October 15, 2024

Dear Valued Shareholder,

  Claudia Sheinbaum, Mexico’s first female President, took office early this month and her inaugural address has injected much needed optimism into the country’s mining sector.    The former president, Andrés Manuel López Obrador (AMLO), created uncertainty for the industry through unexpected Mining Reform and a last-minute proposal to ban open      pit mining.

  In July 2024, then president-elect Sheinbaum released a “100 Steps for Transformation” plan stating no new open-pit mining concessions would be granted. Existing concessions   will be evaluated and continued only with public approval and minimal impact on the environment. Yet the noticeable absence of an open-pit ban, from President Sheinbaum’s   100 pledges delivered during her October 2024 inauguration, signals a welcome divergence from ALMO’s ideology-driven approach to the sector. 

 While President Sheinbaum is likely to continue many of the policies of her predecessor and mentor, she is also embracing a more pragmatic approach. AMLO’s social programs to   reduce poverty and inequalities remain very popular, but his increased social spending against a backdrop of economic nationalism created significant economic strain, leaving Sheinbaum to inherit the largest budget deficit since the 1980’s debt crisis.

To continue the generous social spending, President Sheinbaum must reinvigorate Mexico's economy.This means increasing foreign investments and restoring investor confidence across multiple industries,including the mining sector. For states such as Sonora, a top destination for Direct Foreign Investment and where Sheinbaum’s political party Morena enjoys strong support, the extractive industry is a significant contributor to the state’s economy and often the primary economic activity.

President Sheinbaum will need to balance her commitment to her predecessor’s populist legacy with the fragility of her country’s economy, while at the same time, back her own inaugural statement: “I say with complete clarity. Be assured that investments of national and foreign shareholders are safe in our country.”

Bolstering foreign investor confidence will also aid President Sheinbaum’s support for Mexico’s

nearshoring opportunities. As also stated in her inaugural address, “We will take advantage of the trade agreement with the United States and Canada to continue promoting the relocation of companies [to Mexico].”

Global supply chain disruptions, caused by the COVID pandemic as well as geopolitical conflicts, have highlighted the importance of reliable manufacturing and distribution hubs. For the first time in 20 years,Mexico replaced China as the top exporter to the United States and, as a key player in the global supply chain, Mexico’s mining sector is now well-positioned to meet increasing demand for strategic and critical minerals.

So, what does this mean for Sonoro Gold and the Company’s flagship Cerro Caliche gold project in Sonora,Mexico?

The positive impact of President Sheinbaum’s pragmatism and apparent shift away for AMLO’s proposed open-pit ban is being felt throughout the sector with Mexican mining stocks showing signs of recovery.

Since President Sheinbaum’s inauguration on October 1, 2024, Sonoro has traded almost 4,000,000 shares, with the price increasing 55% from $0.04 to $0.07.

As the Sheinbaum administration settles in and the country’s permitting authority SERMANAT transitions to new leadership under Secretary Alicia Bárcena, who previously worked under President Sheinbaum’s new Minister of Economy, Secretary Marcelo Ebrard, Sonoro Gold will maintain its “cautious optimism.” 

The concessions for the Cerro Caliche project are owned by the Company and, in May 2022, we submitted a permitting (MIA) application to bring the project into production to initiate cashflow to fund ongoing exploration and development. The 2023 Preliminary Economic Assessment (PEA) estimated the project’s current resource potentially supports an initial nine-year, open-pit heap leach mining operation. At a gold price of US $2,000 per ounce, the project has a Pre-Tax NPV5 of US $116.8M with an IRR of 85%. Current gold prices of over US $2,600 only help to improve the overall economics of the project.

Regardless of permitting delays, I would like once again to emphasize that 70% of Cerro Caliche’sidentified mineralized zones have yet to be drilled and assayed and therefore the project holds significant exploration potential. Sonoro’s Board continues to carefully monitor the situation and insiders’ commitment is reflected in our approximate 24% holdings of all outstanding shares, plus continuous shareholder loans of approximately CAD $3.5m to fund property payments, operating expenses in Mexico and regulatory filings. The Company intends to settle insider loans from project financing, or from  production revenues.

Sonoro is also actively pursuing the VAT receivable in Mexico from the Mexican government. As disclosed in the March 2024 financial statements, the VAT receivable is CAD $2.4m and we have engaged legal counsel in Mexico to provide the requested documentation to the Mexican tax authority.

In September 2024, Sonoro completed a modest financing of $875,000 to fund operations and ongoing development of the Cerro Caliche project.

 We also presented at the recent Nordic Funds & Mines event in Stockholm and enjoyed meeting up with some of our loyal European shareholders. Sonoro will also be presenting at the upcoming Red Cloud Fall Mining Showcase in Toronto on October 16th and 17th and will attend the Commodities Global Expo 2024 in Fort Lauderdale on October 20th to the 22nd.