Can you introduce Chesapeake?

Chesapeake was founded by Randy Reifel, who had huge success discovering the El Sauzal and Marlin deposits in his previous company, Francisco Gold Corp. After selling these projects to Glamis (which was acquired by Goldcorp - now part of Newmont), Randy and his team found a new opportunity in Metates, in the Durango state of Mexico. With 18 million oz gold and almost 500 million oz silver in total resources, Metates is one of the largest undeveloped gold and silver projects globally.

Chesapeake has been advancing Metates since 2007, but the precious metals are trapped in pyrite, a refractory mineral that makes their recovery very difficult. A pre-feasibility study in 2016 indicated a capital cost of US$3.5 billion to bring Metates into production. In 2020, we merged a private company with a sub-license to a breakthrough alternative oxidative leach technology, and last year, we acquired the underlying license and patent portfolio, becoming the full IP owners of the processing technology. We have since continued to advance the proprietary technology and explore opportunities to apply and license the innovative process to partners on projects that have similar if not larger-capital cost challenges than Metates. How does the oxidative leach technology impact the costs of bringing Metates into production?

By applying our proprietary technology, we believe the capital requirement could be reduced from US$3.5 billion down to US$360 million. Last year, we released results showing how our technology can improve gold recoveries from 33% (using a regular cyanidation process) to over 70% after 204 days when applying the technology, thus crossing the threshold of economic viability that is comparable to many traditional heap-leach operations out there. What is the market size of refractory deposits that could benefit from the technology?

According to McKinsey & Company (2021), an estimated 580 Moz out of the global 2.6 billion oz gold reserves and resources are in refractory form (1 in 4 ounces). If we correlate it to a conservative US$2,500/oz gold price, this is a US$1.5 trillion market. We have built a list of over 200 projects that we believe to be amenable to our technology and we are actively seeking to expand the application of this technology across the refractory precious metals space. This year we will begin testing other projects with the technology. Could you elaborate on other cost and environmental advantages that Chesapeake’s technology promises?

In our 2021 PEA, we highlighted a first-quartile AISC of ~US$750/oz gold using our technology. Processing costs, encompassing everything from three-stage crushing, oxidation, heap-leaching, Merrill-Crowe process, and foundry, amounted to ~US$8/t of ore, again falling in the first quartile globally. This is based on a 15,000 t/d operation.

Just as exciting are the environmental benefits. First is water: Our technology uses 10 times less water per ounce of gold produced than a traditional refractory processing circuits. Secondly, our technology does not require external energy sources to run large integrated refractory processing circuits for autoclave, roaster or auriferous pyrite concentrates shipped to a smelter/refinery, but relies purely on chemistry to do the work. This results in upwards of 70% in energy savings. Moreover, the total GHG emission footprint is approximately 80% reduced in a heap-leach environment. And lastly, since we are not doing a flotation, our operation does not require a tailings facility. For these reasons, we call the end product “green gold.” Besides Metates, Chesapeake has made a discovery at the Lucy gold project in Sinaloa. Can you speak about the exploration results at Lucy?

Lucy is an exciting grassroots discovery in our portfolio and it is also very different from Metates. From our initial trench and rock sampling on the skarn at Lucy, we saw exceptional results, with gold at surface with 40 m of 4.4 g/t. We followed up with drilling in 2023, and each of the eight drill holes hit mineralization at surface. We defined a 500-m mineralized corridor with grades of 24 m @ 6g/t gold on the eastern side and 24 m @ 4g/t gold on the western side. Last year, we drilled another 12 holes, extending the mineralized corridor to 700 m, which remains open in all directions. The 2024 campaign successfully expanded the strike length, showed continuity (through infill drilling), and determined that the mineralization continues at depth beyond the first 25 m intersected below surface. We have also completed metallurgical testing and achieved up to 97% gold recoveries in bottle roll tests, indicating that Lucy is an oxide project and a much simpler system compared to Metates. We are currently permitting a larger drill program while continuing to run metallurgical testing and geological data interpretation to better understand the system before commencing the next exploration campaign. Do you have a final message for potential investors?

With US$10 million in the bank, Chesapeake will continue to advance on three fronts: continue to advance our technology, progress Metates towards a pre-feasibility study, and explore the new Lucy discovery.