Resource World Magazine

A U G U S T / S E P T E M B E R 2 0 1 7 www.resourceworld.com 7 have a contiguous land position of approx- imately 47 square kilometres of patented ground. RW: Are there any other valuable met- als at Madsen such as silver? DL: There's silver in the deposit and I would expect to find more at the explora- tion targets that we're drilling; however, we don't expect anything of significant value for future production. This is a high- grade gold asset and the value driver is gold. RW: With the high gold grades you are encountering, it makes me wonder why Claude, or earlier, Placer, didn't develop the project themselves to production. DL: The previous owners conducted significant work at Madsen, including drilling, dewatering and bringing in some key infrastructure. All of that provides value to us moving forward. They faced issues with respect to financing and gold prices over that market cycle. There was a change to the dynamic in the camp as well with Placer Dome being acquired by Barrick and then Barrick selling assets in Canada but at the end of the day, we believe the project lacked focus. We're applying modern science methodology to the project's exploration program and that's identified new opportunities that we are delivering. RW: The indicated and inferred resources already add up to over a million ounces of gold. Do you have an ounce tar- get for resource definition? DL: Yes, we'd like to see gold resources grow up to 2 million ounces in the near term. From a development perspective, we want to see our potentially mineable resource feed into an optimization study that allows us to look at the mill so we can focus on a long-term life with increased annual throughput. The PEA we pub- lished in 2016 is based on a small portion of resource. It was effective to lay out a base case or worst case study to show that Madsen had a potentially economic scenario. We are now focused on a larger scenario with an increase in resources, a longer mine life, and potentially, higher annual throughput. RW: What is happening at the project site now? DL: We have been active on site for three years. The project comes with an extensive data set, from which we applied strong geoscience and then iden- tified opportunities from our studies. We found some gaps in the exploration data, addressed those gaps and started to build a geological model for the Madsen Mine that explained what we saw from a past production perspective, but importantly, identified opportunities for additional resource development. We started to test those ideas in January 2016 and, with success, accelerated our exploration program such that we drilled about 78,000 metres last year. This year we continue to be aggressive from an explo- ration standpoint. We've been drilling from surface with four rigs for a program of another 70,000 metres. We are now transitioning to an underground and sur- face directed exploration program with the reopening of an existing ramp [slop- ing tunnel] that provides access to the top 150 vertical metres. We have recently commenced underground exploration and drilling. RW: Have you dewatered the mine? DL: The mine was dewatered in 2013 down to a depth of about 800 metres by our predecessor. Those pumps were shut off in 2013. Based on historic recharge rates, we anticipate the water depth is about 600 metres below surface. Later this summer we will confirm that. RW: It looks like the water level is below where you plan to install your drill stations? DL: Absolutely, and so we have reopened the ramp and walked it. It's dry, in very good condition and water will not impact exploration. For production in the future, we would have to continue to dewater the mine as normal course for a producing mine. RW: Does the Madsen mill require much rehabilitation? DL: The Madsen mill is not the original mill that produced continuously for 36 years. This mill was brought in during the late 1990s. It's the Dona Lake mill from a Placer Dome operation in Ontario that was purchased and brought to Madsen. It was put on care and maintenance so it's in good shape. Our PEA from last year suggests it will cost about $2 million to put it back in operation. RW: Your 2016 PEA has very high num- bers such as a 62% after-tax IRR. Are you planning a feasibility study to confirm the PEA figures? DL: The PEA 2016 was a base case. It only considered a portion of the Madsen – the in-situ mineral resource that we acquired in 2014. We wanted to establish a viable economic scenario. Meanwhile, our focus since acquiring the property has been on resource growth. We are being successful in adding ounces and we will have our resource update out in Q3 this year. That update will feed into an updated Preliminary Economic Assessment which we anticipate completing in Q3 to Q4 this year. Our updated PEA will be a larger scenario looking at a broader portion of mineral resource and will drive the larger scenario. RW: I understand you want to develop and operate the Madsen Mine yourselves. What is your thinking on going it alone? DL: We're moving towards production now. We have the benefit of existing infra- structure, a mill on site, a tailings facility and access to the underground through both a shaft and ramp which we recently reopened. So far, our focus has been on exploration. We feel strongly about the potential of the property to grow resources and make additional high-grade discover- ies. However, our program is really dual track. The second half is moving into opera- tional readiness and, to that end we've initiated studies with hydro to understand LEFT TO RIGHT: Darin Labrenz, President & CEO, Graeme Currie, Chairman, and Dr. Mark O'Dea, Director

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