Updates & Opportunities at the Davidson Molybdenum-Tungsten Property

0:08 Hello, everyone, and welcome to the Moon River Capital Live event hosted by 6. I'm pleased to introduce our speaker for today, Ian McDonald. Ian is the chairman of Moon River and has a bit of a background on him. He's the founder of Blue Pearl Mining and former chairman and CEO of Thompson Creek Metals, which owned the world's third and fifth largest molybdenum mines with a 3 billion dollar market Cap in 2008. He's also the founder and CEO of Wheaton River Minerals, or he was the CEO, which in 1996 built Golden Bear, Canada's first and only successful

0:41 gold heap leach mine, which then merged with Goldcorp in 2005. So Ian, after that bit of a background there, can you give, so given your history with large molybdenum mining operations, how do you plan to leverage your past experiences of blue pearl mining and Thompson Creek Metals in the development of the Davidson project. Well, thanks Maxim. We have, it's not just me, we have quite a few people involved in the company on the board and in management that have experience with these assets. Mark Wilson, who's an advisor to us, was also the former CEO of Thompson Creek Metals, when it was a subsidiary of Sentara Gold.

1:29 And Gord Reid was the chief operating officer of Centera when they operated these assets. And I think the fact that we have the experience means we're very realistic and we're aware of exactly what we have to do. So I think that bodes well for the future because there is a lot of work to get these things back in production.

1:51 Excellent. And how do the combined experiences, just going a little bit more into the leadership team, how do the combined experiences of the team shape the company's strategies in navigating the complexities of mining project development and the market fluctuations, which are obviously quite significant at times. Yes, well, there's many facets to building a mine and a mining company, both with First Nations engagement, local community engagement and financing. We're lucky though that the Davidson deposit, it's a well-known deposit. It's had feasibility done on it in the 1960s. It had a feasibility in 2008 by Hatch. It had an updated scoping study in 2018.

2:39 So it is the highest grade, large malabdic deposit in the world. And there really is not much substitute for a high-grade. Yes, perfect. And what are the long-term goals for Moon River once the Davidson project reaches the production stage? And how does it fit into the broader industry trend towards critical minerals?

3:03 Well, right now, we did announce a couple of months ago a PEA that is only focused on the Molybdenum at the Davidson deposit. We are confident that there's 4 other potential revenue sources with co-products, although make no mistake, it is a primary molybdenum deposit. But these Other minerals, namely tungsten, gallium, rare earths, and a little bit of copper, they could add to revenue. And they also are in demand, because 30 years ago nobody even assayed for rare earths. Now people, now they're in demand, mainly because they all come from China. So we have a little bit of work to do, but we're doing that metallurgical work right now, and we should have a new updated PEA by the end of

3:59 the year, actually. Okay. And just a little bit, just to double down a little bit on the critical mineral side of things, can you just explain a little bit what the uses of these rare earths are? Rare earths are of a, they're necessary for the 21st century in terms of, well, gallium, for example. It's what they call a transition metal. It's not one of the 17 rare earths, but tungsten, gallium, germanium, these are what they call, they're known as transition metals. Whereas molybdenum and tungsten, they're known as noble alloys, but they're used in all sorts of applications for high-grade steel, but also things like, well, you can't have a fluorescent light without gallium. And medical instruments,

4:54 just the, they're finding all sorts of new applications every year. But well, cars, vehicles, you need a little bit of these minerals. And they don't use much. That's the, I mean, that's sort of the dilemma, because they don't appear as in heavy concentrations. There is no, there's only, well, there's 1 rare earth mine in North and South America, and that's in California. So they, they're not very common. But I mean, as you can see from government's input, they do want to get control of some of these minerals right here in North America. Yeah, I think if I'm not mistaken, tungsten actually has significant use in tooling and also in the defense industry from what I recall, correct?

5:44 Well, You can't have a bullet without tungsten. And you can't have, it's the element that has the highest melting temperature in nature. As a matter of fact, to recover tungsten, molybdenum has the sixth highest melting temperature. And we would smelt that. In other words, it goes to a roaster or a smelter, and you would make only oxide or ferromaldehyde. Because the tungsten is such a high melting point, They actually have to extract it through a chemical process. But all these minerals are, well, they're in demand, but they do come from China. So this is a China story. And I'll say that either this year or next year will be the first year that China will be in surplus for molybdenum. So for decades they had to import molybdenum.

6:39 They are the largest producer and the largest

6:42 consumer of molybdenum. And they consume 4 times what the United States does and 4 times what what Europe does, because they're still building out their infrastructure, you know, bridges, boats and so on that require molybdenum. OK, perfect. And jumping back just to the Moon River side of things, how does the after-tax, and this is in context about the PEA, how does the after-tax NPV of $600M, an IRR of 24% for the Davidson project, compare to other similar mining projects in terms of profitability and risk?

7:21 Well, I think the risk is low because it's a well-known deposit. It's in a good jurisdiction. And although it's gonna take quite a few years to get it engineered and permitted, it's an underground mine, very close to a workforce in British Columbia where there's lots of mines. I would say that the main risk is the price of molybdenum, which we're actually quite bullish on going forward. And the IRR at 24%, that is just the molybdenum. When we come out with an updated PEA later in the year, I'm very confident that that's going to increase a lot. But I think that the major mining companies, everybody aims to have something over 20%, but the reality is it's about 15%.

8:16 That's what long-term, what mines, you know, they're cyclical, so some years they're worse, some years they're better. So, and by the way, the PEA, which is the first engineering study for a project, normally after that there's a series of, you know, continual small erosions as you get to a final feasibility study. I think that won't

8:40 happen with us because we have the other elements that we could introduce and get paid for. And as I say, we'll have that work done hopefully by the end of the year. And the other thing is I think there's ways to improve upon the development of the mine. The main thing being we have in the PEA estimating a 3 and a half year timeline to get the tunnel done, but that does not include a tunnel boring machine. So we will be looking at that for when we do the feasibility study, which I would estimate we would start the feasibility

9:20 say the end of this year, and that would take another 12 or 18 months. So just to clarify, you're saying that high likelihood that the IRR will be almost 10% above your peers when all is said and done. Well, it could be. That's why you do studies. But the high grade is, like I say, it's the highest grade, primary molybdenum. I'm not saying there's, because there are other deposits that have molybdenum in them that are worth more dollars per ton. But these are copper mines, and they're subject to the vagaries of the copper and molybdenum price. Our mine, our project, will have, It's about $100 U.S. A ton at today's price for that ore body. Keep in mind that the ore body has, under the 43-101 that we announced last fall, it has a 400 million ton deposit.

10:20 And that's actually within a 900 million ton mineralized zone, but 400 million tons of about $40 a ton rock. That's U.S. What we're proposing to do is take out the highest grade 50Mt. So 2.5Mt a year times 20 years gets you 50Mt, and that rock's worth about US$100. The coal products, meaning the gallium, tungsten, rare earths and Copper, if we can get that out. The gross in situ value is about another US$50 a tonne. Now, we don't know how much we're going to get out, but I'm confident we're going to get some 20%, 30% at least. Okay. Now, jumping a little bit onto the cost side of things.

11:08 So with an initial capital cost of 575 million dollars, including a contingency of 109 million dollars, What strategies does Moon River have in place to manage potential cost overruns?

11:21 Well, it's a serious issue in the mining business, building mines. I think it was a bigger issue say 5 to 2 years ago when almost everything went over budget. But what we're going to do is we'll move right from the PEA we've done to a definitive feasibility study. We're not going to do a pre-feasibility because it's had a lot of work done on it. We know the deposit very well. It's already had over 2km of underground workings. There was a 1,700t bulk sample taken back in the 60s. So we're highly confident in the metallurgy and the reserves. And what we will have to do is more work, and that's why it's going to take another year, year and a half to do that final feasibility. But it is a big concern. And we'll take certain strategies to mitigate that and you just have to be safe and you've really got to be belt and suspenders.

12:27 You can't be arm waving. You've got to deal with the real numbers. And jumping to the side of things, the environmental side of things, a lot of funds and purchasers and companies are focusing on low carbon mines and things like that. So Can you elaborate on how the project design as an underground mine with electric mining equipment will contribute to the goal of being a low carbon emitter? Yeah, well, this really is a 21st century mine we're proposing because we'll bring a hydro line right up to the portal, and that's the main grid of the province, which is hydroelectric power.

13:13 And we will use all electric equipment underground. The mill runs on electricity. It's all rubber tired equipment, not tracked. And these are all electric battery pack equipment. There's scoop trams and the backhoes and so on that are underground. And we won't have a tailings facility outside either. There will be no tailings dam because we're going to have a small cement plant and we will mix the tailings with the cement and we'll, it's called a paste backfill. So the cavity that we mine, we fill it up and it just becomes more rock in that cavity.

13:59 So it's a Number 1, you don't need ground support. And number 2, you don't need to, more than 3 quarters of the rock we mine just stays underground, never comes back out. The little bit that we do need, it'll be dry stacked. The water will be removed. It'll be dry stack tailings of which we'll cover it up and put a forest on top of it when we finish, and that'll be on the side of the mountain. So it really is low impact. And the local community, especially the First Nations, they're concerned about the water. And we'll have very little effect on the water. This is, even though the ore is just sulfide, it is actually just slightly on the basic side. So there is no ARD, acid rock drainage. And when we do what they known as ABA or acid based accounting, it's going to be, like I said, 21st century and we will not have an acid drainage problem at all.

15:05 Mm-hmm. That sounds great. And just coming back to the economic side of things, what methodologies were employed in the estimation of the measured and indicated mineral resources? And how do these impact the confidence in the project's economic forecasts? That really is the strong suit for this deposit because it's had so much work done on it. It was, I mean, it had a positive feasibility and a positive production decision made on it by Climax, the world's largest molybdenum producer back in the 60s. So that is the one thing I would say is bulletproof on the project, and that is the reserves. And keep in mind that We're going to take out the high-grade 50 million tons over the next, well, 20 years after the mine starts, so let's say 5, 6 years from now.

15:56 But we will not sterilize the rest of the resource, because if the price of Moleb did them by 2050s, up at US$30 or US$35 a pound, there's no reason why we couldn't keep mining it and just process in a lower grade. But back to the resource, No, it is solid. Anybody can look at it. And like I said, that's why we got involved in the project. We're not hoping that it's there. We don't have to find anything else. It's the resources there and the metallurgy has already been done. So and you mentioned that in the PEA, why products like tungsten and the rare earths are not being counted in. But what are the prospects and challenges of economically recovering these minerals?

16:48 Well, we have to do some work. We're doing it right now, in fact. We have rock just a couple hundred kilos right now. But we're going to take a 1 and 1 half ton bulk sample this summer. We'll get it through a drill core. And because to do, you know, metallurgical work, we can't use 20-year-old drill core. We need fresh sulfide ore from the deposit. Matter of fact, when they take the drill core out, they have to put it in bags and fill it with nitrogen. So it's that fresh. And it goes to the lab and we do bench-scale tests, because what we need to do is design a circuit that, or maybe more than 1 circuit, to recover these other minerals. I think that the tungsten, there's already been a lot of work done on that. We have a feasibility that was done in 1978 by Climax that was positive through flotation to recover the tungsten. The other minerals, though, the gallium and rare earth, which, you know, are not high grade, but they're certainly high enough grade to add a few dollars to the overall value.

18:02 And the, well, what we have to do is figure out if we can make a concentrate that is saleable. But I'm pretty confident, well, first of all, I'm very confident that we're going to get some of the tungsten out. The gallium and the rare earths, well, we don't know. And as I said, the copper is 0.04 and that's only 0.8 of a pound. So, you know, say $4 or $5 Canadian right now in situ per ton. So it's not a lot, but however, we're already gonna mine it, grind it, crush it, float it. So it's not that much extra work to put in the circuit to take it out. Okay, yeah, great answer. And now kind of going to the more recent news about Endaco here. Late in Feb, you announced the potential acquisition of 25% of the Endaco Molobdinum mine. Is there any updates on that? And can you just give a little bit more context for some people here?

19:02 Yes. We did sign a deal with Sojitz to acquire their 25%. Now, Ndako is not operating. It's built, it's got a brand new mill. I think it's tied for the fifth largest metal mine in Canada, 55,000t a day. And the 75% owner, Sentara, has a 60-day period from February 28th, so 10 days from now. Look, I'm very confident that we are going to get our, that 25%, and then we have to sit down with Sinterra and see if we can't think of a way to do a study to see if we can turn the mine back on. You know, when the mine shut down, Molybdenum was, you know, $10, $11 a pound. Now it's over 20.

19:49 So I think it could be a go, but we need to do that work. But keep in mind, when we get that, we also get $43 million for our effort, which is and it costs about 2 and a half million dollars in Ongoing care and maintenance so that the money is going to go out the door But we've got I'd say about 5 years to get the mine turned back on anyway. It's quite exciting I know you can't really see it too well, but that picture behind over my right shoulder, that is actually a picture of the Endaco pit, which has been operating since 1965. When it was built, it was the second largest mine in the world. The new mill, which cost $600 million to build in 2012, it would be over a billion dollars to replace that right now.

20:41 It's a big asset. We're excited to get that. Yeah, Excellent. Just can you give investors a little bit of a little bit of insight into what catalysts they should be looking forward to in the coming months and maybe years? Yeah, well, we I think in the next 10 days we'll find out about the Indaco 25 percent, and we will then be doing some work on that, obviously negotiating with big brothers and Terra to see if we can't do a study to see if we can turn that back on next step, but well, we're gonna be Negotiating not negotiating just introducing our so we've already had zoom calls with the First Nations in Smithers. I'll be going up there in a couple of weeks to sit down with them and see what we can do to satisfy both of us, or what we both want. We have metallurgical work, like I said, that 1.5t bulk sample will be taken out this summer and we'll have an upgraded PEA this year. And then we will embark on a final feasibility study, say, by the end of this year to take another year. But we should have quite a bit of news over the next, well, the short period of time, and let's say the next year and a half, because I think we're, to be honest, realistic, we would probably be 2 years away from

22:13 making a production decision on Davidson, and then we've still got to get all the permits and financing, but it is the highest grade deposit. It's a heck of an endowment for the local area of Smithers and also Canada. Okay, perfect. So that looks like all the questions that we have for today. So thank you for taking us through the Q&A session. I also want to thank everyone for participating. Today's replay will be available to watch on demand in the coming hours, so look out for that. And before we wrap up, just passing things back over to you, Ian, for any closing remarks. No, I think I covered it off when you asked me what's going to happen the next year.

23:00 We do not have any institutional share ownership right now. And we have to get out, not that many people, other than maybe the people on the screen here, not many people know about us. And one of the reasons for that is we needed to find out whether we were gonna get the 25% and we still have 10 days for that to be formal. And then we will get out and tell people the story. I'm looking forward to that. Awesome. Thanks so much, Ian, for taking us through this. And I hope you all have a great rest of your day.