Gabbs

Transaction Terms

P2 Gold has entered into an asset purchase agreement with Borealis Mining Company, LLC (“Waterton”), to acquire all of the assets that comprise the Gabbs Project located on the Walker-Lane Trend in the Fairplay Mining District of Nye County, Nevada (the “Transaction”). Under the terms of the asset purchase agreement, P2 Gold has agreed (a) to pay US$5 million and issue 15 million shares in its capital to Waterton at closing, and (b) to pay an additional US$5 million to Waterton on the earlier of the announcement of the results of a Preliminary Economic Assessment and the 24 month anniversary of closing.  Waterton will also reserve for itself a 2% net smelter returns royalty on production from the Gabbs Project, of which one percent may be repurchased at any time by P2 Gold for US$1.5 million and the remaining one percent of which may be repurchased for US$5 million.  The closing of the Transaction remains subject to the satisfaction of customary closing conditions for a transaction of such nature, including acceptance by the TSX Venture Exchange and the completion of the Private Placement (defined below).

P2 Gold intends to complete a private placement of 32 million subscription receipts (the “Subscription Receipts”) at a price of $0.50 per Subscription Receipt for aggregate gross proceeds of $16 million (the “Private Placement”).  If the Private Placement is brokered, P2 Gold intends to pay the brokers a commission and grant the brokers an option to sell an additional 4.8 million Subscription Receipts at $0.50 per Subscription Receipt.  The Private Placement remains subject to approval of the Exchange.

The net proceeds of the Private Placement will be used by P2 Gold to fund the acquisition of the Gabbs Project and, following the closing of the Transaction, exploration of the Gabbs Project and for general corporate purposes.  At the time the Transaction closes, each Subscription Receipt will be exchanged for one common share of the Company.  If the Transaction has not closed by May 21, 2021 the Subscription Receipts will automatically be cancelled and all subscription proceeds will be returned to the subscribers.  The Subscription Receipts to be issued under the Private Placement and the common shares of the Company exchanged for the Subscription Receipts upon the closing of the Transaction will be subject to a hold period in Canada expiring four months and one day from the closing date of the Private Placement.

Property Description

The Gabbs Project is comprised of 355 unpatented lode mining claims and one patented lode mining claim covering four known zones of mineralization and comprising approximately 2,800 hectares.  Nevada Highway 361, Gabbs Pole Line Road and a powerline cross the Gabbs Project.  A powerline crosses the property.

The gold-copper mineralization at three of the zones, Sullivan, Lucky Strike and Gold Ledge, is hosted within what are interpreted to be sills associated with an alkaline gold/copper porphyry.  The gold mineralization at the fourth zone, Car Body, is interpreted to be low-sulphidation epithermal mineralization.

Mineral Resources

P2 Gold retained P&E Mining Consultants Inc. (“P&E”) to prepare a Mineral Resource Estimate for the Gabbs Project based on 494 drill holes completed by prior project operators between 1970 and 2011. (See news release dated February 23, 2021.)  The Gabbs Project has an Inferred Mineral Resource of 1.84 million ounces of gold equivalent or 1.26 million ounces of gold and 422.3 million pounds of copper (73.1 million tonnes grading 0.54 g/t gold and 0.26% copper).  See Tables 1 and 2 below.

Table 1:  Gabbs Project Inferred Mineral Resource Estimate(1)(2)(3)(

Tonnes
(M)

Gold Grade
(g/t)

Copper Grade
(%)

Gold
(M oz)

Copper
(M lbs)

Gold Eq. Grade
(g/t)

Gold Eq.
(M oz)

73.1

0.54

0.26

1.26

422.3

0.79

1.84

(1) Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.

(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 in this press release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), Standards on Mineral Resources and Reserves, Definitions (2014) and Best Practices (2019) prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.

(4) The Inferred Mineral Resource Estimate was prepared for a potential open pit scenario using a constraining pit shell (with 50 degree slopes) at respective 0.24 g/t and 0.30 g/t oxide and sulphide gold equivalent cut-off grades.  The gold equivalent cut-off grades were derived from US$1,600/oz gold, US$3/lb copper, US$2/tonne mining cost, US$8 and $12/tonne oxide and sulphide processing costs, US$2/tonne G&A cost and 80% Au oxide and sulphide process recoveries and 90% Cu sulphide process recoveries.  A zero process recovery for oxide Cu was used.

Table 2:  Gabbs Project Inferred Mineral Resource Estimate by Zone(1)(2)

Zone

Tonnes
(M)

Gold Grade
(g/t)

Copper Grade
(%)

Gold
(M oz)

Copper
(M lbs)

Gold Eq. Grade
(g/t)

Gold Eq.
(M oz)

Sullivan

37.6

0.58

0.28

0.70

233.8

0.75

0.90

Lucky Strike

32.6

0.41

0.26

0.43

188.3

0.77

0.81

Car Body

2.8

1.39

0.00

0.13

0

1.39

0.13

Gold Ledge(3)

0.1

0.76

0.15

0

0

0.76

0

Total

73.1

0.53

0.26

1.26

422.3

0.79

1.84

(1) See Notes 1 to 4 to Table 1 above.

(2) Tables may differ and not sum due to rounding.

(3) Gold Ledge Inferred Mineral Resource rounded to zero.

The Gabbs Project oxide Inferred Mineral Resource Estimate is 610,000 ounces of gold (26.2 million tonnes grading 0.72 g/t gold and assuming zero recovery for copper).  See Table 3 below for a breakdown of the oxide and sulphide Inferred Mineral Resources.

Table 3:  Gabbs Project Inferred Mineral Resource Estimate by Rock Group(1)(2)

Rock Group

Tonnes
(M)

Gold Grade
(g/t)

Copper Grade
(%)

Gold
(M oz)

Copper
(M lbs)

Gold Eq. Grade
(g/t)

Gold Eq.
(M oz)

Oxide(3)

26.2

0.72

0.25

0.61

143.3

0.72

0.61

Sulphide

46.9

0.43

0.27

0.65

279.2

0.82

1.24

Total

73.1

0.54

0.26

1.26

422.3

0.79

1.84

(1) See Notes 1 to 4 to Table 1 above.

(2) Tables may differ and not sum due to rounding.

(3) Copper recovery in oxides assumed to be zero.

Technical Report

National Instrument 43-101 Technical Report has been prepared by P&E with an effective date of January 13, 2021.

Exploration Target

Based on historical drilling, the Gabbs Project has an Exploration Target of 0.90 million to 2.25 million ounces of gold (contained in 40 million to 70 million tonnes at an average grade of 0.7 to 1.0 g/t gold).  No Exploration Target has been estimated for copper.  The potential quantity and grade of this Exploration Target is conceptual in nature.  There has been insufficient exploration to define it as a Mineral Resource and it is uncertain if further exploration will result in the target being delineated as a Mineral Resource.

Historical Exploration

The Gabbs property is situated within the northwestern end of the Fairplay Mining District and has been intermittently explored by various operators from the 1970’s until 2011.  Over half of the drilling during this period concentrated on the Sullivan porphyry gold-copper deposit.  Two pre-feasibility level studies were completed for Sullivan, in 1990 (by Gwalia Gold Mining) and 1995 (by Arimetco).  The most recent substantive exploration work on the property was completed by Newcrest from 2002 to 2008, which included geochemical and geophysical surveying and drilling.  Newcrest decided in 2009 to divest its US properties and Gabbs was acquired by St. Vincent Minerals Inc. in 2010. No exploration work has been undertaken since St. Vincent’s work in 2011.

2021 Exploration Strategy

Due to the limited systematic exploration completed to date at Gabbs, P2 Gold believes the full potential of each of the known zones of mineralization has yet to be recognized. The mineralized zones have not been tested along strike or at depth, and of the 494 holes drilled at Gabbs between 1970 and 2011, 180 holes (36%) ended in mineralization.  Also, a significant number of holes drilled prior to 2004 were, depending on the focus of the operator, assayed only for gold or only for copper, not both metals.

Following the closing of the acquisition of Gabbs, the company plans to undertake a systematic exploration program for a large porphyry-related copper-gold system.  Drilling will focus on the known zones of mineralization to expand and improve the confidence in the mineral resources.  Drilling will be spaced for minimum Indicated Mineral Resource category, targeting the full depth of the zones and assaying for the full suite of elements. In 2021, an initial drill program is planned, comprising 20,000 meters of reverse circulation and diamond drilling. Additional work will include satellite hyperspectral surveying, airborne geophysics, ground geophysics and mapping and sampling, as well as metallurgical testwork.  

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