Marimaca enters options to acquire sulphuric acid plant

Mr. Hayden Locke reports MARIMACA COPPER ANNOUNCES OPTION TO ACQUIRE 150KTPA SULPHURIC ACID PLANT Marimaca Copper Corp. has executed a binding asset purchase option agreement to acquire a used sulphuric acid plant in Chile from CEMIN Holding Minero. Sulphuric acid is one of the key input costs for the Marimaca oxide deposit (MOD) and the ability to produce a significant amount of its own supply will reduce exposure to a volatile acid market. Highlights Option agreement to acquire sulphuric acid plant for $2.5-million (U.S.); Exclusivity period of three months to allow further detailed technical and engineering reviews including capital and operating cost estimates for the installation and operation of the sulphuric acid plant; Plant capacity of up to 150,000 tpa (tonnes per annum) of concentrated sulphuric acid, representing approximately 30 per cent to 40 per cent of total acid consumption at the Marimaca oxide deposit depending on phase of development: Substantial opportunity to reduce volatility of key input cost (sulphuric acid); Based on market research and quotations received by Marimaca -- the estimated equipment cost of a new sulphuric acid plant of similar capacity is approximately $35-million (U.S.) to $40-million (U.S.), with total installation cost of $50-million (U.S.) to $60-million (U.S.); Relocation to Mejillones and start-up costs of used plant expected to be materially lower than cost of new equipment. Indicative operating costs show potential for approximately 30-per-cent reduction in acid cost relative to current long-term forecast and normal historical spot and contract acid prices delivered to Mejillones; Simplifies acid storage strategy due to relative ease of storing physical elemental sulphur when compared with concentrated sulphuric acid; The company has completed initial engagement with industrial operators in Mejillones with respect to installation of sulphuric acid plant; Significant mitigation of key financial risk for the company; The MOD definitive feasibility study, now largely complete and undergoing final review before publication, will not capture potential value upside from this acid strategy -- a clear opportunity for optimization. Hayden Locke, president and chief executive officer of Marimaca Copper, commented: "The MOD is forecast to be a mid-level acid consumer in the context of Chilean heap leach operations, and we continue to recognize acid cost as one of our most important drivers of profitability. We have numerous operational levers we can utilize to reduce acid consumption, if necessary, however, lowering the volatility associated with one of our key consumables was a logical step for the company. "Based on current projections from Comision Chilena del Cobre (Cochilco), which provides industry forecasts for long-term acid supply and demand in the Chilean market, the expectation is for acid prices to normalize at around $95 (U.S.)/tonne in Mejillones from 2028 onwards. Our analysis indicates, based on today's elemental sulphur price (CFR Mejillones), a company-owned acid plant could produce sulphuric acid for approximately $70 (U.S.)/tonne, excluding byproduct credits from heat generation. This represents an approximate 30-per-cent reduction from the current long-term acid price forecasts from Cochilco. This discount is even more significant if you consider current spot prices, which are artificially elevated by H2SO4 seaborn freight rates and strong demand from the global fertilizer industry. "In addition, while the elemental sulphur and global sulphuric acid markets exhibit reasonably strong price correlation, the underlying volatility of the final acid cost via a sulphur burner is reduced. This is due to stoichiometric relationship of reacting one tonne of elemental sulphur to produce approximately three tonnes of concentrated (98 per cent) sulphuric acid." Transaction overview Marimaca will complete the transaction via a structured asset purchase agreement from CEMIN's subsidiary, Administradora Industrial y Minera Pada SpA: Upfront payment of $1.0-million (U.S.) paid concurrent with execution of the agreement; Second payment of $1.5-million (U.S.) following a three-month exclusive further due diligence period; Commitment to mobilize plant equipment to a Marimaca-designated site before June 30, 2026. The plant operated until 2015, producing up to 150,000 tpa of sulphuric acid from elemental sulphur. The plant has been on care and maintenance since 2015. Marimaca has completed an initial technical due diligence, including a site visit and review of independent engineering reports completed by Holtec International. Overview of sulphuric acid production and indicative production costs Production of sulphuric acid via burning of elemental sulphur is an exothermic reaction, meaning it creates significant heat as a byproduct which can be used to offset production costs in some circumstances. Byproduct credits for steam generation have not been considered by the company in its initial analysis, but has the potential to further reduce costs. The industrial process is very well understood and involves heating elemental sulphur to its molten state before injecting it into a reaction chamber with oxygen to create sulphur dioxide gas. Sulphur dioxide is then passed over a catalyst to create sulphur trioxide gas. Hydrogen is then absorbed with oxygen, prior to a final dilution with water to achieve the desired acid concentration. Marimaca has engaged with several manufacturers of sulphur burners to obtain indicative capital and operating cost profiles for the production of sulphuric acid. The key input cost for the production process is the elemental sulphur cost assumed, which represents between 70 per cent and 90 per cent of total cost of acid production. Current forecast supply demand for Chilean sulphuric acid market The company has completed a review of the market for sulphuric acid in Chile using external consultants, including reviewing supply/demand forecasts in Chile and commencing strategy development around sourcing and storage of sulphuric acid for the project. Mejillones is a key centre for the import of sulphuric acid to Chile and is also a significant production hub from local smelters and a dedicated sulphur burner. A significant proportion of acid imported to Chile comes from the Chinese market, which is currently impacted by historically elevated shipping costs due to repurposing of fleet previously used for sulphuric acid transport. It is reported that a new fleet is under construction, which is expected to impact the shipping rates favourably from 2026 onward. The Comision Chilena del Cobre (Cochilco) provides long-term supply, demand and price forecasts for the Chilean acid market out to 2033, which was completed in September, 2023, and updated in September, 2024. From 2028, Cochilco forecasts a material reduction in the local acid supply deficit to Chile caused by declining consumption in combination with a projected increase in the base level of supply in the region. Cochilco expects this to have a material positive impact on the acid price in the Chilean market. Marimaca is expected to enter production during 2028, with full production from 2029 onward, which coincides with the improvement in market dynamics for acid. Cochilco's long-term price forecast, based on its detailed market analysis, for the Chilean market out to 2033 is $95 (U.S.)/tonne. Historical relationship of global traded sulphuric acid prices to elemental sulphur prices Elemental sulphur is the most relevant cost to produce sulphuric acid. Given the yield of sulphuric acid per tonne of elemental sulphur burned (approximately 2.5-to-3:1), overall exposure to price volatility is reduced when purchasing elemental sulphur rather than market-based sulphuric acid. Elemental sulphur and sulphuric acid are price correlated, with, on average, elemental sulphur trading at approximately 1.103 times sulphuric acid over a seven-year period. About Marimaca Copper Corp. Marimaca is a copper exploration and development company focused on its 100-per-cent-owned flagship Marimaca copper project and surrounding exploration properties located in Antofagasta region, Chile. The Marimaca copper project hosts the Marimaca oxide deposit (the MOD), an iron-oxide-copper-gold-type copper deposit. The company is currently progressing the Marimaca copper project through the definitive feasibility study led by Ausenco Chile Ltda. In parallel, the company is exploring its extensive land package in the Antofagasta region, including the greater than 15,000-hectare wholly owned Sierra de Medina property block, located 25 kilometres from the MOD. We seek Safe Harbor.