A Message from the Chairman of Sonoro Metals Corp.

Dear Shareholder,

As a valued shareholder, let me begin by thanking you for your ongoing support and continued confidence in Sonoro Metals. I also want to take this opportunity to update you on the Company’s progress and vision for the future, as well as outline our philosophy and approach to doing business in the junior mining sector.

When I joined the Sonoro board of directors as Chairman in the fall of 2018, I did so with the goal of developing the Company into a profitable mid-tier gold producer, while minimizing share dilution. One year later, I believe we are on the path to achieving this goal. We remain focused on our flagship project, the Cerro Caliche Gold Project, located in the Cucurpe Mining District of Sonora State, Mexico. By this I refer to our ongoing campaign at Cerro Caliche to explore and assess the viability of a mining operation and, if successful, to ultimately commence mining.  We believe we have the right property, and our management and exploration teams are as capable as any in the industry.

Over the past 35 plus years, members of our management team have collectively, discovered, developed and mined more than a dozen copper and gold deposits across the globe. I think this record more than amply demonstrates that we have the necessary expertise to discover and subsequently transform mineralized areas into profitable, working mines. As we continue to work hard to develop the project, an understanding of how we are progressing, can be found by reading our July, 26, 2019 filing titled “NI 43‐101 Technical Report on the Cerro Caliche Gold Project” which is available online under Sonoro’s profile at www.sedar.com.

Strategy: Create Cashflow

So how might we fund an ongoing exploration company without continually selling shares and further diluting the stock? We believe the answer is by creating a revenue stream from a small, pilot gold operation and using the cash-flow to fund further exploration and, if this exploration is successful, additional project development. This strategy, I believe, is critical if we are to build value for our shareholders ON A PER SHARE BASIS. There is little value in growing the Company if we end up doing so at the expense of excessive dilution. So, to avoid dilution as much as possible, our business strategy is directed at producing gold and cash flow as soon as project conditions and capital market circumstances will permit.

We Are Not the First

Others have successfully implemented this strategy. Beginning in the1980s, Chester Millar was instrumental in transforming Glamis Gold from a junior exploration company into a substantial gold producer which grew from a market capitalization of $400,000 to US$8.6 billion when it was taken over by Goldcorp in 2006[1]. Millar started with the cash flow from a low-grade heap leach operation called the Picacho Mine, which produced 24,000 oz/Au per year at its peak. For the first few years, Picacho provided enough cash flow to enable Glamis to acquire and develop additional gold projects, even in uncertain market conditions. Our operations manager, Jorge Diaz, was involved in the development and operations at one of the Glamis mines and we continue to harness his extensive hands-on expertise to realize success at Cerro Caliche.

To expedite this strategy, we plan to team up with a major mine developer, known in the industry as an EPC company. (“EPC” is an acronym which stands for Engineering, Procurement and Construction) During this past summer, Sonoro’s Director of Corporate Finance, Neil Maedel, and I visited China, and through our contacts were introduced to several large-scale Chinese mine developers with expertise in small heap leach gold projects with similar grades to those identified in the mineralized zones at Cerro Caliche. I am optimistic that our Cerro Caliche project may be just the right kind of project many of these companies are seeking for development.

These EPC contractors have a unique interest in identifying opportunities for contract revenues and profitable investments. Their operational input and detailed knowledge of a project, in addition to contracts for a mine’s design, equipment procurement and construction, all work to lower their investment risks and potentially increase project profits. Furthermore, if development is to occur in areas that may lead to more and even larger EPC contracts, the opportunity becomes even more compelling to the EPC company. A fast CAPEX (capital expenditure) payback combined with a lucrative EPC contract, adds further to an EPC contractor’s incentive to invest and in effect arrange reasonably priced debt financing. In our view, this combination is what makes an EPC contractor an ideal candidate for both financing and developing our Cerro Caliche project.

Progress Report

We have held discussions with five China-based EPC companies regarding the parameters of our strategy of pursuing near-term development of a Heap Leach Pilot Operation (“HLPO”), including the desire to collaborate with a long-term EPC partner that would provide project financing. Each of the five companies indicated the Cerro Caliche Project fits with its business criteria and requested time to conduct a detailed analysis of the published data as a prelude to further negotiations. I am happy to report that due diligence of the HLPO material has already been initiated by all five of these EPC contractors.

When we commissioned the previously mentioned NI 43-101 Technical Report for Cerro Caliche last summer; this was an initial but essential step in the evolution of our HLPO plans. The Technical Report includes estimated inferred resources in the Cerro Caliche Central zones alone as 201,000 ounces of gold equivalent with an average grade of 0.545 grams per tonne[2].

From the onset of discussions, the expectation was and continues to be for an EPC partner to fund the HPLO with debt that would be serviceable from production. In conjunction with this financing, the EPC’s first mandate would be to complete a pre-feasibility study (PFS). Once completed, the EPC contractor would supply the equipment and oversee its installation for mining operations.

In the meantime, the list of potential China-based partners (and investors) continues to grow. Neil and I were invited back to China the second week of October to resume our discussions with the EPC companies plus several Chinese institutions which have shown an interest in Sonoro.

We Are Still Exploring

We are first and foremost an exploration company and any success will come from the drill bit as our team members try to do what they have done many times in the past: discover and develop gold deposits. To explore we must raise money. With each financing and related dilution of existing shareholders, I am reminded of the need to remain focused on the goal for Sonoro of generating cash flow to organically fund on-going exploration and development of Cerro Caliche and future projects.  I know you share my desire to see Cerro Caliche’s full potential to be optimally explored, defined and realized. Our efforts to date have been both exciting and consistently rewarding as each drill-hole further advances our plans.  The Cerro Caliche project is evolving into the substantial asset we hoped it would, and all signs are that it should continue to do so.

Our first two drilling campaigns at Cerro Caliche accomplished our key objective of identifying an inferred resource exceeding 200,000 oz AuEq as an initial step in our plan to develop a proposed HLPO.    We remain optimistic that this quantity could grow significantly. Exploration has identified 17 zones of gold mineralization in shallow, broadly mineralized low-sulphidation epithermal vein systems, with a continuing potential to develop a near-surface large tonnage resource.  All 17 zones appear to extend along a northwestern strike and if confirmed, this alone may increase our existing resource.

Results to date have allowed us to develop a geological model that we believe will improve our ability to identify optimal drill targets.  We have determined, for example, that the gold mineralization is likely to be found in the concessions’ broad zones of densely veined rock.  Multiple testing of this observation has returned relatively consistent and predictable results; of the 96 holes we drilled, every one intercepted gold mineralization. And there is still much more drilling to do. Roughly two-thirds of the similar structures we have identified throughout the concession have yet to be drilled. Combined with the potential resource expansion of our existing mineralized zones, the upcoming Phase III drilling campaign may prove to be transformational as we work towards defining the full extent of the Cerro Caliche’s mineralized gold zones.

Always Observing … Always Learning

There are eight known historic gold mines on the property. These small operations were active during the turn of the 19th century when artisanal miners extracted the relatively high-grade, visible gold from quartz veins near the surface. While evidence of historical small-scale mining does not confirm that Sonoro’s future exploration will yield the desired results, the location of such historical activities is beneficial to Sonoro in identifying optimal locations for future drilling and other exploration plans. For example, Cerro Caliche’s  17 known mineralized zones are shallow broad bands of oxide gold mineralization which are associated with these historic mines. And as you know we have already outlined and drilled some of these zones with considerable success.

Having now acquired an advanced knowledge of a portion of Cerro Caliche’s geology, a comprehensive program of 3D modelling, mapping and sampling is currently underway. We expect this program to further improve our understanding of the geology and to further refine our exploration model, enabling us to proceed with the intent of expanding the current resource estimate in a cost-efficient manner. With this improved understanding, we are examining more closely some of the less explored parts of Cerro Caliche with a goal of identifying new zones of gold mineralization so that we may further increase Cerro Caliche’s potential.

Our Phase III drilling campaign is scheduled to begin shortly and will consist of infill, step out and scout drilling, totaling approximately 7,000 meters at an estimated cost of USD $1.6 million. Most of the drilling will be lower cost reverse circulation, with the exception of the core drilling required to further define the geological structure to depth and provide deeper mineralization samples for HPLO-related metallurgical testing.

If you wish to learn more, further details can be found in our September 12, 2019 news release: “Sonoro Prepares to Launch Phase 3 Drilling Program at Cerro Caliche.” You can view this and all of news releases on our website at www.sonorometals.com. Alternatively, you can call the Sonoro office directly at +1-(604)-632-1764 or email us at info@sonorometals.com.

A Little Philosophy

An investor does not buy a $0.20 share because the investor speculates it may become $500 million-dollar company within five-years. Instead, investors buy those shares because he or she speculates it may become a $5-dollar stock within five-years.  This is what I define as a successful company.  So, what are the components needed to build a successful company in our business?  As Chairman, I assert it is a combination of the following:

Management: Talented, storied and driven to find and develop economically viable mines. These individuals are often hard to recruit but are easy to identify. Typically, by the time these individuals hit their mid-40s, they will have a history of several successful discoveries and developments.

Cornerstone Asset: At least one cornerstone asset in an advanced stage of development that can provide cashflow to allow the company to quickly finance its own growth. Ideally this same asset has the potential to expand and provide future growth.

Share Structure: Minimal share issuance and a strategy to keep it that way, while maximizing per share asset and cash flow growth.

A Great Partner: Project partners that bring expertise and financing capabilities, while reducing risk and avoiding dilution; serving shareholders’ interests, provided the company can maintain its independence and does not have to encumber its core assets. This is often easier said than done. To be an attractive opportunity, a company typically needs a “development ready” asset in hand, along with a management team that collaborates well with the partner company’s executive.

Project Pipeline: A junior should never stand still. Instead it should be executing a strategy of ‘sensible high impact’ asset acquisition and development for future exploration, and, conditions permitting, establishing and then continuing revenue growth.

Time, Hard Work and a Little Creative Thinking

I am proud of what we have achieved since I joined Sonoro and I am growing ever more excited about our future. I believe that our ongoing exploration work and business plans for Sonoro will prove that we have components needed to build a highly successful company. With time, hard work and a little creativity, a major success story is what we intend to create.

Warm regards,
John Darch
Chairman, Sonoro Metals

[2] See the Technical Report and the Company’s press release dated July 26, 2019 for additional information. Mineral resources are not mineral reserves because the economic viability has not been demonstrated. There are no mineral reserve estimates for the Cerro Caliche project. It is reasonably expected that a majority of Inferred mineral resources could be upgraded to Indicated (or Measured) mineral resources with continued exploration.
ForwardLooking Statement Cautions: This shareholder information letter contains certain “forward‐looking statements” within the meaning of Canadian securities legislation, relating to, among  other  things, a contemplated Phase III drilling program (including metres to be drilled, program budget and anticipated results), identifying and contracting with a China-based EPC company to support the building and operation of a proposed heap leach pilot operation (HLPO), and to provide the Company with debt financing on favourable terms, the suitability of the Cerro Caliche Project to support a viable and profitable HLPO, and the Company’s plans to minimize shareholder dilution through debt financing and the near-term establishment of profitable mining operations. Although the Company believes that such statements are reasonable based on current circumstances, it can give no assurance that such expectations will prove to be correct. Forward‐looking statements are statements that are not historical facts; they  are  generally,  but  not  always,  identified  by  the words “expects,” “plans,” “intends,” “anticipates,” “believes,” “intends,” “estimates,” “projects,” “aims,” “potential,” “goal,” “objective,” “prospective,” and similar expressions, or that events or conditions “will,” “would,” “may,” “can,” “could” or “should” occur, or are those statements, which, by their nature, refer to future events.

The Company cautions that forward‐looking statements are based on the beliefs, estimates and opinions of the Company’s management on the date the statements are made, and they involve a number of risks and uncertainties, including the possibility that further exploration of the Cerro Caliche Project will not yield the results necessary to support the development of a HLPO or mine, the Company will not be able to reach acceptable terms on any agreements with a China‐based EPC firm, the Company will not be able to secure the financing necessary to fund its proposed Cerro Caliche HLPO, or its other exploration and  development plans, and unanticipated changes in the legal, regulatory and permitting requirements for the Company’s  exploration programs for its projects, at  present, all of  which  are  located  in  Mexico, will hinder or block the Company’s business plans.

There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on any such forward‐looking statements. The Company disclaims any intention or obligation to update or revise any forward‐looking statements, whether as a result of new information, future events or otherwise, except as required by law or the policies of the TSX Venture Exchange. Readers are urged to review the Company’s complete public formal disclosure record on SEDAR at www.sedar.com.


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Gold: $1,808.90 /OZ
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