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La Bolsa (100% Ownership)

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Location and Access

The La Bolsa property is located in northern Sonora State, Mexico approximately 29 km west of Nogales, Sonora, Mexico, and 100 km south-southwest of Tucson, Arizona, USA. Access to the property from Nogales is by highway on to a maintained unpaved road.

History

No historical records have been located describing the limited prospecting completed on La Bolsa hill. It is believed that this activity took place at approximately the same time as initial mining in the Oro Blanco District north of the Mexican border (second half of the 19thcentury). No modern day exploration had occurred at La Bolsa prior to property acquisition by the previous owner, Minefinders Corporation Ltd.

Initial field work was carried out during 1994 by Minefinders, followed by detailed geologic mapping, rock chip sampling and completion of a sample grid covering much of the current mineral resource area.

Results of the surface work were sufficient to warrant drilling. In 1995 the first round of drilling was initiated and additional drill campaigns followed in 1998, 2003, 2004, 2008, 2009 and 2010. A pre-feasibility study for the project was prepared in 2010, and project construction was slated to commence in 2012. Pan American is currently assessing its plans for the La Bolsa project.

Geology

The gold-silver mineralization at La Bolsa occurs within stockwork and disseminations that are generally located within a low-angle north-south trending structural zone. Mineralization is in the form of an oxidized blanket that is sub-parallel to topography and then dips shallowly below surface from the base of a ridge. Gold and silver enrichment at La Bolsa typically occurs in association with disseminated iron oxides and quartz – calcite and quartz – adularia veins and stockwork. Alteration of the volcaniclastic sediments, flows, and intrusive rocks consists of silicification, adularization, local argillic alteration, and iron oxides. The hydrothermal fluids that deposited the gold-silver mineralization are interpreted to have been of epithermal low-sulfidation character.

Technical report

In August 2010, Minefinders filed a Technical Report disclosing Mineral Resources at La Bolsa.

The Technical Report contemplates conventional open-pit mining methods at La Bolsa with low-cost heap-leach processing. Throughput is projected at 8,500 tonnes per day with two-stage crushing and gold and silver recovery achieved through a carbon adsorption recovery system. Assuming average recoveries of 72% for gold and 7% for silver, the total production from La Bolsa is estimated at 227,600 ounces of gold and 315,100 ounces of silver over a six year mine life. The life of mine strip ratio is estimated at 1.9 to 1 waste to ore and the operating strip ratio is estimated at 1.5 to 1 waste to ore, net of capitalized pre-stripping.

The table below outlines the Economic Highlights:

  Base case Spot case
Gold price $850 $1,200
Silver price $14 $18
Life of mine gold production (ounces) 227,600 227,600
Life of mine silver production (ounces) 315,100 315,100
Gross revenues (includes silver) $197.9 million $278.8 million
Total cash cost per ounce, silver by-product $516 $510
NPV 0% discount – pre-tax $42.3 million $123.2 million
NPV 5% discount – pre-tax $28.2 million $91.3 million
IRR – pre-tax 34% 95%

Pan American is currently assessing how best to leverage value from La Bolsa which is not considered a core asset.

Mineral reserves 1

Reserve Category Tonnes (million) Silver g/t Gold g/t
Proven 9.5 10.1 0.67
Probable 6.2 7.2 0.57
Total 15.6 9.0 0.63

Mineral resources 1, 2

Resource Category Tonnes (million) Silver g/t Gold g/t
Measured 1.4 10.7 0.90
Indicated 4.5 8.8 0.50
Inferred 13.7 7.6 0.51

1. La Bolsa's Reserves and Resources as stated by Minefinders at July 31, 2010. Measured and Indicated mineral resources are exclusive of Proven and Probable mineral reserves.

2. Mineral Resources do not have demonstrated economic viability.

For a detailed description of the La Bolsa project, please refer to Minefinders' Annual Information Form, dated February 22, 2012, which is available on SEDAR (www.SEDAR.com).
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