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Manantial Espejo

OVERVIEW

Manantial Espejo is an open pit and underground silver-gold mine in the province of Santa Cruz Argentina and is 100% owned by Pan AmericanSilver and gold mineralization is present as epithermal veins, vein breccias, sheeted and stockwork veining, and minor disseminations. Ore is mined at Manantial Espejo using a combination of conventional open pit and underground mining methods. The open pit operations use trucks and front end loaders, as well as track shovel loading equipment. The underground mining operations use either long hole, cut and fill, or shrinkage mining methods, depending on the geometry of the mineralized zones.

Ore is treated by primary crushing, semi-autogenous and ball mill grinding, agitation leaching, thickening, cyanide leaching thickening, and precipitation of silver and gold in solution in the Merrill-Crowe circuit to produce silver and gold doré from melting of the precipitate. The nominal treatment rate at design capacity is 2,000 tonnes per day, and in 2013 the mine milled 0.7 million tonnes of ore, producing 3.1 million ounces of silver and 60,800 ounces of gold.

OPERATING UPDATE

 In 2013, Manantial Espejo produced 3.1 million ounces of silver and 60,800 ounces of gold. Silver production declined 13% from 2012 levels due to lower grades and throughput rates. In contrast, gold production rose 40% on account of higher gold grades and recoveries, which were in line with the mine’s production sequencing. Throughput rates were significantly challenged during 2013 by mobile equipment availability issues in a large part due to Argentinean importation restrictions, which severely limited the supply of spare parts necessary to sustain operations.

Manantial Espejo’s cash costs during 2013 were $8.55 per ounce of silver, net of by-product credits, 42% below 2012’s levels thanks to a combination of lower operating costs and higher gold by-product credits due to higher quantities of gold produced. Operating costs declined due to lower royalty expenses, cost-cutting initiatives and local currency devaluation. These cost declines were partly offset by continued high local inflation rates.

In 2013, capital expenditures at Manantial Espejo totaled $12.0 million. This was lower than anticipated due to the deferral of pre-stripping activities in response to the downturn in precious metals prices. Capital investments were primarily spent for open pit pre-stripping and equipment acquisitions, underground mine development, improvements to the camp and upgrades to the mill.

2014 FORECAST

In 2014, we anticipate producing 3.75 to 4.05 million ounces of silver and 69,000 to 72,000 ounces of gold at Manantial Espejo at cash costs of $8.75 to $10.00 per ounce of silver, net of by-product credits.

In 2014, capital expenditures are expected to increase to $30.0 million.  The majority of capital investments ($23.8 million) will be destined to capitalized open pit pre-stripping in the Maria and Concepcion pits and to capitalized underground development. The remaining expenditures are to go towards a tailings dam expansion, equipment overhauls and replacements, and mine-site exploration.  We also expect to invest $3.0 million on 14,000 metres of exploration drilling.

Mineral Reserves and Resources

Pan American’s management estimates the mineral reserves at Manantial Espejo, as at December 31, 2013, are as follows:

Manantial Espejo Mineral Reserves 1, 2

Reserve Category Tonnes (Mt) Grams of Silver per tonne Contained Ag (Moz) Grams of Gold per tonne Contained Au (Koz)
Proven 3.0 135 13.2 2.06 200.7
Probable 1.3 140 6.0 2.17 92.4
TOTAL 4.3 137 19.2 2.09 293.1

Notes:

1. Estimated using prices of $22 per ounce of silver and $1,300 per ounce of gold.

2. Mineral Reserve estimates for Manantial Espejo were prepared under the supervision of, or were reviewed by Martin G. Wafforn, P.Eng., who is a Qualified Person as that term is defined in NI 43-101.

Pan American’s management estimates that mineral resources at Manantial Espejo, as at December 31, 2013, are as follows:

Manantial Espejo Mineral Resources 1, 2

Resource Category Tonnes (Mt) Grams of Silver per tonne Contained Ag (Moz) Grams of Gold per tonne Contained Au (Koz)
Measured 2.0 93 5.9 1.26 79.1
Indicated 3.4 90 9.9 1.16 127.7
Inferred 1.4 99 4.3 1.17 51.2

Notes:

1. These mineral resources are in addition to Manantial Espejo mineral reserves using prices of $22 per ounce of silver and $1,300 per ounce of gold.

2. Mineral resource estimates for Manantial Espejo were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., who is a Qualified Person as that term is defined in NI 43 101.

Mineral reserve estimates are based on a number of assumptions that include metallurgical, taxation and economic parameters. Increasing costs or increasing taxation could have a negative impact on the estimation of mineral reserves. There are currently no known factors that may have a material negative impact on the estimate of mineral reserves or mineral resources at Manantial Espejo.

Technical Report
HIGHLIGHTS
Name Manantial Espejo
Location Santa-Cruz, Argentina
Mine Type Open Pit/Underground
Ownership 100%
Products Silver and gold doré
Capacity 2,000 tpd
Deposit Type Epithermal veins, breccias, and stockworks
Location
ManantialEspejoMap