----

----

----

|                                                   | Page         |
|--------------------------------------------------------|--------------|
| Management's Responsibility for Financial Reporting    | 2            |
| Independent Auditor's Report                           | 3            |
| Consolidated Statements of Financial Position          | 5            |
| Consolidated Statements of Loss and Comprehensive Loss | 6            |
| Consolidated Statements of Changes in Equity           | 7            |
| Consolidated Statements of Cash Flows                  | 8            |
| Notes to the Consolidated Financial Statements         | 9 – 32 |

----

|                                          |        |                        |
|-----------------------------------------------|--------|-----------------------------|
|                                          |   |                        |   |
| (Signed) Darren Blasutti                 |   |  (Signed) Warren Varga |   |
| President & Chief Executive Officer  |   | Chief Financial Officer     |   |
|                                          |   |                             |   |
|                                          |   |                        |   |
| Toronto, Ontario, Canada                      |   |                        |   |
| March 30, 2017                                |   |                        |   |

----

----

----

|    (In thousands of U.S. dollars)   |
|--------------------------------------------------------------|
|                                       |   |         |    |   |         |
|--------------------------------------------|--------|--------------|---------|--------|--------------|
|                                       |   | December 31, |    |   | December 31, |
| As at                                      |   | 2016         |    |   | 2015         |
| Assets                                     |   |         |    |   |         |   |
|  Current assets                       |   | $            | 24,055  |   |         | $ | 1,319 |   |
|  Cash and cash equivalents            |   |         | 4,002   |   |         |   | 4,529 |   |
|  Trade and other receivables (Note 6) |   |         | 6,618   |   |         |   | 8,790 |   |
|  Inventories (Note 7)                 |   |         | 1,385   |   |         |   | 737 |   |
|  Prepaid expenses                     |   |         | 503     |   |         |   | 466 |   |
|  Investment in Scorpio Gold (Note 8)  |   |         | 36,563  |   |         |   | 15,841 |   |
|                                       |   |         |    |   |         |   |   |   |
| Non-current assets                         |   |         |    |   |         |   |   |   |
| Restricted cash                            |   |         | 151     |   |         |   | 151 |   |
| Long-term investments                      |   |         | 28      |   |         |   | 11 |   |
| Property, plant and equipment (Note 9)     |   |         | 80,548  |   |         |   | 80,875 |   |
| Total assets                               |   | $            | 117,290 |   |         | $ | 96,878 |   |
| **Liabilities**                               |   |   |            |   |   |   |     |   |
|-----------------------------------------------|--------|--------|-----------------|--------|--------|--------|----------|--------|
| Current liabilities                           |   |   |            |   |   |   |     |   |
| Trade and other payables                      |   | $      | 8,727           |   |   | $      | 9,358    |   |
| Credit facilities (Note 10)                   |   |   | 7,758           |   |   |   | 1,000    |   |
|                                          |   |   | 16,485          |   |   |   | 10,358   |   |
| Non-current liabilities                       |   |   |            |   |   |   |     |   |
| Other long-term liabilities                   |   |   | 882             |   |   |   | 1,052    |   |
| Credit facilities (Note 10)                   |   |   | -               |   |   |   | 6,141    |   |
| Post-employment benefit obligations (Note 11) |   |   | 8,116           |   |   |   | 9,290    |   |
| Decommissioning provision (Note 12)           |   |   | 3,829           |   |   |   | 4,568    |   |
| Deferred tax liabilities (Note 17)            |   |   | 834             |   |   |   | 624      |   |
| Total liabilities                             |   |   | 30,146          |   |   |   | 32,033   |   |
|  Equity                                  |   |   |            |   |   |   |     |   |
| Share capital (Note 13)                       |   |   | 202,191         |   |   |   | 181,143  |   |
| Equity reserve                                |   |   | 34,400          |   |   |   | 28,452   |   |
| Foreign currency translation reserve          |   |   | 6,454           |   |   |   | 7,788    |   |
| Changes in available-for-sale investment      |   |   | 237             |   |   |   | -        |   |
| Deficit                                       |   |   | (156,138        | )      |   |   | (152,538 | )      |
| Total equity                                  |   |   | 87,144          |   |   |   | 64,845   |   |
|                                          |   |   |            |   |   |   |     |   |
|  Total liabilities and equity            |   |   |  $ 117,290 |   |   |   | $ 96,878 |   |

| (Signed) Brad Kipp | (Signed) Gordon Pridham |
|--------------------|-------------------------|
| Director           | Director                |

----

| (In thousands of U.S. dollars, except share and per share amounts) |
|--------------------------------------------------------------------|

|                                                         |   | 2016   |       |   | 2015   |   |
|--------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|  Revenue                                                |   | $      | 58,866     |   |   | $      | 53,450 |   |
|                                                         |   |   |       |   |   |   |   |   |
| Cost of sales (Note 15)                                      |   |   | (46,145    | )      |   |   | (52,574 | ) |
| Depletion and amortization (Note 9)                          |   |   | (7,388     | )      |   |   | (8,481 | ) |
| Care, maintenance and restructuring costs                    |   |   | (993       | )      |   |   | (1,994 | ) |
| Corporate general and administrative (Note 16)               |   |   | (5,355     | )      |   |   | (6,063 | ) |
| Exploration costs                                            |   |   | (1,681     | )      |   |   | (1,433 | ) |
| Accretion on decommissioning provision (Note 12)             |   |   | (152       | )      |   |   | (162 | ) |
| Interest and financing expense                               |   |   | (2,337     | )      |   |   | (1,175 | ) |
| Foreign exchange gain                                        |   |   | 340        |   |   |   | 880 |   |
| Loss on derivative liability                                 |   |   | -          |   |   |   | (126 | ) |
| Loss on mining concession sales                              |   |   | -          |   |   |   | (291 | ) |
|  Loss on disposal of assets                             |   |   | (20        | )      |   |   | - |   |
| Loss on investment in Scorpio Gold (Note 8)                  |   |   | (132       | )      |   |   | (640 | ) |
| Impairment of property, plant and equipment (Note 9)         |   |   | -          |   |   |   | (1,429 | ) |
| Loss before income taxes                                     |   |   | (4,997     | )      |   |   | (20,038 | ) |
| Income tax (expense) recovery (Note 17)                      |   |   | (210       | )      |   |   | 652 |   |
| Net loss                                                     |   |   | (5,207     | )      |   |   | (19,386 | ) |
|  Other comprehensive income (loss)                      |   |   |       |   |   |   |   |   |
| Items that will not be reclassified to net loss              |   |   |       |   |   |   |   |   |
| Actuarial gain (loss) on post-employment benefit obligations |   |   | 1,607      |   |   |   | (3,853 | ) |
| Items that may be reclassified subsequently to net loss      |   |   |       |   |   |   |   |   |
| Foreign currency translation reserve                         |   |   | (1,334     | )      |   |   | (186 | ) |
| Change in fair value of available-for-sale securities        |   |   |       |   |   |   |   |   |
| of Scorpio Gold                                              |   |   | 237        |   |   |   | (307 | ) |
| Other comprehensive income (loss)                            |   |   | 510        |   |   |   | (4,346 | ) |
|  Comprehensive loss                                     |   | $      | (4,697     | )      |   | $      | (23,732 | ) |
|                                                         |   |   |       |   |   |   |   |   |
|  Loss per share                                         |   |   |       |   |   |   |   |   |
|  Basic and diluted (Note 2)                             |   |   | (0.15      | )      |   |   | (0.68 | ) |
|                                                         |   |   |       |   |   |   |   |   |
|  Weighted average number of common shares               |   |   |       |   |   |   |   |   |
|  outstanding                                            |   |   |       |   |   |   |   |   |
|  Basic and diluted (Note 14)                            |   |   | 34,526,435 |   |   |   | 28,328,612 |   |

----

| (In thousands of U.S. dollars, except share amounts) |
|------------------------------------------------------|

|                                                       |   |                            |   |   |       |   |    |            |   |   | Foreign           |   |   | Changes in fair     |   |   |        |   |   |   |   |
|------------------------------------------------------------|--------|---------------------------------|--------|--------|------------|--------|---------|-----------------|--------|--------|-------------------|--------|--------|---------------------|--------|--------|-------------|--------|--------|--------|--------|
|                                                       |   |                            |   |   |       |   |    |            |   |   | currency          |   |   | value of            |   |   |        |   |   |   |   |
|                                                       |   | Share capital    |   |   | **Equity** |   |    | **translation** |   |   | **available-for** |   |   |                |   |   | Total       |   |
|                                                       |   | **Shares (000s)**               |   |   | **Amount** |   |    | **reserve**     |   |   | **reserve**       |   |   | **sale investment** |   |   | **Deficit** |   |   | equity |   |
|                                                       |   |                            |   |   |       |   |    |            |   |   |              |   |   |                |   |   |        |   |   |   |   |   |   |   |   |   |   |   |
|  Balance at January 1, 2015                           |   |                            | 28,005 |   |       | $      | 179,907 |            |   | $      | 26,450            |   |   | $                   | 7,974  |   |        | $      | 307    |   |   | $ | (129,299 | ) |   | $ | 85,339 |   |
| Net loss for the year                                      |   |                            | -      |   |       |   | -       |            |   |   | -                 |   |   |                | -      |   |        |   | -      |   |   |   | (19,386 | ) |   |   | (19,386 | ) |
| Other comprehensive loss for the year                      |   |                            |   |   |       |   |    |            |   |   |              |   |   |                | (186   | )      |        |   | (307   | )      |   |   | (3,853 | ) |   |   | (4,346 | ) |
| Share-based payments (Note 13)                             |   |                            | -      |   |       |   | -       |            |   |   | 523               |   |   |                | -      |   |        |   | -      |   |   |   | - |   |   |   | 523 |   |
| Shares and warrants issued on private placement (Note 13)  |   |                            | 930    |   |       |   | 1,236   |            |   |   | 203               |   |   |                | -      |   |        |   | -      |   |   |   | - |   |   |   | 1,439 |   |
| Warrants issued and amended (Note 13)                      |   |                            | -      |   |       |   | -       |            |   |   | 1,276             |   |   |                | -      |   |        |   | -      |   |   |   | - |   |   |   | 1,276 |   |
| Balance at December 31, 2015                               |   |                            | 28,935 |   |       | $      | 181,143 |            |   | $      | 28,452            |   |   | $                   | 7,788  |   |        | $      | -      |   |   | $ | (152,538 | ) |   | $ | 64,845 |   |
|                                                       |   |                            |   |   |       |   |    |            |   |   |              |   |   |                |   |   |        |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |                            |   |   |       |   |    |            |   |   |              |   |   |                |   |   |        |   |   |   |   |   |   |   |   |   |   |   |
| Balance at January 1, 2016                                 |   |                            | 28,935 |   |       | $      | 181,143 |            |   | $      | 28,452            |   |   | $                   | 7,788  |   |        | $      | -      |   |   | $ | (152,538 | ) |   | $ | 64,845 |   |
| Net loss for the year                                      |   |                            | -      |   |       |   | -       |            |   |   | -                 |   |   |                | -      |   |        |   | -      |   |   |   | (5,207 | ) |   |   | (5,207 | ) |
| Other comprehensive (loss) income for the year             |   |                            | -      |   |       |   | -       |            |   |   | -                 |   |   |                | (1,334 | )      |        |   | 237    |   |   |   | 1,607 |   |   |   | 510 |   |
| Share-based payments (Note 13)                             |   |                            | -      |   |       |   | -       |            |   |   | 585               |   |   |                | -      |   |        |   | -      |   |   |   | - |   |   |   | 585 |   |
| Shares and warrants issued on private placements (Note 13) |   |                            | 8,766  |   |       |   | 17,889  |            |   |   | 5,161             |   |   |                | -      |   |        |   | -      |   |   |   | - |   |   |   | 23,050 |   |
| Proceeds from exercise of options and warrants             |   |                            | 1,839  |   |       |   | 3,159   |            |   |   | (1,149            | )      |   |                | -      |   |        |   | -      |   |   |   | - |   |   |   | 2,010 |   |
| Warrants issued and amended (Note 13                       |   |                            | -      |   |       |   | -       |            |   |   | 1,351             |   |   |                | -      |   |        |   | -      |   |   |   | - |   |   |   | 1,351 |   |
| Balance at December 31, 2016                               |   |                            | 39,540 |   |       | $      | 202,191 |            |   | $      | 34,400            |   |   | $                   | 6,454  |   |        | $      | 237    |   |   | $ | (156,138 | ) |   | $ | 87,144 |   |

----

| (In thousands of U.S. dollars) |
|--------------------------------|

|                                                                                                                                                                                                                                                                                    |   | 2016   |   |   | 2015   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|  Cash flow generated from (used in)                                                                                                                                                                                                                                                |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |
| Net loss for the year Adjustments for:                                                                                                                                                                                                                                                  |   | $      | (5,207 | )      |   | $      | (19,386 | ) |
| Depletion and amortization                                                                                                                                                                                                                                                              |   |   | 7,388  |   |   |   | 8,481 |   |
| Deferred income tax expense (recovery)                                                                                                                          |   |   | 210    |   |   |   | (647 | ) |
| Accretion on decommissioning provision                                                                                                                          |   |   | 152    |   |   |   | 162 |   |
| Share-based payments                                                                                |   |   | 1,237  |   |   |   | 916 |   |
| Unrealized (gain) loss on long-term investments                                                                                                                                          |   |   | (17    | )      |   |   | 14 |   |
| Loss on derivative liability                                                                        |   |   | -      |   |   |   | 126 |   |
| Non-cash impact of warrants issued and amended                                                                                                                                                                                                                                          |   |   | -      |   |   |   | 1,276 |   |
| Non-cash impact of other long-term liabilities                                                                                                                                 |   |   | 143    |   |   |   | 493 |   |
| Non-cash impact of credit facilities                                                                                                                                                                                                                                                    |   |   | 1,178  |   |   |   | (1,606 | ) |
| Non-cash impact of post-employment benefit obligations                                                                                                                                                                                                                                  |   |   | 433    |   |   |   | 256 |   |
| Loss on mining concession sales                                                                                                                                                                                                                                                         |   |   | -      |   |   |   | 291 |   |
| Loss on disposal of assets                                                                                                                                                                                                                                                              |   |   | 20     |   |   |   | - |   |
| Loss on investment in Scorpio Gold                                                                                                                                                                                                                                                      |   |   | 132    |   |   |   | 640 |   |
| Impairment of property, plant and equipment                                                                                                                                                                                                                                             |   |   | -      |   |   |   | 1,429 |   |
|                                                                                                                                                                                                                                                                                    |   |   | 5,669  |   |   |   | (7,555 | ) |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Changes in items of working capital:                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Trade and other receivables                                                                                                                                                                                                                                                             |   |   | 542    |   |   |   | 2,239 |   |
| Income taxes                                                                                                                                                                                                                                                                            |   |   | -      |   |   |   | 236 |   |
| Inventories                                                                                                                                                                                                                                                                             |   |   | 2,172  |   |   |   | 3,563 |   |
| Prepaid expenses                                                                                                                                                                                                                                                                        |   |   | (648   | )      |   |   | (38 | ) |
| Trade and other payables                                                                                                                                                                                                                                                                |   |   | (2,348 | )      |   |   | (4,105 | ) |
| Net cash generated from (used in) operating activities                                                                                                                                                                                                                                  |   |   | 5,387  |   |   |   | (5,660 | ) |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Investing activities                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Expenditures on property, plant and equipment                                                                                                                                                                                                                                           |   |   | (7,972 | )      |   |   | (10,424 | ) |
|  Mining concession sales                                                                                                                                                                                                                                                           |   |   | -      |   |   |   | 88 |   |
|  Net cash used in investing activities                                                                                                                                                                                                                                             |   |   | (7,972 | )      |   |   | (10,336 | ) |

|  Financing activitiesCash paid on foreign exchange derivatives |   |   | -      |   |   |   | (411    | )      |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|
| Sale of investment in Scorpio Gold                                  |   |   | 89     |   |   |   | 92      |   |
| Proceeds from long-term investments                                 |   |   | -      |   |   |   | 7       |   |
| Proceeds from credit facilities                                     |   |   | 2,900  |   |   |   | 1,000   |   |
| Proceeds from private placements                                    |   |   | 23,787 |   |   |   | 1,439   |   |
| Proceeds from exercise of options and warrants                      |   |   | 2,010  |   |   |   | -       |   |
| Payments on credit facilities                                       |   |   | (2,300 | )      |   |   | -       |   |
| Net cash generated from financing activities                        |   |   | 26,486 |   |   |   | 2,127   |   |
|                                                                |   |   |   |   |   |   |    |   |
|  Effect of foreign exchange rate changes on cash               |   |   | (1,165 | )      |   |   | (36     | )      |
| Increase (decrease) in cash and cash equivalents                    |   |   | 22,736 |   |   |   | (13,905 | )      |
| Cash and cash equivalents, beginning of year                        |   |   | 1,319  |   |   |   | 15,224  |   |
|  **Cash and cash equivalents, end of year**                    |   | $      | 24,055 |   |   | $      | 1,319   |   |
|                                                                |   |   |   |   |   |   |    |   |
|                                                                |   |   |   |   |   |   |    |   |
|  Cash and cash equivalents consist of:                         |   |   |   |   |   |   |    |   |
|  Cash                                                          |   | $      | 24,055 |   |   | $      | 1,319   |   |
|  Term deposits                                                 |   |   | -      |   |   |   | -       |   |
|                                                                |   | $      | 24,055 |   |   | $      | 1,319   |   |
|                                                                |   |   |   |   |   |   |    |   |
|  Interest paid during the year                                 |   | $      | 1,122  |   |   | $      | 802     |   |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

| ● | the title, specific risks and rewards of ownership have been transferred to the purchaser; |
|---------|--------------------------------------------------------------------------------------------|

| ● | the Company does not retain continuing managerial involvement to the degree usually associated with ownership or effective control over the concentrate sold; |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● | the amount of revenue and costs can be measured reliably; and |
|---------|---------------------------------------------------------------|

| ● | it is probable that the economic benefits associated with the transaction will flow to the Company. |
|---------|-----------------------------------------------------------------------------------------------------|

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

| ● | Mining interests – unit of production based upon estimated proven and probable reserves |
|---------|-----------------------------------------------------------------------------------------------|
| ● | Plant and equipment – 3 – 30 years over straight line basis                       |
| ● | Corporate office equipment – 3 – 10 years over straight line basis                |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

| ● | a significant deterioration in expected future commodity prices;                                                                    |
|---------|-------------------------------------------------------------------------------------------------------------------------------------|
| ● | a significant adverse movement in foreign exchange rates;                                                                           |
| ● | a significant increase in production costs;                                                                                         |
| ● | a large cost overrun during the development and construction of a new mine;                                                         |
| ● | a significant increase in the expected cost of dismantling assets and restoring the site;                                           |
| ● | a significant reduction in the mineral content of ore reserves/resources;                                                           |
| ● | serious mine accidents;                                                                                                             |
| ● | a significant increase in market interest rates; and                                                                                |
| ● | adverse changes in government regulations and environmental law, including a significant increase in the taxes payable by the mine. |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                         |   | December 31,2016 |   |   | December 31,2015 |   |
|------------------------------|--------|------------------|--------|--------|------------------|--------|
|  Trade receivables      |   | $                | 2,126  |   |             | $      | 2,405 |   |
| Value added taxes receivable |   |             | 1,638  |   |             |   | 1,789 |   |
| Other receivables            |   |             | 238    |   |             |   | 335 |   |
|                         |   | $                | 4,002  |   |             | $      | 4,529 |   |
|                     |   | December 31,2016 |   |   | December 31,2015 |   |
|--------------------------|--------|------------------|--------|--------|------------------|--------|
|  Concentrates       |   | $                | 1,266  |   |             | $      | 1,780 |   |
| Spare parts and supplies |   |             | 5,191  |   |             |   | 5,594 |   |
| Ore stockpile            |   |             | 161    |   |             |   | 1,416 |   |
|                     |   | $                | 6,618  |   |             | $      | 8,790 |   |

|                                      |   |   | December 31,  |   |   |   | December 31,  |   |
|-------------------------------------------|--------|--------|--------------------|--------|--------|--------|--------------------|--------|
|                                      |   |   | 2016          |   |   |   | 2015               |   |
|  Investment, beginning of year       |   | $      | 466                |   |   | $      | 1,655              |   |
| Sale of investment                        |   |   | (100               | )      |   |   | (92                | )      |
| Change in fair value and foreign exchange |   |   | 137                |   |   |   | (1,097             | )      |
| Investment, end of year                   |   | $      | 503                |   |   | $      | 466                |   |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                                |   |            |   |   |                |   |   |            |   |   |  Corporate |   |   |        |   |
|-------------------------------------|--------|-----------------|--------|--------|---------------------|--------|--------|-----------------|--------|--------|-----------------|--------|--------|-------------|--------|
|                                |   |  Mining    |   |   |  Non-producing |   |   |  Plant and |   |   |  Office    |   |   |        |   |
|                                |   |  interests |   |   |  properties    |   |   |  equipment |   |   |  equipment |   |   |  Total |   |
|                                |   |            |   |   |                |   |   |            |   |   |            |   |   |        |   |
| Cost                                |   |            |   |   |                |   |   |            |   |   |            |   |   |        |   |
| Balance at January 1, 2015          |   | $               | 56,612 |   |                | $      | 75,429 |            |   | $      | 36,313          |   |   | $           | 187    |   |   | $ | 168,541 |   |
| Assets acquired                     |   |            | 7,647  |   |                |   | 825    |            |   |   | 1,899           |   |   |        | -      |   |   |   | 10,371 |   |
| Change in decommissioning provision |   |            | (305   | )      |                |   | -      |            |   |   | -               |   |   |        | -      |   |   |   | (305 | ) |
| Disposals                           |   |            | -      |   |                |   | (508   | )               |   |   | (16             | )      |   |        | (26    | ) |   |   | (550 | ) |
| Balance at December 31, 2015        |   |            | 63,954 |   |                |   | 75,746 |            |   |   | 38,196          |   |   |        | 161    |   |   |   | 178,057 |   |
| Assets acquired                     |   |            | 4,569  |   |                |   | 1,583  |            |   |   | 1,817           |   |   |        | 3      |   |   |   | 7,972 |   |
| Change in decommissioning provision |   |            | (952   | )      |                |   | 61     |            |   |   | -               |   |   |        | -      |   |   |   | (891 | ) |
| Disposals                           |   |            | -      |   |                |   | -      |            |   |   | -               |   |   |        | (83    | ) |   |   | (83 | ) |
| Balance at December 31, 2016        |   | $               | 67,571 |   |                | $      | 77,390 |            |   | $      | 40,013          |   |   | $           | 81     |   |   | $ | 185,055 |   |

|  Accumulated depreciation      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  and depletion                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at January 1, 2015          |   | $      | 25,211 |   |   | $      | 50,502 |   |   | $      | 11,520 |   |   | $      | 55     |   |   | $ | 87,288 |   |
| Depreciation/depletion for the year |   |   | 3,087  |   |   |   | -      |   |   |   | 5,372  |   |   |   | 22     |   |   |   | 8,481 |   |
| Impairments                         |   |   | -      |   |   |   | -      |   |   |   | 1,429  |   |   |   | -      |   |   |   | 1,429 |   |
| Disposals                           |   |   | -      |   |   |   | -      |   |   |   | (16    | )      |   |   | -      |   |   |   | (16 | ) |
| Balance at December 31, 2015        |   |   | 28,298 |   |   |   | 50,502 |   |   |   | 18,305 |   |   |   | 77     |   |   |   | 97,182 |   |
| Depreciation/depletion for the year |   |   | 3,112  |   |   |   | -      |   |   |   | 4,261  |   |   |   | 15     |   |   |   | 7,388 |   |
| Disposals                           |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | (63    | ) |   |   | (63 | ) |
| Balance at December 31, 2016        |   | $      | 31,410 |   |   | $      | 50,502 |   |   | $      | 22,566 |   |   | $      | 29     |   |   | $ | 104,507 |   |
|  Carrying value                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at December 31, 2015                |   | $      | 35,656 |   |   | $      | 25,244 |   |   | $      | 19,891 |   |   | $      | 84     |   |   | $ | 80,875 |   |
| at December 31, 2016                |   | $      | 36,161 |   |   | $      | 26,888 |   |   | $      | 17,447 |   |   | $      | 52     |   |   | $ | 80,548 |   |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                                     |   | December 31, |   |   | December 31, |   |
|------------------------------------------|--------|--------------|--------|--------|--------------|--------|
|                                     |   | 2016         |   |   | 2015         |   |
|                                     |   |         |   |   |         |   |
| Credit facilities                        |   | $            | 7,931  |   |         | $      | 7,141 |   |
| Deferred discount from warrants issued   |   |         | (96    | )      |         |   | - |   |
| Deferred transaction costs               |   |         | (77    | )      |         |   | - |   |
|                                     |   | $            | 7,758  |   |         | $      | 7,141 |   |
|                                     |   |         |   |   |         |   |   |   |
| Current portion of credit facilities$    |   |         | 7,758  |   |         | $      | 1,000 |   |
| Non-current portion of credit facilities |   |         | -      |   |         |   | 6,141 |   |
|                                     |   | $            | 7,758  |   |         | $      | 7,141 |   |

|                                      |   | December 31, |   |   | December 31, |   |
|-------------------------------------------|--------|--------------|--------|--------|--------------|--------|
|                                      |   | 2016         |   |   | 2015         |   |
|  Present value of funded obligations |   | $            | 23,910 |   |         | $      | 24,495 |   |
| Fair value of plan assets                 |   |         | 15,794 |   |         |   | 15,205 |   |
| Deficit of funded plans                   |   | $            | 8,116  |   |         | $      | 9,290 |   |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

| The movements in the defined benefit obligations are as follows:     |   | December 31,     |   |   | December 31,     |   |
|----------------------------------------------------------------------|--------|------------------|--------|--------|------------------|--------|
|                                                                 |   | 2016             |   |   | 2015             |   |
|  Obligations, beginning of year                                 |   | $                | 24,495 |   |             | $      | 20,214 |   |
| Current service costs                                                |   |             | 781    |   |             |   | 690 |   |
| Interest costs                                                       |   |             | 1,057  |   |             |   | 822 |   |
| Benefits paid                                                        |   |             | (830   | )      |             |   | (718 | ) |
| Actuarial (gain) loss                                                |   |             | (1,593 | )      |             |   | 3,487 |   |
| Obligations, end of year                                             |   | $                | 23,910 |   |             | $      | 24,495 |   |
|  The movements in the fair value of plan assets are as follows: |   |             |   |   |             |   |   |   |
|                                                                 |   | December 31,2016 |   |   | December 31,2015 |   |
|  Assets, beginning of year                                      |   | $                | 15,205 |   |             | $      | 15,033 |   |
| Return on assets                                                     |   |             | 648    |   |             |   | 604 |   |
| Actuarial gain (loss)                                                |   |             | 13     |   |             |   | (366 | ) |
| Employer contributions                                               |   |             | 758    |   |             |   | 652 |   |
| Benefits paid                                                        |   |             | (830   | )      |             |   | (718 | ) |
| Assets, end of year                                                  |   | $                | 15,794 |   |             | $      | 15,205 |   |

|                                     |   | December 31 |   |   | December 31 |   |
|------------------------------------------|--------|-------------|--------|--------|-------------|--------|
|                                     |   | 2016        |   |   | 2015        |   |
|                                     |   |        |   |   |        |   |
| Current service costs and interest costs |   |        |   |   |        |   |
| included in cost of sales                |   | $           | 1,838  |   |        | $      | 1,512 |   |

|                                         |   | December 31, |   |   | December 31, |   |
|----------------------------------------------|--------|--------------|--------|--------|--------------|--------|
|                                         |   | 2016         |   |   | 2015         |   |
|                                         |   |         |   |   |         |   |
| Discount rate (expense)                      |   |         | 4.25   | %      |         |   | 4.00 | % |
| Discount rate (year end disclosures)         |   |         | 4.25   | %      |         |   | 4.25 | % |
| Future salary increases (salaried plan only) |   |         | 5.00   | %      |         |   | 5.00 | % |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                                          |   | December 31, |   |   | December 31, |   |
|-----------------------------------------------|--------|--------------|--------|--------|--------------|--------|
|                                          |   | 2016         |   |   | 2015         |   |
|  Provisions, beginning of year           |   | $            | 4,568  |   |         | $      | 4,832 |   |
| Decommissioning costs and change in estimates |   |         | (891   | )      |         |   | (426 | ) |
| Accretion on decommissioning provision        |   |         | 152    |   |         |   | 162 |   |
| Provisions, end of year                       |   | $            | 3,829  |   |         | $      | 4,568 |   |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                                        | December 31, |   | December 31, |   |
|---------------------------------------------|--------------|--------|--------------|--------|
|                                        | 2016         |   | 2015         |   |
|                                        |         |   |         |   |
| Issued                                      |         |   |         |   |
| 39,540,384 (2015: 28,935,433) common shares |         | $      | 202,191      |   |   | $ | 181,143 |   |

|                       |   |        |   |   | December 31, |   |   |        |   |   | December 31, |   |
|----------------------------|--------|-------------|--------|--------|--------------|--------|--------|-------------|--------|--------|--------------|--------|
|                       |   |        |   |   | 2016         |   |   |        |   |   | 2015         |   |
|                       |   |        |   |   | Weighted     |   |   |        |   |   | Weighted     |   |
|                       |   |        |   |   | average      |   |   |        |   |   | average      |   |
|                       |   |        |   |   | exercise     |   |   |        |   |   | exercise     |   |
|                       |   | Number      |   |   | price        |   |   | Number      |   |   | price        |   |
|                       |   | (thousands) |   |   | CAD          |   |   | (thousands) |   |   | CAD          |   |
|                       |   |        |   |   |         |   |   |        |   |   |         |   |
|                       |   |        |   |   |         |   |   |        |   |   |         |   |
| Balance, beginning of year |   |        | 1,516  |   |         | $      | 9.50   |        |   | $      | 1,889        |   |   | 12.36 |   |
| Granted                    |   |        | 808    |   |         |   | 2.09   |        |   |   | 521          |   |   |   | 2.40 |   |
| Exercised                  |   |        | (93    | )      |         |   | 3.12   |        |   |   | -            |   |   |   | - |   |
| Expired                    |   |        | (460   | )      |         |   | 16.50  |        |   |   | (894         | )      |   |   | 11.40 |   |
| Balance, end of year       |   |        | 1,771  |   |         | $      | 4.64   |        |   |   | 1,516        |   |   | $ | 9.50 |   |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|           |   |  Weighted        |   |   |        |   |   |             |   |   |        |   |   |             |   |
|----------------|--------|-----------------------|--------|--------|-------------|--------|--------|------------------|--------|--------|-------------|--------|--------|------------------|--------|
|           |   | average               |   |   |        |   |   | Weighted         |   |   |        |   |   | Weighted         |   |
|  Exercise |   | remaining contractual |   |   |        |   |   | average exercise |   |   |        |   |   | average exercise |   |
| price          |   | life                  |   |   | Outstanding |   |   | price            |   |   | Exercisable |   |   | price            |   |
| CAD            |   | (years)               |   |   | (thousands) |   |   | CAD              |   |   | (thousands) |   |   | CAD              |   |
| 2.00 to 5.00   |   |                  | 1.54   |   |        |   | 1,441  |             |   | $      | 2.37        |   |   |             | 742    |   |   | $ | 2.57 |   |
| 5.01 to 10.00  |   |                  | 1.43   |   |        |   | 87     |             |   |   | 5.60        |   |   |             | 87     |   |   |   | 5.60 |   |
| 10.01 to 20.00 |   |                  | 0.67   |   |        |   | 181    |             |   |   | 16.03       |   |   |             | 181    |   |   |   | 16.03 |   |
| 20.01 to 30.00 |   |                  | 0.04   |   |        |   | 62     |             |   |   | 22.68       |   |   |             | 62     |   |   |   | 22.68 |   |
|           |   |                  |   |   |        |   | 1,771  |             |   | $      | 4.64        |   |   |             | 1,072  |   |   | $ | 6.25 |   |

|                                                                                                                                                                                                                                                                                                                                                    |   | Year ended December 31, |   |    | Year endedDecember 31, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|---------|------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                    |   | 2016                    |   |    | 2015                   |   |
|                                                                                                                                                                                                                                                                                                                                                    |   |                    |   |    |                   |   |
| Expected stock price volatility (1)                                                                     |   |                    | 83     | %       |                   |   | 78 | % |
| Risk free interest rate                                                        |   |                    | 0.47   | %       |                   |   | 0.39 | % |
| Expected life                                                        |   | 3 years                 |   | 3 years |
| Expected forfeiture rate                                                                                                                                                                                                                                                                                                                                |   |                    | 4.97   | %       |                   |   | 4.74 | % |
| Expected dividend yield                                                                                                                                                                                                                                                                                                                                 |   |                    | 0      | %       |                   |   | 0 | % |
| Share-based payments included in cost of sales |   | $      | 19     |   |   | $      | 46     |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Share-based payments included in general and   |   |   |   |   |   |   |   |   |
| administrative expenses                        |   |   | 566    |   |   |   | 477    |   |
| Total share-based payments                     |   | $      | 585    |   |   | $      | 523    |   |

| (1) | Expected volatility has been based on historical volatility of the Company's publicly traded shares. |
|-----|------------------------------------------------------------------------------------------------------|

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|  Number of |  Exercise |  Issuance |  Expiry |
|-----------------|----------------|----------------|--------------|
| warrants        | price (CAD)    | date           |  date   |
| 802,595         | 4.68           | Jul 2016       | Jun 14, 2021 |
| 224,728         | 4.20           | Jul 2016       | Jun 14, 2018 |
| 1,388,883       | 4.68           | Jun 2016       | Jun 9, 2021  |
| 388,886         | 4.20           | Jun 2016       | Jun 9, 2018  |
| 2,306,248       | 1.20           | Feb 2016       | Feb 10, 2019 |
| 307,777         | 1.20           | Nov 2015       | Nov 10, 2018 |
| 29,166          | 1.56           | Aug 2015       | Aug 26, 2018 |
| 231,481         | 1.20           | Aug 2015       | Aug 26, 2018 |
| 227,988         | 3.00           | Aug 2015       | Aug 26, 2018 |
| 445,553         | 1.56           | May 2015       | May 27, 2018 |
| 509,203         | 2.76           | Dec 2014       | Dec 22, 2017 |
| 6,862,508       |           |           |         |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                                                |   | Year ended December 31,2016 |       |   | Year ended December 31,2015 |   |
|-----------------------------------------------------|--------|-----------------------------|------------|--------|-----------------------------|--------|
|                                                |   |                        |       |   |                        |   |   |   |
|  Basic weighted average number of shares       |   |                        | 34,526,435 |   |                        |   | 28,328,612 |   |
|  Effect of dilutive stock options and warrants |   |                        | -          |   |                        |   | - |   |
| Diluted weighted average number of shares           |   |                        | 34,526,435 |   |                        |   | 28,328,612 |   |
|                                     |   | Year ended December 31,2016 |   |   | Year ended December 31,2015 |   |
|------------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|
|  Raw materials and consumables      |   | $                           | 15,065 |   |                        | $      | 18,553 |   |
| Salaries and employee benefits           |   |                        | 23,430 |   |                        |   | 25,138 |   |
| Utilities                                |   |                        | 4,113  |   |                        |   | 4,693 |   |
| Other costs                              |   |                        | 1,768  |   |                        |   | 2,514 |   |
| Change in concentrates and ore stockpile |   |                        | 1,769  |   |                        |   | 1,676 |   |
|                                     |   | $                           | 46,145 |   |                        | $      | 52,574 |   |

|                        |   | Year ended       |   |   | Year ended       |   |
|-----------------------------|--------|------------------|--------|--------|------------------|--------|
|                        |   | December 31,2016 |   |   | December 31,2015 |   |
|  Salaries and benefits |   | $                | 2,153  |   |             | $      | 2,270 |   |
| Directors' fees             |   |             | 251    |   |             |   | 269 |   |
| Share-based payments        |   |             | 1,237  |   |             |   | 870 |   |
| Professional fees           |   |             | 639    |   |             |   | 1,286 |   |
| Office and general          |   |             | 1,075  |   |             |   | 1,368 |   |
|                        |   | $                | 5,355  |   |             | $      | 6,063 |   |
|                                   |   |                        |   |   |                        |   |   |   |
|----------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|--------|--------|
|                                   |   | Year ended December 31,2016 |   |   | Year ended December 31,2015 |   |
|  Current income tax recovery      |   | $                           | -      |   |                        | $      | (5     | )      |
| Deferred income tax expense (recovery) |   |                        | 210    |   |                        |   | (647   | )      |
|   Income tax expense (recovery)   |   | $                           | 210    |   |                        | $      | (652   | )      |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                                  |   | Year ended   |   |   | Year ended   |   |
|---------------------------------------|--------|--------------|--------|--------|--------------|--------|
|                                  |   | December 31, |   |   | December 31, |   |
|                                  |   | 2016         |   |   | 2015         |   |
|                                  |   |         |   |   |         |   |
|  Tax recovery at statutory rates |   | $            | (1,330 | )      |         | $      | (5,310 | ) |
| Mexican mining royalty                |   |         | 210    |   |         |   | (647 | ) |
| Impact of foreign tax rates           |   |         | 215    |   |         |   | (864 | ) |
| Non-deductible expenses               |   |         | 1,477  |   |         |   | 474 |   |
| Losses not recognized                 |   |         | (362   | )      |         |   | 5,695 |   |
| Income tax expense (recovery)         |   | $            | 210    |   |         | $      | (652 | ) |

|                           |   | December 31, |   |   | December 31, |   |
|--------------------------------|--------|--------------|--------|--------|--------------|--------|
|                           |   | 2016         |   |   | 2015         |   |
|                           |   |         |   |   |         |   |
| Property, plant and equipment  |   | $            | 972    |   |         | $      | 1,116 |   |
|                           |   |         |   |   |         |   |   |   |
| Total deferred tax liabilities |   |         | 972    |   |         |   | 1,116 |   |
| Tax losses                     |   |         | -      |   |         |   | - |   |
| Other                          |   |         | 138    |   |         |   | 492 |   |
| Total deferred tax assets      |   |         | 138    |   |         |   | 492 |   |
| Net deferred tax liabilities   |   | $            | 834    |   |         | $      | 624 |   |

|                                          |   | December 31, |    |   | December 31, |   |
|-----------------------------------------------|--------|--------------|---------|--------|--------------|--------|
|                                          |   | 2016         |    |   | 2015         |   |
|                                          |   |         |    |   |         |   |
|  Property, plant and equipment           |   | $            | 3,272   |   |         | $      | 9,345 |   |
| Mexican tax losses (expiring in 2017 - 2026)  |   |         | 52,702  |   |         |   | 51,130 |   |
| Canadian tax losses (expiring in 2029 - 2036) |   |         | 30,268  |   |         |   | 26,796 |   |
| U.S. tax losses (expiring in 2020 - 2036)     |   |         | 29,764  |   |         |   | 30,783 |   |
| Provisions and other                          |   |         | 24,718  |   |         |   | 26,356 |   |
| Deferred Mexican mining royalty               |   |         | 834     |   |         |   | 624 |   |
|                                          |   | $            | 141,558 |   |         | $      | 145,034 |   |
|                        |   | Year ended   |   |   | Year ended   |   |
|-----------------------------|--------|--------------|--------|--------|--------------|--------|
|                        |   | December 31, |   |   | December 31, |   |
|                        |   | 2016         |   |   | 2015         |   |
|                        |   |         |   |   |         |   |
|  Salaries and benefits |   | $            | 860    |   |         | $      | 1,264 |   |
| Severance                   |   |         | 75     |   |         |   | - |   |
| Directors' fees             |   |         | 251    |   |         |   | 269 |   |
| Share-based payments        |   |         | 968    |   |         |   | 840 |   |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                          |   | December 31, 2016              |   |
|-------------------------------|--------|--------------------------------------------------------------------------------------------|--------|
|                          |   |                                                                                       |   |   | Less than |   |   |   |   |   |   |   |   | Over 5 |   |
|                          |   | Total                                                                                      |   |   | 1 year |   |   | 2-3 years |   |   | 4-5 years |   |   | years |   |
| Trade and other payables      |   | $                                                                                          | 8,727  |   |   | $ | 8,727 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Credit facilities             |   |                                                                                       | 7,931  |   |   |   | 7,931 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Interest on credit facilities |   |                                                                                       | 545    |   |   |   | 545 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Leases                        |   |                                                                                       | 1,763  |   |   |   | 352 |   |   |   | 621 |   |   |   | 499 |   |   |   | 291 |   |
| Other long-term liabilities   |   |                                                                                       | 882    |   |   |   | - |   |   |   | 108 |   |   |   | - |   |   |   | 774 |   |
|                          |   | $                                                                                          | 19,848 |   |   | $ | 17,555 |   |   | $ | 729 |   |   | $ | 499 |   |   | $ | 1,065 |   |

| (1) | Interest rate risk |
|-----|--------------------|

| (2) | Currency risk |
|-----|---------------|

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                        |   |   | As at December 31, 2016      |   |
|-----------------------------|--------|--------|-------------------------------------------------------|--------|
|                        |   |   | CAD                                         |   |   |   | MXP  |   |
|                        |   |   |                                                  |   |   |   |   |   |
| Cash and cash equivalents   |   | $      | 18,408                                                |   |   | $ | 112 |   |
| Trade and other receivables |   |   | 41                                                    |   |   |   | 1,793 |   |
| Trade and other payables    |   |   | 1,928                                                 |   |   |   | 2,689 |   |
| Credit facility             |   |   | 6,331                                                 |   |   |   | - |   |

|                     |   |   | CAD/USD        |   |   |   | MXP/USD        |   |
|--------------------------|--------|--------|---------------------|--------|--------|--------|---------------------|--------|
|                     |   |   | Exchange rate  |   |   |   | Exchange rate  |   |
|                     |   |   | +/- 10%        |   |   |   | +/- 10%        |   |
|                     |   |   |                |   |   |   |                |   |
| Approximate impact on    |   |   |                |   |   |   |                |   |
| Net loss                 |   |   | 624                 |   |   |   | 1,231               |   |
| Other comprehensive loss |   |   | 90                  |   |   |   | 44                  |   |

| (3) | Price risk |
|-----|------------|

| ● | Cash and cash equivalents: The fair value of cash equivalents is valued using quoted market prices in active markets. The Company's cash equivalents consist of money market accounts held at financial institutions which have original maturities of less than 90 days.                                                                               |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ● | Trade and other receivables: The fair value of trade receivables from silver sales contracts that contain provisional pricing terms is determined using the appropriate quoted forward price from the exchange that is the principal active market for the particular metal. As such, there is an embedded derivative feature within trade receivables. |
| ● | Investment in Scorpio Gold: The investment in Scorpio Gold Corporation shares have been marked to market based on the trading price as at December 31, 2016.                                                                                                                                                                                            |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

| ● | Long-term investments: The fair value of long-term investments is determined based on the closing price of each security at the balance sheet date. The closing price is a quoted market price obtained from the exchange that is the principal active market for the particular security.                                                                                                                                                                                                                                                                                                        |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ● | Embedded derivatives: Revenues from the sale of metals produced since the commencement of commercial production are based on provisional prices at the time of shipment. Variations between the price recorded at the time of sale and the actual final price received from the customer are caused by changes in market prices for metals sold and result in an embedded derivative in revenues and accounts receivable. Embedded derivatives in the form of prepayment options and financing cost payable exist in the Company's outstanding credit facilities (see credit facilities note 10). |
| ● | Derivatives: The Company uses derivative and non-derivative instruments to manage financial risks, including commodity, interest rate, and foreign exchange risks. The use of derivative contracts is governed by documented risk management policies and approved limits. The Company does not use derivatives for speculative purposes. The fair value of the Company's derivative instruments is based on quoted market prices for similar instruments and at market prices at the valuation date.                                                                                             |

| ● | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ● | Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. |
| ● | Level 3 inputs are unobservable (supported by little or no market activity).                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

|                       |   | December 31, |   |   | December 31, |   |
|----------------------------|--------|--------------|--------|--------|--------------|--------|
|                       |   | 2016         |   |   | 2015         |   |
|                       |   |         |   |   |         |   |
| Level 1                    |   |         |   |   |         |   |
| Cash and cash equivalents  |   | $            | 24,055 |   |         | $      | 1,319 |   |
| Restricted cash            |   |         | 151    |   |         |   | 151 |   |
| Investment in Scorpio Gold |   |         | 503    |   |         |   | 466 |   |
| Long-term investments      |   |         | 28     |   |         |   | 11 |   |

|  Level 2               |   |   |   |   |   |   |
|-----------------------------|--------|--------|--------|--------|--------|--------|
| Trade and other receivables |   |   | 4,002  |   |   |   | 4,529 |   |
| Credit facilities           |   |   | 7,758  |   |   |   | 7,141 |   |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                                |   |  As at December 31, 2016 |   |   |  As at December 31, 2015 |   |
|-------------------------------------|--------|-------------------------------|--------|--------|-------------------------------|--------|
|                                     |   | Mexican                       |   |   | U.S.                          |   |   | Corporate |   |   |   |   |   | Mexican |   |   | U.S. |   |   | Corporate |   |   |   |   |
|                                |   | Operations                    |   |   | Operations                    |   |   | and Other |   |   | Total |   |   | Operations |   |   | Operations |   |   | and Other |   |   | Total |   |
|  Cash and cash equivalents     |   | $                             | 1,875  |   |                          | $      | 3,511 |   |   | $ | 18,669 |   |   | $ | 24,055 |   |   | $ | 1,009 |   |   | $ | 121 |   |   | $ | 189 |   |   | $ | 1,319 |   |
| Trade and other receivables         |   |                          | 2,855  |   |                          |   | 1,106 |   |   |   | 41 |   |   |   | 4,002 |   |   |   | 1,807 |   |   |   | 2,688 |   |   |   | 34 |   |   |   | 4,529 |   |
| Inventories                         |   |                          | 3,738  |   |                          |   | 2,880 |   |   |   | - |   |   |   | 6,618 |   |   |   | 5,620 |   |   |   | 3,170 |   |   |   | - |   |   |   | 8,790 |   |
| Prepaid expenses                    |   |                          | 840    |   |                          |   | 353 |   |   |   | 192 |   |   |   | 1,385 |   |   |   | 70 |   |   |   | 462 |   |   |   | 205 |   |   |   | 737 |   |
| Investment in Scorpio Gold          |   |                          | -      |   |                          |   | - |   |   |   | 503 |   |   |   | 503 |   |   |   | - |   |   |   | - |   |   |   | 466 |   |   |   | 466 |   |
| Restricted cash                     |   |                          | -      |   |                          |   | 151 |   |   |   | - |   |   |   | 151 |   |   |   | - |   |   |   | 151 |   |   |   | - |   |   |   | 151 |   |
| Long-term investments               |   |                          | -      |   |                          |   | - |   |   |   | 28 |   |   |   | 28 |   |   |   | - |   |   |   | - |   |   |   | 11 |   |   |   | 11 |   |
| Property, plant and equipment       |   |                          | 42,474 |   |                          |   | 38,022 |   |   |   | 52 |   |   |   | 80,548 |   |   |   | 42,413 |   |   |   | 38,378 |   |   |   | 84 |   |   |   | 80,875 |   |
| Total assets                        |   | $                             | 51,782 |   |                          | $      | 46,023 |   |   | $ | 19,485 |   |   | $ | 117,290 |   |   | $ | 50,919 |   |   | $ | 44,970 |   |   | $ | 989 |   |   | $ | 96,878 |   |
|  Trade and other payables      |   | $                             | 4,144  |   |                          | $      | 2,422 |   |   | $ | 2,161 |   |   | $ | 8,727 |   |   | $ | 4,031 |   |   | $ | 4,337 |   |   | $ | 990 |   |   | $ | 9,358 |   |
| Other long-term liabilities         |   |                          | -      |   |                          |   | 448 |   |   |   | 434 |   |   |   | 882 |   |   |   | - |   |   |   | 511 |   |   |   | 541 |   |   |   | 1,052 |   |
| Credit facilities                   |   |                          | -      |   |                          |   | - |   |   |   | 7,758 |   |   |   | 7,758 |   |   |   | - |   |   |   | - |   |   |   | 7,141 |   |   |   | 7,141 |   |
| Post-employment benefit obligations |   |                          | -      |   |                          |   | 8,116 |   |   |   | - |   |   |   | 8,116 |   |   |   | - |   |   |   | 9,290 |   |   |   | - |   |   |   | 9,290 |   |
| Decommissioning provision           |   |                          | 1,834  |   |                          |   | 1,995 |   |   |   | - |   |   |   | 3,829 |   |   |   | 2,034 |   |   |   | 2,534 |   |   |   | - |   |   |   | 4,568 |   |
| Deferred tax liabilities            |   |                          | 834    |   |                          |   | - |   |   |   | - |   |   |   | 834 |   |   |   | 624 |   |   |   | - |   |   |   | - |   |   |   | 624 |   |
| Total liabilities                   |   | $                             | 6,812  |   |                          | $      | 12,981 |   |   | $ | 10,353 |   |   | $ | 30,146 |   |   | $ | 6,689 |   |   | $ | 16,672 |   |   | $ | 8,672 |   |   | $ | 32,033 |   |

|                                        |   |   | **As at December 31, 2016**              |   |   |   | **As at December 31, 2015**              |   |
|---------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------|--------|
|                                        |   |   | Mexican                                                                                              |   |   |   | U.S.                                                                                                 |   |   |   | Corporate  |   |   |   |   |   |   |   | Mexican  |   |   |   | U.S.  |   |   |   | Corporate  |   |   |   |   |   |
|                                        |   |   | Operations                                                                                           |   |   |   | Operations                                                                                           |   |   |   | and Other  |   |   |   | Total  |   |   |   | Operations  |   |   |   | Operations  |   |   |   | and Other  |   |   |   | Total  |   |
|                                        |   |   |                                                                                                      |   |   |   |                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                                     |   | $      | 23,322                                                                                                    |   |   | $      | 35,544                                                                                                    |   |   | $ | - |   |   | $ | 58,866 |   |   | $ | 23,083 |   |   | $ | 30,367 |   |   | $ | - |   |   | $ | 53,450 |   |
| Cost of sales                               |   |   | (17,679                                                                                                   | )      |   |   | (28,466                                                                                                   | )      |   |   | - |   |   |   | (46,145 | ) |   |   | (22,212 | ) |   |   | (30,362 | ) |   |   | - |   |   |   | (52,574 | ) |
| Depletion and amortization                  |   |   | (3,534                                                                                                    | )      |   |   | (3,839                                                                                                    | )      |   |   | (15 | ) |   |   | (7,388 | ) |   |   | (3,933 | ) |   |   | (4,526 | ) |   |   | (22 | ) |   |   | (8,481 | ) |
| Care, maintenance and restructuring costs   |   |   | (399                                                                                                      | )      |   |   | (495                                                                                                      | )      |   |   | (99 | ) |   |   | (993 | ) |   |   | (1,447 | ) |   |   | (547 | ) |   |   | - |   |   |   | (1,994 | ) |
| Corporate general and administrative        |   |   | -                                                                                                         |   |   |   | -                                                                                                         |   |   |   | (5,355 | ) |   |   | (5,355 | ) |   |   | - |   |   |   | - |   |   |   | (6,063 | ) |   |   | (6,063 | ) |
| Exploration costs                           |   |   | (690                                                                                                      | )      |   |   | (991                                                                                                      | )      |   |   | - |   |   |   | (1,681 | ) |   |   | (581 | ) |   |   | (852 | ) |   |   | - |   |   |   | (1,433 | ) |
| Accretion on decommissioning provision      |   |   | (112                                                                                                      | )      |   |   | (40                                                                                                       | )      |   |   | - |   |   |   | (152 | ) |   |   | (113 | ) |   |   | (49 | ) |   |   | - |   |   |   | (162 | ) |
| Interest and financing income (expense)     |   |   | 2                                                                                                         |   |   |   | -                                                                                                         |   |   |   | (2,339 | ) |   |   | (2,337 | ) |   |   | 13 |   |   |   | - |   |   |   | (1,188 | ) |   |   | (1,175 | ) |
| Foreign exchange gain (loss)                |   |   | 384                                                                                                       |   |   |   | -                                                                                                         |   |   |   | (44 | ) |   |   | 340 |   |   |   | 934 |   |   |   | - |   |   |   | (54 | ) |   |   | 880 |   |
| Loss on derivative liability                |   |   | -                                                                                                         |   |   |   | -                                                                                                         |   |   |   | - |   |   |   | - |   |   |   | (126 | ) |   |   | - |   |   |   | - |   |   |   | (126 | ) |
| Loss on mining concession sales             |   |   | -                                                                                                         |   |   |   | -                                                                                                         |   |   |   | - |   |   |   | - |   |   |   | (291 | ) |   |   | - |   |   |   | - |   |   |   | (291 | ) |
| Loss on disposal of assets                  |   |   | -                                                                                                         |   |   |   | -                                                                                                         |   |   |   | (20 | ) |   |   | (20 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Loss on investment in Scorpio Gold          |   |   | -                                                                                                         |   |   |   | -                                                                                                         |   |   |   | (132 | ) |   |   | (132 | ) |   |   | - |   |   |   | - |   |   |   | (640 | ) |   |   | (640 | ) |
| Impairment of property, plant and equipment |   |   | -                                                                                                         |   |   |   | -                                                                                                         |   |   |   | - |   |   |   | - |   |   |   | (10 | ) |   |   | (1,419 | ) |   |   | - |   |   |   | (1,429 | ) |
| Income (loss) before income taxes           |   |   | 1,294                                                                                                     |   |   |   | 1,713                                                                                                     |   |   |   | (8,004 | ) |   |   | (4,997 | ) |   |   | (4,683 | ) |   |   | (7,388 | ) |   |   | (7,967 | ) |   |   | (20,038 | ) |
| Income tax (expense) recovery               |   |   | (210                                                                                                      | )      |   |   | -                                                                                                         |   |   |   | - |   |   |   | (210 | ) |   |   | 647 |   |   |   | 5 |   |   |   | - |   |   |   | 652 |   |
| Net income (loss) for the year              |   | $      | 1,084                                                                                                     |   |   | $      | 1,713                                                                                                     |   |   | $ | (8,004 | ) |   | $ | (5,207 | ) |   | $ | (4,036 | ) |   | $ | (7,383 | ) |   | $ | (7,967 | ) |   | $ | (19,386 | ) |

----

| (In thousands of U.S. dollars, unless otherwise stated) |
|---------------------------------------------------------|

|                                                                   |   | December 31, |   |   | December 31, |   |
|------------------------------------------------------------------------|--------|--------------|--------|--------|--------------|--------|
|                                                                   |   | 2016         |   |   | 2015         |   |
|                                                                   |   |         |   |   |         |   |
| Equity attributable to shareholders of the Company      |   | $            | 87,144 |   |         | $      | 64,845 |   |