Outcrop Silver: Deutsche Goldmesse Spring 2024 Presentation

0:09 Okay, so up next we've got Outcrop Silver. Outcrop Silver is a silver and gold explorer in Colombia with the Santa Ana high-grade silver deposit, as well as some gold projects which are also in Columbia. They've recently announced and made an indicated resource. Fully diluted, they have about 388 million shares outstanding, market cap of about 61 million. They trade on the CSE, on OCG,

0:38 on the OTCQX, on OCGSF, and in Frankfurt on MRG. I'd like to welcome Ian Harris, President and CEO. Very good. Good morning. So, I am Ian Harris. I'm here to talk about outcrop and the famous Santa Ana mine. Obviously, lots of forward-looking statements, so I encourage everybody to do their own due diligence. And I don't normally spend too much time on this slide, but Kai said to make sure to talk a little bit about the overall industry. So Santa Ana is all about silver. I'm going to start with I'm a mining engineer. I've got 25 years working in the industry.

1:27 15 of those years are living in South America. And for the majority of my career, I've never been a silver bug. Never. Okay? Because I'm a fundamentalist when it comes to mining. I believe in commodities and the long-term outlook for those commodities. And I like being involved in projects that became future minds and really didn't buy into the overall silver story. But that's obviously something that has transformed dramatically over the last years. Silver has really changed, and those that have maybe ignored silver in the past, maybe should take a new look at it, because over the last 5 years, it has truly turned into an industrial metal.

2:16 It hasn't lost its silver shine in terms of monetary or insurance to fiat currencies, but it truly has become a true industrial metal. Now, last year I think it was 65% of the demand in silver was industrial. And that has been driven by, you'll hear the term a lot, the energy transition, the movement to 0 carbon-based economies. But to give you an example, last year the growth in solar panels alone was over 60%. To, I think, forecast now to move, Solar demand was almost 200 million ounces of silver.

3:04 And to put that into perspective, the entire demand last year was about 1.2 billion ounces. Total supply, 1 billion ounces. So when I talk about 200 million ounces, that's 20% of the entire supply of silver. Okay. We've seen a deficit since 2020, a cumulative deficit of over 800 million ounces and a projection to reach 1 billion ounces by the end of 2024, and many might argue that it's underestimated the demand side. So those are, we're not talking about a 2% deficit, we're not talking about a 3% deficit, we're talking about a cumulative deficit that is big as an annual supply.

3:51 On top of that, mining supply is only about 800 million ounces a year and the majority of that supply does not come from silver mines. Only about 30% of actual silver comes from primary silver mines. That means a copper mine does not make their decisions of producing more based on silver price. So you have an elastic on your price supply, on the supply slide, and also on the demand side, right? A solar panel today, silicon prices have gone down, down, down, down, down, and silver is still only 10% of the value of our silver above solar panel. So silver can double in price, and a solar panel only goes up 10%. So really, it has lots and lots of room to where the price of silver can go and on top of that that there is no easy way to replace that supply.

4:45 So I know I spent a lot of time on that, but now I'll talk about where, how does Outcrop Silver sit into that? Last year, we put out a made in resource, about 37 million ounces. We also did some important, very important metallurgical test work, and I'll dive into that. And in April of this year, just at the beginning of this last month, we restarted drilling, but we started drilling in the areas we wanted. So the first special part about Santa Ana is its grade. It's one of the highest-grade projects in the world. It's actually pretty much close to some of the highest grade producing mines in the world in silver, but it is also 73% silver. Okay, so on a silver basis it is truly one of the highest grade projects in the world. On a silver equivalent basis it's still one of the the highest and also you notice this graph itself does not have very many comparables, because there's not too many other projects that have indicated resources in silver in the world. It's a very small pack. It's a rare project within a rare set of projects.

5:48 Okay? And it's very, very much coupled to silver price, and even at today's silver price, I think it's a very economic project. When we put out the Maiden Resource, a very high percentage of that resource was in an indicated category to demonstrate these very, very high grades really hang together along strike and along depth. Moving forward as we now have a vision to get over 100 million ounces, our goal is now we can just do it on an inferred category because we've proven the geostatistics and proven to market how it holds together. And so where are we today? The previous resource was based off 7 different veins, really 6 different veins, but each one of those individual veins contributed a very important component of that overall resource. So my point on that one is every time that we can convert a vein into a discovery, you know it's going to add a significant amount of ounces. If you look up at the map, up in the northeast corner, all those little red lines are the veins that contributed to the resource estimate.

6:45 And I'm going to maybe eat a little bit of crow right now, but we really spent a lot of time last year working around that general area and it really didn't pan out how we really wanted to. We had some performance issues. We took a very difficult decision after really being at this conference last year to get rid of the existing drill contractor and get into the areas that we really wanted to be drilling. Okay, because we're working around this general area and we really need to get further down into this 18 kilometer trend. So where are we today? We are currently drilling and we are now about 10 days away to be able to step out down into what the vein that you can see there called Aguilar, about halfway down the trend and be able to move down there and start drilling on that area and then by the end of the year move down to what's called Mangos and drill on those 2 areas. Why? We want to be able to demonstrate to market that there is a pathway.

7:37 If there's those little red lines are 37 million ounces, that we have a pathway to get over the 100 million ounce mark and be able to prove the rest of this trend and show where we're going to grow this overall project. It's taken a lot of work. It's taken the work with working together with the community, the landowners, logistically, etc. But we've got that done. It was actually in March, end of February this year, that We've got all the components in place. We're very excited because we're going to be able to drill in the areas that we want to drill. You can see Aguilar is the highest trenching in that area, up to 5 kilograms per ton. Down in Mangos, up to 9 kilograms per ton. So continued high silver grades in this overall trend. That is our number 1 objective this year, but it's also backed up with some things that make this project extremely special.

8:25 And one of the things that makes this project extremely special is the mineralogy, because the silver is a sulfide. So 88% of that silver is in sulfide form, and that is very important because we are getting a 93% recovery of silver by flotation alone. But not only are we getting good recovery, but we're getting extremely high concentrate grades. So when most, you saw in the previous graph, the more silver is produced from zinc and lead mines than it is produced by silver mines. But you do not get paid very well for your silver in a zinc concentrate. You do get paid very well if you have a high-grade precious metal concentrate or indore.

9:13 Okay? So that's an important takeaway. We are producing silver in a flotation concentrate because our silver floats. And that makes a very high-grade concentrate. As you can see, over 9 kilograms per ton in silver and over that 100 grams per ton gold mark because that is an important mark that you get paid a very high amount for your value of your concentrate if you sell it as a concentrate. But I can tell you, and I was saying it before, it's such high grade that you could smelt it directly. So without the use of cyanide, you could produce Dore. And after that, we actually took this concentrate and we produced it directly in the lab, of course, but directly from a flotation concentrate to silver. So this is silver from Santa Ana, but it proves you can do it. Because when I get it into this form, I get paid 98 to 99% of my silver. So we have an extremely high grade, very high recoveries, and the potential for a very high payable.

10:13 Okay, so we're maintaining that value inside of our project, but it also decouples it from scale. Meaning you could have a very small project, start at a very small project, and still be profitable. And so that's one of the reasons as a mining engineer I get so excited about this project, because I know it will become one of the future mines that will be a part of the next silver bull. The other stat I didn't mention when I was talking about silver market is, despite all of these things, the M&A in the silver market last year was $5 million. Meaning, Mid-tier silver companies want to become gold companies. And we're not seeing the M&A yet, so I know that on that nice cycle that makes the next great silver mid-tiers, Santa Ana is going to be a part of that overall puzzle. On top of that, we just put out results for gravimetric.

11:00 Doesn't sound like a significant recovery at 7%, but remember that could be that 4% native silver and that 4% of electrum, adding some additional points to our overall recovery. We're doing that work now. So starting with the gravity, ending with a flotation become overall recovery between the 2 methods. But we're also excited to see the types of recoveries and the grades of our gravity flotation, sorry, our gravity concentrates also, meaning it will be able to maintain that high payable. Overall, we're in the one of the most classic, the biggest mining, metal mining district in Colombia, but what's also interesting about Borretica, Segovia, even Marmato, they are all narrow grape vein mines. They all started small and they all got very big, right? And that's one of the things that we can do with Santa Ana directly to our south. There's an additional gold mine, so it's also a mining district.

11:56 And obviously, you do not become a future mine without having strong relationships locally. It's one of the reasons I joined Outcrop in July of last year, was the strong quality of the work that had been done on the ground with the community. And we are only going to be making this stronger as we work forward. Wonderful team. Kathy with me, also ex-Silvercorp. I myself was a Senior Vice President of Corriente Resources and took the Mirador Mine to the start of construction, first mine in the history of Ecuador on an industrial scale. Joe was the ex-CEO who discovered Santa Ana and helped put out that initial resource, still on the board. Anna Molina, President of Women in Mining in Columbia, ex-Executive

12:38 Vice President of Collective Mining, but really a strong team to be able to advance this project forward. We do have a significant amount of shares out, so we're very conscious on how we're going to be taking these next steps with the company, but Eric Sprott is our largest shareholder. Eric Sprott personally is our largest shareholder, and we have been trading. I think We are well positioned to grow significantly now that we're getting into a strong news flow. So we have a solid foundation, solid team, solid project, and a clear strategy. Even if market goes sideways, I know that we have a strategy that can create significant value for our shareholders. As we move forward, We're drilling and hope to have first drill results out before this conference, but I know that we're gonna be getting into a strong news flow from now until the end of the year.

13:26 So I hope I left a little bit of time for questions. Yeah, we've got some time for Sure. Any questions from out here? Yeah. How many meters are you drilling this year? Do you know?

13:37 Sure. We started in April. We're averaging 900 meters was our target. We're finally hitting our targets, even in the first month, which is nice. So that should put us around 8,000 meters by the end of the year, and we will continue into next year. So it's really when does year end. Average depth is about 140 meters, so we should be putting out a significant amount of holes every month. Once news flow starts, we should see nice news flow on a monthly basis. Any other questions?

14:06 Want me to get into mine then? Sure, why not. I was asking in the last presentation, I was asking about Quebec as a jurisdiction. Columbia has obviously a very colorful past, which I think a lot of it is misplaced. So can you just get maybe a little bit more into the details about the realities of why Columbia is such a good jurisdiction? Sure, first I want to take a step back and when we talk about jurisdictions, I saw a stat recently that out of 100 companies that went into an EA process in BC, only 30 have come out the other side. So it's independent of jurisdiction, and I want to go back to fundamentals. I've taken projects all the way to the start of construction and seen them go into production, including in Bolivia, also in Colombia, and in the United States.

14:52 And there's been 1 common theme, and in all those it is the relationships that you have locally, I'm not talking about good community relations, I'm talking about the relationships that you've developed over time locally are what drive a project forward and what create political will. Politicians are driven by votes, and if so, if the people are for your project, your project will move forward. So independent of that, that for me is more important than jurisdiction, is the quality of the relationships that are to be developed with your local community and having them involved in your project. So Columbia overall, it has gotten recently with its first leftist president in 30 years, I think a little bit of rattled market, especially with his comments, but they were towards oil and coal primarily. He is very much supportive of the energy transition and using the mineral wealth of Colombia in order to support the world's energy transition.

15:45 And that is obviously silver, Having one of the few silver districts in the world, right now Mexico produces about 30% of the world's silver, right? But in colonial times, the Santa

15:56 Ana mine, since colonial times, there was a time that Colombia produced a third, sorry, was the third largest producer of silver for the Spanish Empire, and all of that silver came out of Santa Ana. So it is a true silver district. It's very rare. They are not common. And if I was the president of Columbia, I'd be very proud of the ability to produce silver. My friend Chen always says that silver is the next lithium because it's really not clearly understood how much of a problem the supply demand is and unlike lithium, unlike uranium, it is a resource problem. There is not the resources in the ground and so we're not only have to start from basics and expiration and get projects all the way and through and producing so it's a serious problem with silver and I look forward to watching how it plays out.

16:47 Anybody else? Okay I'll go again then. You've got you found 7 veins, you've got a resource estimate now, you're still drilling, you know, at what point is there enough to hang together in order to be able to take things to the next stage?

17:03 Like, technically you can drill till the cows come home, but what internally are you guys trying to get to? Technically, I want to have my cake and eat it too, okay? But you are correct. This is a district that could probably be drilled out to maybe 200 million ounces, but I think it's a very important psychological level, that 100 million mark. There are very few high-grade solar projects in a development company over 100 million ounces. I know 2 of them. So being able to do that puts you in a very special category, and I think it also is enough meat on the bones to justify the spend to go into a project development. PEA, pre-feasibility, feasibility are very costly, so you don't want to do it on a couple ounces. You want to do it on a project that has a valuation that can take it and drive it through. At the same time, we are also working on permitting a very small scale pilot project, because we think it's important to be able to demonstrate to market that it can be profitable at any scale, work with the community in developing capacity, and also it's easier to expand a permit than it is to permit a brand new mine.

18:05 So we are doing that in the background at the same time. Are working on permitting a very small, and I'm talking small, ball mill the size of this desk but still a very profitable project to be able to demonstrate that pathway and de-risk the project. Okay, I guess the final question I have is about metallurgy. Projects live and die on the metallurgy. You've done some testing. How far are you into that process? I understand that if Santana's a past producer, metallurgy is probably not one of the biggest problems going, because it's already proven itself in that respect. But how far are you along that path? We have done the lock cycle flotation test work. So that is the highest level of flotation. We've done the gravity test work, and right now we're working on a combined gravity plus flotation.

18:53 That is enough work to get you to a flow sheet, right?

18:58 And obviously the initial results are really good. That's why I like carrying around my little teeny piece of silver to prove that you can take that deposit straight through to Dore without cyanide. So we're very advanced on the metallurgical test work for a project of this size only because it's such a special part of the project. Any other final questions? OK, with that, thanks a lot, Ian. Thank you. And I think now.