Current Copper Prices see Productora’s NPV increase 500% and firm as a Higher Grade Development Option

Highlights

• Pre-feasibility Study (PFS) for Hot Chili's 2.9Mt copper and 2.7Moz gold Costa Fuego (the combined Cortadera and Productora Resources “ 14km apart) copper development in Chile is on-track to commence in the coming weeks
• Several months work has re-shaped the Productora resource as a potential higher grade, open pit, satellite option for Costa Fuego
• Resource re-modelling and recent underground mine reconciliation confirms higher grade resources (above 0.4% Cu) at Productora are robust and shallow
• Grind size re-optimisation and further metallurgical testwork is set to increase Productora's metal recoveries
• Productora's 2016 PFS (US$3.00/lb Cu) is already highly leveraged to current spot copper prices (US$4.62/lb Cu, 20th May 2021) as a standalone, bulk tonnage, open pit development:
  • 500% increase in Net Present Value (NPV) to US$1.1 Billion, and
  • 150% increase in Internal Rate of Return (IRR) to 38%
• Combining Cortadera and Productora into one central development hub cements Costa Fuego as one of the largest coastal copper developments in Chile

 Productora 2016 PFS Results Versus Copper Price (Wood, 2020)

Refer to œHot Chili Delivers PFS and Near-Doubles Reserves at Productora, 2nd March 2016. The PFS financial model for Productora is adjusted each year by independent consultants Wood to model changing economic conditions. The copper price leverage using the 2020 adjustment is shown above. The model was adjusted for the following changes (only) - Au = 1,550 USD/oz Au (increased 300 USD/oz), Mo = 12.00 USD/lb Mo (decreased 2.00 USD/lb), Foreign Exchange CLP:USD was adjusted from 690 CLP : 1 USD to 719 CLP : 1 USD (the average FX rate for YTD according to S&P Global, increased 4%)

Hot Chili Limited (ASX: HCH) (OTCQB: HHLKF) (œHot Chili or œCompany) is pleased to announce several advances in the lead-up to commencement of a combined Pre-feasibility Study for its Costa Fuego copper-gold development in Chile.

Review of Productora as a Higher Grade Satellite Pit Option

Detailed work over the past nine months has confirmed the potential for Productora to provide a higher grade open pit development option for Costa Fuego.

Productora is located 14km from the Company's flagship Cortadera copper-gold porphyry discovery which has a maiden resource of 451Mt grading 0.46% Cu Eq that is set to be upgraded this year.

Productora's current resource of 273Mt grading 0.44% Cu and 0.09g/t Au supports a bulk tonnage open pit ore reserve estimate of 166.9Mt grading 0.43% copper, 0.09g/t gold (refer to ASX Announcement œHot Chili Delivers PFS and Near-Doubles Reserves at Productora, 2nd March 2016)
Hot Chili have been undertaking reconciliation of lease mining results (Santa Innes mine) and reviewing block model estimation approaches to confidently define high grade resources at Productora.

Channel sample grades and mapping of the Santa Innes underground mine showed positive reconciliation to the Productora 2016 resource block model, however, a positive finding has been the recognition of additional zones of mineralisation that have been encountered while mining.
Structural analysis and mapping suggest the additional zones are high grade (+0.4% Cu) short range breccias which exist within the current drill density at Santa Innes.

Multiple iterations of various re-estimation parameters have been completed to best represent the distribution of high grades at Productora, and provide a fit-for-purpose block model for use in revised pit optimisations using higher cut-off grades.

The Company now has flexibility to assess Productora as either a bulk tonnage or higher grade satellite ore source.

Improved Copper Price and Lower Power Cost Driving Improved Economics

Productora's value has been enhanced by higher copper prices and lower power costs than that considered in the 2016 PFS.

Since 2016, the central and southern Chilean electrical grids have been connected, driving a large influx of solar power derived from the Atacama region. Several large solar projects are now operating proximal to Costa Fuego.

These factors have allowed Hot Chili to contemplate the adoption of a finer grind size, a key recommendation of the Productora PFS. This will see sulphide copper recoveries increase by 2% to 88% overall at Productora (refer to ASX Announcement œHot Chili Delivers PFS and Near-Doubles Reserves at Productora, 2nd March 2016).

Further metallurgical testwork programmes are underway to optimise gold and oxide copper recoveries for the combined Costa Fuego PFS, with both of these items considered significant potential value levers for the project.

The Company looks forward to announcing ongoing drill results from its 40,000m drilling programme at Cortadera, which aims to expand and upgrade Costa Fuego's 724Mt open pit and underground resource base.

Flexibility of higher grade mine sequencing and improved recoveries provide a strong basis for the kick-off of Costa Fuego's combined Pre-feasibility Study in the coming weeks.

This announcement is authorised by the Board of Directors for release to ASX.
For more information please contact:
Christian Easterday
Managing Director
Tel: +61 8 9315 9009
Email: christian@hotchili.net.au

or visit Hot Chili's website at www.hotchili.net.au

Source - https://www.hotchili.net.au/current-copper-prices-see-productoras-npv-increase-500-and-firm-as-a-higher-grade-development-option/

Figure 1 Location of Productora and the Cortadera discovery in relation to the coastal range infrastructure of Hot Chili's combined Costa Fuego copper project, located 600km north of Santiago

Refer to ASX Announcement œCosta Fuego Becomes a Leading Global Copper Project (12th October 2020) for JORC Table 1 information related to the Cortadera JORC compliant Mineral Resource estimate by Wood and the Productora re-stated JORC compliant Mineral Resource estimate by AMC Consultants * Copper Equivalent (CuEq) reported for the resource were calculated using the following formula: CuEq% = ((Cu% — Cu price 1% per tonne — Cu_recovery)+(Mo ppm — Mo price per g/t — Mo_recovery)+(Au ppm — Au price per g/t — Au_recovery)+ (Ag ppm — Ag price per g/t — Ag_recovery)) / (Cu price 1% per tonne).  The Metal Prices applied in the calculation were: Cu=3.00 USD/lb, Au=1,550 USD/oz, Mo=12 USD/lb, and Ag=18 USD/oz.  For Cortadera (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=56%, Mo=82%, and Ag=37%.  For Productora (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=43% and Mo=42%.  For Costa Fuego (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=51%, Mo=67% and Ag=23%. ** Reported on a 100% Basis - combining Cortadera and Productora Mineral Resources using a +0.25% CuEq reporting cut-off grade.

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