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Hasbrouck Project

The Hasbrouck Property (“Hasbrouck” or the “Property”) is comprised of the Hasbrouck and Three Hills Deposits. The Hasbrouck Deposit is located approximately five miles south of the town of Tonopah in Esmeralda County, Nevada, adjacent to US Highway 95 and approximately halfway between Reno and Las Vegas. The Three Hills Deposit is located in east central Esmeralda County, approximately one mile west of the community of Tonopah, Nevada, and approximately six miles north of the Hasbrouck Deposit.

Hasbrouck Project General Description
Allied Nevada completed a Preliminary Economic Assessment (“PEA”) for the Hasbrouck Project in 2012, which is detailed in the April 11, 2012 Technical Report. The PEA indicates that the proposed development of a heap leach operation to process both Hasbrouck and the nearby Three Hills mineral resources is expected to be economically robust with low execution risk.

The PEA was developed by Allied Nevada technical staff with contributions from a number of specialist consultants. All dollar amounts are in U.S. currency. Economics are estimated using metal selling prices of $1,000 per ounce for gold and $18 per ounce for silver. The inferred resource was estimated using a gold price of $800 per ounce and a silver price of $14 per ounce.

Highlights of the Preliminary Economic Assessment
  • Inferred mineral resources of 1.2 million ounces of contained gold and 29.3 million ounces of contained silver (128.6 million tons grading 0.009 opt Au and 0.228 opt Ag)
  • Net Present Value ("NPV") of $98.7 million, after tax and royalties, at a 6% discount rate
  • Internal rate of return ("IRR") of 60%, after taxes and royalties, and 18-month payback
  • Average annual production of 135,000 ounces of gold and 540,000 ounces of silver at an average annual adjusted cash cost1 of $555 per ounce for a five year mine life
  • Initial capital cost of $78.1 million (life-of-mine capital cost of $90 million) for a conventional run-of-mine and crushed heap leach facility
  • Production plan assumes mining and processing the nearby Three Hills mineralization ahead of Hasbrouck mineralization
  • Potential to extend mine life as the Hasbrouck deposit remains open and the Company intends to explore other regional opportunities
Hasbrouck would be mined and processed as a conventional open pit, heap leach operation. Mining equipment that is currently being replaced at Hycroft by a larger fleet is planned to be overhauled and transitioned to Hasbrouck including the semi-mobile crushers.

The capital cost estimate assumes refurbishing costs for the smaller mobile equipment that will be transitioned from Hycroft to Hasbrouck, as well as engineered estimates, direct quotations, when available, and industry guidelines. Operating costs were developed using industry standard estimates and current labor and commodity pricing in effect at Hycroft at the time of the PEA. The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA will be realized.
The financial model was sensitized to various metals prices and the results are shown below:

Metal Prices
Au           Ag
NPV 0%
 $ Million
NPV 6%
 $ Millions
IRR
 %
Adjusted Cash Cost
   $/ounce
$800       $14 $49.9 $29.1  28%  $550
$1,000       $18 $147.1 $98.7 60%  $555
$1,200       $21 $238.1 $164.8 104% $560
$1,400       $25 $330.2 $230.3 138% $565
* Adjusted cash costs assume silver revenue as a byproduct credit to costs

Base line environmental studies have begun at Hasbrouck to initialize the permitting program. It is anticipated that the mine could receive permits to begin construction in the second half of 2014. For the purposes of the PEA, it is assumed that permits to begin construction could be received in the second half of 2013 and, subject to completing a positive feasibility and a decision by the Board to begin production, operations could begin in 2015.