Hemlo Mining Update | Jason Kosec and Jimmy Connor

Hemllo Mining Acquisition & Optimization Plan – Detailed Summary

Key Concepts:

• Hemllo Mine: A long-life gold mine in Canada, acquired from Barrick Gold, with a current 14-year mine life and production of 140,000 ounces annually.
• Optimization Program: A multi-faceted plan to increase production to 200,000+ ounces, extend mine life beyond 20 years, and improve operational efficiency.
• Resource to Reserve Conversion: The process of upgrading geological resources (inferred, indicated) to proven and probable reserves through drilling and analysis.
• All-In Sustaining Cost (AISC): The total cost of producing an ounce of gold, including operating costs, capital expenditures, and sustaining costs. Currently $1,400/ounce.
• Structural Geology: The branch of geology that studies the deformation of the Earth's crust, crucial for understanding ore body formation and extension.
• Brownfield Project: Developing or expanding an existing mine site, as opposed to a Greenfield project (new mine development).
• NAV (Net Asset Value): A valuation metric representing the present value of a company’s assets.

1. Acquisition Process & Rationale

Hemllo Mining, a newly publicly traded company, acquired the Hemllo gold mine from Barrick Gold in a competitive bidding process. Approximately 35 companies initially expressed interest, narrowing to a final four. Hemllo Mining prevailed despite being the only “shell company” bidder, competing against multi-billion dollar producers. The acquisition price was $925 million, comprised of $875 million in cash and $50 million in stock (all figures in US dollars).

A key factor in Hemllo’s success was the expertise of its leadership team, particularly lead director Bob Cordermain, who was involved in two of the three original discoveries at Hemllo in the early 1980s. His geological knowledge and relationships with CIBC and Mark Bristo were instrumental. The team identified an undervalued asset that Barrick was willing to divest, focusing on maximizing its potential.

2. Asset Overview & Historical Context

The Hemllo mine has been producing gold since 1985 and is considered a significant piece of Canadian mining history. The current mine life is 14 years, with annual production of approximately 140,000 ounces. Hemllo Mining believes the potential exists to extend the mine life to over 20 years and increase production to over 200,000 ounces per annum. The asset is unique in Canada and North America due to its longevity and potential.

3. Financial Performance & Metal Price Strategy

The acquisition was timed strategically, with the deal inked at a long-term metal price of $2,600/ounce, while spot prices were around $3,300/ounce (and have since increased by $1,000). This represents a significant discount compared to the typical 15% discount between spot and long-term consensus prices. The company emphasizes the value of securing a long-term price for a 14+ year asset. The all-in sustaining cost (AISC) is currently $1,400/ounce, resulting in high margins at current gold prices.

4. Optimization Program – Three Key Pillars

Hemllo Mining’s strategy centers on a comprehensive optimization program with three main components:

• Resource Conversion: Launching a large-scale drill program (130 kilometers this year) focused on converting resources into reserves. This is divided into “growth drilling” (expanding the resource base) and “high-definition drilling” (upgrading resource categories). The company plans to spend $20 million on growth drilling alone, a significant increase from Barrick’s $2 million annual investment. The goal is to have 100% of mined material classified as “measured” resources.
• Mine & Mill Improvements: The existing infrastructure is currently underutilized. Hoisting capacity is at 60% (potential for 6,000 tons/day), while current mining rates are 3,500 tons/day. Mill capacity is 10,000 tons/day. The company plans to increase throughput by redesigning the life-of-mine plan based on a higher metal price (between $2,100 and $2,500/ounce, up from Barrick’s $1,700/ounce). This will allow for more focused mining in high-grade areas, improving productivity and lowering operating costs.
• Mill Upgrades: The mill currently operates two parallel lines. Upgrading the back end of the mill (Nelson concentrator, tailing flotation cells, cyanide detox tanks) will increase capacity from 3,800 to 4,800 tons/day with no capital investment, to 6,000 tons/day with $10 million, and to the full 10,000 tons/day capacity with $32 million (as detailed in the technical report).

5. Geological Potential & Regional Exploration

The Hemllo gold deposit is located within the Hemllo greenstone belt, a highly prolific gold-bearing region. The deposit is hosted in two deformation events (F1 and F2 folds), indicating significant potential for extending the ore body at depth and along multiple fold closures (Ezone, Bzone, Dzone, Azone). While the company acknowledges the large 47,000-hectare regional land package, it is prioritizing optimization of the existing Hemllo mine site due to its immediate potential for value creation. Regional exploration will be pursued on an accretionary basis in the future.

6. Timeline & Cash Allocation

The optimization program is expected to be completed within 1.5 years. By the end of 2027, the company aims to reach a 6,000-ton/day run rate, equating to approximately 200,000 ounces of annual production. The company currently has $140 million (US) in cash, plus approximately 20,000 ounces held at the refinery. $125 million will be invested back into the mine this year.

7. Valuation & Investor Outreach

Hemllo Mining is currently trading at a discount to its peers, with a market capitalization of $1.5 billion compared to comparable companies trading at $3-3.5 billion. The company believes that delivering on its optimization plan will close this valuation gap. The company is planning a comprehensive investor outreach program in Q1 2026, including presentations in Switzerland, London, Paris, the United States, Australia, Singapore, Hong Kong, and attendance at major mining conferences (Beimo, TD, PDAC). They also plan a site tour for investors following PDAC. Key catalysts for the share price include a TSX mainboard listing, index inclusion in March, an updated resource statement (Q1 2026), and a US listing (2027).

8. Key Takeaways & Future Newsflow

Hemllo Mining has acquired a high-potential gold asset with a long mine life and significant optimization opportunities. The company’s experienced team, strategic metal price positioning, and comprehensive optimization program are expected to drive substantial value creation for shareholders. Investors should monitor the following news events:

• TSX mainboard listing
• Index inclusion (March)
• Updated resource statement (Q1 2026)
• Drill program results
• Updated technical report (mid-2027)
• NYSE listing (2027)

Notable Quote:

“...this is a very unique asset in Canada…where we’re talking about a 14-year mine life that we see potential going over 20.” – Jason Simpson, CEO of Hemllo Mining.