$1.40  +0.03
NGEx Resources Inc.
The NGEx District

Chile's Biggest New Copper-Gold Camp

Projects

Quarterly Updates

2016 Third Quarter Report

HIGHLIGHTS AND SIGNIFICANT EVENTS

The spin out of the Company's wholly-owned Filo del Sol property into Filo Mining Corp. through a Plan of Arrangement under the Canada Business Corporations Act (the "Arrangement") was completed on August 16, 2016. Filo Mining Corp. common shares began trading on the TSX Venture Exchange and the Nasdaq First North Exchange on August 26, 2016 and September 6, 2016, respectively under the trading symbol "FIL".

The Arrangement was designed to deliver greater value to shareholders by unlocking the value of the Filo del Sol Project and minimizing dilution of the Company's Constellation Project. With the spin out of Filo Mining complete, the Company is focused on advancing its 60% owned Project Constellation which includes the Los Helados and Josemaria deposits located, respectively, in Region III of Chile and in the adjacent San Juan Province of Argentina. Project Constellation is one of the largest undeveloped copper-gold projects in South America.

On September 19, 2016 NGEx provided an update on the Company's plans to advance Project Constellation and take advantage of opportunities to add value at modest costs by evaluating lower cost development options including: assessing the potential to initially develop Josemaria at a smaller scale; testing the heap leach potential of the oxide cap at Josemaria; and reducing timelines to development by starting the process of acquiring water rights and continuing baseline environmental studies. The Company also plans to work up a number earlier stage exploration targets between Los Helados and Josemaria. During the third quarter of 2016, NGEx also secured the surface rights covering the Los Helados deposit, including areas for infrastructure and access, representing an important milestone in Project Constellation's development.

CORE BUSINESS AND BACKGROUND

The Company is principally engaged in the acquisition, exploration, and development of precious and base metal properties located in Chile and Argentina. The Company's common shares are listed on the Toronto Stock Exchange (the "TSX") and NASDAQ OMX Stockholm ("Nasdaq Stockholm") under the symbol "NGQ".

NGEx has built a strong portfolio of copper-gold projects in Chile and Argentina. The Company has an experienced management team and board with an extensive background in Chile and Argentina and an appropriate mix of geological, engineering, financial, and business skills to advance its projects and to generate value for its shareholders.

The Company's principal project is Project Constellation, a combination of the Los Helados and Josemaria Projects which are advanced exploration stage copper-gold projects located in Chile and Argentina, respectively.

The Company's long term view of the copper market is positive, with the expectation that tightening mine supply and growing demand, especially from developing countries, will contribute to stronger prices and require the development of new greenfield mining projects. The Company's strategy is to create value for its shareholders by expanding and increasing the quality of its resources through successful exploration and advancing the engineering and other studies that are required to prepare its projects for eventual development by the Company and its partners or by third parties. The overall objective is to position the Company as a top tier copper industry investment.

PROJECTS

Project Constellation

The Integrated PEA contemplates combining the Los Helados and Josemaria projects, whereby material from both deposits would be processed at a centralized processing plant located in Argentina. Following the removal of an export retention tax that was applicable to copper concentrate exports in Argentina, the results of the Integrated PEA were updated on February 22, 2016, which resulted in an increase in Project Constellation's after-tax NPV and after-tax IRR to US$2.61 billion and 16.6%, respectively.

A National Instrument 43-101 Technical Report with an effective date of February 12, 2016, an amended signature date of March 31, 2016, and titled "Constellation Project incorporating the Los Helados Deposit, Chile and the Josemaria Deposit, Argentina NI 43-101 Technical Report on Preliminary Economic Assessment" (the "Project Constellation Report") was prepared by Amec Foster Wheeler International Ingeniería y Construcción Limitada ("AMEC") under the direction of Jamie Beck, P. Eng, Project Manager (NGEx Resources). The report has been filed on SEDAR and is available for review under the Company's profile on SEDAR (www.sedar.com).

Project Constellation is expected to produce a life-of-mine annual average of approximately 150,000 tonnes of copper, 180,000 ounces of gold and 1,180,000 ounces of silver over a project life of 48 years. Forecast annual metal production over the first five years of production is 185,000 tonnes of copper, 345,000 ounces of gold and 1,310,000 ounces of silver.

Integrated PEA Summary
Pre-Tax NPV (8%) & IRR $4.43 billion NPV
20.7% IRR
After-Tax NPV (8%) & IRR $2.61 billion NPV
16.6% IRR
Payback Period (undiscounted, after-tax cash flow) 3.6 years
Metals Prices Assumed $3.00/lb Cu
$1,275/oz Au
$20.00/oz Ag
Initial Capital Expenditures $3.08 billion
LOM Sustaining Capital Expenditures $4.36 billion
LOM C-1 Cash Costs (net of by-product credits) $1.05/lb Cu payable
Nominal Mill Capacity 150,000 t/d
Mine Life 48 years
Average Annual Metal Production (rounded) Life of Mine First 5 years
150,000 t Cu
180,000 oz Au
1,180,000 oz Ag
185,000 t Cu
345,000 oz Au
1,310,000 oz Ag
LOM Average Process Recovery 88.3% Cu   
72.7% Au   
61.4% Ag

* All figures in the table above are in 2015 US dollars and on a 100% Project and 100% equity basis valuation.

Note: The reader is advised that the Integrated PEA results are only intended to provide an initial, high-level summary of the project. The Integrated PEA is preliminary in nature and includes the use of inferred mineral resources, which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the Integrated PEA results will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

Both Los Helados and Josemaria are subject to separate Joint Exploration Agreements with joint exploration partners. The Company acts as the operator of both agreements and, in each case, both parties are required to contribute their pro-rata share of expenditures or dilute their interest in their respective projects.

Los Helados is subject to a Joint Exploration Agreement ("PPC JEA") with Pan Pacific Copper Ltd. ("PPC"), whereby the Company holds approximately a 61.17% interest and PPC holds approximately a 38.83% interest in the Los Helados Project. Effective September 1, 2015, PPC has elected not to fund its pro-rata share of expenditures and, as a result, has elected to dilute its interest pursuant to the PPC JEA. Accordingly, the Company has funded 100% of the Los Helados project starting September 1, 2015. As at September 30, 2016, PPC's interest in the Los Helados Project has been diluted by approximately 1.17%.

Josemaria is subject to a Joint Exploration Agreement with Japan Oil, Gas, and Metals National Corporation ("JOGMEC"), whereby the Company owns a 60% interest and JOGMEC holds a 40% interest in the Josemaria project. JOGMEC is currently funding its pro-rata share of expenditures.

Activities in the Current Quarter of 2016

During the quarter, the Company completed the spin-off of the Filo del Sol property into a new publicly traded vehicle, Filo Mining Corp. The Arrangement was designed to unlock the value of the Filo del Sol Project while minimizing shareholder dilution of Project Constellation and will allow the Company to focus on its more advanced projects.

At Project Constellation, the Company signed an agreement with the owners of the surface rights covering the Los Helados project area, including areas for infrastructure and access. This agreement provides life-of-mine access to and use of the surface lands required for project construction and operation, and reduces risk and timelines for potential development.

A comprehensive review of earlier stage exploration targets within the large land package that surrounds Josemaría and Los Helados was completed during the third quarter of 2016. This work has highlighted several potential targets for further work including, most notably, the Cerro Blanco target located less than 2 km from Los Helados. All drill targets are within a few kilometers of the proposed processing plant and display coincident geological and geochemical signatures typical of porphyry systems.

Environmental baseline data collection in support Project Constellation remains ongoing.

Other Chilean and Argentinean Projects

The Company holds a number of early stage exploration projects in Chile and Argentina. In addition to its efforts on Project Constellation the Company continued with its ongoing project evaluation program through field visits and data reviews of a number of mineral projects during the 2016 period.

OUTLOOK

The Company remains focused on the advancement of Project Constellation and on continued efforts to lay the groundwork for the development of this significant asset. Work is planned to explore the varied development options that these projects provide in this new mining region. Specifically, the Company sees clear opportunities to add value, at modest costs, by evaluating lower cost development options and identifying other opportunities to improve the project, including:

  • Assessing the potential to initially develop Josemaria at a smaller scale. Josemaria has a zone of near surface, higher grade mineralization. The Company plans to complete an internal scoping study that would focus on the potential of this material to enable a lower initial capex, scaled development of Josemaria;
  • Testing the recovery of gold from the oxide cap at Josemaría, which contains approximately 450,000 ounces of gold within an Indicated resource of 43 million tonnes at a grade of 0.32 g/t gold. This material was considered as waste in the Integrated PEA mine plan, however, the limited leach test work completed to date showed good gold recoveries and further test work is planned to evaluate whether it could contribute to project economics;
  • Evaluating high potential regional exploration targets within a few kilometers of the existing deposits and the proposed plant site;
  • Reducing timelines to development by starting the process of acquiring water rights to support the project. The proposed process plant location in Argentina greatly reduces the cost and risk of securing a water supply since water will be sourced from Argentina rather than from Chile;
  • Continuing baseline environmental studies and community relations programs; and
  • Exploring potential regional synergies and cooperative development plans with other regional operators to utilize spare capacity of processing plants and infrastructure, including port facilities. Innovative development concepts such as Teck-Goldcorp's Nueva Union Project open up the potential for sharing infrastructure on a regional scale by connecting deposits via long distance conveyor systems.

The Company continues to pursue these de-risking opportunities and will seek to engage with potential partners to lay the groundwork for either eventual development by the Company and its partners or for sale to a third party. Efforts will be focused on exploring all potential development scenarios for the Project Constellation assets while keeping costs to a minimum.

 
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