An Update on Atlantic Gold (TSX-V: AGB)(OTC: SPVEF) with Chairman Steven Dean

Nick and Steven Discuss Atlantic's Moose River Consolidated Project, Ongoing and Upcoming Drilling, Mine Construction, Its Low Cash Costs, and Upcoming Catalysts for 2017

Nick Hodge: Hi, this is Nick Hodge, editor of Wall Street Underground. I have on the phone today for you a special treat. It's Steven Dean. He's the chairman, chief executive officer and a director of Atlantic Gold (TSX-V: AGB)(OTC: SPVEF), a recommendation I made to you just a couple of months ago. He's got a long track record in the industry. He's a fellow of the Australian Institute of Mining and Metallurgy. He's a former president of Teck Cominco, one of the largest, if not the largest, diversified resource companies in Canada. Steven Dean is also a founding member of the Normandy Poseidon Group which was ultimately acquired by Newmont. There's more, I could go on about Steven Dean, but I want to get into the project. Steven, thank you for joining us today.

Steven Dean: Hey, thanks for having us.

Nick Hodge: You and I met, it's been three or four months, at the New Orleans show. We met and I liked what I saw in you and Atlantic Gold, and it didn't take me long to pull the trigger. I won't steal your thunder but you guys are the only project that's fully permitted, financed, and under construction in Canada. You've got a project that's expected to be open pit in Nova Scotia and that really has some room to grow. Why don't you give us a little bit of background on Atlantic Gold and the current project, the Moose River Consolidated Project that you're pursuing in Nova Scotia?

Steven Dean: Happy to do so, Nick. In the last 18 months or two years we've put through essentially a consolidation of the mineral field, what we call the Moose River Consolidated Project, and we focused initially on advancing two of four deposits all within fairly close proximity to each other. Based around a concept of a central milling facility to process those resources in due course. As I mentioned, we focus on two of them. Roughly about a million ounces of base case resource ounces and we progress that into a feasibility study which ultimately we financed in April-May of 2016 with some debt – project finance debt, plain vanilla project finance debt – from a bank. The balance, which was the equity portion, was essentially financed with the board and insiders' contribution to get it fully financed. As you say, it was fully permitted so we started construction in May-June of this year.

Nick Hodge: Well that's great. How's construction going? Let's talk about the mine that you're building first and then we'll get into the other deposits that you're currently exploring and upgrading after that.

Steven Dean: Construction's going well, Nick. On schedule, pleased to say. Weather's been kind to us so we've not had any major weather delays through the winter. If anyone would care to look at our website, you'll see regular updates with a bunch of pictures in there showing some really good progress in construction on the mill building, crusher foundations, reagent buildings, roads, tailing stands, etc. We're on schedule to be aiming to commission the plant in September of this year, which would make it about a 15 month construction period, which I think is on the shorter end, I'm proud to say. I guess that's partly because our management team have built projects before. We're on schedule to complete a 15-month construction and commissioning, as I said, in September with ramp up in Q4 of this year, 2017.

Nick Hodge: That's certainly exciting times. 2017 is going to be great and busy for you all. Let's talk a little bit about the deposits that you have. The feasibility study was done just on two of the four deposits and it was a pretty robust study. If I recall correctly, I think something like at gold at US$1,130 you had a post-tax NPV of $168 million and a 30% IRR. An extremely low cash cost of production of $520 US an ounce. Can you talk a little bit more about the project economics and where it stands now, and then we'll talk about potentially upgrading the resource later on?

Steven Dean: Yeah. Happy to. The cash costs are a function, largely, of grade. Grade, as you know, from your work in the business, Nick, is a big driver of economics. We're fortunate to have what I call a medium-grade open pit deposit of around 1.4, 1.5 grams per tonne (g/t). That helps with generating the basis of those cash costs. The second significant piece is that the strip ratio, the waste-to-ore ratio, of any deposit will be a large driver of economics of extraction of the gold and the cost of production. The strip ratio on the Touquoy deposit is around 2.1, which against a backdrop of a typical global strip ratio in the industry averaging around seven, means that the economics are going to be pretty attractive from a mining perspective.

Then layer upon that the fact that we are about 45 minutes drive from the Halifax International Airport. Halifax is the provincial capital of Nova Scotia as most people would know, which all translates to a bunch of other cost advantages, whether it be things like the fact that we draw our workforce from the surrounding area of Halifax and Dartmouth. We don't have a typical mining camp. We're not flying things like fuel into ice runways during the winter time and that sort of stuff. No, we have a fuel depot just down the road literally and we get supplies of fuel directly from the distributor. All those things, Nick, add up to the advantages that we enjoy that culminate in a cash cost, as you say, of around C$690 Canadian or about US$510, US$520 US at the moment.

Nick Hodge: It's why jurisdiction is so important. There's a few check boxes I go down when I look at any company: management, share structure, and jurisdiction are right there at the top. For the reasons you say, access to workforce, access to low-cost inputs, and of course in mining every cent matters, right? Every cent you put in the ground is something less that comes off the profits. It’s one of the reasons I was excited about Atlantic Gold and its jurisdiction there in Nova Scotia.

Let's transition a little bit to the asset if you would. You mentioned Touquoy. You also have Beaver Dam. Those are the two deposits that were included in the feasibility study. Something like just over three quarters of a million ounces at 1.44 grams a tonne, proven and probable. But you have two additional deposits that aren't yet in the mine plan. If I read correctly you're currently putting 340 holes in them and we're getting assays back progressively. Those two other assets are Cochrane Hill and Fifteen Mile Stream. So far in 2017 you've put out two press release about results from Cochrane Hill. I have to expect there's many more still pending given the amount of holes you plan to drill. Can you talk about the last two press releases from January 3rd and January 11th with results from Cochrane Hill, and then also about holes that are still pending and plans going forward?

Steven Dean: Yeah. Happy to. To put it in context the feasibility study deposits, as you mentioned, Touquoy and Beaver Dam, roughly total about a million ounces in resources. We always knew we had approximately another million ounces in inferred and indicated categories in the other two deposits, Cochrane Hill and Fifteen Mile Stream. They were always seen as our expansion ounces and our upside. The plan before this little tick-up in the gold space in the last six to nine months, was always to look to drill those other two deposits, Cochrane and Fifteen Mile, off with cash flow once we're in production because money was tight. The funding that we did have came from either a bank or our own pockets. The market was not, earlier in 2016, was not a place where you could easily find a low-cost-of-capital capital.

The world changed, as I think we'd all agree, in around the summer of last year and the gold space became a much more attractive place because of the gold price but also because of the performance of the capital markets. We did a flow through financing. It's a financing which you're probably familiar with, Nick, which has some tax advantages here in Canada, where we raised C$9 million, of which half was taken up by insiders. That C$9 million dollars is earmarked to do the drilling that you mentioned. The 55,000 meters of drill off of the two other deposits. We started first with Cochrane Hill and we've released a number of those hole results and so far they are consistent with what we were looking for in terms of our capacity to convert those ounces from indicated and inferred into measured and indicated and ultimately reserve status.

The other good piece of news that we, in fact, released earlier this week is that we did some what we call step-out holes, approximately 400 meters to the west of the main zone of mineralization, and encountered some good length intercepts of very economic grades. As I said, 400 meters off where the last drill results were. That suggests that there is some further continuity of mineralization beyond the original identified zone. We're now focusing some drill rigs on that area, both on the further west of that last line of holes and also in filling between the space between the recent holes and the main zone.

There's some real capacity, potentially, to add to the ounces that we have there. There's about 500,000-550,000 ounces in that Cochrane deposit and in Fifteen Mile Stream it's about the same. At around 1.4 to 1.5, 1.6 grams – similar to what we're enjoying at Touquoy and at Beaver Dam. Our objective is at around the time we are commissioning our base case Moose River Operation, in other words in Q4 of this year, that we'll be able to bring those ounces at Fifteen Mile and Cochrane Hill into measured, indicated, and proven status and then that will be further incorporated into an expanded life of mine plan about the time we start up the base case.

Nick Hodge: Well that's certainly exciting because if memory serves, you had some economics done including Cochrane into the mine and when you did that, at the time, the project came to an NPV at that present value of $242 million. It will definitely be exciting to see what sort of valuation Atlantic Gold can attract and what sort of economics will be tied to it once you can upgrade the resources from Cochrane Hill and Fifteen Mile Stream and get them included into some sort of mine plan.

What is the plan for that? You have a mine that's under construction. You get these upgraded resources. Is there any need or any impetus for you guys to include them formally or what's the next step after that?

Steven Dean: The next step would be a revised resource estimate statement, probably around June of this year – middle of the year. Then the formal step of issuing a statement on a revised life of mine plan for the whole consolidated project. As I said, that'll be in probably late Q3, early Q4 of this year. The analogy – and why I'm excited about the next steps – is I was a number of years ago fortunate to be a chairman of OceanaGold, which has a project... It's an intermediate company listed here and in Australia. It has a project called Macraes and I was involved in its inception in 1986, '87 in Australia and then later, as I said, going on the board of that when it listed in Australia 12 odd years ago.

Their main engine room is a project called Macraes in New Zealand and there's a lot of similarities between what they have there and what I believe we have here in Nova Scotia. It's a sedimentary-style deposit. When that Macraes project started in '87, '88, they had around 600,000 ounces in a single deposit. Almost 30 years later that mine continues to produce and it now has nine separate deposits it has now mined through the central mill at Macraes. They call it and we call it a string of pearls. We think that the structure that hosts all of our deposits, the four of them we have here in Nova Scotia – Touquoy, Beaver Dam, Fifteen Mile Stream, and Cochrane – are all on the same structure. And we believe the potential to add additional pearls to that string of pearls has analogies to what has been achieved at Macraes. That's our vision for Atlantic and for Moose River is to continue to add additional deposits along that structure.

The first step is exactly what we've been talking about. Drilling off Cochrane and Fifteen Mile, and maybe in the next 12 months adding a fifth deposit. We're targeting a project called Plenty which is in between Beaver Dam and Fifteen-Mile Stream. We're going to do some drilling there in the next few months and we hope to get some results which will ultimately lead to the addition of another deposit there.

Nick Hodge: Well, Steven. I love oysters. It's time to get to shucking. When can we expect the next set of results from Cochrane Hill and then when can we expect drills to start turning this year?

Steven Dean: It's a matter of when the results flow out of the assay lab, but I imagine it'll be on an every two to three weeks basis. I think we expect some more numbers out of the lab for Cochrane and in due course we'll also start to see some of the numbers flowing from Fifteen Mile Stream and that Plenty prospect that I mentioned.

Nick Hodge: Steven, there's plenty going on for you and Atlantic Gold. You've got the upgrade drilling results pending, you've got more drilling upcoming, you've got a mine under construction, and you've got a gold market that's seemingly improving. I look forward to the rest of the year. Is there anything you'd like to add today?

Steven Dean: Nick, I think we've covered it all. Thank you for your time.

Nick Hodge: Steve, thanks so much for coming on. Again ladies and gentlemen, Steven Dean from Atlantic Gold. The ticker is AGB on the Toronto Stock Exchange (Venture) and you can learn more at Steven, thanks for joining us today.

Steven Dean: You're welcome, Nick.

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