Altaley Mining: Turnaround Plan to Deliver, Refinance and Rerate in 2023

1. Mike Struthers, CEO of Altaley Mining, highlights the company's base and precious metal operations in Mexico and his extensive background in mining and capital projects.
2. Altaley's primary goal is to complete the 500-tonne project that is currently 85% finished. To finalize this project, they need a backup facility for sustained operations.
3. Capital requirements to finish the 500-tonne project are under discussion. The company has faced challenges in raising funds, which has eroded its credibility.
4. A major focus for Altaley is stabilizing and optimizing the base metals segment of their operations. Concurrently, they aim to improve precious metal recoveries in 2024.
5. The company is keen on rebuilding its credibility by ensuring consistent delivery, refining the capital structure, and stabilizing operations, while keeping stakeholders informed through regular news flow.

Altaley Mining is a TSX-listed base and precious metals mining company operating in Mexico, with an advanced construction project and operating mine. The company has experienced difficulties over the past couple of years, but new CEO Mike Struthers believes 2023 will be a turnaround year as the company focuses on project delivery, refinancing, and improving market credibility. With significant assets and resources, a strengthened management team, and a clear path forward, Altaley presents an attractive investment opportunity.

New CEO with Extensive Mining Experience to Lead Turnaround

Mike Struthers joined as CEO of Altaley in September 2022, bringing over 40 years of experience in the mining industry. Struthers has a technical background in geology, rock engineering and mine planning, with extensive operational and project management expertise. He has worked around the world, including Australia, Portugal, Chile and Mexico, and has experience across the spectrum from feasibility studies to mine expansions and optimization.

Most recently, Struthers was CEO of Empire Metals, focused on exploration projects in Australia and Eastern Europe. Prior to that, he spent four years based in Portugal managing mining operations for London Mining. Struthers' blend of technical knowledge and practical management skills makes him well-suited to lead Altaley's operational turnaround.

Two Core Assets in Mexico

Altaley has two key assets in Mexico:

Campo Morado Mine: Operational mine in Guerrero state producing zinc, copper, silver and gold. In 2021 the mine generated $26 million in operating cash flow.

Tahuehueto Project: Advanced construction project in Durango state with 500 tonne per day (tpd) base case and potential 1,000 tpd expansion. Mine is currently operating at 300 tpd pre-production.

Both assets have significant exploration upside and potential for operational optimization.

Deliver 500 tpd at Tahuehueto by Q2 2023

The Tahuehueto project has experienced repeated delays, with Altaley failing to meet expected development timelines in 2022. This damaged credibility with investors. The main focus now is to finalize construction and deliver the 500 tpd base case operation by Q2 2023.

The mill and primary equipment are in place, with about 85% of construction complete. The main items outstanding are:

• Finalizing the tailings storage facility design and construction
• Installing additional cyclones and pumps to boost throughput
• Adding a second tailings filter press as backup

The estimated cost to finish the 500 tpd construction is $4.5-5 million. Altaley is utilizing a $10 million advance from a rights offering plus existing cash flow from operations to fund completion.

By delivering on schedule in Q2, Altaley aims to rebuild credibility and confidence. The 500 tpd operation is projected to be cash flow positive.

Expand Tahuehueto to 1,000 tpd by Year End

Once the 500 tpd base case is completed, Altaley plans to move forward with expanding throughput to the full 1,000 tpd potential later in 2023. This will require installation of a second ball mill and additional development to debottleneck mine operations.

The goal is to get the mine to nameplate capacity and boost margins through economies of scale. The PFS models a 10.5 year mine life at 1,000 tpd. While timing of the expansion will depend on funding and market conditions, Struthers is confident it can be achieved by end of 2023.

With extensive visible veining and limited exploration to date, there is significant upside to grow resources and potentially expand beyond 1,000 tpd in the future.

Optimize Operations at Campo Morado

Campo Morado is a more complex VMS deposit that requires detailed geo-metallurgical planning to optimize performance. Operations suffered in 2022 due to lack of preparation for variability between ore zones.

Under the new planning approach, the mine sequence is designed based on detailed geo-metallurgical analysis so the processing plant receives appropriate blended feed. This helps stabilize operations.

Other initiatives underway include adding flotation capacity to boost copper recoveries and testing new technologies to improve precious metals recoveries.

The mine plan for 2023 focuses on copper-rich zones and is expected to deliver significantly higher cash flow, especially in the second half of the year. There is extensive upside potential through operational improvements currently not factored into guidance.

Strengthened Balance Sheet and Funding

Altaley has announced a rights offering to help fund the capital required to complete Tahuehueto. The company also restructured debt facilities in 2022 to provide more flexibility.

With both mines ramping up production and cash flow over the next year, the balance sheet is expected to steadily strengthen. This will allow Altaley to self-fund future expansion programs.

The company is also looking at options to acquire a large share position from a distressed seller to solidify the share register.

Investment Thesis: Deliver, Refinance and Rerate

With an experienced new CEO, strengthened management team, clear operational plan and significant assets, Altaley is positioned for a turnaround in 2023. The key drivers for re-rating include:

• Delivering the 500 tpd base case at Tahuehueto on schedule - Build credibility and generate cash flows
• Expanding Tahuehueto to 1,000 tpd - Increase production, resources and mine life
• Optimizing Campo Morado - Unlock operational upside and grow cash flows
• Refinancing and balance sheet improvement - Fund growth and reduce dilution

If Altaley Mining can deliver operationally and execute its refinancing/growth strategy over the next year, the company is likely to rerate significantly. The current valuation of around $14 million appears extremely cheap relative to asset quality and production profile.

Altaley offers investors a unique turnaround opportunity in the mining space. With commodities expected to remain strong and Mexico being a top mining jurisdiction, Altaley's high-grade projects have excellent prospects. The roadmap is clear - execute in 2023 and position for sustainable growth.

Altaley Mining could be a good investment opportunity for investors:

• Undervalued assets: Altaley's two mines in Mexico have significant exploration and expansion potential that is not reflected in the current low market valuation of only $14 million. The company's assets appear undervalued relative to their production capabilities and resources.
• Improving operations: With an experienced new CEO and management team, Altaley has a clear plan to optimize its mines and ramp up production. Investors could benefit from this operational turnaround and the expected increase in cash flows.
• Near-term catalysts: Completion of the Tahuehueto project expansion and optimized production at Campo Morado provide clear catalysts in 2023 that could drive re-rating of the stock as Altaley executes its business plan.
• Commodities upside: Altaley produces zinc, copper, silver and gold. With analysts projecting these commodities to remain strong over the next few years, Altaley is well-positioned to benefit from supportive metals pricing.
• Funding resolved: The rights offering and debt restructuring address near-term funding needs. As the mines increase cash flow, the balance sheet will strengthen, reducing dilution risk.
• Turnaround story: Investors have an opportunity to get in early on a compelling turnaround story as Altaley transitions from past difficulties to improved operational and financial performance. The significant re-rating potential exists.
• Limited downside: At the current valuation, there appears to be relatively limited downside risk but a large upside potential if execution proceeds as planned. The assets provide a solid foundation.

For investors comfortable with some execution risk, Altaley Mining offers an attractive risk/reward proposition for exposure to base and precious metals growth through undervalued quality mining assets with strong turnaround potential.