INNOVAT MINERAL PROCESS SOLUTIONS LIMITED. INN14-CS-001 Sept 30, INNOVAT Case Study 10,000 t/d Heap Leach Panama

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1 760 Brant St., Suite 405C, Burlington ON, L7R 4B8, Canada Tel Fax INN14-CS-001 Sept 30, 2014 Document: Project: TECHNICAL MEMORANDUM INNOVAT Case Study 10,000 t/d Heap Leach Panama This memorandum presents an economic comparison based on a 10,000 t/d heap leach operation located in Latin America. All assumptions, equipment layouts, mining, and costing, for the purposes of this comparison, have been accepted from the pre-feasibility base case and have not been adjusted except as required to implement a Continuous Vat Leaching (CVL) based process. INNOVAT was directly engaged in engineering activities related to the project from 2007 through 2013, including bulk pilot plant testing, and believes that the cost estimates associated with the implementation of Continuous Vat Leaching have been conservatively estimated, and that potentially significant savings in both processing, and material handling can be realized with modification to the base case. 1.0 INTRODUCTION Three economic analyses are presented in this memo, two of which have been prepared by INNOVAT, and one of which was presented as a heap leach, prefeasibility study by the owner. All costing where possible has been carried forward, or based on the base case. The models are as follows: Base case: 10,000t/d Heap Leach Facility (unadjusted) Direct Comparison: 10,000t/d Continuous Vat Leaching Alternate: 5,000t/d Continuous Vat Leaching The following considerations were used when evaluating the alternate methods: Maintain design criteria of the original project plan Use direct cost from original project plan where feasible

2 CASE STUDY 10,000t/d HEAP LEACH COMPARISON INN14CS 2 Use unit cost from original project plan where direct cost is not feasible 2.0 BASIS OF COMPARISON INNOVAT has not modified the flow sheets in any way beyond addition of components which are required for Continuous Vat Leaching, and removal of components related specifically to Heap Leaching. The mining and material handling process has been unmodified for the 10,000t/d Continuous Vat Leach case, and modified only as a result of the reduction in processing rate for the 5,000t/d CVL case. The crushing circuit has been modified as a result of the Continuous Vat Leaching process feed size requirement of -6mm. In order to use the primary and secondary crusher from the base case, an additional tertiary, and quaternary crushing stage have been added to both of the CVL scenarios. The cost of this inclusion has been captured in both the CAPEX and OPEX within the comparison. It is expected that a crushing circuit designed specifically to reduce the particle size from ROM to -6mm would require three stages and have a small cost savings over the crushing circuit utilized in this comparison. The CVL facility has been placed near the base of the proposed heap leach facility, and receives ore from the crushed ore stockpile. No modification has been made to the material handling / conveyor system as presented in the base case. The CVL is expected to discharge the material to a tailings pile which has been modelled to occupy the space currently designed for the heap leach facility. The costing associated with this tailings pile has been developed based on a combination of the costs reported for the heap leach facility, and the costs reported for the waste rock dump. 3.0 COMPARISON OF COSTS 3.1 PRE-PRODUCTION CAPITAL EXPENDITURE - PROCESS In the case of the 10,000t/d CVL system, cost reductions associated with the centralization of the process were included and amounted primarily to a minor reduction in the cost of the reagent

3 CASE STUDY 10,000t/d HEAP LEACH COMPARISON INN14CS 3 system. The pre-production direct cost comparison between the base case and 10,000t/d CVL case excluding Area 30 Heap Leach & Solution Handling, and Area 60 Detoxification, produces a difference of 0.33% capital expense. If we look at only Area 30 and 60, the preproduction cost of the CVL scenario represents a 50% cost premium over the base case. It is important to note however, that this cost premium is almost completely offset in year one during the heap leach expansion. The difference between the total process & infrastructure capital cost (pre-production) between the base case and 10,000t/d CVL case is a 12.4% increase in capital cost. In the case of the 5,000t/d CVL system, direct cost of associated equipment was reduced as a result of the 50% reduction in processing rate. The aggregate reduction in direct cost associated with this throughput reduction is 20.8%, excluding Area 30 Heap Leach & Solution Handling, and Area 60 Detoxification. The capital cost difference associated with Area 30 & 60 is 9.2% in favour of the 5,000t/d CVL case. Further savings occur following year one, where leach pad expansion must occur with the base case. The difference between the total process & infrastructure capital cost (pre-production) between the base case and 5,000t/d CVL case is a 19.4% decrease in capital cost. 3.2 PRE-PRODUCTION CAPITAL EXPENDITURE MINING As the mining schedule and mining method were not modified, the mining costs have been carried directly for the 10,000t/d case, and reduced only by decreasing the number of required haul trucks in the 5,000t/d case. The 10,000t/d CVL case shares a common mining capital expenditure throughout life of mine in comparison to the base case, whereas the 5,000t/d case includes a capital savings of 19.6% as the equipment requirement for 5,000t/d has decreased with respect to the base case. 3.3 OPERATING EXPENSE - MINING Mining costs have not been modified for the 10,000t/d comparison as the mining and material handling process has not been altered. Additional mining cost was included in the 5,000t/d case owing to the reduced equipment efficiency. This increase over the mine life amounts to a mining operating cost increase of 6.9%.

4 CASE STUDY 10,000t/d HEAP LEACH COMPARISON INN14CS OPERATING EXPENSE PROCESS LABOUR Process labour has been adjusted based on the removal of all of the tasks specifically associated with the heap leach, offset by the workers required for continuous vat leaching. The main difference is the removal of the piping crew which accounts for 10% of the process staff. In comparison to the base case, the 10,000t/d CVL case total life of mine (LOM) process labour expenditure is reduced by 12%. In comparison to the 5,000t/d CVL case, the total LOM process labour expenditure increases by 62% exclusively as a result of an additional 6 years of operation. It is expected that optimization of the project for a 5,000t/d operation would reduce this process labour expense to a more comparable level. 3.5 OPERATING EXPENSE - PROCESSING Processing cost was modified primarily to account for the switch from heap leaching to CVL. A minor cost savings in the case of 10,000t/d of 3.8% over LOM is expected. This savings is attributed to a reduction in power consumption, use of hydrated lime, and removal of heap specific expenses. A similar savings is expected in the 5,000t/d case, with a 1.6% reduction in total processing cost. 3.6 OPERATING EXPENSE - LABORATORY Laboratory costs were reduced in both cases primarily by a reduction in the number of samples taken. Given the rapid leach characteristics of the ore within the vat, and the ability of the system to tolerate feed variation, the number of samples has been reduced. In the case of 10,000 t/d, this equates to 75 solids assays, and 125 solution assays per day. This results in a savings over the base case of 19.4% and 33.9% for the 10,000t/d and 5,000t/d comparison respectively. 3.7 OPERATING EXPENSE SERVICES & SUPPORT Services and Support costs have not been affected by the change in processing method and therefore the 10,000t/d CVL case cost remains identical to the base case. In comparison to the 5,000t/d CVL case, the LOM cost has increased 15.7% as a result of yearly expenditures occurring for an additional 6 years.

5 CASE STUDY 10,000t/d HEAP LEACH COMPARISON INN14CS OPERATING EXPENSE G & A G&A costs have not been modified in the case of the 10,000t/d comparison. The G&A costs have been carried directly. For the 5,000t/d case, the yearly expenditure has been reduced to accommodate the changes required for a 50% reduction in processing, with the total G&A expenditure increasing by 74%. This is one area where significant additional savings can be realized in the 5,000t/d case, as yearly costs from the base case have been extended over 12 years, resulting in much higher total expense per category. It is expected that these costs can be reduced by virtue of the smaller plant, or distributed over the project life resulting in a more accurate G&A cost comparison. 3.9 MONITORING/RECLAMATION & CLOSURE The total cost of monitoring/reclamation & closure has not been adjusted in any way. This activity is expected to take place following leaching and as such has been moved where required to begin at the end of leaching activity. It should be noted that reclamation on an ongoing basis can take place with either CVL scenario OTHER TAXES The calculation of other taxes is done using the same formula as applied to the base case. The total tax expenditure does not vary significantly between cases TRANSPORT, INSURANCE, REFINING The same formula for determining the total cost of this category has been used across all cases. Since the CVL installation has a higher total recovery, the total cost over the life of the project has increased, but remains the same on a per ounce basis ONGOING CAPITAL EXPENDITURE Mining capital expenditure on an ongoing basis remains unchanged in the 10,000t/d CVL case in comparison to the base case. Closure cost is expected to reduce significantly, as the tailings pile does not require the same treatment as the heap leach facility at project completion. In addition,

6 CASE STUDY 10,000t/d HEAP LEACH COMPARISON INN14CS 6 costs related to heap leach pad expansions have been modified to reflect tailings dump expansion. The tailings area as designed for the CVL will undergo identical pad expansions, but these expansions will consist only of appropriate clearing, and placement of a geotextile, more closely resembling the preparation of the existing WRD site. The combined savings from adjustment of the leach pad expansions, and reduction in closure requirements results in a savings of approximately $12,950,644 LOM. A similar savings is realized in the 5,000t/d CVL comparison. At this scale, $12,669,875 is saved LOM on ongoing expenditures as a result of the transition from heap leach to tailings pile. 4.0 SUMMARY OF COMPARISON A summary of the key financial parameters is shown in Table 1. Here you can see that the 10,000t/d CVL case offers superior economics in comparison to the base case, and that while the average cost per ounce of gold is 7% higher in the 5,000t/d case, the overall economics are better thanks to the reduced capital expenditure both initially and ongoing. In all cases the NPV of the CVL installation betters the base case, which is aided by the short leach duration, which leads to a rapid realization of gold production. A complete cash flow analysis for each case is attached in the Appendix. Table 1 - Key Financial Parameters Base Case Heap Leach (10,000t/d) CVL Case (10,000t/d) CVL Case (5,000t/d) Mine Life 5.3 year 5.3 year 11.1 year CAPEX (Pre-Production) $ $ $ After-tax IRR 33.7% 47.1% 36.5% Operating Years to Payback (5%) After Tax NPV of Project Cash Flow At 0% Discount Rate $ $ $ At 5% Discount Rate $ $ $ At 10% Discount Rate $ $ $

7 CASE STUDY 10,000t/d HEAP LEACH COMPARISON INN14CS 7 Base Case Heap Leach (10,000t/d) CVL Case (10,000t/d) CVL Case (5,000t/d) At 15% Discount Rate $ $ $ Average cash cost per oz $ 402 $ 359 $ 430 Cost per oz (including Capital) $ 981 $ 905 $ APPENDIX

8 APPENDIX 10,000t/d HEAP LEACH COMPARISON INN14CS A 10,000 t/d Heap Leach (Base Case)

9 APPENDIX 10,000t/d HEAP LEACH COMPARISON INN14CS B 10,000t/d Continuous Vat Leaching

10 APPENDIX 10,000t/d HEAP LEACH COMPARISON INN14CS C 5,000t/d Continuous Vat Leaching