2019: The Year Quality Explorers Will Break Out

Written by Gerardo Del Real
Posted February 18, 2019

After a tough 2018 for most junior resource companies, 2019 looks like the year that quality explorers break out.

K2 Gold has the team, the share structure, and recently added Great Bear Resources' — also a Discovery Group company — CEO Chris Taylor as an advisor.

CEO Steve Swatton explains why he’s excited again and what to expect from K2 this year.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader.


Gerardo Del Real: This is Gerardo Del Real with the Outsider Club. Joining me today is the President and CEO of K2 Gold (TSX-V: KTO)(OTC: KTGDF), Mr. Steve Swatton. Steve, how are you today?

Steve Swatton: Great. Thanks very much, Gerardo. It's great to be back with you.

Gerardo Del Real: It's been a bit. I joked off air that it's been a quiet winter. 2019 is shaping up to be a much more stable gold market. Some hope, like myself, that the second half leads to a breakout. You've done an excellent job behind the scenes positioning the company for a big 2019.

K2 Gold, for those that are not familiar, is part of the Discovery Group of companies that's led, of course, by John Robins. You had a piece of news that I found interesting. There's two pieces. The first part is you exercised your option on the Wels property. I want to talk about that. But before I do, I want to talk about the addition of Chris Taylor, who has agreed to become an advisor to the company. Chris Taylor, of course, for those not familiar, is the President and CEO and a Director of Great Bear Resources, what has to be the 2018 story of the year in the junior mining space. That company trades for about $4.00 Canadian now. It was trading in the cents.

Can we talk about the addition? And then let's talk about Wels.

Steve Swatton: Yeah, sure. Chris is an amazing, phenomenal geologist. He is a younger guy, mid-40s, with incredible experience in a whole range of different assets. He used to work for Imperial Metals, I believe, before. Fundamentally, he's a field geologist with a financial brain. And of course, with the recent success of Great Bear, he's really cranked up the heat here, and founded with his partner, Bob Singh, a tremendous — it looks like a new asset discovery in Red Lake district, which all of the majors are looking at it right now. Its largest shareholder is Rob McEwen. Rob was the catalyst that created this latest interest and, of course, Chris has raised a significant amount of money on the basis of it. He just told me yesterday that he really could continue drilling for the next two years without having to have another financing.

The significance for K2 is that we obviously mentioned in the past we're looking for assets elsewhere. We were looking in Alaska. We still are looking in Alaska, but something has come up on our radar screen here in mainland USA that's of extreme interest to us. It's a more advanced property than the Wels property. Now, there's no security that it will come into the company. We haven't signed any agreement or anything like that, but I'm getting the feeling that it is something that would actually make a difference to the company, should it come in.

Anyway, I've been working on that for the last four months, five months now. Hopefully, I'll be able to announce some news in the near future, but just to reiterate, there's nothing being said, there's nothing being signed, an agreement at this stage.

Gerardo Del Real: To be clear, you're excited about something. You haven't shook hands on it. You haven't signed off on it. It may or may not happen. Let me explain to people really briefly why, whether or not you execute on this, I believe K2 Gold is an extremely attractive speculation at these levels. You have a market cap of approximately $5 million Canadian.

For those of you that have not seen gold bull markets in the past, just having someone of the likes of John Robins, having yourself and the team that you've put in place, you could run a shell company in those types of markets, a better market which I see coming, that would demand a market cap multiples of where you're at now.

With that being said, Wels — and I know because we've talked about this before — is an extremely attractive project on its own merit. That's a part of what I want to talk about today. You just went ahead and exercised your option where you now have earned into 90% of that project. Can we talk about Wels for a second?

Steve Swatton: Yeah, Gerardo. Just to be clear on this, it was discovered in 2002 and it's only just now that we're unlocking the goods on it. Here, we've got 4 kilometers by 3 kilometers geochemical anomaly. The first location where gold was found is in a place called Saddle, and 1,700 meters of drilling has been drilled. We've had intersections such as 28 meters of 2.37 grams and 12 meters of 5 grams, not insignificant. If we put our hand around it, we have a small resource right there. So what happened is, initially in 2012 when a lot of work was going on, 2014 to '16, it was drilled in 2015, all of the work was concentrated in this one area and they ignored all of the other areas.

Right at the end of the 2017 season, as we were packing up the drill, we sent a geologist over to a couple of these other anomalies and, lo and behold, it has multi-gram, if not ounce. We had 43 grams, 18 grams, 16-gram material coming from completely different rock types 2 kilometers to the south. We were scratching our heads simply because we did not have any outcrop in that area. These guys were simply using a shovel to go and get down to the bedrock and take whatever they could.

This is extremely significant because now we're not even sure if the area we drilled initially is the real focus of mineralization. Because the mineralization occurs in different rock types, the feeling is that it might be orogenic. Orogenic as a style of mineralization is similar to Kaminak. Kaminak is 5 million ounces. That's why we're excited about Wels.

There's a couple of negatives up against it. It's the weather, the weather, the short weather window and the fact that we have overburden. Those two reasons are probably the reasons why it's never been discovered. If this location was in Nevada, there would be people running all over it, but it's not. It's in a cold climate and it's covered with a loamy soil and about half a meter of overburden. So you just can't see anything.

The significance of it can't be underestimated. We have four other targets that we're going to be looking at this year. We already have a backhoe, a small digger, so that we can build some trenches coming in June this year and, hopefully, we'll have more joy on it. In order to get the 365-days-a-year news coverage, that's why I've been spending my last four to five months actively seeking a property in a warmer climate so that we can have 365 days of news.

Gerardo Del Real: Excellent. So, just to summarize, everybody, you've got a company with great management, a great tight share structure, committed long-term shareholders, a tiny market cap of approximately $5 million Canadian, an excellent exploration property that'll see a lot of important work this summer and the potential, of course, for near-to-mid-term acquisitions that are accretive and obviously make for a much better 2019 than what 2018 was.

Steve, anything else that you'd like to add?

Steve Swatton: No, nothing further, except for we are much more excited. I was just going to mention as well that I was at the Whistler Conference, and I thought to myself, "Geez, what am I going to say to everybody?" Because we haven't really progressed the Wels particularly further than last year. The actual level of excitement and the level of interest in K2 I would say was double, if not more, than last year. It was so easy to talk to people about the prospects for K2 that I'm extremely encouraged by not only the market, but the level of interest in our company.

Gerardo Del Real: Steve, well said. Thanks again for your time. I appreciate it. I get the feeling we're going to be chatting a lot here soon.

Steve Swatton: Yep. Thanks. Thanks very much, Gerardo.

Gerardo Del Real: Thank you.


For the past decade, Gerardo Del Real has worked behind the scenes providing research, due diligence, and advice to large institutional players, fund managers, newsletter writers, and some of the most active high-net-worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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