Highland Copper Corporate Update

0:07 Hello everyone and welcome to Hilo and Copper's live event hosted by 6. I'm pleased to introduce their speaker for today, Barry O'Shea, Interim CEO. Barry will provide a review of recent news and afterwards we'll be answering questions. So you can submit your questions in the bottom right corner there in the chat box at any point during the conversation. You don't need to wait to the Q&A session. Please ask them as you think of them. But as always, the summit is being recorded and will be available on Six.com to watch afterwards. So without further ado, I'll hand things over to you, Barry, to kick things off. Thanks for the introduction, Kyle, and I appreciate you hosting. It's certainly nice to be here to give an update on Highland Copper. Off the back of the recent news that we're in consideration for a $50 million grant from the state of Michigan. As you can understand, that's pretty game changing for our company.

1:01 And we've kind of taken a look at it from a position statement perspective. You know, we really do feel, and it's supported by that grant, that we're in the right time, the right place, and doing things the right way. The right time, naturally, you know, there's a push for electrification. The US is already in a domestic imbalance from a supply-demand perspective and from a place perspective, Michigan clearly is the place to be. I'm not aware of other jurisdictions worldwide that are both permitting and incentivizing mining in the way that Michigan is. With local support and fully in place, we're certainly ready to move. And we're getting that support predominantly because we intend on doing things the right way.

1:47 We intend on mining with respect for the environment and respect for the community and I'll deal with that in more detail a little later on. But maybe first to look at some of the macro headlines. I think it's been well documented that there's a supply demand imbalance from a carbon perspective, both worldwide and in the US. But that is coming really more so now into short-term view. We've seen mine closures, we've seen scarcity of supply, and we've seen an ongoing projection of demand from a carbon perspective to support the energy transition. So really when you think about it, and in particular for countries like the US who have historically had imbalances on certain critical metals, whereas they might have relied on imports in the past, geopolitics are also changing.

2:37 So really it's a matter of resource independence for countries like the US. There's certainly an argument to made that mines like Copperwood and White Pine and others need to be built. Let me just give you a view of the key highlights of our company. I mentioned our US location with focus on domestic copper supply. Permitting is critical. Our Copperwood mine, the first of our 2 assets is fairly permitted. The second mine, the White Pine project, which we joint ventured, is now progressing through permitting. These are large assets, multi-billion pound in scale, giving rise to long-lived mines and well-funded. And I'll walk you through what we've done in the past year to make sure that we are well-funded in somewhat challenging markets to make sure that we can move both of our projects forward.

3:29 Obviously we have cash on hand. We're in consideration for a grant from the state of Michigan and we have a strong partner in Kintera to assist us moving the White Pine joint venture forward. So briefly to talk about Michigan, honestly I can't quite say enough. As a company, we've been in the region for 10 years. I've been operating with Highland for the last 2 years. And it's quite a pleasure to watch. The state of Michigan are there to make sure that you comply with their stringent regulation. But they're not there to trip you up. They're there to support. It's a historic mining district. There's local community support. Obviously, there's OEMs in the region, Ford and GM particularly.

4:15 We're on private land, so it's a state-led permitting process. And critically, as you know, we're in consideration for a grant. I don't think there's a better place that we could be from a mining perspective. So maybe as a quick update on the state funding, we announced that the Michigan Economic Development Corp has proposed a $50 million grant for the Copperwood project. That's substantial. There are 2 layers of approval that we need to go through. The first is Michigan Strategic Fund, where we're currently engaging, And the final step would be the Michigan House and Senate Appropriations Committees. You know, as I say, to be in consideration is wonderful. We were having constructive discussions with the state of Michigan, and we certainly feel comfortable and positive about the outcome over the coming period.

5:06 And that outcome I think is supported by the local communities. We were asked by the state of Michigan to solicit support, formal support from the local communities and over 20 local municipalities, townships and counties have provided formal resolutions. So maybe just take a look at what we have under the hood. Like I mentioned, these are large projects, both over a few billion pounds each. The initial mine life of Copperwood is based, as you can imagine, on the measures indicated only and that gives rise to an 11-year mine life of 30,000t per year. But we do believe that the additional 75Mt sitting in Inferred certainly can be converted with additional drilling.

5:52 We definitely see this as mine life 15 years plus. As I mentioned, importantly, it's permitted. And as we know that this is our project that is 100% owned and that we're advancing towards construction and production. White Pine on the other side, it's bigger, slightly longer dated, and that's in part why we joint ventured that asset along with Kinterra. It's a wonderful asset with a 20-year mine life, larger scale production of 40,000 tonnes annually. And we look forward now alongside Kinterra to moving that through permitting and feasibility study. But really a nice sequence in terms of how these projects come online and really an incredible growth story over the decades.

6:40 I mentioned permitting is important, it's critical. Beyond having local license to operate naturally, you need your state permits. I mentioned we're operating in private land in Michigan and you can see the benefit of what's resulted there. Copperwood has all state permits required and for White Pine, seeing as it was a historic producer, we've grandfathered in a few permits and alongside Kinterra are pushing that process along. But this is a place where we are welcome to mine. And maybe just a couple of highlights as a little refresher on the Kintera transaction, help you understand how we've surfaced capital to really move both projects forward proactively for corporate development perspective.

7:27 We sold 66% of the White Pine project for 30 million. That 30 million is not ring fenced in any way. That money is being taken and allocated directly to our Copperwood project and we've already started putting some of that money to work with early site preparation. The joint venture then has committed a second 30M that sits inside White Pine to advance permitting, infill drilling and feasibility studies. So really $30M into each asset and moving forward. For our proportional 1 third of the 30M sitting inside the JV, Kintyra has also offered a $10M unsecured loan at rates we could get better. We couldn't get better anywhere else. So we're just very pleased with how we've structured the company now.

8:15 Plenty of capital to move the assets forward and take advantage of what we think is going to be a long-term Copper cycle. And so this is what the company looks like on a combined basis. There's very strong net asset values based on current studies done in 2023. You can see the net present values at $4 Copper. What's interesting is the leverage. A modest movement of Copper price significantly increases the net present value. Long mine lives, manageable initial capitals and strong IRRs at $4 Copper and of course improved at $4.50. But what I do want to highlight is how we've somewhat divided and conquered in this instance. Having sold 66% of White Pine to Kinterra, with Kinterra now being the operator, that puts our management team focus, both from a management time perspective and capital, all on Copperwood. And you'll see us moving that one forward.

9:15 Whereas Kinterra, who are particularly strong in where White Pine is in the life cycle, that permitting through the feasibility area now have technical ownership of White Pine. So we can feel the kind of the weight of both organizations pushing the 2 assets forward. And of course, the capital from both organizations pushing the projects forward. I want to take time definitely to talk about responsible mining. We're only welcome in Michigan because we intend on operating respectfully. And we've designed our project such that it is respectful of the area. Fortunately, it's an underground mine. That means it's a modest surface footprint, very specifically, and we listened to local concerns on this, we're electing not to draw water from Lake Superior.

10:05 Any water that does come in contact with the mine goes through rigorous water treatment and monitored through the life cycle of mine into closure. We set up a wetland preservation area for 717 acres to be protected in perpetuity. That's an amount of land tenfold the wetland that we intend on impacting. We have financial assurance in place with Michigan. And I wanted to point out that during 2023, when we did some initial site preparation, we had no environmental incidents and no safety accidents. This should be a good reflection of how we intend on operating and I think it's a good reflection of why we're welcome in the region. Not to mention, of course, the significant economic impact. Projected to have 300 jobs in construction, 380 jobs in operation. And you know when our mine comes into an area that there's a knock-on impact from an economic perspective across the region.

11:00 And I would also add there'll be considerable tax benefit for the region that will support overall infrastructure. We know we're operating in a beautiful area and a beautiful part of Michigan, and we certainly want to keep it that way. So now I'm just going to give you a few details on each of the projects before we step into some questions a little later on. So Copperwood, fully permitted, as I mentioned, outstanding community support, feasibility in place, initial site works having somewhat started, you can see that we're really moving towards construction ready projects. The US and other countries to serve their energy transitions need copper production now.

11:50 You'll know that the life cycle of a mine is long. We're already 10 to 15 years into this from drilling to geology to establishing a reserve to doing studies to doing permitting. Mines that are going to assist over the next decade or 2 need to be ready now and couple what is. Licensed to operate first, that's certainly how we think about things. We've built strong communications in the local municipalities with the state authorities and we're building partnerships so that we know that we're welcome and truthfully utilizing all the resources that Michigan has to offer. And I want to talk a little bit about leverage.

12:36 You know, at $4 Copper, Copperwood is a strong project with an 18% IRR, but you can see really how things move. You move from a $4 Copper price to simply $4.50, the net present value increases from $168M to $333M. So, incredible leverage as you move modest amounts in Copper prices. That said, we're not solely depending on Copper price changes. I think it's important to see that we have a range of other opportunities to advance the project, both from life of mine additions through converting inferred tonnes, looking at technologies like ore sorting, ground support design, meta improvements, all of these things we're working on to improve the economic benefit of the project. And specifically, if we're fortunate to see this funding through the 50 million, that is a straight dollar for dollar benefit to the net present value.

13:36 And now I'll walk you through just some of the quick highlights from the White Pine North project. Importantly, we brought a joint venture partner and then we're seeing the benefits of that right away. Naturally, we have limited capital, we're putting that towards Copperwood, but we're watching Kintera put their time, money and effort into White Pine. They've hired very strong project management and recently announced the initiation of a drilling program, Some activity that would have been challenging for us to do alone. We feel comfortable and confident in the permitting process. We've done it in the past with Copperwood and had success. I think if we operate in good faith with the state of Michigan, we have a very strong opportunity alongside Kinterra of permitting this project. And naturally, White Pine, as you know, has a history of successful operations, operated for over 40 years to the mid-90s, producing considerable amount of Copper. It will be wonderful to bring that mine back to the region.

14:33 And it's a strong project, 820 million after-tax NPV, you know, good manageable operating costs, a strong NPV to initial capital, and naturally initial capital that is larger than we and ourselves would like to take on. And that helps you understand why we brought Kinterra and their balance sheet into the company. And a quick reminder that this is a mine that's operated in the past, there's considerable infrastructure at site. To be clear, we don't own all of this infrastructure, but what you can see is rail, road and power coming into site, making it considerably easier to restart. Some quick investor highlights.

15:20 We've spoken a lot about our shareholder register and you can see at the top of the list Orion Mine Finance. We have strong private equities that have been supportive of us through this initial part of the mine cycle and we look forward to the ongoing support as we step into the good parts of building and operating a Copper mine. And quickly, just a brief look back at our achievements. We did a lot in 2023. We brought studies at both projects, current. We incorporated a revised water source for Copperwood such that we did not need to draw any water from Lake Superior. We completed our joint venture with Kinterra, unlocking the 2 assets from a capital perspective.

16:06 We initiated some site work at Copperwood and we've also gotten a good start on some of the value creation initiatives. Some wonderful things done in the year and creating an opportunity for some catalysts going into 2024. And so let's look at that. Obviously, we're going to continue on with our works at Copwood, preparing the site for full construction, continue moving through our value initiatives. And really, our goal is to step into funding and a construction decision during 2024. And we think our prospects are strong there, particularly in light of the potential state funding. At White Pine, it's arguably 2 to 3 years behind in that process, but keep moving. Drilling has started to support studies, environmental baselining, building a team.

16:56 They're also building local community support in the same way that we've done for Copperwood. That project is moving forward nicely. And from a corporate perspective, there are a host of potential sources of funding. Our key priority is obviously the process that we're working on with the state of Michigan, but there are other federal sources and potential industry partnerships that we can look at. And I would point out specifically as we move now towards a potential construction and operating phase, we're continuing to define our ESG strategy very specifically to be respectful of the local communities. So that's it, that's where we stand today. Very pleased with the fact that we're moving both projects proactively forward in what we'll call a relatively challenging market to raise capital.

17:48 And Kyle, I'm more than happy to take any questions if there are any. Excellent, thank you, Barry. Before question, I'd rather highlight a comment in the chat. Someone thanking you for the update. And I just wanted to add on to that, that anyone that has been following your story for a while is aware that you do provide updates. And I just wanted to mention for the long term shareholders, they probably feel the same way they branded, the new branding looks Excellent. So well done on your team's part in that regards. So for people that came in a little late, yes, we are accepting questions. Please submit them in the chat. We did have some come through email and there are already quite a few in the chat. So I'm gonna go with the most recent news here.

18:34 And how have the conversations been around the Michigan strategic fund? They're not just going to give anyone $50 million. What have the, what has the conversations been like? Yeah, I think the conversations have been constructive. I mean, I'll tell you to begin with that there is a significant amount of diligence done by the Michigan Economic Development Corp before they even consider putting a project forward for a grant. We've been working with them for approximately a year, and they're doing a whole host of things, understanding the project, understanding the community benefits, understanding the environmental impacts, really doing their diligence, so that when they make a proposal, they feel solid in that proposal. So they've made that proposal now to the Michigan Strategic Fund and that's the state that we're at. For the first time last week, we sat with the NADC alongside us and presented the project to the Michigan Strategic Fund. Naturally, as you say, it's a large grant. They have questions.

19:35 We're going to continue to answer those in a very positive manner. And yeah, we look forward to a positive outcome. Thank you for that. Tom is saying that you say Copperwood is fully permitted. Does that include the tailings disposal facility or the tailings dam safety permit? Yeah, it certainly does. So all of them, all of the permits that we need to construct and operate the mine are in place. And yeah, naturally, the tailings permit is in place. That has been looked at with rigor over the years by the EGLE, which is the department that manages permitting. As I said, for EGLE, they have at their disposal mining regulation that is strong and well articulated.

20:28 They are there to hold us to that. Certainly the work that we did in 2023, they were on site on multiple occasions, ensuring that everything that we do from beginning to end is in compliance, that we have financial assurance in place. And I assure you, they've looked in significant detail at all aspects of the mine plan through to tailings. E.S. Here has a question that I'm just going to read it verbatim here. It says, what is the impact of copper being added to the critical mineral list If tax abatements are available at 10% of cost, how does this impact the 17.8% IRR? And then there's a follow-up question here. Is it 50 BP benefit or 350 BP?

21:16 What's the right ballpark impact to the IRR? Yeah, so we're doing some work on that. You're right. The Department of Energy in 2023 identified copper as a critical material. I think it's a reflection of the importance of copper for the US, both from an energy transition perspective, but also a domestic copper supply and resource independence perspective. Outside of the state funding, there are a host of federal fundings available from the Department of Defense, Department of Energy, it is the Department of Energy funding that we're probably a little more focused on. It's more relevant, I would say to copper. As the individual pointed out, inside that there are arguably some tax breaks, a 10% credit.

22:04 We are looking at that at the moment. That is something that you need to apply for. We're working through it. I don't have an immediate answer on the impact other than to say it would be quite significant for the IRR. There's a follow-up question regarding this. Tom's saying copper has still not been promoted to critical mineral status by the US Geological Survey. Why is that? Yeah, that's a good question. So to distinguish, It's been made a critical material by the Department of Energy. Separately, the USGS has a separate rating from a mineral perspective. My view is that they're a little behind on this. The Department of Energy and Department of Defence both consider this a critical mineral. Importantly, that opens up funding buckets for us.

22:51 I'm a little less concerned from the USGS perspective, but I do acknowledge that I think they need to take a look at that in relatively short order. The US, as we stand today is already in a deficit. And, you know, I think historically they look, you know, can the US meet that deficit with imports? The deficit is only growing and the capacity to import is only decreasing. I do think that will be relooked at in the next year. I've heard a few questions about White Pine. I see one more overall question here. It might be a little difficult to answer just given where Copperwood is at in its stage.

23:36 What is the spending rate per month that we can expect this year for each project? Yeah, so obviously spending depends on access to capital. We do have a budget put in place for Kintera. I won't speak to their numbers specifically, other than to say that they have a drill program initiated at site. They're engaging from an environmental perspective and certainly from a community relations perspective. So money is being put in to drills at site. We had an announcement out recently, kind of getting a sense of the scale of that program. We, as you know, own 34% of White Pine and we're carried on that piece. So in terms of how we spend, we actually don't have to put any physical cash into White Pine, Kinterra or Carrie and that.

24:24 At Copperwood, yeah, we have some, you know, we have modest operating costs, I would say until such point that we start into our summer works program. That's probably in the May to June timeframe where we'll have some increased expenditure, specifically as we look at completing some of our environmental mitigation obligations required under our wetlands permit. Thank you for that. So moving into White Pine, let's first just touch on 1 that an email has submitted. They were wondering what's the relationship like with Conterra right now in that partnership? How's it going? Anything you can touch on there before we get into the specifics? Yes, certainly. I have to say we've been really pleased with how Kintera are operating, the energy that they're putting into that project, both in terms of putting people on the ground in Michigan, working in-state, but also from a corporate perspective, they have a very strong technical team.

25:21 White Pine North is a very important asset for their portfolio and they're moving it forward well. We have continual touch points with them, both from a management committee and a technical committee perspective. So we have capacity to influence, acknowledging of course, they are in charge of the project, but it's been a very good relationship and we've just been pleased just from a corporate structure and standpoint that they're moving that asset forward. YD is asking, what is the plan or timing for progressing studies from the PEA at White Pine? Yes, so at White Pine, as I say, and Again, I want to be mindful and careful not to speak too much on behalf of Kinterra. But broadly speaking, the drilling that's being done at the moment is mainly for metallurgical and geological purposes to assist moving from PEA to feasibility study.

26:18 You know, once that drilling is done, you think about the standard timelines to move through a feasibility study process. Certainly it's a 2 year process. You can think about that, but that's what Kintyra are moving forward on. And at the same time, attempting to permit the project in parallel. William's wondering about the plan moving forward for White Pine in regards to the structure. Is it going to be a joint operation with Kinterra, bringing a larger partner? Would you sell your stake of White Pine? Yeah, honestly, there's a whole host of things. There's a few options mentioned there. We can't make any decisions at this point. What we're controlling is this part of the mining lifecycle. There's certainly 2 to 3 years to get through permitting and feasibility study. And we'll reassess at that point. I mean, if copper price is particularly strong and Kintera and Highland as a group would like to move forward and build that asset, That's what we'll do.

27:16 You know, if there's an appropriate other structure for the project, we'll consider it and certainly consider what's best for the shareholders. Just based on a few comments here, I'm gathering that there are individuals in the local state of Michigan on the call. One is asking, what is Highlands plan to engage the local labour market? Has a study been conducted to determine if the region can support this expansion? The area experienced significant deterioration after mine mill closures. Yeah, listen, we I wouldn't say we've we've initiated a formal study. We're building partnerships, specifically with Invest-UP, Michigan Works, all the local universities, starting intern programs. I acknowledge the last time that full active mining was in the Western UP was the best part of 30 years ago. I will also say though, on the Eastern side, the Eagle Mine has been up and running for the past 10 years. So there has been more skill brought in.

28:16 Naturally, we'll need to build around that. It's nice that there's a history. Certainly there will be people and families arguably wanting to come back into the district. We will encourage that and as I say work through our partnerships build our workforce as locally as possible. Looks like we have one more question here. Given previously, It looks like back in 2018, there was a projection construction date of June 2024. So that's 8 years ago. Does that still hold true as far as today? No, obviously, that would have been a different time and a different management. After 2018, the company looked at stepping towards construction and operation, but you'll probably know through 2018, 2019 and well into 2020, copper price wasn't supporting a project of that nature, but things have changed.

29:21 Copper price has gone up significantly. It's projected to go up again. And now we think is the right time to look at construction and production. Very, thank you. I think we've got one more here. Did Barry say wipe time was free carry for Highlands 34%? It's carried for the initial $30 million budget that we have envisioned over the next 2 to 3 years. Now, I wouldn't call it a free carry if they fund on our behalf. We have an obligation to pay that back. The interest rates are favorable and the loan is unsecured. But yeah, we are carried for the next 2 to 3 years. Excellent. Thank you for addressing all these questions and the great presentation there, Barry.

30:09 Any closing remarks for the people out there? Yeah, I just say we're excited. These projects have been in the pipeline for some time, but we think it's the right time now. We think Michigan is stepping up in a large way. We obviously hope to bring that funding process through the conclusion, But looking at the backdrop of the supply demand imbalance, we do believe we're in the right place at the right time here. I certainly hope investors see the benefit of that. You know what, just one more question if you don't mind it came in and for anyone that came in late this is being recorded will be available on youtube if not today most certainly tomorrow you can always reach out to the highland copper management to have any other questions if you come up with them later This will be the last question here though from Peter.

31:04 Will this be a room and pillar mining or solution mining? Yeah, it's room and pillar mining, which you know is very safe in terms of thinking about surface subsidence. Yeah, A considerable portion of the ore body will be left behind as pillars. A very safe tried and true method of mining. Great. Well, thank you, Barry, for the update. The new Brandon looks excellent, amazing. Really appreciate everything for taking the time out of your day to update the audience and your investors. But thank you for your time and thank you for everyone that tuned in.