Latest MD&AMANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED AUGUST 31, 2021
Report Date: December 29, 2021
Key facts summary Teck shall hold a pre-emptive right to participate in any financing of Deep-South as long as Teck holds over 5% of Deep-South’s outstanding common shares;
Prospecting License Renewal Declined On June 16, 2021, the Company has received notice from the Ministry informing the Company that its application for the renewal of its License had been denied citing the Company’s inability to advance the License to Pre-Feasibility and complete the proposed drilling program as planned.
The Company maintains that the Ministry was kept well apprised, with no objection on their part, of a proposed change from the Pre-Feasibility (PFS) study to an upgraded Preliminary Economic Assessment (PEA) and the commencement of a full Feasibility Study (FS). The FS was already commenced with at the time of the refusal.
The License conditions state clearly that the Company shall request the approval of the Minister for any material program or budget changes.
Therefore, the change was not requiring the approval of the Minister. Moreover, the Ministry issued all permits required for the drilling program and officials were well aware that Haib had completed the drilling program at the time of the refusal to renew.
The Ministry proceeded with their last filing on November 17, 2021. The filing did not include any documents supporting the decision of the Minister to deny the renewal of the Haib Copper license. Therefore, the Ministry has not provided any evidence supporting the decision of the Minister. Drilling results: On May 10, 2021, Deep-South reported significant drilling results:
• HM06 : 0.47% CuEq over 152 metres, including 30 metres at 0.81% CuEq
• HM07 : 0.42% CuEq over 128 metres, including 14 metres at 0.57% CuEq
• HM10 : 0.65% CuEq over 36 metres, including 12 metres at 1.04% CuEq
We were extremely enthusiastic by the first results from our active
drill program. Previous drilling programs point to the presence of
higher grade zones of Cu, probably associated with near vertical structures within the broader mineralized areas of the project.
The use of vertical drilling in the past potentially missed those structures during those programs resulting in an underestimation of overall grade. This current drilling program is looking to redress this through the use of inclined holes to identify and delineate these structures and test the association with higher Cu grade zones. These first results seem to support this updated interpretation, showing substantial intersections at Cu grades considered high for Haib. Additionally, the presence of molybdenum has been confirmed with high Mo grades obtained in association with structures and alterations. Furthermore, three holes have expanded the size of Pit 2 in the higher-grade area.
On June 10, 2021, Deep-South reported a second set of significant drilling results:
• HM03 : 0.46% CuEq over 156 metres, including 24 metres at 0.65% CuEq
• HM02 : 0.39% CuEq over 74 metres, including 6 metres at 0.73% CuEq
• HM04 : 0.43% CuEq over 26 metres, including 4 metres at 0.87% CuEq
We were continuing to have success with our active drill program identifying thick, higher-grade zones.
We are consistently intercepting significantly higher grades than the average grade of our NI 43-101 indicated resource that stands at 0.31%Cu. The higher-grade zone in Pit 2 extends significantly further west and at depth than previously demonstrated. It’s increasingly apparent that the use of vertical drilling in the past missed many of the near vertical structures contained within the broader mineralization of the project. Those near vertical structures so far are proving to be associated with a higher grade of copper than contained within the current resource. Additionally, the presence of molybdenum has been confirmed with high Mo grades obtained in association with structures and alterations.
This Haib Copper Mineral Resource has been defined by diamond core drilling covering a total surface area of some 2.6 square kilometres. The mineral resource classification is closely related to data proximity.
Topographic elevations within the mineral resource area vary from 320m to 640m above mean sea level and average 480m above mean sea level. Indicated resources are constrained between the variable topographic surface and a horizontal level which is 75m above mean sea level and within which the majority of the drill and assay data are constrained. Inferred resources are laterally constrained by the last line of drill holes and extend 12 vertically from the horizontal surfaces defined by the +75m and -350m above mean sea level (a block of 425m thickness) within which there is a lesser data set derived from drilling.
Mineralization is open near surface and at depth to at least 800 metres deep. The Mineral Resource estimate is based on the results from approximately 66,500 metres of drilling in 196 holes. The most recent drilling data comes from Teck Resources drilling programs totalling 14,500 metres (2010 & 2014) and from re-assaying a part of the 164 historical drill cores which are well preserved on site. Indicated Resources are defined by a drill grid of 150 metres by 150 metres, while Inferred Resources are defined by a drill grid of 300 metres by 150 metres.
The Haib Copper exploration licence provides significant potential for resource expansion, since there is known, but poorly drilled and assayed, mineralisation beyond the drill grid boundaries and below the main mineralized body (which covers some 2 square kilometres of surface area), where a few drillholes from 75m above mean sea level to -350m above mean sea level (i.e. a thickness of 425m) have shown that mineralisation is present. The deepest drillhole did not pass out of mineralized material. In addition, there are 5 satellite mineralized target areas surrounding the main Haib porphyry body which still require further evaluation.
The PEA technical report will be filed on SEDAR at www.sedar.com and on the Deep-South website at
www.deepsouthresources.com Financial risk factors Level Ref. August 31, 2021
Other financial assets (cash) $2,307,138 Accounts payable and accrued liabilities $194,306 Other financial liabilities $0 FORWARD LOOKING STATEMENTS
All statements in this report that do not directly and exclusively relate to historical facts constitute forward looking statements. These statements represent the Company’s intentions, plans, expectations and belief, and are subject to risk, uncertainties, and other factors of which many are beyond the control of the Company. These factors could cause actual results to differ materially from such forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements, as a result of new information, future events or otherwise.