PIPESTONE LAKE PROPERTY JV

The Pipestone Project is a 50% owned joint-venture with Cross Lake Mineral Explorations Inc., a wholly-owned private corporation of the Cross Lake First Nation. Gossan is continuing to encourage engagement with the Cross Lake Band Council and the Chiefs of the Pimicikamak Okimawin Four Councils in discussions regarding the development and/or sale of its mineral rights at the Pipestone Property.

In July of 2016, after a hiatus, discussions pertaining to the future of the Pipestone Property resumed with the Pimicikamak Okimawin. Gossan was advised that Pimicikamak Okimawin has completed their due diligence process and would be in a position to extend a formal purchase offer to Gossan for the Pipestone mineral rights. There is no indication that any offer will be immediately forthcoming. On July 13, 2018, a new Chief and Band Council were elected at the Cross Lake First Nation. An initial meeting was held with the new Chief, Councilors and advisors and Gossan’s management in December of 2018 and an offer was discussed. Subsequently, on May 7, 2019, a new Chief and Band Council were elected and an initial meeting, led by the Vice-Chief, was held on October 1, 2019.

The Pipestone Property is comprised of 11 claims and covers 2,578 hectares. On 9 of the claims, assessment work requirements have been temporarily deferred and these claims may become subject to loss of tenure. The other two claims along the deposit, totaling 278 hectares, are in good standing with tenure that extends to 2030 and 2044. The Property is situated within Northern Flood Agreement Selection Site 1.9, an area that is otherwise withdrawn from staking as a potential and possible future site for a reserve.

The Pipestone Lake Property is located in north central Manitoba, approximately 150km south of Thompson and 550km north of Winnipeg. It is situated within Northern Flood Agreement Selection Site 1.9, an area that is otherwise withdrawn from staking as a potential and possible future site for a reserve. At the Pipestone Lake’s Areas 1 and 2, drilling to date has outlined a non-compliant NI 43-101 historic indicated resource of 156.8 million tonnes grading 5.56% TiO2, 28.11% Fe2O3 and 0.22% vanadium pentoxide and an inferred resource of 150 million tonnes at a similar grade. The mineral resources at Pipestone Lake were estimated by Reedman & Associates in a report prepared for the Company in 1998 but should not be relied upon as the report was not compliant with NI 43-101 and has not been verified by a Qualified Person under the Instrument. More drilling could significantly increase the resource.

A preliminary mine plan has been prepared for the Pipestone deposit by Reedman and Associates which classifies various tonnage according to titanium dioxide cut-off grades, provides proposed open pits, and estimates stripping ratios; however more detailed drilling is required to support a 30,000 tons per day operation. Additional metallurgical and other studies are required in order to assess the economic feasibility of the deposit. The operation of an open-pit mine of this magnitude would be expected to require 400-500 workers on a long-term basis.

Currently, about 85% of vanadium is used in the steel industry as a strengthener. Various nations are mandating stronger steel rebar in construction and building codes, likely increasing vanadium demand. On February 9, 2018, China announced new rebar standards which were implemented in November 2018 and to be phased in over 3 years.

Vanadium may also play an important new role in electrical storage technology which could substantially increase demand for this metal. A potential large-scale use of vanadium is in grid–scale electrical storage of renewable energy – wind, solar and hydro – using re-dox flow batteries. Vanadium re-dox batteries could substantially lower power utilities’ capital costs as they allow for electricity to be generated and transmitted in off-peak hours and then stored locally to satisfy the following day’s peak power demand. New electrical transmission grids are increasingly difficult to get approved and expensive to build.

Vanadium pentoxide prices bottomed in early 2016 at about US $2.50 per pound. Prices increased during 2017 and 2018 with a peak price of over US $11.00 per pound in 2017 and US $28.00 per pound in 2018. The current market price is in the range of US $5.00 to US $6.00 per pound.

Paints, paper and plastics are the main uses of titanium dioxide. Potential future green uses of titanium dioxide include pliable solar panels.