Positive Ore Sorting Testwork Results for the Scotia Mine

0:00 Okay, we're now live. Hello everyone, and thanks for joining us live today. We have Mark Haywood, president and CEO of EDM Resources to discuss their latest news regarding their OR sorting test work results and why this is some significant news. So I have some questions prepped for Mark, but if you have any of your own, please do submit them in the chat, which can be found at the bottom of your screen. And as always, this event is being recorded and available for replay shortly after we conclude. With that, Mark, let's start off with what drew EDM to test XRT or sorting at

0:31 Scotia, and how did the results compare to your expectations? Well essentially we demonstrated through the dense media test work that the ScotiaWire mineralization responds very well to what we call pre-concentration And so since that time we completed the DMS work, the XRT technology, that's X-ray transmission technology, and the associated software like they use AI to help on a program that continue to advance. And so the XRT ore sorting appealed to us because you could potentially do that in the crushing circuit. So the ore is dry.

1:17 It's a relatively simple method of separating. Basically the rock is scanned and then the system or the computer decides whether to keep it or not or put it in one way or which they call ejecting the rock to a different stream. So basically, you separate the mineralized ore from the non-mineralized material through that process. And so the AI-assisted programming helps to make that decision. The ore sorting is very modular, so you can basically just essentially bolt it on to the crushing circuit, which we've basically been designing as part of the new circuit for the Scotia mine.

2:03 DMS compared to ore sorting also has a different capital cost. So because this modular system, ore sorting by Steinert, it's a lower capital cost than the DMS, which is a little bit more complicated. There's a lot of pumps and obviously systems to go into separating that on a dense media basis. So the XRT would also be a fairly easy integration into our crushing circuit, as opposed to DMS would be a little bit more complicated. So XRT also measures the atomic density differences in the rock and that's one of the key things of XRT.

2:52 So that's allowing as I mentioned individual particles to be separated or if you like classified and then rejected And so here's where we have the good results in terms of rejecting more waste or non-mineralized material from the crushing circuit. So those results were much better than I expected. I went down there and looked at them processing our high-grade, medium-grade, and low-grade ores and it was much better results, particularly on the zinc. So we rejected about 25% of the mass.

3:39 And so that means basically 25% of the waste material or non-mineralized or very lowly mineralized material mass is separated. And so what that does, obviously it's a very compelling opportunity when you can do that before the flotation. And the other key aspect is the recoveries of zinc and lead were also remaining quite high. And so that does kind of indication of how successful. So the bottom line is basically we rejected roughly 1 ton of every 4 tons before the downstream process in terms of grinding.

4:29 And while we still retained like basically 94% of the zinc and 96% of the lead. So we didn't lose much zinc or lead in that process. That was really successful in my mind. So what Do the zinc and lead grade increases actually mean for material going into your mill? Well, essentially the zinc grade increased by 26, roughly 26.1 percent, and lead grade also increased. So essentially you've got more product going into the downstream

5:10 processes for recovering of the zinc in the lead. So it's an important concept. So it's not just the grade, the higher grade that we're recovering, but by removing waste before the expensive downstream processing stages is very meaningful. So that essentially means that less barren or low grade rock is put into the grinding circuit or put into the flotation circuit or even pumped to the turning stand and then of course the overall handling. So if you put, if you can eliminate waste, essentially upfront in the crushing circuit, for example, then we're not processing waste, which is very waste wasteful in terms of costing energy.

6:05 And so that by eliminating that waste analysis enables us to essentially lower the energy costs for the same amount of time, lower the reagent consumption. And this is all per unit of contained metal. So that enables us to potentially increase the amount of concentrate for the same downstream plant capacity. So That's really the bottom line here is like, why pay to waste, why pay to process waste if we can remove it before it even reaches the grinding or flotation circuits? Right, right. So how should investors view the OR sorting results alongside last year's DMS work?

6:50 So I guess the answer is, there's a little bit of a nuance in there. So both test programs were successful. Both rejected almost exactly the same amount of mass, which is 25%. So all sorting was 25.2 and DMS was 25.3. So essentially the same. But they achieved, and this is the key, they achieved different results. The zinc recovery was better with all sorting or XRT and it was like 94% compared to 88% of the DMS. Lead recovery was pretty much the same but it was a little bit better in DMS but it was only like a small difference but importantly the zinc grade increased.

7:40 In DMS it was about 18.4% increase from that so that was a pretty good result. But in ore sorting, it increased to 26%. So that was a significant increase on the DMS. And then the lead increase was not as high, but we're still quite good. Really, this is a zinc mine and the lead is more of a by-product. But importantly, Kyle, the CapEx costs are different. So we estimate that the capital cost of XRT is about 1.5 million, whereas the capital cost of putting in the DMS and operating the DMS is a little bit different, but the capital cost is about 3.5 million.

8:32 So that's a difference of about $2 million. So I guess in essence, all sorting was stronger, better in the zinc recovery and zinc upgrading. The DMS was stronger on the lead recovery and lead upgrading, but it's like not exactly, not comparing apples with apples exactly, because there's essentially 2 viable concentration options, pre-concentration options. So we could do both if you like. But DMS essentially proved the concept of pre-concentrating. Ore sorting with XRT has given us another option and I think potentially simpler and lower capital cost of achieving that increase.

9:24 So ore sorting came in slightly lower on lead recovery than DMS. How are you thinking about that trade-off and could the 2 technologies work together? Well, yeah, like the difference is pretty meaningful. $2 million upfront capital cost is a pretty meaningful reduction, especially for a restart scenario. So, our philosophy has always been to maximise the use of infrastructure we've already got and essentially choose a technology, not because it's cheaper, but how can it improve the recovery, the operating costs, throughput, reduce that energy, maybe reduce our water consumption and maintenance reliability, and how will that all be integrated into the flow sheet? So if XRT was more expensive than DMS, we go, okay, well, it's got a better result in terms of increasing the zinc

10:23 grade, but it's actually lower cost. So not only does XRT increase the recovery and the amount of zinc that we can potentially produce from the mine, but it's cheaper. And so it's a lower capital cost, operationally simpler. It's also a dry technology, whereas DMS requires a more involved density separation. That all has to be fine-tuned and tweaked on a basically hourly basis or whatever res. All sorting can do that much faster, I think, and much more reliably, and you can continue to tweak it.

11:10 So, you know, at the Scotia mine, our capital discipline really matters. We're not trying to build like a new mine. Obviously we've been talking about this in other forums, but leveraging the infrastructure and the mill and so forth is about making an existing operation much better with the same amount of capital as we kind of defined in our previous PFS. So keeping that balanced, but improving the efficiency of the operation. So I think that's where DMS is quite different to XRF. DMS is a little bit more expensive, or sorting cheaper, but essentially more effective.

11:56 Right. So what are the next steps before you select a flow sheet for the updated PFS? Well, the next steps I think to look at the overall capacity of the concentrator and optimized at a certain grade, you know, because I think in removing 25% of the material, the waste material from the crushing circuit, that's how we're going to improve the flow sheet by looking at less material, what happens to the flotation, how much energy needs to be consumed, and then less material being processed in terms of waste. So that's going to go into the flow sheet.

12:55 And our consultants are working on that. We'll work on that as they finish all these results and incorporate that in. So I'm not saying that it's going to essentially turn the operation into a, you know, 3600 ton per day operation, but the engineering has to be done to look at the bottlenecks, wear, crushing, all sorting, grinding, and all work together, and even the flotation and dewatering aspects. So, you know, the idea is that if we can remove roughly 25% of the waste before the constrained part of the plant, i.e. In the crushing circuit, we're effectively freeing up capacity to process more metal rather than just rock. That's a very key point.

13:43 I have a couple more questions for you, but I see there are quite a few in the chat, so I'm going to pivot here and ask a lot of these questions just to make sure we have time. First one is regarding FAA approval, just looking for an update on that, any pushback, expected time for approval. Mr. Liddy Okay. The FAA is obviously very important for us to have. A lot of thought on when that's going to be received and to our knowledge that's could be anytime. We've spent a lot of time negotiating,

14:23 maybe not negotiating, but working with the DFO and the First Nations on the expectations of the mine going forward. And so we feel that it could be any day. And we've always said that we're expecting it in the fall and the fall is now. And so, and we're still expecting it sometime in the fall which is, I guess, this month or next month. And so that's still on track for that, as far as we're aware. Great. And how's the gold exploration program coming along? So our consultants are working, that's Mercator exploration, are working on putting all that data together and working with our geologists on site as well to collect that.

15:12 They've gone up to Skeleton Core Lab and they've looked at Core and they're working on databases. They're looking at old production reports and tailings, what was put into the tailings dam under Arcadian days. So that's all coming along. So it's like in previous discussions, we're very excited that that opportunity in terms of gold mineralization is really being overlooked for the Scotia mine. And so I don't know when we're going to have results out on that, but that's ongoing. Jan asked a few questions and thank you for breaking it up after. So I'm just going to go through the broken up ones here.

15:57 Could the known groundwater inflow at the Scotia mine affect the ore sorting in brackets, wet ore question mark?

16:05 No, it won't. The groundwater surface and groundwater at the mine is basically very known quantities and it was part of the Fisheries Act authorization application. We did, our consultants did a lot of analysis on that. And the good thing about that is when you're operating a mine, we're in operations, we'll have wells, primitive wells, around the boundary of the open pit. And that will reduce the amount of water on the face of the open pit as it's developed. So that stabilizes the pit walls. And that's a very important aspect for the geotech stability of the mine, but also that water that will pull out. We'll put that into the tanning's dam and which will be polished and like cleaned up as many contaminants or stain a tiny tan and then we'll use that in the processing circuit.

17:07 So ore sorting doesn't really use water in a circuit at all but what we're doing and I've said to some visitors on site last week, is the ability for us to improve some of the issues that Arcadian have now been done. And so using some of the ground water effectively in the processing circuit to make sure that that's not an issue or bottleneck in the future is key. But all sorting doesn't use water other than maybe in a winter time we could use some sprays to stop freezing, So antifreeze combined with water. So it's really just the dust suppression aspects that we use.

18:00 Great. Yeah. Follow up question, As the PFS has been postponed, is it the same for the MRE? So the mineral resource estimation is going well, I think. There's separate consultants for that and they, we expect to have that very soon and to see that modeling complete. So SIK is doing that. They've been to site, they've been to the core lab and they've done I believe what they need to do to prepare the model. This has become a fairly large, I guess, process because we're trying to add in additional gypsum and also anhydrate into the mineral resource estimate.

18:47 And so that hasn't been done before. And it's also been combined with the updating the Zinc and Lead resource model as well. So I just want to make sure that this resource model is the best that's been

19:03 like SRK did back in 2020. They reviewed everything and found emissions in the previous work. I want to make sure this is a very solid model. They're also converting it from our previous system, which is under GEMS to, I think it's LeapFrog they're using. So it's a different software, and they want to make sure that that is all cross-checked and validated. So that's an important thing, because it's the basis of the data for the PFS. And so the PFS now would finish the ore sorting component and we're waiting for that to be done. So we're testing some more low-grade ore just to make sure that any of the very highly disseminated ores also treated at a similar kind of improvement in the grade, or at least the ore sorting has the capacity to define even low grade materials. So I think that would be a benefit. We want we're putting that into the upgraded updated PFS as well.

20:13 And so The whole PFS is significant update from the 2021 PFS. And I want to make sure we get it right, not only from the resource modeling aspects, but the other things that we're looking at to improve the overall operation that we've learned needs to be incorporated into the updated PFS. So things like all sorting slash DMS, do we want to do both of them? That's an opportunity, because they're separate circuits, but the all sorting is essentially in the crushing circuit. And the key to that is if we can remove the waste from the crushing circuit, that essentially reduces waste going into the tailing spot.

21:05 So that's a significant thing, but it's all sorting's on the crushing circuit. Whereas DMS would be in the grinding circuit, probably after the rod mill, to make sure that the sizing is appropriate to ensure we have the best recovery on the zinc and lead materials in the grinding circuit and so they have to be a certain particle size where as ore sorting can operate on a much larger particles particle size So a rock that could be an inch or less to like 6 inches, it basically scans that rock and then decides whether to keep it or not. So this is all going into the updated PFS along with all these other changes like the crushing circuit, the brand new crushing circuit, optimizing that that's going in. We're also looking at increasing the throughput, potentially increasing the throughput with an additional or larger bore mill. So potentially going from 2700 tonnes a day to maybe 3000 tonnes a day or 3500 tonnes a day. We have the capacity because under the industrial approval, we can process basically about 1 million tonnes.

22:22 I think that's the current limit, 1 million tonnes. And in our first couple of years of production, because of the ramp up, we're under that. So ore sorting or a slash DMS or a bigger ball mill would enable us to reach that peak capacity and therefore make more concentrate per year. So that's a great opportunity. That's why we're still looking at 0.25 1 of 2027, because there's such a significant opportunities to improve the project on that with the PFS. Thanks for being thorough on that. That's great. Adam has a question here. The sorting sample contained 15.6% zinc and 14.2% lead. That's exceptionally rich compared with the planned mine feed, how would that be representative?

23:22 Well, in the ore body, there's large sections of very high grade, and that's what the original underground miners back in the 70s and 80s targeted. And so that is a significant part of the mineralisation. What the mine plan in the 2021 PFS showed that we needed to blend that with the lower grade disseminated ores to get an optimal throughput, which is 2,700 tons a day with optimal grind and recovery. And So it's a blending thing. And so most of our ores are actually very, very high grade. And so that sample was very representative of the mine as we start. And that's the key to making sure we rechain that ore. So the lower grade ores basically bring that down to provide a blending source at the ROM and then going into the mill.

24:30 So that's of lesser importance, but we gave SRK and Steiner a range of different mineralization, ranging from, I think it was by 0.3, 0.4% low grade zinc up to basically the upper limit of 20-25%. So we gave them a big range and basically that's just their average. So we're not worried about that. I think that really the ore sorting proved, in my view, beyond doubt that it's a method that can separate out a rock that's mineralized or non-mineralized. Or non-mineralized and that's really the key thing. It doesn't really matter the grade. That's the beauty about XRT.

25:23 It's not looking at grade, it's looking at basically density of a metal in that particular rock and it's deciding whether it's going to keep it or not. So that was basically how the ore test works. Adam has a follow-up question here. Do you have an opinion on PinePoint's different path in its November 2024 design update? Pine Point said it would exclude both XRT for sorting and DMS in favour of full mining. I don't have an opinion on that. I haven't been really briefed on what their process is and why they would make that decision. But I would say it would depend a lot on their grades,

26:13 what the recovery is on the mining aspect, what their concentration of mineralization is in their rock class, and of course how their mill processes the ore generally. So I think it really depends. It's a case by case. Our ores are very, very clear. They're carbonate hosted. The XRF was very clearly a winner in terms of comparing to the DMS. I'd say DMS could be more expensive and obviously I think it's going to be more expensive to operate than XRF, but it really depends on the geology.

27:01 No 2 minds are the same and it's how that all fits together really makes a difference. So I would really have to look into their design case in order to have a clear opinion on that. But each mine takes their decision and I think in terms of XRF for us, XRT, in terms of for us it's very clear distinction. If they're using XRF that's a different process as well That's more of a grade analysis where we're using XRT. So it's a different process. And so maybe if they use XRT, it would be different. I don't know. Okay, great.

27:47 We've got 2 more questions for you, but first in summary, compared with the 2021 PFS, how could ore sorting improve Scotia's economics through higher concentrate production, lower unit costs and the potential to bring more material into the economic mine plan?

28:02 So I guess there's kind of 6 points here. We believe that we'll process more concentrate per tonne and so by applying those test grades from the ore sorting or even DMS, we're increasing the concentrate by probably about 27%, assuming that the downstream recoveries and concentrates are the same. So if we're looking at, just to summarize that point, that maybe about 27% increase in combined concentrate of zinc and lead. So that's meaningful. Also, potentially stronger annual production.

28:51 I mentioned that we have that cap of about 1 million tonnes per annum on the grinding circuit and that all goes into the capacity of the tanning stand, for example. But if we can increase the amount of concentrate that could potentially produce another 12,000 extra tons of concentrate. And so obviously we get paid on that. And so even if it's another 10,000 tonnes annually, that's significant increase in our revenue for the project for the same basically cost. The third point is with the additional concentrate being resulting from the process that effectively lowers our processing unit cost of recovered metal for the mine. So higher feed grade spread across the existing mills, operating costs and producing more recovered metal, that is basically a big advantage of this pre-concentrating as well.

30:00 The fourth point is we're getting additional value from material that's already being moved or being moved from even a mining point. We're using the same mining equipment, existing mining operation, but by looking at the cutoffs, cutoff grades in mining, and then of course in processing, we're essentially just moving the limit down so it can be potentially cheaper to mine per tonne because we're getting more ore tonnes delivered to the mill. The next point is potentially more economic mineral reserves from the mine. So by looking at even adding in the gypsum and the anhydrite revenue and ore sorting, I think that's going to support a lower cutoff rate for the mine, which will bring additional material into the economics of the operation.

31:03 And The final point is this is looking to potentially increase our margins and our MPV. That's really where we want to ensure that these opportunities are included in our upcoming 2027 PFS. Great, thank you for that. Take this as closing remarks here, Just as a reminder for people joining the call a little late, this is being recorded and you can watch the replay shortly after we conclude here. But thank you for all the questions. It's always appreciated when there's a lot of interaction with these live events. To close things off here, Mark, one last question. How does this milestone fit into the broader path to restart in Scotia? And what catalyst should investors watch for next?

31:54 Well, I think that some of the catalysts, and I said to focus on that, is the upcoming Fisheries Act authorization. We expect to have that as I mentioned fairly soon. We're working on this updated pre-feasibility study. That's also going to be an important catalyst. And they're, like I said in the discussion the other day, they're very near-term catalysts for the company. And so when we're looking at the timing on that, that's roughly within the next 6 months or so. On the basis of those 2 milestones, then we'd be looking at a production decision combined with the offtake and financing discussions. So I think in 0102 next year, we'll be looking at announcing this to go into production, the timing for that. And I think that's going to be a major catalyst.

32:54 All those things for potentially another re-rating on our share price and of course, creating additional value to our shareholders as we go through that process. Exciting times ahead. We look forward to future updates, but thank you for taking the time out of your day today, Mark, for this update. Congratulations on the news and we look forward to the next one. Thanks, Carl. Have a good one, everyone. Bye now.