Hot Chili - Another Non Dilutive Financing to Advance Copper Production

• Hot Chili Limited, based on the Chilean Coastline, is among the world's largest copper developers. They are set to be a part of the next wave of large-scale production to meet global decarbonization needs.
• The company has recently released strong project numbers, aiming for a production profile of around 100,000 tons of copper annually with a mine lifespan of approximately 16 years.
• Hot Chili has secured an investment deal with Osisko for a 1.1% royalty over payable metals on their Costa Fuego project, boosting their treasury to approximately 26 million U.S dollars.
• They aim to maintain a non-dilutive funding approach, with strategies such as streaming options on their precious metals and off-take rights, and potential strategic investments at the project level.
• Hot Chili's future plans involve optimizing efficiency over size, aiming for a larger processing facility on the Chilean Coastline, and leveraging the project for maximum copper exposure in the market.

Large-Scale Chilean Copper Developer Presents Attractive Risk/Reward Profile

Hot Chili Limited is positioning itself as a leading copper developer in Chile, with a large, low-cost project called Costa Fuego. With copper demand set to surge amid decarbonization efforts, Hot Chili offers investors leveraged exposure to higher copper prices, with several upcoming catalysts that could significantly boost the value of the project.

Hot Chili Limited is an Australian mining company focused on developing its flagship Costa Fuego copper-gold project in the coastal region of Chile. The project has several characteristics that make it stand out:

• Large scale with low costs - Targeting production of 100,000 tonnes of copper per year at first quartile cash costs
• Significant gold by-product - Estimated to produce 50,000 ounces of gold per year
• Long mine life - Currently 16 years with upside through further exploration
• Low capital intensity - One of the lowest capital intensity major copper projects globally

The company recently completed a Preliminary Economic Assessment (PEA) for Costa Fuego, which outlined robust economics at conservative long-term copper prices. Hot Chili is led by Christian Easterday, an experienced mining executive who has consolidated a dominant position along 70km of the coastal belt hosting Chile's largest copper mines.

Interview with Chief Executive Officer & Managing Director, Christian Easterday

Costa Fuego's Strong Economics and Exploration Upside

The Costa Fuego PEA outlined a 16-year mine life producing 95,000 tonnes of copper and 50,000 ounces of gold per year. With an initial capex of $1.5 billion, the project generates a pre-tax NPV of $1.54 billion and IRR of 23% at $3.85/lb copper. Capex per annual tonne of production is approximately $15,000, making it one of the most capital-efficient projects globally.

Significantly, the PEA economics have considerable upside through further exploration and project optimization. The current mine plan only uses 2 of Costa Fuego's 4 known deposits, providing options for increasing production. A 30,000 meter drill program is underway, aimed at expanding resources and mine life.

Attractive Leverage to Copper Price

Hot Chili emphasizes that the PEA uses conservative long-term copper price assumptions. With many forecasts calling for structural copper shortages and prices above $4.00/lb, Costa Fuego's economics would improve dramatically at higher prices. Specifically, a 50% increase in the copper price would triple the project's NPV and double its IRR.

This level of leverage gives investors amplified exposure to a potential copper bull market. As Easterday states, "If you believe copper price has got the ingredients to multiply by 10 like iron ore did...the Hot Chili leverage equation is extraordinary."

Funding Options Retained for Minimal Equity Dilution

A common concern with developing large mining projects is funding the high initial capex. However, Hot Chili has taken steps to retain flexibility in funding Costa Fuego while minimizing equity dilution.

In November 2022, the company completed a $15 million royalty financing with Osisko Gold Royalties. This provides funding for the next 12-18 months without issuing shares. Importantly, Hot Chili has maintained the right to fund a significant portion of the project's capex through non-dilutive sources:

• Debt/EC financing - $500M+ potential funding through export agencies and commercial banks
• Precious metals stream - Gold production could support a $100-$300M stream
• Strategic partner - Discussions ongoing with multiple parties
• Offtake agreements - 40% of initial production uncommitted

Easterday states the company's objective is to limit equity financing to a "negligible amount" relative to the project's value. This would help preserve shareholder value.

Near-Term Catalysts Could Re-Rate Valuation

Looking ahead, Hot Chili has several upcoming catalysts that could significantly enhance Costa Fuego's economics and re-rate the company's valuation:

• Resource update by end of 2022 - New drilling expected to expand resources
• Pre-Feasibility Study in 2024 - Will refine and potentially optimize mine plan
• Ongoing exploration results - Targeting further discoveries to extend mine life
• Strategic partner - Potential for strategic investment to accelerate development

With its dominant position in a prime copper district and world-class development project, Hot Chili offers investors exposure to a potential copper supplier just as global demand is set to surge. The company estimates that 7-8 million tonnes per year of new copper supply is required through 2030, but only 2-3 million tonnes is currently visible.

Trading at a fraction of its NPV, Hot Chili offers attractive risk/reward for investors betting on higher copper prices. Near-term catalysts provide opportunities for positive re-ratings, while strong leverage amplifies the upside in a rising copper market. Easterday summarizes the opportunity: "If you want exposure to copper, we're the largest on the ASX."

The Investment Thesis for Hot Chili

Leverage to Copper Price Upside

• With many forecasts predicting structural copper shortages and prices above $4/lb, Hot Chili offers leveraged exposure to higher copper prices. At 50% higher copper prices, the project NPV triples.

World-Class Asset in Premier Mining Jurisdiction

• Costa Fuego is one of the largest undeveloped copper-gold projects globally, with competitive costs. Chile is considered the most attractive mining investment jurisdiction.

Near-Term Catalysts Could Re-Rate Valuation

• Resource update by the end of 2022 and Pre-Feasibility Study in 2024 provide upcoming catalysts that could significantly improve economics/valuation.

Funding Structure Minimizes Equity Dilution

• Hot Chili has positioned to fund the project mostly through non-dilutive sources like debt, stream financing, and offtakes. This preserves shareholder value.

Dominant Position in Emerging Copper District

• Consolidated 70km long belt with only large-scale copper development project in the region. Points to significant exploration upside.

First Mover Advantage in Copper Supply Race

• One of only a handful of major copper projects globally not controlled by a major miner. Critical to closing looming copper supply gap.

Hot Chili offers investors a rare opportunity for leveraged exposure to copper through a large-scale, low-cost project with significant upside potential, in a premium mining jurisdiction. The attractive risk-reward profile and positioning as an emerging major copper supplier make it a compelling investment case if one is bullish on the copper market.