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Quarterly Updates

2019
Q3 2019 Highlights and Outlook

2019 OPERATING HIGHLIGHTS

Conclusion of PFS and Definition of Maiden Probable Mineral Reserve Estimates

On January 13, 2019, the Company successfully completed a PFS on the oxide portion of the Filo del Sol deposit, which continued to demonstrate that the Filo del Sol Project exhibits strong economic potential. The PFS was headlined by a US$ 1.28 billion after-tax NPV using a discount rate of 8% and an IRR of 23%, at US$ 3.00/lb copper, US$ 1,300/oz gold, and US$ 20/oz silver.

The PFS also introduced initial Mineral Reserve estimates for the Filo del Sol Project, which at a 0.01 US$/tonne Net Value per Tonne (“NVPT”) cut-off, were as follows:


Notes to accompany Filo del Sol Mineral Reserves table:

  1. Mineral Reserves have an effective date of 13 January 2019. The Qualified Person for the estimate is Mr. Jay Melnyk, P.Eng. of AGP Mining Consultants, Inc.
  2. The Mineral Reserves were estimated in accordance with the CIM Definition Standards for Mineral Resources and Reserves;
  3. The Mineral Reserves are supported by a mine plan, based on a pit design, guided by a Lerchs Grossmann (LG) pit shell. Inputs to that process are:
    • Metal prices of Cu $3.00/lb, Ag $20/oz, Au $1300/oz;
    • Mining cost of $2.00/t;
    • An average processing cost of $9.73/t;
    • General and administration cost of $2.02/t processed;
    • Pit slope angles varying from 29 to 45 degrees, inclusive of geotechnical berms and ramp allowances;
    • Process recoveries were based on rocktype. The average recoveries applied were 83% for Cu, 73% for Au and 80% for Ag, which exclude the adjustments for operational efficiency and copper recovered as precipitate which were included in the financial evaluation;
  4. Dilution and Mining Loss adjustments were applied at ore/waste contacts using a mixing zone approach. The volumes of dilution gain and ore loss were equal, resulting reductions in grades of 1.0%, 1.3% and 1.0% for Cu, Au and Ag respectively;
  5. Ore/Waste delineation was based on a Net Value Per Tonne (NVPT) breakeven cut-off considering metal prices, recoveries, royalties, process and G&A costs as per LG shell parameters stated above;
  6. The life-of-mine (LOM) stripping ratio in tonnes is 1.52:1;
  7. All figures are rounded to reflect the relative accuracy of the estimate. Totals may not sum due to rounding as required by reporting guidelines.

To date, only the deposit’s uppermost portion, which is comprised of oxide material, has been incorporated into the Company’s engineering and economic studies, including the PFS. While the Company was aware of the existence of copper-gold mineralization below this oxide cap, exploration work on the size, scope and grade of this material had been limited. This deeper mineralization represents potentially transformative upside for the project, which the Company has recently drill-tested, as discussed below.

Confirmation of Large Copper-Gold Porphyry System Underlying Current Resource

During the 2018/2019 field season, which ended March 2019, the Company successfully completed seven diamond holes, totaling 4,747 metres. The 2018/2019 campaign confirmed the existence of a significant underlying porphyry copper-gold system, extending to depths of over 1,000 metres below surface, 530 metres deeper than previously known. Six of the seven holes completed during this campaign also ended in mineralization. The full assay results from the 2018/2019 drill program were received and disclosed in May 2019 and are summarized in the following table:

Hole-ID

From 

(m)

To

 (m)

Length (m)

Cu

(%)

Au

(g/t)

Ag

(g/t)

CuEq1

(%)

FSDH025

0.0

1,025.0

1,025.0

0.30

0.22

1.6

0.47

incl.

334.0

466.0

132.0

0.48

0.30

1.2

0.71

FSDH026

0.0

613.9

613.9

0.39

0.34

1.6

0.65

incl.

14.0

474.0

460.0

0.45

0.34

1.6

0.71

and incl.

14.0

94.0

80.0

0.73

0.43

1.8

1.06

and incl.

228.0

316.0

88.0

0.50

0.33

1.4

0.75

and incl.

420.0

474.0

54.0

0.49

0.37

3.3

0.79

FSDH027

0.0

545.4

545.4

0.22

0.28

1.8

0.44

incl.

318.0

422.0

104.0

0.37

0.34

3.5

0.65

FSDH028

16.0

563.5

547.5

0.40

0.78

8.0

1.04

incl.

155.0

164.0

9.0

0.18

22.04

15.2

n/a

and incl.

390.0

563.5

173.5

0.55

0.54

12.9

1.05

incl.

496.0

563.5

67.5

0.61

0.68

24.0

1.31

FSDH029

0.0

800.1

800.1

0.24

0.26

1.8

0.44

incl.

6.0

42.0

36.0

0.78

0.20

3.1

0.95

FSDH030

134.0

512.0

378.0

0.44

0.89

42.5

1.44

incl.

190.0

244.0

54.0

1.05

0.83

1.4

1.67

and incl.

262.0

388.0

126.0

0.19

1.79

121.5

2.50

incl.

262.0

274.0

12.0

0.54

12.60

260.1

n/a

and incl.

388.0

512.0

124.0

0.49

0.40

2.6

0.80

FSDH031

212.0

216.0

4.0

0.08

3.18

10.5

2.49

1 CuEq is calculated based on US$ 2.80/lb Cu, US$ 1,400/oz Au and US$ 16/oz Ag. The formula is: CuEq % = Cu % + (0.7292 * Au g/t) + (0.0083 * Ag g/t).

These findings represented a step change in the Company’s understanding of the geology of the Filo del Sol deposit, and continued to affirm that the current Mineral Resource is only a small portion of a much larger mineralization system.

Accordingly, for the 2019/2020 field season, which began in November 2019 and is currently being concluded, the Company executed an extensive field program to follow up on prior season’s findings. Namely, a main focus of the program was to continue drilling the gold-copper-silver mineralization system, which hosts the Filo del Sol deposit, with a focus on extending the mineralization on strike and at depth. In addition, the campaign tested the Tamberias West prospect, a previously unexplored and recently permitted area located southwest of the current Mineral Resource, for additional near surface oxide mineralization. In addition, the 2019/2020 field program also included the undertaking of drone magnetometer and full 3D induced polarization (“IP”) geophysical surveys to refine targeting.

To date, partial assay results on the first two diamond holes have been received and verified by the Company. These first assay batches are highlighted by an intercept of 600 metres of 1.12% Copper Equivalent1 (“CuEq”), comprised of 0.67% copper and 0.44 g/t gold. A summary of these partial assay results are provided in the table below:

Hole-ID

From 

(m)

To

 (m)

Length (m)

Cu

(%)

Au

(g/t)

Ag

(g/t)

CuEq

(%)

FSDH032

192.0

978.0

786.0

0.57

0.40

13.6

0.97

incl.

378.0

978.0

600.0

0.67

0.44

16.2

1.12

and incl.

492.0

702.8

210.8

0.90

0.54

19.5

1.46

FSDH033

96.0

366.0

270.0

0.48

0.52

23.5

1.06

incl.

176.0

366.0

190.0

0.57

0.58

33.1

1.27

incl.

176.0

226.0

50.0

1.31

0.68

1.8

1.82

and incl.

264.0

284.0

20.0

0.03

0.42

223.1

2.19

The assay results, particularly those for hole FSDH032, demonstrate the size and scope of this deeper mineralization and reaffirm that a large porphyry mineralization system exists beneath the current Mineral Resource and extends to the north. It is important to note that the highlighted 600 metre intercept commences at effectively the floor of the PFS’ open pit design.

In light of the COVID-19 pandemic, the Company has now curtailed its 2019/2020 field and drill campaign at the Filo del Sol Project (see the “Outlook and Statement on Readiness and Response to COVID-19” section below). The remaining assays from the 2019/2020 drill program will be released as data is received and verified by the Company.

OUTLOOK AND STATEMENT ON READINESS AND RESPONSE TO COVID-19

While the oxide material of the Filo del Sol deposit in itself represents a compelling production case, as outlined in the PFS, with an after-tax NPV of US$1.28 billion at an 8% discount rate and an IRR of 23%, the exploration results arising out of last two drill programs have confirmed the existence of a large porphyry system underlying the current Mineral Resource, which may be transformative for the flagship asset’s size and scope. While the primary focus of the Company’s most recent 2019/2020 field campaign has been the drilling of diamond holes to better define and extend this deeper mineralization, the Company has also drill-tested other targets on the project’s extensive and largely unexplored land package, such as the Tamberias West area.

In light of the COVID-19 pandemic, the Company’s 2019/2020 field program is being curtailed with demobilization of personnel and equipment currently underway. The Company is responding to COVID-19 within the framework of internal protocols, and local and national health authority requirements and recommendations. The health and safety of the Company’s employees, contractors, visitors, and stakeholders is Filo Mining’s number one priority. The Company’s camp facilities and offices have implemented travel restrictions, surveillance, monitoring and response plans to reduce the risk of COVID-19 exposure and outbreak, including health screening of personnel when appropriate. All non-critical business travel has also been curtailed. We will continue to monitor the situation and are prepared to implement additional changes to minimize any potential impacts of the global outbreak that might emerge at the Company’s project site or offices as necessary.

As a result of an earlier end to the 2019/2020 field program than initially planned, the Company’s completed drilling will be lower than previously estimated and will total approximately 8,000 metres. Prior to the decision to conclude the field season early, the Company did successfully complete the planned drone magnetometer survey and full 3D IP geophysical survey. Despite the early curtailment to the 2019/2020 field season, the Company was able to achieve its key strategic operating objective for the season in successfully drill-testing the mineralization underlying the current Mineral Resource, as evidenced by hole FSDH032 described above.

The remaining assays results from the 2019/2020 field program will be made available as data is received and verified by the Company.