"We managed to increase production at the plant by 20% on a daily basis, reduce operating costs, and increase the net return from around 15% to almost 23%. Furthermore, we reduced the payback period on initial capital from 3.6 years to 2.4 years.”

-Anthony Hawkshaw, President & CEO

Anthony Hawkshaw, Elsiario Antunez De Mayolo, Eric Caba, Andres Franco

PRESIDENT & CEO, COO & GM, VP PROJECT DEVELOPMENT, VP CORPORATE DEVELOPMENT, BEAR CREEK MINING

May 12, 2020

What were some of the key findings of the NI 43-101 technical report published for the Corani project in December 2019?

EC: The 43-101 is an update to the technical report issued in 2017. Primarily we looked at addressing risks on construction design, trying to make a constructible plan and improve the economics of the project. During the process we undertook materials testing, additional geotechnical studies, and contracted Ausenco to review the design of the process plant. We then went through and requoted everything, doing a zero-based estimate for owners and operating costs. The net result saw the capex come out basically the same as in 2017, but with significant changes within the capex regarding the distribution of capital.

AH: We managed to increase production at the plant by 20% on a daily basis, reduce operating costs, and increase the net return from around 15% to almost 23%. Furthermore, we reduced the payback period on initial capital from 3.6 years to 2.4 years. The capex is about US$580 million, but the people that provide the financing will expect us to provide the capacity for potential delays and start-up cost overruns, which will push the number above US$600.

In March 2020, Bear Creek Mining announced it had engaged BNP Paribas and Société Générale for a US$400 million senior secured credit facility. Can you expand on this transaction?

AH: Both banks have substantial mining experience, financing projects such as Mina Justa in Peru, and, in 2018, they provided approximately US$13 billion of financing for mining projects around the world. Based on their desktop work, each of them offered indicative terms, and each proposed they would like to work with another bank for syndication. We received their proposals in December 2019 and January 2020, and the synergies between the two banks was apparent.

We negotiated an engagement letter which sets out the due diligence process, which will take three or four months. Discussions with other sources of finance with respect to an inter-creditor arrangement, legal documentation, translation of documentation, and perfection of security in Peru, should take an additional three or four months. Sometime in Q3 2020, we hope to have put together an additional US$250 million of financing that may include offtake arrangements with smelters and/or traders, possibly a base metals stream, subordinated debt, and a portion of equity to complement the debt facility.

How have Bear Creek’s relationships with the Chacaconiza and Quelcaya communities evolved?

AH: On Common Ground Consultants did a review of the Corani region in 2012 and made recommendations to Bear Creek as to the type of programs we should implement. Andres Franco took these recommendations and expanded on them to a much greater extent than was initially planned. We knew we had the best community social relations in Peru, or anywhere I have ever seen, but wanted this to be validated by a third party, so we hired On Common Ground to undertake a follow up social review in 2019. Their December 2019 report showed that we have done an excellent job in earning social licence, but their one area of concern is that the people want the mine to be built and are waiting for us to start work to further improve their lives.

AF: Since 2011, Bear Creek conducted a successful community relations program that has provided real support of all communities around the project, especially Chacaconiza and Quelcaya.

In December 2017, we started a program of workshops focused on ensuring compliance to regulatory requisites to get the project construction permits. The Ministry of Energy and Mines and the Ministry of Culture carried out the “consulta previa” on-the-ground visits to define the focus areas for the ensuing assemblies. In order to ensure a thorough and successful appraisal, they asked community members about specific grievances and complaints. Meetings took place with representatives from nearby indigenous communities and received unanimous consent to proceed with the project under the discussed procedures and practices. By April 2018, the communities and government had approved the “consulta previa” process and Corani received the construction permits in May and June of that year.

We are completely transparent with the local communities; for example, the local population has been educated about the environmental impact of the project. Selected community representatives were enrolled in an intensive program that covers the Environmental and Social Impact Assessment in detail, for example outlining the use of chemicals and explaining milling processes. These people now have extensive knowledge and have been engaged to explain environmental matters related to the Corani project to community members and visitors. This stimulates community engagement and provides a high level or transparency and, at the same time, mitigates any risks there may be stemming from a lack of knowledge about the impacts of the project.

Bear Creek announced a CAD$16.6 million bought deal financing in February 2020. Where will this money be invested?

EAM: In 2017 we started to build a substation near the town of Macusani to provide energy for the project but also to provide social benefits. In 2020 we will continue with the power line, which will also help the community. We want to integrate the project development and social support to solidify the good relationships we have with the communities and local authorities. We also intend to invest in the project access road, which has been a matter of contention for other mining projects in Peru.

What would the successful development of the Corani project mean for the Puno region?

EAM: The project is vitally important for the Corani district, which the National Institute of Statistics (INE) declared is the poorest district in Puno.  Mining Canon has been decreasing in recent years, mainly due to the lower contributions from Minsur’s San Rafael mine related to lower metal prices as well as production. The direct and indirect revenues to local communities from a project the size of Corani will have a transformational impact in the region.

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