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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 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.

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 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 ore type and head grade, and averaged over the life-of-mine at 78% for silver and 52% for copper on the ores destined to produce the copper silver concentrates and 34% for silver and 77% for lead on the ores destined to produce the lead silver concentrates.

In 2013, Pan American spent $2.8 million on activities at Navidad, of which $0.2 million was capitalized. The project expenditures have been reduced to minimum levels since the fourth quarter of 2012 pending positive changes to the Provincial legislation that would permit the development and attract the investment necessary to advance the Project.  Meanwhile, the Company continues to focus on local community and Proincial support activities in Chubut.

2014 FORECAST

The Navidad project forecast assumes that the law in Chubut will not be amended in a manner which encourages further investment at this stage and hence, our activities at Navidad will be kept at minimum levels We remain committed to Navidad and to contributing to the positive economic and social development of Chubut in anticipation of the adoption of favourable legislative framework to allow the development of a mine.

We currently expect to spend a total of $3.9 million at Navidad in 2014 and all expenditures will be expensed.

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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