiton Exploration Group. Stephen, thank you for joining me today.
Stephen Swatton: Thank you for having me.
Gerardo Del Real: I wanted to have you on because K2 Gold, as we know, is focused on exploring and developing mineral resources in the Yukon. It's a relatively new company that I know is looking at potential acquisitions, specifically in Canada. It benefits from an excellent and very distinguished group of people.
I want to touch on all of that, in addition to the excellent share structure and the past successes because there's been several. Before that, could you please share a little bit more about your background and how you got involved with K2 Gold?
Stephen Swatton: Sure. I'm a geologist by training, graduated from the UK. My first job was with Rio Tinto. Traveled the world with them looking at various different mineral deposits. Shortly after that, whilst I was in Bolivia, I was poached by Yorkton Securities. I was their mining analyst for several years.
When I was a mining analyst, I sat literally in Frank Giustra’s office nextdoor to him, saw every deal that went over his desk. I went and visited near enough 30 different countries for him whilst in the 4 years that I was working with Frank.
We raised about a billion dollars in financing during that time. A lot of the junior companies, which I subsequently became involved with were ones that we worked in those early days. Subsequent to that, I also joined Lukas Lundin with Fortress Minerals, which later turned into Lundin Gold.
Subsequent to that, I was head of business development for BHP Billiton, based out of Singapore. I've had a fairly rounded upbringing in terms of the geological background and also on the management side as well. I've been CEO of various companies. I got a lot experience in the management side of running junior resource companies.
Gerardo Del Real: You mentioned the broad skillset and the experience that you bring to the table. One of the things that just stands out to me with K2 Gold is, like I said, the distinguished group of people that are involved.
Those people include chairman and founder of K2 Gold, Mr. John Robbins, who, as we all know, was also chairman and founder of Kaminak Gold, which was acquired by Goldcorp in August of last year for $520 million.
The list also includes Craig Roberts and Gary Freeman, among others. Can you share a bit more about how the group came together?
Stephen Swatton: Yeah, absolutely. John Robbins and myself have known each other over 25 years, as I have with Craig as well. What we said many years ago was it would be neat if we all got together and used our collective skills. The skillsets are quite broad.
On the one hand, Craig is a mining engineer, very much a numbers guy. He was also an analyst when I was an analyst. He was at National Bank Financial and First Malton and subsequently became an investment banker. He's extremely gifted at taking a whole bunch of data and re-analyzing it and making sense of the numbers.
John, on the other hand, is an amazing deal maker. He's got an amazing network of people in the industry. He not only sold, as you quite rightly say, Kaminak for half a billion dollars. Just today, he announced that he's taking over a project in Guatemala called Cerro Blanco, which has 1.2 million ounces. That is at the development stage and is ready to go right now.
He has an amazing skillset ranging right from grassroots exploration, right through to development. He and I remained friends. We remained colleagues ever since BHP Billiton did the deal with him, back in about 2005. John and I do go back a long way.
The third member of the team, Gary, Gary Freeman, he sold his company, Pediment, to Argonaut Gold for $137 million in January 2011. He is no stranger to this business either and has a extremely good track record in the marketing side of things.
I just want to mention one more person we have on the team, besides the support team that we have, we have one person called Allison Rippin. She is our vice president of community and social relations. This is extremely important for us.
Dealing in the Yukon, we deal with first nations and indigenous groups throughout. It's inherent now that whatever you do, you have to have extremely good relations with the first people to live in the land.
Allison has and extremely long track record in negotiating and supporting both the companies and the indigenous groups. She is our main person and our main interaction with the First Nations in the Yukon Territory.
Gerardo Del Real: Excellent, excellent. Why I'd love to have Alison on sometime. I know she's got a long track record of success, so I'd love to hear her insights.
I also would like to get into the share structure a bit. K2 has a tiny market cap. It's sub C$8 million. You have 22 million shares fully diluted. You trade around the C$.35 level, Canadian. I understand that insiders have significant skin in the game, which I always like. Can you speak to that a bit?
Stephen Swatton: Yeah, briefly what I basically say is we control, between the four of us, this would be myself, John, Craig, and Gary, 35% of the diluted shares I should say. It's extremely large amounts of the shares on offer. Therefore, it almost trades by appointment at the moment.
Bear in mind that each one of us have had success in various different acquisitions and takeovers. I don't think the price is going to be staying around this point for very much longer.
Yes, it's key that we held the largest number of shares. In a way, then we can control the way that the shares are distributed going forward.
Bear in mind, we are going to be diluting as we go forward, as we raise money to do our various exploration programs. Right now absolutely right rather it's absolutely key that we maintain control.
Gerardo Del Real: I think you've positioned yourself very well, both for potential acquisitions and for future fund raising for the subsequent drill program that I'm sure will follow.
Speaking to the drill program, now the main focus currently is the Wels gold property, which is located, as you mentioned, in the traditional territory of White River First Nation. It's about 180 kilometers south of Dawson City, west-central Yukon, approximately 60 kilometers south of Goldcorp's 2.2 million ounce Coffee deposit.
The property is a new discovery in an area not previously recognized to host the potential for gold. The geology appears to suggest the potential for Dublin Gulch Eagle and Fort Knox type deposits. Can you share with us why K2 chose this area and what the strategy moving forward will be?
Stephen Swatton: Yeah, absolutely. Very exciting new project this one, Wels. In an area which had been cursorily looked at before, back in 2002 a helicopter dropped down. They just took a handful of samples and really, to be honest with you, the samples were pretty low, only 33, 56 ppb of gold in soils.
Subsequently went back and staked it just based on these two very low soil samples. 2012, get a load of this. They came back with 150 gram gold sample from a very limited .... Yeah, it's incredible number.
They went back the following year, took 5 further samples and came back with 15 grams of gold, so half an ounce. Obviously, they were on to something. With that they put in 5, 6 different trenches in various directions, because they really weren't quite sure which way this asset was trending.
Every single trench that they put in returned some amazing values like 40 meters of 9 grams gold. We've just scratched the surface of this to be honest with you, Gerardo.
It really is an incredible deposit, which their local geologist who's working on our behalf, Al Doherty, who's been in the Yukon for 30 years, thinks we're on the next significant discovery in the Yukon.
It's very early days. Obviously, we can't predict how it's going to go, but he thinks we're at the very top of an intrusive related system. Intrusive related systems are similar to Dublin Gulch, Fort Knox. These are multi million ounce deposits.
Bear in mind, when you consider that the levels of gold that I just mentioned, 150 grams and 5 to 15 gram samples that we're receiving, a gold deposit in this part of the world is economic anywhere around 1 to 2 grams of gold. You can see we're definitely in the right ballpark for finding a significant discovery.
The reason why this was never found before is it looks like it's a little window in some sediments, which have been passed over. Even on the old geological maps, it's incorrectly mapped. We're quite excited. Being only 25 kilometers from an old airfield, it's well positioned actually for us to be able to do a significant exploration program next year. This year, I should say.
Gerardo Del Real: Excellent. I don't think it's an accident that such an accomplished group came together to work on this property. With that being said, can you explain, Stephen, to me what the plan is for 2017 as far as advancing the property?
Stephen Swatton: Yes. We're going to push out all of the soil grids. At the moment, we've got a 4,700 hectare claim. I'd say that we worked on less than one fifth of that claim.
We're going to push out all of the soil grids as far as we can. We're going do to at least 1,000 meters of drilling. We've restricted to some extent, because of the various regulations in terms of how much work you can do per year.
With 1,000 meters of drilling in addition to the 400 meters that we've already done, 480 meters we've already done, it'll give us a really good idea of what we're dealing with and how we're going forward. It's about a half a million dollar budget. It's essentially going to be drilling and soil sampling.
Gerardo Del Real: Excellent. As that advances, I'd love to have you back on, Stephen, to share the details. I know when we spoke recently, you had mentioned that there's also the potential for acquisitions and that you had potential deals scattered all over your desk. Can you share any details as to the approach there?
Stephen Swatton: Yeah. We are looking at various different projects in the Yukon, in Nevada, in other parts of the States. As a result of both John and myself international experience, we're looking at a couple other projects outside of these jurisdictions too.
In particular, I'm fairly close to two particular assets that we should be able to announce going forward. Obviously, it's not done until the ink's dry. I'm very confident that we'll be putting at least 2 to 3 more projects into the company in the short term.
Gerardo Del Real: Excellent. Stephen, I want to thank you for your time today. I hope that I can have you back on when and if those acquisitions are made and as you develop this Wels Gold property, which obviously has a lot of people excited.
Stephen Swatton: Gerardo, I'm very happy to have taken this interview from you. I'd be more than happy to come back. Yes, if you would like to speak to our other directors and particularly Allison, as well, with her vast experience in the Yukon, very happy to come back. Thank you very much, Gerardo.
Gerardo Del Real: That would be fascinating. Thank you very much Stephen. I'm looking forward to it.