Terronera PFS 2017

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NI 43-101 TECHNICAL REPORT

PRELIMINARY FEASIBILITY STUDY


FOR THE
TERRONERA PROJECT
JALISCO STATE
MEXICO

Report Date: May 18, 2017


Effective Date: April 3, 2017

Qualified Persons:
Peter J. Smith, P.Eng.
Eugenio Iasillo, P.E.
Eugene Puritch, P.Eng., F.E.C.
Yungang Wu, P.Geo.
David Burga, P.Geo.
Jarita Barry, P.Geo.
James Pearson, P.Eng.
Benjamin Peacock, P.Eng.
Scott Fleming, P.E.

Prepared For:

Endeavour Silver Corp.


301 – 700 West Pender Street
Vancouver, B.C., Canada, V6C 1G8
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

Table of Contents
1.0 SUMMARY ......................................................................................................... 11
1.1 INTRODUCTION ............................................................................................................11
1.2 LOCATION AND PROPERTY DESCRIPTION ......................................................................12
1.3 OWNERSHIP ................................................................................................................12
1.4 HISTORY .....................................................................................................................13
1.5 GEOLOGY AND MINERALIZATION ...................................................................................14
1.6 EXPLORATION PROGRAM .............................................................................................14
1.7 2013 MINERAL RESOURCE ESTIMATE ...........................................................................16
1.8 2017 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES .....................................16
1.9 MINERAL PROCESSING AND METALLURGICAL TESTING ..................................................17
1.10 MINING METHODS .......................................................................................................18
1.11 RECOVERY METHODS ..................................................................................................18
1.12 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL IMPACT........................................19
1.13 CAPITAL AND OPERATING COSTS .................................................................................20
1.14 ECONOMIC ANALYSIS ..................................................................................................20
1.15 CONCLUSIONS AND RECOMMENDATIONS ......................................................................21
1.16 ENVIRONMENTAL .........................................................................................................23
1.17 FURTHER STUDIES ......................................................................................................23
2.0 INTRODUCTION ................................................................................................ 24
2.1 ISSUER AND PURPOSE OF REPORT ...............................................................................24
2.2 SOURCES OF INFORMATION AND DATA ..........................................................................24
2.3 QUALIFIED PERSONS ...................................................................................................25
2.4 UNITS AND CURRENCIES ..............................................................................................26
3.0 RELIANCE ON OTHER EXPERTS.................................................................... 28
4.0 PROPERTY DESCRIPTION AND LOCATION .................................................. 30
4.1 OWNERSHIP AND PROPERTY DESCRIPTION ...................................................................31
4.2 MEXICAN REGULATIONS FOR MINERAL CONCESSIONS ...................................................33
5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND
PHYSIOGRAPHY ............................................................................................... 36
5.1 ACCESSIBILITY AND LOCAL RESOURCES .......................................................................36
5.2 PHYSIOGRAPHY AND CLIMATE ......................................................................................36
5.3 INFRASTRUCTURE .......................................................................................................37
6.0 HISTORY ........................................................................................................... 39
6.1 SAN SEBASTIAN DEL OESTE MINING DISTRICT ..............................................................39
6.2 HISTORICAL EXPLORATION AT TERRONERA ...................................................................39
6.3 PREVIOUS MINERAL RESOURCE ESTIMATES .................................................................41
6.4 PREVIOUS PRODUCTION ..............................................................................................42

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7.0 GEOLOGICAL SETTING AND MINERALIZATION ........................................... 43


7.1 REGIONAL GEOLOGY ...................................................................................................43
7.2 PROPERTY GEOLOGY ..................................................................................................44
7.3 DEPOSIT GEOLOGY .....................................................................................................46
7.4 STRUCTURE ................................................................................................................46
7.5 MINERALIZATION AND ALTERATION ...............................................................................46
8.0 DEPOSIT TYPES ............................................................................................... 48
9.0 EXPLORATION.................................................................................................. 50
9.1 EXPLORATION 2010 – 2013 .........................................................................................50
9.2 EXPLORATION 2014.....................................................................................................53
9.3 EXPLORATION 2015.....................................................................................................60
9.4 EXPLORATION 2016.....................................................................................................60
10.0 DRILLING........................................................................................................... 62
10.1 DRILLING 2011 - 2013 .................................................................................................62
11.0 SAMPLE PREPARATION, ANALYSES, AND SECURITY ............................... 84
12.0 DATA VERIFICATION ....................................................................................... 87
12.1 SITE VISIT AND DUE DILIGENCE SAMPLING ....................................................................87
12.2 QUALITY ASSURANCE/QUALITY CONTROL PROGRAM .....................................................89
12.3 CERTIFIED REFERENCE MATERIALS ..............................................................................89
12.4 DUPLICATE SAMPLES...................................................................................................97
12.5 CHECK ASSAYS ...........................................................................................................99
12.6 RECOMMENDATIONS AND CONCLUSIONS ....................................................................101
13.0 MINERAL PROCESSING AND METALLURGICAL TESTING ....................... 102
13.1 BASE CASE FLOTATION AND CYANIDATION OF CST .....................................................103
13.2 METALLURGICAL STUDY.............................................................................................104
13.3 METALLURGICAL TESTING ..........................................................................................104
13.4 SAMPLE CHARACTERIZATION .....................................................................................105
13.5 BASE CASE -- SECOND CLEANER CONCENTRATE FLOTATION .......................................106
13.6 ESTIMATED CLEANER SCAVENGER TAIL LEACH EXTRACTION .......................................106
13.7 MINERALOGY ............................................................................................................109
13.8 COMMINUTION TESTING .............................................................................................109
13.9 GRIND CALIBRATION AND ROUGHER FLOTATION..........................................................110
13.10 PROCESSING OPTIONS ...............................................................................................112
13.11 GRAVITY CONCENTRATION.........................................................................................112
13.12 PROCESS MASS BALANCE .........................................................................................112
13.13 CONCLUSIONS ..........................................................................................................113
13.14 RECOMMENDATIONS ..................................................................................................113
14.0 RESOURCE ESTIMATE .................................................................................. 115
14.1 INTRODUCTION ..........................................................................................................115
14.2 DATABASE ................................................................................................................115

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14.3 DATA VERIFICATION...................................................................................................116


14.4 DOMAIN INTERPRETATION ..........................................................................................116
14.5 ROCK MODEL CODE DETERMINATION .........................................................................117
14.6 COMPOSITING ...........................................................................................................118
14.7 GRADE CAPPING .......................................................................................................119
14.8 SEMI-VARIOGRAPHY ..................................................................................................120
14.9 BULK DENSITY ..........................................................................................................121
14.10 BLOCK MODELING .....................................................................................................121
14.11 RESOURCE CLASSIFICATION ......................................................................................123
14.12 MINERAL RESOURCE ESTIMATE .................................................................................123
15.0 MINERAL RESERVE ESTIMATES .................................................................. 129
15.1 MINERAL RESOURCE CONSIDERED .............................................................................129
15.2 MINERAL RESERVE ESTIMATE PARAMETERS ...............................................................131
15.3 MINERAL RESERVE STATEMENT .................................................................................134
16.0 MINING METHODS .......................................................................................... 135
16.1 MINE PLANNING ........................................................................................................135
16.2 MINE AND STOPE DEVELOPMENT ...............................................................................136
16.3 MECHANIZED CUT & FILL MINING METHOD ..................................................................147
16.4 GROUND SUPPORT....................................................................................................148
16.5 HYDROGEOLOGY .......................................................................................................157
16.6 SCHEDULES ..............................................................................................................159
16.7 MINE VENTILATION ....................................................................................................169
16.8 ELECTRICAL LOADS ...................................................................................................174
17.0 RECOVERY METHODS .................................................................................. 175
17.1 SUMMARY .................................................................................................................175
17.2 PROCESS DESCRIPTION .............................................................................................176
17.3 ENERGY AND W ATER REQUIREMENTS ........................................................................179
17.4 BENEFICIATION PLANT PROCESS REAGENTS...............................................................180
18.0 PROJECT INFRASTRUCTURE....................................................................... 182
18.1 EXISTING INFRASTRUCTURE .......................................................................................182
18.2 INFRASTRUCTURE FOR PROJECT ................................................................................182
18.3 PROCESS PLANT .......................................................................................................183
18.4 FILTER PLANT ...........................................................................................................183
18.5 WASTE ROCK STORAGE STOCKPILE ...........................................................................183
18.6 ANCILLARY BUILDINGS ...............................................................................................184
18.7 PROJECT ACCESS .....................................................................................................184
18.8 INTERNAL HAUL ROADS AND MINE ACCESS INFRASTRUCTURE .....................................184
18.9 POWER SUPPLY AND DISTRIBUTION ............................................................................184
18.10 WATER SUPPLY AND DISTRIBUTION ............................................................................185
18.11 WASTE MANAGEMENT ...............................................................................................185
18.12 SURFACE W ATER CONTROL .......................................................................................185
18.13 COMMUNICATIONS .....................................................................................................185
18.14 CAMP FACILITIES .......................................................................................................186

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19.0 MARKET STUDIES AND CONTRACTS ......................................................... 187


20.0 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL IMPACT ........... 189
20.1 TERRONERA PROJECT SURFACE FACILITIES LAYOUT...................................................189
20.2 ENVIRONMENTAL LIABILITY.........................................................................................189
20.3 ENVIRONMENTAL PERMITTING BASIS ..........................................................................190
20.4 EXISTING SITE CONDITIONS .......................................................................................196
20.5 TAILINGS STORAGE FACILITY (TSF)............................................................................201
20.6 ENVIRONMENTAL CONSIDERATIONS FOR TAILINGS STORAGE .......................................203
20.7 SOCIO-ECONOMIC AND COMMUNITY RELATIONS .........................................................207
20.8 CULTURAL AND HISTORICAL RESOURCE STUDIES ........................................................208
20.9 ARCHEOLOGICAL ARTIFACTS AND STUDIES .................................................................208
20.10 RECLAMATION AND CLOSURE ACTIVITIES ....................................................................208
21.0 CAPITAL & OPERATING COSTS ................................................................... 210
21.1 PREPARATION OF CAPITAL COST ESTIMATES ..............................................................210
21.2 BASIS OF CAPITAL COSTS ..........................................................................................211
21.3 CAPITAL COSTS FOR 1,000TPD PLANT........................................................................213
21.4 CAPITAL COSTS FOR EXPANSION TO 2,000TPD ...........................................................220
21.5 MINE CLOSURE COSTS ..............................................................................................223
21.6 SUSTAINING CAPITAL COSTS......................................................................................223
21.7 OPERATING COST ESTIMATES ....................................................................................225
22.0 ECONOMIC ANALYSIS ................................................................................... 229
22.1 INTRODUCTION ..........................................................................................................229
22.2 TECHNICAL AND FINANCIAL ASSUMPTIONS ..................................................................229
22.3 ECONOMIC ANALYSIS SUMMARY ................................................................................231
22.4 CASH FLOWS ............................................................................................................232
22.5 TAXES AND TAX TREATMENT ......................................................................................235
22.6 SENSITIVITY ANALYSIS ...............................................................................................235
23.0 ADJACENT PROPERTIES .............................................................................. 237
24.0 OTHER RELEVANT DATA AND INFORMATION ........................................... 239
24.1 PROJECT EXECUTION PLAN .......................................................................................239
24.2 CONSTRUCTION SCHEDULE .......................................................................................240
25.0 INTERPRETATION AND CONCLUSIONS ...................................................... 241
25.1 INTERPRETATION .......................................................................................................241
25.2 CONCLUSIONS ..........................................................................................................243
26.0 RECOMMENDATIONS .................................................................................... 244
26.1 MINERAL RESOURCES AND RESERVES .......................................................................244
26.2 MINERAL PROCESSING AND METALLURGICAL TESTING ................................................244
26.3 MINING METHODS .....................................................................................................244
26.4 ENVIRONMENTAL .......................................................................................................245
26.5 FURTHER STUDIES ....................................................................................................245

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27.0 REFERENCES ................................................................................................. 246


28.0 CERTIFICATES ............................................................................................... 247
APPENDIX A - FIGURES ........................................................................................... 264
APPENDIX B - 3D DOMAINS ..................................................................................... 269
APPENDIX C - AU AND AG LOG-NORMAL HISTOGRAMS .................................... 271
APPENDIX D - VARIOGRAMS .................................................................................. 275
APPENDIX E - CROSS-SECTIONS & PLANS OF AGEQ GRADE BLOCKS ........... 280
APPENDIX F - CLASSIFICATION BLOCK MODEL CROSS-SECTION AND PLANS
......................................................................................................................... 290
APPENDIX G - GENERAL ARRANGEMENTS .......................................................... 300
APPENDIX H - OPERATING COST ESTIMATE BACK-UP ...................................... 308

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Tables
TABLE 1.1 SUMMARY OF THE TERRONERA MINERAL RESOURCE AT A CUT-OFF GRADE OF 150 G/T
AGEQ..................................................................................................................17
TABLE 1.2 SUMMARY OF THE MINERAL RESERVE AT A CUT-OFF GRADE OF 150 G/T AGEQ* ..........17
TABLE 2.2 LIST OF ABBREVIATIONS ............................................................................................26
TABLE 4.1 SUMMARY OF THE MINERAL CONCESSIONS OWNED BY ENDEAVOUR SILVER.................32
TABLE 4.2 SUMMARY OF ENDEAVOUR SILVER’S SURFACE ACCESS RIGHTS ..................................34
TABLE 6.1 SUMMARY OF HISTORIC EXPLORATION ON THE SAN SEBASTIAN PROPERTY ..................40
TABLE 9.1 TERRONERA SURFACE EXPLORATION SAMPLING PROGRAM – PEAK VALUES 2016 .......61
TABLE 10.1 TERRONERA SURFACE EXPLORATION DRILLING ACTIVITIES IN 2014 ...........................65
TABLE 10.2 2014 DRILL HOLE SUMMARY FOR THE TERRONERA SURFACE DIAMOND DRILLING
PROGRAM ...........................................................................................................65
TABLE 10.3 SURFACE DRILL HOLE SIGNIFICANT ASSAY SUMMARY FOR MINERAL INTERCEPTS IN THE
TERRONERA VEIN AREA .......................................................................................69
TABLE 10.4 TERRONERA SURFACE DRILLING ACTIVITIES IN 2015 ................................................74
TABLE 10.5 2015 DRILL HOLE SUMMARY FOR THE TERRONERA SURFACE DIAMOND DRILLING
PROGRAM ...........................................................................................................74
TABLE 10.6 SURFACE DRILL HOLE SIGNIFICANT ASSAY SUMMARY FOR MINERAL INTERCEPTS IN THE
TERRONERA VEIN AREA - 2015.............................................................................75
TABLE 10.7 TERRONERA SURFACE DRILLING ACTIVITIES IN 2016 .................................................78
TABLE 10.8 2016 DRILL HOLE SUMMARY FOR THE TERRONERA SURFACE DIAMOND DRILLING
PROGRAM ...........................................................................................................79
TABLE 10.9 SURFACE DRILL HOLE SIGNIFICANT ASSAY SUMMARY FOR MINERAL INTERCEPTS IN THE
TERRONERA VEIN AREA – 2016 ............................................................................79
TABLE 10.10 SURFACE DRILL HOLE SIGNIFICANT ASSAY SUMMARY FOR MINERAL INTERCEPTS IN
THE LA LUZ VEIN AREA - 2016 ..............................................................................80
TABLE 12.1 TERRONERA PROJECT QC SAMPLES ........................................................................89
TABLE 12.2 SUMMARY OF CRM SAMPLES USED IN TERRONERA SURFACE DIAMOND DRILLING
PROGRAM ...........................................................................................................90
TABLE 13.1 BASE CASE FLOTATION CYANIDATION OF CLEANER SCAVENGER TAIL ......................103
TABLE 13.2 HEAD ANALYSES OF COMPOSITE SAMPLE TR2015 - 1 ............................................105
TABLE 13.3 BASE CASE FLOW SHEET .....................................................................................106
TABLE 13.4 TEST NO. 1 CYANIDATION OF CLEANER SCAVENGER TAIL .......................................107
TABLE 13.5 TEST NO. 2 CYANIDATION OF CLEANER SCAVENGER TAIL .......................................107
TABLE 13.6 SAMPLES CHARACTERIZATION AND HEAD ASSAY, FIRE ASSAY, AND W HOLE ROCK
ANALYSIS (%) ....................................................................................................108
TABLE 13.7 BOND’S BALL MILL W ORK INDEX TEST RESULTS .....................................................109
TABLE 13.8 COMMINUTION TESTING RESULTS ..........................................................................110
TABLE 13.9 ROUGHER FLOTATION GRIND SIZE VS RECOVERY LOW – MEDIUM – HIGH GRADE
COMPOSITES .....................................................................................................111
TABLE 14.1 DRILL HOLE DATABASE SUMMARY .........................................................................115
TABLE 14.2 MODEL ROCK CODE DESCRIPTION AND VOLUME.....................................................117
TABLE 14.3 BASIC STATISTICS OF ALL CONSTRAINED ASSAYS AND SAMPLE LENGTHS ................118
TABLE 14.4 COMPOSITE SUMMARY STATISTICS ........................................................................119
TABLE 14.5 AG GRADE CAPPING VALUES .................................................................................120
TABLE 14.6 AU GRADE CAPPING VALUES .................................................................................120
TABLE 14.7 BLOCK MODEL DEFINITION ....................................................................................121

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TABLE 14.8 AU & AG BLOCK MODEL INTERPOLATION PARAMETERS ...........................................122


TABLE 14.9 MINERAL RESOURCE ESTIMATE STATEMENT AT CUT-OFF 150G/T AGEQ (1) (2) (3) (4) (5) ..124
TABLE 14.10 SENSITIVITY TO MINERAL RESOURCE ESTIMATE ....................................................125
TABLE 14.11 AVERAGE GRADE COMPARISON OF COMPOSITES WITH BLOCK MODEL ...................126
TABLE 14.12 VOLUME COMPARISON OF BLOCK MODEL WITH GEOMETRIC SOLIDS ......................127
TABLE 15.1 SUMMARY OF MINERAL RESOURCE CONSIDERED @ 150 AGEQ G/T CUT-OFF ..........129
TABLE 15.2 CUT-OFF PARAMETERS .........................................................................................130
TABLE 15.3 MINE DILUTION AND EXTRACTION ESTIMATES .........................................................132
TABLE 15.4 SUMMARY OF PROBABLE MINERAL RESERVE .........................................................132
TABLE 15.5 LIFE OF MINE MINERAL RESERVE SUMMARY ...........................................................134
TABLE 16.1 SUMMARY OF LOM DEVELOPMENT (M) ...................................................................146
TABLE 16.2 PRELIMINARY GROUND SUPPORT RECOMMENDATIONS FOR CUT AND FILL STOPES ..153
TABLE 16.3 SUMMARY OF PRELIMINARY CROWN PILLAR ASSESSMENT ......................................154
TABLE 16.4 SUMMARY OF GROUNDWATER INFLOW ESTIMATES..................................................158
TABLE 16.5 MINE AND STOPE DEVELOPMENT SCHEDULE (M) .....................................................164
TABLE 16.6 YEARLY MINE PRODUCTION SCHEDULE SUMMARY ..................................................168
TABLE 17.1 REAGENTS AND DOSAGE .......................................................................................181
TABLE 19.1 ANNUAL HIGH, LOW , AND AVERAGE LONDON PM FIX FOR GOLD AND SILVER FROM 2000
TO 2016 ............................................................................................................187
TABLE 21.1 MINE DEVELOPMENT COSTS IN YEAR -1 .................................................................213
TABLE 21.2 MINE EQUIPMENT COSTS IN YEAR -1 ......................................................................215
TABLE 21.3 1,000TPD PROCESS & FILTER PLANTS COST BREAKDOWN (US$) ............................217
TABLE 21.4 DRY TAILINGS STORAGE FACILITY COST ESTIMATE .................................................218
TABLE 21.5 ROADS AND PIPELINES COST ESTIMATES ...............................................................218
TABLE 21.6 SUMMARY OF 1,000TPD CAPITAL COSTS ................................................................219
TABLE 21.7 SUSTAINING MINE DEVELOPMENT COSTS YEAR 3+ .................................................225
TABLE 21.8 SUMMARY OF MINE OPERATING COSTS (US$/T) .....................................................226
TABLE 21.9 SUMMARY OF PROCESS & FILTER PLANTS OPERATING COSTS (US$) ......................227
TABLE 21.10 DRY TAILINGS STORAGE FACILITY O & M COSTS ..................................................227
TABLE 21.11 PUMPS AND HAUL ROADS O&M COSTS ................................................................228
TABLE 22.1 BASE CASE FINANCIAL & TECHNICAL ASSUMPTIONS ...............................................230
TABLE 22.2 SUMMARY OF AFTER-TAX ECONOMIC ANALYSIS ......................................................231
TABLE 22.3 DISCOUNTED AFTER-TAX CASH FLOW MODEL ........................................................234
TABLE 22.4 BASE CASE AFTER-TAX NPV (US$ MILLIONS) AND IRR SENSITIVITIES .....................236

Figures
FIGURE 4.1 TERRONERA PROJECT LOCATION MAP .....................................................................30
FIGURE 4.2 TERRONERA PROJECT CLAIM MAP ...........................................................................31
FIGURE 5.1 VIEW OF THE TOPOGRAPHY SURROUNDING THE TOWN OF SAN SEBASTIÁN ................37
FIGURE 5.2 VIEW OF THE TOWN OF SAN SEBASTIÁN DEL OESTE, JALISCO ....................................38
FIGURE 7.1 GEOLOGY OF THE SAN SEBASTIAN DEL OESTE AREA.................................................44
FIGURE 7.2 TERRONERA PROPERTY GEOLOGY SHOWING LOCATION OF THE MINERALIZED VEINS .45
FIGURE 8.1 ALTERATION AND MINERAL DISTRIBUTIONS WITHIN A LOW -SULPHIDATION EPITHERMAL
VEIN SYSTEM ......................................................................................................49
FIGURE 9.1 EXPLORATION TARGETS IN THE TERRONERA PROJECT AREA .....................................52

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FIGURE 9.2 SURFACE MAP SHOWING LA CASCADA MINE AND TRENCHES CONDUCTED IN THE AREA
...........................................................................................................................54
FIGURE 9.3 ENTRANCE TO THE LA CASCADA MINE ......................................................................54
FIGURE 9.4 SECONDARY VEINLETS AT THE TERRONERA VEIN, INSIDE THE LA CASCADA MINE ........55
FIGURE 9.5 AND FIGURE 9.6 PHOTOGRAPHS OF THE LA CASCADA MINE ........................................55
FIGURE 9.7 GEOLOGICAL MAP OF THE RESOYADERO MINE ..........................................................57
FIGURE 9.8 GEOLOGICAL MAP OF THE OTATES MINE ..................................................................58
FIGURE 9.9 GEOLOGICAL MAP OF THE COPALES MINE ................................................................58
FIGURE 9.10 AND FIGURE 9.11 PHOTOGRAPHS OF THE QUITERIA W EST VEIN.................................59
FIGURE 9.12 PHOTOGRAPH SHOWING LOS CABLES PIT ...............................................................59
FIGURE 9.13 PHOTOGRAPH SHOWING TRENCH IN THE QUITERIA W EST VEIN .................................59
FIGURE 9.14 MAP OF NEW VEINS DISCOVERED IN 2016 ..............................................................60
FIGURE 10.1 SURFACE MAP SHOWING COMPLETED DRILL HOLES (BLACK) IN THE TERRONERA AREA
...........................................................................................................................71
FIGURE 10.2 LONGITUDINAL SECTION (LOOKING NORTHEAST) SHOWING THE INTERSECTION POINTS
ON THE TERRONERA VEIN.....................................................................................72
FIGURES 10.3 & 10.4 CROSS-SECTIONS THROUGH HOLES TR07-1, TR07-2 & TR07-3 AND TR14-1,
TR14-2, TR14-3 & TR14-4 DRILLED TO TEST THE TERRONERA VEIN .....................72
FIGURES 10.5 & 10.6 CROSS-SECTIONS THROUGH HOLES TR15-1 & TR15-2 AND TR17-1, TR17-2 &
TR17-3 DRILLED TO TEST THE TERRONERA VEIN ...................................................73
FIGURES 10.7 & 10.8 CROSS-SECTIONS THROUGH HOLES TR20-1, TR20-2, TR20-3 & TR20-4 AND
TR22-1, TR22-2 & TR22-3 DRILLED TO TEST THE TERRONERA VEIN .....................73
FIGURE 10.9 SURFACE MAP SHOWING 2015 AND 2016 DRILL HOLES ..........................................82
FIGURE 10.10 DRILL INTERSECTIONS – LA LUZ VEIN ....................................................................83
FIGURE 11.1 FLOWSHEET FOR TERRONERA CORE SAMPLING, PREPARATION AND ANALYSIS .........86
FIGURE 12.1 TERRONERA DUE DILIGENCE SAMPLE RESULTS FOR GOLD: JUNE 2016 ...................88
FIGURE 12.2 TERRONERA DUE DILIGENCE SAMPLE RESULTS FOR SILVER: JUNE 2016 .................88
FIGURE 12.3 PERFORMANCE OF CDN-FSM-7 FOR GOLD ............................................................92
FIGURE 12.4 PERFORMANCE OF CDN-FSM-7 FOR SILVER ..........................................................92
FIGURE 12.5 PERFORMANCE OF CDN-ME-19 FOR GOLD ............................................................92
FIGURE 12.6 PERFORMANCE OF CDN-ME-19 FOR SILVER ..........................................................93
FIGURE 12.7 PERFORMANCE OF CDN-ME-1302 FOR GOLD ........................................................93
FIGURE 12.8 PERFORMANCE OF CDN-ME-1302 FOR SILVER ......................................................93
FIGURE 12.9 PERFORMANCE OF CDN-GS-2Q FOR GOLD ...........................................................94
FIGURE 12.10 PERFORMANCE OF CDN-GS-2Q FOR SILVER .......................................................94
FIGURE 12.11 PERFORMANCE OF CDN-ME-1408 FOR GOLD ......................................................94
FIGURE 12.12 PERFORMANCE OF CDN-ME-1408 FOR SILVER ....................................................95
FIGURE 12.13 PERFORMANCE OF CDN-ME-1307 FOR GOLD ......................................................95
FIGURE 12.14 PERFORMANCE OF CDN-ME-1307 FOR SILVER ....................................................95
FIGURE 12.15 PERFORMANCE OF BLANKS FOR GOLD .................................................................96
FIGURE 12.16 PERFORMANCE OF BLANKS FOR SILVER ...............................................................97
FIGURE 12.17 PERFORMANCE OF CRUSHED FIELD DUPLICATES FOR GOLD ..................................98
FIGURE 12.18 PERFORMANCE OF CRUSHED FIELD DUPLICATES FOR SILVER ................................99
FIGURE 12.19 PERFORMANCE OF INSPECTORATE CHECK ASSAYS FOR GOLD.............................100
FIGURE 12.20 PERFORMANCE OF INSPECTORATE CHECK ASSAYS FOR SILVER...........................101
FIGURE 14.1 AG GRADE SWATH PLOT ALONG STRIKE ...............................................................127

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FIGURE 14.2 AG GRADE AND TONNAGE COMPARISONS DERIVED FROM ID3 AND NN GRADE
INTERPOLATION .................................................................................................128
FIGURE 16.1 TERRONERA MINE 1380 HAULAGE DRIFT, COMPOSITE PLAN .................................136
FIGURE 16.2 TERRONERA 1380 HAULAGE DRIFT, GENERAL INFRASTRUCTURE ...........................137
FIGURE 16.3 TERRONERA PLAN VIEW , PORTAL BOXCUT ...........................................................138
FIGURE 16.4 TERRONERA MINE DESIGN, ISOMETRIC DRAWING..................................................139
FIGURE 16.5 TERRONERA MINE, HAULAGE DRIFT AND RAMP CROSS SECTION (5M X 5M) ............140
FIGURE 16.6 TERRONERA CROSS SECTIONAL PROJECTION, MINING BLOCK M2 ..........................141
FIGURE 16.7 TERRONERA CROSS SECTIONAL PROJECTION, MINING BLOCK M3 .........................142
FIGURE 16.8 TERRONERA CROSS SECTIONAL PROJECTION, MINING BLOCK M4 .........................143
FIGURE 16.9 TERRONERA MINE LEVEL DEVELOPMENT, CROSS SECTION (4.5M X 4.5M) ..............144
FIGURE 16.10 TERRONERA MINE, LONGITUDINAL PROJECTION ..................................................145
FIGURE 16.11 TYPICAL MINING METHOD, CUT AND FILL ............................................................147
FIGURE 16.12 TERRONERA MINE, REPRESENTATIVE LEVEL DESIGN ..........................................148
FIGURE 16.13 ‘TERRONERA MINE LONGITUDINAL PROJECTION, PILLARS, ROCK MASS QUALITY, FILL
.........................................................................................................................157
FIGURE 16.14 ‘TERRONERA MINE LONGITUDINAL PROJECTION, CRITICAL PATH DEVELOPMENT
SEQUENCE’ .......................................................................................................162
FIGURE 16.15 ‘TERRONERA MINE LONGITUDINAL PROJECTION, DEVELOPMENT SEQUENCE YEARS 1
TO 6’. ................................................................................................................163
FIGURE 16.16 ‘TERRONERA MINE LONGITUDINAL PROJECTION MINING SEQUENCE .....................169
FIGURE 16.17 ‘TERRONERA MINE LONGITUDIAL PROJECTION, VENTILATION FLOW SCHEMATIC’ ..172
FIGURE 16.18 TERRONERA MINE VENTILATION PHASE 2 AIR FLOW ............................................173
FIGURE 16.19 TERRONERA MINE VENTILATION PHASE 3 AIR FLOW ............................................173
FIGURE 16.20 TERRONERA MINE LONGITUDINAL PROJECTION, ELECTRICAL LOAD ......................174
FIGURE 17.1 OVERALL PROCESS FLOW SHEET.........................................................................177
FIGURE 20.1 AMEC FOSTER W HEELER 2017 MAP OF MINE SURFACE FACILITIES LAYOUT ...........189
FIGURE 20.2 ENVIRONMENTAL PERMITTING STEPS FOR MINING PROJECTS IN MEXICO ...............191
FIGURE 20.3 ENVIRONMENTAL PERMITS REQUIRED FOR THE TERRONERA PROJECT ...................192
FIGURE 20.4 RETURN PERIOD STORM EVENT PRECIPITATION ...................................................199
FIGURE 20.7 AMEC FOSTER W HEELER 2017 MAP OF THE MONDEÑO TAILINGS STORAGE AREA
MONITORING W ELL LOCATIONS ..........................................................................205
FIGURE 22.1 AFTER-TAX ANNUAL AND CUMULATIVE CASH FLOW...............................................233
FIGURE 22.2 AFTER-TAX NPV SENSITIVITY GRAPH...................................................................236
FIGURE 23.1 MINERA CIMARRON’S SANTA QUITERIA MINE IN THE SAN SEBASTIÁN DEL OESTE AREA
.........................................................................................................................237
FIGURE 24.1 TERRONERA DEVELOPMENT SCHEDULE................................................................240

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1.0 SUMMARY

1.1 Introduction

Endeavour Silver Corp. (Endeavour Silver) commissioned Smith Foster &


Associates Inc. (SFA) to prepare a Preliminary Feasibility Study (PFS) for the
Terronera Project compliant with Canadian Securities Administrators (CSA)
National Instrument 43-101 (NI 43-101). The project was formerly known as the
San Sebastián Project, however, in March, 2015, Endeavour formally changed
its name to the Terronera Project and, on April 30, 2015, Endeavour Silver
issued a Preliminary Economic Assessment (PEA) of the Terronera Project.

Endeavour Silver is a mid-tier silver mining company engaged in the


exploration, development, and production of mineral properties in Mexico.
Endeavour Silver is focused on growing its production, Mineral Reserves, and
Mineral Resources in Mexico. Since start-up in 2004, Endeavour Silver has
posted numerous consecutive years of growth of its silver mining operations.
Endeavour Silver owns and operates the Guanaceví Mine located in the
northwestern Durango State, and the El Cubo and Bolañitos Mines, both
located near the city of Guanajuato in Guanajuato State, Mexico. In May, 2016
Endeavour Silver acquired Oro Silver Resources Ltd. which owned the El
Compas gold-silver mine property and held a five-year renewable lease on the
500tpd La Plata mineral processing plant in Zacatecas, Mexico.

This report follows the format and guidelines of Form 43-101F1, Technical
Report for National Instrument 43-101, Standards of Disclosure for Mineral
Projects (NI 43-101), and its Companion Policy 43-101 CP, as amended by the
CSA and which came into force on June 30, 2011.

This report has an effective date of April 3, 2017. The Mineral Resource and
Mineral Reserve Estimates reported in this report comply with the Canadian
Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards and
definitions, as required under NI 43-101 regulations.

In this report, the term San Sebastián Property refers to the entire area covered
by the mineral concessions, while the term Terronera Project refers to the area
within the mineral concession and separate surface lands on which the current
exploration programs and proposed mining, processing, and tailings storage
will be conducted.

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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. The Qualified Persons (QPs)
responsible for this report do not consider such errors to be material to the
calculations presented herein.

The conclusions and recommendations in this report reflect the QPs best
independent judgment in light of the information available at the time of writing.

Summarized briefly below is key information in the report, including property


description and ownership, geology and mineralization, the status of
exploration and development, Mineral Resource and Mineral Reserve
Estimates, mineral processing and metallurgical testing, environmental studies
and permitting, capital and operating costs, economic analysis, and the QPs
conclusions and recommendations.

1.2 Location and Property Description

San Sebastián del Oeste (San Sebastián) is an historic silver and gold mining
district located in southwestern Jalisco State, approximately 155 km southwest
of Guadalajara and 40 km northeast of Puerto Vallarta, accessible by paved
and gravel roads. One small, high grade, underground silver-gold mine, La
Quiteria (130 tonnes per day - tpd), continues to operate in the district. The San
Sebastián Properties acquired by Endeavour Silver surround the La Quiteria
mine and represent a new, district-scale, silver-gold exploration opportunity for
the company.

1.3 Ownership

In February, 2010, Endeavour Silver acquired an option to purchase the San


Sebastián silver-gold Properties in Jalisco State from Industrias Minera México
S.A. de C.V. (IMMSA), also known as Grupo Mexico, one of the largest mining
companies in Mexico.

Endeavour Silver holds the Terronera Project through its 100% owned Mexican
subsidiary, Endeavour Gold Corporation S.A. de C.V. (Endeavour Gold).
Endeavour Gold holds the Project through its 100% owned subsidiary Minera
Plata Adelante S.A. de C.V. (Minera Plata).

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At present, the Terronera Project is comprised of 13 mineral concessions


totaling 6,159 hectares (ha) and certain surface lands upon which mining
surface operations, mineral processing, and tailings and waste rock storage are
proposed to occur. The core group of 10 concessions totaling 3,388 ha were
owned by IMMSA. These concessions cover the main area of the known
mining district. In 2013, Endeavour Silver completed the acquisition of a 100%
interest in the San Sebastián Properties from IMMSA. IMMSA retains a 2%
NSR royalty on mineral production from the properties.

In 2012, Endeavour Silver also filed and received title for 2 concessions (San
Sebastián FR. 1 and FR. 2) totaling 2,078 ha. Additionally, in 2013, Endeavour
Silver filed a total of 7 concessions (San Sebastian 12, San Sebastian 13, San
Sebastian 14, San Sebastian 15, San Sebastian 16, San Sebastian 17 and San
Sebastian 18) totaling 4,163 ha. Titling of these concessions is still pending,
with the exception of San Sebastian 17 which is already titled (693 ha).

The annual 2016 concession tax for the San Sebastián Properties was
4,485,679 Mexican pesos (pesos), which is equal to US $224,283 at an
exchange rate of 20 pesos to US $1.00 dollar.

1.4 History

Although the San Sebastián silver and gold mines were first discovered in
1542, and there were several periods of small-scale mining over the last 450
years, the only significant modern exploration in the district was carried out by
IMMSA in the late 1980’s and early 1990’s.

According to Southworth in his 1905 volume on Mexican mining, “These veins


have been mined for more than three centuries, and the production has been
enormous. Many exceptionally rich bonanzas have been extracted, with the
aggregate production totals many millions.” However, while this may have been
the case, the data available appear to suggest that this mining district was a
minor silver producer when compared to the more well-known districts which
have been among the world class producers.

Ramirez, in his 1884 volume entitled “Noticia Histórica de la Riqueza Minera


De Mexico Y de Su Actual Estado de Explotación or Historical News of the
Mineral Wealth of Mexico” does not appear to mention the Sebastián del Oeste
region as a major past or current producing district. Even the Consejo de
Recursos Minerales 1992 Monograph for the State of Jalisco has no production

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records for the San Sebastián mining district and only briefly mentions the
district and some of the more well-known veins.

As is the case with many mines in Mexico which were owned by individuals or
corporations, the historical production records have not survived the
revolutions, passing of the individual owners, closing of the mines, corporate
failure, or government seizure of assets. Therefore, the exact silver production
is unknown.

1.5 Geology and Mineralization

The San Sebastián Properties (5,466 ha) cover a classic, low sulphidation,
epithermal vein system in four mineralized vein sub-districts named Los Reyes,
Santiago de los Pinos, San Sebastián and Real de Oxtotipan. Each sub-district
consists of a cluster of quartz (calcite, barite) veins mineralized with sulphide
minerals (pyrite, argentite, galena and sphalerite). Each vein cluster spans
about 3 km by 3 km in area. In total, more than 50 small mines were developed
historically on at least 20 separate veins.

The San Sebastián veins tend to be large and can carry high grade silver-gold
mineralized deposits. For example, the La Quiteria vein ranges up to 15 m
thick, and the Santa Quiteria mine averages about 280 g/t silver and 0.5 g/t
gold over a 3 m to 4 m width. This high grade mineralized zone appears to
extend into the San Sebastián Properties both along strike and immediately
down dip.

1.6 Exploration Program

1.6.1 2010 Exploration Program

In 2010, Endeavour Silver commenced exploration activities on the Terronera


Project. Initial work mainly included data compilation, field mapping and
sampling. A total of US $325,600 (including property holding costs) was spent
on exploration activities on the Terronera Project.

1.6.2 2011 Exploration Program

In 2011, exploration activities continued on the Terronera Project and included


geological mapping, rock chip sampling, topographic surveying and diamond
drilling.

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A total of US $2.25 million (including property holding costs) was spent on


exploration activities on the Terronera Project in 2011.

1.6.3 2012 Exploration Program

In 2012, exploration activities continued on the Terronera Project, primarily


involving surface diamond drilling.
A total of US $3.46 million (including property holding costs) was spent on
exploration activities on the Terronera Project in 2012.

1.6.4 2013 Exploration Program

In 2013, exploration activities continued on the Terronera Project. Follow-up


surface diamond drilling continued in the Terronera Vein area. Also, geological
mapping, trenching and sampling was conducted in the Terronera South and
Quiteria West areas.
A total of US $3.94 million (including property holding costs) was spent on
exploration activities on the Terronera Project in 2013.

1.6.5 2014 Exploration Program

The 2014 exploration program included 6,250 m of core in approximately 20


surface diamond drill holes to delineate resources on the Terronera Vein.

The field activities included detailed mapping and trenching, mainly focused to
the south and northern part of Terronera, and also the west part of Quiteria
West Vein.
Endeavour Silver spent US $1.55 million mainly on diamond drilling.

1.6.6 2015 Exploration Program

In 2015, Endeavour Silver continued its drilling program on the Terronera


property. Endeavour Silver’s objective for the drilling campaign was to continue
defining the mineralized body and to expand upon Mineral Resources identified
in the 2012-2014 drill programs. Endeavour Silver completed a total of 6,133 m
in 27 surface diamond drill holes at the Terronera Project in 2015 and was
successful in meeting its objectives for the 2015 drilling program.
Endeavour Silver spent US $1.76 million mainly on diamond drilling.

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1.6.7 2016 Exploration Program

Endeavour Silver continued its drilling program on the Terronera property in


2016. The aim of the 2016 drilling program was to continue infill drilling within
the Terronera Vein system and conduct exploration drilling on the La Luz Vein,
located about 2,200 m northeast of the Terronera Vein. Endeavour Silver
completed a total of 5,670 m in 19 surface diamond drill holes at the Terronera
Project in 2016.

Endeavour Silver spent US $3.3 million mainly on diamond drilling.

1.6.8 2017 Exploration Program

Exploration and definition drilling is ongoing at the Terronera property and at


the time of this report results for four drill holes on the Terronera Vein and
seven drill holes on the La Luz vein have been received.

1.7 2013 Mineral Resource Estimate

The Mineral Resource Estimate discussed in the Technical Report Audit of the
Mineral Resource Estimate for the San Sebastian Project dated March 27,
2014 was estimated using the Canadian Institute of Mining, Metallurgy and
Petroleum (CIM) Definition Standards for Mineral Resources and Mineral
Reserves prepared by the CIM Standing Committee on Reserve Definitions
and adopted by CIM Council on November 27, 2010. The effective date of this
Mineral Resources Estimate is December 31, 2013.

1.8 2017 Mineral Resource and Mineral Reserve Estimates

The Mineral Resource and Mineral Reserve Estimates presented in this PFS
were estimated using the CIM Definition Standards for Mineral Resources and
Mineral Reserves adopted by CIM Council on May 10, 2014. The effective date
of the Mineral Resource and Mineral Reserve Estimates is April 3, 2017.

1.8.1 Cut-off Grade

The cut-off grade selected by Endeavour Silver for the Mineral Resource
Estimate and Mineral Reserve Estimate is 150 g/t silver equivalent (AgEq).

See Section 14.12 for AgEq cut-off details based on prices of US $18/oz silver
and US $1,250/oz gold,.

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A summary of the Mineral Resource at a cut-off grade of 150 g/t AgEq is given
in Table 1.1.

Table 1.1 Summary of the Terronera Mineral Resource at a Cut-off Grade


of 150 g/t AgEq

Tonnes Au Au Ag Ag AgEq AgEq


Class
(‘000’s) g/t k oz g/t k oz g/t k oz
Indicated 3,959 2.18 277 232.4 29,530 384.8 48,920
Inferred 720 1.48 34 308.9 7,153 412.5 9,533

1. Mineral Resources which are not Mineral Reserves do not have demonstrated economic
viability. The estimate of Mineral Resources may be materially affected by environmental,
permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.
2. The Inferred Mineral Resource in this estimate has a lower level of confidence than that
applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is
reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to
an Indicated Mineral Resource with continued exploration.
3. The Mineral Resources in this report were estimated using the CIM Definition Standards for
Mineral Resources and Mineral Reserves.
3. AgEq g/t = Ag g/t + (Au g/t x 70)
4. Historical mined areas were depleted from the Terronera Vein wireframe.

A summary of the Mineral Reserve at a cut-off grade of 150 g/t AgEq is given in
1.2.

Table 1.2 Summary of the Mineral Reserve at a Cut-off Grade of 150 g/t
AgEq*

Tonnes Ag Au AgEq Ag oz Au oz AgEq oz


Classification
(‘000’s) g/t g/t g/t (‘000’s) (‘000’s) (‘000’s)
Probable 4,061 207 1.95 344 27,027 255 44,877
*See Section 15.1 for Mineral Reserve cut-off details

1.9 Mineral Processing and Metallurgical Testing

Resource Development Inc. (RDi) conducted locked and open cycle flotation
testing for the Terronera Project at its metallurgical testing facility in Wheat

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Ridge, Colorado. The primary objectives of the test program were to develop
the levels of recovery and final concentrate characteristics.

A process comprised of a flotation circuit and cyanidation of a high grade


cleaner scavenger (CST) tail flotation product was selected. The locked cycle
flotation data developed indicate that production of a high grade gold and silver
bearing second cleaner concentrate followed by cyanide leaching of the CST
flotation product will enhance the precious metals overall recovery.

The flow sheet developed for Terronera includes two stage crushing coupled
with closed circuit grinding to achieve a relatively coarse flotation feed grind
size of 80 percent passing 200 mesh (75 microns).

The PFS is based on a 1,000tpd throughput in Years 1 and 2 expanding to


2,000tpd in Year 3. The project will produce a high grade concentrate and
transport the CST flotation product to an off-site facility to be leached by others.
The expected overall levels of recovery are:

 Gold 74.71 percent


 Silver 87.02 percent

Further studies are recommended to upgrade the process plant feed, lower the
grinding costs, and increase process recoveries.

1.10 Mining Methods

The principal mining method selected is mechanized cut and fill using trackless
underground equipment, including scooptrams, haulage trucks and electric-
hydraulic drill jumbos. The average mining width is estimated to be 4.4m and
stope lifts will be mined from the bottom up.

A geomechanical study was carried out which included a geomechanical and


hydrogeological site investigation program, domain definition, underground
mine design input, and a groundwater inflow estimate. The recommendations
from this study were implemented in the mine plan.

1.11 Recovery Methods

The mineral processing facility design throughput is 1,000 dry mtpd equivalent
to 342,000 dry mtpy for Years 1 and 2 and 2,000 dry mtpd equivalent to

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684,000 dry mtpy from Year 3. The life-of-mine (LOM) for the project is
estimated at 7 years.

The project comprises the following processing circuits:


 Crushing plant (two stage - closed circuit)
 Fine ore storage
 Primary single grinding mill
 Flotation Stages
o Rougher & Scavenger
o Two stage cleaning & Scavenger
 Concentrate & CST sedimentation and filtration
 Concentrate & CST storage and shipping
 Tailings sedimentation
 Reclaimed and fresh water systems
 Filter plant
 Dry stack filtered tailings storage facility (TSF)

Power will be provided by on-site generators in Year 1 and by CFE via a new
115kV power line beginning Year 2.

Fresh water will be pumped from the U/G mining operations to a fresh water
tank and fed by gravity to the process plant, fire water system, potable water
system, and water trucks.

1.12 Environmental Studies, Permitting, and Social Impact

The Terronera Project submitted in December, 2013 a Manifest of


Environmental Impact (MIA) to the Mexico environmental permitting authority
known as SEMARNAT (Secretaria de Medio Ambiente y Recursos Naturales).
A SEMARNAT permit for the Terronera Project was issued in October, 2014 for
a 500tpd project with tailings reporting to a traditional slurry deposit.
In February, 2017 a modified MIA application was issued by SEMARNAT to
expand the proposed process rate to up to 1,500 tpd and to establish that the
tailings storage facility would be developed as a filtered tailings storage.

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A further modified MIA application to expand the Terronera process rate to


2,000tpd will be developed and submitted to SEMARNAT at a future date in
anticipation of the proposed 2,000 tpd process phase for the project.
The Terronera Mine project will be required to be designed to comply with the
environmental regulations and standards in place in México. The mining
infrastructure and supporting facilities will need to be designed so as to
minimize the impact to the natural environment.

Mexican law requires that an environmental monitoring program of surface and


underground water, creek sediments, soil, air, vegetation and wildlife conditions
be implemented. The current SEMARNAT regulatory objective is to limit
transmission of contaminants such that pre-mining environmental conditions
are maintained downstream of the permitted mine perimeter. This program will
be required before and during mining operations and after mine closure.

The Terronera Mine tailings storage facility (“TSF”) will be designed to store
filtered tailings, or “drystack” tailings, to minimize downstream contamination
risk and to maximize geotechnical stability in the seismically active coastal area
of western Mexico. The conceptual Terronera TSF design will accommodate
approximately 2.0 million m3 of compacted tailings which provides a storage
capacity, at process rates of 1,000tpd (Years 1 and 2) and 2,000tpd (Year 3
onwards), for the 7 years’ mine life plus 3 more years at 2,000tpd should the
mine life be extended.

1.13 Capital and Operating Costs

The Terronera Project has an estimated initial capital cost of US$69.2 million.
The estimated capital cost to expand to 2,000tpd in Year 3 is US$35.4million.

Average operating costs over the LOM of US$42.8 per tonne for mining,
US$17.8 per tonne for processing, and US$6.9 per tonne for General and
Administration were developed and estimated from first principles using unit
labour and materials costs from Endeavour Silver’s current mine and process
plant operations in Mexico.

1.14 Economic Analysis

This Technical Report contains forward-looking projected mine production


rates, development schedules, and estimates of future cash flows that involve
known and unknown risks, uncertainties, and other factors that may affect the

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actual results. These forward-looking projections, however, are based on


assumptions the QPs believe are reasonable.

An economic analysis utilizing a pre-tax and after-tax cash flow financial model
was prepared for the base case mine plan. The metal prices assumed in the
base case are US$18/oz silver and US$1,260/oz gold.

The Mexico tax policies for mining changed effective January 1, 2014. An
overriding royalty on gross revenues, after smelter deductions, of 0.5% applies
to precious metal mines (gold, silver and platinum). A new Special Mining Duty
of 7.5% is levied on earnings before income tax and depreciation allowance.
Corporate income taxes of 30% are applied to earnings after the usual
allowable deductions for depreciation, loss carry-forwards etc. The Special
Mining Duty and the over-riding royalty are also deductible for the purpose of
calculating corporate income tax. The financial model incorporates these taxes
in computing the after-tax cash flow amounts, NPV, and IRR.

The Terronera Project key financial indicators for the base case are as follows:
 After-tax rate of return 21.2%
 Project payback period 4.3 years
 After-Tax Net Present Value (5% discount) of US$78,105,000
These key indicators describe a project whose base case is financially viable
and which has considerable upside potential should metal prices improve or
operating costs decrease.

1.15 Conclusions and Recommendations

The Terronera Mineral Resource and Mineral Reserve Estimates presented


conform to the current CIM Definition Standards for Mineral Resources and
Mineral Reserves, as required under NI 43-101 “Standards of Disclosure for
Mineral Projects.” The estimation approach and methodology used is
reasonable and appropriate based on the data available.

The project is subject to technical, legal, environmental, and political risks that
are similar to the risks faced by Endeavour Silver on its current operations in
Mexico. The QPs consider these risks to be manageable and should not have
an adverse effect on the continued development of the Terronera Project.

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Based on a review of the Terronera Project and the encouraging results thus
far, it is recommended that Endeavour Silver:

 Continue exploratory drilling nearby mineralized bodies to extend the mine


life
 Investigate the inclusion of an HPGR crusher as the tertiary crusher to
give the lowest energy requirement for size reduction. Estimated cost
US$25,000
 Investigate the flotation of a bulk concentrate at a coarse grind using
Hydrofloat to increase recoveries, provide savings in grinding, and
enhance the stability of the TSF. Estimated cost US$45,000
 Evaluate ore sorting techniques to upgrade the mill feed. Estimated cost
US$5,000
 Optimize the grinding circuit. Estimated cost US$35,000
 Conduct more detailed analyses based on additional or updated data for
the deposit in order to support the next stage of engineering. Additional
data requirements include:
 Creating a 3D lithological model. Estimated cost US$25,000
 Creating a 3D structural model. Estimated cost US$25,000
 The rock mass characteristics in the immediate vicinity of the crown pillar
and to the east of the Arroyo Fault zone should be better defined during
the next phase of design or during the early stages of mining. Estimated
cost US75,000 plus drilling
 Additional geomechanical logging should be completed to better define
difference in structural trends around KP16-02. Estimated cost US$25,000
 Additional hydrogeological data should be collected if the project
economics or operating conditions are sensitive to the groundwater
conditions and groundwater inflow estimate. For example, the completion
of additional packer testing and the installation of additional vibrating wire
piezometers could be used to refine the hydrogeological characterization
and evaluate the potential for spatial variability. Estimated cost
US$150,000

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 The groundwater pore pressure data from the vibrating wire piezometers
should be recorded and reviewed on a regular basis. Estimated cost
US$15,000
 Update the domain definition, stability analyses, recommendations, and
groundwater inflow estimate to account for the results of the additional
data inputs and any changes to underground mine plan. Any significant
changes to the mine plan should be reviewed from a rock mechanics
perspective
 Advance the current preliminary TSF area design, associated hauling
accessways, and tailings delivery infrastructure to construction design
level in conjunction with the feasibility level analysis.
 Refer to Table 16.2 for preliminary ground support recommendations for
cut and fill stopes

1.16 Environmental

Amec Foster Wheeler recommends that, as the Terronera Project moves


through its study and development process, timely applications that support the
Proposed Project Schedule be submitted for all permits and approvals required
in Mexico for mining developments as described in Section 20.

1.17 Further Studies

Given the risk-mitigating features of the Terronera Project and the positive
results of the economic analysis, the QPs consider the project is ready to
proceed to Feasibility Study.

The recommended budget to prepare a Feasibility study is US$1,200,000.

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2.0 INTRODUCTION

2.1 Issuer and Purpose of Report


Endeavour Silver Corp. (Endeavour Silver) is a mid-tier silver mining company
engaged in the exploration, development, and production of mineral properties
in Mexico. Endeavour Silver is focused on growing its production and Mineral
Reserves and Mineral Resources in Mexico. Since start-up in 2004, Endeavour
Silver has posted ten consecutive years of growth of its silver mining
operations. In addition to the San Sebastián property, Endeavour Silver owns
and operates the Guanaceví Mine located in the northwestern Durango State
and the El Cubo and Bolañitos Mines, both located near the city of Guanajuato
in Guanajuato State, Mexico. In May, 2016 Endeavour Silver acquired Oro
Silver Resources Ltd. which owns the El Compas gold-silver mine property and
holds a five-year renewable lease on the 500TPD La Plata mineral processing
plant in Zacatecas, Mexico.
Endeavour Silver commissioned Smith Foster & Associates Inc. (SFA) to
prepare a Technical Report at the level of a Preliminary Feasibility Study (PFS)
for the Terronera Project compliant with Canadian Securities Administrators
(CSA) National Instrument 43-101 (NI 43-101). The purpose of this report is to
provide an engineering design, cost estimates, and economic analysis to
evaluate the potential viability of the project.
The project was known as the San Sebastián Project but, in March, 2015,
Endeavour Silver formally changed the project name to the Terronera Project
and, in April, 2015, issued a Preliminary Economic Assessment (PEA) for the
Terronera Project. The term San Sebastián Property, in this report, refers to the
entire area covered by the mineral concessions, while the term Terronera
Project refers to the area within the mineral concessions on which the current
exploration program and the proposed mining program will be conducted.

2.2 Sources of Information and Data


The following sources of information and data were used in preparing this
report:
 Personal inspections of the Terronera site and surrounding area
 Technical information provided by Endeavour Silver
 Technical and cost information provided by the Commission Federal de
Electricidad (CFE) concerning power supply for the project

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 Information provided by other experts with specific knowledge in their


fields as described in Section 3 Reliance on Other Experts
 Additional information obtained from public domain sources
 Additional reports relevant to the study are listed in Section 27 References
2.3 Qualified Persons
The Qualified Persons responsible for this report and the dates of their visits to
the Terronera Project site and surrounding area are as follows:

QP Name Certification Company Dates of Site Visit Section Responsibility

Sections 1, 2, 3, 4, 5,
Peter J. Smith Foster & Sept 11 & 12, 2014
P.Eng 6, 18, 19, 21, 22, 24,
Smith Associates Inc. and Nov 10, 2016
25, 26, 27

Eugenio Process Sept 11 & 12, 2014


P.E. Section 13, 17
Iasillo Engineering LLC and Nov 10, 2016

Eugene P.Eng. P&E Mining Co-author section 14,


Sept 11, 2014
Puritch F.E.C. Consultants Inc. 15, 16, 21
P&E Mining
Yungang Wu P.Eng. Co-author section 14
Consultants Inc.
Sept 11, 2014, Oct Section 7 to 10 & 23.
P&E Mining
David Burga P.Geo. 7, 2014 and June Co-author Section 4,
Consultants Inc.
14, 2016 11, 12
P&E Mining Co-author section 11,
Jarita Barry P.Geo.
Consultants Inc. 12
James P&E Mining Co-author Sections
P.Eng.
Pearson Consultants Inc. 15, 16 & 21
Sept 7-10, 2016 and
Benjamin
P.Eng. Knight Piésold Nov 30 to Dec 3, Co-author Section 16
Peacock
2016

Scott Amec Foster Sept 11 & 12, 2014


P.E. Section 20
Fleming Wheeler and Nov 10, 2016

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2.4 Units and Currencies


All currency amounts are stated in US dollars or Mexican pesos (MXP), as
specified, with costs and commodity prices typically expressed in US dollars.
The exchange rate as of the report effective date of April 3, 2017 was
approximately US$1.00 equal to MXP20.0 and US$1.00 equal to Can$1.35.

Quantities are generally stated in Système International d’Unités (SI) 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, any Imperial units of
measure encountered have been converted to 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 (oz), a common practice in the mining industry. Base metal grades may
be expressed as a percentage (%). Table 2.1 provides a list of the
abbreviations used throughout this report.

Table 2.1 List of Abbreviations


Name Abbreviations Name Abbreviations
arithmetic average of
mean Metre(s) m
group of samples
atomic absorption AA Mexican Peso mxp
BSI Inspectorate BSI Life of Mine LOM
Canadian Institute of
Manifestacion de
Mining, Metallurgy and CIM MIA
Impacto Ambiental
Petroleum
Canadian National
NI 43-101 Milligram(s) mg
Instrument 43-101
Carbon-in-leach CIL Millimetre(s) mm
Commission Federal
CFE Million ounces mo
de Electricidad
Centimetre(s) cm Million tonnes Mt
Construction
CM Million years Ma
management
Minera Plata Adelente Minera Plata
Copper Cu
S.A. de C.V. Adelente
Cubic feet per minute cfm Nearest Neighbor NN
Day d Net present value NPV
Degree(s) o Net smelter return NSR

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North American
Degrees Celsius °C NAD
Datum
Not
Digital elevation model DEM n.a.
available/applicable
Dirección General de
DGM Ordinary Kriging OK
Minas
Dollar(s), Canadian $, CDN $ Ounces (troy) oz
Endeavour
Endeavour Silver Corp Ounces per year oz/y
Silver
Endeavour Gold Endeavour
Parts per billion ppb
Corporation S.A de C.V. Gold
Estudio Tecnico Parts per million (=
ETJ ppm
Justificative g/t)
Potassium-Argon
Global Positioning
GPS (referring to age date K-Ar
System
technique)
Pounds per square
Gold Au psi
inch
Gram (1g = 0.001 kg) g Project management PM
Grams per metric tonne g/t Qualified Person QP
Quality
Greater than > Assurance/Quality QA/QC
Control
Robust relative
Hectare(s) ha RSD
standard deviation
Rock Quality
Horsepower hp RQD
Designation
Inches, 2.42 cm in or (") Second s
Secretaria de Medio
Internal rate of return IRR Ambiente y Recursos SEMARNAT
Naturales
Inverse Distance
IDW Silver Ag
Weighted
Kilogram(s) kg Specific gravity SG
Standard Reference
Kilometre(s) km Standard
Material
System for Electronic
Kilovolt-amps Kva Document Analysis SEDAR
and Retrieval
Système International
Lead Pb SI
d’Unités
Less than < Tonne (metric) t
Tonnes (metric) per
Litre(s) l t/d, tpd
day
Universal Transverse
Megawatt MW UTM
Mercator
Metalurgica Guanaceví Metalurgica
Zinc Zn
S.A. de C.V. Guanaceví

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3.0 RELIANCE ON OTHER EXPERTS

This Technical Report relies on reports and statements from legal and technical
experts who are not Qualified Persons (QPs) as defined by NI 43-101. The QPs
responsible for the preparation of this report have reviewed the information and
conclusions provided and have determined that they conform to industry
standards, are professionally sound, and are acceptable for use in this report.

The information, conclusions, opinions, and estimates contained herein are


based on:
 Information available to the authors of this report up to and including
the effective date of the report
 Assumptions, conditions, and qualifications as set forth in this report
 Data, reports, and other information supplied by Endeavour Silver and
other third party sources

The QPs, while taking full responsibility for the contents of the report, recognize
the support of:

 Endeavour Silver’s staff in Mexico including: Henry Cari, Manager,


Projects; Luis Castro, VP Exploration; Cesar Bonilla, Environmental
Manager, and Nelson Peña, Manager, Planning and Engineering
 PM Ingenieria y Construccion, S.A. de C.V. (PMICSA) for its
engineering and cost estimating services
 Ing. José Luis Razura González and Ing. Roberto Trujillo for their
permitting and environmental services

Scott Fleming, P.E., of Amec Foster Wheeler, has fully relied upon, and
disclaims responsibility for, the expert statements and representations
submitted to SEMARNAT by:

 Ing. José Luis Razura González in the process of achieving the


October, 2014 SEMARNAT 500tpd MIA permit for the Project

 The statements and representations of Ing. Roberto Trujillo for the


February, 2017 1,500tpd amended MIA permit ,

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In reporting certain site investigation, site impact representations, and


permitting entitlement aspects of the Environmental Studies, Permitting, Social
Impact, and Mine Closure in Section 20 of this PFS report , Scott Fleming has
not performed independent investigations to verify the reliability of the
representations of Ing. Razura , Ing. Trujillo, their respective consulting entities
or their associates.

The Trujillo study was submitted as MIA justification for the mine and process
plant and as Amec Foster Wheeler is involved in only the tailings storage
facility in the Mondeño area of the project, Amec Foster Wheeler did not
participate in the generation of or the environmental justification to regulatory
authorities of the Trujillo study. Amec Foster Wheeler requested and received
a copy of the Consultoría Forestal y Ambiental MIA report generated by Ing.
Roberto Trujillo for the mine and plant components of the project in April, 2017.

None of the authors of this report has researched or verified property title or
mineral or land access rights for the Terronera Property and the authors of this
report express no opinion as to the legal status of property ownership and rights
as disclosed in Section 4 of this report. However, the authors have received a
review of the mineral concession titles by the legal firm of Cereceres Estudio
Legal, S.C. of Chihuahua, Mexico dated February 23, 2017 which supports
Section 4.

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4.0 PROPERTY DESCRIPTION AND LOCATION

The Terronera Project is located in the northwestern portion of Jalisco State,


near its border with the State of Nayarit, as shown in Figure 4.1. The Project is
near the town of San Sebastián del Oeste, which also gives its name to the
municipality and mining district which surrounds it.
The Project is situated between coordinates 20°39’45" and 21°02’30" north
latitude and 104°35’00" and 104°51’00" west longitude (between UTM
coordinates 514,860 and 524,860 east and 2,303,715 and 2,289,120 north).

Figure 4.1 Terronera Project Location Map

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4.1 Ownership and Property Description

In February, 2010, Endeavour Silver acquired an option to purchase the


Terronera silver-gold Properties in Jalisco State from Industrias Minera México
S.A. de C.V. (IMMSA), also known as Grupo Mexico, one of the largest mining
companies in Mexico.
Endeavour Silver holds the Terronera Project through its 100% owned Mexican
subsidiary Endeavour Gold Corporation S.A. de C.V. (Endeavour Gold).
Endeavour Gold holds the Project through its 100% owned subsidiary Minera
Plata Adelante S.A. de C.V. (Minera Plata).
The Project is comprised of 13 mineral concessions (Table 4.1), totaling 6,159
ha. See Figure 4.2 for a concession map of the Terronera Project.
Figure 4.2 Terronera Project Claim Map

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The core group of 10 concessions was owned by IMMSA, totaling 3,388 ha.
These concessions cover the main area of the known mining district. In 2013,
Endeavour Silver completed the acquisition of a 100% interest in the Terronera
Properties from IMMSA. IMMSA retains a 2% NSR royalty on mineral
production from the properties.

In 2012, Endeavour Silver has also filed and received title for 2 concessions
(San Sebastián FR. 1 and FR. 2) totaling 2,078 ha.

Additionally, in 2013, Endeavour Silver filed a total of 7 concessions (San


Sebastian 12, San Sebastian 13, San Sebastian 14, San Sebastian 15, San
Sebastian 16, San Sebastian 17 and San Sebastian 18) totaling 4,163 ha.
Titling of these concessions is still pending, with the exception of San
Sebastian 17 which is already titled (693 ha).

Table 4.1 Summary of the Mineral Concessions Owned by Endeavour


Silver

Title Term of Mineral


Concession Name Hectares
Number Concession
San Sebastián 4 211073 31/03/00 to 30/03/50 22.0000
San Sebastián 7 213145 30/03/01 to 29/03/51 166.0000
San Sebastián 6 213146 30/03/01 to 29/03/51 9.8129
San Sebastián 8 213147 30/03/01 to 29/03/51 84.8769
San Sebastián 5 213528 18/05/01 to 17/05/51 95.0600
San Sebastián 10 213548 18/05/01 to 17/05/51 16.0000
San Sebastián 9 214286 06/09/01 to 05/09/51 101.8378
San Sebastián 2 214634 26/10/01 to 25/10/51 19.5887
San Sebastián 3 221366 03/02/04 to 02/02/54 63.8380
San Sebastián 1 R-1 235753 24/02/10 to 08/07/55 2,808.8716
San Sebastian 10 Fracc. 1 238532 23/09/11 to 22/09/61 2,075.2328
San Sebastian 10 Fracc. 2 238533 23/09/11 to 22/09/61 2.9294
San Sebastián 17 243380 12/09/14 to 11/09/64 693.0000
Total 6,159.0481

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The annual 2016 concession tax for the Terronera Properties was 4,485,679
Mexican pesos (pesos), which is equal to US $224,284 at an exchange rate of
20 pesos to US $1.00 dollar.

The Endeavour Silver concessions surround mining concessions owned by


Minera Cimarron S.A. de C.V. (Minera Cimarron), a private Mexican company.
These concessions cover the active La Quiteria mine, and the historic Los
Reyes and San Andres mines. These concessions are shown on Figure 4.2.

P&E has not independently reviewed Endeavour Silver’s land tenure. P&E is
reliant on information provided by the Company’s lawyers, including a copy of a
legal opinion on the Property.

4.2 Mexican Regulations for Mineral Concessions

In Mexico, exploitation concessions are valid for 50 years and 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. All new 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 Dirección General de Minas
(DGM) within 60 days of staking. Once this is completed, the DGM will usually
grant the concession.

Prior to December 21, 2005, exploration concessions were granted for a period
of 6 years in Mexico and at the end of the 6 years they could be converted to
exploitation concessions. However, as of December 21, 2005 (by means of an
amendment made on April 28, 2005 to the Mexican mining law) there is now
only one type of mining concession. Therefore, as of the date of the
amendment (April, 2005), there is no distinction between exploration and
exploitation concessions on all new titles granted. All concessions are now
granted for a 50 year period provided that the concessions are kept in good

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standing. For the concessions to remain in good standing a bi-annual fee must
be paid (January and July) to the Mexican government and two reports must be
filed in January and May of each year which covers the production and work
accomplished on the property between January and December of the
preceding year.

4.2.1 Licences, Permits and Environment

In addition to the mineral rights, Endeavour Silver has agreements with various
private ranch owners and three local Ejidos (San Sebastián del Oeste, Santa
Ana and Santiago de los Pinos) that provide access for exploration purposes.
Table 4.2 summarizes the surface access rights as at September 30, 2014.

Table 4.2 Summary of Endeavour Silver’s Surface Access Rights

Owner Validity Term

07/11/2013
Ejido Santiago de los Pinos 5 Years
- 2018
14/10/2010
Ejido Santa Ana 5 Years
- 2015
27/01/2011
Ejido San Sebastian 5 Years
- 2016
02/04/2011
Fernando Cervantes Gómez 5 Years
- 2016
Ejido Santiago de los Pinos (La 07/07/2014
25 Years
Terronera Mine Area) - 2039
Mine Operations (El Portezuelo 07/07/2014
25 Years
and El Mondeño) - 2039

In January, 2011, Endeavour Silver received approval of its Manifestación de


Impacto Ambiental (MIA) for Exploration activities, the Mexican equivalent of an
Environmental Impact Statement (EIS), from the Secretaria Medio Ambiente y
Recursos Naturales (SEMARNAT). This permit grants Endeavour Silver the
right to conduct its surface exploration activities in accordance with all the
Mexican environmental regulations. In the third Quarter of 2013, an extension
of this permit was requested, and by the end of the year it was renewed for 2
more years.

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In October, 2014, Endeavour Silver also received approval of its Manifestación


de Impacto Ambiental, particular modality (MIA-P) for Exploitation activities for
a 500tpd project with tailings reporting to a traditional slurry deposit, from the
Secretaria de Medio Ambiente y Recursos Naturales (SEMARNAT). This
permit grants Endeavour Silver the right to develop workings and activities
related to mineral exploitation in accordance with all the Mexican environmental
regulations. The permit was granted for 20 years.

A MIA modification was issued February 23, 2017 for an amended 1,500tpd
project with drystack, or filtered tailings. An application for a 2,000tpd project is
currently pending submittal to SEMARNAT.

A permit will be solicited for the handling, storage and use of explosives at the
Terronera Project. SEDENA (Secretaria de Seguridad Nacional) is one of three
review/issuing agencies for these permits, which must comply with the Federal
Law for Firearms and Explosives. The other two reviewing agencies are the
State of Durango and the local municipality. There are two distinct permits
involved in these permissions:

1. Explosives

2. Detonators and Storage

There are regulations controlling the separation of explosives from other


facilities and detonator storage. Suppliers for explosives must be authorized by
SEDENA, and the handlers and mining company users of explosives must be
trained in their use.

Endeavour Silver is currently working under existing environmental Mexican


laws. In the past, environmentalists have tried to convert the San Sebastián del
Oeste (Terronera Project) area into a protected natural area. To-date, the local
community has not allowed this to happen, since they are more in favour of
resource development and the potential economic benefit, especially
employment.

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5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES,


INFRASTRUCTURE, AND PHYSIOGRAPHY

5.1 Accessibility and Local Resources


The Terronera Project is approximately 160 km due west of Guadalajara in
Jalisco State and 40 km east of Puerto Vallarta. Access to Terronera is on
paved roads. From Guadalajara, travel by road is via Federal Highway No. 70
that passes through the town of Mascota, about 210 km west of Guadalajara,
and then another 55 km to San Sebastián del Oeste. Highway 70 continues to
Puerto Vallarta on the Pacific coast. Good gravel roads exist on the property
itself and year round access is possible with some difficulties experienced
during the rainy season.
Recent road improvements have cut the transit time by vehicles from Puerto
Vallarta to San Sebastián del Oeste to approximately 1 hour. San Sebastián del
Oeste is also served by an airfield with a paved landing strip in excellent
condition.
National and international access to Puerto Vallarta and Guadalajara is good,
with numerous daily flights from major cities in Mexico, the United States and
Canada, giving many options for travelling to and from the Project.
The municipality of San Sebastián del Oeste has a population of approximately
5,600 with less than 1,000 people living in the town of the same name. The
town of San Sebastián del Oeste is well maintained and tourism is the principal
industry with several hotels and restaurants. It receives regular tourist visits
from nearby Puerto Vallarta.

5.2 Physiography and Climate

The town of San Sebastián del Oeste is at an elevation of 1,480 m above sea
level. The surrounding area is mountainous and heavily forested, mainly with
pine trees. The surrounding valleys are occupied by cattle ranches, corn fields
and coffee plantations. Figure 5.1 and Figure 5.2 are views of the topography
surrounding Terronera.

The weather is predominantly humid in the winter and dry and warm during the
spring. The mean temperature is 18°C, with a maximum mean of 25.6°C and a
minimum mean of 11.7°C. The wettest months are June through September.
The Terronera project will operate continuously throughout the year.

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5.3 Infrastructure

Most of the labour required for the exploration programs can be found in the
Municipality of San Sebastián del Oeste. Supplies are usually purchased in
either Puerto Vallarta, Mascota, or Guadalajara.

Power supply to the Terronera Project is provided by the national grid operated
by the Comisión Federal de Electricidad (CFE).

Figure 5.1 View of the Topography Surrounding the Town of San


Sebastián

Photograph taken from 2012 Micon Technical Report

Telephone communications are integrated into the national land-based


telephone system that provides reliable national and international direct dial
telephone communications. Satellite communications also provide phone and
internet capabilities at the Terronera Project. There is also cell phone service in
the town of San Sebastián del Oeste. Figure 5.2 is a view of the town of San
Sebastián del Oeste.

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Figure 5.2 View of the Town of San Sebastián del Oeste, Jalisco

Photograph taken from 2012 Micon Technical Report

The area covered by the San Sebastian Property is sufficiently large to


accommodate open pit and underground operations, including ancillary
installations. In summary, the Terronera Project area is considered
advantageously situated with respect to potential future mine development due
to its relatively undeveloped state, proximity to good road and air transport, and
electrical grid systems and proximity to government, business and work force
population centres.

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6.0 HISTORY

6.1 San Sebastian Del Oeste Mining District

The following section is summarized from Lewis and Murahwi (2013) and
Munroe (2014). San Sebastián del Oeste is a silver and gold mining town
founded in 1605 during the Spanish colonial period. By 1785, more than 25
mines and a number of foundries had been established in the district and,
during the peak mining period, the area was considered one of the principal
sources of gold, silver and copper for New Spain. The main mines in the district
included Real de Oxtotipan, Los Reyes, Santa Gertrudis, Terronera and La
Quiteria. As of 2013, the La Quiteria mine was still active and mined by Minera
Cimarrón S.A. de C.V., a private mining company.

San Sebastián del Oeste was declared a city in 1812 and reached a peak
population of more than 20,000 people by 1900. At one time, it was the
provincial capital and one of the gold and silver mining centres of Mexico. The
prosperity of the city declined after the revolution of 1910.

The mines were, in part, responsible for the founding of the city of Puerto
Vallarta that supplied the mines with salt. The salt was taken by mules to San
Sebastián del Oeste and other mines in the high sierras for use in the smelting
process. The silver and gold from the mines was sent, again by mule train,
through Guadalajara and Mexico City to Veracruz, where it was sent to Spain.

6.2 Historical Exploration at Terronera

Historic exploration on the Terronera property by previous operators as


described by Lewis and Murahwi (2013) is summarized in Table 6.1.
Endeavour Silver’s programs were initiated in 2010 following an option
agreement with Industrias Minera México S.A. de C.V. (IMMSA) (also known as
Grupo Mexico) and are described in Sections 9 and 10.

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Table 6.1 Summary of Historic Exploration on the San Sebastian


Property

Year Company/Person Exploration


After the Mexican Revolution, intermittent small scale
mining took place in the areas of Santiago de los
1921
Pinos, Los Reyes and Navidad. All of these areas are
currently inactive.
Consejo de
Regional and local semi-detailed mapping and
1979 Recursos
exploration activity.
Minerales (CRM)
Prospecting activities in the areas of Los Reyes and
Compañía Minera
1985 Santiago de los Pinos. This worked eventually ended
Bolaños, S.A.
and many of the concessions were allowed to elapse.
Late Begins exploring in the San Sebastián del Oeste
IMMSA
1980’s district.
Detailed geological mapping and sampling of
outcropping structures including the La Quiteria, San
1992-
IMMSA Augustin and Los Reyes veins, as well as other veins
1995
of secondary importance. IMMSA assayed more than
200 rock samples from many of the old mines.
An initial program of 17 widely-spaced diamond drill
holes was completed, mainly at the Terronera vein.
Drilling succeeded in intersecting widespread silver-
IMMSA gold mineralization generally ranging up to 1 g/t gold
and from 50 to 150 g/t silver over 2 to 6 m widths.
Drilling was suspended and quantification of mineral
resources was not undertaken.
Endeavour Silver acquires option to purchase San
Endeavour
2010 Sebastian properties from Industrias Minera México
Silver/IMMSA
S.A. de C.V. (IMMSA)

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6.3 Previous Mineral Resource Estimates

Lewis and Murahwi (2013) of Micon International conducted an audit of


Endeavour Silver’s Mineral Resource Estimates at the Terronera Project (then
called the San Sebastián Project) including the Animas-Los Negros, El Tajo,
Real and Terronera Veins.

As of December 15, 2012, the Mineral Resource Estimate for the San
Sebastian Project comprised Indicated Mineral Resources totaling 1,835,000 t
at a grade of 193 g/t Ag and 1.17 g/t Au and Inferred Resources of 3,095,000 t
at a grade of 196 g/t Ag and 1.39 g/t Au. The Terronerra Vein is the largest
component of the Mineral Resource Estimate and was determined to contain
Indicated Mineral Resources of 1,528,000 t at 192 g/t Ag and 1.30 g/t Au and
Inferred Mineral Resources of 2,741,000 t at 194 g/t Ag and 1.50 g/t Au.

The San Sebastian Mineral Resource estimate utilized a 2D polygonal method


for the Animas-Los Negros, El Tajo, and Real Veins and 3D block modeling for
the Terronera Vein. Samples were capped at 524 g/t Ag and 2.38 g/t Au for the
Animas-Los Negros, El Tajo, and Real Veins and 1,970 g/t Ag and 7.96 g/t Au
for the Terronera Vein. The Mineral Resource Estimate utilized a bulk density
of 2.5 t/m3 for all veins and a cut-off grade of 100 g/t AgEq based on metal
prices of US$31/oz Ag and US$1,550/oz Au.

Munroe (2014) updated the San Sebastian Project Mineral Resource Estimate
with additional drilling data. As of December 31, 2013, Munroe (2014)
estimated the San Sebastian Project including the Animas-Los Negros, El Tajo,
Real and Terronera Veins to contain Indicated Mineral Resources totaling
2,476,000 t at a grade of 229 g/t Ag and 1.08 g/t Au and Inferred Mineral
Resources of 2,376,000 t at a grade of 175 g/t Ag and 1.66 g/t Au. The
Terronerra Vein was estimated to contain Indicated Mineral Resources of
2,169,000 t at 233 g/t Ag and 1.16 g/t Au and Inferred Mineral Resources of
2,022,000 t at 169 g/t Ag and 1.86 g/t Au. Munroe’s parameters were similar to
those reported for Lewis and Murahwi, except that the sample capping values
were increased in the Terronera Vein to 2,070 g/t Ag and 7.96 g/t Au and the
cut-off grade of 100 g/t AuEq was based on metal prices of US$24.20/oz for Ag
and US$1,452/oz for Au.

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The reader is cautioned that P&E has not verified the Lewis and Murahwi
(2013) and Munroe (2014) Mineral Resource Estimates relating to the
Terronera Project (formerly known as the San Sebastian Project). Subsequent
to the 2013 Mineral Resource Estimate, Endeavour Silver drilled an additional
49 surface holes and the Mineral Resource Estimates reported in the PEA
issued April 30, 2015 incorporated these 49 surface holes.

6.4 Previous Production

There has reportedly been significant historical production from the San
Sebastian del Oeste region spanning the period from 1566 when the Villa de
San Sebastain was founded through to the early 20th century. The amount of
silver production, however, is unknown since historical production records have
not survived the revolutions, passing of the individual owners, closing of the
mines, corporate failure, or government seizure of assets (Lewis and Murahwi,
2013; Munroe, 2014).

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7.0 GEOLOGICAL SETTING AND MINERALIZATION

7.1 Regional Geology

The following section is summarized from Lewis and Mulahwi (2013) and
Munroe (2014). The mining district of San Sebastián del Oeste is situated at
the southern end of the Sierra Madre Occidental metallogenic province, a
north-northwesterly trending volcanic belt of mainly Tertiary age. This volcanic
belt is more than 1,200 km long and 200 to 300 km wide, and hosts the majority
of Mexico’s gold and silver deposits. The volcanic belt is one of the world’s
largest epithermal precious metal terrains.

The oldest rocks in the southern part of the Sierra Madre Occidental are late-
Cretaceous to early-Tertiary calc-alkaline, granodiorite to granite batholiths that
intrude coeval volcano-sedimentary units of late Eocene to Miocene age.

The Terronera Project lies within the structurally and tectonically complex
Jalisco Block at the western end of the younger (early Miocene to late Pliocene)
Trans-Mexican Volcanic Belt. Country rocks within the Jalisco Block include
Cretaceous silicic ash flows and marine sedimentary rocks deposited between
45 and 115 Ma that are intruded by Cretaceous to Tertiary granite, diorite and
granodiorite of the Puerto Vallarta Batholith (Lewis and Murahwi 2013 and
references therein). The volcanic rocks of the San Sebastián cinder cone field,
are dated at 0.48 to 0.26 Ma, and are characterized by distinct, high potassium,
alkalic compositions and were extruded within the Tepic-Zacoalco Graben
which bounds the andesitic stratovolcanoes located to the north and northeast.

The area has been affected by a strong tectonic activity during the Cretaceous
to Recent. This activity has resulted in regional northwest-southeast striking
transcurrent faults associated with movements of the northern portion of the
Jalisco Block.

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Figure 7.1 Geology of the San Sebastian del Oeste Area

Source: Lewis and Murahwi (2013) and references therein.

7.2 Property Geology

The following section is summarized from Lewis and Mulahwi (2013) and
Munroe (2014). The San Sebastián del Oeste area and the Terronera Project
is underlain by an intermediate to felsic volcanic and volcaniclastic sequence
which is correlated with the middle to lower Cretaceous, Lower Volcanic Group
of the Sierra Madre Occidental geological province. This volcano-sedimentary
sequence consists of mainly shale, sandstone and narrow calcareous-clayey
interbeds overlain by tuffs, volcanic breccias and lava flows of mainly andesitic
composition. The volcano-sedimentary units outcrop in north-central part of the
district. Further to the north, granitic to granodioritic intrusives are present.

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The sedimentary basin most likely developed along with a volcanic arc which
was later intruded by granitic granodiorite intrusions. This magmatism gave rise
to andesite flows and pyroclastic eruptions followed by deposition of the rhyolite
flows, volcanic breccias, pyroclastic dacites, and basalt which are host to the
epithermal veins in the district. A later volcanic event, attributable to the
formation of the Trans Mexican Volcanic Belt, gave rise to volcanic rocks of
mafic alkaline composition.

Figure 7.2 Terronera Property Geology Showing Location of the


Mineralized Veins

Source: Endeavour Silver, 2015.

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7.3 Deposit Geology

As documented in Section 14 of this report, the silver-gold with associated base


metal mineralization in the Terronera epithermal veins occurs in structurally
controlled quartz and quartz breccia veins. The principal Terronera vein has
been traced by drilling for 1.5 km on strike and from surface to the maximum
depth of drilling at 546m. The Terronera vein strikes at approximately 145o and
dips 80o east.The true width of the principal Terronera vein ranges from 1.5m to
16m and averages 3.9m. In addition to the main Terronera vein, there are
additional hanging wall and footwall veins. The veins are primarily hosted in
volcanic flows, pyroclastic and epiclastic rocks and associated shales and their
metamorphic counterparts (Lewis and Mulahwi, 2013; Munroe, 2014).

7.4 Structure

The more important mineralized veins in the San Sebastián del Oeste district
are controlled by west-northwest to northwest striking structures related to a
transcurrent fault system. An extensive, second order, east-west structural
trend is related to extension caused by sinistral movement on the primary
structures.

7.5 Mineralization and Alteration

The following section is primarily summarized from Lewis and Mulahwi (2013)
and Munroe (2014). In the San Sebastián del Oeste district, silver and gold
mineralization represents the upper portion of an epithermal vein system. Illite,
sericite and adularia are characteristic alteration assemblages that typically
occur in the veins and in the vein wall rocks. In areas of higher elevation, where
limited mining has occurred, such as the El Hundido and Real de Oxtotipan
mines, the quartz is amorphous and milky white in colour indicative of a low
temperature environment.

Metallic minerals include galena, argentite and sphalerite associated with


gangue constituents of quartz, calcite and pyrite. Munroe (2014) reports that
elevated Ag and Au values from 2011 sampling of underground workings in the
Terronera vein were primarily obtained from crystalline quartz veins, drusy in
places, with limonite and manganese oxides lining boxworks after sulphides
and fine-grained disseminated pyrite and traces of dark grey sulphides,
probably silver sulphides.

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Geologic information and field observations indicate that the San Sebastián
hydrothermal system is preserved over an elevation difference of 1,200m. The
known mines contain polymetallic sulphide mineralization in wide vein
structures. The veins at higher elevations may represent the tops of ore shoots
containing significant silver and gold mineralization at depth.

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8.0 DEPOSIT TYPES

As documented by Lewis and Murahwi (2013) and Munroe (2104), the San
Sebastián del Oeste silver-gold district comprises classic, high grade silver-
gold, epithermal vein deposits, characterized by low-sulphidation mineralization
and adularia-sericite alteration. The veins are typical of most other epithermal
silver-gold vein deposits in Mexico in that they are primarily hosted in volcanic
flows, pyroclastic and epiclastic rocks, or sedimentary sequences of mainly
shale and their metamorphic counterparts.

Low-sulphidation epithermal veins in Mexico typically have a well-defined,


subhorizontal ore horizon about 300m to 500m in vertical extent where the
bonanza grade mineralization shoots have been deposited due to boiling of the
hydrothermal fluids. Neither the top nor the bottom of the mineralized horizons
at the Terronera Project has yet been established precisely.

Low-sulphidation deposits are formed by the circulation of hydrothermal


solutions that are near neutral in pH, resulting in very little acidic alteration with
the host rock units. The characteristic alteration assemblages include illite,
sericite, and adularia that are typically hosted by either the veins themselves or
in the vein wall rocks. The hydrothermal fluid can either travel along discrete
fractures where it may create vein deposits or it can travel through permeable
lithology such as a poorly welded ignimbrite flow, where it may deposit its load
of precious metals in a disseminated deposit. In general terms, this style of
mineralization is found at some distance from the heat source.

Figure 8.1 illustrates the spatial distribution of the alteration and veining found
in a hypothetical low-sulphidation hydrothermal system.

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Figure 8.1 Alteration and Mineral Distributions within a Low-Sulphidation


Epithermal Vein System

Source: From Lewis and Murahwi (2013) and references therein

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9.0 EXPLORATION

9.1 Exploration 2010 – 2013

The exploration programs conducted by Endeavour Silver between 2010 and


2013 are summarized below. Further details on these exploration programs can
be found in Lewis and Murahwi (2012), Lewis and Murahwi (2013) and Munroe
(2014).

9.1.1 2010 Exploration Program

Endeavour Silver commenced exploration activities on the Terronera Project in


2010. Initial work included data compilation, field mapping, and sampling.

During 2010, surface mapping was completed on the Real Alto in the southern
part of the project. Several quartz veins were discovered on the surface in the
Real Alto area, most significantly the Real, Animas-Los Negros, El Tajo, and La
Escurana Veins.

A total of 1,004 rock and soil samples were collected in 2010, mainly from the
historic mines in the San Sebastián del Oeste district. A soil geochemistry
survey was conducted over the Real Alto zone to delineate potentially buried
veins in the area and to map and sample any veins exposed on surface. A total
of 735 soil samples were collected in the Real Alto area.

9.1.2 2011 Exploration Program

Exploration activities in 2011 included geological mapping, rock chip sampling,


topographic surveying, and diamond drilling. Mapping and sampling of
structures in the Santiago de los Pinos area, including El Alcribil, El Orconcito,
El Padre, El Izote, La Plomosa, Tierras, Coloradas, Los Cuates, La Yesquilla,
and La Ermita Areas, were conducted. In early 2011, mapping and sampling
was also carried out on the Terronera Vein near the town of San Sebastián del
Oeste. In late 2011, mapping and sampling was conducted in the La Luz area
and the Los Reyes area.

The Terronera Vein (Figure 9.1) is comprised of mainly white, opaque quartz
with calcite white clays and iron oxides. Banded textures and boxworks after
pyrite are locally present. The vein trends NW 60o up to NW 50o, dipping

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steeply to the northeast. The vein is up to 12m wide in the northwest and
pinches down to less than 1m in the southeast. At least two mineralizing events
were observed in the Terronera Mine with faulting being associated with both
mineralizing events.

The Terronera Vein has been mined in four separate underground workings:
the Salto mine to the northwest, the Santa Gertrudis and El Hundido mines to
the southeast, and the Terronera mine in the centre.

The Terronera Vein is moderately to strongly brecciated in the El Salto mine


area and measures up to 4m wide. The vein is not well exposed and is hosted
in andesite. Several post-mineralization faults are present with widths up to 1m.
The crosscut in the mine was drained but the workings were not completely
accessible.

The Santa Gertrudis mine was caved in and inaccessible.

The El Hundido mine has a similar trend and dip as seen in the Terronera Vein
and the vein width reaches up to approximately 9m. Rock chips returned
significant assays up to 494 g/t Ag and 0.40 g/t Au over 1.1m.

Wall and roof samples were collected every 3m, depending on the presence of
quartz veins, in the La Terronera Mine. Rock chip samples from the Terronera
Mine returned assay values up to 1,720 g/t Ag and 2.09 g/t Au over 0.5m and
943 g/t Ag and 0.46 g/t Au over 0.8m.

9.1.3 2012 and 2013 Exploration Programs

In 2012, the primary exploration activity on the Terronera Project was surface
diamond drilling.

Endeavour Silver continued drilling in 2013 and also conducted geological


mapping, trenching, and sampling on the Terronera South and Quiteria West
area. Work on the Terronera South area was done between August and
November, 2013. A total of 315 rock samples (including samples collected
during trenching) were analyzed.

Topographical surveys of old trenches were conducted SW of the Hundido until


the La Zavala Zone, which is the continuity of the Terronera Vein, including San
Simon, El Madroño, La Perdida, La Esperanza, La Providencia, and La Zavala

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mines. The structure hosted a 6-8m wide quartz vein with MnOx, mixed with
banded sulphides with red sulphosalts of silver and quartz druses and FeOx.
The Terronera Vein was traced near the La Esperanza Mine for approximately
60m.

The 2013 trenching program included 6 trenches and 25 samples taken from
Terronera, 5 trenches and 33 samples taken from Pabellon, and 13 trenches
and 71 samples taken from Zavala.

Figure 9.1 Exploration Targets in the Terronera Project Area

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9.2 Exploration 2014

In 2014, exploration activities primarily involved surface mapping, sampling and


diamond drilling in the Terronera (Santa Quiteria) area.

9.2.1 Surface Geological Mapping and Sampling

As at September, 2014, geological mapping, trenching and sampling was


conducted by Endeavour Silver in the Terronera Project at the Terronera North
and Quiteria West areas.

Terronera North

During February and March, geological mapping, trenching, and sampling was
conducted in the Terronera North area. A total of 242 rock samples (including
samples collected on trenches) were collected and submitted for assays. There
were no significant assay values from the trenching program.

In this area rock exposures with significant quantities of quartz were mapped.
During this mapping, an old flooded working was located. A trench was made in
order to drain the tunnel. This working, around 100m long, belonged to the La
Cascada Mine (Figure 9.2), a shaft was also located in the area.

The La Cascada Mine was surveyed, the host rock consisted of


Rhyolitic/Rhyodacitic Tuff, strongly silicified, with live Pyrite, weakly propilitized;
near the vein presents FeOx + MnOx with traces or gray sulphides. Also
presents stalactites of CaCO3 by dissolution.

The trend at the beginning of the structure is NW 75º/Vertical, with around 3 m


width, with gray sulphides + FeOx + MnOx; then presents a stockwork /
hydrothermal breccia with FeOx + MnOx (with gray sulphides) + live Pyrite and
in box work, in which there is a fault of 1.5m width trending NW 65º/84º SW,
possibly the real trend of the quartz vein.

There are veinlets of <0.2m width, with FeOx + MnOx + visible gray sulphides,
in traces, disseminated and/or mm bands, which corresponds to subsequent
veinlets to the Terronera Vein and with mineral.

The trenching program included Terronera NW, where a total of 10 trenches


were completed with 129 samples.

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Figure 9.2 Surface Map showing La Cascada Mine and Trenches


Conducted in the Area

Figure 9.3 Entrance to the La Cascada Mine

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Figure 9.4 Secondary Veinlets at the Terronera Vein, inside the La


Cascada Mine

Figure 9.5 and Figure 9.6 Photographs of the La Cascada Mine

Quiteria West

During January through April, geological mapping, trenching, and sampling was
conducted in the Quiteria West area. A total of 431 rock samples (including
samples collected on trenches) were collected and submitted for assays.

In the area were located some “windows” of Quartz veins / Hydrothermal


Breccias inside rhyolitic volcanic rocks and/or porphyritic andesites.

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The extension is greater than 500m long; there are zones with Quartz veins
with different directions: NW 75º/75º SW, NE 25º/80º NW, SE 65º/75º SW and
E-W/Vertical.

In the Quiteria West area, between the Point 1 and sample ESA1159, the width
of the structure is around 25m and consisted of Quartz and/or Hydrothremal
Breccia, with FeOx + MnOx and traces of sulphides.

Prospecting of the East part of the structure was also conducted, in the area
were some “catas” and 4 old workings were located which follows the trace of
the Quiteria Vein, some of them at the hanging wall and others at the footwall.
The preferential trend of the vein is NW 75º to E-W, dipping 60º to 85º S.

In the Resoyadero Mine (Figure 9.7), with 75m of strike length and > 15m
width, the structure is presented as a Quartz (crystalline-minor milky) Vein, with
FeOx + MnOx + live and in box work Pyrite; the sulphides are mainly Pb, which
are more visible in the Cross Cut E-E’; the trend of the structure is E-W/82ºS.

The structure ends in a strong Fault, with a Quartz Vein and a Quartz Vein /
Hydrothermal Breccia of 4m width, with similar characteristics to the previous
one. At the End of the mine there is a Stockwork, with FeOx + MnOx + live
Pyrite.

In the Otates Mine (Figure 9.8), the structure has a 25m strike length and >25m
width on surface. The structure consisted of a Quartz (crystalline to milky) Vein,
with FeOx + MnOx + live and box work Pyrite; with traces of gray Sulphides,
possible Ag; with a Fault in the entrance of the working, with a trend of E-
W/65ºS.

Other old workings were also located in the area. The smallest were 3-20m
deep but some, such as the Los Cables Pit, were around 22m deep (Figure
9.12).

The ZP3 mine (with a 5.3m length and a structure >25m) the structure is
presented as a Quartz (crystalline) Vein, with FeOx + MnOx (minor), no visible
sulphides, weak to moderate acidity, weak argillization.

In the Los Copales mine (Figure 9.9), with an approximate length of 18m and a
structure on surface >25m, the structure is presented as a Quartz (crystalline

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to milky) Vein, with FeOx + MnOx + Pyrite in box work, no visible sulphides,
moderate acidity, parts with blade texture. Local trend E-W/75ºS.

The zone of the La Zopilota Mine was also cleared; with a vein of Quartz
(crystalline), with iron and manganese oxides.

The trenching program includes:


 Quiteria West (West Part): A total of 11 trenches were completed with 61
samples. There were no significant intersections in these trenches.
 Quiteria West (East Part): A total of 16 trenches were completed with
176 samples. There were no significant intersections in these trenches.

Figure 9.7 Geological Map of the Resoyadero Mine

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Figure 9.8 Geological Map of the Otates Mine

Figure 9.9 Geological Map of the Copales Mine

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Figure 9.10 and Figure 9.11 Photographs of the Quiteria West vein

Figure 9.12 Photograph showing Los Cables pit

Figure 9.13 Photograph showing trench in the Quiteria West vein

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9.3 Exploration 2015

The only exploration done at Terronera in 2015 was the drilling summarized in
Section 10.
9.4 Exploration 2016

Endeavour Silver conducted a surface exploration program in 2016. Several


thousand samples were collected and analysis revealed the vein system to
extend over a 7 km by 7 km area and identified nine additional veins in the
northern half of the property (Figure 9.14). The exploration program confirmed
that high-grade, low sulphidation epithermal silver-gold mineralization is
present in many of the veins. Peak assay values from five of the new veins are
presented in Table 9.1. Silver equivalents are calculated using a ratio of 70:1
silver: gold.

Figure 9.14 Map of New Veins Discovered in 2016

Source: www.edrsilver.com

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Table 9.1 Terronera Surface Exploration Sampling Program – Peak


Values 2016

Sample
Vein Au (g/t) Ag (g/t) AgEq
No.
17540 6.41 2,880 3,329
17542 0.59 850 891
Las
Coloradas 17543 1.52 1,005 1,111
17555 0.13 294 303
17559 0.25 282 300
15808 0.10 585 592
15813 1.93 393 528
15814 0.99 562 631
Los Reyes 15875 1.42 630 729
17259 4.03 1,050 1,332
17264 0.73 743 794
17302 1.94 575 711
15261 0.13 398 407
15358 0.88 506 568
15359 0.48 387 421
La Ermita 15361 0.55 290 329
15367 0.37 423 449
15369 0.43 1,355 1,385
15470 0.13 342 351
14223 0.87 135 196
14061 10.10 148 855
14208 0.58 174 215
El Padre 14226 0.52 227 263
14229 1.97 315 376
14207 0.73 325 376
14221 0.66 358 404
12840 20.70 506 1,955
12832 5.31 555 927
14019 0.52 564 600
12836 6.82 567 1,044
12862 7.81 576 1,123
La Luz
12837 5.70 589 988
12838 26.70 763 2,632
12833 11.15 763 1,544
12808 8.09 818 1,384
12907 7.40 951 1,469

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10.0 DRILLING

10.1 Drilling 2011 - 2013

The drill programs conducted by Endeavour Silver between 2011 and 2013 are
summarized below. Further details of these drill programs can be found in
Lewis and Murahwi (2012), Lewis and Murahwi (2013) and Munroe (2014).

10.1.1 2011 Drilling Program

In 2011, Endeavour Silver commenced a surface diamond drilling program on


prospective targets within the Terronera Project. Exploration drilling focused on
two main areas: 1) The Real el Alto area, exploring the Animas-Los Negros, El
Tajo and Real Veins, and 2) The Central area, exploring the extension of the
Quiteria Vein, west of the La Quiteria Mine.

By mid-December, 2011, the company had completed 7,688.25m of drilling in


36 surface diamond drill holes on the Terronera Project. A total of 2,980
diamond drill core samples were analyzed.

Drilling identified the Animas-Los Negros vein in the Real el Alto area (Figure
10-1), which was found to be one vein, offset by faulting. The vein is principally
hosted in rhyolite and is comprised of quartz with abundant manganese oxides
(pyrolusite), minor pyrite and traces of disseminated dark grey and blue
sulphides. Highlights include 132 g/t Ag and 1.02 g/t Au over a 3.2m true width
in hole LN07-1, 144 g/t Ag and 1.21 g/t Au over a 3.6m true width in hole LN08-
1 and 258 g/t Ag and 0.61 g/t Au over a 4.5m true width was returned for hole
LN09-1.

The 2011 drill program also outlined new Mineral Resources on the El Tajo
Vein area. El Tajo is believed to be either a brecciated quartz +/- calcite vein or
a stockwork zone with weak to moderate veinlets and disseminations of fine
pyrite and traces of galena and possible silver sulphides (possibly argentite).
Drilling highlights in the El Tajo vein include 107 g/t Ag and 0.10 g/t Au over
1.6m true width within hole TA03-1 and 169 g/t Ag and 0.63 g/t Au over a 3.0m
true width in hole TA04-1.

New Mineral Resources were also outlined on the Real Vein, which is located
to the northeast of the Animas-Los Negros and El Tajo veins. The Real Vein is

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mainly comprised of white quartz which is intensely oxidized with both iron and
manganese oxides in places. Base metal sulphides and traces of dark grey
sulphides were observed locally. The Real vein is also characterized by
hydrothermal breccias and stockworks of narrow quartz veinlets in some
intercepts. The most significant intercept for the Real Vein was in hole RE04-1
which returned 320 g/t Ag and 0.74 g/t Au over a true width of 2.6m.

Drill holes were also advanced on the La Esurana Vein and in the La Luz area,
but did not return significant gold or silver mineralization.

10.1.2 2012 Drilling Program

Endeavour Silver continued its diamond drilling program on the Terronera


Property to expand Mineral Resources defined in the 2011 drill program.
Exploration drilling focused on two main areas: 1) The Real el Alto area,
exploring the Animas-Los Negros and Real Veins, and 2) The Central area,
exploring the extension of the Quiteria Vein, west of the La Quiteria Mine, and
the Terronera Vein. Endeavour Silver completed 13,237.10m of drilling in 32
diamond drill holes on the Terronera Property. A total of 3,118 samples were
collected for analysis.

Drill holes advanced on the Animas-Los Negros Vein were successful in


intercepting the mineralized zone at depth. These drill holes also passed
through the La Escurana Vein in the upper part of each drill hole. The Escurana
vein is located in the southernmost part of the Real el Alto area. Two holes
were advanced on the Real Vein but did not return significant intersections.
Only one hole was drilled on the Quiteria Vein in the La Luz area. The only
intersection of note was 15 g/t Ag and 0.02 Au over 5.2m in hole QT05-2.

The 2012 drill program discovered a new, high grade, silver-gold mineralized
zone in the Terronera Vein. The Terronera Vein mainly consists of brecciated
to massive quartz +/- calcite, locally banded and sugary-textured. Sulphide
content is typically <1% and predominately fine-grained pyrite. The vein is often
weak to moderately oxidized with mainly hematite and manganese oxides in
fractures. Minor faulting with clay and reworked vein and wall rock material is
also often associated with the Terronera Vein.

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Drilling highlights in the Terronera Vein include 1,489 g/t Ag and 0.85 g/t Au
over a 5.66m true width in hole TR02-1 and 500 g/t Ag and 1.15 g/t Au over an
11.48m true width in hole TR12-1. Hole TR09-1 yielded 650 g/t Ag and 1.17 g/t
Au over a 5.50m true width and 519 g/t Ag and 0.47 g/t Au over a 9.02m true
width.

10.1.3 2013 Drilling Program

Endeavour Silver continued its diamond drilling program on the Terronera


Property to expand Mineral Resources defined in the 2012 drill program.
Drilling in 2013 focused on the Terronera Vein area.

Endeavour Silver completed 8,573.5m of drilling in 30 drill holes in 2013. The


2013 program was successful in expanding and connecting the two high grade
silver-gold mineralized zones, the Central area and the El Hundido areas, in the
Terronera Vein.

Drilling highlights from the Terronera Vein include 122 g/t Ag and 2.00 g/t Au
over a 5.90m true width in hole TR02-5, 507 g/t Ag and 1.36 g/t Au over a
6.66m true width in hole TR03-1, 915 g/t Ag and 2.33 g/t Au over a 2.47m true
width in hole TR03-5 (including 5,580 g/t Ag and 15.85 g/t Au over a 0.27m true
width), 646 g/t Ag and 1.11 g/t Au over a 5.03m true width in hole TR07.5-1
(including 1,650 g/t Ag and 1.82 g/t Au over a 1.04m true width) and 583 g/t Ag
and 0.79 g/t Au over an 8.41m true width in hole TR08.5-1 (including 4,420 g/t
Ag and 2.46 g/t Au over a 0.47m true width).

10.1.4 2014 Drilling Program

In 2014, Endeavour Silver continued its drilling program on the Terronera


Property. Endeavour Silver’s objective for the drilling campaign was to continue
defining the mineralized body and to expand upon Mineral Resources identified
in the 2012-2013 drill programs. Endeavour Silver was successful in meeting its
objectives for the 2014 drilling program.
As at September 2014, Endeavour Silver completed a total of 8,204.20m in 27
surface diamond drill holes at the Terronera Project. A total of 2,470 samples
were collected and submitted for assays. Surface exploration drilling conducted
during 2014 is summarized in Table 9.1.

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Table 10.1 Terronera Surface Exploration Drilling Activities in 2014

Number of Number of
Project Area Total Metres
Holes Samples Taken
Terronera 27 8,204.20 2,470

Surface diamond drilling was conducted by Energold de Mexico, S.A. de C.V.


(Energold Mexico) a wholly-owned subsidiary of the Energold Drilling Corp.
(Energold) based in Vancouver, British Columbia, Canada. Energold Mexico
and Energold do not hold any interest in Endeavour Silver and are independent
of the company.

Early May, 2014, follow-up surface diamond drilling resumed on the Terronera
area, using two man-portable drill rigs and one skid mounted drill rig (CS14) all
provided by Energold. At the end of September, Endeavour Silver had
completed a total of 8,204.20m in 27 holes (Table 10.2 and Figure 10.1).

Table 10.2 2014 Drill Hole Summary for the Terronera Surface Diamond
Drilling Program
Total Depth
Hole Azimuth Dip Diameter Start Date Finish Date
(m)
TR20-1 230º -45º HQ/NQ 255.35 03/05/2014 09/05/2014
TR20-2 230º -60º HQ/NQ 329.40 10/05/2014 20/05/2014
TR20-3 230º -68º HQ/NQ 295.85 20/05/2014 29/05/2014
TR22-1 230º -67º HQ 216.55 30/05/2014 04/06/2014
TR22-2 230º -55º HQ 129.60 05/06/2014 07/06/2014
TR21-1 182º -45º HQ 97.60 07/06/2014 09/06/2014
TR23-1 283º -45º HQ 163.15 09/06/2014 13/06/2014
TR20-4 230° -45° HQ 94.75 13/06/2014 15/06/2014
TR17-2 237º -60º HQ/NQ 286.70 16/06/2014 24/06/2014
TR4S-1 230º -68 º HQ 317.60 14/06/2014 27/06/2014
TR17-3 237° -74° HQ 344.50 24/06/2014 07/07/2014
TR2S-1 228 º -45º HQ / NQ 318.15 28/06/2014 07/07/2014
TR39-1 230° -49° HQ 535.75 27/06/2014 10/07/2014

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TR37-1 204° -45º HQ 393.45 10/07/2014 19/07/2014


TR18-2 268° -64° HQ 289.75 08/07/2014 21/07/2014
TR2S-2 228 º -65º HQ/NQ 297.20 08/07/2014 21/07/2014
TR16-2 199° -66° HQ/NQ 263.80 21/07/2014 27/07/2014
TR35-1 172º -45º HQ 465.20 19/07/2014 27/07/2014
TR38-1 212º -61º HQ-BT 456.45 27/07/2014 04/08/2014
TR2S-3 228º -77º HQ/NQ 245.40 21/07/2014 07/08/2014
TR15-2 230° -65º HQ/NQ 240.90 28/07/2014 08/08/2014
TR14-2 233° -45° HQ 248.60 08/08/2014 15/08/2014
TR41-1 252° -45º HQ 477.75 04/08/2014 16/08/2014
TR14-3 233º -70º HQ 367.50 15/08/2014 24/08/2014
TR22-3 229º -54º HQ 372.50 19/08/2014 26/08/2014
TR07-3 200° -70° HQ 377.45 10/08/2014 28/08/2014
TR14-4 233° -56º HQ 323.30 24/08/2014 30/08/2014

Total 8,204.20

The 2014 exploration drilling program was conducted with the objective to
continue defining the high grade silver-gold mineralized body between sections
TR-4S through TR-41, primarily on the Central Part (between sections TR-07
through TR-23).

The Terronera Vein intercepted in drill holes mainly consists of brecciated to


massive quartz +/- calcite, translucent to milky white in colour, locally banded
and sugary-textured. Vugs filled with drusy quartz crystals are observed in
places. Sulphide content is typically <1%, occurring either as disseminations or
very thin bands. Sulphides are predominately fine-grained pyrite. Traces of
other dark grey sulphides, possibly argentite, are also present. Relict pyrite and
hematite line cavities and boxworks in some vein intercepts. The vein is often
weak to moderately oxidized with mainly hematite and manganese oxides in
fractures. Hydrothermal breccia or strongly fractured intervals with either
fragments or horses of brecciated and quartz-stockworked rhyodacite are
common. Minor faulting with clay and reworked vein and wallrock material is
also often associated with the Terronera Vein.

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The host rock is mainly propylitized rhyodacite, weak to moderately silicified in


places, with minor narrow quartz stock veinlets associated with the more
strongly silicified zones. Oxidation, primarily on fractures, is common, especially
in shallower holes.

Drilling highlights for Terronera Vein included 499 g/t Ag & 1.4 g/t Au over 2.6m
true width (including 1,660 g/t Ag & 1.3 g/t Au over 0.2m true width) in hole
TR07-3; 345 g/t Ag & 0.8 g/t Au over 6.3m true width (including 1,440 g/t Ag &
1.0 g/t Au over 0.5m true width) in hole TR14-3; 301 g/t Ag & 0.7 g/t Au over
6.7m true width (including 1,250 g/t Ag & 1.4 g/t Au over 0.4m true width) in
hole TR15-2; 788 g/t Ag & 0.8 g/t Au over 3.8m true width (including 3,620 g/t
Ag & 2.0 g/t Au over 0.7m true width) in hole TR17-2; 106 g/t Ag & 5.5 g/t Au
over 3.2m true width in hole TR20-1; 272 g/t Ag & 8.5 g/t Au over 3.0m true
width in hole TR20-2; 105 g/t Ag & 5.0 g/t Au over 2.6m

true width in hole TR21-1; 121 g/t Ag & 3.3 g/t Au over 16.0m true width in hole
TR23-1. Also significant results returned for HWTRV1 (101 g/t Ag & 4.3 g/t Au
over 8.2m true width in hole TR21-1; 114 g/t Ag & 3.9 g/t Au over 4.1m true
width in hole TR22-2; 107 g/t Ag & 1.9 g/t Au over 7.9 m true width in hole
TR23-1).

Drilling results are summarized in

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Table 10.3 and the Terronera Vein intercepts are shown on the longitudinal
section in Figure 10.2.

Figures 10.3 through 10.8 depict typical cross-sections showing several of the
holes drilled to test the Terronera Vein structure in the Terronera Project.

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Table 10.3 Surface Drill Hole Significant Assay Summary for Mineral
Intercepts in the Terronera Vein Area

Mineralized Interval Assay Results

Drill Hole ID Structure Core


From To True
Length Ag(g/t) Au (g/t)
(m) (m) Width (m)
(m)
Terronera 300.65 304.95 4.30 2.65 499 1.37
TR07-3
Including 301.65 301.95 0.30 0.18 1660 1.32
Terronera Vein 181.30 182.40 1.10 0.93 38 0.22
TR14-2 Terronera Composite 180.40 182.40 2.00 1.70 295 0.29
Including 180.40 180.70 0.30 0.25 1750 1.01
Terronera Vein 290.25 301.65 11.40 6.86 320 0.82
Terronera Composite 290.25 300.70 10.45 6.29 345 0.84
TR14-3
Including 291.90 292.80 0.90 0.54 1440 0.97
FW Terronera Projection 322.10 325.45 3.35 2.15 2 0.02
Hw Terronera (HWTRV2) 147.75 154.95 7.20 5.27 388 0.65
Including 150.65 151.05 0.40 0.29 857 1.10
TR15-2 Terronera Vein 168.95 175.00 6.05 3.56 204 0.76
Terronera Composite 168.95 180.40 11.45 6.73 301 0.73
Including 179.70 180.40 0.70 0.41 1250 1.37
Hw Terronera 164.70 165.35 0.65 0.46 58 0.84
Hw Terronera Composite 163.00 165.35 2.35 1.66 21 0.31
TR16-2 Terronera Vein 202.95 224.65 21.70 11.50 138 1.20
Terronera Composite 219.60 223.00 3.40 1.80 695 1.86
Including 219.60 220.40 0.80 0.42 2230 5.63
Terronera Vein 140.30 143.70 3.40 2.45 181 0.60
TR17-2 Terronera Composite 139.35 144.60 5.25 3.78 788 0.79
Including 139.35 140.30 0.95 0.68 3620 2.03
Hw Terronera (HWTRV2) 175.55 177.80 2.25 1.56 283 0.87
Hw Terronera Composite 174.70 178.75 4.05 2.81 206 0.58
Including 175.55 175.85 0.30 0.21 1185 3.39
TR18-2
Terronera Vein 243.00 248.75 5.75 2.88 108 6.55
Terronera Composite 240.75 248.75 8.00 4.00 91 5.23
Including 246.40 247.05 0.65 0.33 197 18.55
Hw Terronera (HWTRV1) 116.40 128.55 12.15 10.07 76 3.24
Hw Terronera Composite 118.55 128.55 10.00 8.29 80 3.84
Including 126.25 127.00 0.75 0.62 229 12.35
TR20-1
Terronera Vein 181.90 187.90 6.00 5.35 74 3.37
Terronera Composite 182.20 185.80 3.60 3.21 106 5.51
Including 184.25 185.15 0.90 0.80 121 7.08

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Hw Terronera (HWTRV1) 155.65 159.60 3.95 2.64 61 2.97


Including 155.65 157.00 1.35 0.90 80 3.53
TR20-2 Terronera Vein 207.80 215.50 7.70 6.31 134 4.11
Terronera Composite 207.80 211.50 3.70 3.03 272 8.50
Including 207.80 208.90 1.10 0.90 222 15.20
Hw Terronera (HWTRV1) 57.65 68.35 10.70 7.43 111 4.53
Hw Terronera Composite 57.65 69.50 11.85 8.23 101 4.29
Including 62.50 64.00 1.50 1.04 263 11.60
TR21-1
Terronera Vein 85.40 89.45 4.05 2.60 105 5.04
Including 88.45 89.45 1.00 0.64 163 7.57
Old Working 89.45 97.60 Old Working
Hw Terronera (HWTRV1) 45.75 53.25 7.50 5.75 74 4.29
Hw Terronera Composite 43.45 48.80 5.35 4.10 114 3.89
TR22-2 Including 45.75 48.80 3.05 2.34 115 6.04
Terronera Vein 72.15 80.10 7.95 6.09 80 3.18
Including 79.30 80.10 0.80 0.61 322 14.30
Hw Terronera (HWTRV1) 49.70 54.45 4.75 3.05 49 4.55
Hw Terronera Composite 49.70 62.00 12.30 7.91 107 1.94
Including 51.85 54.45 2.60 1.67 48 5.16
TR23-1
Terronera Vein 77.85 99.05 21.20 12.76 126 4.08
Terronera Composite 77.85 104.50 26.65 16.04 121 3.33
Including 91.00 92.50 1.50 0.90 213 12.25

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Figure 10.1 Surface Map Showing Completed Drill Holes (black) in the
Terronera Area

(Source: edrsilver.com)

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Figure 10.2 Longitudinal Section (Looking Northeast) Showing the


Intersection Points on the Terronera Vein

(Source: edrsilver.com)

Figures 10.3 & 10.4 Cross-Sections through holes TR07-1, TR07-2 & TR07-3 and
TR14-1, TR14-2, TR14-3 & TR14-4 Drilled to test the Terronera Vein

(Source: edrsilver.com)

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Figures 10.5 & 10.6 Cross-Sections through holes TR15-1 & TR15-2 and
TR17-1, TR17-2 & TR17-3 Drilled to test the Terronera Vein

(Source: edrsilver.com)

Figures 10.7 & 10.8 Cross-Sections through holes TR20-1, TR20-2, TR20-
3 & TR20-4 and TR22-1, TR22-2 & TR22-3 Drilled to test the Terronera Vein

(Source: edrsilver.com)

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10.1.5 2015 Drilling Program

In 2015, Endeavour Silver continued its drilling program on the Terronera


Property. Endeavour Silver’s objective for the drilling campaign was to continue
defining the mineralized body and to expand upon Mineral Resources identified
in the 2012-2014 drill programs. Endeavour Silver was successful in meeting its
objectives for the 2015 drilling program.

Endeavour Silver completed a total of 6,133m in 27 surface diamond drill holes


at the Terronera Project in 2015 (Table 10.4). A total of 3,756 samples were
collected and submitted for assays. Surface exploration drilling conducted
during 2015 is summarized in Table 10.4.

Table 10.4
Terronera Surface Drilling Activities in 2015

Number of Number of
Project Area Total Metres
Holes Samples Taken
Terronera 27 6,133 3,756

Drilling highlights for Terronera Vein included 1,371 g/t Ag and 1.10 g/t Au
(1,448 g/t AgEq) over 6.6m true width including 5,420 g/t Ag and 5.12 g/t Au
(5,778 g/t AgEq) over 0.3m true width in hole TR 10-4, 508 g/t Ag and 3.25 g/t
Au (735 g/t AgEq) over 8.2m true width, including 6,600 g/t Ag and 22.10 g/t Au
(8,147 g/t Ag Eq) over 0.23m true width in hole TR18-5.

Select drilling results are summarized in Table 10.6 and the Terronera Vein
intercepts are shown on the longitudinal section in Figure 10.2 and a surface
plan of drill hole locations is presented on Figure 10.9.

Table 10.5
2015 Drill Hole Summary for the Terronera Surface Diamond Drilling Program
Total Depth
Hole Azimuth Dip Start Date Finish Date
(m)
TR06-4 190.2 -60 335.5 19/11/2015 30/11/2015
TR08-4 230 -60 352.25 09/11/2015 20/11/2015
TR09-5 250 -60 394.95 29/11/2015 09/11/2015
TR13-5 208 -60 352.25 13/07/2015 21/07/2015

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TR14-6 235 -77 151.75 06/07/2015 09/07/2015


TR14-7 235 -77 316.25 17/11/2015 17/12/2015
TR15-4 275 -47 160.1 09/07/2015 13/07/2015
TR15-5 257 -60 297.35 22/07/2015 28/07/2015
TR17-4 200 -55 215 01/06/2015 06/06/2015
TR18-3 230 -45 181.5 09/05/2015 14/05/2015
TR18-4 230 -55 207.4 14/05/2015 20/05/2015
TR18-5A 215 -65 129.6 20/05/2015 24/05/2015
TR18-5 216 -65 266.85 25/05/2015 01/06/2015
TR19-2 240 -50 154 16/04/2015 20/04/2015
TR19-3 245 -65 181.5 20/04/2015 24/04/2015
TR19-4 245 -75 239.4 25/04/2015 30/04/2015
TR19-5 250 -80 280.45 30/04/2015 09/05/2015
TR20-6 230 -60 198.8 11/04/2015 15/04/2015
TR21-2 235 -70 164.7 06/06/2015 10/06/2015
TR21-3 230 -46 240.95 11/06/2015 16/06/2015
TR21-4 230 -60 264.5 17/06/2015 22/06/2015
TR22-4 230 -50 160.1 23/06/2015 26/06/2015
TR23-3 230 -50 164.7 27/06/2015 30/06/2015
TR23-4 230 -70 227.2 01/07/2015 05/07/2015
TR25-2 230 -45 178.4 06/04/2015 09/04/2015
TR26-2 230 -45 150.95 30/03/2015 02/04/2015
TR26-3 230 -80 166.2 02/04/2015 05/04/2015

Table 10.6 Surface Drill Hole Significant Assay Summary for Mineral Intercepts
in the Terronera Vein Area - 2015
From True Width
Hole Structure Au (g/t) Ag (g/t) AgEq (g/t)
(m) (m)
Terronera 263.75 6.58 1.10 1371 1448
TR10-4
Including 270.85 0.31 5.12 5420 5778
TR11-2 Hw Terronera 196.90 1.57 0.12 96 104
Including 197.75 0.35 0.21 239 253
Terronera 223.30 10.90 0.84 413 472
Including 234.90 0.31 9.14 4830 5470
TR15-3 Terronera 358.80 1.71 2.75 217 409
Including 359.75 0.31 6.84 150 629
TR16-4 Hw Terronera 125.05 1.56 0.58 363 403
Including 126.15 0.21 1.37 1295 1391
Terronera 134.35 1.58 2.08 24 170

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Including 134.80 0.27 3.82 11 278


TR16-5 Hw Terronera 148.40 2.29 0.86 681 741
Including 149.45 0.20 1.29 1370 1460
TR16-6 Hw Terronera 318.85 0.19 0.28 92 112
Terronera 346.25 3.90 5.25 235 602
Including 349.50 0.16 11.9 366 1199
TR16-7 Terronera 366.75 1.52 0.35 255 279
Including 367.60 0.23 0.62 545 588
TR16-8 Terronera 418.80 1.57 2.56 74 253
Including 418.80 0.65 5.76 165 568
TR19-1 Hw Terronera 242.00 1.68 7.19 150 653
Including 243.20 0.72 11.20 195 979
Terronera 291.25 4.24 2.24 117 274
Including 291.90 0.55 3.84 298 567
TR19-2 Hw Terronera 70.60 6.86 1.78 283 408
Including 78.55 0.53 6.85 204 684
Terronera 93.00 2.16 2.28 42 201
Including 93.00 0.32 3.23 55 281
TR19-3 Hw Terronera 95.15 1.52 5.99 184 603
Including 96.35 0.32 23.5 647 2292
Terronera 144.60 5.28 6.10 116 543
Including 149.50 0.19 26.2 307 2141
TR19-4 Hw Terronera 111.60 0.25 0.33 95 118
Terronera 191.10 5.82 3.11 98 316
Including 196.70 0.16 10.05 277 981
TR20-6 Hw Terronera 100.00 1.80 1.31 57 148
Including 101.9 0.25 3.71 90 350
Terronera 151.00 2.08 3.93 63 338
Including 153.30 0.2 7.79 89 634
TR25-2 Terronera 107.45 2.12 3.06 72 286
Including 109.20 0.57 9.97 185 883
TR26-2 Terronera 30.45 3.90 4.43 296 606
Including 30.70 0.42 10.5 537 1241

TR13-5 Terronera 258.90 11.87 1.76 81 205


Including 260.45 0.16 0.51 501 537

TR14-6 Terronera 88.45 1.55 0.2 256 269


Including 90.15 0.27 0.53 785 822

TR15-4 Terronera 109.25 1.76 0.15 88 98


Including 109.25 0.11 0.74 581 633
TR15-5 Terronera 235.30 10.78 1.75 44 167

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Terronera HG 248.65 3.51 3.04 62 275


Including 250.80 0.33 5.82 56 463

TR17-4 Terronera 167.30 6.83 1.80 62 188


Including 168.05 0.34 8.57 153 753
Hw Terronera 118.65 2.99 0.94 319 385
Including 119.15 0.33 1.43 1,310 1,410
TR18-3
Terronera 137.35 4.98 1.53 76 183
Including 142.30 0.57 5.84 222 631

TR18-4 Terronera 168.65 6.18 2.73 94 285


Including 169.85 0.38 5.82 306 713

TR18-5 Terronera 198.30 8.16 3.25 508 735


Including 201.55 0.23 22.1 6,600 8,147
Hw Terronera 53.45 2.58 6.69 81 549
Including 54.9 0.11 26.7 309 2,178
Terronera 111.10 6.39 4.75 137 469
TR21-2
Including 115.90 0.40 18.65 238 1,544
Terronera Vein (Fw) 123.1 1.84 6.38 164 610
Including 125.55 0.20 25.8 845 2,651
Terronera 157.05 4.91 2.82 61 258
Including 158.00 0.49 9.89 154 846
TR21-3
Terronera Vein 181.45 5.17 5.93 179 595
Including 185.00 0.40 16.75 339 1,512
Hw Terronera 183.55 2.16 2.85 67 267
Including 186.3 0.21 1.92 101 235
Hw Terronera 188.85 1.63 0.79 65 120
TR21-4
Including 190.60 0.39 1.66 159 275
Terronera 210.15 1.7 18.13 490 1,759
Including 210.95 0.3 36.5 909 3,464
Hw Terronera 96.10 3.52 4.20 90 384
Including 96.10 0.66 7.59 121 652
TR22-4
Terronera 117.50 8.68 1.69 156 274
Including 127.25 0.7 1.67 775 892
Hw Terronera 97.10 1.82 2.37 64 230
Including 98.35 0.81 3.72 99 359
TR23-3
Terronera 113.00 11.26 2.44 401 572
Including 125.35 0.48 7.68 4,770 5,308

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10.1.6 2016 Drilling Program

Endeavour Silver continued its drilling program on the Terronera Property in


2016. The aim of the 2016 drilling program was to continue infill drilling within
the Terronera Vein system and conduct exploration drilling on the La Luz vein,
located about 2,200m northeast of the Terronera Vein.

Endeavour Silver completed a total of 5,670m in 19 surface diamond drill holes


at the Terronera Project in 2016 (Table 10.8). A total of 1,805 samples were
collected and submitted for assays. Surface drilling conducted during 2016 is
shown in Table 10.7.

Table 10.7 Terronera Surface Drilling Activities in 2016

Number of Number of
Project Area Total Metres
Holes Samples Taken
Terronera 19 5,670 1,805

Drilling highlights for Terronera Vein included 717 g/t Ag and 2.94 g/t Au (923
g/t AgEq) over 6.56m true width, including 4,860 g/t Ag and 2.99 g/t Au (5,069
g/t AgEq) over 0.39m true width in hole TR10.5-1 and 226 g/t Ag and 5.0 g/t Au
(576 g/t AgEq) over 6.74m true width, including 527 g/t Ag and 169 g/t Au
(1,710 g/t AgEq) over 0.7m true width in hole TR09-06.

The 2016 infill drill holes are summarized in Table 10.8 and the Terronera Vein
intercepts are shown on the longitudinal section in Figure 10.2. A surface plan
of drill hole locations is presented on Figure 10.9 and select intersections are
summarized on Table 10.9.

Drilling on the La Luz Vein, which is outside of the current Mineral Resource
area, outlined a west plunging mineralized zone over 300m by 250m deep
starting approximately 100m below surface and still open to surface and to
depth. Highlights include 408 g/t Ag and 58.6 g/t Au (4,512 g/t AgEq) over
1.14m true width, including 1,365 g/t Ag and 238.0 g/t Au (18,025 g/t AgEq)
over 0.9m true width in hole LL-02. Select significant intersections are
presented on Table 10-10. Intersections on the La Luz Vein are shown on
Figure 10.10.

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Table 10.8 2016 Drill Hole Summary for the Terronera Surface Diamond
Drilling Program
Total Depth
Hole Azimuth Dip Start Date Finish Date
(m)
TR15-6 225 -50 161.15 20-Feb-16 29-Feb-16
TR16-9 50 -50 270.95 19-Mar-16 26-Mar-16
TR17-5 230 -60 136.5 01-Mar-16 06-Mar-16
TR18-6 250 -70 121.5 07-Mar-16 12-Mar-16
TR19-6 300 -55 152.35 12-Mar-16 18-Mar-16
TR20-7 65 -45 140.05 10-abr-16 15-abr-16
TR20-8 70 -20 106.1 15-abr-16 20-abr-16
TR21-5 45 30 103.85 20-abr-16 24-abr-16
TR24-2 230 -35 106.35 27-Mar-16 30-Mar-16
TR24-3 225 -75 138.25 30-Mar-16 04-abr-16
TR25-3 300 -55 156.5 04-abr-16 09-abr-16
TR17_5-1 255 -50 157.5 24-abr-16 29-abr-16

Table 10.9 Surface Drill Hole Significant Assay Summary for Mineral Intercepts
in the Terronera Vein Area – 2016

True
Hole Structure From (m) Au (g/t) Ag (g/t) AgEq (g/t)
Width (m)
TR10.5-1 Terronera 380.75 6.56 2.94 717 923
Including 386.9 0.39 2.99 4,860 5,069
TR12-6 Terronera 419.15 4.53 1.83 71 199
Including 423.35 0.34 3.90 206 479
Fw Terronera 436.5 1.59 0.35 243 268
Including 436.5 0.07 0.53 764 801
TR14-7 Terronera 363.9 4.78 3.91 109 383
Including 372.25 0.48 11.05 246 1020
TR15-6 Hw Terronera 126.7 2.10 1.22 737 823
Including 127.55 0.34 3.34 2,140 2,374
TR16-9 Terronera 212.2 2.67 2.18 72 225
Including 214.45 0.38 5.56 133 522
Hw Terronera 254.75 0.23 2.60 152 334
TR17-5 Terronera 83.35 1.80 0.43 216 246
Including 83.35 0.40 0.88 484 546
TR18-6 Hw Terronera 48.1 5.28 3.48 53 296
Including 52.75 0.20 23.8 90 1,756
TR19-6 Hw Terronera 57.85 1.74 0.35 179 204

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Including 59.35 0.13 0.25 354 372


TR20-7 Terronera 80.7 4.99 2.70 81 270
Including 81.55 0.25 17.15 431 1,632
Hw Terronera 97.8 5.85 1.54 174 282
Including 99.1 0.31 6.48 186 640
TR20-8 Terronera 67.6 5.35 2.73 112 302
Including 69.6 0.49 0.58 651 692
Hw Terronera 80 7.72 0.85 106 166
Including 89.05 0.59 0.12 301 310
TR21-5 Terronera 42.45 13.22 1.55 145 254
Including 45.6 0.48 4.57 102 422
Hw Terronera 83.8 4.04 5.34 107 481
Including 83.8 0.23 27.6 74 2,006
TR24-2 Terronera 46.55 2.11 0.35 168 192
Including 46.55 0.49 0.09 402 408
TR24-3 Terronera 77.65 10.32 1.96 82 219
Including 79.15 0.31 19.40 69 1,427
Including 93.1 0.19 1.57 684 794
TR25-3 Terronera 102.7 1.69 7.21 268 773
Including 103.25 0.40 13.05 354 1,268

Table 10.10 Surface Drill Hole Significant Assay Summary for Mineral
Intercepts in the La Luz Vein Area - 2016
True
Hole Structure From (m) Au (g/t) Ag (g/t) AgEq (g/t)
Width (m)
LL-02 La Luz 207.45 1.14 58.63 408 4,512
Including 208.61 0.26 238.00 1365 18,025
LL-04 La Luz 244.10 1.17 4.05 194 478
Including 244.40 0.25 12.20 751 1,605
LL-06 La Luz 87.80 1.01 2.65 61 246
Including 87.80 0.39 0.44 102 133
LL-07 La Luz 113.90 1.43 3.07 202 418
Including 113.90 0.68 6.11 233 661
LL-08 La Luz 95.25 1.57 5.25 86 454
Including 95.65 0.41 2.58 152 333
Including 96.45 0.75 8.76 24 637
LL-10 La Luz 127.40 3.34 2.33 140 303
Including 130.45 0.45 5.60 176 568
LL-12 La Luz 176.10 1.79 0.56 244 283
Including 176.10 0.5 1.28 548 638

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10.1.7 2017 Drilling Program

Exploration and definition drilling is ongoing at the Terronera Property and at


the time of this report results for four drill holes on the Terronera Vein and
seven drill holes on the La Luz Vein have been received.

Drilling highlights on the Terronera Vein include 230 g/t Ag and 1.8 g/t Au (359
g/t AgEq) over 16.3m true width, including 3,490 g/t Ag and 8.9 g/t Au (4,110
AgEq) over 0.3m true width in hole 11-3.

Drilling highlights on the La Luz Vein include 63 g/t Ag and 57 g/t Au (4,054 g/t
AgEq) over 2.2m true width, including 340 g/t Ag and 320 g/t Au (22,740 g/t
AgEq) over 0.3m true width in hole LL-21.

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Figure 10.9 Surface Map Showing 2015 and 2016 Drill Holes

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Figure 10.10 Drill Intersections – La Luz Vein

(Source: edrsilver.com)

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11.0 SAMPLE PREPARATION, ANALYSES, AND SECURITY

Prior to 2014, samples were taken by lithological and geological markers and
zones with different drill recoveries were mixed. In this way, if a zone with lower
recuperation had a higher grade and was mixed with a lower grade zone with
higher core recovery, the overall value of the sample would be diluted and not
representative of the zone. Likewise, the reverse could be true and a low grade
zone could be given a higher value due to recovery issues.

Since September, 2014 sampling has coincided with core recovery. In this way,
losses of drill core are considered at the sample level. This ensures that values
in areas with low drill core recovery do not artificially affect (either positively or
negatively) the gold and silver values of the zone. This project has core
recovery issues in certain spots. This was implemented in the newest round of
drilling from September, 2014 onwards, analyses, and security at the Terronera
Project from 2012 to 2017.

Endeavour Silver established the following procedures for sample preparation,


analyses, and security at the Terronera Project from 2012 to 2017.

Drilling is subject to daily scrutiny and coordination by Endeavour Silver’s


geologists. On the drill site, the full drill core boxes are collected daily and
brought to the core storage building where the core is laid out, measured,
logged for geotechnical and geological data, and marked for sampling.

Depending on the competency of the core, it is either cut in half with a diamond
bladed saw or split with a pneumatic core splitter.

The core storage facilities at Terronera have been moved from the town of San
Sebastian to a permanent structure located on the property that is more
secluded and well protected.

All of Endeavour Silver’s samples of rock and drill core are bagged and tagged
at the Terronera Project warehouse and shipped to the ALS-Chemex (ALS)
preparation facility in Guadalajara, Mexico. After preparation, the samples are
shipped to the ALS laboratory in Vancouver, Canada, for analysis.

Upon arrival at the ALS preparation facility, all of the samples are logged into
the laboratory’s tracking system (LOG-22). Then the entire sample is weighed,
dried if necessary, and fine crushed to better than 70% passing 2 mm (-10

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mesh). The sample is then split through a riffle splitter and a 250 g sub-sample
is taken and pulverized to 85% passing 75 microns (-200 mesh).

The analytical procedure for the gold mineralization is fire assay followed by an
atomic adsorption (AA) analysis. A 30 g nominal pulp sample weight is used.
The detection range for the gold assay is 0.005 to 10 ppm.

The analytical procedure for the silver mineralization is an aqua regia digestion
followed by an ICP-AES analysis. The detection range for the silver assay is
0.2 ppm to 100 ppm.

These analytical methods are optimized for low detection limits. The assays for
evaluation of high-grade silver (+/- gold) mineralization have been optimized for
accuracy and precision at high concentrations (>20 ppm for silver). The
analytical procedure for high-grade gold and silver mineralization is fire assay
followed by a gravimetric finish. A 30 g nominal pulp sample weight is used.
The detection ranges are 0.5 to 1,000 ppm for the gold assay and 5 to 3,500
ppm for the silver assay.

The pulps from selected drill holes are also subjected to aqua regia digestion
and inductively coupled plasma (ICP) multi-element analysis (ME-ICP41).

ALS Minerals has developed and implemented at each of its locations a Quality
Management System (QMS) designed to ensure the production of consistently
reliable data. The system covers all laboratory activities and takes into
consideration the requirements of ISO standards.

The QMS operates under global and regional Quality Control (QC) teams
responsible for the execution and monitoring of the Quality Assurance (QA) and
Quality Control programs in each department, on a regular basis. Audited both
internally and by outside parties, these programs include, but are not limited to,
proficiency testing of a variety of parameters, ensuring that all key methods
have standard operating procedures (SOPs) that are in place and being
followed properly, and ensuring that quality control standards are producing
consistent results.

ALS maintains ISO registrations and accreditations. ISO registration and


accreditation provides independent verification that a QMS is in operation at the
location in question. Most ALS Minerals laboratories are registered or are

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pending registration to ISO 9001:2008, and a number of analytical facilities


have received ISO 17025 accreditations for specific laboratory procedures.

Endeavour Silver’s sampling process, including handling of samples, preparation


and analysis, is shown in the quality control flow sheet in Figure 11.1.

Figure 11.1 Flowsheet for Terronera Core Sampling, Preparation and


Analysis

It is P&E’s opinion that sample preparation, security, and analytical procedures


for the Terronera Project drill program were adequate for the purposes of this
Mineral Resource Estimate.

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12.0 DATA VERIFICATION

12.1 Site Visit and Due Diligence Sampling

The Terronera Project was visited by Mr. David Burga, P. Geo. on September
11, 2014, October 7, 2014 and June 14, 2016, for the purposes of completing
site visits and due diligence sampling. General data acquisition procedures,
core logging procedures, and quality assurance/quality control (QA/QC) were
discussed during the visit.

During the June, 2016 site visit Mr. Burga collected 12 samples from 11 drill
holes. A range of high, medium, and low-grade samples were selected from the
stored core samples. Samples were collected by taking a 1⁄4 split of the half
core remaining in the core box. Once the samples were 1⁄4 sawn they were
placed in a large polyurethane bag and brought back to Canada by Mr. Burga.
The samples were couriered from P&E’s office in Brampton to AGAT’s
Laboratory in Mississauga for preparation and analysis.

Samples at AGAT were analyzed for gold by fire assay with AAS finish and for
silver by 4-Acid digestion with an AAS finish.

Results of the site visit due diligence samples are presented in Figures 12.1
and 12.2. The results for gold were acceptable but all of the P&E analyses for
silver were under 110 ppm (and as low as 12% of the Endeavour Silver values).
These values are represented by the red line on Figure 12.2. Due to this
discrepancy, P&E obtained the pulps from AGAT for reanalysis purposes. P&E
personnel repackaged the pulps, placed them in new sample bags, gave them
new sample numbers, and submitted the samples back to AGAT for reanalysis.
The analysis of the pulp samples yielded values closer to the Endeavour Silver
samples than the first round of AGAT testing and no further action was taken.
The reanalysis samples are represented by the green line on Figure 12.2.

Variances in analyses between core duplicates typically have the highest


sampling variance due to geologic variability and inter-laboratory analytical
variance. Considering the site visit samples were quarter core and therefore
weighed less than the original half core (i.e. difference in sample volume), the
comparison between the original results and the P&E results demonstrates that
the tenor for the two metals are similar.

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Figure 12.1 Terronera Due Diligence Sample Results for Gold: June 2016

Figure 12.2 Terronera Due Diligence Sample Results for Silver: June 2016

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12.2 Quality Assurance/Quality Control Program

Endeavour Silver implemented and monitored a thorough quality


assurance/quality control program (“QA/QC” or “QC”) for the diamond drilling
undertaken at the Terronera Project over the 2014-2016 period. QC protocol
included the insertion of QC samples into every batch of approximately 20
samples. QC samples included one standard (certified reference material), one
blank, and one crushed field duplicate. Check assaying was also conducted on
the samples at a frequency of approximately 5%.

A total of 7,728 samples, including QC samples, were submitted during


Endeavour Silver’s most recent surface drilling program at Terronera
(September, 2014 through 2016), as shown in Table 12.1. A total of 361 pulps
were also submitted for check assaying.

Table 12.1 Terronera Project QC Samples

Samples No. of Samples Percentage (%)


Standards 372 4.8 %
Duplicates 367 4.7 %
Blanks 366 4.7 %
Normal 6,623 85.7 %
Total 7,728 99.99%
Check samples 361 4.7 %

12.3 Certified Reference Materials

Endeavour Silver uses commercial certified reference material (“CRM” or


“standards”) to monitor the accuracy of the laboratory. The CRM’s were
purchased from an internationally-recognized company, CDN Resource
Laboratories Ltd., of Langley, B.C., Canada. Each CRM sample was prepared
by the vendor at its own laboratories and shipped directly to Endeavour Silver
along with a certificate of analysis for each standard purchased.

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From 2014 through 2016, a total of 372 CRM samples were submitted at an
average frequency of 1 in 20 samples. The standards were ticketed with pre-
assigned numbers in order to avoid inadvertently using numbers that were
being used during logging.

Four different standards were submitted and analyzed for gold and silver as
summarized in Table 12.2.

Table 12.2 Summary of CRM Samples Used in Terronera Surface


Diamond Drilling Program

Reference Reference
Standard Assays Standard Assays
Reference Reference Reference (Certificate) (Calculated)
Standard Number Source
Au (g/t) Ag (g/t) Au (g/t) Ag (g/t)

CDN Resource
EDR-32 CDN-FSM-7 0.90 65 0.89 67
Laboratories
CDN Resource
EDR-38 CDN-ME-19 0.62 103 0.63 99.1
Laboratories
CDN Resource
EDR-40 CDN-ME-1302 2.41 418.9 2.44 416.9
Laboratories
CDN Resource
EDR-41 CDN-GS-2Q 2.37 73.2 2.44 75.8
Laboratories
CDN Resource
EDR-42 CDN-ME-1408 2.94 396 2.94 387
Laboratories
CDN Resource
EDR-43 CDN-ME-1307 1.02 54.1 1.01 55.3
Laboratories

The Company was originally monitoring the standards by utilizing the certified
mean and standard deviation values resulting from the round robin assaying
undertaken during the certification process for each of the CRMs. In 2013,
Endeavour Silver decided to modify the protocol for monitoring the standards
by utilizing the available ALS laboratory data to improve the control limits for the
CRM’s.

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For each of the four standards used with greater than 25 sample results from
the primary lab (ALS) they recalibrated the mean and standard deviation using
available data. This is an acceptable practice implemented by some
Companies to strengthen the control limits (CL’s) utilized in an ongoing QC
program, with a larger dataset being more reliable than the smaller number of
round robin results used to calculate certified values.

CL’s for all CRMs were recalibrated as summarized in Table 12.2.

Endeavour Silver’s general rules for a batch failure are as follows:


 A reported value for a standard greater than 3 standard deviations
from the mean is a failure
 Two consecutive values of a standard greater than 2 standard
deviations from the mean is a failure
 A blank value over the acceptable limit is a failure
 Results of each standard are presented separately. Most values for
gold and silver were found to be within the control limits and the
results are considered satisfactory
 Only one silver sample (SDH17789) was outside the three standard
deviation threshold and also inside the resource zone. This failure
caused the reanalysis of a batch of 22 samples (SDH17779 to
SDH17799). All standards were within acceptable limits in the
reanalysis and no further action was taken
 Only one gold sample (SDH18413) and one silver sample
(SDH14132) were outside the three standard deviation threshold.
These samples were located outside the mineralized zones, however,
and no further action was deemed necessary
 Several values for gold and silver were outside the two standard
deviations but were not contiguous and none of them above or below
three standard deviations, which fulfill the protocol outlined above,
and no further action was required

Graphs of the results for each of the CRM’s are presented in Figures 12.3
through 12.14. The green line represents the mean and the red lines represent
+/-2 standard deviations from the mean.

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Figure 12.3 Performance of CDN-FSM-7 for Gold

Figure 12.4 Performance of CDN-FSM-7 for Silver

Figure 12.5 Performance of CDN-ME-19 for Gold

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Figure 12.6 Performance of CDN-ME-19 for Silver

Figure 12.7 Performance of CDN-ME-1302 for Gold

Figure 12.8 Performance of CDN-ME-1302 for Silver

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Figure 12.9 Performance of CDN-GS-2Q for Gold

Figure 12.10 Performance of CDN-GS-2Q for Silver

Figure 12.11 Performance of CDN-ME-1408 for Gold

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Figure 12.12 Performance of CDN-ME-1408 for Silver

Figure 12.13 Performance of CDN-ME-1307 for Gold

Figure 12.14 Performance of CDN-ME-1307 for Silver

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12.3.1 Performance of Blank Material

Blank samples were inserted to monitor possible contamination during both


preparation and analysis of the samples in the laboratory. The blank material
used was commercial bentonite purchased for Endeavour Silver’s drilling
programs on the Terronera Project. The bentonite used was National brand
bentonite (1/4”).

Blank samples were inserted at an average rate of approximately 1 in 20


samples with a total of 366 blank samples submitted.

The tolerance limit used for the blank samples is 10 times the lower detection
limit for the corresponding assay method (gold = 0.05 ppm and silver = 2 ppm).

Graphs of the results for the blank samples are presented in Figures 12.15 and
12.16.

Figure 12.15 Performance of Blanks for Gold

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Figure 12.16 Performance of Blanks for Silver

Only one sample for gold (SDH16161) was above the set tolerance limit and
the sample was located in an area outside the mineralized zones and no further
action was considered necessary.

A total of four samples for silver (SDH13726, SDH13747, SDH16392 and


SDH17740) were outside the tolerance limit, two of which (SDH137474 and
SDH16392) were outside the mineralized zone and no further action was taken.
The other two samples (SDH13726 and SDH16392) were in the mineralized
area but were not considered significant when compared to contiguous, high-
grade samples and no further action was taken. It is possible that
contamination from the high-grade samples caused the failures.

12.4 Duplicate Samples

Crushed field duplicate samples were used to monitor the potential mixing up of
samples and precision of the data. Duplicate core samples were prepared by
Endeavour Silver personnel at the core storage facility at the Terronera Project.

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Preparation involved the random selection of a sample interval to be duplicated


and, at the time of sampling, this interval was sawn in half using a saw or
manual cutter. One half of this interval was then selected for sampling and was
crushed manually with the use of a hammer. The crushed sample was then
mixed and divided by hand into two samples.

The original and duplicate samples were tagged with consecutive sample
numbers and sent to the laboratory as separate samples. Duplicate samples
were collected at a rate of 1 in 20 samples.

A total of 367 duplicate samples were taken, representing 4.7% of the total
samples.

The results of the duplicate sampling are shown graphically in Figures 12.17
and 12.18.

Figure 12.17 Performance of Crushed Field Duplicates for Gold

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Figure 12.18 Performance of Crushed Field Duplicates for Silver

Data precision for the crushed field duplicates is poor, as to be expected.

12.5 Check Assays

Endeavour Silver routinely conducts check analyses at a secondary laboratory


to evaluate the accuracy of the primary laboratory.

Random pulps were selected from original core samples and sent to a second
laboratory to verify the original assays and monitor any possible deviation due
to sample handling and laboratory procedures.

A total of 361 pulp samples were sent to a third party laboratory (Inspectorate)
for check analyses, equating to approximately 4.7% of the total samples taken
during the drilling program.

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Correlation coefficients are high, at >0.98 for both gold and silver, showing
excellent overall agreement between the original ALS-Chemex assay and the
Inspectorate check assay.

The results of the check sampling program are shown by way of scatter
diagrams in Figures 12.19 and 12.20.

Figure 12.19 Performance of Inspectorate Check Assays for Gold

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Figure 12.20 Performance of Inspectorate Check Assays for Silver

12.6 Recommendations and Conclusions

Endeavour Silver implemented a comprehensive QA/QC program for 2014


through 2016 at the Terronera Project that saw some minor adjustments with
regards to sampling protocols from its 2012-2014 procedures. The
recommendation is made to insert both coarse reject and pulp duplicates for
future drilling at the Terronera Project to review precision at all stages.

Based upon the evaluation of the QA/QC program undertaken by Endeavour


Silver, as well as P&E’s due diligence sampling, it is P&E’s opinion that the
results are suitable for use in the current Mineral Resource Estimate.

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13.0 MINERAL PROCESSING AND METALLURGICAL TESTING

Resource Development Inc. (RDi) conducted locked and open cycle flotation
testing for the Terronera project at its metallurgical testing facility in Wheat
Ridge, Colorado. The primary objectives of the test program were to develop
the levels of recovery and final concentrate characteristics.

Gold and silver recoveries were developed for materials originating from the
Terronera project. The metallurgical data developed was used to support this
PFS.

For PFS purposes, a process comprised of a flotation circuit and cyanidation of


a high grade cleaner scavenger (CST) tail flotation product was selected. The
locked cycle flotation data developed indicate that production of a high grade
gold and silver bearing second cleaner concentrate followed by cyanide
leaching of the CST flotation product will enhance the precious metals overall
recovery.

The flow sheet developed for Terronera includes a two stage crushing coupled
with closed circuit grinding to achieve a relatively coarse flotation feed grind
size of 80 percent passing 200 mesh (75 microns).

The PFS is based on a 1,000 tpd throughput in Years 1 and 2 expanding to


2,000tpd in Year 3. The project will produce a high grade concentrate and
transport the CST flotation product to an off-site facility to be leached by others.

Based on recently developed locked cycle flotation metallurgical data, a flow


sheet including the following processing steps is recommended for Terronera.
 Crushing (two stage)
 Grinding (ball mill)
 Flotation
o Rougher flotation
o Cleaners flotation (two stage) circuit
o Cleaner scavenger circuit
 Agitated Cyanide Leach (by others)
o Cleaner scavenger tail

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 Filter Plant
 Dry Tailings Storage Facility (TSF)
Using the recommended flow sheet the marketable products for the project
include the following:
 Second Cleaner Flotation Concentrate
 Dore

13.1 Base Case Flotation and Cyanidation of CST

The overall mass balance for this processing option is provided in Table 13.1.
The overall calculated recovery was 74.71 and 87.02 percent for gold and
silver, respectively.
The following assumptions were made in preparation of the mass balance:
 The precious metal extracted into solution was recovered as Dore
 Approximately 90 percent gold and silver dissolution was achieved in
cyanidation
 Overall recovery is the sum of the precious metal reporting to the
final products in the flotation concentrate and Dore

Table 13.1 Base Case Flotation Cyanidation of Cleaner Scavenger Tail

Weight Distribution % Assay (g/t)


Metallurgical Product
(%) Au Ag Au Ag
Cleaner Concentrate 1.50 67.50 80.70 54.90 14625
CST Leached Residue 2.30 1.09 0.78 0.40 82
Rougher tail 96.20 24.20 12.20 0.30 34
Dore ---- 7.21 6.32 -- --
Calculated Head 100.00

This processing option can be summarized as follows:


 The overall gold recovery was 74.71 percent
 The overall silver recovery was 87.02 percent
 The CST product leached represents approximately 2.3 percent by
weight of the feed to flotation

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Trace elements detected in the Inductively Coupled Plasma (ICP) scan


conducted in the final concentrate product indicate that deleterious elements
identified include As, Cd, Cr, Hg, and Sb. The analytical data indicate that one
of the most abundant elements is iron. The sulfur flotation mass balance
calculations indicate that a significant portion of the sulfur is present as sulfide.
These findings are corroborated by the mineralogical examination of the
flotation tailings sample and the flotation tests results which indicate the
presence of pyrite.

13.2 Metallurgical Study


A comprehensive metallurgical study was designed for development of the data
required to support the PFS. Its main objectives were to assess the impact of
precious metal grade and grind size upon flotation recovery. In addition, the
characteristics of the flotation concentrate produced were evaluated with
respect to precious metal and impurities content. Additional studies included
as part of the metallurgical investigation are outlined below:
 Comminution Study
 Solid-Liquid Separation Study
 Evaluation of Differential Flotation of Copper-Lead-Zinc
Mineralization
 High Pressure Grinding Rolls (HPGR) testing
 Mineralogical Examination (Quemscan & petrographic analysis)

In addition, the samples under study were analyzed by ICP scan and metallic
gold as well as silver and cyanide soluble gold / silver.

13.3 Metallurgical Testing


The metallurgical test program included comprehensive evaluation of the
flotation parameters for one composite representing an average grade of the
deposit and three composite samples representing low, medium, and high
grade materials identified in the deposit. Each composite sample was subjected
to rougher flotation testing at three different grind sizes including 80 percent
passing 150, 200 and 270 mesh (Tyler). Precious metals and metal sulfides
mineralization flotation characteristics were evaluated in an attempt to develop
the levels of gold and silver recoveries that could be achieved at different
grinds.

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13.4 Sample Characterization

A total of four composite samples were evaluated for a metallurgical response


to a flotation process. An additional sample was submitted for comminution and
abrasion testing. The samples identification follows:

 TR2015 – 1 AVERAGE GRADE


 TR2016 – 03 LOW GRADE
 TR2016 – 01 MEDIUM GRADE
 TR2016 – 02 HIGH GRADE
 TERRONERA COMMINUTION TESTING

RDi received approximately 160 kilograms of bulk sample labeled TR2015-1.


The material was crushed to P100 passing 6 mesh, blended, and split into 1 kg
and 10 kg charges. A representative sample was pulverized and submitted for
head analyses. The analytical data developed on the Terronera composite
average grade sample are outlined in Table 13.2.

Table 13.2 Head Analyses of Composite Sample TR2015 - 1

Element (units) Assay


Au, g/t 1.124
Ag, g/t 225.0
CN Sol Au g/t 0.92
CN Sol Ag g/t 201.0
Fe mg/kg 9440
Hg mg/kg 0.11
Sulfide S % 0.23
Sulfate S % 0.16
Total S % 0.39

The feed grade was 1.12 g/t Au and 225 g/t Ag. Approximately 81.9% of the
gold and 89.3% of the silver present in the sample was cyanide soluble. The
total sulfur assayed 0.39% with slightly more than half of the total coming from
sulfide sulfur.

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13.5 Base Case - Second Cleaner Concentrate Flotation

The locked cycle flotation data developed on an average grade composite


sample indicate that production of a marketable concentrate is feasible. The
data in Table 2.1 indicate that relatively low levels of precious metal recovery
may be obtained by flotation at a relatively coarse primary grind (P80 200
mesh).

Table 13.3 outlines the relevant flotation data developed for this processing
option.

Table 13.3 Base Case Flow Sheet

Weight Distribution % Assay (g/t)


Metallurgical Product
(%) Au Ag Au Ag
Cleaner concentrate 1.50 67.50 80.70 54.90 14625
Cleaner Scavenger tail 2.30 8.30 7.10 4.36 837
Rougher tail 96.20 24.20 12.20 0.30 34
Combined final tail 98.50 32.50 19.30 0.40 53
Calculated head 100.00 100.00 100.00 1.19 267

It is estimated that the second cleaner concentrate will contain approximately


68 percent of the gold and 80 percent of the silver contained in the feed to
flotation.

13.6 Estimated Cleaner Scavenger Tail Leach Extraction

The efficiency applied in the cyanide leach circuit corresponds to the levels of
extraction achieved on a cleaner scavenger tail flotation product. The levels of
precious metal extraction were determined in duplicate by the metallurgical
laboratory in Wheat Ridge, Colorado (RDi). The metallurgical data are
summarized in Tables 13.4 and 13.5.

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Table 13.4 Test No. 1 Cyanidation of Cleaner Scavenger Tail

Reagents
Sample Distribution % Assay (g/t) Consumption
Metallurgical
Weight (kg/t)
Products
(grams)
Au Ag Au Ag NaCN Ca(OH)2
Pregnant Solution 89.60 89.30 1.56 324 4.69 7.11
CST Leached
247.5 10.40 10.70 0.39 81
Residue
Calculated Head 250.0 100.00 100.00 3.80 761

Table 13.5 Test No. 2 Cyanidation of Cleaner Scavenger Tail

Reagents
Sample Distribution % Assay (g/t) Consumption
Metallurgical Weight (kg/t)
Products (grams)
Au Ag Au Ag NaCN Ca(OH)2

Pregnant Solution 88.80 89.40 1.50 337 4.66 6.79


CST Leached
248.8 11.20 10.60 0.41 82.4
Residue

Calculated Head 250.0 100.00 100.00 3.60 781

The levels of precious metal extraction are in a 90 percent range for both gold
and silver. The cyanide consumption averaged 4.7 kg per tonne. The lime used
as pH modifier was added as calcium hydroxide. For these tests, lime addition
represents the consumption at approximately 7 kg per tonne.

The metallurgical data developed indicate that leaching of the CST would be
required in order to enhance recovery of gold and silver.

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Cyanide leaching of the CST provided the highest levels of precious metal
recovery for Terronera. Production of a high grade precious metal bearing
concentrate product at Terronera coupled with transportation and off-site
cyanidation of the CST flotation product will provide an enhanced level of
precious metal recovery.

Additional leach test work conducted by Endeavour Silver indicated that lower
levels of precious metal extraction were obtained at Guanacevi’s leaching
operation metallurgical laboratory. Leaching parameters currently in practice at
Guanacevi were applied for the leach tests. The seemingly lower extractions
obtained may be attributed to the following factors:

 Shorter retention time (60 hrs. vs 120 hrs.)


 Cyanide addition at 24 hour intervals
 Leach solution level of saturation

Approximately 20 kilograms of each of the three samples (representing various grades)


were procured for evaluation. The samples were labeled TR2016-01 (Medium Grade),
TR2016-02 (High Grade), and TR2016-03 (Low Grade). The material was crushed to
P100 passing 6 mesh, blended, and split into 1 kg charges. A representative sample
was pulverized and submitted for head analyses. The results are shown in Table 13.6.

Table 13.6 Samples Characterization and Head Assay, Fire Assay, and
Whole Rock Analysis (%)

Head Assays
Ore Grade Item Au Ag SiO2 CaO Fe2O3 Total S Sulfide
(g/t) (g/t) (%) (%) (%) (%) (%)
Low (LG) TR2016-03 0.967 115.7 89.2 4.60 1.08 0.45 0.18
Medium (MG) TR2016-01 2.014 241.4 84.8 5.60 1.13 0.24 0.05
High (HG) TR2016-02 3.734 881.3 92.0 1.13 1.49 0.99 0.57

The composite samples provided by Endeavour Silver are deemed


representative of materials with various precious metal grades present at
Terronera:

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 The whole rock analyses showed some variability


 The low and medium grade composites showed lower quartz contents
when compared to the high grade composite
 Differences are observed in the CaO and sulfide contents
 Iron content is higher in the high grade composite
 Higher levels of iron and sulfide provide an indication of presence of
pyrite in the high grade composite

13.7 Mineralogy

The analytical and mineralogical data indicate that the rock matrix is comprised
mainly of quartz. The vein material tested had a specific gravity of 2.65. This
correlates well with the mineralogy results.

13.8 Comminution Testing

A Bond's Ball Mill Work Index was determined for four samples from various
areas of the deposit for variability testing. The samples were designated as
501, 502, 503 and n504. Each sample was tested at a closed size of 100 mesh.
In addition, the Bond's Ball mill work index was determined for the original
composite TR 2015-1 sample at a closed size of 100 and 200 mesh. The BWi
results are summarized in Table 13.7.

Table 13.7 Bond’s Ball Mill Work Index Test Results

Sample BWi @100 mesh (kWh/t)


501 15.82
502 16.98
503 16.73
504 17.65
TR 2015-1 17.36
Sample BWi @200 mesh (kWh/t)
TR 2015-1 17.28

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Samples were submitted to Hazen Research for additional comminution testing.


The samples were subjected to SMC testing, Bond rod mill work index (RWi),
Bond abrasion index (Ai), and Bond impact work index testing (CWi). The
results are summarized in Table 13.8.

Table 13.8 Comminution Testing Results

RWi Ai CWi SCSE


(kWh/t) (g) (kWh/t) (kWh/t)
17.2 1.0916 8.3 9.85

Based on the results obtained the material would be classified as hard and
highly abrasive. These grindability test results correlate well with previous data
developed for materials from Terronera.

13.9 Grind Calibration and Rougher Flotation

Test charges from each sample were ground in a laboratory rod mill at
60 percent solids to establish a correlation between grind time and particle
size distribution. Three targeted 80 percent passing particle size distributions
were specified 150, 200 and 270 mesh Tyler.

Rougher flotation tests were conducted i n d u p l i c a t e on each of the three


TRPM composite samples at each of the target grind sizes.

For all tests, the following flotation reagents and conditions were applied:

 86 g/t of AP-3418A added in the grind and flotation stages


 28 g/t of A-241 added in the grind
 107 g/t of CuSO4 added in the grind

 33 g/t of F-65 added in the condition and flotation


 30 percent pulp density
 Natural pH using tap water
The individual composites flotation test results are outlined in Table 13.9.

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Table 13.9 Rougher Flotation Grind Size vs Recovery Low – Medium –


High Grade Composites

Grind Size Concentrate Assay Recovery (%)


P80 Weight
Sample ID Au Ag Fe
(micron) (%) Au Ag Fe
(g/t) (g/t) (%)
106 5.70 14.18 1766 7.54 79.00 81.20 38.00
TR2016 - 03
Low Grade 75 9.10 9.73 1128 6.30 86.00 88.10 45.00

53 11.7 0 8.17 903 7.03 89.80 89.40 49.20

TR2016 - 01 106 7.00 22.49 3431 5.64 77.10 88.10 34.00


Medium
75 7.80 21.19 3089 6.28 80.90 89.40 35.50
Grade
53 12.10 15.11 2022 5.80 86.80 89.10 40.30

106 6.50 47.86 9767 10.16 82.19 91.10 48.40


TR2016 - 02
75 8.00 38.94 8183 10.78 86.20 54.00
High Grade 93.00
53 9.40 36.81 7003 10.13 90.10 92.90 49.10

 Gold recovery is sensitive to grind size. Silver recovery does not appear to
be as sensitive to grind in the Medium and High Grade composites
 Precious metals appear to be associated with sulfide mineralization
present. A higher precious metal content correlates well with higher iron
contents in the Rougher concentrates
 The medium and higher grade composites showed a lower sensitivity for
silver recovery when compared to the low grade composite.
 The Terronera Low, Medium and High grade composites evaluated had a
similar response to flotation results obtained in previous testing conducted
in 2014. Precious metals recoveries were similar. The low grade
composite exhibited lower silver recovery at coarser grinds.

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13.10 Processing options

Processing options to be considered for Terronera for optimization of


consumables and energy requirements include the following:
 Coarse primary grind followed by Rougher flotation and fine grinding
 Application of HPGR technology coupled with fine grinding using
vertical and high intensity grind (VTR & HIG) milling equipment
 Ore sorting

13.11 Gravity Concentration

Small quantities of metallic gold and silver were indicated by metallic assay
conducted on the composite samples at various grades. Inclusion of a gravity
concentration circuit is not supported by the metallic assay data developed in
this evaluation. However, higher grade zones should be analyzed for metallic
gold and silver content to address the possibility of presence of coarse precious
metal in higher grade zones in the deposit.

13.12 Process Mass Balance

In order to develop projected levels of precious metal recovery for the project a
metallurgical simulation model of the beneficiation plant was constructed. A
steady state mass balance was calculated for the entire process including the
flotation circuit. The following parameters and processing circuits were taken
into account in the development of the metallurgical model and mass balance
calculations.

 A 1,000 tonne per day beneficiation plant


 Coarse ore stockpile area
 Two stage crushing circuit
o Fine ore storage
 Single ball mill grinding circuit
o Grind of 80 percent passing 200 mesh (Tyler)
 Flotation Circuit
o Rougher & Scavenger
o Two stage cleaning circuit

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 Concentrate and CST thickeners


o Filtration
o Products storage
 Reclaim & Fresh Water systems
 Reagent Mixing & Addition
 Tailings thickener
 Tailing Storage Facility (TSF)

13.13 Conclusions

Using the metallurgical data developed on a medium grade composite sample


from Terronera project the expected levels of recovery for gold and silver are
74.71 and 87.02 percent, respectively. These levels of recovery may be
achieved at grind of 80 percent passing 200 mesh.

The benefits of a finer grind are offset by an increase in energy requirement for
grinding. Optimization of the grinding circuit configuration may be necessary in
order to achieve the fine grind required to enhance precious metal recovery.

The metallurgical data developed lead to the following conclusions:

 Precious metal recovery is sensitive to grind size. Precious metals appear


to be associated with sulfide mineralization present

 Flotation of separate lead and zinc concentrates provided poor levels of


base metals recoveries. Significant losses of gold and silver were incurred
when trying to clean the lead and zinc Rougher concentrates

 The Terronera Low Medium and High grade composites evaluated had a
similar response to the flotation parameters evaluated. Precious metals
recoveries were similar

 In general, high levels of pyrite recovery were obtained at the coarsest


grind evaluated (100 mesh)

13.14 Recommendations

The following recommendations are presented for consideration in the process


design criteria for development of the Terronera Project:

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 The lowest energy requirement for size reduction could be provided by


inclusion of an HPGR crusher as the tertiary crusher

 Flotation of a bulk concentrate at a coarse grind to enhance recovery


(Hydrofloat) may provide the desired savings in grinding. The bulk
concentrate can be subjected to fine grinding at a much lower energy
requirement. This will result in improved levels of process recovery and
enhanced stability for the TSF.

 Ore sorting techniques should be evaluated to upgrade the mill feed

 Optimization of the grinding circuit is recommended for optimization of


costs associated with grinding

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14.0 RESOURCE ESTIMATE

14.1 Introduction

This report section is to update the Mineral Resource Estimate from the
Preliminary Economic Assessment Report for the Endeavour Silver Terronera
Project dated April 30, 2015. The Mineral Resource Estimate presented herein
is reported in accordance with the Canadian Securities Administrators’ National
Instrument 43-101 (“NI 43-101”) and has been estimated in conformity with
generally accepted CIM “Estimation of Mineral Resource and Mineral Reserves
Best Practices” guidelines. Mineral Resources are not Mineral Reserves and do
not have demonstrated economic viability. There is no guarantee that all or any
part of the Mineral Resource will be converted into Mineral Reserve.
Confidence in the estimate of Inferred Mineral Resources is insufficient to allow
the meaningful application of technical and economic parameters or to enable
an evaluation of economic viability worthy of public disclosure. Mineral
Resources may be affected by further infill and exploration drilling that may
result in increases or decreases in subsequent Mineral Resource Estimates.

This Mineral Resource Estimate was undertaken by Yungang Wu, P.Geo., and
Eugene Puritch, P.Eng., FEC of P&E Mining Consultants Inc. of Brampton,
Ontario, both independent Qualified Persons in terms of NI 43-101, from
information and data supplied by Endeavor Silver. The effective date of this
Mineral Resource Estimate is April 3, 2017.

14.2 Database

All drilling and assay data were provided in the form of Excel data files by
Endeavour Silver. The Gems database for this Mineral Resource Estimate,
constructed by P&E, consisted of 138 core holes totaling 38,366.6 metres and
36 channel samples totaling 77.25m (Table 14.1). A drill hole plan is shown in
Appendix A.
Table 14.1 Drill Hole Database Summary
Drilling Year # Drill Holes Metres of Drilling # of Samples
2011-2014 79 24,268.05 6,511
2015-2016 59 12,347.50 6,440
Total 138 38,366.60 12,951
Channel 77.25 36

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The assay database contains 12,951 Au and, Ag assays. The Au and Ag


assays were discounted by core recovery and Marked as Au_R and Ag_R in
the database which were utilized for the Mineral Resource Estimate.

All drillhole survey and assay values are expressed in metric units, while grid
coordinates are in the WGS84, Zone 13Q UTM geodetic reference system.

14.3 Data Verification

P&E carried out data verification for silver and gold assays contained within the
mineral resource wireframes against laboratory certificates that were obtained
directly from ALS Chemex laboratory in Hermosilla, Mexico. No errors were
found.

Endeavour Silver adjusted 1,091 raw Ag and Au assays for core recovery, of
which 257 assays were used for the Mineral Resource Estimate. If core
recovery was 92%, for example, Ag and Au assay values were reduced to 92%
of the original analytical value. The adjusted values are recorded in the
database as “Ag_R” and “Au_R” and these values were used for the Mineral
Resource estimation. No study was provided to support this practice. P&E’s site
visit confirmed that core recovery was generally very good, the vein was very
competent and recovery was over 90% for core examined. The oxidation level
was generally low and the mineralization appeared unleached. P&E agrees
with Endeavour Silver that the use of “recoverable” grades is a conservative
approach.

In addition to the data verification reported above, P&E reviewed the QAQC for
the Terronera Project laboratory analyses and concludes that the analyses are
acceptable. In P&E’s opinion the drill hole and assay/analytical databases may
be used for the estimation of Mineral Resources.

14.4 Domain Interpretation

Endeavour Silver constructed 3D mineral wireframes for four veins based on a


cut-off grade of 150 g/t AgEq. The formula applied for AgEq was AgEq = Ag +
Au*70. P&E reviewed and modified the wireframes and created two new
additional mineralized wireframes. Historical mined out areas were clipped from
the Terronera Vein (TRV) with the stopes provided by Endeavour Silver.

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A total of six (6) mineralization vein wireframes were generated during the
course of this Mineral Resource Estimate. The wireframes were created from
successive polylines on NW oriented vertical sections with 50m spacings. In
some cases, mineralization below the 150 g/t AgEq cut-off was included for the
purpose of maintaining zonal continuity. On each section, polyline
interpretations were digitized from drill hole to drill hole but not typically
extended more than 50 metres into untested territory. Minimum constrained
sample length for interpretation was 2.0 metres. The resulting domains were
used as hard boundaries during Mineral Resource estimation, for rock coding,
statistical analysis and compositing limits. The 3D domains are presented in
Appendix B.

Topographic surface and mined voids were provided by Endeavour Silver. The
topographic surface was created using satellite image which presented some
discrepancies with the surveyed drill hole collars. The influence on the Mineral
Resource Estimate by these discrepancies is minor, however, it is
recommended that Endeavour Silver survey the topography of the Terronera
Deposit in future with a differential GPS.

14.5 Rock Model Code Determination

A unique rock model code was assigned for each mineralized domain in the
resource model. The codes applied for the models are tabulated in Table 14.2.

Table 14.2 Model Rock Code Description and Volume

Domains Rock Model Code Volume (m3)


TRV 100 1,779,753
HW1 200 316,531
HW2 300 148,242
HW3 400 17,917
HW4 500 18,414
FW 600 23,185
Air 0
Waste 99

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14.6 Compositing

The basic statistics of all constrained assays and sample lengths are
presented in Table 14.3.

Table 14.3 Basic Statistics of all Constrained Assays and Sample Lengths

Length
Variable Au g/t Ag g/t
(m)
Number of Samples 1,710 1,710 1,710
Minimum Value 0.01 0.30 0.05
Maximum Value 36.50 15,532.50 4.00
Mean 2.10 305.61 0.72
Median 0.90 89.00 0.60
Variance 11.98 876,784.42 0.15
Standard Deviation 3.46 936.37 0.39
Coefficient of Variation 1.65 3.06 0.55

Approximately 88% of the constrained sample lengths were 1m or less, with an


overall average of 0.72 m. In order to regularize the assay sampling intervals
for grade interpolation, a one metre compositing length was selected for the drill
hole intervals that fell within the constraints of the mineralized domains.
Composites were calculated for Au and Ag over 1.0m lengths starting at the
first point of intersection between assay data hole and hanging wall of the 3-D
zonal constraint.

The compositing process was halted upon exit from the footwall of the
aforementioned constraint. Un-assayed intervals and detection limit assays
were set to 0.001 g/t or 0.001% for all elements. Any composites that were less
than 0.25m in length were discarded so as not to introduce any short sample
bias in the interpolation process. The constrained composite data were
extracted to point files for a capping study. The composite statistics are
summarized in Table 14.4.

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Table 14.4 Composite Summary Statistics

Variable Au_Comp Ag_Comp Ag_Cap Au_Cap

Number of
1,313 1,313 1,313 1,313
Samples
Minimum
0.001 0.001 0.001 0.001
Value g/t
Maximum
28.575 11,492.397 2,000 21.0
Value g/t

Mean g/t 1.847 257.298 210.971 1.827

Median g/t 0.931 92.119 92.119 0.931

Geometric
0.794 88.988 87.486 0.793
Mean g/t

Variance 7.090 445,368.111 115593.799 6.360

Standard
2.663 667.359 339.991 2.522
Deviation
Coefficient
1.442 2.594 1.612 1.381
of Variation

14.7 Grade Capping

Grade capping was investigated on the 1.0m composite values in the database
within the constraining domains to ensure that the possible influence of erratic
high values did not bias the database. Ag and Au composite Log-normal
histograms were generated for each mineralized domain and the resulting
graphs are exhibited in Appendix C.

The Ag and Au grade capping values are detailed in Table 14.5 and 14.6
respectively. The capped composites were utilized to develop variograms and
for block model grade interpolation.

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Table 14.5 Ag Grade Capping Values


Total # of Capping Mean of CoV of
# of Capped Mean of Raw CoV of Raw Capping
Domains Composite Value Ag Capped Capped
Composites Composites Composites Percentile
s (g/t) Composites Composites

TRV 938 2,000 23 277.48 228.24 2.66 1.65 97.5%


HW1 212 1,000 4 172.90 156.62 1.83 1.29 98.1%
HW2 107 1,000 6 253.67 168.20 2.56 1.42 94.4%
HW3 14 600 2 334.83 256.46 1.11 0.85 85.7%

HW4 23 No Cap 0 108.25 108.25 1.58 1.58 100.0%


FW 19 800 3 346.21 296.50 1.12 0.98 84.2%

Table 14.6 Au Grade Capping Values


Capping Mean of CoV of
Total # of # of Capped Mean of Raw CoV of Raw Capping
Domains Value Au Capped Capped
Composites Composites Composites Composites Percentile
(g/t) Composites Composites

TRV 938 No Cap 0 1.82 1.2 1.38 1.38 100.0%

HW1 212 15 2 2.05 1.95 1.63 1.39 99.1%

HW2 107 15 1 2.13 2.09 1.31 1.22 99.1%

HW3 14 No Cap 0 0.59 0.59 0.90 0.90 100.0%

HW4 23 No Cap 0 1.75 1.75 1.12 1.12 100.0%

FW 19 No Cap 0 0.3 0.43 0.81 0.81 100.0%

14.8 Semi-Variography

A semi-variography study was performed as a guide to determining a grade


interpolation search strategy. Omni, along strike, down dip and across dip semi-
variograms were attempted for each domain using Ag and Au capped
composites. Selected variograms are attached in Appendix D.

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Continuity ellipses based on the observed ranges were subsequently generated


and employed as the basis for estimation search ranges, distance weighting
calculations, and Mineral Resource classification criteria. Anisotropy was
modeled based on an average strike direction of 320°, -75° NE down dip.

14.9 Bulk Density

A total of 1,391 bulk density measurements from 75 drill holes were provided by
Endeavour Silver of which 556 measurements were from the mineralized veins
with an average bulk density of 2.56t/m3. Testing was by water displacement on
waxed drill core by Endeavour Silver.

David Burga, P. Geo of P&E collected 10 samples during his June, 2016 site
visit. The samples were tested in Agat Laboratories in Mississauga, Ontario
and had an average bulk density of 2.52 t/m 3.

14.10 Block Modeling

The Terronera resource block model was constructed using Geovia Gems
V6.7.1 modeling software and the block model origin, rotation, and block size
and block numbers are tabulated in Table 14.7. The block model consists of
separate model attributes for estimated grade, rock type, percent, bulk density,
and classification attributes.

Table 14.7 Block Model Definition


Direction Origin # of Blocks Block Size (m)
X 516,353.894 506 3.0
Y 2,296,905.785 188 1.5
Z 1,714.000 182 3.0
o
Rotation -50

All blocks in the rock code block model were initially assigned a waste rock
code of 99, corresponding to the surrounding country rocks. All mineralized
domains were used to code all blocks within the rock type block model that
contain 1 % or greater volume within the domains. These blocks were assigned
their appropriate individual rock codes as indicated in Table 14.2. The
topographic surfaces were subsequently utilized to assign rock code 0 for air, to
all blocks 50 % or greater above the surface.

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A volume percent block model was set up to accurately represent the volume
and subsequent tonnage that was occupied by each block inside the
constraining domains. As a result, the domain boundary was properly
represented by the volume percent model ability to measure individual infinitely
variable block inclusion percentages within that domain. The minimum inclusion
percentage of any mineralized block was set to 1%.

The bulk density of each mineralization block was interpolated by domain


utilizing Nearest Neighbour interpolation and 556 bulk density measurements.

Ag and Au grade were interpolated with Inverse Distance Cubed (1/d 3), while
Cu, Pb, and Zn interpolated with Inverse Distance Squared (1/d 2) all using
capped composites. Multiple passes were executed for the grade interpolation
to progressively capture the sample points in order to avoid over smoothing and
preserve local grade variability. Search ranges were based on the variograms
and search directions which were aligned with the strike and dip directions of
each domain accordingly. Grade blocks were interpolated using the following
parameters in Table 14.8.

Table 14.8 Au & Ag Block Model Interpolation Parameters

Dip Max # of
Strike Across Dip Min # Max #
Element Pass Range Samples
Range (m) Range (m) Samples Samples
(m) per Hole
I 27 30 6 2 5 12
Ag II 45 50 10 2 3 12
III 135 150 30 2 1 12
I 20 25 5 2 5 12
Au II 30 40 10 2 3 12
III 135 150 340 2 1 12

Selected vertical cross-sections and plans of the AgEq grade blocks are
presented in Appendix E.

The Ag equivalent blocks (AgEq) were determined using the formula AgEq g/t =
Ag g/t + (Au g/t x 70).

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14.11 Resource Classification

In P&E's opinion, the drilling, assaying, and exploration work of the Terronera
Project supporting this Mineral Resource Estimate are sufficient to indicate a
reasonable potential for economic extraction and thus qualify it as a Mineral
Resource under the CIM definition standards. The Mineral Resources were
classified as Indicated and Inferred based on the geological interpretation,
semi-variogram performance and drill hole spacing. The Indicated Mineral
Resources were classified for the blocks interpolated by the grade interpolation
Pass I and II in Table 14.8, which used at least three composites from a
minimum of two holes; and Inferred Mineral Resources were categorized for all
remaining grade populated blocks within the mineralized domains. The
classifications have been adjusted on a longitudinal section to reasonably
reflect the distribution of each category. Selected classification block cross-
sections and plans are attached in Appendix F.

14.12 Mineral Resource Estimate

The Mineral Resource Estimate was derived from applying an AgEq cut-off
grade to the block model and reporting the resulting tonnes and grade for
potentially mineable areas. The following calculation demonstrates the rationale
supporting the AgEq cut-off grade that determines the underground potentially
economic portions of the constrained mineralization.

Underground AgEq Cut-Off Grade Calculation (US$)

Au Price US$1,250/oz a based on approx. three year average at Aug 31/16


Ag Price US$18/oz based on approx. three year average at Aug 31/16
Ag Eq Process Recovery 87%
Mining Cost $40/tonne mined
Process Cost $23/tonne milled
General & Administration $10/tonne milled
AgEq Refining $/oz $0.50
AgEq Smelter Payable 99%

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Therefore, the AgEq cut-off grade for the underground resource estimate is
calculated as follows:

Mining, Processing, and G&A costs per ore tonne = ($40 + $23 + $10) =
$73/tonne

[($73)/[($18-$0.50)/31.1035 x 87% Recovery x 99% Payable] = 150.6 g/t


Use 150 g/t

Mineral Resource Estimate Statement


The resulting Mineral Resource Estimate is tabulated in the Table 14.9.
P&E considers that the gold and silver mineralization of the Terronera
Project is potentially amenable to underground extraction.

Table 14.9 Mineral Resource Estimate Statement at Cut-off 150g/t AgEq (1) (2) (3) (4) (5)

Au Au Ag Ag AgEq AgEq
Class k tonnes
g/t k oz g/t k oz g/t k oz
Indicated 3,959 2.18 277 232.4 29,530 384.8 48,920
Inferred 720 1.48 34 308.9 7,153 412.5 9,533

1) Mineral resources which are not mineral reserves do not have demonstrated
economic viability. The estimate of mineral resources may be materially affected
by environmental, permitting, legal, title, taxation, socio-political, marketing, or
other relevant issues.
2) The Inferred Mineral Resource in this estimate has a lower level of confidence
than that applied to an Indicated Mineral Resource and must not be converted
to a Mineral Reserve. It is reasonably expected that the majority of the Inferred
Mineral Resource could be upgraded to an Indicated Mineral Resource with
continued exploration.
3) The mineral resources in this report were estimated using the Canadian Institute of
Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources
and Reserves, Definitions and Guidelines prepared by the CIM Standing
Committee on Reserve Definitions and adopted by the CIM Council.
4) AgEq g/t = Ag g/t + (Au g/t x 70)
5) Historical mined areas were depleted from the Terronera Vein wireframe.

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Sensitivity to Mineral Resource Estimate


Mineral Resources are sensitive to the selection of a reporting AgEq cut-
off grade and are demonstrated in Table 14.10.

Table 14.10 Sensitivity to Mineral Resource Estimate

Cut-off K Au Au Ag Ag AgEq AgEq


Class
AgEq g/t tonnes g/t k oz g/t k oz g/t k oz
1000 152 3.46 17 1,125.1 5,513 1,367.1 6,699
750 316 3.50 36 859.8 8,746 1,105.0 11,240
500 765 3.51 86 562.8 13,837 808.5 19,877
250 2,566 2.63 217 299.8 24,732 484.0 39,931
200 3,305 2.38 253 259.7 27,596 426.1 45,277
Indicated
150 3,959 2.18 277 232.4 29,580 384.8 48,984
125 4,236 2.10 285 222.0 30,229 368.7 50,210
100 4,460 2.03 291 214.0 30,677 355.9 51,024
50 4,765 1.93 295 203.1 31,114 338.0 51,782
0.01 4,883 1.88 296 198.7 31,193 330.6 51,908
1000 39 4.08 5 1,034.9 1,293 1,320.8 1,651
750 79 2.91 7 874.3 2,223 1,078.2 2,741
500 194 2.14 13 647.3 4,032 796.9 4,964
250 449 1.81 26 414.5 5,983 540.9 7,808
200 583 1.63 31 354.2 6,641 468.2 8,779
Inferred
150 720 1.48 34 308.9 7,147 412.5 9,546
125 791 1.43 36 287.5 7,316 387.7 9,864
100 846 1.38 37 274.0 7,448 370.3 10,066
50 909 1.30 38 258.6 7,559 349.8 10,224
0.01 922 1.29 38 255.5 7,571 345.5 10,239

Confirmation of Estimate

The block model was validated using a number of industry standard


methods including visual and statistical methods:
 Visual examination of composite and block grades on
successive plans and sections on-screen in order to confirm
that the block model correctly reflects the distribution of local
sample grades

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 Review of estimation parameters including:

- Number of composites used for estimation;


- Number of holes used for estimation;
- Mean Distance to sample used;
- Number of passes used to estimate grade;
- Mean value of the composites used.

Comparison of Ag and Au mean grades of composites with block model


is presented in Table 14.11.

Table 14.11 Average Grade Comparison of Composites with Block Model

Data Type Ag g/t Au g/t

Composites 257.3 1.85


Capped Composites 211.0 1.83
Block Model ID3* 207.7 1.79
Block Model NN** 205.7 1.79
Note: * block model grade interpolated using Inverse Distance Cubed
** block model grade interpolated using Nearest Neighbour

The comparison above shows the average grades of the Ag and Au


blocks in the block models to be somewhat lower than the average
grades of capped composites used for grade estimation. This is likely
due to the localized clustering being smoothed by the block modeling
grade interpolation process. The block model grade will be more
representative than the capped composites due to the block model’s 3D
spatial distribution characteristics.

A volumetric comparison was performed with the block model volume


versus the geometric calculated volume of the domain solids and is
presented in Table 14.12.

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Table 14.12 Volume Comparison of Block Model with Geometric Solids

Geometric Volume of Wireframes 2,304,042 m3


Block Model Volume 2,301,224 m3
Difference % 0.12%

Local trends were evaluated by comparing the ID3 and NN estimate at


zero cut-off along the strike. In general, the ID3 block estimate is in good
agreement with the NN estimate.

Figure 14.1 Ag Grade Swath Plot along Strike

A Comparison of Ag grade interpolated with Inverse Distance cubed


(1/d3) and Nearest Neighbor (NN) on global resource basis, as
presented in Figure 14.2.

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Figure 14.2 Ag Grade and Tonnage Comparisons derived from ID3 and
NN Grade Interpolation

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15.0 MINERAL RESERVE ESTIMATES

15.1 Mineral Resource Considered

The Mineral Resource considered for conversion to a Mineral Reserve, for the
Terronera underground mine plan, is summarized in Table 15.1. This Mineral
Resource was estimated at a 150 g/t AgEq cut-off grade.

Table 15.1 Summary of Mineral Resource Considered @ 150 AgEq g/t Cut-Off

Resource Area Level (El) Tonnes (t) Au (g/t) Ag (g/t) AgEq (g/t)

Total 3,885,938 2.09 223 368


Details
M1 – Ext of M2 1560 19,102 4.47 112 424
M1 - Ext of M2 1530 83,739 4.10 131 418
M1 1500 135,438 2.40 126 294
M1 1470 151,778 2.71 126 316
M1 1440 97,024 2.75 147 340
M1 (Haulage Level) 1410 7,238 4.22 97 392
M2 - TDB 1620 602 1.73 122 243
M2 1590 35,086 2.16 159 310
M2 1560 137,610 1.51 155 260
M2 (1530 constructed sill) 1530 164,866 1.82 158 286
M2 (16m Sill) 1500 122,838 2.56 115 294
M2 1470 200,661 3.29 92 322
M2 1440 274,979 2.96 131 338
M2 1410 202,315 3.50 184 429
M2 (Haulage Level) 1380 139,908 3.47 146 389
M2 (12m Sill) 1350 101,135 4.56 133 451
M2 (Bottom) 1320 44,624 3.00 109 318
M3 1560 25,190 0.70 373 423
M3 1530 103,890 0.72 306 356
M3 1500 155,705 0.86 340 400
M3 (1470 Sill) 1470 189,545 1.27 275 365
M3 (12m Sill) 1440 210,473 1.63 269 383
M3 1410 170,963 1.77 223 347
M3 (Haulage Level) 1380 128,113 1.92 186 320
M3 (12m Sill) 1350 112,661 1.57 144 250

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Resource Area Level (El) Tonnes (t) Au (g/t) Ag (g/t) AgEq (g/t)

M3 (Bottom) 1320 15,733 1.37 200 295


M4 1500 51,479 0.72 488 510
M4 1470 93,344 0.88 559 610
M4 1440 105,615 0.86 495 555
M4 1410 80,783 0.69 392 441
M4 (Haulage Level) 1380 53,524 0.75 245 298
M4 (12m Sill) 1350 51,602 1.12 302 375
M4 1320 39,800 2.25 790 942
M4 (Bottom) 1290 21,946 2.31 780 940
M5 1500 23,024 0.54 293 285
M5 1470 81,190 0.53 233 270
M5 1440 50,161 0.63 222 266
M5 1410 52,917 1.04 281 354
M5 (Haulage Level) 1380 59,091 1.33 295 388
M5 (16m Sill) 1350 17,550 2.37 130 295
M5 1320 20,836 2.45 121 293
M5 1290 31,546 2.20 134 288
M5 (Bottom) 1260 20,314 3.02 134 346

The Mineral Resource that was converted to a Mineral Reserve was estimated
at a 150 g/t AgEq cut-off grade which was based on the parameters presented
in Table 15.2.

Table 15.2 Cut-Off Parameters

Ag $/oz $18
Au $/oz $1,250

Concentrate Recovery Ag 87.0%


Concentrate Recovery Au 74.7%

Smelter Payable Ag 96.0%


Smelter Payable Au 97.5%

Ag Refining $/oz $1
Au Refining $/oz $10

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Concentrate Mass Pull 1.5%


Moisture Content 8.0%
Concentrate Freight $/WMT $20
Concentrate Freight $/DMT $22
Port Rehandling $/WMT $15
Port Rehandling $/DMT $16
Smelter Treatment Charge $/DMT $315

Mining Cost $/t $32.98


Process Cost $/t $23.20
G&A Cost $/t $7.50
Freight, Rehandling & Treatment $/t $5.29

Property NSR Royalty 2.0%


Government NSR Royalty 0.5%

NSR Ag $/g $0.45


NSR Au $/g $28.31

Mine Cut-off $/t $68.97


Process Plant Cut-off $/t $35.99

Mine Cut-off AgEq g/t 155


Rounded Cut-off AgEq g/t 150

15.2 Mineral Reserve Estimate Parameters

Mechanized cut and fill and longhole sill pillar recovery are the proposed mining
methods. Mine dilution is estimated to be 10%, represented by an approximate
15cm thick skin around the mining outline, plus dilution from backfill. Dilution
grades were estimated within this 15cm skin. The average vein thickness is
estimated to be 4.4m, which includes hanging wall and footwall dilution. A
summary of mining dilution and recovery estimates is presented in Table 15.3.

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Table 15.3 Mine Dilution and Extraction Estimates

Dilution Grade Au (g/t) Ag (g/t) AgEq (g/t)

Area M1 0.90 86 149


Area M2 0.93 56 121
Area M3 0.33 50 73
Area M4 0.30 86 107
Area M5 0.95 83 150
Average Dilution
0.71 66 115
Grades
Dilution Tonnes
HW & FW Dilution Annulus (%) 7.1%
Floor B/F Dilution (%) 3.0%
Total Dilution (%) 10.0%
Mine Extraction
Total Extraction (%) 95.0%

Mine dilution and extraction was applied to stope tonnes only. A summary of
the mine diluted and recovered Probable Mineral Reserve, is presented in
Table 15.4.

Table 15.4 Summary Of Probable Mineral Reserve

Area Level Tonnes (t) Au (g/t) Ag (g/t) AgEq (g/t)

Total 4,061,054 1.95 207 342


Details
M1 – Ext of M2 1560EL 19,794 4.15 107 397
M1 - Ext of M2 1530EL 86,187 3.83 125 393
M1 1500EL 138,626 2.27 120 279
M1 1470EL 155,916 2.55 121 299
M1 1440EL 100,863 2.57 140 320
M1 (Haulage Level) 1410EL 8,124 3.69 93 351

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Area Level Tonnes (t) Au (g/t) Ag (g/t) AgEq (g/t)

M2 - TDB 1620EL 675 1.58 110 221


M2 1590EL 37,015 2.01 147 288
M2 1560EL 144,510 1.43 144 244
M2 (1530 constructed
1530EL 172,231 1.71 148 267
sill)
M2 (16m Sill) 1500EL 132,065 2.35 107 271
M2 1470EL 210,535 3.04 87 300
M2 1440EL 286,127 2.76 123 316
M2 1410EL 212,110 3.23 170 397
M2 (Haulage Level) 1380EL 148,279 3.18 135 358
M2 (12m Sill) 1350EL 108,846 4.11 122 409
M2 (Bottom) 1320EL 48,429 2.72 101 291
M3 1560EL 28,348 0.63 322 366
M3 1530EL 110,191 0.67 278 325
M3 1500EL 161,410 0.81 314 371
M3 (1470 Sill) 1470EL 192,769 1.20 259 343
M3 (12m Sill) 1440EL 212,228 1.55 255 363
M3 1410EL 172,857 1.67 211 329
M3 (Haulage Level) 1380EL 131,913 1.79 174 299
M3 (12m Sill) 1350EL 116,049 1.46 135 234
M3 (Bottom) 1320EL 16,995 1.24 181 266
M4 1500EL 53,321 0.68 452 474
M4 1470EL 96,424 0.83 519 567
M4 1440EL 110,137 0.80 456 513
M4 1410EL 85,700 0.64 358 403
M4 (Haulage Level) 1380EL 58,093 0.69 223 271
M4 (12m Sill) 1350EL 55,378 1.02 275 342
M4 1320EL 43,581 1.98 695 829
M4 (Bottom) 1290EL 24,129 2.03 684 824
M5 1500EL 24,322 0.56 270 267
M5 1470EL 84,940 0.54 217 255

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Area Level Tonnes (t) Au (g/t) Ag (g/t) AgEq (g/t)

M5 1440EL 53,957 0.64 203 248


M5 1410EL 56,824 1.00 256 326
M5 (Haulage Level) 1380EL 62,715 1.26 271 359
M5 (16m Sill) 1350EL 19,640 2.13 121 270
M5 1320EL 22,692 2.23 114 271
M5 1290EL 33,919 2.03 126 268
M5 (Bottom) 1260EL 22,190 2.73 125 316

15.3 Mineral Reserve Statement

The total Life of Mine Mineral Reserve is presented in Table 15.5.

Table 15.5 Life of Mine Mineral Reserve Summary

Ag Eq
Tonnes Ag Au Ag Eq Ag oz Au oz
Classification oz
(‘000’s) g/t g/t g/t (‘000’s) (‘000’s)
(‘000’s)
Probable 4,061 207 1.95 344 27,027 255 44,877

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16.0 MINING METHODS

16.1 Mine Planning

The Terrronera mining site is located underneath mountainous terrain with local
topographic relief of 550m over an area of 3.7km2. The initial mining elevation
was selected to produce higher grades early in the mine life. Maintaining a
haulage drift is critical to the success of the mine material movement system.
The portal daylights slightly above a valley floor on the side of a mountain
which reduces the potential of any water washouts into the mine during rainy
periods. To further prevent water ingress, the portal is initiated with a +2%
gradient before ramping down once underground.
One goal of the material handling system is to reduce the haulage distance
from the stoping areas to the portal and subsequently to the process plant. To
accomplish this, stoping areas above 1380el are equipped with finger raises
connecting to an ore pass dropping material down to the 1380 haulage drift.
Once at the bottom of the ore pass, ore will be chute loaded onto a truck by a
scooptram and hauled to the portal and subsequently to the process plant.
The deposit characteristics were considered in selecting the elevation of the
haulage drift at 1380el. Refer to Figure 16.1 ‘Terronera Mine 1380 Haulage
Drift, Composite Plan’ and Figure 16.2 ‘Terronera 1380 Haulage Drift, General
Infrastructure’ for a plan and infrastructure details of the 1380 haulage drift
layout. The traditional overhand mechanized cut and fill mining method is a
bottom up method. Above 1380el there is higher grade and greater tonnage
than below. 0.5 million ore tonnes are expected to be extracted from below
1380el while 3.5 million ore tonnes would be extracted from above that
elevation. This decision maximizes the tonnage delivered to the 1380el via the
ore pass.
A goal of the material handling design is keeping the scoop tram hauling
distance less than 150m. Accordingly, the 1400m strike length of the deposit is
divided into five mining blocks of 300m strike length serviced by an
independent spiral ramp in the footwall of the middle of each mining block. The
maximum distance along strike from each side of the ramp access is 150m to
the end of the mining block.
Stoping areas have two means of egress for mining personnel. One path of
egress is walking from the production area to the mining block access ramp to
the haulage drift. The second way is a constructed ladder way egress in backfill

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at the far end of the mining block, which leads to the 1380 haulage drift. There
are two means of egress from the haulage drift, one at the NW end out the
portal and one at the SE end out a fresh air raise/egress near mining block five.

16.2 Mine and Stope Development

The Mineral Reserve extends from the 1,610m to 1,260m elevations, a vertical
distance of approximately 350m, and has a lateral extent of approximately
1,400m. A conceptualized mechanized cut and fill mining method plan has
been laid out to extract the deposit using trackless underground equipment,
including scooptrams, haulage trucks, and electric-hydraulic drill jumbos. A
small amount (7% of total Mineral Reserve) of mechanized long hole mining is
also required for the recovery of sill pillars.

Figure 16.1 Terronera Mine 1380 Haulage Drift, Composite Plan

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Figure 16.2 Terronera 1380 Haulage Drift, General Infrastructure

Primary access to the deposit will be via a 526m long -12% 5m by 5m trackless
haulage ramp, from the portal, at the 1469 m Level to the 1410m Level. Refer
to Figure 16.3 ‘Terronera Plan View, Portal Boxcut’ for details of the portal
excavation. The -12% haulage ramp will be driven an additional 283m to the
1380m Level haulage drift. The 1380m Level haulage drift will be driven at
+1% for an addition 892m, during the next 3 quarters of a year to the end of the
1380m Level haulage drift. Refer to Figure 16.4 ‘Terronera Mine Design,
Isometric Drawing’ for further details of the mine and stope development plan,

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and to Figure 16.5 ‘Terronera Mine, Haulage Drift and Ramp Cross Section (5m
x 5m)’ for the drift and ramp design layout.

Figure 16.3 Terronera Plan View, Portal Boxcut

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Figure 16.4 Terronera Mine Design, Isometric Drawing

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Figure 16.5 Terronera Mine, Haulage Drift and Ramp Cross Section (5m x 5m)

Access to the mining zones will be via a series of five +/-12% up-and-down
spiral ramps, access cross-cuts, and stope attack cross-cut ramps. This
development will have cross-sectional dimensions of 4.5m by 4.5m. Refer to
Figures 16.6, 16.7 and 16.8 ‘Terronera Cross Sectional Projection, Mining
Blocks M2, M3 and M4’ for details of the mine plan up-and-down spiral ramps,
access cross-cuts, and stope attack-crosscut ramps layout and Figure 16.9
‘Terronera Mine Level Development, Cross Section (4.5m x 4.5m)’ for the ramp
and cross-cut design layout.

Refer to Figure 16.10 ‘Terronera Mine, Longitudinal Projection’ for additional


development details.

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Figure 16.6 Terronera Cross Sectional Projection, Mining Block M2

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Figure 16.7 Terronera Cross Sectional Projection, Mining Block M3

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Figure 16.8 Terronera Cross Sectional Projection, Mining Block M4

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Figure 16.9 Terronera Mine Level Development, Cross Section (4.5m x 4.5m)

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Figure 16.10 Terronera Mine, Longitudinal Projection

There are a planned 31,955m of total life-of-mine (LOM) mine and stope
development. A summary of this development, by type and cost category, is
given in Table 16.1.

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Table 16.1 Summary of LOM Development (m)

Item Dimensions (m x m) Cost Type Total (m)


Portal Entrance @ +2% 5 5 CAPEX 24
Portal Ramp @-12% 5 5 CAPEX 503
Ramp 1410 - 1380 @-12% 5 5 CAPEX 284
1380 Haulage Drift @ +2% 5 5 CAPEX 892
1380 Electrical Substations 5 5 CAPEX 24
1380 Refuge Shelters 5 5 CAPEX 60
1380 Fuel and Lube 5 5 CAPEX 12
1380 Day Cap Mag 5 5 CAPEX 12
1380 Day Powder Mag 5 5 CAPEX 12
1380 Latrines 5 5 CAPEX 30
1380 Clean & Dirty Sump 5 5 CAPEX 71
1380 Raise Bore Ore Pass 2.4 2.4 CAPEX 1,012
1380 Egress/Fresh Air Raise 2.4 2.4 CAPEX 1,018
Ramp 4.5 4.5 CAPEX 4,841
Ramp Re-muck 4.5 4.5 CAPEX 240
Ramp 4.5 4.5 CAPEX 4,191
Ramp Re-muck 4.5 4.5 CAPEX 204
Ramp Sump at Bottom 4.5 4.5 CAPEX 48
Ramp Level Access 4.5 4.5 CAPEX 971
Access Ore Pass 4.5 4.5 CAPEX 605
Access Egress/Fresh Air Raise 4.5 4.5 CAPEX 780
Access BF Re-muck 4.5 4.5 CAPEX 615
Drainage Hole Cut-out 4.5 4.5 CAPEX 228
Attack Ramps 4.5 4.5 OPEX 10,783
Ore Pass Finger Raise 2.4 2.4 CAPEX 510
Waste Pass Finger Raises 2.4 2.4 CAPEX 510
Level Extensions 4.5 4.5 CAPEX 78
C&F Cross0cut to lenses 4.5 4.5 OPEX 2,964
Ore Pass 2.4 2.4 CAPEX 217
Fresh Air Raise/Egress 2.4 2.4 CAPEX 217
Total (m) 31,955

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16.3 Mechanized Cut & Fill Mining Method

The principal mining method envisaged is mechanized non-captive cut and fill
using trackless underground equipment, including scooptrams, haulage trucks
and electric-hydraulic drill jumbos. Refer to Figure 16.11 ‘Typical Mining
Method, Cut and Fill’. The average mining width is estimated to be 4.4m.

Figure 16.11 Typical Mining Method, Cut and Fill

Initial access to the stope lifts will be via cross cut attack down slope ramps.
Refer to Figure 16.12 ‘Terronera Mine, Representative Level Design’ for a
typical layout of spiral ramp-to-stope access. The initial bottom cut and fill lift
will be excavated 4m high by the width of the mineralized domain (up to 6m
wide), as drift development. Stope lifts will be mined from the bottom up. The
backs of the attack ramps will be slashed to access higher lifts. Stope lift strike
lengths will be up to 300m in length and 150m in each direction from the attack
ramp access. Mining breasts will be drilled using horizontal blast holes.
Where more than one vein occurs in the same mining block, adjacent veins will
not be mined) simultaneously at the same elevation..

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Figure 16.12 Terronera Mine, Representative Level Design

16.4 Ground Support

In 2016, Endeavour engaged Knight Piésold Ltd. (KP) to provide Pre-Feasibility


level geomechanical and hydrogeological support for the proposed
underground mine at the Terronera Project. The scope of work included a

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geomechanical and hydrogeological site investigation program, domain


definition, underground mine design input and a groundwater inflow estimate.
This report section summarizes those aspects of the work scope.

16.4.1 Site Investigation

A geomechanical and hydrogeological site investigation program was


completed in 2016 which included:
 Three HQ3 diameter oriented and triple-tubed diamond drill holes with
associated detailed geomechanical logging using the RMR89 and NGI-
Q classification systems. Hydraulic conductivity testing using an
inflatable packer was completed in these drill holes.
 One HQ diamond drill hole that was drilled parallel to the historic
Lupillo adit to allow the rock mass quality observed in the exploration
drill core to be calibrated against the performance of the existing
underground workings.
 Laboratory strength testing of drill core samples from the
geomechanical drill holes.

In total, the program included 1,180 m of geomechanical drilling and 894 m of


detailed geomechanical logging.

16.4.2 Geomechanical Domain Definition

The encountered rock masses at the Terronera Deposit were grouped into
geomechanical domains in order to simplify the stability analyses. Each domain
contains rock masses with similar engineering characteristics that are expected
to perform similarly during mining. Several possible domain definitions were
considered. The rock mass quality domains were ultimately defined by the
spatial domains identified from a review of the core photos and by the major
lithology groupings. The spatial domains are as follows:

 Main Zone - Approximately located in the centre of the deposit.


Associated with the most competent rock within the deposit.

 Surface Effects Zone - Reduced rock mass quality was observed in the
upper 100 m of the northwest area of the deposit. The reduction in
rock mass quality is attributed to weathering.

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 Arroyo Fault Zone - Approximately located at the eastern end of the


deposit. A major fault zone that represents the least competent
rock within the deposit.

 Transition Zone - A transition between the Arroyo Fault Zone and the
Main Zone.

Within these spatial domains, the rock mass quality varies by lithology, as
follows:

 Andesite - The Andesite is characterized by an average UCS of 225 MPa and a


mi value of 17. It is classified as FAIR to GOOD quality rock with an
RMR89 design value ranging from 55 in the Transition Zone, 60 in the
Lower Quality Main Zone, to 70 in the Main Zone

 Rhyolite - The Rhyolite is characterized by an average UCS of 90 MPa and a mi


value of 15. It is classified as POOR to GOOD quality rock with an
RMR89 design value ranging from 40 in the Transition Zone to 60 in
the Main Zone

 Vein - The Terronera Vein is of variable quality, and was subdivided into
three classes:

o Class 1 is characterized by an average UCS of 100 MPa, which


was based on Schmidt hammer rebound values, and a mi
value of 15. It is classified as GOOD quality rock with an
RMR89 design value of 60. The vein is typically Class 1
within the Main Zone which may be possible for longhole
mining consideration once underground mining has
commenced in this area and a geotechnical re-evaluation
has been undertaken
o Class 2 is characterized by an average UCS of 100 MPa, which
was based on Schmidt hammer rebound values, and a mi
value of 15. It is classified as FAIR quality rock with an
RMR89 design value of 45. The vein is typically Class 2
within the Transition Zone
o Class 3 is characterized by an average UCS of 20 MPa and a mi
value of 15. It is classified as POOR quality rock with an

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RMR89 design value of 30. The vein is typically Class 3


within the Surface Effects Zone

 Fault - The Arroyo Fault Zone is characterized by an average UCS of 1 MPa,


which was based on the ISRM description of soil and rock strength. It
is classified as POOR quality rock with an RMR89 design value of 30

16.4.3 Mine Design Input

Underground rock mechanics design recommendations have been provided for


the Terronera Deposit on:

 Stope Dimensions – Stope dimensions for cut and fill mining were
evaluated. The following back spans are thought to be achievable under
standard 2.4 m long primary ground support:
o Vein Class 1: 6m
o Vein Class 2: 4.5m
o Vein Class 3 / Fault: 3m

 Stope Height – A maximum stope height of 4 m is recommended

 Extraction Sequencing – The proposed overhanded extraction


sequence was reviewed from a rock mechanics perspective.

 Ground Support - The basis for a minimum support standard was


proposed for the long-term development, access drifts and cut and fill
stopes. The main ground control issues are expected to be associated
with:

o The quality of the Terronera Vein in the back of the stopes. The
properties of this unit have a significant impact on the ground
support recommendations

o Random shears or structures intersecting the mine openings.


These interactions could result in the formation of wedges that
overtop the recommended ground support. The failures
observed to date in the historical underground workings are
primarily of this type

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o Locally reduced rock mass quality associated with faults.


Numerous faults are expected intersect the mine openings.
These faults represent zones of reduced rock mass quality and
will likely require additional ground support. The Arroyo Fault is
of particular concern. Wherever possible, development should
avoid this area.

o Larger spans, particularly those associated with intersections

A summary of the preliminary ground support recommendations for cut and


fill stopes is shown in Table 16.2.

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Table 16.2 Preliminary Ground Support Recommendations for Cut and Fill
Stopes

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 Crown Pillar Dimensions - Crown pillar dimensions were evaluated.


The analyses suggest that a 30 m thick crown pillar will meet the design
criteria, given the recommended ground support and the use of backfill.
Tight filling the stopes as soon as possible after mining will be important
to maintaining the long-term stability of the crown pillar.

A summary of preliminary crown pillar assessment is shown in Table 16.3.

Table 16.3 Summary of Preliminary Crown Pillar Assessment

 Sill Pillar Dimensions - Temporary sill pillars have been incorporated


into the proposed mine plan to vertically separate adjacent mining
blocks. The stability of the pillars was evaluated. The results suggest
that a 12m sill pillar is suitable for HW-FW spans of up to 9m in the
Class 1 or 2 vein. Comments have been provided regarding the
implementation, support, instrumentation and monitoring of the sill
pillars.

 Review of Mine Plan - The mine design was reviewed from a rock
mechanics perspective. Several changes to the mine plan were
recommended and are understood to have been implemented by P&E;
an updated mine plan was not reviewed. Additional recommendations
were made for the next level of design.

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A longitudinal projection of the location of crown and sill pillars is shown in


Figure 16.13. The rock mass quality within the vein has been estimated from a
review of core photos. P&E used this information to estimate the typical rock
mass quality for each mining block, as shown on Figure 16.13. The rock mass
quality is expected to vary significantly within each of the mining blocks.

16.4.4 Recommendations

The recommendations, and the analyses on which they are based, are
appropriate for Pre-Feasibility level design. The design recommendations are
based upon the currently available geological, structural, geomechanical, and
hydrogeological data. The completed stability analyses suggest that the
recommendations are reasonable and appropriate. The recommendations
assume that controlled blasting and proactive geotechnical monitoring will be
undertaken along with an ongoing commitment to geomechanical and
hydrogeological data collection and analyses. Maintaining flexibility in the mine
plan will be important to accommodate any ground control issues.

Future work should include more detailed analyses based on additional or


updated data for the deposit in order to support the next stage of engineering.
Additional data requirements include:

 Creating a 3D lithological model

 Creating a 3D structural model

 The rock mass characteristics in the immediate vicinity of the crown


pillar and to the east of the Arroyo Fault zone should be better
defined during the next phase of design or during the early stages of
mining

 Additional geomechanical logging should be completed to better


define difference in structural trends around geomechanical drillhole
KP16-02

 Additional hydrogeological data should be collected if the project


economics or operating conditions are sensitive to the groundwater
conditions and groundwater inflow estimate. For example, the
completion of additional packer testing and the installation of

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additional vibrating wire piezometers could be used to refine the


hydrogeological characterization and evaluate the potential for spatial
variability

 The groundwater pore pressure data from the vibrating wire


piezometers should be recorded and reviewed on a regular basis

The domain definition, stability analyses, recommendations, and groundwater


inflow estimate should be updated to account for the results of the additional
data inputs and any changes to underground mine plan. Any significant
changes to the mine plan should be reviewed from a rock mechanics
perspective.

For preliminary ground support recommendations for cut and fill stopes refer to
Table 16.2 ‘Preliminary Ground Support Recommendations for Cut and Fill
Stopes’.

A summary of preliminary crown pillar assessment is shown in Table 16.3.

A longitudinal projection of the location of crown and sill pillars and rock mass
qualities is shown in Figure 16.13.

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Figure 16.13 ‘Terronera Mine Longitudinal Projection, Pillars, Rock Mass


Quality, Fill

16.5 Hydrogeology

Knight Piésold Ltd. (KP) was retained by Endeavour Silver to estimate


groundwater inflows to the proposed underground workings at the Terronera
Project. The inflow estimate is intended to support Pre-Feasibility level
engineering design and dewatering requirements.

16.5.1 Conceptual Hydrogeological Model

A conceptual groundwater model was developed using data from previous


studies by GIXTOH Ingenieria & Medio Ambiente (GIXTOH, 2016a and 2016b),
the results of the site investigation program completed by KP (2017) and the
mine design developed by P&E.

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 The rhyolite and andesite that host the Terronera Vein have a geometric
mean hydraulic conductivity of 1 x 10-7 m/s.
 The Terronera Vein is highly fractured and is characterized by frequent zones
of broken rock or rubble and some faults. As a result, the hydraulic
conductivity of the Terronera Vein is expected to be relatively high, in the
order of 10-6 m/s.
 Recharge to groundwater is expected to be primarily from precipitation but
may also be contributed from surface water where faults and fractured rock
zones are present.
 The depth to water is approximately 100 mbgs near the central mining area,
and a steep downward hydraulic gradient is observed between the overlaying
host rock and the vein. This relatively strong vertical gradient suggests that
Terronera Vein or historical mine works are acting as a drain.

16.5.2 Estimated Groundwater Inflow to the Proposed Development

The conceptual hydrogeological model was used to estimate groundwater


inflows to the proposed mine workings. A base case and lower and upper
bound groundwater inflow estimates (Table 16.4) were determined in order to
account for the range of uncertainty in the bulk hydraulic conductivity and
recharge.
Table 16.4 Summary of Groundwater Inflow Estimates
Total Inflows (l/s)
Mine Year
Lower Bound Base Case Upper Bound

Pre-Development 10 15 40

Mine Year 1 - 8 10-15 25-30 55-85

Higher than estimated inflows may temporarily occur when highly fractured
zones associated with faults or water-filled historic workings are intersected.
Identifying water-bearing features in advance of mining and implementing
mitigation measures can help to manage water inflows. These mitigation
measures can include depressurization drill holes or pilot dewatering wells to
allow the features to be drained, or pressure grouting to seal the features off
from a source of recharge. Mitigation measures to manage water inflows may

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be necessary near the vicinity of the Arroyo Fault zone. Additional data
collection is recommended to reduce uncertainty in the groundwater flow
regime and inflow estimate.
16.6 Schedules

Many mine production rates were considered. Ultimately, the maximum mining
rate is decided by the size and shape of the deposit. The relationship is shown
using “Taylor’s Rule

The orebody size and shape determines the number of working areas it can
support. Further examination to determine cycle time and productivity from first
principles used in the study have provided guidance on the maximum
production rate possible. The mining schedule described in this section
produces the highest net present value (“NPV”). After analysis of various
possible scenarios, it was determined that mining at a high rate was not
advantageous early in mine life. The cost of pre-production development
required to develop the mine to produce at 2,000tpd early in the mine life is
detrimental to NPV. To achieve a 1,000tpd production rate, a minimal amount
of active mining areas is required early in mine life. Specifically MB1, MB2,
MB3, MB4 and MB5 mining zones are active from the haulage drift which is
1,702m long. This represents minimal pre-production development.
The strategy of using cash flow generated from the 1,000tpd early mine phase
to support pre-production development to a 2,000tpd rate reduces capital
requirements. To increase production to 2,000tpd in year three, nearly all the
available mining areas need to be active. The pre-production development
required is deferred until cash flow is available from production.

16.6.1 Development Schedule

1) Development Schedule Objectives


The development schedule objectives are as follows:
 Calculate development rate productivity using first principles
calculations for single and multiple heading scenarios
 Establish the critical path for development to achieve 1,000tpd
production

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 Determine the development schedule increase to achieve


2,000tpd steady state production
 Development on demand as required to achieve steady state
production for remainder of the mine life

2) Development advance rate


The development advance rate was calculated from first principles and
verified using empirical observations. The advance rate used is
125m/month on a single heading and 175m/month for a multiple
heading scenario. It is possible to increase the advance rates, which
would likely involve additional contractor involvement to perform the
work.
3) Critical Path Pre-Production
The critical path pre-production focuses the production schedules on
the most readily accessible mining areas as soon as possible which are
on the haulage drift on 1380 elevation. All working areas must be
available to achieve the 1000tpd production rate target.
The portal excavation is expected to take 45 days to complete starting
in Year -1 (“Yr-1”). Afterwards, a dedicated development crew will
advance the main access ramp to the attack ramp entrance for the first
MB1 cut-and-fill lift. The distance to this location is approximately 525m
from the portal, with scheduled completion in the sixth month. A
dedicated development crew will be required to develop 125m/month on
a single heading which will include completing key infrastructure cut
outs and re-muck bays from the haulage ramp.
After reaching the cut-out for the MB1 attack ramp, the dedicated crew
will hand the heading over to the second development crew for
completion and continue the critical path 1380 haulage drift. Scheduled
completion dates of the 1,380 haulage drift access to the mining blocks
are as follows:

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Mining Area Portal to attack ramp Completion


distance
(name) (m) (month)
Haulage MB1 – 1410el 525 6th
Haulage MB2 – 1380el 809 9th
Haulage MB3 – 1380el 1087 12th
Haulage MB4 – 1380el 1368 14th
Haulage MB5 – 1380el 1702 17th

The second development crew will be required to complete the


production level development as well as major infrastructure services
which include the cap and powder magazine, electrical substation, ore
pass, chute, ventilation raise, waste pass chute, and attack ramp to
MB1. The size of this crew will grow in Year 1 due to it being required to
complete major infrastructure from 1,380 haulage drift and start
developing each independent mining area decline. The initial target of
this group will be to provide the development required to meet the
steady state production requirements of 1,000tpd from 1,380el
developing upwards from each mining block as shown in Figure 16.14.

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Figure 16.14 ‘Terronera Mine Longitudinal Projection, Critical Path


Development Sequence’

The long-term goal of the second development crew will be to establish pre-
production access for the increase to 2,000tpd in Year 3. This includes mining
out the first few lifts above the temporary sill pillar and replacing the mined
material with consolidated fill.

An illustration of the mine development sequence and schedule is presented on


Figure 16.15.

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Figure 16.15 ‘Terronera Mine Longitudinal Projection, Development


Sequence Years 1 to 6’.

A total of 31,599m of development is scheduled to be excavated, LOM. A


summary of yearly development requirements is presented in Table 16.5.

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Table 16.5 Mine and Stope Development Schedule (m)


Development YR-1 YR-1 YR-1 YR-1 YR1 YR1 YR1 YR1 YR2 YR2 YR2 YR2
YR3 YR4 YR5 YR6 YR7 Total
Item Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Portal Entrance 24 24
Portal Ramp 164 339 503
Ramp 1410 - 1380 0 283 284
1380 Haulage Drift 29 277 363 224 892
1380 Electrical
12 12 24
Substations
1380 Refuge Shelters 12 12 12 12 12 60
1380 Fuel and Lube 12 0 12
1380 Cap Mag 12 12
1380 Powder Mag 12 12
1380 Latrine 15 15 30
1380 Clean & Dirty
0 71 71
Sump
1380 RB Ore Pass 125 199 292 189 208 1,012
1380 Egress/Fresh
128 207 276 175 231 1,018
Air Raise
1,61
Ramp 0 403 403 403 403 403 403 403 403 4,841
4
Ramp Re-muck 0 20 20 20 20 20 20 20 20 80 240
1,27 1,01
Ramp 254 252 509 514 367 4,191
7 9
Ramp Re-muck 12 12 24 60 24 24 48 204
Ramp Sump 0 0 0 12 24 12 48
Ramp Level Access 45 65 45 45 20 0 20 65 60 80 120 140 146 120 971
Access Ore Pass 15 30 15 15 15 0 15 30 55 60 90 90 85 90 605
Access Egress/Fresh
20 40 20 20 20 0 20 40 60 80 120 120 100 120 780
Air Raise
Access BF Re-muck 15 30 15 15 15 0 15 30 45 60 90 105 90 90 615
Drainage Hole Cut-
6 12 6 6 6 0 6 12 12 24 36 36 30 36 228
out
Attack Ramp 263 263 263 263 263 263 263 263 263 1,841 1,578 1,841 1,578 1,578 10,783
OP Finger Raises 15 15 0 15 15 45 60 90 90 75 90 510
WP Finger Raises 15 15 0 15 15 45 60 90 90 75 90 510
Level Extensions 78 78
C&F Cross-cut to
91 91 91 91 91 91 0 180 180 800 679 69 425 81 2,964
lenses
Ore Pass 30 125 63 217
Fresh Air
30 125 63 217
Raise/Egress

Total (m) 188 375 729 1,609 1,822 1,478 1,322 778 1,148 893 1,260 1,823 6,308 3,817 3,039 3,707 1,659 31,955

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16.6.2 Ore Production Schedule

1) Mine Production Schedule Objectives


The mine production schedule objectives are as follows:
 Producing high grade at the start of mining
 Determine mine productivity by area from first principles
 Schedule enough working areas to meet production targets
 Deplete blocks strategically, ensuring sufficient working areas
until end-of-mine life
 Schedule temporary sill pillar mining according to geotechnical
sequencing at end-of-mine life

2) Early Mine Life Ore Production at 1,000tpd

The 1,380el is a prime location to develop the haulage drift because


there are higher grades at and above this level. The attack ramps driven
from the 1,380el into the cut-and-fill mining blocks start in high grade
ore.
The schedule is based on first principle mechanized cut-and-fill
productivity calculations. The productivity has been estimated for each
mining block (“MB”) considering cycle times for drilling, blasting,
mucking, ground support, services, and backfill. The height of the cut is
fixed at 4m, however, the thickness of the deposit varies as well as the
geotechnical properties of the ore being mined. The productivities for
each mining block are estimated as follows:

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Areas Rock Property Width Productivity


(name) (1-3) (m) (tpd)
Mining block 1 Above1530 el 3 5.6 150
Below 1530 el 2 5.6 225
Mining block 2 Above 1470 el 3 3.7 150
Below 1470 el 1 3.7 255
Mining block 3 Above 1440 el 1 6 315
Below 1440 el 2 6 225
Mining block 4 All 2 3.6 225
Mining block 5 Above 1380 el 3 3.4 150
Below 1380 el 2 3.4 225

In narrower areas, the estimated productivity is lower than in wider


areas. In wide areas, longitudinal panel mining may be required which
reduces the cycle time since the material must be taken in two passes
and requires an intermediate backfill cycle.
The geotechnical properties of the deposit were also considered in the
productivity estimate. Rock types were divided into three mining
categories: Class 1. ‘Fair Ground’, Class 2. ‘Poor Ground’ and Class 3.
‘Very Poor Ground’. In poor ground and very poor ground more support
will be required which will reduce the productivity.
The Terronera Deposit is 1,400m in strike length and approximately
350m in vertical height with 14 working areas. A typical working area is
300m long and can produce from both advancing sides. MB2 has three
lenses available to mine on each level as opposed to one which is
typical for all other mining blocks. MB2 contributes six working areas to
the total and brings the total number of working areas available for the
Terronera mine to fourteen.
A summary of all working areas for the Terronera mine is provided
below:
Mining Block #1 Mining Block #2 Mining Block #3 Mining Block #4 Mining Block #5
Top Sill 1530el – 1620el 1470el – 1320el
Haulage Sill 1380el – 1500el 1380el – 1440el 1380el – 1500el 1380el – 1500el
Bottom 1410el – 1560el 1320el – 1350el 1320el – 1350el 1290el – 1350el 1260el – 1350el
Work Areas 1 6 3 2 2

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To achieve the 1,000tpd production target, five mining areas in MB1,


MB2, MB3, MB4, MB5 must be active. The areas that can be accessed
directly from the haulage drift are in blue in the table above.

3) Mine Production Ramp up to 2,000tpd


In year three (“YR3”) many working areas must be active to achieve a
steady production rate of 2,000tpd. The top sill of MB2 and MB3 become
active as well as the bottom of MB2. Preparation for the increase to
2,000 tpd can be achieved by targeted development. This will be
discussed later in this section.
A summary of all active working areas in Year 3 are in blue below:

Mining Block #1 Mining Block #2 Mining Block #3 Mining Block #4 Mining Block #5

Top Sill 1530el – 1620el 1470el – 1320el


Haulage Sill 1380el – 1500el 1380el – 1440el 1380el – 1500el 1380el – 1500el
Bottom 1410el – 1560el 1320el – 1350el 1320el – 1350el 1290el – 1350el 1260el – 1350el
Work Areas 1 6 3 2 2

4) Mining Sill Pillars at the End-of-Mine Life

The sill pillar beneath the constructed sill mat is planned for extraction at
the end-of-mine life. Careful establishment and mining of the sill pillars
will be crucial to the success of the mine near the end-of-mine life. The
sill mat and associated consolidated waste rock backfill immediately
above must be designed to support the overlying unconsolidated backfill
material during this phase.

The temporary sill pillar will be removed using a long hole retreat mining
method. It is important that mining is completed above the constructed
sill pillar before removal of the sill pillar. The sequencing of the sill pillars
is to be in the following order:

1. The M2-1530 and M3-1470 sill pillar


2. The M2-1380, M3-1380, M4-1380, M5-1380 after the pillars
above in #1.

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Removing sill pillars involves risk. It is important that during this phase of
the project potential risks are reassessed by on site personnel with the
assistance of recent geotechnical information gained during the mining
of Terronera. There is not enough information currently to make an
accurate decision about the mining of the sill pillars. Before commencing
the task, a full risk assessment should be performed. Actions to mitigate
potential risks include:

 The longhole drills can drill the entire pattern before blasting
commences
 The scoops can operated remotely when mucking beneath the
constructed sill pillar in the stope
 Care should be taken nearby the brow of the retreating temporary
sill pillar. Cable bolt the brow and inclining production blast holes
forward will increase the strength of the brow
 Removing operators from the brow is also possible either by pre-
loading brow holes with explosives or loading remotely
 Geotechnical monitoring

A summary of yearly ore production is presented in Table 16.6.

Table 16.6 Yearly Mine Production Schedule Summary


Year Total /
Item Units
Yr-1 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Avg.

Tonnes (t) 8,124 310,150 350,931 743,469 680,696 697,056 717,415 553,213 4,061,054

Au g/t 3.69 2.76 2.60 1.96 1.90 1.63 1.90 1.56 1.95

Ag g/t 93 148 170 185 196 207 252 246 207

AgEq g/t 351 341 353 322 329 321 384 350 342

An illustration of the stoping schedule is presented in Figure 16.16.

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Figure 16.16 ‘Terronera Mine Longitudinal Projection Mining Sequence

16.7 Mine Ventilation

The Terrenora Project has five mining areas, M1 through M5. The production
areas have a total of eleven active work faces, each workface requiring 50,000
cfm (25m3/s) of fresh air flow for providing effective ventilation for workplace
safety. Therefore, total airflow requirement for the mine life is 11x25 m 3/s = 275
m3/s or 550,000 cfm, and this input has been used for simulating airflow and
determining fan pressure and power input required. Refer to Figure 16.17
‘Terronera Mine Longitudial Projection, Ventilation Flow Schematic’.

A ventilation simulation exercise was conducted using VENTIM software and


used a phased approach; Phase 1: Portal development to the extent of M2

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area, b) Phase 2: Intermediate stage with fresh air fans on surface, on top of
M1 and M2 areas installed, and Phase 3: All five areas (M1-M5) are fully
ventilated using surface mounted Fresh Air fans on respective Fresh Air Raises
(FAR).

All ramps and drifts were assumed at 5m x 5m and raises at 2.4m diameter.

Phase 1 requires allocation of 700kW, Phase 2 requires 400-500kW, and


Phase 3 requires power allocation of 825kW. All portal fans could be used as
fresh air fans on surface installation in areas M1-M4, and 2 additional similarly
rated fans will be needed for the M5 area.

Note: The return airflow velocity at the portal is 11.0 m/s and M1 and M2 areas
are in the range of 9-10m/s, which are high velocities and could cause dust
related hazards. Therefore, these areas with high air velocity should have dust
control measures.

Below are specific notes on phase simulation of ventilation airflow.

Phase 1: Portal development required two lines of 1,200mm flexible ducting


each supplying 35m3/s of fresh air through: a) 6.0 kPa system (3-2.0kPa,
100kW fans in series on a skid) to M1 area and b) 8.0kPa system (4.0-2.0kPa,
100kW fans in series on a skid) to M2 area. Fan system efficiency has been
assumed as 75% (conservative). The ventilation plan accounts for using these
seven fans on surface as fresh air fans. Total rated power allocation required
for the Phase 1 is 700kW.

Phase 2: It was assumed that the Portal has been developed beyond M2 area
and surface fans from the portal area could be mounted on top of the FARs on
surface M1 and one workface and M2 has three work faces. Therefore, in this
case Fresh Air requirement is 100m3/s, M1 area fan supplies 25 m3/s and M2
areas has two of the Portal area fans in parallel combination delivering 37.5
m3/s each. Each duty requirement is well below the rated power of 100kW.
Four auxiliary fans would be drawing approximately 160kW of power and total
ventilation related power allocation would be in the range of 400-500kW during
this phase. Refer to Figure 16.18 ‘Terronera Mine Ventilation Phase 2 Air
Flow’.

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Phase 3: This is the critical phase when all areas (M1-M5) are actively mined.
Total fresh air inflow is 275m3/s from all surface fan systems. Return air of
275m3/s exits from the portal area. Refer to Figure 16.19 ‘Terronera Mine
Ventilation Phase 3 Air Flow’. Fan arrangements are as follows:

 M1 area: 1-100kW fan with power input of 24kW


 M2 area: 2-100kW fans in parallel delivering 37.5m3/s of fresh air
each (total 75m3/s), total power input of 118kW (59kW per fan)
 M3 area - 2-100kW fans in parallel delivering 37.5m3/s of fresh air
each (total 75m3/s), total power input of 118kW (59kW per fan)
 M4 area - 2-100kW fans in parallel delivering 25m3/s of fresh air each
(total 50m3/s), total power input of 75kW (37.5kW per fan)
 M5 area - 2-100kW fans in parallel delivering 25m3/s of fresh air each
(total 50m3/s), total power input of 75kW (37.5kW per fan)
Please note: Fresh air fans for M1-M4 are the portal fans used during Phase 1.
Require two new similar fans for M5 area.

Total power input required for supplying fresh air during this phase is 418kW
and the eleven auxiliary fans with 37 kW required need allocation of 407 kW.
Therefore, total power input allocation for mine ventilation is 825kW, which is
well below 900kW specified.

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Figure 16.17 ‘Terronera Mine Longitudial Projection, Ventilation Flow


Schematic’

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Figure 16.18 Terronera Mine Ventilation Phase 2 Air Flow

Figure 16.19 Terronera Mine Ventilation Phase 3 Air Flow

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16.8 Electrical Loads

A summary of electrical load requirements is illustrated in Figure 16.20


‘Terronera Mine Longitudinal Projection, Electrical Load’.

Figure 16.20 Terronera Mine Longitudinal Projection, Electrical Load

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17.0 RECOVERY METHODS

A comprehensive metallurgical study was conducted by Resource


Development Inc. (RDi) in support of the PFS for the Terronera Project. The
metallurgical data developed indicate that a high grade flotation concentrate
and Dore may be produced by flotation and cyanidation processes.

17.1 Summary

A beneficiation plant utilizing a flotation process was selected for recovery of


precious metals present in the Terronera deposit. A fine grind of 80 percent
passing 200 mesh provides acceptable levels of gold and silver recovery.
Precious metal values will be recovered into a flotation concentrate that may be
sold in the open market. A cleaner scavenger tail (CST) flotation product will be
shipped to a cyanide leach facility for further processing. The Dore produced
via a cyanidation, Merrill – Crowe, and refinery system will enhance the overall
precious metal recovery for Terronera.

The mineral processing facility design throughput is 1,000 dry tpd equivalent to
342,000 dry tpy for Years 1 and 2 and 2,000 dry tpd equivalent to 684,000 dry
tpy from Year 3. The life-of-mine (LOM) for the project is estimated at 7 years.

SFA conducted an analysis of the data developed by RDi to develop the


estimated levels of gold and silver recovery that may be achieved. Metallurgical
data were also used in the development of process design criteria and
processing plant unit operations design. The metallurgical data were developed
by RDi using mining industry accepted standard practice. The composite
samples used for development of the metallurgical data were assembled and
provided by Endeavour Silver. These samples are believed to be
representative of various grades of material from the Terronera deposit.

Results from testing mineralized material may not always represent


metallurgical results obtained from a production scale processing plant
following a defined mine production plan. The process design developed for the
Terronera project is consistent with the metallurgical data developed from
samples tested by RDi for this study. The calculated levels of precious metal
recovery developed for this study may change as more metallurgical data
become available from future testing.

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17.2 Process Description

The processing methodology selected for gold and silver recovery from
precious metal bearing materials originating from the Terronera Project
consists of the following processing circuits:

 Crushing plant (two stage - closed circuit)


 Fine ore storage
 Primary single grinding mill
 Flotation Stages
o Rougher & Scavenger
o Two stage cleaning & Scavenger
 Concentrate & CST sedimentation and filtration
 Concentrate & CST storage and shipping
 Tailings sedimentation
 Reclaimed and fresh water systems
 Dry tailings filter plant
 Dry stack tailings storage facility (TSF)

The run-of mine material will be transported to a coarse material storage patio
with haul trucks. The crushing circuit was designed to process 1,000 dry tpd in
10 hours of operation. The beneficiation plant will operate continuously 365
days per annum. The beneficiation plant availability was assumed to be 92
percent. The specific gravity of the run-of-mine material is 2.67 with average
moisture of 4 percent. The beneficiation plant will produce a precious metal
bearing high grade concentrate as final product.

The grinding circuit design consists of a single stage of grinding in a primary


ball mill. The vein materials at Terronera have been classified as hard with an
average Bond Work Index (Wi) of 17.4 kWh/metric ton. Optimization of the
milling circuit design will be necessary to ensure that the fine grinding desired
will be achieved during normal operation of the plant.

The overall process flow sheet is shown in Figure 17.1.

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Figure 17.1 Overall Process Flow Sheet

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A brief description of the processing circuits included in the design is as follows:

1. The crushing circuit is comprised of a dump ore pocket fitted with an apron
feeder. The Apron feeder sends the ore to a primary jaw crusher to reduce
the material to minus 150 mm. The oversize is broken with a hydraulic
breaker.
2. The crushed material is transported to subsequent stages of screening and
crushing in closed circuit to further reduce the material to minus 9 mm.
Conveyor belts are used to transport the intermediate and fine crushed
materials throughout the crushing circuit.
3. The crushing circuit design provides two weigh scales, crushed ore
sampling system, and magnetic separators to protect the cone crusher
from iron coming from underground mining operations. The finely crushed
product is transported to a fine ore bin with 1,000 tonne live capacity.
4. A variable speed belt feeder transports the crushed material from the fine
ore bin to the primary grinding mill. The material is ground to 80 percent
minus 200 mesh (75 microns) in closed circuit with a battery of cyclones.
5. Some flotation reagents will be added into the grinding mill to allow for
conditioning. Ground slurry (cyclone overflow) at approximately 30 percent
solids is sent to a trash screen for removal of debris produced in the
underground mining operation. After trash removal the clean slurry is
directed to a conditioning tank where flotation reagents are added for
conditioning prior to the flotation process.
6. The flotation circuit consists of banks of Rougher followed by Scavenger
cells to achieve maximum precious metal recovery. The Rougher
concentrate is sent to a two stage cleaning circuit to achieve the highest
possible gold and silver grade in the final concentrate. The first cleaner
tailing product and the scavenger concentrate are returned to the head of
flotation. The cleaner scavenger tails (CST) report to the thickener and
filtration area for dewatering.
7. The CST is filtered and the filter cake with a moisture ranging from 15% to
20% is stored and air dried in a warehouse prior to shipment.
8. The second cleaner concentrate reports to the concentrate thickener. The
second cleaner concentrate is filtered and the filter cake (final concentrate)

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with moisture ranging from 15% to 20% is stored and air dried in a
warehouse prior to shipment.
9. Each concentrate and CST shipment will be sampled and analyzed for
precious metal and moisture contents. Impurities present in the concentrate
will be quantified.
10. Flotation tails will be sent to a thickener and the higher density slurry
filtered at a dry tailings filter plant prior to conveying the solids to the dry
tailings storage facility (DTSF). A dry stack type of tailings storage has
been selected for the Terronera Project.
11. After sedimentation and filtration, the flotation tailings will be transported to
the dry tailings stacking area. The filtered tailing material will be placed in a
stockpile by a radial stacker. Front end loaders and compaction equipment
are ultimately used to spread and compact the tailing material as required.
12. Advantages of a dry stack tailings system include the following:

o Water reclaim maximization


o No embankment needed
o Minimal area required for placement
o Improved drainage control
o Lower reclamation cost

17.3 Energy and Water Requirements

Power will be provided by on-site generators in Year 1 and by CFE via a new
115kV power line beginning Year 2. The electrical power distribution system
consists of a medium tension line with two substations to service the following
processing areas:

 Crushing plant
 Grinding – flotation – sedimentation

Medium tension equipment is comprised of transformers with primary and


secondary sides. Starters with 4160 Volts tension are provided for the grinding
mill motor.

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Lower tension panels, motor control centers (MCC), harmonic filters, and
capacitors are included in the design. Transformers are included for lights
throughout the plant. MCC’s are intelligent type. Voltage is 480 V, three phase,
60 Hz. For lights and services, 220/127 voltages were included in the design.

Terronera’s water systems are comprised of a Fresh Water System and a


Reclaimed Water System. Fresh water will be provided by U/G mining
operations. The fresh water make-up requirement has been estimated at
approximately 11 m3 per hour. This is equivalent to approximately 0.3 tonnes of
fresh water per tonne of ore processed.

Water from the mine will be pumped to a fresh water tank. Fresh water will be
fed by gravity to the following process areas:

 Make-up to reclaim water tank


 Fire water system
 Potable water
 Pumps gland water seals
 Reagent mixing
The reclaim water tank will provide water via pumps to three processing
circuits:
 Grinding
 Classification (dilution water)
 Flotation (launder water)

17.4 Beneficiation Plant Process Reagents

The reagents to be utilized in flotation of sulfide mineralization associated with


precious metals present at Terronera are outlined in Table 17.1.

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Table 17.1 Reagents and Dosage


Reagent Dosage (g/t)
PROMOTER AP – 3418A 86
COLLECTOR A – 241 28
COPPER SULFATE 107
FROTHER F – 65 33
FLOCCULANT 30

Reagent dosage optimization studies will allow for reduction of costs associated
with flotation and sedimentation of tailing and concentrate products.

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18.0 PROJECT INFRASTRUCTURE

18.1 Existing Infrastructure

A public access road connects Puerto Vallarta with the local communities and
the Terronera project site area. The regional power needs are served by CFE
which has a 23kV power line that runs through the Terronera property. There is
no other existing infrastructure on the project site.

18.2 Infrastructure for Project

The major project infrastructure is shown on Figure 18.1 below:

Figure 18.1 Amec Foster Wheeler 2017 Map of Major Project


Infrastructure

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18.3 Process Plant

Run-of-mine material is delivered by truck to the process plant area which


comprises several buildings and structures housing the crushing, grinding,
flotation, concentrate thickening, and tailings thickening equipment.
The process plant buildings are sized for 2,000tpd throughput but the project
will be constructed and will begin operations as a 1,000tpd plant. Some of the
initial equipment, however, will be sized to handle 2,000tpd so that when the
plant throughput is expanded, the additional works needed will be minimal,
primarily a new 1,000tpd ball mill and flotation line.

Preliminary drawings of the process plant are enclosed in Appendix G.

18.4 Filter Plant

The filter plant takes the flotation tailing product from the process plant and
puts it into sedimentation tanks. From there the sediment is filtered and
pressed into a dry tailings material which is conveyed to a stockpile. Trucks
then transport the dry tailings material to the dry tailings storage facility.

Preliminary drawings of the filter plant are enclosed in Appendix G.

18.5 Waste Rock Storage Stockpile

Excavated material from the process plant area and initial mine development
will generate 600,000m3 of material to be stored in a waste rock storage
stockpile close to the mine portal. All rock material will be transported to the
stockpile in 12m3 trucks, end-dumped, and pushed into place by bulldozers.
The rocks will be up to 30” to 40” in size and geotechnical studies determined
the maximum safe slope. Hydrological studies were used as a basis for
designing the stockpile drainage system. For the purposes of the PFS,
preliminary designs were prepared of the stockpile.
The stored waste rock will be reclaimed for use as backfill in the mine. In Years
1 and 2 the annual amount reclaimed will be 10,000m 3 to 15,000m3 but from
Years 3 to 7 the annual volume will be from 60,000m 3 to 130,000m3.

Preliminary drawings of the stockpile are enclosed in Appendix G.


.

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18.6 Ancillary Buildings

Ancillary buildings necessary to support the Terronera project include the


following: Administration Building, Warehouse, Maintenance Shop,
Garage/Repair Shop, Change House, Dining Room, First Aid Station, Main
Gatehouse, Fuel Station, Explosives Storage Facility, Truck Scale, and
Laboratory.

18.7 Project Access

The Terronera site is accessible by public road from Puerto Vallarta which lies
55 km to the west. The road is paved for 35km and the remainder is a well-
maintained gravel road.

18.8 Internal Haul Roads and Mine Access Infrastructure

The Terronera Project will include access that is developed both from existing
public roads and mine-site specific haul and access roads to be used only by
Terronera Project equipment and mine personnel. Access from existing public
roads will be utilized to connect the mine site to external access and to connect
the mine portal platform area to the process plant. These access ways will
accommodate light duty vehicles and heavy duty traffic including dump trucks,
semi-tractor trailers, and construction machinery. The proposed mine access is
shown on Figure 20.1.
Haul and access roads to transport personnel, equipment, rock and earth
material haulage, and tailings on the mine property between the process plant
and the TSF will be developed on land either owned or leased by Minera Plata
Adelante SA de CV. The conceptual alignment for this haul and access road is
also shown on Figures 20.1 and 20.5.

18.9 Power Supply and Distribution

Electrical power in the region is provided by CFE which operates the national
grid in Mexico. An existing 23kV power line runs from the Tamarind substation
47km away in Ixtapa (near Puerto Vallarta) across the site of Terronera,
however, this line has no excess power available for Terronera.
Endeavour Silver has arranged with CFE for the construction of a new 115kV
power line to site together with a new substation. The permitting process for
these facilities was initiated in April, 2017 and is expected to take 12 months.

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Following permit approval, construction of the new power line and substation by
CFE is expected to take 18 months.
As the new 115kV supply will not be ready until Year 2 of the 1,000tpd
operations, leased generators will be installed on site to provide power during
construction and the first year of 1,000tpd operations.

18.10 Water Supply and Distribution

A 1,000M3 fresh water tank situated near the process plant will collect and
store excess water from the mine. This tank water will be the main supply of
process make-up, fire, and potable water for the site.
A reclaim water tank will store water reclaimed from the process plant and filter
plant.
A separate fire water system and potable water system will be installed to
service the site.

18.11 Waste Management

All domestic waste will be treated in sewage treatment facilities.

18.12 Surface Water Control

A stormwater pond located below the dry tailings storage area will collect the
run-off water from the tailings site.
All surface water throughout the site will be collected, controlled, and
discharged as described in Section 20.

18.13 Communications

The site will be serviced by a fiber optic telecommunications line. A telephone


system with 512 extension lines will connect all parts of the mine, process
plant, and ancillary buildings. Mobile communications comprising cell phones
and radio sets will be available for operating staff.

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18.14 Camp Facilities

A construction camp will be established near the site comprising:


 Three 18 person camp buildings for managers
 Three 72 person camp buildings for workers
 One building complex containing dining room, kitchen, laundry, and gym
 One building complex for general meetings and common use

The camp will continue to provide meals and accommodation when the mine is
operating.

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19.0 MARKET STUDIES AND CONTRACTS

Endeavour Silver produces a silver concentrate which is then shipped to third


parties for further refining before being sold. To a large extent, silver
concentrate is sold at the spot price.

Endeavour Silver has a policy of neither hedging nor forward selling any of its
products. As of the date of issuing this report, the company has not conducted
any market studies, as gold and silver are commodities widely traded in world
markets.

Due to the size of the bullion market and the above-ground inventory of bullion,
Endeavour Silver's activities will not influence silver prices.

Table 19.1 summarizes the annual high, low, and average London PM gold and
silver price per ounce from 2000 to 2016.

Table 19.1 Annual High, Low, and Average London PM Fix for Gold and
Silver from 2000 to 2016

Gold Price (US$/oz) Silver Price (US$/oz)


Year
High Low Average High Low Average
2000 312.70 263.80 279.12 5.45 4.57 4.95
2001 293.25 255.95 271.04 4.82 4.07 4.37
2002 349.30 277.75 309.67 5.10 4.24 4.60
2003 416.25 319.90 363.32 5.97 4.37 4.88
2004 454.20 375.00 409.16 8.29 5.50 6.66
2005 536.50 411.10 444.45 9.23 6.39 7.31
2006 725.00 524.75 603.46 14.94 8.83 11.55
2007 841.10 608.40 695.39 15.82 11.67 13.38
2008 1,011.25 712.50 871.96 20.92 8.88 14.99
2009 1,212.50 810.00 972.35 19.18 10.51 14.67
2010 1,421.00 1,058.00 1,224.52 30.70 15.14 20.19
2011 1,895.00 1,319.00 1,571.52 48.70 26.16 35.12
2012 1,791.75 1,540.00 1,668.98 37.23 26.67 31.15
2013 1,693.75 279.40 1,257.42 32.23 5.08 21.26
2014 1,385.00 1,142.00 1,266.40 22.05 15.28 19.08
2015 1,295.75 1,049.40 1,160.06 18.23 13.71 15.68
2016 1,366.25 1,077.00 1,259.00 20.71 13.58 17.21

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Over the period from 2000 to 2016, world silver and gold prices have increased
significantly. This had a favourable impact on revenue from production of most
of the world’s silver mines, including the three mines - Guanacevi, Bolanitos,
and El Cubo - operated by Endeavour Silver.

Endeavour Silver has no contracts or agreements for mining, smelting, refining,


transportation, handling or sales that are outside normal or generally accepted
practices within the mining industry.

In addition to its own workforces, Endeavour Silver has a number of contract


mining companies working at its three operating mines and is evaluating the
possibility of using contract miners at Terronera.

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20.0 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL IMPACT

20.1 Terronera Project Surface Facilities Layout

Figure 20.1 illustrates the currently proposed project surface facilities layout and
the Terronera Project’s location relative to the nearby communities of Santiago
de Los Pinos and San Sebastian del Oeste.
Figure 20.1 Amec Foster Wheeler 2017 Map of Mine Surface Facilities
Layout

The drainage basin within which the Terronera filtered tailings deposit will be
constructed is known locally as the “Mondeño”.
20.2 Environmental Liability

The Terronera Project, as a greenfields mine development, has the advantage


of not inheriting latent environmental contamination issues.
As evidenced by surface disturbance, no historical mining activities appear to
have occurred within the project boundaries, however, there exist several
currently active mining operations of limited scale in the project vicinity.

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20.3 Environmental Permitting Basis

The Terronera project submitted, in December, 2013, a Manifest of


Environmental Impact (“MIA”), the Mexico Federal Government’s equivalent to a
Canadian Environmental Assessment, to the Mexican environmental permitting
authority known as SEMARNAT (Secretaria de Medio Ambiente y Recursos
Naturales). A SEMARNAT permit for a 500 tpd Terronera Project was issued in
October, 2014. Prior to the December, 2013 MIA application, Endeavour Silver
was issued an exploration MIA and certain associated SEMARNAT permits
specific to the exploration phase for the project.
In February, 2017 a modified MIA application was issued by SEMARNAT to
expand the proposed process rate to up to 1500 tpd and to establish that the
tailings storage facility would be developed as a filtered tailings storage.
A further modified MIA application to expand the Terronera process rate to
2,000 tpd will be developed and submitted to SEMARNAT at a future date in
anticipation of the proposed 2,000 tpd process phase for the project.
The Terronera Project process plant feed will be processed on site by flotation.
The processing agents will not include cyanide and will be limited principally to
agents such as coagulants, surfactants, and flocculants that facilitate the
process of “floating” the silver and gold that are introduced to the process circuit
in the milled material.
These flotation agents are typically relatively inert. The majority of reagent
chemicals are captured in very fine (80% sub #200 gradation) tailings waste
that is stored, and thus contained, within the drystack tailings storage facility
(“TSF”). Any potential seepage from this and other storage facilities will be
monitored and treated to achieve constant on-site reagent containment.
A small fraction of the ore (~ 2%) will be processed by tank leaching at
Endeavour Silver’s Guanaceví Mine. This limited Terronera Project tonnage
will be transported by haul truck to the Guanaceví plant in the State of Durango
for leachate processing. The tailings that will be generated by this Terronera
ore will ultimately be stored at the Guanaceví filtered tailings storage facility
which is controlled by the permits in-place at the Guanaceví Mine.
Tailings that do not include cyanide processed ore are covered by regulations
that are unique and separate in the SEMARNAT permitting system from those
for cyanide leaching ore processing. The flotation regulations are more
appropriate for the hydrological, seismic, TSF geometry, and natural terrain

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conditions at the Terronera Project than the regulations applicable to mines that
require cyanide process permits for their TSF entitlement requirements.

The flow chart for Mexico mine permitting is shown in Figure 20.2.

Figure 20.2 Environmental Permitting Steps for Mining Projects in Mexico

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The status of the Terronera project as of the effective date of this PFS per the
Federal, State, and Regional/Municipal governing bodies in Mexico is as listed
in Figure 20.3.

Figure 20.3 Environmental Permits required for the Terronera Project


Required
per
Minera
Submittal Plata
Mining Stage Agency/Permit Comments/Observations
Documentation Adelante
/Submittal
Date if
Issued

Permit Issued to Minera Plata


31 Oct.
Exploration MIA Adelante - extended for 24
2011
months on 20 January 2017

SEMARNAT /
Permit Issued to Minera Plata
Exploration NORMA de Ley Adelante for the Terronera
General vein exploration – Diligence
19 Jan.
Exploration ETJ ongoing for additional
2013
exploration permissions for
the La Luz and Espinos
veins.

Local
Municipality:
Will be requested from the
(Permit for
local municipality after the
Construction Disposal of Application Yes
precedent permits have been
Non-hazardous
granted.
Waste
Residues)

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SEMARNAT:
(Land use Application n/a
License)

INAH: No evidence of archeological


(Archeological Survey n/a sites currently exists for
Clearance) Terronera project.

Application and
SEDENA, Local Endorsement
The SEMARNAT Change of
Municipality and Letter – All
Land Use permit is issued
State submittals occur
Yes prior to presentation of
Governments: after
SEDENA (Federal), State,
(Explosives SEMARNAT
and Local applications.
Handling) authorizations
are issued.

500 tpd MIA submitted Dec


2013 and granted in Oct
SEMARNAT: 2014. 1500 tpd MIA
Environmental Environmental modification was authorized
Impact Impact by SEMARNAT on 23 Feb
Manifesto Yes
Resolution for 2017. The 1,000/2,000 tpd
the Mining (MIA) MIA modification has not
Project been submitted for
SEMARNAT review as of the
date of this report.
ETJ for 1,500 tpd mine and
plant (not including TSF
Technical
installations) submitted to
SEMARNAT: Economic
SEMARNAT on February 7
Permit to Justification
Yes 2017. The ETJ for
Change the Use Study (ETJ) –
1,000/2,000 tpd has not been
of Land aka Change of
submitted for SEMARNAT
Soils Use (CUS)
review as of the date of this
report.

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Very likely that Terronera


Not required by
CONAGUA: underground mine will
CONAGUA
Concession to generate 100% of process
since process
Extract n/a and makeup water demand.
water source is
Underground Filter plant in the Mondeño
from mining
Water will also considerably reduce
operations
makeup water demand.

Yes. It has been


confirmed that the
CONAGUA: TSF basin natural The application is
Concession to drainage flow being processed by
Various
Occupy a exceeds the CONAGUA as of the
Documents
Federal threshold of 2m Effective Date of this
Riverbed Area width and 0.75m PFS.
depth in a 5 year
storm event.

CONAGUA: Application Application CNA 02-002 to


Permit to Form Supported construct the TSF in the
Yes
Construct in the by Technical Federal Zone has been
Federal Zone Documents. submitted to CONAGUA

CONAGUA:
Permit to Dry tailings storages typically
Construct n/a n/a avoid the hydraulic structure
Hydraulic permit requirement
Infrastructure

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Risk Analysis
Study is typically The risk level of the
not required when project will be
cyanide (NaCN) is assessed when the
SEMARNAT:
Risk Analysis not used in the project is sufficiently
Risk Analysis
Study (ER) processing circuit. advanced. The Risk
Study
Terronera will be a Analysis Study will
flotation circuit thus be advanced if
excluding the use required.
of NaCN.

SEMARNAT: Unified Once the MIA has been


Unified Technical issued and the ETJ is in
n/a
Technical Document process the DTU is not
Document (DTU) typically required.

CONAGUA: Documents will be submitted


Effluent Various to CONAGUA prior to
Yes
Discharge Documents Terronera operation
Permit activities.

Provides an Environmental
MUNICIPIAL:
registration number for the
Sole Various
Operation Yes mine. Requested by Minera
Environmental Documents
Plata Adelante prior to the
License
time of mine startup.

Const. Phase
SEMARNAT: Included in Risk Analysis
Risk Analysis Included in
Accident Documentation (ER shown
Covers this ER
Prevention Plan above)
Requirement

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MUNICIPAL:
This document will register
Registration as
Various prior to mine start-up the use
Generator of Yes
Documents of certain chemicals, oils, and
Hazardous
slag materials.
Wastes

SEMARNAT: Management plan will be


(mining Management generated & submitted to
residues mgmt. Plan that SEMARNAT by Minera Plata
Yes
plan) NOM-157- Complies with Adelante per the
SEMARNAT- NOM-157 requirements of NOM-157-
2009 SEMARNAT-2009

Plan should be submitted to


SEMARNAT: Closure Plan SEMARNAT w/ 1000/2000
(Closure and that Complies tpd MIA application, updated
Closure Yes
Reclamation with NOM141 during the mine operation
Plan) Sect. 4.17 phase, and finalized prior to
closure of mine.

20.4 Existing Site Conditions

20.4.1 Baseline Studies

To provide a basis upon which to gauge the potential environment impact of the
proposed project, certain environmental baseline studies were performed prior
to the issuance of the Preliminary Economic Assessment which was issued in
April, 2015. The following baseline studies were performed by Endeavour
Silver’s two previously identified in-country permitting consultants:
 Meteorology, air quality, and climatology
 Soil erosion and contamination
 Surface and subsurface hydrological conditions and hydraulic forces
on surface structures

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 Flora and fauna, cultural, historical, archeological resources, as


applicable

20.4.2 Topography

The Terronera Project is located in a mountainous region of Western Mexico


with elevations ranging from sea level at the Pacific coast to 2,850m in the
highest elevation in the San Sebastian region of the Sierra Madre Occidental
mountain range.
Elevations range from 1,160m to 1,800m within the Terronera project footprint.
The initial topographical and geographical mapping basis for the development
planning for the Terronera Project was captured by satellite photogrammetry on
March 1, 2012 by Photosat Satellite and GIS Data Consultant of Vancouver,
Canada. The topographic resolution for this data generated one meter
contours. Because the project area has remained relatively undisturbed since
the date of this satellite capture the image and contour data remains current
and relevant for the basis of this PFS.

20.4.3 Meteorology – Air Quality

The climate type reported for the project site is subtropical with the rainy
season occurring from June to September, with July typically being the wettest
month. Data from the closest meteorological station (San Sebastián del
Oeste), show the average annual precipitation as 1.35 m. The maximum mean
air temperature is 25.6° C and the minimum mean is 11.7° C.
Prevailing winds in the area are from the southwest.
No existing data on air quality is available for the project area. Existing unpaved
road traffic may be the main source of dust but, in general, the area is
considered to have good air quality as a rural and relatively undeveloped area.

20.4.4 Soil

The predominant type of soil in the Mondeño is known as regosol per the
agricultural soils nomenclature. Soils of this type generally result from the
relatively recent formation of non-alluvial substrates and are located in areas
with strong erosion causing continuous soil creation from the weathering of the
host rock.

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The regosol soils in the Terronera area are of silt-clay texture of high plasticity
(USCS type CH), clayey sands (SC), highly compressible silts (MH) and silty
sands (SM) with a density range of 1,359 to 1,929 kg/m3 and an in-situ
moisture range of 6% to 37% within the sampling from the seventeen open pit
tests performed by Amec Foster Wheeler in the Mondeño basin.

20.4.5 Geotechnical and Seismic Studies

Geotechnical investigations including subsurface hollow stem augur drilling,


standard penetration testing (SPT), and soil/core samples, open pit tests, and,
as appropriate, permeability testing, occurred utilizing various drilling and coring
subcontractors and were supervised and logged by Amec Foster Wheeler
geotechnical engineers between December, 2015 and October, 2016 for the
preliminary design phase for the tailings, soils, and waste rock storage facilities.
Amec Foster Wheeler generated, in November, 2014, and then updated in
October, 2016, a Deterministic Seismic Hazard Assessment for the Terronera
Project site. The report’s findings identify the seismic influence of the Jalisco
block and Rivera and Cocos tectonic plates at the tectonic subduction zone
approximately 175 km west of the project site along the margin of the Pacific
coast. Three earthquakes of 8.0 Richter magnitude or greater have occurred
within 320 km of the site since 1930. The deterministic weighted mean un-
attenuated horizontal acceleration for the site was determined in the Amec
Foster Wheeler study to be 0.48g. For this reason Amec Foster Wheeler has
recommended that tailings be stored in a structurally placed and densified
filtered tailings configuration that consistently maintains static and seismic force
geotechnical stability that meets or exceeds TSF factor-of-safety criteria set by
the Canadian Dam Association.

20.4.6 Hydrology

According to the hydrological classification system used by the Mexico Federal


water commission, CONAGUA, the Terronera Project area is located within the
administrative hydrologic region #3, “Pacifico Norte”.
If the flow of stormwater, in the drainage area that the proposed mine facilities
are located within can flow during a five-year return period intensity with a
stream width of ≥two meters and a depth of ≥0.75 meters then a permit to
construct facilities in what is regarded as “Federal Waters”, or “Federal Zone”
can be required by CONAGUA. The several principal drainages in the

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Mondeño have been determined by hydrologic and hydraulic analysis to


exceed these CONAGUA Federal Zone flow thresholds. For this reason, the
Terronera filtered tailings deposit design and operational procedure was
established by Amec Foster Wheeler for this PFS so as to comply with the
CONAGUA Federal Zone regulations.
Hidrologia e Hidraulica de Mexico generated, in May, 2016, a Precipitation
Analysis Study for the Terronera Project. The study evaluated precipitation
data from three meteorological data stations within 36 km of the project,
including the San Sebastian station about four km from the site. The return
period data necessary for pending hydraulic sizing and design configuration of
Terronera site drainage infrastructure was developed and is shown in Figure
20.4.

Figure 20.4 Return Period Storm Event Precipitation

Return Period Size 24 Hour Precipitation (mm)


2 years 58
5 years 76
10 years 88
20 years 99
50 years 114
100 years 124
500 years 150
1,000 years 161
5,000 years 186
10,000 years 197

20.4.6.1. Watershed – Surface Hydrology

The Terronera Project is located in the watershed Rio Ameca – Ixtapa.


This watershed covers an area of 3,160 km2. The watershed western
boundary occurs at the Pacific Ocean. The sub-basin including the
Terronera Project is the San Sebastian drainage which captures
approximately 84,700 hectares of drainage area.

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20.4.6.2. Sub-Surface Hydrology

The Terronera Project is located above the aquifer Mixtlán, specifically in


the northwestern quadrant of the aquifer.
Endeavour Silver is anticipating that the Terronera Project will use excess
water pumped from the mine tunnels and recovered from the tailings filter
plant for 100% of the operations water demand. The beneficial use of
processing ore using water from underground workings is established in
Article 19 of Chapter 3 of the Mexican Mining Law.
Under water law in Mexico, mining process water cannot be returned to
the surface or subsurface basins without treatment in accordance with
SEMARNAT NOM-001, Limits of Contaminants in the Discharges of
Wastewaters into the Mexican National Waters and Resources.

20.4.7 Land Use

The communities in the project area have been organized since the early
1900’s into various ejidos, or community groups, which distribute and share
agricultural and other lands for the benefit of the ejido member families. The
Terronera Project has completed negotiations with various ejido members for
leased surface rights of certain parcels of land needed for the location of the
tailings and waste rock storage facilities. The aggregate limit of these parcels
is identified on Figure 20.1. as the dashed magenta line labeled as the TSF
surface area boundary.
The predominant use of land at the site project is forestry, pasture land, and
subsistence agriculture. The SEMARNAT default land use is known in Spanish
as “forestal”, or forest in English.
A network of unpaved roads exists for transportation between communities and
ranches. The Terronera Project has used these roads for exploration phase
access. A portion of the Terronera construction phase work includes improving
those portions of the main community road between Los Pinos and San
Sebastian which the mine will utilize during the operations phase of the project.

20.4.8 Vegetation and Ecosystems

A study area inventory was performed by Ing. Roberto Trujillo of the


Consultoría Forestal y Ambiental of Durango, DGO, Mexico for the Terronera

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Project. The results are included in the MIA report submitted to SEMARNAT in
February, 2017, for a 1,500tpd Terronera mine and process plant.

The Trujillo study identifies fauna and flora as a baseline condition for the
project area and recommends certain actions to minimize the environmental
impact of the proposed Terronera Project.

20.5 Tailings Storage Facility (TSF)

The TSF will store filtered tailings, or “drystack” tailings, to minimize


downstream contamination risk and to maximize geotechnical stability in the
seismically active coastal area of western Mexico.

The TSF design will accommodate approximately 2.3 million m 3 of compacted


tailings over a 7 year mine life based upon an initial two year 1,000 tpd process
rate and then an expansion to 2,000 tpd beginning in Year 3.

Additional storage volume is available in the initial TSF footprint as incremental


additional TSF overall height should Endeavour Silver increase process rates
or identify additional mineralization for an extended mine life.

The layout of the TSF is shown in Figure 20.5.

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Figure 20.5 Amec Foster Wheeler 2017 Map of the TSF Layout

20.5.1 TSF Location and Geometry

The location of the TSF in relation to the overall project facilities is shown in
Figure 20.1. The TSF is located in a valley approximately 1km northwest of the
process plant. The current footprint of the TSF occupies a footprint area of
approximately 87,000 m2.
The TSF is designed to have an overall downstream slope of 2.5 to 1 with
interim benches of 5m width and slopes 10m in height at 2:1 slope. Below the
TSF to the northwest, there is a proposed storm water collection pond to
collect, treat, and release storm water from the TSF surface area and any
subgrade water that is not qualified to be released downstream.

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Upstream drainage will be captured in cutoff ditches constructed immediately


above the TSF upstream perimeter and routed to the natural drainage course
below the TSF as non-contact water.

20.5.2 TSF Operating Methodology

Filtered tailings will be placed and compacted in lifts of approximately 30cm to a


design target density of 1.76 MT/m3 at an optimal moisture content of
approximately 18%. It is proposed that the TSF be constructed and reclaimed
concurrently with erosion protection, re-vegetation, and drainage structures
once the TSF toe dam and its initial bench and slope are completed.

20.5.3 Tailings Transport and Deposition

The proposed TSF will be constructed with filter tailings produced by a filter
press plant that is located at the TSF. Filter tailings will be transported to the
TSF area by either 12 m3 haul trucks that will transport the filtered tailings
approximately one-half km along a proposed newly constructed haul road or by
a conveyor system. A dry tailings staging area will feed the dry tailings haul
trucks or conveyor system at the filter plant site.
At the TSF, the tailings will be truck end-dumped or radial conveyor-placed,
spread, and compacted by a series of mid-size dozers, motor grader(s), and
vibratory roller compactors.

20.6 Environmental Considerations for Tailings Storage

20.6.1 Substances and Residues Used and Produced by the Ore Processing
Operations

The reagents used in the process flotation operations are Cytec AP-3418,
Cytec A-241, Cytec AF-65, Copper Sulphate, and Foaming Agent PQM F-65.

The mine area will utilize a variety of oils, greases, and chemicals, and other
reagents that will be identified, quantified, classified, and submitted for
registration per NOM-052, 083, & 157 specific to the Mine Risk Analysis and
Application for the Generation of Hazardous Wastes.

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20.6.2 Geotechnical Characterization of the Starter Dam Structure and Filtered


Tailings Storage

Subject to the requirements of NOM-157 – SEMARNAT 2009 Amec Foster


Wheeler has performed testing on the waste rock to quantify any acid
generating, or potential acid generating waste rock. The tailings have also
been sampled and tested for potential contaminants for the purpose of
sizing/designing the TSF contact water management pond as shown at the toe
of the tailings storage facility in Figure 20.5.

20.6.3 Environmental Monitoring Program

The Terronera project will be required to comply with the environmental


regulations and standards in place in México. The mining infrastructure and
supporting facilities will need to be designed so as to minimize the impact to the
natural environment.
Mexican law requires that an environmental program be implemented to
monitor the surface and underground water, creek sediments, soil, air,
vegetation and wildlife conditions. Amec Foster Wheeler has supported
Endeavour Silver during the installation of four combination piezometer and
water quality monitoring wells in the Mondeño basin as shown in Figure 20.7.
Additional wells have been proposed by Amec Foster Wheeler at upstream and
downstream locations of the TSF to verify groundwater quality once the TSF is
operational.

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Figure 20.5 Amec Foster Wheeler 2017 Map of the Mondeño Tailings
Storage Area Monitoring Well Locations

20.6.4 Surface Water Management

The Amec Foster Wheeler design components for the Terronera tailings
management facilities are shown on Figure 20.5 and are listed as follows:
 The filtered tailings storage, or TSF, with a capacity of approximately
four million tons of densified tailings material
 A constructed haul road from the process plant to the filter plant. This
road also provides the alignment for the raw tailings and filter plant
extracted process water piping
 A constructed haul road from the filtered tailings plant to the active TSF
platform
 A platform above the TSF on which the filter plant will be located.
These features will interrupt natural drainage courses and will need to be
designed to accommodate both typical stormflows and the 50 year design
stormflows as stipulated in SEMARNAT NOM.141 Section 5.3.1. Because the

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TSF is located in a Federal Zone as designated by CONAGUA the non-contact


diversion structures in association with the TSF will be sized to be able to
successfully pass through the TSF the 10,000 year return period stormflow.
The constructed haul roads will utilize concrete, HDPE, and ADS plastic
culverts sized according to NOM141 criteria to pass 50 year return period
design storm flows. The TSF will use a combination of perimeter canals
constructed above the facilities, subdrain rock and pipe systems beneath the
storages, and, where feasible, culverts to route design storm flows through
facilities as appropriate. Long culverts with minimal slope will be avoided in
favour of open drainage structures so as to minimize culvert maintenance.

20.6.5 Mine Water Discharge

Mine water will be pumped to the surface and utilized as process water. Any
process water excess will need to be water quality tested and can be
discharged downstream if compliant with SEMARNAT NOM157 Section
5.4.2.4.1 mine waste discharge contamination limits, and certain applicable
sections of NOM-001. If not compliant it will need to be stored, treated, and
tested to achieve compliant discharge.

20.6.6 Groundwater Management

The current process water demand estimate does not require the use of
groundwater from the project aquifer Mixtlán identified in Section 20.4.6.2.
Amec Foster Wheeler, as part of the permitting submittal to CONAGUA,
conducted 2-d water infiltration modeling through the tailings dry stack and the
native vadose zone that considered the tailings unsaturated pore water
properties, the effects of drystack height or geometry as it grows over time, and
the climatological conditions of the site (Amec Foster Wheeler, 2016). Based on
the available site data and the projected drystack properties, it is anticipated
that no liner would be required over the entire area of the TSF to prevent
infiltration into the native ground, however, the TSF design includes the
construction of a subdrain system in identified ephemeral and perennial spring
areas at the bottom of the existing valley and the inclusion of a geomembrane
both to prevent saturation of the overlying filtered tailings material and to
separate contact from non-contact water at the base of the TSF.

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20.6.7 Air Quality Management

SEMARNAT NOM-141, specific to tailings facilities, provides fairly general


commentary on limiting fugitive dust contamination of surrounding communities,
and of the need for mine perimeter particulate contamination monitoring.

20.6.8 Soil-Rock Management as Closure Capping Materials

In accordance with SEMARNAT regulations, during the stages of preparation,


construction, operation, maintenance and closure/reclamation, actions must be
taken to prevent soil erosion and contamination of native soils in the project
area.
The Terronera TSF plan, as shown in Figures 20.1 and 20.5, demonstrates the
geometry for the Mondeño filtered tailings deposit that will be generated by the
processing of 4.06 M tonnes of ore as presented in this PFS. At more
advanced stages of design documentation, Amec Foster Wheeler will
recommend the storage and preservation on-site of dedicated topsoil and
waste rock storages of sufficient volume to facilitate capping of the TSF to
achieve long term erosion control, dust control, and to contain the filtered
tailings storage within a stable surface cover mantle of soil-rock material that
will minimize ongoing TSF management at the time of the implementation of
the project reclamation and closure plan.

20.6.9 Solid Waste Disposal

Hazardous waste management criteria are established in SEMARNAT NOM-


052; 2005 which describes the characteristics, process of identification,
classification, and listing of hazardous waste.
Hazardous waste generated onsite will need to be loaded into containers that
clearly identify the type of waste and placed in an appropriate disposal area for
such waste.
20.7 Socio-Economic and Community Relations

The project is in the vicinity of the communities of San Sebastian del Oeste,
Santiago de Pinos, and Los Reyes. These three relatively typical Mexican
“pueblos” belong to the municipality of San Sebastian del Oeste, Jalisco. Per
the Federal Mexican census of 2010, this municipality has 5,755 inhabitants.

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20.8 Cultural and Historical Resource Studies

According to the baseline cultural and historical resource studies, the QP is


unaware of any cultural events or practices or any historical landmarks that
would interfere with the development of the Terronera Project.

20.9 Archeological Artifacts and Studies

According to the baseline archaeological studies, the QP is unaware of any


archaeological artifacts that would be impacted by the development of the
Terronera Project.

20.10 Reclamation and Closure Activities

A Terronera closure and reclamation plan will be included in the amended


1000/2000tpd MIA permit application, and ETJ support documentation, as
outlined in the Construction Phase portion of Figure 20.3.
Every three years during the active mine operation, and no less than three
years prior to the closure of the mine, an updated closure plan should be
presented to SEMARNAT for the Terronera Project.
At the end of the mine life, Endeavour Silver shall perform restoration activities
on impacted areas ensuring the stability of disturbed areas. These efforts
should be started to the extent possible during project operations and be
completed within two years after the end of the mine operations.

20.10.1 Mine Surface Disturbance Closure Activities

20.10.1.1. Resurfacing and Vegetation

The Terronera Project above ground improvements will need to be


dismantled and removed from the site. The resulting disturbed platforms
and other surface areas will need to be covered with rock or stable soil fill
as necessary to provide positive drainage conditions and then capped with
topsoil from the mine topsoil storage generated during mine development.
The topsoil capped areas will need to be re-vegetated so as to provide a
permanent self-sustaining rehabilitation of the previously disturbed mine
surface area.

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20.10.1.2. Mine Runoff and TSF and Rock Storage Seepage Management

Any mine generated contact water seepage that does not qualify for
release into the downstream environment will need to be managed as
actively treated flows until such time as it can qualify for direct release per
the discharge limits criteria of SEMARNAT NOM-001 Contaminant
Discharge, NOM-157 Mine Discharge, and NOM-052 Hazardous Waste.
As is typical of contemporary mine closures, the final mine closure will
need to be a mine site with a condition of zero non-qualified release of
runoff.

20.10.2 Underground Mine Infrastructure Closure Activities

All vent raises and portals that provide access to underground workings should
be properly sealed to prohibit access to underground workings. Subsurface
mine water that reaches the surface should be managed as surface runoff.

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21.0 CAPITAL & OPERATING COSTS

Capital and operating cost estimates were developed to evaluate the economic
feasibility of the Terronera Project. The capital costs comprise initial capital
costs (incurred from the date of the project go-ahead to start-up of commercial
production) and sustaining capital costs (incurred from start-up of commercial
production to mine closure). The estimates are summarized in the following
tables:
 Table 21.6 Summary of 1,000tpd Capital Costs
 Table 21.9 Summary of Capital Costs for Expansion to 2,000tpd
Excluded from all capital costs are the sunk costs incurred prior to the project
go-ahead, including all costs associated with:
 Property purchases
 Drilling and exploration
 Concession taxes and annual payments
 Metallurgical testing
 Geotechnical sampling and coring for TSF foundation assessment
 Advice, studies and technical reports from third party professionals
including cost of outside consultants
 Permitting fees
 Endeavour Silver time and expenses in trips to site, meetings, and
discussions with authorities, contractors, and other parties

The operating costs comprise operating and maintenance costs from all areas
of Endeavour Silver’s Terronera operations and administration. The operating
costs are summarized in Section 21.7.

21.1 Preparation of Capital Cost Estimates


The capital cost estimates were prepared by the following contributors and
compiled by SFA into a single capital cost estimate:
 P&E Mining Consultants Inc. (“P&E”) estimated the mining costs
 Amec Foster Wheeler estimated the dry tailings storage facility, filter
plant site preparation, and TSF basin roads and pipelines costs

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utilizing Endeavour Silver Corp provided unit costs as generated


during operation of their three currently operating Mexico mining
properties.
 Endeavour Silver estimated the taxes, royalties, and transport and
refinery costs
 Endeavour Silver obtained from the Commissión Federal de
Electricidad (“CFE”) the cost of providing a 115 kV power line to site
and the costs per kWh of supplying power
 Endeavour Silver estimated the cost of leasing generators to provide
power to the site during construction and all the project facilities for
the first year of operations
 SFA, with input from P&E and PMICSA, estimated the engineering,
procurement, and project and construction management costs
 SFA, with the assistance of PM Ingeniería y Construcción, S.A. de
C.V.(“PMICSA”), estimated the process and filter plant costs, the site
preparation costs for the process plant, and the waste rock storage
costs
 SFA estimated the total mine closure costs with the Terronera closure
and reclamation phase reclamation costs being provided by Amec
Foster Wheeler
 SFA, with input from Endeavour Silver, estimated the site buildings,
water supply, construction camp, and Owner’s costs

21.2 Basis of Capital Costs

The capital costs were estimated by engineers and construction managers with
recent experience on similar mining projects in Mexico and were based on the
following:
 Topographic maps with 1m contours
 Life of mine (LOM) production schedules derived from 3D block
models
 Metallurgical test work by RDi, Wheat Ridge, Colorado
 Material quantity take-offs for tailings facility, earthworks, and roads

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 Vendor quotes for major equipment


 Contractor quotes for contract mining work
 Preliminary engineering for the process and filter plants, including:
flowsheets; material balances; process design criteria; P&ID’s;
electrical single-line diagrams; equipment lists; equipment data
sheets; specifications (for major equipment); instrument list; site
layouts; general arrangement drawings; and sections
 Endeavour Silver and SFA data for all other equipment and materials
 The Project Execution Plan enclosed in Section 24 of this report
 Spares at 4% of mechanical and electrical equipment costs for the
1,000tpd process and filter plants and 2% for the expansion to
2,000tpd
 Freight, duties, taxes, and vendor commissioning costs were included
in equipment costs
 CONAGUA TSF permit submittal concept for the TSF area
installations
 Labour installation manhours and unit costs for all structural,
mechanical, piping, electrical, and instrumentation work were based
on PMICSA’s data base from mining projects in Mexico
 The direct costs include all contractors’ mobilization, management,
overheads, site vehicles, utilities, surveying, and material testing
 Owner’s costs include: internal Endeavour Silver project staff
(management, procurement, accounting); environmental and
community relations activities; temporary works; start-up costs;
vehicles, ambulance; and communications equipment
 Engineering at 6% of direct costs
 PM/CM costs were based on manpower and rates used on previous
Endeavour Silver projects (Bolanitos and El Cubo) and Terronera’s
construction schedule enclosed in Section 24 of this report

The accuracy of the capital cost estimates is ± 20%.

The estimates are based on prices ruling 4th Quarter, 2016.

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No allowance has been made for escalation and exchange rate fluctuations and
the cost estimates exclude working capital and the costs of project financing.

A contingency % was applied to each of the major capital cost items in Table
21.6 to cover costs which are expected to be incurred but which cannot be
quantified with the level of information available. The % varied with each item
depending on the amount of engineering completed for that item and the
source of the estimate. The result was a weighted average contingency of 13%
which was applied to all the direct and indirect capital costs, including the mine
development costs in Year -1, Year 1, and Year 2 and the tailings expansion
costs in Year 1 and Year 2.

Contingency does not cover out-of-scope items or events that may arise during
project execution, for example:
 Labour strikes
 Earthquakes, hurricanes, floods
 Large increases in material prices (structural steel, cement, cabling)
 Legislation changes

21.3 Capital Costs for 1,000tpd Plant

21.3.1 Mine Costs

The mine capital costs for development in Year -1 are shown in Table 21.1.

Table 21.1 Mine Development Costs in Year -1

Estimated Cost
Item
US$(‘000’s)
Construction
Construct Portal 500
Construct Refuge Shelters 300
Total Construction 800
Development Months 1-9
Portal entrance @ +2% 39.5
Portal Ramp @ -12% 845.4
Ramp 1410 - 1380 @ -12% 477.2

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Estimated Cost
Item
US$(‘000’s)
1380 Haulage Drift @ +2% 48.2
1380 Electrical Substation 40.3
1380 Refuge Shelter 40.3
1380 Fuel and Lube 20.1
1380 Day Cap Mag 20.1
1380 Day Powder Mag 20.1
1380 Latrine 25.2
1380 Raise Bore Ore Pass 276.3
1380 Egress/FAR 283.9
Ramp Level Access 64.6
Access Ore Pass 21.5
Access Egress/FAR 28.7
Access BF Re-muck 21.5
Drainage hole cut–out 8.6
Total Development Months 1-9 2,282
Development Waste Haulage 289
Equipment Power 163
Development Months 10-12
1380 Haulage Drift @ +2% 466.3
1380 Refuge 20.2
1380 Latrine 25.2
1380 Clean & Dirty Sump 119.1
1380 Raise Bore Ore Pass 441.9
1380 Egress/Fresh Air Raise 459.7
Ramp 364.1
Ramp Re-muck 17.2
Ramp Level Access 93.4
Access Ore Pass 43.1
Access Egress/Fresh Air Raise 57.5
Access Backfill Re-muck 43.1
Drainage Hole Cut-out 17.2
Ore Pass finger raise 7.7

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Estimated Cost
Item
US$(‘000’s)
Wastepass Finger Raises 7.7
Total Development Months 10-12 2,183
Development Waste Haulage 203
Labour
Warehouse Person 34.9
Clerk 20.2
Labourer / Nipper 20.2
Dry Man 20.2
Mine Superintendent /Mine Manager 54.2
Mine Engineer / Planner 86.5
Ventilation/Surveyor Technician 18.2
Mine Geologist 86.5
Geotechnical Engineer 18.1
Diamond Drill Foreman 9.1
Mine Safety /Trainer 27.1
Construction Leader 4.8
Construction Person 27.2
Mine Labourer / General Labourer 13.5
Contractor Admin. Indirect Labour 171.3
Total Labour 612
Total Mine Development Costs Year -1 6,532

The mine capital costs for equipment in Year -1 are shown in Table 21.2

Table 21.2 Mine Equipment Costs in Year -1

Estimated Cost
Item
US$(‘000’s)
Single Boom Jumbo 83.2
Production 3.5m3 LHD 80.1
2.0m3 Scooptram 52.7
Scissor truck 95.3

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Estimated Cost
Item
US$(‘000’s)
Maintenance/Lube Truck 77.1
Shotcrete Truck 131.2
Shotcrete Delivery Truck 77.1
Ground Support Bolter 101.4
Personnel Carrier 37.5
Utility Tractor 5.3
U/G Pickup Truck 10.5
Grader 22.5
Jackleg Drills 37.5
Diamond Drill 300.0
U/G Fans 83.9
Surface Fans 250.2
U/G Face Pumps 125.0
Compressors 271.2
Electrical Sub-stations (UG) 220.0
Refuge Shelters 100.1
Total Equipment Costs Year -1 2,161.8

21.3.2 Power Costs

The power used on site during construction and all of the power required for the
first year of operations will be provided by generators leased from 3 rd parties. A
quote for supplying the power from generators was provided to Endeavour
Silver and is the basis for the generated power costs used in the cost estimates
in this report.

The total 5,100kW power demand in the first year of 1,000tpd operations
comprises:
o Mine Operations 1,632kW
o Process & Filter Plants 3,032kW
o Buildings, Camp, Water Supply 436kW

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21.3.3 Process Plant & Filter Plant

The cost estimates for the 1,000tpd process and filter plants are detailed in
Table 21.3.

Table 21.3 1,000tpd Process & Filter Plants Cost Breakdown (US$)
Process Electrical Mechanical Mechanical
Structural
Description Equipment Equipment Civil Works Buildings Equipment Equipment Piping Electrical Instrumentation Total
Works
Supply Supply Fabrication Install

PROCESS PLANT

COARSE ORE HANDLING


& CRUSHING
Coarse Ore Handling $336,797 $0 $1,107,949 $29,526 $4,555 $250,302 $36,182 $0 $30,364 $13,768 $1,809,443
Crushing $958,239 $0 $310,190 $532,129 $48,433 $189,178 $98,383 $47,607 $38,884 $17,631 $2,240,674
Conveyors $692,607 $0 $160,284 $12,589 $0 $63,500 $258,022 $0 $48,934 $40,250 $1,276,186
Electrical Room $0 $230,404 $29,986 $9,911 $46,053 $0 $0 $0 $97,463 $6,039 $419,856
ORE STORAGE & MILLING $5,746,159
Fine Ore Bin $126,681 $0 $108,322 $50,522 $0 $288,600 $36,363 $8,806 $18,438 $17,552 $655,284
Mill Building $0 $0 $165,037 $406,585 $4,687 $0 $0 $0 $23,707 $0 $600,016
Ball Mill $1,357,400 $222,794 $325,234 $0 $6,198 $87,073 $409,588 $68,984 $230,564 $118,195 $2,826,030
Other Equipment $619,915 $0 $16,381 $55,310 $0 $122,238 $45,819 $68,992 $64,720 $29,346 $1,022,721
FLOTATION $5,104,051
Flotation Building $0 $0 $156,538 $822,814 $1,022 $0 $0 $0 $59,453 $18,901 $1,058,728
Flotation Cells $2,091,530 $0 $88,486 $102,276 $0 $12,168 $245,654 $91,297 $116,713 $37,105 $2,785,229
Scavengers $669,078 $99,642 $19,115 $24,774 $0 $22,192 $66,501 $8,876 $37,221 $11,833 $959,232
Substation, MCC, Office $0 $504,090 $100,754 $98,471 $244,043 $0 $0 $0 $56,109 $17,838 $1,021,305
Other Equipment $973,005 $0 $19,211 $32,995 $14,454 $137,112 $92,393 $65,633 $73,822 $23,469 $1,432,094
THICKENERS & FILTERS $7,256,588
Concentrate Thickener $474,114 $51,764 $193,450 $118,540 $14,487 $158,632 $17,559 $87,038 $58,660 $26,594 $1,200,838
Tailings Thickener $855,646 $70,641 $379,772 $82,639 $0 $368,906 $56,962 $229,319 $95,746 $43,414 $2,183,045
Concentrate Filter $306,127 $34,460 $468,016 $287,432 $24,534 $20,287 $27,224 $37,514 $68,182 $30,916 $1,304,692
Scavenger Tail Filter $857,129 $96,782 $287,924 $180,392 $0 $164,640 $44,988 $35,473 $74,376 $33,724 $1,775,428
WATER SYSTEMS $6,464,003
Fresh Water $13,000 $0 $83,694 $0 $0 $131,397 $0 $14,546 $0 $5,932 $248,569
Process Water $43,536 $0 $109,199 $0 $0 $129,389 $2,147 $22,423 $16,395 $7,434 $330,523
REAGENTS $579,092
Reagent Building $252,968 $0 $139,897 $76,130 $76,844 $154,280 $8,628 $41,043 $17,707 $33,067 $800,564
ANCILLARY WORKS
Truck Staging Area $0 $0 $236,465 $0 $78,639 $0 $0 $0 $0 $0 $315,104
Substation $0 $166,550 $240,346 $72,842 $84,922 $0 $0 $0 $60,585 $0 $625,245
Storage Yard $0 $0 $23,312 $0 $0 $0 $0 $0 $1,686 $0 $24,998
$965,347
SPARE PARTS $425,111 $59,085 $0 $0 $0 $0 $0 $0 $0 $0 $484,196

TOTAL $11,052,883 $1,536,212 $4,769,562 $2,995,877 $648,871 $2,299,894 $1,446,413 $827,551 $1,289,729 $533,008 $27,400,000

FILTER PLANT $1,440,000 $150,000 $422,000 $435,000 $20,000 $270,000 $270,000 $224,000 $184,000 $85,000 $3,500,000

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21.3.4 Dry Tailings Storage Facility

The cost estimate for the dry tailings storage facility is detailed in Table 21.4.

Table 21.4 Dry Tailings Storage Facility Cost Estimate

Estimated
Description Cost
US$ ('000's)

Ground Preparation 228


Hauling 178
Pond Platform 248
Starter Dam 193
Non-Contact Water Management 558
Contact Water Management 126
Contact Water Pond System 170
Pump Stations 32
Construction Survey 57
TOTAL 1,790

21.3.5 Roads and Pipelines

The cost estimate for the roads and pipelines is detailed in Table 21.5.

Table 21.5 Roads and Pipelines Cost Estimates


Estimated
Description Cost
US$ ('000's)
Haul Road from Process Plant to Filter Plant 1,105
6" Ø Tailings Pipeline 34
6" Ø Solutions Pipeline 29
Road from Community Road to Tailings Storage Facility (TSF) 77
Haul Road from Filter Plant to TSF 884
TOTAL 2,129

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21.3.6 Total Capital Costs for 1,000tpd

The total capital costs for executing the 1,000tpd project include all the direct
and indirect costs from Endeavour Silver’s project go-ahead to the start of the
1,000tpd operations.

The capital costs are summarized in Table 21.6 Summary of 1,000tpd Capital
Costs.

Table 21.6 Summary of 1,000tpd Capital Costs

Estimated
Item Costs
US$ ('000's)

Direct Costs
Site Preparation Process Plant 2,750
Site Preparation Filter Plant 1,820
Roads and Pipelines 2,130
Waste Rock Storage 700
Mine Development 6,530
Mine Equipment 2,160
Site Power 100
Water Supply 780
Buildings 2,100
Process Plant 27,400
Filter Plant 3,500
Dry Tailings Storage Facility 1,790
Total Direct Costs 51,760
Indirect Costs
Owner's Costs 1,390
Construction Camp 1,150
Engineering, Procurement, PM/CM 6,900
Total Indirect Costs 9,440
Sub-Total Direct + Indirect Costs 61,200
Contingency @ 13% 7,956
TOTAL CAPITAL COSTS 69,156

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21.4 Capital Costs for Expansion to 2,000tpd


The capital costs for expanding the 1,000tpd plant to 2,000tpd include the
direct and indirect costs from the start of Endeavour Silver’s 1,000tpd
operations in Year 1 to the start of the 2,000tpd operations in Year 3. The
capital costs of mine development and tailings expansion in Year 1 and Year 2
are considered sustaining capital costs.
21.4.1 Mine Expansion Cost
The mine expansion capital costs for equipment are shown in Table 21.7.

Table 21.7 Mine Equipment Expansion Costs

Estimated Cost Estimated Cost Total Estimated


Item US$ (‘000’s) US$ (‘000’s) Cost
Yr 1 Yr 2 US$ (‘000’s)
Single Boom Jumbo 332.7 83.2 415.9
Long Hole Drill 101.4 101.4
Production 3.5m3 LHD 160.3 80.1 240.4
2.0m3 Scooptram 105.5 105.5
Scissor truck 95.4 95.4 190.8
Shotcrete Truck 131.2 131.2
Shotcrete Delivery Truck 77.1 77.1
Ground Support Bolter 101.4 101.4 202.8
Personnel Carrier 37.5 37.5
Utility Tractor 5.3 5.3 10.6
U/G Pickup Truck 21.0 21.0
Jackleg Drills 75.0 75.0
U/G Fans 28.0 28.0
U/G Face Pumps 25.0 25.0
Main Pumps 600.0 600.0
Construct Main Sump 500.0 500.0
CRF Cement Applicator 250.0 250.0
CRF Backfill Plant 250.0 250.0
Electrical Sub-stations (UG) 110.0 110.0
Refuge Shelters 100.1 100.1
Total Equipment Costs 3,106.9 365.4 3,472.3

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21.4.2 Power Supply


In April, 2017, Endeavour Silver instructed CFE to proceed with the permitting
and construction of a new 115kV power line to site. The total capital cost of
providing the power line and associated main substation is estimated by CFE to
be US$12 million. It has been assumed in this report that 50% of these costs
will be spent in Year 1 and 50% in Year 2.

21.4.3 Process & Filter Plant Expansions


The cost estimates for the process and filter plant expansions to 2,000tpd are
detailed in Table 21.8. All of these capital costs will be spent in Year 2.

Table 21.8 Process & Filter Plant Expansions Cost Breakdown (US$)
Process Electrical Mechanical Mechanical
Structural
Description Equipment Equipment Civil Works Buildings Equipment Equipment Piping Electrical Instrumentation Total
Works
Supply Supply Fabrication Install

PROCESS PLANT

COARSE ORE HANDLING &


CRUSHING $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
ORE STORAGE & MILLING
Fine Ore Bin $152,400 $0 $116,760 $51,951 $0 $302,287 $53,857 $8,806 $21,692 $31,344 $739,097
Mill Building $0 $0 $116,635 $276,087 $0 $0 $0 $0 $13,945 $0 $406,667
Ball Mill $1,357,400 $278,493 $345,316 $0 $0 $94,661 $421,436 $68,984 $271,251 $84,425 $2,921,966
Other Equipment $208,192 $0 $17,433 $56,887 $0 $125,500 $21,178 $68,992 $76,142 $41,923 $616,247
FLOTATION
Flotation Building $0 $0 $133,407 $677,282 $0 $0 $0 $0 $27,890 $0 $838,579
Flotation Cells $2,200,000 $0 $115,924 $130,722 $0 $29,948 $317,450 $22,824 $129,041 $71,051 $3,016,960
Substation, MCC, Office $0 $188,665 $0 $0 $0 $0 $0 $0 $17,974 $0 $206,639
Other Equipment $98,584 $0 $10,489 $0 $0 $81,023 $8,820 $18,626 $27,706 $0 $245,248
THICKENERS & FILTERS
Concentrate Thickener $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Tailings Thickener $0 $0 $0 $0 $0 $0 $0 $167,397 $0 $0 $167,397
Concentrate Filter $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
WATER SYSTEMS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
REAGENTS
Reagent Building $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
ANCILLARY WORKS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

SPARE PARTS $80,000 $11,200 $0 $0 $0 $0 $0 $0 $0 $0 $91,200

TOTAL $4,096,576 $478,358 $855,964 $1,192,929 $0 $633,419 $822,741 $355,629 $585,641 $228,743 $9,250,000

FILTER PLANT $1,282,000 $127,000 $223,000 $228,000 $0 $168,000 $269,000 $7,000 $288,000 $158,000 $2,750,000

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21.4.4 Total Capital Costs for Expansion to 2,000tpd

The total capital costs for executing the expansion to 2,000tpd include all the
direct and indirect costs from the start of the 1,000tpd operations to the start of
the 2,000tpd operations. The total capital costs are summarized in Table 21.9.

Table 21.9 Total Capital Costs for Expansion to 2,000tpd

Estimated Costs US$ ('000's)


Item
Year 1 Year 2 Total
Direct Costs
Site Preparation Process Plant 0 0 0
Site Preparation Filter Plant 0 0 0
Roads and Pipelines 0 0 0
Waste Rock Storage 0 0 0
Mine Development 0 0 0
Mine Equipment 3,107 365 3,472
Site Power 6,000 6,000 12,000
Water Supply 0 0 0
Buildings 0 0 0
Process Plant 0 9,250 9,250
Filter Plant 0 2,750 2,750
Dry Tailings Storage Facility 0 0 0
Total Direct Costs 9,107 18,365 27,472
Indirect Costs
Owner's Costs 50 410 460
Construction Camp 150 270 420
Engineering, Procurement, PM/CM 200 1,270 1,470
Total Indirect Costs 400 1,950 2,350
Sub-Total Direct + Indirect Costs 9,507 20,315 29,822
Contingency 2,217 3,365 5,582
TOTAL CAPITAL COSTS 11,724 23,680 35,404

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21.5 Mine Closure Costs

When the mine shuts down, the plant and buildings will be dismantled and
demolished. All waste will be taken to a disposal site and salvageable
equipment and steel will be set aside for sale. All the plant and tailings areas
will then be treated as described in Section 20.

The estimated capital costs of closing the mine are summarized in Table 21.10.

Table 21.10 Summary of Mine Closure Costs

Estimated
Description Cost
US$ ('000's)
Reclamation of TSF & TSF Roads 2,250
Reclamation of Storage and Plant Areas 1,500
Dismantling & Demolition of Plants 800
Salvage Value (20% of All Mechanical and Electrical Process Equipment,
(6,490)
Structural, Mechanical, Buildings, Piping, & Spare Parts)
TOTAL CLOSURE COSTS (1,940)

The mine closure costs are included in the cash flow and economic analysis
described in Section 22.

21.6 Sustaining Capital Costs

The sustaining capital costs are the direct costs of mine development from the
start of 1,000tpd operations to the end of mine life.

Excluded from the sustaining capital costs are all costs incurred by Endeavour
Silver that are related to the cost of operating and maintaining the mine and
plant as detailed in Section 21.7 Operating Cost Estimates.

The sustaining mine development costs for Years 1 and 2 are summarized in
Table 21.11.

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Table 21.11 Sustaining Mine Development Costs Years 1 and 2

Estimated Cost Estimated Cost Total Estimated


Item US$ (‘000’s) US$ (‘000’s) Cost
Yr 1 Yr 2 US$ (‘000’s)
1380 Haulage Drift @ +2% 986.6 986.6
1380 Refuge 40.4 40.4
1380 Raise Bore Ore Pass 1,525.1 1,525.1
1380 Egress/Fresh Air Raise 1,513.3 1,513.3
Ramp 2,317.2 2,317.3 4,634.5
Ramp Re-muck 114.9 114.9 229.8
Ramp 1,092.8 1,092.8
Ramp Re-muck 51.7 51.7
Ramp Sump at Bottom 17.3 17.3
Ramp Level Access 158.0 323.1 481.1
Access Ore Pass 64.6 229.8 294.4
Access Egress/Fresh Air Raise 86.2 287.2 373.4
Access Backfill Re-muck 64.6 215.4 280.0
Drainage Hole Cut-out 25.9 77.6 103.5
Ore Pass finger raise 7.7 69.4 77.1
Wastepass Finger Raises 7.7 69.4 77.1
Ore Pass 15.4 15.4
Fresh Air Raise/Egress 15.4 15.4
Total Development 6,912.2 4,896.7 11,808.9
Development Waste Haulage 98.0 98.0
Total Costs 7,010.2 4,896.7 11,906.9

The sustaining mine development costs from Year 3 onwards are summarized
in Table 21.12. The sustaining capital costs are included in the cash flow and
economic analysis described in Section 22.

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Table 21.7 Sustaining Mine Development Costs Year 3+

Estimated Estimated Estimated Estimated Total


Cost Cost Cost Cost Estimated
Item
US$ (‘000’s US$ (‘000’s US$ (‘000’s US$ (‘000’s Cost
Yr 3 Yr 4 Yr 5 Yr 6 US$ (‘000’s)

Ramp 2,317.2 2,317.2


Ramp Re-muck 114.9 114.9
Ramp 1,834.0 737.6 526.8 1,463.7 4,562.1
Ramp Re-muck 86.2 34.5 34.5 68.9 224.1
Ramp Sump at Bottom 34.5 17.2 51.7
Ramp Level Access 172.3 201.1 209.7 172.3 755.4
Access Ore Pass 129.3 129.2 122.1 129.3 509.9
Access Egress/Fresh Air
172.3 172.3 143.6 172.3 660.5
Raise
Access Backfill Re-muck 129.2 150.8 129.2 129.3 538.5
Drainage Hole Cut-out 51.7 51.7 43.1 51.7 198.2
Ore Pass finger raise 46.3 46.3 38.6 46.3 177.5
Wastepass Finger Raises 46.3 46.3 38.5 46.3 177.4
Level Extensions 111.4 111.4
Ore Pass 64.0 32.2 97.2
Fresh Air Raise/Egress 64.1 32.1 97.2
Total Development 5,099.7 1,843.8 1,368.6 2,280.1 10,592.2

21.7 Operating Cost Estimates

21.7.1 Mine Operating Costs

The average mine operating costs over the LOM are estimated to be US$43.33
per tonne. The mine operating costs were estimated by P&E on the basis of the
mining method, class of ground support, stope width, type of backfill, and
whether a constructed sill pillar is required.

The 30 tables detailing the breakdown of the operating costs are given in
Appendix H and the total mine operating costs are summarized in Table 21.8.

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Table 21.8 Summary of Mine Operating Costs (US$/t)

Total /
Item Yr-1 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
Average
Direct Labour 2.77 2.30 2.30 2.19 2.37 2.41 2.03 1.87 2.21
Indirect Labour 43.63 5.24 4.72 2.40 2.40 2.40 2.40 2.40 2.90
Contractor Admin Ind.
28.11 2.92 2.57 1.30 1.30 1.30 1.30 1.30 1.59
Labour
Direct Equipment
5.59 4.93 4.97 4.69 5.02 5.07 4.44 4.16 4.74
operating
U/G Equipment Leasing 51.65 13.30 14.30 6.83 0.98 3.77
Ind. Equip operating &
40.60 5.06 4.63 2.35 2.35 2.35 2.35 2.35 2.83
Ele. Power
Drill steel and bits 2.93 2.59 2.61 2.41 2.60 2.61 2.22 2.05 2.43
Explosives 3.08 2.77 2.78 2.59 2.76 2.76 2.40 2.25 2.60
Ground support 5.21 3.73 3.94 3.90 4.58 5.02 4.15 3.64 4.21
Backfill Placement &
3.72 3.40 2.65 2.52 2.49 2.00 1.69 1.31 2.20
Cement
Piping 0.84 0.67 0.68 0.61 0.68 0.69 0.55 0.50 0.62
Electrical Consumables 1.20 0.95 0.97 0.87 0.97 0.98 0.79 0.72 0.89
Ventilation
2.27 1.81 1.83 1.65 1.83 1.86 1.49 1.36 1.68
Consumables
Miscellaneous 0.15 0.12 0.12 0.11 0.12 0.12 0.10 0.09 0.11
Haulage 7.48 4.82 4.71 5.27 5.94 6.09 5.95 6.29 5.71
Stope Development 62.65 6.56 6.15 5.39 4.63 3.92 4.11 4.02 4.87
Total 261.8 61.14 59.93 45.10 41.02 39.60 35.98 34.32 43.33

21.7.2 Process and Filter Plant Operating Costs


The operating costs for the process and filter plants are based on Endeavour
Silver’s operating costs at its three similar-sized process plants and one filter
plant in Mexico. The current unit costs for labour, material, consumables, and
maintenance from these operations together with estimates of the quantities of
labour, reagents, power, and consumables required for Terronera were used to
estimate the operating costs. The electrical kWh costs were provided by CFE.
The total process and filter plants operating costs for 1,000tpd and 2,000tpd
operations are summarized in Table 21.9.

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Table 21.9 Summary of Process & Filter Plants Operating Costs (US$)

Annual Cost using Annual Cost using Annual Cost using


Description Generators CFE Power CFE Power
@ 1,000tpd @ 1,000tpd @ 2,000tpd
Labor $1,950,000 $1,835,000 $1,900,000
Reagents $300,000 $300,000 $600,000
Steel Consumption $1,138,000 $1,138,000 $2,276,000
Electric Power $5,180,000 $2,424,500 $3,650,000
Maintenance Parts and Services $875,000 $875,000 $1,100,000
Supplies and Services (Allowance) $420,000 $420,000 $550,000
Filter Cloth $223,000 $223,000 $446,000
Diesel Fuel $12,000 $12,000 $16,000
Total $10,098,000 $7,227,500 $10,538,000
Annual Milled Tonnes 350,000 350,000 700,000
Unit Cost per Tonne $28.85 $20.65 $15.05
Transport & Leach Tails $1.20 $1.20 $1.20
Total Operating Costs per Tonne $30.1 $21.9 $16.2

21.7.3 Dry Tailings Storage Facility O & M Costs

The annual costs of operating and maintaining the dry tailings storage facility
are shown in Table 21.10.
Table 21.10 Dry Tailings Storage Facility O & M Costs

Estimated Costs US$ (‘000’s)


Item
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
Hauling and compacting 467 515 1029 848 768 667 867
Additional leased area 2 2 2 2 2 2 2
Ground preparation 29 28 30 27 25 27 29
Survey support 8 8 8 8 8 8 8
Non-contact water management 0 52 393 83 70 333 64
Contact water management 4 37 62 47 38 47 8
Contact water pond system 8 8 8 8 8 8 8
Total 518 650 1532 1023 919 1092 986

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21.7.4 Operating and Maintenance (O&M) of Pumps and Haul Roads


The annual costs of operating and maintaining the pumps and haul roads are
shown in Table 21.11.

Table 21.11 Pumps and Haul Roads O&M Costs

Estimated Costs US$ (‘000’s)


Item
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
Pump stations power 10 10 6 6 6 6 6
Haul roads 12 12 12 12 12 12 12
Total 22 22 18 18 18 18 18

21.7.5 G&A Operating Costs

At Endeavour Silver’s other operations in Mexico, General and Administration


(“G&A”) costs include the following services: Warehousing, Purchasing,
Environmental, Human Resources, Camp, Security, Information Technology,
Accounting, Administration, Community Relations, Legal, and Safety.
The G&A services and staffing required at Terronera for both the 1,000tpd and
2,000tpd operations were prepared with input from Endeavour Silver.
Using salaries and costs from Endeavour Silver’s other operations in Mexico,
the total annual cost at 1,000tpd was estimated to be $3.15 million which
equals US$9.00 per tonne. When the throughput is expanded to 2,000tpd, the
total annual costs rise to US$4.55 million and the unit costs drop to US$6.50
per tonne.

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22.0 ECONOMIC ANALYSIS

22.1 Introduction

An economic analysis utilizing a after-tax cash flow financial model was


prepared for the base case mine plan, processing a total of 4 million tonnes of
mined diluted Mineral Resource in a nominal 1,000 tonne/day plant for Year 1
and Year 2, and expanding to 2,000 tonne/day in Year 3 allowing for normal
plant maintenance and process plant availability. The forecast operating mine
life is 7 years following a one year period of pre-production capital investment,
construction, and mine development. The after-tax analysis is only an
approximation as exact tax payable is highly dependent on business structure
and involves complex variables that can only be calculated during operations.

Sensitivity analyses were performed for variations in commodity prices,


operating costs, and initial capital costs to determine how each variable
impacts valuation.

This Technical Report contains forward-looking projected mine production


rates, development schedules, and estimates of future cash flows. The
anticipated mill head grades and metal recoveries are derived from industry
standard sampling and testing programs that is expected to be representative
of actual mining operations. Numerous other factors such as permitting,
construction delays, and availability of mining equipment may result in timing
and scheduling differences from those presented in the economic analysis. The
economic analysis has been run on a constant dollar basis with no inflation
factor. The economic cash flow model is available in Figure 22.3.

22.2 Technical and Financial Assumptions

Silver and gold recoveries to a bulk flotation precious metal concentrate are
projected to be 87% silver and 74.7% gold based on metallurgical test work
with a target grind of 80% passing 200 mesh as detailed in Section 13 and the
recovery methods described in Section 17. Payments for silver and gold in
concentrate of 96.1% and 97.6%, respectively, are based on current
concentrate sales contracts for concentrates produced at Endeavour Silver’s
Bolañitos and El Cubo Mines.

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The average mine operating costs over the LOM are estimated to be US$69.8
per tonne. This estimate is based on: the mining method and LOM production
schedule shown in Section 16.0; productivities and quantities estimated by
P&E; and unit costs provided by P&E and Endeavour Silver.
The operating costs for the process and filter plants are based on Endeavour
Silver’s operating costs at its three similar-sized process plants and one filter
plant in Mexico. The current unit costs for labour, material, consumables, and
maintenance from these operations together with estimates of the quantities of
labour, reagents, power, and consumables required for Terronera were used to
estimate the operating costs. The electrical kWh costs were provided by CFE.

The G&A services and staffing required at Terronera for both the 1,000tpd and
2,000tpd operations were prepared with input from Endeavour Silver. Using
salaries and costs from Endeavour Silver’s other operations in Mexico, the total
annual cost at 1,000tpd was estimated to be $3.15 million which equals
US$9.00 per tonne. When the throughput is expanded to 2,000tpd, the total
annual costs rise to US$4.55 million and the unit cost drops to US$6.50 per
tonne.

Royalties are calculated directly from the modeled gross revenues, based on
application of the 0.5% royalty payable to the Mexico government and a 2% net
smelter royalty payable to Grupo Mexico, the original owner of the Terronera
Property.

A summary of the financial and technical assumptions used in the Base Case
analysis are presented in Table 22.1:

Table 22.1 Base Case Financial & Technical Assumptions


Financial Notes
Corporate Tax Rate 30.0% After allowable deductions
Mining Special Duty Tax Applied to EBITDA, deductible against
7.5%
Rate Corporate Tax
NSR on gross revenues after smelter
Government Royalty 0.5%
charges
Discount Rate 5.0% for NPV calculation
PESOS:USD FX Rate 20 Approximate average Q1 2017

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Silver price, US$/oz $18.00 Constant, LOM


Gold Price, US$/oz $1,260 Constant, LOM
Depreciation 7.5yr Straight Line
Property NSR Royalty 2.0% Payable to original property owner
Technical Notes
Silver recovery to con % 87.02% Forecast from detailed metallurgical tests
Gold recovery to con % 74.71% Forecast from detailed metallurgical tests
Con Silver Payable% 96.1% Based on current contracts
Con Gold Payable% 97.6% Based on current contracts
Mining Cost/tonne (Av) $42.8 Applicable to stoped ore
Includes smelter treatment and refining
Processing cost/tonne (Av) $17.3
charges
G&A costs/tonne (Av) $6.9 On-site G&A

22.3 Economic Analysis Summary

The cash flow model after-tax financial results are summarized in Table 22.2.

Table 22.2 Summary of After-Tax Economic Analysis


Mine Plan Tonnage (kt) 4,061
Silver Grade (g/t) 207
Gold grade (g/t) 1.95
Mill Capacity, Years 1 & 2 (kt/a) 342
Mill Capacity, Years 3+ (kt/a) 700
Mine Life (yr) 7
Payable Silver, LOM (koz) 22,555
Payable Gold, LOM (koz) 185.3
Gross revenue, LOM US$(000s) $639,517
Operating Costs, LOM US$(000s) $292,252

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Capital Expenditures, LOM US$(000s) $133,918


Total Taxes Paid US$(000s) $89,961
After-Tax Net Cash Flow, LOM US$(000s) $125,326
LOM Operating Cost/tonne US$ $71.44
Cash Cost/oz Silver, net of gold by-product US$ $2.60
After-Tax NPV , 5% discount US$(000s) $78,105
After-Tax Internal IRR (%) 21.2%
After-Tax Payback period (yr) 4.3

22.4 Cash Flows

The projected pre-tax, after-tax and cumulative after-tax cash flows are
presented in Figure 22.1 and a more complete year by year summary is
presented in Table 22.3.

For the purposes of calculating the after-tax Net Present Value (NPV), a
discount rate of 5% is used, applied at the midpoint of each year of the project,
commencing in the first pre-production year of capital investment. Table 22.3
displays the discount factors applied through the life of the project.

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Figure 22.1 After-Tax Annual and Cumulative Cash Flow

$150,000

$100,000

$50,000
US$ (000s)

-
Year -1 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

($50,000)

($100,000)

After-Tax Annual Cash Flow After-Tax Cumulative Cash Flow

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Table 22.3 Discounted After-Tax Cash Flow Model


Year -1 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Terronera Total LOM 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Production -2 -1 1 2 3 4 5 6 7 8
Stoping Tonnes (kt) 4,061 8 310 351 743 681 697 717 553
Beginning Tonnes (kt) 4,061 4,061 4,061 3,743 3,392 2,692 2,011 1,314 614 0
Tonnes Processed (kt) 4,061 - - 318 351 700 681 697 700 614 0
Ending Tonnes (kt) - 4,061 3,743 3,392 2,692 2,011 1,314 614 0 0

Silver Grade (g/t) 207 207 147 170 185 196 207 252 242 -
Silver Recovery (%) 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0%
Silver Payable (%) 96.1% 96.1% 96.1% 96.1% 96.1% 96.1% 96.1% 96.1% 96.1% 96.1%
Payable Silver (koz) 22,555 - 1,254 1,607 3,483 3,594 3,881 4,745 3,991 -

Gold Grade (g/t) 1.95 1.95 2.78 2.60 1.96 1.90 1.63 1.90 1.60 -
Gold Recovery (%) 74.7% 74.7% 74.7% 74.7% 74.7% 74.7% 74.7% 74.7% 74.7% 74.7%
Gold Payable (%) 97.6% 97.6% 97.6% 97.6% 97.6% 97.6% 97.6% 97.6% 97.6% 97.6%
Payable Gold (koz) 185.3 - - 20.7 21.4 32.1 30.3 26.7 31.1 23.0 -

Revenue
Silver Price ($/oz) $18.00 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00
Gold Price ($/oz) $1,260 $1,260 $1,260 $1,260 $1,260 $1,260 $1,260 $1,260 $1,260 $1,260
Total Revenue ($000s) $639,517 - - $48,703 $55,913 $103,162 $102,839 $103,459 $124,630 $100,809 -
Costs
Total Costs ($000s) $292,252 - $2,128 $32,625 $33,272 $52,003 $45,946 $46,013 $44,820 $35,446 $0

Cash Costs
Total Costs ($000s) $292,252 - $2,128 $32,625 $33,272 $52,003 $45,946 $46,013 $44,820 $35,446 $0
Gold By-Product Credit ($000s) ($233,519) - - ($26,130) ($26,986) ($40,459) ($38,151) ($33,602) ($39,227) ($28,964) -
Total Cash Costs net of gold credits ($000s) $58,733 - $2,128 $6,495 $6,286 $11,544 $7,795 $12,411 $5,593 $6,482 $0
Total Cash Costs per oz Payable Silver ($/oz) $2.60 - - $5.18 $3.91 $3.31 $2.17 $3.20 $1.18 $1.62 -
2.509593708
Cash Flow
Pre-Tax Operating Cash Flow (EBITDA) ($000s) $347,265 - ($2,128) $16,078 $22,642 $51,159 $56,893 $57,446 $79,811 $65,363 ($0)
Less Depreciation ($000s) $133,920 - - $5,420 $7,784 $21,563 $22,650 $24,194 $25,524 $25,782 $1,004
Earnings before Taxes ($000s) $213,345 - ($2,128) $10,658 $14,858 $29,596 $34,244 $33,253 $54,287 $39,581 ($1,004)
Mine Development + Capex ($000s) ($133,918) - ($69,161) ($19,274) ($29,249) ($6,650) ($2,885) ($2,305) ($3,390) ($1,004)
Tax Depreciation ($000s) ($88,582) - ($3,689) ($4,146) ($13,059) ($13,266) ($13,404) ($13,529) ($13,677) ($13,811)
Earnings for Tax Purposes ($000s) $124,765 - ($74,977) ($7,342) ($19,666) $31,243 $40,604 $41,612 $62,743 $50,548 ($0)
Corporate Taxes ($000s) $71,599 - - - - $9,959 $12,868 $13,208 $19,592 $15,973 -
Mining Taxes ($000s) $18,361 - - - $447 $2,505 $3,217 $3,302 $4,898 $3,993 -
Total Taxes ($000s) $89,961 - - - $447 $12,464 $16,085 $16,510 $24,489 $19,966 -
Net Earnings ($000s) $123,384 - ($2,128) $10,658 $14,411 $17,132 $18,159 $16,743 $29,797 $19,615 ($1,004)
Add back depreciation ($000s) $133,920 - - $5,420 $7,784 $21,563 $22,650 $24,194 $25,524 $25,782 $1,004
Less Capex & Exploration ($000s) $131,978 - $69,161 $19,274 $29,249 $6,650 $2,885 $2,305 $3,390 $1,004 ($1,940)
Free Cash Flow ($000s) $125,326 - ($71,289) ($3,196) ($7,054) $32,045 $37,923 $38,632 $51,931 $44,393 $1,940
Cumulative Free cash Flow ($000s) - ($71,289) ($74,485) ($81,538) ($49,493) ($11,570) $27,062 $78,993 $123,386 $125,326

Discount Years 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5
Discount Factor 0.9759 0.9294 0.8852 0.8430 0.8029 0.7646 0.7282 0.6936 0.6605
Discounted Free Cash Flow ($000s) $78,105 - ($69,570) ($2,970) ($6,244) $27,015 $30,448 $29,539 $37,818 $30,789 $1,281
$215,287 - ($71,289) ($3,196) ($6,607) $44,509 $54,008 $55,141 $76,421 $64,359 $1,940
NPV ($000s) $78,105
IRR (After-Tax) 21.2%
Payback period (yrs) 4.3

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22.5 Taxes and Tax Treatment

The Mexico tax policies for mining changed effective January 1, 2014. An
overriding royalty on gross revenues, after smelter deductions, of 0.5% applies
to precious metal mines (gold, silver and platinum). A new Special Mining Duty
of 7.5% is levied on earnings before income tax and depreciation allowance.
Corporate income taxes of 30% are applied to earnings after the usual
allowable deductions for depreciation, loss carry-forwards etc. The Special
Mining Duty and the over-riding royalty are also deductible for the purpose of
calculating corporate income tax.

The financial model for the Terronera PFS incorporates these taxes in the cash
flow model in computing the after-tax cash flow amounts, NPV and IRR. The
financial model is constructed on a 100% equity basis.

22.6 Sensitivity Analysis

The after-tax cash flow model Net Present Value (at 5% discount) and IRR
were determined after varying the base case model values for Metal Prices,
Operating Costs and Initial Capital Costs to determine the project economic
sensitivity to these key parameters. In each case, the other project and model
assumptions were kept constant. Sensitivity analysis results are summarized in
Table 22.4 and Figure 22.2 below. Variances were run at ±10% and ±20% from
the base case.

As is typical of high-grade underground mines, results show that the project


NPV and internal IRR are most directly sensitive to changes in metal prices,
and almost equally so to operating costs. Variance in the initial capital has
much less impact on the NPV and IRR.

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Table 22.4 Base Case After-Tax NPV (US$ millions) and IRR Sensitivities
Operating Costs Initial Capital Metal Prices
Variance NPV (5%) IRR NPV (5%) IRR NPV (5%) IRR
-20% $ 107.7 27.1% $ 91.6 26.4% $ 10.1 7.2%
-10% $ 93.0 24.2% $ 84.9 23.6% $ 44.3 14.4%
Base Case $ 78.1 21.2% $ 78.1 21.2% $ 78.1 21.2%
10% $ 61.3 17.7% $ 71.4 19.0% $ 109.0 26.9%
20% $ 44.5 14.2% $ 64.6 17.1% $ 140.0 32.2%

Figure 22.2 After-Tax NPV Sensitivity Graph

$160.0

$140.0
After-Tax NPV (5%) US$(millions)

$120.0

$100.0

$80.0

$60.0

$40.0

$20.0

$-
-20% -10% Base Case 10% 20%

Operating Costs Initial Capital Metal Prices

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23.0 ADJACENT PROPERTIES

Minera Cimarron S.A. de C.V. (Minera Cimarron) is a small private mining


company that operates the Quiteria Mine in the San Sebastián del Oeste area
(Figure 23.1). Approximately 70 ha of mining claims are owned by the
company. These 70 ha include some recently acquired claims in the Los Reyes
area which lies in an adjacent canyon to the north. The company has done only
some minor sampling in the abandoned workings in Los Reyes but anticipates
that, in the near future, it will be able to supplement production from this area.

Figure 23.1 Minera Cimarron’s Santa Quiteria Mine in the San Sebastián
del Oeste Area

Minera Cimarron is currently doing development work by means of an inclined


ramp from surface. Most of the material that is milled is from this development
work and a small portion comes from shrinkage stoping. Minera Cimarron is
also encountering some old workings at depth and along strike.

Drilling is done with jack-legs and mucking and hauling are done mainly with 2
and 3.5 yard LHDs. Ore grades are reportedly approximately 275 g/t silver and
0.4 g/t gold. The company is currently milling about 130 tpd with 70% recovery

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and this is done with the following equipment: 1 jaw crusher, 1 Symon’s 2 ft
cone crusher, 1 Hardinge 8’ x 48” 200 HP ball mill, followed by a series of
Wemco flotation cells. The concentrate is dewatered with an Eimco drum filter
and shipping on average, 25 t of concentrates to the Peñoles smelter in
Torreón, Coahuila per month.
Future plans for the mine include further development toward the northwest on
the vein structure, the continuation of an existing adit to shorten hauling
distances, driving a new adit to access the vein structure at greater depth and,
possibly, diamond drilling below the current levels to establish new resources.
Installations include an assay laboratory, a small repair shop for vehicles and
diesel equipment, and a warehouse for parts and materials. The mine currently
has about 35 workers. Most of the operating personnel come from Santiago de
los Pinos which is 4 km away. More qualified employees come from mining
districts throughout Mexico.
Accounting and purchasing are done in administrative offices in Guadalajara.
The mine has several rented houses in the small town of Santiago de los Pinos
and Minera Cimarron recently obtained a building permit for some living
quarters for its supervisors.
Also in the Municipality of San Sebastián del Oeste is the 5,080-ha Guijoso
Property. It is located about 25 km northeast of San Sebastián del Oeste and
approximately 5 km south of the town of San Felipe de Hijar. Intermittent small
scale exploitation of veins has occurred in San Felipe de Hijar, similar to that in
the San Sebastián del Oeste area.
The Guijoso Property is also located within the same belt of low sulphidation
epithermal deposits which hosts the San Sebastián Veins. All mineralization at
the Guijoso Project is associated with pervasive, vein and stockwork
silicification and adjacent argillic alteration within rhyolite tuffs. Silicification has
been recognized over an area approximately 6 km in length by 1.5 km in width.
Comments on Section 23
The QP has not verified the information regarding adjacent properties and has
not visited them or audited them. The values and the information on adjacent
properties presented do not have any direct bearing on the San Sebastián
Property and the reader should not infer or assume that the San Sebastián
Property will have similar results.

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24.0 OTHER RELEVANT DATA AND INFORMATION

24.1 Project Execution Plan

The project execution plan assumed for Terronera is based on a contracting


approach that Endeavour Silver successfully used on its Bolanitos and El Cubo
Projects. The methodology of this proven approach is as follows:

 Endeavour Silver purchases directly all mine equipment, process and


filter plant process equipment, and all mobile equipment
 Endeavour Silver contracts directly with qualified engineering
companies to engineer the mine and tailings facilities
 Endeavour Silver engages the design engineers to monitor the
procurement and construction of the mine and tailings facilities
 Endeavour Silver negotiates a single lump sum price contract with a
qualified local contractor to engineer, procure, and construct (EPC) the
process and filter plants
 Endeavour Silver engages an Owner’s Engineer (OE) to monitor and
control the engineering, procurement, and construction of the process
plant, filter plant, and all surface infrastructure. The OE also provides
overall project management; monitors and controls the overall project
schedule; plans, organizes, monitors and controls commissioning and
handover; and implements a site safety program
 Local contractors bid competitively on all other packages of work:
earthworks; roads; buildings; water supply; and other site infrastructure
 Endeavour Silver staff monitor and control the construction of roads,
buildings, and water supply
 Endeavour Silver arranges the supply of electrical power to site with
CFE including the construction of a new 115kV power line and main
substation
 Endeavour Silver employs and trains an operating and supervisory
labour force for the mine, process plant, and filter plant and other
project facilities in time for plant commissioning

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24.2 Construction Schedule

A Terronera Development Schedule based on the contracting approach,


estimated approval times, key interfaces, equipment delivery times, and
established productivities is shown in Figure 24.1.
The overall duration of the project from project go-ahead to start of 1,000tpd
operations is 17 months. The 2,000tpd operations start two years later.

Figure 24.1 Terronera Development Schedule


YEAR 2018 2019 2020
MONTH M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Environmental Permitting 115 kV Line


Environmental Permitting Plant
Project Go-ahead x

Engineering
Procurement
115 kV Line Construction
Gas-Fired Generators
Pre Mine (Mine Method Testing)
Mine Development
Roads & Site Preparation
Buildings and Camps
Delivery of Equipment
Process Plant Construction
Filter Plant Construction
Tailings Facilities Construction
Commissioning
Start -Up x x

Operations 1,000TPD 2 ,0 0 0 T P D

Year -2 Year -1 Year 1 Year 2

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25.0 INTERPRETATION AND CONCLUSIONS

25.1 Interpretation

The results of a Preliminary Feasibility Study for a mining project depend on


several key issues, including:

1. The size and quality of the deposit


The total life-of-mine production from the Terronera deposit is expected to be
22.6 million oz silver and 185,000 oz gold.

The initial production rate of 1,000tpd will expand to 2,000tpd in Year 3. Over
the 7 year mine life the plant will process 4.1 million tonnes grading 207 g/t
silver and 1.95 g/t gold. The process plant will recover 87% of the silver and
75% of the gold.
2. The mining methods
The principal cut-and-fill mining method planned in the study is used by
Endeavour Silver in its current mining operations. The planned 31,955m of total
life-of-mine (LOM) mine and stope development uses trackless underground
equipment similar to the equipment now operated by Endeavour Silver.

The ground support recommendations provided by Knight Piésold were


incorporated in the mine plan.
3. The amount of metallurgical testing
The metallurgical testing program was based on four composite samples, one
representing an average grade and three representing the low, medium, and
high grade areas of the deposit. The samples were tested by RDi at their
metallurgical testing facilities in Wheat Ridge, Colorado.

A comprehensive metallurgical study assessed the impact of precious metal


grade and grind size upon flotation recovery. In addition, the characteristics of
the flotation concentrate produced were evaluated with respect to precious
metal and impurities content. Other studies conducted were: Comminution
Study; Solid–Liquid Separation Study; Evaluation of Differential Flotation of
Copper-Lead-Zinc Mineralization; High Pressure Grinding Rolls (HPGR)
testing; and Mineralogical Examination (Quemscan & petrographic analysis).

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4. The amount of engineering


All the data verifying, Mineral Resource and Mineral Reserve estimating, and
mining engineering provided by P&E was at level suitable for a Preliminary
Feasibility Study
The basic engineering of the process and filter plants and the preliminary
engineering of the waste rock storage stockpile was carried out by PMICSA,
the same company that engineered and constructed the El Cubo process plant
for Endeavour Silver. Although the Terronera Project is only at the Preliminary
Feasibility stage, Endeavour Silver authorized basic engineering of the process
and filter plants to be completed to provide more certainty regarding their
capital costs.
The preliminary engineering of the tailings facilities was carried out by Amec
Foster Wheeler, an international consultant that engineers Endeavour Silver’s
tailings operations at its three mines in Mexico.

5. The reliability of the cost estimates


All the capital and operating cost estimates were prepared by engineers and
contractors with direct experience on Endeavour Silver’s recent capital projects
and current operations in Mexico. Quotes were obtained for all major
equipment. The mining capital costs were estimated by P&E supported by
Endeavour Silver’s mining personnel. Quotes from a Mexican contract miner
were used for the mining work to be contracted out. The TSF capital unit costs
were estimated by Endeavour Silver’s mining personnel and then provided to
Amec Foster Wheeler for extrapolation in accordance with estimated materials
volumes.
All operating costs were estimated using unit costs from Endeavour Silver’s
three operations in Mexico and quantities applicable to Terronera. The cash
cost per ounce of silver (net of byproduct) of US$3.44 places Terronera in the
lower quartile of mining costs in Mexico.

6. Project-Specific Risks

The Terronera Project involves neither the storage of wet tailings nor the
leaching process and has no design or operational features which require
environmental treatment atypical for milled-flotation and filtered tailings storage

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facilities in Mexico. This limits project environmental risk to that which is typical
for this process and tailings storage methodology.

All the process equipment specified for Terronera is proven, reliable equipment
similar to equipment that Endeavour Silver uses on its three existing plants thus
removing risks associated with new process technologies.

7. Metal Prices

Given historical and current prices the base case prices assumed for silver
(US$18/oz) and gold (US$1,260/oz) are acceptable. Increases and decreases
in the base case prices and their impact on the project key indicators were
examined as part of the sensitivity analysis.

25.2 Conclusions

This Technical Report contains forward-looking projected mine production


rates, development schedules, and estimates of future cash flows that involve
known and unknown risks, uncertainties, and other factors that may affect the
actual results. These forward-looking projections, however, are based on
assumptions the QPs believe are reasonable.

The QPs conclude that the economic analysis of the Terronera Project is based
on sound inputs and cost estimates that significantly reduce certain risks of the
project and provide a reliable basis for quantifying the key financial indicators of
the project and for examining the project’s most critical sensitivities.

The Terronera Project key financial indicators for the base case are as follows:
 After-tax rate of return 21.2%
 Project payback period 4.3 years
 After-Tax Net Present Value (5% discount) of US$78,105,000
These key indicators describe a project whose base case is financially
profitable and which has considerable upside potential should metal prices
improve or operating costs decrease.
The main downside risks are that metal prices will decrease or operating costs
will increase.

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26.0 RECOMMENDATIONS

26.1 Mineral Resources and Reserves

Continue drilling nearby mineralized bodies to extend the mine life.

26.2 Mineral Processing and Metallurgical Testing

Investigate the inclusion of an HPGR crusher as the tertiary crusher to give the
lowest energy requirement for size reduction. Estimated cost US$25,000
Investigate the flotation of a bulk concentrate at a coarse grind using Hydrofloat
to increase recoveries, provide savings in grinding, and enhance the stability of
the TSF. Estimated cost US$45,000
Evaluate ore sorting techniques to upgrade the process plant feed. Estimated
cost eUS$5,000
Optimize the grinding circuit. Estimated cost US$35,000

26.3 Mining Methods

Future work should include more detailed analyses based on additional or


updated data for the deposit in order to support the next stage of engineering.
Additional data requirements include:

 Creating a 3D lithological model. Estimated cost US$25,000


 Creating a 3D structural model. Estimated cost US$25,000
 The rock mass characteristics in the immediate vicinity of the crown
pillar and to the east of the Arroyo Fault zone should be better defined
during the next phase of design or during the early stages of mining.
Estimated cost US$75,000 plus drilling
 Additional geomechanical logging should be completed to better define
difference in structural trends around KP16-02. Estimated cost
US$25,000
 Additional hydrogeological data should be collected if the project
economics or operating conditions are sensitive to the groundwater
conditions and groundwater inflow estimate. For example, the
completion of additional packer testing and the installation of additional

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vibrating wire piezometers could be used to refine the hydrogeological


characterization and evaluate the potential for spatial variability.
Estimated cost US$150,000
 The groundwater pore pressure data from the vibrating wire
piezometers should be recorded and reviewed on a regular basis.
Estimated cost US$15,000

The domain definition, stability analyses, recommendations, and groundwater


inflow estimate should be updated to account for the results of the additional
data inputs and any changes to underground mine plan. Any significant
changes to the mine plan should be reviewed from a rock mechanics
perspective.

For preliminary ground support recommendations for cut and fill stopes, refer to
Table 16.2 ‘Preliminary Ground Support Recommendations for Cut and Fill
Stopes’.

26.4 Environmental

Amec Foster Wheeler recommends that Endeavour Silver submits an


application for a revised MIA that increases the mine throughput from 1,500tpd
(which is the current approved MIA) to 2,000tpd.

Amec Foster Wheeler recommends that, as the Terronera Project moves


through its study and development process, timely applications that support the
Proposed Schedule be submitted for all permits and approvals required in
Mexico for mining developments as described in Section 20.

26.5 Further Studies

Given the positive results of the Preliminary Feasibility Study economic


analysis, the QPs recommend that Endeavour Silver prepares a Feasibility
Study for the Terronera Project.

The recommended budget to prepare a Feasibility Study is US$1,200,000.

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27.0 REFERENCES

Lewis, W.J., Murahwi, C.Z., (2013), NI 43-101 Technical Report, Audit of the
Mineral Resource Estimate for the San Sebastian Project, Jalisco State,
Mexico, by Micon International Limited for Endeavour Silver Corp., March 6,
2013, 128 p.
Munroe, M.J., (2014), NI 43-101 Technical Report on the Resource Estimates
for the San Sebastian Project, Jalisco State, Mexico, by Michael J. Munroe for
Endeavour Silver Corp., March 27, 2014, 140 p
Amec Foster Wheeler, Hidrologia e Hidraulica de Mexico, (2016), Reporte del
Diseno del Deposito de Jales y de Tepetate Proyecto Terronera, Jalisco State,
Mexico, for Endeavour Silver Corp., October 31, 2016.
PhotoSat (2016), Proyecto de Mapeo de Elevacion Por Satelite San Sebastian
Project, Jalisco State, Mexico, by , PhotoSat Information Ltd., October, 2014.
Amec Foster Wheeler (2014 and 2016), Deterministic Seismic Hazard
Assessment, Mina Terronera, New Tailings Facility, Jalisco State, Mexico,
November, 2014, updated October, 2016.
Manifestacion de Impacto Ambiental Modalidad Particular (2013), Expolitacion
Minera Proyecto Terronera, Ing. Joazura Gonzalez, Jalisco State, Mexico, for
Endeavour Silver Corp and Minera Plata Adelante, December, 2013.
Modification of the Manifestacion de Impacto Ambiental Modalidad Particular
(2017), Expolitacion Minera Proyecto Terronera, Ing. Roberto Trujillo, Jalisco
State, Mexico, for Endeavour Silver Corp and Minera Plata Adelante, February,
2017.
Exploitacion Minera Terronera (2017), Estudio Tecnico Justificativo para
Cambio de Uso de Suelos en Terrenos Forestales, Proyecto Terronera, Ing.
Roberto Trujillo, Jalisco State, Mexico, for Endeavour Silver Corp and Minera
Plata Adelante, February, 2017.
Costos Estandares de Construccion en las Minas Activas de Endeavour Silver
(2017), Ing. Henry Cari, Gestor de Proyectos, Endeavour Silver, and Ing. Juan
Manuel Leon de Geoingenieria, February and March, 2017.
SEMARNAT NORMAS #001 (1996), #141 (2003), and #157 (2009), and
CONAGUA Delimitacion y Proteccion de Zonas Federales de Cauces y
Cuerpos de Agua (1972) y Ley de Aguas Nacionales (1994).

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28.0 CERTIFICATES

CERTIFICATE OF QUALIFIED PERSON

PETER J. SMITH, P.ENG.

I, Peter J. Smith, P. Eng., residing at 951 Beachview Drive, North Vancouver, BC V7G 1P8, do
hereby certify that:

1. I am an independent consultant and President of Smith Foster Associates Inc.

2. This certificate applies to the NI 43-101 technical report titled “Technical Report Preliminary
Feasibility Study for the Terronera Project, Jalisco State, Mexico” (the “Technical Report”),
with an effective date of April 3, 2017.

3. I graduated with a Bachelor’s Degree in Applied Science (Civil Engineering) from the
University of British Columbia in 1968.

4. I am a registered member in good standing of the Association of Professional Engineers and


Geoscientists of BC, registration number 12720.

5. I have worked as a civil engineer, project manager, and senior engineering manager in
Canada and internationally since graduation from university. My summarized career
experience is as follows:
 Engineer - Dept. of Fisheries & Oceans………………………….…….….1968-1969
 Engineer – Gruner AG Consulting Engineers……………………….……1970-1974
 Site Project Engineer – Alusuisse Engineering………………………..…1974-1979
 Project and Construction Manager – Swan Wooster Engineering Ltd....1969-1985
 Engineer and Co-Owner – Watson Smith Consultants Ltd…………...…1985-1986
 Director, Engineering – Vancouver Port Corporation…………………….1986-1995
 Managing Director, Ports & Infrastructure, Simons Consulting Ltd……..1995-2000
 Senior VP, Industrial – UMA Engineering Ltd……………………………..2000-2006
 Co-Owner & President – Axxent Engineering Ltd…………………..…….2006-2012
 Co-Owner & President – Smith Foster Associates Inc………………..2012-Present
6. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-
101”) and hereby certify that by reason of my education, affiliation with a professional
association (as defined by NI 43-101), and past relevant work experience on mining projects,
I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101.

7. I am the qualified person responsible for Sections 1, 2, 3, 4, 5, 6, 18, 19, 21, 22, 23, 24, 25,
26, and 27 of the Technical Report.

8. I am independent of the issuer as independence is described in Section 1.5 of NI 43-101.

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9. I visited the site of the project that is the subject of this Technical Report on September 11,
2014 and on November 10, 2016.

10. I have had prior involvement with the Property that is the subject of this Technical Report
with a previous technical report titled “NI 43-101 Technical Report Preliminary Economic
Assessment for the Terronera Project, Jalisco State, Mexico”, with an effective date of
March 25, 2015.
11. I have read NI 43-101 including Form 43-101F1 and the Technical Report. This Technical
Report has been prepared in compliance therewith.

12. At the effective date of the Technical Report, 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 the Technical Report not misleading.

Effective Date: April 3, 2017


Signed Date: May 18, 2017

{SIGNED AND SEALED}


[Peter J. Smith]

Peter J. Smith, P. Eng

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CERTIFICATE OF QUALIFIED PERSON

EUGENIO IASILLO, P.E.

I, Eugenio Iasillo, P. E., residing at 3370 W. Crestone Court Tucson, Arizona 85742 do hereby
certify that:

1. I am currently Principal of:


Process Engineering LLC
3370 W. Crestone Court
Tucson, Arizona 85742
2. Process Engineering LLC provides consulting services for mining project development
and mineral processing plants design. Development of metallurgical data, data analysis
and development of plant design criteria. Coordination of EPCM, plant commissioning and
start up.

3. Registrations:
Registered Professional Engineer - Arizona, U.S.
Arizona Certificate/Registration No. 28209
Chemical Engineering, Mexico
Professional Registration, CEDULA No. 486768

4. This certificate applies to the NI 43-101 technical report titled “Technical Report Preliminary
Feasibility Study for the Terronera Project, Jalisco State, Mexico” (the “Technical Report”),
with an effective date of April 3, 2017.

5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-
101”) and certify that by reason of my education, affiliation with a professional association (as
defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a
“qualified person” for the purposes of NI 43-101.

6. I have visited the Property that is the subject of this report on September 11, 2014.

7. I am responsible for Sections 13 and 17 of the Technical Report and co-authoring Sections 1,
25, and 26 of the Technical Report.

8. I am independent of the issuer as independence is described in Section 1.5 of NI 43-101.

9. I have had prior involvement with the Property that is the subject of this Technical Report with
a previous technical report titled “NI 43-101 Technical Report Preliminary Economic
Assessment for the Terronera Project, Jalisco State, Mexico”, with an effective date of March
25, 2015.

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10. I have read NI 43-101 including Form 43-101F1 and the Technical Report. This Technical
Report has been prepared in compliance therewith.

11. At the Effective Date of the Technical Report, 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 the Technical Report not misleading.

Effective Date: April 3, 2017


Signed Date: May 18, 2017

{SIGNED AND SEALED}


[Eugenio Iasillo]

__________________________
Eugenio Iasillo, P.E.

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CERTIFICATE OF QUALIFIED PERSON

EUGENE J. PURITCH, P.ENG., FEC

I, Eugene J. Puritch, P. Eng., residing at 44 Turtlecreek Blvd., Brampton, Ontario, L6W 3X7, do
hereby certify that:
1. I am an independent mining consultant and President of P&E Mining Consultants Inc.
2. This certificate applies to the technical report titled “NI 43-101 Technical Report Preliminary
Feasibility Study for the Terronera Project, Jalisco State, Mexico” (the “Technical Report”)
with an effective date of April 3, 2017.
3. I am a graduate of The Haileybury School of Mines, with a Technologist Diploma in Mining,
as well as obtaining an additional year of undergraduate education in Mine Engineering at
Queen’s University. In addition I have also met the Professional Engineers of Ontario
Academic Requirement Committee’s Examination requirement for Bachelor’s Degree in
Engineering Equivalency. I am a mining consultant currently licensed by Professional
Engineers and Geoscientists New Brunswick (License No. 4778), Professional Engineers,
Geoscientists Newfoundland & Labrador (License No. 5998), Association of Professional
Engineers and Geoscientists Saskatchewan (License No. 16216), Ontario Association of
Certified Engineering Technicians and Technologists (License No. 45252) the Professional
Engineers of Ontario (License No. 100014010) and Association of Professional Engineers
and Geoscientists of British Columbia (License No. 42912). I am also a member of the
National Canadian Institute of Mining and Metallurgy.
4. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-
101”) and certify that, by reason of my education, affiliation with a professional association
(as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a
“qualified person” for the purposes of NI 43-101.
5. I have practiced my profession continuously since 1978. My summarized career experience is
as follows:
 Mining Technologist - H.B.M.& S. and Inco Ltd., .................................. 1978-1980
 Open Pit Mine Engineer – Cassiar Asbestos/Brinco Ltd., ..................... 1981-1983
 Pit Engineer/Drill & Blast Supervisor – Detour Lake Mine, .................... 1984-1986
 Self-Employed Mining Consultant – Timmins Area, .............................. 1987-1988
 Mine Designer/Resource Estimator – Dynatec/CMD/Bharti, ................. 1989-1995
 Self-Employed Mining Consultant/Resource-Reserve Estimator, ......... 1995-2004
 President – P&E Mining Consultants Inc, ......................................... 2004-Present
6. I have visited the Property that is the subject of this report on September 11, 2014.
7. I am responsible for co-authoring Sections 1, 14, 15, 16, 21, 25 and 26 of the Technical
Report.
8. I am independent of the Issuer applying the test in Section 1.5 of NI 43-101.

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9. I have had prior involvement with the Property that is the subject of this Technical Report with
a previous technical report titled “NI 43-101 Technical Report Preliminary Economic
Assessment for the Terronera Project, Jalisco State, Mexico”, with an effective date of March
25, 2015.
10. I have read NI 43-101 and Form 43-101F1. This Technical Report has been prepared in
compliance therewith.
11. As of the effective date of this Technical Report, 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 the Technical Report not misleading.

Effective Date April 3, 2017


Signing Date: May 18, 2017

{SIGNED AND SEALED}


[Eugene J. Puritch]

________________________
Eugene J. Puritch, P.Eng., FEC

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CERTIFICATE OF QUALIFIED PERSON

JARITA BARRY, P.GEO.

I, Jarita Barry, P.Geo., residing at 2485B Hwy 3A, Nelson, British Columbia, V1L 6K7, do hereby
certify that:

1. I am an independent geological consultant contracted by P & E Mining Consultants Inc.


2. This certificate applies to the technical report titled “NI 43-101 Technical Report Preliminary
Feasibility Study for the Terronera Project, Jalisco State, Mexico” (the “Technical Report”)
with an effective date of April 3, 2017.
3. I am am a graduate of RMIT University of Melbourne, Victoria, Australia, with a B.Sc. in
Applied Geology. I have worked as a geologist for over 10 years since obtaining my B.Sc.
degree. I am a geological consultant currently licensed by the Associations of Professional
Engineers and Geoscientists of British Columbia (License No. 40875) and Professional
Engineers and Geoscientists Newfoundland & Labrador (License No. 08399). I am also a
member of the Australasian Institute of Mining and Metallurgy of Australia (Member No.
305397);
12. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI
43-101”) and certify that by reason of my education, affiliation with a professional association
(as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a
“qualified person” for the purposes of NI 43-101.
13. My relevant experience for the purpose of the Technical Report is:
 Geologist, Foran Mining Corp. 2004
 Geologist, Aurelian Resources Inc. 2004
 Geologist, Linear Gold Corp. 2005-2006
 Geologist, Búscore Consulting 2006-2007
 Consulting Geologist (AusIMM) 2008-2014
 Consulting Geologist, P.Geo. (APEGBC/AusIMM) 2014-Present.

4. I have not visited the Property that is the subject of this Technical Report.
5. I am responsible for co-authoring Section 1, 11, 12, 25 and 26 of this Technical Report.
6. I am independent of the Issuer applying all of the tests in section 1.5 of National Instrument
43-101.
7. I have had prior involvement with the Property that is the subject of this Technical Report with
a previous technical report titled “NI 43-101 Technical Report Preliminary Economic
Assessment for the Terronera Project Jalisco State, Mexico”, with an effective date of March
25, 2015.

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8. I have read NI 43-101 and Form 43-101F1 and the Technical Report has been prepared in
compliance therewith.
9. As of the effective date of this Technical Report, 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 the Technical Report not misleading.

Effective Date April 3, 2017


Signing Date: May 18, 2017

{SIGNED AND SEALED}


[Jarita Barry]

________________________________
Jarita Barry, P.Geo.

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CERTIFICATE OF QUALIFIED PERSON

DAVID BURGA, P.GEO.

I, David Burga, P. Geo., residing at 3884 Freeman Terrace, Mississauga, Ontario, do hereby
certify that:
1. I am an independent geological consultant contracted by P & E Mining Consultants Inc.
2. This certificate applies to the technical report titled “NI 43-101 Technical Report Preliminary
Feasibility Study for the Terronera Project, Jalisco State, Mexico” (the “Technical Report”)
with an effective date of April 3, 2017.
3. I am a graduate of the University of Toronto with a Bachelor of Science degree in Geological
Sciences (1997). I have worked as a geologist for 20 years since obtaining my B.Sc. degree.
I am a geological consultant currently licensed by the Association of Professional
Geoscientists of Ontario (License No 1836).
I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-
101”) and certify that, by reason of my education, affiliation with a professional association
(as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a
“qualified person” for the purposes of NI 43-101.
My relevant experience for the purpose of the Technical Report is:
...... Exploration Geologist, Cameco Gold 1997-1998
...... Field Geophysicist, Quantec Geoscience 1998-1999
...... Geological Consultant, Andeburg Consulting Ltd. 1999-2003
...... Geologist, Aeon Egmond Ltd. 2003-2005
...... Project Manager, Jacques Whitford 2005-2008
...... Exploration Manager – Chile, Red Metal Resources 2008-2009
...... Consulting Geologist 2009-Present

4. I have visited the Property that is the subject of this Technical Report on September 11,
2014, October 7, 2014 and June 14, 2016.
5. I am responsible for authoring Sections 7 to 10 and 23 and co-authoring Sections 1, 4, 11,
12, 25 and 26 of the Technical Report.
6. I am independent of the Issuer applying the test in Section 1.5 of NI 43-101.
7. I have had prior involvement with the Property that is the subject of this Technical Report
with a previous technical report titled “NI 43-101 Technical Report Preliminary Economic
Assessment for the Terronera Project, Jalisco State, Mexico”, with an effective date of March
25, 2015.
8. I have read NI 43-101 and Form 43-101F1 and this Technical Report has been prepared in
compliance therewith.

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9. As of the effective date of this Technical Report, 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 the Technical Report not misleading.

Effective Date April 3, 2017


Signing Date: May 18, 2017

{SIGNED AND SEALED}


[David Burga]

David Burga, P.Geo.

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CERTIFICATE OF QUALIFIED PERSON

YUNGANG WU, P.GEO.

I, Yungang Wu, P. Geo., residing at 3246 Preserve Drive, Oakville, Ontario, L6M 0X3, do hereby
certify that:

1. I am an independent consulting geologist contracted by P&E Mining Consultants Inc.

2. This certificate applies to the technical report titled “NI 43-101Technical Report Preliminary
Feasibility Study for the Terronera Project, Jalisco State, Mexico” (the “Technical Report”)
with an effective date of April 3, 2017.

3. I am a graduate of Jilin University, China with a Master Degree in Mineral Deposits (1992). I
am a geological consultant and a registered practising member of the Association of
Professional Geoscientist of Ontario (Registration No. 1681). I am also a member of the
Ontario Prospectors Association.

I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-
101”) and certify that, by reason of my education, affiliation with a professional association (as
defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a
“qualified person” for the purposes of NI 43-101.

My relevant experience for the purpose of the Technical Report is as follows:

 Geologist –Geology and Mineral Bureau, Liaoning Province, China1 ............... 1992-1993
 Senior Geologist – Committee of Mineral Resources and Reserves of Liaoning, China
........................................................................................................................ 1993-1998
 VP – Institute of Mineral Resources and Land Planning, Liaoning, China ......... 1998-2001
 Project Geologist–Exploration Division, De Beers Canada ............................... 2003-2009
 Mine Geologist – Victor Diamond Mine, De Beers Canada ............................... 2009-2011
 Resource Geologist– Coffey Mining Canada .................................................... 2011-2012
 Consulting Geologist ............................................................................................ Present

4. I have not visited the Property that is the subject of this Technical Report.

5. I am responsible for co-authoring Sections 1, 14, 25 and 26 of the Technical Report.

6. I am independent of the Issuer applying the test in Section 1.5 of NI 43-101.

7. I have had no prior involvement with the Property that is the subject of this Technical Report.

8. I have read NI 43-101 and Form 43-101F1 and the Technical Report has been prepared in
compliance therewith.

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9. As of the effective date of this Technical Report, 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 the Technical Report not misleading;

Effective Date April 3, 2017


Signing Date: May 18, 2017

{SIGNED AND SEALED}


[Yungang Wu]

Yungang Wu, P.Geo.

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CERTIFICATE OF QUALIFIED PERSON

JAMES L. PEARSON, P. ENG.

I, James L. Pearson, P.Eng., residing at 105 Stornwood Court, Brampton, Ontario. Canada, L6W
4H6, do hereby certify that:

1. Mining Engineering Consultant, contracted by P& E Mining Consultants Inc.

2. This certificate applies to the technical report titled “NI 43-101 Technical Report Preliminary
Feasibility Study for the Terronera Project, Jalisco State, Mexico” (the “Technical Report”)
with an effective date of April 3, 2017.

3. I am a graduate of Queen’s University, Kingston, Ontario, Canada, in 1973 with a Bachelor


of Science degree in Mining Engineering. I am registered as a Professional Engineer in the
Province of Ontario (Reg. No. 36043016). I have worked as a mining engineer for a total of
37 years since my graduation.

I have read the definition of "qualified person" set out in National Instrument 43-101 (“NI 43-
101”) and certify that by reason of my education, affiliation with a professional association
(as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a
"qualified person" for the purposes of NI 43-101. My relevant experience for the purpose of
the Technical Report is:

 Review and report as a consultant on numerous exploration and mining projects


around the world for due diligence and regulatory requirements;
 Project Manager and Superintendent of Engineering and Projects at several
underground operations in South America;
 Senior Mining Engineer with a large Canadian mining company responsible for
development of engineering concepts, mine design and maintenance;
 Mining analyst at several Canadian brokerage firms

4. I have not visited the Property that is the subject of this Technical Report.

5. I am responsible for coauthoring Sections 1, 15, 16, 21, 25 and 26 of the Technical Report.

6. I am independent of the issuer applying all of the tests in Section 1.5 of NI 43-101.

7. I have had prior involvement with the Property that is the subject of this Technical Report
with a previous technical report titled “NI 43-101 Technical Report Preliminary Economic
Assessment for the Terronera Project, Jalisco State, Mexico”, with an effective date of March
25, 2015.

8. I have read NI 43-101 and Form 43-101F1, and the Technical Report has been prepared in
compliance with that Instrument and Form.

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9. As of the effective date of this Technical Report, 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 the Technical Report not misleading.

Effective Date: April 3, 2017


Signed Date: May 18, 2017

{SIGNED AND SEALED}


[James L. Pearson]

James L. Pearson, P. Eng.

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CERTIFICATE OF QUALIFIED PERSON

SCOTT FLEMING, P.E.

I, Scott Fleming P.E., residing at 7475 South Elm Ct, Centennial, Colorado, 80122,
USA, do hereby certify that:

13. I am an employee of Amec Foster Wheeler Environment and Infrastructure within


its Mexico Mining Group located at 2000 South Colorado Blvd., Denver, Colorado,
80222, USA.

14. This certificate applies to the NI 43-101 technical report titled “Technical Report
Preliminary Feasibility Study for the Terronera Project, Jalisco State, Mexico” (the
“Technical Report”), with an effective date of April 3, 2017.

15. I graduated with two Bachelor’s Degrees in each Environmental Studies from the
University of California in 1973 and Civil Engineering from Colorado State University
in 2002.

16. I am a registered member in good standing of the Colorado State Board of Licensure
for Professional Engineers under License #37663.

17. I have worked as a civil engineer, project manager, and senior engineering manager
in the United States and Mexico and since graduation from university. My
summarized career experience is as follows:
 General Contractor and Construction Manager……………..……..1978-1999
 Civil Engineer – Goff Consulting Engineers…………..…………...2002-2004
 Civil Engineer – Fleming Engineering Inc……………..…………...2004-2010
 Civil Engineer – Amec Foster Wheeler…………..……………...2010-Present

18. I have read the definition of “qualified person” set out in National Instrument 43-101
(“NI 43-101”) and hereby certify that by reason of my education, affiliation with a
professional association (as defined by NI 43-101), and past relevant work
experience on mining projects, I fulfill the requirements to be a “qualified person” for
the purposes of NI 43-101.

19. I am the qualified person responsible for Section 20 of the Technical Report.

20. I am independent of the issuer as independence is described in Section 1.5 of NI 43-


101.

21. I visited the site of the project that is the subject of this Technical Report on
September 11, 2014 and on November 10, 2016.

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22. I have had prior involvement with the Property that is the subject of this Technical
Report with a previous technical report titled “NI 43-101 Technical Report
Preliminary Economic Assessment for the Terronera Project, Jalisco State,
Mexico”, with an effective date of March 25, 2015.

23. I have read NI 43-101 including Form 43-101F1 and the Technical Report. Section
#20 of this Technical Report has been prepared in compliance therewith.

24. At the effective date of the Technical Report, 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 the Technical Report not
misleading.

Effective Date: April 3, 2017


Signed Date: May 18, 2017

{SIGNED AND SEALED}


[Scott Fleming, PE]

Scott Fleming, PE

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CERTIFICATE OF QUALIFIED PERSON

BENJAMIN D. PEACOCK, P.ENG.

I, Benjamin D. Peacock, P. Eng., residing at 280 Ross Drive, North Bay, Ontario, P1A 0C3, do
hereby certify that:
14. I am a Senior Engineer employed by Knight Piésold Ltd.
15. This certificate applies to the technical report titled “NI 43-101 Technical Report Pre-
Feasibility Study for the Terronera Project, Jalisco State, Mexico” (the “Technical Report”)
with an effective date of April 3, 2017.
16. I am a graduate of the University of Waterloo, Waterloo, Ontario, Canada, in 2008 with a
Bachelor of Science degree in Civil Engineering. I am registered as a Professional Engineer
in the Province of Ontario (Reg. No. 100141409). I have been employed full-time by Knight
Piesold Ltd. since 2008 providing geomechanical design support for underground and open
pit mines and projects.
I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-
101”) and certify that, by reason of my education, affiliation with a professional association
(as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a
“qualified person” for the purposes of NI 43-101.
17. I have visited the Property that is the subject of this report from September 7 to 10, 2016
and from November 30 to December 3, 2016.
18. I am responsible for co-authoring Section 16 of the Technical Report.
19. I am independent of the Issuer applying the test in Section 1.5 of NI 43-101.
20. I have not had prior involvement with the Property that is the subject of this Technical
Report.
21. I have read NI 43-101 and Form 43-101F1. This Technical Report has been prepared in
compliance therewith.
22. As of the effective date of this Technical Report, 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 the Technical Report not misleading.

Effective Date April 3, 2017


Signing Date: May 18, 2017

{SIGNED AND SEALED}


[Benjamin D. Peacock]

________________________
Benjamin D. Peacock, P.Eng.

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APPENDIX A - FIGURES

Figure #1: Plan View 1440 Elevation

Figure #2: Longitudinal Projection

Figure #3: Cross Sectional Projection

Figure #4: Cut & Fill Mining

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APPENDIX B - 3D DOMAINS

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APPENDIX C - AU AND AG LOG-NORMAL HISTOGRAMS

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APPENDIX D - VARIOGRAMS

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APPENDIX E - CROSS-SECTIONS & PLANS OF AGEQ GRADE BLOCKS

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REFERENCE LINE
1,700 EL

SURFACE

1,600 EL

1,500 EL

1,400 EL

1,300 EL

0 50 100 150 200


AgEq g/t
METRES
1,200 EL + 550

MINERALIZED DOMAINS
450 - 550 P&E Mining Consultants Inc.
350 - 450
PROJECTED TO SECTION
250 - 350
FW HW3 TERRONERA PROJECT
HW1 HW4 150 - 250
AgEq BLOCK MODEL SECTION 10 NW
HW2 TRV 0.01 - 150
Scale 1:3,500 May 2017

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REFERENCE LINE
1,700 EL

CE
SURFA

1,600 EL

1,500 EL

1,400 EL

1,300 EL

0 50 100 150 200


AgEq g/t
METRES
1,200 EL + 550

MINERALIZED DOMAINS
450 - 550 P&E Mining Consultants Inc.
350 - 450
PROJECTED TO SECTION
250 - 350
FW HW3 TERRONERA PROJECT
HW1 HW4 150 - 250
AgEq BLOCK MODEL SECTION 16 NW
HW2 TRV 0.01 - 150
Scale 1:3,500 May 2017

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REFERENCE LINE
1,700 EL

CE
SURFA

1,600 EL

1,500 EL

1,400 EL

1,300 EL

0 50 100 150 200


AgEq g/t
METRES
1,200 EL + 550

MINERALIZED DOMAINS
450 - 550 P&E Mining Consultants Inc.
350 - 450
PROJECTED TO SECTION
250 - 350
FW HW3 TERRONERA PROJECT
HW1 HW4 150 - 250
AgEq BLOCK MODEL SECTION 22 NW
HW2 TRV 0.01 - 150
Scale 1:3,500 May 2017

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REFERENCE LINE
1,700 EL

SURFACE
1,600 EL

1,500 EL

1,400 EL

1,300 EL

0 50 100 150 200


AgEq g/t
METRES
1,200 EL + 550

MINERALIZED DOMAINS
450 - 550 P&E Mining Consultants Inc.
350 - 450
PROJECTED TO SECTION
250 - 350
FW HW3 TERRONERA PROJECT
HW1 HW4 150 - 250
AgEq BLOCK MODEL SECTION 27 NW
HW2 TRV 0.01 - 150
Scale 1:3,500 May 2017

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REFERENCE LINE
1,700 EL

1,600 EL

SURFACE

1,500 EL

1,400 EL

1,300 EL

0 50 100 150 200


AgEq g/t
METRES
1,200 EL + 550

MINERALIZED DOMAINS
450 - 550 P&E Mining Consultants Inc.
350 - 450
PROJECTED TO SECTION
250 - 350
FW HW3 TERRONERA PROJECT
HW1 HW4 150 - 250
AgEq BLOCK MODEL SECTION 30 NW
HW2 TRV 0.01 - 150
Scale 1:3,500 May 2017

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516,400 E

516,600 E

516,800 E

517,000 E

517,200 E

517,400 E
2,297,000 N

2,296,800 N

2,296,600 N

2,296,400 N

2,296,200 N

2,296,000 N

2,295,800 N

2,295,600 N

0 100 200 300 400


AgEq g/t
METRES
+ 550
450 - 550 P&E Mining Consultants Inc.
MINERALIZED DOMAINS
350 - 450
PROJECTED TO PLAN
250 - 350
FW HW3 TERRONERA PROJECT
HW1 HW4 150 - 250
AgEq BLOCK MODEL PLAN 1,600 EL
HW2 TRV 0.01 - 150
Scale 1:7,000 May 2017

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516,400 E

516,600 E

516,800 E

517,000 E

517,200 E

517,400 E
2,297,000 N

2,296,800 N

2,296,600 N

2,296,400 N

2,296,200 N

2,296,000 N

2,295,800 N

2,295,600 N

0 100 200 300 400


AgEq g/t
METRES
+ 550
450 - 550 P&E Mining Consultants Inc.
MINERALIZED DOMAINS
350 - 450
PROJECTED TO PLAN
250 - 350
FW HW3 TERRONERA PROJECT
HW1 HW4 150 - 250
AgEq BLOCK MODEL PLAN 1,500 EL
HW2 TRV 0.01 - 150
Scale 1:7,000 May 2017

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516,400 E

516,600 E

516,800 E

517,000 E

517,200 E

517,400 E
2,297,000 N

2,296,800 N

2,296,600 N

2,296,400 N

2,296,200 N

2,296,000 N

2,295,800 N

2,295,600 N

0 100 200 300 400


AgEq g/t
METRES
+ 550
450 - 550 P&E Mining Consultants Inc.
MINERALIZED DOMAINS
350 - 450
PROJECTED TO PLAN
250 - 350
FW HW3 TERRONERA PROJECT
HW1 HW4 150 - 250
AgEq BLOCK MODEL PLAN 1,400 EL
HW2 TRV 0.01 - 150
Scale 1:7,000 May 2017

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516,400 E

516,600 E

516,800 E

517,000 E

517,200 E

517,400 E
2,297,000 N

2,296,800 N

2,296,600 N

2,296,400 N

2,296,200 N

2,296,000 N

2,295,800 N

2,295,600 N

0 100 200 300 400


AgEq g/t
METRES
+ 550
450 - 550 P&E Mining Consultants Inc.
MINERALIZED DOMAINS
350 - 450
PROJECTED TO PLAN
250 - 350
FW HW3 TERRONERA PROJECT
HW1 HW4 150 - 250
AgEq BLOCK MODEL PLAN 1,300 EL
HW2 TRV 0.01 - 150
Scale 1:7,000 May 2017

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APPENDIX F - CLASSIFICATION BLOCK MODEL CROSS-SECTION AND PLANS

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REFERENCE LINE

1,700 EL

SURFACE

1,600 EL

1,500 EL

1,400 EL

1,300 EL

0 50 100 150 200

METRES
1,200 EL

MINERALIZED DOMAINS P&E Mining Consultants Inc.


PROJECTED TO SECTION
CLASS
FW HW3
HW4 INDICATED
TERRONERA PROJECT
HW1
HW2 TRV
CLASS BLOCK MODEL SECTION 10 NW
INFERRED
Scale 1:3,500 May 2017

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REFERENCE LINE
1,700 EL

CE
SURFA

1,600 EL

1,500 EL

1,400 EL

1,300 EL

0 50 100 150 200

METRES
1,200 EL

MINERALIZED DOMAINS
P&E Mining Consultants Inc.
PROJECTED TO SECTION
CLASS
FW HW3 TERRONERA PROJECT
HW1 HW4 INDICATED
CLASS BLOCK MODEL SECTION 16 NW
HW2 TRV INFERRED
Scale 1:3,500 May 2017

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REFERENCE LINE
1,700 EL

CE
SURFA

1,600 EL

1,500 EL

1,400 EL

1,300 EL

0 50 100 150 200

METRES
1,200 EL

MINERALIZED DOMAINS
P&E Mining Consultants Inc.
PROJECTED TO SECTION
CLASS
FW HW3 TERRONERA PROJECT
HW1 HW4 INDICATED
CLASS BLOCK MODEL SECTION 22 NW
HW2 TRV INFERRED
Scale 1:3,500 May 2017

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REFERENCE LINE
1,700 EL

SURFACE
1,600 EL

1,500 EL

1,400 EL

1,300 EL

0 50 100 150 200

METRES
1,200 EL

MINERALIZED DOMAINS
P&E Mining Consultants Inc.
PROJECTED TO SECTION
CLASS
FW HW3 TERRONERA PROJECT
HW1 HW4 INDICATED
CLASS BLOCK MODEL SECTION 27 NW
HW2 TRV INFERRED
Scale 1:3,500 May 2017

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REFERENCE LINE
1,700 EL

1,600 EL

SURFACE

1,500 EL

1,400 EL

1,300 EL

0 50 100 150 200

METRES
1,200 EL

MINERALIZED DOMAINS
P&E Mining Consultants Inc.
PROJECTED TO SECTION
CLASS
FW HW3 TERRONERA PROJECT
HW1 HW4 INDICATED
CLASS BLOCK MODEL SECTION 30 NW
HW2 TRV INFERRED
Scale 1:3,500 May 2017

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516,400 E

516,600 E

516,800 E

517,000 E

517,200 E

517,400 E
2,297,000 N

2,296,800 N

2,296,600 N

2,296,400 N

2,296,200 N

2,296,000 N

2,295,800 N

2,295,600 N

0 100 200 300 400

METRES

P&E Mining Consultants Inc.


MINERALIZED DOMAINS
PROJECTED TO PLAN
CLASS
FW HW3 TERRONERA PROJECT
HW1 HW4 INDICATED
CLASS BLOCK MODEL PLAN 1,600 EL
HW2 TRV INFERRED
Scale 1:7,000 May 2017

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516,400 E

516,600 E

516,800 E

517,000 E

517,200 E

517,400 E
2,297,000 N

2,296,800 N

2,296,600 N

2,296,400 N

2,296,200 N

2,296,000 N

2,295,800 N

2,295,600 N

0 100 200 300 400

METRES

P&E Mining Consultants Inc.


MINERALIZED DOMAINS
PROJECTED TO PLAN
CLASS
FW HW3 TERRONERA PROJECT
HW1 HW4 INDICATED
CLASS BLOCK MODEL PLAN 1,500 EL
HW2 TRV INFERRED
Scale 1:7,000 May 2017

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516,400 E

516,600 E

516,800 E

517,000 E

517,200 E

517,400 E
2,297,000 N

2,296,800 N

2,296,600 N

2,296,400 N

2,296,200 N

2,296,000 N

2,295,800 N

2,295,600 N

0 100 200 300 400

METRES

P&E Mining Consultants Inc.


MINERALIZED DOMAINS
PROJECTED TO PLAN
CLASS
FW HW3 TERRONERA PROJECT
HW1 HW4 INDICATED
CLASS BLOCK MODEL PLAN 1,400 EL
HW2 TRV INFERRED
Scale 1:7,000 May 2017

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516,400 E

516,600 E

516,800 E

517,000 E

517,200 E

517,400 E
2,297,000 N

2,296,800 N

2,296,600 N

2,296,400 N

2,296,200 N

2,296,000 N

2,295,800 N

2,295,600 N

0 100 200 300 400

METRES

P&E Mining Consultants Inc.


MINERALIZED DOMAINS
PROJECTED TO PLAN
CLASS
FW HW3 TERRONERA PROJECT
HW1 HW4 INDICATED
CLASS BLOCK MODEL PLAN 1,300 EL
HW2 TRV INFERRED
Scale 1:7,000 May 2017

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APPENDIX G - GENERAL ARRANGEMENTS

Process Plant

 General Arrangement

 General Arrangement View 1

 General Arrangement View 2 & 3

Filter Plant

 General Arrangement Plan

 General Arrangement Views 1, 2, and 3

Stockpile

 General Arrangement Plan

 Cross Section

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S.A.deC.V.

 ompetent construction of the reinforced backfill sill pillar will be crucial to the success of the mine near the end-of-
mine life. The sill pillar beneath the constructed sill pillar is planned for extraction at the end-of-mine life. The
constructed sill pillar above must be designed to support the unconsolidated backfill material above during this
phase.

X
XX

X
X
X X X
XX X X

X X
X X XX X X
X
X

X X X X
APPROVED
PFS
W.L.L.10t

PFS
APPROVED

S.A.deC.V.
PFS
APPROVED
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY
TERRONERA PROJECT
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APPENDIX H - OPERATING COST ESTIMATE BACK-UP

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1.0 CAPITAL AND OPERATING COSTS

All capital and operating costs are in US dollars, unless otherwise stipulated.

1.1 Capital Cost Estimates

Capital costs include: company underground equipment; contractor pre-production and


sustaining capital development and haulage; and company pre-production indirect labour and
electric power costs. The total estimated life of mine capital cost is US$34.7 M, summarized
in Table 1.1 below.

TABLE 0.1
SUMMARY OF MINE CAPITAL COSTS (US$M)
Year Total
Item
Yr-1 Yr+1 Yr+2 Yr+3 Yr+4 Yr+5 Yr+6 Yr+7
U/G Equipment 3.0 3.1 0.4 6.4
Development 4.5 6.9 4.9 5.1 1.8 1.4 2.3 26.9
Development. Haulage 0.5 0.1 0.6
Electric Power 0.2 0.2
Indirect Labour 0.6 0.6
Total 8.7 10.1 5.3 5.1 1.8 1.4 2.3 34.7

1.1.1 Pre-production Mine Capital Cost Estimates

All capital expenditures during the first three quarters of Year -1 are categorized as pre-
production capital costs. The total estimated pre-production mine capital cost is US$4.2 M,
summarized in Table 1.2.

TABLE 0.2
SUMMARY OF PRE-PRODUCTION MINE CAPEX – US$(000’S)
ITEM UNITS / M $(000’S)
Company Underground Equipment / Construction CAPEX
Construct Portal 1 500
Refuge Shelters 3 300
Total Equipment / Construction 800
Contractor Development
Portal entrance @ +2% 24 39.5
Portal Ramp @ -12% 503 845.4
Ramp 1410 - 1380 @ -12% 284 477.2
1380 Haulage Drive @ +2% 29 48.2
1380 Electrical Substation 24 40.3
1380 Refuge Shelter 24 40.3

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TABLE 0.2
SUMMARY OF PRE-PRODUCTION MINE CAPEX – US$(000’S)
ITEM UNITS / M $(000’S)
1380 Fuel and Lube 12 20.1
1380 Day Cap Mag 12 20.1
1380 Day Powder Mag 12 20.1
1380 Latrine 15 25.2
1380 Raise Bore Ore Pass 125 276.3
1380 Egress/FAR 128 283.9
Ramp Level Access 45 64.6
Access Ore Pass 15 21.5
Access Egress/FAR 20 28.7
Access BF Re-muck 15 21.5
Drainage hole cut–out 6 8.6
Subtotal 1,291m 2,282
Development Waste Haulage 289
Indirect Equipment Operating & Electric Power 163
Company Pre-production Indirect Labour
Warehouse Person 34.9
Clerk 20.2
Labourer / Nipper 20.2
Dry Man 20.2
Mine Superintendent /Mine Manager 54.2
Mine Engineer / Planner 86.5
Ventilation/Surveyor Technician 18.2
Mine Geologist 86.5
Geotechnical Engineer 18.1
Diamond Drill Foreman 9.1
Mine Safety /Trainer 27.1
Construction Leader 4.8
Construction Person 27.2
Mine Labourer / General Labourer 13.5
Contractor Admin. Indirect Labour 171.3
Subtotal 612

Grand Total 4,146

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1.1.2 Sustaining Mine Capital Cost Estimates

Commercial production period starts in the 4th quarter Year -1. Sustaining mine capital
expenditures includes company equipment, contractor mine development and development
waste haulage. All company equipment purchases / leases are completed by the end of Year
2. A summary of the number of units purchased / leased, by year, is presented in Table 1.3.

TABLE 0.3
SUMMARY OF SUSTAINING CAPEX COMPANY EQUIPMENT
PURCHASES / LEASES BY YEAR (UNITS)
EQUIPMENT YR-1 YR+1 YR+2 TOTAL
Single Boom Jumbo 1 4 5
Long Hole Drill 1 1
3
Production 3.5m LHD 1 2 1 4
2.0m3 Scooptram 1 2 3
Scissor Truck 1 1 1 3
Maintenance/Lube Truck 1 1
Shotcrete Truck 1 1 2
Shotcrete Delivery Truck 1 1 2
Ground Support Bolter 1 1 2
Personnel Carrier 1 1 2
Utility Tractor 1 1 1 3
U/G Pickup Truck 2 4 6
Grader 1 1
Jackleg drills 10 20 30
Diamond Drill 2 1 3
U/G Fans 6 2 2 10
Surface Fans 5 5
U/G Face Pumps 5 1 2 8
Main Pumps 4 1 5
Construct Main Sump 1 1
CRF Cement Applicator 1 1
CRF Backfill Plant 1 1
Compressors 2 2
Electrical sub-stations (UG) 2 1 3
Refuge Shelters 1 1 2

A summary of the sustaining mine development capex required, by year, is presented in


Table 1.4.

Appendix H - Page 3
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TABLE 0.4
SUMMARY OF SUSTAINING MINE DEVELOPMENT CAPEX(METRES)
HEADING YR-1 YR+1 YR+2 YR+3 YR+4 YR+5 YR+6 TOTAL
1380 Haulage Drive @ +2% 277 587 864
1380 Refuge Shelter 12 24 36
1380 Latrine 15 15
1380 Clean & Dirty Sump 71 71
1380 Raisebore Ore Pass 199 688 888
1380 Egress/FAR 207 683 890
Ramp (1) 1,614 1,614 1,614 4,841
Ramp (1) Muck Bays 80 80 80 240
Ramp (2) 254 761 1,277 514 367 1,019 4,191
Ramp (2) Muck Bays 12 36 60 24 24 48 204
Ramp Sump at Bottom 12 24 12 48
Ramp Level Access 65 110 225 120 140 146 120 926
Access Ore Pass 30 45 160 90 90 85 90 590
Access Egress/FAR 40 60 200 120 120 100 120 760
Access BF Re-muck 30 45 150 90 105 90 90 600
Drainage Hole Cut-out 12 18 54 36 36 30 36 222
Orepass Finger Raise 15 15 135 90 90 75 90 510
Wastepass Finger Raises 15 15 135 90 90 75 90 510
Level Extensions 78 78
Ore Pass 30 125 63 217
Fresh Air Raise/Egress 30 125 63 217

Subtotal 1,254 3,983 3,621 3,667 1,559 1,129 1,703 16,917

A summary of production mine capex, by year, is presented in Table 1.5 below.

TABLE 0.5 SUMMARY OF PRODUCTION MINE CAPEX (US$ 000’S)


ITEM YR-1 YR+1 YR+2 YR+3 YR+4 YR+5 YR+6 TOTAL
Company Underground Equipment Purchases
Single Boom Jumbo 83.2 332.7 83.2 499.1
Long Hole Drill 101.4 101.4
Production 3.5m3 LHD 80.1 160.3 80.1 320.5
2.0m3 Scooptram 52.7 105.5 158.2
Scissor truck 95.3 95.4 95.4 286.1
Maintenance/Lube Truck 77.1 77.1
Shotcrete Truck 131.2 131.2 262.4
Shotcrete Delivery Truck 77.1 77.1 154.2
Ground Support Bolter 101.4 101.4 101.4 304.2
Personnel Carrier 37.5 37.5 75.0
Utility Tractor 5.3 5.3 5.3 15.9
U/G Pickup Truck 10.5 21.0 31.5

Appendix H - Page 4
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TABLE 0.5 SUMMARY OF PRODUCTION MINE CAPEX (US$ 000’S)


ITEM YR-1 YR+1 YR+2 YR+3 YR+4 YR+5 YR+6 TOTAL
Grader 22.5 22.5
Jackleg Drills 37.5 75.0 112.5
Diamond Drill 300.0 300.0
U/G Fans 83.9 28.0 111.9
Surface Fans 250.2 250.2
U/G Face Pumps 125.0 25.0 150.0
Main Pumps 600.0 600.0
Construct Main Sump 500.0 500.0
CRF Cement Applicator 250.0 250.0
CRF Backfill Plant 250.0 250.0
Compressors 271.2 271.2
Electrical Sub-stations (UG) 220.0 110.0 330.0
Refuge Shelters 100.1 100.1 200.2
Total Equipment 2,161.8 3,106.9 365.4 5,634

Contractor Development Cost


1380 Haulage Drive @ +2% 466.3 986.6 1,452.9
1380 Refuge 20.2 40.4 60.6
1380 Latrine 25.2 25.2
1380 Clean & Dirty Sump 119.1 119.1
1380 Raise Bore Ore Pass 441.9 1,525.1 1,967.0
1380 Egress/Fresh Air Raise 459.7 1,513.3 1,973.0
Ramp 2,317.2 2,317.3 2,317.2 6,951.7
Ramp Re-muck 114.9 114.9 114.9 344.7
Ramp 364.1 1,092.8 1,834.0 737.6 526.8 1,463.7 6,019.0
Ramp Re-muck 17.2 51.7 86.2 34.5 34.5 68.9 293.0
Ramp Sump at Bottom 17.3 34.5 17.2 69.0
Ramp Level Access 93.4 158.0 323.1 172.3 201.1 209.7 172.3 1,329.9
Access Ore Pass 43.1 64.6 229.8 129.3 129.2 122.1 129.3 847.4
Access Egress/Fresh Air Raise 57.5 86.2 287.2 172.3 172.3 143.6 172.3 1,091.4
Access Backfill Re-muck 43.1 64.6 215.4 129.2 150.8 129.2 129.3 861.6
Drainage Hole Cut-out 17.2 25.9 77.6 51.7 51.7 43.1 51.7 318.9
Ore Pass finger raise 7.7 7.7 69.4 46.3 46.3 38.6 46.3 262.3
Wastepass Finger Raises 7.7 7.7 69.4 46.3 46.3 38.5 46.3 262.2
Level Extensions 111.4 111.4
Ore Pass 15.4 64.0 32.2 111.6
Fresh Air Raise/Egress 15.4 64.1 32.1 111.6
Total Development 2,183.4 6,912.2 4,896.7 5,099.7 1,843.8 1,367.6 2,280.1 24,584
Development Waste Haulage 203.0 98.0 301
Total Sustaining CAPEX 4,548.2 10,117.1 5,262.1 5,099.7 1,843.8 1,367.6 2,280.1 30,519

The total estimated sustaining mine capital cost is estimated to be US$30.5M.

Appendix H - Page 5
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1.2 Mine Operating Cost Estimates

All cut-and-fill (C&F) and longhole sill pillar recovery (LH) mining will be completed by the
company. P&E estimated operating costs by the following: mining method; by 3 Classes of
ground support requirements; by stope width; by type of backfill, and whether or not a
constructed sill pillar is required. A summary of OPEX estimating parameters is presented in
Table 1.6.

TABLE 0.6
SUMMARY OF OPEX ESTIMATING PARAMETERS
MINING GROUND SUPPORT STOPE BACKFIL CONSTRUCT
METHOD CLASS WIDTH L SILL
Unconsolida
C&F Class 1 3.0m to 4.5m No
ted
Consolidate
C&F Class 1 3.0m to 4.5m Yes
d
Unconsolida
LH Class 1 3.0m to 4.5m No
ted
Unconsolida
C&F Class 1 4.5m to 6.0m No
ted
Consolidate
C&F Class 1 4.5m to 6.0m Yes
d
Unconsolida
LH Class 1 4.5m to 6.0m No
ted
Unconsolida
C&F Class 2 2.0m to 3.0m No
ted
Consolidate
C&F Class 2 2.0m to 3.0m Yes
d
Unconsolida
LH Class 2 2.0m to 3.0m No
ted
Consolidate
C&F Class 2 2.0m to 3.0m No
d
Consolidate
C&F Class 2 2.0m to 3.0m Yes
d
Consolidate
LH Class 2 2.0m to 3.0m No
d
Unconsolida
C&F Class 2 3.0m to 4.5m No
ted
Consolidate
C&F Class 2 3.0m to 4.5m Yes
d
Unconsolida
LH Class 2 3.0m to 4.5m No
ted

Appendix H - Page 6
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TABLE 0.6
SUMMARY OF OPEX ESTIMATING PARAMETERS
MINING GROUND SUPPORT STOPE BACKFIL CONSTRUCT
METHOD CLASS WIDTH L SILL
Unconsolida
LH Class 2 3.0m to 4.5m No
ted
Unconsolida
C&F Class 3 2.0m to 3.0m No
ted
Consolidate
C&F Class 3 2.0m to 3.0m Yes
d
Unconsolida
LH Class 3 2.0m to 3.0m No
ted
Consolidate
C&F Class 3 2.0m to 3.0m No
d

1.2.1 Mechanized Cut and Fill Mining

A summary of Mechanized Cut and Fill parameters, by mining width, is presented in Table
1.7.

TABLE 0.7
SUMMARY OF C&F MINING PARAMETERS
BREAST WIDTH
PARAMETER UNITS
2.0M TO 3.0M 3.0M TO 4.5M 4.5M TO 6.0M
Height 4.0 4.0 4.0 m
Average width 2.5 3.8 5.3 m
Arch factor 98% 98% 98% %
Arch radius 1.00 1.00 1.00 m
Face area 9.8 14.7 20.6 sq.m
Blast hole length 4.88 4.88 4.88 m
Bootleg length 0.12 0.12 0.12 m
Advance 4.75 4.75 4.75 m
Overbreak factor 7.0% 7.0% 7.0% %
Swell factor 35% 35% 35% %
Insitu density 2.52 2.52 2.52 t/ m3
Loose density 1.87 1.87 1.87 t/ m3
In-situ volume / breast 50 75 105 m3
Loose volume / breast 67 101 141 m3
Tonnes ore / breast 126 189 264 tonnes
Tonnes backfill / breast 93 140 196 tonnes
Tonnes / metre of breast 26 40 56 tonnes

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1.2.1.1 Cut and Fill Drilling

A summary of the stope drilling parameters and productivities, using a single-boom


production jumbo, is presented in Table 1.8.

TABLE 0.8
SUMMARY OF C&F STOPE DRILLING PARAMETERS
BREAST WIDTH
PARAMETER UNITS
2.0M TO 3.0M 3.0M TO 4.5M 4.5M TO 6.0M
Number of drills 1 1 1
Blast hole diameter 45 45 45 mm
Number of Holes:
Perimeter holes 12 14 16 holes
Other blast holes 8 12 16 holes
Total holes 20 26 32 holes
Total drilled metres 98 127 156 m
Drilling Productivity:
Penetration Rate - 45mm 1.3 1.5 1.3 m/min
Penetration Rate - 89mm 0.8 0.8 0.8 m/min
Reposition boom 0.8 0.8 0.8 min/hole
Cycle auxiliary 0.2 0.2 0.2 min/hole
Drilling time 78 85 125 min/rd
Repositioning time 15 20 24 min/rd
Auxiliary 4 5 6 min/rd
Change shank to ream/drill 10 10 10 min/rd
Travel/setup 30 30 30 min
Clean up and leave 10 10 10 min
Total drilling cycle 147 159 205 min
Drilling cycle (in 50 min hours) 2.9 3.2 4.1 hrs

A summary of Cut and Fill OPEX drilling cost estimates are presented in Table 1.9.

TABLE 0.9
SUMMARY OF C&F STOPE DRILLING COST ESTIMATES PER METRE OF BREASTING
Breast Width 2.0m to 3.0m 3.0m to 4.5m 4.5m to 6.0m Unit 2.0m to 3.0m 3.0m to 4.5m 4.5m to 6.0m
Price
Units/m Drilled. (US$) Cost / Meter of Breasting (US$)
Rockbolt Drilling
Steel 8 ft 0.10 0.11 0.12 133.98 $13.81 $14.29 $16.19
32mm Blade bit 0.29 0.30 0.34 35.32 $10.34 $10.70 $12.12
Jumbo Drilling
Rod 16' x FI38 x Hex x 35 x R32 0.04 0.05 0.07 373.93 $15.34 $19.94 $24.54
Bit 45mm x R32 0.21 0.27 0.33 66.99 $13.74 $17.86 $21.99

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Shank Cop 1838 x T38 0.06 0.07 0.09 281.36 $16.03 $20.84 $25.65
Coupling T38 0.02 0.02 0.03 66.99 $1.15 $1.49 $1.83
Miscellaneous/waste @ 10% 10% $7.04 $8.51 $10.23
Total C&F Stoping Drilling Material Cost / m Breast $77.45 $93.63 $112.56

1.2.1.2 Cut and Fill Blasting

A summary of the Cut and Fill stope blasting productivities and powder factors is presented
in Table 1.10.

TABLE 0.10
SUMMARY OF C&F STOPE BLASTING PRODUCTIVITIES AND POWDER FACTORS
BREAST WIDTH
PARAMETER 2.0M TO 3.0M TO 4.5M TO UNITS
3.0M 4.5M 6.0M
Travelling time 15 15 15 min
Clean face, setup 15 15 15 min
Load time per hole 0.75 0.75 0.75 min
Tie-in and cap 0.50 0.50 0.50 min
Total loading time 25 33 40 min
Clean up and leave 10 10 10 min
Blasting cycle time 65 73 80 min
Blasting cycle time (in 50 min
1.3 1.5 1.6 hrs
hrs)

kg/tonn
0.52 0.49 0.48
Powder factor e
1.16 1.08 1.06 lb/tonne

A summary of Cut and Fill OPEX blasting cost estimates are presented in Table 1.11.

TABLE 0.11
SUMMARY OF C&F STOPE BLASTING COST ESTIMATES PER METRE OF
BREASTING
COST / M OF BREASTING
ITEM UNITS/BREAST
UNIT PRICE (US$)
BREAST WIDTH 2.0-3.0M 3.0-4.5M 4.5-6.0M 2.0-3.0M 3.0-4.5M 4.5-6.0M
Packaged ANFO (kg) 43 65 97 $1.23 $11.19 $16.78 $25.17
Geldyne 32x400 (kg) 8 11 13 $3.96 $6.85 $8.91 $10.96
Xactex 19x600 (kg) 14 17 17 $12.45 $37.62 $43.89 $43.89
Exel MS detonator 5m 20 26 32 $3.52 $14.80 $19.23 $23.67
Electric detonator 4.5m 2 2 2 $2.96 $1.25 $1.25 $1.25
B-Line (m) 20 20 20 $0.49 $2.05 $2.05 $2.05

Appendix H - Page 9
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TABLE 0.11
SUMMARY OF C&F STOPE BLASTING COST ESTIMATES PER METRE OF
BREASTING
COST / M OF BREASTING
ITEM UNITS/BREAST
UNIT PRICE (US$)
BREAST WIDTH 2.0-3.0M 3.0-4.5M 4.5-6.0M 2.0-3.0M 3.0-4.5M 4.5-6.0M
Connecting wire 50m 1 1 1 $1.79 $0.38 $0.38 $0.38
Miscellaneous/waste @ 10% $7.41 $9.25 $10.74

Total C&F Stoping Blasting Material Cost / m Breast $81.54 $101.74 $118.11

1.2.1.3 Cut and Fill Services

Air and water line; power and blasting cables, and ventilation ducting are required in all
stoping areas. The estimated time to install stope pipe, cable and ventilation duct services is
detailed in Table 1.12 below.

TABLE 0.12
SUMMARY OF C&F STOPE SERVICES INSTALLATION PRODUCTIVITIES
SERVICES ITEM PRODUCTIVITY UNITS
Piping
2" waterline installation time 1.5 min/m
Install 2" waterline 7.1 min
4" airline installation time 3.0 min/m
Install 4" airline 14.3 min
Total pipelines installation time 21.4 min

Electrical Cable
Cable installation time 1.0 min/m
Install power cables 4.8 min
Install blasting cables 4.8 min
Install miscellaneous lighting 4.8 min
Total cable installation time 14.3 min

Ventilation Duct
Vent duct installation time 2.0 min/m
Install ventilation duct 9.5 min
Messenger cable installation time 0.5 min/m
Install messenger cable 2.4 min
Total ventilation duct installation time 11.9 min

Appendix H - Page 10
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TABLE 0.12
SUMMARY OF C&F STOPE SERVICES INSTALLATION PRODUCTIVITIES
SERVICES ITEM PRODUCTIVITY UNITS
Travel/Setup for Service installation 30.0 min

Total Service installation time 77.5 min


Total service time (in 50 min hours) 1.6 Hrs

A summary of the cost estimate for Cut and Fill stoping services are presented in Table 1.13.

TABLE 0.13
SUMMARY OF C&F STOPING SERVICES COST ESTIMATES PER METRE OF
BREASTING
SERVICES ITEM UNITS/M UNIT PRICE COST / M OF BREASTING
Piping
2" Water Pipe 1.00 $12.48 $12.48
4" Air Line 1.00 $32.50 $32.50
2" Couplings 0.08 $24.93 $2.04
4" Couplings 0.08 $46.30 $3.79
2" Water valve 0.01 $256.65 $1.28
4" Air valve 0.01 $393.72 $1.97
2" Tees 0.01 $45.33 $0.23
4" Tees 0.01 $94.22 $0.47
3/4" x 18" re-bar eyebolt 0.33 $8.18 $2.68
Pipe hangers 0.33 $4.52 $1.48
Coil proof chain 0.98 $1.64 $1.62
Miscellaneous @10% $6.06
Subtotal $66.61
66 % pipe in ore development recovered & reused
Total Pipe and Accessory Supplies / m Breast $22.20

Electrical Cable
Cable Electrical 35MM2 3 CORE 0.50 $33.17 $16.58
Power Board 230V 13A 50/60HZ 0.50 $5.06 $2.53
Connector Socket Elect 0.00 $453.09 $1.13
Connector Plug Elect 0.00 $461.81 $1.15
Cable Blasting 1.00 $1.13 $1.13
Misc Lighting 1.00 $5.00 $5.00
Cable Hangers 0.20 $6.08 $1.22
Miscellaneous @ 10% $2.88
Total Electrical Supplies / m Breast $31.63

Appendix H - Page 11
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TABLE 0.13
SUMMARY OF C&F STOPING SERVICES COST ESTIMATES PER METRE OF
BREASTING
SERVICES ITEM UNITS/M UNIT PRICE COST / M OF BREASTING

Ventilation Duct
Vent Duct 42" 50 feet 1.00 $15.03 $15.03
Hanger 0.20 $2.50 $0.50
3/4" x 18" rebar eyebolt 0.20 $8.18 $1.64
Messenger Cable 1.00 $1.20 $1.20
Miscellaneous @ 10% $1.84
Subtotal $20.20
70 % vent duct in ore development recovered & reused
Total Ventilation Supplies $6.06

Total C&F Stoping Services Material Cost / m of Breasting $59.89

1.2.1.4 Cut and Fill Ground Support

A summary of C&F stope ground support installation productivities is presented in Table


1.14.

TABLE 0.14
SUMMARY OF C&F STOPE GROUND SUPPORT INSTALLATION PRODUCTIVITIES
GROUND SUPPORT CLASS CLASS 1 CLASS 2 CLASS 3
3.0M TO 4.5M TO 2.0M TO 3.0M TO 2.0M TO UNITS
BREAST WIDTH
4.5M 6.0M 3.0M 4.5M 3.0M
Productivities
Travel/Setup 30 30 30 30 30 min
Scale face 1.0 1.0 1.0 1.0 1.0 min/sq.m
Scale back 1.0 1.0 1.0 1.0 1.0 min/sq.m
Scale walls 0.8 0.8 0.8 0.8 0.8 min/sq.m
Total scaling time 30.2 36.8 24.8 30.2 24.8 min
Bolting area - Back 17.5 24.5 11.6 17.5 11.6 sq.m
- Walls 23.3 23.3 28.0 28.0 28.0 sq.m
- Walls with Mesh 11.2 11.2 sq.m
Bolting Pattern (1.2mx1.2m) 1.44 1.44 1.44 1.44 1.44 sq.m/bolt
Number of bolts - Back 13 17 9 13 9
- Walls 17 17 20 20 20
Bolt length 2.4 2.4 2.4 2.4 2.4 m
Drilled metres 72 82 70 79 70 m
Penetration rate 0.8 0.8 0.8 0.8 0.8 m/min
Mark & collar holes 0.8 0.8 0.8 0.8 0.8 min/hole

Appendix H - Page 12
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TABLE 0.14
SUMMARY OF C&F STOPE GROUND SUPPORT INSTALLATION PRODUCTIVITIES
GROUND SUPPORT CLASS CLASS 1 CLASS 2 CLASS 3
3.0M TO 4.5M TO 2.0M TO 3.0M TO 2.0M TO UNITS
BREAST WIDTH
4.5M 6.0M 3.0M 4.5M 3.0M
Drilling time 60 68 58 66 58 min
Install bolts 2.0 2.0 2.0 2.0 2.0 min/bolt
Bolt installation time 30 34 29 33 29 min
Screen area (Bolted area) 31.7 38.7 39.6 45.4 39.6 m2
Time per screen 3.6 3.6 3.6 3.6 3.6 min/ m2
Total screening time 114 139 142 163 142 min
Shotcrete Area 39.6 45.4 49.2 .m2
Time per shotcrete 1.8 1.8 1.8 min/ m2
Total shotcrete time 35.5 40.8 88.2 min
Tear down & clean-up 15 15 15 15 15 min
Total ground support cycle time 279 323 334 378 387 min
Support cycle (in 50 min hours) 5.6 6.5 6.7 7.6 7.7 hrs

A summary of ground support cost estimate for Cut and Fill stoping are presented in Table
1.15.

TABLE 0.15
SUMMARY OF C&F STOPING GROUND SUPPORT MATERIAL COST ESTIMATES / M OF
BREASTING
UNITS/M ADVANCE COST /METRE OF BREASTING
ITEM
CLASS 1 CLASS 2 CLASS 3 UNIT PRICE CLASS 1 CLASS 2 CLASS 3
4.5-
BREAST WIDTH 3.0-4.5M 2.0-3.0M 3.0-4.5M 2.0- 3.0M 3.0-4.5M 4.5-6.0M 2.0-3.0M 3.0-4.5M 2.0-3.0M
6.0M

2.4 metre split set bolt 3.58 3.58 4.21 4.21 1.89 $6.92 $24.73 $24.73 $29.10 $29.10 $17.02
2.4 metre rebar bolt 2.73 3.58 1.89 2.73 4.21 $6.59 $18.01 $23.56 $12.47 $18.01 $29.10
5"X5" X 3/8" Plate 6.31 7.15 6.10 6.94 6.10 $1.40 $8.84 $10.02 $8.54 $9.72 $8.54
Fast resin cartridges 2.73 3.58 1.89 2.73 $1.96 $5.35 $7.00 $3.70 $5.35
Slow resin cartridges 5.47 7.15 3.79 5.47 $1.96 $10.70 $13.99 $7.41 $10.70
Welded wire mesh 1.11 1.36 1.39 1.59 1.39 $21.39 $23.76 $29.00 $29.69 $34.06 $29.69
Shotcrete 0.23 0.26 0.57 $150.00 $34.36 $39.41 $85.31
Misc. / waste @ 10% $9.14 $10.83 $12.53 $14.64 $16.97
Total C&F Stoping Ground Support Material Cost / m of Breasting $100.53 $119.12 $137.81 $161.00 $186.63

Appendix H - Page 13
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

1.2.1.5 Cut and Fill Direct Labour

A summary of Cut and Fill stoping direct labour costs are presented in Table 1.16.

TABLE 0.16
SUMMARY OF C&F STOPING DIRECT LABOUR COSTS / M OF BREASTING
Direct labour Hours / Breast Cost / Metre of Breasting
Item
Class 1 Class 2 Class 3 Rate/Hr Class 1 Class 2 Class 3
Breast Width 3.0-4.5m 4.5-6.0m 2.0-3.0m 3.0-4.5m 2.0-3.0m 3.0-4.5m 4.5-6.0m 2.0-3.0m 3.0-4.5m 2.0-3.0m

Drilling 8.49 10.95 7.84 9.39 7.84 $8.93 $15.94 $20.55 $14.72 $17.64 $14.72
Blasting 3.87 4.27 3.47 3.87 3.47 $8.93 $7.26 $8.01 $6.51 $7.26 $6.51
Ground support 14.88 17.20 17.84 20.16 20.65 $8.93 $27.93 $32.30 $33.49 $37.85 $38.77
Services 4.14 4.14 6.20 6.20 4.14 $6.39 $5.56 $5.56 $8.34 $8.34 $5.56
Mucking - Ore & Backfill 7.93 10.58 5.62 7.93 5.62 $8.61 $14.36 $19.15 $10.17 $14.36 $10.17
Total C&F Stoping Direct Labour Cost / m of Breasting $71.05 $85.57 $73.23 $85.44 $75.73

1.2.1.6 Cut and Fill Equipment

A summary of Cut and Fill equipment operating costs are presented in Table 1.17.

TABLE 0.17
SUMMARY OF C&F STOPING EQUIPMENT OPERATING COSTS / M OF BREASTING
HOURS OPERATING / BREAST COST / METRE OF BREASTING
ITEM
CLASS 1 CLASS 2 CLASS 3 RATE/HR CLASS 1 CLASS 2 CLASS 3
BREAST WIDTH 3.0-4.5M 4.5-6.0M 2.0-3.0M 3.0-4.5M 2.0-3.0M 3.0-4.5M 4.5-6.0M 2.0-3.0M 3.0-4.5M 2.0-3.0M
1-boom Jumbo 3.18 4.10 2.94 3.52 2.94 $65.12 $43.61 $56.22 $40.27 $48.24 $40.27
LHD Scooptram 5.95 7.93 4.21 5.95 4.21 $65.96 $82.50 $110.07 $58.47 $82.50 $58.47
ANFO Loader 0.95 1.10 0.80 0.95 0.80 $43.69 $8.73 $10.11 $7.35 $8.73 $7.35
Scissor Truck 1.55 1.55 1.55 1.55 1.55 $35.11 $11.45 $11.45 $11.45 $11.45 $11.45
Rockbolter 0.60 0.68 0.58 0.66 0.58 $67.99 $8.58 $9.72 $8.29 $9.44 $8.29
Auxiliary Fan 22.18 27.02 21.19 25.27 22.60 $0.89 $4.13 $5.03 $3.95 $4.71 $4.21
Water Pump 2.68 3.60 2.44 3.02 2.44 $0.26 $0.15 $0.20 $0.13 $0.17 $0.13
Compressor 1.20 1.36 1.16 1.32 1.16 $1.77 $0.45 $0.51 $0.43 $0.49 $0.43
Hoses & Fittings 2.98 3.98 2.72 3.38 2.72 $1.31 $0.82 $1.10 $0.75 $0.93 $0.75
Small Tools & Acc. 16.64 20.27 15.90 18.96 16.95 $5.00 $17.49 $21.31 $16.72 $19.93 $17.82
Total C&F Stoping Equipment Cost / m of Breasting $177.92 $225.72 $147.81 $186.59 $149.18

Appendix H - Page 14
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

1.2.1.7 Cut & Fill Direct Stope Mining OPEX Details

A Summary of Cut and Fill direct stoping operating costs are presented in Table 1.18.

TABLE 0.18
SUMMARY OF CUT & FILL DIRECT STOPING OPERATING COSTS / M OF BREASTING
Cost/Meter Breast Cost/Tonne
Item
Class 1 Class 2 Class 3 Class 1 Class 2 Class 3
Breast Width 3.0-4.5m 4.5-6.0m 2.0-3.0m 3.0-4.5m 2.0-3.0m 3.0-4.5m 4.5-6.0m 2.0-3.0m 3.0-4.5m 2.0-3.0m
Direct labour $71.05 $85.57 $73.23 $85.44 $75.73 $1.79 $1.54 $2.77 $2.15 $2.86
Equipment cost $177.92 $225.72 $147.81 $186.59 $149.18 $4.49 $4.07 $5.59 $4.71 $5.64
Drill bits and steel $93.63 $112.56 $77.45 $96.38 $77.45 $2.36 $2.03 $2.93 $2.43 $2.93
Explosives $101.74 $118.11 $81.54 $101.74 $81.54 $2.57 $2.13 $3.08 $2.57 $3.08
Ground support $100.53 $119.12 $137.81 $161.00 $186.63 $2.54 $2.15 $5.21 $4.06 $7.06
Unconsolidated
$59.47 $83.26 $39.65 $59.47 $39.65 $1.50 $1.50 $1.50 $1.50 $1.50
backfill
Piping $22.20 $22.20 $22.20 $22.20 $22.20 $0.56 $0.40 $0.84 $0.56 $0.84
Electrical $31.63 $31.63 $31.63 $31.63 $31.63 $0.80 $0.57 $1.20 $0.80 $1.20
Ventilation $59.89 $59.89 $59.89 $59.89 $59.89 $1.51 $1.08 $2.27 $1.51 $2.27
Miscellaneous $3.92 $3.92 $3.92 $3.92 $3.92 $0.10 $0.07 $0.15 $0.10 $0.15
Total $721.98 $861.98 $675.14 $808.26 $727.83 $18.21 $15.53 $25.54 $20.39 $27.54

1.2.2 Long Hole Sill Pillar Recovery Mining

A summary of Long Hole Sill Pillar Recovery mining parameters is presented in Table 1.19.

TABLE 0.19
SUMMARY OF LH SILL PILLAR RECOVERY MINING PARAMETERS
PARAMETER VALUE UNIT
Average Height 14.0 m
Width 4.5 m
Arch Factor 98% %
Arch Radius 0.3 m
Face area 61.7 sq.m
Dip 90 deg.
Drill & Blast Strike length 4.8 m
Blast length 14.0 m
Load length 14.0 m
Bootleg length 0.7 m
Advance 13.3 m
Overbreak factor 10% %
Swell factor 35% %
Insitu Density 2.52 t/ m3

Appendix H - Page 15
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

TABLE 0.19
SUMMARY OF LH SILL PILLAR RECOVERY MINING PARAMETERS
PARAMETER VALUE UNIT
In-situ volume per blast 323 m3
Loose volume per raise 436 m3
Tonnes per blast 814 tonnes
Tonnes per meter strike length 171 tonnes

1.2.2.1 Long Hole Sill Pillar Recovery Drilling

A summary of the Sill Pillar Recovery drilling parameters and productivities, using a long
hole drill jumbo, is presented in Table 1.20.

TABLE 0.20
SUMMARY OF LH SILL PILLAR RECOVERY DRILLING PARAMETERS
PARAMETER VALUE UNITS
No. drills 1
Blast Hole dia. 64 mm
Relief Hole dia. 102 mm
Number of Holes:
Blast Holes 8 holes
Total Holes 8 holes
Drill & Blast Strike length 4.8 m
Total Drilled Metres - 64mm 67 m
Drilling Productivity:
Penetration Rate - 64mm 0.5 m/min
Penetration Rate - 102mm 0.4 m/min
Drilling time-64mm 133 min
Drilling time-102mm 0.000 min
Collar Hole 2 min/hole
Align and Level 3 min/hole
Reposition boom 5 min/hole
Add/Retact Rods 1 min/rod
Change Bits 2.5 min/bit
Cycle auxiliary 0.2 min/hole
Change shank 10 min/rd
Total auxiliary time 112 min/rd
Travel/Setup 25 min
Teardown/Demobilize 25 min
Total drilling cycle 295 min
Drilling cycle (in 50 min hours) 5.9 hrs

Appendix H - Page 16
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

A summary of Long Hole Sill Pillar Recovery OPEX drill cost estimates are presented in
Table 1.21.

TABLE 0.21
SUMMARY OF LH SILL PILLAR RECOVERY DRILLING COST ESTIMATES PER
METRE OF STRIKE LENGTH
LIFE UNITS/M STRIKE UNIT COST/M STRIKE
ITEM
(M/UNIT) LENGTH PRICE LENGTH
Coupling T38 1200 0.01 $34.00 $0.40
Rod 6ft x T38
300 0.06 $226.00 $13.71
MF
64mm Drop
100 0.14 $106.00 $14.84
center bit
Miscellaneous/ waste $3.54
Total Drilling Supplies $32.49

1.2.2.2 Long Hole Sill Pillar Recovery Blasting

A summary of Long Hole Sill Pillar Recovery blasting productivities and powder factors is
presented in Table 1.22.

TABLE 0.22
SUMMARY OF LH SILL PILLAR RECOVERY BLASTING PRODUCTIVITIES AND
POWDER FACTORS
ITEM VALUE UNITS
Travel, clean face, setup 30 min
Clean hole 3 min/hole
Plug hole 3 min/hole
Insert primer 2 min/hole
Load hole 1 min
Load stemming 2 min/hole
Load time per hole 11 min
Tie-in and cap 2 min
Total loading time 104 min
Clean up and leave 10 min
Shoot and blow smoke 15 min
Blasting cycle (in 50 min hours) 3.0 hrs

0.44 kg/tonne
Powder factor
0.96 lb/tonne

A summary of Long Hole Sill Pillar Recovery OPEX blasting cost estimates are presented in
Table 1.23.

Appendix H - Page 17
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

TABLE 1.23
SUMMARY OF LH SILL PILLAR RECOVERY BLASTING COST ESTIMATES PER
METRE OF STRIKE LENGTH
UNI UNITS/BLA UNITS/M STRIKE UNIT COST/M STRIKE
ITEM
T ST LENGTH PRICE LENGTH
Bulk ANFO kg 343 72 1.01 $72.75
Geldyne kg 13 3 5.53 $15.34
Exel MS detonator
each 8 2 3.26 $5.48
4m
B-Line m 20 4 0.49 $2.05
Connecting wire
spool 1 0 1.79 $0.38
50m
Miscellaneous/waste @10% $9.60

Total Blasting Supplies $105.59

1.2.2.3 Long Hole Sill Pillar Recovery Direct Labour

A summary of Long Hole Sill Pillar Recovery direct labour costs are presented in Table 1.24.

TABLE 0.24
SUMMARY OF LH SILL PILLAR RECOVERY DIRECT LABOUR COSTS / M OF
STRIKE LENGTH
Units/blast Units/m Strike Length Unit Price Cost/m Strike Length
Discipline
(hrs) (hrs) (US$/hr) (US$/m)
Drilling 15.76 3.31 $8.93 $29.58
Blasting 7.99 1.68 $6.70 $11.25
Mucking 11.49 2.42 $8.61 $20.80
Total Labour $61.63

1.2.2.4 Long Hole Sill Pillar Recovery Equipment Operating

Summary of Long Hole Sill Pillar Recovery equipment operating costs are presented in
Table 1.25

TABLE 0.25
SUMMARY OF LH SILL PILLAR RECOVERY EQUIPMENT OPERATING COSTS /
M OF STRIKE LENGTH
UNITS/BL UNITS/M OF STRIKE UNIT COST/M OF STRIKE
EQUIPMEN
AST LENGTH COST LENGTH
T
(HRS) (HRS) (US$/HR) (US$/M)
Longhole
5.91 1.24 $52.27 $64.94
Drill

Appendix H - Page 18
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

TABLE 0.25
SUMMARY OF LH SILL PILLAR RECOVERY EQUIPMENT OPERATING COSTS /
M OF STRIKE LENGTH
UNITS/BL UNITS/M OF STRIKE UNIT COST/M OF STRIKE
EQUIPMEN
AST LENGTH COST LENGTH
T
(HRS) (HRS) (US$/HR) (US$/M)
LHD 8.62 1.81 $65.96 $119.55
ANFO
3.00 0.63 $43.69 $27.54
Loader
Water Pump 5.91 1.24 $0.26 $0.32
Hoses &
5.91 1.24 $1.31 $1.63
Fittings
Total Equipment Operating Cost $213.99

1.2.2.5 Long Hole Sill Pillar Recovery Direct OPEX Details

A summary of Long Hole Sill Pillar Recovery direct operating costs are presented in Table
1.26.

TABLE 1.26
SUMMARY OF LONG HOLE SILL PILLAR RECOVERY DIRECT OPERATING
COSTS / M OF STRIKE LENGTH
ITEM COST/M OF STRIKE LENGTH COST/TONNE
Labour $62 $0.36
Equipment cost $214 $1.25
Drill steel and bits $32 $0.19
Explosives $106 $0.62
Total $414 $2.42

1.2.3 Labour

1.2.3.1 Company Stoping Labour

A summary of company stoping daily labour requirements is presented in Table 1.27.

TABLE 1.27
SUMMARY OF COMPANY STOPING DAILY LABOUR
YR-1 YR+1 YR+1 YR+1 YR+1 YR+2 YR+2 YR+2 YR+2
Crew / Period YR+3 YR+4 YR+5 YR+6 YR+7
(Q4) (Q1) (Q2) (Q3) (Q4) (Q1) (Q2) (Q3) (Q4)
Drilling 1 5 5 7 7 7 7 7 7 13 13 13 13 13
Blasting 0 2 2 3 3 3 3 3 3 6 6 6 6 6
Ground support 1 11 12 15 15 15 15 15 15 29 29 29 29 29
Services 0 3 3 4 4 4 4 4 4 8 8 8 8 8

Appendix H - Page 19
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

Mucking 0 4 4 5 5 5 5 5 5 11 11 11 11 11

Subtotal 3 25 27 33 33 33 33 33 33 67 67 67 67 67

1.2.3.2 Indirect Labour

A summary of company daily indirect labour requirements is presented in Table 1.28.

Appendix H - Page 20
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

TABLE 1.28
SUMMARY OF COMPANY INDIRECT DAILY LABOUR REQUIREMENTS
DESCRIPTION / YR- YR- YR- YR- YR+1( YR+1( YR+1( YR+1( YR+2( YR+2( YR+2( YR+2( YR YR YR YR YR
PERIOD 1(Q1) 1(Q2) 1(Q3) 1(Q4) Q1) Q2) Q3) Q4) Q1) Q2) Q3) Q4) +3 +4 +5 +6 +7
Mine Administration
Warehouse 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
Clerk 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Labourer 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Dry Man 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Subtotal 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9
Mine Staff
Mine Super/Manager 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Captain 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Shift Foreman 3 3 3 3 3 3 3 3 3 3 3 3 3 3
M. Eng./Planner 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Vent/Survr Tech 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Mine Geologist 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Sampler 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Geotech Eng 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Project Engineer 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Dia. Drill Foreman 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Maint. Super 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Safety /Trainer 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Subtotal 6 6 10 18 18 18 18 18 18 18 18 18 18 18 18 18 18
Service Crew
Lead Mechanic 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Mechanics 5 11 12 12 12 14 14 14 14 14 14 14 14 14
Lead Electrician 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Electrician 3 5 5 5 5 5 5 5 5 5 5 5 5 5
Services Leader 1 1 1 1 1 1 1 1 1 1 1 1 1
Grader Operator 1 1 1 1 1 1 1 1 1 1 1 1 1

Appendix H - Page 28-21


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TABLE 1.28
SUMMARY OF COMPANY INDIRECT DAILY LABOUR REQUIREMENTS
DESCRIPTION / YR- YR- YR- YR- YR+1( YR+1( YR+1( YR+1( YR+2( YR+2( YR+2( YR+2( YR YR YR YR YR
PERIOD 1(Q1) 1(Q2) 1(Q3) 1(Q4) Q1) Q2) Q3) Q4) Q1) Q2) Q3) Q4) +3 +4 +5 +6 +7
Pump Person 1 1 1 1 1 1 1 1 1 1 1 1 1
Construction. Leader 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Construction. Person 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Mine Labourer 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4
Service
2 3 3 3 3 3 3 3 3 3 3 3 3 3
EquipmentOperator
Subtotal 11 24 36 37 37 37 39 39 39 39 39 39 39 39 39
Grand Total 15 15 30 51 63 64 64 64 66 66 66 66 66 66 66 66 66

A summary of company and contractor indirect labour costs is presented in Table 1.29.

TABLE 1.29
SUMMARY OF COMPANY AND CONTRACTOR INDIRECT LABOUR COSTS – US$(000’S)
YR YR YR YR
DESCRIPTION / PERIOD YR-1(Q1) YR-1(Q2) YR-1(Q3) YR-1(Q4) YR+1(Q1) YR+1(Q2) YR+1(Q3) YR+1(Q4) YR+2(Q1) YR+2(Q2) YR+2(Q3) YR+2(Q4) YR+3
+4 +5 +6 +7
Mine Administration
Warehouse Person 11.6 11.6 11.6 11.6 11.6 11.6 11.6 11.6 11.6 11.6 11.6 11.6 46.5 46.5 46.5 46.5 39.4
Clerk 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 26.8 26.8 26.8 26.8 22.7
Labourer 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 26.8 26.8 26.8 26.8 22.7
Dry Man 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 26.8 26.8 26.8 26.8 22.7
Mine Staff
Mine Super 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 72.2 72.2 72.2 72.2 61.1
Captain. 11.9 11.9 11.9 11.9 11.9 11.9 11.9 11.9 11.9 47.5 47.5 47.5 47.5 40.2
Shift Boss 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 108 108 108 108 91.6
Mine Eng./Plan 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 115.3 115.3 115.3 115.3 97.6
Vent/Sur. Tech 18.2 18.2 18.2 18.2 18.2 18.2 18.2 18.2 18.2 18.2 72.7 72.7 72.7 72.7 61.6
Mine Geologist 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 115.3 115.3 115.3 115.3 97.6
Tech/Sampler 18.2 18.2 18.2 18.2 18.2 18.2 18.2 18.2 18.2 72.7 72.7 72.7 72.7 61.6
Geotech. Eng. 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 72.2 72.2 72.2 72.2 61.1

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TABLE 1.29
SUMMARY OF COMPANY AND CONTRACTOR INDIRECT LABOUR COSTS – US$(000’S)
YR YR YR YR
DESCRIPTION / PERIOD YR-1(Q1) YR-1(Q2) YR-1(Q3) YR-1(Q4) YR+1(Q1) YR+1(Q2) YR+1(Q3) YR+1(Q4) YR+2(Q1) YR+2(Q2) YR+2(Q3) YR+2(Q4) YR+3
+4 +5 +6 +7
Proj. Engineer 14.4 14.4 14.4 14.4 14.4 14.4 14.4 14.4 14.4 57.6 57.6 57.6 57.6 48.8
Dia. Drill Boss 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 36.0 36.0 36.0 36.0 30.5
Maint. Super 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 72.2 72.2 72.2 72.2 61.1
Safety /Trainer 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 36.0 36.0 36.0 36.0 30.5
Service Crew
Lead Mechanic 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 37.5 37.5 37.5 37.5 31.8
Mechanics 24.9 49.7 52.0 52.0 52.0 56.5 56.5 56.5 56.5 253 253.1 253.1 253.1 214.3
Lead Electrician 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 18.7 18.7 18.7 18.7 15.9
Electrician 5.8 12.9 11.0 12.3 12.3 15.9 15.9 15.9 15.9 71.8 71.8 71.8 71.8 60.8
Services Leader 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 18.7 18.7 18.7 18.7 15.9
Grader Operator 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 15.5 15.5 15.5 15.5 13.1
Pump Person 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 13.4 13.4 13.4 13.4 11.4
Constr. Leader 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.8 19.0 19.0 19.0 19.0 16.1
Constr. Person 27.1 27.1 27.1 27.1 27.1 27.1 27.1 27.1 27.1 27.1 109 108.5 108.5 108.5 91.9
Mine Labourer 13.4 13.4 13.4 13.4 13.4 13.4 13.4 13.4 13.4 13.4 53.7 53.7 53.7 53.7 45.4
Ser. Equip. Oper. 7.8 11.6 11.6 11.6 11.6 11.6 11.6 11.6 11.6 46.5 46.5 46.5 46.5 39.4
Grand Total 116.5 116.5 207.0 349.0 396.8 397.1 398.4 398.4 406.6 406.6 406.6 406.6 1661 1,661 1,661 1,661 1,407
Total OPEX 349.0 396.8 397.1 398.4 398.4 406.6 406.6 406.6 406.6 1,661 1,661 1,661 1,661 1,407
OPEX - US$/t 42.96 6.17 5.61 4.55 4.55 4.65 4.65 4.65 4.65 2.37 2.37 2.37 2.37 2.37
Total CAPEX 116.5 116.5 207.0
Cont. Ind. Labour 57.1 57.1 57.1 228.3 228.3 228.3 228.3 228.3 228.3 228.3 228.3 228.3 913.4 913.4 913.4 913.4 773.5
Cont. Ind. Lab - US$/t 28.11 3.55 3.22 2.61 2.61 2.61 2.61 2.61 2.61 1.30 1.30 1.30 1.30 1.30

Appendix H - Page 28-23


TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

1.2.4 Underground Equipment Leasing

All major pieces of company underground equipment will be leased over a 3 year period. These costs do not include a 15% down
payment CAPEX cost. A summary of the leasing cost estimates are presented in Table 1.30.

TABLE 1.30
SUMMARY OF COMPANY LEASED UNDERGROUND EQUIPMENT – US$(000’S)
EQUIPMENT UNITS YR-1(Q4) YR+1(Q1) YR+1(Q2) YR+1(Q3) YR+1(Q4) YR+2(Q1) YR+2(Q2) YR+2(Q3) YR+2(Q4) YR+3 YR+4
Single boom jumbo 6 45.1 180.4 225.5 225.5 225.5 270.6 270.6 270.6 270.6 1,082.4 180.4
Long hole drill 1 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 220.0
Production 3.5m3 LHD 4 43.4 86.9 130.3 130.3 130.3 173.8 173.8 173.8 173.8 695.2 173.8
3
2.0m scooptram 3 28.6 85.8 85.8 85.8 85.8 85.8 85.8 85.8 85.8 314.6
Scissor truck 3 51.7 103.4 103.4 103.4 103.4 155.1 155.1 155.1 155.1 620.4 155.1
Maintenance/lub truck 1 41.8 41.8 41.8 41.8 41.8 41.8 41.8 41.8 41.8 125.4
Shotcrete truck 2 71.1 142.2 142.2 142.2 142.2 142.2 142.2 142.2 142.2 497.8
Shotcrete delivery truck 2 41.8 83.6 83.6 83.6 83.6 83.6 83.6 83.6 83.6 292.6
Ground support bolter 3 55.0 110.0 110.0 110.0 110.0 165.0 165.0 165.0 165.0 660.0 165.0
Personnel carrier 2 20.3 40.7 40.7 40.7 40.7 40.7 40.7 40.7 40.7 142.3
Utility tractor 3 2.9 5.8 5.8 5.8 5.8 8.6 8.6 8.6 8.6 34.6 8.6
U/G pickup truck 6 5.7 17.1 17.1 17.1 17.1 17.1 17.1 17.1 17.1 62.6
Grader 1 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.2 36.6
Total - US$(000's) 419.7 964.8 1,053.4 1,053.4 1,053.4 1,251.5 1,251.5 1,251.5 1,251.5 4,784.5 682.9
Total/t (US$/t) 51.65 15.00 14.87 12.04 12.04 14.30 14.30 14.30 14.30 6.83 0.98

Appendix H - Page 28-24


TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

1.2.5 Company Indirect Equipment Operating and Electric Power

A summary of estimated electric power consumptions are presented in Table 1.31.

TABLE 1.31 SUMMARY OF ELECTRIC POWER CONSUMPTION


UNIT
NUMBER DUTY
DESCRIPTION POWER KWH/D MWH/A
UNITS FACTOR
Hp kW
Drill Jumbo - Two Boom 181 135 1 60% 1,944 680
Mobile
Drill Jumbo - One Boom 94 70 6 40% 4,032 1,411
Main Fan(s) 125 93 5 100% 11,190 3,917
Main Pump(s) 125 93 4 65% 5,819 2,037
Grindex Dewater Pumps 58 43 10 50% 5,192 1,817
Fixed Ventilation Fans 50 37 12 50% 5,371 1,880
Compressor(s) 300 224 2 35% 3,760 1,316
Diamond Drills 50 37 2 65% 1,164 407
Lighting & Misc. 40 30 1 100% 716 251
Total kWh 39,188 13,716
Megawatts 1.6

Electric power costs are estimated to be US$781,800/annum @ US$0.057/kWh


A summary of company indirect underground equipment and electric power operating cost estimates are presented in Table 1.32.

TABLE 1.32 SUMMARY OF COMPANY INDIRECT EQUIPMENT OPERATING COST ESTIMATES – US$(000’S)
YR-1 YR-1 YR-1 YR-1 YR+1 YR+1 YR+1 YR+1( YR+2 YR+2 YR+2 YR+2
Equipment Units YR+3 YR+4 YR+5 YR+6 YR+7
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4) Q1 Q2 Q3 Q4
Lub truck 1 30.3 30.3 30.3 30.3 30.3 30.3 30.3 30.3 30.3 121.2 121.2 121.2 121.2 102.6
Pers. Carrier 2 16.4 32.8 32.8 32.8 32.8 32.8 32.8 32.8 32.8 131.4 131.4 131.4 131.4 111.2
Tractor 3 15.8 31.5 31.5 31.5 31.5 47.3 47.3 47.3 47.3 189.0 189.0 189.0 189.0 160.1
Pickup Truck 6 15.8 47.3 47.3 47.3 47.3 47.3 47.3 47.3 47.3 189.0 189.0 189.0 189.0 160.1

Appendix H - Page 28-25


TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

Grader 1 21.0 21.0 21.0 21.0 21.0 21.0 21.0 21.0 21.0 84.0 84.0 84.0 84.0 71.1
Dia. Drill 2 25.7 25.7 25.7 25.7 25.7 25.7 25.7 25.7 25.7 102.6 102.6 102.6 102.6 86.9
Surface Fans 5 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 37.6 37.6 37.6 37.6 31.8
Main Pumps 4 2.7 2.7 2.7 2.7 2.7 2.7 2.7 10.9 10.9 10.9 10.9 9.2
Refuge Sta. 5 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.4 0.4 0.4 0.4 0.4
Elec. Power 48.9 48.9 65.1 195.4 195.4 195.4 195.4 195.4 195.4 195.4 195.4 195.4 781.8 781.8 781.8 781.8 662.0
Total 48.9 48.9 65.1 329.8 393.5 396.2 396.2 396.2 412.0 412.0 412.0 412.0 1,648 1,648 1,648 1,648 1,396
OPEX Total/t (US$/t) 40.60 6.12 5.59 4.53 4.53 4.71 4.71 4.71 4.71 2.35 2.35 2.35 2.35 2.35

Appendix H - Page 28-26


TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

1.2.6 Ore, Development Waste and Backfill Haulage

All ore, development waste and backfill haulage will be by a haulage contractor. It is
assumed that as mining progresses, and backfill is required at that time, development waste
will be hauled directly into the stopes as backfill, at no extra cost to the company. A
summary of estimated contractor haulage rates, per cubic metre, is presented in Table 1.33.

TABLE 1.33
SUMMARY OF CONTRACTOR ESTIMATED HAULAGE RATES
Haulage Route US$/m3
Development Waste to Portal Stockpile 7.78
Ore U/G to Plant 8.04
Plant Backfill to U/G 6.19
Portal Waste Stockpile to UG 5.13

A summary haulage schedule and cost estimate is presented in Table 1.34.

Appendix H - Page 28-27


TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

TABLE 1.34
SUMMARY OF CONTRACTOR ESTIMATED HAULAGE SCHEDULE AND COSTS – (000’S)
Haulage Route YR-1 (Q1) YR-1 (Q2) YR-1 (Q3) YR-1 (Q4) YR1 (Q1) YR1 (Q2) YR1 (Q3) YR1 (Q4) YR2 (Q1) YR2 (Q2) YR2 (Q3) YR2 (Q4) YR3 YR4 YR5 YR6 YR7
Cubic Metres (000’s)
Ore U/G to Plant 4.4 34.5 37.9 46.9 46.9 46.9 46.9 46.9 46.9 375 375 375 375 318
Devel Waste To Portal Stockpile 6.5 13.0 17.5 29.4 11.4 2.8 9.7
Portal Waste Stockpile to UG 11.7 16.9 6.6 12.3 7.5 132 107 85 65 95
Plant Backfill to U/G 97 132 132 112
Cost – US$(000’s)
Ore U/G to Plant 35 277 305 377 377 377 377 377 377 3,014 3,014 3,014 3,014 2,552
Devel Waste To Portal Stockpile 51 101 137 229 88 22
Portal Waste Stockpile to UG 60 86 34 63 38 678 548 434 333 485
Plant Backfill to U/G 599 817 817 692
Total 51 101 137 264 365 327 437 463 410 440 415 377 3,692 4,161 4,266 4,164 3,729
Total CAPEX – US$(000’s) 51 101 137 203 79 19
Total OPEX 61 286 308 437 463 410 440 415 377 3,692 4,161 4,266 4,164 3,729
OPEX US$/t 7.48 4.45 4.34 4.99 5.29 4.69 5.03 4.74 4.31 5.27 5.94 6.09 5.95 6.29

Appendix H - Page 28
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

1.2.7 Stope Development (Expensed)

Two stope development headings are expensed. These are lift attack ramps and cross-cut development to mineral lenses. A summary
of expensed stope development schedule and OPEX cost estimates are presented in Table 1.35.

TABLE 1.35
SUMMARY OF EXPENSED STOPE DEVELOPMENT SCHEDULE AND COSTS – (000’S)
HEADING YR-1 (Q4) YR1 (Q1) YR1 (Q2) YR1 (Q3) YR1 (Q4) YR2 (Q1) YR2 (Q2) YR2 (Q3) YR2 (Q4) YR3 YR4 YR5 YR6 YR7
Development Metres
Lift attack ramps 263 263 263 263 263 263 263 263 263 1,841 1,578 1,841 1,578 1,578
Cross-cuts to lenses 91 91 91 91 91 91 0 180 180 800 679 69 425 81
Total 4.5mx4.5m Eq. 354 354 354 354 354 354 263 443 443 2,641 2,257 1,910 2,003 1,659
Cost @ 1,436.16/m – US$(000’s)
Lift attack ramps 378 378 378 378 378 378 378 378 378 2,644 2,266 2,644 2,266 2,266
Cross-cuts to lenses 131 131 131 131 131 131 0 259 259 1,149 976 99 611 117
Total – US$(000’s) 509 509 509 509 509 509 378 636 636 3,793 3,242 2,743 2,877 2,383
Total US$/t 62.65 7.91 7.19 5.82 5.82 5.82 4.32 7.27 7.27 5.42 4.63 3.92 4.11 4.02

Appendix H - Page 29
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

1.2 OPEX Summary

A total of twenty OPEX US$/t costs were estimated based on the following classifications:

 Ground Support Classification – 1,2 or 3


 Stope Width – 2.0 to 3.0m; 3.0 to 4.5m, and 4.5 to 6.0m
 Mining Method –Mechanized Cut and Fill; and 12m and 16m high Long Hole
 Cut and Fill Sill Pillar Construction
 C&F Backfill – Consolidated and Unconsolidated

A summary of these estimated costs is presented in Table 1.36.

Appendix H - Page 30
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

TABLE 1.36
SUMMARY OF OPEX COST ESTIMATES
OPEX Classification
Gr Sup. Class 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 3 3 3 3
2.0-3.0m Wide Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
3.0-4.5m Wide Yes Yes Yes Yes Yes Yes Yes
4.5-6.0m Wide Yes Yes Yes
C&F Mining Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
LH 12m H Yes Yes Yes Yes Yes Yes
LH-16m H Yes
Sill Yes Yes Yes Yes Yes Yes
Uncon Backfill Yes Yes Yes Yes Yes
Cons Backfill Yes Yes Yes Yes Yes Yes Yes Yes
Mineable Resources by OPEX Classification
Tonnes (000’s) 701 59 44 543 77 85 371 26 23 371 26 23 569 23 22 10 870 94 70 51 4,061
Au (g/t) 3.08 3.18 4.11 1.03 1.20 1.55 2.09 1.79 1.46 2.09 1.79 1.46 1.14 0.69 1.02 2.13 1.90 1.59 2.35 3.88 1.95
Ag (g/t) 137 135 122 282 259 255 152 174 135 152 174 135 403 223 275 121 154 180 107 122 207
AgEq (g/t) 353 358 409 354 343 363 299 299 234 299 299 234 479 271 342 270 286 292 271 394 342
OPEX Details by OPEX Classification– US/t
Direct Labour 1.79 2.14 0.36 1.54 1.83 0.36 2.77 3.40 0.36 2.77 3.40 0.36 2.15 2.63 0.36 0.36 2.86 3.60 0.36 2.86 2.21
Ind. Labour 3.51 5.52 2.45 2.40 2.40 2.40 3.60 4.09 2.40 3.60 4.09 2.40 2.40 3.64 2.40 2.40 2.44 2.64 2.40 2.40 2.90
Contr. Admin 1.92 3.08 1.33 1.30 1.30 1.30 2.02 2.24 1.30 2.02 2.24 1.30 1.30 1.99 1.30 1.30 1.33 1.43 1.30 1.30 1.59
Dir Equip Op. 4.49 4.49 1.25 4.07 4.07 1.25 5.59 5.59 1.25 5.59 5.59 1.25 4.71 4.71 1.25 1.25 5.64 5.64 1.25 5.64 4.74
Equip Leasing 8.34 13.78 3.86 0.93 4.17 6.02 11.45 6.02 11.45 1.36 10.34 6.83 1.06 5.20 3.77
Ind Equip Op 3.42 5.33 2.40 2.35 2.35 2.35 3.50 3.99 2.35 3.50 3.99 2.35 2.35 3.55 2.35 2.35 2.39 2.59 2.35 2.35 2.83
Bits & Steel 2.36 2.36 0.19 2.03 2.03 0.19 2.93 2.93 0.19 2.93 2.93 0.19 2.43 2.43 0.19 0.19 2.93 2.93 0.19 2.93 2.43
Explosives 2.57 2.57 0.62 2.13 2.13 0.62 3.08 3.08 0.62 3.08 3.08 0.62 2.57 2.57 0.62 0.62 3.08 3.08 0.62 3.08 2.60
Ground Sup. 2.54 2.88 2.15 2.45 5.21 5.63 5.21 5.63 4.06 4.41 7.06 7.47 7.06 4.21
Backfill 1.50 5.94 1.50 5.94 1.50 5.94 5.94 5.94 1.50 5.94 1.50 5.94 5.94 2.20
Piping 0.56 0.56 0.40 0.40 0.84 0.84 0.84 0.84 0.56 0.56 0.84 0.84 0.84 0.62
Electrical 0.80 0.80 0.57 0.57 1.20 1.20 1.20 1.20 0.80 0.80 1.20 1.20 1.20 0.89
Ventilation 1.51 1.51 1.08 1.08 2.27 2.27 2.27 2.27 1.51 1.51 2.27 2.27 2.27 1.68

Appendix H - Page 31
TERRONERA PROJECT
PRELIMINARY FEASIBILITY STUDY

TABLE 1.36
SUMMARY OF OPEX COST ESTIMATES
Misc. 0.10 0.10 0.07 0.07 0.15 0.15 0.15 0.15 0.10 0.10 0.15 0.15 0.15 0.11
Haulage 5.23 4.66 5.57 5.97 5.58 6.10 5.54 5.01 6.12 5.54 5.01 6.12 5.96 5.06 5.27 6.29 5.96 5.47 6.19 5.95 5.71
Devel. Expensed 5.59 6.86 4.88 4.27 5.06 4.06 5.68 5.71 4.02 5.68 5.71 4.02 4.31 5.73 4.32 4.02 4.31 5.28 4.05 4.11 4.87
Total (US$/t) 46.21 62.58 22.92 32.76 41.44 18.63 51.91 63.52 18.62 56.36 63.52 18.62 38.07 55.95 24.90 18.79 45.02 55.74 18.71 48.10 43.33
Total (US$M) 32.4 3.7 1.0 17.8 3.2 1.6 19.3 1.7 0.4 20.9 1.7 0.4 21.7 1.3 0.6 0.2 39.2 5.2 1.3 2.5 176.0

Appendix H - Page 32
A summary of Terronera’s yearly OPEX costs is presented in Table 1.37.

TABLE 1.37
SUMMARY OF TERRONERA’S YEARLY OPEX COST ESTIMATES
Year Total /
Item Units
YR-1 YR+1 YR+2 YR+3 YR+4 YR+5 YR+6 YR+7 Avg.
t
Tonnes 8.1 310.2 350.9 743.5 680.7 697.1 717.4 553.2 4061.1
(000's)
Au g/t 3.69 2.76 2.60 1.96 1.90 1.63 1.90 1.56 1.95
Ag g/t 93 148 170 185 196 207 252 246 207
AgEq g/t 351 341 353 322 329 321 384 350 342
OPEX
Direct Labour US$/t 2.77 2.30 2.30 2.19 2.37 2.41 2.03 1.87 2.21
Indirect Labour US$/t 43.63 5.24 4.72 2.40 2.40 2.40 2.40 2.40 2.90
Contractor Admin Ind. Labour US$/t 28.11 2.92 2.57 1.30 1.30 1.30 1.30 1.30 1.59
Direct Equipment operating US$/t 5.59 4.93 4.97 4.69 5.02 5.07 4.44 4.16 4.74
U/G Equipment Leasing US$/t 51.65 13.30 14.30 6.83 0.98 3.77
Ind. Equip operating & Ele.
US$/t 40.60 5.06 4.63 2.35 2.35 2.35 2.35 2.35 2.83
Power
Drill steel and bits US$/t 2.93 2.59 2.61 2.41 2.60 2.61 2.22 2.05 2.43
Explosives US$/t 3.08 2.77 2.78 2.59 2.76 2.76 2.40 2.25 2.60
Ground support US$/t 5.21 3.73 3.94 3.90 4.58 5.02 4.15 3.64 4.21
Backfill Placement & Cement US$/t 3.72 3.40 2.65 2.52 2.49 2.00 1.69 1.31 2.20
Piping US$/t 0.84 0.67 0.68 0.61 0.68 0.69 0.55 0.50 0.62
Electrical Consumables US$/t 1.20 0.95 0.97 0.87 0.97 0.98 0.79 0.72 0.89
Ventilation Consumables US$/t 2.27 1.81 1.83 1.65 1.83 1.86 1.49 1.36 1.68
Miscellaneous US$/t 0.15 0.12 0.12 0.11 0.12 0.12 0.10 0.09 0.11
Haulage US$/t 7.48 4.82 4.71 5.27 5.94 6.09 5.95 6.29 5.71
Stope Development US$/t 62.65 6.56 6.15 5.39 4.63 3.92 4.11 4.02 4.87

Total OPEX/t US$/t 261.88 61.14 59.93 45.10 41.02 39.60 35.98 34.32 43.33
Total OPEX US$M 2.1 19.0 21.0 33.5 27.9 27.6 25.8 19.0 176.0

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