While other juniors have done the same thing, snapping up adjacent properties to big discoveries and/or operating mines with the hope of capturing some valuation based on the “me too” factor, Rogue stands apart from this opportunistic crowd for four basic reasons: the quality of asset they are advancing, their clear path to cash flow, the Company’s successful financing track record and last but not least, a skillful executive team with decades of industry experience. Stockhouse writers sat with Rogue Resources President, CEO and Director, Sean Samson, to get a closer look at the company and the opportunity it presents for investors.
So Sean, you were appointed to your present position back in February, would you give us a brief description of Rogue Resources and what attracted you to the company?
Sure. Rogue is a Venture-listed junior miner, currently focussed on de-risking and bringing into production in the next year or two, the Silicon Ridge Project in Quebec- a high quality, potentially low-cost and long-life asset northeast of Quebec City. It’s a very interesting opportunity because Silicon Ridge is within 5 km of a similar quarry which has operated for more than fifty years and with advanced industries in the region already requiring this type of silica product. What we’d build is a simple drill-blast-crush-sort-ship operation at Silicon Ridge (like the neighbours) and Rogue sees it as a chance to get a low capex-intensity operation up and running. We would then plan to invest the cashflow from this operation into advancing other assets in our portfolio- current, or ones that we’d acquire.
I first met Rogue a few years ago when I was helping run First Nickel (“FNI”), a Resource Capital Fund-backed junior which was on the acquisition hunt, trying to buy Rogue’s Timmins assets. I was impressed with the deJongs (Steve, former Rogue CEO now runs Integra Gold and his father John, who I replaced as Rogue CEO upon his retirement, and continues to serve on our Board) and kept up our relationship, so it was a natural fit when I was looking for an opportunity after FNI.
Rogue was very active exploring Silicon Ridge last year and in 2016, at the end of April, you announced the results of your metallurgical analysis, done through Dorfner ANZAPLAN in Germany. They tested and recommended which potential applications you could use the silica mineralization found on the Silicon Ridge property for. Would you fill us in on the details and significance of this report?
We were very pleased with the results of the ANZAPLAN report and they came back as anticipated. The significance of the results is that they confirm our high quality quartzite is suitable for a wide range of high value silica products that range from silicon metal and ferrosilicon to glass and ceramics as well as fillers and construction materials. Based on the results, I believe we will be able to supply a number of customers and end users for high value material as well as sell nearly 100% of all material that is planned to be extracted from our quarry. It was a great result from that work.
Rogue just released a 43-101 Resource, how did that turn out for the Company?
Working with Met-Chem in Montreal, using the data from last year’s field program- 12,000m of diamond drill core and over 500m of channel samples- they came up with about 10M tonnes of Measured and Indicated and about 5M tonnes of Inferred material in a pit-constrained Resource. It’s of course premature to talk mine-life until we have a study to backup a mine-plan but if we build something that looks like the neighbours’ operation, producing 200-250K tonnes per year, that will be more than 60 years and the mineralization continues up trend. Having the material to support a business plan, in terms of metallurgy or volume, won’t be a concern. This Resource was another great step for Rogue.
But the market hasn’t immediately seen it that way, your stock has continued to be soft?
I also noticed that! It seems that some investors are trading out of our stock on this news, which is frustrating but it’s also an opportunity for us to get our paper into the hands of investors who better understand our story. As best I can tell, there are at least a couple things going on with the stock.
First, some investors have been drawn to silica for the potential appeal of selling ultra high purity quartz into the technology sector and competing against the existing suppliers who supply most of the global market from a mine in North Carolina, getting paid many thousands per tonne. That’s tremendously appealing, and some of our drill core intersected grades that are of interest in that space but it’s not a market that we’re planning to build a business around. It’s a relatively small volume market and the current suppliers are well-positioned and well-financed- I know that’s the target of a whole group of other Canadian juniors, either through defining a deposit or black-box technology, but I’ll leave it to others to chase that dream. We are going to build a real business, with the potential for great margins, but it’s not going to be solely based on HPQ, and I think some investors are exiting on that realization.
Second, Rogue has been able to raise hard and flow-through money over the past few years, which has been great because it’s kept continued investment in and advancement of the asset but selling the tax-advantaged flow-through has led to investors who have already realized the tax bump and are now liquidating their positions, which has led to a bunch of pressure on the offer. I’m hoping that’s over now so hopefully we’ll begin to see the stock moving in the direction that reflects how far we’ve advanced the project.
The good news from all of this, and I hear this a lot, is that our core investors, who know the story, have been able to take advantage of this opportunity and pick up cheaper stock.
“Rogue has an excellent land package around the W4 deposit and once you discover one deposit on a trend, the likelihood of additional deposits is greatly improved.”
Besides Silicon Ridge, Rogue also has the Radio Hill Iron Project, located 85 kilometres southwest of Timmins, Ontario, and the Langmuir Nickel Project, located 35 kilometres southeast of Timmins, Ontario. Would you give us an update on these properties and what attracted Rogue to them in the first place?
Radio Hill is an interesting project that captured the attention of previous management given its excellent location, proximity to infrastructure including a paved highway and CN Rail Line. At the time of the acquisition, the iron ore price was very attractive and the property is in an area that has excellent gold and base metal potential. The property is contiguous to our Timmins West Project that is currently under a licence agreement with Rapier Gold for its gold potential.
Langmuir on the other hand was a brand new discovery made by Rogue in 2007 in the Shaw Dome south of Timmins. The Langmuir W4 deposit was discovered by diamond drilling a VTEM anomaly. The property was advanced quickly with drilling off of the deposit and the issuing of a 43-101 resource estimate prepared by SRK in 2010. Rogue has an excellent land package around the W4 deposit and once you discover one deposit on a trend, the likelihood of additional deposits is greatly improved. The Langmuir property package is a great exploration target for nickel as well as gold and base metals.
For each of those though, we need a shift in the metal pricing markets to bring them into the money.
What is the philosophy behind Rogue’s acquisition strategy?
The philosophy for Rogue in general is that we are focussed on generating positive cash flow, and that’s the lens we will look through for any acquisitions. We are not tied to any metal, we judge targets by rock value and we search out good grade deposits that can withstand all stages of the metal price cycle. We are always looking and as things advance on Silicon Ridge, we will be positioning ourselves for cash flow to redeploy and advance other assets.
What can investors expect in 2016 in terms of milestones?
We have a busy year ahead, with milestones laid out from my joining in February. In April we published our Metallurgical results, confirming that we had commercial applications for our material. In May we announced our Permitting consultants and will soon layout a roadmap for what we will need to achieve and when we expect it by. The Met-Chem 43-101 Resource has just come out and in September we will be working with them to publish a PEA. Now that we have the met results in-hand we are entering into serious discussions with Market Participants (potential buyers, offtakers, etc.), this helps inform our price assumptions in the PEA but also, I hope to firm up a partnership with a Market Participant later this year. That could be an equity investment, an offtake or some other confirmation of commitment. By the end of this year we plan to make an Advancement Decision and if we go ahead we’d plan to be permitted and into initial production by mid-2017.
Rogue has been able to raise capital despite what has been described as challenging market conditions. In fact, at the beginning of April, Rogue closed an over-subscribed private placement for gross proceeds of $1.2 million. What will these funds be used for and where is Rogue financially? Will there be another financing in the near-term? If so, why?
Our raise earlier this year was very well received, we closed 80% on announcement, mainly from existing shareholders, and the second tranche, after a few weeks of marketing, was close to $400K and mainly new investors- most from across my personal network, and all hard dollars. Those funds have been used to finish paying the bills from last year’s large drilling campaign, and the ongoing spending with the metallurgical consultants and the engineers working on the Resource. We are in good shape for cash now but still continuing to spend as we de-risk the asset and are looking to do another raise in the coming months- that will be towards the PEA work, our ongoing costs related to finding buyers of the product and ensuring we maintain enough working capital as we move towards an Advancement Decision by year-end. We run a very tight ship and target having all of our dollars go towards advancing the asset. Management is sensitive towards dilution though, as we are investors as well.
One of Rogue’s core strengths is its leadership. Who are the key members on your executive and board, and what skills do they bring to the table that will help drive Rogue forward?
We do have a very strong team and it’s something that drew me to the Company. I have been impressed by the deJongs and their success with Rogue and with Integra, they know how to build shareholder value and I’m glad to have John on my Board.
I have experience building and managing teams, attracting investors, advancing assets through permitting and construction, managing operations and doing transactions. This came from the ten years I’ve been in mining- I ran a few hundred men underground while the Interim COO at FNI and had a global team of a similar number at Kinross Gold, when my jobs included running Global Supply Chain and Continuous Improvement, Capital Approvals and being the Chief Risk Officer- plus the experiences earlier in my career when I worked across industries in Consulting and Private Equity at Bain and prior to that while working in Finance in New York and Europe.
On my Management team I have 2 very strong technical colleagues. I’ve brought in with me Paul Davis, who’s a very capable geologist who has found, permitted, financed, built and run mines in different metals in Ontario, and he’s just a really strong, experienced guy who has done a lot of things. In Montreal I have Eddy Canova, a mining professional with deep experience who has advanced and led projects in Québec, plus done work in Latin America. Eddy has done an excellent job running the drill program, and just generally starting this project. He has very strong relationships in the community and he has been able to get a lot of stuff done.
I also rely on a core team of key advisors and plan to soon formalize them into a group we’ll speak about more regularly. Our team works well together but the thing I like most about our group is that between us we have done everything we now plan to do with Rogue, none of this is new for us.
What would you have to say to investors who may be thinking about adding Rogue Resources to their portfolio?
Rogue is a great opportunity to invest into a Company which is building a profitable business, focussed on cash flow. We expect to advance Silicon Ridge, add to our portfolio and advance additional assets along the development trajectory. We will remain focussed on building cash flow and with it, shareholder value.
FULL DISCLOSURE: Rogue Resources is a Stockhouse Publishing client.
Read the interview here.