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2016 Updated NI 43-101 Mineral Resource Estimates For the Mangazeisky Project

Total mineral resources for the Mangazeisky Silver Property are detailed in the table below.

Zone Indicated Resource Inferred Resource
Tonnes
(t) 		Grade
Ag (g/t) 		Contained Metal
Ag (Troy oz) 		Tonnes
(t) 		Grade
Ag (g/t) 		Contained Metal
Ag (Troy oz)
Vertikalny
Central 		700,000 1,227 27,700,000 350,000 786 8,900,000
Vertikalny
Northwest 		200,000 476 3,100,000
Nizhny
Endybal 		710,000 316 7,200,000
Mangazeisky
North 		304,000 626 6,100,000 98,000 671 2,100,000
Mangazeisky
South 		60,000 246 500,000
Sterzhnevoy 48,000 1,530 2,360,000
Silver Total 1,004,000 1,045 33,800,000 1,466,000 511 24,160,000
Zone Inferred Resource
Tonnes
(t) 		Grade
Au (g/t) 		Grade
Ag (g/t) 		Grade
Cu (%) 		Contained Metal
Au (Troy oz) 		Contained Metal
Ag (Troy oz) 		Contained Metal
Cu (lbs)
Porphirovy 80,000 1.7 46 0.6 4,000 115,000 1,000,000

Notes:

The effective date of the Sterzhnevoy and Porphirovy maiden resources is August 27, 2016. The effective date of the Vertikalny Central resource is July 8, 2016 and the Vertikalny Northwest Resource is February 10, 2015. The effective date of the original Nizhny Endybal Resource estimate was September 11, 2012, this resource was re-stated with a higher cut-off grade on the June 10, 2015. The effective date of the Mangazeisky North is March 31, 2016 and the Mangazeisky South resource is June 10, 2015.

2016 NI 43-101 Mineral Reserve

Category

Quantity
(kt)

Ag Grade
(g/t)

Ag Metal
Content
(koz)

Proven – Open Pit

-

-

-

Proven – Underground

-

-

-

Probable – Open Pit

400

1,083

13,934

Probable – Underground

458

569

8,375

Total Mineral Reserves

858

809

22,309

Notes on Mineral Reserves: The mineral reserve statement is as of 23th day of September 2016. Mining will comprise two sequential phases: open pit and underground. The open pit (the first four years of production) will consist of a conventional drill, blast, load, and haul operation, using the current fleet on site, supplemented with leased equipment. Capital for the open pit will only be spent on trucks, lighting units, pumps, site office facility, and light vehicles.

As Vertikalny is a steeply dipping ore body in the range of 60 to 90°, for underground mining the shrinkage stoping method using a modern, trackless style operation with electrical powered jumbos will be employed. Mining will advance from the bottom upwards in horizontal slices, with a portion of the broken ore left in place from which miners can work. Three areas were identified for the mine design: the North, Central, and South zones. The North and Central zones will be accessed by ramp and the South Zone by adit.

In accordance with Russian standard practice the open pit design includes 30% dilution and 95% mining recovery. Given the selectivity of the underground mining method and equipment, the dilution was limited to 15 cm on each of the hanging wall and footwall (30 cm total) and integrated into the stope optimisation process. It is assumed that 95% of the diluted material, including pillar material, will be recovered. The open pit and underground cut-off grades are 250 g/t and 450 g/t, respectively.

Geological and Sampling Procedures

A quality assurance/ quality control program is part of the drilling program on the Mangazeisky deposits. This program includes chain of custody protocols as well as systematic submittals of standards, duplicates and blank samples into the flow of samples produced by the drilling. Prior to 2011, analysis was carried out at Russian certified laboratories in Yakutsk and Aldan, Russia. Analysis for 2011, 2012, 2013, 2014 and 2015 campaigns were completed by ALS Chemex in Chita, Russia.

Qualified Person

The updated Indicated and Inferred Mineral Resource estimate was prepared by Mr. Robert Davies, B.Sc., European Geologist (EurGeol) and Chartered Geologist (CGeol). Mr. Davies is Senior Resource Geologist at Tetra Tech and is a "qualified person" as such term is defined in NI 43-101. Mr. Davies reviewed the technical and scientific information in the press release relating to the Mineral Resource estimates and has approved the use of the information contained herein.

Key Assumptions

Vertikalny Central & Northwest

  • The mineral resources have been estimated into a three dimensional block model comprising the following parameters:
    • Vertikalny Central: 10 m x 10 m x 1 m (x,y,z), with minimum sub-block dimensions of 2.5 m x 2.5 m x 0.25 m (x,y,z).
    • Vertikalny Northwest: 10 m x 10 m x 1 m (x,y,z), with minimum sub-block dimensions of 2.5 m x 2.5 m x 0.25 m (x,y,z).
  • The estimation was constrained to the mineralised zone using wireframed solid models. The wireframe was subdivided into a strongly mineralised central zone with a less strongly mineralised halo.
  • Grade estimates were based on 0.7 m composited assay data.
  • The interpolation of metal grades was undertaken using ordinary kriging.
  • In order to demonstrate that the deposit has reasonable prospects for economic extraction a cut-off grade of 200 g/t Ag has been applied to resources contained within an open pit shell at Vertikalny Central or within 80 m of surface at Vertikalny Northwest. A 350 g/t silver cut-off has been applied for the under ground resource.
  • At Vertikalny Central, a pit shell wireframe was used to constrain the open pit resource in order to demonstrate that the resource has reasonable prospects for economic extraction. The pit shell is based upon the following assumptions:
    • Silver price of US$19/oz Troy ounce Ag.
    • Mining recovery 95%
    • Waste dilution 30%
    • Mining cost of US$2.53/t.
    • Processing cost of US$52/t.
    • General and administration cost of US$40.6/t
    • Overall silver recovery of 88%.

Nizhny Endybal

  • In order to maintain the Nizhny Endybal Resource as a Current Resource, Tetra Tech has restated the resource with the following assumptions:
    • Cut-off grade of 150 g/t Ag.
    • Spot metal prices effective February 10, 2015 of US$17/oz Troy ounce Ag.
    • Mining cost of US$75/t.
    • Processing cost of US$50/t.
    • General and administration cost of US$40/t
    • Overall silver recovery of 90%.

Mangazeisky North & South

  • The Mangazeisky North Mineral Resources have been estimated into a three dimensional block model constructed in GEOVIA Surpac™ Version 6.7, comprising the following parameters:
    • Mangazeisky North: 20 m x 20 m x 5 m (x, y, z), with minimum sub-block dimensions of 0.625 m x 0.625 m x 0.156 m (x, y, z).
  • The grade interpolation was constrained within the mineralised zone using wireframed solid models. The wireframes were sub-divided into a strongly mineralised core with a halo of weakly mineralised material corresponding to coliform banded mineralisation.
  • Grade estimates were based on composited assay records, 0.6 m composite within the strongly mineralised core zone and 0.7 m composite within the halo.
  • The interpolation of the metal grades was undertaken using ordinary kriging.
  • In order to demonstrate that the deposit has reasonable prospects for economic extraction a cut-off grade of 150 g/t has been applied, based upon the following assumptions:
    • Forecasted Silver price of US $17 /Troy oz Ag.
    • Mining Cost of US $3.16 /t.
    • Processing Cost of US $50 /t.
    • General and administration costs of US $12.5 /t(1).
    • Transport from pit to process plant $3.6 /t.
    • Overall Silver recovery of 80%.

Note:

  • Assumes that the Mangazeisky deposits will be worked with Vertikalny and will therefore share general and administrative costs.

Sterzhnevoy and Porphirovy

  • The Mineral Resources have been estimated into two separate three dimensional block models each comprising the following parameters:
    • 20 m x 20 m x 10 m (x, y, z), with minimum sub-block dimensions of 1 m x 1 m x 0.5 m (x, y, z).
  • The estimation was constrained to the mineralised zone using wireframe solid models.The wireframes were sub-domained to isolate each mineralised structure.
  • Grade estimates were based on 0.5 m composited assay data.
  • The interpolation of the metal grades was undertaken using Inverse Distance Weighting.
  • In order to demonstrate that the deposit has reasonable prospects for economic extraction a cut-off grade of 150 g/t has been applied for Sterzhnevoy, based upon the following assumptions:
    • Silver Price of $17 /Troy oz.
    • Mining Cost of US $75 /t.
    • Processing Cost of US $50 /t.
    • General and administration costs of US $40 /t.
    • Overall Silver recovery of 90%.
  • And a cut-off grade of $77 equivalent based on the same assumptions for Porphirovy. Dollar equivalent calculated with the formula = Au ozt x $1250 + Ag ozt x $17 + Cu lbs x $2.2