Our operations

Navidad Project

OVERVIEW

Navidad is a development stage silver property in the province of Chubut, Argentina. Pan American acquired the project in 2010 through the acquisition of Aquiline Resources Inc. Silver, lead, and minor amounts of copper mineralization are present as epithermal, stratiform veins and disseminations.

There are material governmental and legal factors that affect the mineral resources at Navidad and the conversion of the mineral resources to mineral reserves. Legislation in place in the Province of Chubut prohibits open pit mining and the use of cyanide in the entire province. No cyanide would be used to process the material anticipated to be mined at Navidad, but given the depth and orientation of the deposits, the economic mine plan involves open pit mining. No amendments to the law have yet been instituted and even if the law were to be changed, it is unclear whether it would be amended in a manner which would encourage further investment. Because of these governmental and legal factors, the otherwise economically viable portions of the deposit cannot be estimated as mineral reserves at this time.

Our current activities are guided by an investment plan which focusses primarily on satisfying the legal requirements necessary to maintain our property interests under the current mining law. We do, however, remain committed to Navidad and to contributing to the positive economic and social development of Chubut, should a favourable legislative framework be adopted.

OPERATING UPDATE

A preliminary economic assessment completed in late 2011 anticipated a daily production rate of 15,000 tonnes per day from open pit mines at Navidad’s eight known deposits using shovels and 150 tonne trucks. The mine schedule, based on the mineral resources, was anticipated to last 14.9 years after a pre-production and construction period, with an additional 1.6 years of re-handling ore from a low grade stockpile for plant feed after mining is completed.

The anticipated processing plant design includes a gyratory crusher, stockpile, and a 15,000 tonne per day capacity semi-autogenous/ball mill with flotation and concentrate filtration, producing both a copper-silver concentrate and a lead-silver concentrate. Metallurgical recoveries were anticipated to vary depending on the feed material type and head grade, and averaged over the life-of-mine at 78% for silver and 52% for copper for the material destined to produce the copper silver concentrates and 34% for silver and 77% for lead for the material destined to produce the lead silver concentrates.

The Navidad project remains on care and maintenance since the fourth quarter of 2013. In 2014, we spent a total of $4.4 million at Navidad on local community support activities in Chubut.

After a number of years of debate on the future of mining in Chubut, on December 5, 2014, a new law (Law XVII No. 127) came into force in Chubut which suspended all metalliferous mining activity in the Province for a period of 120 days and established that mining projects must obtain social license through a binding public consultation process prior to any mining exploitation activity beginning. We are currently assessing this new law and its potential impact on the Navidad project.

2015 FORECAST

The Navidad project budget assumes that the law in the Province of Chubut would not be amended in a manner which encourages further investment at this stage and hence, our activities at Navidad are guided by an investment plan which focuses primarily on satisfying the legal requirements necessary to maintain our property interests under the current mining law. We plan to continue with such maintenance requirements, but also anticipate additional activities relating to the public consultation process previously discussed.

Mineral Resource Estimates

Management estimates that the mineral resources at the Navidad property, as at April, 2009, are as follows:

Navidad Mineral Resouces 1, 2

Resource Category Tonnes (Mt) Grams of Silver per tonne % Lead % Copper
Measured 15.4 137 1.44 0.10
Indicated 139.8 126 0.79 0.04
Inferred 45.9 81 0.57 0.02

Notes:

1. Estimated and reported above a 50 g/t AgEQ using a silver equivalence formula of AgEQ = Ag + (Pb × 10,000/365) and a price of $12.52 per ounce of silver and $1,100 per tonne of lead. The most likely cut-off grade for these deposits is not known at this time and must be confirmed by the appropriate economic studies. The estimated metal content does not include any consideration of mining, mineral processing, or metallurgical recoveries.

2. Mineral resource estimates for Navidad were prepared by Pamela De Mark, P. Geo., as a Qualified Person as that term is defined in NI 43-101.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. The Navidad property does not currently have any mineral reserves.

There are material governmental and legal factors that affect the mineral resources at the Navidad and the conversion of the mineral resources to mineral reserves. Legislation in place in Chubut, prohibits open pit mining and the use of cyanide in the entire province. No cyanide will be used to process the material anticipated to be mined at Navidad, but given the depth and orientation of the deposits, the economic mine plan involves open pit mining. No amendments to the law have yet been instituted and even if the law were to be changed, it is unclear whether it would be amended in a manner which would encourage further investment. Because of these governmental and legal factors, the otherwise economically viable portions of the deposit cannot be estimated as mineral reserves at this time.

On October 26, 2011, the Federal Government of Argentina promulgated an “economic emergency” decree requiring all oil, gas and mining exporters to repatriate 100% of revenue receipts, in an attempt to stem ongoing capital flight. The Government of Argentina has also instituted certain other currency and import and export controls.

Technical Report
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