Partnership with Adventus Mining

  • Background

    Salazar has a joint venture with Adventus on the Curipamba VMS discovery, whereby Adventus can earn 75% of the project by funding exploration and development expenditures of US$25 million before 2024. A feasibility study is expected to be completed during 2020-2021, after which Adventus is required to fund 100% of the development and construction expenditures to commercial production.

    In addition, the partnership has a zinc-exploration Alliance that currently contains two projects, Pijili and Santiago with Adventus (80%) funding all activities in the Alliance up to a construction decision on any project. 

    News release: Adventus Zinc Enters Into Option Agreement With Salazar Resources on the Curipamba Copper-Zinc-Gold Project and Forms Exploration Alliance in Ecuador

    News release: Adventus and Salazar announce execution of Ecuador-wide exploration Alliance with the Pijili Project and provide Curipamba Project update

  • El Domo, Curipamba

    Investment terms

    Adventus Mining (“Adventus”) has the option to earn a 75% interest in the Curipamba Project by funding costs of US $25,000,000 (the “Earn-In”) over five years. Under the Curipamba Option Adventus has agreed to provide Salazar Resources with US $250,000 per year advance payments until achievement of commercial production, to a maximum of US $1,500,000. As operator, the Company also receives a 10% management fee on certain expenditures, with a prescribed minimum annual amount of US $350,000.

    Adventus has notified the Company that it has incurred or funded costs totaling US $11,883,628 as at March 31, 2019 towards the Earn-In. Once the feasibility study is completed Adventus is required to fund 100% of the development and construction expenditures to commercial production.

    Upon achievement of commercial production, Adventus will receive 95% of the dividends from the Curipamba Project until its aggregate investment, including the US $25,000,000, has been recouped minus the approximate Company carrying value of US $18,200,000 when the Curipamba Option was signed, after which dividends will be shared on a pro-rata basis according to their respective ownership. In certain circumstances where project development is delayed post earn-in, Adventus’ ownership position could be diluted.

    PEA

    A Preliminary Economic Assessment (“PEA”) for the El Domo volcanogenic massive sulphide deposit (“El Domo”), located within the Curipamba Project, Bolivar State, Ecuador was announced on 2 May 2019.

    The El Domo resource at 4.9% copper equivalent is almost an order of magnitude higher than average global copper grades, which is reflected in the compelling set of economics, and the project is located in an increasingly pro-mining jurisdiction, with good infrastructure.

    The PEA shows that El Domo can be a low-cost supplier of copper gold and zinc, generates cash flows after taxation of US$449 million over the initial six years of production, and delivers an IRR of 40% with a payback of less than two years.

    PEA Results Summary

     

    PEA Base
    Case

    -10% Pricing

    +10% Pricing

    Long-term
    Consensus
    Forecast(3)

    Spot Prices
    as of April
    30, 2019

    After-Tax NPV ($M, 8% discount rate)(2)

    $288

    $225

    $342

    $330

    $271

    After-Tax IRR (%)(2)

    40%

    35%

    45%

    44%

    39%

    First 6 Years of After-Tax Cashflow ($M)

    $449

    $392

    $500

    $488

    $434

    Initial Capital Cost ($M, incl. refundable VAT)(4)

    $185

    Life of Mine ("LOM") Sustaining Capital Cost ($M)

    $105

    Total Capital Cost ($M)

    $289

    C1 Cost ($/lb CuEq, see production below)(5)

    $0.96

    $0.94

    $0.98

    $0.98

    $0.91

    Payback Period (years)

    Approximately 2 years

    Nominal processing capacity (tpd)

    1,750

    LOM CuEq Head Grade over 15 years

    4.9%

    Average annual payable production (Years 1 - 14)

    Cu = 8,495 t
    Au =24,433 oz
    Zn = 10,831 t
    Ag = 558,160 oz
    Pb = 564 t
    CuEq = ~19,000 t

    Metal prices assumed

    $3.15/lb Cu

    $1,350/oz Au

    $1.15/lb Zn

    $18.00/oz Ag

    $1.00/lb Pb

    $2.84/lb Cu

    $1,215/oz Au

    $1.04/lb Zn

    $16.20/oz Ag

    $0.90/lb Pb

    $3.47/lb Cu

    $1,485/oz Au

    $1.27/lb Zn

    $19.80/oz Ag

    $1.10/lb Pb

    $3.38/lb Cu

    $1,436/oz Au

    $1.22/lb Zn

    $19.80/oz Ag

    $1.00/lb Pb

    $2.91/lb Cu

    $1,285/oz Au

    $1.33/lb Zn

    $14.91/oz Ag

    $0.88/lb Pb

     

    Notes:

    1)

    Unless otherwise noted in this news release, all currencies are reported in US dollars on a 100% basis

    2)

    Assumes an 18-month construction period as the basis for the internal rate of return ("IRR") and net present value ("NPV") calculations

    3)

    Long-term, consensus metal forecasting has been provided by RPA

    4)

    Capital cost estimates used for the PEA are based off benchmarking and not engineering design

    5)

    C1 Cost is net of direct operating costs and royalties

    Geology and Mineral Resource Estimate

    El Domo, located within the Curipamba project, Bolivar and Los Rios Provinces, Ecuador is hosted in a juvenile volcanic-magmatic arc of the Paleocene-Eocene Macuchi Terrane that is known to host at least two other volcanogenic massive sulphide deposits.

    Sulphide mineralization at El Domo is principally located at the contact between a felsic volcanic dome and overlying volcaniclastic strata and is generally flat lying. It has been traced for approximately 800m in a north-south direction and between 350m and 500m east-west. 

    A Mineral Resource estimate for El Domo has been completed as part of the PEA to include all infill drilling completed in 2018. The updated, open pit constrained, Mineral Resource estimate for El Domo has an effective date of 2 May 2019 and is supported on information provided from 309 core boreholes, totalling 60,449 metres, completed between 2007 and 2018. The new Mineral Resource estimate has a total tonnage distribution of approximately 14%, 73%, and 13% classified in the Measured, Indicated and Inferred categories, respectively.

    Measured Mineral Resources for El Domo total 1.4 million tonnes grading 1.92% copper, 0.37% lead, 3.52% zinc, 3.75 g/t gold and 58 g/t silver. The Indicated Mineral Resources for El Domo total 7.5 million tonnes grading 2.02% copper, 0.26% lead, 2.81% zinc, 2.33g/t gold and 49 g/t silver. The Inferred Mineral Resources for El Domo total 1.3 million tonnes grading 1.52% copper, 0.20% lead, 2.25% zinc, 1.83 g/t gold and 42 g/t silver.

    Total Mineral Resource for El Domo

    Resource
    Category

    Tonnes
    (Mt)

    Grade

    Contained Metal

    Cu
    (%)

    Pb
    (%)

    Zn
    (%)

    Au
    (g/t)

    Ag
    (g/t)

    Cu

    (kt)

    Pb
    (kt)

    Zn

    (kt)

    Au
    (koz)

    Ag

    (koz)

    Measured

    1.4

    1.92

    0.37

    3.52

    3.75

    58

    27.8

    5.3

    50.9

    174

    2,704

    Indicated

    7.5

    2.02

    0.26

    2.81

    2.33

    49

    150.9

    19.7

    210.3

    559

    11,884

    M+I

    8.9

    2.00

    0.28

    2.93

    2.56

    51

    178.7

    25.0

    261.3

    733

    14,588

    Inferred

    1.3

    1.52

    0.20

    2.25

    1.83

    42

    20.1

    2.7

    29.7

    78

    1,783

     Pit Constrained Mineral Resource for El Domo

    Resource
    Category

    Tonnes
    (Mt)

    Grade

    Contained Metal

    Cu
    (%)

    Pb
    (%)

    Zn
    (%)

    Au
    (g/t)

    Ag
    (g/t)

    Cu

    (kt)

    Pb
    (kt)

    Zn

    (kt)

    Au
    (koz)

    Ag

    (koz)

    Measured

    1.4

    1.92

    0.37

    3.52

    3.75

    58

    27.8

    5.3

    50.9

    174

    2,704

    Indicated

    5.7

    1.74

    0.28

    2.60

    2.47

    51

    99.0

    16.1

    147.8

    452

    9,417

    M+I

    7.1

    1.78

    0.30

    2.78

    2.73

    53

    126.8

    21.4

    198.7

    627

    12,121

    Inferred

    0.7

    0.67

    0.21

    1.72

    1.60

    46

    4.6

    1.5

    11.9

    36

    1,032

     Underground Mineral Resource for El Domo

    Resource
    Category

    Tonnes (Mt)

    Grade

    Contained Metal

    Cu
    (%)

    Pb
    (%)

    Zn
    (%)

    Au
    (g/t)

    Ag
    (g/t)

    Cu

    (kt)

    Pb
    (kt)

    Zn

    (kt)

    Au
    (koz)

    Ag
    (koz)

    Indicated

    1.8

    2.91

    0.20

    3.51

    1.85

    43

    51.9

    3.6

    62.5

    106

    2,467

    Inferred

    0.6

    2.46

    0.19

    2.82

    2.09

    37

    15.5

    1.2

    17.8

    42

    751

    2 May 2019 PEA and Mineral Resource Estimate Update

    Future Work

    Adventus, Salazar and Consultants have identified several areas and opportunities that may provide significant costs savings and improved economics for the project. Post-PEA the team will embark on additional technical work and trade-off engineering studies to better position and further de-risk the project, including but not limited to the following: mining, milling and metallurgy, tailings ttorage and waste rock facilities, and local infrastructure.

    In addition, the partnership will continue to conduct exploration activities within the 21,500-hectare Curipamba project which encompasses El Domo. The objective of continuing regional exploration is to develop and assess targets that could further maximize flexibility with respect to future development decisions on the El Domo, Curipamba project.

  • Santiago

    Santiago is a 2,350 ha exploration licence (one concession area) within the Adventus-Salazar Exploration Alliance. The Ecuador-wide Alliance is for zinc targets, or for specified licences, in this case Santiago, which hosts copper-gold porphyry exploration targets, in conjunction with epithermal gold and silver veins. The Alliance is currently investigating the exploration potential at Santiago, with extensive mapping, surveying and sampling underway ahead of drilling.

    Adventus will fund all activities in the Alliance up to a construction decision on any project. The work programme and budgets are controlled by the Alliance board, consisting of two representatives from Adventus, and one from Salazar.  Exploration activities of the Alliance are  carried out by Salazar on a cost +10% basis.

    The Santiago Project is subject to a 1.5% NSR that can be bought out for US $1,000,000 and a 4% net profits interest royalty that are held by INV Metals Inc.

  • Pijili

    Pijili is a 3,246 ha exploration licence (three concession areas in Azuay province) within the Adventus-Salazar Exploration Alliance. The Ecuador-wide Alliance is for zinc targets, or for specified licences, in this case Pijili, which hosts copper-gold porphyry exploration targets, in conjunction with epithermal gold and silver veins.  Legal artisanal miners following precious metal-bearing structures via small adjacent open pits are active in the area. The Alliance is currently investigating the exploration potential at Pijili, with extensive mapping, surveying and sampling underway ahead of drilling.

    Pijili was granted to Salazar by the government subject to US$5 million of exploration investment before 2023. Adventus will fund all activities in the Alliance up to a construction decision on any project. The work programme and budgets are controlled by the Alliance board, consisting of two representatives from Adventus, and one from Salazar.  Exploration activities of the Alliance are carried out by Salazar on a cost +10% basis.

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