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El Limon Mine – Nicaragua

Property Location and Access:

El Limon Mine is located in northwestern Nicaragua approximately 100 kilometres (“km”) northwest of Managua, the capital of Nicaragua. The mine straddles the boundary of the municipalities of Larreynaga and Telica of the Department of Leon and the municipalities of Chinandega and Villa Nueva of the Department of Chinandega. The mine is readily accessed by a paved highway and a 15 km gravel mine road with a total road distance from Managua of 140 km.

Second Quarter (“Q2”) 2017:

El Limon Mine produced 7,740 ounces of gold in the second quarter of 2017, which was 5,023 ounces below budget and 3,335 ounces lower than the second quarter of 2016. The primary cause of the shortfall was lower processed grade which was 2.43 g/t versus a budget of 3.45 g/t and 3.65 g/t in the second quarter of 2016. El Limon’s production continued to be negatively affected by water control issues which reduced high-grade ore flow from Santa Pancha Underground. As a result, mill feed was supplemented with smaller volumes of lower grade ore recovered from surface. At the end of the quarter, improved control of underground water was achieved with the successful rehabilitation of a key dewatering well, now enabling the development of the lower levels of Santa Pancha 1 to proceed. Additional mining equipment was delivered in the quarter and the addition of a specialized rebuild crew has resulted in an improvement of haul fleet availability by 11% since the first quarter. Tonnage milled for the quarter was 106,428 tonnes compared to budget of 123,209 tonnes and 99,947 tonnes in the first quarter of 2016. Mill recoveries averaged 93.1% compared to budget of 93.5% and 94.5% in the second quarter of 2016.

El Limon’s second quarter cash costs(2), on a per ounce basis, were impacted by the lower than planned production (and as a result were significantly above budget) with cash operating costs of $1,328 per ounce (Q2 2016 – $733 per ounce) and all-in sustaining costs (“AISC”)(2) of $1,904 per ounce (Q2 2016 – $1,121 per ounce). 

First-Half (“FH”) 2017:

For the first half of 2017, El Limon Mine produced 16,601 ounces of gold, which was 7,269 ounces below budget and 4,690 ounces lower than the first six months of 2016.

For the first half of 2017, El Limon’s cash operating costs were $1,149 per ounce (FH 2016 – $753 per ounce) and AISC were $1,727 per ounce (FH 2016 – $1,124 per ounce).

2017 Guidance:

Although production from Santa Pancha 1 is expected to return to more normal levels by the fourth quarter of 2017, the shortfall to date is not expected to be fully recovered in the second half of the year. As a result, El Limon’s production guidance has been revised lower and for the full-year 2017, El Limon Mine is now forecast to produce between 40,000 to 50,000 ounces of gold (original guidance was 50,000 to 60,000 ounces). El Limon’s full-year cash operating costs and AISC are now both expected to be higher than original guidance and be between $815 and $855 per ounce (original guidance was $655 to $695 per ounce) and between $1,415 and $1,455 per ounce (original guidance was $1,065 to $1,095 per ounce), respectively.