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Chakana Copper (TSX-V: PERU) CEO David Kelley on the Latest High-Grade Intersections at the Soledad Copper-Gold-Silver Project in Peru

July 2, 2018

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is President and CEO of Chakana Copper (TSX-V: PERU)(OTC: CHKKF), Mr. David Kelley. Dave, how are you this afternoon?

David Kelley: I'm great, Gerardo. How are you?

Gerardo Del Real: I'm well as well. Thank you so much for asking. You had some important news this week. Several days ago, you discovered a blind pipe at Breccia Pipe 1, and a little bit of context. Everybody, the market, has come to expect excellent results from drilling at Breccia Pipe 1, but you intersected additional high-grade intervals that included 187 meters with 1.05% copper, 1.18 grams per tonne gold for a 2.38 copper equivalent, and 111 meters with 1.05% copper and 3.48 grams per tonne gold.

As I mentioned, people have come to expect excellent results from the Breccia Pipe 1. We are anticipating several catalysts here in the near term. Permits is a huge one for the second half, additional drilling. Let's start with the 13 holes that you reported on this week, and then we can move forward and talk about some of the other details, Dave.

David Kelley: Yeah, Gerardo, that really is an important news release, because first of all, we're putting out lots of results because we're in a definition drilling program. We've done a lot of drilling, and that's come together really well. We've got one more batch of results that we'll release on Breccia Pipe 1. The drill rig is currently on Breccia Pipe 5, and again, we're drilling there. We've completed two additional holes on pipe in addition to original nine, and that's all looking really well. But the discovery of the North Zone, what we're calling the North Zone, it gives a blind breccia pipe. We confirmed that in our drilling.

We originally drilled into the top of the North Zone, in our hole 25, in the early part of our program, but we didn't really understand its significance. It's at about 50 meters off of the main pipe, very strongly mineralized. I think that 13-meter intercept ran about 12% copper equivalent, really spectacular grades. But we were focused on drilling out the principal breccia, and we stayed in that for most of the program. Then finally, we put a hole beneath that original hole, about 30 meters deeper, and we ended up with an 84-meter intercept, a very good grade mineralization, confirming that that indeed was a separate breccia body.

Then we've since put multiple holes into that zone and that was also part of this last news release. Importantly, that breccia body is an in situ, blind breccia pipe. We know that it's not a structural offset of the original breccia pipe. We've confirmed that with the contact relationships between that breccia body and in the host rock and in the breccia body to the south, the main pipe. We do have two separate pipes. Now, maybe they coalesce at depth. We don't know the timing of these two pipes. If one came in first and then the other came in later or if they formed at the same time.

We're very excited about chasing this at depth and seeing what happens, but it is very significant because it potentially adds significant tonnes to Breccia Pipe 1. But also more importantly, it tells us that we're at that critical erosion level, where we're exposing some of the pipes but not all of the pipes. We have 11 other areas on the property that have been mapped and sampled and detailed, that have the characteristics of being adjacent to or above a breccia pipe, and we know that because we've seen that relationship in our drilling.

And now, knowing that we have blind breccia bodies on the project, as a function of this erosion level, having these other alteration areas, we're very excited about the potential of drill testing those other areas that don't have breccia pipe mineralization exposed at surface, but have the characteristics of being very close to a breccia pipe.

Gerardo Del Real: This is important. Right, David? Because you were very candid with me when you and I spoke, I believe, a month or so ago. You mentioned that, yes, the grades are spectacular for Breccia Pipe 1 and the other pipe. But you knew and you were candid about the fact that you were going to need to discover more of these pipes, and that leads me to my next question. In order to do that, you're awaiting a critical permit. How are things coming along on that front?

David Kelley: Yeah, they're coming along just as planned. We submitted this permit application back in December and it's got three main phases that it has to go through, and it's in the final third stage of that process. We have our permit team that monitors the progress of the permit on a weekly basis. We've got a target date of mid-July for that permit to be awarded. As soon as that permit is awarded, then we can start breaking ground on platforms and drill road access. We've got most drill road access already sorted out. There's a few older drill roads that we want to open up to give us access to different drill platform sites for the various pipes.

But what you'll see when that happens is we've got a second drill rig on the site. The second drill rig will get fired up. We'll be able to drill pipes. Our nomenclature is Bx 3, Breccia Pipe 3 East and West, two different pipes, and Breccia Pipe 6. Plus some additional step-up platforms on Breccia Pipe 5, where we're drilling now, to finish off the resource drilling on Breccia Pipe 5. So, we expect that within the next two months, we'll have the definition drilling completed on two of the pipes. We'll have a permit that allows us to start drilling additional pipes.

You'll just see a crescendo through the rest of the year of drilling additional pipes. We have a second permit milestone to reach that we anticipate will be October 15th. That will give us access to drilling the pipes on the lower part of the hill, which was part of a news release we put out, about six weeks ago, on the expansion of our mineral rights, including the Soledad's ground and some really spectacular surface-exposed, mineralized breccia pipes in the south part. So that's another catalyst that you'll see in mid-late October, and we'll get drilling happening on there, and then we'll continue. The plan is to continue with two drill rigs through the end of the year.

Gerardo Del Real: Excellent. The last time we spoke, we also touched on the met work, and we all know how important that can be. How are things coming along there?

David Kelley: Yeah, we've got the first 40-kilogram composite samples. Three from Breccia Pipe 1 and one from Breccia Pipe 5 into RDI here in Denver. RDI is a well-known metallurgical research lab. They've worked throughout the Americas, very impressive track record of the number of projects they've worked on. They've done a lot of work in Peru, and they're very familiar with the mineralogy of the type of system that we're dealing with here — high-grade copper-gold systems with silver. We've nailed down the mineralogy now. We understand what kind of mineralogy we're dealing with in this system.

Those guys are going through their diagnostic bleach process to characterize the recoveries and give us some idea of different types of processing options that might work. It's very early days. We don't have any results yet. The samples have been in the lab for about three weeks. It's about a two-and-a-half-month program that they run through the work, and it's really just the start of met work that will continue. I think I might have mentioned to you at one point, Gerardo, that we bought a freezer container. We keep that on site at our core facility in Lima.

As soon as the rejects come back from the lab, they go straight into the freezer container, and that's to keep the samples from oxidizing. So, when we do these metallurgical tests, we've got the optimal material to work with.

Gerardo Del Real: Wonderful, wonderful. There's a lot of drilling planned, obviously, permitting milestones that you plan to check off. What's the treasury look like?

David Kelley: The treasury right now is about $12 million Canadian in the bank, and that's well funded through the end of the year and we should be able to reach our milestone of initial resource in March, with that treasury balance. Then that'll take us into 2019. So we're being very conservative in the way we spend that money and try to be very efficient with our drilling and our G&A costs and that type of thing. But we're on track to be able to cover the initial resource estimate in March of next year with that budget.

Gerardo Del Real: You and I spoke in person at the 121 Mining Conference in New York here, recently, and I think you would agree that there's just not a lot of copper-gold projects of quality and scale out there. The Soledad project obviously checks a lot of boxes. That permit coming, the drilling, and what you're able to discover is going to take it to the next level. I can't wait to see what the drill bit turns out, David. It's exciting times.

David Kelley: It is very exciting. We keep hearing that from our investors and other people in the industry telling us that there are so few good copper and good gold stories out there, and we've got both here. I mean, the gold endowment of these copper breccia pipes are really spectacular, and we're optimistic about the recovery of the gold and silver and copper in the pipes. Obviously, that's going to be borne out with the detailed works that we're doing now. But we are very excited about it. It's a different story. Not everyone's familiar with tourmaline breccia pipes.

So we've got some really excellent information on our website about what tourmaline breccia pipes are, how they form, how we're exploring them. You know, what the potential depth extent of these types of features are just from comparable type of systems elsewhere. So I encourage people to get up onto our website, take a look at some of that stuff. If they have any questions, I'm always open to set up a time to talk to people and explain the story as much as it needs to be.

We couldn't be more excited about where the project is going, and the milestones we've already accomplished, and being on track to continue to deliver. Hopefully, we can continue to deliver to those high expectations that the market's come to expect.

Gerardo Del Real: Wow. And again, exciting stuff. That website, by the way, is chakanacopper.com. Dave, looking forward to having you back on and once we start getting results from the met work, and of course, the permitting catalyst that's coming up here soon.

David Kelley: You bet, Gerardo. Anytime, and appreciate the interest and the opportunity to tell the story.

Gerardo Del Real: Thank you for your time, David.

David Kelley: You bet. Have a great day.

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