Golden Hope Mines

Q&A with Augen Gold Corp. (GLD) Chief Executive Officer and Director J. David Mason

I understand Augen Gold is the first company to have tradable flow-through warrants. What are they?

We created the idea of a tradable flow-through warrant. In other words, companies can issue gold flow-through warrants, and this has been done for quite some time, but no one has actually listed them on the TSX. It took us about a year of regulatory work to get it through approvals: CRA, the Department of Finance, and finally the TSX Venture Exchange. But as of November 11, the warrants are now trading under the symbol “GLD.wt.”

They are actually quite a good deal – by my estimation, the warrants should trade at a slight premium to the stock price. When you exercise at 20 cents, you get a flow-through share, and you also get back a tax break of about 8 cents.

Then there’s a time value. These warrants have four years remaining before expiry, so that’s worth about another 15 cents. Then there’s the intrinsic value, which at today’s price (50 cents) and a strike price of 20 cents on the warrant, equates to 30 cents. So that means at a 50 cent stock price, the warrant could trade all the way up to 53 cents – that is, the 8 cent tax break, the 15 cent term value, and the 30 cent intrinsic value.

What is the significance of the “Jerome extension” on the Augen Gold property?

The Jerome mine was mined by Noranda from 1938 to 1942. It is 100% owned by Augen Gold – there are 63 patented claims out of the entire claim package stretching over 45 kilometres. The Jerome mine is located at a peninsula into a lake known as Lake Opeepeesway. Most of the Jerome-area gold – as depicted by our computer model, up to 1.1 million ounces - is concentrated over a strike length of 750 metres, or three quarters of a kilometer. Geologists have found the same geological formation stretching out over most of our property. There is one theory that states that gold is found at the intersection of two different rock types, one that carries the gold from the earth’s core up to the surface (igneous) and the other one, the sediments, which the gold penetrates into. So at the intersections of these two rock types you get a very high grade core surrounded by low grade and probably ‘open pittable’ material. It’s been speculated for perhaps 70 years that there is a big extension to the Jerome and I believe we’ve found it.

We were drilling on Lake Opeepeesway during the late summer from a barge, checking out some Soil Gas Hydrocarbon (SGH) anomalies, and we had a very, very good intersection of more than a half an ounce of gold. In the gold business half an ounce is worth really looking at because you very seldom get that high grade an intersection over any kind of length. A further two kilometers along strike there was another good intersection of about the same order of magnitude – both of these are on our website by the way. So what has happened is we have an extension of the Jerome Mine, which is now about seven kilometers in length, and over a width of at least 80 metres. So, in my opinion, we have an area that is 10 times the size of Jerome and could potentially have proportionally more ounces. Right now there’s a drill on that property and we’ve got four holes down. We will probably be completing about 30 holes in total this winter and hopefully developing a very significant resource.

How does your West Coté grid area compare to Trelawney Mining and Exploration’s (V.TRR) Coté Lake discovery?

Down at the very eastern end of our property our claims surround our neighbour, Trelawney Mining, on all four sides – they’re like an isthmus into our property. They’ve made a significant discovery near a place called Coté Lake. Their estimates of anywhere from 3.5 million to 6 million ounces in place is probably accurate. But significant for Augen Gold to the north of this discovery, where they are still drilling, they’re finding gold within 200 metres of our border. Just north of that on our property – we call it the West Coté Grid – we have a huge Soil Gas Hydrocarbon (SGH) anomaly. SHG is the latest of the geochemical techniques and we also used it to discover the previous target, the Jerome extension.

The SGH anomaly over the Lake Opeepeesway is quite major and it led us to the discovery and we are drilling that one, the North Shore of Lake Opeepeesway, right now. We now have a SGH anomaly, a very good one, rated 5.5 out of 6 by the geochemists, on the West Coté Grid and this anomaly covers an area of probably about three times the size of Trelawney’s drilling area and many times the area of our original Jerome target. So we’re quite hopeful this is going to be exciting. We’ve brought in a very large backhoe, stripped down to the basic outcrop, washed the outcrop, there’s veining visible on surface. We’ve done trenching and sampling and now you can go to our website and see a map where the drill is going to be operating within the next few days. We have started collaring a drill on the West Coté Grid. We’re keeping our fingers crossed that this could be another big one.

What other targets do you have?

Along this 45 kilometre property of ours, which is huge by any standard, there’s perhaps about 20 kilometres of the ideal Jerome-type environment. Right in the centre, which is about 10 kilometres away from the Jerome mine, there’s a property we’ve optioned called the Huffman Lake option. Last winter we put in a number of holes, announced in January. Each hole had significant intersections of gold, but at that time we didn’t have the advantage of SGH survey. So now that we are quite comfortable that SGH mapping will lead us to the correct drill locations, we will do a SGH survey over Huffman this spring followed by a major drill program there as well. So that’s four large targets in total, if you include the original Jerome mine, which as I said has more than one million ounces estimated so far.