Kutcho Project

Project Overview

The Kutcho property is located approximately 100 km east of Dease Lake in the Liard mining division of northern British Columbia, and consists of one mining lease and 46 mineral exploration claims covering an area of approximately 17,060 hectares. The site is accessible via a 900 m long gravel airstrip located 10 km from the deposit and a 100 km long seasonal road from Dease Lake suitable for tracked and low-impact vehicles.

Project Highlights

  • Development project located in British Columbia, a top tier mining jurisdiction with major mines and active projects including Brucejack (Pretium), Red Chris (Imperial Metals) and Galore Creek (Teck/NovaGold)
  • High grade copper-zinc-gold-silver volcanic massive sulphide (“VMS”) system with a Probable Mineral Reserve(1) (2017 estimate) of 10.4 Mt @ 2.01% Cu, 3.19% Zn, 34.61 g/t Ag and 0.37 g/t Au
  • 2017 updated Prefeasibility Study (“PFS”) demonstrates robust economics: after-tax NPV (8% discount rate) and IRR of C$265 million and 27.6% respectively with a manageable initial capex (incl. 15% contingency) of C$220.7 million
  • Significant potential for improvement through expansion of reserve/resources and a focused permitting effort

2017 PFS Highlights

  • Pre-tax NPV (8% discount rate) of C$423 million and IRR of 34.6%
  • After-tax NPV (8% discount rate) of C$265 million and IRR of 27.6%
  • 12 year mine life with 2,500 tonne per day production rate for a total life-of-mine payable production of 378 million pounds of copper and 473 million pounds of zinc
  • Average annual production of 33 million pounds of copper and 42 million pounds of zinc
  • Initial capital costs, including 15% contingency, for a 100% owner-operated mine are estimated at C$220.7 million
  • Operating costs of C$73.72/tonne of material milled
  • Unit operating costs of US$1.60/lb copper excluding by-products, and US$0.59/lb copper net of by-products
  • Pre-tax payback of 3.3 years and post-tax payback of 3.5 years

2017 Mineral Reserve(1)

Classification

Cu cut-off grade (%)

Tonnage
(Kt)

Grade

Contained Metal

Cu
(%)

Zn
(%)

Au
(g/t)

Ag
(g/t)

CuEq(2)
(%)

Cu
(Mlbs)

Zn
(Mlbs)

Au
(Moz)

Ag
(Moz)

Main Probable Reserve(3)

1.5

8,106

1.92

2.51

0.31

28.0

2.59

344

449

0.08

7.3

Esso Probable Reserve(3)

1.0

2,335

2.32

5.53

0.59

57.5

4.05

119

285

0.04

4.3

Total Probable Reserve(3)

1.0-1.5

10,441

2.01

3.19

0.37

34.6

2.92

463

734

0.12

11.6

  1. Preliminary feasibility study dated July 2017, prepared by JDS Mining Inc. for Desert Star Resources titled “Kutcho Copper Project Prefeasibility Study British Columbia.”
  2. Copper equivalent grade (CuEq%) calculated as copper equivalent recovered and based on commodity prices of $2.75/lb Cu, $1.10/lb Zn, $17.00/oz Ag and $1,250/oz Au and recoveries of 84.7% Cu, 75.7% Zn, 48.0% Ag, 41.2% Au. Actual economic parameters, including recoveries, are subject to change as additional test work and studies are completed.
  3. Probable Mineral Reserve is the economically mineable part of an Indicated Mineral Resource, and in some circumstances a Measured Mineral Resource, demonstrated by at least a Preliminary Feasibility Study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.

2019 Mineral Resources(6,7)


Classification

Cu cut-off grade (%)

Tonnage (Kt)

Grade

CuEq4

Cu

Zn

Au

Ag

(%)

(%)

(%)

(g/t)

(g/t)

Main Deposit

Measured (M) Resources

1.2

5,831

2.66

1.92

2.78

0.48

28.7

Indicated (I) Resources

1.2

9,003

2.20

1.62

2.13

0.40

29.2

M&I Resources

1.2

14,834

2.38

1.74

2.38

0.43

29.0

Inferred Resources

1.2

1,902

1.98

1.31

2.16

0.48

29.7

Esso Deposit

Indicated (I) Resources

1.2

2,425

3.98

2.52

4.76

0.81

64.0

Inferred Resources

1.2

1,025

2.30

1.60

2.23

0.52

41.4

Sumac Deposit

Inferred Resources

1.2

7,779

1.52

1.10

1.60

0.17

16.9

Combined – All Deposits

Measured (M) Resources

1.2

5,831

2.66

1.92

2.78

0.48

28.7

Indicated (I) Resources

1.2

11,428

2.58

1.81

2.68

0.49

36.5

M&I Resources

1.2

17,259

2.61

1.85

2.72

0.49

33.9

Inferred Resources

1.2

10,706

1.67

1.18

1.76

0.26

21.5

  1. The estimates in the table are considered to be amenable to underground extraction methods. The base case cut-off grade is 1.2% CuEq based on the formula CuEq = (Cu% x 0.825) + (Zn% x 0.302) + (Ag g/t x 0.004) + (Au g/t x 0.262). Mineral resources are not mineral reserves because the economic viability has not been demonstrated.
  2. Estimate assumes Mining (underground) US $34.00/t, Processing US $18.00/t, US G&A $10/t, copper price US $3.00/lb, zinc price US $1.25/t, gold price US $1350/oz, silver price US $17.00/oz, copper payable recovery 82.5%, zinc payable recovery 72.5%, silver payable recovery 45%, gold payable recovery 40%
  3. Effective date of resource estimate February 22nd, 2019
  4. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to the measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied.
  5. Assumptions used to derive the cut-off grades in order to meet the NI43-101 requirement for mineral resource estimates to demonstrate “reasonable prospects for eventual economic extraction”. The cut-off grades to be used in the upcoming feasibility study may vary from those used to limit the mineral resources reported herein, as the inputs to that study are determined. No inference is implied in the changes to the assumptions used in the cut-off grade calculations from the prior mineral resource estimates as to what will be used in the upcoming feasibility, as those assumptions remain to be determined.

 

Project Strategy & Execution

Kutcho’s experience management and technical team plans to advance the Kutcho project to a completed feasibility study in Q2-Q3 2019 and advancing through the permitting process.

Highlights include:

  • Focused permitting strategy with dedicated team in place, including Sue Craig and Rory Kutluoglu to progress community and government relations
  • Completed an extensive field program in 2018 of geotechnical, metallurgical and resource expansion drilling; re-established baseline environmental studies.
  • Feasibility study incorporating expanded project size to be completed within 9 months
  • Construction decision estimated within 40 months

Qualified Person

Rory Kutluoglu, B.Sc. P.Geo., a Qualified Person as defined by National Instrument 43-101, has read and approved all technical and scientific information contained in this Website. Mr. Kutluoglu is the Company’s Vice President Exploration.

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