An interview with Rick Brown of Amarillo Gold (AGC.v)

Your humble correspondent recently caught up with the the COO of Amarillo Gold (AGC.v), COO Rick Brown. Along with Buddy Doyle, Brown is very much the driving force of AGC.v, especially in its exploration and development activites at its Brazilian assets. This interview was first published in IKN20 last sunday and Rick has kindly given permission for it to be repeated here on the public access blog. No more blahblah from me, on with the action.

Otto Rock: Hi Rick, and thanks for agreeing to do this interview

Rick Brown: Happy to answer your questions Otto and hope to catch up with you next time I’m over your way.

OR: So down to business. What is it like running an exploration junior in Brazil? You have plenty of experience of other countries, so how does Brazil compare as an environment to do business?

RB: Modern mining and exploration, even by foreign companies, has political and social/ community support throughout the country and except for parts of the Amazon basin generally excellent infrastructure and very tolerable working conditions. The only other country on the continent that can boast those conditions is Chile and that’s a lot more mature as far as exploration opportunities goes. The one notable negative in Brazil is the pervasive bureaucracy which is one of the worst in Lat Am, but once you’ve scaled the learning curve its manageable.

OR: And what about it as a place to live, as it’s your home base if memory serves?

RB: That’s right and a very easy place to live (except when that dreaded bureaucracy gets in the way). First world convenience and comforts if you got a professional income and all over the country people are welcoming and friendly.

OR: As for the company, Amarillo Gold, we understand that it has two main projects moving forward at the moment. Would you give us a general overview of both, starting with the Posse project.

RB: Posse is a million ounce resource in all categories about 60/40 indicated/inferred. Location couldn’t be better, 11km from main N-S federal highway and within a few hours drive of five other major mining projects. The deposit was previously mined on a small scale by WMC in the early 1990’s with about 80,000ozs extracted. The mine represented a major source of employment in the small town of Mara Rosa and the people were able to observe that environmental impact can be managed without any long term effects. So we have the happy situation where the locals are eager for a new mining operation to commence and start employing people again, and from the authorities point of view there has already been a mining operation and subsequent environmental rehabilitation all with the requisite approvals.

OR: The other main area is Lavras do Sul. What can you tell us about that?

RB: Lavras do Sul is the best known gold project in the South of Brazil. The prospective area covers a 100km2 intrusion, plus some of the surrounding volcanic, of which Amarillo has optioned about 95% from three different titleholders. Mining commenced in the 1700s, and about 20 old workings dot the area. Over 20,000 metres has been drilled to date in 5 prospect areas, 16,000 by Amarillo. Four of the prospects have returned significant gold intersections of which the most promising are Butia and Cerrito. The best intersections are 232 metres @ 1.92 g/t, 227 metres @ 1.80 g/t and 120m @ 3.23 g/t, both at Butia. The next phase of drilling planned for October this year will aim to delineate an initial 43-101 resource for Butia and Cerrito. Drilling will continue on the other prospects in 2010.

OR: As long as I’ve understood correctly, Posse is the more advanced of the two projects. Last week (Sept 2^nd) Amarillo announced it was running a third party metallurgical testing on Posse mineral. Can you tell us, layman’s terms if possible so that even I can understand, what you’re looking to achieve with this testing and the importance of it in the mine development track?

RB: The objective is of the tests is to maximise gold recoveries from any future mining on a cost/benefit basis. This will involve testing for example various grind sizes and applying different process flow parameters. During the previous mining at Posse, gold recoveries varied between 80% and 90%. In our 2008 scoping study we assumed the lower end of this range due to the fact that we had no historic data for the sub 2g/t material included in the expanded Posse resource. Since then we carried out some preliminary tests at a state run laboratory which indicate that we can hope to repeat these recoveries even in the lower grades and that finer grinding may be the key to higher recoveries throughout the grade spectrum.

However it must be stressed that these tests were a long way from even pre-feasibility criteria and didn’t include economic parameters such as cyanide concentration and energy consumption. For this reason we’re running this new series of tests which will be way more comprehensive and will give a much better idea of what kind of recoveries we can expect from a 21st century mining operation.

OR: Moving to the financial side of the company, you’ve recently raised working capital successfully via an equity offering. After going through the institutional process, what’s your feeling of the market right now or junior exploration-stage miners?

RB: You’d think with gold over $1,000 the gold juniors would be in fat city but the market is still very selective and this is reflected in the fact that the TSX venture index is still at August 2003 levels. One thing that’s noticeable this year is that good drill results will really move stocks – we’re hoping for same from our upcoming Lavras drill program - but apart from that the best thing you can do is get your story out.

OR: How long is the capital you raised in this last round expected to last the company? Will it see you through 2010, for example?

RB: For sure we could see through 2010 but that would mean a higher proportion of relatively fixed costs such as G&A, management, promotion and BCSC compliance and less actually going in the ground proving up more ounces and thereby adding real shareholder value. We’d prefer to aim for an 80/20 ratio which means more news flow, more chances of exploration success and more shareholder value.

OR: One problem that is seemingly raising its head in Brazil is that of the appreciation of the currency, the Brazilian Real (BRL) against the dollar. Is the strong Real affecting your company finances very much?

RB: While we’d obviously pefer a weaker Real bear in mind that the Company is financed in Canadian dollars which has lost just 12% against the Real this year and is actually at the same level – approx 1.7 – as it was 12 months ago.

OR: There are a number of shareholders of Amarillo reading this interview. Also, there are plenty of other potential shareholders. I took some straw poll opinion from AGC shareholders and, although they are in general relaxed about holding the stock on a longer term basis, the main complaint they have is the lack of promotion given to the stock by you the management team. Can you address this issue?

RB: We have been saying the same thing internally and for the first time we are developing a promotion strategy and budget starting with a Munich investment conference and presentation later this month.

OR: And as for the future, what can we expect from AGC by way of catalysts in the months to come? I for one am rooting for the company, but I’d like some solid newsflow to cheer me on the way and hopefully move the stock price forward.

RB: Newsflow catalysts up till end of year will likely be drilling at Lavras do Sul, interim results from Posse met (metallurgical) tests, further plans for advancing Posse pre-feas and exploration on other Mara Rosa targets, plus surface geochem and drill targeting at Lavras and Santo Antonio projects.

OR: Rick, thank you for the interview today. We can wrap it up here, but I’d like to give you the chance to say any last words.

RB: It’s worth mentioning that we never stop looking for new acquisition opportunities that will add significant shareholder value to our current portfolio..

OR: Thank you very much.