Xali to acquire Pico Machay project from Pan American

Executive Summary

• Xali Gold Corp. entered into a share purchase agreement to acquire 100% of Minera Calipuy SAC (Calipuy), which wholly owns the Pico Machay gold project in central Peru, from Pan American Silver Corp. and Aquiline Resources Inc.
• The Pico Machay project is a high-sulphidation gold deposit with a historic measured and indicated resource of 264,600 ounces of gold and an inferred resource of 446,000 ounces of gold.
• The acquisition is subject to customary closing conditions, including TSX Venture Exchange approval, and involves deferred cash payments to Pan American, which will retain security interests until payments are completed.

Key Details

• Transaction Structure: Share Purchase Agreement (SPA) to acquire 100% of Calipuy, the owner of the Pico Machay project.
• Sellers: Pan American Silver Corp. and its subsidiary, Aquiline Resources Inc.
• Target Asset: Pico Machay gold project, located in the district of Santa Ana, province of Castrovirreyna, department of Huancavelica, Peru.
• Historic Resource Estimates:
  • Measured and Indicated: 264,600 ounces of gold from 10.6 million tonnes grading 0.78 g/t gold.
  • Inferred: 446,000 ounces of gold from 23.9 million tonnes grading 0.58 g/t gold.
• Resource Estimation Methodology:
  • Based on historical drilling (up to 2004) and current drilling (2004–2008), including holes up to ABS-246.
  • Estimated using Micromine software (Version 11.0.4) in accordance with CIM Standards.
  • Average specific gravity of 2.31 used.
  • Measured/Indicated blocks identified manually based on drill intercept spacing of 27m and 20m respectively; Inferred blocks defined by search ellipse parameters with a 40m range.
  • Ordinary block kriging used for grade estimation.
• Financial Terms:
  • Cash payments are structured as deferred payments (details referenced in an attached table not provided in text).
  • Pan American retains security interests over Calipuy until Xali Gold completes the deferred payments.
• Strategic Rationale:
  • Original resource calculated using a long-term gold price of $700/oz; current higher gold prices offer upside potential for resource upgrades and production alternatives.
  • Focus on updating resource estimates and engineering studies with a near-term production goal.
  • Evaluation of exploration targets for resource expansion and potential acquisition of nearby high-sulphidation prospects.
• Logistics:
  • Located 35 km southwest of Huancavelica, 457 km from Lima, and 270 km from Pisco.
  • Nearest town is Santa Ana (13 km away).
  • Connected to Callao port via a 650-km intermontane rail line from Huancavelica.
• Qualified Persons: David G. Thomas, PGeo (Independent) and Joanne C. Freeze, PGeo (President and CEO of Xali Gold).

Notable Quotes

• "The Pico Machay acquisition represents a pivotal step for Xali Gold as we expand our presence in one of the world's most prolific epithermal gold-silver countries," said Joanne Freeze, president and chief executive officer of Xali Gold. "With a historic resource already in place and various engineering studies conducted since discovery through 2010, the project offers both immediate value and excellent upside potential."
• "Pico Machay is especially compelling given that the original resource was calculated using a long-term gold price of $700 (U.S.)/oz. The current stronger gold price environment provides us with many opportunities to upgrade the project and evaluate additional production alternatives that may not have been supported by lower gold prices."