Pinnacle Identifies Gold-Silver Mineralization at Historic La Dura Mine

0:03 Good morning, good afternoon, good evening, depending on where in the world you are signing in from. I'm lucky enough to be joined today by CEO of Pinnacle Silver and Gold, Bob Archer. Bob, how are you today?

0:13 I'm doing well, thanks, Romeo. I hope you are too. I am, yes. And excited to talk about your most recent release. So here's how today is going to work. I've got a number of questions based on my careful reading of the release for Bob today. But this is also an interactive event. I know there were some questions that already came in advance over email, and I thank you for those. And we'll try to get to them today. But there is a chat button in the bottom right. You can feel free to enter that or direct message me directly through the platform and I'll be more than thrilled to answer your questions during today's event as we get through it. The only other piece of housekeeping I got before we get into the good stuff. This is being recorded and will be available live for replay

0:51 in probably as early as an hour and a half today because our team is really on it for recordings lately. So you'll be able to get it either directly on the same link where it'll come up as a replay or on Six's YouTube channel. But that's it for the boring stuff. Bob, I want to get into the protein of your most recent release. As I understand it, you've now identified 3 mineralized zones along the dust to my vein structure. So what does this pattern of repeatability tell you about the geology of the system?

1:17 And how does it compare to other epithermal vein systems you've worked with in Mexico? It's coming together in a way that we would expect for this type of system. These types of vein systems are never mineralized in a continuous sheet. You know, you always get these pods or, you know, in Mexico they call them clavos, and, or little sort of mini ore bodies. And, But there's never really a set size or distance or anything like that. So you just have to, this is where the drilling comes into play. But when we started on this project, we knew that there were 3 sets of historic workings.

2:04 So that was a great starting point, but we didn't have any data whatsoever as to where the veins were mineralized within

2:13 those 3 mine workings. And so, we've taken well over 700 underground samples now in those 3 sets of workings to determine where the mineralization actually occurs. And, you know, by doing that, you know, we start to get a better feel for it and, you know, the style of mineralization, the great variability, the size of these pockets and, you know, and they can vary in size as well. I mean, you know, some can be quite large, others a little smaller. And, but, you know, can just, what this one has done is really just sort of confirmed that yes,

2:52 La Dura is also mineralized, just as the other 2 were. And so now it just speaks to the potential of the entire Dos de Mayo vein system as to the potential for more of these pockets along strike. Now, it's grand. I know what you mentioned, this is also something that's so interesting to me, that the main Ladura adit was developed in the wrong direction historically. And first of all, that's interesting to me. But I'm also curious if you could walk me through how your geological team identified that and what it kind of reveals about how we do things now versus those historical mining approaches.

3:32 Well, yeah, essentially, as I said, we had no data whatsoever from this underground workings. So our guys had to go in and just take systematic channel samples across the vein in all of the openings. And it's really just through doing that that we were able to determine that the one main adit

3:53 was essentially not mineralized, or at least just very low values. Now, there can be different reasons for that, because the mineralization in these systems is typically within a sort of a limited vertical range of maybe 200 meters or something of that nature. And so they're not vertically extensive, they're laterally extensive and can go for kilometers, but vertically, you know, they're typically within about a 200-meter range. So it's quite possible that that first adit was just a little bit below that productive horizon. And so it doesn't necessarily mean that, you know, the vein is not mineralized in that direction, but they were just maybe a little bit below it. But where that added occurs,

4:38 there's no significant mineralization there. And the only way we found that out was from sampling it. But The Ladura II is a little bit farther up the hill and in the opposite direction along the vein. And it was only open for about 15, 12, 15 meters and almost the entire thing is mineralized. And

5:07 if they had opened that up early on, then they would have developed that more and actually mined that zone, whereas they didn't. So that's where I'm thinking that that was opened up later after they had developed the first one, didn't find anything. And so then poking around, they found the other one and just started to open it up. But we really don't know why they stopped or when, or all of this was done in

5:39 1970s and 80s probably, and all done by hand. This was not led by drilling, which we would normally do now in order to let us know where these pockets are and how to develop them. I was looking for the history and I appreciate that. That's actually pretty interesting. One thing I wanted to ask you, so there's currently significant untested gaps.

6:03 There's that 150 meters between La Dura and Pinos Juartes and 120 meters between Pinos Juartes and Dustin Mayo. What gives you personally, just your experience, the confidence that these gaps are gonna host similar mineralizations rather than being the barren zone? Yeah, well, I'm not sure if confidence is the right word, but certainly the possibility that they are mineralized to some degree is definitely there. As I say, there's no set rule, you know, that you get one of these pockets every 50 meters or every 100 meters or anything like that. But you know, you'll get a pocket and then you'll get a, you know, either lower grade or a barren stretch and then you'll get another pocket.

6:47 These things are all structurally controlled, and so the size of these pockets and even sometimes the grades as well is determined by the structural components and different rock types and that sort of thing and the interplay between them. Really, It just opens up the potential of those zones in between because there's absolutely nothing to go on. There's no workings, there's no outcrop, there's no drilling.

7:17 We're just going to have to go and work on those and drill them when we can and see what we can find. Awesome. And you did note that there were very fine visible gold observed at the drill too. For investors who don't understand the implications, what does the presence of visible gold actually tell you about the great potential, but also just the nature

7:40 of the mineralization generally? Well, for gold, it's a very good sign. As we saw in a recent press release talking about the metallurgy and the fact that we got, you know, an average of 95% recovery from bottle roll leaching tests, you know, and we got those high recoveries because the gold is essentially free. You know, it's not locked up in pyrite or, you know, other sulfides.

8:10 And so seeing that fine visible gold, just, It's just a positive sign, more from a metallurgical standpoint. When it's fine like that, it doesn't necessarily translate to very high grades, but if the gold can be coarse, that's when you can sometimes get much higher grades and more of a nugget effect. And we do know from the sampling at Pinos Quartus in particular, where we had grades up to 85 grams gold, that there probably is some coarser gold in that zone. So just seeing the free gold is really just a, it's a positive feature all around, from both the consistency and the recoveries.

9:02 So it's sexy to say. That's what I always say to investors. It's sexy to see invisible gold. I know you're now exploring La Estrella, which trends north-south rather than north-west-southeast like Nuestamaya.

9:14 Can you explain why the intersection of these different structural trends could be significant for discovering a higher grade zone? Yeah, so in these systems, as I say, they're structurally controlled and where you have 2 structures coming together, where they meet, that often leads to an area where there is more of a greater opening, I guess, to allow the mineralized fluids

9:47 to come into. And you very often get a widening of the zone, of the veins and it can often be better grade as well, just because it is creating that opening. So it'll be very interesting to follow La Estrella, a long strike. I'm not sure how much we'll be able to do from surface if it's not exposed, but certainly by drilling. And the fact that it's about 500 meters away from the Dos de Mayo vein is also really quite encouraging because that opens up that whole area for exploration and, you know, following these veins. So it's, and the fact also that it's a little bit higher up in on the hillside, you know, again, coming back to that,

10:40 that certain elevation, that's a bit more perspective than than others. So, So, you know, these are all different factors that we have to consider when we get into targeting for drilling. Sure. And with almost 500 meters of strike length now identified, plus a thousand meters of exploration potential to the Northwest, just wanna get in your head a bit here. How are you prioritizing targets for the upcoming drill program once those permits are there? Yeah, so it's going to be,

11:11 it'll be relatively easy to target within that 500 meters because we'll be starting, you know, in and around the existing mines and we've gotten good results. There was that parallel vein called El Capurlin and we just talked about Australia. So these are all fairly obvious targets. I've always been a firm believer in starting from a known and working towards an unknown. So we're gonna start with those areas and just gradually step out, drill those areas in between the 3 main mine workings and then start to step out along strike. There is not a lot of outcrop going to the northwest. So it's a little bit like joining the dots in terms of extending the vein in that direction. But

11:57 we are hoping that the LIDAR survey that is coming up will help to define that trend a little better and perhaps show little bends in the structure which would be would be targets or you know breaks or other structures coming in and coming together. So, you know, those sorts of things. So the lidar might

12:22 might help in that regard. Otherwise, you know, we'll just we'll just sort of step out on, you know, regular basis, like every 100 meters or something like that. And just and just determine that the vein and the structure are there, and then just use that information to gradually zoom in on the better looking areas. Great. I always love that extra context, so I appreciate getting in your head. I think it's helpful to see how we're doing it next. Now, here's something I've talked about with you before, but I know there's some new folks in the room. So I want to bring it up again, as part of another question. There's a unique earn-in structure at Pinnacle, where you get 50% ownership upon commencing production. So my question is, given where you are today with permitting, with exploration, what's the realistic timeline investors should be thinking about for that that big initial production milestone where you get the 50%?

13:16 Yeah, so what we've said pretty much from starting this project, once we got into it and got to understand it a little bit better, is that we were thinking in terms of a two- to three-year timeline, and the biggest wildcard really being the permitting. Not that we don't, I mean, I don't think that there will be any major issues, but it's a process. There are lots of different permits that are required and we have to deal with different ministries within the Mexican government. And so it's just, you know, it's a process and there's a lot of back and forth involved and, you know, You can appreciate these guys are often, they have been understaffed for the last 6 years under the AMLO administration and so trying to clear the backlog.

14:13 We just had some great news a few days ago or a week ago, I guess, maybe, regarding granting of permits for Silver Tigers mine in Mexico. And that's an underground mine. So, I mean, that sends a very positive signal. That's been, I think, the first mining permit granted for many years in Mexico. And so a lot of investors were kind of looking to Mexico and it was sort of hands off for a while. It's now looking like Mexico is open for business again, at least for underground mines, which is what we have. So, I think I'm trying to be sort of cautiously optimistic. If we can get something going by the end of 2027, that would be fantastic.

15:02 It may spill over into early 28, but we'll obviously be pushing to try and get all of that done as quickly as we can. But the things under our control, like rebuilding the plant and rehabilitating the underground workings, getting the mines ready, those sorts of things, we can do all of that in less than a year. So that aspect of it is not really an issue. It's just the permitting. I mean, a lot of those things can't start until we have the permits. You know, there's some things we can work on and try to move things forward. And we have been doing that, you know, and we'll continue to do so. But generally speaking, yeah, 2 to 3 years, late 27, early 28, I think is kind of what I have in mind at the moment. Okay.

15:54 And you have to throw my own opinion in. I think now is the time for cautious optimism in Mexico. So there you go. Last question I got before I get to the couple that come in from the audience. The grades at Ladura averaged 1.98 grams per ton gold and 98 grams per ton silver. But just for the folks in the room who might not know, how do those numbers stack up against economic thresholds for low-sulfidation epithermal systems? And what do you need to see from drilling to confirm this, as this is a viable mining operation? Well, in terms of Mexico as a whole, those grades are not unusual. And the average grade that you end up with in an operating mine depends to a large degree on your throughput.

16:44 With a higher throughput, larger mine, you can afford to go slightly lower grade because your unit costs are going to be that much lower. So you do get economies of scale. And in a smaller operation, you like the grades to be a bit on the higher side. Now when we started with this at Pinos Koutis, not knowing what we were getting into until we sampled it, as I mentioned, the grades there are very high in places. And we had been told, although we don't have anything in writing, but we've been told by the vendor who built the plant 35 years ago, that, you know, their grades at the time were around 10 grams per tonne gold equivalent. And so, you know, we had an idea going in that this was quite possibly going to be a higher grade mine, which is terrific.

17:36 But what we saw at La Dura, I wouldn't call them higher grades, but we have to keep in mind that this is just a very small exposure. It was just 12 meters long, and it's just a small tunnel into the side of the hill, and that's where the zone was exposed. So we have nothing more to go on, you know, as far as that goes. And so it's not necessarily representative as of what the overall grade might be once we expand that. So, we'll have to do some mine development and some drilling in and around that to see what the overall grades might be. But we saw that at Pinus Quartus, actually. I mean, when we were in on the first main adit, there were only a few samples that were even mineralized. And then we went up the rays and into a sub-level.

18:30 And in the rays, we started to get better mineralization and it was up in the sub-level that we hit those really high grades. And then it was from there up to surface and it was on surface that we got those silver grades that were in excess of 2000 grams per ton. So, you know, there is variability within these systems and we expect that to continue. So, you know, I'm not at all concerned about, you know, the overall grades at Ladura and, you know, I think additional work will quite possibly turn up some higher grades. Great. Now I got 2 questions for you from the audience. 1 I think is on the impossible side and 1 should be on the relatively simple side. So I'll hit you with the simple one first and then I'll throw you the tough one. So T from the chat asks, what's the metallurgy like? Is this straightforward processing or are there any red flags you can see so far?

19:25 Yeah, so we put a news release out a few weeks ago talking about the metallurgy just based on some preliminary testing that we had done with 3 samples from penis quartus and we received an average of 95% recovery on the bottle roll testing. So, we're extremely pleased with that. As a first pass without any sort of optimization at all to get those kinds of numbers was terrific. You know, the silver numbers were a little lower, but that was expected because silver doesn't leach as well as gold and it can also be more complex in terms of its mineralogy. So, we will have to do some additional studies on the silver to determine how it occurs within the mineralization and then how to actually optimize it because just those 3 samples varied from I think it was 41 to 76% recovery from the silver so it's quite a wide range and so that tells you that there's you know there's there's something going on there as far as the mineralogy and that there's definitely an opportunity to optimize that.

20:36 So we're just in discussions with SGS right now as to the next steps for additional metallurgical testing, And we'll just continue to do that as the project advances. Great. And here's the one that answered the best to your ability. It's one of those questions. Perry from the chat asks, with 500 meters of strike identified and exploration potential Northwest, what is the size of deposit you think you could be looking at here? You know it's it's really early days to to say that and because for example you know we've just recently started to to expose that Kapelin vein which is only a couple hundred meters away. And now we're looking at La Estrella, which is 500 meters away. And then we've got all these areas in between.

21:26 And, you know, so I expect that there will be a kind of a, almost a swarm of these veins as we get going and you know the lidar may help to identify those certainly additional drilling will prove those up as well so it's really early days to be able to put any kind of a number on that. But having said that, this project and really our entire business strategy, business model for Pinnacle is not about trying to build a large resource. We want to advance this project as quickly as we can to get into production, take advantage of the high metal prices and start to generate cash flow as quickly as we can.

22:12 So if we can just have enough to start at say 100 tons a day, which is roughly the size of the plant. And depending on the grades, we can get going fairly quickly. And I'm not going to spend years and millions of dollars of shareholders' money to try and demonstrate that we've got a 5 or a 10-year mine life. That's not what it's all about. This project is really just a stepping stone, and it will allow us to acquire another project and then another one after that. And so we're just sort of leapfrogged them and just develop one after the other. So this is all about building a company.

22:58 It's not just about building up a big resource on 1 project. Well, hey, I appreciate a very thorough answer to a very tough question. I appreciate it very much, Bob. Thanks generally for letting me grill you for a bit on the last press release. I know there are a bunch of people in the room. Thank you so much for your time. If you have any additional questions, If you think of the perfect thing to ask Bob right after the event ends, please do still ask. I'm going to make sure that the Pinnacle team gets it. But Bob, thank you