Greg Smith

PRESIDENT, TREK MINING

July 14, 2017

Could you outline the creation of Trek Mining?

At Anthem United we constructed a 350 mt/d gold ore processing plant in Peru and started operating that facility in 2015. At that time, we were approached by Lowell Copper and Gold Mountain Mining, who had an idea to combine the companies and create a more diversified multi-asset gold production company. We completed that transaction in October 2015, raising around C$50 million. My role as CEO of the combined company, JDL Gold, was to find a flagship, larger gold asset where we could deploy our capital to become a larger gold producer. The combination with Luna Gold made sense because at JDL we had a significant amount of cash and Luna Gold had a world-class gold asset in Brazil but some financial debt as well. By combining and raising some additional equity, we were able to eliminate all the cash debt at Luna and maintain a significant treasury of over $85 million.

Do you think we will see more business combinations like this one in the market?

There is a tremendous amount of space for companies to consolidate. When you start spinning off assets in multiple companies, especially for smaller assets, you end up incurring substantial amount of costs in general administration, filing fees, and competing for capital. When you have assets within a more diverse portfolio, you have greater scale, which mitigates risk; you also have greater access to capital, and then you have choices of where to deploy that capital to obtain the best return for shareholders.

How is the newly created Trek Mining perceived by the market?

We certainly did a lot of transactions over a very short period of time, so a number of shareholders or potential investors are not aware of all the assets that are part of the new company. In terms of the JDL-Luna combination, the shareholders were very responsive –we were able to raise over C$80 million as part of the transaction. Our job now is to deliver the results.

Could you give us more details about your Koricancha plant in Peru?

Koricancha is a 350 mt/d gold ore processing plant in Arequipa, not far off the Pan American Highway. The business model is fairly well known in Peru: we purchase ore from legally-operating small scale or artisanal mines, and then produce gold and silver which the company sells at market prices. Our goal with Koricancha is to have a win-win-win situation, where the miners have access to efficient and economic processing options, where the government gets the tax revenues generated, and where we can make money as the operator of the business.

How different is this business model from a traditional mining operation?

Koricancha is not a mining asset, so we need to make sure that we have solid relationships with the miners that sell ore to us. Over the first months of 2017, we have been increasing production every month. Our goal now is to reach the full capacity of 350 t/d. We want to become the first choice for miners in Peru moving forwards. For that, we need to make sure that the ore we buy is suitable for our plant to get the recoveries that will benefit both the company and the miners.

The previous formalization process was unsuccessful. Do you think the new government will change that?

Peru has done a fantastic job and is on the leading edge of working to formalize their small-scale and artisanal mining industry. If it is not formalized, the sector could cause many environmental and other problems. The changes of the government over the last year will make it easier and more efficient for informal miners to enter the system.

Other gold processing companies have suffered from delays to get their IGV tax returned. Was this your case as well?

I do not want to blame SUNAT because, if you do things the right way, your records are in good shape and you are operating according to the tax regulation, it may not happen as quickly as you would like, but you can collect your IGV and operate your business in a way that makes sense. That being said, this is indeed an area of extreme importance for companies like ours. If you spend 18% on everything you buy and you cannot collect that, you are not going to be able to make any money. The government needs to be aware that those delays can significantly affect business.

What are going to be the highlights for Trek Mining in 2017?

We are extremely busy. At Aurizona, we will be completing a feasibility study in mid-2017, while we also accelerated exploration activities at the project. Ideally, we would start construction in Q3-2017 and pour gold at Aurizona in late 2018. At Koricancha, we continue with the ramp-up, every month is better than the previous one, so Koricancha will be increasingly significant within our portfolio moving forward. Finally, we keep looking for opportunities to add value and advance the other assets that we have.

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