Starting a Dialogue with the Market

Q: To what degree are you moving toward full-scale production at your Oposura project?

A: Azure initiated the process of moving from exploration to production in early 2019. Our intent was to do small-scale mining and processing, sell the concentrate and develop cash flow for the company. We did some detailed grade control drilling to identify near to surface high-grade zinc-lead-silver mineralization during the summer of 2019. We then mined 6,000 tons of very high-grade sulfide zinc and lead ore (+20% zinc and +10% lead). We stockpiled it on the surface with the intention of processing it through a third-party-owned processing facility. In November, we started processing on a small scale to optimize the processing. We were doing small batches of around 10 tons to optimize the throughput rate, the crushing size and the grinding size, among other parameters to be able to create the best concentrates in terms of quality, quantity and recovery. In January and February, we began production of the concentrates and introduced them into the market.

Unfortunately, we are now dealing with COVID-19, which has basically caused the metals markets around the world to collapse in terms of prices. As a result, we have put everything on hold. Two months ago, our goal was to be in the middle of production, and we nearly got to that stage but global macroeconomic factors have prevented us from continuing with this operation. We are now looking at reverting back to exploration until metal prices rebound. Twelve months ago, we were looking at a price of about US$2,600 per ton of zinc or US$1.20 per pound. The price is now around US$1,900 per ton or US$0.90 a pound. Our operation is not economically viable at those prices.

For now, we need to wait until we can see a clear pathway to success. It is also important to remember that prices for zinc have been decreasing for the past two years. COVID-19 has also had a significant negative impact on what was already a negative cash flow and a negative pricing environment.

Q: What are your plans for current and future exploration activities at Oposura?

A: We will continue to conduct exploration on this project because we have several high-quality targets that we have identified and which remain untested. If we find zinc and lead mineralization as we expect, it will significantly enhance the overall resources of the project.

The main focus for our exploration has reverted back to our silver-gold-copper Alacrán project. We have decided to do this because the price of gold is very strong and the price of silver is also good and this has led us to become more focused on precious metals. The project has two deposits: Loma Bonita, which is gold and silver, and Mesa de Plata, which is silver only, and our goal is to increase these resources with more drilling. with more good results these gold and silver deposits would be considered for development into a mine.

The recent drilling at Alacrán also discovered a new zone of high-grade copper mineralization at a prospect called Gregors. Making new discoveries is always very exciting and we are looking forward to growing this discovery into a copper deposit. We have precious metals projects, base metals projects and a cobalt project, which is the Sara Alicia project.

Q: How is the Sara Alicia project coming along?

A: We were able to settle the ownership issue and we now own a much larger concession that contains high-grade gold and cobalt mineralization. The cobalt market is not very attractive at the moment but Sara Alicia has great potential for high-grade gold and we are looking into doing more exploration to progress those targets.

We need to focus on areas and commodities in which the markets are interested financially for exploration and development. There is no point in trying to explore something that the market is not interested in, so our financial and technical will mostly be focused on the Alacran project.

Azure Minerals is an Australian mining company with a total of nine projects located in the Mexican states of Baja California Sur, Sonora, Chihuahua, Durango and Oaxaca.