Carlton's Peruvian Setback: A Test of Grit in a Silver Boom

TORONTO, ON – December 01, 2025 – Junior explorer Carlton Precious Inc. (TSX-V: CPI) hit a significant regulatory roadblock at its promising Esquilache Silver project in Peru, a development that serves as a stark reminder for investors of the complex interplay between resource potential, regulatory scrutiny, and historical legacies in modern mining. The company announced that its application for a straightforward drilling permit was rejected, with Peruvian authorities demanding a more comprehensive and time-consuming environmental review. This delay puts Carlton's ambitious plans on ice, precisely as the price of silver surges to near all-time highs, creating a high-stakes scenario for the small-cap miner.

The news from the Puno region of Southern Peru is a classic case study in the challenges facing the global mining sector. While the allure of high-grade deposits is stronger than ever, the path to extraction is increasingly governed by stringent environmental and social standards. For Carlton Precious, and by extension its investors, the question is no longer just about the silver in the ground, but about navigating a demanding regulatory landscape inherited from a bygone era of mining.

Peru's Permitting Paradox

At the heart of Carlton's delay is a bureaucratic distinction with major consequences. The company had applied for a Ficha Técnica Ambiental (FTA), a simplified permit for exploration activities deemed to have minimal environmental impact. Instead, Peru’s Ministry of Mines and Energy (MINEM) has mandated an upgrade to a Declaración de Impacto Ambiental (DIA). This is not a minor paperwork adjustment; a DIA is a primary environmental certification that requires a far more detailed analysis of potential impacts and, crucially, entails deeper community consultations.

This move by MINEM is telling. It signals that even in a country keen to attract mining investment and streamline approvals—as evidenced by a December 2023 decree aimed at cutting red tape—the government is drawing a firm line when historical issues are involved. The reason cited for the upgrade was the presence of "historical workings and surface mine liabilities" at Esquilache, a legacy of operations by Hochschild Mining PLC in the mid-20th century. Local authorities have reportedly committed to rehabilitating these areas, but the work remains outstanding, placing the onus on the new operator to satisfy a higher standard of environmental due diligence.

Carlton now expects to submit the more complex DIA application in early 2026, pushing back its planned 5,000-metre drilling program indefinitely. For a junior explorer like Carlton, with a market capitalization of just over C$10 million, such delays can be financially taxing. They burn through cash reserves without advancing the project toward a bankable resource, testing the patience of the market. This situation highlights the "Peruvian Paradox": a nation rich in mineral wealth that is actively trying to be more business-friendly, yet is simultaneously (and justifiably) tightening the screws on environmental and social governance.

The Weight of a Mining Legacy

The Esquilache project is not a pristine, untouched land parcel. It is a brownfield site, covering 1,600 hectares that bear the scars of previous industrial activity. Hochschild Mining operated the site from 1950 to 1962, processing hundreds of tonnes of ore daily and reportedly extracting over a million tonnes grading an impressive 3.4 ounces per tonne (opt) of silver, along with significant zinc and lead. While this history is the very source of the project's geological appeal, it is also the root of its current regulatory predicament.

The "surface mine liabilities" mentioned by MINEM are a common issue across legacy mining districts worldwide. In the Puno region, concerns over water quality are particularly acute. Environmental groups and local community leaders have long campaigned for the cleanup of rivers like the Ramis, which flows into the culturally vital Lake Titicaca, citing contamination from decades of formal and informal mining.

By demanding a DIA, MINEM is effectively forcing Carlton to confront this legacy head-on. The required community consultations will bring company executives face-to-face with local stakeholders who are likely wary of new mining activity, given the unresolved issues of the past. This is the new reality of ESG in the resource sector: a company's social license to operate is no longer just about its own future plans, but also about its willingness and ability to address the environmental debts left by its predecessors. For investors, this adds a layer of non-technical risk that is difficult to quantify but impossible to ignore.

Unearthing Esquilache's Silver Lining

Despite the permitting setback, the underlying asset remains exceptionally compelling. The historical production data from Hochschild alone suggests a richly mineralized system. The project was last seriously examined in 2015 by another Canadian junior, Vena Resources Ltd., whose work further burnished Esquilache's potential. Vena's exploration, which included rehabilitating old mine adits, identified numerous mineralized zones and reported stellar drill intercepts, including one stretch of 22 meters grading 348 g/t silver. Surface samples yielded grades as high as 1,147 g/t silver and high percentages of copper, lead, and zinc.

Geologically, Esquilache is located in the mineralized core of a large volcanic caldera, a setting known for hosting significant polymetallic deposits. Carlton’s own geological team has already identified over two dozen primary and secondary veins that were overlooked in historical mapping. The project's proximity to Buenaventura's major Chucapaca gold-silver deposit, just 28 kilometers away, adds to the regional prospectivity.

This is the "silver lining" that keeps Carlton and its investors focused. The goal of the delayed 5,000-metre drill program is to convert this tantalizing historical data and geological promise into a modern, NI 43-101 compliant mineral resource estimate—the first major step toward proving commercial viability. The potential prize is a high-grade, multi-metal deposit in a world hungry for silver.

Navigating a Bull Market with Limited Resources

The timing of this delay is particularly poignant. The silver market is currently white-hot, with prices pushing past $57 per ounce in early December, driven by a perfect storm of factors. Industrial demand is surging, fueled by silver’s critical role in solar panels, electric vehicles, and AI-related electronics. Simultaneously, investment demand is robust amid economic uncertainty. This demand is running headfirst into a structural supply deficit, with mine production failing to keep pace for several years. Analysts at major banks are forecasting prices to remain elevated, with some projecting silver could average over US$56 per ounce in 2026.

In this context, a project like Esquilache, with its history of high-grade silver production, represents a potentially enormous prize. However, Carlton Precious is a junior explorer with the financial profile to match. The company is not yet generating revenue and operates at a loss, a common status for explorers but one that makes them vulnerable to protracted delays. The unexpected costs and extended timeline associated with the DIA process will stretch its financial resources.

This creates a critical juncture for management. They must successfully navigate Peru's complex environmental and social landscape to unlock a project whose potential value is escalating daily with the rising silver price. The challenge is to maintain investor confidence and secure the necessary capital to see the lengthy DIA process through, all while the market opportunity of a lifetime beckons. Carlton's experience at Esquilache is a microcosm of the entire junior mining sector: immense geological potential tempered by significant on-the-ground execution risk.