WEC.V · 2018-11-02 12:00:00

Sprott Resource Holdings Inc. Announces Positive Results from Technical Studies on the Minera Tres Valles Copper Project Project Expected to Generate Significant Cash Flow in 2020 High Project Internal Rate of Return with Less than 2 Year Payback

Economic Studies

Sprott Resource Holdings Inc. Announces Positive Results from Technical Studies

on the Minera Tres Valles Copper Project

Project Expected to Generate Significant Cash Flow in 2020

High Project Internal Rate of Return with Less than 2 Year Payback

TORONTO, November 2, 2018 -- Sprott Resource Holdings Inc. (“ SRHI” or the “ Company”) (TSX: SRHI) is

pleased to announce the results from a series of technical studies (the “Technical Studies”) on its 70% owned

Minera Tres Valles Copper Project (“MTV” or the “Project”) located in Salamanca in Region IV of Chile which will

be reported in a consolidated NI 43-101 compliant t echnical report (the “Technical Report”). The Technic al

Studies were completed by Amec Foster Wheeler, a Wood company (“ Wood”) along with contributions from

independent consulting firms.

“We are very pleased with the results of the Technical Studies which validates our initial due diligence and investment

thesis for the Project,” said Steve Yuzpe, CEO of SRHI. “The Technical Studies confirm that MTV should almost triple

current levels of production achieving a run rate of approximately 18,000 tonnes per annum of copper cathodes ,”

added Mr. Yuzpe. “Based on a long-term copper price of US$2.75 /lb, the preliminary economic assessment which

looked at the total available mineral resources on the Project indicates that MTV could generate US$34 million in

project cash flow in 2020 peaking at US$45 million in 2022.”

“The mine is operating well and crushing more than 100,000 tonnes of mineralized material per month,” said Luis

Vega, CEO of MTV. “With the substantial infrastructure and development built by Vale S.A., the capital cost required to

ramp up to full production is low and has resulted in attractive project economics with a short payback period.”

“We continue to believe in the long-term fundamentals for copper and Chile as a premier mining jurisdiction,” said Rick

Rule, CIO of SRHI. “MTV is a core asset for SRHI and we are focused on building from this foundation.”

Table 1. Technical Studies – Economic Analysis Highlights (US dollars)

Base Case PEA Case

Pre-tax Net Present Value (NPV) (8%) $87M $129M

After-tax Net Present Value (NPV) (8%) $87M $129M

Pre-tax Internal Rate of Return (IRR) 93% 131%

After-tax Internal Rate of Return (IRR) 93% 131%

Payback (years) 2.0 1.2

Average Annual Copper Cathode Production (2019-2025) 24M lbs 34M lbs

Total Copper Cathode Production (LOM) 177M lbs 250M lbs

2020 Cash Flow $23M $34M

Life of Mine 6.5 years 7.5 years

Operating Cash Cost (per lb of finished copper) $1.66/lb $1.65/lb

Upfront Capital Cost $15M $21M

LOM Capital Cost $32M $52M

Notes:

1. Base Case includes only the Don Gabriel Manto open pit, Papomono Masivo underground and ENAMI tolling revenues. The

PEA Case includes the Don Gabriel Manto, Papomono Masivo, Don Gabriel Vetas, Papomono Norte, Manto Norte, Epitermal,

Papomono Cumbre, Papomono Mantos Conexión and Papomono Sur. The PEA Case also includes ENAMI tolling revenues.

2. The PEA Case is preliminary in nature and includes inferred resources that are too speculative geologically to have the

economic considerations applied to them. There is no certainty the PEA Case will be realized.

3. Base Case capital cost estimate was completed at a cost accuracy of +/- 25%. PEA Case capital cost estimate was

completed at a cost accuracy of +/- 50%.

4. Based on long-term flat copper price forecast of US$2.75/lb.

5. Includes revenue from long-term tolling contract with ENAMI of minimum of 15,000 t/month and a tolling rate of

US$27.50/t of material received. MTV delivers copper cathodes produced from supplied feed material to ENAMI, on the

basis of a contractual metallurgical recovery of 78%.

6. MTV has tax losses available to apply that will shelter any tax payable on operating profits, due to capital costs and

operating losses sustained by prior operators. MTV is subject to a sliding scale copper royalty payable to the Chilean

government.

7. Does not include copper production from purchasing of mineralized material from small scale third party miners and any

additional copper production pursuant to excess recovery from the ENAMI toll milled material.

8. NPV is calculated based on monthly discounting using a reference date of July 2018.

Highlights of the Technical Studies include:

 Low Capital Cost to Triple Production with Short Payback Period

o Low project capital requirement of US$15 million for the base case mine plan (the “Base

Case”) and US$21 million for the PEA (the “PEA Case”) to ramp-up operation to

approximately 18,0001 tonnes per annum of copper cathodes within 24 months

o Low capital intensity

o Short payback of 2.0 years for the Base Case and 1.2 years for the PEA Case

 Positive project economics demonstrated by economic analysis confirms SRHI’s investment

thesis2

o Base Case pre-tax and after-tax NPV (8%) of US$87 million and IRR of 93% based on a long-

term flat copper price of US$2.75/lb

o PEA Case pre-tax and after-tax NPV (8%) of US$129 million and IRR of 131% based on a long-

term flat copper price of US$2.75/lb

o Average annual copper cathode production estimates (2019-2025) of 24 million pounds per

annum for the Base Case and 34 million pounds per annum for the PEA Case

o 6.5 year mine life (“LOM”) for the Base Case and 7.5 year LOM for the PEA Case with

opportunity to extend through exploration on 44,000 hectares of land

o Attractive LOM operating cash costs estimate of US$1.66/lb of finished copper for the Base

Case and US$1.65/lb of finished copper for the PEA Case

o Base Case demonstrates potential to generate cash flow of US$23 million in 2020 with peak

cash flow reaching US$45 million in 2022

o PEA Case demonstrates potential to generate cash flow of US$34 million in 2020 with peak

cash flow reaching US$45 million in 2022

o Completion of Technical Studies and related Technical Report is key to advancing currently

ongoing project financing discussions

Technical Studies

The purpose of the Technical Report is to consolidate all the NI 43-101 compliant Technical Studies completed

over the past 10 months, including:

1 Based on preliminary economic analysis (PEA) case study results. See “Notes on Preliminary Economic Assessments”.

2 See “Notes on Preliminary Economic Assessments”.

 Mineral resource and mineral reserve estimates for the Don Gabriel and Papomono deposits;

 Preliminary Feasibility Study (“PFS”) for the implementation of chloride leaching (“Salt Leach”);

 Feasibility Study (“FS”) for the expansion of the Don Gabriel Manto open pit;

 PFS for the underground exploitation of the Papomono Masivo mine zone; and,

 Preliminary Economic Assessment (“PEA”) on a subset of MTV's mineral resources.

The Technical Studies comprise a Base Case based on the ex ploitable mineral reserves from the Don Gabriel

Manto open pit and the Papomono Masivo incline block cave underground deposit. These studies were

completed at a FS level for Don Gabriel Manto and a PFS level for Papomono Masivo and the Salt Leach

conversion. Wood has also completed a PEA Case for the exploitation of the Don Gabriel Manto and Papomono

Masivo deposits and eight additional mining zones within the Don Gabriel and Papomono deposits which will

utilize different mining methods such as sub-level caving and sub-level stopping. These additional eight mining

zones will require additional drilling and engineering work to increase the confidence level. The PEA Case

illustrates the property-wide production potential for the Project.

The PEA Case mine plan is partly based on inferred 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, and there is no certainty that the PEA Case based on these mineral resources will be realized.

Mineral resources that are not mineral reserves do not have demonstrated economic viability . The Technical

Report will be filed within 45 days of this release.

ENAMI and Third Party Material Treatment

As part of MTV’s toll processing strategy, MTV purchases mineralized material from third -party miners that

operate near and on the MTV property and toll treat mineralized material from Empresa Nacional de Minería

(“ENAMI”), the Chilean state owned enterprise that supports small and artisanal miners under the provisions

of a long-term contract (the “ ENAMI Tolling Contract”). This strategy is expected to continue going forward.

Since 2014, MTV has purchased an average of 14,500 tonnes per month of mineralized material with a copper

grade of 1.44%. Since SRHI’s acquisition in October 2017, MTV has purchased an average of 16,500 tonnes

per month at a grade of 1.13% copper. Since 2014, ENAMI has delivered an average of 8,000 tonnes per month

of mineralized material with a copper grade of 2.3 0%. Since SRHI’s acquisition in October 2017 , ENAMI has

delivered an average of 4,300 tonnes per month of copper at the same grade. The min eralized material from

ENAMI and the small scale third-party miners has not been subject to any technical study, and is therefore not

included in the Base Case and PEA Case mine plan and economic analysis contained in the Technical Studies,

apart from the toll treatment revenue which serves to reduce the processing and general and administrative

(“G&A”) unit cost. The economic analysis described in this press release also includes operating costs for the

toll treatment.

In 2017, MTV produced 11.3 million pounds of copper cathode which comprised 8.6 million pounds from MTV’s

own Project and 2.7 million pounds from small scale third party miners and the excess recovery of mineralized

material delivered under the ENAMI tolling arrangements.

Next Steps

 With the results of the Technical Studies and of the Technical Report, SRHI will be working wit h MTV

to secure the necessary expansion capital. Several parties have submitted term sheets, and the

Technical Report is expected to assist in the technical diligence to secure the best terms for financing.

 MTV has already commenced the Don Gabriel open pit expansion, and the mining contractor, Vecchiola

S.A., and the haulage contractor, Tiex, have brought substantially all of the heavy equipment for the

pre-strip and ore movement on site.

 MTV have also firmed up quotations for the long -lead time equip ment required for the salt -leach

project.

 With the work completed by Wood on the Papomono Masivo, MTV will advance to detailed engineering

based on the PFS study, and have quotations for the required underground equipment in the near -

term.

 MTV will com mence an infill drill campaign on the PEA Case additional deposits to increase the

confidence level of the mineral resources, determine and define any additional mineral resources, and

also advance geotechnical work on these deposits adjacent to the current operations.

Consolidated Mine Plan

Figure 1 illustrates the Base Case mine plan using mineral reserves from the Papomono and Don Gabriel

deposits.

Figure 1. Base Case Forecast Mine and Process Plan

Notes: Figure prepared by Wood, 2018. Don Gabriel Manto open pit is the main mine zone from Don Gabriel deposit. Papomono

Masivo IBC and Papomono Masivo FC are the zones that will be mined from the Papomono deposit. Dark grey shading indicates

additional processing capacity for material anticipated to be delivered under the ENAMI Tolling Contract that could be toll treated.

Dark grey shading indicates additional processing capacity for material anticipated to be delivered under the ENAMI Tolling Contract

that could be toll-treated.

Figure 2 illustrates the property-wide mine plan based on the PEA Case.

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Jul-18

Sep-18

Nov-18

Jan-19

Mar-19

May-19

Jul-19

Sep-19

Nov-19

Jan-20

Mar-20

May-20

Jul-20

Sep-20

Nov-20

Jan-21

Mar-21

May-21

Jul-21

Sep-21

Nov-21

Jan-22

Mar-22

May-22

Jul-22

Sep-22

Nov-22

Jan-23

Mar-23

May-23

Jul-23

Sep-23

Nov-23

Jan-24

Mar-24

May-24

Jul-24

Sep-24

Nov-24

Jan-25

Mar-25

May-25

Tonnes / month

Month

Don Gabriel PPM Masivo PPM-FC Tolling

Figure 2. PEA Case Forecast Mine Production Plan

Notes: Figure prepared by Wood, 2018. The PEA Case is preliminary in nature and includes inferred mineral resources that are too

speculative geologically to have the economic considerations applied to them. There is no certainty that the PEA Case will be realized.

Dark grey shading indicates additional processing capacity for material anticipated to be delivered under the ENAMI Tolling Contract

that could be toll-treated.

Table 2 and 3 below summarizes the cash flow analysis for the Base Case and PEA Case. The Technical Studies

economic evaluation considers cash flows starting in July 2018 (month one). This is consistent with the use of

fiscal years (July to June).

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

Jan-18

May-18

Sep-18

Jan-19

May-19

Sep-19

Jan-20

May-20

Sep-20

Jan-21

May-21

Sep-21

Jan-22

May-22

Sep-22

Jan-23

May-23

Sep-23

Jan-24

May-24

Sep-24

Jan-25

May-25

Sep-25

Jan-26

May-26

Sep-26

Tonnes / month

Don Gabriel OP

PPM Masivo

Papomono Norte

PPM Sur

Mantos Conexión

Manto Norte

Epitermal

Papomono Cumbres

Don Gabriel Vetas

PPM-FC

Tolling

Table 2. Economic Results for Base Case

Year

Production

(kt)

Cathode

(t)

Total

Capex

(US$

000s)

Mine

Opex

(US$

000s)

Plant /

G&A Opex

(US$

000s)

Total

Opex

(US$

000s)

Revenue

(US$

000s)

Pre-tax

Cash Flow

(US$

000s)

After-tax

Cash Flow

(US$

000s)

2018 502 4,291 7,312 8,639 13,381 22,020 22,097 -7,236 -7,236

2019 1,185 7,932 7,968 19,600 27,777 47,377 42,022 -13,322 -13,322

2020 1,426 13,418 2,320 20,844 30,482 51,326 76,169 22,522 22,510

2021 1,593 13,224 4,464 17,876 31,288 49,164 74,983 21,355 21,342

2022 1,781 16,585 1,312 15,742 33,155 48,897 95,582 45,373 45,289

2023 1,775 15,407 497 12,432 32,807 45,239 88,358 42,622 42,564

2024 894 8,958 512 6,733 20,302 27,035 48,836 21,289 21,289

2025 0 301 7,522 204 1,845 2,048 379 -9,192 -9,192

2026 0 0 0 0 0 0 0 0 0

Total 9,156 80,116 31,907 102,070 191,036 293,106 448,425 123,412 123,244

Notes:

1. Assumes a long-term flat copper price of US$2.75/lb

2. Analysis assumes cash flows starting in July 2018. Results were obtained on the bases of a monthly mine plan and cash

flows discounted on the same monthly basis.

3. Processing recovery is based on the salt leach process, for all years, except for 2018. Assumptions for 2018 are based on

acid leaching without salt.

4. Revenues and operating costs for the ENAMI toll treatment is based on a minimum of 15,000 t/month of feed material and

a tolling rate of US$27.50/t of material received. MTV delivers copper cathodes produced from supplied feed material to

ENAMI, on the basis of a contractual metallurgical recovery of 78% based on the oxide grade as per the terms of the ENAMI

Tolling Contract. Revenue from excess recovery is not included in this analysis.

5. MTV has tax losses available to apply that will shelter any tax payable on operating profits, due to capital costs and

operating losses sustained by prior operators. MTV is subject to a sliding scale copper royalty payable to the Chilean

government.

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