Transforming Refractory Gold Deposits with Innovative Technology

• Chesapeake Gold owns the Metates deposit with a measured and indicated resource of 17 million ounces of gold and 423 million ounces of silver and a further 2 million ounces of gold and 59 million ounces of silver in inferred, previously considered too challenging to develop due to its refractory nature.
• The company has acquired and developed a proprietary oxidation technology that transforms sulfide ore into oxide ore, making previously unrecoverable gold accessible through conventional heap leaching.
• This technology reduces capital expenditure for Metates from $3.5 billion to $360 million, increases IRR from under 10% to 35%, and enables a smaller initial operation of 15,000 tons per day with potential to expand.
• The technology has been proven on a commercial scale at the Hycroft mine, achieving 80-90% gold recovery from previously 20% recoverable material, and has potential applications for many other refractory deposits globally.
• The heap oxidation process is more environmentally friendly than alternatives like pressure oxidation, autoclaves, or roasting, using less water and energy while producing fewer greenhouse gas emissions.

In a recent interview, Jean Paul Tsotsos, Interim Chief Executive Officer of Chesapeake Gold, alongside newly appointed Chief Metallurgical Officer Justin Black, discussed the company's proprietary oxidation technology and its potential to transform the development of refractory gold deposits.  The presentation focused on how their technology addresses the long-standing challenge of extracting precious metals from sulfide ore, potentially unlocking a market worth approximately $1.5 trillion in currently inaccessible gold resources.

Understanding Refractory Gold Deposits

Refractory gold deposits represent a significant portion of the world's untapped gold resources. According to a McKinsey report cited by Tsotsos, approximately 580 million ounces of gold globally are considered refractory, meaning the gold is trapped in sulfide minerals like pyrite and cannot be efficiently extracted using conventional methods.

"Globally there are many deposits out there that have precious metals... a lot of them start off as these sulfide deposits. The big challenge here is oxide deposits obviously are amenable to heap leaching... but the minute we get into a sulfide deposit, or a deposit has not been oxidized and it's fully sulfidic, you have to go to more challenging methods to extract the precious metals."

Importantly, these refractory deposits tend to be higher grade because they've been left behind while easier-to-process deposits have been mined. According to Tsotsos, 

"The average grade of refractory deposits is about 2.25 grams per tonne, which is almost 100% higher than the non-refractory type, which is about 1.21 grams per tonne."

The Technology: Accelerating Natural Oxidation

Chesapeake's technology essentially replicates and accelerates a natural process. In nature, over millions of years, sulfide deposits can naturally oxidize as oxygen replaces sulfur in the mineral structure. The company's process accomplishes this same transformation in a matter of months.

"Our technology basically takes that 100 million years that nature changes a sulfide deposit into oxide ore, and we're doing that at the lab and we've done that at scale."

The process works by applying proprietary reagents to crushed ore placed on a heap leach pad. These reagents strip away sulfur from the pyrite crystals, allowing oxygen to replace it and transform the material into oxide form, which then makes the gold accessible to conventional cyanide leaching.

Justin Black, who previously worked with the technology at Hycroft Mining, described the development process: 

"About eight years ago I spent time in the lab at Hycroft facility trying to figure out a way to make all the oxidation processes... come true and be realized on a heap environment. From small bottle rolls to column tests to increasing the large columns, we continued to find success and refine a process that we're really calling heap oxidation."

Proven Results and Commercial Application

The technology has progressed from laboratory testing to commercial-scale application. At Hycroft, Black oversaw a 150,000-ton test pad that demonstrated remarkable improvements in gold recovery.

"We had really great success on the test pad. Material that was 20% recoverable gold at the start made it into the 80% and even 90% for one of the domains. From there we continued into production through the crusher, filling out all the available leach pad space... about 900,000 tons of sulfide ore was processed this way."

For Metates specifically, column tests have shown that while untreated material yields only about 33% gold recovery through conventional cyanidation, material oxidized for 204 days achieved nearly 75% gold recovery. Different deposits show different oxidation kinetics, with some requiring less time to achieve similar results.

Interview with Justin Black, CMO, & Jean-Paul Tsotsos, Interim CEO

Transforming the Economics of Metates

The most dramatic impact of the technology is on project economics. Tsotsos explained that previous development plans for Metates involved pressure oxidation autoclave (POX) technology that would have required:

• A 90,000 ton per day operation
• Capital expenditure of approximately $3.5 billion
• Construction of a desalination plant, power plant, oxygen plant, flotation facility, and tailings storage
• Sub-10% internal rate of return (IRR)

With the new oxidation technology, Chesapeake envisions:

• Starting with a 15,000 ton per day operation (expandable to 30,000)
• Capital expenditure of $360 million
• Simple heap leach operation without complex facilities
• Pre-tax NPV of $1.4 billion (at $1,600 gold)
• 35% IRR
• All-in sustaining costs of approximately $750 per ounce
• Annual production of 147,000 gold equivalent ounces

"By having the technology within Chesapeake, it really has given it an alternative pathway forward. It's going to produce a meaningful 147,000 ounces gold equivalent... the IRR is 35%. There's a lot of upside on the commodity side."

Environmental Advantages

Beyond economic benefits, the technology offers significant environmental advantages compared to traditional methods for processing refractory ores. Using Barrick Gold's data comparing pressure oxidation (POX) at Pueblo Viejo to conventional heap leaching at Veladero, Tsotsos highlighted:

1. Lower water consumption - no need for flotation circuits or tailings facilities
2. Reduced energy usage - no need for power-intensive processes like pressure oxidation
3. Lower greenhouse gas emissions - less energy-intensive operations
4. No tailings production - all material stays on the heap

"If we're able to do things in that heap leach environment, then our demands on the environment, our demands on energy, are all diminished to a point where it's considered to be a green gold alternative."

Future Plans

Looking ahead, Chesapeake is advancing on multiple fronts:

• Continuing test work on Metates with larger diameter columns
• Working toward a pre-feasibility study
• Analyzing samples from other companies' deposits
• Planning to establish a pilot plant to demonstrate the technology
• Exploring potential partnerships with existing mines

Tsotsos noted:

"The key thing here is the technology is really the most important thing, for both Metates and for the gold and silver industry. Bringing Justin on has given us a new catalyst for the company to continue to advance the technology, not only looking at Metates but looking at it on a global scale and really highlighting the potential of the technology to unlock that $1.5 trillion market."

The Investment Thesis for Chesapeake Gold

• Transformative Technology: Proprietary oxidation technology that converts refractory sulfide ore into oxide ore, making gold recoverable through conventional heap leaching.
• Dramatic Project De-risking: Reduced Metates capital requirements from $3.5 billion to $360 million, transforming it from an unfinanceable megaproject to a viable development opportunity.
• Strong Economics: 35% IRR at $1,600 gold price (versus sub-10% previously), with significant upside at current gold prices above $3,100.
• First Quartile Costs: All-in sustaining costs estimated at $750/oz, positioning Metates in the lowest cost quartile globally.
• Massive Resource Base: Metates hosts a measured and indicated resource of 17 million ounces of gold and 423 million ounces of silver and a further inferred resource of 2 million ounces of gold and 59 million ounces of silver, offering decades of potential production.
• Scalable Approach: Initial 15,000 ton/day operation with ability to expand to 30,000 tons/day to accelerate returns.
• Technology Licensing Potential: Identified 200+ deposits globally where the technology could apply, creating additional revenue streams beyond Metates.
• Environmental Advantages: Significantly reduced water usage, energy consumption, and greenhouse gas emissions compared to traditional refractory ore processing methods.
• Strong Cash Position: Well-funded to advance technology development and project studies.
• Experienced Technical Team: Key personnel with direct experience in developing and commercializing the technology at Hycroft mine.

Macro Thematic Analysis:

The global mining industry faces a growing challenge of resource replenishment, as easily accessible oxide gold deposits become increasingly scarce. Meanwhile, a substantial portion of the world's gold remains locked in refractory deposits that have been historically uneconomic or too capital-intensive to develop. McKinsey estimates approximately 580 million ounces of gold, worth roughly $1.5 trillion at current prices, fall into this category.

These refractory deposits typically offer higher grades (averaging 2.25 g/t versus 1.21 g/t for non-refractory deposits) but require complex, expensive processing facilities that consume significant water and energy while generating substantial environmental impacts. Traditional approaches like pressure oxidation, roasting, or bioleaching all involve high capital costs that make many projects unfeasible, particularly for junior mining companies.

Chesapeake's oxidation technology potentially addresses this fundamental industry challenge by offering a simpler, more cost-effective, and environmentally friendly alternative. As the industry grapples with rising costs, environmental pressures, and the need to replace depleting reserves, technologies that can unlock previously stranded resources while reducing capital intensity and environmental footprint could prove transformative. As Tsotsos summarized: 

"I think the technology is going to be a game-changer for the precious metals industry, and we're looking forward to being on the forefront of that transformation."

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