Domestic Metals is earning 60% of the Smart Creek copper-gold-silver project in Montana from Rio Tinto, who keeps 40% and a clawback right. It’s a porphyry copper target with carbonate replacement and oxide copper mineralization hanging off the same system, and the conversation was mostly about the 9,000 metre drill program that was about to start, the money behind it, the Rio Tinto option terms, and permitting.

TL;DR

The CEO told me the final MDEQ approval landed the morning we spoke, drills were moving up the hill, water lines were going in the next day, and drilling would start that Friday, which is roughly three and a half months after the May financing. The first three holes will re-drill Rio Tinto’s best hole, SMCR000022, which returned 109 metres of 0.75% copper drilled vertically. Megaw thinks the structure dips, so they are going back in at about 55 degrees for around 700 metres, hoping for a wider intercept and better grade. CEO Gordon Neal was explicit that his plan is to publish visuals first, then assays, then raise money at a higher price and add a second rig. They are carrying just over C$4 million against a drill program he costed at C$4.5 to 5 million and G&A of C$80,000 to 90,000 a month, so a raise is likely coming.

What have they done for shareholders lately?

Not much in terms of results, and he knows it. The concrete items are permits in hand for Smart Creek, a drill rig and crew secured in a market he described as the tightest he has seen for rigs, infill IP geophysics completed this year that generated targets at Smart Creek, Radio Tower, Sunrise and Sunrise PCD, and Rio Tinto’s outstanding reclamation paperwork on old holes cleaned up. On the geology side, Megaw’s core review flagged scheelite, so tungsten testing is now part of their core logging routine, and MacNeil and Wainwright found a porphyry dyke at surface near the old Sunrise mine that assayed roughly 4.5 g/t gold, which Neal says Rio Tinto admitted in a technical meeting they had missed. They also dropped the Swedish project, confirmed in the latest filings. Historic context he gave: the Sunrise mine produced about 12,500 ounces of gold at 6 g/t, 31 g/t silver and 1.5% copper, and 40 holes have been drilled on the property in total, 26 of them by Rio Tinto between 2017 and 2022.

How much money do they have and what are they spending it on?

He said just over C$4 million in the bank. The last raise was C$3 million in May at 28 cents with a full warrant at 40 cents for three years. The stock was 21 cents on the day, roughly a C$15 million market cap on 72 million shares out, with 6.9 million options and 41 million warrants making up about 40% of the roughly 120 million fully diluted shares; 52-week range 16 to 41 cents, average daily volume about 62,000 shares. The 9,000 metre program in six to eight holes is budgeted at C$4.5 to 5 million, so the treasury does not cover the full program alongside G&A of C$80,000 to 90,000 a month, which he said includes accounting, auditors, lawyers, permitting consultants, geologists, a market maker and paid marketing. Staff is three people: himself, the CFO and one accounting person. His salary is C$300,000. The Rio Tinto earn-in is US$5 million of exploration spending over five years, C$350,000 in year one, C$1.6 million in year two and C$1 million in each of years three to five, with the deadline in July 2031, and he expects to satisfy it early. Insiders hold about 8.5%; Neal personally owns 2 million shares and 2.2 million options at around 20 cents, no cheap founder paper, and no management royalties on the project. Change of control pays him 24 months of salary.

Upcoming catalysts

Technical: first assays from the re-drill of hole 22 around the end of October or first week of November, with labs quoting three to four weeks; drilling then moves west to Sunrise, with Radio Tower roughly third in line; tungsten assaying added to core logging.

Operational: drilling starting the Friday after the interview at about a 55 degree angle for around 700 metres, with mineralization expected within 20 metres of surface and no plan to stop while still in mineralization; a visuals news release targeted for late September or the first week of October; permitting for the Sunrise area is underway and takes about four months; a possible winter shutdown from October or November to April, though he thinks light snowfall may let them drill through.

Corporate: a planned financing after results to fund a second rig; Beaver Creek in September, interviews through October, and European conferences in Zurich and Frankfurt in November; an additional US project he expects to sign before the Smart Creek assays come out, and analyst site visits and institutional coverage only if the drilling works.

Risks

Neal said himself that the biggest exploration risk is missing the target, and given how much he has been promoting the expected result, a miss would be hard on the company and take the stock from 21 cents toward single digits. He said he can still finance after a miss but at much higher dilution. Beyond that, this is a one-asset company with a treasury slightly below the cost of the announced program and about C$90,000 a month going out the door, so a raise is needed regardless of results, and the three and a half month delay between financing and spudding already burned roughly C$300,000 that was meant for the ground. Rio Tinto can exercise its 20% clawback at any time by paying twice the exploration spend, which Neal said is a positive but which does dilute the project interest. Add Montana winter access and slope conditions for moving rigs, the four month permitting wait for Sunrise, the cyanide ban and the NGO opposition he expects but has not yet seen.

Domestic Metals CEO Interview

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