Interview with Thomson Resources (ASX:TMZ)

Thomson Resources (ASX:TMZ)

We spoke with David Williams, Exective Chairman, about the way in which the New England Fold Belt Silver Projects came together and how the Thomson Resources team is working to build out the resource estimates to be JORC 2012 compliant, ahead of work on a ‘hub and spokes’ processing model.

Full transcription below.

 

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Transcription

 

Stuart: Hello, and welcome to Pitt Street Research. My name is Stuart Roberts, and I’m one of the founders of our firm, and with me is David Williams, who’s the executive chairman of Thomson Resources ASX:TMZ. It’s Wednesday, the 11th of August, and David, it’s been a good year for you, it’s fair to say.

David: It’s been an interesting year, Stuart, about 12 months I should say. I haven’t had much time to catch breath.

Stuart: Now, for a bit of background, Pitt Street Research just published an issued response at AP Research on Thomson. This company is one of several on ASX now that is making silver a priority. And David and his colleagues have just aggregated five individual silver projects in the New England Fault Belt of northern New South Wales and southern Queensland. And going after 100 million ounces of silver equivalent in resource, of which in our report we estimate they’re about three-quarters of the way there. So, David, silver is a big thing for you right now and the timing is perfect.

David: Yeah. Look, if you think back to where little old Thomson was 12 months ago and hadn’t even heard the word silver, I think. So, it was very focused on gold and tin in the Lachlan Fold Belt, but talking with one of our advisors in August, he said when I asked him, where [inaudible 00:01:28] and get up more of the developmental pathway, he said, “Well, you should get into silver.” And I sort of laughed, and he said, “Ah, get into silver. You know, that’s the poor man’s precious metal.” And he said, “No, no, no. Mark my words, it’s more than that,” and luckily, I listened to him, and we went straight in then to do the deal with silver mines to acquire the Webbs and Conrad Project in the New England Fault Belt, and then it’s gone on from there.

Stuart: Right. Now, just this morning you filed with the ASX that you’ve taken the Conrad resource that you inherited from silver mines and converted that resource from JORC 00 to JORC 2012, and it’s looking pretty good.

David: Yeah. Look, it’s been an interesting exercise with the view that the ASX has on the JORC code, and essentially what they’ve said to us is we can’t refer to any numbers previously published by prior operators because then we’re considered to be publishing it for the first time and we have to do a full-blown JORC 2012 estimation. So, people probably wondered why we haven’t referred to the numbers much, other than at a global figure, and that’s the reason.

I had my little table, which I’m now gonna be able to start populating the fourth column with some numbers, but you know, we could have gone out there and just got the numbers rubber-stamped, so to speak, and produced those, but that’s not what Thomson is about. Thomson is about developing these projects and developing them within the hub-and-spoke strategy. So, for us, we wanted to have serious numbers.

We wanted to have robust numbers and we appointed AMC here out of Brisbane to work with us on doing the estimations of JORC 2012 of all of the projects so we’re getting that consistency. Now, that takes time. The databases are in different degrees of certainty and QAQC around them, but also, you wanna make sure you’ve got it right and rethink the geological model. And that’s what’s gone on and Conrad is the first one that’s come out.

And what’s pleasing about that is that we’ve come out with resources of a number in silver equivalent that was larger than what was published before by Malachite [SP], and also with a much often proportion-wise, a much higher part indicator as opposed to inferred. Now, there’s a number of reasons for that, and that’s not to say that the Malachite one was incorrect, just a bit more conservative, and also hadn’t taken into account the drilling that had been done on [inaudible 00:04:29]. But now when you go through it, you look at it, it’s a very robust estimation, and gives us confidence in going forward that as we go through this process, we are going to move towards 100 million silver equivalent ounces.

Stuart: Right. Now, it’s instructed to me that other companies have come where you’ve come from before, but you’ve never had all five of these projects under one roof before. And so you talked about hub and spokes. Now, I look at the map of Northern New South Wales, Emmaville is roughly the middle of those four. Now, the hub could be anywhere, but the big challenge for you is the metallurgy of those projects has probably got some variances across the five of them. And so, you’re going to have to do a bit of fancy footwork, right?

David: Correct, and again, that’s why we’ve not been rushing out on the various projects, particularly projects like the Texas Silver Project, which really has had no metallurgical work done on it at all. And so, a lot of the issues there was that they didn’t understand. The previous operators didn’t understand the rock they were dealing with, and therefore weren’t getting the returns that they had hoped to get, let alone the fact that the resource wasn’t of a sufficient scale. And that’s what’s led us into the hub and spoke is that when you look at each of these projects, each of them a legacy mine so each of them had been mined before. So, you know you can get the rock out of the ground, you know you can get the silver and some of the other minerals out of the rock, but you know, do you have a large enough resource? And in each case, it just wasn’t there.

And when we were looking at that, and particularly looking at both Webbs and Conrad, which are high-grade silver, and particularly Conrad, higher volume metallic rock, and there have been some good metallurgical work done on those two. We looked at what was within proximity and the two that we identified pretty much straight up were Mount Carrington in Texas. And as I’ve often said, blow me down if they both didn’t come up in the first week of December and we progressed through the rows to do a deal on Mount Carrington in February and the deal on Texas in March. And we’ve now signed the definitive earning agreement on Mount Carrington, and we should, any tick of a clock can break the acquisition of Texas.

Coming back to your point though, you said yes, that each of them are different, posted in different rocks, different compositions, and therefore you do need to make sure that you understand the metallurgy of the rock. Therefore, we’re spending a lot of time and effort with Peter Rohner and Core Resources guys on working through that so that we fully understand how we need to process each of them, and how will we be able to work in a blending fashion, and what’s the optimal processing design that we can come up with? Now, we’ve got some ideas, but that’s still further down the track as we go and do this metallurgical work.

The interesting thing though is that five different deposits, yeah, Conrad Webbs, Silver Spur, and two deposits in Texas, Mile Canyon and Twin Hills, you can also ultimately throw in the Mount Carrington deposits there, each of them different, each of them in different locations, each of them with different compositions of minerals. If one of them doesn’t quite stack up the way we had hoped it would, that’s not the death of the project. If you’re all on one deposit, then if it doesn’t quite come out as you were hoping, then that can have an impact on your overall project.

Stuart: Absolutely. I mean, and the folks in Macmin years and years ago could attest to that principle.

David: Yeah, absolutely, and it was interesting to a degree that Macmin and Mellacart [SP] were having a chat about that and were doing things together back in the early 2000s. It’s just perhaps they didn’t do it on a large enough scale or didn’t really understand the metallurgy of what they were dealing with, but by having that sort of optionality and flexibility…optionality where you process it, flexibility is that what blend you use and optimizing the minerals to a degree where one price might be up and the other one might be down. Now, you know, that all sounds really simple and, of course, as you’d appreciate, Stuart, it’s not as simple as that but it does have a lot of those benefits with it.

And coming back to your point about Emmaville being the center of the piece, I actually had a counselor at Glen Innes say to me the other day, “Well, Glen Innes would be a great place to set up a central processing facility.” The interesting thing is, if you drive…and I’m not talking about a truck, but if you drive your car from Mount Carrington to Texas, or from Webbs to Texas or from Conrad to Texas, in each case it takes you about an hour-and-a-half. So, while as the crow flies, they all look different, the actual time on the road, they’re about the same if you use Texas as that central point. But it’s no reason, for example, why we couldn’t use Conrad if we wanted to. I mean, Webbs is probably a little bit more difficult, and Mount Carrington, it’s just that bit, sort of, further away, but again, it comes back to that optionality and flexibility.

Stuart: Yeah. Now, in the research that we at Pitt Street Research have just completed, we looked at those estimates that other parties had done on the various projects. Now, we put a valuation considerably ahead of the share price based on what the market here and elsewhere is valuing silver resources on. It’s like you haven’t yet arrived yet on anyone’s radar screen. Now, part of that is the speed with which this company is evolving. A year ago, we couldn’t have imagined that the New England Fault Belt projects were coming together. But what else is causing you to be off people’s radar screen right now?

David: It is an interesting question because it’s what was asked of me, or comment made to me several times by investors and advisors in North America. You know, they would say to me, “David, we don’t get how Thomson is not on anyone’s radar in the U.S.” This should be with the interest in silver. In part, I put it down to the speed and, you know, while we were putting it together, we wanted to fly below the radar a bit at the same time because we didn’t want people to twig as to what we were doing. It’s interesting now, people have twigged a bit and we are starting to see a few more hub and spoke concepts coming out. And which is all good, I mean that’s what we need a bit more on the Eastern seaboard, but so I think it’s been that combination of moving very quickly, and sailing under the radar, and being very focused on getting on with the job.

But the other one is that because of not being able to talk about the numbers in any ASX release. You know, they’d only been able to talk about our aim is to aggregate 100 million silver equivalent ounces in the ground. I don’t think people have really got it because we really haven’t been able to talk a lot about what really is there. And again, I think people will miss it when they look at other silver players, you know, as you’ve done in your report. And what’s so comparable with Thomson? Well, where do I look? I mean, you’ve put that into stark focus for people and so they will get a better idea about what is going on.

But the other thing also, perhaps the third part of it is, is we are serious about developing this. So, being serious about developing it, we wanna make sure we’ve got it right before we talk about it. Conrad is a good example of that of, you know, we’re making sure we’ve got that right so we know those numbers are robust. We’ll do the same with the other resources as we go through. We haven’t talked a lot about the metallurgical work that’s going on because we want to make sure we’ve got it all so we understand what the total picture is.

You know, we haven’t talked a lot about the potentiality of expansion and extension because that, sort of, comes in with both the geological model that leads into the resource definition which then identifies where the low-hanging fruit is. So, I suppose because we’ve been so careful about pulling that together because we’re more focused on being a developer, you know, than scoring a few quick wins. Again, we’ve net played far on under the radar a bit, but look, now we’ll change that as we go forward as we now start rolling these things out.

Stuart: All right. So, I’ll close it off with this. I was amazed when I looked at the updated pre-feasibility work that your friends and White Rock Minerals had published last year where they had a mix of gold and silver deposits at Mount Carrington. And they’ve rejigged the PFS to be gold dominant, and in gold dominant terms we unlock hundreds of millions of dollars potentially of shareholder value, which you’ve now provided the catalyst for. White Rock Minerals shareholders ought to be taking a look at you as potentially a great value play as well.

David: Well, you’ll get me in trouble with Matt Gill if I respond to that. Look, you know, I think White Rock and Matt’s doing the right thing there of keeping his focus on Alaska and now Victoria as he completes [inaudible 00:14:52.238] Gold, and they have someone like us progressing Mount Carrington, that’s a positive for them. I mean, it does in the way it’s structured sit out there on the side a bit at the moment but, and that’s where we’re starting to, sort of, you know, hone in our focus as well, to be careful that we just don’t add too much on the plate that we’re dealing with. But yeah, I suppose, you know, we potentially offer, you know, as we might offer some of the other parties were bought assets from, you know, with silver players we offer an alternative. An alternative which is not just an alternative investment but an alternative story and an alternative approach, and I would like to think, as you’ve identified, yeah, an opportunity for growth given the fact that where our valuation sits today.

Stuart: Yes. Well, David Williams, it’s been a pleasure and a privilege. Congratulations on everything you’ve achieved since you took the helm at Thomson, and good luck with the next stage of the journey.

David: Yeah. No, looking forward to it, Stuart, and certainly looking forward to continuing to talk to you at Pitt Street Research as we go forward, bringing you along with the journey.

Stuart: All right, and here’s to silver going to $45 an ounce again.

David: Hope It goes back up towards $30 would do me for the moment.

Stuart: All right. Good. Okay, thanks so much.