Message from the Chairman

Chairmans Letter

May 16, 2022

John M. Darch, Chairman.

As I write this, I am reminded of the Chairman’s letter I wrote on March 17, 2020, shortly after the World Health Organization declared COVID-19 a global pandemic. I remember feeling overwhelmed with the undaunting task of maintaining operations and investor confidence while keeping our site crew safe and healthy as management adapted to a virtual workspace. Since that day, the Company has successfully navigated multiple global shutdowns, market uncertainty and constant socio-economic changes. Yet despite these challenges, and what seemed at times to be never ending delays, we continued to advance our flagship Cerro Caliche gold project in Sonora, Mexico with successful drilling campaigns, comprehensive technical studies and positive Preliminary Economic Assessments.

While I am honoured to be part of such an exciting project and work alongside such a dedicated and tenacious group of people, I am also aware of the ongoing impact of COVID-19.  Again, I would like to express my heartfelt sympathy for those continuing to be affected by the pandemic.

Market downturns are not new and we cannot point to COVID as the only culprit.  Rising inflation and interest rates, the war in eastern Europe and global economic uncertainty are all likely contributing to the recent increase in market volatility.  Unfortunately, the decline in market sentiment not only impacts share price but also impacts the abilities for juniors, such as Sonoro Gold, to successfully secure financing within the capital markets as we witnessed during the recent periods of volatility.

 

Private Placement Withdrawn

On April 25, 2022, Sonoro Gold announced a CAD $3 million Private Placement to fund ongoing project development including permitting, land agreements and technical studies.  Even though we continued to announce positive results from our now completed drilling program as well as two material events for the project’s development, it was not enough to shield our stock from declining almost 20%.  Successfully closing a financing that is priced higher than the current market price would be a challenge, so as opposed to delaying closing until market sentiment improved, the Company announced it had decided to withdraw its financing offering.  This gives us the freedom to seek financing at a time and with terms that are in the best interest of Sonoro Gold.

While several factors, such as market sentiment or third-party related delays, are beyond the control of the Company, it is always management’s top priority to protect the Company’s assets and ensure all concession payments, taxes and regulatory filings are up to date with minimum dilution to shareholders. While financing may be delayed, we continue to move the project forward, as highlighted by the recently announced environmental permit filing and updated PEA results.

 

Environmental Permit Filed

On May 4, 2022, the Company announced that it filed its Environmental Impact Statement (or “MIA”) with the Mexican federal permitting authority (“SEMARNAT”).  Under Mexican law, mining construction and operation activities require MIA, as well as a Land Use Change (ETJ) permit.  The MIA is a compilation of extensive technical and environmental studies conducted by our exploration team over the past four years.  Its filing is a significant milestone in the project’s development and the Company will continue to work alongside its stakeholders during the permitting process.  We are currently completing the required documentation for the ETJ application and anticipate filing with SEMARNAT soon.
 
 

Updated PEA Results

On May 9, 2022, the Company announced positive results of an updated independent Preliminary Economic Assessment (“PEA”) on Cerro Caliche.  Based on the same mineral resource estimate contained in the Company’s initial PEA dated October 29, 2021, the updated PEA contemplates an optimized mine plan commencing production at a lower rate of 8,000 metric tonnes per day (“mtpd”) utilizing higher-grade ore and then increasing to 15,000 mtpd for the remaining life of mine (“LOM”).

The optimized mine plan projects an increase in total tonnes processed as well as the average gold grade including an increase in the average grade during the first three years where gold-equivalent grade increased from 0.51 g/t AuEq to 0.58 g/t AuEq.  Total recovered gold equivalent ounces also increased from 323,550 ounces to 344,674 ounces.

The economic result is an increase in after-tax NPV and IRR of 29% and 40.4%, respectively, and a decrease of the initial CAPEX by over 19%.

Below are a few highlights, but I would also encourage you to click here to read the news release.

 

Drilling Data

Approximately 7,000 meters of additional drilling recently completed at Cerro Caliche were not included in the current mineral resource estimate.  Final assay results are still pending, with the new geological data to be included in a further updated resource estimate scheduled to be released in the fall of 2022.

Since drilling resumed in November 2021, the Company announced multiple high-grade intercepts and expansions on March 1, 2022 and again on April 21, 2022.  The objective of the drilling program was to increase the estimated size and grade of the resources as this may not only extend the mine life but also improve the overall economics. The potential economic impact of these results on the proposed mining operation will also be assessed during the resource estimate update.

Recently confirmed higher-grade intercepts at depth also suggest the potential for underground gold mineralization, but further geological data is required.  With just over 30% of the mapped mineralized zones drilled and assayed to date, we continue to be very encouraged with the drilling results from Cerro Caliche.  Final assay results from the recent drilling campaign are expected to be announced in June.

For the project’s short-term objectives, click here to view our Corporate Summary.  To view our latest Corporate Presentation, please click here.

 

Conclusion

Thank you for your continuing support and confidence in Sonoro Gold.  I know it’s been a bit of a bumpy ride, but the Company continues to move the project forward with site preparation work and arranging project financing. And although pandemics, volatile markets and delays can be both frustrating and exhausting, the Company remains committed to its objective to bring Cerro Caliche into production.

 

Kindest Regards,

John M. Darch, Chairman

Sonoro Gold Corp.

Forward-Looking Statement Cautions:

 

This Chairman’s Letter may contain “forward-looking information” as defined in applicable Canadian securities legislation. All statements other than statements of historical fact, included in this letter, including, without limitation, statements regarding the Cerro Caliche project, and future plans and objectives of the Company, including the NPV, IRR, initial and sustaining capital costs, operating costs, and LOM production of Cerro Caliche, constitute forward looking information that involve various risks and uncertainties. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect, including, but not limited to, assumptions in connection with the continuance of the Company and its subsidiaries as a going concern, general economic and market conditions, mineral prices, the accuracy of Mineral Resource Estimates. There can be no assurance that such information will prove to be accurate and actual results and future events could differ materially from those anticipated in such forward-looking information. Important factors that could cause actual results to differ materially from the Company’s expectations include exploration and development risks associated with the Company’s projects, the failure to establish estimated Mineral Resources or Mineral Reserves, volatility of commodity prices, variations of recovery rates, and global economic conditions. The forward-looking information contained in this letter is made as of the date of this letter. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or the policies of the TSX Venture Exchange.  Readers are encouraged to review the Company’s complete public disclosure record on SEDAR at www.sedar.com.