AR:   So the biggest empire, as usual, is ushered in with some elegant statement.

DH:   That's very positive.

AR:   Anyhow, so I'm in a good mood. Now, but, I would like to convey to you that this mining decline, from which you suffered and many other people suffered, was an artificial market correction. The world needs your molybdenum.

DH:   Right.

AR:   Correct. My first question is, can you briefly describe your company?

DH:   Yes. We went public, about three years ago. I have been actively involved in mineral exploration for 20 years.

AR:   Yeah.

DH:   I am the president and CEO of Newmac Resources,

AR:   So you started the company, you have been in the mining business, please carry on,

DH:   I have been actively involved in mineral exploration for about 20 years.

AR:   And, what was the purpose of setting up this company.

DH:   It was to identify, find and identify, mineral projects, primarily in British Columbia.

AR:   Your were thinking of industrial metals?

DH:   No, we actively have taken on properties that are displaying, what we wanted was clean free properties, which basically are, can go and very large. Targeting copper, gold and molybdenum.

AR:   Now, may I ask you, these three metals go together under the ground, or not?

DH:   Quite often they do. Systems at times that carry copper molybdenum don't necessarily carry high gold or gold, whereas, a prime copper system will carry a decent gold mine.

AR:   Let me ask you, An explorer, or an exploring company, what are the initial indications
you go on?

DH:   We like to take on projects that have surface indications of copper, gold, molybdenum, whatever, that shows that they could go large.

AR:   And how do you ascertain the initial step?

DH:   It's a matter of dealing, quite often, with a prospector, who has gone out and picked up surface sampling, that have indications of a mineral systems.

AR:   And you employed prospectors, you listened to prospectors when you started?

DH:   Yes, prospectors. Like one time one of the vice presidents of Placerdome, before they were bought out make a statement at one of their board meetings that we spend approximately $10 million a year in exploring for new properties, and yet every mine we have came to us by a prospector or a junior company. He just threw that out as a question and nobody could really answer it. But it's a major, big companies notoriously have a difficult time in mineral exploration, so they tend to watch closely the development of juniors, and what happens with a prospector is they like to deal with juniors, because the junior, like, only of these prospects one in a thousand ever make it to a mine, so the odds are very long. And if they deal directly with a major company, the do not get stock, and the odds of that property succeeding are very long.

AR:   Ok, so we have ascertained that you have a company, let's say public, and you deal with a prospector or several prospectors who have possibility of discovering metals which can become a mine. The profit potential is divided up between the company and the selected number of the prospectors. That's the incentive?

DH:   Yeah, the typical deal with a prospector will be some cash up front and stock, and then it increases as it develops. If the property doesn't pan out, well it ends there and you move on to the next one. But in the meantime the prospector has picked up a bit of stock, and feels a lot better about the whole deal.

AR:   Now, there is a time when you take one or some of the prospectors seriously, and put public money behind them to develop the territory, correct?

DH:   That is correct. You start out as a private company, then if you do end up with some projects that look like they could go somewhere, you can then, it's called, it has to be a property of merit, will pass the test of the stock exchange and the geologists on staff there. If you have a project that looks like it could develop, they will then allow you to go public and raise public money, and that is where we are at.

AR:   Now, coming down with a specific to your company, where are you at the moment in historical development from the original prospectus.

DH:   We have three properties that we're actively exploring at the present time. One property just north of Can Loops, British Columbia, is probably I would say our most advance project, prospect at the time, at the present time. It's showing very, potential of a very large tungsten, molybdenum [unintelligible] project. We have now drilled 38 diamond drill wholes in that project. We've spent about $2 million on it and we have a resource identified there that is a approximately 275 – 300 million tons, starting, of tungsten molybdenum, starting at surface, down to 1,000 feet.

AR:   Now, can I just, in other words, you have pointed out that there is a possibility of tungsten and molybdenum in one of your properties.

DH:   Yeah, it's more than a possibility, because it's showing up in the assay results, that we do, it's definitely carrying good tungsten and molybdenum.

AR:   Ok, now let me just be very pedestrian. How much tonnage do you suspect in tungsten and molybdenum, how big is the territory.

DH:   Right now, and it's still open, in three directions, with the drill holes that we've done and the spacing that we've done, we're looking at approximately 275 to 300 million tons, with it being open in three directions.

AR:   That's underground, 300 million tons.

DH:   That is from surface. We're developing this prospect as an open pit. It's low grade, but an open pit does not require high grade. A typical open pit, either copper or tungsten or molybdenum project operates and gets interesting at about $10 a ton rock, we're looking right now at around $30 to $50 a ton rock, here.

AR:   You consider that a rock is worth $30 to $50 per ton?

DH:   Yes.

AR:   So, in other words, the expert opinion. Now, if we take it very simply, 300 million tons at $30 is a billion dollars.

DH:   I think probably closer to $9 billion.

AR:   I'm sorry, $10 billion. So, in other words, what we have now, how many shares do you have outstanding?

DH:   Fully diluted, about 20 million.

AR:   And, what's the price of the stock?

DH:   The price is trading today between 35 and 40 cents. I think it last traded at 38 and a half.

AR:   Ok, so at 35 cents, US, 20 million is a market cap of $7 million.

DH:   Right.

AR:   And, may I ask you how much cash do you have in the company?

DH:   About one and a half million dollars right now.

AR:   Ok, so in other words, $5.5 million represents an ore body which you think may be worth $10 billion.

AR:   Now, is it very atypical, or normal in your business, these kinds of ratios?

DH:   No, they projects, as I mentioned at the start, only one in a thousand ever make it to a mine, and very few ever demonstrate the size that is beginning to develop here. It's not ususal. It doesn't come along all the time, and that's only one of the three projects that we have under way.

AR:   Now, let's talk about the one in three purchase, we have the $10 billion potential value for $5.5 million. Now, please, one by one, list the various steps you should be taking to realize the potential of the company.

DH:   We are going to be continuing with the drilling. We just applied and received permission to continue drilling. We are going to do another 20 holes in the near future, and by fall we want to then do a, what's a 43101 Resource Calculation by an engineering firm. That's the, what we discovered so far is not going to be the total size of it, because as I was saying it's still open in three directions.

AR:   Ok, but $10 billion is enough for me for a minute. So, you continue to drill to ascertain in a legalized format what you have.

DH:   We can get a better handle by in-fill drilling. Now, the drill spacing to be closer together in order to confirm the fact that the mineralization is pretty, it carries across the ground, we're looking at 6 or 700 by 1000 meters in distance here, and we'd like to know that

AR:   So, in other words, the government or somebody is giving you a certificate. Now, what would come afterwards.

DH:   Once we have a better handle on grade and tonnage, then that's when the bigger companies will then look at you. There's a lot of companies in the world, major mining companies, especially in other countries like Japan, Korea, China, who are

AR:   I know, they want molybdenum. But, can I ask you something. Suppose they came in as partners, what would happen, what money would you have to spend and what would you do, specifically.

DH:   Well, it depends on the deal that would be made. In some cases they will just come in and buy you out.

AR:   That I understand, anybody understands that, but let's say they come in with a check, buy one third of the company, but what would you do, what do you have to do as a professional engineer, for the property, put the financial transactions aside.

DH:   Well, ok, let's say they, a big company takes an interest in the project because it's a commodity that they require. They will then come and offer, ok, they'll make an offer to earn in that they will spend the next $10 million to earn in up to 50 percent of the project.

AR:   But, what would they do for that 50, what would be, what steps physically are they taking?

DH:   They would do primarily diamond drilling and they would fill in very close diamond drilling, they would then take bulk samples, they would do metallurgical testing, and they would then do a feasibility study on the project.

AR:   How much does a feasibility study cost?

DH:   It varies, but on a project like this, quite possibly $25 million.

AR:   And once the feasibility study is completed, what is the next step?

DH:   The next step then, if it's a positive feasibility study would be to take it into production and they are the ones that would do that.

AR:   How much money would it take?

DH:   A big open-pit mine can take anywhere from $200 million to $2 billion.

AR:   Ok, so, now, but at the same time, we are going back now, you have something which is, let's say worth a billion dollars, but you have a bigger territory and other locations, so let's say you come up with a figure, that the whole thing is worth two and a half billion dollars, so then spending $25 million on a feasibility study, $200 million to construct the mine is not such a big quantity, because afterwards the cash flow would carry the company.

DH: Oh, absolutely. We would get a portion of that cash flow, because the larger company who would spend the big dollars to put it in production, part of their agreement would be that they have now, once they've spent the money to complete the drilling and the feasibility, they then would have the right to another 10 percent of the whole project by placing it in production. We then would be 40 percent partner in it and we would eventually get 40 percent of the revenue, once it

AR:   Ok, now, projects like yours, the $10 billion. Assuming you find nothing else, prices go up, do you build a mine, and so on, how much can you produce per annum? How many tonnage would go through?

DH:   In a deposit of this size, they could do 50,000 tons a day.

AR:   Now, 50,000, times by 50 for a market price increase, is two and a half, how much, 50,000 tons times 50 is two and a half million dollars. Correct?

DH:   Yes.

AR:   So, if you take 40 percent of the revenues, that's 10 million goes to 2.5 million, 10 percent, 40 percent is $1 million dollar to you, that's too small, no?

DH:   Well, that's per day.

AR:   Oh, per day, I'm sorry. Ok, then it means like $300 million dollars would go into your pocket.

DH:   In a year.

AR:   So, in other words, it's worth, if you believe that you have the $10 billion in reserves, it's worth for you to do two things, one to continue to work on your project and at the same time to expose yourself for the big brother and other investors who would make it possible to raise the money and then your 40 percent is worth let's say, $300 million a year.

DH:   Yeah. I have talked to other major mining companies, one in Japan who are quite interested in this project. They want to talk again after we have done more in-fill drilling and

AR:   But all through this project, all through your work, now three months from now, six months from now, the more, and if you make operating progress, which is your business, the more you are exposed, the more people talk to you, the more comfortable you feel and you always have a chance to sell pieces of the company to get more cash, and that would also mean that eventually instead of 40 percent, you end up with 20 percent. Twenty percent is still $150 million a year, and I have a feeling that your stockholders, your board, yourself, your family would be very happy with $150 million annual income.

DH:   Oh, I think they would, even if our company ended up with 10, 20 percent for a junior company with the little bit of stock we have out, that is an awful big dividend check to each shareholder.

AR:   So, in other words, it's your duty to fight this on two fronts. One front is at the mines and the fields, as an operator, as a mining engineer or mining expert, and your team. The other part is to look outside for the future, which is the stock market, the banking industry and international interest to have the progress of your company recognized by the right parties.

DH:   That is true, and the reason we are getting attention by a lot of the bigger companies is, I haven't seen, like I read the news releases from a lot of other companies, I haven't seen very many projects in the world that are demonstrating the type of, we have drill holes here, tungsten molybdenum from surface, down to 1,200 feet of continuous tungsten molybdenum, 340 meters.

AR:   Let me then ask you a question, molybdenum is used by the oil industry in pipelines, and of course the stainless steel industry.

DH:   Yes, right.

AR:   The price has been going up sharply in the last four years. Can you tell me something about tungsten?

DH:   Tungsten is the hardest mineral there is out there. The melting point of tungsten is about 4500 degrees. Tungsten is used a lot for armor plating in the armed forces use a lot of it. It's used in ships, in the steel industry also it's used. All your light bulbs are tungsten filament.

AR:   Who are the main tungsten manufacturers?

DH:   Country by country, I would say Japan probably is, Europe, certainly a large tungsten suppliers there. China is becoming one of the, becoming very strong now. China actually, and Russia, basically are curtailing tungsten exports and placing very high tariffs, they are only allowing, like China is only allowing 30 percent of their tungsten production to be exported.

AR:   In other words, looking for the long term, there is what you call a tungsten crisis. Even the mine producers trying to protect the country, and some of the countries will not be able to buy this element, which has its own implications, and the price, of course, would rise.

DH:   Yes, now, Russia also, or, China has declared tungsten to be a strategic mineral and Russia has now as well, so they are going to be.

AR:   I tell you, how much is, how do you measure tungsten, excuse me, I have to change the tape, can you just hold on. Now, carry on. Tell me, how do you measure tungsten? By pounds or ton or what? How do you, what is the price measurement?

DH:   Tungsten right now is kind of floating all over the place. I see quotes on tungsten now at $10 a pound up to $15 a pound, it's hard to get a price fixed on it because of the limited supply of it and the limited number.

AR:   Tell me, what particular part of industry can have a tungsten shortage? Internationally.

DH:   Anything to do with steel manufacturing, this sort of thing is because the supply is being curtailed. China historically has been the largest tungsten supplier

AR:   How much is the yearly production, do you have any idea?

DH:   I do not, I'm sorry.

AR:   I'll look it up. But, the price of tungsten has been going up in the last five years, no?

DH:   Yes, very much so, it's been following molybdenum, although molybdenum is higher, molybdenum trades $31 to $35 a pound, and tungsten trades between $10 and $15, but tungsten is still worth three times a pound what copper is worth.

AR:   Tungsten is worth three times what it's selling at?

DH:   Right.

AR:   So, in other words, you eventually, there may be a "Tungsten Gap?"

DH:   There is now. And it's being created, it's come about because Russia and China, the main suppliers of tungsten to the world have curtailed any export.

AR:   America produces any tungsten or not?

AR:   Does America produce any tungsten?

DH:   Some, but not a lot.

AR:   So, there is a tungsten gap? In the movies Dr. Strangelove said there is a missile gap. There is a Tungsten Gap.

DH:   There was the paper came out of Europe about six months ago outlining the looming tungsten shortage.

AR:   Can I ask you something? How many people know in this world that you have the potential to produce tungsten?

DH:   Not that many. We're, we're doing now like, I don't know if you get the Northern Miner, but the issue that just came out this week is now showing our company and the drill holes and all the rest of it. And I think it's going to start catching the attention of more people.

AR:   So, in other words, at the moment, August 22, 2007, you wouldn't say that too many people know that NER, Newmac, in five years time can actually deliver and produce tungsten.

DH:   Well, that, we probably will not be the producers though. These projects, like for Newmac to raise $500 million would

AR:   Wait a minute. I agree. I take that point, but do people know that Newmac with financial help, with acquisition has mining properties that can produce tungsten for business?

DH:   No.

AR:   No, so they don't know. Ok, so in other words, it's not in the stock price.

DH:   No, that's the whole thing. That is why we're interested in talking with you, Andrew.

AR:   Now, if you get the story out, ok, eventually you meet a rich man, probably Mongolian or Hungarian, who may call Dale and say, "I understand you have a client, we have a $500 million check and we want to build a mine which can produce tungsten." That's really is a possibility at some stage, but the more you advertise, the more people know about it, the earlier you get the inquiries.

DH:   Oh, absolutely. We need to do a better job than we've done of letting people know what we have, because what we have is rather unique in world. I have not seen a drill hole anywhere in the world yet that is 340 meters carrying tungsten and molybdenum from surface, and the beauty of where we're sitting here, this is a large hill.

AR:   We have, as you know, behind us the century of warfare, a horrible hundred years when people were killing one another and they were not caring for human beings. Now, we have a new century and we have seven billion people who are working. When I travel, I travel a lot, I see Vancouver, Munich, Budapest, London, New York City, people are working, and they earn money and they spend it. You, we still have about 150 million what I call the lunatic fringe, who wants to fight, but every day they come down because there is no money for them. Nobody gives money away to anybody any more. No more foreign aid. Now, let's go back, seven billion people, let's assume that next year, as opposed to 2007 the seven billion will earn $1,000 extra. Which is not unreasonable, because likely it is next year you will make $1,000 more than this year. Now, seven billion, times $1,000 extra, is $7 trillion. This is equal to the American budget deficit, which is about $7 or $8 trillion, and it took us 250 years to get into this deficit. So, we have an extra $7 trillion that people like you, Dale, the guy in China, in Russia, President Putin's daughter, anybody. Everybody makes $1,000 more—$7 trillion. Now the $7 trillion buys something. None of them will buy weapons. None of them will build shelters. The $1,000—$7 trillion is going to be spent on consumer items. Consumer items needs mining products.

DH:   That's right.

AR:   You have to deliver the mining products, otherwise they don't fly on airplanes, they don't buy on automobiles, it's all money.

DH:   Appliances

AR:   Appliances, it's all mining. I mean, General Motors announce today that they will manufacture 60,000 electric cars next year. It's all metals, it's not coming out of wheat or garbage, it's all metals. So, we have a market now, $7 trillion for mining products, and if they require tungsten or molybdenum, there will be a price squeeze.

DH:   Well there will be a looming shortage, I mean right now with tungsten, what I've read is they're predicting a seven percent increase in consumption of tungsten and something like a seven to ten percent decrease in production.

AR:   Now, if that happens, we have, and in closing, have to buy a book about one of the greatest financiers of the world, Bernard Baruch. Baruch said, I only knew one principle in economics. If the demand increases more than the supply, the price goes up. And if it's the opposite, the price goes down. He said, that's all I knew and I was constantly in my life shorted or bought copper. Baruch was America's first "Commodity Man."

Andrew Racz

(Article 60 - posted August 27, 2007)

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