Resources

2022 Resource Estimate 

This updated MRE is based on a drill hole database comprising approximately 152,000 metres of diamond drilling, including approximately 50,000 metres drilled since 2018. The MRE combines multiple mineralized zones at the Seel deposit area into a single pit constrained volume and demonstrates both the overall size of the mineral endowment at Ootsa, as well as the presence of near-surface, higher-grade subsets of the resource which could be evaluated in future studies as potential starter pits.

Highlights

• Combined Total: pit-constrained resources of 439 Mt grading 0.32% copper equivalent^* (“CuEq”) in the combined Measured and Indicated categories (“M+I”), representing a 96% increase in M+I resources compared to the previous 2016 estimate, plus an additional 138 Mt grading 0.28% CuEq in the Inferred category (“Inf.”), comprised of:
  • Seel Deposit: 380 Mt grading 0.32% CuEq M+I plus an additional 135 Mt grading 0.28% CuEq Inf.
  • Ox Deposit: 59 Mt grading 0.32% CuEq M+I
• Total contained metal in the M+I categories of 1.7 Blbs Cu, 167 Mlbs Mo, 1.6 Moz Au, and 30 Moz Ag
• With the nearby Berg deposit, which hosts 610 Mt of M+I resources, this new resource at Ootsa brings Surge’s total M+I inventory to over 1 billion tonnes, with total contained metal across the two projects of 5.3 Blbs Cu, 586 Mlbs Mo, 1.6 Moz Au, and 89 Moz Ag

* See Note 4 in Table 1.

Table 1: Ootsa Mineral Resource Estimate by Classification at Base Case NSR Cut-off of C$8.27/t

Notes:

1. Economic viability can only be assessed through the completion of engineering studies defining reserves including PFS and FS. Resource classification adheres to CIM Definition Standards; it cannot be assumed that all or any part of Inferred Mineral Resources will be upgraded to Indicated or Measured as a result of continued exploration.
2. A C$8.27 per tonne NSR cut-off value was used as the base case for reporting mineral resources that have reasonable prospects for eventual economic extraction. The NSR cut-off was derived from US$ metal prices of US$3.85/lb Cu, US$12.40/lb Mo, US$1,750/oz Au, and US$22.00/oz Ag, and a USDCAD exchange rate of 0.77. Process recoveries used were 90% Cu, 70% Au, 70% Mo, and 65% Ag with respective smelter payables of 96%, 90%, 98.5%, and 96%. Refining charges in US$ were US$0.05/lb Cu, US$5/oz Au, and US$0.50/oz Ag. A generated pit shell using Whittle (3DS Geovia) was used to report resources. The generation of the pit shell considered 45-degree slope angles, C$ operating costs of C$2.34/t for mining and C$8.11/t for processing, G&A, and ore mining premium with a 2% ore dilution rate.
3. Grades were estimated using ordinary kriging using capped assays composited to two-metre intervals, with estimation block sizes of 12x12x12 for both Seel and Ox.
4. Copper equivalent assumes metal prices of US$3.85/lb Cu, US$12.40/lb Mo, US$1,750/oz Au, and US$22.00/oz Ag and uses the formula CuEq (%) = Cu (%) + 3.2208 x Mo (%) + 0.6630 x Au (g/t) + 0.0083 x Ag (g/t).
5. The total waste tonnes within the Seel constraining pit are 1,443.4 Mt implying a strip ratio of 2.8 : 1, and the total waste tonnes within the Ox constraining pit are 65.6 Mt implying a strip ratio of 1.1 : 1.
6. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
7. The Qualified Person for the Mineral Resource Estimate is James N. Gray, P.Geo, of Advantage Geoservices Ltd.
8. All figures are rounded to reflect the relative accuracy of the estimate.
9. The effective date of the mineral resource estimate is February 18, 2022.

Resource Estimation Methodology & Parameters

Resource estimation was performed by James Gray of Advantage Geoservices Ltd., an independent Qualified Person as defined by National Instrument 43-101. Data from 300 core holes at Seel and 133 at Ox was used for estimation using Geovia GEMS software. Control for grade estimation in both deposits is based on three directional domains and a 0.1% CuEq mineralized domain. Mineralized versus background material was separated using an indicator (0.1% CuEq) estimation method. Grades were subsequently estimated by ordinary kriging inside and outside that mineralized zone. Copper, molybdenum, gold, and silver grades were estimated using capped assays composited to two-metre intervals. The estimation block size was 12x12x12 metres for both deposits. Average rock densities of 2.74 t/m³ and 2.70 t/m³ were applied to Seel and Ox, respectively, based on 4,081 measurements from Seel and 1,054 measurements from Ox. Overburden was assigned a density of 2.0 t/m³.

Blocks were classified based on spatial parameters related to available drill data as well as on the generation of an optimized pit. At both deposits, Measured resource blocks have a maximum nominal drill spacing of 40m and the third closest hole is within 60m of the block. Indicated blocks have a maximum drill spacing of 80m. Inferred blocks are the remainder estimated within the pit volume. The resource was constrained by a Whittle generated (3DS Geovia) pit for which the optimization parameters used are included in Note 2 of Table 1. Including 2% dilution the resource NSR cut-off is C$8.27/t.

2016 Resource Estimate 

Open pit constrained mineral resources for the Ootsa project contain 1.1 billion pounds of copper and over 1 million ounces of gold in the measure and indicated categories as indicated in the table below.

The mineral resource model was developed utilizing a drill hole database comprised of 26,995 assays from 258 drill holes.  Drill hole assay data was composited into 2 m intervals and a block model with 10 m by 10 m by 10 m block size was constructed using Gemcom modeling software.  Mineralized domains for all deposits were constrained incorporating geological, structural, and lithological parameters and using a $10/t NSR cut-off value.  Within these domains, a $8.50/t NSR cut-off value was applied to define the extent of mineralization with reasonable prospects for economic extraction.  Within these domains, grades for copper, gold, molybdenum, and silver were estimated using inverse distance squared (ID2) grade interpolation guided by geostatistical analysis.  The resulting resource model was subject to pit optimization using a Lerchs-Grossman algorithm to define a pit constrained mineral resource as detailed in the table below.

Ootsa Project Pit Constrained Mineral Resource Estimate at $8.50/t NSR Cut-off Value

The current technical report supporting the resource statement and PEA is available on SEDAR or the Company’s website and has an effective date of January 2016.  The resource estimate uses $8.50 per tonne NSR cut-off value.  Mineral resources are not mineral reserves and by definition do not demonstrate economic viability. There is no certainty that all or any part of the mineral resource will be converted into mineral reserves.  A ‘Measured Mineral Resource’ is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit.   An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit.  Copper Equivalent (CuEq) calculations are based on base case metal price (US$3/lb Cu, US$1260/oz Au, US$10.30/lb Mo, and US$17/oz Ag) and process recovery assumptions, and take into account smelter payable rates and refining costs.  M&I = measured and indicated. The resource update and Preliminary Economic Assessment was completed by P&E Mining Consultants Inc. in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects.

The $8.50/t NSR resource cut-off value grade was derived from Sep 30/15 three year approximate trailing average US metal prices of: Cu $3.25/lb, Au $1,350/oz, Mo $12/lb and Ag $22/oz and a US$:CDN$ exchange rate of 0.85. Process recoveries used were Cu 90%, Au 70%, Mo 70% and Ag 65% with respective smelter payables of 96%, 96%, 96% and 90%. Refining charges in US$ were Cu $0.05/lb, Au $5/oz and Ag $0.50/oz. C$ operating costs used were $2.25/t for mineralized material and waste mining, $1.50/t for overburden mining, $7.50/t for processing and $1.00/t for G&A. An optimized pit shell was utilized for resource reporting that utilized 45 degree slopes and an average mineralized material bulk density of 2.72 t/m3.

The resource update and Preliminary Economic Assessment have been completed by P&E Mining Consultants Inc. in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects.  The updated mineral resource estimate has been prepared by Brian Ray, P.Geo. and Eugene Puritch, P.Eng., both Independent Qualified Persons as defined by National Instrument 43-101, and has an effective date of January 1, 2016.  Dr. Shane Ebert, Ph.D., P.Geo. is the Qualified Person for Surge Copper and has reviewed and approved this content.