Dolores Technical Report

Technical Report for the Dolores Property, Chihuahua, Mexico -
Preliminary Economic Assessment of a Pulp Agglomeration Treatment and Underground Option
Effective date: May 31, 2014
Prepared by Michael Steinmann, P. Geo

Martin Wafforn, P. Eng.
Americo Delgado, P. Eng.
Preliminary Economic Assessment of a Pulp Agglomeration Treatment and Underground Option - Technical Report
1 Summary ................................................................................................................................... 11
1.1 Introduction, property description, and ownership..................................................... 11
1.2 Geology and mineralization.......................................................................................... 12
1.3 Status of exploration, development, and operations .................................................. 13
1.4 Mineral resource and reserve estimates...................................................................... 14
1.5 Mining ........................................................................................................................... 15
1.5.1 Mining methods of the existing operation ................................................. 15
1.5.2 Mining methods of the proposed expanded operation ............................. 16
1.5.3 Life of mine plan of the existing operation ................................................ 16
1.5.4 Life of mine plan of the proposed expanded operation............................. 17
1.5.5 Infrastructure of the existing operation ..................................................... 17
1.5.6 Infrastructure of the proposed expanded operation ................................. 18
1.5.7 New power line........................................................................................... 18
1.6 Mineral processing and recovery methods .................................................................. 18
1.6.1 Current heap leaching method................................................................... 18
1.6.2 Proposed pulp agglomeration method ...................................................... 19
1.7 Capital and operating costs and economic analyses .................................................... 21
1.7.1 Estimated capital, sustaining capital, and operating costs of the
existing operation ....................................................................................... 22
1.7.2 Estimated capital, sustaining capital, and operating costs of the
proposed expanded operation ................................................................... 23
1.7.3 Estimated financial metrics of the existing operation................................ 23
1.7.4 Estimated financial metrics of the proposed expanded operation............ 23
1.8 Environmental, social, and community impact ............................................................ 24
1.9 Conclusions and recommendations ............................................................................. 24
1.9.1 Existing operation ....................................................................................... 24
1.9.2 Proposed expanded operation ................................................................... 25
2 Introduction............................................................................................................................... 30
3 Reliance on other experts ......................................................................................................... 33
4 Property description and location............................................................................................. 34

4.1 Location, issuers interest, mineral tenure, and surface rights .................................... 34
4.2 Royalties, back-in rights, payments, agreements, and encumbrances ........................ 36
4.3 Environmental liabilities ............................................................................................... 36
4.4 Permits.......................................................................................................................... 36
4.5 Significant factors and risks .......................................................................................... 37
5 Accessibility, climate, local resources, infrastructure, and physiography ................................ 38
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5.1 Physiography and climate ............................................................................................ 38

5.2 Accessibility, local resources, population centres, and transport ................................ 38
5.3 Surface rights ................................................................................................................ 38
5.4 Power and water .......................................................................................................... 39
5.5 Infrastructure................................................................................................................ 39
6 History ....................................................................................................................................... 41
7 Geological setting and mineralization ....................................................................................... 42

7.1 Regional geology .......................................................................................................... 42
7.2 Local geology ................................................................................................................ 43
7.3 Property geology .......................................................................................................... 44
7.3.1 Lithostratigraphy ........................................................................................ 45
7.3.2 Intrusions .................................................................................................... 48
7.3.3 Structure ..................................................................................................... 49
7.3.4 Alteration .................................................................................................... 49
7.4 Mineralization............................................................................................................... 50
8 Deposit types ............................................................................................................................. 52
9 Exploration ................................................................................................................................ 54
9.1 Exploration by Minefinders from 1993 to 2012 ........................................................... 54
9.2 Exploration by Pan American from 2012 to present .................................................... 54
10 Drilling ....................................................................................................................................... 55
10.1 Drilling summary and database .................................................................................... 55
10.2 Drilling by Minefinders from 1996 to 2012 .................................................................. 57
10.3 Drilling by Pan American from 2012 to present ........................................................... 58
10.4 Material impact on the accuracy and reliability of drilling results ............................... 58
11 Sample preparation, analyses, and security ............................................................................. 60

11.1 Sampling by Minefinders from 1996 to 2012 ............................................................... 60
11.1.1 On-site sample preparation and security ................................................... 60
11.1.2 Laboratory sample preparation and analytical methods ........................... 60
11.1.3 Quality assurance and quality control ........................................................ 61
11.2 Sampling by Pan American from 2012 to present........................................................ 61
11.2.1 On-site sample preparation and security ................................................... 61
11.2.2 Laboratory sample preparation and analytical methods ........................... 62
11.2.3 Quality assurance and quality control ........................................................ 62
11.3 Bulk density measurements ......................................................................................... 63

12 Data verification ........................................................................................................................ 65

12.1 Data verification by the qualified persons ................................................................... 65
12.1.1 Geology data reviews ................................................................................. 65
12.1.2 Mine engineering data reviews .................................................................. 65
12.1.3 Metallurgy data reviews ............................................................................. 65
12.2 Data adequacy .............................................................................................................. 65
13 Mineral processing and metallurgical testing ........................................................................... 67

13.1 1996 to 2000 test work by Echo Bay and Minefinders................................................. 67
13.2 2003 to 2004 feasibility study test work by Minefinders ............................................. 67
13.2.1 Test work to support selection of processing option ................................. 67
13.2.2 Study and process selection conclusions ................................................... 68
13.2.3 Test work to support heap leach processing option .................................. 68
13.3 2008 to 2010 test work and pre-feasibility study of a proposed sulphide
grinding, flotation, and cyanidation plant by Minefinders........................................... 70
13.3.1 Reassessment of previous test work .......................................................... 70
13.3.2 Test work to support a sulphide grinding and flotation plant.................... 70
13.3.3 Additional test work on heap leaching ....................................................... 73
13.3.4 Pre-feasibility study conclusions ................................................................ 73
13.4 2012 to 2014 heap leach test work by Pan American .................................................. 73
13.4.1 Cyanide soluble silver and gold shake tests ............................................... 74
13.4.2 Metallurgical recovery model update ........................................................74
13.5 2012 to 2014 preliminary economic assessment of a pulp agglomeration
treatment option by Pan American .............................................................................. 77
13.5.1 Introduction ................................................................................................ 77
13.5.2 Bottle roll tests ........................................................................................... 78
13.5.3 Column leaching tests ................................................................................ 79
13.5.4 Metallurgical recovery model..................................................................... 81
13.5.5 Comminution tests and pilot plants ........................................................... 82
13.5.6 Solid liquid separation tests ....................................................................... 83
13.5.7 Conclusions ................................................................................................. 84
13.6 Material issues and deleterious elements ................................................................... 85
13.7 Recommendations........................................................................................................ 85
14 Mineral resource estimates ...................................................................................................... 86

14.1 Disclosure ..................................................................................................................... 86
14.2 Available data, data preparation, data transformations, and data validation ............. 86
14.3 Geological interpretation, modeling, and domaining .................................................. 87

14.3.1 Geological interpretation and modelling ................................................... 87

14.3.2 Definition of grade estimation domains..................................................... 87
14.4 Sample statistics ........................................................................................................... 88
14.4.1 Compositing of sample assay intervals....................................................... 88
14.4.2 Summary statistics...................................................................................... 88
14.4.3 Extreme grade value treatment ................................................................. 89
14.5 Variogram analysis and variogram modelling .............................................................. 89
14.6 Estimation methods and parameters ........................................................................... 90
14.6.1 Block model set up ..................................................................................... 90
14.6.2 Grade interpolation and parameters ......................................................... 91
14.7 Bulk density .................................................................................................................. 91
14.8 Estimation validation .................................................................................................... 92
14.9 Mineral resource confidence classification .................................................................. 92
14.10 Dilution, value estimates, and resource pit optimization ............................................ 93
14.11 Dilution, value estimates, and definition of underground inventory........................... 94
14.12 Mineral resource tabulation ......................................................................................... 95
14.13 Recommendations........................................................................................................ 95
15 Mineral reserve estimates......................................................................................................... 97

15.1 Disclosure ..................................................................................................................... 97
15.2 Planned dilution ........................................................................................................... 97
15.3 Recovery and cost parameters ..................................................................................... 97
15.4 Geotechnical parameters ............................................................................................. 98
15.5 Pit design ...................................................................................................................... 99
15.6 Mineral reserve tabulation ......................................................................................... 100
15.7 Recommendations...................................................................................................... 101
16 Mining methods ...................................................................................................................... 102

16.1 Existing open pit operations ....................................................................................... 102
16.1.1 Mining methods ....................................................................................... 102
16.1.2 Geotechnical and hydrological parameters.............................................. 102
16.1.3 Production and process rates and expected mine life ............................. 103
16.1.4 Waste mining requirements ..................................................................... 104
16.1.5 Mining fleet and machinery ..................................................................... 104
16.1.6 Workforce ................................................................................................. 104
16.1.7 Recommendations.................................................................................... 105
16.2 Preliminary economic assessment of combined open pit and underground
operations with a pulp agglomeration treatment option .......................................... 105
16.2.1 Mining methods ....................................................................................... 105

16.2.2 Geotechnical parameters ......................................................................... 108

16.2.3 Production and process rates and expected mine life ............................. 110
16.2.4 Waste mining requirements ..................................................................... 111
16.2.5 Mining fleet and machinery ..................................................................... 111
16.2.6 Workforce ................................................................................................. 112
17 Recovery methods................................................................................................................... 114

17.1 Existing heap leach process ........................................................................................ 114
17.1.1 Heap leach flow sheet .............................................................................. 114
17.1.2 Power and water requirements ............................................................... 116
17.2 Preliminary economic assessment of a pulp agglomeration treatment option......... 116
17.2.1 Introduction .............................................................................................. 116
17.2.2 Pulp agglomeration flow sheet................................................................. 117
17.2.3 Plant design .............................................................................................. 119
17.2.4 Equipment and specifications .................................................................. 120
17.2.5 Power and water requirements ............................................................... 125
18 Project infrastructure .............................................................................................................. 127

18.1 Existing operations ..................................................................................................... 127
18.1.1 Transportation and logistics ..................................................................... 127
18.1.2 Crushing, leach pad, and waste disposal facilities....................................127
18.1.3 Power........................................................................................................ 128
18.1.4 Water ........................................................................................................ 129
18.2 Estimated infrastructure requirements for the proposed expanded operation........ 129
18.2.1 Crushing facilities...................................................................................... 129
18.2.2 Grinding facilities ...................................................................................... 129
18.2.3 Thickening facilities .................................................................................. 130
18.2.4 Filtration facilities ..................................................................................... 130
18.2.5 Agglomeration facilities ............................................................................ 130
18.2.6 Reagent facilities ...................................................................................... 130
18.2.7 Auxiliary facilities ...................................................................................... 130
18.2.8 Cemented rock fill plant ........................................................................... 131
18.2.9 Power........................................................................................................ 131
18.2.10 Water ........................................................................................................ 131
19 Market studies and contracts.................................................................................................. 133

19.1 Contracts and marketing ............................................................................................ 133

19.2 Review by the qualified person .................................................................................. 133
20 Environmental studies, permitting, and social or community impact .................................... 134

20.1 Environmental factors ................................................................................................ 134
20.2 Environmental studies ................................................................................................ 134
20.3 Pan Americans environmental policy ........................................................................ 135
20.4 Permitting factors ....................................................................................................... 135
20.5 Waste disposal............................................................................................................ 135
20.6 Site monitoring ........................................................................................................... 136
20.7 Water management ................................................................................................... 136
20.8 Environmental certification ........................................................................................ 136
20.9 Social and community factors .................................................................................... 136
20.10 Project reclamation and closure................................................................................. 137
20.11 Expected material environmental issues ................................................................... 137
21 Capital and operating costs ..................................................................................................... 138

21.1 Estimated capital, sustaining capital, and operating costs of the existing
operations................................................................................................................... 138
21.2 Estimated costs for the proposed expanded operation............................................. 138
21.2.1 Introduction .............................................................................................. 138
21.2.2 Estimated capital and sustaining capital costs for the underground
mine .......................................................................................................... 139
21.2.3 Estimated capital and sustaining capital costs for the pulp
agglomeration facilities ............................................................................ 140
21.2.4 Underground operating cost estimates ................................................... 142
21.2.5 Pulp agglomeration operating cost estimates.......................................... 143
21.2.6 Opportunities ........................................................................................... 144
21.2.7 Risks .......................................................................................................... 145
22 Economic analysis.................................................................................................................... 146

22.1 Estimated economic model for the existing operation .............................................. 146
22.1.1 Estimated life of mine plan....................................................................... 146
22.1.2 Estimated cash flow forecast.................................................................... 146
22.1.3 Assumptions ............................................................................................. 146
22.1.4 Estimated taxes, duties, and royalties ...................................................... 147
22.2 Estimated economic model for the proposed expanded operation .......................... 147
22.2.1 Introduction .............................................................................................. 147
22.2.2 Estimated life of mine plan....................................................................... 151

22.2.3 Estimated cash flow forecast.................................................................... 152

22.2.4 Assumptions ............................................................................................. 152
22.2.5 Estimated taxes, duties, and royalties ...................................................... 153
22.2.6 Estimated payback period ........................................................................ 153
22.2.7 Sensitivity analysis .................................................................................... 154
22.2.8 Risks .......................................................................................................... 155
23 Adjacent properties ................................................................................................................. 157
24 Other relevant data and information ...................................................................................... 158
25 Interpretation and conclusions ............................................................................................... 159

25.1 Mineral resources and mineral reserves .................................................................... 159
25.2 Mineral processing, metallurgical testing, and recovery methods ............................ 160
25.3 Mining and financial ................................................................................................... 161
25.4 Environmental and community .................................................................................. 163
26 Recommendations .................................................................................................................. 164

26.1 Project advancement.................................................................................................. 164
26.2 Mineral resources and mineral reserves .................................................................... 164
26.3 Mineral processing, metallurgical testing, and recovery methods ............................ 164
26.4 Mining and financial ................................................................................................... 165
26.5 Environmental and community .................................................................................. 166
27 References ...............................................................................................................................167
28 Date, signatures, and certificates ............................................................................................ 169
Tables
Table 1.1 Dolores mineral resources as at May 31, 2014 ............................................ 14
Table 1.2 Dolores mineral reserves as at May 31, 2014 .............................................. 15
Table 1.3 Comparison of production and financial metrics for the existing
operation to the proposed expansion Project at $22 per ounce of
silver and $1,300 per ounce of gold ............................................................. 21
Table 2.1 Responsibilities of each qualified person..................................................... 31
Table 4.1 Mining concession details ............................................................................ 35
Table 10.1 Drillhole summary ........................................................................................ 55
Table 11.1 Certified standard results............................................................................. 62
Table 13.1 2005 feasibility study metallurgical recoveries by heap leaching ............... 69

Table 13.2 Pre-feasibility study metallurgical recoveries by milling, flotation, and

cyanidation of reground concentrates and flotation tails ........................... 70
Table 13.3 Heap leaching metallurgical recovery model at 6.3 mm ............................. 75
Table 13.4 Heap leaching metallurgical recovery kinetic model at 6.3 mm.................. 76
Table 13.5 Pulp agglomeration metallurgical recovery model at 425 microns ............. 81
Table 13.6 Pulp agglomeration metallurgical recovery kinetic model at 425
microns ......................................................................................................... 82
Table 14.1 Details of drillholes available to the mineral resource estimate ................. 87
Table 14.2 Silver and gold variograms at the 80th percentile ........................................ 89
Table 14.3 Grade estimation sample search parameters .............................................. 91
Table 14.4 Dolores mineral resources as at May 31, 2014 ............................................ 95
Table 15.1 Metallurgical recoveries by material type applied to the mineral
reserve estimate .......................................................................................... 98
Table 15.2 Economic parameters applied to the mineral reserve estimate ................. 98
Table 15.3 Cost parameters applied to the mineral reserve estimate .......................... 98
Table 15.4 Dolores mineral reserves as at May 31, 2014 ............................................ 101
Table 16.1 Preliminary underground mining physicals summary ............................... 106
Table 16.2 Preliminary estimated underground mining inventory ............................. 110
Table 16.3 Underground mining fleet.......................................................................... 111
Table 17.1 Crushing design criteria for the pulp agglomeration plant ........................ 120
Table 17.2 Milling design criteria for the pulp agglomeration plant ........................... 122
Table 17.3 Leaching, thickening, filtration and clarification, and agglomeration
design criteria for the pulp agglomeration plant ....................................... 123
Table 17.4 Reagent requirements for the pulp agglomeration plant.......................... 124
Table 21.1 Summary of estimated intial capital and sustaining capital costs for
the underground mine ............................................................................... 139
Table 21.2 Summary of estimated capital and sustaining capital for the pulp
agglomeration facilities .............................................................................. 141
Table 21.3 Summary of operating cost estimates for the underground mine ............ 142
Table 21.4 Summary of operating cost estimates for the pulp agglomeration
facilities ...................................................................................................... 144
Table 22.1 Annual production schedule and cash flow forecast for the expanded
operation.................................................................................................... 148
Table 22.2 Comparison of production and financial metrics of the existing
operation to the proposed expanded operation at $22 per ounce of
silver and $1,300 per ounce of gold ........................................................... 150
Table 22.3 Comparison of process and marketing parameters of the existing
operation to the proposed expanded operation ....................................... 152

Table 22.4 Comparison of Project sensitivity to silver and gold price of the
existing operation to the proposed expanded operation .......................... 154
Table 22.5 Comparison of Project sensitivity to operating cost of the existing
operation to the proposed expanded operation ....................................... 155
Figures
Figure 4.1 Property location map ................................................................................. 34
Figure 4.2 Mining concessions and surface rights relative to the pit outline ............... 35
Figure 7.1 Tectono-stratigraphic terranes of Mexico (Pratt, 2013, redrawn from
Campa & Coney, 1983)................................................................................. 43
Figure 7.2 Map of the local geology, redrawn from published 1:250,000 Servicio
Geolgico Mexicano map (Pratt, 2013). ...................................................... 44
Figure 7.3 Cartoon of stratigraphic and structural relations at Dolores (Pratt,
2013. Not to scale) ....................................................................................... 45
Figure 7.4 Simplified geological map of the Dolores Property ( Pratt, 2013) .............. 46
Figure 10.1 Location map of Dolores drillholes .............................................................. 57
Figure 13.1 Column leach test results and kinetic models for silver and gold by
feed type ...................................................................................................... 75
Figure 13.2 Agglomerates formed from Dolores feed crushed to 425 microns ............. 78
Figure 13.3 Load/permeability test results ..................................................................... 81
Figure 13.4 Dolores pilot rod milling plant ..................................................................... 83
Figure 14.1 Mineralization outlines at 1525 m elevation ............................................... 88
Figure 14.2 Cross section through Dolores mineral resource estimate, mineral
reserve pit design, and exploration drillholes at 53000 m North ................ 94
Figure 15.1 Plan of ultimate pit design ......................................................................... 100
Figure 16.1 Plan of underground access development ................................................ 107
Figure 17.1 Predicted versus actual silver and gold metal recovery ............................ 115
Figure 17.2 Pulp agglomeration flow diagram .............................................................. 119
Figure 17.3 Pulp agglomeration plant layout (Lyntek, 2014)........................................ 120
Figure 18.1 Mine infrastructure plan ............................................................................ 128
Figure 22.1 Cumulative cash flow comparing the existing operation to the
proposed expanded operation .................................................................. 154
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1 Summary
1.1 Introduction, property description, and ownership
This technical report refers to the Dolores property (the Property), an open pit silver-gold
mine located in Chihuahua state, Mexico, approximately 250 km west of the city of
Chihuahua. The Property is owned by Pan American Silver Corp. (Pan American) through its
wholly owned subsidiary, Compaa Minera Dolores S.A. de C.V.
This technical report has been prepared to disclose relevant information about the Property
which has resulted from mineral resource and reserve delineation drilling, updated mineral
resource and mineral reserve estimates, and a preliminary economic assessment of an
expansion of the Dolores mine to include pulp agglomeration treatment and an underground
mine to extract material from beneath the current pit limits (the Project). This technical
report supports the disclosure of the updated mineral resource and reserve estimates and the
results of the preliminary economic assessment.
The preliminary economic assessment is preliminary in nature and includes inferred resources
which are considered too speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as mineral reserves, and there is
no certainty that the assessment will be realized.
Metallurgical testing of the Dolores mineralization has shown a strong relationship between
the size of the ore particles and metallurgical recovery, with decreasing particle size resulting
in increased metallurgical recovery. Pan American has determined that recovery of the higher
grade mineralization can be improved by constructing a pulp agglomeration plant to crush,
grind, filter, and agglomerate the higher grade ore particles and then sending them to the
existing heap leach pads for leaching.
The possibility of developing an underground mine to provide supplemental feed to the
existing heap leach facilities, without construction of a pulp agglomeration plant, was
investigated. The study concluded that although the economics were positive, they were not
sufficiently robust to justify developing an underground mine without the benefit of the
additional metal recovery that would be achieved by the pulp agglomeration plant. The life of
mine plans and the economics presented in the preliminary economic assessment assume
that the pulp agglomeration plant and the underground mine will be developed together.
The expansion Project construction could be completed over a period of 15 to 18 months and
would involve increasing the current treatment rate from roughly 16,200 to 20,000 tonnes
per day by processing the high grade portion of the mined material through a pulp
agglomeration treatment plant and conveying the agglomerated material with the crushed
lower grade portion of the mined material to the heap leach pads for leaching. The pulp
agglomeration plant would be comprised of crushing, grinding, particle size classification,
thickening, filtration, agglomeration, and reagent facilities. The pulp agglomeration process of
liberating metals by grinding has the advantage of improved leaching kinetics and ultimate
recovery of precious metals in the high grade ore relative to the current heap leach method.
The improvement in recovery of the high grade fraction due to pulp agglomeration is
August 2014 11 of 171

estimated at around 19% for silver and 13% for gold. This results in an overall improvement in
metal recovery of around 7% for both silver and gold for the entire mineral inventory.
Underground mining is expected to occur concurrently with open pit mining, and will be
developed to commence production at approximately the same time as the pulp
agglomeration plant installation is completed. The proposed underground mining method is
open stoping, a low cost mechanized bulk mining method appropriate for the competent
ground conditions present at the mine that allows for a near complete extraction of the
mineable inventory. A preliminary underground schedule based on the underground mine
plan targets a production rate of approximately 1,500 tonnes per day to feed the pulp
agglomeration circuit in tandem with the high grade portion of the material from the open pit
mine. The planned schedule indicates underground development commencing in 2015 with
full production achieved in 2018 and a mine life of approximately 12 years, including
construction time. The projected mine life of the expanded operation may increase if
additional mineral resources are defined and can be converted to mineral reserves.
The Project also considers cost savings in replacing onsite power generation with the
installation of a high voltage power line approximately 110 km long to connect the Dolores
operation with the main electrical grid in Chihuahua. The new power line project will proceed
regardless of the construction decision related to the expansion Project.
1.2 Geology and mineralization

Mineralization at Dolores occurs within the Sierra Madre Occidental volcanic belt, an arc
formed by eastward subduction of the Pacific tectonic plate. The Sierra Madre is a
metallogenic terrane well known for its epithermal precious metal deposits. The lower part of
the arc comprises late Cretaceous to early Tertiary calc-alkaline batholiths and equivalent
volcanosedimentary rocks. These rocks are generally referred to as the 'Lower Volcanic
Supergroup' or 'Lower Volcanic Series' (McDowell and Keizer, 1977, Wark et. al., 1990, and
Wark, 1991) and were formed by magmatic activity about 80 to 40 million years ago. The
Lower Volcanic Series is the main host for mineralization at the Property and is cut by a
swarm of north-northwest striking dikes. The magmatic activity was followed by two periods
of major ignimbrite eruption in the early Oligocene and early Miocene. Collectively these
eruptions constitute the 'Upper Volcanic Supergroup' or 'Series' (McDowell and Keizer, 1977).
The ignimbrites were accompanied by minor andesite/basalt flows and rhyolitic domes.
Dolores lies about 42 km north-northeast of the Mulatos high sulphidation epithermal gold
deposits and 82 km north-northwest of Pinos Altos. Pinos Altos, a low sulphidation epithermal
vein system, lies on the northeast rim of the Ocampo Caldera. This 30 km diameter caldera
hosts a district of epithermal gold-silver deposits, including the Ocampo mine.
The most important faults at Dolores, from west to east, are the Chupacabras, San Francisco,
and East faults. The overall geometry is horst-like. The San Francisco fault and its footwall
host most of the mineralization at Dolores. The immediate footwall and hanging wall of the
San Francisco fault form a 500 m wide corridor of northwest-striking igneous intrusions
broadly following the fault.
There is a great variety of intrusive types and field relations indicate that they are
contemporaneous with mineralization. The rocks with the most plutonic character occur in
August 2014 12 of 171

the south, where a steep-sided barren microdiorite stock straddles the San Francisco Fault.
Coinciding with high grade mineralization, it comprises weakly porphyritic diorite and
marginal parts comprise porphyritic quartz diorite with a potassium feldspar-rich aplitic
groundmass.
Silver and gold mineralization at Dolores is hosted in north-northwest trending, mostly
steeply southwest dipping hydrothermal breccias and sheeted vein zones on the order of 5 m
to 10 m wide. Most of the high grade mineralization occurs along two or three major
structures which provided the conduit for metal-bearing hydrothermal fluids. Silver and gold
mineralization identified on the surface at Dolores covers an area 4,000 metres long and up
to 1,000 metres wide, at elevations ranging between 1,100 metres to 1,700 metres above sea
level. The extent of mineralization at depth and along strike has not yet been fully defined.
Most high grade mineralization occurs within the San Francisco Breccia, a well-defined and
spatially continuous hydrothermal breccia and stockwork zone that occurs in the immediate
footwall of the post-mineral San Francisco Fault. The breccia trends farther away from the
fault towards the north until it joins a second major breccia zone known as the Alma Maria
Breccia. The San Francisco Fault marks a profound drop in grade and the hanging wall is
mostly devoid of silver and gold mineralization. This barren hanging wall, comprised mostly of
latite lava, forms the high west walls of the open pit mine.
Most veins at Dolores are relatively simple, with only weak crustiform texture. They comprise
euhedral comb quartz, commonly zoned from milky to transparent. They are thin, rarely over
30 mm wide, and tend to form as sheeted swarms. Economically mineable grades occur
where the veins are sufficiently closely spaced.
1.3 Status of exploration, development, and operations

The central part of the silver-gold mineralization at Dolores is well defined by over
1,100 drillholes and has been the subject of mineral resource and mineral reserve estimates.
Typical near mine exploration takes place on an annual basis, including testing of the open
regions of the deposit at depth and towards the south, as well as infill drilling to upgrade the
confidence categories of mineral resource and mineral reserve estimates.
The mine has been in commercial operation since May 2009 and the current infrastructure
includes the typical components of an operating open pit mine, including the mine workings,
the processing facilities, three heap leach pads, medium grade mineralization stockpiles,
waste rock storage facilities, workshops, laboratories, storage facilities, offices, drill core and
logging sheds, water and power lines, access roads, a light aircraft landing strip, and the
workers camp and recreational facilities.
Pan American acquired the Dolores mine from Minefinders Corp. Ltd. (Minefinders) at the
end of March 2012, and began mining operations in April 2012. As at December 31, 2013,
13.3 million ounces of silver and 335,200 ounces of gold have been produced from modern
operations at Dolores. Historical production from between 1922 and 1931 is on the order of
116,000 ounces of gold and 6 million ounces of silver.
August 2014 13 of 171

1.4 Mineral resource and reserve estimates

Pan American conducts infill and near-mine drilling through much of the year. The drillhole
data cut-off date for the commencement of the geological interpretation and the mineral
resource estimate was October 22, 2013 and the effective date of the mineral resources is
May 31, 2014. Mineral resources were estimated by Pan American technical staff under the
supervision of and reviewed by Michael Steinmann, P. Geo., Executive Vice President,
Corporate Development and Geology of Pan American Silver, who is a qualified person as that
term is defined by NI 43-101.
Mineral resources for Dolores as at May 31, 2014 are given in Table 1.1. This tabulation
includes in situ potentially economic material classified as measured, indicated, and inferred
constrained within an optimized pit shell created using metal prices of $35 per ounce of silver
and $1,400 per ounce of gold, as well as any potentially economic material within the reserve
pit classified as inferred, underground resources below the resource pit shell, and low grade
previously mined stockpiled material. The in situ mineral resources have been depleted for
mining as at May 31, 2014 and stockpiles have been inventoried as at May 31, 2014. The costs
and metallurgical recoveries estimated for pulp agglomeration treatment and combined open
pit/underground mining have been used to estimate mineral resources. There are no known
mining, metallurgical, environmental, permitting, legal, title, taxation, socio-economic,
marketing, political, or other factors or risks that could materially affect the potential
development of the mineral resources. Mineral resources that are not mineral reserves do
not have demonstrated economic viability. Mineral resources reported here are in addition to
mineral reserves.
Table 1.1 Dolores mineral resources as at May 31, 2014

Classification Tonnes Ag Ag Au Au
(Mt) ppm contained ppm contained
metal metal (koz)
(Moz)
Measured 5.0 22 3.6 0.40 64.0
Indicated 12.0 28 10.7 0.83 319.6
Measured + Indicated 17.0 26 14.3 0.70 383.7
Inferred 16.1 33 17.0 0.77 402.7
Notes: Mineral resources do not have demonstrated economic viability. Totals may not
add up due to rounding. Mineral resource estimates were prepared under the supervision
of or were reviewed by Michael Steinmann, P. Geo., Executive Vice President, Corporate
Development and Geology of Pan American. Mineral resources have been estimated using
a combination of pulp agglomeration and heap leaching metal recovery and cost
parameters. Metal prices used for the mineral resource estimate were $35 per ounce of
silver and $1,400 per ounce of gold. Mineral resources are in addition to mineral reserves.
August 2014 14 of 171

Mineral reserve estimates were prepared by Pan American technical staff under the
supervision of and reviewed by Martin Wafforn, P. Eng., Vice President, Technical Services of
Pan American, who is a qualified person as that term is defined by NI 43-101.
Mineral reserve estimates for Dolores as at May 31, 2014, comprising in situ material
classified as proven and probable reserves within a reserve pit designed using metal prices of
$22 per ounce of silver and $1,300 per ounce of gold, as well as previously mined stockpiled
economic material, are given in Table 1.2. The in situ mineral reserves have been depleted for
mining as at May 31, 2014 and stockpiles have been inventoried as at May 31, 2014.The costs
and metallurgical recoveries for the existing heap leach only operation have been used to
estimate mineral reserves. Mineral reserves do not use the pulp agglomeration cost and
metal recovery assumptions disclosed in this preliminary economic assessment, nor do they
include any of the resources anticipated to be mined from underground, because the
economic viability of those resources has not yet been determined by at least a pre-feasibility
study.
Mineral reserve estimates are based on assumptions that include mining, metallurgical,
infrastructure, permitting, taxation, and economic parameters. Increasing costs and taxation
and a fall in metal prices will have a negative impact on the estimation of mineral reserves.
Aside from the current fluctuations in silver and gold prices, there are no other known factors
that may have a material impact on the estimate of mineral reserves at Dolores.
Table 1.2 Dolores mineral reserves as at May 31, 2014

metal metal (koz)
(Moz)
Proven 37.3 31 36.9 0.76 914.1
Probable 29.1 35 32.5 0.81 759.4
Proven + Probable 66.4 32 69.3 0.78 1,673.5
Notes: Totals may not add up due to rounding. Mineral reserve estimates were prepared
under the supervision of or were reviewed by Martin Wafforn, P. Eng., Vice President,
Technical Services of Pan American. Mineral reserves have been estimated using heap
leach only metal recovery and cost parameters. Metal prices used for the estimate were
$22 per ounce of silver and $1,300 per ounce of gold.
1.5 Mining
1.5.1 Mining methods of the existing operation
Mining at Dolores has been ongoing since 2008 using conventional open pit methods with
excavators, shovels, loaders, and haul trucks.
Ore grade control is carried out using angled reverse circulation drilling to provide closer
spaced sample data for a grade control estimate, which is used to mark out the ore/waste
August 2014 15 of 171

mining boundaries. Ore and waste are usually blasted separately to minimize ore loss,
dilution, and material misclassification. The minimum mining unit is 7 x 15 x 7.5 m, and
planned dilution in the mineral reserve estimate averages around 13%. Blast movement
monitoring takes place regularly.
The mining sequence is to focus on the higher grade material in the south of the pit with
waste material stored in the east waste rock facility, which is located to the south of the pit.
When the last phase in the south is depleted, mining will switch to the north part of the pit
with some of the waste stored inside the pit and some of the waste stored at the north waste
rock facility.
1.5.2 Mining methods of the proposed expanded operation
There are no anticipated changes to the existing open pit mining methods or mining fleet
associated with the expansion Project. Implementation of the proposed expanded operation
will require additional mining selectivity to separate the high grade portion of the deposit for
grinding, which will require a manageable adjustment to current grade control practices.
The preliminary economic assessment assumes that a mechanized, ramp accessed
underground mine will be developed to provide additional production from the extension of
the mineralized structures below and along strike of the planned open pit mine. Underground
mining is expected to occur concurrently with open pit mining and will be completed at
approximately the same time. The mining method selected was open stoping, mostly
oriented longitudinally, which takes into account the competent ground conditions and the
requirement to tight fill stopes beneath the open pit. The advantages of this method include
near complete extraction of the mineable inventory as no pillars are routinely necessary, and
lower unit costs compared to development intensive methods such as cut and fill.
Where competent backfill is required, cemented rock fill will be used, and where the stopes
are located in areas that will later interact with open pit mining, the cemented rock backfill
will be placed tightly to the backs to ensure open pit stability. Uncemented rock fill will be
used where competent fill is not required, and will be preferentially sourced from
underground development.
1.5.3 Life of mine plan of the existing operation
The life of mine plan of the existing operation is based on the mineral reserve estimate and
has been developed with all mining sourced from the current open pit, feeding the existing
crushing plant and heap leach system at a rate of 16,200 tonnes per day. In this life of mine
plan the mining rate for the next seven years of production varies from 38.2 million tonnes to
40.9 million tonnes of ore and waste. The waste mining rate declines thereafter, with mining
completed in 2024. The heap leach system is fed at full capacity from the pit and stockpiles
through to 2025, and stacking of crushed ore on the heap leach pads is completed in 2026.
Production from residual leach-down of silver and gold from the heap leach pads is projected
to continue through 2029. The projected mine life of the existing operation may increase if
additional mineral resources are defined and can be converted to mineral reserves.
The open pit has been designed with multiple phases to allow for earlier access to higher
grade ore in the pit and to provide a smoothed mining schedule that minimizes peak open pit
mining fleet requirements. Where excess ore is available in the mine plan, the mine will
stockpile lower grade material to be processed later in the mine life. Silver and gold grades
August 2014 16 of 171

are highly variable with annual head grades expected to vary between 24 ppm Ag and
51 ppm Ag and between 0.48 ppm Au and 1.68 ppm Au during the mining phase. When
mining has been completed and the stockpile is being processed, grades are expected to
decline to approximately 16 ppm Ag and 0.24 ppm Au.
1.5.4 Life of mine plan of the proposed expanded operation
The preliminary economic assessment is based on measured, indicated, and inferred
resources mined by a combination of open pit mining from within a reserve pit and
underground mining methods, both designed using metal prices of $22 per ounce of silver
and $1,300 per ounce of gold, and treated using the current heap leaching facilities at the
current processing rate of 16,200 tonnes per day until 2016, at which point the pulp
agglomeration plant would commence operations. The annual feed mining rates between
2014 and 2024 are estimated to range between 5.0 million and 9.9 million tonnes.
For the preliminary economic assessment, the open pit mine has been optimized and
redesigned with the combined pulp agglomeration and heap leach process costs and metal
recoveries and using metal prices of $22 per ounce of silver and $1,300 per ounce of gold. The
life of mine plan for the expanded case includes an additional 5.6 million tonnes of ore from
the open pit that was formerly uneconomic with the heap leach only metal recoveries and
operating costs, as well as an additional 5.0 million tonnes of ore from the underground mine.
A preliminary underground schedule based on the underground mine plan targets a feed rate
of approximately 1,500 tonnes per day for 550,000 tonnes per year to feed the pulp
agglomeration circuit in tandem with the coarser, lower grade feed from the open pit. Level
development per heading is estimated to advance at a rate of 100 m per month, for a total of
315 m per month of development. The planned schedule indicates development commencing
in 2015 and full production achieved in 2018, with a mine life of approximately 12 years
including construction time.
The preliminary economic assessment assumes that construction of the pulp agglomeration
plant is completed by the beginning of 2016 and processing starts at a rate of 5,600 tonnes
per day (2.0 million tonnes per annum). With the start-up of the pulp agglomeration plant,
the throughput of the existing crushing plant and heap leach system is reduced to
14,400 tonnes per day (5.3 million tonnes per annum), while overall processing and stacking
on the heap leach pads increases from the current 16,200 tonnes per day (5.9 million tonnes
per annum) to 20,000 tonnes per day (7.3 million tonnes per annum).
The preliminary economic analysis assumes that the open pit will continue until the end of
2023 and that stockpiled open pit material will be processed in 2024 and 2025. The
underground mine is anticipated to continue operations providing feed to the pulp
agglomeration plant until into 2026. Production from residual leach-down of silver and gold
from the heap leach pads is projected to continue through 2029. The projected mine life of
the expanded operation may increase if additional mineral resources are defined and can be
converted to mineral reserves.
1.5.5 Infrastructure of the existing operation
The existing mine infrastructure comprises three waste storage facilities, three leach pads,
pregnant solution and overflow, run of mine stockpiles of material awaiting crushing, a three
stage crushing plant, a Merrill-Crowe plant, a power generation plant, and maintenance
August 2014 17 of 171

shops and warehouses. As the mine plan prioritizes the highest grade material available for
crushing, approximately a dozen medium grade stockpiles are located around the mine site,
awaiting crushing.
A series of fixed and portable conveyor belts transport the crushed material to the leach
pads. Pad 1 operated for the first two years of the mine life and is now currently on care and
maintenance. Stacking on Pad 2 is nearly complete except for the transfer of a minor amount
of partially leached ore from Pad 1. All stacking of fresh ore now takes place on Pad 3, with
active leaching continuing in series on Pad 2 and Pad 3.
1.5.6 Infrastructure of the proposed expanded operation
This preliminary economic assessment considers an expansion of the mine with the
development of a new 1,500 tonne per day capacity underground mine and the construction
of a pulp agglomeration plant for processing the higher grade mined material. The
agglomerated material will then be conveyed to the heap leach pads for leaching. The pulp
agglomeration plant will be comprised of crushing, grinding, thickening, filtration,
agglomeration, reagent, and auxiliary facilities. A cemented rock fill plant necessary for
providing back fill and ground support to the underground operation will comprise a fully
automated mixing plant where cement, aggregate, and water are combined in a concrete-
style drum mixer. These facilities will include a mixer structure, mixer feed conveyor,
aggregate belt feeder, a slurry plant, and a cement silo.
1.5.7 New power line
Pan American has been working with an independent power line consultant to study the
economic benefits of the installation of a power line to the Dolores operation to replace the
existing diesel generators. An initial study completed by the Comisin Federal de Electricidad,
the national power utility of Mexico (CFE), showed that the project is strongly economic,
with initial capital costs in the $15 to $20 million range. The initial economics based on the
projected power requirements in 2014 and the current diesel fuel consumption and costs
indicated annual savings of $7.5 million in diesel fuel costs alone. Savings in the maintenance
and replacement costs of the existing generators further add to the benefits of the Project.
The additional power costs associated with the expanded operation, particularly for crushing
and grinding, would essentially double the annual savings.
Pan American is proceeding with the power line project, and negotiations with the land
owners for right of way along the access route are currently underway. The connection to the
Chihuahua electrical grid is expected to be completed by the beginning of 2016.
1.6 Mineral processing and recovery methods

1.6.1 Current heap leaching method
Broken ore is trucked from the open pit to a crushing plant where the target treatment rate is
a nominal 16,200 tonnes per day crushed to a target particle size of 80% of the particles
passing (P80) 6.3 mm in a three stage crushing circuit with a recirculating load. The crushed
ore product is conveyed to the leach pads via an overland conveyor system, sampled at
regular intervals from a material sampler, and placed on the pads using portable
grasshoppers and a radial stacking system. Sodium cyanide solution is pumped to the leach
August 2014 18 of 171

pads directly or to a holding tank near Pad 3, from where it is distributed to the heap leach
pads and applied using a combination of drip and sprayer systems. The mine operates a
closed circuit processing system without tailings facilities.
Metal recoveries are a function of solution flow rates, cyanide concentration, and time, and
the metal leaching period can cover years, continuing as subsequent lifts are placed on the
pads. The pregnant leach solution containing the dissolved silver and gold is collected from
the bottom of the leach piles via gravity collectors and/or vertical perforated steel pipes (well
risers) fitted with internal pumps that transfer the solution to the pregnant solution pond.
The solution is clarified, de-oxygenated, and processed through a Merrill-Crowe circuit with a
nominal capacity of 1,000 cubic metres per hour to precipitate silver and gold from the
cyanide solution. The clarified and de-oxygenated silver and gold cyanide solution is added to
zinc dust, which triggers the precipitation of the silver and gold. The remaining barren cyanide
solution is then recycled back to the heap leach pad for continued processing, while the
precipitate in suspension is pumped to filter presses, where the resulting material containing
zinc, gold, and silver is dried. The dried material is then mixed with fluxes and melted in a
furnace to form dor bars.
The bars are cleaned, assayed, weighed, and transported to a third party refinery in North
America for final recovery. The dor bars typically contain between 1% and 5% gold and
95% to 99% silver, with generally less than 1% impurities.
The heap leach pads, ponds, and cyanide circuit are contained within a closed circuit and not
released to the environment.
Metallurgical recoveries during 2013 averaged 43% for silver and 82% for gold.
Medium grade material may be placed on stockpiles allowing for the preferential crushing
and stacking of higher grade material. Currently approximately a dozen such stockpiles are
located around the mine workings.
1.6.2 Proposed pulp agglomeration method
Pulp agglomeration is the process of grinding ore and filtering it to form a moist pulp (the
pulp), combining the pulp with cement, and tumbling to form round balls on the order of
inch to 2 inches in diameter. In this process the fine pulp and cement particles are tumbled
together in a drum at a controlled moisture content and feed rate such that they start to stick
to each other. During the agglomeration process balls of material start to form, and as the
tumbling continues more and more material adheres to these balls (the agglomerates). The
cement acts as a binder that holds the particles together and gives the agglomerates strength
to prevent them from crumbling as material is stacked on top of them during heap leaching.
This is important to prevent the fine material being washed to the solution collection drains
and in maintaining good permeability in the heap for percolation of cyanide solution down
through the heap. The agglomerates remain very porous and permeable which allows the
cyanide solution to contact with the increased surface area of the individual particles that is
produced by grinding the high grade fraction of the ore deposit. This in turn results in
increased metallurgical recoveries and improved metal recovery kinetics compared to the
current coarse crushing and heap leaching process.
The pulp agglomeration process will operate in an integrated fashion with the existing heap
leach processing facilities. High grade run of mine material will be stockpiled on the existing
August 2014 19 of 171

run of mine pad, separated from the medium grade run of mine material. The high grade
material will be tipped into a bin using front end loaders, at a rate of 5,600 tonnes per day,
then recovered from the bin by a vibrating grizzly feeder, delivered to a primary jaw crusher,
and the discharge will be conveyed to a vibrating screen. Screen oversize will pass through a
cone crusher in a closed loop to produce a rod mill feed with a P80 12.8 mm. The screen
undersize will report to a discharge bin outfitted with two reclaim belt feeders. One of the
reclaim belt feeders will report directly to the rod mill via a conveyor. The other reclaim belt
feeder from the discharge will report to a conveyor and radial stacker for depositing onto a
fine feed stockpile. The material will be recovered from this stockpile via multiple reclaim
feeders and a reclaim tunnel conveyor system for eventual feed to the rod mill if necessary.
The rod mill discharge will be pumped in closed circuit to a Vertimill/vibrating wet screen
circuit. The screen oversize will report back to the Vertimill and the screen undersize will be
pumped to a surge tank for feed to the pressure filters. This closed loop circuit is anticipated
to produce a P80 of 0.425 mm (35 mesh) product.
The milled slurry will be pumped from the surge tank to one of three horizontal pressure
filters equipped with vertical plates, air blowers, and a membrane squeeze. The filtration
process is necessary primarily to reduce the water content of the material to a level suitable
for agglomeration and will also provide an opportunity for early recovery of a portion of the
precious metal content that will be leached in the rod mills. The pressure filters will dewater
the slurry and produce a filter cake of approximately 15% moisture. Recovered filtrate
solution will be pumped to a pregnant solution holding tank for eventual metal recovery in
the Merrill-Crowe plant.
The dewatered filter cake will be discharged from the filter presses onto a belt conveyor with
the possible addition of cement for feed to the rotating agglomerator drum. Additional
solution will be sprayed onto the mixture within the drum as it tumbles in order to control the
moisture content and formation of the agglomerate balls. The agglomerate balls will be
discharged from the drum and conveyed to the heap leach pad feed conveyor where they will
be combined with crushed low grade mineralized material to be conveyed to the existing
heap leach pads.
Most of the pulp agglomeration process make-up water for the high grade treatment circuit
will be sourced by diverting a portion of the pregnant solution flow from the heap leach pads
on its way to the Merrill-Crowe plant. The benefits of using pregnant solution in the pulp
agglomeration plant include cost savings in sodium cyanide and solution pumping, optimizing
the Merrill-Crowe and cementation process which improves with higher metals values in
solution, and minimizing any increase in fresh water consumption. Additional cyanide solution
will be sourced from a sodium cyanide solution make-up plant constructed next to the berm
of heap leach Pad 3. The heap leach pads, ponds, and cyanide circuit will remain contained
within a closed circuit and will not be released to the environment.
No tailings disposal system is required as the pulp agglomeration process does not produce a
tailings stream.
August 2014 20 of 171

1.7 Capital and operating costs and economic analyses

This preliminary economic assessment compares the relative value of the existing
16,200 tonne per day heap leach operation and a 20,000 tonne per day pulp agglomeration
and heap leach operation. Summary production and financial metrics of the two options are
given in Table 1.3, assuming grid power costs.
The project was evaluated on an after-tax, free cash flow basis. The income tax rate
applicable to corporations in Mexico was increased from 28% to 30% effective
January 1, 2014. A tax-deductible special mining duty of 7.5% was applied on earnings before
the deduction of interest, taxes, depreciation, and amortization. An additional 0.5%
extraordinary mining duty on precious metals revenue (applicable to precious metals only)
was assumed to be in effect as of January 1, 2014.
The preliminary results indicate that the expansion Project has the potential to generate
positive after tax economic returns using Pan Americans current reserve metal prices of
$22 per ounce of silver and $1,300 per ounce of gold. The Project economics also remain
robust at metal prices of $19 per ounce of silver and $1,200 per ounce of gold. The Project
will increase average annual silver production from 3.7 million ounces to 5.0 million ounces,
while average annual gold production will increase from an estimated 111,000 ounces to
148,000 ounces.
Table 1.3 Comparison of production and financial metrics for the existing operation to
the proposed expansion Project at $22 per ounce of silver and $1,300 per ounce of gold
Parameter Units Existing operation Expansion Project
Feed processed from pit and stockpiles Mt 69.7 75.3
Feed processed from underground Mt - 5.0
Total feed processed Mt 69.7 80.3
Heap leach processing Mt 69.7 61.8
Heap leach silver grade ppm 32 24
Heap leach gold grade ppm 0.79 0.50
Pulp agglomeration processing Mt - 18.6
Pulp agglomeration silver grade ppm - 62
Pulp agglomeration gold grade ppm - 1.82
Recoverable total silver produced Moz 44.7 58.4
Recoverable total gold produced koz 1,250.2 1,614.8
Initial capital investment $M 28.8 133.2
Sustaining capital investment $M 118.8 170.3
August 2014 21 of 171


Pit operating cost $M 700.2 683.5
Underground operating cost $M - 175.6
Process operating cost $M 554.1 685.5
G&A operating cost $M 170.8 178.9
Revenue $M 2,589.9 3,360.2
Treatment charges and refining $M 21.9 28.6
Income taxes $M 171.0 244.6
Special mining duty on EBITDA $M 71.6 103.8
Extraordinary mining duty on revenue $M 13.0 16.9
Royalties to RG Mexico $M 72.3 94.0
Cash flow $M 671.4 853.3
NPV at 8% $M 389.6 479.8
IRR relative to existing 16,200 tpd heap leach % - 32.8

operation
1.7.1 Estimated capital, sustaining capital, and operating costs of the existing
operation
The Dolores mine has been constructed and is in operation, however, capital expenditures
that will be required in 2014 and 2015 regardless of the construction decision related to the
expansion Project include $11.6 million to complete the current phase of construction on
heap leach Pad 3, $15.2 million for the new power line, and a further $2.0 million for
technical support to the operation and the expansion Project.
Sustaining capital expenditures for the existing operation are estimated to total
$118.8 million over the remaining mine life. This includes an estimated $60.4 million for
mining, primarily for the rebuild and replacement of the open pit mining equipment fleet over
the life of the operation. A further $42.1 million has been estimated for future construction of
heap leach pad capacity after the current phase of construction. Other sustaining capital of
$16.4 million is estimated for general and administrative (G&A) purposes.
For the estimate of operating costs, the existing operation is assumed to continue to mine,
crush, and convey material to the heap leach pads at the same rate as the current
16,200 tonnes per day. Mining costs are estimated to total $700.2 million to mine
340.6 million total ore and waste tonnes, including the cost of stockpiling and re-handling
stockpiles over the life of the mine. Processing costs are estimated to total $554.1 million to
process 69.7 million tonnes, including the cost of solution recirculation for leach-down. G&A
charges are estimated to total $170.8 million over the life of mine.
August 2014 22 of 171

1.7.2 Estimated capital, sustaining capital, and operating costs of the proposed
expanded operation
The estimated capital cost over the life of the underground mine is $77.6 million. Of this,
$34.8 million can be considered initial capital, which includes all costs incurred in the first two
years and the cost of mobile equipment entering the fleet at the beginning of the third year.
All primary access declines and ventilation designs are capitalized, while level development is
capitalized during the first two years and treated as an operational expense thereafter.
Based on the underground mining schedule, a cost model was developed that produced a
total operating cost over the life of mine of $175.6 million, which equates to $34.94 per tonne
of feed mined. Operating costs include all underground mining costs, up to the delivery of the
feed to the crusher stockpile, or waste to the final backfill or waste rock facility location. Key
inputs to the mining cost estimate include diesel fuel at $1.02 per litre, electrical power at
$0.12 per kWh, and cement at $194 per tonne. Operating costs are estimated to be expended
at an annual rate of between $15 and $18.5 million.
The initial capital cost estimate for the pulp agglomeration process plant addresses the
completion of design engineering, procurement, construction, and start-up of a nominal
5,600 tonnes per day circuit for preparing a high grade silver and gold feed amenable to
cyanide leaching via a heap leach pad. The initial capital costs are expected to be on the order
of $69.6 million, including $35.3 million of direct capital, $20.0 million of indirect capital, and
$14.3 million of contingency.
Sustaining capital costs for the addition of a pulp agglomeration plant includes an estimate of
an additional $6.4 million for the additional heap leach pad tonnage, $2.7 million for the pulp
agglomeration plant, and a reduction of $0.3 million in G&A costs due to cut-back of one year
of metal production because of the higher treatment rate with the addition of the pulp
agglomeration plant as well as better recovery kinetics of the pulp agglomerated material.
Operating costs are estimated at $339.5 million, including $112.8 million for reagents and
consumables, and $54.7 million in G&A.
1.7.3 Estimated financial metrics of the existing operation
The operating cash flow of the existing operation is anticipated to total $825.8 million, which
is comprised of an estimated revenue of $2,602.9 million, $1,425.1 million in operating costs,
$21.9 million in smelting and refining charges, $13.0 million relating to the new 0.5%
extraordinary mining duty on gross revenue, $72.3 million on third-party royalties,
$71.6 million relating to the new 7.5% special mining duty on earnings before interest, tax,
depreciation, and amortization (EBITDA), and $171.0 million in income taxes. After
accounting for reclamation and capital expenditures, the total net cash flow for the operation
is estimated to be $671.4 million. The after tax NPV at an 8% discount rate is estimated at
$389.6 million.
1.7.4 Estimated financial metrics of the proposed expanded operation
The operating cash flow of the expanded operation is anticipated to increase to
$1,163.6 million, comprised of $3,377.1 million in revenue, $1,723.5 million in operating
costs, $28.6 million in smelting and refining charges, $16.9 million relating to the new
extraordinary mining duty, $93.7 million in third party royalties, $103.8 million relating to the
August 2014 23 of 171

new special mining duty, and $244.6 million in income taxes payable to the government. After
$479.8 million.
1.8 Environmental, social, and community impact

The most significant environmental liabilities associated with the Dolores Property include
surface disturbance and reclamation liabilities and issues related to the stability and
containment system of heap leach Pad 1, which developed prior to Pan Americans
acquisition of the Property. Pan American has implemented additional contingency measures
in and around leach Pads 1 and 2, and has commenced the relocation of ore to Pad 2 to allow
rebuilding of Pad 1 for future operation. Pan American has also completed construction and is
operating an extension to Pad 2, after application of rigorous quality control to both the
design and construction of the facility, and has finalized construction of the first phase of
Pad 3.
The Dolores staff community relations team implements an extensive program of community
engagement activities including information sessions, infrastructure works, and educational
and training programs for local people, which have resulted in the establishment of several
important businesses. Unskilled workers are sourced from nearby small villages, and the
company has recruiting and training programmes in place to develop the mining skills of the
local workforce.
Due to the relative scale, the physical and organizational changes proposed in the expansion
Project are unlikely to modify the existing environmental and social impacts at the Property. A
permit modification for the Project would be lodged with the Mexican authorities and the
processing of that permit application is not expected to create unmanageable time delays or
risk to the realization of the Project.
There are no known environmental or social issues that could materially impact the mines
ability to extract the mineral resources or mineral reserves or affect the viability of the
expansion Project.
1.9 Conclusions and recommendations

1.9.1 Existing operation
The Dolores mine was acquired by Pan American in 2012 as part of the acquisition of
Minefinders. Pan American has operated the mine for the last two years, and following an
initial period of investment, particularly in building heap leach pad capacity, the operation is
now at steady state.
This technical report demonstrates that the proven and probable mineral reserves in the
mine plan will be economic with the forecast metal prices and other assumptions. Based on
the current mineral reserves, the mine is projected to continue to produce silver and gold
until 2030. This projected mine life may increase if additional mineral resources are defined
and can be converted to mineral reserves.
August 2014 24 of 171

There are no known drilling, sampling, or recovery factors that could materially impact the
reliability of the drilling results used to estimate mineral resources and reserves. Pan
American intends to continue annual near-mine diamond drilling programmes to test the
southern and down dip extents of the currently defined mineralization and to conduct regular
infill drilling of the deposit to upgrade mineral resource and reserve confidence categories.
There are no known significant risks and uncertainties that could reasonably be expected to
affect the reliability or confidence in the mineral resource and reserve estimates. Pan
American routinely conducts reconciliation of the reserve model to the grade control model
and to the heap leach feed conveyor weight meter and sampler in order to monitor actual
mine versus model performance. Between January and the end of May, 2014, sample grade
information obtained from closer spaced grade control drilling (10 m along strike and 15 m
across strike) has allowed the operation to identify and economically mine additional lower
grade material in some areas that was either not identified by the exploration drillhole data
used to estimate the mineral reserve, or else was not supported by sufficient data to estimate
the tonnes and grade of the mineralization to mineral reserve levels of confidence.
Additionally, in some areas the closer spaced grade control drilling has revealed less physical
continuity of the economic zones as assumed by the interpretation of the wider spaced
exploration data. These two factors have resulted in the operation mining year to date 21%
more ore tonnes at a 17% lower silver grade and a 26% lower gold grade, for a difference of
nil in silver ounces and 10% fewer gold ounces relative to the tonnes, grade, and contained
metal estimated in the reserve model.
For the existing heap leach only operation, column leach testing on a range of mineralization
grades and lithologies from the Dolores deposit yielded gold recoveries ranging between
51% and 91%, and silver recoveries between 23% and 74%, all at a target particle size of
P80 6.3 mm. The metallurgical recovery model created for the mineral reserve estimate
estimates gold recoveries of 81.5% for oxides and 66.1% for mixed and sulphide ores, and
silver recoveries of 47.4% for oxides and 59.2% for mixed and sulphide ores. The kinetic
model created for the mineral reserve estimate assumes a three year period to achieve
ultimate gold recovery and five years to achieve ultimate silver recovery. The authors have
reviewed these models and conclude that they are consistent with recovery tracking
observations in the heap leach operation at the mine.
Pan American should continue to optimize blasting patterns, including continuing to measure
blast movements, and to monitor pit slope stability, as per good mining practices.
1.9.2 Proposed expanded operation
For the expansion Project, it is the authors opinion that sufficient test work has been
conducted to confirm that the recovery of silver and gold increase at finer grind size at
Dolores. The metallurgical recovery model created for the pulp agglomeration of high grade
mineralization presented in this preliminary economic assessment estimates gold recoveries
of 89.3% for oxides and 82.4% for mixed and sulphide material and silver recoveries of 66.1%
for oxides and 76.7% for mixed and sulphide material, all at a particle size of P80 425 microns.
The kinetic model created for pulp agglomeration assumes a one year period to achieve
ultimate gold recovery from oxide material and two years to achieve ultimate gold recovery
from mixed and sulphide material. The ultimate silver recovery of all material types subject to
August 2014 25 of 171

pulp agglomeration is assumed to take two years. The authors conclude that these models
are reasonable and respect the available data.
The load / permeability tests that have been conducted and the experience gained from other
operations using a similar process provide a reasonable degree of assurance that the
agglomerates will remain stable in the heap leach stack. The ponding issue on the master
composite using 15 kg/t of cement and shortened curing time is an indication that the
operation would need to be vigilant in ensuring a minimum of 20 kg/t of cement and
adequate curing time during actual operations.
The pilot plant testing results provide a good degree of confidence for rod and Vertimill sizing.
Filtration and other testing have also been conducted. The authors consider that the
metallurgical and recovery methods have been developed to the point to confirm the
concepts.
recovery of precious metals in the high grade material relative to the existing heap leach
method. The improvement in recovery of the high grade fraction due to pulp agglomeration is
The preliminary economic assessment of expanding the Dolores mine by adding a milling and
pulp agglomeration circuit to the processing flow sheet to enhance silver and gold recoveries
of higher grade mineralization, as well as by developing an underground mine to extract
mineral resources that exist beneath and to the south of the ultimate open pit floor, has been
shown to have positive economic results.
agglomeration plant construction is completed. The proposed underground mining method is
open stoping, a low cost mechanized bulk mining method appropriate for the competent
construction time.
The expansion Project will increase total average annual silver production from 3.7 million
ounces to 5.0 million ounces, while total average annual gold production will increase from an
estimated 111,000 ounces to 148,000 ounces. The projected mine life of the expanded
August 2014 26 of 171

operation may increase if additional mineral resources are defined and can be converted to
mineral reserves.
The expansion Project also considers cost savings in replacing onsite power generation with
the installation of a high voltage power line approximately 110 km long to connect the
Dolores operation with the main electrical grid in Chihuahua.
The preliminary economic assessment is based on a mineral inventory of approximately
80.3 million tonnes of oxide, sulphide, and mixed oxide/sulphide material sourced from a
combination of open pit and underground mining and treated at a rate of 20,000 tonnes per
day, including 14,400 tonnes per day from the existing crusher and 5,600 tonnes per day from
the pulp agglomeration plant. The estimated after tax NPV of the incremental cash flow at an
8% discount rate is $90.2 million, with an internal rate of return of 33% and a capital payback
period of 1.7 years, using the Companys current reserve metal prices of $22 per ounce of
silver and $1,300 per ounce of gold. At metal prices of $19 per ounce of silver and $1,200 per
ounce of gold, the estimated after tax NPV of the incremental cash flow at an 8% discount is
$65.6 million, with an internal rate of return of 27%.
The initial capital requirements for the Project are estimated at $104.5 million, including
$69.7 million for the pulp agglomeration plant and $34.8 million for the underground mine.
Other capital projects that are required for the expansion to be successful, but which will
proceed regardless of the construction decision related to the expansion Project, include an
estimated $15.2 million for the power line installation, $11.6 million for leach pad
construction, and $2.0 million for technical support to the operation.
Sustaining capital costs are estimated at $170.3 million, including $60.4 million for the open
pit mine, $48.4 million for the expanded heap leach pad operation, $42.8 million for the
underground mine, $16.1 million for G&A, and $2.7 million for the pulp agglomeration plant.
Many of these sustaining capital expenditures will be required regardless of the construction
decision related to the expansion Project. The incremental sustaining capital expenditures
associated with the Project total $51.5 million spread over the mine life.
Operating costs in the open pit mine vary by depth and haul distance and are estimated to
average $1.91 per tonne over the life of mine. Underground mining costs are estimated to
average $34.94 per tonne. Heap leach costs with the benefit of grid power beginning in 2016
and the additional volume from the pulp agglomeration plant will decline by approximately
$2 per tonne. Pulp agglomeration costs with grid power and sharing the cost of the existing
facilities that will be used for all material (Merrill-Crowe plant, refinery, and leaching system)
are estimated at $15.20 per tonne. G&A costs for the mine and heap leach are estimated to
be $1.99 per tonne and $3.01 per tonne for pulp agglomeration.
There are no known significant risks or uncertainties that could reasonably be expected to
affect the reliability and confidence in the projected economic outcomes. The preliminary
economic assessment is preliminary in nature and includes inferred resources which are
considered too speculative geologically to have the economic considerations applied to them
that would enable them to be categorized as mineral reserves, and there is no certainty that
the assessment will be realized.
Pan American has decided to defer making a construction decision for the next nine to
12 months while it invests a modest amount of capital (estimated at $3.0 to $5.0 million) to
August 2014 27 of 171

proceed with additional studies, and continue the delineation of the underground accessible
mineralization, in order to further de-risk the Project. This will allow Pan American more time
to operate the mine at its optimum steady state, prior to introducing further investment and
changes, and to continue to reconcile actual mining results with mineral reserve estimates to
ensure the reliability of the mineral resource and reserve estimates, which form the basis for
the expansion plan. The mine plan indicates that the highest incremental returns from the
Project do not commence until 2017, when mining of higher grade material from the open pit
begins, and as a consequence there is a built-in window of time to further de-risk the Project
without sacrificing the economic returns, while monitoring the prices of silver and gold.
It is recommended to advance the preliminary economic assessment of the proposed
expansion Project to a pre-feasibility study level. This will require more detailed engineering,
mine plans, test work, and cost estimates to more accurately assess the technical feasibility
and economic viability of the Project and to finalize the anticipated flow sheet. The cost of
this work is estimated at approximately $1.45 million.
The secondary crushing equipment selected for this study has been sized in common with the
existing crushing plant, which affords benefits in areas such as spares stockholding. If the run
of mine feed size can be reduced by varying the blasting practices in the pit, then smaller and
less expensive primary and secondary crushing equipment may be used. It is recommended
to evaluate the benefits of varying the blasting practices in the pit in order to reduce the size
and cost of the crushing equipment in the pulp agglomeration plant.
An opportunity lies in diverting the rod mill product to pre-leach holding tanks for early
recovery of silver and gold prior to the thickening and filtration process. This option may be
more attractive at higher metal prices. Additional studies are required to compare the
additional capital and operating costs versus the advantage of improved kinetics.
The authors recommend exploring opportunities to optimize the filtration equipment. There
is an opportunity to use vacuum filters if medium grade material is added to the
agglomeration drums to help control the moisture content while forming agglomerates.
Diverting the crushed medium grade material to the agglomeration drum circuit will add
flexibility to the high grade filter cake moisture content; however the system will be exposed
to the variability in the moisture content of the crushed medium grade that changes with the
seasons at the mine. It is recommended to quantify the peaks of maximum moisture content
in the crushed medium grade material in order to evaluate the optimization of filtration
equipment.
Pan American is currently preparing samples for additional load permeability tests to assess
the behaviour of the agglomerates under the current design conditions and height of the
heap leach pads. Initial tests have confirmed the permeability with 20 kg of cement per tonne
of high grade material, and further testing with variable feed is recommended. An estimated
$1 million will be required for the additional testing, the trade-offs, and to advance the
engineering and cost estimates of the process area to a pre-feasibility study level.
The authors recommend advancing the expansion studies to a pre-feasibility study level to
update the recovery and cost parameters and to re-optimize the pit design used in the
estimation of mineral reserves. The open pit mining plan used in the preliminary economic
assessment has a slightly higher production rate than is currently achieved at the mine and
additional open pit production is expected to be supplied by an existing contractor and by
August 2014 28 of 171

purchasing additional mine haulage trucks. Implementation of the pulp agglomeration

processing option will require additional mining selectivity to separate the high grade portion
of the deposit for grinding, which will require a manageable adjustment to current grade
control practices, but is not likely to result in significant additional mining costs.
The authors further recommend advancing the underground studies to a pre-feasibility study
level in order to convert the underground mineral resources to mineral reserves. This will
require pre-feasibility study level underground mine designs, plans, schedules, and cost
models so that the value of the proposed underground operations can be assessed with a
higher level of confidence. Other studies will include advancing geotechnical test work and
analyses, addressing the open pit and underground interactions and interfaces, and assessing
the appropriating mining and back filling techniques. Work should also be done to understand
the geothermal gradient and heat loading in the mine.
Given the high level of existing knowledge about the geology and ground conditions at the
site, the amount of test work required for a pre-feasibility study for the underground mine is
anticipated to be much less than at a greenfield project. Key items to be addressed for a
future study include:
Additional studies of potential water inflow and water pumping requirements.
Improving the confidence of inferred resources which make up around two thirds of
the underground inventory. The primary access decline for the underground could
provide improved sites for diamond drilling to target structures beneath the pit.
Advancing the level of geotechnical knowledge, particularly where the underground
and open pit operations will be in close proximity to each other.
Conducting a more detailed assessment of the cemented rock fill requirements and
schedule.
Understanding the geothermal gradient and heat loading in the mine.
Identify the permitting requirements for the addition of an underground operation.
Develop pre-feasibility level mine designs, plans, schedules, and cost models so that
the value of the proposed underground operations can be assessed with a higher
level of confidence.
The estimated costs of pre-feasibility level underground mine designs, plans, schedules, and
cost models is $450,000. Given a positive outcome of these studies, Pan American may
conclude that the most effective method of assessing the geotechnical and geothermal
conditions and to improve the confidence of the inferred resource will be to develop part of
the primary access decline for underground and some of the planned level accesses prior to
making a final production decision on the underground mine.
As the pulp agglomeration plant and the underground are expansions to the existing Dolores
mine, Pan American may consider that upgrading only a portion of the inferred mineral
resource prior to making a decision on construction of the pulp agglomeration plant and the
underground mine may be an acceptable risk.
August 2014 29 of 171

2 Introduction
This technical report has been prepared by Pan American Silver Corp. (Pan American) in
compliance with the disclosure requirements of Canadian National Instrument 43-101 (NI 43-
101), to disclose relevant information about the Dolores Property. This information has
resulted from additional mineral resource and reserve delineation drilling, updated mineral
resource and mineral reserve estimates, and a preliminary economic assessment of an
expansion of the Dolores mine to include pulp agglomeration treatment and an underground
mine to extract economic material from beneath the current pit limits. This technical report
supports the disclosure of the updated mineral resources and reserves and the results of the
preliminary economic assessment.
The effective date of this technical report is May 31, 2014. The drilling data cut-off date for
the geological interpretation and mineral resource estimation was October 22, 2013. The
economic analysis to determine the appropriate cut-off values for reporting mineral
resources was complete by May 31, 2014, and the in situ mineral resources and reserves
were depleted for mining and stockpiles were inventoried as at May 31, 2014. No new
material information has become available between these dates and the signature date given
on the certificate of the qualified persons.
Pan American is a silver mining and exploration company listed on the Toronto (TSX:PAA) and
NASDAQ (NASDAQ:PAAS) stock exchanges.
Unless otherwise stated, information, data, and illustrations contained in this report or used
in its preparation have been provided by Pan American for the purposes of this technical
report. This technical report has been compiled from sources listed in the References section
and cited in the text by Martin Wafforn, P. Eng., Vice President, Technical Services for Pan
American, Michael Steinmann, P. Geo, Executive Vice President, Corporate Development and
Geology for Pan American, and Americo Delgado, P. Eng., Director, Metallurgy for Pan
American. Messrs. Wafforn, Steinmann, and Delgado are qualified persons as defined by
NI 43-101 and are not independent of Pan American. The responsibilities of each co-author
are provided in Table 2.1.
Mr. Wafforn visited Dolores on November 22, 2011 as part of the due diligence reviews
undertaken in support of the acquisition of Minefinders, during July 16 and 17, 2012 in
support of the integration of the Property with Pan American, during October 1 and 2, 2012
as part of the annual mineral reserve estimate and budget reviews, from March 10 to
15, 2013 to review the pulp agglomeration process studies, during August 20 to 21, 2013 to
review the operational mine plan, from October 29 to 31, 2013 for pulp agglomeration
project meetings, and on March 31, 2014 as part of a mine tour. During these visits Mr.
Wafforn reviewed the operational mine plan, actual mine operation data, grade control and
blasting protocols, geotechnical data, the crushing and heap leach facilities, the site layout
August 2014 30 of 171

and logistics for mining and processing, safety protocols and indicators, the environmental
layout, and general business performance.
Mr. Steinmann visited Dolores during March 30 and 31, 2011 and on November 22, 2011 as
part of the due diligence reviews in support of the acquisition of Minefinders, during
August 20 to 21, 2013 and on February 27, 2014. During these visits Mr. Steinmann reviewed
the exploration drilling, sampling, and sample security protocols, drill core and the core
cutting and storage facilities, bench and surface mapping, cross sections, the operational
mine plan, actual mine operation data, grade control protocols, mining leases, site access,
and surface rights information, and general business performance.
Mr. Delgado visited the Property from February 21 to 24, 2012 to evaluate heap leach Pads 2
and 3, from April 18 to 20, 2012 to review Pad 3 and well riser designs, from May 28 to
June 1, 2012 to work on Pad 3 and well riser designs, to review the mill studies, and to audit
the analytical lab, from October 15 to 17, 2012 for mill study meetings, from November 14 to
16, 2012 to review the mill studies and Pad 3 design and construction, from July 17 to 19 2013
to review the pulp agglomeration plant layout and study progress, from March 11 to 16, 2013
to review the pulp agglomeration process studies, and from May 19 to 23, 2014 to review the
pulp agglomeration pilot plant testing. During those visits Mr. Delgado reviewed operational
data such as metallurgical results, production, reagent consumption, treatment rates,
pumping capacities, pond levels, and solution concentrations. He additionally reviewed the
heap leach facilities, the heap leach layouts, the heap leach pad expansion plans, the stacking
system, stacking plans, well riser construction, water facilities, crushing plant facilities,
crushing plant availabilities and utilization, metallurgical lab procedures, analytical lab
procedures, pulp agglomeration plant locations, mill pilot plant testing and procedures, and
general business performance.
Table 2.1 Responsibilities of each qualified person

Qualified person Company Responsible for sections
Martin Wafforn, P. Eng. Vice Pan American Silver Corp. 1: Summary; 2: Introduction; 3: Reliance on
President, Technical Other Experts; 4: Property Description and
Services Location; 5: Accessibility, Climate, Local
Resources, Infrastructure and Physiography;
12: Data Verification; 15: Mineral Reserve
Estimates; 16: Mining Methods; 19: Market
Studies and Contracts; 20: Environmental
Studies, Permitting and Social or Community
Impact; 21: Capital and Operating Costs; 22:
Economic Analysis; 24: Other relevant data
and information; 25: Interpretation and
Conclusions; 26: Recommendations; 27:
References
Michael Steinmann, P. Geo. Pan American Silver Corp. 1: Summary; 2 :Introduction; 6: History; 7:
Executive Vice President, Geological Setting and Mineralization; 8:
Corporate Development and Deposit Types, 9: Exploration; 10: Drilling; 11:
Geology Sample Preparation, Analyses and Security;
12: Data Verification: 14: Mineral Resource
Estimates; 23: Adjacent Properties; 25:
Interpretation and Conclusions; 26:
Recommendations
August 2014 31 of 171

Qualified person Company Responsible for sections

Americo Delgado, P. Eng., Pan American Silver Corp. 1: Summary; 2: Introduction; 12: Data
Director, Metallurgy Verification; 13:Mineral Processing and
Metallurgical Testing; 17: Recovery Methods;
18: Project Infrastructure; 21: Capital and
Operating Costs; 25: Interpretation and
Conclusions; 26: Recommendations
Unless otherwise stated, all units are metric and currencies are expressed in United
States dollars. Project data coordinates are in a local coordinate based on a transformation
relative to the Mexico 97 geoid.
August 2014 32 of 171

3 Reliance on other experts

The qualified persons preparing this technical report have not relied on the reports, opinions,
and statements of other experts for the preparation of this technical report.
August 2014 33 of 171

4 Property description and location

4.1 Location, issuers interest, mineral tenure, and surface rights
The Dolores mine is located in Chihuahua state, Mexico, approximately 250 km west of the
city of Chihuahua, at 2900 North, 10832 West. Pan American is the 100% owner of the
Dolores mine and the mining concessions, through its wholly owned subsidiary, Compaa
Minera Dolores S.A. de C.V. A Google map of the Property location is given in Figure 4.1.
Figure 4.1 Property location map
Hermosillo Dolores project

Chihuahua
50 km
The mineral rights are held under three contiguous mining concessions with a total area of
27,700 hectares covering the entire mineral resources, mineral reserves, and surface
infrastructure. Pan American makes the required semi-annual payments to maintain the
mining concessions and has agreements in place granting surface rights and legal access to
the mining operations, and to Pan Americans knowledge, all obligations required for the
conduct of mining operations at Dolores are currently in good standing. Details of the mining
concessions are given in Table 4.1. A plan prepared by Pan American of the mining
concessions and surface rights relative to the pit outline as at May 31, 2014 is given in Figure
4.2.
August 2014 34 of 171

Table 4.1 Mining concession details
Claim name Claim number Area (ha) Expiry date

Silvia 217587 2,866 August 20, 2052
Unificacion Real Cananea 227028 1,920 December 12, 2039
Dolores 221593 22,914 March 3, 2054
Figure 4.2 Mining concessions and surface rights relative to the pit outline
August 2014 35 of 171

4.2 Royalties, back-in rights, payments, agreements, and encumbrances

A net smelter return of 2% on silver production and 3.25% on gold production is payable to
RG Mexico Inc., a subsidiary of Royal Gold Inc. There are no other known back-in rights,
payments, agreements, or encumbrances in place.
4.3 Environmental liabilities

acquisition of the Property. A tear in the liner of Pad 1 developed in June 2010 following
movement in the stability berm and significant leakage was collected by the leak collection
system. Minefinders ceased stacking and irrigation on Pad 1 and relocated approximately
2 million tonnes of ore to heap leach Pad 2. The pad under the excavated material was
examined and stabilized with an additional retaining wall structure, and the damaged liner
was repaired. No sodium cyanide was detected in the downstream surface and ground water
sampling points as a result of the failure, and continued soil and water sampling below Pad 1
has confirmed that no residual cyanide is present.
Approximately 8 to 9 million tonnes of ore remain in a stable state on Pad 1, awaiting transfer
to another operational pad. A small portion of that ore is currently being transferred by truck
to Pad 2 to complete that pads design capacity. Full remediation of the liner system will be
required as the life of mine plan and leach pad capacity estimates indicate that Pad 1 will be
required for use in the future. The additional costs associated with moving the ore and
reconstructing the pad, as well as the additional metal production from the partially spent ore
currently on Pad 1, have been accounted for in the life of mine plan.
Pan American has implemented additional contingency measures in and around leach Pads 1
and 2, including the installation of well riser type over-liner solution collection systems,
additional under drain and leak collection systems, and a network of containment,
monitoring, and demonstration wells. Pan American has also completed construction and is
Pad 3.
The surface disturbance and reclamation liabilities are addressed under Pan Americans
project reclamation and closure plan, which is discussed in Section 20.10.
4.4 Permits
Pan American holds all necessary environmental and operating permits for the development
and operating of the existing mine and is in compliance with Mexican law.
Permit applications for the construction and operation of Dolores, including an Environmental
Impact Study or Manifestation (MIA), a Technical Justification Study for Change of Land
Use, and an Environmental Risk Study were approved by the Mexican Secretariat of
Environment and Natural Resources (SEMARNAT) in April 2006. These studies include a full
assessment of the environmental and social impacts of the mine and environmental
August 2014 36 of 171

management plans, which describe the ongoing management and environmental monitoring
programs. Other principal permits include an Accident Prevention Program, a Surface Water
Extraction Authorization, an MIA for an underground exploration ramp, and a Waste
Management Plan. These permits are renewed regularly and as far as Pan American is aware,
all of the permits required for the mine and processing operations are in good standing.
Modifications to the existing permits will be necessary to obtain authorization for future
activities such as adjustments to the life of mine open pit operations, waste rock facilities,
and leach pads; expansion of the processing facilities to include additional crushing and a new
grinding, leaching, and pulp agglomeration circuit; and development of an underground mine.
Any modification application for these activities will require an updated MIA, Environmental
Risk Assessment, and Technical Justification Study for Land Use Change. The required
technical baseline studies and impact assessment for these updates would be based on the
extensive monitoring database that has been developed over the past seven years, and
conducted by an independent environmental consultant. Due to the minor changes in
footprint and the overall impacts that these changes imply, as well as the current good
standing of the existing permits, it is expected that the necessary permit modifications could
be completed within standard regulatory timeframes of five to seven months.
The power line connection from Chihuahua will be the subject of a separate approvals
process managed with the CFE.
4.5 Significant factors and risks

There are no known significant factors or risks that may affect access, title, or the right or
ability to conduct mining, processing, and exploration at Dolores.
August 2014 37 of 171

5 Accessibility, climate, local resources, infrastructure, and

physiography
Information in this section is referenced and updated from Chlumsky, et. al. (2011).
5.1 Physiography and climate

The topography at the mine site is rugged, with elevations ranging from 1,200 to
2,000 metres above sea level. The vegetation is typical of the foothills of the Sierra Madre and
ranges from thorn scrub and cactus to oak and pine forests at higher elevations. The climate
is also typical of the Sierra Madre with an average annual temperature of 18 C, an annual low
of -10 C, and an annual high of 45 C. Annual precipitation averages around 250 millimetres,
with much of it occurring between July and September as brief heavy rainstorms. Short-lived
snowfall is common in December and January. Mining and exploration work may be carried
out year round.
5.2 Accessibility, local resources, population centres, and transport

The main road access to the Property is via 92 kilometres of unpaved roads leading north
from Federal Highway 16, near Yepachic, Chihuahua. Access for personnel is also provided by
an unpaved landing strip suitable for light aircraft, located about 8 kilometres from the mine.
The nearest major population centre is at the city of Chihuahua, located 250 kilometres to the
east. Employees travel to the mine either by road or by light aircraft, while materials come by
road.
The local economy is based on logging, ranching, and subsistence farming. Unskilled workers
are sourced from nearby small villages, and the company has recruiting and training
programmes in place to develop the local workforce. Much of the mine workforce is
supplemented from the town of Ciudad Madera located 50 km east of Dolores, from the city
of Chihuahua, and from the city of Hermosillo in the state of Sonora, located 350 kilometres
to the west. Both Sonora and Chihuahua states have an established mining culture and
provide a pool of experienced workers, as well as vendors and contractors who provide
services to the Dolores site.
5.3 Surface rights

The majority of the surface rights on the Property are owned by Ejido Huizopa. An ejido is an
area of communal land registered with the National Agrarian Registry of Mexico and parcelled
out to community members for agricultural use. Pan American has surface rights agreements
with Ejido Huizopa and with several individual members of the Ejido dating from November
2006 which allows for irrevocable access and the right to carry out exploration and mining
activities for a term of 15 years with a right to extend for a further 15 years. These surface
rights provide sufficient access to the mining operations, waste storage areas, heap leach pad
areas, and other facilities.
August 2014 38 of 171

5.4 Power and water

Water for the operations is sourced from wells, the historical underground workings, pit
dewatering activities, the nearby Tutuaca River, and more recently from the Chabacan dam.
The wells yield 9 litres of water per second while the nominal pumping capacity from the river
is 47 litres per second from an available supply of 57 litres per second. Water availability from
the river is substantially limited during the dry season, which typically runs from April to June.
Water supply lines have been installed from the Tutuaca River to the Chabacan dam which is
located to the west of the waste storage facility and then from the dam to the processing
facilities. The Chabacan dam reservoir has a capacity of 1.2 million cubic metres and provides
storm water control as well as the primary water storage. The permitted water usage from
the Tutuaca River is 2.0 million cubic metres per annum at a maximum rate of 64 litres per
second. The current consumption is well under this limit with annual water usage estimated
at approximately 800,000 cubic metres.
Power is currently generated on site by six 1,800 kW Cummins and two 1,200 kW Caterpillar
diesel generators. This reserve provides the start current requirements of the existing primary
or tertiary crusher motors and also allows for planned and unplanned shutdown of two
generating sets for maintenance, without disturbing the plant operations. The existing power
station capacity is a total of 13.2 MW. In 2014, the power demand for the existing operations
are forecast to average 6.8 MW, reaching a maximum of 8.4 MW when re-starting the crusher
motors, which are the largest motors on site. Power costs using diesel generators are
anticipated to be in the order of $0.29 per kilowatt hour, depending on the cost of diesel.
economic benefits of the installation of a high voltage power line to the Dolores operation to
replace the existing diesel generators. An initial study completed by the CFE, showed that the
project is strongly economic, with initial capital costs in the $15 to $20 million range. The
initial economics based on the projected power requirements in 2014 and the current diesel
fuel consumption and costs indicated annual savings of $7.5 million in diesel fuel costs alone.
Savings in the maintenance and replacement costs of the existing generators further add to
the benefits of the project. The additional power costs associated with the expanded
operation, particularly for crushing and grinding, would essentially double the annual savings.
Chihuahua electrical grid is expected to be completed by the beginning of 2016. There is
some uncertainty associated with these negotiations in determining the final cost and
schedule. The current estimate for completion is between $15 million to $20 million with a
two year period required for right of way negotiation, environmental assessment, permitting,
and construction.
5.5 Infrastructure
The existing infrastructure includes the typical components of an operating open pit mine,
including the mine workings, the processing facilities, heap leach pads, medium grade
mineralization stockpiles, waste rock storage facilities, workshops, laboratories, storage
facilities, offices, drill core and logging sheds, water and power lines, access roads, a light
August 2014 39 of 171

aircraft landing strip, and the workers camp and recreational facilities. A plan of the existing
infrastructure is given in Figure 18.1.
August 2014 40 of 171

6 History
Information in this section is referenced and updated from Chlumsky, et. al. (2011).
Placer mining began in the region of the Dolores mine in the 1860s and was followed by lode
mining in 1898. A power line from the town of Madera was installed in 1915, and a 25 tonne
per day stamp mill began treating the Dolores ore until it was destroyed by fire in early 1929.
Only sporadic production occurred from 1929 to 1931, after which there are no further
records of any historical production. Incomplete mining records from between 1922 and 1931
indicate that on the order of 372,000 tonnes of ore containing over 116,000 ounces of gold
and 6 million ounces of silver were mined from several underground operations, including
Dolores.
The Property lay idle until 1993 when Minefinders Ltd. began acquiring a land position in the
district. Minefinders began a full exploration programme in November 1995 and commenced
drilling programmes in September 1996, using both diamond and reverse circulation drilling
methods.
In July 1996, Minefinders granted Echo Bay Mines (Echo Bay) an option in the Property and
Echo Bay commenced drilling, sampling, environmental data collection, and metallurgical
testing. Minefinders bought back the option, including the information collected by Echo Bay,
in October 1997.
A number of historical mineral resource estimates have been prepared for the Property since
1997. In 2003 Minefinders commenced a feasibility study to evaluate various process options
and in June 2005 disclosed a mineral reserve estimate and the results of a technically and
financially feasible operation involving open pit mining operations and heap leaching of
tertiary crushed ore followed by the Merrill-Crowe process for silver and gold metal recovery.
Following the results of the positive feasibility study, Minefinders undertook detailed
engineering and optimization of the mine plan as well as updates to the mineral resource and
mineral reserve estimates.
Construction of the mine began at the end of 2006, with the commissioning period occurring
between September 2008 and January 2009. The construction of the treatment process
followed the recommendations made in the 2005 feasibility study and comprised a crushing
plant, conveying and stacking facilities, leach pads, solution ponds, and Merrill-Crowe and
refining facilities. The first dor was produced in November 2008 and commercial production
began in May 2009. During the 2008 to 2011 period, Minefinders mined 25.5 million tonnes
and stacked 18.3 million tonnes of ore on the leach pads, producing 210,660 ounces of gold
and 6.2 million ounces of silver. The remaining low grade material has been stored in
stockpiles for later treatment.
Pan American acquired the Dolores mine from Minefinders at the end of March 2012 and
assumed control of mining operations in April 2012. As at December 31, 2013, 13.3 million
ounces of silver and 335,200 ounces of gold have been produced from modern operations at
Dolores.
August 2014 41 of 171

7 Geological setting and mineralization

Information in this section is referenced from Pratt (2013).
7.1 Regional geology

Pre-Tertiary rocks in northern and mid-Mexico comprise a jigsaw of oceanic and island arc
terranes (Campa and Coney, 1983). Figure 7.1 shows a regional map of the tectono-
stratigraphic terranes of Mexico, as redrawn from Campa and Coney (1983). These elongate
terranes create the mostly northwest structural grain apparent on national and regional
maps. Strike-slip movements, driven by Pacific microplates pushing into the Caribbean, played
an important role in assembling the terranes. This process continues to the present day,
exemplified by the major dextral (right lateral) offset on the San Andreas Fault system, which
continues into the Gulf of California before joining the East Pacific Rise.
Dolores occurs within the Sierra Madre Occidental volcanic belt, an arc formed by eastward
subduction of the Pacific Plate. The lower part of the arc comprises late Cretaceous to early
Tertiary calc-alkaline batholiths and equivalent volcanosedimentary rocks. This is generally
referred to as the 'Lower Volcanic Supergroup' or 'Lower Volcanic Series' (McDowell and
Keizer, 1977, Wark et. al., 1990, and Wark, 1991). It represents magmatic activity during the
mostly thin-skinned Laramide orogeny (about 80 to 40 million years ago). This was followed
by two periods of major ignimbrite eruption in the early Oligocene and early Miocene.
Collectively these constitute the 'Upper Volcanic Supergroup' or 'Series' (McDowell and
Keizer, 1977). The ignimbrites were accompanied by minor andesite/basalt flows and rhyolitic
domes. Age dating suggests that the Upper Volcanic Supergroup began to be erupted at
about 35 to 32 million years ago and finished around 27 million years ago in the northern
Sierra Madre Occidental (Wark et. al., 1990 and Wark, 1991).
Precise isotopic dates are sparse, but many Mexican low sulphidation epithermal deposits
probably developed during the first ignimbrite phase, in a window between 40 and 27 million
years ago (Camprub et. al., 2003). Many deposits seem associated with the calderas that
produced the voluminous ignimbrites, for example the Ocampo Caldera. The epithermal belt
overprints an older belt of Eocene copper-molybdenum porphyries that includes Cananea and
La Caridad (Barra et. al., 2005).
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Figure 7.1 Tectono-stratigraphic terranes of Mexico (Pratt, 2013, redrawn from Campa
& Coney, 1983).
7.2 Local geology

The best available geological mapping is shown on the 1:250,000 Madera (H12-9) and
Tecoripa (H12-12) sheets produced by the Servicio Geolgico Mexicano and are available on
their website. The local geology shown in Figure 7.2 is based on these maps.
Bedding dips are mostly sub horizontal and gently undulating. The maps show a strong north-
northwest structural grain defined by many faults, some with apparent normal offsets. Some
of these regional faults probably had a syn-depositional history, controlling local basins.
Dolores lies about 42 km north-northeast of the Mulatos high sulphidation epithermal gold
deposits and 82 km north-northwest of Pinos Altos. Pinos Altos, a low sulphidation epithermal
vein system, lies on the northeast rim of the 30 km diameter Ocampo Caldera. This caldera
hosts a district of epithermal gold-silver deposits, including the Ocampo mine.
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Figure 7.2 Map of the local geology, redrawn from published 1:250,000 Servicio
Geolgico Mexicano map (Pratt, 2013).
7.3 Property geology

The following information is referenced from Overbay, et. al. (2001) and from fieldwork
undertaken in 2012 by Pan Americans structural geology consultants, Warren Pratt and
Miguel Ponce.
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7.3.1 Lithostratigraphy
The Property lithostratigraphy was previously split into 'Lower' and 'Upper Volcanic Series',
with a major unconformity inferred between them (Overbay et. al., 2001) and tentatively
correlated with the Upper and Lower Volcanic supergroups, although there is no definitive
work or mapping to confirm the correlation. It was suggested that mineralization occurred
before deposition of the Upper Volcanic Series (Overbay et. al., 2001). However, recent
mapping shows no clearly exposed stratigraphic break and the observed contacts between
the two series comprise mostly faults, as shown in the cartoon of the stratigraphic and
structural relations given in Figure 7.3. The most important faults, from west to east, are the
Chupacabras, San Francisco, and East faults. The San Francisco and its footwall host most of
the mineralization on the Property.
Figure 7.3 Cartoon of stratigraphic and structural relations at Dolores (Pratt, 2013. Not
to scale)
Lower Volcanic Series

A simplified geological map of the Dolores Property is given in Figure 7.4. The Lower Volcanic
Series is divided in two by Overbay et. al. (2001) and consists of a lower andesitic sequence
overlain by latites. The main andesitic outcrop forms a wide strip between the San Francisco
and East faults. It is the main host for mineralization and is cut by a swarm of north-northwest
striking dikes. It comprises alternating dark and light green units. Dark green units comprise
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massive, porphyritic andesite and basaltic andesite while feldspar and clinopyroxene
phenocrysts occur in the aphanitic groundmass. The light units are either strongly
amygdaloidal andesite or monomict andesitic breccias (autobreccias and transported volcanic
breccias). There are also minor hyaloclastites and hyalotuffs. The light green colour comes
from abundant epidote, sometimes in excess of 15%, locally giving a skarn-like appearance.
Peperite forms at the bases of some andesite by the interaction of igneous rock and wet
sediments.
Figure 7.4 Simplified geological map of the Dolores Property ( Pratt, 2013)
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Other rock types in the Lower Volcanic Series include thin acid welded and crystal-rich tuffs,
as well as bedded sandstones between andesite lava flows.
The andesitic sequence is overlain by several massive porphyritic latites, with minor
tuffaceous sediments. Their geometry is tabular and stratiform and they are interpreted to
have formed as lava flows and/or sills. The main outcrop forms a wide strip between the
Chupacabras and San Francisco faults. Petrography shows phenocrysts of potassium feldspar
and biotite (Overbay et. al., 2001). The latites are about 250 metres thick and the base is
apparently conformable. Latite crops out extensively around the heap leach pads and forms
cliffs at Cerro Colorado (shown in Figure 7.3). It also occurs widely on the west side of the San
Francisco Fault, up to the Chupacabras Fault. It forms most of the high west wall of the open
pit.
Fresh latite is purplish grey and comprises isolated feldspar phenocrysts, mostly less than
2 mm to 3 mm long, within a very fine grained groundmass. The texture is locally
glomeroporphyritic. Small biotite and long thin hornblende phenocrysts also occur. The rock
is locally flow banded, but to a much lesser extent than in the latite dikes at Dolores. Fresh
latite weathers like a plutonic rock, with onion-skin form, or is friable and crumbly.
The latites are widely hydrothermally altered and weather to a red colour by extensive
hematite alteration of disseminated pyrite. The source of the latite is unclear. There is no
obvious 'root' to indicate a volcanic neck or eruptive center. However, they are texturally
identical to the swarm of latite dikes at Dolores (see Figure 7.4). Overbay et. al. (2001)
suggests they may have been erupted from a diorite-diatreme complex present in the pit.
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There are some extensive areas of latite breccia that are not distinguished on Figure 7.4. They
comprise clast-supported, monomict latite blocks from 0.1 m to greater than 2 m diameter.
Patches of siliceous sediment commonly occur in between clasts which may be either
autobreccias or talus aprons spilling off flow fronts. They are also more deeply
hydrothermally altered than massive latite, perhaps because of improved permeability.
Transported latite breccia and lapilli tuff, with crude bedding and sorting, occurs in a few
places, overlying flow banded latite. A short distance to the north, this same lapilli tuff
overlies autobrecciated latite, the equivalent of the flow banded latite.
A body of strongly flow foliated latite occurs in the pit in the footwall (east) of the San
Francisco Fault. It is unusual because the flow banding is very intense and dips consistently
gently southeast. The body overlies andesites with a shallow, conformable contact. This latite
does not seem to correlate with the major latite flows to the west of the fault. This may be a
sill within andesitic rocks of the Lower Volcanic Series or one of the domes mentioned by
Overbay et. al. (2001).
Upper Volcanic Series

The Upper Volcanic Series comprises a bimodal sequence of rhyolite/obsidian, basalt, pumice-
rich lapilli tuffs and volcaniclastic rocks. It is well exposed on the two main access roads to the
mine and is preserved west of the Chupacabras Fault, and is possibly a caldera margin. The
tabular or lens-shaped rhyolites show widespread, flat-lying flow banding. Scattered perlitic
obsidian layers in the rhyolite contain large spherulites with drusy zeolites, quartz, and minor
amethyst.
The amygdaloidal and oxidised basalts are probably thin lava flows, and have peperitic bases.
The geological map given in Figure 7.4 shows all other lithologies as volcaniclastics (labelled
Volc). These comprise crystal tuffs, green non-welded pumice-rich lapilli tuffs, crystal-rich
sandstones, and conglomerates. They are mostly sub horizontal, though the dip varies where
they onlap rhyolite bodies. Some of the tuffs are pyroclastic surge deposits, with shallow
antidunes.
The topographically, and stratigraphically, highest rocks comprise a thick porphyritic andesite
flow (labelled UAnd in Figure 7.4), which is overlain by a basalt underlying the Dolores
airstrip.
The Baucarit Formation comprises polymict conglomerates, sandstones, and scattered
basalts. To the east of the East Fault, the formation sits directly on latites of the Lower
Volcanic Series and the Upper Volcanic Series appears to be absent, an indication of the
importance of fault control on sedimentation and volcanism at Dolores.
7.3.2 Intrusions
The immediate footwall and hanging wall of the San Francisco Fault form a 500 m wide
northwest-striking corridor of igneous intrusions broadly following the fault. However, there
is a tendency for dikes to strike slightly clockwise and there are also some splits and north-
northeast jogs.
There is a great variety of intrusive types. Field relations indicate that some are pre- and post-
mineralization. There are no isotopic dates, but the intrusions are probably of Eocene to
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Oligocene age and are broadly contemporaneous with mineralization. The rocks with the
most plutonic character occur in the south, where a steep-sided barren microdiorite stock,
500 m in diameter, straddles the San Francisco Fault. Coinciding with high grade
mineralization, it comprises weakly porphyritic diorite and marginal parts comprise
porphyritic quartz diorite with potassium feldspar-rich aplitic groundmass. Age relations are
not clear, but it appears to be cut by latite dikes. Exposures in the pit walls show very complex
intrusive relationships, including diorite chilled against possibly intrusive andesite. Deep
drilling shows a range of intrusive types in this area, including porphyritic granodiorite and an
unusual amygdaloidal porphyritic andesite packed with xenoliths of diorite. Probable
diatreme occurs in drill holes, but does not appear to crop out. Overbay et. al. (2001) suggests
that some of the intrusions pass upwards into flow-domes.
The dike swarm at Dolores is dominated by latite. This phase cuts the plutonic and sub
volcanic rocks and is clearly younger. It comprises strongly flow banded rock, with isolated
feldspar phenocrysts. Flow banding is parallel to the dike contacts, generally dipping steeply
west. The latite dikes are visually indistinguishable from the latite lavas of the Lower Volcanic
Series which is a major obstacle to geological interpretation. There were clearly several pulses
of intrusion as evidenced by the presence of xenoliths of early latite varieties within later
latites. The latite is in turn cut by late andesite dikes with a strong trachytic texture.
7.3.3 Structure
The sequence at Dolores is broadly flat-lying and suffered no significant compressional
deformation after the Late Cretaceous. The major faults show large post-Pliocene (post-
Baucarit) normal offsets. However, complications in the stratigraphic sequence indicate an
older history. Subtle changes in dip, internal angular unconformities, wedges, and missing
strata all imply that the major faults controlled sedimentation and volcanism.
The Chupacabras Fault throws down rocks to the west by about 200 m to 400 m while the
East Fault drops the Baucarit Formation down to the east by about 350 m. The San Francisco
Fault throws down latite lavas by about 300 m to 500 m to the west and is marked by a
corridor of dikes and stocks. The overall geometry is therefore horst-like. The Upper Volcanic
Series appears much thicker to the west of Chupacabras and it is possible that the fault is a
trap-door type caldera. This may explain the chaotic nature of rock exposures to the south of
the Dolores mine which may be related to caldera collapse.
Although each major fault has an apparent normal offset, there is also evidence of strike-slip
movement. The clockwise orientation of dikes relative to faults, along with north-northeast
dike jogs, suggests a component of dextral strike-slip during intrusion and mineralization.
All of the principal faults suffered major post-mineral (post-Pliocene) reactivation. The San
Francisco Fault shows smectite-rich gouge with milled vein fragments, locally with amethyst.
Fabrics within the foliated gouge confirm mostly normal offsets.
7.3.4 Alteration
The andesitic rocks of the Lower Volcanic Series show widespread, locally intense, propylitic
alteration (chlorite + epidote + calcite + pyrite). Epidote is locally abundant (>15%), giving
rocks a skarn-like appearance. The wide distribution of propylitic alteration suggests it is
semi-regional, perhaps due to burial metamorphism. Propylitic alteration also affects the
dioritic rocks of the stock-diatreme complex.
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In contrast, the latite lavas of the Lower Volcanic Series show argillic (pyrite + clay) alteration.
Pyrite commonly replaces original biotite phenocrysts. Clay, commonly kaolinite, replaces
feldspars. Rarely exceeding a few percent, the kaolinite may be hypogene, but it is more likely
that original hypogene clay, perhaps illite, was converted to kaolinite during weathering of
pyrite. These altered latites form spectacular hematite-stained cliffs at Cerro Colorado. The
alteration dies out abruptly in the west, probably along a steep front, between the
Chupacabras and San Francisco faults. Fresh latite lava therefore occurs only a short distance
west of the pit. At deeper levels, light green sericite haloes occur around veins and
hydrothermal breccias. An area of probable advanced argillic alteration occurs beside the East
Fault, where the latite is silicified and has pyrophyllite and/or alunite/dickite.
7.4 Mineralization
Silver and gold mineralization at Dolores is hosted in north-northwest trending hydrothermal
breccias and sheeted vein zones on the order of 5 m to 10 m wide. Most high grade
mineralization occurs along two or three major structures which provided the conduit for
metal-bearing hydrothermal fluids. Silver and gold mineralization identified on the surface at
Dolores lies over an area 4,000 metres long and up to 1,000 metres wide, at elevations
ranging between 1,100 metres to 1,700 metres above sea level. The extent of mineralization
at depth and along strike has not yet been fully defined.
Most high grade mineralization occurs within the San Francisco Breccia, a well-defined and
continuous hydrothermal breccia and stockwork zone that occurs in the immediate footwall
of the post-mineral San Francisco Fault. The breccia trends farther away from the fault
towards the north until it joins a second major breccia zone known as the Alma Maria Breccia.
Other high grade zones split and re-join, forming diamond-shaped structures and steeply
pitching mineralization shoots. These types of splits and branches, and steeply pitching
intersections, are typical of fault systems with some strike-slip movement, in this case dextral.
The San Francisco Fault marks a profound drop in grade and the hanging wall is mostly devoid
of silver and gold mineralization. This barren hanging wall, mostly latite lava, forms the high
west walls of the open pits.
Hydrothermal breccias carry the highest silver and gold grades and vary from crackle to very
milled types. Crackle types were more permeable and they commonly show coarse
quartz + sulphide (pyrite, sphalerite, and galena) + fluorite gangue. They pass outward into
vein stock works. Milled varieties of breccia contain fewer sulphides. The finer varieties
resemble the fluidised mud/sand dikes typical of active geothermal fields. Hydrothermal
breccias commonly include quartz vein or quartz-veined fragments. For example, exposed
breccias at the north end of the San Francisco Breccia, where it more or less coincides with
the San Francisco Fault, include amethyst vein fragments. Overall, the hydrothermal breccias
mostly developed after the sheeted vein swarms, presumably by evolution from early
fracturing to total failure and transportation of clasts. However, there are rare examples of
breccias cut by veins.
Diatremes, the roots of maar volcanoes, are reported at Dolores (Overbay et. al., 2001).
Unusual breccias in a drill hole located on the north side of the microdiorite stock in the pit
resemble diatreme. They are polymict, with common sub-rounded clasts, and show local
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crude bedding and fine grained sediment partings. Large parts of the breccia are silicified and
carry economic values of silver and gold mineralization.
Most veins at Dolores are relatively simple, with only weak crustiform texture. They comprise
euhedral comb quartz, commonly zoned from milky to transparent, depending on fluid
inclusion content. Veins commonly show aggregates of very fine grained drusy quartz. They
are thin, rarely over 30 mm, and tend to occur as sheeted swarms. Economically mineable
grades occur where the veins are sufficiently closely spaced.
Many of the veins and hydrothermal crackle breccias are open and drusy. Vein fill progresses
from high temperature (>200oC) minerals, such as epidote, to low temperature (150oC to
200oC) minerals such as colloform chalcedony, adularia, amethyst, laumontite, and other
zeolites. Examples of well crystallized adularia are quite rare, but Overbay et. al. (2001)
describes widespread adularia as an alteration mineral in the wall rocks. Geopetal structures
occur in some veins and indicate high levels in the epithermal system, with only hydrostatic
pressure in the conduits. The proximity of high and low temperature minerals suggests rapid
cooling of fluids, perhaps due to uplift or a rapidly waning hydrothermal system. The
presence of zeolites indicates very alkaline fluids.
Local acanthite and visible gold occur in a variety of settings, including hydrothermal crackle
breccias and in thin quartz-dominated veins. Base metal sulphides appear to increase at
depth, with widespread coarsely crystalline sphalerite, galena and minor chalcopyrite. The
sphalerite is always zoned, from yellow in the core, to black (marmatite) rims. Base metal
sulphides are particularly abundant in the deeper parts of the stock-diatreme complex in the
pit.
A sub-vertically pitching mineralization shoot occurs where the San Francisco and Alma Maria
Breccias meet, parallel to the intersection. Clearly this was a site of increased permeability for
hydrothermal fluids. High grades also occur in the diorite stock-diatreme complex in the pit.
The diorite formed an ideal brittle host for fracture, meaning more extensive brecciation and
stock working. It may also have been the main upflow centre for hydrothermal fluids.
Not all silver and gold mineralization occurs in vein swarms and hydrothermal breccias. Some
diffuse areas of sugary, silicified rock with coarse adularia and high silver and gold grades also
occur.
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8 Deposit types
Information in this section is referenced from Pratt (2013).
Dolores is a low sulphidation epithermal deposit with strong structural control (Overbay et.
al., 2001). Northeast-striking faults, perpendicular to the structural grain, locate many mineral
deposits in the Sierra Madre Occidental. However, regional controls at Dolores are unclear
where mineralized faults are north-northwest striking. There is no apparent transverse
structure apparent on geological maps or satellite imagery. The mineralized structures have a
typical Sierra Madre, or Laramide, trend, a direction probably inherited from the basement of
elongate terranes.
Local structural controls are better understood. Sometime after eruption of the Upper
Volcanic Series, which finished about 27 million years ago, there was a northeast-southwest
extensional regime, with a component of dextral strike-slip, creating dilation on northwest-
striking faults. It also caused local dilational jogs that allowed emplacement of dikes,
hydrothermal breccias, and sheeted veins. It is highly likely that the diorite stock-diatreme
complex was the main heat engine that drove the hydrothermal system and provided the
source of metals. It may have also been emplaced into a space created by a dilational jog.
Many aspects of mineralization at Dolores resemble Pinos Altos, where mineralization is
hosted by major normal faults either side of a west-northwest-striking horst, according to
Agnico Eagles website. Like Dolores, the horst comprises the Lower Volcanic Group, faulted
against the surrounding Upper Volcanic Group. Sinter suggests that the original paleosurface
is preserved in places. Likewise, geopetal structures and low temperature minerals suggest
Dolores developed close to the original surface and has not been strongly eroded.
Pinos Altos lies on the northeast margin of the Ocampo Caldera. No circular caldera is
apparent in satellite imagery or topography at Dolores. However, it is possible that the
Chupacabras Fault is a trap-door type caldera margin since a thick pile of rhyolites, basalts
and pumice tuffs is preserved to the west.
High silver and gold grades occur over a wide vertical interval at Dolores. This is unusual for
most low sulphidation epithermal deposits, which tend to have narrow vertical intervals of
high grade. Studies in geothermal fields (e.g. Simmons and Browne, 2000) suggest that this is
due to elevation-controlled boiling or fluid-mixing. However, Pinos Altos is also similar, with a
considerable vertical range (> 750 m). These large vertical ranges mean that both Dolores and
Pinos Altos are amenable to open pit mining, followed by underground working.
Lithology was important for localizing high grade. Although the principal control on fluids was
through-going semi-regional faults (San Francisco and Alma Maria), some host rocks were
ideal for fracturing. Others were ductile and less amenable to mineralization. For example,
historic workings in the East Dike targeted a continuous 1 m to 2 m wide hydrothermal
breccia, hosted by a latite dike. This breccia disappears where the structure passes into
country rocks. This, and many other examples, highlights the importance of brittle host rocks.
Latite dikes were ideal while the surrounding andesites were a poorer host.
Vein textures, the occurrence of adularia, and the simple sulphide mineralogy confirm
Dolores is a low sulphidation epithermal deposit. But it lacks the typical complex crustiform
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banding found in most low sulphidation veins (e.g. Hishikari in Japan and Kupol in Russia). This
implies relatively few mineralizing and boiling events in the conduits.
Local advanced argillic alteration along the East Fault suggests the potential presence of high
sulphidation-type mineralization. There are examples of high sulphidation gold deposits in the
area, for example, Mulatos, located about 42 km south-southwest (Staude, 2001).
Major post-mineral offsets of up to 500 m occurred on the principal faults at Dolores. This
locally juxtaposed unaltered glassy rocks with argillic-altered rock. The San Francisco
structure was effectively sealed by mineralization. Therefore, the focus of post-mineral
movement jumped west by up to 100 m. This resulted in a major fault zone, dominated by
milled and foliated smectitic rock. A significant concealed epithermal system may occur in the
deep part of the hanging wall.
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9 Exploration
Information in this section is referenced and updated from Pincock, Allen, & Holt (2002).
9.1 Exploration by Minefinders from 1993 to 2012

Minefinders acquired the Property in 1993 and began a reconnaissance surface exploration
programme, assisted by aerial photographs taken in 1995, a 3 metre resolution digital
topography map sourced from air photographs covering 20 square kilometres, and satellite
imagery. Minefinders staff geologists carried out surface mapping and sampling, and
employed contractors to complete the geophysical programmes.
Four mapping campaigns defining the general structural and geological trends of the
mineralized systems were completed, including an initial 1:5000 scale map covering 12 square
kilometres, followed up by more detailed mapping at 1:2000 scale covering 3 square
kilometres, and two structural mapping campaigns covering over 4 square kilometres at
1:1000 and 1:500 scales.
Over 13,000 rock samples were taken from surface outcrops, including 9,882 samples taken
as 5 m long continuous samples along road cuts or sample lines cut perpendicular to the
strike of the deposit. Channel samples were taken in the accessible portions of the
underground workings. In workings parallel to the strike of the deposit, samples were
selected from across the back at 5 m intervals at lengths averaging 2 m wide and up to 4 m
wide. For other areas of the workings, 2 m long continuous samples were taken along the
ribs.
Geophysical surveys undertaken for Minefinders by Quantech Consulting Inc. of Reno,
Nevada included 14,900 line metres of induced polarization/resistivity surveys and total field
magnetic surveys, run across the strike of the deposit.
The results of the surface exploration work as well as ore microscopy, metal ratio studies, and
petrographic analyses were used to identify potential drill targets.
None of the sample assay data collected from the surface and underground sampling
campaigns has been used in the estimation of the current mineral resources and mineral
reserves.
9.2 Exploration by Pan American from 2012 to present

Since Pan American acquired the Property, staff and consulting structural geologists have
carried out near mine surface geological and structural mapping and near mine diamond
drilling exploration campaigns are ongoing.
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10 Drilling
10.1 Drilling summary and database
Minefinders conducted drilling programmes on the Property almost annually using either
diamond drill core or reverse circulation methods since 1996 (no drilling took place during
1999, 2001, or 2008). A summary of the drillhole data available at the drillhole data cut-off
date of October 22, 2013 for the commencement of the geological interpretation, which uses
holes up to and including D13-0803, is given in Table 10.1. About 75% of the drillholes in this
summary were completed by Minefinders, 15% were drilled by Echo Bay during their option
period between 1996 and 1997, and the remaining 10% were drilled by Pan American. Since
Pan American began operating the Property in April 2012, near mine exploration programmes
have been conducted using only diamond drilling methods.
Many of Minefinders drillholes were drilled down the dip of the mineralized trends, which
provides little reliable grade and intersection width information. Pan American removed the
majority of these drillholes, which comprise 17% of the current database, from the geological
interpretation and the estimation of mineral resources and mineral reserves. A few down dip
holes were retained for the interpretation where there are no nearby supporting drillholes
oriented perpendicular to the mineralized trends.
Most of the drilling is centred over the strike length of the currently defined mineral
resources. A plan showing the location of the drillholes, coloured by drillhole type, is given in
Figure 10.1. A cross section of the exploration drillholes used in the mineral resource estimate
at 53000 m North is given in Figure 14.2, which shows the relative orientation and spacing of
drillholes on a typical section.
Table 10.1 Drillhole summary

Year Operator Hole type Number of holes Metres
1997 Echo Bay Reverse circulation 68 12,949.45
1998 Minefinders Reverse circulation 45 10,301.11
Total Reverse circulation 396 71,557.76
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Year Operator Hole type Number of holes Metres

1996 Echo Bay Diamond core 30 6,599.4
1997 Echo Bay Diamond core 80 19,382.1
1998 Minefinders Diamond core 26 5,996.5
2000 Minefinders Diamond core 5 847.35
2004 Minefinders Diamond core 67 18849.43
2012 Pan American Diamond core 70 17,379.01
2013 Pan American Diamond core 68 27,431.7
Total Diamond core 792 252,892.52
Total All types 1,118 324,450.28
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Figure 10.1 Location map of Dolores drillholes
10.2 Drilling by Minefinders from 1996 to 2012

Minefinders drilled using a combination of reverse circulation and diamond drilling methods,
with holes mostly oriented perpendicular to the strike of the deposit and spaced roughly 25 m
apart. Some of the holes were oriented down the dip of the mineralized zones and the
majority of these have been removed from the geological interpretation and the estimation
of mineral resources and mineral reserves. The diameter of the diamond drillholes was either
HQ or NQ. The diameter of the reverse circulation holes was not well documented but
appears to be either 4 or 5 inches. The majority of collar surveys were taken with a total
station or multi-station GPS survey instrument, while the remaining holes were surveyed
relative to previously surveyed holes using a tape measure and Brunton compass. About 70%
of the holes were surveyed down the hole by the drilling crews using a Tropari single shot
camera tool for reverse circulation holes and an Ausmin or Sperry-Sun single shot camera for
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diamond drillholes, at downhole intervals of around 50 m. The remainder of the holes were
not surveyed.
10.3 Drilling by Pan American from 2012 to present

Pan American uses two Boart Longyear LF90 diamond drill rigs and one hybrid diamond drill
rig, with a depth capacity of around 950 m, operated by Rock Drill Mining of Aguascalientes,
Mexico. The hole diameter varies from PQ, HQ, and NQ. Drilling recovery is good, on the
order of greater than 95%, and additives such as bentonite are used whenever necessary to
improve core recovery and to regulate drilling pressure.
The drillhole collars are set up in the field prior to drilling by the mine survey department
using total station survey equipment and by laying out the front and back sights with stakes
and flagging tape. Collar coordinate surveys are taken of the drillhole by the mine surveyors
using total station methods, and downhole surveys are taken with a Reflex Multi-shot
instrument on average every 25 m down the hole. The bearing and dip at the collar is
determined by the mine survey department using total station survey equipment to survey a
point at the collar and another point along the drill rod.
10.4 Material impact on the accuracy and reliability of drilling results

Pan American is aware of a number of potential issues with the drilling protocols for some of
the drillholes in the Minefinders database, including the use of reverse circulation drilling
(which may result in a less reliable sample than diamond drillholes, particularly when the
sample is wet), orienting some of the drillholes down the dip of mineralization, absent or
insufficiently spaced downhole surveys in some of the drillholes, and the lack of an effective
Quality Assurance / Quality Control (QAQC) programme to monitor error and accuracy of
the drillhole sample data.
However, Pan American believes these potential issues are unlikely to have a material impact
on the accuracy and reliability of the drilling results and the mineral resource and mineral
reserve estimates. There are a large number of drillholes present over the deposit, and
wherever there is a potentially biased drillhole, another more reliable hole is located nearby
that confirms the results. There is only a negligible difference in the silver and gold grades and
thicknesses of the mineralized zones encountered by reverse circulation and diamond
drillholes drilled in close proximity to each other. The removal of down dip drillholes from the
geological interpretation and the grade estimation technique has mitigated the effect of
poorly oriented drillholes, and there appears to be no significant difference in the location of
the mineralized zones encountered by surveyed and by unsurveyed drillholes.
Regular reconciliation reviews comparing close spaced grade control drillhole data against the
mineral resource and mineral reserve estimates have reasonably confirmed the location,
orientation, and grades of the mineralized zones as defined by the exploration drillholes.
These factors relating to the reliability of the sample data has been considered when applying
confidence categories to the current mineral resource and mineral reserve estimates.
Pan American routinely conducts reconciliation of the reserve model to the grade control
model and to the heap leach feed conveyor weight meter and sampler in order to monitor
actual mine versus model performance. Between January and the end of May, 2014, sample
August 2014 58 of 171

grade information obtained from closer spaced grade control drilling (10 m along strike and
15 m across strike) has allowed the operation to identify and economically mine additional
lower grade material in some areas that was either not identified by the exploration drillhole
data used to estimate the mineral reserve, or else was not supported by sufficient data to
estimate the tonnes and grade of the mineralization to mineral reserve levels of confidence.
exploration data. These two factors have resulted in the operation mining year to date
21% more ore tonnes at a 17% lower silver grade and a 26% lower gold grade, for a difference
of nil in silver ounces and 10% fewer gold ounces relative to the tonnes, grade, and contained
Since acquiring the Property, Pan American has undertaken measures to ensure the data used
for the estimation of mineral resources and mineral reserves is reliable and collected using
industry best practice. This includes orienting holes to obtain as perpendicular an intersection
with mineralization as possible, taking downhole surveys at frequent intervals down every
hole, and conducting an effective QAQC programme.

reliability of the drilling results. Pan American intends to continue annual near-mine diamond
drilling programmes to test the southern and down dip extents of the currently defined
mineralization and to conduct regular infill drilling of the deposit to upgrade mineral resource
and mineral reserve confidence categories.
August 2014 59 of 171

11 Sample preparation, analyses, and security

11.1 Sampling by Minefinders from 1996 to 2012
11.1.1 On-site sample preparation and security
For reverse circulation drillholes, Minefinders selected one sample over the interval of each
drill rod length, which was 5 feet (1.52 m), as the hole was being drilled. For holes drilled
under dry conditions, the broken rock fragments were collected in a bucket placed below the
cyclone discharge nozzle, divided into two equal sample pairs with a splitter, and then
bagged. Sample weights varied from 10 kg to 12 kg. Wet drillholes were sampled from a wet
splitter placed directly below the cyclone discharge, which directed half the material to one
bucket and the second half of the material to a second bucket. Flocculant was added to the
buckets and then the buckets were placed in tubs to rest and settle the fine material. The
weight of the wet samples varied from 10 kg to 13 kg.
One sample pair was sent to the laboratory for analysis and the other was retained on site for
reference. A portion of the reference sample was stored in plastic chip trays, logged for
geological features, and retained on site for future reference. The geological logging included
codes for lithology, colour, and breccia type. Strength ratings were assigned for brecciation,
fractures, veins (quartz, calcite, and epidote), alteration (silica, argillite, and propylite),
oxidation (pervasive or fracture controlled), sulphides (pyrite, galena, and sphalerite), and
oxide minerals (goethite, hematite, jarosite, and manganese oxides).
Diamond drillholes were logged, photographed, split in half, and sampled in a secure core
logging facility at the Property. The geological log included all the data collected for reverse
circulation holes as well as core recovery, rock quality designation (RQD), and structural
features. Core was split in half with a manual core splitter, with one half sent to the
laboratory for preparation and analysis and the other half retained in the core tray for
reference. The sampling length was frequently 2 m.
Samples were collected by truck from the Property site by whichever commercial sample
preparation laboratory was currently in use, which included Bondar-Clegg (since acquired by
ALS) of Chihuahua, Mexico, ALS of Hermosillo, Mexico, or Inspectorate of Hermosillo, Mexico.
11.1.2 Laboratory sample preparation and analytical methods
Samples were dried and crushed to 70% passing minus 2 mm in either jaw or roll crushers,
then reduced to 1 kg weight by splitting in a riffle splitter, then pulverized to 85% passing less
than 75 microns (200 mesh). The pulverized material was then split to a 150 gram pulp
sample weight.
Between 1996 and 2002, the pulverized samples were sent for geochemical analyses by air to
ALS of Vancouver, Canada and from 2002 onwards, the period covering the majority of the
drillholes in the database, to Inspectorate of Reno, USA.
ALS of Vancouver is an accredited laboratory that conforms to the requirements of CAN-P-
1579, CAN-P-4E (ISO/IEC 17025:2005) and Inspectorate conforms to the requirements of ISO-
9001:2008.
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At the analytical laboratory, a 30 gram subset was assayed for gold using fire assay with
atomic absorption finish. Any sample with a grade greater than 1 ppm gold was re-assayed
using fire assay with gravimetric finish.
Prior to 2001, samples were assayed for silver using Aqua Regia digestion with atomic
absorption finish, until metallurgical test work at McClelland Laboratories Inc. (MLI) found
that the Aqua Regia digestion technique may have been under-reporting silver values, likely
because of poor digestion of silver halide minerals. Minefinders implemented a campaign to
re-assay approximately 9,000 retained pulps from drillhole and underground channel samples
for silver using multi-acid digestion with atomic absorption finish, which resulted in a grade
increase of 59% for oxidized samples, 22% in mixed oxide-sulphide samples, and 19% in
sulphide samples. The database prioritizes assays by analytical method first by fire assay with
gravimetric finish, then fire assay with atomic absorption finish, then multi-acid digest with
atomic absorption finish, and finally Aqua Regia digest with atomic absorption finish.
11.1.3 Quality assurance and quality control
As part of their QAQC programme, Minefinders submitted standard reference material and
blank material to the laboratory to independently test for accuracy and contamination of the
assays determined by the laboratory. No duplicates were submitted to test for grade
precision and variability. Standards were submitted with each annual drilling campaign at a
frequency that varied from between 1 standard per every two drillholes up to 16 standards
per drillhole, for an overall frequency of approximately 1 standard per 20 samples.
From 1997 Minefinders submitted three standards comprised of mineralized material from
the Dolores Property, which were prepared and certified for gold by Bondar-Clegg from round
robin assays from a number of external laboratories. In 2002 Minefinders purchased four new
standards comprised of mineralized material from site which were prepared and certified for
both silver and gold by Inspectorate Laboratories.
Blanks, comprised of material believed to be unmineralized and sourced from overburden or
the upper parts of drillholes, were submitted in 1997 and from between 2004 and 2009, at a
frequency of approximately 1 blank per 80 samples.
The results of the QAQC data are problematic to assess, as record keeping and standard
identification numbering on the log sheets was poor, no coherent QAQC database was
maintained, and no regular QAQC reports are available for review. Pan Americans review of
the results of the silver and gold standards from both sets of standards shows unacceptably
wide grade variation, which is likely the result of poor standard preparation. Blanks failed on
the order of 3.8% for gold and 3.2% for silver, but since the blank material was not prepared
from material assayed and certified to be completely free of mineralization, there is no way
to assess whether the blank failed because of contamination during the sample preparation
and analysis process or from trace mineralization present in the blank material.
11.2 Sampling by Pan American from 2012 to present

11.2.1 On-site sample preparation and security
Diamond drillholes are logged, photographed, halved, and sampled in a newly constructed
and secure core logging facility at the Property. The drill core is cut in half with a diamond
August 2014 61 of 171

bladed saw, and samples are selected with respect to geological features, at 2 m lengths or
less. The samples are collected weekly from site by SGS of Durango, Mexico and driven to
their laboratory for sample preparation and analysis.
SGS Durango conforms to the requirements of the ISO/IEC 17025 standard for the analytical
methods employed for the Dolores samples.
11.2.2 Laboratory sample preparation and analytical methods
The samples are crushed to 2 mm in size and split with a riffle splitter to obtain a 250 g sub-
sample, which is then pulverized to 75 microns.
Samples are analysed for gold using fire assay with atomic absorption finish, and any sample
with a grade greater than 10 ppm Au is re-assayed using fire assay with gravimetric finish.
Silver is assayed using three acid digest with atomic absorption finishing methods, and any
sample with a grade greater than 300 ppm Ag is re-assayed by fire assay with gravimetric
finish.
11.2.3 Quality assurance and quality control
Since acquiring the Property, Pan American has implemented an industry standard QAQC
programme including the submission of certified standards, blanks, and duplicate samples to
the laboratory and reviews the results regularly to ensure that appropriate and timely action
is taken in the event of a QAQC failure. The protocol for the submission of QAQC samples is
5% each of blanks, certified standards, and duplicate samples. The actual submission rate
achieved to date is 5.0% blanks, 4.9% standards, and 6.1% duplicates.
As at the diamond drilling data cut-off date of October 22, 2013 used for the geological
interpretation, just over 1,000 samples from four different certified gold/silver standards
were submitted to the laboratory with the diamond drill core samples. Sampling errors are
assumed to follow a normal distribution, which means that 70% of the results are expected to
fall within one standard deviation of the certified value, 95% of the results are expected to fall
within two standard deviations, and 99.7% of the results are expected to fall within three
standard deviations. For gold, the standards performed slightly better than expected at one
standard deviation, 5% worse than expected at two standard deviations, and 2.5% worse at
three standard deviations. For silver, the standards performed 5% better than expected at
one standard deviation, 2% better at two standard deviations, and slightly worse than
expected at three standard deviations. Overall, the results are acceptable and indicate
reasonable accuracy at the laboratory. The bias of the failures to the plus standard deviation
is noted, but the biases are within acceptable ranges.
Table 11.1 Certified standard results
Gold Silver
Count 1,002 1,009
Fail +1 SD 230 149
Fail -1 SD 80 99
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Gold Silver
% fail 1 SD 31 25
Fail +2 SD 89 19
Fail -2 SD 13 9
% fail 2 SD 10 3
Fail +3 SD 23 4
Fail -3 SD 5 5
% fail 3 SD 3 1
1,027 blanks were submitted to the laboratory with the diamond drill core samples, with
1.4% failures for gold (samples that returned assay values greater than 0.05 ppm Au) and
1.0% failures for silver (samples that returned assay values greater than 2.5 ppm Ag),
indicating little concern for sample contamination at the laboratory.
860 field duplicates comprising the second half of the drill core and 404 duplicate pulps were
sent to the laboratory with the diamond drill core samples. Sample grade precision is
problematic at Dolores given the mineralization style and the presence of highly variable
sample grades over short distances. Long (1998) recommends monitoring and assessing the
results of precision pairs using a ranked absolute relative deviation (ARD) plot, with his
recommendations corresponding to 10% agreement on 90% of pulp duplicate pairs and to
30% agreement on 90% of field duplicate pairs when using the ranked half absolute relative
difference (ranked HARD) between sample pairs. Following Longs criteria, the pulp
duplicates have poor precision for gold at 20.4% for 90% of pairs and poor precision for silver
at 53.6% for 90% of pairs. Field duplicates are poor for both gold and silver at 40.8% for gold
and 50.3% for silver for 90% of pairs. In general, while laboratory issues may be a potential
factor, the highly variable nature of mineralization is considered to be the main cause of the
poor precision noted in the duplicate data.
11.3 Bulk density measurements

Minefinders measured bulk density using the water immersion method from 296 paraffin
sealed drill core samples of mineralized latite and andesite selected from 58 different drill
holes from the 1996, 1997, 2002, and 2003 drilling campaigns. In 2012, Pan American
selected 441 samples from 317 different drillholes chosen from geologically and spatially
representative locations along 25 m sections oriented along the strike of the mineral
resources. The samples were measured for bulk density by ALS of Vancouver, Canada, using
the water displacement method on wax coated samples. The results of the bulk density
measurements are discussed in section 14.7.
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No effective QAQC programme was in place at the Dolores Property prior to 2012 to assess
the accuracy, precision, and contamination of drillhole sample grades. Despite this, the risk of
any material error or bias in the sample grades is considered to be low, given that the
samples were prepared and analysed at certified, international commercial laboratories and
that there is no material difference between the grade of exploration samples and the
current grade control samples. The opinion of the Qualified Person responsible for this
section of the technical report is that the sample preparation, analytical, and security
procedures followed for the samples used to estimate mineral resources and mineral reserves
are sufficient and reliable for the purpose of the mineral resource and mineral reserve
estimates, and for the preliminary economic assessment of the expansion Project.
The Qualified Person recommends continuing the sampling and assaying protocols in place at
the Property and to continue to follow the practice of submitting blanks, standards, and
duplicate samples at regular intervals for all drillholes at the Property in order to monitor
potential issues with sample contamination, grade accuracy, and precision.
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12 Data verification
12.1 Data verification by the qualified persons
12.1.1 Geology data reviews
Prior to and following the acquisition of the Property from Minefinders, Pan American
undertook extensive geological data verification reviews. These reviews included compiling
the available information and conducting reviews of downhole surveys in the database
against the original photographic disks, visual reviews of the drill hole location in three
dimensional mining software, reviews of the drillhole collar coordinates against the surveyed
topography, and extensive reviews of the assays in the database. The assay reviews included
checking around 2,600 assays in the database against the original assay certificate, with
particular attention paid to relatively high silver and gold grades and any assay showing
unusual gold to silver ratios. A relatively minor number of discrepancies were noted and
corrected.
In the opinion of the qualified person, the data used to estimate mineral resources and
mineral reserves and that form the basis of the preliminary economic assessment of the
proposed expansion Project are sufficiently reliable for those purposes.
12.1.2 Mine engineering data reviews
Pan American has undertaken reviews of the mine engineering data, including the mining
fleet and mine operational and production data, grade control data including dilution and ore
loss, geotechnical and hydrological studies and pit wall and underground stability data, waste
disposal requirements, environmental and community factors, the heap leach operations and
production data, the development of the life of mine plan including production and recovery
rates, capital and operating costs estimates for the mine and processing facilities,
transportation, logistics, and power and water consumption and future requirements,
taxation and royalties, and the parameters and assumptions used in the economic model.
In the opinion of the qualified person, the data and assumptions and parameters used to
estimate mineral resources and mineral reserves and the preliminary economic assessment of
the proposed expansion Project are sufficiently reliable for those purposes.
12.1.3 Metallurgy data reviews
Pan American has undertaken reviews of the metallurgical test work performed in the past, as
well as reviews of the metallurgical test work currently ongoing under Pan Americans
direction. In the opinion of the qualified person, the data and assumptions used to estimate
the metallurgical recovery model for the mineral resource and reserve estimates are
sufficiently reliable for those purposes, and that the data and assumptions used for the
purposes of the preliminary economic assessment are sufficiently reliable.
12.2 Data adequacy

It is the opinion of the qualified persons responsible for the preparation of this technical
report that the data used to support the conclusions presented here are adequate for the
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purposes of the mineral resource and reserve estimates and the preliminary economic
assessment of the pulp agglomeration treatment and underground option.
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13 Mineral processing and metallurgical testing

Information in this section is referenced and updated from M3 (2005), Chlumsky, et. al.
(2011), McClelland (2014), and Lyntek (2014).
13.1 1996 to 2000 test work by Echo Bay and Minefinders

Between 1996 and 1998, Echo Bay engaged Hazen Research (Hazen) of Golden, Colorado to
undertake bottle roll tests and mineralogical studies and Colorado Mineral Research Institute
(CMRI) of Golden, Colorado to perform column leach and bottle roll tests. Subsequently,
Minefinders engaged MLI of Sparks, Nevada to perform wet tails screen analyses and to
develop metallurgical balances based on the column head grades reported by CMRI. In 1998
Minefinders engaged MLI to undertake additional bottle roll tests which showed increasing
metal recoveries with finer grind sizes.
The results of this test work as well as the successful implementation of pulp agglomeration
at the Ruby Hill mine in Nevada encouraged Minefinders to consider pulp agglomeration as a
potential processing option for the Dolores ores. In 1999 and 2000, Minefinders engaged MLI
to conduct further tests on three crushed, non-agglomerated, medium grade control columns
as well as columns of high grade material ground to 65 mesh and 150 mesh and agglomerated
onto crushed medium grade material. The results of this work confirmed the amenability of
the material to cyanidation.
13.2 2003 to 2004 feasibility study test work by Minefinders

13.2.1 Test work to support selection of processing option
In support of a feasibility study completed in June 2005, Minefinders began a two year
programme of metallurgical test work in early 2003 to obtain data for scoping level trade off
studies of various processing options to determine the most economic flow sheet for the
Dolores ores and to optimize the processing conditions of the selected process route. Test
work by MLI and SGS Lakefield Research Limited (Lakefield) of Lakefield, Ontario included
bottle roll, column leach, gravity scalping, and flotation tests to determine the metallurgical
response of the feed types to heap leach treatment, gravity concentration, pulp
agglomeration, flotation, and cyanide leaching of the flotation tails and concentrate.
Flocculant screening, gravity sedimentation, pulp rheology, and vacuum and pressure
filtration studies on leached concentrate and tail samples were also completed. The results
from the column and bottle roll tests were used to determine silver and gold metal
recoveries, recovery rates, reagent requirements, and crush size for heap leach parameters.
Additionally, Hazen performed crushing, grinding, and abrasion index determination and
impact crushability tests for work index determination. Metso of Wisconsin, USA performed
paddle abrasion tests for abrasion index determination for estimating crusher liner
consumption and impact crushability tests for work index determination. Metso classified the
abrasion index of the andesite material as acceptable and the latite material as abrasive. The
weighted average abrasion index of the feed material was determined at 0.336. The crushing
work indices were considered favourable at 5.4 kilowatt hours per tonne for andesite and
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7.6 kilowatt hours per tonne for latite. An average of 6.3 kilowatt hours per tonne was
assumed for the feasibility study. Pocock Industrial Inc. (Pocock) of Salt Lake City, Utah,
performed flocculant screening, gravity sedimentation, pulp rheology, and vacuum and
pressure filtration studies on leached concentrate and tailings samples.
This test work was conducted on 92 spatially and geologically representative drill core
composites and 13 reverse circulation composites, categorized into feed types dependent
upon grade, lithology, and the presence of iron and/or manganese oxides.
13.2.2 Study and process selection conclusions
Based on the results of the studies, the stand-alone heap leach processing option at a target
particle size of P80 6.3 mm, a processing capacity of 18,000 tonnes per day, and a 90%
availability of the crushing plant was selected as the preferable processing choice for the
Dolores ores and was used as the basis for engineering, construction, and start-up of the
operation.
13.2.3 Test work to support heap leach processing option
Minefinders initiated a further series of test work in 2003 and 2004 on 16 composite samples
categorized by grade and oxidation state in order to collect information in support of the
chosen heap leach processing option. The test work included size sensitivity column tests,
column leach tests, head screen analyses, comminution testing, finer crushing tests, and
bottle roll tests to determine silver and gold metal recovery, recovery rates, reagent
requirements, and crush sizes for optimizing the heap leach parameters. Following the results
of the initial bottle roll tests, further column leach tests and head screen analyses were made
on finer crushed material, and additional comminution, milling/cyanidation, gravity, and
flotation testing were carried out.
Direct agitated leach cyanidation tests were performed on 16 composites to determine
sensitivity to feed size and metallurgical variability. All of these tests showed that the feed is
amenable to direct cyanidation leaching and that silver and gold recoveries are related to
feed size, with higher and quicker metal recoveries correlated with finer feed sizes. Silver
recovery was shown to be slower than gold recovery at all sizes. MLI found no strong
correlation between gold recovery and gold head grade, but later analysis using all the data
available at the time indicated that sulphide columns showed a general tendency of higher
silver and gold recovery with increasing silver head grade. Gold recoveries were higher for the
oxide and mixed feed composites than the sulphide composites, while silver recoveries were
higher for the sulphide composites. MLI initially noted no strong correlation between
manganese content and silver and gold recovery in bottle roll testing, but later reviews of
bottle roll and column test work showed decreasing silver recovery in the presence of
manganese oxide.
Column leach (percolation) tests conducted by MLI on 15 composite samples confirmed the
amenability of the feed to heap leach cyanidation treatment. Tests were carried out on
medium grade and high grade composites, as well as on medium grade composites at
different crush sizes to determine the sensitivity of the medium grade feed type to feed size.
The column leach tests did not indicate any problems with solution percolation, fines
migration, or solution channeling with any of the composites.
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The column leach tests confirmed the results found in the bottle roll tests: that gold recovery
tended to decrease and silver recovery tended to increase with increasing sulphide sulphur
content of the feed. Table 13.1 gives the average recoveries for silver and gold by feed type. A
weighted average recovery of 51.3% for silver and 73.9% for gold was assumed in the
2005 feasibility study. As expected, the overlying iron and manganese oxide ores were
planned to be mined in the early stages of the mine life and the sulphide ores were expected
to be mined later.
Table 13.1 2005 feasibility study metallurgical recoveries by heap leaching

Feed type Gold recovery % Silver recovery %
Oxide 79 46
Mixed oxide/sulphide 79 52
Medium grade sulphide 56 55
High grade sulphide 65 71
Precious metal recovery rates of the leaching tests were slow, between 333 and 399 days,
and both silver and gold extractions continued to increase during the one year leach test.
Cyanide consumption was very high, in part because of the long column leach test cycle.
Based on the results of this test work and reagent consumptions reported from existing
commercial heap leach operations elsewhere treating similar feed types, an average cyanide
consumption of 0.4 kg per tonne of feed was assumed for the feasibility study. Lime
requirements for the column testing conducted by MLI ranged from 0.6 kg to 5.6 kg per tonne
of feed. Oxide ores required almost twice as much lime as mixed and sulphide feed types and
andesite lithologies required about twice as much lime as latite. A weighted average lime
consumption for all feed types of 1.4 kg per tonne at 100% CaO availability (or 1.69 kg per
tonne of feed at 83% active CaO) was assumed for the feasibility study.
Assays were made of each sample using fire assay methods for silver and gold content. Multi-
element ICP scans, sulphur speciation analysis, and bulk density determinations were carried
out on some of the samples. The sulphur speciation analysis showed an inconsistent
correlation between sulphide sulphur content and the oxidation code assigned to the sample
composite, which may be attributed to the variety of different inexperienced loggers
assigning oxidation codes to the geological log.
Load/permeability tests on select column residues indicated that the leached feed maintained
relatively high permeability even under compressive loadings simulating heap stack heights of
up to 100 metres. The physical feed characteristic data showed that moisture requirements
were typical for finely crushed feed and tended to increase with decreasing feed size. Very
little or no slumping of the feed charges were observed during leaching. The feed charges did
not require agglomeration at any of the feed sizes.
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13.3 2008 to 2010 test work and pre-feasibility study of a proposed

sulphide grinding, flotation, and cyanidation plant by Minefinders
13.3.1 Reassessment of previous test work
In a press release dated April 8, 2010, Minefinders disclosed the results of a pre-feasibility
study considering the technical and economic feasibility of a proposed grinding-flotation-
leaching plant with a capacity of 6,500 tonnes per day to treat mixed and sulphide feed. The
sulphide plant was proposed to improve the metal recoveries of the mixed and sulphide feed
material achieved using the existing heap leaching process. However, no changes were made
to the process flow sheet following the disclosure of the pre-feasibility study results.
The 2010 pre-feasibility study included a review of the existing metallurgical test work data,
undertaking new tests in 2004 and 2009, and focussing on the evaluation of the impact of
grinding followed by direct agitated cyanidation or by the addition of a flotation stage and
cyanidation for mixed and sulphide feed types. This review indicated that compared to heap
leaching, direct cyanidation significantly improves metal recoveries for both silver and gold.
At P80 75 microns and 1.0 grams of sodium cyanide per litre concentration, there was an
improvement of 9% and 19% for gold and silver recoveries respectively in the oxide material,
11% and 13% in the mixed material, and 22% and 4% in the sulphide material.
Minefinders developed estimates for the silver and gold recoveries to be expected from
milling at 106 microns and cyanidation of flotation concentrate reground at 25 microns plus
cyanidation of the flotation tails, as shown in Table 13.2.
Table 13.2 Pre-feasibility study metallurgical recoveries by milling, flotation, and

cyanidation of reground concentrates and flotation tails
Oxide 87 61
Mixed oxide/sulphide 92 87
Medium grade sulphide 91 78
High grade sulphide 92 90
In summary, the sulphide feed responded satisfactorily to the flotation process. Cyanide
consumption for all tests varied between 0.15 kg per tonne and 1.02 kg per tonne, and lime
consumption varied between 1.6 kg per tonne and 24.5 kg per tonne. The highest
consumption was observed in ores with high amounts of manganese oxides.
Minefinders reported that mixed ores could be treated along with oxide ores by direct
cyanidation or with the sulphide ores via flotation/cyanidation, however, direct cyanidation
was not considered an attractive option for sulphide ores since silver and gold recoveries
were significantly lower than for flotation/cyanidation of reground concentrates.
13.3.2 Test work to support a sulphide grinding and flotation plant
In 2004 two sulphide feed composites and one mixed feed composite were subjected to test
work at Lakefield to investigate the recovery of silver and gold by flotation and cyanidation of
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the flotation products. Mineralogical analysis of the composites was undertaken to determine
the nature of silver and gold mineralization, which found that the samples were composed
primarily of silicates and pyrite with minor amounts of sphalerite, chalcopyrite, galena,
pyrrhotite, and magnetite, and trace amounts of silver minerals, kustelite, native gold,
bornite, chalcocite, and covellite. Gold and silver recoveries of between 90% and 93% for gold
and between 80% and 95% for silver in a flotation concentrate were achieved using a simple
flow sheet and reagent scheme. No optimization of the leach conditions was performed.
Variability test work showed considerable variation in terms of grind, and flotation and
cyanidation response. The lowest recoveries were found in the medium grade samples, but
the overall relationship between head grade and overall recovery was weak. Regrinding the
concentrate to a P80 of less than 20 microns increased the extraction of gold and particularly
silver.
Lakefield also conducted environmental characterization comprising both geochemical and
geotechnical testing of three composite samples of cyanide destruction tails, in order to
provide basic information on the cyanide destruction process and the physical characteristics
of the tailings product. All three composites responded well to cyanide destruction treatment
using the SO2-Air process. The target residual total cyanide concentration of less than
1 milligram per litre was achieved using a retention time of 90 to 120 minutes. SO2
consumption was in the normal range of 4 to 5 grams of SO2 per gram of cyanide.
No metallurgical test work took place between 2005 and 2007. Construction of the mine
began at the end of 2006, and the commissioning period took place between September 2008
and January 2009. The construction of the processing facility followed the recommendations
made in the 2005 feasibility study and comprised a crushing plant, conveying and stacking
facilities, leach pads, solution ponds, and Merrill-Crowe and refining facilities. The first dor
was produced in November 2008 and commercial production began in May 2009, initially
treating the overlying oxide ore.
In 2009, SGS Lakefield Research Limited of Santiago, Chile (Lakefield Chile) undertook
flotation and cyanidation test work considering four stages for each feed type to determine
silver and gold recovery and cyanide and lime consumption in four different processes,
including rougher flotation on different size distributions and cyanidation of the flotation
tailings, kinetic tests of rougher flotation with varying reagents and dosages, testing of
cyanidation concentrates and flotation tailings at varying cyanide concentrations and
regrinding degrees, and direct cyanidation testing of the different feed types.
The results of the flotation-cyanidation tests showed that there was no significant difference
in the metallurgical recoveries obtained from flotation and cyanidation for particle sizes of P80
of 100 microns and 150 microns, at the flotation reagent scheme and cyanidation conditions
used, although increased silver recoveries were obtained at a P80 of 75 microns in the oxide
sample.
Kinetic testing of the rougher flotation with different reagents and dosages was performed,
indicating that the standard formula of potassium amyl xanthate (PAX), A3418 promoter,
and methyl isobutyl carbinol (MIBC) with a flotation time of ten minutes would be the most
effective for the flotation of the Dolores feed minerals.
Rougher concentrates were tested at intensive leaching conditions. Gold recoveries from the
rougher concentrate of the mixed feed types were over 91% at P80 50 microns or finer and
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5 grams of sodium cyanide per litre or higher. Gold extraction for the sulphide rougher
concentrates ranged from 84% at P80 47 microns using 20 grams of sodium cyanide per litre
concentrate to 87% at P80 15 microns using 5 grams of sodium cyanide per litre, with
appreciably slower kinetics. In both cases, no significant effect of cyanide concentration on
gold extraction was observed for concentrations between 5 grams and 20 grams of sodium
cyanide per litre. Silver extractions from mixed concentrates ranged between 87% and 91%.
For high grade sulphide concentrates, silver extraction was lower and reached a maximum of
80%.
The test work by Lakefield Chile showed that the optimum particle size for rougher
concentrate flotation is P80 106 microns, followed by regrind of rougher concentrates to
P80 25 microns. A leaching residence time of 72 hours is required for concentrate leaching and
56 hours for tailings leaching, with total cyanide and lime consumptions of 0.7 kilograms per
tonne and 2.5 kilograms per tonne, respectively. The expected gold recoveries of a circuit
with flotation at 106 microns, cyanidation of cleaner concentrates reground to 25 microns
plus the cyanidation of the rougher tails are around 92% for mixed and sulphide ores and
87% for oxide ores, and expected silver recoveries are 61% for oxide, 87% for mixed, 78% for
medium grade sulphide, and 90% for high grade sulphide.
Comminution testing, including Bond (ball mill and rod mill) work index testing and abrasion
index testing was performed and added to the database of test work undertaken in 2004. The
rod mill work index was variable depending on the material type, ranging from 16.1 to
17.3 over the eight samples tested, and averaging 16.8 kilowatt hours per short ton. The ball
mill work index averaged 17.0 and ranged from a medium of 14.8 to a high of 19.0 for the
16 samples tested. The average and maximum abrasion indices were 0.335 and 0.762,
respectively. Comminution testing for grinding design, including Specific Energy Consumption
(CEE) determined in pilot plant tests and Minnovex SPI tests also confirmed that the feed is
in the high hardness range. The average and minimum SPI indices were 115 and 98,
respectively.
Lakefield Chile also made mineralogical assessments of three head samples categorized as
sulphide, mixed, and oxide, using quantitative evaluation of minerals by scanning electron
microscopy (QEMSCAN) technology to determine mineralogical associations and the degree
of mineral liberation. Four silver species, including argentite/acanthite,
freibergite/argentotennantite, argentojarosite, and electrum were identified. The mineral
associations varied depending upon the sample type. Silver was almost completely occluded
in the sulphide and mixed minerals, while over 65% of the silver was released in the oxide
sample. This indicated that a greater reduction of particle size will be required to increase
liberation of silver minerals in the sulphide ores than is currently being achieved in the
crushing and heap leach circuit. Gold in electrum was associated with sericite/muscovite in
the sulphide sample, with pyrite, quartz, feldspars, and phyllosilicates in the mixed feed, and
with quartz, feldspars, micas, and clays in the oxide sample.
Preliminary IsaMill test work was performed by Lakefield Chile, which indicated that the
specific consumption for a grinding particle size of P80 of 15 microns is 22.5 kilowatt hours per
tonne.
Thickening and consolidation testing was undertaken at different solids concentrations to
assess the optimal pulp dilution and flocculant dosage. Washing efficiencies higher than
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96% were obtained when using a washing ratio of 2.5 cubic metres per tonne and three
thickening stages. A thickening of 8 tonnes per square metre per day and a fluctuating
consumption per thickener of 10 g/t was used for equipment design. Vacuum filtration tests
showed that washing efficiencies of higher than 99.5% could be achieved when using a
2.5 cubic metre per tonne washing ratio in the closed circuit decantation circuit composed of
three thickeners and a displacement ratio of 1 cubic metre per cubic metre in the filtration
stage.
13.3.3 Additional test work on heap leaching
In 2008, MLI undertook column leach testing and bottle roll testing on seven drill core
composites to determine the amenability of the ore to heap leach cyanidation treatment and
feed size sensitivity. Column leach tests were conducted at 1,000 ppm of sodium cyanide
concentration, with a leaching time of 376 days. Gold recoveries at 6.3 mm ranged from
57.1% to 79.6% with an average of 71.6%, and silver recoveries ranged from 24.6% to 66.0%,
with an average of 56.2%. At 4.4 mm, gold recoveries ranged from 62.5% to 77.7%, with an
average of 71.0%, and silver recoveries ranged from 26.3% to 68.1%, with an average of
57.5%. The results showed that the composites were amenable to heap leach cyanidation
treatment at 6.3 mm and 4.4 mm feed sizes, and that metal recovery, recovery rates, and
reagent requirements were not particularly sensitive to the crushed sizes tested and were
similar to the previous test undertaken at 6.3 mm. Pan American has used the results of this
test work at 6.3 mm to update the current heap leach pad recovery model.
13.3.4 Pre-feasibility study conclusions
The pre-feasibility study of the sulphide grinding, flotation, and cyanidation plant concluded
that the project was technically and economically feasible, and recommendations were made
to undertake a feasibility study and more detailed engineering work to provide a higher level
of detail on the project. Minefinders initiated a preliminary economic assessment involving an
update of the current life of mine plan with the new treatment plan including updated costs,
as well as a review of design for major omissions or errors, but terminated the work in
anticipation of a potential acquisition of the Property by Pan American, which was completed
at the end of March 2012.
Pan Americans later review of pre-feasibility study test work found that the direct
cyanidation test work was undertaken under non-optimized conditions, that the flotation
concentrate did not contain sufficient value to be sold directly to a smelter, that no viable
option was presented for tailings storage, and that the option of pulp agglomeration was not
evaluated
13.4 2012 to 2014 heap leach test work by Pan American

During the process of acquiring the Dolores mine from Minefinders, Pan American reviewed
the available metallurgical test work, monthly operational performance data collected from
the heap leach pads, and the results of monthly column leach tests performed at the
metallurgical laboratory on site. Following acquisition of the mine in April 2012, Pan American
selected 521 drill core samples for metallurgical test work. These samples were selected from
spatially and geologically representative core drillholes located every 50 m along strike and
every 100 m in depth, with consideration of silver and gold grade (including the cut-off grade,
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the average grade, and high grade), oxidation state (sulphide, mixed, iron oxide, and
manganese oxide), and lithology.
13.4.1 Cyanide soluble silver and gold shake tests
The 521 samples as well as 15 composite samples prepared for previous metallurgical test
work by Minefinders were subjected to cyanide solubility (cyanide shake tests) tests and
analysis of manganese, lead, zinc, total sulphur, and sulphide sulphur content at MLI. The
testing conditions were optimized using the composite samples with the objective of
maximizing silver and gold extraction with respect to leach time, cyanide concentration, and
solids density. After finalizing the optimum testing conditions, shake tests were performed on
the 521 variability samples to measure the solubility of gold and silver by cyanide, which
averaged 72% and 66% respectively.
The cyanide soluble recovery results were then reviewed spatially and with respect to the
geological codes assigned to the sample interval by the geologists during logging, in order to
assess for any correlation of recovery with spatial or geological features. While the recovery
results were highly variable, no meaningful correlation was noted between recovery and
spatial location, lithology, or oxidation and alteration strength codes. As noted in the previous
test work undertaken by Minefinders, there was a moderate negative correlation of gold
recovery with respect to sulphur and total sulphur content and a moderate positive
correlation of silver recovery with respect to sulphur and total sulphur content. These results
indicated that information collected in the geological logs is not a reliable indicator of cyanide
soluble silver and gold recovery.
13.4.2 Metallurgical recovery model update
An updated metallurgical recovery model for the existing heap leach operation was prepared
for the December 31, 2012 mineral resource and mineral reserve estimates, and confirmed
for the December 31, 2013 and May 31, 2014 mineral resource and mineral reserve
estimates, and is shown in Table 13.3. The recovery model was developed using the results of
the tests conducted by Minefinders that were performed under similar conditions to the
current heap leach operation, at a particle size of 6.3 mm and cyanide concentrations of 1.0
grams of sodium cyanide per litre. No distinction is made between the metal recoveries of
mixed and sulphide ores as the metallurgical results are similar.
The metallurgical recovery model was supplemented with a silver and gold leaching kinetic
model developed from the kinetics of all of the column leach tests and based on the solid to
liquid ratio (the ratio of feed placed on the heap leach relative to the solution added) and
metal recoveries. Furthermore, based on the topography of Pad 3, the current treatment
rate, and the quantity of solution applied to heap leaching (1,000 m3/hour), a solid to liquid
time schedule was estimated for use in the kinetic model equation. The kinetic silver and gold
recovery curves by feed type are presented in Figure 13.1 and the kinetic model of
metallurgical recovery of heap leaching at a target particle size of P80 6.3 mm after placement
on the heap leach pad is given in Table 13.4.
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Table 13.3 Heap leaching metallurgical recovery model at 6.3 mm

Feed type Gold recovery (%) Silver recovery (%)
Oxide 81.5 47.4
Mixed and sulphide 66.1 59.2
Figure 13.1 Column leach test results and kinetic models for silver and gold by feed type
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Table 13.4 Heap leaching metallurgical recovery kinetic model at 6.3 mm
Oxide Mixed/sulphide
Year Au recovery % Ag recovery % Au recovery % Ag recovery %
1 66.9 30.7 55.1 41.8
2 9.9 9.2 6.1 10.0
3 4.7 3.5 4.9 3.8
4 - 2.1 - 2.2
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5 - 1.1 - 1.2
6 - 0.8 - 0.1
Total 81.5 47.4 66.1 59.2
13.5 2012 to 2014 preliminary economic assessment of a pulp

agglomeration treatment option by Pan American
13.5.1 Introduction
Following review of the previous metallurgical test work at the Property, Pan American
concluded that a fuller economic analysis considering the existing heap leach pad versus a
new mill plus heap leaching at various capacities should be conducted as well as a thorough
study of whole ore milling cyanidation at optimized conditions. Pan American further
decided to undertake a meaningful evaluation of the ability to selectively mine the higher
grade sulphide component of the deposit as well as prepare a geologically based
interpretation of the tonnes and grade of the different feed types (oxide and mixed/sulphide)
present in a rigorously developed economic mine plan.
In mid-2012 Pan American began a preliminary economic assessment of three alternative
process options including a pulp agglomeration followed by heap leaching option, a grinding
and leaching in tanks option, and a review of a flotation/cyanidation option. The three
options were compared to the existing 16,200 tonne per day heap leach only process. The
comparisons involved a high level assessment of treatment rates, metal recovery, the
required particle size reduction, the necessity and cost of any tailing disposal system,
operating costs, and initial capital requirements.
Pulp agglomeration was ultimately selected as the most attractive treatment option based on
higher metallurgical recoveries and improved recovery kinetics relative to the existing heap
leaching option, and lower capital and operating costs as well as avoiding the logistical issues
of siting tailings storage facilities on the challenging topography at Dolores relative to the
grinding and leaching in tanks and flotation/cyanidation options.
Minefinders had previously identified pulp agglomeration as a potential process alternative
and initial tests were carried out at MLI in 2000. These tests were conducted at a medium
grade to high grade ratio of 75% to 25% using partially leached (24 hour pre-leaching) high
grade pulp with grind sizes of P80 212 microns and 106 microns agglomerated with crushed
9.5 mm medium grade ores. Overall column percolation leach test results showed the Dolores
ores to be amenable to pulp agglomeration heap leaching treatment and that recovery from
high grade pulp is relatively independent of grind size. Recoveries from P80 106 micron pulps
were nearly always only slightly higher than P80 212 micron pulps. No percolation, fines
migration, or solution channeling problems were encountered.
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Pulp agglomeration is the process of grinding ore and filtering it to form a moist pulp (the
pulp), combining the pulp with cement, and tumbling to form round balls on the order of
inch to 2 inches in diameter. In this process the fine pulp and cement particles are tumbled
together in a drum at a controlled moisture content and feed rate such that they start to stick
to each other. During the agglomeration process balls of material start to form, and as the
tumbling continues more and more material adheres to the balls (the agglomerates). The
cement acts as a binder that holds the particles together and gives the agglomerates strength
to prevent them from crumbling under the weight of the material stacked on top of them
during heap leaching. This is important to prevent the fine material from being washed to the
solution collection drains and in maintaining good permeability in the heap for percolation of
cyanide solution down through the heap. The agglomerates remain very porous and the
surface area of the particles increased by grinding the high grade fraction of the mineral
deposit allows for better contact of the cyanide solution on the surface of the precious metal-
bearing minerals. This in turn results in increased metallurgical recoveries and improved
metal recovery kinetics compared to the existing coarse crushing and heap leaching process.
A photograph of the pulp agglomerates in a 1 gallon paint bucket is given in Figure 13.2.
Figure 13.2 Agglomerates formed from Dolores feed crushed to 425 microns
13.5.2 Bottle roll tests

In 2012 Pan American conducted additional bottle roll tests at MLI on 16 composites to
determine the amenability of the feed to milling/cyanidation and to optimize leaching
conditions. The tests were conducted to determine silver and gold recovery, recovery rates,
reagent requirements, and in the case of a few composites, sensitivity to feed size. The
optimum conditions were determined to be 3.0 grams of sodium cyanide per litre and a grind
size of P80 of 75 microns. All of the high grade and medium grade composites were amenable
to milling and cyanidation treatment. Grind size optimization testing showed that the feed is
sensitive to feed size with respect to silver recovery but less so for gold recovery and that
reagent consumption is not significantly sensitive to grind size.
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At optimum conditions gold recoveries ranged from 72.3% to 95.3% with an average of
87.8%, and silver recoveries ranged from 60.0% to 94.9% with an average of 80.4%. Cyanide
consumption and lime requirements were low to moderate.
At the optimum testing conditions, the results showed improvements on the order of 15% to
20% higher silver recovery and similar gold recovery compared to the previous test work
conducted under less optimal conditions.
On comparison of the recoveries of the milling/cyanidation bottle roll tests and the estimated
the capital and operational cost required for a whole ore crushing, milling, and leaching in
tanks plant, the estimated recoveries and economics of a pulp agglomeration plant were
considered more favourable than the whole ore milling/cyanidation plant option.
13.5.3 Column leaching tests
In 2013 Pan American initiated column leach testing at MLI on high grade oxide, mixed, and
sulphide composites; medium grade oxide, mixed, and sulphide composites; and on a
combination of master composites representing high grade and medium grade oxide, mixed,
and sulphide material. The composites were sourced from 521 spatially representative
diamond drill core samples selected to represent the deposit in terms of grade, feed type,
and lithology, and were prepared in the proportion of the feed types expected during the life
of mine.
Column leach tests are currently in progress on each high grade and medium grade composite
at a P80 6.3 mm feed size to determine baseline recoveries for the existing heap leach only
process. Pulp agglomeration column leach tests are also being conducted on each high grade
composite. For these tests, the high grade composite was ground to P80 425 microns, pre-
leached for one hour to simulate the cyanide solution contact time in the mills, thickeners,
and during filtration, then agglomerated with cement (20 kg/t) prior to column leaching
without the addition of any medium or low grade material. Baseline and pulp agglomeration
tests are also being conducted on combined high grade and low grade master composites. For
these tests, the high grade material was milled, agglomerated, and then the agglomerates
were blended with the crushed (6.3 mm) medium grade material at a ratio of 77% crushed
medium grade material to 23% high grade pulp agglomerated material. This test work is still
in progress and final results are expected in late 2014.
Preliminary metallurgical results show that through 238 to 240 days of leaching of pulp
agglomeration columns, extraction from the high grade composite samples ranges from
0.91 ppm Au to 1.96 ppm Au and from 39 ppm Ag to 93 ppm Ag. Relative to baseline column
leach tests, extractions from the pulp agglomeration column leach tests are currently 1% to
21% higher for gold and 35% to 50% higher for silver. Through 295 days, extraction from the
pulp agglomeration column leach test on the master composite comprising blended high and
medium grade material is 17% higher for both silver and gold. The ultimate recovery from all
column tests may change following completion of the tests and with residual (tails) assays.
The relative improvement in recovery by grinding and pulp agglomeration treatment may be
significantly different than the relative improvement in extraction observed at this time.
Gold extraction from the pulp agglomeration column leach test on a high grade mixed
oxidation composite is essentially the same as the extraction from the baseline test. Interim
tail assay samples were taken from the baseline test of this composite after 120 days of
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leaching to determine if the gold head grade of that sample might be higher than expected.
Assay results confirmed that the head grade of the column test sample is likely greater than
expected (approximately 1.74 ppm Au), giving rise to an anomalously high baseline
extraction. Based on these observations, it is believed that in terms of gold recovery, there
may be a significant advantage to pulp agglomeration of the high grade mixed material. Final
tail assays from both columns will be required to verify this conclusion.
Reagent consumption was compared for baseline and the agglomerated samples. The results
showed that cyanide consumption in the high grade samples is significantly lower (between
2.3 and 3.0 kg/t) than for the baseline tests (between 4.4 to 5.0 kg/t). The high cement
requirements for agglomerating ground high grade material results in an elevated pH, which
likely limits cyanide consumption. Reagent consumption results for the master composite test
were nearly the same (4.3 and 4.6 kg/t respectively) where the baseline and pulp
agglomeration tests were conducted at a similar pH. The addition of the medium grade into
the pulp agglomerated sample results in a normal pH for leaching (around 11).
The master composite column with 77% medium grade at P80 6.3 mm and 23% high grade at
P80 425 microns presented ponding on the top of the column, indicating permeability
restriction, perhaps due to migration of fines. The column was prepared with 15 kg of cement
per tonne of high grade feed instead of 20 kg of cement per tonne of high grade feed as has
been defined as the design criteria for the Project based on the results of load/permeability
tests received later in the testing programme. The column was also cured for three days
instead of seven, as is currently defined as the design criteria. Additional testing is now in
progress at the conditions defined for the pulp agglomeration Project.
Load/permeability tests at Geo-Logic Associates of Grass Valley, California, and agglomerate
strength and stability testing at MLI have been conducted on a number of sample
combinations, with varied binder additions, and on non-agglomerated feed, to evaluate the
permeability of the material under expected commercial heap stack height compressive
loadings. In summary, those tests have shown that it is possible to achieve acceptable
permeability of a blended feed, by agglomerating only the milled high grade material and
blending it with the crushed (P80 6.3 mm) medium grade material. The permeability of the
blends evaluated was sensitive to cement addition, feed size of the milled high grade
material, and blend ratio. In the case of 425 micron high grade material, blended at a ratio of
77 % medium grade material to 23 % high grade, adequate permeability was obtained with a
cement addition of 20 kg per tonne of high grade material. The results of the
load/permeability test are presented in Figure 13.3.
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Figure 13.3 Load/permeability test results
13.5.4 Metallurgical recovery model

The recovery model for the pulp agglomeration process was calculated using head and tail
screen analysis results of 24 column leach tests of medium and high grade material. The
weight and silver and gold grade distributions were calculated on each size fraction based on
the screen analysis results, then the values of the coarser fractions (+850 microns) were
redistributed and included in the fractions expected for grinding to P80 425 microns (minus
20 mesh, 35 mesh, 65 mesh, 150 mesh, and minus 150 mesh fractions). The pulp
agglomeration metallurgical recovery model is shown in Table 13.5.
Table 13.5 Pulp agglomeration metallurgical recovery model at 425 microns
Oxide 89.3 66.1
Mixed and sulphide 82.4 76.7
The kinetics of the pulp agglomeration leaching were estimated using the same methodology
as for heap leaching. The kinetic model was based on the extraction rate of the column leach
tests at 425 microns, developing an equation of solid to liquid ratio with the partial recoveries
of the current column leach tests and extrapolated or adjusted to the ultimate recovery
estimated based on the screen analysis results. The topography of Pad 3 was also considered
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along with the pulp agglomeration treatment rate (20,000 tonnes per day) and the solution
addition rate (1,000 m3/hour) to arrive at the kinetic model presented in Table 13.6.
Table 13.6 Pulp agglomeration metallurgical recovery kinetic model at 425 microns
1 89.3 59.7 82.4 68.0
2 - 6.4 - 8.7
Total 89.3 66.1 82.4 76.7
13.5.5 Comminution tests and pilot plants

Three new series of comminution tests were conducted for pulp agglomeration and the
results were used with the previous test work reported in Minefinders 2005 feasibility study.
The first of the new series of tests consisted of Bond rod and Bond ball mill grindability tests
completed at Phillips Enterprises LLC in Golden, Colorado. A second series of tests was
conducted using a 19 (0.482 m) diameter continuous pilot rod mill at Metsos pilot milling
facility in York, Pennsylvania. A third series of tests was conducted by Pan American at the
Dolores operation in a 4 by 8 rod mill. The pilot data from the mine was used to verify the
data obtained in the pilot mill tests at Metso and to provide the design parameters for the
comminution circuit for the pulp agglomeration study.
The new series of Bond grindability tests were completed on three diamond drill core
composites milled to 1,180 microns for rod mill test work and milled to 150 microns for ball
mill test work. The results from this test work were similar to all previously determined Bond
mill and rod work indices, however, these results were used for initial estimates only with the
pilot milling tests considered to be more accurate and reliable for final design of the rod mill
circuit. The average rod mill work index was 17.8 kilowatt hours per tonne and the average
ball mill work index was 18.7 kilowatt hours per tonne, a measure that indicates that the ores
are moderately hard.
A series of pilot rod milling tests were conducted under various circuit configurations in
Metsos 19 diameter by 35 long continuous pilot mill. The tests of interest were three wet
open circuit tests run with a feed size of 7.5 mm. Two runs at a feed rate of around 125 and
145 kg per hour produced a final product of P80 381 microns and P80 552 microns, respectively,
and reported a net specific energy of 7.6 and 6.7 kW hours per tonne, respectively. The third
run at twice the feed rate produced a final product of P80 1,360 microns and reported a net
specific energy of 3.8 kW hours per tonne. The results of this test work are considered
indicative of rod mill performance at the considered grinds, but because the size of the pilot
plant limits the feed size and road diameter that can be used in the tests, the results are not
necessarily indicative for final design.
Pan American purchased a 4 by 8 rod mill (shown in Figure 13.4) to conduct large scale batch
and continuous tests under varying conditions to confirm the laboratory data and to allow for
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a more representative feed sample of the correct feed size. The mill can be operated in either
open or closed circuit. The pilot rod milling plant also produced larger samples of the final
product suitable for filtration and settling test work to provide data to confirm the design
criteria. A series of open circuit test runs were conducted using a range of feed size
distributions prepared by different crushing circuits with material considered to be typical of
the Dolores feed expected for the pulp agglomeration plant. To facilitate the comparison of
grinding circuit efficiency, operating work indices were calculated for each of the runs. The
criteria for the selection of the rod mill considers the highest operating work index of 22.4 kW
hour per tonne obtained from three test runs with feed and product sizes within the range of
expectations.
Figure 13.4 Dolores pilot rod milling plant
13.5.6 Solid liquid separation tests

In late 2012 Pan American undertook solid liquid separation tests on reverse circulation
coarse reject sample composites at Pocock including sample characterization, particle size
analysis, flocculant screening, gravity sedimentation, pulp rheology, vacuum filtration, and
pressure filtration studies.
The flocculant screening test work helped identify the optimum flocculant product, dosage,
and concentration to be used in subsequent testing. Dynamic thickening tests were
conducted to determine the maximum hydraulic sizing basis for thickener design based on
the settling properties of the material, and/or based on achieving acceptable underflow
density or overflow total suspended solids limitations. Thickener underflow was used for
viscosity testing to determine the rheological properties of the thickened pulp by measuring
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the apparent viscosity of the material at known shear rates relative to solids concentrations.
Yield values were determined for the pulps based on the observed relationship between
shear stress and shear rate.
Vacuum filtration test work was performed on the thickened samples to establish a general
set of data to design and size vacuum filtration equipment by examining the effect of cake
thickness and drying time, wash rate, and wash efficiency on production rates and filter cake
moisture content. This test work was performed on six composites at variable percentages of
feed solids and the absence and presence of flocculant at variable dosages and
concentrations. Based on the results of these studies, vacuum filtration was not selected for
agglomeration of the high grade by itself as a dewatering technology due to both the
thixotropic behaviour of the produced cakes and poor production rates necessary to achieve
a moisture content below 15%.
Following the vacuum filtration tests, pressure filtration tests were performed on the
thickened samples to establish a general set of data to design and size pressure filtration
equipment, by examining the effect of cake thickness, drying time, wash rate, and wash
efficiency on production rates and filter cake moisture content. The pressure filtration test
work indicated that a filter press with a horizontal recessed plate equipped with vertical
plates and air blow and membrane squeeze will produce the optimal product at the assumed
production rates.
13.5.7 Conclusions
grades and lithologies from the Dolores deposit yielded gold recoveries ranging between
51% and 91%, and silver recoveries between 23% and 74%, all at a particle size of P80 6.3 mm.
The metallurgical recovery model created for the mineral reserve estimate estimates gold
recoveries of 81.5% for oxides and 66.1% for mixed and sulphide ores, and silver recoveries of
47.4% for oxides and 59.2% for mixed and sulphide ores. The kinetic model created for the
mineral reserve estimate assumes a three year period to achieve ultimate gold recovery and
five years to achieve ultimate silver recovery. The authors have reviewed these models and
conclude that they are consistent with recovery tracking observations in the heap leach
operation at the mine.
ultimate gold recovery for oxide material and two years to achieve ultimate gold recovery
mixed and sulphide material. The ultimate silver recovery of all material types subject to pulp
agglomeration is assumed to take two years. The authors conclude that these models are
reasonable and respect the available data.
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concepts.
13.6 Material issues and deleterious elements

There are no known material issues and the operation is not subject to any negative impact of
deleterious elements. The mine operates a closed circuit processing system without tailings
facilities and produces a dor product.
13.7 Recommendations
Recommendations for additional metallurgical test work include incorporation of the final
results of the column tests currently in progress into a pre-feasibility study upon their
completion.
The authors recommend exploring opportunities to optimize the filtration equipment.
Calculations based on test results with Dolores ores has demonstrated that there is an
opportunity to use vacuum filters if medium grade is added to the agglomeration drums to
form the agglomerates. Diverting the crushed medium grade material to the agglomeration
drum circuit will add flexibility to the high grade filter cake moisture content; however the
system will be exposed to the variability in the moisture content of the crushed medium
grade. The usual range of crushed medium grade moisture content is acceptable to use with
vacuum filter product. It is recommended to quantify the peaks of maximum moisture
content in the crushed medium grade material in order to evaluate the optimization of the
filtration equipment.
of high grade feed, and additional load permeability tests are recommended with variable
feeds.
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14 Mineral resource estimates

14.1 Disclosure
Pan American updates mineral resources on an annual basis following reviews of metal price
trends, operational performance and costs experienced in the previous year, and forecasts of
production and costs over the life of mine. No new material information has become
available between May 31, 2014 and the signature date given on the certificates of the
qualified persons.
Pan American conducts infill and near-mine drilling through much of the year. The drillhole
data cut-off date for the commencement of the geological interpretation was October
22, 2013, which uses holes up to and including D13-0803. The mineral resource estimate as at
May 31, 2014, using this same drillhole data, has been updated to reflect anticipated cost and
metal recovery parameters assumed in the pulp agglomeration treatment option, and to
reflect refinements to the underground inventory based on the advancing underground
studies, both of which are disclosed in this technical report. The effective date of the mineral
resources is May 31, 2014.
Mineral resources were prepared by Pan American staff under the supervision of and
reviewed by Michael Steinmann, P. Geo., Executive Vice President, Corporate Development
and Geology of Pan American Silver, who is a qualified person as that term is defined by
NI 43-101.
There are no known environmental, permitting, legal, title, taxation, socio-economic,
marketing, political, or other relevant factors that could materially affect the potential
mineral reserves.
14.2 Available data, data preparation, data transformations, and data

validation
A breakdown of the type of drillholes available for interpretation is given in Table 14.1. The
available drillhole data includes collar coordinates, downhole survey information, silver and
gold assays, multi-element assays for a subset of the drillholes, and codes for lithology,
structural features, alteration, mineralization, and oxidation, all in Microsoft Excel format.
This data was imported into Datamine format and desurveyed into three dimensional
drillhole traces. The drillhole data was reviewed and corrected as necessary for errors such as
overlapping intervals. The drillholes were reviewed for their orientation relative to the
orientation of the deposit, as well as for the presence and frequency of downhole surveys, to
assess the reliability of the location of the drillhole trace and the nature of the drillhole
intersection with the mineralization.
Some of Minefinders drillholes were drilled down the dip of the mineralized trends, which
provides little reliable grade and intersection width information. Pan American removed the
majority of these drillholes, which comprise 17% of the current database, from the geological
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interpretation and the estimation of mineral resources and mineral reserves. A few down dip
holes were retained for the interpretation where there are no nearby supporting drillholes
oriented perpendicular to the mineralized trends.
Table 14.1 Details of drillholes available to the mineral resource estimate

Hole type Number of holes Drilling metres
Diamond 723 232,714.32
Reverse circulation 261 47,097.17
Total 984 279,811.49
14.3 Geological interpretation, modeling, and domaining

14.3.1 Geological interpretation and modelling
The drillhole data was assessed for any correlation between silver and gold content relative to
geological features such as lithology, alteration, oxidation, and structure. Low to moderate
correlations exist between silver and gold content and brecciation as well as quartz veining
and silicification. There are no meaningful correlations between metal content and any of the
other logged features.
Three dimensional interpretations were made of the mostly barren diorite stock and iron
oxidation codes on the drillholes on 25 m sections. These interpretations were wireframed
and used to code the drillhole data and later the block model for the respective features.
14.3.2 Definition of grade estimation domains
Mineralization at the Property is structurally controlled and occurs in numerous parallel
trends oriented to the northwest and dipping steeply to the southwest. As there are no other
meaningful indicators to differentiate between economic and uneconomic grade except for
sample assays, and because silver and gold grades are generally gradational within the
mineralized zones, three dimensional mineralized envelopes for open pit mineral resources
and reserves were prepared on 25 m sections around spatially continuous trends of
composite samples greater than 0.25 ppm gold equivalent, using a gold to silver ratio of
1 gold to 55 silver grams per tonne, with a minimum horizontal width of 3 m. This resulted in
the creation of 28 spatially distinct and continuous mineralized trends. These interpretations
were wireframed and used to back-code the drillhole data and later the block model for
28 mineralized grade estimation domains, as well as the surrounding unmineralized domain.
An example graphic of Pan Americans interpretation of the mineralization style as at
May 31, 2013 is given in Figure 14.1, which shows a plan of the mineralized trends at the
1525 m elevation. The widths of the narrower zones are on the order of 15 m wide, while the
widths of the wider zones are on the order of 155 m wide.
Some of these mineralized zones extend to depths that cannot be mined economically by
open pit mining methods, and will likely be accessed from underground. Interpretations of
12 spatially continuous down dip extensions of the mineralized trends were made in the same
manner but using a higher cut-off of 1.25 ppm gold equivalent and the same minimum
horizontal width of 3 m. The interpretations were then expanded by 1 m either side to create
August 2014 87 of 171

a dilution skin to account for the volume and grade of uneconomic material that is likely to
be mined underground.
Figure 14.1 Mineralization outlines at 1525 m elevation
14.4 Sample statistics

14.4.1 Compositing of sample assay intervals
Approximately 40% of the samples within the mineralized domains were taken at intervals
less than 2 m, 58% of the samples were taken at 2 m intervals, and around 2% of the samples
were taken at intervals greater than 2 m. All samples were composited to 2 m intervals to
ensure equal weighting of sample grades during the grade estimate.
14.4.2 Summary statistics
Gold grades within the 28 open pit estimation domains range from a mean of 0.11 ppm Au
and 6 ppm Ag to a mean of 1.05 ppm Au and 56 ppm Ag. The mean grade of all composites in
all domains is 0.69 ppm Au and 31 ppm Ag. The main zones at San Francisco and Alma Maria
are the two volumetrically largest estimation domains and comprise nearly 80% of the
mineral resource, with mean grades of 0.71 ppm Au and 29 ppm Ag at San Francisco and
0.91 ppm Au and 37 ppm Ag at Alma Maria.
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The coefficient of variation (CV), a statistic that defines the similarity of sample grades and
which may be used to justify the selection of grade interpolation method, is relatively high at
4.9 for gold and 3.5 for silver at San Francisco and 3.4 for gold and 5.2 for silver at Alma
Maria. Because the mineralization at Dolores is characterized by highly variable silver and
gold grades over short distances, multiple indicator kriging was selected as the grade
interpolation method for those domains with sufficient numbers of sample composites to
support the creation of multiple variograms at different grade bins.
Gold grades within the 12 underground estimation domains range from a mean of 0.85 ppm
Au and 32 ppm Ag to a mean of 4.40 ppm Au and 154 ppm Ag. The mean of all composites in
all domains is 2.25 ppm Au and 79 ppm Ag.
14.4.3 Extreme grade value treatment
No top cuts were applied in the multiple indicator kriging estimation domains as the
interpolation method better deals with high grade variability than ordinary kriging or inverse
power of distance, and does not require the use of top cuts. A review of composite grades in
each domain not intended for multiple indicator kriging was conducted to assess and apply
any necessary top cuts of extreme silver and gold grade values. Where necessary, top cuts to
reduce the influence of a small number of high grade values were applied to domains based
on the log histogram and location of the extreme grade values.
14.5 Variogram analysis and variogram modelling

Multiple indicator kriging requires the calculation and modelling of variograms at a range of
grade thresholds, usually at the 10th percentiles (deciles) and the upper grade percentiles.
Experimental variograms were calculated on each grade estimation domain to assess whether
sufficient drillhole intersections were present to produce reasonable multiple indicator
variograms. In the open pit region, reasonable variograms were obtained for the San
Francisco and Alma Maria mineralized trends, as well as five other larger domains. A single
variogram for all samples in one of the mineralized trends (domain 24, which lies between the
San Francisco and Alma Maria trends) and the waste domain was calculated for an ordinary
kriged estimate in those two domains. In the 20 remaining open pit estimation domains and
all 12 of the underground estimation domains, no reliable variogram could be found, so
inverse power of distance estimates were planned for those domains.
Variogram models were developed for the 30th, 40th, 50th, 60th, 70th, 80th, 90th, 95th, 97.5th,
98.75th, 99.6th, and 99.9th percentiles for silver and gold for samples in each of the seven
multiple indicator estimation domains, oriented along the strike and dip of each mineralized
trend. An example variogram for silver and gold at the 80th percentile for samples within the
San Francisco trend is given in Table 14.2.
th
Table 14.2 Silver and gold variograms at the 80 percentile
Variable Gold Silver
Percentile 80th 80th
Cut-off ppm 0.68 31.4
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Variable Gold Silver

Angle 1 60 60
Angle 2 110 110
Angle 3 90 90
Nugget1 0.14 0.31
Structure 2 variance 0.38 0.29
Structure 2 range2 (m) 12, 8, 3 12, 9, 3
Structure 3 range (m) 26, 26, 6 55, 40, 15
Structure 4 range (m) 45, 45, 14 70, 50, 28
Note1: variances have been normalized to a total of one
Note2: ranges for the major, semi-major, and minor axes, respectively
14.6 Estimation methods and parameters

14.6.1 Block model set up
A block size of 12.5 m x 12.5 m x 7.5 m was chosen with respect to the average drillhole
spacing over the mineral resource region and to the open pit mining selectivity. Sub-cells
were employed to obtain a better volumetric fit within the wireframes wherever the
wireframe configuration cannot accommodate a full size parent block. The model was coded
using the interpretation wireframes for the diorite stock, grade estimation domains, and iron
oxidation strength. Iron oxidation affects metallurgical recovery and the oxidation
interpretations are used to code the model for metallurgical recovery.
The resulting block model was then depleted for previous open pit mining as at May 31, 2014.
According to a review of incomplete mining records (Overbay, et. al., 2001), approximately
372,000 tonnes of ore grading 9.8 ppm Au and 563 ppm Ag were mined from underground
stopes between 1922 and 1931, producing 117,000 ounces of gold and 6.7 million ounces of
silver. Minefinders staff created long sections plotting the location of the old workings based
on drillholes that had encountered underground openings. These interpretations were
digitized and wireframed but the resulting tonnage in the interpretations was on the order of
2.5 million, far in excess of the reported tonnage and the volumes encountered during open
pit mining thus far. There are very few grades in the drillhole database that correspond to
reported mined grades, so in order to meaningfully deplete the resource for historic
production, the interpretations were reduced in size to match the reported mined tonnages,
adjusted to centre on the highest grade portions of the deposit, and the bulk density of the
blocks within the mined volumes was set to zero.
August 2014 90 of 171

14.6.2 Grade interpolation and parameters

The 12 indicator variograms parameters for silver and gold were applied to the multiple
indicator kriging estimate of silver and gold for the seven multiple indicator kriged grade
estimation domains, and the ordinary kriged variogram parameters for silver and gold were
applied to domain 24 and the waste domain. The range and direction of continuity obtained
from the 70th percentile Au indicator bin was used to define the search ellipse. A minimum of
8 and a maximum of 16 samples were required to return an estimate to the parent block
(which means that all sub-cells of a parent block receive the same grade estimate), with a
restriction of two samples from any one drillhole. A second search at 1.5 times the first search
(which matches the range of continuity of the 60th percentile) was applied if the first search
did not find the minimum number of samples, and a final search at 2.5 times the first search
(which matches the range of continuity of the 30th percentile) was used if the second search
did not find sufficient samples. For the unmineralized domain and for the other 20 domains
where reliable variograms could not be obtained, silver and gold estimates were prepared
using inverse power of distance and the same search parameters as the mineralized multiple
indicator estimation domains. A summary of the search parameters is given in Table 14.3.
Table 14.3 Grade estimation sample search parameters

Search 1 Search 2 Search 3
Distance 1 (m) 65 97.5 162.5
Distance 2 (m) 60 90 150
Distance 3 (m) 20 30 50
Minimum sample numbers 8 8 8
Maximum sample numbers 16 16 16
Samples per drillhole 2 2 2
Angle 1 60
Angle 2 110
Angle 3 90
14.7 Bulk density

The 441 bulk density measurements taken by Pan American from spatially and geologically
representative regions of the deposit were reviewed with the 296 bulk density measurements
collected by Minefinders. The bulk density values range from 2.0 to 3.00 grams per cubic
centimetre (g/cm3), and have a mean of 2.61 g/cm3. The variability of the bulk density values
is relatively low, at 2.54 for the 25th percentile, 2.62 at the 50th percentile, and 2.69 at the 75th
percentile. There is no meaningful correlation between bulk density and any geological or
spatial features, except for base metal content. Considering the variability of the bulk density
measurements and that there are insufficient base metal assays to reliably estimate base
metal content and then derive bulk density based on estimated base metal content
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throughout the model, bulk density was applied to the block model using a nearest neighbour
estimate to honour the local bulk density variability.
14.8 Estimation validation

The estimates were validated by comparing the global declustered mean composite grades
with the mean of the estimated grades, by domain, and by comparing the local composite
grade trends with estimated grade trends, by domain, on slice or swath plots. These
reviews show the estimated grades to reasonably reflect the variability of the composite
grades. Only a few smaller domains with fewer input sample grades showed poorer
comparisons, and this was reflected in the confidence classification. Histograms of the input
sample grades, by domain, were also compared to the histogram of the estimated grades to
assess whether the shape of the histogram was reasonably maintained.
Pan American routinely conducts reconciliation of the reserve model to the grade control
model and to the heap leach feed conveyor weight meter and sampler in order to monitor
actual mine versus model performance. Between January and May 31, 2014, sample grade
exploration data. These two factors have resulted in the operation mining year to date
21% more ore tonnes at a 17% lower silver grade and a 26% lower gold grade, for a difference
of nil in silver ounces and 10% fewer gold ounces relative to the tonnes, grade, and contained
In the authors opinion, the diamond drilling and reverse circulation drilling information that
has been collected is of sufficient spacing and quality for mineral resource and mineral
reserve estimation. There are areas of the Dolores deposit that will benefit from additional
infill drilling in order to improve the interpretation of the continuity of the economic zones.
14.9 Mineral resource confidence classification

The estimate was classified into spatially continuous measured, indicated, and inferred
categories by preparing three dimensional interpretation wireframes around the drillhole
patterns and coding the estimate for classification category with the wireframes. Measured
resources were assigned at the central and upper zones of the deposit where drillhole spacing
is on the order of 25 m or less, surrounded by indicated resources where drillholes are more
widely spaced at the lower and outer regions of the deposit, on the order of 50 m or less, and
then by inferred resources at depth and in other regions with the widest, but still regularly
spaced drillholes.
August 2014 92 of 171

14.10 Dilution, value estimates, and resource pit optimization

The sub-celled open pit block model was then re-blocked to a 6.25 m x 6.25 m x 7.5 m re-
block size by a process that eliminates the sub-cells formed at the boundaries of the
wireframe interpretation and incorporates the grade of any sub-cell across the boundary into
the grade of the re-blocked cell. On the contact of the economically mineralized zones with
the surrounding uneconomic material, this process dilutes the grades of any cells with a
majority of the volume lying within the economic interpretation, by incorporating the grade
of the neighbouring uneconomic material into the re-block cell. The quantity of dilution
added in this process varies and is dependent upon the width and location of the mineralized
zone relative to the block, but on average the process resulted in the application of around
13% dilution.
A value per tonne was applied to each block based on the grade, metallurgical recovery, and
location of the block as well as metal prices and costs including refining, transportation,
royalties, processing, mining, G&A, and leach pad sustaining capital. For mineral resources,
the costs and metallurgical recoveries applied were relevant to the pulp agglomeration
processing option. An optimized pit shell was created for constraining the mineral resources
using metal prices of $35 per ounce of silver and $1,400 per ounce of gold. For open pit
mineral reserves, a pit design was prepared using costs and metallurgical recoveries for the
heap leach only processing option and metal prices of $22 per ounce of silver and $1,300 per
ounce of gold.
An example cross section showing the regularized mineral resource estimate (shown without
being trimmed by a resource and reserve pit), the May 31, 2014 mineral reserve pit outline,
and the exploration drillholes used in the estimate is given in Figure 14.2.
August 2014 93 of 171

Figure 14.2 Cross section through Dolores mineral resource estimate, mineral reserve
pit design, and exploration drillholes at 53000 m North
14.11 Dilution, value estimates, and definition of underground inventory

To account for dilution during underground mining, a 1 m skin of block cells was applied to
either side of the 3 m minimum width underground mineralization interpretations. These
block cells contained estimated silver and gold grades based on the sample composites
located within the dilution skin. The value per tonne calculation for underground material
uses the same metal recovery percentages and resource metal prices as open pit material but
uses higher cost parameters appropriate to underground mining. More details on the
metallurgical recovery, cost parameters, mining methods, and development of the
underground inventory are given in the relevant sections elsewhere in this report.
The economic underground inventory was visually examined and any small isolated pods that
would not be economical to extract due to the cost of access were removed from the
inventory. No crown pillar between the open pit mine and the underground mine is
necessary, as long as underground mining is scheduled to occur at a distance of greater than
30 m from the active bottom of the open pit, and the stopes are tightly back filled before the
pit advances to its final depth. As a conservative measure, however, in two areas a 15 m pillar
was maintained in areas where underground production would interact with large sections of
the pit high wall or which would undercut the pit ramp access.
August 2014 94 of 171

14.12 Mineral resource tabulation

Mineral resources for Dolores as at May 31, 2014, are given in Table 14.4. This tabulation
includes in situ potentially economic material classified as measured, indicated, and inferred
constrained within an optimized pit shell created using metal prices of $35 per ounce of silver
and $1,400 per ounce of gold, as well as any potentially economic material within the reserve
pit classified as inferred, underground resources below the resource pit shell, and low grade
previously mined stockpiled material. The in situ mineral resources have been depleted for
mining as at May 31, 2014 and stockpiles have been inventoried as at May 31, 2014. The costs
and metallurgical recoveries estimated for pulp agglomeration treatment and combined open
pit/underground mining have been used to estimate mineral resources. There are no known
mining, metallurgical, environmental, permitting, legal, title, taxation, socio-economic,
marketing, political, or other factors or risks that could materially affect the potential
mineral reserves.
Table 14.4 Dolores mineral resources as at May 31, 2014

metal metal (koz)
(Moz)
Measured 5.0 22 3.6 0.40 64.0
Indicated 12.0 28 10.7 0.83 319.6
Measured + Indicated 17.0 26 14.3 0.70 383.7
Inferred 16.1 33 17.0 0.77 402.7
Notes: Mineral resources do not have demonstrated economic viability. Totals may not
add up due to rounding. Mineral resource estimates were prepared under the supervision
of or were reviewed by Michael Steinmann, P. Geo., Executive Vice President, Corporate
Development and Geology of Pan American. Mineral resources have been estimated using
a combination of pulp agglomeration and heap leaching metal recovery and cost
parameters. Metal prices used for the mineral resource estimate were $35 per ounce of
silver and $1,400 per ounce of gold. Mineral resources are in addition to mineral reserves.
No significant recommendations are made to improve the quality of the mineral resource
estimate methodology. Pan American intends to continue with annual diamond drilling
programmes and it is recommended to commence an additional infill drilling campaign to
collect closer spaced drillhole information for updating the annual mineral reserve and
resource estimates at Dolores. Exploration diamond drilling is expected to be concentrated on
defining the southern strike extent of the deposit, and in improving the confidence in the
estimate at depth. Mineral resources will be updated annually to include additional diamond
August 2014 95 of 171

drilling undertaken during the year and to deplete for the previous years mining. Reviews of
the geological interpretation against grade control drilling will continue to be undertaken on a
regular basis to verify the reliability of the resource estimate.
August 2014 96 of 171

15 Mineral reserve estimates

15.1 Disclosure
Mineral reserve estimates were prepared by Pan American technical staff under the
supervision of and reviewed by Martin Wafforn, P. Eng., Vice President, Technical Services of
Pan American, who is a qualified person as that term is defined by NI 43-101.
Pan American updates mineral reserves on an annual basis following reviews of metal price
trends, operational performance and costs experienced in the previous year, and forecasts of
production and costs over the life of the mine. The mineral reserve is based on measured and
indicated mineral resources estimated as at December 31, 2013 using heap leach only metal
recovery and cost parameters. The effective date of the mineral reserves is May 31, 2014,
which accounts for material removed by mining between December 31, 2013 and
May 31, 2014 as well as the inventory of economic broken material held in stockpiles at
May 31, 2014. No other new material information has become available between
May 31, 2014 and the signature date given on the certificates of the qualified persons.
Mineral reserves reported in this section do not use the pulp agglomeration cost and metal
recovery assumptions disclosed in this preliminary economic assessment, nor do they include
any of the resources anticipated to be mined from underground, because the economic
viability of those resources has not yet been determined by at least a pre-feasibility study.
Mineral reserve estimates are based on assumptions that include mining, metallurgical,
infrastructure, permitting, taxation, and economic parameters. Increasing costs and taxation
and lower metal prices will have a negative impact on the quantity of estimated mineral
reserves. There are no other known factors that may have a material impact on the estimate
of mineral reserves at Dolores.
15.2 Planned dilution

As described in section 14.10, the sub-celled block model created for the mineral resource
estimate was re-blocked to 6.25 m x 6.25 m x 7.5 m block size by a process that eliminates the
sub-cells and incorporates the grade of the neighbouring block into the grade of the re-
blocked cell. On the contact of the economic mineralized zones with the surrounding
uneconomic material, this process dilutes the economic grades by incorporating the grade of
the neighbouring uneconomic material into the re-blocked cell. The quantity of dilution is
dependent upon the width and location of the mineralized zone relative to the block, but on
average the process resulted in the application of around 13% dilution.
15.3 Recovery and cost parameters

A value per tonne was applied to each block based on the estimated grade, projected
metallurgical recovery, and location of the block as well as metal prices and costs including
refining, transportation, royalties, processing, mining, G&A, and leach pad sustaining capital.
For open pit mineral reserves, a pit design was prepared using metal prices of $22 per ounce
of silver and $1,300 per ounce of gold.
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The metallurgical recoveries applied for heap leach processing are given in Table 15.1, the
economic parameters for silver and gold are given in Table 15.2, and the cost parameters are
given in Table 15.3.
Table 15.1 Metallurgical recoveries by material type applied to the mineral reserve
estimate
Ore type Gold recovery (%) Silver recovery (%)
Oxide heap leach 81.5 47.4
Mixed/sulphide heap leach 66.1 59.2
Table 15.2 Economic parameters applied to the mineral reserve estimate

Item Units Silver Gold
Sale price $US per ounce 22 1,300
Refining cost $US per ounce 0.22 0.72
Transportation cost $US per ounce 0.08 0.08
Refining recovery % 99.75 99.80
Royalty to RG Mexico % 2.00 3.25
Extraordinary mining duty to government % 0.50 0.50
Table 15.3 Cost parameters applied to the mineral reserve estimate

Item Units Cost
Processing heap leach $US per tonne ore 7.86
Site G&A heap leach $US per tonne ore 2.79
Leach pad sustaining capital $US per tonne ore 0.60
Mining cost $US per tonne 1.88 with an increase/decrease
of 0.01 per tonne per bench
below/above the 1455 level
15.4 Geotechnical parameters

Golder Associates Inc. of Tucson, Arizona, USA, updated their recommendations for the
geotechnical parameters for the open pit design, following their review of the available data
and the rock conditions in August, 2013 (Golder, 2013a). The results of their review are
discussed in more detail in section 16.1.2.
Surface weathering and/or intense argillic alteration occurs to a depth of around 30 m.
Benches above 30 m should be constructed with production bench heights of 7.5 m with
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6.2 m wide catch benches located on each bench (separated by 7.5 m vertically). The bench
face angle should be 60 resulting in an inter-ramp angle of 35.
15.5 Pit design

An optimized pit shell following the geotechnical parameters provided by Golder was
prepared using Whittle software on resource blocks classified as measured and indicated
using the value per tonne calculations. Roadways and other adjustments were made to the
optimized pit shell using Minesight software to complete the pit design. The resulting pit is
developed in a series of phased outward expansions, comprising triple benches of 7.5 m each
and 9.1 m wide catch berms. A 24 m wide catch berm has been included in the design of the
high west wall to mitigate the risk of failure.
Below the weathering profile at a depth of 30 m, the inter ramp angle for internal phases has
been designed at 47 as it is assumed that presplit blasting will not be used for internal
phases. The final pit wall is designed with the assumption of presplit blasting to an inter ramp
angle of 52.
The pit extends around 2,400 m in length trending to the northwest, and is about 750 m wide.
The bottom elevation is at 1,285 m towards the north and at 1,155 m in the south. A plan
view of the ultimate pit is given in Figure 15.1.
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Figure 15.1 Plan of ultimate pit design
15.6 Mineral reserve tabulation

Mineral reserves for Dolores as at May 31, 2014, comprising in situ material classified as
proven and probable reserves within a reserve pit designed using metal prices of $22 per
ounce of silver and $1,300 per ounce of gold, as well as previously mined stockpiled economic
material, are given in Table 15.4. The in situ mineral reserves have been depleted for mining
as at May 31, 2014 and stockpiles have been inventoried as at May 31, 2014.
August 2014 100 of 171

Table 15.4 Dolores mineral reserves as at May 31, 2014

metal metal (koz)
(Moz)
Proven 37.3 31 36.9 0.76 914.1
Probable 29.1 35 32.5 0.81 759.4
Proven + Probable 66.4 32 69.3 0.78 1,673.5
Notes: Totals may not add up due to rounding. Mineral reserve estimates were prepared
under the supervision of or were reviewed by Martin Wafforn, P. Eng., Vice President,
Technical Services of Pan American. Mineral reserves have been estimated using heap
leach only metal recovery and cost parameters. Metal prices used for the estimate were
$22 per ounce of silver and $1,300 per ounce of gold.
The authors recommend advancing the pulp agglomeration processing studies to a pre-
feasibility study level. This work will provide more accurate estimates of the recovery and cost
parameters relevant to the pulp agglomeration process and will allow the conversion of
mineral resources to mineral reserves using the pulp agglomeration metal recovery and cost
parameters.
require pre-feasibility study level mine designs, plans, schedules, and cost models so that the
value of the proposed underground operations can be assessed with a higher level of
confidence. Other studies will include advancing geotechnical test work and analyses,
addressing the open pit and underground interactions and interfaces, and confirming the
appropriating mining and back filling techniques. Work should also be done to understand the
geothermal gradient and heat loading in the mine.
August 2014 101 of 171

16 Mining methods
16.1 Existing open pit operations
16.1.1 Mining methods
Mining at Dolores has been ongoing since 2008 using conventional open pit methods with
excavators, shovels, loaders, and haul trucks.
Ore grade control is carried out using angled reverse circulation drilling to provide closer
spaced sample data for a grade control estimate, which is used to mark out the ore/waste
mining boundaries. The grade control holes are oriented perpendicular to the strike of the
deposit on sections spaced every 15 m along strike and every 10 m to 15 m across strike.
Drillholes are approximately 43 m long, which results in a vertical span of 30.2 m, which is
equal to four bench heights. The holes pattern is offset with 25% of the holes drilled from
each bench to provide full coverage. The reverse circulation drillholes are logged for lithology
and oxidation and sampled every 2.03 m. The sample assays are used to estimate a grade
control model with similar attributes as the mineral resource model, but with a 3 m x 5 m x
7.5 m block size. A blast layout is designed based on polygons interpreted from the value per
tonne calculation in the grade control model.
Ore and waste material is drilled and blasted using 135 mm diameter, 8.5 m deep blast holes
spaced 4.5 m along strike and 4.5 m across strike, charged with ammonium nitrate fuel oil
(ANFO). Ore and waste are usually blasted separately to minimize ore loss, dilution, and
material misclassification. The minimum mining unit is 7 x 15 x 7.5 m, and planned dilution in
the mineral reserve averages around 13%.
In late 2012, the mine commenced a blast movement investigation conducted by Blast
Movement Technologies of Australia in a further effort to reduce ore loss, dilution, and
material misclassification. In early 2013 the mine implemented a blast movement monitoring
system comprising directional transmitters placed into the hole prior to blasting and located
with a detector after the blast, from which the distance and direction of blast throw is
determined. The blast movement monitoring now takes place regularly.
The mining sequence is to focus on the higher grade material in the south of the pit with
waste material stored in the east waste rock facility, which is located to the south of the pit.
When the last phase in the south is depleted, mining will switch to the north part of the pit
with some of the waste stored inside the pit and some of the waste stored at the north waste
rock facility.
16.1.2 Geotechnical and hydrological parameters
Golder Associates Inc. of Arizona, USA, made recommendations for the geotechnical
parameters for the open pit design, following their review of the rock conditions at site in
mid-2012 (Golder, 2013a). During that site visit, Golder supervised the drilling of three
oriented diamond drillholes to extend the geotechnical database in the northern and
southern halves of the southwest wall.
August 2014 102 of 171

Golder classified the rocks present in the mining area into two major lithology types including
a latite group consisting of non-welded latite tuff, breccias, flows, dikes, and sills, and an
andesite group consisting of andesite volcanics, porphyry intrusives, and diorite intrusives.
The structural model consists of a dominant structural fabric striking 330 and dipping steeply
to the west that pre-dates mineralization and cuts through both major lithology groups.
Faults following this trend typically comprise normal faults dipping to the southwest.
Conjugate normal faults and reverse faults dipping to the northeast are also present. A weak
orthogonal system of normal and wrench faults striking east-west are also part of the major
structural model. Minor structures including joints and veins typically follow the major
structural trends, and a joint set dipping to the northeast at an angle less steep than the
overall fabric is present within the pit.
The geomechanical model includes the data collected from nine oriented diamond drillholes,
30 unconfined compression tests, six disk tension tests, 11 triaxial compression tests,
43 uniaxial compressive strength tests, and four direct shear tests of saw cut joints in the drill
core. The tests on the Dolores drill core indicate good to very good rock quality and that the
structural conditions are generally favourable for the development of steep inter-ramp slopes
in all sectors of the pit except within the upper weathered zone and other surface areas
affected by intense argillic weathering of the rock, which generally occurs to a depth of
approximately 30 m below the surface.
Hydrogeological studies indicate generally low permeability of the rock mass with very steep
groundwater gradients towards the steep sided drainage valleys, likely following faults,
fractures, and other geological boundaries. The groundwater elevation varies from 1,400 m to
1,575 m above mean sea level. Initial work indicates that the orthogonal system of normal
and wrench faults may be more permeable than the primary mineralized fabric, which
facilitates natural drainage of the southwest pit wall.
Golder recommended production bench heights of 7.5 m with 7.5 m wide catch benches
located after each bench for mining areas within 30 m of the surface, and catch benches
located each third bench or each 22.5 m vertically for mining areas below 30 m. For pre-split
and trim mining, the recommended catch bench width is 9.1 m, with a bench face angle of
70 and an inter-ramp angle of 52. For buffered blasting, the recommended catch bench
width is 9.5 m with a bench face angle of 67 and an inter-ramp angle of 50.
16.1.3 Production and process rates and expected mine life
The life of mine plan is based on the mineral reserves presented in Section 15.6 and has been
developed with all mining sourced from the existing open pit, feeding the existing crushing
plant and heap leach system at a rate of 16,200 tonnes per day. In the life of mine plan the
mining rate for the next seven years of production varies from 38.2 million tonnes to
40.9 million tonnes of ore and waste. The waste mining rate declines thereafter, with mining
completed in 2024. The heap leach system is fed at full capacity from the pit and stockpiles
through to 2025, and stacking of crushed ore on the heap leach pads is completed in 2026.
Production from residual leach-down of silver and gold from the heap leach pads is projected
to continue through 2029. The projected mine life may increase if additional mineral
resources are defined and can be converted to mineral reserves.
The open pit has been designed with multiple phases to allow for earlier access to higher
grade ore in the pit and to provide a smoothed mining schedule that minimizes peak open pit
August 2014 103 of 171

mining fleet requirements. Where excess ore is available in the mine plan, the mine will
stockpile lower grade material to be processed later in the mine life. Silver and gold grades
are highly variable with annual head grades expected to vary between 24 ppm Ag and 51 ppm
Ag and between 0.48 ppm Au and 1.68 ppm Au during the mining phase. When mining has
been completed and the stockpile is being processed, grades are expected to decline to
approximately 16 ppm Ag and 0.24 ppm Au.
16.1.4 Waste mining requirements
Stripping and other waste mining is expected to be at around 34 million tonnes annually
between 2014 and 2020, reducing to 3.5 million in 2024. The final life of mine strip ratio is
1 to 4.46. Waste rock is stored in three different waste rock storage facilities, located to the
north, west, and east of the open pit.
The mining sequence is planned to focus on the higher grade material in the south of the pit
with waste material stored in the east waste rock facility, which is located to the south of the
pit. When the last phase of mining in the south is completed, mining will switch to the north
part of the pit with some of the waste stored inside the pit and some of the waste stored at
the north waste rock facility.
16.1.5 Mining fleet and machinery
The mining fleet operated by Pan American includes six Komatsu HD785-5LC 91 tonne
capacity haul trucks, nine Komatsu HD785-5 78 tonne capacity haul trucks, three Caterpillar
777F 91 tonne capacity haul trucks, three Komatsu PC3000-6 shovels, one Komatsu
PC1250SP-8 excavator, two Komatsu WA900-3A and one Komatsu WA600-6 wheel loaders,
two Komatsu D375A-5 and one Komatsu D155AX-6 bulldozers, two Komatsu WD500-3 wheel
dozers, two Komatsu GD825A-2 bladed road graders, and four Atlas Copco DM-45E and one
Atlas Copco DM780D blast hole drill rigs.
The mining fleet operated by the site mining contractor, PEAL, includes two Komatsu PC1250
excavators, one Komatsu PC2000 shovel, ten Caterpillar 777F 91 tonne capacity haul trucks,
two Atlas Copco blast hole drill rigs, one Caterpillar 16H bladed road grader, one Caterpillar
D10T and one Caterpillar D8T bulldozers, one water truck, one diesel re-fuel truck, and a
flatbed work truck.
As mining progresses deeper and haulage distances increase, the life of mine plan
contemplates the requirement for an increase in the number of mine haul trucks from the
current 28 trucks (including PEAL) to a maximum of 33 trucks. This number is planned to be
accomplished by replacing lower capacity (78 tonne) trucks with higher capacity (91 tonne)
trucks and by purchasing additional trucks.
16.1.6 Workforce
The workforce currently budgeted for 2014 comprises 488 Pan American employees,
including 257 in the mine (drilling, loading, hauling, and equipment operators, maintenance,
administration, engineering and geology), 168 in the process area (crushing, leaching,
maintenance, smelting, Merrill-Crowe, laboratory, administration, and metallurgy), and 63 in
G&A (administration, human resources, safety, environmental, security, information
technology, cost controllers, logistics, and warehouse). A further 282 contractors bring the
total site workforce to 770.
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Most of the mining is undertaken by Dolores mine staff, and there is also a contract in place
with a mining contractor, PEAL, to undertake an agreed upon amount of mining per year,
most of which takes place in the waste areas. The mine operates year round on two twelve
hour shifts per day, with the workers rotating on a two week on, one week off roster.
16.1.7 Recommendations
Pan American should continue to optimize blasting patterns, including continuing to measure
blast movements, and to monitor pit slope stability, as per good mining practices.
16.2 Preliminary economic assessment of combined open pit and

underground operations with a pulp agglomeration treatment option
16.2.1 Mining methods
There are no anticipated changes to the existing open pit mining methods or mining fleet
associated with the expansion Project. Implementation of the expansion Project will require
additional mining selectivity to separate the high grade portion of the deposit for grinding and
processing through the pulp agglomeration circuit, which will require a manageable
adjustment to current grade control practices.
Snowden Mining Industry Consultants of Vancouver (Snowden, 2014) and Pan American
completed a preliminary economic assessment of the proposed underground mine, which is
expected to occur concurrently with open pit mining and will be completed at approximately
the same time. The mining method selected was open stoping, mostly oriented longitudinally,
which takes into account the competent ground conditions and the requirement to tight fill
stopes beneath the open pit. The advantages of this method include near complete extraction
of the mineable inventory as no pillars are routinely necessary, and lower unit costs
compared to development intensive methods such as cut and fill. Golder (2014b) advised that
stope heights of 25 m, widths of 15 m, and lengths of up to 100 m will be stable. The width of
economic mineralization is mostly less than 15 m, but there are localized areas with widths of
between 15 m and 20 m, and in those cases the stope lengths are reduced. The average stope
length used in the design is 75 m, to allow for level geometry and to accommodate a few
stopes where the width is greater than 15 m.
Where competent backfill is required, cemented rock fill will be used, and where the stopes
are located in areas that will later interact with open pit mining, the cemented rock backfill
will be placed tightly to the backs to ensure open pit stability. Uncemented rock fill will be
used where competent fill is not required, and will be preferentially sourced from
underground development. The ratio of backfill used for this study is estimated at 35%
cemented to 65% uncemented.
Using the mining inventory available below the current reserve pit design, the underground
was designed using a decline access for haulage and transport of personnel and materials,
utilizing a portal at the surface previously excavated by Minefinders, which is located
August 2014 105 of 171

approximately 750 m east of the final pit crest at an elevation of 1335 m. The main access will
first develop to a point where a ventilation raise can be developed, and then will approach
the mineralization near the mid-point of the production zones along strike and split into
subsidiary declines to access each of the production zones. Access declines are at a grade of
1:7. A summary of the physicals developed from the mine plan are shown in Table 16.1. A
plan view of the access development, underground inventory, and open pit design is given in
Figure 16.1.
Table 16.1 Preliminary underground mining physicals summary
Item Units Value
Stope feed kt 4,260
Development feed kt 765
Development waste kt 1,885
Lateral development m 38,350
Vertical development m 2,550
August 2014 106 of 171

Figure 16.1 Plan of underground access development
The total length of all access development for the material in the plan is estimated to be
10,460 m. Decline development will be 5.5 m wide by 5.5 m high, except for a section from
the portal leading to the point where development splits north and south, which would be
5.5 m wide by 6.0 m high to allow room for auxiliary ventilation ducting.
Production levels are spaced at vertical intervals of 25 m or less in each production zone.
Levels will include footwall drives and crosscuts in waste to within 100 m of the level extents
along strike, beyond which development along economic mineralization will provide the sole
access. The design includes 24,080 m of level development, of which 12,340 m is in
mineralization above the economic cut-off.
It is estimated that the underground mine plan would require 280 cubic metres per second of
airflow to safely ventilate the mine at a 1,500 tonnes per day production rate. It is envisaged
August 2014 107 of 171

that the access decline will serve as the primary intake supplemented by a downcast fresh air
raise to keep velocities in the decline within acceptable limits. The return infrastructure will
consist of two upcast return air raises with surface fan installations. A dedicated fresh air
drive and return air drive will connect the ventilation shafts to the mining horizon.
The mining areas will be accessed by an access drive which will also serve as a fresh air drive
supplying air to each of the spiral ramp systems. In addition a return air drive will be required
which will access each of the mining zones and spiral ramp systems. Return from the levels
will connect to this collector return air drive via a series of small raise bore holes or long
hole raises of equivalent area that will follow the spiral ramp system. This will also provide a
through ventilation position for the ramp development. The ventilation design includes
3,810 m of lateral development, 930 m of 4.0 to 4.5 m diameter raises, and 1,620 m of 2.5 m
diameter raises. Three portable refuge chambers have been included in the cost estimate.
16.2.2 Geotechnical parameters
Geotechnical characterization
Golder (2013b) provided geotechnical input into the underground preliminary economic
assessment, building on the recommendations they had previously provided for the open pit
mine (Golder, 2013a). The scope of their underground work included characterizing the
deposit, investigating open pit and underground interaction design aspects, and providing
preliminary recommendations for the underground mine design and backfill requirements.
The nine geotechnical drillholes completed for the open pit studies were insufficiently spaced
to adequately characterize the rock conditions that will be encountered in the underground
mine. To supplement this data, Golder reviewed RQD data and core photographs from
exploration drillholes. As previously noted, the intact rock strength is considered generally
very strong, at greater than 100 MPa (megapascals), on the basis of 43 uniaxial compressive
strength tests.
No major features or structures were identified near the proposed underground mine. As the
design analysis for the pit slopes were undertaken assuming any failure would occur through
the rock mass rather than along any major structural discontinuities, Golder considers it
unlikely that structural features will adversely impact underground stability or that the
proposed underground stopes will adversely influence overall pit wall stability. Assessments
of the rock mass, including uniaxial compressive strength tests, RQD and discontinuity spacing
measurements, the condition of the discontinuities, and ground water conditions, indicates
that the rock quality is generally good to very good. The data do not suggest any variability in
rock quality related to lithology, mineralization, or alteration.
The review of the drillhole photographs indicates consistently good quality rock with the
exception of a single anomalous drillhole which shows poor quality, highly fractured rock. The
reasons for the condition of this hole are unknown. Other holes nearby, however, indicate
good quality rock, and the ground conditions in the anomalous drillhole appear to be
localized to that one hole.
Based on the geotechnical information determined from core logging and strength testing,
and from the observations of the drill core photographs, Golder concluded that the quality of
all of the mineralized rock beneath and outside the pit limits that might be mined by
underground methods, is good to very good.
August 2014 108 of 171

The interpretation of structural features suggests that faults are very steep and are generally
aligned normal to the southwest pit wall, particularly in areas where the mineralized rock
intersects the pit. The overall stability of the pit is not controlled by major structural features,
only the local bench faces, and this is particularly true of the areas where the mineralized rock
intersects the pit. Analyses undertaken to evaluate overall stability of the pit (with no
underground stopes) were based on failure of the rock mass and the factor of safety was
determined to be very high, at greater than approximately 1.8. This represents very stable
conditions, and as a result, the slope angles for the overall pit design were based on
geometrical considerations and not on pit stability considerations.
Geotechnical recommendations
On the basis of the geotechnical characterization, underground stope dimensions of
approximately 15 m wide by 100 m long by 25 m high are considered to be achievable.
Mesh and pattern bolting is the recommended ground support for stope development. 2.4 m
long bolts at a spacing of 1.5 m across the back and ribs to within 2 m of the sill were
assumed for the study. Routine shotcrete is not considered necessary, but may be required in
very localized areas where poor quality rock is encountered. Some limited cable bolting of the
backs may be necessary. Parallel drilling and controlled blasting techniques will be necessary,
especially immediately adjacent to the hangingwall contact, to ensure the walls are not
undercut on the levels.
The good quality rock, stable pit conditions, and the limited lengths of proposed underground
stopes indicate that underground stopes that will be subsequently intersected by the pit, or
are located immediately below the open pit, should not have a destabilizing impact on the pit
walls provided that the stopes are backfilled tightly with cemented backfill immediately after
they are excavated.
Underground stope stability will require an adequate crown pillar between the open pit and
the stopes at the time each stope is mined. Golder recommends that the stopes are mined
and completely backfilled before the pit approaches within approximately 30 m of the stopes
to avoid any adverse interaction developing between the open stope mining and the pit.
Following tight filling of the stopes, open pit mining will advance through the crown pillar to
achieve full extraction of the reserve.
The necessary backfill material is expected to comprise both cemented and uncemented rock
fill, at a ratio of 35% cemented rock fill to 65% uncemented rock fill. The backfill material is
expected to be sourced from andesite and rhyolite waste rock broken mainly during
underground mining, depending on the mine schedule, as well as crushed silver-depleted
heap leach material. The waste rock is considered to be of good quality, with high uniaxial
compressive strength values greater than 150 Mpa, and contains no clay or other
contaminants. Neither the waste rock nor the spent heap leach material individually meets
typical cemented rock fill aggregate size distribution requirements, so the two materials will
be combined at a ratio of two parts waste rock screened to 100% passing minus 100 mm to
one part spent heap leach material to yield about 30% passing 10 mm.
The cemented rock fill is expected to contain between 3% and 4% cement, prepared in
batches using engineered aggregate. The cemented rock fill will be prepared in a plant and
hauled underground at a rate of around 1,250 tonnes per day. The likely capital expenditure
August 2014 109 of 171

for the plant and equipment is estimated at $4.8 million, with a further $2.4 million estimated
for mobile equipment which includes underground haul trucks equipped with ejector plates.
Overall backfill costs including cemented and uncemented rock fill are estimated at $5.09 per
tonne of feed.
16.2.3 Production and process rates and expected mine life
The preliminary economic assessment is based on measured, indicated, and inferred
resources mined by a combination of open pit mining from within a reserve pit and
underground mining methods, both designed using metal prices of $22 per ounce of silver
and $1,300 per ounce of gold, and treated using the current heap leaching facilities at the
current processing rate of 16,200 tonnes per day until 2016, at which point the pulp
agglomeration plant would commence operations. The annual feed mining rates between
2014 and 2024 are estimated to range between 5.0 million and 9.9 million tonnes.
redesigned with the combined pulp agglomeration and heap leach process costs and metal
recoveries and using metal prices of $22 per ounce of silver and $1,300 per ounce of gold. The
life of mine plan for the expanded case includes an additional 5.6 million tonnes of feed from
the open pit that was formerly uneconomic with the heap leach only metal recoveries and
operating costs, as well as an additional 5.0 million tonnes of feed from the underground
mine.
The preliminary economic assessment assumes that construction of the pulp agglomeration
plant is completed by the beginning of 2016 and processing starts at a rate of 5,600 tonnes
per day (2.0 million tonnes per annum). With the start-up of the pulp agglomeration plant,
the throughput of the existing crushing plant and heap leach system is reduced to
14,400 tonnes per day (5.3 million tonnes per annum), while overall processing and stacking
on the heap leach pads increases from the current 16,200 tonnes per day (5.9 million tonnes
per annum) to 20,000 tonnes per day (7.3 million tonnes per annum).
An underground mining inventory, shown in Table 16.2, was developed using mining
parameters appropriate to the mining method, derived mining costs, and estimated process
and G&A costs and process recoveries.
Table 16.2 Preliminary estimated underground mining inventory
Classification Mt Au grade Contained Au Ag grade Contained Ag

(ppm) (koz) (ppm) (Moz)
Measured 0.48 1.02 16 81 1.3
Indicated 1.33 1.82 78 68 2.9
Inferred 3.22 1.82 188 61 6.3
A preliminary underground schedule based on the underground mine plan targets a feed rate
of approximately 1,500 tonnes per day for 550,000 tonnes per year to feed the pulp
agglomeration circuit in tandem with the coarser, lower grade feed from the open pit. Level
development per heading is estimated to advance at a rate of 100 m per month, for a total of
315 m per month of development. The planned schedule indicates development commencing
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in 2015 and full production achieved in 2018, with a mine life of approximately 12 years
including construction time. The projected mine life of the expanded operation may increase
if additional mineral resources are defined and can be converted to mineral reserves.
from the heap leach pads is projected to continue through 2029.
16.2.4 Waste mining requirements
Open pit waste mining is anticipated to average 34.2 million tonnes per annum until 2020, at
which point the waste mining will decline until completed in 2023. Waste mining in the life of
mine plan totals 271 million tonnes from June, 2014, for a strip ratio of 1 to 4.12. The majority
of the waste will be stored to the south of the pit, and there is an opportunity to store
31.7 million tonnes of waste in the south part of the open pit after mining has been
completed in that area.
Underground waste mining is anticipated to occur at a rate of around 240,000 tonnes per
year between the 2nd and 6th year of mining, reducing to around 110,000 tonnes per year
thereafter.
16.2.5 Mining fleet and machinery
The mobile equipment fleet for the open pit mine will be essentially unchanged from that of
the existing operation.
The fleet of mobile equipment for the underground mine is shown in Table 16.3. Major
equipment, including drills, trucks, and loaders, will be overhauled and replaced according to
accrued service hours, while ancillary equipment and light vehicles will be replaced according
to age. Two underground dump trucks and one scoop tram were purchased by Minefinders
and are currently sitting unused in storage.
Table 16.3 Underground mining fleet
Item Maximum fleet
Development drill 5
Production drill 1
Underground dump truck 5
Ejector truck for cemented rock fill 3

haulage
Scoop tram 3
ANFO truck 1
Motor grader 1
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Item Maximum fleet
Light trucks 4
Service truck 1
Water truck 1
Telescopic handler 2
Van for shift changes 2
Ambulance 1
Small bus 2
Light vehicle 8
Portable refuge chamber 3
16.2.6 Workforce
The open pit mine workforce will be essentially the same as for the existing operations.
At its peak, the underground mine would employ 154 people in mine, maintenance,
management, and technical services roles. The average annual workforce would comprise
around 135 individuals, with around 85 in the mine, 28 in maintenance, and 22 in
management and technical services.
The authors recommend advancing the preliminary economic assessment of the pulp
agglomeration processing option to a pre-feasibility study level, which will allow Pan
American to update the recovery and cost parameters and to re-optimize the pit design used
in the estimation of mineral reserves. The open mining plan used in the preliminary economic
assessment has a slightly higher production rate than is currently achieved at the mine and
additional open pit production is expected to be supplied by PEAL and by purchasing
additional mine haulage trucks. Implementation of the pulp agglomeration processing option
will require additional mining selectivity to separate the high grade portion of the deposit for
grinding, which will require a manageable adjustment to current grade control practices, but
is not likely to result in significant additional mining costs.
value of the proposed underground operations can be assessed with a high level of
addressing the open pit and underground interactions and interfaces, and assessing the
August 2014 112 of 171

schedule.
Identifying the permitting requirements for the addition of an underground
operation.
Developing pre-feasibility level mine designs, plans, schedules, and cost models so
that the value of the proposed underground operations can be assessed with a higher
The estimated cost of pre-feasibility level mine designs, plans, schedules, and cost models is
$450,000. Given a positive outcome of these studies, Pan American may conclude that the
most effective method of assessing the geotechnical and geothermal conditions and to
improve the confidence of the inferred resource will be to develop part of the primary access
decline for underground and some of the planned level accesses prior to making a final
production decision on the underground mine.
A total of $2.7 million has been considered in the preliminary economic assessment for
diamond drilling to improve the confidence of the mineral resource estimates in the region of
the proposed underground mine. As the pulp agglomeration plant and the underground are
expansions to the existing Dolores mine, Pan American may consider that upgrading only a
portion of the inferred mineral resource prior to making a decision on construction of the
pulp agglomeration plant and the underground mine may be an acceptable risk.
August 2014 113 of 171

17 Recovery methods
Information in this section is referenced and updated from M3 (2005), GBM (2013), and
Lyntek (2014).
17.1 Existing heap leach process

In early 2003, in support of a feasibility study completed in June 2005, Minefinders embarked
on a two year programme of metallurgical test work to obtain data for scoping level trade off
studies for various processing options to determine the most economic flow sheet for the
Dolores ores and to optimize the processing conditions. Based on the results of the
metallurgical test work, the ultimate flowsheet selected for the processing of the Dolores
feed included primary crushing of run of mine feed to 112 mm, followed by secondary and
tertiary crushing in closed circuit with screens to produce a final crushed product with a
target P80 6.3 mm, conveying the crushed product to the heap leach pad, and stacking using a
conveyor stacking system for leaching with sodium cyanide. The recovery of metals from the
pregnant leach solution follows the Merrill-Crowe process with precipitation of metal ions
using zinc dust followed by the removal of trace amounts of mercury in retort ovens and
smelting of the precipitate to produce dor bars. The metals recovery circuit was designed for
the capacity to produce approximately 200,000 ounces of gold and 7.5 million ounces of
silver, for 8 million ounces of dor annually.
Construction of the mine began at the end of 2006, with the commissioning period occurring
between September 2008 and January 2009. The construction of the processing facility
followed the recommendations made in the 2005 feasibility study and comprised a crushing
plant, conveying and stacking facilities, leach pads, solution ponds, and Merrill-Crowe and
refining facilities. The first dor was produced in November 2008 and commercial production
began in May 2009, initially treating the shallow oxide ore.
17.1.1 Heap leach flow sheet
a nominal rate of 16,200 tonnes per day crushed to a target particle size of P80 6.3 mm in a
three stage crushing circuit with a recirculating load. The crushed ore product is conveyed to
the leach pads via an overland conveyor system, sampled at regular intervals from a material
sampler, and placed on the pads using portable grasshoppers and a radial stacking system.
Sodium cyanide solution is prepared in the same building that houses the Merrill-Crowe plant
and pumped to the leach pads directly or to a holding tank near Pad 3, from where it is
distributed to the heap leach pads and applied using a combination of drip and sprayer
systems. More sprayers are used during the rainy season between July and October to
increase evaporation in the circuit to account for the dilution of additional rain fall on the
pads, while drip systems are used exclusively during drier times of the year. The mine
operates a closed circuit processing system without tailings facilities.
Metal recoveries are a function of solution flow rates, cyanide concentration, and time, and
the metal leaching period can cover years, continuing as subsequent lifts are placed on the
pads. The pregnant leach solution containing the dissolved silver and gold is collected from
August 2014 114 of 171

the bottom of the leach piles via gravity collectors and/or vertical perforated steel pipes (well
risers) fitted with internal pumps that transfer the solution to the pregnant solution pond.
The solution is clarified, de-oxygenated, and processed through a Merrill-Crowe circuit with a
nominal capacity of 1,000 cubic metres per hour to precipitate silver and gold from the
cyanide solution. The clarified and de-oxygenated silver and gold cyanide solution is added to
zinc dust, which triggers the precipitation of the silver and gold. The remaining barren cyanide
furnace to form dor bars.
The bars are cleaned, assayed, weighed, and transported to a third party refinery in North
America for final recovery. The dor bars typically contain between 1% and 5% gold and 95%
to 99% silver, with generally less than 1% impurities. A chart showing predicted recovery
compared to actual production since late 2010 is given in Figure 17.1.
The heap leach pads, ponds, and cyanide circuit are contained within a closed circuit and not
released to the environment.
Medium grade material may be placed on stockpiles allowing for the preferential crushing
and stacking of higher grade material. Currently approximately a dozen such stockpiles are
located around the mine workings.
Figure 17.1 Predicted versus actual silver and gold metal recovery
August 2014 115 of 171

17.1.2 Power and water requirements

are forecast to be average 6.8 MW, reaching a maximum of 8.4 MW when re-starting the
crusher motors, which are the largest motors on site. Power costs using diesel generators are
anticipated to be on the order of $0.29 per kilowatt hour, depending on the cost of diesel.
the river is substantially limited during the dry season, which runs from April to June. Water
supply lines have been installed from the Tutuaca River to the Chabacan dam which is located
to the west of the waste storage facility and then from the dam to the processing facilities.
The Chabacan dam reservoir has a capacity of 1.2 million cubic metres and provides storm
water control as well as the primary water storage. The permitted water usage from the
Tutuaca River is 2.0 million cubic metres per annum at a maximum rate of 64 litres per
17.2 Preliminary economic assessment of a pulp agglomeration treatment

option
17.2.1 Introduction
Laboratory testing has confirmed that reducing the particle size of the material being sent to
the heap leach pads by grinding to a finer size will increase the overall recovery of precious
metals and will reduce the leaching time required to achieve that recovery. The economic
aspects of the additional costs of finer grinding and the associated treatment costs versus the
benefits of the improved recovery and leaching time (leach kinetics) are the subject of this
preliminary economic assessment. The concept is to exploit the apparent economic benefit of
grinding higher grade materials to a finer grain size. Lower grade material would continue to
be processed in the existing crushing circuit.
This preliminary economic assessment of alternative processing treatments considers the
existing 16,200 tonnes per day three stage crushing followed by heap leaching versus a
20,000 tonne per day pulp agglomeration process consisting of 14,400 tonnes per day of low
and medium grade material sent through the three stage crushing circuit and fed directly to
the leach pads as well as 5,600 tonnes per day of high grade material ground to 425 microns
and agglomerated before sending to the leach pads. The comparison involved a high level
August 2014 116 of 171

assessment of treatment rates, particle sizes, and their respective metal recovery, the
necessity and cost of any tailing disposal system, operating costs, and initial capital
requirements.
Bench scale laboratory testing and current pilot scale testing conducted on site have
demonstrated a viable method for treating the high grade mineralization. The recommended
treatment method consists of two stage crushing followed by coarse grinding in a rod mill to
produce a P80 of 0.425 mm (-35 mesh) product. This material is then dewatered to
approximately 15% moisture via pressure filtration, the dewatered material is then fed into
an agglomeration drum where cement is added and mixed to produce a stable agglomerated
product. This agglomerated material is then placed on the heap leach pad for metal recovery.
This method provides the advantages of:
Improved liberation, leaching kinetics, and ultimate recovery of precious metals in the
high grade ores
Reduced capital cost compared to fine milling and tank leaching and fine milling,
flotation, and cyanidation of concentrate and tails
Reduced operating cost compared to fine milling and tank leaching and fine billing,
flotation, and cyanidation of concentrate and tails
Maintained stability of heap leach pads
Optimized use of cyanide, lime, and cement reagents
No requirement of a tailings disposal system
17.2.2 Pulp agglomeration flow sheet
The pulp agglomeration process will operate in an integrated fashion with the existing heap
leach processing facilities, as shown in the flow diagram in Figure 17.2. High grade run of
mine feed will be stockpiled on the existing run of mine pad, separated from the medium
grade run of mine material. The high grade feed will be tipped into a bin using front end
loaders, at a rate of 5,600 tonnes per day, then recovered from the bin by a vibrating grizzly
feeder, and delivered to a primary jaw crusher (Metso C-150 or equivalent). The discharge
from the primary crusher will be conveyed to a vibrating screen. Screen oversize will pass
through a cone crusher (Metso HP-800 or equivalent) in a closed loop to produce a rod mill
feed (screen undersize) with a P80 of 12.8 mm. The screen undersize will report to a discharge
bin outfitted with two reclaim belt feeders. One of the reclaim belt feeders will report directly
to the rod mill (Nordberg 13 by 188) via a conveyor. The other reclaim belt feeder from the
discharge will report to a conveyor and radial stacker for depositing onto a fine feed stockpile.
The material will be recovered from this stockpile via multiple reclaim feeders and a reclaim
tunnel conveyor system for eventual feed to the rod mill if necessary.
The rod mill discharge will be pumped in closed circuit to a Vertimill/vibrating wet screen
circuit. The screen oversize will report back to the Vertimill and the screen undersize will be
pumped to a surge tank for feed to the pressure filters. This closed loop circuit is anticipated
to produce a P80 of 0.425 mm (35 mesh) product.
Cyanide and lime will be fed into the rod mill to start the metals recovery process. Process
water for the rod mill will be pregnant solution from the heap leach. The entire area from the
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rod mill forward will be on concrete pads for chemical and spill containment. A small
thickener for mill clean-out and general spill and water recycle has been included in the initial
design of the system. Thickener underflow will be intermittently pumped to the slurry surge
tank. The thickener overflow will be processed in the Merrill-Crowe plant.
The milled slurry will be pumped from the surge tank to one of three horizontal pressure
filters equipped with vertical plates, air blowers, and a membrane squeeze. The filtration
process is necessary primarily to reduce the water content of the material to a level suitable
for agglomeration and will also provide an opportunity for early recovery of a portion of the
precious metal content that will be leached in the rod mills. The pressure filters will dewater
the slurry and produce a filter cake of approximately 15% moisture. Recovered filtrate
solution will be pumped to a pregnant solution holding tank for eventual metal recovery in
the Merrill-Crowe plant.
The filtration circuit is expected to consist of three filter presses and associated support
equipment, and all of the equipment will be housed within a building. Three filters will allow
for continuous operations with one filter being filled while the other two are being emptied
or going through a wash cycle.
The dewatered filter cake will be discharged from the filter presses onto a belt conveyor with
the possible addition of cement for feed to the rotating agglomerator drum. Additional
solution will be sprayed onto the mixture within the drum as it tumbles within the drum in
order to control the moisture content and formation of the agglomerate balls. The
agglomerate balls will be discharged from the drum and conveyed to the heap leach pad feed
conveyor where they will be combined with crushed low grade mineralized material to be
conveyed to the existing heap leach pads.
Most of the pulp agglomeration process make-up water for the high grade treatment circuit
will be sourced by diverting a portion of the pregnant solution flow from the heap leach pads
on its way to the Merrill-Crowe plant. The benefits of using pregnant solution in the pulp
agglomeration plant include cost savings in sodium cyanide and solution pumping, optimizing
the Merrill-Crowe and cementation process which improves with higher metals values in
solution, and minimizing any increase in fresh water consumption. Additional cyanide solution
will be sourced from a sodium cyanide solution make-up plant constructed next to the berm
of heap leach Pad 3. The heap leach pads, ponds, and cyanide circuit will remain contained
within a closed circuit and will not be released to the environment.
No tailings disposal system is required as the pulp agglomeration process does not produce a
tailings stream.
August 2014 118 of 171

Figure 17.2 Pulp agglomeration flow diagram
3 Stage Medium 2 Stage High

Grade Crushing Grade Crushing
Milling
Thickening
Pregnant Solution Filtering
Filtrate (Enriched) Solution

Agglomeration
Make-up water Heap Leaching Merrill Crowe
Solution
Dore Bars
17.2.3 Plant design

The proposed pulp agglomeration plant will require a two stage crushing plant with a capacity
of 5,600 tonnes per day, a rod mill targeting a particle size of P80 passing 1,700 microns, a
Vertimill targeting a particle size of P80 passing 425 microns, a thickener, pressure filters for
dewatering of the ground rod mill product, and an agglomeration drum where the ground
high grade feed will be agglomerated with the addition of cement. The cement requirements
for agglomeration are expected to be approximately 20 kilograms per tonne of feed.
A schematic of the proposed pulp agglomeration plant layout (Lyntek, 2014) is given in Figure
17.3 and is anticipated to be located to the northwest of the existing crushing plant. This
location was selected as the most suitable given its close location to the existing crushed
medium grade stockpile, which eliminates the necessity of long overland transfer conveyors.
Sharing the run of mine feed pad with the existing crushing facility eliminates the
requirement for any additional haul roads.
August 2014 119 of 171

Figure 17.3 Pulp agglomeration plant layout (Lyntek, 2014)
17.2.4 Equipment and specifications

Scoping level estimates of equipment requirements and specifications for the proposed pulp
agglomeration processing option have been made in the preliminary economic assessment.
Estimates for the crushing design criteria are given in Table 17.1. A trade off study of the
crushing equipment concluded that unless the run of mine feed size can be reduced to less
than the current 800 mm, it will not be possible to achieve the necessary size reduction
through units smaller than those presented in Table 17.1.
Table 17.1 Crushing design criteria for the pulp agglomeration plant
Item Unit Value
Crusher run of mine feed size F98, mm 800
Crusher product size P80, mm 12.8
Combined crusher utilization and % 75
availability
Hourly crusher throughput Tonnes per 311
hour
Primary crusher feeder
August 2014 120 of 171

Item Unit Value

Type Vibrating grizzly
Make Metso
Model AVT14-65 ds2 4.6 x 21.3
Primary crusher
Type Jaw
Make Metso
Model C150
Operating power kW 140
Installed power kW 200
Closed setting mm 125
Product P80 mm 155
Secondary screen
Type Two deck screen
Make Metso
Model LH 3073-2
Size
Width m 3.0
Length m 7.3
Top deck aperture mm 30 x 30
Bottom deck aperture mm 18.5 x 58
Secondary crusher
Type Standard cone fine liner
Make Metso
Model HP800
Closed side setting mm 16
Crusher discharge P80 mm 13
Operating power kW 339
Installed power (maximum) kW 600
Estimates for the milling plant design criteria are given in Table 17.2. An alternative option
was also analysed that entailed the use of two rod mills to grind directly to 425 microns. This
option could achieve the target particle size, but technical and operational advantages of the
selected circuit outweighed the use of two rod mills in parallel.
August 2014 121 of 171

Table 17.2 Milling design criteria for the pulp agglomeration plant
Item Unit Value
Primary Mill
Type Rod
Quantity 1
Make Nordberg
Model 13 x 18
Feed size F80, mm 12.8
Product size P80, m 1,560
Mill dimensions (inside)
Diameter m 3.96
Length m 5.69
Motor rating kW 1,500
Mill operating density % w/w 60 to 70
Secondary Mill
Type Vertimill
Quantity 1
Make Metso
Model VTM 1500
Feed size F80, mm 1,560
Product size P80, m 425
Mill dimensions (inside)
Motor rating kW 1,500
Mill operating density % w/w 65 to 75
Mill circuit throughput Tonnes per hour 256
Mill circuit utilization % 91
Rod mill work index kWh/t 17.9
Abrasion index Ai 0.4253
Grinding rod consumption (rod mill)
Power basis kg/kWh 0.133
Unit consumption kg/t 0.485
Daily kg/d 2.716
Mill liner consumption (rod mill)
August 2014 122 of 171

Item Unit Value

Daily kg/d 176.6
Grinding ball consumption (Vertimill)
Unit consumption kg/t 0.285
Daily kg/d 1,602
Mill liner consumption (Vertimill)
Replacement frequency Per year two sets of digging
shoes, one set balance of
screw liners
The estimated design criteria for leaching, thickening, filtration and clarification, and
agglomeration are given in Table 17.3. No leaching has been accounted for in the rod mill. A
portion of the soluble silver and gold will be recovered from the thickener overflow and filter
press filtrate streams, but the majority of the precious metals will be leached on the heap
leach pads and will report to the Merrill-Crowe plant in the pregnant leach solution. The
cyanide required for the high grade feed will be sourced by diverting a portion of the flow of
the pregnant heap leach solution from the pads to the Merrill-Crowe plant, as well as from a
cyanide solution make up plant to be built at the berm of heap leach Pad 3.
Table 17.3 Leaching, thickening, filtration and clarification, and agglomeration design
criteria for the pulp agglomeration plant
Item Unit Value
Leaching criteria
Lime addition to rod mills kg/t 1.15
Cyanide consumption kg/t 0.5
Thickening criteria
Thickener type High rate
Thickener underflow density % solids by 64-68
weight
Thickener net feed loading m3/m2 per 5.68
hour
Thickener diameter m 6
Filtration criteria
Filter type Horizontal with vertical
plates, air membrane
blow, and membrane
August 2014 123 of 171

Item Unit Value

squeeze
Surge tank nominal capacity h 1
Sizing basis m3/t 0.733
Filter wash ratio m3 wash / m3 0
feed solution
Filter cake moisture % by weight 15
Flocculant to filter g/t 0
Agglomeration criteria
Cement addition kg/t 20.0
Optimum moisture content % by weight 9 - 11
Retention time seconds 60
The estimated reagent requirements are given in Table 17.4. The addition of lime and cement
to the pulp agglomeration plant is anticipated to result in a reduction in the amount of lime
required for the medium grade heap leach feed, which has been accounted for in the
operating cost estimate. There are no other product handling costs required beyond those
incurred in the existing heap leaching system.
Table 17.4 Reagent requirements for the pulp agglomeration plant

Item Unit Value
Lime requirements
Delivered form Pebble lime
Addition rate kg/t 1.15
Consumption (maximum) t/d 6.44
Addition points Rod mill feed conveyors
Existing silo capacity t 200
Sodium cyanide requirements
Delivered form
State Briquette
Grade % NaCN by weight >90
Mixed solution concentration % NaCN by weight 25-30
Addition points Rod mill feed,
agglomeration drums,
August 2014 124 of 171

Item Unit Value

existing barren solution
tank
Consumption (including heap) kg/t 0.5
Consumption by high grade feed only t/d 2,800
Cement requirements
Type Portland type II
Delivered form Dry
Addition rate kg/t 20.0
Consumption t/d 112
Addition point Agglomeration drum
Silo capacity t 200
17.2.5 Power and water requirements

The lease of an additional 2,000 kW generating set is considered for six months to cover the
power requirements of the pulp agglomeration plant with the assumption that grid power
will be installed by April, 2016. If connection to a power grid is not available, then an
additional 2,000 kW generator will be required to cover the power requirements. The
estimated operating load is 3,500 kW for a 5,600 tonnes per day pulp agglomeration plant,
with an estimated total connected load of 5,130 kW.
replace the existing diesel generators. An initial study completed by the CFE, showed that the
the benefits of the project. The additional power costs associated with the expanded
August 2014 125 of 171


and construction.
The only additional water requirements for the pulp agglomeration plant include minor
amounts of raw water for emergency eye wash, showers, and miscellaneous fresh water
needs. Plant water will be delivered from the existing heap leach pad pregnant solution
collection and pumping systems.
Additional engineering will be required to more reliably assess the technical feasibility and
economic viability of the Project and to finalize the anticipated flow sheet. Some of the
additional test work and studies necessary to advance the Project are discussed here.
to evaluate the benefits of varying the blasting practices in the pit in order to reduce the size
and cost of the crushing equipment in the pulp agglomeration plant.
Diverting the crushed medium grade material to the agglomeration drum circuit would add
flexibility to the high grade filter cake moisture content; however the system would be
exposed to the variability in the moisture content of the crushed medium grade that changes
with the seasons at the mine. It is recommended to quantify the peaks of maximum moisture
content in the crushed medium grade material in order to evaluate the optimization of
filtration equipment. An estimated $500,000 would be required for the trade-offs and studies
to advance the process area to a pre-feasibility study level.
August 2014 126 of 171

18 Project infrastructure
18.1 Existing operations
18.1.1 Transportation and logistics
The main road access to the Property is via 92 kilometres of unpaved roads leading north
from Federal Highway 16, near Yepachic, Chihuahua. Access for personnel is also provided by
an unpaved landing strip suitable for light aircraft, located about 8 kilometres from the mine.
The nearest major population centre is at the city of Chihuahua, located 250 kilometres to the
east. Employees travel to the mine either by road or by light aircraft, while materials come by
road.
No additional road works are anticipated for the construction and operation of the proposed
expansion Project.
18.1.2 Crushing, leach pad, and waste disposal facilities
The existing mine infrastructure comprises three waste storage facilities located to the north,
west, and south of the open pit mine workings, three leach pads located to the east of the
workings, pregnant solution and overflow ponds located to the north of the offices, run of
mine stockpiles of material awaiting crushing, a three stage crushing plant, a Merrill-Crowe
plant, a power generation plant located to the west of the ponds, and maintenance shops and
warehouses located near the mine offices. As the mine plan prioritizes the highest grade
material available for crushing, approximately a dozen medium grade stockpiles are located
around the mine site, awaiting crushing.
A series of fixed and portable conveyor belts transport the crushed material to the leach
pads. Pad 1 operated for the first two years of the mine life and is now currently on care and
maintenance. Stacking on Pad 2 is nearly complete except for the transfer of a minor amount
of partially leached ore from Pad 1. All stacking of fresh ore now takes place on Pad 3, with
active leaching continuing in series on Pad 2 and Pad 3. The mine operates a closed circuit
processing system without tailings facilities. A plan of the current site facilities is shown in the
photograph in Figure 18.1.
August 2014 127 of 171

Figure 18.1 Mine infrastructure plan
18.1.3 Power
replace the existing diesel generators. An initial study completed by the CFE showed that the
August 2014 128 of 171

the benefits of the Project. The additional power costs associated with the expanded
and construction.
18.1.4 Water
the river is substantially limited during the dry season, which runs from April to June. Water
supply lines have been installed from the Tutuaca River to the Chabacan dam which is located
to the west of the waste storage facility and then from the dam to the processing facilities.
The Chabacan dam reservoir has a capacity of 1.2 million cubic metres and provides storm
water control as well as the primary water storage. The permitted water usage from the
Tutuaca River is 2.0 million cubic metres per annum at a maximum rate of 64 litres per
18.2 Estimated infrastructure requirements for the proposed expanded

operation
A schematic of the proposed pulp agglomeration plant layout is given in Figure 17.3 and is
anticipated to be located to the northwest of the existing crushing plant.
18.2.1 Crushing facilities
In addition to the existing crushing facilities, additional crushing facilities will be necessary for
the pulp agglomeration Project. This will include a front end loader, run of mine ore bin, a
vibrating grizzly feeder, a primary jaw crusher, a secondary screen and a secondary cone
crusher, belt conveyors, a dust collection and dust suppression system with the necessary
ducting and piping, a tramp iron magnet, and feeders discharging to the crushed ore
stockpile.
18.2.2 Grinding facilities
The necessary infrastructure for the grinding area will include a stockpile reclaim and rod mill
feed belt conveyor, a rod mill, a scalping screen, a Vertimill, mill discharge and associated
August 2014 129 of 171

pumps, an automatic sampler, a metal detector and tramp iron magnet if necessary, piping,
instrumentation, platforms and support structures, thickener feed pumps, control room, and
ablution facilities.
18.2.3 Thickening facilities
The necessary infrastructure for the thickening facilities will include grinding circuit product
pumps, a feed box, one high-rate thickener, thickener underflow to surge tank feed pumps,
sumps and all other associated pumps, piping, launders, instrumentation, platforms, support
structures, filter press feed pumps, and filtrate pumps.
18.2.4 Filtration facilities
The necessary infrastructure for the filtration facilities will include a filter feed surge tank, a
filter feed surge tank agitator, filter feed pumps, three filter presses with air blow and
membrane squeeze, filter cake conveyors, filtrate tank, filtrate pump, piping to deliver the
pregnant solution to the existing Merrill-Crowe plant, instrumentation, and platforms and
support structures.
18.2.5 Agglomeration facilities
The necessary infrastructure for the agglomeration facilities will include a cement silo, one
agglomeration drum, process solution sprayers, instrumentation, platforms, support
structures, and additional conveyors to feed the agglomerates to the stacking system on heap
leach Pad 3.
18.2.6 Reagent facilities
The necessary infrastructure for the sodium cyanide, flocculant, lime, and cement reagent
facilities will include tanks, mixers, pumps, metering pumps, piping, instrumentation,
platforms and support structures, storage facilities, two overhead travelling cranes, and
splitters. The facilities are anticipated to have the capacity to store a two day supply of
cement. Existing facilities will be used for storage of a one month supply of lime and sodium
cyanide.
18.2.7 Auxiliary facilities
The facilities will also include compressed air, power supply, and process solution and water
management systems. The compressed air facilities will consist of plant and instrument air,
compressors, filters, receivers, piping, instrumentation, and platforms and support structures.
The process solution management system will include pumps and tanks for the collection,
storage, and distribution of the pregnant solution from the Pad 3 discharge that will be used
as process water. The water management system will include pumps, tanks for the collection,
storage, treatment, and distribution of the plant fresh water, fire suppression water, potable
water, and plant safety showers.
An expansion of the current camp facilities will be necessary to house additional construction
personnel, additional plant operators, and underground mine development and operations
personnel.
August 2014 130 of 171

18.2.8 Cemented rock fill plant

A cemented rock fill plant necessary for providing back fill and ground support to the
underground operation will comprise a fully automated mixing plant where cement,
aggregate, and water are combined in a concrete-style drum mixer. These facilities will
include a mixer structure, mixer feed conveyor, aggregate belt feeder, a slurry plant, and a
cement silo. Aggregate will be comprised of a combination of waste rock with the oversize
screened off and spent heap leach material that will be blended into an engineered aggregate
by a series of aggregate hoppers and conveyors. The plant will be loaded by a front end
loader and discharged directly into mine haul trucks that are equipped with ejector beds so
that the backfill can be tipped directly into the open stopes.
18.2.9 Power
The lease of an additional 2,000 kW generating set is considered for six months to cover the
power requirements of the pulp agglomeration plant with the assumption that grid power
will be installed by April, 2016. If connection to a power grid is not available, then an
additional 2,000 kW generator will be required to cover the power requirements. The
estimated operating load is 3,500 kW for a 5,600 tonnes per day pulp agglomeration plant,
with an estimated total connected load of 5,130 kW.
18.2.10 Water
The only additional water requirements for the pulp agglomeration plant include minor
amounts of raw water for hydration of cement to form the agglomerates, increased water
retained in the agglomerates in the heap, and miscellaneous fresh water needs such as
emergency eye wash and showers. The current water supply infrastructure will be adequate
for the expansion Project needs and any additional water supply will become available from
the underground mine dewatering.
The main Project infrastructure has been identified and the cost has been included. Detailed
engineering will be required in order to more accurately assess the cost estimates and the
technical feasibility and economic viability of the Project. Some of the additional studies for
infrastructure are discussed here.
August 2014 131 of 171

to evaluate the benefits of varying the blasting practices in the pit in order to reduce the
crushing equipment in the pulp agglomeration plant.
filtration equipment. An estimated $500,000 would be required for the studies to more
accurately assess the necessary infrastructure.
The power line project will proceed regardless of the construction decision related to the
expansion Project.
August 2014 132 of 171

19 Market studies and contracts

19.1 Contracts and marketing
The Dolores operation has a contract in place with a mining contractor, PEAL Mexico of
Hermosillo, Mexico, to undertake an agreed upon amount of mining per year, most of which
takes place in the waste areas.
Dolores also has a multi-year contract in place with Johnson Matthey of Salt Lake City, Utah,
for the purchase of the dor produced on site. The dor is transported to the Johnson
Matthey refinery in Salt Lake City where it is refined to the London Good Delivery
specification, which is defined as a minimum of 995.0 parts per thousand of fine gold and a
minimum of 999.0 parts per thousand of silver. Once refined, the bars are sold on the
international market to bullion banks, financial institutions, and traders under negotiated
fixed term contracts. The terms, rates, and charges are within industry norms. To date, no
problems have been encountered in securing contracts for the sale of Dolores dor or for the
dor produced at Pan Americans other two mines operating in Mexico. Pan American has
secured a back-up contract with the Republic Metals Corporation refinery in Miami, Florida,
and the Met-Mex Peoles refinery in Torren, Mexico, in the event that full marketing
requirements cannot be met by Johnson Matthey. No forward sales or hedging takes place at
this time.
19.2 Review by the qualified person

Martin Wafforn, the qualified person responsible for this section of the technical report, has
reviewed the contract terms, rates, and charges for the production and sale of the silver and
gold produced at Dolores, and consider them sufficient to support the assumptions made in
this technical report.
August 2014 133 of 171

20 Environmental studies, permitting, and social or community

impact
20.1 Environmental factors
containment system of heap leach Pad 1. A tear in the liner of Pad 1 developed in June 2010
following movement in the stability berm and significant leakage was collected by the leak
collection system. Minefinders ceased stacking and irrigation on Pad 1 and relocated
approximately 2 million tonnes of ore to heap leach Pad 2. The pad under the excavated
material was examined and stabilized with an additional retaining wall structure, and the
damaged liner was repaired. No sodium cyanide was detected in the downstream surface and
ground water sampling points as a result of the failure, and continued soil and water sampling
below Pad 1 has confirmed that no residual cyanide is present. Approximately 8 to 9 million
tonnes of ore remain in a stable state on Pad 1, awaiting transfer to another operational pad.
Full remediation of the liner system will be required as the life of mine plan anticipates that
the Pad 1 area will be required for heap leaching in the future and that the liner system in the
area will be fully rebuilt.
Pan American has implemented additional contingency measures in and around leach Pads 1
and 2, including the installation of well riser type over-liner solution collection systems,
additional under drain and leak collection systems, and a network of containment,
monitoring, and demonstration wells. Pan American has also completed construction and is
Pad 3.
The surface disturbance and reclamation liabilities will be addressed under Pan Americans
project reclamation and closure plan, which is discussed in Section 20.10.
20.2 Environmental studies

A full suite of environmental baseline studies was completed by Minefinders as part of its
original permit application for the construction of the mine. Pan American has continued
environmental monitoring in and around the mine and continues to add to the database of
environmental information. These studies would be used in any future permit modification
application for the expansion Project.
Static and kinetic testing was conducted during the feasibility and permitting phases of the
mine development in order to ascertain potential for acid generation in the waste and ore
materials. That work determined that only a small portion of the waste is potentially acid
generating and no specific measures to manage waste or ore deposition were required. Pan
American plans to review the representativity of the samples tested against the current
mineral resource and reserve estimate and mine plan, and expects to conduct new sampling
August 2014 134 of 171

and testing to increase the available data and to improve the understanding of potential acid
and metal leaching issues during operation and post-closure.
20.3 Pan Americans environmental policy

Pan American has committed to operate all mines and develop new projects in an
environmentally responsible manner. The existing environmental conditions at each site are
evaluated and Pan American strives to minimize and mitigate environmental impacts of
mining and processing operations by applying prudent design and operating practices, and by
educating employees and contractors who work at company facilities. Pan American has an
environmental policy that all employees and contractors are required to follow.
20.4 Permitting factors

and operating of the existing mine and is in compliance with Mexican law and international
best practice environmental management.
Permit applications for the construction and operation of Dolores, including an Environmental
Impact Study or Manifestation (MIA), a Technical Justification Study for Change of Land
Use, and an Environmental Risk Study were approved by the Mexican Secretariat of
Environment and Natural Resources (SEMARNAT) in April 2006. These studies include a full
assessment of the environmental and social impacts of the mine and environmental
management plans, which describe the ongoing management and environmental monitoring
programs. Other principal permits include an Accident Prevention Program, a Surface Water
Extraction Authorization, an MIA for an underground exploration ramp, and a Waste
Management Plan. These permits are renewed regularly and as far as Pan American is aware,
all of the permits required for the mine and processing operations are in good standing.
Modifications to the existing permits will be necessary to obtain authorization for future
activities such as adjustments to the life of mine open pit operations, waste rock facilities,
and leach pads; expansion of the processing facilities to include additional crushing and a new
grinding, leaching, and pulp agglomeration circuit; and development of an underground mine.
Any modification application for these activities will require an updated MIA, Environmental
Risk Assessment, and Technical Justification Study for Land Use Change. The required
technical baseline studies and impact assessment for these updates would be based on the
extensive monitoring database that has been developed over the past seven years, and
conducted by an independent environmental consultant. Due to the minor changes in
footprint and the overall impacts that these changes imply, as well as the current good
standing of the existing permits, it is expected that the necessary permit modifications could
be completed within standard regulatory timeframes of five to seven months.
The power line connection from Chihuahua will be the subject of a separate approvals
process managed with the CFE.
20.5 Waste disposal

Mine waste is deposited in three constructed waste rock facilities (East, West and North
facilities) which are located around the pit. The west waste rock facility has reached full
August 2014 135 of 171

capacity. Environmental permits include an allowance for a south waste rock facility which is
currently not planned for use, in preference of expanding the existing East and North waste
rock facilities. The changes to the projected waste rock facility layouts are covered in a
modification application to the current environmental permits that are currently being
evaluated by SEMARNAT. The life of mine plan also contemplates storing some waste in the
southern portion of the open pit mine when mining has been completed in that area.
The mine operates a closed circuit processing system without tailings facilities.
20.6 Site monitoring

The mine operates an extensive monitoring programme that includes surface and
groundwater, waste, air quality, noise, flora and fauna, and socio-economics. Due to the
location of the proposed future infrastructure, it is anticipated that there will be no material
effect on the cost of any modifications to the existing, future, or post-closure monitoring
programs.
20.7 Water management

Water supply for the mine is obtained from the Tutuaca River and a dam constructed on the
Chabacan Creek upstream of the pit. Wells located in the Arroyo Amplio town area supply
water to the town and the Dolores camp. Current water use at the operation is approximately
half that provided for in Dolores water permits and no modification to the permits are
anticipated to supply any mining and processing expansions. Process water is recycled and
the mine has essentially no discharge except for effluent from domestic waste water
treatment plants servicing the offices and camp.
20.8 Environmental certification

The Dolores mine voluntarily participates in the Mexican Federal Environmental Protection
Authoritys (PROFEPA) Clean Industry Program which involves independent verification of
compliance with all environmental permits and the implementation of good practice
environmental management procedures and practices. The mine obtained its first
certification in 2010 and was re-certified again in June, 2012.
20.9 Social and community factors

The majority of the surface rights on the Property are owned by Ejido Huizopa. An ejido is an
area of communal land registered with the National Agrarian Registry of Mexico and parcelled
out to community members for agricultural use. The Dolores mine has surface rights
agreements with Ejido Huizopa and with several individual members of the ejido dating from
November 2006 which allows for irrevocable access and the right to carry out exploration and
mining activities for a term of 15 years with a right to extend for a further 15 years. These
surface rights provide sufficient access to the mining operations, waste storage areas, heap
leach pad areas, and other facilities. The agreement provided for relocation of the old village
of Dolores, which formerly occupied an area directly over the southern end of the deposit.
Construction of the new town and relocation of all families from within the Property area was
completed by the end of 2009.
August 2014 136 of 171

The Dolores staff community relations team implements an extensive programme of

community engagement activities including information sessions, infrastructure works, and
educational and training programs for the local people which have resulted in the
establishment of several important small businesses. Unskilled workers are sourced from
nearby small villages, and Pan American has recruiting and training programmes in place to
develop the mining skills of the local workforce. Dolores is recognized as a Socially
Responsible Enterprise by the Mexican Center for Philanthropy.
Pan American, through its Corporate Social Responsibility Policy, has committed to operating
all of its mines in harmony with the communities where they are located, and to continually
improve standards of social responsibility and to make a positive difference in the
surrounding communities by fostering sustainable development.
20.10 Project reclamation and closure

A closure cost estimate for Dolores was prepared in 2012 according to Pan Americans
standard methodology which employs the State of Nevada approved Standardized
Reclamation Cost Estimator (SRCE) model. This estimate includes consideration of all
surface disturbance and reclamation liability at the site and is updated on an annual basis.
The Dolores SRCE model includes demolition of all site infrastructure, re-grading of waste
rock facilities, rinsing and covering leach pads, and complete re-vegetation of the site. The
current model estimates the present value of reclamation costs or environmental liability for
the Dolores Property at December 31, 2012 to be approximately $5.2 million. Reclamation
bonds are not currently a legal requirement in Mexico.
Given the long mine life and the location of the proposed expansion Project within the
existing mine footprint, the incremental change in overall closure cost liability is not expected
to have a material effect on the conclusions of this report.
20.11 Expected material environmental issues

There are no known environmental issues that could materially impact the mines ability to
extract the mineral resources or mineral reserves.
expansion Project.
August 2014 137 of 171

21 Capital and operating costs

21.1 Estimated capital, sustaining capital, and operating costs of the
existing operations
The Dolores mine has been constructed and is in operation, however, capital expenditures
that will be required in 2014 and 2015 regardless of the construction decision related to the
expansion Project include $11.6 million to complete the current phase of construction on
heap leach Pad 3, $15.2 million for the new power line, and a further $2.0 million for
technical support to the operation and the expansion Project.
Sustaining capital expenditures for the existing operation are estimated to total
$118.8 million over the remaining mine life. This includes an estimated $60.4 million for
mining, primarily for the rebuild and replacement of the open pit mining equipment fleet over
the life of the operation. A further $42.1 million has been estimated for future construction of
heap leach pad capacity after the current phase of construction. Other sustaining capital of
$16.4 million is estimated for G&A purposes. No capitalization of waste mining or pre-
stripping strategy has been assumed as part of this preliminary economic assessment in the
coming years, although should Pan American decide to use pre-stripping accounting, it is the
opinion of the authors that this will not materially change the cash flow or the overall Project
economics.
For the estimate of operating costs, the existing operation is assumed to continue to mine,
crush, and convey material to the heap leach pads at the same rate as the existing
16,200 tonnes per day. Mining of the 69.7 million tonnes of proven and probable mineral
reserves will be completed in 2024 and stacking of stockpiled material on the leach pads will
continue for another two years. Thereafter a further four years of solution recirculation and
precious metal extraction will follow during leach-down of silver and gold from the heap leach
pads. The new power line and connection to the Chihuahua electrical grid is expected to be
completed by the beginning of 2016 and will result in a significant reduction in operating
costs.
Mining unit costs in the open pit are expected to vary primarily by depth and haulage
distance. Mining costs are estimated to total $700.2 million to mine 340.6 million total ore
and waste tonnes, including the cost of stockpiling and re-handling stockpiles over the life of
the mine. Processing costs are estimated to total $554.1 million to process 69.7 million
tonnes, including the cost of solution recirculation for leach-down of silver and gold from the
heap leach pads. G&A charges are estimated to total $170.8 million over the life of mine.
21.2 Estimated costs for the proposed expanded operation

21.2.1 Introduction
Capital and operating cost estimates for a proposed pulp agglomeration processing option
and an underground mine have been prepared at a preliminary economic assessment level.
The estimates for the underground mine are based on resource and cost estimates prepared
by Pan American, underground geotechnical parameters and options and cost estimates for
August 2014 138 of 171

backfill prepared by Golder Associates of Vancouver, and a mine plan and schedule prepared
by Snowden. The estimates for the pulp agglomeration plant were prepared by Pan American
and by Lyntek Incorporated of Lakewood, Colorado (Lyntek).
21.2.2 Estimated capital and sustaining capital costs for the underground mine
The preliminary design for the underground mine is to utilize decline access for haulage and
transportation of personnel and materials. The decline makes use of the previously
established portal which is located approximately 750 m east of the final pit crest at an
elevation of 1,335 m and approaches the mineralized zone near its mid-point. From there the
decline splits to develop the zones to the north and to the south providing access to sub
levels at 25 m vertical intervals. Snowden has provided preliminary designs for a ventilation
circuit where fresh air is provided via the decline and a fresh air raise, with return air via raise
bore holes and surface fans. A total of 14,300 m of decline ventilation drives has been
estimated as well as 900 m of 4 m to 4.5 m diameter main ventilation circuit raise bore holes.
Capital costs for the mobile equipment were estimated using data from other underground
studies in Mexico and elsewhere. The purchase cost of two large capacity haulage trucks
(45 tonne and 55 tonne) and a scoop tram already purchased were excluded from the
estimate. Over the life of mine the estimated capital cost is $77.6 million. Of this,
$34.8 million can be considered initial capital, which includes all costs incurred in the first two
years and the cost of mobile equipment entering the fleet at the beginning of the third year.
All primary access declines and ventilation designs are capitalized, while level development is
capitalized during the first two years and treated as an operational expense thereafter. A
summary of the preliminary estimate of initial and sustaining capital costs is given in Table
21.1.
Table 21.1 Summary of estimated intial capital and sustaining capital costs for the
underground mine
Item Initial cost $M Sustaining cost $M
Development (initial 2 years, 17.4 15.7

and all decline development)
Mobile equipment 10.2 25.6
Backfill plant and equipment 4.8 -
Surface works 2.4 1.5
Total 34.8 42.8
August 2014 139 of 171

21.2.3 Estimated capital and sustaining capital costs for the pulp agglomeration
facilities
The capital cost estimate included in this preliminary economic assessment has been
developed to a level sufficient to assess and evaluate the Project concept, various process
options, and the potential for overall Project viability. After inclusion of the recommended
contingency, the capital cost estimate is considered to have a level of accuracy in the range of
plus and minus 25%. Amounts are presented in second quarter 2014 United States dollars.
The initial capital cost estimate addresses the completion of design engineering,
procurement, construction, and start-up of a pulp agglomeration process plant for a nominal
5,600 tonnes per day circuit for preparing a high grade silver and gold feed amenable to
cyanide leaching via a heap leach pad. The initial capital costs are expected to be on the order
of $69.6 million, including $35.3 million of direct capital, $20.0 million of indirect capital, and
$14.3 million of contingency. A breakdown of the capital costs is given in Table 21.2.
The cost estimate includes:
$22.1 million of mechanical equipment including labour and ancillary systems
$7.3 million for earthworks, civil, structural, and concrete
$3.7 million for electrical, control, and instrumentation
$2.2 million for piping and buildings associated with the plant
$8.7 million of engineering, procurement, and construction management
(EPCM) for the delivery of the plant and infrastructure, including mobilization,
equipment rentals such as generator, contractor fuel and maintenance, small
tools and consumables, and vendor commissioning
$6.3 million for camp expansion, camp operations, Pan Americans Project
management team, overhead costs, consultants, geotechnical work, and
additional test work
$2.5 million for capital spares, one-year spares, and commissioning spares and
liners for the first year-wear
$2.5 million for cost of freight and freight forwarding services for mixed
domestic and international procurement
The following items are not included in the capital estimate:
Sunk costs that are associated with the existing plant and leach pads
All taxes
Reclamation costs
Potable water and sewage systems for the plant
Working capital and sustaining capital
Corporate allocation costs charged to the Project
Escalation
August 2014 140 of 171

Risks due to political upheaval, government policy changes, labour disputes,

permitting delays, weather delays, or any other force majeure occurrences
Sustaining capital costs for the addition of a pulp agglomeration plant includes an estimate of
an additional $6.4 million for the additional heap leach pad tonnage, $2.7 million for the pulp
agglomeration plant, and a reduction of $0.3 million in G&A due to cut-back of one year of
metal production because of the higher treatment rate with the addition of the pulp
agglomeration plant as well as better recovery kinetics of the pulp agglomerated material.
Table 21.2 Summary of estimated capital and sustaining capital for the pulp
agglomeration facilities
Item Cost US$ (000s)
Direct
Crushing 8,661
Milling 7,565
Thickening 720
Filtration 12,580
Agglomeration 1,334
First fills (start-up consumables) 743
Infrastructure and utilities 3,648
Indirect
Detailed engineering 3,960
Construction management 1,525
Start-up and commissioning 205
Construction contract 958
Miscellaneous construction supplies and rentals 1,077
Contractor fuel and maintenance 575
Contractor small tools and consumables 186
Vendor commissioning 214
Commissioning spares 100
One year spares 1,022
Capital spares 856
Mill liners first year wear 586
Transportation and logistics 2,537
August 2014 141 of 171

Item Cost US$ (000s)

Owners costs 6,274
Contingency (25%) 14,331
Total capital investment 69,657
Sustaining capital $2,650
21.2.4 Underground operating cost estimates

A cost model was developed for the underground using fundamental productivity
assumptions for the nominated equipment, such as drill penetration rates, and scoop tram
and truck speeds, combined with the physicals from the schedule to build up fleet size and
fleet utilization values. This was then combined with unit operating costs for the equipment,
unit costs for material, and labour costs which were in turn derived from, in some cases, first
principals, and in other cases, previous similar studies or operational experience at Dolores.
Level development is estimated at 11,700 m in waste and 12,300 m in pulp agglomeration
plant feed, and a further 1,600 m are estimated for small diameter raise bore holes for
ventilating air distribution within the mine.
Based on the underground mining schedule, a cost model was developed that produced a
total operating cost over the life of mine of $175.6 million, which equates to $34.94 per tonne
of feed mined. Operating costs include all underground mining costs, up to the delivery of the
feed to the crusher stockpile, or waste to the final backfill or waste rock facility location. Key
inputs to the mining cost estimate include diesel fuel at $1.02 per litre, electrical power at
$0.12 per kWh, and cement at $194 per tonne. Operating costs are estimated to be expended
at an annual rate of between $15 and $18.5 million. A summary of the operating cost items is
shown in Table 21.3.
Table 21.3 Summary of operating cost estimates for the underground mine
Item Total cost $M Average annual cost $ per tonne feed

$M (at full production)
Development 51.9 5.31 10.33
Vertical development 7.7 0.77 1.54
Stoping 26.1 2.89 5.19
Haulage 20.1 2.22 4.00
Ventilation 8.6 0.86 1.71
Dewatering 4.4 0.44 0.88
Backfill 25.6 2.82 5.09
Labour 10.2 1.06 2.02
August 2014 142 of 171

Item Total cost $M Average annual cost $ per tonne feed

$M (at full production)
Mining G&A 7.8 0.78 1.55
Auxiliary equipment 10.5 1.14 2.09
Sub total 172.9 18.29 34.94
Initial definition drilling 2.7
Total 175.6
21.2.5 Pulp agglomeration operating cost estimates

Operating costs for the proposed pulp agglomeration plant are expected to be on the order of
$18.15 per tonne of feed, including $15.20 per tonne of feed for processing costs and
$2.95 per tonne of feed for G&A. A detailed breakdown of the operating costs is given in
Table 21.4. Following completion of stacking on the heap leach pads, additional expenditures
will be required for a further three years of solution recirculation and precious metal
extraction. The additional annual costs include $1.6 million for processing solution and
$1.2 million for G&A costs.
The estimate includes provisions for feed re-handling, reagents, consumables, power, water,
and fuel for the operation of the plant, 64 additional employees and their associated costs,
operating spares, wear and maintenance costs of the plant equipment, and the additional
demands on the heap leaching, Merrill-Crowe, refining/smelting, generators, laboratory,
metallurgy, and process general administration. Mining and plant road maintenance costs are
not included in the pulp agglomeration costs.
The operating cost estimate has been developed with the consultants inputs, current costs of
Dolores operations, and test work results. Power draw was calculated based on the size of the
motors, power demand for the processing areas, and the projected power cost per kW-hr
($0.12 per kW-hr). Wear and media costs were estimated based on test work results, and in
the case of the crushing liners were confirmed by the actual consumption and costs at
Dolores as well as using a database of liner weights. Reagents and consumables were derived
from test work results and on-going tests of cyanide, cement, and lime consumptions as well
as actual consumptions in the Merrill-Crowe and refining/smelting facilities at the Dolores
operation. Current vendor pricing for steel and reagents was applied to the consumption
rates to derive the per tonne costs. Labour cost estimates are based on actual current rates at
the operation.
The unit costs at the existing facilities of heap leaching, Merrill-Crowe, smelting, generators,
process maintenance, labs, and process administration will reduce due to the additional
volume from pulp agglomeration plant and from the benefit of grid power beginning in 2016.
For the estimate of operating costs, it has been assumed that the existing operation will
continue to mine, crush, and convey material to the heap leach pads at the same rate as the
existing 16,200 tonnes per day operation until the pulp agglomeration plant begins
operations at the beginning of 2016. Thereafter, the pulp agglomeration plant will process
August 2014 143 of 171

5,600 tonnes per day and the existing crushing plant will process 14,400 tonnes per day. The
total material processed increases to 80.3 million tonnes from 69.7 million tonnes due to a
lower costs and improved economics of the higher processing rate in the pit and the addition
of 5.0 million tonnes from underground. Open pit mining is estimated to be completed in
2024 while underground mining and stacking of stockpiled material on the leach pads will
continue for another two years. Thereafter a further three years of solution recirculation and
precious metal extraction will follow during leach-down of silver and gold from the heap leach
pads. The new power line and connection to the Chihuahua electricity grid is expected to be
completed by the beginning of 2016 and will result in a significant reduction in operating
costs.
Mining unit costs in the open pit are expected to vary primarily by depth and haulage
distance. Open pit mining costs are estimated to total $683.5 million to mine 337.2 million
total tonnes, including the cost of stockpiling and re-handling stockpiles over the life of the
mine. Processing costs are estimated to total $685.5 million to process 80.3 million tonnes,
including the cost of solution recirculation for leach-down of silver and gold from the heap
leach pads. G&A charges are estimated to total $178.9 million over the life of mine.
Table 21.4 Summary of operating cost estimates for the pulp agglomeration facilities
Item Total cost Average annual cost $ per tonne of pulp
$M over life $M at full production agglomeration
of mine feed
Reagents and consumables 112.8 12.4 6.08
Shared costs (stacking, solution 79.6 8.7 4.29
pumping, Merrill-Crowe, smelting,
generators, labs, and process
administration)
Wear and maintenance 35.0 3.9 1.89
Power 33.4 3.7 1.80
Labour 19.5 2.1 1.05
Re-handle and utilities 1.7 0.2 0.09
Last years of recirculation 1.6
G&A 54.7 2.95
Last years of recirculation G&A 1.2
Total operating cost 339.5 31.0 18.15
21.2.6 Opportunities
The filtration equipment costs are believed to be conservative based on discussions with
equipment suppliers. As design and test work progresses, more reasonable quotes may be
obtained.
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The crushing equipment selected for this study has been sized in common with the existing
crushing plant, which affords benefits in areas such as spares stockholding, and is oversized to
cater for a relatively large run of mine feed size. If the run of mine feed size can be reduced by
varying the blasting practices in the pit, then smaller and less expensive crushing equipment
may be used.
Additional cost savings may be found by the use of second hand, discounted, or unutilized
equipment at Pan Americans other operations.
21.2.7 Risks
The pulp agglomeration plant operation was developed in the absence of site specific
geotechnical information. The site was chosen with a degree of confidence in the ground
competence, but there is a risk that additional excavation and fill may be required to provide
solid ground. Typical risks to the estimate of the capital cost would include the availability of
equipment for purchase or hire, increases in equipment and labour costs, and extensions in
the length of the rainy season and the construction time. Typical risks to the estimate of the
operating costs would include increases to the reagent and power consumption and costs,
and availability of equipment and contractors.
Capital and operational costs for the Dolores expansion Project have been estimated at a
preliminary level. It is recommended to advance the preliminary economic assessment of the
pulp agglomeration processing option and the underground mine development to a pre-
feasibility study level. This will require more detailed engineering and test work to more
accurately assess the cost estimates of the Project.
August 2014 145 of 171

22 Economic analysis
22.1 Estimated economic model for the existing operation
22.1.1 Estimated life of mine plan
The life of mine plan for the open pit in situ reserves as at May 31, 2014 is for processing a
total of 69.7 million tonnes of ore at an average grade of 32 ppm Ag and 0.79 ppm Au,
including 6.0 million tonnes of ore currently placed on stockpiles and awaiting processing. The
ore mining rate varies annually from between 5.2 million to 9.5 million tonnes per year until
2023, and reduces to 0.7 million tonnes in 2024, the final year of mining. Processing of
stockpiles continues to 2026 and metal recovery from the heap leach pads extends to 2030.
The projected mine life of the existing operation may increase if additional mineral resources
are defined and can be converted to mineral reserves.
The total produced ounces accounting for metallurgical recovery is estimated at 44.7 million
ounces of silver and 1.3 million ounces of gold. Overall metallurgical recoveries for new
material added to the heap leach pads are 55.2% for silver and 70.1% for gold. These
recoveries increase to 61.7% for silver and 70.8% for gold when factoring in the recovery of
metal from material already on the pads.
The open pit mining requires the removal of 276.9 million tonnes of waste to access the ore,
for a strip ratio of 1 to 4.35.
22.1.2 Estimated cash flow forecast
The operating cash flow of the existing operation is anticipated to total $825.8 million, which
is comprised of an estimated revenue of $2,602.9 million, $1,425.1 million in operating costs,
$21.9 million in smelting and refining charges, $13.0 million relating to the new 0.5%
extraordinary mining duty on gross revenue, $72.3 million on third-party royalties,
$71.6 million relating to the new 7.5% special mining duty on earnings before interest, tax,
depreciation, and amortization (EBITDA), and $171.0 million in income taxes. After
$389.6 million.
22.1.3 Assumptions
Metal prices for this analysis were set at $22 per ounce of silver and $1,300 per ounce of gold.
Overall production is estimated at 44.7 million ounces of silver and 1.3 million ounces of gold.
This production includes 13.2 million ounces of silver and 375,000 ounces of gold from oxide
material, 19.8 million ounces of silver and 403,000 ounces of gold from mixed material, and
11.7 million ounces of silver and 473,000 ounces of gold from sulphide material. Silver
metallurgical recoveries were assumed at 47.4% for oxide material and 59.2 for mixed and
sulphide material, and gold metallurgical recoveries were assumed at 81.5% for oxide
material and 66.1% for mixed and sulphide material.
Total dor produced is estimated at 48.4 million ounces. Refinery payable is assumed to be
99.75% for silver and 99.8% for gold. Refinery treatment charges are assumed to be $0.22 per
August 2014 146 of 171

ounce of dor, plus gold refining charges of $0.50 per ounce of gold, and transport and
insurance charges are assumed at $0.22 per ounce of dor.
22.1.4 Estimated taxes, duties, and royalties
The principal taxes of Mexico affecting Dolores include income tax, annual fees for holding
mineral properties, various payroll and social security taxes, and a refundable value added
tax. Total taxes, mining duties, and mining duties payable to the government for the Project
are forecast at $255.5 million.
On October 1, 2007, the Mexican taxing authority enacted a business flat tax (IETU) that
became effective in 2008 and was defined as a minimum tax in respect to income tax, but
with a wider taxable base as many of the tax deductions authorized for income tax purposes
were not permissible for IETU.
On October 31, 2013, the Mexican government enacted a new mining tax that became
effective in 2014. The new mining tax includes a 7.5% special mining duty on EBITDA, a 0.5%
extraordinary mining duty on gross revenue, and cancelling the IETU tax.
A net smelter return of 2.0% on silver and 3.25% on gold is payable to RG Mexico Inc., a
subsidiary of Royal Gold Inc. The total paid for the royalty is forecast at $72.3 million.
22.2 Estimated economic model for the proposed expanded operation

22.2.1 Introduction
Following a two year construction period where crushing continues at the current rate of
16,200 tonnes per day, the pulp agglomeration treatment option considers a 20,000 tonne
per day rate, including 14,400 tonne per day of open pit feed processed in the existing three
stage crushing circuit plus 5,600 tonnes per day crushed, ground, and pulp agglomerated
higher grade material from the open pit and from the underground. Since some of the
existing facilities will be used for the pulp agglomeration plant and the underground mine,
the treatment of the medium grade in the existing facilities will be reduced to 14,400 tonnes
per day from the current 16,200 tonnes per day. Complete life of mine plans have been made
for the options of continuing with the existing heap leach only crushing circuit, and for the
option of constructing the pulp agglomeration plant and the underground mine. The annual
production schedule and annual cash flow forecast for the life of mine estimated for the
proposed expanded operation are given in Table 22.1. A comparison has then been made of
the cash flow streams in order to determine the potential benefits of the pulp agglomeration
and underground option.
August 2014 147 of 171

Table 22.1 Annual production schedule and cash flow forecast for the expanded operation
June
Units to Dec 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 LOM
2014
Mined - open pit feed tonnes Mt 4.97 5.91 5.59 5.66 8.85 5.07 6.47 8.25 8.64 6.47 - - - - - - - 65.89
Mined - underground feed tonnes Mt - - 0.05 0.35 0.54 0.55 0.55 0.55 0.55 0.55 0.55 0.55 0.24 - - - - 5.03
Mined - total feed tonnes Mt 4.97 5.91 5.64 6.01 9.39 5.62 7.02 8.80 9.19 7.02 0.55 0.55 0.24 - - - - 70.92
Mt - - - - - - -
Mined - open pit waste tonnes 17.93 34.09 35.20 34.82 31.85 34.69 34.21 23.67 15.00 9.88 271.32
Strip ratio - 3.60 5.76 6.30 6.15 3.60 6.84 5.29 2.87 1.74 1.53 - - - - - - - 4.12
Processed - open pit crusher feed
Mt - - - - -
tonnes 3.47 5.91 5.26 5.26 5.26 5.26 5.26 5.26 5.26 5.26 5.26 5.07 61.76
Processed - open pit pulp
Mt - - 1.98 1.69 1.49 1.49 1.50 1.49 1.49 1.49 0.89 - - - - - - 13.52
agglomeration feed tonnes
Processed - underground pulp
Mt - - 0.05 0.35 0.54 0.55 0.55 0.55 0.55 0.55 0.55 0.55 0.24 - - - - 5.03
agglomeration feed tonnes
Processed - total feed tonnes
Mt 80.31
(including stockpiles) 3.47 5.91 7.28 7.30 7.29 7.30 7.30 7.30 7.30 7.30 6.69 5.62 0.24
Processed - open pit crusher feed Ag
ppm - - - - - 24
grade 46 45 24 26 28 16 25 24 16 17 13 13
Processed - open pit crusher feed Au
ppm - - - - - 0.50
grade 0.52 0.61 0.35 0.32 0.55 0.33 0.37 1.21 0.64 0.46 0.29 0.29
ppm - - 57 88 60 51 98 47 46 49 40 - - - - - - 61
agglomeration feed Ag grade
ppm - - 1.61 1.47 1.91 1.90 1.82 2.65 2.01 1.67 1.63 - - - - - - 1.85
agglomeration feed Au grade
ppm - - 72 73 56 89 75 47 52 59 57 82 60 - - - - 65
agglomeration feed Ag grade
ppm - - - - - - 1.74
agglomeration feed Au grade 2.27 3.10 2.29 2.16 1.90 1.68 1.61 1.57 1.34 0.87 0.92
ppm 46 45 33 43 36 29 44 31 25 27 20 20 60 - - - -
Processed - Total feed Ag grade 33
ppm 0.52 0.61 0.70 0.72 0.96 0.79 0.78 1.54 0.99 0.79 0.55 0.35 0.92 - - - -
Processed - Total feed Au grade 0.80
Recovered - open pit crusher feed Ag Moz 2.33 4.51 3.25 3.06 3.51 2.25 2.54 2.50 1.90 1.69 1.48 1.22 0.40 0.17 0.08 0.03 - 30.91
Recovered - open pit crusher feed Au koz 42.7 77.3 46.4 42.2 60.8 44.6 46.1 124.3 79.8 62.8 37.9 36.3 6.3 2.3 - - - 709.9
Recovered - open pit pulp
Moz - - 2.40 3.36 2.25 1.83 3.35 1.89 1.63 1.74 0.93 0.09 - - - - - 19.48
agglomeration feed Ag
August 2014 148 of 171

Recovered - open pit pulp

koz - - 85.0 67.0 76.3 76.9 72.9 106.0 82.1 67.6 39.1 - - - - - - 672.7
agglomeration feed Au
Recovered - underground pulp
Moz - - 0.07 0.57 0.74 1.15 1.03 0.68 0.69 0.79 0.77 1.07 0.44 0.04 - - - 8.03
agglomeration feed Ag
Recovered - underground pulp
koz - - 2.8 28.7 32.9 31.4 27.4 24.4 23.5 22.9 19.5 12.7 5.9 - - - - 232.2
agglomeration feed Au
Recovered - total Ag Moz 2.33 4.51 5.73 6.99 6.50 5.22 6.92 5.07 4.23 4.21 3.19 2.38 0.83 0.21 0.08 0.03 - 58.42
koz 42.7 77.3 134.2 138.0 170.0 152.8 146.4 254.6 185.4 153.3 96.5 49.0 12.2 2.3 - - -
Recovered - Total Au 1,614.8
Revenue $ M 106.6 199.2 299.8 332.3 363.2 312.9 341.8 441.7 333.3 291.3 195.3 115.8 34.1 7.6 1.8 0.6 - 3,377.1
$M 83.8 148.9 165.7 182.8 180.4 187.0 184.4 161.0 136.7 127.8 88.6 59.4 13.6 2.5 0.6 0.3 -
Operating cost 1,723.5
$M 36.8 92.9 37.0 23.8 27.2 17.5 18.8 16.4 10.9 10.7 5.9 5.3 0.3 - - - -
Capital cost 303.6
Taxes and royalties $M 4.0 8.6 17.1 31.3 50.1 37.4 50.4 97.0 66.0 56.0 26.7 9.6 3.9 0.6 0.1 - - 459.0
Smelting and refining charges $M 1.1 2.2 2.8 3.4 3.2 2.6 3.3 2.6 2.1 2.1 1.6 1.1 0.4 0.1 - - - 28.6
Reclamation expenditures $M - - - - - - - - - - - - - - 3.0 3.7 - 6.7
Exploration expenses $M 2.3 - - - - - - - - - - - - - - - - 2.3
$M -21.5 -53.3 77.2 91.0 102.3 68.4 84.8 164.6 117.5 94.7 72.5 40.4 15.8 4.4 -2.1 -3.4 -
Cash flow 853.3
August 2014 149 of 171

As part of the analysis, the option of developing the underground mine without the pulp
agglomeration plant was considered. In this option, the economic underground material was
assumed to be processed in the existing crushing circuit. Although the economics were
marginally better than the open pit to heap leach only option, the authors concluded that
development of the underground mine is dependent upon the increased metallurgical
recovery provided by the pulp agglomeration plant. For this reason the options presented
are:
The existing case which is open pit feed processed in the existing crushing plant and
sent to the heap leach pads for leaching, including the benefit of a new power line.
The expanded case which includes the construction of the pulp agglomeration plant
and the underground mine, including the benefit of a new power line.
Increasing processing to a rate of 20,000 tonnes per day as assumed in the expanded case
requires initial capital expenditures of $104.5 million for the pulp agglomeration plant and the
underground development. The investment increases total cash flow to $853.3 million and
increases the after tax NPV to $479.8 million at a discount rate of 8%.
The project was evaluated on an after-tax, free cash flow basis. The income tax rate
applicable to corporations in Mexico was increased from 28% to 30% effective
January 1, 2014. A tax-deductible special mining duty of 7.5% was applied on earnings before
the deduction of interest, taxes, depreciation, and amortization. An additional 0.5%
extraordinary mining duty on precious metals revenue (applicable to precious metals only)
was assumed to be in effect as of January 1, 2014.
Comparing the cash flow streams of the two options, the expanded case generates an
estimated IRR of 32.8% relative to the existing operation.
This preliminary economic assessment compares the relative value of the existing
16,200 tonne per day heap leach operation and a 20,000 tonne per day pulp agglomeration
and heap leach operation. Summary production and financial metrics of the two options are
given in Table 22.2, assuming grid power costs.
Table 22.2 Comparison of production and financial metrics of the existing operation to
the proposed expanded operation at $22 per ounce of silver and $1,300 per ounce of gold
Feed processed from pit and stockpiles Mt 69.7 75.3
Feed processed from underground Mt - 5.0
Total feed processed Mt 69.7 80.3
Heap leach processing Mt 69.7 61.8
Heap leach silver grade ppm 32 24
Heap leach gold grade ppm 0.79 0.50
Pulp agglomeration processing Mt - 18.6
August 2014 150 of 171


Pulp agglomeration silver grade ppm - 62
Pulp agglomeration gold grade ppm - 1.82
Recoverable total silver produced Moz 44.7 58.4
Recoverable total gold produced koz 1,250.2 1,614.8
Initial capital investment $M 28.8 133.2
Sustaining capital investment $M 118.8 170.3
Pit operating cost $M 700.2 683.5
Underground operating cost $M - 175.6
Process operating cost $M 554.1 685.5
G&A operating cost $M 170.8 178.9
Revenue $M 2,589.9 3,360.2
Treatment charges and refining $M 21.9 28.6
Income taxes $M 171.0 244.6
Special mining duty on EBITDA $M 71.6 103.8
Extraordinary mining duty on revenue $M 13.0 16.9
Royalties to RG Mexico $M 72.3 94.0
Cash flow $M 671.4 853.3
NPV at 8% $M 389.6 479.8
IRR relative to existing 16,200 tpd heap leach % - 32.8

operation
22.2.2 Estimated life of mine plan

redesigned with the combined pulp agglomeration and heap leach processes and using metal
prices of $22 per ounce of silver and $1,300 per ounce of gold. The life of mine plan for the
expanded case includes an additional 5.6 million tonnes of mineralization from the open pit
that was formerly uneconomic with the heap leach only metal recoveries and operating costs,
as well as an additional 5.0 million tonnes of mineralization from the underground mine.
As a result of the underground development and sharing the fixed cost of some of the existing
facilities, the total economic material mined increases by 15% to 80.3 million tonnes at an
average grade of 33 ppm Ag and 0.80 ppm Au, with a contained metal content of 84.7 million
ounces of silver and 2.1 million ounces of gold. Total produced ounces accounting for
August 2014 151 of 171

metallurgical recovery are 58.4 million ounces of silver and 1.6 million ounces of gold. The
total waste mined to access the feed is 271.3 million tonnes, reducing the strip ratio slightly
to 1 to 4.12.
22.2.3 Estimated cash flow forecast
The operating cash flow of the expanded operation is anticipated to increase to
$1,163.6 million, comprised of $3,377.1 million in revenue, $1,723.5 million in operating
costs, $28.6 million in smelting and refining charges, $16.9 million relating to the new
extraordinary mining duty, $93.7 million in third party royalties, $103.8 million relating to the
new special mining duty, and $244.6 million in income taxes payable to the government. After
$479.8 million.
22.2.4 Assumptions
A preliminary estimate of the processing and selling costs associated with the pulp
agglomeration treatment was used as an input to prepare the underground mining inventory.
These parameters are shown in Table 22.3. Taxes were excluded from the analysis but are
included in the later economic modelling.
Table 22.3 Comparison of process and marketing parameters of the existing operation
to the proposed expanded operation
Expansion
Existing heap
Parameter Units Heap at Pulp agglomeration
at 16,200 tpd
14,400 tpd at 5,600 tpd
Processing costs
Process cost (with grid power

including site G&A expenses $ per tonne 10.89 8.74 18.75
and heap sustaining capital)
Selling costs
Gold price $ per ounce 1,300 1,300 1,300
Silver price $ per ounce 22 22 22
Payable gold % 99.8 99.8 99.8
August 2014 152 of 171

Expansion
Existing heap
Parameter Units Heap at Pulp agglomeration
at 16,200 tpd
14,400 tpd at 5,600 tpd
Payable silver % 99.75 99.75 99.75
Refining charge gold $ per ounce 0.50 0.50 0.50
Refining charge silver $ per ounce 0.00 0.00 0.00
Transport $ per ounce dor 0.22 0.22 0.22
Gold royalty % 3.25 3.25 3.25
Silver royalty % 2.00 2.00 2.00
Process recoveries
Oxide gold % 81.5 81.5 89.3
Oxide silver % 47.4 47.4 66.1
Mixed/fresh gold % 66.1 66.1 82.4
Mixed/fresh silver % 59.2 59.2 76.7
22.2.5 Estimated taxes, duties, and royalties

Total taxes and duties payable to the government are estimated to increase from
$255.5 million to $365.3 million under the proposed expanded operation. Royalties payable
to RG Mexico Inc. increase $93.7 million on account of increased precious metal production,
revenue, and profitability.
22.2.6 Estimated payback period
The payback period is estimated to be 1.7 years. A graph comparing the benefits of the
cumulative cash flow of the proposed expanded pulp agglomeration Project to the existing
heap leach operation is shown in Figure 22.1.
August 2014 153 of 171

Figure 22.1 Cumulative cash flow comparing the existing operation to the proposed
expanded operation
22.2.7 Sensitivity analysis

The sensitivity of the after tax economics of the existing heap leach operation and the
proposed expanded pulp agglomeration operation to commodity price is shown in Table 22.4.
The expansion Project remains better economically than the existing heap leach operation
through the range of metal prices and discount rates shown in the sensitivity. The IRR of the
expansion Project versus the existing operation is 27.4%.
Table 22.4 Comparison of Project sensitivity to silver and gold price of the existing
operation to the proposed expanded operation
Metal price ($ per ounce)

Case Units
Ag 19, Au 1,200 Ag 22, Au 1,300 Ag 25, Au 1,500
Existing heap leach operation:
NPV 0% discount US$ millions 510.7 671.4 910.4
Expanded heap + pulp agglomeration
August 2014 154 of 171

Metal price ($ per ounce)

Case Units
Ag 19, Au 1,200 Ag 22, Au 1,300 Ag 25, Au 1,500
NPV 0% discount US$ millions 650.9 853.3 1,159.9
IRR vs existing % 27.4 32.8 42.0

operation
An assessment was made of the sensitivity of the Project to reduced feed grades by
simulating increased dilution, which showed that the expansion case was preferred to the
existing operation.
Increasing the underground and pulp agglomeration capital costs by 25% has the impact of
reducing the IRR versus the existing operation to 24.8% at metal prices of $22 per ounce of
silver and $1,300 per ounce of gold. As shown in Table 22.5, the impact of the Project
economics of increasing and decreasing the operating cost estimates for the underground
and pulp agglomeration by 25% at metal prices of $22 per ounce of silver and $1,300 per
ounce of gold reduces the IRR of the expansion case versus the existing operation to 22.6%,
which demonstrates the robust nature of the Project.
Table 22.5 Comparison of Project sensitivity to operating cost of the existing operation
to the proposed expanded operation
Case Units Operating costs Operating costs

increased by 25% decreased by 25%
Existing heap leach operation at US$ millions 389.6 389.6

NPV 8% discount
Expanded heap + pulp US$ millions 437.1 522.6

agglomeration operation at NPV
8% discount
IRR vs existing operation % 22.6 41.8
22.2.8 Risks
Fluctuations in the prices of silver and gold represent one of the most significant factors
affecting the profitability of the Dolores mine. Within the range of metal prices considered,
the expansion Project provides enhanced economics.
The majority of the material in the underground mining plan for this preliminary economic
assessment is from inferred mineral resources that are based on limited drillhole information.
Due to the uncertainty that is associated with inferred mineral resources, it cannot be
assumed that all or any part of an inferred mineral resource will be upgraded to indicated or
measured mineral resources as a result of additional drilling.
August 2014 155 of 171

It is recommended to advance the preliminary economic assessment of the Dolores
expansion Project to a pre-feasibility study level. This will require more detailed mine
engineering, mine plans, and cost estimates for the underground mine, as well as additional
testing, trade-offs, and engineering and cost estimates of the process area to more accurately
assess the technical feasibility and economic viability of the Project.
August 2014 156 of 171

23 Adjacent properties
There is no relevant information on adjacent properties to report.
August 2014 157 of 171

24 Other relevant data and information

There is no additional information to report.
August 2014 158 of 171

25 Interpretation and conclusions

The Dolores mine was acquired by Pan American in 2012 as part of the acquisition of
Minefinders. Pan American has operated the mine for the last two years, and following an
initial period of investment, particularly in building heap leach pad capacity, the operation is
now at steady state.
This technical report demonstrates that the proven and probable mineral reserves in the
mine plan will be economic with the forecast metal prices and other assumptions. The
preliminary economic assessment disclosed in this technical report also demonstrates that
the Dolores expansion Project has the potential to be economically robust. Based on the
current mineral reserves, the mine is projected to continue to produce silver and gold until
2030. With the higher production rate of the expansion case and the addition of some
mineral resources, the mine will still produce until 2030. This projected mine life may increase
if additional mineral resources are defined and can be converted to mineral reserves.
25.1 Mineral resources and mineral reserves

reliability of the drilling results used to estimate mineral resources and reserves. Pan
American intends to continue annual near-mine diamond drilling programmes to test the
southern and down dip extents of the currently defined mineralization and to conduct regular
infill drilling of the deposit to upgrade mineral resource and reserve confidence categories.
There are no known significant risks and uncertainties that could reasonably be expected to
affect the reliability or confidence in the mineral resource and reserve estimates. Pan
American routinely conducts reconciliation of the reserve model to the grade control model
and to the heap leach feed conveyor weight meter and sampler in order to monitor actual
mine versus model performance. Between January and May 31, 2014, sample grade
exploration data. These two factors have resulted in the operation mining year to date 21%
more ore tonnes at a 17% lower silver grade and a 26% lower gold grade, for a difference of
nil in silver ounces and 10% fewer gold ounces relative to the tonnes, grade, and contained
August 2014 159 of 171

25.2 Mineral processing, metallurgical testing, and recovery methods

a nominal rate of 16,200 tonnes per day crushed to a target particle size of P80 6.3 mm in a
three stage crushing circuit with a recirculating load. The crushed ore product is conveyed to
the leach pads and placed on the pads using portable grasshoppers and a radial stacking
system. Sodium cyanide solution is pumped to the leach pads directly or to a holding tank
near Pad 3, from where it is distributed to the heap leach pads and applied using a
combination of drip and sprayer systems. The mine operates a closed circuit processing
system without tailings facilities.
The pregnant leach solution containing the dissolved silver and gold is collected from the
bottom of the leach piles and transferred to the pregnant solution pond. The solution is
clarified, de-oxygenated, and processed through a Merrill-Crowe circuit with a nominal
capacity of 1,000 cubic metres per hour to precipitate silver and gold from the cyanide
solution. The clarified and de-oxygenated silver and gold cyanide solution is added to zinc
dust, which triggers the precipitation of the silver and gold. The remaining barren cyanide
furnace to form dor bars. The bars are cleaned, assayed, weighed, and transported to a third
party refinery in North America for final recovery. The heap leach pads, ponds, and cyanide
circuit are contained within a closed circuit and not released to the environment.
grades and lithologies from the Dolores deposit yielded gold recoveries ranging between 51%
and 91%, and silver recoveries between 23% and 74%, all at a particle size of P80 passing
6.3 mm. Based on laboratory test work and site performance, the metallurgical recovery
model created for the mineral reserve estimate estimates gold recoveries of 81.5% for oxides
and 66.1% for mixed and sulphide ores, and silver recoveries of 47.4% for oxides and 59.2%
for mixed and sulphide ores. The kinetic model created for the mineral reserve estimate
assumes a three year period to achieve ultimate gold recovery and five years to achieve
ultimate silver recovery. The authors have reviewed these models and conclude that they are
consistent with recovery tracking observations in the heap leach operation at the mine.
ultimate gold recovery for oxide material and two years to achieve ultimate gold recovery
mixed and sulphide material. The ultimate silver recovery of all material types subject to pulp
agglomeration is assumed to take two years. The authors conclude that these models are
reasonable and respect the available data.
August 2014 160 of 171

concepts.
There are no known significant risks or uncertainties that could reasonably be expected to
affect the reliability and confidence in the projected economic outcomes. The preliminary
economic assessment is preliminary in nature and includes inferred resources which are
considered too speculative geologically to have the economic considerations applied to them
that would enable them to be categorized as mineral reserves, and there is no certainty that
the assessment will be realized.
recovery of precious metals in the high grade feed relative to the existing heap leach method.
The improvement in recovery of the high grade fraction due to pulp agglomeration is
25.3 Mining and financial

The preliminary economic assessment of expanding the Dolores mine by adding a milling and
pulp agglomeration circuit to the processing flow sheet to enhance silver and gold recoveries
of higher grade mineralization, as well as by developing an underground mine to extract
mineral resources that exist beneath and to the south of the ultimate open pit floor, has been
shown to have positive economic results.
agglomeration plant construction is completed. The proposed underground mining method is
open stoping, a low cost mechanized bulk mining method, appropriate for the competent
construction time.
August 2014 161 of 171

The mine schedule for the expansion Project assumes that the open pit will continue until the
end of 2023 and that stockpiled open pit material will be processed in 2024 and 2025. The
The expansion Project will increase total average annual silver production from 3.7 million
ounces to 5.0 million ounces, while total average annual gold production will increase from an
estimated 111,000 ounces to 148,000 ounces.
The expansion Project also considers cost savings in replacing on site power generation with
the installation of a high voltage power line approximately 110 km long to connect the
Dolores operation with the main electrical grid in Chihuahua. The power line project will
proceed regardless of the construction decision related to the expansion Project.
The preliminary economic assessment is based on a mineral inventory of approximately
80.3 million tonnes of oxide, sulphide, and mixed oxide/sulphide material sourced from a
combination of open pit and underground mining and treated at a rate of 20,000 tonnes per
day, including 14,400 tonnes per day from the existing crusher and 5,600 tonnes per day from
the pulp agglomeration plant. The estimated after tax NPV of the incremental cash flow at an
8% discount rate is $90.2 million, with an internal rate of return of 33% and a capital payback
period of 1.7 years, using the Companys current reserve metal prices of $22 per ounce of
silver and $1,300 per ounce of gold. Using metal prices of $19 per ounce of silver and $1,200
per ounce of gold, the estimated after tax NPV of the incremental cash flow at an 8% discount
is $65.6 million, with an internal rate of return of 27%.
The initial capital requirements for the Project are estimated at $104.5 million, including
$69.7 million for the pulp agglomeration plant and $34.8 million for the underground mine.
Other capital projects that are required for the expansion to be successful, but which will
proceed regardless of the construction decision related to the expansion Project, include an
estimated $15.2 million for the power line installation, $11.6 million for leach pad
construction, and $2.0 million for technical support to the operation.
Sustaining capital costs are estimated at $170.3 million, including $60.4 million for the open
pit mine, $48.4 million for the expanded heap leach pad operation, $42.8 million for the
underground mine, $16.1 million for G&A, and $2.7 million for the pulp agglomeration plant.
Many of these sustaining capital expenditures will be required regardless of the construction
decision related to the expansion Project. The incremental sustaining capital expenditures
associated with the Project total $51.5 million spread over the mine life.
Operating costs in the open pit mine vary by depth and haul distance and are estimated to
average $1.91 per tonne over the life of mine. Underground mining costs are estimated to
average $34.94 per tonne. Heap leach costs with the benefit of grid power beginning in
2016 and the additional volume from the pulp agglomeration plant will decline by
approximately $2 per tonne. Pulp agglomeration costs with grid power and sharing the cost of
the existing facilities that will be used for all material (Merrill-Crowe plant, refinery, and
leaching system) are estimated at $15.20 per tonne. G&A costs for the mine and heap leach
are estimated to be $1.99 per tonne and $3.01 per tonne for pulp agglomeration.
August 2014 162 of 171

25.4 Environmental and community

acquisition of the Property. Pan American has implemented additional contingency measures
in and around leach pads 1 and 2, and has commenced the relocation of ore to allow
rebuilding of Pad 1 for future operation. Pan American has also completed construction and is
design and construction of the facility, and has finalized construction of the first phase of Pad
3.
Only a small portion of the waste is potentially acid generating and no specific measures to
manage waste or ore deposition are required.
and operation of the existing mine and is in compliance with Mexican law and international
best practice environmental management. The mine has held Clean Industry Certification,
awarded by Mexicos PROFEPA, since 2010.
The Dolores staff community relations team implements an extensive program of community
engagement activities including information sessions, infrastructure works, and educational
and training programs for the local people, including small business training, which has
resulted in the establishment of several important service providers to the mine.
expansion Project.
August 2014 163 of 171

26 Recommendations
26.1 Project advancement
26.2 Mineral resources and mineral reserves

No significant recommendations are made to improve the quality of the mineral resource
estimate methodology. Pan American intends to continue with annual diamond drilling
programmes and it is recommended to commence an additional infill drilling campaign to
collect closer spaced drillhole information for updating the annual mineral reserve and
resource estimates at Dolores. The cost of these programs will be covered by Pan Americans
usual annual drilling budget. Exploration diamond drilling is expected to be concentrated on
defining the southern strike extent of the deposit, and in improving the confidence in the
estimate at depth. Mineral resources will be updated annually to include additional diamond
drilling undertaken during the year and to deplete for the previous years mining. Reviews of
the geological interpretation against grade control drilling will continue to be undertaken on a
regular basis to verify the reliability of the resource estimate.
26.3 Mineral processing, metallurgical testing, and recovery methods

It is recommended to advance the preliminary economic assessment of the pulp
agglomeration processing option to a pre-feasibility study level. This will require more
detailed engineering, test work, and cost estimates to more accurately assess the technical
feasibility and economic viability of the Project and to finalize the anticipated flow sheet.
Some of the additional test work and studies necessary to advance the Project are discussed
here.
to evaluate the benefits of varying the blasting practices in the pit in order to reduce the
crushing equipment in the pulp agglomeration plant.
August 2014 164 of 171

filtration equipment.
of high grade feed, and further testing with variable feed is recommended. An estimated
$1 million would be required for the additional testing, the trade-offs, and to advance the
engineering and cost estimates of the process area to a pre-feasibility study level.
26.4 Mining and financial

The authors recommend advancing the preliminary economic assessment of the pulp
agglomeration processing option to a pre-feasibility study level, which will allow Pan
American to update the recovery and cost parameters and to re-optimize the pit design used
in the estimation of mineral reserves. The open pit mining plan used in the preliminary
economic assessment has a slightly higher production rate than is currently achieved at the
mine and additional open pit production is expected to be supplied by PEAL and by
purchasing additional mine haulage trucks. Implementation of the pulp agglomeration
processing option will require additional mining selectivity to separate the high grade portion
of the deposit for grinding, which will require a manageable adjustment to current grade
control practices, but is not likely to result in significant additional mining costs.
value of the proposed underground operations can be assessed with a high level of
addressing the open pit and underground interactions and interfaces, and assessing the
August 2014 165 of 171


schedule.
Identifying the permitting requirements for the addition of an underground
operation.
Developing pre-feasibility level mine designs, plans, schedules, and cost models so
that the value of the proposed underground operations can be assessed with a higher
The estimated cost of pre-feasibility level underground mine designs, plans, schedules, and
cost models is $450,000. Given a positive outcome of these studies, Pan American may
conclude that the most effective method of assessing the geotechnical and geothermal
conditions and to improve the confidence of the inferred resource will be to develop part of
the primary access decline for underground and some of the planned level accesses prior to
making a final production decision on the underground mine.
A total of $2.7 million has been considered in the preliminary economic assessment for
diamond drilling to improve the confidence of the mineral resource estimates in the region of
the proposed underground mine. As the pulp agglomeration plant and the underground are
expansions to the existing Dolores mine, Pan American may consider that upgrading only a
portion of the inferred mineral resource prior to making a decision on construction of the
pulp agglomeration plant and the underground mine may be an acceptable risk.
26.5 Environmental and community

At this time there are no significant recommendations to make with respect to environmental
and community issues, until a construction decision has been reached and permit
modifications are required.
August 2014 166 of 171

27 References
Author Title
Barra, F., Ruiz, J., Valencia, V. Laramide porphyry Cu-Mo mineralization in Northern
A., Ochoa-Landn, L., Chesley, J. Mexico: age constraints from Re-Os geochronology in
T., and Zurcher, L., 2005 molybdenite. Economic Geology, 100, 1605-1616.
Campa, M. F. and Coney P. J., Tectono-stratigraphic terranes and mineral resource
1983 distributions in Mexico. Canadian Journal of Earth
Sciences, 20, 1040-1051.
Camprub, A., Ferrari, L., Cosca, Ages of epithermal deposits in Mexico: regional
M. A., Cardellach, E., and significance and links with the evolution of Tertiary
Canals, . 2003 volcanism. Economic Geology, 98, 1029-1037.
Chlumsky, Armbrust, and NI 43-101 Technical Report Dolores Gold-Silver Project
Meyer, LLC., 2011 Chihuahua, Mexico. Technical Report prepared for
Minefinders Corporation Ltd., September 30 2011.
GBM, 2013 Dolores Mill Study Project, Order of Magnitude Study
Report. Internal report prepared for Pan American
Silver, May 2013.
Golder, 2013a Review of Inter ramp Slope Angle, Dolores Mine,
Chihuahua, Mexico. Internal report prepared for Pan
American Silver, August 2013.
Golder, 2013b Geotechnical Characterization for Underground
Mining, Dolores Project. Internal report prepared for
Pan American Silver, October 2013.
Golder, 2014a Initial Assessment of Stability of Proposed
Underground Mining. Email message sent to Pamela
De Mark June 15, 2013.
Long, S. D., 1998 Practical Quality Control Procedures in Mineral
Inventory Estimation. Explor. Mining. Geol. 7 (1-2) pp
117-127.
Lyntek, 2014 Pan American Silver Paste Agglomeration Project
Summary Report Comminution Testwork, Dolores.
Internal report prepared for Pan American Silver, June,
2014.
M3, 2005 Dolores Feasibility Study, Volume 1, NI 43-101
Technical Report for Dolores Project Chihuahua.
Technical report for Minefinders Corporation Ltd., June
August 2014 167 of 171

2005.
McDowell, F. W. and Keizer, R. Timing of mid-Tertiary volcanism in the Sierra Madre

P., 1997 Occidental between Durango city and Mazatln,
Mexico. Bulletin of the Geological Society of America.
88, 1479-1487.
McClelland Laboratories, Inc., Preliminary Report on Pulp Agglomeration Testing MLI
2014 Job No. 3787. Internal report prepared for Pan
American Silver, June 19, 2014.
Overbay, W., Page, T., Geology, Structural Setting, and Mineralization of the
Krasowski, D., Bailey, M., and Dolores District, Chihuahua, Mexico. In Special
Matthews, T., 2001 Publication No. 8 Society of Economic Geologists, 71-
85.
Pincock, Allen & Holt, 2002 Audit of Resources at the Dolores Gold Silver Project
Chihuahua, Mexico. Technical report prepared for
Minefinders Corporation Ltd, December 2, 2002.
Pratt, W., 2013 Internal report on Dolores geology and deposit types
prepared for Pan American Silver, August 2013.
Simmons, S. F and Browne, P. R. Hydrothermal minerals and precious metals in the
L., 2000 Broadlands-Ohaaki geothermal system: implications for
understanding low-sulfidation epithermal
environments. Economic Geology, 95, 971-999.
Snowden Mining Industry Dolores: Preliminary underground assessment. Internal
Consultants, 2014 report prepared for Pan American Silver, June 2014.
Staude, J-M., 2001 Geology, geochemistry and formation of Au-(Cu)
mineralization and advanced argillic alteration in the
Mulatos District, Sonora, Mexico. In: New Mines and
Discoveries in Mexico and Central America. Special
Publication No. 8. Society of Economic Geologists. 199-
216.
Wark, D. A., Kempter, K. A., and Evolution of waning, subduction-related magmatism,
McDowell, F. W., 1990 Northern Sierra Madre Occidental, Mexico. Geological
Society of America Bulletin, 102, 1555-1564.
Wark, D. A., 1991 Oligocene Ash Flow Volcanism, Northern Sierra Madre
Occidental: Role of Mafic and Intermediate-
Composition Magmas in Rhyolite Genesis. Journal of
Geophysical Research, 96, 13, 389-13,412.
August 2014 168 of 171

28 Date, signatures, and certificates

CERTIFICATE of QUALIFIED PERSON
I, Dr. Michael Steinmann, Executive Vice President, Corporate Development and Geology of Pan
American Silver Corp., 1500-625 Howe St, Vancouver, BC, V6C 2T6, Canada do hereby certify that:
a) I am the co-author of the technical report titled Technical Report for the Dolores Property,
Chihuahua, Mexico Preliminary Economic Assessment of a Pulp Agglomeration Treatment and
Underground Option, with an effective date of May 31, 2014 (the Technical Report).
b) I graduated with a Master of Science in Geology degree from the University of Zurich,
Switzerland, in 1993. I earned a Doctor of Natural Science in Geology degree from the Swiss
Federal Institute of Technology, Zurich, Switzerland, in 1997. I am a Professional Geologist in
good standing with The Association of Professional Engineers and Geoscientists of the Province
of British Columbia. My experience is primarily in the areas of mining geology and exploration
and I have worked as a geologist for a total of 21 years since my graduation from the University
of Zurich.
c) I have read the definition of qualified person set out in National Instrument 43 101 (the
Instrument) and certify that by reason of my education, affiliation with a professional
association and past relevant work experience, I fulfil the requirements of a qualified person for
the purposes of the Instrument.
d) I am responsible for the preparation of the sections of the Technical Report as detailed in Table
2.1 Responsibilities of each Qualified Person.
e) I am currently employed as the Executive Vice President, Corporate Development and Geology
for Pan American Silver Corp., the owner of the Dolores Property, and by reason of my
employment, I am not considered independent of the issuer as described in Section 1.5 of the
Instrument.
f) I have had prior involvement with the Dolores Property that is the subject of the Technical
Report; I am an employee of Pan American Silver Corp. and have conducted numerous site visits
to the Dolores Property, including as described in Section 2 Introduction of the Technical
Report, and most recently on February 27, 2014.
g) I have read the Instrument and Form 43 101F1, and the Technical Report has been prepared in
compliance with the Instrument and that form.
h) As of the effective date of the Technical Report, to the best of my knowledge, information and
belief, the Technical Report contains all the scientific and technical information that is required
to be disclosed to make the Technical Report not misleading.
Dated at Vancouver, British Columbia, this 18th day of August, 2014.
Signed and sealed

Michael Steinmann, P.Geo.
August 2014 169 of 171

I, Martin Wafforn, Vice President, Technical Services of Pan American Silver Corp., 1500-625 Howe St,
Vancouver, BC, V6C 2T6, Canada do hereby certify that:
b) I graduated with a Bachelor of Science in Mining degree from the Camborne School of Mines in
Cornwall, England in 1980. I am a Professional Engineer in good standing with The Association of
Professional Engineers and Geoscientists of the Province of British Columbia. I am also a Chartered
Engineer in good standing in the United Kingdom. My experience is primarily in the areas of mining
engineering and I have worked as an engineer in the mining industry for a total of 31 years since my
graduation from the Camborne School of Mines.
Instrument) and certify that by reason of my education, affiliation with a professional association
and past relevant work experience, I fulfil the requirements of a qualified person for the purposes of
the Instrument.
d) I am responsible for the preparation of the sections of the Technical Report as detailed in Table 2.1 -
Responsibilities of each Qualified Person.
e) I am currently employed as the Vice President, Technical Services for Pan American Silver Corp., the
owner of the Dolores Property, and by reason of my employment, I am not considered independent
of the issuer as described in Section 1.5 of the Instrument.
f) I have had prior involvement with the Dolores Property that is the subject of the Technical Report; I
am an employee of Pan American Silver Corp. and have conducted site visits to the Dolores Property,
including as described in Section 2 Introduction of the Technical Report, and most recently on
March 31, 2014.
h) As of the effective date of the Technical Report, to the best of my knowledge, information and belief,
the Technical Report contains all the scientific and technical information that is required to be
disclosed to make the Technical Report not misleading.
Signed and sealed

Martin Wafforn, P. Eng.
August 2014 170 of 171

I, Americo Delgado, Director, Metallurgy of Pan American Silver Corp., 1500-625 Howe St, Vancouver, BC,
V6C 2T6, Canada, do hereby certify that:
b) I graduated with a Master of Science in Metallurgical and Material Engineering from the Colorado
School of Mines in Golden, Colorado, in 2007, and with a Bachelor of Science in Metallurgical
Engineering degree from the Universidad Nacional de Ingenieria, Lima, Peru, in 2000. I am a
Professional Engineer in good standing with the Association of Professional Engineers and
Geoscientists of the Province of British Columbia. My experience is primarily in the areas of
metallurgy and mineral processing engineering and I have worked as a metallurgist in the mining
industry for a total of 14 years since my graduation from the Universidad Nacional de Ingenieria.
Instrument) and certify that by reason of my education, affiliation with a professional association
and past relevant work experience, I fulfil the requirements of a qualified person for the purposes of
the Instrument.
d) I am responsible for the preparation of the sections of the Technical Report as detailed in Table 2.1 -
Responsibilities of each Qualified Person.
e) I am currently employed as the Director, Metallurgy for Pan American Silver Corp., the owner of the
Dolores Property, and by reason of my employment, I am not considered independent of the issuer as
describe in Section 1.5 of the Instrument.
f) I have had prior involvement with the Dolores Property that is the subject of the Technical Report; I
am an employee of Pan American Silver Corp. and have conducted site visits to the Dolores Property,
including as described in Section 2 Introduction of the Technical Report, and most recently on May
19 to 23, 2014.
h) As of the effective date of the Technical Report, to the best of my knowledge, information and belief,
the Technical Report contains all the scientific and technical information that is required to be
disclosed to make the Technical Report not misleading.
Signed and sealed

Americo Delgado, P. Eng.
August 2014 171 of 171

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Technical Report for the Dolores Property, Chihuahua, Mexico -

Preliminary Economic Assessment of a Pulp Agglomeration Treatment and Underground Option

Effective date: May 31, 2014

Prepared by Michael Steinmann, P. Geo

3 Reliance on other experts ......................................................................................................... 33

4 Property description and location............................................................................................. 34

5 Accessibility, climate, local resources, infrastructure, and physiography ................................ 38

August 2014 2 of 171

5.1 Physiography and climate ............................................................................................ 38

7 Geological setting and mineralization ....................................................................................... 42

8 Deposit types ............................................................................................................................. 52

11 Sample preparation, analyses, and security ............................................................................. 60

August 2014 3 of 171

11.4 Conclusions and recommendations ............................................................................. 64

12 Data verification ........................................................................................................................ 65

13 Mineral processing and metallurgical testing ........................................................................... 67

14 Mineral resource estimates ...................................................................................................... 86

August 2014 4 of 171

14.3.1 Geological interpretation and modelling ................................................... 87

15 Mineral reserve estimates......................................................................................................... 97

16 Mining methods ...................................................................................................................... 102

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16.2.2 Geotechnical parameters ......................................................................... 108

17 Recovery methods................................................................................................................... 114

18 Project infrastructure .............................................................................................................. 127

19 Market studies and contracts.................................................................................................. 133

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19.1 Contracts and marketing ............................................................................................ 133

20 Environmental studies, permitting, and social or community impact .................................... 134

21 Capital and operating costs ..................................................................................................... 138

22 Economic analysis.................................................................................................................... 146

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22.2.3 Estimated cash flow forecast.................................................................... 152

23 Adjacent properties ................................................................................................................. 157

24 Other relevant data and information ...................................................................................... 158

25 Interpretation and conclusions ............................................................................................... 159

26 Recommendations .................................................................................................................. 164

28 Date, signatures, and certificates ............................................................................................ 169

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Table 13.2 Pre-feasibility study metallurgical recoveries by milling, flotation, and

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1.2 Geology and mineralization

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1.3 Status of exploration, development, and operations

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1.4 Mineral resource and reserve estimates

Table 1.1 Dolores mineral resources as at May 31, 2014

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Table 1.2 Dolores mineral reserves as at May 31, 2014

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1.6 Mineral processing and recovery methods

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1.7 Capital and operating costs and economic analyses

Parameter Units Existing operation Expansion Project

Feed processed from pit and stockpiles Mt 69.7 75.3

Feed processed from underground Mt - 5.0

Total feed processed Mt 69.7 80.3

Heap leach processing Mt 69.7 61.8