Costa Fuego Copper- Gold Project Preliminary Economic Assessment ( PEA)1 Outlines One of World’s Lowest Capital Intensity, Major Copper Developments
1
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Hot Chili Limited ACN 130 955 725
First Floor, 768 Canning Highway, Applecross, Western Australia 6153
PO Box 1725, Applecross, Western Australia 6953
P: +61 8 9315 9009 F: +61 8 9315 5004. www.hotchili.net.au
Highlights
Costa Fuego Copper- Gold Project Preliminary Economic Assessment ( PEA)1
Outlines One of World’s Lowest Capital Intensity, Major Copper Developments
• Strong Economics: Costa Fuego PEA delivers using an 8% discount rate and long- term metal
price assumptions of US$3.85/lb copper (Cu) and US$1,750/oz gold (Au)
• Base-case post-tax Net Present Value (NPV 8%) of US$1.10 B illion (approximately, within a
range of US$733 Million to US$1.46 B illion) and Internal Rate of Return (IRR) of 21%
(approximately, within a range of 17% to 25%)
• Low Start-up Capital: US$1.05 Billion estimated, resulting in fast 3.5-year payback. Initial phases
of open pit mining fully fund development of a bulk underground operation
• Low Capital Intensity: One of the lowest capital intensities of global copper development projects
• Approximately 112 ktpa Average CuEq2 Production Rate: Including 95 kt Cu and 49 koz Au
during primary production (first 14 years) at C1 Cash Cost 3 of US$1.33/lb (estimated, net of by-
product credits)
• Initial M ine Life: 16-years with 1.41 Mt Cu and 718 koz Au produced for total revenue of
approximately US$13.52 Billion and total free cash flow of approximately US$3.28 Billion (post-
tax, after operating costs, capital costs, and royalties)
US$15 Million Investment Agreement with Osisko Gold Royalties
• Strong endorsement from a leading North America n royalty-streaming group with funds to be
used to advance the Costa Fuego Pre -feasibility Studies (PFS), resource growth drilling
programmes and general project advancement.
30,000 m drilling program across multiple targets to commence shortly
Single, Large Pit Scenario for Cortadera being studied in H2 2023
Strong Cash balance of $26 million
1 The PEA is preliminary in nature and includes 3% of production feed from Inferred Mineral Resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable them to be categorised as Mine ral
Reserves (NI 43-101) or Ore Reserves (JORC 2012), and there is no certainty that the PEA will be realised. Mineral Resources that are
not Mineral Reserves or Ore Reserves do not have demonstrated economic viability. References to “Mineral Reserves” in this
announcement include Ore Reserves (JORC 2012). See page 39 for additional cautionary language.
2 The copper-equivalent (CuEq) annual production rate was based on the combined processing feed (across all sources) and used long-
term commodity prices of: Copp er US$3.85/lb, Gold US$1,750/oz, Molybdenum US$17/lb, and Silver US$21/oz; and estimated
metallurgical recoveries for the production feed to the following processes: Concentrator (87% Cu, 56% Au, 37% Ag, 58% Mo), O xide
Leach (55% Cu only), & Low-grade Sulphide Leach (40% Cu only).
3 See page 16 for full non-IFRS measures disclaimer.
Quarterly Report
Period Ending 30th June 2023
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Hot Chili Limited ACN 130 955 725
First Floor, 768 Canning Highway, Applecross, Western Australia 6153
PO Box 1725, Applecross, Western Australia 6953
P: +61 8 9315 9009 F: +61 8 9315 5004. www.hotchili.net.au
Hot Chili’s Managing Director and Chief Executive Officer Mr Christian Easterday is responsible
for this announcement and has provided sign-off for release to the ASX and TSXV.
For more information please contact:
Christian Easterday
Managing Director – Hot Chili
Tel: +61 8 9315 9009
Email: [email protected]
Penelope Beattie
Company Secretary – Hot Chili
Tel: +61 8 9315 9009
Email: [email protected]
Harbor Access
Investor & Public Relations (Canada)
Email: [email protected]
Email: [email protected]
or visit Hot Chili’s website at www.hotchili.net.au
Cautionary Statement – JORC Code (2012)
The Preliminary Economic Assessment referred to in this report is equivalent to a Scoping Study under JORC Code (2012) reporting
guidelines. It has been undertaken for the purpose of initial evaluation of a potential development of the Costa Fuego Copper Project in Chile.
It is a preliminary technical and economic study of the potential viability of the Costa Fuego Copper Project. The PEA outcomes, production
target and forecast financial information referred to in the report are based on low level technic al and economic assessments that are
insufficient to support estimation of Ore Reserves. The PEA is presented in US dollars to an accuracy level of +/ - 35%. While each of the
modifying factors was considered and applied, there is no certainty of eventual conversion to Ore Reserves or that the production target itself
will be realised. Further exploration and evaluation and appropriate studies are required before Hot Chili will be in a position to estimate any
Ore Reserves or to provide any assurance of any economic development case. Given the uncertainties involved, investors should not make
any investment decisions based solely on the results of the PEA.
Of the Mineral Resources scheduled for extraction in the PEA production plan, approximately 97% are classified as Indicated and 3% as
Inferred during the 18-year evaluation period. The Company has concluded that it has reasonable grounds for disclosing a production target
which includes a small amount of Inferred Mineral Resources. There is a low level of geological confidence associated with Inferred Mineral
Resources and there is no certainty that further exploration work will result in the determination of Indicated Mineral Resources or that the
production target itself will be realised. Inferred Mineral Resources comprise 2.5% of the production schedule in the first four years of operation.
The viability of the development scenario envisaged in the PEA does not depend on the inclusion of Inferred Mineral Resources.
The Mineral Resources underpinning the production target in the PEA have been prepared by a competent person in accordance with the
requirements of the JORC 2012. For full details on the Mineral Resource estimate, please refer to the ASX announcement of 31 March 2022.
Hot Chili confirms that it is not aware of any new information or data that materially affects the information included in that release and that all
material assumptions and technical parameters underpinning the estimate continue to apply and have not been changed.
To achieve the outcomes indicated in the PEA, including reaching Definitive Feasibility Study (“DFS”) stage, funding in the order of US$1.10
Billion will be required, including pre-production and working capital and assumed financing charges. Investors should note that that there is
no certainty that Hot Chili will be able to raise that amount of funding when needed. One of the key assumptions is that the funding for the
Project will be available when required. It is also possible that such funding may only be available on terms that may be dilutive to or otherwise
affect the value of Hot Chili ’s existing shares. It is also possible that Hot Chili could pursue other value realisation strategies such as debt
financing, a sale or partial sale of its interest in the Costa Fuego Copper Project, sale of further royalties and/or streaming rights, sale of non-
committed offtake rights, and sale of non-core assets.
This report contains forward-looking statements. Hot Chili has concluded that it has a reasonable basis for providing these forward- looking
statements and believes it has a reasonable basis to expect it will be able to fund development of the Costa Fuego Copper Project. However,
a number of factors could cause actual results or expectations to differ materially from the results expressed or implied in the forward-looking
statements. Given the uncertainties involved, investors should not make any investment decisions based solely of the results of the PEA.
ASX: HCH
TSXV: HCH
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Hot Chili Limited ACN 130 955 725
First Floor, 768 Canning Highway, Applecross, Western Australia 6153
PO Box 1725, Applecross, Western Australia 6953
P: +61 8 9315 9009 F: +61 8 9315 5004. www.hotchili.net.au
SUMMARY OF OPERATIONAL ACTIVITIES
Costa Fuego Copper-Gold Project Preliminary Economic Assessment (PEA)1
Outlines One of World’s Lowest Capital Intensity, Major Copper Developments
The Costa Fuego PEA has been prepared by Wood Australia Pty. Ltd. as an update to the historical
Productora 2016 Pre- Feasibility Study ( the “2016 PFS”). It follows significant regional consolidation
and a near quadrupling of the Company’s resource inventory with the addition of the Cortadera porphyry
resource, and the San Antonio high- grade satellite resource. The expanded resource base provided
the opportunity to lift the scale of development for a combined development hub (Costa Fuego) and
optimise infrastructure required to transport these resources to a proposed centralised processing plant
at Productora. The PEA therefore presents a materially different project to that contemplated in the
2016 PFS.
The Costa Fuego PEA presents the largest copper development project listed on the Australian
Securities Exchange (ASX). Already the ASX’s largest copper development resource, the PEA confirms
Costa Fuego as having the largest potential copper production in the exchange’s development pipeline,
(refer to ASX Announcement “Costa Feugo PEA Presentation”, released 28th June 2023, slide 51 “New
Material Copper Supply”) at a time when the ASX is losing its significant copper -players, with Oz
Minerals taken over by diversified-miner BHP and Newcrest under takeover by US-based Newmont.
The strong economics of Costa Fuego are described below in Table 1, using financial assumpt ions of
an 8% discount rate and long- term metal price assumptions for the base case of US$3.85/lb copper
(Cu) and US$1,750/oz gold (Au).
1 The PEA is preliminary in nature and includes 3% of production feed from Inferred Mineral Resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable them to be categorised as Mine ral
Reserves (NI 43-101) or Ore Reserves (JORC 2012), and there is no certainty that the PEA will be realised. Mineral Resources that are
not Mineral Reserves or Ore Reserves do not have demonstrated economic viability. References to “Mineral Reserves” in this
announcement include Ore Reserves (JORC 2012). See page 19 for additional cautionary language.
ASX: HCH
TSXV: HCH
OTCQX: HHLKF
Hot Chili Limited ACN 130 955 725
First Floor, 768 Canning Highway, Applecross, Western Australia 6153
PO Box 1725, Applecross, Western Australia 6953
P: +61 8 9315 9009 F: +61 8 9315 5004. www.hotchili.net.au
Table 1. Copper Price Ranges: Lower-, Base-, and Upper-Case Scenarios1,2
Project Metric Units
Copper Price
Lower
(US$3.50/lb)
Base
(US$3.85/lb)
Upper
(US$4.20/lb)
Pre-Tax
NPV
8%
US$M 1,046 1,540 2,029
IRR % 19% 24% 29%
Post-Tax
NPV
8%
US$M 733 1,100 1,463
IRR % 17% 21% 25%
Annual Average Revenue US$M 779 845 911
Annual Average EBITDA US$M 384 445 506
Annual Average Free Cash Flow US$M 226 271 315
Payback period (From First Production) years 4.25 3.50 3.25
Post-Tax NPV8% /Start-up Capital 0.7 1.1 1.4
Within the base-case scenario of the PEA, the positive economics shown in Table 2 outline a project that
leverages its low -elevation advantage to achieve low start -up capital costs and consequently one of the
lowest capital intensities of global copper development projects at this scal e. Annual average revenue of
around US$845 Million allow the project to achieve a fast 3.5 -year payback on the back of initial open pit
mining that fully funds the project expansion and development of underground bulk mining.
1 Certain terms of measurement used in this news release are not performance measures reported in accordance with International
Financial Reporting Standards (“IFRS”). Non-IFRS terms measures used such as “Cash Cost”, “All-in Sustaining Costs”, “C1”, “Expansion
Costs”, “Free Cashflow” and “All -in costs” are included because these statistics are measures that management uses internally to
evaluate performance, to assess how the Project ranks against its peer projects and to assess the overall effectiveness and efficiency
of the contemplated mining operations. These performance measures do not have a meaning within IFRS and, therefore, amounts
presented may not be comparable to similar data presented by other mining companies. These performance measures should not be
considered in isolation as a substitute for measures of performance in accorda nce with IFRS.
2 The PEA is preliminary in nature and includes 3% of production feed from Inferred Mineral Resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable them to be categoris ed as Mineral
Reserves, and there is no certainty that the PEA will be realised. Mineral Resources that are not Mineral Reserves do not ha ve
demonstrated economic viability. See page 19 for additional cautionary language.
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Hot Chili Limited ACN 130 955 725
First Floor, 768 Canning Highway, Applecross, Western Australia 6153
PO Box 1725, Applecross, Western Australia 6953
P: +61 8 9315 9009 F: +61 8 9315 5004. www.hotchili.net.au
Table 2: Costa Fuego PEA1 Economic Highlights2- Base Case
Project Metric Units Estimated
Value
Financial Measures
Pre-tax Cu US$3.85/lb NPV8% US$M 1,540
IRR % 24
Post-tax Cu US$3.85/lb NPV8% US$M 1,100
IRR % 21
Payback period (from start of operations) years 3.5
Open Pit Strip Ratio W/P 1.8
Post-tax NPV/Start-up Capex Ratio 1.1
Capital Costs Costs2
Total Pre-production Capital Expenditure US$M 1,046
Expansion US$M 708
Sustaining US$M 1,014
Total US$M 2,768
Operating Costs2
C1 $/lb Cu 1.33
Total Cash Cost (net by-products and including royalties) $/lb Cu 1.43
All-in-Sustaining Cost $/lb Cu 1.74
All-In Cost LOM $/lb Cu 2.31
Mine Life & Metal Production
Primary Mine Production Including Ramp-up years 14
Mine Life (Life of Mine Processing) years 16
Primary Mine Production – Average Annual Copper Equivalent Metal3 kt 112
Primary Mine Production – Average Annual Copper Metal kt 95
Primary Mine Production – Average Annual Gold Metal koz 49
Following the pre-production Capital Cost of around US$1.05 Billion, operations are expanded to access
the remaining deposits at an estimated Capital Cost of US$708 Million, with Sustaining Capital Costs
bringing the total project Capital Cost to around US$2.77 Billion. Capital Cost s incorporated a 20%
contingency, with further contingency applied to the mining pit shells, which were developed using a copper
price of US$3.30/lb to hedge against downside price risk impacting the production feed inventory.
Operating costs for Costa Fuego average (estimated net of by-products) a C1 Cash Cost of US$1.33/lb of
copper, with an approximate average production rate of 112 ktpa CuEq4 that includes 95 kt Cu and 49 koz
Au during primary production (first 14 years).
1 The PEA is preliminary in nature and includes 3% of production feed from Inferred Mineral Resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable them to be categorised as Mine ral
Reserves, and there is no certainty that the PEA will be realised. Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability. See page 39 for additional cautionary language.
2 Certain terms of measurement used in this news release are not performance measures reported in accordance with Internati onal
Financial Reporting Standards (“IFRS”). See page 40 for full non-IFRS measures disclaimer.
3 Includes Payability
4 The copper-equivalent (CuEq) annual production rate was based on the combined processing feed (across all sources) and used long-
term co mmodity prices of: Copper US$3.85/lb, Gold US$1,750/oz, Molybdenum US$17/lb, and Silver US$21/oz; and estimated
ASX: HCH
TSXV: HCH
OTCQX: HHLKF
Hot Chili Limited ACN 130 955 725
First Floor, 768 Canning Highway, Applecross, Western Australia 6153
PO Box 1725, Applecross, Western Australia 6953
P: +61 8 9315 9009 F: +61 8 9315 5004. www.hotchili.net.au
The Costa Fuego life-of-mine processing runs for 16-years, producing an estimated 1.41 Mt of copper and
718 koz of gold (plus 22 kt of molybdenum and 1.7 Moz of silver) for total revenue of approximately
US$13.52 Billion and total free cash flow of approximately US$3.28 Billion (post-tax, after operating costs,
capital costs, and royalties)
Revenues from the PEA metal payload are described in Table 3 below, with 85% of revenue deriving from
copper. Costa Fuego is highly leveraged to the copper price, with analysis identifying that for every
US$0.10/lb increase above US$ 3.85/lb Cu price, US$100 Million (approximately) is added in post -tax
NPV8%
Table 3: Costa Fuego Revenue Breakdown1
LOM Revenue Contribution Revenue (US$M) % of Total
Copper in Concentrate 10,342 76%
Copper Cathode 1,218 9%
Gold 1,132 8%
Molybdenum 799 6%
Silver 32 0.2%
Total 13,523 100%
Hot Chili has been systematic in its approach to de -risking the project with over a decade of work in
consolidating the deposits and securing infrastructure easements and surface rights. Costa Fuego is one
of the very few projects globally that holds a granted water permit, approval for power connection to the
national grid and the necessary easement corridors for water and power infrastructure that would support
the advancement of the project to construction.
30,000 m drilling program across multiple targets to commence shortly
The Company plans to rapidly begin drilling high priority growth targets proximal to the current resource.
Drilling will also test promising greenfield targets as shown in Figure 1 . Further strategic regional
consolidation options are concurrently being pursued, with mineral resource estimate upgrades
expected in Q4 2023 and H1 2025.
metallurgical recoveries for the production feed to the following processes: Concentrator (87% Cu, 56% Au, 37% Ag, 58% Mo), O xide
Leach (55% Cu only), & Low-grade Sulphide Leach (40% Cu only).
1 Includes Payability
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Hot Chili Limited ACN 130 955 725
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PO Box 1725, Applecross, Western Australia 6953
P: +61 8 9315 9009 F: +61 8 9315 5004. www.hotchili.net.au
Figure 1. Exploration Growth Targets Across the Costa Fuego Project
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Hot Chili Limited ACN 130 955 725
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PO Box 1725, Applecross, Western Australia 6953
P: +61 8 9315 9009 F: +61 8 9315 5004. www.hotchili.net.au
Figure 2. Cortadera Porphyry Expansion Targets1
1 Refer to announcement dated 28th August 2019 for further information regarding Induced Polarisation (IP/MT –
MIMDAS) Survey.
* Resource Copper Equivalent (CuEq) considers assumed commodity prices and average metallurgical recoveries for the
Mineral Resource from testwork. See Page 43 for complete Mineral Resource disclosure of Costa Fuego.