THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED.  ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

29 September 2021

CASTILLO COPPER LIMITED
("Castillo" or the "Company")

Castillo secures option to acquire two prime lithium projects

Castillo Copper Limited (LSE and ASX: CCZ), a base metal explorer primarily focused on copper across Australia and Zambia, is pleased to announce that it has entered into a 90-day option agreement to acquire - subject to due successful due diligence - two granted, highly prospective lithium projects. The Litchfield and Picasso Lithium Projects are located in prime regions in the Northern Territory (NT) and Western Australia (WA) respectively.

Highlights

·    Option secured for 90-days to acquire - subject to successful due diligence - two highly prospective lithium projects in prime locations:

1) Litchfield Lithium Project (Northern Territory) is contiguous to Core Lithium's (ASX: CXO) strategic Finniss Lithium Project which has JORC compliant ore reserves (7.4Mt @ 1.3% Li2O), with production slated to commence in H2 2022¹:

§ Analysing satellite imagery² shows potential for lithium pegmatite bodies to be apparent along Litchfield's north-west boundary; this is the primary exploration target area 

2) Picasso Lithium Project (Norseman region, WA) is proximal to Liontown's Resources' (ASX: LTR) Buldania Project, with a JORC compliant resource at 14.9Mt @ 0.97% Li2O³, and has mapped pegmatites⁴ that potentially host lithium mineralisation

·    Castillo has ample funds on hand to develop core projects moving forward; meanwhile, the drilling campaign at the Arya Prospect is about to commence 

Simon Paull, Managing Director of Castillo Copper, commented: "This is a strategic acquisition to complement our existing copper assets and strengthen Castillo's exposure to critical metals for the clean energy transition. We consider the projects to be highly prospective and they are situated in prime locations nearby to proven Lithium reserves. By focusing on developing copper and lithium projects, the Board is positioning Castillo to potentially create significant incremental value from the transition towards renewable energy sources and accelerating demand for electric vehicles globally."

In addition to this release, a PDF version with supplementary information and images can be found on the Company's website: https://castillocopper.com/investors/announcements/ 

PRIME LITHIUM ASSETS

Rationale for Acquisition

Following a recent strategic review, the Board of Castillo Copper decided it was prudent to diversify the asset portfolio and acquire quality projects prospective for lithium mineralisation. By having the ability to develop projects prospective for copper and lithium, it positions the Company strategically to potentially create significant incremental value from the transition towards renewable energy sources and surging demand for electric vehicles globally.   

Litchfield Lithium Project, NT

The Litchfield Lithium Project is close to Darwin Port in a mineral rich, yet underexplored, region. In geological terms, it is in the Bynoe pegmatite field, which is known to host lithium mineralisation. A key positive for the Litchfield Lithium Project is neighbour CXO's contiguous Finniss Lithium Project which has four demonstrable spodumene lithium deposits within 1-2km of the north-west boundary.¹

The JORC compliant total reserve for the Finniss Lithium Project, which comprises deposits at several prospects noted in Figure 1 above, is 7.4Mt @ 1.3% Li2O (equivalent to 97,900t Li2O¹). Of these prospects, the BP33 deposit, which is >140m deep and 20-40m wide, has produced some stellar intersections across several drill-holes, including: 75m @ 1.68 % Li2O including 55m @ 1.97% Li2O⁵. 

Based on CXO's published Definitive Feasibility Study, the Finniss Lithium Project's pre-tax NPV for stage 1 development is A$384m, with low start up CAPEX ($89m), 8 year mine life producing up to 197ktpa concentrate and production commencing H2 2022⁶. Moreover, CXO has two binding four-year off-take agreements for 75ktpa concentrate each, with one potentially part of Tesla's supply chain⁶.

A closer analysis of satellite imagery⁴, encompassing the Litchfield and Finniss Lithium Projects, demonstrates the geology along the former's western boundary is comparable to that prevalent in the latter. As such, with the potential for lithium pegmatite bodies to be apparent in the western zone of the Litchfield Lithium Project, there is the possibility for contiguous mineralisation.  

The primary and secondary targets were selected for their potential to host lithium-bearing pegmatites intruded within the Burrell Creek Formation. Pleasingly, the current owners undertook a comprehensive surface sampling campaign, collecting up to 600 soil and rock-chip samples, which are presently being analysed at a laboratory. The assay results, which are due back shortly, will form a significant component of the preliminary due diligence. 

Picasso Lithium Project, WA

The Picasso Lithium Project is circa 50km from Norseman which connects via road / rail to Esperance Port. This is a well-known lithium producing region as it hosts the Mt Marion and Bald Hill Lithium Mines which have JORC compliant total resources at 71Mt @ 1.37% Li2O⁷ & 26Mt @ 0.96% Li2O⁸ respectively.

More significantly, the Picasso Lithium Project is proximal to LTR's Buldania Lithium Project, circa 20km west, which has a JORC compliant resource at 14.9Mt @ 0.97% Li2O.⁹

Within the Buldania Lithium Project, there is outcropping and spodumene-related mineralisation that extends to the south-east under shallow cover along a 1.4km strike event that is open. Moreover, reflecting LTR's optimism in the Buldania Project's potential, a mining lease application has been lodged over the area which hosts the resource.⁹

Encouragingly, the Picasso Lithium Project hosts geology that is comparable to occurrences found in LTR's tenure and ground proximal to the Bald Hill Lithium Mine. Drilling down, the Geological Survey of Western Australia¹⁰ (GSWA) has mapped granitic pegmatites (which typically host lithium bearing minerals such as spodumene) within the Picasso Lithium Project. 

Reflecting the exploration potential, a closer analysis and interpretation of GSWA's maps suggest there are potentially more outcropping granite units and mapped pegmatites in the Picasso Lithium Project's than proximal to the Bald Hill Lithium Mine.¹⁰

Within the Picasso Lithium Project, historical exploration drilling for gold-copper-zinc-lead was undertaken by Anglo Gold.¹¹ This entailed air-core drilling along a predetermined path which largely encapsulated known outcropping pegmatites. Pleasingly, the assay results for many of the drill-holes returned elevated lithium levels (up to 75ppm Li), with >30ppm deemed significant to warrant closer geological investigation.¹¹ Interpreting the geochemistry findings reinforces the argument that pegmatites within several target areas across the tenure have the potential to host lithium mineralisation.

OPTION AGREEMENT 

Vendor Group & Asset Overview

The owners of Lithium Technologies Pty Ltd (ACN: 619683859; "LT") and Lithium Supplies Pty Ltd (ACN: 621172478; "LS"), which, in turn, each own 50% of Synergy Prospecting Pty Ltd (ACN: 622779980; "Synergy"), have granted the Company a 90-day option to acquire 100% of the outstanding shares of LT and LS and by implication 100% of Synergy. The major shareholder of LT and LS on a consolidated basis, with circa 26%, is UK-based and AIM listed Cadence Minerals plc¹² (LSE: KDNC).

During this 90-day period, Castillo will be conducting due diligence on all three entities to ensure the underlying assets are in good standing and there are no material adverse issues. Under the terms of the option agreement, Castillo can exercise its right to acquire LT, LS and Synergy at any time during the 90-day period.

The primary assets of Synergy, which are wholly-owned, comprise the Litchfield Lithium Project (EL31774) in NT and Picasso Lithium Project (E63/1888) in WA. In addition, Synergy has an application in NT - EL31828 - known as the Alcoota Lithium Project, which comprises ground proximal to Alice Springs. However, further geological due diligence is required on this application to determine if it meets the criteria to be a core asset.

Between them, LT and LS hold applications for six lithium properties in San Luis Province, Central Argentina. At this juncture, further due diligence is required to determine if these applications will be progressed to grant status.

For further details on all the exploration permits - refer to Appendix A.

Option Terms & Consideration

The terms of the 90-day option are as follows:

·    A$50,000 non-refundable deposit in cash on formally granting the option that will go directly to Synergy for working capital purposes.

Upon exercising the option within the 90-day period, the binding consideration terms are as follows:

·    A$1m script payment in Castillo shares will become payable to the Vendor Group based on the 14-day WVAP calculated from the date of which the option agreement is announced to the ASX.

·    Note, the Vendor Group will be subject to a 6-month voluntary escrow period for 50% of the shares and 12-months for the 50% balance from the date of settlement. In addition, both parties agree to sign off on a binding term sheet.

Incremental consideration terms are applicable if the following milestones are achieved:

·    A$1m script payment in Castillo's shares to the Vendor Group based on the 14-day WVAP if two drill-holes produce assayed intercepts greater or equal to a true width of at least 10m @ 1.3% Li2O.

·    Note, the two holes will be at least 100m apart, but not greater than 200m.

·    A$1m script payment in Castillo's shares to the Vendor Group based on the 14-day WVAP if a JORC compliant total inferred resource of at least 7Mt @ 1.3% Li2O is modelled by SRK Consulting.

·    In the event of commercial mining operations commencing, a 2% NSR will be payable to the nominees of the facilitator.

NEXT STEPS

For the lithium projects, the initial focus will be on the following areas:

·    Commencement of due diligence on the Litchfield and Picasso Lithium Projects.

·    For the Litchfield Lithium Project, return of assays for circa 600 surface samples.

In Queensland, the following is set to take place over the coming weeks:

·    Commencement of drilling at the Arya Prospect.

·    Return of all Big One Deposit assays from the laboratory, which will enable the geology team to interpret the results then formulate the next drilling campaign.

There are several ongoing steps for the Zambia operations, including:

·    Complete the IP survey at the Luanshya & Mkushi Projects then analyse the results for incremental targets for test-drilling; and

·    Commence work on the inaugural drilling campaign for the Luanshya Project.

For further information, please contact:

About Castillo Copper

Castillo Copper Limited is an Australian-based explorer primarily focused on copper across Australia and Zambia. The group is embarking on a strategic transformation to morph into a mid-tier copper group underpinned by its core projects:

·    A large footprint in the Mt Isa copper-belt district, north-west Queensland, which delivers significant exploration upside through having several high-grade targets and a sizeable untested anomaly within its boundaries in a copper-rich region.

·    Four high-quality prospective assets across Zambia's copper-belt which is the second largest copper producer in Africa.

·    A large tenure footprint proximal to Broken Hill's world-class deposit that is prospective for zinc-silver-lead-copper-gold.

·    Cangai Copper Mine in northern New South Wales, which is one of Australia's highest grading historic copper mines.

The group is listed on the LSE and ASX under the ticker "CCZ."

References

1)     CXO ASX Release - 21 September 2021 (Annual Report)

2)     NT satellite imagery. Available at: https://strike.nt.gov.au/wss.html

3)     LTR ASX Release - 2 August 2021

4)     Satellite imagery from Geological Survey of Western Australia. Available at: https://www.dmp.wa.gov.au/Geological-Survey/Geological-Survey-262.aspx

5)     CXO ASX Release - 11 April, 28 June & 18 December 2018

6)     CXO ASX Release - 26 July 2021

7)     MIN ASX Release - 31 October 2018

8)     Alita Resources - 20 March 2019 (121 Mining Conference Presentation). Available at: http://www.allianceminerals.com.au/wp-content/uploads/2019/03/02088109.pdf

9)     LTR ASX Release - 2 August 2021

10)   Satellite imagery from Geological Survey of Western Australia. Available at: https://www.dmp.wa.gov.au/Geological-Survey/Geological-Survey-262.aspx

11)   Anglo Gold Reports - WAMEX A97556. Available at: https://geodocs.dmirs.wa.gov.au/Web/documentlist/10/Report_Ref/A97556

12)   Cadence Minerals profile. Available at: https://www.cadenceminerals.com/about/strategy/

Competent Person Statement

The information in this report that relates to Exploration Results for "Litchfield" and "Picasso" is based on information compiled or reviewed by Mr Geoffrey Reed, a Non- Executive Director of CCZ.  Mr Reed is both a shareholder and director of Bluespoint Mining Services, a company which is a shareholder of Castillo Copper Limited.  Bluespoint Mining Services provides ad hoc geological consultancy services to Castillo Copper Limited.  Mr Reed is a member of the Australian Institute of Mining and Metallurgy (CP) (member #250422) and has sufficient experience of relevance to the styles of mineralisation and types of deposits under consideration, and to the activities undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, and Mineral Resources. Mr Reed is a member of the Australian Institute of Geoscientists. Further, Mr Reed consents to the inclusion in this report of the matters based on information in the form and context in which it appears.

Mr Reed has not verified any of the information regarding any of the properties or projects referred to herein other than the "Litchfield" and "Picasso" Properties.

The London Stock Exchange has not reviewed and does not accept responsibility for the accuracy or adequacy of this release.

APPENDIX A: TENEMENT & APPLICATION SCHEDULE

Australian exploration permits

Argentina exploration permits