Barton Gold (ASX:BGD) interview with CEO Alex Scanlon

 

Barton Gold (ASX:BGD)

We spoke to Barton Gold (ASX:BGD) CEO Alex Scanlon about the 1.3 million ounces that have been identified in the Tarcoola and Tunkillia projects in South Australia, the pipeline of advanced exploration projects and brownfield mines, and what it means to own 100% of the only regional gold mill in the central Gawler Craton of South Australia.

Full transcription below.

 

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Transcription

 

Stuart: Hello, and welcome to “Stocks Down Under.” My name is Stuart Roberts, and I’m one of the co-founders of our service. And joining me on the morning of Tuesday, the 11th of July, 2023 from right here in Sydney is Mr. Alex Scanlon, who’s the CEO of Barton Gold (ASX:BGD). Alex, good morning.

Alex: Good morning.

Stuart: Alex, you’re riding high at the moment, 1.3 million ounces at your Tarcoola Project across Tarcoola and Tunkillia. And I suspect there’s more where that came from. Tell us what the plans are for Tarcoola at the moment, and then we’ll come back and talk about how you got there.

Alex: Yeah, so the project that you’re mapping out is, yes, Tarcoola and it’s Tunkillia, and it really is one combined project that’s sort of two big tenements that sit about 70 kilometers apart from one another. We just announced at the end of April a pretty significant resource upgrade, which took us to 1.3 million ounces. So, that was about 189,000-ounce addition, and, importantly, that was done at a very, very low cost. So, it was about 12 AUD per ounce on an all-in basis. So, drilling and assaying and, you know, all laboratory work and logistics and labor and all these things. So, very low cost.

We are already preparing to follow that up and look at additional growth both in that existing large-scale sort of deposit that we have, which we consider our Stage 2 expansion asset. And then this year, we’re also looking to accelerate some of our potential Stage 1 operational restart ounces. So, when we think about that asset package, we are looking at a staged lower cost and lower risk development because we have a fully built, fully permitted mill within trucking distance of our Tarcoola project, and the idea is, particularly with some of our capital that we’ve raised recently, is to accelerate resources on that open pit that we have there, accelerate the definition of repeats of that high-grade material, and then turn on Stage 1 operations using our mill.

Stuart: So, looking back in time, you must be surprised that, in the neighborhood, most of the exploration had been done when gold was only $200 an ounce recently, and most of the drilling was excessively shallow. So, it was a gimmick in retrospect. However, you had to do the work. When Barton Gold first got hold of Tarcoola, what was the state of play at the time?

Alex: Yeah, so Tarcoola is very interesting because it is a piece of ground that was actually the home of not only gold but high-grade gold in South Australia. So, Tarcoola was the site of the South Australia…

Stuart: You’re talking 400 kilometers roughly north of Port Augusta.

Alex: Correct.

Stuart: There have been a gold rush there in the 1890s, where the original discoveries were made.

Alex: Exactly. So, at the same time as the Western Australian gold discoveries are going on, South Australia had its own discovery. And there was sort of a series of shallow high-grade workings dug out across an escarpment, a hillside there, which now sits on what is a mining lease and which we own. So, this is an area that has had high-grade gold production on smaller volumes for, you know, the past 120, 130 years. More recently, there was an open pit there dug around one of the historical high-grade shafts, and that produced 40,000 or 50,000 ounces at around 3 grams per [crosstalk 00:03:32].

Stuart: It’s the Perseverance Mine, right?

Alex: Correct, the Perseverance Mine, yeah. So, it’s an interesting mine. It was only developed to a very shallow depth. And, really, the sort of thinking there when it was developed, it was essentially mining the soup bowl. So, there was a known body of resource. But as you say, not a lot of work has been done regionally, and so we’ve come into that asset or all of these assets with the view to essentially step back, do a lot of tactical work, bring the technical understanding of the assets out of the 1980s and 1990s into a more contemporary context and rebuild the regional geological models. And the result of that is that we’ve identified not only new gold zones on that high-grade open pit but potential repeats of that pit in the near proximity. So, we’ll be looking to essentially create multiple of those that can then feed our existing mill.

Stuart: What’s interesting to me is, in one recent presentation, you said barely 2% of the identified structures have been drill-tested at the moment. So, you’re gonna have a lot of fun over the next few years by building up the full potential of this project.

Alex: Correct. Yeah, there are a lot of very interesting targets for us, and I think, you know, we’re as focused on developing, you know, current resources towards an actual operational objective as we are also just steadily building that exploration pipeline so that we can make sure we’ve got sort of continued targets for discovery and future resource growth.

Stuart: Right. But at the moment, I need a magnifying glass to see your market cap. It’s about $50 million at the moment. You’ve got 1.3 million ounces more where that came from, and you’ve got $10 million in cash, so I’m buying you for only about $20 per resource ounce at the moment. In one of the presentations, you contrasted that with the build-out of the Karlawinda mine, which has been a company-maker for its own. Talk to us about the parallels for that particular project.

Alex: Yeah, look, we really look at Capricorn Metals as the golden standard, no pun intended. But they really are the gold standard in terms of, you know, open pit goldmine developments in Australia. So, this is a team that has, over the course of about 20 years now, demonstrated consistently that large-scale bulk open pit mining is far and away the most cost-effective and profitable way to mine gold. You know, we tend to think of gold mining in Australia as high-grade, narrow-vein underground mining, and Australian miners are the best at doing that in the world, really, but, you know, mining is really all about the sort of volumetric efficiencies of blasting and lifting and moving and processing materials.

So, when we look at what Capricorn have done, they acquired a project called Karlawinda back in 2015, and it was about a 650,000-ounce asset when they acquired it, and they grew it to about 900,000 ounces, and then 1.1 million ounces, and 1.3 million ounces, and so on, and today it is now a 2.3 million-ounce resource at about a 0.7-gram-per-ton resource grade, so what we would think of in the Australian context as, you know, very low grade. But it is today…on a quarter-to-quarter basis, it is either the lowest cost or second lowest cost gold producer in Australia. So, they’re producing gold at around 1,250 AUD per once.

Stuart: Yeah, I’ll say that one is sustaining very nicely.

Alex: Yeah. And so, you know, it’s just…it’s a remarkable operation. And when we were looking at Tunkillia asset, which is the sort of second-stage expansion asset that’s really the bulk of that 1.3 million ounces, we saw a lot of similarities in that asset with the Karlawinda asset. And indeed, you know, when we bought it, it was a 558,000-ounce asset. We then grew it to 965,000 ounces. We’ve now grown it to 1.15 million ounces, and as you noted, we do expect it to continue growing. So, we are really looking at it, and actually now, even though it’s sort of really in resource stage, modeling it how we plan the development as a large-scale bulk open-pit asset. And the geometry of it is starting to look very interesting, because you have about 80% of the ounces within 200 meters of surface, you have a 300-meter-long high-grade zone in the middle, which is naturally where you’re gonna start developing, and then as you develop down on that high-grade zone and then you start opening the pit north to south essentially to prepare for bulk open pit operations all at Karlawinda, there’s about a 225,000-ounce shallow supergene blanket that sits across the top of the whole thing. So, it sort of pays for you to open the pit. And the benefit all of that is that we can think about the staging of the development of this project to emulate what Capricorn had done with Karlawinda and target something that’s, you know, a 5 million ton per annum project, producing, you know, north of 100,000 ounces per annum.

We, in our case, have the benefit of Tarcoola as a high-grade satellite and the ability to use Tarcoola for Stage 1 operations with an existing mill. So, we have sort of a stepping stone between where we are today and our medium-term objective of producing, say, 150,000 ounces per annum.

Stuart: You recently produce some concentrate, and it’s fair to say you’re pretty happy with the test work, right?

Alex: Yeah. Yeah, so in December of last year, so December 2022, we started looking at the gravity circuit on our plant, thinking about how we might be able to optimize that, and so we started taking off some of the key pieces of equipment to clean them out and preserve them for later reinstallation. And when we did this, we realized there was about 10 tons of gold-bearing concentrates trapped in the gravity circuit between the cyclones, going all the way down to the gold room. We had done a gold room clean-out last year, and we sold about $1.5 million worth of gold from that. But we’ve taken down now the gravity circuit, we’ve cleaned it out, we’ve recovered about 10 tons or so of gold-bearing concentrates. We’ve now processed around 7.4 tons of those materials into saleable concentrates, and they contain roughly around 1200 ounces of gold or, you know, about $3.4 million worth of gold and concentrates. So, we’ve got a third parcel that will go to preparation later this month. And once we have all of the materials prepared, we’ll then look at how best to process or sell them to maximize recoveries.

Stuart: Right. So, you’ve got some clues about what to add to the gravity circuit to make this operation work efficiently, is what investors can take home from here?

Alex: Yeah, that’s right. It was already a very efficient mill, to begin with. So, it was processing Tarcoola material at about 93% or 94% recoveries, but there’s probably opportunities to optimize that, and it is very nice for us to get paid several million dollars just for having to look at that.

Stuart: You recently raised a bit of capital at 25 cents a share. You’re at 26.50 as we speak. And you were impressing to me a moment ago a very small discount to market on that placement. It’s unusual given that gold equities are out of favor at the moment compared to where the middle is. What’s attracted the investors who’ve come into that capital raising to you?

Alex: Well, look, I mean, I think there’s a couple of factors there. You know, when we put out our resource upgrade at the Tunkillia project, we had a number of groups, some of whom that we knew had been watching us and following us and talking to us for a while and others that we actually didn’t know were tracking us quite so closely. Several of these groups came forward, and we said, “Look, we like what you’re doing. We like the team. We really like the responsible treasury management and the fact that you are, you know, generating cash out of your assets. This is obviously a nice anti-dilution tool. And we see where you’re going. You know, we like the sort of rational, you know, risk-reduced plan to go forward. If there’s an opportunity to be involved, we’d like to be involved.” And so, this kind of happened all at once with several groups.

So, we saw an opportunity to essentially open a door to bring some very high-value names and some value-add investors onto our register, as well as essentially by doing that, bring in some acceleration capital to look at accelerating resource growth for potential Stage 1 operations. Because if we have a 5-year target to be producing, say, 150,000 ounces per annum, every 50,000 to 60,000 ounces that we can identify in terms of shallow, high-grade, open-pitable mineralization around Tarcoola, that’s a year’s worth of operations that we can bring forward using our existing mill. So, it’s an acceleration opportunity, it’s an opportunity to boost sort of, you know, global institutional awareness of us. And, yeah, look, I think the pricing that we achieved, you know, a 5.6% discount is probably quite a strong validation of our methodology in our story.

Stuart: Right. Now, finally, that accent sounds like you’re not from around here. A lot of people who don’t know you think you’re Canadian. In fact, you’re from the U.S. state of Idaho. What brought you Down Under?

Alex: Just, actually, just, I grew up in Washington State, but my family is from Idaho, Montana, and Washington State, so the Pacific Northwest. Yeah, but I moved to Australia back in 2009, actually, so 14 years ago almost exactly to the day, actually. And, you know, I was in London, I was working for Barclays Capital in a structured finance team, and I actually had, at the time, an Australian girlfriend who had gotten very tired of the weather in London, so we decided to come down here. And, you know, my family has a background in mining investment and real assets investments, so it was kind of an easy transition for me to come back into that space in Australia in particular. And, of course, that was a very exciting time in, you know, sort of foreign direct investment and in general investment in resources in Australia.

Stuart: Absolutely. We were booming off the back of that. And gold, it was, I’m guessing, about $800 an ounce at the time you moved here, right?

Alex: 2009, yeah, it would’ve been about 800 USD or 900 USD an ounce, yeah.

Stuart: Right. Well, Alex Scanlon, thanks for talking to “Stocks Down Under.” Well done on what you’ve achieved at Tarcoola and Tunkillia, and here’s to the next million or 2 million ounces of resource coming your way.

Alex: Yeah, thank you very much.