The San Dimas mine is located approximately 125 kilometres northeast of Mazatlán, on the border of Sinaloa and Durango States, in central west Mexico. The site is accessed via a 45 minute flight from either Mazatlán or Durango, or a 10 hour drive from Durango.

The historic mining town of Tayoltita, located adjacent to San Dimas, is an important population centre with approximately 8,000 inhabitants. San Dimas currently employs approximately 1,100 people.

The San Dimas mine consists of five ore zones or blocks: Central, Sinaloa Graben, Tayoltita, and Arana Hanging Wall, and San Antonio West, contained within a 22,500 hectares contiguous property. San Dimas uses long-hole stoping and mechanized cut-and-fill underground mining methods, with all mined production processed at the Tayoltita mill. After milling, cyanidation, precipitation, and smelting the doré bars are poured and transported to refineries in Mexico and the United States.

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Regional topography is considered mountainous with elevations ranging from highs above 2,400 metres to lows below 400 metres in the valley floors. Pine, juniper and scattered oak trees grow on the higher ridges while the lower slopes are covered with thick brush, cactus and grasses. Mining, subsistence farming, ranching and timber cutting are the predominant activities in the region.

Water for mining operations is obtained from on-site wells and from the Piaxtla River. San Dimas also supplies water to the town of Tayoltita from an underground thermal spring at the Santa Rita mine. Electrical power is obtained through a combination of wholly-owned power systems and the Federal Power Commission’s supply system. San Dimas operates hydroelectric and back-up diesel generators which are interconnected to the Federal Power Commission system.

The San Dimas deposit is considered to be one of the most significant precious metal deposits in Mexico, situated within in a very large (15 square kilometres) mining district. Historic production from the San Dimas district has been estimated to total 11 million ounces of gold and 582 million ounces of silver.

Geology and Mineralization

The San Dimas deposit is located within the central part of the Sierra Madre Occidental volcanic pile, containing rocks reflecting two separate periods of magmatism active between 45 to 100 million years ago and 23 to 32 million years ago. The precious metals bearing veins are contained within rhyolitic, andesitic and granodioritic rocks of the older magmatic episode.

Regionally, the geological setting at San Dimas shows two major volcanic successions and a number of intrusive events. The Eocene aged Lower Volcanic Group (LVG) is predominantly composed of andesitic and rhyolitic flows and tuffs, and is intruded by a number of bodies including the dominant Piaxtla Granite (part of the Sinaloa composite batholith). The Tertiary aged Upper Volcanic Group (UVG) is composed of a lower andesitic horizon capped by rhyolitic ash flows and tuffs, and is separated from the LVG by an erosional and depositional unconformity. Subsequent rhyolitic and basalt dykes intrude both the LVG and UVG.

Structurally, the San Dimas district lies within an area of complex normal faulting along the western edge of the Sierra Madre Occidental. Compressive forces first formed predominantly east-west and north-northeast tension gashes that were later cut by transgressive north-northwest striking slip faults. The strike-slip movements caused the development of secondary north-northeast faults, with right lateral displacement.

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Locally, precious metal ore is contained in over 120 epithermal veins characterized by low sulphidation and adularia-sericitic alteration, and formed prior to deposition of the UVG. Veins pinch and swell and commonly exhibit bifurcation, horse-tailing, and cymoidal structures. 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 itself 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.

The ore deposits are typically found within the ‘Favourable Zone’, analogous with the boiling zones. Strike length of these Favourable Zones can exceed 2,000 metres and dip length can exceed 300 metres. Exploration generally relies on a combination of structural geology, geochemistry, and fluid inclusion studies to identify the Favourable Zone. Historical reconciliation has shown that, once the Favourable Zone is defined, over 30% of the vein material contained within the zone will be classified as ore.

Mining and Processing

San Dimas utilizes underground long-hole stoping and mechanized cut-and-fill as the primary mining methods, with LHD equipment feeding haul trucks delivering ore to the mill. Primary access takes advantage of the topographic relief, with adits driven at river level to intersect the veins at depth. Ore is transported from the mining areas to the processing plant in Tayoltita.

The Tayoltita mill has a nameplate capacity of 2,500 tonnes per day. The facility uses conventional crushing/grinding coupled with cyanidation and zinc precipitation for recovery of gold and silver. The mill uses fine crushing and single stage ball milling to achieve a fine grind before passing into the leach circuit. Leaching is completed in a series of tanks providing 72 hours of leach residence time. The pregnant solution is recovered in a CCD circuit with the gold and silver recovered from solution in a zinc precipitation circuit.

Tailings are pumped by a single stage pumping station to the tailings impoundment area located in a box canyon east of the mill site. Gold and silver precipitate is refined using an induction furnace to produce 1,000 ounce gold and silver doré bars.

The Tayoltita mill has gone through a series of expansions over its operating life. In December 2005, crushing capacity was increased to 2,100 tonnes per day, with improvements to the chemical treatment/leaching area. Primero acquired the San Dimas Mine in 2010 and implemented thorough optimizations and a two phase expansion program. Phase 1 was completed in Q1 2014 increasing nameplate throughput to 2,500 tonnes per day.

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Silver Purchase Agreement

On October 15, 2004, the previous owner of the San Dimas mine, entered into a silver purchase agreement to sell 100% of the payable silver produced for a period of 25 years to a subsidiary of Silver Wheaton Corp.

On August 6, 2010, upon Primero’s acquisition of the San Dimas mine, the silver purchase agreement was amended. Primero assumed the obligation to sell Silver Wheaton the first 3.5 million ounces of payable silver produced per year plus 50% of any excess at $4.04 per ounce (plus 1% inflation) until August 5, 2014. Since August 6, 2014 and continuing until the end of the mine life, Primero is obligated to sell Silver Wheaton the first 6 million ounces of payable silver produced per year plus 50% of any excess at $4.20 (plus 1% inflation) per ounce. The remainder of the silver produced is sold at spot market prices, considerably increasing revenues.

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