otis gold corp. · 2017-04-12 · otis gold corp. (“otis gold” or “the company”) is an...
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Exploration Activities and Joint Venture to
Generate Future Growth Otis Gold Corp. (“Otis Gold” or “the Company”) is an advanced-stage gold exploration
company that is well-positioned to grow by exploiting its multi-million ounce potential. The
Company has an acquisitive history and has been opportunistic in buying early/intermediate
stage projects, especially during the global downturn of 2008-09. The Company has a total
of four projects: Kilgore Gold Project (100% Working Interest -WI), Oakley Project (70%
WI), Gold Bug Project (100% WI) and Hai Project (100% WI) located in the mining-friendly
jurisdiction of Idaho, USA with a total resource base of 755,000 ounces (oz) of Indicated
Gold and 300,000 oz of Inferred Gold.
The Company’s primary focus is the Kilgore Project which is at an advanced stage of
exploration and is expected to enter production potentially as early as 2017. Since Kilgore’s
acquisition in 2008, Otis Gold has drilled about 20,000 meters at the deposit and has a
National Instrument (NI) 43-101 compliant resource of 520,000 oz Au Indicated and
300,000 oz Au Inferred.
The Oakley Deposit is an intermediate stage project with an Indicated Gold resource of
235,000 oz. Currently, the Company is looking at acquiring the balance 30% WI in Oakley
Project through their existing Joint Venture (JV). After acquiring the entire 100% WI, they
plan to form a separate JV with Lateral Gold Corp. to secure funding of around C$6.6
million by offering them a 70% WI in the Oakley Project. Currently, the Company has signed
a Letter of Intent (LOI) and plans to enter into a definitive agreement with Lateral Gold Corp
by 15th
February 2013.
Sizeable progress on the Kilgore Project, funding support for the Oakley Project and a
bullish outlook on gold augur well for the Company. We believe that the management and
technical team have the experience and capability to steer the Kilgore Project into
commercial operations.
Investment Arguments
Encouraging Prospects for the Flagship Kilgore Project:
Strong Potential for Expansion: Geological studies undertaken by Otis Gold have
established that the Kilgore deposit (Mine Ridge Area, Prospect Ridge Area and North
Target Area) has significant potential to exceed 1 million oz of gold, while other Kilgore
Target Areas such as Gold Ridge and Dog Bone Ridge have multi-million ounce
potential.
Sizable Drilling Goal for 2013: Approximately 7,000 meters of drilling are being
planned for 2013 at the Kilgore deposit’s North Target area and additional drilling is
expected at Prospect Ridge. The Company also plans to initiate a scoping study to
evaluate project economics and also conduct 12 month environmental baseline studies.
Further, Otis Gold has received permits to drill on six sites at the Gold Ridge target and
initial testing is expected to be undertaken in 2014.
Production Outlook: Otis Gold’s flagship Kilgore Project is expected to commence
production as early as 2017 and is estimated to produce around 50,000 oz of Au per
year.
Positive Results: Column Leach tests conducted in 2011 showed recovery rate of
85% - 90% within 30 days at 1.5 inch and .5 inch crushed material. This recovery rate
is higher than comparable mines; the Briggs Mine (owned by Atna Resources) has a
Price (C$): (Jan 24, 2013) 0.145
Beta: 1.06
Price/Book Ratio: 0.46
Debt/Equity Ratio: 0.00
Listed Exchange: TSX.V
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OOO TSX Composite (RHS) *Company listed on the TSX.V and hence is compared to
TSX Composite Index. Source: Bloomberg.
Recent News
01/17/2013: Otis Gold drills 121.9 Meters @
1.04gpt Au And 83.8 Meters @1.12gpt Au at
Kilgore North Target Area.
1/10/2013: Otis Gold signs letter of intent to
JV Oakley Project with Lateral Gold Corp.
Lateral to earn up to an initial 70% interest.
10/1/2012: Otis Gold appoints Dr. Roger
Norwich as Director. He was the founding
Director of formerly TSX-V listed Mexican
Silver Mines Ltd.
6/5/2012: Otis Gold announces the receipt
of additional positive column leach gold
recoveries from coarse-crush bulk samples
at the Kilgore Gold Project.
4/13/2012: Otis Gold closes 2nd tranche of
non-brokered private placement of 250,000
units @C$0.20 amounting to C$50,000.
3/27/2012: Otis Gold closes 1st tranche of
non-brokered private placement of 7,042,500
units @C$0.20 amounting to C$1,408,500.
2/22/2012: Otis increases land position at
Kilgore by 58%. Otis acquired 1,880 acres of
land making the land package 5,130 acres.
Shares in Issue
50.2 M
Market Cap
(C$ M) 7.28
52 Week (High): C$0.250
52 Week (Low): C$0.055
Otis Gold Corp.
(Tickers: TSX-V: OOO, OTC QX: OGLDF)
January 25, 2013
www.RBMILESTONE.com
Equity Research and Market Intelligence
2
80-85% recovery rate at .25 inch minus crushed material i and the Round Mountain
Gold Mine (a Kinross Gold & Barrick Gold JV) has a 85% recovery rate at .75 inch. ii
Potential for Additional Drilling at North Target Area: In addition, the new drilling
results of six holes at the North Target portion of the Kilgore Project have helped in
defining and extending the deposit, indicating a scope for expansion of the deposit
through additional drilling.
Secured Funding through a Possible JV: In January 2013, Otis Gold has signed a
letter of Intent for its Oakley Project with Lateral Gold Corp. As per the agreement,
Lateral Gold Corp. can earn an initial 70% interest in the project with options to acquire
the remaining 30% interest in the future. Through this JV, Otis Gold will benefit in terms
of cash (C$0.9 million), property expenditures (C$5.7 million) and Lateral shares (4.9
million shares) and will support the Company in moving the project forward to
development stage.
Experienced Technical Team and Strong Management: Otis Gold’s exploration and
development team has considerable technical and financial experience. The team
primarily comprises of members from Echo Bay Mines US exploration team, which had
conducted sizable studies for exploring gold resource at Kilgore in the 1990s. The
management team also has extensive experience in Investment Banking, Corporate
Finance and Business Development.
Favorable Outlook for Gold Demand and Price: Demand for gold has been
constantly rising since the economic recession in 2008-09 on the back of rising
consumption demand from emerging economies such as India and China, coupled with
gold purchases by Central Banks across the globe. Growing uncertainty arising from
the US budget deficit and EU debt is expected to fuel investments in gold due to its
perception as a safe investment option. Further, quantitative easing in developed
economies and the resultant currency devaluation is likely to support gold prices.
These factors should make the mines economically viable at the existing cost of
production.
Relative Valuation: Based on our peer analysis, Otis Gold’s Market Capitalization to
Resources (contained AU oz) ratio of C$6.9 per oz is much lower than the median of
C$17.6 per oz for a group of peer companies. We note that as companies move closer
to production they generally command significantly higher multiples. Therefore, as Otis
Gold transitions from the exploration stage to development and production, we believe
that there can be substantial upside potential from current levels. Additionally, Otis
enjoys advantages in projected stripping ratios and gold recoveries relative to its peer
group, which further underscores its low valuation.
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Otis Gold Corp.
Company Overview
Otis Gold Corp. is a mineral exploration company primarily focused on acquiring and
developing gold projects in the state of Idaho, USA. It is a Canada-based company listed
on the TSX Venture Exchange (TSX.V: OOO) since 28th
November 2007. In 2011, the
Company’s shares were listed on OTCQX International (OTCQX: OGLDF). Currently, the
Company has four projects; 1) Kilgore Gold Project, 2) Oakley Project 3) Gold Bug Project
and 4) Hai Project.
Exhibit 1 : Project Portfolio
Source: Company Presentation, January 2013
The Kilgore Gold Project, the Company’s flagship project, is an advanced-stage gold
exploration project with open-ended gold resources in which Otis has a 100% working
interest. The Kilgore deposit is a low sulphidation, volcanic-hosted epithermal hot spring
system located in Clark County, Idaho, approximately 70 miles north of Idaho Falls. Its
resources are NI 43-101 compliant with Indicated resources of 27.3 million tons containing
520,000 oz Au @ 0.59gpt and Inferred resources of 20.2 million tons containing 300,000
oz Au @ 0.46gpt updated in 2012. Prior to Otis Gold, the Kilgore Project was initially
operated by Placer Dome, Pegasus Gold & Echo Bay Mines. To date, over 60,000 meters
of drilling has been conducted at Kilgore with Otis Gold contributing about 20,000 meters
drilling between 2008 and 2012. The results of the recent drilling at the Kilgore North
Target area showed drilling at 82.3 meters of 0.95gpt gold in hole 12 OKR-291, 121.9
meters of 1.04gpt Au, that includes 45.7 meters of 1.52gpt Au, in hole 12 OKR-292, and
83.8 meters of 1.12gpt Au, that includes 30.5 meters of 2.10gpt Au, in hole 12 OKR-294.
The Oakley Project is an Intermediate-stage gold exploration project with open-ended gold
resources located in Cassia County, Idaho, USA. As of 2008, it had 14.4 million tons of
Inferred resources containing 235,000 oz Au @ 0.55gpt. Currently, the Company holds a
70% WI in the project and plans to increase it to 100% through a transaction with its
existing JV partners. On the completion of the acquisition of the entire 100% WI, the
Company plans to enter into another JV with Lateral Gold Corp., a gold exploration and
development company. They have already signed a Letter of Intent to option a 70% WI to
Lateral Gold Corp. with a definitive agreement expected to be signed by February 15,
2013. However, this JV is subject to the completion of Otis Gold’s ongoing acquisition of
the remaining 30% working interest.
The Gold Bug and Hai projects are gold exploration targets located in Lemhi County,
Idaho wherein no NI 43-101 compliant mineral deposits have been defined to date.
Currently, the Company has 100% WI in both the mines; however they have no plans to
explore these projects in the near future.
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Otis Gold Corp.
Key Projects
Kilgore Project
The Kilgore deposit is an open pit mine which is an epithermal hot spring type of deposit
located in the state of Idaho. The project is located on the northern margin of the eastern
Snake River Plain, approximately 5 miles west-northwest of the small rural hamlet of
Kilgore, Clark County, Idaho. It is accessible by road approximately 32 miles northeast of
the town of Dubois and Interstate Highway 15. The Kilgore Project includes the Kilgore
Deposit (comprised of the Mine Ridge Area, Prospect Ridge Area and North Target Area),
Gold Ridge Target and Dog Bone Ridge Targets.
Exhibit 2 : The Kilgore Target Areas
Source: Company Presentation
Claims, Permits and Working Interest
The project has 232 unpatented federal lode federal mining claims located on U.S. Forest
Service land, Caribou-Targhee National Forest, Idaho. They also hold one Idaho state
land permit. Together, these claims and permits cover an area of 5,130 acres.
Otis acquired 100% WI in the Kilgore Project in November 2010 from Bayswater Uranium
Corporation and is not liable to pay any Net Smelter Royalties (NSR) on future production.
Geology
The Kilgore Gold site has low sulfidation deposits found very close to the surface of the
earth among volcanic rocks of Miocene age. Gold mineralization is the classic
disseminated, bulk-tonnage type similar to volcanic-hosted gold deposits found at Round
Mountain, Nevada and McDonald Meadows, Montana. Gold mineralization is localized by
west, northwest, and northeast trending structure. The deposit is composed of lithic tuff,
dike and silicified clastic sedimentary rocks.
Resources
Exhibit 3 : NI 43-101 Compliant Resources
Resource Category
Tons (Million)
Grade Au (gpt)
Contained Au oz
Estimation Type
Date
Indicated 27.3 0.59 520,000 Kriged 31st July 2012
Inferred 20.2 0.46 300,000 Kriged 31st July 2012
Source: ‘Technical Report and Resource Estimate for the Kilgore Gold Project’, by Donald E. Cameron, Consulting
Geologist, Company Website
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Otis Gold Corp.
The resource cut-off grade of 0.24gpt Au is considered to be a reasonable estimate of
potential break-even mining economics based on the price, cost, recovery and mining
assumptions. Both the Indicated and Inferred resources have grades higher than 0.24gpt
indicating that it is economically feasible to develop the mine.
Further, geological studies undertaken by the Company indicate that there is substantial
potential for the Kilgore deposit to exceed the 1 million oz mark. Other target areas such
as Gold Ridge and Dog Bone Ridge have additional multi-million ounce potential.
Exploration and Drilling
Previous Work and Observations
To date, over 60,000 meters of drilling has been conducted at the Kilgore Project with Otis
Gold drilling around 20,000 meters between 2008 and 2012. During the time duration
1993-1996, Echo Bay Exploration, Inc. (EBX) was the most active explorer and had
performed airborne magnetic surveying, regional geologic mapping, soil sampling, and
collection of baseline soil data. The results indicated that the Kilgore deposit had strong
gold, arsenic, antimony, mercury, and selenium geochemical signature. EBX had plans to
put the mine into production and had completed the internal initial engineering
assessment. They identified a mineable potential of about [email protected] and considering
a production rate of 4,700tpd, the mine life was estimated to be about 6.6 years. However,
gold prices deteriorated to less than $300 per oz, making the project economically
unfeasible. In 2004, Kilgore Minerals Ltd. completed an updated scoping study which
showed attractive economics at a gold price of $375 per oz.
Permitting
Most of the Kilgore Project is located on United States Forest Service (USFS) federal
ground and hence Otis Gold has to submit a Plans of Operations (POO) to obtain permit
for drilling activities. Permits are obtained through the Caribou-Targhee National Forest
local headquarters in Dubois, Idaho, usually within 30 to 60 days, under a Categorical
Exclusion. In addition, Otis Gold has to sign a reclamation bond with USFS which is
released annually as reclamation work is completed.
Drill Activities and Results
In 2008, Otis Gold submitted a POO to obtain a permit for 20 drill sites at Mine Ridge.
They completed 4 core holes totaling 635 meters and all of them were found to be
mineralized (Average Recovery: 98.6%). Further in 2009, Otis Gold drilled 12 core holes
totaling 3,122 meters at Mine Ridge (Average Recovery: 97.4%). In 2010, Otis drilled 35
holes, out of which 31 were found to have significant mineralization (Average Recovery:
95%). Five additional holes were drilled to test CSAMT anomalies in the Dog Bone Ridge
area. However, only anomalous gold was discovered. In 2011, 41 holes were drilled, out of
which 28 were found to have significant mineralization (Average Recovery: 93.8%).
Intercepts greater than 100 meters thick were discovered in holes 11 OKC-258 and 11
OKC-259.
O’Keefe Drilling of Butte, Montana conducted the drilling program at the North Target Area
(North West of Kilgore deposit) for Otis Gold in 2012. The 2012 fall drill program included
1,009 meters of drilling in 6 Reverse Circulation (RC) holes and it was found that all six of
them were mineralized. Four out of these six drilled holes had bulk-tonnage thickness and
gold grades.
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Otis Gold Corp.
Exhibit 4 : Results of 2012 Fall Drill Program – Kilgore North Target Area
Hole Number
Distance Drilled (Range) Thickness (meters)
Grade (gpt Au) From (meters) To (meters)
OKR-290
13.7 15.2 1.5 1.03
35.1 26.6 1.5 0.98
61.0 74.7 13.7 0.31
102.1 112.8 10.7 0.55
12 OKR-291
3.0 7.6 4.6 0.67
12.2 16.8 4.6 1.32
45.7 128.0 82.3 0.95
105.2 115.8 10.6* 2.21
12 OKR-292 6.1 128.0 121.9 1.04
38.1 83.8 45.7** 1.52
12 OKR-293
33.5 39.6 6.1 0.45
45.8 48.8 3.0 0.63
76.2 89.9 13.7 0.30
111.3 114.3 3.0 1.17
164.6 166.1 1.5 1.48
12 OKR-294
15.2 29.0 13.8 1.09
61.0 144.8 83.8 1.12
96.0 126.5 30.5*** 2.10
12 OKR-295
3.0 13.7 10.7 0.42
38.1 73.2 35.1 0.77
112.8 129.5 16.7 0.53
Source: Company News, 17th January 2013,
* indicates that within the distance drilled i.e. from 45.7 meters to 128 meters, there exists a patch from 105.2 meters
to 115.8 meters where the grade of Gold was found to be 2.21gpt.
** indicates that within the distance drilled i.e. from 6.1 meters to 128.0 meters, there exists a patch from 38.1
meters to 83.8 meters where the grade of Gold was found to be 1.52gpt.
*** indicates that within the distance drilled i.e. from 61.0 meters to 144.8 meters, there exists a patch from 96.0
meters to 126.5 meters where the grade of Gold was found to be 2.10gpt.
Soil Studies
Otis Gold studied 681 soil samples from two grids (North Soil Grid – 266 samples and
South Soil Grid – 415 samples) which are positioned along the strike projection of the
Northwest Fault. The purpose of the study at the North Soil Grid was to extend the strike
length of the Mine Ridge Deposit northward of the +100 meters thick intercepts. The
results from the North Soil Grid displayed strong linear gold-in-soil anomalies that trace the
extension of the Northwest Fault for a minimum of 400 meters to the northwest and
represent the surface manifestation of feeder faults that supplied the gold-rich
hydrothermal fluids into the deposit’s host rocks. Sampling of the South Soil Grid was
performed in order to better define drill targets in the Prospect Ridge target area, located
immediately to the southeast of the Mine Ridge deposit. Results from the South Soil Grid
identified a large, and previously untested, anomalous area in the Prospect Ridge target
area. The results from the South Soil Grid displayed a very strong and coherent gold-in-
soil anomaly that covers around 15,000 sq. meters in the Prospect Ridge target area.
Metallurgy
In 2010, McClelland Laboratories, Inc. of Sparks, Nevada conducted column leach tests
on three main host rock sample types found at the deposit. The results were in line with
historical findings and indicated that a conventional heap leach process technology can be
used at the deposit. It was also found that 93% of the deposit comprised of Felsic Dikes
and Lithic Tuff type of rocks and maximum mineralization occurred in them. The column
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Otis Gold Corp.
leach tests showed that the recovery rate for three types of host rocks (Felsic Dikes, Lithic
Tuff and Aspen Formation) was 85%, 81% and 70% respectively. The tests performed in
2010 indicated that up to 77% of the gold extracted during the process is recoverable
within 30 days. Further in 2011, column leach tests were conducted on three samples
comprising oxidized and non-oxidized Dike and oxidized Lithic Tuff and the results
confirmed that the heap leach cyanide method of extraction can be used at the Kilgore
Mine Ridge. Most importantly, they showed that larger crush size material (e.g. 1.5”)
leached at the same rate as 0.5” crush size material in 2 of 3 tests, indicating the potential
for a “run of mine” scenario at Kilgore. Larger crush sizes will reduce both capital and
operating costs at Kilgore.
Exhibit 5 : Results of 2011 Column Leach Tests on 1.5 inch and ½ inch crushed material
Rock Type Crush Size Leach Time % Au
Recovery
CN Consumption (lbs/ton ore)*
Lime Consumption (lbs/ton ore)
Oxidized Felsic Dike
12.5 mm/0.5” 78 days 83.3 % 0.76 1.0
38.0 mm/1.5” 78 days 71.2% 0.69 1.0
Un-Oxidized Felsic Dike
12.5 mm/0.5” 91 days 74.5% 0.82 1.8
38.0 mm/1.5” 91 days 78.5% 1.00 1.1
Oxidized Lithic Tuff
12.5 mm/0.5” 91 days 85.5% 0.87 1.8
38.0 mm/1.5” 91 days 84.9% 0.60 1.8
Source: Company Website * Commercial CN consumption in heaps is generally 25%-33% of NaCN consumption
achieved from laboratory tests.
The results of the column leach tests showed a recovery rate of 85% - 90% within 30
days. The tuff comprises 65% of the deposits. The leaching process (extraction of gold
under the effect of a solvent) for tuff requires the same time for both crush sizes. The un-
oxidized dike showed a similar recovery rate of approximately 75%, with the coarser
crushed material having an even better recovery percentage at 78%. Only the oxidized
dike (14% of the deposit by volume) showed feed size sensitivity in regard to gold
recovery in column leach tests, possibly due to the shorter residence time of 78 days.
Future Plans
At the Kilgore deposit, around 7,000 meters of drilling is being planned for 2013, focused
on the North Target area. Additional drilling is expected to take place at Prospect Ridge.
The Company also plans to initiate scoping study to evaluate project economics and also
conduct 12 month environmental baseline studies. In addition, Otis Gold has received
permits to drill on six sites at the Gold Ridge target and hence initial testing is expected to
be undertaken.
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Otis Gold Corp.
Oakley Project
The Oakley Project is an intermediate-stage epithermal hot springs gold exploration
project comprised of two primary targets, Cold Creek and Blue Hill Creek, located in
Cassia County, Idaho, roughly 15 miles south of Oakley and just north of the Utah/Nevada
border.
Exhibit 6 : The Oakley Project - Location
Source: Company Website
Claims, Permits and Working Interest
The Oakley Project has 107 federal lode mining claims as well as several Utah State
leases (comprising 1,360 acres). Currently, Otis Gold has 70% WI in the Oakley Project
and is in the process of increasing that to a 100% stake. Once completed, Otis plans to
enter into a separate transaction with Lateral Gold Corp. to offer them an option to
purchase up to 70% WI in the Oakley Project in return for cash, property expenditures and
Lateral shares.
Exhibit 7 : The Oakley Project - Lateral Gold Corp. – JV Payment Schedule for 70% WI
Type of Payment
Amount Conditions
Cash
C$15,000 On execution of agreement
C$35,000 On the acceptance of option by TSX Venture Exchange (i.e. Acceptance Date)
C$115,000 1st anniversary of the acceptance date
C$250,000 2nd
anniversary of the acceptance date
C$250,000 3rd anniversary of the acceptance date
C$250,000 4th anniversary of the acceptance date
Total Cash C$915,000 To be paid by Lateral Gold Corp.
Work Expenditures
C$300,000 shall be incurred within 12 months following the Acceptance Date with at least 50% to be spent directly on drilling
C$700,000 within 24 months following the Acceptance Date
C$1,300,000 within 36 months following the Acceptance Date
C$1,500,000 within 48 months of the Acceptance Date
C$1,900,000 within 60 months of the Acceptance Date
Total Work Expenditure
C$5,700,000 To be incurred by Lateral Gold Corp.
Shares
200,000 On acceptance date
250,000 on or before the first anniversary of the Acceptance Date
500,000 on or before the second anniversary of the Acceptance Date
1,500,000 on or before the third anniversary of the Acceptance Date
2,500,000 on or before the fourth anniversary of the Acceptance Date
Total Shares 4,950,000 To be issued by Lateral Gold Corp.
Source: Company News, 10th January 2013
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Otis Gold Corp.
Exhibit 8 : The Oakley Project - Lateral Gold Corp. – JV Payment Schedule for balance 10% WI
Type of Payment Amount Conditions
Cash C$500,000 within 90 days of earning its 70% interest
C$1,000,000 within 24 months of earnings its 70% interest
Total Cash C$1,500,000 To be paid by Lateral Gold Corp.
Shares 500,000 issued within 90 days of earning its 70% interest
1,500,000 within 24 months of earnings its 70% interest
Total Shares 2,000,000 To be issued by Lateral Gold Corp.
Source: Company News, 10th January 2013
The balance 20% WI can be taken by Lateral Gold Corp. by offering 5 million shares and a
cash payment based on a multiple of any NI 43-101 Inferred Gold ounces contained in a
NI 43-101 Report to be filed with the Exchange in conjunction with its approval of this
Agreement, with both to made within six months of achieving the 80% interest.
Additionally, an NSR of 2.5% will be issued in favor of Otis Gold in connection with any
lands subject to this agreement that are not already encumbered by royalty agreements.
Geology
Blue Hill Creek is comprised of gold bearing sinters and Tertiary Salt Lake Formation
among sedimentary and volcanic rocks. Sedimentary rocks with disseminated pyrite and
quartz veining form the main target in the altered zone with mineralization in all directions
containing surface gold values up to 0.060 opt. At Cold Creek, alteration and gold
mineralization are hosted by Tertiary Salt Lake Formation sedimentary and volcanic rocks.
Pervasive silicification and local strong chalcedonic quartz veining are the primary
alteration types present at the main target in the altered zone. This zone contains surface
gold values to 0.060 opt. Mineralization appears related to north- and northeast-trending,
high-angle structures for both Blue Hill and Cold Creek.
Resources
Exhibit 9 : NI 43-101 Compliant Resources
Resource Category Tons (Million) Grade Au (gpt) Contained Au oz Date
Indicated 14.4 0.549 235,000 February 2008
Source: Technical Report, Blue Hill Creek Gold Project - Geology, Mineralization, Resource Potential, Cassia
County, Idaho’, by Mr. Laurence Pancoast, Geologist, Company Website
Exploration and Drilling
Otis Gold conducted geologic mapping and sampling at the Blue Hill Creek and Cold
Creek Project and completed a CSAMT survey in the summer and fall of 2008. Results
from the survey indicate the presence of a sizeable and geologically significant 1.5
kilometer-long, low-resistivity anomaly underlying and extending down dip from the Blue
Hill Creek gold deposit. Based on the results of the survey, the Company took additional
Federal lode mining claims and applied for additional Idaho State leases to expand the
Company's land position beyond the original core claims.
Hai Project
The Hai Project is a gold exploration project located at Lemhi Counties of Idaho with 7
lode claims. This project was acquired as a part of the JV agreement with Bayswater
Uranium in 2008. It is 5 sq. mile, volcanic-hosted disseminated epithermal hot-spring gold
system situated on the northern margin of the eastern Snake River Plain. The deposit
consists of rocks that belong to the Miocene age while the mineralization is of Pliocene
age. No exploration has been done on this project nor has any resources been defined.
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Otis Gold Corp.
Gold Bug Project
The Gold Bug Project is a gold exploration project located roughly 3 miles from the Hai
project. The eluvial placer gold deposits occur on the slopes of gentle terrain and deposit
is characterized by large tonnage, low-grade gold mineralization. The project has 9 lode
claims. No exploration has been done on this project nor has any resources been defined.
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Otis Gold Corp.
Industry Overview
Gold
Gold (Symbol: Au) is a bright yellow colored, malleable, ductile, dense and lustrous metal.
Its chemical properties such as resistance to corrosion, electrical conductivity, infrared
(heat) reflectivity and thermal conductivity have led to its uses in a variety of industry
applications. It is soluble in cyanide alkaline solutions and mercury, a property which is
very commonly used for gold extraction from low-grade ore. Gold is found in very low
concentrations and usually occurs in an alloy form with silver and copper. It also occurs in
compound forms of tellurides such as calaverite, sylvanite, petzite, etc. It is found in
alluvial and lode deposits in the ground, as well as in low concentrations in sea water.
Demand
The demand for gold is chiefly driven by the consumer’s need to preserve value. In 2011,
gold demand (including official sector purchase) grew by 10.6% Y-o-Y in terms of volume
to 4,585.7 tons. In terms of value, the demand grew by 41.9% to US$231.7billion in 2011
led by an increase in the price of gold.iii
However, in the 9 months period ended
September 2012, gold demand declined by 7.3% Y-o-Y in terms of volume to 3,185 tons
and by 0.3% in terms of value to reach US$169.2billioniv primarily due to a decline in
demand from the two major consumers; India and China. Depreciation of rupee against
the US dollar, stubborn inflation and high interest rates in India caused the local prices of
gold to shoot up, impacting the jewelry demand from that region. Further, China’s GDP
was hampered by a slump in real estate market and a decline in the growth rate of
exports. Negative sentiments in the market triggered by reduced economic growth,
coupled with a shift by policy makers giving priority to consumption over investment has
hurt commodity prices leading to decline in gold demand in China.
Exhibit 10 : Total Gold Demand: By Applications (2007-2011)
2,405 2,187
1,747 2,017 1,972
685 1,183
1,271
1,588 1,704
462 436
368
466 453
77 457
0
1,000
2,000
3,000
4,000
5,000
2007 2008 2009 2010 2011
Jewellery Total investment Technology Official sector purchases
Go
ld D
em
an
d (T
on
ne
s)
3,552 3,3863,806 4,5864,148
43%
37%
10%
10%Jewellery
Total investment
Technology
Official sector purchases
2011
Source: World Gold Council
Note: Gold demand includes official sector purchases. For the years 2007-2009, there were net official sector sales
which form a part of the supply and hence, are not shown in the chart.
12
Otis Gold Corp.
The major sources of gold demand can be categorized into: jewelry, investment,
technology and official sector (Central Banks).
Jewelry
Jewelry has consistently accounted for a major proportion of the gold demand. Usually,
demand for jewelry grows during periods of price stability and lessens during periods of
price volatility. In 2011, about 43.0% of the total gold demand in terms of volume
amounting to 1,972.1 tons was driven by jewelry on the back of strong demand from
India.v
Investment Demand
Investment demand, which includes bar and coin demand as well as investment in ETFs,
was the second largest source of demand for gold and contributed to 37.2% (1,703.9 tons)
of the total gold demand in terms of volume in 2011. vi
In the past five years i.e. 2007-
2011, investment demand increased at a CAGR of 53.8% in terms of value to reach
US$86.1 billion. vii
The ability to reduce credit risk, use of gold to hedge against inflation
and positive price expectations have been the key drivers for increased investments in
gold.
Technology
Gold in technology is mainly used in electronics and dentistry. The demand for gold used
in Technology as a percentage to the total demand has declined to 9.9% (452.9 tons) in
2011 from 13% in 2007 (462.0 tons). viii
High average gold prices and negative consumer
sentiments in an uncertain economic environment have led to reduced consumption in this
sector.
Official Sector Sales/Purchases
Official sector sales/purchases are undertaken by Central Banks and multinational
organizations such as International Monetary Fund. On an average, central governments
hold about 15% of their official reserves as gold, although the fraction differs by country.
Since 1989, the official sector has been a net seller and has, therefore, contributed to the
supply of gold. However, post the recession in 2008-09, there has been a significant
demand shift in this sector and central banks have turned net purchasers of gold. The
official sector purchased about 97.6 tons of gold (about 9% of the total demand) in the
third quarter of 2012 and 456.8 tons of gold (about 10% of the total demand) in 2011. ix
European economies have started increasing the proportion of gold reserves in order to
provide confidence and stability in view of on-going weakness in the Eurozone. Even
emerging economies have experienced strong growth and have started buying significant
amounts of gold in order to diversify their external reserves and to re-establish the former
balance between foreign currencies and gold. The World Gold Council projects that the
official sector will continue to purchase gold and contribute to its demand in the future.
Regional Demand for Gold
India is the world’s largest consumer, contributing to 27% of the total demand in 2011 in
terms of volume (933.4 tons) x. Demand for gold in India is driven by cultural and religious
traditions and, hence, is relatively less affected by global economic trends. The recent tax
hike on imports of gold in India is likely to affect the demand marginally. Greater China
(China, Hong Kong and Taiwan) is another large market of gold, contributing to 23.5%
(811.2 tons) of the total demand in terms of volume in 2011. xi Gold demand in China has
increased consistently as a result of liberalization of the gold investment market, launch of
novel gold savings accounts and an increasing preference for gold as a means of wealth
preservation.
13
Otis Gold Corp.
Exhibit 11 : Consumer Demand Trends (2000-2006-2011)
28.6%
11.6%
5.0%25.0%
14.6%
15.3%
2000
2,532 tonnes
30.6%
12.4%
4.9%27.0%
16.0%
9.1%
2006
India Greater China
Europe ex CIS * Middle East - Turkey
USA Rest of the World (ROW)
2,360 tonnes
27.1%
23.5%10.9%
10.0%
5.6%
22.9%
2011
3,450 tonnes
Source: World Gold Council
Note: Consumer demand is defined as gold purchased directly by individuals and includes jewelry and bar and coin
purchase.
Supply
The major sources of gold supply include mines, recycled gold and official sector sales.
The gold supply trend in the recent years has been given below:
Exhibit 12 : Break-up of Total Gold Supply (2007-2011)
956 1,217
1,549 1,723 1,669
2,032
2,060
2,297
2,632 2,836 484
236
44
0
1,000
2,000
3,000
4,000
5,000
2007 2008 2009 2010 2011
Recycled gold Total mine supply Official sector sales
Go
ld S
up
ply
(To
nn
es)
3,472 3,8903,513 4,5054,355
37%
63%
Recycled gold
Mine production
2011
Source: World Gold Council
Note: Supply includes official sector sales. For the years 2010-2011, there were net official sector purchases which
form a part of the demand and hence, are not shown in the chart.
As shown by the chart above, relative proportion of recycled gold and total mine supply
has remained near about the same in 2011 as compared to the previous year.
14
Otis Gold Corp.
Mine production
Exhibit 13 : Gold Mine Production Trend (2000-2006-2011)
6.7%
11.5%
13.7%
5.5%
16.6%5.2%4.8%
6.0%
30.0%
2000
2,590 tonnes
9.5%
9.9%
10.3%
6.0%
10.8%8.0%
6.6%4.1%
34.8%
2006
China Australia USA
Russia South Africa Peru
Indonesia Canada Other
2,359.9 tonnes2,481 tonnes
13.1%
10.0%
8.8%
7.4%
7.0%
5.6%4.4%
4.1%
39.6%
2011
2,827 tonnes
Source: World Gold Council
Note: World gold production data for the 2006 and 2011 has sourced from World Gold Council. Production figure for
2000 has been sourced from the US Geological Survey.
While new mines have been developed in the past few years, these have served as a
means to replace existing production and to meet the current demand rather than to
expand global production. As a result, production has remained reasonably steady and
averaged 2,377 tons per year in the five years to Q4 2011. xii
Gold mining involves longer
lead times and it takes 5 to 10 years for a new mine to come on stream. Hence, gold
production is described as relatively inelastic as miners cannot rapidly increase production
to take advantage of increase in prices.
Gold mine production takes place throughout the world except in Antarctica, where mining
is prohibited. Historically, South Africa was the largest producer of gold followed by the
U.S. and Australia. However, the rapidly rising demand in China has boosted its domestic
production and made it the major producer in 2011. According to the Chinese Ministry of
Industry and Information Technology, in the coming years the Chinese government is
looking to increase domestic production to 450 tons by 2015 (increase of 25% over 2011
levels) and is supporting gold exploration, encouraging mergers and restructuring within
the sector, and promoting their technological up-gradation. xiii
Recycled Gold
Since gold is neither consumed nor destroyed in its use, recycling forms an important
source of gold supply. The recycling of gold ensures availability of a potential source of
supply which helps to cater to an increase in demand and keep the gold price stable.
Recycled gold constituted an average of 37% of the annual supply flows over the 5-year
period ending Q4 2011.xiv
15
Otis Gold Corp.
Reserves
Exhibit 14 : Gold Reserve Trends (2000-2006-2012)
25%
10%
10%7%9%
1%7%
1%2%3%1%
23%
2000
33,157 tonnes
27%
11%
11%8%
9%
2%4%1%3%2%1%
21%
2006
USA GermanyIMF ItalyFrance ChinaSwitzerland RussiaJapan Netherlands
2,359.9 tonnes30,472 tonnes
26%
11%
9%8%
8%3%
3%3%2%2%2%
23%
2012
31,575 tonnes
Source: World Gold Council
The chart above demonstrates that there has been no significant change in world gold
reserves over 2000-12. It is observed that USA, Germany and IMF have, historically, been
the largest holders of gold reserves.
Gold Price Trend and Outlook
With increasing demand for gold in jewelry, currency, industrial applications and
investment purposes, gold price has been on a rise. Its price in 2012 averaged US$1,669
per oz, an increase of 6.2% over the 2011 average of US$1,572 per oz. xv
Exhibit 15 : Daily Gold Price (2007-Present)
0.0
400.0
800.0
1,200.0
1,600.0
2,000.0
1/1
/20
07
7/1
/20
07
1/1
/20
08
7/1
/20
08
1/1
/20
09
7/1
/20
09
1/1
/20
10
7/1
/20
10
1/1
/20
11
7/1
/20
11
1/1
/20
12
7/1
/20
12
1/1
/20
13
Daily Gold Price / London PM Fix (US$/Oz)
Pri
ce
(U
S$
/Oz)
Source: World Gold Council
There has been a growing uncertainty with respect to US Budget Deficit and EU debt and
there have been no immediate or concrete solutions to these problems. However, policy
makers are trying to solve these issues through unconventional monetary policies such as
quantitative easing wherein the central bank buys financial assets from commercial banks,
thus injecting money into the economy. Further round of Quantitative easing is expected in
future to revive the economy. However, with increase in money supply there could be a
debasement of currency. In such a scenario, investors are likely increase their holdings in
Gold due to its perception as a safe haven during volatile times, a good portfolio diversifier
and hedge against inflation increasing its demand. On the other hand, with excessive debt,
there is possibility of the default at a country level wherein all the government bonds could
be written-off and hence investors would start looking at Gold as the next best investment
option.
16
Otis Gold Corp.
Growth Factors
Encouraging Prospects for Flagship Kilgore Project
Increase in Resources
The Kilgore Deposit contains a NI 43-101 Indicated Resource of 520,000 oz Au in 27.4
million tons at a grade of 0.59gpt Au (representing a volume increase of 138% in oz and
328% in tons as compared to the 2002 estimates). The Inferred resources contains
300,000 oz Au in 20.2 million tons at a grade of 0.46gpt Au (representing a volume
increase of 12% in oz and 131% in tons as compared to the 2002 estimates). It should
also be noted as per geological studies undertaken by the Company, there exists a
significant potential for Otis Gold’s Kilgore deposits to exceed the 1 million oz mark.
Further, other target areas such as Gold Ridge and Dog Bone Ridge have additional multi-
million ounce potential.
Potential at the Kilgore North Target Area
According to the results of the drilling undertaken at the Kilgore North Target Area in the
fall of 2012, where a number of bulk-tonnage intercepts in excess of 80 meters in
thickness were intersected, the 6 holes which were drilled showed the existence of 82.3
meters (m) of 0.95 grams per tons gold (gpt Au) in hole 12 OKR-291, 121.9 m of 1.04gpt
Au, that includes 45.7 m of 1.52gpt Au, in hole 12 OKR-292, and 83.8 m of 1.12gpt Au,
that includes 30.5 m of 2.10gpt Au, in hole 12 OKR-294. We believe that the drilling results
indicate better prospects for the Company as it intends to generate future revenue by
transitioning from the explorer to the developer/ producer stage in this project.
Near-term Production
The Kilgore Project is a near-term production project and is expected to commence
production as early as 2017 and produce approx. 50,000 oz Au per year. The project has
the following positive factors:
Characterized by volcano-based open pit epithermal deposits which are less
expensive in terms of extraction costs, thereby reducing technical feasibility risk
Based in Idaho which is not only a mining friendly jurisdiction but also a hub for
several gold discoveries in the past
Easily available labor and an already established infrastructure
Very favorable projected strip ratios and gold recoveries
The Kilgore deposit, with lower capital requirements, favorable infrastructure and location,
and lower technical risk, has a high probability to succeed and is likely to generate cash
flows for the Company in future.
Secured Funding Through JV
Otis Gold entered into a JV on its Oakley Project with Lateral Gold Corp, another junior
gold exploration and development company, in January 2013. The Oakley Deposit has an
NI 43-101 compliant Inferred resource of 235,000 oz Au at a grade of 0.55gpt. The JV will
provide an opportunity to the Company to further develop the Oakley Project and generate
capital to fund other activities.
Experienced Technical Team and Strong Management
Otis Gold’s exploration and development team has high expertise in developing mining
projects and includes members from the US exploration team of Echo Bay Mines such as
17
Otis Gold Corp.
Mitch Bernardi, John Carden, Donald E. Ranta, Charles W. (“Bill”) Reed. This expertise is
visible in their strong track record during their term of employment at Echo Bay Mines as
well as other organizations where they were involved in the development of several
projects such as Lamefoot gold deposit, Easy Junior gold deposit, White Pine County gold
deposit, Coulterville gold Project, Crypto zinc deposit, Pan gold deposit, Noche Buena
Project, San Sebastian silver and gold mine, McDonald gold ore, Santa Gertrudis gold ore,
and Paradones Amarillos among several others.
The management team led by Craig Lindsay (CEO and President), Mitch Bernardi (Chief
Geologist), and John Carden (Consulting Geologist & Board Advisor) have a combined
experience of 98 years in corporate finance, public company management, as well as
exploration and mining. An experienced technical team coupled with strong management
is a strong driver for future growth of the Company.
Favorable Outlook for Gold Demand and Price
Demand for gold in terms of jewelry, in the form of investment as well as in technology has
been rising rapidly in the past few years. Historically, the highest demand for gold has
been from India for use in jewelry. However since 2006, China’s gold demand has
increased at a rapid pace prompting the Government to support domestic production as
well as increase imports in order to meet its current demand. Central Banks of various
countries have been purchasing gold to protect themselves from future recessionary
times.
The rising demand for gold combined with the relatively inelastic nature of its supply has
led the gold prices to skyrocket after the 2008-09 recession. In the backdrop of this
demand-supply imbalance as well as additional quantitative easing, growth in demand and
price is likely to continue.
Exhibit 16 : Gold Demand vs. Price (2007-2012)
600
800
1,000
1,200
1,400
1,600
1,800
600
800
1,000
1,200
1,400
1,600
1,800
Q1 2007
Q3 2007
Q1 2008
Q3 2008
Q1 2009
Q3 2009
Q1 2010
Q3 2010
Q1 2011
Q3 2011
Q1 2012
Q3 2012
Total Gold Demand (Tonnes) Average Gold Price / London PM Fix ($/Oz)
Go
ld D
em
an
d (T
on
ne
s)
Ave
rag
e G
old
Pric
e ($
/Oz)
Source: World Gold Council
18
Otis Gold Corp.
SWOT
Strengths
Experienced Technical Team. Otis Gold boasts a strong technical team which
consists of the core members of the Echo Bay Mines US exploration team. The Echo
Bay Mines team was one of the most active explorers during the period 1993-1996 at
the Kilgore deposit. They successfully drilled approx. 25,000 meters at Kilgore and
performed airborne magnetic surveying, regional geologic mapping, soil sampling,
and the collection of baseline soil data. The results of these exploration studies
demonstrated existence of a substantial gold deposit at Kilgore.
Kilgore is a Low Sulphide Epithermal Deposit. The extraction costs related to this
resource are relatively low due to the nature of epithermal deposits, which are found
very close to the surface. Further, low sulphidation deposits allow for the use of the
‘Heap Leach Extraction Method,’ which increases the recovery rate at low costs and
thereby enhances the economic feasibility of the Kilgore Project.
Mining Friendly Jurisdiction. Idaho has a long history of being a mining friendly
jurisdiction and is rich in silver, molybdenum, gold, and phosphate deposits.
Furthermore, the Kilgore Project is outside the jurisdiction of any national park or
Indian Reservation making the permitting process less complicated.
Potential for Expansion. The Kilgore Project currently has a strong Indicated and
Inferred resource base which has the potential to be increased to over 1 million oz.
Since volcanic deposits like Kilgore occur in clusters, it is estimated that the Gold
Ridge and Dog Bone Ridge targets could host additional multi-million ounce potential.
Availability of Infrastructure and Labor. The Kilgore site is accessible through a
network of paved roads while a freight line runs through Spencer (Idaho) and Dubois
(Idaho). Further, water and power are abundant while labor is also readily available.
Weaknesses
Losses resulting in Dilution of Shareholder Base. In the absence of revenue, the
Company has been reporting losses since inception in April 2007. These losses have
resulted in erosion of the Company’s net worth compelling Otis Gold to raise equity
through private placements and dilute the shareholder base.
No Proven Reserves. While Otis Gold does report an Indicated and Inferred
resource base of approximately 1,055,000 oz of gold, it does not have any Measured
deposits or gold in the Reserve category.
Opportunities
Growing Demand for Gold. The demand outlook appears favorable led by investor
preference for gold, increasing consumption demand and increased gold buying by
Central Banks globally.
Projection of Higher Gold Price in Future. Quantitative Easing and the possible
devaluation of currencies coupled with higher inflation rate are likely to lead to an
increase in gold prices. As gold prices rise, cut-off grades fall making it possible for
the companies to mine lower-grade material.
Availability of More Efficient Technology. Innovative and more efficient methods
for gold detection which use satellite imagery, remote sensing technology and
geophysics have increased the likelihood of discovering economically viable
19
Otis Gold Corp.
quantities of gold deposits. This would encourage more exploration activities and
hence provide more growth opportunities for the industry.
Threats
Rising Costs. If production cost inflation outstrips increases in gold price, the
economic viability of gold mines under development would be impacted, thereby
discouraging companies from pursuing further development of exploration projects.
Mining Tax on Federal Land. According to the General Mining Law of 1872, mining
companies in USA do not have to pay royalties to the Government for any gold
produced on federal land. However, the Obama administration has considered
implementing a 12.5% tax proposal on such gold mine production, which could lead to
increases in mining costs and reduced profit margins. xvi
20
Otis Gold Corp.
Financial Performance
Exhibit 17 : Latest Financial Statement
In C$ Quarter Ended
Sept 30, 2012 Quarter Ended
Sept 30, 2011 Y-o-Y (%)
EXPENSES
Consultants 39,991 42,251 -5.3%
Office Expenses 31,788 35,530 -10.5%
Share-based Compensation 0 10,155 -100.0%
Investor Relations and Advertising 13,105 39,512 -66.8%
Professional Fees 33,972 12,914 163.1%
Travel and Entertainment 11,169 29,254 -61.8%
Regulatory Costs 3,058 3,503 -12.7%
Property Investigations 0 4,147 -100.0%
Depreciation of Equipment 2,277 2,852 -20.2%
Bank Charges 546 523 4.4%
Total Expenditure 135,906 180,641 -24.8%
OTHER ITEMS
Interest Income 4,531 8,108 -44.1%
Foreign Exchange Loss (3,058) (110,710) -97.2%
Total Other Items 1,473 (102,602) NM
Comprehensive Loss for the Period (134,433) (283,243) NM
Deficit at the Beginning of the Period (4,382,616) (3,160,258) NM
Deficit at the End of the Period (4,517,049) (3,443,501) NM
Loss Per Share (0.002) (0.007) NM
Source: Company Reports
Otis Gold, is currently in exploration stage, and has therefore not yet begun generating
revenues from its operating activities. The Company has reported operating losses since
its inception in April 2007. Loss for the quarter ended September 30, 2012 was C$0.13
million as compared to C$0.28 million for the same period a year before. Total Expenditure
for the Q1FY2013 reduced by 24.8% Y-o-Y due to reduced Investor Relations &
Advertising Expenses and Travel & Entertainment Expenses.
The Company is currently debt-free and has a cash balance of C$1.7million as of
September 30, 2012. Fuelled by acquisitions of exploration assets activities at its Kilgore
Project, the Unproven Mineral Interests (Exploration and Evaluation Assets) increased
from C$2.4 million as of 30th
June 2009 to C$15.3 million as of September 30, 2012.
So far, the Company has raised funds for its operations through the issue of common
shares and warrants often issued in consideration for Exploration and Evaluation Assets.
The Company is yet to raise funds though debt or any other fixed interest bearing security.
21
Otis Gold Corp.
Relative Valuation
While considering comparable companies, we have restricted our Peer set to only include
companies that have projects in Idaho and have NI 43-101 compliant resources with
contained Au of 500,000 oz or more.
Exhibit 18 : Peer Analysis
Exhibit 19 : Market Capitalization per Ounce of NI 43-101 Certified Au or Au Eq.
55.9
29.8
20.5 14.8
9.4 6.9
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Northern Vertex Mining Corp(NEE CN)
Midas Gold Corp
(MAX CN)
Terraco Gold Corp
(TEN CN)
Premium Exploration Inc
(PEM CN)
Atlanta Gold Corp
(ATG CN)
Otis Gold Corp(OOO CN)
MC
ap
/Co
nta
ine
d A
U in
oz (
C$
/oz)
Median:C$17.6/ oz
Otis Gold currently trades at a Market Capitalization to Resources (oz contained Au) ratio
of C$6.9 per oz of gold or gold equivalent which is lower than its peers who are trading at
a median of C$17.6 per oz of gold or gold equivalent. It is important to note that Northern
Vertex and Midas Gold command a premium as they both are in advanced stage of their
business cycle. Midas Gold has filed its Preliminary Economic Assessment for its Golden
Meadows Project in September 2012 and Northern Vertex is expected to commence
construction on a phase one pilot plant in Q2 2013. Given that Otis Gold has a sound
asset base and an experienced technical team; one can expect a strong potential upside
for its valuation as the Company progresses though its business cycle.
Company Name Ticker Share Price (C$) – As on 24
th Jan. 13
Shares o/s
Million
M. Cap (C$
million)
NI 43-101 oz
(Au or Au Eq.)
M.Csp/oz (C$)
Northern Vertex Mining Corp
NEE CN 1.30* 52.6 68.4 1,223,140 55.9
Midas Gold Corp MAX CN 1.85 114.8 212.4 7,119,000 29.8
Terraco Gold Corp TEN CN 0.15 133.8 19.4 948,000 20.5
Premium Exploration Inc
PEM CN 0.08 143.2 11.5 775,000 14.8
Atlanta Gold Corp ATG CN 0.05 248.2 11.2 1,182,300 9.4
Otis Gold Corp OOO CN 0.15 50.2 7.3 1,055,000 6.9
Sources: Bloomberg, Company websites.
* Price as on 22nd
Jan. 13
22
Otis Gold Corp.
Key Risk Factors
Financing Risk. As an exploration stage Company, Otis is likely to need additional
funds to fully develop its assets. If Otis is not able to raise funds as needed, the
Company may face delays or be forced to abandon its exploration and production
plans. However, since inception, the Company has successfully raised capital through
several private placements on various occasions, while the pending JV with Lateral
Gold Corp will also further mitigate this risk.
Commodity Price Risk. The range-bound movement of gold prices coupled with
rising extraction costs in recent times has been a major concern for gold exploration
companies. In such a scenario, a significant decline in gold prices could make
exploration projects economically unviable. However, management indicates that their
cash cost of production is between $650 – $750 per oz which compares very
favorably to the recent average gold price of $1,697 per oz xvii
.
Exploration Risk. There is a risk that the Kilgore Project may not achieve the
estimated resource base as anticipated by the Company. However, geological studies
carried out by Otis Gold have established that the probability of finding gold at their
sister deposits at Gold Ridge and Dog Bone Ridge is fairly high.
Permitting Risk. The mining industry is subject to significant regulatory control due to
the environmental threats resulting from exploration and drilling activities. Any delay
or failure to receive permits could have a significant impact on the Company’s
prospects. However, the Kilgore Project is located in the State of Idaho which is a
mining friendly jurisdiction. It should be noted that the Kilgore Project is located
outside the jurisdiction of any national park or Indian Reservation and no endangered
species have been found in the area surrounding Kilgore. Further, drainage water
from the site does not pollute any drinking water reserves, further reducing this risk.
Delay in Production. Currently, the Company does not have any projects in the
production stage. The successful exploration and development of the Kilgore Project
holds the key to the growth of the Company and any delay in production could impact
its future prospects.
23
Otis Gold Corp.
Management and Board of Directors
The management and governance team is composed of a good balance of experienced
professionals, geologists and consultants accomplished in exploration, mining, planning,
implementing, directing and developing deposits across the globe. The team also
composes of professionals from Investment Banking, Corporate Finance and Business
Development.
Mr. Craig Lindsay, CEO, President and Director
Mr. Lindsay has a Bachelor of Commerce (Finance) degree from UBC, a Master of
Business Administration (Finance and International Business) degree from Dalhousie
University, and is a Chartered Financial Analyst. He has over 18 years of experience in
Investment Banking, Corporate Finance, and Business Development in Asia and North
America. His prior experience includes positions as a President and CEO of Magnum
Uranium Corp and Vice President (Corporate Finance and Investment Banking Group) at
PricewaterhouseCoopers LLP, founding Director of Malasapina Capital Ltd and Chairman
of the Family Services of Greater Vancouver. Presently, he is a Director and immediate
past President of the Hong Kong – Canada Business Association (Vancouver Section),
member of the Leadership Council of Dalhousie University’s “Bold Ambitions” capital
campaign and a Director of Tarsis Resources Ltd, Archer Petroleum, and Philippine
Metals Inc.
Mr. Mitch Bernardi, Chief Geologist
Mr. Bernardi holds a Master of Science (Geology - Magna Cum Laude) degree from
Western Washington University and undertook a University Fellowship at Ohio State
University. He has over 30 years of experience in the mining industry and has worked at
Echo Bay Mines (Sr. Geologist), Cyprus Metals Exploration, Meridian Minerals, Unocal -
Molycorp, Inc, Latitude Minerals, Amoco Minerals and Magnum Uranium Corp. He has
also been a project leader or co-discoverer of various projects such as Kilgore gold
deposit (706,000 oz Au), Coulterville gold Project (70,000 oz Au), Crypto zinc deposits
(6.01 million tons @8.68% sulfide zinc), Pan gold deposit (400,000 oz Au), Santiam
copper breccia pipe, and the Blue Hill Creek gold/silver deposit (235,000 oz Au).
Dr. John Carden, Consulting Geologist & Board Advisor
Dr. Carden has a PhD in Geology from the Geophysical Institute, University of Alaska, and
a Masters in Geology from Kent State University. He is a Licensed Geologist in the State
of Washington, a Fellow of the Society of Economic Geologists, and a member of the
American Institute of Professional Geologists. He has over 30 years of experience in
exploration management, teaching, and research. In the past, he has worked at Echo Bay
Mines for 12 years and headed a group of 2 district geologists, 8 senior geologists, and a
GIS specialist and was responsible for generating 35 funded projects some of which
include Lamefoot gold deposit (600,000 oz Au) and Easy Junior gold deposit (250,000 oz
Au). He has also acted as a consultant for some gold projects such as Corex Gold Corp
and Paramount Gold and Silver Corp. Presently, Dr. Carden is a Director of Paramount
Gold and Silver Corp. (NYSE: PZG).
Dr. Donald E. Ranta, Director
Dr. Ranta has a PhD and is a professional geoscientist. He is a mining exploration and
development executive involved in planning, implementing and directing exploration and
acquisitions across the globe. Some of the successful projects he has worked on include
McDonald gold ore (Montana), Santa Gertrudis gold ore (Mexico), Paradones Amarillos
(California), Kilgore (Idaho), Seven-Up Pete (Montana), Mexico Dolores gold-silver
(Mexico), Youga gold (Burkina Faso's) and Kuranakh gold deposits (Russia). During his
24
Otis Gold Corp.
tenure, he was a Vice President of Exploration for Echo Bay Mines and Manager/Vice
President for North American Exploration at Phelps Dodge Mining Company. He is a
former Vice President, Finance and board member of the American Institute of Mining,
Metallurgical, and Petroleum Engineers (AIME) and former President and Board Member
of the Society for Mining, Metallurgy, and Exploration (SME). Presently, he is the
Chairman of Rare Element Resources (TSX: RES).
Dr. Roger Norwich, Director
Dr. Norwich holds a Bachelor of Arts (Geology and Archaeology), MB Bachelor of
Medicine and ChB Bachelor of Surgery degrees from Manchester University. He has prior
experience as an oil exploration Geologist for Texaco and was a founding Director of
Mexican Silver Mines Ltd which was merged with Rio Alto Mining Limited (TSX: RIO).
Presently, he is a non-Executive Chairman of Grupo Minero Panuco, an Independent
Director of Rio Alto, and Director of Inkron Limited.
Mr. Charles W. (“Bill”) Reed, Director
Mr. Reed has a Bachelor of Science (Mineralogy) degree from the University of Utah and
is a Registered Professional Geologist in the State of Utah. He has past experience as
Vice President of Exploration for Paramount Gold and Silver Corp, Chief Geologist -
Mexico for Minera Hecla SA de CV (a subsidiary of Hecla Mining), Regional Geologist -
Mexico and Central America, for Echo Bay Exploration. Some of the projects that he has
worked on include detailed exploration at Noche Buena Project (Sonora) and San
Sebastian silver and gold mine (Durango), discovery and drilling of the Don Sergio vein,
identification of potential of the Dolores mining district (Mexico) and recommendation of
acquisitions that led to the discovery of more than 2.5 million oz of gold and 44 million oz
of silver. Presently, he is a Director of Empire Capital Ltd.
Mr. Norman Eyolfson, Director
Mr. Eyolfson is an entrepreneur with significant experience in the mining industry. In the
past 15 years, he has been actively involved in the public markets. Formerly, served as
President of Latitude Minerals Corp and has been a board member of Corex Gold Corp
and Magnum Uranium Corp where he was instrumental in overseeing the Magnum
Uranium Corp-Energy Fuels Inc amalgamation. Currently, Mr. Eyolfson currently sits on
the Board of Directors of Otis Gold Corp. and Empire Capital Corp.
Mr. Sean Mitchell, Director
Mr. Mitchell holds a Bachelor of Commerce (Finance) degree from University of British
Columbia. Prior to joining Otis Gold in 2007, he has worked at Mattmar Minerals Inc, Fii
International Inc, and American Eagle Energy Inc. He has approximately 16 years of
experience in business, specifically in corporate financing and investment banking
activities. xviii
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Otis Gold Corp.
Disclaimer
Some of the information in this report relates to future events or future business and
financial performance. Such statements constitute forward-looking information within the
meaning of the Private Securities Litigation Act of 1995. Such statements can be only
estimations and the actual events or results may differ from those discussed due to,
among other things, the risks described in Otis Gold Corp. reports. The content of this
report with respect to Otis Gold Corp., Inc has been compiled primarily from
consultations and, information provided by Otis Gold Corp., Inc and information available
to the public released by Otis Gold Corp., Inc through news releases and SEC (if
applicable) or other actual government regulatory filings. Although RBMG may verify
certain aspects of information provided to it, Otis Gold Corp., Inc is solely responsible for
the accuracy of that information. Information as to other companies has been prepared
from publicly available information and has not been independently verified by Otis Gold
Corp., Inc or RBMG. Certain summaries of scientific or other activities and outcomes
have been condensed to aid the reader in gaining a general understanding. For more
complete information about Otis Gold Corp., Inc, the reader is directed to the Company's
website at http://www.otisgold.com. RBMG is an equity research and financial
communications firm the operations of which seek to increase investor awareness to the
small cap community. RBMG research analysts do not invest in or own shares of
companies analyzed and reported on by them. RBMG is not responsible for any claims
or losses sustained by an investor resulting from any of its reports, company profiles or
in any other investor relations materials disseminated by them. This report is published
solely for informational purposes and is not to be construed as advice designed to meet
the investment needs of any particular investor, or as an offer to sell, or the solicitation of
an offer to buy any security in any state. Investing in the Stock Market based on past
performance does not guarantee future performance. This report is not to be copied,
transmitted, displayed, distributed (for compensation or otherwise), or altered in any way
without RBMG's prior written consent. RBMG is not compensated for the analytical
research and evaluation services that were performed in connection with the preparation
of this report for Otis Gold Corp., Inc; but RBMG has received compensation (under
$16,000) in exchange for other segregated services.
We strongly urge all investors to conduct their own research before making any
investment decision.
26
Otis Gold Corp.
Sources
i http://www.atna.com/i/pdf/2012_Briggs_NI43_101_final.pdf
ii http://www.kinross.com/pdf/operations/Technical-Report-Round-Mountain.pdf
iii Gold Demand Trends Report (Q3 2012), World Gold Council
iv Gold Demand Trends Report (Q3 2012), World Gold Council
v Gold Demand Trends Report (Q3 2012), World Gold Council
vi Gold Demand Trends Report (Q3 2012), World Gold Council
vii Gold Demand Trends Report (Q3 2012), World Gold Council
viii Gold Demand Trends Report (Q3 2012), World Gold Council
ix Gold Demand Trends Report (Q3 2012), World Gold Council
x Gold Demand Trends Report (Q4 2011), World Gold Council
xi Gold Demand Trends Report (Q4 2011), World Gold Council
xiihttp://www.gold.org/investment/why_how_and_where/why_invest/demand_and_supply/
xiii http://www.marketwatch.com/story/china-2015-gold-output-likely-450-tons-ministry-2012-11-26-34855517
xivhttp://www.gold.org/investment/why_how_and_where/why_invest/demand_and_supply/
xv http://www.gold.org/download/value/stats/statistics/xls/gold_prices.xls
xvi http://www.bloomberg.com/news/2013-01-16/miners-may-pay-u-s-more-in-royalties-under-1872-overhaul.html
xvii Bloomberg
xviiihttp://investing.businessweek.com/research/stocks/people/person.asp?personId=20644412&ticker=OOO:CN&pre
viousCapId=36765668&previousTitle=OTIS%20GOLD%20CORP