Pinnacle Commences Underground Delineation Drilling Program at El Potrero

0:04 Good morning, good afternoon or good evening, depending on where in the world you're logging in today. I've got with me today Bob Archer, CEO and president of Pinnacle Silver and Gold. Bob, how are you today?

0:12 I'm doing well, thanks, Romil. I hope you are too. Yeah, I am. So here's how today's going to work, just for the folks in the room. I've got some prepared questions, just based on Pinnacle's most recent news, but also some updates on where Drilling at El Patero is at right now. But this is an interactive event, so please do feel free. I know that some people submitted questions already in advance over email, but feel free to ask them during today's event. We'll have some time absolutely to answer questions before we jump today, despite this being on the shorter side of events. I think we'll probably be out of here in a half hour. If for whatever reason I don't get to your question,

0:43 it's probably just because we ran out of time or it's slightly off topic. Either way, I'm gonna make sure the Pinnacle team gets those questions afterwards so I can get back to you as quickly as possible. Last boring thing before we get to the good stuff. This is being recorded and will be available for replay. You can expect it probably around 2 p.m. Eastern today. It'll come right into your inbox if you're here in this room, but if you're sharing it with others, it'll be at the same link and also on Six's YouTube channel. Awesome. So let me jump right into it. So based on the recent news, the program is really kicking off at Pinos Cuates with 67 holes across 2 levels. Is that right? Yeah, that's correct. Yeah. And Pinos Quates is the central mine of the 3 historic mines along that 500 meter trend. And that's where we're starting. Yeah. And what made Pinos Quates the right starting point? And then there's a corollary. What are you hoping to confirm there before moving to Dustin Mayo?

1:38 Well, I mean, there's probably a little bit more development in the workings at Pino Squat within the mineralized zone. And that's where we got the highest grades from the underground channel sampling that we conducted, you know, individual grades up to 85 grams gold and 520 grams silver. So there's some real bonanza grade material in there. And when you're doing these kinds of programs you always want to work from a known to an unknown so you know we want to establish ourselves within

2:11 the zone that's well mineralized, get a good sense of the style of mineralization, allow the geologists to really look at the core and what it looks like and learn as much as we can. Because these zones have never been drilled before. So it's not like there is historic core that we could look at or anything like that. So this is a first. And we'll be drilling at close spacings. So we really want to get a good sense of the size and geometry of the zones and the overall grades. Obviously, it's great to get those bonanza grades, but that's not going to be the average.

2:49 We do know from the metallurgical testing that we've done that the grades, the overall grades that we're seeing from that are pretty much aligned with what we had been told was the production grades when this was in production in the late 80s. So pretty close to 10g per tonne Gold equivalent, 9.5g per tonne, somewhere in that range. So

3:15 That's what we're expecting, I guess, or that's where it currently stands and we'll see what the drilling tells us. But that's effectively why we're starting with Pinos Quates and then we'll move on from there. No, appreciate that. And then Just so people understand the timeline and the process, the Dustomayo mine has 6 drill stations planned for 35 holes, totaling 887 meters is the next phase. So really, how does the data from Pinos Cuates inform how you'll approach Dustomayo, And can those 2 phases overlap at all, or does it really have to be one after the other? It'll be one after the other. There's only one drill, so they'll be done sequentially. And the guys, I mean, the nice thing about having the 3 mines, and they're all separate, they're not connected underground or anything.

4:04 So each one is its own little unit, so to speak. But that gives us some flexibility and that the mining contractor that was preparing the underground drill stations, you know, making them larger, more secure, safe for the workers and so on. You know, they finished at Pinos Cuates, which allowed us to start drilling there. And then they've moved on to Dos de Mayo, and that's where they're working now. So as we're conducting the drilling at Pinos Quartos, they're preparing all the drill stations and everything at Dos de Mayo. And then when they pull out of there, then we'll be able to move the drill over. So it will be done sequentially. In terms of what we'll learn, it'll largely be geological, I guess, from what the guys determined, looking at the core.

4:57 You can appreciate when you're underground, it's like being in a tunnel or a hallway, and you really don't know what lies beyond the walls. And where the underground workers, if they're following the vein, you can either be totally inside the vein, in which case you don't know where either contact is outside the walls, or maybe you're following along 1 contact and you just don't know where the other contact is. And the only way you can determine that is through the drilling. So, you know, we'll be getting a sense of what those contacts look like, how well the mineralization is spread through the vein, or if it's just concentrated on 1 contact or the other, which you know sometimes happens.

5:44 So those are the sorts of things that that the geologists will be looking for. But I mean, you would typically sample the entire thing anyways, but in terms of modeling it and getting a good understanding, knowing what to look for, Those are the sorts of things that we'll be getting from the first round. Okay, it makes sense. There's always a line in a press release that I like to pry on a little bit. I know the total program is expected to comprise 108 NQ size holes over 2,416 meters. But you noted, this is what I find interesting, the plan may be adjusted as work progresses. What kind of early results would cause you to expand or redirect the program, just to look at a better sense of what that line means? Well, essentially, I mean, for one thing, you know, those numbers are fairly exact.

6:38 But a drill program is never exact like that. You know, you'll notice a lot of companies will just put out, oh, we're drilling, you know, we're drilling 2000 meters or we're drilling 5000 meters. And they're all nicely rounded. And, you know, it never works out to the exact amount. And there are lots of reasons for that. It can be logistical, it can be geological.

6:57 If you get through the zone and you're just drilling barren wall rock, then there's really not much point in continuing. So you shut the hole down and or maybe you find a parallel vein, maybe you see something that you weren't expecting, and so you keep the hole going. So there are things like that that happen during the course of the program. And there's really no way to anticipate that exactly. So it's always an approximation. So, you know, we put out those exact numbers because that's the planned number of holes and meteoration and so on. But because, as I mentioned, you start from a known and work towards an unknown. So you start within the mineralized zones and you work outwards at fairly close spacing until you start to hit the edges of the zone.

7:47 And it's always irregular in shape. And so, you know, as you get close to the edges, then ultimately you will step outside of the mineralized zone and you won't be hitting anything. You'll still get the vein and the structure, but it won't be mineralized. And often you won't know what

8:11 that's like until you get the assays back, which will be several weeks later. So you can adjust the program to a certain degree. And maybe once you're outside of the mineralized zone, maybe you just don't drill as many holes because there's no point drilling barren rock.

8:30 But if you can't tell visually, then you just keep the holes going, you know, as because you can always you never know when you're going to hit another mineralized zone, for example. You know, so there's there's still a little bit of that. So as much as it's delineation drill into a large degree, there's still a little bit of exploration going there as well, outside of the mineralized zones, because we just don't know what's there. The mine workings are not connected, the 3 mines, so there are gaps between them. To some degree, those gaps will have to be filled in with the surface drilling which will follow the underground drilling. Awesome. I love that peek behind the curtain of how that stuff works.

9:15 I appreciate it. And I know one thing that's exciting is the surface drilling permit is anticipated within 60 to 90 days, which could allow surface work to begin as underground drilling wraps up. How important is that sequential flow to maintaining momentum for Pinnacle right now? And what's your contingency if the permit happens to take longer?

9:36 Well, it's, I mean, for one thing, it's going to be important for the geologists to learn as much as they can from the underground drilling. There's a lot of detail there, the holes will be closely spaced.

9:52 Whatever they learn from that underground program, they'll then be able to use that to perhaps slightly modify the surface drilling once we get into that. But with the surface drilling, not only will we be filling in gaps between the 3 existing mines along Dos de Mayo, but we'll be stepping out and we'll be drilling the other veins like El Capulin and La Estrella. And what we do know is that those veins are slightly different in character than the Dostomio vein, which tends to be more of a vein breccia, whereas the others are more, you know, banded type solid quartz veins. And so they have slightly different character

10:40 and maybe slightly different mineralogy as well. And So we'll have to approach those a little bit differently. And so, it's all a matter of learning as you go along and then potentially modifying the program as you go. So That's part of it. So in terms of momentum,

11:05 it's just good to, if we're hiring extra people for the drilling program, then it's nice to just continue to keep going rather than having to lay people off, take a break, that sort of thing. But at the end of the day, as you say, we're just waiting for those permits to come through. And we do anticipate that we'll be getting that within that timeframe. So hopefully the surface drilling will be able to just follow on from the underground. But if not, if there are any delays, then we'll just go back to following up on some of the surface work that we've been doing. And in particular, the new polymetallic discoveries that we've made on the property, the zinc zones,

11:54 because we only just made those discoveries in February and March. So we still are tracing those out, sampling them on surface, you know, looking at some of the old underground workings there and cleaning those out, you know, so there's still certainly work to be done in that regard. Right, no, appreciate that. I know the team and yourself completed more than 1,300 channel samples to build a 3D model of that main mineralized zone. This might be my question. How has that model evolved from what you

12:25 initially expected when you acquired the project? And has anything surprised you a lot? And if so, what has?

12:35 I don't know that surprises is really what's happened. It's just, it's nice to see how it's all evolved. Because, you know, when we started the project, there was no historic data for us to work with at all. There was no production data, you know, it's never been drilled before, so there was no drill data, there was no resource, you know, so really that's where we had to start from the ground up and literally and just develop our own database with all the sampling and everything that we've been doing. And so, you know, as I just mentioned, the style of mineralization, the veins themselves are slightly different 1 to the other. And so it'll be interesting to see with the drilling what those really look like in core and in detail, get a better sense of the thickness of the veins, whether mineralization is concentrated at 1 contact or the other contact or spread evenly throughout the vein.

13:38 And you can get any of those possibilities in these systems. And so It's just nice to see it evolve. So I think what we've seen in some respects, I would say even that it hasn't been a surprise because it's system is quite typical of a low sulfidation epithermal system. You know, something that, I've been working on in Mexico for the last 30 years and,

14:12 our, our geo is, you know, are, are quite used to these sorts of systems as well. So, so it's just, yeah, it's just nice to see it all come together. Sometimes no surprises is the best thing. So that's, yeah, that's right. Yeah. Yeah. I know since I've talked to you about El Patrero, you've always talked about a cash flow first approach, really right from first time I talked to you about it. With drilling now fully underway, how close are you to having the data you need to make a formal production decision? What does that decision process actually look like from here?

14:47 Well, because of the limitations that the underground workings place on us, I mean, they are a certain size, and that's it. So the underground drilling won't be any greater than what we've planned. We're not going to suddenly double the size of the program or anything like that. It is what it is. We'll do that work and then continue on with the surface drilling.

15:17 We can start to model the underground drilling as soon as it's done and we have all the results. And then the surface work, we'll just add to that. So it's really, I think, a question of

15:32 comfort. Once we get to a point where we like what we're seeing, we're confident in the results and the resource that we're doing internally starts to hold together. And then of course, we'll be doing our own internal budgets and numbers in terms of what we think production costs are likely to be and mining costs, processing costs, all that sort of thing. And then looking at metal prices and taking a look at basically building a cash flow model. And when we're comfortable with that, then That's what will ultimately lead to a production decision.

16:20 And in conjunction with discussions with metal traders as to providing production financing, because that's gonna be an important component of that decision, because

16:34 it'd be nice to, yeah, it'll be sort of a part and parcel decision, I guess, in a sense, and that'll be the biggest milestone, if you like, for the project in terms of moving forward. And certainly

16:54 we expect to be at that point before the end of the year. Awesome. I know you very briefly mentioned evaluating additional acquisitions as a goal for 2026. How are you balancing that goal or interest with the capital and management attention required just to keep El Patrero through this part of the drilling phase? How are you keeping both of those goals in your mind at the same time? Yeah, the acquisition side of it is something that I guess you could say I'm the main one handling that. I'm using my network in Mexico to try and identify potential targets.

17:36 And so there are always a few that are undergoing evaluations and some you can reject right away for various reasons, and others as you continue to do due diligence. Some will fall by the wayside, others are more interested. You get to the point of perhaps looking at some data or the guys will do a site visit, that sort of thing. And then

18:03 you can do all the technical and legal due diligence as well, making sure the concessions are valid and people actually own what they say they do and taxes are paid and all that kind of stuff. So, you know, the due diligence does take some time, but then ultimately, you can get to a point where you're happy with all of that, but if you can't come to terms on negotiations, then the whole thing goes nowhere anyway. So it does take some time. So I'm the one that's handling most of that. I'll call the guys in on an as-needed basis, either from our geological team or the mining side, bring in Carlos if there's a plant there and he needs to go take a look at it. Obviously the lawyers are involved.

18:55 So it can be a team approach and the farther you get into something, the more people get involved, but it is a little time-consuming. And so, from that standpoint, I'm cognisant of the fact that that may be a little harder now with the geological team because they are focused on the drilling, but we'll have to take that into consideration and see how things develop. But the due diligence itself doesn't really cost very much. So from a budget standpoint, that's not so much a consideration. Once you get to the point of actually coming to terms on a deal, then you'd have to look at what those terms are, what payments might look like, any work commitments, that sort of thing, and then budget accordingly.

19:48 And I think that would likely, depending on what we come up with, that would likely require additional financing because right now we're financed for the drilling, for the underground drilling, but not for surface drilling. And not for an acquisition. But we'll have to see what that looks like if it does come together in the short term. My last question, then I promise I'll get to all the questions that are in the chat that are great. But for investors watching today, I know there's a number in the room and number watching on replay. What to you would be the most important milestone between now and the end of this year that signals this project is on track to becoming a producing mine? Yeah, that's going to be that production decision for sure. And as I say, that will be more or less hand in hand with production financing as well.

20:46 And so whether we announce those together or 1 in advance of the other. I'm not sure at this point, but certainly, that will be the biggest trigger, you know, because we'll need, We'll need that production financing to move forward with the plant reconstruction, with extending the power line, building the tailings facility, all those kinds of things. So that will be key. But obviously we won't be doing that until we've made the production decision and we're confident that we're moving ahead. So, and you know, from the on the flip sides, you know, no lenders, no metal trader is going to enter into an agreement unless they're comfortable with a production decision as well and know that you can pay it back.

21:39 So it is part and parcel, but for sure that will be the biggest milestone for us. Great. I appreciate this. I think it's always helpful to ask what to watch for so everybody knows now. That's what you should be keeping an eye out. Stay tuned. So question in the chat. One person has a question that I think I've asked you before, but it's always good to reiterate. Wesley asked, is all the talent on site local? Not all of it. You know, we're, I'm rebuilding the, our team from the old Great Panther team. Our project manager, Carlos Castro, used to be our mine manager in Wanuwato at the mine there. He worked for me for 7 years, and he's just brought on a fellow who was the head of the safety committee there, safety team, mine rescue team, and so on.

22:34 And he'll bring in other mining guys on an as needed basis. And similarly, our QP and exploration manager used to be our exploration manager in Guanajuato as well. And so, and Jorge's rebuilding the team a little bit there as well. So the, the geos and mining engineers used to work for us. And, but the technicians and the, and the laborers are largely local. You know, we're hiring local as much as we can. And, you know, that's great for local communities because there's not much else in that region really. If they're right in Topia, then there are often mines related to the Topia mine.

23:25 But we're still 30 kilometers away by road, and so for some of the smaller communities around there, it's a long way for them to be going back and forth every day. And I say a long way, 30 kilometers doesn't sound like much, but it takes an hour and a half to drive in that country. I've been in the roads near there. It sounds about right, actually. Yeah. I think 30 kilometers can feel a lot more than that. Exactly. 2 more questions from the chat. Barry noted, just right as we started today's event, basically, he talks about the production decision by year end. He wants to know what grade do the 67 holes need to hit to be able to pull that trigger? Well, as I mentioned, the metallurgical testing has indicated that the grades could be somewhere in that 9 to 10 grand gold equivalent range.

24:14 So that's sort of what we're anticipating, I guess you could say, and that's from what we've been told, that's roughly the old production grade as well. But grades are also related to tonnage and what the throughput would be. And so right now we're sort of aiming for that 100 ton a day because that's basically the size of the plant. And that's where we'd like to start. If it goes beyond that, we'll have to wait and see. But once we learn more, we'll be able to get into a more detailed cost analysis for what it's actually going to cost to, to mine it and process it and so on. And We're just, we're not quite there yet. And, but, you know, certainly at 9, 10 grams per ton, that's, that's very, very good grade.

25:11 And if we can get even close to that, I'd be, I'd be very happy. Awesome. And then last question, but before I ask it, I'll let everybody in the room know that at the bottom of your screen there's a request meeting button. Please do feel free to press that. I know some already have. And I'll get you connected with the Pinnacle team. You can have a chat with Bob or the team there. I'll ask this last question from Mauricio in the chat. He wants to know, you got a polymetallic zone in the south and a silver gold zone in the north. He wants to know, are you going to chase both or are you picking 1? What's the current plan? We will be working on both. We have a team of guys that are working on that Silverlight Zinc or those Silverlight Zinc discoveries because they're 2 separate parts of the property and there's still some targets from the LIDAR that they haven't really even looked at yet.

26:03 So there is a team of guys working on that, but it's very early days on that because we've only just made those discoveries and there are some old historic workings there, some artisanal mines and those that need to be cleaned out and so on. So, I'd like to get to the point where we can start drilling those from surface later this year. But In the interim, where we're working now on the Silver Gold Zone is obviously much more advanced and that's what we need to continue to advance to get to that production decision. We are working on all of it at the same time, but they are at different stages. We'll follow through with a normal progression with each of them.

26:57 Sounds great. Well, Bob, thank you so much, as always, for letting me grill you about recent news. And everybody in the room, thank you so much for joining us today. If you do have any other questions, please do let me know. I'll make sure they get to the Pinnacle team. But Bob, thanks so much, and I hope you