Preliminary Economic Assessment (PEA)

Results of the PEA present a robust base for the next phase of gold production in the Company’s growth pipeline. As engineering work progresses, the Company continues to seek opportunities to reduce the initial project capital requirements and improve overall project economics.

The PEA was focused on a starter pit with a 5 year mine life based on the currently defined +300,000 oz gold resource. Minera Alamos fully expects to build the resource base through exploration funded out of the mining operation.

PEA Summary

Notes:
1. The PEA was prepared by CSA Global Geosciences Canada Ltd (CSA Global) of Toronto, Canada.
2. Metal prices used to determine gold equivalent (AuEq) oz were US$1,250/oz gold, US$16/oz silver and US$5,725/t copper.
3. All-in sustaining capital (AISC) per oz is a non-GAAP financial performance measures with no standardized definition under IFRS.
4. Further details of the PEA are provided in the Minera Alamos August 16, 2018 press release.

PEA Cautionary Note

Readers are cautioned that the PEA is preliminary in nature and there is no certainty that the PEA results will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability. Additional work is needed to upgrade these mineral resources to mineral reserves.

PEA - Mining

The mineralization extends close to surface and is amenable to conventional open pit mining methods. An open pit mine plan was completed using a preliminary Whittle pit shell for the deposit ($1,250/oz gold, $2.50/t mining, $30.00/t processing, 95% recovery, 45-degree pit slopes). No inferred resources were utilized in the PEA mine planning and further optimization efforts aimed at cut-off grades and the smoothing of waste mining activities may provide additional economic upside for the project.

All drilling, mining and crushing operations will be accomplished via an open pit mining contractor. Mine planning and supervision activities will be performed by Minera Alamos personnel.

PEA - Processing

A simplified base case process was utilized for the La Fortuna plant site. Mineralized material from the mine is stockpiled and crushed prior to being transported to the process plant. The overall processing facilities consist of a primary coarse grind followed by a bulk sulphide concentrate flotation. Bulk concentrate is reground prior to a final flotation producing a copper concentrate. Centrifugal gravity gold recovery circuits are included in both the primary and concentrate reground circuits to extract free gold as a concentrate. Tailings from the flotation circuit are dewatered via filtration and dry-stacked in the tailings containment area adjacent to the processing plant.

Gold recovery for the PEA study has been conservatively estimated at 90%. Approximately half of the gold is extracted as a gravity concentrate, which will be cyanide leached at site and loaded onto activated carbon for shipping outside of Mexico for final doré production. The other half of the recovered gold reports to the copper flotation concentrate (along with the majority of the copper and silver) which is filtered and transported to the port facilities at Guaymas (approximately 500  km) for final sale.

The Company has purchased a used 2000 tpd processing facility (grinding/flotation/filtration) that has been used as the basis for the Fortuna project processing facilities. The size of the major equipment items allows for plant throughput to be increased from the currently assumed 1100 tpd rate as the size of the project resource increases.

PEA - Project Opportunities

The PEA identifies several opportunities to further enhance project economics, including:

• Considerable exploration potential outside of deposit area with numerous targets identified; most of the area has never been explored using modern exploration methods;
• No Inferred resources were utilized in the current mining plans. Further step out drilling may be able to define additional extensions of the current resources;
• Further metallurgical test work to optimize the gold extraction process and further improve overall metal recoveries;
• A staged plant construction plan to further reduce the initial start-up CAPEX and then expand the facilities once production is underway;
• Mine planning optimization studies to evaluate opportunities to delay portions of early waste removal until later in the mine life;
• Optimization studies to determine if a more aggressive use of ore sorting may offer additional economic benefits for the project (i.e. plant CAPEX reductions, increased mineable gold ounces, etc.); and
• Trade-off studies aimed at optimizing cut-off grades and the incorporation of additional milling capacity; project is permitted for a 2,000 tpd operation with the PEA based on a starting rate of 1,100 tpd.