We interviewed you with ASCU in 2022. Can you give us a quick introduction to the company?

Arizona Sonoran is a lower-risk, emerging SX/EW and heap leach copper developer on private land in Arizona. The company is focused on developing its brownfields Cactus project, including the new Parks/Salyer deposit and MainSpring zone. Competitive advantages unique to ASCU include onsite and locally available infrastructure, an advanced and streamlined permitting process, access to a permitted water source, and support from the local community. ASCU is the third largest independent US-based copper developer with first-quartile capital intensity, and it has the potential to start selling copper cathodes directly into the US supply chain within this copper cycle.

Can you speak more about the PFS released in early 2024?

The PEA we published in 2021 showed a production profile of 28,000 tons per annum of cathode production with a mine lifespan of 18 years. The recent PFS was promised to be transformational for Arizona Sonoran, and it demonstrated the first-quartile capital intensity needed to build a major mining project in Arizona. In contrast to the 2021 PEA, which excluded Parks/Salyer, this PFS integrates 4 ore sources to outline a 55,000-ton annual Copper Cathode, heap-leach, and solvent extraction/electrowinning processing to produce LME Grade A copper cathodes directly onsite, over a mine life of 21 years. By integrating Cactus East, West, Parks/Salyer, and the Stockpile, we expect to benefit from economies of scale by leveraging the existing infrastructure and layering in the sources of mineralized material.

Interestingly, we issued the PFS and, shortly thereafter, received the title for our MainSpring property. MainSpring sits immediately to the south of Parks/Salyer, and through recent drilling, we have shown an exploration opportunity 2,500 ft up-dip from the Parks/Salyer deposit, within 140 ft of the surface. The intent is to incorporate MainSpring into an updated PFS later this year. Concurrently, the Nuton Steering Committee will advance a Cactus PEA, demonstrating the value of our Nuton agreement. The Nuton PEA will include MainSpring and the primary resources excluded from the current mine plan.

As we move forward, we hold great confidence in the potential of this highly prized asset, poised to yield robust returns and prosperity for our shareholders.

What were some of the permits acquired by Arizona Sonoran Copper over the last months?

Our team has completed all major permitting as it pertains to the Cactus PEA in the first half of 2023. Most recently, we rounded out the major permits with the Industrial Air and the Mined Land Reclamation permits. From the moment of application to the receipt of these permits, the entire process was accomplished within five months. Such efficiency instills confidence in the market, signifying a streamlined permitting process for this project, considering its location on private land, devoid of federal implications.

Upon final PFS mine planning later this year, our team will begin the application process for minor permits and proceed to amend the permits impacted by a larger operation, including the air, dust, and MLRP, which currently align with the 2021 PEA mine plan. Water usage is permitted to 2070 from onsite wells with excess capacity. Notably, the company has secured the original Aquifer Protection Permit and an amendment based on the 2021 PEA, which is crucial in demonstrating our social license and our dedication to protecting the water source.

What kind of drilling has the company been conducting in Parks/Salyer?

In September 2022, we released the maiden mineral resource estimate (MRE) on Parks/Salyer, which was not present in the 2021 Cactus PEA. This maiden MRE boasted 2.9 billion pounds of copper with a grade exceeding 1% of total copper. Since then, we have completed a 105,000-feet (32,000-meters) infill drilling program targeting the indicated category. We completed it in March 2023, with all assays confirming robust thicknesses, and aligning with the inferred mineral resource previously announced in 2022. With the 2023 drilling program at Parks/Salyer, we declared first reserves of 1.79 Blbs (96M tons @0.820% Cu TSol), and overall at Cactus, we declared first reserves of 3.0 Blbs (276M tons @0.484% Cu TSol). This reserve category is crucial as we advance toward the definitive feasibility study anticipated by mid-2025.

In 2024, we have completed the MainSpring inferred drill program (500 ft | 152 m drill spacing) and have begun drilling to define indicated drill spacings (250 ft | 76 m drill spacing) with 3 drill rigs. Drilling at MainSpring has extended the High-Grade Mine Trend at Parks/Salyer by 650 ft (198 m) to the southwest and traces lower-grade mineralization another 2,500 ft (762 m) south to within 140 ft (42 m) of the surface. So far, in 2024, ASCU has reported 26 drill holes for 35,529 ft (10,828.3 m).

Are you incorporating Nuton’s technology into the PFS?

Our February 2024 PFS delivered a reset to the economics and operations as a new base case heap leaching operation comprised of the oxides and secondary sulfides (enriched), specifically chalcocite. Nuton’s technology, which would address the excluded primary sulfide, is not part of this PFS. The primary sulfide currently exists only as an inferred resource and will be integrated into a PEA in the summer of 2024. For the upcoming PFS and subsequent definitive feasibility studies, we can only consider measured and indicated resources to convert into proven and probable reserves. To explore the economic potential of Nuton’s technology, additional work is required to drill out the primary sulfide, elevating it to a measured and indicated category and demonstrating more rigorous metallurgical testing.

In December 2023, we entered into a proposed, or option, Joint Venture with Nuton. Nuton paid up to $33 million cash to ASCU, and in turn, the two companies will work together to prove the Nuton technologies through a Phase 2 metallurgical program. If certain triggers are met, including an uplift to the ASCU Prefeasibility Study, Nuton will have the option to Joint Venture at the project level. This was important to us, as we now have a top global mining company validating the project and derisking the company financially and operationally. The option payment will be calculated using our MainSpring PFS NPV (due later this year) at a 0.65x multiple, multiplied by their ownership percentage (35-40%). We can use our baseline new PFS as a starting point to the calculation, which is $509M, multiplied by 0.65x and again by 35-40%.

What advantages does Nuton’s technology bring to the project?

Fundamentally, with our substantial global resource of 5.2 billion pounds of copper in the indicated category and 2.2 billion pounds of copper in the inferred category, approximately 22% resides in the primary sulfide or chalcopyrite. Thus, the potential success of Nuton’s technology opens the door to an additional 1.6 billion pounds of copper. On the other hand, Nuton’s technology also revolutionizes the recovery of copper from primary sulfides by reducing water usage and lowering GHG relative to traditional milling; Nuton’s leaching solution also eliminates the need to transport concentrate to smelters and undergo further refining. This aligns with our ESG commitment to reduce greenhouse gas emissions, which is especially crucial to providing cleaner copper used in EVs and the green energy sector.

Specifically, the Joint Venture, if executed, will offer financial and execution support during the project financing and construction stages, significantly derisking our already lower-risk development asset.

How will Arizona Sonoran address the water concerns in the southern US?

While water remains a critical concern in the arid southwestern US, our project benefits from a unique advantage: we have tapped into an independent and natural aquifer that provides water to fulfill all our operational and processing requirements throughout the mine’s lifespan. It is essential to note that this water permit allotment is exclusively for industrial purposes due to the presence of selenium, chromium, and zinc, making it unsuitable for human consumption, agriculture, or livestock use.

What are your thoughts on listing copper as a critical material?

The recent inclusion of copper as a critical material by the Department of Energy here in the US is an early indication that sentiment toward copper as a critical material may be shifting in the right direction. The European Union’s critical raw materials list further reinforces its significance in the global landscape. As countries vie for access to critical minerals, securing a stable supply chain becomes paramount. With copper now designated as a critical material, it should open avenues for accessing Federal grants and funds through the IRA, providing valuable support for mining projects in the US.

Within Pinal County and in Casa Grande, there are two US EV manufacturers, Nikola Motor and Lucid Motors, and the broader North American auto market as a whole is increasing its lines of available EV’s. While these manufacturers might not require copper cathode directly, the demand for copper wire in electric motors and copper foil for batteries opens the possibility of integrating our copper into these types of supply chain.

Do you have a final message for GBR’s audience?

During day-to-day fluctuations in the copper price, it is essential to maintain a broader perspective and focus on the medium and long-term dynamics of copper’s demand and supply fundamentals. With the anticipated exponential rise in copper demand and ongoing supply constraints, companies operating in the copper space stand poised to generate significant value for their shareholders beyond current equity valuations.

Looking forward, 2024 will be a transformational year for the company. We have raised the bar from our PEA to our PFS and will be continually demonstrating optimizations throughout the year as we incorporate MainSpring and Nuton to the mine plans.