Red Eagle Mining CEO Ian Slater on Winning CB Gold, Batero Gold Battle

Red Eagle Mining Corp (CVE:RD)(FRA:R6E) (OTCMKTS:RDEMF) CEO Ian Slater discusses the bitter war for the takeover of CB Gold Inc. (CVE:CBJ)(OTCMKTS:CBHDF) (FRA:C97) against Batero Gold Corp. (CVE:BAT) (OTCMKTS:BELDF)(FRA:68B). After both sides claimed victory, it appears that Red Eagle Mining is definitely the new controlling shareholder of CB Gold, have gained over 50 percent of the company’s outstanding shares.

(CVE:RD)
Midas-Letter-financial-radio-podcast-thumb[four_fifth_last padding=”0 0 0 20px”]Listen to the interview with Ian Slater:

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Full Transcript:

 

James West:    Ian, thanks for joining us today.

Ian Slater:    Thank you, James, great to talk to you again.

James West:    Ian, I guess congratulations is probably premature on your takeover bid for CB Gold in competition with Batero. Where do we stand on that whole transaction at this point?

Ian Slater:    Well, an official share register, Red Eagle owns 49 percent of CBJ and Batero, together with Navarro Grau’s private companies, own 22 percent, and the both bids – they extended their bid a couple of times, so it expires on Monday, and we extended ours so they expire at the same time.

James West:    Mm hmm. Okay. So you control, no ifs, ands or buts, 40 percent, Batero has, sorry, did you say 22 percent?

Ian Slater:    That’s right.

James West:    And now they’ve stated in press releases that they have, what is it, a total of 21 percent of shares tendered in addition to their 22 percent? Is that accurate?

Ian Slater:    Yeah, that’s what their press releases say.

James West:    Okay. And so what has to happen for either party to be successful?

Ian Slater:    Well I think, clearly we’re going to have over 50 percent by the time this is over, so we’ll be in the driver’s seat. We’ve requisitioned a shareholder meeting to replace CB’s board of directors. So I think there’s – so either we’ll go that route, where we’ll take control of the company that way and then do a plan of arrangement merger with Red Eagle, and the existing CB shareholders will end up being Red Eagle shareholders, or there’s still a possibility of coming to an agreement with the Navarro Ground family also, where they buy our shares or we buy their shares, or we develop Vetas together.

James West:    Okay. So it’s very much still to be determined, as it were.

Ian Slater:    Yeah. I think what’s important is that we’re in the driver’s seat, so it really depends on what we want to do.

James West:    Okay. So now what is the grand prize here that CB Gold has?

Ian Slater:    Well, we like Vetas. We did a due diligence on it 18 months ago; we’re convinced, as the Navarro Grau family is, that this will be a mine. We think it’ll give a similar type of production that we’re going to start with Santa Rosa next year. You know, Santa Rosa is going into production next summer at 70,000 ounces a year, and we think we can get that kind of production out of Vetas. So for us, it’s a material acquisition of our pipeline project, and we can move our engineers up there to start working on the engineering once they’ve finished building Santa Rosa.

So we had our eye on it for a long time, but we couldn’t come to an agreement with CB’s management on valuation last year, and then it wasn’t ideal timing for us this summer because we were in the middle of our CapEx financing, which is all done now, so luckily it didn’t interfere with that. But CB was going to sell the property for $2 million, and they spent $60 million on buying it and drilling it, and we didn’t want to see that project get sold for that price. We have a lot of shareholders in common. So there’s a lot of shareholders in Red Eagle and CB; there’s actually a lot of similarities between the companies, is, you know, we both founded the companies in 2010; they’re both in Colombia; they were both very similar grade, actually, and we moved into the same office building on the same floor on the same day in Vancouver.

James West:    Really? Wow, that’s funny.

Ian Slater:    Yeah. It was.

James West:    So the bottom line is, we’ll know what the outcome is by the end of the day Monday?

Ian Slater:    Yeah, but I don’t think it will change anything. We’re already going to be over 50 percent, so we’ll have more than 50 percent of CB, and we’ve already requisitioned the shareholder meeting, so we’ll go that way unless we can come to some agreement with the Navarro Grau family.

James West:    Mm hmm. And are you having discussions with them presently?

Ian Slater:    No, we can’t right now, because they’re under – they’re locked up with CB and Batero and Navarro Grau all have confidentiality agreements with each other and lock up agreements with each other.

James West:    So is anybody going to suffer a break fee in the event of – well, obviously, somebody’s going to be unsuccessful.

Ian Slater:    No, no, the way we understand the legal agreements between CB and Batero, as long as Batero takes up, which they – I guess that’s the – we’re assuming they’re going to take up on Monday, so if that happens, and CBJ’s board haven’t recommended a different offer, then there’s no break fee payable.

James West:    Okay, great. So where is Red Eagle at its evolution with Santa Rosa right now?

Ian Slater:    as you know, we got the first permitting in Colombia in decades in the spring. We financed $105 million this summer in debt and equity, and we started construction this summer, and we’re expecting to be in production this time next year. So we’ve got a lot of people and equipment’s been mobilized to Colombia, and a lot of dirt being moved right now with the earthworks are well underway.

James West:    Sure. What’s your anticipated all-in cash costs of production?

Ian Slater:    We’re still on track for what’s in our feasibility study, which is under $800, but you know we’ve had, the Colombian peso has gone from 1,900 to 3,000, and in Colombia, most of these local contracts are all priced in pesos. So there’s lots of places in the world like Mexico, where even though you’d have local contractors, it’s priced in US dollars, well, that’s just not the case in Colombia. So we’re going to have some significant currency impacts effect reducing our CapEx and our OpEx.

James West:    So the exchange rate is currently 3,000 pesos for $1 USD?

Ian Slater:    That’s right.

James West:    And you’re talking about all-in cash costs oat 1,900 pesos per dollar of $800 USD per ounce?

Ian Slater:    Yeah. It was less than 800.

James West:    Less than 800. Okay. So no matter what happens, unless gold absolutely crashes, you’re going to start off profitable.

Ian Slater:    Exactly. At $1200 gold, we have after-tax cash flow of $50 million a year.

James West:    Okay. Paul Harris recently wrote in the Colombia Gold letter that investors had lost confidence in Colombia, and he did sort of indicate that in your case, that didn’t really apply, because as evidenced, your mining permit. What is the situation with that, and how much is that likely to impact risk for investors in other Colombian gold companies?

Ian Slater:    I think we talked about it last year, too, I think, is I think it’s undeserved, the perception that North Americans have in Colombia when there was the big rush to go to Colombia in 2009 and ’10. There was big frustrations at that point with not getting applications converted to concessions for expiration companies, but that was because the government was just completely overwhelmed with thousands and thousands of applications, and those same companies hiring all of the geologists from the government agency. So there was no one to do it. I don’t think it was a fair accusation. And that’s resolved now, anyway; it works to stake some ground and get it converted to a concession, and start drilling.

So that was one misconception. And then of course there’s only – and a lot of the drilling, a lot of the expiration dollars were spent drilling lower grade, bulk tonnage, porphyry targets that are not being able to develop right now. So for a couple reasons: one is, they’ve completely gone out of vogue, and two, they’re just not economical. You know, you’re under half a gram of gold, you’re just not economical with these kind of gold prices. And three, they were in places where there isn’t existing open pits. So it was going to be a long process educating everyone, from the local towns to the Federal government to the department level governments on permitting open pits there.

So a lot of it all added up together, and then you look at the two – there’s only three of us that actually applied for permits; Greystar did at first, and we all know about the mistakes they made, and they didn’t have support of the local communities. By the time they had their first stakeholder meeting, they both threw chairs at them, because they had completely ignored the local communities.

And then with Buriticá, I mean, it’s a lot more complicated there than where we are. They have thousands of artisanals there that have come from all over Colombia and the key thing is that if you don’t have that social license, and the commitment of the local communities, the environmental agencies, they won’t even start looking at your EIA.

So the first thing we did when we approached Corantiochia about what should be in the EIA and working together to get exactly what they wanted, is they wanted stakeholder meetings with all the villages around us. So no one lives near Santa Rosa, which we got lucky in that respect, but a very broad area of influence of 20 kilometers, and there’s half a dozen villages in that area of influence, and Corantiochia, the department level environmental agency, they wanted to go to each village and hear directly from everybody if they wanted a mine here or not. So that’s a challenge that Buriticá has, especially when you’ve got a lot of those artisanals have come from other places as well, and they don’t have, they have a vested interest in the status quo, right?

James West:    Right. So where do you see the permitting process for Buriticá going?

Ian Slater:    Best ask them, I think.

James West:    Let’s not speculate on that, then. Okay, great. So you’re probably going to be the best mine in production in Colombia, by the sounds of things.

Ian Slater:    Well you know, we’re the only junior building a gold mine in the entire Andes.

James West:    Is that right?

Ian Slater:    Yeah.

James West:    Wow. So is the perception and the atmosphere in the gold mining and development community in Latin America, is it as doom-and-gloom still as it is in North America, or I guess, with a property that’s going to produce gold at under $800 per ounce, there’s no reason for anything but excitement and enthusiasm.

Ian Slater:    Yeah, exactly. All of our stakeholders in Colombia are excited, and also, you know, we were the first company to list, to do the dual listing that the TSXV has got going with the Santiago Exchange. And you know, it’s not working perfectly yet; there’s not much trading happening there, but it’s the start of something that I think could really work, and the conversations that we’re having with brokers in Santiago and Lima and Bogota are exciting about the potential for new capital pools in the Andes being invested in companies like ours.

James West:    Sure. So just to clarify for the audience, there’s essentially a merger of the exchanges of Lima, Santiago and Bogota, correctly into one exchange, is that accurate?

Ian Slater:    No, it doesn’t work exactly like that in practice. They’re still separate exchanges, but brokers that are licensed on one exchange can trade on all the exchanges.

James West:    I see. So you have a symbol for Red Eagle on the Santiago Exchange?

Ian Slater:    Yeah, and we were a bit of a guinea pig for the TSXV in doing this, and they’ve got a new program just from January where we can list on the Santiago Exchange at no cost, and no filing requirements. They rely completely on what we file on the Venture.

James West:    Hmm. I see. That’s pretty positive. But you say there hasn’t been much trading there yet?

Ian Slater:    Not yet. They’re still working through the bugs of all the different exchanges working together, and also, you’ve got to throw in currency there as well, right?

James West:    Right. There was some discussion when I was living in Lima last, in 2009 and ’10, of actually merging the three exchanges into one, but that never moved forward in that format?

Ian Slater:    No.

James West:    Okay. So then, will you have a symbol on the Bogota Exchange and the Lima Bolsa de Volares?

Ian Slater:    No, right now, just on Santiago, but brokers in Lima and Bogota can trade on the Santiago Exchange easily.

James West:    Okay. So what’s your symbol on the Santiago Exchange?

Ian Slater:    It’s RDCL.

James West:    RDCL. Okay, great. So you’re going to be in production, you think, when, on Santa Rosa?

Ian Slater:    At this time next year, exactly.

James West:    So exactly one year from now.

Ian Slater:    Yeah.

James West:    Okay. Well that’s a great update, Ian. It’s been great talking to you, and we’ll come back to you in about six months’ time and see how it’s progressing. Thanks for joining us today.

Ian Slater:    Yeah, thanks for reaching out. That’s great. It’s good to chat with you again.

James West:    You bet.

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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