Missed opportunities Chilean investors have missed a rally in mining stocks

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1 Photo: Santacruz Silver Mining 3 Gloves off in Salar de Atacama 4 Chile Explore Congress Conferences and event calendar 6 Subscription form Missed opportunities Chilean investors have missed a rally in mining stocks I t has been a year since the Santiago Stock Exchange launched the Santiago Venture Market, a dual-listing initiative with the TSX Venture Exchange in Canada. Since then, conditions in mining markets have changed significantly. After hitting multi-year lows in late 2015, mining shares have rallied dramatically in line with improved commodity prices, especially gold and silver. Canada s leading diversified Teck (TSX: TCK) has seen its market capitalization triple this year. The move has been even more dramatic among volatile exploration plays. The S&P/TSX Venture Composite Index, which is dominated by small mining and energy companies, has rallied 43% since hitting a decade-low in January. And that average figure masks huge variations in performance between individual stocks, with some investors racking up huge gains in the first few months of The mood is entirely different, the level of optimism has changed, commented TSX Venture Exchange president John McCoach on a recent visit to Santiago. The shares dual-listed in Santiago have not been immune to this year s rally in natural resource stocks. Of the ten companies listed on the Santiago Venture Market only Inca One Gold Corp (TSXV: IO, SSEV: IOCL) has seen its share price fall while Peruvian Precious Metals The processing plant at Santacruz Silver Mining's Rosario mine in Mexico The mood is entirely different, the level of optimism has changed. John McCoach, TSX Venture Exchange president (TSXV: PPX, SSEV: PPXCL) is largely unchanged. All the rest have recorded increases ranging from a modest 34% for Gold Reserve Ltd (TSXV: GRZ, SSEV: GZCL) to a mouth-watering 180% for Santacruz Silver Mining and 450% for Wealth Minerals. In comparison, shares in retail group Cencosud have risen 52% over the same period. Unfortunately, interest from Chilean investors has been minimal. According to the Santiago Stock Exchange s web-

2 Photo: Google Feature site, there have been trades in just two of the companies listed in Santiago (Puma Exploration and Red Eagle Mining) worth less than CLP1M (US$1,446). Here we look at some of the opportunities local investors are ignoring: Santacruz Silver Mining (TSXV: SCZ, SSEV: SZCL) C$ up 383% YTD Silver has been one of the stars of the 2016 rebound in commodity with prices rising below US$14/oz in December to almost US$18/oz in April although they have pulled back since then. SCZ has been one of many companies to benefit. After stabilizing production and grades at its Rosario Ag mine in San Luis de Potosi state, Mexico, SZCL is due to produce 1.2Moz AgEq this year at an allin sustaining cost of US$12.50/oz, says IR director Neil MacRae. SZCL will receive another boost later this year when production begins at the Veta Grande mine held under a net profit sharing agreement with a Mexican company. SZCLs share of output should lift production to well over 2Mozpa from 2017, MacRae predicts. But SZCLs big opportunity is the San Felipe project, a former Hochshild Mining (LON: HOC) property, where a 2014 PEA proposed a US$36.3M investment to produce 3.2Mozpa AgEq over 7.5 years. MacRae says SZCL studying the possibility of turning financial markets, largely John McCoach, TSX Venture Exchange closed to mining companies over the last three years, to finance construction. We need to do more work this year and then take a decision whether to move forward or not, he said. Southern Silver Exploration (TSXV: SSV, SSEV: SVCL) C$0.25- up 400% YTD SVCL is another Mexico silver play. Its main project is the 130km2 Cerro Las Minitas Ag-Pb-Zn property, in the heart of northern Mexico s Silver Belt, where it recently estimated Indicated Reserves of 10.8Moz Ag, 189Mlb Pb & 207Mlb Zn. But more high-grade mineralization was recently identified around the Mina La Bocona area and on extensions of the Blind and El Sol zones. Exploration is being funded by Electrum Global Holdings LP, which can earn a 60% stake in the property by spending US$5M over a four year period. Meanwhile, SVCL has turned its attention to the Oro polymetallic project, across the border in the US state of New Mexico. The 11.8km2 project covers most of the historic Eureka mining district, which produced silver, lead and copper from the late 19 th century into the 1960s. SZCL recently raised US$1.1M to fund a first phase exploration program, including trenching and RC drilling at the Stockpond target, a low outcrop of oxidized disseminated Au mineralization on the edge of porphyry copper/skarn/ carbonate-replacement system. Red Eagle Mining (TSXV: RD, SSEV: RDCL) C$ up 143% YTD RDCL is well on its way to building Colombia s first modern gold mine. Construction work at the San Ramon mine and mill is now 70% complete and the project is scheduled to enter production during 3Q16. The 1,000tpd underground mine, 70km N of Medellin, is designed to produce an average of 50,000ozpa Au over eight years from reserves of 5.2g/t Au. The deposit is just one of several targets at RDs 10,000h Santa Rosa project but San Ramon continues to turn up surprises. Recent stope delineation drilling intercepted 12.8g/t Au (hole SRD- 0004) and 5.71g/t Au (hole SRD-0005), significantly longer than our average mining width of 3m and grades significantly higher than our reserve grade, said COO Bob Bell. Wealth Minerals (TSXV: WML, SSEV: WML) C$ up 450% YTD Originally formed by Henk van Alphen, a veteran promoter of South American mining ventures, to seek opportunities in copper and gold, WMLCL switched its focus to lithium at the start of the year with a deal to merge with Li3 Energy (OTC: LIEG), which has interests on the Salar de Maricunga in Region III. WMLCL subsequently appointed Marcelo Awad, a former CEO of Antofagasta plc (LON: ANTO), to lead its lithium business in Chile and in April signed a Letter of Intent to acquire an option over concessions on the Salar de Aguas Calientes in Region II. The move into lithium has been welltimed. Lithium prices have doubled over the last year on expectations of rising demand and supply troubles. Chile s SQM (NYSE: SQM), the world s largest producer of the volatile metal, recently estimated that global lithium demand will rise 10% this year. WMLCL could also benefit from changes in Chile s lithium policy. LIEGs concessions on the Maricunga Salar lie adjacent to those held by state copper company Codelco, which is seeking a partner to explore and develop its lithium resources. CER 2

3 Photos: Google Feature Gloves off in the Atacama SQM expects the arbitrator to provide a decision by early 2017 T he long-running arbitration process between economic development agency CORFO and SQM (NYSE: SQM) over concessions on the lithium-rich Salar de Atacama, in Region II, has entered a new stage. The state agency, led by executive director Eduardo Bitran, is seeking the termination of the SQMs lease of the claims, claiming that between 2009 and 2013 the nitrates producer paid up to US$8.9M less than required under formula contained in the 1993 rental contract. SQMs operations on the Salar are a key part of its business, accounting for 38% of total revenues in 2015, including 100% of its potash and lithium output. On May 23 rd, CORFO launched a second arbitration proceeding against SQM, this time referring to the framework Project Contract signed in 1986 to develop the claims on the Salar. CORFO notified SQM subsidiary SQM Salar of what it believes are various grave breaches of obligations under the contract, in particular a requirement to safeguard the integrity of CORFO s mining property. SQM countered that the second lawsuit had been filed to correct an omission in the original arbitration request. SQM and its subsidiaries have fully complied with all of the obligations established in these contracts and mutually agreed upon with CORFO in a timely manner for over 20 years, the company said, denying that its actions had ever put the continuity of its industrial and mining operations on the Salar de Atacama at risk. On May 25th, a brief meeting at CORFO s offices in downtown Santiago with top executives from both companies broke up without agreement. Shortly afterwards, CORFO announced that the two sides will recur to arbitration hearings to settle their dispute. The first step is to name an arbiter. SQM has said it expects the arbitrator to provide a decision by early Restructuring Meanwhile, SQM has reorganized its management structure, creating two separate sales departments, for SQM CEO Patricio de Solminihac and Eduardo Bitran, Executive VP of CORFO SQMs operations on the Salar are a key part of its business, accounting for 38% of total revenues in 2015, including 100% of its potash and lithium output. fertilizers and industrial products respectively, and created new departments for development and planning, human resources and performance, public affairs and sustainability and finance reporting to VP Corporate Services. The move follows the election of Luis Eugenio Ponce, brother of controlling shareholder Julio Ponce, as chairman of the board at its AGM in April. Ponce was previously SQMs Commercial VP. The change also means a new position for SQMs growing metallic exploration business. The unit will now reports to Pablo Altomiras, VP Planning and Development. Daniel Jimenez, who led SQMs search for copper and gold as VP Exploration, will now lead the marketing of SQMs iodine, lithium and industrial chemicals. The new structure would provide SQM with the best way to face the challenges we see in the different markets in which we participate, in the coming years, commented CEO Patricio de Solminihac. CER 3

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5 Calendar Conferences and Events Calendar June 2nd - 4th June 5th - 8th June 8th - 10th June 15th - 17th Conference on Environment and Mineral Processing Mining and Communities Solutions 2016 VI Exposición Internacional San Juan 8th International Seminar on Process Hydrometallurgy Ostrava, CZECH REPUBLIC Vancouver, CANADA Predio Cepas Sanjuaninas San Juan, ARGENTINA miningandcommunities/ hydroprocess June 23th - 24th July 5th - 8th July 17th - 19th August 1st - 3rd Sustainable Minerals 2016 International Seminar on Paste and Thickened Tailings MAPLEMIN 2016 Diggers and Dealers Falmouth, UNITED KINGDOM Lima, PERU Kalgoorie, AUSTRALIA sustainableminerals16/ maplemin August 3rd - 5th August 21th - 23th August 22th - 24th August 24th - 25th SAFEMINING 2016 MININ 2016 Mine Management 2016 LatAm Mine Water Conference Brisbane, AUSTRALIA Lima, PERU safemining m.com.au/ fleming.events/en/events/ landing-page/mining/latammine-water-conference August 24th - 26th September 7th -8th September 26th - 28th October 26th - 28th ENERMIN 2016 Mine Expo International 2016 PROCEMIN 2016 Grand Hotel Hyatt, Las Vegas, Nevada, USA

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