LETTER TO SHAREHOLDERS
August 28, 2017
Dear Fellow Shareholders,
2017 has proven to be a monumental year for Mexican Gold Corp. Since the beginning of the year, the company has made considerable progress, including:
- Raising $3,600,000 through two equity financings;
- Rebuilding management, including the addition of Ali Zamani, a former Goldman Sachs portfolio manager, as Chairman;
- Attracting Palisade Global Investments Ltd. as a significant shareholder that now holds approximately 19.8% of the issued and outstanding common shares;
- Renegotiating property agreements to extend payments until the end of 2018;
- Confirming a parallel zone to El Dorado/Juan Bran, called Cinco Senores, through step out drilling; and
- Releasing an initial Mineral Resource Estimate for the El Dorado/Juan Bran and Santa Cruz Zones at Las Minas.
On August 1, 2017, Mexican Gold Corp. tabled its initial Mineral Resource Estimate for the El Dorado/Juan Bran and Santa Cruz zones, two of the eight known mineralized zones at the Las Minas property. The initial Mineral Resource Estimate is substantial in both scale and grade, making an important milestone for the company.
The total Inferred Resource for the two zones is 719,000 Au Eq ozs contained within 10,304,000 tonnes grading 2.17 g/t Au Eq. The total Indicated Resource is 299,000 Au Eq ozs contained within 4,908,000 tonnes grading 1.89 g/t Au Eq and the total Measured Resource is 5,000 Au Eq ozs contained within 62,000 tonnes grading 2.32 g/t Au Eq for a total Measured and Indicated Resource of 304,000 gold equivalent ounces contained within 4,970,000 tonnes grading 1.90 g/t Au Eq. See press release dated August 1, 2017.
Not only do the two zones remain open for expansion along strike and down dip, but six other mineralized zones are ready for drilling.
Since the beginning of the year, the company's stock price has appreciated approximately 100% from its 2017 low. Yet, considering the size of the resource, we believe that the company is still trading at a significant discount to its peers.
In addition, 2017 has been a stagnant year for the commodities and junior mining companies, with the majority of Canadian resource companies trading in the red. The company's ability to raise capital and appreciate approximately 100% is a testament to the hard work put in and the results being released.
Phase 2 Exploration Program
Following hard on the completion of the initial Mineral Resource Estimate, we have initiated the 2017 Phase 2 exploration program to expand the resource at El Dorado/Juan Bran and explore for additional resources at other zones of known mineralization. The company has contracted for target - scaled ground magnetic and Time Domain Electromagnetic (TDEM) surveys to be carried out at the El Dorado/Juan Bran, Cinco Senores, and Las Minillas zones. The results from the surveys will be used to focus the drilling program on high priority targets. The geophysical program is currently underway and will be followed by a 3,000 metre diamond drilling program.
Below are details pertaining to each mineralized zone. Feel free to skip over these sections to the conclusion for a less technical overview.
Cinco Senores Zone
The Cinco Senores zone is the site of several small scale high-grade historical mines and underground workings. Recent diamond drilling at the site intersected massive chalcopyrite in hole LM-17-CS-04 grading 10.8 g/t gold, 41.7 g/t silver and 2.8% copper or 15.98 g/t Au Eq over 2.0 metres - see press release dated May 15, 2017. The intercept was located approximately 100 metres west of mineralized intercepts outlined by earlier drilling and at the same elevation as the projected El Dorado/Juan Bran skarn zone. It is believed that the geology and style of mineralization at Cinco Senores is indicative of a potential El Dorado/Juan Bran type zone. The ground magnetic and TDEM surveys will target potential extensions to the high-grade intercept in step-out hole LM-17-CS-04 as well as other potential mineralized zones at Cinco Senores.
Las Minillas Zone
The Las Minillas zone is the site of the historical high-grade San Jose de Oro mine, which was operational in the 1930s. A high-resolution ground magnetic survey carried out over the Las Minillas zone in 2011 delineated a large magnetic - high anomaly measuring approximately 1,000 metres by 750 metres and located next to the underground workings of the historical San Jose de Oro gold mine.
Diamond drill hole LM-11-LM-24, which was drilled in 2011 near the San Jose de Oro mine workings and located within the boundaries of the magnetic high anomaly, intersected 5.14 g/t gold, 8.6 g/t silver and 1.46% copper over 2.0 metres - see press release dated May 15, 2017. Previous sampling of the underground workings of the San Jose de Oro mine returned up to 3.89 g/t gold, 26.6 g/t silver and 0.83% Cu over 2.0 metres - see press release dated February 02, 2011.
The ground magnetic and TDEM surveys at Las Minillas will target extensions to the mineralization exposed in the underground workings and intersected by previous drilling.
El Dorado/Juan Bran Zones
The initial Mineral Resource Estimate for the El Dorado/Juan Bran and Santa Cruz zones estimated that the two zones contain a total Inferred Resource of 719,000 Au Eq ozs and 304,000 Measured and Indicated Au Eq ozs - see above and press release dated August 1, 2017. The El Dorado zone, which contains 11,868,000 tonnes, remains open for expansion both on dip and strike. The geophysical surveys will target extensions to the mineralized zones included in the initial Mineral Resource Estimate.
Pueblo Nuevo Zone
The 2017 Phase 1 field exploration program at the Pueblo Nuevo concession was successful in identifying a number of gold bearing veins. Sampling results included 19.09 g/t gold and 10.6 g/t silver over 0.72 metres at Tamiagua - see press release dated May 31, 2017. A new parallel vein with extensive historical mining was also discovered. The upcoming field exploration program will focus on trenching, sampling and mapping to extend known veins and explore for new parallel veins.
Santa Cruz Zone
The Santa Cruz zone, which has numerous high-grade drill intersections over significant widths, remains open for expansion. Recent field work identified highly mineralized boulders dislodged from the area above the drill sites. Additionally, in-situ mineralization has been identified in the upward extension area of the known mineralized zone. The area is also the site of a large magnetic geophysical anomaly. A field exploration work program, including trenching, sampling and mapping, will be carried out to identify potential mineralized area in the upward extension of the Santa Cruz zone. Further drilling will be conducted if supported by the results of the field exploration program.
In summary, the initial Mineral Resource Estimate clearly demonstrated that a substantial mineral resource exists at Las Minas. We are confident that the Phase 2 exploration program will build on the success achieved to date and further expand the resource at Las Minas.
Ali Zamani, Chairman
Brian Robertson, President & CEO
QUALIFIED PERSON: The technical information in this letter has been reviewed and approved by Sonny Bernales, P. Geo., a registered Professional Geoscientist in the Province of British Columbia and a qualified person as defined by NI 43?101. Mr. Bernales is responsible for logistics and supervision of all exploration activity conducted by Mexican Gold on the property.
MINERAL RESOURCES : Mineral resources were calculated at a gold price of US$1,250 per troy ounce, a copper price of US$2.85 per pound and a silver price of US$16.75 per troy ounce. Gold equivalent grade was calculated as Au Eq (g/t) = Au (g/t) + Ag (g/t) x 0.013 + Cu (%) x 1.564.
GOLD EQUIVALENT GRADES : Gold Equivalent grades for Press Releases dated May 15, 2017 and May 31, 2017 were calculated at a gold price of US$1,250 per troy ounce, a copper price of US$3,00 per pound and a silver price of US$18.00 per troy ounce. Gold equivalent grade was calculated as Au Eq (g/t) = Au (g/t) + (Ag (g/t) x 0.014 + Cu(%) x1.64).
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This letter includes certain information that may constitute "forward-looking information" under applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, statements about the estimate of mineral resources, magnitude or quality of mineral deposits, anticipated advancement of mineral properties or programs, future operations, results of exploration, prospects, commodity and precious metals prices, future work programs, anticipated financial and operational results, capital expenditures and objectives and the completion and timing of mineral resource estimates. Forward-looking information is necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking information, including the degree to which mineral resource estimates are reflective of actual mineral resources and the risks identified in Mexican Gold's disclosure documents available at www.sedar.com. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. All forward-looking information contained in this letter is given as of the date hereof and is based upon the opinions and estimates of management and information available to management as at the date hereof. Mexican Gold disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.