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Bermejal Underground Deposit

Overview

The Bermejal Underground deposit is located entirely below and separate from the current Bermejal Open Pit Mineral Reserves of the Los Filos project. The deposit would be developed and mined concurrently with the Los Filos Mine. It was acquired by Leagold in 2017 as part of the Los Filos transaction.

A Preliminary Economic Assessment (PEA) study for the Bermajal Underground project has selected a combination of sublevel caving and mechanized cut-and-fill as the mining methods, with a ramp serving as the primary mine access. Mechanized cut-and-fill mining is already in use at the Los Filos Underground mine.

Bermejal Underground: PEA Cross Section


Gold would be recovered utilizing the same, low cost heap leach and ADR (adsorption-desorption-recovery) process used by the current Los Filos Mine operation.

Corebox Model

Key Production and Economic Factors

A summary of the calculated gold production and other key parameters of the Bermejal Underground PEA, which assumes the execution of the Bermejal Underground Mine as an expansion project, is shown in the following table:

Bermejal Underground: Summary of Life-of-Mine (LOM) Gold Production and AISC/oz

Item Units Bermejal U/G PEA
LOM Tonnage Ore Processed kt 10,504
LOM Strip Ratio waste:ore n/a
LOM Feed Grade Processed g/t Au 5.15
LOM Au Recovery – Overall % 80
LOM Au Production koz 1,392
Production Period years 8
Upfront Expansion Capital US$M 47
Au Average Annual Production koz 174
AISC per oz US$/oz 439

The Bermejal Underground PEA has the potential to add 1.392 Moz of gold production over an eight-year mine life at an average All-In Sustaining Cost (AISC) of $439/oz to the Los Filos Mine production. The Bermejal Underground PEA has an upfront capital cost estimate of $47 million, primarily for the access ramp construction and equipment purchases, based on cost estimates by Stantec Consulting International LLC (“Stantec”).

At gold prices ranging from $1,200/oz to $1,300/oz, the after-tax IRR for the Bermejal Underground PEA is 93.8% to 107.2%, as the project benefits from using existing infrastructure and process facilities and therefore has fixed cost-sharing opportunities by operating concurrently with the existing Los Filos operations. Using $1,200/oz gold price and 5% discount rate parameters, the life-of-mine production plan for only the Bermejal Underground PEA has an after-tax NPV of $418 million, as shown in the following tables:

Bermejal Underground: Summary of NPVs at $1,200/oz and $1,300/oz Gold Prices

At $1,200/oz Bermejal U/G PEA
After-tax NPV (US$M)
Discount Rate 0%
5%
10%

564
418
315
Upfront Capital (US$M) 47
After-tax IRR 93.8%
At $1,300/oz Bermejal U/G PEA
After-tax NPV (US$M)
Discount Rate 0%
5%
10%

654
488
370
Upfront Capital (US$M) 47
After-tax IRR 107.2%

The Bermejal Underground PEA is preliminary in nature; it includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is also no certainty that the Preliminary Economic Assessment will be realized.

The annual gold production and AISC/oz profiles from the Los Filos Technical Report, which includes the Reserves-Only LOM plan and the potential contribution from the Bermejal Underground PEA, are shown on the following figure. The Bermejal Underground PEA shows the opportunity to increase production and extend the Los Filos Mine life while lowering AISC/oz.

Los Filos Mine and Bermejal Underground PEA: Gold Production and AISC/oz Profiles


Mineral Resources

The portion of the Bermejal deposit that was considered to be part of the Bermejal Underground for the PEA is entirely below and separate from the current Bermejal Open Pit Mineral Reserves.

The Bermejal Underground Measured and Indicated Mineral Resources total 4.7 Mt at 6.65 g/t containing 1.012 Moz gold and Inferred Mineral Resources of 4.2 Mt at 5.05 g/t containing 0.678 Moz gold as shown in the following table:

Bermejal Underground: Mineral Resource1-5 in the PEA (Stantec, 2016)

Classification Tonnes
(kt)
Au Grade
(g/t)
Au Contained
(koz)
Ag Grade
(g/t)
Ag Contained
(koz)
Measured 13 5.08 2 49.27 21
Indicated 4,722 6.65 1,009 22.30 3,385
Total Measured and Indicated 4,735 6.65 1,012 22.37 3,406
Inferred 4,173 5.05 678 26.55 3,563

Notes:
1. Effective date is December 31, 2016.
2. Mineral Resources are reported to a gold price of US$1,400/oz.
3. Mineral Resources are inclusive of Mineral Reserves.
4. Mineral Resources do not include recovery or dilution factors.
5. Tonnages are rounded to the nearest 1 kt, grades are rounded to two decimal places; rounding, as required by reporting guidelines, may result in apparent summation differences.

Exploration Potential

The Bermejal Underground deposit remains open on strike and to depth and will be the focus of drilling in 2017. Present exploration activities are concentrated on infill drilling of the Bermejal Underground deposit to convert the current Inferred Resource to an Indicated Resource and to further determine the extent of the deposit. In addition, geotechnical drilling will assist with the optimization of the mining methodology in forthcoming engineering designs.

Disclaimer

The authors of the “NI 43-101 Technical Report and Preliminary Economic Assessment, Los Filos Gold Mine, Guerrero State, Mexico” (the “Technical Report”), William A. Glover, P.Eng., Allan L. Schappert, CPG, and Dawn H. Garcia, PG, CPG of Stantec Consulting International LLC. (“Stantec”) and Alfred S. Hayden, P.Eng. of EHA Engineering Ltd., are each a “qualified person” as defined in NI 43-101 and independent of the Company, and have prepared or supervised the preparation of the technical information upon which this information is based.

Doug Reddy, P.Geo, Leagold’s Senior Vice President – Technical Services, is a Qualified Person under NI 43-101, and has reviewed and approved the technical contents of this information on behalf of Leagold.