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Ltd. has the property, the resources and an experienced team in place as they head into
production in Mongolia, a country whose government is very supportive of quality mining
Garrison International Ltd.
Suite 500, 360 Bay Street
Toronto, ON Canada M5H 2V6
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
Published May 11, 2007
President and CEO
Mr. Krueger spent over 20 years providing financial advisory services to clients in Canada
with a specialty focus on the mining industry in China and the Far East. His experience as
a financial advisor provides critical skills he has used to aggressively lead Garrison
forward in the acquisition of high-quality mining properties worldwide. He holds an MBA
and a BSc degree in Physics and worked as a Professional Geophysicist for 5 years in Calgary,
Garrison is a junior mineral exploration company focused on acquiring and developing
advanced stage gold properties in Mongolia, China and Guyana. Garrison currently has a
property in Mongolia which they are in the process of putting into production.
CEOCFO: Mr. Krueger, what areas are you
active in and why?
Mr. Krueger: We are a gold mining
company with our major property located in Mongolia, that is, outer Mongolia the
independent country. It is situated between Russia and China. Our property is in the
southwest corner of Mongolia just on the edge of the Gobi desert.
Why are you there?
Mr. Krueger: Mongolia is rich in
resources and there are a tremendous number of opportunities there. The environment in Mongolia
is very positive for mining companies. Coming from Canada I can really connect well with Mongolia;
you have a country there that is rich in resources with a much larger population and much
larger economy to the south. Canada, of course, is to the United States what Mongolia is China.
The opportunities are very good there. They dont have the necessary technology
themselves or the capital or resources to fully exploit all of their mining potential by
themselves so they are relying on foreign investment and foreign companies to go in there
and put these projects into production.
Do you need much infrastructure?
Mr. Krueger: Where we are located, you
have gentle rolling grasslands, so it is easy to mobilize a drilling rig and get a lot of
things done. It is easy to move from one location to another. Setting up camp is no
problem. We have good access to power, to roads, and communications. We have put in a
satellite system there in order to make phone calls and emails.
Please tell us about the specific property that you have and why you have chosen this site
Mr. Krueger: We found a property that
has a very high-grade gold deposit. It wasnt difficult to find because the situation
in Mongolia is not a lot different from other developing countries in that the locals will
often mine at surface if it is profitable to do so. This creates a de facto geo-chemical
anomaly. The locals are going to need somewhere north of 15 grams per ton of gold in order
to make a hand-to-mouth living mining at surface. In many cases a lot of the foreign
companies will chase locals off the property; in our case we let them dig for a period of
time because, they are creating workings whereby we can go in there and sample. In turn,
we were able to locate a very high-grade type of deposit. We had some good fortune at the
top of that; to the south of us is a mine that was operated by the Chinese that was in
production and was located just 450 meters to the south of us. A distance of 450 meters is
a Par 4 on a golf course and it is a short walk for most of us. As it turned
out, the Chinese ran into some problems with the Mongolians in that they hadnt
constructed their tailings dam properly. Consequently, an environmental situation was
created there and the Mongolians revoked their permits. The property where the Chinese
mine is located is on a specific mine license that still belongs to the Chinese, but as it
turns out, where they were actually mining is on our property. It was a bit fortuitous in
a way and as it turns out we inherited some existing mining faces as a result of
aggregating a land position in the area. Subsequently, as part of our deal with the
Mongolians, we have committed to cleaning up the Chinese tailings dam. This has created
goodwill with the Mongolians in our case
You recently appointed a number of people to get started; where are you in the process?
Mr. Krueger: The chief operating
officer is Mr. Tony Bainbridge who is Australian. He brought in a number of his mates that
he had worked with over the years in Australia and New Guinea for Highlands Pacific and
other gold mining companies. The Australians have quite a different attitude and focus
than mining people in Canada. Geography and climate has a lot to do with it. In Canada, it
is very expensive to hire people and put a mine into production. We really need to spend
$20 to $40 million and put in a full-scale, world-class facility in order for a mining
project to make sense. Also, in Canada we have a robust stock exchange here in Toronto. In
Australia, they dont give the same premiums on their stock exchange - they actually
have to produce gold or minerals and make money. This is their attitude and they are
geared up for that. In Australia, they may have a small-scale production out in the middle
of the outback and they dont even have it enclosed by housing because it
doesnt rain there. They can get up and running in short order and this is what I
have learned by working with them and by their attitude. Tony has put together a team of
like-minded individuals who plan to get this project into production as quickly as
possible. Because we acquired some existing mining leases, we were able to leap-frog a lot
of the permitting and the issues that normally take a period of time, so we were able to
fast-track the entire operation.
What is the timetable for the next few years?
Mr. Krueger: What we are trying to do
is get into production before the end of this year in a 100 ton per day facility. In the
grand scheme of things, 100 tons per day in terms of a facility is not a particularly
large facility, however we have got a high-grade situation. The Chinese were producing
anywhere from one to 3 kilograms of gold per day averaging 2 kilograms a day with their 30
tons a day facility, and ours is more than 3½ times that size. The limiting factor in the
overall operation is not the above ground production, it is the below ground production
and how much ore can be pulled out from underground in a given day. Given this particular
situation, we are budgeting 2 kilograms of gold a day, which at $675.00 you are looking at
more than $1 million a month in revenues. What will happen is the entire project will
become self-sufficient at that particular point in time. In addition, we recently
purchased two drilling rigs and they are on schedule for delivery in late May, so we will
be able to continue to drill out resources and eventually reserves at a low cost because
we will own our own rigs and be able to finance their use through our own production. This
means we can move things forward without diluting the shareholders and having to go back
to the market for additional finances.
What are the challenges to the plan and how are you ready?
Mr. Krueger: It is challenging working
in a developing country, but we are offset by other advantages as well. One of the
advantages is that we are next-door to China. As I mentioned earlier we can procure our
mining equipment and heavy equipment from China. The same equipment brought in from Canada
or Australia would be four or five times the cost. A lot of the younger people in Mongolia
are fluent in English, it makes our life easier. The older set is fluent in Russian as a
second language because the Russians occupied Mongolia up until about 1991. Language and
culture is one thing, but it hasnt been an overwhelming stumbling block, we have
been able to get around that quite easily. Travel is an issue for me, I try to get there
four to six times a year and of course that takes wear and tear on the body.
Is your funding in place until you get into production?
Mr. Krueger: We just did a $1.6
million dollar private placement. We have a joint venture with Asia Intercept Mongolia
LLC; they are putting in $400 thousand worth of equipment and cash. We are working on a $2
million budget and we are on budget at this point. We do have unexercised warrants to add
to our finances that can bring in additional funds going forward.
Are there other properties that you are currently working on?
Mr. Krueger: Yes we have been
aggregating land position in this area and we are negotiating on additional properties in
the area that can add to the critical mass. In general, the overall game plan is moving
forward and I am talking immediate future now, the plan is to acquire the properties, move
forward with our production plans and at the same time continue drilling and run a drill
program around the clock through the next twelve months. We want to try to double the
production in 2008 to 200 tons a day and then double again, depending on the information
we are getting back. So far the geophysics that we ran earlier this year in January
gave us a snapshot of what is happening below surface and we see a vein system that does
not outcrop at surface but is below surface and that is giving us a great deal of
optimism. We had a positive report from Greg Collins, who is a New Zealander who did our
43-101. He is a geologist registered in Australia. He has done work at the Boroo mine,
which is the largest producing mine in Mongolia owned by the Canadian company Centerra,
where they are producing 200-250,000 ounces of gold a year. He is a structural geologist,
and said our project is structurally similar to theirs. If this turns out to be the case,
we eventually want to do bulk mining with heavy equipment in a large open pit. This is the
overall game plan. However, we have to walk before we can run. This is why we want to get
our facility up and running and get cash flow in place so we can chase all these ideas
Why should potential investors be interested in the company?
Mr. Krueger: Investors should be
interested because we are heading into production, and looking to establish at least a
ten-year mining life, so we are going to be around. We are not just going to fizzle out.
That is why they should give us consideration. We have the team in place, as well as the
capital resources. What is attractive is that we can own the property 100% ourselves so we
can go as fast as we want. We are not bogged down with red tape. That has been a great
benefit. We have had a positive response from anybody we have come in contact with on the
government side - nothing but support. They want us to come in and invest, bring in
technology and managing skills. It has been a positive experience.
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