Resource World Magazine

18 www.resourceworld.com A P R I L / M A Y 2 0 1 9 D uring the recent Vancouver Resource Investment Forum in Vancouver, Cal Everett, President and CEO of Liberty Gold Corp. [LGD-TSX; LGDTF-OTC], gave a presentation on the topics of gold and the gold mining industry. It was well received and it became apparent that his talk would make for an interesting interview to which he kindly consented. RESOURCE WORLD: You mentioned "Peak Gold" in your talk. Some people think Peak Gold is a myth like Peak Oil appears to be. What is your view on Peak Gold? CAL EVERETT: I do not believe in Peak Gold because some mines make money at $1,000 an ounce while others do not make money at $1,300 an ounce. If gold goes to $1,500 an ounce, those $1,300 ounces are now economic. It has to do with pric - ing because as soon as the gold price goes up, something that would have been deemed to be waste and not economic now becomes economic. Production is going to go up based on the price of gold and pro - duction similarly would go down if the gold price went to $900. Mines that could make money at $1,000 per ounce would close. RW: The VanEck Vectors Gold Miners ETF bottomed last September and has been rising in steps since then – so has the price of gold. What is driving this scenario? CE: For the rise in the VanEck and the gold price, it is a combination of declin - ing production grades and central bank buying. We are also in a period of politi- cal uncertainty whether it's tariff wars or the rise of populous governments – even though they are shown as being democratic – there could be more of a dictator-type governance involved. All of these things are coming together at the same time. We are at nine years of a bull market – the longest in history – and when you pull back on interest rates for nine years and you stop and reverse, it is like going back through the cross hairs of a sling shot and you over-shoot on the other side. When you get that kind of uncer - tainty, people will take on gold as a risk on asset again. RW: In your presentation, you said that gold producers are dysfunctional and lack foresight. Can you explain this? CE: Their predicament is quite simple. In 2012, when gold was $900 an ounce, they borrowed money on their balance sheets because they bought assets that were overvalued. Balance sheets suffered from having too much debt. Since 2012, gold producers have cleaned up their bal - ance sheets on an industry-wide basis. By cleaning up their balance sheets, they only did brownfield exploration and they over- produced gold. The average grade of an operating gold mine has gone from about 2 grams/tonne in 2012 down to 1.54 grams/tonne, so they've been high-grading mines to get extra cash flow to lower their debt. They also took profits instead of reinvesting in their own infrastructure. Now that reinvestment is down to an average of 54%. This is for the public company side of the industry. All that went into reducing debt. In other words, they've cleaned up their balance sheets but they didn't clean up their proj - ect pipelines. And that's coupled with the fact that it takes longer to get a mine found and permitted today. The average mine life since 2012 has fallen by about 3.3 years to around 12 years. In another seven years, I would think that the average gold mine life – if gold stays at a stable price – is likely to fall by another two to three years to under 10 years for an average mine life. RW: High-grading to fix balance sheets and pay down debt may look good short term, but what about long term conse - quences? High-grading shortens mine life by making the lower grade zones uneco- nomic because there won't be higher grade ore to blend with the lower. Isn't this bad Cal Everett on gold and gold Mining by Ellsworth Dickson Cal Everett, President of Liberty Gold Corp.

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