ANACORTES MINING CORP. ANACORTES MINING CORP.
(formerly First Light Capital Corp.)
MANAGEMENT DISCUSSION & ANALYSIS
For the year ended December 31, 2021 (Expressed in Canadian dollars)
General
On October 6, 2021, the Company changed its corporate name from First Light Capital Corp. to Anacortes Mining Corp. The Company is listed on the TSX Venture Exchange under the symbol 'XYZ.V' and is a reporting issuer in Ontario, Alberta and BC. The Company is also listed on the OTC Markets Group
(OTCQB) under the symbol 'XYZFF'.
The following Management's Discussion and Analysis ("MD&A") is intended to assist the reader to assess material changes in financial condition and results of operations of Anacortes Mining Corp. ("Anacortes" or the "Company") as at and for the years ended December 31, 2021 and 2020.
This MD&A should be read in conjunction with the audited consolidated financial statements and the notes thereto as at and for the year ended December 31, 2021. These audited consolidated financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board ("IASB").
All dollar amounts are expressed in Canadian dollars unless otherwise indicated. Note that additional information relating to the Company is available on SEDAR atwww.sedar.com. This MD&A contains forward-looking statements. Please refer to the cautionary language at the end of this document.
The effective date of this MD&A is April 12, 2022.
Contents of the MD&A
1. Highlights for the year ended December 31, 2021 and outlook for 2022
2. Overview
3. Tres Cruces Project (including Preliminary Economic Assessment)
4. Results of operations
4.1 Results of operations for years ended December 31, 2021 and 2020
4.2 Results of operations for the three months ended December 31, 2021 and 2020
5. Selected annual and quarterly information
6. Liquidity and capital resources
7. Outstanding share data
8. Transactions between related parties
9. Off-balance sheet transactions
10. Proposed transactions and subsequent events
11. Use of accounting estimates and judgments
12. Financial instruments
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ANACORTES MINING CORP.
(formerly First Light Capital Corp.)
MANAGEMENT DISCUSSION & ANALYSIS
For the year ended December 31, 2021 (Expressed in Canadian dollars)
13. Risk factors
13.1 Financial
13.2 Industry
13.3 Metal prices
13.4 Political risk
13.5 Environmental and governmental regulations
13.6 COVID-19 global pandemic
14. Cautionary statement on forward-looking information
15. Approvals
16. Additional information
1.
Highlights for the Year Ended December 31, 2021 and Outlook for 2022
On October 6, 2021, the Company changed its name from First Light Capital Corp. and closed a transaction with New Oroperu Resources Inc. pursuant to a definitive arrangement agreement entered into by both parties on June 16, 2021 to combine and create Anacortes Mining Corp. (the
"Transaction").
Under the terms of the Arrangement Agreement, each New Oroperu shareholder received 5.815 common shares of Anacortes for each New Oroperu common share held.
Concurrent with the closing of the Transaction, the Company consolidated its shares on a 6 for 1 ratio.
Anacortes is led by a new management team and Board of Directors with extensive experience in Latin America and Peru and proven capabilities in all facets of mine development and operations.
During the fourth quarter of 2021, the Company commenced a Preliminary Economic Assessment
("PEA") on its Tres Cruces Project in Peru. The PEA was completed in March 2021 and its highlights include a pre-tax net present value at a 5% discount rate ("NPV 5%") of US$294.3 million, an after-tax
NPV 5% of US$165.9 million and an after-tax internal rate of return ("IRR") of 33.0% with a 2.1 year payback at US$1,700/oz.
During the year ended December 31, 2021, the Company incurred a net loss of $19,424,280 compared to $1,369,678 in 2020, mostly as a result of incurring transaction costs of 16,397,735 and $2,298,137 in share-based payments related to option grants.
As at December 31, 2021, the Company had a cash position of $12,862,013 (December 31, 2020 - $1,820,538.
The Company is preparing to commence a drilling program at Tres Cruces in April 2022. This program will provide further information to support the Company's planned feasibility study at Tres Cruces as
well as to test the deep sulphide potential suggested by a number of holes previously drilled by Barrick which ended in high-grade mineralization.
2
ANACORTES MINING CORP.
(formerly First Light Capital Corp.)
MANAGEMENT DISCUSSION & ANALYSIS
For the year ended December 31, 2021 (Expressed in Canadian dollars)
2. Overview
On October 6, 2021, the Company closed a transaction with New Oroperu Resources Inc. ("New Oroperu")
pursuant to a definitive arrangement agreement entered into by both parties on June 16, 2021 (the
"Arrangement Agreement") to combine and create Anacortes Mining Corp. Anacortes intends to focus on continued exploration and advancement of New Oroperu's Tres Cruces project located in Peru, in addition to seeking further growth opportunities in the Americas with the goal of creating the next mid-tier multi-asset gold producer.
Tres Cruces is one of the highest-grade oxide deposits globally and hosts oxide plus sulphide indicated resources of 2,474,000 ounces at 1.65 g/t gold, inclusive of 630,000 ounces of high-grade leachable gold at 1.28 g/t gold and inferred resources of 104,000 ounces at 1.26 g/t gold. The recently released PEA on the leachable resource at Tres Cruces indicates a robust open-pit, heap leach project. Anacortes is well capitalized and intends to aggressively advance the Tres Cruces Oxide Project through feasibility, permitting and to production as quickly as possible.
3. Tres Cruces Project
The Tres Cruces Oxide Project is strategically located in a highly prospective geological belt that hosts significant gold deposits such as Lagunas Norte (which is located within 10 km), Yanacocha and Pierina. Tres Cruces is underexplored with oxide and sulphide resource growth potential. It has not been drilled since 2008 when gold prices were approximately US$850/oz, and several of the best drill intercepts from the previous drilling campaign are below and outside of the current pit-constrained mineral resource.
The Company released its Preliminary Economic Assessment (PEA) on Tres Cruces in March 2022. Highlights of the PEA are:
● Pre-Tax Net Present Value at a 5% discount rate ("NPV 5%") of US$294.3 million
● After-Tax NPV 5% of US$165.9 million
● After-Tax Internal Rate of Return ("IRR") of 33.0%; 2.1 year payback at US$1,700/oz
● Average gold production of 68,000 ounces annually over an initial oxide mine life of 7 years.
Peak gold production of 81,000 ounces in Year 2.
● Initial CAPEX of US$125.2 million
● Average Daily Throughput: 5,800 tpd over initial mine life.
● 588,000 ounces of gold mined over the initial mine life of 7 years.
● Recovered gold is estimated at 481,000 ounces over the initial mine life.
This PEA was prepared in accordance with National Instrument 43-101 ("NI 43-101") and evaluates the economics of mining the Tres Cruces Oxide Gold Deposit through conventional open pit mining and heap leach processing for gold recovery to doré. The study was prepared by M3 Engineering and Technology of Tucson, Arizona and Lima, Peru, in cooperation with Nilsson Mine Services of Pitt Meadows, BC, Transmin Ltd., of Lima, Peru, Advantage Geoservices Ltd. of Osoyoos, BC, and Jeffrey Rowe of Surrey, BC.
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ANACORTES MINING CORP.
(formerly First Light Capital Corp.)
MANAGEMENT DISCUSSION & ANALYSIS
For the year ended December 31, 2021 (Expressed in Canadian dollars)
PEA ASSUMPTIONS AND RESULTS | ||
Description | Units | |
Net Present Value (NPV 5%) Pre-Tax | US$ (million) | $294.3 |
Net Present Value (NPV 5%) After-Tax | US$ (million) | $165.9 |
After-Tax Internal Rate of Return (IRR) | % | 33.0 |
Payback Period | Years | 2.1 |
LOM Cumulative Cash Flow | US$ (million) | $235.6 |
LOM All-In Sustaining Costs (AISC) | US$/oz | $786 |
Pre-Production CAPEX | US$ (million) | $125.2 |
Sustaining CAPEX (LOM) | US$ (million) | $5.2 |
Mine Life | Years | 7 |
Average Processing Rate | Tonnes/day | 5,800 |
LOM Strip Ratio | 2.89:1 | |
Average Gold Recovery | % | 81.7 |
Average Annual Gold Production | Oz/year | 68,000 |
Total LOM Gold Production | Ounces | 481,000 |
Mineral Resource Estimate
The current resource prepared by Jeffrey Rowe and James Gray (Advantage Geoservices), published in March 2021, was an update of the Technical Report by Lacroix and Associates (L&A) dated September 2012 for previous owner New Oroperu Resources (which is now a wholly-owned subsidiary of the Company). The estimate used the geologic models of lithology and alteration that were developed for the L&A resource, but divided the deposit by mineralization type (oxide, transition, or sulphide). Gold grade correlation based on geology was not readily apparent and the decision was made to use a 0.2 g/t grade shell as control for grade estimation. This shell was generated using an indicator estimation method. A total of 327 holes have been used for this estimate, of which 159 were RC holes and 168 were core holes. Sample grades were composited to a down-hole length of 3 m. Assays, subdivided by grade domain, were capped in a conventional manner prior to compositing.
Gold grades were estimated inside and outside the mineralized grade shell by ordinary kriging, into blocks with dimensions of 10m x 10m x 5m (X/Y/Z). Average density values were assigned by lithology based on 2,700 core density measurements.
The resource has been classified based on spatial parameters related to drill density and configuration, and the generation of an optimised pit. Blocks were initially classified as Inferred where the average distance to
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ANACORTES MINING CORP.
(formerly First Light Capital Corp.)
MANAGEMENT DISCUSSION & ANALYSIS
For the year ended December 31, 2021 (Expressed in Canadian dollars)
the closest three holes is within 80 m, and as Indicated where the average distance to the closest three holes is within 50 m. Pit optimization included variable cost and recovery values dependent on mineralization type. All material included in the Mineral Resource Estimate is contained within the optimized shell.
Mineral Resources Estimates1 | ||||||
Resource Classification | Indicated | Inferred | ||||
Tonnes (1000's) | Au (g/t) | Oz Au (1000's) | Tonnes (1000's) | Au (g/t) | Oz Au (1000's) | |
Oxide (0.3 g/t cut-off) | 9,636 | 1.37 | 425 | 487 | 0.75 | 12 |
Transition (0.3 g/t cut-off) | 5,707 | 1.12 | 205 | 361 | 0.60 | 7 |
Sulphide (0.9 g/t cut-off) | 31,132 | 1.84 | 1,844 | 1,713 | 1.55 | 85 |
Total | 46,475 | 1.65 | 2,474 | 2,561 | 1.26 | 104 |
The PEA only considers mining and processing of leachable oxides and transition materials from the Indicated and Inferred resource categories. Sulfide mineralization is considered a future opportunity and does not currently factor into mine planning, processing or financial results as reported in this PEA.
Mining and Processing
The Tres Cruces Oxide project presented in the PEA will employ conventional open pit mining with heap leach processing on a 365 day per year, 24 hour per day operating basis. The process will consist of a crushing circuit, a heap leach pad, a recovery plant, and water management ponds. Mined rock from the pit will be transported to the crusher by haul truck. A 6,000 tpd, three-stage crushing plant will reduce run-of-mine (ROM) to minus 16 mm. Crusher product will be transported to the heap leach pad via a conveyor belt and stacker system.
The heap leach pad will be lined with a geomembrane and will include a solution recovery system to contain and capture the process solution. The crushed phase will be conveyed and stacked in lifts on the leach pad by a mobile radial stacker. The stacker will be fed by a series of mobile grasshopper conveyors placed across the heap that will be fed from the main overland conveyor from the crushing circuit. Sections of the conveyor transporting crush to the heap will be permanent, and some sections located on the overliner will be semi-permanent and mobile to allow them to be moved as needed, allowing for phased construction of the pad and overliner placement over the life of the mine.
The lifts will be stacked to a target of 8 m with a total heap height of 85 m. Stacking will advance continuously, whereby areas will be placed under leach intermittently through the irrigation of dilute cyanide solution delivered from the Adsorption Desorption Recovery (ADR) plant by an infrastructure of distribution piping. The cyanide solution leaches gold from the stacked heap and the rate of recovery and ultimate
1 Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
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Anacortes Mining Corp. published this content on 22 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 April 2022 16:37:05 UTC.
