Investor Q&A

QUINCHIA, COLOMBIA

What are the next steps at Miraflores?

The scoping study completed by SRK on 8 September 2016 was very positive. It confirmed the robust nature of the project using an underground mining only scenario, utilizing filtered tailings as backfill material and a dry stack tailing facility.  Subsequently the Company commenced the Miraflores Feasibility Study which is anticipated to be completed during Q3 2017 with the EIA expected to be lodged by the end of 2017. The Company, subject to EIA approval, is targeting commencement of construction of the proposed Miraflores gold mine and facilities during Q2 2018 with gold production targeted to commence in the first half of 2019.

What is the overall funding strategy for Miraflores?

On completion of the Feasibility Study the Company will commence evaluation of alternatives for funding the development of the planned Miraflores gold mine. Preliminary evaluation work indicates the most attractive alternative will be a combination of debt and equity and/or introducing a minority funding partner. The Board and management have the experience and all the required technical skills to develop and operate a project of this scale.

MOLLACAS, CHILE

What is the current position with Mollacas?

The Company is evaluating the situation constantly, but for now the project is on care and maintenance and its efforts are concentrated on Colombia where the Company is well positioned to generate significant value. The Company continues to work on resolving the mining access issue and will update shareholders when it is in a position to do so.

COLOMBIA

What is the macro landscape like in Colombia?

Colombia has a strong democratic tradition, winning independence in 1819.President Santos, has been in office since 2010 and was previously Minister of Defence. The country is rich in mineral wealth with significant mining groups being active including AngloGold Ashanti, Continental Gold, B2 Gold and South32. There is an increasing belief that Colombia will in the next 10 years become one of the new and preeminent gold districts in the world.

The 24 August 2016 peace deal between the Colombia Government and FARC was the result of four years of formal negotiations. The objective is for it to lead to lower levels of violence, better security of infrastructure and an improved operating environment. The “No” vote to the agreement on the 2nd October 2016 was a bump in the road to country peace however more recently at the end of November 2016 both houses of Colombia’s Congress approved a revised peace accord with FARC. The important point here is that the opposition and Government remain united to formulate a sustainable peace agreement. The FARC ceasefire continues and the National Liberation Army (ELN) is now in formal peace talks. This does not impact Metminco in any way and the Quinchia Gold Portfolio is located in a secure location for mining.

SALE OF INTEREST IN LOS CALATOS

Why sell the Los Calatos Project when we are currently taking it through feasibility?

The Company is focussed on delivering near term shareholder value. Developing Los Calatos in the current environment has proven highly challenging for the Company as a junior miner. The CD Capital deal last year was important as it removed the financial burden of Los Calatos whilst enabling us to focus on generating value elsewhere.  Selling the Company’s interest in Los Calatos at this point allows the Company to realise value and deploy that cash to continue to advance the Miraflores Gold Project where we see significant near term value accretion through mine development and gold production.

Doesn’t US$5m undervalue our stake in Los Calatos and not take into consideration its future value?

In the longer term the answer may be yes but the sale price is a reflection of the current market.  There is no guarantee that Los Calatos will eventually be developed into a producing mine and so holding onto that stake has risks as well as potential opportunities. After detailed consideration, the Board formed the view that monetising the value of the Company’s’ interest in the Los Calatos Project now would benefit existing shareholders more than the previously proposed in specie distribution of shares.  Most likely it would be some years before shareholders would benefit from the Los Calatos Project, whereas cash from its sale can flow into the Miraflores Gold Project and benefit shareholders in the short term, while also minimising dilution from equity raisings to fund the Miraflores Gold Project.

Do you believe this was the optimum sale time for Los Calatos?

Copper prices have been rising since the beginning of October 2016 however as with everything there are uncertainties. Completion of the Los Calatos Feasibility Study, which is some way off is a critical point for de-risking the project and potentially facilitating a release of capital to shareholders. The Board, after taking into consideration the opportunity for the Company to become a gold producer in the near term, believes it is a good time to release our equity in the Los Calatos Project and re-deploy it to advance our strategy of becoming a gold producer in the near term.

Why did the Company decide to sell LCH and not distribute to its shareholders?

The planned In Specie Distribution as reflected in the Company’s share price did not receive the support from investors anticipated by the Board, and proved more complex at tax, legal and funding levels than anticipated.  Under the circumstances the Board decided to sell its interest in the Los Calatos asset to fund the ongoing work for the development of the Miraflores Gold Project. The Board believes that advancing Miraflores will ultimately be more value accretive to shareholders than a cash distribution.

Why not raise funds as opposed to monetise interest in the Los Calatos Project?

At the current share price the dilution to current Metminco shareholders would be significant when funding via an equity capital raise. By monetising Los Calatos, dilution to shareholders is minimized. 

GENERAL

What is Metminco’s primary focus and future plans?

The primary focus of the Company is to complete the Feasibility Study on the Miraflores Gold Project within the 100% owned Quinchia Gold Portfolio in Colombia and to advance the project towards gold production.

When is the Company aiming to have an operating cash flow?

The Company is aiming to have the Miraflores Gold Mine commence production in the first half of 2019, subject to EIA approval and funding.

What is the timing for the Company to commence gold production and what additional funding will be needed?

The Company aims to have the Miraflores Gold Mine commencing production in the first half of 2019, subject to EIA approval. The Company is funded towards a decision to mine with completion of the Miraflores Feasibility Study scheduled during third quarter 2017 and the Environmental Impact Study scheduled to be submitted by the end of 2017.  Additional funding will be required to finance the construction and early operational phase of the project.