Pinnacle Silver and Gold Corporate Update

0:04 I'll say good morning, good afternoon, good evening, depending on where in the world you're signing in from today. Today, I'm lucky enough to be joined by Bob Archer, CEO of Pinnacle Silver and Gold. Bob, how are you today? Hi, Romeo. I'm doing great. Thanks. You? I'm well, I'm well. Ready for P-DEC, like I think a lot of people in the industry are this week. So for the folks in the room, here's how today's gonna work. First, I'm gonna throw it to Bob just for an update on recent news. He's gonna kind of lay the groundwork for what's going on this week at Pinnacle. It's been a big week, obviously, for the company. So we want to get through some of that information. Then I've got some questions that I'm eager to ask Bob to just give some extra context to the news. But then I'm going to open it up to you guys, the live audience. Please do ask any questions you'd like at any point during the event today. It is an interactive event. That chat button at the bottom right of your screen. We'll allow you to ask questions at any point during today's event. I'll try and work them into the conversation, but if not, I'll grab them at the end.

0:53 If they're totally off topic, but still great questions, I'll pass them on to Bob and make sure that the Pinnacle team gets back to you as soon as possible. One last piece of housekeeping, then I promise we're onto the protein. Today's event is being recorded and will be available for replay probably last thing before end of day Eastern time. It'll come right in your inbox but feel free to share it. It'll be available on 6.com but also on our YouTube channel. But enough out of me, I'll throw it to you, Bob, to get us started today with a bit of update on recent news. Great, thanks very much, Romeo, and welcome everybody, thanks for tuning in. Yeah, it has been quite an eventful week, but somewhat transformative, I guess you could say. I mean, Pinnacle is essentially rebuilding itself

1:39 and focused on precious metal exploration and development in the Americas in general, but more specifically, a couple of great projects in the Red Lake area, northwestern Ontario, but now branching out into Mexico. And what's happened in the last week is that we have just closed the acquisition of a staged option agreement for a project in northwestern Durango in the Sierra Madre silver gold trend of northwestern Mexico. And that's a very significant project in many ways, which we can get into. But I mean, for me personally, it's great to be back working in Mexico.

2:26 I've been working there for almost 30 years, and particularly in this area, because this project is only about 13 kilometers from the Topium Mine, which was the first mine that we acquired when we started Great Panther back in 2004. So I'm very, very familiar with this area, love the geology, and has tremendous potential. So really excited about this project. Awesome, 20 years, that's got to feel kind of full circle for you. That's fun. Yeah, absolutely. It was, you know, People have different views on mining in general, but when I went back into Topé, we flew into the town just a few months ago, and walking around

3:12 and just seeing the activity level in the town. And then when we drove in the next day, coming back from the field, I noticed there was a sign at the outskirts of town saying that the population was now more than 9,000 people. When we were there in 2003, it was about 3,000.

3:33 And we bought that mine in 2004, brought it back on stream 2006. And, you know, the town site has just grown, you know, according to all the activity there with with the mine and everything. So, you know, that boom in the local economy and everything is just so prosperous now, mainly as a result of that mine coming back on stream. So it was very, very rewarding on a personal level to see that, to see the impact that we had had. And that mine's been running steady since 2006. And it was actually built in mid 1950s by Penolas. So, outside of about a 5 year timeframe, That mine's been in operation since 1954, I would say, up until now. So it's, you know, these are long-lived mines in that region.

4:26 And that's one of the reasons I'm so excited about this new project of ours, El Potrero, because it was in production

4:34 in the late 1980s, but nothing has been done on the property since 1990. It's been privately owned since that time. And there's, when I say nothing, I mean, absolutely nothing, It's never been explored, it's never been drilled, never even been mapped.

4:53 So the potential there is pretty significant and yeah, I'm pretty excited about it. Awesome. Well, I do, I got a couple of questions based on the news. If you don't mind, I'm going to grill you for a minute and we'll throw it to the audience and see what they've got. Now, I know the news mentions the historic resource of 45,561

5:10 tons, I believe 10.3 grams per ton gold equivalent. That's correct? Yes, that's correct. What timeline do you envision for establishing a new compliance, like NI 43-101 compliant resource estimate, and what initial exploration work has to be prioritized to get us there? So the first thing we're going to do, and this will start in just a few weeks, the guys are going in there to get established, get a house in the local village and for the guys to stay and then start mapping and sampling on surface. And we're gonna bring in some contractors, most likely from Topia or one of the local mines to rehabilitate the underground workings that are there, the old mine workings, and clean those out, make them safe for our guys to go in and do some actual systematic sampling underground.

6:07 The sampling that we've done so far was really just part of our due diligence in looking at the project. It wasn't a systematic sampling. It was somewhat limited, but nonetheless it did validate that grade that around 10 grams per ton gold equivalent. And it's about 75 grams, or sorry, about 75% gold and 25% silver in that particular area. Now that can change across the property potentially, but that's what we're seeing at the moment. And we just need to get in and do some systematic sampling. And from that, we'll be able to

6:50 determine some drill targets in and around those underground workings because there are 3 old mines spread out over about a 500-meter strike yeah, we just need to establish, you know, proper drill targets there. And, and then, you know, those will, those sites will need to be permitted and so on. So, you know, It'll probably be somewhere in the 6-8-month

7:19 sort of timeframe to start drilling. Obviously, we'd like to get going sooner than that if we can, but I think that's fairly realistic. Once we're drilling, we should be able to just keep drilling and step out along strike after we've drilled in and around the old historic workings. And so from there to having enough information to establish a new resource,

7:48 You know, it's potentially by the end of the second year, we should have done enough work to do that. And, but there is, you know, point out to that, you know, one of the terms of the acquisition is that there is what's called a contingent bonus. It's not really tied to

8:12 the acquisition itself or the percentage that we would earn, but there is a contingent bonus whereby we would pay $1 million to the vendor and issue a million shares of the company once we have established a resource of 350,000 ounces. So That becomes a little bit of a trigger point. I think that would also be a reasonable level to justify

8:43 commencing production. We could generate that in-house as well, whereby, you know, internally, we could justify going ahead with production, you know, whether or not, you know, we actually do it independently and make it compliant, we can make that decision at the time. And then again, considering that contingent bonus and whatnot. So those are all the sort of triggers and the things we would look at, but probably about a 2 year timeframe. Very helpful. I think that's useful context. And one thing I note is that you've outlined a strategy to generate cash flow through production, which is cool, while minimizing shareholder dilution, which I know everybody always loves to hear. So I'm curious if you could provide more details on the

9:32 timeline and estimated capital requirements to the best of your ability now. Obviously, it's subject to change, but to refurbish the plant and bring the property into production. Yeah. So, I mean, just to touch on that model, that's basically the model that Great Panther was built on. And, you know, we did that successfully, you know, built the company out of cash flow, and so we got Topia up and running. And then just a year later, we acquired the 1 Watto mine. And, and, you know, I mean, obviously, along the way, we still did some equity financings and so on. But one thing I like to point out to people is that, when we started Great Panther in 2004,

10:10 I stepped down as CEO in 2017. So after 13 years of building that up with 3 operating mines, about 1200 employees and contractors. We had $100 million cash in the bank, no debt, and we still only had 165 million shares on the ship. So that's what I mean about lack of dilution. And that's really how you create shareholder value in this industry. So we've gone back to that sort of model again with Pinnacle. And, you know, The share structure is a little bit different because we're not starting from scratch here as we did with Great Panther. Having said that, the concept is still the same.

10:58 The sooner we can get to that point, the better. That's one of the things I really like about this project because it was in production before. There's all the basic infrastructure of 100t per day plant on site already that we can refurbish and get that back up and running again, probably within about a 2 year timeframe, 2 to 3 years and at a cost, including drilling of about 2 to 3 million. So the plant itself, we can probably get that back up and going for about a million bucks. But we also have to refurbish the, or rehabilitate the underground workings

11:39 and do the drilling that we talked about to build up the resource to justify the production start. So, yeah, somewhere in that, you know, it's kind of almost coincidental, we're talking, you know, 2 to 3 years, 2 to 3 million, in terms of cost and timeframe. Great. That's great amount of detail. And I appreciate that. Now, the agreement structure indicates, as I understand it, a gradual increase in ownership from 50% to 100%.

12:06 What I'm curious about, I'm hoping you can explain, is what are the milestones or targets that trigger your decision to accelerate the acquisition of the remaining interest versus staying at JV for the time being? Yeah. Well, I mean, for starters, it won't really be a joint venture in a traditional sense. It's more of just a sort of profit sharing. We'll be the operator throughout, and That'll be always at our option, whether to speed it up or, I mean, worst case scenario, we could even back away from it if we wanted to, but I doubt that'll be the case.

12:45 So In terms of the milestones, the payments or the acquisition, we go from 50% when we start production, and then we go to 70, and then to 90. And then at 90%, the vendor will have a choice of either staying on a 10% participating interest, or converting that last 10% to a 2% NSR, in which case that would give us a full 100%. So they're really just those those 2 milestones,

13:11 and, you know, we, we could accelerate it a little bit depending, it really depends on the situation at the time, because what we want to do, going back to the last question, is to be able to make those final payments out of cashflow from the operations. So if we triggered those milestones and those interest acquisitions too quickly, we wouldn't be far enough advanced in the production scenario to have generated the cashflow that we want to use to make those payments. So to get to 70% would require another $1 million. The final to get to 90 would be a $3 million payment. So there's $4 million US in cash that needs to be paid between 50% and 100% effectively.

14:03 So we would want to be in a position to be able to make those payments out of cash flow if possible, you know, rather than going back to the market to try and finance that, you know, sooner rather than later. But, you know, there are lots of extenuating circumstances, I guess, that could play into that down the road, but that's

14:26 kind of our thinking at the moment. That makes sense. Having a plan is good. I think that's a good place. Now, one thing with your experience at Great Panther and the Topia mine, what specific operational lessons will you apply to El Potrero? So what have you taken from that experience that you'll bring here? And also as a point of comparison, how does this property compare to Topia in terms of geology and development potential? Yeah, so maybe answer the second question first.

14:57 There are some differences and some similarities. They're both vein type deposits, so very strong structural control, that's a key element to these types of things. But I mean, Topia is silver-lead zinc with a bit of gold, and the Petraro project is gold-silver with no base metals at all. So they are a little different that way. The Topia district, the veins there are oriented northeast, southwest, whereas at Petraro, we're looking at northwest, southeast, so almost perpendicular to 1 another. So, you know, there are some differences along those lines as well. But having said that, the Topia district has been known for a very long time.

15:46 It's, in fact, one of the oldest mining districts in Mexico, with the initial silver discovery recorded at somewhere around 1538. So, you know, a few hundred years there and even before I was born.

16:05 It's a well established district and the veins are spread out around sort of a horseshoe-shaped valley and they're kind of staggered on echelon, sort of going down the hillsides.

16:26 And so logistics are extremely important because Topography is, it's not super rugged, not as bad as it is in some places in the Sierra Madre, but it's still rugged enough. You're dealing on mountain roads that can accommodate one lane, 1 truck at a time kind of thing. So yeah, logistics are very important. And as I said, these are vein deposits. So they're not wide, everything's underground. There are no shafts, they're just going into tunnels to straight into the side of the mountain.

17:04 And so, you know, typically not looking at, you know, super wide zones or veins, but they can be very rich. You know, that the grade at Topia is very high. And that's something that we see also here at El Potrero, with a grade of 10 grams gold equivalent, that's a very, very good grade as well. So, there are those similarities and in terms of operating, just knowing the logistical challenges of working in an area like that. Going in there sort of eyes wide open, if you like, you know, knowing what to expect, you know, where potential bottlenecks could be, what the costs are likely to be.

17:50 But on the plus side, being where we are, not far from Topia, we've got a pretty good pool of skilled labor in the town. And the fact that it's grown so much, there's a lot we can draw on there. Lots of contractors, all kinds of mining contractors really, and transportation, supplies, that sort of thing, a good size labor pool, and it's a mining town. You know, it's just, there's really nothing else there. It's the supply center for the municipality but it's, yeah, so I think just being there being familiar with all of that

18:36 is a big advantage, you know. And in all honesty, that's one of the reasons that we were able to do this deal because the vendor of the property is a mining contractor. And he not only has his own mine operating within about 25 kilometers of Potrero, a silver-lead zinc mine,

18:58 but he also worked at Cienega, which is about 35 kilometers away and one of the largest underground mines in Mexico at 4,000 tons per day. He worked there as a mining contractor for about 20 years. So, you know, he is extremely familiar with that entire area. And so the fact that I am as well, that allowed us to really sort of bond, I guess, in a way that a lot of other companies wouldn't have been able to do if they'd been coming in as complete newbies and not really understanding what it takes to put a mine in production in an area like that. So I think he, yeah, That was certainly a point in our favor in terms of being able to do this deal because you know given his background as a mining contractor he wants to see this mine put into production as quickly as possible

19:57 as do we. And so you know for another company coming in if all they wanted to do was do a bunch of drilling and maybe build up a resource, you know, promote the stock or whatever, you know, that's not what he was interested in. You know, he didn't wanna do that kind of deal at all. So, you know, the fact that we had a similar sort of vision for the property and saw that it had that kind of potential, that's really what gave us the ability to close this deal in the first place. Awesome. That is helpful. And you actually answered one of the questions from the chat already. Picker1980 asked what the labour force in the region is like. So I think we've tackled that. But he also asked if there's any potential issues with local communities. I think we've already alluded to an answer, but I'd love to hear it straight from you. Yeah, no, absolutely. And another that was another key advantage of this project as well is that, you know, the plant and the mines, the historic mines sit on private property.

20:53 So, you know, that will be advantageous, certainly going to the permitting process, because as part of the permits in order to get a permit, an operating permit, you have to have an agreement in place with the surface rights owner. And the fact that it's the same vendor, it's the vendor of the mining concessions, that, you know, he's just finalizing the paperwork on that now, but I mean, he'll, he will have full ownership of the surface rights. So there won't be any issue whatsoever as far as that's concerned. And, you know, the private land is it's big enough that covers most of the Northern 5 concessions on the property. And so there are local communities, he does, they call them in Mexico, sort of agricultural communities, technically.

21:46 And so they do surround that private property, but they won't impede the operations at all, at least not in the early days, unless we're looking at a massive expansion at some point down the road. And one of those Ahitos is the Topia Ahito, whom we had a great relationship with them back in the great Panther days. And so to sit back down with them again and negotiate something else, I don't see that as really being an issue either. Great. No, very helpful. Thanks for the answer. I want to get back to the geology

22:22 real quick. I know you mentioned the property has never been drilled or explored by modern methods. So I'm curious, what geophysical or sampling techniques do you plan to implement first? And if you've got an answer off the top of your head, which exploration targets beyond the known mine workings look really promising right now? So with this type of deposit

22:42 You know a lot of the standards Geophysical methods, you know like mag and IP and so on don't really work all that well. They're, you know, they're too narrow with with this one, it's a low self adhesion gold silver system. And there's not a lot of sulfide in the system to begin with. So there's nothing you're going to pick up, you know, with a lot of geophysical methods, and even with IP, and the terrain is not really conducive to running long lines on the ground, that sort of thing as well. So it really comes down to just detailed mapping and sampling, you know, with a very strong emphasis on structure because structure is the key to controlling these things. So that's why we wanna get to hit the ground running on that immediately.

23:29 And we have the advantage of having the underground workings there, because that gives you a 3 dimensional perspective on things, you know, you're not just mapping the surface, you're mapping the, you know, the down dip or down plunge extension, so you can get a much better understanding of them. You know, going beyond the, you know, I mentioned about 500 meter strike length that we know of from the underground workings, it'll just be a matter of following those out along strike and see how far we can follow them because the property hasn't been mapped, so they haven't been traced out. But we do like the idea that these are hosted within what's called the lower volcanic series of the Sierra Madre.

24:16 And basically, there's a lower and an upper. And the upper tends to be younger than the mineralization to a large degree and so it's not mineralized for the most part And the mineralization comes near the top or near the contact between the 2 groups, the 2 series. And we're right at that juncture, right at that contact. So the geological environment is very, very good. But these things are all driven by intrusive bodies as well. And we know from government mapping down in the river valley down below us that there are some intrusive rocks exposed down there. So if those are the what we call the heat engine, that's, you know, drives the mineralizing fluids, then we're also, you know, quite close to, you know, to to that engine. And, you know, that can be important from a mineralizing perspective as well. So the geological environment is very favorable.

25:22 That's what all that comes down to. And it's just a matter of going in and just taking a systematic approach and mapping it out and say with a strong emphasis on structure. But not much in the way of geophysics other than it's not really a geophysical technique, but you may have heard of LIDAR, which is like a radar airborne type survey that also gives you a lot of structural interpretation and it sees through all the vegetation and the overburden and everything. So, you know, we will be doing that as early as we can. And that will really help with the structural interpretation.

26:10 It doesn't pick up mineralization itself directly, But it is extremely useful for the structural interpretation, which then leads you to the minimization. Great. I appreciate that. Now, I did notice that the new release indicates mining permits need to be reestablished. So what is your personal assessment of the regulatory timeline in Durango for obtaining necessary permits?

26:34 And are there any environmental or considerations that could impact this process?

26:40 Yeah, so a few things there. You know, from an environmental aspect, one of the things that again, works in our favor is the fact that this has been in production before. So, I mentioned that there is the infrastructure, the basic infrastructure of the plant already there. And then access roads, there's what's left of a camp, offices, that sort of thing. So it's basically what we would call a disturbed site. So it's not some brand new pristine area where you'd have to go in and do a whole full environmental

27:21 study from the ground up with flora and fauna and all that kind of stuff. This has been through that process before, and we can stick to existing roads as much as possible, stick to the existing sites as much as possible, so as not to create any new disturbance. But so I think all of that will speed up the permitting process considerably. It'll

27:47 diminish the amount of work that needs to be done. And really we can get going with the most basic baseline studies pretty much right away. We're gonna have some guys in there just cleaning up, it's a little bit overgrown because it hasn't been, nothing's happened there for 35 years. So, you know, get some guys in there with machetes and chainsaws and such, but, you know, we'll clean that up and then do those baseline studies and then start to prepare the documentation to apply for a permit. So, you know, I think it should go relatively quickly and also because it's underground, you know, the footprint is very small, you know, compared to say an open pit.

28:33 And it's also in the early days, you know, it's only a 100 ton per day plant. So it's not huge, you know, and we'll look for ways to expand it down the road, it's entirely scalable. But you know, that first step of just getting this going, it's relatively small. So I think with all that said, I'm hopeful that we can do that within the same sort of timeframe that it's gonna take to rebuild the plant. So in that 2 to 3 year timeframe,

29:04 I hope it's realistic that we can have the permits in hand by around that same timeframe. Durango is a very mining friendly state. And so I don't really see any issues at the state level.

29:19 At the federal level, I think that the new administration is far more realistic and pragmatic than the previous administration. And already they're talking about granting permits that have been waiting for years in some cases and some of those much larger operations open pit type scenarios so you know if there is a serious change in attitude there then you know I think for this type of an operation you know I don't really foresee any major issues at this point in time. Great. That actually echoes one of the questions in the chat, which is the broad, are things turning around in Mexico for mining? But I think you've just dealt with that. Yeah, I think they really are. Yeah, I'm optimistic on that. Certainly seems like a change in sentiment from the AMLO to the Scheinbaum administration. So we'll see. Fingers crossed. Fingers crossed, right? So far so good. We'll take it for now. I do want to end, Bob, by asking, I know we're at the half hour, what you're most excited about at Pinnacle this year? What should investors be looking forward to alongside you?

30:19 You know, it's been a long haul here, Romiel. These last few years, I mean, the markets for junior mining have been just brutal these last few years. And, you know, since I took over the company in 2021, this is actually the third acquisition that we've tried to push through. And there just hasn't been market support for the previous ones. And so to finally close on this one and to be back in Mexico in an area that I really enjoy, an area I've worked before, you know, I'm just thrilled to have a project like this and to be able to get back working again. And you know, we closed on the full amount of the financing that we had announced, 800,000, and really happy with that.

31:11 We started trading again this morning after a four-month halt, so it's nice to be active again. It feels almost like we're back to normal if there is such a thing in the industry anymore. So yeah, really, really looking forward to building up this project. I think it has huge potential and really excited about this new sort of business model. And if we can really make it work, it allows us to get going. You know, the one thing I'll say maybe on closing is just, You know, this is just a means to an end. You know, people might look at this and, you know, people the same way people looked at Topia when we started back in 2004.

31:54 And they said, oh, it's small. You know, it's 150 tons a day. It's not, you know, but a year later, we acquired Guanajuato, which is a world-class deposit, the second largest silver deposit in Mexico with over a billion ounces of silver produced. So, you know, these kinds of things, you just leverage off them and, you know, it creates opportunities and already we're looking towards the next potential major acquisition.

32:23 So it just gives you that foothold. So this, and I just wanted to the fact that the project itself has great potential to scale it up. So on both those fronts, this is just a means to the end. This is just the beginning. We've got a long way to go and I'm looking forward to it. Exciting. Well, it's great to see you trading again. And I know, Bob, you will be at PDEX next week, if I'm not mistaken? That's correct. Yes, I will. Awesome. So folks in the audience, if you'd like to meet with Bob, make sure you bug him so that you can try and catch him at the show to the best of your ability. But thanks so much for running through this today, Bob. I think this is very exciting. Thrilled to see you trading again. And for those who are in the room, thanks for joining. Thanks for asking questions. The replay should be in your inbox soon.