Hi All,I got back home to Minneapolis yesterday from the PDAC...

Hi All,

I got back home to Minneapolis yesterday from the PDAC Event in Toronto. If you have never heard of PDAC, see here: https://www.pdac.ca/convention

One of my top goals was learn more about Chesser/CHZ during this trip. On Tuesday, the stars aligned and I was able to get information from multiple sources:

-CEO Mike Brown
-Taylor Collison Analyst Ryan Armstrong
-A very well respected geo who used to work with AngloGold in Mali/Senegal
-A great technical event attended by Mike, Ryan, another CHZ shareholder (great follow on twitter: https://twitter.com/MiningCatalyst ), and me.

We attended part of that event ("Recent West Africa Gold Discoveries", see here: https://www.pdac.ca/convention/programming/technical-program/sessions/technical-program/gold-deposits-of-west-africa-recent-discoveries-and-developments )

And then the main meeting took place at 10:25am for about 40 minutes, between Mike, MiningCatalyst, an interested non-shareholder (also a great follow on twitter: https://twitter.com/GrantMBeasley ), and me. Here is a fun selfie I took of us at the end of that meeting: https://twitter.com/MiningBookGuy/status/1234875207493525505?s=20

I want to be clear that we did not received any inside information. I am the only one that had additional talks with other people, like a side conversation with Ryan, and a lunch of the former AngloGold geo. The following notes will be a mix of what was learned, and my own personal speculation on what is happening and what should happen. I took full responsibility for any errors, and please do not assume any specific party told me something unless I clearly say so. This is meant to be a summary of where Chesser stands based on first-hand research at the world's largest mining event, and where I see the company headed. This is a messy summary, but I'm trying to get down as many important details quickly, as it's a mixture of notes I took and memory.

With that out of the way, I am really glad I got to meet Mike Brown in person for the first time. Talking to him in person was just like over the phone. I only wish we had more time! I was able to meet Mike for an additional 25 minutes, but then had to run to a lunch appointment. And he was fully booked with meetings the rest of the day. So I had just over an hour with Mike, while my last phone call was over 2 hours. Keep that in mind, as I could have easily asked 10 more questions.

But it was great to have meetings with the 3rd-parties as well. Specifically on Taylor Collison, it is worth highlighting that Ryan was just one of multiple people from the Taylor Collison team at PDAC, primarily with meetings related to multiple companies they have backed (Chesser and Oklo being my main interests in West Africa, though I did not see Oklo at this event). As something that is very speculative on my part, I think Taylor Collison could be looking to help Chesser with getting new business-savvy people helping on the Board or in Management. I'll address this a bit more later in the post. But it was definitely a highlight to see that Taylor Collison is so active on behalf of the companies. Chesser is in an important transitional period, and I hope Taylor Collison can take them down the same path as Oklo (where they were also an early key-backer).

I'll discuss some of the technical details during the meeting with Mike. The recent news and powerpoint provide some excellent visuals. I'll try to make it easier for all of you to understand the significance of some of these updates:

Direct link to new powerpoint: https://www.investi.com.au/api/announcements/chz/8836413c-590.pdf

For me, the most interesting point Mike made was about the "high volume potential" for gold, when we combine the "feeder structure" and the "hangingwall zone".

1. For the "hangingwall zone", pay special attention to the following 2 visuals (page 9, then page 8):






Find DSDD008 on both visuals. Notice it's the best hole (so far) that is furthest to the east. Also notice it's in the "hangingwall zone" of the 2nd visual, and the alteration/mineralization zone is projected to go further to the east in the first visual. If we start seeing more holes like DSDD008 in the next phase of drilling, this would be very encouraging for building ounces quickly in a small area. Not only would this be open-pittable, but continuing horizontally/laterally (or maybe "flat-lying" is the best word) should significant reduce the strip ratio and make it easier to mine. Still very early days, but I think this particular intersection and model could be undervalued by the market. All of these 2-3 g/t intersections could be very economic if we see continuity towards the east.

2. For the "Feeder Structure", pay special attention to the following 2 visuals. The first one is page 12 from the powerpoint (a slight variation of page 8), and the 2nd one is Figure 5B from page 10 of the news release ( https://www.investi.com.au/api/announcements/chz/9eaff2bc-0f7.pdf ):





In the first visual, notice how it says "Feeder Structure: 1km strike length to SE, tested partially in a 275m section", and see the bolded black line with the arrow pointing to the SE. Then look at the 2nd visual, with the "FEEDER TARGET AREA" pointing to all those yellow dots, leading to the Barrick Bambadji JV. That is a "zoomed-out" view of the the potential feeder structure. This is a real potential prize, where the feeder structure could extend along auger geochemical anomaly, and maybe the grades are even higher at certain parts. We just don't know yet, and its a top priority to find out.

I think one point that is hard to get across to retail investors is that while the grades were lower in the "potential feeder structure" section of DSDD013, what CHZ saw in the rocks/alteration was extremely encouraging, because it further validates the potential of a Tier 1 deposit. This is something the company will need to get better at communicating. But of course it will help to see more very high grades.

In any case, the truth is that this deposit is wide open, and is begging to be drilled, BOTH for the "feeder structure" extension AND now the sedimentary units in the "hangingwall zone". These would be the primary targets for the next phase of drilling (though even the "footwall zone" is interesting too).

3. While I do think Area D drill results were disappointing, I also think Chesser is getting a much better idea of structure across the entire property. This means that BOTH the NW Fault Target at Area D AND the Western Splay (and completely different part of the property) are very exciting targets, neither of which have been tested. I am not going to post visuals here (they are in the news release and powerpoint). But it's just to emphasize that Chesser has a ton of interesting targets begging to be drilled.

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A quick note: It was very important that I get confirmation Chesser has a top technical team. I have never spoken to exploration manager Gareth O'Donovan. But very interestingly to me, my geo contact (formerly at AngloGold) talked about how this was a very interesting project, and his friend Gareth O'Donovan would be perfect for looking at this project. He did not actually know that Gareth IS the exploration manager!

This is one of those coincidental confirmations that Chesser definitely has "the right technical team" working on this project. In addition, Mike Brown knows the key geos at Barrick and many of the potentially interested corporates in the region. I am now 100% confident they are good to go on the technical side, even if there are many aspects I don't understand. The news releases and powerpoints are very well done.

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But this gets into the areas where CHZ could use help. I do think it's unfortunate that CHZ can't immediately follow this up with a $4M+ AUD drill program in the next 3 months. Again, this project is BEGGING to be drilled like crazy, but a $5M+ AUD Capital Raise likely pushing it at this stage. This is partially a result of very bad luck with the macro environment. But there are some clear areas of improvement, including:

-basic promotion. We did not see the company come out with any news releases all of February. we also did not see any supporting communication from the company beyond an updated powerpoint, particularly visual interviews or presentations.

-cash position. clearly the HotCopper community was smart enough to realize CHZ needed to raise soon. It's always better when a company has enough cash where it's unclear to the investment community what they will do. You always want flexibility for a "worse case scenario" situations.

-possible new management/board member. again, speculation on my part that this could be happening. But as an excellent parallel, Papillon Resources (for the Fekola deposit), was run much more poorly than CHZ early on. As I studied it, I realize they did some massively diluted capital raises early, and management changed at least twice. I believe this included changes for both the technical and business side. In the case of CHZ, I am convinced they are all set on the technical side. But I think this is the time to strongly consider help on the business side. A perfect example would be someone like Mark Connelly. He became Chairman on Papillon Resources, then West Africa Resouces, and now Oklo Resources. I think Chesser is right at the turning point to look to someone of that caliber.


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I have been thinking hard about CHZ's transition from "retail investors" to "institutional/corporate investors". I don't think it's there yet. BUT, it's a critical time for the company. To limit longer-term dilution, sometimes you have to "suck it up", and take some extra dilution in the short-term. The last raise at 0.06 AUD for just under ~2M AUD in cash was very solid, building from a previous raise at 0.04 AUD. Up until 2 weeks ago, it seemed like 0.10 AUD could be the low-end figure for the next raise. Now that is almost surely the high-end.

What do I think should happen? I believe that CHZ should raise at least 4M AUD in an upcoming round. Please keep in mind I do not know when the next raise is happening. But I strongly expect it to be by the end of March, to allow for a follow-up drill program from April to early-July before the rainy season (approx. 3 months). By raising 4M AUD, perhaps an initial program can be budgeted for something like 1.5M AUD (at least as much as this last phase, likely 5000M+ of drilling). IF they are seeing something REALLY interesting, they can up that budget to something like 2-2.5M AUD in a snap, and likely still have 2M+ AUD by the time all the results come out (likely in batches from July-September). I think 2M+ AUD is an important benchmark for cash to have in the treasury when CHZ looks to raise again. It would be enough to not have to raise, and keep the market on its toes.

The company needs to do more for retail. All the technical details I tried to explain above could be in an interview. Maybe one is coming soon? I sure hope so! The company should pound the table on the "tier 1 potential" of the story, make it simpler to digest, and show why this is a unique aspect that is potentially superior to peers like Oklo/OKU. I am fully convinced that the potential of CHZ is much greater than OKU. But how many others believe that? Probably not many right now. And yet at an 0.08 AUD share price, CHZ has roughly a 20M AUD enterprise value, while OKU has roughly an 80M AUD. BUT VERY IMPORTANTLY, OKU is much more advanced, it's is loaded with cash, has all the best institutional investors, has corporate interest (RSG), and has a broader management team. I don't want to make this about OKU. But sometimes you have to dig into what's working for similar companies to know where you're headed. I own plenty of shares of OKU as well, and I hope CHZ can learn a few things from them (helped by the fact Taylor Collison backs both).

One great step for CHZ will be attending Beaver Creek in September (they are on the official list you can see here: https://www.precioussummit.com/event/2020-summit-colorado/?section=companies

As a very large CHZ shareholder, I want to see them do all the right things leading up to Beaver Creek. If they need to dilute 20% (which would be 56M shares) in this next raise, I have decided I am ok with that, and much prefer it to not raising enough. At a share price of 0.09 AUD, that would be $5M AUD. At 0.08 AUD, that would be $4.5M AUD. Maybe they can raise a bit less, but like I said, I hope to see $4M+ AUD raised to avoid the "cash crunch" situation we are seeing right now.

What to do as an investor or potential investor right now? This is a huge holding for me, and I am even slightly underwater. I bought a lot of shares around 0.07 AUD before the run, then bought a lot more around 0.10 AUD (thinking that would be the low-end for the next capital raise), and then bought just a few more on this downward turn (with my lowest purchase being at 0.065 AUD). As of this post, we are back at 0.079 AUD. Not an absolute disaster, but definitely not great either. I know Mike does not want to do the next raise close to 0.06 AUD. My current projection is somewhere between 0.075 AUD-0.10 AUD. The high-end feels optimistic here, but keep in mind the 20-30 day VWAP still looks pretty good, and that has to be worth something. I would love to get through this capital raise as quickly as possible and get back to drilling.

If I didn't own shares here, I would be on the bid for everything I could get up to 0.08 AUD. I'd probably still be looking at up to 0.09 AUD before the raise, knowing that the high-end raise is a possibility. But I wouldn't fault someone for waiting until a raise is complete. If you have a minimum 6 month time horizon in the stock, it makes it very easy to build a position here. There is no cheaper gold discovery out there, especially one where Barrick is interested (and likely all the mid-tiers in West Africa). But again, there is a transition from retail to institutional/corporate that is coming, and the next 6 months leading to Beaver Creek will be crucial. I will be at that event, and I could see CHZ being the talk of the conference. We just need to see some improvements on the business side to go with the A+ technical team and asset.

Sorry for the ramble at the end hear. I need to get back to some other work, and I just wanted to get all my thoughts into one post. I left out a few things, and would be happy to add follow-up comments for anything that sounds confusing or you'd like to hear more. Overall, this was a very positive conference for me, with the Chesser related meetings being a big highlight.

Again, I take full responsibility for any errors above, and much of this is just my own interpretation/opinion of where things should be headed.

Cheers,

MBG