Sun Metals Corp. (TSX-V: SUNM) CEO Steve Robertson on the Win-Win Arrangement with Lorraine & the Distinguished Exploration Team Following Up on the 100 Meter 5% Copper Equivalent Intercept at the Stardust Project

February 6, 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 Sun Metals Corp. (TSX-V: SUNM)(OTC: SMTTF), Mr. Steve Robertson. Steve, how are you today?

Steve Robertson: I'm doing great, Gerardo. Thanks for having me on.

Gerardo Del Real: Congratulations are in order. You just entered into an arrangement agreement with Lorraine. So, first things first, congrats on that front.

Steve Robertson: Thank you very much. We're very excited about it.

Gerardo Del Real: I bet you are, and I want to talk about it. But before we get into that, I want to talk about how you closed the year in 2018. You actually were smart enough to raise $5.2 million in a private placement. I couldn't help but notice that Teck participated for a good portion of that. Obviously, in the space that you're in, that's a big endorsement. Can we start there?

Steve Robertson: Absolutely. Yeah, we're very excited about that as well. Teck coming in for the financing like that is a great endorsement for the work that we've been doing up on Stardust. I think one of the big differences between Teck and some of the other companies is they actually have an exploration manager who had his Ph.D. in carbonate replacement systems. So they had a really good understanding of the program that we were undertaking. They understood the magnitude of exactly what we'd hit.

We've got this major CRD, carbonate replacement deposit, intercept in northern British Columbia where you wouldn't expect to find it. These types of systems are normally found down in northern Mexico and Peru, places like that. Because they were early to recognize that we had such a significant hit in one of these systems, they were very reactive when we asked if they wanted to participate in the financing and actually gave us a nice premium. Our shares were trading at about $0.22 at the time, and the front end to that deal was at $0.413. So almost a 100% premium to the trading price at that time.

Gerardo Del Real: Yeah, that's impressive. But when you hit 100 meters grading 5% copper equivalent, I think that inspires a bit of confidence. I want to talk in a bit about how you plan on following what I believe is the best copper hit out of Canada last year, but let's talk about this arrangement with Lorraine. You have a deep understanding, and the team does as well, of the capital pool markets. I have to believe that inspired a portion of why you decided to move forward with the deal. Can you talk about that?

Steve Robertson: Absolutely. Yeah, this is a very common sense move. I'm really thinking of this as good housekeeping. We want to get this transaction behind us before we get into the 2019 exploration season, which is where the value is created, through the exploration and discovery.

In terms of capital structure for the company, we were in a position where we were going to be issuing 31.5 million shares approximately to Lorraine at the end of March to complete our earn-in. There was a tax event that would be triggered by that transaction. So we were going to facing a little bit of an overhang of the stock because a lot of the Sun Metals shares would have to be sold to help them pay for the tax bills. So, by doing this transaction, there's no tax event triggered and we can actually have the Lorraine shareholders come along on board with Sun Metals and continue to participate fully in the Stardust project exploration and discovery.

On top of that, there's no royalty that's going to be created as would have been had the earn-in been completed. There's a myriad of other minor reasons. For instance, Lorraine Copper as a holding company would have continued to trade at a discount to market, whereas now they'll be able to fully participate at full market value. It gives our company greater liquidity. It's just a win-win-win situation all around. I think that it's just going to be very attractive to both the Sun Metal shareholders and Lorraine shareholders.

Gerardo Del Real: I understand that there won't be a change to the management or the board of Sun Metals. Is that accurate?

Steve Robertson: Yeah, that's correct. None of the employees will change. The two principals of Lorraine Copper, Bill Morton and Glen Garratt, are already involved in Sun Metals. Glen sits on the board and Bill is on the technical advisory board. They'll both continue to hold those positions, and there will be no addition of employees to Sun Metals. It's going to mean very little change in terms of the actual operation of the company.

Gerardo Del Real: I referenced hole SD-421. Of course, that was 100 meters of 4.99% copper equivalent. Let's talk 2019. I know the team is excited. Can you explain to us what the approach will be and when we can anticipate some drills turning?

Steve Robertson: Yeah. We're going to get out onto the ground as soon as we can. Up in that part of the world, it's generally sometime in May that we have enough snow cleared away that we can easily access the property on some of the good road access that we have up there.

Last year, we were fortunate enough to get into this tremendous intercept, 100 meters of almost 5% copper equivalent. The average thickness of the resource intercepts is about 4.3 meters thick, so this is something that is clearly a quantum leap ahead in terms of size and magnitude.

We want to get in and make sure that we explore this particular area very thoroughly, and we'll do that through some very controlled directional drilling. We're going to employ a system that's going to allow us to very precisely target areas around hole 421 so we can continue to follow that fluid flow feeder pathway, which is going to lead us back toward the source of the mineralizing fluids and hopefully get into more of this very rich, thick mineralization.

Gerardo Del Real: For people not familiar with your team along with yourself, can you tell who's leading that charge there?

Steve Robertson: The guy that's leading the charge in the field certainly is a fellow by the name of Ian Neill. He is our VP of Exploration. He was the 2003 Bill Dennis Award winner. That's the award that's given away by the PDAC in Toronto for the best exploration discovery of the year. He won that for his role in the discovery of some big, massive sulfide deposits up in Nunavut. So good exploration history behind him, a very solid guy, and I couldn't be more pleased than having him at the helm for the exploration crew. His right-hand man is a fellow by the name of Tyler Caswell, who's the Project Manager and also a very experienced guy with a good history of exploration and discovery. So we're building a very solid team here at Sun Metals.

Gerardo Del Real: I can't wait for the drills to start turning and the snow to start melting and to see what comes of the follow-up drilling. I think it's going to get the market's attention for sure. Is there anything else that you'd like to add?

Steve Robertson: No. I think that we just need to continue to do very methodic and systematic exploration of this, and if there's additional mineralization to be found, then we're going to make sure that we find it.

Gerardo Del Real: Steve, thanks so much for the update. Appreciate it.

Steve Robertson: Thanks, Gerardo.

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