Azucar Minerals (TSX-V: AMZ) CEO Morgan Poliquin on Discovery of a New Porphyry Center at the “Primo” Target at the El Cobre Project, Mexico

October 17, 2019

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President and CEO of Azucar Minerals (TSX-V: AMZ)(OTC: AXDDF), Mr. Morgan Poliquin.

Morgan, how are you this afternoon?

Morgan Poliquin: I'm excellent. Thank you very much. And you?

Gerardo Del Real: I'm well, I'm well. Thank you for asking. The last time we spoke, we talked about the fact that it looked like you had hit some more smoke at the El Cobre porphyry copper-gold project in Veracruz State, Mexico.

This time, it looks like you actually hit some fire. You've discovered a new porphyry center. And I know that for the pessimists and skeptics out there, they'll read the headline numbers and they'll say, "Okay, 0.50 meters of 2.12 grams per tonne gold and 1.61% copper down 200 meters isn't going to cut it."

But after a decade of speaking with you, I know the way that you approach exploration, Morgan. So I would love for you to share why you're excited about this blind Primo target area and why these numbers are important and, of course, what the follow-up looks like.

Morgan Poliquin: Great. Thanks very much. Obviously, what we're looking for is something big and high grade – isn't everybody on earth who is in exploration?

Porphyries can be both. Obviously, they can also be big and low grade, and if they're big and low grade, you need them near the surface for open pitting. But gold-rich porphyries in this kind of setting often can be quite high grade. What that means in porphyry systems is above 0.5% copper, 1 gram gold sort of things.

And, of course, they get much higher grade. We've had indications that we have quite high gold grades here in the 1-gram range locally on this project and on numerous different targets. But we've been in this 0.2%, 0.3% going along with that, and we felt that potentially could be because we're high in the system.

What people are looking for, like our shareholder I think, not to put words in their mouth, but people are generally looking for block caveable, meaning underground mineable porphyry systems that are high grade. That presents a whole range of pluses and cons. But if I'm not mistaken, Newcrest, for example, is free cash-flowing $1 billion a year. So that can be the exciting result of these block cave, big mines.

A lot of development costs up front, but then you're pulling for years. All your development is done and you're pulling ore, and you're putting it through a mill and you're making money. So that's what these block cave projects present.

Oyu Tolgoi is being developed by Rio Tinto in Mongolia, and, of course, there's a big one, Grasberg in Indonesia, that Freeport is operating, and there's various ones around the world. So that's what we're looking for here. We're agnostic. We're not focused on low-grade open pits and we're not focused on deep high-grade, but we know that deep high-grade deposits are kind of what a lot of bigger companies are focused on.

We think we could be on to the top of something here. You mentioned the upper hole, which had just a couple of intercepts and not very much in the way of porphyry, but good indications, and then, below, we hit – and again, I'm just on the phone here and not looking at a screen as it happens right now – but it was around 86 meters of 0.7 grams gold and over 0.4% copper, with some intervals in there that are approaching 1% copper.

It's a real indication that we're on to higher grades. It's a broad, large intrusive. So we're quite excited about the potential for this to open up potentially at depth into what we're looking for, which is, again, something big and high grade.

It's early days and we don't know the orientation and we don't know which way it could be going and all sorts of things, but it's very exciting.

Gerardo Del Real: Let me read off some of those numbers from hole 86 at the Primo target, because that was my followup question. I noticed that hole went down to, I believe, 918 meters at the very least. There was a 200-meter intercept from 718 meters to 918 meters, which came in at 0.4 grams per tonne gold and 0.24% copper, but, within that, there was an 86.5-meter intercept of 0.70 grams per tonne gold and 0.42% copper. You referenced that one.

There were also 55.6 meters of 0.94 grams per tonne gold and 0.56% copper. That was from 862 meters to 918 meters. I could continue. There was a 43.6-meter intercept of 1.04 grams per tonne gold and 0.63% copper, and even a 10-meter intercept of 1.44 grams per tonne gold and 0.85% copper.

You mentioned, Morgan, that you're not sure, of course, of the geometry of this, the orientation. Tell me a bit about what the follow-up looks like, because I know the drills are still turning if I'm not mistaken.

Morgan Poliquin: Yeah, we outlined on the section in the news release we're drilling a steeper hole underneath. In good deposits, you go from chalcopyrite-rich zones to bornite-rich zones. That is alluding to the occurrence of the mineral that the copper is occurring in. Chalcopyrite is about 0.3% copper and bornite is almost 0.6% copper.

Basically, things tend to get copper-rich with depth, and that's what we think we're seeing in this system. The shallower systems that we've identified elsewhere have this 2 to 3 gold grams per tonne / 1% copper kind of ratio. Here, we're getting a lot different, we think. We're starting to get these copper grades increase, and so we're going to test beneath this hole first of all, as we've shown in the section, but we could be on the margins. We could not be in the center. Basically, chalcopyrite tends to zone inward as well as with depth into bornite, so we're hopeful that we're going to get into a real copper-rich part of the system.

This is early days, but drilling will continue. We've got three drills turning at the moment. We've got other targets to test that we've never tested before as well. We think that the exploration story here is, despite the fact we're on hole 89 here as the section shows, we think we're early days.

We would also like to point out that Oyu Tolgoi, as I mentioned in the interview with you before, before they got into the real high-grade part, the part that really made that huge system, which I'm not comparing El Cobre to necessarily at all, but it it was over hole 150 I think when they really got into it. It's very early days here, and it's a tough exploration because you're drilling deep holes, but we've got cheap drilling, and we think, in terms of an exploration target, it's world class.

Gerardo Del Real: Now, this is a big mineralized intrusive. Is that correct, Morgan?

Morgan Poliquin: That's right. Yeah, this is the largest, continuous intrusive that's mineralized that we've hit so far in the program. That's very encouraging.

Gerardo Del Real: Good stuff, Morgan. I can't wait for the follow-up drilling. I know it takes some time because of the depth of the holes, but I can't wait to start getting the numbers back and see what you're on to here.

Morgan Poliquin: Very good. Yeah, thanks so much. We've got all our fingers crossed, but we think this is proof in the pudding. Obviously, we're a long way from defining an economic of the deposit, it's exploration. But nevertheless, I feel that this indicates our exploration thesis that this is a very, very permissive area, and it's a district and we control it.

I would like to point out that, as we're closing here, that we're in an area where you can very cheaply develop a porphyry. We're not in the middle of Mongolia. We're not at 5,000 meters in the Andes. As you've seen, you've been there yourself, we're just a couple of hundred meters above sea level. We're 7 kilometers or so from a deep seaport gas line highway, and a power plant is nearby.

So this is very unique, and so the drills are turning, and we'll see. We're looking forward to reporting and satisfying your craving for the next hole.

Gerardo Del Real: Absolutely. Morgan, thank you so much. Appreciate it.

Morgan Poliquin: Thank you.

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