San Dimas (Mexico)

Operator: Primero
Location: Mexico
Term of Stream: Life of Mine
Stream Parameters: 100% of silver production up to 6 Moz per annum and 50% of excess
Upfront Consideration: US$190M
Cost Quartile: 1st
Primary Metal: Gold

Project Overview

The San Dimas mine (“San Dimas”) is owned and operated by Primero Mining Corp. (“Primero”), which purchased the mine from Goldcorp in August 2010. The mine is a low-cost producer of gold and silver and has been in continuous production for well over 100 years. The San Dimas gold-silver deposit, located in the San Dimas district on the border of Durango and Sinaloa states, is one of the most significant precious metal deposits in Mexico. The district is comprised of over 100 epithermal bonanza type mineralized gold-silver veins. The veins widths vary from less than one centimetre to over 15 metres, but average approximately 2 metres. Veins have been followed underground from a few metres in strike-length to more than 2 kilometres.

Mineralization is typical of epithermal vein structures with banded and drussy textures. Three major stages of veining have been recognized in the district, each containing variable amounts of mineralization. The second stage produced the majority of the ore deposits, which included three sub-stages characterized by distinct mineral assemblages, quartz-chlorite-adularia, quartz-rhodonite, and quartz-calcite. Sulphide minerals include pyrite, sphalerite, chalcopyrite and galena as well as lesser amounts of argentite, polybasite, stromeyerite, native silver and lectrum.

Over the substantial mine life to date, the operating team at San Dimas has demonstrated a strong track-record of converting resources into reserves and the mine continues to exhibit excellent potential exploration upside. Primero has stated that it believes that it can continue to expand reserves by focusing new drilling programs on areas with significant exploration potential, such as the Sinaloa Graben block, where exploration results confirm mineralization of higher grades and in wider veins than the existing reserves.

The San Dimas district has experienced a long mining history dating back to 1757 with the first cyanide mill being built in Mexico at Tayoltita in 1904. Historical production from the district is estimated at 582 million ounces of silver and 11 million ounces of gold, affirming it as a world class epithermal mining province. The mines at San Dimas are underground operations using primarily mechanized cut-and-fill and long-hole stoping mining methods. Once milling, cyanidation, precipitation, and smelting occur at the San Dimas mill located near the town of Tayoltita, doré bars are poured and then transported to refineries in Mexico and the United States.

Precious Metal Purchase Agreement

On October 15, 2004, Silver Wheaton entered into a silver purchase agreement with Goldcorp to purchase 100% of the silver produced by Goldcorp’s Luismin mining operations (owned by Goldcorp at the date of the transaction) for a period of 25 years, which consisted primarily of the San Dimas and Los Filos mines, for an upfront payment of C$46 million in cash and 108 million Silver Wheaton Common Shares, plus a payment equal to the lesser of US$3.90 per ounce of delivered silver (subject to an annual inflationary price adjustment) and the then prevailing market price per ounce of silver.

On March 30, 2006, Silver Wheaton and Goldcorp amended the Luismin silver purchase agreement, eliminating any capital expenditure contributions previously required to be paid by Silver Wheaton. In consideration for these amendments, Silver Wheaton issued to Goldcorp 18 million Common Shares, representing approximately 9.8% of the then outstanding Common Shares, and a US$20 million one year non-interest bearing promissory note, which was paid in full on March 29, 2007.

On August 6, 2010, Goldcorp completed the sale of the San Dimas mine to Primero. In conjunction with the sale, Silver Wheaton amended its silver purchase agreement relating to the mine. The term of the silver purchase agreement, as it relates to San Dimas, was extended to the life of mine. Primero will deliver to the Company a per annum amount equal to the first 6 million ounces of payable silver produced at San Dimas and 50% of any excess. Goldcorp will continue to guarantee the delivery by Primero of all silver produced and owing to the Company until 2029. In addition, Goldcorp will continue to deliver to Silver Wheaton the silver produced by the Los Filos mine.

More Information

To view the April 2014 San Dimas Technical Report please click here or visit www.sedar.com. For more information about the San Dimas mine, please visit Primero's website at www.primeromining.com. Cost quartile information is sourced from Wood Mackenzie byproduct cost curves for gold, zinc/lead, copper, nickel, and silver mines.

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