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Los Filos Mine

Overview

The Los Filos Mine is one of Latin America’s largest gold mines, with 2015 production of 272,900 ounces and 2016 production (nine months to September 30) of 194,000 ounces, at an All-In Sustaining Cost (AISC) of US$854/oz. The Mine currently consists of two open pit mines, Los Filos and Bermejal, an underground mine at Los Filos, and the opportunity to develop an underground mine at Bermejal as an expansion project, as shown on the following figure:

Location of Los Filos Mining Areas and Mineral Deposits


The Mine is located 230 km south of Mexico City and is accessible by paved roads and a private airstrip.

The Los Filos open pit operation began commercial production in 2008. Gold is recovered from crushed and run-of-mine ore via a conventional, low-cost heap leach and ADR (adsorption-desorption-recovery) process.

Key Production and Economic Factors

A summary of the gold production information and other key parameters of the current Los Filos Mine using the Life-of-Mine production plan based on the Proven and Probable Mineral Reserves (the “Reserves-Only” case) is as follows:

Los Filos: Summary of Life-of-Mine (LOM) Gold Production and AISC/oz

Description Units Reserves-Only
LOM Tonnage Ore Processed kt 40,709
LOM Strip Ratio waste:ore 3:1
LOM Feed Grade Processed g/t Au 1.12
LOM Au Recovery – Overall % 69
LOM Au Production koz 1,256
Production Period years 8
Au Average Annual Production koz 157
AISC per oz US$/oz 803

The Reserves-Only LOM plan has an eight-year mine life producing a total of 1.256 Moz gold at an average AISC of $803/oz. Using $1,200/oz gold price and 5% discount rate parameters, the life-of-mine production plan based on the Proven and Probable Mineral Reserves has an after-tax NPV of $334 million as shown in the table below:

Los Filos: Summary of NPVs at $1,200/oz gold price

At $1,200/oz Reserves-Only
After-tax NPV (US$M)
Discount Rate 0%
5%
10%

382
334
297

Mineral Resources and Mineral Reserves

As of December 31, 2016, the Los Filos Mine’s Measured and Indicated Mineral Resources total 422.5 Mt at 0.85 g/t containing 11.5 Moz gold and Inferred Mineral Resources of 162.7 Mt at 0.76 g/t containing 4.0 Moz gold as shown in the following table:

Los Filos: Mineral Resources1-5 by Principal Deposits and Mining Areas (Stantec, 2016)

Area Classification Tonnes
('000)
Au Grade
(g/t)
Au Oz
('000)
Bermejal Open Pit Measured 82,010 0.71 1,869
Indicated 275,505 0.80 7,062
Measured + Indicated 357,515 0.78 8,931
Inferred 156,771 0.63 3,180
Bermejal Underground Measured 0
Indicated 171 5.01 28
Measured + Indicated 171 5.01 28
Inferred 3,510 5.03 568
Los Filos Open Pit Measured 51,998 0.70 1,174
Indicated 8,226 0.62 164
Measured + Indicated 60,224 0.69 1,338
Inferred 1,436 0.44 21
Los Filos Underground Measured 1,539 8.25 408
Indicated 3,080 7.82 775
Measured + Indicated 4,618 7.97 1,183
Inferred 937 7.54 227
Total Los Filos Mine Measured 135,547 0.79 3,451
Indicated 286,982 0.87 8,028
Measured + Indicated 422,529 0.85 11,479
Inferred 162,653 0.76 3,995

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.

Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

The Proven and Probable Mineral Reserves total 40.7 Mt at 1.30 g/t containing 1.466 Moz Au as shown in the following table:

Los Filos: Mineral Reserves1-6 (Stantec, 2016)

Classification Tonnes
(kt)
Au Grade
(g/t)
Au Contained
Ounces (koz)
Ag Grade
(g/t)
Ag Contained
Ounces (koz)
Proven 23,877 0.75 575 5.37 4,120
Probable 16,831 1.65 890 10.37 5,614
Subtotal Proven + Probable 40,708 1.12 1,466 7.44 9,734

Notes:
1. Effective date is December 31, 2016.
2. Metal price assumption for gold was US$1,200/oz.
3. Underground Mineral Reserves are contained within stope designs that have a minimum horizontal continuity of 10 m, a height of 3 m, and supported by a mine plan that features variable stope mining width from 3 m to a design width depending on zone and cutoff optimization.; open pit Mineral Reserves are within pit designs and supported by a mine plan.
4. Cutoff grades vary by deposit, whether ore is ROM or crushed before leaching, and for underground ore whether development is required or not. Recoveries vary by ore type or geometallurgical domain and are 64% to 77% for crush-leach ore and from 49% to 59% for ROM ore at Los Filos Open Pit; recoveries at Bermejal Open Pit vary from 53% to 73%. A 5% silver recovery is assumed from all geometallurgical domains. All underground ore is crushed and assumed to have 80% gold recovery.
5. Rounding, as required by reporting guidelines, may result in apparent summation differences between tonnes, grade, and contained metal content. 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.
6. Tonnage and grade measurements are in metric units. Contained gold and silver ounces are reported as troy ounces.

In addition, there is a Leach Pad Reserve of 49,785 kt at 0.51 g/t, which contains 814 koz Au. The estimated recovery is 29.7% and, therefore, there are 242 koz of recoverable gold ounces included in the mine plan. The total Proven and Probable Mineral Reserves, including the recoverable ounces in the Leach Pad Reserve (Probable Mineral Reserve), is 1,707 koz gold.

Key Production Facts

Operation highlights for 2014, 2015 and the nine months ended September 30, 2016 for the Los Filos Mine are shown in the following table:

Los Filos: Operation Highlights (2014-2016)

Operating Highlights FY 2014 FY 2015 9 months ended
September 30, 2016
Tonnes of Ore Mined 23.3 Mt 18.7 Mt 8.6 Mt
Tonnes of Waste Mined 37.4 Mt 43.9 Mt 11.4 Mt
Strip Ratio (waste:ore) 1.6 2.4 1.4
Tonnes of Ore Processed 23.3 Mt 18.6 Mt 8.6 Mt
Average Grade Processed 0.67 g/t 0.76 g/t 0.83 g/t
Average Recovery Rate 49% 58% 72%
Gold Produced 259 koz 273 koz 194 koz
Cash Costs/oz(1) US$676(1) US$829(1) US$744
AISC/oz(2) US$873(1) US$1,003(1) US$854
Revenue(3) US$326M US$315M US$238M
US$317M (annualized)
Mine EBITDA(4) US$60M US$104M US$85M
US$113M (annualized)
Mine EBITDA Margin(5) 18% 33% 36%

(1) From audited Los Filos Mine carve-out financial statements.

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 presentation is based.