Ready to Take Lean Into Operation

Q: What are the latest developments on the El Alacrán project?

A: We have been exploring the El Alacrán project since January 2015, spending a total US$5 million in that time. We have also met our initial milestone commitment to the owner of the project, Teck Resources, which means that we have 100 percent ownership of the project. Of course, Teck still has the option of buying back into the project if it believes we have found a viable or attractive deposit.

In the two years we have been exploring the site, we have been tremendously successful, having found two substantial deposits. Firstly, we discovered the Mesa de Plata silver deposit, which holds an estimated 26 million ounces of high-grade silver at surface. This deposit is easily treatable and we expect to have the Pre-Feasibility Study (PFS) completed during 1Q17. We recently discovered the Loma Bonita gold deposit, which lies just 300m from Mesa de Plata and outcrops.

What is really exciting about these two deposits is that they are both high grade and they are found at surface on top of a hill. Moreover, Grupo México’s Cananea copper mine is visible from the site just 12km to the north. Although copper exploration has dominated the region in recent years, we have found two significant precious metal deposits, which speaks volumes for the potential for mineral exploration in Mexico.

When we acquired the El Alacrán property from Teck Resources, it was subject to a buy-back clause wherein Teck had the right to re-acquire a 51 percent interest in the property by sole funding US$10 million in expenditures over the next four years and making cash payments of US$500,000 to Azure. In December 2016, we were advised by Teck that it planned to exercise this right and, as of July 2017, Teck has a 5,500m drill plan scheduled. Teck Resources will complete follow-up drilling at Loma Bonita, Cerro San Simon, Cerro Enmedio, La Morita and Palo Seco prospects, subject to securing the permits from the authorities.

Q: Assuming the PFS reveals that the construction of a mine is a viable option, will Azure then start looking for a buyer?

A: We are looking to take this project right through to production to become a mining operator ourselves. The members of the company’s executive board all have substantial experience not only in exploration but also in developing, building and operating mines, so we feel confident that we can transform Azure Minerals from being a junior explorer into a producing company. If everything goes according to plan, we anticipate that the mine could be up and running before the end of 2018.

The Loma Bonita discovery was the final confirmation we needed that we were exploring an area of high potential. On its own, Mesa de Plata is an attractive, modest-sized, high-grade and potentially lucrative mining operation that would have a mine life of three to five years. However, the discovery of the Loma Bonita gold deposit changed the scope of the overall project entirely, doubling the tonnage and extending the life to up to 10 years. With the exploration potential in the area, there is nothing to say that more deposits will not be discovered in the future.

Q: Will the proximity of the Buenavista del Cobre mine be a bonus to the project in terms of infrastructure?

A: Very much so because the Cananea district is one of the busiest mining districts in Mexico. Not only is there a lot of mining and exploration in the area but there is a big push on infrastructure projects, with new highways, power lines and water supplies constantly being installed. It is hard to think of a place better-suited to mine construction in Mexico. The town of Cananea has a population of over 30,000 and the community is supportive of mining given the long history of operations in the area. This provides us with a ready-made workforce. We hope that once the mine is in operation it will be mutually beneficial for both Azure Minerals and the municipality of Cananea.

Q: How have the discoveries of Mesa de Plata and Loma Bonita affected the company’s stock price?

A: The market capitalization of the company rose from around US$10 million to US$60 million between September 2015 and September 2016. We have also distributed a fair number of shares to fund our activities, and that explains why the share price on the ASX has only gone up fourfold. We have raised more than US$15 million from Australia, North America and Europe, which shows how much interest our projects are attracting around the world. In fact, 25 percent of our shares are now owned in North America and we are investigating the possibility of making a listing on the TSX. This would make us a dual- listed company and allow us to attract even more interest from North America. We plan to use the extra funds to complete the feasibility study and develop the mine.

Q: What are the latest developments on the JV with Rio Tinto at Promontorio?

A: As part of the deal we agreed with Rio Tinto, it has to spend US$45 million to earn an 80 percent interest in the project. In the first year, the focus was on geophysical and geochemical studies, while the second year the main goal was to complete drilling. We completed nine holes totaling 9,000m and we successfully identified a large, strong, porphyry body that contains copper mineralization.

This is exciting because the two main deposits that we have already discovered – La Cascada and Promontorio – are modest-sized deposits that would not attract a company the size of Rio Tinto. However, with the new copper porphyry body, coupled with some of the other targets we have identified in the area, we expect that a large mining company could see enough mineral potential to build a sizeable mine. Rio Tinto, with its long history of copper production, could be that company.

Q: How valuable has the experience of Rio Tinto been to the project?

A: Rio Tinto is an impressive exploration organization, with highly qualified and knowledgeable geochemists and geophysicists who bring to the table state-of-the- art analysis techniques and practices. We have learned a tremendous amount from them and we hope to replicate their modus operandi on our other projects. On the financial side, Rio Tinto has also been vital. A junior company like Azure Minerals does not always have the cash to fund extensive drilling and exploration work, especially when prices are depressed as they were in the past few years, so having a large JV partner with more liquidity like Rio Tinto is a real boost for the project.

Q: What are the main challenges you have encountered as an Australian exploration company operating in Mexico?

A: The main challenge on the corporate side is explaining to the Australian investment community the benefits of working in Mexico and the country’s vast mineral potential. We have just discovered a good silver deposit but Australia does not have a big history in silver so we have had to educate the market about the grey metal’s many advantages. This is one of the reasons why we want to transfer the company to Toronto with a dual listing, because the Canadian investment community is vastly more experienced in both Mexican operations and silver extraction.