Arizona Sonoran Copper Company Corporate Update

0:08 Hello everyone, welcome to Arizona-Sonoran Copper Company's live summit today, hosted by 6. I'm pleased to introduce our speakers for today, President, CEO, and Director, George Ogilvie, their COO, Ian McMullen, as well as their Resource Geologist Anthony Botrill. The team is going to walk us through their latest news and after we'll be accepting questions live. So as a reminder, you can submit your questions using the right-hand tab Q&A found on your screen at any time during today's presentation. And as always, this event is being recorded and it's going to be available on six.com afterwards. So for you, George, I

0:39 want to pass things over to you to get us started. Thank you, Cam. And thank you for the opportunity to speak here today. So it's Arizona Sonora Copper Company and the title of our presentation is Copper Invest in Sustainability. Obviously we have some forward-looking statements and this presentation will be on our company website so I'll draw your attention to the cautionary language. As far as the share capital structure is concerned, today, 89 million shares issued, fully diluted 99 million, and importantly, the company is debt-free and has a very clean balance sheet. Today, the company is sitting with 28 million U.S. Dollars in the bank and we're well funded through until the summer of 2023.

1:32 We have 5 analysts actually covering the company with the target price of 2 dollars 75 up to 4 dollars Canadian with a consensus price around 3 dollars and 7 cents. And of course we've been on the show before and everybody is very well aware that we have a large strategic shareholder in Tembo Capital and obviously recently Rio Tinto put $10 million US dollars into the company and is a 7% shareholder. So we just recently announced this morning a large resource update coming from Park Salier, which is an exploration property 2 kilometers southwest of the main cactus project. Today that takes our global resource up to 6.5 billion pounds in all categories.

2:22 That's broken out with 1.6 billion pounds in the indicated resource and 4.9 billion pounds in the inferred resource. As everybody knows, we put out a PEA in August 2021. Within that PEA, we used a copper price of $3.35 to run the financial and economic model, and it gave us an NPV after tax at that time of US$312 million and an IRR of 33% after tax. Of course, the key thing about this project is it's located all on 100% controlled private land, meaning that there is no federal regulators involved, and we're only dealing with the local state and local municipality.

3:10 I think we've all just shown this morning through these results, which we're going to discuss in detail, that the project now is beginning to build some real scale and size to it. And of course we still have considerable targets on our property still to drill and we believe over time that we can further add to the 6.5 billion pounds of copper that we have in the ground at the Cactus Project. Everybody knows where the project is located but just to recap we're 45 miles south of Phoenix. Phoenix has a population of 4.5 million people. We're 75 miles north of Tucson with a population of 1 million people. We are 3 kilometers west of the city of Casa Grande with a population of 55,000 people. And we have a very strong social license, a lot of support from the local community to see this mine go back into production.

4:06 Obviously, we're at the intersection of 3 of the main copper porphyry systems in Arizona. The site is serviced with electricity. The main power line runs right through the site. And of course, Interstate 10 and the Maricopa-Casagrande Highway are right on our southern border. So the area is very well serviced and we have access to a large labor pool when the mine goes into construction and development and ultimately commercial production. So this is a new graph that we've put inside our corporate deck. Since we acquired the project in late 2019, we've grown the resource from what was the surface stockpile at only £225 million, as we said today, to something in and around £6.5 billion of contained copper in the ground.

4:57 When we actually look at our discovery cost, i.e. The amount of money that we've put into exploration and the amount of pounds that we've generated, we're actually generating those pounds based on a discovery cost well below 1 cent per pound of copper in the ground. So I think what it says is that investors in the company have definitely recognized a return on their investment through the exploration success. And we believe over time as we de-risk the project and Obviously we move it through the technical studies in the final permitting. The shareholders of the company are going to realize some significant returns when we put this into production. I'm also happy to report now that at 6.5 billion pounds and we look within the global US of A, This project now ranks number 4 as far as scale and size is concerned with only Santa Cruz at 10 billion pounds, Rosemont and North Met slightly larger when it comes to size of deposits.

6:05 Everybody is very well aware of our land package, 4,800 acres. The beauty of this resource that we've put out this morning as Park Salia will be an underground mine. That therefore means that the amount of capital development and waste rock we have to move will be much less than the open pit. And at the same token, the grades are significantly higher than our other assets on this site. The good news is that our current land package will accommodate the mining of mineralization from Park Salier, including the leaching pads and the ultimate rock storage areas. So we're really in control of our own destiny. And of course, since we last spoke, Ivanhoe Electric has IPO'd their company on the New York Stock Exchange and continue to drill immediately south of the Cactus project.

7:00 A little bit on the permitting. There's been a slight change here. With the deferment of the pre-feasibility study being pushed out 12 to 18 months, we'd originally said that we were only going to submit the next set of permits once we had a line of sight on that pre-feasibility study. Because that's been delayed, we've discussed internally and we now believe that before the end of the year, we will be making submissions for the industrial permits and the mine land reclamation permits. The thinking there is that by sometime in the summer of next year, we should be in possession of those permits, recognising that there may be an amendment required, but from a de-risking event, we believe that the market would look upon that favourably if we already had the main permits in hand, recognising that there was only an amendment required.

7:55 Anthony? Thanks, George. So what I wanted to highlight here is just the global mineral resource for the company. And with our latest release, we're really seeing a big uptick in the inferred resource, which has now grown to 4.8 billion pounds. And 2.9 billion pounds of that is coming now from Park Salia, which is located in the south-west of our property.

8:24 The other thing to highlight about that new resource is a significant amount of it, 2.4 billion pounds, is actually coming from our leachable materials and in particular the enriched material.

8:42 The good thing about Park Salia as a resource is that it's significant in terms of thickness and in grades. And so what we see is that it's a resource that's very sensitive to copper price or highly leveraged to copper price. So you can see on the chart on the left there a fairly straight line between changing copper prices. So what we find that is that we're highly leveraged to a good increase in copper price. On the downside, if copper prices were to remain low or reduce, the grade of the deposit will then come into play. So it's an exceptional resource from our perspective in terms of its thicknesses and grades and that leveraged copper price.

9:30 If I talk, I just want to talk a little bit about the upside to the property. This is a grade thickness chart, so it's the copper grade times the vertical thickness of intercepts in the drilling. And so All of our work to date had been on Cactus East and Cactus West and just recently we've done significant work on Park Salya to the south west. I think the thing to highlight there is you can see in the grade thickness the scale of Park Salya and you can see that rather than being 2 bodies that have been offset by faulting park salias remain as a single body of mineralisation. The other thing that we find in the resource that the grade thickness is showing quite well is that the thickest mineralisation and high grades are actually on the eastern side of the resource. So where you can see on the eastern side of Park Salia, that real bull's eye of highs, we're seeing very thick mineralisation, 500 to 600 feet thick.

10:36 In terms of exploration, what we have when you line these up, we have what's called the cactus mine trend. And so we see this trend to the northeast of high grade material. And so right in the very northeast corner we have the northeast extension. But what we also have is between Park Salyer and Cactus West, really good upside to find more material. A lot of the drill holes that were drilled through that area that come onto this great thickness map were actually stopped prior to mineralisation or they'll terminate in mineralisation. So the great thickness map gives us indications that it continues through this zone but it's not well tested to date. There's been various

11:20 fast drilling. And then this slide's really talking about the direction of how we're moving forward. So as you know, we have the Cactus Mine PEA, which is an 18-year mine life. By putting out this latest resource on Park Salia, we need to step back and re-scope now to add the Park Salia into that full project.

11:48 But there's other work that we're also working on in terms of the upside. So we have a lot of primary material, particularly adjacent to and below Cactus West, but also coming into play with Park Salyer. And so the Newton test work that we've started working on will hopefully give us the optionality to start looking at that primary resource and how we can utilise that. And then on top of that, as I said, we have things like the North East Extension and that cactus mine trend that we need to test for exploration.

12:25 So immediate priorities, we've, we completed the resource, but we actually stepped straight into infield drilling on Park Salyer, which is 250-foot drill spacing. So the inferred resource that we put out was on 500-foot drill spacing, so we're halving that. That's about 100,000 feet and we expect to complete that around the end of the year. On the cactus deposits, both Cactus East and Cactus West, we're infilling to what we expect will be measured with 125-foot drill spacing. That's another 60,000 feet. Then there's another 12,000-foot program that we're planning that really tries to expand some of the local resources around cactus, particularly with the Newton test work technology in mind.

13:19 And so that drilling will come on later on in the year. So I'll pass it over to Ian. Yeah, thanks, Anthony. So the chart in front of you is actually data that we put out an updated PR for metallurgy back in February. What we're trying to articulate here is the ongoing work that continues with respect to metallurgy and understanding the deposits as they sit and how they can be maximized from a recovery perspective. So the work you see here obviously is Cactus related. We do some test work as part of the PEA and then the column tests continue to be updated as we sit here today. But the important piece here is we're parlaying that data from Cactus and its ongoing results to Park Salyer, that testing, including preliminary bottle roll testing as well as the full-on columns that are the benefit of this work here.

14:30 So, you know, exciting times when we announced a new resource today, but now we have a whole suite of work to do to understand it and continue to move forward this important piece of the project. So stay tuned on that. If we go to the next slide. And it just really a segue into to what we're moving on to towards next. So as you can see from a complete sort of point of view, we completed a Cactus MRE back in early 2021, head of the Cactus PEA, announcing the Maiden Park Salyer MRE today.

15:12 So armed with all that And the work that continues, what we're trying to do now is re-sculpt the project such that over the next 12 to 18 months, we integrate Cactus with Park Salier from a mine design and technical study point of view to see if we can extract the best synergy possible within the mine site. And of course alongside that as Anthony's mentioned, Rio's Newton work continues. They have their own set of columns that will test alongside of ours and that work will you know that work is early days but obviously if something looks good there or it comes to pass that it can be applied to the site there's additional sort of negotiation whatnot to see that through so you know the next steps really are that ongoing metallurgical program.

16:09 Obviously, the permitting that goes with a change in the site, if you will, potentially, all the mine design scheduling that goes with it. And then, you know, subject to the next set of technical studies, we have a project financing. We always have to consider that all ahead of a construction decision. So, you know, this 12 to 18 months now that we have Partsallier lined up and alongside Cactus will be critical for the site. Thanks, Ian. So, when we look at the project now on an enterprise value per pound of copper in the ground, currently the company has an enterprise value of only US$65

17:01 million. And we derive that from a market cap of approximately 95 million with no debt. And we have 30 million U.S. Dollars cash, approximately 30 million U.S. Dollars cash in the bank. And when you look then at 6.5 billion pounds of copper in the ground, essentially at the moment, the company is being valued at 1 cent a pound of copper in the ground. And we can see our immediate peer group, Ivanhoe Electric, who, as we saw earlier, were on our southern border with the Santa Cruz property. They're currently being valued at 5 cents enterprise value per pound of copper in the ground. And the market cap of that company today is approximately 800 million US dollars.

17:51 So we think over time as we can continue to de-risk the project through the technical studies, through the advancement of the permitting, and ultimately show the market in the next 12 months through a re-scope PFS that Park Salier is extremely accretive and value additive for the shareholders of the company, we ultimately believe that the company should see a re-rating. Of course, these markets are not particularly good in general. However, we do know that we are in a cyclical industry. And over time, obviously, the markets will turn. And the focus will come back to copper. And there's going to be a hell of a lot of upside for the shareholders or potential investors of this company on a go-forward basis.

18:42 Thank you, Alison. And when we do a little bit of a peer comparison benchmarking against our immediate peers. You can see, as I said, we have Ivanhoe Electric, we have Foran Mining, we have Philo, and we have Miramaka. The nice thing about this new maiden resource on Park Salier, as I said earlier, now bringing us up to a global resource of £6.5 billion, it starts to really put us in the same sort of size and scale of some of our immediate peers. So Ivanhoe Electric, £10 billion, Foran, £2.5 billion, Philo, £8 billion, and Maramaka, you know, £2.5 billion. So we're definitely up there now as far as the scale is concerned.

19:31 And If there was 1 criticism that I've heard since joining this company 18 months ago, it always has been that the project lacks scale. I think with today's announcement, you're going to see over time as we complete the engineering studies that we're going to actually start to build that scale in to the mine plan and obviously the financial and economic models of the company. Thank you, Alison. And then when we look at on a price per times NAV basis, you can see all of our peers and ourselves have come off quite substantially in the last 3 months or so with the MELI in the market. But we're still only trading at 0.37 times price to NAV, and that's about 10% below where our current peers are actually sitting.

20:25 So to recap, we believe that longer term, the fundamentals for the copper market still remain extremely strong. Indeed, I would argue that, you know, given the drive for decarbonization and the energy crisis that we're seeing in Europe, there'll be even more incentive there to move towards green energy much quicker and sooner than what was anticipated, which will drive up the demand for a lot of the green energy commodities, including copper. As you've seen, we've got a very tight share capital structure and we're well supported with Tembo Capital and having Rio Tinto involved in the company as a strategic investor plus access to their technical team is obviously hugely advantageous for the company.

21:16 You've got a very experienced leadership and management team here that have a proven track record of creating significant value for the shareholders of the company and there's no reason to believe that we cannot repeat that with Arizona-Sonoran. We're in a fantastic tier 1 jurisdiction, access to water, permits to take water, a brownfield site minimizing future CAPEX, and of course as we said earlier, private land with no federal nexus and only dealing with state and local municipal authorities. We've just added some significant steel project, which we think over time will be extremely accretive for the shareholders Based on the PEA, obviously robust project economics, and when we come out with that ReSCOPE technical report in the next 12 months, there's no reason to believe that we won't be seeing robust project economics at the same time.

22:17 Low risk as far as the permitting framework is concerned. And certainly I think over time, you know, once we can further de-risk the project, there's certainly a lot of synergies in the immediate area, as you've seen on the project. And certainly M&A activity certainly could heat up within the sector over the course of the next 2 to 5 years. So that's the key highlights and summary of the project. I'm gonna stop there and hand back to Cam, and we'll open up the conversation for some Q&A. Thanks, George. Great presentation, gentlemen. With that, as George mentioned, we are entering into the Q&A portion of today's Summit, so please make sure that if you have questions, you ask them in the Q&A tab found on the right-hand side of your screen. We already have a couple of questions, though. First one from Joe. What do you attribute to higher leachable and primary grades at Park Salier versus Cactus?

23:15 Anthony, maybe you want to take that one on? Yeah, I can speak to that. So the higher grades that we're seeing at Park Salyer, particularly in the primary, are actually consistent with what we were seeing in Cactus East. I suppose the difference at Cactus East is that we don't actually, because you have a basement fault that's cut out, the mineralisation, the bulk of the primary below Cactus East is being cut out. So we're not actually seeing that high grade. There's very small amount of it. But in terms of what's driving that primary grade, it's that we're in the potassic and philic alteration. And with the intrusions of the porphyries, we've had really good ground prep for dissemination of mineralisation through that brecciation. So that's really what defines that mine corridor.

24:04 And that's what, you know, for Park Salyer is giving that higher grade to the primary. That's then being upgraded with the enrichment at Park Salyer, and particularly it's the, you know, being in the right alteration zone in the Potassic and Phillip that's really driving that increasing grade, particularly with the good ratio of pyrite to chakrapyrite through that zone. Great, thank you, Anthony. Both question, could you comment on possible synergies that could exist with the neighboring Santa Cruz project? There seems to be some confusion about how much of their project area is on private versus public lands. Yeah, well, I can take that one on. I mean obviously from their public document, which was part of their IPO, they've indicated that they will be looking at both a flotation and a leaching process.

25:00 And of course at this juncture in time we are only looking at a leaching process. So certainly there could be some natural synergies there, given the close proximity of the operations that, you know, if we got into production first and We had a heat leach operation with an SXCW. It would make perfect sense to potentially look at processing maybe material from Ivanhoe Electric that was leachable. And then on the opposite side of that equation, we have primary material. Obviously, we're working with Rio and the Newton technology to see if that material could be leachable, but it is a new technology which is unproven. Of course, we do know a chalcopyrite can be processed through a normal copper concentrator and a flotation process which Ivanhoe Electric has indicated might be amenable to some of their ore.

25:59 So there's the potential that maybe they put in a primary concentrator on their property and they've got the ability to take our primary sulfide. So that to me would be 1 potential synergy that I think over time as the companies advance their projects should be explored given the close proximity of both projects. Absolutely. With the size and grade of the park's salient resource, does this shift the center of gravity with respect to the development in this area versus Cactus? Ian, perhaps you want to take that question on? Sure. There's a short term and long term answer to that question. In the short term, We have shifted the center of gravity, as Joe stated there.

26:50 But in the sense that we've moved on to the indicated portion of the drilling program, because we need to bring that resource confidence up. And then, you know, obviously, alongside that, we continue our technical work, including mine design and that sort of thing. So there's going to come a point in time down the road or a little longer term where we start to put all that together versus cactus to see what makes sense from a sequencing perspective and you know what comes first so to speak and how that feeds into things like leach pad size and SXCW size and things of that nature. So yeah at the moment we're obviously focusing on that infill drilling, but there'll come a time where we mesh the 2 technical streams, if you will, and really via scenario analysis try to understand What makes the best sense for the property.

27:47 Right, OK. Joe wants to know, given the push for critical minerals, albeit copper is not considered in the US at the moment, does that open up funding alternatives from the US governments similar to other minerals? I think it does. I mean, obviously, there's various groups in the U.S. Which are lobbying the U.S. Government. And, you know, Robert Friedland himself, Ivanhoe Electric, it's one of the reasons why he's invested so heavily in the US now with Santa Cruz and the Tentac property in Utah, that he believes ultimately copper will be a strategic metal and will be highly sought by the US government. So yeah, I think over time it does.

28:39 Okay, fair enough. What's the likely mining method for the Park Sailer? So, I mean, very early days on that. There's no doubt, you know, some sort of bulk mining method, especially if it means underground, which it likely will, would be the order of the day, so to speak. But, again, you know, We just hired a senior engineer to start doing some of that work internally. And then once we're in a position with the updated resource, we'll hand over the work sort of we've done to a consultant and work alongside a consultant to understand what makes sense and what fits best for that poor body.

29:24 Fair enough. Are there any discussions going on regarding the source and price of acid for the SXCW process? Yes, those conversations have already taken place. I mean, obviously, we were driving towards a pre-feasibility study purely on cactus. Of course, we recognized several months ago that Park Salia would not be included in that report, yet it could be quite material. So we basically, as we've announced this morning, we deferred that PFS, giving ourselves the opportunity to build in a Parkesalia and potentially even the Newton technology if it were successful. But as part of that PFS process, we did go out for quotes on sulfuric acid.

30:14 Obviously, you know, it was at a time of high volatility and a lot of uncertainties and- we were looking for sulfuric acid prices not today. But you know 2 to 3 years out. So the PEA. Had 120 dollars a ton. Associates in 20 21. Today's sulfuric acid prices are north of $200 a tonne. And within our PFS that never went to market, we were anticipating around about $170 a tonne would be the operating cost for the sulfuric acid. And interestingly, that number actually paired up quite well with the HUD Bay PEA on Rosemont, where they had $170 a ton as their operating costs for sulfuric acid. So we definitely felt that the number we had quotes on and we were using was appropriate.

31:15 Of course, all of that will now have to be redone when we redo this PFS in the next 12 to 18 months. We'll have to go out and get more market quotes at that time. Absolutely. Joe in the audience says that he believes Newton is a proprietary tech of Rio Tinto. How do you discuss that in a technical report? Well we're going to have to obviously get our QP very comfortable with the technology. And as Ian sort of alluded to earlier, the physical column tests with the leaching with the Newton technology are in the process of starting up. And we saw within the computer modeling that it was anywhere between 200 and 220 days of leaching time was predicted before we sort of got up to a 75 to 80 percent recovery of the copper within the Chalcopyrite.

32:17 So once those physical column tests actually do start, we'll be bringing our QP in sort of under the tent, and he'll be working with ourselves in Rio to get very comfortable with the technology. And, you know, hopefully, you know, at some point in time, if we see promising results and we can actually build that into the technical report, then obviously the QP has to be comfortable with that and sign off on it. Okay, fair enough. What's your cash position currently and are you raising money in the short term? Yeah, as I said in the presentation, our cash position today is we've got slightly north of 28 million US dollars cash in the bank. And thankfully, we don't have to come to market and raise any money at this juncture in time.

33:08 That's great. Could you comment on the water rights at Cactus and are they transferable to Park Salier? Ian, you want to take this one on? Yeah, because it's, the site is considered the cactus site, you know, with multiple ore bodies on it, it's definitely water confined within the property. So therefore, transferable, I guess, if you want to use that term, between each of the ore bodies. So as far as the water rights we have, I believe we published this last year, but we've received approval from the ADWR to access 3,600 acre feet over a pre-year, over a 50-year period.

33:56 So it's a lower aquifer. Water is heavily impacted by metals, not from previous mining, but from basically geology in the area. So the water was deemed for industrial use only, so we were able to tap into that allotment. So that's available to us. I think the other key thing there, Ian, is that when we do our water balance, both within the PEA and the draft PFS, we're only actually using about 1200 acre feet per year of the 3800 acres in totality that we have available. I suspect that may increase with Park Salier coming into the plan, but ultimately I believe we will have excess water rights that we won't be fully taking advantage of. And as Ian already pointed out, those water rights are transferable.

34:55 So coming back to the question that was raised earlier about synergies between ourselves and other projects in the immediate area, there certainly could be opportunities there as well. Oh fair enough, absolutely. Can you talk to us about upcoming catalysts for the company in the next 6 months? Yeah, well I mean obviously as Anthony's described, we're continuing with the NFL drilling at Park Salier. So I think between now and the end of the first quarter of next year, we'll be getting all the drill results back from the assay lab. So the market should expect infill drilling results over the course of the next 6 to 8 months.

35:41 With those column tests starting up on the Newton technology, I would probably expect that some juncture towards the end of the first quarter next year With the columns running at least 6 months We'll probably have some preliminary indication of how the Newton technology is is Performing in leaching the the chalcopyrite And obviously we would have to clear this with Rio and Newton, but there could be an opportunity obviously then to release some preliminary results to the market in the first half of next year. And then our plan as well is to go back to infill drilling at Cactus East. That's part of moving the indicated resource into the measured.

36:26 And some of that material obviously could then go into the re-scoped PFS and ultimately a bankable feasibility study as a proven reserve. And assuming that, you know, our budgets are approved in December, I think there will be some monies that will get allocated to further exploration around the site. As Anthony's alluded to, you know, that northeast corridor from Park Salire heading back to Cactus West is still to be tested. The primary sulfide below the open pit still has to be fully tested to the bottom of the basement fault. And then we've got that northeast extension where a sarco drilled a couple of holes. They had the copper porphyry system. They walked away from it, however, because the mineralization occurred at least 1,000 feet down the hole.

37:16 And they weren't looking for an underground deposit. They were interested in near surface mineralization and hence the reason why they walked away. So there's a lot of positive news flow I believe coming from the project over the course of the next 6 to 9 months. All right, gentlemen, well, thank you. That was a great presentation and another great Q&A session. That is all the questions we received for today. So with that, I'd like to thank not only you for coming on, but also everyone in the audience today, especially those who did ask questions and participate. But before we wrap up the day fully, I want to pass things back to you just for some closing remarks. Yeah, thank you, Cam. Appreciate that. Well, again, thank you everyone for joining us here today.

38:01 I think the results that we've put out today from Park Salier are exceptional. You know, we believed when we initiated this drilling campaign in late December last year that based on the geophysics and the sonic soil sampling, there could be upwards of 3 billion pounds at better than 1% copper in the ground. And I'm very happy, obviously, to report that the project management team, including the exploration team, have done a great job in coming in right at the top end of that range. And I'm sure everybody would recognize from the slides that there's still a hell of a lot more exploration potential on this property. Obviously the markets aren't cooperating at the moment, but my message here today would be, think about the long-term fundamentals of the copper supply demand curves.

38:52 And when you start to look out, you know, 5 to 10 years, the supply is just not going to be there with respect to the demand as we've discussed through the presentation. And I believe that the only way supply can have any chance of, you know, keeping up with demand is through incentivization through pricing. And that ultimately means that the copper price and some other commodities that are associated with the green energy sector are going to have to go a lot higher in order to incentivize projects to come into production and also to keep some existing mines actually in production where grades are diminishing, costs are going up, you know, marginalized ore just can't be mined profitably.

39:40 And through incentivization of prices, the only way supply is going to keep up with demand. And I think, you know, for people who are invested in the copper sector and pick the right projects, their long investment in the longer term is going to be significantly rewarded and Arizona Sonora Copper Company is going to be one of those projects that create significant returns for the shareholders of the company. All right, George. Well, with that, thank you very much for coming on yet again. And with that, we will be wrapping up, though. So I hope you, your team, and everyone in the audience has a good rest of the day. Cheers.