AZUR Project Taamar gold deposit

Exploration and estimation of the large gold deposit in Yakutia (2020-2023) December 2019 Project concept

Nizhnekolymsk region

Klen (Highland)

YAKUTIA Taamar ore field Taamar ore field: mineral potential

General information Arctic Gold Resources owns 100% of YAKU 06192 BP license for exploration of the Azur deposit, including prospecting and estimation of deposits in the Nizhnekolymsk region, the Republic (Yakutia). The license expires 30.04.2025. The licensed area is located within the Taamar gold ore field. + There’s good enough infrastructure. 270 km to the East is the port and airport in the Chersky. 45 km to the South is the federal ice road Arktika.

+ The Azur deposit is a part of the Taamar ore field with inferred mineral resources of category Р2 (53,5) + Р3 (135) = 188,5 t Au (6 061 093 oz) average grade of 5 ppm. Resources are included in the Report of inferred mineral resources of solid minerals in the Sakha Republic (Yakutia) as of 01.01.2018. + The ore field is insufficiently studied (less than 10% of acreage is prospected). The resource growth potential is quite high: up to Р2 (107) + Р3 (170) = 277 t Au (8 906 752 oz) with average grade of more than 5 ppm (proprietary estimation). + On the Azur site there is a promising gold ore deposit with high-grade free-milling gold ore for open and underground mining. Estimation of the site for priority open-pit mining: С1 + С2 = 35 t (1 125 401 oz) with average grade of gold of 6 ppm. An alternative deposit is Kumtor gold mine (Centerra Gold). + Geographically the site belongs to the priority development area in Arctic and can be included in the ТОР program. + The planned expenses at the prospecting and exploration stage reach 10 M$ for 3 years.

+ Basing on the results of exploration, it is expected to find a deposit with gold reserves C1+C2 up to 50-80 t Au (1 607 717 – 2 572 347 oz) with average grade of more than 5 ppm for open-pit mining. + NPV10 150-300M$, IRR >50%. + Start of pilot mining is possible in 2024. Azur site location

Taamar area (ore field) is located in the Alazea river watershed, 140 km South of the coast, 270 km away from the village Chersky – an administrative center, port (Green Cape) of Northern Sea Route and airport which is capable of receiving heavy cargo aircrafts (IL-76 and others); 45 km to the North is the village Andryushkino with a helipad, through which the federal ice road Arktika goes. The enterprises of the Khanate (transport, gold mining) are mainly located in the village Chersky, and there’s labor market slack. It is possible to deliver cargo and equipment either by plane from the village Chersky right to the site or by the ice road through the village Andryushkino (400 km). Alternative modes of transportation: by light displacement boats going down by the sea and the Alazea river from the village Andryushkino to the site (140 km) or arranging a winter landing spot for small airplanes either on one of the lakes or on the Alazea river.

4 Geological map of Nizhnekolymsk region

Taamar ore field is located at the Easternmost part of the Ulahan- Tassky segment of the Chersko- Polousnensky belt, at the crossing of zones of deep ore faults which are known for their productivity.

Being located on the borderline of three large regional structures, the ore field has high potential.

The site was discovered during the geological survey in 1985 carried out at scale 1:200 000 (Yanskaya surveying expedition. “Yakutskgeology” production geological association. Zadorozhny N.P.)

5 The state of exploration and geological reasoning of works

1. General prerequisites for site discovery: in the territory of Ulakhan-Tas district, gold placer deposits of various sizes have been exploited for a long time. 2. Direct indicators of meaningful gold mineralization of bedding rocks on the licensed site were discovered in 1984 after the geological survey carried out at scale 1:200 000, including the survey of exploration sites localized by complex features at scales 1:25 000 and 1:5 000.

Types of on-site works: • On-site magnetic survey (1:25 000 scale). • Geochemical survey by secondary dissemination aureoles (1: 25 000 scale). • Heavy mineral concentrate sampling of stream sediment. • Mining works (mapping trenches). • Trench sampling and geochemical sampling by bedding rocks. • According to the geochemical data, there are 9 gold sites, and 5 of them are partly proven by trench sampling. Geological map of the Azur site

3

2 4

Mineralization coincides with the contact zones between Jurassic granodiorites, leucocratic granites and the rocks of Cretaceous volcanic- sedimentary complex, as well as with shear zones of the sublatitudinal strike.

1 5 Magnetic anomaly map

High-intensity linear sublatitudinal anomalies in the central, Northern and Eastern parts of the site are formed above sedimentary rocks that include granite bodies.

Anomalous rocks are represented by skarns, mineralized crush zones and silicified zones.

According to the mineralogical analysis of crushed samples taken during the confirmation of linear anomalies, the rock contains the following amounts of ferromagnetic and paramagnetic minerals: up to 2-10% of pyrrhotite, up to 2% of ilmenite, up to 70-75% of limonite and pyrite in heavy schlich fractions. Lithogeochemical survey by secondary dissemination aureoles (1:25 000 scale) Cu Pb

Anomalous Anomalous concentrations concentrations 37 – 124 ppm 20 – 130 ppm

As Zn

Anomalous Anomalous concentrations concentrations 47 – 114 ppm 211 – 437 ppm Taamar ore field: project potential

ORE Au 5 400 kg (173 633 oz) ZONE 1 Average grade 6 ppm

ORE ZONE 3 ORE ZONE 4

ORE Au 7 500 kg (241 157 oz) Au 20 650 kg (663 987 oz) Average grade 6 ppm ZONE 2 Average grade 6 ppm Au 1 200 kg (38 585 oz) Average grade 4 ppm

The geological analysis brings us to the conclusion that a 24.5 large new gold deposit might be discovered at the Azur site in the Ulahan-Tassky ore area of the Eastern Yakutia. Mining and sampling

Trench 79 Lithoc Lithoc hemisthemist 0,5 0,7 0,75 0,1 1,0 1,0 0,95 1,0 0,95 1,0 1,0 1,0 1,0 1,0 1,0 1,0 1,0 1,0 1,0 1,0 1,0 1,0 0,5 ry ry 0,006 0,008 1,0 28,8 0,5 3,6 1,6 5,0 15,2 - 0,4 1,3 3,8 4,0 0,9 6,6 0,2 0,8 0,8 5,0 2,9 0,4 0,6 0,5 24,5 5,0 8,5 5,95 2,9 7,5 3,1 Total 18,5 4,5 Trench 76 Trench 63 Trench 64 Lithoch Lithoch Lithoch Lithoch Lithoch Lithoch 0,5 0,7 0,7 0,5 100х5 1,0 1,0 1,0 1,0 1,0 1,0 0,6 emistry emistry emistry emistry emistry emistry 1,0 1,0 1,0 1,0 1,0 1,0 0,2 6,6 29,2 13,9 <0,2 0,05 0,013 0,3 0,048 <0,2 <0,2 1,1 6,1 2,9 3,3 0,3 2,1 0,8 15,6 1,1 5,3 0,4 0,6 1,4 1,9 16,8 4,0 3,4 4,0 5,8 Sampling statistics Lithogeochemical sampling Trench sampling Trenches, 1. Ore fields with meaningful gold Site including including Thickness, Au, Au, ppm total trenches samples Au, ppm trenches samples mineralization were discovered, with valuable valuable m ppm maximum thickness between 1,9 and 18,5 m. 8 6 48 18 0,01-0,3 к-76 4 3 1,7 16,8 29,2 Н/0 1 Average grade of Au is 3,4 - 16,8 38% к-79 23 21 18,5 4,5 24,5-28,8 Н/0 ppm, and in some samples it reaches 16 100 22 0,1-1,0 к-63 6 4 4 3,35 6,1 Н/0 2 22% к-64 7 4 4 5,82 15,6 Н/0 28 - 29 ppm.

2. According to trench sampling and Gold is associated with sulfides, is localized in fracted zones in hornfels at contact with granitoids chip lithogeochemical sampling, none and in altered Jurassic roof rocks of intrusions. Gold is free, the estimated size of crushed of the mines is beyond the ore field. samples is 0,1-0,5 mm. Fine gold is not studied. Ores are supposedly non-refractory, free-milling. Evaluation parameters of AZUR ore occurrences

Ore zones parameters (m) Ore bodies parameters and reserves

Ore body thickness Length (m) (m) Ore Site № Au Au Length Vertical Number of reserves, Thickness К . Р. grade, reserves, (strike) extent ore bodies thousand strike dip from to average ppm kg tons

Site 1 900 300 100 4-5 100-500 150-300 1 4 2.5 0.5 949 6 5695

8-10 or Site 2 1250 250 120 100-300 200 1 12 5.5 0.5 2475 8.5 18563 stockwork

Site 3 1500 300 100 3-4 300-500 150-350 1 6 3.5 0.5 1531 4.5 6891

5-8 or Site 4 1100 300 300 100-350 150-300 1 4 2.5 0.5 844 4.5 3839 stockwork

Total 5799 ~ 6.0 34988 Comparative analysis of Taamar and Kumtor deposits

Taamar Kumtor Mineralized crush zones in phyllitised black Mineralized fault zones in phyllitised black shales shales Ore body thickness – 3,0-20,0 m, Ribbon-like ores and lenticular bodies with a length of ore zones – up to 3,0 km, length of 150-200 m, and thickness up to 10,0 m length of ore bodies is not estimated Gold-pyrite type Gold-pyrite type Au – 1,0-29,0 ppm (average of 6,0) Au – 3,0-25,0 ppm (average of 4,26) Pt, Pd are not estimated Pt – 1,06-1,21 ppm; Pd – 2,46-3,01 ppm Free gold – up to 0,1-0,5 mm Free submicroscopic gold Simple ore composition. Ore dressing category: Simple ore composition. Ore dressing category: non-refractory, free-milling ore non-refractory, free-milling ore Possible ways of processing

Gravity concentrate Gravity Pilot mining (sale) separation Tailings Flotation Tailings

Commercial Gravity Gravity Cyanidadion Dore bead mining separation concentrate

Ore quality. Ores are characterized by simple composition. Predominantly it is limonite (62-79%), some pyrite (1,6-10,0%), and small amounts of cassiterite – up to 0,5%; chalcopyrite – 0,25%; arsenopyrite – 0,3-0,5%; pyrrhotite – 0,1-1,6%; galena – up to 0,2%; antimonite – up to 1,3%; ilmenite – 1-2%; free gold with a size of up to 0,2-0,5 mm; gangue minerals – quartz – 60-70%; fluorite – 3-10%; vesuvianite – up to 24%; garnet, zircon – up to 1-2%. Gold is concentrated in limonite and pyrite, and less in other sulfides. Main stages and distribution of volumes

Parameters and volumes Category of № pp Stage Grid interval Mines reserves number length linear, m section cubic, m 1 Revision and estimation Lithogeochemical survey by secondary 1.1 100х20 samples 8452 dissemination aureoles 1.2 Magnetic survey 100х10 linear km 144 1.3 Electrical resistivity survey (gradient array/IP) 100х10 linear km 144 1.4 Electrical resistivity survey (IP/point sounding) linear km 10 Revision of trench sampling, cleanup and re- 1.5 2000 samples 2000 sampling of trenches Trenching: finishing old trenches and digging trenches 35 90 3150 16.7 52500 new 1.6 200х200 m P1 Drilling confirmatory boreholes and appraisal boreholes 70 115 8050 wells 1.7 Feasibility analysis of the exploration project 2 Exploration trenches 33 50 1650 13.6 22500 2.1 Preliminary exploration 200х100 С2 boreholes 64 123 7840 trenches 32 49 1580 14.7 23300 2.2 Exploration 50х50 С1+С2 64 136 8710 boreholes 13 365 4750 2.3 Feasibility analysis and reserves confirmation TOTAL trenches trenches 100 64 6380 10.0 98300 TOTAL boreholes boreholes 211 139 29350 Investments evaluation for the works in 2020–2022

By periods Total Price per Total cost, № p/p Types of works Unit 2020​ 2021​ 2022​ amount unit, rub. rub. Amount Cost, rub. Amount Cost, rub. Amount Cost, rub. Organization of work (village, fuel, 1 100% 35 000 000 70% 24 500 000 15% 5 250 000 15% 5 250 000 equipment, staff) 2 Prospecting traverses km 100 50 000 5 000 000 60 3 000 000 40​ 2 000 000 Lithogeochemical survey samples 8452 3 17 000 000 8452 (16.5)​ 17 000 000 (1:10 000 scale) on a grid of 100х20 m (square km)​ (16.5)​ 4 Geophysical survey 4.1​ Magnetic survey on a grid of 100х10 m linear km 144 806 400 144 806 400 Electrical resistivity survey (gradient 4,2 linear km 144 29 700 4 276 800 144 4 276 800 array/IP) on a grid of 100х10 m Electrical resistivity survey (IP/point 4.3​ linear km 10 800 000 8 000 000 10​ 8 000 000 sounding) to a depth of 200 m cubic m 98 300 278 27 327 400 52 500 14 595 000 22 500 6 255 000 23 300 6 477 400 5 Excavation of open pits and trenches linear m 6 380 3 400 1 460 1 520 6 Drilling m 32 350 9 800 317 030 000 3 500 34 300 000 22 000 215 600 000 6 850 67 130 000 7​ Sample preparation items 38 730 671 25 987 830 6 900 4 629 900 23 460 15 741 660 8 370 5 616 270 8​ Technological research 15 000 000 5 000 000 10 000 000 9​ Laboratory research 35 000 000 8 750 000 21 000 000 5 250 000 10​ Related expenses 135 000 000 100 000 000 20 000 000 15 000 000 11 Preparing feasibility study 12 000 000 12 000 000 TOTAL 637 428 430 224 858 100 295 846 660 116 723 670

Project tasks: - Estimation of reserves С1+С2 and resources Р1 in known ore bodies by means of drilling, trench sampling, technological sampling and studying ore concentration. - Defining the borders of the Taamar ore field. - Localization of new sites on the flanks of the Taamar ore field using geophysical and geochemical methods. - Technological sampling in order to choose the best processing flowsheet. Project KPIs

• 2020-21 – Prospecting stage: geochemical and geophysical surveys; geological, mining and drilling works. • 2021-22 – Estimation stage: surface mining, core drilling, geological resource model. • 2022-23 – Prefeasibility study and reserves calculation. Estimation of mineral resources and ore reserves in accordance with JORC (NI-43-101). Obtaining mining permits and licenses. • 2023-24 – Project development: pilot mining, further exploration and designing of a mining and production plant.

Expected results in 2022 Expected results in 2025 • Reserves С1 + С2: 35 t of gold with average grade of 5 ppm • Increase in reserves up to 50-80 t • Resources Р1 + Р2: >115 t of gold with average grade of 6 ppm (1 607 717 – 2 572 347 oz) • 5 ppm shall be treated as an average grade in a negative scenario

Au, t Expenses at the exploration stage 350 4,5 300 4 250 3,5 150 200 3 2,5 150 280 277 277 2 100 115 1,5 50 10 1 35 0 0,5 1997 2019 2020 2022 0 С1+С2 P1 P2+P3 2020 2021 2022-23 Investment attractiveness: SWOT

Strengths Weaknesses

• Large promising gold-rich deposit. • Adverse climatic conditions. • Easy mining method – mainly open-pit mining at pilot operation. • Undeveloped infrastructure of the • Technological characteristics of ores are similar to that of free-milling ores of Centerra Gold – region. cheap processing. • Low degree of certainty. • Existing infrastructure of Chukotka nearby. • Acceptable scope of expected exploration project (drilling works in 2020-22). • IRR > 50%. Highly profitable project. Fast monetization. • Low cost of the project at the start with the cash-in method. • High liquidity of gold. Possible rise of gold prices. • Highly skilled team experienced in advanced prospecting and exploration techniques.

Opportunities Threats

• Project potential: the resource base can increase at least twice. • Gold price sensitivity – volatility of • Ore bodies are not fully contoured. financial markets. • Prospects for the discovery of gold placers in drainage streams of the ore field (first tons). • Geological/technological risks. • Increase in resources due to blind ore bodies under thin (1-25 m) loose sediments. • Further exploration of the site. • Regional privileges of Yakutia (profit tax, mineral tax) / state infrastructure development program (Arctic TOP). 18 Operational and financial indicators of a development project Unit Negative scenario Basic scenario Ore mining Million t 7.2 14 Au grade ppm 5 6 Au* extraction % 89 91 Lifecycle of a mine Years 12 14 Planned production – Au t 32 76 thousand Ore mining / processing 600 1 000 t/year Planned output – Au t/year 2.7 5.4 CAPEX M$ 140 230 Revenue** M$/year 102 208 OPEX M$/year 21 35 AISC $/oz 650 580 EBITDA M$/year 64 144 Pay-back period Years 4.5 3.5 NPV10 M$ 175 461 IRR 44% 55% * Unit cost – 35 $/t of ore, ** Gold price is US$ 1200 per oz

+$15-20 M Project cost at pilot . NPV10 >$175-461 M mining . IRR >44% $140-230 M >$5.2 M per year $9-23 M . PB 2.5-3.5 years Licensing Financing for the Managed asset Exploration mining project (cash machine)