This is an automatically generated transcript. Denver Gold Group cannot accept responsibility for mistakes, errors, omissions, or any action taken in reliance thereon. Use of this transcript is governed by Denver Gold Group’s Terms of Use.

I think we're going to take a slightly different tack here rather than letting Doug run through the presentation. He's going to directly address the elephant in the room, which is Mexico, everything that's going on in the mining world in Mexico. So maybe hand over and just maybe give an overview of what you're seeing at the moment and the challenges that you're facing. Yeah, thanks for us. I just gave the presentation up in Beaver Creek. So I thought doing it again perhaps isn't as helpful for people as actually addressing the elephant in the room, which has been major headwinds for companies down in Mexico the last couple of years. If you believe the headlines, you know, there will be no open pits in Mexico. If you believe the headlines, you know, the sky is falling and it's going to become Venezuela and arguably judicial reform they passed last week was not a good, good move for the company country, but it's actually a lot more nuanced than that. There are open pit mines. Now there will be open pit mines in the future. We plan to build at least two of those. We've worked down in Mexico for 16 years as a company and in different iterations and these last couple of years have been some of the hardest that I think any company down there has faced., there is no open pit mine ban. There are statements from the outgoing president that I think no one wants him to have to walk back. And in the next couple of weeks, he leaves office and his heir apparent Miss Claudia Sheinbaum takes over with an, you know, enlarged Mirena majority, a super majority in the lower house. And but more importantly, just short of a super majority in the Senate. And I think rather like in the US, there's a lot of stuff that gets pushed to the floor in the House of Representatives that's dead on arrival in the Senate. The way we're seeing things is a little bit more complex than looking at am Low's party, which is the Morena Party, his party rules by a coalition unlike Canada, where, where I live, where the Green, you know, there's a lot of people that vote Green, they get one member of parliament, maybe it's two. I can't remember. It's, it's a very insignificant number of parliamentary share in Mexico with proportional representation and the like the Green Party make up a roughly 12% portion of the Morena coalition. So when you think about it in February of 2023 there were some mining reforms proposed and ideologically, I had no issue with any of those. I think they hurt exploration companies down there. But from a producer or development standpoint, no issue. There was no talk of open mining bans and, and then you fast track forward to an election year. And we all know Mexico is no different than any other, any other government in an election year. There's lots of promises made and the importance of that judicial reform they've just pushed through is if you and, and that was one of the cornerstones of of am low's reforms that he wanted to get through. Well, if you've got a green party, you need to have on side kind of makes sense in election year to suddenly bring up the boogey man of open pit mining bands fracking genetically modified modified corn. Sure enough. Then the first thing that gets tabled is the judicial reform and it's through. There's literally two weeks of the legislator left with Amlo in control this week. Mining reform is not being debated. And even if these headlines, like we saw from Reuters about three weeks ago where something simply coming out of committee to the lower house and the headlines of open pit mining ban advances in Congress, you know, again, spooks everyone. It sounds bad. But you have to, you have to start looking at the Senate. and, and the Mara Senators there that represent the northern mining states. And whilst mining in Mexico has, has continued to drop as a share of countrywide GDP. Some of those big northern states, Sonora and Zacatecas where we operate, is over 20% of statewide GDP is mining. And so I think you're going to see, you're not going to see the same vote down party lines like you saw in the judicial reform. Even if it gets to the Senate, it will more than likely either not be debated or if it actually goes through, be watered down. Probably more to Claudia Scheinbaum actual electoral platform. She had 100 point platform and 0.87 was no granting of new mineral concessions for open PIPS. And there's a couple of things to look at that new, not retroactive and smart enough. I think it's made a lot of pragmatic decisions winning to understand that retroactively, you're going to start breaching aspects of us MC and lots of law challenges. But the other thing is if she wanted to say permit, she could have said permits and her words were very similar to what Amlo said at the beginning of his term. He was frustrated at previous administrations that have pushed vast tracts of Mexico's land into mineral exploration. And he said enough, no new mineral concessions, again, not permits, no new mineral concessions. What we've seen in the last two years appears to be a de facto ban. We are seeing permit amendments for underground operations. I think that there are obvious low hanging fruit like permit amendments for all and their push back lay backs at Camino Rojo that we will start seeing move in the new year. You have the governor of Sonora recently advocating for permits to start moving forward again. So the headlines seem very bleak. We are not going to see day one in office. Like when President Biden killed Keystone on day one, we're not going to see permits flow day one. But even Alamos Gold, I think a couple of weeks ago on their new PD A project which is an underground one needs a permanent amendment, anticipates receiving that by the end of this year, I think we're going to start seeing the the kind of murks and dark clouds and the very lack of clarity that investors crave clarity. start to start to clear and, and that's got to be good for a country which has one of the most storied mining histories in the world. And it's got to be good for all manner of companies, including ones like us that want to build mines that can have a really positive impact for all stakeholders, not just our shareholders, but you know, the local stakeholders at our projects that are universally supportive of the kinds of mines we want to build. Ok. And relating that back to Minera Alamos for you, for Santana and for your other projects do you have the permits already in place and therefore, is it going to impact you the rhetoric at a more political level? Yeah, from a retroactive point of view, I mean, we have all our mineral concessions, Santana is permitted. It, it's a small mine we built during the middle of the pandemic, 10 million Capex that it had a few teething problems. But with the new permit amendment should be able to get into kind of steady state production moving forward. But it's, it's not, it's not what makes the company it's as I say, it will be a 20,000 ounces a year operation that pays back its Capex every year. It's kind of almost like an ATM for us. We have a permitted project called La Fortuna in Durango. We just don't want to build it. Second for a lot of reasons and the one we have in permitting right now is sad or in Northern Zacatecas. And if we were playing in the UK, the game show was called Family Fortunes over here. I think it was Family Feud. I think if you were to ask 100 people that know mining in Mexico where they'd most like to build a new open pit, Northern Zacatecas would probably be the top answer on the board. It's, it's a step change for our company. We specialize on low capital intensity projects. We do. I have now had the data from National Bank to support it, we have industry leading low capital intensity. It makes sense to sequence a project. Second that needs its permits over for tuna for a number of reasons. So sad. Or maybe I just flick very quickly through to the P A for it., so pe A, this is a six, the base case is a 60,000 ounce a year, eight year life., mine that we're gonna build for 28 million us. So about $500 an ounce capital intensity, we picked up the project all told our payments on it worked out at less than $6 an ounce. And while the life of mine, Asic is 873 arguably in the first few years in the P A, it's sub 700 I say, throw that out the window. Let's let's look at it as $1000 an ounce operation. And let's not worry about spot gold cases right now because we really don't need spot gold for this project to be a cash cow for the company. In fact, we want to build projects that work in whichever cycle. This project has 100 and 11% irr after tax ir at $1600 gold at 12 $50 gold, it has a 41% irr we want to build projects that not only can be built cheaply that are low cost, but also that will blend out wherever we are in the gold in the gold cycle, obviously taking advantage if prices go up, we're permitting an upside case. It's 80,000 ounces for 13 years. But our market cap is roughly a little over 100 million us right now, this project alone delivers a 50% free cash yield against the sector right now, which is about 10%. And maybe that's why generalists are a little gun shy even at these high gold prices. At, at $2000 gold, we'll see 60 million us in operating cash flow and 58 million us in free cash. And our biggest challenge then is how can we spend that money efficiently over the last four years, we've raised $26 million. We still got 8.6 million of that now. And there is only so much money you can invest efficiently back into the business. And we've certainly got areas which would be perfect repositories for that cash. But I, I think undeniably with the cash generating capability we have and our biggest shareholders, the generalists. I kind of talk a mining story even though I've got a technical background without talking about hydrothermal bretches. And the like, I'd rather talk about, you know, dividends that our cash can deliver for our shareholders. As a big shareholder, myself owning 2% of the company, I can a modest dividend, they can take more off from the company from dividend payments and they take a salary. So this is an absolute game changer. It would be a nice project in a lot of companies, but in a company of our scale, the talk from these cash flows is extraordinary. So it's permitting right now. And it's, I I think people believe that, you know, everything stopped and it's all gathering dust in an inbox and just before we kind of go back to Mexico again in what, just very quickly, what's driving the compelling returns that you can see on the screen there is that is that grade related and also the the incredibly low capital intensity as well. Yeah, we build, we build cheaply, we don't build ads. So we immediately cut out the the the capital cost of an ADR down there. We loaded carbon to metals research and eventually, as we build a few of these, we'll probably have an ADR in Mexico. The nice thing about the ADR 10 million in Capex, but it also costs us 10 to $12 an ounce to ship and strip. Now undeniably, if you are producing gold dory at site down there, your security costs are actually going up more than that 10 to $12 an ounce. So it's a very elegant way to to not only reduce car on the front end but to reduce operating costs as well. The grade is low at 0.37 but the strip ratio on this is remarkably low at 0.3 to one life of mine. I think in year one it's 0.1 to one and open pit. He bleach is a giant earth moving exercises. It's very nice. When, if you're mining 10 tons out of the pit, only one or two of those tons are going to the waste dump. You know, you've got five or six are going, run a mine to a pad and thus slightly higher grade material goes through a two stage crush. So, it costs you a fraction of what it costs in Nevada to build he bleach pad down there. I mean, you're about $20 a square meter down there. It can be 50 to 100 in Nevada. So all those, all those play into it. OK. And then coming back to Mexico, I was just mentioning to you that we advised a company called back in or lithium which was sold to Gan Fen a number of years ago. And during the process of advising them, there was a bit of governmental rhetoric about nationalizing the lithium industry, which we knew was there, but we didn't really take that seriously subsequent to the offer. And the asset was nationalized by the Mexican government and taken away from Gan Fen. And there was that nationalization more broadly of the lithium industry, even though there isn't really much else. And do you see a differentiation between critical minerals and precious metals in country or do you think there, there, there, there isn't a differentiation between at the top level. Well, I, I certainly know when it comes to resource nationalizing, you know, over my 30 years, it comes up from time to time. But really for all the stories and the headlines, very few examples of it, this is a recent example. you know, you had reps all in Argentina one time and I could look at what's happening with first quantum's crate Panama. But really, it's they're the exception, not the rule for short and certainly way more headlines on resource nationalizations than we've ever seen in terms of examples. No, I think M Shain was up here on the campaign trail in Sonora. talking about the importance of Mexico's lithium and cop deposits for helping the EV transition and it's kind of like news flash Claudia, those are open pits. So there's a lot that's been conflated to this open pit thing. I the reality is Mexico has always been a good jurisdiction and Canadian companies in particular have brought skills and capital that Mexico don't have to develop all their resources themselves and it's been a very good symbiotic relationship. The last couple of years have been murky. I certainly think we're all going to look back in a couple of years time and go, you know, what were we quite so concerned about? And that's certainly what we're hearing on the ground, you know, to us directly, but also our larger peers are hearing the same thing. So this is not me sitting with my rose colored glasses going on saying we need, we need permits for our business model. We're hearing things are going to be moving down there. And I also advise some clients that have been down and operate in Peru and Peru has had issues with issuing new licenses. How does the governmental or political rhetoric at the top level feed down into the machinations of the departments that actually offer the permits? Because I think the Peruvian example was there's rhetoric and therefore the department kind of freezes for a period and is too scared to make the wrong decision. Do you think that's just going to play out over the next few years or do you think you need a bit of a roll back in terms of the Ilo view before you start to see more permits being issued? It's kind of exactly what's happened. And it's a lot easier to not have to walk back his comments when he's just been replaced by his heir apparent. This almost de facto ban has come because he's made statements. Now, he's made a lot of statements which you know, are popular, but we've seen in the States as well. Pop populism doesn't always equate to truth. Early on in his, in his presidency, he said his government never awarded any mining permits, but I would say mine, Alamo Silvercrest and Orlo would all beg to disagree because those were all Greenfields projects that were built with permits received from the Amlo administration. But then he did make statements and you could see the permitting authority at sermon at almost, you know, not want to go up against his public statements. And I think one of the best things in the next couple of weeks is the bombastic kind of rhetoric that often he can say will be gone and will be a thing of the past. There's an argument as to how much control he's going to have over Miss Schein, but I think so far, she's, she's making all the right moves to kind of define her own path whilst protecting aspects of am low's legacy. But I think that's where this really came from. The other thing that's kind of important that people don't really realize is when Amlo came into power, he called the civil service called it. So sermon, I'm a mining degenerate. So I always think of sermon at as, as a permitting authority for mining, but they're actually involved with all manner of environmental permitting for all manner of industrial. down there, there are condo developments in Mazatlan that are stalled in their development because they're waiting on paperwork from Serman, not because there's a country countrywide condo ban. So, you know, we've, we're hearing that minor, especially if she's trying to bring in foreign investment has been saying we need to start getting things moving again. I think we will start seeing those changes even before the end of the year. And certainly 2025 will be a very different looking year than this election year and the year that preceded it, which, which were some very hard yards for, for any of us in the mining sector down there. Ok, perfect. We've got one minute left so I might open up the floor and ask if there's, there's any questions from the room. OK? There's no questions. I mean, maybe just coming back to mine Alamos. What can we expect from Santana this year and into next year in terms of production and growth and, and casual generation. Yeah, Santana will do about 20,000 answers over the next 12 months. You know, it's a sub 1000 a type project as it ramps up, we're opening up a new pit, so it takes a little time during its ramp up. And then really, we're, we're hoping that we're constructing C or next year. And that's a step change that even on the base case gets us closer to 80,000 ounces a year. Again of kind of this 1000 as gold production where I'm salivating at what a company like us can do with that kind of cash in terms of marrying up with companies that are developing assets that don't have cash flow to see how we can continue to scale the company up both organically and through M and A. When you look at M and A, you're going to look at Mexico or you're going to broaden your geographic. I have zero problems doing a tuck in so long as there's virtually no cost associated with it in Mexico right now, but we're looking elsewhere as well. I mean, you want to be multi mind, you want to jurisdiction. We are more than happy having operated in 16 years in Mexico as it's a great jurisdiction to start building the foundation of the cash flow to deploy elsewhere. That's a good summary. Thank you. Good point to end on as well. Positive note.