Pinnacle Provides First Results from Underground Drilling Program

0:08 I'm lucky enough to have me today, Bob Archer, president and CEO of Pinnacle Silver and Gold. I've talked about a very exciting press release that was released this morning. Bob, how are you today?

0:18 I'm doing well, thanks, Romeo, and you? Good, good. Now I know it's a bit last minute, so for the folks in the room, here's how today's gonna work. I've got some questions for Bob, but if for whatever reason You have additional questions, you can use the chat at the bottom of the screen, this is an interactive event. So please do enter your questions at any point during today's time, be eager to hear from you. You can also press that request meeting button at the bottom of the screen to request a meeting with the PNaCl team. I'll be sure to pass those along afterwards. If for whatever reason we don't get to your question today, I'll make sure

0:49 the team gets it, and they'll still be able to get back to you. But this is also being recorded and will be available for replay probably in about 45 minutes. So you'll be able to see it quite quickly after then. Bob, I want to get into the protein pretty quickly. So thanks, obviously, for joining me. But to kick us off, can you walk us through the highlights of the latest underground drilling update and what stood out most to you? What was most exciting there? Well, these results that we published today, Romeo, were all from the upper level of the Pinos Quartos mine, which is the central mine of the 3 historic mines along the stretch on the Dos de Mayo vein at the Alpachurro property.

1:28 So the holes were drilled from 2 different drill stations on that sub-level. As we described in previous interviews, that the holes are short, they're closed-spaced.

1:44 It's a very different type of program than you would have from your typical surface drill program. It was really designed to give us a better idea of what the mineralized zone actually looks like in core, and how wide it might be, what the grade distribution looks like, and so on. But at the same time, we have to recognize that we're in old mine workings. The reason for that is that they've actually mined some of this in the past. Some of the mineralized material has already been mined out. So, you know, these holes, none of the holes represent a complete cut through the entire zone. You're getting one side or the other side or whatever. But we did drill a couple of holes, a long strike, basically flat holes and drilled a long strike along the vein to get a sense of what it actually looked like in those directions.

2:46 The one that really stood out is the one to the northwest, Hole 35, which intersected some visible gold, and that's the one where we got the 59 grams of gold and some silver as well. But one of the things that really stood out to me was that entire stretch, it was a little over 13 meters, it contained several very good grade intercepts. So It's not like the whole thing is being carried by that 1 1.5m sample. There are several samples throughout. There's some lower-grade stuff on either side. We basically extended the mineralised zone for about 20m before it exited the vein into the wall rock.

3:41 We had similar results drilling a long strike to the southwest as well, or southeast rather.

3:50 We've really extended the strike length of the mineralized zone to about 70m that we know of. It's at least that long a long strike and we have some holes going up and down dip, but we'll need to follow up and draw those from surface. Oh, great. And as you said, you've extended the potential strike length of Pinos Cuates to 70 meters. How does that extension shape your understanding of the deposits overall,

4:21 size, continuity, etc.? It's actually a fairly substantial improvement over what we thought previously. What we had up until now was just the results from the channel sampling, which are limited to the walls of the underground workings. That's where the drilling really extended things in both directions. Our knowledge going in was that this mineralized zone was maybe 35m

4:53 along strike. But with this drilling, it's effectively doubled that to about 70m. So that's pretty substantial because these mineralized chutes are,

5:05 they're sub-vertical chutes, essentially. And there's 1 at Pinas Cuates, there's 1 at Dos Tomayo, and 1 at La Gura, and so on, and maybe others that we don't know about yet. No fun. And I know as we've talked about before, and as you said here, the program is designed as more than 100 short, closely spaced holes to better define the size, shape and grade of the zones. Now you've got 58 of the plans, I think 108 complete. How is the campaign overall progressing against your expectations? Well, it's, well, admittedly, it's going a little slower than we had anticipated, and things, the labs themselves are busier than they were previously. So you know, getting the results out is a little bit slower as well. So, you know, that's all unfortunate. But As far as the results go, these are the first ones where we've been able to put them together and interpret them properly.

6:07 The first 16 holes that we drilled, just for logistical reasons while the drillers are getting used to things and set up, we drilled a few holes at the portal areas, the entrances to each of the 3 mines. We will be drilling more holes in those areas, so I don't want to just release a few holes at a time from each of those because that doesn't really mean very much. We'll wait until we have more information before releasing those. This package now, holes 17 to 37

6:37 is the first time that, you know, we've actually had the opportunity to, you know, to put all the results together, to interpret them and really, you know, make some sense out of it. And so we, yes, we've drilled up to 58 now, but we don't have assays back for those yet. So, we'll do the same sort of thing. Those are on the main level of Pinot Squatus and we'll keep drilling at the different stations on that main level. And then we'll move over to the Dos de Mayo, which I think I said in the release, it's about around hole 84, something like that, that we'll move over to the Dos de Mayo mine and start to do the same sort of thing and drilling the mineralized stone at Dos de Mayo and see what we can learn there. No, it's fun. I'm eager to see what comes next there. 2 things I wanted to clarify.

7:27 I know you talked about how there's higher grade mineralization occurring in sub vertical shoots separated by that lower grade material.

7:34 I'd love if you could help just the investors in the room and watching the replay, understand why that structural picture matters as you go towards a resource estimate. Well, It matters for the resource, but ultimately what you're leading towards is a mine plan. And so once you get underground and you start mining, you need to know what's mineralized and what's not,

7:58 and with what grade. So, you know, every mine has a cutoff grade where you're not going to mine anything that is below your cut-off, which basically means it's uneconomic. So you're not going to waste a lot of time and money to mine stuff that's effectively waste, waste rock. So These types of programs, plus subsequent channel sampling, once you do actually get into production, the geologists are sampling every day, so that they can mark up the walls to guide the miners and say, okay, take this material, this is economic, but leave this stuff behind because it's not economic.

8:40 And so that's ultimately what we're leading towards. So this is just like a first step. And then the resource itself will give us, you know, an indication of size and grade you know shape and all that sort of stuff where the limits are and And then, you know from there getting into mining then it's just a day-to-day mind planning type thing Great 1 thing I caught in the release is you noted that oxidation and fracturing had a couple poor core recoveries in some holes locally as low as 20 percent, but

9:10 you're taking steps like panel sampling, etc. To address it. My question is How confident would you say you are that the true grades are being captured? I think there's a very good chance that we're not getting all of the fine gold and silver. Knowing from the metallurgical tests that we did or mineralogical tests, that the gold is like 50 microns and less and the silver is 80 microns. 50 microns is 51,000 of a millimeter. A lot of it's being washed away because at the upper level at Pinos Quatus,

9:53 it's relatively close to surface and being oxidized and fractured and so on. When the drill cuts it, it just breaks it up into little pieces and mud and so on. And the fine material just gets carried away by the water that you're using as a lubricant

10:13 for the drilling. And So I think we are losing some of the fine minimalization at the upper level, because we do seem to see the recoveries improving as we go down in elevation. But at those upper levels, I think we're probably losing some. So by panel sampling the walls that we're drilling through, that gives us a little bit of an indication. Because again, that doesn't tell you what lies beyond the walls, just what's right there. So we're trying to focus on, like, if the first sample in a drill hole carried, let's say a gram, then we'll panel sample around it. And if the panel sample comes back and says that the grade is actually 2 or 3 or 5 grams, then we'll know that the drilling is is actually losing some some fine grain mineralization so little tests like that there are other tests as well that we can do but you know we'll get into the details of that on this call don't appreciate it love getting under the hood a little bit so appreciate you

11:18 now I know you've already touched on it, but surface drillings anticipate to begin in September or October. And they're gonna test new veins, as you said, like El Capilin and La Estrella for the first time ever. How much untapped potential do you see across the broader property right now?

11:35 Well, given that the other veins have never been drilled at all, and there are only small underground workings on the 2 which we have sampled, you know, with with the underground channel sampling as well, and they are mineralized. So, we know that there is good grade material at both Kapelin and Estrella, and we know that there's pretty decent strike length on them as well for hundreds of meters that we can follow on surface before it gets covered by overburden. So really the only way to test those is by surface drilling. And I think there's pretty significant potential on both of those. And so that's total upside exploration upside from here. So I'm pretty excited about those. And they're also, and this is a little bit technical, but they're higher in elevation.

12:26 And these epithermal systems

12:30 tend to be mineralized at certain elevations. They're not vertically extensive, they're horizontally extensive. They can go for kilometers along strike, but usually only a few hundred meters vertically. Given that we can see mineralization at surface on both these other veins, then there's a very good, and given the elevation that they're at, there's a very good chance that we have quite a bit of the mineralized zone

12:57 protected below us. Interesting. Now, I know this is a question I've asked you a number of times before, but I really want investors in the room to really understand that El Pachero sits within 35 kilometers of 4 operating mines and has existing plant infrastructure on the site. How does that position Pinnacle for the near-term production strategy that's always been the plan here? One of the interesting things is that earlier in the year, we discovered polymetallic mineralization on the property that we didn't even know existed. And the 4 surrounding mines are polymetallic mines. And so their processing circuits are flotation, which is completely different from the gold silver mineralization that we have, that we know we have at Potrero, which will be a Vat Leach and Merrill Crow type processing circuit.

13:52 It'll be completely different. If we were to mine this other mineralization ourselves, we would need a different type of setup. But given that the surrounding mines already have the flotation circuits to process that type of mineralization, then that gives the opportunity to custom mill some material that we're developing

14:19 in the early stages. And perhaps we can get into a contract with one of the surrounding mines to custom mill at an early stage. And that way we can start to generate a bit of revenue without having to go through a big resource building and permitting and construction to build a new plant and all that kind of stuff. So it really does improve the overall economics quite significantly.

14:46 And so we're looking forward to getting drilling on those zones as well. Great. Like I said, I already knew, but I love asking questions. I already know the answer to me. I'm sure there's some folks in the room who didn't know. 2 questions. I'll say I come up with the same answer each time.

15:02 I think it's actually improving over time. It's great. I'll throw out 2 questions that came in in the chat, and then we'll wrap up for today. Antonio wants to know, what are the next steps for permitting in the state? Well, I mean, the permitting is a bit of a process, so it's not so much next steps. I mean, we've already started the whole permitting process and there's collecting baseline data, whether it's water quality, what vegetation there is on site, if there are any animals or anything like that. I mean, if there are none, that's great. But that's the sort of data that we need to collect, which we've already done. And then there are maps, there are coordinates, detailed coordinates that we have to submit to the government on various things, the type of equipment we're going to use the processes, how much water we're going to need.

15:59 If there's any discharge of water, you know what the tailings is going to look like. I mean, there are all kinds of things that we have to submit to different groups within the government. I mean, there's the environmental group, summer and that there's the water guys at Kanagawa, there's the electricity for the power line, and all of that has to go through the Federal Electrical Commission. So, there are processes to be followed for all of those, and that's just ongoing. So it's not so much next steps. It's just just following through and doing what we need to do to get to that ultimate granting of the permits. Appreciate that helpful reminder of how permitting works. One last question, and this is a bit of crystal ball gazing, so answer to the best of your ability, obviously. I would say I want to know if you think the stock is going to track with precious metals prices.

16:54 Well, I think just based on experience, I could say, yeah, it should, you know, I mean, I've been in this business for 45 years and having built a previous company, when we built Great Panther, we started when silver price was around $5 and we built that company through to when it was $50. And the stock price ran from 35 cents to 5 bucks. So, yeah, I mean, there are other factors in there. Of course, we were putting mines in production and that sort of thing as well. But ultimately, you know, stocks will track will track the metal prices. We saw that in January when everything took a big run through the second half of last year. We traded up to $0.19 at that point.

17:41 Now here we are back in the $11.00, $11.50 range when things have only gotten better. There's no reason but just because of the correction So it goes I mean it goes both ways obviously, you know price went down when metal prices went down So when they go back up we should go back up as well No, appreciate that very much and geez what I would give for $5 silver, let's get 10 ounces for 50 bucks. What a dream. Don't think I'll ever see that again. It would be a great buying opportunity. Yeah, it would. Yeah, it'd be at the stores. But Bob, thank you so much. Really appreciate you willing to go through the press release and then getting grilled about it a little bit. But if anybody does have questions or would like to request a meeting, that screen will still be up after I close today's event. But thanks, everybody, for joining. Bob, hope you have a great rest of your Monday.

18:26 All right. Thanks a lot, Romeo. Take care. Cheers, everyone.