Element 29 Resources: Advancing the Next World-Class Copper Project in Peru

• Element 29 Resources is a copper-focused exploration company with projects in Peru dedicated to discovering and developing large-scale copper deposits in the highly prospective Andean Copper Belt.
• The company flagship project is the Elida Project, a grassroots copper discovery with a 321Mt inferred resource estimate grading 0.32% copper, 0.029% molybdenum and 2.6 g/t silver. The deposit remains open for expansion and covers just a small portion of the larger 2.5 x 2.5 km alteration system.
• Elida has good infrastructure, low arsenic levels, and potential to expand the resource to 500Mt+. The project is located close to highways, power, and port facilities and is expected to produce a clean, high-quality concentrate based on low arsenic levels in drilling. Element 29 sees potential to expand the resource to over 500 million tonnes with additional drilling.
• Element 29 aims to advance Elida to a PEA and potentially sell the project rather than develop it themselves. Their strategy is to derisk the project through exploration and economic studies with the goal of selling it to a major mining company rather than becoming a producer.
• They have a strong technical team with major company experience and good community relations in Peru. CEO Richard Osmond and his team have extensive experience with major mining companies like Freeport McMoRan, Anglo American and Teck. The company places a strong emphasis on ESG and has positive relationships with local stakeholders.

Richard Osmond, CEO of Element 29 Resources (TSXV:ECU), provided an in-depth look at the company's copper exploration projects in Peru. Element 29 is focused on advancing its Elida copper project from discovery to a preliminary economic assessment (PEA) to demonstrate the potential for a major copper mine. With its large resource, strong infrastructure, clean concentrate, and mining-friendly jurisdiction, Element 29 presents a compelling opportunity in a market facing increasing copper supply challenges.

Elida: A Significant Grassroots Copper Discovery

Element 29's flagship Elida project represents a major grassroots copper discovery in central Peru. The project currently has an inferred resource estimate of 321.7 million tonnes grading 0.32% copper, 0.029% molybdenum and 2.6 g/t silver. Elida was originally discovered by Lundin Mining, which completed nearly 10,000 meters of drilling before returning the project to Element 29.

As Osmond stated, "Elida was sort of a grassroots discovery based on generative work that we're doing in Peru with it getting it back from Lundin with close to 10,000 meters of drilling, we did another 5,000 meters after it got listed."

Element 29 sees potential to significantly expand the resource at Elida. The current resource encompasses just one of five targets within a 2.5 by 2.5 km alteration footprint.

"[Elida] Still lots of room to expand the resource and also make some new discoveries within the system," according to Osmond.

The company's goal is to expand the resource to over 500 million tonnes through an additional 10,000-15,000 meters of drilling.

Strategic Location and Clean Concentrate

Beyond its size, Elida benefits from highly strategic infrastructure and the potential to produce a clean, high-quality copper concentrate.The project is located just 75 km from the coast and 200 km north of Lima, easily accessible by highway. Power and port facilities are located nearby.

"Elida is very strategically well-located," Osmond explained. "It's low elevation and it's close to Antamina, 200 km north of Lima. You can drive up the Pan-American Highway from Lima and then go about 75 kilometers from the coast. There's a high voltage electrical facility about 15 kilometers away. We're closer to the Antamina port than Antamina is and we can likely drive the concentrate directly to that port within an hour and a half."

Importantly, Elida is expected to produce a clean, high-quality concentrate with very low levels of arsenic, a deleterious element that can result in smelter penalties.

"The mineralization associated with the deposit is quite low in arsenic," Osmond noted. "We expect to produce a concentrate with significantly less than 0.5% arsenic. In the assay intervals that we have, we're getting like 40 ppm arsenic."

A clean concentrate could command a premium price or be blended with lower quality concentrates.

Interview with President & CEO Richard Osmond

Mining-Friendly Jurisdiction

Peru is a highly favorable jurisdiction for mining, ranking as the second largest copper producer globally. The country has a well-established mining industry, supportive government policies, and competitive tax rates. Peru has free trade agreements and bilateral investment treaties in place with Canada, the US and China.

"Mining companies are willing to go into a place like Peru and spend the billions of dollars that it takes to develop these kind of projects," Osmond stated. "If you look at recent acquisitions in Peru, Hudbay just acquired Pampacancha from Pan American Silver - a 685 million tonne resource at 0.39% copper and 0.24 g/t gold. That's a realistic goal for us to get into that realm."

Peru has a rigorous but manageable permitting process. While it can take time, permits are consistently granted for projects that meet environmental and social standards. Several major new copper mines have been permitted and developed in recent years, including Las Bambas, Constancia and Mina Justa.

Strong Management and Community Relations

Element 29 is led by a highly experienced management team with a track record of major discoveries and mine development. CEO Richard Osmond has over 25 years of experience with major mining companies like Inco and Anglo American. Executive VP Exploration Manuel Montoya has over 30 years of experience in Peru, including significant discoveries for companies like Teck.

The company has a strong ESG focus and positive relations with local communities near its projects.

"We spend a lot of time building and keeping good relationships with our host communities," said Osmond. "While we're drilling, we hire about 15 community members and rotate them on a two week cycle. We do a lot of health and safety training and train them on technical aspects of the drill program. It's all about providing the communities with economic benefits."

Valuation and Upcoming Catalysts

Element 29 currently trades at around C$0.45, a substantial discount to the valuations of more advanced projects in the 10-20 cent range. As the company expands the resource at Elida and advances the project towards a PEA, there is potential for significant re-rating.

Upcoming catalysts for the stock include drill results from the ongoing 6,000 meter program at Elida, which is focused on expanding the higher grade starter pit and growing the overall resource. The company also plans to report results from preliminary metallurgical test work in the coming months. Longer-term, Element 29 aims to complete a PEA on Elida within the next 2-3 years to demonstrate the economic potential of the project. The company will also look to permit and drill its earlier stage Flor de Cobre, Paka, and Pahuay projects.

Conclusion

With its major copper discovery at Elida, Element 29 Resources provides investors with exposure to a highly prospective project in a mining-friendly jurisdiction. The company's experienced technical team, strategic infrastructure, potential for a clean concentrate, and positive community relations bode well for its ability to create shareholder value as it advances Elida towards development and/or an eventual sale. As the copper market faces increasing supply challenges, Element 29 is well positioned to help fill the gap with new, low-cost production from Peru.

The Investment Thesis for Element 29 Resources

• Major (321Mt+) copper resource with substantial expansion potential at flagship Elida project
• Excellent infrastructure - power, ports and highways nearby. Potential for low-cost operation
• Expected to produce clean, high-quality concentrate with very low arsenic levels
• Mining-friendly jurisdiction with clear and consistent permitting process
• Strong management team with track record of exploration success and mine development
• Positive community relations and ESG focus
• Attractive valuation with potential for re-rating as resource expands and project de-risked
• Near-term catalysts: Drill results from ongoing 6000m program, met work
• 2-3 year path to PEA to demonstrate potential for standalone mine or acquisition target

Macro Thematic Analysis

The outlook for copper is extremely bullish due to a looming supply gap driven by increasing demand and lack of new discoveries. Copper demand is expected to soar in the coming years, driven by global decarbonization efforts and the rapid adoption of electric vehicles, renewable energy, and electrification. At the same time, the pandemic-related disruptions, declining grades, and lack of new discoveries has created an impending supply cliff. Bank of America recently warned of copper scarcity, noting there have been no major discoveries in the last five years and future supply is concentrated in riskier jurisdictions.

In this context, Element 29 CEO Richard Osmond highlighted the importance of Peru as a stable, mining-friendly copper jurisdiction.

"These things are really hard to find, especially in stable mining jurisdictions," Osmond explained. "Peru was the second largest copper producer and sort of held that position for quite a while. If I'm going to be exploring for copper, I'm definitely going to be exploring in Peru. Compared to some jurisdictions like Chile, it's been underexplored and it's much cheaper to hold ground."

The lack of new copper supply, combined with policies limiting development in countries like Chile, is likely to put Peru at the forefront of future copper production. Its established mining industry, competitive tax rates, and free trade agreements make it highly attractive for foreign investment. The recent permitting of several major new mines demonstrates Peru remains open for business. For companies like Element 29 with major discoveries, this provides a highly favorable backdrop to create value.

Key Takeaways

Element 29 Resources offers a compelling investment opportunity in the copper space. The company's Elida project represents a significant grassroots discovery in a top copper jurisdiction. With a large and growing resource, outstanding infrastructure, clean concentrate, experienced management, and positive community relations, Element 29 has the key ingredients for success. The company is well-positioned to create value through exploration success and project advancement in a market facing structural supply shortages. Investors can look forward to steady news flow as the company expands the resource at Elida and advances the project towards a PEA over the next 2-3 years.