Name and Location

San Agustin heap-leach silver/gold project, Mexico.

Client

The project is owned by Minera Real del Oro, a wholly owned subsidiary of Argonaut Gold.

Project Description

The San Agustin property comprises four mineral claims totaling 1 065 ha in the northern San Lucas de Ocampo mining district.

The project has been designed as an openpit mine with a heap-leach operation using two separate multiple-lift, single-use leach pads.

The pit has been designed with five mining phases and contains 72.4-million tonnes of indicated mineral resources at an average grade of 0.32 g/t of gold and 10.6 g/t of silver. Total life-of- mine (LoM) production of 488 000 oz of gold and 3.8-million ounces of silver is estimated from the indicated mineral resource. The LoM strip ratio is 0.39:1.

Pit resources have been divided into high- and low-grade material types designated for heap-leach processing.

At a production rate of six-million tonnes of high-grade material a year during the first year, increasing to 10.8-million tonnes a year from the second year to the end of the mine’s life, it is expected that the potential mine life will be 6.5 years. The production schedule has targeted a consistent total mine tonnage of about 18-million tonnes a year, comprising high-grade, low-grade and waste material.

Separate circuits will be used to crush higher- and lower-grade material – the higher-grade material is two-stage fine-crushed to 80% passing 22 mm, and the lower-grade material is single-stage coarse-crushed to 80% passing 100 mm.

The projected gold and silver field recoveries for the fine-crushed material are 66% and 16% respectively, and for coarse-crushed material 57% and 9% respectively. The Phase 1 heap-leach pad will contain both types of crushing circuits. The final products from each will be combined and conveyed to a stacking system at the heap- leach pads.

During Phase 2 of the project, an additional fine-crushing circuit, along with a new heap-leach pad and ponds, will be added to meet the targeted production. No coarse-crushed material is planned for this phase. The stacked material will be leached using a low-concentration sodium cyanide solution.

The gold- and silver-bearing solution will be collected in individual pregnant solution ponds and pumped into separate carbon adsorption circuits to extract the precious metals.

Both phases will have independent heap-leach pads, process solution ponds, barren tanks, reagent mix/storage and carbon adsorption circuits.

The loaded carbon will be shipped to Argonaut’s La Colorada facility, in Sonora, Mexico, where the metal from the loaded carbon will be processed and recovered.

Net Present Value/Internal Rate of Return

The technical report and updated preliminary economic assessment, completed in April 2016, estimates a pretax net present value (NPV), at a 5% discount rate, of $126-million and an after-tax NPV of $89.9-million. Payback will take about 3.1 years from the start of production.

San Agustin offers an internal rate of return of 57.7%, compared with the company’s preliminary economic assessment, completed in December 2015, which calculated an after-tax internal rate of return of 50%.

Value

Total project costs are estimated at $84.8-million, which includes $42.6-million preproduction capital and

$42.2-million sustaining capital.

Duration

Not stated.

Latest Developments

Argonaut has acquired the necessary land to develop the San Agustin project.

The land agreement enables it to file for the required ‘change in use of soil’ permit, which it expects to receive

by the third quarter, allowing for a construction decision before year-end.

Assuming a positive construction decision, first gold production could be achieved in the third quarter of 2017,

Argonaut has advised.

Key Contracts and Suppliers

None stated.

On Budget and on Time?

Not stated.

Contact Details for Project Information

Argonaut Gold VP investor relations Dan Symons, tel +1 416 716 6466 or email dan.symons@argonautgold.com.