Discovery Silver Corp. provide a project update on its Cordero project (‘Cordero’ or ‘the Project’) located in Chihuahua State, Mexico. KEY DE-RISKING ITEMS: The Company is set to initiate the permitting process in the next three to four weeks with the submission of its Environmental Impact Statement (‘Manifesto de Impacto Ambiental’ or ‘MIA’) to the Mexican Federal Environmental Department (‘SEMARNAT’).

The MIA is one of the principal permits required for the development of Cordero and encapsulates extensive social and environmental work programs completed by the Company’s team in Mexico since 2020 in parallel with multiple reviews by third-party consultants. The Company has reviewed the expected changes to be made with the new mining law recently introduced in Mexico and does not expect the new law will have a material impact on the Project timeline. It is the Company’s intention to be in full compliance with all Mexican regulatory requirements alongside its overarching commitment to meet the highest industry standards for environmental protection, social responsibility and health and safety.

The Company’s MIA submission incorporates the expected changes to the new mining law, in particular the inclusion of supplementary details of the Project’s closure and reclamation plans. Cordero benefits from being located on private land in an area of Mexico (Chihuahua State) where mining has a long history and is a key economic contributor. The Company recently secured the surface rights that correspond with the planned open pit and key infrastructure locations at Cordero as well as a significant volume of water rights.

For hydrogeology, the Company is continuing its work with Mexican specialist consultant Investigacion y Desarrollo de Acuiferos y Ambiente (‘IDEAS’) to build on previous hydrogeology drilling to develop a more detailed groundwater flow model within and near the open pit and geophysical surveys further away from the pit to guide future water exploration drilling campaigns. Discovery also recently engaged M3 Engineering & Technology Corp. to complete a technical review of the scope and cost to source water from existing water treatment plants in the region.

An impact assessment study and power installation study by Mexican electrical infrastructure authority CENACE were delivered earlier this year, with confirmation that there is sufficient capacity in the existing power grid to supply the Project with power for operations at peak throughput levels. Standard upgrades of the Camargo II substation will be required as well as the installation of a 74-kilometre powerline along the existing power corridor. This scenario confirms prior assumptions about power supply to Cordero and is an important milestone in de-risking the Project.

The work to be undertaken in the Feasibility Study for power supply will entail a detailed cost estimate for the construction of the powerline and preparation of tender documentation to allow qualified contractors to bid on the defined scope. The option to use renewable energy sources at site to supplement grid power will also be evaluated. FEASIBILITY STUDY UPDATE: Study Approach: The Company will look to accelerate front-end engineering design work as part of the Feasibility Study (‘FS’ or ‘the Study’) scope to increase the confidence level of the initial capital cost estimate and to shorten the timeline between the Study completion and the Project build.

As part of Discovery’s overall approach to ensuring successful project execution the Company plans to expand its owner’s team through the course of the year with a skillset focus on processing, mining and engineering, procurement and construction management. Reserves/Resource update: the FS will be supported by an updated reserves and resource estimate to be released concurrently with the results of the Study. The updated estimates will be based on a total of approximately 310,000 m in 793 drill holes.

This includes an additional 35,000 m in 103 drill holes, completed since the update in January 2023, focused on resource upgrade and reserve expansion opportunities. Metallurgical testwork: Testwork will be focused on the potential reduction of reagent costs through minimizing reagent dosages and testing of lower cost substitute reagents. Variability testwork focused on blend optimization over the life-of-mine will also be completed.

This will consist of testing of rock type blends and of higher oxide-sulphide blends (up to 20% oxides). Additional comminution testwork, including sensitivity of regrind sizes on recoveries and testing alternative regrind mills will also be completed. The testwork is being conducted by Blue Coast Research Ltd. (‘Blue Coast’) with oversight from Libertas Metallurgy Ltd. (‘Libertas’) and Ausenco Engineering Canada Inc. (‘Ausenco’).

Process Design: The process design will continue to incorporate staged expansions that are roughly in-line with the Preliminary Feasibility Study (‘PFS’) with Phase 1 expected throughput of approximately 25,000 tonnes per day (‘tpd’) and Phase 2 throughput of approximately 50,000 tpd. The Study will focus on optimizing the selection of equipment based on these throughput rates and will also evaluate the opportunity to vary throughput levels over the life-of-mine based on changes in ore hardness of the different rock type blends. Mining: mine planning work for the FS will be completed by AGP Mining Consultants Inc. (‘AGP Mining’).

A trade-off study assessing potential cost reductions by moving to bigger benches and larger mine equipment will be completed as part of this scope. Options to reduce the Project’s carbon footprint, including the use of automation, electric vehicles and trolley assist technology will also be assessed. The mine plan for the FS will include a more detailed mine schedule for the early years of the mine life (including monthly and quarterly resolution).

Like the PFS, the mine plan will be focused on mining rates and cut-off grade and stockpiling strategies that optimize the capital efficiency and Net Present Value of the Project. Geotechnical: WSP Global Inc. (‘WSP’) has been selected for the role of Geotechnical Engineer for the Study and will perform the geotechnical work for the open pit (pit slope analysis) and for the infrastructure locations of the project (input to foundation design). The first part of the geotechnical investigation is ongoing through a condemnation drilling campaign with additional geotechnical drilling expected to commence in Third Quarter 2023.