Hey Guys- I know this took longer than what I originally thought it would- but I finished the transcript of the Dec. 23rd Conference Call- I'm going to post it here and I also made another Google Doc Click Here to View where it will remain in perpetuity or until Google finally takes over the world, whichever comes first. it'll also be available on my facebook page. So without further adue:
So this is obviously not a word for word transcript- I’ve omitted some utterances that occurred during the call, and self-corrections made by Corey- Anyone is welcome to use this as a reference, however if you want word for word- you must listen to the call. I think you will find that if you were to listen to the call, and read along in my document, you’d find 99.9% accuracy. Enjoy.
Okay thank you very much for attending the first Affinity Gold shareholder call. Today on Monday, December 23, I want to first thank you for taking the time to participate, thank all those who have sent questions in ahead of time, and want to also express my sincere appreciation and gratitude for all of our existing shareholders, those that have been with us for very long time, since the beginning, those who have joined us along the way, as well as many of you who have recently joined and became in Affinity shareholder within the last 3 to 6 months. This has been quite a long journey for a lot of us, I know it has tried our patience and resolve, but things are looking very good and I would like to give you guys an update on what we have already accomplished as well as what we plan on doing going forward here.
So what I want to begin with is a bit of background and information to help those that may not have been with us for very long as a shareholder, about myself and how I got involved with Affinity, I think that would answer a lot of questions. Initially, my background is very entrepreneurial focused and I’ve dealt with a lot of startup and business development type circumstances and environments. When I got involved with Affinity I was asked to come on and do something similar, as a consultant in that capacity to help with the developing the business plans, doing some financial modeling, and a few other tasks. Through that process of learning a little bit more about Peru and mining I realize that precious metals is the place to be. I believed that then, I actually believe that more today, in spite of the bearish sentiment with regards to precious metals today.
The opportunity with Affinity that I saw after the first year and a half of being involved with Affinity, it was unfortunate that Affinity was unable to be successful the first time around with the first management team, however when the opportunity came around to take control of Affinity I did what I could to do so, simply because the asset was good, but the approach that the previous management used may have lacked a few other elements to help it be successful. With regards to Affinity and my strategy going forward the simple strategy has been getting back to the basics.
So what I'm really focused on is developing a compelling story with a proven management team, making sure that we have the right vehicle and developing a solid growth strategy, as well as the strategy has to have a real market potential. The other key item for us is that our business model has to have and our strategy has to have near term profitability and potential. Those six key requirements really are what have driven me around developing this business model for Affinity for focusing on near-term production assets as well as producing assets today within the precious metals industry.
As I look forward, the opportunity with Affinity is such that, we have the opportunity to develop a very sound business plan focused on these small to medium-sized projects in Peru. I'm not sure how many of you are aware of what the opportunities are in Peru, there are tremendous opportunities for small to medium-size near-term production, and producing projects in Peru, and the first day I set foot in Peru I realized that that's the case but nobody's really doing it yet, and quickly realized that there's a reason that nobody was rushing to do it- because it's challenging.
So for the last 3 1/2 years we have spent quite a bit of time, effort, and money, focusing on this business model for near-term production, how do we work with the landowners, how do we identify the right types of projects, how do we begin structuring these types of projects, raising the capital to get them into production etc.
If you look on the website there is some great information in regards to some bullet points around, why near-term production, why the projects that were focused on, if you look at the projects we've taken on so far the Machacala, and the Cambalache, they meet the key requirements that we have to have near-term production, and or producing. If it's near-term it has to be able to go into production within 12 to 18 months, for less than $2M to $3M in capital. We do require that we see physical evidence on site of actual production. We prefer to find projects that have historical data as well. Machacala is a good example of that, it's an absolutely wonderful project, we have a tremendous amount of data that Goldhawk and Meridian Gold produced, that we are relying on, and collaborating on.
Hey guys if you don't mind, this is kind of a more intimate, hopefully less formal presentation, what I really wanted to do through this process is just give you a quick high-level macroeconomic view of where we've been, where we are, and where we’re going. Just kind of explain the current business model that we have today, when we're looking forward based on what we've accomplished today, and that's something to step back and look at and realize as well, is that over the last 3 to 6 months we’ve accomplished quite a bit.
Over the last 3 1/2 years we’ve worked solely on flushing out this business model, putting the pieces together, making sure it works, and we've had a couple of false starts, in trying to actually implement against the turnaround strategy, and basically realize that before we pull the trigger again we have to make sure all of our ducks are in a row. So we made sure to do that this time, starting about 3 to 4 months ago we just started implementing our turnaround strategy for Affinity. So we are literally at the beginning and if you look back to simply at what we've accomplished so far, you can see back in June is when we signed the LOI on Machacala, August we signed the LOI with Colombia Crest Gold on Machacala, in September we entered into the definitive agreement on Machacala. Those three months there were extremely key, and I really want to impress upon everybody that everybody can question Affinity's past and they are right to do so, as a shareholder I would be questioning the same considering we saw a company that went from six dollars a share down to pennies and I would want to know why. But if you look today at how much time has passed between now and then, and the amount of work that we've done to clean things up, to prepare ourselves for implementing the turnaround, and the projects that we brought in. If you look at just the strategic relationships that we've started to develop, with regards to our projects, with affinity, beginning with Machacala you'll have to ask yourself really what is going on behind the scenes with Affinity.
With Machacala, Machacala is a property of merit, a company like Colombia Crest Gold, the company itself may not be a major or anything like that, but the management team is a very well-versed, experienced, seasoned management team. With that being the case, they would not have signed any sort of a deal with Affinity simply for the sake of doing a deal. The reason why Columbia Crest signed the deal was because of the merits of the project and the fact that it can be producing immediately as well as the long-term potential for exploration. So that's something that...., there's more that I could say, but I think for the sake of time I'll pass at this moment. It's extremely important to understand that a company like Colombia Crest and the management team of Colombia Crest at the time would not have signed any sort of deal with Affinity, if it were not for the merits of the project at Machacala. Going back to our recent accomplishments, So, September like I said- we signed a definitive agreement on Machacala, beginning of November is when we really started implementing more aggressively against the turnaround strategy. There is been a number of things that were kind of stacked up that we had to start announcing, some material, and some not so material. In November though, we also, if you could recall; we got the caveat emptor sign put on our stock. So we went from the OTC pink stop sign to a caveat emptor, I believe it was on the second day of increased volume. Within two weeks exactly from that date, we had the caveat emptor sign removed, and were up listed one step above where we were previously. So we were at the OTC pink limited information. What I wanted to also stress is that the company filed its first SEC filing, its first 8K in the last 3 1/2 years. This was a very intentional step, to begin this process not simply because it was just addressing the caveat emptor sign on OTC markets. But it is our intention to become current in our filings very soon, within the next 180 days from the news release I announced on September 26, I laid out the 180 day time frame, and the objectives that we seek to accomplish in that time period.
So November 5th was the very first 8K filing in the last 3 1/2 years, also in November we added a new board member and secretary of the company, Craig Laughlin. To help increase transparency, we began providing level II quotes on OTCMarkets.com for our shareholders; we signed the LOI on Cambalache. Cambalache is a producing mine today doing roughly about 12 tons per day, you're looking at about a gross of just under $100,000 per month. You're netting about $10-$15,000 per month. It's nothing to write home about, however the key with Cambalache is it's a perfect turnaround situation where all the pieces are there but they're not being worked the right way. It's like having all the right ingredients, but not the right recipe, or the chef to make it work. It's a perfect opportunity for us to come in and be able to acquire something at a steep discount, and be able to add value, significant value without a tremendous amount of capital. So were extremely excited about Cambalache, were looking to be able to increase production up to about 60 tons per day within the first two or three months if not more, and if not sooner.
Also with regards to our filings, we did in November as well receive our approval from the CFOCA for the application of allowance to allow us to file a comprehensive 10K to become current in our filings. The end of November, at the beginning of November actually closed our private placements and filed the 8K for the private placements for about $275,000 or just under. Come December this month, we signed a formal agreement with our joint venture partner Corizona Mining Partners, and today we are having a very first ever Affinity Gold shareholder conference call. So looking back over the last 3 to 6 months I will say that I believe that we have made a tremendous amount of progress against our turnaround strategy, however still we are just at the beginning. There is a tremendous amount of work regarding what Affinity has to do to become current in its filings, become a producer, and begin further executing against this growth strategy.
A couple of things I wanted to address on the call and then I'll get to some questions that I received. With regards to the 180 day goals that I set out, there were three primary objectives that I set out in our September 26th news release. The three primary objectives were to finalize our strategic advisory committee, to become current in regulatory filings with the SEC, and to establish small-scale production. So you know, were making great progress against all three of those objectives. I still expect to meet and/or exceed the expectation of accomplishing those objectives within that 180 day time period.
With regards to establishing small-scale production, (I'm going to address these in reverse) with regards to establishing small-scale production- our Cambalache project is producing today. The moment we close formally between Corizona and Affinity and the project owners in Peru via the new legal entity that we are setting up, Affinity will be able to claim 24.9% of production from Cambalache from that moment. So technically when that occurs Affinity will be able to say we are producing. That is the way the agreements have been written. So that will be, in my opinion, a major milestone for the company. Furthermore, on Machacala, we expect towards the end of Q1 early Q2 of 2014, we expect to see production on Machacala begin as well. So we can see by the end of Q1 timeframe roughly having to projects producing, both with tremendous upside in terms of exploration. So I'm very pleased with regards to that. We will have accomplished the promise we made to our original shareholders back in 2009, to become producers.
Secondly, with regards to becoming current in our SEC filings, this has been no easy task to say the least. It's been a mess to clean up and we’re working diligently towards that. We did receive, like I said, the allowance from the CFOCA to file the comprehensive 10K, which we are working towards. We have updated our internal books up through August 2013, we are working on preparing our internal records for the audits that would occur, for the years 2010, 2011, 2012, and 2013. That is for the US Company, public company. Our subsidiaries in Peru we are also doing the same with. My recent trip to Peru, I returned on the 14th of this month. While down there that was one of the objectives, the tasks I was working on is preparing for getting all the internal books and records organized for the audit process. There will be more information regarding that, as well as a status update and news release in the weeks ahead. That will give you more information that I think you will feel comfortable with.
Just so you know, the next one, with regards to the strategic advisory committee ties into why- the filings tie into why I am creating the strategic advisory committee and there’s a lot of push, a lot of pressure to get our filings current. It’s an absolute must, and I will explain a couple of different reasons in just a minute.
So the strategic advisory committee we have put together, we are very close to finalizing; I would anticipate in the next couple of weeks that it’ll be finalized. The strategic advisory committee was created, formalized because we’ve had the opportunities for the last 3 1/2 years where we’ve developed a lot of relationships, with key people, where they would like to come in and support, and assist Affinity moving forward with implementing against the turnaround plan and growth strategy. However, with not being current in our filings, them coming onto the board was more risk than they were comfortable with, and rightfully so. So as an intermediary step, as well as, for our own business needs and my needs, we decided to create a strategic advisory board or committee. So with regards to the strategic advisory committee, there will be a total of five people on the committee, to start. I can give you information about three, I cannot release names at this time, but we have a former precious metal hedge fund manager based out of Minnesota joining, we have a former attorney/investment banker, and now executive of a small junior producer out of Canada joining, and we have a former minister of environment out of Peru joining.
These are all people who would not associate with the company that was doing something nefarious or something not right. I really want to impress that upon you, that what Affinity is doing today is not something in my mind that a small. There are a couple of different business models that are under the umbrella here at Affinity. The primary and the first being developing near-term and producing assets to start. We also have another model called an eco-mining model. However, that model will be further explained later on, but I can share with you that it is not about “environmentally friendly mining” there’s no such thing. Mining in and of itself is just invasive, it’s destructive. It’s more about what you do afterwards really determines what your impact on the environment is. Those are the two primary business models, we’re focused on the first now, however the strategic advisory committee members that are coming on board, their skill sets both complement our initial model and strategy, as well as really and truly support and get behind the overall business model that were moving towards which is the eco-mining. And like I said, we have the former precious metals hedge fund manager, former Minister of environment of Peru, and former attorney/investment banker and now executive of a small junior producer joining. When we finalize the strategic advisory committee I will put out a press release with the bios of each person and their names attached so that you can see it. So I very much look forward to doing that.
But I really want to impress upon you that just like Columbia Crest and Hans Rasmussen who signed the deal with Affinity on Machacala, (Hans has since gone to Coeur Mining, as a VP of exploration) but just like Hans, these other individuals would not associate with Affinity, its projects, etc. if there wasn’t something legitimately happening here period.
Next, I wanted to move on to some of the questions that I received if that’s all right. So with regards to some of the questions I think, some of the things I’ve covered. Those of you, who are online, please feel free to text/chat me if I’m missing something. Questions I’ve received so far:
Question: What is the status of the filings? Answer: So I’ve kind of explained that, 180 day time frame from September 26. I am still anticipating meeting that date we are making a lot of progress in terms of preparing for the audits, there are a couple of key things that we are considering right now. First, how do we handle the XBRL obligations that we have? And so we are managing through that a bit, we are looking at getting a preclearance letter from the SEC for some of our obligations in filing the comprehensive 10K. We are working on the preparation of the internal books and records for both the US Company in the subsidiaries, as well as the XBRL filings and the preclearance letter for meeting those XBRL obligations.
Question: Does the company carry any convertible debt or toxic financing? Answer: No, actually, with regards to the convertible debt, there are two debts on the books, that are convertible to technically that were done a while back they total $10,000 apiece. They are not being converted. Those are technically set up as convertible debt. With regards to the more important question of the toxic financing- absolutely not. There is no toxic financing in place nor would I allow or be willing to sign Affinity up for any toxic financing. Just so that everybody’s aware, I have some restricted shares in Affinity, I have roughly 40,000,000 warrants of Affinity with strike prices ranging between one and four cents that I structured long ago, which previous management and Board of Directors approved as part of a bonus. Those warrants are not cashless, I have to cut a check to the company to exercise them, between the 40 million warrants the total cash to come to the table with his $1.2 million roughly. Once I exercise those warrants to fund the company though shares will be restricted for at least six months if we’re current, if we’re not they will be restricted for 12 months or more, and subsequent to that I will be subject to the 1% rule. So I will not be able to sell that stock anytime soon. So with that being said, the last thing that I want to do is sign Affinity up for any toxic financing. It’s against…, it wouldn’t make sense for our shareholders or for myself.
Question: Is the Cambalache project producing today? Answer: I addressed that, yes it is producing today.
Question: Who is aqua gold mining? Answer: aqua gold mining, I do not know exactly who they are. They are not associated with Affinity Gold. We did look, my name is attached to aqua gold, Johnny Lian Yong’s name is attached to aqua gold, and the original 500 hectare project is attached to aqua gold. We do not know who aqua gold is. What I do know is it has absolutely nothing to do with myself, or the company. I have been in direct contact with the domain host enom.com. I have informed them that the website for aquagoldmining.com is fraudulently misrepresenting who they are, claiming to have our assets, and our management as a part of the company. We requested that the website be immediately taken down. If that does not happen soon, then the next step would be that we do take some level of immediate action with our attorney to begin the process for, begin the legal process for making sure that website comes down. But to answer your question that absolutely has nothing to do with myself or the company at all.
Question: Is there any relationship between Affinity and Valley High Mining? Answer: Absolutely not, there is no relationship between Affinity and Valley High Mining. The link with Valley high Mining is Corizona Mining Partners, who is also Affinity’s joint venture partner. Corizona Mining Partners and Valley High Mining had a joint venture relationship, over a year ago that fell apart because Valley high Mining could not come to the table with financing. Corizona Mining subsequently terminated that agreement with Valley high in moved on and there provided the opportunity for affinity to get involved with Machacala.
Question: How does the company plan to meet its financial obligations and fund Cambalache? Answer: That’s a great question. We’ve raised enough money in the short term to be able to meet our obligations on Cambalache as well as get current in our filings. Like I said Cambalache is producing today, but Cambalache will be a producer technically for Affinity, the day that we close on the overall agreement with the new legal entity we are setting up. So once that happens and Affinity can claim 24.9% of the production from Cambalache, and as we’re increasing production from 12 tons per day to 60 tons per day in the first couple of months, we’ll have plenty of production data, and bank statements in the first 3 to 6 months, to show what we are receiving, what we are producing, the rates, along with the assay results, and the sales slips of concentrate from Cambalache to show what our production is and what our net is. Once we can show that, we know that will we will be able to raise additional funds at a higher price, so there’s less dilution. The intent right now is not to raise too much money up front so that we stagger it and stair step it so that we avoid further dilution for our shareholders. I hope that answers the question again if you have any additional questions please feel free to email me, you can email me at csandberg@affinitygold.com or info@affinitygold.com.
Question: What is the current share structure? Answer: the current share structure as of today Monday, December 23rd received from NATCO, the transfer agent for Affinity Gold, we have 250 million authorized shares the total issued and outstanding is 137,310,336 the restricted shares is 100,298, 336 the free trading shares is 37,012,000 of that free trade the float is 26,427,000. Within the last month, the last 30 days exactly as you can see from our previous share structure the float has increased roughly 3.5 million shares. That was between two shareholders. One with a much lesser amount of shares than the other and that is it. So I have been in touch with both shareholders, since depositing stock to ask them if they have any questions and to share more about the story about Affinity, and both are very supportive. That’s been the only change. This is a nondilutive share structure. The fully diluted share structure will be added to our website when I update this later today or tomorrow morning, which will include the warrants and the options that I previously mentioned.
Question: What is the relationship between Corey Sandberg and Corizona Mining Partners? Answer: That’s a great question, and I think that in some of the news releases we’ve listed a bit about what that is especially when we talked about Corizona in the news releases. But, what Corizona Mining Partners is is a private company that really mirrors, to some extent, what Affinity is doing. When I took over Affinity 3 1/2 years ago, Affinity (and maybe I did this naïvely), but Affinity was in terrible shape, it had gone from six dollars over six dollars a share down to pennies, the Peruvian entity had a bad reputation and so I was in a situation where on the public side we could not raise any money, and on the subsidiary side in Peru, it was very difficult to get anybody to sit down and have a serious conversation about new ventures, new projects, etc.
To add to that, what I also realized early on is that, although our alluvial 500 hectare project is a great project, it’s not a project that the traditional mining industry accepts. So I had to switch gears and focus on hard rock mining, or the hard rock projects as opposed to the alluvial. Not to say that we’re not coming back to alluvial, but we first need to focus on delivering against production, leveraging what the market will accept, which is hard rock projects for now and then in time we will prove to market ourselves with our own capital the validity and merits of our alluvial projects.
Going back to Corizona Mining partners, so at the beginning Affinity Gold, the public company, could not raise capital and the subsidiary could not get anybody at that point to really sit down with them and negotiate a project. Without wanting to miss out on opportunities for beginning to establish relationships, strategic partnerships and opportunities to develop small to medium-sized projects towards production. Not wanting Affinity to miss out on that, however Affinity was not able to participate, what we decided to do was, I happened to be approached by a group of people who I know here locally in Minnesota, who suggested that maybe a new company, a private company could be structured and set up that would run alongside of affinity to some extent and put these projects together, and ultimately when Affinity was ready, be for the benefit of Affinity as well.
And so for the last 2 1/2 to 3 years, that’s exactly what Corizona has been doing. If it were not for Corizona and the over 400 something thousand dollars Corizona had raised affinity would not be in the position that it is in today. The other thing is, when I was approached in doing that I was asked to be a part of Corizona as well, because of the experience that I had. So up until a short while ago when we signed the Machacala project between Corizona are in affinity I had been the chief manager of Corizona. Once that project became available and Affinity was in a position to capitalize on that, I immediately had to step down from Corizona Mining partners to avoid the conflict of interest and solely focus on Affinity. Another shareholder of Corizona stepped in as the CEO. I do have an ownership interest of 24 1/2% of Corizona Mining Partners. I am not an active manager of Corizona Mining Partners. However, I am very pleased with the direction of Corizona Mining partners and Affinity Gold and how the paths are becoming closer and closer together.
There’s a tremendous amount of potential in terms of the amount of projects that Affinity could participate in via this relationship with Corizona Mining Partners, and I think that is something to keep in mind and if anyone has any questions regarding that in particular, by all means please feel free to pick up the phone and give me a call, feel free to email me ask me the hard questions I welcome them.
So, ladies and gentlemen, I think that’s pretty much the end of my agenda for our conference call. I want to thank all of you for participating in the first Affinity Gold conference call ever. I appreciate your patience and understanding as this is or has been our first. Hopefully they’ll go smoother and easier to have going forward. Also to let you know this will be an ongoing monthly call starting in January. This is not a one-time thing, this will be ongoing at a minimum monthly, I will provide more information on our website, there is the potential that this occurs biweekly at times, but going forward please plan on a monthly call that you can also send questions ahead of time to the AFYGconferencecall@affinitygold.com . So again thank you everyone very much for attending the call, I look forward to hearing any feedback and questions you may have and in the meantime I wish all of you happy holidays and Merry Christmas.
