Management's Discussion and Analysis

Year Ended December 31, 2021

(Expressed in Canadian dollars, except per share amounts and where otherwise noted)

April 19, 2022

This Management's Discussion and Analysis ("MD&A") should be read in conjunction with the audited financial statements for the year ended December 31, 2021 and related notes thereto which have been prepared with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. References to "E29", "Element 29", and the "Company" are to Element 29 Resources Inc. and/or one or more of its wholly-owned subsidiaries. Further information on the Company is available on SEDAR atwww.sedar.com. Information is also available on the Company's website at www.e29copper.com. Information on risks associated with investing in the Company's securities is contained in this MD&A. Technical and scientific information under National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") concerning the Company's material properties are located in their respective technical reports: technical and scientific information regarding the Flor de Cobre Project (the "Flor de Cobre Project") is contained in the technical report titled "NI 43-101 Technical Report Flor de Cobre Property Arequipa and Moquegua Regions, Peru" with an effective date of March 15, 2020, prepared for the Company by Derrick Strickland ( P.Geo.) (the "Flor de Cobre Technical Report") and a table of historical drilling results prepared for the Company by Christopher Keech (P.Geo); and technical and scientific information regarding the Elida Project ("Elida Project") is contained in the technical report titled "NI 43-101 Technical Report Elida Property, Peru" with an effective date of February 15, 2020 prepared for the Company by Derrick Strickland (P.Geo.) (the "Elida Technical Report") and a table of historical drilling results prepared for the Company by Christopher Keech (P.Geo.). The disclosure in this MD&A of scientific and technical information regarding the Company's other mineral projects has been reviewed and approved by Paul Johnston (P.Geo.), the Vice President of Exploration of the Company and Richard Osmond (P. Geo.), the President and Chief Executive Officer of the Company. Each of Mr. Strickland, Mr. Keech, Mr. Johnston, and Mr. Osmond are a "Qualified Person" for the purposes of NI 43-101.

COMPANY BACKGROUND

Element 29 is a Canadian resource company engaged in the exploration and development of mineral resource properties in Peru. The Company is exploring for copper ("Cu"), molybdenum ("Mo"), gold ("Au"), silver ("Ag"), and other metals including lead ("Pb"), and zinc ("Zn"). At present, none of the Company's mineral properties are at a commercial development or production stage. The Company's objective is to confirm, delineate, and develop the copper mineralization at its Flor de Cobre property ("Candelaria"). At the Elida porphyry copper project, the Company plans to explore and expand on the copper, molybdenum, and silver mineralization intersected in Target 1 (see Elida Copper Project) and drill test the four other porphyry targets located on the project.

The Company also holds two other projects; the Pahuay Copper Project, and the Muñaorjo Copper Project, which are both located in Peru.

The Company was incorporated in British Columbia on August 30, 2017. The Company's corporate headquarters is in Vancouver, British Columbia, Canada. Field operations are conducted out of a local office in Peru. On December 7, 2020, the Company's common shares commenced trading on the TSX Venture Exchange ("TSX-V") under the symbol "ECU". On February 4, 2021, the Company's common shares commenced trading on the Frankfurt Stock Exchange ("FSE") under the trading symbol "2IK". On May 27, 2021, the Company commenced trading on the Over-the-Counter OTCQB Venture Market ("OTCQB") under the symbol "EMTRF".

The Company has three wholly-owned subsidiaries; Candelaria Resources SAC, Elida Resources SAC, and Pahuay Resources SAC, all of which were incorporated under the laws of Peru (the "Subsidiaries").

Element 29 is led by a seasoned team of mining, corporate finance and corporate governance professionals, who have the experience to advance the Company's projects and generate value for Element 29's shareholders.

HIGHLIGHTS

The Company's strategy is to further explore the copper mineralization, and transition through to advanced exploration and engineering studies towards becoming a mining company.

Elida Copper Project (Peru)

The Company completed its seven-hole, 4,500 metre ("m") drill program with the following highlights:

  • Drill hole ELID019 intersected 383.75 m of 0.54% copper ("Cu"), 0.035% molybdenum ("Mo"), and 4.2 g/t silver ("Ag") for 0.71% copper equivalent ("CuEq"). The vertical hole was collared to test the vertical continuity of strong Cu-Mo mineralization intersected by ELID012, which was drilled in 2015.

  • Drill hole ELID020 intersected 308 m of 0.43% Cu, 0.028% Mo, 3.9g/t Ag (0.56% CuEq). This hole was drilled to test the southward continuation of mineralization intersected by ELID015.

  • Drill hole ELID021 intersected 556.1 m of 0.36% copper ("Cu"), 0.024% molybdenum ("Mo"), and 2.40 g/t silver ("Ag") for 0.47% copper equivalent1 ("CuEq") (Figure 2). The hole confirmed the northern limit and the eastward continuity of mineralization.

  • Drill hole ELID022 intersected 388.0 m of 0.34% Cu, 0.026% Mo, 2.36 g/t Ag (0.45% CuEq1). This hole was drilled to obtain information from the east side of the mineralized zone and define the northern extent of mineralization.

  • Drill hole ELID023 encountered a much wider than anticipated zone of mineralization on the south side of the low-grade central quartz monzonite porphyry stock and confirmed the westward continuity of mineralization south of the stock. The strongest of two mineralized intervals was 91.1 m of 0.41% Cu, 0.032% Mo, 4.1 g/t Ag (0.56% CuEq1). The hole was stopped before reaching the southern limit of the Target 1 mineralized zone.

  • Drill hole ELID024 intersected 451.75 m of 0.38% Cu, 0.034% Mo, and 3.1 g/t Ag for 0.53% CuEq1. The hole confirmed an apparent western limit of Target 1 mineralization and demonstrated good continuity of mineralization between holes ELID019, ELID020, and ELID025.

  • Drill hole ELID025 intersected 908.75 m of 0.39% Cu, 0.035% Mo, and 2.9 g/t Ag for 0.55% CuEq, including 339.6 m of 0.50% Cu, 0.036% Mo and 4.3 g/t Ag for 0.67% CuEq1 starting from the bedrock surface at 38.45 m depth. The hole confirmed the vertical extent of mineralization to 933 m below surface and remains open at depth.

Flor de Cobre Copper Project (Peru)

  • On February 3, 2022, the Company commenced a 3,700 m drill program at its Flor de Cobre copper project.

  • The objectives of the drill program are to validate the historical copper resource estimate of 57.4 million tonnes of 0.67% Cu associated with a supergene enrichment blanket formed on the Candelaria porphyry ("Candelaria") and to explore for primary Cu sulphide mineralization under the enrichment blanket to depths of over 500 m. Historical drilling intersected 272 m of 0.92% Cu starting at 78 m depth, including 116 m of 1.4% Cu as secondary enrichment followed by 156 m of 0.58% Cu as primary sulfides from drill hole K-008.

Corporate

  • The Company appointed Steve Stakiw as President, Chief Executive Officer and a Director of the Company effective April 11, 2022.

  • On December 14, 2021, the Company successfully closed its oversubscribed private placement financing of 11,498,000 units of the Company (the "Units") at a price of $0.60 per Unit for gross proceeds of $6,898,800. Each Unit comprises one common share of the Company and one-half of one common share purchase warrant of the Company (each whole common share purchase warrant, a "Warrant"). Each Warrant is exercisable into one common share of the Company (each, a "Warrant Share") at an exercise price of $0.85 per Warrant Share and will expire December 14, 2024.

The Company's financial highlights for the year included:

  • For the full 2021 year, the operating loss was $2,923,536 compared to an operating loss of $2,031,388 in 2020;

  • For the full 2021 year, operating cash outflow before working capital was $2,024,548 compared to an operating cash outflow before working capital of $1,809,055 in 2020; and

  • As at December 31, 2021, cash was $7,857,949 and the working capital balance was $7,155,772.

2022 OUTLOOK

Flor de Cobre

Company has commenced a 3,700 metre ("m") drill program at the Flor de Cobre Copper Project as announced on February 3, 2022. The objectives of the drill program are to verify the historical copper ("Cu") resource estimate of 57.4 million tonnes of 0.67% Cu associated with a supergene enrichment blanket formed on the Candelaria porphyry ("Candelaria") and to explore for primary Cu sulphide mineralization under the enrichment blanket to depths of over 500 m. Historical drilling intersected 272 m of 0.92% Cu starting at 78 m depth, including 116 m of 1.4% Cu as secondary enrichment followed by 156 m of 0.58% Cu as primary sulfides from drill hole K-008.

The Company's drill program consists of approximately 3,700 m of diamond drilling centred on the Candelaria porphyry. A total of 2,180 m has been allocated to twin nine legacy drill holes to verify the accuracy of existing historical geochemical assay and drill logs. These nine drill holes are interpreted to represent 70% of the copper contained in the historical copper resource estimate and potentially verify the assay results and provide the level of confidence needed for completion of a possible resource estimate that meets CIM best practice guidelines. The remaining 1,520 m allocated to the drill program will test the primary copper sulfide mineralization potential below the supergene enrichment blanket to depths of more than 500 m.

The Company also continues to progress drill permitting on the Atravezado porphyry target ("Atravezado") in preparation for initial drill-testing of a priority porphyry target supported by coincident outcrop geology, surface geochemistry, and geophysical response.

Elida

The Company completed a drilling program in December 2021 consisting of seven diamond drill holes totaling 4,481.4 m to test the Target 1 mineralized zone within the Elida porphyry cluster. Results of the first 3 drill holes were reported on November 15, 2021 and the final three drill holes were reported on January 19, 2022. Drilling results will be used to complete a potential initial resource estimate of Target 1 in accordance with CIM Definition Standards for Mineral Resources and Mineral Reserves (2014). In parallel, preliminary metallurgical studies have been initiated to examine recovery characteristics of mineralization for use in preliminary economic studies. Exploration planned for later in 2022 will be designed to test the unexplored segments of the Target 1 mineralized zone. Initial drill testing of Targets 2 and 3 will also be planned (Figure 8).

PROJECT ACQUISITIONS BACKGROUND

Title to exploration and evaluation assets involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristics of many mineral properties. The Company has investigated title to its exploration and evaluation assets and, to the best of its knowledge, including INGEMMET public records, title to the mineral properties remains in good standing.

In April 2019, the Company acquired from Globetrotters, a private company incorporated under the laws of British Columbia, Canada, two advanced copper projects located in Peru. The projects acquired were the Flor de Cobre copper project ("Flor de Cobre") and the Elida copper project ("Elida"). The purchase price of $2,811,250 was settled through an issuance of 28,112,501 common shares of the Company. Globetrotters also retains a 2% net smelter royalty ("NSR") on the projects. The Company and Globetrotters share certain directors in common.

In September 2019, the Company was successful in acquiring an additional three claims through a government auction process located to the northeast of Flor de Cobre, which was named the San Jose property.

In November 2019, the Company acquired the Pahuay Copper Skarn Project ("Pahuay") and the Muñaorjo Copper Skarn Porphyry Project ("Muñaorjo") from Globetrotters for $1,500,000. In December 2020, in connection with the Company's IPO, 3,750,000 common shares of the Company were issued to Globetrotters as payment for the acquisition. Globetrotters also retains a 2% NSR on the project.

PROJECT DETAILS - PERU

FLOR DE COBRE COPPER PROJECT

The Company owns 100% of the Flor de Cobre Copper Project. In addition, the Company has the option to earn 100% of certain concessions ("Candelaria concessions") from a Peruvian vendor of 127.12 hectares.

The Company can earn 100% interest in the Candelaria concessions at Flor de Cobre by making option payments to the vendor in the total amount of approximately US$5 million over five years between 2020 and 2024. An additional US$6 million payment would be due on completion of a positive detailed feasibility study for the concession area.

The Flor de Cobre Property is in the Southern Peru Copper Belt, which hosts numerous porphyry copper deposits including the Cerro Verde copper-molybdenum mine operated by Freeport-McMoRan; the Cuajone and Toquepala copper-molybdenum mines operated by Southern Copper; and the Quellaveco copper-molybdenum project under construction by Anglo American (Figure 1). Flor de Cobre is 5 kilometres northwest of the Chapi Mine and 26 kilometres southeast of the Cerro Verde Mine. The property contains the Candelaria historic copper resource first identified in the 1960s and was the site of an historical small-scale copper mining operation since that time.

Flor de Cobre is located 45 kilometres southeast of Arequipa at a modest elevation of ~2,700 metres with excellent infrastructure for mine development with respect to roads, power lines and port access (Figure 1 and Figure 2).

Figure 1. Flor de Cobre Project location.

Figure 2. Regional setting and infrastructure.

The Flor de Cobre property is made up of seven mining concessions and two concession applications totalling 1,927 hectares. Individual concessions are shown in Figure 3.

Figure 3. Flor de Cobre property concession map.

Candelaria Historic Copper Resource

Historical drilling by prior operators in the Candelaria area was very limited in scope but led to the discovery of an historic resource of 57.4 million tonnes at a grade of 0.67% copper, using a 0.2% copper cut-off grade in the near-

This is an excerpt of the original content. To continue reading it, access the original document here.

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

Element 29 Resources Inc. published this content on 20 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 April 2022 21:44:01 UTC.