"I would like to see Ariana back in construction, Condestable’s first expansion fully completed, and the permitting process underway for the second stage of the expansion. In an ideal world, I would also like at least one more asset in the SPM portfolio."

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Adolfo Vera

PRESIDENT & CEO, SOUTHERN PEAKS MINING

March 09, 2021

How has the pandemic impacted your operations?

When we last spoke in February 2020 I had identified Covid as a risk, but I think no one anticipated the scale of what would happen. In the case of Southern Peaks Mining (SPM), we had the fortune of not having to stop operations completely, but we did scale down to comply with social distancing measures. Condestable did not have a camp site at the mine, so we have had to build one on a modular basis to take care of cash flow. By Q4 2020, we were back to 75 to 80% production levels, and when the camp construction is complete in 2021 we expect to be back to full capacity.

What progress has been made with the planned expansion at Condestable?

The process of certifying the reserves and resources was delayed in 2020, as we were relying on a Canadian firm and they were not able to visit due to the travel ban. In Q4 2020 we restarted process with local engineering firm, BISA, and by April 2021 the basis of studies for the expansion will be ready.

The staged expansion at Condestable will initially increase throughput from 7,000 tonnes per day (mt/d) to 8,400 mt/d, and construction for this stage should be finished in Q3 2021, which will result in a 20% increase in copper production from the mine. The next stage after this will be to increase throughput to 12,000 mt/d after we have prepared a new EIA and obtained the necessary permits.

What is the current status of Ariana, and can you elaborate on the company’s plan to increase investment in the project by US$15 million to around US$140 million?

Ariana is subject to a judiciary process right now, which we hope will be resolved in 2021. There was an additional hearing in August 2020, but the judge has not make a decision yet, so we have decided to keep the project suspended for the time being. Ariana is a project that SPM will definitely build, as I have always maintained, because there is no technical support for any of the claims of those who oppose the project. The increase in investment we are considering relates to a number of upgrades including a dry tailings deposit. By the end of this year we will hopefully be able to restart construction, with production to start by the end of 2022. Ariana will be a very low cash cost producer in the neighborhood of US$0.50/lb, and will increase production by 15,000 mt/y fine copper equivalent, about 35,000 mt/y of copper concentrate.

Would SPM consider acquiring another project to add to its portfolio?

The current high copper price, led by the astonishing Chinese recovery from the pandemic that does not seem to be slowing down, gives us a much more robust case for expansion. This will bring about cheaper capital for brownfield copper projects, and has also stimulated M&A interest. We are looking at properties in Peru and Chile, and to a lesser extent Ecuador and Argentina, and we are waiting for the opportunity to add another asset to SPM’s portfolio. However, right now we are focusing more on operating assets rather than exploration or M&A, as is it the area we can add the most value in the short term.

SPM participated in the TSX Latam Mining Investor Day in August 2020. Considering the company’s organic growth pipeline and current high copper price, is listing publicly on the cards?

We are IPO ready. SPM prepared for an IPO in 2017, but the market turned and we decided against listing, which was a good decision for us at that moment, and in hindsight. We have kept the discipline of being IPO ready, but I do not see it as a priority in the short term for 2021, unless there is a particular bull run for small cap copper producers and it becomes undeniably attractive. That being said, listing publicly is certainly on the cards further down the line for SPM in the not so distant future.

Where would you like to see SPM by 2022?

I would like to see Ariana back in construction, Condestable’s first expansion fully completed, and the permitting process underway for the second stage of the expansion. In an ideal world, I would also like at least one more asset in the SPM portfolio.

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