Can You Ride a Heliostar to the Moon?

Charles Funk: I'm very well, thank you. Thank you for having me.

CF: Thank you. My background started out in Australia working for mid-tier and major copper explorers and gold miners, most notably Oxiana, OZ Minerals, and Newcrest. And particularly when I was with Newcrest, I got a lot of opportunities to travel to North and South America… and that's how I first came to Alaska.

And so I did that for a number of years and got a little bit frustrated with how big companies work and how difficult it was to find things that move the needle. And so I wanted to be a bit more entrepreneurial. So my wife and I moved to Canada nearly five years ago, and I started as VP for a prospect generator called Evrim which introduced me to Mexico.

And during that time, I was fortunate enough to be involved in copper discoveries in Australia and then gold and silver discoveries in Mexico — most recently as VP of Exploration for Vizsla.

And we had tremendous success last year on the Panuco project. But all the while, I always wanted to build a company that had a nucleus of a fun management team to work with but a serious long-term goal of building a serious scale company.

And so I’d always focused on projects that had significant upstarts. And so I founded a company called Heliodor eighteen months ago backed by a number of high net worth individuals. And we picked up some early-stage but quite attractive projects in Mexico, that we might get time to talk about, and went looking for that flagship asset.

And early last year, got talking to Redstar on their Unga project in the Aleutian Islands in Alaska. Long story short, we agreed to merge our access to capital and knowledge of these systems combined with Redstar having the asset and needing a catalyst to bring that share structure back to a more investable state.

That meant Redstar acquired Heliodor, and we consolidated the capital structure. We raised C$7 million. We rebranded as Heliostar. We undertook a drill program which is where we have the results from. And so today, we have a whole new company called Heliostar with some very high-grade, very attractive projects.

CF: Yeah, you've summed up the strategy really succinctly. Unga is an amazing project because of its history. It had a lot of quality exploration in the 80s particularly by Battle Mountain. But then there's almost been a 40-year hiatus with no systematic follow-up.

Some of that comes about because it spent nearly 15 years in an oil and gas company. And then for other reasons… some including even the passing of the former CEO or Redstar’s initial focus on the Red Lake District.

Then outside of SH-1, this huge district has seen very, very limited exploration. And that's highlighted at SH-1 by the fact that you've got this high-grade resource that is wide open… and we’ll talk about our drilling in a little more. But the deepest hole at SH-1 is 5.5 meters at 24 grams. That hole was drilled nearly 14 years ago and, to this day, has never had any drilling in it. It's incredible!

CF: Yes. So you're right. It is a remote project. It's in the Aleutian Islands and in the far south of Alaska. But it's surprisingly accessible. There's a major airstrip at Sand Point with regular international and charter flights. It actually comes with a huge advantage. And when people think of Alaska… they think cold, frozen, short field seasons. We can drill nine months of the year at Unga.

In fact, we finished drilling at the end of November last year and we plan to re-mobilize in late-March. So it gives us a tremendous advantage from that perspective. The other surprise is that it was Alaska's first underground gold mine. And we'll talk about the Apollo target shortly. But they mined that from the late-1880s to the early-1920s. So it's actually a brownfield site.

In fact, the island of Unga – we’re under our claims, it’s about 10 by 13 kilometers – and it is approximately sort of twice that size. It's quite a big tract of land. It's got roads connecting our major targets. It used to have a town that finally they abandoned in the late-50s as a consequence of the mine shutting down in the late-20s. And so for a project in remote Alaska, it's got surprisingly good infrastructure. They've got a port, road, and it's accessible.

CF: Yeah. In fact, it probably is worth wrapping into a broader history. So I won't bore too much on the geology but this is an amazing property. It's got porphyry targets; it's got bulk-tonnage gold targets as well as these high-grade mines. And the nature of these high-grade mines is intermediate sulfidation.

And effectively what that means is it starts off gold-rich in shallow levels. And as you go deeper becomes more silver and then gold-silver base metals at-depth. And so the opportunity at Apollo is the old timers mined 130,000 ounces at about 10 grams per tonne. So quite a profitable operation.

But they didn't understand that model and that transition. And so as they went deeper in — they started getting sulfide. And so they called that complex ore, which, with stamp mills in the 20s, was uneconomic to recover.

In fact, I've mentioned a couple of times… they looked at producing a concentrate and they would've got penalized for their zinc. So the world's changed a lot in a hundred years.

They're struggle is our opportunity because as they went deeper, they dug their shafts, they dug these exploration tunnels, and blocked out these zones of mineralization anywhere from 20 feet wide, 8 meters wide. Under Apollo… I think there's a 100,000 tonne block under the shaft area that they've shown the location of.

And they went one step further and estimated the grade. They said, on average, you'll find 3 grams gold, 250 grams silver, and 10% combined lead-zinc. So you've got an old mine that they tell you the mineralization continues underneath; they tell you the grade, which is about 8 to 10 grams gold equivalent. And from that day until we started late last year, no one had ever drilled under those workings.

CF: Yeah. So the true widths are approximately 80% to 85% of the announced widths so really robust. So SH-1; there’s two major vein zones at Unga. We just talked about Apollo. To the north, a few kilometers, there's a parallel vein called Shumigan. And the best advanced zone, which we touched at the top of the interview, is the SH-1 ore shoot.

And so the drilling there has this core area that's been quite well-grouped. It’s got holes in it like 17 meters at 24 grams per tonne gold. But when we had a close look at the resource as part of our due diligence for the merger, there's three opportunities very clearly.

The first is there was a 100-meter gap from surface to the first pierced points into the vein. And so we completed 7 shallow holes last year. And so the first of those results on 50-meter step-outs, we announced, as you mentioned, the 11.65 meters at 7.7 grams including 4 meters at 16 grams and Hole-2 that had nearly 2 meters of 18 grams.

So spectacular high-grade above what is already a very high-grade resource. And we're expecting the rest of those results throughout February, maybe into early-March. We suffered from lab delays like everybody else.

Another real opportunity is, as we step down into the vein, the drilling becomes really loosely spaced. Consistently, 100 to 300-meter spaced drilling. And that's not the appropriate way to drill an epithermal like this. It doesn't give you a lot of confidence in the results and also leaves a lot of answers behind because you've got a low result in an area that hasn't had enough follow-up because you can easily get low results in the middle of ore shoots.

And so we think by infill drilling, we can increase the confidence of the resource and very likely add quite significant ounces particularly on some of the parallel zones that you can see in the long section on the company presentation. And then, extending the ore shoot to-depth below the very high-grade intersect that I just mentioned.

So we think we could increase the resource of SH-1 to 0.5 to 1 million ounces. And that'll be a real focus for us in 2021 at Unga.

CF: Yeah, you're correct that it has been a little bit of a frustration to wait that time. But no, we're not resting on our laurels. We're fortunate that we're well-financed with C$5.5 million worth of cash and short-term investments.

So we completed 23 holes last year. We hit the vein that we were targeting in 19 of those 23 holes; that's spread across SH-1, Aquila, and the Apollo trends. We've received results, as of today, now from three of those holes. So we have quite a significant number of holes outstanding.

But with the funding, we've already committed to going back to start in mid- to late-March. And we're going to plan a two-phase program. The first covers what we've just spoken about in systematically stepping out of SH-1 and also doing the same at Apollo where we've intersected the vein underneath those old workings. And we think that could be an initial pathway to the 1 million ounces of high-grade material.

And then phase two is to do systematic geophysics, mapping; generate a lot more targets and drill anywhere up to 20,000 meters to really unlock the potential of this district because it has some of the highest probability exploration targets that I've seen in my career.

CF: Yeah. So the reason that we've balanced our portfolio between Alaska and Mexico is there's a perception from investors that, if you're focused in northern Canada or Alaska, that you can trade around the field season and sell towards the end of the year and then think about coming back in early the next year.

And so we have two lines of defense there. The first is that long nine-month field season you and I talked about. The second is that portfolio in Mexico. And I share your sympathy for this part of the world.

I’ve spent a lot of time in the last few years in northern Sonora in particular. I was fortunate enough to be involved in the Ermitaño discovery, which is about to go into production with First Majestic. It’ll probably be a 1 million ounce gold equivalent ore shoot when all is said and done; 3 kilometers east of the Santa Elena mine.

And as I mentioned, also led the Panuco discovery with Vizsla last year. And so I've got a lot of exposure to the prospectivity of vein systems in Mexico. And you mentioned the big copper porphyries. This part of Sonora has always been held by the copper miners. And it's only in the last 10 years that the gold and silver endowment is really being recognized.

You mentioned Santa Gertrudis, which is a priority development project for Agnico. We all know Las Chispas and Santa Elena and now Equinox at Mercedes; it's produced over a million ounces.

But multiple mines that produce from high-margin vein systems are within about 50 kilometers of our three projects. And so we plan to drill at La Lola in February. La Lola is a large epithermal district that I actually staked in a previous role.

It's got a vein that gets up to 14 meters wide on-surface. It's got some really nice samples on it like 58 grams per tonne gold and 424 grams per ton silver. But there's not widespread mineralization at-surface.

And when you understand the geology, it makes sense. You're at a shallow level in the system, and you want to drill deeper to where it might be more prospective. And so we'll be drilling that in February and we'll be sharing some more news with our shareholders and your listeners over the next few months.

We've got a second project called Oso Negro that’s got spectacular grades on-surface. It's got three veins each over 500 meters long with 200 [grams] to 2.5 kilos silver grades; one with 10 gram gold grades with that. And we just need to do some more systematic mapping and sampling before we refine our drill holes.

And then given that this is a sort of an interview or conversation… a bit more of a story around our third project, which is Cumaro. I always liked the old Picacho district. It shows a lot of potential. And I started by acquiring the primary claim block with a view to putting the whole district together.

And my glass-half-empty, glass-half-full narrative for Primero is that, unfortunately, we didn't secure the entire district. That is because SilverCrest comprehensively out-bid us in late-August last year. They had much deeper pockets than we had at the time.

And so the glass-half-full is everyone knows SilverCrest’s reputation in this part of the world. N. Eric and Rosy and the team have done a fantastic job. I think they saw the same potential that we did. And so glass-half-full, we have the key part of a really attractive district, and we're doing some mapping and sampling on that at the moment.

CF: No, I think that's a really good summary. So the last part is the team. In the last few months, we've really built out our team. Sam Anderson joined us after 17 years with Newmont as VP of Exploration.

We've got a new exploration manager, new corporate manager, new CFO, and Rob Grey has just joined as our IR manager with a very strong track record in new discoveries. So we think we've got a really robust team, and we're really aggressively unlocking the potential of our portfolio.

CF: No worries. Thank you and thank you to your listeners.