Chairman’s Letter – March 2022

Iron & Copper Projects - Chala Metals
Chairman's Letter - March 2022 -

Dear Shareholders in CML,

8.6% Cu + 200 gms Ag in one sub-surface sample, above 10 grams of gold in another
 It has been an eventful couple of months since I last updated you on company news.  Let me commence with the really exciting news. On our own concession, AMP 1, we have found Copper, Gold and Silver at exceptionally encouraging grades. We propose to now focus on this concession whilst other matters run their course. The following is a report on developments over the past 6 weeks.

Assay results
We received 59 assay results as per the attached certificate from one of the world’s leading laboratories. 52 of the results relate to the four concessions of Elfer Bravo, now in dispute. They are good results with Copper averaging nearly 2% and that is close to surface.

The remaining 7 results relate to samples collected on the concession AMP owns. It is titled AMP 1. These results are outstanding. One result has more than 10 grams of gold per tonne and another has 8.6% Copper plus over 200 grams of silver, near surface.

Our Senior geologist, Mr Jacob Rebek, is very excited by these results in AMP 1.  He has advised that the minor elements found together with the gold are an indicator for a large scale NEVADA style open cut gold mining operation. In the first week of March our Peruvian exploration team will carefully select significantly more samples from AMP 1 and we shall have them assayed with results by the end of March.
 When we have those results we will know if the following plan is realistic.
Development plan for AMP 1
Assuming we are able to complete the access agreement with the local farmers, we will have the legal ability to obtain approval to explore, mine and process ore on the AMP 1 site at the rate of up to 350 tonnes per day within 4-6 months of application and funding.

CML Board
We are pleased to welcome both Jacob Rebek and Frank Howard to the CML Board. Frank is an experienced banking and finance executive and Jacob is a world renowned exploration geologist. Their willingness to join the Board is a strong vote of confidence in the strategies your company is pursuing and the potential of our Peruvian activities, centred around the coastal town of Chala.

Peruvian team
We are privileged to have a first rate Peruvian team. I count Jacob and myself, both Spanish speakers, as part of the team. Others are our lawyer Greta, her accountants Karin Silva and Katty Lopez, Arturo an experienced Copper and Gold trader, Amadeo, the geologist who discovered the exceptional AMP 1 samples and Luis Guzman, mining engineer and previous superintendent of a large underground Copper-Silver mine.

We have the people on the ground able to make things happen.  Our Peruvian resident CML Director, Paulo Diamantino, is the person who suggested acquiring AMP 1 so we all owe him a debt of gratitude. Paulo unfortunately was struck down badly by Covid and is now starting the long road of recuperation. We wish him the very best.
Gold and Copper district
More and more we are discovering that the whole Quicacha district is full of Copper, Silver and Gold. We have been invited to JV with no less than 4 other concession holders in the district.  Of course there is a huge volume of Iron ore also and one day the West Coast of South America may supply the world with as much iron ore as Australia currently does. However for CML we are focused on the fact that Copper, Silver and Gold can generate substantial wealth with very modest investment.
As stated above there are 5 concessions next to each other that collectively make up the Achatayhua project. Four are held in the name of Elfer Bravo and one (AMP1) is held in the name of Achatayhua Metals Peru s.a.c. (AMP), a wholly owned subsidiary of CML. AMP has a four year option to purchase the Elfer Bravo concessions. This option is valid until 25 November 2022.
In late 2021 the Peruvian Government granted approval for AMP to begin road construction to the site and drilling.  Shortly after this, the concession holder unilaterally declared our option agreement invalid for reason of non-performance, which is strenuously denied, and managed to get a public notary to endorse that annulment of contract.

AMP has now commenced legal action against Mr Bravo to recover its rights to purchase and develop the 4 concessions he holds of about 3300 Ha. AMP also holds the exploration permit which cost two years and a considerable sum of money to obtain and belongs exclusively to AMP and cannot be used without our permission. Whilst vigorously pursuing our legal rights, we have also opened discussion with the medium size Peruvian mining company, Stellar Mining, who we understand have entered into an option agreement with Elfer Bravo to buy the concessions.
Separate to the legal title issues, access to the mining site has been blocked for the past 15 months by a large family of local farmers/informal miners. They run cattle on the land of the mining concessions, even although it is very poor agricultural land. I met with all the brothers of this family last week and we reached an in principal access agreement. It is an expensive agreement but by holding it we are in a strong negotiating position with Stellar Mining. On Sunday 6th of March we shall meet again on site and negotiate staggered payment terms for the fee they are requiring.

Expenditure and Capital requirement
The Board of Chala Metals has managed to constrain the expenditure of funds to less than A$42,000 per month over the past 10 months including funding costs, management costs, an exploration excursion, travel and legal costs. We note this is a very modest “burn” rate. Nevertheless funds are now running low and we need to raise capital in the near future. In the interests of all shareholders the management team has approached various interested parties to purchase shares in CML. Several are considering and will revert shortly.
In the event we are unable to negotiate a share placement agreement with others we shall either seek a stockbroker to sponsor a listing or do a rights issue to existing shareholders or undertake a second pre-IPO fund raise. World events and metal prices and assay results from new sampling will be some of the factors the Board will consider in making its decision on where to obtain the next round of Capital.
 The funds raised will be used to thoroughly explore AMP 1 , continue the legal processes to regain our rights to the Bravo concessions and to possibly acquire some new prospective tenements from open ground in coastal desert or to the east of Achatayhua. Our Chief Geologist, Jacob Rebek, deems these areas to be prospective for a range of intrusive minerals.

Annual General Meeting
The first annual General Meeting of the company and its shareholders shall be held at 11 am on Monday 4th April in a Sydney venue to be advised 
 With warm regards

Mark Newton
Executive Chairman and CEO