Nash Creek Project

PEA Highlights:

• Open pit mine plan with average annual production of 96M pounds of ZnEq. (77M pounds of zinc, 15M pounds of lead and 437K ounces of silver) over a ten year mine life
• Pre-tax IRR of a 34.1% (25.2% post-tax) and a pre-tax NPV8% of C$230M (C$128M post-tax) with a payback period of 2.4 years (2.8 years post-tax)
• Indicated mineral resource totaling 13.6 Mt averaging 3.2% ZnEq. (2.7% Zn, 0.6% Pb and 17.8 g/t Ag) containing 963 million pounds of ZnEq. and an Inferred mineral resource totaling 5.9 Mt averaging 3.1% ZnEq. (2.7% Zn, 0.5% Pb and 14.0 g/t Ag) containing 407 million pounds of ZnEq.
• LOM all-in sustaining costs (“AISC”) of C$0.37 per pound of zinc produced, net by-product credits
• Total pre-production capital costs of C$168 million (including 18% contingency)
• Potential to materially enhance the economic return with additional drilling over the district-scale land package

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Overview

The Nash Creek Property (Property) is located in Restigouche County in northeast New Brunswick and is situated approximately 18 kilometres (km) east of the Port of Belledune and 45 km northwest of city of Bathurst. The Property is comprised of seven contiguous mineral claims, totaling 15,542.31 hectares. Access to the Property is excellent via highway and is adjacent to the nearby Port of Belledune where there is a lead/silver smelter, power plant, deep water port and railway hub with direct access to a zinc smelter in Valleyfield, QC.

The initial PEA outlines a 10-year, 3,900 tpd open-pit mining operation with a Dense Media Separation (“DMS”) plant and 1,950 tpd conventional flotation process facility at the Nash Creek Project (the “Project”). The mine plan generates a strong economic return with a pre-tax internal rate of return (“IRR”) of a 34.1% (25.2% post-tax) and a pre-tax Net Present Value (“NPV”) at an 8% discount rate of C$230 million (C$128 million post-tax) based on pre-production capital costs of C$168 million and a zinc price of US$1.25/lb (See Tables 1 and 2). The Company believes there is a clear opportunity to significantly enhance the project’s economics with additional exploration that allows for higher grade material to be scheduled earlier in the mine plan

The Nash Creek Deposit (the “Deposit) is a base metal sulphide deposit hosted within the Early Devonian Dalhousie Group volcanics and volcaniclastic bedrock units. It is comprised of two main zones called the Hickey Zone, located to the north and the Hayes Zone, located to the south. Mineralization occurs at surface in the Hayes Zone and extends for approximately 2.1 km along strike, where mineralization consists of sub-horizontal mineralization which is interpreted as a series of vertically stacked horizons within the Hickey Zone. The majority of Zn+Pb+Ag mineral resources within both the Hayes and Hickey zones are located with 250m from surface

The Deposit is open for expansion in several directions with relatively few drill holes located outside of the Mineral Resource area. The 2017 drilling campaign on the Nash Creek Deposit, the first to ever be completed by the Company, led to a 74% increase in Indicated Mineral Resource zinc equivalent (“Zn Eq.”) pounds and a 385% increase in Inferred Mineral Resource zinc equivalent pounds (See News Release dated April 16, 2018). Additionally, the Project encompasses several untested high-grade mineral occurrences over a highly prospective 20 km long trend. The Company plans to commence permitting while aggressively advancing exploration opportunities within this underexplored 150 km² district-scale land package.

Click Here to Download the 2018 Preliminary Economic Assessment

Click Here to Download the 2018 Technical Report and Updated Resource Estimate

Click Here for a Video Overview of the Nash Creek Project

Cautionary Note on PEA. The PEA is preliminary in nature and it includes 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. There is no certainty that the PEA will be realized.The PEA was prepared under the supervision of Eugene Puritch, P. Eng., FEC, CET of P&E Mining Consultants Inc.

Opportunities and Exploration Potential

The Company’s management team is very encouraged about the strong economic results generated from its initial PEA and the opportunities for further improvement with additional exploration, especially considering that only limited drilling has occurred outside of the Mineral Resource area. Notable opportunities for further improvement include:

• Exploration or acquisition activities resulting in the addition of higher-grade material after year one of the mine plan which could have potential to significantly increase the IRR and NPV^8% (See Figure 3);
• Expand the 10-year mine life with additional exploration success at the Nash Creek Deposit, which is open for expansion, to increase the NPV^8% and evaluate increasing process plant throughput with potential to lower unit costs and increase production volumes; and
• Potential for new discoveries within a 150 km² land package where a primary north-south corridor has several high-grade mineral occurrences up to 19% Pb+Zn at surface with very limited historic drilling.

Overview of PEA Results and Assumptions

Economic Sensitivities and Indicators

Table 1: Economic Sensitivities and Project Economics

The economic sensitivities and project economics are as follows:

 Mining and Processing Method

The PEA assumes a conventional truck and excavator open-pit mining operation at an average annual process plant production rate of 1,425,000 tonnes per annum over a mine life of approximately 10 years. Mining operations will reach an annual average total material movement of 10 million tonnes using 11.5 m³ diesel hydraulic excavators, 90 tonne haulage trucks, and track mounted diesel powered drill rigs with up to 200 mm diameter blastholes drilled on 5 and 10 metre height benches.

The mined material will be processed at a new 3,950 tonne per day dense media plant and a 1,950 day tonne per day grinding and flotation plant located on the Project site. Two concentrates will be produced; zinc-silver and lead-silver.  It is anticipated that lead concentrates could be processed at the nearby Belledune Smelter and zinc concentrates at Valleyfield, QC. The zinc concentrates also have potential to be processed overseas via the deep water port from Belledune although this alternate option was outside the scope of the PEA and was not investigated. A review of metallurgical test work has not identified any deleterious elements that would impact the marketability of the zinc and lead concentrates, which are considered of good quality.

Table 2: Mine Production Summary⁽¹⁾

The operating assumptions for the financial model are as follows:

• Zinc equivalent calculation used to reference PEA figures is based on the following metal prices: zinc US$2,755/t (1.25/lb), lead US$2,205/t (1.10/lb), and silver US$17.0 per oz. Metal recoveries of 100% were applied in the metal equivalent calculations. The zinc equivalent calculation is as follows: Zn Eq = 100 ((Ag Price in (g) x Ag Grade) + (Pb Price*2204.6 x Pb Grade(%)/100) + (Zn Price*2204.6 x (Zn Grade(%)/100))/Zn Price*2204.6).

Operating and Capital Costs

Table 3: Operating Cost

The anticipated operating costs are as follows:

Table 4:Life of Mine Capital Costs

The initial and sustaining capital costs are presented as follows:

 Project Infrastructure

The Project will benefit from infrastructure, services and skilled labour available in the Bathurst Mining Camp. The Nash Creek Project site is located approximately 50 km northwest of the city of Bathurst and is accessible year-round from paved Provincial Highway 11 and a 1 km paved road.  Project site infrastructure is anticipated to include:

• Plant site and haul roads;
• Administration buildings and assay lab;
• Mine maintenance shop, warehouse and fuel storage facilities;
• Fresh water supply and sewage treatment; and
• Lined tailings storage area.

The proposed Nash Creek Project mill and process plant site is ideally located on the access road to the open pit and on private land owned by Callinex. The proposed processing plant site is located on a relatively flat area adjacent to the open pit. A small creek valley to the west of the open pit provides a suitable site for a dammed tailings management facility for the first 4 years of mine life. Thereafter, tailings will be deposited into the first small pit area to be mined out. Power to the site will be supplied by a 1 km transmission line connecting to the nearby 230 kV provincial grid.

Environmental, Permitting and Taxes

The PEA envisages potential to create approximately 225 jobs if the project is advanced into production. The project could have a major impact within the surrounding communities of Lorne and Belledune, where there are limited number of economic opportunities resulting in a unemployment rate exceeding 20%. The nearby cities of Bathurst and Cambellton located within 50 km to the Project also have higher unemployment rates of approximately 11%. In addition to the potential for direct job creation, the PEA outlines gross taxes and royalty payable to the Province of New Brunswick of approximately $130 million and approximately $64 million to the Government of Canada (See Table 6).

The Nash Creek Project will be subject to federal, provincial and local regulatory requirements. The principal provincial legislation related to the approval of mining projects and environmental impact assessment (EIA) and are the New Brunswick Mining Act and General Regulation 86-98 of The Clean Environment Act and EIA Regulation 87-83, and Water Quality Regulation 82-126. Relevant key federal legislation includes the Canadian Environmental Assessment Act, Fisheries Act and Metal Mining Effluent Regulations. The New Brunswick Department Energy and Resource Development has provided a concise guide to the mine approval process.

The relatively low sulphide content of the Nash Creek mineralization is anticipated to have low waste rock ARD potential. Additionally, identifiable ARD material will be placed in the mined out open pits at the end of the Project life.

Table 5: Taxes Payable

Conceptual Toll Milling Scenario

P&E investigated the concept of transporting the mined mineralized material with DMS upgrading to a hypothetical toll milling facility within the Bathurst Mining District located 100 km from the Nash Creek Project. Transport costs of C$15/tonne and toll processing costs of C$24/tonne were assumed. This scenario provided robust economic return on capital with a pre-tax IRR of 46.9% (32.3% post-tax) and a pre-tax NPV^8% of C$125 million (C$69 million post-tax) with a pre-production capital cost of $62.2M

Mineral Resource Estimates Incorporated in PEA

The PEA mine plans assumes that 14.4 million tonnes of diluted mineralized material grading 3.1% Zn Eq. (2.9% Zn, 0.6% Pb and 20.3 g/t Ag) is delivered to the DMS plant. The table below outlines the total Indicated and Inferred Mineral Resources (See News Release dated April 16, 2018), including those that were not included within the mine plan.

Table 6: Mineral Resource Estimates for the Nash Creek and Superjack Projects

Notes:

1. Mineral Resources are categorized according to CIM Definition Standards; it cannot be assumed that all or any part of Inferred Mineral Resources will be upgraded to Indicated or Measured as a result of continued exploration.
2. The Nash Creek Mineral Resource Estimate includes the Hickey Zone and Hayes Zone.
3. The Superjack Mineral Resource Estimates includes the Nepisiguit A (the “A Zone”) and Nepisiguit C Zones (the “C Zone”).
4. Zinc equivalent Mineral Resources for the Nash Creek Project based on trailing 3-year metal prices and metallurgical recovery assumptions based on limited testwork.  Zinc equivalency is calculated as Zn%+ 0.747*Pb% + 0.006*Ag_ppm.
5.  A cut-off grade of 1.5% Zn Eq. was utilized in the resource estimate.
6. Zinc equivalent Mineral Resources for the Superjack Project were calculated using metal prices of $1.12/lb for zinc, $1.06/lb for lead, $2.97/lb for copper and $20.38/oz for silver. Metal recoveries have been assumed to be 100% for zinc, 72% for lead, 86% for copper and 70% for silver. A cut-off grade of 1.5% Zn Eq. was utilized in the Mineral Resource Estimate.

 Figure 1: Map of the Bathurst Mining District of New Brunswick

Figure 2: Nash Creek Land Package

Figure 3: Nash Creek Production Schedule Overview – Operating Cash Flow and Zinc Grades

Figure 4: Nash Creek Provides Leverage to Zinc and Lead PricesFigure 5: Conceptual Nash Creek Open Pit with Mineral Resources

Qualified Persons Statement

The PEA was prepared under the supervision of Eugene Puritch, P. Eng., FEC, CET of P&E Mining Consultants Inc. Mr. Puritch is an independent Qualified Person in accordance with NI 43-101 and has reviewed and approved the technical contents noted above.