Discovery Silver Corp · TSX:DSV
Discovery Silver — Investor Presentation (February 2023)
52 slides from Discovery Silver's investor presentation, February 2023
Slide 1: Developing One of the World’s Largest Silver Deposits
Developing One of the World’s Largest Silver Deposits February 2023
Slide 2: Forward Looking Statement & NI 43-101 Disclosure
Forward Looking Statement & NI 43-101 Disclosure Cautionary Statement on Forward-Looking Information & NI 43-101 Disclosure • This presentation contains certain forward-looking information and statements (collectively, “Forward Looking Statements”) extent required by applicable laws. which may not b
Slide 3: Resource Investor Checklist
Resource Investor Checklist 18-year mine life Tony Esplin (COO) & Tony Makuch (CEO) Tier 1 Proven recently appointed; Tier 1 operating Project +30Moz AgEq production Management/ experience Board Proactive approach to build Project Bottom half of cost curve Execution team NPV to Capex ratio of 2.5x C
Slide 4: Our ESG Commitment
Our ESG Commitment PEOPLE, HEALTH & Equality, Diversity, Inclusion DELIVERABLES: Zero-Harm SAFETY Talent and Performance Management Quality of Life 2021 • Environmental and Social Baselines - ENVIRONMENT Protect, Respect Complete Eliminate, Mitigate, Minimize Impact Plan for the Future • Inaugural E
Slide 5: Discovery Silver … The Basics
Discovery Silver … The Basics Cordero Project • PFS-stage Ag+ (Zn-Pb-Au) project • Located in mining-friendly Chihuahua, Mexico • +1B oz AgEq1 M&I resource Strong Cash Position • ~C$45M cash balance 5
Slide 6: Capital Structure
Capital Structure Eric Sprott, Retail, 35% 25% Shares Outstanding 349 million TSXV: DSV, OTCQX: DSVSF Founders / Institutions, Mgmt / 30% Board, 10% Options Outstanding 25 million Weighted average exercise price $1.37 Fully Diluted Shares Outstanding 374 million Basic Market Capitalization (1) C$475
Slide 7: Creating Value Through Execution
Creating Value Through Execution 7
Slide 8: Silver Reserves: Discovery vs Silver Producers
Silver Reserves: Discovery vs Silver Producers 500 5.0 400 4.0 Market Cap (USD B) Silver Reserves (Moz) 300 3.0 200 2.0 100 1.0 0 0.0 Pan Discovery Coeur Hecla Aya Silver First Endeavour Silvercrest Fortuna American Silver Mining Majestic Silver Silver Source: Company Contained Silver Reserves (Moz)
Slide 9: AgEq Production: Cordero vs Silver Producers
AgEq Production: Cordero vs Silver Producers 45 $22.50 AgEq Produced (Moz) 40 $20.00 AISC Co-product (US$/AgEq oz) Cordero AISC Co-product (US$/AgEq oz) 35 $17.50 Sourced from Jan. AgEq Produced (Moz) 30 2023 PFS $15.00 25 $12.50 Silver peer production 20 $10.00 BMO Capital Markets 15 $7.50 forecast
Slide 10: A Low-risk Project
A Low-risk Project A Simple Project Large, Disseminated Deposit Well-defined Reserves Excellent Metallurgy Existing Local Infrastructure Open pit mine with low strip ratio +50% of Reserves in the Sulphides recoveries of ~85-95% Capex savings from proximity to of 2.1:1 Proven category for Ag/Pb/Zn at
Slide 11: A Platform to Execute
A Platform to Execute A big headstart • Large land package (35,000 ha) • Excellent local infrastructure • Topography ideal for open pit mining • Benign bedrock with good geotech characteristics 11
Slide 12: Exceptional Economics
Exceptional Economics 2023 PFS Highlights Base Case Economics Upside Case Economics Size + Margin + Mine Life Low Capital Intensity NPV(5%) = US$1.2 B NPV(5%) = US$1.8 B 33 Moz AgEq annual production Initial capex ~US$450M IRR = 28% IRR = 38% AISC < $13.00/oz (Y1 – Y12) NPV to Capex ~2.5x (base case
Slide 13: PFS vs PEA Comparison
PFS vs PEA Comparison PARAMETER UNITS 2023 PFS 2021 PEA EXPLANATION ECONOMICS After-Tax NPV (5% discount rate) (US$ B) $1.2 $1.2 Pit expansion offset by impact of inflation Internal Rate of Return (%) 28% 38% Two-year construction period vs one-year with heap leach in PEA MINING/PRODUCTION Mine Life
Slide 14: Clear Re-rating Potential
Clear Re-rating Potential 1.4x Significant multiple expansion opportunity 1.2x through the advancement of Cordero to a 1.0x construction decision Consensus P/NAV 0.8x 0.6x 0.4x 0.2x 0.0x Discovery Silvercrest MAG Silver Source: Capital IQ (multiples priced as of January 20, 2023) 14
Slide 15: www.discoverysilver.com
15 www.discoverysilver.com | 55 University Ave, #701 | Toronto, Ontario, Canada M5J2H7
Slide 16: Appendices
Appendices TSXV: DSV | OTCXQ: DSVSF 16
Slide 17: Proven Management & Board
Proven Management & Board Management Board Tony Makuch, P.Eng Tony Esplin Murray John, MBA Jeff Parr, CPA, MBA CEO Chief Operating Officer Chairman Director 35+ years’ experience in mine development, 30+ years’ experience including 20+ years of 35+ years’ experience in engineering, 30+ years’ experi
Slide 18: Silver – Supply & Demand
Silver – Supply & Demand Silver Demand Contribution by End-Use Silver Supply Deficit Forecast to Grow Source: Silver Institute, BMO Capital Markets 18
Slide 19: Silver: Demand Growth Gaining Momentum
Silver: Demand Growth Gaining Momentum Tripling of Demand from Solar & Auto Sector over last Decade 150 Silver Demand (Moz) 100 50 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023E Solar Panels Auto Sector Source: CPM Group 19
Slide 20: Geology + Resource + Reserves
Geology + Resource + Reserves
Slide 21: Cordero – Conceptual Geological Model
Cordero – Conceptual Geological Model 21
Slide 22: Geophysics – Interpreted Intrusives at Depth
Geophysics – Interpreted Intrusives at Depth 22
Slide 23: Property-Wide Exploration Targets
Property-Wide Exploration Targets La Ceniza • Resource growth target adjacent to Cordero Porfido Norte • Chargeability high suggesting possible intrusion • Prominent Ag soil anomaly + surface alteration Sanson • Large, strong mag high indicative of possible source intrusion • Intense silica alterati
Slide 24: 2023 Resource Estimate
2023 Resource Estimate GRADE CONTAINED METAL TONNES MATERIAL CLASS Ag Au Pb Zn AgEq Ag Au Pb Zn AgEq (Mt) (g/t) (g/t) (%) (%) (g/t) (Moz) (koz) (Mlb) (Mlb) (Moz) Measured 21 30 0.08 0.23 0.25 49 21 51 109 117 33 Indicated 42 24 0.06 0.24 0.31 46 33 85 224 288 62 OXIDE M&I 63 26 0.07 0.24 0.29 47 54
Slide 25: 2023 Mineral Reserve Estimate
2023 Mineral Reserve Estimate GRADE CONTAINED METAL TONNES MATERIAL CLASS Ag Au Pb Zn Ag Au Pb Zn (Mt) (g/t) (g/t) (%) (%) (Moz) (Moz) (Blb) (Blb) Proven 8 34 0.08 0.28 0.29 9 0.02 0.05 0.05 OXIDE Probable 11 28 0.07 0.28 0.36 10 0.02 0.07 0.09 Total P&P 19 31 0.07 0.28 0.33 19 0.04 0.12 0.14 Proven
Slide 26: Silver: A Scarcity of Supply
Silver: A Scarcity of Supply Largest Undeveloped Primary Silver Deposits by Silver Reserves 250 200 Silver Reserves (Moz) 150 100 50 0 Cordero Corani Prognoz Bowdens Santa Ana (Mexico) (Peru) (Russia) (Australia) (Peru) Source: S&P Global Capital IQ 26
Slide 27: Metallurgy
Metallurgy
Slide 28: PFS Metallurgical Test Program Summary
PFS Metallurgical Test Program Summary PFS Test Program Scope PFS Test Program Results Sulphides Sulphides High-grade samples & testing of rock blends Recoveries from high grade samples: Ag 94-98%, Pb 89-97%, Zn 92-96% Test based on coarse grind size (~210 micron) & lower reagent consumptions Recove
Slide 29: PFS Metallurgical Test Program Results
PFS Metallurgical Test Program Results Lead Circuit Zinc Circuit Head Grade Recovery to Concentrate Recovery to Concentrate Rock Type / Concentrate Grade Concentrate Grade Test Type Sample Location Ag Pb Zn AgEq Ag Pb Ag Pb Ag Zn Ag Zn (g/t) (%) (%) (g/t) (%) (%) (g/t) (%) (%) (%) (g/t) (%) Breccia
Slide 30: PFS Process Design
PFS Process Design Phase 1 – Initial Throughput Heap leach circuit eliminated Advantages include simplified circuit, improved capital efficiency & streamlined permitting Throughput rate of ~25,000 tpd Phase 2 – Expanded Throughput Addition of parallel grinding & flotation circuits Throughput rate of
Slide 31: 2023 Pre-Feasibility Study
2023 Pre-Feasibility Study
Slide 32: Silver Price Torque
Silver Price Torque PFS Mine Plan Optionality PFS Mine Plan only assumes ~40% of M&I Resource tonnes are processed Potential to extend mine life and/or increase production at higher metal prices 32
Slide 33: Mining: PFS Mine Plan
Mining: PFS Mine Plan PFS mine plan 302Mt of ore +70% of mill feed in Proven category in Y1 – Y5 2.1:1 strip ratio Steady mining rate of 60 – 70 Mt/a Stockpiling of low-grade material over LOM Mine life extension potential 279Mt of M&I Resource sits outside PFS pit but within Resource Pit Reserves b
Slide 34: Mining: PFS Mine Plan
Mining: PFS Mine Plan 80 4.0 70 3.5 60 3.0 Strip Ratio (w:o) Tonnes (Mt) 50 2.5 40 2.0 30 1.5 20 1.0 10 0.5 0.0 Y-2 Y-1 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15 Y16 Y17 Y18 Stockpile Balance Direct to Mill Stockpiled Waste Strip Ratio 34
Slide 35: Processing: LOM Process Schedule
Processing: LOM Process Schedule 20.0 160 17.5 140 15.0 120 Head Grade (AgEq g/t) Tonnes Processed (Mt) 12.5 100 10.0 80 7.5 60 5.0 40 2.5 20 0.0 0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15 Y16 Y17 Y18 Sulphide Tonnes Oxide Tonnes Head Grade 35
Slide 36: Sizeable Production at Low Costs
Sizeable Production at Low Costs Production & All-in 50 $25.00 Sustaining Costs (ASIC) are sourced from 2023 PFS. Production & AISC 40 $20.00 calculations assume: AgEq Produced (Moz) Ag = $22/oz Au = $1,600/oz Pb = $1.00/lb AISC ($/oz AgEq) Zn = $1.20/lb 30 $15.00 AISC is calculated on a co-product
Slide 37: Processing: Metallurgical Recoveries
Processing: Metallurgical Recoveries PHASE 1 PHASE 2 LOM UNITS Years 1 - 4 Years 5 - 12 Years 13 - 16 Ag Au Pb Zn Ag Au Pb Zn Ag Au Pb Zn Ag Au Pb Zn Average head grade g/t or % 44 0.20 0.63 0.76 29 0.07 0.48 0.81 19 0.05 0.31 0.52 27 0.08 0.44 0.70 RECOVERIES Recovered to Pb Con % 77% 13% 89% - 71%
Slide 38: Marketing: Concentrate Terms
Marketing: Concentrate Terms Payabilities Ag Au Pb Zn Pb Concentrate Payable metal 95% 95% 95% - Minimum deduction 50 g/t 1 g/t 3 units - Zn Concentrate Payable metal 70% 70% - 85% Deduction 3 oz/t 1 g/t - - Treatment/Refining Charges 5-YEAR PARAMETER UNITS PFS COST BENCHMARK AVERAGE TREATMENT/REFIN
Slide 39: Capex: Summary
Capex: Summary Initial Capital INITIAL CAPITAL EXPANSION CAPITAL SUSTAINING TOTAL LOM Two-year construction period LOM CAPEX CAPEX Y-2 Y-1 Y3/4 Y9 Infrastructure + TSF construction + Plant CAPITAL EXPENDITURES (US$ M) throughput of 25.5 ktpd Mining $18 $52 $3 - $67 $140 Infrastructure $8 $23 $12 - $
Slide 40: Capex: PFS vs PEA Comparison
Capex: PFS vs PEA Comparison Major cost increases Plant: +25% increase in plant size Mining: switch to owner mining Inflation: cost escalation based on Q4 2022 quotes Major cost decrease Heap leach: elimination of heap leach based on positive flotation results from oxide-sulphide blending 40
Slide 41: Capex: Benchmarking
Capex: Benchmarking Global Base Metal Concentrators 450 Capex efficiencies driven by: Minimal early mine development/pre-strip 400 Minimal site development earthworks required Process Plant Direct Costs ($M USD, 2022) 350 R² = 0.60 due to flat topography 300 Conventional process design for the conce
Slide 42: Operating Costs: Summary
Operating Costs: Summary Mining cost Assumes owner-operated with lease financing ITEM UNIT COST LOM COST Diesel cost: $0.65/t (assumes $1.10/L vs $1.00/L in PEA) Mining Cost $2.45 ($/t mined) $2,286M Processing Costs Processing cost Phase 1 - 25.5ktpd $6.46 ($/t processed) Generated from first princ
Slide 43: Operating Costs: Benchmarking
Operating Costs: Benchmarking Unit CORDERO COPPER MOUNTAIN GIBRALTAR MT. MILLIGAN RED CHRIS PINTO VALLEY Benchmark group Commodity Ag-Pb-Zn Cu Cu-Mo Cu-Au Au-Cu-Ag Cu-Au-Ag Open pit + flotation plants with high throughput Chihuahua, Location BC, Canada BC, Canada BC, Canada BC, Canada Arizona, USA M
Slide 44: Processing Costs: PFS vs PEA Comparison
Processing Costs: PFS vs PEA Comparison Major cost increases Power: higher consumption based on comminution testwork Consumables: higher grinding media consumption + water costs Inflation: cost escalation related to power, grinding media & reagents Major cost decrease Reagents: elimination of soda a
Slide 45: Commodity Price Sensitivity
Commodity Price Sensitivity NPV/IRR/Payback sensitivity to Ag/Zn prices: (Fixed prices for Au = $1,600/oz & Pb = $1.00/lb) Ag ($/oz) $18.00 $20.00 $22.00 $25.00 $30.00 NPV (5%) IRR Payback NPV (5%) IRR Payback NPV (5%) IRR Payback NPV (5%) IRR Payback NPV (5%) IRR Payback (US$M) (%) (yrs) (US$M) (%)
Slide 46: Cross Sections
Cross Sections
Slide 47: Sections
Sections Long Section A – A’ • North Corridor including Pozo de Plata & NE Extension Long Section B – B’ • South Corridor Cross Section C – C’ • Pozo de Plata – potential starter pit Cross Section D – D’ • NE Extension, South Corridor & Josefina Cross Section E – E’ • NE Extension, South Corridor &
Slide 48: Long Section A - A’
Long Section’/A 2A\ oy Legend NSR ($/dtm) ——— Resource Pit Meas+ind Reserves Pit Topography — 400 Top of Sulphides 0 ots 05 05 075 1 Cordero PFS. st mmm Kone SECTION: = = EE INSR PRICES: Ag-22/0z, Au=1600/oz, Pb=1.00/Ib, Zn=1.20/Ib Discoverysilver
Slide 49: Long Section B – B’
Long Section B =Bs Legend NSR ($/dtm) — 600 Resource Pit Meas+ind| Inferred Reserves Pit Topography — 400 Top of Sulphides Cordero PES 0 04308 0s 076 1 a ee Ki = a fez, Au=1600/02, Pb=1.00/lb, Zn=1.20/lb Discoverysilver
Slide 50: Cross Section C – C’
Cross Section C@@ — 1600 — 1000 Legend NSR ($/dtm) —— __—Resource Pit Meas+ind| Inferred ——__ Reserves Pit — 900 Topography — Top of Sulphides IPROJECT: _ Cordero PFS SECTION: C-C' INSR PRICES: Ag=22/cz, Au=1600/0z, Pb=1.00/Ib, Zn=1.20/Ib Discoverysilver
Slide 51: Cross Section D – D’
Cross Section DE’ D: 1400 — 1200 Legend NSR ($/dtm) Resource Pit Meastind| Inferred Reserves Pit Topography ee Top of Sulphides Cordero PFS 0 100 20 #0 600 800 Det Ne Motors NSR PRICES: Ag=22/02, Au=1600/oz, Pb=1.00/1b, Zn=1.20/lb a —— Discoverysilver
Slide 52: Cross Section E – E’
Cross Section E% NSR ($/dtm) PROJECT: Cordero PFS SECTION: E-E" NSR PRICES: Ag=22/02, Au=1600/oz, Pb=1.00/! Discoverysilver
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