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Dan Weir, the Executive Chairman for DNI Metals sits down with Maurice Jackson of Proven and Probable to discuss the latest updates on the their flagship project called Vohitsara. This interview is based on a site visit that was conducted 5-14 May 2017. There are a number of highlights of particular interest for current and prospective shareholders! First, Dan provides a brief narrative on the vast, expansive industrial uses of graphite and how the demand curve will only increase, due largely in part to the growing demand of lithium batteries. We then shift the focus of the interview on the value proposition the DNI Metals as for speculators and its market advantages of becoming one of the lowest cost producers of graphite. We provide an progress update the Vohitsara Project regarding roads, drilling, and trenching. DNI Metals is in early stage exploration company with a unique added advantage of saprolite extraction, which truly reduces operating costs with the added benefit of being 45 mins. away from a major port. Furthermore, we discuss the close and very critical relationship that DNI Metals has forged with the local community. The entire community is embracing and exciting about the Vohitsara Project coming to fruition specifically under Dan Weir and DNI Metals. Our site visit also covered meeting the Port Director and having an exclusive tour of the Port. Also we met with Ministry of Mines which was very welcoming and accommodating to having DNI Metals fully permitted project continue to advance. And finally, we address the first tranche of financing that was completed on 4 May and how DNI Metals plans to deploy their capital. This is an action packing interview you won’t want to miss!
Maurice: Welcome to Proven & Probable where we focus on metals, mining and more. I’m your host, Maurice Jackson. Joining us today is the executive chairman of DNI Metals, Mr. Dan Weir. Dan, thank you for joining us today.
Dan: Thank you, Maurice.
Maurice: Full disclosure for our listeners today, we are proud shareholders of DNI Metals for the virtues we will convey in this today’s message. Dan, why is graphite so important?
Dan: Graphite is important because everything we touch pretty much every single day has a touched of graphite. And what I mean by that is that 50% of the world’s graphite is used in the steel-making business. It’s used in the molds to form the steel. It also lines those great big crucibles, you know, you’ve probably seen pictures of them pouring iron ore out of those big large pots. Those are called crucibles. They’re all lined with graphite because graphite has a much higher melting point than iron ore or steel.
Dan: But, more importantly—sorry. Where the growth area is in the world for graphite is in the lithium-ion battery. It’s one of the biggest inputs into a lithium-ion battery. In fact, it’s the second most—sorry—second largest input into a battery besides the actual plastic case or plastic pouches that you find the cells in.
Maurice: So there is a growing demand for graphite. Let’s talk about the value proposition that DNI Metals presents for listeners.
Dan: So, we did a lot of homework in the graphite space. We realized that if you’re going to compete in industrial minerals like graphite, you’ve got to be one of the lowest cost producers. To be one of the lowest cost producers, you have to have good infrastructure. Maurice—and just so listeners know, Maurice spent a week with me last week in Madagascar and he—hopefully you can—Maurice, as we have this conversation, that you can point out some of the things that you saw last week as well. But, more importantly, you know, we’re 50 kilometers from a port on a paved highway, our project is. That’s one of the key things.
The second thing is to be a low-cost producer, you have got to be able to produce from low-cost material and, in our case, you have this weathered material called saprolite where it’s as simple as going in with an excavator and digging it up and processing it. There is no need for the drilling and blasting that you need in hard rock. Our cost will be significantly lower than anybody in the hard rock, and what I mean hard rock, that would be most of the deposits that you find in North America, that you find in Australia, really anything that you’d find in the northern hemisphere. There’s only certain parts of the world, certain parts of Madagascar, certain parts of Brazil where you get this weathering effect in the material. In the nickel and cobalt world, they call it a laterite. We call it a saprolite, the same type of material.
Maurice: You know, you referenced location, so let’s start off with that. It’s correct. We had a remarkable time there in Madagascar last week. Talking about location, how close is your flagship project to the highway?
Dan: So, to the highway, it’s by the crow flies, it’s less than 1 mile. We just completed a road back to the main zone. There’s multiple zones on our property. The main zone that we’re going to focus on where most of the drilling will be done, the road has to wind a little bit because it’s fairly hilly. It probably takes about 3 kilometers to get in there and that road has been completed now. We had to go across one river. The river was not all that big. It might have been—what would you say, Maurice, maybe 30 feet across maximum? That’s less than 10 meters.
Maurice: And very shallow, I might add to that as well.
Dan: Yes, very shallow.
Maurice: Are we talking knee high?
Dan: Not even that. It’s because we put a bunch of rocks and stuff in there that you’re seeing that it was knee high. In fact, where we put the forting through the river, you know, we could walk through it just with a pair of rubber boots before. So, you know, it’s very shallow depending on the time of the year. Some times of the year, you get more rain. It can be higher, but in general, it’s very easy to cross the river.
Maurice: Well, the reason I emphasized the location is you have to look at your cost and you’re looking at being one of the leading low-cost producers of graphite. The infrastructure there, you need to be close to the highway and you have a great location. I can vouch for it. I was there. And how long would it take to get to the port city to deliver the graphite?
Dan: So, it’s 50 kilometers. That’s 30 miles to the port. It takes 45 minutes to an hour to drive that. Very, very simple. In fact, we’ll pack all the material in containers right at our property and it’ll get delivered right to the port and basically come off the truck right on to—in a container, a 20-foot container, and right on to a ship and away it go. What people don’t understand about graphite is is that graphite is shipped all around the world in 20-foot containers 20 tons at a time. In some cases, in some states, you can only put 19 tons because of weight restrictions into the United States. But in general, it’s 20 tons and they’re a big super-sack, it’s what it’s called. It basically fits on a pallet and it stands about 5-1/2 feet tall, one of these super-sacks.,.
Maurice: Now, Dan, investors want to know the latest updates we have on the flagship project called Vohitsara. If you would please, give us a historical reference please.
Dan: So, historically, all of Madagascar, the graphite has been produced there for over 100 years. There was 4 main French families that produced here in Madagascar. They would have a centralized processing plant. They would have a mine usually besides the processing plant, but then they would go out in high grades where they sought outcroppings. Our property was one of those properties that had outcropping on it, so in the 1930s or 1940s, our property had been high grades and Maurice was able to see where they had dug out part of a hill that they had worked on. Historically, they had never ever gone and done any proper drilling in Madagascar in the area that we’re in and we’re one of the first people to go and actually drill it and do a full 43-101 style resource. Very, very important to know that because, again, most people just gone in and high-graded the outcroppings and they never really did any further work.
Maurice: And just for our listeners just to be clear, this is called alluvial mining. It’s more or less non-mechanized mining on this project site here. Dan, let’s talk about the roads again. Share with investors where the roads are now.
Dan: So, just the small road that we have put in directly to the deposit is now at the deposit. When Maurice was there with us last week, he saw the bulldozer working away and moving it forward. It now goes right to the deposit. This is very critical so that we can move the drill rig around. It will be a road that you can use all year round and we’re very excited about that. We’ll be able to drive with a pickup truck right to the deposit now.
Maurice: Yeah. Surprisingly, it was moving very expeditiously. We were there for a couple of days and the progress was moving very fast. Let’s talk about your joint venture partner, Cougar Metals. You had the managing director there, Randall Swick. So he was on site and drilling has already begun. Talk to us about that.
Dan: So, we did—at DNI, we did a deal where Cougar has the right to earn into a percentage of our property. In order to do that, they have to complete all the drilling. They have to complete a 43-101—sorry—NI 43-101 resource report as well as a PEA. The PEA must be done by October 31st of this year for them to earn in anything into the property. They’ve got to complete all the drilling and a resource report is supposed to be done by the end of—sorry—by June 30th of this year.
Maurice: All right. And how about trenching? Has there been any trenching done?
Dan: Yes. So, we historically did some trenching in 2015 and a little bit in 2016. We’re now opening this up to—sorry. As part of the deal, Cougar has to drill a minimum of 3000 meters which basically is 3000 yards and they have to complete a minimum of 1000 meters of trenching as well. So when we were there, Maurice, we started digging the one trench. It’s now probably about 200 to 300 meters long. I haven’t had an update yesterday or today and moving right along. The trench when we were there as you saw, Maurice, was right on top of a hill and we were going front on top of the hill down both sides of it and you could see the beautiful large flake graphite here.
What Madagascar is known for is their very large flake graphite. In fact, one of the consultants when we were there, I showed them the size of some of the flakes and he said basically these are the largest flakes that he’d ever seen in his life and he has been on many, many different graphite projects around the world.
Maurice: And I can attest—
Maurice: Well, if I may, Dan, I just want to share. I can attest to that. I was present when that discussion was taking place and also I was just curious. I love to read non-verbals and the body language was very—it was very surprising. You could see that, wow, you got some big stuff here.
Dan: Yeah. Now, when you’re processing the material, you’re not going to maintain those large flakes. But they really are very, very big. In fact, Maurice, I think you took a little bag of it with you home so—to show off how big some of these flakes are.
Maurice: They truly are surprisingly large. And, Dan, before we leave the trenching aspect over here. How many trenches will be dug? And give us also the depth of these.
Dan: So we’ll go down to about 2 meters. We’ve discussed about going a little bit further. 2 meters, you can do that very safely and they don’t cave in. Once you start going over that, you’re going to have to widen the trench significantly because you start to worry about cave-ins on people when they’re trying to collect the samples. So, we’re going to have further discussions about that, exactly how we want to do that.
We have to do a minimum of—sorry. Part of Cougar’s deal is do a minimum of 3000 meters. The trenches I think what we’ll start out at is like 300 meters long. We may extend them out to 500 meters. We have seen mineralization on this deposit. The width of it anywhere from 300 to 500 meters wide and we’ll start with 300 and then if we see that the mineralization continues on, we will likely make them wider. Most of the trenches will start out about 500 meters apart. So, really if you think about it, what we will do is probably have over a kilometer of trenching because if we have one at the bottom, one in the middle and one at the top, that will be over 1000 meters or basically a kilometer, which if you’re thinking imperial units, that’s about 0.6 mile. That would give us a wonderful resource if we just focus it on that. The main zone we do know extends over 3 kilometers long. So, we’ll focus on 1 kilometer to start with. We may step out afterwards and do some drilling outside of that.
Maurice: You know, Dan—
Dan: And trenching.
Maurice: Thank you for sharing that as well. Dan, who’s going to be conducting the sampling and the assay report?
Dan: So the sampling and the assay report is Cougar’s responsibility. They have groups that will sign off qualified people and companies that will sign off on all of these reports. DNI has hired a gentleman named Don Haynes. Don Haynes is one of the leading experts in the world in industrial minerals. He is going to oversee that for DNI’s point of view. He came with us on this trip just to make sure that the samples were going to be taken properly, how the trenches were dug and to check out the drill rig when he was there.
Maurice: All right. Switching gears, let’s discuss strategic relationships. You know, I looked at the local people there in the village and here are some things that I saw. And the first thing I noticed was there was a mutual respect that they have for you in DNI Metals, but there’s also a trust factor. You could see that they trusted you and these are the intangibles that investors don’t see and they’re so critical because as you and I know, there are some relationships there that aren’t based on trust and mutual respect and projects get delayed and don’t come to fruition. And here, it was just unique to see the trust factor. Talk about that some more please.
Dan: I’m going to answer that 2 ways. When you’re working in a country like Madagascar—and as far as I’m concerned, it’s one of the best countries to work in—you have got to have people on the ground that can help you with all this work. One gentleman that you met, Maurice, does a fantastic job for us. He looks after all the community relations, the CSR, as well as the environmentals. He has done a fantastic job of going it out and meeting all the individual landholders, all the people that live in and around the project. We’ve even met the local presidents of the villages, the people that are elected for the whole region as well as senior people in the mining commission in the capital city.
We’re very lucky and we’ve spent a bunch of time working with all of those people. The locals as far as I’m concerned are some of the nicest people I’ve ever met anywhere in the world. They’re very poor. They’re looking for work and desperately looking for work to improve their lives. We have sat down with them. We’ve had all sorts of meetings with them and they’ve very, very happy to see us moving forward in what we’re doing. Just the simple things like getting a road back into there where they never had access from vehicles before is improving their life as it is. As I mentioned, the local people are absolutely amazing and we really like working with them.
Maurice: You know, and I couldn’t have said it any better. Now, moving from the local people, let’s talk about other entities that are involved indirectly with this process and that’s the port director. We went to the port. You were there with the port director and again they welcomed DNI Metals with open arms. Talk to us about that relationship and also the expansion of the port, why that’s so critical here in this discussion.
Dan: As far as I’m concerned, it’s a world-class port. The container area is run by a Filipino company. Maurice and I and the other people that were with us on the trip, we went and had a tour of that port area—sorry—of the container part. We also had a tour of the bulk area where they bring in all the cars into the country as well as the diesel fuel and any other materials that are needed, bulk-type materials. A company called Sherritt, Sumitomo and KORES have a very large nickel laterite deposit close to our property. They spent a lot of money on the port because they have to bring in sulfur and limestone and other materials to make the sulfuric acid for their processing. I’ll make one note because I don’t like scaring people when I start talking about sulfuric acid. When you’re mining for graphite, we don’t have to use any of those harsh chemicals, so we don’t have to bring in any other materials whatsoever for our operation. Graphite is one of the easiest things in the world to process, so I just want to make it very, very clear. We’re very environmentally-friendly. We don’t need any harsh chemicals to process the graphite.
So back to the port. The Sherritt, Sumitomo and KORES, they spent over a billion dollars when they expanded their operations in Madagascar. There’s a Japanese group that was announced just before Christmas that they’re going to lend the company 500 million dollars to expand out container port now. What they’re looking for is over the next 10 years, as the economy grows in Madagascar, they foresee a lot of growth and the need to be able to bring larger ships. Currently, you can bring Panama or cape-sized ships into here, container ships. You cannot bring those massive new container ships just because of the depth of the port, but expanding out the worth to be able to do that. There is lots of room for us right now over the next 10 years to be able to ship containers out of here. Every day, a different shipping company brings in a container ship that comes in and out of this port. So, we’re very, very lucky in that case that it’s very easy for us to ship materials.
Maurice: You know, I just want to echo what you just heard. It is a world-class port. It really was, surprisingly. I didn’t know what to expect and it exceeded my expectations. Another critical element in this discussion is the Ministry of Mines. Talk to us about the relationship there.
Dan: So, I took Maurice in to meet the mining general manager at the Ministry of Mines in the capital city. I wanted him and some of the other people that were with us to show that we do have a great relationship with the mining commission. It’s called the BCMM in Madagascar. And, Maurice, I really want to point out here. We are fully permitted. So if I want to put this thing in production tomorrow, we have the permits to do that. There’s also—you know, there’s always a few extra forms that we will have to file. Once we know how much our water usage is going to be, then we just have to file some paperwork for that. But that’s really—that’s not going to stop the project. That’s just a matter of just filing with the commission certain things once we have that data and know exactly how much water usage as well as a few other things that we’ll need. But, as far as permit-wise, we have all the permits in place to put this thing into production.
Maurice: Which again is critical because you can have a theoretical aspect of wanting a mine but you’ve already done the hard work, which is building these relationships and you have the permits. Very critical and kudos to you, sir. Dan, before we leave here, what is the next unanswered question for DNI Metals?
Dan: So, we are drilling. We are trenching, you know. All the samples that we’ve taken over the last couple of years have shown that we have a very large flake deposit. Madagascar is known for its large flakes, some of the best large flakes in the world. It was very exciting to me to see a consultant that was there with us to say, “Wow, these really are the biggest flakes I’ve ever seen.” Again, I must say though that in the processing of the graphite, you’re not going to maintain those flakes. Now, some of these flakes that Maurice saw were the size of a dime, so picture a graphite flake the size of a dime. When you’re actually selling the material, the material is very large or jumbo-style flake, it would be what—a twentieth the size of a dime, maybe even a little bit less than that. So, these flakes will break up in the processing, but I can tell you that super, super jumbo graphite that we’ll sell to customers around the world would only be about a tenth the size of a dime and probably more like a twentieth the size of a dime, I would think.
Maurice: It’s truly spectacular and again, ladies and gentlemen, we just want to be very clear. That was not throughout the entire project, but we definitely saw those large flake sizes. It’s quite remarkable. Dan, before we leave here, there was some financing done or completed I should say the first trench on the 4th of May. Talk to us about the results and what shareholders should expect.
Dan: So, Cougar has to pay to do all the drilling and the trenching, complete the resource study and the PEA, the preliminary economic assessment. So that’s what I’ll look after and they’ve committed to complete all of that. What DNI has made some decisions is that we want to—we have some other properties that we are looking at, so we are raising money currently to purchase those. We did close on part of the financing. Our goal is to raise about 2.5 to 3 million dollars. We have raised a million dollars that we closed on just before we went to Madagascar, Maurice, and we’re working on the balance of that. We hope to complete that over the next 30 to 60 days and I think it really does give great value to anybody who wants to invest in the company. Our current market cap is right around 3 million dollars. I think you can see that this will grow significantly over the next year as we continue to drill and trench and complete the resource study, complete the PEA as well as it’s going to be very exciting when people see a few of the other potential acquisitions that we’re going to make over the next little while.
Maurice: And, Dan, before we leave this subject matter. The million was in Canadian or US dollars?
Dan: That was in Canadian dollars.
Maurice: All right. And just one more thing here, what is the burn rate again?
Dan: Oh, we have a very low burn rate in DNI. It costs us to—as a public company, remember, there is quite a bit of expense to be a public company. You have to pay for auditors and lawyers. You’ve got to pay exchange fees and everything else in a year. Our burn rate is right around $30,000 a month and majority of that is paying for the auditors and the legals and everything else. So, yes, we have a very low burn rate.
Maurice: Dan, for an investor that’s listening to today’s conversation, what is the best contact information for you?
Dan: Yeah. You can call me anytime on my cellphone. I don’t mind giving that to anybody. It’s 416-720-0754. Again, that’s 416-720-0754 or you can email me directly at [email protected]. That’s [email protected]
Maurice: And also, give us that website please.
Dan: And it’s www.dnimetals.com.
Maurice: And last but not least, please visit our website, www.provenandprobable.com. Dan Weir of DNI Metals. Thank you for joining us today on Proven & Probable.
Dan: Thank you, Maurice. And hopefully you had a great trip when we were there. Anybody else who would like to come to Madagascar, please get ahold of me. We can set up a great trip where we can show you the project. We can show you the port and we can have a little fun. We can take you out and show you what lemurs look like and stuff as well.
Maurice: Well, it’s truly remarkable time but, most importantly, it was very—I was very impressed I should say with the relationships, the village and the progress that’s been made there at the flagship project, Vohitsara. Dan, again, I appreciate your time and effort and we look forward to speaking with you in future interviews here.
Dan: Thank you, Maurice.
Maurice: All the best, sir.
[End of transcript]
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