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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  Aquila Resources Inc.    AQA   CA03841G1019

AQUILA RESOURCES INC.

(AQA)
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Aquila Resources : Back Forty PEA Report

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09/16/2020 | 05:40pm EDT

PRELIMINARY ECONOMIC ASSESSMENT

OF THE

BACK FORTY PROJECT,

MENOMINEE COUNTY,

MICHIGAN, USA

FOR

AQUILA RESOURCES INC.

NI 43-101 & 43-101F1

TECHNICAL REPORT

Andrew Bradfield, P.Eng.

Jarita Barry, P.Geo.

David Burga, P.Geo.

Kebreab Habte, P.Eng., Golder Associates

Kenneth Kuchling, P.Eng.

Neil Lincoln, P.Eng., Lincoln Metallurgical

Manochehr Oliazadeh, P.Eng., Lycopodium Minerals Canada

David Penswick, P.Eng., Gibsonian

Eugene Puritch, P.Eng., FEC, CET

D. Gregory Robinson, P.Eng.

Yungang Wu, P.Geo.

P&E Mining Consultants Inc.

Report 329

Effective Date: October 14, 2019

Signing Date: September 16, 2020

TABLE OF CONTENTS

1.0

SUMMARY.........................................................................................................................

1

1.1

Property Description and Location ..........................................................................

2

1.2

Accessibility, Climate, Local Resources, Infrastructure and Physiography............

2

1.3

History......................................................................................................................

3

1.4

Geological Setting and Mineralization ....................................................................

5

1.5

Deposit Type............................................................................................................

9

1.6

Exploration...............................................................................................................

9

1.7

Drilling...................................................................................................................

10

1.8

Sample Preparation, Analyses and Security ..........................................................

13

1.9

Data Verification....................................................................................................

13

1.10

Mineral Processing and Metallurgical Testing ......................................................

13

1.11

Mineral Resource Estimate ....................................................................................

16

1.12

Mining Methods.....................................................................................................

19

1.12.1

Open Pit Mining...................................................................................

19

1.12.2

Underground Mining ...........................................................................

22

1.13

Process Plant ..........................................................................................................

24

1.14

Site Infrastructure...................................................................................................

27

1.15

Market Studies and Contracts ................................................................................

27

1.16

Environmental Studies, Permits and Social or Community Impact ......................

29

1.17

Capital Costs ..........................................................................................................

30

1.17.1

Initial Capital Costs..............................................................................

30

1.17.2

Sustaining Capital Costs ......................................................................

31

1.18

Operating Costs......................................................................................................

32

1.19

Financial Evaluation ..............................................................................................

33

1.20

Conclusions and Recommendations ......................................................................

37

2.0

INTRODUCTION AND TERMS OF REFERENCE .......................................................

38

2.1

Sources of Information ..........................................................................................

39

2.2

Units and Currency ................................................................................................

40

3.0

RELIANCE ON OTHER EXPERTS ................................................................................

48

4.0

PROPERTY DESCRIPTION AND LOCATION .............................................................

49

4.1

Introduction............................................................................................................

49

4.2

Property Interests, Title, Taxes and Other Legal Obligations ...............................

50

4.2.1

Description of Properties .....................................................................

51

4.2.1.1

Peripheral Properties................................................................

53

4.2.2

State of Michigan Metallic Mineral Leases .........................................

53

4.2.3

Summary of Royalties..........................................................................

55

4.3

Environmental........................................................................................................

55

5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND

PHYSIOGRAPHY.............................................................................................................

56

5.1

Physiography..........................................................................................................

56

5.2

Climate...................................................................................................................

56

5.3

Access ....................................................................................................................

57

5.4

Site Sufficiency......................................................................................................

57

6.0 HISTORY ..........................................................................................................................

58

6.1

Historical Mineral Resource Estimates..................................................................

63

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Aquila Resources Inc., Back Forty Project PEA, Report No. 329

7.0

GEOLOGICAL SETTING AND MINERALIZATION ...................................................

66

7.1

Regional Geology ..................................................................................................

66

7.2

District Geology

.....................................................................................................

69

7.3

Property Geology...................................................................................................

70

7.3.1

Lithology..............................................................................................

71

7.4

Mineralized Zones .................................................................................................

76

7.4.1

Massive Sulphide Mineralization ........................................................

76

7.4.1.1

Main Zone Massive Sulphide ..................................................

78

7.4.1.2

Pinwheel Zone Massive Sulphide............................................

79

7.4.1.3

Deep Zone Massive Sulphide ..................................................

80

7.4.1.4

Tuff Zone Massive Sulphide....................................................

80

7.4.2

Stockwork and Peripheral Sulphide Mineralization ............................

80

7.4.3

Copper Mineralization Associated with Sulphide Mineralization.......

81

7.4.4

Precious Metal-RichLow-Sulphide Mineralization ............................

83

7.4.5

Gossan (Supergene) Mineralization.....................................................

84

7.4.6

Mineralization Encountered at Depth ..................................................

85

8.0

DEPOSIT TYPES..............................................................................................................

87

9.0

EXPLORATION................................................................................................................

89

9.1

Introduction............................................................................................................

89

9.2

Surficial Geologic Mapping...................................................................................

89

9.3

Geochemistry .........................................................................................................

90

9.4

Geophysics.............................................................................................................

91

9.5

Airborne Geophysical Surveys ..............................................................................

91

9.6

Ground and Downhole Geophysical Surveys ........................................................

93

10.0

DRILLING.........................................................................................................................

96

10.1

Introduction............................................................................................................

96

10.1.1

2002-2003 Drilling Program................................................................

99

10.1.2

2006

Drilling Program .........................................................................

99

10.1.3

2007

Drilling Program .........................................................................

99

10.1.4

2008

Drilling Program .........................................................................

99

10.1.5

2009-2010 Drilling Program................................................................

99

10.1.6

2011

Drilling Program .......................................................................

100

10.1.7

2015

Drilling Program .......................................................................

100

10.1.8

2015

Metallurgical Drilling Program.................................................

100

10.1.9

2015

Mineral Resource Drilling Program..........................................

101

10.1.10

2015

Exploration Drilling Program ...................................................

101

10.2

2016

Drilling Program .........................................................................................

101

10.2.1

2016

Geotechnical Drilling Program .................................................

102

10.2.2

2016

Resource Drilling Program .......................................................

102

10.2.3

2016

Exploration Drilling Program ...................................................

103

10.3

2017

Drilling Program .........................................................................................

104

10.3.1

2017

Geotechnical Drilling Program .................................................

104

10.3.2

2017

Mineral Resource Drilling Program..........................................

105

10.3.3

2017

Exploration Drilling Program ...................................................

107

10.4

2018

Exploration Drilling Program .....................................................................

109

10.5

2019

Drilling........................................................................................................

109

10.5.1

2019

Geomechanical Drilling Program .............................................

109

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10.5.2

2019 Metallurgy Drilling Program ....................................................

109

10.6

Ground Conditions and Survey Data ...................................................................

110

11.0 SAMPLE PREPARATION, ANALYSIS AND SECURITY .........................................

111

11.1

Core Sampling .....................................................................................................

111

11.2

Sample Preparation and Analysis ........................................................................

113

11.2.1

2002 to 2003 Sampling Programs......................................................

113

11.2.2

2006 Sampling Program ....................................................................

113

11.2.3

2007 to 2008 Sampling Programs......................................................

114

11.2.4

2009 to 2010 Sampling Programs......................................................

115

11.2.5

2010 to 2011 Sampling Programs......................................................

115

11.2.6

2015 Sampling Program ....................................................................

116

11.2.7

2016 to 2017 Sampling Programs......................................................

116

11.3

Bulk Density ........................................................................................................

117

11.4

Security ................................................................................................................

118

11.5

Quality Assurance/Quality Control Program.......................................................

118

11.5.1

2002-2008 Drill Programs .................................................................

119

11.5.2

2009-2010 Drill Programs .................................................................

119

11.5.2.1

Performance of Standards ......................................................

119

11.5.2.2

Performance of Blanks...........................................................

120

11.5.2.3

Performance of Duplicates.....................................................

121

11.5.3

2010-2011 Drill Programs .................................................................

121

11.5.3.1

Performance of Standards ......................................................

121

11.5.3.2

Performance of Blanks...........................................................

122

11.5.3.3

Check Assays .........................................................................

122

11.5.4

2015 Drill Program ............................................................................

123

11.5.4.1

Performance of Standards ......................................................

123

11.5.4.2

Performance of Blanks...........................................................

124

11.5.5

2016 Drill Program ............................................................................

124

11.5.5.1

Performance of Standards ......................................................

124

11.5.5.2

Performance of Blanks...........................................................

125

11.5.5.3

Performance of Duplicates.....................................................

125

11.5.6

2017 Drill Program ............................................................................

125

11.5.6.1

Performance of Standards ......................................................

125

11.5.6.2

Performance of Blanks...........................................................

129

11.5.6.3

Performance of Duplicates.....................................................

129

11.5.6.4 Performance of Check Assays ...............................................

129

11.6

Recommendations and Conclusions ....................................................................

130

12.0 DATA VERIFICATION .................................................................................................

131

12.1

Database Verification May 2016 Site Visit .........................................................

131

12.2

Site Visit and Due Diligence Sampling May 2016..............................................

131

12.3

Database Verification November 2017 Site Visit................................................

134

12.4

Site Visit and Due Diligence Sampling November 2017 ....................................

134

12.5

Recommendations and Conclusions ....................................................................

135

13.0 MINERAL PROCESSING AND METALLURGICAL TESTING ...............................

138

13.1

Introduction..........................................................................................................

138

13.2

Previous Testwork ...............................................................................................

138

13.2.1

G&T Metallurgical Services Ltd. 2007 (KM 1983) ..........................

139

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Aquila Resources Inc., Back Forty Project PEA, Report No. 329

13.2.1.1

Sample Composition..............................................................

139

13.2.1.2

Mineralogy.............................................................................

140

13.2.1.3

Rougher Flotation ..................................................................

141

13.2.2

G&T Metallurgical Services Ltd. 2008 (KM 2047) ..........................

142

13.2.2.1

Sample Composition..............................................................

142

13.2.2.2

Hardness.................................................................................

143

13.2.2.3

Mineralogy.............................................................................

143

13.2.2.4

Rougher Flotation ..................................................................

145

13.2.2.5

Cleaner Flotation....................................................................

147

13.2.2.6

Locked Cycle Flotation..........................................................

149

13.2.2.7

Oxide Whole Material Cyanidation .......................................

151

13.2.2.8

Sulphide Zinc Rougher Tailings Cyanidation........................

152

13.2.2.9

Gravity Concentration Tests ..................................................

152

13.2.2.10

Minor Element Assays...........................................................

153

13.2.3

SGS Canada Inc. 2009 .......................................................................

153

13.2.3.1

Gravity Separation .................................................................

153

13.2.3.2

Cyanide Leach .......................................................................

154

13.2.3.3

Overall Recovery ...................................................................

155

13.2.4

G&T Metallurgical Services Ltd. 2010 (KM 2575) ..........................

155

13.2.4.1

Cleaner Flotation....................................................................

156

13.2.4.2

Locked Cycle Flotation..........................................................

156

13.2.4.3

Pinwheel Gossan Cyanide Leach...........................................

158

13.2.4.4

NS Zone Gravity and Cyanide Leach ....................................

158

13.2.5

SGS Canada Inc. 2010 (12338-001) ..................................................

159

13.2.5.1

Bond Ball Mill Grindability...................................................

159

13.2.5.2

Cyanide Leach .......................................................................

160

13.2.5.3

Carbon-in-Leach ....................................................................

160

13.2.5.4

Carbon-in-Pulp.......................................................................

160

13.2.5.5

Cyanide Destruction...............................................................

163

13.2.6

G&T Metallurgical Services Ltd. 2011 (KM 2775) ..........................

163

13.2.6.1

Cleaner Flotation....................................................................

164

13.2.6.2

Cyanide Leach .......................................................................

165

13.2.7

Resource Development Inc. (RDi) 2011............................................

165

13.2.7.1

Sample Composition..............................................................

165

13.2.7.2

Comminution Characteristics.................................................

167

13.2.7.3

Cyanide Leach .......................................................................

167

13.2.8

Resource Development Inc. (RDi) - 2012.........................................

171

13.2.8.1

Oxide Sample Composition ...................................................

171

13.2.8.2

Sulphide Sample Composition...............................................

171

13.2.8.3

Oxide Sample Cyanide Leaching...........................................

172

13.2.8.4

Sulphide Sample Flotation.....................................................

173

13.3 Sample Selection - 2018 Feasibility Study and Current PEA.............................

175

13.3.1

Introduction........................................................................................

175

13.3.2

Comminution Samples.......................................................................

175

13.3.3

Metallurgical Samples .......................................................................

175

13.4 Comminution Circuit Characterization Testwork................................................

177

13.4.1

Overall Grindability Testwork Results ..............................................

178

13.4.2

SMC Tests..........................................................................................

180

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Aquila Resources Inc., Back Forty Project PEA, Report No. 329

13.4.3

Crusher Work Index Tests .................................................................

180

13.4.4

Bond Ball Mill Grindability Tests .....................................................

180

13.4.5

ModBond Tests..................................................................................

181

13.4.6

Bond AbrasionTests...........................................................................

182

13.4.7

Additional Comminution Testing ......................................................

182

13.5 Flotation Testwork ...............................................................................................

182

13.5.1

Introduction........................................................................................

182

13.5.2

Master Composite Mineralogy ..........................................................

183

13.5.3

Master Composite Rougher Testing ..................................................

186

13.5.4

Master Composite Cleaner Testing....................................................

188

13.5.4.1 Main Zone Cleaner Flotation .................................................

188

13.5.4.2 Tuff Zone Cleaner Flotation ..................................................

188

13.5.4.3 Pinwheel Zone Cleaner Flotation...........................................

188

13.5.4.4 Pinwheel Variability Composite Mineralogy ........................

188

13.5.4.5 Master Composite Locked Cycle Testing..............................

190

13.5.4.6

Variability Composite Cleaner Testing .................................

191

13.5.4.7 Main Zone Variability Cleaner Flotation...............................

192

13.5.4.8 Tuff Zone Variability Cleaner Flotation ................................

192

13.5.4.9 Pinwheel Zone Variability Cleaner Flotation ........................

194

13.5.5

Variability Composite Locked-Cycle Testing ...................................

194

13.5.5.1

Main Zone Variability Composite Locked Cycle Flotation ..194

13.5.5.2 Tuff Zone Variability Composite Locked Cycle Flotation....

195

13.5.5.3 Pinwheel Zone Variability Composite Locked

Cycle

Flotation .................................................................................

196

13.5.6

Additional Variability Composite Testing.........................................

196

13.5.6.1 Main Zone Additional Variability Composite Flotation........

196

13.5.6.2 Tuff Zone Additional Variability Composite Flotation.........

197

13.5.6.3 Pinwheel Zone Additional Variability Composite Flotation .198

13.5.7

Regrind Size Selection.......................................................................

199

13.5.8

Zinc Regrind Bypass..........................................................................

200

13.5.9

Concentrate Minor Elemental Analysis .............................................

200

13.6 Oxides Testwork

..................................................................................................

202

13.6.1

Introduction........................................................................................

202

13.6.2

Bottle Roll Tests ................................................................................

203

13.6.2.1

Cyanide Concentration...........................................................

204

13.6.2.2

Primary Grind Size ................................................................

205

13.6.2.3

Oxygen Addition....................................................................

205

13.6.2.4

Other Conditions....................................................................

205

13.6.3

Leach Product Filtration (Via Vacuum Filtration).............................

205

13.6.4

SART (Sulphidization, Acidification, Recycling, Thickening).........

206

13.6.5

Cyanide Destruction...........................................................................

206

13.6.6

Tailings Leach Testwork....................................................................

207

13.6.6.1 Gravity Recovery and Sulphide Tailings Testwork...............

207

13.7 Tailings Dewatering and Rheology .....................................................................

216

13.7.1

Introduction........................................................................................

216

13.7.2

Flocculant Selection...........................................................................

217

13.7.3

Settling Tests......................................................................................

217

13.7.4

Rheological Characterization.............................................................

218

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13.7.4.1 Slump Versus Solids Content ................................................

218

13.7.4.2 Static Yield Stress Testing .....................................................

218

13.7.4.3 Water Bleed and Yield Stress Versus Time...........................

218

13.7.4.4

Plug Yield Stress....................................................................

218

13.7.4.5 Viscosity and Dynamic Yield Stress Determination .............

218

13.8

Metal Recovery Equations...................................................................................

219

13.8.1

Methodology......................................................................................

219

13.8.2

Results

................................................................................................

222

14.0

MINERAL RESOURCE ESTIMATE.............................................................................

224

14.1

Introduction..........................................................................................................

224

14.2

Database...............................................................................................................

224

14.3

Data Verification..................................................................................................

225

14.4

Domain Interpretation..........................................................................................

225

14.5

Rock Code Determination....................................................................................

227

14.6

Compositing.........................................................................................................

229

14.7

Grade Capping .....................................................................................................

232

14.8

Semi-Variography

................................................................................................

248

14.9

Bulk Density ........................................................................................................

248

14.10

Block Modeling ...................................................................................................

250

14.11

Mineral Resource Classification ..........................................................................

252

14.12

NSR Calculation ..................................................................................................

253

14.13

Mineral Resource Estimate ..................................................................................

254

14.14

Confirmation of Estimate.....................................................................................

268

15.0

MINERAL RESERVE ESTIMATE................................................................................

279

16.0

MINING METHODS ......................................................................................................

280

16.1

Open Pit Mining...................................................................................................

280

16.1.1

Open Pit Geotechnical Studies...........................................................

280

16.1.2

Overburden Slope ..............................................................................

280

16.1.3

Rock Slopes .......................................................................................

281

16.1.4

Groundwater Studies..........................................................................

282

16.1.5

Open Pit Optimization .......................................................................

283

16.1.5.1

Pit Optimization Parameters ..................................................

283

16.1.5.2

Pit Optimization Results ........................................................

286

16.1.6

Pit Design...........................................................................................

287

16.1.7

Pit Phases ...........................................................................................

287

16.1.8

Dilution and Mining Loss ..................................................................

289

16.1.9

Open Pit Production Schedule ...........................................................

290

16.1.10

Stockpiling Strategy...........................................................................

290

16.1.10.1 Sulphide Plant (Flotation) Feed Types ..................................

290

16.1.10.2 Oxide Plant (Leach) Feed Type .............................................

291

16.1.11

Open Pit Mining Schedule.................................................................

291

16.1.12

Open Pit Mining Practices .................................................................

297

16.1.13

Drilling and Blasting..........................................................................

297

16.1.14

Grade Control Drilling.......................................................................

298

16.1.15

Loading and Hauling..........................................................................

298

16.1.16

Stockpile Handling.............................................................................

299

16.1.17

Pit Dewatering ...................................................................................

299

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16.1.18

Auxiliary Pit Services ........................................................................

300

16.1.19

Waste Storage Facilities.....................................................................

300

16.1.19.1

Topsoil ...................................................................................

301

16.1.19.2

Overburden ............................................................................

301

16.1.19.3

Waste Rock ............................................................................

301

16.1.20

Open Pit Support Facilities ................................................................

302

16.1.21

Open Pit Manpower ...........................................................................

302

16.2 Underground Mining ...........................................................................................

303

16.2.1

Design Methodology..........................................................................

305

16.2.2

Geotechnical Considerations .............................................................

307

16.2.2.1

Pinwheel Pillar.......................................................................

311

16.2.2.2

Main Pillar .............................................................................

312

16.2.2.3

Pit Pillar .................................................................................

312

16.2.2.4

Pit Backfill Exclusion Zone ...................................................

312

16.2.2.5

Cemented Rockfill Pit Plug ...................................................

312

16.2.3

Stope Design Recommendations .......................................................

313

16.2.3.1

Ground Support......................................................................

314

16.2.3.2

Pastefill Strength....................................................................

314

16.2.4

Development ......................................................................................

315

16.2.4.1

Lateral Development..............................................................

315

16.2.4.2

Vertical Development ............................................................

315

16.2.5

Mining Methods.................................................................................

316

16.2.5.1

Cut and Fill Mining................................................................

316

16.2.5.2

Longhole Mining ...................................................................

319

16.2.6

Backfill...............................................................................................

320

16.2.6.1

High-Strength Pastefill...........................................................

320

16.2.6.2

Low-Strength Pastefill ...........................................................

321

16.2.6.3

Other Fill................................................................................

321

16.2.7

Productivity Estimates .......................................................................

321

16.2.8

Personnel Estimates ...........................................................................

322

16.2.9

Mining Schedule ................................................................................

323

16.2.9.1

Development ..........................................................................

327

16.2.9.2

Production ..............................................................................

328

16.2.9.3

Mining Within 50 m of Pit Operations ..................................

328

16.2.10

Mine Services.....................................................................................

328

16.2.10.1

Ventilation..............................................................................

328

16.2.10.2

Electrical ................................................................................

330

16.2.10.3

Communications and Controls...............................................

331

16.2.10.4

Dewatering.............................................................................

331

16.2.10.5

Compressed Air .....................................................................

333

16.2.10.6

Refuges, Egress, Additional Underground Infrastructure......

333

16.2.11

Equipment Inter-Operability..............................................................

335

16.2.11.1

Lateral Development Equipment ...........................................

335

16.2.11.2

Vertical Development Equipment..........................................

335

16.2.11.3

Cut and Fill Mining Equipment .............................................

335

16.2.11.4

Longhole Mining Equipment.................................................

335

16.2.11.5

Ancillary and Support Equipment .........................................

336

16.2.11.6

Diamond Drilling ...................................................................

336

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16.2.11.7

Fleet Summary.......................................................................

336

16.2.12

Material Handling ..............................................................................

337

16.2.12.1

Mineralized Material Handling..............................................

338

16.2.12.2

Waste Rock Handling ............................................................

338

16.2.13

Cut-off Grades ...................................................................................

338

16.2.13.1

Economic Cut-off Grade........................................................

338

16.2.13.2

Stope Optimization and Marginal Cut-off Grades.................

339

16.2.14

Mining Dilution .................................................................................

340

16.2.14.1

Internal Dilution.....................................................................

340

16.2.14.2

Longhole External Dilution ...................................................

341

16.2.14.3

Cut and Fill External Dilution................................................

341

16.2.14.4

Backfill External Dilution......................................................

341

16.2.15

Mining Recovery ...............................................................................

342

16.2.15.1

Longhole Mining Loss...........................................................

342

16.2.15.2

Cut and Fill Mining Loss .......................................................

342

16.2.16

Net Smelter Return Impacts...............................................................

342

16.2.16.1

Impact of Dilution on NSR ....................................................

343

16.2.16.2

Impact of Multiple MET Types on NSR ...............................

344

16.2.17

Potentially Mineable Resource ..........................................................

344

16.2.17.1

Potentially Mineable Mineral Resource Calculation .............

345

16.2.17.2

Potentially Mineable Mineral Resource Summary................

348

16.3

Combined Open Pit and Underground.................................................................

349

17.0 RECOVERY METHODS

................................................................................................

351

17.1

Process Design .....................................................................................................

351

17.1.1

Selected Process Flowsheet ...............................................................

352

17.1.2

Operating Context..............................................................................

354

17.1.3

Key Process Design Criteria ..............................................................

355

17.1.3.1

Comminution .........................................................................

358

17.1.3.2

Cyanide Leach and Metal Recovery ......................................

359

17.1.3.3

Flotation Circuit .....................................................................

360

17.1.3.4

Ancillary Testwork ................................................................

360

17.1.3.5

Tailings Thickening ...............................................................

360

17.2

Oxide Crushing Circuit ........................................................................................

360

17.2.1

Oxide Primary Crushing ....................................................................

360

17.2.2

Secondary and Tertiary Crushing and Screening...............................

361

17.3

Oxide Grinding Circuit ........................................................................................

361

17.4

Pre-leach Thickening and Leaching.....................................................................

362

17.5

Vacuum Filtration and Oxide Tailings ................................................................

363

17.6

Cyanide Destruction.............................................................................................

364

17.7

SART ...................................................................................................................

364

17.8

Carbon-in-Column Adsorption ............................................................................

365

17.9

Acid-Washing, Desorption and Regeneration (ADR) .........................................

365

17.9.1

Acid Wash..........................................................................................

366

17.9.2

Elution

................................................................................................

366

17.9.3

Carbon Regeneration .........................................................................

367

17.10

Electrowinning and Gold Room ..........................................................................

368

17.11

Sulphide Crushing Circuit....................................................................................

369

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17.12

Sulphide Grinding Circuit....................................................................................

369

17.13

Gravity Concentration..........................................................................................

370

17.14

Sulphide Trash Screening ....................................................................................

370

17.15

Bulk Rougher Flotation........................................................................................

371

17.16

Bulk Regrind........................................................................................................

371

17.17

Bulk Cleaner Flotation.........................................................................................

372

17.18

Bulk Concentrate Thickening and Filtration........................................................

373

17.19

Zinc Rougher Flotation ........................................................................................

374

17.20

Zinc Regrind ........................................................................................................

374

17.21

Zinc Cleaner Flotation .........................................................................................

375

17.22

Zinc Concentrate Thickening and Filtration ........................................................

376

17.23

Sulphide Tailings and Sulphide Process Water ...................................................

377

17.24

Reagents and Consumables..................................................................................

377

17.24.1

Sodium Cyanide.................................................................................

377

17.24.2

Sodium Metabisulphite (SMBS)........................................................

378

17.24.3

Copper Sulphate.................................................................................

378

17.24.4

Oxide Plant Flocculant.......................................................................

378

17.24.5

Activated Carbon ...............................................................................

379

17.24.6

Sodium Hydrosulphide ......................................................................

379

17.24.7

Sulphuric Acid ...................................................................................

379

17.24.8

Sodium Hydroxide (Caustic Soda) ....................................................

379

17.24.9

Hydrochloric Acid .............................................................................

379

17.24.10

Hydrated Lime ...................................................................................

380

17.24.11

3418A (Collector) ..............................................................................

380

17.24.12

MIBC (Frother)..................................................................................

380

17.24.13

SIPX (Collector) ................................................................................

380

17.24.14

Zinc Sulphate .....................................................................................

381

17.24.15

Sulphide Plant Flocculant ..................................................................

381

17.24.16

Anti-scalant ........................................................................................

382

17.25

Water Circuits ......................................................................................................

382

17.25.1

Raw Water .........................................................................................

382

17.25.2

Fresh Water........................................................................................

382

17.25.3

Potable Water.....................................................................................

382

17.25.4

Fire Water ..........................................................................................

383

17.25.5

TMF Decant Water and Contact Water Basin ...................................

383

17.26

Services and Utilities ...........................................................................................

383

17.26.1

On-stream Analysis System...............................................................

383

17.26.2

High- and Low-Pressure Air..............................................................

384

17.27

Sampling and Metallurgical Accounting .............................................................

385

17.27.1

Oxide Plant.........................................................................................

385

17.27.2

Sulphide Plant ....................................................................................

385

17.28

Energy Requirements...........................................................................................

386

17.29

Consumables ........................................................................................................

386

17.30

Process Plant Personnel .......................................................................................

388

18.0 PROJECT INFRASTRUCTURE ....................................................................................

390

18.1

Overall Site ..........................................................................................................

390

18.2

Roads....................................................................................................................

390

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18.2.1

Access to Site.....................................................................................

390

18.2.2

Project Site Roads ..............................................................................

390

18.2.3

Other Access Routes ..........................................................................

390

18.3

Power Supply.......................................................................................................

392

18.3.1

Electrical Distribution........................................................................

392

18.3.2

Electrical Buildings............................................................................

392

18.3.3

Transformers and Compounds...........................................................

393

18.4

Fuel Supply ..........................................................................................................

393

18.5

Paste Backfill Plant ..............................................................................................

393

18.6

Support Buildings ................................................................................................

394

18.7

Cut-off Wall (COW)............................................................................................

394

18.8

Mine Waste Management Facilities.....................................................................

394

18.8.1

Tailings Management Facility ...........................................................

397

18.8.2

Waste Rock Storage Facilities ...........................................................

401

18.8.3

Overburden Stockpile ........................................................................

402

18.9

Water Circuits ......................................................................................................

403

18.9.1

Raw Water Supply .............................................................................

403

18.9.2

Fresh Water........................................................................................

403

18.9.3

Fire Water ..........................................................................................

404

18.9.4

Potable Water Supply ........................................................................

404

18.9.5

Process Water.....................................................................................

404

18.9.6

Treated Water.....................................................................................

404

18.9.7

Mine Water Supply............................................................................

405

18.10

Mine Air Services ................................................................................................

405

18.11

Sewage Treatment................................................................................................

405

18.12

Site Water Management and Effluent Treatment ................................................

405

18.12.1

Contact Water Management and Treatment ......................................

405

18.12.2

Non-Contact Water Management ......................................................

407

19.0 MARKET STUDIES AND CONTRACTS.....................................................................

409

19.1

Contracts

..............................................................................................................

409

19.2

Metal Prices and Market Outlook ........................................................................

409

19.2.1

Gold....................................................................................................

409

19.2.2

Zinc ....................................................................................................

410

19.2.3

Copper................................................................................................

411

19.3

Concentrate Marketing.........................................................................................

412

19.3.1

Zinc Concentrate Market ...................................................................

412

19.3.2

Copper Concentrate Market...............................................................

416

19.3.3

Lead Concentrate Market...................................................................

418

20.0 ENVIRONMENTAL STUDIES, PERMITS, AND SOCIAL OR COMMUNITY

IMPACTS ........................................................................................................................

420

20.1 Environmental Studies .........................................................................................

420

20.1.1

Geologic and Related Geotechnical Studies ......................................

420

20.1.2

Groundwater and Surface Water Hydrology and Quality..................

421

20.1.3

Geochemical Characterization of Water Rock and Tailings..............

422

20.1.4

Wetlands ............................................................................................

423

20.1.5

Aquatic Biology and Terrestrial Vegetation and Wildlife.................

423

20.1.6

Air Quality and Meteorology.............................................................

424

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20.1.7

Cultural and Historical Resource Studies ..........................................

425

20.2

Key Environmental Protection Issues..................................................................

425

20.2.1

Open Pit Proximity to the Menominee River ....................................

426

20.2.2

Management of Waste Rock and Tailings and Site Reclamation......

426

20.2.3

Archaeological Artifacts ....................................................................

426

20.2.4

Wetlands Protection ...........................................................................

426

20.2.5

Listed and Protected Species and Sensitive Habitat in the Area .......

427

20.2.6

Particulate Emissions .........................................................................

427

20.2.7

Waste Disposal...................................................................................

427

20.3

Site Monitoring ....................................................................................................

428

20.4

Water Management..............................................................................................

428

20.5

Project Permitting Requirements .........................................................................

429

20.6

Mine Closure........................................................................................................

431

20.7 Social and Community Impacts ...........................................................................

432

20.7.1

Tribal Relationships ...........................................................................

433

21.0 CAPITAL AND OPERATING COSTS..........................................................................

434

21.1

Initial Capital Cost ...............................................................................................

434

21.1.1

Summary............................................................................................

434

21.1.2

Open Pit Mine Capital Costs..............................................................

435

21.1.2.1

Open Pit Mining Equipment ..................................................

436

21.1.2.2

Open Pit Mine Development .................................................

436

21.1.3

Process Plant and Associated Infrastructure Capital Cost .................

438

21.1.3.1

Estimating Methodology........................................................

438

21.1.3.2

Project Implementation Strategy............................................

439

21.1.3.3

Quantity Development ...........................................................

439

21.1.3.4

Pricing Basis ..........................................................................

440

21.1.3.5

Earthworks .............................................................................

441

21.1.3.6

Concrete .................................................................................

441

21.1.3.7

Steelwork ...............................................................................

441

21.1.3.8

Platework and Shop Fabricated Tanks...................................

442

21.1.3.9

Field Erected Tanks ...............................................................

442

21.1.3.10

Conveyors ..............................................................................

442

21.1.3.11

Equipment ..............................................................................

442

21.1.3.12

Pipework ................................................................................

442

21.1.3.13

Electrical / Instrumentation....................................................

442

21.1.3.14

Erection and Installation ........................................................

442

21.1.3.15

Engineering, Procurement and Construction Management

(EPCM)..................................................................................

443

21.1.3.16

Spares.....................................................................................

443

21.1.3.17

Transport ................................................................................

443

21.1.3.18

Installation Costs....................................................................

443

21.1.4

TMF and WRFs .................................................................................

444

21.1.5

Owner's Costs....................................................................................

444

21.1.6

Escalation...........................................................................................

444

21.1.7

Qualifications and Assumptions ........................................................

445

21.1.8

Exclusions..........................................................................................

445

21.1.9

Contingency .......................................................................................

445

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21.2

Sustaining Capital Costs ......................................................................................

446

21.2.1

Open Pit Mine Sustaining Capital......................................................

446

21.2.2

Underground Mine Sustaining Capital ..............................................

447

21.2.3

Non-Mining Sustaining Capital .........................................................

450

21.2.4

Project Closure Costs.........................................................................

450

21.3

Operating Costs....................................................................................................

452

21.3.1

Open Pit Mine Operating Cost...........................................................

452

21.3.2

Underground Mine Operating Cost ...................................................

456

21.3.3

Benchmark Mining Costs ..................................................................

458

21.3.4

Process Plant Operating Costs ...........................................................

460

21.3.4.1 Qualifications and Exclusions................................................

462

21.3.4.2 Basis of Operating Cost Estimate ..........................................

462

21.3.5

General and Administration Costs .....................................................

465

21.3.6

Process Plant Benchmark Costs.........................................................

466

21.3.7

Water Treatment Plant Operating Costs ............................................

467

21.3.8

Hazardous Waste Disposal Requirements and Costs.........................

469

21.3.9 Tailings Management Facility and Waste Rock Facility Operating

Costs

...................................................................................................

470

21.3.9.1

Structural Maintenance ..........................................................

470

21.3.9.2

External Monitoring Program ................................................

470

22.0

ECONOMIC ANALYSIS ...............................................................................................

471

22.1

Summary..............................................................................................................

471

22.2

Assumptions.........................................................................................................

473

22.2.1

Macro-Economic Forecasts ...............................................................

473

22.2.2

Realization .........................................................................................

473

22.2.2.1

Copper Concentrate ...............................................................

473

22.2.2.2

Zinc Concentrate....................................................................

474

22.2.2.3

Lead Concentrate ...................................................................

474

22.2.2.4

Doré........................................................................................

474

22.2.3

Gold and Silver Streaming.................................................................

475

22.2.4

Operational Performance ...................................................................

475

22.2.5

Metallurgical Recovery......................................................................

476

22.2.6

Royalties and Payments .....................................................................

477

22.2.7

Financial.............................................................................................

477

22.3

Results

..................................................................................................................

478

22.4

Composition of Returns .......................................................................................

483

22.4.1

Returns by Source and Classification of Mineral Resources.............

483

22.4.2

Revenue by Metal ..............................................................................

485

22.5

Sensitivity Analysis .............................................................................................

486

22.5.1

Macro-Economic................................................................................

486

22.5.2

Costs

...................................................................................................

487

22.5.3

Operating Assumptions......................................................................

488

23.0

ADJACENT PROPERTIES ............................................................................................

490

24.0 OTHER RELEVANT DATA AND INFORMATION ...................................................

492

24.1

Opportunities........................................................................................................

492

24.2

Risks.....................................................................................................................

492

25.0

INTERPRETATION AND CONCLUSIONS.................................................................

493

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25.1

Property Description and Location ......................................................................

493

25.2

Geological Setting and Mineralization ................................................................

493

25.3

Drilling and Sample Verification.........................................................................

494

25.4

Mineral Processing and Metallurgical Testing ....................................................

494

25.5

Mineral Resource Estimate ..................................................................................

494

25.6

Mining Methods...................................................................................................

495

25.7

Recovery Methods ...............................................................................................

495

25.8

Site Infrastructure.................................................................................................

495

25.9

Environmental Studies, Permits and Social or Community Impact ....................

496

25.10

Economic Analysis ..............................................................................................

496

26.0

RECOMMENDATIONS.................................................................................................

498

26.1

Geomechanical Design Input...............................................................................

498

26.2

Mining..................................................................................................................

498

26.3

Waste Water Treatment .......................................................................................

499

26.4

Metallurgical Testwork........................................................................................

499

26.5

Process Plant and Associated Infrastructure ........................................................

500

26.6

Operational Readiness .........................................................................................

500

26.7

Tailings Management and Waste Rock Facilities................................................

500

26.8

Cut-off Wall .........................................................................................................

501

26.9

Budget ..................................................................................................................

501

27.0

REFERENCES ................................................................................................................

502

28.0

CERTIFICATES..............................................................................................................

505

APPENDIX A

SURFACE DRILL HOLE PLAN......................................................

516

APPENDIX B

3-D DOMAINS..................................................................................

519

APPENDIX C

LOG NORMAL HISTOGRAMS OF OPEN PIT MODEL ..............

525

APPENDIX D

LOG NORMAL HISTOGRAMS OF UNDERGROUND MODEL.534

APPENDIX E

VARIOGRAMS OF OPEN PIT MODEL.........................................

543

APPENDIX F

VARIOGRAMS OF UNDERGROUND MODEL ...........................

548

APPENDIX G

AU BLOCK MODEL CROSS SECTIONS AND PLANS...............

553

APPENDIX H

ZN BLOCK MODEL CROSS SECTIONS AND PLANS ...............

572

APPENDIX I

NSR BLOCK MODEL CROSS SECTIONS AND PLANS.............

591

APPENDIX J

CLASSIFICATION BLOCK MODEL CROSS SECTIONS AND

PLANS...............................................................................................

610

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LIST OF TABLES

Table 1.1

Metallurgical Types .....................................................................................................

13

Table 1.2

Mineralogy of Sulphide Material (Relative Differences) ............................................

15

Table 1.3 Back Forty Mineral Resource Estimate (1-7).................................................................

17

Table 1.4 Open Pit Mining Schedule...........................................................................................

20

Table 1.5 Production by Mining Type by Year (kt) ....................................................................

23

Table 1.6 Capital Estimate Summary by Area (Q3 2019, ±25%) ...............................................

31

Table 1.7

Open Pit Mine Sustaining Capital Costs ($k)..............................................................

31

Table 1.8

Underground Sustaining Capital Costs ($k) ................................................................

32

Table 1.9

Project Sustaining Capital Costs ($k) ..........................................................................

32

Table 1.10 LOM Operating Costs................................................................................................

32

Table 1.11 Summary Metrics.......................................................................................................

33

Table 2.1

Report Authors and Co-authors ...................................................................................

39

Table 2.2 Terminology and Abbreviations ..................................................................................

40

Table 4.1

State of Michigan Mineral Royalty Schedule..............................................................

54

Table 6.1 Summary Metrics of 2018 Feasibility Study ...............................................................

62

Table 6.2

February 4, 2013 Mineral Resource Estimate .............................................................

63

Table 6.3 August 1, 2018 Mineral Resource Estimate (1-6) ..........................................................

64

Table 10.1 Yearly Summary of Drilling ......................................................................................

97

Table 10.2

2015 Mineral Resource Drilling - Significant Results.............................................

101

Table 10.3

2016 Mineral Resource Drilling - Significant Results.............................................

103

Table 10.4

2016 Exploration Drilling - Significant Results ......................................................

103

Table 10.5

2017 Geotechnical Drilling - Significant Results ....................................................

105

Table 10.6

2017 Resource Drilling - Significant Results ..........................................................

106

Table 10.7

2017 Exploration Drilling - Significant Results ......................................................

108

Table 11.1 Summary of Analytical Samples by Year................................................................

112

Table 11.2 Summary of 2015 Sampling Program .....................................................................

116

Table 11.3

Mineral Reference Standards (2009-2010)..............................................................

120

Table 11.4

Mineral Reference Standards (2010-2011)..............................................................

122

Table 11.5

Mineral Reference Standards (2015) .......................................................................

123

Table 11.6

Certified Reference Materials Used in 2016............................................................

124

Table 11.7

Certified Reference Materials Failures in 2016.......................................................

125

Table 11.8

Certified Reference Materials Used in 2017............................................................

126

Table 11.9

Certified Reference Materials Failures in 2017.......................................................

126

Table 13.1

Metallurgical Types .................................................................................................

139

Table 13.2 KM 1983 Composite Head Grades..........................................................................

140

Table 13.3 KM 1983 Composite Mineral Composition ............................................................

140

Table 13.4 KM 1983 Composite Mineral Liberation ................................................................

141

Table 13.5 KM 1983 Rougher Flotation Results Summary ......................................................

142

Table 13.6 KM 2047 Sulphide and Oxide Composite Head Grades .........................................

143

Table 13.7 KM 2047 Composite Mineral Composition ............................................................

144

Table 13.8 KM 2047 Sulphide Composite Mineral Liberation .................................................

144

Table 13.9 KM 2047 Oxide Cyanidation Results......................................................................

151

Table 13.10 KM 2047 Sulphide Tailings Cyanidation Results .................................................

152

Table 13.11 KM 2047 Gravity Concentration Results ..............................................................

152

Table 13.12 SGS 2009 East Gossan - Cyanide Leach Results..................................................

155

Table 13.13 SGS 2009 East Gossan - Overall Recoveries........................................................

155

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Table 13.14 KM 2575 Composite Head Grades........................................................................

155

Table 13.15 KM 2575 Locked Cycle Flotation Test Results.....................................................

157

Table 13.16 KM 2575 PW Gossan Flotation Tailings - Cyanidation Leach Results................

158

Table 13.17 KM 2575 NS Zone - Gravity Concentration Results ............................................

158

Table 13.18 KM 2575 NS Zone - Gravity Tailings Leach Results...........................................

159

Table 13.19 12338-001 Calculated Head Grades ......................................................................

159

Table 13.20

12338-001 Bond Ball Mill Grindability Test Results............................................

160

Table 13.21 12338-001 Summary of Bottle Roll Test Results..................................................

160

Table 13.22 12338-001 Summary of CIL and CIP Bottle Roll Test Results ............................

162

Table 13.23 KM 2775 - Composite Assays ...............................................................................

164

Table 13.24 KM 2775 - Pyrite Rougher Concentrate Generation .............................................

164

Table 13.25 RDi 2011 - Sample Assays ....................................................................................

166

Table 13.26 RDi 2011 - Comminution Test Results Summary.................................................

167

Table 13.27 RDi 2012 - Oxide Composite Assays ....................................................................

171

Table 13.28 RDi 2012 - Sulphide Sample Assays.....................................................................

172

Table 13.29 RDi 2012 - Summary of Bottle Roll Test Results .................................................

172

Table 13.30 RDi 2012 - Cleaner Flotation Summary................................................................

174

Table 13.31

Metallurgical Feasibility Samples .........................................................................

176

Table 13.32

Summary of Grindability Test Statistics (2016 Results) .......................................

179

Table 13.33

Summary of Grindability Test Statistics, 2017 Results.........................................

182

Table 13.34 Modal Mineralogy - Master Composite Samples ..................................................

183

Table 13.35 Summary of Pinwheel Master Composite Cu-Sulphide Liberation ......................

184

Table 13.36 Summary of Pinwheel Master Composite Sphalerite Liberation ..........................

184

Table 13.37 Summary of Main Master Composite Cu-Sulphide Liberation.............................

185

Table 13.38 Summary of Main Master Composite Sphalerite Liberation.................................

185

Table 13.39 Summary of Tuff Master Composite Galena Liberation .......................................

185

Table 13.40 Summary of Tuff Master Composite Sphalerite Liberation ..................................

186

Table 13.41 Pinwheel Variability Composite Head and Concentrate Modal Mineralogy ........

189

Table 13.42

Pinwheel Variability Composites and Concentrates - Cu-Sulphide and Pyrite

Liberation .........................................................................................................

189

Table 13.43 Tuff Zone Blended Composite Performance .........................................................

193

Table 13.44

Main Zone Variability Composite Locked Cycle Flotation Results......................

195

Table 13.45

Tuff Zone Variability Composite Locked Cycle Flotation Results.......................

195

Table 13.46

Pinwheel Zone Variability Composite Locked Cycle Flotation Results ...............

196

Table 13.47 Main Zone Additional Flotation Comparison........................................................

197

Table 13.48

Tuff Zone Additional Flotation Comparison .........................................................

197

Table 13.49 Pinwheel Zone Additional Flotation Comparison .................................................

199

Table 13.50

Zinc Rougher Kinetics ...........................................................................................

200

Table 13.51 Summary of Concentrate Minor Elemental Analysis ............................................

201

Table 13.52 Oxide Samples .......................................................................................................

203

Table 13.53

Summary of Cyanidation Bottle Roll Test Results................................................

203

Table 13.54 Modelled Doré Quality ..........................................................................................

206

Table 13.55 Composite Head Assays ........................................................................................

207

Table 13.56 EGRG Modelling Results from FLSmidth ............................................................

208

Table 13.57 Flotation Versus Gravity + Flotation Summary - Main Zone...............................

209

Table 13.58 Flotation Versus Gravity + Flotation Summary - Pinwheel Zone ........................

210

Table 13.59 Flotation Versus Gravity + Flotation Summary - Main Zone + Oxide.................

212

Table 13.60 Flotation Versus Gravity + Flotation Summary - Pinwheel Zone + Oxide ..........

213

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Table 13.61

Impact of Gravity Concentration to Copper Concentrate......................................

214

Table 13.62

Cyanidation Bottle Roll Results ............................................................................

215

Table 13.63 Bottle Roll Test - Cyanide Consumptions ............................................................

215

Table 13.64 4 L Settling Test Summary ....................................................................................

217

Table 13.65 Summary of Testwork to Support Recovery Equations ........................................

219

Table 13.66

Incremental Recovery to Account for Locked Cycle Testing ...............................

221

Table 13.67 Recovery Equations ...............................................................................................

223

Table 14.1 Back Forty Assay Database Summary.....................................................................

225

Table 14.2 NSR $/t Cut-off Values Used for the Open Pit Model Wireframes ........................

226

Table 14.3 NSR $/t Cut-off Values Used for the Underground Model Wireframes .................

226

Table 14.4 Model Codes Used for the Mineral Resource Estimate...........................................

227

Table 14.5

Basic Statistics of all Constrained Assays and Sample Lengths .............................

229

Table 14.6

Summary Statistics of Composites ..........................................................................

231

Table 14.7 Summary Statistics of Capped Composites .............................................................

232

Table 14.8 Capped Composite Values of the Open Pit Model..................................................

233

Table 14.9 Capped Composite Values of the Underground Model...........................................

240

Table 14.10 Block Model Definition for Open Pit and Underground Mineral Resource

Estimate ............................................................................................................

250

Table 14.11

Block Model Interpolation Parameters for the Open Pit Model............................

251

Table 14.12 Block Model Interpolation Parameters for the Underground Model.....................

251

Table 14.13 Average Density by Metallurgy Type ...................................................................

252

Table 14.14 Back Forty Mineral Resource Estimate (1-7)...........................................................

255

Table 14.15

Pit-Constrained Mineral Resource Estimate Sensitivity........................................

260

Table 14.16

Underground Mineral Resource Estimate Sensitivity ...........................................

263

Table 14.17 Average Grade Comparison of Composite Grade Values with Block Models .....

269

Table 16.1

Pit Slope Criteria......................................................................................................

282

Table 16.2

Key Pit Optimization Parameters ............................................................................

284

Table 16.3

Stockpiling Strategy.................................................................................................

290

Table 16.4 Open Pit Mining Schedule.......................................................................................

292

Table 16.5 Mined Head Grades by Feed Type ..........................................................................

293

Table 16.6

Stockpile Reclaim Activity......................................................................................

296

Table 16.7

Drill and Blast Design..............................................................................................

297

Table 16.8 Mine Equipment Requirements ...............................................................................

300

Table 16.9 Topsoil Volumes from Mining Activities................................................................

301

Table 16.10 Open Pit Mining Manpower Requirements ...........................................................

303

Table 16.11

Potentially Mineable Portion of the Mineral Resource .........................................

305

Table 16.12 Stope Size Recommendations................................................................................

313

Table 16.13 Total LOM Lateral Development ..........................................................................

315

Table 16.14 Total LOM Vertical Development.........................................................................

316

Table 16.15 CF Mining Opening Dimensions...........................................................................

317

Table 16.16 Typical Hourly Mining Personnel Roster..............................................................

323

Table 16.17 Underground Site Personnel by Department by Year ...........................................

323

Table 16.18

Lateral Development by Type by Year (metres) ...................................................

327

Table 16.19 Vertical Development by Type by Year (metres)..................................................

328

Table 16.20 Production by Mining Type by Year (kt) ..............................................................

328

Table 16.21

Electrical Load Details...........................................................................................

331

Table 16.22

Pump Station Details .............................................................................................

332

Table 16.23 Primary Fleet by Year and Equipment Type .........................................................

337

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Table 16.24

Auxiliary Fleet Details and Quantities by Year.....................................................

337

Table 16.25 Economic Cut-off Grade Estimate.........................................................................

339

Table 16.26

Average Direct Mining Cost Initial Estimate ........................................................

339

Table 16.27 Example Stope Optimization Table for a Sulphide Stope .....................................

340

Table 16.28

Backfill Dilution Ratios by Mining Type ..............................................................

341

Table 16.29 CF Recovery Loss by Mining Type.......................................................................

342

Table 16.30 Impact of Weighted Average Versus Recalculation on NSR ................................

343

Table 16.31

Impact of Waste and Pastefill Dilution on NSR....................................................

343

Table 16.32 Impact of MET Type Segregation on NSR ...........................................................

344

Table 16.33

In-Situ Stope Material............................................................................................

347

Table 16.34

Recoverable Stope Material...................................................................................

348

Table 16.35

Potentially Mineable Portion of the Mineral Resource .........................................

349

Table 16.36 Combined Open Pit and Underground Mining Schedule ......................................

350

Table 17.1

Mineralogy of Sulphide Material (Relative Differences) ........................................

354

Table 17.2

Process Plant Changeover Scenarios .......................................................................

355

Table 17.3

Key Process Design Criteria - Oxide Process Plant................................................

356

Table 17.4

Key Process Design Criteria - Sulphide Plant.........................................................

357

Table 17.5 Annual Power Usage ...............................................................................................

386

Table 17.6 Annual Consumables - Oxide Plant ........................................................................

386

Table 17.7 Annual Consumables - Sulphide Plant....................................................................

388

Table 17.8

Annual Process Plant Personnel Requirements .......................................................

389

Table 18.1 CDA Minimum FOS for Slope Stability .................................................................

406

Table 19.1

Metal Price Cases.....................................................................................................

409

Table 21.1

Initial Capital Estimate Summary by Area (Q3 2019, ±25%).................................

434

Table 21.2 Currency Exchange Rates........................................................................................

435

Table 21.3 Foreign Currency Exposure .....................................................................................

435

Table 21.4

Open Pit Mine Initial Capital Cost ..........................................................................

435

Table 21.5

Open Pit Mine Initial Equipment.............................................................................

437

Table 21.6

Initial Open Pit Mine Development.........................................................................

437

Table 21.7 Major Quantity Summary ........................................................................................

440

Table 21.8 Supply Cost Source..................................................................................................

441

Table 21.9 Standard Direct Labour Gang Rates ........................................................................

444

Table 21.10

Contingency Per Discipline ...................................................................................

446

Table 21.11

Open Pit Mine Sustaining Capital Costs ($k)........................................................

447

Table 21.12

Underground Mine Sustaining Capital Costs ($k).................................................

448

Table 21.13

Underground Mine Sustaining Capital Infrastructure Costs..................................

448

Table 21.14 Underground Mine Sustaining Capital Equipment Costs......................................

449

Table 21.15 Underground Mine Sustaining Capital Lateral Development Costs .....................

449

Table 21.16 Underground Mine Sustaining Capital Vertical Development Costs....................

450

Table 21.17

Other Project Sustaining Capital Costs ($k) ..........................................................

450

Table 21.18

Project Closure Costs.............................................................................................

450

Table 21.19 Mine Closure and Backfilling Annual Cost...........................................................

451

Table 21.20 LOM Operating Costs............................................................................................

452

Table 21.21 Annual Open Pit Mine Operating Costs ................................................................

454

Table 21.22 Annual Open Pit Mine Unit Operating Costs ........................................................

455

Table 21.23 LOM Underground Mining Operating Costs.........................................................

456

Table 21.24 LOM Underground Operating Development Costs by Type.................................

457

Table 21.25 LOM Production Costs by Underground Mining Method ....................................

457

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Table 21.26 LOM Underground Indirect Operating Costs........................................................

458

Table 21.27 Underground LOM Cost Summary .......................................................................

458

Table 21.28

Oxide Process Plant Operating Costs ....................................................................

460

Table 21.29

Sulphide Process Plant Operating Costs................................................................

461

Table 21.30

Process Plant Labour Costs....................................................................................

463

Table 21.31 Summary of Process Plant Power Costs................................................................

465

Table 21.32 G&A Labour Compensation..................................................................................

466

Table 21.33 Reagent Requirements and Costs for the WWTP..................................................

467

Table 21.34 CO2 Vendor Package Rentals and Costs ...............................................................

468

Table 21.35 Reagent Requirements and Costs ..........................................................................

469

Table 22.1 Summary Metrics.....................................................................................................

471

Table 22.2

Metal Price Cases.....................................................................................................

473

Table 22.3

Metallurgical Recovery............................................................................................

477

Table 22.4

Process Plant Feed ...................................................................................................

479

Table 22.5 Payable Metal ..........................................................................................................

480

Table 22.6

Detailed Project Metrics ..........................................................................................

482

Table 22.7

Sensitivity of NPV to Metal Price Assumptions .....................................................

486

Table 22.8

Sensitivity of IRR to Metal Price Assumptions.......................................................

486

Table 22.9

Sensitivity of Simple Payback to Metal Price Assumptions....................................

487

Table 23.1

Non-Ferrous Properties of the Great Lakes Region.................................................

491

Table 26.1 Recommended Work Program Budget ....................................................................

501

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LIST OF FIGURES

Figure 1.1

Open Pit Phases ..................................................................................................

21

Figure 1.2

Underground Mine at End of LOM, 3-D Schematic..........................................

23

Figure 1.3

Overall Process Plant Block Flow Diagram .......................................................

26

Figure 1.4

Overall Site Plan.................................................................................................

28

Figure 4.1

Back Forty Project Property ...............................................................................

49

Figure 4.2

Aquila Properties ................................................................................................

50

Figure 5.1

Typical Landscape of Back Forty Project ..........................................................

56

Figure 5.2

Location of the Back Forty Project ....................................................................

57

Figure 7.1

Schematic Geological Map of the Great Lakes Region Showing Principal

Volcanic Belts ....................................................................................................

66

Figure 7.2

Geologic Map of Northern Wisconsin and Western Michigan Showing

Major Terranes ...................................................................................................

67

Figure 7.3

Geologic Map of the Penokean Volcanic Belt ...................................................

68

Figure 7.4

Back Forty Area Geologic Bedrock Map...........................................................

69

Figure 7.5

Bedrock Geology of the Back Forty Project Area..............................................

70

Figure 7.6

Example Cross-Section (435325 E) Through the Eastern Portion of the

Deposit Area.......................................................................................................

73

Figure 7.7

Example N-SCross-Section (435150 E) Through the Central Portion of the

Deposit Area.......................................................................................................

74

Figure 7.8

Example N-SCross-Section (435150 E) Through the Central Portion of the

Deposit Area.......................................................................................................

75

Figure 7.9

3-D Model of the Mineralized Zones of the Back Forty Deposit.......................

76

Figure 7.10

3-D Model of the Massive Sulphide Zones of the Back Forty Deposit

(Looking South)..................................................................................................

77

Figure 7.11

Zirconium-Titanium Versus Aluminium-Titanium Ratios of Rhyolites

Hosting the Back Forty Deposit .........................................................................

78

Figure 7.12

Cross-Section Through the Back Forty Deposit (Section 435,125 E)

Showing Cu/Zn Values for the Mineralized Zones within the Block Model.....

82

Figure 7.13

Plan View of the Back Forty Mineralization and Cross-Cutting QFP Dyke

Highlighting Gold Zones....................................................................................

84

Figure 7.14

Plan View of the Back Forty Mineralization and Cross-Cutting QFP Dyke

Highlighting Mineralization Encountered at Depth ...........................................

86

Figure 8.1

Schematic Cross-Section Through a VMS Mound ............................................

87

Figure 8.2

Classification of VMS Deposits Based on Copper and Zinc Ratios ..................

88

Figure 9.1

Bedrock Geological Property Map with Outcrop Distribution ..........................

89

Figure 9.2

Immobile Element Plot - Geochemical Variations of Rhyolites - Back Forty

Deposit................................................................................................................

91

Figure 9.3

Location of Airborne Geophysical Flight Blocks - Back Forty Project Area ....

92

Figure 9.4

Location of Gravity Stations - Back Forty Project Area ....................................

94

Figure 9.5

Expanded Detailed Gravity Survey Showing Newly Discovered 2016 Zone....

95

Figure 10.1

Drill Hole Plan Map Showing Drill Hole Traces Projected to Surface..............

98

Figure 11.1

Drill Holes GT-10 and GT-11 Check Assays for Au: Bureau Veritas Versus

MPC..................................................................................................................

127

Figure 11.2

Drill Holes GT-10 and GT-11 Check Assays for Ag: Bureau Veritas Versus

MPC..................................................................................................................

127

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Figure 11.3

Drill Holes GT-10 and GT-11 Check Assays for Cu: Bureau Veritas Versus

MPC..................................................................................................................

128

Figure 11.4

Drill Holes GT-10 and GT-11 Check Assays for Pb: Bureau Veritas Versus

MPC..................................................................................................................

128

Figure 11.5

Drill Holes GT-10 and GT-11 Check Assays for Zn: Bureau Veritas Versus

MPC..................................................................................................................

129

Figure 12.1

Back Forty Project Due Diligence Sample Results for Au: May 2016 ............

132

Figure 12.2

Back Forty Project Due Diligence Sample Results for Ag: May 2016 ............

132

Figure 12.3

Back Forty Project Due Diligence Sample Results for Zn: May 2016 ............

133

Figure 12.4

Back Forty Project Due Diligence Sample Results for Cu: May 2016 ............

133

Figure 12.5

Back Forty Project Due Diligence Sample Results for Pb: May 2016.............

134

Figure 12.6

Back Forty Project Due Diligence Sample Results for Au: November 2017 ..

135

Figure 12.7

Back Forty Project Due Diligence Sample Results for Ag: November 2017 ..

136

Figure 12.8

Back Forty Project Due Diligence Sample Results for Zn: November 2017...

136

Figure 12.9

Back Forty Project Due Diligence Sample Results for Cu: November 2017...

137

Figure 12.10

Back Forty Project Due Diligence Sample Results for Pb: November 2017 ...

137

Figure 13.1

KM 2047 Rougher Performance - Varying pH ...............................................

145

Figure 13.2

KM 2047 Rougher Performance - Varying Collector and Depressant

Dosage ..............................................................................................................

146

Figure 13.3

KM 2047 Rougher Performance - Varying Primary Grind Size .....................

147

Figure 13.4

KM 2047 Cleaner Performance - Varying Regrind Size.................................

148

Figure 13.5

KM 2047 Cleaner Performance - Varying Collector and Depressant Dosage 149

Figure 13.6

KM 2047 Flowsheet - Locked Cycle Tests .....................................................

150

Figure 13.7

SGS 2009 East Gossan - Gold Recovery by Gravity Concentration Stage .....

154

Figure 13.8

KM 2775 - Pyrite Rougher Concentrate Leach Kinetics..................................

165

Figure 13.9

RDi 2011 -Effect of Grind Size on Cyanide Leach .........................................

168

Figure 13.10

RDi 2011 - Effect of NaCN Concentration on Cyanide Leach ........................

169

Figure 13.11

RDi 2011 - Effect of Pulp Density on Cyanide Leach .....................................

170

Figure 13.12

Master Composite Compilation........................................................................

177

Figure 13.13

Comminution Sample Preparation Example ....................................................

178

Figure 13.14

Rougher Flotation Flowsheet ...........................................................................

186

Figure 13.15

Master Composite Rougher Flotation Performance .........................................

187

Figure 13.16

Locked Cycle Flotation Flowsheet ...................................................................

191

Figure 13.17

Grade Recovery Relationship for Composite 14..............................................

193

Figure 13.18

Grade Recovery Relationship for M2 - C7......................................................

198

Figure 13.19

Leach Kinetics at Varying NaCN Concentrations............................................

204

Figure 13.20

Metallurgical Testing Flow Chart ....................................................................

208

Figure 13.21

Example of Concentrate Grade - Recovery Regression ..................................

220

Figure 13.22

Type 1 Zn Recovery (55% Zn Concentrate Grade)..........................................

222

Figure 14.1

Constrained Sample Length Distributions of Open Pit Model.........................

230

Figure 14.2

Constrained Sample Length Distributions of Underground Model .................

231

Figure 14.3

Correlation Between Bulk Density and Sulphur for Massive Sulphide

(Including Semi-Massive Sulphide) .................................................................

249

Figure 14.4

Correlation of Bulk Density and Sulphur for Non-Massive Sulphide

Mineralization (Stringers and Gold Zones)......................................................

249

Figure 14.5

Au Grade-Tonnage Curve for ID3 and NN Interpolation for All Zones of

Open Pit Model.................................................................................................

270

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Figure 14.6

Au Grade-Tonnage Curve for ID3 and NN Interpolation for All Zones of

Underground Model .........................................................................................

270

Figure 14.7

Zn Grade-Tonnage Curve for ID2 and NN Interpolation for All Zones of

Open Pit Model.................................................................................................

271

Figure 14.8

Zn Grade-Tonnage Curve for ID2 and NN Interpolation for All Zones of

Underground Model .........................................................................................

271

Figure 14.9

Au Grade Swath Easting Plot of Open Pit Model ............................................

272

Figure 14.10

Au Grade Swath Northing Plot of Open Pit Model..........................................

273

Figure 14.11

Au Grade Swath Elevation Plot of Open Pit Model.........................................

273

Figure 14.12

Au Grade Swath Easting Plot of Underground Model.....................................

274

Figure 14.13

Au Grade Swath Northing Plot of Underground Model ..................................

274

Figure 14.14

Au Grade Swath Elevation Plot of Underground Model..................................

275

Figure 14.15

Zn Grade Swath Easting Plot of Open Pit Model.............................................

276

Figure 14.16

Zn Grade Swath Northing Plot of Open Pit Model ..........................................

276

Figure 14.17

Zn Grade Swath Elevation Plot of Open Pit Model .........................................

277

Figure 14.18

Zn Grade Swath Easting Plot of Underground Model .....................................

277

Figure 14.19

Zn Grade Swath Northing Plot of Underground Model...................................

278

Figure 14.20

Zn Grade Swath Elevation Plot of Underground Model ..................................

278

Figure 16.1

Open Pit Slope Design Sectors.........................................................................

281

Figure 16.2

Optimization Slopes (Adjusted for Ramps) .....................................................

285

Figure 16.3

Pit NPV Versus Revenue Factor ......................................................................

286

Figure 16.4

Pit Tonnage Versus Revenue Factor ................................................................

287

Figure 16.5

Open Pit Phases ................................................................................................

288

Figure 16.6

Total Annual Open Pit Mined Material Type...................................................

294

Figure 16.7

Stockpile Re-handling ......................................................................................

295

Figure 16.8

Underground Mining Areas, View Looking South ..........................................

305

Figure 16.9

Pillar Thickness ................................................................................................

308

Figure 16.10

Open Pit Fill Exclusion Zone at End of Year 9................................................

309

Figure 16.11

Open Pit Fill Exclusion Zone at End of Year 10..............................................

310

Figure 16.12

Open Pit Fill Exclusion Zone at End of Year 11..............................................

311

Figure 16.13

Mechanized CF Mining Sequence Plan View..................................................

317

Figure 16.14

Mechanized CF Mining Sequence Section View.............................................

318

Figure 16.15

Longhole Mining Sequence Plan View............................................................

320

Figure 16.16

UG Mine At End Of Year 5, 3-D Schematic....................................................

324

Figure 16.17

UG Mine At End Of Year 6, 3-D Schematic....................................................

324

Figure 16.18

UG Mine At End Of Year 7, 3-D Schematic....................................................

325

Figure 16.19

UG Mine At End Of Year 8, 3-D Schematic....................................................

325

Figure 16.20

UG Mine At End Of Year 9, 3-D Schematic....................................................

326

Figure 16.21

UG Mine At End Of Year 10, 3-D Schematic..................................................

326

Figure 16.22

UG Mine At End Of Year 11, 3-D Schematic..................................................

327

Figure 16.23

Underground Ventsim Ventilation Model, Looking North..............................

330

Figure 16.24

Underground Dewatering System Schematic...................................................

333

Figure 16.25

Underground Services Schematic.....................................................................

334

Figure 16.26

Underground Mineable Shape Tonnage-Grade Curve .....................................

345

Figure 17.1

Overall Process Plant Block Flow Diagram .....................................................

353

Figure 18.1

Overall Project Site Plan ..................................................................................

391

Figure 18.2

General Arrangement Plan of the Cut-off Wall ...............................................

396

Figure 18.3

General Arrangement Plan of the TMF, WRFs and OS...................................

397

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Figure 18.4

Typical Cross-Section of the TMF ...................................................................

398

Figure 18.5

Double Liner System of the TMF Base............................................................

399

Figure 18.6

Double Liner System of Leachate and Leakage Collection Sumps .................

399

Figure 18.7

Composite Liner Closure Cover System of the TMF Benches and Crown .....

400

Figure 18.8

Single Liner Closure Cover System of the TMF Side Slopes ..........................

400

Figure 18.9

Typical Cross-Section of the WRFs .................................................................

401

Figure 18.10

Double Liner System of the WRFs Base..........................................................

402

Figure 18.11

Typical Cross-Section of the OS ......................................................................

403

Figure 19.1

Historical Spot - Benchmark Differentials for Zinc Concentrate ....................

413

Figure 19.2

Supply - Demand Balance Versus Spot and Benchmark Copper Smelting

Terms................................................................................................................

417

Figure 21.1

Open Pit Mining Operating Cost Benchmarks .................................................

459

Figure 21.2

Underground Mining Operating Cost Benchmarks..........................................

459

Figure 21.3

Process Plant Operating Cost Benchmarks ......................................................

467

Figure 22.1

Production and Cash Flow................................................................................

481

Figure 22.2

Composition Undiscounted Cash Flows ..........................................................

484

Figure 22.3

Composition of NPV ........................................................................................

484

Figure 22.4

Revenue by Metal - Base Case ........................................................................

485

Figure 22.5

Revenue by Metal - Spot Case.........................................................................

485

Figure 22.6

Sensitivity to Costs ...........................................................................................

487

Figure 22.7

Erosion of Value from Slowing Open Pit.........................................................

489

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1.0 SUMMARY

This National Instrument ("NI") 43-101 Technical Report was prepared by P&E Mining Consultants Inc. ("P&E") with input from Lycopodium Minerals Canada Ltd. ("Lycopodium"), Golder Associates Ltd. ("Golder") and various independent consultants for Aquila Resources Inc. ("Aquila") to provide an Updated Mineral Resource Estimate and summarize the results of a Preliminary Economic Assessment ("PEA") for the Back Forty Project ("the Project" or "the Property"), located in Menominee County, Michigan, USA. The Back Forty Property is 100% owned by Aquila Resources Inc. ("Aquila" or "the Company"). Aquila is a public, TSX listed, company trading under the symbol "AQA".

Aquila's Back Forty Deposit ("the Deposit") is a volcanogenic massive sulphide ("VMS") deposit located along the mineral‐rich Penokean Volcanic Belt ("PVB") in Michigan's Upper Peninsula. The Project contains approximately 1.1 million ounces of gold and 1.2 billion pounds of zinc in the Measured and Indicated Mineral Resource classifications, with additional upside potential. For the purpose of this Technical Report, mineralized rock that is processed to recover zinc, copper, lead, gold and silver is referred to as "mineralized material".

A Feasibility Study on the Project was issued in September 2018 that studied open pit mining and on-site processing plants for treating oxide material to produce gold doré and sulphide material to produce zinc, copper, lead concentrates. The value proposition of the Project was based on mining the highest value material as soon as possible and treating this material through the process plants to maximize cash flow. This strategy is achieved by mining the mineralized material and either feeding the material directly to the process plant or stockpiling the material onsite for processing later per a feed schedule based on optimal economics and/or consistent feed for the operation.

The subject of this Technical Report and Preliminary Economic Assessment relates to an expansion of the open pit mining case (Phase 1) by proposing the development of an underground mine (Phase 2) associated with the Project after the open pit phase is complete. Before the open pit has been mined out, the development of an underground mine will commence to extend the life of mine of the Project. It should be noted that this is a preliminary economic analysis of a future underground option: the Company has not yet commenced the permitting process for a potential underground expansion, including technical and environmental impact studies needed to support this process.

While the value proposition and operating context is similar to the 2018 Feasibility Study, this PEA Technical Report assumes a number of key design changes including:

  • As a result of an addition of an underground mine, the oxide and sulphide processing plants were resized to a lower throughput to align combined open pit and underground Mineral Resources to optimize the Project's economics. The oxide plant throughput has been reduced from 800 tpd to 350 tpd and the sulphide plant throughput has been reduced from 4,000 tpd to 2,800 tpd.
  • New cost estimates were developed for the underground mine. The initial, sustaining capital and operating PEA costs for the open pit mine and process plants were derived

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from the 2018 Feasibility Study and were updated accordingly. The reduction in process plant throughput contributed to a $54 million decrease in initial capital expenditures.

  • The oxide processing flowsheet was updated to include a SART plant for optimal doré quality, silver recovery, mercury management, and cyanide management. Cyanide consumption has been reduced by approximately one third versus the Feasibility Study.
  • Process plant feed, stockpile management and sulphide process plant change-overs have been optimized to improve operability.
  • Additional metallurgical testwork has been incorporated to assess blending options and process recovery performance and penalties.
  • Updated permit conditions have been incorporated, including a double liner leak detection system under all waste rock storage areas and additional contact water storage volume.

Due to the inclusion of Inferred Mineral Resources in the underground mine plan, minimal metallurgical testwork being completed to validate the metallurgical response of the underground material in the process plant, and minimal geotechnical analysis and input to the underground mine design, this Technical Report is classified as a PEA. This PEA supersedes the 2018 Feasibility Study thereby replacing the former Mineral Reserves with a potentially extractable portion of the Mineral Resource.

1.1 PROPERTY DESCRIPTION AND LOCATION

Aquila controls approximately 1,304 hectares (3,222 acres) of private and public (State of Michigan) mineral lands located in Lake and Holmes Townships in Menominee County, Michigan. Approximately 1,019 hectares (2,517 acres) of these lands form a contiguous block of Aquila-controlled mineral rights. The Active Project Boundary encompasses approximately 479 hectares (1,183 acres). The Project is centred at latitude 45° 27' N and longitude 87° 51' W.

In addition to the key properties, Aquila has also purchased, leased, or optioned additional properties. These properties are either contiguous with the Key Parcels, may contain facilities utilized by the Company, are perceived to have exploration potential, or were purchased for other strategic purposes.

1.2 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

The Property area lies along the east bank of the Menominee River and consists of low, rolling hills with maximum topographic relief of 30 m and intervening wetland (in part prairie- savannah); mean elevation is approximately 200 to 300 masl. Vegetation is mostly immature hardwood-pine forest and swamp/prairie-savannah grasses; wetland areas also occur along creeks and secondary tributaries. The climate is temperate, allowing exploration, potential

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development, and potential mining activities to take place year-round. Regionally, July is the warmest month with a mean temperature of 19.7°C and January is the coldest month with a mean temperature of -15.4°C. On average, the region receives approximately 796 mm of precipitation annually.

The Property is located approximately 55 km south-southeast from Iron Mountain, and approximately 19 km west of Stephenson, Michigan, within the Escanaba River State Forest. Access from Stephenson is via County G12 Road, north on River Road, travelling approximately 5 km to the Project field office. A number of drill roads connect with River Road and cross the Property. Infrastructure on the Property includes a nearby power line and paved road access.

1.3 HISTORY

In 2004, a new company, Aquila Resources Corporation, was formed for the purpose of publicly listing the Project. In 2006, the Company was renamed Aquila Resources Inc. after a reverse take-over by JML Resources. In 2007, Aquila announced the approval to list on the Toronto Stock Exchange. During the period 2009 to 2014, Aquila entered into agreements and arrangements with Hudbay Minerals Inc. and REBgold Corporation, which eventually resulted in giving Aquila 100% ownership of the Back Forty Project.

The Company currently has three main subsidiaries, Aquila Resources Corp., Aquila Resources USA Inc., and Aquila Michigan Inc. (formerly known as HMI). The remaining subsidiaries are inactive. All subsidiaries are 100% owned.

In 2014, a Preliminary Economic Assessment was completed which contemplated an open pit and underground mining/processing operation at Back Forty.

On March 31, 2015, the Company closed a multi-level financing transaction with Orion Mine Finance ("Orion") that included an equity private placement and a silver stream for total funding of $20.75 million (collectively, the "Orion Transaction"). Concurrent with the Orion Transaction, the Company completed the repurchase of two existing royalties on the Back Forty Project. As part of the Orion Transaction, pursuant to a silver purchase agreement (the "Silver Purchase Agreement") dated March 31, 2015 between Orion Titheco Limited, the Company and Back Forty Joint Venture LLC, Orion acquired 75 per cent of Aquila's life-of-mine ("LOM") silver production from the Back Forty Project for gross proceeds of $17.25 million. Orion has advanced the first instalment of $6.5 million, the second instalment of $3.0 million, the third instalment totalling $3.375 million plus the $1.35 million land payment and the final installment of $2.376 million. In June 2016, the silver purchase agreement was amended to reduce the deposit owing by $625,000. In November 2016, the silver purchase agreement was amended to reduce the deposit owing by $14,000.

In July 2017, Orion sold a portfolio of royalties, streams and precious metal offtakes, including the Silver Purchase Agreement, to Osisko Gold Royalties Ltd. ("Osisko").

On November 10, 2017, the Company completed a financing transaction with Osisko Bermuda Limited ("OBL"), a wholly owned subsidiary of Osisko pursuant to which OBL has agreed to commit $65 million to Aquila through a $10 million private placement and $55 million gold

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stream purchase agreement. In connection with the private placement, Osisko received the right to nominate one individual to the board of directors of Aquila and thereafter for such time as Osisko owns at least 10 per cent of the outstanding common shares. Osisko's nominee was appointed to the board of directors in November 2017.

Concurrent with the Strategic Investment, the parties have entered into a Gold Purchase Agreement (the "Gold Stream"), whereby OBL will provide the Company with staged payments totalling $55 million, payable as follows:

  • $7.5 million on close of the Gold Stream (received November 2017);
  • $7.5 million upon receipt by Aquila of all material permits required for the development and operation of the Project, and receipt of a positive Feasibility Study (received October 2018);
  • $10 million following a positive construction decision for the Project (milestone amended in June 2020); and
  • $30 million upon the first drawdown of an appropriate Project debt finance facility (reduced to $20 million in June 2020), subject to the COC Provision (as defined below).

Under the terms of the Gold Stream, OBL will purchase 18.5% of the refined gold from the Project (the "Threshold Stream Percentage") until the Company has delivered 105,000 ounces of gold (the "Production Threshold"). Upon satisfaction of the Production Threshold, the Threshold Stream Percentage will be reduced to 9.25% of the refined gold (the "Tail Stream"). In exchange for the refined gold delivered under the Gold Stream, OBL will pay the Company ongoing payments equal to 30% of the spot price of gold on the day of delivery, subject to a maximum payment of $600 per ounce.

On September 7, 2018 Aquila filed an open pit Feasibility Study Technical Report on SEDAR, with an effective date of August 1, 2018.

On October 5, 2018, Aquila received a payment of $7.4 million from an affiliate of Osisko under the Gold Purchase Agreement. This payment represents the second deposit of the total advance payment of US$55 million to be made by Osisko under the Gold Purchase Agreement. The payment, which was made net of a $100,000 capital commitment fee, follows receipt by Aquila of all material permits required for the development and operation of the Back Forty Project and the completion of the Back Forty Project Feasibility Study.

On June 28, 2019, the Company announced that its two largest shareholders, Orion Mine Finance (and its affiliated funds) ("Orion") and Osisko Gold Royalties Ltd. ("Osisko") completed a transaction whereby Orion purchased from Osisko all 49,651,857 common shares of the Company owned by Osisko (the "Transaction"). The Transaction was a small component of the share repurchase and secondary offering transaction first announced by Osisko on June 25, 2019. Orion now owns 97,030,609 common shares of Aquila representing approximately 28.7% of the outstanding common shares. Osisko remains a significant financial partner to Aquila as the holder of gold and silver streams on the Company's Back Forty Project.

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On June 17, 2020, Aquila announced it entered into definitive agreements with Osisko to amend certain terms of the Gold Stream and the Silver Purchase Agreement in order to accelerate Aquila's access to a portion of the outstanding funding under the Gold Stream and to provide additional flexibility.

Under the terms of the amendments, Osisko will immediately advance $2.5 million (excluding transaction costs) of the remaining deposit under the Gold Stream to Aquila. Osisko will advance an additional $7.5 million upon Aquila achieving certain corporate and Project development milestones that are expected to be completed over the next 12 to 18 months. Osisko has also agreed to adjust certain milestone dates under the Gold Stream and Silver Purchase Agreement to align the streams with the current Project development timeline.

In exchange for Osisko agreeing to make the payments and milestone date changes described above, the remaining deposit available to Aquila under the Gold Stream will be reduced from $40 million to $35 million, of which $10 million is payable as described above, and the remaining $25 million will be payable pro-rata with drawdowns under a senior construction facility for the Company's Back Forty Project. The designated Gold Stream percentage remains unchanged at 18.5% until the delivery of 105,000 gold ounces to Osisko, upon which the stream will be reduced to 9.25%. Osisko will continue to pay 30% of the gold spot price on delivery, subject to a maximum payment of $600/oz. The Silver Purchase Agreement will be amended to increase the designated silver stream percentage from 75% to 85% of the number of payable silver ounces produced from Back Forty with no change to the ongoing price of $4/oz.

1.4 GEOLOGICAL SETTING AND MINERALIZATION

The Back Forty VMS Deposit is one of a number of deposits located throughout the Ladysmith- Rhinelander volcanic complex in northern Wisconsin and the Upper Peninsula of Michigan. The complex lies within the lower Proterozoic PVB, also known as the Wisconsin Magmatic Terranes. The PVB is part of the Southern Structural Sub-province of the Canadian Shield.

Published small-scale (1:250,000) geologic maps of northeastern Wisconsin indicate the area to the west of the Project area is underlain by the 1,760 to 1,870 Ma old Athelstane Quartz Monzonite, an intrusive complex composed of tonalite, granodiorite and granite. The plutonic complex is bounded on the north, east, and south by metavolcanic rocks of the Beecher Formation and contains numerous metavolcanic rock inclusions. The volcanics generally face outward from the margin of the intrusive complex. Dykes of Athelstane Quartz Monzonite extend a short distance into the Beecher Formation (Jenkins 1973).

The Beecher Formation consists of a stratigraphically lower, 3,000 m thick sequence of calc- alkaline andesite to dacite flows and an upper 300 m thick section of interbedded felsic ash, crystal tuff, lapilli tuff, coarser fragmental rocks, and locally black slates near the stratigraphic top of the formation. The Back Forty Deposit is hosted by a volcanic complex quite similar to the upper volcaniclastic section of the Beecher Formation. Zircons extracted from rhyolite crystal tuff and intrusive rhyodacite porphyry from Back Forty have yielded a uranium/lead age of 1,874 ±4 Ma (Schulz et al. 2008). This age is consistent with the published age of the Athelstane Quartz Monzonite. It is likely that the felsic sequence at Back Forty is a member of

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the Beecher Formation. The lateral extent of this volcanic centre is unknown at this time. However, drilling and gravity surveys indicate it is truncated to the west and north by Athelstane Quartz Monzonite, but likely extends further to the east and south, beneath Cambrian sandstone sediments.

Detailed core logging and lithogeochemical studies completed to date by Aquila have established at least four lithologic units within the portion of the felsic centre hosting the Back Forty mineralization. Regional deformation has produced a penetrative foliation; locally shears have been observed. The foliation is developed best in rhyolite crystal tuff units that have the strongest sericite alteration. In the fragmental units, clasts are commonly stretched parallel to foliation. In the bedded tuffaceous unit, schistosity is parallel to relict bedding.

Based on geologic relationships and apparent offsets, high angle, north-south striking faults were inferred striking through the central portion of the Back Forty Deposit. A detailed review of drill core and geotechnical data did not confirm these as major, through-going structures. A second set of west-southwest trending, high-angle faults were also previously interpreted. These faults in general parallel the axial plane of the anticlinal fold. The principal east-west fault has been confirmed by a review of drill core and geotechnical data, and appears to strike through the southern portion of the East Zone massive sulphide and continue west to form the northern boundary of the Hinge Zone massive sulphide, as well as the southern boundary of the Pinwheel Zone.

Mineralization at the Back Forty Deposit consists of discrete zones of: 1) zinc or copper-rich massive sulphide (±lead), which may contain significant amounts of gold and silver, 2) stockwork stringer and peripheral sulphide, which can be gold, zinc, and copper-bearing (±lead/silver), 3) precious metal-only,low-sulphide mineralization, and 4) oxide-rich, precious metal-bearing gossan.

To date, VMS-style mineralization has been identified within at least two stratigraphic levels within the felsic sequence at the Back Forty Deposit. Although the majority of rhyolitic rocks hosting the Deposit sulphide mineralization are indiscernible with respect to appearance, the two main rhyolites (rhyolites 1 and 2) have distinctive geochemical signatures as can be observed through aluminum-titanium and zirconium-titanium ratios. The Main Zone massive sulphide, which accounts for the vast majority of massive sulphide mineralization lies at the statigraphic boundary of these two rhyolite units. Rhyolite 1 lies stratigraphically below this sulphide horizon (footwall) while rhyolite 2 lies above the horizon (hanging wall). Another massive sulphide horizon, the Tuff Zone, is located at or near the upper contact of rhyolite 2 and the lower contact of an overlying package of tuffaceous and siliceous sediments. Another zone of massive sulphide mineralization, the Deep Zone, was identified as a possible third, lower mineralized horizon. Additional drill intercepts of massive sulphide mineralization have been encountered at depth and to the southwest (down plunge) of known mineralization. Due to limited follow-up drilling of these intercepts it is, at the current time, unknown as to how these fit in with the overall geology and stratigraphy of the Deposit. Massive sulphide refers to rocks composed of at least 80% sulphide, rather than the more common cut-off of 60% for massive sulphides. Semi-massive sulphide mineralization is considered to contain 10 to 80% sulphides.

The Main Zone is composed of three separate massive sulphide bodies (referred to as the East, Hinge, and South Limb Zones) that form parts of a plunging anticlinal structure and are

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considered the same horizon. These bodies are hosted by Rhyolite 1 (footwall) along and stratigraphically below their contact with Rhyolite 2 (hanging wall). These horizons are stacked, strata-bound massive sulphide bodies that are enveloped locally by stockwork and semi-massive sulphide mineralization. Pervasive sericite and disseminated pyrite alteration as well as variable silicification are abundant and extend outward for an undetermined distance. The Main Zone extends along strike for over 450 m in a west-southwest direction; it is up to 100 m wide and subcrops at its eastern end under thin (less than 10 m) glacial overburden or local Palaeozoic sandstone. The stockwork-stringer and peripheral sulphide envelope grades outward into a semi- conformable disseminated (less than 10%) pyritic halo that extends throughout the entire altered Rhyolite 1 host unit for an undetermined distance. The zone has been extensively disrupted by variably altered quartz feldspar porphyry ("QFP") intrusions.

The East Zone subcrops east of the Keweenawan dyke under glacial overburden, which is less than 10 m thick. Locally, erosional outliers of Palaeozoic sandstone are less than 0.5 m thick. The massive sulphide body is capped by a thin gossan (generally 3-5 m thick). At the top of the massive sulphide, directly underlying the gossan is a thin zone of copper-rich massive sulphide (often less than 1-2 m) which was likely enriched by means of late super-gene processes.

The Hinge Zone, in part offset by faulting, has been folded tightly into a cigar-shaped body that plunges moderately at approximately forty degrees to the southwest along the axial plane of the anticlinal fold; the South Limb is separated from the Hinge by a laterally persistent QFP dyke and remains open to the southwest. Further west, the horizon is apparently offset downwards again between Sections 435,225E and 435,200E. Between sections 435,200E and 435,100E, deformation of the Hinge horizon likely has resulted in tectonic thickening of this unit (up to approximately 70 m in the "hinge" area). Beyond Section 435,100E to the west, the Hinge horizon appears to pinch out against a QFP dyke.

The South Limb Zone is interpreted to represent the steeply-dipping southern fold limb of the anticline where it is steeply dipping to the south, while plunging to the west-southwest this interpretation is supported by lithogeochemical data. Locally, shearing is common, resulting in an overall uniform thickness and lens-shaped geometry.

The Hinge and South Limbs Zones are separated by large, variably-altered QFP dykes that have been intruded into the axial plane area of the anticlinal fold. These syn- or post-mineralization QFP intrusions have intruded, cut-off, and obliterated portions of both horizons. To the west, the model suggests that the South Limb may be pinching and swelling down plunge into a series of thin to thick lenses that occupy the south limb of the anticline. Drilling continues to support the above interpretation. The South Limb remains open along strike.

The Pinwheel Zone is located at the northwest end of the Deposit and is a shallow, isolated erosional remnant located structurally along the gently north-dipping northern limb of the anticlinal fold and is truncated to the south by the E-W fault. Limited geochemical data suggests that this unit is in fact located along the contact between rhyolite 1 and rhyolite 2 and is therefore likely the equivalent to the Main Zone massive sulphide and represent a 'faulted-up' portion of the north limb of this important massive sulphide horizon. Massive sulphide mineralization on strike of the Pinwheel Zone has been traced for roughly 700 m to the west-southwest where the gentle north-dip of the unit steepens. It should be noted however, that the massive sulphide mineralization is to some degree discontinuous and often has a 'stacked' geometry, and that

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numerous faults and shear zones have been encountered in the adjacent host rock. The geometry of this zone is likely complicated due to these structures.

The Pinwheel Zone is broken up in to two separate units based on spatial relationships and dominant mineralization types. The near-surface, gently north-dippingeastern-most portion of the Pinwheel Zone is referred to as the 'Pinwheel Cu-Rich Zone' due to the relative abundance of copper mineralization (predominantly pyrite + chalcopyrite) and subsequent lack of other base metals (zinc and lead) within the massive sulphide. The majority of the Cu-Rich Zone is capped by an overlying gossan that crops out on the Property along the southeast terminus of the zone. The Cu-Rich portion of the Pinwheel Zone represents the most copper-enriched massive sulphide located at the Back Forty Deposit and it is interpreted that the copper enrichment has a secondary, supergene association. It is possible, however, that this zone represents an original, high-temperature, copper rich portion of the VMS system. Along strike to the west-southwest,copper-dominant mineralization diminishes with a subsequent increase in the presence of zinc (sphalerite) and to a lesser extent lead (galena). This zone has been referred to as the 'Pinwheel Extension' or 'Pinwheel Zn-Rich Zone' and the variation in metal content with respect to the Cu- Rich portion is interpreted to be due, in part, to a lack of influence from secondary, super-gene processes.

The Deep Zone is located north of one of the QFP dykes, juxtaposed against the South Limb horizon. Recent geological and geochemical data interpretation suggests that the Deep Zone may be the down-dip continuation of the South Limb, where it has been folded and rotated. This interpretation leaves significant spatial potential for further resource discovery between the South Limb and the Deep Zone as well as down dip of the Deep Zone.

The Deep Zone is relatively enriched in copper compared to zones of the main horizon (East, Hinge, and South Limb) and suggests that a more copper-rich portion of this VMS system may occur at depth.

The Tuff Zone massive sulphide occurs at the south edge of the Deposit. Stratigraphic and structural data suggest this zone is located at a higher level in the volcanic sequence. In cross sections and three-dimensional models, the zone appears to have a bowl-shaped geometry possibly reminiscent of small relict depositional basin or local graben structure.

The Tuff Zone is hosted at or near the stratigraphically upper portions of the intensely sericitized and locally chlorite-altered Rhyolite 2 unit as well as within the lower portion of the overlying siliceous tuffaceous sediment unit. The Tuff Zone has been traced along strike to the southwest by drilling (parallel to the Main Zone) for roughly 25 m. The zone is predominantly steeply dipping to the south and occupies the southern limb of the anticlinal structure. Drilling intercepts down dip and at depth of the zone indicate shallowing and flattening of the unit that suggests proximity to a synclinal structure to the south. Massive sulphide mineralization of the Tuff zones appears preferentially developed within coarser grained tuffaceous units at or near the contact of rhyolite 2 and of the overlying tuffaceous and siliceous sediments. Overall sulphide content is less massive than that of the Main Zone (~60-80%) and is dominated by sphalerite, pyrite, and galena. The zone's thickness is typically on the order of a few metres. The horizon possibly subcrops in the northeast along Sections 435,175E and 435,150E but plunges southwest (to at least Section 435,000E) similar to the orientation of the massive sulphide horizons of the Main Zone.

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1.5 DEPOSIT TYPE

The zinc-copper-lead-gold-silver bearing sulphide mineralization identified on the Property exhibits typical characteristics of VMS mineralization. VMS deposits form in a marine volcanic environment by the circulation of hot hydrothermal fluids near spreading centres. Cold seawater infiltrating ocean crust off-axis is progressively heated by hot magma underlying the rift zone. Heated and buoyant fluids leach metals from the surrounding rocks. Metallic sulphides precipitate at or near the rock-water interface as a result of rapid changes in Eh and pH triggered by rapid mixing with cold ambient seawater. Precipitated sulphides form massive mounds, fracture and cavity fills, as well as replacement textures. Metal zoning is common with copper- rich zones at or near the centre and zinc-rich zones at the fringes of a sulphide mound. Multiple events and zone refinement are common, often due to changes in the internal plumbing system.

1.6 EXPLORATION

Geophysical surveys including airborne EM, ground EM, gravity, and magnetic surveys have been the primary means of exploration over the life of the Project. To a lesser extent, geochemistry and geologic mapping have also been utilized to aid in exploration efforts.

Sparse outcrop mapping in the immediate Deposit area has yielded structural and geochemical data supporting the general Deposit model, although outcrop distribution does not allow for any delineation of mineralization.

A total of 680 geochemical whole rock analysis of drill core have been collected from host rocks at the Back Forty Deposit as well as from drilling peripheral to the Deposit area from 2002 to 2012 and have been compiled into a geochemical database. Additional whole rock samples have been collected from the 2015 to 2017 drill programs and are currently being added to the geochemical database. No traditional soil geochemical surveys have been undertaken in the Project area.

Extensive geophysical surveys have been completed over the immediate Project area and surrounding areas from 2002 to present. Geophysical surveys include two airborne magnetic/EM surveys and extensive ground surveys including HLEM (Max-Min), Pulse EM, magnetics and gravity as well as extensive downhole Pulse EM surveys completed during various drilling campaigns.

Two airborne electromagnetic and magnetic surveys have been flown over the Project area. In 2002, a GEOTEM, fixed wing electromagnetic and magnetic survey with north south 200 m spaced lines was flown over the area of the Back Forty discovery, and in 2007 a larger (500 square km), partially overlapping VTEM and magnetic survey was flown by Geotech Ltd. The VTEM survey line spacing was 100 m in the western portion of the block and 200 m in the eastern portion.

Previous ground geophysical surveys completed over the prospect area were conducted by initial operator MPC and include horizontal loop electro-magnetic(max-min), total field magnetics, and gravity. Ground and down-hole pulse electromagnetic surveys ("PEM") were conducted

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during the 2002 to 2003 drilling program. The ground and down-hole geophysical surveys were conducted by Crone Geophysics with interpretation provided by ACNC geophysicists. Four loops were laid out to locate extensions of the sulphide deposit.

Additional PEM surveys that were conducted in the immediate Back Forty Mineral Resource area were run during middle to late 2006 and 2007 with interpretation provided by Clark Jorgenson in 2007 and 2008. All electromagnetic responses were modelled with the "Maxwell" program developed by Electromagnetic Imaging Technology of Perth, Australia. A number of geophysical targets were tested successfully; other targets could not be explained through drilling.

Additional downhole Pulse EM surveys were completed during the 2009-2011 drill programs. The surveys were completed by Crone Geophysics and reviewed and interpreted by Hudbay geophysicists who aided in the initial delineation of the Back Forty Deposit at depths exceeding 650 m in the vertical direction.

Downhole surveys were also carried out following the 2016 drilling campaign and were completed by Abitibi Geophysics. Geophysicist, Dan Card has been overseeing the design and interpretation of these recent surveys, and has also recently reinterpreted the VTEM responses in the deposit are in conjunction with past and recently completed downhole PEM and Surface PEM.

Since most of the immediate Deposit area and prospective geologic trends adjacent to the Deposit are covered with glacial drift and Paleozoic sediments, and because cultural features (power lines, fences, etc.) are common and interfere with electromagnetic techniques, extensive gravity surveys have been conducted over the Deposit and surrounding area from the Project's inception through 2016.

In 2016, consolidation of land ownership peripheral to the Deposit allowed expansion of the detailed gravity grid to the northeast and southwest of the Deposit. Subsequent drill testing of the gravity anomaly extending southwest of the known Deposit resulted in the discovery of a new zone of massive sulphide mineralization - the 2016 Zone, which was the target of drill testing in 2017.

1.7 DRILLING

Drilling on the Property was conducted over several campaigns. Between 2002 and 2017, 624 drill holes totalled approximately 122,100 m. In addition to Mineral Resource delineation drilling associated with the expansion of the Back Forty Mineral Resource, focused drill efforts were also undertaken which included: drilling of exploration (geophysical) targets in the immediate vicinity of the Deposit area, drilling to support metallurgical testing programs, and geotechnical drilling to characterize the rock quality of the Deposit area.

The first drill program, conducted by ACNC, started in February 2002 and continued to late May 2003. The program consisted of 71 drill holes (20,600 m), from which approximately 7,600 assay samples and 340 whole-rock samples were collected.

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The second drill program occurred in Q4 2006. This program delivered 13,190 m of core in 80 BTW sized holes. The majority of the drilling targeted the East and Pinwheel Zones.

The third drilling program was completed in 2007 with 118 drill holes totalling 27,800 m.

A fourth drill program in 2008 on targets distributed throughout the Mineral Resource area was completed in 2008 with 66 drill holes for 13,950 m.

From October 2009 to May 2010, another phase of drilling was mounted. For this program, IDEA Drilling completed the first 20 holes on the Project using NQ2 and the drill holes were oriented (totalling 1,327 m). IDEA Drilling subsequently completed 93 NQ3 split-tube oriented holes and one extension using BTW for a total of 8,681 m. IDEA Drilling also completed 11 drill holes outside the immediate Deposit area that were not used for the Mineral Resource Estimate (1,388 m). Boart Longyear completed 11 NQ3 split-tube oriented holes that were included in the Mineral Resource Estimate totalling 1,492 m. In addition, Boart Longyear completed five NQ3 "geotechnical" holes that targeted the conceptual open pit walls (971 m). The core from these holes was archived in its entirety, i.e., not cut and assayed, therefore they are not included in the current Mineral Resource Estimate.

Drilling from 2009 to 2010 outside the immediate Back Forty Deposit approximately 600 m to the east was targeted on ground magnetic and gravity anomalies. Anomalous zinc and gold mineralization in altered rhyolites and sediments was encountered in two drill holes. Drill hole PTL-1 intersected 10.0 m of 0.61% Zn, including one 1.5 m sample of 1.08% Zn. Drill hole PTL-2 encountered an interbedded sequence of flows and tuffaceous sediments including a chlorite-altered fragmental zone containing 26.5 m of 0.54% Zn, with smaller zones exceeding 1% Zn, a lower interval of tuffaceous sediments containing 12.5 m of 0.51% Zn, and an underlying siliceous breccia with 6 m of 1.1 g/t Au, including 1.5 m of 2.67 g/t Au. This suggests that prospective host rocks continue to the east of the Back Forty Deposit for at least 600 m. These two drill holes are not part of the Back Forty Mineral Resource Estimate.

78 holes were drilled during 2011. The programs included drilling 22 high-grade gold targets at depth, four geophysical targets, and 22 relatively shallow holes to delineate the Pinwheel Gossan Zone.

A total of 11 drill holes were completed to collect metallurgical samples, 12 for condemnation purposes east of the Mineral Resource and 5 drill holes to install monitoring wells for groundwater purposes. These additional 28 drill holes are not part of the current Mineral Resource Estimate.

Drilling in 2015 consisted of a total of 13 NQ sized drill holes totalling 1,775 m. The primary focus of the program consisted of 833 m of drilling in 9 metallurgical drill holes targeting sulphide mineralization within the open-pit portion of the Mineral Resource. Two drill holes from the 2015 drill program targeted Mineral Resource expansion of the Pinwheel Zone on a property that had previously been unavailable for drilling. The two drill holes intercepted zinc- rich massive sulphide and associated gold mineralization within the host rocks. An additional 2 drill holes targeted a geophysical anomaly peripheral to the Deposit area. No significant grades were reported in the two drill holes.

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A total of 2,333 m was drilled in 13 holes in 2016. Geotechnical drilling consisted of 671 m of drilling in 3 drill holes evaluating rock quality in the south-western and south-eastern portion of the open pit Mineral Resource area as well as to test the rock mass quality along the proposed cut-off wall between the planned open pit and the Menominee River. One drill hole intercepted mineralization outside of the planned open pit extents. This drill hole was sampled and assayed as part of the 2017 drill program.

Four drill holes for 627 m were completed in 2016 to delineate and extend the known Mineral Resource outside of the planned open pit. An additional 6 drill holes totalling 1,195 m were drilled testing both airborne and recently identified ground geophysical anomalies proximal to the Back Forty Deposit.

A total of 24 drill holes totalling 6,001 m were completed between January and June of 2017. The drilling consisted of three independent programs including a geotechnical drilling program which characterized rock mass qualities for 'out of pit' Mineral Resource, a Mineral Resource delineation drilling program which included both infill drilling to convert Inferred Mineral Resources to Indicated Mineral Resources and step out drilling on known mineralization, as well as an exploration program evaluating geophysical anomalies. The geotechnical drilling program consisted of a total of 5 drill holes and 1,281.2 m total of drilling designed to evaluate the rock mass quality within the potential underground mining area including 3 drill holes in the Pinwheel area southwest of the planned open pit and 2 holes in the Main Zone and Deep Zone area below and southwest of the planned open pit. In addition to collecting geotechnical data a number of the geotechnical drill holes were also designed to intercept areas of Inferred mineralization within the Mineral Resource model in the vicinity of the Pinwheel Zone, Tuff Zone as well as the Deep Zone.

Mineral Resource delineation drilling consisted of a total of 10 drill holes as well as extensions of two holes for a total of 2,610 m. In addition to geological logging, geotechnical logging was completed on select drill holes due to a lack of geotechnical information within the Pinwheel portion of the potential underground mine area. Seven drill holes were designed to intercept Inferred Mineral Resources as well as to test the western, down-dip extension of the Pinwheel Massive sulphide. All drill holes encountered massive sulphide mineralization associated with the pinwheel massive sulphide. Two holes were designed to intercept Inferred mineralization located in the Deep Zone massive sulphide and adjacent Porphyry Margin Gold Zone. Both drill holes also encountered mineralization associated with the Tuff Zone massive sulphide and stringers as well as the 90 Gold Zone along the south margin of the proposed open pit.

A total of 9 drill holes totalling 2,110 m were drilled as part of an exploration program targeting a geophysical anomaly identified during 2016 and as follow-up on the newly discovered massive sulphide zone from the 2016 drill program. Given the limited drilling in this area mineralization has not been modelled and is not incorporated into the Mineral Resource Estimate.

Three drill holes totalling 633.27 m were drilled as part of an abbreviated exploration program in 2018. The drill program was designed to test the extents of the recently discovered 2016 Zone and another geophysical target peripheral to the known Deposit. The drill holes were completed after the current Mineral Resource Estimate was completed, and not are included in the Updated Mineral Resource Estimate.

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The 2019 geomechanical drilling program consisted of a total of seven drill holes totalling 1,274.03 m. Drilling was designed to evaluate the rock mass quality within the west pit wall and to evaluate the rock quality on a potential crown pillar. The 2019 metallurgical sampling program consisted of a total of eight drill holes totalling 558.33 m targeting early mining within the open-pit portion of the Mineral Resource. Assays from the 2019 drill holes were not incorporated into the Updated Mineral Resource Estimate.

1.8 SAMPLE PREPARATION, ANALYSES AND SECURITY

It is P&E's opinion that sample preparation, security and analytical procedures for the Project drilling and sampling programs were adequate for the purposes of this Mineral Resource Estimate.

Based upon the evaluation of the QA/QC programs undertaken by Aquila, P&E concludes that the data are of good quality for use in the Back Forty Updated Mineral Resource Estimate.

1.9 DATA VERIFICATION

Based upon P&E's due diligence sampling and data verification, P&E concludes that the data are of good quality for use in the Back Forty Updated Mineral Resource Estimate.

1.10 MINERAL PROCESSING AND METALLURGICAL TESTING

Several historical metallurgical testwork campaigns have been completed on various samples related to the Project. The main objective of the metallurgical test work campaigns was to quantify the metallurgical response of the VMS mineralization and included several flotation and leaching studies, comminution and gravity tests. This work was used to established metallurgical domains (refer to Table 1.1) and direction for test conditions and to demonstrate variability throughout the Deposit. Metallurgical testing has generally focused on the three main sulphide mineralized zones (Main, Pinwheel and Tuff Zones) and the oxide portion of the Deposit.

TABLE 1.1

METALLURGICAL TYPES

No.

Major Zones

Name

1

Main

Main Zone Massive Sulphide

2

Pinwheel

Pinwheel Massive Sulphide Cu Rich

3

Pinwheel

Pinwheel Semi-Massive and Stringers

4

Pinwheel

Pinwheel Extension

5

Tuff

Tuff Zone

6

Oxides

Oxides

7

Pinwheel

Pinwheel Gossan Flotation

8

Pinwheel

Pinwheel Massive Sulphide Cu-Zn Rich

A series of metallurgical testing campaigns were completed from 2015 to 2019 in support of both the 2018 Feasibility Study and the current PEA. These metallurgical testwork programs

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were primarily conducted at SGS (Lakefield, Ontario) and dewatering and rheology work was conducted at Golder (Sudbury, Ontario). Filtration and sulphidization-acidification-recycling- thickening ("SART") testwork was carried out by Tenova and BQE, respectively (Vancouver, British Columbia).

SGS's Geostats group was engaged by Aquila to develop a drill plan for fresh sulphide material and assist with sample selection. Oxide and sulphide domain composites were created. Following sub-domain compositing, three sulphide master composites with the sub-domain composite material were created. The samples selected represent the spatial distribution, head grades and mineralization types of the Back Forty Deposit.

Comminution testwork included Bond ball work index ("BWI"), modified Bond ball work index ("ModBond"), abrasion index ("AI"), crusher work index ("CWI") and SAG mill comminution ("SMC") tests. Overall, the samples depicted a high degree of variability across the grindability characterization tests. Samples for SMC tests were considered soft to very hard with A x b ranging from 83.9 to 22.5. There was a broad range in the relative density, from 2.71 to

  1. t/m3. Within their own mineralized zones, there was relative consistency in both hardness and density of the samples. CWI samples covered the soft to moderately hard range of hardness within the SGS database, with CWI varying from 4.4 to 12.5 kWh/t. The average CWI was
  1. kWh/t (classified as moderately soft). BWI results ranged from very soft to hard (9.1-
  1. kWh/t). While a relatively wide range of results are observed over the data as a full set, ranges are narrower by metallurgical type, with oxides being the most competent and Pinwheel being the least competent. ModBond samples covered very soft to very hard range of hardness in the SGS database, ranging from 9.2 to 20.8 kWh/t. Following the trend from other hardness characterization tests, the global set of data shows a significant relative standard deviation, while within each metallurgical type the data range was narrower. The AI values ranged from 0.285 g to 0.564 g, with an average value of 0.398 g, which is considered medium.

The metallurgical testwork program included flotation testwork to develop the flotation conditions and further optimize the historical results. The program aimed at minimizing the number of distinct metallurgical types from a processing perspective and to optimize reagent dosages with some consideration for alternatives. The approach taken to decrease the number of metallurgical types was to create variability composites within each of the main mineralized types (Main, Pinwheel and Tuff).

The main master composites were submitted for mineralogical analysis (QEMSCAN). The resulting modal analysis indicated that both the Pinwheel and Main zone master composites were dominated by chalcopyrite and sphalerite as value minerals and pyrite as the major gangue mineral. The Tuff Zone master composite was dominated by sphalerite and galena as value minerals, with a large amount of the gangue represented by quartz. Liberation data established the primary grind size for the main mineralized types.

Table 1.2 summarizes the relative mineralogical differences between Main, Pinwheel and Tuff material types.

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TABLE 1.2

MINERALOGY OF SULPHIDE MATERIAL (RELATIVE DIFFERENCES)

Mineral

Chalcopyrite

Galena

Sphalerite

Material Type

Liberation for

(Copper

(Lead

(Zinc

Flotation (P80)

Mineral)

Mineral)

Mineral)

Main

75 µm

Medium

-

High

Pinwheel

50-55 µm

MS and Gossan

High

-

Trace

SM and Stringers

Low

-

Low

Extension

Medium

-

High

Tuff

60-65 µm

Trace

High

Medium

Note: MS = massive sulphide, SM = semi-massive sulphide.

All of the variability composites for each of the three metallurgical types were subjected to cleaner flotation testing. There were two main purposes of the tests: 1) to examine in greater depth the flotation responses of the individual samples making up each master composite in order to determine which of the individual samples were particularly problematic and to further explore optimization strategies; and 2) to understand the metallurgical responses over a range of samples.

In general, the target regrind size used in the most recent phase of testing for both copper and zinc rougher concentrate was 15-20 µm. Although not quantifiably tested historically, the general trend was a positive shift in the grade recovery relationship of a given composite that was subjected to a finer regrind (both bulk and zinc). This was further confirmed by mineralogical data that in general showed that the degree of free and liberated Cu-Sulphate, galena and sphalerite increased with decreasing particle size. This regrind target range was deemed suitable in consideration of grinding effort and the need to minimize overgrinding of the cleaner feed.

The metallurgical testwork program included an oxide testwork program to test various subdomains within the metallurgical type, to determine suitable leach conditions and to acquire downstream data (oxide tailings filtration and SART). The approach taken was to subject all oxide sub-domains which made up the ultimate master composite to varying conditions in a series of bottle roll tests.

The main test conditions that were explored were primary grind size, cyanide concentration and oxygen addition. Other conditions examined were the addition of lead nitrate, test pH and leach time. Leaching of flotation tailings was also completed to investigate at a scoping level alternative gold recovery flowsheets.

Once universal test conditions were determined, a master composite was created by blending the representative sub-domains by what is understood to have been their appropriate in-situ proportions. A larger bulk leach was performed on the master composite to generate a global overall expected recovery as well as enough product to perform filtration testing and SART testing.

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Tailings samples, representing Main, Pinwheel, Tuff and Oxide zones were subjected to settling and rheology testing.

Test results from 2016-2019 testwork programs and historical test results formed the basis for each of the metallurgical recovery equations. In general, there is a reasonable correlation between the head grade of the target base metal with the ultimate recovery to the concentrate. Target concentrate grades were selected based on the metallurgical performance of the samples for each material type for the financial analysis. For copper, the target concentrate grade varies for each copper containing material type and has a range of 17% to 22% Cu. Zinc concentrate targets vary from 50% to 55% Zn and the lead target concentrate grade is 35% Pb.

1.11 MINERAL RESOURCE ESTIMATE

All drilling and assay data were provided in the form of Excel data files by Aquila. The GEOVIA GEMS™ V6.8 database for the updated Mineral Resource Estimate, compiled by P&E, consisted of 741 drill holes totalling 128,670 m, of which 1,447 intersects totalling 17,201 m from 489 drill holes were used for the updated Mineral Resource Estimate.

The updated Mineral Resource Estimate with an effective date of October 14, 2019 is tabulated in Table 1.3. P&E considers the mineralization of Back Forty to be potentially amenable to Open Pit and Out of Pit (underground) extraction. Open pit model NSR cut-off values were $21/t for flotation and $22/t for leach material above 0 m EL, and $70/t below 0 m EL. Underground model NSR cut-off values ranged from $65/t to $68/t for flotation and $77/t for leach material.

54 and 58 mineralization wireframes were constructed for open pit and underground Mineral Resource Estimates, respectively. Block sizes in the models were 5.0 m x 2.5 m x 2.5 m (XYZ). For Mineral Resource estimation, P&E considers metallurgical ("met") type 2 and 7 to be the same material, and met type 4 and 8 to be the same material.

The pit-constrained Mineral Resource Estimate totalled 11.4 Mt of Measured and Indicated Mineral Resources at 1.87 g/t Au, 23.03 g/t Ag, 0.27% Cu, 0.22% Pb and 2.62% Zn. Pit- constrained Inferred Mineral Resources totalled 0.3 Mt at 3.13 g/t Au, 42.32 g/t Ag, 0.06% Cu, 0.56% Pb and 0.62% Zn. The underground Mineral Resource Estimate totalled 6.9 Mt of Measured and Indicated Mineral Resources at 1.93 g/t Au, 25.86 g/t Ag, 0.40% Cu, 0.32% Pb and 3.71% Zn. Underground Inferred Mineral Resources totalled 0.9 Mt at 3.88 g/t Au, 51.21 g/t Ag, 0.47% Cu, 0.45% Pb and 1.40% Zn.

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TABLE 1.3

BACK FORTY MINERAL RESOURCE ESTIMATE (1-7)

TOTAL MINERAL RESOURCE ESTIMATE

NSR

Metallurgy Type

Classi-

Cut-

Tonnes

Au

Au

Ag

Ag

Cu

Cu

Pb

Pb

Zn

Zn

fication

off

(k)

(g/t)

(koz)

(g/t)

(koz)

(%)

(Mlb)

(%)

(Mlb)

(%)

(Mlb)

($/t)

Measured

12.4

4,735

2.10

319.2

16.07

2,446.7

0.32

33.0

0.11

11.1

4.85

506.0

Met1

Indicated

3,907

2.01

253.1

21.60

2,714.1

0.36

30.8

0.18

15.9

3.28

282.2

M+I

+62.5

8,643

2.06

572.3

18.57

5,160.8

0.33

63.8

0.14

27.0

4.14

788.2

Inferred

373

3.26

39.1

38.77

465.2

0.55

4.5

0.41

3.4

1.02

8.4

Met2

Measured

12.0

428

1.96

26.9

73.43

1,010.5

2.42

22.8

0.02

0.2

0.11

1.0

Indicated

156

2.82

14.2

62.00

311.5

1.33

4.6

0.04

0.1

0.08

0.3

+62.0

M+I

584

2.19

41.1

70.37

1,322.0

2.13

27.4

0.02

0.3

0.10

1.3

Measured

12.0

206

1.89

12.5

15.25

100.9

0.48

2.2

0.03

0.1

0.13

0.6

Met3

Indicated

521

2.37

39.7

19.57

328.0

0.46

5.3

0.09

1.1

0.23

2.6

M+I

+62.0

727

2.23

52.2

18.35

428.9

0.46

7.4

0.08

1.2

0.20

3.2

Inferred

65

5.19

10.9

30.89

64.6

0.35

0.5

0.25

0.4

0.20

0.3

Flotable

Measured

232

1.13

8.4

30.24

225.9

0.55

2.8

0.54

2.8

6.43

33.0

Met4

Indicated

12.0

1,802

1.30

75.3

24.65

1,428.3

0.53

21.2

0.41

16.4

5.53

219.6

+62.0

M+I

2,035

1.28

83.8

25.28

1,654.1

0.54

24.0

0.43

19.2

5.63

252.6

Inferred

273

1.45

12.7

20.61

180.9

0.73

4.4

0.15

0.9

2.21

13.3

Measured

13.1

2,236

0.82

58.7

12.66

909.8

0.02

1.1

0.33

16.0

1.25

61.7

Met5

Indicated

1,653

1.14

60.5

31.50

1,674.1

0.03

1.2

0.75

27.4

2.60

94.7

M+I

+63.1

3,889

0.95

119.2

20.67

2,583.9

0.03

2.4

0.51

43.4

1.83

156.5

Inferred

99

3.02

9.6

121.26

387.5

0.05

0.1

1.09

2.4

3.30

7.2

Measured

12.0

7,838

1.69

425.8

18.63

4,693.7

0.36

61.9

0.17

30.1

3.49

602.4

Sub

Indicated

+12.4

8,040

1.71

442.8

24.97

6,455.9

0.36

63.1

0.34

61.0

3.38

599.4

M+I

+13.1

15,878

1.70

868.6

21.84

11,149.7

0.36

125.0

0.26

91.1

3.43

1,201.8

Total

+62.0

Inferred

811

2.78

72.4

42.14

1,098.2

0.53

9.5

0.39

7.0

1.64

29.2

+62.4

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TABLE 1.3

BACK FORTY MINERAL RESOURCE ESTIMATE (1-7)

TOTAL MINERAL RESOURCE ESTIMATE

NSR

Metallurgy Type

Classi-

Cut-

Tonnes

Au

Au

Ag

Ag

Cu

Cu

Pb

Pb

Zn

Zn

fication

off

(k)

(g/t)

(koz)

(g/t)

(koz)

(%)

(Mlb)

(%)

(Mlb)

(%)

(Mlb)

($/t)

+63.1

Measured

21.4

607

5.76

112.3

37.73

735.9

0.05

0.7

0.13

1.7

0.20

2.7

Leachable

Met6

Indicated

1,786

2.26

129.5

39.47

2,267.0

0.04

1.6

0.28

11.0

0.41

16.0

M+I

+71.4

2,393

3.14

241.8

39.03

3,003.0

0.04

2.3

0.24

12.7

0.35

18.7

Inferred

384

5.69

70.2

64.26

792.9

0.07

0.6

0.65

5.5

0.37

3.1

Measured

12.0

8,444

1.98

538.1

20.00

5,429.7

0.34

62.6

0.17

31.8

3.25

605.0

Indicated

+12.4

9,827

1.81

572.4

27.61

8,722.9

0.30

64.7

0.33

72.0

2.84

615.4

M+I

+13.1

18,271

1.89

1,110.4

24.09

14,152.6

0.32

127.3

0.26

103.8

3.03

1,220.5

Total

+21.4

+62.0

Inferred

+62.4

1,194

3.71

142.5

49.24

1,891.2

0.38

10.1

0.47

12.5

1.23

32.3

+63.1

+71.4

Notes:

  1. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.
  2. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.
  3. The Inferred Mineral Resource in this estimate has a lower level of confidence than that applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration.
  4. The Mineral Resources in this Technical Report were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by the CIM Council.
  5. Metallurgical type Oxide (all gold domains and leachable Gossans) is leachable, while all other metallurgical types are flotable.
  6. The Mineral Resource Estimate was based on metal prices of US$1,375/oz gold, US$22.27/oz silver, US$1.10/lb zinc, US$3.19/lb copper and US$1.15/lb lead.
  7. Open pit Mineral Resources were defined within the constraining pit design as per the 2018 Feasibility Study.

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1.12 MINING METHODS

The Back Forty mine plan presented in this Preliminary Economic Assessment is based on mining the highest value material as soon as possible and treating this material through the process plants to maximize cash flow. This strategy is achieved by mining the mineralized material and either feeding the material directly to the process plant or stockpiling the material onsite for processing later per a feed schedule based on optimal economics for the operation. The mine plan consists of a combined open pit and underground mining operation. Open pit mining will take place from Year 1 to Year 5. Underground development will be initiated in Year 5 and underground production mining will continue to Year 11.

A number of stockpiles, by material type, will facilitate the accelerated processing of higher- grade material and also manage fluctuations in process plant feed delivery from the two mining operations.

The Back Forty Project area consists of very subdued terrain and topography. The area, topography and climate are amenable to the conventional open pit mining operations proposed for the Project. The open pit mining operation will encompass a single open pit that will be mined with conventional mining equipment in three pushback phases. The underground mine will be developed beneath the open pit with a single decline access point located part way down the open pit ramp.

1.12.1 Open Pit Mining

The open pit design is based on the 2018 Feasibility Study. Minor modifications were made to standardize on 5 m high benches with a quadruple (4) bench configuration, resulting in a 20 m vertical distance between catch berms. For scheduling purposes, the Back Forty pit was subdivided into three phases. Mining commences in a small higher-grade pit and then expands outwards by pushing back the pit wall. This enables annual waste stripping quantities to be distributed to avoid high and low annual tonnage fluctuations.

Open pit mining operations will be carried out by Company personnel except for blasting. A blasting contractor will be used to supply the explosives, prepare the blasts, charge the holes, fire the blast, and inspect the area post-blast. The equipment fleet will consist of hydraulic excavators and front-end wheel loaders, both with 8 m3 buckets, and 90 t capacity haul trucks, plus track dozers, graders, and support equipment.

A summary of the open pit mining schedule is shown in Table 1.4. Mineralized material may be delivered either to the primary crushers or placed into one of the stockpiles. Waste rock is either taken to a waste rock storage facility or used in tailings dam construction. A six month preproduction period is planned.

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TABLE 1.4

OPEN PIT MINING SCHEDULE

Type

Units

Total

Year

Y-1

Y1

Y2

Y3

Y4

Y5

Overburden

kt

3,778

1,233

1,648

896

-

-

-

Waste Rock

kt

47,970

1,568

9,263

12,130

13,437

10,512

1,058

Total Waste

kt

51,747

2,801

10,911

13,027

13,437

10,512

1,058

Process Plant Feed

Mining

Total Sulphide

kt

8,815

73

2,236

1,647

1,406

2,678

776

Total Oxide

kt

1,317

126

353

327

157

309

45

Total Feed

kt

10,132

199

2,589

1,974

1,563

2,987

821

Total Material

kt

61,880

3,000

13,500

15,000

15,000

13,500

1,879

Strip ratio

w:o

5.1

14.1

4.2

6.6

8.6

3.5

1.3

Feed to Stockpiles

kt

6,961

199

1,995

1,609

575

1,953

629

Plan views of the three pit phases are shown in Figure 1.1. Mining will occur in several phases simultaneously in order to meet the requisite stripping and process plant feed delivery targets.

Mineralized material mining dilution is based on a selective mining unit ("SMU") model and is estimated at 22.3%, with 3% mining losses. Once excavated, the material is transported to either a stockpile or to one of the primary crushers, according to the material type (Main, Pinwheel, Tuff, Oxides).

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FIGURE 1.1 OPEN PIT PHASES

PHASE 1

PHASE 2

PHASE 3 (FINAL PIT)

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1.12.2 Underground Mining

Extraction of the potentially economic portion of the underground Mineral Resource will be achieved by a combination of mechanized Cut and Fill ("CF") or Longhole ("LH") methods. CF mining is the dominant method, producing approximately 63% of mined tonnes, with LH producing the remaining 37% of tonnes. CF mining uses one of four stope sizes, and targets low-dipping material (dip less than 55°). LH mining uses one of two stope size subsets and orientations (transverse or longitudinal).

All waste and mineralized material development will be carried out using drill jumbos and mechanized bolting units, thus allowing for sharing of the equipment fleet between development and production assignments, allowing crews and machinery to perform production and/or development tasks in nearby mining areas while limiting machinery travel distances. Mineralized material will be extracted from the CF and LH stopes using 9 t and 14 t load-haul-dump ("LHD") units and loaded into 40 t underground trucks for transport to surface.

Access to the Deposit is via a 5 m by 5 m ramp from surface, with the underground portal located on the 187.5 m pit bench. All development and production material from underground is hauled to, and dumped at, a portal stockpile. From the stockpile, open pit trucks will transport the material to its final destination. Backfilling of the stope areas is achieved through the use of Pastefill ("PF"), delivered via two boreholes from the surface PF Plant. PF varies from 3-7% cement by mass, depending on application: higher cement contents are used for artificial sill pillars, lower cement contents are used otherwise. The PF system has a planned capacity of 2,300 tpd and the PF Plant is to be operated for 16-18 hours per day on average. All stoping areas are planned to be filled with pastefill.

The underground construction and development commences in Q1 of Year 5, with production beginning at the start of Q3 of Year 5. Commercial production is achieved midway through Q4 of Year 6. The production rate of the underground varies depending on development requirements, with a nominal commercial production rate of 2,300 tpd, increasing to a maximum of 3,200 tpd in Year 7, before decreasing slightly towards the end of mine life in Year 9 as CF mining areas are exhausted and the mine transitions to lower-value LH stopes. LH mining for the Back Forty Deposit uses a nominal 25 m floor-to-floor sublevel spacing, with 5 m drift heights.

The underground mine is equipped with a high-capacity pumping system capable of moving 109 L/s to surface if necessary. Ventilation is provided via three powered fresh air raises, with the portal and a single unpowered return air raise for exhaust. Electrical power is supplied initially at 15 kV, with step-down transformers distributed throughout the mine. The mine also has a small compressed air distribution system capable of providing 0.45 m3/s at standard temperature and pressure.

Mining dilution is broken down into three types: Internal, External and Backfill. Average internal dilution is 13.6% by mass, average external dilution is 6.3% by mass, and average backfill dilution is 4.4% by mass. Overall mining recovery on a tonne-weighted basis is expected to be 93.4%.

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The total mined and recovered portion of the underground Mineral Resource comprises 5,717 kt of mineralized material with an average Net Smelter Return ("NSR") value of US$109.24/t. Figure 1.2 presents a 3-D schematic of the underground mine layout at the end of the life-of- mine ("LOM"). The green stopes are active in the final year of mining, and the blue stoping areas are mined out and filled.

A total of 22,805 m of lateral development and 1,169 m of vertical development are required over the underground LOM.

FIGURE 1.2 UNDERGROUND MINE AT END OF LOM, 3-DSCHEMATIC

Table 1.5 shows the production tonnes from the Back Forty underground Mineral Resource by year and mining method. Units are in thousands of tonnes.

TABLE 1.5

PRODUCTION BY MINING TYPE BY YEAR (KT)

Type

Year

Year

Year

Year

Year

Year

Year

Total

5

6

7

8

9

10

11

LH

-

-

-

-

438

968

732

2,138

CF Type 1

-

98

503

520

268

-

-

1,389

CF Type 2

119

551

558

536

232

-

-

1,996

CF Type 3

1

18

43

47

13

-

-

122

CF Type 4

1

16

22

24

8

-

-

72

Total

122

683

1,126

1,126

959

968

732

5,717

Note: CF1 = 7.5 m x 5.0 m, CF2 = 5.0 m x 5.0 m, CF3 = 4.0 m x 2.5 m, CF4 = 5.0 m x 2.5 m, Width x Height.

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1.13 PROCESS PLANT

Oxide mineralized material and sulphide mineralized material (Main, Pinwheel and Tuff material) are treated through separate process plants.

The oxide mineralized material will be processed via a cyanidation leach circuit to produce doré. Depending on the grades of copper, zinc and lead, the sulphide mineralized material will be processed via two stages of flotation to produce concentrates, i.e. either a copper and zinc concentrate, or a lead and zinc concentrate.

Sulphide mineralized material will be processed on a campaign basis based on the main material types that have a similar metallurgical response. As such the design of the sulphide plant is based on a flexible metallurgical flowsheet to process the main material types.

The oxide and sulphide flowsheets are based on proven unit operations in the industry.

The oxide plant has been designed for a throughput of 350 tpd (dry) at head grades of up to 8.0 g/t Au and 127 g/t Ag. The overall flowsheet includes the following steps:

  • Three stage crushing using an open circuit jaw crusher, open-circuit secondary cone crusher and closed-circuit tertiary cone crusher.
  • Grinding and classification.
  • Pre-leachthickening.
  • Cyanide leach.
  • Vacuum filtration of leaching tailings.
  • SART.
  • Carbon-in-Column("CIC") gold adsorption.
  • Carbon acid-washing, desorption and recovery ("ADR").
  • Smelting to produce doré.
  • Cyanide destruction of the final wash filtrate from the vacuum filtration step.
  • Tailings repulping and disposal to the Tailings Management Facility ("TMF").

The sulphide plant has been designed for a nominal throughput of 2,800 tpd (dry), with varying copper, lead and zinc head grades. The overall flowsheet includes the following steps:

  • Primary crushing.
  • Coarse mineralized material stockpile and reclaim.
  • Grinding and classification.
  • Gravity concentration.
  • Bulk rougher flotation to produce copper concentrate or lead concentrate depending on mineralized material campaign.
  • Zinc rougher flotation.
  • Bulk concentrate regrind (copper or lead concentrate).
  • Zinc concentrate regrind.
  • Bulk cleaner flotation, using three stages of cleaning (copper or lead concentrate).
  • Zinc cleaner flotation, using two stages of cleaning.
  • Bulk concentrate thickening and filtration (copper or lead concentrate).
  • Zinc concentrate thickening and filtration.

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  • Tailings thickening and disposal in the common TMF.

Figure 1.3 presents an overall block flow diagram depicting the major unit operations incorporated in the selected process flowsheet.

The process plants will receive material based on a processing schedule where material will either come from the mine directly or from stockpiled material that was mined earlier.

Stockpiled material will be stored according to the main material types (not blended) that have a similar metallurgical response in the plant, i.e. Main, Pinwheel, Tuff, and Oxide. Oxide material will be constantly fed to the Oxide Plant at 350 tpd. Depending on the processing schedule, sulphide material will be fed constantly per material type on a campaign basis to the Sulphide Plant at 2,800 tpd (Tuff), 3,500 tpd (Main) or 3,440 tpd (Pinwheel).

For stable process plant operations, the processing schedule has a minimum of one-month campaigning on a material type. When the feed material is changed from Main to Pinwheel and vice versa, the sulphide plant parameters are adjusted according to the metallurgical requirements and are considered relatively minor in nature. When the feed material is changed from Main or Pinwheel to Tuff and vice versa, then a complete clean out of the bulk flotation circuit is required to prevent contamination of the final concentrates.

Design parameters for the comminution circuit were sourced from testwork conducted at SGS during 2015 and 2017. Mineralized material characterization and comminution modelling was completed based on this testwork.

Aquila elected to pursue the vacuum filtration, SART and carbon adsorption flowsheet instead of the Merrill Crowe recovery circuit for this PEA. The primary driver for this decision is the need to remove copper from the circuit with a view to improving the quality of the doré bars. SART also allows for the removal of mercury and silver from the pregnant leach solution to further improve the quality of the doré product. The recovery of free cyanide and cyanide bound as weak acid dissociable metal complexes is expected to improve the economics of this flowsheet.

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FIGURE 1.3 OVERALL PROCESS PLANT BLOCK FLOW DIAGRAM

Source: Lycopodium Minerals Canada Ltd. (2019)

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1.14 SITE INFRASTRUCTURE

The overall site plan is shown in Figure 1.4 and includes major facilities of the Project including the open pit mine, mineralized material stockpiles, oxide and sulphide processing plants, TMF, waste rock facilities ("WRF"), cut-off wall ("COW"), contact water basin ("CWB"), non-contact water basins ("NCWB"), waste water treatment plant ("WWTP"), mine services, overburden stockpile and access road.

Prior to commencing underground mining, a paste backfill plant will be installed near the open pit mine to provide cemented paste for backfill requirements.

Access to the Project is from the east side of the Property off the existing County Road 356. Main access will be via the main security gate near the process plant.

Grid power will be provided from an incoming 138 kV high voltage ("HV") line from the east side of the Project along the main access road.

The site will be fenced to clearly delineate the Project area and deter access by unauthorized people.

1.15 MARKET STUDIES AND CONTRACTS

There are no material contracts or agreements in place as of the effective date of this Technical Report.

Statistics for metal markets have been taken from September 2019 analysis by BMO Capital Markets. Statistics for concentrate markets have been provided by Ocean Partners, who are specialist base metal concentrate traders.

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FIGURE 1.4 OVERALL SITE PLAN

Source: Lycopodium Minerals Canada Ltd. (2019)

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1.16 ENVIRONMENTAL STUDIES, PERMITS AND SOCIAL OR COMMUNITY IMPACT

Aquila currently holds several permits as required in Michigan's environmental regulations. The current permits that have been issued for the Back Forty Project include:

  • Part 632 Mining Permit (MP 01 2016) for mining and beneficiation activities associated with the Back Forty Deposit.
  • Part 632 Mining Permit (MP 01 2016) Amendment.
  • National Pollutant Discharge Elimination System ("NPDES") Permit (MI0059945) for treated process wastewaters.
  • Michigan Air Use Permit to Install ("PTI") (205-15) has been issued for the Project for emissions associated with construction and mining activities.
  • PTI 205-15 Modification for the updated facilities.
  • Part 301 Inland Lakes and Streams and Part 303 Wetlands Protection Permit (WRP011785).

In addition the permits listed above, a Dam Safety Permit for the CWB and TMF will be obtained prior to the construction and operation of the Back Forty Mine.

Wetlands have been extensively studied at the site and are documented in the MDEQ/USACE Joint Permit Application for: Wetland Protection; Inland Lakes and Streams; Floodplain (Foth et al., 2017). Wetlands of various sizes and classification encroach across the site. Although the mine and processing facilities have been located in a compact area, every effort has been made to avoid and minimize wetland impacts.

Aquatic surveys and assessments address aquatic biota and their habitats in the Menominee River, Shakey River, and Shakey Lakes systems. Original baseline sampling documented in the original Mining Permit Application (Foth, 2015) and Mining Permit Amendment Application (Foth, 2018) provides an understanding of presence and species of aquatic biota in and around the Project site. Prior to commencement of construction, additional baseline sampling is required under the Mining Permit. With understanding of aquatics provided by the original survey, an additional aquatics preconstruction survey is proposed.

On-going terrestrial flora monitoring to confirm baseline conditions, and address trends during construction and operations include annual observations of plant species along transects. Meander surveys through upland habitats and surveys within the established transects address the scope of upland vegetative surveys.

Terrestrial wildlife monitoring during the Project operations will include annual and semi-annual observations of amphibians, reptiles, birds, and mammals at designated survey sites previously studied. Observations will be documented and included with the Project's annual report. The

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fauna monitoring will be completed to confirm baseline conditions and document the trends and conditions of these resources during operations.

Over the life of the mine, the data and observations will be documented by qualified professionals and will assist in identifying trends in biota in and around the site. These trends, along with other media data such as groundwater and surface water quality and hydrologic parameters, will be used to evaluate whether an observed trend is related to the Project.

Undeveloped areas, such as the Project area, have very good air quality. The largest city with industrial activity is Menominee, Michigan - Marinette, Wisconsin, an area 30 miles south of the site with a combined population of approximately 20,000.

The Property and proposed development area have been investigated for the existence of cultural resources, and historical artefacts have been documented.

Feedback to this Project is continually requested and submitted by the public as part of Aquila's ongoing efforts to engage in operational transparency and information sharing with the local community and other affected stakeholders. This engagement strategy dates to almost a decade ago under previous Project proponents. The Back Forty Project represents many employment opportunities that have attracted interest of unions and business groups. As such, the Project has seen strong support from legislators and regulators. Aquila has developed a good working relationship with the Upper Peninsula Construction Council to ensure availability of local skilled labour.

Tribal engagement has been very important to the Project, especially considering the cultural resources near the site. Aquila plans to continue working with the Tribes to better understand their concerns and to find opportunities to work together on issues that are important to both parties such as communication on the preservation of and unanticipated discovery plan of historical artifacts.

Currently, there are four ongoing legal actions involving the Menominee Tribe, regarding the wetland and mine permits.

1.17 CAPITAL COSTS

1.17.1 Initial Capital Costs

The initial capital cost estimate for the Project is summarized in Table 1.6 by major area.

All costs are expressed in United States Dollars unless otherwise stated and are based on Q3 2019 pricing and deemed to have an overall accuracy of ±25%. The capital cost estimate conforms to Association for the Advancement of Cost Engineering International ("AACEI") Class 4 estimate standards as prescribed in recommended practice 47R11.

The initial capital cost estimate was based on an overall engineering, procurement and construction management ("EPCM") implementation approach and horizontal (discipline based) construction contract packaging. Equipment pricing was based on a combination of budget

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quotations and actual equipment costs from recent similar Lycopodium and P&E projects considered to be representative of the Project.

TABLE 1.6

CAPITAL ESTIMATE SUMMARY BY AREA

(Q3 2019, ±25%)

Item

Capital Costs

($M)

Construction Indirects

11.4

Oxide Plant

24.1

Sulphide Plant

57.5

TMF/WRFs

42.6

Infrastructure

34.2

Mining

23.6

EPCM

15.7

Owner costs

11.4

Subtotal

220.6

Contingency

29.9

Total

250.4

1.17.2 Sustaining Capital Costs

Capital expenditures for open pit mining incurred after Year -1 are considered sustaining capital and are estimated at $45.9M in Table 1.7. The majority of the sustaining capital consists of capital lease payments for the mining equipment. Given the life of the open pit, no equipment replacements are planned.

TABLE 1.7

OPEN PIT MINE SUSTAINING CAPITAL COSTS ($K)

Item

Total

Year

($k)

1

2

3

4

5

6

7

Equipment and Down

851

851

0

0

0

0

0

0

Payments

Equipment Capital

39,824

6,769

8,819

8,819

8,820

4,380

2,134

83

Leases

Mine Development

3,228

2,956

163

110

0

0

0

0

Freight and Spares

2,034

381

441

441

441

219

107

4

Total Mine Sustaining

45,937

10,956

9,423

9,370

9,261

4,599

2,241

87

Capital

Initial capital costs for the underground mine are treated as sustaining capital costs for the Back Forty Project since open pit mining will be well underway by the time the underground mine is developed. Sustaining capital costs also include all costs associated with infrastructure, capital waste development (vertical and lateral), relevant equipment leasing costs (downpayments, legal

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fees, origination costs and mobilization costs), and the paste backfill plant. Total sustaining capital costs are estimated at $98.9M, as shown in Table 1.8.

TABLE 1.8

UNDERGROUND SUSTAINING CAPITAL COSTS ($K)

Item

Total

Year

($k)

4

5

6

7

8

9

10

11

Infrastructure

19,763

250

4,471

7,889

1,063

5,875

214

1

0

Equipment

32,198

100

9,011

9,990

9,241

3,265

542

0

50

Development

31,984

0

9,314

11,120

6,942

3,772

769

68

0

Paste Plant

15,000

15,000

0

0

0

0

0

0

0

Total

98,946

15,350

22,796

28,999

17,246

12,912

1,524

69

50

Other Project sustaining capital costs include subsequent TMF stage raises over the LOM and plant annual capital expenditures. The sustaining capital schedule over the life of mine is estimated at $69.3M as shown in Table 1.9.

TABLE 1.9

PROJECT SUSTAINING CAPITAL COSTS ($K)

Item

Total

Year

($k)

1

2

3

4

5

Cut-off Wall

4,667

4,667

0

0

0

0

TMF

28,690

17,039

4,580

5,257

0

1,813

SWRF

9,233

9,233

0

0

0

0

NWRF

31,524

10,616

20,907

0

0

0

Total Project Sustaining Costs

69,320

38,728

23,623

5,155

0

1,813

Mine closure costs, salvage value and rehabilitation costs are estimated at $75M.

A key aspect of mine closure is the backfilling of the open pit with waste rock. In addition, capping of the TMF is required along with topsoil placement in preparation for re-vegetation. These earthworks will occur during the last few years of the operation and extend two year beyond the end of processing. The total cost is estimated at $55M.

1.18 OPERATING COSTS

LOM operating costs are presented in Table 1.10.

TABLE 1.10

LOM OPERATING COSTS

Item

Total Cost

Unit

Average

($ M)

Unit Cost

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Open pit mining

$/t mined

3.03

Underground mining

$/t mined

50.31

Open pit mining

178

$/t processed

11.2

Underground mining

288

$/t processed

18.2

Process plant

310

$/t processed

19.5

G&A

46

$/t processed

2.9

Total

821

$/t processed

51.8

1.19 FINANCIAL EVALUATION

A Preliminary Economic Assessment of the Project has been conducted using an after-tax cash flow model. The model was structured using an EXCEL workbook. The economic analysis is presented for two macro-economic cases that are summarized in Table 1.11. The Base Case uses current (June 2020) consensus long term forecast metal prices, while the Spot Case uses prices at the time of writing (July 9, 2020).

The PEA was prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). Readers are cautioned that the PEA is preliminary in nature. It includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be classified as Mineral Reserves, and there is no certainty that the PEA will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, socio-political, marketing, or other relevant issues.

Input data was provided from a variety of sources, including the various consultants' contributions to this PEA, pricing obtained from external suppliers and contractors, and foreign exchange rates and Project specific financial data such as the expected taxation regime were received from Aquila.

TABLE 1.11

SUMMARY METRICS

Area

Item

Units

Base1

Spot2

Case

Price

Total Process Feed

Mt

15.9

15.9

Grade

g/t AuEq4

4.2

3.7

Total Recovery and Payability

% of contained AuEq

74.3

73.4

Process

Payable Gold

koz Au

692

692

Payable Gold Equivalent

koz AuEq

1,543

1,323

Production

Annual Gold Equivalent

koz AuEq

128

110

Life of Mine

Years

12

12

Nominal

2,800

Throughput

tpd

sulphides + 350

oxides

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TABLE 1.11

SUMMARY METRICS

Area

Item

Units

Base1

Spot2

Case

Price

Total Tailings

Mt

14.4

14.4

Gold

$/oz

1,485

1,998

Metal Price

Zinc

$/lb

1.08

1.04

Copper

$/lb

3.05

2.92

Deck

Silver

$/oz

18.20

25.00

Lead

$/lb

0.91

0.83

Gross Revenue

US$/t process feed

132

149

NSR

US$/t process feed

113

130

Revenue

Total Site Opex

US$/t process feed

52

52

Royalties

% of NSR

2.0

2.1

and OPEX

EBITDA

US$/t process feed

59

75

EBITDA margin

EBITDA / NSR

52

58

C1 Cash Costs (co-product)3

US$/oz AuEq

733

854

C1 Cash Costs (by-product)3

US$/oz Au

(82)

(29)

Initial Capital

US$ M

250

250

CAPEX

Sustaining Capital

US$ M

214

214

AISC (co-product)3

US$/oz AuEq

926

1,078

AISC (by-product)3

US$/oz Au

397

462

Pre-Tax NPV 6% discount rate

US$ M

248

430

Unlevered

Pre-Tax IRR

%

31.6

45.4

Post-Tax NPV 6% discount rate

US$ M

176

316

Returns5

Post-Tax IRR

%

26.1

37.8

Post-Tax Payback

Years

2.4

1.6

Notes:

  1. The Base Case macro-economic forecast assumes flat pricing that has been drawn from the consensus long term estimates of select banks as of August 4, 2020.
  2. As at August 4, 2020.
  3. C1 cash costs, which are intended to measure direct cash costs of producing paid metal, include all direct costs that would generate payable recoveries of metals for sale to customers, including mining of mineralized materials and waste, leaching, processing, refining and transportation costs, on-site administrative costs and royalties, net of by-product credits. C1 cash costs do not include depreciation, depletion, amortization, exploration expenditures, reclamation and remediation costs, sustaining capital, financing costs, income taxes, or corporate general and administrative costs not directly or indirectly related to the Project. C1 cash costs are divided by the number of ounces of gold estimated to be produced for the period to arrive at cash costs per gold ounce produced. AISC includes C1 cash costs, as defined above, plus exploration costs at the Project and sustaining capital expenditures (including additional tailings storage, permitting and customary improvements to the operations over the life of the Project). AISC is divided by the number of ounces of gold estimated to be produced for the period to arrive at AISC per gold ounce produced. EBITDA is earnings before interest, taxes, depreciation, and amortization.
  4. Gold equivalent ounces were determined by calculating the total value of metals contained or produced and dividing that number by the gold price ($1,485/oz gold Base Case or $1,998/oz gold Spot Case). As the denominator is higher in the Spot Case, the gold equivalent is lower than at Base Case prices. Gold equivalent grade is calculated by dividing the number of gold equivalent ounces by the Mineral Resource size (tonnes).

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  1. Project economics reflect the Company's gold and silver streaming agreements with Osisko Gold Royalties (see Aquila press release dated June 18, 2020). The PEA financial model includes $30 million of initial payments under the gold stream to be received during the design and construction period. The 2018 Feasibility Study did not include the impact of the gold streaming agreement.

Commercial terms for concentrate and doré have been based on guidance from the specialist metals traders, Ocean Partners, and are as follows:

Copper Concentrate

  • The most cost-effective destination for concentrate treatment is in Eastern Canada, with a total cost of transport of approximately $52/t. Note that this cost, and transport costs discussed below, includes trucking of concentrate from the mine site to a rail head, rehandle then rail transportation to the final destination. The second lowest cost, in Western USA, would have an associated cost approximately $60/t higher.
  • Concentrate grade would be adjusted to target the optimal economics per material type, ranging between 17 - 22% Cu and with an average of 18.5%. Copper payables would be calculated on a one unit deduction to a maximum of 96.5% and would average 94.1%. Treatment charges would include a base rate of $80/t, with penalties ranging from $4 - $10/t by material type (for mercury content) and average approximately $7/t. Refining charges would be $0.08/lb payable Cu.
  • The grades of by-product Au and Ag would average 57 g/t and 738 g/t, respectively. These high grades would be expected to make Back 40 copper concentrate desirable and allow maximum payables of 96.3% Au and 90% Ag to be achieved. Refining charges would be $6/oz Au and $0.50/oz Ag.

Zinc Concentrate

  • The most cost-effective destination for concentrate treatment is in Eastern Canada, with a total cost of transport of approximately $62/t. At present, this facility does not pay for precious metals though there has been discussion regarding addition of a circuit to recover these. Facilities that do pay for precious metals located in Western Canada or Europe have a transportation cost premium of approximately $70/t. Note that transport costs to Europe also include rehandle of concentrate at a port and shipping to the final destination.
  • Concentrate grade would be adjusted to target the optimal economics per material type, ranging between 50 - 55% Cu and with an average of 53.9%. Zinc payables would be calculated on an eight unit deduction to a maximum of 85% and would average 84.8%. Treatment charges would include a base rate varying by material type from $200 - $220/t, with penalties ranging from $5 - $8/t by material type (for mercury, iron and silica content) and average $209/t. For the assumed long term zinc price of $1.09/lb, the standard escalation clause would result in a further charge of $8/t. There are no refining charges for zinc.

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  • Facilities in Western Canada, Europe, Korea and Japan currently pay for by-product gold and silver in excess of 1 g/t and 3 oz/t, respectively. There are no refining charges for by-product precious metals. Over the life of mine, approximately 78% of zinc concentrate would contain potentially payable levels of by-product precious metals, with 90% of potentially payable by-products contained in 55% of total concentrate and 50% of potentially payable by-products contained in just 20% of total concentrate. It is possible that zinc concentrate would be shipped to multiple destinations to optimize shipping costs and precious metals realizations.

Lead Concentrate

  • Lead concentrate would be shipped to Western Canada, with a total cost of transport of approximately $136/t.
  • Concentrate grade would average 35% Pb. Lead payables would be calculated on a three unit deduction to a maximum of 95% and would average 91.4%. Treatment charges would include a base rate of $160/t, with penalties for mercury content of $3/t. There are no refining charges for lead.
  • Average by-product grades of 63 g/t Au and 1,183 g/t Ag would attract the maximum level of payability of 95%. Refining charges would be $20/oz Au and $1/oz Ag.

Doré

  • Doré would command payables of 99.9% Au and 99% Ag.
  • Freight costs would total $15k/t doré, while smelter charges would be $8k/t. Total charges would equate to $0.82/oz Au.

Aquila previously sold a stream that will comprise 85% of future silver production. The commercial arrangements associated with the stream included initial payments totalling $17.25M and a further $4/oz for silver delivered into the stream. The financial model does not include the initial payments as inflows since these have already been received.

Aquila also previously sold a stream that will comprise 18.5% of gold production to a cap of 105 koz into the stream (or approximately 568 koz total production). Thereafter, the stream reduces to 9.25% of total production. Over the life of mine, gold delivered into the stream is forecast to total 116 koz or 16.8% of total production. Gold stream payments included phased initial payments of $55M, of which $15M has been received to date and an additional $2.5M will be received prior to construction. The model reflects the final $30M deposit as an inflow during the construction period. The stream also makes provision for payment of 30% of the spot price, to a maximum of $600/oz, for gold delivered into the stream.

The streams are omitted from the calculation of tax obligations, with pre-tax revenues calculated based on the entirety of production sold at forecast spot prices.

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Returns are most sensitive to gold and zinc prices, with a ±15% movement in prices having a 38

  • 41% relative impact to the NPV. The impact of similar variation in copper prices is less than one third as much at 12%. Returns are relatively insensitive to variation in silver or lead prices. Project economics remain viable even with the entire suite of metals at 85% of the assumed long term price, with the Project generating an 8.0% IRR. Under the more optimistic pricing scenario, simple pay back could be achieved within 20 months.

1.20 CONCLUSIONS AND RECOMMENDATIONS

Based on the work undertaken to date, as summarized in this Technical Report, and the individual Qualified Persons conclusions listed in Section 25, the PEA has identified a viable future underground mining option for the Project.

Subject to ongoing Project funding and board approval, it is recommended that Aquila advance the PEA concepts and commence a Feasibility Study update phase including additional studies and site investigations set out in Section 26 at an estimated work program budget of $4M.

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2.0 INTRODUCTION AND TERMS OF REFERENCE

This report was prepared to provide a National Instrument ("NI") 43-101 Technical Report and Preliminary Economic Assessment ("PEA") for the polymetallic (zinc + gold + copper + silver + lead) volcanogenic massive sulphide ("VMS") Back Forty Deposit (the "Project" or "Property") located in Menominee County, Michigan, USA. The Back Forty Property is 100% owned by Aquila Resources Inc. ("Aquila" or the "Company").

This Technical Report was prepared by P&E Mining Consultants Inc. ("P&E") at the request of Mr. Andrew Boushy, Senior VP Projects, and is considered current as of October 14, 2019.

Aquila is a public, TSX listed, company trading under the symbol "AQA", with its head office located at:

141 Adelaide Street West, Suite 520

Toronto, Ontario

Canada

M5H 3L5

Telephone: 647-943-5672

Aquila's Back Forty Project is an open pit VMS deposit with underground potential located along the mineral‐rich Penokean Volcanic Belt ("PVB") in Michigan's Upper Peninsula. The Project contains approximately 1.2 billion pounds of zinc and 1.1 million ounces of gold in the Measured and Indicated Mineral Resource classifications, with additional upside potential. A Feasibility Study on the Project was issued in September 2018 that studied open pit mining and on-site processing plants for oxide and sulphide material. This Technical Report considers underground mining in addition to open pit mining. Currently Aquila is working to secure the final permits required to build and operate the Back Forty Project.

The purpose of this Technical Report is to provide an independent, NI 43-101 Updated Mineral Resource Estimate and Preliminary Economic Assessment on the Back Forty Project. P&E understands that this Technical Report may be used for internal decision-making purposes and will be filed as required under TSX regulations. The Technical Report may also be used to support public equity financings.

The current P&E Updated Mineral Resource Estimate presented in this Technical Report has been prepared in full conformance and compliance with the "CIM Standards on Mineral Resources and Reserves - Definitions and Guidelines" as referred to in NI 43-101 and Form 43- 101F, Standards of Disclosure for Mineral Projects and in force as of the effective date of this Technical Report.

Mr. Yungang Wu, P.Geo., and Mr. Eugene Puritch, P.Eng., FEC, CET of P&E, each a Qualified Person under the terms of NI 43-101, conducted a site visit of the Property on May 23, 2016. Mr. Wu conducted a subsequent site visit on November 13-14, 2017. A data verification sampling program was conducted as part of each on-site review.

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Mr. Neil Lincoln, P.Eng., of Lincoln Metallurgical Inc., a Qualified Person under the terms of NI 43-101, visited the Property July 12, 2016 where he observed the drill core at the core storage area, and toured the site of the proposed mine, process plant and infrastructure.

Mr. Kebreab Habte, P.Eng., of Golder Associates Ltd., a Qualified Person under the terms of NI 43-101, visited the Property June 28, 2016 to carry out a site reconnaissance survey to become familiar with the site layout, drainage conditions, subsurface conditions, and to identify potential geotechnical risks.

Mr. David Penswick, P.Eng., of Gibsonian Inc., a Qualified Person under the terms of NI 43- 101, visited the Property November 2, 2017 where he reviewed and confirmed aspects impacting the financial valuation.

2.1 SOURCES OF INFORMATION

In addition to the site visits, P&E held discussions with technical personnel from the Company regarding all pertinent aspects of the Project and carried out a review of available literature and documented results concerning the Property, including internal Company technical reports and maps, published government reports, Company letters, memoranda, public disclosure and public information, as listed in the References at the conclusion of this Technical Report. Sections from reports authored by other participating consultants have been summarized in this Technical Report, and are so indicated where appropriate. Table 2.1 presents the authors and co-authors of each section of the Technical Report, who acting as a Qualified Person as defined by NI 43-101, take responsibility for those sections of the Technical Report as outlined in the "Certificate of Author" attached to this Report.

TABLE 2.1

REPORT AUTHORS AND CO-AUTHORS

Qualified Person

Employer

Technical Report Section

Responsibility

Mr. Andrew Bradfield, P.Eng.

P&E Mining Consultants Inc.

2, 3, 15, 24 and Co-author 1,

25, 26

Ms. Jarita Barry, P.Geo.

P&E Mining Consultants Inc.

11 and Co-author 1, 12, 25, 26

Mr. David Burga, P.Geo.

P&E Mining Consultants Inc.

4, 5, 6, 7, 8, 9, 10, 23 and Co-

author 1, 25, 26

Mr. Kebreab Habte, P.Eng.

Golder Associates Ltd.

Co-author 1, 18, 21, 25, 26

Mr. Kenneth Kuchling, P.Eng.

P&E Mining Consultants Inc.

Co-author 1, 16, 18, 21, 25, 26

Mr. Neil Lincoln, P.Eng.

Lincoln Metallurgical Inc.

13, 20 and Co-author 1, 25, 26

Dr. Manochehr Oliazadeh,

Lycopodium Minerals Canada

17 and Co-author 1, 18, 21, 25,

P.Eng.

Ltd.

26

Mr. David Penswick, P.Eng.

Gibsonian Inc.

19, 22 and Co-author 1, 25, 26

Mr. Eugene Puritch, P.Eng.,

P&E Mining Consultants Inc.

Co-author 1, 12, 14, 25, 26

FEC, CET

Mr. D. Gregory Robinson,

P&E Mining Consultants Inc.

Co-author 1, 16, 21, 25, 26

P.Eng.

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TABLE 2.1

REPORT AUTHORS AND CO-AUTHORS

Qualified Person

Employer

Technical Report Section

Responsibility

Mr. Yungang Wu, P.Geo.

P&E Mining Consultants Inc.

Co-author 1, 12, 14, 25, 26

This Technical Report was prepared in accordance with the requirements of NI 43-101 and in compliance with Form NI 43-101F1 of the Ontario Securities Commission ("OSC") and the Canadian Securities Administrators ("CSA"). The Mineral Resource Estimate was prepared in compliance with the CIM Definitions and Standards on Mineral Resources and Mineral Reserves that were in force as of the effective date of this Technical Report.

2.2 UNITS AND CURRENCY

Unless otherwise stated, all units used in this Report are metric. Gold ("Au") and silver ("Ag") assay values are reported in grams of metal per tonne ("g/t"). Zinc ("Zn"), lead ("Pb") and copper ("Cu") assay values are reported in percent metal weight content ("%").

Quantities are generally stated in Système International d'Unités ("SI") metric units including metric tons ("tonnes", "t") and kilograms ("kg") for weight, kilometres ("km") or metres ("m") for distance, hectares ("ha") for area, grams ("g") and grams per tonne ("g/t") for gold grades ("g/t Au"). Gold and silver grades may also be reported in parts per million ("ppm") or parts per billion ("ppb"). Metal values are reported in percentage ("%"), grams per metric tonne ("g/t") and parts per billion ("ppb"). Quantities of gold and silver may also be reported in troy ounces ("oz") and quantities of copper in avoirdupois pounds ("lb"). Copper, lead and zinc metal assays are reported in percent ("%") or parts per million ("ppm"), whereas gold and silver assay values are reported in grams of metal per tonne (g/t) unless ounces per short ton ("oz/T") are specifically stated. Abbreviations and terminology are summarized in Table 2.2.

The US dollar is used throughout this Report unless otherwise specified. All metal prices are stated in US dollars.

The coordinate system used by Aquila for locating and reporting drill hole information is the Universal Transverse Mercator coordinate system ("UTM"), the datum used is NAD83, zone 16N. The coordinates for the approximate centre of the Property are latitude 45° 27' N, longitude 87° 51' W. Maps in this Report use either the UTM coordinate system or latitude and longitude.

Table 2.2 sets out terminology and abbreviations used in this Technical Report.

TABLE 2.2

TERMINOLOGY AND ABBREVIATIONS

Abbreviation

Meaning

$

dollar

$M

dollars, millions

$/t

$/tonne

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TABLE 2.2

TERMINOLOGY AND ABBREVIATIONS

Abbreviation

Meaning

%

percent

AA

atomic absorption

AAS

atomic absorption spectrometry

AACEI

Association

for

the Advancement of

Cost Engineering

International

Accurassay

Accurassay Lab

ACNC

American Copper and Nickel Company, Inc.

Actlabs

Activation Laboratories Ltd.

ADR

acid-washing, desorption and recovery

Ag

silver

Ai

abrasion index

ALS Chemex

ALS Chemex Labs, now ALS Minerals

amsl

above mean sea level

Aquila

Aquila Resources Inc.

ARC

Aquila Resources Corporation

ARD/ML

acid rock drainage and/or metal leaching

the Arrangement

January 16,

2014,

REBgold Corporation

and Aquila closed a

statutory plan of arrangement

asl

above sea level

Au

gold

Baker Steel

Baker Steel Capital Managers LLP

BFJV

Back Forty Joint Venture LLC

Bureau Veritas

Bureau Veritas Mineral Laboratories USA

BV

bed volume

BWI

bond ball mill work index

°C

degree Celsius

CAD$

Canadian dollar

CaO

calcium oxide

CaSO4

gypsum

CCRS

Commonwealth Cultural Resources Group, Inc.

CDA

Canadian Dam Association

CDN

CDN Resources Laboratory

CF

cut and fill

CHTF

chloritic crystal tuff

CIC

carbon in column

CIL

carbon in leach

CIM

Canadian Institute of Mining, Metallurgy, and Petroleum

CIP

carbon in pulp

cm

centimetre(s)

CMP

Cyanide Management Plan

CN

cyanide

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TABLE 2.2

TERMINOLOGY AND ABBREVIATIONS

Abbreviation

Meaning

the Project may elect to forgo the final payment, in which case the

the COC Provision

Threshold Stream Percentage and Tail Stream will be reduced to

9.5% and 4.75%, respectively

the Company

Aquila Resources Inc.

conc

concentrate

COW

cut-off wall

CRF

cemented rock fill

CRM

certified reference material

CSA

Canadian Securities Administrators

CSM

Cutter Soil Mixing

CSPT

Chinese Smelter Purchase Team

Cu

copper

CWB

contact water basin

CWI

crusher work index

DDH

diamond drill hole

the Deposit

Back Forty Deposit

dmt

dry metric tonne(s)

DNR

Michigan Department of Natural Resources

DWT

drop weight test

ECOG

economic cut-off grade

EIA

Environmental Impact Assessment

EIAA

Environmental Impact Assessment Amendment

EGLE

Environment Great Lakes and Energy

EM

electromagnetic

EPCM

engineering, procurement and construction management

EW

electrowinning

FAR

fresh air raise

FEL

front-end loader

FOS

factor of safety

ft

foot / feet

g

gram(s)

g/t

gram(s) per tonne

G&T

G&T Metallurgical Services Ltd.

GCL

geosynthetic clay liner

Golder

Golder Associates Ltd.

GOSS

gossan

GPS

global positioning system

ha

hectare(s)

HBF

horizontal belt filter

HCl

hydrochloric acid

HCN

hydrogen cyanide

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TABLE 2.2

TERMINOLOGY AND ABBREVIATIONS

Abbreviation

Meaning

HDPE

high-density polyethylene

HMI

Hudbay Michigan Inc.

HS PF

high-strength pastefill

Hudbay

Hudbay Minerals Inc.

HV

high voltage

IBC

intermediate bulk container

ICP-AES

inductively coupled plasma-atomic emission spectrometry

ID

inverse distance

ID3

inverse distance cubed

ID2

inverse distance squared

IDEA Drilling

Idea Drilling Company

Inspectorate

Inspectorate America Corporation, now Bureau Veritas Mineral

Laboratories USA

IP

induced polarization

ISO

International Organization for Standardization

Jumbo

electric-hydraulic powered development drill jumbo, typically with

one or two drill booms

JV

joint venture

k

thousand(s)

K80

primary grind size of 83 µm

kg

kilogram(s)

Km

kilometre(s)

KP

Knight Piesold Ltd.

kW

kilowatt

kWh/t

kilowatt hours per tonne

ktpm

kilotonnes per month

L

litre(s)

L/s

litres per second

lb

pound (weight)

LCS

leachate collection system

LDS

leachate detection system

Level

mine working level referring to the nominal elevation (m RL), eg.

4285 level (mine workings at 4285 m RL)

LH

longhole

LHD

load, haul and dump unit (underground loader)

LLCS

leachate and leakage collection sump

LOM

life of mine

LRS

liquid resistance starter

LS PF

low-strength pastefill

Lycopodium

Lycopodium Minerals Canada Ltd.

m

metre(s)

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TABLE 2.2

TERMINOLOGY AND ABBREVIATIONS

Abbreviation

Meaning

m3

cubic metre(s)

Ma

millions of years

Mag

magnetic

MASU or MS

massive sulphide

max.

maximum

mbs

metres below surface

MCOG

marginal cut-off grade

MDEQ

Michigan Department of Environmental Quality

Met

metallurgical

MFDK

mafic dyke

MIBC

methyl isobutyl carbinol

min.

minimum

mm

millimetre

ModBond

modified Bond ball work index

Moz

million ounces

MPC

Minerals Processing Corporation

m/s

metres per second

MREC

Menominee River Exploration Company

MRHY

massive, aphyric rhyolite flows

m RL

metres relative level

Mt

mega tonne or million tonnes

Mtpa

million tonnes per annum

MW

megawatt

N-S

north-south, north to south

NaCN

sodium cyanide

NAD

North American Datum

NAG

non-acid generating

NCWB

non-contact water basin

NE

northeast

NI

National Instrument

NN

nearest neighbour

NOC

Notice of Coverage

NOI

Notice of Intent

NPDES

National Pollutant Discharge Elimination System

NPI

net profits interest

NPT

Northern Penokean Terrane

NPV

net present value

NREPA

Natural Resources and Environmental Protection Act

NRHP

National Register of Historic Places

NSR

net smelter return

NW

northwest

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TABLE 2.2

TERMINOLOGY AND ABBREVIATIONS

Abbreviation

Meaning

NWRF

north waste rock facility

OBL

Osisko Bermuda Limited

OMC

Orway Mineral Consultants

OP

open pit

OS

overburden stockpile

OSA

on-stream analysis

OSC

Ontario Securities Commission

Osisko

Osisko Gold Royalties Ltd.

Orion

Orion Mine Finance

the Orion

March 31, 2015, the Company closed a

multi-level financing

transaction with Orion that included an equity private placement

Transaction

and a silver stream for total funding of $20.75M

oz

ounce

P80

80% percent passing

pa

per annum

P&E

P&E Mining Consultants Inc.

PAG

potentially acid generating

PAX

potassium amyl xanthate

Pb

lead

PC

Paterson and Cooke Canada Inc.

PEA

Preliminary Economic Assessment

PED

personal emergency device

PEM

pulse electromagnetic (survey)

P.Eng.

Professional Engineer

PF

pastefill

P.Geo.

Professional Geoscientist

PIPP

pollution incident prevention plan

Plug

artificial sill pillar

PoF

probability of failure

Portal

initial surface entrance prepared for ramp tunnel

PMF

probable maximum flood

ppb

parts per billion

ppm

parts per million

the Production

is when the Company has delivered 105,000 oz of gold to Osisko

Threshold

Bermuda Limited

the Project

Back Forty Project

the Property

Back Forty Property

PTI

Michigan Air Use Permit to Install

PVB

Penokean Volcanic Belt

Q1, Q2, Q3, Q4

first quarter, second quarter, third quarter,

fourth quarter of the

year

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TABLE 2.2

TERMINOLOGY AND ABBREVIATIONS

Abbreviation

Meaning

QA/QC

quality assurance/quality control

QEMSCAN

quantitative evaluation of materials by scanning electron

microscopy

QFP

quartz feldspar porphyry

QMS

quality management system

Ramp

tunnel excavated in downward (upward) inclination

RAR

return air raise

RATF

rhyolite ash tuff

RCTF

rhyolite crystal tuff

REBgold

REBgold Corporation

RF

revenue factor

RFID

radio frequency identification

ROM

run-of-mine

Ro Tail

rougher tail

RQD

rock quality designation

S

sulphur

SART

sulphidization, acidification, recycling and thickening

SCB

soil, cement, and bentonite

SCC

Standards Council of Canada

SE

southeast

SEDAR

System for Electronic Document Analysis and Retrieval

SESC

soil erosion and sedimentation control

SFST

sulphide stringer

SGS

SGS Canada Inc. and its subdivisions, e.g. SGS Mineral Services

SM

semi-massive sulphide

SMBS

sodium metabisulphite

SMC

SAG mill comminution

SMD

stirred media detritor

SMSS

semi-massive sulphide

SMU

selective mining unit

SPCC

spill prevention control and countermeasures

SSR

side slope risers

the Strategic

OBL purchased 49,173,076 units of Aquila at a price of C$0.26

Investment

per unit for aggregate gross proceeds of $10 million

the Stream

a Gold Purchase Agreement between Osisko Bermuda Ltd. and

Aquilla Resources Corp.

SW

southwest

SWRF

south waste rock facility

t

metric tonne(s)

T

short ton(s)

the Tail Stream

is when the Threshold Stream Percentage will be reduced to 9.25%

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TABLE 2.2

TERMINOLOGY AND ABBREVIATIONS

Abbreviation

Meaning

of the refined gold

TC

treatment charge

TCRC

treatment and refining charge

TFSD

tuffaceous sediments

the Threshold

Osisko Bermuda Ltd. will purchase 18.5% of the refined gold from

Stream Percentage

the Project

TMF

tailings management facility

tpd

tonnes per day

the Transaction

June 28, 2019, Orion purchased from Osisko all 49,651,857

common shares of the Company owned by Osisko

UG

underground

UTM

Universal Transverse Mercator grid system

VFD

variable frequency drive

VOIP

voice-over-internet-protocol

VMS

volcanogenic massive sulphide

VTEM™

versatile time domain electromagnetic (system)

w/v

weight by volume

w/w

weight by weight

WAD

weak acid dissociable

wmt

wet metric tonne(s)

WRF

waste rock facility (storage)

wt%

weight percent

WWTP

waste water treatment plant

Y or yr

year

Zn

zinc

ZnSO4

zinc sulphate

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3.0 RELIANCE ON OTHER EXPERTS

P&E has assumed that all of the information and technical documents listed in the References section of this Technical Report are accurate and complete in all material aspects. While P&E has carefully reviewed all of the available information presented, P&E cannot guarantee the accuracy and completeness of the documents listed in the References section of this Technical Report. P&E reserves the right, but will not be obligated, to revise the Technical Report and conclusions therein if additional information becomes known to P&E subsequent to the effective date of this Technical Report.

Copies of the tenure documents, operating licenses, permits, and work contracts were not reviewed. Information on tenure was obtained from Aquila and included a legal due diligence opinion supplied by Aquila's American legal counsel, Mr. Steven J. Tinti. P&E has relied upon tenure information from Aquila and has not undertaken an independent detailed legal verification of title and ownership of the Back Forty Project. P&E has not verified the legality of any underlying agreement(s) that may exist concerning the licenses or other agreement(s) between third parties but has relied on, and believes it has a reasonable basis to rely upon Aquila to have conducted the proper legal due diligence.

Qualified Person Mr. Neil Lincoln has relied on Foth Infrastructure & Environment, LLC for information related to the environmental studies and permitting.

A draft copy of this Technical Report has been reviewed for factual errors by Aquila. Any changes made as a result of these reviews did not involve any alteration to the conclusions made. Hence, the statement and opinions expressed in this Technical Report are given in good faith and in the belief that such statements and opinions are not false and misleading at the effective date of this Report.

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  1. PROPERTY DESCRIPTION AND LOCATION
  2. INTRODUCTION

Aquila controls approximately 1,304 hectares (3,222 acres) of private and public (State of Michigan) mineral lands located in Lake and Holmes Townships in Menominee County, Michigan. Approximately 1,019 hectares (2,517 acres) of these lands form a contiguous block of Aquila-controlled mineral rights (Figure 4.1). The Active Project Boundary encompasses approximately 479 hectares (1,183 acres) and is situated in portions of Sections 1, 11 and 12 in Township 35N, Range 29W, and portions of Sections 6 and 7, in T35N, R28W, in Lake Township, Menominee County, Michigan. The Project is centred at latitude 45° 27' N and longitude 87° 51' W.

FIGURE 4.1 BACK FORTY PROJECT PROPERTY

Source: Aquila Resources Inc. (2019)

Properties comprising the Active Project Area are currently 100% owned or controlled by Aquila through purchase of the Back Forty Joint Venture LLC ("BFJV") and Hudbay Michigan Inc. ("HMI"). Aquila properties comprising the contiguous parcels outside of the Active Project

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Area are controlled by Aquila through metallic minerals leases with the State of Michigan. All Company properties are shown in Figure 4.2.

FIGURE 4.2 AQUILA PROPERTIES

Source: Aquila Resources Inc. (2019)

4.2 PROPERTY INTERESTS, TITLE, TAXES AND OTHER LEGAL OBLIGATIONS

The known Mineral Resource at the Project is covered by five parcels (Parcel numbers 1, 2, 3, 4b and 5 on Figure 4.1). Additional parcels that make up the balance of the Active Project Area are considered important for development purposes.

A title opinion was prepared for Aquila on October 14, 2019 by the law office of Steven J. Tinti. Based on records filed with the Menominee County Register of Deeds Office and the agreements examined, Mr. Tinti concluded that under Michigan law: Aquila has full rights to pursue its exploration plans on the parcels controlled by the Company that are within the Active Project Area; there are no legal impediments to Aquila pursuing its mineral exploration plans on these parcels. There are no legal impediments to Aquila pursuing its mineral exploration plans on these parcels. All Back Forty Project properties controlled by Aquila are described below.

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4.2.1 Description of Properties

Key properties in the Active Project Area parcels, which contain known Mineral Resources or are considered to be important for development are described below and are shown in Figure 4.1. Parcel numbers are derived from the parcel descriptions in the title opinions.

  • Parcel 1 - (16 hectares, 40 acres). 100% of the surface is owned by Aquila through purchase. The severed mineral estate owned by the State of Michigan is held under lease number M-00775. Property tax obligations for assessment year 2017 for this property were $1,331.43.
  • Parcel 2 - (approximately 16 hectares, 39 acres). The surface is owned 100% by Aquila. This includes an Aquila ownership of a 20% mineral interest purchased from the surface owner and 40% mineral interest purchased from heirs of the mineral estate. Another 30% mineral interest is leased to Aquila by agreements with the heirs of the mineral estate. This gives the Aquila a total of 90% mineral interest in this property to date. The former surface owner is due a 3.5% NSR on open pit production and a 2.5% NSR on underground production. The leased mineral owners are due various NSR's ranging from 1% to 2%. Property tax obligations for assessment year 2017 for this property were $2,478.60.
  • Parcel 3 (776) - (State Lease M-00776) - (97 hectares, 240 acres). 81 hectares (200 acres) of state surface and mineral estates in fee simple and 16 hectares (40 acres) of state mineral estate. This lease calls for minimum royalty payments (deductible from future production royalties) of $30/acre ($7,200) for year 2016 increasing by $5.00 per acre per year through year 2021. The rental payments increase to $55/acre after year 2021. Mineral production from the lease is subject to a sliding scale production royalty.
  • Parcel 4a - (approximately 5 hectares, 13 acres) was acquired when Aquila exercised an Option to Purchase. The parcel consists of 100% private surface fee simple and mineral interest purchase. Property tax obligations for assessment year 2017 for this property were $5,598.03.
  • Parcel 4b - (Approximately 7 hectares, 17 acres). The surface is owned 100% by the Aquila. This includes an Aquila ownership of a 20% mineral interest purchased from the surface owner and 40% mineral interest purchased from heirs of the mineral estate. Another 30% mineral interest is leased to the Aquila by agreements with the heirs of the mineral estate. This gives the Aquila a total of 90% mineral interest in this property to date. Property tax obligations for assessment year 2017 for this property were $2,268.19.
  • Parcel 5 - Government Lot 1 - (approximately 19 hectares, 47 acres, of private surface and mineral estate in fee simple) in T35N, R29W, Section 1. An option to purchase agreement for this property was executed in mid-2006. It called for annual option payments over a period of nine years. The final option payment for this

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property was made in 2015. There is no retained production royalty for the property owner. Property tax obligations for assessment year 2017 for this property were $4,805.76.

  • Parcel 6 - (5 hectares, 11.5 acres) was acquired when Aquila exercised an Option to Purchase. The parcel consists of 100% private surface fee simple and mineral interest purchase with the former owner retaining a 1.5% NSR from open pit production and underground production. Property tax obligations for assessment year 2017 for this property were $3,002.72.
  • Parcel 13 - (32 hectares, 80 acres) was acquired when Aquila exercised an Option to Purchase. This parcel consists of private fee simple surface and minerals now wholly owned by Aquila. The mineral estate for this parcel was previously listed under State of Michigan ownership. A 2010 title search led to the discovery that the mineral estate was held by the surface owner. The State has acknowledged this correction and the purchase agreement with the surface owner was amended to reflect the surface owner's mineral interest and retained royalty. The former surface owner has retained a NSR royalty equivalent to the State of Michigan royalty schedule. Property tax obligations for assessment year 2017 totalled $2,276.80.
  • Parcel 14 - (16 hectares, 40 acres) was acquired when Aquila exercised an Option to Purchase. The parcel consists of 100% private surface fee simple and mineral interest purchase with the former owner retaining a 3.5% NSR from open pit production and a 2.5% NSR from underground production.
  • Parcels 15a and 15b - (49 hectares, 120 acres) 100% of the surface is owned by Aquila through purchase. The mineral interest for these parcels is state owned and held under lease number M-00773. Property tax obligations for assessment year 2017 for parcels 15a and 15b totalled $5,207.48.
  • Parcel 16 - (32 hectares, 80 acres) was acquired when Aquila exercised an Option to Purchase. The parcel consists of 100% private surface fee simple and mineral interest purchase with the former owner retaining a 2% NSR from both open pit and underground production. Property tax obligations for assessment year 2017 are included in the property tax bill with Parcel 15a.
  • Parcel 19 - (81 hectares, 200 acres) 100% of the surface is owned by Aquila through purchase in 2016. The severed mineral estate is owned by the State of Michigan and held under state leases (M-00772 and M-00773). Property tax obligations for assessment year 2016 for all of parcel 19 totalled $4,973.65.
  • Parcel (772) - State Lease M-00772 (32 hectares, 80 acres, of state surface and mineral estates in fee simple and 49 hectares, 120 acres, of state mineral estate). The severed mineral estate corresponds to Aquila owned private surface in a portion of parcel 19 (that portion residing in Section 6 of T35N, R28W). This lease calls for minimum royalty payments (deductible from future production royalties) of $30/acre ($6,000) for year 2016 increasing by $5.00 per acre per year through year 2021. The

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rental payments increase to $55/acre after year 2021. Mineral production from the lease is subject to a sliding scale production royalty.

  • Parcel (773) - State Lease M-00773 (81 hectares, 200 acres, of state mineral estate). The severed mineral estate corresponds to Aquila owned private surface (parcels 15a, 15b, and the portion of parcel 19 residing in Section 7 of T35N, R28W). This lease calls for minimum royalty payments (deductible from future production royalties) of $30/acre ($6,000) for year 2016 increasing by $5.00 per acre per year through year 2021. The rental payments increase to $55/acre after year 2021. Mineral production from the lease is subject to a sliding scale production royalty.
  • Parcel (775) - State Lease M-00775 (16 hectares, 40 acres, of state mineral estate) The severed mineral estate corresponds to Aquila owned private surface (parcel 1). This lease calls for minimum royalty payments (deductible from future production royalties) of $30/acre ($1,200) for year 2016 increasing by $5.00 per acre per year through year 2021. The rental payments increase to $55/acre after year 2021. Mineral production from the lease is subject to a sliding scale production royalty.

4.2.1.1 Peripheral Properties

In addition to the key properties, Aquila has also purchased, leased, or optioned additional properties. These properties are either contiguous with the Key Parcels, may contain facilities utilized by the Company, are perceived to have exploration potential, or were purchased for other strategic purposes. Figure 4.2 shows the locations and descriptions of the properties.

4.2.2 State of Michigan Metallic Mineral Leases

Michigan state leases (M00775, M00776, M00772 and M00773) in the Mineral Resource area were previously nominated by and awarded to Minerals Processing Corporation ("MPC") as early as 2002 on a non-competitive basis. These and other state leases in the Project area originally held by MPC have been subsequently assigned to Aquila. The current leases call for a 10-year term that can be extended to 20 years by paying advance royalties.

Other terms include a one-time $1/acre minimum bonus bid, a rental rate commencing at $3/acre per year for the first five-years and $6/acre per year for years six through ten.

In the absence of mining operations, a minimum advance royalty payment (deductible from a production royalty) is due for years eleven through twenty. The advance royalty payment rate begins at $10.00/acre in the eleventh year and escalates by $5.00/acre per year until the twentieth year when the rate is $55.00/acre. If production occurs, a royalty must be paid to the State. A sliding scale production royalty with no deductions of incurred costs is utilized based on an "adjusted (indexed for inflation) sales value" per short ton of dry ore. For base and precious metals, it is calculated on a quarterly basis whereby the gross sales value (revenue received by the mine from a smelter or processor, i.e. "smelter return") is divided by ore production which is then adjusted for inflation (using the producer price index for all commodities). The resulting adjusted sales value per short ton of ore is subject to the following rates: two percent on value less than $12/ton; this rate is increased by one percent for each $6.00 increase in the value above

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$12.00 to a maximum of $71.99/ton; at or above $72/ton a seven percent rate applies. The State of Michigan allows for renegotiation of production royalties (rates and method of calculation) at any time during the term of the lease.

The Michigan Department of Natural Resources ("DNR") has revised the current mining lease agreement which clarifies and expands the royalty schedule. The new lease format calls for rental rates and advance minimum royalty payments similar to the old lease but includes a much- improved production royalty schedule. The new production royalty is also based on "smelter return" that includes processor deductions for (1) base smelting and refining charges (2) sampling and/or assay charges assessed by the smelter (3) penalties for impurities that are deducted from the assay value of the ore (adjusted sales value). No deductions for operation of the mine, on-site enrichment of ore, or transportation to the smelter will be allowed in calculating smelter returns. None of these costs can be recouped by deductions against the adjusted sales value. The production royalty is calculated the same way as in the old lease for base and precious metals but uses a different royalty schedule that is shown in Table 4.1.

TABLE 4.1

STATE OF MICHIGAN MINERAL ROYALTY SCHEDULE

The new royalty rates are improved and more in line with industry standards. As with the old lease, royalty rates in the new lease agreement may be renegotiated any time during the lease term. Although the Project has no new state leases, it does have the option to renegotiate the production royalty in the older leases to the more favourable rates. A renegotiated production royalty is particularly important for leases M00775 and M00776 that control portions of the identified Mineral Resource. However, there is no guarantee that any negotiations with the state regarding modification of state lease production royalty rates will be successful.

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4.2.3 Summary of Royalties

The royalties that apply to material planned to be mined include:

  • The Michigan State royalty, which applies to approximately 36% of the total mineralized material (38% on a value basis). The royalty is calculated on a sliding scale that ranges from 2.5% to 10.5% of NSR for the open pit and 2.0% to 10.0% for the underground.
  • The County royalty, which applies to 1% of the total mineralized material (1% on a value basis). This royalty is calculated in the same manner as the State royalty.
  • The Ganzer Royalty, which applies to 12% of the total mineralized material (10% on a value basis). This royalty is a flat 3.5% of NSR.

Royalties aggregate to approximately 2.0% of NSR and are assumed to be paid following the year in which the material is mined.

4.3 ENVIRONMENTAL

To the best of knowledge and belief of P&E, after reasonable inquiry, P&E is not aware of any environmental litigation or pending fines associated with the Back Forty Project.

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  1. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
  2. PHYSIOGRAPHY

The Property area lies along the east bank of the Menominee River and consists of low, rolling hills with maximum topographic relief of 30 m and intervening wetland (in part prairie- savannah); mean elevation is approximately 200 to 300 masl. Vegetation is mostly immature hardwood-pine forest (Figure 5.1) and swamp/prairie-savannah grasses; wetland areas also occur along creeks and secondary tributaries. The climate is temperate, allowing exploration, potential development, and potential mining activities to take place year-round.

FIGURE 5.1 TYPICAL LANDSCAPE OF BACK FORTY PROJECT

Source: Tetra Tech Preliminary Economic Assessment (2014)

5.2 CLIMATE

Climate information was obtained from the Midwest Regional Climate Center station in Stephenson, Michigan for the period of 1949 to 2004. Regionally, July is the warmest month with a mean temperature of 19.7°C and January is the coldest month with a mean temperature of -15.4°C.

On average, the region receives approximately 796 mm of precipitation annually. Record high and low precipitation measurements were 1086 mm in 1959 and 568 mm in 1989. July and August are the wettest months, with average monthly precipitation of 92 mm, and February is the driest month with 27 mm of precipitation on average. The area receives an average of 154 cm of snowfall per year, with most snowfall occurring in January. There was no recorded snowfall during the months of June, July, or August over the periods of record.

An on-site meteorological station was operated from July 14, 2007 to July 13, 2009. During this time, ambient temperature averaged 5.8°C, with a low of -33.3°C on January 26, 2009 and a high of 35.2°C on July 31, 2007. Winds have been recorded 37.6% of the time, predominantly from the south southwest, southwest, northwest, and north-northwest sectors. The average wind speed

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for all directional sectors was 8.4 km/h. The local climatic conditions are not anticipated to impede an open pit mining operation at the Property and the expectation is to operate on a year- round basis.

5.3 ACCESS

The Property is located approximately 55 km south-southeast from Iron Mountain, and approximately 19 km west of Stephenson, Michigan, within the Escanaba River State Forest (shown in Figure 5.2). Access from Stephenson is via County G12 Road, north on River Road, travelling approximately 5 km to the Project field office. A number of drill roads connect with River Road and cross the Property. Infrastructure on the Property includes a nearby power line and paved road access.

FIGURE 5.2 LOCATION OF THE BACK FORTY PROJECT

Source: Tetra Tech Preliminary Economic Assessment (2014)

5.4 SITE SUFFICIENCY

In the immediate area of the Back Forty Deposit, Aquila controls approximately 1,019 hectares (2,517 acres) of contiguous key parcels available for Project development. This is adequate to address the potential space requirements for mining operations, processing plant, overburden, and rock and tailings storage. The Project is also located within ready access to water and power needs, including a 138 kV transmission line that is currently proposed to service the operation from the northeast corner of the Project site.

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6.0 HISTORY

In 2001 a private landowner hired a drilling company to construct a new domestic water well on his property in Michigan. The drillers collected drill cuttings from that well and brought them to a local geologist. Upon further inspection, the cuttings were found to represent a sphalerite-rich massive sulphide. This Property would become the key asset of the Back Forty Project. Subsequent assay of the cuttings confirmed the well had indeed penetrated 12 m (40 ft) of zinc- rich massive sulphide. Upon further surface investigation of the Property, bedrock exposures of favourable pyritic quartz-sericite schist were identified and an auriferous gossan that they interpreted to be capping massive sulphide mineralization at depth. This ultimately led to the acquisition of additional private and state mineral interests in the surrounding area.

In February of 2002, two diamond drill holes were completed along the eastern edge of the Property on state mineral leases. These holes targeted a 1.5 mGal gravity anomaly coincident with a strong max-min electromagnetic conductor. Although the first hole (108401) failed to intersect any significant mineralization, the second hole (108402) penetrated 37 m of massive sulphides grading 9.1% Zn and 5.7 g/t Au after penetrating the capping gossan that graded 21.9 g/t Au. The East Zone had been discovered.

Shortly thereafter, the Back Forty Joint Venture ("BFJV") was formed between the Menominee River Exploration Company ("MREC") and the American Copper and Nickel Company, Inc ("ACNC"), INCO's American subsidiary. ACNC could earn a 60% interest in the Project by spending $10 million over six years. After protracted negotiations, a purchase option was finally arranged for the Thoney property. In October 2002, drilling commenced and continued through early May of 2003. With up to five drill rigs operating, a total of 20,450 m in 71 holes were completed. This drilling partially delineated a zinc-copper-gold-silver rich VMS deposit. However, ACNC deemed the deposits potential size as too small to meet their minimum requirements of at least 20 Mt.

ACNC attempted unsuccessfully to sell its position in the BFJV. It still had not vested its 60% interest. By mid-2003, ACNC had negotiated with MREC an immediate withdrawal from the Project in exchange for a retained 7% net profits interest ("NPI") in any future deposits developed within the Project area. With ACNC out of the joint venture, MREC began seeking a new partner to help advance the Project. However, in early 2004, a new company, Aquila Resources Corporation ("ARC"), was formed for the purpose of becoming publicly listed with the Project. It was not until mid-2006 that JML Resources acquired 100% of the outstanding shares of ARC through a reverse take-over and was listed on the TSX Venture Exchange.

Once listed, the new company, renamed Aquila Resources Inc. (Aquila) raised additional exploration capital to restart drilling operations. By early September 2006, the Thoney Property was re-acquired and combined with adjacent parcels to become the Back Forty Property. Two drilling rigs were brought back to focus on drilling the shallow portions of the Deposit. An additional 14,600 m in 80 holes were completed by mid-November 2006, to fill in gaps in earlier drilling. In early 2007, Datamine International Ltd. was commissioned to conduct a Mineral Resource Estimate that included the 2006 drilling results. In April of 2007, Aquila announced the approval to list on the Toronto Stock Exchange.

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Exploration drilling continued into 2008, resulting in 354 drill holes to be compiled into a new Mineral Resource Estimate. In 2008, SRK Consulting, Toronto, was retained to provide a new Mineral Resource Estimate. During 2008, SRK evaluated data from the Back Forty Property, including drilling, survey, core logging, assay and quality control procedures, data entry and management procedures, review of geological interpretation, and inspection of drill core. The initial Mineral Resource Estimate was released in January 2009.

In August of 2009, Hudbay Minerals Inc. ("Hudbay") entered into a Subscription, Option, and Joint Venture Agreement allowing Hudbay to earn a majority share of the Project and become the operator. Under the agreement, another phase of drilling started in the fall of 2009 and continued until June of 2010. The total number of drill holes increased to 478. Golder Associates, from Mississauga, Ontario were retained to calculate an updated Mineral Resource Estimate, which was released in October 2010.

In September 2010, Hudbay announced that, pursuant to the terms of a Subscription, Option, and Joint Venture Agreement with Aquila Resources Inc., Hudbay had exercised its option to earn a 51% joint venture interest in Aquila's Back Forty Project in Michigan's Upper Peninsula after expenditures of $10 million on the Project. Hudbay would be able to increase its ownership interest in the Project to 65% by completing a Feasibility Study and submitting a mine permit application to the State of Michigan.

On January 16, 2014, REBgold Corporation ("REBgold") and Aquila closed a statutory plan of arrangement (the "Arrangement"). The Arrangement required that:

  • Aquila acquires 100% of the outstanding shares of REBgold in exchange for Aquila shares on a one-for-one basis.
  • The acquisition of 100% of the shares of HudBay Michigan Inc. ("HMI"), effectively giving Aquila 100% ownership of the Back Forty Project.
  • The non-brokered private placement of REBgold shares for gross proceeds of approximately $4.85 million (the "REBgold Financing"). Pursuant to the REBgold Financing, Baker Steel Capital Managers LLP ("Baker Steel"), on behalf of investment funds managed or controlled by it, invested $4.5 million of such gross proceeds. Proceeds from the REBgold Financing would be used for general working capital and to fund the next phase of development activity at Back Forty.

Pursuant to the REBgold Financing, REBgold issued a total of 37,300,385 shares at a price of $0.13 per share for gross proceeds of approximately $4.85 million. All of these shares were immediately exchanged for 37,300,385 Aquila shares pursuant to the Arrangement. In connection with the issuance of 2,285,000 REBgold shares for gross proceeds of $297,050 as part of the REBgold private placement, REBgold paid broker compensation consisting of (i) a cash commission equal to 7% of the gross proceeds related to such subscriptions, and (ii) non- transferable broker warrants (the "Broker Warrants") to purchase an aggregate of 159,950 REBgold shares (representing 7% of the REBgold shares related to such subscriptions) at a price of $0.15 per share for two years from the closing of the REBgold Financing. As a result of completion of the Arrangement, each Broker Warrant became exercisable for one Aquila share at a price $0.15 per share.

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Immediately following completion of the Arrangement and related transactions, there were approximately 183 million common shares of Aquila outstanding and 27.6 million common shares exercisable through stock options, convertible debentures and warrants. Immediately prior to completion of the Arrangement and related transactions, there were 64,825,568 REBgold shares outstanding (including shares issued pursuant to the REBgold Financing). All of these shares were exchanged for Aquila shares pursuant to the Arrangement on a one-for-one basis.

Pursuant to the HMI Acquisition, Hudbay's 51% interest in the Back Forty Project was acquired in consideration for the issuance of 18,650,193 common shares of Aquila, future milestone payments tied to the development of the Back Forty Project and a 1% net smelter return royalty on production from certain land parcels in the Project. The net smelter return royalty was repurchased in conjunction with the Orion Transaction (see below). At the time, Baker Steel was Aquila's largest shareholder and owned or controlled 45,483,886 Aquila common shares or approximately 25% of the outstanding Aquila common shares. Hudbay owned or controlled 33,017,758 Aquila common shares or approximately 18% of the outstanding Aquila common shares. In connection with the completion of the Arrangement, REBgold, as a wholly-owned subsidiary of Aquila, had its shares delisted from the TSX Venture Exchange and ceased to be a reporting issuer.

In 2014, a Preliminary Economic Assessment was completed which contemplated an open pit mining/processing operation at Back Forty.

On March 31, 2015, the Company closed a multi-level financing transaction with Orion Mine Finance ("Orion") that included an equity private placement and a silver stream for total funding of $20.75 million (collectively, the "Orion Transaction"). Concurrent with the Orion Transaction, the Company completed the repurchase of two existing royalties on the Back Forty Project. As part of the Orion Transaction, Aquila issued 26,923,077 units at a price of $0.13 per unit for gross proceeds of $3.5 million, with each unit consisting of one common share and one- half common share purchase warrant. Each whole warrant allows the holder to purchase one common share at a price of $0.19 per common share for a term of three years. Also as part of the Orion Transaction, pursuant to a silver purchase agreement (the "Silver Purchase Agreement") dated March 31, 2015 between Orion Titheco Limited, the Company and Back Forty Joint Venture LLC, Orion acquired 75 per cent of Aquila's life-of-mine ("LOM") silver production from the Back Forty Project for gross proceeds of $17.25 million. Orion has advanced the first instalment of $6.5 million, the second instalment of $3.0 million, the third instalment totalling $3.375 million plus the $1.35 million land payment and the final instalment of $2.376 million. In June 2016, the silver purchase agreement was amended to reduce the deposit owing by $625,000. In November 2016, the silver purchase agreement was amended to reduce the deposit owing by $14,000.

The Company currently has three main subsidiaries, Aquila Resources Corp., Aquila Resources USA Inc., and Aquila Michigan Inc. (formerly known as HMI). The remaining subsidiaries are inactive. All subsidiaries are 100% owned.

On November 10, 2017, the Company completed a financing transaction with Osisko Bermuda Limited ("OBL"), a wholly owned subsidiary of Osisko Gold Royalties Ltd. (TSX and NYSE:

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OR,) ("Osisko") pursuant to which OBL has agreed to commit $65 million to Aquila through a $10 million private placement and $55 million gold stream purchase agreement.

OBL purchased 49,173,076 units of Aquila at a price of C$0.26 per unit for aggregate gross proceeds of $10 million (the "Strategic Investment"). Each unit consists of one common share and one-quarter of one common share purchase warrant. Each whole warrant entitles the holder to purchase one common share of the Company for C$0.34 until May 10, 2021. Osisko also has the right to participate in any future equity or equity-linked financings to maintain its ownership level in Aquila. In connection with the private placement, Osisko received the right to nominate one individual to the board of directors of Aquila and thereafter for such time as Osisko owns at least 10% of the outstanding common shares. Osisko's nominee was appointed to the board of directors in November 2017.

Concurrent with the Strategic Investment, the parties have entered into a Gold Purchase Agreement (the "Stream"), whereby OBL will provide the Company with staged payments totalling $55 million, payable as follows:

  • $7.5 million on close of the Streaming Transaction.
  • $7.5 million upon receipt by Aquila of all material permits required for the development and operation of the Project, and receipt of a positive Feasibility Study.
  • $10 million following a positive construction decision for the Project.
  • $30 million upon the first drawdown of an appropriate Project debt finance facility, subject to the COC Provision (as defined below).

Under the terms of the Stream Agreement, OBL will purchase 18.5% of the refined gold from the Project (the "Threshold Stream Percentage") until the Company has delivered 105,000 ounces of gold (the "Production Threshold"). Upon satisfaction of the Production Threshold, the Threshold Stream Percentage will be reduced to 9.25% of the refined gold (the "Tail Stream"). In exchange for the refined gold delivered under the Stream, OBL will pay the Company ongoing payments equal to 30% of the spot price of gold on the day of delivery, subject to a maximum payment of $600 per ounce ("/oz").

In the event of a change of control of the Company prior to the advancement of the final $30 million under the Stream, the person or entity acquiring control over the Project may elect to forgo the final payment, in which case the Threshold Stream Percentage and Tail Stream will be reduced to 9.5% and 4.75%, respectively (the "COC Provision"). All other terms and conditions of the Stream will remain unchanged.

Pursuant to the Stream, the Company has agreed to pay a $200,000 capital commitment fee. The fee is payable as to 50% upon closing of the Stream transaction and 50% upon OBL funding the second deposit under the Stream. Aquila satisfied the initial $100,000 fee by way of the issuance of 478,781 common shares of the Company based upon the five-day volume weighted average price of the common shares prior to November 10, 2017.

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On September 7, 2018 Aquila filed an open pit Feasibility Study Technical Report on SEDAR, with an effective date of August 1, 2018. The study concluded that the Project will produce approximately 1.1 Moz AuEq over a seven-year life. The study was limited to a sub-set of economically viable Mineral Resources that yielded optimal returns by open pit mining. There were additional economically viable Mineral Resources that could be exploited with a push back beyond the pit limits contemplated in the study. Alternatively, the incremental Mineral Resources could be exploited using underground methods. Salient metrics for the base case macro-economic forecast, which included prices of $1,300/oz for Au and $1.20/lb for Zn, are presented in Table 6.1.

TABLE 6.1

SUMMARY METRICS OF 2018 FEASIBILITY STUDY

Item

Unit

Value

Ore Mined

Mt

11.7

Payable Au

koz

512

Payable AuEq1

koz

468

Payable Zn

Mlbs

1,197

Payable ZnEq1

Mlbs

1,105

Gross Revenue

$/t ore

$123

Treatment Charge/Refining Charge

$/t ore

$15

Net Smelter Return

$/t ore

$108

Site Operating Costs

$/t ore

$31.88

Net Direct Cash Cost (C1)

$/lb Zn

($1.73)

Initial Capital

$M

$294

Total Investment2

$M

$480

Net All-in Sustaining Costs (AISC)

$/lb Zn

($1.34)

Post-Tax Net Present Value NPV6%

$M

$208

Post-Tax IRR

%

28.2

Post-Tax Cash Flow Index

NPV : Peak

0.70x

Investment

Simple Payback

months

26

Notes:

  1. By-Productsconverted to equivalent Zn and Au using weighted average metal prices over LOM.
  2. Total investment includes initial capital, sustaining capital and closure expenses.

On October 5, 2018, Aquila received a payment of $7.4 million from an affiliate of Osisko under the Gold Purchase Agreement. This payment represents the second deposit of the total advance payment of US$55 million to be made by Osisko under the Gold Purchase Agreement. The payment, which was made net of a $100,000 capital commitment fee, follows receipt by Aquila of all material permits required for the development and operation of the Back Forty Project in Michigan and the completion of the Back Forty Project Feasibility Study.

On June 28, 2019, the Company announced that its two largest shareholders, Orion Mine Finance (and its affiliated funds) ("Orion") and Osisko Gold Royalties Ltd. ("Osisko") completed a transaction whereby Orion purchased from Osisko all 49,651,857 common shares of the Company owned by Osisko (the "Transaction"). The Transaction was a small component of

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the share repurchase and secondary offering transaction first announced by Osisko on June 25, 2019. Orion now owns 97,030,609 common shares of Aquila representing approximately 28.7% of the outstanding common shares. Osisko remains a significant financial partner to Aquila as the holder of gold and silver streams on the Company's Back Forty Project. Under its gold streaming agreement with the Company, Osisko remains committed to funding an additional US$40 million in staged payments to continue the development of the Back Forty Project.

6.1 HISTORICAL MINERAL RESOURCE ESTIMATES

Tetra Tech produced a Mineral Resource Estimate in a 2014 PEA using metal prices of US$1,456.36/oz gold, US$27.78/oz silver, US$3.64/lb copper, US$1.0125/lb lead, and US$0.96/lb zinc. The effective date of the Mineral Resource Estimate was February 4, 2013.

TABLE 6.2

FEBRUARY 4, 2013 MINERAL RESOURCE ESTIMATE

Resource

Au

Ag

Cu

Pb

Zn

NSR

NSR

Tonnes

zg

Classification

(ppm)

(ppm)

(%)

(%)

(%)

($/t)

($/t)

Flotable Resources

Measured

5,595,842

1.956

24.558

0.555

0.165

4.681

139.693

37.844

Indicated

7,614,303

1.538

19.707

0.220

0.255

2.587

85.727

42.847

Inferred

2,132,302

1.973

24.710

0.389

0.335

2.388

98.988

63.416

Measured

+

13,210,145

1.715

21.762

0.362

0.217

3.474

108.587

40.728

Indicated

Leachable Resource

Measured

1,106,960

3.194

41.145

0.059

0.252

0.239

151.747

46.592

Indicated

816,942

5.527

45.870

0.195

0.278

0.228

263.598

51.689

Inferred

204,432

3.138

45.455

0.084

0.319

0.233

163.079

71.538

Measured

+

1,923,902

4.184

43.151

0.117

0.263

0.234

199.242

48.756

Indicated

Leachable +

Flotable Resource

Measured

6,702,803

2.160

27.297

0.473

0.180

3.947

141.684

39.288

Indicated

8,431,244

1.925

22.242

0.218

0.257

2.358

102.962

43.704

Inferred

2,336,734

2.075

26.525

0.362

0.334

2.200

104.595

64.127

Measured

+

15,134,047

2.029

24.481

0.331

0.223

3.062

120.112

41.748

Indicated

P&E produced a Technical Report and Updated Mineral Resource Estimate, with an effective date of February 6, 2018, as tabulated in Table 6.3. P&E considered the mineralization of the Back Forty Deposit to be potentially amenable to Open Pit and Out of Pit (underground) extraction. The Updated Mineral Resource Estimate formed the basis for the 2018 Feasibility Study that Aquila filed on SEDAR with an effective date of August 1, 2018.

The Mineral Resource Estimates noted in this section are superseded by the Updated Mineral Resource Estimate presented in Section 14 of this Technical Report.

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TABLE 6.3

AUGUST 1, 2018 MINERAL RESOURCE ESTIMATE (1-6)

Resource

Metallurgy

NSR

Tonnes

Au

Au

Ag

Ag

Zn

Zn

Cu

Cu

Pb

Pb

Classification

Cut-off

Area

Type

(k)

(g/t)

(koz)

(g/t)

(koz)

(%)

(Mlb)

(%)

(Mlb)

(%)

(Mlb)

($/t)

Measured

21

6,797

1.75

381

18.4

4,027

3.45

516.5

0.38

56.4

0.16

23.4

Flotable

Indicated

21

3,768

1.58

191

25.2

3,056

3.15

261.7

0.24

19.9

0.39

32.8

M & I

21

10,565

1.68

572

20.9

7,083

3.34

778.2

0.33

76.3

0.24

56.2

Inferred

21

71

1.01

2

30.7

70

2.98

4.7

0.14

0.2

0.37

0.6

Pit

Measured

22

553

5.61

100

34.8

618

0.19

2.4

0.05

0.6

0.13

1.5

Leachable

Indicated

22

1,777

2.15

123

39.6

2,263

0.41

16.1

0.03

1.3

0.29

11.5

Constrained

M & I

22

2,330

2.97

223

38.5

2,881

0.36

18.5

0.04

1.9

0.25

13.0

Inferred

22

378

3.62

44

40.1

487

0.38

3.2

0.06

0.5

0.52

4.3

Measured

21+22

7,350

2.04

481

19.7

4,645

3.20

518.8

0.35

57.0

0.15

24.9

Total

Indicated

21+22

5,545

1.76

314

29.8

5,319

2.27

277.8

0.17

21.2

0.36

44.3

M & I

21+22

12,895

1.92

795

24.0

9,964

2.80

796.6

0.28

78.2

0.24

69.2

Inferred

21+22

448

3.21

46

38.6

557

0.79

7.9

0.07

0.7

0.49

4.9

Measured

70

556

1.79

32

26.8

480

5.32

65.2

0.33

4.0

0.41

5.0

Flotable

Indicated

70

3,059

1.84

181

26.2

2,577

4.23

285.4

0.51

34.3

0.30

20.3

M & I

70

3,615

1.83

213

26.3

3,057

4.40

350.7

0.48

38.4

0.32

25.3

Inferred

70

544

2.96

52

37.5

656

1.38

16.6

0.62

7.5

0.39

4.6

Measured

70

37

7.38

9

74.3

89

0.31

0.3

0.12

0.1

0.11

0.1

Out of Pit

Leachable

Indicated

70

77

3.85

10

47.3

117

0.32

0.5

0.15

0.2

0.13

0.2

M & I

70

114

5.01

18

56.1

206

0.32

0.8

0.14

0.3

0.13

0.3

Inferred

70

137

5.93

26

81.0

356

0.42

1.3

0.16

0.5

0.49

1.5

Measured

70

593

2.14

41

29.8

569

5.01

65.5

0.32

4.1

0.39

5.1

Total

Indicated

70

3,135

1.88

190

26.7

2,694

4.14

286.0

0.50

34.6

0.30

20.5

M & I

70

3,729

1.93

231

27.2

3,262

4.28

351.5

0.47

38.7

0.31

25.7

Inferred

70

680

3.56

78

46.2

1,011

1.19

17.8

0.53

8.0

0.41

6.1

Total

Flotable

Measured

21+70

7,353

1.75

414

19.1

4,507

3.59

581.7

0.37

60.5

0.18

28.4

Indicated

21+70

6,827

1.69

371

25.7

5,633

3.64

547.1

0.36

54.2

0.35

53.1

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TABLE 6.3

AUGUST 1, 2018 MINERAL RESOURCE ESTIMATE (1-6)

Resource

Metallurgy

NSR

Tonnes

Au

Au

Ag

Ag

Zn

Zn

Cu

Cu

Pb

Pb

Classification

Cut-off

Area

Type

(k)

(g/t)

(koz)

(g/t)

(koz)

(%)

(Mlb)

(%)

(Mlb)

(%)

(Mlb)

($/t)

M & I

21+70

14,180

1.72

785

22.2

10,140

3.61

1,128.8

0.37

114.7

0.26

81.5

Inferred

21+70

615

2.74

54

36.7

726

1.57

21.2

0.57

7.7

0.38

5.2

Measured

22+70

590

5.72

109

37.3

707

0.20

2.6

0.05

0.7

0.12

1.6

Leachable

Indicated

22+70

1,854

2.22

132

39.9

2,380

0.41

16.7

0.04

1.6

0.29

11.7

M & I

22+70

2,444

3.07

241

39.3

3,087

0.36

19.3

0.04

2.2

0.25

13.4

Inferred

22+70

514

4.24

70

51.0

842

0.39

4.5

0.09

1.0

0.51

5.8

Measured

21+22+70

7,943

2.04

522

20.4

5,214

3.34

584.3

0.35

61.2

0.17

30.0

Total

Indicated

21+22+70

8,680

1.80

504

28.7

8,013

2.95

563.8

0.29

55.8

0.34

64.9

M & I

21+22+70

16,623

1.92

1,026

24.8

13,227

3.13

1,148.1

0.32

116.9

0.26

94.9

Inferred

21+22+70

1,129

3.42

124

43.2

1,568

1.03

25.7

0.35

8.7

0.44

11.0

Notes: M = Measured Mineral Resource, I = Inferred Mineral Resource.

  1. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
  2. The Inferred Mineral Resource in this estimate has a lower level of confidence than that applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration.
  3. The Mineral Resources were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by the CIM Council.
  4. Metallurgical type Oxide (all gold domains and leachable Gossans) is leachable, while all other metallurgical types are flotable.
  5. The Mineral Resource Estimate was based on US$ metal prices of $1,375/oz gold, $22.27/oz silver, $1.10/lb zinc, $3.19/lb copper and $1.15/lb lead.
  6. Mineral Resources were defined within a conceptual constrained pit shell.

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  1. GEOLOGICAL SETTING AND MINERALIZATION
  2. REGIONAL GEOLOGY

The Back Forty VMS Deposit is one of a number of deposits located throughout the Ladysmith- Rhinelander volcanic complex in northern Wisconsin and the Upper Peninsula of Michigan. The complex lies within the lower Proterozoic Penokean Volcanic Belt ("PVB"), also known as the Wisconsin Magmatic Terranes. The PVB is part of the Southern Structural Sub-province of the Canadian Shield (Figure 7.1).

FIGURE 7.1 SCHEMATIC GEOLOGICAL MAP OF THE GREAT LAKES REGION SHOWING PRINCIPAL VOLCANIC BELTS

Sims et al. (1989) divided the PVB into the Pembine-Wausau and Marshfield subterranes, separated by the Eau Pleine Shear Zone. Each subterrane is characterized by volcanic island-arc- basin assemblages containing abundant calc-alkaline metavolcanic units and lesser amounts of sedimentary rocks; they generally lack major regional oxide-facies iron formations. Sims et al. (1989) established an Early Proterozoic age, ranging from 1,889 to 1,835 Ma (Figure 7.2). The PVB is in contact with another major terrane to the north designated the "Northern Penokean Terrane" (NPT). The contact between these terranes is marked by the Niagara Fault Zone, which is believed to be a paleosuture (Sims et al. 1989).

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FIGURE 7.2 GEOLOGIC MAP OF NORTHERN WISCONSIN AND WESTERN MICHIGAN SHOWING MAJOR TERRANES

The NPT is characterized in part by a thick turbidite platform sequence, which was deposited at a continental margin on Archean basement. Subordinate interbedded tholeiitic metavolcanics and major Superior-typeoxide-facies iron formations occur within the package. This supracrustal sequence has been interpreted to correlate with the Marquette Range Supergroup in Michigan. Both terranes (NPT and PVB) have been affected by the Penokean Orogeny, which occurred from 1,900 to 1,840 Ma, and resulted in major folding and faulting, regional metamorphism, and emplacement of major granitic intrusions.

On the basis of regional gravity and magnetic data, three volcanic complexes have been defined in the PVB: 1) the Ladysmith-Rhinelander Volcanic Complex, which dominates the northern portion of the Pembine-Wausau Subterrane; 2) the Wausau Complex, to the south, which has been intruded over much of its extent by the Wolf River Batholith; and 3) the Eau Claire Complex, in the Marshfield Subterrane.

Geological, geophysical and geochemical data compiled since the 1960s define three depositional environments in the 1,880 to 1,860 Ma old Ladysmith-Rhinelander Complex, with each containing VMS mineralization: 1) a main volcanic-arc sequence, forming the structural core of the complex, 2) a laterally equivalent and/or possibly younger back-arc basin, volcanic- volcaniclastic succession that includes a series of mafic volcanic piles, and 3) major felsic volcanic centres in the back-arc basin and along the flanks of the main volcanic arc. The three

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mineral districts in the Ladysmith-Rhinelander Complex are defined by clustering of VMS deposits and occurrences as shown in Figure 7.3 (DeMatties 1994).

FIGURE 7.3 GEOLOGIC MAP OF THE PENOKEAN VOLCANIC BELT

The spatial distribution of the three districts appears to be linear, trending in an east-west direction (the so called "Highway 8" trend) and are separated from each other by 30 km to 50 km. However, a more complicated arrangement of individual deposits and occurrences is evident within each district. It is interesting to note the Back Forty deposit is isolated from the known districts; located at the east end of the belt and east of the Menominee River in Michigan. The nearest significant deposit is the Catwillow occurrence located at the east end of the Crandon District, approximately 50 km northwest of the Project. The distance from the Crandon District is significant given the average distance between districts of 30 km to 50 km. This distribution suggests strongly that the Back Forty Deposit lies within a new, but as yet unrecognized, district at the extreme east end of the belt. As a result, the Back Forty discovery has created a larger district-scale potential for Aquila.

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7.2 DISTRICT GEOLOGY

Published small-scale (1:250,000) geologic maps of north-eastern Wisconsin indicate the area to the west of the Project area is underlain by the 1,760 to 1,870 Ma old Athelstane Quartz Monzonite, an intrusive complex composed of tonalite, granodiorite and granite. The plutonic complex is bounded on the north, east, and south by metavolcanic rocks of the Beecher Formation and contains numerous metavolcanic rock inclusions (Figure 7.4). The volcanics generally face outward from the margin of the intrusive complex. Dykes of Athelstane Quartz Monzonite extend a short distance into the Beecher Formation (Jenkins 1973).

FIGURE 7.4 BACK FORTY AREA GEOLOGIC BEDROCK MAP

Source: Aquila Resources Inc. (2018)

The Beecher Formation consists of a stratigraphically lower, 3,000 m thick sequence of calc- alkaline andesite to dacite flows and an upper 300 m thick section of interbedded felsic ash, crystal tuff, lapilli tuff, coarser fragmental rocks, and locally black slates near the stratigraphic top of the formation. The Back Forty Deposit is hosted by a volcanic complex quite similar to the upper volcaniclastic section of the Beecher Formation. Zircons extracted from rhyolite crystal tuff and intrusive rhyodacite porphyry from Back Forty have yielded a uranium/lead age of 1,874 ±4 Ma (Schulz et al. 2008). This age is consistent with the published age of the Athelstane Quartz Monzonite. It is likely that the felsic sequence at Back Forty is a member of the Beecher Formation. The lateral extent of this volcanic centre is unknown at this time. However, drilling and gravity surveys indicate it is truncated to the west and north by Athelstane Quartz Monzonite, but likely extends further to the east and south, beneath Cambrian sandstone sediments.

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In the Menominee River valley, the PVB is unconformably overlain by erosional remnants of generally flat lying, Cambrian sandstone of the Munising Formation that coalesce into a coherent sandstone sheet approximately 600 m (1,969 feet) east of the Menominee River. The sandstone thickens and dips gently to the east, overlain by progressively younger sediments of the Michigan Basin further to the east.

The majority of western Menominee County is blanketed by an irregular thickness of unconsolidated sand, gravel, peat, and clay, deposited as the glaciers receded. Locally, water bearing sand and gravel formations are included in the glacial deposits. The thickest, most extensive deposits of sand and gravel occur along the Menominee River in the west-central part of Menominee County (Vanlier, 1963). In Lake Township, these deposits consist of predominantly glacial outwash sand and gravel and postglacial alluvium (Farrand, 1982).

7.3 PROPERTY GEOLOGY

Mineralization of the Back Forty Deposit is hosted within a succession of strongly altered felsic volcanic rocks interlayered with fine grained tuffaceous sediments which locally host strata- bound massive to semi-massive sulphide units. The volcanic stratigraphy has been intruded by a number of felsic to intermediate, syn-volcanic porphyry dykes and subsequently intruded by later dykes of mafic composition. The stratigraphy in the immediate deposit area is situated along an asymmetrical antiformal structure defined by a steeply dipping (65°) southern limb and a shallowly dipping (35°) north limb which steepens to the southwest. The antiformal structure plunges to the west-southwest at approximately 30°. Figure 7.5 shows the bedrock geology of the Back Forty Deposit.

FIGURE 7.5 BEDROCK GEOLOGY OF THE BACK FORTY PROJECT AREA

Source: Tetra Tech Preliminary Economic Assessment (2014)

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7.3.1 Lithology

Rhyolite crystal tuff ("RCTF") is the dominant lithology at the Project. Certain domains of the RCTF display a distinctive, often pervasive chlorite alteration. This rock is referred to as the chloritic crystal tuff ("CHTF"). Both of these units include quartz +/- feldspar phyritic rhyolite tuff, vitric tuff, pyroclastic or epiclastic breccias (or pseudobreccias) and other fragmental rocks. In other areas, particularly to the south of the deposit, distinctive massive, aphyric rhyolite flows ("MRHY") may represent a late felsic domal complex. Whole rock geochemistry and the observed geologic relationships indicate these rocks were formed in a volcanic environment. However, all of the lithologies have been pseudomorphically replaced by predominantly quartz with varying percentages of sericite, chlorite and pyrite; the result of being intensely altered, at least once, and recrystallized. In many cases, primary textures have been completely obscured. Elsewhere, pyroclastic textures are observed, but may in fact represent irregular alteration fronts producing pseudo-fragments. While these rocks are considered to be volcanic in origin, it is likely that some of this material may have been transported or reworked by gravity or water.

The RCTF and the CHTF are considered to be the same lithology except the CHTF shows moderate to strong chlorite alteration. In addition, the upper part of the CHTF commonly shows apparent clastic textures, suggesting it may have been transported and possibly reworked by epiclastic processes.

Volcanic-derived sedimentary units are interbedded within and often occupy the contacts between the felsic volcanic sequences. Tuffaceous sediments ("TFSD") consist of thin-bedded volcaniclastic sediments and tuffs interbedded with chert. Some rocks are very fine grained, foliated, and finely layered to massive sericite schist. This unit is composed almost entirely of sericite with minor amounts of quartz and may contain variable amounts of pyrite and base- and precious metal sulphides when associated with massive sulphide ("MASU"). Geochemically, this unit is very similar to RCTF and has been interpreted to be bedded rhyolite ash tuffs ("RATF"). Further analysis of this unit indicates it is found associated with deformed MASU and as thin units bounded by less deformed RCTF, so it may represent a sheared phase of RCTF.

Tuffaceous sediments ("TFSD") are similar to RATF but often show cherty or siliceous horizons interlayered with grey to white ash layers to produce a distinctive alternating pattern. This unit also includes lapilli tuff and volcaniclastic sediments. This unit can also be mineralized, hosting a relatively thin, undulating MASU layer with a very thin, gossan at the bedrock surface and low-sulphide, precious metal-bearing zones that are poorly defined.

MASU and semi-massive sulphide ("SMAS") is typically associated with RATF and TFSD. On the Project, MASU refers to rocks composed of at least 80% sulphide and semi-massive sulphide is composed of 40% to 80% sulphide. Both also contain variable amounts of Zn, Cu, and Ag that occur most commonly as sulphides and Au found most commonly as finely divided native metal or as a natural amalgam. Sulphide stringer ("SFST") mineralization consists of 10 to 40% pyrite in veins with variable amounts of Cu, Ag, and Au that predominantly penetrates RCTF. Oxides and hydroxides of iron form a crudely bedded gossan ("GOSS") above MASU, where it is exposed at the bedrock surface. GOSS contains variable amounts of Au, Ag, and Cu and accessory minerals including chlorite and calcite. Certain intervals are characterized by

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significant amounts of finely laminated hematite and magnetite, and may represent an exhalative iron formation deposit.

Intruding the entire volcanic pile are several types of dykes and sills. Dacitic quartz feldspar porphyry (QFP) dykes and sills are the predominant intrusive rock. Intermediate to felsic dykes are locally abundant occurring as thin isolated intrusive units to multiple sheeted dykes that may represent reactivated chilled margins of QFP, or zones where QFP has partially to completely assimilated its host. These intrusive rocks have also been intensely altered, with sericite and biotite pseudomorphically replacing feldspar and hornblende, respectively. Thin, fault-bounded biotite lamprophyre dykes have been found in the southwest part of the Project Area. Several mafic dykes (MFDK), only moderately altered by chlorite, appear to cut all units and may represent the youngest intrusive in the Project Area.

Cambrian-age quartz sandstone overlies the east side of the known deposit and host rocks. This sandstone is a clast-supported quartz arenite, generally poorly cemented by calcite that grades downward into moderately silicified sandstone near the unconformity. Quaternary to recent alluvium blankets nearly the entire bedrock surface except for a relatively small area of Pre- cambrian rock exposures above 220 m in elevation. The alluvium consists of glacial till, muck, and sand, with post-glacial to recent alluvium within the Menominee River floodplain.

Three geologic cross-sections through the Deposit shown in Figures 7.6, 7.7 and 7.8.

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FIGURE 7.6 EXAMPLE CROSS-SECTION(435325 E) THROUGH THE EASTERN PORTION OF THE DEPOSIT AREA

Source: Tetra Tech Preliminary Economic Assessment (2014)

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FIGURE 7.7 EXAMPLE N-S CROSS-SECTION(435150 E) THROUGH THE CENTRAL PORTION OF THE DEPOSIT AREA

Source: Tetra Tech Preliminary Economic Assessment (2014)

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FIGURE 7.8 EXAMPLE N-S CROSS-SECTION(435150 E) THROUGH THE CENTRAL PORTION OF THE DEPOSIT AREA

Source: Tetra Tech Preliminary Economic Assessment (2014)

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7.4 MINERALIZED ZONES

Mineralization at the Back Forty Deposit consists of discrete zones of: 1) zinc or copper-rich massive sulphide (±lead), which may contain significant amounts of gold and silver, 2) stockwork stringer and peripheral sulphide, which can be gold, zinc, and copper-bearing (±lead/silver), 3) precious metal-only,low-sulphide mineralization, and 4) oxide-rich, precious metal-bearing gossan.

FIGURE 7.9 3-DMODEL OF THE MINERALIZED ZONES OF THE BACK FORTY DEPOSIT

Source: Tetra Tech Preliminary Economic Assessment (2014)

7.4.1 Massive Sulphide Mineralization

To date, VMS-style mineralization has been identified within at least two stratigraphic levels within the felsic sequence at the Back Forty Deposit (Figure 7.10). Although the majority of rhyolitic rocks hosting the Back Forty sulphide mineralization are indistinguishable with respect to appearance, the two main rhyolites (rhyolites 1 and 2) have distinctive geochemical signatures

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as can be observed through aluminium-titanium and zirconium-titanium ratios (Figure 7.11). The Main Zone massive sulphide, which accounts for the vast majority of massive sulphide mineralization lies at the statigraphic boundary of these two rhyolite units. Rhyolite 1 lies stratigraphically below this sulphide horizon (footwall) while rhyolite 2 lies above the horizon (hanging wall). Another massive sulphide horizon, the Tuff Zone, is located at or near the upper contact of rhyolite 2 and the lower contact of an overlying package of tuffaceous and siliceous sediments. A possible third massive sulphide horizon, the Deep Zone (Figure 7.10), may represent a lower mineralized zone. The general configuration of the massive sulphide horizons is shown in the 435,150 E cross-section (Figure 7.7). Additional drill intercepts of massive sulphide mineralization have been encountered at depth and to the southwest (down plunge) of known mineralization. Due to limited follow-up drilling of these intercepts it is, at the current time, unknown as to how these fit in with the overall geology and stratigraphy of the Deposit. In this section, massive sulphide refers to rocks composed of at least 80% sulphide, rather than the more common cut-off of 60% for massive sulphides. Semi-massive sulphide mineralization is considered to contain 10% to 80% sulphides.

FIGURE 7.10 3-DMODEL OF THE MASSIVE SULPHIDE ZONES OF THE BACK FORTY DEPOSIT (LOOKING SOUTH)

Source: Tetra Tech Preliminary Economic Assessment (2014)

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Disclaimer

Aquila Resources Inc. published this content on 15 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 September 2020 21:39:05 UTC

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