Alio Gold Inc. is pleased to announce the board of directors has formally approved an underground exploration decline (“decline”) and exploration program at its high grade, high margin Ana Paula Project located in Guerrero, Mexico. The Company also received the authorization to start construction of the decline from SEMARNAT (Mexico’s Secretary of Environment and Natural Resources).

Highlights

• Initiating a $16 million underground decline and exploration program
• Exploring the extension of the high-grade breccia mineralization and skarn target  
• Permitting of the decline approved by SEMARNAT
• Receiving detailed bid proposals from contract miners during September 2017
• Mobilizing of the contractor expected to commence in October 2017
• Initiating an additional $1.8 million surface exploration program targeting a zone north of the proposed pit
• Drilling underway to twin 11 holes (2,000 metres) for metallurgical testing

“Delineating further underground Mineral Resources and providing access to mine the Resources will add significant value to an already attractive project,” said Greg McCunn, Chief Executive Officer. “While we are advancing the project through the Definitive Feasibility Study towards a construction decision in Q2 2018, we will undertake a systematic drill program on the known continuation of the high grade breccia system and evaluate the deeper skarn target that has been identified by past drilling. We are also very excited about the surface drill target North of the proposed pit. With a large land package of approximately 56,000 hectares on the highly prospective Guerrero Gold Belt this is the start of what we expect to be a successful exploration program to enhance the already robust economics of Ana Paula.”

Underground Decline and Exploration Program

A 1,200 meter long decline will be driven from a portal site located in the adjacent valley from the proposed pit and approximately 400 meters from the proposed mill site. The underground decline is expected to take nine months to reach the mineralized area after which an underground diamond drill program will commence.

Drill targets from the underground are compelling as previous depth drilling has reported high grade gold mineralization in a series of intrusive sills in the contact with the sedimentary sequence. The drill program is expected to confirm the continuity and shape of the high grade gold mineralization below the proposed pit that is hosted in the complex breccia and it will also explore the gold mineralization indications at depth hosted in hornfels skarn, typical of the Guerrero Gold Belt. The underground drilling program proposed includes 80 diamond drill holes (20,000 metres) and will include geochemical sampling and assaying.

Figure 1: Proposed decline and drill holes below the proposed pit
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Figure 2: Cross section showing mineral reserves and resources and proposed exploration targets
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The pit proposed in the May 2017 Pre-Feasibility Study (“PFS”) estimated Proven and Probable Mineral Reserves of 13.44 Mt grading 2.36 g/t (~1.02M oz gold) using a $1,200/oz gold price.  The mineralization in the Reserves consists of a high-grade breccia core as well as a surrounding halo of lower grade mineralization. Included in the Reserves is an estimated 2.3 Mt at 5.9 g/t (~436k oz gold) within the high-grade breccia core with an approximate depth of 190 metres.

The high-grade breccia is known to continue for approximately 300 metres below the bottom of the proposed pit based on prior drilling programs. Due to the topography in the area, mining a deeper pit is not economical under reasonable gold price assumptions. The purpose of driving the decline into the breccia system will be to provide access to the extension of the high-grade mineralization for both exploration drilling and, if warranted, future mining.

The potential to add value to the existing project is significant as the project as currently proposed in the May 2017 PFS is limited to mining rates of 5,000 tonnes per day (“tpd”) from the open pit due to the geometry of the pit. However, the PFS envisions installing a used processing plant that the Company has purchased and is currently refurbishing which while in operation at the El Sauzal mine had a processing capacity of 6,000 tpd. Further work is being undertaken on grindability testwork to confirm mill capacity and if positive there could potentially be latent capacity that could be capable of treating material from underground mining commencing in the first year of operations.

Previous drilling from surface below the proposed pit into the high-grade breccia system has yielded positive results, including the previously announced drill results that can be found in Table 1.

To confirm historical drilling results, a drill program is underway that is twinning 11 holes (2,000 meters) for metallurgical testing with initial results expected by the end of October 2017.

In addition to targeting expansion of the Mineral Resource in the high-grade breccia extension, the underground drill program will explore a deeper Skarn target. Gold mineralization in the Guerrero Gold Belt, including the neighbouring Torex Mining deposits, have traditionally been associated with skarn mineralization. Prior drilling at Ana Paula from surface has identified a skarn target approximately 300 metres below the proposed pit. Previously announced drill results can be found in Table 2.

Surface and Regional Exploration Program

Historical drilling at Ana Paula has identified a target located approximately 100 metres north of the proposed pit. A $1.8 million exploration program has been approved which is primarily focused at this target, including surface mapping and a high resolution helicopter airborne magnetic survey to delineate a drill program expected to consist initially of 12 diamond drill holes for a total of 4,000 meters drilled. It is expected that the airborne magnetic survey will commence in the fourth quarter of 2017 with drilling expected in the first half of 2018. Prior drill results in the North Area target can be found in Table 3.

Figure 3: Location of proposed drilling on the North Area of the Ana Paula proposed pit
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With a land position of approximately 56,000 hectares within the highly prospective Guerrero Gold Belt there is significant potential to delineate mineral deposits outside of the immediate Ana Paula project area. The Company holds a premier land package in the area, adjacent to Torex Mine’s flagship operations and on trend with Leagold’s Los Filos mine. Between the concession for all three companies, over 3 million ounces1 of gold have been produced with current Measured and Indicated Mineral Resources of over 15 million ounces1.

1 As per company reports and presentations

Figure 4: Large Land Package in Close Proximity to other Gold Mining Operations
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The Company plans to delineate further targets on its concessions over the coming year by consolidating all of the known work to-date on the concessions and further advancing structural and geological surface mapping combined with interpretation of prior airborne survey results.

For more information, please visit: http://aliogold.com/