$1.05  even
NGEx Resources Inc.
The NGEx District

Chile's Biggest New Copper-Gold Camp

Projects

Quarterly Updates

2016 year End Report

HIGHLIGHTS AND SIGNIFICANT EVENTS

The Company achieved a number of significant milestones during fiscal 2016, most notably the release of the results of the Preliminary Economic Assessment (the "Integrated PEA") of Project Constellation and the completion of the spin out of the Filo del Sol property into Filo Mining Corp.

On January 7, 2016 the Company published the results of the Integrated PEA for Project Constellation, which contemplates the combined development of the Los Helados and Josemaría deposits, whereby material from both deposits would be processed at a centralized processing plant located in Argentina. The Integrated PEA estimated Project Constellation's after-tax NPV and after-tax IRR to be US$2.61 billion and 16.6%, respectively.

To minimize dilution of the Company's Project Constellation while further unlocking the value of the Filo del Sol Project, the Company initiated 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 spin out 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".

With the spin out of Filo Mining complete, the Company is focused on advancing its Project Constellation. 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: testing the heap leach potential of the oxide cap at Josemaría; and continuing baseline environmental studies. The Company continues to pursue these de-risking opportunities and will seek to engage with potential partners to lay the groundwork for either the eventual development by the Company and its partners or through a sale to a third party. The Company also plans to evaluate a number of earlier stage exploration targets between Los Helados and Josemaría.

During the third quarter of 2016, NGEx completed an agreement which provides surface rights covering the Los Helados deposit, including areas for infrastructure and access, representing an important milestone in Project Constellation's development. A minimum annual payment of US$0.5 million is required, with a total of US$1.2 million paid by the Company as of the date of this MD&A. Work during the fourth quarter of 2016 focused on developing the metallurgical test program for the oxide cap at Josemaría in addition to regional exploration targeting.

The Company completed three separate private placements during the year which sold an aggregate of 25,333,333 common shares for net proceeds totaling $20.4 million. On November 10, 2016, the Company also received $0.9 million in cash from the sale of its remaining interests in the GJ royalties including a transfer of its future common share consideration receivable from Skeena Resources Limited.

The Company announced the following corporate updates during the year ended December 31, 2016 and as of the date of this MD&A:

  • On November 10, 2016, the Company announced the retirement of Mr. Paul Conibear as a director of the Company. Paul has served on the Board of the Company and its predecessor companies for many years and was involved with the NGEx projects since the late 1990s and played a key role in the management of the early work. To fill Mr. Conibear's vacant position, and to add additional depth and diversity, the Company appointed Mr. Jack Lundin and Ms. Cheri Pedersen to the Company's Board of Directors.

    Mr. Jack Lundin received a Bachelor of Science degree in Business Administration from Chapman University and a Master of Engineering degree in Mineral Resource Engineering from the University of Arizona. He previously worked as an analyst for Lundin Petroleum and is currently employed with Lundin Gold Inc. on the construction of the world class Fruta del Norte gold project in Ecuador.

    Ms. Pedersen holds a Bachelor of Commerce degree and a law degree, both from the University of British Columbia. Ms. Pedersen practiced securities law in Vancouver, British Columbia for over 30 years, retiring from law practice in April 2016.
  • On November 10, 2016, Ms. Joyce Ngo was appointed Chief Financial Officer. Ms. Ngo previously held the position of Interim Chief Financial Officer and, before that, Corporate Controller.
  • On February 1, 2017 Mr. James Beck was appointed Vice President, Corporate Development and Projects. Mr. Beck previously held the position of Director, Corporate Development.

PROJECT CONSTELLATION

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

In January 2016 NGEx announced the results of a Preliminary Economic Assessment ("Integrated PEA") that evaluated the development of Project Constellation. 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 Josemaría 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., (NGEx Resources). The report has been filed on SEDAR and is available for review under the Company's profile on SEDAR (www.sedar.com).

The Integrated PEA contemplates combining the Los Helados and Josemaría projects, whereby material from both deposits would be processed at a centralized processing plant located in Argentina. The results of the Integrated PEA indicate positive economics and position Project Constellation amongst the largest and most exciting development projects in South America. Pursuant to the Integrated PEA, Project Constellation is expected to produce 150,000 tonnes of copper, 180,000 ounces of gold and 1,180,000 ounces of silver per year for 48 years, and is projected to have after-tax NPV (8%) and after-tax IRR to be US$2.61 billion and 16.6%, respectively. 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 in this MD&A 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 Josemaría are subject to separate Joint Exploration Agreements with joint exploration partners. The Company is the majority partner and operator for both projects.

Activities in the Fourth Quarter of 2016

The Company initiated a phased metallurgical testing program to evaluate the leach amenability of the oxide cap at Josemaría during the fourth quarter. The oxide cap 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. Bottle roll leaching of composite and individual samples will be completed to study the rate of gold, silver and copper leaching, and determine whether further testwork is warranted. If the results are positive, this material could contribute to Project Constellation's economics.

In addition to environmental baseline data collection in support Project Constellation, the Company also conducted a review of earlier stage exploration targets within the large land package that surrounds Josemaría and Los Helados. 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 targets are within a few kilometers of the proposed processing plant and display coincident geological and geochemical signatures typical of porphyry systems.

Other Chilean and Argentinean Projects

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 2016.

 
2016 Third Quarter Report
 
2016 Second Quarter Report
 
2016 First Quarter Report
 
2015 Fourth Quarter Report
 
2015 Third Quarter Report
 
2015 Second Quarter Report
 
2015 First Quarter Report
 
2014 Fourth Quarter Report
 
2014 Third Quarter Report
 
2014 Second Quarter Report
 
2014 First Quarter Report
 
2013 Year End and Q4 Report

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