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Miner Golden Arrow looks toward fourth discovery as revenue rolls in

“Finally, we’re in production.”

Those were the jubilant words of Golden Arrow Resources president and CEO Joseph Grosso to shareholders on Wednesday, during the company’s annual general meeting – the first face-to-face meeting since the company catapulted from explorer, to precious metals producer status late in May.

It had formed a joint venture (JV) with partner SSR Mining (formerly Silver Standard Resources) to jointly develop its Chinchillas discovery, in Argentina, leveraging the infrastructure in place for SSR’s soon-to-be-closing Pirquitas mine, located 45 km to the south by road.

Named Puna Operations (POI), the JV vehicle holds both the Chinchillas project and the Pirquitas project, which consists of the San Miguel openpit mine that ceased mining operations in January, and the associated mineral processing facilities and tailings facility, in Argentina. POI is 75% owned and operated by SSR, and owned 25% by Golden Arrow.

Golden Arrow has received payment of C$17.8-million from SSR, which represented 25% of the mine earnings generated by Pirquitas less certain expenditures incurred for the period from October 1, 2015 to May 30, 2017. For this reason, the company is in a strong financial position to fund its 25% share of the projected capital expenditure for POI to develop the Chinchillas project.

It is also important to consider that only 75 ha of the Chinchillas project has been explored to date in detail. The remaining 1 978 ha of Chinchillas remains under- or unexplored. Grosso pointed out how prospective the valley in which Chinchillas is located is, sharing it with the massive Veladero 50/50 JV between Barrick Gold and Shandong Gold Group, and Barrick's stalled Pascua-Lama project, which straddles the border with Chile.

The Pirquitas operation continues to process stockpiled ore from the Pirquitas pit, with 25% of the profits attributable to Golden Arrow. Chinchillas will be mined by conventional drill, blast, truck and loading openpit methods. A fleet of 35-t road haul trucks will transport ore to the Pirquitas operation. Haul truck, loading equipment and drills at Pirquitas will be transferred to Chinchillas, allowing the project to leverage existing equipment and infrastructure for capital cost savings and an expected shorter time to production.

Chinchillas is undergoing the necessary permitting to enable development and ore supply to the Pirquitas Operation, which is projected to have a further operating life of at least eight years, with ore supplied from Chinchillas.

Chinchillas is expected to supply the Pirquitas operation with milling ore in the second half of 2018, and produce on average 8.4-million ounces of silver equivalent, at a 4 000 t/d plant throughput. Golden Arrow's 25% share of average annual production will therefore be equal to 2.1-million ounces of silver equivalent, representing total attributable after tax undiscounted cash flow of $66.75-million, according to the most recent prefeasibility study.

MAJOR GIFT

“Golden Arrow shareholders should be grateful for the great gift that SSR has given them. When we first approached SSR with our proposal, they were not abusive, despite the market being in the midst of the worst downturn ever. They did not take advantage of Golden Arrow and the Chinchillas project, when they knew they were nearing the end of the Pirquitas mine’s life,” Grosso stated.

He believes the Chinchillas project, in Argentina, is an asset with a potentially much longer life beyond the current mine plan. The first stage of Chinchillas is ready for production, with an estimated mine life of eight years. A subsequent phase has already been drilled, and could be developed concurrently or subsequently, he noted. And there is more potential for another phase, he pointed out.

“To their credit, SSR kept quiet about the future potential of Chinchillas, instead focusing on the first phase of the mine. We should be extremely happy to have 25% of Chinchillas.

“There is no comparison to the synergies we are leveraging through our agreement with SSR. We are devoted to the SSR partnership. If Chinchillas was discovered in any other region, it would probably have taken about another seven to nine years to raise the money for a mine, but now it will only take nine months, with zero dilution to shareholders,” Grosso noted.

POI is currently working on a preliminary economic assessment to evaluate adding a possible high-grade underground ore stream at Pirquitas.

EXPLORATION FORTE

Looking forward, Grosso said that Golden Arrow’s strength has always been at the drill bit. “We are skilled at managing community relations, finding resources, and that’s why the ‘New Golden Arrow’ will prosper.

He expects SSR to receive the operating permit for Chinchillas “soon”.

Grosso is no stranger to Argentina, having built a solid reputation in the country over his 24-year presence, with zero permit rejections over this time. “There still are some questions not settled by the operator, and we’ll support them. Our relationship with Argentina hinges on trust. They know we will not put something ‘unholy’ in front of them,” he said.

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