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Toronto, September 8, 2020 – O3 Mining Inc. (TSX.V:OIII) (“O3 Mining” or the “Corporation”) is pleased to announce positive results from the independent preliminary economic assessment (“PEA”), prepared in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), for its 100% owned Marban project at the Malartic property, in the world-class mining region of Val D’Or in Québec, Canada.

With the PEA now complete, O3 Mining will begin working on a pre-feasibility study to advance the Marban project towards production as part of a staged development strategy while continuing its aggressive drilling programs aimed to maximize value creation for shareholders.

PEA Highlights*

• Long-term Gold Price of US$1,450/oz

• Exchange rate of C$1.00 = US$0.74

• After-tax net present value (“NPV”) (discount rate 5%) of $423 million

• After-tax internal rate of return (“IRR”) of 25.2%

• After-tax payback period 4.0 years

• Initial capital of (“CAPEX”) of $256 million including mine preproduction, processing, infrastructure (roads, power line relocation, tailings facility, ancillary buildings, and water management)

• Life of mine (“LOM”) of 15.2 years

• Average LOM strip ratio (W:O) of 5.9:1

• Total production of 60,356 kt of mill feed yielding 1.8 Moz Au

• Average annual gold production of 115,000 oz

• Average gold mill head grade of 1.13 g/t in years 1 to 10 (0.97 g/t for LOM)

• Average recovery of 93.7%

• Measured and indicated mineral resource of 54,151 kt at a 1.10 g/t Au grade

• Cash cost of US$741/oz

• All-in sustaining cost (“AISC”) of US$822/oz

Notes

* All figures are stated in Canadian dollars unless otherwise stated.

** Cautionary Statement: The reader is advised that the PEA summarized in this news release is intended to provide only an initial, high-level review of the project potential and design options. The PEA mine plan and economic model include numerous assumptions and the use of inferred mineral resources. Inferred mineral resources are considered to be too speculative to be used in an economic analysis except as allowed for by NI 43-101 for PEA studies. There is no guarantee that inferred mineral resources can be converted to indicated or measured mineral resources, and as such, there is no guarantee the project economics described herein will be achieved. 

The O3 Mining team is pleased to present the results of a PEA on its Marban Project, which unequivocally demonstrates the potential of O3 Mining to become a major North American gold producer, with a positive after-tax IRR of 25.2% and an after-tax NPV of C$423 million. The PEA supports an 11,000 tonnes per day open pit project with production spanning 15.2 years with robust economics at a US$1,450/oz gold price, with very attractive cash costs and AISC, low CAPEX and low capital intensity. The first 12 years will target production in excess of 130,000 ounces gold per year peaking at more than 161,000 ounces in Year 9.

“Marban has shown potential to become a highly profitable gold mine in one of the most prolific producing regions in Canada, supported with a PEA produced by the Ausenco team, one of the most experienced and reputable engineering firms working on gold projects in Canada. The Marban Geological team has demonstrated the ability to identify an abundance of gold resources over a very short period. The ongoing drill program will continue to add to and upgrade resources as we seek to move the project forward towards production,”commented Jose Vizquerra, President, CEO and Director of O3 Mining.

O3 Mining believes the Marban property has the geological potential to extend the LOM beyond the initial 15.2 years presented in the PEA as well as the opportunity to expand the scale of production by increasing the mineral resource through ongoing exploration and drilling. The Corporation’s goal is for Marban to be a cornerstone mine for its future growth in a mining-friendly jurisdiction. With a strong treasury to support its next steps, the Corporation plans to commence pre-feasibility and environmental impact studies, while continuing to explore the geological potential of its Marban property.

“O3 Mining was born out of a series of successful mining ventures on properties in the same Val D’Or region in Québec – ranked as the fourth best mining jurisdiction in the world and has produced over 30 million ounces of gold. O3 Mining is ready to maximize Marban’s value by advancing the studies to further refine and de-risk the project, which the Osisko Group has successfully done with other deposits in the past, such as Canadian Malartic,” added Mr. Vizquerra.

O3 Mining looks forward to working with its partners in the Abitibi region including the Malartic and Val D’Or municipalities and the Abitibiwinni, Lac Simon, Long Point, and Kitcisakik Anishinabeg First Nations as well with the support of the Québec and federal governments, to advance the Marban Project.

Overview

Ausenco Engineering Canada Inc. (“Ausenco”) was appointed as lead consultant on May 7, 2020, to prepare the PEA in accordance with NI 43-101, and was assisted by Moose Mountain Technical Services, Golder Associates Inc., and WSP Canada.

The Marban project is located on the Malartic property in the Abitibi gold district of Québec,

Canada. The Project area contains three past-producing mines (Marban, Norlartic and Kierens), which collectively produced 585,000 ounces of gold between 1959 and 1992. The land package owned by O3 Mining, in the heart of the Malartic, and Val D’Or gold mining camps, covers 125 square kilometres and is located 12 kilometres from the Canadian Malartic Mine and along the same shear structure as Wesdome’s Kiena deposit.

Financial Analysis

The economic analysis was performed assuming a 5% discount rate. On a pre-tax basis, the NPV is $715 million, the IRR is 31.5% and the payback period is 3.7 years. On an after-tax basis, the NPV is $423 million, the IRR is 25.2% and the payback period is 4.0 years. A summary of project economics is listed in (Table 1) and shown graphically in the figures below.

Table 1: Summary of project economics

Notes

* Cash costs consist of mining costs, processing costs, mine-level general & administrative expenses and refining charges and royalties.
** AISC includes cash costs plus sustaining capital, closure cost and salvage value.

Figure 1: Projected Annual and Cumulative LOM Post-Tax Unlevered Free Cash Flow

Sensitivity

A sensitivity analysis was conducted on the base case pre-tax and after-tax NPV and IRR of the Marban project, using the following variables: metal price, total capex (initial + sustaining), total operating cost and exchange rate. The tables below provide a summary of the sensitivity analysis.

Table 2a: Post-Tax NPV(5%) Sensitivity

Table 2b: Post-Tax IRR Sensitivity

Mineral Resource

The mineral resource is estimated from a drill hole database containing 5,808 drill holes consisting of 271,599 metres of drilling and 288,345 assay intervals. Data prior to 1984 was not used in the interpolation. The Marban deposit consists of 27 domains and the Kierens-Norlatic consists of 16 domains with gold grades capped at values between 10g/t Au and 100g/t Au and outlier restriction of gold grades during interpolation at values of 1.5g/t to 50 g/t Au depending on the domain. Blocks were assigned a classification based on the variography and drill hole spacing by domain, with measured blocks requiring three drill holes within 10 metres and indicated blocks requiring two drill holes within 30 metres.

The base case cut-off grade is 0.30 g/t Au based on a cut-off grade mill recovery of 87%, processing + general & administrative costs of CDN$15/tonne and a US$1,400/oz Au price, with smelter terms as detailed below. The underground resource is within a 3.5 g/t gradeshell. At these cut-offs, the total measured and indicated mineral resource is estimated at 54.1Mt at 1.10 g/t Au for a total of 1.9Moz (Table 3). Of the total resource 76% is considered measured and indicated mineral resources.

Table 3: Mineral Resource Estimate (effective date August 12, 2020)

Notes

1. The Mineral Resource estimate has been prepared by Sue Bird, P.Eng., an independent “qualified person” (within the meaning if NI 43-101).

2. Resources are reported using the 2014 CIM Definition Standards and were estimated in accordance with the CIM 2019 Best Practices Guidelines.

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

4. The open pit mineral resource has been confined by a “reasonable prospects of eventual economic extraction” pit shell generated using the following assumptions: US$1,800/oz. Au at a currency exchange rate of 0.75 US$ per CDN$; 99.95% payable Au; CDN$4.30/oz Au offsite costs (refining, transport and insurance); a 3% NSR royalty; $16/t process and G&A costs; $2.60/t mining costs; grade dependent mill process recoveries; and pit slopes varying from 25 to 50 degree overall depending on geotechnical characteristics.

5. The underground mineral resource reports all material within a continuous 3.5g/t Au gradeshell

6. Metallurgical recovery is based on the formula: ln(Au)*0.0372+0.9017, maximum 96.7%

7. The specific gravity of the deposit has been determined by lithology as being between 2.67 and 2.81.

8. Numbers may not add due to rounding.

There are no other known factors or issues that materially affect the mineral resource estimate other than normal risks faced by mining projects in the province in terms of environmental, permitting, taxation, socio-economic, marketing, and political factors and additional risk factors as listed in the “Cautionary Note Regarding Forward-Looking Information” section below.

Mining

The mine plan includes 60Mt of mill feed and 356Mt of waste over the 15.2-year LOM. Mine planning is based on conventional open pit methods suited for the project location and local site requirements. Owner operated and managed open pit operations are anticipated to begin 9–12 months prior to mill start up, running for 13 years to pit exhaustion, then followed by 2.2 years of low-grade stockpile reclamation to the mill. The subset of mineral resources contained within the designed open pits, summarized in Table 4 with a 0.35g/t gold cut-off, forms the basis of the mine plan and production schedule.

Table 4: PEA Mine Plan Production Summary

Notes:

1. The PEA Mine Plan and Mill Feed estimates are a subset of the August 12, 2020 mineral resource estimates and are based on open pit mine engineering and technical information developed at a scoping level for the Marban and Kierens-Norlartic deposit.

2. The PEA Mine Plan and Mill Feed estimates are mined tonnes and grade, the reference point is the primary crusher.

3. Waste/ore contact edge dilution of 20% at 0.15 g/t is applied to the insitu Mineral Resources. Mining Recovery of 100% of diluted tonnages is assumed.

4. Cutoff grade of 0.35 g/t assumes US$1,400/oz. Au at a currency exchange rate of 0.75 US$ per C$; 99.95% payable gold; $4.30/oz offsite costs (refining, transport and insurance); a 3.0% NSR royalty; and a variable metallurgical recovery for gold that is anticipated to be 88% at cutoff.

5. The cut-off grade covers processing costs of $14.00/t, administrative (G&A) costs of $2.00/t, and low grade stockpile Rehandle costs of $1.50/t.

6. Estimates have been rounded and may result in summation differences.

The economic pit limits are determined using the Pseudoflow algorithm. The Marban deposit is planned as one pit split into four phases or pushbacks, and the Kierens-Norlartic deposit is split into six phases, two for Kierens, two for Norlartic, one for North North-Zone, and one for Gold Hawk. Pit designs are configured on 5 metre bench heights, with 6 to 9 metre wide berms placed every four benches, or quadruple benching. Benchface angles and subsequent inter-ramp angles are varied based on prescribed geotechnical zones. General pit sequencing is shown in Table 5 below.

Table 5: PEA Mine Plan Pit Sequencing

The mill will be fed with material from the pit at an average rate of 4.0 Mtpa (11ktpd). Cut-off grade optimization is employed, which feeds a low-grade stockpile south of the Marban deposit, which is planned for reclamation to the mill in the later years of the mine life. Overburden will be placed in a stockpile directly north of the Marban pit. Waste rock will be placed in stockpiles adjacent to all pits. Waste rock will also be used for construction of the tailings and water management pond northwest of the deposits.

Mining operations will be based on 365 operating days per year with two 12-hour shifts per day. An allowance of 10 days of no mine production has been built into the mine schedule to allow for adverse weather conditions.

The mining fleet will include diesel powered down the hole (DTH) drills with 165mm bit size for production drilling, diesel-powered RC drills for bench-scale grade control drilling, 12 cubed meter bucket size diesel hydraulic excavators and 13 cubed meter bucket sized wheel loaders for production loading, and 91 t payload rigid-frame haul trucks and 36 t articulated trucks for production hauling, plus ancillary and service equipment to support the mining operations. In-pit dewatering systems will be established for each pit. All surface water and precipitation in the pits will be handled by submersible pumps.

The mine equipment fleet is planned to be purchased via a lease financing arrangement. Maintenance on mine equipment will be performed in the field with major repairs to mobile equipment in the shops located near the plant facilities.

Milling

The Marban Process Plant employs standard Carbon-In-Leach (CIL) technology along with gravity concentration for gold recovery. The plant includes crushing, grinding, gravity concentration, classification, thickening, leach and CIL and detoxification before deposition into a Tailings Storage Facility.

The plant will treat 4.0 Mt of ore per year at an average throughput of 496 tonnes per hour. The mill design availability is 8,059 hours per year or 92%. The plant has been designed to realize an average recovery of 93.7% of the gold over the life of the project based on metallurgical testwork completed by SGS Lakefield in years 2012-2016. Of this, 30.4% of the gold will be extracted by the gravity circuit and a further 63.3% by the leach/CIL process.

Tailings storage capacity has been identified to safely accommodate the life of mine production as described in this PEA. Tailings produced over the first eight years of mine operation will be accommodated in a new tailings storage facility to be constructed northwest of the Kierens-Norlartic open pits The tailings storage facility perimeter containment dams will be constructed with waste rock and overburden from open pit mine development and will utilize the downstream construction method to ensure safe tailings storage over the long-term. Runoff from the tailings storage facility will be collected in an adjacent water management pond. Tailings production after Year 8 will be placed in the mined out Kierens-Norlartic Pit #4. Water will be reclaimed for reuse at the mill from the Water Management Pond and from the Kierens-Norlartic Pit #4 after Year 8. Tailings will be dewatered to approximately 60% solids by weight with a thickener located at the mill to reduce the volume of water being pumped between the mill and tailings storage facilities.

In order to allow mining of the Kierens-Norlartic pits, Kierens Creek will be diverted to the North. The 120kV power line crossing through the Marban property will be re-aligned along the south edge of the property boundary to free up room for the waste rock stockpile.

Capital and Operating Costs

The total pre-production capital cost for the Marban project is estimated to be $256 million including allowances for indirect costs and contingency of $24.5 million and $30.6 million, respectively. Sustaining capital costs are estimated at $199 million, including closure costs (Table 6). Operating costs are estimated at $28.2 per tonne milled (Table 7).

Table 6: Total Capital and Operating Costs

Table 7: Total Life of Mine Operating Costs

Gold Production

Projected gold production averages 115,000oz per year over the LOM, peaking at 161,000oz in year nine.