Tepal project

Resource Estimate

Resource Statement for the Tepal project located in Michoacán, Mexico: JDS Energy & Mining Inc., Effective Date January 19, 2017, Authored by Gord Doerksen, P. Eng., Dino Pilotto, P.Eng., and Kelly McLeod, P.Eng. of JDS Energy & Mining Inc.; Daniel Friedman, P.Eng, Knight Piesold Ltd.; Michael Godard, P.Eng., Independent Consultant; and David K. Makepeace, P.Eng., Micon International Ltd. This report is currently being amended.

Measured and Indicated Mineral Resources at US$5/t Equivalent Value Cut-Off – March 29, 2012

Deposit Resource Category Tonnage(000 ) In Situ Average Grade Contained Metal
Total Measured 34, 000 0.48 0.25 0.95 0.002 528 185
Indicated 153, 000 0.26 0.19 1.67 0.004 1,276 628
M + I 187, 000 0.30 0.20 1.54 0.004 1,804 813

1. Au = gold, Cu = copper, Ag = silver, Mo = molybdenum, g/t = grams per tonne, % = percent, oz. = ounces, lbs. = pounds. Resource numbers above are rounded to nearest 100,000 tonnes, 1,000 oz Au, 1,000,000 lbs Cu and 1,000 oz. AuEq 2 AuEq = gold equivalent and is calculated using gold and copper only using $1000 Au, $2.75 Cu metal prices (AuEq = (lbs. Cu*$2.75/$1000) + Au oz.). All dollar values stated are $USD
2. The mineral resource stated in the table conforms to CIM guidelines for reasonable potential for economic extraction and is not to be considered mineral reserves. Source: NI-43-101 Technical Report Preliminary Economic Assessment on the Tepal Project, Michoacan, Mexico, JDS Energy & Mining Inc; January 2017

Upon ValOro acquiring the project in 2009, the company drilled an additional 63,078 meters for resource delineation, exploration, metallurgical, pilot plant and geotechnical purposes. Today, Tepal is an advanced stage exploration project with an extensive database of geochemical, geophysical and other technical surveys as well as a combined total of 82,895 meters of core and RC drilling completed in 443 holes.

The project has demonstrated growth potential by expanding existing resources and through new discovery. The delineation of the North, South and Tizate zones significantly increased the 2009 historic resources for the project. Drilling by the company also succeeded in placing a high percentage of mineral resources from all three zones into the Measured and Indicated categories.

An Environmental Impact Assessment (MIA-P), based on the previous studies, was completed and submitted on September 10, 2013 and the permit to proceed was received March 24, 2014. A concurrent global downturn within the industry prompted a decision to place the project on care and maintenance until market conditions improved.

Due to lower metal prices experienced during 2014 to 2017, the company revised the project to a smaller more efficient 22,000 tonne per day operation using metal prices of US$1,250/oz. for gold US$2.50/lb. for copper and US$18.00/oz. for silver in a Preliminary Economic Assessment. JDS Energy & Mining Inc. proposed a 22,000 tonne per day sulphide processing plant and an independent 5,500 tonne per day oxide plant. The mining plan was changed to reflect the lower mill feed rate changes which resulted in a reduced strip ratio of 0.6:1. Mining was changed from an owner fleet to contractor mining using an average cost of $2.16/ tonne. Metallurgical recoveries were derived from the extensive test work previously completed.

The 2017 PEA estimate was positive, resulting in a US$169M After-Tax NPV (5%) and 24% IRR. Due to the smaller plant and contractor mining, the initial capex was reduced 40% to US$214M.Below are key highlights that improved the economics of the project:

Metal Prices used in the Economic Analysis

Assumptions Unit Value
Cu Price US$/lb 2.50
Au Price US$/oz 1,250
Ag Price US$/oz 18.00
FX Rate MX$:US$ 18

Source: JDS (2017)

Breakdown of Estimated Operating Costs

Operating Costs Avg Annual (M$) $/t processed** LOM (M$)
Mining* 31 3.30 299
Processing – Sulphide Flotation/Cyanidation 44 4.75 430
Processing – Oxide CIL 8 0.85 77
G&A 7 0.75 67
Total 90 9.65 873

*Average LOM Mining cost amounts to $2.16/t mined at a 0.6:1 strip ratio (excluding pre-production tonnes mined).
**includes all tonnes processed (both sulphide and oxide)
Source: JDS (2017)

Summary of Results

Summary of Results Unit Value
Cash Cost (Net of Byproduct) US$/oz 313
Cash Cost (incl. Sustaining and Closure CAPEX) US$/oz 396
Capital Costs
Pre-Production Capital M$ 192
Pre-Production Contingency M$ 22
Total Pre-Production Capital M$ 214
Sustaining & Closure Capital M$ 80
Sustaining & Closure Contingency M$ 7
Total Sustaining & Closure Capital M$ 87
Total Capital Costs Incl. Contingency M$ 301
Working Capital M$ 23
Pre-Tax Cash Flow LOM M$ 417
M$/a 43
Taxes LOM M$ 160
After-Tax Cash Flow LOM M$ 257
M$/a 26
Pre-Tax NPV5% M$ 299
Pre-Tax IRR % 36
Pre-Tax Payback Years 1.6
After-Tax NPV5% M$ 169
After-Tax IRR % 24
After-Tax Payback Years 2.3

Technical Reports