Continued Growth Expected when Cash Flow Starts at Cerro Caliche

Q: What commitments and support have you received from Mexico’s government and local communities? 

A: We are very much engaged with the local community and Mexican authorities, as was the case when we prepared and filed the Environmental Impact Assessment (MIA) for our Cerro Caliche project. We have received local support and have not encountered any difficulties with SEMARNAT. The company is very fortunate to have the mine in an area where there is already a mining culture and we have been able to offer employment on a prolonged basis, which has been recognized by the Sonoran government. We have nothing but full support from the State government and locally. Our management team has been developing mines in the region for decades. As a result, we have very good relationships with all levels of government.

Q: What distinguishes the state of Sonora from other important mining states in Mexico? 

A: Sonora is very rich geologically and it is very pro-mining. The state produces over 80% of the country’s copper and over 33% of its gold. With more than 40 large mines, the state accounts for 36% of Mexico's total mining production and revenue stream by value. It can be argued that Sonora is Mexico's leading mining state.

From a Mexican perspective, we are in the right location. We are in an area where we want to keep everyone fully involved and we are very keen on ensuring that the local community is fully on-side with us. In addition, Sonora hosts vast amounts of copper and gold deposits and its authorities are receptive to investment and understand the need to have these operations. I will continue to encourage the citizens of Sonora to understand that mining is hugely valuable to the country. It is also important to ensure that the mining companies in Sonora have a serious development and rehabilitation plan for the land. In the end, the community will benefit greatly through high-paying employment and high-value economic activity.

Q: What have been the highlights of the company’s activities in the past year?

A: One of the highlights was the result of our phase four drilling campaign, which we expect will add to our gold resources and extend the estimated life of our proposed heap leach mining operation. We also prepared a new Mineral Resource Estimation (MRE) with very favorable improvements. We will prepare a new also be updating it again with new resource calculations to include the phase four drilling results. The latest PEA results envision seven years of production with an average annual production of 45,000 oz AuEq. The PEA provided for a pretax net present value of US$84 million for the project, while calculating an internal rate of return of 74.5%. The initial  is only US$26 million. Cash cost is US$1,206/oz, with an all-in-sustaining cost of US$1,333/oz, well below gold's current price.

Q: What are the expectations for the Cerro Caliche project and what are the key elements of the Mine Development Plan?

A: It is reasonable to expect that we will become a cash flowing company over the coming  year and will materially expand the size of the gold resource.  We should continue to grow as we use cash flow to explore and expand the Cerro Caliche deposit. The key elements of the Mine Development Plan going forward will be the inclusion of the latest drill results into our upcoming PEA, followed by the securing of debt financing for the mining operation. In the meantime, detailed engineering for our planned mining operation is being done internally. We have filed an Environmental Impact Statement with SEMARNAT and are preparing to file an application for a Change of Land Use permit. We expect to have both in the near future, followed by the start of construction.

We believe Cerro Caliche will prove to have a much larger resource than shown in the new MRE. This is because of the faith we have in our VP Exploration, Mel Herdrick and the work that is being done. As it develops, it is not unreasonable to expect that Cerro Caliche will have the potential for up to 2 million ounces. I emphasize the word ‘potential’ because until it is proven, all we have are the current resource estimates.

Q: How do you go about offering the local community long-term employment opportunities and lasting benefits that extend beyond the mine life?  

A: At Sonoro, we hope to double the proposed mine life. This means a decade and a half of work for more than 200 employees.  At the same time, we plan to provide educational opportunities and scholarships for members of the local community, which should provide substantial long-term benefits. 

Providing these opportunities is something that all mining companies should do. When these companies start a venture, the reality is that if you walk away at the end of the venture it will cause many issues. During the operation of the mine, we do as much as possible to help the community develop. For instance, I helped with a private enterprise in Thailand that helped the villagers improve their lives. Rather than remaining only laborers, they became professionals with the ability to develop their own lives, especially through education. They may become engineers, doctors, or lawyers. They may end up in other professions simply as a result of having Sonoro generating revenue and employment that flows into the community. As a result, the community grows.

Q: What are your plans for the near term?

SRK is the company that will review the resources at Cerro Caliche. That is a very important factor. They have a great deal of knowledge and they have been to the property and have met our team. The rapport between our team and SRK was highly respected because it puts us in great standing when it comes to project’s financing. For 2023, we look forward to receiving an updated resource report from SRK followed by a new PEA. We aim to have our mining license with our MIA approved in that time frame. We expect to shortly have our financing in place and from there, we hope to start production by the tail end of 2023 or perhaps by early 2024.