My name is Robert Blum, Managing Partner at Lytham Partners, and today I'll be moderating a Q&A discussion with Stephen Soock, VP of Investor Relations and Development at Heliostar. Company trades under the ticker symbol HSTR on the TSXV and HSTXF in the United States on the OTCQX. With that, let's get started. Stephen, welcome.
Thanks so much for having me.
Fantastic. For those newer to the story, can you give us a high-level overview of Heliostar today, its asset base, how the company's maybe changed a little bit over the past year, and how you would describe the strategy in its current form?
Yeah, absolutely. We are a junior gold producer with assets primarily in Mexico. We acquired Argonaut Gold's Mexican portfolio in a series of two transactions in 2020, late 2022 and then in 2024. We found opportunities to quickly put those two of those mines into production from care and maintenance. We restarted one within weeks of the acquisition, the other late last year.
Yeah, the idea here is that we'll be able to grow our business to 300,000-500,000 ounces a year from more organic pipeline, and importantly being able to do that without issuing any additional equity as we're able to kind of bootstrap you know small scale production and cash flow into successively larger opportunities and continue to grow organically that way. I think that's really what sets us apart.
Maybe just 'cause I wanna dive into a couple macro items, maybe just give the audience a little bit of your background here as well.
Sure. I joined the company about a year ago. Prior to that, I was a sell-side research analyst, covering the junior precious metals base, for Stifel out of Toronto, in the industry as a mining engineer. I bounced around Canada for about five years, doing primarily hard rock underground, mine design and short-range planning, long-range strategic planning, things like that. I kind of speak both languages, the technical side and the financial side. Macro can be dangerous. I used to love it as an analyst, so I'll try not to go too far down the rabbit hole.
We're gonna go there just a little bit. All right? Let's put your sell side hat on to the extent that you can or you want to here. You know, when investors hear gold, they often think of it primarily as sort of a macro hedge. From your perspective, you know, what are sort of the most important drivers of gold demand today, and which of those is still maybe most underappreciated?
Yeah. I think the biggest one is the U.S. dollar. I think debasement of the U.S. dollar as a general long-term trend is really the driver, you know, of the recent run-up in gold prices is really call it a delayed shock from the money printing that went on through COVID as a recalibration there that's happened in my view. I think it is, you know, kind of a macro hedge. I think, you know, central bank buying is typically the largest driver, and that's one we have seen specifically, you know, China over the last few years be very active in the market.
I think also recently it's garnered a lot of attention, you know, especially with the run-up in price, it was on everybody's radar. You know, I think the pullback's good to allow people to come in. Certainly, you know, with the global uncertainty we're in right now, in terms of, you know, changing world order, gold certainly holds its appeal as a safe haven asset in that regard.
You know, you just mentioned central banks there for a moment, as you mentioned, being meaningful buyers in recent years. Do you view that as a cyclical response to some of these recent shocks, or is this a more structural shift in sort of reserve strategy?
I think more the latter. I think this has been going on for, you know, the better part of the last decade, and you're seeing specifically, you know, the BRICS or BRICS + kind of group of nations significantly adding to their gold holdings as a percentage of their reserves. I think it's something that's again a shift away from the U.S. dollar, maybe not exactly towards an alternative reserve currency, but certainly trying to distance themselves and provide some protection away from, again, a more uncertain U.S. dollar. I think that's a trend we, you know, or I expect to see continue over the next several years at least.
What do you think might have to dramatically change or maybe just slightly change in order for that sort of role of the U.S. dollar to change here in terms of the role vis-à-vis gold?
Yeah, I think you know a certainty in policy. You know, political views aside, I think everyone can agree the last year has been whippy in terms of what's gonna happen day to day. The markets don't like that, and gold's certain. So I think you know, for any sort of pullback, you'd have to see much more certainty and much more fiscal discipline. Again, not two things that are necessarily a forte in the U.S. political or monetary system right now.
Again, I see that as not being a risk to the gold price in sort of a weird upside down sort of way, is what I think those are the two things to keep an eye on in terms of what direction gold's gonna continue at.
Yep. Mining supply remains constrained sort of despite stronger gold price. Looking globally, where do you see the biggest structural obstacles to new gold supply emerging, and how does that affect the strategic value of high-quality projects?
I think permitting has gotten a lot harder over the last, you know, last couple of years, last decade, last couple of decades. I think that's really where you're seeing supply be constrained. Certainly with the higher gold price, you see more projects that make sense and you could see, you know, additional supply come online. The issue is the timeline it takes for that actual response to happen. Permitting really in most jurisdictions dampens that traditional, you know, supply and demand price dynamic. I think that's the single biggest challenge in the industry bringing on additional supply in response to the higher price.
How has sort of that definition of a, quote-unquote, good project changed? You know, not just geologically, but in terms of, you know, some of the jurisdictions, community support, timeline credibility.
Yeah. I mean, I think geology has got to come from upside or grade. You know, the rest doesn't really matter, quite frankly. You know, I think a good project's a good project in any market. I think that's part of the definition of what a good gold project is. Certainly a good project is also one that's permittable and on a reasonable timeline, right? You could have the best gold deposit in the world, but if it takes you 20 years to get there, your time value of money is negligible. I think that's certainly an increasingly important piece of the puzzle for you know. That plays into that timeline credibility in terms of you know, permitting framework and then the credibility, and also I think safety of jurisdiction.
You see some incredible gold projects, but, you know, their mineral tenure is maybe not as secure in parts of Africa as it is in North America and Mexico. I think that's important as well.
All right. Against that backdrop, and thank you for sort of indulging us and putting on that other hat there for a moment, why is this the right moment for sort of the company's speed, grade, growth model, particularly the focus on building around sort of mid-size, high-quality assets that larger producers may have overlooked?
Yeah. I think we're a little bit ahead of the curve in wanting to be a gold producer. This was our stated goal, from day one of the company, from our CEO, Charles Funk. Didn't know necessarily how we were gonna get there on day one, but that path is becoming, you know, more defined for us. I think, you know, it's only become in vogue to be a producer over the last year or 18 months, and we got a bit of a running start at that. I think, that certainly helps us with the momentum.
You know, like, speed is a key part that again sets us apart from most other stories. We're a small, tactical, technical team and able to move quickly on opportunities to grow the business or evaluate something and kill it and move on. I think that's something that is important, especially in being able to take advantage of a rising gold price market. For example, you know, we found the ability to go into production within weeks at La Colorada, and that let us catch the tailwind through 2025 of that rising gold price by achieving that producer status in a creative, expedient sort of way.
You know, you just talked on speed of execution here. What is it that sort of changed inside the company, maybe it was leadership as you just sort of alluded to, but, you know, sort of culturally, operationally to allow you to move so quickly from, you know, an acquisition to production and cash generation standpoint here?
I think part of it is just creativity. We were able to look at that, you know, maybe we're not meaningful for them and/or weren't identified by them. I think that's kind of what allowed us to unlock these opportunities. I think that's a key part of our culture, like I said, strong technical team and that mandate internally to get creative and present off-the-wall ideas to continue to execute on successfully. That's really what was the big game changer was, like I said, going into production quickly in, you know, the biggest gold bull run in a generation. I think that's really what was the biggest, you know, switch to flip within the company over the last year or so.
Got it. You mentioned La Colorada there a moment ago. You know, how are you balancing sort of the opportunity to really maximize near-term cash flow with sort of the longer term upside of the broader district there?
It's definitely something we're focused on, trying to maintain that balance. You know, our objective number one is maximizing near-term cash flow with as little CapEx as possible from La Colorada. To that end, we did resequence our stage pit expansions, you know, within the last year to look at keeping things in line with that, and that's something that's been really good for us. Now we're able to show how we're able, like I said, kind of a bootstrapping methodology and continue to grow cash flow while still, you know, being able to look at those exploration opportunities on the broader land package that are basically untouched. Like I said, priority one is maintaining that production profile we've laid out.
Priority two is extending the mine life through additional discoveries on the brownfield environment.
San Agustin, you know, has progressed quickly from approval to sort of the restart to production, right? What do you think that asset can become in the portfolio beyond simply being a successful restart?
Quite frankly, it is a bit of a cash ATM for us as a project. It's got 14 months of mine life based on the current reserves. You know, at spot or near spot prices, that represents about $60 million-$70 million of net free cash flow to the company. So that's really why San Agustin is important to us. You know, we're not gonna add six to 10 years of mine life here. There's only so much oxide gold left. I think adding quarters to a year or two is reasonable. We're doing the drilling now to continue to try and extend that mine life and getting some good results. You know, I think it can be a good
It is a good cash engine. It could continue to be a good cash engine for a little bit longer than is shown on paper. You know, that's kind of the near-term focus. Longer term, there is a very large polymetallic sulfide deposit. You know, we're gonna go hunting a little bit for that, with a couple of drill meters dedicated to that program later this year. That being said, it would be a whole separate project. If you know, we're able to kind of crack that code there, it would require a mill, a much larger pit, a whole different processing and mining scenario. Again, great problem to have, if we're able to kind of have the sort of success of the drill bit.
We think we might, but still work to be done before we really start tackling that portion of that.
You know, a lot of what you've talked about here today is sort of this you know, using operating assets to fund that next wave of growth. you know, what have you sort of learned about building the company around self-funded growth, rather than relying on the market for every next step?
Yeah, it's a good point 'cause that really is, you know, as I mentioned, the crux of what makes us different as Heliostar. We only have a couple of true peers, and I think of us as an organically funded developer more so than a true junior producer. I think that's a better way to kind of frame our story and our pathway forward. I think getting into production with cash flow is comforting in that it insulates you from the whipiness and availability of equity capital markets to some degree.
It insulates you from some of the games that are played where, you know, the investors might try and guess when the next time you need money as a traditional, you know, single asset developer story. Everybody knows it's coming sooner or later. You've got to keep that till full to advance the project. We're lucky in that we're able to say with increasing certainty every day, "Nope, we don't need any equity to get from our 33,000 ounces of gold last year to over 300,000 ounces by the end of the decade." You know, every ounce we sell with a four or five handle in front of it makes that easier to say.
That's something where we're able to control our own destiny in terms of how we fund the growth of the company. It's nice to have growth to fund. I think that's the other thing that sets us apart. Cash flow is great, but if you don't have a quality pipeline to put it into, it's not quite as meaningful. We're lucky that we're able to pair the opportunities we found for robust cash flow with this incredible, you know, growth pipeline that we picked up for a song over the last couple of years.
Perfect segue. Thank you for that. You know, sort of Ana Paula stands out really as this high-grade development asset with really meaningful strategic importance. How has the recent work changed your view of its scale, its potential and really the role that it could play in the company's future here?
Yeah, I think, to back up a little bit. Some historical context here is important. Ana Paula was presented to the market when it was for sale. It's a very different project than when we envisioned it. It was presented as a large low-grade open pit with, you know, a complicated flow sheet and marginal economics. We had no interest in that, and really credit to the technical team and Sam Anderson in particular for really focusing on the high-grade core of that deposit, redoing the geologic model to hone in on that, turn the drills 90 degrees, and with 3,000 m of drilling, added almost 300,000 ounces to the resource base. Really just nailed it in terms of how to approach this.
I think that's, you know, that was a few years ago. I think the market's come around to accept this is the correct way to tackle the project. We put out the PEA, based on, you know, just about 1 million ounces of M&I and inferred, if you add it all up, showing a nine-year mine life at 100,000 ounces a year, with a $1,000 all-in sustaining cost. I think being able to show to the market the economics in that study format was really a game changer. You know, technically, I think something that's become more and more meaningful is the penchant for this deposit to grow.
You know, we did a few step-out holes through with our last program and had great success finding, you know, new pods of mineralization near planned underground infrastructure within a few hundred meters of where we're gonna put drifts anyway. I think being able to show that there is more mine life than just in what is shown in the PEA. Even more recently in the last couple of weeks, we put out our first down-dip extension holes, one of which hit 25 g a ton. It's showing that this thing still has legs at depth, and we can continue to add mine life or grow the deposit there. I think, you know, the PEA was a great starting point, and I think Ana Paula is gonna continue to grow.
Beyond that, the other thing that the down-dip drilling showed us again is that the high-grade system continued, but the Ana Paula mine project, I'll call it, is a distal expression of a skarn system. It sits higher up in the geologic column compared to its neighbors, you know, Torex's Morelos complex and the Los Filos mine in Equinox, which are 12-million and 15-million-ounce deposits if you add them all up. We think there's good potential that as we continue to drill at depth, we'll hit that similar style of contact skarn, and that could be a true Tier One deposit. Stay tuned.
We still have some work to do, but again, geologically, all the pieces are there telling us that we've got a very good, very, very profitable, you know, 10-year mine life at 100,000 ounces a year. We could have a multimillion-ounce beast below that.
On the Cerro, you know, looks capable of materially changing sort of your scale here, right? How do you think about its role relative to Ana Paula here as a second engine of growth, you know, a timing option or part of really just the path to a very different sized company?
Yeah. I think Cerro de Gallo, our open pit heap leach project in Guanajuato, it fleshes out our organic pipeline, shows how we go from, you know, round numbers, 200,000 ounces a year by the end of 2028 to that 300,000 ounces a year by the end of 2030. We put out a PFS study on that in Q4. Again, Q4 was very busy for us for studies. That really showed where we need to dig in a little bit more. It showed that the deposit can expand with, you know, additional land acquisitions, being able to move surface infrastructure away from the pit to stop limiting the size of the pit.
It showed us that, you know, there's some metallurgical blind spots, we'll call them, within the deposit where we just don't have drill data to support, putting some of that material into an oxide heap leach mine plan. Again, a small drill program there could be meaningful. You know, we're talking hundreds of thousands of ounces that can be added through now closing some of those gaps, and adding another 100,000 ounces a year to the company's portfolio. You know, Ana Paula will be to Heliostar what the Red Lake Mine was for Goldcorp. It's gonna be this incredible cash engine, high grade, high margin asset that will then fund, all future growth plans to follow very comfortably.
Maybe the last one here on some development here is Goldstrike, right? Really adds a new dimension to the story through U.S. exposure, existing infrastructure and really antimony optionality, right? What does that sort of say about your acquisition filter, maybe how it's evolving while still maintaining a focus on the core portfolio?
Yeah. Make no mistake, Ana Paula is front and center in terms of everything we do, you know, is to get Ana Paula into production for obvious reasons when you look at the economics. I wouldn't say our filter has changed. Our filter starts with the project. We are, like I mentioned previously, a technically driven team and, you know, good projects start with the geology and the project. So that's really our first filter. If we don't like the project, we don't go any further. It doesn't really matter from there. I think otherwise we are looking for, you know, quality assets and in a good jurisdiction. I think that was something that was important to us. We love Mexico. Mexico's a great place for us to operate.
We've never had any issues, but I think as you continue to expand the portfolio, it behooves us as a company to diversify our geographic exposure, as with any larger and growing company. Goldstrike certainly did that. It's a great project in the Great Basin. Again, Carlin-style deposits in the Great Basin tend to grow as well as you continue to poke around, understand the geology, find the future structures, et cetera. I think that's, you know, this adds into our growth pipeline, likely, you know, after Cerro de Gallo is where it probably fits in. Then the other part you mentioned was the antimony.
You know, there is a nice antimony project on the east end of the Goldstrike property, you know, a past producing mine in the 1970s, at high grade, and then some very high-grade grab samples as well have come out of there more recently. It's still at a fairly early stage of exploration, but we think there's a lot of potential to expand and flesh out that opportunity maybe as a separate standalone antimony project, maybe as an indicator for where to chase the gold on the property, maybe as a lever to help us expedite permitting. I know antimony is a critical mineral, so having that as an additional card to play in our hand certainly helps.
Yeah, it's still a relatively new to the West. Again, we announced the acquisition, work to close it and start to get those work programs going, get it under our thumb, so to speak, and look forward to progressing it thereafter.
All right. Very good. Maybe in the final couple of minutes here, you know, help summarize the conversation a bit and really what investors should be looking for over the next 12-18 months. You know, what are the most important operating development and really strategic milestones they should be watching really across the entire portfolio?
Yeah. I mean, I think to sum it up in a phrase, we are, you know, equity dilution-free growth. I think we're gonna re-rate from a developer multiple to a producer multiple. I think if you look at any sort of our future peers who produce 200,000+ ounces a year in the lower half of the global cost curve, you know, that's a $3+ billion company versus our $600 million. I think that's what we can deliver to investors is that sort of re-rate and growth potential recognized in our market cap and directly in our share price by not having any equity dilution. In terms of catalysts, you know, we are drill bit heavy over the next little while in a good way.
We're drilling aggressively across the portfolio. We're drilling for mine life extension at San Agustin. We're doing additional down-dip drilling at Ana Paula, and we're looking forward to the regional exploration of La Colorada, as well as some resource growth opportunities closer to the open pits there. You know, stay tuned for steady drill results and assays. I think our Q1 financials will be impactful as well as a true catalyst. It'll show the cash flow impact from San Agustin, the first full quarter of production there for the first time. I think that's one to really keep on investors' radar and could show well. The other one I think is operational momentum at Ana Paula.
Now that we've got certainty of cash flow from the San Agustin restart, we're going to start to continue to advance a decline that was started by a previous operator. It was actually 400 m of production scale decline that they were driving as an exploration adit. We're gonna continue that as our main access, and that'll let us de-risk the ore body, get in there, map it, see how the rock stands up, show operational momentum as part of a broader early works program, and also establish an underground drill platform to continue to tackle those down-dip extensions, and go hunting for the you know, the potential contact skarn and beast at depth. That's all things to look forward to.
I think the other thing, you know, worth noting is continuing to show the next stage of growth at La Colorada. We're gonna do the stripping at our Veta Madre pit cut back. This is the next in our sequence of pit expansions there. That work's gonna start in the second half of this year and really show that we're continuing to do the work to unlock future production. Now, that'll unlock production in 2027. Again, bigger and better. We'll be stacking, you know, 0.7 g a ton that year versus the 0.2 g a ton we did from stockpiles to get into production quickly in 2025.
Again, all these things that are just execution to continue to go along the path that we've laid out, and now it's on management to continue to follow that, execute, find additional opportunities for growth, and stay the course.
All right. Fantastic. Well, Stephen, thank you very much for your participation and the company's participation in the Lytham Partners Summit here today. Greatly appreciate it. Thank you to everybody watching, of course. If there are any questions, maybe you would like to schedule a meeting here with management, anything I can do to be of assistance, please let me know. Shoot me an email, Blum, B-L-U-M @lythampartners.com. Again, have additional presentation and well, fireside chat actually coming up here shortly. So, stick around for that. Again, Stephen, thanks so much for your time today.
Great. Thank you.