Otis Gold CEO anticipates ‘exciting’ drill results at Kilgore

VANCOUVER — Explorer Otis Gold (TSXV: OOO; US-OTC: OGLDF) hasn’t let tepid market conditions impact its vision for an open-pit, heap-leach gold mine at its Kilgore project roughly 50 km due northeast of the town of Dubois, Idaho. The company managed to raise over $2 million this year, and has put the proceeds toward a 3,200-metre step-out drill program it hopes will lay the foundations for a much more aggressive exploration campaign in 2016.

Kilgore is a volcanic-hosted epithermal gold deposit related to a zoned-epithermal hot-spring system in volcanic rocks of Miocene age. The project hosts a small, relatively low-grade indicated resource of 25 million tonnes grading 0.59 gram gold per tonne for 300,000 contained oz. Meanwhile, inferred resources total around 18 million tonnes of 0.46 gram gold for another 300,000 oz.

“Quite frankly things have been going pretty well for us given the truly challenging state of capital markets. We’ve been able to complete three financings this year at what I would classify as very competitive terms in reference to premiums and warrants,” commented president and CEO Craig Lindsay during an interview.

“It’s worth noting that we’ve had success with non-traditional investors. There’s just no interest in the mining space on the retail side and the institutional money has dried up. In fact, we’ve kept our heads down and have continued to increase our ownership stake in the company,” he added.

Otis has closed three separate financings this year for gross proceeds of roughly $2.6 million. The most recent was a $500,000 non-brokered private placement wherein it issued 4.2 million shares priced at 12¢ each in early November.

The company’s story isn’t entirely uncommon given the lack of retail and/or institutional money. According to Lindsay, the return of director Dr. Roger Norwich allowed Otis to tap into a small pool of “high net-worth” individuals in the United Kingdom interested in advancing Kilgore to production without pillaging the company’s share structure.

Well the relationship isn’t what is typically referred to as a “private-equity deal” it is an example of a small group of wealthy shareholders opting to essentially back a mining deal single-handedly. The arrangement has resulted in Otis’ top ten investors accounting for around 65% of its outstanding share base.

“We’ve had these individual, high-net worth investors — who typically already own some stake in our company — opting to do these friendly financings that maintain share structure and market value,” Lindsay elaborated. “It is effectively private equity. They’re getting very actively involved, and don’t want to be destructive to our existing shareholders. I know some people are scratching their heads in terms of how we’d done these financings at a premium with virtually no warrants.”

Otis put a portion of its capital toward constructing access roads into the emerging North Target and Crab Claw areas, which represent a potential northern expansion at Kilgore. The company extended the strike length of the deposit by roughly 150 metres to the north in 2011 when it cut 114 metres of 0.89 gram gold in hole OKC-258.

Otis wrapped up a 19-hole drill program in early December, which was essentially a step-out initiative aimed at testing gold-in-soil anomalies outlined at North Target and Crab Claw during field sampling.

“We’re excited about the results of the program because we’re hopeful we can enhance Kilgore’s grade profile and demonstrate that size potential we’ve always believed has been there. On the heels of this drilling we’ll be able to rationalize a much more extensive exploration program that could change the entire complexion of our story,” Lindsay elaborated.

“We’ll move towards a preliminary economic assessment (PEA) next year, but what we’ve also discussed is moving Kilgore into the permitting phase. So as we update the resource and move ahead with engineering, we’ll be looking to file a plan of operation for our mine,” he added. “There’s plenty of companies shopping in the gold space, and we have a project with a very competitive strip ratio and proven metallurgy that could lead to a run-of-mine, heap-leach scenario.”

Otis has traded within a 52-week window of 2¢ and 14¢, and closed at 9.5¢ per share at the time of writing. The company maintains 108 million shares outstanding for a $10.3 million press-time market capitalization, and reported working capital of nearly $1.4 million at the end of September.