GSCU Great Southern Copper Plc

Operations Report

The Company has three projects all located in Chile, Especularita, San Lorenzo and Monti Lithium. Of these, the primary focus is its Especularita project which is highly prospective for porphyry Cu-Au, intrusive related Cu-Au and high-grade IOCG Skarn-type mineralisation. 

The Company's Especularita and San Lorenzo projects are strategically located within the coastal metallogenic belt, offering significant infrastructure advantages over explorers operating in the high-altitude Andean belt including access to roads, power, towns, and ports, which facilitate more efficient and cost-effective operations. Geologically, the coastal metallogenic belt also offers the company deposit style optionality being known for large IOCG deposits as well as porphyry copper deposits.

Both projects are along trend from major deposits and exhibit substantial evidence of historical artisanal mining, yet the areas remain relatively underexplored compared to the Andean regions. This under-exploration presents an opportunity for significant discoveries in a region with proven mineral potential.

We have also acquired the Monti Lithium project in Chile during the period, which is a lithium brine project located in the highly prospective Salar de Atacama in Chile¹.

Exploration activities at the projects for the year to 31 March 2024 and subsequent to the year end are set out below.

Especularita Project

At Especularita, we have seen some particularly exciting developments as we advanced our exploration campaign through the year. We received strong results from mapping and sampling activity at various prospect locations across the project. Assay results from our rock chip sampling at Victoria, returned grades up to 6.9% Cu and 1.85g/t Au, highlighting the significance of the Victoria prospect with consistent high grades of copper and associated gold-silver mapped and sampled in the outcrop².

The results of our drone-magnetics survey at Especularita were also highly encouraging, which identified high grade Cu-Au prospects, Abundante and Teresita, as magnetic anomalies, prompting plans to drill at these sites.³ It also identified multiple NE-trending targets within the Teresita magnetic anomaly corridor and bullseye anomalies that potentially represent breccia-pipe or pencil-porphyry type Cu deposits.

Building on these findings, we completed our scout drilling programme at the Abundante and  Teresita prospects⁴. At Teresita, broad intervals of anomalous Cu-Au results from scout RC drill-testing of the Gato Negro vein validated our IRGS target models and we are now aggressively advancing our follow-up exploration activities. Significantly, the Teresita drill results also confirm the IRGS nature of mineralisation at the Company's Victoria prospect.

Our initial exploration programme at the Aurelia prospect delivered another high-grade copper target into the drilling prospect pipeline, with assay grades up to 6.76% Cu⁵. This success gave us the impetus for follow-up exploration, including soil sampling and petrochemical surveys, setting the stage for initial scout drilling at the prospect.

We also announced results from our latest mapping and sampling programme at our Victoria prospect, which reported grades up to 4.04% Cu, 4.57g/t Au and 26.7g/t Ag⁶. These results continue to highlight the significance of the Victoria prospect with consistent high grades of copper and associated gold-silver mapped and sampled in outcrop. Work is now continuing at Victoria with a view to better understanding the controls on mineralisation and advancing the prospect toward being ready for drill testing.

In February 2024, we announced our intention to expand the Company's footprint at Especularita by signing binding letters of intent for two new high-priority prospects, Artemisa and Cerro Negro⁷, and in June and July 2024 respectively, we completed those agreements adding a total of 1,748 ha of new concessions, including drill-ready targets.

The Artemisa group of concessions comprise five new prospect areas and significantly expands the Company's Victoria and Lipa exploration targets. The Cerro Negro option includes the historic Mostaza Cu-Ag-Au Mine which was previously owned by Antofagasta Minerals. Due diligence work by GSC indicates that mining in the past did not exhaust the Mostaza mineral inventory and as such potential exists to expand the known deposit in all directions as well as discover new deposits along trend.

San Lorenzo

San Lorenzo comprises both mining and exploration concessions covering 25,680 ha. The project area includes extensive historical mine workings for high-grade Cu-Au as well as evidence of placer gold workings in two locations.

During the period, the Company received the results of reconnaissance sampling at the newly acquired Suyay prospect with results up to 4.13g/t Au and 1.75% Cu⁸. The anomalous geochemistry combined with our early understanding of the geology and controls on mineralisation now suggests that there is potential at Suyay for a high-level gold-rich porphyry or intrusive-related system. The Company has identified a number of large radiometric anomalies potentially representative of porphyry-type silica-clay-sericite alteration which it intends to target with regional mapping and sampling programmes.

Monti Lithium

GSC made its first foray into lithium exploration with the acquisition of an option over the Monti Lithium Project located in the Salar de Atacama region of Chile.

The Group secured rights to 100% ownership of the Monti Lithium Project comprising concession applications surrounding the Salar de Atacama, Chile's premier lithium producing region. The Salar de Atacama is a tier 1 lithium production region with estimated pre-mine resources greater than 6.0 Mt LiCO3. Lithium is hosted in subterranean brine solutions which are pumped to the surface, where the lithium is extracted via evaporation processes producing a lithium carbonate (LiCO3) concentrate product.

The Monti Project initially comprised 81 concession applications for a total combined concession area of 235 km² (23,500 ha).

In October 2023, the total concession application area of the Monti Lithium project was expanded to 331 km² (33,100 ha), strategically targeting areas where the Company believes the fluid-flow of Li-rich brines into the Salar de Atacama basin is enhanced by large-scale structures⁹.

GSC is now conducting due diligence on the project with a view to ranking the concession areas on the basis of potential access to brine-rich horizons in the basin in-flow regions. Work will include reconnaissance field trips to undertake surface sampling and mapping programmes.

Outlook

It has been a positive year of progress as we continue to make significant strides across our prospects, particularly at Especularita. Our exploration campaigns have yielded encouraging results and we have established a very strong pipeline of drill targets. Whilst acknowledging that GSC will need to continue to raise funds for its activities, with a strengthened capital base, we are poised to accelerate our exploration efforts, where we aim to commence drilling shortly at our highly prospective targets.

Our Especularita project remains our primary focus, given its highly promising potential for porphyry Cu-Au, intrusive-related Cu-Au, and high-grade IOCG Skarn-type mineralisation. The impressive assay results and magnetic surveys have reinforced our confidence in the project's potential, and we are advancing with aggressive follow-up exploration activities. The expansion of our footprint at Especularita, including the recent acquisition of Artemisa and Cerro Negro, strategically positions us to unlock significant value from these highly prospective areas. In addition, the team has shown strong discipline in dropping certain non-core concessions subsequent to the year end.

Looking ahead, our strategic priorities are clear and the next six to twelve months promise to be an exciting period for the Company with our plans to drill our priority targets, namely Cerro Negro, Victoria and Aurelia. All drilling activities are subject to permitting approvals, rig availability and community consultations. We will continue to prioritise and advance our high-potential targets with a focused and disciplined approach aimed at advancing prospects to drill-ready status. Our strengthened financial position enables us to commence our exploration drilling plans at Cerro Negro, ensuring that we maximise the value of our asset base.

Sam Garrett
Chief Executive Officer

25 July 2024

References:

1.   RNS 9894M (20 Sep 2023): GSC Secures "Monti Lithium Project" in the Prolific Salar de Atacama Region, Chile

2.   RNS 0032C (05 Feb 2024): Rock Chip Sampling at Victoria Prospect Delivers Assay Results up to 4.04% Cu, 4.16g/t Au and 26.7g/t Ag from Multiple Quartz-Sulphide Vein Breccias

3.   RNS 4849P (10 Oct 2023): Especularita Magnetics Survey Identifies Multiple Targets

4.   RNS 5914A (23 Jan 2024): Scout Drilling Completed at Abundante Prospect, Especularita,

5.   RNS 4473Q (18 Oct 2023): High Grade Rock Chips up to 6.76% Cu at Aurelia Prospect, Especularita

6.   RNS 0032C (05 Feb 2024): Rock Chip Sampling at Victoria Prospect Delivers Assay Results up to 4.04% Cu, 4.16g/t Au and 26.7g/t Ag from Multiple Quartz-Sulphide Vein Breccias,

7.   RNS 0741E (22 Feb 2024): GSC Expands Especularita Project with Two New Agreements

8.   RNS 4266J (16 Aug 2023): New "Suyay" Prospect Delivers High-Grade Gold-Copper in Rock Chip Samples, San Lorenzo

9.   RNS 7843R (31 Oct 2023): Monti Lithium Project Grows by 40% with New Concession Filing

Extract from Strategic Report

The Directors present their Strategic Report on the Group and Company for the year ended 31 March 2024.

Strategy and Business Review

The Company's strategy is to create value for shareholders by using the expertise of its management team to successfully explore for copper-gold (Cu-Au) deposits in Chile and, potentially, to identify and acquire other mineral exploration projects.

The Company's key exploration projects in Chile comprise the Especularita Cu-Au project located approximately 350km north of Santiago and the San Lorenzo Cu-Au project north east of the coastal town of La Serena in northern Chile. Both projects are situated in the Coastal Cordillera of Chile with good access to infrastructure.  In addition, the Company has an option over the Monti Lithium project located in the Salar de Atacama district of northern Chile.

Subsequent Events

On 26 June 2024, the Company completed a fund-raising through the placing and subscription for 104,416,667 new ordinary shares of 1p each at £0.012 per share raising £1.25m before expenses.

On 12 June 2024, the Company signed a binding purchase option agreement to acquire the Artemisa copper project at the Company's Especularita project in Chile.

On 29 June 2024, the Company signed a binding purchase option agreement to acquire the Cerro Negro copper project at the Company's Especularita project in Chile.

Principal Risks

The Directors have identified the following principal risks in regards to the Company's future. The relative importance of these risks is likely to evolve over time as the Company executes its strategy in Chile and as the external economic and market environment changes.

Strategic Risk

The Company's strategy may not deliver the results anticipated by the shareholders. The Directors regularly monitor the Company's progress and will modify the strategy as required, based on internal and external developments and exploration results. The strategy is monitored at the Company's regular Board meetings.

Concentration Risk

The Company's activities are currently geographically concentrated in Chile.  As a result of this concentration, the Company may be disproportionately exposed to the impact of local delays or interruptions to development of, and future production from, these locations caused by significant changes to governmental regulation, interruption to transportation together with capacity constraints, curtailment of future production, natural disasters, adverse weather conditions, civil unrest, labour disputes or other events which impact this area.

Exploration Risk

The Company's projects are regarded as 'early-stage exploration', are highly speculative in nature, and may not result in success. There is no guarantee that further mineralisation or recoverable economic resources will be found.

Whilst the Directors endeavour to apply their skills to assess the projects, exploration is costly, highly speculative and often unsuccessful. For instance, factors such as adverse weather conditions, natural disasters, equipment or services shortages, procurement delays or difficulties arising from the environmental and other conditions in the areas where the potential resources are located, may increase costs and make it uneconomical to advance or develop the Company's projects.  Failure to discover new mineral resources or maintain existing mineral rights could materially and adversely affect the Company's results of operations, cash flows, financial conditions and prospects.

Government Regulation

The licences and operations of the Company are in jurisdictions outside of the UK and there will, therefore, be a number of risks that the Company will be unable to control.

Whilst the Company will make every effort to ensure that it has robust commercial agreements in place, there is a risk that the Company may be adversely affected by political factors such as taxes and charges, suspension of licences and changes to the laws governing mineral exploration and extraction activities. The adoption of a mining royalty tax in Chile may adversely affect the Company's operations in the future.

On 10 August 2023, a mining royalty law was enacted which introduces a new royalty system payable by copper mining companies. The law contains a variable royalty rate, dependent on the quantity of copper sold and will apply to companies producing more than 50,000 metric tonnes of fine copper per annum. The Company is aware of the law and will continue to monitor relevant regulations and any other proposed changes and specifically the impact they could have on any potential future operations of the Company.

Permitting

The Company's rights to the exploration projects are defined by option agreements that its subsidiary, PTRC, has over the exploration and exploitation concessions at these projects. The option agreements and all of the concessions are in good standing.

Exploration concessions in Chile currently last for 2 years, counted since their constitution by judicial ruling, and are subject to the payment of annual fees to the Chilean Treasury. If these fees are not paid in a timely manner, the claim can only be restored to good standing by paying double the annual fee the following year. At the end of the two-year period, the exploration concession may i) be renewed for an additional two years, in which case at least 50% of the surface area of the exploration concession must be relinquished, or ii) be converted, totally or partially, into an exploitation concession. Pursuant to article 112 of the Mining Code, amended by Law No. 21,420 of 4 February 2022 which became effective on 1 January 2024, exploration concessions will have a duration of 4 years counted since their constitution (and the 4-year period cannot be extended).

Exploitation concessions are valid indefinitely so long as annual fees are paid to the Chilean government. Pursuant to article 142 bis of the Mining Code, added by Law No. 21,420 of February 4, 2022 which became effective on 1 January 2024, the annual fee for proving the start and maintenance of mining works will be US$8/ha. In the event that the exploitation concessions do not comply with such requirement (maintenance of mining works), a progressive annual fee will be applied for the aforementioned measure, as follows:(i) USD32/ha for the first 5 years of validity; (ii) USD64/ha from year 6 to year 10; (iii) USD72/ha from year 11 to year 15; (iv) USD96/ha from year 16 to year 20; (v) USD240/ha from year 21 to year 25; (vi) USD580/ha from year 26 to year 30; and (vi) USD960/ha from year 31. Pursuant to article 142 bis of the Mining Code, added by Law No. 21,420 of February 4, 2022 which became effective on 1 January 2024, the annual fee for proving the start and maintenance of mining works will be US$8/ha.

The process to incorporate an exploitation concession is based on the principle that grants preference to the first petitioner before the local court. The holder of an exploration concession in good standing has the preferential right to incorporate an exploitation concession within the boundaries of its exploration concession. Notwithstanding, anyone can request the incorporation of an exploitation concession within the limits of the exploration concession of a different owner, in which case the holder has to file a claim opposing the aforementioned constitution, within 30 days, counted from the date of publication of the application made by the interested third party. Exploration and exploitation concessions do not necessarily imply a right to mine, except on a small scale. However, they give the owner the right to mine subject to the granting of permits.

There is no guarantee that any of PTRC's granted exploration concessions, or any exploration concessions granted in the future, will be renewed. Additionally, there is no guarantee that PTRC's exploitation concessions granted or to be granted can be effectively maintained by payment of the appropriate annual licence fees or by means of compliance with any new regulation that may control the granting and maintenance of exploitation concessions in the future. If these exploration and exploitation concessions are not renewed or maintained, or if new exploration and exploitation concessions are applied for and not granted, this could have a material adverse effect on the Company's business, prospects, financial conditions and results of operations.

Whilst the Company is satisfied that it has taken reasonable measures to ensure an unencumbered right to explore its projects in Chile, the relevant concessions may be subject to undetected defects. If a defect does exist, it is possible that the PTRC may lose all or part of its interest in one or more of the concessions to which the defect relates and its exploration and exploitation rights over the areas related to such concessions and prospects of commercial production may accordingly be adversely affected.

Exploration concessions, which PTRC has the right to acquire through option agreements, need to be duly registered in the Chilean Mining Registrar in order for them to be enforceable. Whilst PTRC is satisfied that it has submitted all option agreements not currently registered in the Chilean Mining Registrar for registration, if PTRC fails to register any option agreement in the Chilean Mining Registrar, then it may be unable to enforce the benefit of them and PTRC's title to the exploration concession and could be subject to potential litigation by third parties claiming an interest in them.

Environmental and Other Regulatory Requirements

Currently the Group's environment impact is limited to the activities associated with exploration and is therefore minimal. The development of any project into a mining operation will have a considerable impact on the local landscape and communities. There may at some point be opposition to mining by some parties and this may impact the ability of the Company to progress these projects towards production.

Although the Company believes that its projects are currently in compliance with all relevant environmental and health and safety laws and regulations, there can be no guarantee that new laws or regulations, or amendments to current laws or regulations will not be introduced and they may have a material impact on the Company and its projects. The Company will continue to maintain the highest standards and aim to comply with all appropriate laws and regulations. The Company will also continue to engage with local communities and non-governmental and governmental bodies to ensure any impacts of current and future activities are minimised and managed appropriately.

Financing

The Company is in the exploration stage of its development and will only become revenue producing once successful exploration has been achieved and an operating mine developed.  Consequently, the Company will be dependent on either equity funding or bringing in partners to finance its operations.  The Company may not be successful in the procurement of the required funds and may therefore have to adjust its exploration strategy accordingly.

Commodity Prices

The market prices of copper and gold, like many commodities, are volatile and are affected by numerous factors which are beyond the Company's control.  Sustained downward movements in copper and gold prices could render less economic, or uneconomic, the mineral projects that the Company is exploring and could negatively impact the availability of equity finance to the Company for it to continue to fund its exploration activities.

Foreign Currency and Exchange Rates

The Company may be exposed to ongoing currency risk, however no forex sensitivities have been included as they are deemed to be immaterial. Proceeds of fundraises are expected to be mostly in Sterling; the Company's financial statements are stated in Sterling and certain ongoing management costs will be denominated in Sterling. Its operational costs are largely in Chilean Peso (CLP). As a result, fluctuations in the exchange rates of these currencies may adversely affect the Company's exploration budgets, operating results, cash flows or financial condition to a material extent.

Market Conditions

The Company cannot predict the extent of periods of slow or negative economic growth and any resultant weakening of consumer and business confidence. This might result in difficulties in raising capital and lower the level of demand for many products across a wide variety of industries, including those industries for which commodities in the natural resources sector are an important raw material. Accordingly, the Company's estimate of the results of operations, financial condition and prospects of the Company, and of any future acquisition targets, will be uncertain and may be adversely impacted by unfavourable general global, regional and national macroeconomic conditions.

Dependence on Key Personnel

The Company's success depends to a significant extent on the quality of its management. The Company's business may be disrupted, additional cost may be incurred or its future may be jeopardised by a loss of, or failure to retain, sufficient numbers and quality of management staff or senior personnel.

To mitigate this risk, measures are in place and are under review to reward and retain key individuals and to protect the Company from the impact of staff turnover.

Social, Community and Human Rights

It is the Company's intention to operate for the benefit of all stakeholders.  In this regard, it will ensure that PTRC:

·      Adopts fair, non-discriminatory employment practices;

·      Ensures safe working practices for all employees;

·      Positively engages with local communities and is sensitive to any concerns that they may have regarding land usage, water resources, biodiversity, cultural sites and artefacts; and

·      Will treat local suppliers fairly.

Whilst the projects are still at an early stage of exploration, the Company recognises that for any mine to be developed at the project sites, it must be able to demonstrate to all stakeholders, a clear positive benefit that respects social, community and human rights.  

Key Performance Indicators (KPIs)

Given that the Company is at an early stage in its development, has no turnover and is dependent on raising funds in the equity market to finance its activities, many of the quantifiable KPIs that companies in other industries may present are not applicable here.  Nevertheless, management is monitoring key performance indicators or the process associated with:

·      Company expenses and the cash balance to ensure that the Company can meet its expected obligations as they fall due and to inform the required timing of the next fund raising;

·      The progress of the exploration programme and the status and commitments with regards to the exploration concessions; and

·      Ensuring that Pacific Trends Resources Chile Spa ("PTRC") meets its environmental and social obligations in Chile.

·      Ensuring that the Group maintains as low an impact on climate change as possible

The Directors are of the opinion that, for an early-stage mineral exploration company, the audited accounts, the Chairman's Statement and the Operations Report are the best means of assessing the performance of the Company during the year.

Section 172(1) Statement

The Directors believe they have acted in the way that they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole (as required by s172 of the Companies Act 2006), and in doing so have had regard (amongst other matters) to the following factors:

·      The likely consequences of any decision in the long term;

·      The interests of the Company's employees;

·      The need to foster the Company's business relationships with suppliers, customers and others;

·      The impact of the Company's operations on the community and the environment;

·      The desirability of the Company maintaining a reputation for high standards of business conduct; and

·      The need to act fairly as between members of the Company.

The application of the s172 requirements can be demonstrated by the actions and key decisions of the Company during the year including:

·      In pursuit of the Company's strategy of creating value for shareholders via the exploration for copper mineral deposits in Chile, the Company has, in the past year:

·      carried out exploration and identified copper mineralisation at its two projects in Chile;

·      confirmed the discovery of a large intrusive-related copper-gold mineralised system at Especularita;

·      identified mineralised vein breccia targets for follow up work; and

·      added a third project to the Company - being the Monti lithium project

·      In order to pursue the strategy outlined, the Directors are aware of the importance of developing the skills of its employees and establishing a good team work ethic where team members work well together and communicate openly with each other.  In pursuit of this objective, the CEO visited the projects in Chile on a number of occasions during the year, working with team members and, together with the Company's experienced exploration manager, imparting the benefit of their expertise to more junior team members.

·      In the past year, the Company has acted fairly, in good faith and without problems with all of the service providers.

·      At this stage of the Company's development, it has no customers.

·      The Directors are very aware of the need to carefully manage environmental and social matters in Chile in order to ensure that it has a social licence to explore and, if successful, to ultimately mine at the project sites.  The Company has prepared a 'Sustainability' statement which appears on the Company's website and has commenced work on an Environmental, Social and Corporate Governance ("ESG") policy to govern how members of the team manage these matters and to ensure that the Company operates to the highest standards.

·      The Company's values of business conduct are described in the Corporate Governance Statement.  Additionally, the culture of the Company is illustrated by the following statements that appear on the Company's website:

·      We will be guided by our company values to act with integrity at all times both within the workplace and within the community more broadly; and

·      We will communicate transparently and honestly with all stakeholders

·      Retaining investor support is important to the Company and, therefore, the Directors intend to keep shareholders fully and equally informed.  In the past year, the Company has kept shareholders informed of progress via news releases, web podcasts, the Company's website, attending a mining conference and through direct contact.  Moving forward, management will continue to attend mining conferences where they will be available to meet shareholders in person.

Extract from the Directors' report

The Directors have pleasure in submitting their report together with the audited financial statements for Great Southern Copper plc (the 'Company' and together with its subsidiary, the 'Group') for the year ended 31 March 2024.

Principal Activities

The Group is currently focussed upon the exploration for copper and gold in Chile. Further detail is covered in the Chairman's Statement and also in the Operations Report.

Dividends

No dividends are planned (2023: £nil).

Subsequent Events

Further details on subsequent events can be found in note 24 and in the strategic report on page 19 of the Annual Report. 

Going Concern

In common with many other mineral exploration companies, the Group has raised equity and debt finance for its exploration activities. The Board recognises that further finance will need to be raised as and when required to progress its exploration projects and add shareholder value. The Board also acknowledges that previous success in raising funds does not necessarily provide any guarantee that the Group will be able to do so in the future.

As at 31 March 2024, the Group's cash at bank amounted to £503k; at the date of signing this report, the balance of cash and committed funds amounted to £1,005k.

The Board has reviewed the Group's cash flow forecast up to 31 July 2025 and are aware that additional funds will need to be sourced in order to continue to advance its exploration activities and continue as a going concern for a period of at least 12 months from the approval of these financial statements.  The Directors are confident that they will be able to secure the necessary funding in order to enable the Group to continue to advance its projects, however the requirement for further uncommitted fundings casts significant doubt over the Group's ability to continue as a going concern.  The auditors have acknowledged this going concern uncertainty in their unqualified audit report.

The Board continues to closely monitor its cash position, allocate funds in line with its detailed budget and maintain a strict control over non-project spend.  The Directors remain confident in the Company's ability to raise additional funds as required, from existing and/or new investors and therefore consider it appropriate to continue to adopt the going concern basis of accounting in preparing these financial statements.

Extracted from Directors' responsibility statement pursuant to Disclosure and Transparency Rules

Each of the Directors, whose names and functions are listed on page 7 and 8 of the Annual Report, confirms that to the best of his knowledge and belief:

·      The financial statements prepared in accordance with UK-adopted International Accounting Standards and in conformity with the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and loss of the Group and parent company; and

·      The Annual Report and financial statements, including the Operations Report, includes a fair review of the development and performance of the business and the position of the Group and parent company, together with a description of the principal risks and uncertainties that they face.

Approved by the Board of Directors and signed on behalf of the Board by:

Charles Bond

Chairman

25 July 2024

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 MARCH 2024

The notes form part of these financial statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2024

The notes form part of these financial statements