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Alamo Dorado

OVERVIEW

Alamo Dorado is an open pit silver-gold mine located in the Sierra Madre mountain range in Sonora, Mexico, and was acquired by Pan American in 2003 (upon completion of the acquisition of Minera Corner Bay). Silver and gold mineralization is present as structurally controlled, low sulphidation epithermal quartz veins and stockworks. Mining is a conventional truck and shovel open pit.

Ore is treated by crushing, semi-autogenous and ball mill grinding, followed by thickening, agitated cyanide leaching, leach residue filtration, direct electrowinning to produce a cathode sludge, AVR (acidify, volatilize, and re-neutralize) cyanide recovery and recirculation, and leach residue washing with AVR product solutions to produce silver and gold doré from melting of the cathode sludge. A minor amount of silver and gold is also obtained from copper concentrates in the AVR circuit. The plant’s nominal design treatment rate is 4,000 tonnes per day and in 2013 the mine milled 1.8 million tonnes of ore, producing 5.1 million ounces of silver and 17,600 ounces of gold.

OPERATING UPDATE

In 2013, Alamo Dorado’s silver production declined 5% from 2012 to 5.1 million ounces and gold production decreased 2% from 2012 to 17,600 ounces. The decline in gold and silver production was anticipated as the operation exhausts its mineral reserves and resources in its final production years at lower grades. Increased throughput rates helped to partially offset lower grades.

Alamo Dorado’s 2013 cash costs of $10.98 per ounce of silver, net of by-product credits, were 42% higher than in 2012 due to the effects of higher operating costs and lower gold by-product credits on account of less gold ounces produced and lower gold prices.

In 2013, capital expenditures at Alamo Dorado totaled $7.6 million and were destined mainly to pre-stripping work of the Phase 2 open pit expansion and investments in additional mine equipment necessary to access the Phase 2 ores that have a higher strip ratio.

2014 FORECAST

In 2014, Alamo Dorado is expected to produce 3.75 to 3.80 million ounces of silver, as well as 17,000 to 19,000 ounces of gold at cash costs of $12.50 to $13.50 per ounce of silver, net of by-product credits.

In 2014, we expect minimal total capital expenditures at Alamo of $0.5 million primarily for work on the tailings dam and laboratory equipment. We also expect to invest $0.5 million on mapping and sampling of newly acquired nearby mineral concessions. We do not expect to incur any decommissioning obligations until 2018 once the stockpile ores have been processed.

Mineral Reserves and Resources

Management estimates that the Proven and Probable mineral reserves for the Alamo Dorado mine, as at December 31, 2013, are as follows:

Alamo Dorado 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 4.4 68 9.7 0.29 41.0
Probable 0.7 88 2.0 0.61 13.8
TOTAL 5.1 71 11.7 0.33 54.8

Notes:

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

2. Mineral Reserve estimates for Alamo Dorado were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., and Martin G. Wafforn, P.Eng., as Qualified Persons as that term is defined in NI 43-101.

Management estimates that mineral resources at Alamo Dorado, as at December 31, 2013, are as follows:

Alamo Dorado 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 1.0 43 1.3 0.22 6.8
Indicated 1.2 78 3.1 0.40 15.9
Inferred 0.0 39 0.0 0.54 0.0

Notes:

1. These mineral resources are in addition to Alamo Dorado mineral reserves. Mineral resources were constrained within a pit shell using a price of $35 per ounce of silver and $1,400 per ounce of gold.

2. Mineral resource estimates for Alamo Dorado were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., and Martin G. Wafforn, P.Eng., as Qualified Persons 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 Alamo Dorado.

Technical Report
HIGHLIGHTS
Name Alamo Dorado
Location Sonora State, Mexico
Mine Type Open Pit
Ownership 100%
Products Silver and gold doré
Capacity 4,000 tpd
Deposit Type Epithermal quartz vein stockworks
Location