Mr. Tim Gallagher reports

MEXICAN COURTS RULE THAT CAPSTONE COPPER OWES UNPAID ROYALTIES SINCE 2019 ON THE COZAMIN MINE-PENDING AMPARO

Royalties Inc. has provided a summary and estimated value of the lawsuit of its 88-per-cent-owned subsidiary, Minera Portree de Zacatecas S.A. de C.V. (MPZ or Portree), against Capstone Copper Corp.'s Cozamin copper-silver mine. The final federal court decision on the amparo is pending and the timing of enforcement remains uncertain.

In 2002, MPZ established, registered and legally confirmed a 2-per-cent net smelter return (NSR) royalty on five mining concessions which now represents an estimated 33 per cent of the production and value of resources at the Cozamin mine. Based on Capstone's first quarter results, royalty payments at the Cozamin mine have doubled to an annualized $9-million (U.S.) with record high copper and silver prices. Accordingly, the estimated amount attributable to MPZ is $3-million (U.S.) per year. No royalties have been paid since 2019 when Capstone acquired the Portree claims, despite being confirmed by two levels of Mexican courts and supported by the Attorney General of Mexico. Subject to Capstone providing actual production records and technical geological information, based on their public disclosure, the value of the estimated claim is $50-million (U.S.), before future increases in the copper and silver prices as follows:

Unpaid royalties 2019 to 2025 based Capstone audited financial statements

Estimated accrued arrears plus 10 per cent cumulative interest

$15-million (U.S.)

Future royalties 2026 to 2030 based on current mine life

$15-million (U.S.)

Royalty value post 2030 and future resources

$20-million (U.S.)

Overview

Zacatecas, Mexico -- In 2025, MPZ announced that it won judgments twice in the Mexican courts confirming that its registered 2-per-cent NSR (net smelter return) royalty on five mining concessions forming part of the Cozamin mine, was never legally transferred and remains 100 per cent the property of MPZ. Capstone is obligated to pay the royalty from Aug. 9, 2019, the date it acquired the concessions in production.

The Cozamin mine, located 3.6 kilometres north of Zacatecas City, has been producing in Mexico since 2006. It produced 25,348 tonnes of copper and approximately 1.4 million ounces of silver in 2025, with a declared mine life extending to 2030. In April, Capstone retained Scotiabank Global Banking and Markets (GBM) to run a reported sale process for the mine, valued in media reports at approximately $400-million (U.S.).

Portree's 2-per-cent royalty -- registered at Mexico's Public Mining Registry (Registro Publico de Mineria) under registration No. 74/2002 on April 5, 2002, and confirmed by two levels of Mexican courts in 2025 -- constitutes a real encumbrance running with the land, binding on Capstone and on any future purchaser of the concessions.

A 25-year history

From exploration to a multimillion-dollar royalty claim

1990s

MPZ owned and conducted exploration work on the five mining concessions. A resource was identified at the Parroquia mine (southwestern portion of the Portree area) as early as 1994.

2002

Jan. 11: Portree assigned the six concessions to Gerardo Gonzalez Garcia and Raul Gonzalez Anaya, expressly reserving a 2-per-cent NSR royalty on all future production. The contract was notarized and registered at the Public Mining Registry under No. 74/2002. The royalty was defined as running with the land -- binding on all future owners and operators.

2004

Darren Pylot, founder of Capstone Mining acquires the neighbouring Cozamin mine from Grupo Bacis and signs an option agreement to drill the Portree 1 concession -- establishing Capstone's early and first knowledge of the Portree ground and its royalty obligations.

2006

Cozamin commences commercial production. In 2010, Capstone begins exploiting the Mala Noche footwall zone (MNFWZ), a portion of which lies within the Portree 1 concession.

2010

Portree grants Raul Gonzalez Anaya a special and irrevocable power of attorney, strictly limited to collecting and managing royalty payments already generated -- expressly not authorizing him to sell or assign the royalty itself.

2017

By 2017, 80 per cent of Cozamin's production is from the MNFWZ -- partially within the Portree 1 concession. With copper prices near $2 (U.S.)/pound, Capstone aggressively pursues acquisition of the Portree ground. In December, 2017, Gonzalez Anaya assigns three concessions to Cozamin mine.

2019

Aug. 9, 2019: Gonzalez Anaya sells the two remaining concessions (Portree I and Jimena) to the Cozamin mine for $904,000 (U.S.). On the same day, purporting to act as Portree's attorney-in-fact, he also assigns the 2-per-cent royalty to the Cozamin mine -- for a fraudulently understated consideration of 100,000 Mexican pesos (approximately $5,000 (U.S.) at the time). Portree gave no such authorization. The royalty assignment was made without the knowledge or consent of its legitimate owner. Court documents confirm that Capstone's executives -- including Darren Pylot, Jason Howe and Wendy King -- had been notified of Portree's royalty in writing in 2018 and 2019 prior to the transaction.

2019 to 2021

Following acquisition, Capstone drilled Portree aggressively, reporting "the best drilling results ever seen" in the MNFWZ. In January, 2021, Capstone announced a 10-year mine life extension to 2030, with projected annual production of 51 million pounds of copper and 1.6 million ounces of silver -- production underpinned in material part by the Portree concessions.

2022

Minera Portree files commercial case No. 411/2022 before the courts of Zacatecas against Raul Gonzalez Anaya, Gerardo Gonzalez Garcia and Capstone Gold S.A. de C.V. (C0zamin mine), seeking a declaration that the 2019 royalty assignment is legally non existent, payment of all accrued royalties and damages.

2025

June 16: first instance judgment -- won entirely by Portree. Nov. 4: Civil Chamber of the Zacatecas Superior Court of Justice confirms the judgment in full on appeal (TOCA A.C. 77/2025). Capstone files a Direct Amparo (Nov. 25, 2025) seeking federal constitutional protection.

2026

Feb. 6: The Attorney General of the Republic (Fiscalia General de la Republica) files Submission No. 81/2026 before the Second Collegiate Tribunal of the Twenty-Third Circuit, recommending that Capstone's amparo be denied and the judgments confirmed. Portree has also filed its own response requesting dismissal of the amparo. The matter is now before the federal Collegiate Tribunal.

Court judgments

Two levels of Mexican courts have ruled in Portree's favour

Both the first instance court and the Civil Chamber of the Zacatecas Superior Court of Justice have issued comprehensive judgments confirming Portree's position. The six core findings -- confirmed at both levels -- are:

Confirmed findings -- first and second instance (June and November, 2025)

• The royalty assignment contract of Aug. 9, 2019, is declared legally non existent for lack of consent from the true owner (Minera Portree).
• The 2-per-cent NSR royalty never left the patrimony of Minera Portree and continues to own 100 per cent.
• Capstone Gold (Cozamin mine) is the legitimate owner of the concessions but is obligated to pay the 2-per-cent royalty from the date it acquired each concession -- specifically, from Aug. 9, 2019, for Portree I (Titulo No. 199902).
• Raul Gonzalez Anaya lacked authority to assign the royalty -- the 2010 power of attorney permitted him only to collect payments already generated, not to sell the royalty itself.
• The matter has been referred to the public prosecutor for investigation of possible criminal liability for sale of property belonging to another (venta de cosa ajena) against Raul Gonzalez Anaya.
• Raul and Gerardo Gonzalez are condemned jointly and severally to pay royalties for the period 2011 to 2017, primarily for production from the Unificacion el Cobre concession.

"The federal prosecutor in Zacatecas has stated that the judgments of both courts are fully compliant with the principles of congruence, exhaustiveness, proper legal basis and adequate reasoning -- and has recommended that the federal tribunal deny Capstone's amparo in its entirety."

The final decision on the amparo is expected in the next few months, which will be followed by enforcement proceedings including providing evidence to support the valuation, as well as punitive damages since 2019.

Capstone Gold filed a direct amparo (case No. 23/2026) on Nov. 25, 2025, seeking to recharacterize the finding of inexistencia (non existence) as mere nulidad relativa (relative nullity) -- a distinction that Portree and the Attorney General's Office have both described as purely theoretical, since the legal consequence is identical: the royalty never left Portree's patrimony.

The royalty value continues to grow with copper and silver prices

Cozamin is one of the most productive copper-silver mines in Mexico. Based on Capstone Copper's own published production data -- 25,348 tonnes of copper and approximately 1.4 million ounces of silver in 2025, with guidance through 2030 -- Portree's 2-per-cent NSR royalty generates an estimated $9-million (U.S.) per year at current copper and silver prices (approximately $13,000 (U.S.)/tonne copper and $75 (U.S.)/ounce silver as of May, 2026). Note this is the gross royalty estimate of 100 per cent of production and Portree's share is estimated at one third.

At consensus institutional forecasts for 2030 -- copper at $13,000 (U.S.) to $15,000 (U.S.)/tonne (Goldman Sachs: $15,000/tonne by 2035) and silver at $100 (U.S.) to $130 (U.S.)/oz (J.P. Morgan, BMO) -- the annual royalty value is projected to grow to $10-million (U.S.) to $11-million (U.S.) per year, roughly 2 per cent of $500-plus-million in revenue per year.

The most directly comparable market transaction is Gold Royalty Corp.'s acquisition of a 1-per-cent NSR (net smelter return) royalty on two Cozamin concessions (the Calicanto vein) from Endeavour Silver Corp. in July, 2023, for $7.5-million (U.S.) -- at copper prices of approximately $8,500 (U.S.)/tonne. Portree's royalty is twice the percentage rate and covers five concessions rather than two, with the principal concession (Portree I, 46.9 hectares) representing an estimated 33 per cent of the MNFWZ production zone.

Revenue multiples reflect comparable royalty company transaction data. Capstone's own 2025 annual report discloses $4.9-million (U.S.) in royalties paid at Cozamin -- $3.5-million (U.S.) to Grupo Bacis (Durango) and $1.35-million (U.S.) to Gold Royalty Corp. -- with no payment disclosed to Portree. These figures confirm the scale of the NSR base from which Portree's royalty should be calculated.

Sale process notice

Any purchaser of the Cozamin mine takes the concessions subject to Portree's royalty

Portree has been informed through media reports that Capstone Copper Corp. has engaged Scotiabank GBM to conduct a sale process for the Cozamin mine, reportedly valued at approximately $400-million (U.S.). Portree has issued formal notice to Scotiabank GBM, in its capacity as financial adviser to the sale, that the Portree royalty constitutes a registered, legally confirmed encumbrance on the concessions.

The 2-per-cent NSR royalty runs with the land. It was confirmed as such by both Mexican courts and is a matter of public record at the Registro Publico de Mineria (registration No. 74/2002). No act of sale between Capstone and a purchaser can extinguish or waive this obligation without Portree's written consent and formal deregistration at the RPM. Any purchaser who acquires the Cozamin concessions will do so subject to the royalty -- together with all accumulated arrears and interest since 2019.

Portree has formally demanded from Capstone a complete accounting of NSR and payment of all accrued royalties and has notified Scotiabank GBM of its obligation to disclose the encumbrance to all prospective purchasers in any information memorandum, process letter or data room.

About Minera Portree de Zacatecas S.A. de C.V.

Minera Portree de Zacatecas is a Mexican mining company registered in Zacatecas, Mexico, and the holder of a 2-per-cent net smelter return royalty on five mining concessions forming part of the Cozamin copper-silver mine. The royalty is registered at the Registro Publico de Mineria under registration No. 74/2002, confirmed by two levels of Mexican courts and supported by the Attorney General of the Republic. Portree is represented by Luis Emilio Villanueva in this matter.

About Royalties Inc.

Royalties owns a 100-per-cent interest, subject to a 1.5-per-cent NSR owned as a separate asset, on the Bilbao silver-zinc-lead project located in the state of Zacatecas, Mexico.

Royalties owns 88 per cent of the outstanding shares of Minera Portree de Zacatecas (MPZ), which holds a court confirmed claim (twice) to a 2-per-cent net smelter royalty established in 2002 on five mining concessions called the Portree claims, a portion of which is on the Mala Noche footwall zone, the main source of production at the Cozamin mine where Capstone Copper has been mining since 2010. Capstone attempted to assign this royalty to themselves without the knowledge, consent or proper payment to MPZ, the long-standing and rightful owner since 2002.

Royalties has a 5-per-cent stake in Music Royalties Inc. (MRI), which has paid out over $15-million in 76 monthly dividends since 2019 from 31 cash-flowing catalogues with 7,000 songs with a 7.2-per-cent annual yield.

We seek Safe Harbor.