Transcript: District Metals (DMX) - 10,000m Drilling to Unlock Polymetallic Potential
Interview with Garrett Ainsworth, President & CEO of District Metals.
District Metals Corp., formerly MK2 Ventures Ltd., is a Canada-based company. The Company holds interests in the Bakar copper property. The Bakar Property includes 15,687 hectares of mineral claims located on Northern Vancouver Island, British Columbia.
- 1:38 - Company & Progress Overview
- 2:43 - New Team Members, Their Experience & Contribution to District Metals
- 7:54 - Raise of $4.75M & Allocation of Money Since
- 8:51 - Plan for Growth: Gaging the Markets, Focus on Certain Metals, Timing for Deliverables
- 18:49 - Cash Position & Burn Rate
- 19:43 - 1 Rig VS 2 Rigs, What's the Decision Based On?
- 20:42 - Strategy, Data Gathering, & Options for Expansion in Sweden
- 25:06 - Alignment to Investors: Management Buying at Market & Shareholding
- 26:03 - Aggression of Ambition: Focus & Accelerating the Process
- 28:47 - Diversifying Country Risk, an Option Considered?
Matthew Gordon: Garrett, how are you, sir?
Garrett Ainsworth: I’m doing excellent, Matt. Very nice to see you again.
Matthew Gordon: Very nice to see you again. Where are you?
Garrett Ainsworth: In Kelowna; you can probably tell by the background. Going to move. Everyone’s doing it so I thought I’d hop on the bandwagon and it’s a good move for the family, but it’s still within Kelowna so not a huge change there.
Matthew Gordon: How do you do that? How do you move? Do you have to do it all online or are you guys allowed to actually go and visit the home you’re about to buy? Here, you’ve got to do it on Zoom.
Garrett Ainsworth: Just use a lot of PPE, and then I think you’re good to go.
Matthew Gordon: PPE. What’s PPE?
Garrett Ainsworth: Personal protective equipment.
Matthew Gordon: Jesus. Nice TLA. I like it. Three letter acronym. It’s good. Well, congratulations I guess are in order for that. It would be nice to catch up with you as well. Have you been keeping well? Keeping busy?
Garrett Ainsworth: Very busy. We talked in December 2020, and we were in the middle of a financing that was $3M. Got upsized to $4.75M. Then in January of this year, we brought on Hein Ratt as our country manager to run our drill program, and then we put out grab and the interpretation results, which showed various significant anomalies regionally and very importantly at the Tomtebo mine, which is where we’re currently drilling. We started our drill program on March 15th. It’s 5,000m, 20 holes, and very importantly we put out our first drill assays 2-days ago, which was very exciting because the first 3 holes show good widths and very high grades of polymetallic mineralisation.
Matthew Gordon: Fantastic. I’d normally ask you for a 1-minute summary but you’ve done it. You got ahead of me there, which is perfect. I tell you why I wanted to catch up with you because I liked the conversation we had last time around but looking at your chart, you’ve had a bit of a bump off the results you put out recently. I’m intrigued about how you’re building this thing up. We talked about how poly-met stories are a little bit harder to understand for some. You’re in Sweden, which is seeing some good companies with some good results coming out there, but you’ve got a way to go. I’m intrigued about how you’re building this up. You’ve been adding to the team; that was the first thing I noticed. What are some of the new names there?
Garrett Ainsworth: Hein Ratt, to give a bit of detail on him, he’s based out of the Netherlands. He’s been a consultant for a few companies: EMX Royalty largely, and he worked for Boliden for about 6-years. He’s worked in the Bergslagen for 8-years, so he’s got a tonne of experience that’s very specialised with polymetallic targets in the Bergslagen and elsewhere in Sweden and Scandinavia. But he’s an absolutely perfect fit for us because he did a lot of the compilation work on Tomtebo before I even looked at it. We got to know each other over about 1-year and really hit it off. He’s an amazing geologist so for him to come on, it helps to validate projects in that he’s interested to work on Tomtebo, but his expertise is crucial to the success for us going forward. Then Rodney Allen. We recently brought him on. He accepted our offer to come on as a technical advisor and he’s a minister of Bergslagen. He has a long history at Boliden’s Garpenberg mine and led the technical team that took Garpenberg in the 1990s from near closure; they did some amazing technical studies and some wildcat-type drilling and made some very large blind discoveries and took it from near closure to being a tier-1 asset for Boliden, so his knowledge in the Bergslagen is immense. To have him helping guide on a hole-by-hole basis - he only lives about 1.5-hours away from Tomtebo so whenever we get a good drill intercept, he just zips up in his car and we get these amazing presentations outlining exactly what the drill holes mean.
Matthew Gordon: Are they both full-time?
Garrett Ainsworth: Hein is full-time during the drilling. Rodney is not. He’s a consultant geologist so he’s in and out. He works for Lundin mining, for Boliden, for LKAB. He’s quite busy and in high demand. Again, having him accept a technical advisor role was very exciting for us to join us.
Matthew Gordon: So, he was doing their jobs before they arrived? How is the technical side of things advancing?
Garrett Ainsworth: Hein was consulting part-time before. He and Rodney were involved in the mapping and sampling that we did in the fall of 2020, but it wasn’t official that he was-
Matthew Gordon: Okay, you’re just formalising those relationships. Okay, cool.
Garrett Ainsworth: Exactly.
Matthew Gordon: Talk to me about the board here. There’s a familiar face there in Doug Ramshaw who we’ve got a lot of time for. Also, Jonathon Challis and Joanna Cameron, etc. Are these guys active or are they just names?
Garrett Ainsworth: No, and that’s the key. All the directors that we have are very active and they all bring a skillset that’s crucial for the company. Doug has a good geological technical background and capital markets. He’s very well known as an executive with Minera Alamos and director of Great Bear. He brings a lot of amazing advice for me and the company. He came on, I believe it was in March or April of 2020. Joanna Cameron is a lawyer and I worked with her at NextGen, she was VP of Legal when I was VP of Exploration and Development. She’s always making sure I’m on my toes in terms of technical disseminations. It’s great to have her keeping me in check. Jonathon Challis is another great addition. He’s the newest director and he’s a mining engineer by training. He actually worked with Doug Ramshaw at a brokerage way back in the day. He’s got really good capital markets experience as well.
Matthew Gordon: Okay. You raised that money shortly after we spoke. When we talked, it was $4.75M in the end. I’ve seen a few press releases, your 5,000m drill program, which I want to understand a little bit. How else have you been allocating that capital?
Garrett Ainsworth: The majority of the capital has been going to do all the technical work that we’re on. About 10% of the budget goes to marketing and making sure that we’re getting the right message out to the public because that’s obviously a very important aspect of the business, to talk about what you’re doing. We’re very focused. Obviously, with everything being virtual, the costs stay pretty low in terms of travel and conferences and whatnot. It’s really good in that sense.
Matthew Gordon: Long may it continue. For sure, I think a lot of shareholders would agree. Let’s talk about the drill program component. You’ve done a bit of technical work on this, and you’ve made some hires there, or at least solidified those people working with you. What is the plan going forward? The growth compared to where you were a year ago is all good but you’ve got to keep this thing going. Got to keep this show on the road. What’s the plan?
Garrett Ainsworth: Yeah, right from day 1, the plan was we saw Tomtebo as a highly prospective project that had not seen any modern systematic exploration. It all started off with compiling everything historically and knowing that when the last extensive work was really done in the 1970s, they didn’t understand the deposit model back then and they didn’t have the technology that we have now. They didn’t even do things like downhole EM surveys that can detect conductive bodies that are off hole. We’re using that technology to help guide us with our next drill holes. This current drill program that we’re doing, 5,000m, 20 holes, we’re doing confirmation drilling of historical holes, we’re doing infill, and we’re stepping out a little bit below the 200m exploration drift where most of the holes were drilled horizontally off of it but by drilling underneath there and doing the downhole EM surveys, we’re getting a good feel for targets at depth. It’s really important, the depth component because we brought mineralisation wide open at the Tomtebo mine at the 200m level. But at Garpenberg, they’re mining it down at the 400m level. There’s a huge vertical window of opportunity at Tomtebo that’s never been explored but we’re not just going to go drilling blindly. We need to set ourselves up to make every metre count. In phase 2, when we come back, we’ll be using our visual observations of mineralisation supported by assays. We’ll be using geophysics, the downhole EM surveys to help guide us through some of the deeper targets, and we’ll also be using whole-rock geochemistry. Essentially, the rocks are so altered, you can’t even really tell what’s what. It’s very challenging but by getting the whole-rock geochemistry, you’re able to plot it out and know where you are in the system and that allows you to target specific prospective horizons. What we’re doing now sets us up for phase 2 to really expand the known mineralisation in a significant way and therefore expand the value of the company in doing so.
Matthew Gordon: Right, okay. It also helps if people understand what it is that you’re doing and how you’re going to go about doing it. I saw the press release earlier this week. There were some nice numbers in there. The Zinc particularly stands out. Is that what you’re after? You said it’s complicated and the rock needs to be understood, so what are you hunting for? We’ve interviewed polymetallic companies and one minute they’re a Gold company, the next they’re a Silver, and then they turn into something else. How do you approach something like this?
Garrett Ainsworth: It’s a good point you raise. I’ve had friends, colleagues, and whatnot, say, ‘Hey, you should be District Silver.’ I can’t really do that in the sense that it’s not strictly Silver. Yeah, there are some very high-grade Silver numbers. We had Silver values up to 1.4kg/t in our latest drill results, which is fantastic but in other cases, it was only 40g/t Silver and the Zinc was quite high, so it was more Zinc dominant. I think the best way to view it is our best analogy is 25km away, that’s Boliden’s Garpenberg mine and the revenue in 2020 from Garpenberg, 37.5% came from Silver, 37.5% of the revenue came from Zinc, 15% from Lead, and 10% came from Gold. It truly is polymetallic but our main target interest, which Garpenberg has the highest tonnage with, is the Silver Zinc Lead type mineralisation. They do have Copper Gold dominant mineralisation, but they haven’t even bothered going after it because it’s a lower tonnage target. From what we’re seeing at Tomtebo, we’re going down that track of going for the more distal Silver Zinc Lead style mineralisation.
Matthew Gordon: Right okay. Obviously, Silver has had a good run of it. It’s come off a little bit. Gold and Silver have had a funny 2021. Do you think the market gets excited by- because we’ve seen a few Gold stories coming out of Sweden that have really caught the imagination for sure. Polymetallic - I keep coming back to this because it’s one of the biggest questions we get sent in: how do these companies decide what to focus on? Does the rock make the decision or does the management team make the decision in terms of where you look as you get a better understanding?
Garrett Ainsworth: The value of the rock is what makes the decision. It’s an NSR play in that sense. If you look at the numbers, Boliden produced at Garpenberg 3Mt at about 300g/t Silver equivalent of 8.8% Zinc equivalent and then you go - they have great details about that mine. You look at their Opex, and it’s $43/t. It’s a very valuable rock and they’re able to mine it for a very low cost because it has to do with the rock conditions, the competent-, the resources or the reserves that they’re mining are very steeply dipping so it’s very much a dream for a mining engineer to come in there, extract it, and get the most profit out of it as possible. The play is not any one commodity or metal, it’s the value of the rock that we’re looking at. That’s what will shape it.
Matthew Gordon: I keep apologising for coming on about this because I’m just fascinated by it, if you look back 9-months ago, Zinc wasn’t really performing. If you look back to 12-months ago, Silver was starting to perform but it still wasn’t there yet and going forward who knows what will happen in the market. The value of the rock, I totally get that, but as you understand what’s happening beneath the ground, do you need to retain some sort of optionality to where you go and where you drill when you’re trying to build out the value here depending on what the market’s telling you? Do you see what I mean? Does that weaken your planning somewhat or is it just a case of being flexible?
Garrett Ainsworth: Yeah, it’s always good to be flexible and pivot. There are really only 2 styles of mineralisation that we could chase: the Copper Gold dominant and the Silver Zinc Lead dominant. Because Garpenberg is the best analogy and is a higher tonnage target, it is the Silver Zinc Lead in these types of stratabound deposits, VMS type deposits, then that is the one to go after. No matter what the price of metal is doing, because it’s the higher tonnage target and that’s what potential suitors will be going after as well. That’s how we’re viewing it.
Matthew Gordon: Okay. Let’s talk about how this thing grows. What are we, $36M - $38M market cap? You’ve had a little bump recently which is fantastic. We can expect to see more drill results over the coming weeks and months presumably. How long is it going to take to actually drill that 5,000m?
Garrett Ainsworth: We started on March 15th, and we should be done drilling mid to late June is about right. The turnaround times are around 4 to 6-weeks on the drill results. We put initial drill results there on the Steffenburgs zone, and Oscarsgruven zone. We focused on the Steffenburgs after that. I’m not sure, we’ll probably batch together about 8 holes for the next releases. Those went out to the lab not too long ago so it could be about 6-weeks until we see the next news release on that front thereabouts and then we’ll try to put good context in these releases by batching it out accordingly.
Matthew Gordon: How deep are you going?
Garrett Ainsworth: Some of the holes have gone down to about 300m. The idea is to get just underneath that 200m exploration drift where there are indications of mineralisation and then see if it exists beneath, which we fully believe it does, given that it’s wide open from historical holes.
Matthew Gordon: What’s the picture you’re trying to build up here? If we see continued results like you’ve put out earlier this week, obviously that will be great, but you need that reaction from the market because you’re going to need some money, aren’t you?
Garrett Ainsworth: No, we’re fully funded right now. That was one of the-
Matthew Gordon: Fully funded. You’re not fully funded. You’re fully funded to a point in time, right? Where are you funded to?
Garrett Ainsworth: I can tell you that point in time, absolutely. By raising $4.75M, which closed on December 30th of last year, we’re fully funded for the current 5,000m drill program and we’re also fully financed for another 5,000m as well. That’s the minimum metres that we’re looking at when we start phase 2 in October.
Matthew Gordon: Okay, and that will last how long? Another 3-months?
Garrett Ainsworth: It’s possible we go for 2-rigs on the next program and then it would be 1.5-months.
Matthew Gordon: What’s the decision-making between 1 rig versus 2 rigs?
Garrett Ainsworth: Yeah, the rigs can drill pretty quickly. You don’t want the geologists in the field to get behind and miss things. When you only have one rig, things are going slower, you have more time to pivot and go off the original plan. That’s the good thing about a junior company - you’re more likely to do that. There’s not this huge chain of command that has to tick it off. With 2 rigs, if we’re going deeper then we have more time between holes anyway because they take longer if there are 400m holes or 500m holes. I’m looking right now; it makes more sense to go for 2 rigs for the phase 2 deeper holes.
Matthew Gordon: Right. It also gives comfort to the market that you’re confident about what you’re pulling out of the ground, I suspect. There’s a little bit of that.
Garrett Ainsworth: That’s right.
Matthew Gordon: Okay. Let’s say you get through that. I’m trying to get to the point where you’ve got to make a decision about what you do next. We’re going to need - it’s difficult without the data coming out of the ground but in theory, let’s assume it continues as it is and you’re hitting good holes. Do you go and raise a whole stack of money, or do you continue just with small $5M here, $5M there? How does that work?
Garrett Ainsworth: That is all dependent upon results. In phase 2, if we are hitting wide intercepts of mineralisation well below the 200m exploration drift then doing a very large financing and bringing in even more rigs makes a lot of sense, but you’d never want to let the rigs get ahead of the geology and then the core starts piling up and you end up not drilling optimal holes. I’ve always been very conscious of making every metre count because it’s about CAD$300/m, which is not expensive but it’s not cheap. It’s right in the middle, probably globally. There’s a fine balance as to how big you go in terms of meterage. Especially with these high-grade deposits. If you’ve got porphyry, then, of course, you go to 10 drill rigs and you have to go really quickly because you’ve got a lot of volume to try to drill off.
Matthew Gordon: What are you chasing?
Garrett Ainsworth: We’re chasing very high-grade polymetallic VMS deposits, which are in the Bergslagen. That’s what Garpenberg essentially is. It’s got a bunch of different names. In Bergslagen, the local geologists call it the stratabound style of mineralisation.
Matthew Gordon: Right. You mentioned in the presentation, I know Sweden’s got a big history with Iron Ore, but you also mention it in a couple of your slides. Why are you bringing that up? Are you chasing Iron as well?
Garrett Ainsworth: No. The reason why I bring that up in the jurisdiction is really to hit home that Sweden provides a lot of metal for all over Europe and it’s a very good jurisdiction to operate in. There are active mines and there’s really a big push in the country to get more of the local mines up and running because we’ve got Northvolt, the battery factory. It’s up in the north. They want to source their metal locally. That’s great for Boliden and Lundin, who have smelters in Scandinavia. Boliden has 5 smelters in Scandinavia so not having to ship your concentrate over to Asia and then have the refined product come back makes a lot of sense from an environmental footprint. Also, they’re looking at doing a green Steel H2, like Hydrogen Steel manufacturer up in the north to basically take the product and make Steel without using Coking Coal.
Matthew Gordon: In terms of the thought process for the management team, you’re going through the 5,000m and you’ve got another 5,000m to come. What data do you need or what are the decision moments where you say maybe we start thinking about expanding our claims area. Maybe we need to think a little bit wider. Would you have enough money to do those sorts of things? I don’t know how expensive it is in Sweden.
Garrett Ainsworth: It’s really cheap to expand the claims area. Where we’re drilling, we’re well covered with our claims. We don’t need to expand our claims in any immediate fashion. Tomtebo mine is within a 4km trend of very positive geophysical anomalies and that’s really our main area of concentration at this time.
Matthew Gordon: Okay. Are you still buying in the market?
Garrett Ainsworth: I am blacked out. When you start a drill program and are privy to the assays as they come in so it wouldn’t be good if I were to be buying or selling.
Matthew Gordon: You could be blacked out for 12-months of the year.
Garrett Ainsworth: For quite some time, yes. Our assays, even though we’re done drilling in mid to late June, assays will continue on probably until September.
Matthew Gordon: I think you’ve got a lot of shares. You’ve put a chunk of money into this, haven’t you?
Garrett Ainsworth: I did. I’m almost at 1.8M shares that are purchased anywhere from down as low as $0.12 and up to about $0.38, they were some of my highest purchases.
Matthew Gordon: Cool. I guess we’re waiting for drill results. Assays to come back. That’s the next moment to try and understand what you’ve got here. How do you accelerate the process here? Obviously, you’re getting out; you’ve got a marketing program. You’re chatting to people. Do you continue as you are with what you’ve got, organic growth, or are there opportunities to go out and be buying stuff, in which case you’re going to need to raise some capital? How aggressive is the board about how you expand this company?
Garrett Ainsworth: That’s a good point that you raise. From day 1, when we got Tomtebo, I always thought we were going to have to keep looking for another project, a third project. The more and more comfortable I have gotten with the Bergslagen district, and I’ve seen a lot of opportunities, so right from the get-go, we’ve been looking at projects and we still are. If we come across something that’s the right terms for the company then we would definitely bring in a second or third property because, to me, the district itself is highly underexplored. Bergslagen only really has 3 junior companies that are very active, and that’s District Metals, Norden Crown Metals, and an Australian company called Alicanto Resources. But there is a lot of open ground. There are a lot of historic mines, maybe not quite at the level of what Tomtebo was but there is a lot of prospective ground to capitalise on.
Matthew Gordon: Right, and you’re based in Kelowna, so you’re not over there. I know you’re busy. Are you sitting on any other boards yourself?
Garrett Ainsworth: I am. I’m a director of a Uranium company called Standard Uranium, which is located right next to where I made a discovery at the Patterson Lake South property. I’m definitely still involved with Uranium in the southwest Athabasca, which is where I spent the majority of my career so far and I’m also a director on a new start-up company called Au Gold Corp, with a project located not too far away from Westhaven, so it’s a Gold Silver epithermal project and it’s really only a 2-hour drive away from me in Kelowna, so it’s pretty handy in that sense.
Matthew Gordon: Okay. In terms of capacity to think about how you grow District Metals by looking at maybe diversifying the country risk, that’s probably not on the agenda.
Garrett Ainsworth: I’m so comfortable with Bergslagen and what it has to offer. I see a lot of projects coming inbound to go work somewhere else. There’s actually a pretty good one I saw the other day in Scotland, but I don’t want to go off the path of the Bergslagen because it’s just such a fantastic district. You’re right, that might mess with the bandwidth because right now we’ve got this ideal team with Hein, Rodney, and EMX is a great partner that we have in Sweden. I want to be just laser-focused on high-grade polymetallic in the Bergslagen. By going to another jurisdiction, you can muddle that up, I think.
Matthew Gordon: Yeah, you don’t want angry Scot’s people after you. You’ve seen the movies, it’s all true. Well look, Garrett, I really appreciate you coming on the show. I just wanted to catch up and see how you’re getting on. I really liked the story last time; it sounds like it’s moving forward so keep at it. Come back on and let us know when some of these assays come back. I’d be delighted to have that conversation with you.
Garrett Ainsworth: Absolutely, yes. I’ll do my best to grow the company as we have discussed.