Hot Chili - Higher-Grade Copper Now 1/3 Of Resource for Q3 PFS

• Hot Chili, one of the few senior copper developers globally, has been working on the Costa Fuego asset on Chile's coastline for over a decade. They recently tripled its size to 724 million tons.
• In the last 18 months, they worked towards a resource upgrade and have now added 30% to their resource inventory, bringing it close to a billion tons. Over 80% of this resource base is now in the indicated classification.
• A significant achievement is that the high-grade component of Costa Fuego, which is more at a grade of 0.8 copper equivalent, now forms one-third of their metal inventory. This high-grade component has increased by over 50% in the last year.
• Hot Chili is working towards a PFS (pre-feasibility study) expected in Q3 of the current year. They have a strong treasury with around $32 million, with another $10 million expected inflow this year, funding their growth and development program.
• There's been a noticeable disconnect between the copper price and the share prices of companies like Hot Chili. Despite the challenges, the company is optimistic about the copper market, with increasing demand, especially for electric vehicles.

Hot Chili Pursuing a Large, High-Grade Copper Project in Chile

Hot Chili Limited (ASX:HCH, TSXV:HCH) is advancing one of the largest undeveloped copper projects in the world located in coastal Chile. With copper prices reaching record highs, Hot Chili's Costa Fuego project represents a unique investment opportunity for exposure to near-term production of a critical metal.

Interview with Chief Executive Officer & Managing Director, Christian Easterday

Major Resource Upgrade Adds High-Grade Tonnage

Hot Chili has significantly increased resources at its Costa Fuego copper project, adding over 30% more copper metal to bring the total resource to just under 1 billion tonnes. Importantly, over 80% of the resource is now in the Indicated category, providing a strong foundation for conversion to reserves.

A key objective of the latest drilling program was to increase the proportion of higher-grade material, which has been achieved successfully. The Indicated resource now contains over 170 million tonnes grading 0.8% copper equivalent, representing one-third of the project's total metal inventory.

The high-grade component comes primarily from the Cortadera porphyry discovery, where drilling has more than doubled over the past year to over 90,000 metres. The Cortadera zone will be instrumental in assembling a robust mine plan with a focus on maximizing cash flow in the early years of production.

Fully Funded Growth Strategy

With A$32 million in the bank and another A$10 million in expected inflows this year, Hot Chili is fully funded to continue advancing Costa Fuego over the next 18 months.

The company plans to invest A$10 million into further exploration drilling, testing high-priority targets that have never been drilled before. An additional A$10 million has been allocated to resource expansion drilling in preparation for a further upgrade in Q3 2023 to support the pre-feasibility study.

Hot Chili expects to maintain up to four drill rigs turning this year as it continues growing and optimizing resources while also testing new exploration targets. There is potential to delineate a third major deposit from Hot Chili's extensive land holdings surrounding the main project areas.

On Track for Near-Term Development

Hot Chili has been systematically advancing Costa Fuego for over a decade and now finds itself positioned among only a handful of major copper projects globally that are ready for near-term development.

The company remains on track to complete a pre-feasibility study in Q3 2023, followed by full project financing activities and a definitive feasibility study by late 2024. The first production is targeted for 2026, outpacing most competing copper projects globally.

The expedited development timeline is attributed to over 10 years spent on drilling, exploration, permitting, and baseline work. With key permits in place and strong local support, Costa Fuego is primed to capitalize on strong forecast copper market fundamentals.

World’s Largest Copper Trader Validates Potential

A major endorsement of Costa Fuego's potential came recently when global commodity giant Glencore signed on as an off-take partner and strategic investor. Glencore has committed to purchasing 60% of concentrate production from the first 8 years of mining.

For Hot Chili, securing an off-take agreement ahead of the pre-feasibility study is a huge accomplishment and a vote of confidence in the project. It also provides certainty around future revenue and will strengthen financing discussions.

Glencore's participation further validates the scale, grade, jurisdiction, and development timeline at Costa Fuego. The project's production profile neatly aligns with looming supply shortages as demand for copper accelerates in the coming decade.

Exploration Upside Creates Acquisition Appeal

In addition to delineating over 1 billion tonnes of resources to date, Hot Chili has an extensive portfolio of untested exploration targets that provide strong upside potential.

Proving up additional deposits through drilling could establish Costa Fuego as a multi-generational copper mining hub. The company also sees consolidation opportunities to acquire neighbouring deposits and incorporate them into an expanded development plan.

With copper demand set to dramatically outpace new supply sources, large-scale projects like Costa Fuego with exploration upside will become increasingly scarce. Hot Chili is poised to emerge as a highly sought-after takeover target for mid-tier and major miners looking to bolster copper pipelines.

Rising Copper Prices Validate Development Strategy

Despite copper prices reaching new all-time highs in recent months, shares in Hot Chili and other copper developers remain muted as investors grapple with macroeconomic uncertainty.

However, the positive long-term supply and demand fundamentals underpinning copper remain intact. Accelerating demand from electrification and decarbonization trends will require new copper projects like Costa Fuego to come online.

As Hot Chili continues meeting key development milestones over the next 18 months, the value proposition of near-term copper production should attract increasing investor interest. The impending pre-feasibility study will be a pivotal catalyst in demonstrating Costa Fuego's commercial viability.

With copper markets set to tighten further through this decade, projects with clear pathways to production like Costa Fuego's are poised to create substantial value for shareholders. The company's disciplined and timely execution provides confidence that the first copper output can be achieved by 2026 to capitalize on forecast price strength.

Hot Chili offers investors a unique opportunity for leveraged exposure to rising copper markets through a large-scale, advanced-stage copper project located in a premier mining jurisdiction. The company's systematic execution and visionary management instil confidence to weather any market turbulence on the path towards development. As the Costa Fuego copper project continues taking shape, Hot Chili has emerged as an attractive speculation on the copper bull run.

• Near-term production potential - With permits in place and a clear development timeline targeting first production by 2026, Hot Chili offers rare exposure to new copper supply coming online in time to benefit from forecast demand growth.
• Expanding high-grade resource - The latest drilling has significantly increased the amount of higher-grade indicated resources, providing a strong foundation to support a robust mine plan focused on maximizing early cash flow.
• Prime jurisdiction - Chile is one of the world's most mining-friendly and stable jurisdictions, with established infrastructure to support large-scale projects. This reduces development risks.
• Exploration upside - Extensive undrilled targets within the company's land package provide excellent opportunities to discover new deposits and expand existing resources. Additional discoveries could transform Costa Fuego into a multi-generational mining district.
• Rising copper thesis intact - While the equity markets have been volatile, the positive long-term fundamentals for copper remain unchanged. Costa Fuego stands to benefit from the tightening market conditions ahead.
• Offtake agreement de-risks production - Securing a major offtake agreement with Glencore prior to the pre-feasibility study greatly enhances the financing and development outlook.
• Takeover potential - As a sizeable asset with clear expansion potential, Costa Fuego could attract takeover interest from majors looking to acquire copper production and resources.
• Undervalued based on peers - Hot Chili is trading below the valuations assigned to other copper developers, presenting an opportunity to gain exposure at an attractive entry point.

For investors seeking leveraged exposure to rising copper prices, Hot Chili offers an advanced-stage copper project with production in sight to capitalize on strong market conditions. The Costa Fuego investment case should grow stronger as development milestones are achieved over the coming 18 months.