Sub-Sill

The Sub-Sill Underground Mine (Sub-Sill) was discovered in 2016 and a mineral resource estimate of 324,000 Inferred gold ounces and 89,000 Indicated gold ounces, at a cut-off grade of 2.5g/t was announced in June 2017. Also in June 2017, the first 260 tonnes of ore from the Sub-Sill were delivered to the processing plant. Reserves of 522,000 tonnes at 10.9g/t were announced in January of 2018. The Sub-Sill deposit is located in close proximity to the processing plant for the ELG Mine Complex and remains open in all directions, including at depth. The Company expects to start processing 850tpd from the Sub-Sill consistently by the end of 2018.

Sub-Sill Mine Plan From The Maiden Mineral Reserve:

  • The mineral resource remains open in three directions
  • The In-fill drill program had a 100% success rate in upgrading Inferred mineral resource tonnes to Indicated mineral resource tonnes
  • The mineral reserve includes 71% of the Indicated mineral resource ounces at a 4.6 g/t cut-off-grade. Inferred ounces are not included.
  • Estimated $86 million of before tax, free cash flow
  • Estimated 29 months of production, delivers 480,000 tonnes at 11.65 g/t, containing 180,000 Au ounces:
    • 8 months to get to the steady state production rate of 850 tonnes per day. 76,000 tonnes at 15.30 g/t Au while main ventilation and electrical infrastructure are being established.
    • 11 months at 850 tpd producing 283,000 tonnes at 11.40 g/t Au.
    • For the remaining 10 months, the current mineral reserve supports the mining of 120,000 tonnes, at 9.93 g/t Au.
    • Additional drilling is planned with the objective of upgrading inferred mineral resources, identifying additional mineral resources, and extending the mine life.
  • Recoveries average 84.4% over the mine plan, 88.30% when Cu grade is less than 0.1%. 85.8% when Cu grade is between 0.1%, and 1% and 80.1% when Cu grade is greater than 1%. The average expected Ag recovery is 26.2% for the mine plan.
  • Total Cash Cost(1) of $479 /Au Oz and All In Sustaining Cost (AISC)(1) of $512/Au Oz.
    • Mining costs average $110/tonne over the mine plan. Processing and G&A are the same as for the ELG open pits
  • Total capital required is $23M, of which, $22M will be spent in the first year.
  • There are 6 mining areas in the Sub-Sill mine plan, that range in size from 40 – 100m length on strike, 40 – 200m on plunge, and 3.5 to 25m thick dipping at an average of 24°.
    • The mining method is post pillar, cut and fill

Mineral Resource Statement, Sub-Sill Underground

Tonnes
(Mt)

Au Grade
(g/t)

Ag Grade
(g/t)

Cu Grade
(%)

Contained
Au

(oz)

Contained
Ag

(oz)

Sub Sill

Indicated

1.29

8.09

10.22

0.50

336,085

424,492

Inferred

0.65

9.09

10.79

0.60

191,087

226,919

Notes to accompany Sub Sill Underground Mineral Resource table

  • The estimate was prepared by Mark. P. Hertel, RM SME, an employee of MPH Consulting, who is a "Qualified Person" under NI 43-101.
  • The estimate has an effective date of December 31, 2017.
  • Mineral Resources are classified in accordance with the 2014 CIM Definition Standards for Mineral Resources and Mineral Reserves and the 2003 CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines.
  • Mineral Resources are reported above a 2.5 g/t Au cut-off grade.
  • Mineral Resources are reported as undiluted; grades are contained grades.
  • Sub Sill Resources contained within the conceptual pit shell have been removed from the El Limón Open Pit Resources.
  • Mineral Resources are reported using a long-term gold price of US$1380/oz, and silver price of US$21.00/oz.
  • The assumed mining method is from underground.
  • Recoveries gold 87% and silver 32%.
  • Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade, and contained metal content.
  • Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Mineral Reserve Statement, Sub-Sill Underground

Tonnes
(Mt)

Au Grade
(g/t)

Ag Grade
(g/t)

Cu Grade
(%)

Contained
Au

(oz)

Contained
Ag

(oz)

Sub Sill

Proven

-

-

-

-

-

-

Probable

0.48

11.65

11.65

0.60

180,000

180,000

Notes to accompany Sub Sill Underground Mineral Reserve table

  • Mineral reserves are based on mechanized cut and fill mining within designed cut shapes above in-situ cut-off grades that vary from 4.37g/t Au to 4.84g/t Au accounting for the affect of copper content on process plant recoveries.
  • Mineral reserves incorporate estimates for dilution and mining losses.
  • Process plant recoveries for the Sub-Sill range from 80.1% to 88.3% for Au and 14.1% to 67.3% for Ag.
  • The Mine plan was developed using metal prices of $US1,200/oz. Au and $US17/oz. Ag.
  • Mineral reserves are founded on and include within, Sub-Sill measured and indicated resource. Effective date of resources is October 13, 2017.
  • Mineral reserves have an effective date of December 31, 2017.
  • Mineral reserves were developed in accordance with CIM (2014) guidelines.
  • Rounding may result in apparent summation differences between tonnes, grades and contained metal content.
  • The qualified person for the mineral reserves estimate is Clifford Lafleur, Professional Engineer of Ontario, Canada and a Torex employee.

ELG U/G Sub-Sill Mine Plan

A post pillar mechanized cut and fill mine plan has been designed using the updated Mineral Resource Estimation and geological model resulting in a high grade, Probable Mineral Reserve, of 0.48 million tonnes at 11.65 g/t Au for 180,000 gold ounces at an average in situ cut-off grade 4.60 g/t Au cut-off grade.

Three Cut-Off Grades were calculated to account for the affect of Cu grades on recoveries and used to guide the design of cut and fill production shapes. There are 6 mining zones in the mine plan which range in size from 40 – 100m length on strike, 40 – 200m on plunge and 3.5 to 25m thick dipping at an average 24°. The mine plan converts 71% of Indicated Mineral Resource Au ounces to Probable Mineral Reserve Au ounces.

Development and infrastructure construction were designed to provide access to the production areas, main ventilation via a second portal and to service the mining operations. The production, development and infrastructure construction were costed and scheduled in a financial model.

The mine plan is expected to deliver 480,000 tonnes of high grade (11.65 gpt Au) ore containing 180,000 Au ounces to the ELG Processing Plant over a 29-month period. The Mine is expected to ramp up over an 8-month period with estimated production of 76,000 tonnes at 15.30 g/t Au while main ventilation and electrical infrastructure are being established. Steady state production is expected to continue for 11 months with estimated production of 283,000 tonnes (850tpd) at 11.40 g/t Au, the main constraint being backfilling rate. For the remaining 10 months, the mine plan is expected to deliver 120,000 tonnes (400tpd) at 9.93 g/t Au.

Sub-Sill ore is expected to perform well in the existing Plant with expected Au recoveries ranging from 88.30% when Cu grade is less than 0.1%, 85.8% when Cu grade is between 0.1% and 1% and 80.1% when Cu grade is greater than 1%. The average expected recovery is 84.4% for the mine plan. The expected recoveries for Ag range from 67.3% when Cu grade is less than 0.1%, 37.1% when Cu grade is between 0.1% and 1% and 14.1% when Cu grades are greater than 1%. The average expected Ag recovery is 26.2% for the mine plan.

During steady state production (approximately 850tpd), expected operating costs average $108.35/tonne, including $79.97/tonne mining cost, $19.33/tonne processing and $9.05/tonne in general administration (G&A). Over the 29-month mine plan, operating costs are expected to average $140.86 /tonne.

Total capital required to execute the mine plan is estimated to be $23M, of which, $22M will be spent in the first year. Of the total capital spend, $9.5M is needed for lateral development.

Assuming the production, costs and plant recoveries listed above, the mine plan is expected to generate $86M in free cash flow (before tax) with a Cash Cost of $479/Au Oz and All In Sustaining Cost (AISC) of $512 /Au Oz.

Sub-Sill Geology

The Sub-Sill deposit occurs at the south end of the El Limon deposit in the Mesozoic carbonate-rich Morelos Platform, which has been intruded by Paleocene granodiorite stocks, sills and dikes. Skarn-hosted gold mineralization is developed along the contacts of the intrusive rocks and the enclosing carbonate-rich sedimentary rocks of the Cuautla and Morelos formations. Gold mineralization at El Limon open pit is hosted in skarn developed immediately above a large granodiorite sill. At the Sub-Sill area, multiple skarn zones have been recognized underneath the El Limon Sill, developed along the contacts between marbles of the Morelos formation and multiple granodiorite sills that are interpreted as late stage porphyritic intrusions that emanate from the main body of granodiorite. The best developed skarn zones at the Sub-Sill area, strike NE-SW and dip between 35° and 45° to the northwest. They host multiple horizons with high grade gold mineralization that vary in strike length from approximately 50 meters up to 200 meters, with apparent widths varying from 2 meters to 36 meters. The trend of the overall skarn body in the Sub-Sill area is N-S to NE-SW and appears to connect to previously recognized skarn and gold mineralization at the Limon Sur deposit 200 meters to the SW.

Mineralization at the Sub-Sill deposit is primarily gold, strongly associated with bismuth and variable contents of silver and copper. Gold occurs in variably sulfidized pyrrhotite enriched skarn, while silver and copper mineralization is primarily determined by the degree of sulfidation of the host skarn. Mineralization is associated with retrograde alteration characterized by amphibole, calcite and quartz, with lessor amounts of chlorite ± epidote, affecting pyroxene-garnet exoskarn and granodiorite-related endoskarn. Locally mineralization occurs in narrow lenses of massive sulfides.

Additional technical information is contained in the technical report entitled "Morelos Property, NI 43-101 Technical Report, ELG Mine Complex Life of Mine Plan and Media Luna Preliminary Economic Assessment, Guerrero State, Mexico" dated effective March 31, 2018, and filed on September 4, 2018 (the "Technical Report"). The technical information contained in this presentation is based upon the information contained in the Technical Report which is available on SEDAR as www.sedar.com and the Company's website at www.torexgold.com and as updated in the Company's continuous disclosure documents also available on www.sedar.com and www.torexgold.com.