Dear stevenp

Thank you for your question.  There are three primary reasons for acquiring lands surrounding Hay Mountain.

In the first instance, the previous coverage of Liberty Star's mineral holdings were essentially coextensive with the geophysical/biogeochemical signature of the primary exploration target (Target 1).  Later addition of the North Block extended this coverage to include a prominent signature immediately to the north of, and likely contiguous and associated with, Target 1.  The North Block also reveals indications of gold mineralization.  That increase in holdings, however, remains essentially coextensive with the combined potential mineralization signatures.

Development of every mining operation requires substantial surface area on which to locate support facilities such as equipment maintenance, offices, mineral processing (heap leaching and SX/EW and/or concentrator) and waste rock and tailings disposal.

Locating such facilities over mineralized zones effectively sterilizes the ore body located beneath, because it becomes cost prohibitive to relocate such facilities when the operation is ready to extract minerals in that location.  This is true, to varying extents, whether the future operation is surface or underground.  In the context of a surface operation the conflict is obvious.  While some underground mining methods can be employed to limit or control surface subsidence, and therefore impact to surface facilities, having to do so severely constrains the choice of methods.  If no subsidence can be tolerated, underground extraction methods become limited to more costly options such as cut and fill versus more efficient block caving techniques (block caving can result in surface impacts caused by subsidence).

Having access to such surface areas sufficient to support the mine operation throughout its life is essential to its long term viability.

Second, if Liberty Star were to delay such acquisitions until drilling reveals minable ore, the surrounding lands would immediately become prime targets for competing operators and speculators to gain control, thereby placing Hay Mountain on an island and subject to leveraged, opportunistic pricing to obtain the necessary surface access to support operations.  Exposing Hay Mountain to this additional financial burden would, at a minimum, degrade the economics of the operation, and perhaps jeopardize long term project viability entirely. 

This may raise the corollary question, "Why couldn't Liberty Star defer the acquisition expense by waiting until start of drilling is imminent and then gain control of these lands during the four-day reporting window permitted by the SEC before drilling commencement is announced?"  The answer to this question is, yes, it could be delayed, but delaying the acquisition prohibits other flexibility that is important to Liberty Star in the immediate term, as follows.

Demonstrating that a mineral prospect is attractive enough for an operating partner to commit the formidable capital required to prove-up the extent and quality of an ore body, and finalize a feasibility report required to take the project to the financial markets for detailed engineering, equipment procurement and construction (commonly referred to as "engineering, procurement and construction", or "EPC") and, ultimately operations, requires very compelling pre-drilling data.  In the case of Hay Mountain, because of its size, both areal and at depth, such drilling and pre-feasibility work, ultimately captured in the final feasibility report, is expected to cost up to $80MM to $100MM.  While, to date, Liberty Star has executed extensive geophysical (ZTEM) and biogeochemical exploration work over Target 1, this data needs additional analysis to elevate it to current 3D inversion standards (ZTEM), and integrate the available biogeochemical and geological data to create a fully developed, 3-dimensional model of the prospect.  The 3D inversions are in progress, and the integration will follow receipt of those results.

Third and finally, acquisition of the surrounding lands provides the ability to dramatically increases a potential venture partner's visibility into project data by significantly relieving the pressure to commit every such entity to a robust and strict confidentiality agreement encompassing all project data.  This is because we are now less threatened by intervenors constraining our operations by surrounding the prospect with lands controlled by others (see the island discussion above).  With this greater land position security Liberty Star has much more flexibility regarding what we can publicly release, whether by posting on our website, distributing via press release or any combination of the two.  This dramatically increases the pool of potential venture entities that may be interested in reviewing Hay Mountain in greater detail.

As a closing note, I have been made aware of related questions such as, "Why wouldn't we put the land acquisition funds toward immediate drilling?"  Part of that answer is above.  The rest of the answer lies in the relative costs.  Land acquisition including rental fees, once the applications are accepted by the State of Arizona, will be approximately $18,000.  Drilling costs start with a minimum of $100,000 drill mobilization fee before the drill rig leaves the contractor's equipment yard.  These contracts also typically include guaranteed minimums of 10,000 feet of drill hole.  While costs per foot of diamond core drill hole are greatly influenced by geological factors including, but not limited to, rock hardness and competence, and depth of hole dictated by geologic and mineralogic findings, they can run in the range of $50 to $100 per foot.  Therefore, commencement of drilling is, at a minimum, a $600,000 contractual commitment; but, could run as high at $1.1MM.  Making such a commitment prematurely, i.e. without a sound underlying funding stream, beyond the land control and access issues cited above, would place the Company at an unacceptable risk of failure for inability to discharge its contractual obligations.

In the coming days I will be publishing a President's Update.  That update will include discussions as above, but also summaries of what has been accomplished since December, 2018 (subject to confidentiality obligations) and placing the activities in the context of an overall development and execution plan for Hay Mountain.

I hope this helps answer your question.  If your need for more clarity remains unsatisfied, please await the President's Update and we can address any outstanding issues at that time.

In the meantime, thank you for your interest in and dedication to Liberty Star.

With sincerest regards,

Brett I. Gross