Interview itemCompany Interview: Claude Resources, Inc. (CGR) - Neil McMillan, President And CEO
February 9, 2010 - The Wall Street Transcript has just published Gold & Precious Metals, Base Metals and Non Metals Mining Report offering a timely review of the Metals & Mining sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
View Details of This Special Report
Recent Wall Street Transcript Special Reports.
Neil McMillan is President and Chief Executive Office of Claude Resources, Inc., in addition to a member of the company's board of directors, which he has served on since 1996. He joined Claude in 1995, following 16 years in the financial sector, where he managed the RBC Dominion Securities operation in Saskatoon. Mr. McMillan also serves on the boards of Shore Gold and Cameco Corporation.
TWST: Please give us a brief historical sketch of your company and then bring us up to date.
Mr. McMillan: The company has been around since 1982 and has 25 consecutive years of positive operating cash flow - the first eight years from passive oil and gas assets that the company owned, and the last 17 years from gold production at a 50,000-ounce-a-year producing mine in Western Canada. We're a small-cap gold company with about $130 million or $140 million market cap. We are producing net of that single asset in Western Canada and have a very large exploration project called Madsen, in Red Lake, Ontario.
We are currently in a position where we have growing gold production. We expect to move from 50,000 ounces a year roughly now through to 70,000 ounces over the next three years. We have growing cash flow going with it, and we have growing ounces in ground, both at our Seabee gold mine - the producing asset - and at our big project in Red Lake, Ontario. We currently have over 750,000 ounces in inventory at the Seabee gold mine to support the production growth, and we have just had an independent 43-101 report done on our Madsen, Red Lake project that established us with 1.2 million ounces in the resource categories of high-grade ore on that project.
TWST: Over the next two to three years, what do you see as the key opportunities and key challenges for Claude Resources?
Mr. McMillan: The big opportunity for us, I think, from the investor's point of view, remains the exploration potential at depths on our Madsen, Red Lake project. We have had an opportunity to drill five holes below the 4,000-foot level; we did that in 2009. Those holes were outstanding, high-grade extensions to a known discovery that was made many years ago, and it demonstrated that we have the potential to duplicate to some degree the success in the Red Lake camp that's been enjoyed by Goldcorp and Rubicon, and others. We do have the host rock for very high-grade and very large tonnage on our Madsen property.
The second real significant change over the next two to three years is the growth in production at our Seabee mine. We, as I say, believe we can go from where we currently sit at about 47,000 ounces to 50,000, 60,000 and 70,000 ounces through 2012 - all of that growth with the existing resources and existing infrastructure. So on the assumption that we can execute that successfully, we will see dramatic increases in our free cash flow at current gold prices. The biggest risks to us really are normal execution risks in our production, in our drillings. And then obviously the sensitivity we have to the gold price, particularly in Canadian dollars. We are currently receiving about C$1,200 an ounce. So there is obviously gold price risk and foreign exchange risk built into that.
TWST: What is your perspective on the commodities markets' performance over the past six months? Where do you think they are headed in the next six to 12 months?
Mr. McMillan: As far as the commodities market goes, my focus is entirely on the price of gold, and I guess to a lesser degree on oil and gas. We still have a small oil and gas asset - about 110 barrels a day of production. We have stated publicly it's our intention to sell that in 2010 if we are comfortable with the value we can get for it. But our principal focus is on the price of gold and particularly in Canadian dollars. We received C$1,280 an ounce in the first quarter of 2009 at much lower U.S. dollar gold prices because the Canadian dollar was relatively weak to the U.S. dollar. We are currently receiving about C$1,200 an ounce in the latter part of this year, even with the gold price much, much higher and the Canadian dollar stronger. We think that we will likely continue to see Canadian dollar gold prices at or above the C$1,000-an-ounce range through 2010 as a base case.
Our expectation is we could see them dramatically higher than that. As your readers know, the gold price is currently about half of its inflation-adjusted former high in the $1,000 or $1,100 range. So we think there is a distinct possibility that that price could continue to increase through 2010. And frankly our expectation is that's the most likely case. Where it ends, I don't know. Our success in our business is as much dependent on our ability to exercise our production increase and to execute it properly as it is to depend on an increasing gold price. We don't need that in order to bring and add significant value to our shareholders, although we do expect that price increase to continue.
The remainder of this 104 page Gold & Precious Metals, Base Metals and Non Metals Mining Report can be immediately viewed by purchasing online.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 104 page special issue is available by calling (212) 952-7433 or via