Luis Zapata, Executive Chairman of Montan Mining

Montan Mining Corp. (TSX-V: MNY) is moving forward on its plans for its acquisition of Cerro Dorado SAC, owner of the Rey Salomon gold mine and plant (together the “Cerro Dorado Project”) from Chazel Capital Inc. to become a Peruvian toll miner. Yesterday the company announced the signing of a definitive agreement with Chazel along with the closing of a second financing tranche. The company intends to use the proceeds of the recent financing to finalize the acquisition of the mine/plant combo in the heart of Caraveli, Arequipa; a well known toll mining district in Peru. The plan is to provide feed for the mill from local miners along with some supply on site from the past producing Rey Salomon mine and/or from the adjoining mining claims included in the acquisition. The company had originally announced a $600,000 private placement which was then increased to $1 million due to heavy demand. The private placement comprises 20 million units at 5 cents and each unit has one common share and one share purchase warrant exercisable into one additional common share at 10 cents for five years after the closing date.

Chazel was founded in 2010 by Andre Savard, a former Canadian Military Officer of 21 years who was previously CEO of Nippon Dragon Resources. Cerro Dorado holds an option and permits to operate the Rey Salomon gold mine with two kilometers of underground development, 32 identified veins, and a 60-tonne-per-day carbon-in-pulp processing plant permitted for up to 100 tonnes per day. The entire mineral property under option by Cerro Dorado comprises four concessions totaling 1,172 hectares located in the district of Arequipa, Caraveli province, Peru. Montan has received conditional TSX-V acceptance for the proposed transaction to acquire Cerro Dorado from Chazel. The deadline for the transaction to close is January 16, 2017.

In the deal, Montan will assume approximately $264,000 of Cerro Dorado’s debt in Peru along with assuming option payments of $453,968 due to the underlying property owner. The option payments will be spread out over 24 months beginning January 30th, 2017. Upon execution of the transaction, Montan will issue 10 million shares to Chazel with an additional 4 million shares being paid after certain production goals are met.

Montan has also recently filed a NI-43-101 report, available on SEDAR, that recommends a two phase exploration project on the Rey Salomon mining claims with the first phase comprising structural mapping and prospecting along with a drone mag survey of the property. $30,000 has been budgeted. The second phase of the recommended exploration program comprises 130 metres of underground exploration/development with a $120,000 budget. There was no specific timeline in the report for the recommended work.

I reached out to Executive Chairman of Montan Mining Corp. (TSX-V: MNY), Luis Zapata to get an update.

Why did the previous operator run into challenges and sell to Montan?

Rey Salomon was originally envisioned as a standalone mining project which in a previous iteration served as a testbed for non-traditional thermal fragmentation mining technology. Through this phase the previous operators permitted and built a significant amount of underground workings, and more importantly built a plant to service this mining project in what turned out to be a really good valley for toll milling. By the time the strategy switched from mining Rey Salomon to toll milling with the plant was made in 2015 the mining finance market was dried up and the previous operator (like anyone else at the time) had a tough time raising further capital especially as they were a private company.

How are you going to succeed? The biggest risks you need to mitigate?

When the project was brought to us earlier this year, we immediately saw an attractive toll milling asset in a very good location that needed to be in a public vehicle to finance. That’s on the plant side. On the mine side, we saw a smaller but potentially higher grade mine which had recorded mineral sales averaging 13 g/t Au. In other words, we saw a previously operating and fully permitted plant in a strategic valley with a mine that could possibly provide some base feed.

Look, a toll miller’s biggest worry is supply of mineral to process. That’s the lifeblood of a toll milling company right there. Montan is going to differentiate itself by having a hybrid toll milling/mining model where we aim control mines and/or the feed of mineral to our plant. That’s how the Peruvian toll millers have operated since the dawn of the modern Peruvian toll milling sector in the early 90’s. That is why we always looked for plant/mine/claim combos for an acquisition. Now, Rey Salomon may be a relatively small mining asset, but it may have the potential to deliver base feed to the plant both from the current workings and through a small-scale contractor JV model on other parts of the claims. It’s a great proving ground for our business model, which mitigates supply risk.

Will the company need more money after this financing?

Yes. The company will need to fund the plant upgrades mentioned above and we are evaluating of perhaps adding a floatation circuit to assist with some of the anticipated sulphide mineral feed as well.

What is your hope for Montan in 2017, what will the business look like?

Both the plant and mine are currently permitted and ready to operate at varying levels. Assuming we close and finance the acquisition then suffice to say that Montan should be an operational mining and toll milling company in 2017.

Why the increased private placement?

The increase was due to oversubscription and will allow us to cover all the budgeted costs through definitive close of the Cerro Dorado.

Who are some of the investors or firms that are taking part of the private placement?

We have had three institutional investors invest in the company. I think this is an indication that smart money is dipping their toes into Montan now with a view to increasing their position as we close the Cerro Dorado acquisition and crystallize the opportunity there.

Have you identified or secured any long term mineral feed contracts?

We are currently working on a couple long term mineral feed contract negotiations some of which we are hoping to structure as direct low-cost ($50K - $150K CAPEX) JV's into small-scale mines with our prospective mineral suppliers. Our GM Jose Luis Garcia was in charge of such contracts at his previous position inside Peru's largest private toll miller and we are looking to deliver the same model for Montan.

How are you building the team for Montan?

Our core local management team comes from Peru's largest privately held toll miller. It's no secret that those guys are relatives of Jose Luis and I so our network in the space is solid. To this management core we have added a couple experienced mining and plant engineers whom were previously employed by other Canadian toll milling companies in Peru. They are currently employed as contractors focused on plant optimization planning and budgeting and we'll look to bring them onboard full time post-definitive close and finance.

What are the next things investors should be looking for coming out of Montan?

In the short term we are focused on the definitive close of the Cerro Dorado acquisition. This acquisition secures a solid tolling and mining asset for Montan in a valley teeming with mineral and without any other processing plants. That’s a great chip to have whether we develop it on our own or look to consolidate with other opportunities.

I will follow up with Montan soon to get any updates. Montan Mining trades on the TSX Venture under the ticker MNY. Do your own due diligence.

Montan Mining Corp. (TSX-V: MNY)

Shares issued: 61,019,012 as of 2016-12-16

Market Cap: $3,356,045 as of 2016-12-16

Cash Position: $2,996 CAD as of 2016-07-31

Year High: 0.155

Year Low: 0.015

Sector: Gold

The author does own a position in Montan Mining and was paid to write this investor update.

Forward Looking Statements: This investor update contains certain information that constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as "plan," "expect," "project," "intend," "believe," "anticipate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward looking statements in this update include that Montan will close the acquisition of Cerro Dorado; that it can get mineral supply contracts with several of the larger miners in the Atico valley; it will try to improve the features of the mill; it may add a floatation circuit; that it will be an operational mining and toll milling company in 2017; that Rey Salomon may have the potential to deliver base feed to the plant both from the current workings and through a small-scale contractor JV model on other parts of the claims; and Montan will bring consultants on board full time post-definitive close and finance.. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the inherent risks involved in the hiring and retention of directors and officers, Montan may be unable to reach final agreement with Chazel, Montan may not be able to fund its plans, risks involving exploration and development of mineral properties, mine site planning and development, the uncertainties involved in interpreting drilling results and other geological data, fluctuating metal prices, permitting and licensing and other factors described above and in the Company's filings on the Canadian Securities Administrators' website located at www.sedar.com. The Company disclaims any obligation to update or revise any forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.