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ANNUAL INFORMATION FORM

Year ended December 31, 2016





March 20, 2017

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TABLE OF CONTENTS

|FORWARD-LOOKING
      STATEMENTS                                 | 1 
|---------------------------------------------------------------- | --
|MINERAL RESERVE AND RESOURCE ESTIMATES                           | 2 
|CURRENCY AND EXCHANGE
      RATES                                | 3 
|CORPORATE STRUCTURE                                              | 3 
|GENERAL DEVELOPMENT OF
      THE BUSINESS                        | 4 
|Risk Factors                                                     | 9 
|Mineral Properties                                               | 20
|San Francisco Property                                           | 20
|Ana Paula
      Project                                          | 35
|DIVIDENDS                                                        | 46
|CAPITAL STRUCTURE                                                | 47
|MARKET FOR SECURITIES                                            | 48
|ESCROWED SECURITIES                                              | 49
|DIRECTORS AND OFFICERS                                           | 50
|Director
      and Officer Information                           | 50
|Shareholdings of Directors
      and Officers                    | 51
|Corporate
      Cease Trade Orders or Bankruptcies               | 51
|Penalties or Sanctions                                           | 52
|Conflicts
      of Interest                                      | 52
|LEGAL PROCEEDINGS AND REGULATORY ACTIONS                         | 52
|INTEREST OF MANAGEMENT
      AND OTHERS IN MATERIAL TRANSACTIONS | 53
|REGISTRAR AND TRANSFER AGENT                                     | 53
|MATERIAL CONTRACTS                                               | 53
|TECHNICAL INFORMATION                                            | 53
|INTEREST OF EXPERTS                                              | 54
|AUDIT COMMITTEE INFORMATION                                      | 54
|ADDITIONAL INFORMATION                                           | 56

- i -

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Unless otherwise stated or the context requires otherwise,
references in this Annual Information Form (AIF) to the Company,
Timmins, we, us or our refer to Timmins Gold Corp. and its subsidiaries
on a consolidated basis.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this AIF may constitute
forward-looking statements or forward-looking information (collectively,
forward-looking statements) and are made pursuant to the safe harbor
provisions of the United States Private Securities Litigation Reform Act of 1995
and Canadian securities laws. Forward-looking statements are statements which
relate to future events. Such statements include estimates, forecasts and
statements with respect to project development risks and estimated future
production and cash costs, future trends, plans, strategies, objectives and
expectations, including with respect to costs, capital requirements,
availability of financing, production, exploration and reserves and resources,
projected production at the Companys San Francisco Property and Ana Paula
Project, including estimated internal rate of return and projected production,
exploitation activities and potential, and future operations. Information
inferred from the interpretation of drilling results and information concerning
mineral resource estimates may also be deemed to be forward-looking statements,
as it constitutes a prediction of what might be found to be present when, and
if, a project is developed. In some cases, you can identify forward-looking
statements by terminology such as may, should, expects, plans,
anticipates, believes, estimates, predicts, potential, or continue or
the negative of these terms or other comparable terminology. All statements and
information other than statements of historical fact may be forward-looking
statements.

These forward-looking statements are based on a number of
assumptions, including: the successful completion of development projects,
planned expansions or other projects within the timelines anticipated and at
anticipated production levels; the accuracy of reserve and resource, grade, mine
life, cash cost, net present value and internal rate of return estimates and
other assumptions, projections and estimates made in the technical reports for
the San Francisco Property and the Ana Paula Project; that mineral resources can
be developed as planned; interest and exchange rates; that required financing
and permits will be obtained; general economic conditions; that labor disputes,
flooding, ground instability, fire, failure of plant, equipment or processes to
operate are as anticipated and other risks of the mining industry will not be
encountered; the price of gold, silver and other metals; competitive conditions
in the mining industry; title to mineral properties; and changes in laws, rules
and regulations applicable to the Company.

Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements, or industry results, to differ materially from those anticipated
in such forward-looking statements. The Company believes the expectations
reflected in such forward-looking statements are reasonable, but no assurance
can be given that these expectations will prove to be correct and readers are
cautioned not to place undue reliance on forward-looking statements due to the
inherent uncertainty thereof. Some of the risks and other factors which could
cause actual results to differ materially from those expressed in the
forward-looking statements contained in this AIF include, but are not limited
to: decreases in the price of gold; competition with other companies with
greater financial and human resources and technical facilities; risks associated
with doing business in Mexico; maintaining compliance with governmental
regulations and expenses associated with such compliance; ability to hire,
train, deploy and manage qualified personnel in a timely manner; ability to
obtain or renew required government permits; failure to discover new reserves,
maintain or enhance existing reserves or develop new operations; risks and
hazards associated with exploration and mining operations; accessibility and
reliability of existing local infrastructure and availability of adequate
infrastructures in the future; environmental regulation; land reclamation
requirements; ownership of, or control over, the properties on which the Company
operates; maintaining existing property rights or obtaining new rights; inherent
uncertainties in the process of estimating mineral reserves and resources;
reported reserves and resources may not accurately reflect the economic
viability of the Companys properties; uncertainties in estimating future mine
production and related costs; risks associated with expansion and development of
mining properties; currency exchange rate fluctuations; directors and officers
conflicts of interest; inability to access additional capital; problems
integrating new acquisitions and other problems with strategic transactions; legal proceedings; uncertainties
related to the repatriation of funds from foreign subsidiaries; no dividend
payments; volatile share price; negative research reports or analysts
downgrades and dilution; and other factors contained in the section entitled
Risk Factors in this AIF.

1

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Although the Company has attempted to identify important
factors that could cause actual results or events to differ materially from
those described in the forward-looking statements, you are cautioned that this
list is not exhaustive and there may be other factors that the Company has not
identified. Furthermore, the Company undertakes no obligation to update or
revise any forward-looking statements included in this AIF if these beliefs,
estimates and opinions or other circumstances should change, except as otherwise
required by applicable law.

MINERAL RESERVE AND RESOURCE ESTIMATES AND NOTICE TO U.S.
READERS

The Company is subject to the reporting requirements of the
applicable Canadian securities laws, and as a result reports mineral reserves
and resources according to Canadian standards. Canadian reporting requirements
for disclosure of mineral properties are governed by National Instrument 43-101
Standards of Disclosure for Mineral Projects (NI 43-101). The
definitions of NI 43-101 are adopted from those given by the Canadian Institute
of Mining, Metallurgy and Petroleum (CIM). U.S. reporting requirements
are governed by Industry Guide 7 (Guide 7) of the Securities and
Exchange Commission (the Commission). These reporting standards have
similar goals in terms of conveying an appropriate level of confidence in the
disclosures being reported, but embody different approaches and definitions. For
example, under Industry Guide 7, mineralization may not be classified as a
reserve unless the determination has been made that the mineralization could
be economically and legally produced or extracted at the time the reserve
determination is made. We report resources in accordance with NI 43-101. While
the terms Mineral Resource, Measured Mineral Resource, Indicated Mineral
Resource and Inferred Mineral Resource are recognized and required by
Canadian regulations, they are not defined terms under standards of the
Commission and generally, U.S. companies are not permitted to report resources
in documents filed with the Commission. As such, certain information contained
in this AIF concerning descriptions of mineralization and resources under
Canadian standards is not comparable to similar information made public by U.S.
companies subject to the reporting and disclosure requirements of the
Commission. In addition, an Inferred Mineral Resource has a great amount of
uncertainty as to its existence and as to its economic and legal feasibility,
and you cannot assume that all or any part of an Inferred Mineral Resource will
ever be upgraded to a higher category. You are cautioned not to assume that all
or any part of Measured or Indicated Resources will ever be converted into
Mineral Reserves, and not to assume that all or any part of an Inferred Mineral
Resource exists, or is economically or legally mineable. In addition, the
definitions of Proven Mineral Reserves and Probable Mineral Reserves under
CIM standards differ in certain respects from the standards of the Commission.

2

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CURRENCY AND EXCHANGE RATES

All dollar amounts in this AIF are expressed in United States
dollars, unless otherwise indicated. References in this AIF to dollars or $
are to United States dollars. References in this AIF to C$ are to Canadian
dollars. The following table sets forth the value of the Canadian dollar
expressed in United States dollars on December 31 of each year and the average,
high and low exchange rates during the year indicated based on the noon rate of
exchange as reported by the Bank of Canada:

|Canadian Dollars into United States Dollars | 2016   | 2015   | 2014  
|------------------------------------------- | ------ | ------ | ------
|                                            |        |        |       
|Closing                                     | 0.7448 | 0.7225 | 0.8620
|                                            |        |        |       
|Average                                     | 0.7548 | 0.7820 | 0.8985
|                                            |        |        |       
|High                                        | 0.7972 | 0.8527 | 0.9422
|                                            |        |        |       
|Low                                         | 0.6854 | 0.7148 | 0.8589
|                                            |        |        |       

CORPORATE STRUCTURE

Timmins Gold Corp. was incorporated pursuant to the Business
Corporations Act (British Columbia) on March 17, 2005.

The Companys head office and its registered and records office
are located at Suite 615  700 West Pender Street, Vancouver, British Columbia,
V6C 1G8. The Companys head office in Mexico is located at Blvd. Solidaridad
#335 A, Local 3, Col Las Palmas, Hermosillo, Sonora, Mexico, 83270. The Company
also maintains a field office at the San Francisco Property (as defined under
General Development of the Business  Overview below), near Estacion
Llano, Sonora.

The Company has five subsidiaries: Timmins Goldcorp Mexico,
S.A. de C.V. (Timmins Mexico), Molimentales del Noroeste, S.A. de C.V.
(Molimentales), Newstrike Capital Inc. (Newstrike), Aurea
Mining Inc. (Aurea) and Minera Aurea, S.A. de C.V. (Minera).
All subsidiaries are wholly owned except for nominal shareholders holding one
share in each of the Mexican subsidiaries. Timmins Mexico was incorporated
pursuant to the laws of Mexico on March 23, 2005 and is the entity through which
the Company conducts its Mexican operations, except for its operations in
Guerrero, Mexico. Molimentales was acquired on March 20, 2007, and was
incorporated pursuant to the laws of Mexico for the principal purpose of holding
the mineral concessions and infrastructure that constitute the San Francisco
open pit gold mine. In February 2015 the Company acquired all of the outstanding
shares of Newstrike. Newstrike was incorporated pursuant to the Business
Corporations Act (Alberta) on November 7, 2000 under the name Erez Inc..
The name was changed to MCS Global Corp. on June 20, 2003. On April 21, 2006 MCS
Global Corp. continued to British Columbia under the Business Corporations
Act (British Columbia) and changed its name to Newstrike Capital Inc. on
May 5, 2006. In 2008 Newstrike, acquired all of the outstanding shares of Aurea.
Aurea was incorporated pursuant to the Business Corporations Act (British
Columbia). Aurea holds all but one of the outstanding shares of Minera which was
incorporated pursuant to the laws of Mexico on March 22, 2004. Minera owns the
Ana Paula gold project in Guerrero, Mexico.

3

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GENERAL DEVELOPMENT OF THE BUSINESS

Overview

The Company is a publicly traded gold producer engaged in the
operation, development, exploration and acquisition of resource properties,
primarily in Mexico. The Company owns and operates the San Francisco open pit
gold mine (the San Francisco Mine), which together with the associated
La Chicharra open pit gold mine, and additional exploration claims in and around
the mines (collectively, the San Francisco Property) consists of
approximately 33,146 hectares (ha) of surface area in the state of
Sonora, Mexico. On May 26, 2015, the Company completed the acquisition of
Newstrike, owner of the Ana Paula property in the state of Guerrero, Mexico (the
Ana Paula Project). The Companys goal is to become a Mexican-focused
intermediate gold producer.

4

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Three Year History

Recent Developments

Effective February 1, 2017 Greg McCunn was appointed CEO of the
Company replacing Interim CEO Mark Backens. Mr. McCunn also joined the Companys
board of directors.

2014

On February 11, 2014, the Company closed a bought deal offering
of 18,920,000 common shares of the Company (including 2,250,000 common shares
issued pursuant to the partial exercise of the underwriters over-allotment
option), at a price of C$1.50 per common share for aggregate gross proceeds of
C$28,380,000. The common shares were issued in a public offering in certain
provinces of Canada pursuant to a short form prospectus dated February 4, 2014
filed with certain Canadian securities regulators, and were underwritten by a syndicate of underwriters led by RBC Dominion Securities Inc.
and including BMO Nesbitt Burns Inc., TD Securities Inc., GMP Securities L.P.,
National Bank Financial Inc., Scotia Capital Inc. and PI Financial Corp.

5

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During 2014, the Company carried out an exploration drilling
program adjacent to and below the San Francisco pit and also completed a
regional program. The Company completed approximately 2,100 m in 20 diamond
drill (core) holes evaluating the area immediately south of the current pit. The
drilling was designed to evaluate whether the orogenic nature of the deposit may
provide the potential for the discovery of high grade feeders. Previous drill
results combined with this follow-up work done in 2014 indicated the potential
for high grade structures proximal to and down dip of the existing pit.

The Company also completed approximately 9,000 m of drilling in
73 reverse circulation (RC) holes at various locations throughout the
pit. These holes were designed to provide additional information to support
operations and also to test areas where prior positive drill results warranted
follow-up drilling. Results identified that there was potential for improvements
in grade adjacent to existing operations.

In 2014, the Company also completed a regional drill program on
the North Trend, a cluster of high priority targets 2-8 kilometers (km)
north of the San Francisco Property. The program consisted of approximately
25,000 m in a combination of core, RC and rotary air blast drilling on the North
Trend identified by previous prospecting and exploration. The drill program met
its objective of identifying potential deposits similar to San Francisco or La
Chicharra that could act as a satellite pit to the existing operations.

In December 2014, the Company announced that it had entered
into an Asset Purchase Agreement (the Asset Purchase Agreement) among
Goldgroup Mining Inc. (Goldgroup), Candymin S.A. de C.V., Minera Cardel
S.A. de C.V. (each a subsidiary of Goldgroup) and Molimentales to purchase 100%
of the Caballo Blanco Project, for total consideration of $10,000,000 in cash
and 16,065,000 common shares of the Company. The Company also agreed to pay to
Goldgroup a contingent payment of an additional $5,000,000 in certain
circumstances.

2015

In 2015, the Company drifted into underground veins parallel to
the south wall of the San Francisco pit. The drift was part of a pilot phase
designed to test mining and processing of the underground ore. Previous drilling
had delineated three mineralized veins near the south wall of the San Francisco
pit located within 50 to 100 m of the current south pit wall. The pilot phase
involved drifting 90 m into the south wall of the pit to access the veins
followed by 200 m of lateral drifting to extract a bulk sample of ore. The pilot
phase allowed the Company to test ground conditions, mining costs, grade and
metallurgical recovery of the underground ore. The program was put on hold in Q3
of 2015 due to the depressed gold price. The program provided useful
information. The Company continues to evaluate the underground potential at the
San Francisco Property, however it is not a priority at this time.

On May 26, 2015, the Company completed a plan of arrangement
(Arrangement) with Newstrike, owner of the Ana Paula Project, pursuant
to which the Company acquired all of the issued and outstanding common shares of
Newstrike by way of a court approved plan of arrangement. Under the terms of the
Arrangement, Newstrike shareholders received 0.9 of a common share (Exchange
Ratio) and C$0.0001 in cash for each Newstrike common share (a
Newstrike Share). In addition, each outstanding option to purchase a
Newstrike Share was exchanged for an option to purchase a common share of the
Company, based upon the Exchange Ratio.

In July 2015, the Company commenced a drill program at its Ana
Paula Project designed to confirm the drilling of previous owners and carry out
select infill drilling. The program consisted of 2,000 m in ten core holes. The
results of this drilling were consistent with those from previous drill programs
and helped to increase the confidence of the block model via increased drill
density at the core of the deposit.

6

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On October 6, 2015, the Companys employment agreement with
Bruce Bragagnolo ended. Mr. Bragagnolo resigned as a director of the Company and
was replaced by Mark Backens as Interim CEO.

On November 2, 2015, the Company acquired a process plant and
select auxiliary equipment (Plant) used by Goldcorp Inc.
(Goldcorp) in the operation of its El Sauzal Mine in Chihuahua, Mexico
(Plant Acquisition). The El Sauzal Mine was operational until
December 2014 when Goldcorp began its closure. The Plant was acquired by the
Company for future use at the Ana Paula Project.

The total purchase price of C$8,000,000 consisted of the
following:

| | a. | C$1,000,000 in cash paid on closing;                                                                                                                         
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                              
| | b. | C$3,000,000 which was satisfied by the issuance of 10
      million shares in the capital of the Company at a price of C$0.30 per
      share on closing; and
| |    |                                                                                                                                                              
| | c. | C$4,000,000 in cash payable to Goldcorp one year from
      closing.                                                                                         

The closing of the Plant Acquisition was subject to, among
other things, the completion of a C$6,000,000 investment by Goldcorp in the
Company by way of a non-brokered private placement of 20 million units of the
Company ("Private Placement") at a price of C$0.30 per unit. Each unit
consisted of one share and one half of a Warrant, each whole Warrant being
exercisable for a term of 24 months into a common share of the Company at a
price of C$0.35 per share. The Warrants are subject to an accelerated exercise
period of 10 days if the Company's closing share price meets or exceeds C$0.60
per share for 20 consecutive trading days. As a result of the Plant Acquisition
and Private Placement, Goldcorp, upon closing of both transactions, held
approximately 9.9% of the Companys issued and outstanding common shares on an
undiluted basis. During the fourth quarter of 2015 the demobilization of the El
Sauzal Mine began and approximately 15% of the total demobilization was complete
by December 31, 2015.

On November 2, 2015, the Company announced that, assuming the
gold price retained in its then current range over the next year, open pit
operations would cease at the San Francisco Mine in the second half of 2016, at
which point the mine would be placed on care and maintenance. Heap leach
operations would continue through early 2017. Full operations could then resume
if and when gold prices returned to higher levels. The focus of the 2016
mine-out was to mine the highest margin ounces to maximize free cash flow during
that period.

On December 31, 2015, the Company announced that it had agreed
to an extension to January 31, 2016 of its existing $10,220,000 credit facility
with Sprott Resource Lending Partnership (Sprott) and Morgan Stanley
Capital Group Inc. In consideration of the extension, the Company paid a fee to
Sprott as administrative agent in the amount of $150,000. On January 26, 2016,
the credit facility was amended to replace Morgan Stanley Capital Group Inc.
with Goldcorp (together with Sprott the Lenders) and to extend the
maturity date to June 30, 2016. Interest was payable monthly at the rate of 12%
per annum. In consideration of the re-financing the Company paid a $408,901
bonus to the Lenders. The bonus was payable in cash or shares at the option of
each Lender, in relation to its proportion of the credit facility, on the
earlier of the repayment and June 30, 2016.

2016

In June 2016, the Company repaid its $10,220,000 credit
facility with the Lenders. A cash bonus of $204,450 was paid to Sprott and a
cash bonus of $70,416 was paid and 550,000 common shares were issued to Goldcorp
pursuant to the terms of the credit agreement.

The Company repaid its C$2,000,000 loan from Zebra Holdings and
Investments S.à.r.l. and Lorito Holdings S.à.r.l. in June 2016.

7

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In June 2016 the Company completed the demobilization of the El
Sauzal Mine acquired in September, 2015. The final C$4,000,000 payment to
Goldcorp was made in October, 2016 in accordance with the terms of the
agreement.

Darren Prins resigned as Chief Financial Officer of the Company
in June, 2016.

On July 20, 2016, the Company completed the sale of the Caballo
Blanco Project in Veracruz, Mexico (which the Company originally acquired in
December 2014) to Candelaria Mining Corp. Consideration for the sale was
$12,500,000 cash and the assumption of the $5,000,000 contingent payment.

In August 2016, the Company announced a new mine plan for its
San Francisco Mine which included extended operations into 2023.

In August 2016, the Company announced the commencement of
pre-construction activities at the Ana Paula Project including feasibility work,
infill drilling, metallurgical test-work and environmental baseline and
permitting activities.

The estimated budget for the pre-construction program is
approximately $9,200,000 and includes:

| | (a) | $2,200,000 - Drilling, including soil sampling and
      trenching; 10,000 meters of core drilling for resource definition, 2,000
      meters of core drilling for geotechnical work, and 4,000 meters of reverse
      circulation (RC) drilling for condemnation;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                       
| | (b) | $3,400,000 - Feasibility work program; and,                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                       
| | (c) | $3,600,000 - Environmental studies and construction
      permits.                                                                                                                                                                                                    

On November 30, 2016, the Company closed a bought deal offering
of 36,400,000 units of the Company (the Units), at a price C$0.55 per
Unit for gross proceeds to the Company of approximately C$20,000,000. The Units
were issued in a public offering in all of the provinces of Canada, other than
Québec, pursuant to a short form prospectus dated November 28, 2016. The
financing was underwritten by a syndicate of underwriters led by National Bank
Financial Inc. and RBC Capital Markets and included BMO Nesbitt Burns Inc., PI
Financial Inc., Scotia Capital Inc. and TD Securities Inc. Each Unit consists of
one common share of the Company and one-half of one common share purchase
warrant (each whole common share purchase warrant, (a Warrant). Each
Warrant entitles the holder to acquire one common share at a price of C$0.70 at
any time prior to May 30, 2018. The proceeds of the offering are intended to be
used for exploration and preconstruction activities at the Ana Paula Project and
for working capital purposes.

Gold Sales

The Company delivers gold and silver in doré form to an
international precious metal refinery in North America where the doré may, at
the Companys option, be converted into London Good Delivery metal, or
alternatively, be sold to the refiner. Gold is delivered to the refinery by
armoured, insured carriers. If the metal is returned to the Company, it is sold
to international bullion dealers.

Metal Revenues

In 2016, the Company sold 100,480 gold ounces at an average
realized gold price of $1,234 per ounce, compared to sales of 93,196 gold ounces
at an average realized gold price of $1,172 per ounce during 2015. This
represents an increase of 7.8% in gold ounces sold and an increase of 5.2% in
realized gold price over 2015.

8

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Total metal revenues from mining operations in 2016 were
$123,900,000, compared to $109,200,000 during 2015. Metal revenues were
negatively affected by the short-term pricing program implemented during January
2016. Approximately 13,000 gold ounces were committed for delivery at a gold
price of $1,083 per ounce. These ounces were delivered during the first quarter
of 2016.

Environmental Protection Requirements

Mining, exploration and development activities are subject to
various levels of federal, provincial, state and local laws and regulations
relating to the protection of the environment, including requirements for
closure and reclamation of mining properties.

The Companys total liability for reclamation and closure cost
obligations at December 31, 2016 was $3,148,000 and was calculated using an
effective weighted discount rate of 7.31% . The undiscounted value of this
liability is $4,195,000, calculated using an effective weighted inflation rate
assumption of 3%. Reclamation expenditures for the year ended December 31, 2016
were nil.

Employees

As of December 31, 2016, the Company had sevenfull-time
employees or contractors at its Vancouver, Canada head office and one full-time
employee in Toronto, Canada. In addition, the Company had 12 full-time employees
at its office in Hermosillo, Mexico and 21 full-time employees at the Ana Paula
Project. At its San Francisco Project the Company had 242 employees and 166
skilled mining personnel provided by a mining contractor.

RISK FACTORS

Risk Factors Relating to the Companys
Business

The Companys revenue is derived primarily from the sale of
gold; and therefore, decreases in the price of gold may cause the Companys
revenue to decrease substantially.

The majority of the Companys revenue is derived from the sale
of gold, and therefore fluctuations in the price of gold represent one of the
most significant factors affecting the Companys operations and profitability.
To a lesser extent, the Company also generates revenue from other by-product or
co-product metals, such as silver. The price of gold and other commodities has
fluctuated widely in recent years and is affected by numerous factors beyond the
Companys control, including:

| | levels of supply and demand;                                                                       
|- | ---------------------------------------------------------------------------------------------------
|  |                                                                                                    
| | global or regional consumptive
      patterns;                                                     
|  |                                                                                                    
| | sales by government holders;                                                                       
|  |                                                                                                    
| | metal stock levels maintained by
      producers and others;                                       
|  |                                                                                                    
| | increased production due to new
      mine developments and improved mining and production methods;
|  |                                                                                                    
| | speculative activities;                                                                            
|  |                                                                                                    
| | inventory carrying costs;                                                                          
|  |                                                                                                    
| | availability and costs of metal
      substitutes;                                                 

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| | international economic and
      political conditions;
|- | ------------------------------------------------------
|  |                                                       
| | interest rates;                                       
|  |                                                       
| | currency values; and                                  
|  |                                                       
| | inflation or deflation.                               

The market price of gold and other metals may decline from
current levels. Declining market prices for gold or other metals could
materially adversely affect the Companys operations and profitability. Further,
a decline in the market price of gold may also require the Company to write-down
its mineral reserves or resources, which would have a material adverse effect on
its earnings and profitability.

The Company operates in a highly competitive industry with
many large competitors and it expects that competition may intensify in the
future.

The gold mining industry is intensely competitive and the
Company competes with other companies that have greater financial and human
resources and technical facilities. Competition is primarily for mineral-rich
properties which can be developed and produced economically; the technical
expertise to find, develop, and produce such properties; the labor and equipment
to operate such properties; and the capital to finance the development of such
properties. Many of the Companys competitors not only explore for and mine
precious metals, but conduct refining and marketing operations on a worldwide
basis and have far greater financial and technical resources than the Company.
Such competition may result in the Company being unable to acquire desired
properties, recruit or retain qualified employees or acquire the capital
necessary to fund its operations and develop its properties, which could have an
adverse effect on results.

The Company is subject to particular risks associated with
doing business in Mexico, any of which could result in additional costs to the
Company and cause its operating results to suffer.

The Companys only operating mine and all of its exploration
and development properties are located in Mexico. In the past, Mexico has been
subject to a number of risks and uncertainties, including:

| | terrorism and hostage taking;                                                                                                                                                          
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                        
| | expropriation or nationalization without adequate
      compensation;                                                                                                                  
|  |                                                                                                                                                                                        
| | difficulties enforcing judgments obtained in Canadian or
      United States courts against assets located outside of those
      jurisdictions;                                       
|  |                                                                                                                                                                                        
| | high rates of inflation;                                                                                                                                                               
|  |                                                                                                                                                                                        
| | changes to royalty and tax regimes;                                                                                                                                                    
|  |                                                                                                                                                                                        
| | substantial fluctuations in currency exchange rates;                                                                                                                                   
|  |                                                                                                                                                                                        
| | volatile local political and economic developments;                                                                                                                                    
|  |                                                                                                                                                                                        
| | difficulty understanding and complying with the
      regulatory and legal framework respecting the ownership and maintenance of
      mineral properties, mines and mining operations;
|  |                                                                                                                                                                                        
| | as the price of fuel is set by the federal government the
      fuel component of cost structure is not necessarily determined by market
      forces; and                             

10

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| | difficulty obtaining key
      equipment and components for equipment.
|- | ----------------------------------------------------------------------

Criminal activities in the State of Guerrero, where the
Companys Ana Paula Project is located, or the perception that criminal
activities are likely, may disrupt operations, hamper the ability to hire and
keep qualified personnel and impair access to sources of capital. Risks
associated with conducting business in the region include risks related to
personnel safety and asset security. Risks may include, but are not limited to:
kidnappings of employees and contractors, exposure of employees and contractors
to local crime related activity and disturbances, exposure of employees and
contractors to drug trade activity, and damage or theft including future gold
shipments, if any. These risks could result in serious adverse consequences
including personal injuries or death, property damage or theft, limiting or
disrupting operations, restricting the movement of funds, impairing contractual
rights and causing the Company to shut down operations, all of which may expose
the Company to costs as well as potential liability. Such events could have a
material adverse effect on the Companys cash flows, earnings, results of
operations and financial condition and make it more difficult for the Company to
obtain required financing. Although the Company intends to develop procedures
regarding these risks, due to the unpredictable nature of criminal activities,
there is no assurance that the Companys efforts will effectively mitigate risks
and safeguard personnel and Company property.

Any of these factors, among others, may cause changes in the
existing business or regulatory environment in Mexico with respect to mineral
exploration and mining activities, which could result in additional costs to the
Company and thereby cause its operating results to suffer. In addition, the
enforcement by the Company of its legal rights to exploit its properties may not
be recognized by the government of Mexico or by its court system. These risks,
along with any variation from the current regulatory, economic and political
climate may limit or disrupt the Companys operations, restrict the movement of
funds or result in the deprivation of contractual rights. The Company obtains
insurance coverage to partially mitigate risk; however, there is no assurance
that adequate insurance will be available to cover all risks or if insurance
coverage is available the cost of coverage might be prohibitive.

The Companys business is subject to various governmental
regulations and compliance with these regulations may cause the Company to incur
significant expenses. If the Company fails to maintain compliance with
applicable regulations it may be forced to pay fines, be subject to civil
penalties or be forced to temporarily halt or cease
operations.

The Companys business is subject to a variety of federal,
state, provincial and local laws and regulations in Mexico and Canada,
including:

| | environmental protection;                                                            
|- | -------------------------------------------------------------------------------------
|  |                                                                                      
| | management and use of toxic
      substances and explosives;                         
|  |                                                                                      
| | management of natural resources;                                                     
|  |                                                                                      
| | exploration, development,
      production and post-closure reclamation of mines;    
|  |                                                                                      
| | imports and exports;                                                                 
|  |                                                                                      
| | price controls or production
      restrictions;                                     
|  |                                                                                      
| | taxation;                                                                            
|  |                                                                                      
| | mining royalties;                                                                    
|  |                                                                                      
| | labour standards and occupational
      health and safety, including mine safety; and
|  |                                                                                      
| | historical and cultural
      preservation.                                          

11

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The Companys activities relating to the San Francisco Property
are subject to, among other things, regulations promulgated by SEMARNAT,
Mexicos environmental protection agency; DGM, the Mexican Department of
Economy-Director General of Mines; and the regulations of CONAGUA, the Comisión
Nacional del Agua with respect to water rights. Mexican regulators have broad
authority to shut down or levy fines against facilities that do not comply with
regulations or standards.

The costs associated with compliance with these laws and
regulations are substantial and possible future laws and regulations, changes to
existing laws and regulations or more stringent enforcement of current laws and
regulations by governmental authorities, could cause additional expense, capital
expenditures, restrictions on or suspensions of the Companys operations and
delays in the development of its properties. Moreover, these laws and
regulations may allow governmental authorities and private parties to bring
lawsuits based upon damages to property and injury to persons resulting from the
environmental, health and safety impacts of the Companys past and current
operations, or possibly even those actions of parties from whom the Company
acquired its properties, and could lead to the imposition of substantial fines,
penalties or other civil or criminal sanctions. It is difficult to strictly
comply with all regulations imposed on the Company, and even with the
application of considerable care the Company may inadvertently fail to comply
with certain laws. Such events can lead to fines, penalties, loss, reduction or
expropriation of entitlements, the imposition of additional local or foreign
parties as joint venture partners and other material negative impacts on the
Company.

If the Company is unable to hire, train, deploy and manage
qualified personnel in a timely manner, particularly in Mexico, its ability to
manage and grow its business will be impaired.

Recruiting and retaining qualified personnel is critical to the
Companys success. The Company is dependent on the services of key executives
including our President and Chief Executive Officer and other highly skilled and
experienced executives and personnel focused on managing the Companys
interests. The number of persons skilled in acquisition, exploration and
development of mining properties is limited and competition for such persons is
intense. As the Companys business activity grows, the Company will require
additional key financial, administrative and mining personnel as well as
additional operations staff, particularly in Mexico. The Company may not be
successful in attracting, training and retaining qualified personnel as
competition for persons with these skill sets increases. If the Company is not
successful in attracting, training and retaining qualified personnel, the
efficiency of its operations could be impaired, which could have an adverse
impact on its future cash flows, earnings, results of operations and financial
condition.

It may be particularly difficult to find or hire qualified
personnel in the mining industry who are situated in Mexico, to obtain all of
the necessary services or expertise in Mexico, or to conduct operations on the
Companys projects at reasonable rates. If qualified personnel cannot be
obtained in Mexico, the Company may need to obtain those services outside of
Mexico, which will require work permits and compliance with applicable laws and
could result in delays and higher costs to the Company.

The Company may be unable to obtain or renew required
government permits, or may only be able to do so at significant expense, which
may harm its operating results.

In the ordinary course of business, the Company is required to
obtain and renew governmental permits and licenses for the operation and
expansion of existing operations or for the development, construction and
commencement of new operations. Obtaining or renewing the necessary governmental
permits and licenses is a complex and time-consuming process, often involving
public hearings and costly undertakings on the Companys part.

The duration and success of the Companys efforts to obtain and
renew permits and licenses are contingent upon many variables not within its
control, including the interpretation of applicable requirements implemented by
the permitting authority. The Company may not be able to obtain or renew permits
or licenses that are necessary to its operations, or the cost to obtain or renew
permits or licenses may exceed what the Company believes it can recover from a
given property once in production. Any unexpected delays or costs associated with the permitting and licensing process, including
challenges to the terms of such permits or licenses, whether successful or
unsuccessful, could delay the development or impede the operation of a mine,
which could adversely affect the Companys operations and profitability.

12

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For the Company to carry out its mining activities, its
exploitation licenses must be kept current. There is no guarantee that the
Companys exploitation licenses will be extended or that new exploitation
licenses will be granted. In addition, such exploitation licenses could be
changed and applications to renew existing licenses may not be approved. The
Company may also be required to contribute to the cost of providing the required
infrastructure to facilitate the development of its properties. The Company will
also be required to obtain and comply with permits and licenses that may contain
specific conditions concerning operating procedures, water use, waste disposal,
spills, environmental studies, abandonment and restoration plans and financial
assurances. The Company may not be able to comply with any such conditions.

Failure to discover new reserves, maintain or enhance
existing reserves or develop new operations could negatively affect the
Companys future results and financial condition.

The long-term operation of the Companys business and its
profitability is dependent, in part, on the cost and success of its exploration
and development programs. Many of the Companys properties are in the
exploration and development stages and only the San Francisco Property has
mineralization considered a mineral reserve pursuant to CIM standards. Mineral
exploration and development involves a high degree of risk and few properties
that are explored are ultimately developed into producing mines. The Companys
mineral exploration and development programs may not result in any discoveries
of bodies of commercially viable mineralization, and even if commercial
quantities of mineralization are discovered, the Company may not be able to
bring the mineral property into commercial production. Development of the
Companys mineral properties will follow only upon obtaining satisfactory
exploration results. Discovery of mineral deposits is dependent upon a number of
factors, not the least of which is the technical skill of the exploration
personnel involved. The commercial viability of a mineral deposit once
discovered is also dependent upon a number of factors, some of which are the
particular attributes of the deposit (such as size, grade and proximity to
infrastructure), metal prices, permitting, anticipated capital and operating
costs and government regulations, including regulations relating to royalties,
allowable production, importing and exporting of minerals and environmental
protection. Most of the above factors are beyond the Companys control. As a
result, the Companys acquisition, exploration and development programs may not
yield new reserves to replace or expand current reserves. Unsuccessful
exploration or development programs could have a material adverse affect on the
Companys operations and profitability.

In addition, the Companys ability to sustain its present
levels of gold production is dependent upon the identification of additional
reserves at the Mine. If the Company is unable to develop new ore bodies, it may
not be able to sustain or increase present production levels. Reduced production
would have a material and adverse affect on future cash flows, results of
operations and financial condition.

The Company is subject to various operating risks and
hazards associated with its exploration and mining operations, any of which
could cause it to incur substantial expenses or affect the economic feasibility
of its projects. The Company may be unable to insure against such risks or to
insure against such risks at a reasonable cost.

The ownership, operation and development of a mine or mineral
property involves many risks which even a combination of experience, knowledge
and careful evaluation may not be able to overcome. These risks include:

- environmental hazards;
- industrial accidents, explosions and third party accidents;
- the encountering of unusual or unexpected geological formations;

13

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- ground falls, rock bursts, cave-ins and seismic activity including
  earthquakes;
- fires and flooding;
- metallurgical and other processing problems, including the availability and
  costs of processing and refining facilities;
- availability of economic sources of power;
- variations in grade, deposit size, density and other geological problems;
- unanticipated adverse geotechnical conditions;
- incorrect data on which engineering assumptions are made;
- mechanical equipment performance problems;
- unavailability or significant changes in the cost of materials and
  equipment including fuel;
- labour force or local community disruptions;
- title claims, including aboriginal land claims;
- unanticipated transportation costs; and
- periodic interruptions due to inclement or hazardous weather conditions.

These occurrences could result in:

- environmental damage and liabilities;
- work stoppages, delayed production and resultant losses;
- increased production costs;
- damage to or destruction of mineral properties or production facilities and
  resultant losses;
- asset write downs;
- monetary losses;
- claims for compensation of loss of life or damages in connection with
  accidents that occur on company property, and punitive awards in connection
  with those claims; and
- other liabilities.

These factors, among others, may cause anticipated capital and
operating costs, production and economic returns, or other estimates to differ
significantly from the Companys actual capital and operating costs. It is not
always possible to fully insure against such risks and the Company may decide
not to insure against such risks due to high premiums or for other reasons.
Should any such uninsured liabilities arise, they could adversely impact the
Companys profitability.

The Companys operations are dependent on the accessibility
and reliability of existing local infrastructure and its exploration or
exploitation activities are dependent upon adequate infrastructure being
available in the future.

Mining, processing, development and exploration activities
depend, to some degree, on adequate infrastructure. Reliable roads, bridges,
power sources and water supply are important determinants, which affect capital
and operating costs. The lack of availability on acceptable terms or the delay
in the availability of any one or more of these items could prevent or delay
exploitation or development of the Companys projects. If adequate
infrastructure is not available in a timely manner, the exploitation or
development of the Companys projects may not be commenced or completed on a timely basis, if at all.
In addition, the resulting operations may not achieve the anticipated production
volume, or the construction costs and ongoing operating costs associated with
the exploitation and/or development of the Companys advanced projects will be
higher than anticipated. Unusual or infrequent weather phenomena, sabotage,
government or other interference in the maintenance or provision of such
infrastructure could adversely affect the Companys operations and
profitability.

14

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The Company is subject to extensive environmental
regulation, and any failure of compliance could result in fines or government
sanctions, civil liabilities and damage to its reputation.

All phases of the Companys operations are subject to
environmental laws and regulations. These laws and regulations set certain
standards regarding health and environmental quality, and provide for penalties
and other liabilities for violations, as well as obligations to rehabilitate
current and former properties in certain circumstances. Furthermore, operating
permits could be temporarily withdrawn where there is evidence of serious
breaches of health and safety, or even permanently, in the case of extreme
breaches. Significant liabilities could be imposed on the Company for damages,
clean-up costs or penalties in the event of certain discharges into the
environment, environmental damage caused by previous owners of acquired
properties or noncompliance with environmental laws. In addition, environmental
legislation in Mexico is generally evolving in a manner which will require
stricter standards and will be subject to increased enforcement, fines and
penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and
their officers, directors and employees. Such changes in environmental
regulation, if any, may adversely impact the Companys operations and
profitability.

Land reclamation requirements may be burdensome.

Land reclamation requirements are generally imposed on
companies with mining operations in order to minimize the long-term effects of
land disturbance, and the Company is subject to such requirements at its mineral
properties. Reclamation obligations include requirements to:

- control dispersion of potentially harmful effluents; and
- reasonably re-establish pre-disturbance land forms and vegetation.

To carry out reclamation obligations arising from exploration
and development activities, the Company must allocate financial resources that
might otherwise be spent on further exploration and development programs. If the
Company is required to carry out unanticipated reclamation work, its financial
position could be adversely affected.

The Companys production and exploration depend on its
ownership of, or control over, the properties on which it operates, and
maintaining existing property rights or obtaining new rights is a highly
competitive and costly process.

The Companys ability to carry out successful mining activities
will depend in part on its ability to obtain tenure to its properties to the
satisfaction of international lending institutions. The issue of any such
licenses must be in accordance with Mexican law and relevant mining legislation.
The validity of mining or exploration titles or claims or rights, which
constitute most of the Companys property holdings, can be uncertain and may be
contested. The Company has used reasonable commercial efforts to investigate its
title or claims to its various properties and, to its knowledge, except where it
has otherwise identified, those titles or claims to material properties are in
good standing. However, the Company has not conducted surveys of all the claims
in which it holds direct or indirect interests and therefore, the precise area
and location of such claims may be in doubt. The Companys properties may also
be subject to prior unregistered liens, agreements or transfers, native land
claims or undetected title defects. The Mexican government may revoke or
significantly alter the conditions of the applicable exploration and mining
titles or claims, and such exploration and mining titles or claims may be
challenged or impugned by third parties, which could materially impact the
Companys rights to its various properties or interests. Title insurance is
generally not available for mining properties, and the Companys ability to ensure that it has obtained secure claims to
individual mineral properties or mining concessions may be severely
constrained.

15

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Mines have limited lives and, as a result, the Company
continually seeks to replace and expand reserves through the acquisition of new
properties. In addition, there is a limited supply of desirable mineral lands
available in areas where the Company would consider conducting exploration,
development or production activities. Because the Company faces strong
competition for new properties from other mining companies, some of which have
greater financial resources than it does, the Company may be unable to acquire
attractive new mining properties on terms that it considers acceptable.
Competition in the mining business for limited sources of capital could
adversely impact the Companys ability to acquire and develop suitable mines,
developmental projects or properties having significant exploration potential.
As a result, the Companys acquisition, exploration and development programs may
not yield new mineral reserves to replace or expand current mineral
reserves.

The process of estimating mineral reserves and resources is
subject to inherent uncertainties and reported reserves and resources may not
accurately reflect the economic viability of the Companys properties.

There is a degree of uncertainty attributable to the
calculation of mineral reserves and mineral resources. Until mineral reserves or
mineral resources are actually mined and processed, the quantity of mineral and
reserve grades must be considered as estimates only. Levels of metals indicated
by such mineral reserves or mineral resources may not be produced, and the
Company may not receive the price assumed in determining its reserves. These
estimates are expressions of judgment based on knowledge, mining experience,
analysis of drilling results and industry practices. Valid estimates made at a
given time may significantly change when new information becomes available.
While the Company believes that its reserve and resource estimates are well
established and reflect managements best estimates, by their nature reserve and
resource estimates are imprecise and depend, to a certain extent, upon analysis
of drilling results and statistical inferences that may ultimately prove
unreliable.

Furthermore, fluctuations in the market price of metals, as
well as increased capital or production costs or reduced recovery rates may
render ore reserves uneconomic and may ultimately result in a reduction of
reserves. The extent to which resources may ultimately be reclassified as proven
or probable reserves is dependent upon the demonstration of their profitable
recovery. The evaluation of reserves or resources is always influenced by
economic and technological factors, which may change over time. Resource
estimates may not ultimately be reclassified as proven or probable reserves. If
the Companys reserve or resource figures are inaccurate or are reduced in the
future, this could have an adverse affect on its future cash flows, earnings,
results of operations and financial condition.

In estimating its reserves and resources, the Company relies on
laboratory-based recovery models to project estimated recoveries by ore type at
optimal crush sizes. Actual gold recoveries in a commercial heap leach operation
may exceed or fall short of projected laboratory test results. In addition, the
grade of mineralization ultimately mined may differ from the one indicated by
the drilling results and the difference may be material. Production can be
affected by such factors as permitting regulations and requirements, weather,
environmental factors, unforeseen technical difficulties, unusual or unexpected
geological formations, inaccurate or incorrect geological, metallurgical or
engineering work and work interruptions, among other things. Short term factors,
such as the need for an orderly development of deposits or the processing of new
or different grades, may have an adverse effect on mining operations or the
results of those operations. Minerals recovered in small scale laboratory tests
may not be duplicated in large scale tests under on-site conditions or in
production-scale operations. Material changes in proven and probable reserves or
resources, grades, waste-to-ore ratios or recovery rates may affect the economic
viability of projects. The estimated proven and probable reserves and resources
the Company discloses should not be interpreted as assurances of mine life or of
the profitability of future operations.

The Company has engaged expert independent technical
consultants to advise it on, among other things, mineral reserves and resources
and project engineering at the Mine. The Company believes these experts are competent and that they have and will carry out their work in
accordance with internationally recognized industry standards. If, however, the
work conducted and to be conducted by these experts is ultimately found to be
incorrect or inadequate in any material respect, the Company may experience
delays and increased costs.

16

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The process of estimating future mine production and related
costs are subject to inherent uncertainties and actual results may differ
materially from such estimates.

The Company periodically prepares estimates of future mine
production and future production costs for the Mine. There can be no assurance
that the Company will achieve these production estimates. These production
estimates are dependent on, among other things, the accuracy of underlying
mineral reserve estimates; the accuracy of assumptions regarding ore grades and
recovery rates, ground conditions and physical characteristics of ores;
equipment and mechanical availability; labour availability; facilities and
infrastructure; having sufficient materials and supplies on hand; and the
accuracy of estimated rates and costs of mining and processing. Failure to
achieve production estimates could have a material and adverse effect on any or
all of the Companys future cash flows, results of operations and financial
condition.

The Companys actual production and costs may vary from its
estimates for a variety of reasons, including actual ore mined varying from
estimates of grade, tonnage, dilution and metallurgical and other
characteristics; short-term operating factors, such as the need for sequential
development of ore bodies and the processing of new or different ore grades from
those planned; and the risks and hazards associated with mining described
throughout these Risk Factors Relating to the Companys Business. In addition,
metal recoveries in small scale laboratory tests may not be duplicated in larger
scale tests under on-site conditions or during production, and known and
experienced recoveries may not continue. Costs of production may also be
affected by changing stripping ratios, ore grade metallurgy, labour costs, costs
of supplies and services (such as, for example, fuel and power), general
inflationary pressures and currency exchange rates. Failure to achieve cost
estimates could have a material and adverse effect on any or all of the
Companys future cash flows, results of operations and financial condition.

The expansion and development of the Companys mining
properties is uncertain and subject to risk.

The development of the Companys properties that are found to
be economically feasible will require the expansion and improvement of existing
mining operations, as well as the construction and operation of additional
mines, processing plants and related infrastructure. As a result, the Company is
subject to all of the risks associated with establishing and expanding mining
operations and business enterprises including:

- the timing and cost, which will be considerable, of the construction of
  additional mining and processing facilities;
- the availability and costs of skilled labour, power, water, transportation
  and mining equipment;
- the availability and cost of appropriate smelting and/or refining
  arrangements;
- the need to obtain necessary environmental and other governmental
  approvals, permits and licenses, and the timing of those approvals, permits
  and licenses; and
- the availability of funds to finance construction and development
  activities.

It is not unusual in new mining operations to experience
unexpected problems and delays during the construction and development of a
mine. In addition, delays in the commencement or expansion of mineral production
often occur and, once commenced or expanded, the production of a mine may not
meet expectations or estimates set forth in feasibility or other studies.
Accordingly, the Company may not be able to successfully develop and expand
mining operations or profitably produce precious metals at its exploration or
development-stage properties.

17

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The Companys results may be negatively affected by currency
exchange rate fluctuations.

Fluctuations in currency exchange rates, particularly the
weakening or strengthening of the U.S. dollar (being the currency in which the
Companys products are sold) against the Mexican peso (being the currency in
which the majority of the Companys capital and operating costs are incurred),
could have a significant effect on the Companys results of operations. The
Company does not currently have a formal policy of actively managing such
currency fluctuations, and therefore, such fluctuations may have a significant
effect on its financial results in any given period.

Some of the Companys directors and officers have interests
that may be different than the Companys interests.

Some of the Companys directors and officers are engaged and
will continue to be engaged in the search for additional business opportunities
on behalf of other companies, and situations may arise where these directors and
officers will be in direct competition with the Company. Conflicts, if any, will
be dealt with in accordance with Company policies and the relevant provisions of
the Business Corporations Act (British Columbia).

The Companys inability to access additional capital could
have a negative impact on its growth strategy.

The Company has limited financial resources and operating
income, and adequate funding may not be available to further its exploration and
development projects. The Company may need to raise additional capital to fund
its operations, and such capital may not be available on commercially acceptable
terms, if at all. If the Company is unable to obtain additional capital on
commercially acceptable terms, the Company may be forced to reduce or curtail
its operations or its anticipated exploration activities. Although the Company
has been successful in the past in financing its activities through the sale of
equity securities or incurring debt, it may not be able to obtain sufficient
financing in the future. The Companys ability to arrange additional financing
in the future will depend, in part, on the prevailing capital market conditions
as well as the business performance of the Company.

The Company may experience problems integrating new
acquisitions and other problems associated with strategic transactions.

Strategic transactions, including acquisitions or dispositions
of assets, could involve numerous risks, including:

- potential disruption of the Companys ongoing business and distraction of
  management;
- difficulty integrating acquired businesses or segregating assets to be
  disposed of;
- exposure to unknown or contingent or other liabilities, including
  litigation arising in connection with the acquisition, disposition or against
  any businesses the Company may acquire, and
- changing the Companys business profile in ways that could have unintended
  consequences.

The Companys success at completing acquisitions will depend on
a number of factors, including, but not limited to, identifying acquisitions
that fit its strategy, negotiating acceptable terms with the seller of the
business or property to be acquired and obtaining approval from regulatory
authorities in the jurisdictions of the business or property to be acquired. Any
positive effect on the Companys results from its acquisitions, including the
acquisition of Newstrike, will depend on a variety of factors, including, but
not limited to, assimilating the operations of an acquired business or property
in a timely and efficient manner, the ability to achieve identified and
anticipated operating and financial synergies, the decline in value of acquired
properties, companies or securities, maintaining the Companys financial and
strategic focus while integrating the acquired business or property, managing
the potential loss of the Companys key employees or key employees of any
business acquired, implementing uniform standards, controls, procedures and
policies at the acquired business, as appropriate, and conducting and managing
operations in a new operating environment. In addition, the financing of any
significant acquisition may result in changes in its capital structure,
including the incurrence of additional indebtedness. Conversely, any material disposition
could reduce its indebtedness or require the amendment or refinancing of a
portion of its outstanding indebtedness. The Company may not be successful in
addressing these risks or any other problems encountered in connection with any
strategic transactions.

18

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The Company may from time to time become subject to legal
proceedings.

The Company may from time to time, become involved in various
claims, legal proceedings, regulatory investigations, and complaints arising in
the ordinary course of business. The Company cannot reasonably predict the
likelihood or outcome of these actions, should they arise. If it is unable to
resolve any such disputes favorably, it may have a material adverse effect on
the Companys financial performance, cash flow and results of operations. In
particular, see Legal Proceedings and Regulatory Actions.

The Company faces risks and uncertainties related to the
repatriation of funds from its foreign subsidiaries.

The Company expects to generate cash flow and profits at its
foreign subsidiaries, and may need to repatriate funds from those subsidiaries
to fulfill its business plans, in particular in relation to ongoing expenditures
at its exploration and development assets. The Company may not be able to
repatriate funds, or may incur tax payments or other costs when doing so, as a
result of a change in applicable law or tax requirements at local subsidiary
levels or at the parent level, which costs could be substantial.

Risk Factors Relating to the Companys Common
Shares

The Company does not intend to pay dividends for the
foreseeable future.

The Company has never declared or paid any cash dividends on
the Companys common shares and does not intend to pay any cash dividends in the
foreseeable future. The Company anticipates that it will retain all of its
future earnings for use in the development of its business and for general
corporate purposes. Any determination to pay dividends in the future will be at
the discretion of the Companys board of directors. In addition, from time to
time the Company may enter into agreements that restrict its ability to pay
dividends.

The price of the Companys common shares may be
volatile.

The trading price of the Companys common shares has been and
may continue to be subject to material fluctuations and may increase or decrease
in response to a number of events and factors, including:

- changes in the market price of the commodities the Company sells and
  purchases, particularly gold and silver;
- current events affecting the economic situation and exchange rates in
  Canada, the United States, Mexico and internationally;
- changes in financial estimates and recommendations by securities analysts;
- acquisitions and financings;
- quarterly variations in operating results;
- the operating and share price performance of other companies that investors
  may deem comparable;
- the issuance of additional equity securities by the Company or the
  perception that such issuance may occur; and
- purchases or sales of blocks of the Companys common shares.

Part of this volatility may also be attributable to the current
state of the stock market, in which wide price swings are common. This
volatility may adversely affect the prices of the Companys common shares regardless of the Companys operating performance and could
cause the market price of the Companys common shares to decline.

19

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If securities analysts or industry analysts downgrade the
Companys common shares, publish negative research or reports, or do not publish
reports about the Companys business, the price of and trading volume of the
Companys common shares could decline.

The trading market for the Companys common shares will be
influenced by the research and reports that industry or securities analysts
publish about the Company, its business and its market. If one or more analysts
adversely change their recommendation regarding the Companys common shares, the
price of the Companys common shares would likely decline. If one or more
analysts cease covering or fail to regularly publish reports about the Company,
it could lose visibility in the financial markets, which in turn could cause its
share price or trading volume to decline. In addition, the Companys common
share price could be adversely affected by negative stories written or broadcast
about it.

Holders of the Companys common shares may experience
dilution when outstanding options or warrants are exercised, or as a result of
additional securities offerings which may reduce the Companys earnings per
share.

There are a number of outstanding options and warrants pursuant
to which additional common shares of the Company may be issued in the future.
Exercise of such options or warrants may result in dilution to the Company
shareholders. In addition, if the Company raises additional funds to finance its
activities, through the sale of equity securities, shareholders may have their
investment diluted. If the Company issues additional common shares,
shareholders percentage ownership of the Company will decrease and shareholders
may experience dilution in the Companys earnings per share. Moreover, as the
Companys intention to issue any additional equity securities becomes publicly
known, the common share price may be materially and adversely affected.

MINERAL PROPERTIES

San Francisco Property

The following information has been derived from the NI 43-101
technical report entitled NI 43-101 F1 Technical Report Updated Resources
and Reserves and Mine Plan for the San Francisco Gold Project, Sonora,
Mexico dated November 25, 2016 with an effective date of July 1, 2016 (the
San Francisco Report) prepared by Micon International Limited of
Toronto, Ontario (Micon). The Qualified Persons responsible for the San
Francisco Report are William J. Lewis, B.Sc., P.Geo., Ing. Alan J. San Martin,
MAusIMM(CP), Mani Verma, P.Eng. and Richard M. Gowans, B.Sc., P.Eng. of Micon
who have approved of the summary of the San Francisco Report provided below. The
following summary is extracted from the San Francisco Report, which is
incorporated by reference in this AIF and is available on the Companys website
(www.timminsgold.com) and on Companys profile
on SEDAR (www.sedar.com).

General

The Company has retained Micon to conduct an audit of its
resource and reserve estimates and prepare an update of its February, 2016
Technical Report on the San Francisco Project in the state of Sonora, Mexico.
The purpose of the San Francisco Report is to support disclosure of the results
of Micons resource and reserve audit and the updated mining plan, compliant
with National Instrument NI 43-101 (NI 43-101) and Canadian National Instrument
(NI) 43-101.

Micons most recent Technical Report for the Company was
entitled NI 43-101 F1 Technical Report, Updated Resources and Reserves and Mine
Plan for the San Francisco Gold Mine, Sonora, Mexico, dated February 29, 2016.
That Technical Report was filed by the Company on the System for Electronic
Document Analysis and Retrieval (SEDAR, www.sedar.com) which is an electronic
filing system developed for the Canadian Securities Administrators (CSA). Prior to this current Technical
Report, Micon has written eight prior reports on the San Francisco Project for
the Company since 2005.

20

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Micon does not have nor has it previously had any material
interest in the Company or related entities. The relationship with the Company
is solely a professional association between the client and the independent
consultant. The San Francisco Report is prepared in return for fees based upon
agreed commercial rates and the payment of these fees is in no way contingent on
the results of the San Francisco Report.

The San Francisco Report includes technical information which
requires subsequent calculations or estimates to derive sub-totals, totals and
weighted averages. Such calculations or estimations inherently involve a degree
of rounding and consequently introduce a margin of error. Where these occur,
Micon does not consider them to be material.

The San Francisco Report is intended to be used by the Company
subject to the terms and conditions of its agreement with Micon. That agreement
permits the Company to file the San Francisco Report as a Technical Report with
the CSA pursuant to provincial securities legislation or with the SEC in the
United States. Except for the purposes legislated under provincial securities
laws, any other use of the San Francisco Report, by any third party, is at that
partys sole risk.

1.1Property Description and Location

The San Francisco Property is situated in the north central
portion of the state of Sonora, Mexico, approximately 150 kilometres (km) north
of the state capital, Hermosillo. In the San Francisco Report, the term San
Francisco Project refers to the area within the exploitation or mining
concessions controlled by the Company, while the term San Francisco Property
refers to the entire land package (mineral exploitation and exploration
concessions) under the Companys control.

The San Francisco Project is comprised of two previously mined
open pits (San Francisco and La Chicharra), together with heap leach processing
facilities and associated infrastructure located close to the San Francisco pit.

The Company advises that it holds the San Francisco Project,
which consists of 13 mining concessions, through its wholly-owned Mexican
subsidiary Timmins Mexico. All concessions are contiguous and each varies in
size for a total property area of 33,667.72 hectares (ha). In late 2005, the
original Timmins II concession was subdivided into two concessions (Timmins II
Fraccion Sur and Pima), as part of separate exploration strategies for the
original Timmins II concession. All concessions are subject to a bi-annual fee
and the filing of reports in May of each year covering the work accomplished on
the property between January and December of the preceding year. The tax rates
are estimated in US dollars based on the rates published in the Diario Oficial
de la Federacion (DOF) as of January 28, 2016.

The Company reduced the size of the primary mineral concessions
in 2015 by eliminating those areas deemed to have very little exploration
potential, while maintaining the integrity of the overall concessions. It has
retained approximately 19,713 ha, which it believes contain the most prospective
geology and mineralized targets upon which to base further exploration once
metal prices have recovered. The reduction in the size of the concessions has
also resulted in a reduction in the bi-annual fees for the San Francisco
Project.

The Company advises that it acquired the first seven
concessions covering the San Francisco Mine through its purchase of Molimentales
in April, 2007.

In 2006, the Company signed a temporary occupancy agreement
with an agrarian community (Ejido) in Mexico called Los Chinos, whereby the
Comapny was granted access privileges to 674 ha, the use of the Ejidos roads,
as well as being able to perform all exploration work on the area covered by the
agreement. The agreement is for a period of 10 years with an option to extend
the access beyond the 10-year period.

21

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During August and September, 2009, Molimentales acquired the
800 ha of surface land on which the San Francisco Mine is located, by means of
five purchase agreements covering all of the Ejido Jesus Garcia Heroe de
Nacozaris five former parcels that together form the 800 ha.

Other parties control two mineral concessions which are
contained within the area of the mineral concessions owned by the Company but
neither of these concessions impacts the main area of the San Francisco Project.

On February 23, 2011, the Company announced that it had staked
an additional 95,000 ha of claims along the highly prospective Sonora-Mojave Megashear structural province in northern Sonora. The Company continued to stake
additional concessions since February, 2011 and the total additional regional
mineral concessions amounted to approximately 152,279.6 ha in 2013.

On July 6, 2011, Molimentales acquired (through a straight
purchase) a 10-ha mineral concession called La Mexicana. This purchase agreement
has been filed with the Mexican Federal Mining Registrar. Prior to this
purchase, the La Mexicana mineral concession was the last area in the
metamorphic package that did not belong to the Company.

Molimentales has completed the process (before the Mexican
Federal Agrarian Secretariat) of converting the 674 hectares contracted from the
Los Chinos Ejido into private property, and formalizing the purchase of the 674
ha, before a notary public, according to the Sonora State Civil Code. The 674 ha
was purchased by Molimentales, in 2011, and the final public instrument
documenting the purchase was issued on February 9, 2015.

Since completing the purchase of the 674 ha from the Los Chinos
Ejido, Molimentales has not undertaken any further land purchases and believes
no further purchases are necessary at this time.

The Mexican mining laws were changed in 2005 and, as a result,
all mineral concessions granted by the Dirección General de Minas (DGM) became
mining concessions. There are no longer separate specifications for a mineral
exploration or exploitation concession. A second change to the mining laws was
that all mining concessions are granted for 50 years, provided that the
concessions remain in good standing. As part of this change, all former
exploration concessions which were previously granted for 6 years became
eligible for the 50-year term.

For any concession to remain valid, the bi-annual fees must be
paid and a report has to be filed during the month of May of each year which
covers the work conducted during the preceding year. Concessions are extendable
provided that the application is made within the five-year period prior to the
expiry of the concession and the bi-annual fee and work requirements are in good
standing. The bi-annual fee payable to the Mexican government for the Company to
hold the group of contiguous mining concessions for the San Francisco operations
is $536,179. The bi-annual fee for the Company to hold the group of contiguous
mining concessions which comprise the regional mineral property is $128,648.

Accessibility, Climate, Physiography, Local Resources and
Infrastructure

The San Francisco Project is located in the Arizona-Sonora
desert in the northern portion of the Mexican state of Sonora, 2 km west of the
town of Estación Llano, approximately 150 km north of Hermosillo and 120 km
south of the United States/Mexico border city of Nogales along Highway 15 (Pan
American highway). The closest accommodations are in Santa Ana, a small city
located 21 km to the north on Highway 15.

The climate at the San Francisco Project site ranges from
semi-arid to arid. The average ambient temperature is 21°C, with minimum and
maximum temperatures of -5oC and 50oC, respectively. The average annual rainfall
for the area is 330 mm with an upper extreme of 880 mm. The desert vegetation
surrounding the San Francisco mine is composed of low lying scrub, thickets and
various types of cacti, with the vegetation type classified as Sarrocaulus
Thicket.

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Physiographically, the San Francisco Property is situated
within the southern Basin and Range Province, characterized by elongate,
northwest-trending ranges separated by wide alluvial valleys. The San Francisco
Mine is located in a relatively flat area of the desert with the topography
ranging between 700 and 750 m above sea level.

History

After conducting exploration on the San Francisco Project
between 1983 and 1992, Compania Fresnillo S.A. de C.V. sold the San Francisco
Property in 1992 to Geomaque Explorations Ltd. (Geomaque). After
conducting further exploration, Geomaque decided to bring the San Francisco
Project into production in 1995. Due to economic conditions, mining ceased and
the operation entered into the leach-only mode in November, 2000. In May, 2002,
the last gold pour was conducted; the plant was mothballed, and clean-up
activities at the mine site began.

In 2003, Geomaque sought and received shareholder approval to
amalgamate the corporation under a new Canadian company, Defiance Mining
Corporation (Defiance). On November 24, 2003, Defiance sold its Mexican
subsidiaries (Geomaque de Mexico and Mina San Francisco), which held the San
Francisco Mine, to the Astiazaran family of Sonora and their private company.

Since June, 2006, the Astiazaran family and their company
Desarrollos Prodesa S.A. de C.V. have been extracting sand and gravel
intermittently from both the waste dumps and the leach pads for use in highway
construction as well as other construction projects.

The Company acquired an option to earn an interest in the San
Francisco Property in early 2005, whereupon they conducted a review of the
available data and started a reverse circulation drilling program in August and
September, 2005. This was followed by a second drilling program comprised of
both reverse circulation and diamond drilling in 2006, based on the results of
the 2005 drilling program.

Geological Setting and Mineralization

The San Francisco Project is a gold occurrence with trace to
small amounts of other metallic minerals. The gold occurs in granitic gneiss and
the deposit contains principally free gold and occasionally electrum. The
mineralogy, the possibility of associated tourmaline, the style of
mineralization and fluid inclusion studies suggest that the San Francisco
deposits may be of mesothermal origin.

The San Francisco deposits are roughly tabular with multiple
phases of gold mineralization. The deposits strike 60° to 65° west, dip to the
northeast, range in thickness from 4 to 50 m, extend over 1,500 m along strike
and are open ended. Another deposit, the La Chicharra zone, was mined by
Geomaque, as a separate pit.

Exploration Programs

*1.1.1****Timmins Exploration Programs*

From 2007 to 2009, concurrent with the feasibility study, which
focused on re-starting the mining operations, the Company conducted exploration
comprised mainly of in-fill and confirmation drilling in and around of the San
Francisco and La Chicharra pits. The drilling results as of the end of 2009
indicated that the mineralization extended both along strike and down dip of the
known deposit, a situation which led to the decision to accelerate the drilling
in the first 6 months of 2010. The results from the 2010 drilling, when combined
with the previous results, led to the Company updating the resource and reserve
estimations, as well as its mine plan.

Between July, 2010 and June, 2011, the Company conducted an
intensive exploration drilling program which included deeper drilling to explore
the mineralization at depth, both in and around the La Chicharra and San
Francisco pits. The results of this drilling indicated that the mineralization
is located in parallel mineralized bodies both along strike and at depth. The Company believes
that the conclusion that the mineralization is located in parallel bodies may
lead to further increases in the mineral resources.

23

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From July, 2011 to June, 2013, 1,464 reverse circulation
(RC) and core holes were drilled for a total of 327,853 metres (m).
Most of the drilling was undertaken in and around the San Francisco pit and the
La Chicharra pit. The RC drilling included 13,219 m in 62 holes of condemnation
drilling and 3,842 m in 20 holes for water monitoring. A further 8 RC holes
totalling 107 m were drilled on the low grade stockpile for grade control.

The drilling conducted within and around the San Francisco and
La Chicharra pits comprised more than 92.8% of the drilling undertaken between
July, 2011 and June, 2013. Both the RC and core drilling in these areas has
identified the extent of the mineralization along strike, as well as the extent
down-dip, which remains open. The drilling surrounding the San Francisco and La
Chicharra pits has been completed, except for defining the extent of the
mineralization to the southeast of the San Francisco pit which remains open
along strike and at depth. In 2013, the Company had completed its planned
exploration drilling programs. Additional in-fill drilling is necessary to
confirm the extension in the up-dip direction from the newly discovered mineral
zones identified at the northern extremity of the pit but it was still undecided
if these areas were going to be exploited due to the lower gold price.

Since 2013, the Company has reduced its exploration
significantly as a result of low gold prices. As a result, the Company has only
conducted a small number of exploration drilling programs comprised of in-fill
drilling in the San Francisco pit to cover gaps in drilling on the lower
benches, exploration drilling to outline preliminary underground resources
beneath the south wall of the pit and exploration drilling to the north of the
San Francisco pit to potentially identify a secondary deposit which would supply
feed to the heap leach pad and processing facilities at the San Francisco
Mine.

The in-fill drilling in the San Francisco pit on the lower
benches was successful in allowing a better understanding of the mineralization
being extracted in these areas. The drilling in the south wall, along with
preliminary underground mining, has helped to identify the extent and mining
potential for this areas but further drilling will be necessary to fully
identify the extent of the mineralized lenses in this area. The exploration
drilling to the north produced mixed results with areas of good mineralization
identified but the extent of the mineralization is still not fully understood
and these areas will need further work to identify if they are amenable to open
pit mining methods.

As part of its future production plans, the Company now plans
to conduct a pushback along the southern wall of the pit and as a result the
drilling in this area to potentially identify an underground resource will no
longer be conducted as the mineralization will be mined via open pit
methods.

Future Exploration Programs

The Company is not planning any further exploration programs on
the San Francisco Property, at the current time. However, should the price of
gold continue to remain at its current price, greater than $1,300/oz gold, the
Company can revisit this decision.

While the Company is not planning any further exploration on
the San Francisco Property at this time. Micon did review the work that the
Company conducted to the north of the San Francisco pit, as well as the work
conducted on the south wall of the pit during its February, 2016 site visit, and
considers that further exploration is warranted in these areas. As always, any
proposal for further exploration and budget for the work will be subject to
either funding or other matters which may cause a proposed program to be altered
in the normal course of its business activities, or alterations which may affect
the program as a result of the exploration activities themselves.

24

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Mineral Resource and Reserve Estimates

Mineral Resource Estimate

The resource block model is based on 5 m by 5 m by 6 m high
blocks. The coordinate limits of the previous model were retained for this
current work. The topography was updated to reflect the mined surface as of July
1, 2016. The undisturbed pre-mining topographic surfaces are also available in
the model.

Since the 2011 update, the Company has continued to conduct a
manual interpretation of the mineralized zones, based on all of the drilling
intersections now available in its database. This approach allows for more
precise geological modelling and mineralization interpretation, which is
enabling the Company to plan better drilling programs to explore the extent of
the mineralization and also to prepare better engineering designs regarding the
ore and waste split in the pit for planning purposes. Overall, the method is
similar to the previous method, except that the grade envelopes and geological
domains are directly interpreted by the geologists using the drilling
information they have gathered.

The database of the San Francisco and La Chicharra deposits
consists of 4,071 drill holes with 380,031 intervals, amounting to 592,435 m of
drilling. A total of 126 of the drill holes lie beyond the model limits and have
not been included in the study. The current database includes 13,345 m of
drilling from 114 new holes drilled in 2014 and 2015.

Approximately 13% of the sampling intervals are greater than or
equal to a 2 m length, about 84% of the intervals are between 1.5 and 2.0 m in
length, and about 3% are less than 1.5 m in length. In the case of duplicate
samples, the original sample was used in the database.

High grade outlier assays were capped at different gold grades,
according to the domains, as with the previous 2013 estimate.

Once Micon had audited and accepted the Companys block model,
the Company proceeded to run a pit optimization program in order to estimate the
resources. The gold price used for estimating the resources at the San Francisco
Project was $1,350 per ounce.

The parameters used in the pit optimization for the estimation
of the resources are summarized in Table 1.1. They are a combination of the
parameters determined by Micon and the Company, taking into account the actual
costs obtained from the operation.

Pit bench heights were set at 6 m (the block height used in the
model) and slope angles were based on inter-ramp angles recommended by Golder
Associates in its December, 1996, report, adjusted to allow for haul roads of 25
m width.

The pit shell adopted for reporting resources was estimated at
a gold price of $1,350/troy ounce, using the economic parameters summarized in
Table 1.1, the drilling database as of November, 2015 and the topographic
surface as of July 1, 2016. The mineral resource, as estimated by the Company
and audited by Micon, is presented in Table 1.1. This resource estimate includes
the mineral reserve described subsequently, and has an effective date of July 1,
2016.

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Table 1.1Pit Optimization Parameters for the July
1, 2016 Resource Estimate for the San Francisco and La Chicharra Deposits

Area
    CostsSan Francisco Mine
    Description
    Units
    AmountWaste mining cost
    $/t
    2.00Ore mining cost
    $/t
    2.00Process cost
    $/t
    3.86G & A cost
    $/t
    1.04Gold price
    $/oz
    1,350Rock Densities and RecoveriesName/code
    Density
    **Recovery
      %**Diorite (2)
    2.72
    65.00Gneiss felsic (4)
    2.75
    65.00Granite (5)
    2.76
    65.00Schist (6)
    2.75
    65.00Lamprophrite dike (8)
    2.76
    65.00Pegmatite (10)
    2.85
    65.00Gabbro (11)
    2.81
    65.00Conglomerate (12)
    2.00
    65.00General Recovery
    65.00La Chicharra Mine
    CostsWaste mining cost
    $/t
    1.45Ore mining cost
    $/t
    1.45Process cost
    $/t
    4.107G & A cost
    $/t
    0.50Gold price
    $/oz
    1,350Rock Densities and RecoveriesName/code
    Density
    **Recovery
      %**All Rock (100-500)
    2.90
    65.00General Recovery
    65.00


Table provided by Timmins Goldcorp
Mexico, S.A. de C.V.

The underground resource estimate presented in the previous
report in January 2016 has been moved back to open pit resource and no
underground resource has been considered this time.

Micon recommends that the Company use the July 1, 2016 mineral
resource estimate contained in Table 1.2 as the stated mineral resource estimate
for the San Francisco Project as this estimate recognizes the use of 0.18 g/t
for the San Francisco deposit and 0.17 g/t gold for the La Chicharra deposit as
the open pit cut-off grades, at which the mineralization would meet the
parameters for potential economic extraction, as defined by the CIM standards
and definitions for resources.

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Table 1.2Mineral Resource Estimate for the San
Francisco Project (Inclusive of Mineral Reserves)($1,350/oz Gold
Price)

Area
    **Category**
    Cut-off
      (Au g/t)
    Tonnage
      (x1,000)
    Avg. Grade (Au
      g/t)
    Gold OuncesSan Francisco Mine OP
    0.18
    Measured
    26,731
    0.60
    515,000Indicated
    15,239
    0.61
    299,000Total Measured
      & Indicated
    41,970
    0.60
    814,000Inferred*
    246
    0.72
    6,000La Chicharra Deposit OP
    0.17
    Measured
    9,902
    0.50
    160,000Indicated
    3,575
    0.48
    55,000Total Measured
      & Indicated
    13,477
    0.50
    215,000Inferred*
    79
    0.43
    1,000Total Resources
    
    Measured
    36,633
    0.57
    675,000Indicated
    18,814
    0.58
    354,000Total Measured
      & Indicated
    55,447
    0.58
    1,029,000Total Inferred*
    324
    0.65
    7,000


*Inferred resources in this table do
not include material outside of the pits limit.

Micon believes that no environmental, permitting, legal, title,
taxation, socio-economic, marketing or political issues exist which would
adversely affect the mineral resources estimated above, at this time. However,
mineral resources that are not mineral reserves do not have demonstrated
economic viability. The mineral resource figures in Table1.2 have been rounded
to reflect that they are estimates and therefore, the totals in the table may
not add due to the rounding errors.

The mineral resource estimate has been reviewed and audited by
Micon. It is Micons opinion that the July 1, 2016 mineral resource estimate has
been prepared in accordance with the CIM standards and definitions for mineral
resource estimates and that Timmins can use this estimate as a basis for further
exploration and economic evaluation of the San Francisco Project.

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Mineral Reserve Estimate

Once Micon had audited and accepted the Companys resource
estimate, the Company proceeded to run a pit optimization program in order to
estimate the reserves. The gold price used for estimating the reserves at the
San Francisco Project was $1,250 per ounce.

Mining recovery has been estimated at 96% for the San Francisco
and 98% for the La Chicharra deposits. Micon agrees with this estimate, as it is
based on actual experience at the mine.

The dilution for the San Francisco and La Chicharra deposits
varies, up to 4%, depending on the pit phases. The parameters used in the pit
optimization for the estimation of reserves are the same as those used for the
resource estimation.

Table 1.3 presents the total reserves estimated within the pit
design outline, including mine recovery and dilution factors.

Table 1.3Mineral Reserves within the San
Francisco and La Chicharra Pit Design (July 1, 2016) after Mining Recovery andDilution

PIT
    Classification
    Metric tonnes
      (x1,000)
    Gold g/t
    Contained Gold
      OuncesSan Francisco Pit
    Proven
    16,666
    0.58
    313,000Probable
    8,644
    0.54
    144,000Total
    24,934
    0.57
    457,000La Chicharra Pit
    Proven
    6,596
    0.51
    108,000Probable
    579
    0.45
    8,000Total
    7,175
    0.51
    117,000Total
    Proven
    23,262
    0.56
    421,000Probable
    8,846
    0.54
    153,000Total
    32,109
    0.56
    574,000San Francisco Pit
    Stockpile
    7,371
    0.26
  61,000


The proven and probable reserves in Table 1.3 have been derived
from the measured and indicated mineral resources summarized in Table 1.2 and
account for mining recovery and dilution. The figures in Table1.3 have been
rounded to reflect that they are an estimate and therefore, the totals in the
table may not add due to the rounding errors.

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The mineral reserve estimate has been reviewed and audited by
Micon. It is Micons opinion that the July 1, 2016 mineral reserve estimate has
been prepared in accordance with the CIM standards and definitions for mineral
reserve estimates and that the Company can use this estimate as a basis for
further mine planning and operational optimization at the San Francisco Project
(San Francisco and La Chicharra pits).

Operational Data

Production to Date

The San Francisco Mine resumed commercial production in April,
2010. Table 1.4 summarizes production from April, 2010 to the end of August,
2016, by quarter. Ore of lower grade is being stockpiled for processing at the
end of the mine life. The Company reports that, as of the end of August, 2016, a
total of 8,121 Mt at an average grade of 0.260 g/t gold had been placed on the
low grade stockpile since 2010. However, since 2010, the Company has processed
some of the stockpile material and the actual low grade stockpile contains 7,371
MT at an average grade of 0.26 oz/t gold as of the date of the San Francisco
Report.

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Table 1.4SanFranciscoProject,TimminsAnnualProductionfrom April, 2010 to the End ofAugust,2016 byQuarter)

Year
    Quarter
    Mined Ore* (Dry
      Tonnes)
    Average Grade
      (g/t Gold)
    Processed Ore (Dry
      Tonnes)
    Average Grade
      (g/t Gold)
    Gold Ounces
      Placed on LeachPad
    Gold Ounces
      **Recoverable**
    Silver Ounces
      **Recoverable**
    Gold Ounces
      Sold
    Waste Mined
    Strip Ratio
    Days in
      **Quarter**
    Average Ore Mined
      (tonnes/day)
    Average Ore
      Processed (tonnes/day)
    Total Mined
      (tonnes/day)2010
    April - June
    911,319
    0.802
    905,296
    0.718
    20,904
    14,145
    6,050
    10,375
    4,057,842
    4.1
    91
    10,014
    9,948
    55,461July - September
    1,085,845
    0.873
    1,090,768
    0.817
    28,667
    19,375
    8,398
    15,685
    3,630,021
    3.27
    92
    11,803
    11,856
    51,524October - December
    1,222,551
    0.972
    1,208,677
    0.939
    36,483
    25,034
    11,030
    20,031
    4,498,925
    3.54
    92
    13,289
    13,138
    62,7202011
    January - March
    1,229,043
    0.870
    1,207,339
    0.895
    34,743
    24,088
    10,501
    17,020
    4,701,677
    2.89
    90
    13,656
    13,415
    70,289April - June
    1,268,454
    0.907
    1,239,075
    0.859
    34,235
    22,138
    8,622
    16,676
    4,239,137
    2.57
    91
    13,939
    13,616
    64,696July - September
    1,359,091
    0.835
    1,364,290
    0.804
    35,282
    22,667
    8,640
    17,287
    5,097,292
    2.51
    92
    14,773
    14,829
    77,474October - December
    1,285,035
    0.777
    1,327,299
    0.778
    33,195
    21,686
    11,635
    21,524
    4,160,488
    1.98
    92
    13,968
    14,427
    68,0232012
    January - March
    1,287,804
    0.794
    1,255,477
    0.772
    31,150
    19,721
    11,740
    21,532
    3,879,662
    1.85
    91
    14,152
    13,796
    65,627April - June
    1,306,312
    0.901
    1,347,112
    0.901
    39,028
    25,507
    14,453
    23,203
    4,342,495
    2.07
    91
    14,355
    14,803
    70,776July - September
    1,423,531
    0.893
    1,420,414
    0.887
    40,490
    26,075
    13,857
    25,154
    4,210,428
    1.86
    92
    15,473
    15,439
    70,401October - December
    1,340,712
    0.880
    1,493,623
    0.819
    39,339
    24,886
    16,203
    24,556
    5,295,383
    2.84
    87
    14,573
    16,235
    77,8582013
    January - March
    1,713,827
    0.817
    1,787,262
    0.825
    47,434
    30,501
    14,313
    28,328
    6,375,048
    3.02
    90
    19,043
    19,858
    94,318April - June
    1,776,833
    0.818
    1,848,832
    0.814
    48,380
    31,800
    16,124
    28,024
    6,235,920
    2.79
    91
    19,526
    20,317
    93,074July  September
    1,665,064,
    0.799
    1,815,709
    0.771
    45,016
    29,666
    16,228
    29,139
    5,441,889
    2.58
    92
    18,099
    19,736
    82,093October  December
    1,934,903
    0.824
    2,014,968
    0.872
    56,504
    38,784
    21,849
    34,166
    5,307,526
    2.32
    92
    21,032
    21,902
    82,519


30

---

2014
    January - March
    2,085,582
    0.792
    2,122,650
    0.760
    51,838
    34,544
    26,648
    35,413
    5,520,468
    2.37
    90
    23,173
    23,585
    87,712April - June
    2,061,943
    0.699
    2,184,316
    0.650
    45,616
    30,007
    23,489
    32,932
    5,810,088
    2.38
    91
    22,659
    24,003
    90,891July  September
    1,949,924
    0.571
    2,213,740
    0.504
    35,889
    23,783
    18,800
    26,675
    6,208,303
    3.08
    92
    21,195
    24,062
    89,411October  December
    1,785,811
    0.688
    2,101,873
    0.563
    38,078
    24,604
    16,327
    25,007
    6,417,044
    3.30
    92
    19,411
    22,846
    90,8862015
    January - March
    1,974,125
    0.581
    2,074,788
    0.532
    35,469
    21,473
    15,309
    24,155
    5,997,897
    2.87
    90
    21,935
    23,053
    89,825April - June
    2,070,769
    0.571
    2,252,591
    0.527
    38,176
    23,242
    13,041
    22,869
    7,151,798
    3.38
    91
    22,756
    24,754
    101,868July  September
    1,946,848
    0.549
    2,200,292
    0.510
    36,072
    23,010
    10,526
    23,387
    7,000,474
    3.57
    92
    21,161
    23,916
    97,428October  December
    1,711,899
    0.487
    1,921,060
    0.458
    28,314
    18,084
    13,151
    22,787
    6,857,052
    4.00
    92
    18,608
    20,881
    93,1512016
    January - March
    1.995,354
    0.621
    2,003,712
    0.622
    40,038
    25,723
    14,671
    24,667
    4,708,661
    2.36
    91
    21,927
    22,019
    73,714April - June
    1,848,675
    0.604
    1,939,567
    0.604
    37,640
    24,801
    14,884
    26,474
    3,729,153
    2.02
    91
    20,315
    21,314
    61,295July  August1
    1,148,317
    0.647
    1,197,975
    0.649
    24,981
    16,744
    9,761
    17,739
    2,611,423
    2.27
    62
    18,521
    19,322
    60,641**Total**
    
    41,389,574
    0.735
    43,538,704
    0.702
    982,962
    642,088
    366,250
    614,805
    133,486,093
    2.66
    90
    17,668
    18,580
    77,834


*Excluding lower grade ore stockpiled.Third Quarter 2016,
only includes July and August production figures. Table provided by Timmins
Goldcorp Mexico, S.A. de C.V.

31

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During July, 2011, the Company tested the expansion of the
crushing system to 15,000 t/d and announced that it is quickly reaching this
target.

In December, 2012, a new additional 5,000 t/d crushing circuit
was installed. The equipment initially installed was one jaw crusher, one
secondary crusher, two tertiary crushers and two screens. In August, 2013, an
expansion was made to this crushing circuit, installing an additional secondary
crusher, along with a screen, for a further capacity of 2,000 t/d. Total
capacity for the new crushing circuit is 7,000 t/d.

With the original plant equipment and additions mentioned, and
some fine tuning the crushing capacity currently operates at 22,000 t/d.

Mine Plans and Activities

Production from the La Chicharra deposit recommenced in late
2015. The San Francisco and La Chicharra pits will be mined at the same
time.

The La Chicharra pit, previously mined by Geomaque, is located
1,000 m west of the San Francisco pit.

All mining activities are being carried out by the contractor,
Peal Mexico, S.A. de C.V., of Navojoa, Mexico. The contractor is obliged to
supply and maintain the appropriate principal and auxiliary mining equipment and
personnel required to produce the tonnage mandated by the Company, in accordance
with the mining plan.

The Company provides contract supervision, geology, engineering
and planning and survey services, using its own employees.

Processing

Ore extracted from the pit is transported in 100 t capacity
haulage trucks, which feed directly into the gyratory primary crusher with
dimensions of 42 x 65. The crusher has nominal capacity of 900 t/h. The
crushed product is then transported on conveyor belts to a stockpile with a
capacity of 6,000 tonnes.

Two feeders beneath the stockpile deliver the ore onto a
conveyor belt which feeds the secondary crushing circuit. The ore is screened
and the screen undersize (minus 0.5 inch) reports to the final product, while
screen oversize is fed to two parallel secondary crushers.

Product from the secondary crushers is transported on conveyor
belts to the tertiary crushing circuit, which consists of three tertiary
crushers in parallel operating in closed circuit with screens. The minus 0.5
inch undersize from the screens is delivered to the leach pad.

Product from the crushing plant is transported to the leach pad
on overland conveyors and deposited on the pad with a stacker, forming lifts
between 8 m and 12 m in height. A bulldozer is used to level the surface of each
lift. The irrigation pipelines are then installed to distribute the leach
solution over the entire surface of the lift.

The Company has constructed the leach pad and has five
different phases for depositing, based on the permits granted by the Mexican
Environmental Agency (PROFEPA, Procuraduría Federal de Protección al Ambiente).
Table 1.5 summarizes the leach pad phases.

32

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Table 1.5Summary of the Leach Pad Phases Based
Upon the Permits Acquired for the San Francisco Mine

# Phase
    Duration
    Surface
    Nominal
      Capacity
    Capacity to
      date
    Status1 & 2
    November, 2009 to
      November, 2013
    36 ha
    23 Mt
    22 Mt
    Releached3
    November, 2013 to
      August, 2015
    25 ha
    16 Mt
    15 Mt
    On Irrigation4
    August, 2015 to
      date
    16 ha
    8 Mt
    4 Mt
    Depositing ore5
    From October,
      2016 on forward (projected)
    12 Ha
    7 Mt
    -----
    In Construction


Table provided by Timmins Goldcorp Mexico, S.A. de C.V.

The 0.05% sodium cyanide leach solution with a pH of 10.5 to
11, flows downward through the crushed ore dissolving the precious metals. The
solution percolates to the bottom of the lift and is collected in the channel
that carries the pregnant solution to a storage pond, from which it is pumped to
the gold recovery plant. The gold contained in pregnant solution is adsorbed in
the carbon columns.

The gold recovery operation comprises two
adsorption-desorption-recovery (ADR) plants with a total of three parallel sets
of carbon columns with a total feed capacity of 1,475 m3/h (6,500 US
gpm) of pregnant solution.

Barren solution exiting the ADR plant flows to a second storage
pond where fresh water and sodium cyanide are added, before the solution is
pumped back to the leach pad.

Capital and Cash Costs

Capital Expenditures

The San Francisco Project was originally designed for a
production rate of 12,000 t/d of ore to be placed on the leach pad. It has now
been expanded to 22,000 t/d.

Future capital expenditures over the mine life which includes
all development and sustaining capital (i.e. leach pad expansions, on-going
maintenance, and resource drilling) are estimated to total $18,000,000. On a
year-by-year basis the capital expenditures are estimated at $4,000,000 for 2016
and 2017, decreasing to $2,000,000 from 2018 to 2021 and drop off to $1,000,000
for the last two years in 2022 and 2023.

Micon has reviewed the Companys estimate of the future capital
expenditures for the San Francisco Project and regards it as reasonable.

Cash Costs

The Companys projected production and average cash cost per
ounce of gold from 2016 to 2018 is estimated to be as follows:

- 2016 production between 90,000 and 100,000 gold ounces at cash costs of
  $750 to $800 per gold ounce.

33

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- 2017 production between 65,000 and 70,000 gold ounces at cash costs of
  $900 to $950 per gold ounce.
- 2018 production between 80,000 and 85,000 gold ounces at cash costs of
  $1,000 to $1,050 per gold ounce.

The Companys latest estimates of its Life-of-Mine production
is between 450,000 and 500,000 ounces of gold at cash costs of $900 to $950 per
ounce of gold. Cost per ounce of gold are quoted net of by-product credits.

Micon has reviewed the Companys operating cost forecasts for
the life of the San Francisco Project and regards them as reasonable.

Economic Analysis

Since the last Technical Report conducted on the San Francisco
Project in February, 2016, the Company has continued to meet the requirements
necessary to be considered a producing issuer, according to the definition
contained in NI 43-101.

Based upon the price of gold in the fourth quarter of 2015, the
Company announced that mining operations at the San Francisco mine would
continue into the fourth quarter of 2016 at which point the mine would be placed
on care and maintenance, while the heap leach operations would continue into
2017. However, in the first quarter of 2016 the price of gold increased and so
far, this year has averaged over $1,250/oz gold. The increase in the gold price
led the Company to announce in August that it will continue to operate the San
Francisco Mine through to 2023.

The Companys updated economic guidance, since the February,
2016 Technical Report was published, considers that the 2016 fiscal year
production is estimated to range from 90,000 to 100,000 ounces of gold with the
cash costs ranging from $750 to $800 per ounce of gold sold. The estimated
operating parameters for 2016, include an average ore throughput of 22 kt/d at a
processed grade of 0.59 g/t Au with a strip ratio in the 2.0:1 range. The total
2016 capital expenditures (sustaining and development) are estimated to be
approximately $4,000,000.

The Company updated 2016 to 2023 guidance calls for a
Life-of-Mine production of between 450,000 and 500,000 ounces of gold at a cash
cost of between $900 to $950 per ounce of gold and a total capital expenditure
of approximately $18,000,000 or $38 per ounce of gold.

Conclusions and Recommendations

The San Francisco Mine commenced commercial production in
April, 2010, and by the end of August, 2016, the Company had sold 614,805 ounces
of gold. Between April, 2010 and the end of August, 2016, production at the San
Francisco Mine has totalled 41,389,574 tonnes at a grade of 0.735 g/t gold. In
addition, a total of 8,121,428 tonnes grading 0.260 g/t gold has been placed on
a low grade stockpile for potential processing in the future. However, since
2010, the Company has processed some of the stockpile material and currently the
low grade stockpile contains 7,371 MT at an average grade of 0.26 oz/t gold.

Micon has audited the resource and reserve estimates, and has
reviewed the mine design, the mining schedule, the mining contract terms and the
ability of the contractor to meet the mining production targets, and concludes
that the estimations and designs have been properly carried out and that the
contractor is capable of meeting the schedule.

Micon has reviewed the crushing, heap leach and ADR facilities
and concludes that they are adequate for the treatment of the scheduled process
feed material and the recovery of gold in doré, as forecast in the production
plan.

Micon has reviewed the economics of the San Francisco operation
and concludes that it is viable and meets the criteria for publication of a
mineral reserve.

Micon has reviewed the Companys previous exploration programs
and considers that the current mineral concessions hold the potential to host
further deposits similar to either San Francisco or La Chicharra pits and that,
once it is able to do so, the Company could implement further exploration
programs on its concessions. However, if the Company decides to reverse its
current decision to not conduct any further exploration on the San Francisco
Project, any further exploration programs will be subject to either funding or
other matters which may cause any proposed program to be altered in the normal course of its business activities, or
alterations which may affect the program as a result of the exploration
activities themselves.

34

---

Since the Company has completed all exploration within the
vicinity of both the San Francisco and La Chicharra pits and has curtailed all
exploration activities on the San Francisco Project due to the price of gold and
is unlikely to conduct exploration on the property for the next several years.

While Micon understands that the Company has curtailed its
exploration programs, on the portions of the San Francisco Project that lay
outside of the immediate areas of the San Francisco and La Chicharra pits and
that the exploration in the immediate vicinity of the pits has been completed,
Micon makes the following additional recommendations:

| | 1) | When applicable the Company recommences its exploration
      on the other areas of mineralization on the property, as well as to the
      east-southeast of the San Francisco pit. An estimated budget for this
      exploration program could range from $700,000 to $1,000,000.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                     
| | 2) | The Company continues to optimize costs, where applicable
      in the current precious metal market.                                                                                                                                                                               

Given the known extent of mineralization on the property,
compared to the amount of mining activity, the San Francisco Project could have
the potential to host further deposits or lenses of gold mineralization outside
the present mining areas.

Given the prospective nature of the property, it is Micons
opinion that the property merits further exploration and Micon recommends that
the Company continues to hold its existing mineral concessions until such time
as expenditures on exploration become justifiable once again. The annual fee to
maintain the mineral concessions is estimated to be $685,000 per year. However,
while the property merits further exploration this does not imply that the
exploration activities will be material to the existing or future operations.

Ana Paula Property

The following information has been derived from the NI 43-101
technical report entitled Ana Paula Project Preliminary Economic Assessment,
Municipalities of Cuetzala del Progreso and Apaxtla del Castregon, Guerrero
State, Mexicodated November 24, 2016 with an effective date of February 2,
2016 (the Ana Paula Report) prepared by Michel Creek, Tony Loschiavo
(P.Eng.), Craig Gibson (P.Geo., Ph.D.), Kelly McLeod (P.Eng.), Herb Welhener,
SME-RM and Dawn Garcia, P.G. who are independent qualified persons under NI
43-101 and have approved of the summary of the Ana Paula Report provided below.
The following summary is extracted from the Ana Paula Report which is
incorporated by reference in this AIF and is available on the Companys website
(www.timminsgold.com) and on Companys profile
on SEDAR (www.sedar.com).

Introduction

JDS Energy & Mining Inc. (JDS) was commissioned by the
Company to update a preliminary economic assessment (PEA) pursuant to Canadian
Securities Administrators National Instrument 43-101 and Form 43-101F1
standards (collectively, NI 43-101) of the Ana Paula Project which is a
gold resource development project located in Guerrero State, Mexico. The Ana
Paula Project encloses several gold occurrences within an exploration concession
covering an area of more than 600 km2.

This update to the PEA includes the use of El Sauzal equipment
for the process plant at Ana Paula. The effect of this is a significant
reduction in project capital. The acquisition cost, dismantling, and
transportation costs spent through 2015, are now sunk costs and are so treated
in this report. The remaining costs for dismantling, transportation, storage,
purchase of additional equipment, engineering, and on-site construction are
included in the Ana Paula Report.

The Ana Paula Report is presenting the same data as the initial
PEA except for the inclusion of a process plant acquired by the Company in 2015,
reduction of the gold price to current levels, and updates to foreign exchange
rates, major commodity prices, and minor adjustments to labor burden rates to
make them consistent. The inclusion of the process plant acquisition warranted
an update to the financial model.

35

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It must be noted that this PEA is preliminary in nature and
includes the use of 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, and there is no
certainty that the preliminary economic assessment will be realized.

Property Description and Location

The Ana Paula Project is located in the north central part of
the State of Guerrero in southern Mexico, roughly half way between the major
cities of Mexico City and the Port of Acapulco; the Ana Paula Project centroid
is defined by UTM Q14N, WGS84, 409,027.8E and 1,997,632.6N or by 99° 51 34.4
west longitude and 18° 3 55.2 north latitude. The Ana Paula Project lies
within the Sierra Madre mountain range where topography can range from moderate
to rugged with elevations varying from 900 m to over 1,460 masl. The Balsas
River, which divides the Sierra Madre Mountains into north and south ranges
flows just south of the project area.

The climate in the region is warm and humid, with temperatures
ranging 17 to 45 degrees Celsius and average precipitation of 835 mm per year
mostly occurring between June and October during a monsoonal wet season that is
influenced by hurricanes from both the Atlantic and Pacific oceans. Seismic
activity in the area is a design consideration.

The Company acquired Newstrike in an arrangement that closed on
May 26th, 2015. With the arrangement, the Company acquired ownership of all of
the issued and outstanding common shares of Newstrike; Newstrike is now a
wholly-owned subsidiary of the Company.

Newstrike, through its Mexican operating subsidiary Minera,
entered into an agreement to acquire a 100 percent interest in certain mineral
rights and concessions from Desarrollos Mineros San Luis, S.A. de C.V. and
Minera San Luis S.A. de C.V., wholly owned Mexican subsidiaries of Goldcorp for
C$2,100,000 in cash and shares. In addition, the Company granted Goldcorp a
three percent net smelter royalty (NSR). Newstrike will have the right, upon
completion of an NI 43-101 feasibility study, to purchase one third of the NSR.

Newstrike controls surface access to 2019.41 hectares overlying
and surrounding the Ana Paula exploration target area, where 1,025.33 hectares
are owned outright and approximately 994.08 hectares are under contract in 63
separate ten year access agreements. Surface rights for a significant portion of
planned mining disturbance and facilities is secured through a combination of
Newstrike surface ownership and pending Ejido negotiations. JDS has not
completed a detailed review of surface ownership.

The authors are unaware of any factors or risks that may affect
access, title, or the right or ability to develop the Ana Paula Project.

Geology and Mineralization

Mineralization in the Guerrero Gold Belt (GGB) is characterized
as a skarn porphyry mineralization related to an early Tertiary intrusive event.
The Ana Paula Project is located along the northwesterly trend of the GGB where
it straddles a boundary between two older tectonic sub-terranes; a
volcanic-volcaniclastic arc assemblage to the west and a thick carbonate
platform sequence overlain by younger marine deposits to the east.

The stratigraphy of both sub-terranes was deformed during the
compressive Laramide orogeny and subsequently intruded by a ±62-66 million year
calc-alkali magmatic event that is currently thought to be associated with the
timing of mineralization responsible for the gold deposits and showings of the
GGB.

In general four gold depositional settings are recognized at
the Ana Paula Project, including:

|1. | Quartz-sulphide and quartz-carbonate-sulphide veinlets,
      stockworks with sulphide clots and disseminations in both intrusions and
      hornfels.                                  
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                         
|2. | Narrow semi-massive sulphide contact replacement of
      limestone or hornfels/skarn at the intrusion contacts.                                                                        
|   |                                                                                                                                                                                         
|3. | Sulphide clots, rims and masses in narrow contact
      replacement of breccia hosted in intrusions at or near the sedimentary
      contacts and/or fault contacts (detachment
faults).

36

---

|4. | Associated with a sulphide constituent within breccia
      matrix and with sulphide replacement textures within structurally
      controlled breccia formed oblique to the dominant northerly trending
      westerly dipping stratigraphy.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The veinlets, stockwork, clots and disseminated mineralization,
along with the contact replacement textures (settings 1, 2 and 3 above) are
commonly observed contained within a sediment intrusive domain (SZ) that
collectively make up a corridor of structurally controlled northerly trending
and westerly dipping marine sediment and intrusive sill/dike stratigraphy that
is host to a lower grade mineralization that has an undiluted composite average
grade of 1.0 grams per tonne gold and 3.9 grams per tonne silver. The corridor
includes at least two continuous horizons of mineralized intrusions with contact
replacement mineralization separated by relatively barren rock that is
dominantly limestone. Discontinuous mineralization may occur locally within the
barren horizons.

The sediment intrusive-domain lies to the east of a
predominantly intrusive domain composed of several different intrusive phases.
The contact trends northerly and dips to the west at steep to moderate angles
parallel to the structural stratigraphy of the sedimentary-intrusive domain, and
is locally defined by a fault breccia.

Two discrete structurally controlled breccia bodies of
irregular dimensions that are oblique to the trend of the sediment intrusive
domain have been delineated in drill core. Both breccia bodies come to surface
relatively close to each other and may share a common origin. One of these
breccia bodies is described as the high grade Breccia Zone (B1) which intersects
the SZ host rock, dipping at a high angle to the south.

The B1 Breccia zone includes a high grade core zone of
brecciated rock (setting 4 above) that represents the intersection of at least
two structural lineaments. This high-grade breccia is surrounded by an extensive
and irregular mineralized halo hosted within the altered limestone and intrusion
country rock belonging to the sediment-intrusion domain described previously.
The orientation of the mineralized halo is dominantly controlled by the steeply
dipping structural intersection (the fluid conduit) and partly controlled by
stratigraphy, especially along contacts (settings 1 to 3 above). The second
breccia body is described as the Lower Grade Breccia (B2) and
mineralization is hosted by the intrusive domain, partly within oxidized
intrusion and partly within (auto) brecciated intrusion (item 4) (setting 1).
The mineralized zone is in fault contact with the footwall sedimentary-intrusive
domain that hosts the high grade breccia. The B2 breccia tends to host lower
grade gold mineralization. Table 1.1 lists averages grades of composites
selected for metallurgical testing within the Breccia zones.

Table 1.1: Select Composite Grades within Breccia Zones

Gold Grade (gm/tonne)
    Silver Grade (gm/tonne)B1 Breccia Zone
    9.76
    10B1 Breccia Halo
      Zone
    3.74
    4.25B2 Breccia Zone
    0.93
    5.06


Source: JDS(2016)

A second mineralized zone hosted within the intrusive domain,
known as Tejocote, (pronounced as teh ho cõtti) lies to the southwest of the
main Ana Paula deposit and consists of a mineralized intrusive body of
coalescing dikes and sills separated by discontinuous altered sedimentary rock
horizons. An extensive low grade mineralization has been identified at the
surface and in core throughout this area that is dominantly disseminated within
the intrusion(s) with some contact replacement observed (settings 1 and 2
above). Exploration of the intrusive domain is still underway and insufficient
information is available to calculate average grades.

37

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Exploration and Drilling

Drill holes AP-05-01 through AP-12-130, comprising a total of
130 diamond core drill holes aggregating 67,942.8 m and containing 45,512 assay
intervals, formed the basis of Newstrikes initial 2013 resource estimate
technical report. The report is available on SEDAR at www.sedar.com. Drill hole
collar and assay data for the first 130 drill holes included in the initial
resource database are available in that report.

Drilling for the updated resource was completed on November 18,
2013 with an additional 45,844.61 m of core drilling in 100 delineation and
exploration drill holes from AP-12-131 to AP-13-230, aggregating 37,158 new
sample intervals collected for geochemical assay. All results from AP-05-01
through AP-14-230 form the basis of the updated resource and preliminary
economic assessment that is the subject of the Ana Paula Report, incorporating a
total of 110,099.88 m drilled in 230 diamond core drill holes and aggregating
results from 82,670 downhole drill sample intervals with an average length of
1.4 m, where effectively all are assayed for gold and silver.

Since exploration began in 2010, a total of 96,045 samples have
been collected from road cuts, outcrop chip and channel samples, stream and soil
samples, and from drill core including blanks and standards. In addition,
various samples for metallurgy, density measurements and quality assurance and
quality control (QAQC) were collected for geochemical assay, Table 9-1.
Results from the ongoing surface exploration indicate that alteration and
mineralization remain open in several directions and at depth. Continuing
exploration with surface mapping, ground geophysics, compilation of existing
data and drilling is warranted based on results to date.

Metallurgy

The Ana Paula Project has undergone a number of metallurgical
studies covering a range of process options. The majority of gold and silver
values in the Ana Paula Project materials appear to be in close association with
sulfides and as liberated particles of electrum. This allows the metal values to
be concentrated by flotation or gravity and leachable by conventional methods.
Testwork has included all the major refractory processing methods including
roasting, autoclave, and Albion. Conventional process methods including
flotation testing and gravity concentration followed by cyanidation, whole-rock
leaching, diagnostic leaching, and heap leaching, were also studied. Basic
testwork defining some cyanidation parameters are included with the leach
studies, and bond work indices were conducted on some of the rock types. More
detailed work is recommended for the next phase of engineering.

The proposed Ana Paula Project flowsheet which consists of
sulfide concentration and cyanide leaching was based on the results of testwork
performed by ALS, Report KM4097, on a year 1-4 composite sample. This work was
considered the most reliable for use as a basis in designing a processing plant
and superior to whole-rock leaching based on the reagent consumption. While
whole-rock leaching produced similar recovery results to the flotation/leaching
of concentrates, a comparison of the operating reagent costs did show the
flotation system as more economically favorable. Additional test work to confirm
the reagent consumptions is recommended in the next phase of engineering to
optimize the process.

The results of the composite tests showing the first four years
of production seem to correlate with the previous testwork, showing similar
flotation results in terms of mass pull, and leaching results reported by SGS.
The flowsheet is based on leaching a rougher concentrate however additional work
is needed to confirm design parameters and reagent consumptions. This work is
included in the proposed next phase of engineering. The work index chosen as a
basis for design was a single composite sample which gave a BWi of 19.8
kWh/tonne. This index is high and because it is based on a single sample should
be considered conservative.

Mineral Resource Estimate

The Ana Paula Project mineral resource estimate has an
effective date of August 8, 2014 and was developed using an updated mineral
resource model based on 223 drill holes (within the block model limits), an
updated geologic interpretation, metallurgical recovery data discussed in
Section 13, updated costs provided by JDS and a geotechnical study by Steffen,
Roberts & Kirsten Consulting of Denver, Colorado (SRK), which was
completed in late November, 2012 (Ross-Brown, Levy, 2012). The deposit has been
modeled using an inverse distance squared operator applied to 5 m gold and silver drill hole composite lengths which respected
lithology units. Model blocks are classified as measured, indicated or inferred
based on kriging variance, the number of holes inside the search ellipsoid and
distance from the closest hole. Tonnages are estimated using the average of the
density data by lithology.

38

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Table 1.2 is a summary of the input parameters to define the
portion of the mineral inventory which falls within a resource shell and thus
tabulated as the mineral resource. A summary of the mineral resource is
presented in Table 1.3, tabulated at an internal cut-off of 0.46 g/t gold
equivalent (AuEq). The calculation of AuEq includes the gold and silver prices
and recoveries presented in Table 1.3. AuEq equals Au + 0.011 x Ag.

Table 1.2: Input Parameters to Define the Mineral Resource
Open Pit Shell Geometry

|                         | Process Recovery                                     | Metal Price
|------------------------ | ---------------------------------------------------- | -----------
|Gold Price               | 80%                                                  | $1450/oz   
|Silver Price             | 55%                                                  | $23/oz     
|Costs:                   |                                                      |            
|Process                  | $15.60/t                                            
|G&A                      | $1.65/t                                             
|Mining                   | $1.85/t, plus $0.02/t per bench below 900m elevation
|Pit overall slope angles | 55 degrees on west                                  
|45 degrees on all others

Table 1.3: Summary of the Mineral Resource

Category
    Tonnage & Grades >= 0.46 g/t AuEq
      Cutoff
    Contained Ounces (000s)Ktonnes
    AuEq, g/t
    Au, g/t
    Ag, g/t
    Gold
    SilverMeasured
    22,767
    1.661
    1.608
    4.9
    1,177
    3,587Indicated
    18,243
    1.229
    1.163
    5.95
    683
    3,489Sum M&I
    41,010
    1.469
    1.41
    5.37
    1,859
    7,076Inferred
    1,904
    1.233
    1.113
    10.85
    68
    664


Mineral Reserve Estimate

JDS has not developed a mineral reserve estimate for the Ana
Paula Project as part of this PEA. Significant additional data collection and
technical work is required to elevate the technical confidence of the project to
a level consistent with mineral reserve estimation, in accordance with the
Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition
Standards on Mineral Resources and Mineral Reserves adopted by CIM Council, as
amended, NI 43-101, 2014.

Mineral resources that are not mineral reserves do not have
demonstrated economic viability. It 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.

JDS is not aware of any previous mineral reserve estimates on
the Ana Paula Project deposit that have been completed in accordance with an
international reporting code.

39

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Mining

The Ana Paula Project will be mined by open pit methods using
conventional truck and shovel production equipment. Pit optimization and mine
planning was carried out on the basis to support a plant capacity of 6000
tonnes-per-day, using measured, indicated and inferred resources provided by
IMC. The project life will extend over a period of 10 years, including one year
of waste rock pre-stripping followed by 9-years of production operations as
shown in the mine production schedule provided in Table 1.4.

All mine equipment is modelled as provided by contractors.
Total material movement peaks at approximately 9.5 million tonnes per year,
which requires a modest production fleet of up to 5 conventional 90-tonne class
haul trucks, 1 each 12.5 m3 class hydraulic shovel for primary use and 1 each
12.5m 3 class wheel loader for backup. Drilling can be completed with
a single rotary machine capable of drilling 200 mm diameter holes.

Table 1.4: Mine Production Schedule by Year

Year
    Resources to the Mill
    Waste
        (Mt)
    Rehandle
        (Mt)
    Total
        EXPIT (Mt)
    S.R.
        (W:O)Tonnes (Mt)*
    AuEq (g/t)
    Au (g/t)
    Ag (g/t)-1
    
    
    
    
    6.65
    0.00
    7.27
    10.731
    2.16
    2.18
    2.06
    11.48
    7.93
    0.47
    9.82
    4.182
    2.16
    2.50
    2.43
    6.40
    6.26
    0.00
    9.47
    1.953
    2.16
    3.28
    3.20
    7.18
    5.57
    0.00
    9.33
    1.484
    2.16
    2.93
    2.80
    12.29
    7.63
    0.67
    9.27
    4.645
    2.16
    2.14
    2.08
    5.71
    8.03
    1.18
    9.24
    6.656
    2.16
    1.67
    1.63
    4.08
    3.43
    0.25
    5.62
    1.577
    2.16
    2.59
    2.56
    3.36
    0.52
    0.00
    2.77
    0.238
    2.16
    1.56
    1.51
    4.88
    0.10
    1.17
    1.08
    0.109
    0.47
    0.68
    0.62
    5.51
    0.00
    0.47
    0.00
    0.00Total
    17.75
    2.31
    2.24
    6.89
    46.11
    4.22
    63.86
    2.60


*The reader is cautioned that inferred resources included in
the mine production schedule are considered too speculative geologically to have
economic considerations applied to them and there is no certainty that inferred
resources will ever be upgraded to a higher category.

Source: JDS(2016)

During the mine life, two stockpiles will be required to manage
the mill throughput and to smooth out peaks in the strip ratios in years 4 and
5. The first stockpile will contain approximately 2.6 million tonnes of material
above a 0.72 g/t AuEq, cutoff which will be rehandled and processed throughout
the mine life. The second stockpile will contain approximately 1.6 million
tonnes of marginal grade for material ranging between 0.64 g/t and 0.72 g/t AuEq
which is processed at the end of the mine life.

Underground mining was not considered for this PEA at the time
of this study, which warrants further investigation.

40

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Mine Rock Management

Rock management facilities (RMF) will be constructed
during operations in various locations surrounding the open pit. As required,
material pre-stripped in year -1 will also be used for tailing management
facility (TMF) embankment construction. The various RMF will be
designed at later stages to be reclaimed concurrent with operations to reduce
ultimate liability upon mine closure.

In pre-production 6.6 million tonnes of mine rock and 0.6
million tonnes of mill-feed will be pre-stripped. Life-of-mine (LOM), a
total of 46 million tonnes of mine rock will be moved at a strip ratio of 2.6 to
1.

Recovery Methods

Several recovery methods were evaluated to process the
mineralized materials at the Ana Paula Project. Although alternative process
options may be potentially viable after subsequent testwork, the most economical
method of extraction for this PEA was determined to be flotation concentration
followed by cyanide leaching to produce a doré on site.

The major unit operations consist of: crushing followed by
closed circuit ball mill and gravity concentration. Cyclone overflow reports to
flotation and flotation concentrates are reground before entering an oxidation
preparation stage. Oxidation is followed by carbon-in-leach for 48 hours. Gold
is collected on carbon which is separated from the pulp, stripped, and precious
metals recovered by electrowinning. Leached slurry will be detoxified before
reporting to the tailings impoundment Mill throughput is designed at 6,000
tonnes per operating day. The plant is expected to achieve an average recovery
to doré of 75 percent for gold and 50 percent for silver.

The plant is provided with basic utilities, air and water
systems, and a fire water system. Tailings are thickened and stored in a
conventional tailings management facility. Process water is recovered to a
separate process water tank.

Project Infrastructure

The site is currently accessible for light vehicle traffic and
intermittent heavy loads via a gravel roadway from the town of Cuetzala del
Progreso. During mine construction and operations, an existing gravel road north
of the site would be improved to enable access for larger loads to site
especially during plant construction and equipment mobilization.

This same mine access road is connected to Mexico Highway 51, a
paved and improved roadway which provides mine access to the Mexico highway
system and capacity for large heavy loads either west from Mexico City via
Iguala, or east from the port of Acapulco. Iguala is the nearest major city,
however does not have a commercial jet airport. Air service is available from
Mexico City, Acapulco or Cuernavaca.

A lined tailings storage facility has been located,
preliminarily sized and costed to facilitate the tailings anticipated to result
from processing the 17.8 million tonnes of mineralized material to be processed.
Additional volume for storm water runoff, surge, and wave action have been
incorporated into the design as freeboard for the tailings storage facility. The
tailings storage facility will cover an area of approximately 392,000 m2 or 39.2
hectares.

The rock management facility has been sized for approximately
46 million tonnes of mine rock based on the mine production schedule. The rock
management facility has been located adjacent to the pit with impacted runoff
being captured by the downstream located tailings storage facility. This enables
the contact runoff water to be controlled and utilized as process water if
required.

The mine support facilities and process plant will be situated
roughly one km southeast of the pit area and one km northwest of the tailings
storage facility. In order to avoiding steep terrain in the area a location for
the primary crusher at the plant was chosen which is 85 meters vertically higher
than the pit crest. This rather large elevation gain between pit crest and
primary crusher will require attention to ramp design as it exits the pit.

Support and ancillary buildings include a covered, but not
fully enclosed equipment maintenance shop, administration office building,
mobile security trailer, fuel storage/dispensing system, truck scale, and
warehouse. Certain additional facilities may be brought in by the mining contractor. The mine
scenario evaluated here includes the construction of an on-site camp. Security
issues and effectively expanding the region or area from which skilled labor can
be drawn to this mine will be enhanced by having a camp enabling the housing of
workers at the site.

41

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Line power is available within approximately 1.5 km of the
plant site. The power line planned to be tied into supplies power at 115 kV and
is reported by the Federal Power Agency in Mexico (CFE) to have
sufficient capacity for the estimated +/-10 megawatt anticipated loading for the
site. Once delivered to a new, yet to be constructed substation proximal to the
mill, the power will be stepped down to 25 kV for site-wide distribution and to
4160 Vac for the larger motor loads. A site visit by CFE is required to obtain
written confirmation that power is secured and is the next steps in this area.

The average fresh water usage for the project is estimated to
be 2400 gallons per minute. Water is planned to be obtained from groundwater
sources through a series of well clusters. Mexico recognizes water as a national
resource and regulates its use. A water concession will need to be granted by
the Mexican water agency, Comisión Nacional del Agua (CAN), based on a
permit application. The permit application will need to be supported by a
technical study demonstrating that water availability and sufficient quantity
exist in the area.

The next phase of the investigation recommended is a
preliminary hydrologic study that would include verifying the proposed
groundwater source locations and conducting a field program to characterize
aquifer characteristics and water quality and quantity to support the proposed
water supply requirements and the environmental baseline study.

Environmental Considerations

As yet, no formal baseline characterization studies have been
conducted for the project. Baseline studies will be required prior to submittal
of environmental permit documents. No known environmental condition exists that
would preclude development of the project.

Capital Costs

During the two-year pre-production period, the initial capital
costs amount to $121,700,000. This includes costs for site detailed engineering,
stationary mine equipment, facility construction, processing plant, tailings
facility, etc. (Table 1.5) .

Sustaining and closure capital cost estimates amount to
$53,200,000 with a majority of these costs attributed to the tailings facility,
capitalized stripping, and reclamation. A 20 percent contingency is applied to
all capital. Details on the capital costs can be found in Section 21 of the Ana
Paula Report.

Table 1.5: Initial Capital Costs

Capital Costs
    Pre-Production
        ($M)
    Sustaining/Closure ($M)
    LOM ($M)Capitalized
      Stripping
    15.2
    12.3
    27.5Contractor
      Mob/Demob
    0.4
    0.4
    0.8Crushing and
      Handling
    1.6
    0
    1.6Process Plant
    25
    1.5
    26.5General Site &
      Utilities
    5.1
    0.3
    5.4Laboratory
    0.2
    0.2
    0.4Construction Camp
    0.6
    0
    0.6Camp Site
      (Operations)
    1.5
    0.3
    1.8Administration
      Facilities
    0.2
    0.2
    0.4Tailings Facility
    13
    14.6
    27.6Electrical Supply
      & Distribution
    4.6
    0.2
    4.8


42

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Water Supply & Distribution
    1.8
    0
    1.8Royalty Purchase
    2.8
    0
    2.8Reclamation/Closure
    0
    14.4
    14.4Indirects
    14
    0
    14EPCM
    11.3
    0
    11.3Owners Costs
    4.4
    0
    4.4Subtotal
    101.8
    44.3
    146.1Contingency (20%)
    19.8
    8.9
    28.7Total Capital
      Costs
    121.7
    53.2
    174.8


Source: JDS(2016)

Operating Costs

LOM operating costs amount to $425,800,000 or an average unit
cost of $23.98/t milled. A breakdown of these costs is outlined in Table 1.6.
Cost were adjusted from the original PEA relative to the Mexican Peso versus US
dollar exchange rate. Cost categories affected were labour, power, diesel, and
ANFO costs. Labor burden was also adjusted to be consistent across all
departments.

Table 1.6: Operating Costs

Operation
    Unit
    Cost Per Ton MilledMining
    $/t processed
    $6.00Rehandle*
    $/t processed
    $0.12Processing
    $/t processed
    $15.52G&A
    $/t processed
    $2.34Total Operating
      Costs
    $/t processed
    $23.98


Mining Cost is based on $2.10/t mined *Rehandle Cost is
based on $0.50/t rehandled Source: JDS(2016)

Economic Analysis

An engineering economic model was developed to estimate annual
cash flows and sensitivities of the Ana Paula Project. Pre-tax estimates of
project values were prepared for comparative purposes, while after-tax estimates
were developed to approximate the true investment value. It must be noted that
tax estimates involve many complex variables that can only be accurately
calculated during operations and, as such, the after-tax results are
approximations to represent an indicative value of the after-tax cash flows of
the Ana Paula Project.

Mineral resources that are not mineral reserves do not have
demonstrated economic viability. It 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 preliminary economic assessment will be realized.

The results of the economic analysis are shown in Table 1.7.

43

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Table 1.7: Results of the Economic Analysis

|Summary of Results                    | Unit     | Value 
|------------------------------------- | -------- | ------
|Mine Life                             | Years    | 8     
|Total Resource                        | M tonnes | 17.8  
|Total Waste                           | M tonnes | 33.6  
|Total Capitalized Waste               | M tonnes | 12.5  
|Total Mined                           | M tonnes | 63.9  
|Strip Ratio                           | w:o      | 2.6   
|Mining Rate                           | ktpd     | 23.4  
|Plant Throughput                      | ktpd     | 6     
|Pre-Strip/Capitalized Waste           | M tonnes | 12.5  
|Average Head Grades                   |          |       
|Au                                    | g/t      | 2.24  
|Ag                                    | g/t      | 6.89  
|Payable Metal                         |          |       
|Au                                    | LOM k oz | 957   
|k oz/yr                               | 116     
|Ag                                    | LOM k oz | 1,961 
|k oz/yr                               | 239     
|NSR (Net of Royalties)                | $M       | 1,152 
|$/t processed                         | 64.88   
|Operating Costs                       | $M       | 425.8 
|$/t processed                         | 23.98   
|Au Cash Cost                          | $/Au oz  | 470.4 
|Au Cash Cost (Net of By-Product)      | $/Au oz  | 441.72
|Capital Costs                         |          |       
|Pre-Production Capital                | $M       | 101.8 
|Pre-Production Contingency            | $M       | 19.8  
|Total Pre-Production Capital          | $M       | 121.7 
|$/t processed                         | 6.85    
|Sustaining & Closure Capital          | $M       | 44.3  
|Sustaining & Closure Contingency      | $M       | 8.9   
|Total Sustaining & Closure Capital    | $M       | 53.2  
|$/t processed                         | 2.99    
|Total Capital Costs Incl. Contingency | $M       | 174.8 
|$/t processed                         | 9.85    
|Working Capital                       | $M       | 6.9   
|Pre-Tax Cash Flow                     | $M       | 551.2 
|Taxes                                 | $M       | 206.2 
|After-Tax Cash Flow                   | $M       | 345   
|Economic Results                      |          |       

44

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Summary of Results
    Unit
    ValuePre-Tax NPV5%
    $M
    407.5Pre-Tax IRR
    %
    58.80%Pre-Tax Payback
    Years
    1.6After-Tax NPV5%
    $M
    247.8After-Tax IRR
    %
    42.50%After-Tax Payback
    Years
    2.1


Source: JDS(2016)

Sensitivity analyses were performed on the base case economics
to determine which factors most affected the project performance. The analysis
revealed that the project is most and equally sensitive to metal prices and head
grades, followed by operating costs.

Figure 1.1: Sensitivity Results for Base Case Scenario



Conclusions

It is the conclusion of the Qualified Persons preparing the Ana
Paula Report that the information contained within adequately supports the
positive economic results obtained for the Ana Paula Project. The project
contains 17.8 million tonnes of gold-bearing sulphide mineralization that can be
mined by open pit methods and recovered using common processing methods
consisting of gravity, flotation, and cyanide leaching of flotation
concentrates. Mineral resources that are not mineral reserves do not have
demonstrated economic viability. It 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 preliminary economic assessment will be realized.

The resource mined in the PEA base case is 97% measured and
indicated and three percent inferred.

45

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As demonstrated by the information contained in the Ana Paula
Report, the Ana Paula Project demonstrates potential for economic development
and should proceed to the next level of evaluation; either a pre-feasibility or
feasibility study stage.

The Company has identified anomalous gold at surface in
association with limestone, hornfels, intrusive rocks and breccia beyond the
current pit shape that are consistent with existing mineralization at the Ana
Paula Project and comparable with other known deposits of the GGB. Results from
drilling, mapping and surface geochemistry indicate that mineralization within
the Ana Paula Project deposit continues to remain open in several directions
including at depth that merits follow up exploration and drilling.

Recommendations

The Ana Paula Project should advance to a preliminary
feasibility study (PFS) in alignment with the Companys desire to
develop the resource. This study would encompass:

- Metallurgical testwork described herein to optimize the process flowsheet
  and quantify operating parameters and reagent consumptions.
- Geotechnical drilling and data collection to for pit slope design and
  stability analysis of TSF and MRF.
- More detailed mine planning based on geotechnical data, and a tradeoff
  between owner vs. contract mining.
- MRF design based on results of geochemical and geotechnical information.
- Generate a water balance.

It is recommended that environmental baseline studies and a
socio-economic program also be initiated as soon as practical. The proposed
environmental characterization studies are included as part of the proposed
budget. However, other responsibilities more typically associated with
environmental permitting and developing sustainable community relations are not
encompassed within the PFS budget as they are normally considered and executed
separately.

Further action with CFE to schedule a site visit and formally
secure line power should be initiated immediately. Further hydrologic study to
identify water resources and make application for their use is a priority task.
Geochemical characterization of mine rock and tailings must be completed to
generate a basis for further engineering of storage methods and design.

Other Mineral Properties

The Company has title to the Patricia, Norma, La Pima and Los
Carlos claims located in the state of Sonora, Mexico. The Company also has title
to the Ejutla property in Oaxaca Mexico which was acquired pursuant to the Plan
of Arrangement with Newstrike. No exploration was performed on these properties
during 2016. The Company will conduct further exploration on these properties if
resources allow.

DIVIDENDS

The Company has neither declared nor paid any dividends on its
common shares. The Company intends to retain its earnings to finance growth and
expand its operations and does not anticipate paying any dividends on its common
shares in the foreseeable future.

46

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CAPITAL STRUCTURE

Authorized and Issued Share Capital

The authorized share capital of the Company consists of an
unlimited number of common shares of which 355,628,602 common shares were issued
and outstanding as at December 31, 2016 and 355,628,602 common shares are
currently issued and outstanding. The holders of common shares are entitled to
receive notice of and to attend and vote at all meetings of the shareholders of
the Company and each common share confers the right to one vote in person or by
proxy at all meetings of the shareholders of the Company. The holders of the
common shares are entitled to receive such dividends in any financial year as
the board of directors of the Company may by resolution determine. In the event
of the liquidation, dissolution or winding-up of the Company, whether voluntary
or involuntary, the holders of the common shares are entitled to receive the
remaining property and assets of the Company.

Convertible Preference Shares

The authorized capital of the Company also includes an
unlimited number of non-voting convertible preference shares without par value,
none of which were issued and outstanding during the year ended December 31,
2016 and none of which are currently issued and outstanding.

Options

As at December 31, 2016, the Company had the following
outstanding options pursuant to the Stock Option Plan adopted by the Companys
board of directors on May 24, 2016. These options are exercisable into common
shares.

47

---

Number of Options
    Exercise Price
    Issue Date
    Expiry Date1,600,000
    C$2.56
    January 26, 2012
    Jan. 26, 201775,000
    C$2.15
    August 20, 2012
    August 20, 2017300,000
    C$2.74
    September 28, 2012
    September 28, 20171,500,000
    C$1.25
    December 18, 2013
    December 18, 20181,400,000
    C$2.00
    August 6, 2014
    August 6, 20191,100,000
    C$1.03
    December 31, 2014
    December 31, 20191,150,000
    C$0.75
    May 8, 2015
    May 7, 20201,600,000
    C$0.76
    May 26, 2015
    May 26, 2020800,000
    C$0.25
    November 5, 2015
    November 5, 20201,275,000
    C$0.29
    November 5, 2015
    November 5, 20202,550,000
    C$0.33
    June 1, 2016
    June 1, 20212,205,000(1)
    C$0.78
    May 26, 2015
    June 27, 2020643,500(1)
    C$0.65
    May 26, 2015
    November 29, 2020315,000(1)
    C$1.50
    May 26, 2015
    March 21, 2021315,000(1)
    C$0.96
    May 26, 2015
    May 20, 20211,026,000(1)
    C$3.12
    May 26, 2015
    August 10, 202117,854,500


Notes: (1) Newstrike options converted to options in the
Company as of May 26, 2015.

As of the date of this AIF 1,600,000 options issued on January
26, 2012 at an exercise price of C$2.56 expired; a further 1,200,000 options
were issued on January 16, 2017 at an exercise price of C$0.44 with an expiry
date of January 16, 2022; and a further 600,000 options were issued on March 13,
2017 at an exercise price of $0.47 with an expiry date of March 13, 2022.

Warrants

As at December 31, 2016, the Company had the following
outstanding warrants issued in the capital of the Company and the same number of
warrants are outstanding as at the date of this AIF.

Number of Warrants
    Exercise Price
    Issue Date
    Expiry Date10,000,0000
    C$0.35
    October 19, 2015
    October 19, 201718,200,000
    C$0.70
    November 30, 2016
    May 30, 2018


MARKET FOR SECURITIES

Effective November 4, 2011 the Companys common shares were
listed for trading on the NYSE MKT under the symbol TGD. Effective March 23,
2011 the Companys common shares were listed and posted for trading on the TSX
under the symbol TMM. Prior to March 23, 2011, the Companys common shares
were listed and posted for trading on the TSX-V under the symbol TMM. The
following table gives the monthly trading ranges for the Companys common shares
and the number of common shares traded (Volume) on the TSX:

48

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Trading Price and VolumeTSX

2016
    High C$
    Low C$
    Close C$
    VolumeJanuary
    0.210
    0.105
    0.190
    15,526,225February
    0.335
    0.170
    0.320
    28,686,262March
    0.365
    0.275
    0.295
    23,395,313April
    0.560
    0.280
    0.530
    22,711,986May
    0.550
    0.300
    0.345
    27,196,745June
    0.490
    0.330
    0.475
    19,076,156July
    0.750
    0.485
    0.670
    32,843,707August
    0.800
    0.550
    0.560
    27,901,215September
    0.710
    0.550
    0.610
    23,945,001October
    0.650
    0.550
    0.600
    10,440,502November
    0.670
    0.425
    0.445
    24,514,284December
    0.480
    0.370
    0.415
    16,534,131


ESCROWED SECURITIES

None of the Companys securities are held in escrow.

49

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DIRECTORS AND OFFICERS

Director and Officer Information

The following table provides the names, municipalities of
residence, position, and principal occupations of each of the directors and
executive officers as of the date hereof. Each director is elected at the annual
meeting of shareholders or appointed pursuant to the provisions of our articles
and applicable law to serve until the next annual meeting or until a successor
is elected or appointed, subject to earlier resignation by the director.

Name, Municipality of
      Residence and Position with the Company
    Director/Officer Since
    Principal Occupation for the
      Past Five YearsDIRECTORSMark Backens(4)(6)Vancouver, British Columbia Canada Director and Interim
      CEO
    May 26, 2015
    Corporate Director; Corporate Development and
      Mining Consultant (February 2013 to present); Companys Interim Chief
      Executive Officer (October 2015 to Feb 2017); Director of Investment
      Banking - Mining for Scotia Capital (January 2006 to January 2013).George Brack(2)(3)(5)Vancouver, British Columbia Canada Director
    July 31, 2014
    Corporate Director.Bryan A. Coates(2)(6)Saint-Lambert, Quebec Canada Director and Chair of the
      Board
    July 31, 2014
    President of Osisko Gold Royalties Ltd. (July
      2014 to present); Vice-President Finance and Chief Financial Officer
      Osisko Mining Corp. (2007 to 2014).Anthony Hawkshaw(1)(3)(5)Vancouver, British Columbia Canada Director
    July 31, 2014
    Corporate Director.Stephen Lang(3)(4)(5)Columbia, Missouri USA Director
    July 31, 2014
    Corporate Director (2012 to present); President
      and Chief Executive Officer of Centerra Gold Inc. (2008 to 2012).Paula Rogers(1)(2)(5)Vancouver, British Columbia Canada Director
    August 3, 2011
    Corporate Director; Chief Financial Officer of
      Castle Peak Mining Ltd. (2010 to 2014).José Vizquerra(2)(4)Toronto, Ontario Canada Director
    November 27, 2013
    Executive Vice President of Strategic
      Development and Director of Osisko Mining Corp.OFFICERSArturo Bonillas Hermosillo, Sonora
      Mexico President
    March 17, 2005
    Companys President since its inception in
      2005.Miguel Bonilla Hermosillo, Sonora,
      Mexico Vice-President Finance Mexico
    November 12, 2009
    Companys Vice-President Finance, Mexico; the
      Companys comptroller since its inception in 2005.


50

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Name, Municipality of Residence and
      Position with the Company
    Director/Officer Since
    Principal
      Occupation for the Past Five YearsMiguel Soto Hermosillo, Sonora Mexico
      Vice President Exploration
    September 2005
    Director of the Company (2005 to
      2014); Chief Operating Officer of the Company (2005 to 2012); Vice
      President Exploration since July 2012.Taj Singh Toronto, Ontario Canada
      Vice-President Engineering and Project Development
    September 9, 2012
    Companys Vice-President
      Engineering and Project Development; Professional Engineer; Chartered
      Professional Accountant; formerly an Equity Research Analyst at Macquarie
      Capital Markets in Toronto.Alex P. Tsakumis Richmond, British Columbia
      Canada Vice-President Corporate Development
    November 12, 2009
    Companys Vice-President
      Corporate Development since November 2009.Leslie Kapusianyk Vancouver, British Columbia
      Canada Corporate Secretary
    June 28, 2012
    Barrister and solicitor;
      Companys Corporate Secretary since June 2012; Companys Corporate Counsel
      since August 2008.


| | Notes: |                                                                                                                                                                                                                                  
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)    | Denotes a member of the Audit Committee of the
    Company                                                                                                                                                                       
| | (2)    | Denotes a member of the Compensation Committee of the
      Company                                                                                                                                                              
| | (3)    | Denotes a member of the Corporate Governance and
      Nominating Committee of the Company                                                                                                                                       
| | (4)    | Denotes a member of the Technical Committee of the
      Company                                                                                                                                                                 
| | (5)    | Denotes a member of the Finance Committee of the
      Company                                                                                                                                                                   
| | (6)    | Effective February 1, 2017 Greg McCunn was appointed
      Chief Executive Officer and a director of the Company, Mark Backens
      resigned as Interim Chief Executive Officer of the Company and remained as
      a director.

Shareholdings of Directors and Officers

To the best of the Companys knowledge, as at December 31,
2016, directors and executive officers, as a group, beneficially owned,
directly, or exercised control over 4,813,100 common shares (not including
common shares issuable upon the exercise of stock options or common shares
issuable upon the exercise of share purchase warrants) of the Company,
representing 1.35% of the then outstanding common shares.

Corporate Cease Trade Orders or Bankruptcies

No director or executive officer of the Company is, as of the
date hereof or was within 10 years before the date hereof, a director, chief
executive officer or chief financial officer of any company (including the
Company) that:

| | (a) | was subject to a cease trade order, an order similar to a
      cease trade order or an order that denied the relevant company access to
      any exemption under securities legislation, for a period of more than 30
      consecutive days, that was issued while the director or executive officer
      was acting in the capacity as director, chief executive officer or chief
      financial officer; or                                                                                                                                                      
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (b) | was subject to a cease trade order, an order similar to a
      cease trade order or an order that denied the relevant company access to
      any exemption under securities legislation, for a period of more than 30
      consecutive days, that was issued after the director or executive officer
      ceased to be a director, chief executive officer or chief financial
      officer and which resulted from an event that occurred while that person
      was acting in the capacity as director, chief executive officer or chief
      financial officer.

Except as disclosed below, no director or executive officer of
the Company, and no shareholder holding a sufficient number of securities of the
Company to affect materially the control of the Company:

51

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| | (a) | is, as of the date hereof or was within 10 years before
      the date hereof, a director or executive officer of any company (including
      the Company) that, while that person was acting in that capacity, or
      within a year of that person ceasing to act in that capacity, became
      bankrupt made a proposal under any legislation relating to bankruptcy or
      insolvency, or was subject to or instituted any proceedings, arrangement
      or compromise with creditors or had a receiver, receiver manager or
      trustee appointed to hold its assets; or
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (b) | has, within 10 years before the date hereof, become
      bankrupt, made a proposal under any legislation relating to bankruptcy or
      insolvency, or become subject to or instituted any proceedings,
      arrangement or compromise with creditors or had a receiver, receiver
      manager or trustee appointed to hold the assets of the director, executive
      officer or shareholder.                                                                                                                                                                                  

Mr. Stephen Lang is a former director of Allied Nevada Gold
Corp. which together with certain of its domestic direct and indirect
subsidiaries, filed voluntary petitions for relief under chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware on March 10, 2015. The plan was confirmed on October 6, 2015.

Penalties or Sanctions

No director or executive officer of the Company and no
shareholder holding a sufficient number of securities of the Company to affect
materially the control of the Company has been subject to:

| | (a) | any penalties or sanctions imposed by a court relating to
      securities legislation or by a securities regulatory authority or has
      entered into a settlement agreement with a securities regulatory
      authority; or
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                 
| | (b) | any other penalties or sanctions imposed by a court or
      regulatory body that would likely be considered important to a reasonable
      investor making an investment decision.                                            

The foregoing, not being within the knowledge of the Company,
has been furnished by the respective directors, executive officers and
shareholders holding a sufficient number of securities of the Company to affect
materially the control of the Company.

Conflicts of Interest

The directors of the Company are required by law to act
honestly and in good faith with a view to the best interests of the Company and
to disclose any interests, which they may have in any project or opportunity of
the Company. If a conflict of interest arises at a meeting of the board of
directors, any director in a conflict will disclose his or her interest and
abstain from voting on such matter. In addition, the Companys Corporate
Governance and Nominating Committee has developed, and the board of directors
has adopted, guidelines which require all Company directors to disclose all
conflicts of interest and potential conflicts of interest to the Company.

To the best of the Companys knowledge, there are no known
existing or potential conflicts of interest among the Company, its promoters,
directors and officers or other members of management of the Company or of any
proposed promoter, director, officer or other member of management as a result
of their outside business interests except that certain of the directors and
officers serve as directors and officers of other companies, and therefore it is
possible that a conflict may arise between their duties to the Company and their
duties as a director or officer of such other companies.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

The Company is not party to any legal proceedings or regulatory
actions except for the following:

52

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Pursuant to the 2007 acquisition agreement under which the
Company acquired the San Francisco Property (the Acquisition
Agreement), the Company purchased certain mining equipment and buildings
from a Mexican vendor for $4,025,000. The balance outstanding at December 31,
2016 was $1,725,000. The balance remains unpaid due to continuing mutual
deferrals between the Company and the vendor. The Company signed a promissory
note in favour of the vendor in the amount of $1,725,000 on April 18, 2007.

During the year ended March 31, 2011, an order was issued by
the Mexico Tax Administration Service (SAT) requiring the Company to
directly pay amounts owed under the Acquisition Agreement to SAT rather than to
the vendor through a process similar to a garnishment order. This was done to
cover liabilities owed by the vendor to SAT. In January 2011, the order was
overturned by a Mexican tax court, and was subsequently appealed by SAT. In May
2011, a Mexican appellate court judgment was issued confirming that the
garnishment order had been imposed by SAT with insufficient legal support, and
the Company started an administrative process to release the MXP 21,047,000
($1,811,000) of previously restricted funds. The funds were released from
restrictions on July 5, 2011. The liability under the promissory note in favour
of the vendor remains outstanding; however, the Company has received legal
advice not to pay the amount to the vendor while the garnishment order remains
outstanding. The vendor has obtained a court order to collect on the promissory
note and to place a lien on seven of the San Francisco Project concessions. The
Company has appealed the order.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as disclosed in this AIF, no director, executive or
insider of the Company, or associate or affiliate of them, has any material
interest, direct or indirect, in any transaction since incorporation or in any
proposed transaction that has materially affected, or will materially affect the
Company.

REGISTRAR AND TRANSFER AGENT

The registrar and transfer agent of the Company is
Computershare Trust Company of Canada of 2nd Floor, 510 Burrard Street,
Vancouver, British Columbia, Canada V6C 3A6.

MATERIAL CONTRACTS

Except for contracts made in the ordinary course of business,
the following are the only material contracts entered into by the Company within
the year ended December 31, 2016, or before that period but are still in effect:

|1. | Stock Option Plan dated May 24, 2016 and the granting of
      stock options thereunder to directors, officers, employees and consultants
      of the Company;                                                                                                                                           
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                           
|2. | Asset Purchase Agreement dated May 11, 2016 among the
      Company, Molimentales, Candelaria Mining Corp. and Grupo Minero Candelaria
      S.A.P.I de C.V. with respect to the disposition by the Company of the
      Caballo Blanco Project;                                                          
|   |                                                                                                                                                                                                                                                                                                           
|3. | Underwriting Agreement dated November 16, 2016 among the
      Company, RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., PI
      Financial Corp., Scotia Capital Inc. and TD Securities Inc. with respect
      to the bought deal offering of 36,400,000 units at a price of C$0.55 per
      unit.

TECHNICAL INFORMATION

The Company has included scientific and technical information
concerning material mineral projects of the Company (Technical
Information) in this AIF.

53

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Taj Singh, M.Eng, P.Eng, CPA, a Qualified Person under NI
43-101 and the Vice President of Engineering and Project Development of the
Company, has approved the Technical Information disclosed regarding the San
Francisco Property and the Ana Paula Project contained in this AIF.

INTEREST OF EXPERTS

In November 2016, the Company filed the San Francisco Report
prepared by Micon. The San Francisco Report is dated November 25, 2016 with an
effective date of July 1, 2016. The Independent Qualified Persons (as defined by
National Instrument 43-101) responsible for the San Francisco Report are William
J. Lewis, B.Sc., P.Geo., Ing. Alan J. San Martin, MAusIMM (CP), Mani Verma,
P.Eng. and Richard M. Gowans, B.Sc., P.Eng. of Micon.

Messrs. Lewis, San Martin, Verma and Gowans and Micon, are not
known to the Company to have any registered or beneficial interest, direct or
indirect, in any securities or other property of the Company or any of the
Companys associates or affiliates.

In November 2016, the Company filed the Ana Paula Report. The
Ana Paula Report is dated November 24, 2016 with an effective date of February
2, 2016. Originally prepared for Newstrike on October 29, 2014, the initial
technical report was re-addressed to the Company following completion of the
Arrangement in 2015. The Ana Paula Report presents the same data as the initial
technical report except for the inclusion of the Plant pursuant to the Plant
Acquisition described under the heading Recent Developments, reduction of the
gold price to current levels, and updates to foreign exchange rates, major
commodity prices, and minor adjustments to labour burden rates to make them
consistent. The inclusion of the process plant acquisition warranted an update
to the financial model. The Ana Paula Report was prepared by Michel Creek
(P.E.), Tony Loschiavo (P.Eng.), Craig Gibson (P.Geo., Ph.D.), Kelly McLeod
(P.Eng.), Herb Welhener, and Dawn Garcia (P. G.), all of whom are independent
Qualified Persons as defined in NI 43-101.

Messrs. Creek, Loschiavo, and Welhener and Mses. McLeod and
Garcia are not known to the Company to have any registered or beneficial
interest, direct or indirect, in any securities or other property of the Company
or any of the Companys associates or affiliates. Mr. Gibson held common shares
and options in Newstrike that, upon the acquisition of Newstrike by the Company
were converted into 3,000 common shares and 508,500 options in the Company.

Deloitte LLP is independent within the meaning of the Rules of
Professional Conduct of Chartered Professional Accountants of British Columbia.

AUDIT COMMITTEE INFORMATION

Audit Committee Charter

The text of the Companys Audit Committee Charter is included
as Appendix 1.

Composition of the Audit Committee and Relevant Education
and Experience

The Companys Audit Committee is comprised of Paula Rogers,
Stephen Lang and Tony Hawkshaw, all of whom are financially literate within
the meaning of applicable Canadian and U.S. securities laws. In the opinion of
the Companys Board of Directors, Ms. Rogers, Mr. Lang and Mr. Hawkshaw are
independent within the meaning of applicable Canadian and U.S. securities
laws, including Rule 10A-3 of the Exchange Act of 1934, as amended (the
Exchange Act) and the rules of the TSX and NYSE MKT.

The Companys Board of Directors has determined that it has at
least one audit committee financial expert serving on its Audit Committee. The
Companys Board of Directors has determined that Paula Rogers and Anthony
Hawkshaw are audit committee financial experts (as such term is defined in
paragraph 8(b) of General Instruction B to Form 40-F) and are independent, as
that term is defined by the Exchange Act and the NYSE MKTs corporate governance
standards applicable to the Company.

54

---

The Securities and Exchange Commission has indicated that the
designation of a person as an audit committee financial expert does not make
such person an expert for any purpose, including without limitations for
purpose of Section 11 of the Securities Act of 1933, as amended, does not impose
on such person any duties, obligations or liability that are greater than those
imposed on such person as a member of the Audit Committee and the Companys
Board of Directors in the absence of such designation and does not affect the
duties, obligations or liability of any other member of the Audit Committee or
the Companys Board of Directors.

A summary of the relevant education and experience of each
member of the Audit Committee is included in the table below.

Committee Member
    Relevant Education and
      ExperiencePaula Rogers Director and Chair of Audit Committee
      Independent Financially Literate
    Ms. Rogers received her Bachelor of Commerce degree from
      the University of British Columbia in 1990. She became a member of the
      Institute of Chartered Accountants of British Columbia in 1993. From 1990
      to 1994, Ms. Rogers was with Deloitte & Touche LLP (now Deloitte LLP),
      Chartered Accountants. Ms. Rogers has over 20 years experience working
      for Canadian-based international public companies in the areas of treasury
      operations, tax planning and compliance, mergers and acquisitions and
      financial reporting. She has extensive experience in multi- million dollar
      financings in the Canadian and US bank and public debt markets. Ms. Rogers
      has served as an officer of other public companies including
      Vice-President, Treasurer of NYSE-listed Goldcorp Inc. and Treasurer of
      Wheaton River Minerals Ltd. and Silver Wheaton Corp. She currently serves
      on the board of NeutriSci International Inc. and Diversified Royalty
      Corp., where she also serves as the Chair of the Audit Committee.Stephen Lang Director Independent
      Financially Literate
    Mr. Lang has over 32 years of experience in the mining
      industry. He is a director of Centerra Gold Inc. and served as Centerras
      President and CEO from 2008 to 2012, having joined Centerra in 2007 as
      Chief Operating Officer. Mr. Lang served as a director and Audit Committee
      member of Allied Nevada Gold Corp. from 2013 to 2015. Between 2003 and
      2007, Mr. Lang served as Executive Vice President and Chief Operating
      Officer of Stillwater Mining Company. Prior to joining Stillwater, he was
      employed with Barrick Gold Corporation as Vice President and General
      Manager of Barrick Golds Goldstrike/Meikle operation from 2001 to 2003.
      Prior to this he served as Vice President of Engineering and Project
      Development of Rio Algom, Limited in Santiago, Chile from 1999 to 2001.
      From 1996 to 1999, he served as Vice President and General Manager of
      Kinross Gold Corporation/Amax Gold Corporations Fort Knox Mine in
      Fairbanks, Alaska. From 1981 to 1996, he held various positions with Santa
      Fe Pacific Gold Minerals Corporation.Anthony Hawkshaw Director Independent
      Financially Literate
    Mr. Hawkshaw has more than 30 years of experience in the
      mining industry in countries including Canada, the United States, Mexico,
      Russia and Peru and is a former director, Chief Financial Officer and
      founding shareholder of Rio Alto Mining Ltd. Prior to joining Rio Alto,
      Mr. Hawkshaw was the Chief Financial Officer of Pan American Silver Corp.
      and Chariot Resources Ltd. He has also served as Chair of the Audit
      Committee of Caza Gold Corp. and is currently the Chair of the Audit
      Committee of Regulus Resources Inc.


Pre-approval policies and procedures

All related services provided by the Auditors, including
non-audit services, are subject to pre-approval by the Audit Committee through
established procedures. The Companys Controller performing the functions of
chief financial officer (CFO) discusses proposed non-audit related
services to be performed by Deloitte LLP (Deloitte) with the Chair of
the Audit Committee. If the amount is immaterial and will not otherwise
interfere with the independence of the auditors, the Chair approves the services
and the Controller performing the functions of CFO reports to the Audit
Committee on these services at the next regularly scheduled Audit Committee
meeting. If the amount of the proposed services is material, a special Audit
Committee meeting is convened to discuss the proposed service and the pre-approval is put to a vote. Management
regularly updates the Audit Committee on the services rendered by the Auditors.

55

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The Audit Committee has reviewed other services provided by the
Auditors and has determined that they do not interfere with the independence of
the Auditors.

External auditor service fees

Deloitte has been the Companys external auditor since January
2008. The aggregate fees billed for professional services rendered by Deloitte
for the year ended December 31, 2016 and the year ended December 31, 2015 in
Canadian dollars were as follows:

Year Ended December 31, 2016
    Year Ended December 31, 2015Audit fees (1)
    C$280,000
    C$311,500Audit related fees (2)
    C$51,500
    C$27,500Tax fees (3)
    C$nil
    C$16,300All other fees (4)
    C$nil
    C$nilTotal
    C$331,500
    C$355,300


Notes:

|(1) | Audit Fees means the aggregate fees billed by the
      Companys external auditor for audit and interim review services; $12,500
      of the audit fees for the year ended December 31, 2015, relate to final
      billings for the audit for the year ended December 31, 2014.                
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Audit Related Fees means the aggregate fees billed for
      assurance and related services by the Companys external auditor that are
      reasonably related to the performance of the audit or review of the
      Companys financial statements and are not reported under Audit
    Fees.
|(3) | Tax Fees means the aggregate fees billed in each of the
      last two fiscal years for professional services rendered by the Companys
      external auditor for tax compliance, tax advice and tax
planning.                                                                                   
|(4) | Other Fees means the aggregate fees billed for products
      and services provided by the Companys external auditor, other than the
      services reported under Audit Fees, Audit-Related Fees and Tax
      Fees.                                                                      

ADDITIONAL INFORMATION

Additional information relating to the Companys business is
available on SEDAR at www.sedar.comor on the
Companys website at www.timminsgold.com.

Additional information, including directors and officers
remuneration and indebtedness, the Companys principal shareholders, and
securities authorized for issuance under equity compensation plans, if
applicable, is contained in the management information circular prepared for the
Annual and Special Meeting of Shareholders held on May 24, 2016, and available
on SEDAR at www.sedar.com.

Additional financial information is provided in the Companys
financial statements and Management Discussion and Analysis for the Companys
most recently completed financial year and is available on SEDAR at www.sedar.com oron the Companys website at www.timminsgold.com.

56

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APPENDIX 1

TIMMINS GOLD CORP.

(the Company)

AUDIT COMMITTEE CHARTER

I.      Purpose and
authority

The audit committee of the Company(the Audit
Committee)is an advisory committee of the Board of Directors of the
Company (the Board).

This charter (the Audit Committee Charter) is part of the
Companys Corporate Governance Manual for the Boards strategic oversight of the
Company and will be interpreted in the context of all Applicable Laws.

This Audit Committee Charter is a Board policy to guide the
directors and officers in the governance of the Company. Although this Audit
Committee Charter is intended to summarize legislative, regulatory or corporate
obligations established by other documents and processes, it remains subject to
the most current and binding legislative, regulatory and contractual obligations
of the Company, and its directors and officers.

The Audit Committee is established by and among the Board for
the primary purpose of assisting the Board in:

- Overseeing the integrity of the Companys financial statements and the
  Companys accounting and final reporting processes and financial statement
  audits.
- Overseeing the Companys compliance with legal and regulatory requirements.
- Overseeing the registered public accounting firms qualifications and
  independence.
- Overseeing the performance of the Companys independent auditor and
  internal audit function.
- Overseeing the Companys system of disclosure controls and procedures,
  internal controls over financial reporting, and compliance with ethical
  standards adopted by the Company.
- Overseeing the identification of the principal financial risks of the
  Companys business, and ensuring the implementation of appropriate systems to
  manage these risks.

Consistent with this function, the Audit Committee should
encourage continuous improvement of, and should foster adherence to, the
Companys policies, procedures, and practices at all levels. The Audit Committee
should provide for open communication among the independent auditor, financial
and senior management, the internal audit function, and the Board.

The Audit Committee has the authority to conduct investigations
into any matters within its scope of responsibility and obtain advice and
assistance from outside legal, accounting, or other advisors as necessary, to
perform its duties and responsibilities.

1

---

In carrying out its duties and responsibilities, the Audit
Committee shall also have the authority to meet with and seek any information it
requires from employees, officers, directors, or external parties.

The Company will provide appropriate funding, as determined by
the Audit Committee, for compensation to the independent auditor, to any
advisors that the Audit Committee chooses to engage, and for payment of ordinary
administrative expenses of the Audit Committee that are necessary or appropriate
in carrying out its duties including services of a non-executive secretary.

The Audit Committee will primarily fulfill its responsibilities
by carrying out the activities enumerated in Section III of this Audit Committee
Charter.

II.     Composition and meetings

The Audit Committee will comprise three or more directors as
determined by the Board.

Each Audit Committee member must be independent as defined by
NI 52-110.

All members of the Audit Committee must comply with all
financial-literacy requirements as defined by NI 52-110, currently as having the
ability to read and understand a set of financial statements of comparable
breadth and complexity of issues reasonably expected to be raised in the
financial statements of the Company, within a reasonable period of time
following his or her appointment. To help meet these requirements, the Audit
Committee will provide its members with annual continuing education
opportunities in financial reporting and other areas relevant to the Audit
Committee. At least one member will qualify as an audit committee financial
expert as defined by the SEC and determined by the Board.

Audit Committee members will be appointed by the Board at the
first Board meeting following each Annual General Meeting and from time to time
thereafter to fill vacancies on the Audit Committee. An Audit Committee member
may be removed or replaced at any time at the discretion of the Board.

The Board will designate the chair of the Audit Committee (the
Audit Committee Chair). The Audit Committee Chair shall be responsible for the
leadership of the Audit Committee, including scheduling and presiding over
meetings, preparing agendas, overseeing the preparation of briefing documents to
circulate during the meeting as well as pre-meeting materials, and making
regular reports to the Board. The Audit Committee Chair will also maintain
regular liaison with the CEO, the CFO, the head of internal audit and the lead
external audit partner.

The Audit Committee will meet at least quarterly, or more
frequently as circumstances dictate. It is acceptable for members to participate
by telephone or other electronic means. Each regularly scheduled meeting will
conclude with an executive session of the Audit Committee absent members of
management. As part of its responsibility to foster open communication, the
Audit Committee will meet periodically with management, the head of the internal
audit function, and the independent auditor in separate executive sessions.

Each of the Audit Committee Chair, members of the Audit
Committee, the Board Chair, external auditors, CEO, CFO or secretary shall be
entitled to request that the Audit Committee Chair call a meeting which shall be
held within one week of receipt of such request.

The Audit Committee, through the Audit Committee Chair, shall
report after each Audit Committee meeting to the Board at the Boards next
regular meeting. A copy of the minutes of each meeting of the Audit Committee
shall be provided to each member of the Audit Committee, to each Director, to
the CFO and to the external auditor in a timely fashion.

2

---

III.    Responsibilities and duties

To fulfill its responsibilities and duties, the Audit Committee
will:

External auditors

|1. | Be directly responsible for the appointment,
      compensation, retention and oversight of the work of the independent
      auditor in preparing or issuing an audit report or performing other audit,
      review or attest services for the Company. The independent auditor must
      report directly to the Audit Committee.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                     
|2. | Obtain and review, at least annually, a report by the
      independent auditor describing:                                                                                                                                                                                                                                         

| | a. | the firms internal quality control procedures;                                                                                                                                                                                                                           
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                           
| | b. | any material issues raised by the most recent internal
      quality control review or peer review of the firm, or any governmental or
      professional authorities of the firm within the preceding five years, and
      any steps taken to deal with such issues; and
| |    |                                                                                                                                                                                                                                                                           
| | c. | all relationships between the independent auditor and the
      Company to assess the auditors independence.                                                                                                                                                              

|3. | After reviewing the foregoing report and the independent
      auditors work throughout the year, the Audit Committee shall evaluate the
      auditors qualifications, performance and independence. This evaluation
      should include the review and evaluation of the lead audit partner and
      take into account the opinions of management and the Companys personnel
      responsible for the internal audit function.                                                    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4. | Discuss with the external auditor, the audit partner
      rotation plan including the timing and process for implementing the plan
      to ensure the succession plan is set.                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|5. | Pre-approve all non-audit services to be provided to the
      Company or its subsidiary entities by its external auditors or the
      external auditors of its subsidiaries. The Audit Committee may delegate to
      one or more independent members of the Audit Committee the authority to
      pre-approve nonaudit services if the Audit Committee is informed of each
      pre-approval at the next scheduled Audit Committee meeting.                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|6. | Review the terms and conditions of the annual external
      audit engagement including, but not limited to, staffing, objectives and
      scope of the external audit work, materiality limits, audit reports
      required, areas of audit risk, performance timetable, and proposed fees
      and compensation.                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|7. | Oversee the work of the external auditors engaged for the
      purposes of preparing or issuing an audit report or performing other
      audit, review or attest services for the Company, including the resolution
      of disagreements between management and the external auditors regarding
      financial reporting, and including the review with the external auditors
      of the results of the annual audit examination including, but not limited
      to the following:

| | a. | any difficulties encountered, or restrictions imposed by
      management, during the annual audit;                                                                                                                                                        
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                            
| | b. | any significant accounting or financial reporting
      issues;                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| | c. | the auditors evaluation of the Companys system of
      internal accounting controls, procedures and documentation;                                                                                                                                      
| |    |                                                                                                                                                                                                                                                            
| | d. | the post-audit or management letter containing any
      findings or recommendations of the external auditor including managements
      response thereto and the subsequent follow-up to any identified internal
      accounting control weaknesses; and

3

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| | e. | any other matters which the external auditors should
      bring to the attention of the Audit Committee.
| | -- | ---------------------------------------------------------------------------------------------------------

|8. | Hold timely discussions with the external auditor
      regarding the following:
|-- | --------------------------------------------------------------------------------

| | a. | all critical accounting policies and practices;                                                                                                                                                                                                                                                                                  
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                  
| | b. | all alternative treatments of financial information
      within generally accepted accounting principles related to material items
      that have been discussed with management, ramifications of the use of such
      alternative disclosures and treatments, and the treatment preferred by the
      external auditor; and
| |    |                                                                                                                                                                                                                                                                                                                                  
| | c. | other material written communications between the
      independent auditor and management, including, but not limited to, the
      management letter and schedule of unadjusted differences.                                                                                                                                   

Internal audit

|9.  | Review and approve the internal audit annual audit plan
      and all major changes to the plan.                                                                                                                            
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                             
|10. | Review and discuss with the internal auditor the scope,
      progress and results of executing the internal audit plan.                                                                                                    
|    |                                                                                                                                                                                                                             
|11. | Receive the requisite information from the internal
      auditor including a report on the key risks facing the Company and the
      status of significant findings and recommendations, and managements
      responses.
|    |                                                                                                                                                                                                                             
|12. | Periodically review, with the internal auditor, any
      significant difficulties, disagreements with management, or scope
      restrictions encountered in the course of the internal audit functions
      work.       
|    |                                                                                                                                                                                                                             
|13. | Review and concur on the appointment, replacement,
      reassignment or dismissal of the head of internal audit, who shall have
      direct access to the Audit Committee.                                                
|    |                                                                                                                                                                                                                             
|14. | Review the annual performance of the internal audit
      function.                                                                                                                                                         

Risk management and controls

|15. | Discuss the Companys policies on risk assessment and
      risk management, including appropriate guidelines and policies to govern
      the process, as well as the Companys major financial risk exposures and
      the steps management has undertaken to control them.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                               
|16. | Review with senior management the Companys overall
      anti-corruption and anti-fraud programs and controls.                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                               
|17. | Obtain reasonable assurance, by discussions with and
      reports from management and external auditors, that the accounting systems
      are reliable and that the system of internal controls is effectively
      designed and implemented.                              
|    |                                                                                                                                                                                                                                                                               
|18. | Ensure that any noted deficiencies in internal controls
      are addressed in a timely fashion as well as assess whether any such
      deficiency warrants a more thorough evaluation of the
  system.                                                                      

Disclosure

|19. | Review the appropriateness of accounting policies and
      financial reporting practices used by the Company.                                                                                                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                   
|20. | Review major issues regarding accounting principles and
      financial statement presentations, including any significant proposed
      changes in financial reporting and accounting policies and practices to be
      adopted by the Company.

4

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|21. | Review any new or pending developments in accounting and
      reporting standards that may affect or impact on the Company.                                                                                                                                                                                                                                                                                                                                              
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|22. | Discuss the key estimates and judgments of management
      that may be material to the financial reporting of the Company.                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|23. | Periodically review the adequacy and effectiveness of the
      Companys disclosure controls and procedures and the Companys internal
      control over financial reporting, including any significant deficiencies
      and significant changes in internal controls.                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|24. | Ensure that adequate procedures are in place for the
      review of the Companys public disclosure of financial information
      extracted or derived from the issuers financial statements, and
      periodically assess the adequacy of those procedures.                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|25. | Satisfy itself that management has developed and
      implemented a system to ensure that the Company meets its continuous
      disclosure obligations, and receive regular reports from management and
      the Companys legal advisors on the functioning of the disclosure
      compliance system, including any significant instances of non- compliance
      with such system, in order to satisfy itself that such system may be
      reasonably relied upon.

Financial results and reports

|26. | Review, and recommend to the Board for approval as
      applicable, the following public disclosure
documents:
|--- | ---------------------------------------------------------------------------------------------------------------

| | a. | the quarterly financial statements, including
      Managements Discussion and Analysis of Financial Condition and Results of
      Operations and related press release;    
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                               
| | b. | the annual audited financial statements including
      Managements Discussion and Analysis of Financial Condition and Results of
      Operations and related press release;
| |    |                                                                                                                                                                               
| | c. | the annual management information circular and proxy
      materials; and                                                                                                     
| |    |                                                                                                                                                                               
| | d. | the annual information form.                                                                                                                                                  

|27. | Review, and recommend to the Board for approval, all
      financial statements, reports of a financial nature, and the financial
      content of prospectuses or any other reports which require approval by the
      Board, including any report of management which accompanies published
      financial statements (to the extent such a report discusses the financial
      position or operating results) for consistency of disclosure with the
      financial statements themselves.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CEO/CFO certification

|28. | Receive and review the CEO and CFO certificates to be
      filed under Section 302 and 906 of the Sarbanes-Oxley Act, as well as
      under the Canadian Securities Administrators National Instrument 52-109
      certification of disclosure in issuers annual and interim filings, and
      inquire as to practices and procedures adopted to permit managements
      assurance on the underlying controls.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Whistle-Blower program

|29. | Establish procedures for the receipt, retention and
      treatment of complaints received by the Company regarding accounting,
      internal accounting controls, or auditing or other matters and, for the
      confidential, anonymous submission by employees of the Company of concerns
      regarding questionable accounting, auditing or other
  matters.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5

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Other responsibilities

|30. | Reviewing regular reports from management and others
      (e.g. internal and external auditors) with respect to the Companys
      compliance with laws and regulations having a material impact on financial
      reporting and disclosure, including:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | tax and financial reporting laws and
  regulations;                  
| | -- | ---------------------------------------------------------------------
| |    |                                                                      
| | b) | legal withholding requirements;                                      
| |    |                                                                      
| | c) | environmental protection laws and regulations;
  and                 
| |    |                                                                      
| | d) | other laws and regulations which expose Directors to
      liability.

|31. | Reviewing the adequacy of the Companys insurance
      coverage, including the Directors and Officers insurance
  coverage.                                                                                                                                            
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                           
|32. | Reviewing activities, organizational structure, and
      qualifications of the CFO and the staff in the financial reporting area
      and ensuring that matters related to succession planning within the
      Company are raised for consideration at the Board level.
|    |                                                                                                                                                                                                                                                                           
|33. | Reviewing the compensation of directors and officers,
      including expenses and the use of the Companys
assets.                                                                                                                                                       

Review of Audit Committee mandate and performance

|34. | On an annual basis the Audit Committee shall review and
      assess the adequacy of this Audit Committee Charter taking into account
      all applicable legislative and regulatory requirements as well as any best
      practice guidelines recommended by regulators or stock exchanges with whom
      the Company has a reporting relationship and, if appropriate, recommend
      changes to the Audit Committee Charter to the Board for its
    approval.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|35. | The Audit Committee shall perform an evaluation of its
      performance at least annually to determine whether it is functioning
      effectively and such assessments should be reported to the Board. The
      Audit Committee also shall discuss with the independent auditor the
      accountants observations related to the effectiveness of the Audit
      Committee.                                                                                    

6

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