Document:

EX-4.11

 Exhibit 4.11 

Amended NI 43-101 Technical Report on 
 Resources 

Cusi Mine 
 Mexico 

Effective Date: January 31, 2017 
 Original Report Date:
April 14, 2017 
 Amended Report Date: June 29, 2017 

Report Prepared for 
  

			
	  Sierra Metals, Inc.
  

 79 Wellington Street West, Suite 2100
  P.O. Box 157

 Toronto, Ontario, M5K 1H1
  Canada
	 	

		
	 Report Prepared by
  

 SRK Consulting (U.S.), Inc.
 1125
Seventeenth Street, Suite 600
 Denver, CO 80202
  

SRK Project Number: 470200-150
	 	

 Signed by Qualified Persons: 
 Matthew
Hastings, MSc Geology, MAusIMM (CP) 
 Fernando Rodrigues, BS Mining, MBA, MMSAQP 

Daniel Sepulveda, BS Extractive Metallurgy Engineer 
 Mark Willow, MSc, CEM, SME-RM

 Reviewed by: 
 Bart A. Stryhas, PhD, CPG 

Grant Malensek, MEng, PEng/PGeo 

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Page ii

  

 

 Table of Contents 

									
			
	 1
	 	 Summary
	  	 	1	 
				
		 	1.1	 	Property Description and Ownership	  	 	1	
				
		 	1.2	 	Geology and Mineralization	  	 	1	
				
		 	1.3	 	Status of Exploration, Development and Operations	  	 	2	
				
		 	1.4	 	Mineral Processing and Metallurgical Testing	  	 	2	
				
		 	1.5	 	Mineral Resource Estimate	  	 	3	
				
		 	1.6	 	Mineral Reserve Estimate	  	 	6	
				
		 	1.7	 	Mining Methods	  	 	6	
				
		 	1.8	 	Recovery Methods	  	 	6	
				
		 	1.9	 	Infrastructure	  	 	6	
				
		 	1.10	 	Environmental and Permitting	  	 	6	
				
		 	1.11	 	Capital and Operating Costs	  	 	7	
				
		 	1.12	 	Economic Analysis	  	 	7	
				
		 	1.13	 	Conclusions and Recommendations	  	 	7	
				
		 		 	 1.13.1 Geology and Mineral Resources
	  	 	7	
				
		 		 	 1.13.2 Mineral Reserves
	  	 	9	
			
	 2
	 	 Introduction
	  	 	10	
				
		 	2.1	 	Terms of Reference and Purpose of the Report	  	 	10	
				
		 	2.2	 	Qualifications of Consultants (SRK)	  	 	10	
				
		 	2.3	 	Details of Inspection	  	 	11	
				
		 	2.4	 	Sources of Information	  	 	11	
				
		 	2.5	 	Effective Date	  	 	12	
				
		 	2.6	 	Units of Measure	  	 	12	
			
	 3
	 	 Reliance on Other Experts
	  	 	13	
			
	 4
	 	 Property Description and Location
	  	 	14	
				
		 	4.1	 	Property Location	  	 	14	
				
		 	4.2	 	Mineral Titles	  	 	14	
				
		 		 	 4.2.1    Nature and Extent of Issuer’s Interest
	  	 	17	
				
		 	4.3	 	Royalties, Agreements and Encumbrances	  	 	18	
				
		 		 	 4.3.1    Purchase Agreement with Minera Cusi
	  	 	18	
				
		 		 	 4.3.2    Purchase Agreement with Manuel Holguin
	  	 	18	
				
		 		 	 4.3.3    Purchase Agreement with Martha Azucena Holguin
	  	 	18	
				
		 		 	 4.3.4    Purchase Agreement with Hector Sanchez
	  	 	18	
				
		 		 	 4.3.5    Agreement with Mexican Government
	  	 	19	
				
		 	4.4	 	Environmental Liabilities and Permitting	  	 	19	

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Page iii

  

 

									
				
		 		 	 4.4.1    Environmental Liabilities
	  	 	19	
				
		 		 	 4.4.2    Required Permits and Status
	  	 	19	
				
		 	4.5	 	Other Significant Factors and Risks	  	 	19	
			
	 5
	 	 Accessibility, Climate, Local Resources, Infrastructure and Physiography
	  	 	20	
				
		 	5.1	 	Topography, Elevation and Vegetation	  	 	20	
				
		 	5.2	 	Accessibility and Transportation to the Property	  	 	20	
				
		 	5.3	 	Climate and Length of Operating Season	  	 	20	
				
		 	5.4	 	Sufficiency of Surface Rights	  	 	20	
				
		 	5.5	 	Infrastructure Availability and Sources	  	 	20	
				
		 		 	 5.5.1    Power
	  	 	20	
				
		 		 	 5.5.2    Water
	  	 	21	
				
		 		 	 5.5.3    Mining Personnel
	  	 	21	
				
		 		 	 5.5.4    Potential Tailings Storage Areas
	  	 	21	
				
		 		 	 5.5.5    Potential Waste Rock Disposal Areas
	  	 	21	
				
		 		 	 5.5.6    Potential Processing Plant Sites
	  	 	21	
			
	 6
	 	 History
	  	 	22	
				
		 	6.1	 	Prior Ownership and Ownership Changes	  	 	22	
				
		 	6.2	 	Exploration and Development Results of Previous Owners	  	 	22	
				
		 	6.3	 	Historic Mineral Resource and Reserve Estimates	  	 	22	
				
		 	6.4	 	Historic Production	  	 	22	
			
	 7
	 	 Geological Setting and Mineralization
	  	 	23	
				
		 	7.1	 	Regional Geology	  	 	23	
				
		 	7.2	 	Local Geology	  	 	25	
				
		 	7.3	 	Property Geology	  	 	26	
				
		 	7.4	 	Significant Mineralized Zones	  	 	27	
			
	 8
	 	 Deposit Type
	  	 	29	
				
		 	8.1	 	Mineral Deposit	  	 	29	
				
		 	8.2	 	Geological Model	  	 	29	
			
	 9
	 	 Exploration
	  	 	30	
				
		 	9.1	 	Relevant Exploration Work	  	 	30	
				
		 	9.2	 	Sampling Methods and Sample Quality	  	 	30	
				
		 	9.3	 	Significant Results and Interpretation	  	 	31	
			
	 10
	 	 Drilling
	  	 	32	
				
		 	10.1	 	Type and Extent	  	 	32	
				
		 	10.2	 	Procedures	  	 	32	
				
		 		 	 10.2.1 Downhole Deviation
	  	 	33	

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Page iv

  

 

									
				
		 		 	 10.2.2 Core Recovery
	  	 	33	
				
		 	10.3	 	Interpretation and Relevant Results	  	 	33	
			
	 11
	 	 Sample Preparation, Analysis and Security
	  	 	35	
				
		 	11.1	 	Security Measures	  	 	35	
				
		 	11.2	 	Sample Preparation for Analysis	  	 	35	
				
		 	11.3	 	Sample Analysis	  	 	35	
				
		 	11.4	 	Quality Assurance/Quality Control Procedures	  	 	37	
				
		 		 	 11.4.1 Standards
	  	 	37	
				
		 		 	 11.4.2 Blanks
	  	 	38	
				
		 		 	 11.4.3 Duplicates
	  	 	40	
				
		 		 	 11.4.4 Actions
	  	 	40	
				
		 		 	 11.4.5 Results
	  	 	41	
				
		 	11.5	 	Opinion on Adequacy	  	 	45	
			
	 12
	 	 Data Verification
	  	 	46	
				
		 	12.1	 	Procedures	  	 	46	
				
		 		 	 12.1.1 Database Validation
	  	 	46	
				
		 	12.2	 	Limitations	  	 	46	
				
		 	12.3	 	Opinion on Data Adequacy	  	 	47	
			
	 13
	 	 Mineral Processing and Metallurgical Testing
	  	 	48	
				
		 	13.1	 	Testing and Procedures	  	 	48	
				
		 	13.2	 	Recovery Estimate Assumptions	  	 	48	
			
	 14
	 	 Mineral Resource Estimate
	  	 	50	
				
		 	14.1	 	Drillhole Database	  	 	50	
				
		 	14.2	 	Geologic Model	  	 	51	
				
		 		 	 14.2.1 Domain Analysis
	  	 	56	
				
		 	14.3	 	Assay Capping and Compositing	  	 	57	
				
		 		 	 14.3.1 Outliers
	  	 	57	
				
		 		 	 14.3.2 Compositing
	  	 	59	
				
		 	14.4	 	Density	  	 	60	
				
		 	14.5	 	Variogram Analysis and Modeling	  	 	61	
				
		 	14.6	 	Block Model	  	 	61	
				
		 	14.7	 	Estimation Methodology	  	 	63	
				
		 	14.8	 	Model Validation	  	 	65	
				
		 		 	14.8.1 Visual Comparison	  	 	65	
				
		 		 	14.8.2 Estimation Quality	  	 	66	
				
		 		 	 14.8.3 Comparative Statistics
	  	 	68	
				
		 	14.9	 	Resource Classification	  	 	77	

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Page v

  

 

									
				
		 	14.10	 	Depletion for Mining	  	 	80	
				
		 	14.11	 	Mineral Resource Statement	  	 	81	
				
		 	14.12	 	Mineral Resource Sensitivity	  	 	83	
				
		 	14.13	 	Relevant Factors	  	 	89	
			
	 15
	 	 Mineral Reserve Estimate
	  	 	90	
			
	 16
	 	 Mining Methods
	  	 	91	
				
		 	16.1	 	Cut and Fill Mining	  	 	91	
				
		 	16.2	 	Shrinkage Stope Mining	  	 	91	
				
		 	16.3	 	Production	  	 	92	
				
		 		 	 16.3.1 Mine Design
	  	 	93	
				
		 		 	 16.3.2 Development
	  	 	97	
				
		 		 	 16.3.3 Schedule
	  	 	98	
				
		 		 	 16.3.4 Depletion
	  	 	100	
				
		 	16.4	 	Ventilation	  	 	101	
				
		 	16.5	 	Mining Equipment	  	 	102	
				
		 	16.6	 	Dewatering	  	 	102	
			
	 17
	 	 Recovery Methods
	  	 	106	
				
		 	17.1	 	Plant Design and Equipment Characteristics	  	 	107	
			
	 18
	 	 Project Infrastructure
	  	 	109	
				
		 	18.1	 	Access and Local Communities	  	 	109	
				
		 	18.2	 	Service Roads	  	 	110	
				
		 	18.3	 	Mine Operations and Support Facilities	  	 	110	
				
		 	18.4	 	Process Support Facilities	  	 	111	
				
		 	18.5	 	Energy	  	 	111	
				
		 	18.6	 	Water Supply	  	 	111	
				
		 	18.7	 	Site Communications	  	 	112	
				
		 	18.8	 	Site Security	  	 	112	
				
		 	18.9	 	Logistics	  	 	112	
				
		 	18.10	 	Waste Handling and Management	  	 	112	
				
		 	18.11	 	Tailings Management	  	 	112	
			
	 19
	 	 Market Studies and Contracts
	  	 	113	
				
		 	19.1	 	Introduction	  	 	113	
				
		 	19.2	 	Market Studies	  	 	113	
				
		 		 	 19.2.1 Gold
	  	 	113	
				
		 		 	 19.2.2 Silver
	  	 	114	
				
		 		 	 19.2.3 Lead
	  	 	115	
				
		 		 	 19.2.4 Zinc
	  	 	116	

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Page vi

  

 

									
				
		 	19.3	 	Contracts	  	 	117	
				
		 		 	 19.3.1 Lead Concentrate
	  	 	117	
				
		 		 	 19.3.2 Zinc Concentrate
	  	 	119	
			
	 20
	 	 Environmental Studies, Permitting and Social or Community Impact
	  	 	120	
				
		 	20.1	 	Environmental Studies and Background Information	  	 	120	
				
		 	20.2	 	Environmental Studies and Liabilities	  	 	120	
				
		 	20.3	 	Environmental Management	  	 	120	
				
		 		 	 20.3.1 Tailings Management
	  	 	120	
				
		 		 	 20.3.2 Waste Rock Management
	  	 	120	
				
		 		 	 20.3.3 Geochemistry
	  	 	121	
				
		 	20.4	 	Mexican Environmental Regulatory Framework	  	 	121	
				
		 		 	 20.4.1 Mining Law and Regulations
	  	 	121	
				
		 		 	 20.4.2 General Environmental Laws and Regulations
	  	 	121	
				
		 		 	 20.4.3 Other Laws and Regulations
	  	 	124	
				
		 		 	 20.4.4 Expropriations
	  	 	125	
				
		 		 	 20.4.5 NAFTA
	  	 	125	
				
		 		 	 20.4.6 International Policy and Guidelines
	  	 	126	
				
		 		 	 20.4.7 Required Permits and Status
	  	 	126	
				
		 		 	 20.4.8 MIA and CUS Authorizations
	  	 	130	
				
		 		 	 20.4.9 Inspections
	  	 	131	
				
		 	20.5	 	Social Management Planning and Community Relations	  	 	131	
				
		 	20.6	 	Closure and Reclamation Plan	  	 	131	
			
	 21
	 	 Capital and Operating Costs
	  	 	133	
			
	 22
	 	 Economic Analysis
	  	 	135	
			
	 23
	 	 Adjacent Properties
	  	 	136	
			
	 24
	 	 Other Relevant Data and Information
	  	 	137	
			
	 25
	 	 Interpretation and Conclusions
	  	 	138	
				
		 	25.1	 	Exploration	  	 	138	
				
		 	25.2	 	Mineral Resource Estimate	  	 	138	
				
		 	25.3	 	Metallurgy and Mineral Processing	  	 	139	
				
		 	25.4	 	Mining Methods	  	 	139	
				
		 	25.5	 	Recovery Methods	  	 	140	
				
		 	25.6	 	Infrastructure	  	 	140	
				
		 	25.7	 	Environmental and Permitting	  	 	140	
				
		 	25.8	 	Foreseeable Impacts of Risks	  	 	140	
			
	 26
	 	 Recommendations
	  	 	142	

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Page vii

  

 

									
				
		 	26.1	 	Recommended Work Programs and Costs	  	 	142	
				
		 		 	 26.1.1 Costs
	  	 	142	
			
	 27
	 	 References
	  	 	144	
			
	 28
	 	 Glossary
	  	 	145	
				
		 	28.1	 	Mineral Resources	  	 	145	
				
		 	28.2	 	Mineral Reserves	  	 	145	
				
		 	28.3	 	Definition of Terms	  	 	146	
				
		 	28.4	 	Abbreviations	  	 	147	

					
		
	List of Tables	  			
		
	 Table 1-1: Cusi Mine Mineral Resource Estimate as of January 31, 2017– SRK Consulting (U.S.),
Inc.
	  	 	5	
		
	 Table 2-1: Site Visit Participants
	  	 	11	
		
	 Table 4-1: Mineral Concessions at Cusi
	  	 	15	
		
	 Table 9-1: Summary of Channel Sampling by Area
	  	 	31	
		
	 Table 10-1: Drilling Summary by Type
	  	 	32	
		
	 Table 10-2: Drilling Summary by Period
	  	 	32	
		
	 Table 11-1: Analytical Methods and Reporting Limits for ALS
	  	 	36	
		
	 Table 11-2: Analytical Methods and Reporting Limits for Malpaso
	  	 	37	
		
	 Table 11-3: Failure Statistics for Cusi Standards and Blanks
	  	 	41	
		
	 Table 13-1: Projected Metallurgical Balance for Malpaso Mill – 2017
	  	 	49	
		
	 Table 14-1: Summary of Sample Counts by Type
	  	 	50	
		
	 Table 14-2: Summary of Project Areas and Relationships to Resource Estimation Domains
	  	 	53	
		
	 Table 14-3: Grade Means by Structure
	  	 	57	
		
	 Table 14-4: Capping Limits Utilized for the Cusi MRE
	  	 	58	
		
	 Table 14-5: Example Capping Analysis – Promontorio Ag
	  	 	59	
		
	 Table 14-6: Results for Density Analyses
	  	 	61	
		
	 Table 14-7: Block Model Details
	  	 	63	
		
	 Table 14-8: Estimation Parameters
	  	 	64	
		
	 Table 14-9: Cusi Mine Mineral Resource Estimate as of January 31, 2017– SRK Consulting (U.S.),
Inc.
	  	 	82	
		
	 Table 16-1: Cusi Mine Monthly Production 2016-January 2017
	  	 	93	
		
	 Table 16-2: Example of Dia Bras Monthly Production Schedule – 2018
	  	 	99	
		
	 Table 16-3: Equipment List for the Cusi Mine
	  	 	102	
		
	 Table 16-4: Cusi Mine Pumping Equipment
	  	 	105	
		
	 Table 17-1: Cusi Concentrate Production (2015-January 2017)
	  	 	106	
		
	 Table 17-2: Cusi Mine Metallurgical Balance (2014-2016)
	  	 	107	
		
	 Table 19-1: Lead Concentrate Contracted Quality
	  	 	118	

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Page viii

  

 

					
		
	 Table 20-1: Permit and Authorization Requirements for the Cusi Mine and Malpaso Mill
	  	 	127	
		
	 Table 20-2: Cusi Mine Concessions
	  	 	129	
		
	 Table 20-3: Cusi Mine and Malpaso Mill Cost of Reclamation and Closure of the Mine
	  	 	132	
		
	 Table 21-1: OPEX and CAPEX for the Cusi Mine (2014-2016)
	  	 	134	
		
	 Table 26-1: Summary of Costs for Recommended Work
	  	 	143	
		
	 Table 28-1: Definition of Terms
	  	 	146	
		
	 Table 28-2: Abbreviations
	  	 	147	
		
	List of Figures	  			
		
	 Figure 1-1: Mill Feed and Head Grades – Malpaso Mill
	  	 	2	
		
	 Figure 1-2: Pb/Zn Concentrate Grades – Malpaso Mill
	  	 	3	
		
	 Figure 4-1: Location Map showing the Cusi Area (green box) and Nearby Infrastructure
	  	 	14	
		
	 Figure 4-2: Map Showing Locations of Cusi Mineral Concessions as of 2017
	  	 	17	
		
	 Figure 7-1: 1:5000 Scale Map showing generalized lithologies and locations of historic and active mining
areas on the property
	  	 	24	
		
	 Figure 7-2: Northwest and Northeast-looking cross sections through the Cusi area, 1:5000 scale
	  	 	25	
		
	 Figure 7-3: Local Geology Map showing the location of mineralized veins
	  	 	26	
		
	 Figure 7-4: Aerial Photo of the Cusi property showing the locations and orientations of mineralized
structures
	  	 	27	
		
	 Figure 11-1: Internally Prepared QA/QC Chart for Standard #2 Performance in 2014
	  	 	38	
		
	 Figure 11-2: Blank Analysis Prepared by Sierra Metals for 2015 Blanks
	  	 	39	
		
	 Figure 11-3: Scatter Plot prepared by Sierra Metals to compare performance of duplicates at the internal
Malpaso lab and ALS Chemex
	  	 	40	
		
	 Figure 11-4: Blank Analysis for Ag, Pb and Zn
	  	 	42	
		
	 Figure 11-5: Scatterplot for Core Duplicates Analyzed at the Malpaso Mill, 2014-2016
	  	 	43	
		
	 Figure 11-6: Scatterplot for Coarse Duplicates Analyzed at the Malpaso Mill, 2014-2016
	  	 	44	
		
	 Figure 11-7: Scatterplot for Duplicates Analyzed at the Malpaso Mill and by ALS Chemex
	  	 	44	
		
	 Figure 13-1: Lead Concentrate Tonnes and Grades
	  	 	48	
		
	 Figure 13-2: Zinc Concentrate Tonnes and Grades
	  	 	49	
		
	 Figure 14-1: Plan View of Areas within Cusi District
	  	 	52	
		
	 Figure 14-2: Oblique View of the Cusi Geologic Model
	  	 	54	
		
	 Figure 14-3: Oblique View of the Cusi Geologic Model, looking east
	  	 	55	
		
	 Figure 14-4: Northeast Cross-section through the Cusi Geologic Model, showing complex vein
interactions
	  	 	56	
		
	 Figure 14-5: Sample Count by Vein Domain
	  	 	56	
		
	 Figure 14-6: Example Log Probability Plot – Promontorio Ag
	  	 	58	
		
	 Figure 14-7: Scatter Plot of Length vs. Ag
	  	 	59	
		
	 Figure 14-8: Histogram of Sample Lengths
	  	 	60	
		
	 Figure 14-9: Block Model Extents and Positions
	  	 	62	

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Page ix

  

 

					
		
	 Figure 14-10: Example of Visual Validation – Promontorio Area
	  	 	65	
		
	 Figure 14-11: Example of Visual Validation – San Nicolas Area
	  	 	66	
		
	 Figure 14-12: Histogram of Number of Holes - Promontorio
	  	 	67	
		
	 Figure 14-13: Histogram of Number of Composites - Promontorio
	  	 	67	
		
	 Figure 14-14: Histogram of Average Distances - Promontorio
	  	 	68	
		
	 Figure 14-15: Mean Analysis by Domain – Promontorio Ag
	  	 	69	
		
	 Figure 14-16: Mean Analysis by Vein Domain – Santa Eduwiges Ag
	  	 	69	
		
	 Figure 14-17: Mean Analysis by Vein Domain – San Nicolas/SRL Ag
	  	 	70	
		
	 Figure 14-18: Histogram of Block vs. Composites - Promontorio
	  	 	71	
		
	 Figure 14-19: Histogram of Block vs. Composite – Santa Eduwiges
	  	 	72	
		
	 Figure 14-20: Histogram of Block vs. Composite – San Nicolas/SRL
	  	 	73	
		
	 Figure 14-21: Histogram of Block vs. Composites – Minerva
	  	 	74	
		
	 Figure 14-22: Histogram of Block vs. Composites – San Juan
	  	 	75	
		
	 Figure 14-23: Histogram of Block vs. Composites - Candelaria
	  	 	76	
		
	 Figure 14-24: Histogram of Block vs. Composites – Durana
	  	 	77	
		
	 Figure 14-25: Classification Methods and Results – San Nicolas
	  	 	79	
		
	 Figure 14-26: 3D As-built Shapes - Promontorio
	  	 	80	
		
	 Figure 14-27: Example of Mined Polygons vs. 3D As-builts
	  	 	81	
		
	 Figure 14-28: Grade-Tonnage Chart – Promontorio Area
	  	 	83	
		
	 Figure 14-29: Grade-Tonnage Chart – Santa Eduwiges Area
	  	 	84	
		
	 Figure 14-30: Grade Tonnage Chart – San Nicolas/SRL
	  	 	85	
		
	 Figure 14-31: Grade Tonnage Chart – Minerva Area
	  	 	86	
		
	 Figure 14-32: Grade Tonnage Chart – Candelaria
	  	 	87	
		
	 Figure 14-33: Grade Tonnage Chart – Durana
	  	 	88	
		
	 Figure 14-34: Grade Tonnage Chart – San Juan
	  	 	89	
		
	 Figure 16-1: Schematic Overhand Cut and Fill Diagram
	  	 	91	
		
	 Figure 16-2: Shrinkage Stope Method
	  	 	92	
		
	 Figure 16-3: Plan View of Promontorio 3D Mine Asbuilts
	  	 	94	
		
	 Figure 16-4: Plan View of Santa Eduwiges 3D Mine Asbuilts
	  	 	95	
		
	 Figure 16-5: Plan View of La India 3D Mine Asbuilts
	  	 	96	
		
	 Figure 16-6: Example of Dia Bras Stope Block Design – Promontorio
	  	 	97	
		
	 Figure 16-7: Example of Mine Development Design – Promontorio Area
	  	 	98	
		
	 Figure 16-8: Example of Surveyed 3D Asbuilt Data vs. Polygonal Mined Projections – Promontorio
	  	 	100	
		
	 Figure 16-9: Example Ventsim Ventilation Diagram
	  	 	102	
		
	 Figure 16-10: Total Pumping by Month
	  	 	103	
		
	 Figure 17-1: Flow Chart for Crushing Circuit
	  	 	108	
		
	 Figure 17-2: Flow Diagram for Malpaso/Triunfo Plant
	  	 	108	

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Page x

  

 

					
		
	 Figure 18-1 Photo of Cusihuiriachic Village
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	 Figure 18-2: Aerial View of the Cusi Mine Area
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	 Figure 18-3 On-site Electric and Water Supply
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 Appendices 
 Appendix A: Certificates of
Qualified Persons 

  
  

					
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	1	Summary 

 This report was prepared as a National Instrument 43-101 (NI 43-101)
Technical Report (Technical Report) on Resources for Sierra Metals, Inc. (Sierra Metals) by SRK Consulting (U.S.), Inc. (SRK) on the Cusi Mine, Mexico (Cusi or The Mine). The purpose of this report is to present the methods and results of the
current mineral resource estimate for the Cusi Mine. 
  

	1.1	Property Description and Ownership 

 The Cusi Mine property is held by Sierra
Metals, formerly known as Dia Bras Exploration, Inc., through subsidiary companies Dia Bras Mexicana S.A. de C.V. and EXMIN S.A. de C.V. (collectively Dia Bras). It is located within the Abasolo Mineral District in the municipality of Cusihuiriachi,
state of Chihuahua, Mexico. The property is 135 kilometers from Chihuahua city by car and consists of 73 mineral concessions (11,664.6 hectares) wholly owned by Sierra Metals. Included in these concessions are six historic Ag-Pb producers developed
on several vein structures: the San Miguel mine, La Bamba open pit, La India mine, Santa Eduwiges mine, San Marina mine, and Promontorio mine, as well as exploration concessions around the historic mine areas. 

Sierra Metals holds surface rights to an area of 1,020 hectares located generally within the area where Sierra Metals holds mineral
concessions. Sierra Metals’ area of surface rights includes the access points to the Promontorio and Santa Eduwiges underground mines that are in operation, as well as surface rights over all resource areas delineated in this report, with the
exception of La India. 
  

	1.2	Geology and Mineralization 

 The property lies within a possible caldera that
contains a prominent rhyolite body interpreted as a resurgent dome. The rhyolite dome trends northwest-southeast with an exposure of roughly 7 km by 3 km and hosts mineralization. It is bounded (cut) on the east side by strands of the NW-trending
Cusi fault and on the west by the Border fault. The Cusi fault is a regional fault that may have controlled the location of the caldera and resurgent dome. Continued movement on the Cusi and related faults cut and brecciated the caldera and dome
rocks and provided conduits for mineralizing fluids. 
 Numerous mineralized veins on the property, typically moderately to steeply
dipping to the southeast, southwest, and north, range from less than 0.5 to 2 m thick, extend 100 to 200 m along strike and up to 400 m down-dip. There are at least seven major mineralized structures within the Cusi area, described below.
Historically, small open pits were typically developed at vein intersections. Mineralization mainly occurs in faults, epithermal veins, breccias, and fractures ranging from 1 to 10 meters thick. 

Low-grade mineralized areas exist adjacent to major structures, showing intense fracturing and are commonly laced with quartz veinlets
forming a stockwork mineralized halo around more discrete structures. The country rock in these zones is variably silicified. Pyrite and other sulfide minerals are disseminated in the silicified country rock and are also clustered in the quartz
veinlets. A well-developed mineralized stockwork zone is in the Promontorio area, especially proximal to the Cusi fault. 

  
  

					
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	1.3	Status of Exploration, Development and Operations 

 The Cusi Mine is an operating
mine, with extensive supporting infrastructure and underground development. In addition to this, there are numerous satellite exploration targets which are the subject of drilling and exploration drifts. 

 

	1.4	Mineral Processing and Metallurgical Testing 

 Cusi’s Malpaso mill is a
conventional processing facility that has been long in operation. The performance statistics that SRK had access to for the 2015 January to 2016 August period show that Cusi operates at a throughput ranging from 500 tonnes per day to 600
tonnes per day, or approximately 17,000 tonnes per month of fresh ore. Lead and zinc head grades are comparable and cover a wide range, with monthly average values for the 2016 period between 0.86% and 1.99%. Silver head grade range between 140 g/t
to 200 g/t, and gold head grade is approximately 0.25 g/t in the same period (Figure 1-1). 
  

 
 Source: Dia Bras, 2016 

Figure 1-1: Mill Feed and Head Grades – Malpaso Mill 

  
  

					
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 Historically, Cusi produced lead concentrate only, and since 2015 December it is
also producing zinc concentrate. Lead concentrate production for the first eight months in 2016 ranged approximately between 300 t/month to 800 t/month with lead grade ranging between 30% and 40% (Figure 1-2).

  
 

 
 Source: Dia Bras, 2016 

Figure 1-2: Pb/Zn Concentrate Grades – Malpaso Mill 

Zinc concentrate production for the January to August 2016 period ranged approximately between 100 t/month and 300 t/month with zinc
grade ranging from 50% to 55% approximately. 
 Silver metals is preferably deported to lead concentrate reaching recovery ranging from
70% to 80%. For the period in question, silver grade in lead concentrate is ranging from approximately 3,000 g/t to 7,000 g/t. Average Ag recovery for 2016 is approximately 74%. 

Silver deportment to zinc concentrate is in the range of 1% to 3% and its grade reaches 300 g/t to 560 g/t, which is within commercially
payable range. 
  

	1.5	Mineral Resource Estimate 

 Matthew Hastings, Senior Consultant, SRK Consulting
(U.S.) Inc. conducted the resource estimation using a combination of software including Leapfrog Geo TM, Maptek VulcanTM, and statistical analysis software including Snowden SupervisorTM and X10 GeoTM. 

The basis for the mineral resource estimate is a digital database featuring details about geology, structure, and mineralization. The
final drillhole and channel assay database was provided to SRK by Dia Bras on December 23, 2016. It features both drilling and channel samples which are current to October of 2016. The final database contains over 60,000 assays from drilling
and over 36,000 from channel sampling. The two data sets have been merged for the purposes of geological modeling, statistical analysis, and estimation. 

Three-dimensional wireframe models for the Cusi veins were created by Dia Bras using Leapfrog GeoTM software. SRK was provided the
Leapfrog project files, which were reviewed and modified to include more detail on the structures as well as incorporate channel sample data where appropriate. 

  
  

					
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 The geology models are developed on a combination of geology codes and Ag grades, and
effectively are built using hanging wall and footwall surfaces derived through selection of these points in the drilling and channel sample database, with subsequent interpolation of the points into 3D surfaces and volumes. 

SRK considered each vein its own domain for the purposes of statistical analysis and estimation. SRK limited high grade outlier samples
by capping the maximum grades for each area, and limiting samples above the cap to the grade of the cap. In order to minimize the variance in the estimation due to inherent variability in grade distributions within domains and provide a more
homogenous data set for estimation, SRK used capping of high grades as well as compositing of sample lengths. Capping analysis was done on the raw sample data, evaluating each data set by relevant area. SRK evaluated the sample lengths within the
mineralized domains defined by the geological model. The mean sample length within the mineralized domains is 0.68 m, with a maximum sample length of 8.2 m. SRK notes that there are very few samples that would be affected by a compositing
length of 1.5 m that would in turn affect the estimation. SRK selected a nominal composite length of 1.5 m, retaining short samples for use in the estimation. 

Bulk density of vein material is assigned on the basis of the results of specific gravity samples analyzed by the Servicio Geologico
Mexicano (SGM) on behalf of Dia Bras. The average density of the samples is 2.73 g/cm3, and this density was flagged into the block model for use in the resource calculations. 

Seven block models were built in Maptek VulcanTM software and are designed to approximate the orientation of the strike for the major
structures contained in each model. SRK interpolated grades for Ag, Au, Pb, and Zn using an inverse distance squared estimation method. In general, a nested three-pass estimation was used with higher restrictions on sample selection criteria in the
initial smaller passes, to less restrictive criteria in the subsequent, larger ellipsoids. Ellipsoid orientations are controlled by the hanging wall and footwall surface of each structure. The variations in the distribution of samples and the issue
of clustering of high grade channel samples is dealt with using an octant restriction on the estimation. 
 SRK has validated the
estimation for each model using a variety of methods considered to be industry standard. These include a visual comparison of the blocks versus the composites, an assessment of the quality of the estimate, and comparative statistics of block vs.
composites. 
 SRK is satisfied that the geological modeling honors the current geological information and knowledge. The location of
the samples and the assay data are sufficiently reliable to support resource estimation. The sampling information was acquired primarily by core drilling and channel sampling from mine development. SRK classified the mineral resources in a manner
consistent with CIM Guidelines as Indicated and Inferred Mineral Resources. 
 Significant factors affecting the classification
include: 
  

	 	●	 	 Lack of historic and consistent QA/QC program; 

 

	 	●	 	 Lack of downhole surveys for most drillholes and measured deviations from planned and actual azimuths;

  

	 	●	 	 Spacing of drilling compared to observed geologic continuity; 

 

	 	●	 	 Cusi is a producing mine with a successful operating history dating more than 10 years. 

  
  

					
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 In order to classify mineralization as an Indicated Mineral Resource, “the nature,
quality, quantity and distribution of data” must be “such as to allow confident interpretation of the geological framework and to reasonably assume the continuity” (CIM Definition Standards on Mineral Resources and Mineral Reserves,
December 2005). SRK has based this classification both on the continuity observed in well-drilled areas of the Mine, as well as geologic continuity observed from underground exposures of the mineralization. 

SRK depleted the block models for previous mining prior to reporting. 

The “reasonable prospects for economic extraction” requirement generally implies that the quantity and grade estimates meet
certain economic thresholds and that the Mineral Resources are reported at an appropriate cut-off grade taking into account extraction scenarios and processing recoveries. Costs for mining and processing are taken from data provided by Dia Bras for
their current underground mining operation. Costs are broken down as follows; Mining US$26.74/t, Processing US$16.63/t, and General and Administrative US$3.40/t. These costs aggregate to US$46.77. Assuming a price for Ag of US$18.30/oz (US$0.59/g),
and a nominal Ag recovery of 74%, this cost equates to a grade of about 110 g/t Ag. SRK has reported the mineral resource for the Cusi mine at this cut-off. 

The January 31, 2017, consolidated mineral resource statement for the Cusi Mine area is presented in Table 1-1. 
 Table 1-1: Cusi Mine Mineral Resource Estimate as
of January 31, 2017– SRK Consulting (U.S.), Inc. 
  

																																									
	Source	 	Class  	 	Ag (g/t)	 	 	Au (g/t)	 	 	Pb (%)	 	 	Zn (%)	 	 	Tonnes (000’s)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Promontorio
	 	

	 	 	223	 	 	 	0.08	 	 	 	0.32	 	 	 	0.38	 	 	 	692	 	 		 				 				 				 			
	
Eduwiges
	 	 	 	226	 	 	 	0.36	 	 	 	1.63	 	 	 	1.52	 	 	 	378	 	 		 				 				 				 			
	
SRL
	 	 	 	206	 	 	 	0.14	 	 	 	0.23	 	 	 	0.22	 	 	 	290	 	 		 				 				 				 			
	
San Nicolas
	 	 	 	300	 	 	 	0.11	 	 	 	0.32	 	 	 	0.36	 	 	 	344	 	 		 				 				 				 			
	
San Juan
	 	 	 	227	 	 	 	0.35	 	 	 	0.09	 	 	 	0.05	 	 	 	45	 	 		 				 				 				 			
	
Minerva
	 	 	 	202	 	 	 	0.14	 	 	 	0.21	 	 	 	0.22	 	 	 	106	 	 		 				 				 				 			
	
Candelaria
	 	 	 	376	 	 	 	0.14	 	 	 	0.18	 	 	 	0.29	 	 	 	44	 	 		 				 				 				 			
	
Durana
	 	 	 	226	 	 	 	0.06	 	 	 	0.05	 	 	 	0.02	 	 	 	91	 	 		 				 				 				 			
	
Total Indicated
	 	 	 	 	237	 	 	 	0.16	 	 	 	0.53	 	 	 	0.53	 	 	 	1,990	 	 		 				 				 				 			
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 				 				 				 			
	Source	 	Class	 	Ag (g/t)	 	 	Au (g/t)	 	 	Pb (%)	 	 	Zn (%)	 	 	Tonnes (000’s)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Promontorio
	 	

	 	 	220	 	 	 	0.12	 	 	 	0.37	 	 	 	0.60	 	 	 	265	 	 		 				 				 				 			
	
Eduwiges
	 	 	 	171	 	 	 	0.22	 	 	 	2.03	 	 	 	1.68	 	 	 	45	 	 		 				 				 				 			
	
SRL
	 	 	 	269	 	 	 	0.15	 	 	 	0.28	 	 	 	0.31	 	 	 	189	 	 		 				 				 				 			
	
San Nicolas
	 	 	 	387	 	 	 	0.15	 	 	 	0.54	 	 	 	0.65	 	 	 	599	 	 		 				 				 				 			
	
San Juan
	 	 	 	153	 	 	 	0.03	 	 	 	0.08	 	 	 	0.06	 	 	 	4	 	 		 				 				 				 			
	
Minerva
	 	 	 	226	 	 	 	0.04	 	 	 	0.17	 	 	 	0.30	 	 	 	30	 	 		 				 				 				 			
	
Candelaria
	 	 	 	151	 	 	 	0.19	 	 	 	0.60	 	 	 	1.23	 	 	 	68	 	 		 				 				 				 			
	
Durana
	 	 	 	126	 	 	 	0.01	 	 	 	0.22	 	 	 	0.13	 	 	 	2	 	 		 				 				 				 			
	
Total Indicated
	 	 	 	305	 	 	 	0.14	 	 	 	0.51	 	 	 	0.64	 	 	 	1,200	 	 		 				 				 				 			

			
	 (1)
	  	 Mineral resources are reported inclusive of ore reserves. Mineral resources are not ore reserves and do not have demonstrated
economic viability. All figures rounded to reflect the relative accuracy of the estimates. Gold, silver, lead and zinc assays were capped where appropriate.

	 (2)
	  	 Mineral resources are reported at a single cut-off grade of 110 g/t Ag based on metal price assumptions*, metallurgical recovery
assumptions, mining costs (US$26.74/t), processing costs (US$16.63/t), and general and administrative costs (US$3.40/t).

	 * Metal price assumptions considered for the calculation of the cut-off grade are: Silver (Ag):
US$/oz 18.30.

	The resources were estimated by SRK. Matthew Hastings, M.Sc., PGeo, MAusIMM #314693 of SRK, a Qualified Person, performed the resource calculations for the Cusi Mine.

  
  

					
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	1.6	Mineral Reserve Estimate 

 SRK did not produce a reserve estimate or review
reserves stated by Sierra Metals. This is due to the fact that exploration and development is ongoing in areas that are currently too speculative for Measured and Indicated classification that could be included in a reserve. Sierra Metals does not
consider a release of reserves to be appropriate or of value at this time until sufficient work has been done to better delineate these resource areas 
  

	1.7	Mining Methods 

 The primary underground mining method currently employed at Cusi
is overhand cut and fill. SRK also notes that shrinkage stoping has been in use in modern mining at Cusi, but currently makes up a comparably minor portion of the active mining operations. 

Despite lacking a prefeasibility or feasibility study in the public market, which discloses mineral reserves, the Cusi Mine is in fact in
operation and producing mineralized material from the underground mine. SRK notes that prefeasibility and feasibility studies are required for statement of reserves, but are not required for a company to initiate production for a property. 

The current mining operation produces approximately 600 tonnes of ore per day, and 400 tonnes of waste per day. The source of mined
material is split evenly between the Promontorio and Santa Eduwiges mine areas at this time. 
  

	1.8	Recovery Methods 

 The Cusi concentrator is located in the outskirts of Cuauhtemoc
City, approximately 50 km by road from the Cusi mine operations. Dump trucks each hauling approximately 20 t of ore delivered 186,898 t during the 2016 period. 

The Cusi processing facilities include two interconnected process plants, which are the Malpaso mill purchased from Rio Tinto, and the El
Triunfo mill. Both mills are conventional ball mill and flotation plants fed from a single crushing circuit. The flotation circuit has the ability to produce lead concentrate and zinc concentrate. 

 

	1.9	Infrastructure 

 The Project has fully developed infrastructure, including access
roads, an exploration camp, administrative offices, a processing plant and associated facilities, tailings storage facility, a core logging shed, water storage reservoir and water tanks. 

The site has electric power from the Mexican power grid, backup diesel generators and heating from site propane tanks. The overall
Project infrastructure is built out and functioning and adequate for the purpose of the planned mine and mill. 
  

	1.10	Environmental and Permitting 

 Based on communications with representatives from
Sierra Metals, it does not appear that there are currently any known environmental issues that could materially impact the extraction and beneficiation of mineral resources. However, given the pre-regulation vintage of the original tailings storage
facilities (piles), the likelihood is high that these facilities are not underlain by low-

  
  

					
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permeability liners, increasing the risk of a long-term liability of metals leaching and groundwater contamination. Sierra Metals intends to cover these facilities during decommissioning in order
to minimize this risk. Dia Bras personnel have commented that drill data near the newer tailings impoundment suggests that the underlying material will have no material permeability issues. 

 

	1.11	Capital and Operating Costs 

 SRK did not conduct a detailed review of costs as a
part of this study. Only a high level review was achieved during this scope of work. Capital is allocated based on a yearly budget, which is approved by the board. Additionally, operating costs are similar to other Mexican mines with the same mining
method and mill feed. 
  

	1.12	Economic Analysis 

 SRK did not conduct a detailed review of costs as a part of
this study. 
  

	1.13	Conclusions and Recommendations 

  

	1.13.1	 Geology and Mineral Resources 

SRK is of the opinion that the exploration efforts at Cusi are sufficient for the definition of mineral resources. The primary
exploration method at Cusi has been diamond core drilling followed by limited underground development, which has been successful in delineating a system of discrete epithermal veins and related stockwork mineralization. The drilling appears to be
able to target and identify mineralized structures with reasonable efficacy, and the majority of drilling is oriented in a fashion designed to approximate true thicknesses of the veins. The exploration planning suffers from a lack of focus, and
should be designed to maximize conversion of higher grade Inferred areas with less dense drilling to Indicated, or extending mineralization away from known areas accessed through channel sampling. Efforts should be focused on a single structure or
perhaps two structures to continue to develop these areas along strike and down dip, rather than scattered around several veins with very limited drilling. 

Mine development is also used for exploration, as direct access of the veins along underground drifts is an excellent and efficient way
for Cusi to understand the mineralization on a more local basis. More effort should be made to improve underground survey data, channel sampling consistency, and 3D asbuilt data. 

SRK notes that recent efforts are improving the quality of the drilling and information through more complete and thorough survey data
(for drilling and underground development), as well as modern QAQC programs which are delivering reasonable results. This lends additional confidence to recently-defined resources or newly drilled portions of historic areas. 

SRK also notes that problems for the internal Malpaso Mill laboratory, identified in this document as well as previous technical reports,
appear to continue. These are related to significant differences in precision recognized between the values reported for identical samples between Malpaso and third-party laboratories. These issues, combined with historic deficiencies in downhole
surveying and QA/QC detract from the confidence in quality of the data. 
 The geologic model has been constructed by Dia Bras
geologists, and refined by SRK using Leapfrog GeoTM software. Drilling and channel sample data, as well as sectional interpretation was 

  
  

					
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used in development of the 3D geology shapes, defining veins and stockwork zones. These are used as resource domains to constrain and control the interpolation of grade during the estimation.

 SRK built individual block models for the main resource areas, which have been rotated and sub-blocked to better fit the geologic
contacts in each area. Grade was interpolated from capped and composited sample data using an inverse distance squared algorithm, with sample selection criteria designed to decluster the channel sample data compared to the drilling. A nested
three-pass estimation was used, with decreasing data selection criteria. 
 SRK is of the opinion that the Mineral Resource Estimate
has been conducted in a manner consistent with industry best practices and that the data and information supporting the stated mineral resources is sufficient for declaration of Indicated and Inferred classifications of resources. SRK has not
classified any of the resources in the Measured category due to aforementioned uncertainties regarding the data supporting the Mineral Resource Estimate. 

These deficiencies include: 
  

	 	●	 	 The lack of a historic QA/QC program, which has only been supported by a recent resampling and modern QA/QC program for
a limited number of holes. This will be required in order to achieve Measured resources which generally are supported by high resolution drilling or sampling data that feature consistently implemented and monitored QA/QC. 

 

	 	●	 	 The lack of consistently-implemented down-hole surveys in the historic drilling. Observations from the survey data which
has been done to date show significant down-hole deviations that influence the exact position of mineralized intervals. These discrepancies are confirmed by nearby workings that project the mineralized structures in a different position than that
defined by the un-surveyed holes. 

  

	 	●	 	 The lack of industry-standard 3D survey asbuilt data delineating mined areas. This has been defined using a combination
of the existing survey data, as well as polygons defining other areas thought to be mined. SRK believes these polygons to be conservative, as it is likely that pillar areas or other partially mined areas exist within the limits of the polygons, but
are being excluded by this rudimentary methodology. 

 SRK has the following recommendations for additional work to
be performed at the Cusi mine: 
  

	 	●	 	 Identify areas that are dominantly supported by channel sample data and complete step out drilling. This should be done
at a regular spacing of approximately 25 m. 

  

	 	○ 	 	 Further to this, SRK notes opportunities where significant areas of veins have very few drillholes, but exhibit very
high grades, resulting in local high grade Inferred blocks that could theoretically be converted to Indicated with additional drilling. These should be prioritized. 

 

	 	●	 	 Continue the implementation of the current QA/QC program as documented by Dia Bras internal reports. This program is
robust and appropriate for the type of deposit. 

  

	 	●	 	 Abandon the practice of using the current internal blanks for QA/QC. A thoroughly washed silica sand is readily
available in Mexico and would be a reasonable alternative. The results of the current practices hint at either significant contamination issues during the preparation phase of sample analysis, or a contaminated blank material. In either case, this
should be resolved as soon as possible. Continue the use of newly acquired commercial standards for future QA/QC monitoring. 

  
  

					
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	 	●	 	 All analyses supporting a mineral resource estimation should continue to be analyzed by an ISO-certified independent
laboratory such as ALS Minerals. The intra-lab performance of check samples shows significant and unexpected deviations between ALS and the internal Dia Bras lab. 

 

	 	●	 	 Every drillhole exceeding 50 m in length should be surveyed downhole via Reflex or other appropriate survey tool. This
is currently being implemented at the mine, but has not historically been the case. 

  

	 	●	 	 SRK strongly recommends continuing the practice of consistent use of a total station GPS for surveying of drillhole
collars and channel sample locations, as well as mine workings. Discrepancies between the precise locations of these three types of data occur regularly where they are closely spaced, and reduces confidence in the data as it impacts the Mineral
Resource estimate. 

  

	 	○ 	 	 A 3D mine survey could be accomplished relatively easily and for minimal cost, and could be conducted on a quarterly
basis to develop a better measurement of mined material to be used in reconciliation processes. 

  

	 	●	 	 Evaluate more refined resource estimation procedures incorporating other means of dealing with the highly clustered
data. 

  

	 	●	 	 Develop a simple method of reconciling the resource models to production, using stope shapes and grades derived from
channel sampling. 

  

	1.13.2	 Mineral Reserves 

Mineral reserves have not been stated in this report although the operation has been in production for many years. The company plans to
perform further work to eventually produce an industry best practice reserve statement. The timeline for this work is yet to be defined, but the company has started on many aspects of this work. 

SRK recommends the following work program to achieve mineral reserves: 

 

	 	●	 	 Field work to gather geotechnical information; 

 

	 	●	 	 Geotechnical analysis to confirm mining method parameters and safety analysis; 

 

	 	●	 	 Hydrogeological field work and generation of hydrogeological model; 

 

	 	●	 	 Additional drilling to increase resource confidence to Indicated category; 

 

	 	●	 	 Detailed mine design followed by mine schedule and ventilation analysis; 

 

	 	●	 	 Ensure that tailings and future metallurgical assumptions are appropriate for the next level of study; and

  

	 	●	 	 Economic evaluation with detailed operating and capital costs. 

  
  

					
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	2	Introduction 

  

	2.1	Terms of Reference and Purpose of the Report 

 This report was prepared as a
National Instrument 43-101 (NI 43-101) Technical Report (Technical Report) on Resources for Sierra Metals, Inc. (Sierra Metals) by SRK Consulting (U.S.), Inc. (SRK) on the Cusi Mine, Mexico (Cusi or The Mine). The purpose of this report is to
present the mineral resource estimate for the operating Cusi mine and surrounding exploration areas. 
 This Technical Report has been
amended from a previously filed Technical Report on the Cusi Mine. This Amended report is unchanged from the Original NI 43-101 Technical Report dated April 14, 2017, except to include language with regards to the sustained production at the
Cusi Mine. Changes were made to relevant portions of Sections 1, 25 and 26 summarized therefrom changes to Section 2 Introduction, Section 2.2, 2.3 and Appendix A for the addition of Qualified Person Fernando Rodrigues, Section 16 for
the addition of description of mining methods, Section 17 for the addition of description of recovery methods, Section 5.5.5 and 18 for the addition of description of project infrastructure, Section 19 for the addition of description
of market studies and contracts, and Section 21 for description of capital and operating costs. SRK is not disclosing any material information in Section 15 or Section 22, as relevant study and/or analysis has not been conducted to
support disclosure of mineral reserves or an economic analysis in the relative sections. 
 The quality of information, conclusions,
and estimates contained herein is consistent with the level of effort involved in SRK’s services, based on: i) information available at the time of preparation, ii) data supplied by outside sources, and iii) the assumptions, conditions, and
qualifications set forth in this report. This report is intended for use by Sierra Metals subject to the terms and conditions of its contract with SRK and relevant securities legislation. The contract permits Sierra Metals to file this report as a
Technical Report with Canadian securities regulatory authorities pursuant to NI 43-101, Standards of Disclosure for Mineral Projects. Except for the purposes legislated under provincial securities law, any other uses of this report by any third
party is at that party’s sole risk. The responsibility for this disclosure remains with Sierra Metals. The user of this document should ensure that this is the most recent Technical Report for the property as it is not valid if a new Technical
Report has been issued. 
 This report provides Mineral Resource and Mineral Reserve estimates, and a classification of resources and
reserves prepared in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and Reserves: Definitions and Guidelines, May 10, 2014 (CIM, 2014). 

 

	2.2	Qualifications of Consultants (SRK) 

 The Consultants preparing this technical
report are specialists in the fields of geology, exploration, Mineral Resource and Mineral Reserve estimation and classification, underground mining, geotechnical, environmental, permitting, metallurgical testing, mineral processing, processing
design, capital and operating cost estimation, and mineral economics. 
 None of the Consultants or any associates employed in the
preparation of this report has any beneficial interest in Sierra Metals. The Consultants are not insiders, associates, or affiliates of 

  
  

					
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Sierra Metals. The results of this Technical Report are not dependent upon any prior agreements concerning the conclusions to be reached, nor are there any undisclosed understandings concerning
any future business dealings between Sierra Metals and the Consultants. The Consultants are being paid a fee for their work in accordance with normal professional consulting practice. 

The following individuals, by virtue of their education, experience and professional association, are considered Qualified Persons (QP)
as defined in the NI 43-101 standard, for this report, and are members in good standing of appropriate professional institutions. QP certificates of authors are provided in Appendix A. The QP’s are responsible for specific sections as follows:

  

	 	●	 	 Matthew Hastings, Senior Consultant is the QP responsible for Geology and Mineral Resources, Adjacent Properties, and
Other Relevant Data and Information; Sections 2-12 14, 23, 24 and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report. 

  

	 	●	 	 Fernando Rodrigues, Principal Consultant is the QP responsible for Mining Methods, Market Studies and Contracts, Capital
and Operating Costs, Economic Analysis – Sections 15, 16, 18, 19, 21, 22 and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report. 

 

	 	●	 	 Mark Willow, Principal Consultant is the QP responsible for Environmental Studies, Permitting and Social or Community
Impact Section 20, and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report. 

  

	 	●	 	 Daniel Sepulveda, Associate Principal Consultant is the QP responsible for Mineral Processing and Metallurgical Testing,
and Recovery Methods, Section 13, 17 and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report. 

  

	2.3	Details of Inspection 

 Table 2-1: Site
Visit Participants 
  

									
	Personnel	 	Company	 	Expertise	 	Date(s) of Visit	 	Details of Inspection
	
Matthew Hastings
	 	 SRK Consulting

(U.S.) Inc.
	 	Geology and Mineral Resources	 	March 11-16, 2015	 	Reviewed geologic interpretation, drilling and sampling, QA/QC, and underground geology.
	
Fernando Rodrigues
	 	 SRK Consulting

(U.S.) Inc.
	 	Mining and Infrastructure	 	March 11-16, 2015	 	Reviewed mining methods, designs and planning, on site infrastructure, and limited costs and economics.
	
Daniel Sepulveda
	 	 SRK Consulting

(U.S.) Inc.
	 	Metallurgy and Process	 	October 19-20, 2016	 	Reviewed mill facility, process design and metallurgical balance.

  

	2.4	Sources of Information 

 The sources of information include data and reports
supplied by Dia Bras or Sierra Metals personnel as well as documents cited throughout the report and referenced in Section 27. 

  
  

					
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	2.5	Effective Date 

 The effective date of this report is January 31, 2017. 

 

	2.6	Units of Measure 

 The metric system has been used throughout this report. Tonnes
are metric of 1,000 kg, or 2,204.6 lb. All currency is in U.S. dollars (US$) unless otherwise stated. 

  
  

					
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	3	Reliance on Other Experts 

 The Consultant’s opinion contained herein is based
on information provided to the Consultants by Sierra Metals or their subsidiary Dia Bras throughout the course of the investigations. Where noted, SRK has relied upon the work of other consultants in the project areas in support of this Technical
Report. 
 The Consultants used their experience to determine if the information from previous reports was suitable for inclusion in
this technical report and adjusted information that required amending. This report includes technical information, which required subsequent calculations to derive subtotals, totals and weighted averages. Such calculations inherently involve a
degree of rounding and consequently introduce a margin of error. Where these occur, the Consultants do not consider them to be material. 

These items have not been independently reviewed by SRK and SRK did not seek an independent legal opinion of these items. 

  
  

					
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	4	Property Description and Location 

  

	4.1	Property Location 

 The Cusi Mine property is held by Sierra Metals, formerly known
as Dia Bras Exploration, Inc., through subsidiary companies Dia Bras Mexicana S.A. de C.V. and EXMIN S.A. de C.V. (collectively Dia Bras). It is located within the Abasolo Mineral District in the municipality of Cusihuiriachie, state of Chihuahua,
Mexico. The property is 135 kilometers from Chihuahua city by car and consists of 73 mineral concessions wholly owned by Sierra Metals. Included in these concessions are six historic Ag-Pb producers developed on several vein structures: the San
Miguel mine, La Bamba open pit, La India mine, Santa Eduwiges mine, San Marina mine, and Promontorio mine, as well as exploration concessions around the historic mine areas. The shaft of the Promontorio mine is located at Northing 3,125,854 meters
and Easting 319,019 meters in the 13R UTM grid in WGS84 ellipsoid. 
  
 

 
 Source: Ciesieski, 2007 

Figure 4-1: Location Map showing the Cusi Area (green box) and Nearby Infrastructure 

 

	4.2	Mineral Titles 

 Sierra Metals wholly owns rights for exploration and mining for
the Cusi Property for 73 mineral concessions covering an area of 11,664.6 hectares (Figure 4-2). Locations of the concessions for the Cusi project and their expiry dates are listed in Table 4-1. Expiry dates are all represented as forward-looking dates (i.e., ’52 refers to 2052). 

  
  

					
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 Table 4-1: Mineral Concessions at Cusi

  

																									
	Holding Company	  	Name	  	Type	 	Area (ha)	 	 	File No.	 	 	Title No.	 	 	Enrolled	 	 	Expiry	 
	 Dia Bras Mexicana
	  	Base*	  	Exploration	 	 	23.8090	 	 	 	016/30975	 	 	 	217584	 	 	 	8/6/2002	 	 	 	8/5/1952	 
	 Dia Bras Mexicana
	  	Flor de Mayo*	  	Exploration	 	 	14.4104	 	 	 	016/32699	 	 	 	224700	 	 	 	5/31/2005	 	 	 	5/30/1955	 
	 Dia Bras Mexicana
	  	Base 1	  	Exploration	 	 	3.9276	 	 	 	016/33729	 	 	 	227657	 	 	 	7/28/2006	 	 	 	7/27/1956	 
	 Dia Bras Mexicana
	  	Santa Rita	  	Exploration	 	 	16.6574	 	 	 	016/34624	 	 	 	229081	 	 	 	3/6/2007	 	 	 	3/5/1957	 
	 Dia Bras Mexicana
	  	Sayra I	  	Exploration	 	 	7.2195	 	 	 	016/34623	 	 	 	229064	 	 	 	2-3-20070	 	 	 	3/1/1957	 
	 Dia Bras Mexicana
	  	San Miguel	  	Exploration	 	 	96.2748	 	 	 	016/33730	 	 	 	229166	 	 	 	3/21/2007	 	 	 	3/20/1957	 
	 Dia Bras Mexicana
	  	San Miguel I	  	Exploration	 	 	98.6218	 	 	 	016/33731	 	 	 	228484	 	 	 	11/24/2006	 	 	 	11/23/1956	 
	 Dia Bras Mexicana
	  	San Miguel II	  	Exploration	 	 	100.00	 	 	 	016/33732	 	 	 	227363	 	 	 	6/14/2006	 	 	 	6/13/1956	 
	 Dia Bras Mexicana
	  	San Miguel III	  	Exploration	 	 	100.00	 	 	 	016/33733	 	 	 	227364	 	 	 	6/14/2006	 	 	 	6/13/1956	 
	 Dia Bras Mexicana
	  	San Miguel IV	  	Exploration	 	 	96.9850	 	 	 	016/33734	 	 	 	227485	 	 	 	6/27/2006	 	 	 	6/26/1956	 
	 Dia Bras Mexicana
	  	San Miguel VI	  	Exploration	 	 	98.9471	 	 	 	016/34642	 	 	 	228058	 	 	 	9/29/2006	 	 	 	9/28/1956	 
	 Dia Bras Mexicana
	  	San Miguel VII	  	Exploration	 	 	52.6440	 	 	 	016/34640	 	 	 	229084	 	 	 	3/6/2007	 	 	 	3/5/1957	 
	 Dia Bras Mexicana
	  	Saira	  	Exploration	 	 	16.00	 	 	 	016/33735	 	 	 	227365	 	 	 	6/14/2006	 	 	 	6/13/1956	 
	 Dia Bras Mexicana
	  	Manuel	  	Exploration	 	 	100.00	 	 	 	016/33714	 	 	 	227360	 	 	 	6/14/2006	 	 	 	6/13/1956	 
	 Dia Bras Mexicana
	  	Santa Rita Fracc. I	  	Exploration	 	 	9.00	 	 	 	016/34624	 	 	 	229082	 	 	 	3/6/2007	 	 	 	3/5/1957	 
	 Dia Bras Mexicana
	  	Santa Rita Fracc. II	  	Exploration	 	 	8.8141	 	 	 	016/34624	 	 	 	229083	 	 	 	3/6/2007	 	 	 	3/5/1957	 
	 Dia Bras Mexicana
	  	San Miguel V	  	Exploration	 	 	6.5328	 	 	 	016/34641	 	 	 	227984	 	 	 	9/26/2006	 	 	 	9/25/1956	 
	 Dia Bras Mexicana
	  	San Juan	  	Exploration	 	 	12.3587	 	 	 	016/31500	 	 	 	218657	 	 	 	12/3/2002	 	 	 	12/2/1952	 
	 Dia Bras Mexicana
	  	San Juan Fracc. A	  	Exploration	 	 	0.1727	 	 	 	016/31500	 	 	 	218658	 	 	 	12/3/2002	 	 	 	12/2/1952	 
	 Dia Bras Mexicana
	  	 San Juan

Fracc. B
	  	Exploration	 	 	0.1469	 	 	 	016/31500	 	 	 	218659	 	 	 	12/3/2002	 	 	 	12/2/1952	 
	 Dia Bras Mexicana
	  	Norma	  	Exploration	 	 	12.2977	 	 	 	016/31700	 	 	 	218851	 	 	 	1/22/2003	 	 	 	1/21/1953	 
	 Dia Bras Mexicana
	  	Norma 2	  	Exploration	 	 	1.7561	 	 	 	016/31715	 	 	 	219283	 	 	 	2/25/2003	 	 	 	2/24/1953	 
	 Dia Bras Mexicana
	  	Cima	  	Exploration	 	 	9.9637	 	 	 	016/30957	 	 	 	217231	 	 	 	7/2/2002	 	 	 	7/1/1952	 
	 Dia Bras Mexicana
	  	Manuel 1 Fracc A	  	Exploration	 	 	1.1858	 	 	 	016/34849	 	 	 	229747	 	 	 	6/13/2007	 	 	 	6/12/1957	 
	 Dia Bras Mexicana
	  	Manuel 1 Fracc B	  	Exploration	 	 	1.3425	 	 	 	016/34849	 	 	 	229748	 	 	 	6/13/2007	 	 	 	6/12/1957	 
	 Dia Bras Mexicana
	  	Alma	  	Exploration	 	 	80.4612	 	 	 	Valid	 	 	 	227982	 	 	 	9/25/2006	 	 	 	9/25/1956	 
	 Dia Bras Mexicana
	  	San Bartolo	  	Exploitation	 	 	6.00	 	 	 	Valid	 	 	 	150395	 	 	 	9/30/1968	 	 	 	9/29/2018	 
	 Dia Bras Mexicana
	  	Marisa	  	Exploration	 	 	5.08	 	 	 	Valid	 	 	 	220146	 	 	 	6/17/2003	 	 	 	6/16/1953	 
	 Dia Bras Mexicana
	  	La India	  	Exploitation	 	 	15.76	 	 	 	Valid	 	 	 	150569	 	 	 	10/29/1968	 	 	 	10/27/2018	 
	 Dia Bras Mexicana
	  	Alma	  	Exploration	 	 	87.2041	 	 	 	Valid	 	 	 	227650	 	 	 	7/27/2006	 	 	 	7/27/1956	 
	 Dia Bras Mexicana
	  	Alma I	  	Exploration	 	 	106.00	 	 	 	Valid	 	 	 	226816	 	 	 	3/9/2006	 	 	 	3/9/1956	 
	 Dia Bras Mexicana
	  	Alma II	  	Exploration	 	 	91.00	 	 	 	Valid	 	 	 	227651	 	 	 	7/27/2006	 	 	 	7/27/1956	 
	 Dia Bras Mexicana
	  	Nueva Recompensa	  	Exploitation	 	 	21.00	 	 	 	Valid	 	 	 	195371	 	 	 	9/15/1992	 	 	 	9/13/1942	 
	 Dia Bras Mexicana
	  	Monterrey	  	Exploitation	 	 	5.4307	 	 	 	Valid	 	 	 	183820	 	 	 	11/22/1988	 	 	 	11/21/1938	 
	 Dia Bras Mexicana
	  	Nueva Santa Marina	  	Exploitation	 	 	16.00	 	 	 	Valid	 	 	 	182002	 	 	 	4/8/1988	 	 	 	4/7/1938	 
	 Dia Bras Mexicana
	  	San Ignacio	  	Exploitation	 	 	3.00	 	 	 	Valid	 	 	 	165662	 	 	 	11/28/1979	 	 	 	11/27/2029	 
	 Dia Bras Mexicana
	  	Promontorio	  	Exploitation	 	 	8.00	 	 	 	Valid	 	 	 	163582	 	 	 	10/30/1978	 	 	 	10/29/2028	 
	 Dia Bras Mexicana
	  	La Perla	  	Exploitation	 	 	15.00	 	 	 	Valid	 	 	 	165968	 	 	 	12/13/1979	 	 	 	12/12/2029	 
	 Dia Bras Mexicana
	  	La Perlita	  	Exploitation	 	 	10.00	 	 	 	Valid	 	 	 	163565	 	 	 	10/10/1978	 	 	 	10/9/2028	 
	 Dia Bras Mexicana
	  	Luís	  	Exploitation	 	 	3.1946	 	 	 	Valid	 	 	 	194225	 	 	 	12/19/1991	 	 	 	12/18/1941	 
	 Dia Bras Mexicana
	  	La Consolidada	  	Exploitation	 	 	22.00	 	 	 	Valid	 	 	 	165102	 	 	 	8/23/1979	 	 	 	8/22/2029	 
	 Dia Bras Mexicana
	  	La Doble Eufemia	  	Exploitation	 	 	9.00	 	 	 	Valid	 	 	 	188814	 	 	 	11/29/1990	 	 	 	11/28/1940	 
	 Dia Bras Mexicana
	  	La Gloria	  	Exploitation	 	 	10.00	 	 	 	Valid	 	 	 	179400	 	 	 	12/9/1986	 	 	 	12/8/1936	 
	 Dia Bras Mexicana
	  	La Indita	  	Exploration	 	 	9.9034	 	 	 	Valid	 	 	 	212891	 	 	 	2/13/2001	 	 	 	2/12/1949	 
	 Dia Bras Mexicana
	  	La Suerte	  	Exploration	 	 	10.5402	 	 	 	Valid	 	 	 	216711	 	 	 	5/28/2002	 	 	 	5/27/1952	 
	 Minera Cusi
	  	El Hueco	  	Exploitation	 	 	1.8379	 	 	 	Valid	 	 	 	172321	 	 	 	11/23/2003	 	 	 	11/23/1933	 
	 Dia Bras Mexicana
	  	El Presidente	  	Exploitation	 	 	8.1608	 	 	 	Valid	 	 	 	209802	 	 	 	8/9/1999	 	 	 	8/8/1949	 
	 Dia Bras Mexicana
	  	El Salvador	  	Exploitation	 	 	7.7448	 	 	 	Valid	 	 	 	190493	 	 	 	4/29/1991	 	 	 	4/28/1941	 
	 Dia Bras Mexicana
	  	Cusihuiriachic Dos	  	Exploitation	 	 	87.6748	 	 	 	Valid	 	 	 	220576	 	 	 	8/28/2003	 	 	 	8/27/1953	 
	 Dia Bras Mexicana
	  	La Bufa Chiquita	  	Exploitation	 	 	3.6024	 	 	 	Valid	 	 	 	220575	 	 	 	8/28/2003	 	 	 	8/27/1953	 
	 Dia Bras Mexicana
	  	Aguila	  	Exploration	 	 	4.2772	 	 	 	Valid	 	 	 	216262	 	 	 	4/23/2002	 	 	 	4/22/1952	 
	 Dia Bras Mexicana
	  	Año Nuevo	  	Exploration	 	 	12.00	 	 	 	Valid	 	 	 	192908	 	 	 	12/19/1991	 	 	 	12/18/1941	 
	 Dia Bras Mexicana
	  	Ampl. Nueva Josefina	  	Exploitation	 	 	18.2468	 	 	 	Valid	 	 	 	177597	 	 	 	4/2/1986	 	 	 	3/31/1936	 
	 Dia Bras Mexicana
	  	El Milagro	  	Exploitation	 	 	26.8259	 	 	 	Valid	 	 	 	166580	 	 	 	6/27/1980	 	 	 	6/26/1930	 

  
  

					
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	Holding Company	  	Name	  	Type	 	Area (ha)	 	 	File No.	 	 	Title No.	 	 	Enrolled	 	 	Expiry	 
	 Dia Bras Mexicana
	  	Los Pelones	  	Exploitation  	 	 	16.3018	 	 	 	Valid	 	 	 	166981	 	 	 	8/5/1980	 	 	 	8/4/1930	 
	 Dia Bras Mexicana
	  	La Ilusión	  	Exploitation	 	 	6.00	 	 	 	Valid	 	 	 	166611	 	 	 	6/27/1980	 	 	 	6/26/1930	 
	 Dia Bras Mexicana
	  	La Hermana de la India  	  	Exploitation	 	 	13.1412	 	 	 	Valid	 	 	 	180030	 	 	 	3/23/1987	 	 	 	3/22/1937	 
	 Dia Bras Mexicana
	  	La Rumorosa	  	Exploitation	 	 	20.00	 	 	 	Valid	 	 	 	166612	 	 	 	6/27/1980	 	 	 	6/26/1930	 
	 Dia Bras Mexicana
	  	La Nueva Josefina	  	Exploitation	 	 	10.00	 	 	 	Valid	 	 	 	181221	 	 	 	9/11/1987	 	 	 	9/10/1937	 
	 Dia Bras Mexicana
	  	Mina Vieja	  	Exploitation	 	 	8.25	 	 	 	Valid	 	 	 	165742	 	 	 	12/11/1979	 	 	 	12/10/2029	 
	 Dia Bras Mexicana
	  	Margarita	  	Exploitation	 	 	14.00	 	 	 	Valid	 	 	 	165969	 	 	 	12/13/1979	 	 	 	12/12/2029	 
	 Minera Cusi
	  	Cusihuiriachic	  	Exploration	 	 	472.2626	 	 	 	Valid	 	 	 	240976	 	 	 	11/16/2012	 	 	 	11/15/1962	 
	 Dia Bras Mexicana
	  	CUSI-DBM	  	Exploration	 	 	4,716.6621	 	 	 	Valid	 	 	 	229299	 	 	 	4/3/2007	 	 	 	4/2/1957	 
	 Dia Bras Mexicana
	  	CUSI-DBM 02	  	Exploration	 	 	4,695.1748	 	 	 	Valid	 	 	 	232028	 	 	 	6/10/2008	 	 	 	6/9/1958	 
	 Dia Bras Mexicana
	  	Bronco 1 A	  	Exploration	 	 	55.6309	 	 	 	Valid	 	 	 	240329	 	 	 	5/23/2012	 	 	 	5/22/1962	 
	 Dia Bras Mexicana
	  	Bronco 1 B	  	Exploration	 	 	0.8801	 	 	 	Valid	 	 	 	240330	 	 	 	5/23/2012	 	 	 	5/22/1962	 
	 Dia Bras Mexicana
	  	Bronco 2	  	Exploration	 	 	7.5296	 	 	 	Valid	 	 	 	239311	 	 	 	12/13/2011	 	 	 	12/13/1961	 
	 Dia Bras Mexicana
	  	Bronco 3	  	Exploration	 	 	8.1186	 	 	 	Valid	 	 	 	243011	 	 	 	5/30/2014	 	 	 	5/29/1964	 
	 Dia Bras Mexicana
	  	Bronco 4	  	Exploration	 	 	0.5224	 	 	 	Valid	 	 	 	239312	 	 	 	12/13/2011	 	 	 	12/13/1961	 
	 Dia Bras Mexicana
	  	Bronco 5	  	Exploration	 	 	6.7121	 	 	 	Valid	 	 	 	239335	 	 	 	12/13/2011	 	 	 	12/13/1961	 
	 Dia Bras Mexicana
	  	Bronco 6	  	Exploration	 	 	9.00	 	 	 	Valid	 	 	 	239321	 	 	 	12/13/2011	 	 	 	12/13/1961	 
	 Dia Bras Mexicana
	  	Zapopa	  	Exploration	 	 	8.3867	 	 	 	Valid	 	 	 	240189	 	 	 	4/13/2012	 	 	 	4/12/1962	 
	 Minera Cusi
	  	La Mexicana	  	Exploration	 	 	2.00	 	 	 	Valid	 	 	 	165883	 	 	 	12/12/1979	 	 	 	12/13/1982	 

 Source: Dia Bras, 2017 

  
  

					
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 Source: Dia Bras, 2017 

Figure 4-2: Map Showing Locations of Cusi Mineral Concessions as of 2017 

 

	4.2.1	Nature and Extent of Issuer’s Interest 

 Sierra Metals holds surface rights to
an area of 1,020 hectares located generally within the area where Sierra Metals holds mineral concessions. Sierra Metals’ area of surface rights includes the 

  
  

					
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access points to the Promontorio and Santa Eduwiges underground mines that are in operation, as well as surface rights over all resource areas delineated in this report, with the exception of La
India. Sierra Metals has a working relationship with the local Santa Rita community, who views mining at the Promontorio mine and associated jobs favorably. 
  

	4.3	Royalties, Agreements and Encumbrances 

 Production from the Cusi Project area is
subject to net smelter royalties ranging from 1.5% to 3%, depending on origin of the mined quantity with respect to the mineral concession area. 

Mineral concessions that make up the Cusi property were acquired from private entities and the Mexican federal government
(Dirección General de Minas). The terms associated for the claim blocks are described below. 
  

	4.3.1	Purchase Agreement with Minera Cusi 

 Mineral concessions were purchased from
Minera Cusi S.A. de C.V. under a purchase agreement dated April 15, 2008. A total of 31 mineral concessions for 862 hectares were acquired from Minera Cusi. Sierra Metals is subject to a net smelter royalty (NSR) on production from the Minera
Cusi concessions of 2% if the price of silver is less than US$11 per ounce; and a NSR of 3% if the price of silver is greater than US$11 per ounce. 
  

	4.3.2	Purchase Agreement with Manuel Holguin 

 The mineral concessions from Manuel
Holguin consisting of 27 concessions over an area of 976 hectares were acquired under three purchase agreements dated May 30, 2006, December 7, 2006, and November 15, 2007. Royalties under the original purchase agreements were
acquired under purchase agreements dated April 24, 2012 and November 23, 2012. These concessions are not currently subject to any royalties. 

Sierra Metals holds 100% interest in these concessions. 
  

	4.3.3	Purchase Agreement with Martha Azucena Holguin 

 The mineral concessions from
Martha Azucena Holguin consisting of 50% share of three concessions over an area of 293 hectares were acquired under a purchase agreement dated May 12, 2010. The remaining 50% share was acquired under purchase agreement with Manuel Holguin
May 30, 2006. These concessions are not subject to any royalties. Sierra Metals holds 100% interest in these concessions. 
  

	4.3.4	Purchase Agreement with Hector Sanchez 

 The mineral concessions consisting of two
concessions over an area of 21 hectares were purchased from Hector Sanchez Villalobos and Carmen Saenz Rodriguez under a purchase agreement dated May 2, 2006. These concessions are subject to a 1.5% NSR royalty from production on the two
concessions, to a maximum of US$1.5 million. Sierra Metals holds 100% interest in these concessions. 

  
  

					
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	4.3.5	Agreement with Mexican Government 

 The ten concessions over an area of 10,954
hectares were acquired from the Mexican federal government. Exploration and mining at the Cusi property are subject to semiannual payments to the Mexican federal government. Fees are paid to the federal government twice each year, in January and
July. Sierra Metals made a payment of 494,652.00 Mexican Pesos to the Mexican federal government in January 2014 covering the concessions for the Cusi Project for the period from January to June 2014. 

 

	4.4	Environmental Liabilities and Permitting 

  

	4.4.1	Environmental Liabilities 

 Previous technical reports noted that as part of
current mining operations, waste rock from mining at Promontorio and Santa Eduwiges is stored near the entrances of the respective mines. Management of these waste rock piles does not require permits. 

Tailings are stored in two tailings piles in the vicinity of the Malpaso Mill. Previous technical reports also noted that the tailings
pile at the Malpaso Mill may not be lined, and may constitute a potential environmental liability. 
  

	4.4.2	Required Permits and Status 

 According to the information provided to Gustavson,
as reported in previous technical reports Cusi mine and Malpaso mill are exempt from permit requirements because the operations predate the environmental laws. Sierra has received formal recognition of the permit exemption for Malpaso and is
awaiting documentation of recognition of the exemption for the Cusi mine. Requirements for environmental and land use change permits are managed by the Mexican federal government’s Secretary of Environment and Natural Resources (Secretaria de
Medio Ambiente y Recursos Naturales, or “SEMARNAT”) and local government. 
 Sierra Metals holds an explosives use permit
from the Mexican federal government’s Secretary of National Defense (Secretaria de la Defensa Nacional, or “SEDENA”). This permit is in good standing and is renewed annually. 

 

	4.5	Other Significant Factors and Risks 

 As Sierra Metals does not hold surface rights
for the La India area, it would be difficult to construct access or begin operations at La India at this time. Sierra Metals believes that it will be possible to secure these surface rights in a timely manner at a reasonable cost, but until such an
agreement is secured, that portion of the resource remains at risk. 
 While no permit is required for the tailings piles at the
Malpaso Mill, because the existing tailings deposit pre-dates permitting requirements, the tailings pile at the Malpaso Mill may not be lined, and may constitute a potential environmental liability. 

  
  

					
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	5	Accessibility, Climate, Local Resources, 

	  	Infrastructure and Physiography 

  

	5.1	Topography, Elevation and Vegetation 

 The topography of the Cusi Project ranges
from approximately 2,000 to 2,500 above masl. 
 The Cusi Project is covered by vegetation consisting of deciduous forest in the
valleys and coniferous forest at higher altitudes. Land use around the Cusi property is agricultural, including crops and cattle ranching. Overburden thickness ranges from one to three meters and consists of unconsolidated conglomerate with pebbles
and boulders of volcanic rocks, sand, clay, and volcanic ash. Wildlife in and surrounding Cusi property includes insects, lizards, snakes, birds, and small mammals. 
  

	5.2	Accessibility and Transportation to the Property 

 The Cusi property is situated
within the municipality of Cusihuiriachic located in the central portion of Chihuahua State, Mexico, approximately 135 kilometers (km) by car west of the City of Chihuahua. Access to the village of Cusihuiriachic from the City of Chihuahua is 105 km
along Federal Highway No. 16 to Cuauhtémoc, then south for 22 km along a paved road to the village of Cusihuiriachic, where the Cusi Property is located. 
  

	5.3	Climate and Length of Operating Season 

 The climate at the Cusi Project is
described as semi-arid with average daily mean temperatures per month ranging from 7.5° to 21.7° Celsius, with hotter months occurring mid-year. Annual precipitation is approximately 448 millimeters, with monthly precipitation ranging from
4.1 to 121 millimeters. The highest rainfalls during the year are recorded between July and September. Climate is conducive for year round mining operations. 
  

	5.4	Sufficiency of Surface Rights 

 Sierra Metals holds surface rights over most of the
main mining and resource areas discussed in this report. The main mine shaft of the Promontorio Mine is close to the surface rights boundary, and there is a second, currently unused shaft, (Tiro Consolidada) which is just outside the surface rights
area. Cusi does not currently control surface rights for the La India mine. Otherwise, surface rights are expected to be sufficient for mining. 
  

	5.5	Infrastructure Availability and Sources 

  

	5.5.1	Power 

 Electrical power at the Cusi Project and Malpaso Mill is provided by the
Mexican Electricity Federal Commission (Comisión Federal de Electricidad). At the Cusi mine, electricity is conveyed in 33,000-volt power lines. At the Malpaso Mill, electricity is delivered on a 1,290-kilowatt power line. Existing
electricity supply is expected to be adequate for foreseeable mining operations. 

  
  

					
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	5.5.2	Water 

 At the Cusi mine, Sierra Metals utilizes water recovered from the
underground workings for process water and support of mining operations. Water was generated from dewatering operations in the Promontorio and Santa Eduwiges Mines. Potable water is trucked in. 

 

	5.5.3	Mining Personnel 

 At the Cusi mine, approximately 100 persons are employed, and 67
persons are employed at the Malpaso Mill. 
  

	5.5.4	Potential Tailings Storage Areas 

 Two tailings dams are located in the vicinity of
the Malpaso Mill. Land position within the Malpaso Mill complex is expected to be adequate to support anticipated future milling operations. 

Tailings are stored in two tailings piles in the vicinity of the Malpaso Mill. Previous technical reports (Gustavson, 2014) noted that
the existing tailings pile at the Malpaso Mill may not be have been constructed using a low permeability under-liner (soil and/or geomembrane), and that this lack of liner system could pose a risk to underlying groundwater resources and potential
long-term environmental liability from the leaching of the tailings materials by meteoric precipitation. Given the extremely arid conditions at the site, however, this would likely be a low to moderate risk. 

Dia Bras has permitted additional tailings storage on site to take on additional tailings in early 2018. Subsequent to this, additional
areas on previously permitted and dried tailing facilities as well as upstream from the latest dam and tailings impoundment are in in authorized areas which have been previously permitted. All three of these areas combined should allow up to four
years of capacity using filtered stack tails deposition. 
  

	5.5.5	Potential Waste Rock Disposal Areas 

 Waste rock is generally used as backfill for
ongoing mining operations at Cusi. Regardless, there is sufficient surface area and access for temporary storage and/or disposal of waste rock near the mine. 
  

	5.5.6	Potential Processing Plant Sites 

 Ore from the Cusi Project is processed in the El
Triunfo circuit of the Malpaso Mill, which has a capacity of 650 tonnes per day, and is expected to be sufficient for expected future operations. 

  
  

					
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	6	History 

  

	6.1	Prior Ownership and Ownership Changes 

 Since discovery and initial production of
precious metals in the Cusi district in the late 1800’s, the ownership history is extensive and complex. This is summarized in Section 6.4. 
  

	6.2	Exploration and Development Results of Previous Owners 

 The extensive exploration
history of the Cusi district is not well-documented. From surface sampling and exploration drifting in historic times to modern diamond drilling, the exploration has always been focused on development of more accurate understanding of the
orientations and relationships of the many veins in the district. 
  

	6.3	Historic Mineral Resource and Reserve Estimates 

 As summarized in a previous
technical Report (RPA 2006), exploration activities were conducted by Slocan Development Corp., Minera Cusi, and Pacific Islands Gold. Slocan Development Corp. conducted mineralogical studies which were reported in 1975; these reports were not
available. Minera Cusi conducted surface and geochemical studies and reported results in 1988 and 1989; these reports were not available. Pacific Gold conducted geologic mapping, surface and underground chip sampling, and reverse circulation (RC)
drilling along the San Miguel vein; these results were not available. There are no reports of historic Mineral Resource or Reserve Estimations. 
  

	6.4	Historic Production 

 Gold and silver were first discovered and exploited in the
Cusi area within the San Miguel and La Candelaria zones by a Spaniard, Antonio Rodríguez, in 1687, and continued until the Mexican war of independence, which began in 1810. The amounts mined during the Spanish colonial time are not well
documented. 
 The Mexican war of independence occurred from 1810 to 1821. The actual operators and production history in the vicinity
of Cusi from 1821 to 1881 are not known. From 1881 to 1890, Don Enrique Mining Co. conducted mining operations. From 1896 to 1911, the Helena Mining Company purchased and conducted mining operations: during this period, the Santa Marina and San
Bartolo shafts were sunk to the 1,000 foot level. 
 In 1911, Cusi Mexicana Mining Co. purchased the property from Helena Mining
Company. During the period of the Mexican Revolution from 1910 to 1920, mining at the Cusi Project area occurred intermittently. Total tonnage mined from 1821 to 1920 is unknown. 

From the 1920s to 1937, concessions of the Cusi Project area were acquired by The Cusi Mining Company of American Capital. As reported by
Sierra Metals, one million tonnes were mined. As reported in RPA (2006), from 1924 to 1942, 504,048 tonnes were mined, producing 265,460 kilograms of silver; however, the specific locations of mined areas were not reported. From 1937 to the 1970s,
mining from the Cusi property was reportedly dormant. In the 1970s, mining occurred in several mines in the Cusi Project area: an estimated 3,000 tons of ore per month were being produced at an average silver grade of 12 to 18 ounces per ton silver.
As reported in RPA (2006), during the 1980s, Minera Cusi conducted limited mining: no quantities were reported. 

  
  

					
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	7	Geological Setting and Mineralization 

  

	7.1	Regional Geology 

 The Cusi Project is located within the Sierra Madre Occidental,
a 1,200 by 300 km northwest-trending mountain system featuring a long volcanic plateau within a broad anticlinal uplift. The region is dominated by large-volume rhyolitic ash flow tuffs related to Oligocene (35 to 27 Ma) calderas considered to be
the Upper Volcanic Series. These volcanic rocks comprise calc-alkalic rhyolitic ignimbrites with subordinate andesite, dacite, and basalt with a cumulative thickness of up to a kilometer. The Upper Volcanic series unconformably overlies rocks of the
slightly older Eocene (46 to 35 Ma) Lower Volcanic Series which predominantly comprises andesite with interlayered felsic ash flow tuffs (Figure 7-1). 

Deposition of the Lower Volcanic Series was accompanied by the intrusion of hornblende-bearing quartz diorite and granodiorite batholiths
and stocks. The Lower Volcanic Series hosts the majority of the epithermal and porphyry-related precious metals deposits in the Sierra Madre Occidental. Thin flows of basaltic to rhyodacitic composition of late Miocene and younger age cap many of
the plateaus in the region. The oldest structural episode is related to the Laramide orogeny which produced east-striking, steeply dipping strike-slip faults, generally with right-lateral sense of shear. Later transtensional tectonics resulted in
the development of N-S normal faults and NNW-SSE trending subvertical faults with right-lateral strike-slip and normal sense of shear. Structures developed in the Cusi region are believed to have controlled emplacement of a series of north-northwest
trending intrusions. Permeability associated with these and other faults and intrusive contacts formed conduits for hydrothermal fluids associated with mineralization (Figure 7-2). 

  
  

					
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 Source: Gustavson, 2014 
  

	 	Figure 7-1:	 1:5000 Scale Map showing generalized lithologies and locations of historic and active mining areas on the property

  
  

					
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 Source: Gustavson, 2014 

Figure 7-2: Northwest and Northeast-looking cross sections through the Cusi area, 1:5000 scale

  

	7.2	Local Geology 

 As reported in Geomaps (2012), the geology of the Cusi region
ranges from andesitic volcanism of late Mesozoic to Eocene age to the issuance of rhyolitic tuffs and ignimbrites of Oligocene-Miocene age. 

The Oligocene Bufa Formation ignimbrite forms the dominant topographic feature in the Cusi area. Older andesites in the area are members
of the Loma del Toro Formation, located mostly to the north and northeast of the mineralized Bufa Formation. 
 Mapping by CRM suggests
that the property is hosted within a collapsed caldera (Geostat, 2008). The Cusi fault is a regional NW-trending fault that may have localized and then faulted the caldera. Within the caldera, adjacent to the Cusi fault, a rhyolite dome has been
identified which hosts much of the mineralization in the district. Hydrothermal mineralization at Cusi was episodic and accompanied by structural movement (Geostat, 2008). Galena, sphalerite, and chalcopyrite are the predominant sulfides commonly
ranging from 5% to 10% with occasional massive sulfide zones. Historical mining activity in the District exploited a series of planar veins that cut a lower andesitic volcanic unit and an upper rhyolitic unit. The veins occur in northwest and
northeast-striking faults that appear to define an overall transtensional regime. All veins contain quartz with a variety of crustiform and banded textures typical of the epithermal environment. Most historical mining was

  
  

					
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shallow (<100 m) and appears to have concentrated on supergene-enriched ores including Ag chlorides and native silver (Meinert, 2007) (Figure 7-3). 

 
 

 
 Source: Gustavson, 2014 

Figure 7-3: Local Geology Map showing the location of mineralized veins 

 

	7.3	Property Geology 

 The property lies within a possible caldera that contains a
prominent rhyolite body interpreted as a resurgent dome. The rhyolite dome trends northwest-southeast with an exposure of roughly 7 km by 3 km and hosts mineralization. It is bounded (cut) on the east side by strands of the NW-trending Cusi
fault and on the west by the Border fault. The Cusi fault has both normal and right-lateral strike-

  
  

					
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slip senses of shear. Strands of the Cusi fault are intersected by NE-trending faults, some of which indicate left-lateral strike-slip shear. NE-trending veins associated with these faults dip
steeply either NW or SE. High-grade and wide alteration and mineralization zones exist in the areas of intersection of NW and NE structures (Figure 7-4). 

The property tectonically formed during dextral transtension associated with oblique subduction of the Farallon plate beneath the North
American plate. Strike-slip and normal faults related to this transtension controlled igneous and hydrothermal activity in the region. Regional NW-trending faults like Cusi are generally right-lateral strike-slip faults with a normal slip component.
NE-trending faults are commonly left-lateral strike slip faults which were antithetic Riedel shears in the overall dextral transtensional tectonic regime. 

The Cusi fault is a regional fault that may have controlled the location of the caldera and resurgent dome. Continued movement on the
Cusi and related faults cut and brecciated the caldera and dome rocks and provided conduits for mineralizing fluids. 
  

 
 Source: Dia Bras, 2016 
  

	 	Figure 7-4:	 Aerial Photo of the Cusi property showing the locations and orientations of mineralized structures

  

	7.4	Significant Mineralized Zones 

 Numerous mineralized veins on the property,
typically moderately to steeply dipping to the southeast, southwest, and north, range from less than 0.5 to 2 m thick, extend 100 to 200 m along 

  
  

					
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strike and up to 400 m down-dip. There are at least seven major mineralized structures within the Cusi area, described below. Small open pits were typically developed at vein intersections.
Mineralization mainly occurs in faults, epithermal veins, breccias, and fractures ranging from 1 to 10 meters thick. 
 Low-grade
mineralized areas exist adjacent to major structures, showing intense fracturing and are commonly laced with quartz veinlets forming a stockwork mineralized halo around more discrete structures. The country rock in these zones is variably
silicified. Pyrite and other sulfide minerals are disseminated in the silicified country rock and are also clustered in the quartz veinlets. A well-developed mineralized stockwork zone is in the Promontorio area, especially proximal to the Cusi
fault. 

  
  

					
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	8	Deposit Type 

  

	8.1	Mineral Deposit 

 Mineralization at Cusi has been variably described as a)
low-sulfidation epithermal (Ciesielski, 2007), b) high-sulfidation epithermal (SGS, 2008) and linked epithermal-base metal system (Meinhert, 2006). Meinhert (2006) notes that although shallow (<100 m) historic mining is reported to have
encountered grades exceeding 1000 oz/ton Ag, the veins currently exposed are more base-metal rich than would be expected in an epithermal system. However, Sierra Metals geologists consider the abundance of base metals on the property to be primarily
a function of depth of exposure; SRK agrees with this interpretation. Mineralization occurs along narrow fractures containing quartz, sphalerite, and galena; wallrock alteration consists primarily of silicification and the development of clays and
iron oxides. Veins themselves contain quartz with crustiform and banded textures typical of epithermal systems. 
  

	8.2	Geological Model 

 The current geologic model for the Cusi property is as follows:

 The country rock on the property consists primarily of felsic volcanics interpreted to represent a caldera with a resurgent dome.
Magma is interpreted to have intruded along the Cusi fault, a regional NW-trending, right-lateral strike-slip fault; subsequent eruption produced the collapsed caldera and Upper Volcanic Series felsic tuffs. A resurgent dome then arose within the
caldera on the western side of the Cusi fault. This dome was then dissected by numerous northeast-trending, left-lateral faults, which acted as conduits for hydrothermal fluids and now host mineralized veins. 

Two of the vein sets at Cusi are relatively large and have been mapped along strike for nearly a kilometer each. Within these vein sets,
dilatational areas and structural intersections host the best mineralization. The veins are composed of both wide, continuous areas of mineralization and also of zone of numerous smaller swarms of veins. The mineralization is predominately Ag and
Pb-rich with lesser amounts of Au, Zn and Cu present in some areas. 
 SRK is of the opinion that the geologic model developed by Dia
Bras, which focuses primarily on interpretation of the discrete veins and their related splays/stockwork zones is appropriate for the deposit type and mining method, and that this has been borne out by a history of successful production. 

  
  

					
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	9	Exploration 

 In addition to drilling, Sierra Metals has commissioned several
geologic studies, conducted several geologic mapping campaigns, and completed surface and underground sampling programs. 
  

	9.1	Relevant Exploration Work 

 Sierra Metals has commissioned several geologic studies
culminating in reports summarizing their findings: 
  

	 	●	 	 Cusi Epithermal Ag-Au District, Chihuahua, Mexico. Prepared by Eric R. Braun for Dia Bras Exploration dated
November 26, 2006. 

  

	 	●	 	 Geology and Geochemistry of Mineralized Zones. Prepared by Andre P. Ciesielski for Sierra Metals Exploration Inc.
dated December 2007. 

  

	 	●	 	 Observations on the Cusihuiriachic District. Prepared by Lawrence D. Meinert of Smith College for Sierra Metals
Exploration Inc. dated July 6, 2006. 

  

	 	●	 	 Mineralogy, Assay, and Fluid Inclusion Characteristics of Quartz-Sulfide Veins of the Cusihuiriachic District,
Chihuahua, Mexico. Prepared by Lawrence D. Meinert for Dia Bras Exploration, Inc., dated January 17, 2007. 

  

	 	●	 	 Mineralogy of High Grade Ag Zones in the Cusihuiriachic District. Prepared by Lawrence D. Meinert for Dia Bras
Exploration, Inc., dated April 13, 2007. 

 On behalf of Sierra Metals, Geomaps S.A. de C.V. has prepared
geologic maps showing surface lithology at 1:5,000 scale and 1:1,000 scale, two regional cross sections through the Cusi Project area and a stratigraphic column. Geomaps’ surface lithology maps also contained structural measurements of faults
and veins. 
  

	9.2	Sampling Methods and Sample Quality 

 On behalf of Sierra Metals, Geomaps conducted
surface rock sampling in the Promontorio area in an effort to identify the presence of disseminated mineralization. From November to December 2012, Sierra Metals collected 571 samples from rock outcrops in an area of approximately 0.1 square
kilometer (650 m by 200 m). Samples were collected in lines perpendicular to main structure and faults where quartz vein and fractures with oxidation were identified. Samples were assayed for gold, silver, lead, manganese, and zinc at Sierra
Metal’s internal laboratory in the Malpaso Mill. Sierra Metals reviewed these data and found silver grades ranged from non-detect (less than 20 grams per tonne) to 351 grams per tonne. From these results, Sierra Metals concluded that
disseminated mineralization near the surface within the Promontorio Viejo-San Ignacio- and San Nicolas zone are restricted to the intersections of main structures. Geomaps continued to conduct surface sample work in 2013. Sampling has now been
performed over the entire project area, totaling over 2300 samples. Surface sample data for La Gloria / Minerva, and Monaco / Milagro areas only were used for this resource estimate. This set includes 116 surface channels at La Gloria/Minerva, and
67 surface channels at Milagro/Monaco. 
 Numerous mine workings are present at the Cusi Project area. Sierra Metals has conducted
extensive sampling within these mine workings, the results of which were described in a 2014 technical report by Gustavson and are summarized in Table 9-1. All samples were analyzed at Sierra

  
  

					
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Metals’ internal laboratory at Malpaso. The 2014 report by Gustavson does not mention sample spacing or other factors that may have resulted in biases. 

Table 9-1: Summary of Channel Sampling by Area 

 

																	
	Mine	 	No. Samples	 	 	Avg. Ag Grade (g/t)	 	 	Avg. Pb Grade (%)	 	 	Avg. Zn Grade (%)	 
	 Santa
Eduwiges
	 	 	1,380	 	 	 	399	 	 	 	1.30	 	 	 	1.09	 
	 La India
	 	 	1,187	 	 	 	53.8	 	 	 	0.06	 	 	 	0.15	 
	 La
Gloria/Minerva
	 	 	450	 	 	 	77.6	 	 	 	0.07	 	 	 	0.04	 
	
Milagro (incl. Monaco)
	 	 	588	 	 	 	177	 	 	 	0.79	 	 	 	1.28	 

 Source: SRK, 2016 
  

	9.3	Significant Results and Interpretation 

 Surface mapping of structures has been
used where possible, but the majority of interpretation for the veins is taken from underground development and sampling, with diamond and reverse circulation drilling comprising the remainder. 

  
  

					
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	10	Drilling 

  

	10.1	Type and Extent 

 The primary exploration method at Cusi has been diamond core
drilling followed by limited underground development (Table 10-1 and Table 10-2). To date, 1,015 drillholes have been completed with an average length of 175 m. This
represents over 185,000 m of drilling. The drillholes have historically been drilled primarily from surface in a wide variety of orientations, although recent drilling has been dominated (~65%) by underground drilling. In the areas of focused
exploration, the average drillhole spacing ranges between 25 to 50 m. In the less explored areas, the average drillhole spacing ranges between 75 and 150 m. Overall, the majority of the drilling completed by Sierra has been relatively closely spaced
and not very deep. The closely spaced drilling has been designed to identify the base of historic mining and also directed at resource definition. The wider spaced drilling has been designed to test down dip from surface vein exposures to attain
vein orientation and mineralization grades. 
 Table 10-1: Drilling Summary by Type 

 

																			
	Hole Type  	  	Count  	  	Meters  	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 NQ/BQ
	  	3  	  	244  	 		 		 		 		 		 		 	
	 NQ
	  	157  	  	36,597  	 		 		 		 		 		 		 	
	
HQ/BQ
	  	1  	  	406  	 		 		 		 		 		 		 	
	 HQ/NQ
	  	353  	  	74,559  	 		 		 		 		 		 		 	
	 HQ
	  	156  	  	36,788  	 		 		 		 		 		 		 	
	 BQ
	  	304  	  	35,117  	 		 		 		 		 		 		 	
	 TT-45
	  	37  	  	1,390  	 		 		 		 		 		 		 	
	 Total
	  	1,011  	  	185,101  	 		 		 		 		 		 		 	

 Note: Four holes are not accounted for in this table due to misnomenclature. 

Source: SRK, 2016 

Table 10-2: Drilling Summary by Period 

 

																					
	Year  	  	Count  	  	Meters  	  	% of Total  	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2006  	  	53  	  	10,177  	  	5%  	 		 		 		 		 		 		 	
	2007  	  	99  	  	22,358  	  	12%  	 		 		 		 		 		 		 	
	2008  	  	86  	  	13,245  	  	7%  	 		 		 		 		 		 		 	
	2009  	  	84  	  	8,206  	  	4%  	 		 		 		 		 		 		 	
	2010  	  	71  	  	10,055  	  	5%  	 		 		 		 		 		 		 	
	2011  	  	84  	  	19,623  	  	11%  	 		 		 		 		 		 		 	
	2012  	  	199  	  	37,827  	  	20%  	 		 		 		 		 		 		 	
	2013  	  	102  	  	24,130  	  	13%  	 		 		 		 		 		 		 	
	2014  	  	73  	  	10,543  	  	6%  	 		 		 		 		 		 		 	
	2015  	  	147  	  	27,158  	  	15%  	 		 		 		 		 		 		 	
	2016  	  	17  	  	2,432  	  	1%  	 		 		 		 		 		 		 	

 Source: SRK, 2016 
  

	10.2	Procedures 

 The drilling has been conducted with Sierra-owned drills and outside
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 All drill core is appropriate size (HQ/NQ/BQ) and has been logged by Sierra staff
geologists. Samples intervals are determined by the geologist and the core is then split in half and bagged by Sierra technicians. 

Collar locations are surveyed on surface using handheld GPS, and underground using total station. Collar surveys are accurate for both
types of drilling and underground drill stations generally correspond to clusters of underground drill collars. Core is transported by Dia Bras personnel to the logging facility near the mine offices. 

Core is logged by qualified Dia Bras geologists for lithology, alteration, structure, and mineralization, with sampling intervals
identified during logging to delineate mineralized areas. Sample intervals are marked in the boxes along with a line down the core axis for splitting. Samples are split via core saw, and separated into labeled bags. As of yet, no barcode or
automated tracking system has been implemented at Cusi or Malpaso for sampling. 
  

	10.2.1	Downhole Deviation 

 Only about 25% (246) of the drillholes have downhole
deviation surveys. Since 2014, when a survey tool was acquired by the mine, the majority of drillholes have been surveyed. Surveys are done using a Reflex deviation tool, at intervals ranging between 25 and 50 meters or as available due to drilling
conditions. Deviations in the bearing (for non-vertical holes) average only 0.33 degrees, but feature local significant deviations in excess of 15 degrees between intervals. Dip deviations range between -7 degrees and 13 degrees, with an average of
0.4 degrees between intervals. 
 A significant number of the historic drillholes are relatively long and their precise location is
considered uncertain due to the lack of downhole deviation surveys. This contributes significantly to the uncertainty in the geological model as well as the resource estimation. SRK has noted a select few cases where a drillhole which is not
surveyed crosses very close to surveyed mine workings, and the vein intercept is offset 5 to 10 m from the projection of the structure using the channel samples and mine development. 

Of the 769 drillholes which are not surveyed, the average length per hole is 179 m. This would indicate significant potential for
deviation of these holes over these distances based on observed deviations in the surveyed holes. SRK noted that there are areas where the drill stations have probably been over-used, rather than simply moving the drill to a new station which would
take advantage of closer proximity to the targets. There may be some advantages to efficiency, cost, and accuracy of drilling if the rig is moved more frequently to new drill stations. 

 

	10.2.2	Core Recovery 

 Core recovery is assessed prior to logging and sampling. This is
based on the percentage of an interval that is recovered into the core box compared to the expected length of the interval. Recoveries are generally very good at Cusi, and is more than 98% on average in mineralized intervals. 

 

	10.3	Interpretation and Relevant Results 

 SRK notes that the Cusi Mine is an advanced
property with active mining ongoing. 

  
  

					
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 Relationships between thicknesses of drilling intercepts and actual thicknesses in the
mineralized veins underground have been confirmed through ongoing production. SRK does note that Dia Bras generally attempts to intersect veins in a perpendicular fashion through drilling, but does not always accomplish this due to difficulty of
position rigs from surface or underground. Selected veins are sometimes drilled near the plane of the structure, which may exaggerate mineralized intercepts thicknesses. SRK is not reporting thicknesses or grades of any of these structures. 

  
  

					
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	11	Sample Preparation, Analysis and Security 

  

	11.1	Security Measures 

 Samples are collected by the logging technicians or geologists
after being marked and labeled in core boxes. These are grouped into larger batches of 10 samples per reinforced sack, with a weight of no more than 25 kilograms. Each sack is noted with the intervals contained, the hole ID, and the order number for
the laboratory. Samples are stored on site, behind access-controlled gates, until such a time as they are to be taken to the relevant laboratory. Historically, this has been the Malpaso Mill, a Dia Bras-owned mill facility, or ALS Chemex, an
independent and ISO-certified laboratory with processing facilities in Hermosillo and analytical facilities in Vancouver, Canada. Currently, samples are sent to ALS and ALS only, but historically this decision was made after the sample was first
sent to the Malpaso Mill for analysis, with any positive results of interest warranting confirmation by ALS, utilizing the coarse reject material from Malpaso. 
  

	11.2	Sample Preparation for Analysis 

 The analytical history of the Cusi sampling is
complex, and includes various generations of analyses between the nearby Malpaso Mill and ALS. For samples assayed at ALS in Vancouver, drill core samples were prepared at the ALS prep lab in Chihuahua, Mexico. Upon receipt of samples, ALS dries the
samples, records the received sample weight, and processes the samples as follows: 
  

	 	●	 	 Core is crushed to 70% passing rate of 2 millimeters; 

 

	 	●	 	 A 150 gram split is taken for pulp preparation; and 

 

	 	●	 	 The split sample is pulverized to a pulp at 85% passing rate at 75 micrometers. 

Upon receipt of samples from the mine or exploration team, the Malpaso Laboratory also dries, weighs, and catalogs the samples. Drying
times are 4 hours for channel samples and 8 hours for drill core. The current sample preparation procedures in practice at the Malpaso mill are as follows: 
  

	 	●	 	 Rock from core or channel is crushed to  3⁄4 inch, then is placed in a cone crusher with the sample passing rate of 2 millimeters. 

  

	 	●	 	 A split is taken from this crushed material for pulp preparation (200 g=mine samples; 400 g=core). Samples are
dried again for 30 minutes. 

  

	 	●	 	 Split samples are pulverized to a pulp at 90% passing rate 75 micrometers. 

Previous technical reports have noted that the sample preparation procedures at Malpaso differ from those at ALS. For samples
historically assayed at the Malpaso Mill, samples were crushed initially to 3.175-millimeter (1/8-inch) grain size, then further pulverized to 85% passing rate of 100 mesh (152-micrometer) or 150 mesh (104-micrometer). 

SRK is aware that The Malpaso lab is working to improve and adopt procedures such as those utilized by ALS. 

 

	11.3	Sample Analysis 

 Sample analyses have been performed variably at ALS Chemex and
Malpaso Mill. Historically, all samples have been analyzed at Malpaso, with periodic checks of analyses at ALS Chemex. This practice was deemed to be insufficient due to analytical and preparation inconsistencies in the

  
  

					
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 Malpaso Mill. Thus, a series of campaigns were run with the analyses being entirely
duplicated at ALS, with the findings showed significant differences between the two labs. Currently, all drill core analysis supporting the mineral resource estimation is performed by ALS, although an initial analysis of the sample is done at
Malpaso to determine whether it is warranted to send to ALS or if the material is barren. The coarse reject from the initial crushing of the sample at Malpaso is retained in case the sample needs to be analyzed by ALS. If the sample is analyzed at
ALS, the coarse reject is submitted and the remainder of sample preparation is completed at the ALS Chemex Hermosillo, Mexico facility. Final analysis is conducted at the primary laboratory in North Vancouver, BC, Canada. 

SRK notes that the channel samples are still analyzed by the Malpaso internal laboratory as this laboratory has a considerably better
turnaround time on analyses than ALS, which is critical for timely production decisions. The analytical techniques are appropriate for the mineralization. The analytical methods appear to be similar, but the Malpaso laboratory has an extremely high
lower limit of detection (20 g/t Ag). Most modern laboratories (such as ALS) have significantly lower limits of detection in the 1 to 5 g/t Ag range for ore grades. While this likely does not affect the results of the resource estimation, it should
be noted that the methods used by Malpaso may not be the same as ALS, and may introduce a bias in comparisons made between labs. 
 At
the ALS lab in Vancouver, several analytical techniques are employed for different generations of data. For primary analysis, pulverized samples are digested by aqua regia, followed by analysis for three metals (silver, lead, and zinc, collectively
identified as “Limited Metals”) by inductively coupled plasma atomic emission spectroscopy (ICP-AES) under Method ICP41. A large portion of samples were analyzed for the entire suite of 35 metals by ICP-AES. A large portion of samples were
also analyzed for gold by fire assay and atomic absorption (AA). For over-limit analysis, detections of silver, lead, and zinc that exceed the reporting limit of ICP41 are reanalyzed by an ore grade (OG) ICP-AES method, AA, or fire assay gravimetric
methods (Table 11-1). 
 For samples analyzed at the Malpaso Mill, pulverized material is
assayed for gold and silver by fire assay and base metals by plasma atomic emission spectroscopy. Reporting limits for assays at Malpaso are summarized in Table 11-2. SRK notes that the reporting limits for
the Malpaso lab are inconsistent with industry norms for analytical precision for all known metals, and that this should be rectified in order to have better confidence in these analyses. The uncertainty associated with stating material that may sit
in the ranges of the lower limits of detection for Malpaso allows for the possibility of the expectation for completely unmineralized material to have grades of 0.5 g/t Au and 20 g/t Ag, which would seem to have significantly more value than the
actuals 
 Table 11-1: Analytical Methods and Reporting Limits for ALS 

 

											
	Metal  	  	Initial Assay	  	Over-Limit	  	 
	  	Analytical Method    	  	Reporting Limits (g/t)  	  	Analytical Method  	  	Reporting Limits (g/t)  	  	 
	Gold  	  	AA23  	  	0.005-10  	  	GRA-21  	  	0.05-1000  	  	
	Silver  	  	MEICP-41  	  	0.2-100  	  	OG-46  	  	1-1500  	  	
	 	  	  	  	GRA-21  	  	5-10000  	  	
	Lead  	  	MEICP-41  	  	2-1000  	  	OG-46  	  	10-200000  	  	
	
Zinc  
	  	  	2-1000  	  	OG-46  	  	10-600000  	  	

 Source: ALS Minerals Fee Schedule, 2016-2017 

  
  

					
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 Table 11-2: Analytical Methods and Reporting
Limits for Malpaso 
  

															
	Metal	  	Analytical Method  	  	 Lower Limit of

Detection (g/t)
	 	 	 	 	 	 	 	 	 
	Gold	  	Fire Assay	  	 	0.5  	 	 		 		 		 	
	Silver	  	Fire Assay	  	 	20  	 	 		 		 		 	
	Lead	  	AES	  	 	8  	 	 		 		 		 	
	Zinc	  	AES	  	 	8  	 	 		 		 		 	

 Source: Dia Bras, 2017 
  

	11.4	Quality Assurance/Quality Control Procedures 

 In general, Sierra Metals has been
drilling for the past ten years and has only recently (2013) instituted an industry standard quality assurance/quality control (QA/QC) program. The QA/QC was abandoned for an extended period of time in 2014, resulting in a gap in the QA/QC
monitoring. This was done by Dia Bras management to save costs. 
 A typical QA/QC program includes blanks, standard reference material
and duplicates. The purpose is to submit sample with known values or properties which identifies sample mix ups, sample preparation contaminations, laboratory precision and accuracy and laboratory bias. Although there is no reason to assume the
analytical data for Cusi is problematic, the lack of a consistent QA/QC program does reduce the confidence in the precision and accuracy of the analytical data. 
  

	11.4.1	Standards 

 Prior to 2013, a total of 144 standards were inserted into the sample
stream at Cusi, in 2012. These standards were prepared internally by Sierra Metals. 
 Following the implementation of a more formal
QA/QC program in 2013, Sierra Metals began inserting standards (either high grade, medium grade, or low grade) into the sample stream regularly at a rate of one standard per twenty samples. The standards are internal standards prepared at the
Malpaso mill, from material chosen for its similarity (mineralogical and in terms of appearance) to the samples from the Cusi exploration program. 

SRK notes that these “standards” do not adhere to the international reporting criteria of what a standard or certified
reference material should be. As noted in Figure 11-1, the standard #2 is reported by Dia Bras to have a failure criteria of +/- 2 standard deviations, in this case representing a +/- of over 80 g/t Ag. This
is wholly inconsistent with other labs (and even other standards within Sierra Metals) which feature much tighter ranges of expected performance. 

  
  

					
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 Source: Dia Bras, 2016 

Figure 11-1: Internally Prepared QA/QC Chart for Standard #2 Performance in 2014 

 

	11.4.2 Blanks	

 Prior to 2013, 173 blank samples were inserted into the sample stream at Cusi,
also in 2012. The blank samples were prepared internally by Sierra Metals from pulverized andesite presumed to be unmineralized. Previous technical reports note that for gold, 97% of blank assays complied with acceptance criteria (values less than
or equal to 5-times the ALS reporting limit); however, silver and lead performed less well (67% and 68% compliance, respectively), and for zinc, all blank assays exceeded the acceptance criteria. Gustavson (2014) concluded that unexpectedly
high values for blank samples did not appear to be caused by carryover of the preceding sample, and suggested that the andesite was in fact mineralized. Based on this result, it was recommended that Sierra purchase commercially prepared blank
samples. 
 Since 2013, Sierra Metals has inserted blanks into the sample stream regularly, at a rate of one blank per every 30 to 50
samples. Blanks continue to be prepared internally from pulverized andesite (Figure 11-2). 

  
  

					
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 Source: Dia Bras, 2016 

Figure 11-2: Blank Analysis Prepared by Sierra Metals for 2015 Blanks 

  
  

					
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	11.4.3	 Duplicates 

 Prior to 2013, 208 duplicates were inserted into the sample
stream at Cusi, in 2008. Sierra Metals provided Gustavson with the results of the duplicate sample but was not able to provide information on the corresponding original, and so it was not possible to evaluate laboratory precision. 

Following the implementation of a more formal QA/QC program in 2013, Sierra Metals devised a system whereby three types of duplicates
(coarse duplicates, core duplicates, and external duplicates) are inserted into the sample stream every 30 to 50 samples. External duplicates are sent to ALS Chemex for comparison against the Malpaso Mill to ensure that the internal lab is
performing in a manner consistent with industry standards (Figure 11-3). 
  
 

 
 Note: Original assay is Malpaso and Duplicate is ALS. 

Source: Dia Bras, 2016 

Figure 11-3: Scatter Plot prepared by Sierra Metals to compare performance
of duplicates at the internal Malpaso lab and ALS Chemex 
  

	11.4.4	 Actions 

 SRK conducted a thorough review of the QA/QC procedures and
performance at Cusi. The review process included auditing internal QA/QC charts prepared by Sierra Metals, as well as independent analyses using data provided by the company for all QAQC work completed since 2013. Although Sierra Metals maintains a
QA/QC database, tracks the performance of duplicate, blank, and standard samples, and is aware of poor performance in some cases, no formal failure criteria have been developed. SRK’s independent analyses therefore included developing of a set
of failure criteria for each type of QA/QC data and determining failure rates. 

  
  

					
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	11.4.5	Results 

 The results for the 2014-2016 QA/QC monitoring at Cusi show significant
failure rates or inconsistencies across all types of QA/QC, with these failures made all the more egregious by the fact that Dia Bras uses its own QA/QC materials for these tests, which feature standard deviations far in excess of industry-standard
QA/QC. A summary of the failures for the internal Dia Bras standards is shown in Table 11-3. SRK notes that new commercial standards have been acquired recently by Dia Bras. 

Table 11-3: Failure Statistics for Cusi Standards and Blanks 

 

															
	Failure Statistics - Ag	 	 	 	 	 	 
	  	 	Failure Criterion	 	 	Number of Failures  	 	% Failure	 	 	 	 	 	 
	 Standard 1
	 	 	± 3SD	 	 	1  	 	6%  	 		 		 	
	
Standard 2
	 	 	± 3SD	 	 	2  	 	1%  	 		 		 	
	 Standard 3
	 	 	± 3SD	 	 	0  	 	0  	 		 		 	
	
Standard 4
	 	 	± 3SD	 	 	4  	 	6%  	 		 		 	
	 Blanks
	 	 	>10x LLD	 	 	4  	 	1%  	 		 		 	
	Failure Statistics - PB	 	 	 	 	 	 
	  	 	Failure Criterion	 	 	Number of Failures  	 	% Failure	 	 	 	 	 	 
	 Standard 1
	 	 	± 3SD	 	 	0  	 	0%  	 		 		 	
	
Standard 2
	 	 	± 3SD	 	 	4  	 	3%  	 		 		 	
	 Standard 3
	 	 	± 3SD	 	 	1  	 	7%  	 		 		 	
	
Standard 4
	 	 	± 3SD	 	 	4  	 	6%  	 		 		 	
	 Blanks
	 	 	>10x LLD	 	 	235  	 	68%  	 		 		 	
	Failure Statistics - Zn	 	 	 	 	 	 
	  	 	Failure Criterion	 	 	Number of Failures  	 	% Failure	 	 	 	 	 	 
	 Standard 1
	 	 	± 3SD	 	 	0  	 	0%  	 		 		 	
	
Standard 2
	 	 	± 3SD	 	 	2  	 	1%  	 		 		 	
	 Standard 3
	 	 	± 3SD	 	 	1  	 	7%  	 		 		 	
	
Standard 4
	 	 	± 3SD	 	 	0  	 	0%  	 		 		 	
	
Blanks
	 	 	>10x LLD	 	 	139  	 	40%  	 		 		 	

 Source: SRK, 2017 

The results of SRK’s QA/QC review show generally poor performance for blank samples, particularly for Pb and Zn. Many blank samples
for these elements report values above 10x the lower limit of detection. Although the failure rate for Ag is 1%, the lower limit of detection for Ag at the Malpaso mill is 10 g/ton, significantly higher than at most commercial laboratories. SRK
notes that although Sierra Metals tracks the performance of blanks at the mill (Figure 11-4), their results are compared to the standard deviation of the entire dataset for each element as opposed to the lower
limit of detection for each element. The blanks dataset generally exhibits high standard deviation and it is SRK’s opinion the performance of blanks is exaggerated in Sierra Metals’ internal QA/QC review as a result. SRK agrees with
Gustavson’s (2014) conclusion that internally prepared “blank” material at Cusi may not be unmineralized. 

  
  

					
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 Source: SRK, 2017 

Figure 11-4: Blank Analysis for Ag, Pb and Zn 

Failure statistics for standards at Cusi are between 0% and 7% and are not consistent across all elements. SRK notes that the standard
deviations used to define the failure criteria for standards were derived from the standards dataset and are higher than industry standard. Samples of each standard have been sent to three independent laboratories to define certified values for Ag,
Pb, and Zn (ALS Chemex, SGM, and LIMSA); SRK notes that in most cases, the internally derived standard deviations are 2x to 3x higher than the standard deviations reported by external labs. This is not consistent with industry best practices for
acceptable intra-lab performance. 
 Although a failure rate was not determined for duplicate samples, SRK’s review shows that
internal duplicates generally exhibit poor performance. Figure 11-5, Figure 11-6, and Figure 11-7 show scatterplots for Ag
duplicates from core, coarse reject, and external labs. The figures suggest that performance of the Malpaso mill is inconsistent, both internally and in comparison to commercial laboratories; however, they also suggest that the precision of the
internal lab is higher for coarse 

  
  

					
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duplicates than for core duplicates. Sierra Metals has not developed failure criteria for duplicates, but acknowledges poor performance. 

SRK notes that the 2014-2016 intra-lab check analyses show a general agreement, which is encouraging. This agreement is only when
evaluating the assays >20g/t Ag, which is the Malpaso lower detection limit. In comparison of those assays above 20 g/t Ag, ALS reports average grades that are slightly higher than Malpaso for all metals, but which generally agree. This would
indicate that the Malpaso Mill may be under-reporting grades in general, which may not be easy to perceive given the elevated lower limit of detection. 
  

 
 Source: SRK, 2017 

Figure 11-5: Scatterplot for Core Duplicates Analyzed at the Malpaso Mill, 2014-2016 

  
  

					
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 Source: SRK, 2017 

Figure 11-6: Scatterplot for Coarse Duplicates Analyzed at the Malpaso Mill, 2014-2016

  
 

 
 Source: SRK, 2017 

Figure 11-7: Scatterplot for Duplicates Analyzed at the Malpaso Mill and by ALS Chemex

  
  

					
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	11.5	Opinion on Adequacy 

 The results of the QA/QC program shows that the performance
of the Malpaso lab as it pertains to the accuracy and precision of the analysis is sub-par and inconsistent with the reasonable performance obtained by ALS. Previous technical reports such as Gustavson, 2014 feature excellent analyses which support
this conclusion, showing low failure rates of standards during the ALS periods of analysis, with notable increases in failures for the Malpaso lab. This trend has continued since these were noted and publicly stated in 2014. SRK notes that the
Malpaso lab procedures should be reviewed to confirm whether they are identical to ALS and ensure they can be used with the same confidence as ALS, as their analyses are now being incorporated into the estimation. 

The poor performance of the QA/QC at the Malpaso Mill and inconsistent performance of blanks, standards, and duplicates across multiple
grade ranges is a contributing factor to the lack of Measured Resource for the Cusi Mine. This reflects the uncertainty in the accuracy of the Malpaso Mill data, which continues to support a significant portion of the mineral resource. It remains
unclear as to the source of the factors influencing the poor QA/QC performance, but SRK suggests that they are related to different processes between industry standard labs and Malpaso, poorly-homogenized internal “standards”, and the
inherent local variability of the deposit. 
 SRK is of the opinion that the performance of the QA/QC is poor for a mine in operation,
and strongly recommends improvement to an industry-standard QA/QC program in the near future. SRK is aware that improvements to the Malpaso laboratory are pending, and that recent QA/QC measures have been using commercially available standards to
improve the monitoring of analytical precision. 

  
  

					
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	12	Data Verification 

  

	12.1	Procedures 

 The data supporting the mineral resource estimation for Cusi has been
validated in a number of ways by previous workers as well as SRK. Detailed descriptions of these validations are found in Gustavson’s 2014 report, and are material to the consideration of the deposit as a whole. Since these validations were
performed, SRK notes that Cusi has implemented marked improvements in things like the location of drillholes and downhole surveys, which were issues in previous reports. 

SRK visited the mine in 2016 and was able to access the mine workings, reviewing estimated vein thicknesses and grades in the mine and
finding them appropriately stated. In addition, SRK witnessed the collection of channel samples as well as underground drilling at Cusi and noted these to be consistent with basic industry standards. 

 

	12.1.1	Database Validation 

 As a part of this mineral resource estimation, SRK also
reviewed the drilling database against ALS Minerals assay certificates. A selection of ALS analytical certificates was selected at random from the files provided to SRK by Dia Bras, and these were compared back to the drilling database. This
represented a total number of samples of 1,467, which only represents about 2.6% of the drilling database. SRK does note that all samples reviewed from the certificates matched the database exactly. 

Finally, and due to the historic performance of the QA/QC and the intra-lab data between ALS and Malpaso, SRK recommended that a series
of re-analyses were run in areas which are judged critical to the mineral resource and mine development. The purpose of this was to obtain a separate selection of samples, taken from core or coarse reject material that could be submitted to ALS (and
hadn’t been previously) along with appropriate QA/QC to support the mineral resource where previously the only support had been from Malpaso. In total, this small program featured 233 samples from various areas of the Cusi Mine, across grades
ranging from 0.2 g/t Ag to over 3,700 g/t Ag. Duplicates, blanks and standards were submitted with these samples, and show reasonable performance across all grade ranges. 

However, the intra-lab check samples do not show close agreement to expectations for the analysis quality and data between labs. For this
small subset of samples, Malpaso reports an average Ag of 142 g/t Ag compared to 111 g/t Ag from ALS. Although some of this is related to the Malpaso lab’s inability to report grades less than 20 g/t Ag, there are several intervals where
Malpaso reports very high grades, in excess of 500 g/t Ag, where ALS reports less than 20 g/t Ag. Although it is possible that this is related to the highly variable nature of the mineralization at Cusi and its representation in split core halves,
SRK would expect an average that is more similar between the two labs. SRK does note that, in general, the higher grade samples occurring in a sequence of similar samples are repeated between the labs. 

 

	12.2	Limitations 

 No external auditor or consultancy, including SRK, has validated 100%
of the database to date with independent samples or third-party laboratory checks. 

  
  

					
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	12.3	Opinion on Data Adequacy 

 SRK notes that the database validation against provided
certificates shows excellent agreement, but that the results of the recent intra-lab comparison showed significant variation. This, combined with other factors such as the lack of consistent down hole deviation make the data sufficient for reporting
of Indicated and Inferred resources only, as Measured resources would need more precision and repeatability than what can be demonstrated at this time. 

  
  

					
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	13	Mineral Processing and Metallurgical Testing 

  

	13.1	Testing and Procedures 

 Cusi’s Malpaso mill facilities include a recently
upgraded metallurgical laboratory. Sampling and testing is executed on an as-needed basis to support the industrial scale operation. No detailed metallurgical testwork results were available at this time for the areas being mined. 

 

	13.2	Recovery Estimate Assumptions 

 Metallurgical performance at Malpaso shows a steady
improvement in the 2015 January to 2016 August period. While initially producing lead concentrate only, Malpaso started a separating and producing zinc concentrate since 2015 December. 

Metal recoveries to lead concentrate (Figure 13-1) appear consistent with an upward trend for the
period in question as follows: 
  

	 	●	 	 Lead metal recovery initially in the 75% to 80% range has improve to values ranging from 80% to 88%. Lead grade in
concentrate has been improved over time, and is approaching 40% which is in the lower end of a typical commercial quality lead concentrate. 

  

	 	●	 	 Silver metal is preferably deported to lead concentrate reaching recovery ranging from 70% to 80%. For the period in
question, silver grade in lead concentrate is ranging from approximately 3,000 g/t to 7,000 g/t. 

  

	 	●	 	 Other metals in lead concentrate include gold with concentration ranging approximately between 4 g/t to 7 g/t which is
above the typical payable grade in lead concentrates. Since Cusi started producing zinc concentrate, zinc metal concentration in lead concentrate ranges between 6% and 10% which is possibly translating to a penalty. No deleterious metals are present
in concentrations high enough to translate into penalty payments. 

  
 

 
 Source: Dia Bras, 2016 

Figure 13-1: Lead Concentrate Tonnes and Grades 

  
  

					
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 Deportment of metals to zinc concentrate (Figure
13-2) shows zinc recovery ranging approximately from 30% to 50%, and reaching grade consistently above 50%. 

Silver deportment to zinc concentrate is in the range of 1% to 3% and its grade reaches 300 g/t to 560 g/t which is within commercially
payable range. 
  
 

 
 Source: Dia Bras, 2016 

Figure 13-2: Zinc Concentrate Tonnes and Grades 

Based on the performance of the Malpaso Mill in 2016, the projected production from the mill in 2017 is as summarized in Table 13-1. SRK notes that this information is provided by Dia Bras and is based on actual recoveries from the existing mine, projected using the expected tonnes and grades from their operational plan. SRK notes that the
head grade for Au is more than 2X less than the lower limit of detection for the Malpaso analytical laboratory. 
 Table 13-1: Projected Metallurgical Balance for Malpaso Mill – 2017 
  

																																									
	Metallurgical Balance	 	  	Assays	 	  	Recovery %	 
	Type	  	Tonnes	 	  	%	 	  	Au (g/t)	 	  	Ag (g/t)	 	  	Pb (%)	 	  	Zn (%)	 	  	Au	 	  	Ag	 	  	Pb	 	  	Zn	 
	 Head
	  	 	221,000	 	  	 	100	 	  	 	0.18	 	  	 	184.3	 	  	 	0.89	 	  	 	1.04	 	  			 	  			 	  			 	  			 
	
Conc. Pb
	  	 	6,305	 	  	 	2.85	 	  	 	3.21	 	  	 	4,785.3	 	  	 	25.38	 	  	 	5.00	 	  	 	52.04	 	  	 	74.07	 	  	 	81.00	 	  	 	59.26	 
	 Conc.
Zn
	  	 	2,718	 	  	 	1.23	 	  	 	0.50	 	  	 	350.0	 	  	 	1.26	 	  	 	50.00	 	  			 	  			 	  			 	  			 
	
Final Tails
	  	 	211,977	 	  	 	95.92	 	  	 	0.08	 	  	 	45.3	 	  	 	0.16	 	  	 	0.29	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 

 Source: Dia Bras, 2017 

  
  

					
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	14	Mineral Resource Estimate 

 Matthew Hastings, Senior Consultant, SRK Consulting
(U.S.) Inc. conducted the resource estimation for the Promontorio veins, San Nicolas, Santa Rosa Lima, and San Juan veins. Bart Stryhas, Principal Consultant, SRK Consulting (U.S.) Inc., conducted the resource estimation for the Santa Eduwiges
veins, Candelaria veins, and Durana veins. This was done using a combination of mining software including Leapfrog Geo TM, Maptek VulcanTM, and statistical analysis software such as Snowden SupervisorTM and X10 GeoTM. 

 

	14.1	Drillhole Database 

 The drilling and channel sample databases are kept in separate
Microsoft Excel files with six tabs for drill collars, surveys, lithology, geotechnical parameters, geochemistry, and assays. The lithologies logged are used in combination with the assay data to identify mineralization for the geologic model.
Geotechnical parameters are recorded for drilling and features rock quality designation (RQD), and recovery. Both geochemistry and assays feature the analyses for the primary elements to be reported at Cusi (Ag, Au, Pb, Zn), but the assays feature
only these assays plus Cu, Fe, and Mn. The geochemistry table also features other elements that have been analyzed for a small percentage of samples for other purposes. 

The final drillhole and channel assay database was provided to SRK by Dia Bras on December 23, 2016. It features both drilling and
channel samples which are updated to October of 2016. The final database contains over 60,000 assays from drilling and over 36,000 from channel sampling. The two data sets have been merged for the purposes of statistical analysis and estimation. The
distribution of samples between types and elements is summarized in Table 14-1. 
 Table 14-1: Summary of Sample Counts by Type 
  

																									
	Element    	  	Drill Assays	 	  	Channel Assays	 	  	 	 	  	 	 	  	 	 	  	 	 
	Ag	  	 	61,920	 	  	 	36,250	 	  				  				  				  			
	Au	  	 	46,639	 	  	 	33,568	 	  				  				  				  			
	Pb	  	 	61,353	 	  	 	36,279	 	  				  				  				  			
	Zn	  	 	61,360	 	  	 	36,306	 	  				  				  				  			

 Source: SRK, 2016 

The database features variable incomplete analyses for Au compared to the other elements, which are all relatively consistent for all
intervals. The reason for the partial Au assays is unclear, but is likely related to older analyses or inability to transcribe from historic assay sheets. SRK assigned a value of 0.001 to any element with missing assays. Cu is also partially assayed
at Cusi, but features comparably fewer missing assays than the Au, and is generally quite low grade. Cu was not used in the estimation of the MRE for Cusi. 

SRK notes that the database contains several drillholes that have no assay intervals due to lost data or other doubts regarding data
accuracy. In some cases, Dia Bras has used these to guide the geology model, but they have been ignored for the purposes of the estimation. Any other missing or unsampled intervals in the drilling are given a value of 0 for all elements, on the
assumption that the geologists logging did not identify any mineralization or alteration of interest in the rock. SRK notes that, due to the aforementioned inaccuracy of some of the unsurveyed drilling, that these unsampled intervals may cut through
historic areas of production, and would artificially bias the grades low. 

  
  

					
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	14.2	Geologic Model 

 Three-dimensional wireframe models for the Cusi veins were created
by Dia Bras using Leapfrog GeoTM software. SRK was provided the Leapfrog project files, which were reviewed and modified to include more detail on the structures as well as incorporate channel sample data where appropriate. The geology models
are developed on a combination of geology codes and Ag grades, and effectively are built using hanging wall and footwall surfaces derived through selection of these points in the drilling and channel sample database, with subsequent interpolation of
the points into 3D surfaces and volumes. 
 There are five areas within the greater Cusi District (Figure 14-1), defined based on similarity of mineralization or orientation of structures. These areas were used to define capping limits, on the assumption that all mineralization within the area is related to the same
processes, based on the cross-cutting relationships of the veins. Within these areas, the geologic model defines 33 separate structures or stockwork zones (in the case of Azucarera), all of which are considered discrete domains for the purposes of
resource estimation. The volumes defined in the geologic model serve to constrain and guide the estimation. Descriptions of the areas, resource domains, and general geology are summarized in Table 14-2. 

Examples of the geology models are shown in Figure 14-2, Figure
14-3, and Figure 14-4. 
 SRK notes that the surveyed
channel samples play a critical role in modeling of the mineralized structures. Where an unsurveyed drillhole intercept does not align with the projection of the vein from nearby channel samples, the drillhole intercept is ignored in favor of the
geometry from the mine workings. Dia Bras and SRK agree the working are more accurate than the drilling in these cases. The net result of this is improved and valid vein geometries but locally includes samples within the vein that may not be within
the vein due to the deviation from the drillhole that was not measured. This generally occurs in the vicinity of previous production as all new drillholes are being surveyed and appear to track well with the projection of the veins from the mine
workings. 

  
  

					
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 Source: SRK 

Figure 14-1: Plan View of Areas within Cusi District 

  
  

					
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 Table 14-2: Summary of Project Areas and
Relationships to Resource Estimation Domains 
  

					
	
Area
	 	Veins	 	Description
	Promontorio 	 	Alto El Gallo	 	Anastomosing sequence of NE-trending steeply dipping veins, locally appearing stacked or sheeted. Numerous crossings and
truncations within the sequence. Locally featuring extraneous stockwork zones or splay structures, which may not be defined in drilling. The Azucarera domain is a stockwork zone which has been accessed by workings and appears to be related to the
intersection of multiple structures. Truncated to the north and south by the Santa Rosa Lima and San Nicolas structures respectively. Explored extensively through drilling and exploration/development drifts. Primary production source.
	 	Bajo L	 
	 	El Gallo	 
	 	El Gallo Bajo	 
	 	H	 
	 	J	 
	 	K	 
	 	K’	 
	 	L	 
	 	L’	 
	 	Promontorio	 
	 	V1	 
	 	V2	 
	 	VBP	 
	 	Azucarera	 
	 	San Juan	 
	Eduwiges	 	San Antonio	 	Series of moderately to steeply dipping veins with variable strike trends. Thicknesses vary
dramatically. The majority trend NE similar to Promontorio, but local cross structures are orthogonal. Some structures appear to be related to the trend of the San Nicolas vein, while others are perpendicular and appear to cross San Nicolas. All
appear truncated by the Santa Rosa Lima structure to the north. Extensively explored through drilling and exploration/development drifts. Primary production source.
	 	San Bartolo	 
	 	Santa Marina	 
	 	Mexicana	 
	 	Milagros	 
	 	Milagros Ramal 1	 
	 	Moctezuma	 
	 	  
 Portilla
	 
	San Nicolas	 	San Nicolas	 	Two anastomosing NW/SE trending, steeply-dipping structures with the most
	 	Santa Rosa Lima	 	significant strike length of the modeled veins. Appear to truncate most structures, although others have been demonstrated to cross San
Nicolas with small (5-10m) offsets. Significant potential for exploration and addition of resources. Features drilling and limited channel sampling along development drifts. Primary production source.
	La India	 	Candelaria 1	 	Two sets of variable thickness and orientation veins with NW/SE trends (Durana) and NE/SW trends (Candelaria) to the extreme
south of the project. Although generally lower grade, there are selected areas of very high grade mineralization noted. Exploration is not as extensive as other areas, and is based almost exclusively on drilling. No production of note.
	 	Candelaria 2	 
	 	Durana	 
	 	Durana Ramal 1	 
	 	Durana Ramal 2	 
	 	  
 20 de Noviembre
	 
	La Gloria	 	Minerva	 	Anasotomosing NE/SW trending steeply-dipping vein to the south of the San Nicolas vein. Dominantly explored
via exploration drift. Limited production.

 Source: SRK, 2017 

  
  

					
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 Source: SRK 

Figure 14-2: Oblique View of the Cusi Geologic Model 

  
  

					
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 Source: SRK 

Figure 14-3: Oblique View of the Cusi Geologic Model, looking east 

  
  

					
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 Source: SRK 

Figure 14-4: Northeast Cross-section through the Cusi Geologic Model,
showing complex vein interactions 
  

	14.2.1	Domain Analysis 

 SRK considered each vein its own domain for the purposes of
statistical analysis and estimation. As shown in Figure 14-5, the amount of samples per vein domain are highly variable, influenced largely by the amount of channel sampling in development along structures.

  
 

 
 Source: SRK, 2016 

Figure 14-5: Sample Count by Vein Domain 

  
  

					
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 The individual resource domains also feature a wide range of grade distributions. The
mean grades for each element by vein are shown in Table 14-3. As shown, Ag is the obvious and most dominant contributor to the economic value of the mineralization. Veins in the Eduwiges area commonly feature
more base metals than others. 
 Table 14-3: Grade Means by Structure 

 

																																																																																																	
	Name	 	Mean Ag	 	 	Mean Au	 	 	Mean Pb	 	 	Mean Zn	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
All
	 	 	233.1	 	 	 	0.30	 	 	 	0.81	 	 	 	0.86	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 Alto El
Gallo
	 	 	125.0	 	 	 	0.02	 	 	 	0.13	 	 	 	0.22	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 San
Antonio
	 	 	229.3	 	 	 	0.20	 	 	 	1.58	 	 	 	1.92	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
Azucarera
	 	 	286.0	 	 	 	0.07	 	 	 	0.27	 	 	 	0.29	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 Bajo
L
	 	 	134.7	 	 	 	0.05	 	 	 	0.19	 	 	 	0.23	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
San Bartolo
	 	 	271.4	 	 	 	0.32	 	 	 	1.56	 	 	 	1.06	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 Candelaria
1
	 	 	123.4	 	 	 	0.06	 	 	 	0.25	 	 	 	0.38	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 Candelaria
2
	 	 	153.6	 	 	 	0.19	 	 	 	0.58	 	 	 	1.07	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
Durana
	 	 	63.7	 	 	 	0.04	 	 	 	0.15	 	 	 	0.16	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 Durana Ramal
1
	 	 	132.3	 	 	 	0.07	 	 	 	0.02	 	 	 	0.01	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
Durana Ramal 2
	 	 	156.8	 	 	 	0.06	 	 	 	0.05	 	 	 	0.02	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 El
Gallo
	 	 	270.1	 	 	 	0.50	 	 	 	0.34	 	 	 	0.40	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 El Gallo
Bajo
	 	 	269.2	 	 	 	0.17	 	 	 	0.29	 	 	 	0.35	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 H
	 	 	204.0	 	 	 	0.10	 	 	 	0.29	 	 	 	0.29	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 J
	 	 	177.0	 	 	 	0.04	 	 	 	0.20	 	 	 	0.27	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
San Juan
	 	 	152.2	 	 	 	0.35	 	 	 	0.11	 	 	 	0.13	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 K
	 	 	276.9	 	 	 	0.09	 	 	 	0.42	 	 	 	0.42	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
K’
	 	 	195.6	 	 	 	0.08	 	 	 	0.21	 	 	 	0.22	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 L
	 	 	371.5	 	 	 	0.12	 	 	 	0.32	 	 	 	0.34	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
L’
	 	 	145.0	 	 	 	0.07	 	 	 	0.26	 	 	 	0.32	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
Santa Marina
	 	 	201.2	 	 	 	0.31	 	 	 	1.29	 	 	 	1.06	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
Mexicana
	 	 	160.1	 	 	 	0.36	 	 	 	1.16	 	 	 	1.77	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
Milagros
	 	 	220.9	 	 	 	1.62	 	 	 	1.28	 	 	 	1.67	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 Milagros Ramal
1
	 	 	133.0	 	 	 	0.52	 	 	 	0.85	 	 	 	1.30	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
Minerva
	 	 	93.9	 	 	 	0.22	 	 	 	0.08	 	 	 	0.04	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
Moctezuma
	 	 	150.3	 	 	 	0.22	 	 	 	3.05	 	 	 	2.93	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 San
Nicolas
	 	 	231.2	 	 	 	0.21	 	 	 	0.36	 	 	 	0.39	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 20 de
Noviembre
	 	 	45.3	 	 	 	0.02	 	 	 	0.22	 	 	 	0.27	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
Portilla
	 	 	301.4	 	 	 	0.33	 	 	 	1.72	 	 	 	1.37	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
Promontorio
	 	 	224.3	 	 	 	0.07	 	 	 	0.34	 	 	 	0.31	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 Santa Rosa
Lima
	 	 	258.2	 	 	 	0.11	 	 	 	0.47	 	 	 	0.63	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 V1
	 	 	165.4	 	 	 	0.03	 	 	 	0.28	 	 	 	0.29	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 V2
	 	 	136.2	 	 	 	0.08	 	 	 	0.47	 	 	 	0.48	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	
VBP
	 	 	130.4	 	 	 	0.05	 	 	 	0.30	 	 	 	0.37	 	 		 		 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			

 Source: SRK, 2017 
  

	14.3	Assay Capping and Compositing 

 In order to minimize the variance in the estimation
due to inherent variability in grade distributions within domains and provide a more homogenous data set for estimation, SRK used capping of high grades as well as compositing of sample lengths. 

 

	14.3.1	Outliers 

 SRK limited high grade outlier samples by capping the maximum grades for
each area, and limiting samples above the cap to the grade of the cap. Capping analysis was done on the raw sample data, evaluating each data set by relevant area of mineralization. Capping was not reviewed for every

  
  

					
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individual vein, as the paucity of sampling for many of the veins did not yield appropriate populations for statistical analysis. Thus, areas of the model were selected for similarity in
mineralization style, orientation, and other parameters that would suggest that the grouped veins were related to a single mineralizing event. 

After the data was grouped by these areas, SRK generated log probability plots (to assess the frequency at various grade ranges and
evaluate continuity, changes in slope, and other factors that would indicate high grade sub-populations within the domained assay data. As these were identified, sample plots were generated within the domained areas to determine if any high grade
continuity could be developed and modeled. In the case of Cusi, the veins are simply highly variable and no significant high grade chutes or zones within the structures were modeled separately. Using the probability plots and statistics of the
capping (i.e. percentages of data capped, impact of capping on CV/Mean, total metal lost to capping, etc.) SRK selected appropriate capping limits for each of the areas, as shown in Table 14-4. 

Examples of the capping analysis can be seen in Figure 14-6 and Table 14-5. 
 Table 14-4: Capping Limits Utilized for the Cusi
MRE 
  

																																																																					
	Area	  	Capping Limit	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 
	  	Au (g/t)	 	  	Ag (g/t)	 	  	Pb (%)	 	  	Zn (%)	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 
	 Promontorio
	  	 	3.25	 	  	 	4000	 	  	 	7	 	  	 	6	 	  				  				  				  				  				  				  				  				  				  				  				  				  			
	 Santa
Eduwiges
	  	 	15	 	  	 	4000	 	  	 	18.5	 	  	 	19	 	  				  				  				  				  				  				  				  				  				  				  				  				  			
	 San
Nicolas/SRL
	  	 	3.5	 	  	 	2000	 	  	 	5	 	  	 	5	 	  				  				  				  				  				  				  				  				  				  				  				  				  			
	 La India
	  	 	0.5	 	  	 	750	 	  	 	3	 	  	 	4	 	  				  				  				  				  				  				  				  				  				  				  				  				  			
	
La Gloria
	  	 	2.3	 	  	 	500	 	  	 	0.42	 	  	 	0.31	 	  				  				  				  				  				  				  				  				  				  				  				  				  			

 Source: SRK, 2017 
  

 
 Source: SRK, 2017 

Figure 14-6: Example Log Probability Plot – Promontorio Ag 

  
  

					
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 Table 14-5: Example Capping Analysis –
Promontorio Ag 
  

																																							
	Cap	 	 	Capped	 	 	Percentile	 	 	Capped %	 	 	Lost %	 	 	CV %	 	 	Count	 	 	Max	 	 	Mean	 	 	CV	 
	 	NA		 	 	NA	 	 	 	100	% 	 	 	0.00	%	 	 	NA	 	 	 	NA	 	 	 	9,923	 	 	 	26,931.60	 	 	 	261.86	 	 	 	2.75	 
	 	10000	 	 	 	7	 	 	 	99.9	% 	 	 	0.07	% 	 	 	2%	 	 	 	13%	 	 	 	 	10,000	 	 	 	257.72	 	 	 	2.41	 
	 	7000	 	 	 	20	 	 	 	99.8	% 	 	 	0.20	% 	 	 	3%	 	 	 	18%	 	 	 	 	7,000	 	 	 	254.39	 	 	 	2.26	 
	 	6000	 	 	 	26	 	 	 	99.8	% 	 	 	0.30	% 	 	 	4%	 	 	 	20%	 	 	 	 	6,000	 	 	 	252.54	 	 	 	2.2	 
	 	5000	 	 	 	41	 	 	 	99.7	% 	 	 	0.40	% 	 	 	5%	 	 	 	23%	 	 	 	 	5,000	 	 	 	249.88	 	 	 	2.12	 
	 	4000	 	 	 	70	 	 	 	99.5	% 	 	 	0.70	% 	 	 	7%	 	 	 	27%	 	 	 	 	4,000	 	 	 	245.75	 	 	 	2.02	 
	 	3000	 	 	 	121	 	 	 	99.1	% 	 	 	1.20	% 	 	 	10%	 	 	 	32%	 	 	 	 	3,000	 	 	 	238.75	 	 	 	1.88	 
	 	2500	 	 	 	158	 	 	 	98.8	% 	 	 	1.60	% 	 	 	12%	 	 	 	35%	 	 	 	 	2,500	 	 	 	233.47	 	 	 	1.79	 
	 	2000	 	 	 	234	 	 	 	98.2	% 	 	 	2.40	% 	 	 	15%	 	 	 	39%	 	 	 	 	2,000	 	 	 	226.23	 	 	 	1.69	 
	 	1500	 	 	 	369	 	 	 	97.1	% 	 	 	3.70	% 	 	 	20%	 	 	 	44%	 	 	 	 	1,500	 	 	 	214.73	 	 	 	1.55	 
	 	1000	 	 	 	662	 	 	 	90.0	% 	 	 	6.70	% 	 	 	28%	 	 	 	50%	 	 	 	 	1,000	 	 	 	195.12	 	 	 	1.36	 
	 	Ag > 4000	 	 			 	 			 	 			 	 			 	 			 	 	 	70	 	 	 	26931.60	 	 	 	7048.23	 	 	 	0.63	 
	 	Ag <= 4000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	9853	 	 	 	3888.56	 	 	 	225.79	 	 	 	1.84	 

 Source: SRK, 2017 
  

	14.3.2	 Compositing 

SRK evaluated the sample lengths within the mineralized domains defined by the geological model. The mean sample length within the
mineralized domains is 0.68 m, with a maximum sample length of 8.2 m. The mean sample length above the 97.5% percentile is 1.5 m. SRK examined the relationship between sample length and Ag grade to determine if there were significant
populations of high grade samples that were greater than 1.5 m. The overwhelming majority of samples with significant grade are in samples where the length is less than 1.5 m as shown in Figure 14-7.
SRK notes that there are very few samples that would be affected by a compositing length of 1.5 m that would in turn affect the estimation. 

A histogram distribution of sample lengths (Figure 14-8) within the mineralized domains shows
that the relative percentages of sample lengths above the 1.5 m composite length is very small. SRK selected a nominal composite length of 1.5 m, retaining short samples for use in the estimation. Any bias due to short samples is handled using
length-weighting during the estimation. 
  
 

 
 Source: SRK, 2017 

Figure 14-7: Scatter Plot of Length vs. Ag 

  
  

					
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 Source: SRK, 2017 

Figure 14-8: Histogram of Sample Lengths 

 

	14.4	Density 

 Bulk densities are assigned on the basis of the results of specific
gravity samples analyzed by the Servicio Geologico Mexicano (SGM) on behalf of Dia Bras. The 11 samples were taken from various areas throughout the Promontorio and Santa Eduwiges areas, but are considered by Dia Bras geologists to be representative
of the material types in mineralized areas of all of the Cusi veins. Samples were ground to 100% passing -100 mesh (150 microns) and were analyzed via the use of a pycnometer using ethanol as a solution. Distilled water is used as a reference
(0.99712 g/cm3) in the evaluations. The results of this analysis are presented in Table 14-6. 

The average density of the samples is 2.73 g/cm3, and this density was flagged into the block model for use in the resource calculations.

  
  

					
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 Table 14-6: Results for Density Analyses

  

															
	Sample ID  	 	Stope	  	Area	 	Vein	 	Level Elevation	 	 	Density (g/cm3)	 
	1	 	REB 668	  	Promontorio	 	San Nicolas	 	 	8 1850	 	 	 	2.71	 
	2	 	REB 9461	  	Sta. Eduwiges	 	Moctezuma	 	 	13A 1801	 	 	 	2.98	 
	3	 	REB 9400	  	Sta. Eduwiges	 	Veta B	 	 	13 1839	 	 	 	2.69	 
	4	 	REB 9315	  	Sta. Eduwiges	 	San Antonio	 	 	15 1769	 	 	 	2.99	 
	5	 	REB 627	  	Promontorio	 	El Gallo	 	 	8 1865	 	 	 	2.66	 
	6	 	REB 9306	  	Sta. Eduwiges	 	Sta. Marina	 	 	13 1817	 	 	 	2.78	 
	7	 	REB 786	  	Promontorio	 	Promontorio	 	 	6 1910	 	 	 	2.68	 
	8	 	REB 9400	  	Sta. Eduwiges	 	Riodacita	 	 	12 1839	 	 	 	2.57	 
	9	 	REB 652	  	Promontorio	 	Gallo Back	 	 	6 1930	 	 	 	2.63	 
	10	 	REB 1024	  	Promontorio	 	Promontorio	 	 	10 1910	 	 	 	2.68	 
	11	 	REB 1024	  	Promontorio	 	Promontorio	 	 	10 1910	 	 	 	2.67	 
	 	 	 	  	 	 	 	 	 	Average	 	 	 	2.73	 

 Source: Dia Bras, 2017 
  

	14.5	Variogram Analysis and Modeling 

 SRK did not conduct any variogram analysis for
this MRE. Previous efforts have noted issues with production of good variograms sufficient for informing kriging equations, and SRK’s efforts produced similar results. As has been described previously, the inherent local variability in the
mineralization and the relationships between the veins make assessing continuity through the use of geostatistics very difficult. In addition, the level of domaining that has resulted in the definition of the individual veins means that there are
fewer samples within each vein to use for spatial statistical analysis. 
 SRK is of the opinion that the orientations of continuity
are established through the mapped or logged interpretation of the veins, and that the ranges of the estimation should be dependent on the drill spacing, ensuring selection of multiple holes/channel samples from different areas to interpolate grade
between these points. 
  

	14.6	Block Model 

 Seven block models were built in Maptek VulcanTM software and are
designed to approximate the orientation of the strike for the major structures contained in each model. The models are rotated about the Z axis (and only the Z axis) and limited to the footprint of the structures contained in each model. The model
extents are shown in Figure 14-9. The models are sub-blocked along the mineralized domain margins. Details regarding the block models and their parameters are shown in Table
14-7. All models have been sub-blocked to a minimum of 1 m x 1 m x 1 m with the exception of San Nicolas and Santa Rosa Lima, which are sub-blocked to a minimum of 0.5 m x 0.5 m x 0.5 m. 

  
  

					
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 Source: SRK, 2017 

Figure 14-9: Block Model Extents and Positions 

  
  

					
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 Table 14-7: Block Model Details 

 

																	
	Model	 	Origin	 	  Bearing  	 	Extents (m)	  	Numbers of Blocks
	 	X  	 	Y  	 	Z  	 	 	X  	 	Y  	 	Z  	  
	 Promontorio
	 	9800  	 	9700  	 	1380  	 	50  	 	500  	 	350  	 	1000  	  	1,629,411  
	 Eduwiges
	 	10320  	 	8610  	 	1380  	 	50  	 	1000  	 	500  	 	1000  	  	1,065,127  
	
San Nicolas/SRL  
	 	9210  	 	10170  	 	1380  	 	130  	 	2100  	 	700  	 	1000  	  	2,050,942  
	 Minerva
	 	9814  	 	8995  	 	1380  	 	15  	 	900  	 	250  	 	1000  	  	156,997  
	 Durana
	 	10430  	 	7370  	 	1380  	 	160  	 	800  	 	250  	 	1000  	  	149,178  
	 Candelaria
	 	10863  	 	6776  	 	1380  	 	40  	 	800  	 	250  	 	1000  	  	365,489  
	
San Juan
	 	8820  	 	10060  	 	1380  	 	60  	 	500  	 	250  	 	1000  	  	102,640  

 Source: SRK, 2017 
  

	14.7	Estimation Methodology 

 SRK interpolated grades for Ag, Au, Pb, and Zn using an
inverse distance squared estimation method. In general, a nested three-pass estimation was used with higher restrictions on sample selection criteria in the initial shorter search passes, to less restrictive criteria in the subsequent, larger
ellipsoids. Ellipsoid orientations are controlled by the hanging wall and footwall surface of each structure. A flattened “pancake” ellipsoid shape is used to mirror the vein anisotropy, with the orientations varying as a function of the
bearing, dip, and plunge of the structure. These three parameters are estimated in to the block model from the hanging wall and footwall surfaces of each vein, using the varying local anisotropy tool in Vulcan. They ultimately control the
orientation of the search ellipsoid at each block in the model. Maximum numbers of samples per hole in combination with sample minimums of 3 ensure that all estimates in the first and second passes must use more than one hole. 

The variations in the distribution of samples and the issue of clustering of high grade channel samples is dealt with using an octant
restriction on the estimation. This permits a maximum number of samples to be selected from one octant, working with the sample selection criteria to force a minimum number of octants to be used in the estimate. In this way, the amount of data used
to estimate from a single area is limited, and other samples must be used from areas that may not be as clustered. SRK implemented this methodology for the estimation on every domain. 

SRK varied parameters like the minor ellipsoid ranges, sample selection criteria, and octant restrictions based on performance of the
estimation during review of the validation, but notes that the parameters selected are very similar between the individual structures and seem to work well given the wide variety of data spacing. The estimation parameters used for each area are
summarized in Table 14-8. 

  
  

					
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 Table 14-8: Estimation Parameters 

 

																																									
	Promontorio/San Juan	  	ID2	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 
	Pass	  	Bearing (Z)	 	  	Plunge (Y)*	 	  	Dip (X)*	 	 	Major	 	 	Semi-Major	 	 	Minor	 	 	Min	 	 	Max	 	  	Max/DH	 	 	Max/Octant	 
	
1
	  	 	NA	 	  	 	NA	 	  	 	NA	 	 	 	25	 	 	 	25	 	 	 	5	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
2
	  	  	  	 	 	50	 	 	 	50	 	 	 	10	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
3
	  	  	  	 	 	75	 	 	 	75	 	 	 	20	 	 	 	1	 	 	 	16	 	  	 	2	 	 	 	NA	 
		  				  				  				 				 				 				 				 				  				 			
	Eduwiges	  	ID2	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 
	Pass	  	Bearing (Z)	 	  	Plunge (Y)*	 	  	Dip (X)*	 	 	Major	 	 	Semi-Major	 	 	Minor	 	 	Min	 	 	Max	 	  	Max/DH	 	 	Max/Octant	 
	
1
	  	 	NA	 	  	 	NA	 	  	 	NA	 	 	 	25	 	 	 	25	 	 	 	10	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
2
	  	  	  	 	 	50	 	 	 	50	 	 	 	20	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
3
	  	  	  	 	 	75	 	 	 	75	 	 	 	30	 	 	 	1	 	 	 	16	 	  	 	2	 	 	 	NA	 
		  				  				  				 				 				 				 				 				  				 			
	San Nicolas/SRL	  	ID2	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 
	Pass	  	Bearing (Z)	 	  	Plunge (Y)*	 	  	Dip (X)*	 	 	Major	 	 	Semi-Major	 	 	Minor	 	 	Min	 	 	Max	 	  	Max/DH	 	 	Max/Octant	 
	
1
	  	 	NA	 	  	 	NA	 	  	 	NA	 	 	 	25	 	 	 	25	 	 	 	5	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
2
	  	  	  	 	 	50	 	 	 	50	 	 	 	10	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
3
	  	  	  	 	 	100	 	 	 	100	 	 	 	20	 	 	 	1	 	 	 	16	 	  	 	2	 	 	 	NA	 
		  				  				  				 				 				 				 				 				  				 			
	Azucarera	  	ID2	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 
	Pass	  	Bearing (Z)	 	  	Plunge (Y)	 	  	Dip (X)*	 	 	Major	 	 	Semi-Major	 	 	Minor	 	 	Min	 	 	Max	 	  	Max/DH	 	 	Max/Octant	 
	
1
	  	 	315	 	  	 	-60	 	  	 	0	 	 	 	25	 	 	 	25	 	 	 	5	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
2
	  	  	  	 	 	50	 	 	 	50	 	 	 	10	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
3
	  	  	  	 	 	75	 	 	 	75	 	 	 	20	 	 	 	1	 	 	 	16	 	  	 	2	 	 	 	NA	 
		  				  				  				 				 				 				 				 				  				 			
	Candelaria Durana	  	ID2	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 
	Pass	  	Bearing (Z)	 	  	Plunge (Y)*	 	  	Dip (X)*	 	 	Major	 	 	Semi-Major	 	 	Minor	 	 	Min	 	 	Max	 	  	Max/DH	 	 	Max/Octant	 
	
1
	  	 	NA	 	  	 	NA	 	  	 	NA	 	 	 	25	 	 	 	25	 	 	 	10	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
2
	  	  	  	 	 	50	 	 	 	50	 	 	 	20	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
3
	  	  	  	 	 	75	 	 	 	75	 	 	 	30	 	 	 	1	 	 	 	16	 	  	 	2	 	 	 	NA	 
		  				  				  				 				 				 				 				 				  				 			
	Minerva	  	ID2	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 
	Pass	  	Bearing (Z)	 	  	Plunge (Y)*	 	  	Dip (X)*	 	 	Major	 	 	Semi-Major	 	 	Minor	 	 	Min	 	 	Max	 	  	Max/DH	 	 	Max/Octant	 
	
1
	  	 	NA	 	  	 	NA	 	  	 	NA	 	 	 	25	 	 	 	25	 	 	 	10	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
2
	  	  	  	 	 	50	 	 	 	50	 	 	 	20	 	 	 	3	 	 	 	16	 	  	 	2	 	 	 	2	 
	
3
	  	  	  	 	 	75	 	 	 	75	 	 	 	30	 	 	 	1	 	 	 	16	 	  	 	2	 	 	 	2	 

 * Controlled by VLA unfolding using fault block-specific hangingwall and footwall surfaces. 

Source: SRK, 2017 

  
  

					
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	14.8	Model Validation 

 SRK has validated the estimation for each model using a variety
of methods considered to be industry standard. These include a visual comparison of the blocks versus the composites, an assessment of the quality of the estimate, and comparative statistics of block vs. composites. As Ag is the primary commodity by
far at the Cusi Mine, validation is focused primarily on this rather than the other elements. Cursory validation of the other elements was performed to ensure no material overestimation. 

 

	14.8.1	Visual Comparison 

 SRK reviewed the block estimation visually in comparison with
the composite grades to determine any potential for obvious bias. In general, the objective is to identify areas where the composites do not closely approximate the blocks. SRK reviewed all models in this context and noted that they all seem to
match the drilling well. Examples are shown in Figure 14-10 and Figure 14-11. 
  

 
 Source: SRK, 2017 

Figure 14-10: Example of Visual Validation – Promontorio Area 

  
  

					
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 Source: SRK, 2017 

Figure 14-11: Example of Visual Validation – San Nicolas Area 

 

	14.8.2	Estimation Quality 

 SRK reviews the quality of the estimation using a combination
of statistical comparisons of the number of holes, samples, and average distances per estimation pass. As the estimation passes are used to help assign confidence to the estimate, it is helpful to understand how much data is being used in the passes
to have confidence that the passes are ensuring high quality estimates in passes 1 and 2 and complete estimation of the blocks in the ranges in the third pass. 

The example histograms shown in Figure 14-12, Figure
14-13, and Figure 14-14 illustrate that the Promontorio estimation passes are using more data in the first and second passes, at closer spacing than the third pass.
Importantly, the first and second passes are always using more than one hole to estimate, and for the most part are using three to six holes with three to eight composites. Average distances for all estimation passes are only about 26 m, with the
majority of blocks in the first and second passes estimated between 5 and 30 m. 
 SRK is satisfied from this analysis that the
estimations are appropriate for each model. 

  
  

					
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 Source: SRK, 2017 

Figure 14-12: Histogram of Number of Holes - Promontorio 

 
 

 
 Source: SRK, 2017 

Figure 14-13: Histogram of Number of Composites - Promontorio 

  
  

					
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 Source: SRK, 2017 

Figure 14-14: Histogram of Average Distances - Promontorio 

 

	14.8.3	Comparative Statistics 

 SRK compared the estimated block grades to the composite
grades on a vein by vein basis as well as a global basis, assessing for local and global biases which may indicate over-estimation. Means are compared against the raw composite data as well as a nearest neighbor estimate (the theoretical declustered
composite mean). In the case of many of the Cusi veins, the composite grades tend to be biased high due to the concentration of channel samples which are collected predominantly in the mineralized areas. The degree of bias depends on a number of
factors including the relative number of channel samples and the percentage of these samples taken in high grade areas (tends to be higher). Thus, SRK reviewed the estimates in areas featuring higher number of channel samples using a
nearest-neighbor declustered mean to assess the degree of impact of the clustered channel samples on the estimate. 
 An example of a
simple mean comparison at Promontorio is shown in Figure 14-15. This shows that the block estimates (blue) are generally comparing well against the composite means (red). Nearest-neighbor means are shown in
green, and are generally approximating the grades of the ID2 estimate. However, in some cases such as the El Gallo Bajo (EGB) vein, there is a clear bias in the composites due to highly clustered channel samples (more samples, less blocks) vs. a
smaller number of drillholes (less samples, more blocks) that is reflected in both the ID2 estimate and the nearest-neighbor estimate. In other cases, SRK notes slight over-estimations in the structures such as the VBP vein, where a condition may
exist that features a small percentage of higher grade samples influencing a larger amount of blocks, perhaps on the margins of the vein. SRK is of the opinion that this is acceptable, as these blocks are likely estimated in the third pass of
estimation, and would be classified as Inferred. Other multi-vein comparisons are shown in Figure 14-16 and Figure 14-17. 

  
  

					
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 Source: SRK, 2017 

Figure 14-15: Mean Analysis by Domain – Promontorio Ag 

 
 

 
 Source: SRK, 2017 

Figure 14-16: Mean Analysis by Vein Domain – Santa Eduwiges Ag 

  
  

					
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 Source: SRK, 2017 

Figure 14-17: Mean Analysis by Vein Domain – San Nicolas/SRL Ag 

Global comparisons were also conducted for the models against the composites and the nearest neighbor estimations. These were done by
examining histogram distributions as well as global statistics for each model. SRK notes that the comparison to the global sample mean is somewhat misleading due to the number of higher grade channel samples compared to drillholes. Thus, the
comparison is somewhat more meaningful against the nearest neighbor estimate. SRK notes that the bias due to channel sampling is reduced by almost 50% in the declustered nearest neighbor estimate, which closely approximates the mean of the ID2
estimate. These comparisons have been conducted for each area and each metal, and the plots for Ag are shown in Figure 14-18, Figure 14-19, Figure 14-20, Figure 14-21, Figure 14-22, Figure 14-23, and Figure
14-24. 

  
  

					
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 Source: SRK, 2017 

Figure 14-18: Histogram of Block vs. Composites - Promontorio 

  
  

					
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 Source: SRK, 2017 

Figure 14-19: Histogram of Block vs. Composite – Santa Eduwiges 

  
  

					
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 Source: SRK, 2017 

Figure 14-20: Histogram of Block vs. Composite – San Nicolas/SRL 

  
  

					
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 Source: SRK, 2017 

Figure 14-21: Histogram of Block vs. Composites – Minerva 

  
  

					
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 Source: SRK, 2017 

Figure 14-22: Histogram of Block vs. Composites – San Juan 

  
  

					
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 Source: SRK, 2017 

Figure 14-23: Histogram of Block vs. Composites – Candelaria 

  
  

					
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 Source: SRK, 2017 

Figure 14-24: Histogram of Block vs. Composites – Durana 

Overall, SRK is satisfied with the estimations on a vein by vein basis as well as the global basis, although it is noted that there are
opportunities to improve the estimate in selected veins by employing more restrictions on sample selection or using other means to deal with the highly variable data spacing. This is most obvious for the Durana veins, which show a slight
overestimation. 
  

	14.9	Resource Classification 

 Mineral resource classification is a subjective concept,
and industry best practices suggest that resource classification should consider both the confidence in the geological continuity of the mineralized structures, the quality and quantity of exploration data supporting the estimates and the
geostatistical confidence in the tonnage and grade estimates. Appropriate classification criteria should aim at integrating all of these concepts to delineate regular areas of similar resource classification. 

SRK is satisfied that the geological modeling honors the current geological information and knowledge. The location of the samples and
the assay data are sufficiently reliable to support 

  
  

					
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 resource estimation. The sampling information was acquired primarily by core drilling
and channel sampling from mine development. 
 Significant factors affecting the classification include: 

 

	 	●	 	 Lack of historic and consistent QA/QC program; 

 

	 	●	 	 Lack of downhole surveys for most drillholes and measured deviations from planned and actual azimuths;

  

	 	●	 	 Spacing of drilling compared to observed geologic continuity; and 

 

	 	●	 	 Cusi is a producing mine with a successful operating history dating more than 10 years. 

In order to classify mineralization as an Indicated Mineral Resource, “the nature, quality, quantity and distribution of data”
must be “such as to allow confident interpretation of the geological framework and to reasonably assume the continuity” (CIM Definition Standards on Mineral Resources and Mineral Reserves, December 2005). SRK has based this classification
both on the continuity observed in well-drilled areas of the Project, as well as geologic continuity observed from underground exposures of the mineralization. The classification is generally based on the block estimation passes, using the amount of
data and ranges of interpolation from the nested passes to flag blocks, which are then considered to guide a manually digitized polygon to assign the final classification and eliminate local inconsistencies in the block-by-block classification of
the estimation pass. In the cases of Promontorio, San Nicolas, and San Juan, a secondary script was employed to better approximate the continuity for classification. An example of the classification results from San Nicolas is shown in Figure 14-25. 
 The general category for classification is as follows: 

 

	 	●	 	 Indicated: Blocks estimated in the first or second pass, with continuity along strike between more than two holes.

  

	 	○ 	 	 For Promontorio veins, San Nicolas, and San Juan, a script flagging blocks where the average distance is less than 50 m
and the number of drillholes was more than 2 was used to flag Indicated blocks. 

  

	 	○ 	 	 For the Azucarera area, a script flagging blocks where the average distance is less than 15 m and number of holes
greater than 3 was used to flag Indicated blocks. 

  

	 	●	 	 Indicated blocks are based on the estimation passes or scripts, but are manually flagged using extruded polygons to
eliminate small areas of Inferred within otherwise continuous Indicated mineralization and vice versa. 

  

	 	●	 	All estimated blocks not assigned to the Indicated category were assigned to the Inferred category. 

  
  

					
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Source: SRK, 2017 

Figure 14-25: Classification Methods and Results – San Nicolas 

  
  

					
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	14.10	Depletion for Mining 

 SRK depleted the block models for previous mining prior to
reporting. A variable called “mined” is coded into all models that contain any areas with existing mine workings. The variable is coded between 0-1, with 0 being completely available for mining and 1 being completely mined out. This
variable is used in Vulcan’s reporting tools to eliminate mined tonnes from the resource reporting. 
 Two methods have been
employed to account for mined areas. First, the 3D asbuilt mine workings were provided to SRK by Dia Bras for all surveyed areas. SRK noted that these are locally reasonable and well-surveyed, but are also inaccurate in other areas, where the
channel samples do not plot inside of the surveyed workings. It is suspected that poor survey practices are to blame for these discrepancies. Regardless, the 3D solids were used to complete an initial pass at depleting the models. An example of the
surveyed 3D workings for the Promontorio area is shown in Figure 14-26. 
  

 
 Source: SRK, 2017 

Figure 14-26: 3D As-built Shapes – Promontorio 

In addition to the surveyed workings, Dia Bras also provided polygons projected onto long sections of each vein, which delineate areas
where mining has occurred that have not been consistently surveyed. Many of these are historical. The differences between the surveyed workings and the provided polygons are dramatic, as noted in Figure 14-27.
These polygons were made into extruded 3D solids, and the veins were flagged as mined = 1 within the extruded polygons. 
 All mined
solids and polygon projections are actualized to January 31, 2017. 

  
  

					
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 Note: Green shapes are surveyed 3D as-builts. Red areas are blocks mined using extruded 3D polygons.

 Source: SRK, 2017 

Figure 14-27: Example of Mined Polygons vs. 3D As-builts 

 

	14.11	Mineral Resource Statement 

 CIM Definition Standards for Mineral Resources and
Mineral Reserves (December 2005) defines a mineral resource as: 
 “A concentration or occurrence of diamonds, natural solid
inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable

  
  

					
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prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological
evidence and knowledge”. 
 The “reasonable prospects for economic extraction” requirement generally implies that
the quantity and grade estimates meet certain economic thresholds and that the Mineral Resources are reported at an appropriate cut-off grade taking into account extraction scenarios and processing recoveries. Costs for mining and processing are
taken from January 2016 – September 2016 data provided by Dia Bras for their current underground mining operation. Costs are broken down as follows; Mining US$26.74/t, Processing US$16.63/t, and General and Administrative US$3.40/t. These costs
aggregate to US$46.77. Assuming a price for Ag of US$18.30/oz (US$0.59/g), and an average Ag recovery of 74%, this cost equates to a grade of about 110 g/t Ag. SRK has reported the mineral resource for the Cusi mine at this cut-off. 

The January 31, 2017, consolidated mineral resource statement for the Cusi Mine area is presented in Table 14-9. 
 Table 14-9: Cusi Mine Mineral
Resource Estimate as of January 31, 2017– SRK Consulting (U.S.), Inc. 
  

													
	Source	  	Class	 	Ag (g/t)  	 	Au (g/t)  	 	Pb (%)  	 	Zn (%)  	 	Tonnes (000’s)  
	
Promontorio
	  	

	 	223  	 	0.08  	 	0.32  	 	0.38  	 	692  
	
Eduwiges
	  	 	226  	 	0.36  	 	1.63  	 	1.52  	 	378  
	
SRL
	  	 	206  	 	0.14  	 	0.23  	 	0.22  	 	290  
	
San Nicolas
	  	 	300  	 	0.11  	 	0.32  	 	0.36  	 	344  
	
San Juan
	  	 	227  	 	0.35  	 	0.09  	 	0.05  	 	45  
	
Minerva
	  	 	202  	 	0.14  	 	0.21  	 	0.22  	 	106  
	
Candelaria
	  	 	376  	 	0.14  	 	0.18  	 	0.29  	 	44  
	
Durana
	  	 	226  	 	0.06  	 	0.05  	 	0.02  	 	91  
	 Total
Indicated
	  	 	237  	 	0.16  	 	0.53  	 	0.53  	 	1,990  
	 	  	 	 	 	 	 	 	 	 	 	 	 
	Source	  	Class	 	Ag (g/t)  	 	Au (g/t)  	 	Pb (%)  	 	Zn (%)  	 	Tonnes (000’s)  
	
Promontorio
	  	

	 	220  	 	0.12  	 	0.37  	 	0.60  	 	265  
	
Eduwiges
	  	 	171  	 	0.22  	 	2.03  	 	1.68  	 	45  
	
SRL
	  	 	269  	 	0.15  	 	0.28  	 	0.31  	 	189  
	
San Nicolas
	  	 	387  	 	0.15  	 	0.54  	 	0.65  	 	599  
	
San Juan
	  	 	153  	 	0.03  	 	0.08  	 	0.06  	 	4  
	
Minerva
	  	 	226  	 	0.04  	 	0.17  	 	0.30  	 	30  
	
Candelaria
	  	 	151  	 	0.19  	 	0.60  	 	1.23  	 	68  
	
Durana
	  	 	126  	 	0.01  	 	0.22  	 	0.13  	 	2  
	
Total Indicated
	  	 	305  	 	0.14  	 	0.51  	 	0.64  	 	1,200  

			
	 (1)
	  	 Mineral resources are reported inclusive of ore reserves. Mineral resources are not ore reserves and do not have demonstrated
economic viability. All figures rounded to reflect the relative accuracy of the estimates. Gold, silver, lead and zinc assays were capped where appropriate.

	 (2)
	  	 Mineral resources are reported at a single cut-off grade of 110 g/t Ag based on metal price assumptions*, metallurgical recovery
assumptions, mining costs (US$26.74/t), processing costs (US$16.63/t), and general and administrative costs (US$3.40/t).

	* Metal price assumptions considered for the calculation of the cut-off grade are: Silver (Ag): US$/oz 18.30. Metallurgical recoveries for Ag are based on a three-year annual trailing average.
	 The resources were estimated by SRK. Matthew Hastings, M.Sc., PGeo, MAusIMM #314693 of SRK, a Qualified Person,
performed the resource calculations for Bolivar.

  
  

					
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	14.12	Mineral Resource Sensitivity 

 SRK has generated grade-tonnage charts which
illustrate the fluctuations of tonnage and Ag grade as a function of the cut-off. These charts are shown in Figure 14-28, Figure 14-29, Figure 14-30, Figure 14-31, Figure 14-32, Figure 14-33 and Figure
14-34. 
 SRK notes that the Cusi Mine is very sensitive to the cut-off, in both Indicated and
Inferred mineralization. 
  
 

 
 Source: SRK, 2017 

Figure 14-28: Grade-Tonnage Chart – Promontorio Area 

  
  

					
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 Source: SRK, 2017 

Figure 14-29: Grade-Tonnage Chart – Santa Eduwiges Area 

  
  

					
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 Source: SRK, 2017 

Figure 14-30: Grade Tonnage Chart – San Nicolas/SRL 

  
  

					
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 Source: SRK, 2017 

Figure 14-31: Grade Tonnage Chart – Minerva Area 

  
  

					
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 Source: SRK, 2017 

Figure 14-32: Grade Tonnage Chart – Candelaria 

  
  

					
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 Source: SRK, 2017 

Figure 14-33: Grade Tonnage Chart – Durana 

  
  

					
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 Source: SRK, 2017 

Figure 14-34: Grade Tonnage Chart – San Juan 

 

	14.13	Relevant Factors 

 SRK is not aware of any additional relevant factors that would
impact the statement of mineral resources at this time. 

  
  

					
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	15	Mineral Reserve Estimate 

 SRK did not conduct a reserve estimate at this time,
given that exploration and development is ongoing in areas that are currently too speculative for Measured and Indicated classification that could be included in a reserve. Sierra Metals does not consider a release of reserves to be appropriate or
of value at this time until sufficient work has been done to better delineate these resource areas. The company plans to perform further work to eventually produce an industry best practice reserve statement. The timeline for this work is yet to be
defined but the company has started on many aspects of this work. These costs are likely to be absorbed as a part of the normal operating budget of the Cusi Mine. 

SRK recommends the following work program to achieve mineral reserves: 

 

	 	●	 	 Field work to gather geotechnical information; 

 

	 	●	 	 Geotechnical analysis to confirm mining method parameters and safety analysis; 

 

	 	●	 	 Hydrogeological field work and generation of hydrogeological model; 

 

	 	●	 	 Additional drilling to increase resource confidence to Indicated category; 

 

	 	●	 	 Detailed mine design followed by mine schedule and ventilation analysis; 

 

	 	●	 	 Ensure that tailings and future metallurgical assumptions are appropriate for the next level of study; and

  

	 	●	 	 Economic evaluation with detailed operating and capital costs. 

  
  

					
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	16	Mining Methods 

  

	16.1	Cut and Fill Mining 

 The primary underground mining method currently employed at
Cusi is overhand cut and fill (Figure 16-1). This mining method is appropriate for the narrow and anastomosing veins at Cusi. Minimum mining widths are generally about 2.5 m with this method, with small 1 cu
yd Scooptrams used for mucking ore from these zones and drilling facilitated by pneumatic jacklegs. 
 Ore zones are developed from the
bottom up in 3 meter high slices along strike. Access ramps, also known as attack ramps, are developed at one end of the mineralized zone and driven initially at a negative 15% grade. Once the bottom-most mineralized cut has been mined out, the
cavity is filled with waste rock generated by development to other mineralized zones. This material is stored underground in unused drifts and on the surface. 

The waste rock allows mining to continue on similar 3 meter high cuts upward. Typically, a total of five 3 meter cuts make up a stope
block at Cusi. Because of the competent rock in the mineralized zone and waste area, ground support at Cusi is used infrequently, and is generally utilized in areas of fault zones. 

 
 

 
 Source: SME, 1998 

Figure 16-1: Schematic Overhand Cut and Fill Diagram 

 

	16.2	Shrinkage Stope Mining 

 SRK also notes that shrinkage stoping has been in use in
modern mining at Cusi, but currently makes up a comparably minor portion of the active mining operations. 
 The sublevel shrinkage
stope is accomplished by developing a haulage level drift in the lower portion of the vein structure and creating draw points for the removal of ore. A raise is constructed on each end of the vein and a cross–cut in the vein is established with
the broken ore falling down into the 

  
  

					
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draw points. The mining is then accomplished by drilling out the vein and working off the broken material from the bottom of the vein working up the vein. Figure
16-2 shows the mining method. 
  
 

 
 Source: Dia Bras, 2016 

Figure 16-2: Shrinkage Stope Method 

Jackleg drills that are capable of drilling approximately 2.6 m (8 ft) cut are used as the primary drilling tool in shrinkage stoping
scenarios. The holes are loaded and shot. The haulage then takes place with a mini-scoop loading out of the drawpoint into a truck or to an ore pass to the ultimate level. This mining method allows following the vein, and mining width can adjust
with the vein thickness. The majority of the veins that are 1 to 1.5 m thick, and SRK would consider 1.5 m a minimum sustainable mining width for use with the jackleg drilling method. 

 

	16.3	Production 

 Despite lacking a prefeasibility or feasibility study in the public
market, which discloses reserves, the Cusi Mine is in fact in operation and producing mineralized material from the underground mine. SRK notes that pre-feasibility and feasibility studies are required for statement of reserves, but are not required
for a company to initiate production for a property. 
 The current mining operation produces approximately 600 tonnes of ore per day,
and 400 tonnes of waste per day. The source of mined material is split evenly between the Promontorio and Santa Eduwiges mine areas at this time. Approximately 20 m of development is done per heading per day. Mining recovery is estimated by Dia Bras
at about 75%, with a planned dilution factor of 16%. The monthly mine production for the January 2016 to January 2017 period is shown in Table 16-1. 

  
  

					
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 Table 16-1: Cusi Mine Monthly Production 2016-January 2017

  

																							
	  	  	Planned	  	  	  	Reported Mill Processed
	Month	  	 Tonnes

(dry t)
	  	 Ag  

(g/t)  
	  	 Pb  

(%)  
	  	 Zn*  

(%)  
	  	 Au  

(g/t)  
	  	  	  	Tonnes  
(dry t)  	  	 Ag  

(g/t)  
	  	 Pb  

(%)  
	  	 Zn  

(%)  
	  	 Au

(g/t)

	
Jan 2016
	  	17,400   	  	189.00  	  	0.89  	  	0.00  	  	0.20  	  		  	15,086   	  	137.78  	  	1.03   	  	1.02  	  	0.26 
	
Feb 2016
	  	16,800   	  	189.00  	  	0.87  	  	0.00  	  	0.20  	  		  	16,689   	  	180.92  	  	1.16   	  	1.23  	  	0.33 
	
Mar 2016
	  	17,400   	  	189.00  	  	0.88  	  	0.00  	  	0.20  	  	 	  	17,978   	  	199.01  	  	1.96   	  	1.83  	  	0.29 
	
Apr 2016
	  	17,400   	  	190.00  	  	0.86  	  	0.00  	  	0.20  	  		  	17,557   	  	171.01  	  	1.35   	  	1.31  	  	0.24 
	
May 2016
	  	18,000   	  	189.00  	  	0.88  	  	0.00  	  	0.20  	  		  	17,981   	  	186.50  	  	1.20   	  	1.08  	  	0.23 
	
Jun 2016
	  	17,400   	  	188.00  	  	0.87  	  	0.00  	  	0.20  	  	 	  	16,688   	  	187.14  	  	0.99   	  	1.05  	  	0.21 
	 Jul 2016
	  	17,400   	  	189.00  	  	0.87  	  	0.00  	  	0.20  	  		  	17,980   	  	174.95  	  	0.86   	  	0.95  	  	0.27 
	
Aug 2016
	  	18,000   	  	190.00  	  	0.84  	  	0.00  	  	0.20  	  		  	15,718   	  	150.58  	  	1.36   	  	1.21  	  	0.29 
	
Sep 2016
	  	17,400   	  	189.00  	  	0.88  	  	0.00  	  	0.20  	  	 	  	15,165   	  	145.85  	  	1.13   	  	0.95  	  	0.25 
	
Oct 2016
	  	18,000   	  	189.00  	  	0.86  	  	0.00  	  	0.20  	  		  	14,157   	  	164.20  	  	1.73   	  	1.45  	  	0.26 
	
Nov 2016
	  	17,400   	  	189.00  	  	0.89  	  	0.00  	  	0.20  	  		  	10,366   	  	177.12  	  	0.56   	  	0.59  	  	0.22 
	
Dec 2016
	  	16,800   	  	188.00  	  	0.89  	  	0.00  	  	0.20  	  	 	  	11,532   	  	179.16  	  	0.90   	  	0.93  	  	0.21 
	
Jan 2017
	  	19,040   	  	170.00  	  	0.62  	  	0.69  	  	0.14  	  	 	  	11,747   	  	128.83  	  	0.95   	  	0.99  	  	0.21 

 *Note: No Zn production was planned for 2016, as the Zn flotation circuit was being commissioned.

 Source: Dia Bras, 2016 
  

	16.3.1	Mine Design 

 The Promontorio and Santa Eduwiges mines both benefit from extensive
mine development as a result of the long history of underground mining in the area. Each mine area is accessed from a spiral ramp, as well as a single shaft in each area. Minimal development is needed to exploit mineralized zones, and contract
miners are developing ramps at both mines to exploit ores at depth. 
 In addition to the shaft systems at Promontorio and Santa
Eduwiges, a spiral ramp, 4 meters square also accesses the mine from surface to the 9 level and is used primarily to haul waste out of the mine and for access of men and equipment. The current mine asbuilts for each area are shown below. SRK notes
that, in certain areas, stopes have been surveyed and provided in 3D. In other areas, the stopes have not been surveyed or provided in 3D. For this reason, Dia Bras provided subsequent polygons projected on long sections for each vein, delineating
historic areas which have been mined. 

  
  

					
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 Source: SRK, 2017 

Figure 16-3: Plan View of Promontorio 3D Mine Asbuilts 

  
  

					
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 Source: SRK, 2017 

Figure 16-4: Plan View of Santa Eduwiges 3D Mine Asbuilts 

  
  

					
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 Source: SRK, 2016 

Figure 16-5: Plan View of La India 3D Mine Asbuilts 

SRK notes that no stope optimization or detailed 3D design for the mine plan was provided by Dia Bras, and that the individual stopes
are effectively designed using 2D polygonal long sections upon reaching the level through development, with detailed channel sampling influencing the design of the stopes, in addition to the polygonal 2D grade-thickness derived from nearby
exploration drilling. SRK notes that this is regarded as a high-risk approach to mine design, but one commonly in use in highly-variable epithermal veins systems in Mexico. 

SRK notes that Dia Bras has historically used a system of resources vs. “reserves” to facilitate confidence in mine design. The
internal designation is not consistent with CIM guidelines or industry best practices, and is only referred to herein to facilitate explanation of Dia Bras’ internal practices. Stope blocks were designed in 2D on the basis of the drilling and
channel sampling, per vein, as shown in Figure 16-6. Estimated grade thicknesses based on nearby drill holes are projected from existing mine levels distances of 12.5 m vertically and varying distances
laterally (along strike) for 

  
  

					
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Proven and up to 25 m vertically (again varying along strike) for Probable material. Areas with no access to mine levels, but featuring exploration drilling, are left as Indicated and Inferred
using a similar distance criteria. 
  
 

 
 Source: Dia Bras, 2016 

Figure 16-6: Example of Dia Bras Stope Block Design – Promontorio 

SRK notes that only material which is designated in the “Proven and Probable” categories as defined by Dia Bras is brought
into the mine’s production schedule. SRK notes that this method for designing the stope blocks is not based on the current resource estimation, which utilizes industry-standard 3D geologic models and block model estimates to derive tonnes and
grade. 
 It is expected that Sierra Metals would modify the practice of stope design and eventually produce industry-standard reserve
estimates based on more modern practices, and SRK understands that this is a near-term objective for Sierra Metals. 
  

	16.3.2	Development 

 Development to access these stope blocks is designed up to two years
in advance. An example of the development design is shown in Figure 16-7. Dia Bras’ approach to development design is more consistent with industry standards than is the approach to stope design, likely
due to the necessity to more accurately project development meters and related costs. A development schedule is based on these designs, and broken down by general ramps, cross cut access, faces, raises, and ventilation. 

  
  

					
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 Note: Long section view looking northwest. 

Source: SRK, 2017 

Figure 16-7: Example of Mine Development Design – Promontorio Area 

 

	16.3.3	Schedule 

 SRK has not produced a production schedule, and has not reviewed
internal production schedules provided by Dia Bras in detail. SRK cannot comment on the accuracy of the current mining schedule provided by the Cusi Mine in the context of the statement of the resources in this report, as the schedule is not based
on the mineral resources stated herein. SRK notes that the Cusi Mine does not have a publicly stated reserve. 
 Dia Bras maintains a
monthly schedule for mine production in Microsoft Excel format, out to approximately two years in advance. The schedule then devolves to a less detailed quarterly schedule for years 3-4, and an annual plan for year 5. This schedule is based on
general expectations of production from various areas of the mine from as many as 16 working faces in a month. SRK notes that the production tonnages and grades are derived from the aforementioned 2D stope block designs, although development
scheduling is derived from the 3D designs to reach the relevant stope block. An example of the production schedule used by Dia Bras is shown in Table 16-2. 

  
  

					
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 Table 16-2: Example of Dia Bras Monthly
Production Schedule - 2018 
  
 

 
 Source: Dia Bras, 2016 
 Recursos Au Ag Pb PRODUCCION MINA CUERPO ELEVACION remanentes Zn % ENE FEB MAR ABR MAY JUN JUL AGO SEP OCT NOV DIC para 2018 g/t g/t % ENE - DIC 2018 
STA ED
SAN NICOLAS 1878 1766 11,489 0.3 241 0.3 0.14 1,500 1,500 1,500 1,500 1,500 1,500 2,000 489 0 0 0 0 11,489 
STA ED EDW NE 11,888 0.14 262 1.2 1.8 1,000 1,157 1,200 1,200
1,500 1,500 2,000 2,311 0 0 0 0 11,868 PROM EGB 1845 1794 11,901 0.0796 154.34 0.3518 0.438 2,000 2,000 2,000 2,000 2,000 1,901 0 0 0 0 0 0 11,901 PROM SN_PROM 1853 1819 4,500 0.2043 188.51 0.1891 0.2687 1,500 1,500 1,500 0 0 0 0 0 0 0 0 0 4,500
PROM SN_PROM 1816 1776 7,023 0.3893 175 0.30 0.57 1,500 1,500 1,500 1,500 1,023 0 0 0 0 0 0 0 7,023 PROM PROM 1815 1775 18,679 0.0418 226.5 0.4937 0.4946 1,743 1,743 2,000 2,000 2,000 2,000 2,000 2,500 2,600 0 0 0 18,586 FÁTIMA FATIMA 2000 1750
8,816 0.61 238 2.71 3.75 1,500 1,500 1,500 1,500 1,500 1,300 0 0 0 0 0 0 8,800 STA ED SAN NICOLAS 1720 1780 28,752 0.12 187 0.05 0.10 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 3,500 3,500 3,500 2,252 28,752 STA ED SAN NICOLAS 1660 1720 10,530
0.05 141 0.13 0.17 0 0 0 0 0 0 0 0 0 1,500 1,500 2,500 5,500 STA ED SN ANTONIO 1720 1766 29,569 0.1053 160.79 4.1374 4.1192 2,000 1,000 2,000 2,000 2,000 2,000 2,000 3,000 3,000 4,000 3,300 3,248 29,548 STA ED STA EDUWIGES 1720 1780 557 0.00 187
0.07 0.08 557 0 0 0 0 0 0 0 0 0 0 0 557 STA ED La Mexicana 13 11 3,578 0 65.727 5.559 5.1299 1,000 1,000 1,000 578 0 0 0 0 0 0 0 0 3,578 STA ED La Mexicana 14 13 10,110 0 59.154 9.5031 4.6169 1,000 1,000 1,000 1,322 1,500 1,500 2,700 0 0 0 0 0
10,022 STA ED MOCTEZUMA 14 13 14,886 0.1111 195.82 3.5256 2.7631 1,000 1,000 1,000 1,500 1,500 1,899 2,000 3,000 1,987 0 0 0 14,886 PROM AZUCARERA 1720 1780 50,629 0.16 307 0.63 0.68 0 0 0 0 0 0 0 0 0 0 0 1,500 1,500 PROM EGB 1720 1780 38,361 0.39
223 0.12 0.11 0 0 0 0 1,277 2,000 2,000 2,000 2,500 3,600 3,600 3,600 20,577 PROM PROMONT. SUR 1720 1780 63,343 0.04 300 0.64 0.69 0 0 0 0 000 00 000 0 PROM SAN NICOLAS 1720 1780 127,480 0.06 229 0.17 0.14 0 0 0 0 0 0 1,600 2,000 3,013 3,700 3,700
3,700 17,713 PROM SAN NICOLAS 10 9 38,598 0.13 169 0.09 0.14 2,000 2,000 2,100 2,500 2,500 2,000 2,000 3,000 3,000 4,000 4,000 3,500 32,600 
PROM STA ROSA DE LIMA 1720 1780
272,074 0.12 431 0.26 0.26 0 0 0 0 000 00 000 0 PROM STA ROSA DE LIMA 1660 1720 647,240 0.05 313 0.22 0.15 0 0 0 0 000 00 000 0 
Total 1,410,004 0.09 305 0.47 0.41 20,300
18,900 20,300 19,600 20,300 19,600 20,300 20,300 19,600 20,300 19,600 20,300 239,400 

  
  

					
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	16.3.4	Depletion 

 As noted in Section 14, the mineral resources have been depleted
using a combination of the surveyed 3D mine asbuilts, as well as polygonal mined areas provided by Dia Bras. The major reason for this approach is the lack of 3D surveys in historic areas which have since been filled or are currently inaccessible. A
secondary reason for this is due to the fact that the projections of the veins based on drilling locally do not agree with the surveyed locations of the stopes. This is due primarily to the inadequate survey data being used to project drilling. The
simplest solution to this inaccuracy was for Dia Bras to simply utilize the historic long sections, as well as the modern 3D survey data, and project these mined areas through the relevant structure. SRK notes that there are sets of polygons for
each of the veins which have undergone mining. 
 SRK notes that there is significant uncertainty associated with these generalized
polygons, but that they appear rather conservative in their application, effectively sterilizing major areas of veins (see Figure 16-8) for which it may be assumed that pillars or remnant areas remain. The
close proximity of the veins in areas like Promontorio requires care in allocating mined areas, as one vein may have seen significantly more production than one immediately adjacent by only a few meters. In some cases, this can be seen with areas of
asbuilt data that plot very close to some of the veins, but are not used to mine them as they access one of these adjacent structures. SRK has depended on Dia Bras geological personnel to define these areas and delineate using the polygon method.

  
 

 
 Note: 3D shapes are representing surveyed 3D mine asbuilts. Pink poly-lines are “mined” areas
provided by Dia Bras. The blue transparent shape is the footprint of the Promontorio vein, depleted using the two aforementioned data sets. 

Source: SRK, 2017 

Figure 16-8: Example of Surveyed 3D Asbuilt Data vs. Polygonal Mined Projections –
Promontorio 

  
  

					
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	16.4	Ventilation 

 The Cusi Mine currently uses natural ventilation dependent on the
circulation of warmer versus colder air in the mine. As a result, airflow through the mine varies in quantity and direction as the atmospheric conditions on the surface change. A study conducted by Dia Bras in early 2017 shows that the mine needs at
least 85 Kcfm of air flow to appropriately dilute contaminants from dust, diesel exhaust, explosives, etc. The current estimates of inflow of fresh air show only 36 Kcfm entering the mine, creating a deficit of more than 49 Kcfm. A simple Ventsim
model was built by Dia Bras and is shown in Figure 16-9. The study states that the calculation for the ventilation requirements has been done to the standards of NOM-023-STPS-2012. 

SRK notes that nothing has been provided by Dia Bras demonstrating that the mine achieves these rates of flow, and in fact show a major
deficit in ventilation. In addition, SRK does not suspect that the degree of flow from natural ventilation is sufficient to produce adequate ventilation at the working levels of the mine. The inflow diagram in Figure
16-9 show fresh air entering at lower levels of the mine, without demonstrated access to vent raises or other means of inflow. In addition, the degree of modeling in Ventsim is not consistent with the actual
asbuilts of the mine, making this analysis unreliable. SRK’s experience in the mine is that temperatures are extremely elevated in most working levels, with limited air flow. A well-designed forced-air system would remediate this issue, and Dia
Bras has noted that such a system is in the process of being installed as of June 2017. 
 SRK recommends that the site implement a
whole-of-mine ventilation plan. The main objectives of the plan would be to: 
  

	 	●	 	Develop a whole-of-mine ventilation strategy that will ultimately achieve best practice; 

	 	●	 	Provide additional data for the detailed design and construction of the forced ventilation system; 

	 	●	 	Identify areas of the mine that may need to be sealed in order for the ventilation system to function as designed; 

	 	●	 	Identify auxiliary ventilation requirements; and 

	 	●	 	Train personnel in the operation of the system as well as how the mine plan and operational practices can impact the performance of the system. 

 
 

 
 Source: Dia Bras, 2017 

  
  

					
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 Figure 16-9: Example Ventsim Ventilation
Diagram 
  

	16.5	Mining Equipment 

 A list of the major mining equipment used underground is
included in Table 16-3. The equipment appears to be of sufficient quantity and appropriate size for the operation. Some equipment is notably in poor condition, or features very high work hours. SRK notes that
good maintenance practices, proper ventilation, and properly timed equipment overhaul or replacement will be important as the mine progresses deeper and further from the surface access. 

Table 16-3: Equipment List for the Cusi Mine 

 

													
	Equipment	 	Make	 	Model	 	Capacity	 	  	 	 
	 SCOOPTRAM
	 	JOY GLOBAL	 	LT - 270 ( AÑO 2015 )	 	 	1.5 YDS	 	  			
	 SCOOPTRAM
	 	JOY GLOBAL	 	LT - 270 ( AÑO 2015 )	 	 	1.5 YDS	 	  			
	 SCOOPTRAM
	 	JOY GLOBAL	 	LT - 270 ( AÑO 2015 )	 	 	1.5 YDS	 	  			
	 SCOOPTRAM
	 	TAMROCK	 	EJC 65	 	 	1,25 YDS	 	  			
	 SCOOPTRAM
	 	WAGNER	 	ST 2D	 	 	2 YDS	 	  			
	 SCOOPTRAM
	 	JCI-125 ( MTI )	 	JCI-125	 	 	1.5 YDS	 	  			
	 SCOOPTRAM
	 	MTI ( LT-210)	 	LT-210	 	 	1,25 YDS	 	  			
	 SCOOPTRAM
	 	MTI	 	JCI-250	 	 	2.5 YDS	 	  			
	 SCOOPTRAM
	 	MTI	 	LT - 350 ( AÑO 2014 )	 	 	2.5 YDS	 	  			
	 SCOOPTRAM
	 	JOY GLOBAL	 	LT - 350 ( AÑO 2015 )	 	 	2.5 YDS	 	  			
	 JARVIS
	 	JARVIS CLARK	 	JDT 413	 	 	10 T	 	  			
	 JARVIS
	 	JARVIS CLARK	 	JDT 413	 	 	10 T	 	  			
	 JARVIS JCI-1304
	 	MTI	 	JCI-1304	 	 	13-16 T	 	  			
	 JARVIS
	 	SANVICK	 	EJC-417	 	 	17 T	 	  			
	 JARVIS
	 	MTI	 	DT-1604	 	 	16 T	 	  			
	 CAMION
	 	INTERNATIONAL	 		 	 	16 T	 	  			
	 TRAXCAVO
	 	CASE	 	721C	 	 	3 YDS	 	  			
	 BULLDOZER
	 	CATERPILLAR	 	D6 C	 	 	NA	 	  			

 Source: Dia Bras, 2016 
  

	16.6	Dewatering 

 The Cusi Mine currently pumps an average of about 570 GPM from the
Promontorio mine area and about 350 GPM from the Santa Eduwiges area. SRK was provided with the total pumping from January of 2015 to July of 2016, and notes that the pumping requirements have increased over that period of time, from a total of
about 32,000,000 gallons per month to over 46,000,000 gallons per month. A plot of the total pumping requirements and rates for Cusi during this period of time are shown below in Figure 16-10. 

  
  

					
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 Source: Dia Bras, 2016 

Figure 16-10: Total Pumping by Month 

  
  

					
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 The current dewatering capacity for the Cusi Mine is supported by a system of nine
electric pumps located in various levels and locations throughout the Promontorio and Santa Eduwiges mine complexes. A major pumping station which collects water from other areas of the mine, and removes it to the surface, is located in the shaft
located near San Bartolo, on level 12 of the mine. Seven 15-40 HP pumps located throughout the two mine areas move water to the pumping station, or other discharges. Two 125 to 150 HP vertical pumps lift water to the surface from the pumping
station to the Eduwiges arroyo. The dewatering equipment is shown in Table 16-4. An additional seven pumps are kept in stand by for replacement in the case of mechanical failure or unexpected inflow. SRK notes
that the capacity of some of the stand by pumps are in excess of the primary pumps, mitigating the risk associated with high inflow levels based on surface condition or hydrogeologic conditions. 

  
  

					
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 Table 16-4: Cusi Mine Pumping Equipment

  

																	
	Type	 	Make	 	Model	 	Series	 	Liters/Second	 	Column	 	Capacity
HP	 	Location	 	Discharge
	
VERTICAL
	 	KLASSEN	 	10CHO-10	 	 	 	40	 	250 MTS	 	125 HP	 	ESTACION DE BOMBEO POR TIRO SAN BARTOLO NIVLE 12 CAPACIDAD DE PILETA 1198 M3	 	DESCARGA A SUPERFICIE ARROYO EDUWIGES
	
VERTICAL
	 	WARSON	 	11WL - 1C	 	7-11290	 	50	 	250 MTS	 	150 HP	 	ESTACION DE BOMBEO POR TIRO SAN BARTOLO NIVLE 12 CAPACIDAD DE PILETA 1198 M3	 	DESCARGA A SUPERFICIE ARROYO EDUWIGES
	
SUBMERSIBLE
	 	TSURUMI	 	LH430W-61	 	15471717002	 	20	 	127 MTS	 	40 HP	 	RAMPA 9319	 	DESCARGA A PILETA NIVEL 12 AREA SAN BARTOLO
	
SUBMERSIBLE
	 	TSURUMI	 	LH430W-61	 	 	 	20	 	127 MTS	 	40 HP	 	LABRADO STA. MARINA	 	DESCARGA A PILETA NIVEL 12 AREA SAN BARTOLO
	
SUBMERSIBLE
	 	FRANKLIN	 	K6MA240	 	 	 	14	 	160 MTS	 	30 HP	 	LABRADO STA. MARINA	 	DESCARGA A PILETA NIVEL 12 AREA SAN BARTOLO
	
SUBMERSIBLE
	 	GRUNFOS	 	80KDEH11-2T4	 	OP1462OO1001	 	15	 	50 MTS	 	15 HP.	 	REBAJE 9315	 	DESCARGA EN CARCAMO DE RAMPA 9384
	
SUBMERSIBLE
	 	GRUNFOS	 	80KDEH11-2T4	 	OP1462OO1001	 	15	 	50 MTS	 	15 HP	 	CARCAMO 9450	 	DESCARGA A LABRADO SAN ANTONIO 9440
	
SUBMERSIBLE
	 	GRINDEX	 	MATADOR - H	 	1530429	 	20	 	70 MTS	 	27 HP	 	RAMPA 9383	 	DESCARGA EN LABRADO SANTA MARINA
	
SUBMERSIBLE
	 	GRINDEX	 	MASTER- H	 	1530945	 	20	 	50 mts	 	15 HP	 	CARCAMO 9384	 	DESCARGA EN LABRADO SANTA MARINA

 Source: Dia Bras, 2016 

  
  

					
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	17	Recovery Methods 

 The Cusi concentrator is located in the outskirts of Cuauhtemoc
City, approximately 50 km by road from Cusi mine operations. Dump trucks each hauling approximately 20 t of ore delivered 186,898 t during the 2016 period. 

The Cusi processing facilities include two interconnected process plants, which are the Malpaso mill purchased from Rio Tinto, and the El
Triunfo mill. Both mills are conventional ball mill and flotation plants fed from a single crushing circuit. The flotation circuit has the ability to produce lead concentrate and zinc concentrate, although the Pb circuit represents a comparably
higher percentage of concentrate production. For example, no zinc concentrate was produced in 2015, with over 5,000 tonnes of Pb concentrate reported. For 2016, 5,442 tonnes of Pb concentrate were produced, with 1,540 tonnes of Zn concentrate. 

The summary of concentrate production for the previous two years, including a monthly breakdown of 2016, is shown in Table 17-1. El Triunfo includes a cyanide leach plant that has been used to process legacy tailings and, at times, fresh tails from Malpaso. The leach plant was idled in mid-2012 with no indication that it is scheduled to
restart. The previous three years of performance of the Cusi concentrator facility is shown in Table 17-1. 

Table 17-1: Cusi Concentrate Production (2015-January 2017) 

 

															
	Date	  	Pb concentrate (t)  	  	Zn Concentrate (t)	 	 	 	 	 	 	 	 	 
	2015  	  	5,329  	  	 	0	 	 		 		 		 	
	Jan 2016  	  	477  	  	 	96	 	 		 		 		 	
	Feb 2016  	  	595  	  	 	159	 	 		 		 		 	
	Mar 2016  	  	792  	  	 	290	 	 		 		 		 	
	Apr 2016  	  	577  	  	 	181	 	 		 		 		 	
	May 2016  	  	460  	  	 	129	 	 		 		 		 	
	Jun 2016  	  	334  	  	 	120	 	 		 		 		 	
	Jul 2016  	  	400  	  	 	102	 	 		 		 		 	
	Aug 2016  	  	485  	  	 	125	 	 		 		 		 	
	Sep 2016  	  	375  	  	 	117	 	 		 		 		 	
	Oct 2016  	  	452  	  	 	168	 	 		 		 		 	
	Nov 2016  	  	228  	  	 	8	 	 		 		 		 	
	Dec 2016  	  	267  	  	 	46	 	 		 		 		 	
	2016  	  	5,442  	  	 	1,540	 	 		 		 		 	
	Jan 2017  	  	265  	  	 	55	 	 		 		 		 	

 Source: Dia Bras, 2017 

  
  

					
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 Table 17-2: Cusi Mine Metallurgical Balance
(2014-2016) 
  

							
	 	 	2014  	 	2015  	 	2016  
	
Tonnage
	 	155,268  	 	202,033  	 	186,898  
	 Head Grades
	 		 		 	 
	 Ag (gr/t)
	 	166.69  	 	175.88  	 	171.78  
	 Pb
	 	0.78%  	 	0.78%  	 	1.21%  
	 Zn
	 	0.00%  	 	0.71%  	 	1.16%  
	 Au (gr/t)
	 	0.42  	 	0.22  	 	0.26  
	 Metallurgical Recoveries
	 		 		 	 
	 Pb concentrate
	 		 		 	 
	 Ag recovery
	 	76%  	 	76%  	 	70%  
	 Pb recovery
	 	79%  	 	79%  	 	82%  
	 Pb grade in concentrate %
	 	28%  	 	23%  	 	34%  
	 Au recovery
	 	62%  	 	57%  	 	62%  
	 Zn concentrate*
	 		 		 	 
	 Ag recovery
	 	na  	 	na  	 	1%  
	 Zn recovery
	 	na  	 	na  	 	38%  
	 Zn grade in
concentrate %
	 	na  	 	na  	 	53%  
	 Metal Production (combined in
concentrates)
	 		 		 	 
	 Ag (oz)
	 	630,160  	 	873,496  	 	739,707  
	 Zn (t)
	 	na  	 	na  	 	818  
	 Pb (t)
	 	962  	 	1,246  	 	1,864  
	 Au (oz)
	 	1,289  	 	831  	 	954  

 *Note: Zn concentrate details not reported in 2014-2015 as the Zn recovery circuit was being commissioned. 

Source: Dia Bras, 2017 
  

	17.1	Plant Design and Equipment Characteristics 

 Based on the provided schematic
process flowsheets a single crushing plant reduces ROM feed to minus  1⁄4 inch feeding both mills. Primary crushing is done through a 36 inch X 24 inch Voest
jaw crusher. Primary crush material is screened with oversize reporting to a Symons gyratory 4  1⁄2 crusher. Fine ore, minus
 1⁄4 inch, is conveyed to any of four fine ore silos: two each 70 t capacity and two each 150 t. 

The Malpaso flowsheet indicates three ball mills: one 4.5 ft X 6 ft, one 4 ft X 6 ft and one 5’ X 8’. Each mill is operated in
closed circuit through cyclones. Fine cyclone overflow reports to lead flotation through two conditioner tanks. Lead flotation is arranged with three rougher cells followed by three scavengers (all 50
ft3). Rougher con advances to two first cleaners (50 ft3) and four second cleaners (30
ft3). The concentrates are thickened and filtered but this equipment in not indicated on the flow sheet. 

El Trimfo plant includes two ball mills: one 8 ft X 7 ft and one 7 ft X 10 ft., each operating in closed circuit. Lead flotation includes
an 8 ft X 8 ft conditioning tank, six rougher cells followed by four scavenger cells, all (50 ft3). Lead concentrate advances to 3 first cleaner cells and two second cleaners (not sized on the
flow sheet but presumed to be 50 ft3 cells). 
 The flowsheets provided to SRK are
shown in Figure 17-1 and Figure 17-2. No diagrams are presented for the cyanide circuit, as this area of the plant is currently not operating. 

  
  

					
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 Source: Dia Bras, 2017 

Figure 17-1: Flow Chart for Crushing Circuit 

 
 

 
 Source: Dia Bras, 2017 

Figure 17-2: Flow Diagram for Malpaso/Triunfo Plant 

  
  

					
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	18	Project Infrastructure 

 The Project has fully developed infrastructure including
access roads, an exploration camp, administrative offices, a processing plant and associated facilities, tailings storage facility, a core logging shed, water storage reservoir and water tanks. 

The site has electric power from the Mexican power grid, backup diesel generators, and heating from site propane tanks. The overall
Project infrastructure is built out and functioning and adequate for the purpose of the planned mine and mill. 
  

	18.1	Access and Local Communities 

 Access to the Cusi Property is by paved road,
approximately 105 km from Chihuahua to Cuauhtémoc via Federal Highway No. 16, then 22 km by paved road, and then approximately 8 km by all-season gravel roads to the Village of Cusihuiriachic, which is located within the property. The
total road distance from Chihuahua is approximately 135 km. 
  
 

 
 Source: Geostats, 2008 

Figure 18-1 Photo of Cusihuiriachic Village 

The City of Cuauhtémoc, the largest town in the area, is situated some 22 km north of the Cusi Property, and is an
agro-industrial town. Infrastructure support and availability of trained miners proximal to the various concessions is limited, but is available at Cuauhtémoc and Chihuahua. Numerous towns and villages are located throughout the area and are
used as a local base for exploration activities on the various concessions. The land around the Cusi Property is used for 

  
  

					
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agriculture. The villages in the area use the land to raise cattle, and to grow crops. Wildlife in the area includes various species of insects, lizards, snakes, birds, and small mammals. 

 

	18.2	Service Roads 

 The site has developed and functioning gravel service roads that
access the mine portals, water storage reservoir, camp, and process facilities. The roads between the mine and processing plant are used daily by the fleet of contract trucks that move the ore from the mine ore pads to the processing plant. 

 

	18.3	Mine Operations and Support Facilities 

  
 

 
 Source: Google Earth 

Figure 18-2: Aerial View of the Cusi Mine Area 

Sierra Metals owns a small processing plant equipped with crushers and flotation circuits located approximately 40 km by car from the
Cusi property. The plant is equipped with crushers and two flotation circuits. The Triungo circuit, which has a capacity of 400 tonnes/day, produces a copper concentrate and a zinc concentrate. The Malpaso circuit, which has a capacity of 150
tonnes/day, produces a lead concentrate and a zinc concentrate. The capacity of the Malpaso processing facilities is expected to be sufficient for future mining operations. 

  
  

					
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	18.4	Process Support Facilities 

  

	18.5	Energy 

 Electrical power at the Cusi Project and Malpaso Mill is provided by the
Mexican Electricity Federal Commission (Comisión Federal de Electricidad). At the Cusi mine, electricity is conveyed in 33,000-Volt power lines. At the Malpaso Mill, electricity is delivered on a 1,290-kilowatt power line. Existing
electricity supply is expected to be adequate for foreseeable mining operations. Backup power is available via diesel generators at the mine site. Heating is provided via propane tanks on-site. 

Details regarding energy consumption of the operation have been provided by Dia Bras. In 2016, for example, average monthly usage was
about 850,000 KWh at a cost of approximately MXN$1.07/ KWh. 
  

	18.6	Water Supply 

 Water, both industrial and potable, is drawn from local sources. At
the Cusi mine, Sierra Metals utilizes water recovered from the underground workings for process water and support of mining operations. Water is generated from dewatering operations in the Promontorio and Santa Eduwiges Mines. Potable water is
trucked in as needed from nearby public water facilities and wells. 
  
 

 
 Source: Geostats, 2008 

Figure 18-3 On-site Electric and Water Supply 

  
  

					
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	18.7	Site Communications 

 The site is equipped with a satellite communications system,
including telephone and internet that allows communications between the plant and office facilities. A radio system is also in use. The mine has hard line telephone service. 
  

	18.8	Site Security 

 There is a head of security on site with a staff of four personnel.
In addition to this group, is a mine rescue team trained in rescue techniques, as well as an on-site paramedic for minor medical emergencies. A central guardhouse is located near the access ramp for the Santa Eduwiges mine. Other guardhouses exist
at the entrances to the mines where security personnel ensure that mine personnel entering the mine are properly equipped, as well as where they will be going in the mine. 

A municipal Cusihuiriachi police station is located approximately 150 meters from the mine access area for Santa Eduwiges, and also has
an ambulance in cases of medical emergencies. The Mexican army base in the municipality of Cuahtemoc is approximately 17 km from the mine site in situations that may need more support. 

 

	18.9	Logistics 

 Concentrates produced from Cusi are shipped overland in trucks to the
Manzanillo-Colima shipping complex approximately 1.600 km south. 
  

	18.10	Waste Handling and Management 

 Waste from the Promontorio and Santa Eduwiges mines
is stored near the entry portals and ramps of these mines. Waste is used as backfill for the mine, and thus requirements for waste storage are minimal. Waste disposal areas are expected to be sufficient for expected future operations. 

 

	18.11	Tailings Management 

 Two tailings dams are located in the vicinity of the Malpaso
Mill. Land position within the Malpaso Mill area is expected to be adequate to support anticipated mining operations. SRK notes that Dia Bras has engaged tailings design consultants as of 2015 to develop new tailings impoundments and consider
dry-stacking of tailings. The existing tailings facility is scheduled to be filled as of Q1 2018, at which point additional storage will be required. 

Dia Bras has permitted additional tailings storage on site to take on additional tailings in early 2018. Subsequent to this, additional
areas on previously permitted and dried tailing facilities as well as upstream from the latest dam and tailings impoundment are in the permitting process. All three of these areas combined should allow up to 4 years of capacity using filtered stack
tails deposition. Studies are underway to complete assessment of the dry stack option, and SRK understands that Dia Bras is already scheduling construction. 

  
  

					
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	19	Market Studies and Contracts 

  

	19.1	Introduction 

 This section of the report will present the market assumptions used
for the definition of the disclosed resources and also discuss all contracts held by the Project that cover the sales of the various concentrates and metals produced by the Mine. 

The market studies combined with the contracts information should present the reader with enough information to assess how much revenue
the Mine can potentially yield. 
  

	19.2	Market Studies 

 No specific market study was produced for this report, as reserves
are not disclosed here. Nonetheless, SRK subscribes to a number of market forecast analysts and prepares a consensus market forecast analysis based on the information provided by these subscriptions. 

This Mine produces lead and zinc concentrates yielding payable quantities of gold and silver, the sections below will disclose SRK’s
consensus market forecast for each of these metals based on information available for Q1 2017, with an effective date of March 20, 2017. All price analysis here presented are based on a Free-On-Board (FOB) basis, which, on the case of this
Project, can be considered as loaded at the mine gate. SRK notes that the commodity pricing for the calculation of cut-off grades in the mineral resource statement has been provided by Sierra Metals, and approximates what they internally use for
their own calculations. 
  

	19.2.1	 Gold 

 The spot price of gold, as of March 20, 2017, is US$1,234/oz. The
consensus market forecast here presented is based on the data provided by nine different analysts, where the highest long-term price projection from these professionals is US$1,300/oz and the lowest is US$778/oz. 

The graph below combines the data from these nine analysts to produce an average price curve for this precious metal and an effective
long-term price of US$1,180/oz. This is the price that SRK internally considers for the disclosure of ore reserves, in the case of resources disclosure a premium of 30% is considered, bringing the price to US$1,530/oz. 

The prices here presented are for 99.9% pure gold and do not consider the effect of transportation to market, smelting and refining
charges, payability factors, price participation and penalties, these will be discussed in the Contracts sections. 

  
  

					
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 Source: SRK, 2017 

Figure 19-1: Gold Price Curve and Long-Term Price 
  

	19.2.2	Silver 

 The spot price of silver, as of March 20, 2017, is US$17.40/oz. The
consensus market forecast here presented is based on the data provided by eight different analysts, where the highest long-term price projection from these professionals is US$20.00/oz and the lowest is US$10.94/oz. 

The graph below combines the data from these eight analysts to produce an average price curve for this precious metal and an effective
long-term price of US$19.00/oz. This is the price that SRK internally considers for the disclosure of ore reserves, in the case of resources disclosure a premium of 30% is considered, bringing the price to US$24.75/oz. 

The prices here presented are for 99.9% pure silver and do not consider the effect of transportation to market, smelting and refining
charges, payability factors, price participation and penalties, these will be discussed in the Contracts sections. 

  
  

					
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 Source: SRK, 2017 

Figure 19-2: Silver Price Curve and Long-Term Price 
  

	19.2.3	Lead 

 The spot price of lead, as of March 20, 2017, is US$1.03/lb
(US$2,281/t). The consensus market forecast here presented is based on the data provided by ten different analysts, where the highest long-term price projection from these professionals is US$0.99/lb (US$2,178/t) and the lowest is US$0.55/lb
(US$1,207/t). 
 The graph below combines the data from these ten analysts to produce an average price curve for this base metal and an
effective long-term price of US$0.88/lb (US$1,950/t). This is the price that SRK internally considers for the disclosure of ore reserves, in the case of resources disclosure a premium of 30% is considered, bringing the price to US$1.14/lb
(US$2,550/t). 
 The prices here presented are for pure lead metal and do not consider the effect of transportation to market, smelting
and refining charges, payability factors, price participation and penalties, these will be discussed in the Contracts sections. 

  
  

					
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 Source: SRK, 2017 

Figure 19-3: Lead Price Curve and Long-Term Price 
  

	19.2.4	Zinc 

 The spot price of zinc, as of March 20, 2017, is US$1.30/lb
(US$2,861/t). The consensus market forecast here presented is based on the data provided by nine different analysts, where the highest long-term price projection from these professionals is US$1.22/lb (US$2,692/t) and the lowest is US$0.80/lb
(US$1,765/t). 
 The graph below combines the data from these nine analysts to produce an average price curve for this base metal and
an effective long-term price of US$0.98/lb (US$2,150/t)). This is the price that SRK internally considers for the disclosure of ore reserves, in the case of resources disclosure a premium of 30% is considered, bringing the price to US$1.27/lb
(US$2,800). 
 The prices here presented are for pure zinc metal and do not consider the effect of transportation to market, smelting
and refining charges, payability factors, price participation and penalties, these will be discussed in the Contracts sections. 

  
  

					
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 Source: SRK, 2017 

Figure 19-1: Zinc Price Curve and Long-Term Price 
  

	19.3	Contracts 

 SRK was provided with signed contracts that provide the terms and
conditions for the sales of all lead and zinc concentrates produced by the Mine. These contracts establish the point of sale, quantities, qualities, basis of price, payment conditions, charges and penalties associated with the sales of these
concentrates. Both documents have the same validity of two years, which is the entirety of 2016 and 2017, and provide support for the sales of the whole quantities of concentrates produced by the Project. The following sections present the details
of these contracts and the terms governing the sales of these two concentrates. 
  

	19.3.1	 Lead Concentrate 

Delivery, Quantity and Quality 

The contract establishes the purchase of an estimated total production of 6,200 dry metric tons (+-10%) over the period of one year.
Approximately 520 dry metric tons of concentrate will be sold and delivered every month of the contract validity. The concentrate delivery is established as Delivery at Place (DAP) as defined by Incoterms 2010, which means that the mine is
responsible for all cost and liability of the quantities sold until the products reach a warehouse or point of destination chosen by the buyer. Delivery is established to a specific region of the country of Mexico. The contracted quality of the lead
concentrate is summarized in Table 19-1. 

  
  

					
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 Table 19-1: Lead Concentrate Contracted
Quality 
  

																									
	Item	 	Value	 	 	Unit	 	  	 	 	  	 	 	  	 	 	  	 	 
	Pb	 	 	min. 15	 	 	 	%	 	  				  				  				  			
	Au	 	 	2-30	 	 	 	g/t	 	  				  				  				  			
	Ag	 	 	3,000-7,000	 	 	 	g/t	 	  				  				  				  			
	Zn	 	 	10-20	 	 	 	%	 	  				  				  				  			
	Cu	 	 	1-5.5	 	 	 	%	 	  				  				  				  			
	Fe	 	 	10-18	 	 	 	%	 	  				  				  				  			
	Mn	 	 	0.3-0.6	 	 	 	%	 	  				  				  				  			
	As	 	 	0.10-0.45	 	 	 	%	 	  				  				  				  			
	Sb	 	 	0.15-0.30	 	 	 	%	 	  				  				  				  			
	Bi	 	 	0.03-0.06	 	 	 	%	 	  				  				  				  			
	Sb	 	 	18-22	 	 	 	%	 	  				  				  				  			

 Source: Sierra Metals, 2017 

Price, Payment, Charges and Penalties 

Payment is defined as the sum of the payment of all payable metals contained in the concentrate minus deduction factors, charges and
penalties associated with their processing and recovery. 
 Lead payment is subject to a 95% factor and a minimum deduction of 3
percent units, its considered price if defined as the LME Cash Settlement Price for Standard Lead in US$, as published in the London Metal Bulletin average over the Quotational Period. 

Silver payment is subject to a 95% factor and a minimum deduction of 50 grams per ton, its considered price is defined as LMBA Silver
Price in US$, as published in the London Metal Bulletin average over the Quotational Period. 
 Gold payment is subject to a 95% factor
and a minimum deduction of 1.5 grams per ton, its considered price is defined as Daily Mean of the Morning and Afternoon LMBA Gold Price in US$, as published in the London Metal Bulletin average over the Quotational Period. 

A treatment charge of US$230/t will be applied to the dry mass of concentrate, which is based on a lead price of US$1,725/t, an increment
of US$0.16 for every dollar increase from the lead prices of US$1,725/t to US$1,850/t, and an increment of US$0.18 for every dollar increase for lead prices over US$1,850/t are also due. 

A silver refining charge of US$1.50 for every troy ounce of payable silver will be deduced, this charge will be increased by US$0.11 for
every US$ over the defined base price. Base prices are defined as US$16.00/oz for 2016 and US$17.00/oz for 2017. A gold refining charge of US$15.00 for every troy ounce of payable gold will be deduced. 

Penalties are defined at a prorated basis as the following: 
  

	 	●	 	 Zinc: US$3.00 for every percent point over 14%; 

 

	 	●	 	 Arsenic: US$2.50 for every 0.10% that exceeds 0.30% until the maximum grade of 1.0%. Every 0.10% over 1.0% will be
subject to a penalty of US$3.50; 

  

	 	●	 	 Antimony: US$2.50 for every 0.10% that exceeds 0.30% until the maximum grade of 1.0%. Every 0.10% over 1.0% will be
subject to a penalty of US$3.50; 

  

	 	●	 	 Lead: US$3.00 for every percent point below the minimum grade of 15%; and 

  
  

					
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	 	●	 	 Silica: US$3.00 for every 1% of silica grade above the maximum grade of 15%. 

 

	19.3.2	Zinc Concentrate 

 Delivery, Quantity and Quality 

The contract establishes the purchase of an estimated total production of 2,000 wet metric tons (+-10%) over the period of one year.
Approximately 170 wet metric tons of concentrate will be sold and delivered every month of the contract validity. The concentrate delivery is established as Delivery at Place (DAP) as defined by Incoterms 2010, which means that the mine is
responsible for all cost and liability of the quantities sold until the products reach a warehouse or point of destination chosen by the buyer. Delivery is established to a specific region of the country of Mexico. The contracted quality of the lead
concentrate is summarized in the table below. 
 Table 19-1: Zinc Concentrate Contracted Quality 

 

																									
	Item    	 	Value	 	 	Unit	 	  	 	 	  	 	 	  	 	 	  	 	 
	Zn	 	 	53.09	 	 	 	%	 	  				  				  				  			
	Pb	 	 	1.14	 	 	 	%	 	  				  				  				  			
	Ag	 	 	350	 	 	 	g/t	 	  				  				  				  			
	Zn	 	 	0.4	 	 	 	g/t	 	  				  				  				  			

 Source: Sierra Metals, 2017 

Price, Payment, Charges and Penalties 

Payment is defined as the sum of the payment of all payable metals contained in the concentrate minus deduction factors, charges and
penalties associated with their processing and recovery. 
 Zinc payment is subject to a 85% factor and a minimum deduction of 8
percent units, its considered price if defined as the LME Cash Settlement Price for Special High Grade Zinc in US$, as published in the London Metal Bulletin average over the Quotational Period. 

Silver payment is subject to a deduction of 3.5 ounces per metric ton and a 70% factor of the remaining metal balance, its considered
price is defined as LMBA Silver Price in US$, as published in the London Metal Bulletin average over the Quotational Period. 
 A
treatment charge of US$225/t will be applied to the dry mass of concentrate, which is based on a zinc price of US$1,600/t, an increment of US$0.18 for every dollar increase from the aforementioned base price is also due. 

Penalties are defined at a prorated basis as the following: 
  

	 	●	 	 Silicon Dioxide: US$1.50 for every percent point over 5% and up to 8%, US$2.50 for every percent point over 8% and up to
12%, and US$4.00 for every percent point over the 12%; and 

  

	 	●	 	 Cadmium: US$2.00 for every 0.10% over the grade of 0.30%. 

  
  

					
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	20	Environmental Studies, Permitting and Social or Community Impact 

  

	20.1	Environmental Studies and Background Information 

 SRK’s environmental
specialist did not conduct a site visit of the Cusi Mine or Malpaso Mill operations. As such, the following information is predicated on a review of available documentation and direct communications with the operator. 

 

	20.2	Environmental Studies and Liabilities 

 The Cusi Project area is located within the
municipality of Cusihuiriachic in the central portion of Chihuahua State, Mexico, approximately 135 km from the City of Chihuahua. The Project area encompasses 11,657 hectares over a range of elevation of 1,950 to 2,460 meters above sea level (masl)
in the Sierra Madre Occidental Mountain Range. Details of environmental studies completed for these operations was not available for this review. 

Based on communications with representatives from Sierra Metals, it does not appear that there are currently any known environmental
issues that could materially impact the extraction and beneficiation of mineral resources or reserves. However, given the pre-regulation vintage of the original tailings storage facilities (piles), the likelihood is high that these facilities are
not underlain by low-permeability liners, increasing the risk of a long-term liability of metals leaching and groundwater contamination. Sierra Metals intends to cover these facilities during decommissioning in order to minimize this risk.
(Gustavson, 2014) 
  

	20.3	Environmental Management 

  

	20.3.1	 Tailings Management 

Tailings generated from the milling operations are stored in two tailings piles in the vicinity of the Malpaso Mill. SRK is uncertain if
these older disposal areas are underlain by low-permeability liner material, as the Malpaso Mill has been in operation since the 1970s, prior to the promulgation of environmental laws governing extractive mineral wastes. At the current time, no
environmental permit is necessary for operation of the Malpaso Mill. At closure, it is Sierra Metals’ intent to cover these tailings piles. 

In 2015, Sierra Metals initiated construction of a new tailings storage facility. The new impoundment is located immediately adjacent to
the former tailings pile(s). SRK understands that the expanded capacity of the new impoundment should allow an additional four years of operational capacity at the current processing rates. In the dry climate of the Chihuahuan desert, the need for
additional water resources has led Sierra Metals to consider dry-stack tailings disposal in this new facility. This new impoundment required permitting under the current regulatory regime, including environmental impact analyses. 

 

	20.3.2	Waste Rock Management 

 Waste rock generated from the underground workings at
Promontorio and Santa Eduwiges is deposited near the entrances of the respective mines. Management of these waste rock piles does not require permits. 

  
  

					
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	20.3.3	Geochemistry 

 Geochemical characterization data for the waste, ore and tailings
generated at the Cusi Mine and Malpaso Mill, respectively, were not available for this review. 
  

	20.4	Mexican Environmental Regulatory Framework 

  

	20.4.1	Mining Law and Regulations 

 Mining in Mexico is regulated through the Mining Law,
approved on June 26, 1992 and amended by decree on December 24, 1996, Article 27 of the Mexican Constitution. 
 Article 6 of
the Mining Law states that mining exploration; exploitation and beneficiation are public utilities and have preference over any other use or utilization of the land, subject to compliance with laws and regulations. 

Article 19 specifies the right to obtain easements, the right to use the water flowing from the mine for both industrial and domestic
use, and the right to obtain a preferential right for a concession of the mine waters. 
 Articles 27, 37 and 39 rule that exploration;
exploitation and beneficiation activities must comply with environment laws and regulations and should incorporate technical standards in matters such as mine safety, ecological balance and environmental protection. 

The Mining Law Regulation of February 15, 1999 repealed the previous regulation of March 29, 1993. Article 62 of the regulation
requires mining projects to comply with the General Environmental Law, its regulations, and all applicable norms. 
  

	20.4.2	General Environmental Laws and Regulations 

 Mexico’s environmental protection
system is based on the General Environmental Law known as Ley General del Equilibrio Ecológico y la Protección al Ambiente - LGEEPA (General Law of Ecological Equilibrium and the Protection of the Environment), approved on
January 28, 1988 and updated December 13, 1996. 
 The Mexican federal authority over the environment is the
Secretaría de Medio Ambiente y Recursos Naturales - SEMARNAT (Secretariat of the Environment and Natural Resources). SEMARNAT, formerly known as SEDESOL, was formed in 1994, as the Secretaría de Medio Ambiente Recursos
Naturales y Pesca (Secretariat of the Environment and Natural Resources and Fisheries). On November 30th, 2000, the Federal Public Administration Law was amended giving rise to SEMARNAT.
The change in name corresponded to the movement of the fisheries subsector to the Secretaría de Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación - SAGARPA (Secretariat of Agriculture, Livestock, Rural
Development, Fisheries and Food), through which an increased emphasis was given to environmental protection and sustainable development. 

SEMARNAT is organized into a number of sub-secretariats and the following main divisions: 

 

	 	●	 	 INE – Instituto Nacional de Ecología (National Institute of Ecology), an entity responsible for planning,
research and development, conservation of national protection areas and approval of environmental standards and regulations. 

  
  

					
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	 	●	 	 PROFEPA - Procuraduría Federal de Protección al Ambiente (Federal Attorney General for the Protection of
the Environment) responsible for law enforcement, public participation and environmental education. 

  

	 	●	 	 CONAGUA – Comisión Nacional del Agua (National Water Commission), responsible for assessing fees related to
water use and discharges. 

  

	 	●	 	 Mexican Institute of Water Technology. 

 

	 	●	 	 CONANP – Comisión Nacional de Areas Naturales Protegidas (National Commission of Natural Protected Areas).

 The federal delegation or state agencies of SEMARNAT are known as Consejo Estatal de Ecología –
COEDE (State Council of Ecology). 
 PROFEPA is the federal entity in charge of carrying out environmental inspections and negotiating
compliance agreements. Voluntary environmental audits, coordinated through PROFEPA, are encouraged under the LGEEPA. 
 Under LGEEPA, a
number of regulations and standards related to environmental impact assessment, air and water pollution, solid and hazardous waste management and noise have been issued. LGEEPA specifies compliance by the states and municipalities, and outlines the
corresponding duties. 
 Applicable regulations under LGEEPA include: 

 

	 	●	 	 Regulation to LGEEPA on the Matter of Environmental Impact Evaluations, May 30, 2000; 

 

	 	●	 	 Regulation to LGEEPA on the Matter of Prevention and Control of Atmospheric Contamination, November 25, 1988;

  

	 	●	 	 Regulation to LGEEPA on the Matter of Environmental Audits, November 29, 2000; 

 

	 	●	 	 Regulation to LGEEPA on Natural Protected Areas, November 20, 2000; 

 

	 	●	 	 Regulation to LGEEPA on Protection of the Environment Due to Noise Contamination, December 6, 1982;

  

	 	●	 	 Regulation to LGEEPA on the Matter of Hazardous Waste, November 25, 1988. 

Mine tailings are listed in the Regulation to LGEEPA on the Matter of Hazardous Waste. Norms include: 

 

	 	●	 	 Norma Oficial Mexicana (NOM)-CRP-001-ECOL, 1993, which establishes the characteristics of hazardous wastes, lists the
wastes, and provides threshold limits for determining its toxicity to the environment. 

  

	 	●	 	 NOM-CRP-002-ECOL, 1993 establishes the test procedure for determining if a waste is hazardous. 

 

	 	●	 	 On September 13, 2004, SEMARNAT published the final binding version of its new standard on mine tailings and mine
tailings dams, NOM-141-SEMARNAT-2003. The new rule has been renamed since the draft version was published in order to better reflect the scope of the new regulation. This NOM sets out the procedure for characterizing tailings, as well as the
specifications and criteria for characterizing, preparing, building, operating, and closing a mine tailings dam. This very long (over 50 pages) and detailed standard sets out the new criteria for characterizing tailings as hazardous or
non-hazardous, including new test methods. A series of technical annexes address everything from waste classification to 

  
  

					
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construction of the dams. The rule is applicable to all generators of non-radioactive tailings and to all dams constructed after this NOM goes into effect. 

 

	 	●	 	 Existing tailings dams will have to comply with the new standards on post-closure. The NOM formally went into effect
sixty (60) days after its publication date. 

 PROFEPA “Clean Industry” 

The Procuraduría Federal de Protección al Ambiente (the enforcement portion of Mexico’s Environmental Agency,
referred to as PROFEPA), administers a voluntary environmental audit program and certifies businesses with a “Clean Industry” designation if they successfully complete the audit process. The voluntary audit program was established by
legislative mandate in 1996 with a directive for businesses to be certified once they meet a list of requirements including the implementation of international best practices, applicable engineering and preventative corrective measures. 

In the Environmental Audit, firms contract third-party PROFEPA-accredited auditors, considered to be experts in fields such as risk
management and water quality, to conduct the audit process. During this audit, called “Industrial Verification,” auditors determine if facilities are in compliance with applicable environmental laws and regulations. If a site passes, it
receives designation as a “Clean Industry” and is able to utilize the Clean Industry logo as a message to consumers and the community that it fulfills its legal responsibilities. If a site does not pass, the government can close part, or
all of a facility if it deems it necessary. However, PROFEPA wishes to avoid such extreme actions and instead prefers to work with the business to create an “Action Plan” to correct problem areas. 

The Action Plan is established between the government and the business based on suggestions of the auditor from the Industrial
Verification. It creates a time frame and specific actions a site needs to take in order to be in compliance and solve existing or potential problems. An agreement is then signed by both parties to complete the process. When a facility successfully
completes the Action Plan, it is then eligible to receive the Clean Industry designation. 
 PROFEPA believes this program fosters a
better relationship between regulators and industry, provides a green label for businesses to promote themselves and reduces insurance premiums for certified facilities. The most important aspect, however, is the assurance of legal compliance
through the use of the Action Plan, a guarantee that ISO 14001 and other Environmental Management Systems cannot make. 
 According
to Sierra Metals, the company has initiated the PROFEPA “Clean Industry” application process for the Malpaso Mill. The site is currently preparing for the third-party external audit, and anticipated obtaining the certification in 2017.

 SIGA 

Many companies in Mexico adopt the corporate policy, Sistema Integral de Gestión Ambiental (SIGA) (Integral System of
Environmental Management), for the protection of the environmental and prevention of adverse environmental impacts. SIGA emphasizes a commitment to environmental protection along with sustainable development, as well as a commitment to strict
adherence to environmental legislation and regulation and a process of continuous review and improvement of company policies and programs. The companies continue to improve their commitments to 

  
  

					
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environmental stewardship through the use of the latest technologies that are proven, available, and economically viable. 

SRK is not aware if the Cusi operations participate in the SIGA program at this time, but recommends that they do so. 

Other environmental/social industry programs that the mine could participate in include: 

 

	 	●	 	 Seeking accreditation under the voluntary self-management program for health and safety with the Mexican Department of
Labor and Social Welfare (PASST); and 

  

	 	●	 	 Strive to receive the Social Responsible Company (ESR) Distinctive, which is awarded by the Mexican Center of
Philanthropy. 

  

	20.4.3	Other Laws and Regulations 

 Water Resources 

Water resources are regulated under the National Water Law, December 1, 1992 and its regulation, January 12, 1994 (amended by
decree, December 4, 1997). In Mexico, ecological criteria for water quality is set forth in the Regulation by which the Ecological Criteria for Water Quality are Established, CE-CCA-001/89, dated December 2, 1989. These criteria are used
to classify bodies of water for suitable uses including drinking water supply, recreational activities, agricultural irrigation, livestock use, aquaculture use and for the development and preservation of aquatic life. The quality standards listed in
the regulation indicate the maximum acceptable concentrations of chemical parameters and are used to establish wastewater effluent limits. Ecological water quality standards defined for water used for drinking water, protection of aquatic life,
agricultural irrigation and irrigation water and livestock watering are listed. 
 Discharge limits have been established for
particular industrial sources, although limits specific to mining projects have not been developed. NOM-001-ECOL-1996, January 6, 1997, establishes maximum permissible limits of contaminants in wastewater discharges to surface water and
national “goods” (waters under the jurisdiction of the CONAGUA). 
 Daily and monthly effluent limits are listed for
discharges to rivers used for agricultural irrigation, urban public use and for protection of aquatic life; for discharges to natural and artificial reservoirs used for agricultural irrigation and urban public use; for discharges to coastal waters
used for recreation, fishing, navigation and other uses and to estuaries; and discharges to soils and to wetlands. Effluent limitations for discharges to rivers used for agricultural irrigation, for protection of aquatic life and for discharges to
reservoirs used for agricultural irrigation have also been established. 
 The Cusi operations currently consume water recovered
from the underground workings for process water and support of surface operations. Fresh make-up water is sourced from a well located approximately two kilometers away on private property. A contract with the landowner allows Cusi to pump water to a
surface storage tank, and subsequently to the plant site for use. Make-up water consumption is approximately 1.0 m3/t of ore. Potable water is trucked in from off site. 

Ecological Resources 

In 2000, the National Commission of Natural Protected Areas (CONANP) (formerly CONABIO, the National Commission for Knowledge and Use of
Biodiversity) was created as a decentralized entity 

  
  

					
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of SEMARNAT. As of November 2001, 127 land and marine Natural Protected Areas had been proclaimed, including biosphere reserves, national parks, national monuments, flora and fauna reserves, and
natural resource reserves. 
 Ecological resources are protected under the Ley General de Vida Silvestre (General Wildlife Law).
(NOM)-059-ECOL-2000 specifies protection of native flora and fauna of Mexico. It also includes conservation policy, measures and actions, and a generalized methodology to determine the risk category of a species. 

Other ecological laws and regulations that may affect the Cusi operations include: 

 

	 	●	 	 Forest Law, December 22, 1992, amended November 31, 2001, and the Forest Law Regulation, September 25,
1998. 

  

	 	●	 	 Fisheries Law, June 25, 1992, and the Fisheries Law Regulations, September 29, 1999. 

 

	 	●	 	 Federal Ocean Law, January 8, 1986 

Regulations Specific to Mining Projects 

All aspects related to Mine Safety and Occupational Health are regulated in Mexico by
NOM-023-STPS-2003 issued by the Secretariat of Labor. Appendix D of this regulation refers specifically to ventilation for underground mines, such as Bolívar Mine, and establishes all the requirement
underground mines should comply with, which are subject of regular inspections. 
 New tailings dams are subject to the requirements of
NOM-141-SEMARNAT-2003, Standard that Establishes the Requirements for the Design, Construction and Operation of Mine Tailings Dams. Under this regulation, studies of hydrogeology, hydrology, geology and climate must be completed for sites considered
for new tailings impoundments. If tailings are classified as hazardous under NOM-CRP-001-ECOL/93, the amount of seepage from the impoundment must be controlled if the facility has the potential to affect groundwater. Environmental monitoring of
groundwater and tailings pond water quality and revegetation requirements is specified in the regulations. 

NOM-120-ECOL-1997, November 19, 1998 specifies environmental protection measures for mining explorations activities in
temperate and dry climate zones that would affect xerophytic brushwood (matorral xerofilo), tropical (caducifolio) forests, or conifer or oak (encinos) forests. The regulation applies to “direct” exploration projects
defined as drilling, trenching, and underground excavations. A permit from SEMARNAT is required prior to initiating activities and SEMARNAT must be notified when the activities have been completed. Development and implementation of a Supervision
Program for environmental protection and consultation with CONAGUA is required if aquifers may be affected. Environmental protection measures are specified in the regulations, including materials management, road construction, reclamation of
disturbance and closure of drillholes. Limits on the areas of disturbance by access roads, camps, equipment areas, drill pads, portals, trenches, etc. are specified. 
  

	20.4.4	Expropriations 

 Expropriation of ejido and communal properties is subject to the
provisions of agrarian laws. 
  

	20.4.5	NAFTA 

 Canada, the United States and Mexico participate in the North American Free
Trade Agreement (NAFTA). NAFTA addresses the issue of environmental protection, but each country is responsible 

  
  

					
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for establishing its own environmental rules and regulations. However, the three countries must comply with the treaties between themselves; and the countries must not reduce their environmental
standards as a means of attracting trade. At this time, SRK is not aware of any impacts to the Cusi operations from the requirements of NAFTA. 
  

	20.4.6	International Policy and Guidelines 

 International policies and/or guidelines that
may be relevant to the Bolívar Mine include: 
  

	 	●	 	 International Finance Corporation (Performance Standards) – social and environmental management planning; and

  

	 	●	 	 World Bank Guidelines (Operational Policies and Environmental Guidelines). 

These items were not specifically identified and included in SRK’s environmental scope of work; however, given that Sierra Metals is
a Canadian entity, general corporate policy tends to be in compliance with IFC, World Bank and Equator Principles. 
 SRK recommends
that a more comprehensive audit of the Cusi Mine be conducted with respect to these guidelines and performance standards. 
  

	20.4.7	Required Permits and Status 

 According to Sierra Metals, the Cusi Mine and Malpaso
Mill are exempt from a number of permit requirements since the operations predate the environmental laws. Sierra has received formal recognition from SEMARNAT of the permit exemption for the Malpaso Mill and the Cusi Mine operations. 

The required permits for continued operation at the Cusi Mine and Malpaso Mill, including exploration of the site, have been obtained.
SRK has not independently verified the current status of all the site permits. At this time, SRK has not been made aware of any outstanding permits or any non-compliance issues that would affect the ability of the operator to extract rock, process
ore, and/or disposal of tailings. The following information regarding the permits was provided by Sierra Metals. 

  
  

					
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 Table 20-1: Permit and Authorization Requirements for the
Cusi Mine and Malpaso Mill 
  

															
	Permit	 	  	 	  	 	Agency	 	  	 	  	 	 Approval Date
 (or
anticipated Approval Date)
	 	  
	Mining Law Concession	 	 	 	 	 	President via the Minister of Commerce and Industrial and the General Directorate of Mines Promotion - Mexican Secretaría de Economía	 	 	 	 	 	See Table 20-2	 	 
	Manifestación de Impacto Ambiental (MIA) - Environmental Impact Statement	 	 	 	 	 	Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT) - Secretariat of the Environment and Natural Resources	 	 	 	 	 	 The following concessions are exempt from having to apply for the MIA, according to the document SG.IR.08-20141
/ 93 from SEMARNAT dated May 2014 that recognizes the exception because Dia Bras proved that the mining concessions operated prior to the 1988 regulations. Any other concession will need a MIA or prove operation prior to this date:

• San Bartolo (Title 150395),

• La India (Title 150569),

• Promontorio (Title 163582),

• La Consolidada (Title 165102),

• La Perla (Title 165968),

• El Milagro (Title 163580),

• La Ilusión (Title 166611),

• La Rumorosa (Title 163512),

• Los Pelones (Title 166981),

• La Hermana de la India (Title 180030),

• Nueva Santa María (Title 182002),

• La Gloria (Title 179400),

• La Perlita (Title 163565).
	 	 
	Análisis de Riesgo - Risk Analysis Report	 	 	 	 	 	Dirección Estatal de Proteccion Civil Chihuahua (with assistance from external consultant)	 	 	 	 	 	 A risk analysis is in process by La dirección de Protección Civil de Gobierno del estado de
Chihuahua. It is focused on the security in the mine and the use of explosives. Resolution is expected in the coming weeks;
 In August 2013, an external consultant
(Rodrigo de la Garza Aguillar) presented a geohydrological and geotechnical study on the San Bartolo Mine; and
 In December 2016 an external constant (Ing. Alfredo
Rodriguez) presented a Geo-hydrological study for the San Bartolo and Santa Eduwiges mines.
	 	 
	Operating License (and Air Quality Permit)	 	 	 	 	 	SEMARNAT	 	 	 	 	 	In the Cusihuiriachi mines, there are no atmospheric emissions. At the Malpaso mill, SEMARNAT issued a Licencia Unica Ambiental (unique environmental license) dated August 2013.	 	 
	Cambio de Uso de Suelo - Land Use Change Permit	 	 	 	 	 	SEMARNAT	 	 	 	 	 	 The following concessions are exempt from having to apply for the Cambio de Uso de Suelo, according to
the document SG.IR.08-20141 / 93 from SEMARNAT dated May 2014 that recognizes the exception because Dia Bras proved that the mining concessions operated prior to the 1988 regulations. Any other concession will need the Cambio de Uso de Suelo
permit or prove that it was in operation prior to that year:
 • San Bartolo (Title 150395),

• La India (Title 150569),

• Promontorio (Title 163582),

• La Consolidada (Title 165102),

• La Perla (Title 165968),

• El Milagro (Title 163580),

• La Ilusión (Title 166611),

• La Rumorosa (Title 163512),

• Los Pelones (Title 166981),

• La Hermana de la India (Title 180030),

• Nueva Santa María (Title 182002),

• La Gloria (Title 179400),

• La Perlita (Title 163565).
	 	 
	Concession Title for Underground Water Extraction	 	 	 	 	 	Comisión Nacional del Agua (CONAGUA) - National Water Commission)	 	 	 	 	 	Mine dewatering is regulated under the Mining Law and no permit is required to extract mine water.	 	 
	Wastewater Discharge Permit	 	 	 	 	 	CONAGUA	 	 	 	 	 	 For the Malpaso plant, a discharge permit

(02CHI141178/34EMDL15) was issued in August 2015.
	 	 

  
  

					
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	Permit	 	  	 	  	 	Agency	 	  	 	  	 	 Approval Date
 (or
anticipated Approval Date)
	 	  
	 	 	 	 	 	 	 	 	 	 	 	 	For the Cusi mines, CONAGUA documents No B00.E.22.4.-420 and No B00.E.22.4.-419, dated November 12, 2014, exempt Dia Bras from requiring discharge permits, as the water does not contain
contaminants or is used in industrial processes.	 	 
	Hazardous Waste Registration	 	 	 	 	 	SEMARNAT	 	 	 	 	 	The last update to this registration was November 04, 2016.	 	 
	Explosives Use Permit	 	 	 	 	 	Secretaría de la Defensa Nacional (SEDENA)	 	 	 	 	 	Permit Number 4599 – last updated December 1, 2016. Expires in 1 year.	 	 

 Source: Permit information provided by Sierra Metals, and not independently verified by SRK 

  
  

					
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 Table 20-2: Cusi Mine Concessions 

 

																									
	Holding Company	  	Name	 	Type	 	Area (ha)	 	 	File No.	 	 	Title No.	 	 	Enrolled	 	 	Expiry	 
	 Dia Bras Mexicana
	  	Base*	 	Exploration    	 	 	23.8090	 	 	 	016/30975	 	 	 	217584	 	 	 	8/6/2002	 	 	 	8/5/1952	 
	 Dia Bras Mexicana
	  	Flor de Mayo*	 	Exploration	 	 	14.4104	 	 	 	016/32699	 	 	 	224700	 	 	 	5/31/2005	 	 	 	5/30/1955	 
	 Dia Bras Mexicana
	  	Base 1	 	Exploration	 	 	3.9276	 	 	 	016/33729	 	 	 	227657	 	 	 	7/28/2006	 	 	 	7/27/1956	 
	 Dia Bras Mexicana
	  	Santa Rita	 	Exploration	 	 	16.6574	 	 	 	016/34624	 	 	 	229081	 	 	 	3/6/2007	 	 	 	3/5/1957	 
	 Dia Bras Mexicana
	  	Sayra I	 	Exploration	 	 	7.2195	 	 	 	016/34623	 	 	 	229064	 	 	 	2-3-20070	 	 	 	3/1/1957	 
	 Dia Bras Mexicana
	  	San Miguel	 	Exploration	 	 	96.2748	 	 	 	016/33730	 	 	 	229166	 	 	 	3/21/2007	 	 	 	3/20/1957	 
	 Dia Bras Mexicana
	  	San Miguel I	 	Exploration	 	 	98.6218	 	 	 	016/33731	 	 	 	228484	 	 	 	11/24/2006	 	 	 	11/23/1956	 
	 Dia Bras Mexicana
	  	San Miguel II	 	Exploration	 	 	100.00	 	 	 	016/33732	 	 	 	227363	 	 	 	6/14/2006	 	 	 	6/13/1956	 
	 Dia Bras Mexicana
	  	San Miguel III	 	Exploration	 	 	100.00	 	 	 	016/33733	 	 	 	227364	 	 	 	6/14/2006	 	 	 	6/13/1956	 
	 Dia Bras Mexicana
	  	San Miguel IV	 	Exploration	 	 	96.9850	 	 	 	016/33734	 	 	 	227485	 	 	 	6/27/2006	 	 	 	6/26/1956	 
	 Dia Bras Mexicana
	  	San Miguel VI	 	Exploration	 	 	98.9471	 	 	 	016/34642	 	 	 	228058	 	 	 	9/29/2006	 	 	 	9/28/1956	 
	 Dia Bras Mexicana
	  	San Miguel VII	 	Exploration	 	 	52.6440	 	 	 	016/34640	 	 	 	229084	 	 	 	3/6/2007	 	 	 	3/5/1957	 
	 Dia Bras Mexicana
	  	Saira	 	Exploration	 	 	16.00	 	 	 	016/33735	 	 	 	227365	 	 	 	6/14/2006	 	 	 	6/13/1956	 
	 Dia Bras Mexicana
	  	Manuel	 	Exploration	 	 	100.00	 	 	 	016/33714	 	 	 	227360	 	 	 	6/14/2006	 	 	 	6/13/1956	 
	 Dia Bras Mexicana
	  	Santa Rita Fracc. I	 	Exploration	 	 	9.00	 	 	 	016/34624	 	 	 	229082	 	 	 	3/6/2007	 	 	 	3/5/1957	 
	 Dia Bras Mexicana
	  	Santa Rita Fracc. II  	 	Exploration	 	 	8.8141	 	 	 	016/34624	 	 	 	229083	 	 	 	3/6/2007	 	 	 	3/5/1957	 
	 Dia Bras Mexicana
	  	San Miguel V	 	Exploration	 	 	6.5328	 	 	 	016/34641	 	 	 	227984	 	 	 	9/26/2006	 	 	 	9/25/1956	 
	 Dia Bras Mexicana
	  	San Juan	 	Exploration	 	 	12.3587	 	 	 	016/31500	 	 	 	218657	 	 	 	12/3/2002	 	 	 	12/2/1952	 
	 Dia Bras Mexicana
	  	San Juan Fracc. A  	 	Exploration	 	 	0.1727	 	 	 	016/31500	 	 	 	218658	 	 	 	12/3/2002	 	 	 	12/2/1952	 
	 Dia Bras Mexicana
	  	 San Juan

Fracc. B
	 	Exploration	 	 	0.1469	 	 	 	016/31500	 	 	 	218659	 	 	 	12/3/2002	 	 	 	12/2/1952	 
	 Dia Bras Mexicana
	  	Norma	 	Exploration	 	 	12.2977	 	 	 	016/31700	 	 	 	218851	 	 	 	1/22/2003	 	 	 	1/21/1953	 
	 Dia Bras Mexicana
	  	Norma 2	 	Exploration	 	 	1.7561	 	 	 	016/31715	 	 	 	219283	 	 	 	2/25/2003	 	 	 	2/24/1953	 
	 Dia Bras Mexicana
	  	Cima	 	Exploration	 	 	9.9637	 	 	 	016/30957	 	 	 	217231	 	 	 	7/2/2002	 	 	 	7/1/1952	 
	 Dia Bras Mexicana
	  	Manuel 1 Fracc A	 	Exploration	 	 	1.1858	 	 	 	016/34849	 	 	 	229747	 	 	 	6/13/2007	 	 	 	6/12/1957	 
	 Dia Bras Mexicana
	  	Manuel 1 Fracc B	 	Exploration	 	 	1.3425	 	 	 	016/34849	 	 	 	229748	 	 	 	6/13/2007	 	 	 	6/12/1957	 
	 Dia Bras Mexicana
	  	Alma	 	Exploration	 	 	80.4612	 	 	 	Valid	 	 	 	227982	 	 	 	9/25/2006	 	 	 	9/25/1956	 
	 Dia Bras Mexicana
	  	San Bartolo	 	Exploitation	 	 	6.00	 	 	 	Valid	 	 	 	150395	 	 	 	9/30/1968	 	 	 	9/29/2018	 
	 Dia Bras Mexicana
	  	Marisa	 	Exploration	 	 	5.08	 	 	 	Valid	 	 	 	220146	 	 	 	6/17/2003	 	 	 	6/16/1953	 
	 Dia Bras Mexicana
	  	La India	 	Exploitation	 	 	15.76	 	 	 	Valid	 	 	 	150569	 	 	 	10/29/1968	 	 	 	10/27/2018	 
	 Dia Bras Mexicana
	  	Alma	 	Exploration	 	 	87.2041	 	 	 	Valid	 	 	 	227650	 	 	 	7/27/2006	 	 	 	7/27/1956	 
	 Dia Bras Mexicana
	  	Alma I	 	Exploration	 	 	106.00	 	 	 	Valid	 	 	 	226816	 	 	 	3/9/2006	 	 	 	3/9/1956	 
	 Dia Bras Mexicana
	  	Alma II	 	Exploration	 	 	91.00	 	 	 	Valid	 	 	 	227651	 	 	 	7/27/2006	 	 	 	7/27/1956	 
	 Dia Bras Mexicana
	  	Nueva Recompensa  	 	Exploitation	 	 	21.00	 	 	 	Valid	 	 	 	195371	 	 	 	9/15/1992	 	 	 	9/13/1942	 
	 Dia Bras Mexicana
	  	Monterrey	 	Exploitation	 	 	5.4307	 	 	 	Valid	 	 	 	183820	 	 	 	11/22/1988	 	 	 	11/21/1938	 
	 Dia Bras Mexicana
	  	Nueva Santa Marina  	 	Exploitation	 	 	16.00	 	 	 	Valid	 	 	 	182002	 	 	 	4/8/1988	 	 	 	4/7/1938	 
	 Dia Bras Mexicana
	  	San Ignacio	 	Exploitation	 	 	3.00	 	 	 	Valid	 	 	 	165662	 	 	 	11/28/1979	 	 	 	11/27/2029	 
	 Dia Bras Mexicana
	  	Promontorio	 	Exploitation	 	 	8.00	 	 	 	Valid	 	 	 	163582	 	 	 	10/30/1978	 	 	 	10/29/2028	 
	 Dia Bras Mexicana
	  	La Perla	 	Exploitation	 	 	15.00	 	 	 	Valid	 	 	 	165968	 	 	 	12/13/1979	 	 	 	12/12/2029	 
	 Dia Bras Mexicana
	  	La Perlita	 	Exploitation	 	 	10.00	 	 	 	Valid	 	 	 	163565	 	 	 	10/10/1978	 	 	 	10/9/2028	 
	 Dia Bras Mexicana
	  	Luís	 	Exploitation	 	 	3.1946	 	 	 	Valid	 	 	 	194225	 	 	 	12/19/1991	 	 	 	12/18/1941	 
	 Dia Bras Mexicana
	  	La Consolidada	 	Exploitation	 	 	22.00	 	 	 	Valid	 	 	 	165102	 	 	 	8/23/1979	 	 	 	8/22/2029	 
	 Dia Bras Mexicana
	  	La Doble Eufemia	 	Exploitation	 	 	9.00	 	 	 	Valid	 	 	 	188814	 	 	 	11/29/1990	 	 	 	11/28/1940	 
	 Dia Bras Mexicana
	  	La Gloria	 	Exploitation	 	 	10.00	 	 	 	Valid	 	 	 	179400	 	 	 	12/9/1986	 	 	 	12/8/1936	 
	 Dia Bras Mexicana
	  	La Indita	 	Exploration	 	 	9.9034	 	 	 	Valid	 	 	 	212891	 	 	 	2/13/2001	 	 	 	2/12/1949	 
	 Dia Bras Mexicana
	  	La Suerte	 	Exploration	 	 	10.5402	 	 	 	Valid	 	 	 	216711	 	 	 	5/28/2002	 	 	 	5/27/1952	 
	 Minera Cusi
	  	El Hueco	 	Exploitation	 	 	1.8379	 	 	 	Valid	 	 	 	172321	 	 	 	11/23/2003	 	 	 	11/23/1933	 
	 Dia Bras Mexicana
	  	El Presidente	 	Exploitation	 	 	8.1608	 	 	 	Valid	 	 	 	209802	 	 	 	8/9/1999	 	 	 	8/8/1949	 
	 Dia Bras Mexicana
	  	El Salvador	 	Exploitation	 	 	7.7448	 	 	 	Valid	 	 	 	190493	 	 	 	4/29/1991	 	 	 	4/28/1941	 
	 Dia Bras Mexicana
	  	Cusihuiriachic Dos	 	Exploitation	 	 	87.6748	 	 	 	Valid	 	 	 	220576	 	 	 	8/28/2003	 	 	 	8/27/1953	 
	 Dia Bras Mexicana
	  	La Bufa Chiquita	 	Exploitation	 	 	3.6024	 	 	 	Valid	 	 	 	220575	 	 	 	8/28/2003	 	 	 	8/27/1953	 
	 Dia Bras Mexicana
	  	Aguila	 	Exploration	 	 	4.2772	 	 	 	Valid	 	 	 	216262	 	 	 	4/23/2002	 	 	 	4/22/1952	 
	 Dia Bras Mexicana
	  	Año Nuevo	 	Exploration	 	 	12.00	 	 	 	Valid	 	 	 	192908	 	 	 	12/19/1991	 	 	 	12/18/1941	 
	 Dia Bras Mexicana
	  	Ampl. Nueva Josefina  	 	Exploitation	 	 	18.2468	 	 	 	Valid	 	 	 	177597	 	 	 	4/2/1986	 	 	 	3/31/1936	 
	 Dia Bras Mexicana
	  	El Milagro	 	Exploitation	 	 	26.8259	 	 	 	Valid	 	 	 	166580	 	 	 	6/27/1980	 	 	 	6/26/1930	 

  
  

					
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	Holding Company	  	Name	 	Type	 	Area (ha)	 	 	File No.	 	 	Title No.	 	 	Enrolled	 	 	Expiry	 
	 Dia Bras Mexicana
	  	Los Pelones	 	Exploitation    	 	 	16.3018	 	 	 	Valid	 	 	 	166981	 	 	 	8/5/1980	 	 	 	8/4/1930	 
	 Dia Bras Mexicana
	  	La Ilusión	 	Exploitation	 	 	6.00	 	 	 	Valid	 	 	 	166611	 	 	 	6/27/1980	 	 	 	6/26/1930	 
	 Dia Bras Mexicana
	  	La Hermana de la India  	 	Exploitation	 	 	13.1412	 	 	 	Valid	 	 	 	180030	 	 	 	3/23/1987	 	 	 	3/22/1937	 
	 Dia Bras Mexicana
	  	La Rumorosa	 	Exploitation	 	 	20.00	 	 	 	Valid	 	 	 	166612	 	 	 	6/27/1980	 	 	 	6/26/1930	 
	 Dia Bras Mexicana
	  	La Nueva Josefina	 	Exploitation	 	 	10.00	 	 	 	Valid	 	 	 	181221	 	 	 	9/11/1987	 	 	 	9/10/1937	 
	 Dia Bras Mexicana
	  	Mina Vieja	 	Exploitation	 	 	8.25	 	 	 	Valid	 	 	 	165742	 	 	 	12/11/1979	 	 	 	12/10/2029	 
	 Dia Bras Mexicana
	  	Margarita	 	Exploitation	 	 	14.00	 	 	 	Valid	 	 	 	165969	 	 	 	12/13/1979	 	 	 	12/12/2029	 
	 Minera Cusi
	  	Cusihuiriachic	 	Exploration	 	 	472.2626	 	 	 	Valid	 	 	 	240976	 	 	 	11/16/2012	 	 	 	11/15/1962	 
	 Dia Bras Mexicana
	  	CUSI-DBM	 	Exploration	 	 	4,716.6621	 	 	 	Valid	 	 	 	229299	 	 	 	4/3/2007	 	 	 	4/2/1957	 
	 Dia Bras Mexicana
	  	CUSI-DBM 02	 	Exploration	 	 	4,695.1748	 	 	 	Valid	 	 	 	232028	 	 	 	6/10/2008	 	 	 	6/9/1958	 
	 Dia Bras Mexicana
	  	Bronco 1 A	 	Exploration	 	 	55.6309	 	 	 	Valid	 	 	 	240329	 	 	 	5/23/2012	 	 	 	5/22/1962	 
	 Dia Bras Mexicana
	  	Bronco 1 B	 	Exploration	 	 	0.8801	 	 	 	Valid	 	 	 	240330	 	 	 	5/23/2012	 	 	 	5/22/1962	 
	 Dia Bras Mexicana
	  	Bronco 2	 	Exploration	 	 	7.5296	 	 	 	Valid	 	 	 	239311	 	 	 	12/13/2011	 	 	 	12/13/1961	 
	 Dia Bras Mexicana
	  	Bronco 3	 	Exploration	 	 	8.1186	 	 	 	Valid	 	 	 	243011	 	 	 	5/30/2014	 	 	 	5/29/1964	 
	 Dia Bras Mexicana
	  	Bronco 4	 	Exploration	 	 	0.5224	 	 	 	Valid	 	 	 	239312	 	 	 	12/13/2011	 	 	 	12/13/1961	 
	 Dia Bras Mexicana
	  	Bronco 5	 	Exploration	 	 	6.7121	 	 	 	Valid	 	 	 	239335	 	 	 	12/13/2011	 	 	 	12/13/1961	 
	 Dia Bras Mexicana
	  	Bronco 6	 	Exploration	 	 	9.00	 	 	 	Valid	 	 	 	239321	 	 	 	12/13/2011	 	 	 	12/13/1961	 
	 Dia Bras Mexicana
	  	Zapopa	 	Exploration	 	 	8.3867	 	 	 	Valid	 	 	 	240189	 	 	 	4/13/2012	 	 	 	4/12/1962	 
	 Minera Cusi
	  	La Mexicana	 	Exploration	 	 	2.00	 	 	 	Valid	 	 	 	165883	 	 	 	12/12/1979	 	 	 	12/13/1982	 

 Source: Concession information provided by Sierra Metals, and not independently verified by SRK.

 According to Sierra Metals, Dia Bras is the identified owner of the La India concession title (No. 150569); however, there is
currently no contract in place with the San Bernabe Ejido, the owner of the surface land, for access and occupation. In the past, the Ejido has allowed Dia Bras to explore on this concession, and is apparently willing to sign a contract with the
operations to allow for additional exploration (and possible exploitation) in the future. No documentation to this effect was made available for this review. 
  

	20.4.8	MIA and CUS Authorizations 

 In April 2014, SEMARNAT conducted an inspection of the
Dias Bras Cusi operations. During this site visit, the inspectors met with security and mine planning personnel, who were asked to provide a copy of the Environmental Impact Assessment (MIA) to legally support, in terms of environmental impact, the
work being carried out by the company. However, the MIA could not be provided by the company’s employees. Since the MIA authorization could not be produced, SEMARNAT issued a notice of violation against the company. 

The following month, in a letter addressed to Arturo Valles Chávez, legal representative of Dia Bras Mexicana SA de CV, SEMARNAT
acknowledges that Dia Bras is the legitimate holder of the following concessions in the municipality of Cusihuiriaci, Chihuahua: San Bartolo, Promontorio, La Consolidad, La Perla, El Milagro, La Ilusión, La Rumurosa, Los Pelones, La Hermana
de la India, Nueva Santa Marina, La Gloria, and La Perlita, and that these concessions pre-date the General Law for Sustainable Forest Development, as well as the General Law on Ecological Equilibrium and Environmental Protection, regarding to
Environmental Impact Assessment. As such, SEMARNAT agreed the existing operations (and minor alteration thereto), should not be subject to the Environmental Impact Assessment procedure. However, SEMARNAT did stipulate that, in case of disturbance
and/or removal of vegetation, Dia Bras must comply with the regulations regarding to land use change before the Federal delegation, as well as the proper management of waste generated during mining and processing (i.e., tailings). 

  
  

					
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 SEMARNAT officially dismissed the notice of violation on May 14, 2015 in
Administrative Record No. PFPA/15.212C.27.1/0055-14. 
  

	20.4.9	Inspections 

 In April 2014, during the same inspection by SEMARNAT of the Cusi
operations, the agency found no irregularities in the emission of pollutants to the environment. There was also no mention of any irregularities regarding the process of mineral extraction and storage disposal. 

On November 17, 2015, Chihuahua State regulators, through the Secretary of Urban Development and Ecology, inspected Promotorio Mine
and found that the water discharged by Dia Bras complies with the parameters established by NOM-001/SEMARNAT 2015. At the same time, Dia Bras presented the argument that a special waste water discharge permit from CONAGUA is not required to
discharge water from mining activities developed in Promontorio and San Bartolo mines. 
  

	20.5	Social Management Planning and Community Relations 

 SRK was not provided with any
information regarding public consultation or stakeholder engagement activities on the part of Dia Bras for the Cusi operations. 
  

	20.6	Closure and Reclamation Plan 

 Current regulations in México require that a
preliminary closure program be included in the MIA and a definite program be developed and submitted to the authorities during the operation of the mine (generally accepted as three years into the operation). These closure plans tend to be
conceptual and typically lack much of the detail necessary to develop an accurate closure cost estimate. However, Sierra Metals has attempted to prescribe the necessary closure activities for the operation. 

In February 2017, Treviño Asociados Consultores presented to DIABRAS, S.A. de C.V. a work breakdown of the anticipated
tasks for closure and reclamation of the Cusi Mine and Malpaso Mill. This breakdown, and the associated costs, is summarized in Table 20-3. 

  
  

					
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 Table 20-3: Cusi Mine and Malpaso Mill Cost
of Reclamation and Closure of the Mine 
  

					
	Closure Activity	  	 Cost
Estimate

MXN$
	 
	 Cusi
	  			 
	
Waste Rock Piles (regrading, soil preparation, revegetation) (5Ha)
	  	 	$231,650	 
	
Exploration Drill Pads (remove contaminated soils, soil preparation, revegetation, erosion control) (4Ha)
	  	 	$42,000	 
	
Roads (Border reconstruction, ditches, revegetation) (5Ha)
	  	 	$52,500	 
	
Building Demolition (Dismantling buildings and removing equipment and machinery)
	  	 	$594,000	 
	
Sub-Total Cusi Reclamation and Closure Costs
	  	 	$920,150	 
	
Malpaso
	  			 
	Tailings Impoundment (regrading, soil cover and preparation, revegetation) (14Ha = 2×7Ha)	  	 	$1,901,200	 
	
Stream Restoration (gabion installation) (500m)
	  	 	$1,750,000	 
	
Roads (Border reconstruction, ditches, revegetation) (3Ha)
	  	 	$31,500	 
	Facilities and Buildings (offices, laboratory, warehouses – dismantle and remove, remediate spills,
restore soil and revegetation)	  	 	$2,035,000	 
	
Sub-Total Malpaso Reclamation and Closure Costs
	  	 	$5,717,700	 
	
Total (MXN)
	  	 	$6,637,850	 
	
Total (US$)*
	  	 	$325,385	 

 *Based on exchange rate of US$1 = MXN$20.4 (22Feb2017) 

Source: Dia Bras, 2017 

SRK’s scope of work did not include an assessment of the veracity of this closure cost estimate, but, based on projects of similar
nature and size within Mexico, the estimate appears low in comparison. SRK recommends that Sierra Metals conduct an outside review of this estimate, with an emphasis on benchmarking against other projects in northern Mexico. 

While Mexico requires the preparation of a reclamation and closure plan, as well as a commitment on the part of the operator to implement
the plan, no financial surety (bonding) has thus far been required of mining companies. Environmental damages, if not remediated by the owner/operator, can give rise to civil, administrative and criminal liability, depending on the action or
omission carried out. PROFEPA is responsible for the enforcement and recovery for those damages, or any other person or group of people with an interest in the matter. Also, recent reforms introduced class actions as a means to demand environmental
responsibility from damage to natural resources. 

  
  

					
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	21	Capital and Operating Costs 

 The Cusi Mine has provided the three previous years
of actual complete operational expenses (opex) as well as capital expenses (capex) as summarized in Table 21-1. Note that these are different slightly compared to the costs used to calculate the mineral
resource cut-off grade, as certain all-in mining costs are not incorporated in this calculation. 
 SRK did not conduct an economic
analysis, and has not estimated costs needed to support the mine going forward, as the mine currently has no publicly-reported reserves. SRK recommends that the Cusi Mine generate a reserve estimate as well as a detailed mine plan based on the
updated mineral resource estimation, and cash flow model supporting the operation. 

  
  

					
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 Table 21-1: OPEX and CAPEX for the Cusi Mine
(2014-2016) 
  

																	
	 	 	 Item	  	2014 	 	  	2015 	 	  	2016 	 	  	 
		 	
 Tonnage
	  	 	155,268 	 	  	 	202,033 	 	  	 	186,898 	 	  	
		 	  OPEX
	  				  				  			 	  	
		 	  Mine cost US$/t
	  				  				  			 	  	
		 	  Labor
	  	 	1.89 	 	  	 	1.86 	 	  	 	9.07 	 	  	
		 	  Explosives
	  	 	0.49 	 	  	 	1.53 	 	  	 	2.81 	 	  	
		 	  Diesel
	  	 	0.40 	 	  	 	1.72 	 	  	 	2.02 	 	  	
		 	  Energy
	  	 	0.95 	 	  	 	0.86 	 	  	 	0.93 	 	  	
		 	  Drill bits
	  	 	0.04 	 	  	 	0.08 	 	  	 	0.09 	 	  	
		 	  Oil
	  	 	0.21 	 	  	 	0.43 	 	  	 	0.52 	 	  	
		 	  Tires
	  	 	0.23 	 	  	 	0.85 	 	  	 	0.97 	 	  	
		 	  Gasoline
	  	 	0.05 	 	  	 	0.16 	 	  	 	0.16 	 	  	
		 	  Spare parts
	  	 	0.80 	 	  	 	1.69 	 	  	 	2.23 	 	  	
		 	  Dining hall services
	  	 	0.55 	 	  	 	0.36 	 	  	 	0.36 	 	  	
		 	  External services
	  	 	0.00 	 	  	 	5.81 	 	  	 	5.38 	 	  	
		 	  Other materials
	  	 	4.37 	 	  	 	2.35 	 	  	 	2.80 	 	  	
		 	  Mineral Transportation
	  	 	4.49 	 	  	 	3.91 	 	  	 	3.24 	 	  	
		 	
 Total US$/t
	  	 	$14.47 	 	  	 	$21.60 	 	  	 	$30.59 	 	  	
		 	  Plant cost US$/t
	  				  				  			 	  	
		 	  Labor
	  	 	6.36 	 	  	 	5.05 	 	  	 	5.31 	 	  	
		 	  Reagents
	  	 	1.87 	 	  	 	1.20 	 	  	 	2.30 	 	  	
		 	  Ball mill
	  	 	1.27 	 	  	 	1.09 	 	  	 	1.22 	 	  	
		 	  Energy
	  	 	4.71 	 	  	 	3.06 	 	  	 	3.28 	 	  	
		 	  Oil
	  	 	0.28 	 	  	 	0.38 	 	  	 	0.24 	 	  	
		 	  Diesel
	  	 	0.25 	 	  	 	0.25 	 	  	 	0.23 	 	  	
		 	  Tires
	  	 	0.01 	 	  	 	0.00 	 	  	 	0.02 	 	  	
		 	  Gasoline
	  	 	0.17 	 	  	 	0.15 	 	  	 	0.15 	 	  	
		 	  Water well rights
	  	 	0.85 	 	  	 	0.43 	 	  	 	0.60 	 	  	
		 	  Spare parts
	  	 	0.97 	 	  	 	1.63 	 	  	 	1.00 	 	  	
		 	  External services
	  	 	0.44 	 	  	 	0.58 	 	  	 	0.58 	 	  	
		 	  Other materials
	  	 	2.94 	 	  	 	3.53 	 	  	 	2.94 	 	  	
		 	
 Total US$/t
	  	 	$20.13 	 	  	 	$17.37 	 	  	 	$17.86 	 	  	
		 	  CAPEX (US$000)
	  				  				  			 	  	
		 	  Exploration
	  	 	1,190 	 	  	 	1,937 	 	  	 	501 	 	  	
		 	  Mine Development
	  	 	11,356 	 	  	 	8,155 	 	  	 	3,593 	 	  	
		 	  Resource study
	  	 	352 	 	  	 	234 	 	  	 	127 	 	  	
		 	  Equipment
	  	 	1,571 	 	  	 	2,391 	 	  	 	755 	 	  	
		 	  Santa Eduwiges Shaft
	  	 	412 	 	  	 	2,250 	 	  	 	297 	 	  	
		 	  Plant Improvements
	  	 	462 	 	  	 	645 	 	  	 	331 	 	  	
		 	  Tailings Dam
	  	 	1,654 	 	  	 	1,026 	 	  	 	15 	 	  	
		 	  Other
	  	 	1 	 	  	 	52 	 	  	 	0 	 	  	
		 	
 CAPEX (US$000)
	  	 	$16,998 	 	  	 	$16,690 	 	  	 	$5,619 	 	  	

 Source: Dia Bras, 2017 

  
  

					
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	22	Economic Analysis 

 SRK has not conducted any economic analysis as a part of this
study. Further work needs to be performed to generate an economic analysis that is based on the new resource statement, a detailed mine design, mineral reserve estimation, and production schedule. 

  
  

					
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	23	Adjacent Properties 

 As noted in Figure
4-2, a number of mining claims within the Cusi area are not controlled by Sierra Metals. Mineral resources are not reported within these areas. No publicly disclosed mineral resource or reserve estimates exist
for these areas. 

  
  

					
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	24	Other Relevant Data and Information 

 SRK is not aware of any additional relevant
data and information for the mineral resource estimation at this time. 

  
  

					
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	25	Interpretation and Conclusions 

  

	25.1	Exploration 

 SRK is of the opinion that the exploration efforts at Cusi are
sufficient for the definition of mineral resources. The primary exploration method at Cusi has been diamond core drilling followed by limited underground development, which has been successful in delineating a system of discrete epithermal veins and
related stockwork mineralization. The drilling appears to be able to target and identify mineralized structures with reasonable efficacy, and the majority of drilling is oriented in a fashion designed to approximate true thicknesses of the veins.
The exploration planning suffers from a lack of focus, and should be designed to maximize conversion of higher grade Inferred areas with less dense drilling to Indicated, or extending mineralization away from known areas accessed through channel
sampling. Efforts should be focused on a single structure or perhaps two structures to continue to develop these areas along strike and down dip, rather than scattered around several veins with very limited drilling. 

Mine development is also used for exploration, as direct access of the veins along underground drifts is an excellent and efficient way
for Cusi to understand the mineralization on a more local basis. More effort should be made to improve underground survey data, channel sampling consistency, and 3D asbuilt data. 

SRK notes that recent efforts are improving the quality of the drilling and information through more complete and thorough survey data
(for drilling and underground development), as well as modern QA/QC programs which are delivering reasonable results. This lends additional confidence to recently-defined resources or newly drilled portions of historic areas. 

SRK also notes that struggles for the internal Malpaso Mill laboratory, identified in this document as well as previous technical
reports, appear to continue. These are related to significant differences between the values reported for identical samples between Malpaso and third-party laboratories. These issues, combined with historic deficiencies in downhole surveying and
QA/QC detract from the overall confidence in quality of the data. 
 SRK is aware that Malpaso and Dia Bras are currently implementing
procedures to improve the collection and reporting of data supporting mineral resource estimations. This includes improving down hole surveys, improved channel sampling and mine working surveys, acquiring commercial standards for QA/QC (October
2016), and improvements of the Malpaso Mill to make sample preparation procedures and analyses consistent with ISO-certified laboratories like ALS. SRK is of the opinion that a combination of these factors, once demonstrated to be in full use and
functioning appropriately, will result in a significant portion of the Indicated resource being converted to Measured. 
  

	25.2	Mineral Resource Estimate 

 The geologic model has been constructed by Dia Bras
geologists, and refined by SRK using Leapfrog GeoTM software. Drilling and channel sample data, as well as sectional interpretation was used in development of the 3D geology shapes, defining veins and stockwork zones. These are used as resource
domains to constrain and control the interpolation of grade during the estimation. 

  
  

					
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 SRK built individual block models for the main resource areas, which have been rotated
and sub-blocked to better fit the geologic contacts in each area. Grade was interpolated from capped and composited sample data using an inverse distance squared algorithm, with sample selection criteria designed to decluster the channel sample data
compared to the drilling. A nested three-pass estimation was used, with decreasing data selection criteria. 
 SRK is of the opinion
that the Mineral Resource Estimate has been conducted in a manner consistent with industry best practices and that the data and information supporting the stated mineral resources is sufficient for declaration of Indicated and Inferred
classifications of resources. SRK has not classified any of the resources in the Measured category due to aforementioned uncertainties regarding the data supporting the Mineral Resource Estimate. 

These deficiencies include: 
  

	 	●	 	 The lack of a historic QA/QC program, which has only been supported by a recent resampling and modern QA/QC program for
a limited number of holes. This will be required in order to achieve Measured resources which generally are supported by high resolution drilling or sampling data that feature consistently implemented and monitored QA/QC. 

 

	 	●	 	 The lack of consistently-implemented down-hole surveys in the historic drilling. Observations from the survey data which
has been done to date show significant down-hole deviations that influence the exact position of mineralized intervals. These discrepancies are confirmed by nearby workings that project the mineralized structures in a different position than that
defined by the unsurveyed holes. 

  

	 	●	 	 The lack of industry-standard 3D survey asbuilt data delineating mined areas. This has been defined using a combination
of the existing survey data, as well as polygons defining other areas thought to be mined. SRK believes these polygons to be conservative, as it is likely that pillar areas or other partially mined areas exist within the limits of the polygons, but
are being excluded by this rudimentary methodology. 

  

	25.3	Metallurgy and Mineral Processing 

 The metallurgical balance as stated by Dia Bras
is based on actual production data as reported to SRK. SRK is of the opinion that this is more than sufficient support for the statement of mineral resources, where the cut-off grade is based partially on expectations of recovery. 

The Cusi processing facilities include two interconnected process plants, which are the Malpaso mill purchased from Rio Tinto, and the El
Triunfo mill. Both mills are conventional ball mill and flotation plants fed from a single crushing circuit. 
 Cusi’s highly
variable fresh feed head grades pose a challenge to the steady metallurgical performance of the processing facilities. Additional studies in mine optimization and tailoring of production schedules would potentially mitigate this risk. 

 

	25.4	Mining Methods 

 The primary underground mining method currently employed at Cusi
is overhand cut and fill. SRK also notes that shrinkage stoping has been in use in modern mining at Cusi, but currently makes up a comparably minor portion of the active mining operations. 

  
  

					
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 Despite lacking a prefeasibility or feasibility study in the public market, which
discloses mineral reserves, the Cusi Mine is in fact in operation and producing mineralized material from the underground mine. SRK notes that pre-feasibility and feasibility studies are required for statement of reserves, but are not required for a
company to initiate production for a property. SRK recommends that the Cusi Mine develop an industry-compliant mineral reserve estimation based on the updated mineral resource estimation, including a detailed mine design, production schedule, and
cash flow model. 
 The current mining operation produces approximately 600 tonnes of ore per day, and 400 tonnes of waste per day. The
source of mined material is split evenly between the Promontorio and Santa Eduwiges mine areas at this time. 
  

	25.5	Recovery Methods 

 The Cusi concentrator is located in the outskirts of Cuauhtemoc
City, approximately 50 km by road from Cusi mine operations. Dump trucks each hauling approximately 20 t of ore delivered 186,898 t during the 2016 period. 

The Cusi processing facilities include two interconnected process plants, which are the Malpaso mill purchased from Rio Tinto, and the El
Triunfo mill. Both mills are conventional ball mill and flotation plants fed from a single crushing circuit. The flotation circuit has the ability to produce lead concentrate and zinc concentrate. 

 

	25.6	Infrastructure 

 The Project has fully developed infrastructure including access
roads, an exploration camp, administrative offices, a processing plant and associated facilities, tailings storage facility, a core logging shed, water storage reservoir and water tanks, 

The site has electric power from the Mexican power grid, backup diesel generators, and heating from site propane tanks. The overall
Project infrastructure is built out and functioning and adequate for the purpose of the planned mine and mill. 
  

	25.7	Environmental and Permitting 

 Based on communications with representatives from
Sierra Metals, it does not appear that there are currently any known environmental issues that could materially impact the extraction and beneficiation of mineral resources or reserves. However, given the pre-regulation vintage of the original
tailings storage facilities (piles), the likelihood is high that these facilities are not underlain by low-permeability liners, increasing the risk of a long-term liability of metals leaching and groundwater contamination. 

 

	25.8	Foreseeable Impacts of Risks 

 SRK notes that the main risk associated with the
mineral resources at Cusi are in areas where historic drilling or poorly surveyed channel sampling defines the shape of the vein. It has been demonstrated, where new data juxtaposes old, that there can be material offsets to the projections of the
structures. This will predominantly affect older areas of the Cusi mine, many of which have been 

  
  

					
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mined out, although SRK notes newer areas where the effect is material on the statement of mineral resources. 

Ongoing risk associated with the performance of the Malpaso Mill internal laboratory is difficult to quantify, and is probably not
material to the declaration of mineral resources beyond the reduction in confidence noted in this report. SRK finds the discrepancies between Malpaso and third party laboratories to be troubling in the sense of defining precision for the analytical
work that would support a Measured resource, unfortunately and notably in the vicinity of the workings where all channel samples are supported by Malpaso analyses. 

No mineral reserves are stated for the Cusi Mine at this time, as the requisite mine planning, design, scheduling, and economic analysis
were not a part of the scope of this report. SRK is aware that Sierra is aggressively pursuing improvements to the methods and procedures at Cusi, and that these will be ongoing in the coming year. 

  
  

					
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	26	Recommendations 

  

	26.1	Recommended Work Programs and Costs 

 SRK has the following recommendations for
additional work to be performed at the Cusi mine: 
  

	 	●	 	 Identify and drill areas that are dominantly supported by channel sample data. This should be done at a regular spacing
of approximately 25 m. 

  

	 	○ 	 	 Further to this, SRK notes opportunities where significant areas of veins have very few drillholes, but exhibit very
high grades, resulting in local high grade Inferred blocks that could theoretically be converted to Indicated with additional drilling. These should be prioritized. 

 

	 	●	 	 Continue the implementation of the current QA/QC program as documented by Dia Bras internal reports. This program is
robust and appropriate for the type of deposit. 

  

	 	●	 	 Abandon the practice of using the current internal blanks for QA/QC. A thoroughly washed silica sand is readily
available in Mexico and would be a reasonable alternative. The results of the current practices hint at either significant contamination issues during the preparation phase of sample analysis, or a contaminated blank material. In either case, this
should be resolved as soon as possible. Continue the use of newly acquired commercial standards for new QA/QC. 

  

	 	●	 	 All analyses supporting a mineral resource estimation should continue to be analyzed by an ISO-certified independent
laboratory such as ALS Minerals. The intra-lab performance of check samples shows significant and unexpected deviations between ALS and the internal Dia Bras lab. 

 

	 	●	 	 Every drillhole exceeding 50 m should be surveyed via Reflex or other appropriate survey tool. 

 

	 	●	 	 SRK strongly recommends implementing the practice of consistent use of a total station GPS for surveying of drillhole
and channel samples, as well as mine workings. Discrepancies between the three types of data occur regularly where they are closely spaced, and reduce confidence in the estimate. 

 

	 	○ 	 	 A 3D mine survey could be accomplished relatively easily and for minimal cost, and could be conducted on a quarterly
basis to develop a better working understanding of mined material to be used in reconciliation processes. 

  

	 	●	 	 Evaluate more detailed resource estimation procedures incorporating other means of dealing with the highly clustered
data. 

  

	 	●	 	 Develop a simple method of reconciling the resource models to production, using stope shapes and grades derived from
channel sampling. 

  

	 	●	 	 SRK recommends that Cusi evaluate the maximum head grade the mill is able to receive without compromising quality of its
lead concentrate because of the high presence of zinc (currently grading at about 9%). Improving selectivity will likely improve the overall lead grade in concentrate that needs to be at 50% Pb or higher to achieve better economic value.

  

	26.1.1	Costs 

 SRK notes that the costs for the majority of recommended work are likely to
be a part of normal operating budgets, which Cusi has as an operating mine. These are cost estimates, and would 

  
  

					
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depend on actual contractor costs and scope to be determined by Dia Bras/Sierra Metals. SRK notes that the recommendations for metallurgy, mine design, geotechnical studies, or economic analysis
are not included in these costs, and that these recommendations solely impact the quality of the mineral resource estimation. 

Table 26-1: Summary of Costs for Recommended Work 

 

																					
	Item	  	Cost (US$)	 	  	 	 	  	 	 	  	 	 	  	 	 
	Drilling	  	 	$2,000,000	 	  				  				  				  			
	Underground 3D Survey    	  	 	$60,000	 	  				  				  				  			

  
  

					
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	27	References 

 CIM (2014). Canadian Institute of Mining, Metallurgy
and Petroleum Standards on Mineral Resources and Reserves: Definitions and Guidelines, May 10, 2014. 

Ciesieski, A. (2007) Dia Bras Exploration Inc., Cusihuiriachic Property, Geology and Geochemistry of Mineralized
Zones, H13-10 Sheet. Chihuahua State (Mexico), Montreal, December 2007. 
 Dia Bras Mexicana S.A. de C.V. (2016-2017)
Unpublished Company Data and Information, Provided to SRK over the course of this study and for its express purposes. 

Geostat Systems International Inc. (2008) Dia Bras Exploration Inc., Cusi Project, Chihuahua state, Mexico,
Resource Estimate Technical Report, June 16, 2008. 
 Meinert, LD (2007) Mineralogy of high grade Ag zones
in the Cusihuiriachic district, April 13, 2007. 
 Meinert, LD (2007b) Mineralogy, assay and fluid
inclusion characteristics of quartz-sulfide veins of the Cusihuiriachic district, Chihuahua, Mexico, January 17, 2007. 

Gustavson (2014) NI 43-101 Technical Report on Resources, Cusihuiriachic Property, Chihuahua, 

Mexico, Prepared for Sierra Metals, May 9, 2014 

RPA (2006) Technical Report on the Cusi Silver Project, Mexico, NI 43-101 Report, December 20, 2006 

SME. (1998). Techniques in Underground Mining. Society for Mining, Metallurgy, and Exploration Inc. 

  
  

					
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	28	Glossary 

 The Mineral Resources and Mineral Reserves have been classified
according to CIM (CIM, 2014). Accordingly, the Resources have been classified as Measured, Indicated or Inferred, the Reserves have been classified as Proven, and Probable based on the Measured and Indicated Resources as defined below. 

 

	28.1	Mineral Resources 

 A Mineral Resource is a concentration or occurrence of
solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other
geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. 

An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis
of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated
Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration. 

An Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and
physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived
from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An Indicated Mineral Resource has a lower level of confidence than that
applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve. 
 A Measured Mineral Resource
is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and
final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of
observation. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.

  

	28.2	Mineral Reserves 

 A Mineral Reserve is the economically mineable part of a
Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that
include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. 

  
  

					
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 The reference point at which Mineral Reserves are defined, usually the point where the
ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed
as to what is being reported. The public disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study. This has not been done as a part of this study. 

A Probable Mineral Reserve is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral
Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve. 

A Proven Mineral Reserve is the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high
degree of confidence in the Modifying Factors. 
  

	28.3	Definition of Terms 

 The following general mining terms may be used in this
report. 
 Table 28-1: Definition of Terms 

 

			
	Term	 	Definition
	Assay	 	The chemical analysis of mineral samples to determine the metal content.
	Capital Expenditure	 	All other expenditures not classified as operating costs.
	Composite	 	Combining more than one sample result to give an average result over a larger distance.
	Concentrate	 	A metal-rich product resulting from a mineral enrichment process such as gravity concentration or flotation, in which most of the desired
mineral has been separated from the waste material in the ore.
	Crushing	 	Initial process of reducing ore particle size to render it more amenable for further processing.
	Cut-off Grade (CoG)    	 	The grade of mineralized rock, which determines as to whether or not it is economic to recover its gold content by further
concentration.
	Dilution	 	Waste, which is unavoidably mined with ore.
	Dip	 	Angle of inclination of a geological feature/rock from the horizontal.
	Fault	 	The surface of a fracture along which movement has occurred.
	Footwall	 	The underlying side of an orebody or stope.
	Gangue	 	Non-valuable components of the ore.
	Grade	 	The measure of concentration of gold within mineralized rock.
	Hangingwall	 	The overlying side of an orebody or slope.
	Haulage	 	A horizontal underground excavation which is used to transport mined ore.
	Hydrocyclone	 	A process whereby material is graded according to size by exploiting centrifugal forces of particulate materials.
	Igneous	 	Primary crystalline rock formed by the solidification of magma.
	Kriging	 	An interpolation method of assigning values from samples to blocks that minimizes the estimation error.
	Level	 	Horizontal tunnel the primary purpose is the transportation of personnel and materials.
	Lithological	 	Geological description pertaining to different rock types.
	LoM Plans	 	Life-of-Mine plans.
	LRP	 	Long Range Plan.
	Material Properties	 	Mine properties.
	Milling	 	A general term used to describe the process in which the ore is crushed and ground and subjected to physical or chemical treatment to
extract the valuable metals to a concentrate or finished product.
	Mineral/Mining Lease	 	A lease area for which mineral rights are held.
	Mining Assets	 	The Material Properties and Significant Exploration Properties.
	Ongoing Capital	 	Capital estimates of a routine nature, which is necessary for sustaining operations.
	Ore Reserve	 	See Mineral Reserve.

  
  

					
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	Term	 	Definition
	Pillar	 	Rock left behind to help support the excavations in an underground mine.
	RoM	 	Run-of-Mine.
	Sedimentary	 	Pertaining to rocks formed by the accumulation of sediments, formed by the erosion of other rocks.
	Shaft	 	An opening cut downwards from the surface for transporting personnel, equipment, supplies, ore and waste.
	Sill	 	A thin, tabular, horizontal to sub-horizontal body of igneous rock formed by the injection of magma into planar zones of
weakness.
	Smelting	 	A high temperature pyrometallurgical operation conducted in a furnace, in which the valuable metal is collected to a molten matte or
doré phase and separated from the gangue components that accumulate in a less dense molten slag phase.
	Stope	 	Underground void created by mining.
	Stratigraphy	 	The study of stratified rocks in terms of time and space.
	Strike	 	Direction of line formed by the intersection of strata surfaces with the horizontal plane, always perpendicular to the dip
direction.
	Sulfide	 	A sulfur bearing mineral.
	Tailings	 	Finely ground waste rock from which valuable minerals or metals have been extracted.
	Thickening	 	The process of concentrating solid particles in suspension.
	Total Expenditure    	 	All expenditures including those of an operating and capital nature.
	Variogram	 	A statistical representation of the characteristics (usually grade).

  

	28.4	Abbreviations 

 The following abbreviations may be used in this report. 

Table 28-2: Abbreviations 

 

			
	Abbreviation	 	Unit or Term
	Ag	 	silver
	Au	 	gold
	AuEq	 	gold equivalent grade
	°C	 	degrees Centigrade
	CoG	 	cut-off grade
	cm	 	centimeter
	cm2	 	square centimeter
	cm3	 	cubic centimeter
	cfm	 	cubic feet per minute
	°	 	degree (degrees)
	dia.	 	diameter
	EIS	 	Environmental Impact Statement
	EMP	 	Environmental Management Plan
	g	 	gram
	gal	 	gallon
	g/L	 	gram per liter
	gpm	 	gallons per minute
	g/t	 	grams per tonne
	ha	 	hectares
	ID2	 	inverse-distance squared
	ID3	 	inverse-distance cubed
	kg	 	kilograms
	km	 	kilometer
	km2	 	square kilometer
	koz	 	thousand troy ounce
	kt	 	thousand tonnes
	kt/d	 	thousand tonnes per day
	kt/y	 	thousand tonnes per year

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	 Page
 148

  
  

			
	Abbreviation	 	Unit or Term
	kV	 	kilovolt
	kW	 	kilowatt
	kWh	 	kilowatt-hour
	L	 	liter
	lb	 	pound
	LoM	 	Life-of-Mine
	m	 	meter
	m2	 	square meter
	m3	 	cubic meter
	masl	 	meters above sea level
	mg/L	 	milligrams/liter
	mm	 	millimeter
	mm2	 	square millimeter
	mm3	 	cubic millimeter
	Moz	 	million troy ounces
	Mt	 	million tonnes
	m.y.	 	million years
	NI 43-101	 	Canadian National Instrument 43-101
	oz	 	troy ounce
	%	 	percent
	ppb	 	parts per billion
	ppm	 	parts per million
	QA/QC	 	Quality Assurance/Quality Control
	RC	 	rotary circulation drilling
	RoM	 	Run-of-Mine
	RQD	 	Rock Quality Description
	SEC	 	U.S. Securities & Exchange Commission
	t	 	tonne (metric ton) (2,204.6 pounds)
	t/h	 	tonnes per hour
	t/d	 	tonnes per day
	t/y	 	tonnes per year
	TSF	 	tailings storage facility
	V	 	volts
	W	 	watt
	y	 	year

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Appendices

  

 

  
 Appendices 

 
  

  
  

					
	JL/SH	  		  	June 2017

					
	 SRK Consulting (U.S.), Inc.
 Amended NI 43-101 Technical
Report – Cusi Mine, Mexico
	  	Appendices

  

 

  
 Appendix A: Certificates of
Qualified Persons 
  
  

  
  

					
	JL/SH	  		  	June 2017

					
	

	    	  
 SRK Consulting (U.S.), Inc.

Suite 600
 1125 Seventeenth Street

Denver, CO 80202
  

T: 303.985.1333
 F: 303.985.9947

 
 denver@srk.com

www.srk.com

 CERTIFICATE OF QUALIFIED PERSON 

I, Matthew Hastings, MSc Geology, MAusIMM (CP) do hereby certify that: 
  

	1.	I am Senior Consultant Resource Geologist of SRK Consulting (U.S.), Inc., 1125 Seventeenth Street, Suite 600, Denver, CO, USA, 80202. 

 

	2.	This certificate applies to the technical report titled “Amended NI 43-101 Technical Report on Resources, Cusi Mine, Mexico” with an Effective Date of January 31,
2017 (the “Technical Report”). 

  

	3.	I graduated with a degree in B.S.-Geology from University of Georgia in 2005. In addition, I have obtained a M.S.-Geology from University of Nevada-Reno in 2007. I am a CP of the MAusIMM and Certified Professional
Geology, PGL-1343. I have worked as a Geologist for a total of 10 years since my graduation from university. My relevant experience includes working in exploration and mineral resource definition for precious
metals, base metals, iron ore, and rare earth element deposits worldwide. 

  

	4.	I have read the definition of “qualified person” set out in National Instrument 43-101 (NI 43-101) and certify that by reason of
my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. 

  

	5.	I visited the Cusi Mine property on March 11, 2015 for five days. 

  

	6.	I am responsible for Geology and Mineral Resources, Adjacent Properties, and Other Relevant Data and Information; Sections 2-12 14, 23, 24 and portions of Sections 1, 25 and 26
summarized therefrom, of this Technical Report. 

  

	7.	I am independent of the issuer applying all of the tests in section 1.5 of NI 43-101. 

  

	8.	I have had prior involvement with the property that is the subject of the Technical Report. The nature of my prior involvement is a series of operational reviews and gap analyses that were conducted for Sierra Metals
prior to the technical work supporting the technical report. 

  

	9.	I have read NI 43-101 and Form 43-101F1 and the sections of the Technical Report I am responsible for have been prepared in compliance with
that instrument and form. 

  

	10.	As of the aforementioned Effective Date, to the best of my knowledge, information and belief, the sections of the Technical Report I am responsible for contains all scientific and technical information that is required
to be disclosed to make the Technical Report not misleading. 

  

			
	 Dated this 29th Day of June, 2017.
	 	
		
	 “Signed”

 
	 	 “Sealed”
  

	 Matthew Hastings, MSc Geology, MAusIMM (CP)

  

																	
		 		 		 		 	U.S. Offices:	 		 	Canadian Offices:	 	Group Offices:
		 		 		 		 	 Anchorage
	 	907.677.3520	 	Saskatoon	 	306.955.4778	 	Africa
		 		 		 		 	 Clovis
	 	559.452.0182	 	Sudbury	 	705.682.3270	 	Asia
		 		 		 		 	 Denver
	 	303.985.1333	 	Toronto	 	416.601.1445	 	Australia
		 		 		 		 	 Elko
	 	775.753.4151	 	Vancouver	 	604.681.4196	 	Europe
		 		 		 		 	 Fort Collins
	 	970.407.8302	 	Yellowknife	 	867.873.8670	 	North America
		 		 		 		 	 Reno
	 	775.828.6800	 		 		 	South America
		 		 		 		 	 Tucson
	 	520.544.3688	 		 		 	

					
	

	    	  
 SRK Consulting (U.S.), Inc.

Suite 600
 1125 Seventeenth Street

Denver, CO 80202
  

T: 303.985.1333
 F: 303.985.9947

 
 denver@srk.com

www.srk.com

  

 CERTIFICATE OF QUALIFIED PERSON 

I, Fernando Rodrigues, BS Mining, MBA, MMSAQP do hereby certify that: 
  

	1.	I am Practice Leader and Principal Consultant (Mining Engineer) of SRK Consulting (U.S.), Inc., 1125 Seventeenth Street, Suite 600, Denver, CO, USA, 80202. 

 

	2.	This certificate applies to the technical report titled “Amended NI 43-101 Technical Report on Resources, Cusi Mine, Mexico” with an Effective Date of January 31,
2017 (the “Technical Report”). 

  

	3.	I graduated with a Bachelors of Science degree in Mining Engineering from South Dakota School of Mines and Technology in 1999. I am a QP member of the MMSA. I have worked as a Mining Engineer for a total of 16 years
since my graduation from South Dakota School of Mines and Technology in 1999. My relevant experience includes mine design and implementation, short term mine design, dump design, haulage studies, blast design, ore control, grade estimation, database
management. 

  

	4.	I have read the definition of “qualified person” set out in National Instrument 43-101 (NI 43-101) and certify that by reason of
my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. 

  

	5.	I visited the Cusi Mine property on March 11, 2015 for five days. 

  

	6.	I am responsible for Mining Methods, Market Studies and Contracts, Capital and Operating Costs, Economic Analysis – Sections 15, 16, 18, 19, 21, 22 and portions of Sections 1, 25 and 26 summarized therefrom, of
this Technical Report. 

  

	7.	I am independent of the issuer applying all of the tests in section 1.5 of NI 43-101. 

  

	8.	I have had prior involvement with the property that is the subject of the Technical Report. The nature of my prior involvement is a series of operational reviews and gap analyses that were conducted for Sierra Metals
prior to the technical work supporting the technical report. 

  

	9.	I have read NI 43-101 and Form 43-101F1 and the sections of the Technical Report I am responsible for have been prepared in compliance with
that instrument and form. 

  

	10.	As of the aforementioned Effective Date, to the best of my knowledge, information and belief, the sections of the Technical Report I am responsible for contains all scientific and technical information that is required
to be disclosed to make the Technical Report not misleading. 

  

			
	 Dated this 29th Day of June, 2017.
	 	
		
	 “Signed”

 
	 	 “Sealed”

 

	 Fernando Rodrigues, BS Mining, MBA, MMSAQP[01405QP]

  
  

																	
		 		 		 		 	U.S. Offices:	 		 	Canadian Offices:	 	Group Offices:
		 		 		 		 	 Anchorage
	 	907.677.3520	 	Saskatoon	 	306.955.4778	 	Africa
		 		 		 		 	 Clovis
	 	559.452.0182	 	Sudbury	 	705.682.3270	 	Asia
		 		 		 		 	 Denver
	 	303.985.1333	 	Toronto	 	416.601.1445	 	Australia
		 		 		 		 	 Elko
	 	775.753.4151	 	Vancouver	 	604.681.4196	 	Europe
		 		 		 		 	 Fort Collins
	 	970.407.8302	 	Yellowknife	 	867.873.8670	 	North America
		 		 		 		 	 Reno
	 	775.828.6800	 		 		 	South America
		 		 		 		 	 Tucson
	 	520.544.3688	 		 		 	

					
	

	    	  
 SRK Consulting (U.S.), Inc.

Suite 600
 1125 Seventeenth Street

Denver, CO 80202
  

T: 303.985.1333
 F: 303.985.9947

 
 denver@srk.com

www.srk.com

  

 CERTIFICATE OF QUALIFIED PERSON 

I, Daniel H. Sepulveda, B.Sc, SME-RM, do hereby certify that: 

 

	1.	I am Associate Consultant (Metallurgy) of SRK Consulting (U.S.), Inc., 1125 Seventeenth Street, Suite 600, Denver, CO, USA, 80202. 

  

	2.	This certificate applies to the technical report titled “Amended NI 43-101 Technical Report on Resources, Cusi Mine, Mexico” with an Effective Date of January 31,
2017 (the “Technical Report”). 

  

	3.	I graduated with a degree in Extractive Metallurgy from University of Chile in 1992. I am a registered member of the Society of Mining, Metallurgy, and Exploration, Inc. (SME), member No 4206787RM. I have worked as a
Metallurgist for a total of 23 years since my graduation from university. My relevant experience includes: employee of several mining companies, engineering & construction companies, and as a consulting engineer. 

 

	4.	I have read the definition of “qualified person” set out in National Instrument 43-101 (NI 43-101) and certify that by reason of
my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. 

  

	5.	I visited the Cusi Mine property on October 19, 2016 for two days. 

  

	6.	I am responsible for Mineral Processing and Metallurgical Testing, and Recovery Methods, Section 13, 17 and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report 

 

	7.	I am independent of the issuer applying all of the tests in section 1.5 of NI 43-101. 

  

	8.	I have had prior involvement with the property that is the subject of the Technical Report. The nature of my prior involvement is a series of operational reviews and gap analyses that were conducted for Sierra Metals
prior to the technical work supporting the Technical Report. 

  

	9.	I have read NI 43-101 and Form 43-101F1 and the sections of the Technical Report I am responsible for have been prepared in compliance with
that instrument and form. 

  

	10.	As of the aforementioned Effective Date, to the best of my knowledge, information and belief, the sections of the Technical Report I am responsible for contains all scientific and technical information that is required
to be disclosed to make the Technical Report not misleading. 

  

					
	 Dated this 29th Day of June,
2017.
	 	
		
	 “Signed”

 
	 	 “Sealed”
  

	 Daniel H. Sepulveda, B.Sc, SME-RM
	 	

  
  

																	
		 		 		 		 	U.S. Offices:	 		 	Canadian Offices:	 	Group Offices:
		 		 		 		 	 Anchorage
	 	907.677.3520	 	Saskatoon	 	306.955.4778	 	Africa
		 		 		 		 	 Clovis
	 	559.452.0182	 	Sudbury	 	705.682.3270	 	Asia
		 		 		 		 	 Denver
	 	303.985.1333	 	Toronto	 	416.601.1445	 	Australia
		 		 		 		 	 Elko
	 	775.753.4151	 	Vancouver	 	604.681.4196	 	Europe
		 		 		 		 	 Fort Collins
	 	970.407.8302	 	Yellowknife	 	867.873.8670	 	North America
		 		 		 		 	 Reno
	 	775.828.6800	 		 		 	South America
		 		 		 		 	 Tucson
	 	520.544.3688	 		 		 	

					
	

	    	  
 SRK Consulting (U.S.), Inc.

5250 Neil Road, Suite 300
 Reno, Nevada 89502

 
 T: (775) 828-6800

F: (775) 828-6820
  

reno@srk.com
 www.srk.com

 

  
 CERTIFICATE OF
QUALIFIED PERSON 
 I, Mark Allan Willow, SME-RM do hereby certify that: 

 

	1.	I am Practice Leader of SRK Consulting (U.S.), Inc., 5250 Neil Road, Reno, Nevada 89502. 

  

	2.	This certificate applies to the technical report titled “Amended NI 43-101 Technical Report on Resources, Cusi Mine, Mexico” with an Effective Date of January 31,
2017 (the “Technical Report”). 

  

	3.	I graduated with Bachelor’s degree in Fisheries and Wildlife Management from the University of Missouri in 1987 and a Master’s degree in Environmental Science and Engineering from the Colorado School of Mines
in 1995. I have worked as Biologist/Environmental Scientist for a total of 22 years since my graduation from university. My relevant experience includes environmental due diligence/competent persons evaluations of developmental phase and operational
phase mines through the world, including small gold mining projects in Panama, Senegal, Peru, Ecuador, Philippines, and Colombia; open pit and underground coal mines in Russia; several large copper and iron mines and processing facilities in Mexico
and Brazil; bauxite operations in Jamaica; and a coal mine/coking operation in China. My Project Manager experience includes several site characterization and mine closure projects. I work closely with the U.S. Forest Service and U.S. Bureau of Land
Management on permitting and mine closure projects to develop uniquely successful and cost effective closure alternatives for the abandoned mining operations. Finally, I draw upon this diverse background for knowledge and experience as a human
health and ecological risk assessor with respect to potential environmental impacts associated with operating and closing mining properties, and have experienced in the development of Preliminary Remediation Goals and hazard/risk calculations for
site remedial action plans under CERCLA activities according to current U.S. EPA risk assessment guidance. 

 I am a Certified
Environmental Manager (CEM) in the State of Nevada (#1832) in accordance with Nevada Administrative Code NAC 459.970 through 459.9729. Before any person consults for a fee in matters concerning: the management of hazardous waste; the investigation
of a release or potential release of a hazardous substance; the sampling of any media to determine the release of a hazardous substance; the response to a release or cleanup of a hazardous substance; or the remediation soil or water contaminated
with a hazardous substance, they must be certified by the Nevada Division of Environmental Protection, Bureau of Corrective Action; 
 I am a
Registered Member (No. 4104492) of the Society for Mining, Metallurgy & Exploration Inc. (SME). 
  

	4.	I have read the definition of “qualified person” set out in National Instrument 43-101 (NI 43-101) and certify that by reason of
my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. 

  

	5.	I did not visit the Cusi Mine property. 

  

	6.	I am responsible for Environmental Studies, Permitting and Social or Community Impact Section 20, and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report. 

 

	7.	I am independent of the issuer applying all of the tests in section 1.5 of NI 43-101. 

  

	8.	I have not had prior involvement with the property that is the subject of the Technical Report. 

  

	9.	I have read NI 43-101 and Form 43-101F1 and the sections of the Technical Report I am responsible for have been prepared in compliance with
that instrument and form. 

  
  

																	
		 		 		 		 	U.S. Offices:	 		 	Canadian Offices:	 	Group Offices:
		 		 		 		 	 Anchorage
	 	907.677.3520	 	Saskatoon	 	306.955.4778	 	Africa
		 		 		 		 	 Clovis
	 	559.452.0182	 	Sudbury	 	705.682.3270	 	Asia
		 		 		 		 	 Denver
	 	303.985.1333	 	Toronto	 	416.601.1445	 	Australia
		 		 		 		 	 Elko
	 	775.753.4151	 	Vancouver	 	604.681.4196	 	Europe
		 		 		 		 	 Fort Collins
	 	970.407.8302	 	Yellowknife	 	867.873.8670	 	North America
		 		 		 		 	 Reno
	 	775.828.6800	 		 		 	South America
		 		 		 		 	 Tucson
	 	520.544.3688	 		 		 	

			
	SRK Consulting	  	Page 2

  

	10.	As of the aforementioned Effective Date, to the best of my knowledge, information and belief, the sections of the Technical Report I am responsible for contains all scientific and technical information that is required
to be disclosed to make the Technical Report not misleading. 

  

			
	 Dated this 29th Day of June, 2017.
	  	
		
	 “Signed”

 
	  	 “Sealed”

 

	 Mark A. Willow, M.Sc., CEM, SME-RMEX-4.9

 Exhibit 4.9 

PINNACLE ENTERTAINMENT, INC., 

and 

[                    
                    ,] 
 as
Trustee 
 SENIOR NOTES 

INDENTURE 
 Dated as of
[                    ] 

 CROSS REFERENCE TABLE 
  

			
	 Trust Indenture
 Act
Section
	  	 Indenture

Section

	 310(a)(1)
	  	7.10
	 (a)(2)
	  	7.10
	 (a)(3)
	  	N.A.
	 (a)(4)
	  	N.A.
	 (a)(5)
	  	7.10
	 (b)
	  	7.10
	 311(a)
	  	7.11
	 (b)
	  	7.11
	 312(a)
	  	2.05
	 (b)
	  	11.03
	 (c)
	  	11.03
	 313(a)
	  	7.06
	 (b)(1)
	  	N.A.
	 (b)(2)
	  	7.06; 7.07
	 (c)
	  	7.06; 11.02
	 (d)
	  	7.06
	 314(a)
	  	4.02; 11.02; 11.05
	 (b)
	  	N.A.
	 (c)(1)
	  	11.04
	 (c)(2)
	  	11.04
	 (c)(3)
	  	N.A.
	 (d)
	  	N.A.
	 (e)
	  	11.05
	 (f)
	  	N.A.
	 315(a)
	  	7.01
	 (b)
	  	7.05; 11.02
	 (c)
	  	7.01
	 (d)
	  	7.01
	 (e)
	  	6.11
	 316(a) (last sentence)
	  	2.09
	 (a)(1)(A)
	  	6.05
	 (a)(1)(B)
	  	6.04
	 (a)(2)
	  	N.A.
	 (b)
	  	6.07
	 (c)
	  	2.12
	 317(a)(1)
	  	6.08
	 (a)(2)
	  	6.09
	 (b)
	  	2.04
	 318(a)
	  	11.01
	 (b)
	  	N.A.
	 (c)
	  	11.01

 N.A. means not applicable. 
  

	•	 	This Cross-Reference Table is not part of this Indenture. 

  
 - 2 - 

 TABLE OF CONTENTS 

 

							
	 	 	 	  	Page	 
	 ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
	  	 	6	 
			
	 Section 1.01
	 	 Definitions
	  	 	6	 
	 Section 1.02
	 	 Other Definitions
	  	 	16	 
	 Section 1.03
	 	 Incorporation by Reference of Trust Indenture Act
	  	 	16	 
	 Section 1.04
	 	 Rules of Construction
	  	 	17	 
		
	 ARTICLE II THE NOTES
	  	 	18	 
			
	 Section 2.01
	 	 Amount Unlimited; Issuable in Series
	  	 	18	 
	 Section 2.02
	 	 Form and Dating; Execution and Authentication
	  	 	21	 
	 Section 2.03
	 	 Registrar and Paying Agent
	  	 	22	 
	 Section 2.04
	 	 Paying Agent To Hold Money in Trust
	  	 	23	 
	 Section 2.05
	 	 Holder Lists
	  	 	23	 
	 Section 2.06
	 	 Transfer and Exchange
	  	 	23	 
	 Section 2.07
	 	 Replacement Notes
	  	 	28	 
	 Section 2.08
	 	 Outstanding Notes
	  	 	29	 
	 Section 2.09
	 	 Treasury Notes
	  	 	29	 
	 Section 2.10
	 	 Temporary Notes
	  	 	29	 
	 Section 2.11
	 	 Cancellation
	  	 	30	 
	 Section 2.12
	 	 Defaulted Interest
	  	 	30	 
	 Section 2.13
	 	 Issuance of Additional Notes
	  	 	30	 
	 Section 2.14
	 	 Designation
	  	 	31	 
	 Section 2.15
	 	 CUSIP Numbers
	  	 	31	 
		
	 ARTICLE III REDEMPTION AND PREPAYMENT
	  	 	32	 
			
	 Section 3.01
	 	 Notices to Trustee
	  	 	32	 
	 Section 3.02
	 	 Selection of Notes To Be Redeemed
	  	 	32	 
	 Section 3.03
	 	 Notice of Redemption
	  	 	32	 
	 Section 3.04
	 	 Effect of Notice of Redemption
	  	 	34	 
	 Section 3.05
	 	 Deposit of Redemption or Purchase Price
	  	 	34	 
	 Section 3.06
	 	 Notes Redeemed or Purchased in Part
	  	 	34	 
	 Section 3.07
	 	 Optional Redemption and Gaming Redemption
	  	 	35	 
	 Section 3.08
	 	 Special Mandatory Redemption
	  	 	36	 
		
	 ARTICLE IV COVENANTS
	  	 	36	 
			
	 Section 4.01
	 	 Payment of Notes
	  	 	36	 
	 Section 4.02
	 	 Reports
	  	 	36	 
	 Section 4.03
	 	 Compliance Certificate
	  	 	37	 
	 Section 4.04
	 	 Stay, Extension and Usury Laws
	  	 	38	 

  
 - 3 - 

							
	 ARTICLE V SUCCESSORS
	  	 	38	 
			
	 Section 5.01
	 	 Merger, Consolidation or Sale of Assets
	  	 	38	 
	 Section 5.02
	 	 Successor Person Substituted
	  	 	39	 
		
	 ARTICLE VI DEFAULTS AND REMEDIES
	  	 	39	 
			
	 Section 6.01
	 	 Events of Default
	  	 	39	 
	 Section 6.02
	 	 Acceleration
	  	 	42	 
	 Section 6.03
	 	 Other Remedies
	  	 	42	 
	 Section 6.04
	 	 Waiver of Past Defaults
	  	 	42	 
	 Section 6.05
	 	 Control by Majority
	  	 	43	 
	 Section 6.06
	 	 Limitation on Suits
	  	 	43	 
	 Section 6.07
	 	 Rights of Holders of Notes To Receive Payment
	  	 	44	 
	 Section 6.08
	 	 Collection Suit by Trustee
	  	 	44	 
	 Section 6.09
	 	 Trustee May File Proofs of Claim
	  	 	44	 
	 Section 6.10
	 	 Priorities
	  	 	45	 
	 Section 6.11
	 	 Undertaking for Costs
	  	 	45	 
		
	 ARTICLE VII TRUSTEE
	  	 	45	 
			
	 Section 7.01
	 	 Duties of Trustee
	  	 	45	 
	 Section 7.02
	 	 Rights of Trustee
	  	 	47	 
	 Section 7.03
	 	 Individual Rights of Trustee
	  	 	48	 
	 Section 7.04
	 	 Trustee’s Disclaimer
	  	 	48	 
	 Section 7.05
	 	 Notice of Defaults
	  	 	48	 
	 Section 7.06
	 	 Reports by Trustee to Holders of the Notes
	  	 	48	 
	 Section 7.07
	 	 Compensation and Indemnity
	  	 	49	 
	 Section 7.08
	 	 Replacement of Trustee
	  	 	50	 
	 Section 7.09
	 	 Successor Trustee by Merger, etc.
	  	 	51	 
	 Section 7.10
	 	 Eligibility; Disqualification
	  	 	51	 
	 Section 7.11
	 	 Preferential Collection of Claims Against Company
	  	 	51	 
		
	 ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE
	  	 	51	 
			
	 Section 8.01
	 	 Option To Effect Legal Defeasance or Covenant Defeasance
	  	 	51	 
	 Section 8.02
	 	 Legal Defeasance and Discharge
	  	 	51	 
	 Section 8.03
	 	 Covenant Defeasance
	  	 	52	 
	 Section 8.04
	 	 Conditions to Legal or Covenant Defeasance
	  	 	53	 
	 Section 8.05
	 	 Deposited Money and Government Securities To Be Held in Trust; Other Miscellaneous
Provisions
	  	 	54	 
	 Section 8.06
	 	 Repayment to Company
	  	 	55	 
	 Section 8.07
	 	 Reinstatement
	  	 	55	 
		
	 ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER
	  	 	56	 
			
	 Section 9.01
	 	 Without Consent of Holders of Notes
	  	 	56	 
	 Section 9.02
	 	 With Consent of Holders of Notes
	  	 	57	 

  
 - 4 - 

							
	 Section 9.03
	 	 Compliance with Trust Indenture Act
	  	 	59	 
	 Section 9.04
	 	 Revocation and Effect of Consents
	  	 	59	 
	 Section 9.05
	 	 Notation on or Exchange of Notes
	  	 	59	 
	 Section 9.06
	 	 Trustee To Sign Amendments, etc.
	  	 	59	 
		
	 ARTICLE X SATISFACTION AND DISCHARGE
	  	 	60	 
			
	 Section 10.01
	 	 Satisfaction and Discharge
	  	 	60	 
	 Section 10.02
	 	 Application of Trust Money
	  	 	61	 
		
	 ARTICLE XI MISCELLANEOUS
	  	 	61	 
			
	 Section 11.01
	 	 Trust Indenture Act Controls
	  	 	61	 
	 Section 11.02
	 	 Notices
	  	 	62	 
	 Section 11.03
	 	 Communication by Holders of Notes with Other Holders of Notes
	  	 	63	 
	 Section 11.04
	 	 Certificate and Opinion as to Conditions Precedent
	  	 	63	 
	 Section 11.05
	 	 Statements Required in Certificate or Opinion
	  	 	63	 
	 Section 11.06
	 	 Rules by Trustee and Agents
	  	 	64	 
	 Section 11.07
	 	 No Personal Liability of Directors, Officers, Employees and Stockholders
	  	 	64	 
	 Section 11.08
	 	 GOVERNING LAW AND WAIVER OF JURY TRIAL
	  	 	64	 
	 Section 11.09
	 	 No Adverse Interpretation of Other Agreements
	  	 	65	 
	 Section 11.10
	 	 Successors
	  	 	65	 
	 Section 11.11
	 	 Severability
	  	 	65	 
	 Section 11.12
	 	 Counterpart Originals
	  	 	65	 
	 Section 11.13
	 	 Table of Contents, Headings, etc.
	  	 	65	 
	 Section 11.14
	 	 Notes in a Foreign Currency
	  	 	65	 
	 Section 11.15
	 	 Judgment Currency
	  	 	66	 
	 Section 11.16
	 	 Force Majeure
	  	 	66	 
	 Section 11.17
	 	 U.S.A. Patriot Act
	  	 	67	 

  
 - 5 - 

 INDENTURE dated as of
[                    ] between Pinnacle Entertainment, Inc., a Delaware corporation (the “Company”), and
[                    , a                     
corporation,] as trustee (the “Trustee”). 
 The Company and the Trustee agree as follows for the benefit of each other and for
the equal and ratable benefit of the Holders (as defined) of the Notes (as defined). 
 The Company has duly authorized the execution and
delivery of this Indenture to provide for the issuance from time to time of its senior indebtedness, notes, bonds, debentures or other evidences of indebtedness (collectively, the “Notes”) unlimited as to principal amount to bear
such rates of interest, to mature at such time or times, to be issued in one or more series and to have such other provisions as shall be fixed as in this Indenture provided. 

All things necessary to make this Indenture a valid and legally binding agreement of the Company, in accordance with its terms, have been
done, and the Company has done all things necessary to make the Notes, when executed by the Company, and authenticated and delivered by the Trustee hereunder and duly issued by the Company, valid and legally binding obligations of the Company. 

ARTICLE I 

DEFINITIONS AND INCORPORATION BY REFERENCE 

Section 1.01 Definitions. 

“Additional Lease” shall mean any lease entered into for the purpose of the Company or any of its Restricted Subsidiaries to
acquire the right to occupy and use real property, vessels or similar assets for, or in connection with, the construction, development or operation of Gaming Facilities, including, without limitation, the Meadows Lease. 

“Additional Notes” means additional Notes of a series (other than the initially issued Notes of such series) issued under
this Indenture in accordance with Section 2.02 hereof, as part of the same series as such initially issued Notes of such series. 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that none of GLPI or any of its Subsidiaries (including Pinnacle Predecessor and its Subsidiaries)
shall be deemed to be an Affiliate of the Company or any of its Restricted Subsidiaries. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with”
have correlative meanings. 
 “Agent” means any Registrar, Paying Agent or co-registrar. 

  
 - 6 - 

 “Applicable Procedures” means, with respect to any transfer or exchange of or
for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. 

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. 

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act. The
terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning. 
 “Board of
Directors” means: 
 (a) with respect to a corporation, the board of directors of the corporation; 

(b) with respect to a partnership, the Board of Directors of the general partner of the partnership; and 

(c) with respect to any other Person, the board or committee of such Person serving a similar function. 

“Board Resolution” means a copy of a resolution certified by the Secretary or Assistant Secretary of the Company to have been
duly adopted by the Board of Directors of the Company, to be in full force and effect on the date of such certification and delivered to the Trustee. 

“Business Day” means any day other than a Legal Holiday. 

“Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a
capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP; provided, however, that for the avoidance of doubt, any lease that is accounted for by any Person as an operating lease as
of the date of this Indenture and any similar lease entered into after the date of this Indenture by any Person may, in the sole discretion of the Company, be accounted for as an operating lease and not as a Capital Lease Obligation; and
provided, further, that, for the avoidance of doubt, (i) the Master Lease and any Additional Leases will be accounted for as an operating lease and not as a Capital Lease Obligation and (ii) GAAP for purposes of this
definition shall be deemed GAAP as in effect on the date of this Indenture. 
 “Capital Stock” means: 

(1) in the case of a corporation, corporate stock; 

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock; 

  
 - 7 - 

 (3) in the case of a partnership or limited liability company, partnership or
membership interests (whether general or limited); and 
 (4) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 

“Clearstream” means Clearstream Banking, S.A. 

“Company Order” means a written request or order signed in the name of the Company by an Officer. 

“Comparable Treasury Issue” means the United States Treasury security selected by a Reference Treasury Dealer appointed by
the Company as having a maturity comparable to the remaining term of the Notes of a particular series (as if the final maturity of the Notes of such series was the first date such Notes may be optionally redeemed by the Company, if applicable) that
would be utilized at the time of selection and in accordance with customary financial practice in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes of such series (as if the final maturity of
the Notes of such series was the first date such Notes may be optionally redeemed by the Company, if applicable). 
 “Comparable
Treasury Price” means, with respect to any redemption date: 
 (1) the average of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities”; or 

(2) if such release (or any successor release) is not published or does not contain such prices on such Business Day,
(A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotation or (B) if the Company obtains fewer than three such Reference Treasury
Dealer Quotations, the average of all such Reference Treasury Dealer Quotations. 
 “Corporate Trust Office of the Trustee”
shall be at the address of the Trustee specified in Section 11.02 hereof or such other address as to which the Trustee may give notice to the Company. 

“Credit Agreement” means the Credit Agreement dated on or about April 28, 2016 by and among the Company, the subsidiary
guarantors party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, the other agent parties thereto, and the lenders from time to time party thereto, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, restructured, replaced or refinanced from time to time including increases in aggregate principal amount (whether the same are
provided by the original agents and lenders under such Credit Agreement or other agents or other lenders). 

  
 - 8 - 

 “Custodian” means the Trustee, as custodian with respect to the Notes in global
form, or any successor entity thereto. 
 “Default” means any event that is, or with the passage of time or the giving of
notice or both would be, an Event of Default. 
 “Definitive Note” means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto. 

“Depositary” means, with respect to a particular series of Notes issuable or issued in whole or in part in global form, the
Person specified in Section 2.03 hereof as the Depositary with respect to the Notes of such series, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this
Indenture. 
 “Disqualified Stock” means, with respect to a particular series of Notes, any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes of such series mature (other than
(x) solely for Capital Stock (other than Disqualified Stock) or (y) as a result of a redemption required by Gaming Law or not prohibited by this Indenture); provided, however, only the portion of Capital Stock which is so
redeemable or repurchasable prior to such date will be deemed to be Disqualified Stock. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any
such Capital Stock pursuant to such provisions (x) unless such repurchase or redemption complies with the covenants of this Indenture or (y) prior to any purchase of Notes of such series as are required to be purchased pursuant to the
covenants of this Indenture. 
 “DTC” means The Depository Trust Company in New York, New York. 

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any
debt security that is convertible into, or exchangeable for, Capital Stock and Hedging Obligations entered into as a part of, or in connection with, an issuance of such debt security). 

“Equity Offering” means any public or private issuance or sale of Equity Interests (other than Disqualified Stock) of the
Company. 
 “Euroclear” means Euroclear Bank S.A./N.V., as operator of the Euroclear system. 

  
 - 9 - 

 “Event of Default” means an event described under Article VI hereof. 

“Exchange Act” means the Securities Exchange Act of 1934, as amended. 

“Existing Unrestricted Subsidiaries” means ACE Gaming, LLC, Ameristar Casino Springfield, LLC, AREP Boardwalk, LLC, Casino
Magic (Europe), B.V., Casino Magic Hellas Management Services, S.A., Pinnacle Retama Partners, LLC, PNK Development 10, LLC, PNK Development 11, LLC, PNK Development 17, LLC, PNK Development 18, LLC, PNK Development 28, LLC, PNK Development 29, LLC,
PNK Development 30, LLC, PNK Development 31, LLC, PNK (SA), LLC, PNK (VN), Inc., PNK Finance MLS Corp. and PNK (Kansas), LLC. 

“GAAP” means generally accepted accounting principles set forth as of the relevant date in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within
the U.S. accounting profession), including any Accounting Standards Codifications, which are applicable to the circumstances as of the date of determination. 

“Gaming Approval” means any and all approvals, licenses, registration, qualification, finding of suitability, authorizations,
permits, consents, rulings, orders or directives (a) relating to any gaming business (including par-mutuel betting) or enterprise, including to enable the Company or any of its Restricted Subsidiaries to engage in, operate or manage the casino,
gambling, horse racing or gaming business or otherwise continue to conduct, operate or manage such business substantially as is presently conducted, operated or managed or contemplated to be conducted, operated or managed following the date of this
Indenture, or (b) required by any Gaming Law. 
 “Gaming Authority” means any governmental agency, authority, board,
bureau, commission, department, office or instrumentality with regulatory, licensing or permitting authority or jurisdiction over any gaming business or enterprise or horse racing business or enterprise or any Gaming Facility, or with regulatory,
licensing or permitting authority or jurisdiction over any gaming or racing operation (or proposed gaming or racing operation) owned, managed, leased or operated by the Company or any of its Restricted Subsidiaries. 

“Gaming Facility” means any gaming or pari-mutuel wagering establishment, including any casino or “racino,”
and other property or assets ancillary thereto or used in connection therewith, including any casinos, hotels, resorts, racetracks, off-track wagering sites, theaters, parking facilities, recreational vehicle parks, timeshare operations, retail
shops, restaurants, other buildings, restaurants, theatres, related or ancillary businesses, land, golf courses and other recreation and entertainment facilities, marinas, vessels, barges, ships and equipment. 

“Gaming Laws” means all applicable provisions of all: (a) constitutions, treaties, statutes or laws governing Gaming
Facilities (including card club casinos and pari-mutuel racetracks) and rules, regulations, codes and ordinances of, and all administrative or judicial orders or decrees or other laws pursuant to which, any Gaming Authority possesses regulatory,

  
 - 10 - 

 
licensing or permit authority over gambling, gaming, racing or Gaming Facility activities conducted, operated or managed by the Company or any of its Restricted Subsidiaries within its
jurisdiction; (b) Gaming Approvals; and (c) orders, decisions, determinations, judgments, awards and decrees of any Gaming Authority. 

“Global Note Legend” means the legend set forth in Section 2.06(f) which is required to be placed on all Global Notes
issued under this Indenture. 
 “Global Notes” means, individually and collectively, each of the Global Notes issued in
accordance with Sections 2.01 and 2.06 hereof. 
 “GLPI” means Gaming and Leisure Properties, Inc., a
Pennsylvania corporation, or its successor. 
 “Government Securities” means direct obligations of, or obligations
guaranteed by, the United States of America, and for the payment of which the United States pledges its full faith and credit. 

“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of
business, direct or indirect, in any manner, including by way of a pledge of assets, of all or any part of any Indebtedness; provided that “Guarantee” shall not include any lease of property (where the Company or a Subsidiary
of the Company is the lessee) entered into in connection with the issuance of industrial revenue bonds or similar instruments which industrial revenue bonds or similar instruments are held by the Company or its Subsidiaries, where such lease
obligations were intended to support debt service on such industrial revenue bonds or similar instruments. 
 “Guarantor”
means a Restricted Subsidiary that is required to provide a guarantee in respect of a particular series of Notes pursuant to the provisions of this Indenture. 

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under: 

(1) interest rate swap agreements, currency swap agreement, interest rate cap agreements, interest rate collar agreements,
commodity swap agreement, commodity cap agreement, commodity collar agreement or foreign exchange contract; and 
 (2) other
agreements or arrangements designed to hedge or protect such Person against, or transfer or mitigate, fluctuations in interest rates or currency exchange rates. 

“Holder” means a Person in whose name a Note is registered. 

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: 

(1) in respect of borrowed money; 

  
 - 11 - 

 (2) evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or, without double counting, reimbursement agreements in respect thereof); 
 (3) in respect of banker’s
acceptances; 
 (4) representing Capital Lease Obligations (it being understood that the obligations of such Person under the
Master Lease or any Additional Lease shall not constitute Indebtedness); 
 (5) representing the balance deferred and unpaid
of the purchase price of any property, except (i) any such balance that constitutes an accrued expense or trade payable or liabilities incurred in the ordinary course of business, including insurance premium financing, or is payable through the
issuance of Equity Interests (other than Disqualified Stock) of the Company and (ii) any earn-out obligation until such obligation appears in the liabilities section of the balance sheet of such Person;
provided that any earn-out obligation that appears in the liabilities section of the balance sheet (excluding disclosure in footnotes or notes relating thereto) of such Person shall be excluded to the
extent (x) such Person is indemnified for the payment thereof or (y) amounts to be applied to the payment therefor are in escrow; 

(6) representing net obligations under any Hedging Obligations, 

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness (excluding prepaid interest thereon) of others secured by a Lien on any asset of the specified Person (whether or not such
Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of the types referred to in clauses (1) through (6) above of any other Person, other than
by endorsement of negotiable instruments for collection in the ordinary course of business. 
 The amount of any Indebtedness outstanding as
of any date will be: 
 (a) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original
issue discount; 
 (b) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more
than 30 days past due, in the case of any other Indebtedness; 
 (c) in the case of Indebtedness of others secured by a Lien
on any assets of the specified Person, the lesser of the amount of such Indebtedness and the fair market value of such assets; 

(d) in the case of clause (5) above, the net present value thereof determined in accordance with GAAP; 

  
 - 12 - 

 (e) in the case of clause (6), zero unless and until such Indebtedness shall
be terminated, in which case the amount of such Indebtedness shall be the then termination payment due thereunder by such Person; and 

(f) obligations in respect of letters of credit issued in support of obligations not otherwise constituting Indebtedness shall
not constitute Indebtedness except to the extent such letter of credit is drawn and not reimbursed within ten Business Days. 
 For the
avoidance of doubt, it is understood and agreed that (i) (x) casino “chips” and gaming winnings of customers, (y) any obligations of such Person in respect of cash management agreements and (z) any obligations of such
Person in respect of employee deferred compensation and benefit plans shall not constitute Indebtedness, (ii) (x) mortgage, industrial revenue bond, industrial development bond or similar financings to the extent that the holder of such
Indebtedness is the Company or any of its Subsidiaries and (y) Capitalized Lease Obligations to the extent payments in respect of such Capitalized Lease Obligations fund payments made under Indebtedness of the type described in clause (x)
held by the Company or its Subsidiaries shall not constitute Indebtedness and (iii) obligations under the Master Lease or any Additional Lease shall not constitute Capitalized Lease Obligations or any other type of Indebtedness. 

“Indenture” means this Indenture, as amended or supplemented from time to time, and shall include the form and terms of
particular series of Notes established from time to time as contemplated by Section 2.01. 
 “Indirect Participant”
means a Person who holds a beneficial interest in a Global Note through a Participant. 
 “Landlord” means Gold Merger Sub,
LLC, a Delaware limited liability company, in its capacity as landlord under the Master Lease, and its successors in such capacity and any Subsidiaries of GLPI acting as landlord or co-landlord under the Master Lease. 

“Legal Holiday” means a Saturday, a Sunday or a day on which commercial banking institutions in the City of New York or
at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue on such payment for the intervening period (unless otherwise specified). 
 “Lien” means, with
respect to any asset, any mortgage, lien, pledge, or security interest of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention
agreement and any lease in the nature thereof. 
 “Master Lease” means that certain Master Lease, dated as of
April 28, 2016, by and between Landlord and Tenant, as it may be amended, restated, replaced or otherwise modified from time to time in accordance with, or as not prohibited by, this Indenture. 

  
 - 13 - 

 “Meadows Lease” means that certain Lease, dated as of September 9, 2016,
between PA Meadows, LLC, WTA II, Inc., and CCR Pennsylvania Racing, Inc., as lessor, and PNK Development 33, LLC, as lessee, as it may be amended, restated, replaced or otherwise modified from time to time. 

“Merger” refers to the merger of Pinnacle Predecessor with and into Gold Merger Sub, LLC, a direct, wholly owned subsidiary
of GLPI, with Gold Merger Sub, LLC surviving the merger as a wholly-owned subsidiary of GLPI, pursuant to the terms and subject to the conditions set forth in the Agreement and Plan of Merger, dated as of July 20, 2015, as amended pursuant to
Amendment No. 1 thereto, dated as of March 25, 2016, among Pinnacle Predecessor, GLPI and Gold Merger Sub, LLC. 

“Moody’s” means Moody’s Investors Service, Inc. and its successors. 

“Non-U.S. Person” means a Person who is not a U.S. Person. 

“Notes” has the meaning assigned to it in the preamble to this Indenture. The initially issued Notes of any series of Notes
and any Additional Notes of such series shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to Notes of a series shall include the initially issued Notes of such series
and any Additional Notes of such series. 
 “Obligations” means any principal, interest, penalties, fees, indemnifications,
reimbursements, Liquidated Damages, other damages and other liabilities and obligations payable under the documentation governing any Indebtedness, including interest after the commencement of any bankruptcy proceeding at the rate specified in the
applicable instrument governing or evidencing such Indebtedness. 
 “Officer” means, with respect to any Person, the
Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Chief Accounting Officer, the Controller, the Secretary, any Assistant Secretary
or any Vice-President of such Person. 
 “Officers’ Certificate” means a certificate signed on behalf of the Company
by two Officers of the Company that meets the requirements of Section 11.05 hereof. 
 “Opinion of Counsel” means an
opinion from legal counsel who is reasonably acceptable to the Trustee that meets the requirements of Section 11.05 hereof. The counsel shall be an attorney employed by, or counsel to, the Company or any Subsidiary of the Company. 

“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the
Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). 

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, limited liability company or government or other entity. 

  
 - 14 - 

 “Pinnacle Predecessor” means the Delaware corporation known as Pinnacle
Entertainment, Inc. immediately prior to the Merger. 
 “Reference Treasury Dealer Quotation” means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by the Company, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the
Company by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date. 

“Reference Treasury Dealer” means any primary U.S. government securities dealer in the City of New York (a “Primary
Treasury Dealer”) selected by the Company. 
 “Responsible Officer,” when used with respect to the Trustee, means
any officer of the Trustee with direct responsibility for the administration of this Indenture. 
 “Restricted Subsidiary”
of a Person means any Subsidiary of such Person that is not an Unrestricted Subsidiary. 
 “S&P” means
Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, and its successors. 
 “SEC”
means the Securities and Exchange Commission. 
 “Securities Act” means the Securities Act of 1933, as amended. 

“Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in
Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. 

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on
which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof. 
 “Subsidiary” means, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation
shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time. Unless otherwise qualified, all references to a “Subsidiary” or to
“Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Company. 
 “Tenant” means Pinnacle
MLS, LLC, a Delaware limited liability company, in its capacity as tenant under the Master Lease, and its successors in such capacity. 

  
 - 15 - 

 “TIA” means the Trust Indenture Act of 1939, as amended (15 U.S.C.
§§ 77aaa-77bbbb), as in effect on the date on which this Indenture is qualified under the TIA, except as provided in Section 9.03 hereof. 

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption period. 

“Trustee” means the party named as such above until a successor replaces it in accordance with the applicable provisions of
this Indenture and thereafter means the successor serving hereunder. 
 “Unrestricted Subsidiary” means any Subsidiary of
the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution in compliance with, or not prohibited by, this Indenture; provided that the Existing Unrestricted Subsidiaries shall
initially be designated as Unrestricted Subsidiaries without compliance with any other requirements. An Unrestricted Subsidiary shall also automatically include (without any further action required by the Board of Directors, compliance with the
preceding conditions or otherwise) any Subsidiary of an Unrestricted Subsidiary. 
 “U.S. Person” means a U.S. person as
defined in Rule 902(o) under the Securities Act. 
 “Voting Stock” of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. 
 Section 1.02 Other
Definitions. 
  

			
	 Term
	  	Defined in
Section
	 “Applicable AML Law”
	  	11.17
	 “Company”
	  	Preamble
	 “Covenant Defeasance”
	  	8.03
	 “Indemnified Party”
	  	7.07
	 “Legal Defeasance”
	  	8.02
	 “Liquidated Damages”
	  	6.01
	 “New York Banking Day”
	  	11.15
	 “Paying Agent”
	  	2.03
	 “Payment Default”
	  	6.01
	 “Registrar”
	  	2.03
	 “Reports Default Notice”
	  	6.01

 Section 1.03 Incorporation by Reference of Trust Indenture Act. 

Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. 

  
 - 16 - 

 The following TIA terms used in this Indenture have the following meanings: 

“indenture securities” means the Notes; 

“indenture security Holder” means a Holder of a Note; 

“indenture to be qualified” means this Indenture; 

“indenture trustee” or “institutional trustee” means the Trustee; and 

“obligor” on the Notes means the Company and any successor obligor upon the Notes. 

All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them. 
 Section 1.04 Rules of Construction. 

Unless the context otherwise requires: 

(a) a term has the meaning assigned to it; 

(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; 

(c) “or” is not exclusive; 

(d) words in the singular include the plural, and in the plural include the singular; 

(e) the words “include,” “including” and other words of similar import mean “include, without limitation” or
“including, without limitation,” regardless of whether any reference to “without limitation” or words of similar import is made; and the included items do not limit the scope of the more general terms; and the listed included
items are covered whether or not they are within the scope of the more general terms; 
 (f) references to “defeasance” shall mean
both covenant defeasance and legal defeasance, unless otherwise specified; 
 (g) provisions apply to successive events and transactions;
and 
 (h) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor
sections or rules adopted by the SEC from time to time. 

  
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 ARTICLE II 

THE NOTES 
 Section 2.01 Amount
Unlimited; Issuable in Series. 
 The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is
unlimited. 
 The Notes may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and, subject to
Section 2.02, set forth, or determined in the manner provided, in an Officers’ Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Notes of any series: 

(a) the title of the Notes of the series, including CUSIP number(s) (which shall distinguish the Notes of the series from Notes of any other
series) and ranking (including the terms of any subordination provisions) of the series; 
 (b) the price or prices (expressed as a
percentage of the principal amount thereof) at which the Notes of the series will be issued; 
 (c) any limit upon the aggregate principal
amount of the Notes of the series which may be authenticated and delivered under this Indenture (except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes of the series pursuant to
Section 2.06, Section 2.07, Section 2.10, Section 3.06 or Section 9.05); 
 (d) the Person to whom any interest on
a Note of the series shall be payable, if other than the Person in whose name that Note (or one or more predecessor Notes) is registered at the close of business on the record date for such interest; 

(e) the date or dates on which the principal of any Notes of the series is payable; 

(f) the rate or rates (which may be fixed or variable) per annum or, if applicable, the method used to determine such rate or rates
(including, but not limited to, any commodity, commodity index, stock exchange index or financial index) at which the Notes of the series shall bear interest, if any, the date or dates from which any such interest shall accrue, the interest payment
dates on which any such interest shall be payable and the record date for any such interest payable on any interest payment date; 
 (g) the
place or places where the principal of and any premium and interest, if any, on any Notes of the series shall be payable, where the Notes of the series may be surrendered for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Notes of the series and this Indenture may be delivered, and the method of such payment, if by wire transfer, mail or other means; 

(h) if applicable, the period or periods within which, the price or prices at which and the terms and conditions upon which any Notes of the
series may be redeemed, in 

  
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whole or in part, at the option of the Company and, if other than by a Board Resolution, the manner in which any election by the Company to redeem the Notes of the series shall be evidenced and
any provisions for mandatory repurchase offers under certain circumstances; 
 (i) the obligation, if any, of the Company to redeem or
purchase the Notes of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Notes of the
series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; 
 (j) the dates, if any, on which and the price or
prices at which the Notes of the series will be repurchased by the Company at the option of the Holders thereof and other detailed terms and provisions of such repurchase obligations; 

(k) if the amount of principal of or any premium or interest on any Notes of the series may be determined with reference to a financial or
economic measure or to an index based on a currency or currencies or by reference to a commodity, commodity index, stock exchange index or financial index or pursuant to a formula, the manner in which such amounts shall be determined; 

(l) if other than the entire principal amount thereof, the portion of the principal amount of any Notes of the series which shall be payable
upon declaration of acceleration of the maturity thereof pursuant to Section 6.02; 
 (m) if the principal amount payable at the Stated
Maturity of any Notes of the series will not be determinable as of any one or more dates prior to the Stated Maturity, the amount which shall be deemed to be the principal amount of such Notes as of any such date for any purpose thereunder or
hereunder, including the principal amount thereof which shall be due and payable upon any maturity other than the Stated Maturity or which shall be deemed to be outstanding as of any date prior to the Stated Maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount shall be determined); 
 (n) if other than by a Board Resolution, the manner
in which any election by the Company to defease any Notes of the series pursuant to Section 8.02 or Section 8.03 shall be evidenced; or, that the Notes of the series, in whole or any specified part, shall not be defeasible pursuant to
Section 8.02 or Section 8.03 or both such Sections; 
 (o) if applicable, that any Notes of the series shall be issuable in whole
or in part in the form of one or more Global Notes and, in such case, the respective Depositaries for such Global Notes, the form of any Global Note Legend or Legends which shall be borne by any such Global Note in addition to or in lieu of that set
forth in Section 2.06(f) and any circumstances in addition to or in lieu of those set forth in Section 2.06 in which any such Global Note may be exchanged in whole or in part for Notes registered, and any transfer of such Global Note in
whole or in part may be registered, in the name or names of Persons other than the Depositary for such Global Note or a nominee thereof; 

(p) the designation of the currency, currencies or currency units in which payment of the principal of and interest, if any, on the Notes of
the series will be made; 

  
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 (q) if payments of principal of or interest, if any, on the Notes of the series are to be made in
one or more currencies or currency units other than that or those in which such Notes of the series are denominated, the manner in which the exchange rate with respect to such payments will be determined; 

(r) the provisions, if any, relating to any Guarantee provided for the Notes of the series, and, if so, the identity of any guarantor, the
terms and conditions upon which such series of Notes will be guaranteed, including the terms of subordination, if any, of such Guarantee; 

(s) the provisions, if any, relating to any security or collateral for a series of Notes, the terms and conditions upon which such series of
Notes will be secured, including the terms of subordination, if any, of such security or collateral; 
 (t) any depositaries, interest rate
calculation agents, exchange rate calculation agents or other agents with respect to Notes of the series if other than those appointed herein; 

(u) the provisions, if any, relating to conversion or exchange of any Notes of the series, including if applicable, the conversion or exchange
price, the conversion or exchange period, provisions as to whether conversion or exchange will be mandatory, at the option of the Holders thereof or at the option of the Company, the events requiring an adjustment of the conversion price or exchange
price and provisions affecting conversion or exchange if the series of Notes are redeemed; 
 (v) any addition to, deletion from or change
in the Events of Default which apply to any Notes of the series and any addition to, deletion from or change in the right of the Trustee or the requisite Holders of Notes of such series to declare the principal amount thereof due and payable
pursuant to Section 6.02; 
 (w) any addition to, deletion from or change in the covenants set forth in Articles 4 or 5 which apply to
Notes of the series; 
 (x) any addition to, deletion from or change in the definitions set forth in Article 1 which apply to Notes of the
series; and 
 (y) any other terms of the Notes of the series (which terms may supplement, modify or delete any provision of this Indenture,
insofar as it applies to such series of Notes), including any terms that may be required under applicable law or regulations or advisable in connection with the marketing of Notes of the series;. 

All Notes of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 2.02) set forth, or determined in the manner provided, in the Officers’ Certificate referred to above or in any such indenture supplemental hereto. All Notes of any one
series need not be issued at one time and, unless otherwise provided in or pursuant to the Board Resolution referred to above and (subject to Section 2.02) set forth, or determined in the manner provided, in the Officers’ Certificate
referred to above or in any such indenture supplemental hereto with respect to a series of Notes, additional Notes of a series may 

  
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be issued, at the option of the Company, without the consent of any Holder, at any time and from time to time. 

If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers’ Certificate setting forth the terms of the series. If all of the Notes of any series
established by action taken pursuant to a Board Resolution are not to be issued at one time, it shall not be necessary to deliver a record of such action at the time of issuance of each Note of such series, but an appropriate record of such action
shall be delivered at or before the time of issuance of the first Note of such series. 
 Section 2.02 Form and Dating; Execution and
Authentication. 
 (a) General. The Notes of a series and the Trustee’s certificate of authentication shall be substantially
in the form as shall be established by or pursuant to a Board Resolution, in an Officers’ Certificate or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or Depositary
therefor or as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution thereof. If the form of Notes of any series is established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Authentication Order contemplated by Section 2.02(d) for the
authentication and delivery of such Notes. If all of the Notes of any series established by action taken pursuant to a Board Resolution are not to be issued at one time, it shall not be necessary to deliver a record of such action at the time of
issuance of each Note of such series, but an appropriate record of such action shall be delivered at or before the time of issuance of the first Note of such series. 

The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $2,000 and integral multiples of $1,000 in excess thereof. 
 The terms and
provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture, and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be
bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. 

(b) Global Notes. Each Global Note of a series shall represent such of the outstanding Notes of such series as shall be specified
therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes of such series from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes of such series represented
thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note of a series to reflect the amount 

  
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of any increase or decrease in the aggregate principal amount of outstanding Notes of such series represented thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. 
 (c) Execution. The
Notes shall be executed by an Officer or an authorized signatory as identified in an Officers’ Certificate (pursuant to a power of attorney or other similar instrument). The signature of any such Officer (or authorized signatory) on the Notes
shall be by manual or facsimile signature in the name and on behalf of the Company. 
 If an Officer whose signature is on a Note no longer
holds that office at the time the Trustee or authenticating agent authenticates the Note, the Note shall be valid nevertheless. 
 A Note
shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. 

(d) Authentication. The Trustee or an authenticating agent shall, upon receipt of a Company Order, authenticate Notes of a series for
original issue in an aggregate principal amount specified in the Company Order. Such Company Order shall specify the amount of Notes of such series to be authenticated and the date on which the original issue of Notes of such series is to be
authenticated. The aggregate principal amount of Notes, including any Additional Notes, of a series of outstanding at any time may not exceed the aggregate principal amount of Notes of such series authorized for issuance by the Company, pursuant to
one or more Company Orders except as provided in Section 2.07 hereof. 
 The Trustee or an authorized agent, shall upon receipt of a
Company Order and an Officers’ Certificate and Opinion of Counsel pursuant to Section 11.04 authenticate Additional Notes of a series for original issue in an aggregate principal amount set forth in the Company Order. 

The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such authentication agent. An authenticating agent has the same rights as an Agent to deal with the Company or an
Affiliate of the Company. 
 The Notes shall be issuable only in registered form without coupons and only in minimum denominations of
$2,000 in aggregate principal amount and any integral multiples of $1,000 in excess thereof. 
 Section 2.03 Registrar and Paying Agent. 

The Company shall maintain, with respect to each series of Notes, at the place or places specified with respect to such series pursuant to
Section 2.01, an office or agency where Notes of such series may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where Notes of such series may be presented for payment
(“Paying Agent”). The Registrar shall keep a register of the Notes of each series and of their transfer and 

  
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exchange. The Company may appoint one or more co-registrars and one or more additional paying agents for a series of Notes. The term “Registrar” includes any co-registrar and the
term “Paying Agent” includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. 

The Company initially appoints DTC to act as Depositary with respect to the Global Notes of each series. 

The Company initially appoints the Trustee to act as the Registrar and Paying Agent for each series and to act as Custodian for DTC with
respect to the Global Notes of each series unless another Registrar, Paying Agent or Custodian, as the case may be, is appointed prior to the time Notes of that series are first issued. 

Section 2.04 Paying Agent To Hold Money in Trust. 

The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit
of Holders of any series of Notes or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes of such series, and will notify the Trustee of any default by the
Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent for Notes of a series, it shall segregate and hold in a
separate trust fund for the benefit of the Holders of Notes of such series all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. 

Section 2.05 Holder Lists. 
 The
Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders of each series of Notes and shall otherwise comply with TIA § 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date for such series and at such other times as the Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of such series of Notes and the Company shall otherwise comply with TIA § 312(a). 

Section 2.06 Transfer and Exchange. 

(a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All

  
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Global Notes of a series will be exchanged by the Company for Definitive Notes of such series if: 

(i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; or 

(ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for
Definitive Notes and delivers a written notice to such effect to the Trustee. 
 Upon the occurrence of either of the preceding events in
(i), or (ii) above, Definitive Notes of a series shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes of a series also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note of a series authenticated and delivered in exchange for, or in lieu of, a Global Note of such series or any portion thereof, pursuant to this Section 2.06 or 2.07 or 2.10 hereof, shall be authenticated and delivered in
the form of, and shall be, a Global Note of such series. A Global Note of a series may not be exchanged for another Note of such series other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note of a series
may be transferred and exchanged as provided in Section 2.06(b), or (c) hereof. Neither the Company nor the Trustee shall be liable for any delay by the Holder of a Global Note of a series or the Depositary in identifying holders of
beneficial interests in the Global Notes of such series. 
 (b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Transfers of beneficial interests in the Global Notes
also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: 

(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial interest in the same Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this
Section 2.06(b)(i). 
 (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In
connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either: 

(A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another 

  
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Global Note of the same series in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such increase; or 
 (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note of the same series in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in
(1) above. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes of a series contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) of such series pursuant to Section 2.06(g) hereof. 
 (c) Transfer or
Exchange of Beneficial Interests in Global Notes for Definitive Notes. If any holder of a beneficial interest in a Global Note of a series proposes to exchange such beneficial interest for a Definitive Note of such series or to transfer such
beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note of such series, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note of such series to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a
Definitive Note of such series in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination
or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. 
 (d) Transfer and Exchange of Definitive Notes for Beneficial Interests in Global Notes. A
Holder of a Definitive Note of a series may exchange such Note for a beneficial interest in a Global Note of such series or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Global Note
of such series at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Global Notes of such
series. 
 (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes of a
series and such Holder’s compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes of such series. Prior to such registration of transfer or exchange, the requesting
Holder shall present or surrender to the Registrar the Definitive Notes of such series duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly
authorized in writing. In addition, the 

  
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requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). A Holder of
Definitive Notes of a series may transfer such Notes to a Person who takes delivery thereof in the form of a Definitive Note of such series. Upon receipt of a request to register such a transfer, the Registrar shall register the Definitive Notes of
such series pursuant to the instructions from the Holder thereof. 
 (f) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form: 
 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO PINNACLE ENTERTAINMENT, INC. ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 
 TRANSFERS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. 
 THE NOTES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON OWNERSHIP AND TRANSFER IMPOSED BY APPLICABLE GAMING LAWS, THE PROVISIONS OF ARTICLE XIII OF THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION (DEALING WITH GAMING LAWS AND GAMING-RELATED RESTRICTIONS ON OWNERSHIP
AND TRANSFER), INCLUDING ANY AMENDMENTS THERETO OR ANY SUCCESSOR PROVISIONS THERETO, AND Section 3.07(b) OF THE INDENTURE (WHICH IS SUMMARIZED ON THIS CERTIFICATE). A COPY OF ARTICLE XIII OF THE COMPANY’S RESTATED CERTIFICATE OF
INCORPORATION IS ON FILE AT THE OFFICE OF THE COMPANY, AND MADE A PART HEREOF AS FULLY AS THOUGH THE PROVISIONS OF SAID PROVISIONS OF THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION WERE PRINTED IN FULL ON THIS CERTIFICATE, TO ALL OF WHICH
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE HEREOF, 

  
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ASSENTS AND AGREES TO BE BOUND. ANY HOLDER OF A NOTE MAY OBTAIN, UPON REQUEST AND WITHOUT CHARGE, A COPY OF SUCH PROVISIONS OF THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION. ANY SUCH
REQUEST SHALL BE ADDRESSED TO THE SECRETARY OF THE COMPANY. 
 (g) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for Definitive Notes of the same series or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to
or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note of a series is exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Note of such series or for Definitive Notes of such series, the principal amount of Notes of such series represented by such Global Note shall be reduced accordingly and an endorsement
shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note of such series, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such increase. 
 (h) General Provisions Relating to Transfers and Exchanges. 

(i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global
Notes and Definitive Notes upon receipt of a Company Order or at the Registrar’s request. 
 (ii) No service charge
shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, and 9.05 hereof). 

(iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or
in part, except the unredeemed portion of any Note being redeemed in part. 
 (iv) All Global Notes and Definitive Notes
issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or
Definitive Notes surrendered upon such registration of transfer or exchange. 
 (v) The Company shall not be required
(A) to issue, to register the transfer of or to exchange any Notes of a series during a period beginning at the opening of business 

  
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15 days before the mailing of a notice of redemption of Notes of such series under Section 3.03 hereof and ending at the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note of such series so selected for redemption in whole or in part, except the unredeemed portion of any Note of such series being redeemed in part or (C) to register the transfer of or to exchange a Note of a
series between a record date and the next succeeding interest payment date. 
 (vi) Prior to due presentment for the
registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. 

(vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02
hereof. 
 (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant
to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. 
 (ix) The Trustee
shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Notes (including any
transfers between or among depositary participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when
expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 

(x) Neither the Trustee nor any Agent shall have any responsibility or liability for any actions taken or note taken by the
Depositary. 
 Section 2.07 Replacement Notes. 

If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction,
loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of a Company Order, shall authenticate a replacement Note of the same series if the Trustee’s requirements are met. If required by the Trustee or the Company, an
indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note. 
 Every replacement Note of a series is an additional obligation of
the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes of such series duly issued hereunder. 

  
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 Section 2.08 Outstanding Notes. 

The Notes of a series outstanding at any time are all the Notes of such series authenticated by the Trustee except for those canceled by it,
those delivered to it for cancellation, those reductions in the interest in a Global Note of such series effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in
Section 2.09 hereof, a Note of a series does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note of such series; however, Notes of such series held by the Company or a Subsidiary of the Company shall
not be deemed to be outstanding for purposes of Section 3.07(a) hereof. 
 If a Note is replaced pursuant to Section 2.07 hereof,
it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. 

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases
to accrue. 
 If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or
maturity date, money sufficient to pay Notes of a series payable on that date, then on and after that date such Notes of such series shall be deemed to be no longer outstanding and shall cease to accrue interest. 

Section 2.09 Treasury Notes. 
 In
determining whether the Holders of the required principal amount of Notes of a series have concurred in any direction, waiver or consent, Notes of such series owned by the Company, or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only
Notes of such series that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. 
 Section 2.10 Temporary
Notes. 
 Until certificates representing Notes of a series are ready for delivery, the Company may prepare and the Trustee, upon receipt
of a Company Order, shall authenticate temporary Notes of such series. Temporary Notes shall be substantially in the form of certificated Notes of the same series but may have variations that the Company considers appropriate for temporary Notes and
as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes of the same series. 

Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. 

  
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 Section 2.11 Cancellation. 

The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of canceled
Notes in accordance with its customary procedures (subject to the record retention requirement of the Exchange Act). The Trustee shall notify the Company in writing upon cancellation of any Notes. The Company may not issue new Notes to replace Notes
that it has paid or that have been delivered to the Trustee for cancellation. 
 Section 2.12 Defaulted Interest. 

If the Company defaults in a payment of interest on the Notes of a series, it shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders of Notes of such series on a subsequent special record date, in each case at the rate provided in the Notes of such series and in Section 4.01 hereof.
The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note of such series and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and
payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written
request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders of Notes of such series a notice that states the special record date, the related payment date and the amount of such
interest to be paid. 
 Section 2.13 Issuance of Additional Notes. 

The Company shall be entitled to issue, without the consent of the Holders, Additional Notes of a series under this Indenture that shall be
substantially identical in all respects to the initial Notes of such series, except that Additional Notes may have different issuance prices, will have different issuance dates and may have different CUSIP numbers and Additional Notes may have
redemption provisions conditioned on any particular transaction, and, as a result may not be fungible with or treated as the same issue as the Notes of such series initially issued for United States federal income tax purposes. The initial Notes of
a series and any Additional Notes of such series shall be treated as a single class for all purposes under this Indenture. 
 With respect
to any Additional Notes of a series, the Company shall set forth in a resolution of its Board of Directors and in a Company Order, a copy of each of which shall be delivered to the Trustee, the following information: 

(1) the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture; and

 (2) the issue price, the issue date, the “CUSIP” number (if then generally in use) of such Additional Notes, the
first interest payment date and the amount of interest 

  
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payable on such first interest payment date applicable thereto and the date from which interest shall accrue. 

In authenticating such Additional Notes, and accepting the additional responsibilities under this Indenture in relation to such Notes, the
Trustee shall receive, and shall be fully protected in relying upon: 
 (1) an executed supplemental indenture, if any; 

(2) an Officers’ Certificate delivered in accordance with Section 11.04; and 

(3) an Opinion of Counsel which shall state (subject to customary assumptions, qualifications and exceptions): 

(i) that the form and terms of such Notes have been established in conformity with the provisions of this Indenture; 

(ii) that such Notes, have been duly authorized by all requisite corporate action on the part of the Company and duly executed by the Company
under the Delaware General Corporation Law, and when duly authenticated by the Trustee and issued and delivered by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with their terms under the laws of the State of New York, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, preferences and other
similar laws affecting creditors’ rights generally, and to general principles of equity (regardless of whether enforcement is sought in equity or at law). 

Section 2.14 Designation. 
 Any
Additional Notes of a series issued under this Indenture will rank pari passu in right of payment with the initial Notes of such series. 

Section 2.15 CUSIP Numbers. 
 The
Company in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices as a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice and that reliance may be placed only on the other identification numbers printed on the Notes, and any such notice shall not be
affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the “CUSIP” numbers. 

  
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 ARTICLE III 

REDEMPTION AND PREPAYMENT 

Section 3.01 Notices to Trustee. 
 If
the Company elects to redeem Notes of any series pursuant to the optional redemption provisions of Section 3.07 hereof with respect to such series, it shall furnish to the Trustee, at least 15 days but not more than 60 days before a redemption
date (except to the extent shorter or longer notice of redemption may be given to Holders of such series as provided in Section 3.03), an Officers’ Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes of such series to be redeemed and (iv) the redemption price. 

Section 3.02 Selection of Notes To Be Redeemed. 

Unless otherwise indicated for a particular series of Notes by a Board Resolution, a supplemental indenture hereto or an Officers’
Certificate, if less than all of the Notes of a series are to be redeemed or purchased in an offer to purchase at any time (other than pursuant to Section 3.07(b)), the Trustee will select Notes of such series to be redeemed or purchased among
the Holders of the Notes of such series in compliance with the requirements of the principal national securities exchange, if any, on which the Notes of such series are listed or, if the Notes of such series are not so listed, on a pro rata
basis, by lot or in accordance with DTC procedures. In the event of partial redemption or purchase by lot, the particular Notes of a series to be redeemed or purchased shall be selected, unless otherwise provided herein, not less than 15 nor more
than 60 days prior to the redemption or purchase date by the Trustee from the outstanding Notes of such series not previously called for redemption or purchase. 

The Trustee shall promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note
selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected shall be in amounts of $2,000 or whole multiples of $1,000 in excess thereof; except that if all of the Notes
of a series of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes of such series held by such Holder, even if not $2,000 or a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Notes of a series called for redemption or purchase also apply to portions of Notes of such series called for redemption or purchase. 

Section 3.03 Notice of Redemption. 

Unless otherwise indicated for a particular series by Board Resolution, a supplemental indenture hereto or an Officers’ Certificate
delivered pursuant to Section 2.01, at least 15 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail (or in the case of Global Notes, give pursuant to applicable DTC
procedures), a notice of redemption to each Holder whose Notes of the series called for redemption are to be redeemed at its registered address, except that (i) redemption notices may be mailed or given more than 60 days prior to a redemption
date if the notice is issued in 

  
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connection with a defeasance of the Notes of such series (whether by covenant or legal defeasance) or a satisfaction and discharge of this Indenture with respect to the Notes of such series and
(ii) redemption notices may be mailed or given less than 15 or more than 60 days prior to a redemption date if so required by any applicable Gaming Authority in connection with a redemption described under Section 3.07(b) hereof. 

In connection with any redemption of Notes (including with the net cash proceeds of an Equity Offering), any such redemption may, at the
Company’s discretion, be subject to one or more conditions precedent, such as refinancing, acquisitions or Equity Offerings. In addition, if such redemption or notice is subject to satisfaction of one or more conditions precedent, such notice
shall state that, in the Company’s discretion, the redemption date may be delayed until such time as any or all such conditions shall be satisfied (or waived by the Company in its sole discretion), or such redemption may not occur and such
notice may be rescinded in the event that any or all such conditions shall not have been satisfied (or waived by the Company in its sole discretion) by the redemption date, or by the redemption date so delayed. 

The notice shall identify the Notes (including CUSIP number(s)) of the series to be redeemed and shall state: 

(a) the redemption date; 
 (b)
the redemption price; 
 (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and
that, after the redemption date upon surrender of such Note, in the case of physical Notes a new Note or Notes of such series in aggregate principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; 

(d) the name and address of the Paying Agent; 

(e) that Notes of the series called for redemption must be surrendered to the Paying Agent to collect the redemption price; 

(f) that, unless the Company defaults in making such redemption payment, interest on Notes of the series called for redemption ceases to
accrue on and after the redemption date, subject to the satisfaction of any condition to such redemption; 
 (g) the paragraph of the Notes
and/or Section of this Indenture pursuant to which the Notes of the series called for redemption are being redeemed; and 
 (h) that no
representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes; and 

(i) any other information as may be required by the terms of the particular series or the Notes of a series being redeemed. 

At the Company’s written request, the Trustee shall give the notice of redemption in the Company’s name and at its expense;
provided, however, that the Company shall have 

  
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delivered to the Trustee, at least 10 days prior to the date on which the Trustee shall send out the notice of redemption (unless a shorter period is acceptable to the Trustee), an Officers’
Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. 

Nothing in this Indenture shall otherwise prohibit or prevent, the Company or its Affiliates from, at any time, and from time to time,
acquiring Notes of any series or other Indebtedness, whether through open market or privately negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices as well as
with such consideration as the Company or any such affiliates may determine. 
 Section 3.04 Effect of Notice of Redemption. 

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes of a series called for redemption become irrevocably due
and payable on the redemption date at the redemption price, subject to the satisfaction of any condition to such redemption. 
 Section 3.05 Deposit
of Redemption or Purchase Price. 
 No later than 10:00 a.m. New York City time on the redemption or purchase date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of, and accrued and unpaid interest and Liquidated Damages, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the
Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, accrued interest and Liquidated Damages, if any,
on, all Notes to be redeemed or purchased. 
 If the Company complies with the provisions of the preceding paragraph, on and after the
redemption or purchase date, subject to the satisfaction of any conditions to such redemption, interest shall cease to accrue on the Notes or the portions of Notes of the series called for redemption or purchase. If a Note is redeemed or purchased
on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any
Note called for redemption or purchase shall not be so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption
or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes of such series and in Section 4.01 hereof. 

Section 3.06 Notes Redeemed or Purchased in Part. 

Upon surrender of a Note that is redeemed or purchased in part, the Company shall issue and, upon the Company’s written request, the
Trustee shall authenticate for the Holder at the expense of the Company a new Note of the same series and the same maturity equal in aggregate principal amount to the unredeemed or unpurchased portion of the Note surrendered. 

  
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 Section 3.07 Optional Redemption and Gaming Redemption. 

(a) Notes of any series which are redeemable before their maturity shall be redeemable in accordance with their terms set forth in any Board
Resolution, Officers’ Certificate or supplemental indenture that establishes or amends the terms of the Notes of such series and in accordance with this Article. 

(b) In addition to the foregoing, if (1) any Gaming Authority makes a determination of unsuitability of a Holder or Beneficial Owner of
Notes of any series (or an Affiliate of such Holder or Beneficial Owner), or (2) any Gaming Authority requires that a Holder or Beneficial Owner of Notes of any series (or an Affiliate thereof) must either (i) be licensed, qualified or
found suitable under any applicable Gaming Laws or (ii) reduce its position in the Notes of such series to below a level that would require licensure, qualification or a finding of suitability, and such Holder or Beneficial Owner (or Affiliate
thereof): (A) fails to apply for a license, qualification or a finding of suitability within 30 days (or such shorter period as may be required by the applicable Gaming Authority) after being requested to do so by the Gaming Authority, or
(B) fails to reduce its position in the Notes of such series appropriately, or (C) is denied such license or qualification or not found suitable, or (3) any Gaming Authority otherwise requires that Notes of any series from any Holder
or Beneficial Owner be redeemed, subject to applicable Gaming Laws, the Company shall have the right, at its option: (i) to require any such Holder or Beneficial Owner to dispose of its Notes (or applicable portion of Notes) of such series
within 30 days (or such earlier date as may be required by the applicable Gaming Authority) of receipt of such notice or finding by such Gaming Authority, or (ii) to call for the redemption of the Notes (or applicable portion of Notes) of
such series of such Holder or Beneficial Owner at a redemption price equal to the least of: (A) the principal amount thereof, together with accrued and unpaid interest, if any, to, but not including, the earlier of the date of redemption or the
date of the denial of license or qualification or of the finding of unsuitability by such Gaming Authority, (B) the price at which such Holder or Beneficial Owner acquired the Notes of such series, together with accrued and unpaid interest and
to, but not including, the earlier of the date of redemption or the date of the denial of license or qualification or of the finding of unsuitability by such Gaming Authority, or (C) such other lesser amount as may be required by any Gaming
Authority. Immediately upon a determination by a Gaming Authority that a Holder or Beneficial Owner of Notes of such series (or an Affiliate thereof) will not be licensed, qualified or found suitable or is denied a license, qualification or finding
of suitability, the Holder or Beneficial Owner will not have any further rights with respect to the Notes of such series to: (1) exercise, directly or indirectly, through any Person, any right conferred by the Notes of such series; or
(2) receive any interest or additional interest, if any, or any other distribution nor payment with respect to the Notes of such series, or (3) receive any remuneration in any form from the Company or its Affiliates for services rendered
or otherwise, except the redemption price of the Notes of such series. 
 The Company shall notify the Trustee in writing of any such
redemption as soon as practicable, and in any event, no later than five Business Days after receiving notice from the Gaming Authority of such notice or finding. The Holder or Beneficial Owner applying for license, qualification or a finding of
suitability must pay all costs of the licensure or investigation for such qualification or finding of suitability. 

  
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 (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof. 
 Section 3.08 Special Mandatory Redemption. 

The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 

ARTICLE IV 

COVENANTS 
 Section 4.01 Payment
of Notes. 
 The Company shall pay or cause to be paid the principal of, premium, if any, and interest and Liquidated Damages, if any, on
the Notes of a series on the dates and in the manner provided in the terms of the Notes of such series. Principal, premium or Liquidated Damages, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the
Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium or Liquidated Damages, if any, and
interest then due. 
 The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes of a series to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy
Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. 

Section 4.02 Reports. 
 (a) Whether
or not required by the SEC, so long as any Notes of a series are outstanding, the Company shall furnish to the Trustee, with written instructions for mailing (or in the case of Global Notes, delivery pursuant to applicable DTC procedures) to the
Holders of Notes of such series, upon Holder request, within 30 days after the time periods specified in the SEC’s rules and regulations for a non-accelerated filer, (i) all quarterly and annual financial information that is filed or that
would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K, as applicable, if or as if the Company were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by the Company’s certified independent accountants; and (ii) all current reports that would be required to be filed
with the SEC on Form 8-K if the Company were required to file such reports. The availability of the foregoing materials on the SEC’s EDGAR service (or any successor thereto) shall be deemed to satisfy the Company’s obligations to furnish
such materials to the Trustee for mailing (or in the case of Global Notes, delivery pursuant to applicable DTC procedures) to the Holders of Notes of such series upon Holder request, provided, however, that

  
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the Trustee shall have no obligation whatsoever to determine whether or not such information, documents or reports have been filed pursuant to the EDGAR service (or its successor). Delivery of
such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained
therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates). The Company shall promptly notify the Trustee whenever it shall have filed
a Quarterly Report on Form 10-Q or an Annual Report on Form 10-K; provided that the failure to so notify the Trustee shall not be deemed a failure to comply with this Section 4.02(a). 

(b) In addition, the Company has agreed that, for so long as any Notes of a series remain outstanding, if the Company is not required to file
with the SEC the reports required by Section 4.02(a), it will furnish to the Holders of such series and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act. 
 Section 4.03 Compliance Certificate. 

(a) To the extent any Notes of a series are outstanding, the Company shall deliver to the Trustee, within 120 days after the end of each fiscal
year, beginning for the fiscal year ending December 31, [        ], an Officers’ Certificate (which Officers’ Certificate must be signed by the principal executive officer, the principal
financial officer or the principal accounting officer of the Company) stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a
view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has
kept, observed, performed and fulfilled each and every covenant contained in this Indenture applicable to the Notes of such series and is not in default in the performance or observance of any of the terms, provisions and conditions of this
Indenture applicable to the Notes of such series (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to
take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of premium on, if any, interest or Liquidated Damages, it any or interest,
if any, on the Notes of such series is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. 

(b) The Company shall, so long as any of the Notes of a series are outstanding, deliver to the Trustee, forthwith upon any Officer becoming
aware of any Default or Event of Default with respect to the Notes of such series, an Officers’ Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. 

  
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 Section 4.04 Stay, Extension and Usury Laws. 

The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted. 
 ARTICLE V 

SUCCESSORS 
 Section 5.01 Merger,
Consolidation or Sale of Assets. 
 (a) The Company shall not, directly or indirectly, consolidate or merge with or into another Person
(whether or not the Company is the surviving corporation) or sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more
related transactions, to another Person unless: 
 (i) either (A) the Company is the surviving corporation; or
(B) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a Person organized or existing under the laws of
the United States, any state of the United States or the District of Columbia (provided that if such Person is not a corporation, a co-obligor of the Notes is a corporation organized or existing under such laws); 

(ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, conveyance or other disposition has been made expressly assumes, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the performance of every covenant of the Notes and this Indenture on the part of the Company to be performed or observed; and 

(iii) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company) shall have
delivered to the Trustee an officers’ certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance, other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, comply with the applicable provisions of the indenture and that all conditions precedent in the indenture relating to such transaction have been satisfied. 

  
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 In addition, the Company may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related transactions, to any other Person. 
 (b) Upon any sale, assignment,
transfer, conveyance or other disposition of all or substantially all of the Company’s and its Restricted Subsidiaries’ assets, taken as a whole, in compliance with the provisions of this Section 5.01, the Company will be released
from the obligations under the Notes and this Indenture except with respect to any obligations that arise from, or are related to, such transaction. 

This Section 5.01 will not apply to: (i) a merger, consolidation, sale, assignment, transfer, conveyance, lease or other disposition
of assets between or among the Company and any of its Restricted Subsidiaries; (ii) a merger between the Company and an Affiliate of the Company incorporated or formed solely for the purpose of reincorporating or reorganizing the Company in
another state of the United States or the District of Columbia or changing the legal domicile of the Company or for the sole purpose of forming or collapsing a holding company structure or changing the form of legal entity; or (iii) any
transfers, sales or dispositions of real property and related assets to GLPI or its Subsidiaries to the extent the Company or its Restricted Subsidiaries will lease such real property and related assets. 

Section 5.02 Successor Person Substituted. 

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the
Company’s or its Restricted Subsidiaries’ assets, taken as a whole, in compliance with Section 5.01 hereof, the successor Person formed by such consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this
Indenture referring to the “Company” shall refer instead to the successor Person and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been
named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of, premium on, if any, interest and Liquidated Damages, if any, and interest on the Notes
except in the case of a sale, assignment, transfer, conveyance or other disposition of all of the Company’s or its Restricted Subsidiaries’ assets, taken as a whole, that meets the requirements of Section 5.01 hereof. 

ARTICLE VI 

DEFAULTS AND REMEDIES 
 Section 6.01
Events of Default. 
 (a) An “Event of Default”, when used herein with respect to Notes of any series, occurs if
(unless in the establishing Board Resolution, supplemental indenture or Officers’ Certificate, it is provided that such series shall not have the benefit of said Event of Default): 

  
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 (i) the Company defaults in the payment when due of interest on, or Liquidated
Damages with respect to, the Notes of such series and such default continues for a period of 30 days; 
 (ii) the Company
defaults in the payment when due of the principal of or premium, if any, on the Notes of such series when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; 

(iii) subject to Section 6.01(b), the Company or any of its Restricted Subsidiaries fails to observe or perform any other
covenant, representation, warranty or other agreement in this Indenture or the Notes (other than a covenant, representation, warranty or other agreement that has been included in this Indenture solely for the benefit of a series of Notes other than
such series) for 60 days after the Company’s receipt of notice from the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of such series then outstanding voting as a single class, unless such failure to
comply has been waived by the Required Holders; 
 (iv) the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law (A) commences a voluntary case, (B) consents to the entry
of an order for relief against it in an involuntary case, (C) consents to the appointment of a custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors, or
(E) generally is not paying its debts as they become due; 
 (v) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary in an involuntary case; (B) appoints a custodian of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary or for all or substantially all of the property of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary; or (C) orders the liquidation of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the
order or decree remains unstayed and in effect for 60 consecutive days; or 
 (vi) any other Event of Default provided with
respect to Notes of such series, which is specified in a Board Resolution, a supplemental indenture hereto or an Officers’ Certificate delivered pursuant to Section 2.01, in accordance with Section 2.01(v). 

(b) Notwithstanding Section 6.01(a)(iii) or any other provision of this Indenture, except as provided in the second to last sentence of
this Section 6.01(b), the sole remedy for any failure to comply by the Company with Section 4.02 hereof or any failure to 

  
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comply with the requirements of Section 314(a) of the TIA shall be the payment of Liquidated Damages as described in the following sentence, such failure to comply shall not constitute an
Event of Default with respect to the Notes of a particular series, and Holders of the Notes of such series shall not have any right under this Indenture to accelerate the maturity of the Notes of such series as a result of any such failure to
comply. If a failure to comply by the Company with Section 4.02 hereof or any failure to comply with the requirements of Section 314(a) of the TIA continues for 60 days after the Company receives notice of such failure to comply in
accordance with Section 6.01(a)(iii) (such notice, the “Reports Default Notice”), and is continuing on the 60th day following the Company’s receipt of the Reports Default Notice, the Company will pay liquidated
damages to all Holders of Notes of such series at a rate per annum equal to 0.25% of the principal amount of the Notes of such series (“Liquidated Damages”) from the 60th day following the Company’s receipt of the Reports
Default Notice to but not including the earlier of (x) the 121st day following the Company’s receipt of the Reports Default Notice and (y) the date on which the failure to comply by the Company with Section 4.02 hereof or
any failure to comply with the requirements of Section 314(a) of the TIA shall have been cured or waived. On the earlier of the date specified in the immediately preceding clauses (x) and (y), such Liquidated Damages will cease to accrue.
If the failure to comply by the Company with Section 4.02 hereof or any failure to comply with the requirements of Section 314(a) of the TIA shall not have been cured or waived on or before the 121st day following the Company’s
receipt of the Reports Default Notice, then the failure to comply by the Company with Section 4.02 hereof or any failure to comply with the requirements of Section 314(a) of the TIA shall on such 121st day constitute an Event of
Default with respect to such series of Notes. A failure to comply with Section 4.02 hereof or any failure to comply with the requirements of Section 314(a) of the TIA automatically shall cease to be continuing and shall be deemed cured at
such time as the Company furnishes to the Trustee the applicable information or report (it being understood that the availability of such information or report on the SEC’s EDGAR service (or any successor thereto) shall be deemed to satisfy the
Company’s obligation to furnish such information or report to the Trustee), provided, however, that the Trustee shall have no obligation whatsoever to determine whether or not such information, documents or reports have been filed
pursuant to EDGAR service (or its successor). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates). 

(c) In the event that the Holders of at least 25% in aggregate principal amount of the then outstanding Notes of a series deliver to the
Trustee a notice of a Default or an Event of Default with respect to such series or an acceleration with respect to such series, such holders also shall deliver a copy of such notice to the Landlord. 

(d) Notwithstanding the foregoing, in the event of a default by the Company or any of its Restricted Subsidiaries in the performance of any of
their respective obligations under this Indenture with respect to Notes of a series, including any default in the payment of any sums payable thereunder, then, in each and every such case, subject to applicable Gaming Laws, the Landlord shall have
the right (subject to the terms of the Master Lease), but not the obligation, to cause the default or defaults to be cured or remedied (to the extent such default is susceptible to cure or remedy) prior to the end of any applicable notice and cure
periods set forth 

  
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in this Indenture, and any such tender of payment or performance by Landlord shall be accepted by the Trustee and the Holders of the Notes of such series and shall constitute payment and/or
performance by the Company or such Restricted Subsidiary for purposes of this Indenture. 
 Section 6.02 Acceleration. 

Subject to the terms of a Board Resolution, a supplemental indenture hereto or an Officers’ Certificate establishing a series of Notes, if
any Event of Default with respect to Notes of a series (other than an Event of Default specified in Section 6.01(iv) or (v) hereof with respect to the Company, any Restricted Subsidiary that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes of such series may declare
all the Notes of such series (or such portion of the principal amount of any Notes of such series, if other than the entire principal amount thereof is to be due and payable under the terms of the Notes of such series) to be due and payable
immediately. Upon any such declaration, the Notes of such series (or such portion thereof) shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in Section 6.01(iv) or (v) hereof occurs
with respect to the Company, all outstanding Notes of such series (or such portion thereof) shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes
of such series by written notice to the Trustee may on behalf of all of the Holders of Notes of such series rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if the Trustee shall have
received an Officers’ Certificate that all existing Events of Default (except nonpayment of principal of, premium on, if any, interest or Liquidated Damages, if any, on the Notes of such series that has become due solely because of the
acceleration) have been cured or waived. 
 Section 6.03 Other Remedies. 

If an Event of Default with respect to Notes of a series occurs and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of, premium on, if any, Liquidated Damages, if any, and interest on the Notes of such series or to enforce the performance of any provision of the Notes of such series or this Indenture with respect to such series. 

The Trustee may maintain a proceeding even if it does not possess any of the Notes of such series or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder of a Note of such series in exercising any right or remedy accruing upon an Event of Default with respect to Notes of such series shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default with respect to Notes of such series. All remedies are cumulative to the extent permitted by law. 

Section 6.04 Waiver of Past Defaults. 

Holders of not less than a majority in aggregate principal amount of the then outstanding Notes of a series by written notice to the Trustee
may on behalf of the Holders of all of the Notes of such series waive an existing Default or Event of Default with respect to Notes of 

  
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such series and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Notes
of such series (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes of such series may rescind an acceleration and its
consequences, including any related payment default that resulted from such acceleration as described in the last sentence of Section 6.02). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. 

Section 6.05 Control by Majority. 

Holders of a majority in aggregate principal amount of the then outstanding Notes of a series may direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it with respect to Notes of such series. However, the Trustee may refuse to follow any direction that conflicts with law or
this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes of such series or that may involve the Trustee in personal liability. 

Section 6.06 Limitation on Suits. 
 A
Holder of a Note of a series may pursue a remedy with respect to this Indenture or the Notes of such series only if: 
 (a) the Holder of a
Note gives to the Trustee written notice of a continuing Event of Default with respect the Notes of such series; 
 (b) the Holders of at
least 25% in aggregate principal amount of the then outstanding Notes of such series make a written request to the Trustee to pursue the remedy; 

(c) such Holder of a Note or Holders of Notes of such series offer and, if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense; 
 (d) the Trustee does not comply with the request within 60 days after receipt of the
request and the offer and, if requested, the provision of indemnity; and 
 (e) during such 60-day period the Holders of a majority in
aggregate principal amount of the then outstanding Notes of such series do not give the Trustee a direction inconsistent with the request. 

A Holder of a Note of a series may not use this Indenture to prejudice the rights of another Holder of a Note of such series or to obtain a
preference or priority over another Holder of a Note of such series (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders). 

  
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 Section 6.07 Rights of Holders of Notes To Receive Payment. 

Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired without the consent of such Holder. 
 Section 6.08 Collection Suit by Trustee. 

If an Event of Default specified in Section 6.01(a)(i) or (ii) occurs and is continuing, the Trustee is authorized to recover
judgment in its own name and as Trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes (or such portion of the principal amount of any
Notes of such series, if other than the entire principal amount thereof is to be due and payable under the terms of the Notes of such series) and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. 

Section 6.09 Trustee May File Proofs of Claim. 

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes of a series allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes of such series), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the
same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes of such series or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. 

  
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 Section 6.10 Priorities. 

If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: 

First: to the Trustee, any Agent and their agents and attorneys for amounts due under Section 7.07 hereof,
including payment of all compensation, expense and indemnity amounts owed, and all advances made, by the Trustee and the costs and expenses of collection; 

Second: to Holders of Notes in respect of which or for the benefit of which such money has been collected for amounts
due and unpaid on such Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal, premium and Liquidated
Damages, if any and interest, respectively; and 
 Third: to the Company or to such party as a court of competent
jurisdiction shall direct. 
 The Trustee may fix a record date and payment date for any payment to Holders of Notes in respect of which or
for the benefit of which such money has been collected pursuant to this Section 6.10. 
 Section 6.11 Undertaking for Costs. 

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted
by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’
fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note
pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Notes of a series. 

ARTICLE VII 

TRUSTEE 
 Section 7.01 Duties of
Trustee. 
 (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in its exercise, as a reasonably prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs. 

(b) Except during the continuance of an Event of Default: 

  
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 (i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied duties, covenants or obligations shall be read into this Indenture against the Trustee; and

 (ii) the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein). 
 (c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except that: 
 (i) this paragraph does not limit
the effect of paragraph (b) of this Section; 
 (ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved by a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts; 

(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof; and 
 (iv) no provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability in the performance of any of its duties hereunder. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders,
unless such Holder shall have offered to the Trustee security and adequate indemnity satisfactory to it against any loss, liability or expense. 

(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section 7.01. 
 (e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. 

(f) The Trustee shall reasonably cooperate with any Gaming Authority of any jurisdiction in which the Company or any of its Subsidiaries
conducts or proposes to conduct gaming and shall produce any document or information as any of them may reasonably request. 

  
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 Section 7.02 Rights of Trustee. 

(a) The Trustee may conclusively rely upon any document, notice or certificate believed by it to be genuine and to have been signed or
presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. 
 (b) Before the Trustee acts
or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion
of Counsel. The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by
it hereunder in good faith and in reliance thereon. 
 (c) The Trustee may act through its attorneys and agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care. 
 (d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. 
 (e)
Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company, and any resolution of the Board of Directors may be sufficiently
evidenced if certified by an Officers’ Certificate. 
 (f) The Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction. 
 (g) In no event shall the Trustee be responsible or liable for special,
indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of
action. 
 (h) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Reasonable Officer of the Trustee
has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. 

(i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder. 

  
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 (j) The Trustee shall not be required to give any bond or surety in respect of the performance of
its powers and duties hereunder. 
 (k) The Trustee may request that the Company deliver a certificate setting forth the names of
individuals and/or titles of offices authorized at such time to take specified actions pursuant to this Indenture. 
 Section 7.03 Individual Rights
of Trustee. 
 The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with
the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. 

Section 7.04 Trustee’s Disclaimer. 

The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall
not be accountable for the Company’s use of the proceeds from the Notes or any money paid to the Company or upon the Company’s direction under any provision of this Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture
other than its certificate of authentication. 
 Section 7.05 Notice of Defaults. 

If a Default or Event of Default occurs and is continuing with respect to the Notes of any series and if it is actually known to a Responsible
Officer of the Trustee, the Trustee shall mail to Holders of Notes of such series a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if
any, interest or Liquidated Damages, if any, on any Note of any series, the Trustee may withhold the notice if and so long as it in good faith determines that withholding the notice is in the interests of the Holders of the Notes of such series.

 Section 7.06 Reports by Trustee to Holders of the Notes. 

Within 60 days after each
[                    ] beginning with
[                    ], [    ] and for so long as Notes of any series remain outstanding, the Trustee shall mail to the Holders
of the Notes of such series a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no event described in TIA § 313(a) has occurred within the twelve months preceding the reporting date, no report
need be transmitted). The Trustee also shall comply with TIA § 313(b). The Trustee shall also transmit by mail all reports as required by TIA § 313(c). 

A copy of each report at the time of its mailing to the Holders of Notes of any series shall be mailed to the Company and filed with the SEC
and each stock exchange on which the Notes are listed in accordance with TIA § 313(d). The Company shall promptly notify the 

  
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Trustee in writing when the Notes of any series are listed on any stock exchange and of any delisting thereof. 

Section 7.07 Compensation and Indemnity. 

The Company shall pay to the Trustee and any Agent from time to time compensation for its acceptance of this Indenture and services hereunder
as agreed in writing between the Company and the Trustee. The Trustee’s compensation shall not be limited by any law on compensation of a Trustee of an express trust. The Company shall reimburse the Trustee and any Agent promptly upon request
for all reasonable disbursements, advances, performance and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee’s
agents and counsel. 
 The Company shall indemnify each of the Trustee, Agent and their officers, directors, employees, representatives and
agents (each, an “Indemnified Party”) and any predecessor Trustee against any and all claims, losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under
this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or
liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or willful misconduct, as determined by a final,
non-appealable judgment of a court of competent jurisdiction. An Indemnified Party shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Indemnified Party to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the Indemnified Party shall cooperate in the defense. The Indemnified Party may have separate counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. 
 The
obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture, and the resignation or removal of the Trustee or Agent. 

To secure the Company’s payment obligations in this Section, the Trustee shall have a Lien prior to the Notes of any series on all money
or property held or collected by the Trustee, except that held in trust to pay principal of, premium on, if any, interest and Liquidated Damages, if any, on particular Notes of such series. Such Lien shall survive the satisfaction and discharge of
this Indenture. 
 When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(iv) or
(v) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. 

  
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 The Trustee shall comply with the provisions of TIA § 313(b)(2) to the extent
applicable. 
 Section 7.08 Replacement of Trustee. 

A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s
acceptance of appointment as provided in this Section 7.08. 
 The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in aggregate principal amount of the then outstanding Notes of any series may remove the Trustee with respect to that series by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee with respect to Notes of one or more series if: 
 (a) the Trustee fails to comply with
Section 7.10 hereof; 
 (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the
Trustee under any Bankruptcy Law; 
 (c) a custodian or public officer takes charge of the Trustee or its property; or 

(d) the Trustee becomes incapable of acting. 

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the then outstanding Notes of any series may appoint a successor Trustee for such series to replace the successor
Trustee for such series appointed by the Company. 
 If a successor Trustee with respect to the Notes of any one or more series does not
take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in aggregate principal amount of the then outstanding Notes of the applicable series may petition, at the
expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. 
 If the Trustee, after written
request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. 

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee with respect to each series of Notes for which it is acting as Trustee under this Indenture.
The successor Trustee shall mail a notice of its succession to Holders of Notes of each such series. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the 

  
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Trustee pursuant to this Section 7.08, the Company’s obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. 

Section 7.09 Successor Trustee by Merger, etc. 

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business (including the
administration of the trust created by this Indenture) to, another corporation, the successor corporation without any further act shall be the successor Trustee. 

Section 7.10 Eligibility; Disqualification. 

There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has (or in the case of a subsidiary of a bank holding
company, its bank holding company parent shall have) a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition. 

This Indenture shall always have a Trustee who satisfies the requirements of TIA § 310(a)(1), (2) and (5). The Trustee is
subject to TIA § 310(b). 
 Section 7.11 Preferential Collection of Claims Against Company. 

The Trustee is subject to TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has
resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein. 
 ARTICLE VIII 

LEGAL DEFEASANCE AND COVENANT DEFEASANCE 

Section 8.01 Option To Effect Legal Defeasance or Covenant Defeasance. 

The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers’ Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes of a particular series upon compliance with the conditions set forth below in this ARTICLE VIII. 

Section 8.02 Legal Defeasance and Discharge. 

Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.02 with respect to a series of
Notes, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes of such series on the date the conditions set
forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes of such
series, which shall thereafter be 

  
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deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied
all its other obligations under such Notes of such series and this Indenture as it relates to such Notes of such series (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same),
except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes of such series to receive payments in respect of the principal of, or interest or premium
and Liquidated Damages, if any, on such Notes of such series when such payments are due from the trust referred to below, (b) the Company’s obligations with respect to the Notes of such series concerning issuing temporary Notes of such
series, registration of Notes of such series, the replacement of mutilated, destroyed, lost or stolen Notes of such series and the maintenance of an office or agency for payment and money for security payments held in trust, (c) the rights,
powers, trusts, duties and immunities of the Trustee, and the Company’s obligations in connection therewith and (d) this ARTICLE VIII with respect to such series. Subject to compliance with this ARTICLE VIII, the Company may
exercise its option under this Section 8.02 with respect to a series of Notes notwithstanding the prior exercise of its option under Section 8.03 hereof with respect to such series of Notes. 

Section 8.03 Covenant Defeasance. 

Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03 with respect to a series of
Notes, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.02, 4.03 and 4.04 hereof and Section 5.01 and,
unless otherwise specified therein, any additional covenants specified in a supplemental indenture for such series of Notes or a Board Resolution or an Officers’ Certificate delivered pursuant to Section 2.01, with respect to the
outstanding Notes of such series on and after the date the conditions set forth in Section 8.04 are satisfied with respect to such series (hereinafter, “Covenant Defeasance”), and the Notes of such series shall thereafter be
deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders of Notes of such series (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed
“outstanding” for all other purposes hereunder (it being understood that such Notes of such series shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding
Notes of such series, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any
such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as
specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03 with respect to a series of
Notes, subject to the satisfaction of the conditions set forth in Section 8.04 hereof , the “Events of Default” described in Section 6.01(a) hereof (other than clauses (i), (ii), (iv), and (v) thereof pertaining to the
Company) shall not constitute Events of Default with respect to such series of Notes. The Company may exercise Legal Defeasance with respect to a series of Notes regardless of whether it previously has exercised Covenant Defeasance with respect to
such series of Notes. 

  
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 Section 8.04 Conditions to Legal or Covenant Defeasance. 

The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes of any series:

 In order to exercise either Legal Defeasance or Covenant Defeasance, 

(a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes of such series, cash in U.S.
dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as shall be sufficient, in the opinion or based on the report of a nationally recognized firm of independent
public accountants, investment bank or appraisal firm, to pay the principal of, premium, if any, on and accrued and unpaid interest and Liquidated Damages, if any, on the outstanding Notes of such series on the Stated Maturity or on a redemption
date, as the case may be, and the Company must specify whether the Notes of such series are being defeased to maturity or to a particular redemption date; provided that, with respect to any redemption pursuant to Section 3.07(a) in which
the Treasury Rate is used in computing the redemption amount, the amount deposited shall be sufficient for purposes of this Indenture to the extent that an amount is so deposited with the Trustee equal to the redemption amount computed using the
Treasury Rate as of the third Business Day preceding the date of such deposit with the Trustee; 
 (b) in the case of an election under
Section 8.02 hereof, the Company has delivered to the Trustee an Opinion of Counsel confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date of
this Indenture, there has been a change in the applicable United States federal income tax law, in either case to the effect that, the Holders of the outstanding Notes of such series shall not recognize income, gain or loss for United States federal
income tax purposes as a result of such Legal Defeasance and shall be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

 (c) in the case of an election under Section 8.03 hereof, the Company has delivered to the Trustee an Opinion of Counsel confirming
that the Holders of the outstanding Notes of such series shall not recognize income, gain or loss for United States federal income tax purposes as a result of such Covenant Defeasance and shall be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; 
 (d) no Default or
Event of Default with respect to the Notes of such series shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from transactions occurring contemporaneously with the borrowing of
funds, or the borrowing of funds, to be applied to such deposit or other Indebtedness which is being defeased or discharged, and, in each case, the granting of Liens in connection therewith); 

(e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture or any agreement or instrument governing any other Indebtedness which is 

  
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being defeased or discharged or repaid) to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound; 

(f) the Company shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes of such series over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and 

(g) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance with respect to the Notes of such series have been complied with. 

The Legal Defeasance or Covenant Defeasance with respect to the Notes of such series will be effective on the day on which all the applicable
conditions above have been satisfied. Upon compliance with the foregoing, the Trustee shall, upon written request, execute proper instrument(s) acknowledging such Legal Defeasance or Covenant Defeasance. 

Section 8.05 Deposited Money and Government Securities To Be Held in Trust; Other Miscellaneous Provisions. 

Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding Notes of any series shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent), to the Holders of such Notes of all sums due and to become
due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. 

The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of such outstanding Notes.

 Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time
upon the written request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants, investment bank or
appraisal firm expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(b) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance. 

  
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 Section 8.06 Repayment to Company. 

Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or
Liquidated Damages, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium or Liquidated Damages, if any, or interest has become due and payable shall be paid to the Company on its request or (if then
held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as Trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, shall at the expense of the Company cause to be published
once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining shall be repaid to the Company. 
 Notwithstanding the foregoing, in the
case of a covenant or legal defeasance or discharge to the applicable redemption date for a redemption pursuant to Section 3.07(a) (including as set forth in any Board Resolution, Officers’ Certificate or supplemental indenture that
establishes or amends the terms of the Notes of any series) in which a present value is used in computing the redemption amount, the excess (if any) of (x) the amount deposited with the Trustee or any Paying Agent, or then held by the Company,
in trust for the payment of the principal of, premium or Liquidated Damages, if any, or interest on the Notes of any series over (y) the redemption price determined pursuant to Section 3.07(a) (including as set forth in any Board
Resolution, Officers’ Certificate or supplemental indenture that establishes or amends the terms of the Notes of any series) (including accrued and unpaid interest, if any, to the applicable redemption date) shall be paid to the Company on its
request or (if then held by the Company) shall be discharged from such trust on the applicable redemption date. 
 Section 8.07 Reinstatement.

 If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities with respect to the
Notes of any series in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the
Company’s obligations under this Indenture with respect to the Notes of such series and the Notes of such series shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as
the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or Liquidated
Damages, if any, or interest on any such Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. 

  
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 ARTICLE IX 

AMENDMENT, SUPPLEMENT AND WAIVER 

Section 9.01 Without Consent of Holders of Notes. 

Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Notes of one or
more series without the consent of any Holder of a Note: 
 (a) to cure any ambiguity, defect, mistake or inconsistency; provided
such action shall not adversely affect the interests of the Holders of Notes of such series; 
 (b) to provide for uncertificated Notes in
addition to or in place of certificated Notes; 
 (c) (i) to reflect a change in the name or form of entity or jurisdiction of organization
of the Company or (ii) to provide for the assumption of the Company’s obligations to Holders of Notes of such series in the case of a merger or consolidation or sale of all or substantially all of the Company’s assets; 

(d) to comply with the rules of any applicable securities depositary; 

(e) to comply with requirements of applicable Gaming Laws, or to provide for requirements imposed by applicable Gaming Authorities; 

(f) to provide for the issuance of Additional Notes of any series of Notes (including any additional or different restrictions on transfer or
exchange of such Additional Notes, including without limitation those that would be appropriate if the Additional Notes were issued in a transaction exempt from registration under the Securities Act) in accordance with the limitations set forth in
this Indenture; 
 (g) to make any change that would provide any additional rights or benefits to the Holders of the Notes of all or any
series (including to provide for any guarantees of the Notes of such series or any collateral securing the Notes of such series or any guarantees of the Notes of such series) or that does not materially adversely affect the legal rights hereunder of
any Holder of the Note of such series; 
 (h) to conform the text of this Indenture with respect to the Notes of such series or the Notes of
such series to any provision of the “Description of Notes” or similar section of any prospectus, prospectus supplement or other offering document relating to the offering of such series of Notes, as set forth in an Officers’
Certificate; 
 (i) to provide for the issuance of and establish the form and terms and conditions of the Notes of any series as permitted
by this Indenture; 
 (j) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Notes,
provided that any such addition, change or elimination (i)

  
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shall neither (A) apply to any Note of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (B) modify the rights
of the Holder of any such Note with respect to such provision or (ii) shall become effective only when there is no Note described in clause (i) outstanding; 

(k) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes of one or more series
and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; or 

(l) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. 

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that directly affects its own rights, duties or
immunities under this Indenture or otherwise. 
 Section 9.02 With Consent of Holders of Notes. 

Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including, without
limitation, any provisions relating to any mandatory offer by the Company to purchase or repurchase any Notes and the defined terms used therein) and the Notes of any series with the consent of the Holders of at least a majority in aggregate
principal amount of the Notes then outstanding of each series of Notes affected by such amendment or supplement voting, as to each series, as a single class (including consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes of such series), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, interest or
Liquidated Damages, if any, on the Notes of such series, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture with respect to the Notes of any series or the Notes of such
series may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes of such series voting as a single class (including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes of such series). 
 Upon the request of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the appropriate Holders of Notes as aforesaid, and upon receipt by the Trustee of
the documents described in Section 9.06 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee’s own rights,
duties or immunities under this Indenture or otherwise, 

  
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in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. 

It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. 
 After an amendment, supplement or waiver
under this Section 9.02 becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. 
 Subject to
Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes of a series then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this
Indenture with respect to such series of Notes or such Notes thereof. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not: 

(a) reduce the principal amount of Notes of any series whose Holders must consent to an amendment, supplement or waiver; 

(b) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of any series of
Notes (other than any provisions relating to any mandatory offer by the Company to purchase or repurchase any Notes and the defined terms used therein and other provisions for effecting a redemption that do not reduce the redemption price); 

(c) reduce the rate of or change the time for payment of interest on any Note; 

(d) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Liquidated Damages, if any, on the Notes of
any series (except a rescission of acceleration of the Notes of such series by the Holders of at least a majority in aggregate principal amount of the Notes of such series and a waiver of the payment default that resulted from such acceleration);

 (e) make any Note payable in money other than that stated in the Notes; 

(f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the contractual rights of Holders of Notes of
any series expressly set forth in this Indenture to receive payments of principal of, or interest or premium or Liquidated Damages, if any, on the Notes of such series; 

(g) waive a redemption payment with respect to any Note (other than a payment required by one of the provisions providing for the mandatory
offer by the Company to purchase or repurchase any Notes of such series); or 

  
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 (h) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver
provisions. 
 A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly
been included solely for the benefit of one or more series of Notes, or which modifies the rights of the Holders of Notes of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture
of the Holders of Notes of any other series. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture with respect to one or more series of Notes (whether or not such covenant or other provision has
expressly been included solely for the benefit of such series of Notes), or which modifies the rights of the Holders of Notes of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Notes of any other series. 
 Section 9.03 Compliance with Trust Indenture Act. 

Every amendment or supplement to this Indenture or the Notes of one or more series shall be set forth in an amended or supplemental indenture
that complies with the TIA as then in effect. 
 Section 9.04 Revocation and Effect of Consents. 

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date upon which the requisite consents for the applicable waiver, supplement or amendment have been obtained. An amendment, supplement or
waiver becomes effective in accordance with its terms and thereafter binds every Holder of each series of Notes affected by such amendment, supplement or waiver. 

Section 9.05 Notation on or Exchange of Notes. 

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note of any series thereafter authenticated. The
Company in exchange for all Notes of such series may issue and the Trustee shall, upon receipt of a Company Order, authenticate new Notes of such series that reflect the amendment, supplement or waiver. 

Failure to make the appropriate notation or issue a new Note of such series shall not affect the validity and effect of such amendment,
supplement or waiver. 
 Section 9.06 Trustee To Sign Amendments, etc. 

The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article IX if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until its Board of Directors approves it. In executing any amended or

  
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supplemental indenture, the Trustee shall receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 11.04
hereof, an Officers’ Certificate and an Opinion of Counsel (subject to customary assumptions, qualifications and exceptions) stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture and
is the valid and binding obligation of the Company, enforceable in accordance with its terms. 
 ARTICLE X 

SATISFACTION AND DISCHARGE 

Section 10.01 Satisfaction and Discharge. 

This Indenture shall be discharged with respect to the Notes of a particular series and shall cease to be of further effect as to all Notes of
such series issued thereunder, when: 
 (a) either: 

(1) all Notes of such series that have been authenticated, except lost, stolen or destroyed Notes of such series that have
been replaced or paid and Notes of such series for whose payment money has been deposited in trust and, if provided for in this Indenture, thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or 

(2) all Notes of such series that have not been delivered to the Trustee for cancellation have become due and payable by
reason of the mailing of a notice of redemption or otherwise or shall become due and payable within one year (or are to be called for redemption within one year) and the Company has irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust solely for the benefit of the Holders of the Notes of such series, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as shall be
sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes of such series not delivered to the Trustee for cancellation for principal, premium, if any, and Liquidated Damages, if any,
and accrued and unpaid interest to, but not including, the date of maturity or redemption; provided that, with respect to any redemption pursuant to Section 3.07(a) (including as set forth in any Board Resolution, Officers’
Certificate or supplemental indenture that establishes or amends the terms of the Notes of any series) in which the Treasury Rate is used in computing the redemption amount, the amount deposited shall be sufficient for purposes of this Indenture to
the extent that an amount is so deposited with the Trustee equal to the redemption amount computed using the Treasury Rate as of the third Business Day preceding the date of such deposit with the Trustee; 

  
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 (b) the Company has paid or caused to be paid all other sums then payable by it under this
Indenture with respect to the Notes of such series; and 
 (c) the Company has delivered irrevocable written instructions to the Trustee
under this Indenture to apply the deposited money toward the payment of the Notes of such series at maturity or the redemption date, as the case may be. 

In addition, the Company must deliver an Officers’ Certificate and an Opinion of Counsel to the Trustee stating that all conditions
precedent to satisfaction and discharge with respect to the Notes of such series have been satisfied. Notwithstanding the satisfaction and discharge of this Indenture with respect to the Notes of such series, if money shall have been deposited with
the Trustee pursuant to subclause (2) of clause (a) of this Section, the provisions of Section 10.02 and Section 8.06 shall survive with respect to the Notes of such series. 

The satisfaction and discharge with respect to the Notes of such series will be effective on the day on which all the applicable conditions
above have been satisfied. Upon compliance with the foregoing, the Trustee shall execute proper instrument(s) acknowledging the satisfaction and discharge of all of the Company’s obligations under all Notes of such series and this Indenture
with respect to all Notes of such series. 
 Section 10.02 Application of Trust Money. 

Subject to the provisions of Section 8.06, all money deposited with the Trustee pursuant to Section 10.01 shall be held in trust and
applied by it, in accordance with the provisions of the Notes of a particular series and this Indenture with respect to the Notes of such series, to the payment, either directly or through any Paying Agent (including the Company acting as its own
Paying Agent), to the Persons entitled thereto, of the principal (and premium or Liquidated Damages, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except
to the extent required by law. If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 10.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture with respect to the Notes of such series and the Notes of such series shall be revived and reinstated as
though no deposit had occurred pursuant to Section 10.01 hereof; provided that if the Company has made any payment of principal of, premium or Liquidated Damages, if any, or interest on any such Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent. 

ARTICLE XI 

MISCELLANEOUS 
 Section 11.01
Trust Indenture Act Controls. 
 If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA
§ 318(c), the imposed duties shall control. 

  
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 Section 11.02 Notices. 

Any notice or communication by the Company or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), facsimile, given by email in PDF format or overnight air courier guaranteeing next day delivery, to the others’ address: 

If to the Company and/or any Guarantor: 

Pinnacle Entertainment, Inc. 

3980 Howard Hughes Parkway 
 Las
Vegas, NV 89169 
 Telephone No.: (702) 541-7777 

Facsimile No.: (702) 541-7773 

Attention: President and Chief Financial Officer 

With a copy to: 

Irell & Manella LLP 

1800 Avenue of the Stars 
 Suite
900 
 Los Angeles, CA 90067 

Telephone No.: (310) 277-1010 

Facsimile No.: (310) 203-7199 

Attention: Ashok W. Mukhey, Esq. 

Email: amukhey@irell.com 
 If to
the Trustee: 
 [                    
                    ] 
 With a copy to:

 [                    
                    ] 
 The Company or
the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. 
 All
notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if faxed or delivered by electronic mail (in PDF format); and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery, and, with respect to the Trustee, upon
actual receipt. 
 Any notice or communication to a Holder shall be mailed by first class mail, in accordance with Depositary procedures,
certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by 

  
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the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA § 313(c), to the extent required by the TIA. Failure to mail a notice or communication
to a Holder of any series or any defect in it shall not affect its sufficiency with respect to other Holders of such or any other series. 

If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. 

Section 11.03 Communication by Holders of Notes with Other Holders of Notes. Holders of any series may communicate pursuant to TIA
§ 312(b) with other Holders of such series or any other series with respect to their rights under this Indenture or the Notes of such series or all series. The Company, the Trustee, the Registrar and anyone else shall have the protection
of TIA § 312(c). 
 Section 11.04 Certificate and Opinion as to Conditions Precedent. 

Upon any request or application by the Company to the Trustee to take any action under this Indenture, except the initial authentication and
delivery of a series of Notes, the Company shall furnish to the Trustee: 
 (a) an Officers’ Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating
to the proposed action have been satisfied; and 
 (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee
(which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Such counsel may rely on representations, warranties and
certificates of other Persons as to matters of fact, and may qualify the Opinion of Counsel with customary assumptions, exceptions and limitations. 

Section 11.05 Statements Required in Certificate or Opinion. 

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA § 314(a)(4)) shall comply with the provisions of TIA § 314(e) and shall include: 
 (a) a
statement that the Person making such certificate or opinion has read such covenant or condition; 
 (b) a brief statement as to the nature
and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 

(c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has been satisfied; and 

  
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 (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant
has been satisfied. 
 Section 11.06 Rules by Trustee and Agents. 

The Trustee may make reasonable rules for action by or at a meeting of Holders of one or more series. The Registrar or Paying Agent may make
reasonable rules and set reasonable requirements for its functions. 
 Section 11.07 No Personal Liability of Directors, Officers, Employees and
Stockholders. No director, officer, employee, incorporator or direct or indirect stockholder, past, present or future, of the Company, any Guarantor or any successor entity, as such, shall have any liability for any obligations of the
Company, or any Guarantors under the Notes, this Indenture or any Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of the Notes. 
 Section 11.08 GOVERNING LAW AND WAIVER OF JURY
TRIAL. 
 THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B). 

EACH OF THE PARTIES HERETO (A) IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK OR, IF SUCH COURT WILL NOT ACCEPT JURISDICTION, THE SUPREME COURT OF THE STATE OF NEW YORK OR ANY COURT OF COMPETENT CIVIL JURISDICTION SITTING IN NEW YORK COUNTY, NEW YORK, (B) UNCONDITIONALLY WAIVES AND AGREES
NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE ANY CLAIMS THAT IT IS NOT SUBJECT TO THE JURISDICTION OF THE ABOVE COURTS, THAT SUCH ACTION OR SUIT IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH ACTION, SUIT OR OTHER
PROCEEDING IS IMPROPER AND AGREES THAT IT SHALL NOT ATTEMPT TO DENY OR DEFEAT SUCH JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT AND (C) AGREES THAT IT SHALL NOT BRING ANY ACTION RELATING TO THIS INDENTURE OR THE NOTES
IN ANY COURT OTHER THAN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR, IF SUCH COURT WILL NOT ACCEPT JURISDICTION, THE SUPREME COURT OF THE STATE OF NEW YORK OR ANY COURT OF COMPETENT CIVIL JURISDICTION SITTING IN NEW
YORK COUNTY, NEW YORK. 
 EACH OF THE COMPANY AND THE TRUSTEE IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY

  
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AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY. 

Section 11.09 No Adverse Interpretation of Other Agreements. 

This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other
Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. 
 Section 11.10 Successors. 

All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors. 
 Section 11.11 Severability. 

In case any provision in this Indenture or in the Notes of any series shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 
 Section 11.12 Counterpart Originals. 

The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same
agreement. 
 The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective
execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures
for all purposes. 
 Section 11.13 Table of Contents, Headings, etc. 

The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. 

Section 11.14 Notes in a Foreign Currency. 

Unless otherwise specified in a Board Resolution, a supplemental indenture hereto or an Officers’ Certificate delivered pursuant to
Section 2.01 of this Indenture with respect to a particular series of Notes, whenever for purposes of this Indenture any action may be taken by the Holders of a specified percentage in aggregate principal amount of Notes of all series or all
series affected by a particular action at the time outstanding and, at such time, there are outstanding Notes of any series which are denominated in more than one currency, then the principal amount of Notes of such series which shall be deemed to
be outstanding for the purpose 

  
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of taking such action shall be determined by converting any such other currency into a currency that is designated upon issuance of any particular series of Notes. Unless otherwise specified in a
Board Resolution, a supplemental indenture hereto or an Officers’ Certificate delivered pursuant to Section 2.01 of this Indenture with respect to a particular series of Notes, such conversion shall be at the spot rate for the purchase of
the designated currency as published in The Financial Times in the “Currency Rates” section (or, if The Financial Times is no longer published, or if such information is no longer available in The Financial Times, such source as may be
selected in good faith by the Company) on any date of determination. The provisions of this paragraph shall apply in determining the equivalent principal amount in respect of Notes of a series denominated in currency other than U.S. dollars in
connection with any action taken by Holders of Notes of such series pursuant to the terms of this Indenture. 
 All decisions and
determinations provided for in the preceding paragraph shall, in the absence of manifest error, to the extent permitted by law, be conclusive for all purposes and irrevocably binding upon the Trustee and all Holders. 

Section 11.15 Judgment Currency. 

The Company agrees, to the fullest extent that it may effectively do so under applicable law, that (a) if for the purpose of obtaining
judgment in any court it is necessary to convert the sum due in respect of the principal of or interest or other amount on the Notes of any series (the “Required Currency”) into a currency in which a judgment will be rendered (the
“Judgment Currency”), the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the Required Currency with the Judgment Currency on the day
on which final unappealable judgment is entered, unless such day is not a New York Banking Day, then the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York
the Required Currency with the Judgment Currency on the New York Banking Day preceding the day on which final unappealable judgment is entered and (b) its obligations under this Indenture to make payments in the Required Currency (i) shall
not be discharged or satisfied by any tender, any recovery pursuant to any judgment (whether or not entered in accordance with subsection (a)), in any currency other than the Required Currency, except to the extent that such tender or recovery shall
result in the actual receipt, by the payee, of the full amount of the Required Currency expressed to be payable in respect of such payments, (ii) shall be enforceable as an alternative or additional cause of action for the purpose of recovering
in the Required Currency the amount, if any, by which such actual receipt shall fall short of the full amount of the Required Currency so expressed to be payable, and (iii) shall not be affected by judgment being obtained for any other sum due
under this Indenture. For purposes of the foregoing, “New York Banking Day” means any day except a Saturday, Sunday or a legal holiday in The City of New York on which banking institutions are authorized or required by law,
regulation or executive order to close. 
 Section 11.16 Force Majeure. 

In no event shall the Trustee or Agent be responsible or liable for any failure or delay in the performance of its obligations hereunder
arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, 

  
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accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications, computer
(software and hardware) services, or the unavailability of the Federal Reserve Bank wire or facsimile or other wire or communication facility; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted
practices in the banking industry to resume performance as soon as practicable under the circumstances. 
 Section 11.17 U.S.A. Patriot Act.

 In order to comply with the laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions,
including, without limitation, those relating to the funding of terrorist activities and money laundering, including Section 326 of the USA PATRIOT Act of the United States (“Applicable AML Law”), the Trustee and Agent are
required to obtain, verify, record and update certain information relating to individuals and entities which maintain a business relationship with the Trustee and Agent. Accordingly, each of the parties agree to provide to the Trustee and Agent,
upon their request from time to time such identifying information and documentation as may be available for such party in order to enable the Trustee and Agent to comply with Applicable AML Law. 

ARTICLE XII 

SINKING FUNDS 
 Section 12.01
Applicability of Article. 
 The provisions of this Article shall be applicable to any sinking fund for the retirement of the Notes of
a series if so provided by the terms of such Notes pursuant to Section 2.01 and except as otherwise permitted or required by any form of Note of such series issued pursuant to this Indenture. 

The minimum amount of any sinking fund payment provided for by the terms of the Notes of any series is herein referred to as a
“mandatory sinking fund payment” and any other amount provided for by the terms of the Notes of such series is herein referred to as an “optional sinking fund payment.” If provided for by the terms of the Notes of
any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 12.02. Each sinking fund payment shall be applied to the redemption of Notes of any series as provided for by the terms of the Notes of
such series. 
 Section 12.02 Satisfaction of Sinking Fund Payments with Notes. 

The Company may, in satisfaction of all or any part of any sinking fund payment with respect to the Notes of any series to be made pursuant to
the terms of such Notes (1) deliver outstanding Notes of such series to which such sinking fund payment is applicable (other than any of such Notes previously called for mandatory sinking fund redemption) and (2) apply as credit Notes of
such series to which such sinking fund payment is applicable and which have been repurchased by the Company or redeemed either at the election of the Company pursuant to the terms of such series of Notes (except pursuant to any mandatory sinking
fund) or through the application of permitted optional sinking fund payments or other optional redemptions pursuant 

  
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to the terms of such Notes, provided that such Notes have not been previously so credited. Such Notes shall be received by the Trustee, together with an Officers’ Certificate with respect
thereto, not later than 15 days prior to the date on which the Trustee begins the process of selecting Notes for redemption, and shall be credited for such purpose by the Trustee at the price specified in such Notes for redemption through operation
of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. If as a result of the delivery or credit of Notes in lieu of cash payments pursuant to this Section 12.02, the principal amount of Notes of such
series to be redeemed in order to exhaust the aforesaid cash payment shall be less than $100,000, the Trustee need not call Notes of such series for redemption, except upon receipt of a Company Order that such action be taken, and such cash payment
shall be held by the Trustee or a Paying Agent and applied to the next succeeding sinking fund payment, provided, however, that the Trustee or such Paying Agent shall from time to time upon receipt of a Company Order pay over and
deliver to the Company any cash payment so being held by the Trustee or such Paying Agent upon delivery by the Company to the Trustee of Notes of such series purchased by the Company having an unpaid principal amount equal to the cash payment
required to be released to the Company. 
 Section 12.03 Redemption of Notes for Sinking Fund. 

Not less than 45 days (unless otherwise indicated in the Board Resolution, supplemental indenture hereto or Officers’ Certificate
delivered pursuant to Section 2.01 in respect of a particular series of Notes) prior to each sinking fund payment date for any series of Notes, the Company will deliver to the Trustee an Officers’ Certificate specifying the amount of the
next ensuing mandatory sinking fund payment for such series pursuant to the terms of such series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and
crediting of Notes of such series pursuant to Section 12.02, and the optional amount, if any, to be added in cash to the next ensuing mandatory sinking fund payment, and the Company shall thereupon be obligated to pay the amount therein
specified. Not less than 30 days (unless otherwise indicated in the Board Resolution, Officers’ Certificate or supplemental indenture delivered pursuant to Section 2.01 in respect of a particular series of Notes) before each such sinking
fund payment date the Notes to be redeemed upon such sinking fund payment date will be selected in the manner specified in Section 3.02 and the Company shall send or cause to be sent a notice of the redemption thereof to be given in the name of
and at the expense of the Company in the manner provided in and in accordance with Section 3.03. Such notice having been duly given, the redemption of such Notes shall be made upon the terms and in the manner stated in Section 3.04,
Section 3.05 and Section 3.06. 
 [Signatures on following page] 

  
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 IN WITNESS WHEREOF, the parties have executed this Indenture as of the date first written above.

  

			
	PINNACLE ENTERTAINMENT, INC.
		
	By:	 	                                     
                                         
                 
		 	Name:
		 	Title:

  
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	[                                    
    , as Trustee]
		
	By:	 	                                     
                                         
                 
		 	Name:
		 	Title:

  
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