Desert Star Resources Ltd. (TSX-V:DSR) is pleased to announce it has filed, with the Canadian securities regulators an independent technical report prepared in accordance with National Instrument 43-101 titled “Prefeasibility Study Technical Report on the Kutcho Project, British Columbia” which has an effective date of June 15, 2017 and a report date of July 31, 2017. Desert Star signed a definitive agreement dated June 15, 2017 to acquire 100% of Kutcho Copper Corp. from Capstone Mining Corp., subject to certain conditions precedent, as disclosed in the Company’s news release on June 15, 2017.

The results of the 2017 PFS, which were published by the Company in a news release on June 15, 2017, include an after-tax net present value at an 8% discount rate of C$265 million and an internal rate of return of 27.6% using metal prices of US$2.75/lb copper, US$1.10/lb zinc, US$17.00/oz silver and US$1,250/oz gold and a currency exchange rate of 0.75 USD/CAD.

The Technical Report was prepared by JDS Energy & Mining Inc. and can be accessed under Desert Star’s SEDAR profile at www.sedar.com and on the Company’s website at www.desertstar.ca.

Updated Mineral Resource Estimate

As part of the 2017 PFS, a detailed review of cut-off grade sensitivities was undertaken that resulted in a cut-off grade of 1.0% copper being selected for reporting mineral resources (Table 1). The lower cut-off grade increases the Measured and Indicated Mineral Resource tonnage by 49% and the Inferred Mineral Resources tonnage by 432% as compared to the 2011 Prefeasibility Study, with corresponding copper equivalent grade reductions of only 13% and 24% respectively. The Main deposit mineral reserves have not been recalculated at the lower cut-off grade and remain at 1.5% Cu for the 2017 PFS. This updated mineral resource estimate provides a robust foundation on which to move forward with a Feasibility Study that will contemplate optimizing the project in terms of production capacity. Historically, mineral resources at Kutcho have had a high rate of conversion into Proven and Probable Mineral Reserves and Desert Star management is confident that this strong conversion rate will be maintained when applied to the updated Measured and Indicated Mineral Resources.

“The significantly increased tonnages, combined with only modest reductions in grade, illustrates the project’s potential to increase existing mineral reserves and resources through mineral resource conversion and infill drilling. Completion of a Feasibility Study will allow optimization of the mine plan and project economics around a potentially expanded production scenario,” stated Vince Sorace, President & CEO of Desert Star Resources. “The Desert Star team is committed to working closely with First Nations, local communities and all levels of Government to advance and maximize the potential of the Kutcho project.”

Table 1: Kutcho Project Resource Summary (inclusive of Mineral Reserves)

Table 2: Mineral Reserve Estimate by Deposit

Technical Report and Qualified Person

The Technical Report was conducted under the overall supervision of Gord Doerksen, P.Eng. of JDS Energy & Mining Inc (JDS). Mr. Doerksen is the VP Engineering at JDS and an independent qualified person under National Instrument 43-101 who has verified and approved the technical and scientific information related to the Technical Report, and prepared the economic analysis included in this news release.

Under Mr. Doerksen’s supervision, the following persons are responsible for specific inputs into the Technical Report:

• Michael Makarenko, P.Eng., JDS Energy & Mining Inc.
• Kelly McLeod, P.Eng., JDS Energy & Mining Inc.
• Garth Kirkham, P.Geo., Kirkham Geosystems Ltd.
• Daniel Jarratt, P.Eng., Stantec
• Guangwen Zhang, P.Eng., Tetra Tech EBA

Potential Exploration Upside

While the Kutcho area has been extensively explored, most drilling has been focused in and around the three known deposits. However, significant exploration upside has been identified through a review of historic work, including several priority drill ready targets prospective for additional resources. These prospective targets include:

• Mineralized drill intersections along strike and down plunge to the west from the Esso deposit (one of three VMS deposits comprising the Kutcho project) including 7.1 metres @ 1.96% copper, 5.24% zinc, and 18.0 g/t silver in DDH 94-B3. These intercepts could represent extensions to the high-grade Esso deposit or a potential new deposit.
• The FWZ, a relatively narrow sulphide lens (2 to 5 metres thick) which lies beneath the Main zone and which was subject to an historic estimate⁷ prepared as an internal document for Esso Minerals in 1979, of 230,000 tonnes averaging 1.47% copper, 5.52% zinc, 0.4 g/t gold and 43.7 g/t silver. The FWZ may have potential along strike and down dip for additional mineral resources. This mineralized zone demonstrates that additional horizons across the property are productive for VMS style mineralization.
• Main mineralization is open down-dip along 800 m, or 57%, of the total strike for this deposit, indicating potential for resource expansion down-dip.
• Esso mineralization is open down-dip along 300 m, or 50%, of the total strike for this deposit, and is open up-dip along 125 m or 20% of the total strike, indicating potential for resource expansion both up- and down-dip.
• Favourable untested stratigraphy east of the Main Zone, and on the southern portion of the property where the Kutcho time equivalent sulphide horizon is repeated by folding.

⁷A Qualified Person has not completed sufficient work to classify the historic estimate tabulated above as current mineral resources and the issuer is not treating the above mineral estimates as current mineral resources. The historic estimate is uncategorized and does not use the categories (“Inferred”, “Indicated” or “Measured” mineral resource, or “Probable” or “Proven” mineral reserve) set out in Sections 1.2 and 1.3 of NI 43-101 as defined by the Canadian Institute of Mining, Metallurgy and Petroleum, are not compliant with the NI 43-101. The historical estimate is relevant to obtain a reference to mineral potential present on the property. The Company has not undertaken any verification of the historical data upon which the historical estimates are based on.

Qualified Person: Gord Doerksen, P.Eng., a Qualified Person as defined by National Instrument 43-101, has read and approved all technical and scientific information contained in this news release that is related to the 2017 PFS. Mr. Doerksen is Vice President Technical Services for JDS and supervised the compilation of the 2017 PFS.

Rory Kutluoglu, B.Sc. P.Geo., a Qualified Person as defined by National Instrument 43-101, has read and approved all technical and scientific information contained in this news release. Mr. Kutluoglu is the Company’s Vice President Exploration.

T

he QPs verify that sufficient data verification was conducted for the 2017 PFS and that this data is adequately representative of the project.