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Friday, 15 March 2013
Otis Gold's chief gets creative; sees strong times ahead for Kilgore project
Otis Gold (CVE:OOO) is currently chasing many different opportunities when it comes to its Kilgore asset in Idaho as challenging times for juniors are calling for creative measures, says the Canadian company's chief, Craig Lindsay, as he sat for a chat with Proactiveinvestors at the PDAC conference last week.
"You have to be creative in this market. The typical placements with retail investors through brokerage firms are not a great market at the moment," he says.
"You have to look for high net worth individuals and institutions. There is also debt, with which it is becoming much more common to finance projects.
"We're also looking at possible joint venture structures and strategic investments from existing mining companies that want to get that early-stage exposure."
Lindsay adds that nothing is "set in stone" at the moment, as the company is actively pursuing all options right now.
The company's Kilgore gold deposit in Idaho contains an indicated resource of 520,000 ounces gold in 27.35 million tonnes at a grade of 0.59 grams per tonne (g/t) gold, and has an inferred resource of 300,000 ounces gold in 20.23 million tonnes at a grade of 0.46 g/t gold.
Earlier this year, the junior explorer revealed results from its drill program last fall, saying there is significant potential to expand the property in the near-term, as the recent holes were located beyond the northern edge of the deposit. Notable intercepts included 121.9 metres of 1.04 g/t gold in hole 12 OKR-292, which included 45.7 metres of 1.52 g/t gold.
Otis is looking to drill another 7,000 metres in the north target area, and is currently in the process of permitting to build new roads that will give the company access to this region.
"Following a public 30-day comment period, if there are no issues, then we will get the permit and start building the roads this summer, which will be followed by the 7,000 metres of drilling," says Lindsay.
After the drilling, the company will look to put out a new resource estimate, followed by a preliminary economic assessment report.
The junior will be raising capital for its plans in the next three to six months, but its chief is not worried. "Discussions are ongoing, and we have got some strong shareholders that have indicated they will support us. This includes myself and management," he says.
At the prolific PDAC mining conference, Lindsay spent his time meeting with several financial institutions that have indicated they are starting to make investments.
"One of the things we are seeing in Europe, Canada and the U.S. is that a lot of institutions are looking for advanced stage assets with near-term production and low capex that are located in favorable jurisdictions, from a political perspective," explains Lindsay.
"From that view, Otis fits the bill really nicely," he adds, asserting that the Kilgore project, which is located in an area of the western United States with built-out infrastructure, is estimated to have a capex cost of somewhere between $60 to $80 million, with production anticipated to start in 2017.
While the process of permitting in Idaho is a relative unknown, with no company having gone through it in the last 15 years or so,Lindsay expects a typical two-year permitting period for Kilgore.
The CEO explains that Kilgore is located in Clark County, Idaho - an area that holds less than 1,000 people, but at the same time, is roughly the size of Delaware and has no negative mining history. "The local community also seems very supportive of the project," he says, adding that the ore is "extremely clean", with the project also having a simple metallurgy process.
The property, which is equipped with existing power and water, is spread across 5,130 acres in southeastern Idaho, 60 miles north of Idaho Falls, and is accessible by road around 32 miles northeast of the town of Dubois and 15 miles east of Interstate Highway 15.
Otis will also get cash to develop Kilgore from a recent joint venture deal it inked for its Oakley project in Idaho with Lateral Gold Corp (CVE:LTG). The deal allows for Lateral to earn up to an initial 70 per cent stake in Oakley, in exchange for a total of $915,000 in cash, as well as $5.7 million of work expenses on the project and a total of 4.95 million common shares.
"We are chasing lots of different opportunities right now from financings to developing relationships with producing mining companies, to joint ventures. It's a busy time for Otis," confides Lindsay.
"We're always looking quite aggressively at acquiring properties as well, with a regional focus on the western U.S. This is the time to be opportunistic, but we will need a strategic partner for this type of transaction."
The CEO is also, as expected, bullish on gold, when looking at the world's macroeconomic conditions, and the fact that nothing has really been solved, especially when it comes to issues in China.
"I think we will see gold get up to between $1,800 to $2,000 an ounce by the end of the year.
"I wouldn't be putting my own money into Otis right now if I didn't believe in the company and that the market could turn around, with investors seeing the gold space as a good place to invest," Lindsay concludes.