NYSE MKT: TGD • $0.38     TSX: TMM • $0.51     Gold: 1255.38

Ana Paula

Ownership: 100% Timmins Gold Corp.

Land Package: 50,000 ha

Description: Ana Paula is an advanced stage development project in the highly prospective Guerrero Gold Belt.  The Belt is host to various significant gold discoveries and operations with current gold resources of +25 mozs Au.  The project is comprised of two claims totalling 50,000 ha at the north-west end of the Guerrero Gold Belt.

Location: The Project, adjacent to Goldcorp’s Los Filos Mine and Torex Gold’s El Limon project, is located in the north central part of the State of Guerrero in southern Mexico, roughly half way between the major cities of Mexico City and Port of Acapulco.

Access: The Project lies within the Sierra Madre mountain range where topography can range from moderate to rugged with elevations varying from 900 m to over 1,460 masl. The land is largely non-arable and uninhabited. The property is accessible by paved highway and gravel roads.

Infrastructure includes the nearby Balsas River as a source of hydroelectric power and a 115kV power line that transects the project. The river, which divides the Sierra Madre Mountains into north and south ranges flows just south of the project area.

The site is currently accessible for light vehicle traffic and intermittent heavy loads via a 3 km gravel roadway from the town of Cuetzala del Progreso.

During mine construction and operations, an existing gravel road north of the site would be improved to enable access for larger loads to site especially during plant construction and equipment mobilization.

This same mine access road is connected to Mexico Highway 51, a paved and improved roadway which provides mine access to the Mexico highway system and capacity for large heavy loads either west from Mexico City via Iguala, or east from the port of Acapulco.

Iguala is the nearest major city, however does not have a commercial jet airport. Air service is available from Mexico City, Acapulco or Cuernavaca.

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

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

In general four gold depositional settings are recognized at Ana Paula, including:

Mineralization at Ana Paula is mainly associated with arsenopyrite and pyrite, with the dominant mineralization style appearing to be epithermal with brecciation observed at contact zones. The gold mineralization at the project is hosted in a high grade hydrothermal breccia surrounded by a lower-grade alteration halo hosted in intrusive, hornfels, skarn, contact breccia and sedimentary rocks.

The GGB offers large areas of untested and prospective geology, despite the existence of low-cost producers (Los Filos / Nukay, El Bermejal and more recently El Limon) in the belt.

Known deposits are generally related to magmatic intrusives (granodiorites) which drive fluids into amenable host rocks such as limestone sediments, where they react with the country rock to deposit the metal. The fluids need existing structural pathways in order to enter the host rock (i.e. “skarn” mineralization).

The intrusions driving these fluids have been easily identified by their strong airborne magnetic signature, allowing a relatively consistent and simple first pass exploration strategy. In general, the best setting is an intrusion that coincides with structural pathways which trend in a northwesterly direction as evidenced by the linear array of known deposits.

Once one of these intrusive “mineralizing engines” is located by magnetic surveys, soil sampling and structural mapping is used to refine the target area before ultimate drill testing. With the exploration concept now well evolved, a number of new discoveries have been accelerated toward production and several companies have been attracted to the camp armed with the new exploration thesis in hand.

Mineralization tends to be separated into two distinct sub-types in the belt; assets in the south (i.e. Los Filos) are mostly oxidized and amenable to heap leach processing. The source area of these deposits tends to be high grade but the larger mineralized volume has been formed by percolation of fluids over extensive distances and volumes to produce large, but low grade deposits which are largely oxidized but with some sulphide component i.e. Los Filos ( >16 MMoz Au at 0.81 g/t).

Further to the north, mineralization tends to be dominated by later, overprinting phases of sulphide only mineralization which often display richer grade (>5 g/t). These targets tend to be more structurally complex and often include a lower grade seepage halo around the main structure. Timmins Ana Paula falls into this category of deposit with its high grade breccia zone and sulphide mineralogy.

At Ana Paula, unlike El Limon and Los Filos, the mineralization is not primarily hosted in a skarn system; rather, the breccia unit is a zone of higher porosity, which was mineralized with later low-sulfidation epithermal quartz-sulfide, which is observed as pervasive silicification of the matrix as well as cross-cutting veins. The primary sulfides are pyrite (FeS2) and arsenopyrite (FeAsS).

The Ana Paula asset occurs close to surface and the inverted, cone-shaped mineralization has a brecciated core. The breccia zone occurs as fragments of ripped up host rock allowing space for gold rich fluids to preferentially percolate and mineralization in this area grades well above the average resource grade.

Ana Paula:

Current Resources

Effective date of August 8, 2014, based on 223 drill holes (within the block model limits), inverse distance squared methodology, 95% of ounces are in M&I category

Average drill hole spacing is ~50 m in the main part of the Ana Paula deposit, with a range of from 25-50 m in the high grade Breccia Zone and 50-150 m to the north and south pit extremities

Table 1-3: Summary of the Mineral Resource

This table outlines the global resource. For the mine plan, NES focused its pit design on the Breccia Zone of the resource. This yields 17.75M tonnes at 2.24g/t Au for a total of 1,279,183 ozs Au.

Ana Paula – PEA Summary (based on $1200/oz gold price)

PEA SUMMARY OF RESULTS

Mine Life  
Total Ore
Total Waste
Total Capitalized Waste
Years
M tonnes
M tonnes
M tonnes
8.2
17.8
33.6
12.5
Total Mined M tonnes 63.9
Strip Ratio
Mining Rate
Plant Throughput
w:o
tpd
tpd
2.6:1
23,385
6,000
Average Au head grade
Average Ag head grade
g/t
g/t
2.24
6.89
Payable metal, Au LOM k oz
k oz/yr
957
116
Payable metal, Ag LOM k oz
k oz/yr
1,961
239

 

SUMMARY OF ECONOMICS AT BASE CASE US$1,200/Oz GOLD

Pre-Tax Cash Flow during Production
(US $M)
Avg Pre-Tax Cash Flow per Year (US $M)
$691
$84
Taxes (US $M) $206
After-Tax Cash Flow during
Production(US $M)
Avg After-Tax Cash Flow per Year(US $M)
$485
$59
Discount Rate 5%
Pre-Tax NPV (US$M)
Pre-Tax IRR
Pre-Tax Payback (Yrs)
$408
59%
1.6
After-Tax NPV (US$M)
After-Tax IRR
After-Tax Payback (Yrs)
248
43%
2.1
Au Cash Cost (US $/oz)
Au Cash Cost Net of By-Products (US $/oz)
$470
$442
Au Cash Cost incl. Sustaining Capital (US $/oz)
Au Cash Cost Net of By-Products incl.
Sustaining Capital (US $/oz)
$507

$479

The PEA mine plan and economic model include the use of inferred resources which are considered to be too speculative to be used in an economic analysis except as permitted by National Instrument 43-101 (NI 43‑101) for use in a PEA.  There is no guarantee that inferred resources can be converted to indicated or measured resources and, as such, there is no guarantee that the project economics described herein will be achieved. 

CAPITAL AND OPERATING COSTS SUMMARY

Capital Costs Pre-Production
(US $M)
Sustaining &
Closure
(US $M)
Capitalized Stripping
Contractor Mob/Demob
Process Plant
General Site & Utilities
Laboratory
Construction Camp
Camp Site (Operations)
Administration Facilities
Tailings Facility
Electrical Supply & Distribution
Water Supply & Distribution
Royalty Purchase
15.2
0.4
26.6
5.1
0.2
0.6
1.5
0.2
13
4.6
1.8
2.8
12.3
0.4
1.5
0.3
0.2
0
0.3
0.2
14.6
0.2
0
0
Reclamation/Closure
Indirects
EPCM
Owners Costs
0
14.0
11.3
4.4
14.4
0
0
0
Subtotal 101.8 44.3
Contingency (20%) 19.8 8.7
Total Capital Costs 121.7 53.2

 

Operating Costs   LOM Total
Resource & Waste Mined for OPEX
Pre-Stripping and Capitalized Waste
Resource Processed
Mining‡
Resource Rehandle*
Processing
G&A
US$/t processed
US$/t processed
US$/t processed
US$/t processed
tonnes
tonnes
tonnes
$6.00
$0.12
$15.52
$2.34
51.4M
12.5M
17.8M
$106.5M
$2.1M
$275.6M
$41.6M
Total Operating Costs US$/t processed $23.98 $425.8M

‡Mining Cost is based on $2.10/t mined
*Rehandle Cost is based on $0.50/t rehandled

SENSITIVITIES

Gold Price US$/oz $1,000 $1,100 $1,200 $1,300 $1,400

Pre-Tax NPV5% US$

262 335 408 480 553

After-Tax NPV5% US$

154 201 248 295 342

Pre-Tax IRR

43% 51% 59% 66% 73%

After-Tax IRR

31% 37% 43% 48% 53%

Pre-Tax Payback Yrs

2.1 1.9 1.6 1.4 1.3

After-Tax Payback Yrs

2.5 2.2 2.1 1.9 1.7

Source: Ana Paula PEA

  1. The Ana Paula preliminary economic assessment is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the Ana Paula preliminary economic assessment will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
  2. At $1,200/oz Au

Status:

The Ana Paula gold project was acquired in May 2015 through the acquisition of Newstrike Capital.

In September 2015, Timmins acquired from Goldcorp Inc., the entire processing plant and facilities used in Goldcorp’s El Sauzal Mine operation in Chihuahua, Mexico.  The El Sauzal Mine was operational until December 2014 when it began its closure.  The acquisition of the plant for future use at Ana Paula will allow significant capital savings to be realized (approximately $45 million vs. buying new) and will allow for the project schedule to be markedly advanced. The 6,000 tpd plant is essentially a direct fit with the flowsheet (process, throughput, etc.) envisioned for Ana Paula. The total purchase price of paid was C$8.0 million.

The disassembly of the entire facilities has now been completed, on time and on budget, with zero lost-time accidents.

In August of 2016, Timmins announced the commencement of pre-construction program for Ana Paula which includes feasibility work, infill drilling, metallurgical test‐work, and environmental baseline and permitting activities. The Company expects completion of the feasibility study to be complete by Q3 2017 and have all permits required to start construction by Q1 2018. 

The estimated budget for the pre-construction program is approximately $9.2 million and includes:

Exploration Potential

Ana Paula has expansion potential beyond its current proposed mine life. Beneath the current pit bottom exists a high grade breccia hosted mineralization which extends to depth. The tenure of the mineralization indicates good margins can be achieved with underground mining. Additional work is warranted and planned for the future as the Company is confident in the possible extension of the mine life and increase in annual production.

Ana Paula – Underground Potential Map

Below Pit Bottom Drill Highlights:

Drillhole From To Interval
(m)
Au
g/t
Ag
G/t
AP-35 685.00 692.41 7.41 7.39 4.9
AP-70 677.50 692.50 15.00 26.09 21.1
AP-86 520.42 545.45 25.03 5.10 12.3
AP-97 550.16 562.50 12.34 32.11 3.6
AP-125 339.54 354.90 15.36 7.92 3.8
AP-137 320.60 368.18 47.58 5.45 4.1
AP-215 677.10 716.49 39.39 6.42 9.7

 

Timmins completed a drill program in 2015 to: (i) confirm previous drilling, (ii) obtain metallurgical samples and (iii) carry out select infill drilling

Select significant mineral intercepts measured downhole from the 1,400 meters of infill drilling in seven core holes include:

Select significant mineral intercepts from the twin-hole drilling include:

200.35 meters of 8.33 g/t Au in hole APM-15-03, at 0 meters downhole. This hole is a twin hole of hole AP-11-37 drilled in 2011 which intercepted 198.45 meters of 8.379 g/t Au at 3.05 meters downhole.
The results from the confirmation drilling were consistent with those from previous programs.  Additionally, the infill drilling results were very encouraging, as they continue to display Ana Paula’s high-grade gold mineralization and allow for a greater understanding of the deposit.

The samples were sent for metallurgical testing, the results of which will be part of a Feasibility Study which the Company is scheduling for completion by Q3 2017. 

Figures

Fig. 1 shows a plan view of the Timmins Gold drilling program and also shows the location of holes from previous programs. Figs. 2-5 show sections of the Ana Paula deposit with select significant mineral intercepts highlighted. The pits outlined in the figures are based on a gold price of $1200/oz gold.

Fig. 1 – Plan view of Timmins Gold’s drill program and location of previous drilling.

 Fig. 2 – Ana Paula project, Section 7950 N.

Fig. 3 – Ana Paula project, Section 8000 N.

Fig.4 - Ana Paula project, Section 8050 N.

Fig. 5 – Ana Paula project, long section, azimuth 25o.

 

Table 1: Significant Mineral Intercepts, Ana Paula 2015 drill program. *

* Intercept lengths are measured downhole.

 

On February 23, 2017 the Company released the following update to the Ana Paula project.

Highlights:

In August 2016, the Company initiated a US$9.2 million program of pre-construction activities including feasibility work, infill drilling, metallurgical testing, environmental baseline studies and permitting. The program was designed to allow construction to start on the Project in 2018. Over the past six months significant progress has been made on advancing the Project.

Infill Drilling and Mineral Resource Estimate
From October 2016 to the end of January 2017, approximately 7,903 meters of infill drilling in 34 core holes has been completed at the Ana Paula deposit. The objective of the drill program was primarily to carry out infill drilling for supporting an updated Mineral Resource Estimate. Highlights include 48.4 m of 12.16 g/t Au at 136 m downhole in hole AP-16-252, and 151 m of 8.98 g/t Au at 105 m downhole in AP-16-253.

The infill drilling is expected to be completed by the end of this month. The Company has retained AGP Mining Consultants (AGP) of Toronto to act as the independent Qualified Persons in updating the Mineral Resource Estimate beginning in March. AGP have also been engaged to carry out mine planning and engineering work for the Project feasibility studies. Geotechnical drilling to support the mine planning work is expected to start in early March which will greatly enhance the confidence in the pit slope design.

Select significant mineral intercepts measured downhole from the infill drilling program include:

Hole From (m) To (m) Interval
Width (m)
Gold (g/t) Silver (g/t)
AP-16-243 47.50 74.55 27.05 1.87 7.58
AP-16-244 154.50 201.00 46.50 2.76 4.26
AP-16-246 104.55 143.10 38.55 5.19 2.50
AP-16-249 56.30 96.15 39.85 2.72 4.13
AP-16-250 209.95 250.80 40.85 4.08 7.92
AP-16-251 2.00 79.00 77.00 2.68 8.44
AP-16-252 135.65 184.05 48.40 12.16 10.72
AP-16-253 105.00 256.07 151.07 8.98 6.52
AP-16-255 87.60 195.60 108.00 1.15 6.24
AP-16-257 150.00 236.20 86.20 2.21 9.56
AP-16-260 94.50 197.00 102.50 3.80 10.45
AP-16-262 124.52 156.00 31.48 3.37 15.87
AP-16-262 183.03 219.85 36.82 7.32 6.31
AP-16-264 110.20 139.05 28.85 11.59 13.32
AP-16-270 4.00 41.60 37.60 3.87 14.30
AP-16-270 67.00 93.25 26.25 11.94 13.62
AP-16-270 121.20 164.00 42.80 4.78 5.90
AP-16-270 203.00 213.46 10.46 1.31 4.19

 

The complete set of drill results can be accessed on-line at http://www.timminsgold.com/_resources/anapaula/update/feb23.pdf along with a map of the drill hole locations and a selection of sections through the deposit.

Metallurgical Test Work

Metallurgical test work for the Project is being carried out at Blue Coast Research Laboratories in Parksville, British Columbia.  Metallurgical samples from drill core were compiled to represent the four types of mineralized lithological domains found at Ana Paula:

All comminution, gravity, flotation and leach testing (described below) was carried out on individual domain samples and on life-of-mine composites. The average grade of composite samples for test work was 2.26 g/t gold.

Comminution testing including JK Lite simulation (rotary breakage tests) were undertaken on the composite samples and individual domain samples.  Simulation and bond work index results have confirmed that the 6,000 tpd Semi-Autogenous Grinding (SAG) and Ball Mill circuit that was purchased by the Company is suitable for treating the Ana Paula material.

A Gravity Recoverable Gold testing program (with size-by-size analyses) was carried out. Samples consistently showed very good gravity response with gravity recovery to concentrates of 40-50%.  Additionally the gravity concentrates leached very well in a simulated intensive leach reactor, with gold recoveries of 96-98%. A gravity gold recovery circuit including a concentrator and intense cyanide leaching circuit will be added to the process flow sheet.  Large (~30 kg) gravity tests were conducted at various grind sizes in order to generate material for downstream process testing (flotation and/or leaching).

Flotation test work confirmed that Ana Paula ore consistently displays very good gold recoveries through rougher flotation, with 95% of gold recovered with a 15-20% mass pull. Leaching test work was conducted to evaluate various process alternatives  to improve overall gold recovery, which was estimated in the PEA at 75%.  The flowsheet selected as the basis for the feasibility studies was rougher flotation after gravity gold recovery to produce a concentrate, followed by cyanide leaching.  Leach recovery was significantly improved when a pre-oxidation of the flotation concentrate was carried out ahead of leaching.  Overall gold recovery in the preliminary test work showed an improvement over the PEA to 80-85% with the gravity flotation-pre-oxidation-CIL flowsheet.  Further test work is underway which will form the basis of the Process Design Criteria for the feasibility studies.

Feasibility Studies

The Company has engaged M3 Engineering to provide feasibility study engineering including process design, mechanical, piping, electrical, instrumentation, civil, bulk earthworks, capital and operating cost estimates.  It is expected that M3 will produce a PFS by the end of Q2 2017 which will be based on the updated Mineral Resource estimate and mine plan as well as the latest metallurgical testing.  The PFS will provide a much higher level of confidence in the robustness of the project economics then the PEA.  The PEA economic analysis showed an after tax Net Present Value (5%) of US$248 million and IRR of 43% at US$1,200/oz gold.

Knight-Piesold has been engaged to carry out the engineering and design of the waste dumps and Tailings Storage Facility as well as carry out the study for the pit slope design.

Environmental and Permitting

The environmental base line study was completed in November 2016.  In December 2016, the Company submitted an Environmental Impact Assessment (EIA) to SEMARNAT (Mexico’s Secretary of Environment and Natural Resources), using the baseline study as its basis.  The areas covered in the baseline study are climate, hydrology, hydrogeology, aquifer vulnerability, soil type, earthquake risk, geotechnical, surface water, underground water, and environmental risk.  If no further information is required, SEMARNAT guides to a maximum timeline of 120 business days for approval. Up to the current date, Timmins has not received a request from SEMARNAT for further information related to its EIA submission.  The next major submission to SEMARNAT would be the Change of Land Use submission, which is expected to occur in Q2 2017.  The Company expects to receive construction permits in Q4 2017.

Project Financing

As the Company advances its engineering studies, it will also begin to investigate financing alternatives for the Project including project or corporate debt.  It is expected that financing will be arranged in conjunction with the completion of the DFS by early 2018.

Key Milestones

Pre-Feasibility Study Q2 2017
Permitting  Q4 2017
Definitive Feasibility Study Q1 2018
Project Financing Arranged  Q1 2018
Construction Decision Q2 2018
Commissioning and Start Up Q4 2019

Quality Control / Quality Assurance:

The drilling results contained in this update have been prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects. Duplicates, standards and blanks were inserted into the sampling stream at intervals of 25 samples. The sampling of, and assay data from, drill core is monitored through the implementation of a quality assurance / quality control (QA-QC) program designed to follow industry best practice. Drill core (HQ size) samples are selected by the Company’s geologists and sawn in half with a diamond saw at the project site. Half of the core is retained at the site for reference purposes. Sample intervals vary from 1 to 1.5 m in length. Samples are prepared at the ALS Lab facilities in Guadalajara and analyzed using a standard fire assay with a 50 gram pulp and Atomic Absorption (AA) finish at the ALS lab in Vancouver, Canada. Any samples assaying >10.0g/t Au are automatically re-analyzed using a Gravimetric finish. Check assays were sent to each lab and were cross referenced and results verified. 

Technical Information and Qualified Persons and QA/QC

This disclosure was reviewed and approved by Mr. Taj Singh, M.Eng, P.Eng, a Vice-President of the Company, who is recognized as a Qualified Person (“QP”) under the guidelines of NI 43-101.

Technical information has been prepared in accordance with Canadian regulatory requirements set out in NI 43-101 and reviewed by Taj Singh, M.Eng, P.Eng, a Vice-President of the Company, who is recognized as a Qualified Person ("QP") under the guidelines of NI 43-101. The field programs and selection of the metallurgical samples from Ana Paula were carried out under the supervision of Dr. Craig Gibson, PhD, CPG, and a Qualified Person under NI 43-101.

The PEA was conducted under the overall direction of Mr. Michel Creek, P.E., of JDS Energy and Mining, Inc. of Tucson Arizona. Mr. Creek is a JDS Project Manager and an independent "Qualified Person" under NI 43-101 who has verified the technical and scientific information and prepared the economic analysis disclosed.

Under Mr. Creek's review, the following Qualified Persons contributed to their respective sections or reviewed their previous content: Kelly McLeod, P.Eng, JDS, reviewed mineral processing and recovery, methods, Antonio Loschiavo, P.Eng, AFK Mining Services reviewed mine design, Dawn Garcia CPG, Independent, reviewed environmental studies, permitting and social.

Mineral resources that are not mineral reserves do not have demonstrated economic viability.

For a discussion of verification, sampling and QA/QC protocols used by the Company, please see the Company’s technical report dated March 23, 2016 entitled "Ana Paula Preliminary Economic Assessment Municipalities of Cuetzala del Progreso and Apaxtla del Castregon, Guerrero State Mexico” filed on SEDAR.

Timmins Gold - Ana Paula

Timmins Gold – El Sauzal Process Plant