NEE on AOTH
Richard (Rick) Mills
Ahead of the Herd
As a general rule the most successful man in life is the man who has the best information
Today I’m speaking with Ken Berry and Dr. Bob Thompson of Northern Vertex TSX.V – NEE.
Ken Berry, CEO and Director. Ken has over twenty years experience in the financing and corporate communications of public companies. His involvement resulted in more than $275 million in financings for public companies.
Dr. Bob Thompson PhD, P.Eng, Northern Vertex’s Chief Geologist. Bob has more than 35 years experience as a field geologist and has served as a consultant to the mining industry for the past five years.
Rick: Ken, Northern Vertex is a relatively new company, tell us about it.
Ken: Northern Vertex was founded a few years ago and its mandate is to leverage and accelerate growth through the expertise of our management and advisory team.
We’re going to capitalize their leverage on historic expenditures by previous companies on properties that offer a geological resource. Generally these geological resources are non 43-101 compliant, so that gives Northern Vertex the opportunity to create value, to add value to the project by conducting confirmation drilling and confirming those geological resources with a 43-101 report.
An example of that is the acquisition of the Moss Project. We acquired the right to earn a 70% interest for under $10 an ounce. Since acquiring it back in March of 2011 we’ve conducted a series of confirmation drilling programs 27,000 ft, 8200 meters) and baseline studies. We had three drill rigs on it over the summer, and we’re very close now to having a 43-101 report, which will outline the resources on the property. This is an event that can add significant value for the shareholders at Northern Vertex.
Rick: There’s a resource on the new property as well. The Lemhi.
Ken: Yes, we just announced an acquisition, the Lemhi Project. The Lemhi has a former geological resource that was published by Pincock, Allen and Hold and also has a former historic prefeasibility study that was done by Kappes, Cassiday & Associates. We’ll conduct an exploration confirmation program on the property with the goal of producing a 43-101 report. Those ounces, the 1.2 million historic ounces at the Lemhi Project, were acquired for under $8 an ounce for the first 51%, and we have the right to up our interest to 75.5%, so the cost will likely remain under $17 an ounce.
So that outlines the goal for Northern Vertex. We were halted at $1.30. It remains halted, and once this transaction, the Lemhi acquisition is reviewed and approved by the exchange, the shares will come back on for trading.
In a very short period of time Northern Vertex has acquired two properties which offer shareholders a geological non Ni 43-101 historic resource. Our goal is to confirm those resources and prove them up through a 43-101 report.
Rick: When do you expect trading to restart, or is it in the hands of the exchange?
Ken: NEE is currently halted subject to exchange and regulatory approval. We’re submitting a report to the exchange, they will review the transaction, once approval is received we expect Northern Vertex to resume trading.
Rick: Let’s talk about the company and its management team.
Ken: The share structure of Northern Vertex is approximately 33 million shares outstanding, currently, and fully diluted 36 million shares.
The technical expertise and financial team that we’ve assembled with Northern Vertex in a very short period of time is quite impressive. We have in an advisory role David Farrell, who is with Endeavour Financial. David has offered his services to Northern Vertex on the Lemhi acquisition.
In the strategic planning advisory position is Jim MacDonald, who is well known for his role in Kootenay Gold TSX.V - KTN and Alamos Gold. Jim’s expertise in the strategic direction has been invaluable.
We also have Joe Kircher on the mine development side. Joe has an extremely strong track record in taking projects from the start-up phase right through to production. His expertise has been tested in the past through Kinross, Nevada Copper, and Consolidated Nevada Goldfields, those are just a few of the companies that Joe has helped out in a significant way. He is very active on the Moss Project and will also be the key driver on the Lemhi Project.
Joe Bardswich is a director of Northern Vertex, he’s a mining engineer and a very hands-on miner, currently Joe runs a crew of about 120 men at the Drumlummon Mine, that’s the RX Minerals Project in Montana. Joe is very active with Northern Vertex in providing direction.
We also have Dr. Bob Thompson, Bob’s our chief geologist and he’s been instrumental in playing a role in the exploration upside of the Moss Project in Arizona, and he’ll also be transitioning into overseeing the Lemhi Project on the exploration and confirmation drilling.
We have a strong financial advisor out of Switzerland who gives us direction on the financing for the company.
On the acquisition and development side, we have the BHLK Group, they are out of the Pacific Northwest in the US. They’ve been very helpful in identifying our two acquisitions, the Moss Project in March, and most recently the Lemhi Project in September of 2011.
That’s a bit of a background on our people, and in our mind that’s one of the most important assets of Northern Vertex.
Rick: I think it’s one of the most important aspects for a retail investor to be looking at. Real estate is location, location, and in this business, junior resources, you have to consider people, people, people. This is most definitely a people game, long before it becomes a geological game, and if you’re not investing with the right people, you’re simply not going to make money.
You need three sides to a management team. You need the ability to find the projects and generate them, you need the ability to develop them, you need the ability to raise money. As I was told, there are three legs to this stool, and if you don’t have them all, you’ve got nothing.
Ken: I would agree with that Rick, that’s well said. The goal of Northern Vertex has been to assemble the strongest team we can put together, and we’re very comfortable with that. And then of course you leverage that expertise into acquiring geological resources that are historic in nature and then conducting the confirmation drilling to bring those geological resources to a 43-101 compliant resource report. In regards to that, if you look at our track record since March of 2011, we’ve acquired the Moss Project having a geological resource we estimated somewhere around the 500,000 to 600,000 ounce level and with excellent exploration upside, so we’ve conducted that confirmation drilling, since acquiring it in March, we’ve completed that, and we’re now awaiting a 43-101 report, which we expect to be out shortly.
Rick: That’s an amazing amount of progress in so short a time. I think it really speaks to the quality of management of both Kootenay Gold and Northern Vertex that you guys have been able to find such high quality projects in an environment where everybody’s looking and taking everything that they can get their hands on, and paying exorbitant rates for it.
Ken: Well, it is very difficult to come by quality acquisitions these days and especially to get them at reasonable prices. There was a group that was bidding on the Moss Project, they failed to come with the money, so we stepped in at the eleventh hour, put up the money and walked right into an exploration program. That was an exceptional acquisition, and then we transitioned right into the Lemhi Project, which again is an acquisition that’s under $10 an ounce.
One of the reasons why we were able to get a hold of a project of that caliber, with a 1.2 million ounce geological resource, was because we were able to consolidate four separate land positions. One of those land positions came from Yamana, a major mining company, and it just so happened that because this concession was split up into four separate properties, we were able to go in there and in a period of over seven to eight months negotiate an exceptional acquisition price and now we’re in a position where we’ll conduct the confirmation drilling and drive it to a 43-101 resource.
When you look at the acquisition price, compared to the average of $113 per ounce of gold in the ground valuations that Canaccord reported in September, after a thirty company review, there is tremendous opportunity for the shareholders in Northern Vertex in this upcoming program.
Rick: Okay, let’s get right into the geology and the thinking behind the current exploration development programs.
Ken: Okay, I’ll ask Bob to comment on this, but again, the goals are to acquire geological resources that are non 43-101 compliant, conduct a confirmation drilling program, and then look for additional upside through the expansion of the 43-101 resource, and that’s where a fellow like Dr. Bob Thompson plays a key role in the development of Northern Vertex. He’s able to evaluate, map, and identify the program that can add to the 43-101 ounces that we are looking for.
Bob: I’ll make a few comments Rick, and just interrupt me for clarification if I use any words that you don’t understand.
Rick: You will. I can guarantee you will.
Bob: Okay, well I’ll try to keep it really simple because simple often works the best for all of us.
Rick: Teach us something about when you go on to a property, what you see, and how you come up with your exploration process or plans and move the project along.
Bob: Okay. My approach is pretty straight forward, number one is to keep it simple, and number two is to try and eliminate the surprises, and if you can do that, then the investor benefits. I think the Moss project is our main example of the Northern Vertex philosophy. It was acquired, we went in knowing or thinking, based on the circle estimates we did, that yeah, there is half a million plus ounces in there. There were 305 drill holes, historic holes, so that’s the data base that we had to work with.
One could make some really interesting observations based on that data base, and one is, the most important is, that it is a really nicely developed stock work system. By stock work, I just mean it’s a zone that’s up to 100 to 150 meters wide of small quartz calcite vein, and every one of those veins has a potential to contain gold. It’s a little less than a mile long, so it’s linear long, and the important observation is that the gold is really evenly distributed along the system. In other words, it’s predictable. And this is really important.
In other words, if I go along the system and I take samples and I find gold at the surface, then I want to be able to drill gold in the subsurface. So this is a really nice feature of the system.
If you wanted to categorize it geologically, you’d call it a low-sulphidation epithermal system. Which means it was deposited high in the crust in what’s called a boiling zone. That’s where fluids, under pressure, were rising, they turned to steam, and created a lot of cracking or space in the process, and when liquid turns into steam, sometimes gold drops out of the system. So it’s really simple geologically, and it’s predictable as well, the gold is nicely distributed along it, if you find gold at surface, you can find it in the subsurface.
The other observation that we can make, and made almost immediately upon getting onto the property, is that there was a well-defined, well-drilled part of the system, but within a couple of days of walking around and heading to the west, especially, and heading uphill, up fairly steep topography, I said, “holy smokes, the system is really strong to the west. It’s actually widening.” So the geological system hasn’t stopped, it actually keeps going.
Rick: Simple, predictable, and has the potential to grow, being open to the west?
Bob: There is a potential for the Moss deposit to expand in terms of its size and gold content to the west. The terrain is a little steeper and I did make a side comment that probably the reason why this part of the deposit hasn’t been adequately explored, is that most people in there probably were undercapitalized and didn’t have the financial capacity to drill a tougher part of the deposit. So, we went in and did a very aggressive phase one drill program, and as Ken said, that’s the confirmation part of the drilling.
We have to demonstrate that the historical estimates can be brought up to modern 43-101 standards. That’s been done. A report is due soon, and we’re optimistic that we’ll get good results on that report. And the reason I say that, and the easiest way to check, is just to look at the list of news releases that we’ve put out in the last two months or so, and we still have more to come. And those drill results that we’ve been getting from the confirmation drilling have been better than expected, so we’ve got nice interception. This is a one to two gram deposit, no surprises so far at all, and it’s very predictable.
Rick: You have a Phase Two program ready to go.
Bob: The phase two program starts at the end of October and it’s going to be very aggressive as well, we’re going to drill the western extension. The reason we’re going to be very aggressive is that the first decision we made when we went in there, and the reason we could demonstrate that the system was strong and heading west is, we’ve got a crack group of prospectors working, guys that we know and we’ve worked with for years.
We want to know whether there’s gold in the system, so let’s do surface sampling. They took over 600 samples and they got many samples running between a quarter of a gram and over five grams, so it’s the same kind of results you get at surface along the better known part of the Moss system. So nothing’s changed. In other words, we fully expect to drill gold to depth.
The beauty is, the western extension has fairly high relief from a mining point of view, you have gravity working for you, the strip ratio would be minimal, and the system appears to be strengthening or broadening to the west. So, in the next three months or four months, we expect to be really aggressively drilling off this part of the system, and it’s probably not good to speculate, but looking at the volume of rock involved here, it’s entirely possible that we could double this thing, double the resource. So, in terms of adding value, here’s a situation where you raise the capital that allows you to do the exploration, that allows you to hopefully expand the resource, and that builds value and that’s helps our investors.
Rick: And baseline studies are already underway?
Bob: A series of baseline studies are under way. We have water monitoring wells in place, we’ve got preliminary reports on hydrology, we’re expecting reports on metallurgy. We’ve seen preliminary reports on rock mechanic slope stability. We’ve already looked at options for leach pad location, of which there are four. We just received petro-logical reports that look really, really nice so we don’t expect any surprises there. And so all of these other parts of the puzzle that have to be put together, if you are going to try and become a miner, are ongoing and we’re pursuing them very aggressively.
Rick: Okay, we have a new acquisition, Lemhi?
Bob: I was down at Lemhi last week, on my first property visit. Lemhi geologically is a little different.
Ken: Before we go on I’ll recap, that new acquisition, the Lemhi, that we announced on Monday, was basically the culmination of over six months of negotiations to consolidate four separate mineral concessions. What’s very exciting about this property is that is falls right in line with our goals of acquiring properties that have historic resources, and this particular property has a resource historic in nature, a resource report dating back to 1996, by Pincock, Allen and Holt that outlined 1.2 million ounces of gold resource. It also has a prefeasibility report in 1996 by Kappes, Cassiday & Associates, which is based on $400 gold and a 7,500 tonne per day operation, low-cost heap leach operation.
It’s very exciting to be able to acquire an advanced project like this and have the opportunity to confirm these historic resources. So that’s what we’ll conduct now, the confirmation drilling, and from there we’ll produce a 43-101 report and then move to discover the resource expansion potential that the property offers.
Bob: As I said, I was on the property last week for a few days doing a number of things, checking out survey pegs and looking at the rocks and just walking the property, getting a feel for it. Unlike Moss, which is in a desert and really well exposed, Lemhi is covered in surface till and trees, so there is a lot less rock to work with. The data base though, is very extensive, and between it and the surface exposure it gives you a pretty good idea of what’s going on.
It’s a little different, in that the gold’s in place in quartz veins and quartz-flooded rocks, that is, there has been a lot of silica that’s been introduced into the system, and you know that the gold and silica or gold and quartz go together almost always, so it’s a big strong silica system there, and it’s been very, very severely broken. No matter how you look at the rock, if you stand back and look at an outcrop from a distance, it looks kind of shattered, and as you sort of work in towards the rock, the shattering changes scale. It becomes more and more intense, we call it micro-fracturing.
There is a big wide fault going across the property. The zones were ruptured then broken, and that provides the quartz opportunity for fluid to flow and for chemistries to evolve as they flow through the rocks, and for precious metals to be deposited. That’s the first thing that I saw. The system looks really nice and strong.
Rick: Does the Lemhi, like the Moss, have potential to expand the known resource?
Bob: When I look at some of the generalized maps that put the drilling together, it’s quite obvious that the system is open. It’s actually open in an east/west direction and in a south/east direction. When I look at the distribution of drill holes I made two observations. One there is a concentration of holes with really nice grades and two as you move out of that concentration of drilling, the holes are still intercepting gold. In fact there is hardly a hole that was drilled that didn’t intercept anomalous gold, so it just tells us the system is big.
Rick: Oxidization, metallurgy?
Bob: Oxidation is down about 100 feet or so, 100 to 120 feet. According to the reports I’ve seen, there is no problem getting the gold out of either the oxidized or un-oxidized material.
Rick: If you follow the business model of Northern Vertex you’ll…
Bob: Our first goal is to aggressively go in, do the confirmation drilling that is necessary, and generate a proper 43-101 compliant resource number. So that’s goal number one.
Ken: The Moss offers a near term production opportunity, and of course the Lemhi will follow many of the same steps that we’ve conducted with the Moss on the confirmation drilling, producing the 43-101 report to validate the geological resources that we believe are there and then the exploration potential and the upside on that property. So, the near term production opportunity is with the Moss right now.
Rick: Any last words Ken or Bob?
Ken: When you’re able to consolidate property land positions for $17 an ounce, conduct confirmation and exploration drilling and produce a 43-101 report, then you expect to see the market reward you for that and you would expect that your evaluations climb closer to what that the market average is, $113 per ounce in the ground. So that’s the goal of the company, a reevaluation of the share price. We were able to undertake that program on the Moss, and in under a seven months’ timeline we expected to have a 43-101 report.
Now the Lemhi Project, that’s a much larger scale, but we’d also be looking at a scenario that’s under 12 months in conducting confirmation drilling, exploration, and producing a 43-101 report. So that’s our goal on that project. It’s pretty aggressive, but we have a strong team that’s proven they can fulfill that mandate.
Rick: Thanks Ken and Bob, it’s been a pleasure
Richard (Rick) Mills
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