OutCrop Gold (OCG) – ‘Hybrid’ Generator Clear on Narrow Focus

OutCrop Gold is a Canadian precious metals explorer with assets in Colombia. The company operates under a prospect generator JV business model: a strong hybrid business model. Prospect generators are generally a lot more honest and pragmatic than conventional miners. Their sole focus is monetisation and their fundraising capacity is usually severely inhibited.

Having recently raised $5.75M, OutCrop Gold is clear where is best to put this money. The share price has struggled in recent years, but a recent uptick has got the market interested again. OutCrop Gold has a portfolio of advanced exploration gold projects called Santa Ana, Cauca and Mallama; non-developed projects in Antares, Oribella, Lyra, Argelia and Kuntur; and also a royalty in the Willow Creek project in Alaska. There is an encouraging institutional backbone to this gold mining story, with Eric Sprott has sitting on close to 20%. The management team holds 25%, so they are aligned with shareholders. What will the focus be for OutCrop Gold moving forward?

Everything has been parked up except for Santa Ana, which is where Outcrop Gold will be spending all of its time, money and resources. The gold player will be chasing high-grade, narrow gold veins and is attempting to develop its gold asset in a methodical, logical fashion.

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Interview with Joe Hebert, President & CEO of OutCrop Gold (TSX-V: OCG)

We discuss:

• 2:20 – Company Overview
• 3:13 – Business Plan & Strategy of a Hybrid Company
• 4:43 – Team Track Record
• 6:17 – Market VS Company: Drivers of Success
• 8:51 – Comparisons & Competition: How Will OutCrop Gold Stand Out?
• 12:16 – Accelerating Timelines: Any Changes in Planning?
• 14:06 – JV Possibilities and Types of Deals Considered
• 15:43 – The Assets: What Have They Got and What are the Plans?
• 18:55 – Overvalued? Deliverables to Excite the Market
• 23:59 – The Future and End Game Possibilities
• 25:04 – Market Predictions & Expectations for Price
• 27:56 – Shareholder Relations: Profits, Warrants, Options

Business Overview

OutCrop is a hybrid generator in Colombia, or a prospect-generator in Columbia. By hybrid, we mean that they do drilling as part of a joint venture model to add value, especially where it is fairly direct and relatively cheap exploration, to significantly add value to the project. They’ve been in Columbia as their entire focus now for 8-years and have built an incredibly strong portfolio. Outcrop has 3 flagship properties and one which they’re drilling on until further notice and on the others, they will try to seek joint funding, joint ventures.

Map of Outcrop Gold projects in Colombia - Outcrop Gold Sept. 2020

Santa Ana

Outcrop is fully funded to drill 1,600m p/m, or at least until next June and actually, they would probably like to make a start on another prospect, either Cauca or Mallama where they would do at least a scout drilling program and then use those results to attract better quality agreements and better-quality companies. At Santa Ana, they Outcrop is delivering some pretty impressive, over 4kg/t Silver in their drilling, and up to 37g/t Gold and people are interested in their story.

Location map of the Santa Ana project in Colombia - Outcrop Gold Sept. 2020

Historically, narrow veins produce more Silver than any other deposit type and Outcrop has been upfront about the narrow veins and that they are usually in packages. For example in Roberto Tovar, Outcrop can composite 3 veins over 18m, straight-line dilution, and still arrive at 450g/t Silver. That’s almost 50% more than the average grade that’s in production right now for Silver mines adds Hebert. The other factor is the number of veins which will result in the number of faces that will result in a number of flexibilities in future mining.

At the Santa Ana project in Colombia - Outcrop Gold Sept. 2020

Joint Venture

Columbia has been in a really dry spell, for prospect-generators that didn’t also do drilling states Hebert and he says that Santa Ana has had a lot of joint venture interest from companies including 3 majors who are planning to come to Beaver Creek to look at Santa Ana and some other Outcrop projects.

They have a second drilling rig coming and they have 3 shoots identified which they have only drilled to 200m and will then drill on to 400m with the 2nd rig and if the current soil sampling programme comes up with any additional targets, they can also bring a 3rd rig too. 

A joint venture is likely for Outcrop when they are about to enter the resource or when the project is ready to enter a resource delineation stage. The total spend on that venture would exceed USD$20M-$25M.

Outcrop is constantly looking for new finds and are considering another jurisdiction, but it would be limited in focus. There is 22,000m in the Cauca project, it’s a huge porphyry explains Hebert. Mallama is very similar. It is probably technically superior, possibly even to Santa Ana, in potential, because you have clustered veins of up to 8 veins over 0.5km and are producing at 23g/t Gold and over 200g/t Silver. Hebert is certain that there will be people interested in both projects and they are advanced discussions on at least 3 projects for a joint venture, on which minimal exploration has occurred. So far, maybe as much as USD$100,000-$200,000 has been spent on initial exploration.

Holding costs

Whilst the company focuses on Santa Ana, there are minimal costs to keep things ticking over. There is a fee and there must be a work program in place, but that doesn’t have to include drilling. Outside of Santa Ana, Hebert claims that Outcrop will spend about $100,000, every 6-months on holding their other projects.

Gold Market

Hebert is sure that the Gold market will pull back but says that the thing is that just looking at the performance lately with respect to the historical ratio and it’s real, it’s gone from 97 to 80 in less than 3-months. Hebert comments that these things don’t come often in a career and that it is where all the excitement of the job is.

Hebert thinks that this cycle is different from previous cycles but not that different. A 3-4 year bowl is not unusual and he doesn’t see anything in the big picture which will detract from what’s driving it now. Gold is exciting right now and it’s going to take a while for that enthusiasm to peel off says Hebert. They have a lot of investors that are very happy because they’ve made money and they think they’ll make money again and they can be forgiving.

Investors should be taking profits right now hopes Hebert and Outcrop also has some warrant exercises that have taken an impact. Outcrop has been cashflow positive for 3-months with the drilling that they have been doing.

Joe Hebert concludes by saying that although there was a long interval for a while, Outcrop is pleased that they now have 2 rigs starting the drilling and once they get the lab loaded up, they will see assays every 2-weeks.

To find out more, go to the Outcrop Gold Website