Building A Responsible High-Margin Silver Mining Company
High Grade | Growing Silver Production | Peru
JUNE 2020
Building A Responsible High-Margin Silver Mining Company High Grade - - PowerPoint PPT Presentation
Building A Responsible High-Margin Silver Mining Company High Grade | Growing Silver Production | Peru JUNE 2020 THIS PRESENTATION IS PRIVATE AND NOT FOR PUBLIC DISTRIBUTION Such risks, uncertainties and other factors include, but are not
High Grade | Growing Silver Production | Peru
JUNE 2020
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This presentation is being provided for information purposes only and does not constitute or form part
purchase or subscribe for any securities of Kuya Silver Corp. (the “Company”) in Canada, the United States or any other jurisdiction. Trading in the securities of the Company should be considered highly
authority or similar authority has reviewed or in any way passed upon the document or the merits of any securities of the Company and any representation to the contrary is an offence. The information contained in this presentation is a summary description of the Company prepared by the Company and there is no representation or warranty by the Company or any other party as to the accuracy or completeness of the information set forth herein and no recipient will be able to rely on any representations or warranties contained in this presentations. Except as otherwise stated, information included in this presentation is given as of the date hereof. The delivery of this presentation shall not imply that the information herein is correct as of any date after the date hereof. Readers should not construe anything in this presentation as investment, legal or tax advice. Each recipient should consult its own investment, legal, tax and other advisers regarding the financial, legal, tax, and other aspects of the Company, including whether it is legally permitted to purchase any securities from the Company under applicable laws. All dollar amounts referenced herein, unless otherwise indicated, are expressed in U.S. dollars. The Company is currently a private company created and existing under the laws of the Province of
registered in the United States of America. The Company’s securities are not listed for trading on any stock exchange or marketplace. CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION Such risks, uncertainties and other factors include, but are not limited in any manner to: risks inherent in exploration activities; volatility and sensitivity to market prices for silver; volatility and sensitivity to capital market fluctuations; the impact of exploration competition; the ability to raise funds through financings; imprecision in resource and reserve estimates; environmental and safety risks including increased regulatory burdens; unexpected geological conditions; changes in government regulations and policies, including trade laws and policies; demand for silver; failure to obtain necessary permits and approvals from government authorities; weather and other natural phenomena; and other exploration, development, operating, financial market and regulatory risks. The foregoing list of factors is not exhaustive. Although management of the Company believes that the assumptions underlying and the expectations reflected in the forward-looking information are reasonable, significant risks and uncertainties are involved in such information. Management can give no assurances that its assumptions, estimates and expectations will prove to have been correct. Forward-looking information should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether
beyond the Company’s control could cause actual results to differ materially from the results discussed in the forward-looking statements. When considering forward-looking information in this presentation, prospective investors should ensure that the preceding information, the risk factors and the other contents of this presentation are all carefully considered. Except as expressly required by law, the Company does not assume any obligation to update or revise forward-looking information, or to publicly release the results of any revisions to forward-looking information to reflect new events, assumptions or circumstances. Cautionary Note Regarding Technical Disclosure Scientific and technical information contained in this presentation was not reviewed by a “qualified person” as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43- 101”). Additionally, where the Company discusses historical resources, any potential quantity and grade is conceptual in nature and there has been insufficient exploration to define a mineral resource and it is uncertain if further exploration will result in the target being delineated as a mineral resource.
THIS PRESENTATION IS PRIVATE AND NOT FOR PUBLIC DISTRIBUTION
Statements contained in this presentation that are not current or historical factual statements may constitute “forward-looking information” within the meaning of applicable securities laws. The forward- looking information reflects current expectations regarding future results, performance or achievements and speaks only as of the date of this presentation. When used in this presentation, forward-looking information can be identified by such words as “may”, “will”, “expect”, “believe”, “plan”, “project”, “anticipate”, “intend”, “estimate” and other similar terminology. Such forward-looking information involves known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed in or implied by such information.
This presentation does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
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Recent Past + Producing silver mine until 2016 -
+ Earn-in acquisition signed with Kuya late 2017 + Debt retirement completed 2019 + Technical program for mine expansion initiated + Completed initial 43-101 technical report Present (2020-2021) + RTO Q3 2020 (CAD$15 million EV) + Permitting new plant/TSF + Drill/update resource estimate + PEA – Mine Expansion + Close Acquisition (full earn-in) + Finance plant/expansion + Build management team + Execute expansion project Future Vision (2021+)* + Commission/Production + Produce at industry low cost + Aggressive regional exploration + Next growth stage: second mine (identified) and/or expansion of Bethania + Re-rating potential based on comparable public companies
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BETHANIA IS A GREAT FIRST ASSET
Source: Independent Technical Report on the Bethania Silver Project - August 29, 2019 * Management estimates
Kuya Silver is acquiring an 80% interest in the Bethania Silver mine (1) Total investment USD $8 M for 70% (cash + work program) + final 10% for 3,670,000 Kuya (post RTO) shares
▪ $2.0 M work program to development capital* and prepare for expansion ▪ $2.5 M allocated to repay debts and liabilities (clean up S&L balance sheet) ▪ $3.5 M deferred acquisition payment (cash) ▪ Kuya shares for final 10% interest ▪ If full earn-in is not achieved, all investments convert into S&L equity at $12.5 M valuation ▪ Post earn-in, minority interest in mine is fully participating: must provide capital or be diluted (to minimum 5%)
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Oct 2017 (Initial Investment) Apr 30 2020 (Remaining by) Apr 2021
Work Program* $1,460 k $540 k Debt Repayment $1,650 k $850 k Acquisition Cost $550 k $2,950 k Total Cash Investment $3,660 k $4,340 k
1. Source: Independent Technical Report on the Bethania Silver Project - August 29, 2019 2. *Work program includes deal costs and Kuya’s Peru G&A
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Start small and grow through production and acquisition
Pan American (1995)
First Year Production: 2.6 Moz Today: C$6.6 Bln market cap
Endeavour Silver (2005)
First Year Production: 0.9 Moz Today: C$325 MM market cap
First Majestic (2005)
First Year Production: 0.3 Moz Today: C$2.4 Bln market cap
Great Panther (2006)
First Year Production: 0.5 Moz Today: C$215 MM mkt cap gold-focused
Fortuna Silver (2006)
First Year Production: 0.5 Moz Today: C$740 MM mkt cap gold-focused
Silver price
START with a great silver mining asset!
countries in the world, benefitting from strong mining culture, and infrastructure
to drill (increase resources/reserves) and expand (increase production/reduce costs)
processing methods, established workforce, permits in place
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BENEFITS OF A SMALL HIGH-GRADE ORE DEPOSIT – THE “RED LAKE” BUSINESS MODEL
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underway
huge value
Source: mining.com
and precious metal
production Peru ranks:
investments in mining with attractive tax and legal regulations
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Yauricocha (Sierra Metals) Corihuarmi (Mineral IRL) BETHANIA Coricancha (Nyrstar/ Great Panther) Yauliyacu (Glencore/ Wheaton) Santander (Trevali) HUANCAYO (CITY)
and 12 de Mayo) and has been operating at a small scale on and off for 40 years
2009, began toll processing in 2013
silver equivalent (only lead and zinc by-products)
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district in Central Peru
(major city)
Huancayo)
Source: Independent Technical Report on the Bethania Silver Project - August 29, 2019
CRISIS PHASE
from Canada head office
staff continued to work from home on CAD design work, compiling information for permits, etc.
community to assist during the crisis
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RECOVERY PHASE
from home
reopen
Bethania
best practices, upgrade PPE at site, monitor and adjust as required.
with government to take into account COVID-19 prevention
As a smaller mining operation we expect the increased costs as a result of COVID-19 to be minor
$11.69 $12.78 $20.58 $22.51 $0.00 $7.50 $15.00 $22.50 $30.00 Kuya FR FVI EXN EDR
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Low Cost Profile
recoveries
haulage, mining costs vs. deep mines)
sustaining capital, can increase with higher profits
Cash Costs AISC Silver industry comparables in Latin America (2019) Target
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2015 FY
(most recent full year of production)
AISC NEW AISC Treatment/ Refining
conditions
position with greater production
copper/gold circuit
Processing
costs
recoveries
Transport
haul trucking
Other Post Expansion (2021)
several adits on east and west side
43-101 resources
resources
workings – no resources Bethania historically produced approx. 400,000 oz/yr silver plus by-products as a toll-treatment mining operation*
14 * Historical production
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Open
250m
Unexplored
Bethania Mine Long Section
N Vein sample 206 oz/t Ag over 0.12 m (252 oz/t Ag eq.) Vein sample 52.3 oz/t Ag over 0.50m (92 oz/t Ag eq.) Vein sample 31.2 oz/t Ag over 1.40 m (43.5 oz/t Ag eq.)
Current Mine Area 7 sub-parallel veins with development Española 2 Historical workings (no resources) Mercedes vein (surface showing) Open Open
Targeting to commence operations and ramp-up in early 2021 Further Optimizations Improvement from current smelting and refining contracts Parallel permitting process to expand beyond 350 tpd, to further optimize production and cash flow beyond 2020 Identified nearby resource and property owners for potential regional consolidation
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Kuya Silver is actively engaged in building on a strong legacy of working cooperatively with the local Poroche community to develop a mutually beneficial, safe and sustainable mining business in the region The Company is committed to:
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TORONTO, CANADA David Stein, MSc (Geo), CFA – President and CEO, Director
develop the next silver mining company. Mr. Stein has spent most of his 20-year career in mining investments, first as a sell-side analyst and more recently as an investment manager. LIMA, PERU Christian Aramayo, MSc (Eng), CEng – VP Operations
Kinross before starting his own mining consultancy. He founded SIGC Consultants in Lima, and Kuya has access to Mr. Aramayo and his team for engineering and planning as well as access to a deep network in South America. Erika Soria – Country Manager
liaison with the local community. She is also well-connected in the Peruvian mining community and sources new opportunities for Kuya.
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Andres Recalde, Director
with social performance and building stakeholder confidence for the extractive industries. Mr. Recalde is Peruvian/Canadian and has worked extensively all over Latin America as a consultant, advisor and corporate director to mining companies such as Barrick Gold, Pan American Silver and Torex Gold. Alejandro García, MBA - CSR Manager
in mining and environmental law. He directs Kuya’s partnership with the local Poroche community, as well as liaising with government on permitting and licenses
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+723% +480% +132% +53% +61% +43% +50% +21% +357% +272% +399% +150% +47% +27%
+45%
Silver outperforms gold in every rally, but can lag in the early stages (e.g. 2001-2003)
Monetary Metals Rallies Since 1976 in USD GOLD (left) and SILVER (right)
highly correlated
safe haven assets
dominated by investment demand (not supply or industrial uses)
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Gold mining is a crowded sector with dozens of similar companies telling investors the same thing…
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Pan American Silver Hecla Mining Coeur D’Alene Silver Standard Silver Wheaton First Majestic Fortuna Silver Silvercorp Endeavour Silver Great Panther Silver Fresnillo PLC Avino Silver & Gold Hochschild Mining Americas Silver Silver Bear Excellon
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Very few investment options for silver production exposure
One by one silver “peers” have been diversifying into gold and base metals
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The Unfair Advantage: Even though silver miners tend to be smaller on a production/revenue basis, they command much higher valuations as a result of their scarcity
BMO Equity Research – Recent Coverage Comparables Small-cap Silver Small-cap Gold P/NAV (BMO est., 5%) 2.1x 0.7x P/CF 2020e 14.2x 10.2x EV/EBITDA 2020e 11.0x 6.5x
www.kuyasilver.com Follow Kuya Silver @KuyaSilver Kuya-Silver 240 Richmond Street West Toronto, Ontario, Canada M5V 1V6 KuyaSilverCorp