Extracting Critical Metals from Historic Tailings at Fraction of Traditional Mining Costs in Peru

• Cerro de Pasco Resources is advancing the reprocessing of the Quiulacocha Tailings Project in Peru, which contains an estimated 423 million ounces silver equivalent of already-extracted minerals ready for reprocessing.
• Recent drilling has confirmed high-grade mineralization with an average grade of 5.5 oz/t AgEq, including significant gallium concentrations that add strategic value in light of global supply constraints.
• The project offers notably lower costs than traditional mining, with tailings extraction estimated at $1-2 per ton versus $2-15 for open-pit and $30-200 for underground mining operations.
• Environmental remediation is a key benefit, as reprocessing enables resource recovery while mitigating acid water contamination from the historic tailings.
• The company is advancing through key project development milestones, including completion of a 40-hole drilling program, with mineralogical and metallurgical studies underway.

Cerro de Pasco Resources Inc. (TSXV:CDPR) is a resource management company focused on applying modern technology to reprocess mineral stockpiles and tailings from historic mining operations. The company holds a 100% interest in the El Metalurgista mining concession in Peru, which covers 95.74 hectares including mineral rights to 57 hectares of the Quiulacocha Tailings Storage Facility. Located approximately 175 km north-northeast of Lima in the Pasco Region of Peru, the company's flagship project aims to extract valuable minerals while simultaneously addressing environmental contamination from historic mining activities.

Historic Legacy and Strategic Significance

The Cerro de Pasco region has been renowned for its rich mineral deposits since the 16th century. By 1736, it had become famous for its silver lodes, producing approximately 65% of Peru's silver around the time of Peruvian independence. The Cerro de Pasco Corporation, founded in 1902, became Peru's second-largest employer after the government and contributed significantly to the country's infrastructure development.

This rich mining history has left behind substantial mineral resources in tailings that can now be leveraged using modern processing technologies. Guy Goulet, CEO of Cerro de Pasco Resources, stated in a news release:

"The successful completion of this drilling campaign marks a significant milestone for Cerro de Pasco Resources. We are thrilled with the assay results, which not only confirm the high-grade nature of the Quiulacocha Tailings but also highlight significant gallium concentrations—a critical metal with rising global demand."

Quiulacocha Tailings Project: A High-Value Resource

The Quiulacocha Tailings Storage Facility covers approximately 115 hectares with tailings deposited from the early 1900s to 1992. Based on historical metallurgical balances, the tailings are estimated to contain an impressive 423 million ounces of silver equivalent, with a breakdown that includes silver, zinc, lead, copper and gold ounces. The resources were derived from two main mining periods: the Copper Era (1906-1965), which processed high-grade copper-silver-gold ore, and the Polymetallic Era (1952-1992), which focused on zinc-lead-silver ore.

The Economic Advantage of Tailings Reprocessing

One of the most compelling aspects of the Quiulacocha project is its potential for cost-effective mineral extraction. Unlike traditional mining operations, reprocessing tailings eliminates the need for drilling, blasting, and extensive hauling, significantly reducing operational costs.

Tailings extraction is estimated to cost between $1-2 per ton, compared to $2-15 for open-pit mining and $30-200 for underground mining. The project also benefits from minimal dilution factors (0-5%) versus traditional mining (10-50%) and requires almost no infrastructure development compared to conventional mining operations.

Based on internal projections, the company has outlined two potential economic scenarios:

1. Base Case (10,000 tonnes/day processing):
   • Net Smelter Return: $49/tonne
   • Operating Cost: $10/tonne
   • Profit: $39/tonne
   • Total Project Profit: $2.9 billion over project life
2. Upside Case (20,000 tonnes/day processing):
   • Net Smelter Return: $100/tonne
   • Operating Cost: $15/tonne
   • Profit: $85/tonne
   • Total Project Profit: $6.3 billion over project life

Recent Drilling Confirms Resource Potential

Cerro de Pasco Resources completed a 40-hole drilling campaign covering a 300 x 1,000-meter area of the Quiulacocha Tailings. The assay results have confirmed high-grade intersections of silver, zinc, lead, copper, and gold, while also revealing significant concentrations of gallium, a critical metal with growing strategic importance. Key findings from the drilling campaign include consistently high grades across all samples, with an average of 5.5 oz/t AgEq.

The discovery of gallium is particularly significant as it represents a strategic resource with applications in advanced electronics and renewable energy technologies. As Goulet emphasized:

"The consistency of silver, zinc, and lead mineralization, coupled with the potential for valuable by-products like gallium and pyrite, position this project as a cornerstone of our portfolio."

Environmental and Social Benefits

Beyond its economic potential, the Quiulacocha project offers significant environmental and social benefits. Reprocessing the tailings will contribute to environmental remediation by removing a source of acid water contamination while recovering valuable resources.

The operation is designed to have minimal environmental impact, with tailings extraction operating without dust, noise, or explosives. The company plans to use submersible pumps mounted on floating barges to extract the tailings, which will then be transported through a pipeline to processing facilities.

The project is expected to create substantial employment opportunities in the Cerro de Pasco region, a well-established mining town with a skilled workforce. Additionally, it will generate tax revenue for the government and support local economic development.

Silver, and Gallium: A Strategic Critical Metal

The discovery of significant gallium concentrations adds substantial strategic value to the Quiulacocha project. Gallium is essential for semiconductors, 5G technology, LED lighting, and solar panels, with applications extending to military, aerospace, and green technologies.

Global production of gallium has become increasingly concentrated, with China now accounting for over 98% of primary gallium production worldwide, producing approximately 750,000 kg in 2024 compared to just 12,000 kg in the rest of the world. This concentration presents supply chain security concerns for Western economies.

The average gallium grade across the Quiulacocha drill samples was 53.2 g/t, with some areas showing significantly higher concentrations. This positions Cerro de Pasco Resources as a potential alternative source for this critical metal at a time when demand is growing due to the energy transition and technological advancement.

Silver represents another significant value component of the Quiulacocha project. The silver market has been experiencing a persistent supply deficit, with demand exceeding supply for three consecutive years. In 2023, the deficit reached 184.3 million ounces, one of the largest on record, driven by rising industrial consumption.

Silver prices have surged 134% since 2016, climbing from $14.01 to $32.75 per ounce by early 2025. This price growth reflects increasing industrial demand, particularly in photovoltaics, where silver demand has quadrupled since 2015 to an estimated 232 million ounces in 2024. With an estimated 115 million ounces of silver contained in the Quiulacocha tailings, Cerro de Pasco Resources is well-positioned to capitalize on these favorable market conditions.

Investor Outlook

For investors considering Cerro de Pasco Resources, the company presents a unique opportunity to gain exposure to critical and precious metals through a project with significantly lower capital and operational costs than traditional mining operations. The company's focus on reprocessing already-extracted materials aligns with the growing trend toward sustainable and environmentally responsible resource development.

Project Development Progress and Timeline

Cerro de Pasco Resources has made significant progress in advancing the Quiulacocha project. In May 2024, the company received a Supreme Resolution granting access to the El Metalurgista Concession for its drilling campaign, settling a dispute with AMSAC and confirming its rights to explore and reprocess the historic tailings.

The company plans to advance the project with several key initiatives in 2025:

1. Completion of mineralogical and metallurgical studies to determine the most effective recovery methods
2. Expanded Phase 2 drilling program targeting the remaining tailings and the primary high-grade copper zone
3. Formalization of claims on surrounding tailings areas
4. Completion of various site scoping studies, including geotechnical stability, hydrogeology, environmental baseline, and infrastructure assessments

With a market capitalization of approximately $135 million as of March 2025, strong institutional backing (including a 16.84% stake held by Eric Sprott), and an experienced management team with deep expertise in Latin American mining, Cerro de Pasco Resources is well-positioned to unlock the substantial value contained in the Quiulacocha tailings. As the company progresses through its development milestones in 2025, including metallurgical studies and an expanded drilling program, investors may find significant potential for value creation in this innovative approach to resource extraction.