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NI 43-101 F1 Technical Report Updated Resources and Reserves and Mine Plan for the San Francisco gold Project, Sonora, Mexico dated February 29, 2016 with an effective date of December 31, 2015

Originally prepared for Newstrike Capital Inc. (“Newstrike”) on October 29, 2014, the initial technical report was re-addressed to Timmins Gold Corp. (“Timmins”). Timmins acquired 100% of the issued and outstanding shares of Newstrike and Newstrike became a wholly-owned subsidiary of Timmins on May 26, 2015.

This PEA is presenting the same data as the initial PEA except for the inclusion of a process plant acquired by Timmins in 2015, reduction of the gold price to current levels, and updates to foreign exchange rates, major commodity prices, and minor adjustments to labor burden rates to make them consistent. The inclusion of the process plant acquisition warranted an update to the financial model.

Further to Timmins acquisition of Newstrike, Timmins also acquired from a Mexican subsidiary of Goldcorp Inc., the complete process plant and select auxiliary equipment used in the operation of Goldcorp’s El Sauzal Mine in Chihuahua, Mexico. The El Sauzal Mine was operational until December 2014 when it began its closure. The Plant has been be acquired by Timmins Gold for future use at its recently acquired Ana Paula project in Guerrero, Mexico.

This technical report uses incorporates the El Sauzal Plant as a replacement for new capital equipment purchases that were used in the original Ana Paula EIA. This has resulted in a significant reduction in capital cost and thus improved economics.

The total purchase price of C$8.0 million paid by Timmins Gold to Goldcorp for the Plant consisted of the following:

C$3.0 million which was satisfied by the issuance of 10 million common shares in the capital of Timmins Gold at a price of C$0.30 per share on closing; and

The closing of the plant acquisition was subject to, among other things, the completion of a C$6.0 million private placement by Goldcorp in Timmins Gold which closed on October 19, 2015. As a result of the plant acquisition and private placement, Goldcorp holds approximately 9.9% of Timmins Gold’s issued and outstanding common shares on an undiluted basis.

The plant acquisition costs are considered as sunk costs for the purpose of this technical report since Timmins now owns 100 percent of the Plant equipment.

This technical report was written by the following “Qualified Persons” and contributing authors. The effective date of this technical report is February 2, 2016.

All data used as source material plus the text, tables, figures, and attachments of this document have been reviewed and prepared in accordance with generally accepted professional engineering and environmental practices.

This report was prepared as a National Instrument 43-101 Technical Report for Newstrike Capital Inc. (“Newstrike”) by JDS Energy & Mining Inc. (“JDS”). The quality of information, conclusions, and estimates contained herein are consistent with the level of effort involved in JDS’s services, based on: i) information available at the time of preparation, ii) data supplied by outside sources, and iii) the assumptions, conditions, and qualifications set forth in this report. This report is intended for use by Newstrike subject to the terms and conditions of its contract with JDS and relevant securities legislation. The contract permits Newstrike to file this report as a Technical Report with Canadian securities regulatory authorities pursuant to National Instrument 43-101, Standards of Disclosure for Mineral Projects. Except for the purposes legislated under provincial securities law, any other use of this report by any third party is at that party’s sole risk. The responsibility for this disclosure remains with Timmins. The user of this document should ensure that this is the most recent Technical Report for the property as it is not valid if a new Technical Report has been issued.

This report is protected by copyright vested in JDS Energy & Mining Inc. It may not be reproduced or transmitted in any form or by any means whatsoever to any person without the written permission of the copyright holder, other than in accordance with stock exchange and other regulatory authority requirements.

JDS Energy & Mining Inc. (JDS) was commissioned by Timmins Gold Corp. (Timmins) to update a preliminary economic assessment (PEA) pursuant to Canadian Securities Administrators’ National Instrument 43-101 and Form 43-101F1 standards (collectively, “NI 43-101”) of the Ana Paula Project (Ana Paula or Project) which is a gold resource development project located in Guerrero State, Mexico. The Project encloses several gold occurrences within an exploration concession covering an area of more than 600 km2.

This update to the PEA includes the use of El Sauzal equipment for the process plant at Ana Paula. The effect of this is a significant reduction in project capital. The acquisition cost, dismantling, and transportation costs spent through 2015, are now sunk costs and are so treated in this report. The remaining costs for dismantling, transportation, storage, purchase of additional equipment, engineering, and on-site construction are included in this report.

This PEA is presenting the same data as the initial PEA except for the inclusion of a process plant acquired by Timmins in 2015, reduction of the gold price to current levels, and updates to foreign exchange rates, major commodity prices, and minor adjustments to labor burden rates to make them consistent. The inclusion of the process plant acquisition warranted an update to the financial model.

It must be noted that this preliminary economic assessment is preliminary in nature and includes the use of inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.

The Ana Paula Project is located in the north central part of the State of Guerrero in southern Mexico, roughly half way between the major cities of Mexico City and the Port of Acapulco; the Project centroid is defined by UTM Q14N, WGS84, 409,027.8E and 1,997,632.6N or by 99° 51’ 34.4 west longitude and 18° 3’ 55.2” north latitude. The Project lies within the Sierra Madre mountain range where topography can range from moderate to rugged with elevations varying from 900 m to over 1,460 masl. The Balsas River, which divides the Sierra Madre Mountains into north and south ranges flows just south of the project area.

The climate in the region is warm and humid, with temperatures ranging 17 to 45 degrees Celsius and average precipitation of 835 mm per year mostly occurring between June and October during a monsoonal wet season that is influenced by hurricanes from both the Atlantic and Pacific oceans. Seismic activity in the area is a design consideration.

Timmins, acquired Newstrike in an arrangement that closed on May 26th, 2015. With the arrangement, Timmins Gold acquired ownership of all of the issued and outstanding common shares of Newstrike; Newstrike is now a wholly-owned subsidiary of Timmins Gold.

Newstrike, through its Mexican operating subsidiary Minera Aurea, S.A. de C.V., entered into an agreement to acquire a 100 percent interest in certain mineral rights and concessions from Desarrollos Mineros San Luis, S.A. de C.V. and Minera San Luis S.A. de C.V., wholly owned Mexican subsidiaries of Goldcorp Inc. for CAD 2.1Million in cash and shares. In addition, the Company granted Goldcorp a three percent net smelter royalty (NSR). Newstrike will have the right, upon completion of an NI 43-101 feasibility study, to purchase one third of the NSR.

Newstrike controls surface access to 2019.41 hectares overlying and surrounding the Ana Paula exploration target area, where 1,025.33 hectares are owned outright and approximately 994.08 hectares are under contract in 63 separate ten year access agreements. Surface rights for a significant portion of planned mining disturbance and facilities is secured through a combination of Newstrike surface ownership and pending Ejido negotiations. JDS has not completed a detailed review of surface ownership.

The authors are unaware of any factors or risks that may affect access, title, or the right or ability to develop the Project.

Mineralization in the Guerrero Gold Belt (GGB) is characterized as a skarn porphyry mineralization related to an early Tertiary intrusive event. Ana Paula is located along the northwesterly trend of the GGB where it straddles a boundary between two older tectonic sub-terranes; a volcanic-volcaniclastic arc assemblage to the west and a thick carbonate platform sequence overlain by younger marine deposits to the east.

The stratigraphy of both sub-terranes was deformed during the compressive Laramide orogeny and subsequently intruded by a ±62-66 million year calc-alkali magmatic event that is currently thought to be associated with the timing of mineralization responsible for the gold deposits and showings of the GGB.

Quartz-sulphide and quartz-carbonate-sulphide veinlets, stockworks with sulphide clots and disseminations in both intrusions and hornfels.

Narrow semi-massive sulphide contact replacement of limestone or hornfels/skarn at the intrusion contacts.

Sulphide clots, rims and masses in narrow contact replacement of breccia hosted in intrusions at or near the sedimentary contacts and/or fault contacts (detachment faults).

Associated with a sulphide constituent within breccia matrix and with sulphide replacement textures within structurally controlled breccia formed oblique to the dominant northerly trending westerly dipping stratigraphy.

The veinlets, stockwork, clots and disseminated mineralization, along with the contact replacement textures (settings 1, 2 and 3 above) are commonly observed contained within a sediment intrusive domain (SZ) that collectively make up a corridor of structurally controlled northerly trending and westerly dipping marine sediment and intrusive sill/dike stratigraphy that is host to a lower grade mineralization that has an undiluted composite average grade of 1.0 grams per tonne gold and 3.9 grams per tonne silver. The corridor includes at least two continuous horizons of mineralized intrusions with contact replacement mineralization separated by relatively barren rock that is dominantly limestone. Discontinuous mineralization may occur locally within the barren horizons.

The sediment intrusive-domain lies to the east of a predominantly intrusive domain composed of several different intrusive phases. The contact trends northerly and dips to the west at steep to moderate angles parallel to the structural stratigraphy of the sedimentary-intrusive domain, and is locally defined by a fault breccia.

Two discrete structurally controlled breccia bodies of irregular dimensions that are oblique to the trend of the sediment intrusive domain have been delineated in drill core. Both breccia bodies come to surface relatively close to each other and may share a common origin. One of these breccia bodies is described as the high grade Breccia Zone (B1) which intersects the SZ host rock, dipping at a high angle to the south.

The B1 Breccia zone includes a high grade core zone of brecciated rock (setting 4 above) that represents the intersection of at least two structural lineaments. This high-grade breccia is surrounded by an extensive and irregular mineralized halo hosted within the altered limestone and intrusion country rock belonging to the sediment-intrusion domain described previously. The orientation of the mineralized halo is dominantly controlled by the steeply dipping structural intersection (the fluid conduit) and partly controlled by stratigraphy, especially along contacts (settings 1 to 3 above).

The second breccia body is described as the “Lower Grade Breccia” (“B2”) and mineralization is hosted by the intrusive domain, partly within oxidized intrusion and partly within (auto) brecciated intrusion (item 4) (setting 1). The mineralized zone is in fault contact with the footwall sedimentary-intrusive domain that hosts the high grade breccia. The B2 breccia tends to host lower grade gold mineralization. Table 1-1 lists averages grades of composites selected for metallurgical testing within the Breccia zones.

A second mineralized zone hosted within the intrusive domain, known as Tejocote, (pronounced as “teh ho cōtti”) lies to the southwest of the main Ana Paula deposit and consists of a mineralized intrusive body of coalescing dikes and sills separated by discontinuous altered sedimentary rock horizons. An extensive low grade mineralization has been identified at the surface and in core throughout this area that is dominantly disseminated within the intrusion(s) with some contact replacement observed (settings 1 and 2 above). Exploration of the intrusive domain is still underway and insufficient information is available to calculate average grades.

Drill holes AP-05-01 through AP-12-130, comprising a total of 130 diamond core drill holes aggregating 67,942.8 m and containing 45,512 assay intervals, formed the basis of the Company’s initial 2013 resource estimate technical report. The report is available on SEDAR at www.sedar.com and on the Company's website at www.newstrikecapital.com. Drill hole collar and assay data for the first 130 drill holes included in the initial resource database are available in that report.

Drilling for the updated resource was completed on November 18, 2013 with an additional 45,844.61 m of core drilling in 100 delineation and exploration drill holes from AP-12-131 to AP-13-230, aggregating 37,158 new sample intervals collected for geochemical assay. All results from AP-05-01 through AP-14-230 form the basis of the updated resource and preliminary economic assessment that is the subject of this Report, incorporating a total of 110,099.88 m drilled in 230 diamond core drill holes and aggregating results from 82,670 downhole drill sample intervals with an average length of 1.4 m, where effectively all are assayed for gold and silver.

Since exploration began in 2010, a total of 96,045 samples have been collected from road cuts, outcrop chip and channel samples, stream and soil samples, and from drill core including blanks and standards. In addition, various samples for metallurgy, density measurements and quality assurance and quality control (“QAQC”) were collected for geochemical assay, Table 9-1. Results from the ongoing surface exploration indicate that alteration and mineralization remain open in several directions and at depth. Continuing exploration with surface mapping, ground geophysics, compilation of existing data and drilling is warranted based on results to date.

The Ana Paula project has undergone a number of metallurgical studies covering a range of process options. The majority of gold and silver values in the Ana Paula materials appear to be in close association with sulfides and as liberated particles of electrum. This allows the metal values to be concentrated by flotation or gravity and leachable by conventional methods. Testwork has included all the major refractory processing methods including roasting, autoclave, and Albion™. Conventional process methods including flotation testing and gravity concentration followed by cyanidation, whole-rock leaching, diagnostic leaching, and heap leaching, were also studied. Basic testwork defining some cyanidation parameters are included with the leach studies, and bond work indices were conducted on some of the rock types. More detailed work is recommended for the next phase of engineering.

The proposed Ana Paula flowsheet which consists of sulfide concentration and cyanide leaching was based on the results of testwork performed by ALS, Report KM4097, on a year 1-4 composite sample. This work was considered the most reliable for use as a basis in designing a processing plant and superior to whole-rock leaching based on the reagent consumption. While whole-rock leaching produced similar recovery results to the flotation/leaching of concentrates, a comparison of the operating reagent costs did show the flotation system as more economically favorable. Additional test work to confirm the reagent consumptions is recommended in the next phase of engineering to optimize the process.

The results of the composite tests showing the first four years of production seem to correlate with the previous testwork, showing similar flotation results in terms of mass pull, and leaching results reported by SGS. The flowsheet is based on leaching a rougher concentrate however additional work is needed to confirm design parameters and reagent consumptions. This work is included in the proposed next phase of engineering. The work index chosen as a basis for design was a single composite sample which gave a BWi of 19.8 kWh/tonne. This index is high and because it is based on a single sample should be considered conservative.

The Ana Paula mineral resource estimate has an effective date of August 8, 2014 and was developed using an updated mineral resource model based on 223 drill holes (within the block model limits), an updated geologic interpretation, metallurgical recovery data discussed in Section 13, updated costs provided by JDS Mining and a geotechnical study by Steffen, Roberts & Kirsten Consulting of Denver, Colorado (“SRK”), which was completed in late November, 2012 (Ross-Brown, Levy, 2012). The deposit has been modeled using an inverse distance squared operator applied to 5 m gold and silver drill hole composite lengths which respected lithology units. Model blocks are classified as measured, indicated or inferred based on kriging variance, the number of holes inside the search ellipsoid and distance from the closest hole. Tonnages are estimated using the average of the density data by lithology.

Table 1-2 is a summary of the input parameters to define the portion of the mineral inventory which falls within a resource shell and thus tabulated as the mineral resource. A summary of the mineral resource is presented in Table 1-3, tabulated at an internal cut-off of 0.46 g/t gold equivalent (AuEq). The calculation of AuEq includes the gold and silver prices and recoveries presented in Table 1-2. AuEq equals Au + 0.011 x Ag.

JDS has not developed a mineral reserve estimate for the Ana Paula Project as part of this PEA. Significant additional data collection and technical work is required to elevate the technical confidence of the project to a level consistent with mineral reserve estimation, in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council, as amended”, NI 43-101, 2011.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. It includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary economic assessment will be realized.

JDS is not aware of any previous mineral reserve estimates on the Ana Paula deposit that have been completed in accordance with an international reporting code.

The Ana Paula project will be mined by open pit methods using conventional truck and shovel production equipment. Pit optimization and mine planning was carried out on the basis to support a plant capacity of 6000 tonnes-per-day, using measured, indicated and inferred resources provided by IMC. The project life will extend over a period of 10 years, including one year of waste rock pre-stripping followed by 9-years of production operations as shown in the mine production schedule provided in Table 1-4.

All mine equipment is modelled as provided by contractors. Total material movement peaks at approximately 9.5 million tonnes per year, which requires a modest production fleet of up to 5 conventional 90-tonne class haul trucks, 1 each 12.5 m3 class hydraulic shovel for primary use and 1 each 12.5m 3 class wheel loader for backup. Drilling can be completed with a single rotary machine capable of drilling 200 mm diameter holes.

*The reader is cautioned that inferred resources included in the mine production schedule are considered too speculative geologically to have economic considerations applied to them and there is no certainty that inferred resources will ever be upgraded to a higher category.

During the mine life, two stockpiles will be required to manage the mill throughput and to smooth out peaks in the strip ratios in years 4 and 5. The first stockpile will contain approximately 2.6 million tonnes of material above a 0.72 g/t AuEq, cutoff which will be rehandled and processed throughout the mine life. The second stockpile will contain approximately 1.6 million tonnes of marginal grade for material ranging between 0.64 g/t and 0.72 g/t AuEq which is processed at the end of the mine life.

Underground mining was not considered for this PEA at the time of this study, which warrants further investigation.

Rock management facilities (RMF) will be constructed during operations in various locations surrounding the open pit. As required, material pre-stripped in year -1 will also be used for tailing management facility (TMF) embankment construction. The various RMF will be designed at later stages to be reclaimed concurrent with operations to reduce ultimate liability upon mine closure.

In pre-production 6.6 million tonnes of mine rock and 0.6 million tonnes of mill-feed will be pre-stripped. Life-of-mine (LOM), a total of 46 million tonnes of mine rock will be moved at a strip ratio of 2.6 to 1.

Several recovery methods were evaluated to process the mineralized materials at Ana Paula. Although alternative process options may be potentially viable after subsequent testwork, the most economical method of extraction for this PEA was determined to be flotation concentration followed by cyanide leaching to produce a doré on site.

The major unit operations consist of: crushing followed by closed circuit ball mill and gravity concentration. Cyclone overflow reports to flotation and flotation concentrates are reground before entering an oxidation preparation stage. Oxidation is followed by carbon-in-leach for 48 hours. Gold is collected on carbon which is separated from the pulp, stripped, and precious metals recovered by electrowinning. Leached slurry will be detoxified before reporting to the tailings impoundment

Mill throughput is designed at 6,000 tonnes per operating day. The plant is expected to achieve an average recovery to doré of 75 percent for gold and 50 percent for silver.

The plant is provided with basic utilities, air and water systems, and a fire water system. Tailings are thickened and stored in a conventional tailings management facility. Process water is recovered to a separate process water tank.

The site is currently accessible for light vehicle traffic and intermittent heavy loads via a gravel roadway from the town of Cuetzala del Progreso. During mine construction and operations, an existing gravel road north of the site would be improved to enable access for larger loads to site especially during plant construction and equipment Mobilization. This same mine access road is connected to Mexico Highway 51, a paved and improved roadway which provides mine access to the Mexico highway system and capacity for large heavy loads either west from Mexico City via Iguala, or east from the port of Acapulco. Iguala is the nearest major city, however does not have a commercial jet airport. Air service is available from Mexico City, Acapulco or Cuernavaca.

A lined tailings storage facility has been located, preliminarily sized and costed to facilitate the tailings anticipated to result from processing the 17.8 million tonnes of mineralized material to be processed. Additional volume for storm water runoff, surge, and wave action have been incorporated into the design as freeboard for the tailings storage facility. The tailings storage facility will cover an area of approximately 392,000 m2 or 39.2 hectares.

The rock management facility has been sized for approximately 46 million tonnes of mine rock based on the mine production schedule. The rock management facility has been located adjacent to the pit with impacted runoff being captured by the downstream located tailings storage facility. This enables the contact runoff water to be controlled and utilized as process water if required.

The mine support facilities and process plant will be situated roughly one km southeast of the pit area and one km northwest of the tailings storage facility. In order to avoiding steep terrain in the area a location for the primary crusher at the plant was chosen which is 85 meters vertically higher than the pit crest. This rather large elevation gain between pit crest and primary crusher will require attention to ramp design as it exits the pit.

Support and ancillary buildings include a covered, but not fully enclosed equipment maintenance shop, administration office building, mobile security trailer, fuel storage/dispensing system, truck scale, and warehouse. Certain additional facilities may be brought in by the mining contractor. The mine scenario evaluated here includes the construction of an on-site camp. Security issues and effectively expanding the region or area from which skilled labor can be drawn to this mine will be enhanced by having a camp enabling the housing of workers at the site.

Line power is available within approximately 1.5 km of the plant site. The power line planned to be tied into supplies power at 115 kV and is reported by the Federal Power Agency in Mexico (CFE) to have sufficient capacity for the estimated +/-10 megawatt anticipated loading for the site. Once delivered to a new, yet to be constructed substation proximal to the mill, the power will be stepped down to 25 kV for site-wide distribution and to 4160 Vac for the larger motor loads. A site visit by CFE is required to obtain written confirmation that power is secured and is the next steps in this area.

The average fresh water usage for the project is estimated to be 2400 gallons per minute. Water is planned to be obtained from groundwater sources through a series of well clusters. Mexico recognizes water as a national resource and regulates its use. A water concession will need to be granted by the Mexican water agency, Comisión Nacional del Agua (CNA), based on a permit application. The permit application will need to be supported by a technical study demonstrating that water availability and sufficient quantity exist in the area.

The next phase of the investigation recommended is a preliminary hydrologic study that would include verifying the proposed groundwater source locations and conducting a field program to characterize aquifer characteristics and water quality and quantity to support the proposed water supply requirements and the environmental baseline study.

As yet, no formal baseline characterization studies have been conducted for the project. Baseline studies will be required prior to submittal of environmental permit documents. No known environmental condition exists that would preclude development of the project.

During the two-year pre-production period, the initial capital costs amount to $121.7M. This includes costs for site detailed engineering, stationary mine equipment, facility construction, processing plant, tailings facility, etc. (Table 1-5).

Sustaining and closure capital cost estimates amount to $53.2M with a majority of these costs attributed to the tailings facility, capitalized stripping, and reclamation. A 20 percent contingency is applied to all capital. Details on the capital costs can be found in Section 21 of this report.

LOM operating costs amount to $425.8M or an average unit cost of $23.98/t milled. A breakdown of these costs is outlined in Table 1-6. Cost were adjust from the original PEA relative to the Mexican Peso versus US dollar exchange rate. Cost categories affected were labour, power, diesel, and ANFO costs. Labor burden was also adjusted to be consistent across all departments.

An engineering economic model was developed to estimate annual cash flows and sensitivities of the project. Pre-tax estimates of project values were prepared for comparative purposes, while after-tax estimates were developed to approximate the true investment value. It must be noted that tax estimates involve many complex variables that can only be accurately calculated during operations and, as such, the after-tax results are approximations to represent an indicative value of the after-tax cash flows of the project.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. It includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary economic assessment will be realized.

Sensitivity analyses were performed on the Base Case economics to determine which factors most affected the project performance. The analysis revealed that the project is most and equally sensitive to metal prices and head grades, followed by operating costs.

It is the conclusion of the Qualified Persons preparing this technical report that the information contained within adequately supports the positive economic results obtained for the Ana Paula project. The project contains 17.8 million tonnes of gold-bearing sulphide mineralization that can be mined by open pit methods and recovered using common processing methods consisting of gravity, flotation, and cyanide leaching of flotation concentrates.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. It includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary economic assessment will be realized.

The resource mined in the PEA base case is 97 percent Measured and Indicated and three percent Inferred.

As demonstrated by the information contained in this report, the project demonstrates potential for economic development and should proceed to the next level of evaluation; either a pre-feasibility or feasibility study stage.

Newstrike has identified anomalous gold at surface in association with limestone, hornfels, intrusive rocks and breccia beyond the current pit shape that are consistent with existing mineralization at Ana Paula and comparable with other known deposits of the GGB. Results from drilling, mapping and surface geochemistry indicate that mineralization within the Ana Paula deposit continues to remain open in several directions including at depth that merits follow up exploration and drilling.

The Ana Paula project should advance to a preliminary feasibility study (PFS) in alignment with Timmins’s desire to develop the resource. This study would encompass:

Metallurgical testwork described herein to optimize the process flowsheet and quantify operating parameters and reagent consumptions.

It is recommended that environmental baseline studies and a socio-economic program also be initiated as soon as practical. The proposed environmental characterization studies are included as part of the proposed budget. However, other responsibilities more typically associated with environmental permitting and developing sustainable community relations are not encompassed within the PFS budget as they are normally considered and executed separately.

Further action with CFE to schedule a site visit and formally secure line power should be initiated immediately.

Further hydrologic study to identify water resources and make application for their use is a priority task.

Geochemical characterization of mine rock and tailings must be completed to generate a basis for further engineering of storage methods and design.

JDS Energy & Mining Inc. (JDS) was commissioned by Timmins Gold Corp. (Timmins) to update a preliminary economic assessment (PEA) pursuant to Canadian Securities Administrators’ National Instrument 43-101 and Form 43-101F1 standards (collectively, “NI 43-101”) of the Ana Paula Project (Ana Paula or Project) which is a gold resource development project located in Guerrero State, Mexico. The Project encloses several gold occurrences within an exploration concession covering an area of more than 600 km2.

The original version of this document (PEA) was written in October 2014 for Newstrike Capital Inc. (Newstrike). Newstrike was acquired by Timmins in May of 2015 when the acquisition closed. The original PEA was readdressed to Timmins Gold in March 2015. On November 2nd, 2015, Timmins acquired the El Sauzal process plant and ancillary facilities from Gold Corp with the intention of using the plant process equipment at Ana Paula.

This update to the PEA includes the use of El Sauzal equipment for the process plant at Ana Paula. The effect of this is a significant reduction in project capital. The acquisition cost, dismantling, and transportation costs spent through 2015, are now sunk costs and are so treated in this report. The remaining costs for dismantling, transportation, storage, purchase of additional equipment, engineering, and on-site construction are included in this report.

This PEA is presenting the same data as the initial PEA except for the inclusion of a process plant acquired by Timmins in 2015, reduction of the gold price to current levels, and updates to foreign exchange rates, major commodity prices, and minor adjustments to labor burden rates to make them consistent. The inclusion of the process plant acquisition warranted an update to the financial model.

The same mineral resource, open pit optimization, and mine plan as the original PEA report are used here. Sections 3 through 16, 20, 23, 24, 27, and 28 are unchanged from the original PEA.

It must be noted that this preliminary economic assessment is preliminary in nature and includes the use of inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.

A previous technical report was prepared for the Ana Paula project pursuant to Canadian Securities Administrators’ National Instrument 43-101 and Form 43-101F1 and documents exploration work completed by Newstrike on the Ana Paula project in 2010, 2011, and 2012. The technical report was filed on SEDAR dated February 26th 2013. This subsequent technical report summarizes the results of the preliminary economic assessment study and was prepared following the guidelines of the Canadian Securities Administrators’ National Instrument 43-101 and Form 43-101F1.

All drill hole and geological and other technical information in this Report is current through June 26, 2014.

This report summarizes the work carried out by the Consultants, some of which are associated or affiliated with Newstrike. The scope of work for each company is listed below, and combined, makes up the total Project scope.

Dr. Craig Gibson, P.G. Technical Director, Prospeccion y Desarrollo Minero del Norte, ProDeMin scope of work included:

The Qualified Persons (QPs) preparing this technical report are specialists in the fields of geology, exploration, mineral resource and mineral reserve estimation and classification, geotechnical, environmental, permitting, metallurgical testing, mineral processing, processing design, capital and operating cost estimation, and mineral economics.

None of the QPs or any associates employed in the preparation of this report has any beneficial interest in Newstrike with the exception of Dr. Craig Gibson, who is subject to management or consulting contracts with Newstrike. The QPs are not insiders, associates, or affiliates of Newstrike with the exception of Dr. Gibson, who is subject to the terms of a consulting contract and an employment agreement, respectively, with Newstrike. The results of this technical report are not dependent upon any prior agreements concerning the conclusions to be reached, nor are there any undisclosed understandings concerning any future business dealings between Newstrike and the QPs. The QPs are being paid a fee for their work in accordance with normal professional consulting practice.

The following individuals, by virtue of their education, experience and professional association, are considered QPs as defined in the NI 43-101, and are members in good standing of appropriate professional institutions. The QPs are responsible for specific sections as follows:

The sources of information include data and reports supplied by Newstrike personnel as well as documents cited throughout the report and referenced in Section 28.

Unless otherwise specified or noted, the units used in this technical report are metric. Every effort has been made to clearly display the appropriate units being used throughout this technical report. Currency is in United States dollars (US$ or $).

This report includes technical information that required subsequent calculations to derive subtotals, totals and weighted averages. Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, the QPs do not consider them to be material.

The QP’s opinions contained herein are based on information provided by Newstrike and others throughout the course of the study. The QPs have taken reasonable measures to confirm information provided by others and take responsibility for the information.

The QPs used their experience to determine if the information from previous reports was suitable for inclusion in this technical report and adjusted information that required amending.

Mr. Creek, Mrs. Garcia, Mr. Matter, and Mr. Welhener have benefited from technical information provided by and discussions with, Ms. Gillian Kearvell, BSc, Vice President of Exploration for Newstrike, Mr. Thomas H. Bagan, P.E., MBA, Vice President Project Development for Newstrike and Dr. Peter Craig Gibson, Technical Director of ProDeMin. Dr. Peter Craig Gibson, a Certified Professional Geologist of the American Institute of Professional Geologists, and a Qualified Person under NI 43-101 requirements, supervises the Company’s field programs.

It was not within the scope of this Technical Report to examine in detail or to independently verify the legal status or ownership of the Ana Paula Project. However, Newstrike has made available to the authors all the relevant documents, including a legal opinion of title prepared by Newstrike’s counsel, Diaz, Bouchot and Raya of Mexico City and have no reason to believe that ownership and status are other than has been represented by Newstrike in Section 4.0 and 5.0 and their sub-sections.

The Ana Paula Project is located in the north central part of the State of Guerrero in southern Mexico, roughly half way between the major cities of Mexico City and the Port of Acapulco. The Ana Paula Project centroid is defined by UTM Q14N, WGS84, 409,027.8E and 1,997,632.6N or by 99° 51’ 34.4 west longitude and 18° 3’ 55.2 north latitude, Figure 4-1.

Figure 4-2 shows the location of the Ana Paula Project in relation to other mines, deposits and concession holdings in the Guerrero Gold Belt, and Figure 4-3 shows Newstrike’s GGB mineral rights concession holdings, including the Ana Paula Project location.

Mexico is a constituted federation of independent states that has been a party to the North American Free Trade Agreement (NAFTA) since it was signed it into law in December, 1993 and effective on January 1, 1994; as such it is governed by a tax and trade regime comparable to the USA and Canada. It operates under western-style legal and accounting systems, with a 30% flat tax rate.

The Mexican Constitution maintains a direct non-transferable ownership of the nation’s mineral wealth (considered a national resource) that is governed under established Mining Law. The use and exploitation of such national resources is provided for through clear title to a mineral rights concession (lot or concession) that is granted by the Federal Executive Branch for a fee and under prescribed conditions. Mining concessions are only granted to Mexican companies and nationals or Ejidos, (agrarian communities, communes, and indigenous communities). Foreign companies can hold mining concessions through their 100% owned Mexican-domiciled companies. A number of Government agencies have responsibility for enforcing mining laws and its applicable regulations that must be complied with; non-compliance may result in cancellation of a concession.

Mining concessions confer rights with respect to all mineral substances as listed in their Registry document (the title) provided the concessions are kept in good standing. The main obligations to maintain title to a concession in good standing are performance of work expenditures, payment of mining fees and compliance with environmental laws. Mineral rights fees are paid bi-annually in January and July, and annual proof of exploration work expenditures is done via a work report filed by the end of May of the following year (assessment report or comprobacion de obras). The amount of the mineral rights fees and the amount of expenditures required varies each year. It is calculated based on a per hectare rate that typically increases annually in line with annual inflation rates. The new rates are published each year in advance in the Official Gazette of the Mexican Federation (Diario Oficial).

The application process to acquire mineral rights is established under the Mining Law. Title is granted following a due diligence investigation of a mineral rights application as filed by the qualified party. Mineral rights fees and assessment works are required as of the date a concession title is issued. Following changes to the Mining Law in 2006, there is no longer any difference in Mexico between an exploration concession and a mining concession. The term of a mineral rights concession is 50 years, with the term commencing on the date recorded by the Public Registry of Mining, which is the date title is granted. A second 50-year term can be granted if the applicant has abided by all appropriate regulations, and makes the application within five years prior to the expiration date of the original title. Title to the Ana Paula project concessions is owned by Minera Aurea, S.A. de C.V, the 100 percent owned Mexican subsidiary of the Company, with underlying royalties as described in the section 4.2.1 of this report.

The Mexican Senate approved Tax Reform changes in Mexico that became effective January 1, 2014 affect operating mining companies in Mexico. The changes include: the corporate income tax remaining at 30 percent; a new mining royalty fee of 7.5 percent on income before tax, depreciation and interest; an extraordinary governmental fee on precious metals, including gold and silver, of 0.5 percent of gross revenues; and, changes affecting the timing of various expense deduction for tax purposes. This implies an effective combined tax and royalty rate of 35.25 percent depending on how deductions will be applied. The new rates put Mexico in line with the primary mineral producing nations of the world. Should the tax reform changes remain in place as is; the Property will be subjected to the new tax regime.

Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mineral properties. Newstrike has investigated title to all of its mineral properties and maintains them in accordance with Mexican mining law, which provides for the rights to carry out the works and development required of and for mining and related activities.

On February 11, 2010, Newstrike, through its Mexican operating subsidiary Minera Aurea, S.A. de C.V., entered into an agreement to acquire a 100 percent interest in certain mineral rights and concessions from Desarrollos Mineros San Luis, S.A. de C.V. and Minera San Luis S.A. de C.V., wholly owned Mexican subsidiaries of Goldcorp Inc. The TSX Venture Exchange approved the transaction on April 28, 2010 and a definitive agreement for the transfer of assets including mineral titles was signed May 11, 2010. The final documentation was submitted for registration in Mexico City on June 24, 2010. As consideration for the acquisition, Newstrike paid to Goldcorp CA$1.5 million in cash and 1,412,762 common shares of Newstrike having an aggregate value of CA$600,000 calculated at a deemed price of $0.4247, being the volume weighted average trading price of common shares of Newstrike on the TSX Venture Exchange for the 20 consecutive trading days ending on the trading date prior to the issue date. In addition, the Company granted Goldcorp a three percent net smelter royalty (NSR) from the proceeds from the sale of any ores, concentrates, metals or any other material of commercial value produced by and from the Mining Concessions remaining after deducting costs. Newstrike will have the right, upon completion of a feasibility study as defined by NI 43-101, to purchase one third of the NSR for a consideration of US$2.00 per ounce of gold classified as proven and probable reserves and measured and indicated resources in the feasibility study to a maximum of US$6 million.

The asset acquired by Newstrike consists of the mineral rights to two contiguous and two discrete lots (or claims) including the Tembo, Tembo Dos, Tembo Tres and Apaxtla 3 mineral concessions accruing 7,622.38 Ha in total Fig. 4-4. The area highlighted in red in Figure 4-2 and yellow in Figure 4-3 locates the boundaries of the 4,238.00 hectare Ana Paula Project (also referred to as the Project or Ana Paula) that includes the contiguous Tembo and Apaxtla 3 mineral concessions, (Figures 4-3, 4-4). The non-contiguous Tembo Dos and Tembo Tres claims, shown in Figure 4-4, form discrete mineral claims that lie outside the boundaries of the Ana Paula Project. All concessions acquired from Goldcorp are internal to the surrounding 59,587.62 hectare Aurea Norte Property, also owned by Newstrike, (Figure 4-2). In conformance with the assignment of rights agreement between Goldcorp and Newstrike, mineral rights were transferred and registered to Minera Aurea, S.A. de C.V.

Mexican Mining Law requires certain mineral rights payments, paid each January and July, and an annual minimum exploration work obligation (assessment work), is filed each May for the preceding year. The required amounts are subject to modification as annual fee schedules are released for publication by the Mines Office. The 2014 first term mineral rights payment of about CAD$58,478 was completed January 31st, 2014, a second payment was completed July 31st, 2014. The required annual assessment report (Comprobante de Obras) was filed on May 30, 2014, Table 4-1 and Figure 4-2.

The Mining Department in Mexico issued new Regulations, by Presidential decree, regarding mining concessions effective from January 1, 2006, whereby all the Exploration and Exploitation mining claims that existed in good standing under the old system were automatically transformed to a unique type of Mining Concession valid for 50 years, beginning from the date of their registration in the Mining Public Registry.

As a result of this decree, the expiry dates of the mining concessions acquired from Goldcorp, including those concessions comprising the Ana Paula Project that were initially titled as exploration concessions in 2002, 2003, and 2005 were automatically extended to conform with the new decree and will now expire in 2052, 2053 and 2055 respectively. See Table 4-1 for the expiry date for all mineral concessions. Under the new decree, all claims in good standing are renewable for an additional 50 year term.

All acquired mineral rights are internal to Newstrike’ existing mineral rights (blue, map inset). The Ana Paula Project (solid red, map inset) includes the Apaxtla 3 and Tembo concessions. 10 km grid spacing; brown lines are roads; yellow dot is town of Cuetzala Del Progreso, site of Newstrike field office and warehouses.

Mining concession licenses do not automatically grant surface access rights, which are treated separately under Mexican law. Permission for surface access must be negotiated with the relevant communities and individuals who hold surface titles to the areas affected by the mining concessions. These negotiations typically provide for the purchase or lease of the surface rights. Surface rights in Mexico are held as individually titled parcels or communally owned lands (Ejidos) that overlie the mineral rights concessions that are granted separately by the Federal Government. These are separate legal estates where individually titled parcels are governed under Mexican property laws. Ejido surface rights are governed under Mexico’s Agrarian Laws while Mineral Rights are administered under established Mining Laws that have precedence over Agrarian laws.

The Company recognizes surface access as a potential risk to maintaining unencumbered entry to their mineral exploration properties and cannot guarantee to have continual access. As part of the Company’s policy of good corporate citizenship in the communities in which it operates and with the objective of Project sustainability, the Company seeks to reduce potential risk to exploration through long term or permanent surface access agreements with affected surface owners prior to initiation of those activities.

Surface ownership of the Ana Paula Project area is controlled by individuals belonging to one certified and parceled Ejido with no common grounds, and to other individually titled small parcel owners. On October 7, 2010 the Company entered into surface access agreements with the local Ejido and with certain individual parcel owners. These transferable contracts provide unrestricted surface access for exploration to all private and Ejido lands for a period of ten years. Additional agreements, either through long term lease or through direct purchase of surface title, will be required as certain areas are advanced from exploration to development.

On January 17th, 2011 the Company announced the purchase from Goldcorp of surface title to certain land parcels within the Ana Paula Project. Final purchase of 89.48 contiguous hectares was completed on February 15th, 2011 by issuance of 83,200 common shares of the Company in full settlement of this acquisition valued at $75,675.

On February 3, 2012 the Company announced it had entered into a purchase option agreement with a private individual for certain privately held land parcels. The Company will acquire 100 percent ownership in approximately 935.85 hectares by making staged annual payments. This agreement is pending final registration with the Mexican Government once the terms of the contract are completed.

As of June 26, 2014 Newstrike controls surface access to 2019.41 hectares overlying and surrounding the Ana Paula exploration target area, where 1,025.33 hectares are owned outright and approximately 994.08 hectares are under contract in 63 separate ten year access agreements.

All permissions and applications required for the exploration process are being performed in accordance with the applicable Mexican Official Laws and Standards (Normas Oficiales Mexicanas). According to Mexican Federal Law for the Protection of the Environment, existing environmental conditions caused by past operations are not liabilities for the Ana Paula Project or its present owners. Newstrike’s Ana Paula Project does not fall within any protected area or special jurisdiction and there are no known existing environmental liabilities located on the Project.

Until exploration activities have progressed further, the permits required for exploration activities include a letter of initiation of activities received and sealed by the government authority. However, if the Project advances to the development stage the Company will require several Federal and State and Municipal permits. The required permits and their progress status at Ana Paula are shown in Table 4-2.

The Ana Paula Project is located in the Sierra Madre mountain range of southern Mexico where topography can range from moderate to rugged with elevations varying from 900 to over 1,460 masl. The Company’s exploration drilling activities are conducted primarily between 900 to 1,200 m elevation. The Project lies north of the Balsas River, which divides the Sierra Madre Mountains into north and south ranges.

The climate in the region is classified as warm and humid, with an average temperature of 28 degrees Celsius (range of 17 to 45 degrees Celsius) and average precipitation of 835 mm per year. Rainfall occurs from June through October during a monsoonal tropical wet season that includes the influence of hurricanes from both the Atlantic and Pacific oceans. Winters are dry with occasional light rains in February. Guerrero State is in a seismically active part of Mexico.

Thorny plants and cacti dominate the vegetation on the Project at low elevations, giving way uphill to a patchy oak forest above 1400 m elevation. Vegetation is barren and desert-like during the dry winter months, with lush tropical growth during the wet summer season. Surface land use in the immediate area of exploration interest within the Ana Paula Project is devoted to cattle grazing and limited agriculture but is primarily non-arable and is uninhabited.

The town of Iguala, with a population of about 200,000 is a three hour drive from Mexico City and about four hours from the port City of Acapulco, Figure 5.1. The Ana Paula Project concessions are accessible from Iguala via paved highways and good quality all season unpaved roads. Driving time from Iguala is about 1.25 hours to the Ana Paula Project headquarters located at Cuetzala del Progreso. The Company maintains offices, residences, and storage facilities in Cuetzala del Progreso. Access to the Project drill sites is via a series of secondary unpaved roads, built and maintained by the Company and many are passable by two-wheel drive vehicles year round. Four wheel drive vehicles are required on drill access roads during rainy periods. All exploration and potential mining activities are carried out year round. Newstrike has operated the Ana Paula project without interruption since the Project was acquired in June of 2010.

The area offers an established infrastructure with a good road network, and an available unskilled and skilled work force. The nearby Balsas River is a source of hydroelectric power and 115Kv high tension lines transect the Ana Paula Project site. All major supplies and services are available from the cities of Iguala (1.25 hour by road), Cuernavaca (2.5 hours by road), and Chilpancingo, the State capital which is a 3.0 hour drive from the Project, Figure 5-1.

Basic supplies are available from the towns of Nuevo Balsas and Cuetzala del Progreso, among other small town suppliers. The nearest available international airport is in Cuernavaca with a landing strip suitable for large aircraft (a 45 by 2,772 meter airstrip), with major international airports located at Acapulco and Mexico City. The Mexico City Airport is a four to five hour drive depending on traffic.

A small craft gravel airstrip is located in nearby Apetlanca, 20 minutes from Cuetzala del Progreso. Iguala has a paved airstrip suitable for small aircraft (1,685 m in length). The Project lies within the Balsas River catchment basin and water supply for drilling is uninterrupted year round. Studies to evaluate infrastructure will be required as the Project advances.

Newstrike employs several semi-technical and non-technical residents of Cuetzala del Progreso where the Project headquarters and field offices are located. Skilled labor, and heavy equipment is available in Iguala. Several geologists are sourced from the nearby town of Taxco el Viejo where the Universidad Autónoma de Guerrero maintains a satellite university within 15 minutes of Iguala devoted to the earth sciences including degrees in geology. The economy has been dominated by small scale agriculture and agriculture related services. The local economy is improving as mining projects including Rey de Plata, Campo Morado-G9, Morelos, and Los Filos become the principal regional employers.

The world class Guerrero Gold Belt was previously mined for gold and silver since pre-colonial times. Today, the trend includes producing gold mines, several known deposits in various stages of development and exploration, and numerous early stage exploration prospects. Since modern exploration began 20 years ago on the heels of changes to Mexican foreign ownership and mining laws, and signing of the North American Free Trade Act, the trend has evolved into one of Mexico’s most prolific gold producing belts. The Ana Paula Project was acquired from Goldcorp in June, 2010, Goldcorp operates the Los Filos Mine in the region, one of Mexico’s largest gold producing mines after Peñasquito in Zacatecas State. Exploration work completed by Goldcorp at Ana Paula between 2005 and 2009 outlined a one by two km exploration target (target) of coincident geophysical anomalies and surface gold geochemistry that underlies the Project.

In 2005 Goldcorp drilled 3,687 m of diamond core in eleven holes on the northeast portion of the target, intersecting gold and sulphide mineralization hosted in sediments and intrusions in a setting that is similar to other deposits and showings of the GGB. This exploration target is the focus of Newstrike’s exploration and drill programs and the site of the Company’s 2013 resource estimate.

The Morelos Federal Mineral Reserve (the Reserve) was formed during a program of nationalization of Mexico’s mineral wealth during the 1970´s to early 1980´s. The Reserve was known for its historic small mining operations for replacement bodies with gold and fissure filling vein silver. No historic production records are available to the authors for these small-scale operations. The boundaries of the original Reserve and a geology map are provided in Figure 6.1.

In 1998 the Reserve was divided into the Morelos (then called Morelos Norte) and Morelos Sur properties and privatized through national lottery, each subject to a 3% net smelter return royalty payable to the Mexican geological survey, (Kearvell, 2009). Exploration and work activity on and around the Ana Paula Project is described below.

1950 - 1970’s - Several small mines operated in the GGB including gold mining operations at Ana Paula (the Guadalupana Mine).

1977 - 1980’s - The Consejo de Recursos Minerales (today known as the Mexican Geological Survey or SGM) carried out exploration of the GGB primarily outside the Project, including regional and detailed mapping, airborne and ground geophysics, geochemical sampling programs, and some drilling. In 1979 SGM built an access road to the existing Guadalupana gold mine on the Project and conducted mapping, sampling and trenching.

1980 - 1995 - In the 1980's, government surveys include regional and detailed mapping, airborne and ground geophysical surveys and compilation of a database preserving historical data on and outside of the Project boundaries. Grupo Peñoles S.A. acquired claims in the historic Bermejal area, located about thirty kilometers southeast of Ana Paula, and formed a joint venture (JV) with Newmont Corporation (the “Penmont JV”).

In 1987 Minera Nukay S.A. De C.V. (Nukay) acquired the operating Nukay Mine, located immediately north of Bermejal, producing about 100 tons per day (tpd) from underground mine workings.

Nukay was taken over by Miranda Mining Corp. (Miranda) in 1993 and discovery of higher grade gold skarn mineralization prompted opening of the Nukay open pit. Following signing the NAFTA in December, 1992 (effective January 1, 1994) and changes to foreign ownership and mining laws, foreign investment dollars were sought to finance the new pit operation to development. A JV was finalized with Teck Resources Ltd that year (Miranda-Teck JV). In 1993 the Miranda-Teck JV developed the Nukay open pit mine and finalized acquisition of the surrounding claims leading to discovery of the Aguita, Filos-Pedregal, Creston Rojo, Mag Ridge and La Subida gold prospects. The Nukay Mine expanded to 400 tpd.

The Penmont JV announced the discovery of the Bermejal gold deposit, completing prefeasibility in 1994. The Miranda-Teck JV completes an evaluation of the federally owned Morelos Mineral Reserve, which was administered by the CRM prior to privatization.

1995 - 1998 - Miranda collected 726 regional stream sediment samples west of the Morelos Mineral Reserve, including samples from the Project area, and recognizing the gold potential of the historic Guadalupana Mine and San Jerónimo areas they stake the Tembo and Apaxtla 3 mineral concessions that today forms the Ana Paula Project.

1999 - 2001- The SGM collected 160 stream sediment samples across the I.N.E.G.I. 1: 50,000 scale Apaxtla Del Castregon Map sheet that includes the Ana Paula Project. In 1998, the Morelos Mineral Reserve was auctioned and the Miranda-Teck JV won the Morelos North Concession, resulting in discovery of the Limon, C.M.L, Fundición and Amarilla (today called Los Guajes) showings from 1998 to 2000, located southeast of the Project.

2002 - 2005 - In 2002, Wheaton River Minerals Inc (Wheaton) purchased all assets of Desarrollos Mineros San Luis, S.A. de C.V. and Minera San Luis S.A. De C.V. (collectively Luismin) for US$75M, and then purchased 100% of Miranda for US$38.6M in 2003, thereby acquiring a 100% interest in the Ana Paula Project as part of the assets acquired from Miranda. Goldcorp’s acquisition of Wheaton in 2005 included acquisition of Luismin and the Ana Paula Project.

In 2005 former members from the Miranda-Teck JV form Aurea Mining Inc. (today Newstrike), and stake or acquire 59,587.62 contiguous hectares off the western boundary of the former Morelos Mineral Reserve that became the Aurea Norte Property, which surrounds the existing Ana Paula Project mineral concessions, Figure 4.2. Luismin concurrently stakes two non-contiguous claims (Tembo Dos, Tembo Tres) increasing their land position held internal to the Aurea Norte Property to 7,622 hectares.

Aurea Mining describes the northwesterly trend of intrusions that extend across their Property and the internal Ana Paula claims as being associated with magnetic anomalies related to an important trend of orogenic gold mineralization that they informally name the Guerrero Gold Belt (or GGB). Initial mapping and sampling was completed during this period.

The Figure 6-1 map shows the distribution of some of the principal showings and deposits throughout the former Morelos Federal Mineral Reserve and their proximity with the trend of underlying intrusions. These intrusions are associated with a series of magnetic anomalies that together define the northwesterly trend of the GGB (dashed lines) (Kearvell, 2009).

Goldcorp conducted exploration on four mineral concessions (Tembo, Tembo Dos, Tembo Tres, Apaxtla 3) between 2005 and 2009. Work programs included regional and detailed geologic mapping (1:1000, 1:5000, and 1:10000 scale), road building, stream sediment sampling, trench and road cut sampling, age dating of the intrusion, an airborne multispectral and magnetic survey, a ground pole-dipole induced polarization survey, PIMA alteration mapping, structural interpretation, petrologic and microprobe studies. The details and results of these work programs are described in the previous Ana Paula Technical Report by Lunceford (2010).

Goldcorp’s work outlined a one by two km exploration target defined by anomalous outcrop gold geochemistry (>0.2 to 49.9 grams per tonne gold) returned from grid and road cut samples with coincident underlying geophysical anomalies, as shown in Figure 6.2. Goldcorp drill hole locations are in blue.

These anomalies became the focus of Goldcorp’s exploration program and in 2005 Goldcorp completed 3,687 m of diamond core drilling in eleven holes varying from 184.25 m to 520.25 m in depth; the drill collar locations are shown in Table 6-1.

All drill holes intercepted frequently tightly folded, thick, sedimentary sequences invaded by intrusive sills and sill-like bodies. Significant intervals of weighted averages greater than 1.0 gram per tonne gold over downhole intervals of 5.0 m or greater (> 1.0 g/t Au and >5.0 m) are summarized in Table 6-2 below.

These same co-incident anomalies became the focus of Newstrike’s exploration activities upon acquisition of the Project from Goldcorp in 2010.

Southern Mexico is underlain by a basement stratigraphy that includes the greenschist facies Early Jurassic Tierra Caliente Metamorphic Complex. This mega-terrane includes two major sub-terranes in the Project area, the Mixteca Terrane comprising the Morelos-Guerrero Platform sediments as a subterrane (Platform), and the Guerrero-Composite Terrane, which includes submarine arc rocks of the Teloloapan Sub-terrane (Teloloapan). The eastern boundary of the Teloloapan sub-terrane is in contact with the western Platform Sub-terrane, as shown in Figure 7-1 and Figure 7-2. The Teloloapan and Platform stratigraphy form the dominant outcrop exposures underlying the Company’s mineral concessions.

A discussion of the nature of the contact between the two sub-terranes is not within the scope of this Report; however, both are thought to have been highly deformed during Laramide Compressional Orogeny (Laramide), and share a common basement in the Guerrero terrane based on 206/204Pb versus 87/86Sr isotopic studies (Joachin-Ruiz, 2008). A series of intrusions and sub-volcanic rocks were emplaced during or following this orogenic event along a northwesterly trend. The intrusions are interpreted to share a common provenance in a deep seated plutonic body derived from a mixing of two possible magma sources: a depleted mantle and an enriched crust (Joachin-Ruiz, 2008). A trace element study completed in 2003 proposed the pluton formed within a post collision tectonic framework of a volcanic arc related to the interaction between the Farallon and North America plates (Gonzalez-Partida et al, 2003, 2004).

A simplified geology map that shows the Mixteca, Teloloapan, Arcelia, and Zihuatanejo Sub-Terranes. The red square shows the location of the GGB within the Tectono-Stratigraphic Terranes of southwestern Mexico, (after Campa and Ramirez, 1979; Ortega et al., 1992; Talavera-Mendoza et al., 1995; Corona-Chávez and Israde-Alcántara, 1999; Mendoza and Suastegui, 2000; Centeno-García et al., 2003.

Mixteca Sub-Terrane and Guerrero Composite Terrane (Includes the Teloloapan, Arcelia, and Zihuatanejo Terranes), (Centeno-García E et al. 2008).

Ana Paula lies along the northwestern extension of the GGB and straddles the proposed tectonic boundary between the Teloloapan and Morelos Guerrero platform sub-terranes, as shown in Figure 7-3. The following discussion of regional geology is reliant on Werre-Keeman et al., 1999; Valencia-Gomez, et al., 2001 and 2008; Levresse et al., 2004; Centeno-García, E. et al., 2008; and Joachin Ruiz, 2008.

The regional geology includes stratigraphy belonging to the two proposed tectonic sub-terranes. The stratigraphy of the Teloloapan sub-terrane includes a volcanic-volcaniclastic arc assemblage that overlies a basement schist of the Guerrero composite terrane, both of Upper Jurassic to Lower Cretaceous age. This assemblage is in turn overlain by an undifferentiated limestone, shale, and sandstone sedimentary sequence of Cretaceous age that, on the scale of the Project, forms a North-South trending corridor separating in apparent fault contact the Morelos Guerrero Platform sediments on the east from the Teloloapan volcanic-volcaniclastic belt on the west. The volcanic sequence associated with the Teloloapan sub-terrane is observed to outcrop immediately outside the western boundary of the Ana Paula Project. The stratigraphy attributed to the Morelos Guerrero platform includes a thick carbonate sequence of thick to thin bedded limestone and dolomite overlain by younger thinly bedded flysch-like deposits. Outcrops of this stratigraphic assemblage are observed outside the boundaries of the Ana Paula Project, underlying the eastern portion of the surrounding Aurea Norte Property.

The stratigraphy of both sub-terranes was intruded by at least two intrusive events. The earliest is a ±62-66 million years (Ma) calc-alkali intrusive complex that is related to the Laramide Orogeny and the mineralizing event recognized as the Guerrero Gold Belt. These intrusive bodies are observed to outcrop for at least 55 km through the district on a northwesterly trend. Zirconium 206Pb/238U age dating of the intrusions at Ana Paula show they average 66.0 to 66.8Ma ± 1.8Ma in age, placing them within the same intrusive event as the Filos, Filos Deep and Morelos projects, Valencia-Gomez, et al., 2001 and 2008.

The second intrusive event are ±30Ma calc alkali to alkali volcanic rocks related to the onset of continental volcanism that may be associated with overprinting of an epithermal style mineralization observed within the Project. Quaternary volcanic units and lacustrine sediments outcrop regionally as local eroded remnants that overlie all older stratigraphy.

Modified from 1:250,000 scale Cartas Geológico Minero sheets E14-4; E7-10; E14-5 and E14-8; Mexican Geological Service (SGM), 2000.

The geologic units underlying the Ana Paula project are primarily sedimentary rocks composed of an interbedded limestone and shale unit and a carbonaceous limestone unit that have been intruded by intermediate sills, dikes and stocks, as shown in Figure 7-4. A large body of intrusive rocks underlies the Ana Paula deposit as currently defined in quadrants A2, B1, and B2 in Figure 7-4. Two principal geological domains within this body have been recognized, a sedimentary-intrusive domain located in the eastern half of the exploration area and an intrusive dominant domain located in the western half of the exploration area. The contact between these domains is locally a fault. The Ana Paula deposit is hosted mostly in the sedimentary-intrusive domain.

In addition to the principal sediment and intrusive lithologies, several different breccia units important to gold mineralization are developed in local stratigraphy and recognized in drill core and outcrop. The following discussion is partially based on summary information provided by Newstrike and discussions with Newstrike personnel (Kearvell, 2010 to 2013, Gibson, 2010 to 2013).

Geologic mapping by Newstrike completed during 2010 to 2013 has shown that the sedimentary rocks underlying the Ana Paula deposit are composed dominantly of carbonaceous limestone within a more regionally extensive unit of interbedded limestone, shale and sandstone. These sedimentary rocks generally strike northerly and dip westerly and are distinct from the Morelos platform sediments, which lie off the eastern edge of the Project boundary, and from the volcaniclastic sediments of the Teloloapan Sub-terrane which lie west.

Inter-bedded shale and limestone surrounds the deposit area. This unit is characterized by light brown weathering, platy outcrops, with distinct gray and brown limestone beds ranging from a few centimetres to as much as 25 centimetres thick. Sandstone layers may be present in this unit, Figure 7-5.

Massive to thin bedded, fine to medium laminated carbonaceous limestone is present in the area of the main Ana Paula deposit where it is the dominant sedimentary lithology. In drill core the unit locally presents a phyllitic to schistose deformation that varies from strongly carbonaceous to locally graphitic. This unit is known to include local pockets of breccia, stockwork or contact replacement mineralization but is generally not mineralized, Figure 7-6.

A package of differentiated intrusive rocks that was emplaced over a period of time in several different intrusive phases underlies much of the Ana Paula deposit area. As described previously, the distribution of these intrusions has been sub-divided into two domains, marked locally at surface by a northerly trending fault that is approximately parallel to the structural grain defined by the sedimentary rocks and intrusions. The footwall sediment-intrusive domain lies to the east of the fault, and a hangingwall intrusive domain lies to the west, Figure 7-4. The range of observed intrusive textures suggest emplacement into a subvolcanic or, possibly locally, an extrusive environment. The transitional intrusive-extrusive environment is further supported by alteration paragenesis indicating epithermal conditions as observed in petrographic studies of drill core and in outcrop and described in Section 7.3.7.

The intrusions within the sediment-intrusive domain occur primarily as a series of sill-like bodies or dikes emplaced approximately parallel to and within the westerly dipping northerly strike of the sedimentary rocks described in section 7.3.1. The intrusions range from approximately 5-10 m to as much as 100 m in thickness based on drill intercepts. Dikes that cut bedding at a high angle are uncommon. Together the sediments and intrusions form a linear outcrop pattern on surface that trends northerly in a 1.5 by 0.7 km structural and stratigraphically controlled corridor that corresponds to the sediment-intrusive dominant mineralized domain described in Section 7.3.5.

Several intrusive phases are recognized with compositions that range from intermediate to felsic where granodiorite and monzonite predominate. Observation made during mapping and drill core logging includes varying equigranular to porphyritic textures where coarse to fine grained porphyritic textures predominate. The main intrusive phase is plagioclase-biotite±quartz porphyry where plagioclase phenocrysts are commonly large, as much as 5-7 mm in the largest dimension and make up 15 to 25 percent of the rock. Biotite phenocrysts are generally from 1-3 mm in largest dimension and make up two percent to as much as five percent of the rock. In general, a wide range of grain sizes and phenocryst percentages is observed and local alignment of phenocrysts has been noted. The intrusive rock when fresh appears dark in color with subdued porphyritic texture, and contains stable biotite within a recrystallized or annealed quartz and feldspar matrix.

This unit is described as containing locally small amounts (< 1%) of partly resorbed quartz within a fine grained groundmass.

In 2005 a petrographic study was commissioned by Goldcorp on a suite of igneous rocks located within the Apaxtla 3 concession. The igneous suite (11 samples) was reported to consist mainly of aphanitic rocks with porphyritic textures and was classified as dacite porphyry, granodiorite, and porphyritic basaltic trachyandesite (Mauler and Thompson, 2005). A follow-up study was completed in 2008 on 14 samples that described a suite of quartz-plagioclase porphyry, plagioclase porphyry and feldspar porphyry (Thompson, 2008).

Intrusive contacts between the different fine and coarse phases are often gradational and have been observed mainly in core, but have not been mapped or traced over appreciable distances at surface. These contacts are commonly altered with reaction “fronts”. There is also a phase with marked compositional banding reminiscent of magma mixing textures.

Intrusions within the westerly lying intrusive domain occur in the hangingwall to the northerly trending high angle fault that separates the two domains. Intrusive phases within this domain include a series of dikes and/or sills that coalesce to form a stock-like body that has been drilled over 1.2 by 1.2 km approximately. Rafts or slivers of limestone-shale and hornfels are intersected in drill core that do not necessarily outcrop at surface. Several intrusive phases are observed in drill core that are essentially similar to those of the sediment intrusive domain. In addition, several different phases are observed, including a fine grained intrusive phase that commonly exhibits apparent flow banding, and locally resembles a stratified unit such as a tuff. This unit may grade into the B2 breccia unit, which is essentially a monomict intrusive breccia that is partly autobrecciated and partly a hydrothermal breccia, Figure 7-8(Gibson, 2012). Another phase that appears unique to this domain is a dense, silicified intrusive breccia unit that is host to a consistent low grade mineralization, Figure 7-9.

In drill hole AP-12-93 Sample 34437, with 0.344 g/t Au from 235-236.0m, Sample 34438, with 0.386 g/t Au from 236.0 to 237.15m, and sample 34439, with 0.367 g/t Au from 237.15 to 238.5m.

The sediments are locally metamorphosed to hornfels and skarn, Figures 7-10 and 7-11, occurring frequently as narrow contact replacement to the sediment intrusive contacts. More regional scale hornfels crops out to the northeast of the Project area and is encountered in most drill holes at increasing depth to the southwest. The altered rock is often transitional and termed hornfels where individual mineral grains are not recognizable and termed skarn where they are coarser and garnet and pyroxene become visually identifiable at the macroscopic scale. Skarn tends to be more common at depth to the southwest.

The mineralogy is composed of calc-silicate minerals (garnet, wollastonite, tremolite-actinolite, diopside, and idocrase) and is termed silication, and is generally not silicification (Gibson, 2012). This unit is a frequent host to mineralization associated with late disseminated to massive sulphide replacement (arsenopyrite and pyrite).

Breccia bodies were identified as important to the mineralization potential of the Project early in 2010 during re-logging of Goldcorp drill holes. The logging nomenclature of the numerous different breccia types recognized is designed to be descriptive, such as monolithic vs. multilithic, to avoid genetic terms other than contact and hydrothermal breccia.

According to Dr. Gibson (Personal Communication, 2014) ongoing core logging of breccia is still problematic even after modifications. Efforts to separate the different breccia bodies into meaningful divisions are currently underway.

Some breccia bodies, such as the high grade Breccia Zone described in section 7.35, are important to mineralization and others may predate or postdate mineralization. The most important breccias at the Project are multilithic and hydrothermal types. Other breccias identified on the Project include contact breccia, tectonic breccia, intrusive breccia and a monolithic breccia that has been locally described as resulting from autobrecciation. Tectonic breccias can be further subdivided into low angle and high angle fault breccia. Multilithic and hydrothermal breccias are described in more detail below.

This breccia, Figure 7-12, consists of angular to rounded plagioclase-biotite porphyry and angular fragments of hornfels, limestone, shale and other very fine grained to aphanitic fragments range from less than a centimetre to over 10 cm in size. Brecciation appears to be relatively high energy but non-dynamic, exhibiting strong fracturing and angular fragmentation (locally crackle) and no obvious fault features such as gouge. Rock fragments are variably cemented within a matrix of silica (locally chalcedonic) and sulphide minerals (mostly arsenopyrite and pyrite/marcasite). In some areas the matrix appears to be finely ground rock or intrusive material; the latter may be more prevalent with the deeper drill intersections.

This breccia, Figure 7-13, has a dense siliceous matrix with locally abundant sulphide minerals, mainly pyrite/marcasite and arsenopyrite, and these minerals are observed to rim or react with the breccia clasts. Fragments may be angular or rounded and there may be evidence of rock flour and brittle fracturing. Hydrothermal brecciation can occur in all rock types but is dominantly observed in intrusive rocks and is locally observed to re-brecciate the multilithic breccia.

Plagioclase-biotite porphyry and hornfels fragments in a matrix that is partly silica rich partly intrusive rich. In drill hole AP-11-70. Sample 22236 with 18.44 g/t Au - 22.4 g/t Ag from 688.00 to 689.50 m. Sample 22237 with 2.03 g/t Au - 11.2 g/t Ag from 689.50 to 691.0m, (Lunceford, 2012).

In drill hole AP-12-53, Sample 12589 with 1.22 g/t Au - 38.1 g/t Ag from 82.5 -84.0 m; Sample 12590 with 2.31 g/t Au - 27.9 g/t Ag from 84.0 to 85.5m. Sample 12591 with 2.10 g/t Au - 19.2g/t Ag from 85.5 to 87.0 m.

Ana Paula is located along the northwesterly trend of the GGB where it straddles a boundary between two older tectonic sub-terranes; the Teloloapan volcanic-volcaniclastic arc assemblage to the west and the Platform sequence of thick carbonates (limestone and dolomite) overlain by younger marine deposits to the east. The stratigraphy of both sub-terranes was deformed during the compressive Laramide orogeny and subsequently intruded by an early Tertiary, ±62-66 million years, calc-alkali porphyritic magmatic event associated with an essentially barren skarn and hornfels contact metamorphism. This intrusive event is currently thought to be associated with the timing of mineralization responsible for the gold deposits and showings of the GGB. At least two and possibly three mineralizing events are observed at the scale of the property, but the relationships and timing of these events is not currently known.

Quartz-sulphide and quartz-carbonate-sulphide veinlets, stockworks with sulphide clots and disseminations in both intrusions and hornfels.

Narrow semi-massive sulphide contact replacement of limestone or hornfels/skarn at the intrusion contacts.

Sulphide clots, rims and masses in narrow contact breccias hosted in intrusions at or near the sedimentary contacts and/or fault contacts.

Associated with a sulphide constituent within breccia matrix and with sulphide replacement textures within structurally controlled breccia formed oblique to the dominant northerly trending westerly dipping stratigraphy.

Mineralization at Ana Paula occurred during at least two different events or stages. The first event is characterised by gold-arsenic-(bismuth-tellurium), (or Au-As-(Bi-Te)), where mineralization is associated with intermediate intrusions emplaced into limestone. The second event locally cuts the first, and is characterized by gold-silver-lead-zinc-mercury-antimony (or “Au-Ag-Pb-Zn-Hg-Sb”), containing locally zoned coarse sphalerite. There are also various quartz-calcite veins with epithermal textures, but the relative timing of these veins remains unclear.

Mineralization is hosted in both the sediment-intrusive domain and the intrusive domain as described in Section 7.3.2 and illustrated in Table 7-1 and Figure 7-4. Delineation drilling for this Report has focused on mineralization hosted within the boundary of the sediment-intrusive domain and the intrusive domain. General length, width, depth and continuity of the mineralization are discussed in Section 10.

Mineralization is commonly observed contained within the sediment-intrusive domain described in section 7.3.2, occurring as veinlets, stockwork, clots and disseminated mineralization primarily hosted within or adjacent to the intrusive bodies, along with contact replacement textures and stockwork in the adjacent sedimentary rocks. The approximately 700 metre wide corridor has been intersected in drill core over 1.6 km along strike and remains open to the north and at depth. The corridor includes at least two relatively continuous mineralized intrusions with disseminated, stockwork and contact replacement mineralization that are separated by mostly barren limestone. Discontinuous mineralization may occur locally within the “barren” horizons.

This domain is sometimes described as the lower grade mineralization that has an undiluted composite average grade of 1.0 gram per tonne gold and 3.9 grams per tonne silver. Observed minerals include primarily pyrite and arsenopyrite, with traces of pyrrhotite, sphalerite, and native gold and/or gold tellurides. Magnetite, galena, stibnite, realgar and bismuthinite are observed rarely. Chalcopyrite and bornite are identified in thin section.

The intrusive domain is in the hangingwall of the fault that separates this domain from the sediment-intrusive domain. As the name implies this domain is comprised dominantly of intrusive rocks with relatively few “septae” of sedimentary layers. In general, the intrusive domain appears to follow and is hosted within the same northerly structural trend as the sediment-intrusive domain and is in contact with sedimentary rocks to the west and southwest. Several different intrusive phases are present, but they mostly appear to be of similar composition and mainly vary phenocryst grain size and overall percentage. Although the intrusive rocks are generally altered, relatively little mineralization has been encountered. An exception is the area known locally as Tejocotein the southwest or B1 quadrant, where mineralization similar to that at Ana Paula has been drilled, but here consists of a more dense stock-like intrusive body composed of coalescing dikes and sills that are locally separated by discontinuous altered and mineralized sediment horizons and multilithic breccia bodies that appear to be relict rafts of wallrock sedimentary rocks within the intrusive bodies. These sedimentary rocks generally exhibit a higher grade of metamorphism than that present at Ana Paula.

A relatively continuous low grade mineralization is observed in core that occurs as disseminated sulphides within the intrusion(s) with some stockwork, structurally controlled mineralization and some replacement mineralization of breccia clasts, phenocrysts and locally of contact zones (depositional sites 1, 2 and 3 above). Sulphides are primarily pyrite with lesser arsenopyrite. Exploration of this domain is still underway and insufficient information is available to accurately estimate an average grade, expected to be low grade overall (0.3 to 0.5 grams per tonne gold). The mineralization observed to date is indicative of an extensive alteration halo that merits continued drilling. The “stock” has been drilled over about 1.2 by 1.2 km and remains open.

Two discrete structurally controlled breccia bodies of irregular dimensions have been delineated in drill core that are oblique to the surrounding stratigraphy of the sediment–intrusive domain described above. These breccia bodies come to surface relatively close to each other and may share a common origin but are separated by the same fault boundary that separates the sediment-intrusive and intrusive domains.

The high grade Breccia Zone, or B1 rock type, is the most important domain for gold mineralization and is surrounded by the sediment-intrusive domain, sitting in the footwall near the fault contact with the intrusive domain, Figure 7.4. The Breccia Zone consists of a core of multilithic breccia, Figure 7.12, in a steeply south plunging column surrounded by a halo of mineralization and alteration characterized by veins, fracture zones, and massive sulfide contact replacements in country rock that includes limestone, hornfels and intrusive rocks along with other breccia. The breccia core and the surrounding alteration halo combine together to make up what has become known as the B1high grade Breccia Zone. The same sulphide assemblage observed in the sediment-intrusive domain is also observed here where it occurs as matrix filling in hydrothermal breccia, replacements of the breccia fragments, as well as stockwork mineralization in the surrounding altered wallrock,. Late quartz and quartz-carbonate veins crosscut the entire unit and may represent a late or a second mineral event.

The breccia core occurs near a change in orientation or jogs in the stratigraphic and structural fabric of the surrounding sediment-intrusive domain, and is interpreted as being partly controlled by the intersection of at least two planar structures, forming a steeply plunging body that obliquely crosses the main structural grain. The Breccia Zone comes to surface around UTM grid line 1998050mN at the center of the cone pit shown in Section 14.1, and extends at least 700 m vertically from surface where it remains open at depth. Drill hole AP-11-70, drilled across the body at depth, intersected a 33.00metre interval of 12.39 grams per tonne gold and 10.7 grams per tonne silver from 677.5 to 710.5 m downhole (Newstrike, 2012). Drill hole AP-13-215 drilled oblique to the plunge intersected a 72.19 metre interval of 3.92 grams per tonne gold and 5.87 grams per tonne silver (Newstrike, 2013). Insufficient drilling has been completed to fully delineate the breccia at depth and true widths are not known. The B1 high grade breccia core is irregular in its dimensions, locally as thin as 18 m, but appears to average about 55 m near surface, and plunges southerly tapering at depth. The core breccia unit has an undiluted composite average of 9.76 grams per tonne gold and 10.0 grams per tonne silver.

The alteration halo surrounding the lithologic breccia extends laterally between 100 to more than 200 m from the breccia core, is also irregular in shape and is hosted within the altered limestone and intrusions of the sediment-intrusion domain described previously. The orientation of the mineralized halo is dominantly controlled by the steeply dipping structural intersection of the breccia core, and partly controlled by existing stratigraphy and structures, especially along contacts. The mineralized alteration halo has an undiluted average grade of 3.74 grams per tonne gold and 4.25 grams per tonne silver, decreasing away from the high grade core breccia unit.

Collectively the combined core breccia and the surrounding mineralized halo that make up the irregularly shaped B1 “Breccia Zone” has an undiluted average grade of 5.38 grams per tonne gold and 6.49 grams per tonne silver.

The lower grade B2 breccia is located within the intrusive dominant domain in the hanging wall of a fault contact with the sediment-intrusive domain, Figure 7.4, and appears to be cut off by this fault. It is essentially a brecciated intrusion composed of mostly monolithic fragments in a silica rich matrix with mixed sulphide-oxide mineralogy, Figure 7.13. The breccia may be part autobreccia, developed during intrusion emplacement, and part hydrothermal breccia, formed after emplacement. Crackle breccia is locally dominant. The alteration style is distinct from the rest of the mineralization at Ana Paula, with strong clay alteration and local advanced argillic mineralogy. The Lower Grade Breccia exhibits relatively long downhole intersections with consistent grades not common elsewhere in the deposit. Table 7-2 presents selected intersections from drill holes that tested the B2 breccia. This breccia zone requires further delineation as mineralization still remains open.

The B2 breccia is host to a lower grade gold mineralization with an undiluted composite average grade of 0.93 grams per tonne gold and 5.06 grams per tonne silver that may, in part, be stratigraphically controlled.

Metamorphic rocks in the form of stratigraphically controlled hornfels/skarn bodies outcrop in the northeast part of the property and occur in most drill holes within both the sediment-intrusive domain and to a lesser extent in the intrusive domain. These increase in frequency at depth and to the southwest in drill core. Contact breccia bodies hosted in intrusions at or near the sedimentary contacts are associated with the metamorphic rocks but also occur independent of them, and locally may be tectonic in origin. They are both a common host to replacement disseminated to massive sulphides (arsenopyrite + pyrite/marcasite ± pyrrhotite) mineralization that can form high gold grades over narrow intervals, Figures 7-14 and 7-15 and Table 7-3. At present they are averaged into the lower grade bulk mineralization described above, and further drilling is required to evaluate their continuity and their potential for underground extraction methods. Some selected contact replacement intersections are shown in Table 7-3.

A later phase of banded epithermal style veining that is apparently associated with free gold is locally observed crosscutting all stratigraphic units, Figure 7.16, and is locally associated with increased silver grades. Coarse stibnite, sphalerite, galena and chalcopyrite are rarely observed as is occasional realgar crystals (Thompson, 2008). The relationship to the earlier mineralization, if any, is unknown.

In drill hole AP-12-111 Sample 46830 with 13.6 g/t Au - 40.3 g/t Ag from 98.17 to 99.00m; Sample 46831 with 11.45 g/t Au - 67.4 g/t Ag from 99.0 to 99.88m; Sample 46832 with 9.8g/t Au - 42.4 g/t Ag from 99.88 to 100.68m.

Late arsenopyrite, pyrite and gold in massive sulphide replacement in multilithic breccia in drill hole AP-11-37, Sample 9068 with 16.35 g/t Au and 15.8 g/t Ag from 131.0 to 133.0 m; Sample 9069 with 28.0 g/t Au and 27.4 g/t Ag from 133.0 to 134.0 m.

An epithermal style vein crosscutting intrusion in discovery drill hole AP-10-19, Sample 2816 depth 153.0 to 153.5 m with 439.0 g/t Au and 126 g/t Ag (Kearvell, 2011). Visible gold is inside red oval.

The boundary between the Teloloapan and Platform terranes underlies the Ana Paula and surrounding mineral concessions. Medina (2010) described the contact zone as characterized by intense deformation and faulting, and placed the boundary on the eastern margin of the Ana Paula Project where it is interpreted as a north-striking left-lateral fault. Detailed structural work to verify this interpretation is currently underway.

Most of the structures observed at the surface in the area of drilling consist of folds in sedimentary rocks that are surrounded by intrusive rock.

Apparently minor faults are common at low angles to the bedding, in many cases located along contacts between sedimentary and intrusive rocks.

Larger-scale faults are not observed at surface nor have they been intersected in core, other than the faults commonly seen at and parallel to sedimentary-intrusive contacts.

Larger northeast and easterly trending structures (breccia, veins) are observed northeast of the main Ana Paula mineralization.

A structural orientation analysis of veinlets and mineralized contacts was undertaken by collecting structural information at the site of mineralized outcrop chip samples (n) that revealed patterns described in the following, (Johnson, B, 2014). All measurements are in azimuth and use the right hand rule for dips.

A rose diagram of the strikes of all veinlets (n=812) show that there are more veinlets in the NE and SW quadrants of the project area than in the NW and SE quadrants (see section 9.0, figure 9.1), with maximum frequency in the (diametrically opposite) ranges 000°-030° and 180°-210° (Figure 7.17a). Only a few veinlets strike in the minimum-frequency ranges 120°-150° and 300°-330°. Veinlets that carry anomalous gold (>200 ppb) show well-defined northeasterly strikes and near-vertical dips. This includes everything in the range 200 ppb to 5000 ppb Au. In contrast, veinlets and mineralized contacts at sample sites that returned assays of more than 5000 ppb Au mostly strike north-south and dip steeply west.

A rose diagram of all sampled veinlets with anomalous gold (n=318) shows a well-defined NE-SW strike maximum (Figure 7.17b), and the data have a statistical mean orientation of 231°/88°NW. The NE-SW strike is especially prominent in the range 750 to 5000 ppb Au, as shown by a more-detailed analysis not illustrated here.

For samples with >5000 ppb Au (n=32), a rose diagram shows a generally N-S strike maximum and a slightly weaker E-W spike (Figure 7.17c).

A spherical projection of poles to the 32 veinlets and mineralized contacts in this category shows a prominent point maximum corresponding to a strike and dip of 178°/75°W (Figure 7-17d). This steep westerly dip is similar to the orientation of most contacts between the sedimentary rocks and intrusions and of bedding in the sedimentary units, suggesting that the highest-grade gold is controlled by contacts and layering. The second, weaker cluster of poles corresponds to a strike and dip of approximately 080°/85°S.

(a) Rose diagram showing the strikes of all veinlets (n=812) at sites of surface rock-chip samples in the Ana Paula and Tejocote areas; (b) Rose diagram of all sampled veinlets with anomalous gold (n=318); (c) Rose diagram of sampled veinlets with >5000 ppb gold (n=32), and; (d) Equal-area spherical projection of poles to sampled veinlets with >5000 ppb gold (n=32). All diagrams in this section were produced using Orient 2.1.2 software (Vollmer, 2012).

All lithology’s underlying the Project exhibit some degree of alteration. A study undertaken by Mauler and Thompson on a suite of specimens submitted in 2005 identified skarn alteration that is patchy, selective and comprised of aggregates of garnet, calcite-hematite replacing K-feldspar and muscovite or chlorite or clay replacing biotite and commonly fracture controlled calcite. They also describe a main alteration phase within intrusive rocks that includes replacement of plagioclase phenocrysts and matrix K-feldspar by carbonate and minor sericite. Biotite phenocrysts are altered to carbonate ± chlorite ± pyrite ± titanite with minor muscovite, clay and rutile. Mauler and Thompson (2005) concluded that corrosion of quartz phenocrysts and hornblende rims suggest a compositional imbalance of the system during crystallization, possibly caused by assimilation or contamination of the host rocks and/or by a flow of magma (magma mixing). Furthermore, they conclude that the high titanium oxide (TiO2) content in biotite suggests a basic source of magma, suggesting the granitoid rocks originated in a Type-I arc environment. The composition of the samples submitted for the 2005 study is meta-aluminous, calc-alkaline and is high in potassium. Silica varies from 58-65 percent placing the magma as diorite to granodiorite in composition.

Newstrike collected 34 mineralized samples from drill core that were submitted to Vancouver Petrographics Ltd of Langley, BC, Canada for petrographic study in 2012. The samples were selected to determine the alteration and mineral associations for each rock type submitted. A selection of results is described in Table 7-4, where similar rock descriptions are omitted from the sample studied.

The intrusion samples display various alteration, mineralogy and textural characteristics. Within the sediment-intrusive domain (SZ), quartz sericite alteration tends to highlight the porphyritic texture of intrusive rocks (bleaching); and argillic alteration, represented by feldspar phenocrysts altered to clay, locally swelling clay, appears to overprint other alteration types. Vancouver Petrographics also identified free gold in polished section where gold was precipitated on the boundary between euhedral arsenopyrite and the silica matrix. This agrees with early work by Thompson (2008), who determined that gold is associated with arsenopyrite as free grains on or around the grains of arsenopyrite, Figure 7.18.

Within the low grade breccia of the intrusive domain (B2), strong argillic alteration is observed with some petrological evidence for advanced argillic alteration present in the finer grained intrusive units (Colombo, 2012). Staining of these samples highlighted the presence of abundant potassium-bearing minerals, however, the very fine-grained nature of the groundmass/matrix hampered the identification of the minerals and some doubts remained between K-feldspar and illite in some of the samples. SWIR-spectroscopy was undertaken to verify this fine grained assemblage with results highlighted in Table 7-5. The analysis was carried out with a Terraspec 4 at the Mineral Deposit Research Unit (MDRU), Department of Earth and Oceanic Sciences – University of British Columbia, Vancouver. The interpretation of the SWIR-reflectance spectroscopy was conducted by Colombo (2012) with dedicated software (Specmin-ASD).

In some of the samples the alteration paragenesis indicated low-sulphidation epithermal conditions; in one case the gold mineralization was associated to the alteration within a gold-bearing adularia-quartz-calcite arsenopyrite hydraulic breccia (AP-11-37 - 121.30 m), Figure 7-18(a) and (b) and Table 7-4. In another sample, a contact metamorphic assemblage was characterized by calcite-epidote-andalusite-garnet [AP-11-37 - 317.30 m); Figure 7-18(c) and (d) and Table 7-4. In some cases the alteration was overprinted by adularia- bearing assemblages (adularia – calcite – quartz ± pyrite ± arsenopyrite). In one of the samples affected by this alteration, gold was spatially associated with arsenopyrite which in most of its occurrences tends to replace pre-existing pyrite, Figure 7-19.

Colombo, 2012, observed that it seems evident that the mineralization is associated with hydraulic brecciation, intense alteration, and precipitation of pyrite and arsenopyrite. The sulphide deposition is typically accompanied by a strong alteration (clay-calcite±quartz) which selectively replaces plagioclase phenocrysts within the plagioclase-phyric intermediate rock. White mica and clay replaced the biotite, which in some rare cases was observed as relict within the less intensely altered samples. The groundmass was intensely replaced by illite ± kaolinite ± smectites ± calcite ± quartz.

(a) High grade breccia longitudinal split core hand specimen, AP-11-37 - 121.30 m, 18.6 g/t Au and 17.5 g/t Ag, sample #9063; (b) Photomicrograph of (a) shows the contact between the intensely altered rock fragment and the quartz- calcite-arsenopyrite infill (qz, ca and ap) is populated by rhombic adularia (ad). Plane polarized transmitted light; (c) Hornfels, AP-11-37 - 317.30 m, longitudinal split core hand specimen; 0.192 g/t Au, 0.2 g/t Ag, Sample #9190; and; (d) Photomicrograph of (c) shows clay-epidote(?)-rich septa occurs within the calcite- rich vein (ca) which crosscuts the clay-rich schist and hosts andalusite (an) and garnet (gt) crystals. Plane polarized transmitted light

The orogenic deposit model for gold mineralization in the Guerrero Gold Belt (GGB) is considered to be associated with a Pacific Rim style of mineralization as described by Corbett (1998, 2009), Figure 8.1. GGB mineralization is related to a late Cretaceous to Early Tertiary age skarn porphyry continuum emplaced during a 62 to 66 million year old intrusive event associated with Laramide Compressional Orogeny. Early stage, essentially barren calc-silicate skarn alteration associated with one or more intrusive phases is thought to have developed as a contact metamorphic aureole surrounding hydrated intrusive bodies.

Gold deposition at Ana Paula tends to occur both contemporaneous with and post intrusion, exhibiting at least two mineralizing events. The earliest consists of Au-As-(Bi-Te) disseminated mineralization characterized by progressive mineralization over time through deposition of gold in breccias, stockworks, contact skarn (both endoskarn and exoskarn) and other replacement bodies.

The second mineralization event (Au-Ag-Pb-Zn-Hg-Sb) perhaps related to the epithermal style of alteration discussed in section 7.3.7 may be a later hydrothermal phase of the earliest intrusive event (a retrograde overprint?) or may be younger.

The exact timing of gold deposition and the mechanism of deposition within the GGB and at Ana Paula are not yet fully understood and appears to vary among the known deposits, where each deposit shares important characteristics and differences. Intrusions at Ana Paula have been dated at 66.0 – 66.7Ma ± 0.7 -1.8Ma, Valencia, V.et al, (2008), which may also date the earliest onset on mineralization.

Results from Ana Paula suggest that the bulk of the gold deposition occurs with the dominant (earlier?) Au-As-(Bi-Te) mineralization, and is largely hosted in a northerly trending and westerly dipping corridor of intrusive rocks, at the contacts with sedimentary rocks and hornfels, and within important breccia bodies. Gold deposition within the high grade core of the deposit is structurally controlled, located at the intersection of at least two fault structures and the host stratigraphy described in Section 7. Both skarn type massive and disseminated sulphide (arsenopyrite + pyrite) replacements and some epithermal overprinting have occurred but the extent and relationship to the oldest intrusive rocks have not been studied in detail.

Economically significant gold deposits in the GGB are hosted within a variety of structural, lithological and/or geochemical traps and frequently occur in clusters about a northwesterly trend of intrusions of similar age and provenance which are defined by a co-incident northwest trend of magnetic anomalies. The trend is known to exceed 55 km along strike and has become known the Guerrero Gold Belt. Since the first discovery was made at Los Filos in the early 1990’s, the gold belt has grown to host over 21 million ounces of gold and 99 million ounces of silver in the proven and probable (P+P) and measured and indicated (M+I) categories, Table 8-1.

This diagram illustrates the different styles of mineralization in a magmatic arc porphyry and epithermal Cu-Au-Mo-Ag system (Corbett, 2008).

Torex: NI43-101 Mineral Resource statements, Limon-Guajes effective Sept 04,2012, Neff et al, (2012). Media Luna effective Sept 13, 2013, Hertel et al, ( 2013).

Exploration at the Ana Paula Project is conducted under the supervision of Ms. Gillian Kearvell, Vice President of Exploration for Newstrike. Project operations are contracted to the geologic consulting firm Prospección y Desarrollo Minero Del Norte S.A. de C.V. (ProDeMin) of Chihuahua City, Mexico. As of June 26th, 2014, the Project employs 10 professional and support staff, and approximately 43 local labourers.

110,199.67 m of core drilling in 219 drill holes, from AP-10-12 started October 22, 2010 through AP- 13-230 completed on November 2, 2013

Concurrent with this work, core logging, storage areas, field offices and drill access roads were built, rehabilitated or expanded to accommodate the accelerated drill program following discovery of the high grade breccia zone in drill hole AP-10-19.

Geologic outcrop mapping has been conducted continuously since June, 2010. Drill operations have continued without interruption since drill start up on October 15, 2010. A local map sheet grid was devised across the Project that is used to systematically plot all Project data, informally subdividing the Project area into nine 1:2000 scale map sheets, designated from north to south and west to east as A1-A2-A3, B1-B2-B3, and C1-C2-C3. The local grid covers an area defined by UTM coordinates 408,000-413,000 m Easting by 1,985,000-2,000,000 m northing (WGS 84 datum), Figure 9-1. Virtually all sampling, geologic mapping and drilling has been conducted within the A1-A2 and B1-B2 map sheets, informally described sometimes as the northwest, northeast, southwest and southeast quadrants respectively. These four map sheets hosts the approximately two by two km exploration target area defined in Section 6.2, Figure 6-1.

The initial resource announced by the Company On March 27th, 2013 is located on map sheets A2 and B2 where the greatest density of drilling and sampling has occurred.

Surface mapping and sampling methods and protocols have remained the same since work on the Project began in mid-2010. Outcrop and road cut locations are registered on handheld GPS (WGS84 datum) and recorded along with lithologic, structure, mineralization, alteration and other relevant details on field map sheets of the same 1:2000 scale that are then transferred first by hand then digitally to the final map sheets. These map sheets are composited into the final Project-wide geologic map shown previously in Figure 7-4.

Prior to sampling, road cut and outcrop exposures are carefully cleaned and intervals to be sampled are measured, numbered with paint, and marked with an aluminium tag. Road cut samples are collected as continuous channels and/or as representative chips, carefully collected along intervals of 1.5 m or less depending on structural/lithologic breaks. Outcrop samples are collected as random or selective chips or panel samples depending on the exposure. Sample material is placed in plastic bags along with a sample tag, which is numbered and sealed at the site, and then double bagged with the corresponding sample number to prevent tearing and sample loss during transport. Samples are transported to the Company’s field offices and secure storage facilities where the individual sample bags are put into appropriately labeled rice sacks, about 5 to 10 per sack to await transport.

Storage facilities are enclosed and kept under 24 hour security. Samples are picked up at scheduled intervals directly by trucks sent from the two respective contracted analytical laboratories, ALS Chemex and SGS. All descriptive data collected in the field is recorded daily into the Company’s database under the supervision and control of a database manager. Hand drawn and digital maps are prepared as a permanent record. Once geochemical assay results are received from the laboratory the assay certificates are digitally merged with the descriptive database and verified by the geologist.

Road cuts are outcroppings of rock exposed during road building activities. Road cut exposures are systematically mapped and cataloged using the same methodology described in Section 9.1.1. The greatest density of road cuts from existing and new road building has occurred over map sheets A2 and B2 where drill density is also greatest. The objective of the road cut mapping and sampling is to identify new areas of potential mineralization and to refine structural and lithologic controls to mineralization and new road cuts are mapped and systematically sampled as they are built. If warranted, newly identified zones of possible gold mineralization resulting from this program are then proposed for testing by core drilling. An outcrop sample location map showing anomalous gold distribution is shown on Figure 9-1.

In 2012 Newstrike contracted SJS Geophysics Ltd (SJS) of Vancouver, Canada to undertake certain 3 dimensional modelling interpretations using the existing database acquired from Goldcorp to compare it with the results of drilling. The database includes an aeromagnetic and radiometric (K, Th, U) survey by McPHAR Geoservices Inc. of Manila, Philippines that covers a 225 km2 area over the Ana Paula Project area, and an Induced Polarization (3 dimensional) geophysical survey by SJS Geophysics of Vancouver, Canada. Results of this interpretation indicate a strong correlation between mineralization and resistivity and magnetic responses, Figure 9-2,

In 2013, Geotech Ltd of Aurora, Ontario, Canada was contracted to complete a ZTEM survey of approximately 250 km2encompassing 1,298 flight line km flown at a line spacing of 200m. The survey area encompassed the entire Ana Paula Project area and the eastern portion of the surrounding Aurea Norte Property, also owned 100% by Newstrike. The ZTEM survey is recognized for its ability to map resistivity contrasts associated with the structure and alteration typically associated with porphyry-skarn deposits or with structurally controlled epithermal deposits. ZTEM is capable of penetrating to depth that can exceed 1-2km and is useful in identifying “blind” exploration targets (a buried target that does not outcrop at surface).

The objective of the survey was to locate potentially buried intrusive bodies associated with the GGB mineralization model and to confirm controlling structures along the mineralized San Luis Trend. The new anomalies identified by the ZTEM survey include resistivity contrasts typical of buried silicified intrusions and with alteration commonly associated with skarn-porphyry and epithermal style deposits, Figure 9-3, (Legault, J, 2013).

The results from all exploration work carried out by Newstrike are summarized in the discussion of Project geology in Section 7.3 of this Report. All geochemical roadcut and outcrop sample results collected by Newstrike up to June 26th, 2014 that returned anomalous values exceeding 0.2 grams per tonne gold are summarized in Figure 9-1, which also illustrates the focus of the Company’s exploration advances.

Since exploration began in 2010, a total of 96,045 samples have been collected from road cuts, outcrop chip and channel samples, stream and soil samples, and from drill core. This number includes blanks and standards inserted systematically every 20th sample. In addition, various samples for metallurgy, density measurements and quality assurance and quality control (“QAQC”) were collected for geochemical assay, Table 9-1. Results from the ongoing surface exploration program continue to provide encouragement, indicating that alteration and mineralization still remains open in several directions and at depth. Continuing

exploration with surface mapping, ground geophysics, compilation of existing data and drilling is warranted based on results to date.

Newstrike commenced drilling on October 15, 2010 and discovery hole, AP-10-19, was drilled in December the same year with assay results announced on January 18, 2011 (Newstrike, 2011). This led to an expanded drill campaign that resulted in publication of the Company’s initial resource estimate on March 27, 2013 The mineral resource estimate has an effective date of February 26, 2013 and is titled “Ana Paula Project - Technical Report and Initial Resource Estimate, Municipalities of Cuetzala Del Progreso and Apaxtla del Castregon, Guerrero State, Mexico” (the “Report”).

The Ana Paula mineral resource estimate was developed by Independent Mining Consultants of Tucson, Arizona, USA (IMC) for Newstrike under the direction of Mr. H.E. Welhener, (2013). The Technical Report is available on SEDAR at www.sedar.com. The initial resource is based on 130 diamond core drill holes aggregating 67,943 m and containing 45,512 assay intervals, of which effectively all are assayed for gold and silver. This includes 3,687.53 m of core drilling and 2,853 assay intervals completed in 11 drill holes by Goldcorp in 2005 and 64,255.27 m of core drilling completed by Newstrike in 119 drill holes including drill hole numbers AP-10-12 to AP-12-130. All drill collar and assay information for AP-05-01 through AP-12-130 is described in Welhener, (2013). A complete list of drill results over a 0.2 gram per tonne gold cut off is available on the Company website at www.newstrikecapital.com.

All subsequent activities on the Project focused on fulfilling recommendations made in the Report that were required to bring the project to an updated resource, a preliminary economic assessment, and on new exploration drilling. The work program focused on increasing the confidence of the in pit resource, on testing the potential to increase the resource, on testing the potential to expand the pit walls through pit optimization studies and also tested the exploration potential outside the mineral resource pit shell model outlined in the initial resource estimate.

The Company’s drilling and sampling program are planned and executed by experienced professionals under the supervision of a qualified person as defined by NI43-101. Drill hole numbering began consecutively from the last drill hole completed by Goldcorp in 2005, drill hole AP-05-11, hence, Newstrike’s first drill hole is AP-10-12, using a nomenclature similar to Goldcorp where AP refers to the Ana Paula Project followed by two digits for the year and two or more digits for the consecutive drill hole number as required.

Previous to initiating a drill campaign at Ana Paula, an audit of historic drill results was completed by Newstrike in 2010 on all drill and surface data collected previous to calendar year 2010 by Goldcorp. The audit included statistically proportional re-sampling of selected pulps, rejects, ¼ core splits and, in some cases, ½ core splits to verify Goldcorp’s reported drill results and for QAQC purposes to serve as check assays on Goldcorp’s drill results.

All drill holes are planned and sited on the basis of cross section and plan projections using a UTM based local grid system with east trending grid lines stepping out every 50 to 100 m to the north as shown on Figures 10-1 through 10-4. The final drill site is adjusted in the field depending on topography or local conditions and paint is used to mark the specific collar location in the field. Each drill hole is assigned a specific sequential number and the location is marked with an azimuth, and length. The final drill hole location is recorded in the field using a hand held GPS noting UTM location co-ordinates as northing, easting and elevation.

Drill holes are mostly inclined east at angles of 45 or 60 degrees varying to 90 degrees (vertical). All drilling was completed with HQ (63.5/96.9 millimetre) diameter diamond core drill core rods, reducing to NQ (45.0/75.7millimetre) diameter core barrels if needed. Deeper drill holes (greater than 1,000 m) use PQ (85.0/122.6 mm) diameter core rods reducing to HQ or NQ diameter as necessary. Core rod dimensions given include inner and outer rod diameters in mm. Core recovery averages 97%. Ground conditions in general are very good and few holes were lost or reduced due to poor ground conditions. Following completion of the drill hole, collars are resurveyed using a total station differential GPS.

Drill holes are mostly oriented to cut approximately perpendicular to stratigraphy. Holes angled at minus 45 degrees are estimated to cut sedimentary units and intrusive sills at about ninety percent of true width. Holes angled at minus 70 degrees may cut down dip of units at less than ninety percent of true width. The local stratigraphy and structural controls on mineralization can vary significantly by location and all reported drill intersections are downhole drill lengths that should not be considered true width, which will be less than the reported intersection.

Down hole inclination and azimuth are recorded every 50 m with a REFLEX EZ-shot that also includes temperature and magnetic measurements. A geologist supervises the drilling operation, completing a “quick log”, including visible mineralized zones, structures, and lithology units. A geologist is always present at the planned completion of the drill hole to avoid, to the extent possible, terminating the hole in a mineralized interval. All drill core is boxed and secured before it is transported at the end of each 12 hour drill shift to the Company’s secure core logging facility for processing by personnel of the Company or their contractors.

Drilling for the updated resource and PEA was completed on November 18th, 2013 with a total of 45,844.61 m of core drilling in 100 drill holes from AP-12-131 to AP-13-230, aggregating 37,158 sample intervals collected for geochemical assay. All final drill results, including check assay results, were received as of February 18th, 2014, the effective date for drill results and are reported here.

Drill hole locations for AP-12-131 to AP-13-230 are plotted by map sheet on Figures 10-1 through 10-4, using the local grid system described in section 9.1. All drill collar location for hole completed following the initial resource are shown on Table 10-1 and that also identifies the drill hole objective and on which local grid map sheet it is located. All drill hole collar and assay information for AP-05-01 through AP-12-130 is described in Welhener, (2013) A complete list of drill results over a 0.2 gram per tonne gold cut off is available on the Company website at www.newstrikecapital.com.

Assay results from AP-12-131 to AP-13-230 are summarized in Table 10-2, which provides a selection of the best calculated grade-width intersections showing all drill core assay results with greater than 50 gram-metres gold, defined as the weighted gold grade intersection in grams per tonne multiplied by the downhole length of the same intersection and whose sum is equal to or greater than 50. Drill cross-sections shown as Figures 10-5 and 10-6, are based on east west local grid lines L7700N and 8000N and are typical of the interpreted geology. The cross sections show selected grade intersections that are representative of the four depositional sites of mineralization discussed in Section 7.3.5.

All drill intersections from AP-12-131 through AP-13-230 with greater than 50 gram-metres gold. Intersections may include barren internal intervals and are reported according to protocol.

The reported mineralized intervals in core tend to be separated by barren intervals that may or may not contain narrow anomalous sections and local high-grade spikes that are not included in the calculations of mineralized intervals. Unless specified otherwise, reported intersections are calculated according to an established written protocol that uses a 0.20 g/t Au cut off for bounding and internal assays. Reported grade intervals are based on the original uncut assay certificates as received from the assay labs. They do not include check assays pending at the time of reporting.

These results are included in the updated database that forms the basis for this Report including drill results completed by the Company between 2010 and 2013, encompassing drill holes AP-10-12 through AP-13-230 for a total of 110,099.88 m drilled in 219 diamond core drill holes, aggregating results from 82,670 downhole drill sample intervals with an average length of 1.4 m, where effectively all are assayed for gold and silver. Including Goldcorp’s drill holes the updated resource will have available results from 113,535 m of drilling aggregating 85,523 assay intervals in 230 drill holes ranging from 57.25 to 1,407.90 m in length with an overall average of 494.73 m, of which effectively all are assayed for gold and silver.

A total of 5,292 QAQC samples were collected, along with 171 samples for metallurgical tests, 4,096 on site density measurements and 1,905 re-assays for overlimits primarily for sulphur and arsenic, Table 9-1. Drilling is contracted to Intercore Perforaciones S. de R.L. de C.V (Intercore) based in Guadalajara, Mexico. Average production with the Intercore rigs is approximately 20-25 m per shift per drill operating two 12 hour shifts daily. The average drill hole spacing is approximately 50 m in the main part of the Ana Paula deposit, with a range of from 25 - 50 m in the high grade Breccia Zone and 50-150 m to the north and south pit extremities.

Viewed north. Abbreviations are Bxh: hydrothermal breccia, Bxml: multilithic breccia, Gd: granodiorite, Gdbd: banded granodiorite,

Gdbx: granodiorite breccia, Hfl: hornfels, Ls: limestone, and Ls-sh: limestone-shale. Intercepts shown correspond to Table 10-2.

Viewed north. Bxh: hydrothermal breccia, Bxml: multilithic breccia (the “high grade Breccia Zone”), Gd: granodiorite,

Gdbd: banded granodiorite, Gdbx: granodiorite breccia, Hfl: hornfels, Ls: limestone, and Ls-sh: limestone-shale.

The following procedures and protocols pertaining to the ongoing drill program are described in a detailed, comprehensive manual prepared by ProDeMin (Gibson, 2010). The manual was completed prior to commencement of the drill program and has been modified slightly after the campaign began (Gibson, Personal Communication, 2014).

The drill is collared with HQ diameter core rods with a 77.8 mm inner diameter, reducing to NQ diameter core rods, a 60.3 mm inner diameter, only if downhole conditions warrant. After core is pulled from the drill rod, it is boxed and transported via flatbed truck to the secure core logging facility. Top boxes are secured with strong rubber retention straps to prevent spillage. To provide complete security the core logging facility has a 24-hour watchman. At the facility the core is geologically described, and recovery (percentage), and Rock Quality Data (RQD) are recorded. Geologic logging is conducted at a graphical scale of 1:100. The core is then marked for sampling with wax crayons and sample characteristics (lithology, alteration, structures, mineralization, gangue, etc.) are coded for later digital compilation. Samples are marked during the core logging procedure and sample divisions are based on geologic features. Within homogeneous zones, samples are divided into relatively equivalent lengths of 1 to 2 m, with 0.5 metre samples taken when mineralization characteristics warrant. Insertion of quality control samples is also planned at this stage.

Quality control samples include standards for gold and for other elements and blanks. Standards are pulps, both commercially prepared and certified samples and those provided by ProDeMin utilized in unrelated projects and previously verified, as well as pulps made from Ana Paula mineralized rock by a certified laboratory. Blanks are generally of ¼ core splits taken from lower grade intervals of core from the project. Further details of the quality control program are given in Section 12 below. After logging and sample marking is completed, the core is photographed in intervals of three boxes and then is sawed longitudinally in half along the sample intervals. A one half split is double bagged in plastic sample bags, and secured with plastic ties. Quality control samples are inserted in the sample stream, and the samples are bagged in rice sacks labelled with the company name, Project, drill hole number, and included sample numbers. A laboratory transmittal sheet is prepared listing the number of bags, and included samples. The remaining half core split is retained in the original core box, ordered by drill hole number and stored in the enclosed core facility in metal storage racks.

ProDeMin geologists, on behalf of Newstrike, are responsible for the collection and preparation of all core prior to pick up. Core is collected directly from the Ana Paula core logging facility, by the analytical laboratory that transports the samples directly to their sample preparation facilities and who are responsible for all subsequent security following collection from site. Newstrike uses only internationally recognized and certified laboratories. ALS Chemex (ALS Chemex), a division of ALS Global Ltd. through Chemex De Mexico, S.A. De C.V is the primary analytical laboratory for the Ana Paula Project located in Guadalajara, Mexico. SGS SA, (SGS) is the secondary laboratory for the Ana Paula Project through SGS de México located in Durango, Mexico.

BSI Inspectorate was used for the preparation and/or verification of blanks, standards and for check assay works. All laboratories are internationally recognized and accredited to ISO 17025 and/or ISO 9001:2008 or better.

As is standard methodology, ALS Chemex employs meticulous sample preparation procedures that are described on their website (http://www.alsglobal.com/ samplepreparation.aspx). ALS Chemex prepares samples at its lab in Guadalajara, Mexico. From Guadalajara, prepared sample pulps are shipped by air to ALS Chemex’s Vancouver laboratory for analysis. Some of the pulp and rejects were later shipped back to the Project site for storage. All core samples and geochemical samples were assayed using the multi-element ICP assay 41-element assay method (ME-ICP41), with gold assayed by fire assay with an AA finish (Au-AA24), using a 50 gram aliquot. Mercury is analyzed separately by (code CV41), since the detection limit in the ICP analysis is too high to be meaningful. SGS also employed a fire assay/AA determination for gold and an ICP analysis to determine multi-element values.

ALS Chemex employs a multi-level approach to analytical testing whereby quality control is built into each step of the process and rely on unambiguous written Quality Work Instructions covering all facets of the analysis from sample receipt through to the issue of final analytical certificates. Final certificates are issued electronically and delivered to Newstrike via email. These assay certificates arrive in excel or as comma separated text (.csv) format and are merged electronically into Newstrike’s database and verified for accuracy. A hard copy of all certified assay certificates is delivered by courier to Newstrike’s Mexico City offices where they are kept on file for view. Each analytical service has specific quality control procedures built into the methodologies that are appropriate to ensure the data produced is of a quality consistent with the end use of the data.

The Ana Paula database is maintained by Newstrike in a set of Excel spreadsheets which are updated as new information is available. During the course of the current mineral resource update Newstrike forwards its master assay file to IMC for use. IMC does internal checks on the database as it converts it into the IMC database software. Inconsistencies are flagged and brought to the attention of Newstrike for correction. As noted in Section 11, the assay certificates are provided to Newstrike electronically for incorporation into the database.

Assays on Ana Paula samples have been run by four laboratories, ALS Chemex, SGS, Inspectorate and ACME. The sample preparation and assaying procedures used by these laboratories are described in Section 11. Inspectorate assaying was only on QA/QC samples.

IMC has reviewed 11 percent of the drill holes in the Ana Paula database against the assay certificates. This was about 13 percent of the assayed intervals and has found the data in the database to be the same as the data on the assay certificates.

IMC has reviewed the results of assays run on standard and check samples and finds them to be within currently acceptable industry standards in support of this mineral resource update and PEA.

Twenty-five drill holes were selected from the Ana Paula database for certificate checks. These drill holes were:

Assays on Ana Paula samples in the database were run by three laboratories, ALS Chemex, SGS, and Acme. Both csv and pdf files were sent for all drilling except for AP-05-02.

Sixteen drill holes of the certificate check data had ALS Chemex listed as their primary lab. Table 12.1 shows the results of four of these drill holes where the assay data did not compare to the ALS Chemex certificates. This table compares the holes assayed by ALS Chemex with assay certificates for silver, gold, arsenic, copper, lead and zinc. For each mineral, in each hole, the total number of assays, the number verifiable on available certificates, and the number of differences are shown. Also, the differences in the database and certificates are explained under the “Description of Differences” column. All assay values which did not match the ALS Chemex certificates are for arsenic and lead and were from Inspectorate Lab Certificates which had been run for check assays on gold values or for over limit values on arsenic.

Eight drill holes had SGS listed as their primary lab. Table 12.2 shows the results of comparing the holes assayed by SGS with assay certificates. All detection limit values for silver have been truncated to .2 (silver detection limit is .5, ½ of this value is .25). As with the ALS Chemex comparison some values for arsenic and lead have been set to the Inspectorate lab value.

One drill hole had Acme listed as its primary lab. Table 12-3 shows the results of the comparison for the hole assayed by Acme with assay certificates. Gold was assayed by Acme using two different methods (G6-50 – fire Assay/AAS with overlimits method G6Gr-50 – fire assay/gravimetric and 1F30 fire assay/ICP-ES), the database contains the value of the assay method which had the greatest gold value

The selection of the higher of two assay methods for use in the database should be changed to using the original assay value.

During the Newstrike drill campaign, control samples, consisting of standard pulps and blanks, were inserted into the drill sample stream every 20th sample. The control samples were numbered consecutively and generally consisted of alternating 4 standards and blanks. The data provided to IMC consisted of 3,264 assays run on the fourteen standards that were used during the Newstrike drilling program (holes AP-10-12 through AP-13-230), representing the insertion of a standard into the sample stream approximately once every 24th sample. For the most current drilling campaign (AP-12-131 to AP-13-230) there were 1,461 standard assays, which represent the insertion of a standard into the sample stream approximately once every 24th sample. No data were available for Goldcorp holes AP-05-01 through AP-05-11.

The standards used for the two Newstrike programs are: 2010-2012 drilling (AP-10-18 to AP-12-130)           AP-01     AP-02     AP-03     AP-04     AP-05     AP-06     AP-07     AP-08

2012-2013 drilling (AP-12-131 to AP-13-230)          AP-03     AP-04     AP-05     AP-06     AP-07     AP-08     AP-09     AP-10           AP-11     AP-12     AP-13     AP-14

Grades, standard deviations and 95% confidence limits for the eight standards (AP-01 to AP-08) prepared by Newstrike are summarized on Table 12.4. Mean grades were determined from assays run at the ALS Chemex, SGS, Inspectorate Vancouver and Inspectorate Reno laboratories and standard deviations are calculated from the assay means measured by these laboratories. No mean grades are available for the six early standards (1F, P2, P7B, EXM-1 through -3) that were used for holes AP-10-12 through AP-10-17.

Standards AP-09 and AP-11 both came from CDN Resource Laboratories LTD. Reference Material CDN-ME-1101. Standards AP-10 and AP-12 both came from CDN Resource Laboratories LTD. Reference Material CDN-ME-19. These standards were purchased at different times and given different names by Ana Paula personnel, and are certified for both gold and silver.

The results of the 3,170 assays run on the fourteen standards are compared with the standard grades for assays run by ALS Chemex (1,925 assays) in Table 12-5, by SGS (1,110 assays) in Table 12-6 and by Acme (134 assays) in Table 12-7. Assay medians rather than means are shown to minimize distortions caused by outlier samples. Gold compares to within 5% in all cases except for Acme on standards AP-03, AP-06, and AP-07. These three Acme comparisons are a total of 20 samples thus representing 0.6% of the total checks on standards. The silver comparisons, however, are within 5% in only seventeen of the thirty cases listed. Silver is not a large contributor to the overall project economics.

The repeatability of standard assays with time is illustrated in Figure 12-1, Figure 12-2 and Figure 12-3. Figure 12-1 plots the gold assays run on standard AP-1, covering holes AP-10-18 through AP-11-71. Figure 12-2 plots the gold assays run on standard AP-5, covering holes AP-11-66 through AP-13-155. Figure 12-3 which plots the gold assays run on standard AP-10 covering holes AP-13-158 to AP-13-227. Time is analogued by sample number on the X-axis.

Figure 12-4, Figure 12-5 and Figure 12-6 show the standards AP-01, AP-05 and AP-10 results for silver. Silver also remains stable with time, but the assays exhibit considerable scatter and are not a good match to the standard mean grades.

The data provided consisted of 1,108 assays run on blank samples during the Newstrike drilling program (holes AP-10-12 through AP-13-230), representing the insertion of a blank into the sample stream approximately once every 70th sample. The protocol for blank insertion included alternating blanks and standards every 20th sample, as well as insertion of a blank within or immediately after mineralized zones. The blanks are numbered sequentially, and samples of quartered or half core with low or below detection limit values were used so that the preparation facility could not identify the sample as a blank. For the most current drilling campaign (AP-12-131 to AP-13-230) there were 499 blank samples, which represents the insertion of a blank into the sample stream approximately once every 70th sample. No data were available for Goldcorp holes AP-05-01 through AP-05-11 or for two short Newstrike holes that did not include a blank, AP-13-183, AP-13-189. Figures 12.7 and 12.8 show the results of gold and silver assays run on blank samples.

Assays on blank samples should ideally return grades at or below the lower detection limit, but even allowing for outliers (again probably a result of mislabelling or data entry errors) approximately 35 percent of the ALS Chemex gold assays, 45 percent of the SGS gold assays and 40 percent of the Acme gold assays exceed the 0.005 g/t gold detection limit. 50 percent of the ALS Chemex silver assays, 35 percent of the SGS silver assays and 12 percent of the Acme silver assays exceed the 0.2 g/t silver detection limit (SGS silver assays which had a 2 g/t lower detection limit were omitted from this comparison). However, the fact that all three labs, ALS Chemex, Acme, and SGS show comparable exceedances for gold indicates that the problem lies with the blank material and not with the assays. As noted in Section 11, the blank sample material comes from Ana Paula core material previously assayed as below detection and is not a certified blank material. Newstrike prefers to use this material as a ‘blank’ so that is has the appearance similar to the other material being assayed. This material will return values greater than a true blank due to the variability of the deposit.

The data provided consisted of 1,214 assays run on duplicate samples prepared by ALS Chemex and SGS from second-split core from holes AP-10-12 through AP-12-81, representing one duplicate assay approximately every 20th sample. No data were available for Goldcorp holes AP-05-01 through AP-05-11 or for Newstrike holes AP-12-82 through AP-13-230.

All 1,214 gold samples but only 684 silver samples gave valid comparisons. The 530 silver samples that were entered as <2 g/t, the SGS lower detection limit, were not usable.

The mean duplicate gold grade for all samples is 14% higher than the mean original gold grade (0.33 versus 0.38 g/t) and the silver grade is 2% higher (4.0 versus 4.1 g/t). This suggests that the first splits may be biased low relative to the second splits, but assay1>assay2 counts meet criteria for randomness, suggesting that there is no bias between the splits. The level of scatter on XY plots of duplicate versus original assays, however, is large and it is doubtful that a bias would be detectable even if one were present. Figures 12.9 and 12.10 show the XY-plots scatter for the Assay values VS the Duplicate values for both gold and silver. The duplicate program was not continued for the 2012-2013 drilling program for the reasons mentioned above, as per the recommendations made in the initial resource report by IMC (Welhener et al, 2013).

The data supplied contained a total of 6,430 check assays run on 5,829 samples from holes AP-10-12 through AP13-230, representing a check assay at an average of approximately once every 14th sample. For the most current drilling campaign (AP-12-131 to AP-13-230) there were 1,662 check samples, which represents a check assay every 21st sample. No check assays were available for the Goldcorp holes AP-05-01 through AP-05-11, although some samples were re-analyzed by Newstrike during its audit program. Check assays were also missing for drill holes AP-11-41, AP-13-162, AP-13-168, AP-13-171, AP-13-172,

AP-13-174, AP-13-176, AP-13-177, AP-13-182, AP-13-187, AP-13-189, AP-13-190 and AP-13-221. Newstrike is in the process of running check assays on these holes in order to complete its check assay program. There were over limits and under limits assays run of many of these holes which provide additional assays, but are not included in the check assay protocol.

Gold and silver check assays were run by ALS Chemex. Inspectorate, and SGS on pulps or rejects supplied by SGS when SGS was the primary laboratory and by SGS, Inspectorate, Acme and ALS Chemex on pulps or rejects supplied by ALS Chemex when ALS Chemex was the primary laboratory, generating ten separate comparisons for gold and eight for silver. These comparisons are summarized in Tables 12-8 and 12-9 and in the Figure 12-11 through 12-28 XY plots.

Table 12-8 compares the mean gold grades measured by the primary lab and the check lab for the ten gold comparison cases along with the Figure number for the corresponding XY plot. IMC considers a check/original mean grade comparison within 5% or less to be acceptable, and all of the comparisons on Table 12-8 meet this criterion except for ALS vs ALS rejects. It should also be noted that the check assays run on rejects act as an independent check on the primary lab's sample preparation procedures of generating a well homogenized sample as well as its analytical procedures.

Table 12-9 shows the results of the comparisons for silver. Only two of the six comparisons show mean grade differences below five percent but this is not a matter of serious concern at this time because of the minor economic contribution of silver.

No QAQC data are available for these earlier holes. Five-metre composite gold and silver grades in these holes were therefore paired over separations of up to 30m with 5m composite gold and silver grades in adjacent Newstrike holes to investigate whether gold and silver grades in the two hole sets were globally comparable. The results are summarized in the Figure 12.29 (gold) and Figure 12.30 (silver) probability plots.

The comparisons pair 220 Goldcorp composites with 220 Newstrike composites, i.e. 1,110 m of Goldcorp drilling with 1,110 m of Newstrike drilling, with an average separation of 18m between the composites. Mean gold grades compare within 7% (Goldcorp 0.203 g/t, Newstrike 0.219 g/t) and the grade distributions show no evidence for systematic bias. Mean silver grades are 3% different (Goldcorp 3.39 g/t, Newstrike 3.28 g/t) again there is no evidence for systematic bias.

Based on the results discussed above IMC considers that the gold and silver assays in the data base supplied to it meet criteria for use in developing a NI 43-101 compliant resource estimate in support of the updated mineral resource and initial PEA.

IMC notes, however, that no check assays are available for holes AP-11-41, AP-13-162, AP-13-168, AP-13-171, AP-13-172, AP-13-174, AP-13-176, AP-13-177, AP-13-182, AP-13-187, AP-13-189, AP-13-190 and AP-13-221. The drill holes AP-13-162 thru AP-13-190 were assayed by ACME lab and have no check assay data. Newstrike considers the re-assay for over and under limits as checks on these holes and is also looking into running additional check assays by its protocol.

Samples from Goldcorp holes AP-05-01 through 11 were assayed by ALS Chemex and the assays are partially confirmed by the Figure 12-25 and 12.26 results, thus IMC considers these compliant. It would be desirable to confirm this by running additional check assays. It is understood that the Goldcorp samples are in Newstrike’s sample storage facility.

The grades of the standards used to date by Newstrike range effectively from 0.3 to 0.9 g/t gold and from 1.5 to 5 g/t silver (higher-grade gold “standards” 4, 7 and 8 are not sufficiently homogeneous to qualify as standards). Three well-homogenized gold standards with grades of around 0.3, 1.5 and 5 g/t would be sufficient to cover the range of grades in the deposit.

The blank material currently being used is clearly not entirely blank, but material from previously drilled holes in the Ana Paula deposit. As mentioned previously, this source of ‘blank’ material is preferred by Newstrike over a certified blank which does not have the same appearance as the deposit. Efforts should be made to have this material as barren as possible. .

The basic purpose of duplicate assays is to demonstrate that core-splitting procedures are not biasing first-split grades relative to second-split grades. Because of high levels of scatter, however, the duplicate samples run to date are not capable of detecting such biases, and since it is hard to see how core-splitting procedures could have systematically biased the assays over a suite of 45,000 samples a good case can be made for not running any more. The duplicate program was discontinued after drill hole AP-12-81 based on IMC recommendations (Welhener et al, 2013).

The approach of running check assays on large numbers of samples from adjacent holes while running none on samples from large numbers of intervening holes has been discontinued and replaced with a one-every-twentieth-sample check assay schedule, as outlined below. Check assays should be run on fresh pulps prepared by the check lab from rejects to check both the primary lab's sample preparation and analytical procedures. There is no need to submit blanks or standards along with the check assay samples.

A regular sample submission schedule of this type will also assist in minimizing sample mislabelling and data entry errors.

Drill holes that have been assayed by Acme laboratory (at this time eleven drill holes) should have the gold values set to the G6-50 assay value, except when an overage occurs (au value > 10), then the gold value should be set to the G6Gr-50 value, if it exists.

Newstrike and ProDeMin should work closely with the assaying labs to determine the reasons for the variance in assaying of silver standards and check samples. Silver does not contribute much value to the project but the variance should be better understood.

The Ana Paula project has undergone a number of metallurgical studies covering a range of process options Testwork has included all the major refractory processing methods, roasting, autoclave, Albion™ Conventional process methods including flotation testing and gravity concentration followed by cyanidation, whole-rock leaching, diagnostic leaching, and heap leaching, were also studied. Basic testwork defining some cyanidation parameters are included with the leach studies, and bond work indices were conducted on some of the rock types.

SGS testwork 2006 – single composite from 84 samples. Test series for cyanidation parameters, diagnostic leaching, flotation parameters, BWi

KCA comprehensive testwork series Jan 2013 summary report date – Five individual reports, Individual BRT report - KCA0120102, BxA700 comprehensive metallurgical report -KCA0120137, BxA700 detailed flotation test program - KCA0120170, Pit composite report – detailed metallurgical test program - KCA0120189, POX testwork on composites BxA700 and Pit composite – KCA0120200 . Work was performed in 2012. This work is assumed to provide the basis for the NI 43-101 report published in May 2013.

ALS report testwork Sept 2013 KM3684 – QEMSCAN, preliminary flotation and gravity response, concentrate leach studies a. Composite sample spreadsheet – Jan 2012, description of samples by lithology type and grade. Basis for ALS testwork performed 2012 to 2014

SGS report, April 2013 – “Cyanidation of Flotation Concentrates on Samples from the Ana Paula Project” – 1.5kg of concentrate, leaching parameters on 10 small tests

ALS report testwork Jan 2014 KM4097 – Preliminary grind and regrind effects on Au recovery, pre- aeration effects on extraction and reagent consumptions.

SGS testwork report April 2014 – Interim, Final Report issued June 2014An NI 43-101 report was published on SEDAR in May of 2013 and summarized the testwork completed as of 2012. The section reads as follows:

Metallurgical testwork initiated in 2012 was conducted by Kappes, Cassiday & Associates (KCA) of Reno, Nevada. The higher grade Breccia Zone described in Sections 7.3.4 and 7.3.5 underwent testwork on the near surface portion of the Breccia Zone that included material above 700 metre elevation. This portion of the Breccia Zone is located in the approximate center of the floating cone pit shape described in Section 14.0 where the Breccia comes to surface and where mining operations would logically be expected to initiate.

A process including conventional Froth Flotation followed by leaching of the flotation concentrate was explored; high gold recoveries to the flotation concentrate of 93-96 % were achieved, making flotation a potentially attractive pre- concentration step prior to leaching.

Conventional CIL/CIP cyanide leach tests of the Flotation Concentrate ranged 79 to 84 percent Au recovery. The CIL test results indicate that the mineralization is not preg- robbing.

The test work has not identified any processing factors or deleterious elements that will have a significant effect on the potential economic gold extraction by leaching at the rates indicated above.

Results obtained are not necessarily representative of all process material types within an ultimate pit shape. Due to the early nature of these studies it is not yet known what, if any factors may exist that could affect economic extraction. Additional testing on carefully selected representative samples underway at G&T Metallurgical Services of Kamloops, BC, Canada, a division of ALS Global Ltd. will deepen the understanding of the Ana Paula Project. Among other results these tests will provide:

Technical indicators obtained from tests so far are encouraging enough to warrant further grind and reagent and flotation optimizations studies aimed at obtaining overall gold recoveries of 85 percent or greater and improving silver recoveries.”

In September 2012, SGS received one sample of concentrate, 1.5 kg, generated from the BxA700 composite for testing. This is the material described in the previous NI43-101 report as the breccia above 700m or near surface. The testwork compared leaching parameters, time, cyanide strength and consumption, aeration, lead nitrate verses recovery. The testwork states that the concentrate extracted about 95 percent gold to concentrate at a mass pull of about 20 percent.

Ten tests were performed and two test results were excluded due to poor performance, L1 and L4. Tests were performed on 100 grams of sample at 20 percent solids by weight. Dissolved oxygen and pH were monitored. A target pH was set at 10.5 - 11.0 except in test 10 where the target pH was maintained between 9.5 and 10.0 for the first 3-hours and increased to average 10.6 for the remaining 93 hours.

The assay head was 25.6 g/t Au, 23.3 percent sulfide sulphur. Head analyses were also high in arsenic and iron, 12.0 and 27.1 percent, respectively. Silver results were not reported although silver extraction was shown in the test conclusions. Table 13-1 shows the results of the tests.

SGS recommended a grind of 62 microns, cyanide concentration of 5g/l, no aeration or additives, and a retention time of 96 hours, and lower pH, between 9.5 and 10. Calculated extraction of gold was 83 percent and silver was 38 percent. Most of the gold extracted in the first 24 hours and silver showed a longer leach curve, 96 hours.

Although SGS recommended some parameters, a review of this testwork and testwork conducted by KCA in 2012 (KCA0120137) showed similar results for cyanide extractions from concentrates, KCA 64365A concentrate showed 79 percent extraction and another concentrate sample, reground to +85 percent passing 20µm showed 81 percent extraction.

Testwork performed by ALS laboratories, KM4009, in 2013 included leach studies on coarse crushed composites representing eight rock types. The samples were crushed to 3.35mm and leached in cyanide solutions at a pH of 11 for 240 hours. The purpose of the tests was to determine the heap leaching amenability of the six composites, B1b to Szi, with information from the B2b and limestone, B1l materials added for comparison. Results are shown in Table 13-2:

These test composites were made from drill core that was also part of the BxA700 composite materials used for the previous testwork conducted by KCA. ALS indicated that the cyanide and lime consumptions were high for the type of material tested.

Additional work completed by SGS/Metcon laboratories in Tucson Arizona focused on column testing and heap leaching. The results are shown in Table 13-3.

The SGS report indicates that of the rock types tested composite 4, B2i, appears to be leachable with gold recovery at 84 percent. Silver recovery was low at 14.6 percent. Cyanide consumption was low and lime consumption was moderate to high. A similar trend was observed for gold and silver recoveries and reagent consumptions with the bottle roll leach tests.

Testwork KM4097 used a composite made up of seven rock types representing the first four years of mining activity. The rock types are the same as those used in the coarse bottle roll tests with the exception of the rock type B1s which was not utilized in making this composite. The composite is described with each rock type contribution and their individual analyses. The testwork is very limited in scope, focusing on extraction from concentrates based on hand panning and bench-top flotation studies. Its primary purpose was to investigate the effects of primary and regrind size on leach extraction and the use of pre-aeration on extraction and reagent consumption.

The testwork conducted was not designed to fully define the process and should be regarded as preliminary in nature. The flowsheet proposed is based on similar material types and is a common method of extraction for precious metals in sulfide concentrates.

Mineralogical studies conducted for KM4097 composite rocks describe the rock types as partially refractory. Most of the material is available for leaching with two rock types showing metal locking in silica and arseno-pyrite. The results of these mineralogical investigations are similar to those conducted by KCA.

The composite description is given in Table 13-4. The rock type descriptions are the same as those used in KM4009. The rock type SMS B1s was not part of the composite. Sample analyses were conducted on heads and reported in KM3684.

There is a variation between the measured heads from KM3684 and KM4097 and the measured heads from KM4009 where assays were available. The variation could be attributed to particulate gold or the nugget effect.

Gravity and flotation studies on the composite showed the material successfully concentrates as a sulfide which is leachable by conventional means.

The testwork compared grind sizes for gravity/flotation. The sizes ranged from 197µm to 73µm. Gold and silver concentrated very well at a coarse size, 95 percent of the gold and 87 percent of the silver values reporting to the flotation concentrate at 197µm. More than 40 percent of the gold reported to the gravity fraction with 1.1 percent of the initial mass. The remaining gold values reported to the flotation concentrate with a total mass pull to the rougher flotation concentrate of 18.9 percent. Silver values to the gravity concentrate were 14 percent with 73 percent reporting the to the rougher flotation concentrate. These concentrates were produced by panning. In the next phase of testwork, the whole-rock should be tested using a laboratory sized gravity concentration machine.

A cleaner concentrate was produced so that leach studies could be conducted on the final sulfide concentrate. The cleaner reduced the amount of arsenic reporting to the concentrate but also reduced the total amount of precious metals. Total gold reporting to concentrate was 90 percent and silver was reduced to 60 percent. The resulting mass pull was 7.1 percent of the whole-rock mass.

Pre-aeration studies on the cleaner concentrate showed no benefit to leaching in terms of extraction but did reduce the amount of cyanide needed to achieve results. The slurry was reground to 43µm and aerated with oxygen for 16 hours or leached directly. Leach tests were conduct at 20 percent solids for 48 hours. Silver extraction was significantly affected, reducing it from 72 percent to 58 percent.

The cyanide consumption of the cleaner concentrate was 32kg/tonne of rock, or 2.2kg/tonne of whole rock, and 1.6kg/tonne of lime or 0.1kg/tonne of whole-rock before aeration. The aerated slurry reduced the total cyanide consumption to 18.3 kg/tonne or 1.3 kg/tonne of whole rock, a reduction of 43 percent on cyanide consumption. The increased lime consumption may have been the result of sulfide oxidation from aeration.

The proposed Ana Paula flowsheet was based on the results of testwork performed by ALS, Report KM4097, on year 1-4 composite sample. This work was considered the most reliable for use as a basis in designing a processing plant and superior to whole-rock leach based on the reagent consumption. The results of the composite tests showing the first four years of production seem to correlate with the previous works done on composite BxA700, showing similar flotation results in terms of mass pull, and leaching results reported by SGS.

While the conclusions of the leach studies for KM4097 were different from SGS leach studies, the following should be noted: in both cases, a single composite was used to generate a concentrate that was later used in leach testing. For the SGS leach studies that composite was a rougher concentrate and for ALS leach studies the composite was a cleaner concentrate. The amount of sulfide present does appear to affect the amount of cyanide required.

The work index chosen as a basis for design was the BXA700 composite sample which gave a BWi of 19.8 kWh/tonne. This index is high and because it is based on a single sample should be considered conservative.

The plant basis uses the parameters sited in BXA700 but assumes a rougher concentrate will be leached. Additional work is needed to confirm these parameters and to confirm the reagent consumptions. This work is part of a proposal for the next phase of engineering.

While whole-rock leaching produced similar results to the flotation/leaching of concentrates, a comparison of the operating reagent costs did show the flotation system as more economically favorable. Additional work to confirm the reagent consumptions will be recommended in the next phase of engineering.

There are concerns about the comparability of reagent consumption results from different laboratories because each laboratory uses different weight percent solids when conducting cyanidation testing. SGS laboratories use 30 percent solids by weight, ALS laboratories use 20 percent solids by weight. This difference in mass densities has an effect on cyanide oxidation and can lead to erroneous results. In future testing, the samples will be leached at the same density proposed for the plant, approximately 40 to 45 percent solids. Results from these tests will be used to compare whole-rock leach and flotation-concentrate leach systems.

This mineral resource has been prepared in accordance with NI 43-101 Standards of Disclosure for Mineral Projects including changes to NI 43-101 policy that became effective on June 30, 2011. The NI 43-101 definition of a Mineral Resource states “In this Instrument, the terms “mineral resource”, “inferred mineral resource”, “indicated mineral resource” and “measured mineral resource” have the meanings ascribed to those terms by the Canadian Institute of Mining, Metallurgy and Petroleum, as the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council, as amended”, NI 43-101, 2011.

The mineral resource estimate for Ana Paula contemplates an open pit extraction method. At this stage, only preliminary studies have been conducted to develop the input parameters used to define the pit shell used in this report and no studies have been completed to determine the viability of underground extraction methods. In the absence of input parameters optimized to the Ana Paula Project certain technical and economic assumptions were made which are considered to be a best estimate given existing conditions. The recommendations from this report will be used to optimize input parameters and advance the economic viability of the Ana Paula resource.

The Ana Paula mineral resource estimate has an effective date of August 8, 2014 and was developed using an update mineral resource model based on 223 drill holes within the model limits, an updated geologic interpretation, metallurgical recovery data discussed in Section 13, updated costs provided by JDS Mining and a geotechnical study by Steffen, Roberts & Kirsten Consulting of Denver, Colorado (“SRK”), which was completed in late November, 2012 (Ross-Brown, Levy, 2012). The deposit has been modeled using an inverse distance squared operator applied to 5m gold and silver drill hole composite lengths which respected lithology units. Model blocks are classified as measured, indicated or inferred based on kriging variance, the number of holes inside the search ellipsoid and distance from the closest hole. Tonnages are estimated using the average of the density data by lithology.

Table 14-1 is a summary of the input parameters to define the portion of the mineral inventory which falls within a resource shell and thus tabulated as the mineral resource. A summary of the mineral resource is presented in Table 14-2, tabulated at an internal cutoff of 0.46 g/t gold equivalent (AuEq). The calculation of AuEq includes the gold and silver prices and recoveries presented in Table 14-1. AuEq equals Au + 0.011 x Ag.

Drilling and assaying statistics for the drill hole data base used to construct the model are summarized in Table 14-3. The statistics are for drill holes that are within the mineral resource model limits (1,997,100 to 1,999,400 north and 408,500 to 410,800 east, elevation 110 to 1390) and exclude 7holes which are in the drill hole database but fall outside the block model limits. Figure 14-1 shows the drill holes by the three drill programs (blue = Goldcorp drilling, green = Newstrike 2010-2012 drilling and red = Newstrike 2012-2013 drilling). Holes are mostly inclined east at angles of 45 or 60 degrees and all were drilled diamond core. Drill hole diameter is HQ with reduction to NQ in some of the deeper holes. Core recovery averages 97 percent with 95 percent of the samples having better than 90 percent recovery. The average drill hole spacing is approximately 50 m in the main part of the Ana Paula deposit, with a range of from 25 -50 m in the high grade Breccia Zone and 50-150 m in the lesser mineralized areas to the north and south of the breccia zone.

The data base also contained essentially complete assay data for sulphur, arsenic and other elements, along with percent core recovery and RQD values. All assayed intervals were coded for the logged lithology and alteration type. The database was back assigned the lithology codes from the block model. The block model lithology was interpreted on cross sections and wire frames were created of the major lithologic units.

The gold and silver assays were reviewed to determine if any high end outliers should be cut prior to compositing the assays into more or less equal length 5m composites. Based on this review, eight gold assays were capped at 100 g/t (original assay values ranged from 105 to 760 g/t for a total of 6.52m of core length) and nine silver assays were capped at 500 g/t (original assay values ranged from 558 to 1120 g/t for a total of 8.16m of core length). Figures 14-2 and 14-3 are box plots of the drill hole uncapped assays for gold and silver by the major lithology units in the block model. The lithology units from left to right on the figures are:

Table 14-4 is a summary of the gold and silver assay statistics by drill program and the block model lithology assigned to the assay intervals. The table compares the assay statistics used from the November 2012 mineral resource estimate (Goldcorp plus Newstrike 2010-2012 drilling, holes 1 - 130) with the additional drilling by Newstrike in 2012-2013. Both tabulations use the capped gold and silver assay values. The Newstrike 2012-2013 drill program intersected lower average grades in many of the rock types. There does not appear to be any changes in assaying or sampling protocol and the lower grades are attributed to the drill hole locations within the deposit.

Source: JDS(2014). Note: Average gold and silver grades at 0.00 g/t cut-off 37 assay intervals have no gold and silver assays

Gold and silver assays were composited into approximately 5 metre equal length intervals based on the lithology contacts of the block model geology. Based on the review of the 5m composite grades of drill holes on either side of the major contacts, selected lithology units were combined prior to compositing as there was minor difference in gold grades when the contact was crossed. Comparison across other contacts showed larger differences and these contacts were respected when developing the final set of composites used for grade estimation. The combined lithology units for compositing are granodiorite, skarn, hornfels, multi-lithic breccia and hydrothermal breccia (codes 20, 40, 41, 60 and 61), with the limestone-shale, BX1 and BX2 breccias (codes 12, 62 and 63) composited uniquely.

Table 14-5 summarizes the total assay and five metre composite databases within the model limits that are used for the grade estimations for gold and silver. Figures 14-4 and 14-5 are box plots of the five metre composites for gold and silver and have the same format as Figures 14-2 and 14-3 that illustrate the assay data.

Note: Average gold and silver grades at 0.00 g/t cut off 34 composite intervals have no gold and silver assays

The patterns of grade distribution in the deposit are illustrated in Figures 14-6 and 14-7, which are east west sections along 1998000N (the Breccia zone) and 1998400N showing 5m composite gold grades, and the block model lithology.

The block model lithology was interpreted by Newstrike/ProDeMin and provided to IMC as both wireframes of the major lithology units and assigned to the block model, coding the 10x10x10m blocks. IMC reviewed the assignments to the model and agrees with the interpretation. The interpretation assigned to the model is simplified and minor occurrences of rock types within larger runs of different lithology units in the logged drill core have been lumped with the major units for the model interpretation. The limestone-shale and granodiorite units are the major lithology types, which are inter-bedded, and the skarn and hornfels being alteration units. There are four breccia units identified in the model lithology, two of which (multi-lithic breccia, 60 and hydrothermal breccia 61) are minor units for resource estimation. The other two breccias, BX1 (high grade) and BX2 (lower grade gold and high silver) are interpreted based in part on metallurgical criteria for separation into unique breccia types. Table 14-6 is a comparison of the 5m composites logged lithology compared to the model lithology assigned to the composite based on its location in the model.

Comparison of the average grades of the 5m composites by the model lithology (shown on Table 14-6) indicates that some of the lithology units could be combined for the estimation of grades and other units should be uniquely estimated. To confirm this, composite grades on each side of the lithology contacts for various combinations of the model lithology units were compared. The results indicate that the limestone-shale, BX1 and BX2 units should be estimated uniquely and the granodiorite, skarn, hornfels and the two minor breccia units (multi-lithic and hydrothermal) can be combined for grade estimation. Graphs of the comparisons are included as Figure 14-7 through Figure 14-13. These show the composite gold grades as a function of distance away from the contact between two lithology units (the first unit in the title on the left of the zero distance line and the second unit on the right side).

Figure 14-8 compares the granodiorite with the combined skarn, hornfels, and two minor breccias. There is one outlier, but otherwise the grades are similar in the granodiorite and the combined other lithologies.

Figure 14-9 compares the granodiorite with the BX1 breccia, with the BX1 breccia showing a higher grade at the contact.

Figure 14-10 compares the granodiorite with the BX2 breccia, with the BX2 breccia showing a higher grade at the contact.

Figure 14-11 compares the limestone – shale with the BX2 breccia, with the BX1 breccia showing a higher grade at the contact.

Figure 14-12 compares the limestone – shale with the BX1 breccia, with the BX2 breccia showing a higher grade at the contact.

Figure 14-13 compares the limestone – shale with the combined granodiorite, skarn and minor breccias. The grades are similar in both groups near the contact, but the limestone – shale grades are lower moving away from the contact and within the search distance for grade estimation. It was decided to treat these two lithology groups separately for grade estimation.

Figure 14-8: Cross Contact Gold Grades: Granodiorite with Combined Skarn, Hornfels and Minor Breccias

Figure 14-13: Cross Contact Gold Grades: Limestone – Shale with Combined Granodiorite Skarn and minor breccias

Variograms were run for the four unique lithology groupings to establish the orientation and search distances for the estimation of gold and silver grades into the block model. Table 14-7 is a summary of the variogram parameters and Figure 14-14 through Figure 14-17 are the fitted variograms.

The Ana Paula block model covers the area from section lines 1997100N to 1999400N, from 408500E to 410800E and from the 110 meter to the 1260 metre elevation. With a block size of 10x10x10 m it contains 230 columns, 230 rows and 128 tiers for a total of 6,083,500 blocks.

Gold and silver grades were estimated to the model blocks using an inverse distance squared (ID2) operator for the statement of mineral resources and by ordinary kriging (OK) as a comparison estimate. The grades were estimated for each rock type using the composites by rock type as shown in Table 14-8. The limestone – shale, BX1 and BX2 rock types were each estimated separately using only the same rock types. The granodiorite (20), skarn (40), hornfels (41), multilithic breccia (60) and hydrothermal breccia (61) were estimated using the combined drill hole composites for these rock types. The orientation and estimation distances used for the grade estimations are included in Table 14-8. The initial estimation distance was used as the first pass for grade estimates to the block model and the maximum distance represents about 67 to 70 percent of the variogram ranges. The search distances were extended to the full range of the variogram to fill in blocks not previously assigned a grade and all blocks from this estimate received an inferred classification. The estimates used a maximum of 12 drill hole composites and a minimum of two composites with no more than three composites coming from a particular drill hole.

Figure 14-18 and Figure 14-19 are east-west cross sections showing the gold grade distribution in the ID2 model at 1,998,000N and 1,998,400N which correspond to the drill hole composite sections 14-6 and 14-7 respectively.

Seven or more drill holes within the initial search ellipsoid distance (Table 14-8) centered on the block and no farther than 25m from the closest hole

Fewer than three drill holes within the search ellipsoid (of either the initial or expanded estimation distances)

These criteria are supported by kriging variances, which are a measure of the errors to which individual block grade estimates are subject. Figure 14-20, which plots kriging variance against the number of drill holes in the search ellipsoid, shows kriging variance increasing slowly as the number of holes decreases from twelve to seven, increasing more rapidly between seven and three and then breaking abruptly upwards below three, as illustrated by the regression lines. The inflections at three and seven holes are used as confidence thresholds for segregating measured, indicated and inferred material.

The criteria for measured blocks were, however, tightened to avoid possible overstatement by applying the 25 metre maximum distance constraint, which is equal to one half or less of the length of the search ellipsoid minor axis. Figure 14-21and Figure 14-22 show the distribution of measured indicated and inferred blocks on the 1998000N and 1998400N sections. The outline of the mineral resource pit shell is shown on each section. The majority of the material within the mineral resource shell is in the area of the denser drilling and is classified as measured or indicated with the inferred to the peripheral in areas of less drilling and generally lower gold grades.

Tonnages were estimated by assigning the means of the core sample specific gravity measurements supplied by Newstrike in each main lithologic unit to the corresponding block lithology codes in the geologic model. The specific gravity values used to estimate tonnages are shown in Table 14-9. The combination of the specific gravity measurement completed by ProDeMin and the SGS commercial laboratory was used for each model lithology.

From October to November 2012, SRK conducted a preliminary assessment of pit slope angles for use in ultimate pit design for the Ana Paula Project. SRK’s program began with a site visit to the Project on October 11-12, 2012 which included a review of available geologic and hydrogeologic information, a field visit to the proposed open pit area, a review of core logging procedures, an inspection of typical core for the major lithologies present in the slopes of a pit model provided by the Company, and collection of six representative core samples for laboratory strength testing

Uniaxial compressive strength tests were conducted on 6 core samples, which included two each for typical granodiorite, limestone and mineralized breccia rock types. A summary of the test results are included in the following Table 14-10.

The granodiorite was characterized as strong with an average UCS strength of approximately 129 Mega Pascal’s (MPa), and the limestone was characterized as weak, with an average UCS strength of approximately 37 MPa. The mineralized breccia showed a wide variation in strength, appearing to lie between the values of the other two rock types.

Examination of the core and estimation of parameters comprising the Barton (1974) Q and Bieniawski (1989) Rock Mass Rating (RMR) systems of classification, Table 14-11, resulted in the following design values of RMR and GSI (Geological Strength Index) to be used in design of pit slope angles, Table 14-12.

The results indicate that the overall rock mass strength where the pit walls will most likely be situated range from fair to very good. However, it is anticipated in the study by SRK that geologic structures will be the controlling factor for pit slope stability rather than intact rock strength or overall rock mass strength, especially on the east slope of the pit where structures, contacts and bedding planes dip into the pit at angles of 45 to 55 degrees.

A tabulation of the mineral resource was developed based on the following inputs. The mineral resource is within an open pit shell geometry.

A floating cone algorithm was run with the input parameters shown on Table 14-13. This defined the portion of the mineral inventory which has a reasonable potential of extraction by open pit mining methods. No underground resource has been defined at this time. Figure 14-23 shows the geometry of the mineral resource shell. Table 14-14 is the tabulation of the mineral resource by lithology tabulated at an internal cutoff of 0.46 g/t gold equivalent (AuEq). The calculation of AuEq includes the gold and silver prices and recoveries presented in Table 14-13. AuEq equals Au + 0.011xAg. No dilution has been applied.

An alternative resource block model was created using ordinary kriging to estimate the gold and silver grades in the model. All of the estimation and classification parameters were the same, but slightly different inputs to generate the open pit shell. A tabulation of the ordinary kriged tonnage and grade within an independently generated open pit shell is shown on Table 14-16. The tonnage and grade is similar to the ID2 mineral resource, in part because of the close spaced drilling. Other mineral inventory estimates were completed, some within the same lithology restrictions, and all inventories within a pit shell were within about 5 to 10 percent of each other.

This section is unchanged from the initial 2014 PEA. As a validation check for this 2016 update, the pit was re-optimized using the current gold price of $1,200 per ounce, and adjusted costs (foreign exchange rate and major commodity price updates). Pit optimization showed contained gold ounces increased by less than 1%. This difference is well within the accuracy level of this report and as such, is not considered a material change.

Mine design and planning for the Ana Paula project is based on the IMC resource model, as detailed in Section 14 of this report. Mine planning and optimization results are based on measured, indicated and inferred resources for gold and silver.

This section outlines the parameters and procedures used to perform pit optimization and subsequent mine planning work for the Ana Paula project.

The deposit will be a conventional, open pit, truck-and-shovel operation. A mill feed of approximately 6,000 tpd is planned over an 8-year mine life. There will be pre-strip material in Year -1, with a full production ramp-up in year 1.

The mine planning and cut-off grade reporting was completed using the Maptek VulcanTM software, then transferred into Geovia Whittle™ pit optimization software. Using the Lerchs-Grossman (LG) algorithm, the optimization performs a series of nested shells by varying revenue factors. The ultimate pit and phases were then selected and used to develop the life of mine plan (LOM).

The waste rock, acid base accounting testing was not yet available at the time of this study; the next level of study will include management of waste as it is categorized.

Table 16-1 shows the key results from the LOM plan. Waste material mined and associated strip ratio includes pre-stripping activities in Year -1.

Due to the natural terrain of the deposit, the Southeast sector is the lowest part of the topography. This would be proposed as the main ramp (entrance/exit) location. The 90t class truck should be considered in the ramp width and mining 20m benches for the overall slope calculation for the geotechnical study.

The block model was provided by IMC in an ASCII format with a 10m-(X) by 10m-(Y) by 10m-(Z) block size. The block model was then transferred into Geovia Whittle™ software and due to the geological complexity of the model, it was re-blocked to 20m-(X) by 20m-(Y) by 20m-(Z) block size within the Geovia Whittle™ software to reduce the optimization run-time.

Parameters defined and outlined in Table 16-3 were estimated using the limited information available. No capital costs were considered at the time of this study. Optimizations were run using measured, indicated and inferred mineral resources.

*Au Price: Lesser of (August 2014 three year trailing average $1508 or Kitco price of $1309.75) as of August 8th, 2014. **Ag Price: Lesser of (August 2014 three year trailing average $27.00 or Kitco price of $20.13) as of August 8th, 2014. Source: JDS, 2014.

Series of nested shells were generated using a revenue factor. The line graphs in Figure 16-1 represent the best- and worst-case value scenarios for each shell by varying revenue factors.

The best-case graph plots discounted values based on the mining performed shell by shell; the worst-case graph plots discounted values based on the mining performed bench by bench. This gives a representation of where the optimized pit shell lies for each best- and worst-case curve. Note that the optimization results are reported in short tons.

The revenue factor ranged from 0.3 to 2.0, with a 0.02 step size increment. The discounted value of each pit shell was estimated using a discount rate of five percent. The tabulation of data from Figure 16-1 is shown in Table 16-4.

The key focus of the preliminary assessment was to maximize the open pit resources and to show ‘reasonable potential for economic extraction’. The final pit selection was based on the revenue factor of 0.9 (90 percent) of the gold and silver prices used in the optimization. Using a 0.9 revenue factor eliminates any marginal grade sitting along the final pit wall. Therefore, pit shell 30, where the revenue factor is equal to 0.9, was selected for the final shell.

A detailed mine design was not completed for this study, but mining will be performed on 10m benches and 60 m minimum mining widths. A series of shells were analyzed, and shells 4 (revenue factor 0.36) and 30 where selected for mine planning.

A gold equivalent calculation was developed to aid in the reporting of gold and silver for mine planning purposes. The gold equivalent calculation is as follows using the optimization parameters provided in Table 16-3:

Factor = [(Ag Price – Ag Selling Cost) * Ag Recovery * Ag Payable * (1 - NSR Royalty)] / [(Au Price – Au Selling Cost) * Au Recovery * Au Payable * (1 - NSR Royalty)]

The gold equivalent calculation was completed in the Maptek VulcanTM software using the gold and silver grades provided by the IMC resource model.

A Gold equivalent cut-off calculation is based on optimization parameters provided in Table 16-4. Mine and Mill cut-off grades calculations were determined for the mine production schedule:

Mine AuEq Cutoff Grade = (Mine+Mill+G&A Costs) / [(((Au Price – Au Selling Cost)/31.1035 * Au Recovery * Au Payable) + ((Ag Price – Ag Selling Cost)/31.1035 * Ag Recovery *Ag Payable)) * (1 - NSR Royalty)]

Mine AuEq Cutoff Grade = (2.12+17.81+2.49)/[(((1300 -0.71)/31.1035*75%*99.80%)+((20 -0.22)/31.1035*55%*99.75%))*(1 -2%)] = 0.72 g/t

The milling AuEq cut-off calculation ignores the mining costs in the calculation; also called marginal grade.

To maximize a higher value during the mine life, a mining cut-off was applied and any material between the milling and mining cut-off would be stockpiled and processed at the end of mine life of approximately 1.620 million tonnes.

The mining production schedule was developed based on a maximum mill capacity of approximately 6000 t/d. The Ana Paula project life is 10 years, including one year of pre-stripping followed by 9-years of operations. The throughput rate is assumed to achieve full capacity Year 1 of operation. Table 16-5 below, outlines the mine production schedule by year.

During the mine scheduling exercise, the goal was to mine the highest-grade material first, while deferring the pre-stripping requirements until later. This would allow for early payback and to help improve the economics of this deposit. Only 6.65 Mt of waste will be required to be moved during pre-striping. The level of organics that will need to be moved is unknown at the time of this study. It is JDS opinion that only a small percentage of the pre-stripping requirements are likely to be associated to the removal of organics.

Approximately 4.22 million tonnes of rehandled material will required during the mine life from two stockpiles. This will be required to manage the mill throughput and to smooth out the strip ratios in years 4 and 5. The first stockpile will contain material above a 0.72 g/t AuEq cutoff which will be rehandled throughout the mine life of approximately 2.60 million tonnes, The second stockpile will contain marginal grade for material ranging between 0.64 g/t and 0.72 g/t AuEq of approximately 1.620 million tonnes to be rehandled at the end of the mine life.

Over the life of mine, the open pit will produce approximately 46 Mt of waste rock. At the time of this study, the mine rock acid-base accounting information was not available; therefore, all mine rock has been categorized as NAG waste rock.

All mine and support mine equipment will be provided by contractors. The equipment description in this section provides general information of the size and/or capacity of the selected equipment.

This operation will be a conventional, open pit, truck-and-shovel operation. JDS prefers conventional, proven 90-tonne class trucks, 12.5 m3 class hydraulic shovels for open pit loading and hauling.

Blast-hole track-mounted drills either rotary drilling or down-the-hole (DTH), are planned for the project. Due to the size of the operation, all equipment on site will be diesel powered.

The mine will operate 24 hours per day, 365 days per year. The contractor’s equipment is expected to have long-term mechanical availability of 85%. Utilization has been assumed to be 85%. This gives approximately 7446 gross operating hours per year.

Major mine equipment provided by contractors has been estimated based above. They are listed in Table 16-6 below.

Explosives will be supplied by a single service contract, using conventional heavy ANFO and delivered by an on-site mixing truck to the blast hole.

Blast design is based on 10m benches, using powder factors 0.26. Over the life of mine, the project will use approximately 16.6 Mkg of ammonium nitrate (AN) with an average use of 1.84 Mkg per year during years 1 through 8.

Owner mine operations personnel will be responsible for the blasting pattern design and the contractor personnel for loading holes and tie-ins.

Pre-Shearing explosive products should be evaluated at the next stage of the study to determine if higher blasting costs to steepen the overall wall angle will reduce the overall mining of waste and costs.

The management staff, technical personnel will only operate on a single 12-hour day shift, on 4 days in, 3 days out, as where contractor mine crews will operate on two 12-hour shifts per day, 365 days per year. This will require four mining and maintenance crews. Crews will work a standard rotation of two weeks on, two weeks off. Personnel requirements are estimated based on the peak number of equipment units operating. Peak mine personnel requirements are estimated and summarized in Table 16-7 to Table 16-11.

The Ana Paula process plant is designed to process 2,160,000 tons per annum at a design rate of 6,000 tpd based on an overall mechanical equipment availability of 92 percent. The plant is designed to run 360 days/year, 24 hours/day. The crushing circuit is designed with a mechanical equipment availability of 70 percent on the same 360/24 schedule.

The proposed process for Ana Paula, based on a review of the available testwork, is a gravity/sulfide concentrate circuit followed by cyanide leach. The plant will include:

Equipment from the El Sauzal process plant will be relocated to Ana Paula and incorporated into the recovery process. A design criteria was developed based on the available testwork, and was used to confirm that the used equipment will have capacity to process 6000 tpd. New equipment will be purchased in circuits where used equipment was not available, or where sizing of the used equipment will not be sufficient to meet the circuit requirements. The overall flowsheet, shown in Figure 17-1, highlights the new equipment in red.

The crushing circuit will incorporate used equipment from the El Sauzal process plant. The circuit is designed to process 357 tph at a mechanical availability of 70%. A single jaw crusher will operate in open circuit, producing an 80 percent passing (P80) product size of 150 mm. The crushing work index and feed size distribution are assumed and should be determined in the next phase of engineering. The circuit was simulated using Plant Designer to confirm that the used crusher would have the capacity to produce the required product size at the desired tonnage.

The crushing circuit is fed with Run-of-Mine (ROM) material at an assumed top size of 900 mm. Haul trucks, or a front-end loader, will dump material onto a 750 mm static grizzly and oversize will be broken up with a hydraulic rock breaker. Material will flow into a dump pocket and a grizzly feeder will transfer the material into a primary jaw crusher. The 1,500 mm x 1,070 mm jaw crusher, model CJ615, has an installed power of 200 kW, and will operate at a closed side setting (CSS) of 135 mm. The jaw crusher product, at a P80 of 150 mm, will be conveyed to the crushed rock stockpile, providing surge capacity for the grinding circuit.

The grinding circuit consists of the El Sauzal SAG mill, pebble crusher, ball mill and a new vertical mill. The ball mill and vertical mill will each have a new gravity circuit operating in closed circuit with a cyclone cluster. The SAG mill is fed from the stockpile using two of three used apron feeders at a fresh feed rate of 272 tph. The circuit operates 24 hours/day at an assumed mechanical availability of 92 percent. Mill sizing was calculated based on one Bond ball mill work index test conducted by Phillips laboratories in Golden, Co. Additional work will be done in the next phase of engineering to confirm hardness indices and size the tertiary grinding mill.

Material from the crushed rock stockpile will be reclaimed by apron feeders (2 operating / 1 standby) and deposited onto a belt conveyor feeding the SAG circuit. The 7.3 dia. x 2.9 m long SAG mill has an installed power of 2,238 kW. The SAG mill product will discharge onto a new SAG discharge screen. The screen oversize will be conveyed using a series of three new conveyors to a used pebble crusher, model CH440, with an installed power of 165 kW. The crushed pebbles will then be circulated back to the SAG mill feed conveyor.

The SAG discharge screen undersize will flow by gravity to the primary cyclone feed pumpbox and combines with the ball mill discharge and the gravity concentrator No. 1 tailings. Used primary cyclone feed pumps (1 operating / 1 standby) will transport the slurry to a cluster of 6 used gMax26 hydrocyclones for size classification. The cyclone overflow, at product P80 of 250 µm, will feed the new tertiary grinding circuit, while the cyclone underflow will be split into two streams. One stream will feed a new QS30MS gravity concentrator to recover free gold, while the other stream will flow to a ball mill for further grinding. The used 4.9 m dia. x 6.4 m long used ball mill has an installed power of 2,238 kW.

The tertiary grinding circuit will provide approximately 700 kW of extra grinding power required to achieve the final P80 of 197 µm. The tertiary grinding circuit includes a vertical mill, VXP2500 or equivalent, operating in closed circuit with a cluster of 6 new gMax26 hydrocyclones. The cyclone overflow will flow by gravity to the rougher flotation circuit, while the cyclone underflow will feed the vertical stirred mill. About 25 percent of the underflow is diverted to a gravity concentrator. According to the testwork, 41 percent of the gold and 14 percent of the silver will be recovered as a gravity concentrate. The gravity concentrate will report to an intensive cyanide leach circuit, Acacia CS2000 or equivalent, to leach the precious metals into solution. The pregnant solution from the circuit will be sent to the electrowinning cells in the gold refinery.

The flotation circuit was sized based on testwork performed by ALS in January 2014 (KM4097). A scale-up factor of 2.5 was applied to laboratory flotation times to calculate flotation cell sizes.

The new circuit consists of a conditioning tank and a single bank of six new 50 m3 rougher flotation tank cells. The sulphide collecting agent, potassium amyl-xanthate (PAX), along with the cyclone overflow slurry will be conditioned in an agitated tank for 5 minutes before feeding the flotation circuit. Frother, similar to methyl-isobutyl carbinol (MIBC), will be added as needed to enhance froth production. The rougher concentrate, approximately 18.9% of the feed tonnage, reports to the regrind circuit, and the tailings reports to the final tailings thickener.

The flotation concentrate discharges into the new regrind circuit cyclone feed pumpbox. The rougher concentrate will then be pumped to a cluster of 8 new gMax10 for size classification. The cyclone underflow will report to the vertical regrind mill, VXP2500 or equivalent, for further grinding, while the cyclone overflow, at final grind P80 of 43 µm will feed the pre-leach thickener.

The regrind concentrate will flow by gravity to the used 14 m diameter high-rate thickener to increase slurry density prior to leaching. The thickener underflow, at approximately 50% solids, will be pumped to the aeration tank, while the overflow solution is transferred to the process water tank.

Leach testwork performed on the concentrate indicates that regrinding to a P80 of 43 µm is necessary toextract the precious metals from the gangue.

After regrinding and thickening, the slurry reports to a 14 m dia. x 15 m high used aeration tank, providing 16 hours of retention time. Air is blown into the tank using a low pressure blower. The oxygen in the air is assumed to passivate sulfide minerals, reducing their potential to serve as cyanicides.

After aeration, the slurry undergoes cyanide leaching in a carbon-in-leach (CIL) circuit. Milk of Lime (MOL) and liquid sodium cyanide are added to the leaching circuit. The MOL adjusts the pH to 10.5 or higher, reducing the loss of aqueous cyanide. The cyanide molecule leaches precious metals into solution, allowing them to be adsorbed onto activated carbon.

Five used 14 m dia. x 15 m tanks will provide 48 hours of retention time for the dissolution of precious metals. The tanks are arranged as overflow tanks and are equipped with agitators and carbon screens. The slurry moves downstream by gravity and the carbon is pumped upstream in a counter current arrangement. This carbon movement allows the most active carbon to be in contact with the lowest concentration solutions, improving the adsorption of metals onto the carbon surfaces.

Once a day, carbon from the first tank in the CIL train will be pumped to a wash screen. The carbon is screened from the slurry and transferred to the ADR plant. The tailings from the CIL circuit will be pumped to the cyanide destruction circuit. No testwork has been performed to date to determine the residual cyanide level or method of cyanide destruction. This will be performed in the next phase of engineering.

The Ana Paula plant is expected to strip and regenerate approximately 5 tonnes of carbon each day. The carbon is expected to load one-third as gold and the remaining values as silver. Other metals will load on carbon as well, most notably copper.

The El Sauzal ADR plant was sized to process 4.5 tonnes of carbon per day. An additional strip vessel and electrowinning cell will be included in the flowsheet to provide extra capacity.

The loaded carbon will be transferred to the acid wash vessel. The loaded carbon will be treated with 3% hydrochloric acid (HCl) solution to remove calcium, magnesium, sodium salts, silica, and fine iron particles. Organic foulants such as oils and fats are unaffected by the acid and will be removed after the stripping or elution step by thermal reactivation utilizing a kiln. The dilute acid solution will be pumped into the bottom of the acid wash vessel, exiting through the top of the vessel back to the dilute acid tank. At the conclusion of the acid wash cycle, a dilute caustic solution will be used to wash the carbon and neutralize the acidity.

A recessed impeller pump will transfer acid washed carbon from the acid wash tank into the strip or elution vessel. Carbon slurry will discharge directly into the top of the elution vessel. Under normal operation, only one elution will take place each day.

After acid washing, the loaded carbon will be stripped of the adsorbed gold using a modified ZADRA process. During the strip cycle, solution containing approximately 1 % sodium hydroxide and 0.1 % sodium cyanide, at a temperature of 140 °C and 450 kPa, will be circulated through the strip vessel. Solution exiting the top of the vessel will be cooled below its boiling point by the heat recovery heat exchanger. Heat from the outgoing pregnant solution will be transferred to the incoming cold barren solution. A diesel powered boiler will be used as the primary solution heater to maintain the barren solution at 140 °C. The cooled pregnant solution will flow by gravity to the electrowinning cells. At the conclusion of the strip cycle, the stripped carbon will be pumped to the carbon regeneration circuit.

The stripped carbon from the strip vessel will be pumped to the vibrating carbon-sizing screen. The kiln-feed screen doubles as a dewatering screen and a carbon-sizing screen, where fine carbon particles will be removed. Oversize carbon from the screen will discharge by gravity to the carbon-regeneration kiln feed hopper. Screen undersize carbon will drain into the carbon fines tank and then be filtered and bagged for disposal. A diesel-fired horizontal kiln will re-activate the carbon at 650 °C. The regeneration-kiln discharge will be transferred to the carbon quench tank by gravity, cooled by fresh water or with carbon-fines water, prior to being pumped back into the CIL circuit.

To compensate for carbon losses by attrition, new carbon will be added to the carbon attrition tank. New carbon and fresh water are mixed to break off any loose pieces of carbon prior to being combined with the reactivated carbon in the carbon holding tank.

Pregnant solution will flow by gravity to a secure gold room. The solution will flow through one of three electrowinning cells. Gold will be plated onto knitted-mesh steel wool cathodes in the electrowinning cell. Loaded cathodes will be power washed to remove the gold-bearing sludge and any remaining steel wool. The gold-bearing sludge and steel wool will be filtered to remove excess moisture and mixed with fluxes consisting of borax, silica and soda ash before being smelted in an induction furnace to produce doré bars.

Slurry from the cyanide destruction circuit and rougher flotation tailings will be dewatered in a used 28 m diameter high-rate thickener. The thickener underflow, at 60% solids by weight, will report to the final tailings pumpbox and pumped to the tailings management facility (TMF). Thickener overflow will be combined with the preleach thickener overflow in the process water tank and used as make-up water in the plant.

The Ana Paula project will have access to the local power grid and will be able to take advantage of existing infrastructure. Make-up water requirements for the plant will be from thickener overflow, reclaim water and fresh water.

Dry reagents will be delivered to site in 1 t super sacks. The bags will be fed via a hopper to a mix tanks, prepared and transferred to the storage tanks for distribution in the plant. PAX (xanthate), Lime, Caustic, Flocculent SMBS and CuSO4 will all be mixed and stored using a similar procedure. The solutions will be delivered to the plant by metering pumps.

Sodium cyanide briquettes will be delivered to site in 1 t super sacks contained in a wood frame. The briquettes will be mixed in the cyanide mix tank and subsequently transferred to the cyanide solution storage tank. The concentrated cyanide solution will be added to the leach circuit at a rate of 3.45 kg/t of material feed. Cyanide will be used in the carbon strip circuit at a concentration of 0.1% .The principles and standards of practice for the transport to site and handling of cyanide on site will be in accordance with the guidelines set out in the International Cyanide Management Code (ICMC).

Hydrochloric acid, MIBC and antiscalant solutions will be supplied to site in 1 t totes. The solutions will be metered directly from the totes for distribution in the plant.

In the next phase of study, the number of metallurgical samples required to better define the Ana Paula property should include composites from the first 3-years of operation by rock type. This is commonly referred to as a variability study. From this testwork, Ana Paula can proceed with some confidence towards a full-scale pre-feasibility or feasibility level study.

Costs for engineering work can vary greatly; however, an estimated cost range should be between $350K and $520K for process engineering.

The Ana Paula project is located in the state of Guerrero, Mexico, approximately 170km southwest of Mexico City, roughly equidistant between Mexico City and Acapulco. The project is accessible from Highway 51 along a stretch of gravel roads that will require some improvement to enable access for the larger trucks carrying heavy mine equipment and supply loads for the mine site. The mine site lies approximately 30 km south of Highway 51, and this section of gravel road can be relatively easily upgraded to service the project. Iguala is the nearest major city and is serviced by direct airline flights from several major Mexican cities.

The mine and process facilities are planned to lie between the open pit and the tailings storage facility and at a higher elevation. A crusher station and conveyor will be placed on a lower saddle point closer to the pit ramp and will deliver the crushed rock to the mill, where further processing will be accomplished.

A lined tailings management facility has been located, preliminarily sized, and costed to facilitate the tailings anticipated to result from processing the 17.8 million tonnes of projected mineralized material to be mined in the base case mine plan.. Additional space for storm water runoff, surge, and wave action have been incorporated into the preliminary design as freeboard for the tailings management facility.

The tailings storage facility and dam as laid out for the purposes of this study involve a mapped area of approximately 392,000 m2 or 39.2 hectares. The tailings storage facility has been situated directly downstream of the rock management facility such that impacted runoff from the rock management is controlled and can be introduced into the process water stream for mineral processing in the plant. The tailings storage facility is also in close proximity and at a lower elevation than the plant, further simplifying tailings placement.

Surplus water from the conveyance and placement of tailings material will be recovered and pumped back to the plant for reuse in the mineral processing activities.

The single rock management facility has been located and sized for approximately 46 million tonnes of mine rock based on the base case mining scenario evaluated for this PEA study. The rock management facility has been located adjacent to the pit with runoff being captured by the downstream located tailings management facility. This downstream placement of the tailings management facility enables this water to be captured and incorporated into the process water for mineral processing activities without the addition of any pumping equipment or catchments beneath the rock management facility.

Slopes and layout of the rock management facility are preliminary, but are anticipated to be sufficiently shallow to account for the seismicity of the region.

The process facility is comprised of a gravity/flotation/carbon-in-leach (CIL) process plant, storage tanks, tailings thickening area, assay lab, and lay-down area. Adequate warehouse and office space have been accounted for along with sewage treatment and potable water treatment facilities.

An assay lab was included with the El Sauzal plant acquisition resulting in a capital cost decrease from the October 2014 PEA.

Support and ancillary buildings for the site include a covered, partially enclosed equipment maintenance shop, administration office building, fuel storage/dispensing system, truck scale, warehouse, and security trailer. Some additional facilities may be brought in by the contract miner. The mine scenario evaluated in this PEA study includes the construction of an on-site camp capable of housing up to approximately 128 people. Security issues and effectively expanding the region or area from which skilled labor can be drawn to this mine will both be enhanced by having a camp enabling the housing of workers at the site.

Administration facilities included with the El Sauzal plant acquisition result in a capital cost decrease from the October 2014 PEA.

Line power is available within 1.5 km of the proposed plant site and is supplied via a 115 kV line running generally east-west adjacent to the site property. A 1.5 km power line will be constructed with appropriate tie-ins and switching to deliver power at 115Kv to a substation that will be constructed in close proximity to the plant site. The substation will drop the supply voltage to either 25 kV for general distribution around the site or to 4,160 kV for distribution to the large motor loads such as the crusher facilities. Power usage has been estimated at +/-10 megawatts and the Federal Power Agency in Mexico (CFE), has reported that the line has sufficient capacity to handle the +/-10 megawatt load anticipated from the site. A site visit by CFE and obtaining written confirmation to secure the power will be the next steps in acquiring power for the mine operations at site.

The average water usage for the project is estimated to be 2,400 gpm. Surface water impacted by the tailings management facility and surplus water from tailings deposition will be returned to the process facility for reuse to help minimize the amount of water needed from the water supply well clusters. The vast majority of water supply is anticipated to be obtainable from proximal groundwater sources.

Mexico recognizes water as a national resource and regulates the use of water through the Comisión Nacional del Agua (CNA). The aquifer targeted for supply of the needed groundwater for the Ana Paula project site will require a new water concession application to be made with the CNA. A water concession will need to be granted by the Mexican water agency, Comisión Nacional del Agua (CNA), based on a permit application. The permit application will need to be supported by a technical study demonstrating that water availability and sufficient quantity exist in the area.

The next level of study should include a preliminary hydrologic study that would include determination of likely supply well cluster locations based upon the proposed groundwater source locations and the conducting of a field program to characterize aquifer characteristics and both water quality and quantity to support the proposed water supply requirements and the environmental baseline study.

To the extent practicable, storm water run-off will be diverted around the tailings management facility and process facilities via engineered diversion conveyances/channels with the intent of delivering unimpacted water back to its original drainage.

At this time, no market studies have been completed as the gold to be produced at Ana Paula can be readily sold in the open market. Gold refining charges were estimated based on similar projects, to be US$0.71/payable oz. Silver refining charges were estimated to be US$0.22/payable oz.

No contractual arrangements for concentrate trucking, port usage, shipping, smelting or refining exist at this time. Furthermore, no contractual arrangements have been made for the sale of gold doré at this time.

The base and precious metal markets benefit from terminal markets around the world (London, New York, Tokyo, Hong Kong) and fluctuate on an almost continuous basis. Historical metal price for gold and silver are shown in Figure 19-1 and Figure 19-2 and demonstrate the change in metal price from 2000 through to January 2016.

Base Case pricing is based on the spot price for silver and the 24 month average for gold as at February 2016. The Base Case pricing used in the parameters established for mine planning is based on spot pricing as at August 8, 2014.

Table 19-1 summarizes the metal prices and exchange rates used to run various scenarios in the economic analysis.

Currently the Project is permitted for the exploration drilling, but no permits are in place for the proposed mining operations. A description of the permitting process for mining operations is presented below.

ProDeMin has started collecting basic environmental information about the area, and has one person assigned one-half time to environmental issues. Formal environmental baseline studies have not been initiated. The project site is located in a mining district in the Sierra Madre del Sur mountain range in southern Mexico. Vegetation of the area is primarily tropical deciduous forest.

The Owner has installed a site-specific weather station near the core shack at the coordinates W 0411703 N 2004037. Local data for precipitation and temperature have been collected since 2000, plus wind speed and wind direction have been collected since 2012. The area is subject to summer storms and hurricanes.

Water management and supply will be an important part of the project development. Surface water bodies in the area include the Cuetzala River, Chilapilla River, Arroyo Hondo, Arroyo de Amaja and Arroyo de La Guadalupe. In the community of Cuetzala, water is sourced from several springs (Ojo de Agua and Cañitas) plus the Cuetzala River.

There is a hydroelectric dam (El Caracol) on the Rio Balsas. The water reservoir is the predominant surface water feature in the region. The reservoir was formed following construction of El Caracol Dam (formerly the Carlos Ramirez Ulloa Dam) in 1986. The reservoir supports an important commercial and subsistence fishery, and is part of the hydroelectric system. Potable water for the mining operation could come from a local well or be sourced from the water reservoir. A hydrologic study is needed to characterize the local groundwater conditions.

The mine will generate mine rock and tailings as part of the operations. Waste characterization studies have not yet been started.

There are presently no known environmental issues that could materially impact Newstrike Capital’s ability to extract the mineral resources and process material. The only known environmental liabilities are associated with the exploration site activities and access roads. Remediation of surface disturbances and any resultant contamination is required as part of the exploration environmental permits.

Guidance for the federal environmental requirements, including conservation of soils, water quality, flora and fauna, noise emissions, air quality, and hazardous waste management, derives primarily from the Ley General del Equilibrio Ecológico y la Protección al Ambiente (“LGEEPA”), the Ley General para la Prevención y Gestión Integral de los Residuos and the Ley de Aguas Nacionales (“LAN”). Article 28 of the LGEEPA specifies that SEMARNAT must issue prior approval to parties intending to develop a mine and mineral processing plant. On June 7, 2013, the Federal Law of Environmental Liability (Ley Federal de Responsabilidad Ambiental) was enacted. According to this law, any person or entity that by its action or omission, directly or indirectly, causes damage to the environment will be liable and obliged to repair the damage, or to pay compensation in the event that the repair is not possible. This liability is in addition to penalties imposed under any other judicial, administrative or criminal proceeding.

Environmental permitting in the mining industry in Mexico is mainly administered by the federal government body SEMARNAT, the federal regulatory agency that establishes the minimum standards for environmental compliance. SEMARANT has set regulatory standards for air emissions, discharges, biodiversity, noise, mining wastes, tailings, hazardous wastes, and soils. The regulatory standards apply to construction and operation activities.

There are three main SEMARNAT permits required prior to construction and development of a mining project. An Environmental Impact Statement (by Mexican regulations called a Manifestación de Impacto Ambiental, or “MIA”, for its initials in Spanish) is the document that must be filed with SEMARNAT for its evaluation and, if applicable, further approval by SEMARNAT through the issuance of an Environmental Impact Authorization. In addition, the Ley General de Desarrollo Forestal Sustentable indicates that authorizations must be granted by SEMARNAT for land use changes to industrial purposes. An application for change in land use or Cambio de Uso de Suelo Forestal, must be accompanied by a technical study that supports the environmental permit application (Estudio Técnico Justificativo or “ETJ”, for its initials in Spanish). In cases requiring a change in forestry land use, a Land Use Environmental Impact Assessment is also required. Mining projects also need to include a risk analysis for the use of regulated substances (Análisis de Riesgo) and an accident prevention program, which are reviewed and authorized by an interministerial governmental body.

Once the MIA is submitted for review, the government publishes an announcement to allow for public review of the proposed project. If the government receives requests, a formal public hearing will be conducted. The government also requires that the mining company publish announcements in the local papers to provide an opportunity for public comment. Government review, comment and approval of the environmental permit documents are estimated to be completed in three to six months; however it should be noted that permitting can be delayed with requests for information or for political reasons.

Following the main project approval and receipt of the Change of Land Use authorization, there are a number of permits that need to be acquired from various federal agencies. The LAN provides authority to the Comisión Nacional del Agua (“CNA”), an agency within SEMARNAT, to issue water extraction and discharge concessions, and specifies certain requirements to be met by applicants. Key permits include approval from the National Water Commission for construction of the tailings dam in creek basins that are considered to be federal zones; an archaeological release letter is required from the National Institute of Anthropology and History (“INAH”, for its initials in Spanish); an explosives permit is required from the Ministry of Defense (“SEDENA”, for its initials in Spanish) before construction begins; and a water discharge and usage must be granted by the CNA.

A project-specific environmental license (Licencia Ambiental Única or “LAU”, for its initials in Spanish), which states the operational conditions and requirements to be met, is issued by SEMARNAT when the agency has approved the project operations. A construction permit is required from the local municipality. Other local permits regarding non-hazardous waste handling and municipal safety and operating authorizations may also be required. The permitting process requires that the mining company has acquired the necessary surface titles, rights and agreements for the land to be used for the project.

Hazardous wastes from the mining industry are highly regulated and specific handling requirements must be met once they are generated, such as hazardous waste generator documentation, log books and handling manifests. Hazardous waste storage areas must comply with federal requirements.

The mine will generate mine rock and tailings as part of the operations. Waste characterization studies have not yet been started.

Community relations programs are carried out by ProDeMin, which has been conducting exploration activities and preliminary environmental characterization at the Project for Newstrike Capital. Stakeholders include the nearby communities, Ejidos, individual property owners, and government. ProDeMin’s internal policy for social responsibility and community relations is based on respect and equality and transparent communication with stakeholders.

The estimated population of the area is about 6,000 inhabitants. The surrounding land supports subsistence-level agriculture, including production of corn, beans, cattle and mangoes. The project will not need to relocate any houses during development. It is a rural area that has a high level of social programs for the underpriviledged.

Local personnel for the exploration activities are sourced primarily from Cuetzala del Progreso for the current project needs, which includes 44 ProDeMin workers and nine employees of Intercore Drilling. It is anticipated that about 35 percent of the area’s population is actively working, and could be employed in the proposed mining operations as general labor, domestic help, technicians and office employees.

ProDeMin has agreements with the owners of the land where the Project is located. One group is comprised of 29 unionized small property owners (locally known as “El Grupo de Pequeños Propietarios”) represented by Javier Velazquez. ProDeMin has individual contracts with each owner for exploration activities for a period of 10 years starting in October 2010. As part of the agreement ProDeMin gives preferential hiring to the group members or their designees. The contracts have an annual inflation increase clause, plus there is an annual meeting to determine increases based on various factors. The second group with a formal agreement is a group of property owners called “El Ejido”, which has 22 members and is represented by Rodimiro Luna. ProDeMin has the same type of contract with this ejido group as with the small property owners. It is ProDeMin’s policy to avoid differences between groups and thus use the same conditions in contracts.

ProDeMin interacts directly with the municipal president of Cuetzala del Progreso for local permitting and to provide support to the community.

Activities carried out as part of the community relations have included economic support and material support to the unions, Christmas holiday parties for the workers, participation and representation in annual sporting events in Cuetzala del Progreso, support to schools in the way of machinery and materials, sports uniforms, prizes, and medicine donations.

Personal security continues to be an issue in this area due in part to the production and transportation of illegal drugs. Project access risks are associated with the area safety issues.

The Project is in early stage exploration and there are no final plans for waste and tailings disposal, site monitoring and water management. During future phases the environmental management program will need to consider these aspects over the life of mine, including closure and post-closure activities. No closure costs have been developed; however an allowance of $15/oz Au was applied for final closure activities. It is assumed that reclamation will take place concurrent with mining activities to the extent practical. Closure and reclamation planning incorporated into the mine and tailings designs, and implemented during operations, will minimize end-of-mine closure liabilities.

The capital cost estimate (CAPEX) is based on a combination of first-principles build-up, experience, reference projects, budgetary quotes and factors as appropriate with a preliminary study.

The CAPEX estimate includes the costs required to develop, sustain, and close the operation for the planned 8 year mine life. The construction schedule is based on an approximate 1-year build period. The intended accuracy of this estimate is +/-25 percent. The CAPEX estimate summary is shown in Table 21-1.

All mining is assumed to be contracted. No mine equipment or facilities expenditures are used in this evaluation with the exception of equipment mobilization charges estimated at $0.4 million without contingency applied.

Process capital costs were based on the flowsheet developed by testwork. Major equipment items were based on solicited bids or recent database. All capital costs are based in $US, Table 21-2. Factors for piping, electrical were utilized to build up the direct cost estimate.

All major equipment items, including mills, crushers, tanks, thickeners were calculated based on parameters from testwork results or calculated based on estimated parameters from similar projects. A Bruno simulation was performed for the crushing circuit with the feed size estimated.

The operating cost estimates are based on a combination of first-principles build-up, reference projects, budgetary quotes and factors as appropriate for a preliminary study.

These costs include direct mining and re-handle by a contractor, and processing and disposal of the mineralized feed to the plant including doré produced on-site and transportation and refining charges, Table 21-3.

Mine operations will be conducted on 24 hours per day, 365 days per year based on 12-hour shifts using a work schedule of 14-days on and 14-days off.

A summary of LOM operating costs by activity are shown in Table 21-5. Mine operating cost allocation is shown in Figure 21-1.

Operating costs were based on the design criteria calculated from testwork, labor rates from previous projects, quotations and estimates for chemicals, and grid power. The total annual cost for operating the process plant is $33.5M or $15.52/tonne processed.

Labor rates are estimated based on previous work conducted in Mexico. The overhead factor includes basic benefits required by Mexican labor law, including basic benefits, labor insurance, severance payments, and payroll taxes, Table 21-6. Totals have been rounded to the nearest $1,000.

Reagent costs are based on quotations from vendors. Sodium hydroxide and hydrochloric acid unit costs are estimates. Consumption rates are calculated from testwork or estimated based on common factors. Cyanide represents approximately 87 percent of the total reagent costs and its consumption rate is taken directly from testwork. The cyanide reagent cost is a vendor quotation. All reagent costs are subject to change based on market conditions.

The total power consumption for the Ana Paula Plant was estimated based on an equipment list developed from the flowsheet. Major equipment sizing calculations were performed to provide power associated with crushers, mills, agitators, and pumps. The power usage was based on 80% of the total installed power.

Media consumption was calculated using the abrasion index and mill power draw. Liner and wear costs were provided by Vendors. The processing cost for grinding media and wear parts were estimated to be $1.65 and $0.72 per tonne, respectively.

G&A expenses include water supply at an estimated cost of $0.53 per cubic meter and electric power for the camp, administration and truck shop.

Camp services allowed for $16.67 per person-day including meals, housekeeping, and laundry. Given the proximity to Cutezala and other residential areas, it was assumed, that 70 percent of employees would be housed at camp and 30 percent would reside locally. Required camp beds are estimated at 70 per day for a combined total of 161 salaried and hourly personnel.

General Expenses include allowances for off-site road maintenance, community relations, consultants, travel expenses, security, safety programs and training.

An engineering economic model was developed to estimate annual cash flows and sensitivities of the project. Pre-tax estimates of project values were prepared for comparative purposes, while after-tax estimates were developed and are likely to approximate the true investment value. It must be noted, however, that tax estimates involve many complex variables that can only be accurately calculated during operations and, as such, the after-tax results are only approximations.

Sensitivity analyses were performed for variations in metal prices, head grades, operating costs, capital costs, and discount rates to determine their relative importance as project value drivers.

This technical report contains forward-looking information regarding projected mine production rates, construction schedules and forecasts of resulting cash flows as part of this study. The mill head grades are based on sufficient sampling that is reasonably expected to be representative of the realized grades from actual mining operations. Factors such as the ability to obtain permits to construct and operate a mine, or to obtain major equipment or skilled labour on a timely basis, to achieve the assumed mine production rates at the assumed grades, may cause actual results to differ materially from those presented in this economic analysis.

The estimates of capital and operating costs have been developed specifically for this project and are summarized in Section 21 of this report (presented in 2016 dollars). The economic analysis has been run with no inflation (constant dollar basis).

One metal price scenario was utilized to prepare the economic analysis. However a sensitivity analysis on the metal prices was completed and outlined in Section 22.8.

All costs, metal prices and economic results are reported in US dollars unless stated otherwise. LOM plan tonnage and grade estimates are demonstrated in Table 22-1.

Exclusion of all pre-development holding costs and sunk costs up to the start of detailed engineering (i.e. exploration and resource definition costs, engineering fieldwork and studies costs, environmental baseline studies costs, etc.)

The reader is cautioned that the gold prices used in this study are only estimates based on recent historical performance and there is absolutely no guarantee that they will be realized if the project is taken into production. The metal prices are based on many complex factors and there are no reliable long-term predictive tools.

Mine revenue is derived from the sale of doré into the international marketplace. No contractual arrangements for refining exist at this time. Details regarding the terms used for the economic analysis can be found in the Market Studies Section 19 of this report. Table 22-3 indicates the NSR parameters that were used in the economic analysis. Figure 22-1 and Figure 22-2 show breakdowns of the amount of gold and silver recovered during the mine life – a total of 957 koz of gold and 1,961 koz of silver is produced during the mine life.

Figure 22-3 demonstrates the breakdown of LOM Net Smelter Return for the Base Case which amounted to $1,152M.

During the two year pre-production period, the initial capital costs amount to $121.7M. This includes costs for pre-stripping, site development, processing plant, on-site infrastructure, tailings management facility, etc. A 20 percent contingency is included in the initial capital costs. A breakdown of the initial capital costs is shown in Table 22-4 and Figure 22-4.

Sustaining and closure capital cost estimates amount to $53.2M and were assumed to occur from Year 1 to Year 10 with a majority of these costs for the tailings management facility. A 20 percent contingency is included in the sustaining and closure capital expenditures. A breakdown of the sustaining and capital costs is shown in Table 22-4 and Figure 22-4.

Total LOM operating costs amount to $425.8M. The total LOM operating costs translate to an average cost of $23.98/tonne processed. A breakdown of these costs is outlined in Table 22-5 and Figure 22-6.

The project has been evaluated on an after-tax basis in order to provide a more indicative, but still approximate, value of the potential project economics. A tax model was prepared by Pricewaterhouse Coopers (PwC) located in Vancouver, Canada for the 2014 PEA. It was not re-reviewed by PwC for this update, however the same structure was used. The tax model contains the following assumptions:

The project is economically viable with an after-tax internal rate of return (IRR) of 42.5 percent and a net present value using a five percent discount rate (NPV5%) of $247.8 using the Base Case metal prices. Table 22-6 summarizes the economic results of each scenario evaluated.

The break-even gold price for the project’s Base Case is approximately US$672/oz, based on the LOM plan presented herein and a silver price of US$14/oz. Figure 22-7 shows the projected cash flows for the project used in the different scenarios of the economic analysis.

A sensitivity analysis was performed on the Base Case metal pricing scenarios to determine which factors most affected the project economics. The analysis revealed that the project is most sensitive to metal prices, followed by head grades and operating costs. The project showed the least sensitivity to capital costs. Table 22-7 along with Figure 22-8 outline the results of the sensitivity tests performed on after-tax NPV5% for the Base Case evaluated.

In addition, various scenarios were evaluated showing the project’s sensitivity to gold and silver price. Table 22-8 shows the economic results of the project using various gold and silver prices.

The project was also tested under various discount rates. The results of these tests for the Base Case are demonstrated in Table 22-9.

The Ana Paula concessions are internal to the Aurea Norte Property, also 100% owned by Newstrike, Figure 23.1 (Kearvell, 2013). Exploration conducted on the Aurea Norte Property is summarized in the NI 43-101 Technical Report filed on Sedar (Lunceford, 2009). Newstrike’s early stage Aurea Sur Property is contiguous to the Aurea Norte Property to the south and is described in Lunceford, 2009 and Lunceford, 2010. Figure 23-1 provides a Property location map for the GGB and known mines, deposits and showings.

The information presented in this section is from publically available information referenced below. No information is available to the authors to permit verification of this data. The information below is not necessarily indicative of the mineralization on Ana Paula.

The Los Filos mine was acquired by Goldcorp in 2005 through the purchase of Wheaton River Minerals Ltd, completed March 1st, 2005, and through the purchase of the Bermejal deposit from Minera El Bermejal, S. de R.L. de C.V. (Minera Bermejal), a joint venture of Industrias Peñoles S.A. de C.V. (“Peñoles”) and Newmont Mining Corporation announced March 22, 2005. The two acquisitions became the Filos Project with a combined inferred resource of 4.92 million ounces that became the Filos Mine when Goldcorp Inc. (“Goldcorp”), put it into production three years later in 2008, (Goldcorp, 2005a and 2005b).

Since then, the Filos Mine has grown to a 16.27 million ounce deposit (all categories, Table 23.1) that continues to provide a significant portion of Goldcorp’s cash flow. 2012 Production was 340,400 ounces of gold and 2013 guidance is to produce 340,000 to 350,000 ounces of gold at a grade of 0.78 to 0.84 grams per tonne gold, (Goldcorp, 2012). The mine is located on the trend of the Guerrero Gold Belt about 20 km southeasterly of Ana Paula (Numbers 14 through 16, Figure 23-1).

The Morelos project owned by Torex Gold Resources Inc (“Torex", formerly Gleichen Resources) was acquired in 2009 as a 3.2 million ounce inferred gold resource within the Limon and Los Guajes deposits and located about eight km southeast of Ana Paula, (Numbers 10 and 11, Figure 23.1, Teck Cominco, 2004). The Morelos project shares the southeastern boundary with Newstrike’s Aurea Norte Project, Figure 23-1.

Torex has published a bankable feasibility study and NI 43-101 reserve and resource estimate by M3 Engineering & Technology Corporation for the Limon and Los Guajes deposits located north of the Balsas River (Neff, et al, 2012), reporting proven and probable reserves of 4.09 million ounces gold and 6.81 million ounces silver and measured and indicated resources of 4.81 million ounces gold and 8.35 million ounces Ag as outlined in Table 23-2 (Neff et all, 2012). Hertel et al, (2013) reported an inferred resource for the Morelos Projects Media Luna deposit, located south of the Balsas River, of 39.9 million tonnes of 5.84 gold equivalent ounces as outlined in Table 23-3.

*Effective dates 11 June 2012 and 28 August 2012. After Neff et al. (2012) Weighted averages are calculated. Rounded numbers may not add up.

All Mineral Reserves and Mineral Resources have been calculated in accordance with the standards of the Canadian Institute of Mining, Metallurgy and Petroleum and National Instrument 43-101. Mineral Resources are classified in accordance with the 2010 CIM Definition Standards for Mineral Resources and Mineral Reserves and the 2003 CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines. These tables use the terms “Measured”, “Indicated” and “Inferred” Resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. “Inferred Mineral Resources” have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume that all or any part of an Inferred Mineral Resource exists, or is economically or legally mineable.

It is the conclusion of the Qualified Person’s preparing this technical report that the information contained within adequately supports the positive economic results obtained for the Ana Paula project. The project contains 17.8 million tonnes of gold-bearing sulphide mineralization that can be mined by open pit methods and recovered using common processing methods consisting of gravity, flotation, and cyanide leaching of flotation concentrates.

As demonstrated by the information contained in this report, the project is economically viable and should proceed to the next level of evaluation; either a pre-feasibility or feasibility study stage.

Newstrike has identified anomalous gold at surface in association with limestone, hornfels, intrusive rocks and breccia beyond the current pit shape that is consistent with existing mineralization at Ana Paula and is also comparable with other known deposits of the GGB. Results from drilling, mapping and surface geochemistry indicate that mineralization within the Ana Paula deposit continues to remain open in several directions including at depth that merits follow up exploration and drilling.

As with any mining project, there are risks that could affect the economic viability of the project. Many of these risks are based on lack of detailed knowledge and can be managed as more sampling, testing, design, and engineering are conducted at the next study stages. Table 25-1 identifies what are currently deemed to be the most significant internal project risks, potential impacts, and possible mitigation approaches.

The most significant potential risks associated with the project are lower gold recoveries than those projected, unanticipated mining dilution, operating and capital cost escalation, permitting and environmental compliance, unforeseen schedule delays, changes in regulatory requirements, ability to raise financing and metal price. These risks are common to most mining projects, many of which can be mitigated with adequate engineering, planning and pro-active management.

External risks are, to a certain extent, beyond the control of the project proponents and are much more difficult to anticipate and mitigate, although, in many instances, some risk reduction can be achieved. External risks are things such as the political situation in the project region, metal prices, exchange rates and government legislation. These external risks are generally applicable to all mining projects. Negative variance to these items from the assumptions made in the economic model would reduce the profitability of the mine and the mineral resource and reserve estimates.

There are also significant opportunities that could improve the economics, timing, and/or permitting potential of the project. The major opportunities that have been identified at this time are summarized in Table 25-2, excluding those typical to all mining projects, such as changes in metal prices, exchange rates, and etcetera. Further information and assessments are needed before these opportunities should be included in the project economics, however.

The Ana Paula project should advance to a preliminary feasibility study (PFS) in alignment with Newstrike’s desire to develop the resource.

The Acquisition of El Sauzal included equipment for a dry stack tailing system. Replacing the conventional tailing method with a filtered tailing storage method should be evaluated in future studies.

It is also recommended that environmental baseline studies and a socio-economic program also be initiated as soon as practical. The proposed environmental characterization studies are included as part of the proposed budget. However, other responsibilities more typically associated with environmental permitting and developing sustainable community relations are not encompassed within the PFS budget as they are normally considered and executed separately.

Estimated costs for a PFS-level study specific to the project total $5.7M and itemized in Table 26-1.

The environmental permitting and community relations activities that are recommended to advance the project to construction and operations are presented below in Table 26-2. These programs will incorporate data generated during the PFS from the water supply hydrogeologic and environmental geochemistry studies listed in Table 26-1. The preliminary baseline studies for environmental permitting are recommended to include the following activities:

The area of interest will be based on a preliminary disturbance area polygon plus the surrounding region. Surveys will be focused within the boundaries of the polygon, whereas background information will be based on the region. It is assumed that the preliminary studies would be conducted over a 12-month period.

Following the first year of baseline studies, it is recommended that the second year continue the baseline studies with a more detailed focus based on the more detailed mine layout, plus that the data and mine plan be used to develop the permit documents. Specific tasks would include the following:

A community relations program will be initiated based on facilitation to develop a sustainable community through empowerment and cooperation between governmental agencies at multiple levels and individuals in the community.

The estimated cost for the permitting and community relations tasks is $674,000USD, which is in addition to the tasks costed in Table 26-1.

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Colombo, F., 2012, June 12, 2012, Report 120480, Ana Paula Project: An internal report for Newstrike Capital Inc., by Vancouver Petrographics Ltd., 92 p.

Centeno-García, E.; Guerrero-Suastegui, M; and Talavera-Mendoza, O, 2008, The Guerrero Composite Terrane of western Mexico: Collision and subsequent rifting in a supra-subduction zone. Geological Society of America Special Papers 2008; 436; 279-308

Corbett G., 2009, Anatomy of porphyry-related Au-Cu-Ag-Mo Mineralised systems: Some exploration implications: For: Australian Institute of Geoscientists North Queensland Exploration Conference June 2009. www.corbettgeology.com.

Corbett, G.J., and Leach, T.M., 1998, ‘Southwest Pacific rim gold-copper systems: Structure, alteration and mineralization’, Short course manual May 1997 edition: Also published with edits as Economic Geology, Special Publication 6, 1998, 238 p.

Díaz Nieves, L., et.al. 2012, Legal opinion on mineral rights status dated November 6, 2012. from Diaz Bouchot and Raya of Mexico City to Davidson and Company LLP of Vancouver. Newstrike internal communication.

Gibson, C., 2010, Ana Paula geology, sampling, and core logging manual: Private report prepared for Newstrike Capital Inc. by ProDeMin, 22 p.

Gibson, C. 2012, Ana Paula Geology – Aurea Report 05-2012, An internal report for Minera Aurea SA de CV, 6 p.

Gibson, C. 2012, Personal communications. Gibson, C. 2013, Personal communications. Gibson, C. 2014, Personal communications.

Goldcorp 2005a, Los Filos Project feasibility study. Press release dated May 17, 2005 available at http://sedar.com and from www.goldcorp.com.

Goldcorp 2005b, Goldcorp completes acquisition of Bermejal gold deposit in Mexico. Press release dated March 31, 2005 and available at http://sedar.com and from www.goldcorp.com.

Goldcorp, 2012, Management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2012, Form 51-102F1. Available on www.Sedar.com and at: http://www.goldcorp.com with accompanying files Reserves.pdf and 2012 Resources.pdf.

Goldcorp, 2014, Goldcorp announces record quarterly and full-year gold production; Provides updated reserves and resources estimates. Press Release Dated February 13, 2014 Available on www.sedar.com and at www.goldcorp.com.

Hacettepe Univerity: Department of Mining Engineering Online Dictionary on Mining, Mineral and Related Terms, www.maden.hacettepe.edu.tr/dmmrt/index.html.

Hertel, M., Rust, J, 2013, Media Luna Gold–Copper Project Guerrero State, Mexico NI 43-101 Technical Report. Prepared for Torex Gold Resources Inc. by AMEC E&C Services, Inc Project Number: 167627. Effective Date: 13 September 2013. 176P.

Johnson, B, 2014, Internal memo for Newstrike Capital dated July 27, 2014, and various personal communications.

Kappes, Cassiday & Associates, 2012, Ana Paula Project BxA700 Composite Report of Metallurgical Test Work, August 2012, doc. file: KCA0120137_ANA02_02. 108p.

Kearvell, G., 2009, Aurea Norte Property, The Guerrero Gold Belt, Guerrero State, México, (the El Coyote, Cosmos, Don Richard, Coyopancho, Cuetzala, Morenita, Don Jesus, Estafania, and Estafania Fracc. I Mining Concessions). 2004-2008 Exploration Programs Compilation Report: Internal report for Newstrike Capital Inc., 115p.

Kearvell, G., 2010, Personal communications during and subsequent to the Ana Paula Project visit conducted March 22-23rd, 2010.

Kearvell, G., 2011, Personal communications during and subsequent to the Ana Paula Project visit conducted January 10-11, 2011.

Kearvell, G., 2012, Personal communications during and subsequent to the Ana Paula Project visit conducted March 27-29, 2012, and October 10-12, 2012, 2012.

Levresse, G; et al, 2004, Petrology, U/Pb Dating And (C-O) Stable Isotope Constraints On The Source And Evolution Of The Adakite-Related Mezcala Fe-Au Skarn District, Guerrero, Mexico. Mineralium Deposita (2004) 39: 301–312 DOI 10.1007/S00126 -003-0403-Y. Springer-Verlag.

Lunceford, R. A., 2009, Geological Report and Summary of Field Examinations, Aurea Norte Property, Municipalities of Apaxtla, Cocula and, Cuetzala Del Progreso Guerrero State Mexico, September 30, 2009: NI 43-101 Technical Report for Newstrike Capital Inc., 96 p.

Lunceford, R. A., 2010, Geological Report and Summary of Field Examinations, Ana Paula Project, Municipalities of Cuetzala Del Progreso, Apaxtla del Castregon Guerrero State, México June 26, 2010: NI 43-101 Technical Report for Newstrike Capital Inc., 101 p.

Mauler, A., Thompson, J. B., 2005, Petrographic Report Of 11 Samples; Mexico: Private Report For Goldcorp Inc., Petrascience Conultants, Inc., 44 P.

Medina Cázares, H., 2010, Geología y Mineralización del Proyecto Ana Paula, Gro.: Goldcorp Internal Report , 46 p.

Neff, D.H., et al, 2012, Morelos Gold Project 43-101 Technical Report Feasibility Study Guerrero, Mexico, Effective Date: 4 September 2012, Issue Date October 1, 2012. Prepared for Torex Gold Resources Inc. by M3 Engineering & Technology Corporation. 377P.

Newstrike Capital Inc, 2010, “Newstrike Capital to acquire Goldcorp’s ‘Ana Paula’ properties in Guerrero, Mexico” March 3, 2010. Available at http://sedar.com and from www.newstrikecapital.com.

Newstrike Capital Inc., 2011, Newstrike Drills 214 Metres of 3.0 G/T Gold at Ana Paula Project, Guerrero, Mexico: January 18, 2011 Available at http://sedar.com and from www.newstrikecapital.com.

Newstrike, 2012a, Management Discussion and Analysis (MD&A) - Six months ended January 31, 2012: Form 51-102F1, filed March 29, 2012, Newstrike Capital Inc., 28 p. Available at http://sedar.com and from www.newstrikecapital.com.

Newstrike, 2012b, Management Discussion and Analysis (MD&A) – Year ended July 31, 2012: Form 51-102F1, filed November 22, 2012, Newstrike Capital Inc., 41 p. Available at http://sedar.com and from www.newstrikecapital.com.

Newstrike, 2012c, Management Discussion and Analysis (MD&A) - Three months ended October 31, 2012: Form 51-102F1, filed December 19, 2012, Newstrike Capital Inc., 22 p. Available at http://sedar.com and from www.newstrikecapital.com.

Newstrike, 2013a, Newstrike Capital Inc. Announces Maiden Ni 43-101 Resource Estimate For The Ana Paula Project, Guerrero, Mexico. Press Release dated March 27, 2013 Available at http://sedar.com and from www.newstrikecapital.com.

NI-43-101, 2011, National Instrument 43-101 Standards of Disclosure for Mineral Projects, B.C. Reg. 86/2011, British Columbia Securities Commission. Deposited May 19, 2011 effective June 30, 2011, available from http://canlii.ca/t/l3nk and from http://www.bcsc.bc.ca.

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Thompson, T., 2008, Petrography Of The AP-Series And Outcrop Specimens, Ana Paula, Mexico: Economic Geology Consulting Internal Report Prepared For Goldcorp, Inc. May 15, 2008. 68p.

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Welhener, H. E., Lunceford, R.A., Winckers, A.H., Ana Paula Project Technical Report And Initial Resource Estimate Municipalities Of Cuetzala Del Progreso And Apaxtla Del Castregon Guerrero State, Mexico. NI 43-101 Technical Report for Newstrike Capital Inc., Effective Date February 26th, 2013 151p.

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Timmins Gold Corp., 2015, Presentación, GOLDCORP -MINA EL SAUZAL VISITA A UNIDAD MINERA (27 Y 28/MAYO/2015) LEVANTAMIENTO GENERAL DE PLANTA COMPLETA DE LIXIVIACION DINAMICA Y PERIFERICOS.

NI 43-101 F1 TECHNICAL REPORT UPDATED RESOURCES AND RESERVES AND MINE PLAN FOR THE SAN FRANCISCO GOLD PROJECT SONORA, MEXICO

William J. Lewis, B.Sc., P.Geo. Ing. Alan J. San Martin, MAusIMM(CP) Mani Verma, P.Eng. Richard M. Gowans, B.Sc. P.Eng.

SUITE 900 - 390 BAY STREET, TORONTO ONTARIO, CANADA M5H 2Y2 Telephone (1) (416) 362-5135 Fax (1) (416) 362 5763

Timmins Gold Corp. (TSX:TMM) (TMM) has retained Micon International Limited (Micon) to conduct an audit of its resource and reserve estimates and prepare an update of its 2013 Technical Report on the San Francisco Gold Project (San Francisco Project or the Project) in the state of Sonora, Mexico. The purpose of this Technical Report is to support disclosure of the results of Micon’s resource and reserve audit and the updated mining plan, compliant with Canadian National Instrument (NI) 43-101.

Micon’s most recent Technical Report for TMM was entitled “NI 43-101 F1 Technical Report, Updated Resources and Reserves and Mine Plan for the San Francisco Gold Mine, Sonora, Mexico”, dated December 6, 2013. That Technical Report was filed by TMM on the System for Electronic Document Analysis and Retrieval (SEDAR) which is an electronic filing system developed for the Canadian Securities Administrators (CSA). Prior to this current Technical Report, Micon has written seven prior reports on the San Francisco Project for TMM since 2005.

Micon does not have nor has it previously had any material interest in TMM or related entities. The relationship with TMM is solely a professional association between the client and the independent consultant. This report is prepared in return for fees based upon agreed commercial rates and the payment of these fees is in no way contingent on the results of this report.

This report includes technical information which requires subsequent calculations or estimates to derive sub-totals, totals and weighted averages. Such calculations or estimations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, Micon does not consider them to be material.

This report is intended to be used by TMM subject to the terms and conditions of its agreement with Micon. That agreement permits TMM to file this report as a Technical Report with the CSA pursuant to provincial securities legislation or with the SEC in the United States. Except for the purposes legislated under provincial securities laws, any other use of this report, by any third party, is at that party’s sole risk.

The conclusions and recommendations in this report reflect the authors’ best independent judgment in light of the information available to them at the time of writing. The authors and Micon reserve the right, but will not be obliged, to revise this report and conclusions if additional information becomes known to them subsequent to the date of this report. Use of this report acknowledges acceptance of the foregoing conditions.

The requirements of electronic document filing on SEDAR necessitate the submission of this report as an unlocked, editable pdf (portable document format) file. Micon accepts no responsibility for any changes made to the file after it leaves its control.

The San Francisco property is situated in the north central portion of the state of Sonora, Mexico, approximately 150 kilometres (km) north of the state capital, Hermosillo. In this report, the term San Francisco Project refers to the area within the exploitation or mining concessions controlled by TMM, while the term San Francisco property (the property) refers to the entire land package (mineral exploitation and exploration concessions) under TMM’s control.

The Project is comprised of two previously mined open pits (San Francisco and La Chicharra), together with heap leach processing facilities and associated infrastructure located close to the San Francisco pit.

TMM advises that it holds the San Francisco Project, which consists of 13 mining concessions, through its wholly-owned Mexican subsidiary Timmins Goldcorp Mexico, S.A. de C.V. (Timmins). All concessions are contiguous and each varies in size for a total property area of 33,667.72 hectares (ha). In late 2005, the original Timmins II concession was subdivided into two concessions (Timmins II Fraccion Sur and Pima), as part of separate exploration strategies for the original Timmins II concession. All concessions are subject to a bi-annual fee and the filing of reports in May of each year covering the work accomplished on the property between January and December of the preceding year. The tax rates are estimated in US dollars based on the rates published in the “Diario Oficial de la Federacion (DOF)” as of January 28, 2016.

Timmins reduced the size of the primary mineral concessions in 2015 by eliminating those areas deemed have very little exploration potential, while maintaining the integrity of the overall concessions. The reduction in the size of the concessions has also resulted in a reduction in the bi-annual fees for the Project.

Timmins advises that it acquired the first seven concessions covering the San Francisco mine through its purchase of Molimentales del Noroeste de S.A. de C.V. (Molimentales) in April, 2007.

In 2006, Timmins signed a temporary occupancy agreement with an agrarian community (Ejido) in Mexico called Los Chinos, whereby Timmins was granted access privileges to 674 ha, the use of the Ejido’s roads, as well as being able to perform all exploration work on the area covered by the agreement. The agreement is for a period of 10 years with an option to extend the access beyond the 10-year period.

During August and September, 2009, Molimentales acquired the 800 ha of surface land on which the San Francisco mine is located, by means of five purchase agreements covering all of the Ejido Jesus Garcia Heroe de Nacozari’s five former parcels that together form the 800 ha.

Other parties control two mineral concessions which are contained within the area of the mineral concessions owned by Timmins but neither of these concessions impacts the main area of the San Francisco Project.

On February 23, 2011, TMM announced that it had staked an additional 95,000 ha of claims along the highly prospective Sonora-Mojave Megashear structural province in northern Sonora. TMM continued to stake additional concessions since February, 2011 and the total additional regional mineral concessions amounted to approximately 152,279.6 ha in 2013.

In 2015, Timmins reduced the size of its regional mineral concessions as a result of its elimination of its regional exploration program due to the drop in metal prices since 2013. It has retained approximately 19,713 ha, which it believes contain the most prospective geology and mineralized targets upon which to base further exploration once metal prices have recovered.

On July 6, 2011, Molimentales acquired (through a straight purchase) a 10-ha mineral concession called La Mexicana. This purchase agreement is in the process of being filed with the Mexican Federal Mining Registrar. Prior to this purchase, the La Mexicana mineral concession was the last area in the metamorphic package that did not belong to Timmins.

Molimentales has completed the process (before the Mexican Federal Agrarian Secretariat) of converting the 674 hectares contracted from the Los Chinos Ejido into private property, and formalizing the purchase of the 674 ha, before a notary public, according to the Sonora State Civil Code. The 674 ha was purchased by Molimentales, in 2011, and the final public instrument documenting the purchase was issued on February 9, 2015.

Since completing the purchase of the 674 ha from the Los Chinos Ejido, Molimentales has not undertaken any further land purchases and believes no further purchases are necessary at this time.

The Mexican mining laws were changed in 2005 and, as a result, all mineral concessions granted by the Dirección General de Minas (DGM) became mining concessions and there are no longer separate specifications for a mineral exploration or exploitation concession. A second change to the mining laws was that all mining concessions are granted for 50 years, provided that the concessions remain in good standing. As part of this change, all former exploration concessions which were previously granted for 6 years became eligible for the 50-year term.

For any concession to remain valid, the bi-annual fees must be paid and a report has to be filed during the month of May of each year which covers the work conducted during the preceding year. Concessions are extendable provided that the application is made within the five-year period prior to the expiry of the concession and the bi-annual fee and work requirements are in good standing. The bi-annual fee payable to the Mexican government for Timmins to hold the group of contiguous mining concessions for the San Francisco operations is USD 536,179. The bi-annual fee for Timmins to hold the group of contiguous mining concessions which comprise the regional mineral property is USD 128,648.

The Project is located in the Arizona-Sonora desert in the northern portion of the Mexican state of Sonora, 2 km west of the town of Estación Llano (Estación), approximately 150 km north of Hermosillo and 120 km south of the United States/Mexico border city of Nogales along Highway 15 (Pan American highway). The closest accommodations are in Santa Ana, a small city located 21 km to the north on Highway 15.

The climate at the Project site ranges from semi-arid to arid. The average ambient temperature is 21°C, with minimum and maximum temperatures of -5ºC and 50ºC, respectively. The average annual rainfall for the area is 330 mm with an upper extreme of 880 mm. The desert vegetation surrounding the San Francisco mine is composed of low lying scrub, thickets and various types of cacti, with the vegetation type classified as Sarrocaulus Thicket.

Physiographically, the San Francisco property is situated within the southern Basin and Range Province, characterized by elongate, northwest-trending ranges separated by wide alluvial valleys. The San Francisco mine is located in a relatively flat area of the desert with the topography ranging between 700 and 750 m above sea level.

After conducting exploration on the Project between 1983 and 1992, Compania Fresnillo S.A. de C.V. (Fresnillo) sold the property in 1992 to Geomaque Explorations Ltd. (Geomaque). After conducting further exploration, Geomaque decided to bring the Project into production in 1995. Due to economic conditions, mining ceased and the operation entered into the leach-only mode in November, 2000. In May, 2002, the last gold pour was conducted; the plant was mothballed, and clean-up activities at the mine site began.

In 2003, Geomaque sought and received shareholder approval to amalgamate the corporation under a new Canadian company, Defiance Mining Corporation (Defiance). On November 24, 2003, Defiance sold its Mexican subsidiaries (Geomaque de Mexico and Mina San Francisco), which held the San Francisco gold mine, to the Astiazaran family of Sonora and their private company.

Since June, 2006, the Astiazaran family and their company Desarrollos Prodesa S.A. de C.V. have been extracting sand and gravel intermittently from both the waste dumps and the leach pads for use in highway construction as well as other construction projects.

Timmins acquired an option to earn an interest in the property in early 2005, whereupon Timmins conducted a review of the available data and started a reverse circulation drilling program in August and September, 2005. This was followed by a second drilling program comprised of both reverse circulation and diamond drilling in 2006, based on the results of the 2005 drilling program.

From 2007 to 2009, concurrent with the feasibility study, which focused on re-starting the mining operations, TMM conducted exploration comprised of mainly in-fill and confirmation drilling in and around of the San Francisco and La Chicharra pits. The drilling results as of the end of 2009 indicated that the mineralization extended both along strike and down dip of the deposit, a situation which led to the decision to accelerate the drilling in the first 6 months of 2010. The results from the 2010 drilling, when combined with the previous results, led to Timmins updating the resource and reserve estimations, as well as its mine plan.

Between July, 2010 and June, 2011, Timmins conducted an intensive exploration drilling program which included deeper drilling to explore the mineralization at depth, both in and around the La Chicharra and San Francisco pits. The results of this drilling indicated that the mineralization is located in parallel mineralized bodies both along strike and at depth. Timmins believes that the conclusion that the mineralization is located in parallel bodies may lead to further increases in the mineral resources.

From July, 2011 to June, 2013, 1,464 reverse circulation (RC) and core holes were drilled for a total of 327,853 metres (m). Most of the drilling was undertaken in and around the San Francisco pit and the La Chicharra pit. The RC drilling included 13,219 m in 62 holes of condemnation drilling and 3,842 m in 20 holes for water monitoring. A further 8 RC holes totalling 107 m were drilled on the low grade stockpile for grade control.

The drilling conducted within and around the San Francisco and La Chicharra pits comprised more than 92.8% of the drilling undertaken between July, 2011 and June, 2013. Both the RC and core drilling in these areas has identified the extent of the mineralization along strike, as well as the extent down-dip, which remains open. The drilling surrounding the San Francisco and La Chicharra pits has been completed, except for defining the extent of the mineralization to the southeast of the San Francisco pit which remains open along strike and at depth. In 2013, Timmins had completed its planned exploration drilling programs. Additional in-fill drilling is necessary to confirm the extension in the up-dip direction from the newly discovered mineral zones identified at the northern extremity of the pit but it was still undecided if these areas were going to be exploited due to the lower gold price.

The San Francisco Project is a gold occurrence with trace to small amounts of other metallic minerals. The gold occurs in granitic gneiss and the deposit contains principally free gold and occasionally electrum. The mineralogy, the possibility of associated tourmaline, the style of mineralization and fluid inclusion studies suggest that the San Francisco deposits may be of mesothermal origin.

The San Francisco deposits are roughly tabular with multiple phases of gold mineralization. The deposits strike 60° to 65° west, dip to the northeast, range in thickness from 4 to 50 m, extend over 1,500 m along strike and are open ended. Another deposit, the La Chicharra zone, was mined by Geomaque, as a separate pit.

Since 2013, Timmins has reduced its exploration significantly as a result of the recent low price of gold. As a result, Timmins has only conducted a small number of exploration drilling programs comprised of in-fill drilling in the San Francisco pit to cover gaps in drilling on the lower benches, exploration drilling to outline preliminary underground resources beneath the southwall of the pit and exploration drilling to the north of the San Francisco pit to potentially identify a secondary deposit which would supply feed to the heap leach pad and processing facilities at the San Francisco mine. The in-fill drilling in the San Francisco pit on the lower benches was successful in allowing a better understanding of the mineralization being extracted in these areas. The drilling in the southwall, along with preliminary underground mining, has helped to identify the extent and mining potential for this areas but further drilling will be necessary to fully identify the extent of the mineralized lenses in this area. The exploration drilling to the north produced mixed results with areas of good mineralization identified but the extent of the mineralization is still not fully understood and these areas will need further work to identify if they are amenable to open pit mining methods.

At this time, Timmins is not planning any further exploration programs on the San Francisco property due to the low gold price and its decision to place the mine on care and maintenance as of the end of 2016. However, should the price of gold rise, Timmins can revisit both decisions at that time.

While Timmins is not planning any further exploration, Micon did review the work that Timmins conducted to the North of the San Francisco pit, as well as the work conducted on the southwall of the pit during its February, 2016 site visit, and considers that further exploration is warranted in these areas. As always, any proposal for further exploration and budget for the work will be subject to either funding or other matters which may cause a proposed program to be altered in the normal course of its business activities, or alterations which may affect the program as a result of the exploration activities themselves.

The block resource model is based on 5 m by 5 m by 6 m high blocks. The coordinate limits of the previous model were retained for this current work. The topography was updated to reflect the mined surface as of January 1, 2016. The undisturbed pre-mining topographic surfaces are also available in the model.

Since the 2011 update, Timmins has continued to conduct a manual interpretation of the mineralized zones, based on all of the drilling intersections now available in its database. This approach allows for more precise geological modelling and mineralization interpretation, which is enabling Timmins to plan better drilling programs to explore the extent of the mineralization and also to prepare better engineering designs regarding the ore and waste split in the pit for planning purposes. Overall, the method is similar to the previous method, except that the grade envelopes and geological domains are directly interpreted by the geologists using the drilling information they have gathered.

The database of the San Francisco and La Chicharra deposits consists of 4,071 drill holes with 380,031 intervals, amounting to 592,435 m of drilling. A total of 126 of the drill holes lie beyond the model limits and have not been included in the study. The current database includes 13,345 m of drilling from 114 new holes drilled in 2014 and 2015.

Approximately 13% of the sampling intervals are greater than or equal to a 2 m length, about 84% of the intervals are between 1.5 and 2.0 m in length, and about 3% are less than 1.5 m in length. In the case of duplicate samples, the original sample was used in the database.

High grade outlier assays were capped at different gold grades, according to the domains, as with the previous 2013 estimate.

Once Micon had audited and accepted Timmins’s block model, Timmins proceeded to run a pit optimization program in order to estimate the resources. The gold price used for estimating the resources at the San Francisco Project was USD 1,250 per ounce.

The parameters used in the pit optimization for the estimation of the resources are summarized in Table 1.1. They are a combination of the parameters determined by Micon and Timmins, taking into account the actual costs obtained from the operation.

Pit bench heights were set at 6 m (the block height used in the model) and slope angles were based on inter-ramp angles recommended by Golder Associates in its December, 1996, report, adjusted to allow for haul roads of 25 m width.

The pit shell adopted for reporting resources was estimated at a gold price of USD 1,200/troy ounce, using the economic parameters summarized in Table 1.1, the drilling database as of November, 2015 and the topographic surface as of January 1, 2016. The mineral resource, as estimated by Timmins and audited by Micon, is presented in Table 1.2. This resource estimate includes the mineral reserve described subsequently, and has an effective date of December 31, 2015.

Table 1.1 Pit Optimization Parameters for the 2015 Resource Estimate for the San Francisco and La Chicharra Deposits

For the underground resource estimate a preliminary cut-off grade of 1.5 g/t gold was used. The mineralization can potentially be accessed from the pit walls via adits rather than developing significant underground ramps which will assist in keeping mining costs down and various different scenarios exist for the processing of the mineralization. Further drilling will be necessary to fully define the underground potential at San Francisco.

Micon recommends that Timmins use the December 31, 2015 mineral resource estimate contained in Table 1.2 as the stated mineral resource estimate for the San Francisco Project (San Francisco and La Chicharra deposits), as this estimate recognizes the use of 0.203 g/t and 0.195 g/t gold as the open pit cut-off grades and 1.50 g/t gold as the underground cut-off grade, as the grades at which the mineralization would meet the parameters for potential economic extraction, as defined by the CIM standards and definitions for resources.

Table 1.2 Mineral Resource Estimate for the San Francisco Project (Inclusive of Mineral Reserves) (USD 1,200/oz Gold Price)

Micon believes that no environmental, permitting, legal, title, taxation, socio-economic, marketing or political issues exist which would adversely affect the mineral resources estimated above, at this time. However, mineral resources that are not mineral reserves do not have demonstrated economic viability. The mineral resource figures in Table1.2 have been rounded to reflect that they are estimates.

The mineral resource estimate has been reviewed and audited by Micon. It is Micon’s opinion that the December 31, 2015 mineral resource estimate has been prepared in accordance with the CIM standards and definitions for mineral resource estimates and that Timmins can use this estimate as a basis for further exploration and economic evaluation of the San Francisco Project.

Once Micon had audited and accepted Timmins resource estimate, Timmins proceeded to run a pit optimization program in order to estimate the reserves. The gold price used for estimating the reserves at the San Francisco Project was USD 1,100 per ounce.

Mining recovery for the San Francisco and La Chicharra deposits has been estimated at 99%. Micon agrees with the mining recovery as it is based on actual experience at the mine.

The dilution for the San Francisco deposit is defined according to the type of mineralization and the size of the modelled blocks. The deposit varies in size and shape of the mineralization from one bench to another. The potential dilution varies with the amount of waste in contact with economic material; larger mineralized zones carry a lower percentage of dilution than smaller zones.

Timmins believes that its method for estimating dilution achieves a close approximation of what can be expected during operations. The method consists of identifying the blocks that are partially mineralized, with a maximum 40% of material below the economic cut-off grade, and adding that waste percent (tonnes and grade) as mining dilution.

For the purposes of the mine plan at the La Chicharra deposit, Timmins has used the difference between two attributes within the block model to estimate the dilution for the purposes of the reserves. The two attributes of the block model that were used was AuT which is the tonnage and grade of the entire block and AuO, which represents only the tonnage and grade for the mineralized portion of the block. At this time it appears that 46% of the blocks within the La Chicharra model are totally mineralized whereas the remainder are only partially mineralized. Timmins has reviewed the difference between the estimation of the dilution for the December 31, 2015 reserves and the previous reserves for La Chicharra in 2013 and noted that the overall dilution in the 2015 estimate is similar to the 3% used in the 2013 estimation.

The parameters used in the pit optimization for the estimation of reserves are the same as those used for the resource estimation.

Table 1.3 3 presents the total reserves estimated within the pit design outline, including mine recovery and dilution factors.

Table 1.3 Mineral Reserves within the San Francisco and La Chicharra Pit Design (December 31, 2015) after Mining Recovery and Dilution

The proven and probable reserves in Table 1.3 have been derived from the measured and indicated mineral resources summarized in Table 1.2 and account for mining recovery and dilution. The figures in Table1.3 have been rounded to reflect that they are an estimate.

The mineral reserve estimate has been reviewed and audited by Micon. It is Micon’s opinion that the December 31, 2015 mineral reserve estimate has been prepared in accordance with the CIM standards and definitions for mineral reserve estimates and that Timmins can use this estimate as a basis for further mine planning and operational optimization at the San Francisco Project (San Francisco and La Chicharra pits).

The San Francisco mine resumed commercial production in April, 2010. Table 1.4 summarizes production from April, 2010 to the end of December, 2015, by quarter. Ore of lower grade is being stockpiled for processing at the end of the mine life. Timmins reports that, at December 31, 2015, there was an accumulated stockpile of 8,117 Mt at an average grade of 0.260 g/t gold.

During July, 2011, Timmins tested the expansion of the crushing system to 15,000 t/d and announced that it is quickly reaching this target.

In December, 2012, a new additional 5,000 t/d crushing circuit was installed. The equipment initially installed was one jaw crusher, one secondary crusher, two tertiary crushers and two screens. In August, 2013, an expansion was made to this crushing circuit, installing an additional secondary crusher, along with a screen, for a further capacity of 2,000 t/d. Total capacity for the new crushing circuit is 7,000 t/d.

With the original plant equipment and additions mentioned, and some fine tuning currently being carried out, total crushing capacity will run at 22,000 t/d.

Production from the La Chicharra deposit began in late 2015. The San Francisco and La Chicharra pits will be mined at the same time.

The La Chicharra pit, previously mined by Geomaque, is located 1,000 m west of the San Francisco pit.

All mining activities are being carried out by the contractor, Peal Mexico, S.A. de C.V., of Navojoa, Mexico. The contractor is obliged to supply and maintain the appropriate principal and auxiliary mining equipment and personnel required to produce the tonnage mandated by Timmins, in accordance with the mining plan.

Timmins provides contract supervision, geology, engineering and planning and survey services, using its own employees.

Table 1.4 San Francisco Project, Timmins Annual Production from April, 2010 to the End of December, 2015 by Quarter)

Ore extracted from the pit is transported in 100 t capacity haulage trucks, which feed directly into the gyratory primary crusher with dimensions of 42” x 65”. The crusher has nominal capacity of 900 t/h. The crushed product is then transported on conveyor belts to a stockpile with a capacity of 6,000 tonnes.

Two feeders beneath the stockpile deliver the ore onto a conveyor belt which feeds the secondary crushing circuit. The ore is screened and the screen undersize (minus 0.5 inch) reports to the final product, while screen oversize is fed to two parallel secondary crushers.

Product from the secondary crushers is transported on conveyor belts to the tertiary crushing circuit, which consists of three tertiary crushers in parallel operating in closed circuit with screens. The minus 0.5 inch undersize from the screens is delivered to the leach pad. The total crushing capacity is currently 22,000 t/d.

Product from the crushing plant is transported to the leach pad on overland conveyors and deposited on the pad with a stacker, forming lifts between 8 m and 12 m in height. A bulldozer is used to level the surface of each lift. The irrigation pipelines are then installed to distribute the leach solution over the entire surface of the lift.

Timmins has constructed the leach pad and has four different phases for depositing, based on the permits granted by the Mexican Environmental Agency (PROFEPA, Procuraduría Federal de Protección al Ambiente). Table 1.5 summarizes the leach pad phases.

The 0.05% sodium cyanide leach solution with a pH of 10.5 to 11, flows downward through the crushed ore dissolving the precious metals. The solution percolates to the bottom of the lift and is collected in the channel that carries the pregnant solution to a storage pond, from which it is pumped to the gold recovery plant. The gold contained in pregnant solution is adsorbed in the carbon columns.

The gold recovery operation comprises two adsorption-desorption-recovery (ADR) plants with a total of three parallel sets of carbon columns with a total feed capacity of 1,475 m3/h (6,500 US gpm) of pregnant solution.

Barren solution exiting the ADR plant flows to a second storage pond where fresh water and sodium cyanide are added, before the solution is pumped back to the leach pad.

The San Francisco Project was originally designed for a production rate of 12,000 t/d of ore to be placed on the leach pad, it has now been expanded to 22,000 t/d.

Future capital expenditures over the mine life are outlined in Table 1.6, which summarizes the planned sustaining capital and the planned development capital expenditures. Also, as a consequence of the change in mine life, stripping costs will no longer be capitalized.

Micon has reviewed Timmins’ estimate of the future capital expenditures for the San Francisco Project and regards it as reasonable.

Micon has reviewed Timmins’ operating cost forecasts for the life of the San Francisco Project and regards them as reasonable.

Since the last Technical Report conducted on the San Francisco Project in December, 2013, TMM has continued to meet the requirements necessary to be considered a producing issuer, according to the definition contained in NI 43-101.

Based upon the price of gold in the fourth quarter of 2015, TMM announced that mining operations at the San Francisco mine would continue into the fourth quarter of 2016 at which point the mine would be placed on care and maintenance. However, the heap leach operations would continue into 2017.

Timmins production guidance for the 2016 fiscal year is estimated to range from 75,000 to 85,000 ounces of gold with the cash costs ranging from USD 750 to USD 850 per ounce of gold sold. The estimated operating parameters include an average ore throughput of 20-22 kt/d at a processed grade of between 0.58 and 0.62 g/t Au with a strip ratio in the 1.75:1 range. The total 2016 capital expenditures (sustaining and development) are estimated to be approximately USD 1 to USD 2 million.

Due to the recent increase in the price of gold, through first quarter 2016, Timmins notes that a sustained higher gold price could have a significant positive impact on the operations at the San Francisco mine. At higher sustained gold prices, the San Francisco mine may not be placed on care and maintenance and operations may continue. However, production rates and detailed mining schedules, etc., would be developed based on the higher gold price at the time and an economic analysis of continuing the operations.

In the possible event of sustained higher gold prices, Timmins may also look to investigate potential underground scenarios, which may supplement the open-pit production. Timmins believes that further delineation drilling for the underground resource is required and would be subject to available funding.

The San Francisco mine commenced commercial production in April, 2010, and by the end of December, 2015, Timmins had sold 545,923 ounces of gold. Between April, 2010 and the end of December, 2015, production at the San Francisco mine has totalled 36,397,227 tonnes at a grade of 0.751 g/t gold. In addition, a total of 8,117,461 tonnes grading 0.260 g/t gold has been placed on a low grade stockpile for potential processing in the future.

Micon has audited the resource and reserve estimates, and has reviewed the mine design, the mining schedule, the mining contract terms and the ability of the contractor to meet the mining production targets, and concludes that the estimations and designs have been properly carried out and that the contractor is capable of meeting the schedule.

Micon has reviewed the crushing, heap leach and ADR facilities and concludes that they are adequate for the treatment of the scheduled process feed material and the recovery of gold in doré, as forecast in the production plan.

Micon has reviewed the economics of the San Francisco operation and concludes that it is viable and meets the criteria for publication of a mineral reserve.

Given the known extent of mineralization on the property, compared to the amount of mining activity, the San Francisco Project has the potential to host further deposits or lenses of gold mineralization, similar in character and grade to those exploited in the past, outside the present resource base. In Micon’s opinion, further exploration is warranted when precious metal prices improve.

Micon agrees with the general direction of Timmins’ exploration and development program for the property and makes the following additional recommendations:

Micon recommends that when applicable Timmins continues to conduct exploration on the other areas of mineralization on the property, as well as to the east-southeast of the San Francisco pit, in order to continue to realize the full potential of its property.

Micon recommends that Timmins continues to optimize costs, where applicable in the current precious metal market.

At the request of Mr. Arturo Bonillas, President of Timmins Gold Corp. (TSX:TMM), Micon International Limited (Micon) has been retained to provide an audit of the current internal resource and reserve estimates and an update of its 2013 Technical Report on the San Francisco Gold Project (San Francisco Project) in the state of Sonora, Mexico. The previous Micon Technical Report was entitled “NI 43-101 F1 Technical Report, Updated Resources and Reserves and Mine Plan for the San Francisco Gold Project, Sonora, Mexico” and dated December 6, 2013. That Technical Report was filed by TMM on the System for Electronic Document Analysis and Retrieval (SEDAR) which is an electronic filing system developed for the Canadian Securities Administrators (CSA) and on its US equivalent the System for Electronic Data Gathering, Analysis and Retrieval (EDGAR) developed for the US Securities and Exchange Commission. TMM announced on December 23, 2013 that the report had been filed on both systems.

TMM advises that it holds its interest in the San Francisco property through its wholly-owned Mexican subsidiary Timmins Goldcorp Mexico, S.A. de C.V. (Timmins), which holds thirteen mining concessions through a wholly-owned subsidiary, Molimentales del Noroeste de S.A. de C.V. (Molimentales).

In this Technical Report, TMM and its subsidiary Timmins are used interchangeably and for the purposes of the report are considered to be one and the same.

The current study is based on the resource and reserve estimates and mine plan prepared in-house by Timmins and Molimentales personnel and their consultants. Micon has audited the resource and reserve estimates as well as conducting a review of the mine plan and its various components. The material in this report was derived from a number of sources in addition to the material provided by Timmins and these sources are noted in Section 28 of this report.

Micon’s most recent site visit was conducted between February 2 and 6, 2016, during which the resources and reserves, as well as various aspects of the operation and mine plan, were discussed. The current and future exploration programs were also discussed. The site visit included a tour through the open pit, leach pad, crushing circuit and the process plant. The previous site visit to the San Francisco Project was conducted, by Micon, between August 12 and 16, 2013.

In addition to the site visit, a number of discussions were held via skype and phone conference calls between Micon personnel in Toronto and Timmins personnel in Hermosillo regarding the database, block model and parameters for the mineral resource estimate, as well as other topics related to the audit and preparation of this Technical Report.

The qualified persons responsible for the preparation of this report are William J. Lewis, B.Sc., P.Geo., Alan J. San Martin, MAusIMM (CP)., Mani Verma, P.Eng. and Richard M. Gowans, P.Eng.

Mr. Lewis conducted the February, 2016, site visit. Messrs. Verma, San Martin and Lewis conducted the previous 2013 site visit. Mr. Gowans conducted his desk top review in Toronto, based on the information provided to him by Timmins. Mr. Lewis has conducted a number of site visits to the San Francisco Project since 2005 and is familiar with the Project.

Mr. Lewis, a Senior Geologist with Micon, is responsible for the independent summary and review of the exploration on the San Francisco Project, the comments on the propriety of Timmins’ exploration drilling program, the plans and budget for the next phase of exploration and the review of Timmins Quality Assurance/Quality Control (QA/QC) program at the mine site. Mr. Lewis and Mr. San Martin, a Mineral Resource Modeller with Micon, conducted the review and audit of the resource estimate.

Mr. Verma, an Associate Mining Engineer with Micon, is responsible for the review of the mine plan, production scheduling, operations and the terms of the existing mining contract. Mr. Verma also reviewed the capital and operating cost estimates for the Project and reviewed the discounted cash flow and sensitivity analyses used to evaluate Project economics. Mr. Gowans, President and Principal Metallurgist of Micon, reviewed the metallurgical aspects of the San Francisco Project.

All currency amounts are stated in US dollars (USD) or Mexican pesos (MXN), as specified, with costs and commodity prices typically expressed in US dollars. Quantities are generally stated in metric units, the standard Canadian and international practice, including metric tons (tonnes, t) and kilograms (kg) for weight, kilometres (km) or metres (m) for distance, hectares (ha) for area, grams (g) and grams per metric tonne (g/t) for gold and silver grades (g/t Au, g/t Ag). Wherever applicable, Imperial units have been converted to Système International d’Unités (SI) units for reporting consistency. Precious metal grades may be expressed in parts per million (ppm) or parts per billion (ppb) and their quantities may also be reported in troy ounces (ounces, oz), a common practice in the mining industry. A list of abbreviations is provided in Table 2.1. Appendix 1 contains a glossary of mining and other related terms.

The review of the San Francisco Project was based on published material researched by Micon, as well as data, professional opinions and unpublished material submitted by the professional staff of Timmins or its consultants. Much of these data came from reports prepared and provided by Timmins.

Micon does not have nor has it previously had any material interest in TMM, Timmins or related entities. The relationship with TMM and Timmins is solely a professional association between the client and the independent consultant. This report is prepared in return for fees based upon agreed commercial rates and the payment of these fees is in no way contingent on the results of this report. This is the eighth Technical Report written by Micon on the San Francisco Project for TMM since 2005.

This report includes technical information which requires subsequent calculations or estimates to derive sub-totals, totals and weighted averages. Such calculations or estimations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, Micon does not consider them to be material.

The conclusions and recommendations in this report reflect the authors’ best independent judgment in light of the information available to them at the time of writing. The authors and Micon reserve the right, but will not be obliged, to revise this report and conclusions if additional information becomes known to them subsequent to the date of this report. Use of this report acknowledges acceptance of the foregoing conditions.

This report is intended to be used by TMM subject to the terms and conditions of its agreement with Micon. That agreement permits TMM to file this report as a Technical Report with the Canadian Securities Administrators pursuant to provincial securities legislation or with the SEC in the United States. Except for the purposes legislated under provincial securities laws, any other use of this report, by any third party, is at that party’s sole risk.

The requirements of electronic document filing on SEDAR necessitate the submission of this report as an unlocked, editable pdf (portable document format) file. Micon accepts no responsibility for any changes made to the file after it leaves its control.

Micon has reviewed and analyzed data provided by TMM and Timmins, its consultants and the previous operator of the Project, and has drawn its own conclusions therefrom, augmented by its direct field examination. Micon has not carried out any independent exploration work, drilled any holes or carried out an extensive program of sampling and assaying on the property. Previous sampling (Lewis, 2006) was conducted to independently substantiate the mineralization at the San Francisco Project and further samples were not obtained during the 2006, 2007, 2010, 2011, 2013 or 2016 site visits. Micon does not believe that further independent sampling of the mineralization at the San Francisco Project is warranted for a Technical Report, as the Project is currently an operating mine and the production records are a more reliable indication of the extent and grade of the mineralization.

Micon has reviewed and audited the work conducted by TMM and Timmins on the resource and reserve estimates, the mine plan and other material related to the operating San Francisco mine. While exercising all reasonable diligence in checking, confirming and testing it, Micon has relied upon Timmins’ presentation of the Project data, including data from the previous operator, in formulating its opinion with respect to the San Francisco property.

Micon offers no legal opinion as to the validity of the title to the mineral concessions claimed by TMM and its wholly-owned Mexican subsidiaries, Timmins and Molimentales. A description of the property, and ownership thereof, is provided for general information purposes only. A legal opinion regarding the mineral concessions and its subsidiaries was provided to Micon by Timmins for the November, 2011 Technical Report. The legal opinion, which was included as Appendix 2 in the 2011 report, was prepared in conjunction with the public offering of common shares held by funds managed or advised by Pacific Road Capital Management Pty. Limited. The legal opinions were dated July 12 and 15, 2011 and were prepared and executed by Roberto Herrera Piñon in Hermosillo, Mexico. The legal opinions were not updated for this Technical Report and Micon has relied upon Timmins for the information regarding title to the mineral concessions.

The existing environmental conditions, liabilities and remediation have been described where required by NI 43-101 regulations. These statements are provided for information purposes only and Micon offers no opinion in this regard.

The existing contracts regarding the sale of bullion and any other products produced by the Timmins operations have been described where required by NI 43-101 regulations. These statements are provided for information purposes only and Micon offers no opinion regarding the legal interpretation of these contracts.

The descriptions of geology, mineralization and exploration used in this report are taken from reports prepared by various organizations and companies or their contracted consultants, as well as from various government and academic publications. The conclusions of this report rely in part on data available in published and unpublished reports supplied by the companies which have conducted exploration on the property, and information supplied by Timmins. The information provided to Timmins was supplied by reputable companies and Micon has no reason to doubt its validity.

Micon is pleased to acknowledge the helpful cooperation of Timmins management and consulting field staff, all of whom made any and all data requested available and responded openly and helpfully to all questions, queries and requests for material.

Some of the figures and tables for this report were reproduced or derived from historical reports written on the property by various individuals and/or supplied to Micon by TMM and Timmins. Most of the photographs were taken by the authors of this report during their respective site visits. In the cases where photographs, figures or tables were supplied by other individuals or TMM and Timmins they are referenced below the inserted item.

Timmins’ San Francisco property is located in the north central portion of the Mexican state of Sonora, which borders on the American state of Arizona, and is approximately 150 km north of the city of Hermosillo, the capital of Sonora. The latitude and longitude for the Project site are approximately 30°21’13” N, 111°06’52” W. The UTM coordinates are 3,357,802 N, 489,017 E and the datum used was NAD 27 Mexico. The Project is located 2 km west of the town of Estación Llano and is accessed via Mexican State Highway 15 (Pan American highway) from Hermosillo.

The term San Francisco Project refers to the area related to the exploitation concessions controlled by TMM, while the term San Francisco property refers to the entire land package (mineral exploitation and exploration concessions) under TMM’s control. The location of the San Francisco property is shown in Figure 4.1.

TMM advises that it holds the San Francisco Project, which consists of 13 mining concessions, through its wholly-owned Mexican subsidiary. All the concessions are contiguous and each varies in size for a total property area of 33,667.72 hectares (ha). In late 2005, the original Timmins II concession was subdivided into two concessions (Timmins II Fraccion Sur and Pima), as part of separate exploration strategies for the original Timmins II concession. All concessions are subject to a bi-annual fee and the filing of reports in May of each year covering the work accomplished on the property between January and December of the preceding year. The tax rates are estimated in US dollars based on the rates published in the “Diario Oficial de la Federacion (DOF)” (Appendix 2) as of January 28, 2016.

Timmins reduced the size of the primary mineral concessions in 2015 by eliminating those areas deemed have very little exploration potential, while maintaining the integrity of the overall concessions. The reduction in the size of the concessions has also resulted in a reduction in the bi-annual fees for the Project.

The information for the thirteen concessions is summarized in Table 4.1. A map of the mineral concessions for the San Francisco property is provided in Figure 4.2.

Timmins advises that it acquired the first seven concessions, covering the San Francisco mine, through its purchase of Molimentales in April, 2007.

In 2006, Timmins signed a temporary occupancy agreement with an agrarian community (an Ejido) in Mexico called Los Chinos, whereby Timmins was granted access privileges to 674 ha, the use of the Ejido’s roads, as well as being able to perform all exploration work on the area covered by the agreement. The agreement is for a period of 10 years with an option to extend the access beyond the 10-year period.

During August and September, 2009, Molimentales acquired the 800 ha of surface land on which the San Francisco mine is located, by means of five purchase agreements covering all of the Ejido Jesus Garcia Heroe de Nacozari’s five former parcels that together form the 800 ha.

In September, 2011, Molimentales acquired 732 ha from Ejido Los Chinos, which was originally part of the exploration agreement signed in 2006.

Other parties control two mineral concessions which are contained within the area of the mineral concessions owned by Timmins but neither of these concessions impacts the main area of the San Francisco Project.

On February 23, 2011, TMM announced that it had staked an additional 95,000 ha of claims along the highly prospective Sonora-Mojave Megashear structural province in northern Sonora. TMM continued to stake additional concessions since February, 2011 and the total additional regional mineral concessions amounted to approximately 152,279.6 ha in 2013.

1 The Timmins II claim, originally staked with a surface of 39.403.0000 ha, was titled by the Direccion General de Minas (DGM) with a surface of 36,142.0604 ha after surveying was completed. In 2008, due to a change in exploration strategy, the Timmins II claim was divided into two claims, Timmins II Fraccion Sur and Pima. In 2015, the surface area of the Pima claim was reduced from 15,772 Ha to 4,997 Ha 2 Fees are estimated in US dollars based on the rates published in the “Diario Oficial de la Federacion (DOF)” . The rates used for the table are as of January 28, 2016.

In 2015, Timmins reduced the size of its regional mineral concessions as a result of its elimination of its regional exploration program due to the drop in metal prices since 2013. It has retained approximately 19,713 ha, which it believes contain the most prospective geology and mineralized targets upon which to base further exploration once the metal prices have recovered.

The information for the regional mineral concessions staked by Timmins is summarized in Table 4.2. A map of the regional concessions is provided in Figure 4.3.

On July 6, 2011, Molimentales acquired (through a straight purchase) a 10-ha mineral concession called La Mexicana by paying the vendor, Mr. Agustin Albelais, a buy-out price of USD 250,000. This purchase agreement was filed with the Mexican Federal Mining Registrar. The La Mexicana mineral concession was the last area in the metamorphic package that did not belong to Timmins.

Molimentales has completed the process (before the Mexican Federal Agrarian Secretariat) of converting the 674 hectares contracted from the Los Chinos Ejido into private property, and formalizing the purchase of the 674 ha, before a notary public, according to the Sonora State Civil Code. The 674 ha was purchased by Molimentales, in 2011, and the final public instrument documenting the purchase was issued on February 9, 2015.

Since completing the purchase of the 674 ha from the Los Chinos Ejido, Molimentales has not undertaken any further land purchases and believes no further purchases are necessary at this time.

When the Mexican mining law was amended in 2006, all mineral concessions granted by the Dirección General de Minas (DGM) became simple mining concessions and there was no longer a distinction between mineral exploration or exploitation concessions. A second change to the mining law resulted in all mining concessions being granted for a period of 50 years, provided that the concessions remained in good standing. As part of the second change, all former exploration concessions which were previously granted for a period of 6 years became eligible for the 50-year term.

For any concession to remain valid, the bi-annual fees must be paid and a report has to be filed during the month of May of each year which covers the work conducted during the preceding year. Concessions are extendable, provided that the application is made within the five-year period prior to the expiry of the concession and the bi-annual fee and work requirements are in good standing. The bi-annual fee, payable to the Mexican government for Timmins to hold the group of contiguous mining concessions for the San Francisco operations is USD 536,179. The bi-annual fee for Timmins to hold the group of contiguous mining concessions which comprise the regional mineral property is USD 128,648.

Table 4.2 San Francisco Project, Summary of the Regional Mineral Concessions (with Fees for 2016 Noted)

Notes: The Picacho property comprises a group of 11 claims under an option contract with Timmins Goldcorp Mexico. The area covered for these claims is a total of 702.9442 ha. The 11 claims comprising the El Picacho group are: El Rincon, El Sol, El Zapo Fraccion 1, El Zapo Fraccion 2, La Uno, El Uno A, El Uno D Rincon Dos, El Mar and El Rin.

During 2015, a number of the claims to the northwest of the existing operation that comprised the regional exploration area were dropped but the claims containing the most significant exploration targets were maintained. Timmins in the process of returning the claims belonging to the El Picacho project to the original owners which includes delivering the El Exito claim to them as well as part of the contractual conditions. However, Timmins will have to pay the tax payments or these areas, at least for the first half of 2016.

All mineral concessions must have their boundaries orientated astronomically north-south and east-west and the lengths of the sides must be one hundred metres or multiples thereof, except where these conditions cannot be satisfied because they border on other mineral concessions. The locations of the concessions are determined on the basis of a fixed point on the land, called the starting point, which is either linked to the perimeter of the concession or located thereupon. Prior to being granted a concession, the company must present a topographic survey to the DGM within 60 days of staking. Once this is completed the DGM will usually grant the concession.

Since the San Francisco Project is located on a number of concessions upon which mining has previously been conducted, all exploration work continues to be covered by the environmental permitting already in place and no further notice is required to be given to any division of the Mexican government. The specific environmental permitting of the San Francisco mine site was obtained in December, 2007, via an environmental assessment, and it is valid for the duration of the seven mining concessions that comprise the mine, provided that Molimentales keeps the permitting in good standing. Water for any drilling programs at the San Francisco Project is obtained from the on-site water wells.

Micon is unable to comment on any remediation which may have been undertaken by previous owners. Environmental studies and permitting by TMM for its San Francisco Project are discussed in Section 20 of this report.

The San Francisco property is readily accessible from Hermosillo, the state capital of Sonora, via Mexican State Highway 15 (Pan American Highway). The property is 150 km north of Hermosillo and is 120 km south of the United States/Mexico border city of Nogales, also on Highway 15. The San Francisco mine site is 2 km west of the town of Estación Llano. The major population centre for the region is Magdalena de Kino (Magdalena) to the north, with a population of over 50,000 inhabitants. Figure 5.1 is a view of the San Francisco mine from Highway 15 driving south towards Hermosillo.

The mineral concessions are located approximately due west and north of Estación Llano, with the closest accommodations being in Santa Ana, a small city located to the north on Highway 15.

Timmins maintains guarded gates across the access road to the mine and immediate Project area. Exploration can be conducted year round, with the desert monsoon season occurring between July and September. Materials needed to supply the mine are transported by either truck (utilizing Mexican State Highway 15) or by rail (utilizing the Ferrocarril del Pacifico railway), both of which pass through the community of Estación Llano.

Timmins has been granted the temporary occupation of surface rights at the San Francisco mine by the DGM for the duration of the exploitation concessions. In the case of an exploration concession, the holder is granted temporary occupancy for the creation of land easements needed to carry out exploration for the duration of the mineral concession. In order to commence mining, the holder of the concession is required to negotiate the surface rights with the legal holder of these rights or to acquire the surface rights through a temporary expropriation. The current surface rights are more than adequate to cover the infrastructure, mining and stockpile areas needed for the life of the Project.

Water for the drilling programs is available from three wells located on the mine site. The water table in the area of the mine is approximately 25 m below the surface. A typical water well is shown in Figure 5.2.

The surrounding cities and towns supply the majority of the workers, with the professional staff coming from other parts of Mexico.

The site contains all of the necessary infrastructure to maintain and operate the equipment and mine.

The Project is located in the Arizona-Sonora desert in the northern portion of the Mexican state of Sonora. The climate at the Project site ranges from semi-arid to arid. The average ambient temperature is 21°C, with minimum and maximum temperatures of -5ºC and 50ºC, respectively. The average annual rainfall for the area is 330 mm, with an upper extreme of 880 mm.

The wet season or desert monsoon season is between July and September and heavy rainfall can hamper exploration at times.

The San Francisco property is situated within the southern Basin and Range physiographic province, which is characterized by elongate, northwest-trending ranges separated by wide alluvial valleys. San Francisco is located in a relatively flat area of the desert with the topography ranging between 700 and 750 m above sea level.

The desert vegetation surrounding the San Francisco mine is composed of low lying scrub, thickets and various types of cacti, with the vegetation type classified as Sarrocaulus Thicket. The state of Sonora is well known for its mining and cattle industries, although US manufacturing firms have moved into the larger centres as a result of the North American Free Trade Agreement (NAFTA). See Figure 5.3 for a view of the desert surrounding the San Francisco Project, between the distant hills, as viewed driving south towards the project from the community of Santa Ana.

The San Francisco gold mine is a heap leach operation which was in production originally between 1995 and 2002. However, during the last two years of operation, gold was being recovered from the leach pads only, with no mining being conducted from the San Francisco and La Chicharra open pits.

Placer mining and small scale underground mining began in the San Francisco mine area during the early 1940s. This limited work drew Fresnillo to the area in 1983. In 1985, three diamond drill holes and 30 conventional percussion drill holes were completed on the property. The results of these drill holes were encouraging enough to warrant additional diamond drilling during 1986. In 1987, 540 m of underground development was conducted, including a decline and a number of drifts and cross-cuts. The decline was completed to the 685 m elevation above sea level, where numerous 1.8 by 1.5 m drifts and cross-cuts were developed. Fresnillo drilled 10 diamond drill holes and 25 reverse circulation drill holes in 1988, and an additional 226 reverse circulation holes in 1989. Metallurgical testing and an induced polarization survey were also completed in 1989. In 1990 and 1991, Fresnillo completed an additional 108 reverse circulation drill holes. Fresnillo decided to sell the property in 1992, at which time it was acquired by Geomaque. See Figure 6.1 for an example of one of the rotary drill site locations southeast of the main pit. As part of the Geomaque purchase, Fresnillo retained a 3% NSR royalty and the option to re-acquire a 50% interest by paying Geomaque twice the amount which it had expended. Geomaque completed a feasibility study in 1993 and drilled a further 69 reverse circulation drill holes in 1994. Geomaque acquired the NSR royalty and option back from Fresnillo in 1995 for USD 4,700,000.

Geomaque conducted its activities in Mexico through its subsidiaries, Geomaque de Mexico, S.A. de C.V. (Geomaque de Mexico) and Mina San Francisco, S.A. de C.V. (Mina San Francisco).

Geomaque began construction of the San Francisco mine in 1995, with production beginning late in that year. Production began at the rate of 3,000 t/d of ore or 30,000 oz/y of gold. As a result of the discovery of additional reserves, an expansion of the mining fleet, crushing system and gold recovery plant was undertaken in an effort to increase production to 10,000 t/d of ore. Due to the prevailing market conditions in February, 2000, Geomaque announced a revised mine plan whereby higher grade ore with a lower stripping ratio would be mined from the San Francisco pit and the La Chicharra deposit, which is located west of the San Francisco pit.

The San Francisco area contained the El Manto, the San Francisco, the En Medio and the El Polvorin deposits. All of these deposits were later incorporated into the main San Francisco pit. The La Chicharra zone was mined during the last two years of production as a second pit.

Mining ended and the operation entered into a leach only mode in November, 2000. In May, 2002, the last gold pour was conducted, the plant was mothballed, and clean-up activities at the mine site began. See Figure 6.2 for a photographic overview of the San Francisco pit and leach pad taken from a hill to the southwest of the mine site prior to the current phase of production. Much of the foreground now is within the limits of the pit.

In 2001, to settle debts related to lease arrangements of construction equipment to Geomaque de Mexico, Butler Machinery Co. (Butler) accepted a payment of USD 500,000, the proceeds in excess of USD 500,000 on the sale of certain equipment from the San Francisco mine and a 1% net smelter return (NSR) royalty on any future gold production from the unmined resources in the main pit of the San Francisco mine. No present value was ascribed to the rights at the time of the agreement. Micon has been advised by Timmins that the agreement between Geomaque and Butler has ended and that it has received an opinion that the property was transferred to Molimentales free of any royalties. It is the opinion of Timmins solicitors that Timmins has free and clear title to the equipment on the property and no obligations to pay any NSR royalties.

Figure 6.2View of the San Francisco Gold Mine with Estación Llano in the Background (Looking Northeast)

Geomaque signed a Surface Rights Agreement with a group of rights holders (the Ejido Jesus Garcia Heroe De Nacozari (Ejido Jesus Garcia)). Based on a letter agreement dated July 7, 1999, the Ejido Jesus Garcia agreed to transfer to the company a surface area of 800 ha, for a total consideration of USD 1,000,000, of which USD 75,000 was due and payable on signing of the agreement. The letter agreement and its efficacy were the subject of litigation between Geomaque and the Ejido Jesus Garcia, whereby the company sought to have the agreement declared void, its deposit returned and other remedies, and the Ejido Jesus Garcia sought to have the agreement held effective and sought, inter alia, the payment of the balance of the purchase price and other relief.

In the summer of 2003, Geomaque sought and received shareholder approval to amalgamate the corporation under a new Canadian company, Defiance Mining Corporation (Defiance).

On November 24, 2003, Defiance sold its Mexican subsidiaries, Geomaque de Mexico and Mina San Francisco, to the Astiazaran family and their private Mexican company for a total consideration of USD 235,000. The Mexican subsidiaries held the San Francisco gold mine and the sale relieved Defiance of long-term liabilities totalling USD 1,900,000, including a USD 925,000 surface rights purchase obligation, approximately USD 760,000 in reclamation provisions and other payables totalling USD 263,000. The litigation of the surface rights between the Ejido Jesus Garcia and Geomaque de Mexico was settled in favour of Geomaque de Mexico on January 20, 2005. Geomaque de Mexico was granted by the DGM the temporary occupation of surface rights at the San Francisco mine for the duration of the exploitation concessions.

Since June, 2006, the Astiazaran family and their company, Desarrollos Prodesa S.A. de C.V. (Prodesa) have retained ownership of the waste dumps and the original leach pads, and have been extracting sand and gravel intermittently for use in highway construction and other construction projects. See Figure 6.3 for a view of gravel extraction from the original leach pads at the San Francisco mine site. The extraction of sand and gravel material from the original leach pads was ongoing during Micon’s July, 2011 site visit to the San Francisco mine. Extraction of sand and gravel material has continued from the original leach pads an was ongoing during both the 2013 and 2016 site visits.

TMM was incorporated on March 17, 2005 under the Business Corporations Act of British Columbia. TMM originally acquired the exploitation concessions covering the San Francisco Project through its wholly-owned Mexican subsidiary, Timmins, via an option agreement with Geomaque de Mexico on April 18, 2005. That option agreement was subsequently superseded by an acquisition agreement. Initially, Timmins had the option to earn a 50% interest in the exploitation concessions by spending USD 2,500,000 on exploration and development over a two-year period and, after Timmins had earned its interest, the property would be operated as a joint venture with Timmins as the operator.

In a press release dated March 19, 2007, TMM announced that it had agreed to increase its interest from 50% and had entered into an agreement to acquire a 100% interest in Molimentales, a company specifically formed to own 100% of the past producing San Francisco mine.

On October 29, 2007, TMM announced, in a press release, that it had paid the full and final USD 2.5 million to complete the acquisition of the San Francisco mine.

On March 23, 2011, TMM announced that its common shares were, as of that date, listed for trading on the Toronto Stock Exchange (TSX) and delisted from the TSX Venture Exchange (TSX-V).

On November 1, 2011, TMM announced that its common shares would be listed for trading on the NYSE Amex under the ticker symbol TGD as of November 4, 2011. It also noted that the shares would continue to trade on TSX.

On December 18, 2014, TMM announced that it had entered into an Asset Purchase Agreement with Goldgroup Mining Inc. to purchase 100% of the Caballo Blanco Gold Project in Veracruz State, Mexico. The completion of the Caballo Blanco Gold Project was acquisition was announced on December 24, 2014.

On February 17, 2015, TMM announced that it had entered into a definitive arrangement agreement with Newstrike Capital Inc. (Newstrike), under which TMM would acquire all of the issued and outstanding shares of Newstrike. Completion of the acquisition of Newstrike was announced by TMM on May 26, 2015.

During August and September, 2005, Timmins conducted a drilling program comprised of 14 reverse circulation (RC) holes, based on the results of previous drilling conducted by both Fresnillo and Geomaque. The 2005 RC drilling program focused on confirming and exploring extensions of the gold mineralization to the northwest and southeast of the existing San Francisco pit. The results of the drilling program confirmed the extension of the gold mineralization to the northwest beyond the limits of the pit and the presence of a higher grade gold zone. To the southeast, the 2005 drilling results did not confirm the previous drilling conducted by Geomaque, with only erratic values detected. However, drill hole TF-06 ended in 6.10 m averaging 2.817 g/t gold and this drill hole will be re-interpreted as part of a future exploration program focusing on reassessing the mineralization to the southeast.

In 2006, Timmins conducted an intensive exploration drill program which was based on the analysis of Geomaque’s drilling results, the 2005 Timmins drill results, the geological and geochemical data and a structural re-interpretation of the gold mineralization controls within the known deposit. The drilling program consisted of 28 reverse circulation and 28 diamond drill holes within three general target areas. The first area covered by the drilling program was the immediate area north and northwest of the existing San Francisco pit, with a particular emphasis placed on drilling in the area covered by the former crusher. The second area covered by the 2006 drilling program was located to the north and south of the La Chicharra pit. The La Chicharra pit was the second pit mined by Geomaque at the Project site and is located west of the San Francisco pit on the other side of a small mountain. The third area covered by the drill program investigated places where direct observations by Timmins geologists and previous geological mapping indicated favourable lithology, hydrothermal alteration and geochemical results for the continuation of the mineralization. The details of the 2006 exploration program and its results were discussed in a February, 2007, Technical Report entitled “NI 43-101 Technical Report and Resource Estimate for the San Francisco Gold Property, Estación Llano, Sonora, Mexico.” This report was filed on the SEDAR website on February 27, 2007 by TMM.

During 2007, Timmins conducted field work and exploration drilling to evaluate the extent of the gold mineralization in other zones on the property. This program was primarily concentrated to the north of the existing San Francisco pit limits and to the north of the La Chicharra pit. Forty holes totalling 4,838 m of core drilling were completed in this program which also included 1,327 m of condemnation drilling west of the original leach pads. In the “NI 43-101 F1 Technical Report on the Preliminary Feasibility Study for the San Francisco Gold Project, Sonora, Mexico” dated on March 31, 2008, a portion of this work was included, but not the conclusions and interpretation of the geophysical and geochemical survey.

The geochemical survey results were not available for the March, 2008, report; they are discussed here for completeness in reporting the program results. In 2007 and early 2008, geochemical surveys were conducted over the area occupied by the package of igneous and metamorphic rocks within the concessions. A total of 222 chip samples and 2,697 soil samples were collected. The sampling covered an area of just over 60 km2 using a sampling grid of 100 m x 50 m, oriented 25° E. Most of the area is covered by alluvium and the presence of the igneous-metamorphic package has been interpreted and defined from isolated outcrops distributed in the area (80 km2).

The results confirmed the targets already identified from historical shallow underground workings developed by former miners along quartz veins containing high gold values. Extending sampling along the dominant structural trend allowed for new interpretations to identify possible conduits which could be feeder zones. The area covering the favourable lithologic unit between the San Francisco and La Chicharra pits was broadly sampled to identify further potential targets.

During May, 2007, Timmins contracted the Mexican Geological Service to survey 1,227 km of high resolution aeromagnetic lineaments and radiometry and acquired raw data for a further 1,569 km previously surveyed by the same institution which fully covered the surface of the property, over 40,000 hectares. The resolution of the data varies due to the flight height, which ranged between 75 and 100 m, with the lines spaced every 100 m. Information sets were given to Engineering Zonge in Tucson for processing and interpretation.

The conclusion of this study was the definition of the indicative structural lineaments of the tectonic sequence in northern Sonora. For the San Francisco Project these lineaments should be correlated with geological and geochemical controls, combined with geological mapping and geochemistry, to identify the best exploration targets for gold and other types of mineralization, particularly in the northern portion of property where the metamorphic package hosts the El Durazno and La Pima mineral areas which are favourable for silver deposits and base metals in a replacement environment within the limestone rocks.

With a view to a more detailed interpretation as mentioned by Zonge in its conclusions, a Natural Source Audio-Frequency Magnetotelluric (NSAMT) survey was completed on the San Francisco mine along the lines 200E, 0, 800W, 1,000W, 1,200W, 1,400W, 1,600W and on the La Chicharra pit along the lines 2,500W and 2,700W. A total of 19.2 km of coverage in 10 survey lines with dipoles of 25 m was completed. Two lines were 2,400 m long and the remainder were 1,800 m.

Lines 800W and 1,000W oriented along the main mineralized zone in the San Francisco pit and line 2,700W on the main mineralized zone of La Chicharra were conducted with the aim of obtaining a geophysical signature for the mineral deposits of San Francisco.

The ten NSAMT lines completed on the San Francisco Project provide a detailed image of resistivity changes relating to geology in the vicinity of the San Francisco open pit mine. As this area is centred on a shear zone associated with a thrust fault, the geology is complex. Intrusive rocks are present as pegmatites, granites and gabbros. Gneiss and schist, with what is assumed to be various degrees of alteration, are also present in this zone. Rock property measurements indicate that the resistivities differ between rock types, ranging from intrusive to a metamorphosed host.

In the shear zone, gold is associated to some degree with granite, gneiss and gabbro rocks. Both the La Chicharra and the San Francisco pits are located in zones with conductive contacts, however, in contrast, these locations are associated with moderately resistive areas. This difference indicates that, while surface resistivities are high, there is differentiation between resistive rocks (intrusive?) and more conductive rocks (pegmatite or altered rock) at moderate depth.

Individual 2-D vertical imaged sections suggest that resistive and conductive banding, identified in the vicinity of the San Francisco mine, dips to the northeast. Recent drilling indicates that gold values are typically associated with pyrite in the more resistive intrusive rocks. Except possibly along contacts, conductive geology (possibly altered host rock) may not be important. The resistive trend coincident with the San Francisco peak may be due to the presence of gold in this area, but is not the focus of this Project. The shear zone associated with the thrust fault defines the area hosting gold.

The magnetic and radiometric data provide a different view of the geology. Magnetic high values are associated with the San Francisco pit. The contact between magnetic highs and magnetic lows appears to match the resistive trends identified previously. In contrast to the San Francisco pit, the La Chicharra pit is located in a zone of magnetic lows. The difference here could simply be due to the intrusive rock hosting primary gold values in each pit. For example, the rock properties demonstrate that the gabbro (at 550 uCGS) has over 100 times the magnetic susceptibility of granite (at 3 uCGS). However, drilling results along Line 800 suggest that both rock types may host gold. Based on these observations, it would be expected that the granite would be the primary source of gold in the San Francisco pit, with gabbro at the La Chicharra pit. Gneiss may host gold at either site.

Radiometric data identify trends that match changes in the Total Magnetic Field plan view map, as well as resistive-conductive trends. Radiometric gamma radiation is strongly controlled by conditions at the surface, as radiation from deeper sources is absorbed by overlying geology. The thorium gamma count appears to identify patterns of surface weathering that may relate to outcropping structures. Magnetic and radiometric data in the vicinity of the La Chicharra and San Francisco pits may be controlled by the thrust fault passing through this zone (the 2-D NSAMT imaged sections for Lines 800, 1,400 and 1,600 identify similar contacts associated with this thrust fault, which dip to the northeast). While the San Francisco peak is centred between NSAMT Lines 1,400 and 1,600, the peak itself appears non-magnetic, with the peak and associated ridge, extending to the northwest, defining a boundary between non-magnetic rock (granite or pegmatite for example) to the southwest and more magnetic rock (gabbro and gneiss for example) to the northeast.

The San Francisco pit is clearly located within the magnetic high zone, positioned along a linear contact seen in the radiometric data. In contrast, the La Chicharra pit is located in a non-magnetic zone also positioned along a linear contact observed in the radiometric data. Both pit locations are within the area thought to be the shear zone, and locally in areas characterized by contacts between intrusive (more resistive) and possibly altered (more conductive) rock types. The NSAMT program successfully identified the shear zone and provided sub-surface imaging of geologic trends that have been identified by airborne magnetic and radiometric surveys, in the test area.

Timmins has concluded that the interpretation of NSAMT is a useful indicator of the different lithologies associated with the mineralization or host rock. The linking of areas of high resistivity at the gabbro basement together with the overlying metamorphic sequence that was affected by several phases of tectonism, resulted in large shear zones and/or thrusting of the Precambrian metamorphic rocks over younger rocks, without generating areas of weakness. This resulted principally in high and low angle faulting through which granite bodies have been emplaced, some of which were subjected to compression and tension and consequent fracturing.

At the end of 2008, the services of a structural geologist, Mr. Tony Starling Ph.D., were recruited to obtain a greater understanding of the structural evolution of the region and in particular the tectonic complex in the San Francisco mine area, and thereby to define the structural controls for the mineralization. The goal of the study was to generate a series of geological and structural criteria that could be applied to the exploration of the property. The work consisted of 10 field days and a further 10 days for the review of existing information and discussions with field geologists. The conclusions from this structural report have assisted Timmins in outlining subsequent exploration programs.

Between 2008 and 2010, Timmins’ exploration programs focused on determining the drill priorities which best achieved its aim of increasing the mineral resources in the areas near the San Francisco and La Chicharra pits, in the area between the two pits and in geochemically anomalous areas along the projection of the San Francisco mineral trend to the northwest. As well, exploration targets to the north of the igneous-metamorphic package were investigated.

During the period from 2008 to the end of July, 2010, a total of 57,753 m in 613 drill holes were completed. Of this total, 48 holes totalling 3,723 m were exploration RAB type holes drilled in the area between the La Chicharra and San Francisco pits and 50 holes totalling 5,207 m were condemnation drilling in the area of the waste piles and new leach pads. Details of these drilling programs were outlined in Section 11 of the November, 2010 Technical Report.

From July, 2010 to June, 2011, 691 RC and core holes were drilled for a total of 94,148 m. These holes were drilled to cover several objectives; most of the reverse circulation drilling and the entire core drilling were performed in and around the San Francisco pit and in June, 2011, 36 RC holes totalling 6,170 m were drilled in the northern area of the La Chicharra pit. The RC drilling included 9,817 m in 67 holes of condemnation drilling which covered two areas; the first area was to the south of the existing waste dumps with the second area to the west of the new leach pads. The negative results allowed Timmins to expand the existing waste dumps to the south and the negative results to the west of the leach pads allow for this area to be used for the stockpile of the low grade material. Details of the exploration and drilling programs were outlined in Sections 9 and 10 of the November, 2011 Technical Report.

From July, 2011 to June, 2013, 1,464 RC and core holes were drilled for a total of 327,853 m. Most of the drilling was undertaken in and around the San Francisco pit and the La Chicharra pit. The RC drilling included 13,219 m in 62 holes of condemnation drilling and 3,842 m in 20 holes for water monitoring. A further 8 RC holes totalling 107 m were drilled on the low grade stockpile for grade control.

The drilling conducted within and around the San Francisco and La Chicharra pits comprised more than 92.8% of the drilling undertaken between July, 2011 and June, 2013. Both the RC and core drilling in these areas has identified the extent of the mineralization along strike, as well as the extent down-dip, which remains open. The drilling surrounding the San Francisco and La Chicharra pits has been completed, except for defining the extent of the mineralization to the southeast of the San Francisco pit which remains open along strike and at depth. At the current time, Timmins has completed its planned exploration drilling programs. Additional in-fill drilling is necessary to confirm the extension in the up-dip direction from the newly discovered mineral zones identified at the northern extremity of the pit.

For the exploration drilling and other programs conducted on the San Francisco property, between July, 2011 and the end of July, 2013, Timmins expended approximately USD 39.5 million. The details of the exploration and drilling programs were outlined in Sections 9 and 10 of the December, 2013 Technical Report.

The exploration and drilling conducted by Timmins between August, 2013 and December, 2015 is discussed in Sections 9 and 10.

A discussion regarding the historical mineral resource estimate was contained in a December 20, 2005 Technical Report entitled “Technical Report on the San Francisco Mine Property, Estación Llano, Sonora, Mexico.” The Technical Report was posted to the SEDAR website on April 28, 2006.

The historical resource estimate for the San Francisco mine was superseded by the January, 2007, updated resource estimate by Independent Mining Consultants, Inc. (IMC). In 2006, IMC was asked by Timmins to update/develop a resource block model and to estimate the mineral resources for the San Francisco mine using the historical Geomaque data, along with the results of Timmins’ 2005 and 2006 exploration drilling programs. The resource estimate for the San Francisco mine was completed by IMC in January, 2007.

A new mineral resource and reserve estimate was conducted as of August 31, 2010 which superseded the previous IMC, 2007, estimate. The details of the August, 2010 resource and reserve estimates were discussed in Section 17 of Micon’s November 30, 2010 Technical Report on the San Francisco gold mine.

The August 31, 2010 resource and reserve estimates were superseded by the June 30, 2011 mineral resource and reserve estimates which were discussed in detail in Sections 14 and 15 of Micon’s November 1, 2011 Technical Report.

On March 14, 2012, TMM announced an updated resource estimate as of November 30, 2011. This resource did not significantly add to the measured and indicated resources when compared to the June 30, 2011 resource estimate but there was a 34% increase in the inferred resources. The updated resource estimate was announced via a press release by TMM but there was no Technical Report to accompany the press release as management did not believe the increase in the resources were material to the operations of TMM.

On November 5, 2013, TMM announced that it had updated its resources and reserves estimates for the San Francisco mine as of July 1, 2013. The resources increased by 30% in the measured and indicated categories and by 77% in the inferred category. Overall there was a 43% increase in the contained gold versus the previous reserves, excluding depletion. The details for the updated estimate were contained in the Micon Technical Report dated December 6, 2013. This estimate superseded the previous 2012 estimate for which there was no Technical Report.

The current December, 2015, mineral resource and reserve estimate are discussed in Sections 14 and 15 of this report.

Historical production occurred at the San Francisco gold mine between 1996 and 2002. Production was conducted using open pit mining methods with gold recovered by heap leaching. During its historical production phase the San Francisco mine extracted 13,490,184 t at a grade of 1.13 g/t gold for a total of 488,680 contained ounces of gold (Table 6.1) . A total of 300,281 oz gold and 96,149 oz of silver were recovered, with the gold recovery estimated to be 61.4% .

Note: 301,893 tonnes of mineral and 975,900 tonnes of waste rock were mined in 1995. Table taken from the 2006 San Francisco Scoping Study by Sol & Adobe Ingenieros Asociados S.A. de C.V.

Other mines or exploratory shafts within the district are El Durazno (gold/silver), El Aguaje (gold), El Jabali (manganese), La Jarra (gold), El Refugio (gold), Caracahui (copper/gold), Sonora Copper (copper/gold), Las Animas (gold/copper), La Colorada (gold), Libertad (gold) and La Chicharra (placer gold). Production statistics for these mines or exploratory shafts are unavailable and in some cases there is very little published data on these workings.

The San Francisco mine resumed commercial production in April, 2010. Table 6.2 summarizes production from April, 2010 to the end of December, 2015, by quarter. Ore of lower grade is being stockpiled for leaching at the end of the mine life. Table 6.3 summarizes stockpiled ore from April, 2010 to the end of December, 2015, by quarter.

During July, 2011, Timmins tested the expansion of the crushing system to 15,000 t/d and announced that it was quickly reaching this target.

On December, 2012, a new crushing circuit was installed for processing 5,000 t/d. The equipment initially installed was one jaw crusher, one secondary crusher, two tertiary crushers and two screens. In August, 2013, a new expansion was made at this crushing circuit, installing an additional secondary crusher, along with a screen, for a capacity of 2,000 t/d. Total capacity for the new crushing circuit is 7,000 t/d.

With the original plant equipment and additions mentioned, and some fine tuning that was conducted, the total crushing capacity ran at 22,000 t/d from November, 2013.

On February 12, 2015, Timmins announced that recent diamond drilling confirmed the presence of at least three, high-grade, sub-parallel, gold bearing structures, all of which are located approximately 50 m to 100 m from surface along the south wall of the current pit. Exploration information indicated that the lenses extend up to 300 m along strike and 200 m down dip. In the press release Timmins noted that “the drilling beneath the pit has confirmed our geological theory that the high grade structures are relatively continuous along the south wall of the pit and may extend along strike underneath the ultimate pit design. It also appears that these structures may extend beyond the eastern edge of the pit. The proximity of the mineralization to the existing pit suggests that it may be accessible by means of limited underground development from the current open pit”

In order to investigate the mineralization further, Timmins announced on July 7, 2015, that it had commenced an underground pilot phase to investigate the underground veins that were parallel to the south wall of the San Francisco pit. Timmins noted that “the pilot phase will involve drifting 90 m into the south wall of the pit to access the veins followed by 200 m of lateral drifting to extract 14,000 t of ore”. The pilot phase allowed Timmins to test ground conditions, mining costs, grade and metallurgical recovery of the underground ore. Additionally, the pilot phase will provide efficient platforms for further underground in-fill and exploration drilling.”

The underground pilot phase ceased in September, 2015. The underground program was successful in identifying the continuous nature of the mineralization underground but further drilling will be necessary to fully identify the extent of the mineralization which could be mined via underground workings in this area.

Table 6.2 San Francisco Project, Timmins Annual Production from April, 2010 to the End of July, 2013 by Quarter)

Table 6.3 San Francisco Project, Timmins Annual Ore Stockpiled from April, 2010 to the End of December, 2015 by Quarter)

Figure 6.4 is a view of the San Francisco pit during the Micon site visit in July, 2011. Figure 6.5 is a view of the San Francisco pit during the Micon site visit in August, 2013. Figure 6.6 is a view of the San Francisco pit during the Micon site visit in February, 2016. Figure 6.7 is a view of the La Chicharra pit during the Micon site visit in February, 2016.

In order to demonstrate the growth of the San Francisco pit since Timmins resumed mining in 2009, a plan view of the current pit (Figure 6.8) outlining the locations of a longitudinal section (Figure 6.9) and a cross section (Figure 6.10) of the pit have been created showing the annual pit limits in these areas.

Figure 6.8Plan View of the Current San Francisco Pit Showing the Location of the Longitudinal and Cross-Sections Demonstrating the Growth of the Pit Since 2009

Figure 6.9Longitudinal Section (3357580 North) Demonstrating the Growth of the San Francisco Pit Since 2009

“The San Francisco property is situated in a belt of metamorphic rocks that hosts numerous gold occurrences along the trace of the Mojave-Sonora megashear, which trends southeast from south-central California into Sonora. The megashear is a left-lateral transform fault which became active during the Jurassic period and exhibits up to 800 km of displacement. Deformation along the megashear occurred along with metamorphism (Calmus et al, 1992) and since the formation of the megashear the area has been subjected to both tectonic compressional and tensional forces.”

“The following description is extracted from Silberman (1992). The northwest-trending range-front faults and numerous low-angle shear zones related to thrust or detachment faults are the most common structures. The Mojave-Sonora megashear as defined by Silver and Anderson (1974) is a regional northwest-trending feature. It separates the Precambrian basement rocks of slightly differing ages. The Jurassic rocks which occupy the zone are strongly deformed along low-angle thrust faults and the associated sedimentary rocks are tightly folded. The south-western boundary of the megashear appears to be a major fault that juxtaposes Precambrian basement rocks against the Jurassic magmatic terrane (Anderson and Silver, 1979). Up to 800 km of left lateral movement has been proposed for this shear after the Middle Jurassic period. Others (Jaques et al., 1989) have suggested that the megashear is a Cretaceous thrust front reactivated as a middle Tertiary detachment. The metamorphism in the area has been postulated to have occurred with the megashear or the magmatic activity of the Middle to Late Jurassic periods (Tosdal et al, 1989). However, others propose a close relationship between deformation and the closing of the marginal basin after its subduction below the volcanic arc, or the result of Late Cretaceous or Tertiary compression associated with uplift and low-grade metamorphism (De Jong et al, 1988). Calmus (1992) believes it is unquestionable that a Cretaceous-Tertiary (Larimide) tectonic event occurred but that it is superimposed upon older Nevada and Lower Cretaceous compressional and extensional phases. Many of the Sonoran gold deposits are located at or near the Mojave-Sonora megashear.”

The Basin and Range province, which extends into Sonora from the United States, is characterized by northwest-trending valleys and ranges. Paleozoic rocks, including quartzite and limestone, overlie the Precambrian locally. The valleys are covered and in-filled by recent gravels. See Figure 7.1 for the regional geology map of the San Francisco mine area and location of the San Francisco and La Chicharra pits.

The San Francisco property lies in a portion of the Mojave-Sonora megashear belt characterized by the presence of Precambrian to Tertiary age rocks represented by different grades of deformation and metamorphism as evidenced in the field by imbricate tectonic laminates. The rocks principally involved in the process of deformation and associated with the gold mineralization in the region are of Precambrian, Jurassic and Cretaceous age.

The oldest rocks within the property are a package of metamorphic rocks which include banded quartz-feldspathic gneiss and augen gneiss, green schist, amphibolite gneiss and some amphibolite and marble lenses (Calmus et al., 1992). All metamorphic rocks exhibit foliation which generally varies in strike direction from between 30° to 72° west and dips to the northeast from 24° to 68°. See Figure 7.2 for a geological map of the San Francisco and La Chicharra mine site.

The metamorphic rocks are intruded by a Tertiary igneous package, which includes leucocratic granite with visible feldspar and quartz, and is porphyritic to gneissic in texture. It appears that the granite was emplaced along low angle northwest-southeast shear zones in the system which developed between an older gabbro and the metamorphic sequence. This is the reason that in some places the granite bodies appear as stratiform lenses that vary in width from centimetres to more than 40 m and are subparallel to the foliation. It is seen however, that the emplacement of leucocratic granite also favours the N30°W fault system, causing the granite to take an elongated form, principally in direction N60°W, but with extensions along the N30°W system.

Besides the gabbro and the granite, dikes of different composition, including diorite, andesite, monzonite and lamprophyre, intrude the metamorphic sequence. In addition, lenses of pegmatite associated with the schist have been mapped, emplaced along the foliation planes, occasionally forming lenses within the gabbro and within the gneiss and on the border of the leucocratic granite bodies. All of the rocks described above form the San Francisco unit which is the most important unit for exploration, with the leucocratic granite being especially significant because it is the primary host rock for gold mineralization.

Mapping of isolated outcrops and geological interpretation of the outcrops demonstrate that the San Francisco unit is extensive within the property, covering a surface area of approximately 100 km2. The unit hosts at least 15 gold occurrences which are considered to be favourable exploration targets, in addition to the known San Francisco and La Chicharra gold deposits.

In the north and south, the San Francisco unit is in contact with the Coyotillo unit which is a weakly metamorphosed package of sandstone, quartzite, phyllite, conglomerate, volcanics and limestones of Jurassic age.

The granitic gneiss containing the mineralization at the San Francisco Project is intensely fractured with a total of five fracture sets having been identified, although there are only two primary sets. One of the primary sets strikes 36° to 60° east and dips northwest 70° to 90°, while the other strikes 64° to 73° west and dips northeast 46° to 66°. The regional fracture sets are generally parallel to major faults and perpendicular to foliation planes.

The main vein systems in the region strike 50° to 80° west with dips ranging from northeast to southwest. These vein systems are the San Francisco, La Playa, El Diez, La Chicharra, and several systems in the La Mexicana area, Area 1B and La Escondida. A secondary system of veins includes the La Trinchera, Casa de Piedra, unnamed veins in portions of Area 1B and the La Mexicana veins which strike 60° to 80° east and dip northwest to southeast. Although the age relation between the two systems is unknown, it is believed that the northeast system is probably later stage.

The metamorphic foliation in the San Francisco deposit primarily strikes 78° west and dips to the northeast at 68°. Regionally the foliation is variable, generally ranging from east-west to 60° west with varying dips to the northest.

The original bedding is recognized in the metavolcanic-sedimentary rocks to the south at Cerro La Bajarita, and is variable with strikes ranging from 70° to 80° west and dips to the north. The sedimentary beds of the Represo Formation in the northern portion of the property strike 60° to 70° west and dip to the northeast.

Dikes of intermediate composition in the Project area strike predominantly 63° west and dip to the northeast at 58°. Several dikes are intruded along planes of foliation, and others cut foliation of the metamorphic units. In the Sierra La Vetatierra mountains in the northern portion of the Project, dikes strike 60° to the east, dip to the northwest, and represent a later system of fractures.

Metamorphic folds, including isoclinal, open symmetrical and kink folds, have been described, but no systematic description of folds has been found in the literature.

The La Chicharra pit is located 2 km west of the San Francisco pit. Discovered by Geomaque in the late 1990’s, it is estimated that approximately 37,000 oz of gold were extracted and processed during Geomaque’s last year of operations.

The discovery of this deposit was the consequence of exploration programs comprised of magnetic ground surveys and soil geochemistry, using both conventional soil sampling and MMI techniques. In both cases, samples returned very high values for the main mineralized zone in an area of low magnetics. Trenches were excavated to conduct chip sampling which confirmed the presence of gold mineralization in the bedrock and drilling delineated a deposit with a resource of 60,000 to 70,000 oz of gold.

The geology of the La Chicharra deposit, although it is hosted in the San Francisco group, differs from the geology found in the San Francisco pit (Figure 7.2) . While the geology consists of quartz-feldspar gneiss, pegmatite, schist, granite and gabbro, the mineralization is hosted principally in gabbro. The gabbro has a very sheared appearance, almost like a breccia, comprised of large fragments with lenses of pegmatite between the fragments. Due to the shearing process, the blocks of gabbro are highly fractured and the fractures are filled with quartz veins and veinlets. The gold mineralization is hosted by the pegmatite lenses and in the veins and veinlets within the gabbro. The limits of the mineralized gabbro are very well delineated by the shear zones, at both the hanging wall and footwall. This geological control allowed for better operational planning during the exploitation by Geomaque.

The gabbro at La Chicharra is different from the gabbro bodies at the San Francisco mine, as it contains no magnetic minerals which are generally produced by the destruction of the original minerals contained within the gabbro during the tectonic and mineralization processes. As well, due to strong shearing, the minerals are oxidized. The gabbro is a tabular body dipping to the northeast at approximately 30 to 40° and striking approximately 60° west, with the mineralization potentially open both along strike and down dip.

Timmins completed a program of core drilling seeking the extension of mineralization down dip and along strike, and confirming continuity for the first 150 m from the northern limit of the pit, with the mineralization open in the northwest direction towards La Severiana.

Structurally, all of the metamorphic and igneous interpretation is based on the High Resolution Air Magnetics which indicate a regional lineament varying in direction from 60° to 30° to the west. The gold deposits are located in the southern portion on each side of this main lineament, and are related to the extension faulting of the system west-northwest and west-east. Other grassroots gold targets are located along this lineament, related to quartz veins with gold mineralization emplaced along the shear zones of the system to the west-northwest and west-east

Figure 7.3 is a view of the La Chicharra pit looking towards the southwest and showing the lineament.

The San Francisco property is located within the Sierra Madre Occidental metallogenic province which extends along western Mexico from the state of Sonora, south to the state of Jalisco. In the state of Sonora, the most important metal produced in the Sierra Madre province is copper, with the Cananea porphyry copper deposit being the most well-known. Gold and silver projects are next in importance and are hosted mainly in sedimentary rocks and brecciated volcanic domes.

At the San Francisco Project, gold occurs principally as free gold and as electrum occasionally. Gold is found, in decreasing abundance, with goethite after pyrite, with pyrite and, to a much lesser extent, with quartz, galena and petzite (Ag3AuTe2). Although it is clear that the gold was deposited at the same time as the sulphides, the paragenetic relationships are not well understood. There is the possibility that some secondary remobilization may have occurred as evidenced by minor amounts of gold occurring in irregular forms along with or on top of drusy quartz (Prenn, 1995).

The gold occurs in a granitic gneiss and the presence of pyrite (or goethite after pyrite) may be an indication of gold. Stockwork quartz veinlets, some with tourmaline, also exist in the mineralized zone. However, the presence of quartz, even with tourmaline, is not necessarily an indication of the presence of gold. Quartz veinlets with tourmaline but without gold mineralization were found hundreds of metres away from the San Francisco deposit. Alvarez (in Prenn, 1995) suggested that some tourmaline was part of the mineralizing system, but could be distinguished from the tourmaline found elsewhere.

The relationship between the quartz and tourmaline at the Project is not well understood, though at least one event is closely related to the gold mineralization. Calmus (1992) and Perez (1992) described the gold as being in quartz, acicular tourmaline, and albite veins and breccias. It was noted (Perez, 1992) that two types of tourmaline exist: schorl and dravite, but these are difficult to distinguish. There is some suggestion that a more greenish tourmaline is associated with the San Francisco zone while the black tourmaline (schorl) is generally barren of gold. If this can be verified, it could become a valuable exploration tool for the region. Horner (in Prenn, 1995) also noted the possibility of two or more types of tourmaline in the cobbles sampled in the stream beds. Horner believes that only one set of the tourmaline veins is associated with the gold and suggests that bismuth is also associated with one tourmaline quartz vein event.

Other metallic minerals associated with the deposit include trace to small amounts of chalcopyrite, galena, sphalerite, covelite, bornite, argentite-acanthite and pyrrhotite. Trace amounts of molybdenite and wulfenite have also been reported. Metal mineralization is low, with copper reaching into the hundreds of ppm, arsenic reaching about 100 ppm, and antimony rarely over 10 ppm. Petzite was recognized but tellurium values rarely reached 10 ppm. The mineral relationships, the possibility of associated tourmaline, and the style of mineralization suggest that the San Francisco deposit might be of mesothermal origin (see Prenn, 1995 for discussion). Others have suggested the same genesis based on these and other factors, including fluid inclusion studies (in Prenn, 1995).

The San Francisco deposits are roughly tabular with multiple phases of gold mineralization. The deposits strike 60° west to 65° west, dip to the northeast, range in thickness from 4 to 50 m, extend over 1,500 m along strike and are open ended. The San Francisco deposits consisted of the El Manto, the San Francisco, the En Medio and the El Polvorin deposits. All of these deposits were later incorporated into the main San Francisco pit. The El Manto deposit (north pit), to the north of the San Francisco (main pit), is tabular, strikes 65° west, dips relatively shallowly to the northeast, and ranges in thickness from 5 to 35 m. The En Medio (in the main pit north of San Francisco) strikes 60° west, dips to the northeast and varies in thickness from 4 to 20 m. The El Polvorin (west pit) is a northwest extension of the San Francisco mineralization which strikes 65° west, dips moderately to the northeast and ranges in thickness from 4 to 20 m.

Alteration related to the mineralization consists of negligible to locally intense sericitization, course-grained pyritization and rare local silicification. This alteration forms a halo extending a few metres from the mineral deposits, but may also be absent. Supergene alteration consisting of oxidation of pyrite to goethite is common. Additionally, there is supergene alteration of feldspar to kaolin and sericite.

Analysis by Geomaque of 110 samples in seven mineralized zones showed a silver/gold ratio of less than 1 to 10, with very low values of zinc, copper, molybdenum, bismuth, antimony and mercury. Lead is occasionally high, but not above 1% while gold shows a good correlation locally with arsenic and lead. However, none of the other elements is a good indicator for gold.

El Durazno is located approximately 12 km north of San Francisco mine. The geology is dominated by the El Claro granitoid intrusion and sediments of the El Represo Formation. The El Claro intrusion is large mass of medium to fine biotite granodiorite intruded by series of monzonite, biotite granite, andesites, diorite and lamprophire dikes trending northwest. The large mass of biotite granodiorite was dated by Poulsen et. al., (2008) using U-Pb in zircon giving an age of 66.0 ± 2.0 Ma.

The biotite granodiorite is cross-cut by multiple major high angle platey foliate structures trending to the northwest which contain quartz-tourmaline with minor sulphides and gold mineralization. The intrusive hosted foliate structures can vary in thickness from a quarter metre to several metres. The structures are preferentially altered and mineralized, carrying sericite (greisen), pyrite, quartz and tourmaline. Where the structures are located, it is common to find signs of past prospecting, and they are geochemically anomalous in gold, silver, lead, tellurium, molybdenum and bismuth.

The main structural feature is the El Durazno fault which lies at the contact between the sedimentary rocks and biotite granodiorite. The foliated N60°W shear zones are more likely evidence of faulting along the east margin of the intrusive, although foliated shear zones have been found all around the intrusion in lesser abundance.

Mineralized areas usually occur as quartz veins relatively near the contacts of the El Claro intrusive and more often within the intrusive. The mineralogy of the veins is primarily quartz-tourmaline with a low sulphur content of less than 0.5% . Closer to the contact with the sediments, a number of quartz-sericite (greisen) veins in the more central parts of the intrusive have been identified. Structurally there are four groups of veins and veinlets within the granitoid El Claro:

One group of veins belongs to the thicker quartz-tourmaline veins in the area which occasionally reach widths greater than 1 metre, have a general N55°W trend and dip to the northeast similar to the monzonitic, diorite, lamprophire and andesitic dikes. These veins are associated with ductile shear zones. The mineral lineation observed in the granite foliation plane has a strike of N50°W and the tourmaline crystals strike N52°W, indicating that emplacement of this first generation of veins is contemporary with the ductile deformation.

The second group of veins have thicknesses of less than half a metre, with a general strike of N40° to 50°E, and are also located in areas with ductile shear zones occurring mainly at the area known as El Pinto.

The third group of veins apparently are emplaced in a ductile-brittle deformation environment, developing sheeted veins with thicknesses less than one centimetre within the intrusive. The general trend of the sheeted veins is N15° to 25°W.

The fourth, poorly represented group of veins strike N65° to 80°E, are located primarily in the central part of the El Claro intrusive and are characterized by quartz- sericite (greisen)-pyrite, with a general trend of N60°W. This last type of veins is very poor in gold with local values up to 0.1 g/t Au, but with high anomalous values of tungsten and molybdenum.

The contact between the granite and Cretaceous sediments is characterized by the development of an alteration zone of quartz-epidote-chlorite-garnet skarn and locally forms low grade metamorphism of the hornfels type. Although quartz gold bearing veins are not very common in sediments, they occur locally in conjunction with a high content of sulphides.

The Vetatierra Project is located approximately 8 km north of the San Francisco mine. It is a very early stage exploration project and its geology is dominated by detritic sediments of the El Represo Formation, intruded by small stocks of fine grained dioritic intrusions and diorite dikes. A sequence of fine grained sandstones, shales, medium bedded conglomerates and locally lenticular limestones commonly trending east-west and dipping to the north. These represent the majority of the rock types at the Vetatierra Project. This sequence is intruded by a diorite stock that covers an area of 600 m by 200 m, oriented to the northeast. Both sequences are cut by a series of dioritic dikes oriented NE 50° to 80°. Locally, the contacts between the sediments and diorite intrusion develop an alteration halo, forming low grade metamorphic rocks as hornfels or slate types.

The sediments are cut by multiple major high angle platey foliated structures, with a preferential northeast trend, at the southwestern portion of the project. The sediments host foliated structures that vary in thickness from a quarter metre to several metres which have been interpreted as shear zones. Low-angle brecciated faults have been interpreted to be located on the south side of this area. This has been interpreted as a possible structural contact between the San Francisco Precambrian rocks and the Cretaceous sediments of the Represo Formation.

The sequence of sediments and diorite stock has been cut by a number of quartz-tourmaline and quartz veins trending east-northeast, which occuring within the diorite stock and all the surrounding areas. At least 3 groups of veins have been noted:

A group of low angle quartz-tourmaline veins trending west-northwest to east northeast, dipping to the north and varying in thickness from a centimetre to over a metre.

The diorite intrusion appears to be the most favourable rock to host the gold bearing quartz-tourmaline veins in the Project area, due the better reactivity and competency of the rock.

West of the diorite stock, a series of conglomerate lenses outcrop which shows a strong silicification and oxidation, with local quartz veinlets. The conglomerate covers an area of 300 metres by 150 metres.

At the San Francisco Project, Timmins is targeting large volume, low grade disseminated gold deposits contained within leucocratic granite, granite-gneiss and gneiss and schist horizons. Leucocratic granite and gneiss are the main rocks hosting the gold mineralization.

The gold mineralization occurs in a series of west-northwest to east-northeast trending quartz-tourmaline veins and veinlets that lie sub-parallel to the local lithology and foliation trends, dipping to the southwest, within the more brittle rocks such as the leucocratic granite and more felsic lithologies within the Precambrian sequence. Extensive studies of the veins and alteration describe the mineralization as mesothermal/orogenic in style, but with a potential link to magmatic fluids and an intrusive source (Calmus et al., 1992; Luna and Gastelum, 1992; Perez Segura, 1992; Perezsegura et al., 1996; Perez Segura, 2008; Albinson, 1997; Poulsen and Mortensen, 2008).

Micon has conducted a number of discussions with Timmins personnel during its site visits to the mine and in Hermosillo and notes that the exploration programs at the San Francisco Project are planned and executed on the basis of the deposit models discussed above. Micon has also observed the various stages of the drilling programs during a number of site visits at the San Francisco Project since 2005 and notes that those programs have always been conducted according to the deposit model which has been proposed for the Project.

The details of Timmins previous 2006 to June, 2013 exploration programs were discussed in Micon’s previous Technical Reports for the San Francisco gold mine and are summarized in Section 6 of this report. The discussions in this section will be confined to the work conducted by Timmins between July, 2013 and December, 2015.

From July, 2013 to December, 2015, very little exploration has been conducted around the San Francisco and La Chicharra deposits. This is primarily because Timmins focused most of its exploration efforts on fully exploring the area immediately surrounding the pits prior to the publication of the 2013 Technical Report. Timmins has generally decreased the exploration budgets due to the continuing decline in the gold price since 2013.

Table 9.1 summarizes the mine expenditures for the exploration programs at the San Francisco Project from July, 2013 to December, 2015.

While Table 9.1 generally appears to indicate an increase in exploration expenditures since 2013, it is only because the expenditures include the 2014 to 2015 in-fill drilling in the San Francisco pit, the 2014 condemnation drilling for the new leach cells, land use change fees for leach pads and southwest waste pads (USD 550,603), as well as the mining taxes for the concessions. In some instances, the in-fill pit and the condemnation drilling, land use change fees and land use mining taxes would not necessarily be considered exploration expenditures but rather mining expenditures related to grade control and infrastructure. However, when compared to the exploration expenditures of USD 39,498,426 for the period from July, 2011 to July, 2013 contained in the last report the reduction in expenditures is actually substantial.

Timmins has begun to explore the other mineralized areas located on the San Francisco property. The El Durazno and Vetatierra Projects located 12 km and 8 km north of the San Francisco Project, respectively, were first discussed in the previous 2013 Technical Report. The 1B Area and La Pima Projects are 3.2 km and 25 km north of the San Francisco Project, respectively.

The El Durazno Project is located approximately 12 km north of the San Francisco mine and is contained within the confines of the San Francisco property. No exploration has been conducted at the El Durazno Project since the previous Technical Report was published.

The early stage Vetatierra Project is located approximately 8 km north of the San Francisco mine and is contained within the confines of the San Francisco property. Mapping and chip sampling was conducted on the Vetatierra Project and the results were briefly discussed in the previous 2013 report.

In 2014, Timmins conducted a drilling program comprised of 4 reverse circulation (RC) and 6 diamond drilling (core) holes on the Vetatierra Project. The RC drilling totalled 1,197.86 m and the core drilling totalled 2,311.3 m for a combined total of 3,509.16 m. Details of the drilling program at the Vetatierra Project are discussed in detail in Section 10 of this report.

The 1B area is located 3.2 km north of the San Francisco pit. Geological mapping indicates that a pair of shear zones, containing gold mineralization, are exposed at surface. The shear zones are approximately 300 m apart in this area, which appears to be the widest portion of a broader zone with the shear zones corresponding to both the foot and hangingwall, respectively. In 2014, Timmins scheduled a preliminary drilling program for this area to better understand how the gold mineralization was related to the low angle highly oxidized shear zone hosted quartz veining in the local granitic rocks. Surface rock sampling returned up to 4.50 g/ton gold, south of the shear zone over what is interpreted to be the eroded footwall of the shear zone.

The drilling program was comprised of 57 RC holes totalling 8,040.40 m and 3 core holes totalling 758.7 m

Details of the drilling program at the 1B Area Project are discussed in detail in Section 10 of this report.

The early stage La Pima Project is located approximately 25 km north of San Francisco mine within the San Francisco property.

The mineralization within the La Pima Project is related to structurally controlled hydrothermal Ba-Ca-Ag-Pb-Zn breccias with over a 2.5 km strike length that are hosted in fossiliferous limestones of Cretaceous age. Artisanal mines and diggings have been developed within the limestone beds.

Four main exploration targets were identified within the project area: West Target (WT), Central Target (CT), North Target (NT) and Pima Mine Target (PMT). At the PMT, artisanal underground workings were developed early in the 1900’s along two main structures (NE 50° and NW 20°). The developed workings stretch over 100 m in length with a maximum width of 10 m and are 60 m deep. The NT is in a flat area north of the PMT and is approximately 85% covered by alluvial material containing small outcrops of interbedded siltstones and sandstones and Ba-Ca breccia’s with anomalous values of Ag-Pb-Zn. The CT and WT areas have a geological, structural and mineralization signature very similar to the PMT.

Initial surface sampling returned significant silver values, with a few samples yielding values of over 1 kg/ton Ag from both surface and underground. The chip channel surface sample No. 7894 returned 2,103.52 g/ton Ag with no significant values of Pb and Zn. The underground chip channel sample No. 5951 returned 1,026.6 g/ton Ag, 2.05% Pb and 0.50% Zn. An additional 845 samples were taken from the other targets including underground sampling.

Rock samples were submitted to San Francisco mine laboratory and were analyzed by fire assay and atomic absorption. 215 pulp samples were submitted to ALS Minerals laboratory (ALS) as assay checks and the results showed slightly lower values in the same assays as those reported by the San Francisco mine laboratory. Once the variation in assay values were tabulated Timmins decided that all of the samples should be reassayed and that the values from ALS were used as the correct numbers.

Figure 9.1 is a geological plan view of the La Pima Project showing the target areas under investigation. Figure 9.2 is a closer view of the geological plan for the La Pima mine target. Figure 9.3 is a longitudinal section demonstrating the extent of the artisanal workings from the early 1900’s within the mineralized zone.

Micon has reviewed Timmins exploration programs and has visited the exploration sites, as well as discussing the exploration programs, procedures and practices with Timmins personnel during the various site visits to the San Francisco Project. Micon believes that the exploration programs are managed according to the Exploration Best Practice Guidelines, as established by the CIM in August, 2000.

Figure 9.2Geological Map of the La Pima Mine Exploration Target and the Location of the Longitudinal Section

Figure 9.3Longitudinal Section Across the La Pima Mine Exploration Target Showing the Artisanal Workings in the Mineralized Zone

The details of Timmins previous July, 2011 and July, 2013 drilling campaigns were discussed in Micon’s previous 2013 Technical Report for the San Francisco gold mine and are summarized, for the most part, in Section 6 of this report. The discussion in this section will be confined to the drilling conducted by Timmins between January, 2014 and December, 2015.

RAB drilling is also known as a down-the-hole drilling. The drill uses a pneumatic reciprocating piston-driven hammer to drive a heavy drill bit into the rock. The drill bit is hollow steel and has approximately 20 mm thick tungsten rods protruding from the steel matrix as buttons. The tungsten buttons are the cutting face of the bit.

The cuttings are blown up the outside of the rods and collected at surface. Air or a combination of air and foam lift the cuttings from the drill hole.

RAB drilling is used primarily for mineral exploration, water bore drilling and blasthole drilling in mines, as well as for other applications. RAB drilling produces lower quality samples because the cuttings are blown up the outside of the rods and can be contaminated from contact with other rock types.

The use of high-powered air compressors can allow drilling of a deeper hole up to approximately 1,250 m.

RAB drilling was conducted on the San Francisco Project between January, 2014 and December, 2014. However, the results of RAB drilling have not been used in the estimation of the mineral resources and reserves discussed herein or in any of the previous Micon Technical Reports.

RC drilling uses hardened steel or tungsten blades to bore a hole into unconsolidated ground. The drill bit has three blades arranged around the bit head. The rods are hollow and contain an inner tube inside the hollow outer rod barrel.

The drilling mechanism is a pneumatic reciprocating piston known as a hammer, driving a tungsten-steel drill bit. RC drilling utilizes large rigs and machinery and depths of up to 500 m are routinely achieved. RC drilling ideally produces dry rock chips, as large air compressors dry the rock ahead of the advancing drill bit. RC drilling is slower and costlier but achieves better penetration than RAB drilling; it is less expensive than diamond coring and is thus preferred for most mineral exploration work.

Reverse circulation is achieved by blowing air down the rods, with the differential pressure creating air lift of the water and cuttings up the inner tube. The cuttings reach the bell at the top of the hole, then move through a sample hose which is attached to the top of the cyclone. The drill cuttings travel around the inside of the cyclone until they fall through an opening at the bottom and are collected in a sample bag or pail.

Although RC drilling is air-powered, water is also used, to reduce dust, keep the drill bit cool, and assist in pushing the cuttings back upwards. A drilling mud is mixed with water and pumped into the rod string, down the hole. When the drill reaches hard rock, a collar is put down the hole around the rods. Collaring a hole prevents the walls from caving in and bogging the rod string at the top of the hole.

Figure 10.1 is a view of one of the RC drill rigs in operation in the San Francisco pit during the Micon site visit in July, 2011.

Diamond core drilling utilizes an annular diamond-impregnated drill bit attached to the end of hollow drill rods to cut a cylindrical core of solid rock. The diamonds used are fine to microfine industrial grade diamonds. They are set within a matrix of varying hardness, from brass to high-grade steel. Holes within the bit allow water to be delivered to the cutting face.

Core samples are retrieved via the use of a lifter tube, a hollow tube lowered inside the rod string by a winch cable until it stops inside the core barrel. As drilling proceeds, the core barrel slides over the core as it is cut. The winch is then retracted, pulling the core barrel to the surface.

Once the core barrel is removed from the hole, the core is removed and catalogued. The core is washed, measured and broken into smaller pieces to make it fit into the sample trays.

Diamond rigs can also be part of a multi-combination rig. Multi-combination rigs are capable of operating in either an RC or diamond drilling mode (though not at the same time). This is a common scenario where exploration drilling is being performed in an isolated location.

Figure 10.2 is a view of a core diamond drilling set-up southeast of the San Francisco pit during Micon’s site visit in July, 2011.

A total of 6,783.75 m in 63 RC holes were drilled between 2014 and 2015 as part of the San Francisco mine in-fill drilling program on Phase 3 and Phase 4 East and Phase 4 down. The aim of both drill programs was to confirm the gold mineralization in the short term mine plan as well as reduce the drilling spacing and confirm the mineralization reported by the historical drill holes.

An exploration/in-fill drill program (Phase 5) was executed on the south wall of the San Francisco pit with the aim of exploring the continuity of the gold mineralization below Phase 3. An in-fill drill program on the south wall was also conducted to partly identify the extent of the high grade gold mineralization related to two main structures that could potentially be extracted using underground mining methods. Thirty one RC holes totalling 4,376.92 m and 20 core holes totalling 2,185.300 m were drilled on south wall of the San Francisco pit.

A program of RC condemnation drilling was conducted in 2014 on the western side of the existing leach pads. The program consisted of 21 holes totalling 3,642 m. The assay results for this program did not indicate any economic gold intersections in this area.

Figure 10.3 is a plan view of the various in-fill drilling programs conducted within the San Francisco pit during 2014. Figure 10.4 is a location plan of the RC condemnation drilling.

A program of 15 RC drill holes were distributed along a strike distance of 160 m spaced every 20 m from Section 660W to Section 820W at the bottom of the San Francisco pit on benches 530 to 536. The program totalled 1,100 m and Table 10.1 summarizes the location and significant assays for the RC drilling on Phase 3 from benches 530 to 536.

Table 10.1Summary of the Location and Significant Assays for the RC Drilling on Phase 3 from Bench 530 to 536

A drilling program was initiated on Phase 4 with the same objectives as the previous program on benches 530 to 536. The drill program consisted of 27 RC holes totalling 3,547 m which were distributed from Section 280W to Section 740W on bench 650, as indicated in Figure 10.3.

Table 10.2 summarizes the location and significant assays for this drilling. The table contains all of the mineral intersections on Phase 4 east, as this completes the overview of the results from the drilling during November, 2014. The results confirmed that the mineralization is in agreement with the existing block model and results of the July, 2013 resource estimation for that portion of the San Francisco mineral deposit.

Table 10.2Summary of the Location and Significant Assays for the RC Drilling on Phase 4 from Bench 650

There were two objectives for the drilling program along the south wall of the San Francisco pit with both derived from the proposal to conduct underground mining on certain high grade gold zones which were identified below the design pit shell.

The first program consisted of an RC drilling totalling 4,376.92 m distributed over 31 holes to identify if there was sufficient mineralization to justify a pushback of the pit wall in a southerly direction in this area.

The holes were drilled from Section 460W to 1340 W with the spacing dependent on the location of the previous drilling along the south wall. The significant results for this drilling program are summarized in Table 10.3.

In addition to the significant intersections encountered, there are a number of other mineralized intersections identified in the drill holes but they are either low grade intersections or very narrow zones of high grade.

Table 10.3Summary of the Location and Significant Assays for the RC Drilling on Phase 5 between Sections 880W to 1160W

The second program of drilling comprised core holes conducted to explore the continuity of the high grade mineralized zones beneath the existing surface of the southwall and underneath the final pit design. The program was also conducted to identify the possibility of extracting the high grade mineralization using an underground mining method. The core program consisted of 20 holes totalling 2,185.12 m located between Sections 880W and 1160W, all of which were drilled from the southern ramp access to the pit.

Figure 10.5Plan View of the November, 2014 Core Drilling Program on the Southwall of the San Francisco Pit

Table 10.4Summary of the Location and Significant Assays for the Core Drilling on Phase 5 between Sections 880W to 1160W

In 2015, after a review of the block model, drill spacing and negative reconciliation on the upper benches (+600 m elevation) of Phase 4, which was approximately a 50 m push back of the north wall of Phase 3 within the San Francisco pit, a drilling program was conducted to test the continuity of the mineralization, as interpreted from the original drilling programs in this area.

The drilling program was based upon a review of the mineral zones as configured by the blast hole patterns for Phase 3, which was depleted in February, 2015. The blast hole patterns indicated that, in this area of the pit, the local mineralization dipped in the opposite direction to the general dip of the mineralization elsewhere in the pit.

As a consequence, a 2,135.12 m drilling program comprised of 21 holes was conducted to test the dip of the mineralization against the original interpretation for Phase 4. The drilling program confirmed that the dip of the mineralization was as originally outlined and that the mineral zone encountered in Phase 3 was an anomaly.

Table 10.5Summary of the Location and Significant Assays for the RC Drilling Below Phase 4 of the San Francisco Pit

From July to September, 2014, a total of 18,132 m of RC and RAB drilling was completed on the targets to the north of the San Francisco pit. This drilling included 3 RAB sections over 5 km in length, with RAB drilling on the La Mexicana-Vetatierra corridor, the 1B area and the La Vetatierra target. The 1B area and La Vetatierra targets were drilled using both core and RC equipment. The objective of this drilling was to provide geological evidence for the discovery of a new gold deposit in the area closest to the existing mining operation, that could act as either a satellite pit or standalone operation.

Table 10.6 summarizes the number of drill holes and metres for each type of drilling conducted north of the San Francisco Pit.

Table 10.6Summary of the Location, Type, Metres Drilled and Number of Drill Holes for the Programs North of the San Francisco Pit

The objective of the RAB drilling was to gain a better understanding of the structural and geochemical controls of the gold mineralization within a 5 km by 2 km structural corridor identified previously by surface mapping, soil sampling and air-magnetic mapping as potentially hosting areas where the flat-lying gold-bearing structures may coalesce into a larger zone.

The RAB drilling program was comprised of 5,547 m distributed in three sections separated in width by 600 m, with drill collars spaced 100 m apart along Section lines 3500W, 4100W and 4700W. The targets tested in this program included low and high mag anomalies, gold soils anomalies, low angle shears zones and red colour anomalies on co-alluvial soils. The various mineralized targets tested with the RAB program were La Playa, El Diez, La Mexicana, 1B and La Vann. The average depth of the RAB holes was 35 m intersecting a thickness of alluvial soil varying from 6 to 76 m. An additional 3,133 m were drilled at the La Mexicana-La Vetatierra structural corridor with 69 RAB holes distributed south and northwest of La Mexicana, including holes south of the La Vetatierra. The entire program was contained within a 2,000 by 500 m corridor.

Figure 10.6 shows the location of the RAB drilling along Section lines 3500W, 4100W and 4700W in relation to the San Francisco pit and the northern exploration targets.

Of the 52 RAB drill holes collared on Section 3500W, 19 returned anomalous gold values. The results along Section line 3500W confirmed the potential extension to the west of the mineral intercepts in the 1B area explored with RC holes during 2008, which returned some significant gold assays and trace elements.

Of the 53 RAB drill holes collared on section 4100W, 17 returned anomalous gold values while, of the 55 RAB drill holes collared on section 4700W, 14 returned anomalous gold values.

Table 10.7, Table 10.8 and Table 10.9 summarize the most significant RAB drill intersections along Sections 3500W, 4100W and 4700W.

Based upon the results of the RAB holes drilled on the section lines, a number of areas were selected for RC follow up drilling, including those located across the projection of the mineralization to the west of the 1B area. The RC drilling focused on exploring the potential continuity of the mineral intersections along strike and down dip, primarily given that the mineral intersections are located between surface and a maximum vertical depth of 60 m for the RAB drilling.

A total of 3,133.88 m were drilled within the low magnetic and gold soil geochemistry anomaly structural corridor between the La Mexicana Project and La Vetatierra Project. The La Mexicana Project was previous drilled in 2009 and has yielded a series of high grade quartz-tourmaline veins with grades of up to 47 g/t Au. The recent drilling has demonstrated that the area has the potential to host a bulk minable gold deposit but there is also the potential that it could become a high grade vein style target due the encouraging gold assays results. Currently, Timmins is conducting various interpretations of the vein structures to determine if there is a single vein or a set of veins with high grade gold values that may be traceable by core drill holes.

Table 10.10 summarizes the best mineral intersections for the RAB drilling in the corridor between the La Mexicana and La Vetatierra Projects

Table 10.10 Summary of the Significant RAB Drilling Results for the Area Between the La Mexicana and La Vetatierra Projects

The 1B area is located 3.2 km north of the San Francisco pit. The area explored with RC drilling comprises a quadrangle of approximately 1,000 m by 300 m where geological mapping has indicated there are a pair of shear zones containing gold mineralization at surface. These shear zones are spaced an average of 300 m apart corresponding to the foot and hangingwall of a wide shear zone, respectively. A first pass drilling program was initiated in order to form a better understanding of how the gold mineralization is related to the low angle high oxidized quartz veining shear zone hosted in granitic rocks.

A total of 9,087.99 m of RC drilling in 65 widely spaced holes were collared north of the main shear zone within an area covered by co-alluvial material, with the goal of following up on the gold mineralization intercepted by the RAB drill holes containing significant assay results close to surface. The mineralized gold intercepted by the drilling is hosted by highly pyritic intervals related to the shear zone and to its hanging and footwall. The shear zone is hosted by granite, gabbro, felsic and mafic gneiss.

Of the 49 RC holes drilled, 29 RC holes returned significant assays from the view point that this is an early stage exploration program. The significant RC holes are distributed from Section line 3500W towards the east to the 1B Area along section-lines spaced every 100 m.

Table 10.11 summarizes the significant mineral intersections encountered during the 2014 RC drilling program at the 1B Area.

In 2014, 3 core holes were drilled within the 1B area. The holes were collared with the objective of confirming the higher grades intercepted by the previous RC drill holes and to obtain a better understanding of the geological and structural controls for the mineralization.

Hole 1BD14-001 was collared on Section 3500W to probe the high grade mineralization encountered by RAB and RC drilling. The mineralization was not intercepted by drilling as it is believed that mineralization is pinching out at depth.

Hole 1BD14-002 was collared on Section 3300W to test of the low grade mineralization encountered by hole 1B14-028, to test the hypothesis that there was possibility of some loss of gold with RC drilling and that core drilling may result in a higher grade. The second objective was to intercept the possible feeder zone of the high grade mineralization intercepted by drill hole 1B14-036. The grade of the mineralization intercepted is very similar in both holes, so there appears to be no gold lost in the RC drilling. The possible feeder zone was not located in the hole.

On Section 2800W, hole 1BD14-003 was collared 50 m north of the RC hole 1B14-005 to intercept the down dip projection of gold mineralization. This hole intercepted 11.10 m grading 0.627 g/t Au, which corresponds to the down dip projection of the mineralization intercepted by RC drill hole 1B14-005.

Table 10.12 summarizes the significant assay results from the three 2014 core holes within the 1B area.

A closer spaced drilling program, approximately 50 m by 25 m apart, within an area 200 m long by 100 m wide was scheduled to the east of the 1B area where the holes 1B14-005 and TF-048 intercepted gold mineralization close to surface. The objective of this second round of drilling was to determine if the mineralization could be of sufficient grade to potentially host a satellite open pit heap leach deposit which could feed the San Francisco mine operation. The drill program was not completed due an in-pit drilling program at the San Francisco pit which was deemed to be a higher priority program.

However, 13 RC holes totalling 2,419.64 m were drilled in an area of 120 by 100 m to the north and on east side of the 1B14-005. The best gold interceptions were in the drill holes 1B14-051 grading 2.025 g/t over 4.57 m, drill hole 1B14-057 grading 1.506 g/t Au over 9.14 m including 4.160 g/t Au over 3.05 m, and 2.469 g/t Au over 4.57 m including 7.102 g/t Au over 1.524 m, and in drill hole 1B14-068 with 1.553 g/t Au over 7.62 m including 3.481 g/t Au over 3.05 m.

The drilling conducted to date does not appear to have identified a bulk low grade gold deposit that could be mined by open pit methods at the 1B area. However, some of the area is still open to testing and some high grade structural zones are still open in the area as well.

The mineralization identified to date occurs as fine grain gold dissemination in what seems be highly pyritic structural zones. The pyrite content is very high and the gold may be associated with these high sulfuric zones, in addition to a local quartz pyrite and rare quartz tourmaline veins. Occurrence of the gold mineralization is most likely similar to the La Chicharra deposit rather than the San Francisco deposit. At the La Chicharra deposit the gold mineralization is related to a confined moderately angled structural zone with a high iron oxide content that may occur after pyrite deposition and some of the ore may be supergene gold enrichment.

Further work will be necessary to fully understand the nature and extent of the mineralization at the 1B area.

The Vetatierra Project is located approximately 8 km north of the San Francisco mine. The geology is dominated by detritic sediments of the El Represo Formation intruded by small stocks of fine grain diorite and diorite dikes. The diorite stock covers an area of 600 m by 200 m oriented to the northeast. The contacts between the sediments and diorite intrusions developed an alteration halo forming metamorphic rocks containing low grade gold mineralization.

Core and RC drilling was conducted in an area 1.2 km by 0.3 km oriented to the northeast to test the surface gold mineralization encountered within and around the dioritic stocks. The gold mineralization at La Vetatierra is related to quartz-tourmaline, quartz-tourmaline-pyrite and quartz-pyrite veins and veinlets. The initial rock chip samples collected at the project returned significant gold values. Sample 4601 returned the highest gold value of 29.56 g/t Au, 27.1 g/t Ag and 0.35 % Pb and sample 4857 yielded 1.0 g/t Au, 905.5 g/t Ag, 3.63% Pb. Chip channel sampling on trenches over the dioritic stock returned significant gold values, including 10 m grading 6.01 g/t Au and 4.63 g/t Ag, including 2 m of 26.61 g/t Au and 2.52 g/t Ag, and 44 m grading 0.39 g/t Au, 1.92 g/t Ag.

The first phase of the drilling program comprised 6 core holes totalling 2,311.3 m and 4 RC holes totalling 1,197.86 m strategically distributed along the dioritic stock and its alteration halo. The first core hole, VT14-001, intersected multiple mineralized intervals confirming the down dip projection of the surface gold values. However, both lower gold grades and narrower intervals were intersected, although the alteration in the diorite and the metasedimentary sequence looks impressive, with sericite, pyrite, magnetite, and quartz and quartz-tourmaline veins among others encountered. The most significant mineral interval is contained within hole VT14-002 which graded 1.286 g/t gold over 33.85 m, including 1.879 g/t gold over 22.40 m or 3.260 g/t gold over 12.50 m.

Additional RC holes, VTRC14-001 and VTRC14-004, were collared 50 and 100 m apart to the southwest of hole VT14-002. Drill holes VTRC14-002 and VTRC14-003 were collared 50 m northeast of hole VT14-002 along the same section, to follow up the immediate down and up dip projection of the gold intersections detected by the VT14-002. Holes VTRC14-001, 002 and 003 all intercepted the gold mineralization, although with different and more intermittent grades.

Judging from the section drilled at the La Vetatierra Project, the mineralization is most likely an open quartz tourmaline and quartz-pyrite stockwork hosted by the fine grain diorite stock. Therefore, at this time, the interpretation of the mineralized zones is difficult and remains to be determined, although the main mineralized zones tend to be flat and gently dipping to the south.

Table 10.13 summarizes the significant core intersections from the 2014 drilling program at the Vetatierra Project.

Table 10.14 summarizes the significant RC intersections from the 2014 drilling program at the Vetatierra Project.

If known, a description of the historical sampling methods, sample preparation, analysis and security conducted on the San Francisco Project is provided in Section 6. TMM, through its Mexican subsidiary Timmins, conducted its initial exploration drilling program on the Project in August and September, 2005, and instituted sampling procedures which have been discussed in the 2005, 2007, 2008 2010, 2011, and 2013 Technical Reports that were filed on SEDAR.

During the January, 2014 to December, 2015, drilling programs, Timmins continued to use the sampling procedures instituted for the previous reverse circulation and diamond drilling campaigns. Micon reviewed and extensively discussed the sampling procedures during the July, 2013 site visit and is satisfied that these procedures are accurately carried out and are in accordance with the best practices currently in use by the mining industry, and that they are well documented. Micon also discussed the procedures again during the February, 2016 site visit. Micon concludes that the results produced by the procedures are reliable enough to form the basis for a mineral resource estimate.

Timmins’ January, 2014 to December, 2015 exploration drilling programs consisted of various types of drilling such as RAB, RC and core drilling. All drill holes were field logged and sampled as the holes were in progress. During the drilling and each day that the drilling was completed, the information contained on the hand-written drilling logs (field logs) was transcribed into an Excel® spreadsheet. The Excel® spreadsheet contains the basic drill hole data, individual sample data and assay results, as well as the codes for the lithology, alteration and mineralization. This information was converted to an ASCII file to import it into the database which supports the present resource estimate by Timmins. Geological and mineralization interpretation was conducted based on cross-sections which were produced using an AutoCAD® software package.

The drilling completed in this period was based on an analysis of the results of the exploration programs of previous years conducted by Timmins, and followed up on previous targets or generally attempted to answer questions regarding the potential for secondary deposits north of the San Francisco pit

From the RC drilling, a portion of the material generated for each sample interval was retained in a plastic specimen tray created specifically for the reverse circulation program. The samples in specimen trays constitute the primary reference for the hole in much the same way as the core does for diamond drilling. The specimen tray was marked with the drill hole number and each compartment within the tray was marked with both the interval and number for the respective sequential sample it contained. Empty compartments were left for the locations where the blank and standard samples were inserted into the sequential sample stream and two compartments were identified for duplicate samples. Figure 11.1 shows some of the specimen trays for drill hole TF-1566.

Due to the nature of RC drilling, only rock chip fragments are produced, and these range from a very fine grained powder up to coarse chips 2 cm in size. Since the stratigraphic contact between the different rock units cannot be identified exactly, the holes were sampled on equal 1.5 m (5 ft) intervals from the collar to the toe of the hole. The sample interval was chosen because it represented two samples per drill rod (3 m or 10 ft). In general, this is considered to be the standard sampling length within the industry.

Samples were taken in the overlying alluvium as well as within the underlying rock units. The alluvium samples were subject to random assaying, whereas every sample originating from the underlying rock units was assayed. The recovery of the material during the drilling program was excellent, in the order of 90% to 95%, in both near surface sulphide-oxide and lower sulphide zones.

A common feature in the sampling process for RC drilling is that a unique sample tag is inserted into the sample bag with each sample, and each sample bag is marked with its individual sample number. The bags containing the blank and standard samples are added into the sequential numbering system prior to shipment of the samples to the preparation facility. Sample preparation and assaying were performed at the San Francisco mine. Approximately 15% of the samples assayed in the laboratory at the San Francisco mine were checked at an external laboratory. The principal external laboratory has been the IPL-Inspectorate laboratory in Vancouver, B.C. Samples identified as field duplicate samples during the RC drilling were split into two separate sequentially numbered samples during the sampling process at the drill.

For core drilling, control starts after a run has been completed and the rods are pulled out of the hole. Once the core is removed, it is placed in core boxes; the length stored in each box depends of the diameter of the core, 2.40 m for HQ diameter and 3.0 m for NQ. This step in the procedure is completed by the contractor’s personnel, under the supervision of a Timmins geologist. Timmins and the drill contractors follow generally accepted industry procedures for core placement in the core boxes.

Small wooden tags mark the distance drilled in metres at the end of each run, the depth from and to, and the length drilled and length recovered. The drill rods used by the contractors involved in the core drilling are measured in Imperial units, while the tags placed in the boxes are measured in metric units. The hole number and progressive box number are marked on each filled box by the drill helper and checked by the geologist. Once the core box is filled at the drill site the box is covered with a lid to protect the core and the box is sent to the core logging facility for further processing.

For diamond drilling where core is produced, the exact stratigraphic contact between the various different rock units can be identified and these contacts are used as the primary basis for separation of the sample intervals. The maximum sample length within the stratigraphic unit was restricted to approximately 1.0 m or 2.0 m, with no minimum restriction. The maximum sample lengths are in accordance with accepted industry practice. In addition to the stratigraphic restrictions that limit the length of the core interval, the size of the sample may be restricted because of the content or type of mineralization encountered within the drill hole. In general, core recovery for the diamond drill holes at the San Francisco Project was better that 98% and no core loss due to poor drilling methods or procedures was experienced.

A unique sample tag is inserted into the sample bag with each sample and each sample bag is marked with its individual sample number. The bags containing the blank and standard samples are added into the sequential sample numbering system prior to be being shipped to the assay preparation facilities of Inspectorate or ALS-Chemex. Both of these preparation facilities are located in Hermosillo, although ALS-Chemex has sent samples to its facilities in Chihuahua and Zacatecas for preparation, if there is a large backlog of samples waiting to be prepared. During the sampling process, some samples are identified as field duplicate samples and these are also inserted into the sample stream.

The RC drill sampling was conducted by a team of two or three geological assistants, under the close supervision of the Timmins staff geologists in charge of the on-site program. The staff geologists were responsible for the integrity of the samples from the time they were taken until they were delivered to the preparation facilities at the San Francisco mine. Figure 11.2 shows collection of a RC sample during the July, 2011 Micon site visit.

The RC cuttings collected at the drill site were discharged from the drill hole through a hose, into a cyclone where they were collected in a plastic pail. Sampling of the material generated during the RC drilling was conducted at the drill rig using a stainless steel riffle splitter if the material was dry and a rotary splitter situated below the cyclone if the material was wet. The cyclone and splitters were cleaned between samples and, in the case of wet samples, the cyclone and splitters were blown out using compressed air and also washed out between each sample using clean water. Using a 12.5 cm drill bit and a sample length of 1.52 m, it is estimated that the original sample weighed 48.3 kg, prior to making allowance for recovery. It is estimated that the average recovery was between 90% and 95%, which would indicate that the mass of the recovered sample varied between 42 and 45 kg.

If the sample was dry, the entire sample interval was collected in a bucket and then passed through the riffle splitter twice before the final sample of 21 to 23 kg was collected. The remaining 21 to 23 kg was rejected. The 21 to 23 kg sample was subjected to a second split to obtain two samples of 10 to 12 kg (an original and a witness sample). The geologist or an assistant (under supervision) had previously marked the drill hole number and sample number on the plastic sample bags and inserted the sample tag into the sample bag for the original sample. Both bags were closed and sealed at the drill with plastic tie wraps and transported to the camp facilities.

If the sample was wet, it was discharged to a cyclone and then passed through a rotary cone splitter to divide the sample into two equal portions, one of which was automatically rejected. The other portion was collected and simultaneously split into two equal halves by means of a mechanism designed for this purpose and installed in the lower portion of the rotary splitter. The two samples were collected in fabrine (micropore) sample bags to allow retention of the solids and the slow dissipation of the drilling water through the pores in the sample bags, without sample loss. In all cases, a flocculent was used to settle the solids, including the fine portion, prior to tying the fabrine bag. The outside of each sample bag was marked with the sample’s individual number which corresponded to the number on the sample tag which was inserted into the bag containing the original sample.

All samples from the RC drilling were prepared at the drill site by the Timmins staff geologists and their assistants. Each time that a hole was completed, a truck was dispatched from the drill site to the preparation facilities of the Timmins assaying laboratory, which currently supports the mining and processing operations of the San Francisco gold mine and the exploration in the area surrounding the pit.

For check assays and their preparation, a truck was periodically dispatched to deliver samples to the Hermosillo assay preparation facility of IPL Laboratories and, from January, 2010, to IPL-Inspectorate. Sample bags containing the blank and standard samples were added into the sequential numbering system prior to shipment of samples to the preparation facilities, both at the San Francisco mine and in Hermosillo. Samples selected as duplicates were split into two separate sequentially numbered samples during the sampling process at the drill.

The procedures used for the RAB drilling are the same as those used for the RC drilling with the exception length of the sample. In the case of the RAB drilling the sample length is 2.032 m rather than 1.52 m used for RC drilling. This generates a larger sample weight per sample but does not impact the quality of the sample.

Geologic descriptions of the core samples, including nature of the sample, length of sample, lithology, alteration and mineralization, were captured on drill log forms. Samples were sealed in cloth bags with drawstring closures with the sample identification tags placed with each sample in the bag. A matching tag was retained in a sample book. Samples are stored on site in a locked warehouse at the exploration camp.

A truck goes to each drill site to collect the core boxes at regular intervals during the day. The boxes were loaded into the truck and placed in a criss-cross pattern and then secured to the truck by ropes to prevent movement on the short drive back to the on-site core logging facilities.

Once the core boxes arrive at the logging facility, they are laid out in order, the lids are removed and the core is washed to remove any grease and dirt which may have entered the boxes. The depth markers are checked by the geologist and the depth “from” and “to” for each box is noted on both the top and the bottom covers of each core box.

The geologist logging the core begins by examining the core to ensure it is intact. During the core logging process, the geologist defines the sample contacts and designates the axis along which to cut the core. Special attention is paid to the mineralized zones to ensure that the sample splits are representative. The sample limits are marked on the core as well as on the side of the core box, and the sample numbers are marked on the core box next to the sample limits. Afterwards, the sample limits are input into an Excel spreadsheet, which records the sample number and intervals.

Once the core has been logged and the samples marked, the core boxes are brought to the area where an electric diamond saw is set up to cut the samples. At the sampling area, two core splitters and their helpers process the samples by using the diamond saw to cut the core in half. Once the core is sawn in half, one half of the core is placed into a plastic sample bag and the other half is returned to the core box. The geologist or an assistant has previously marked the sample bags with the sample number and inserted the individual numbered sample tag into the plastic bag. A geologist supervises the core sawing to ensure that the quality of the sampling remains high and that no mistakes are introduced into the system due to sloppy practices. The boxes containing the remaining half core are stacked, with lower numbers at the bottom and the higher numbers at the top, and stored on site in a secure core storage facility.

As part of Timmins’ QA/QC procedures, a set of samples comprised of a blank sample, a standard reference sample and a field duplicate sample are inserted randomly into the sample sequence. The insertion rate for the blanks, standards and duplicate samples is approximately one in every 25 samples.

During the second semester of 2011, blank samples were used that had been prepared from a tonalite dike that outcrops on the southwestern extension of the San Francisco pit. The rock unit is younger than both the host rock of the gold mineralization and the mineralizing events in the region, at least as far as is known. A geologist currently working with Timmins, and previously for both Geomaque and Fresnillo, considered the material in the dike to be barren and this was verified during the 2005 to 2010 drill programs. However, during the 2011 to 2013 program, anomalous gold values, including economic values, started to appear in this material and a detailed mapping program resulted in the discovery of xenoliths of mineralized rock within the dike. As a result, Timmins made the immediate decision to use material from another source, which was selected based upon a regional geological reconnaissance. The regional reconnaissance resulted in the identification of a basalt-andesite in several areas within a 40 km perimeter around the San Francisco mine. Due to the accessibility of the Norma Project area to the northwest of the mine, a series of outcrops were chosen at the southern end of the Norma concession, from which several samples were taken and assayed by the San Francisco mine laboratory. The results of the assaying revealed gold values either below the detection limits or no gold.

While Timmins was waiting for a new blank sample to be generated from its own material, it used blanks purchased from Proveedora de Laboratorios, SA de CV, based in Hermosillo. Timmins purchased two types of blanks, a fine and coarse grain blank, with the first one used to check the assaying of the primary laboratory and the second to check the sample preparation in Timmins on-site facilities.

The procedure used to prepare the bags of blanks from the basalt-andesite was the same that the used by Timmins for the tonalite. Timmins collected 1 tonne lots of the material which were transported to the San Francisco mine, where the material was crushed to -1/8”, followed by homogenization, and then split into 1 kilogram lots. During the drilling campaign, gold values were detected in a specific lot of blank samples. Timmins then obtained the sample rejects from the Inspectorate laboratory and re-analyzed them in the San Francisco laboratory which confirmed the gold values, but noted that the material in the rejects was different from that in the blanks. From the position of the samples in the sampling sequence, and their position with respect of the gold values hosted in the metamorphic sequence cross-cut by the drilling, it was concluded that a mistake had been made in the numbering of the samples. The rest of the blank material was promptly rejected and a new 2-t sample was obtained and sent for preparation to the Sonora preparation laboratory, with Timmins specifying the requirements for the preparation.

Figure 11.3 and Figure 11.4 show fragments of rock used for the blank samples and the bags once they had been prepared for insertion in the sampling sequence.

Certified standard reference materials (SRM’s) were submitted with each sample shipment during the course of the drill programs. A total of 27 standard reference samples have been used, and these are summarized in the Table 11.1. Standard pulps, consisting of 70 to 100 g of material, were randomly inserted into each batch of 25 samples. The 27 standards include low, medium and high gold grades, in relation to the average grade of the known deposits in the area.

For the RC drilling, the samples which were identified for duplication (field duplicates) were processed and split in the same way as the regular samples taken on either side of them. In the case of dry samples, the final 21 to 23 kg sample was subjected to a further split in the field, yielding two 10.5 to 11.5 kg samples. Wet samples were dried and then passed through the riffle splitter to obtain a second (duplicate) sample of approximately the same mass as the original. The duplicate samples were given sequential numbers and submitted as two separate samples for the purpose of assaying.

For the 2010 to 2011 exploration drilling program, only a small number of samples were prepared and assayed by the San Francisco mine laboratory. In August, 2010, Timmins decided to send all of the samples from the exploration program for preparation at an external laboratory. Timmins did consider building a laboratory at the mine site to analyze the exploration assays, but the costs related to the laboratory, in order to meet the strictest QA/QC requirements were prohibitive and it was decided to build only the preparation facilities, which were completed and ready to begin operations in November, 2012. This facility at the mine was only capable of preparing up to 350 to 400 pulps per day which, considering the quantity of samples generated by the exploration drilling meant that a large proportion of the samples were sent to external laboratories for both preparation and assaying. Timmins conducted an expansion of the preparation facility, so that it is able to prepare at least 700 samples per day of RC or core drilling. However, there are no samples being prepared for assaying currently and there are no drilling programs contemplated in the near future.

The procedure used at the San Francisco mine for the preparation of samples to be assayed for gold is as follows:

The samples received are inspected by the laboratory supervisor or an assigned deputy, to ensure that each is identified and that the original packing is not damaged. All of the samples are placed in the designated reception area.

On the registration form, the user must enter the date and time, the work order number assigned by the laboratory, and record the origin of the sample, elements to be analyzed, requested assay method, sample type (rock fragments, soil, etc.) and priority of the sample. The registration form is filled out in duplicate.

Once reviewed, the form is then registered with the name and signature of the persons who submitted and received the samples.

All exploration and mine samples are weighed individually, with the weight recorded in the designated notebooks. The samples are then delivered to the sample preparation staff.

All samples received are dried in trays that are of an adequate size to ensure that they remain free of any contaminating material.

Using a permanent marker, each sample is labelled according to its original identification number. Each sample is poured into a corresponding tray, ensuring that 100% of the sample is contained within the tray, to avoid cross-contamination of samples. Inside each tray is an identification card that matches the original identification label.

Samples with a low moisture content are checked after 60 minutes to see if they have dried. Samples with high moisture content are checked after 3, 6, or 8 hours, at the discretion of the supervisor. Once the samples are completely dry, they are removed from the oven and placed on trolleys for transport.

The initial crushing is done in a jaw crusher, after it has been cleaned with compressed air. A first pass is conducted to reduce the size of the material to 85% passing a ¼ inch mesh. The material is then transferred to another tray that has already been labelled with the original sample number. Once the crushing is completed, the crusher and trays used in the process are cleaned using compressed air, and then the crusher is cleaned using fragments of monzonite dike. This material is monitored by the laboratory periodically to ensure that it is unmineralized.

A second crushing pass is performed using a roll crusher, in order to obtain a product of minus 10 mesh (2 mm).

The minus 10 mesh product is homogenized by rolling on a rectangular blanket, canvas or plastic liner. Once the sample homogenized, it is placed back into the tray to be split in a Jones riffle splitter.

Prior to splitting the sample, the splitter is checked to ensure that it is free of particles that could contaminate the sample. Compressed air is used where necessary to clean the splitter. The sample is then split, with one half being returned to the original sample bag and the other portion being split again.

The sample continues to be split between 3 to 8 times, until a sample of approximately 250 grams is obtained. This sample is then sent to the pulverizer.

Pulverizing is conducted such that 90% of the material is minus 150 mesh. The samples arrive at the pulverizing process in laminated Kraft envelopes, with each one identified according to the sample number and the work order. Once each sample has been pulverized, it is delivered to an external laboratory for assaying.

Equipment in the sample preparation facilities at the San Francisco mine is shown in Figure 11.5 and Figure 11.6.

Samples from the San Francisco mine are picked up periodically by Inspectorate de Mexico, SA de CV. (Inspectorate), a subsidiary of Inspectorate America Corp. (also, Inspectorate). These sample pickup trips are performed by Inspectorate’s wholly owned trucks, driven by full time Inspectorate employees. Samples are picked up at the San Francisco mine.

Timmins delivers the samples to Inspectorate personnel in rice sacks marked with the numbers corresponding to the samples in each sack. The samples inside the rice sack are contained in plastic bags marked with the sample number and including a numbered sample tag.

Timmins provides proper documentation to Inspectorate’s personnel regarding the samples being picked up, including a list of the samples delivered, the type of samples, the type of analysis requested and the elements for which assays are to be reported.

Samples are driven to Inspectorate’s sample preparation facilities in Hermosillo, Sonora, where they are subjected to the sample preparation process prior to shipment of a representative sub-sample to the analytical laboratories located in Richmond, B.C., Canada or Sparks, Nevada, USA.

Once the samples are received at Inspectorate’s sample preparation facilities, they are sorted in alpha-numerical or numerical order in the sample layout area. A registration form is completed providing details of the samples received.

When all the samples have been sorted and no extra, missing or duplicate samples are found, the sample registration is accepted by the supervisor and is taken to the administration office where the sample data are entered into the Laboratory Information Management System (LIMS).

Once the samples have been registered, each sample is taken out of its plastic bag and placed in a stainless steel drying pan which is then positioned in the wheeled drying racks. The drying racks are placed inside a high capacity drying oven where the samples are fully dried at 100°C. The samples are never dried for more than 5 to 6 hours.

Once the samples are fully dried, the wheeled racks are taken to the crushing area where the entire sample is crushed by a TM Engineering Terminator Jaw Crusher to 70% minus 10 mesh (2 mm).

A quality control check test is performed to ensure that the crushed sample meets the specified size criteria. The test is performed on the first sample crushed at the beginning of a shift and then once in every 40 samples thereafter.

Once a sample has been crushed, it is split using a Jones riffle splitter until a 250 g representative sub-sample is obtained.

The entire 250 sub-sample is pulverized by using a Bico VP-1989 VP Pulverizer or LM2 Labtechnics Pulverizer, to 85% passing minus 200 mesh (75 microns).

A quality control check test is performed to ensure that the pulverized samples meet the specified size criteria. This test is performed at the same frequency as the crushed sample sizing test.

The pulverized material is split to obtain a 100 g representative sample, which is sent to Inspectorate’s analytical laboratory in Richmond, B.C. or Sparks, Nevada, where it is analyzed. The other 150 g split is saved in the warehouse for future checks or returned to the San Francisco mine.

Samples from the San Francisco Project are assayed for gold by fire assay, with atomic absorption finish, on a one assay-tonne sample. The lower and upper detection limits for this method are 5 and 10,000 ppb.

Inspectorate’s Metals and Minerals Inspection and Laboratory Testing Services are certified by BSI Inc. (BSI) annually, in compliance with the ISO 9001:2008 Guidelines for Quality Management.

Inspectorate’s internal quality assurance/quality control (QA/QC) program is considered to meet normal industry standards for analytical laboratories.

All samples received at ALS Chemex are furnished with a bar code label attached to the original sample bag. The system will also accept client supplied bar coded labels that are attached to sampling bags in the field. The label is scanned and the weight of the sample is recorded together with additional information such as date, time, equipment used and operator name. The scanning procedure is used for each subsequent activity involving the sample from preparation to analysis, through to storage or disposal of the pulp or reject.

The sample is logged in the tracking system, weighed, dried and finely crushed to better than 70% passing a 2 mm screen. A split of up to 250 g is taken and pulverized to better than 85% passing a 75 micron screen. ALS states that this method is appropriate for rock chip or core samples. Table 11.3 summarizes ALS methodology codes and descriptions for the preparation methods used for Timmins samples.

A prepared sample is fused with a mixture of lead oxide, sodium carbonate, borax, silica and other reagents as required, inquarted with 6 mg of gold-free silver and then cupelled to yield a precious metal bead.

The bead is digested in 0.5 mL dilute nitric acid in the microwave oven; 0.5 mL concentrated hydrochloric acid is then added and the bead is further digested in the microwave at a lower power setting. The digested solution is cooled, diluted to a total volume of 4 mL with de-mineralized water, and analyzed by atomic absorption spectroscopy against matrix-matched standards.

Table 11.4 summarizes the ALS laboratory Au-AA23 and Au-AA24 Fire Assay Fusion, AAS Finish assay methods.

A prepared sample is fused with a mixture of lead oxide, sodium carbonate, borax, silica and other reagents in order to produce a lead button. The lead button containing the precious metals is cupelled to remove the lead. The remaining gold and silver bead is parted in dilute nitric acid, annealed and weighed as gold. Silver, if requested, is then determined by the difference in weights.

Table 11.5 summarizes the ALS Ag-GRA21, Ag-GRA22, Au-GRA21 and Au GRA22 Precious Metals Gravimetric Analysis Methods.

Table 11.5Summary of the ALS Ag-GRA21, Ag-GRA22, Au-GRA21 and Au GRA22 Precious Metals Gravimetric Analysis Methods

The period covered in this report is from January, 2014 to December, 2015, during which core and reverse circulation drilling decreased significantly from the period covered by the previous Technical Report. Throughout this period, the demand for services from assay laboratories has not been as pressing as for the previous period prior to July, 2013. The reasons for this are primarily related to the completion of the major drilling programs at the San Francisco and La Chicharra pits, as well as the reduction and finally cessation of exploration programs as a result of declining metal prices. During the previous period, Timmins used more than one external laboratory to meet its assaying requirements, which averaged more than 10,000 drill samples per month. The laboratories used for assaying were Inspectorate, ALS Minerals (ALS) and, occasionally, Skyline Assayers and Laboratories (Skyline). All of these laboratories are independent. Timmins continues to use the outside laboratories but now only on an as and when needed basis.

In addition to its regular QA/QC programs when it is conducting exploration programs, Timmins added a program of conducting screen metallic samples as part of its assay checks to deal with free gold that it observed at the Vetatierra Project.

At the Vetatierra project, part of the gold mineralization appears to be related to finely disseminated and coarse free gold on the quartz-tourmaline±pyrite. As a result, Timmins believed it was necessary to conduct assays checks to identify any potential nugget effect in the assay data or if there was the possibility of losing gold during the drilling or RC/core sampling process. Figure 11.7 is a piece of core showing the location of visible gold found within it.

To better understand if there was coarse gold affecting the sample, 5 samples were analyzed. Five rejects samples from the RC drilling were analyzed as sample pairs for screen metallics at the Inspectorate laboratory and at the San Francisco Mine laboratory. An additional five field duplicate samples of the same interval, as rejects samples (25% of the total sample) were analyzed by screen metallics.

The assays results indicated that fine gold or clustering gold may occur at the Vetatierra Project, giving a variation in the assays results which were either positive or negative depending on whether or not free gold was present (Table 11.6) .

Note that in the sample 435954 the assays results are higher in the original sample sent to the lab than the assay returned from screen metallic.

Five of the samples were analyzed as pairs at Inspectorate laboratory, one sample was taken from the rejects and the other one from field duplicate taken at the rig (both samples were from the same interval). Three of the samples were very similar to each other but two of them have a strong variation in the gold results, suggesting that a nugget effect or loss of gold may be present in two of the samples. Table 11.7 shows the variation in the samples both in a tabular fashion and graphically

Table 11.7Summary and Graph Showing the Gold Variation in the Five Pairs of Samples Rejects Vs Field Duplicates

Another 5 samples were analyzed to compare the gold assay results from the screen metallics and fire assays with the AA finish (original sample), and once again the results are very variable (either positive or negative) giving one the impression that a nugget effect due to very fine or clustering of gold may occur at the project (Table 11.8) .

Table 11.8Summary and Graph Showing the Gold Variation in the Samples Screen Metallics Vs Fire Assays

Prior to the last Technical Report in 2013, Timmins stopped using its assay laboratory at the San Francisco mine to analyze samples and was only preparing samples on site. Micon has reviewed the preparation facilities and concludes that the samples are prepared appropriately with regard to potential contamination and sample integrity. There are very few operating mines that do not process and even assay the samples generated by operating and exploration programs. However, in order to maintain independence in the assay results for the exploration programs, Timmins continued to use third party laboratories for assaying samples. The San Francisco mine laboratory continues to participate in a round-robin assay process through CANMET.

In terms of the QA/QC program, Timmins has continued to use duplicates, blanks, standard reference material and check assays as part of its program. While these were not discussed in detail for the purposes of this report, the results were acceptable. Micon considers that the QA/QC program in place as part of Timmins procedures is of sufficient quality and quantity to be considered as following the best practices guidelines as published by the CIM and therefore the sample and results are suitable to be used as the basis of mineral resource estimates.

Since 2005, Micon has prepared seven previous Technical Reports on the San Francisco mine for Timmins, all of which have been filed on SEDAR and are referenced in Section 28 of this report. The previous data verification programs were discussed in those reports.

Prior to the 2016 site visit, the database and model were reviewed in Toronto. This review allowed for any potential issues to be noted so that they could be discussed during the site visit, however no issues were noted with the database and model during this review.

Micon’s most recent site visit was conducted between February 2 and 6, 2016. The site visit included a tour through the San Francisco and La Chicharra open pits and the underground workings beneath the southwall of the San Francisco pit.

In addition to the site visit to the San Francisco mine, a couple of days were spent at the exploration offices in Hermosillo going over the data for this report and the underground resource estimate parameters and particulars.

A number of discussions were held via skype and phone conference calls between Micon personnel in Toronto and Timmins personnel in Hermosillo regarding the database, block model and parameters for the mineral resource estimate, as well as other topics related to the audit and preparation of this Technical Report.

The previous site visit to the San Francisco mine was conducted, by Micon, between August 12 and 16, 2013 with the one prior to that conducted between July 18 and 21, 2011.

The Qualified Persons responsible for the preparation of this report are William J. Lewis, B.Sc., P.Geo., Alan J. San Martin, MAusIMM(CP)., Mani Verma, P.Eng., and Richard M. Gowans, P.Eng.

Mr. Lewis conducted the 2016 and 2011 site visits. Messrs. Verma, San Martin and Lewis conducted the 2013 site visit. Mr. Gowans conducted his reviews in Toronto, based on the information provided to him by Timmins.

Timmins’ San Francisco mine is an operating property, on which mining operations are being carried out by a contractor. The crushing, leaching and gold recovery facilities are operated by Timmins personnel. The Project commenced operation early in 2010 and has been in commercial production since the second quarter of 2010. Micon has reviewed the production data for the mine since it began production, and relevant statistics are summarized in other sections of this report.

Timmins has used its production and cost experience as the basis for its future projections. Micon has reviewed the future operational and production plans developed by Timmins, and regards them as appropriate.

In March, 2014, Timmins started to use the specialized software called GV Mapper by Geovectra, to improve its data collection procedures. GV Mapper is geological data management software which offers a significant improvement in data handling allowing flexibility, scalability and centralization among other benefits, for the purpose of developing a better database.

In January, 2016, Micon undertook a data verification of the entire San Francisco mine database, with the primary focus on the drill collar, survey and assays portions of the database. Cross checks were conducted randomly with the existing sample numbers and no problems were found. The review of the collar and survey tables indicated that there were no issues with these portions of the database.

In January, 2016, Micon conducted an audit of the preliminary resource estimation data and procedures being used by Timmins. Micon assisted Timmins with the variographic analysis performed, in 2013, on the geological domains and helped to select estimation parameters based on the results. These same parameters were applied in the resource update for this report.

After Timmins conducted the mineral resource estimation update, the results were inspected graphically for consistency throughout the deposit, ensuring that the grade distribution of the composites was properly reflected in the interpolated blocks. Micon suggested changes to the categorization of the mineral resource and the final measured, indicated and inferred blocks were approved by Micon.

All of the assay data were related to the geology and statistically analyzed for the purpose of identifying geological domains. Once the geological criteria were considered and the statistical support was reviewed, domains were selected, the overall statistics of which are shown in Table 12.1.

Table 12.1Summary of the Data within the Geological Domains of San Francisco and La Chicharra Mines (Raw Assay Values Expressed in g/t Au)

The San Francisco database was found to be of sufficient quality and free of errors to be used as the basis of the updated resource and reserve estimates. The database has a vast amount of robust data which provide confidence in the resource and reserve estimates.

Micon has concluded that the revised block models for the San Francisco and La Chicharra deposits are also acceptable to be used as the basis for the resource and reserve estimation.

Previous metallurgical testwork was discussed in the prior Technical Reports, the most recent of which is entitled “NI 43-101 F1 Technical Report, Updated Resources and Reserves and Mine Plan for the San Francisco Gold Mine, Sonora, Mexico”, dated December 6, 2013.

On November 21, 2012, TMM announced a summary of the results from its recent bulk sample locked column leach testing program on representative mineralization from the San Francisco Project. This material was tested at the METCON Research metallurgical laboratory in Tucson, Arizona, in 2012.

The column cyanide leach testing results indicated an average gold extraction of 71.0% based on a crush size of 80% of the particles passing (P80) 9.5 mm (3/8 inch) (3/8 inch) and 77.1% based on a crush size of P80 6.3 mm (1/4 inch), on samples from the San Francisco deposit. For La Chicharra samples, the column testing results indicate an average gold extraction of 78.3% and 80.9% based on crush sizes of P80 9.5 mm and P806.3 mm, respectively. No percolation issues were observed during the column leach tests.

Timmins stated, in the November 21, 2012 press release, that it was encouraged by the results from testing program but that it would continue to use a life-of-mine (LOM) gold recovery of 68.6% in its resource estimations, mine planning and economic analyses. TMM also stated that it believed that the results of the testing program indicated there was potential to further improve its gold recoveries, through optimization of the process.

Six composite samples were tested in the 2012 metallurgical study; five from the San Francisco deposit and one from the La Chicharra deposit. The samples were classified by the following rock types.

Table 13.1 and Table 13.2 summarize the gold extractions for these samples, based on crush sizes of P80 9.5 mm (3/8 inch) and P80 6.3 mm (1/4 inch), respectively. Two averages are shown: (1) a simple average and (2) a weighted average based on the estimated LOM relative abundance of each rock type within the deposit.

Lime was blended with the test charge. Lime consumption was determined in a 72-hr agitated cyanidation bottle roll test.

The initial feed solution was prepared by adding reagent grade lime to Tucson tap water to obtain a solution pH of 11.00, followed by the addition of 1.0 gram of sodium cyanide per litre of solution. The columns were irrigated at a flow rate of 10 litres per hour per square metre.

Column tests were conducted under a locked cycle type of leaching regime, by contacting the pregnant solution with activated carbon to remove gold and silver. The loaded activated carbon in each column test was dried, weighed and saved in sealed and labeled plastic bags.

The resulting barren solution was recycled as feed solution after the addition of sodium cyanide and lime to maintain 1.0 gram of cyanide per litre of solution and a pH of 10.50 to 11.00.

As part of the METCON QA/QC program, approximately 10% of the daily pregnant solution samples from each column test were re-assayed to verify the accuracy of the original gold and silver assays. Linear regression analysis was conducted to quantify the difference between both assays. Table 13.3 summarizes the QA/QC analyses conducted on the pregnant solution samples.

The regression analysis conducted on the pregnant solution assays showed that there is a good correlation between the original gold and silver assays and the duplicate assays.

Timmins has conducted internal column leach testing to continuously improve recovery and further its understanding of the metallurgical response of the mineralization types located on the San Francisco property. Table 13.4 summarizes the 2015 results of these internal metallurgical tests.

1 Table provided by Timmins Goldcorp Mexico, S.A. de C.V. 2 Presoak, 7% solution by weight with 1 or 2 g/L sodium cyanide (NaCN) solution

Timmins has updated the mineral resource estimate for the San Francisco and La Chicharra deposits. This update includes 114 new drill holes totalling 13,345 m which were completed at the San Francisco mine between 2014 and 2015, and any additional assay results from earlier drill holes that were not available at the time of the previous 2013 mineral resource estimate. The updated 2016 resource estimate has been audited by Micon.

The process of mineral resource estimation includes technical information which requires subsequent calculations or estimates to derive sub-totals, totals and weighted averages. Such calculations or estimations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, Micon does not consider them to be material.

The resource estimate completed by Timmins and audited by Micon in January, 2016 is compliant with the current CIM standards and definitions specified by NI 43-101, and supersedes the 2011, 2012 and 2013 mineral resource estimates for the San Francisco and La Chicharra deposits. The effective date of the mineral resource estimate is December 31, 2015.

All resources and reserves presented in a Technical Report must follow the current CIM definitions and standards for mineral resources and reserves. The latest edition of the CIM definitions and standards was adopted by the CIM council on May 10, 2014, and includes the resource definitions reproduced below:

“Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated Mineral Resource. An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral Resource but has a lower level of confidence than a Measured Mineral Resource.”

“A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction.”

“The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.”

“Material of economic interest refers to diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals.”

“The term Mineral Resource covers mineralization and natural material of intrinsic economic interest which has been identified and estimated through exploration and sampling and within which Mineral Reserves may subsequently be defined by the consideration and application of Modifying Factors.”

“An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity.”

“An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.”

“An Inferred Mineral Resource is based on limited information and sampling gathered through appropriate sampling techniques from locations such as outcrops, trenches, pits, workings and drill holes. Inferred Mineral Resources must not be included in the economic analysis, production schedules, or estimated mine life in publicly disclosed Pre-Feasibility or Feasibility Studies, or in the Life of Mine plans and cash flow models of developed mines. Inferred Mineral Resources can only be used in economic studies as provided under NI 43-101.”

“An Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit.”

“Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation.”

“An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve.”

“Mineralization may be classified as an Indicated Mineral Resource by the Qualified Person when the nature, quality, quantity and distribution of data are such as to allow confident interpretation of the geological framework and to reasonably assume the continuity of mineralization. The Qualified Person must recognize the importance of the Indicated Mineral Resource category to the advancement of the feasibility of the project. An Indicated Mineral Resource estimate is of sufficient quality to support a Pre-Feasibility Study which can serve as the basis for major development decisions.”

“A Measured Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit.”

“Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.”

“Mineralization or other natural material of economic interest may be classified as a Measured Mineral Resource by the Qualified Person when the nature, quality, quantity and distribution of data are such that the tonnage and grade or quality of the mineralization can be estimated to within close limits and that variation from the estimate would not significantly affect potential economic viability of the deposit. This category requires a high level of confidence in, and understanding of, the geology and controls of the mineral deposit.”

The mineral resource, as estimated by Timmins, is presented in Table 14.1. This resource estimate includes the mineral reserve discussed in Section 15.

Table 14.1Mineral Resource Estimate for the San Francisco and La Chicharra Deposits as of December 31, 2015 (Inclusive of Mineral Reserves) (Gold Price of USD 1,200)

Both the CIM and the Australasian Joint Ore Reserves Committee (JORC) codes state that mineral resources must meet the condition of “a reasonable prospect for eventual economic extraction.” Timmins developed a Lerchs Grossman pit shell geometry at reasonable gold prices, and reasonable costs and recovery assumptions, in order to satisfy this condition. The resource estimate presented in Table 14.1 is based on a pit shell designed at a gold price of USD 1,200 per ounce and additional cost and recovery parameters developed by Timmins. The resource estimate within the pit shell includes all material in the measured, indicated and inferred categories.

The resource block model is based on 5 m by 5 m by 6 m high blocks. The coordinate limits of the previous model were retained for this current work. The topography was updated to reflect the mined surface as of January 1, 2016. The undisturbed pre-mining topographic surfaces are also available in the model.

Unlike the previous study, in which Timmins used the indicator kriging (IK) estimation method to outline the mineral resources, Timmins has continued since the 2011 update to conduct a manual interpretation of the mineralized zones, based on all of the drilling intersections now available in its database. This approach allows for more precise geological modelling and mineralization interpretation, which is enabling Timmins to plan better drilling programs to explore the extent of the mineralization and also to prepare better engineering designs regarding the ore and waste split in the pit for planning purposes. Overall, the method is similar to the previous method, except that the grade envelopes and geological domains are directly interpreted by the geologists using the drilling information they have gathered.

The database of the San Francisco and La Chicharra deposits consists of 4,071 drill holes with 384,892 intervals, amounting to 605,836 m of drilling. A total of 126 of the drill holes lie beyond the model limits and have not been included in the study. The current database includes 114 new holes drilled in 2014 and 2015, and 13,345 m of drilling. Figure 14.1 is a plan view of the San Francisco drill hole collar locations. There was no new drilling at the La Chicharra pit.

Approximately 13% of the sampling intervals are greater than or equal to 2 m length, about 84% of the intervals are between 1.5 and 2.0 m in length, and about 3% are less than 1.5 m in length. In the case of duplicate samples, the original sample was used in the database. Figure 14.2 shows a 3-D profile of the current topography and the drill holes, looking north.

High grade outlier assays were capped at different gold grades, according to the domains. This differs from the capping value of 30 g/t gold used in the previous resource estimate. The capping values applied to each domain, and the number of composites capped, are summarized in Table 14.2.

Figure 14.23-D Profile of the Current Topography and the Drill Holes at the San Francisco Mine (Looking North)

The assay database was composited to 3 m regular down-hole lengths, which is half the block height of 6 m. Assays were length-weighted for each composite. The relatively short composite length was chosen to unsmooth the resultant block grade distribution and provide a better match between the interpolated block grades and the underlying assay data.

The model is based on regular 5 m by 5 m by 6 m blocks and covers an area of 2,560 m by 2,100 m in plan, and 456 m vertically. Table 14.3 gives the model coordinate limits and dimensions. Figure 14.3 is a 3-D view of the topography and interpreted mineral constraints at the San Francisco and La Chicharra deposits.

Figure 14.33-D View of the Current Topography and Interpreted Mineralized Constraints at the San Francisco and La Chicharra Deposits

For the current estimate, the mineralized grade shells were constrained using 3-D solids interpreted by geologists, based on the mineralized intercepts intersected by the drill holes.

Micon considers this approach to be superior because it allows for appropriate interpretive geological control within the model.

Timmins has continued to use the rock domain interpretation developed for previous resource estimates. As much more data are available for the current estimate, the geological domains were interpreted in more detail by a senior geologist in the field. Table 14.4 summarizes the rock domains, with the corresponding codes and specific gravities.

Bench polygons for each rock type were derived from this interpretation and imported into the block model. Blocks were coded based on 12 m bench polygons, projecting 6 m above and 6 m below the bench, in accordance with the principal rock type present in each block.

Composites were assigned the rock type of the block in which they were located. This was necessary since a portion of the drilling, particularly much of the Geomaque drilling, does not have a logged rock type.

A total of 68 specific gravity determinations were made, covering all rock domains. Results range from a high of 2.84 to a low of 2.61, with an arithmetic mean of 2.76. The specific gravity for each rock type, as used in the resource estimate, is summarized in Table 14.4.

All blocks in the model were interpolated using the Ordinary Kriging method. The parameters were derived from the variography analysis and applied to the different domains and zones accordingly.

Mineralization in the San Francisco deposit is classified as a mineral resource according to the CIM definitions. The mineralized zones display good geologic continuity, as demonstrated by the drill results.

Statically – The gold grades of the 3 m composites grouped by domain were compared against the grades of the interpolated blocks.

Trend Analysis – The interpolated block grades and the average grades of the 3 m composites were compared in swath plots at 50-m intervals in the east-west direction.

Visually – Using Gemcom, Micon visually examined vertical sections, comparing the drill hole trace samples against the block model grade distribution, to ensure that the original sample grades and the block grades agree and that they are reasonably related in space.

All three validation procedures gave satisfactory results, sufficient to conclude that the block model can be used with confidence for the estimation of resources and reserves.

Once Micon had audited and accepted the Timmins block model, Timmins proceeded to run a pit optimization program in order to estimate the resources. The gold price used for estimating resources was USD 1,200 per ounce.

The parameters used in the pit optimization for the estimation of the resources are summarized in Table 14.6. They are the parameters determined by Micon and Timmins, taking into account the actual costs obtained from the operation.

Pit bench heights were set at 6 m (the block height used in the model) and slope angles were based on inter-ramp angles recommended by Golder Associates in its December, 1996, report, adjusted to allow for haul roads of 25 m width.

Table 14.6Pit Optimization Parameters for the 2015 Resource Estimate for the San Francisco and La Chicharra deposits

For the underground resource estimate a preliminary cut-off grade of 1.5 g/t gold was used. The mineralization can potentially be accessed from the pit walls via adits rather than developing significant underground ramps which will assist in keeping mining costs down and various different scenarios exist for the processing of the mineralization. Further drilling will be necessary to fully define the underground potential at San Francisco.

The pit shell adopted for reporting resources was estimated at a gold price of USD 1,200/troy ounce, using the economic parameters summarized in Table 14.6, the drilling database as of November, 2015 and the topographic surface as of January 1, 2015. The mineral resource, as estimated by Timmins and audited by Micon, is presented in Table 14.7. This resource estimate includes the mineral reserve described subsequently, and has an effective date of December 31, 2015.

Table 14.7Mineral Resource Estimate for the San Francisco Project (Inclusive of Mineral Reserves) (USD 1,200 Gold Price)

Micon recommends that Timmins use the December 31, 2015 mineral resource estimate contained in Table 14.7 as the stated mineral resource estimate for the San Francisco Project (San Francisco and La Chicharra deposits), as this estimate recognizes the use of 0.203 g/t and 0.195 g/t gold as the open pit cut-off grades and 1.50 g/t gold as the underground cut-off grade, as the grades at which the mineralization would meet the parameters for potential economic extraction.

Micon believes that no environmental, permitting, legal, title, taxation, socio-economic, marketing or political issues exist which would adversely affect the mineral resources estimated above, at this time. However, mineral resources that are not mineral reserves do not have demonstrated economic viability. The mineral resource figures in Table 14.7 have been rounded to reflect that they are estimates.

Having established an unsmoothed ultimate pit shell from the resource pit optimization analysis, Timmins designed an open pit, with haul roads 25 m wide, and prepared a production schedule for the extraction of the measured and indicated mineral resources contained within the pit.

The reserve estimate completed by Timmins as of December 31, 2015 and audited by Micon in January, 2015, is compliant with the current CIM standards and definitions specified by NI 43-101, and supersedes the 2011 and 2012 reserve estimates for the San Francisco mine. In addition, Timmins has carried out a reserve estimate for its second deposit, La Chicharra, which has also been audited by Micon and is presented in this report.

The latest edition of the CIM definitions and standards was adopted by the CIM council on May 10, 2014, and includes the definition of modifying factors that allow resources to become reserves and reserve definitions as reproduced below.

“Modifying Factors are considerations used to convert Mineral Resources to Mineral Reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.”

“Mineral Reserves are sub-divided in order of increasing confidence into Probable Mineral Reserves and Proven Mineral Reserves. A Probable Mineral Reserve has a lower level of confidence than a Proven Mineral Reserve.”

“A Mineral Reserve is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified.”

“The reference point at which Mineral Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported.”

“The public disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study.”

“A Probable Mineral Reserve is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve.”

“The Qualified Person(s) may elect, to convert Measured Mineral Resources to Probable Mineral Reserves if the confidence in the Modifying Factors is lower than that applied to a Proven Mineral Reserve. Probable Mineral Reserve estimates must be demonstrated to be economic, at the time of reporting, by at least a Pre-Feasibility Study.”

“A Proven Mineral Reserve is the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors.”

“Application of the Proven Mineral Reserve category implies that the Qualified Person has the highest degree of confidence in the estimate with the consequent expectation in the minds of the readers of the report. The term should be restricted to that part of the deposit where production planning is taking place and for which any variation in the estimate would not significantly affect the potential economic viability of the deposit. Proven Mineral Reserve estimates must be demonstrated to be economic, at the time of reporting, by at least a Pre-Feasibility Study. Within the CIM Definition standards the term Proved Mineral Reserve is an equivalent term to a Proven Mineral Reserve.”

Once Micon had audited and accepted Timmins resource estimates, Timmins proceeded to run a pit optimization program in order to estimate the reserves. The gold price used for estimating the reserves at the San Francisco Project was USD 1,100 per ounce.

The parameters used in the pit optimization for the estimation of reserves are the same as those described previously in connection with the estimation of resources.

Mining recovery for the San Francisco and La Chicharra deposits has been estimated at 99%. Micon agrees with this estimate, as it is based on actual experience at the mine.

The dilution for the San Francisco and La Chicharra deposits is defined according to the type of mineralization and the size of the modelled blocks. The deposits vary in size and shape of the mineralization from one bench to another. The potential dilution varies with the amount of waste in contact with economic material; larger mineralized zones carry a lower percentage of dilution than smaller zones.

Timmins believes that its method for estimating dilution achieves a close approximation of what can be expected during operations. The method consists of identifying the blocks that are partially mineralized, with a maximum 40% of material below the economic cut-off grade, and adding that waste percent (tonnes and grade) as mining dilution.

For the purposes of the mine plan at the La Chicharra deposit Timmins has used the difference between two attributes within the block model to estimate the dilution for the purposes of the reserves. The two attributes of the block model that were used was AuT which is the tonnage and grade of the entire block and AuO are which represents only the tonnage and grade for the mineralized portion of the block. At this time it appears that 46% of all of the blocks within the La Chicharra model are totally mineralized whereas the remainder are only partially mineralized. Timmins has reviewed the difference between the estimation of the dilution for the December 31, 2015 reserves and the previous reserves for La Chicharra in 2013 and noted that it overall the dilution is similar to the 3% used in the 2013 estimation.

Table 15.1 presents the reserves estimated within the pit design outline, including mine recovery and dilution factors.

Table 15.1Mineral Reserves within the San Francisco and La Chicharra Pit Design (December 31, 2015) after Mining Recovery and Dilution

The proven and probable reserves in Table 15.1 have been derived from the measured and indicated mineral resources summarized in Error! Reference source not found. and account for mining recovery and dilution. The figures in Table 15.1 have been rounded to reflect that they are estimates.

The mineral reserve estimate has been reviewed and audited by Micon. It is Micon’s opinion that the December 31, 2015 mineral reserve estimate has been prepared in accordance with the CIM standards and definitions for mineral reserve estimates and that Timmins can use this estimate as a basis for further mine planning and operational optimization at the San Francisco Project (San Francisco and La Chicharra pits).

Timmins conducted a reconciliation of the model to the mine production in August, 2014. The reconciliation focused its analysis on improving the geological model as well as auditing the production records from the mine and leach pads.

The reconciliation of reserves prepared by Micon was based on the geological block model of October 2013, compared with a customized parallel block model constructed using blasthole data. Both models were constrained to the mined-out solids of 2012 to 2014.

The geological block model was constructed by Timmins and audited by Micon in October, 2012. The block size is 5 x 5 x 6 m. The production block model, prepared from the blasthole data, used the same block size for comparison purposes.

The blasthole data were used to perform variography, determine parameters and populate the blocks using the kriging interpolation method. Blastholes were treated as single ~6-m composites and the all gold values were capped to 5.0 g/t Au.

The blocks were flagged using high and low grade extruded polygons, taking into account the percentage of the block inside the solids. The high and low grade polygons were interpolated separately.

The reconciliation was reported against the overall mine cut-off grade of 0.16 to 0.40 g/t gold and, also, at the following grade ranges, which define whether material is to be heap leached or delivered to the low grade stockpile:

The tonnage and contained ounces predicted by the resource and blasthole block models agreed within 1.0% for the heap leach ore and within 8% of the overall cut-off grade of 0.16 g/t Au. These are satisfactory results.

For the low grade stockpile material, however, the models differed by 25%. This is thought to be due principally to the small size of the blocks in blasthole model and the kriging grade interpolation used in that model. The result is that a significant number of blocks in the resource model do not capture any blasthole data for the low grade portions of the deposit.

Timmins constructs a 3D mineralization model that is snapped to the drill holes and stop using the current method of extruding the flat polygons between sections to create the resource model.

In zones of potentially high grade gold, the resources should be modelled separately using an appropriate cut-off based on local statistics. This will help minimize the smoothing and gain more control over spatial grade distribution within the model.

Timmins should not use partial blocks for the mineralized envelopes but use the 50% rule instead. As the block size (5 x 5 x 6 m) is small enough there is no need to apply a percentage to the blocks since the exploration data do not provide that level of precision.

The San Francisco mine resumed commercial production in April, 2010. Table 16.1 summarizes production from April, 2010 to the end of December, 2015, by quarter. Ore of lower grade is being stockpiled for processing at the end of the mine life. Timmins reports that, at December 31, 2015, there was an accumulated stockpile of 8,117 Mt at an average grade of 0.260 g/t gold, as shown in Table 16.2.

During July, 2011, Timmins expanded of the crushing system to 15,000 t/d. In December, 2012, a new crushing circuit was installed to provide a capacity of 5,000 t/d. In August, 2013, the second crushing circuit was expanded by 2,000 t/d. The total current processing rate is 22,000 t/d and has been operating at this rate since the previous 2013 Technical Report was released.

The previous owners of the property, Geomaque de Mexico, retained Golder Associates (Golder) to conduct a geotechnical study on the San Francisco pit in December, 1996. Golder’s scope of work was to carry out site investigations, testing and analysis to develop slope angle recommendations for the pit design.

The recommended overall slope angles ranged from 37° for single 6 m benches along the northeast facing slopes, to a maximum of 56° for double-benching in schist units. Golder presented a table of recommended inter-ramp slope angles and catch bench widths to achieve the recommended overall slope angles.

Timmins used the Golder recommendations when carrying out the pit optimization analysis and included an allowance for 25 m ramp widths. In July, 2012, Molimentales received the results of a new geotechnical analysis of the pit it had commissioned from Call & Nicholas, Inc. (CNI).

Table 16.1San Francisco Project, Timmins Annual Production from April, 2010 to the End of December, 2015 by Quarter)

Table 16.2San Francisco Project, Timmins Annual Ore Stockpiled from April, 2010 to the End of December, 2015 by Quarter)

To determine optimum inter-ramp slope angles and bench design parameters for the final San Francisco pit design.

To identify and analyze any potential major instability that would represent a significant cost or interference to the mine operations.

Stability analyses included bench scale Backbreak analysis, from which the expected distribution of bench face angles and reliability schedules were developed. The Backbreak analysis relied on a cell-mapping program conducted along existing pit benches. Average and minimum bench face angles for individual cells were recorded concurrently with the mapping. The bench face angle database confirmed the pit wall geometries that are currently being achieved at San Francisco. Discrete faults with lengths exceeding roughly 40 m were analyzed to determine their potential for forming viable failure geometries along final pit walls.

CNI’s recommended inter-ramp slope angles are based on bench geometries that resulted from the Backbreak analysis, using an 80% reliability of achieving the required 7.0 -metre catch bench width for a double-bench configuration and an 8.2 -metre catch bench width for a triple-bench slope configuration. The recommended slope design angles are based on the following considerations:

Recommended slope angles are the flattest inter-ramp slopes resulting from three analytical analyses: the Backbreak bench analysis, the inter-ramp (multibench) slope analysis and the overall slope analysis. Resulting inter-ramp slope angles for 12- metre double benching range from 39° to 50°; angles for 18-metre triple benching range from 42° to 52°.

The recommended slope angles require average bench face angles of at least 72°. Accordingly, a blast control program to minimize damage to final pit walls will be necessary.

Double and triple benching (12 and 18 metres) is recommended for most of the final pit walls. Double and triple bench geometries should have minimum catch bench widths of 7.0 and 8.2 metres, respectively. Recommended mine planning catch widths range from 8.7 metres to 13.1 metres.

Single benching (6 metres) is recommended for upper slope segments that are composed of either alluvial material, or mine waste dump. Slopes composed of these materials may be designed at a continuous 37° inclination, provided that a total height of about 40 metres is not exceeded.

The inter-ramp slope angles were determined for static seismic conditions. The impact of an earthquake on rock slope stability is considered minimal. The reported slope angles are also based on depressurized pit slopes.

CNI’s recommended slope angles assume adequately drained (depressurized) slopes. The Backbreak analysis assumed depressurized conditions on mine benches, and inter-ramp stability analyses were performed for both saturated and depressurized conditions. Preliminary observations suggest that the final pit walls may be relatively free-draining, precluding the development of any excessive pore pressure buildup. It appears that draining will occur mostly through major faults and the more fractured ground surrounding these faults. This assumption should be confirmed once data are available from the piezometer monitoring and from the water seepage record for the pit wall, as the pit deepens.

CNI recommends that, as new data are available from the planned exploration and development drilling campaigns, an updated geology and geotechnical model should be generated. An updated set of final pit geology/structure maps and cross-sections reflecting the most current interpretive work should also be generated.

CNI recommends that careful follow-up pit mapping is required to assist in updating any slope design changes, as additional structural and hydrologic data are collected. The geological, structural and geotechnical data should also be compiled routinely and the composite geology and structure map should be updated at least once a year. Periodic bench face angle surveys should be conducted along the double and triple benches, to evaluate the success in achieving the bench geometries and inter-ramp angle recommendations.

CNI recommends that a blast monitoring database should also be collected at San Francisco. The database should include the peak particle velocities from the complete wave pattern of individual blasts. The blast monitoring data will allow an assessment of blasting effects on slope stability to be undertaken.

CNI recommends that a slope monitoring program be instituted at the San Francisco Project. Using pertinent data collected from routine pit mapping and ongoing geotechnical programs, monthly reports with accompanying maps should be published and circulated to key mining personnel. Contingency plans that allow for alternative mining schemes should be developed, in case of slope instability at critical locations.

Water seeps along pit walls should be documented, with seasonal fluctuations, if any, and recorded. This information can be collected during routine pit mapping.

Piezometers should be installed at strategic locations along the final pit wall to define the groundwater table and its fluctuations (seasonal and/or due to pit dewatering).

The objective of these recommendations is to ensure that low pore pressures are maintained in the pit slopes.

During its site inspection, Micon observed that the existing pit walls were generally dry, with a few minor seepages along shear zones. At the end of 2010, a hydrogeological study was conducted by Investigación y Desarrollo de Acuíferos y Ambiente (IDEAS) around the pit, to evaluate the hydrological regime in this area. A number of piezometers were installed to monitor the water flow surrounding the pit (Figure 16.1) .

During 2013, water volumes pumped from the San Francisco pit have ranged between 6,000 and 51,000 m3 per month.

Before Timmins commenced mining within the San Francisco pit, pit designs were revised from the two mining phases developed previously by IMC, to three mining phases designed by Timmins. The latter designs were used for re-starting operations, in order to achieve a favourable distribution of waste tonnage during the mine life and enhance the availability of heap leach feed.

In 2010, the three-phase open pit design was extended to incorporate the additional resources delineated to the northwest of the previous pit outline. Additional drilling has now extended the pit limits by 70 to 100 m and a fourth pit phase has now been added to the design. The first phase was completely mined in the first quarter of 2012.

The reserves for the La Chicharra pit has also now been incorporated into the formal mine plan. The La Chicharra pit is located 1,000 m west of the San Francisco pit and was previously operated by Geomaque. Drilling has delineated additional resources and a pit design has been developed based on the USD 1,200/oz gold optimized pit shell.

In addition to the open pit, Timmins has been conducting an investigation into whether or not it is economical to conduct limited underground mining beneath the southern pit wall of the San Francisco pit. In 2015, Timmins conducted limited underground drifting to expose the mineralized lenses outlined in preliminary drilling. In September, 2015, Timmins ceased the underground drifting after exposing the mineralization along two lenses. Timmins is contemplating doing further drilling to define the extent of the mineralization exposed in the workings and also to assist it in deciding the best underground mining method, should it proceed with mining these lenses. Figure 16.3 is a view of the portal to the underground working beneath the southern wall of the San Francisco pit.

Existing waste rock dumps are located to the south of the San Francisco open pit, close to the pit rim and cannot be extended to the north. They are also limited to the east by a property boundary and to the west. Accordingly, the existing dumps will be extended further south, where adequate space does exist. Previously with the expansion of the reserves, additional waste dump volume was required and a site located northwest of the pit was identified that would contain the majority of waste rock produced during the mine life. A condemnation drilling program was conducted and waste is currently being dumped in this area.

All mining activities are being carried out by the contractor, Peal Mexico, S.A. de C.V., of Navojoa, Mexico. The contractor is obliged to supply and maintain the appropriate principal and auxiliary mining equipment and personnel required to produce the tonnage mandated by Timmins, in accordance with the mining plan. Table 16.3 is summary of the contractor’s mining equipment currently in place.

Timmins provides contract supervision, geology, engineering and planning and survey services, using its own employees.

Figure 16.3A View of the Portal Access to the Underground Workings Beneath the Southern Wall of the San Francisco Pit

Ore extracted from the pit is transported in 100 t capacity haulage trucks and fed directly into the gyratory primary crusher with dimensions of 42 inch x 65 inch. The primary crusher has a nominal capacity of 900 t/h. The crushed product is then transported on conveyor belts to a coarse ore stockpile with a capacity of 6,000 t.

Two feeders beneath the coarse ore stockpile deliver the material to a conveyor belt for transport to the secondary crushing circuit. The ore is screened at 12.5 mm (½ inch). Screen undersize reports to the final product, while screen oversize is fed to two secondary crushers.

Product from the secondary crushers is transported on conveyor belts to the tertiary crushing circuit, which comprises three parallel tertiary crushers operating in closed circuit with screens. The minus 12.5 mm undersize from the screens is delivered to the leach pad. This crushing circuit has a nominal capacity to deliver 16,000 t/d of crushed material to the leach pads.

Recently, Timmins has installed a new crushing circuit with a capacity for processing an additional 7,000 t/d. This circuit comprises one jaw primary crusher, two secondary crushers, three tertiary crushers, screens and conveyors.

The total installed crushing capacity is 22,000 t/d. At the time of writing this Technical Report, Timmins does not have any additional plans to increase throughput of the crushing and conveying systems for the San Francisco mine.

Product from the crushing plant is transported to the leach pad on overland conveyors and deposited on the pad with a stacker, forming 6 m high lifts. A bulldozer is used to level the surface of each lift. The irrigation pipelines are then installed to distribute the leach solution over the entire surface of the lift.

Timmins has constructed the leach pads and has 4 different phases for depositing, based on the permits granted by the Mexican Environmental Agency (PROFEPA, Procuraduría Federal de Protección al Ambiente). Table 17.1 summarizes the leach pad phases based upon the permits acquired. Figure 17.1 is a photograph of the heap leach pads, as viewed from the La Chicharra pit.

The leach solution consists of 0.05% sodium cyanide with a pH of 10.5 to 11. The solution percolates to the bottom of the lift and flows to the channel that carries the solution to the pregnant solution storage pond, from which it is pumped to the adsorption, desorption and recovery (ADR) plants.

Barren solution exiting the ADR plants flows to the barren solution storage pond where fresh water and sodium cyanide are added, before the solution is pumped back to the leach pad.

Pregnant leach solution is fed to the first adsorption plant which consists of 2 parallel lines of carbon columns, each with 5 tanks in series, through which the carbon is advanced counter-currently to the solution flow. One line of columns contains approximately 2.0 t of carbon and the other 2.5 t. Gold is adsorbed on the carbon to a concentration of approximately 5,000 g/t. Desorption of the carbon is achieved in a Zadra type elution circuit. Gold is recovered by an electrowinning circuit comprising stainless steel electrodes in a stainless steel electrolytic cell. The stainless steel cell and cathodes are relatively new and replace the original polypropylene cell with steel wool cathodes. The use of stainless cathodes is more efficient, as it eliminates the smelting of substantial quantities of steel wool, which requires substantially more flux and can lead to inferior grade doré.

Installation of a new line of carbon columns (second ADR plant) with 5 tanks containing approximately 6 t of carbon, and with a flow of 3,500 USGM, was completed in August, 2011, to increase the production capacity.

Figure 17.2 to Figure 17.7 show the fine crushing circuit, the new crushing circuit, plan view of the crushing circuit, view of the crushing circuit from the San Francisco pit lookout, solution balance and the overall gold recovery circuit flowsheet.

Figure 17.5View of the Crushing Facilities and Heap Leach Pads as Seen from the Lookout at the San Francisco Pit

Figure 18.1 shows the 2016 San Francisco mine site layout, with the current operations and the pit, leach pads, waste storage expansion, the low grade ore stockpile and the area around the La Chicharra pit.

The current total manpower at the San Francisco mine is shown in Table 18.1, excluding the mine contract personnel.

Office space is provided in a structure of approximately 450 m2, located on the property, southeast of the ADR plant. The building has adequate working space for the on-site mine administration and also provides basic catering and ablution facilities.

A vehicle workshop, south of the ADR plant and north of the open pit, occupies more than 660 m2 and accommodates the off-road haul trucks, excavators and ancillary vehicles used in the open pit mining operation.

A general warehouse of approximately 200 m2, located north of the ADR plant, accommodates process reagents and mechanical spares. Bulk lime for the heap leach process is stored in a silo near the crushing plant.

A new building was completed in December, 2010, to house the exploration offices. This new office space is approximately 150 m2, provides adequate working space and basic ablution facilities. This new building is located east of the original ADR plant.

The new 1,500 m2 core and sample storage facility (Figure 18.2, Figure 18.3 and Figure 18.4), north of the ADR plant, was completed in 2013. This facility will provide permanent and secure storage for both the diamond drill core and pulp samples, as well as hosting the new sample preparation facilities for the exploration department. The rear half of the building is currently being used as a secure storage facility for reagents used in the ADR plants.

A new 1,500 m2 general warehouse expansion, located north of the ADR plant, has been completed since January, 2014. The facility accommodates mechanical spares and other consumables.

Electrical power supply to the mine is delivered through a 33 kV overhead line from the utility company, Comisión Federal de Electricidad (CFE). From the main metering point, the power is distributed to the crushing and screening plant and other site infrastructure at 480/220/110 V. However, power used for the new crushing circuit is supplied by diesel generators. At the crushing and screening plant, separate transformers feed the principal equipment. Installed transformer capacity is summarized in Table 18.2.

The electrical power supply is sufficient for the current production rate of 22,000 t/d of ore, with some spare capacity.

The current demand of fresh water is 3,296 m3/d, of which 1,841 m3/d are for the leach area and ADR plants, 988 m3/d for the irrigation of the roads inside both pits, 136 m3/d for crushing and offices, 58 m3/d for the mining contractor office and workshop and 273 m3/d for the irrigation of community roads.

Comisión Nacional del Agua (CONAGUA) has authorized 4 concession titles to exploit and use national water for a grand total of 1,900,000 m3/year. Timmins has built and commissioned 4 water wells, each one with the following capacity:

All fresh water is conducted through pipeline and distributed to each point of usage as shown in Figure 18.5.

A new water tank and a pressure pump were installed to comply with regulation NOM–002–STPS of the Secretaría del Trabajo y Previsión Social (STPS) regarding the prevention of and protection against fire in the workplace, which states that water pressure for fire control should be at least 7 kg/cm2.

Timmins produces gold doré at the San Francisco mine which is further refined and readily sold on the world market. At the time of compiling this report, the price of gold ranged from USD 1,404/oz gold to USD 1,192/oz.

Gold is a metal that is traded on world markets, with benchmark prices generally based on the London market (London fix). Gold has two principal uses: product fabrication and bullion investment. Fabricated gold has a wide variety of end uses, including jewellery (the largest fabrication use), electronics, dentistry, industrial and decorative uses, medals, medallions and official coins. Gold bullion is held primarily as a store of value and as a safeguard against the depreciation of paper assets denominated in fiat currencies. Due to the size of the bullion market and the above-ground inventory of bullion, Timmins activities will not influence gold prices. The doré produced by Timmins at its mines is further refined by third parties before being sold as bullion (99.99% pure gold). To a large extent, gold bullion is sold at the spot price.

Table 19.1 summarizes the high and low average annual London PM gold and silver price per ounce from 2002 to January, 2016.

Table 19.1Average Annual High and Low London PM Fix for Gold and Silver from 2002 to January, 2016 (prices expressed in USD/oz)

Over the period from 2008 to 2012, world gold price increased significantly. This had a favourable impact on revenue from production of most of the world’s gold mines, including the San Francisco Project. In 2013, however, the world gold price decreased rapidly, from a high of approximately USD 1,693.75/oz in January to a low of USD 1,192.00/oz in June. The overall decline in the price of gold has continued since 2013, and has forced companies to defer exploration projects, lay-off staff, cut or cancel dividends, scale back production, halt expansion plans, and place projects and mines on care and maintenance or sell mines in order to decrease debt. Silver prices have decreased during this period, as well.

Under the contract dated September 19, 2009 (initial offer dated May 23, 2007 and updated August 14, 2008), amended various times on March 18, 2011, November 1, 2012, April 1, 2013, March 21, 2014, and in February and March, 2015, the contractor’s performance of mining operations at the San Francisco mine includes drilling and blasting, loading and transportation of waste rock and ore, pit drainage, building slopes and roads as needed, scaling of pit walls to design limits, maintenance of equipment, and providing safe and orderly working conditions.

Until the end of 2014, the base contract rate for mining was USD 1.59/t for the first 2.5 Mt mined in a given month, with reduced rates for the incremental tonnage mined in excess of 2.5 Mt, as summarized in Table 19.2. As part of Timmins’s negotiations with the mining contractor to reduce the operating costs, it has been agreed that there will be a unique base rate of USD 1.59/t for the San Francisco pit and USD 1.30/t for the La Chicharra pit.

Timmins subsidiary Molimentales entered into an agreement with Johnson Matthey Inc. (Johnson Matthey) to refine the gold and silver doré bars produced at the San Francisco mine, at Johnson Matthey’s Salt Lake City refinery in Utah, USA.

The first refining agreement between Molimentales and Johnson Matthey commenced on December 28, 2009 and remained in effect until December 31, 2011. It was renewed in 2012 and the term was extended until December 31, 2013. Thereafter, the agreement has been automatically renewed for 12 months. The current agreement has been signed on November 17, 2014 and covers the period from January 1, 2015 to December 31, 2016.

On June 23, 2010, Molimentales entered into a contract and sale agreement with Auramet Trading, LLC (Auramet), under which it agreed to sell the gold and silver output from the San Francisco mine to Auramet.

On June 23, 2010, Molimentales also entered into a trading agreement with Auramet, which set forth the terms and conditions that govern non-exchange traded, over-the-counter, spot, forward and option transactions, on a deliverable and non-deliverable basis, involving various metals, energy products and currencies. The trading agreement is part of the Master Purchase Contract and Bill of Sale agreement with Auramet.

Timmins subsidiary Molimentales has an agreement, valid until October 31, 2014, with DUFIL, S.A. de C.V., to handle the explosives from the warehouse to the pit, to prepare the ANFO, to design the blasting grids and to load the explosives into the holes. The contract has been automatically renewed and remains valid.

In May, 2012, Molimentales entered into an agreement with Servicios de Mineria Swazi S.A. de C.V., for crushing and hauling to pad 4 Mt of ore. This contract was amended in February, 2013 and in July, 2014.

If the price of the ounce of gold falls below USD 1,000/oz (USD 1,200/oz in initial contract), both parties have agreed to meet and determine whether the services should cease or continue.

In October, 2013, Molimentales also entered into an agreement with EZFE Especialistas en Sistemas Termicos, S.A. de C.V., for crushing and hauling to pad 1 Mt of ore. This contract was amended in June, 2014 to bring the tonnage to be processed up to 2.5 Mt of ore.

Some of the terms and conditions in the contract are similar as in the other contract and are as follows:

If the price of the ounce of gold falls below USD 1,000/oz (USD 1,200/oz in initial contract), both parties have agreed to meet and determine whether the services should cease or continue.

Micon’s 2013 Technical Report discussed the environmental studies, permitting and social or community impact prior to and into the third quarter of 2013. This section will discuss the environmental, permitting and social or community impact studies conducted by Timmins from the third quarter of 2013 until December, 2015.

On March 2, 2012, Molimentales submitted a request to the Secretary for the authorization of an additional land use of 70.00 ha for the Chicharra pit, 160.00 ha for a new waste dump, 100.00 ha for the new leach pads, 8.54 ha for a new crushing circuit and 9.18 ha for a new area in ADR plant, for the increase in production capacity to 25,000 t/d. The Secretary conditionally authorized the additional land on May 02, 2012.

On July 22, 2013, Molimentales submitted a request of A Technical Justification Study for the Change of Use of Land (Estudio Técnico Jusitificativo para el Cambio de Uso de Suelo) to the Secretary to grant authorization for 334.75 ha of new land use areas, based upon the inventory of the natural resources to be affected, and an environmental evaluation of the new areas. The Secretary authorized the additional land on Octuber 16, 2013. At this time, the whole mine site has the authorization.

Modifications to the Environmental Licence (Licencia Ambiental Única), authorized on March 17, 2010, were submitted on August 25, 2014, to request the authorization of the Secretary of Environment and Natural Resources to include new equipment and increased production capacity for the operating licence, new inventory and registration of emissions to the atmosphere, new inventory and registration of hazardous waste generation and, also to register modifications to the blasting program. The Secretary conditionally authorized the modifications on October 6, 2014.

Molimentales continues to comply with the conditions established by the Secretary of Environment and Natural Resources for all of the previous and newly authorized environmental permits. These conditions include programs for the recovery and relocation of flora, reforestation, recovery and relocation of fauna, monitoring of surface water quality, monitoring of air quality, and hazardous waste management.

Recently, due to its efforts to improve in environmental area, Timmins was certified on April 2015 as “Clean Industry”, which is granted by the Federal Attorney of Environmental Protection (PROFEPA). The certification was granted after an environment audit process in the San Francisco mine and it has validity for 2 years. Timmins is committed to maintaining excellent standards on environment protection and care in all of its operations.

Timmins is an active participant in and supporter of a number of community activities in Estación Llano and the surrounding communities. These activities range from assisting with health issues, education, athletics, cultural, social service and public works. Between July, 2013 and 2015 Timmins spent approximately USD 617,000 (11.12 million pesos) on community activities

Timmins assisted the community with health related activities, such as donations of medicine and medical supplies for the local health day and to the local health centre.

Timmins is continuing with medical seminars, where it provides medical consultations by specialists and medicine free of charge to the local communities. In addition, Timmins assists with a number of other health related activities such as:

Management for the certification of the community canteens that are provided by the Secretariat of Health.

Timmins has assisted educational activities in the community with donations of graduation gifts, cistern construction, school bus repairs and the purchase of trees for the purpose of reforestation in the community. In addition, Timmins:

Continues with the maintenance support for the infrastructure of the kindergarten at Estación Llano; air conditioners for Estación Llano, Ejido El Claro and Santa Ana schools were also provided.

In coordination with the municipality of Santa Ana, paid for the construction of a roof in a primary school.

Donated and installed equipment in the Ejido El Claro community for it to be able to have internet service.

Contributed to equipment for a bus of the Ministry of Education and Culture, for the transportation of students.

Financed material for the construction of a perimeter fence around the high school in Estación Llano.

Assisted the local adult community, in coordination with the national employment service and the University of Sonora, in training 25 persons from the community for self-employment.

Timmins is continuing to assist the community with financial contributions towards the purchase of athletic equipment and team uniforms, travel expenses for local teams, payment of instructor’s fees for summer camps in martial arts, music, art, sports and swimming lessons.

Timmins continues to support cultural activities, such as funding for Mother’s Day, the Christmas festivities and party for the children of Estación Llano, support for the children’s or student’s day at the local schools, a water campaign conducted by the city’s water agency and payment of teachers for the summer camp.

Financial assistance of social services has included donation of a vehicle and mechanical service for the local Estación Llano police officer, funding training for the Fire Department of the Municipality of Santa Ana in the handling of hazardous materials, sponsoring training of a person for the prevention of drugs and alcoholism program, and ambulance support.

Public works support has included the donation of electrical cables for the local community’s water well, playground repair, construction of cattle fencing and payment for road safety signs. Timmins has continued to contribute to public works by:

Continuing support for drinking water services, by assisting with the necessary replacement of the engines and pumps for wells that provide water to the communities of Estación Llano, Ejido San Diego and Benjamin Hill.

Working with the city of Santa Ana for the approval of a drainage project, which will benefit of Estación Llano.

Conducting the rehabilitation and renovation of the ballpark "Francisco Celaya and Jesus Bracamontes" of Estación Llano.

In 2014, due to its efforts in the area of corporate social responsibility, Timmins was awarded for the third time with the Company emblem “Sociably Responsible” (ESR®), which is granted by the Mexican Centre of the Philanthropy (CEMEFI) and the Alliance for Managerial Social Responsibility in Mexico. This recognition is awarded on an annual basis and recognizes companies that are leaders in setting social responsibility standards. Timmins is currently working upon its application for 2015.

The San Francisco Project was originally designed for a production rate of 12,000 t/d of ore to be placed on the leach pad, it has now been expanded to 22,000 t/d through various crushing circuits expansions and improvements, including contracting the portable crushing services.

Future capital expenditures over the mine life are outlined in Table 21.1, which summarizes the planned sustaining capital and the planned development capital expenditures. Also, as a consequence of the change in mine life, stripping costs will no longer be capitalized.

Micon has reviewed Timmins’ estimate of the future capital expenditures for the San Francisco Project and regards it as reasonable.

Timmins’ projected average cash cost per ounce of gold in 2016 is estimated to be between USD750 and USD850. Cost per ounce of gold are quoted net of by-product credits.

Micon has reviewed Timmins’ operating cost forecast for the life of the San Francisco Project and regards them as reasonable.

Since the last Technical Report conducted on the San Francisco Project in October, 2013, TMM has continued to meet the requirements necessary to be considered a producing issuer, according to the definition contained in NI 43-101.

Based upon the price of gold in the fourth quarter of 2015, TMM announced that mining operations at the San Francisco mine would continue into the fourth quarter of 2016 at which point the mine would be placed on care and maintenance. However, the heap leach operations would continue into 2017.

Timmins production guidance for the 2016 fiscal year is estimated to range from 75,000 to 85,000 ounces of gold with the cash costs ranging from USD 750 to USD 850 per ounce of gold sold. The estimated operating parameters include an average ore throughput of 20-22 kt/d at a processed grade of between 0.58 and 0.62 g/t Au with a strip ratio in the 1.75:1 range. The total 2016 capital expenditures (sustaining and development) are estimated to be approximately USD 1 to USD 2 million.

Due to the recent increase in the price of gold, through first quarter 2016, Timmins notes that a sustained higher gold price could have a significant positive impact on the operations at the San Francisco mine. At higher sustained gold prices, the San Francisco mine may not be placed on care and maintenance and operations may continue. However, production rates and detailed mining schedules, etc., would be developed based on the higher gold price at the time and an economic analysis of continuing the operations.

In the possible event of sustained higher gold prices, Timmins may also look to investigate potential underground scenarios, which may supplement the open-pit production. Timmins believes that further delineation drilling for the underground resource is required and would be subject to available funding.

With higher sustained gold prices, Timmins would also investigate at a potential underground scenario. The maiden mineral resource estimate, as of December 31, 2015, for the San Francisco underground potential is shown in Table 22.1.

A very limited amount of drilling has been conducted for the potential underground scenario. Most of the current resource estimate was realized as a result of the open-pit confirmation/delineation drilling. Timmins would like to delineate the underground resource further if funding permits, to prove up the current resources and potentially increase them. Different scenarios exist for the processing of the ore, including utilizing the current three-stage crushing and heap leaching processing used for the open-pit ore, or some form of finer grinding/milling followed by some form of intensive cyanide leach, to increase metallurgical recoveries. Ultimately, Timmins envisions a small underground operation (~500 t/d) that could supplement the open-pit ore should the resources be increased and the economics warrant the expenditures to conduct underground mining on a limited basis.

The San Francisco property exists within the Sierra Madre Occidental metallogenic province and is known to host a number of separate zones or showings of anomalous gold mineralization. There are other metallic mineral deposits in the area, but very little information is available on those properties. There are no immediately adjacent properties which directly affect the interpretation and evaluation of the mineralization or anomalies found at San Francisco. However, the 1995 San Francisco Property Reserve and Resource document by Mine Development Associates of Reno, Nevada, listed a number of exploration possibilities in the immediate area of the mine, including La Chicharra (owned by Timmins), which had been mined previously and is now being mined again.

Among the targets which remain is the bedrock area surrounding the Arroyo La Perra, a placer deposit located approximately 2 km northwest of the San Francisco pit. The 1995 report mentions that seven holes had been drilled in bedrock to that point and that one of the holes intersected 8 m of 1.6 g/t gold at 42.5 m down-hole, while another intersected 18 m of 0.422 g/t gold at 4 m down-hole. According to the report, other targets with fair to good exploration potential for the discovery of significant gold deposits were La Desconocida, Casa de Piedras Oeste and La Trinchera, all of which are located between 2 km to 5 km northwest of the San Francisco pit.

Micon considers that the previous mining history of the San Francisco and La Chicharra deposits, and the stated exploration potential of the area as contained in previous reports, positively affect the prospectivity of the ground. The exploration results reported by Timmins support this observation.

Micon has not verified the information regarding the adjacent mineral deposits and showings described above that are outside the immediate area of the San Francisco and La Chicharra pits. The information contained in this section of the report, which was provided by Timmins, is not necessarily indicative of the mineralization at the San Francisco Project.

All relevant data and information regarding Timmins San Francisco Project are included in other sections of this Technical Report.

Micon is not aware of any other data that would make a material difference to the quality of this Technical Report or make it more understandable, or without which the report would be incomplete or misleading.

Timmins successfully reopened the mining operations at the San Francisco Project in 2010. Since that time, Timmins has continued to expand both the resources and reserves through an aggressive exploration program, as well as expanding the operations from a rate of 12,000 t/d to the current 22,000 t/d. Timmins has also continued to explore the areas adjacent to the mine and other targets on its mineral holdings.

Timmins has included the La Chicharra deposit into its mine plan for 2016 which has resulted in a mineral resource and reserve estimate being conducted on both the San Francisco and La Chicharra deposits. An initial underground mineral resource has been estimated for the mineralized lenses beneath the southwall of the San Francisco pit which remains as a resource as no mining plan has been outlined for this area.

Due to the continued decline in the gold price since the previous 2013 Technical Report, Timmins, in the fourth quarter of 2015 decided that it will close the San Francisco mine at the end of 2016 and place the mine on care and maintenance in order to preserve the remaining mineral resources. Timmins has also significantly reduced it mineral concessions in the area to those key areas which, with further exploration, may provide secondary deposits that may be economic to exploit.

Micon has reviewed the exploration Timmins has undertaken on the San Francisco property and believes that the secondary areas of mineralization should be explored further, to determine if Timmins will be able to continue to add to the San Francisco Project mineral resource inventory once Timmins decides to restart its exploration programs.

Recently, through first quarter, 2016, there has been a surge in the gold price and Timmins believes it is worth noting the impact of a sustained higher gold price on operations at the San Francisco mine. In general, at sustained higher gold prices, the mine may not be placed on care and maintenance, and operations would continue. Production rates and detailed mining schedules, etc., would be developed based on the higher gold price at the time and an economic analysis of continuing the operations.

The resource and reserve estimate completed by Timmins as of December 31, 2015, and audited by Micon, is compliant with the current May 10, 2014, CIM standards and definitions specified by NI 43-101, and supersedes the previous estimates for the San Francisco mine reported in 2011, 2012 and 2013.

Both the CIM and the JORC codes state that mineral resources must meet the condition of “a reasonable prospect for eventual economic extraction.” For open pit material, Timmins utilized a Lerchs Grossman pit shell geometry at reasonable long term prices, and reasonable costs and recovery assumptions, as meeting this condition. The resource is based on a pit shell at a gold price of USD 1,200/oz and cost and recovery parameters developed by Timmins which meet the conditions for classification of the material as a mineral resource. Table 25.1 summarizes the economic parameters used for the analysis. These parameters are a combination of Micon and Timmins inputs, taking into account the actual costs obtained from the first three years of operation.

Pit bench heights were set at 6 m (the block height of the 3-D block model) and the slope angles used for the pit optimization were based on inter-ramp angles recommended by Golder Associates in its December, 1996, report, adjusted to allow for haul roads of 25 m width.

Table 25.1Pit Optimization Parameters for the 2015 Resource Estimate for the San Francisco and La Chicharra Deposits

The pit shell adopted for reporting resources was estimated at a gold price of USD 1,200/troy ounce, using the economic parameters summarized in Table 25.1, the drilling database as of November, 2015 and the topographic surface as of January 1, 2016. The mineral resource, as estimated by Timmins and audited by Micon, is presented in Table 25.2. This resource estimate includes the mineral reserve described subsequently, and has an effective date of December 31, 2015.

For the underground resource estimate a preliminary cut-off grade of 1.5 g/t gold was used. The mineralization can potentially be accessed from the pit walls via adits rather than developing significant underground ramps which will assist in keeping mining costs down and various different scenarios exist for the processing of the mineralization. Further drilling will be necessary to fully define the underground potential at San Francisco.

Micon recommends that Timmins use the December 31, 2015 mineral resource estimate contained in Table 25.2 as the stated mineral resource estimate for the San Francisco Project, as this estimate recognizes the use of a cut-off of 0.203 g/t gold for the San Francisco and 0.195 g/t gold the for La Chicharra deposits, as well as 1.50 g/t gold for the underground resources beneath the south wall of the San Francisco pit, as the grades at which the mineralization would meet the parameters for potential economic extraction.

Micon believes that no environmental, permitting, legal, title, taxation, socio-economic, marketing or political issues exist which would adversely affect the mineral resources estimated above, at this time. However, mineral resources that are not mineral reserves do not have demonstrated economic viability. The figures in Table 25.2 have been rounded to reflect that they are an estimate.

The mineral resource estimate has been reviewed and audited by Micon. It is Micon’s opinion that the December 31, 2015 mineral resource estimate has been prepared in accordance with the CIM standards and definitions for mineral resource estimates, and that Timmins can use this estimate as a basis for further exploration and economic evaluation of the San Francisco Project.

The reserve estimate completed by Timmins on December 31, 2015 and audited by Micon in January, 2016, is compliant with the current CIM standards and definitions specified by NI 43-101, and supersedes the October, 2013 reserve estimate for the San Francisco mine. In addition, Timmins has carried out a reserve estimate for its second deposit, La Chicharra, which has also been audited by Micon and is presented in this report.

The gold price used for estimating the reserves at the San Francisco Project was USD 1,100 per ounce. The parameters used in the pit optimization for the estimation of the reserves are the same as those used for the estimation of resources.

Mining recovery for the San Francisco and La Chicharra deposits has been estimated at 99%. Micon agrees with this estimate, as it is based on actual experience at the mine.

The dilution for the San Francisco deposit is defined according to the type of mineralization and the size of the modelled blocks. The deposit varies in size and shape of the mineralization from one bench to another. The potential dilution varies with the amount of waste in contact with economic material; larger mineralized zones carry a lower percentage of dilution than smaller zones.

Timmins believes that its method for estimating dilution achieves a close approximation of what can be expected during operations. The method consists of identifying the blocks that are partially mineralized, with a maximum 40% of material below the economic cut-off grade, and adding that waste percent (tonnes and grade) as mining dilution.

For the purposes of the mine plan at the La Chicharra deposit Timmins has used the difference between two attributes within the block model to estimate the dilution for the purposes of the reserves. The two attributes of the block model that were used was AuT which is the tonnage and grade of the entire block and AuO are which represents only the tonnage and grade for the mineralized portion of the block. At this time it appears that 46% of all of the blocks within the La Chicharra model are totally mineralized whereas the remainder are only partially mineralized. Timmins has reviewed the difference between the estimation of the dilution for the December 31, 2015 reserves and the previous reserves for La Chicharra in 2013 and noted that it overall the dilution is similar to the 3% used in the 2013 estimation.

An overall average of 5.0% dilution was estimated for the San Francisco deposit. Table 25.3 presents the total reserves estimated within the pit design outline, including the mine recovery and dilution factors.

Table 25.3Mineral Reserves within the San Francisco and La Chicharra Pit Design (December 31, 2015) after Mining Recovery and Dilution

The proven and probable reserves in Table 25.3 have been derived from the measured and indicated mineral resources summarized in Table 25.2 (except the stockpile) and account for mining recovery and dilution. The figures in Table 25.3 have been rounded to reflect that they are an estimate.

The mineral reserve estimate has been reviewed and audited by Micon. It is Micon’s opinion that the December 31, 2015 mineral reserve estimate has been prepared in accordance with the CIM standards and definitions for mineral reserve estimates and that Timmins can use this estimate as a basis for further mine planning and operational optimization at the San Francisco Project (San Francisco and La Chicharra pits).

The San Francisco mine commenced commercial production in April, 2010, and by the end of December, 2015, Timmins had sold 545,923 ounces of gold. Between April, 2010 and the end of December, 2015, production at the San Francisco mine has totalled 36,397,227 tonnes at a grade of 0.751 g/t gold. In addition, a total of 8,117461 tonnes grading 0.260 g/t gold has been placed on a low grade stockpile for potential processing in the future.

Micon has audited the resource and reserve estimates, and has reviewed the mine design, the mining schedule, the mining contract terms and the ability of the contractor to meet the mining schedule, and concludes that the estimations and designs have been properly carried out and that the contractor is capable of meeting the schedule.

Micon has reviewed the crushing, heap leach and ADR facilities and concludes that they are adequate for the treatment of the scheduled process feed material and the recovery of gold in doré, as forecast in the production plan.

Micon has reviewed the economics of the San Francisco operation and concludes that it is viable and meets the criteria for publication of a mineral reserve.

Most of the exploration drilling performed from July, 2013 to December, 2013 was focused on confirming the gold mineralization both within the existing San Francisco pit on benches for which previous drilling was widely spaced and underneath the southern wall of existing San Francisco pit where there is the potential to mine a number of high grade lenses using underground methods. Timmins has also conducted some drilling on a number of projects located to the north of the San Francisco pit in order to identify if the mineralization in these areas is amenable to hosting smaller secondary deposits similar in nature to the San Francisco or La Chicharra pits. The drilling on the northern areas of mineralization contained mixed results but generally positive results. Due to the continuing low price of gold, however, exploration in these areas have been curtailed.

Due to the decision to place the San Francisco mine on a care and maintenance schedule at the end of 2016 if the gold price does not appreciably increase in the next year, no exploration budget has been submitted for the San Francisco property. In addition, at the moment there are no exploration personnel to conduct any programs.

Micon has reviewed Timmins previous exploration programs and considers that the current mineral concessions hold the potential to host further deposits similar to either San Francisco or La Chicharra and that, once it is able to so, Timmins should implement further exploration programs on its concessions. However, any further exploration programs will be subject to either funding or other matters which may cause the any proposed program to be altered in the normal course of its business activities, or alterations which may affect the program as a result of the exploration activities themselves.

Micon agrees with the general direction of Timmins’ exploration and development program for the property and makes the following additional recommendations:

Micon recommends that when applicable Timmins continues to conduct exploration on the other areas of mineralization on the property, as well as to the east-southeast of the San Francisco pit, in order to continue to realize the full potential of its property.

Micon recommends that Timmins continues to optimize costs, where applicable in the current precious metal market.

Given the known extent of mineralization on the property, compared to the amount of mining activity, the San Francisco Project has the potential to host further deposits or lenses of gold mineralization, similar in character and grade to those exploited in the past, outside the present resource base.

Micon has reviewed the previous exploration program for the property and, in light of the observations made in this report, supports the exploration concepts as outlined by Timmins. Given the prospective nature of the property, it is Micon’s opinion that the San Francisco Project merits further exploration and Micon recommends that Timmins continues to hold its existing mineral concessions until such time as expenditures on exploration become justifiable once again.

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Lewis, W.J. et al., (2011), NI 43-101 F1 Technical Report Updated Resources and Reserves and Mine Plan for the San Francisco Gold Mine, Sonora, Mexico, 300 p.

Lewis, W.J.et al, (2013), NI 43-101 F1 Technical Report Updated Resources and Reserves and Mine Plan for the San Francisco Gold Project, Sonora, Mexico, 330 p

Luna, R. and Gastelum, G., (1992), Geology of the San Francisco Project Estación Llano, Sonora in Clark, K.F. et al., editors, Geology and Mineral Resources of Northern Sierra Madre Occidental, Mexico, Guidebook for the 1992 Field Conference, El Paso Geological Society, 479 p.

Micon International Limited, (2012), Technical Memorandum, San Francisco Mine Reconciliation of Reserves, 16 p. plus appendices.

Medina, Miguel Rangel, (2013), Estudio de Evaluación Hidrogeológica en el Área de Nuevos Patios de Lixiciación, de La Mina San Francisco, Estacion Llano, Sonora, 46 p.

Medina, Miguel Rangel, (2012), Informe Mensual Noviembre "Construcción de Piezómetros en el Área de la Mina San Francisco, Municipio de Santa Ana, Sonora”, 74 p.

Medina, Miguel Rangel, (2013), Informe Final "Memorias de la Construcción de Piezómetros en el Área de la Mina San Francisco, Municipio de Santa Ana, Sonora” (Nov-Dic/2012), 45 p.

Medina, Miguel Rangel, (2013), Memorias "Construcción de Piezómetros en el Área de la Mina San Francisco, Municipio de Santa Ana, Sonora” (Nov-Dic/2012), 127 p.

Perez Segura, E., (1992), The Au-Te Mineralogy of the San Francisco Deposit, Sonora, Mexico, in Clark, K.F. et al., editors, Geology and Mineral Resources of Northern Sierra

Madre Occidental, Mexico, Guidebook for the 1992 Field Conference, El Paso Geological Society, 479 p.

Prenn, N.B., et al., (1995), San Francisco Property Resource and Reserve Sonora, Mexico prepared by Mine Development Associates for Geomaque Exploration Ltd., 46 p.

Salas, G.P., et al, (1991), Economic Geology, Mexico, Volume P-3 of the Geology of North America, in The Decade of North American Geology Project series by The Geological Society of America, Inc., 438 p.

Silberman, M., (1992), Characteristics and Complex History of Gold-Bearing Quartz veins along the Mojave-Sonora Megashear Zone, northern Sonora, Mexico, in Clark, K.F. et al., editors, Geology and Mineral Resources of Northern Sierra Madre Occidental, Mexico, Guidebook for the 1992 Field Conference, El Paso Geological Society, 479 p.

Silver, L.T., and Anderson, T.H., (1974), Possible Left-lateral Early to Middle Mesozoic Disruption of the Southwestern North American Craton Margin, in Geological Society of America, Abstracts with Programs, v. 6, 955 p.

Telluris Consulting Ltd., (2009), Structural Review of the San Francisco Deposit, Sonora Mexico, Prepared for Timmins Gold Corp. Molimentales del Noroeste S.A. de C.V., 35 p.

Timmins Gold Corp., (May, 2011), Press Release: Timmins Gold sells 65,784 ounces of gold during first year of commercial operations at the San Francisco mine.

Timmins Gold Corp., (September, 2011), Press Release: Timmins Gold Corp Announces Updated Reserve and Resource Estimates for the San Francisco Gold Project.

Timmins Gold Corp., (October, 2011), Press Release: Timmins Gold Reports Second Quarter Production Results.

Timmins Gold Corp., (November, 2011), Press Release: Timmins Gold to commence Trading on NYSE Amex on November 4, 2011.

Timmins Gold Corp., (January, 2012), Press Release: Timmins Gold reports record production of 21,524 gold ounces in final quarter of 2011.

Timmins Gold Corp., (March, 2012), Press Release: Timmins Gold Corp Announces Updated Resource Estimate for the San Francisco Gold Project.

Timmins Gold Corp., (April, 2012), Press Release: Timmins Gold Reports Record Gold Production of 21,532 Ounces of Gold and Record Gold Recovery Ratio of 69% during Q1 2012.

Timmins Gold Corp., (July, 2012), Press Release: Timmins Gold reports record production of 23,203 ounces of gold and 14,453 ounce of silver during Q2 2012.

Timmins Gold Corp., (October, 2012), Press Release: Timmins Gold reports record production of 25,153 ounces of gold and 13,857 ounce of silver during Q3 2012.

Timmins Gold Corp., (January, 2013), Press Release: Timmins Gold reports record production of 94,444 ounces of gold for 2012.

Timmins Gold Corp., (April, 2013), Press Release: Timmins Gold reports record production of 28,328 ounces of gold for the first quarter of 2013.

Timmins Gold Corp., (April, 2013), Press Release: Timmins Gold intersects 72 meters of 1.6 gpt gold, 15 meters of 4.2 gpt gold and 14 meters of 3.2 gpt gold at San Francisco Pit.

Timmins Gold Corp., (July, 2013), Press Release: Timmins Gold reports production of 28,024 gold ounces for the second quarter of 2013.

Timmins Gold Corp., (October, 2013), Press Release: Timmins Gold reports record production of 29,139 gold ounces for the third quarter of 2013.

Timmins Gold Corp., (November, 2013), Press Release: Timmins Gold Announces Updated Reserve and Resource Estimates for the San Francisco Gold Mine.

Timmins Gold Corp., (December, 2013), Press Release: Timmins Files Updated NI 43-101 Technical Report for its San Francisco Gold Mine.

Timmins Gold Corp., (January, 2014), Press Release: Timmins Gold surpasses guidance with record production of 120,900 AuEq ozs in 2013 and 34,563 ozs for the fourth quarter of 2013.

Timmins Gold Corp., (April, 2014), Press Release: Timmins Gold reports record production of 35,684 AuEq* ounces for the first quarter of 2014.

Timmins Gold Corp., (May, 2014), Press Release: Timmins announces USD5 million 2014 exploration program focusing on three high potential targets.

Timmins Gold Corp., (July, 2014), Press Release: Timmins Gold reports production of 32,932 gold ounces for the second quarter of 2014.

Timmins Gold Corp., (October, 2014), Press Release: Timmins Gold reports production of 27,013 gold equivalent ounces for the third quarter of 2014.

Timmins Gold Corp., (December, 2014), Press Release: Timmins Gold to Purchase Caballo Blanco Gold Project.

Timmins Gold Corp., (December, 2014), Press Release: Timmins Gold completes acquisition of Caballo Blanco Gold Project.

Timmins Gold Corp., (January, 2015), Press Release: Timmins Gold reports record production of 121,573 AuEq ozs in 2014 and 25,304 AuEq ozs for the fourth quarter of 2014.

Timmins Gold Corp., (February, 2015), Press Release: Timmins Gold Identifies Potential Satellite Deposits North of San Francisco Mine Drills 33.85 m of 1.29 g/t Au and 10.2 m of 5.52 g/t Au.

Timmins Gold Corp., (February, 2015), Press Release: Timmins Gold Corp. Identifies High Grade Mineralization Adjacent to San Francisco Mine; Drills 14 metres of 8.0 g/t gold and 29 metres of 3.5 g/t gold.

Timmins Gold Corp., (February, 2015), Press Release: Timmins Gold to Combine with Newstrike Capital to Create An Emerging, Mexican-Focused Intermediate Gold Producer.

Timmins Gold Corp., (April, 2015), Press Release: Timmins Gold reports production of 24,374 AuEq ounces for the first quarter of 2015.

Timmins Gold Corp., (May, 2015), Press Release: Timmins Gold Completes Acquisition of Newstrike Capital.

Timmins Gold Corp., (July, 2015), Press Release: Timmins Gold Commences Underground Pilot Phase at its San Francisco Mine.

Timmins Gold Corp., (Undated), Exploration Drilling Update on San Francisco Property, Internal Letter Report, unpagenated 19 p.

Timmins Gold Corp., (Undated), Infill Drilling at San Francisco Gold Mine 2014 – 2015, Exploracion on the San Francisco Mine, Internal Letter Report, unpagenated 18 p.

Timmins Gold Corp., (2005), San Francisco Gold Mine, Sonora Mexico, May, 2005, Power Point Presentation, 13 p.

Tosdal, R.M., Haxel, G.B., and Wright, J.E., (1989), Jurassic Geology of the Sonoran Desert Region, Southern Arizona, Southeastern California and Northwestern Sonora: Construction of a Continental-Margin magmatic Arc, in J.P. Jenny, and S.H. Reynolds (editors), Geological Evolution of Arizona, Tucson, Arizona Geological Society Digest.

Vargas, J.C., et al, (1994), Geological – Mining Monograph of the State of Sonora, M-8E, published by the Consejo de Recursos Minerales, 220 p.

Zonge Engineering and Research Organization Inc., (2007), Processing and Interpretation of High Resolution Aeromagnetic and Radiometric Data for the San Francisco and Pima Project Areas, Sonora, Mexico, for Timmins Gold Corporation, 19 p.

As the co-author of this report for Timmins Gold Corp. entitled “NI 43-101 F1 Technical Report, Updated Resources and Reserves and Mine Plan for the San Francisco Gold Project Sonora, Mexico” dated February 29, 2016 with an effective date of December 31, 2015, I, William J. Lewis do hereby certify that:

I am employed by, and carried out this assignment for, Micon International Limited, Suite 900, 390 Bay Street, Toronto, Ontario M5H 2Y2, tel. (416) 362-5135, fax (416) 362-5763, e-mail wlewis@micon-international.com;

This certificate applies to the Technical Report titled “NI 43-101 F1 Technical Report, Updated Resources and Reserves and Mine Plan for the San Francisco Gold Project in Sonora, Mexico” dated February 20, 2016 with an effective date of December 31, 2015;

I am a registered Professional Geoscientist with the Association of Professional Engineers and Geoscientists of Manitoba (membership # 20480); as well, I am a member in good standing of several other technical associations and societies, including:

I am familiar with NI 43-101 and, by reason of education, experience and professional registration, I fulfill the requirements of a Qualified Person as defined in NI 43-101. My work experience includes 4 years as an exploration geologist looking for gold and base metal deposits, more than 11 years as a mine geologist in underground mines and 15 years as a surficial geologist and consulting geologist on precious and base metals and industrial minerals;

I visited the San Francisco mine project on several previous occasions since 2005 and most recently between February 2, and 5, 2016 to review the resource estimates and exploration programs on the property and discuss the ongoing QA/QC program;

I have written or co-authored previous Technical Reports for the mineral property that is the subject of this Technical Report;

I am independent Timmins Gold Corp. and its subsidiaries according to the definition described in NI 43-101 and the Companion Policy 43-101 CP;

I am responsible for Sections 1 to 12 (except 12.3), 14.1, 14.2, 19, 20 and 23 to 26 of this Technical Report;

As of the date of this certificate, to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make this technical report not misleading;

As the co-author of this report for Timmins Gold Corp. entitled “NI 43-101 F1 Technical Report, Updated Resources and Reserves and Mine Plan for the San Francisco Gold Project Sonora, Mexico” dated February 29, 2016 with an effective date of December 31, 2015, I, Alan J. San Martin do hereby certify that:

I am employed as a Mineral Resource Modeller by Micon International Limited, Suite 900, 390 Bay Street, Toronto, Ontario M5H 2Y2, tel. (416) 362-5135, fax (416) 362-5763, e-mail asanmartin@micon-international.com.

I hold a Bachelor Degree in Mining Engineering (equivalent to B.Sc.) from the National University of Piura, Peru, 1999.

I have continuously worked in my profession since 1999, my experience includes mining exploration, mineral deposit modelling, mineral resource estimation and consulting services for the mineral industry.

I am familiar with NI 43-101 and form 43-101F1 regulations and by reason of education, experience and professional registration with AusIMM, I fulfill the requirements of a Qualified Person as defined in NI 43-101.

As of the date of this certificate to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make this report not misleading.

I am independent of the parties involved in the transaction for which this report is required, other than providing consulting services.

As the co-author of this report for Timmins Gold Corp. entitled “NI 43-101 F1 Technical Report, Updated Resources and Reserves and Mine Plan for the San Francisco Gold Project Sonora, Mexico” dated February 29, 2016 with an effective date of December 31, 2015, I, Mani M. Verma do hereby certify that:

I am an associate of, and carried out this assignment for, Micon International Limited, Suite 900, 390 Bay Street, Toronto, M5H 2Y2 tel. (416) 362-5135 fax (416) 362-5763.

I am a registered Professional Engineer with the Association of Professional Engineers of Ontario (Membership #48070015), I am a member in good standing of

I have read National Instrument NI 43-101 and, by reason of education, experience and professional registration, I fulfill the requirements of a Qualified Person as defined in NI 43- 101. My work experience includes open pit and underground mining, engineering, project evaluation, due diligence reviews and consulting services.

I visited the San Francisco mine during 2010, in connection with a prior Technical Report on the property and again between August 12 and 16, 2013.

I am independent of Timmins Gold Corp. and related entities, other than providing consulting services;

As of the date of this certificate to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make this report not misleading;

As the co-author of this report for Timmins Gold Corp. entitled “NI 43-101 F1 Technical Report, Updated Resources and Reserves and Mine Plan for the San Francisco Gold Project Sonora, Mexico” dated February 29, 2016 with an effective date of December 31, 2015, I, Richard Gowans do hereby certify that:

I am employed by, and carried out this assignment for, Micon International Limited, Suite 900, 390 Bay Street, Toronto, Ontario M5H 2Y2, tel. (416) 362-5135, fax (416) 362-5763, e-mail rgowans@micon-international.com.

I am a registered Professional Engineer of Ontario (membership number 90529389); as well, I am a member in good standing of the Canadian Institute of Mining, Metallurgy and Petroleum.

I am familiar with NI 43-101 and by reason of education, experience and professional registration, fulfill the requirements of a Qualified Person as defined in NI 43-101. My work experience includes over 30 years of the management of technical studies and design of numerous metallurgical testwork programs and metallurgical processing plants.

As of the date of this certificate, to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make this technical report not misleading.

An informal term for an accumulation of mineralization or other valuable earth material of any origin.

Drilling to establish accurate estimates of mineral resources or reserves usually in an operating mine or advanced project.

Rock that is, by necessity, removed along with the ore in the mining process, subsequently lowering the grade of the ore.

The angle at which a vein, structure or rock bed is inclined from the horizontal as measured at right angles to the strike.

A semi refined alloy containing sufficient precious metal to make recovery profitable. Crude precious metal bars, ingots or comparable masses produced at a mine which are then sold or shipped to a refinery for further processing.

Hydrothermal mineral deposit formed within one kilometre of the earth’s surface, in the temperature range of 50 to 200°C.

A mineral deposit consisting of veins and replacement bodies, usually in volcanic or sedimentary rocks, containing precious metals or, more rarely, base metals.

A break in the Earth's crust caused by tectonic forces which have moved the rock on one side with respect to the other.

A milling process in which valuable mineral particles are induced to become attached to bubbles and float as others sink.

A break in the rock, the opening of which allows mineral-bearing solutions to enter. A "cross-fracture" is a minor break extending at more-or-less right angles to the direction of the principal fractures.

Term used to indicate the concentration of an economically desirable mineral or element in its host rock as a function of its relative mass. With gold, this term may be expressed as grams per tonne (g/t) or ounces per tonne (opt).

A process used for the recovery of copper, uranium, and precious metals from weathered low-grade ore. The crushed material is laid on a slightly sloping, impervious pad and uniformly leached by the percolation of the leach liquor trickling through the beds by gravity to ponds. The metals are recovered by conventional methods from the solution.

A Measured Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.

The science and art of separating metals and metallic minerals from their ores by mechanical and chemical processes.

A plant in which ore is treated and metals are recovered or prepared for smelting; also a revolving drum used for the grinding of ores in preparation for treatment.

A naturally occurring homogeneous substance having definite physical properties and chemical composition and, if formed under favourable conditions, a definite crystal form.

That portion of public mineral lands which a party has staked or marked out in accordance with federal or state mining laws to acquire the right to explore for and exploit the minerals under the surface.

The process or processes by which mineral or minerals are introduced into a rock, resulting in a valuable or potentially valuable deposit.

A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Material of economic interest refers to diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals. The term mineral resource used in this report is a Canadian mining term as defined in accordance with NI 43-101 – Standards of Disclosure for Mineral Projects under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the CIM), Standards on Mineral Resource and Mineral Reserves Definitions and guidelines adopted by the CIM Council on December 11, 2005 and recently updated as of May 10, 2014 (the CIM Standards).

A Mineral Reserve is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Mineral Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported. The public disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study.

A payment made by a producer of metals based on the value of the gross metal production from the property, less deduction of certain limited costs including smelting, refining, transportation and insurance costs.

National Instrument 43-101 is a national instrument for the Standards of Disclosure for Mineral Projects within Canada. The Instrument is a codified set of rules and guidelines for reporting and displaying information related to mineral properties owned by, or explored by, companies which report these results on stock exchanges within Canada. This includes foreign-owned mining entities who trade on stock exchanges overseen by the Canadian Securities Administrators (CSA), even if they only trade on Over The Counter (OTC) derivatives or other instrumented securities. The NI 43-101 rules and guidelines were updated as of June 30, 2011.

A form of mining operation designed toextract mineralsthat lie near the surface. Waste or overburden is first removed, and the mineral is broken and loaded for processing. The mining of metalliferous ores by surface- mining methods is commonly designated as open-pit mining as distinguished from strip mining of coal and the quarrying of other non- metallic materials, such as limestone and building stone.

An exposure of rock or mineral deposit that can be seen on surface, that is, not covered by soil or water.

A chemical reaction caused by exposure to oxygen that results in a change in the chemical composition of a mineral.

A measure of weight in gold and other precious metals, correctly troy ounces, which weigh 31.2 grams as distinct from an imperial ounce which weigh 28.4 grams.

A building or group of buildings in which a process or function is carried out; at a mine site it will include warehouses, hoisting equipment, compressors, maintenance shops, offices and the mill or concentrator.

A Probable Mineral Reserve is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve.

Conforms to that definition under NI 43-101 for an individual: (a) to be an engineer or geoscientist with a university degree, or equivalent accreditation, in an area of geoscience, or engineering, related to mineral exploration or mining; (b) has at least five years' experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these, that is relevant to his or her professional degree or area of practice; (c) to have experience relevant to the subject matter of the mineral project and the technical report; (d) is in good standing with a professional association; and (e) in the case of a professional association in a foreign jurisdiction, has a membership designation that (i) requires attainment of a position of responsibility in their profession that requires the exercise of independent judgement; and (ii) requires (A.) a favourable confidential peer evaluation of nthe individual’s character, professional judgement, experience, and ethical fitness; or (B.) a recommendation for membership by at least two peers, and demonstrated prominence or expertise in the field of mineral exploration or mining.

Name for the metamorphic rocks surrounding an igneous intrusive where it comes in contact with a limestone or dolostone formation.

The direction, or bearing from true north, of a vein or rock formation measure on a horizontal surface.

A group of minerals which contains sulphur and other metallic elements such as copper and zinc. Gold and silver are usually associated with sulphide enrichment in mineral deposits.

Rock units on either side of an orebody. The hanging wall and footwall rocks of a mineral deposit or orebody.

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