Mr. Christian Easterday reports

HOT CHILI LIMITED QUARTERLY REPORT FOR 30TH JUNE 2023

Highlights

• Costa Fuego Copper-Gold Project Preliminary Economic Assessment (PEA)1 Outlines One of World's Lowest Capital Intensity, Major Copper Developments
  • Strong Economics: Costa Fuego PEA delivers using an 8% discount rate and long-term metal price assumptions of US$3.85/lb copper (Cu) and US$1,750/oz gold (Au)
  • Base-case post-tax Net Present Value (NPV8%) of US$1.10 Billion (approximately, within a range of US$733 Million to US$1.46 Billion) and Internal Rate of Return (IRR) of 21% (approximately, within a range of 17% to 25%)
  • Low Start-up Capital: US$1.05 Billion estimated, resulting in fast 3.5-year payback. Initial phases of open pit mining fully fund development of a bulk underground operation
  • Low Capital Intensity: One of the lowest capital intensities of global copper development projects
  • Approximately 112 ktpa Average CuEq2 Production Rate: Including 95 kt Cu and 49 koz Au during primary production (first 14 years) at C1 Cash Cost[3] of US$1.33/lb (estimated, net of by-product credits)
  • Initial Mine Life: 16-years with 1.41 Mt Cu and 718 koz Au produced for total revenue of approximately US$13.52 Billion and total free cash flow of approximately US$3.28 Billion (post-tax, after operating costs, capital costs, and royalties)
• US$15 Million Investment Agreement with Osisko Gold Royalties
  • Strong endorsement from a leading North American royalty-streaming group with funds to be used to advance the Costa Fuego Pre-feasibility Studies (PFS), resource growth drilling programmes and general project advancement.
• 30,000 m drilling program across multiple targets to commence shortly
• Single, Large Pit Scenario for Cortadera being studied in H2 2023
• Strong Cash balance of $26 million

Hot Chili's Managing Director and Chief Executive Officer Mr Christian Easterday is responsible for this announcement and has provided sign-off for release to the ASX and TSXV.

SUMMARY OF OPERATIONAL ACTIVITIES

Costa Fuego Copper-Gold Project Preliminary Economic Assessment (PEA)1 Outlines One of World's Lowest Capital Intensity, Major Copper Developments

The Costa Fuego PEA has been prepared by Wood Australia Pty. Ltd. as an update to the historical Productora 2016 Pre-Feasibility Study (the "2016 PFS"). It follows significant regional consolidation and a near quadrupling of the Company's resource inventory with the addition of the Cortadera porphyry resource, and the San Antonio high-grade satellite resource. The expanded resource base provided the opportunity to lift the scale of development for a combined development hub (Costa Fuego) and optimise infrastructure required to transport these resources to a proposed centralised processing plant at Productora. The PEA therefore presents a materially different project to that contemplated in the 2016 PFS.

The Costa Fuego PEA presents the largest copper development project listed on the Australian Securities Exchange (ASX). Already the ASX's largest copper development resource, the PEA confirms Costa Fuego as having the largest potential copper production in the exchange's development pipeline, (refer to ASX Announcement "Costa Fuego PEA Presentation", released 28th June 2023, slide 51 "New Material Copper Supply") at a time when the ASX is losing its significant copper-players, with Oz Minerals taken over by diversified-miner BHP and Newcrest under takeover by US-based Newmont.

The strong economics of Costa Fuego are described below in Table 1, using financial assumptions of an 8% discount rate and long-term metal price assumptions for the base case of US$3.85/lb copper (Cu) and US$1,750/oz gold (Au).

Table 1. Copper Price Ranges: Lower-, Base-, and Upper-Case Scenarios1,2
   
  
  
   Project Metric              Units                       Copper Price                        
                                              Lower (US$3.50/lb) Base   (US$3.85/lb) Upper (US$4.20/lb)
Pre-Tax                     NPV8%       US$M        1,046               1,540              2,029       
                             IRR          %          19 %               24 %                29 %       
Post-Tax                    NPV8%       US$M         733                1,100              1,463       
                             IRR          %          17 %               21 %                25 %       
Annual Average Revenue                  US$M         779                 845                911        
Annual Average EBITDA                   US$M         384                 445                506        
Annual Average Free Cash Flow           US$M         226                 271                315        
Payback period (From First Production)  years        4.25               3.50                3.25       
Post-Tax NPV8% /Start-up Capital                     0.7                 1.1                1.4        


  

Within the base-case scenario of the PEA, the positive economics shown in Table 2 outline a project that leverages its low-elevation advantage to achieve low start-up capital costs and consequently one of the lowest capital intensities of global copper development projects at this scale. Annual average revenue of around US$845 Million allow the project to achieve a fast 3.5-year payback on the back of initial open pit mining that fully funds the project expansion and development of underground bulk mining.

    Table 2: Costa Fuego PEA
   
    1
   
   Economic Highlights
   
    
     2
    
   
   - Base Case
  
  
   Project Metric                                                         Units  Estimated  Value
Financial Measures                                                                             
Pre-tax                       Cu US$3.85/lb              NPV8%         US$M              1,540
                                                          IRR            %                  24
Post-tax                      Cu US$3.85/lb              NPV8%         US$M              1,100
                                                          IRR            %                  21
Payback period (from start of operations)                              years               3.5
Open Pit Strip Ratio                                                    W/P                1.8
Post-tax NPV/Start-up Capex                                            Ratio               1.1
Capital Costs Costs2                                                                           
Total Pre-production Capital Expenditure                               US$M              1,046
Expansion                                                              US$M                708
Sustaining                                                             US$M              1,014
Total                                                                  US$M              2,768
Operating Costs2                                                                               
C1                                                                    $/lb Cu             1.33
Total Cash Cost (net by-products and including royalties)             $/lb Cu             1.43
All-in-Sustaining Cost                                                $/lb Cu             1.74
All-In Cost LOM                                                       $/lb Cu             2.31
Mine Life & Metal Production                                                                   
Primary Mine Production Including Ramp-up                              years                14
Mine Life (Life of Mine Processing)                                    years                16
Primary Mine Production - Average Annual Copper Equivalent Metal[9]     kt                 112
Primary Mine Production - Average Annual Copper Metal                   kt                  95
Primary Mine Production - Average Annual Gold Metal                     koz                 49


  

Following the pre-production Capital Cost of around US$1.05 Billion, operations are expanded to access the remaining deposits at an estimated Capital Cost of US$708 Million, with Sustaining Capital Costs bringing the total project Capital Cost to around US$2.77 Billion. Capital Cost incorporated a 20% contingency, with further contingency applied to the mining pit shells, which were developed using a copper price of US$3.30/lb to hedge against downside price risk impacting the production feed inventory.

Operating costs for Costa Fuego average (estimated net of by-products) a C1 Cash Cost of US$1.33/lb of copper, with an approximate average production rate of 112 ktpa CuEq4: Including 95 kt Cu and 49 koz Au during primary production (first 14 years).

The Costa Fuego life-of-mine processing runs for 16-years, producing an estimated 1.41 Mt of copper and 718 koz of gold (plus 22 kt of molybdenum and 1.7 Moz of silver) for total revenue of approximately US$13.52 Billion and total free cash flow of approximately US$3.28 Billion (post-tax, after operating costs, capital costs, and royalties)

Revenues from the PEA metal payload are described in Table 3 below, with 85% of revenue deriving from copper. Costa Fuego is highly leveraged to the copper price, with analysis identifying that for every US$0.10/lb increase above US$ 3.85/lb Cu price, US$100 Million (approximately) is added in post-tax NPV8%

Table 3: Costa Fuego Revenue Breakdown1
   
  
  
   LOM Revenue Contribution Revenue (US$M) % of Total
 Copper in Concentrate           10,342    76 %   
     Copper Cathode               1,218    9 %    
          Gold                    1,132    8 %    
       Molybdenum                   799    6 %    
         Silver                      32   0.2 %   
         Total                   13,523   100 %   


  

Hot Chili has been systematic in its approach to de-risking the project with over a decade of work in consolidating the deposits and securing infrastructure easements and surface rights. Costa Fuego is one of the very few projects globally that holds a granted water permit, approval for power connection to the national grid and the necessary easement corridors for water and power infrastructure that would support the advancement of the project to construction.

30,000 m drilling program across multiple targets to commence shortly

The Company plans to rapidly begin drilling high priority growth targets proximal to the current resource. Drilling will also test promising greenfield targets as shown in Figure 1. Further strategic regional consolidation options are concurrently being pursued, with mineral resource estimate upgrades expected in Q4 2023 and H1 2025.

Single, Large Pit Scenario for Cortadera being studied in H2 2023

The Company is investigating a large single open pit scenario for Cortadera (no underground block cave) with the potential to materially increase processing feed inventory and mine-life.

This scenario would necessitate a second PEA, studied while refining of the model inputs for metallurgy, geotechnical engineering and hydrogeology, to be incorporated into the Pre-feasibility. Once both PEA scenarios are assessed, the Company would select a single scenario to complete the final stages of its PFS for Costa Fuego, which is expected to be completed by H2 2024.

SUMMARY OF CORPORATE ACTIVITIES

US$15 Million Investment Agreement with Osisko Gold Royalties

The significant investment by Osisko provides strong endorsement from one of North America's leading royalty-streaming groups. The key elements of the royalty agreement, which closed in late July, are:

US$15 million in funds for growth and development with the investment (Royalty Consideration) to be used to advance the Costa Fuego Pre-Feasibility Studies (PFS), resource growth drilling programmes and for the general advancement of the Project

Clear "look-through" value given the Osisko NSR is equivalent to a 1.12% CuEq1 NSR royalty across payable metals for US$15 million and Hot Chili's market capitalisation at the time of announcing the royalty was US$80 million

Buyback rights if a change of control event occurs prior to the fourth anniversary of Closing. The Osisko NSR can be reduced to 0.5% NSR royalty on copper and 2.5% NSR royalty on gold

Osisko to have a Right of First Offer (ROFO) with respect to the sale of any future royalty, stream, or similar interests by Hot Chili

Development and Growth Funding

The Investment by Osisko has strengthened the Company's cash position to approximately A$26 million and the project is now fully funded for the next 12 to 18 months to deliver the next steps in its growth and development plan, (refer Figure 3) including:

Commencement of 30,000 m drill program - preparations well-advanced, drilling operations set to commence in the coming week.

Completion of Costa Fuego resource upgrade by late 2023.

Delivery of Costa Fuego PFS by H2 2024 - The Company has already considerably advanced its PFS (approximately 80% complete) with minimal expenditure required for completion.

Drill Results Reported for Costa Fuego in Quarter 2 2023

No further drilling has been completed in Q2, subsequently there are no details to report.

Health, Safety, Environment and Quality

Field operations during the period included geological reconnaissance activities, core-testing and logging, field mapping, and sampling exercises across the Cortadera, El Fuego and Productora landholdings. El Fuego field activities are run from the Cortadera operations centre and safety statistics are combined for reporting.

No safety incidents were recorded during the quarter. The Company's HSEQ quarterly performance is summarised in Table 3 below.

Hot Chili's sustainability framework ensures an emphasis on business processes that target long-term economic, environmental and social value. The Company is dedicated to continual monitoring and improvement of health, safety and the environmental systems. There is no greater importance than ensuring the safety of our people and their families.

Table 3 HSEQ Quarter 1 2023 Performance and Statistics
  
  
   Deposit                                  Productora   Cortadera     Las Canas   
Timeframe                               Q2 2023 Cum. Q2 2023 Cum. Q2 2023 Cum. 
LTI   events                               0     0      0     6      0      1  
NLTI   events                              0     2      0     5      0      1  
Days   lost                                0     0      0    152     0     23  
LTIFR   index                              0     0      0     24     0     170 
ISR   index                                0     0      0    596     0    3,898
IFR   Index                                0     39     0     43     0     339 
Thousands   of   manhours Superscript 1   2.1   51.2   7.9   257     0     5.9 
Incidents   on materials and assets        0     0      0     0      0      0  
Environmental   incidents                  0     0      0     0      0      0  
Headcount  Superscript 2                   4     11    15     37     0     21  


  
  

Notes: HSEQ is the acronym for Health, Safety, Environment and Quality. LTIFR per million-manhours. Safety perf ormance is reported on a monthly basis to the National Mine Safety Authority on a standard E-100 form; (1) manhours; (2) Average monthly headcount (3) Cumulative statistics since April 2019.

Tenement Changes During the Quarter

During the Quarter, the Company has renewed the mining exploration concessions Porfiada I (replaces Porfiada I, which expired on June, 14th, 2023), Porfiada II (replaces Porfiada II, which expired on July, 5th, 2023), Porfiada III (replaces Porfiada III, which expired on June, 15th, 2023) and Porfiada IV (replaces Porfiada IV, which expired on July, 5th, 2023).

The Company's existing tenements are detailed in the table below.

Competent Person's Statement- Exploration Results

Exploration information in this Report is based upon work compiled by Mr Christian Easterday, the Managing Director and a full-time employee of Hot Chili Limited whom is a Member of the Australasian Institute of Geoscientists (AIG). Mr Easterday has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a 'Competent Person' as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves' (JORC Code). Mr Easterday consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.

Technical Report

For readers to fully understand the information in this report, they should read the PEA Technical Report prepared in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") (to be available on www.sedar.com or at www.hotchili.net.au within 45 days of June 30, 2023) in its entirety, including all qualifications, assumptions, limitations and exclusions that relate to the information set out in this report that qualifies the technical information contained in the PEA. The PEA is intended to be read as a whole, and sections should not be read or relied upon out of context. The technical information in this report is subject to the assumptions and qualifications contained in the PEA.

Qualified Persons - NI 43-101

The PEA was compiled by Wood Australia Pty Ltd with contributions from a team of independent Qualified Persons within the meaning of Canadian Securities Administrators' National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43 -101"). The scientific and technical information contained in this report pertaining to Coast Fuego has been reviewed and verified by the following independent qualified persons within the meaning of NI 43-101:

• Ms Elizabeth Haren (MAUSIMM (CP) & MAIG) of Haren Consulting - Mineral Resource Estimate
• Mr Dean David (FAUSIMM (CP)) of Wood Pty Ltd - Metallurgy
• Mr Piers Wendlandt (PE) of Wood Pty Ltd - Market Studies and Contracts, Economic Analysis
• Farzard Kossari (PE) of Wood Pty Ltd - Cost Estimation
• Mr Anton von Wielligh (FAUSIMM) of ABGM Consulting Pty Ltd - Mine Planning and Scheduling

The independent qualified persons have verified the information disclosed herein, including the sampling, preparation, security, and analytical procedures underlying such information.

Disclosure regarding mine planning and infrastructure has been reviewed and approved by Mr Grant King, FAUSIMM, Hot Chili's Chief Operations Officer, and a Qualified Person within the meaning of NI43-101.

Competent Persons - JORC

The information in this report that relates to Mineral Resources for the Costa Fuego Project is based on information compiled by:

• Ms Elizabeth Haren (MAUSIMM (CP) & MAIG) of Haren Consulting - Mineral Resource Estimate
• Mr Dean David (FAUSIMM (CP)) of Wood Pty Ltd - Metallurgy
• Mr Piers Wendlandt (PE) of Wood Pty Ltd - Market Studies and Contracts, and Economic Analysis
• Mr Farzard Kossari (PE) of Wood Pty Ltd - Cost Estimation
• Mr Anton von Wielligh (FAUSIMM) of ABGM Consulting Pty Ltd - Mine Planning and Scheduling

Ms Haren, Mr David, Mr Wendlandt, Mr Kossari and Mr von Wielligh have sufficient experience, which is relevant to the style of mineralisation and types of deposits under consideration and to the activities undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves' and as Qualified Persons under NI43-101.

For further information on the Costa Fuego Project, refer to the technical report titled "NI 43-101 Resource Report for the Costa Fuego Copper Project Located in Atacama, Chile", dated May 13, 2022 with an effective date of March 31, 2022, which is available for review on SEDAR (www.sedar.com) under Hot Chili's issuer profile.

We seek Safe Harbor.