Chesapeake Gold: Unlocking Value in Mexico with Innovative Oxidation Technology & Exciting Exploration Upside

• Chesapeake Gold has one of the largest gold and silver resources with its Metates project in Mexico
• The company is developing an oxidative leach technology to reduce capital costs and improve project economics at Metates
• Chesapeake is actively exploring its Lucy project in Mexico which has high-grade gold mineralization from surface
• The company is well-funded with $22 million in cash to advance both the Metates project and exploration at Lucy
• Macro environment is favorable with rising gold prices; Mexican election outcome may be constructive for the mining sector

Compelling Opportunity in Chesapeake Gold as Technology Unlocks Value

Chesapeake Gold (TSXV:CKG) presents an attractive investment opportunity for precious metals investors looking for exposure to a large, high-quality gold and silver resource with a clear path to development. The company's flagship Metates project in Mexico hosts one of the largest undeveloped gold and silver deposits in the world with over 17 million ounces of gold, 423 million ounces of silver in the measured and indicated category and a further 2 million ounces of gold and 59 million ounces of silver in the inferred category.

The key to unlocking the value of this enormous resource lies in Chesapeake's innovative oxidative leach technology which has the potential to significantly reduce the capital cost and improve the overall project economics of Metates. In the 2021 Preliminary Economic Assessment, the application of this sulphide oxidation technology enabled a 90% reduction in initial capex to $360 million while maintaining robust operating margins.

"With the technology at Metates, we've shown that we're able to reduce the actual capital to build it – it's actually at a level of $360 million right now which is an executable level internally," explained Chesapeake CEO Jean-Paul Tsotsos in a recent interview.

Interview with Interim CEO Jean-Paul Tsotsos

Metates Sulphide Oxidation Delivers Positive Metallurgical Results

Over the past two years, Chesapeake has demonstrated the effectiveness of its oxidation process on Metates ore in extensive lab-scale test work. Column leach tests on oxidized material achieved gold recoveries of 60% and the company is now targeting 70% recoveries in the current phase of testing.

The oxidation process works by chemically converting the sulphide minerals into oxides which are more amenable to leaching with cyanide. By applying the oxidation pre-treatment, Chesapeake can eliminate the need for an expensive autoclave circuit and significantly reduce overall reagent consumption. The "sweet spot" in terms of oxidation time and recovery will ultimately be determined by project economics and overall profitability.

"The basis of the work that we're doing right now in the lab is going to give us an idea of where that sits," stated Tsotsos,

"I believe in our PEA we're focused on 70% gold recovery – that was our target. The question is how much time does the oxidation process have to go through in order to get that 70%. But at the end of the day it's going to be a calculation of economics."

Exploration Upside at Lucy Project

In addition to the flagship Metates asset, Chesapeake is aggressively exploring its prospective regional land package in Mexico. The Lucy project, located 35 km from Metates, hosts a gold skarn system that has seen limited drilling to date.

Initial results from the first 8 holes of a 14-hole, 1,700-meter drill program at Lucy were highly encouraging with multiple intercepts of high-grade gold mineralization starting from surface. Highlights included 24 meters grading 6.11 g/t gold, 24 meters of 3.95 g/t gold, and 30 meters of 2.57 g/t gold.

The company is taking a systematic approach to drilling at Lucy by focusing on areas with existing trench data and geochemical anomalies. The goal of the current program is to better understand the controls on mineralization as well as the extent both along strike and at depth.

"It's really methodical the project that we're running there," said Tsotsos. "There's a lot of potential here to have a first-class asset."

Following the receipt of assays and geophysical data from the Phase 1 program, Chesapeake plans to develop targets for a follow-up drill campaign later in the year. With high-grade mineralization at surface and multiple zones of skarn alteration, Lucy offers exceptional exploration upside for a potential high-margin, open pit mining scenario.

Well-Funded to Advance Asset Base

With a healthy cash balance of $22 million and a tight share structure (only 68 million shares outstanding), Chesapeake is well-positioned to continue advancing both the Metates and Lucy projects in 2024. The company's strong financial footing provides a competitive advantage in the junior mining space and enables it to systematically de-risk and build value across its portfolio of Mexican gold assets.

Chesapeake also stands to benefit from a rising gold price environment. The precious metal has surged to multi-year highs in recent weeks on the back of cooling inflation data and expectations of a Fed pivot in monetary policy. Many analysts are forecasting a bull market for gold in 2024 as real interest rates move lower and recessionary concerns mount.

"It's pretty obvious that whenever interest rates start to decline, the one thing that does happen every time is precious metals take off," noted Tsotsos. "We're up near all-time record highs close to $2,200 per ounce."

Favorable Macro Environment and Geopolitical Backdrop

Mexico has a long history of mining and remains one of the world's top producers of gold, silver and base metals. The mining industry is a key driver of economic growth and employment in the country. While the current administration of Andrés Manuel López Obrador (AMLO) has taken a more nationalistic approach to resource development, the upcoming presidential election in June 2024 could usher in a more business-friendly regime.

"Anyone with good judgment would realize that if they want their country to succeed on the global front that investing and being an open government and an open country for investment always benefits not only the country but the people in that country too," said Tsotsos. "Whether that's jobs, taxes, royalties – that feeds back into the platforms that they want to push forward whether it's healthcare, pensions, all of that comes from resource development."

Regardless of the election outcome, Chesapeake is well-positioned to work with state and federal governments to advance its projects while delivering benefits to local communities and stakeholders.

Conclusion

Chesapeake Gold offers a unique investment opportunity in the junior mining space with a world-class gold-silver asset at Metates, a promising exploration project at Lucy, and a novel processing technology that could be a game-changer for project economics. With a strong balance sheet, experienced management team, and highly favorable macro backdrop for precious metals, Chesapeake is well-positioned for a significant re-rating as it advances its portfolio of Mexican gold projects in 2024.

The Investment Thesis for Chesapeake Gold

• Large, high-quality resource base: 17M oz gold and 423M oz silver (M&I) at Metates
• Novel sulphide oxidation technology has potential to reduce capex by 90% and improve project economics
• Impressive exploration results from Lucy project with high-grade gold from surface (up to 10 g/t Au over 5m)
• Fully funded ($22M in cash) to advance both Metates and Lucy projects in 2024
• Proven management team with track record of discovering and developing gold deposits in Mexico
• Compelling valuation with EV/oz of only $2-3/oz vs peers at $20+/oz
• Favorable macro environment for gold with potential for higher prices in 2024

Macro Thematic Analysis

The outlook for gold in 2024 is decidedly bullish with a perfect storm of macro drivers poised to push the metal to new all-time highs. Cooling inflation data and a looming recession are likely to force the Fed to pivot on monetary policy, leading to lower real interest rates which are highly supportive of gold. At the same time, escalating geopolitical tensions and a weakening US dollar could provide additional tailwinds for the precious metal.

"You need to realize that in North America maybe people don't actually understand how important gold is, but the rest of the world does," explained Chesapeake CEO Jean-Paul Tsotsos,

"You see the central banks in China, Russia, India – they're stockpiling gold, they're constantly buying. And that's because they see the value. It seems like in North America we're the only ones who have lost our touch and understanding what that value is. But underlying every part of our economics in North America, at some point gold has been a key part of growing wealth within our countries."

With the precious metals complex poised for a major breakout in 2024, mid-tier producers and developers like Chesapeake Gold are likely to outperform as investors seek exposure to high-quality assets in Tier 1 jurisdictions. The company's unique combination of a large resource base, novel processing technology, and exploration upside make it a compelling investment opportunity in the current market environment.