"In total, by the end of 2021 we plan to have drilled a total of 200,000 m on our Val-d’Or properties. By February 2021, we will be releasing results every 10 days, to display the potential to continue to expand Marban and highlight the potential at O3’s other properties, including Alpha."

Jose Vizquerra

PRESIDENT & CEO, O3 MINING

November 25, 2020

What were the highlights from the PEA for the Marban project announced in September 2020?

Our Preliminary Economic Assessment (PEA) included several highlights. The first is the AISC or all-in sustaining cost, which was US$822 per ounce of gold produced. This means at current gold prices, Marban would have a margin of about US$1,000/oz. The second is Marban’s capex, which is relatively low and affordable for a company of O3 Mining’s size at C$256 million. Finally, with production averaging 115,000 oz/y, there is leverage the project provides to the investment. For every C$1 million invested in capex, we will generate C$1.7 million in free cash flow (FCF), high leverage of 1.7x per dollar invested and much higher than for several other projects.

Ausenco led the PEA using a US$1,450/oz gold price, which produced an NPV of C$423 million and an IRR of 25.2%. If we use US$1,900/oz gold, the NPV rises to C$846 million with a 45% IRR. We should also see this in the context of O3 Mining’s (TSXV: OIII) market cap today. The NPV of the conservative scenario of US$1,450/oz equates to twice our market cap, while US$1,900/oz equates to over four times. You can make the argument that out of the 5.9 million ounces (Moz) O3 Mining has already defined, less than half of those equate to a potential market cap two to four times our current size.

How have you managed to maintain a low capex for the project, and what potential do you see to expand the resource?

Location, location, location. Val-d’Or in Québec, Canada has road access, railroads, highways, hydropower, and experienced and technical skilled labor. These are all elements we did not have to invest in to build our projects, which can costs other projects tens if not hundreds of millions of dollars to put in place. Additionally, energy alternatives like Hydropower highlight the investment opportunity in Québec-driven green energy. This positions Marban as an impact investment opportunity using its environmentally innovative approach to attract investors.

The majority of our 600,000 meters (m) drilled at Marban extends the mineralization outside of the PEA pit, and so we have an opportunity to expand this resource. This not only could add ounces, it can potentially increase the production and the mine life. In the coming year, we will be drilling to increase mineable resources and if we find more high-grade gold, we can prioritize those resources first in the mine plan, improving the economic metrics of the project.

Can you tell us about O3 Mining’s exploration campaign for 2021 and use of AI to define targets?

O3 Mining will expand from six drill rigs to 10 in January 2021 as part of our aggressive 150,000 m drilling campaign. 40,000 m of this campaign have already been drilled (completed in October 2020), in addition to an initial 50,000 m in our first drilling campaign. In total, by the end of 2021 we plan to have drilled a total of 200,000 m on our Val-d’Or properties. By February 2021, we will be releasing results every 10 days, to display the potential to continue to expand Marban and also highlight the potential at O3’s other properties, including Alpha (also located in Val-d’Or, Québec).

In partnership with Mira Geoscience, we identified targets using artificial intelligence (AI) on the Alpha property utilizing historical geological information. We are the first group in Val-d’Or to use AI in this way, putting together historical data to create blocks of geological information, including the location of the closest faults, sonic alteration, and areas with the most gold and concentration of shear zones. This has allowed us to search for specific types of deposits, such as the Cadillac style similar to what Agnico Eagle has, the Archean hydrothermal gold systems similar to the Windfall deposit, the Sigma style similar to Eldorado Gold, and skarn types. This work identified 60 targets, which we narrowed to 25. The initial drilling results, such as 0.6m of 176 g/t and 1.3m of 9 g/t in areas that were not previously known, have proven effectiveness of using AI and machine learning for exploration. We firmly believe it will become commonplace in the industry.

O3’s share price has rebounded but is trading less than the IPO. What do you think the market is missing about your story?

The company went public in July 2019 at C$3.88 and we took what some may have initially perceived were underperforming projects from our sister company Osisko Mining, and subsequently we did two acquisitions, including Alexandria Minerals and Chalice Gold to consolidate our land position in Val-d’Or. The market sold-off our shares and within a year we grappled with the largest pandemic in global history. Despite these lists of events, we flipped the narrative. Through strategic investments in exploration, we advanced drilling programs and completed a positive PEA at Marban. I believe people are now appreciating O3’s assets in their own right and recognize the value we are creating.

Our share price rebounded up to C$3.50 following our Marban PEA announcement in September. Now it is a matter of proving the value and displaying to investors the 5.9 Moz we hold is a worthy investment. We have bought shares in the open market frequently, and management now owns close to 7% of the company. O3 Mining has also received coverage from seven analysts, including CIBC and National Bank, with an average target price of C$5.00.

When we created Osisko Mining, the second iteration of Osisko and took the company public in 2015 it took almost a year to start building the share price. O3 Mining, the third iteration of Osisko, is now in a similar position. So far, we have focused on building fundamental value in the ground, now we can prove that value and share our story.

You have previously mentioned that with O3 Mining you would like to create a company bigger than Buenaventura. However, considering the appetite for M&A in a gold bull market, how will you balance developing the company sustainably with the potential of being bought out?

As our mineral resource inventory increases, to use a metaphor, we become an increasingly interesting piece on the chessboard. We are only 8 km from Wesdome’s Kiena property and 12 km from the Canadian Malartic mine, which is due to run out of ore by 2027. Malartic has a mill with the capacity to process 55,000 tonnes per day (mt/d), and in the best scenario from its transition to an underground mine, it will be able to extract a maximum of 25,000 mt/d. This 30,000 mt/d of excess capacity could be used to toll mill ore from Marban, which would cut its C$256 million capex in half. For an asset with 2.5 Moz, a toll mill scenario probably makes more sense than a competitor acquiring O3 Mining. However, if we increase its reserves to 5 Moz then it suddenly becomes a more desirable piece on the board. It is important that we are self-sufficient and do not need help from a major to develop Marban. Flexibility is the name of the game.

We have five clear steps to move through development: first, complete a baseline environmental study; second, an EIA; third, apply for and obtain production permits; fourth, construction; and finally, production. Each of these steps will de-risk the project and make it more valuable, and they will happen in parallel with the continuing growth in resources through exploration. At the same time, this should translate into share price growth for the benefit of our shareholders.

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