Investing.com Canada Interview – Matthew Hornor, President & CEO, Maple Gold Mines
We spoke with Matthew Hornor, President and CEO of Maple Gold Mines Ltd. (TSX-V:MGM) (OTCQB: MGMLF), an advanced-stage gold explorer. Maple Gold is in a 50/50 joint venture partnership with industry major Agnico Eagle Mines (TSX:AEM) (NYSE: AEM) on the district-scale Douay and Joutel gold projects in Quebec. Maple Gold also holds an exclusive option to acquire 100% of the Eagle Mine Property.
Ketki Saxena: Matthew, thank you for joining us.
Matthew Hornor: Great to be here.
Ketki: We'll just get right into it… So, gold prices have been fairly disappointing of late to many of our investors, but we've recently seen gold getting a little bit of traction, just hit 6 month highs as people seek a safe-haven on recent banking fears. . So, where do you believe gold will be heading in the next 12 months, and that's both in terms of demand and price?
Matthew: I think we're seeing a lot of interesting events happening that are kind of like a “vujà dé,” the distinct feeling you've never seen this before…in that you have various jurisdictions and countries starting to look at gold as a backing of their currency to stabilize things. Japan, China, Russia, Saudi Arabia, [have made] all sorts of movements in the background that I think might cause a dramatic shift, dramatic and kind of unexpected, from a time perspective movement in the gold price up significantly. So, I think there are actors at work behind the scenes, that I think that they’re doing things for various reasons that will have that kind of profound effect on the gold price this year. I think that will cause the demand to increase and therefore the price increase dramatically.
On the supply side, it's becoming ever more difficult to find and produce the ounces necessary to fill demand. So, I think, both from the demand side and the supply side, we're going to have a squeeze on gold price, which is going to cause it to go dramatically higher.
Ketki: What is your outlook in that context for the mining sector this year? And other than some of the factors that you've mentioned, this huge government demand for gold and dwindling supply, that of course is going to see demand and prices skyrocket, what other factors do you think will make 2023 possibly a banner year for gold miners and explorers, and in particular junior gold miners and explorers?
Matthew: Sprott has put out some interesting reports on this, how there's a decoupling of the gold price and the junior names, and having finally the trickle down from the larger producers to the junior explorers, and I think that that's going to be one factor. I think most people are looking, given [what] happened with over the recent few years with that “minor flu” that flew around the planet and caused people to stay at home, people are looking at stable jurisdictions. And so I think from that perspective, you're going to want to have your investments in areas that are very stable, i.e. Canada, the United States, Australia, other nations like that. So, I think that the junior mining groups are going to have a lot of success this year for those reasons, should they be located in the more stable jurisdictions.
Ketki: Now, for investors who are looking at the sector, they obviously see the value, the potential, and now they're looking at specific junior miners. So, what kind of catalysts do investors look for in junior miners? What should they be looking for? And could you tell us a little bit about what, of course, institutional audiences, but also retail investors should or would look for?
Matthew: …If you look at the investment as a kind of menu of opportunities, and depending on your risk appetite, there's usually a correlation of risk and return, obviously. I think that most of the retail world tends to follow the momentum plays and look for areas of real torque, obviously. They should always start with location, of course, of where the asset is located. If you have 100 million ounces sitting under Napa Valley wineries, or Manhattan or under the Louvre, for example, you're never going to produce it. So location is incredibly important, even more important than in real estate.
Social license is obviously related to that, so if you have a community around your project that doesn't allow you to take it forward and causes issues for whatever reason, that's something to always be careful of and pay attention to.
And then where does the resource sit from a timeline perspective? How large is the resource? Is there a resource at all, or is it just pure greenfield [property] and [the potential] in the head of the exploration manager or chief geologist? I think that if you have an established resource package to start with, that's key.
And then of course tied for that is … who is the team that's leading the effort? A lot of people have to make sure they're betting on the right jockeys that have been around the mining space for quite some time and know what they're doing from a capital markets and project-on-the-ground basis. You need to combine all those things.
One of my favourite sayings of my former colleague and boss Robert Friedland, who runs Ivanhoe Mines (TSX:IVN) of course, is that “mining is not for the intelligent” because it's so hard. It does, of course … provide incredible opportunities for great returns if you get it right, but there are a lot of things to take into consideration.
So, if you check the boxes on those four or five main items, you're way ahead of the game. And I don't think that the institutional groups look at things in too dissimilar of a manner. It's very similar, but the institutional groups are going to be looking at size. What is the scale, is it a large enough package to provide potential of an exit in the future for sale to a larger player? The best way to think about the junior mining space that I've heard of is similar to like a small biotech firm that's trying to prove the efficacy of a drug, and once they prove that a certain drug is efficacious, then of course the larger pharmas, Pfizer (NYSE:PFE) comes along and buys them. But in the meantime, it's a lot of risky capital going into long nights to prove that the drug or whatever they're working on works, and doing all the heavy lifting. Junior mining is very similar to that, where we don't actually make money. We spend money to develop the project and add the ounces and prove that the viability of the production going forward actually is there. And then you either take it into production, of course, and get interesting cash flows or you're ripe for an opportunity through a merger or some other exit.
Ketki: Right. So that's a very useful checklist for our investors. To continue a little bit with your analogy of having that little pharma company seeking to develop a new drug, and then you have Pfizer swoop in. So, not to put words in your mouth, but the fact that a junior minor is already partnered with a major, it's sort of a lot of the due diligence done. Would you say that's a big advantage to investors?
Matthew: Yes, definitely. Our partners know what they're doing and they know what they're looking at, of course. They spent years doing diligence on our project, looking at the core and doing copious amounts of diligence and reviews, etc. It's a very good analogy.
I think that we have a great partnership with Agnico [Eagle Mines], and it's also important as the guy who runs this company, to not set up a case where it's just they [Agnico Eagle] who can acquire or be a potential takeout partner in the future. That's to allow for other parties also who are interested to get into the game. So although they’re the obvious party that would do potentially something with us in the future of that sort, they're not the automatic one. There's nothing to stop anybody else. If they like what we put into the marketplace and they like what we're doing, there is nothing to stop anyone else from getting involved and participating in that way.
Ketki: Right … I think it kind of offers the asymmetrical opportunity horizon of the junior because you still have all of the majors that could be interested in deals in the future. You're not tied to anyone. But at the same time, you still have that security of working with them at the moment.
Matthew: That's right. Yeah, that's right. Oh, and I have to say, it's my job, I have to say that because, although I love Agnico and I think that they're great, I can't be effusive enough about how wonderful it is to work with these guys, I have to create the best outcome and opportunity for my shareholders. And they, in fact, are one of my biggest shareholders, so it's just something I have to state for the record.
Ketki: So we've got a really good checklist there of things that people should be looking at, and that's very useful for a lot of people familiar with the mining sector. For someone who is new to the sector, do you have any advice of what they should look for from an overall perspective or do you think we've mostly covered it?
Matthew: I think the checklist I mentioned earlier covers the main items … I think the only thing I left off of that is the macro picture of where you believe certain metals are headed from a demand-side perspective. I totally agree with Robert Friedland on his analysis of the market when it comes to copper and battery metals. I think copper is a fantastic commodity for the future of the planet, given the electrification required to keep up with all the EVs on every continent, so copper is a great play. If you feel strongly about that, then you should look at those things, those factors.
…And gold. I think now that the world has realized that, in the crypto space, the emperor has no clothes, and the store of value so to speak that they thought existed with cryptocurrencies is not a store of value at all, and old faithful gold always has been, always will be, a store of value. I think that people are starting to come back down to earth and realize that that is truly the case. I think the thesis for gold investment going forward has never been stronger. I mean, we're at $1,900, but we could very, very easily be $3,000 by the end of this year, for a good reason. I can make the argument easily for that case. So, that's the only additional point I'd make from a how do I play this space. It’s very important for you to know and trust the management team, like the area, like all those items that I mentioned earlier, and then also feel comfortable with the macro picture and how you expect it to play out going forward.
Ketki: …I think it's really great that you mentioned, again, the macro picture and the staying power of gold as opposed to crypto, for example. So, now obviously, it's a tough time right now. We're seeing company valuations kind of down across the mining sector, but as you mentioned, gold resources are something that have staying power. There is genuine value. There's supply [and] demand, there's fundamentals attached to it, so it's likely that we will see those market caps bouncing back, and that's kind of the trust that investors can have in this sector, which makes it always, you know, quite a solid one, so thank you for that checklist. I'd like to turn a little bit, again, to the mining space, but merger and acquisition activity. So do you think that we'll see a lot of that coming up this year and also what [do] you think could be some of the models to strike up M&A deals? For example, the Maple Gold-Agnico Eagle partnership is very attractive. Do you think we'll see more deals or more partnerships with that model, and do you see a lot of that coming up this year?
Matthew: Yeah, I think so, for sure.
Ketki: Short and sweet. Perfect.
Matthew: Absolutely. Actually, I think there's going to be a lot of activity this year, especially with the larger names having to replace the existing production ounces going forward, forever. They're constantly on the hunt for smart plays and smart projects. The smaller groups like ourselves need to be adding additional ounces through merger, in order to increase the size of our platforms to make us more relevant.
I think there are probably too many issuers out there, and we need to probably combine forces to be more relevant and be more investable by the larger audiences. All those things lead to more M&A activity, and as I've said openly for quite some time now, we continue to stay in many conversations with many groups, contemplating and looking at ways to provide accretive transactions to our shareholders.
So for all those reasons, you [must] always be on the lookout for opportunities and look for wins for your stakeholders, and I think this year is going to be very big for M&A. In fact, the last year, we saw a lot of M&A in the larger names, mainly Agnico and Kirkland Lake and others. This year, I hope to see more activity down in our weight class or our bracket.
Ketki: Okay. So it certainly looks like it will be an exciting year ahead. To look a little bit forward into the year ahead, not so much for the sector, but for Maple Gold, what are you expecting this year? Do you have any exciting news, announcements or catalysts and results that the market can expect from the company in the coming months?
Matthew: Oh, yeah, for sure. We have a lot of drilling activity that's happening now. We have 20% of the drilling results for Eagle … We just put out some stellar results there and I think there's more to come. We're doing some kind of “quantum-leap style” exploration at our other projects at Telbel and Douay, on very deep holes to see what the extension of that large resource package is and how big it could get. So, I think there are a lot of reasons to pay close attention to what we are up to on the ground at our projects and things to look out for this year.
Ketki: Great. Well, we look forward to it and we certainly hope in all the conversations you'll be having this year, you'll make some time for us, possibly later in the year as well, because this is very interesting and useful information to all of our investors who would be looking into the junior mining space this year, a very exciting year. So I think that's all for the questions that we have for you today, but is there anything that you would like to discuss or that you think investors should know about the junior mining space in general or Maple Gold in particular?
Matthew: I think we've covered most of it. Just as I said, keep on the lookout for upcoming news and events. I'm getting tired just thinking about all the flights I have to take, but that's all the activities coming up.
On the corporate side, we expect to have some interesting things to talk about. I think the junior mining space, just be mindful to look out for all the activities in Asia prior to the trading day’s over here. So, it's going to be an interesting year, I think, across the boards for everybody concerned.
Ketki: Definitely. And one with a lot of jet lag for you, it looks like.
Matthew: Yeah, I feel it already.
Ketki: Yeah. All right. Well, thank you so much, Matthew, for joining me today, and again, for all your valuable insights.