Transcript: Tombill Mines (TBLL) - Noisy Neighbour Showing a Bit of Ankle?

By
Morgan Leighton
·
June 14, 2021

Interview with Adam Horne, CEO of Tombill Mines. Tombill Mines is involved in mineral exploration, primarily gold and has 74 royalty-free claims; of which 60 are owned and patented. Tombill Mines owns various mineral exploration and past-producing gold mines and claims in the Geraldton Camp and Beardmore region, Ontario. Tombill Mines went public in mid December 2020 which raised $6.5M.

The Geraldton Gold Camp is about 275km north on the TransCanada highway from Thunder Bay which is a great setting for a mining company with existing infrastructure, a highway town with 4000 people and an airport. The camp is accessible year-round via the TransCanada Highway, which splits the Tombill Main Group property in two.

We Discuss:

  • 1:33 - Company Overview: History, Infrastructure, & Team Experience
  • 7:51 - Business Model & Plan
  • 10:46 - Approach, End Goal, & Timelines: How Long Will Investors be Waiting?
  • 17:47 - Value Growth: Return Profile & Pace
  • 20:28 - Expectations for 2021: Assay Results & More Drilling

Matthew Gordon: Adam, how are you, sir? 

Adam Horne: Thank you, I'm fine. 

Matthew Gordon: You're fine, good. Where are you, let's start with that.

Adam Horne: I'm in London and working from my office since I came here.

Matthew Gordon: How long have you been back at the office? 

Adam Horne: Well, from March last year, I came in 1 or 2 days a week and am now coming in a bit more. We found no one got COVID amongst us, we've all been vaccinated. So we're just kicking on and I think we're able to do a bit more from the office together. But we've all also learned to work away from it and so it's a combination of the two.

Matthew Gordon: I'm hoping to avoid going back to London. I'm quite used to rolling out of bed and pouring myself a coffee and getting to work 5 minutes later, it's a nice idea. Well, we've not met before, it’s a new story. We like a new story. So why don’t we kick-off and give us a 1-minute overview, and I'll pick it up from there with some questions. 

Adam Horne: Tombill Mines went public in the middle of December of which we raised about $6.5M. The company's operations are based in Canada and Ontario and a place called Geraldton, which is known as the Geraldton Gold camp and that's about 275km north, on the TransCanada highway from Thunder Bay. So it's in a very good setting where we have, obviously the highway town of 4000 people, airport, we even have a golf course that was built by the legacy miners, but Tombill was founded in 1935 by Tom and Bill Johnson with the backing of Newmont. It had 2 past mines that were in production within a region that had about 10 mines in production, which yielded between the 30s and 60s, about 3Moz of Gold. So that was really done with entrepreneurs, prospectors, and the Gold price didn't facilitate the expansion of that from the 60s, but what happened was approximately by 2008, our neighbour which has had various names, but was at that point Premier Gold created the Greenstone property of that the most important asset they had was called Hardrock, which is right adjacent to us and all the resource punches on to it. So from 2008 to 2016, they did a lot of drilling and resource work and they were able to prove about 6Moz and that then evolved to Centerra buying 50% of them in 2016 for approximate CAD$200M plus they committed $200M capital to do further work. So given that investment and the calibre and expertise of people that created a resource on Hardrock adjacent to us about 11.5Moz today of which 6Moz plunges sort of 800m to 500m in depth that's measured and indicator inferred and then they have an open-pit resource that's about 5.5Moz proven and probable. So in December, this year, the owners of Hardrock or Greenstone sold simultaneously to Equinox, who bought 50% and Orion who bought 50% from Centerra. Equinox is subsequently about 10% additional, and that means they're sort of gung-ho to get going, they're already building the camps and they're moving this from a resource to a mining operation. So Tombill, ourselves really a doughnut hole within the whole Greenstone camp of which Hardrock as I said is to the east of us. Their resource starts about 5km from our border, which is the open-pit, which goes from about 3km to 5km from our border, then from the open-pit to us is another 3km of which they had some of their most memorable holes. I mean, on our border they've drilled when I say on our border 150m to the east of our border, they drilled a hole called MM170, which has about a 20m width by about 19g/t grade. So as a consequence, we are a family, we've owned Tombill for well over 40 years and we bought it from Hudson Bay Mining and Smelting, of which it was part of a bundle of assets. So we didn't buy it as a pure play asset, we bought it in a holdco. We hadn't done any work on it until we really saw the wonderful work that Premier did on the property and the Gold price came into play, plus we were lacking in expertise so we assembled a team

that we'll go through later. But the one thing I do want to point out at this stage, 3 of those team members were very senior executives with Hardrock, the Premier Gold project, and that's Tim Twomey who was in charge of exploration from 2008 to 2012. He really was, I mean, at that point, in 2008, there was a 0 resource and he got to 6Moz. Then Ben Cleland, who worked for him, took over his job from 2012 to 2016 and he's also a consultant with us. I mean, Tim is our technical advisor and really is involved day to day and then Gordon Reid, who actually was the ex-COO of Centerra. We met him subsequently because he bought stock in Tombill Mines because he had a real affinity for the property because he was also on the board of Greenstone until they owned it in December. So he had a clear idea of how our properties really mesh together. I mean, if you do look at the map, we are a doughnut hole and we would be landlocked if we didn't have the TransCanada highway, go right to the middle.

Matthew Gordon: Okay. Thanks for that, kind of fulsome background. I think I can understand what the play is for you guys. If you're a doughnut and surrounded. 

Adam Horne: It's a closology play. 

Matthew Gordon: It’s a closology play but the thing about closology plays is that you actually need to do some work. You can't just sit there and wait, right? So I get the assembling of people with more experience and pro-relevant experience to the property here. But why don't you, I think we can all guess what their business plan is day one, and what you're trying to achieve. You're trying to be a slight irritant at all stages and monetize that, is that the shorthand? 

Adam Horne: I don't know the irritant but I think you inferred what we're doing. I mean, we're really continuing the plan that they would have done because we're using the same human resources that they did to do the asset. I mean, if you look at all the results, everything plunges east to west, and the grade gets higher as it gets deeper. But the main part really is to, and the big zone that they have amongst 17 zones is the F-zone. We raised our money in December, we're already in our drilling plan, and we've drilled about 6000m and we're seeing that yes, the mineralization is very similar and the zones are very similar to what our neighbour has seen. It just plunges as the same geological faults and so forth. But we are also doing a lot of work, which we couldn't do because of winter on the surface and that's up in the north, Northeast, Northwest the property and of which we had one past producing mine there Talmora. We had another past producing mine, a little bit down the road 2km, which is about a 250-acre footprint called Tombill mines itself, but all our resources capital are going to the main group, which is about 2700 acres, and it's not probably a little bit larger, not dissimilar footprint to the Hardrock asset beside us. So it's a two pronged attack of deep drilling to identify that zone and the other zones that make up that F-zone. For our neighbour it has yielded about a grade of 6g/t but they have a lot of other grades but not as strong in the grade category. So we're doing that and then obviously, we're doing a lot of work and we're doing about 10 holes of around 300m in the northeast, northwest part of the property around the Talmora property. We have come out with a press release, where we saw some very high-grade grab samples from 15 to 25 up to there. So that's what we're doing contemporaneously with deep drilling.

Matthew Gordon: So how do you play this because you can stand in either man's shoes and look at it from their point of view and your point of view is well, they'll need this at some point, right, they're gonna need this at some point for them, they've already got a lot to get on with, unless they think that you are going to get this thing into production, they can wait because no one's going to finance what you've got, unless there's the economics stack up. So there's a sort of time, there's a kind of some Mexican standoff potentially further down the line. So how far are you prepared to take this? How much more money will you raise and how long will your shareholders be waiting?

Adam Horne: Well, obviously, it's very popular in other markets, and then we know we're in a wonderful market and that's a big plus, for everyone who's been speaking to you for the last 2 years. But our objective is to prove out the resource, and then raise the capital. Bottom line is if our average all-in cost is worthwhile, and is attractive, I think our neighbours are about 600, they've got close, they have more surface resources than we have and are lower-grade. But if that's attractive, and the Gold price is sustainable at these levels, we'll keep moving on. I guess if the options for us are to continue to raise capital, I think we have the people to do it, and will have the resources and the team to do it. I mean, I come from an investment banking background, I was at Morgan Stanley, and Credit Suisse First Boston, and I worked in the capital markets. So if we have the team and the resource, we will be able to do that. They are definitely focused on their open-pit but they have built a mill that demands 27,000t of ore a day and that has to be fed, it's a big dragon. So perhaps they will do that beyond their open-pit, of course, they will do that. Will we have the grades and the capability to feed that? I think we will and they're going to need that because of their economics, it's very important for their average holding cost to keep utilising that mill.

Matthew Gordon:  I get that. I think it's a when not, if for sure. But at the same time if I look at some of the questions that have been sent in by your shareholders, they are going, why aren’t they accelerating and rushing into this? Where are the assay results? There's an expedient expectation from you, whereas I'm trying to work out from you guys how, in your mind, are you playing this thing, because you've also got to be careful with the money that you've got. Because if this is a longer-term play, in the sense that you're not necessarily in control, unless you can show that the economics allowed you to stand on your own two feet. You've got to be sort of clear about what type of shareholders you think will be attracted to this? Because if you get the kind of ‘I want a quick return group’ that could cause you a lot of angst I suspect?

Adam Horne: Well, yes, I think that's more in the retail sector, we have about currently out of our shareholder base about 10%, you have to remember that our family owns 51%, which means we're locked up for 3 years, we don't mind we've been locked up for 40 years already and we have other sources of income and capital. Then we have another 10% of insiders that are under the same terms as us. Plus, we have 6% with Crescat who came in after we went public so they see the story and then another 20% institutional, bigger names both from Australia and Canada. So I think we have a solid shareholder base and ones that want to stay and we have locked up but you know, your question is a good one. Along with the Gold price, we have to deliver results, but we have to do it on a measured basis. And I think we will be coming out with some information on the drilling within the next month. As I did mention to you earlier, we are seeing mineralization that is the same as our neighbour. I mean at the bottom line, you know, there's a border there that isn't between the two, although what can change is the strike and the fault. We're not saying it's perfect, but the mineralization is pretty similar at the border and within a few 100m. So our plan to answer is we have raised capital to drill 16,000m, we drilled 7000m today, as we've announced, plus do our surface programme that I mentioned earlier. At the end of that programme, we will have about just north of $3M still in our account. Our objective in phase 2 is to go along the strike so we're trying to find from our border to 500m to that strike, then we want to do another 2100m from there, so it'll be a 2.6km strike in total. The drilling programme, we have a main hole every 100m and then 2 daughter holes that branch off that. It's done through a wedging programme, which was the same as was done on the neighbouring.

Matthew Gordon:  Okay, you kind of effectively, the Equinox outsourced jilting because of your explorations so because you're gonna have to ask the questions which they would be asking not necessarily the questions which may drive your economics because if the monetization is different there.

Adam Horne: Yes, currently, that's very different. I'm sure, at one point, they thought the best route would be to show the resource and divest and then they chose the operational model and it's gone through iterations of ownership to get there. I think it probably in retrospect, should have happened a lot quicker, but the 50-50 dynamic, and what really was an issue of how to allocate one's own capital, they decided that it had to go under new ownership to move forward and that they went to various lawsuits and so on. So, we're confronting the same issues and we just have to move properly with the right capital and the right human resources to take it to the next step. But we're not going to stall ourselves and say, oh, here's a resource, and then we're gonna do nothing, I mean, subject to Gold price, we'll obviously move forward.

Matthew Gordon:  So how do you look at this in terms of the return, you're at it from 40 years, right? So yeah, no rush, right? 

Adam Horne: We are in a rush now, we weren't in a rush then but once capital is committed by our partners, we have a duty of care to do the best we can for ourselves and themselves.

Matthew Gordon: So what's that return profile look like, because if you went and had a conversation with economics, at the end of this year, you'll have a little bit more information, they'll offer you an amount, no doubt derisory amount. But whereas if you do go through the process of raising money yourself, go through the exploration process and maybe some kind of study component to it too in the next couple of years, it'll be worth a lot more money, but it's another 2.5 years away.

Adam Horne: You say that, I think if we have drill results that are equivalent to our neighbour and we're a $30M company, the transaction was done for in December valued our neighbour at CAD$800M, US$600, I think, it is US$225 plus a 75M contingency. So we're trading at 30M, I think there is some upside based on drill results. We have to finish the job and so forth, but there will be some accretion and that there are investors out there who appreciate that and would applaud that. So I think the returns could be quite high if we demonstrate a resource, if we demonstrate the trend line is continuing from what they were achieving.

Matthew Gordon: Yeah, I meant derisory as in that'll be your view of the first offer, I suspect.

Adam Horne: I appreciate that point. I know how the world works, but we have to get a resource that's quite big enough that someone else can put their own mill in and so forth and the economics are appealing on a present value basis.

Matthew Gordon:  Okay. I think this resource is quite simple. Unlike most others, you got the end game already in your sights, and you've just got to go and actually well, to some of the questions being sent in, it's like, what's the delay on these assays? When will we see the balance of those and how much more drilling by the end of the year? 

Adam Horne: Yeah, I think as I said earlier, we'll have something out in the next month on the assays.

Matthew Gordon: Meaning all 3000m or whatever, what was it? 

Adam Horne: We've drilled to date 7000m, we’re drilling up to 16,000m. So yes, over the 7000m today, we'll have information out.

Matthew Gordon: Okay and apparently, you've changed drillers recently, drill firms?

Adam Horne: Yeah, we went from M3 to Rodren. I don't want to get into the reasons and M3 three, but it's the right thing to do for us. Rodren's, a bigger player, M3 had done most of the drilling for our neighbour recently, they've used other firms before, but in recent history, they were doing a lot, they were local but yeah, we've had to change and we had the issues we had to sort of deal with and we worked out with them.

Matthew Gordon: Okay. Well, Adam, stay in touch, let us know when the drill results start coming through to say if it is just replicating your neighbours’ types of grades, that's very, very encouraging. But is it as simple as just more drilling?

Adam Horne: It's more drilling and more surface work because surface is cheaper and we're seeing, we don't want to toot our horns and so forth but we have seen things very good, numbers come out of grabbing the resource and sending it out to the lab. So we will do a lot more work and there's a lot of mineralization there and so it will be a combination of the two. I think, originally we were just focusing on the zone, but now we've added.

Matthew Gordon: Okay, great. Well, let's stay in touch. 

Adam Horne: Well, thank you so much for your time, I appreciate it.

Matthew Gordon:  Thanks for listening. If you've enjoyed the interview, why not subscribe to cruxcasts or our website cruxinvestor.com and of course our YouTube channel crux investor. Plus, you can catch us most days on Twitter and LinkedIn. We really love getting your feedback, so please keep it coming and we'll speak to you again soon.

To find out more, go to the Tombill Mines Website

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