Positive Results from Preliminary Metallurgical Tests at El Potrero

0:04 Hello everyone and thank you for joining us for this live Pinnacle event. The company recently announced preliminary metallurgical test results from El Potrero, showing an average Gold recovery rate of 95.09%. Today we're joined by Bob Archer to discuss these exciting results. But before we begin, please note that this event is being recorded and will be made available shortly after we conclude here today. If you have any questions during the presentation, feel free to submit them in the chat box, which can be found on the bottom right corner of your screen. But Bob, congratulations on these preliminary metallurgical results. What are your initial thoughts on achieving 95% average gold recovery? And what does this milestone mean for the El Potrero project moving forward? Yeah, thanks Kyle. It was a nice, a really nice surprise, I guess you could say. We didn't really know what to expect when we sent the samples in because, as you know, there is a plant there that will need to be refurbished because it's been sitting idle for 35 years.

1:04 And even though we know from the equipment that's there, what the process, what the flow sheet was previously, but we have absolutely no data from the time that it was in production in the past. And so we really didn't know what to expect when we sent the samples in. So, you know, it really was like starting from ground 0 in some respects, you know, to, as to what we might expect. So to see you know sort of mid 90s right out of the gate was pretty, you know, very, very encouraging to say the least. And so from there, you know, we can start looking at ways to optimize that a little bit and try to improve it.

1:52 But to have 95% as a starting point is terrific. So we're really, really pleased with that. Now, the Silver recoveries came in a little lower and more variable than the Gold, averaging around 55%. Can you walk us through what this tells you about the mineralogy at El Potrero and what specific steps you will take in the next round of testing to improve the silver recoveries?

2:16 Yes, so far it tends to be a little bit more complex in terms of the mineralogy. You know the gold from what we're seeing from these results from the gold it's telling us that a lot of the gold is just fine free gold and it's liberated very easily and going into solutions so that's terrific. There is some gold mixed with silver to form electrum which is a natural alloy of gold and silver so that's you know 1 mineralogical component But silver can also occur as silver sulfides, like argentite and acanthite. Or it can be silver sulfasalts or other types of minerals. It can be tetrahedrate. And these tend to be more complex and they don't necessarily respond as well to straight leaching.

3:08 So, you know, in some deposits you would use flotation as opposed to leaching if they're silver dominant and you know you need to recover the silver that way. So there are things that can be done, you know the fact that one of the 3 samples actually got silver recoveries of around 76% is encouraging because that tells us that in some places at least the silver is a little more available to go into solution. And So it's just a matter of working through various samples, doing that mineralogy, figuring out what kind of a complex the silver occurs in, and then we can tweak the process from there, try to optimize the reagents and so on in order to increase the recovery.

4:04 So, I mean, ultimately, we may very well be able to get to an average silver recovery that's in the 70s or maybe even 80s. But typically, silver, as I say, doesn't leach as well as gold. So I wouldn't expect to see silver recoveries in the 90s. But from what we can see so far in terms of overall grades, you know, this particular area of this project is about 80% gold by value anyways. So certainly, the gold is going to be much more important to, as opposed to the silver, from what we know at the moment. Understood. Now, you mentioned in the release that the testing used simple baseline parameters without any optimization. What are some key optimization levers you're more excited to explore in future testing and what kind of recovery improvements might this realistically achieve?

4:58 Yeah, so when you send in samples, for preliminary tests, neither the company nor the lab knows what to expect really. And so they'll just start with sort of industry average in terms of the parameters that they use and leach times and the amount of reagents that get used and that sort of thing. So this was kind of starting at a ground 0, if you like, And from what we're seeing, we can improve certainly on the silver side, but perhaps with the gold as well, by extending the leach times, for example, maybe modifying the amount of cyanide that gets used or the amount

5:49 of lime. And just little things like controlling the pH, the acidity levels and that sort of thing. So, and also the grind size, the particle size as well. And each of those has a trade-off, usually a cost trade-off, because, you know, if you grind something for longer, then it means that it's in the ball mill longer, and there's perhaps a bit more wear and tear on the balls. If you're using more reagents, well, then reagents have a cost factor to them. So there's that that factors into it as well. So at the end of the day, it's a little bit of a trade-off. And on the leaching, typically, I think I mentioned in the news release that there was very rapid recoveries of Gold over the first 24 hours and then it starts to taper off and then, you know, the difference between 24 hours and 72 hours is not that great.

6:50 And so, you know, typically you would look at that curve and you would look at that differential and then you would say, okay, you know, what's the cost of keeping it in the lead circuit for that extra, you know, that extra 48 hours and

7:07 is it worth it for the amount of extra gold that you will recover over that 48 hour period. If it costs you more to recover it, well then it's just not economic to do so. So, these are all the sort of things that you would play with and go back and forth on in order to optimize it. Now, the gravity concentration results showed 1 sample achievement over 76% gold recovery, significantly higher than the others. What does this variability tell you about the nature of the gold mineralization across the property and how might this influence your processing strategy? So we ran the gravity test as a completely separate test from the leaching, just to see what it would give us. Again, because you're starting from ground 0. But what you would normally do is that you would run the gravity first, and then you would take the concentrate from the gravity and leach that. So you know whatever is not recovered from gravity then then you would leach it.

8:07 And so at the end of the day you would you would add the recoveries from those you know those 2 components whereas we

8:13 ran them separately this time just to see what we're dealing with. So that's one thing that people should realize. But in terms of the recoveries from the gravity and the variability thereof, that tells us that there is a fair bit of free gold in the system in places. And the variability tells you that there's a bit of a nugget effect. So the distribution of the free gold is not equal throughout, because these samples were taken probably just tens of meters apart. They weren't extending over a huge area. We wanted to sample this one particular zone in the Pinas Coates mine. And so when we then go to the other mines, chances are we're going to get slightly different results there.

9:05 And to some degree, it's going to be affected by grade as well, because if we are getting a bit of a nugget effect, one of these 3 samples had a head grade of more than 17 grams, for example. And normally, you might expect the recoveries to be higher when it's a higher head grade like that.

9:29 And that often reflects free gold in the system and the nugget effect and so on. So that's mostly what it's telling us is that there is a fair bit of free gold in the system and that's one of the reasons really why the recoveries were high is because of the free gold. So, just to clarify, you anticipate higher recoveries at the other 2 mines? I wouldn't necessarily anticipate higher recoveries. Hopefully, they'll be in about that same range, you know, for gold at least. But it's possible they will be different. You know, I think we did see a little bit more of a nugget effect in some of the samples at Pinos Quartos and that's where we had some extremely high grades from the initial channel sampling up to 85 grams. So, you know, we know that there is some nice concentrations of gold there for sure.

10:29 So, you know, that will be the next step for us is sampling the other mines. And we put out a release fairly recently about some of the surface results and another vein about 200 meters away, a parallel vein called El Capulin. And that vein has different characteristics. And the vein itself seems to be a little bit more consistent and the grades are more consistent along the length that it's exposed. Whereas Pinus Quatus is a breccia vein which essentially means that all the pieces of quartz and mineralization are all broken up. So in a sense, you would expect that to be a little bit more variable anyways. And so when we get to Alkapline, for example, I would expect the results there to be somewhat more consistent, because the vein is more consistent and the grades that we're seeing from the sampling are more consistent as well. So that's where the geology can actually help to lead the metallurgy in terms of expectations.

11:33 So based on these preliminary results, how are you thinking about the flow sheet design for the plant, particularly the interplay between gravity concentration and leaching circuits? Yeah, I think that's gonna be the biggest thing because previously there was no gravity circuit in the plant to the best of our knowledge. And if we can achieve fairly significant recoveries from a gravity circuit, that's a fairly low cost part to the overall flow sheet, to the overall process and so by installing a gravity circuit prior to leaching, if we can pull that out then that will make, sorry, install the gravity circuit so that we can pull out the gold ahead of going into leaching, then that would be a fairly significant change addition to the flow sheet. So I think that's probably going to be the most significant change.

12:36 The rest is mostly just tweaking, as I say, grind times and reagents and things like that. Nothing really major. We'll have to replace some of that equipment anyways. But yeah, adding in the gravity is going to be the biggest thing. So looking at the broader picture, you're in a district with 4 operating mines nearby. What do these results tell you about El Potrero's potential economic viability? Well, one of the interesting things, Kyle, is that the 4 surrounding mines are all polymetallic. You know, they're silver-lead zinc with a bit of gold. And because of that, they all operate flotation circuits.

13:23 And so the geology is different, because ours is not polymetallic. It's strictly gold and silver. There's no base metals whatsoever. And so the geology is different, the mineralogy, the process is different. And so we haven't quite determined yet why that's the case. It obviously has something to do with the underlying geology, given the proximity of these other mines. But the fact that the mines exist, and this is a well-known high-grade district, it does certainly speak to the potential for El Potrero. And that's something that we'll be exploring, developing as time goes on, because we've only had this project for 8 months now and we haven't even started drilling yet. So it's still early days as far as that goes, but being in a, as I say, a well-known high grade district like Topia, certainly bodes well for the potential of the project.

14:26 Well, Bob, congratulations on the results and we look forward to continuing to follow the Pinnacle story. Thanks a lot Kyle, take care.