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Arizona Mining - Developing One of the World’s Largest, Highest Grade Zinc-Lead-Silver Deposits

Arizona Mining – Developing One of the World’s Largest, Highest Grade Zinc-Lead-Silver Deposits

Overview

Arizona Mining (TSX:AZ) owns the Hermosa Project which hosts two economically important deposits including the Taylor and Central deposits near Tucson, Arizona. The Taylor Deposit shares with Vale’s (NYSE:VALE) prolific Voisey’s Bay the distinction of being one of only two of the world’s most significant base metal deposit discoveries in the last 35 years.

Taylor is one of the world’s top 20 largest zinc-lead deposits and ranks as one of the highest grade of similar size zinc-lead-silver deposits. The deposit hosts a significant zinc-lead-silver resource with an October 2016 estimate of Indicated Resources of 31.1 million tons grading 10.9 percent zinc equivalent and Inferred Resources of 82.7 million tons grading 11.1 percent zinc equivalent. Arizona Mining is focused on aggressively advancing the Taylor Deposit to become a significant producer of zinc and lead concentrates (silver reports to the lead concentrate). Metallurgical studies have shown that the mineralization is capable of producing high quality concentrates free of deleterious elements, which are in high demand from smelters as “universal blender” concentrate.

The large resource at Taylor and the company’s commitment to fast-tracking the project offers shareholders excellent exposure to improving zinc fundamentals at a time when very few options are available in this space. Zinc inventories are at their lowest level since 2009 at the same time that mine production is down, leading analysts, including those at Scotiabank and RBC Capital, to forecast an inventory deficit for the next five years, resulting in expected higher prices by 2019.

Results of Arizona Mining’s 2016 drill program on the Taylor Deposit indicate plenty of upside exists as the deposit remains open at depth as well as to the north, south and west.

The Central Deposit at the Hermosa Project also provides significant value for Arizona Mining shareholders. The manto oxide type deposits hosts 235 million ounces of Measured and Indicated silver resources and 10 billion pounds of Measured and Indicated manganese resources.

Arizona Mining is increasing shareholder value in the short term by completing a high quality Preliminary Economic Assessment by Q1 2017, followed by a Feasibility Study by Q4 2017.

Arizona Mining’s top-tier management team makes the company a standout amongst its junior peers. James Gowans, President and CEO, has decades of experience in C-level positions for leading mining companies such Barrick Gold (TSX:ABX), DeBeers Canada, PT Inco Indonesia, and Placer Dome. Gowans has been responsible for building and operating six world-class mines including two of the world’s largest zinc-lead mines, Polaris and Red Dog. The company’s COO, Don Taylor led the discovery team at Hermosa. Taylor is an internationally successful geologist with more than 30 years’ experience moving projects from exploration to mine development with companies such as BHP (NYSE:BHP), Westmont and Doe Run. Director Johnny Pappas is a leader in the field of environmental management and permitting, and was recently instrumental in directing the federal and state permitting of the first gold mine permitted east of the Mississippi in the last 20 years.

Investment Highlights

  • First class exposure to improving zinc fundamentals.
  • One of the world’s premier undeveloped zinc-lead-silver deposits at the Hermosa Project in southern Arizona.
  • Large, high quality Taylor discovery ranks among the highest grade of similar size global resources; 2016 Indicated Resource of 31.1 million tons at 10.9 percent zinc equivalent and an Inferred Resource of 82.7 million tons at 11.1 percent zinc equivalent.
  • Simple flotation processing of ore with recoveries of high grade concentrates.
  • Substantial exploration potential on extensive land package; resource remains open in several directions.
  • Experienced management team with considerable mine building and operating expertise.
  • Preliminary economic assessment anticipated in Q1 2017, followed by feasibility study anticipated in Q4 2017.
  • Tight share structure with good liquidity; management and the Board hold 40 percent of shares, of which Arizona Mining Chairman Richard Warke holds the majority.

Key Property: Hermosa Project

The Hermosa Project encompasses 450 acres of patented mining claims and 17,125 acres of unpatented mining claims in Arizona’s Santa Cruz County, about 80 kilometers southeast of Tucson and 13 kilometers north of the U.S. border with Mexico.

Arizona Mining - Developing One of the World’s Largest, Highest Grade Zinc-Lead-Silver Deposits

Hermosa is surrounded by excellent infrastructure including the Arizona State Highway 82 (less than 10 miles from the project), as well as access to the power grid and natural gas.

Arizona Mining - Developing One of the World’s Largest, Highest Grade Zinc-Lead-Silver Deposits

Hermosa hosts the Taylor sulfide carbonate replacement deposit and the Central manto oxide deposit.

Taylor Deposit

The recently discovered Taylor Deposit is a carbonate replacement deposit located down-dip and below the Central Deposit (a manto oxide deposit). Taylor hosts a significant lead-zinc-silver Indicated Resource of 31.1 million tons at 10.9 percent zinc equivalent and an Inferred Resource of 82.7 million tons at 11.1 percent zinc equivalent. The resource, published in October 2016 as an update to the initial February 2016 resource estimate, is based on assay results from 59 surface diamond drill holes, totaling 62,863 meters of drilling, which have all intersected stratabound carbonate replacement sulfide mineralization.

“This updated Mineral Resource estimate indicates that the Taylor Deposit has expanded substantially and continues to be one of the best quality growth stories in the mining sector,” stated James Gowans. “In addition, should the technical feasibility and economic viability of the project be established, continued metallurgical testing indicates the deposit will produce clean, saleable concentrates with no deleterious elements.”

Deposit remains open in multiple directions

Arizona Mining’s aggressive 2016 drill program was not only successful in growing the resource base of the Taylor Deposit, but also tested the potential for further resource expansion. The results show that the deposit remains open down dip and along strike to the south, north and west of the resource.

Step-out drill holes indicate excellent expansion potential on patented ground to the west/northwest and unpatented ground to the northeast and southwest of the deposit.

Drill results from the 2016 program at Taylor include:

  • HDS-358 intersected 58 feet at 24.29 percent zinc-lead, 6.17 ounces per ton (opt) silver, 0.19 percent copper; 24 feet at 46.9 percent zinc-lead, 13.3 opt silver and 0.41 percent copper;
  • HDS-361 intersected 105 feet at 23.98 percent zinc-lead and 3.36 opt silver; 73 feet at 26.4 percent zinc-lead and 3.99 opt silver;
  • HDS-376 intersected 4 distinct mineralized horizons over a thickness of 109 feet including 14 feet at 7.9 percent zinc, 11.5 percent lead and 4.1 opt silver within a broader 46.5 feet thick zone of mineralization; and
  • HDS-377, drilled to a depth of about 3,400 feet, intersected 12 mineralized zones with a cumulative thickness of 412 feet with intersections including 30.5 feet at 14.8 percent zinc, 7.2 percent lead and 3.2 opt silver; and 26 feet at 14.2 percent zinc, 13.8 percent lead and 19.2 opt silver.

Excellent high grade recoveries

Metallurgical testing has produced high grade concentrates of 79 percent for lead in concentrate and 57 percent for zinc in concentrate with no deleterious elements in the concentrates. Recent flotation testing has returned strong results including:

  • Zinc Recoveries:
    • 87 percent recovery of zinc
    • 15 percent recovery of silver
  • Lead Recoveries:
    • 93 percent recovery of lead
    • 85 percent recovery of silver

Advancing toward feasibility

A preliminary economic assessment (PEA) is now underway on the Taylor Deposit and is expected for completion in Q1 2017. Feasibility level metallurgical tests as well as permitting and hydrologic studies are well underway. Arizona Mining is looking toward a completed feasibility study by Q4 2017 which will contemplate an underground mining operation via shaft access to the deposit.

“Up to this point in the project life, we have focused on keeping all our activities on private patented claims, because the permitting path would then only require Arizona state permits,” stated James Gowans. “If our deposit grows to the extent we cannot do so, we would have to impact US Forest Service (USFS)/Bureau of Land Management (BLM) lands, which would require federal permitting in addition to state permits.  Having said that, the mine will be an underground operation, with shaft and ramp/decline(s) access. About half of the tailings would be returned to the underground as cemented/paste backfill and the remaining tailings would be put in a lined tailing area as “dry stack” tailings – designed to minimize the surface footprint of the tailings disposal area, and also to maximize the re-cycling of water for the mine.  These features should make permitting more straightforward than most projects, particularly those that are open pit.”

Central Deposit

The Central Deposit is a silver-manganese manto oxide type deposit containing 235 million ounces of Measured and Indicated silver resources and 10 billion pounds of Measured and Indicated manganese resources (2013).

Arizona Mining - Developing One of the World’s Largest, Highest Grade Zinc-Lead-Silver Deposits

  1. Mineral reserve and resource for the Manto Oxide and Upper Silver Zone only. See QP information in this presentation.
  2. Mineral resources that are not mineral reserves do not have a demonstrated economic viability. Mineral resources are inclusive of mineral reserves.
  3. Metal prices used: $27.06/oz Ag, $0.82/lb Mn, $1,468/oz Au, $0.92/lb Zn, and $3.54/lb Cu.

Arizona Mining completed a Pre-feasibility Study(PFS) on the Central Deposit in 2013 using the above resource. Highlights from the study include:

  • After-tax NPV (at 5 percent) of $830 million.
  • After-tax IRR of 21.3 percent over a 2.8-year payback period.
  • Initial Capex of $835 million.
  • 18-year mine life with average annual silver production of 12.2 million ounces in first 5 years and 5.7 million ounces and average annual electrolytic manganese metalproduction of 110 million pounds for the life-of-mine.
  • Average cash costs of $4.35 per ounce silver and $0.74 per pound of electrolytic manganese metal for the first 5 years and $4.45 per ounce of silver and $0.73 per pound of electrolytic manganese metal for life-of-mine.
  • Average by-product silver cash costs – $4.37 per ounce for life-of-mine.

Management

Richard W. Warke—Executive Chairman, Founder

Richard Warke has more than 25 years of experience in corporate finance and marketing in the global resource industry, and has been involved in raising over $1 billion dollars in equity for resource companies. Although his endeavors have primarily involved mineral resource operations, he has also been involved with oil and gas, forestry, technology and manufacturing operations. He was also the founder and Chairman of Ventana Gold Corp which was sold for C$1.533 billion and Augusta Resource Corporation which was sold for C$666 million. Warke is currently the Executive Chairman of NewCastle Gold Ltd.

James Gowans—President and CEO, Director

James Gowans has more than 30 years of experience in mineral exploration, mine feasibility studies, opening new mines, commissioning mine expansions and in the development of best practices in mine safety, mine operations and economic performance improvement. Gowans was formerly Co-President of Barrick Gold Corporation from July 2014 to August 2015 and Executive Vice President and Chief Operating Officer from January to July 2014. Recent prior roles include Managing Director of Debswana Diamond Company (Pty) Ltd., President and Chief Executive Officer of De Beers Canada Inc., Chief Operating Officer and Senior Vice President of PT International Nickel Indonesia tbk and Executive Vice President at Placer Dome Inc. He is a Professional Engineer and received a Bachelor of Applied Science degree in mineral engineering from UBC and attended the Banff School of Advanced Management.

Donald R. Taylor—COO and Director

Don Taylor has 30 years of successful mineral exploration experience on more than five continents in base and precious metals, taking projects from exploration to mine development. He was previously VP, Exploration at Doe Run Resources and BHP Minerals, has a Bachelor of Science degree in Geology from Southeast Missouri State University and a MSc from University of Missouri at Rolla. He is a Licensed Professional Geologist in several states and a QP as defined by NI 43-101.

Johnny Pappas—Director, Environmental and Permitting

Johnny Pappas has a distinguished career in the field of environmental management and permitting. He recently held the position of Director of Environmental Affairs for Romarco Minerals Inc., where he was instrumental in directing the federal and state permitting of the Haile Gold Mine; the first gold mine permitted east of the Mississippi in the last 20 years. He was previously Environmental Manager of the Climax Mine and Permit Coordinator for Barrick’s Cortez Gold Mine. He has also held Senior Environmental Engineer positions with Pacificorp, Plateau Mining and Santa Fe Pacific Gold. Pappas holds a B.Sc. degree in Geology and Business Administration. 

Paul J. Ireland—Chief Financial Officer

Paul Ireland is a Chartered Accountant with extensive financial experience in mining and forestry. He is also CFO of NewCastle Gold. Recent CFO roles include Ventana Gold Corp prior to its acquisition in 2011, Diavik Diamond Mines Inc. and Western Forest Products Inc.

Gregory F. Lucero—Vice President, Community and Government Affairs

Gregory Lucero has more than 20 years of management experience in both the public and private sector, as well as an extensive background in the executive government working for local, state and federal elected officials. He holds a Bachelor of Arts in Political Science from the University of Arizona.

Purni Parikh—Vice President, Corporate Secretary

Purni Parikh has more than 22 years’ experience in business administration including more than 17 years’ experience with public companies in the areas of communications, investor relations and legal administration; also Corporate Secretary for Plata Latina Minerals and NewCastle Gold Ltd., as well as for Augusta Resource Corporation prior to its recent acquisition. 

Susan Muir—Vice President, Investor Relations and Corporate Communications

Susan Muir is an experienced investor relations executive, and was most recently Vice President, Investor Communications at Barrick Gold Corporation. Prior to Barrick, Susan has 25 years’ experience analyzing and covering large and small cap precious metals equities, respectively.

Poonam Puri—Director

Poonam Puri, Professor of Law and formerly Associate Dean at Osgoode Hall Law School and affiliated scholar to Davies Ward Phillips & Vineberg LLP, is one of Canada’s most respected scholars and commentators on issues of corporate governance, corporate law, securities law and financial regulation. Professor Puri is a member of the Board of Directors of the Greater Toronto Airports Authority and also sits on the Board of Directors of Toronto’s Women’s College Hospital. She has a Bachelor of Laws (LLB) degree from the University of Toronto, a Master of Laws (LLM) degree from Harvard Law School and is a member of the Institute of Corporate Directors.

Don Taylor—Director

Don Taylor has 30 years of successful mineral exploration experience on more than five continents in base and precious metals, taking projects from exploration to mine development. He was previously VP, Exploration at Doe Run Resources and BHP Minerals, has a Bachelor of Science degree in Geology from Southeast Missouri State University and a MSc from University of Missouri at Rolla. He is a Licensed Professional Geologist in several states and a QP as defined by NI 43-101.

Donald R. Siemens—Director

Donald Siemens is an independent financial advisor specializing in corporate finance, cross-border transactions and mergers and acquisitions; previously, Partner-in-Charge of Thorne Ernst & Whinney’s (now KPMG) Vancouver office Financial Advisory Services group; over 30 years of experience as a Chartered Accountant; currently Director and Audit Committee Chair for Atlantic Gold Corporation, Eros Resources Corp, Epicore BioNetworks Inc. and Hansa Resources Limited. Donald obtained his Chartered Accountant designation in 1973.

Robert P. Wares—Director

Robert Wares is a professional geologist with more than 30 years’ experience in mineral exploration and research. Currently, he is President and CEO of NioGold Mining Corporation, Chief Geologist for Osisko Gold Royalties Ltd. and director of several public mining companies. Wares was formerly the Executive VP, COO and Founding Director of Osisko. Wares holds a Bachelor’s Degree (Honours) in Geology and an Honorary Doctorate in Sciences from McGill University.

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