Chapi

Location
Peru

Operator
Minera Pampa de Cobre S.A.C. 

Commodity
Copper

Royalty
2.0% NSR

EMX has acquired a royalty interest of up to 2% of Net Smelter Returns (“NSR”) on minerals produced from the Chapi mine and within the approximately 26,000 hectare Chapi property.

Pursuant to the terms of the Agreement, EMX will acquire a royalty interest of up to 2% of Net Smelter Returns (“NSR”) on minerals produced from the approximately 26,000 hectare property (“Property Royalty”) owned by MPC, as well as up to a 2% NSR royalty from any minerals that are produced from outside the Property Royalty area, but that are processed at the Chapi Mine processing facilities (“Facilities Royalty”). The Agreement also includes a two-kilometer area of interest (“AOI”) around the Property Royalty area, and any property acquired by MPC within this AOI will also be subject to an NSR royalty of up to 2% (“AOI Royalty”). As consideration for the acquisition of the first 1% of the NSR interests, the Company has paid MPC the amount of US$3,000,000. A second 1% NSR interest can be acquired by EMX, at the election of MPC, for an additional US$7,000,000 until February 28, 2025. The Property Royalty is perpetual and cannot be reduced. The Facilities Royalty and the AOI Royalty will be reduced by half (to either 0.5% NSR or 1% NSR – depending on the MPC election) on July 1, 2034.

The Chapi Mine is located in southern Peru’s Moquegua and Arequipa Departments at an elevation of approximately 2,750 meters, and has ready access approximately 50 kilometers south-southeast from the city of Arequipa. Historical, small-scale copper production, which is poorly documented, occurred intermittently from the 1930s through the early 1980s. Subsequently, between 2006 and 2012 the Chapi Mine produced approximately 5,000 to 8,500 tonnes per annum, initially of copper sulphates from open-pit and underground mining and heap leaching, and later copper cathodes from open-pit mining, heap leaching, and SX-EW (solvent extraction-electrowinning) processing. The grades mined during 2006-2012 were reported as 0.59% - 1.04% copper. The operations were halted in 2012 due to declining copper prices and operational challenges that were mainly related to insufficient ore control on materials delivered to the leach pads.

The historical Chapi Mine is comprised of two principal open pits, underground workings, a crushing and grinding circuit, heap leach pads, a solvent extraction plant, an electrowinning copper cathode plant, and related infrastructure including mine camp, office facilities, water supply, and power. Since 2012, Chapi has been maintained under care and maintenance with the principal permits for mining operations remaining in place under a temporary suspension.

The deposits at Chapi are comprised of sandstone-hosted copper mineralized mantos, partially oxidized and secondarily enriched, that are related to a series of porphyry intrusions. The Chapi Mine lies between, and directly along trend from, some of the world’s largest producing porphyry copper deposits, including Cerro Verde and the Cuajone-Quellaveco-Toquepala cluster. All of these deposits and districts, as well as others, comprise the Paleocene-Eocene Cu-Mo porphyry belt of Southern Peru, and contribute to making Peru the second ranked copper producer in the world.

The ~26,000 hectare land package owned by MPC, and subject to EMX’s royalty interests, includes historical resources based on an extensive drill database that delineates the well-mineralized, leachable manto horizons at Chapi, which are open for potential resource expansion from both open pit and underground exploitation. Porphyritic intrusions, intimately associated with the mineralized mantos, have low-grade copper mineralization in sericitic-altered zones, but also have exploration potential for higher-grade copper mineralization within the porphyry system. Further, although gold assays in the drill database are limited in number, those that are present suggest that gold, not recovered by the historical mining operations, might have wider exploration potential.

Additional, potentially leachable copper-oxide and chalcocite drill-defined mineralization, as well as primary sulphide mineralization, occurs at the Pampa Negra and Candelaria projects, related to porphyritic intrusions and associated supergene manto horizons that are covered by the Property Royalty or by the AOI Royalty. Furthermore, early-stage exploration targets at San Jose (with drilling), and Justicia prospect areas (no drilling) show evidence of porphyry-style mineralization with some evidence for oxidation of primary sulphides. These deposits provide upside potential for processing at the existing Chapi plant subject to further drilling, engineering, and permitting. 

Quilla’s near-term plan is to restart Chapi Mine operations utilizing the SX-EW process circuit which is designed to produce a nominal 10,000 tonnes per annum of copper cathode, with the option to potentially increase capacity in the future. Initially, the restart plan is contingent on additional drilling and metallurgical test work, updated resource and reserve modelling, rehabilitation of the mining and leach-processing infrastructure, and updated environmental and other permits.

Comments on Mines and Districts in the Region. The mines and districts in the region of the Chapi Mine property, which include Cerro Verde and the Cuajone-Quellaveco-Toquepala cluster, provide geological context for EMX’s Chapi royalty property. However, this is not necessarily indicative that the Chapi royalty property hosts similar styles, grades, or tonnages of mineralization.

Comments on Chapi Background, Geology, and Exploration Upside. EMX has not verified the historical information and data from the previous Chapi operators, but believes this information and data to be reliable and relevant. Updated information and data will result from Quilla’s restart program technical work.

Maps

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