Resource World Magazine

D E C E M B E R / J A N U A R Y 2 0 2 0 www.resourceworld.com 47 Two salable concentrates would be pro- duced; a zinc concentrate (grading 50% zinc) at 92% recovery and a silver-lead concentrate (grading 50% lead and 88 to 191 oz/tonne silver) at 85% recovery. Tinka believes that significant improve- ments can still be made to make the project potentially even more profitable. The main way is to define more high-grade zinc mineralization. Towards that end, the com- pany has been aggressively drilling the South Zone at the project as well as explor- ing numerous targets at depth. Recent drill results returned some of the best zinc intersections ever drilled at South Ayawilca both from within and immediately outside of the zinc resource boundary. Hole A19-165 intersected four separate gently-dipping mineralized zones with downhole thicknesses of between 9 and 29 metres and grading between 11.8% and 14.0% zinc, within a cumula- tive downhole interval of 170 metres (note: downhole thicknesses approximate true thicknesses in this hole). Hole A19-167, a recently completed and deepened 2017 drill hole, intersected very high-grade silver mineralization (>1,000 g/t silver) accompanied by base metals (14.5% Zn, 0.3% Pb) over a narrow 1.7- metre interval, approximately 100 metres beneath the existing Zinc Zone resource. This was intersected within a wider zone of lower grade silver mineralization associated with strongly altered Pucará limestone. This new "Silver Zone" discov- ery supports Tinka´s view that Ayawilca still has significant exploration potential, including upside for precious metals. "The 2019 drill program at South Ayawilca is greatly improving our under- standing of the structural and lithological controls of the high-grade zinc mineral- ization," commented Dr. Graham Carman, Tinka's President and CEO. "Drill hole A19-166 was drilled at a very shallow angle and confirmed the geometry of a locally overturned anticline which has acted as a structural trap for the zinc mineralization. An additional drill hole, A19-168 was recently collared, which will act as an additional infill hole and provide further geotechnical information." Ayawilca mineralization is classified as a "manto"-style Carbonate Replacement Deposit. The mantos (or blankets of min- eralization) have the greatest thickness and best grades towards the south and west of the project area where the host rocks are folded and overturned. This structure is believed to be instrumental in helping to trap mineralizing fluids. Over the past few years the company has drilled over 40,000 metres, published two resource updates and more recently published a maiden Preliminary Economic Assessment. Nevertheless, the company's stock price has retracted back to 2016 lev- els prior to the South Ayawilca discovery. Tinka is of the view this stock slump is not a reflection of the fundamentals of the project but rather attributes it to a bearish zinc market. To add weight to this state- ment, GMP Securities published a Price to Net Asset Value per share ratio of seven other comparable zinc developers and six zinc producers. Tinka's ratio was 0.24 and represents one of the lowest valuations of any of the zinc developers. GMP deter- mined that the average Developer P/NAV per share ratio was 0.33 and the average zinc producer ratio was 0.46. For the most part, the zinc price has behaved inversely proportional to zinc inventories over the past 12 years; prices rise as inventory stock falls. China pro- duces about 40% of the world's zinc; however, zinc grades in Chinese mines have been steadily declining with the aver- age grades now sitting at about 3.5% zinc. Studies indicate that there is not much zinc coming on stream from pipelined projects. This points to an eventual supply gap and suggests the fundamentals for zinc are strong. If this supply shortfall comes to fruition, companies like Tinka will be well positioned to take full advantage. This is underscored by the fact that Tinka's NPV is highly leveraged to zinc price and zinc grades. A 20% increase to the price of zinc would result in an after- tax NPV (8%) of US $606 million, an increase of US $243 M (or 67%) over the base case PEA scenario. Tinka has no con- trol over the zinc price but it can (and has been) improving zinc grades. Higher zinc grades will have the most beneficial eco- nomic effect in the early part of the mine life. Next year, work will focus on PEA opti- mization and a Prefeasibility Study and engineering with a final feasibility study and permitting currently scheduled for 2022. Tinka Resources currently has 264.6 million shares outstanding with a market capitalization of about $42 million. The company has about $8 million in the bank. Institutional investors currently hold 52% of the outstanding stock. n LEFT: Diamond drilling at the Ayawilca zinc-silver deposit in Peru. Photos courtesy Tinka Resources Limited. RIGHT: Tinka's diamond drill core storage facility for its Ayawilca Project in Peru. MINING

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