"On a tonnage basis we are expanding production by 3.5 times, and will be producing the concentrate on site, instead of toll milling like before. We eliminate the long-haul trucking costs of the ore and the milling costs because you have to pay the other mills a premium to use their facilities.”

David Stein

PRESIDENT, KUYA SILVER

March 17, 2020

What were the circumstances surrounding the creation of Kuya Silver and how you came to take control of the Bethania silver mine?

I was looking at a variety of projects for potential investment around 2016/17, and Bethania stood out as having the most outstanding potential. The more work I did on it the better it looked. We ended up creating Kuya Silver in late 2017 to acquire the Bethania mine, which is held by a Peruvian company. The main goal in the short term is to expand and restart the mine, which was put into care and maintenance in 2016. We saw the opportunity to put our own plant at site, which will greatly lower the costs and increase production, which makes it a very exciting silver project. There are so few primary silver companies out there, so when we take the company public we will have a huge advantage.

It is hard to get exposure to pure silver plays, as so much of the metal is mined as a by-product, and even companies that specialize in silver often have gold assets, such as Hochschild and Pan American. This is why true primary silver companies such as First Majestic trade at very nice premiums.

How do you view the fundamentals of the silver market moving forward?

While gold and silver do have slightly different fundamentals, they are probably more connected and correlated than any other two commodities, and therefore do not act completely independently. The investment demand drives the price. When one moves, the other one is likely to move as well. If you analyze what happens in the various bull and bear markets on a micro level, silver outperforms gold during a bull market by between 50-100%. On the other hand, silver underperforms during a bear market. It is a much smaller dollar value market, so the incremental dollars in and out of the market can really impact the price compared to gold. If we believe we are getting into a precious metals bull market, it is just a matter of time before silver outperforms gold. Very commonly you will see gold do well in the early stages of the upwards run and then silver will take over.

Why do you think the Bethania silver mine has been overlooked by the big Peruvian precious metals producers?

Companies such as Buenaventura are so big that the amount of production required to move the needle is so high. Furthermore, the big companies tend to look at public companies with readily available information. We have identified the opportunity to get to 2 million ounces per year silver (oz/y Ag), which would make Kuya a material public mining company. From this standpoint we will generate income and look for further opportunities in Peru.

What are the reasons behind keeping the company private for the time being?

When I first struck the deal to acquire Bethania we were in a bear market. At the time, we thought that by staying private until production we could go public as a junior producer, something like Excellon Resources, which would be much more attractive for our investors. Kuya’s all-in costs to acquire, expand and restart the mine will be US$18 to 20 million, which is very fundable. Eric Sprott is one of our investors, as well as a number of mining-savvy investors looking for a big return. While the plan was to remain private until we are in production, we are conscious that if silver makes a run we may have to act more quickly, and we are lining things up to be ready to go public in such a market. We are still looking for further investment and are actively funding right now.

Kuya’s website mentions the Bethania silver mine and always been small, until now… Can you elaborate on this statement?

On a tonnage basis we are expanding production by 3.5 times, and will be producing the concentrate on site, instead of toll milling like before. We eliminate the long haul trucking costs of the ore and the milling costs because you have to pay the other mills a premium to use their facilities. Additionally, the market conditions have improved for concentrate so we expect to save costs there as well.

What are the next steps for Kuya Silver and what does the future hold for the company?

We are currently towards the end of the EIA stage and, depending on financing, we expect to start construction later this year and could move into production by Q1 2021. We are fortunate that the area we are in Central Peru is used to mining and the mine is near a small community that we communicate with on a personal basis.

I see Kuya in the longer term being a consolidator in silver-focused projects. Building on the success of Bethania we will be looking to do further projects here, as Peru is stable, has huge exploration potential, and we are positive about the future of mining here.

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