Otis Gold CEO Craig Lindsay on Successful 2017 Drill Campaign & 2018 Catalysts

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President and CEO of Otis Gold (TSX-V: OOO)(OTC: OGLDF), Mr. Craig Lindsay. Craig, how are you today?

Craig Lindsay: Gerardo, I'm doing really well. How are you?

Gerardo Del Real: I am excellent. Thank you very much for asking. I’ve got to believe you're happy. You had a news release out yesterday if I'm not mistaken. And the headline was, "Otis Intercepts 118.9 Meters at 1.41 g/t Gold and 137.2 Meters at 0.91 g/t Gold," at your flagship, 100 percent owned “Kilgore Project.” Have to believe that you're happy with those results.

Craig Lindsay: We really are. These are nice, thick, bulk tonnage intercepts. They're a good, solid grade. The grades are higher than the existing grade on the existing 43-101 gold resource that we have at Kilgore. I think the real takeaway from these results, and really our entire package of drill results from the 25 holes that we drilled in 2017, is that these things number one, have really demonstrated the continuity of the deposit at Kilgore, and number two, we've continued to identify areas of the deposit which remain open to drilling.

So really, really pleased with what we've accomplished in 2017 and it's just given us a lot of excitement about what's going to be happening going forward in 2018.

Gerardo Del Real: You know, there were two points that I alluded to in our last interview, the last time we spoke, but one was the near-surface nature of a lot of this mineralization, which of course is important, but the second was the potential for expansion, especially along the Aspen Formation. Again, this news release was very, very consistent as far as the extensions, the near-surface nature of the mineralization and the fact that this Aspen Formation keeps delivering for you. Can you speak to that a bit just geologically as far as the model and why Aspen is so important to this project?

Craig Lindsay: Sure. Well, when you look at the stratigraphy at our deposit you've got a thick bed of sedimentary rock called the Aspen Formation. It's a sandstone and siltstone unit. I'm simplifying things here, Gerardo, but there's a sandstone unit, then what sits on top of the sandstone is something called lithic tuff, which is a big thick layer of volcanic rock. It's the volcanics that have been host to the majority of the 800,000-ounce resource out at Kilgore.

Starting in 2015 and we followed it up in 2017 was some new targets that we found in this underlying sedimentary unit. So we've been adding ounces down in its underlying sandstone unit. It's an up-faulted unit that is, as you mentioned, it's actually getting closer to the surface than much of the mineralization that's in the volcanics, so it's helping bring your strip ratio down because it's closer. The fact that this underlying sedimentary unit is getting closer to the surface, it's hopefully becoming more oxidized in nature and that's going to potentially help with the gold recoveries that you get.

Gerardo Del Real: Now you touched on the gold recoveries. I understand that the 25th hole of the 2017 work program was designed specifically for metallurgical testing purposes. Is that right?

Craig Lindsay: Yes, it was. A little bit of background, one of the best features of the Kilgore deposit historically has been the metallurgy. So the main host rock out there, the lithic tuff, and then we get some high-angled dikes which cut through the lithic tuff, this stuff gets gold recoveries in between 80 and 85% at inch and a half crush. There's no crush size sensitivity to this ore. The underlying sedimentary unit has historically got recoveries at inch and a half crush on column leach tests of about 70%. So that sedimentary unit isn't, it's just not a heavily oxidized ore.

As I mentioned, this sedimentary unit that we've been drilling into and what we call the Aspen Corridor has been up-faulted. It's closer to the surface so hopefully that ore may be more oxidized and we might get better recoveries out of that, which is just going to enhance the overall economics.

But something I'd like to share with your listeners and your readers, Gerardo, is that in the Western US, so we're talking about the Great Basin open-pit heap leach deposits in Nevada as well as the ones out in the Mojave Desert in California, the average grade on those producing mines is about 0.5 grams per tonne. The average recovery that they get is about 70%. So when you're looking at Kilgore and our grade of 0.6 grams per tonne, and potentially that grade is going to be rising in these 80 to 85% recoveries that we get in the main host rock, the lithic tuff, and the fact that the underlying sedimentary unit is coming in at 70%, which is right on that average of Great Basin gold recoveries, this deposit really compares competitively and favorably with other competing open-pit heap leach mines in the Western US.

Gerardo Del Real: Talk to me about the continuity of the deposit thus far. Because that's important, right? The metallurgy's important, the grade obviously is important. That's going to help dictate your margins, but tell me about the continuity. How is that holding up?

Craig Lindsay: Well, the continuity really holds out very well on this deposit. I think when you look at the drilling from 2016 and the 25 holes that we drilled in 2017, our drill success rate drilling in this deposit so far has been about 90%. So continuity is really clearly there. This is a classic bulk tonnage disseminated gold deposit. Continuity is a really strong feature of it.

Gerardo Del Real: Now 2018 is an important year for Otis, not only I imagine you're planning drilling for Kilgore, but I believe you're also drilling the Oakley Project as well, is that correct?

Craig Lindsay: That is correct. The Oakley Project is a detachment-related gold deposit also in Idaho. It's one that we own 100% interest in. There's a 150,000-ounce resource on it and we're really excited about getting out and doing some drilling there. We're expecting we're going to be drilling step-off holes off of the existing 160,000-ounce deposit, so we're expecting some nice results there.

There's also an entirely new exploration target at Oakley called Matrix Creek. Matrix Creek has never been drilled before, but we have done some work out there, sampling work that has got some very, very good average grades out there. We've got grab samples with silver up to 306 grams per tonne and grab samples of up to 1.3 grams per tonne gold. The average out there of sampling at Matrix Creek has been 1.67 grams per tonne gold equivalent. Never been drilled before so we're really excited about drilling a fence of holes in an area at Matrix Creek that's about 200 meters by about 350 meters. That gold is right at surface.

In addition to that, we're obviously going to be doing some expansion drilling at the existing Kilgore deposit and then we're finally hoping to get out and do true exploration drilling at some of these other targets out at Kilgore. Gold Ridge, Prospect Ridge, Dog Bone Ridge are three of the primary targets that we talked about historically. We've just never had a chance to get out and drill because we've been permit constrained.

As your listeners, readers may know, we are in the process of doing a significant expansion of our permitting at Kilgore that's going to allow us to drill on about 140 drill sites at Kilgore that are located at all of these different targets. Plus step-out drilling at Kilgore, so yeah, it's going to be a big, could be a really big year. With gold running in there now and in that $1,350 range, at some point investors are going to start coming back into the sector. I think we're a lot closer to that inflection point than we were a year ago. Yeah, very excited about things.

Gerardo Del Real: I absolutely agree. I'm excited for the exploration drilling because that's going to come right after, I imagine, your updated 43-101 for the flagship, for the Kilgore Project, which is a major catalyst and it's a near term catalyst. How are things coming along with the resource estimate, Craig?

Craig Lindsay: Well, we just completed getting all of our drill results for 2017 out. We've got an independent resource estimator who's going to be dropping those into our model and then putting together that new resource estimate. We'd hate to put dates on these things because I've been caught up with dates before, but I think we're looking early Q2 this year.

Gerardo Del Real: Excellent. Craig, congratulations again. It's shaping up to be an exciting year. These are excellent numbers and I'm really looking forward to that resource estimate. I think it's really going to provide some good context and a great foundation for what the exploration drilling can add.

Craig Lindsay: I 100% agree with you. I think you've got the whole story nailed really nicely. We've got 160 million shares outstanding. We're trading at about $0.22 right now. We closed the year with $2.7 million dollars in the bank. Something else that we never really talk about, you and I haven't touched on, is the fact that we own almost 7% of a company called Revival Gold, which is one of our neighbors in Idaho that's developing the old open-pit heap leach Beartrack mines.

That was a great transaction for us last year and the value of that investment is sitting on our books and current assets at about $2 million dollars. We're in a strong position right now to start out the year.

Gerardo Del Real: Excellent. Craig, thank you for your time. I'm looking forward as always to having you back on as soon as that resource estimate is published and when you finalize details of the drilling plans for 2018.

Craig Lindsay: Absolutely. I look forward to it, Gerardo.

Gerardo Del Real: Thank you, Craig.

Craig Lindsay: Cheers. Take care.