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Deep-South’S PEA Shows Robust Economics - Pre-Tax NPV US$ 977 Million; IRR 30.1% at $2.50 PER Lb of Copper

Economic Studies

Suite 888, 700 West Georgia, Vancouver, British Columbia, V7Y 1G5

Tel: +1-819-340-0140. E-mail: [email protected]

Web site: http://www.deepsouthresources.com

DEEP-SOUTH’S PEA SHOWS ROBUST ECONOMICS - PRE-TAX NPV US$ 977

MILLION; IRR 30.1% AT $2.50 PER LB OF COPPER

- The deposit showed to be amenable to Bio-heap leaching;

- Throughput of 20 Mtpa

- Copper recovery of 80%

- Production of 35,332 tpa copper cathodes and 51,080 tpa copper sulfate;

- Copper price US $ 2.50 per lb: after-tax NPV US $ 611 million; IRR: 22.7%;

- Low Capex at US $341 million;

- Low-strip ratio at 1.41:1

- Pre-tax payback: 4.22 years, after-tax : 5.71 years;

- Life of mine : 24 years.

Vancouver, B.C., Canada – May 20, 2020 – Deep-South Resources Inc. ("Deep-South"

or “the Company") (TSX-V: DSM) today announced that it has received the results of the

updated Preliminary Economic Assessment ("PEA") from METS Engineering Group

(“METS”) on its Haib Copper Project in Namibia.

"We are thrilled with the updated PEA. By going with a heap leach treatment

operation, we have been able to demonstrate robust economics to the Haib Copper

Project. The past year metallurgical work enabled the project to show a potential

low CAPEX and OPEX operation in a challenging copper price environment. With

our recent Management nominations, we are well positioned to optimize and

advance the project further." said Pierre Léveillé, President & CEO of Deep-South.

“The updated PEA has set the scene for us to move towards a very exciting

feasibility phase on Haib, with ever improving economics. The application of great

technological advances in; geological exploration, mineral processing and

extractive metallurgy will most likely see Haib rapidly becoming a global “tier one”

copper project, with the right economics for development. We have a tremendous

project team, in Namibia, South Africa and Australia, and I really look forward to

working with our team in moving the project into its feasibility phase, and beyond”.

said Paul Smith, COO, Deep South.

The PEA update was carried out to incorporate the results from the Mintek metallurgical

test work program (2019 - 2020) and is based on the PEA report completed by METS in

February 2018. This report presents the findings of the optimized PEA focussed on the

heap leaching process route and is the only process technology option updated from the

2018 PEA. The complete report will be filed soon on SEDAR under Deep-South's profile

and on the web site of the company. Our shareholders will be kept informed upon filling

of the report.

Highlights of PEA

The recent leaching test-work was carried out by Mintek of South Africa. Mintek is a world

leader in Bio-leaching technologies.

Amenability test work confirmed copper recoveries of up to 95% in bacterially assisted

heap leaching of the Haib mineral. Recoveries of 80% and 82% were showed to be very

achievable and sustainable for the project by the test-work to date.

Further work is required in order to refine and optimize process conditions to improve

recoveries and operating costs.

Run-of-Mine mineral Bio heap leaching was determined to be the most viable process

route for the Haib mineral. Six processing scenarios were established with the key

variables being recoveries, final products (copper cathode and copper sulfate) and metal

price. The base case chosen by Deep-South is the scenario (1) below, which is based on

the production of copper cathodes and copper sulfate. All financial metrics are based on

the recent 43-101 indicated resource estimation of 456.9 MT @ 0.31% Cu:

Table 1: Scenario 1 - project metrics

20 Mtpa @ 80% Cu Recovery + CuSO4

LME Cu, tpa 35,332.3

CuSO4.5H2O, tpa 51,080.9

CAPEX, (US$M) $341

OPEX, (US$M / year) $91

Avg Annual Revenue

LME Cu (US$M)

$195

Avg Annual Revenue

CuSO4 (US$M)

$90

Total Cost, US$/t ROM $7.64

Total Cost, US$/lb CuEq $1.34

Copper Price, US$/lb $2.00 $2.25 $2.50 $2.85 $3.00

NPV7.5%, pre-tax (US$ M) $424 $701 $977 $1,364 $1,530

IRRpre-tax 18.6% 24.6% 30.1% 37.3% 40.2%

Payback Period pre-tax 6.91 5.21 4.22 3.38 3.13

NPV7.5%, after-tax (US$ M) $119 $439 $611 $853 $957

IRR after-tax 14.9% 18.9% 22.7% 27.6% 29.7%

Payback Period after-tax 8.87 6.94 5.71 4.59 4.23

Strip Ratio 1.41:1

LOM, years 24

Note: The PEA is based only on the estimated indicated resource and the inferred resource are not

part of this economic assessment

With further metallurgical work and testing, the company's goal is to attain higher recovery

rates. The below scenario (2) illustrate the potential economic upside of higher recoveries:

Table 2: Scenario 2 - project metrics

20 Mtpa @ 85% Cu Recovery + CuSO4

LME Cu, tpa 38,336.8

CuSO4.5H2O, tpa 51,080.9

CAPEX, (US$M) $341

OPEX, US$/year $96

Avg Annual Revenue

LME Cu (US$M)

$211

Avg Annual Revenue

CuSO4 (US$M)

$90

Total Cost US$/t ROM $7.91

Total Cost, US$/lb CuEq $1.32

Copper Price, US$/lb $2.00 $2.25 $2.50 $2.85 $3.00

NPV7.5%, pre-tax (US$ M) $503 $796 $1,088 $1,498 $1,673

IRR pre-tax 20.4% 26.5% 32.2% 39.6% 42.6%

Payback Periodpre-tax 6.32 4.83 3.94 3.18 2.94

NPV7.5% after-tax (US$ M) $119 $497 $681 $937 $1,04

IRR after-tax 16.0% 20.2% 24.1% 29.2% 31.3%

Payback Period after-tax 8.22 6.47 5.34 4.30 3.98

Strip Ratio 1.41:1

LOM, years 24

Note: The PEA is based only on the estimated indicated resource and the inferred resource are not

part of this economic assessment

Please note that: Mineral Resources that are not mineral reserves do not have demonstrated

economic viability. Mineral resource estimates do not account for mineability, selectivity, mining

loss and dilution. These mineral resource estimates ar based on Indicated Mineral Resources that

are considered too speculative geologically to have the economic considerations applied to them

that would enable them to be categorized as mineral reserves. However, there is no certainty that

these indicated mineral resources will be converted to measured categories through further drilling,

or into mineral reserves, once economic considerations are applied. There is no certainty that the

preliminary economic assessment will be realized.

Other scenarios

The other scenarios can be found in the NI 43-101 technical report for the Haib Copper

project that will be filed soon on SEDAR under Deep-South's profile and on the web site

of the company. Our shareholders will be kept informed upon filling of the report.

Geology & Mineralization

The Haib deposit is located within part of the Namaqua -Natal Province called the

Richtersveld geological sub-province which is further subdivided into a volcano -

sedimentary sequence (locally, the Haib Subgroup), the Orange River Group and t he

intrusive Vioolsdrift suite which are closely related in space and time.

The principal mineralized hosts at the Haib are a Quartz Feldspar Porphyry (QFP) and a

Feldspar Porphyry (FP).

The Haib deposit is, in essence, a large volume of rock containing copper mineralization.

The grade is variable from higher grade in the three core zones progressively dropping

towards the margin of the deposit.

The principal sulfides within the Haib body are pyrite and chalcopyrite w ith minor

molybdenite, bornite, digenite, chalcocite and covellite.

Mineral Resources

The mineral resources for the Haib Copper Project were estimated by Dean Richards of

Obsidian Consulting Services, supervidsed by Peter Walker of P & E Walker Consultancy,

both independent Qualified Persons as defined by NI 43-101 and were reported in a news

release dated January 16, 2018 but are summarized below for convenience. Readers

should review that news release for additional information or read the full report that can

be viewed on our web site at: www.deepsouthresources.com or on the SEDAR web site

at: www.sedar.com.

Table 3: Classified mineral resources of the Haib Project at a 0.25% Cu cut-off

grade

Resource

Class

xMillion

Tonnes Cu(%) Contained Cu

x billion lbs

Indicated 456.9 0.31 3.12

Inferred 342.4 0.29 2.19

Notes:

1- Dean Richards of Obsidian Consulting Services, a Member of the Geological Society of South Africa and

Professional Natural Scientist (Pr. Sci. Nat) with the South African Council for Natural Scientific Professions

(SACNASP), estimated the Mineral Resources under the supervision of Peter Walker of P & E Walker

Consultancy, both of whom are the Qualified Persons for the Mineral Resource Estimates. The effective date

of the estimate is January 15, 2018. Mineral Resources are estimated using the CIM Definition Standards for

Mineral Resources and Reserves (2014).

2- Reported Mineral Resources contain no allowances for hanging wall or footwall contact boundary loss and

dilution. No mining recovery has been applied.

Rounding as required by reporting guidelines may result in apparent differences between tonnes, grade and

contained metal content.

Table 4: Haib copper indicated mineral resources, sensitivity cases

%Cu Cut-off xMillion

Tonnes Cu(%) Contained Cu

x billion lbs

0.20% 904.8 0.27 5.39

0.25% 456.9 0.31 3.12

0.30% 219.8 0.36 1.74

Table 5: Haib copper inferred mineral resources, sensitivity cases

%Cu Cut-off xMillion

Tonnes Cu(%) Contained Cu

x billion lbs

0.20% 686.2 0.26 3.93

0.25% 342.4 0.29 2.19

0.30% 109.8 0.34 0.82

Note: The PEA is based only on the estimated indicated resource and the inferred resource are not

part of this economic assessment

This Haib Copper Mineral Resource has been defined by diamond core drilling

covering a total surface area of some 2.6 square kilometres.

The mineral resource classification is closely related to data proximity. Topographic

elevations within the mineral resource area vary from 320m to 640m above mean sea

level and average 480m above mean sea level.

Indicated resources are constrained between the variable topographic surface and a

horizontal level which is 75m above mean sea level and within which the majority of

the drill and assay data are constrained. Inferred resources are laterally constrained

by the last line of drill holes and extend vertically from the horizontal surfaces defined

by the +75m and -350m above mean sea level (a block of 425m thickness) within

which there is a lesser data set derived from drilling.

Mineralization is open near surface and at depth to at least 800 metres deep. The

Mineral Resource estimate is based on the results from approximately 66,500 metres

of drilling in 196 holes. The most recent drilling data comes from Teck Resources

drilling programs totalling 14,500 metres (2010 & 2014) and from re-assaying a part

of the 164 historical drill cores which are well preserved on site. Indicated Resources

are defined by a drill grid of 150 metres by 150 metres, while Inferred Resources are

defined by a drill grid of 300 metres by 150 metres.

The Haib Copper exploration licence provides significant potential for resource

expansion, since there is known, but poorly drilled and assayed , mineralisation

beyond the drill grid boundaries and below the main mineralized body (which covers

some 2 square kilometres of surface area), where a few drillholes from 75m above

mean sea level to -350m above mean sea level (i.e. a thickness of 425m) have shown

that mineralisation is present. The deepest drillhole did not pass out of mineralized

material. In addition, there are 5 satellite mineralized target areas surrounding the

main Haib porphyry body which still require further evaluation.

Mineral Resources that are not mineral reserves do not have demonstrated economic viability.

Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution.

These mineral resource estimates ar based on Indicated Mineral Resources that are considered

too speculative geologically to have the economic considerations applied to them that would enable

them to be categorized as mineral reserves. However, there is no certainty that these indicated

mineral resources will be converted to measured categories through further drilling, or into mineral

reserves, once economic considerations are applied. There is no certainty that the preliminary

economic assessment will be realized.

Mineralogy

The Haib Copper Deposit is a large sulfide mineral deposit. Copper is mainly present as

a sulfide in the form of chalcopyrite. Copper is also present as oxides (chrysocolla,

plancheite, malachite and azurite), occurring as intrusions in shear zones.

Initial testwork results showed that the Haib mineralisation is a competent quartz feldspar

porphyry rock.

It can be seen that the main mineral is copper with only an accessory amount of

molybdenum present. The chalcopyrite also occurs as occasional coarse irregular grains

from 0.1 mm to 0.35 mm.

Mining Methods

Considering the Haib copper deposit characteristics, the suitable mine design is based on

an open pit method. As the deposit is basically composed of hard rock material, the mining

operations will involve drill and blast of all excavated material, which will be segregated

by cut-off grade.

The mining fleet considered for the Haib project would consist of appropriately sized

hydraulic excavators and off highway dump trucks, depending, supported by standard

open-cut drilling and auxiliary equipment.

Initial open pit mine design work undertaken indicates a strip ratio of 1.41:1 for 20 Mtpa.

The low strip ratio has a significant effect on the low operating cost indication of the

project.

Recovery Method

For the recovery of copper from the Haib deposit, heap leaching was considered for all

options. The primary reasons for the selection of heap leaching are the low-grade nature

of the deposit and the vast scale of the mineral body. Previous work conducted on the

Haib Project suggested that a conventional crush -grind-float and sale of copper

concentrate is not economically feasible under the current copper market conditions. The

low costs associated with heap leaching compared to a whole mineral flotation circuit is

believed to improve the viability of the project. Heap leaching is traditionally performed on

oxide material, although there has been increasing development in the application to acid-

insoluble sulfides.

Previous sighter amenability test-work, carried out by Mintek, METS and SGS South

Africa, suggests that high amounts of copper can be extracted from the Haib material, up

to 95.2% via a bacterial assisted leaching. However, additional test-work is required to

determine the optimal operating parameters. The system design proposed will use 3 stage

crushing and a mineral sorting system (either on the primary crushed product or the

secondary crushed product depending on the technology selected) that will provide higher

grade mineral to the heaps. The primary crusher will reduce the rock to 127 mm (gyratory

crusher), the secondary crusher to 32 mm (cone crusher) and the tertiary crusher to 5 mm

(HPGR).

Haib Copper flow sheet diagram

(on the following page)

Capital Cost

Table 6:

Capital cost breakdown @ 80% Cu recovery at a price of US $ 2.50 per lb of copper

Direct Cost (US$M) 20 Mtpa

Crushing & HPGR 100.1

Agglomeration & Heap Leaching 43.2

Copper Solvent Extraction 72.9

Iron Removal 6.3

Process and Raw Water 4.1

Reagents 5.0

Services 2.9

Supporting Infrastructure 3.0

First Fill 8.3

Indirect Cost (US$M)

Working Capital 24.7

Insurance 7.4

EPCM 24.7

Contingency 24.7

Commissioning 5.0

Accommodation & Temp Services 5.0

Spares & Tools 3.0

Total (US$M) 340.3

Operating Costs

Total operating costs, including capital leases as an operating expense, are estimated in

the PEA and are broken down as follows:

Table 7:

Total operating cost breakdown – Scenario 1

20 Mtpa @ 80% Cu Recovery + CuSO4 @ US 2.50 per lb / Cu

Area

Annual

Cost

Unit Cost Unit Cost

(‘000

USD)

(USD/t

ROM)

(USD/lb

CuEq)

Mining 45,200 2.26 0.40

Processing 90,799 4.54 0.80

Product Freight 3,889 0.19 0.03

Wharfage & Shiploading 432 0.022 0.004

Administration 4,000 $0.20 0.04

Royalty

$2.00 6,824 0.34 0.06

$2.25 7,677 0.38 0.07

$2.50 8,530 0.43 0.08

$2.85 9,724 0.49 0.09

$3.00 10,236 0.51 0.09

Total

$2.00 151,144 7.56 1.33

$2.25 151,997 7.60 1.34

$2.50 152,850 7.64 1.34

$2.85 154,044 7.70 1.35

$3.00 154,556 7.73 1.36

Note: Mineral Resources that are not mineral reserves do not have demonstrated economic

viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and

dilution. These mineral resource estimates are based on Indicated Mineral Resources that are

considered too speculative geologically to have the economic considerations applied to them that

would enable them to be categorized as mineral reserves. However, there is no certainty that these

indicated mineral resources will be converted to measured categories through further drilling, or

into mineral reserves, once economic considerations are applied. There is no certainty that the

preliminary economic assessment will be realized.

Tailing Disposal

There will be no tailings. The spent heaps will be rehabilitated and left in place.

Due to environmental reasons and water resources, the tailings from the pH

adjustment process and the iron removal process will be disposed onto the spent

heaps via the method of filtered dry stacked tailings.