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On 28 December 2017, the Company announced that it had entered into a Definitive Agreement with Pan American Silver Corp to acquire the Calcatreu Deposit for a total consideration of US$15 million. Patagonia Gold has made the initial payment of US$5 million with the balance of US$10 million paid on 18 May 2018. As a result of the transaction, Patagonia Gold, through a wholly owned subsidiary, has acquired Minera Aquiline Argentina SA which owns 100% of the Calcatreu Deposit.

Geology and Mineralisation

The Calcatreu Deposit is a high grade (2.325 g/t AuEq) low sulphidation gold system with the mineralisation outcropping at surface. An independent mineral resource estimate was completed by Micon International Limited of Toronto in 2008 for the Calcatreu Deposit, prepared in accordance with the Canadian National Instrument 43-101 requirements and set out a resource containing 780,000 oz at 3.04 g/t AuEq in the Indicated category and a further 255,000 oz at 2.32 g/t AuEq in the Inferred category.

More recently, CUBE Consulting Ltd of Australia prepared an updated JORC/NI 43-101 compliant resource estimate for the Calcatreu project, with effective date of 31 December 2018. This new MRE was made using a long-term metal prices of US$1,300 per ounce (gold) and US$ 16 per ounce (silver). Gold equivalent (“AuEq”) values were calculated at a ratio of 81.25:1 Ag/Au. The current resource contains 9.84 million tonnes at 2.36 g/t AuEq for 746,000 oz in the Indicated category and a further 8.1 million tonnes at 1.5 g/t AuEq for 390,000 oz in the Inferred category. The changes from the previous estimate were due to a revised interpretation of the existing data.

The updated resource model is tabled below.

Table 1 ‑ Calcatreu Mineral Resource by Project Area (as at 31 December 2018)

INDICATED RESOURCES
Zone Indicated Grade (g/t) Contained Metal (kOz)
Tonnes Au Ag AuEq Au Ag AuEq**
Veine 49 6,447 2.45 21.01 2.71 512 4,568 568
Nelson 1,383 1.51 16.94 1.72 67 753 76
Belen
Castro Sur 2,010 1.40 14.77 1.58 90 954 102
TOTAL Indicated 9,841 2.11 19.83 2.36 669 6,275 746
INFERRED RESOURCES
Zone Inferred Grade (g/t) Contained Metal (kOz)
Tonnes Au Ag AuEq Au Ag AuEq**
Veine 49 2,863 1.48 13.38 1.64 136 1,231 151
Nelson 1,448 1.42 14.66 1.60 66 682 74
Belen 681 1.61 23.32 1.90 35 511 42
Castro Sur 3,086 1.12 9.81 1.24 111 974 123
TOTAL Inferred 8,078 1.34 13.09 1.50 348 3,399 390

The opportunity exists to convert a portion of the existing Inferred resources into a higher category through additional drilling and studies to elevate the current level of confidence in the interpretation. The surrounding land package has over 90,000 hectares of sparsely explored terrain

Work to Date

The Company initiated exploration work at Calcatreu shortly after acquiring the project. The 2018 exploration program consisted of a 30-line km Pole-Dipole Inverse Polarisation geophysics survey, mapping and geochemical sampling program. Further diamond drilling was conducted in 2018, which focussed on testing geophysical anomalies at several targets along strike from the main gold-silver mineralisation trends at Calcatreu. In conjunction with ongoing geophysical surveys, the exploration team will be carrying out updated field reconnaissance and mapping study and geochemical rock chip sampling for the remainder of the land package. Calcatreu will be the primary exploration focus for the Company during 2019.

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