RIC Richmont Mines, Inc.

 

General

The legal and commercial name of the Corporation is Richmont Mines Inc. The Corporation is a corporation domiciled in Quebec, Canada. The Corporation was incorporated pursuant to Part 1A of the Companies Act (Quebec) on February 12, 1981 (File number 1843-2286) under the corporate name of Ressources Minières Rouyn Inc. Pursuant to an Article of Amendment filed February 10, 1987 the Corporation added the English version Rouyn Mining Resources Inc. and by another Amendment filed with the Government of Quebec on June 20, 1991, the Corporation changed its name to Richmont Mines Inc., now governed by the Business Corporations Act (Quebec). The Articles of the Corporation are registered by the Government of Quebec in register S02473, folio 10.

Richmont Mines holds all of the shares of Camflo Mill Inc., a corporation incorporated under the Canada Business Corporations Act , all of the shares of Patricia Mining Corporation (“Patricia Mining”), a corporation continued under the Ontario Business Corporation Act and all of the shares of Louvem Mines Inc. (“Louvem”), a corporation incorporated under the Companies Act (Quebec) now governed by the Business Corporations Act (Quebec).

The head office and principal place of business of the Corporation is located at offices of approximately 8,391 square feet at 161 avenue Principale, Rouyn-Noranda, Quebec, J9X 4P6, telephone number: 819 797-2465. The Corporation also utilizes an executive office of approximately 2,156 square feet in rented premises at 181 Bay Street, Suite 810, Bay Wellington Tower, Brookfield Place, Toronto, Ontario M5J 2T3. The common shares of Richmont Mines are listed and posted for trading on the Toronto Stock Exchange (TSX: RIC) and the New York Stock Exchange Market (NYSE MKT: RIC). The co-transfer agent for the Corporation in the United States is Computershare Trust Company, N.A., 350 Indiana Street, Suite 800, Golden, Colorado 80401.

Richmont Mines is principally engaged in activities related to the acquisition, exploration, development and operation of mineral properties. The Corporation began its exploration activities in northwestern Quebec in the spring of 1984. During the following years, it acquired a portfolio of properties with gold-bearing potential with a view to development and commercial operation.

Three-year History

Richmont Mines currently produces gold from the Island Gold Mine in Ontario and the Beaufor Mine in Quebec. The Corporation is also advancing development of the mineralized extension at depth of the Island Gold Mine in Ontario.

On January 9, 2013, the Corporation announced that it had received the required mining permits for its 100%-owned Monique Gold Project. The Corporation subsequently began overburden removal with a view to extracting a 5,000 tonnes bulk sample in 2013.

On February 25, 2013, Richmont announced estimated preliminary Inferred resources of 1.5 million tonnes grading 10.73 g/t Au for 508,000 ounces for the Island Gold Deep C Zone, located below the existing infrastructure and reserve and resource base of its Island Gold Mine. Believed to be an extension of the existing mine at depth, the C Zone is sub-vertical and occurs at approximately 450 metres to 1,000 metres below surface. For full details, refer to February 25, 2013 press release entitled “Richmont Mines Adds New High Grade Inferred Mineral Resources of 508,000 Au Ounces at 10.73 g/t at Island Gold Deep”.

On February 25, 2013, the Corporation announced the appointment of Mr. Daniel Adam as Vice-President, Exploration. Mr. Adam had been working for Richmont Mines since March 10, 2008 and had held various positions over the years.

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On April 12, 2013, Richmont announced that an Island Gold Deep NI 43-101 technical report was filed on SEDAR, and the Corporation noted that new drill results continued to show Island Gold Mine potential at depth. For full details, refer to the April 12, 2013 press release entitled “Island Gold Deep 43-101 Report filed on SEDAR; New drill results continue to show Island Gold Mine deep potential”

On May 9, 2013, the scheduled four month de-commissioning process of the Francoeur Mine was completed following the November 29, 2012 mine closure and approximately $1.6 million of equipment from the operation was redeployed to the other mine sites during the year 2013.

On June 17, 2013, Richmont Mines obtained a letter of offer for a senior credit facility for up to US$50 million from Macquarie Bank Limited (“MBL”) to advance the Island Gold Deep project. The US$50 million facility consisted of three tranches, all of which were subject to certain conditions being met prior to drawdown. The Corporation issued call warrants for the purchase of 1,250,000 Richmont shares to MBL at closing of the facility agreement. The warrants had an exercise price of $2.45 per share, and they subsequently expired 3 years from the original date of their issue to MBL. A total of 812,500 warrants vested immediately upon closing of the facility agreement. The remaining 437,500 warrants were to have vested when the Corporation fully meets the conditions to drawdown Tranche B, which did not occur.

On June 19, 2013, Richmont Mines announced the successful completion of the bulk sampling phase for its W Zone Gold Project. As a result, the Corporation decided to proceed to the commercial production phase of the project.

On July 31, 2013, Richmont Mines announced the successful completion of the bulk sampling phase for its Monique Gold Project. As a result, the Corporation established estimated mineral reserves for the project, and decided to proceed to commercial production.

On August 2, 2013, Richmont Mines announced that Mr. Sam Minzberg had resigned from the Corporation’s Board of Directors.

On August 23, 2013, Richmont Mines closed the previously announced senior credit facility for up to $50 million with Macquarie Bank Limited to advance Island Gold Deep project.

On October 4, 2013, Richmont Mines announced that the Monique Gold project had successfully completed the three month pre-production phase and commercial production was declared on October 1, 2013. The Corporation noted that Monique was expected to produce 4,500 ounces of commercial gold production during the fourth quarter of 2013, and had an estimated life of mine commercial gold production of 30,000 ounces, over 19 months, at an average cash cost per ounce of $904. A NI 43-101 technical report for Monique’s mineral reserve estimate, published July 31, 2013, was filed on SEDAR (www.sedar.com) on September 13, 2013.

On October 7, 2013, Richmont Mines announced an updated Inferred mineral resource estimate of 2.3 million tonnes grading 10.53 g/t for 771,000 ounces of gold for the Island Gold Deep project and provided information regarding the ownership of certain claims at the project. It came to management’s attention that a portion of the Island Gold Deep project’s estimated Inferred resource base lay within four patented claims for which Richmont owned 69% with the remaining 31% being held by a third party. Refer to the October 7, 2013 press release entitled “Richmont Mines announces updated Inferred mineral resource estimate of 771,000 ounces of gold for Island Gold Deep project; Provides information regarding ownership of certain claims at project” for full details.

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On October 16, 2013, Richmont Mines entered into a land and mining rights agreement with Argonaut Gold, owner of the Magino Gold Project that is adjacent to the Corporation’s Island Gold Mine. The agreement will enable Richmont to extend the western boundary of its Island Gold Deep project by approximately 585 metres thus increasing the project’s exploration potential towards the west. Mining rights below a depth of 400 metres were also secured on several claims to the south of the Island Gold Deep project, thus adding to the project’s exploration potential at depth. As part of the agreement, Richmont will acquire Claim SSM 722481 in its entirety, which immediately abuts Island Gold’s Lochalsh Zone, where reserves and resources already existed and where mining was taking place. In exchange, Argonaut will receive exploration and mining rights from surface to a maximum depth of 400 metres on certain Richmont claims that border the Magino Gold Project, providing it with greater flexibility in its project development. Under the terms of the agreement, Richmont will receive a net payment of $2.0 million in cash from Argonaut upon completion of the land transactions. This Agreement was slightly modified in June 2014. Under the revised terms, Argonaut will receive one claim in its entirety and surface and mining rights down to a depth of 400 metres on six claims. It will also receive surface rights on two claims down to a depth of 100 metres. The Corporation will receive two additional claims for a total of three and mining rights below a depth of 400 metres on three claims. As previously reported, under the terms of the Agreement, the Corporation will receive a net payment of $2.0 million in cash from Argonaut upon completion of the land transactions, which are now expected to take place in 2016.

On October 17, 2013, Richmont Mines announced that the W Zone Gold Project had successfully completed the three month pre-production phase and that commercial production was declared on October 1, 2013

On November 7, 2013, Richmont Mines announced that Mr. Christian Pichette, Richmont’s Chief Operating Officer, would retire at the end of 2013 after more than 35 years in the mining industry. During the last 8 of these years, Mr. Pichette spent as an integral part of Richmont’s team. Similarly, it was announced that Mr. Ebe Scherkus had resigned from Richmont’s Board of Directors for personal reasons. In addition, it was announced that Mr. René Marion had joined Richmont’s Board of Directors effective November 6, 2013. A mining engineer by training, Mr. Marion brought over 30 years of industry experience to the Corporation’s Board.

On December 10, 2013, Richmont Mines announced that Dr. James W. Gill would join its Board of Directors. In addition, the Corporation appointed Mr. Rosaire Émond, Eng., to the position of Vice-President and Chief Operating Officer, replacing Mr. Christian Pichette.It was also announced that Mr. Jean Bastien, Eng., MBA, had been appointed to the position of Mine Manager of the Corporation’s Island Gold Mine and that Mr. Raynald Vincent, Eng. M.G.P., had been appointed to the position of Chief Geologist for the Corporation’s Island Gold Mine.

On December 20, 2013, Richmont Mines announced that it had decided to terminate the Senior Secured Credit Facility (the “Facility”) for up to $50 million with MBL in August 2013. No amounts had been drawn on the Facility, and no gold hedging contracts had been put in place. The Corporation, in conjunction with MBL, began the process of releasing the securities that were put in place as part of the Facility. As per the terms of the Facility, the Corporation did not incur any cancellation costs.

On January 28, 2014, Richmont Mines announced an increase in Indicated and Inferred gold resources at its Island Gold Deep Project. Previously reported Inferred resources containing 771,000 ounces of gold were upgraded to Indicated resources of 456,000 tonnes at an average grade of 11.52 g/t for 169,000 ounces of gold, and Inferred resources were increased to 3,200,000 tonnes at an average grade of 9.29 g/t for 955,000 ounces of gold. The increase continued to indicate Island Gold Deep’s potential to be developed into an important high grade and long life contributor to Richmont’s Island Gold Mine.

On February 11, 2014, Richmont Mines announced updated corporate mineral reserve and resource estimates as of December 31, 2013, along with forecasted 2014 production, capital expenditures and exploration budget. The Corporation also announced that, as a result of a downward adjustment to the W Zone Mine reserve base, it would incur a $13.5 million non-cash write-down on the W Zone Mine in the fourth quarter of 2013.

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On April 1, 2014, Richmont Mines announced that an updated NI 43-101 technical report was filed for the Corporation’s Island Gold Mine Property, which encompassed the producing Island Gold Mine and the Island Gold Deep resource located directly below. As per this update, the Island gold Mine Property contained estimated Proven and Probable Reserves of 143,506 gold ounces (733,347 tonnes grading 6.09 g/t Au), Measured and Indicated resources of 233,330 ounces of gold (739,700 tonnes grading 9.81 g/t Au) and Inferred resources of 1,037,327 ounces of gold (3.6 million tonnes grading 9.07 g/t Au) as of December 31, 2013.

On April 23, 2014, Richmont Mines announced that it had closed the bought deal financing previously announced on April 3, 2014. The Corporation issued a total of 8.05 million common shares at a price of $1.45 per share, including the entire over-allotment option of 1.05 million common shares, on a bought-deal basis, for aggregate gross proceeds of $11.67 million (the “Offering”), through a syndicate of underwriters lead by Macquarie Capital Markets Canada Ltd. and including BMO Nesbitt Burns Inc., CIBC World Markets Inc. and Desjardins Securities Inc (the "Offering"). The proceeds from the Offering were to be used for working capital and general corporate purposes.

On April 24, 2014, Richmont Mines announced that access to the upper portion of the Island Gold Deep resource had been achieved with approximately 130 metres of development into the C Zone, on claims that are 100% owned by the Corporation, at a vertical depth of 560 metres (the 560 level). An approximate 92 metre length of this development was well mineralized, and corresponded well with the previously established resource. Chip sample results (face) obtained for the C mineralized zone during lateral drift development over the 92 metres averaged a cut grade of 12.73 g/t over an average width of 2.92 metres. This grade was seen as indicative, as the capping value used (75 g/t) needed to be confirmed by further studies. Results from definition drilling completed within the deep resource offer additional confirmation of prior exploration data for Island Gold Deep. Approximately 5,000 metres of definition drilling had been completed in the upper part of the C zone resource at 25 metre spacing, and results enabled a better definition of the resource limits for both the C and B zones. Ramp development was ahead of schedule and was at the 610 metre level, and was on pace to reach a depth of 635 metres before year-end.

On July 2, 2014, Richmont Mines announced that Mr. Paul Carmel, Richmont’s President and Chief Executive Officer, was relieved of his duties with the Corporation effective immediately. Ms. Elaine Ellingham was appointed interim President and CEO.

On August 5, 2014, Richmont Mines announced that it signed a definitive agreement to acquire the outstanding 31% ownership of four patented claims on the Island Gold Mine property, thereby increasing its ownership of these claims to 100% from 69% previously. The 31% ownership held by the third party was to be acquired by Richmont in return for a 3% Net Smelter Return (“NSR”) royalty that is payable on 100% of the mineral production from the four claims. The transaction was closed on August 6, 2014, resulting in consolidation of Richmont’s ownership of the Island Gold Mine property.

On September 15, 2014, Richmont Mines Inc. announced that it would be commencing an additional exploration drilling program from surface to test part of the down plunge projection of the Island Gold deposit. This was in addition to the remaining budgeted 2014 exploration and definition drill programs that was currently underway from underground. The new program consisted of four diamond drill holes for approximately 4,800 metres at an estimated cost of $0.5 million.

On September 25, 2014, Richmont Mines Inc. announced that the Board of Directors had promoted Nicole Veilleux to Vice-President, Finance. The Corporation concurrently announced that Pierre Rougeau, Chief Financial Officer, resigned from the Corporation to pursue other opportunities.

On September 30, 2014, Richmont Mines Inc. announced an accelerated and expanded development plan for the estimated 1.1 million ounce inferred resource extension below the Corporation’s Island Gold Mine in Ontario, as well as chip sampling results from lateral development on the 535 and 585 metre levels of the mine.

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On October 17, 2014, Richmont Mines Inc. announced the appointment of Mr. Renaud Adams to the position of President and Chief Executive Officer effective November 15, 2014.

On October 17, 2014, Richmont Mines Inc. announced the resignation of Dr. James Gill from the Corporation’s Board of Directors, effective October 17, 2014.

On January 8, 2015, Richmont Mines Inc. provided results from its deep exploration drilling that was announced in September 2014 to test part of the down plunge projection of the Island Gold deposit to the east. Highlights included intersections of 19.87 g/t Au over 3.93 metres at a vertical depth of 1,203 metres and 7.44 g/t Au over 8.49 metres at a vertical depth of 858 metres. Richmont also announced a $7.6 million exploration program for Island Gold Mine in 2015.

On January 15, 2015, Richmont Mines Inc. reported 2014 gold production of 95,208 ounces, a 45% increase over 2013. Full details regarding 2014 production and guidance for 2015 were provided, as well as transformational development plans for the Corporation’s 1.1 million gold ounce global higher-grade resource at the Island Gold Mine in Ontario.

On January 20, 2015, Richmont Mines Inc. announced that it entered into an agreement with Macquarie Capital Markets Canada Ltd. (“Macquarie”) as lead underwriter, on behalf of a syndicate of underwriters, for the issuance of 7.5 million common shares of the Corporation, on a bought-deal basis, at a price of $4.00 per share (the “Offering Price”) for gross proceeds of $30 million (the “Offering”). The syndicate of underwriters also included CIBC World Markets Inc., National Bank Financial Inc., BMO Capital Markets, TD Securities Inc., and PI Financial Corp. On January 21, 2015, Richmont Mines Inc. announced that it had agreed to increase the size of this bought deal offering to $34 million. Pursuant to a revised agreement, the syndicate of underwriters led by Macquarie Capital Markets Canada Ltd. agreed to purchase on a bought deal basis 8.5 million shares of the Corporation, at a price of $4.00 per share for gross proceeds of $34 million. In addition, the underwriters were granted an over-allotment option to purchase an additional 1.125 million common shares from the corporation, for additional gross proceeds of approximately $4.5 million. This transaction was successfully closed on February 11, 2015.

On February 23, 2015, Richmont Mines Inc. announced the appointment of Mr. Steve Burleton to the position of Vice-President, Business Development.

On February 27, 2015, Richmont Mines Inc. announced that Mr. Rosaire Emond, Chief Operating Officer, decided to leave Richmont to pursue other career opportunities. Mr. Emond’s last day was March 6, 2015. Mr. Renaud Adams, President and CEO, would oversee the operations and the transformational development currently underway at Richmont’s cornerstone Island Gold Mine.

On July 14, 2015, Richmont Mines Inc. announced its plan to proceed with the development of the deeper Q zone at Beaufor Mine. This was based on a comprehensive analysis of both geological and economic factors. With this development, life of Beaufor Mine was extended by two years, with an annual estimated production rate of 20,000 to 25,000 ounces in 2016 and 2017.

On August 6, 2015, Richmont Mines Inc. announced record revenues of $40.6M for the second quarter and increased its production guidance to 87,000 – 95,000 ounces, from 78,000 – 88,000 ounces previously, as a result of strong results realized in the first six months of the year.

On September 10, 2015, Richmont Mines Inc. announced commencement of a 23,000 metre deep directional drill program at its Island Gold Mine to further expand its resources at depth below its current 1.0 million ounce global gold resource. This drill program was to follow up on very encouraging results of a single drill hole from surface announced on January 8, 2015. Refer to the September 10, 2015 press release entitled “Deep drilling to commence at Richmont’s Island Gold Mine to pursue resource expansion potential, following up on 2014 high-grade intersection at depth” for full details.

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On September 14, 2015, Richmont Mines Inc. announced its inclusion in the S&P/TSX SmallCap Index, effective after the close of trading on Friday, September 18, 2015.

On September 15, 2015, Richmont Mines Inc. announced strengthening of its executive team by appointment of Anne Day, as Vice President, Investor Relations.

On September 16, 2015, Richmont Mines Inc. provided an update on its previously announced 20,000 metre surface exploration program on its Island Gold property to test the east and west extensions of the Island Gold deposit along strike as well as new deposits within the regional Goudreau zone, which hosts the mine’s operations. The updated program included drilling of selected high-priority gold targets identified by the exploration team, based on their previous work and compilations, elsewhere on the highly prospective 77 km ² Island Gold Property. The exploration drilling began earlier that year with 1,800 metres completed at the end of the second quarter. The program was to follow up on high quality gold targets well characterized by the Corporation’s exploration team, while leveraging more advantageous drilling costs. Refer to the September 16, 2015 press release entitled “Richmont Mines Provides an Update on the Surface Step-Out Exploration Drilling to Test Along Strike and Priority Regional Targets on Its Island Gold Mine Property” for full details.

On October 28, 2015, Richmont Mines announced the completion of a Preliminary Economic Assessment (“the PEA”) for its cornerstone Island Gold Mine. The PEA considered an 800 tonne per day mining operation that solely evaluated the December 31, 2014 Mineral Resources that were located in the most continuous portion of the deposit between the 450 metre and 860 metre levels. For the purposes of this PEA, the Corporation had excluded Resources above the 450 metre level, isolated Resource blocks and parallel zones outside the main area of the study. Further ongoing engineering studies are investigating a possible expansion to 1,150 tonnes per day. Refer to the October 28, 2015 press release entitled “Richmont Mines Announces Results of a Preliminary Economic Assessment for a Portion of the Deeper Resources of the Island Gold Mine” for full details.

On December 7, 2015, Richmont Mines announced the appointment of Christian Bourcier to the Richmont executive team as Vice-President, Operations effective January 11, 2016. Mr. Bourcier will be responsible for all operational programs for Richmont and will be based in Rouyn-Noranda, Quebec.

On December 11, 2015, the Corporation filed an NI 43-101 Technical Report on SEDAR that contained the “PEA” results announced earlier on October 28, 2015. Refer to the December 15, 2015 press release entitled “Richmont Mines Announces Filing of NI 43-101 Technical Report for its Island Gold Mine” for full details.

On December 21, 2015, Richmont Mines provided an initial update on the previously announced Island Gold exploration drilling program. The overall program had four main objectives: 1) To test the near-mine potential to extend mine life above the 860 metre level; 2) to test the down plunge extension of the deposit between the 860 and 1,500 metre levels; 3) to test the east-west lateral extension beyond the known deposit; and 4) to test high-priority gold targets on the prospective Island Gold Property. It is now expected that the entire drilling program will be completed by the end of June, 2016. Refer to the December 21, 2015 press release entitled “Richmont Mines provides exploration update for Island Gold” for full details.

On December 22, 2015, Richmont Mines announced that Mr. Greg Chamandy would be resigning as Executive Chairman of the Board effective January 1, 2016, but would remain as a director of the Corporation and continue to be a member of the Corporation’s Technical and Corporate Responsibility Committee. Mr. René Marion, then currently an independent director, would be appointed as non-executive Chairman of the Board at that time.

On February 9, 2016, the Corporation announced an increase of 187% (net of depletion) in its Mineral Reserves on December 31, 2015. This included a 206% increase in Mineral Reserves at the cornerstone Island Gold Mine to 561,700 ounces (net of depletion) at a Mineral Reserve grade of 8.26 g/t. Mineral Reserves at Beaufor Mine increased 95% to 63,850 (net of depletion) at a Mineral Reserve grade of 6.57 g/t, extending Beaufor mine life by more than two years. Refer to the February 9, 2016 press release entitled “Richmont Mines increases Mineral Reserves by 187% and Island Gold Mine increases Mineral Reserves by 206%, with a 29% increase in Reserve grade” for full details.

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On February 12, 2016, Richmont provided production and costs guidance for 2016, which included a potential increase of 22% from Island Gold Mine expecting to drive a decrease in AISC. Major consolidated operational estimates included the following:

Gold ounces produced	87,000-97,000
Cash Costs per ounce (CAD)	$930-$1,000
All-in sustaining costs per ounce (CAD)	$1,275-$1,390
Cash Costs per ounce (US$) 1	$680-730
All-in sustaining costs per ounce (US$) 1	$935-1,015

1	assuming an exchange rate of 1.364 Canadian dollars to the US dollar

Capital investment estimates included $24.1 million of sustaining capital and $43.4 million of project capital. The Corporation indicated that it will remain focused on a disciplined and prudent capital allocation strategy to ensure expenditures are fully funded internally with sustaining capital investment requirements. Exploration costs for 2016 were estimated at $8.4 million, of which $7.3 million relates to costs required to complete the drilling programs announced in September 2015. Refer to the February 12, 2016 press release entitled “Richmont Mines announces 2016 operational outlook” for full details.

On February 24, 2016, Mr. Peter Barnes was appointed as an independent member of the Richmont Board of Directors and joined the Corporation’s Audit and HR and Compensation Committees.

On February 25, 2016, the Corporation announced an update on its drilling program0s, demonstrating the significant potential of Island Gold Mine, laterally and at depth. Refer to the February 25, 2016 press release entitled “Richmont Mines Continues to Intersect Significant Gold Mineralization at Island Gold Laterally and at Depth” for more details.

On March 28, 2016, the Corporation announced the filing of technical reports for the Island Gold Mine and Beaufor Mine with respect to the updated 2015 Reserves and Resources announced on February 9, 2016.

Capital Expenditures

The following table sets forth the Corporation’s capital expenditures on its properties for the past three fiscal years.

(in thousands of $)	2015	2014	2013
	$	$	$
Island Gold Mine	48,938	20,168	27,770
Beaufor Mine	1,390	1,623	980
W Zone Mine	-	234	3,779
Monique Mine	-	21	8,358
Other	1,770	1,006	1,001
Total	52,098	23,052	41,888

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As part of its strategy of accelerated development and potential production expansion at Island Gold Mine, the Corporation invested $48.9 million in 2015. This included $7.8 million for extending the main ramp to a vertical depth of 740 metres, $8.5 million for a secondary eastern ramp to a vertical depth of 500 metres and $4.8 million for an exploration drift that extends to the east by approximately 440 metres. A $2.8 million delineation drilling program of 50,089 metres was also completed in 2015. Other significant infrastructure upgrades included $8.7 million for the tailings dam expansion, $5.0 million for electrical upgrades and $1.6 million for bunkhouse buildings.

Richmont invested $23.1 million in its assets in 2014, a decrease from the $41.9 million in 2013. The decrease largely reflects the lower development costs associated with the Monique Mine following its commencement of commercial production in the fourth quarter of 2013, lower investments in the W Zone following the decision to cease operations in the second quarter of 2014, and decreased year-over-year investments at the Island Gold Mine.

Property Interests

The following table outlines Richmont Mines’ interest in its exploration properties as at December 31, 2015.

Property	Year of acquisition	Number of Mining titles	Participation 1
Quebec
Wasamac	1988	4	100%
Camflo Northwest	2005	13	80%
Ontario
Sewell	2002	6	100%
Cripple Creek	2002	27	100%

1	The Corporation will be required to pay royalties if some of these properties are brought into commercial production.

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Exploration and Project Evaluation Expenditures

The following table presents Richmont Mines’ exploration expenses in 2013, 2014, 2015 and the budgeted estimated amounts for 2016.

(in thousands of $)	2016		2015		2014		2013
	$		$		$		$
	Estimated
Exploration costs - Mines
Island Gold	7,300		4,600		771		4,532
Beaufor	1,700		2,679		1,733		1,929
	9,000		7,279		2,504		6,461
Exploration costs - Other properties
Wasamac	140		94		169		1,102
Monique	-		-		2		221
Other	100		32		154		347
Project evaluation	825		521		357		474
Exploration and project evaluation before depreciation and exploration tax credits	10,065		7,926		3,186		8,605
Depreciation	35		41		71		229
Exploration tax credits	-		(532	)	515		(959	)
	10,100		7,435		3,772		7,875

2016 Trends

The cost-effective development of its mining assets, both current and future, has always been at the heart of Richmont Mines’ success over the years, and this remains a top priority for the Corporation. Richmont is committed to generating positive cash flows, and delivering organic growth. With over 30 years of experience in gold production, exploration and development, along with prudent financial management, Richmont is well-positioned to cost-effectively build its Canadian reserve base and to successfully enter its next phase of growth.

Richmont currently operates two gold mines – the Island Gold Mine in Ontario and the Beaufor Mine in Quebec. Consolidated production for 2016 is expected to be consistent with 2015, as increased production from Island Gold is expected to fully offset the production decrease related to the 2015 closure of the Monique Mine. Company-wide cash costs and AISC are expected to be largely in-line with the prior year. In 2016, the Corporation will continue to actively explore and develop the Island Gold deposit laterally and at depth, consistent with its goal to increase the production profile, decrease costs and grow its cash flow streams. Further, as the processing of the Monique stockpile will be completed in the first quarter, the tonnes processed at Camflo Mill are expected to decrease during 2016. Richmont will pursue and evaluate opportunities to fully utilize excess capacity. It currently has custom milling contracts in place with local mining companies to process approximately 55,000 tonnes in the first half of 2016.

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The Corporation will remain focussed on a disciplined and prudent capital allocation strategy to ensure expenditures are fully funded internally with sustaining capital investment requirements expected to reduce as compared with the prior year. Project capital investment for the year will continue to focus on unlocking the potential of the Island Gold Mine and investment is primarily allocated to allow for accelerated development, related infrastructure upgrades and equipment purchases as described in the PEA. Delineation drilling in 2016 will target the conversion of the remaining resources within the scope of the PEA deposit area. Sustaining capital at Beaufor is expected to be in-line with 2015 and includes 625 m of ramp development and 100 m of vertical development.

Exploration drilling programs at Island Gold Mine are expected to be completed at the end of June 2016, at which time the Corporation will review the results and will plan its drilling program for the second half of 2016 accordingly. For the Beaufor Mine, the drilling program will focus on the Q Zone extension and in the upper mine to target new resources and potential mine life extension.

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Location and Property Description

The Island Gold Mine is located approximately 83 km northeast of Wawa, Ontario, in the Sault Ste. Marie Mining Division. Dubreuilville, Ontario, is approximately 10 km northwest of the Island Gold Mine.

Description of Mining Rights

The Island Gold property is divided into nine parts and consists of 219 patented, leased and staked claims totaling 7,772 ha, located mainly within the Finan and Jacobson townships. These claims are grouped into nine (9) different properties: Kremzar, Localsh, Goudreau, Goudreau Lake, Edwards, Salo, Ego, Argonaut and Island Gold.

Property	Number of	Area (ha)	Expiration date	Richmont Mines
	claims			Ownership (%)
Kremzar	21	383	Patented Claims:	100
			taxes are paid every year,
			2 Mining Leases: 02/28/2022 to
			06/30/2030
Lochalsh	33	348	Patented Claims:	100
			taxes are paid every year
			Mining Leases: 06/30/2030 to
			03/31/2033
			Claims: 02/06/2017 to 04/25/2018
Goudreau	65	988	58 Patented Claims:	100
			6 Patented Claims:	100 below 400m
			Part of 1 patented claim:	100 below 100m
			taxes are paid every year
			1 Claim: 08/20/2018
Goudreau Lake	4	58	4 Patented Claims:	100
			Taxes are paid every year
Island Gold	41	5,119	Claims: 07/29/2016 to 07/14/2019	100
Edwards	43	703	Patented Claims:	100
			taxes are paid every year
			Claims: 04/05/2017 to 08/28/2019
Ego	3	64	Patented Claims:	100
			taxes are paid every year
			Claims: 06/05/2016
Salo	3	40	Claims: 06/08/2017 to12/28/2018	100
Argonaut	6	72	3 Patented Claims:	100 below 400m
			1 mining lease: 04/30/2030	100
			2 claims: 02/05/2018 to 04/18/2018	100
			taxes are paid every year

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The claims are expected to be renewed by applying excess credits available before the anniversary date. Taxes are paid annually to the government to keep Patented Claims and Mining Leases in good standing. Richmont Mines has an internal procedure to ensure monitoring of the claim expiry dates. All of these mining claims, mining leases and patented leases were in good standing in 2015 and are expected to remain in good standing for 2016 as well. A detailed list and map of locations can be found in the Island Gold NI 43-101 technical report dated December 31, 2015, which will be filed under the Corporation’s profile on the SEDAR website at www.sedar.com.

Summary of Agreements

Richmont Mines entered into an agreement with Patricia Mining on August 28, 2003. Under the agreement, Richmont Mines completed a private placement investment of $1.0 million in common shares of Patricia Mining at $0.50 per share and obtained an option to acquire a 55% interest in the Island Gold property by investing up to $10 million or by bringing the project into commercial production. This initial investment was used to partly finance a $3 million exploration program on the Island Gold property. On December 3, 2004, Richmont Mines decided to invest up to an additional $10 million in order to acquire a 55% interest in the project. Richmont Mines became the project operator as of January 1, 2005. The Corporation acquired its 55% interest during the course of the fourth quarter of 2005, after having fulfilled its obligation to invest $10 million toward the project’s development.

In January 2006, Richmont Mines and Patricia Mining announced the purchase of the remaining joint venture interest of Algoma Steel Inc. (“Algoma”) in the Goudreau property near Dubreuilville, Ontario, for $100,000. The property remains subject to a 15% net profits interest (“NPI”) royalty as per the original joint venture agreement between Algoma and Patricia Mining.

On December 16, 2008, Richmont Mines acquired all of the common shares of Patricia Mining that it did not already own pursuant to a plan of arrangement under the Business Corporations Act (Ontario). Following this transaction, Richmont’s ownership interest of the Island Gold Mine increased to 100% (except for the 4 claims of the Goudreau Lake property where the ownership interest was 69%).

On May 9, 2012, Richmont Mines acquired Red Pine Exploration’s remaining 25% interest in the Edwards property, bringing the Corporation’s ownership to 100%, and on June 13, 2012, the Corporation acquired the Salo property, which includes 3 claims located to the east of the Island Gold Mine.

On October 16, 2013, Richmont Mines entered into a land and mining rights agreement with Argonaut Gold Inc. (“Argonaut”), owner of the Magino Gold Project adjacent to the Island Gold mine. The agreement enables Richmont to extend the western boundary of its Island Gold Lower Zones by a distance of approximately 585 m thus increasing the project’s exploration potential towards the west. Mining rights below a depth of 400 m were also secured on several claims to the south of the Island Gold Lower Zones, thus adding to the project’s exploration potential at depth. As part of the agreement, Richmont will acquire Claim SSM 722481 in its entirety, which immediately abuts Island Gold’s Lochalsh Zone, where reserves and resources currently exist and where mining is currently taking place. In exchange, Argonaut will receive exploration and mining rights from surface to a maximum depth of 400 m on certain Richmont claims that border the Magino Gold Project, providing it with greater flexibility in its project development. Under the terms of the agreement, Richmont will receive a net payment of C$2.0 million in cash from Argonaut upon completion of the land transactions.

This Agreement was modified slightly in June 2014. Under the revised terms, Argonaut will receive one claim in its entirety and surface and mining rights down to a depth of 400 m on six (6) claims. It will also receive surface rights on two claims down to a depth of 100 m. Richmont will receive two additional claims for a total of three (3) and mining rights below a depth of 400 m on three (3) claims. As previously reported, under the terms of the Agreement, Richmont will receive a net payment of C$2.0 million in cash from Argonaut upon completion of the land transactions, which are now expected to take place in 2016.

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On August 5, 2014 - Richmont Mines Inc. announced that it had signed a definitive agreement to acquire the outstanding 31% ownership of four patented claims on the Island Gold Mine property, thereby increasing its ownership of these claims to 100% from 69% previously. The 31% ownership held by the third party will be acquired by Richmont in return for a 3% Net Smelter Return (“NSR”) royalty that is payable on 100% of the mineral production from the four claims, SSM2490, SSM2491, SSM2666 and SSM2667 (the Goudreau Lake property).As part of this agreement Richmont made the following advance royalty payments: $1 million upon closing of the transaction, and $1 million on each of January 3, 2015 and January 3, 2016. Advance royalty payments will decrease to $0.3 million as of January 3, 2017, and will be paid annually until such time as a total of $5.1 million has been paid in royalties (including advance royalties) to the third party, after which advance royalty payments will cease. All advance royal payments will be credited against any future NSR payments.

Ownership of Mining Rights

Richmont currently holds all the mining rights for the Island Gold project.

All mining titles on the Island Gold were jointly held by Richmont Mines (55%), and Patricia Mining (45%). Since the acquisition of Patricia Mining on December 16, 2008, Richmont Mines held 100% of all mining titles relating to the Island Gold property with the exception of 4 patented claims of the Goudreau property (2490, 2491, 2666 and 2667), for which Richmont Mines owned 69%. The remaining 31% was held by a third party. Following the acquisition, the mining rights owned by Patricia (45%) were transferred to Richmont Mines in February and March 2009.

Since the signing in 2014 of a definitive agreement to acquire the outstanding 31% ownership of the four patented claims of the Goudreau property on the Island Gold Mine property, Richmont Mines holds 100% of all mining titles relating to the Island Gold property.

Mining Royalties

Island Gold properties held by Richmont Mines are subject to the payment of royalties and financial contractual obligations. Details can be found in the Island Gold NI 43-101 technical report dated December 31, 2015 and which will be filed under the Corporation’s profile on the SEDAR website at www.sedar.com.

The Kremzar property is subject to a 4% NSR payable to Algoma which becomes payable to Algoma pursuant to the Algoma Royalty Agreement.

The Kremzar property is also subject to a 3% NSR payable to Osisko Gold Royalties Ltd (“Osisko”), which is payable until such time as the Algoma NSR becomes payable. In the event that the Algoma NSR becomes payable and is reduced below 4%, Osisko will be entitled to receive an NSR equal to 50% of the amount by which the Algoma royalty is reduced, payable on the same terms as the Algoma NSR.

The Lochalsh property is subject to a 3% NSR payable to Osisko. The Island Main and Lochalsh zones, as well as a part of the Island Gold mineral resources below the 400 level, are located on this property.

The Goudreau property is subject to a 2% NSR payable to Osisko and a 15% net profit interest (“NPI”) royalty payable to Algoma.

The Goudreau Lake property is subject to the 3% NSR royalty payable to Host’s Gold Incorporated. This property is also subject to 1.38% NSR royalty payable to Osisko and a 10.38% NPI royalty in favour of Algoma Steel.

In February 2016, Osisko sold 15 % of the Island Gold Mine Royalty interests to Caisse de dépôt et placement du Québec ("CDPQ") and Fonds de solidarité des travailleurs du Québec (F.T.Q.)

The Salo property is subject to an NSR royalty of 2% in favour of M.A. Tremblay, J. Robert, R. Salo and P. Robert.

Red Pine Exploration owns a 2% NSR on the Edwards property.

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There is a 10% NPI payable to Cavendish on four (4) claims of the Argonaut property.

Environmental Obligations and Permits

All permitting activities identify and address the various municipal, provincial, and federal environmental and social requirements and standards applicable to the IG project. These include the statutory requirements, stakeholder interests, and environmental, social and economic aspects. Agencies include Environment Canada (EC), Ontario Ministry of Environment and Climate Change (MOECC), Ministry of Natural Resources and Forestry (MNRF), and Ministry of Northern Development and Mines (MNDM). IGM is permitted to be designed and operated at a production rate of 27,000 tonnes per month of gold bearing ore.

Listed below are the major Environmental Compliance Approvals (ECA) from MOECC that are applicable to the site:

• Air and Noise ECA # 8549-9BPP7LV issued September 21, 2015. This now includes limited operational flexibility, which allows minor changes to equipment/infrastructure without having to amend the ECA.

• Septic System ECA # 3989-8XUPS9 issued September 27, 2012. An application for an Amendment was submitted in August 2015 for the Sewage System Expansion Project, Richmont expects to receive approval in first quarter of 2016.

• Industrial Sewage Works ECA (for tailings management area) ECA # 0440-9YLHG7 issued September 9, 2015. (Previously treated discharge was seasonal, with the issuance of ECA, it is now continuous discharge, allowing increased operational flexibility).

Water taking is conducted within acceptable limits to protect fish habitat, as well as under the regulation of a Permit to Take Water (PTTW) from the MOECC.

An amendment to the Closure Plan was submitted to MNDM in April 2013, to amalgamate the Closure Plan (for Lochalsh and Kremzar) and include infrastructure associated with the Island Gold Deep project. Richmont received approval in June 2014. Based on the Dam Raise Project 2015, another Amendment to the 2013 Closure Plan was submitted in September 2015, along with the increase in Financial Assurance, which currently is $1,683,942. The process of review and comments is ongoing, Richmont expects to receive approval in the second quarter of 2016.

Infrastructure

The Island Gold infrastructure includes a primary tailings pond, secondary settling pond, Kremzar Mill (a carbon-in-pulp mill), Lochalsh ramp and portal, mine access road, and hydro-electric power lines, all of which are located on the property. An office, core logging and storage facility, and a mine dry are also located on the previously producing Kremzar mine site. When the Kremzar carbon-in-pulp mill was constructed in 1988, it was capable of handling 650 tpd. Since then, its milling capacity was increased to 850 tpd in 2010 and finally 900 tpd in October 2015. Miller Lake, which is located west of the Kremzar mine, is a fully permitted tailings area. The tailings and waste rock have been tested and are not acid generating. All permits for mining and milling operations have been maintained.

Location of Mineralized Zones

The mineralized zones, including the reserves and resources of the Island Zone and underground infrastructure, are located on mining leases 991853, 991854 and 991852 and patented claim 2075 of the Lochalsh property, and the ramp and waste pad are on patented claims 1776 and 1710 of the Goudreau property. The reserves and resources of Lochalsh are located on mining leases 825288 and 825287 of the Lochalsh property. The Goudreau resources are located on patented claim 3817 of the Goudreau property. The deep C Zone estimated mineral resources at the Island Gold Mine are principally located on the Lochalsh mining lease 825288 and 991855 and on Goudreau patented claim 2490, 2491 and 2666.

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Accessibility

Access to the Island Gold Mine is via an all-weather road from Highway 519, just west of Dubreuilville, Ontario. This village is located approximately 35 km east of the junction between Highways 17 and 519. It takes approximately one hour to drive from Wawa, Ontario, to the mine site.

Climate

The mine is located within the Lake Superior Regional climatic zone, moderated by the influence of Lake Superior. The average daytime temperature is 2°C, ranging from -41°C to 31°C throughout the year. Annual precipitation is normally 669 mm of rain and 278 cm of snow. Winter winds are from the northwest and north, and during the summer south-westerly to westerly winds prevail. The climate does not affect the mining operation, which extends all year long.

Local Resources and Infrastructure

Wawa has a population of approximately 3,500. Dubreuilville, originally a forestry community, has a population of approximately 900. The Island Gold Mine is also within a few kilometres of railway lines operated by Canadian National Railways and Algoma Railways. Sidings for each of these railway lines are located in the villages of Goudreau and Lochalsh.

A power substation connected to the provincial power grid, water supply, gravel roads, offices, maintenance buildings and living accommodations are all available within the mine area. Power is supplied by Algoma Power Inc. (formerly Great Lakes Power Corporation).

Richmont Mines also offers living accommodations and flexible schedules to its employees. Training is offered in order to maintain a local qualified workforce.

Physiography

The property area is within the Precambrian Shield adjacent to Lake Superior, in an area of low rolling hills that trend in an east-west direction with widespread swamps, and mixed forests of broadleafs and conifers. Property relief is low, from a high point of 488 metres above sea level near the Miller and Maskinonge Lakes, to a topographic low point of 381 metres above sea level near Goudreau Creek. The Mine area has been partially logged.

Exploration History

In 1983 Canamax Resources Inc. (“Canamax”) and Algoma formed a joint venture to evaluate the mineral potential of Algoma’s 117 patented claims covering the Goudreau iron range. In 1985, drilling by Canamax about two kilometres south of the Kremzar mine intersected a series of sub-parallel lenses containing gold mineralization within deformed rocks of the Goudreau Lake Deformation Zone (“GLDZ”). These lenses are known as the Lochalsh, Island Gold, Shore and Goudreau Lake zones. During 1989 and 1990, a 1,280 metre long ramp was driven into the Island deposit beneath Goudreau Lake from an adit on the north shore. Drifts and raises totalling 382 metres were developed on two levels at depths of 125 metres and 140 metres below the Goudreau Lake elevation. A bulk sample weighing 4,167 tonnes was extracted and processed at the Kremzar Mill.

Patricia Mining acquired the project in 1996 and completed 16,862 metres of diamond drilling in 49 holes on the Island deposit and Lochalsh Zone between 1996 and 2002. In 2004, Patricia Mining started an underground exploration program and completed a resource estimate at a cost of $3.0 million. A total of 125 metres of exploration drifts, 53 metres of ore sill and 8,137 metres of drilling were completed.

In 2005, Richmont Mines completed 2,111 metres of underground development and 7,903 metres of delimitation drilling. A total of 7,259 tonnes with a content of 6.23 g/t Au from ore development were stockpiled on the surface.

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In 2006, Richmont Mines continued the exploration program. A total of 3,469 metres of development were completed including 506 metres of ramps and 1,700 metres of ore silling. A total of 56,861 tonnes of development ore with a content of 6.96 g/t Au were stockpiled on the surface. At the end of December 2006, a total of 41,531 tonnes of mineralized material grading 4.80 g/t Au were processed at the mill. A total of 28,149 metres of underground diamond drilling were performed on the Island Zone, and 10,602 metres of drilling were completed from the surface on the Lochalsh and Goudreau zones. Reserve and resource estimates were performed by Genivar in 2007 based on this work.

On October 1, 2007, Island Gold began commercial production. On December 16, 2008, Richmont Mines acquired all of the outstanding shares of Patricia Mining, increasing its ownership of the property to 100%, with the exception of four claims on the Goudreau property, for which Richmont owns a 69% interest.

During 2009, underground drilling at the Island Gold Mine included 212 drill holes totaling 26,914 metres. Approximately half of these metres were exploration holes in the Lochalsh, Goudreau and Extension-2 zones. The drilling confirmed the presence and continuity of the targeted zones. A surface diamond drilling program was implemented in conjunction with the underground drilling. The goal of this program was to primarily test the near surface eastern and western extensions of the known zones in the vicinity of Island Gold Mine.

In 2010, Richmont Mines continued its underground exploration program via drilling and drifting in order to improve the quality of the resources, convert resources to reserve categories and increase the overall resource base. The excavations were done in waste rock to continue the exploration access drifts towards the Extension-2 sector of the E1E Zone, the Goudreau and the Lochalsh zones. This development also permitted exploration diamond drilling in the Extension-2 sector of the E1E Zone, the Lochalsh and the Goudreau zones. During 2010, underground drilling at the Island Gold Mine included 12,110 metres of definition drilling and 24,423 metres of exploration drilling. These metres were exploration holes in the Lochalsh, Extension-1, Goudreau and Extension-2 zones. Drilling confirmed the presence and continuity of the targeted zones. The delineation drilling into the Extension-1 sector of the E1E and the Lochalsh sector permitted the conversion of Probable reserves into Proven reserves. The exploration drilling in the Extension-2 sector of the E1E confirmed the location of the known resource, and resulted in the conversion of a portion of the resources into Probable reserves. A surface diamond drilling program was implemented in conjunction with the underground drilling during 2010. The goal of this program was to primarily test the eastern, western and depth extensions of the known zones in the vicinity of Island Gold Mine. The 2010 surface exploration drill program was completed in December 2010, and consisted of 30,015 metres. The drilling on the projected eastern, western and depth extensions of the mine structure horizon was successful in identifying the continuance of similar alteration, mineralization and shearing over one kilometre east of the Island Gold Deposit under Goudreau Lake.

A total of 58,958 metres of drilling were completed in 2011. Nearly 26,000 metres of underground definition drilling were completed in the areas of Lochalsh, Goudreau and Extensions 2 and 3. These and other holes allowed for the conversion of a portion of the resources into reserves. Drilling below the 400 level was mainly done from the surface and once again demonstrated the mine’s potential at depth. More specifically, drilling identified four main areas (G, C, D and E1E) between the -500 and -900 m levels over a 150 metre corridor extending between the Main Island and Lochalsh areas.

A total of 85,509 metres of drilling were completed at Island Gold in 2012, nearly 60,534 metres of which were done underground. Definition drilling, in Lochalsh, Goudreau and Extensions 2 and 3 along with other drill holes, permitted part of the resources to be converted into reserves. Drilling below the 400 metre level was done from surface and from underground, and demonstrated the mine’s potential at depth. (Island Gold Deep program). More specifically, the drilling resulted in a first mineral resource estimation for the C Zone at depth in January 2013.

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In 2013, nearly 100,000 metres of drilling were completed underground at the Island Gold Mine, including approximately 62,000 metres for the Island Gold Deep exploration program, 20,000 metres of definition drilling and 18,000 metres of exploration drilling in the other areas of the mine. Exploration holes in Island Gold Deep sectors from the west, below Lochalsh, to the east, below Extension 1, confirmed the presence and continuity of the deep C Zone and of some parallel zones, and resulted in an important increase in gold resources. The definition-delineation drilling into the upper sectors of the mine and below Extension-2 also renewed the mineral reserves of the mine.

During 2014, approximately 35,000 metres of mainly delineation and definition drilling were performed underground at the Island Gold Mine. The definition-delineation drilling occurred mainly in the lower sectors of the mine, below the 400 level: upper part of the Deep C zone and below Extension 1 and 2. This program has renewed and also increased the mineral reserves of the mine.

With some underground drilling, there were also 1,000 metres of surface exploration drilling which were performed in 2014. Recent drill results (cut grades over true widths): in hole GD-14-01C from surface, intersections of 19.87 g/t Au over 3.93 metres in the C Zone, and 21.1 g/t Au over 0.95 metres in an undetermined zone, and in hole 400-528 09 drilled from underground, an intersection of 7.44 g/t Au over 8.49 metres in the C Zone.

For 2015 exploration details, refer to section ‘exploration and delineation drilling’ on page 39-41 of this document.

Geological Setting

Regional Geology

The Island Gold property is located in the Michipicoten greenstone belt, which is part of the Wawa sub-province and Superior Province of Archean age. The property is stratigraphically positioned in the upper portion of the Wawa Assemblage, composed by intermediate to felsic volcanic rocks capped by pyrite-bearing iron formations.

Project Geology

The Island Gold property covers part of the interface between the Catfish assemblage, composed of mafic rocks, and the Wawa assemblage, which consists of felsic rocks. The pyrite-rich Goudreau iron formation lies at the contact between the Wawa and Catfish assemblages. A unit of pyroclastic rocks marks the transition between the two assemblages and hosts the gold occurrences encountered on the property. This gold mineralization is controlled by the Goudreau Lake Deformation zone (the “GLDZ”). The GLDZ hosts the Island, Lochalsh, Goudreau, Shore, and north shear gold zones, all located within the Island Gold property.

Mineralization

Within the GLDZ there are a series of parallel shear zones, up to 25 metres wide by several hundred metres long, with dips ranging from -70° to -90°, which host the gold mineralization. Moderate to high strain intensity is present within the shear zones containing pervasive alterations occurring in the form of iron carbonate, silica and calcite. Gold is found primarily in quartz stringers and in veins, 1 cm to 1.5 metres wide, within areas of intense sericitization and silicification with 2% to 5% pyrite. Finely disseminated gold occurs in clusters up to 3 mm in diameter.

At the Island Gold deposit, 5 zones referred to as E1, E, D1, D, and C, are defined and characterized by the presence of alteration halos ranging from 0.5 metres to over 8 metres in thickness, and are comprised of intense silica alteration, albite alteration and quartz-carbonate veins. Two dominant envelopes are defined, namely the C/D envelope and the E/E1 envelope, which includes the D1 Zone. An anastamosing pattern defines the relationship between the zones.

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The mineralized Island Gold Lower C Zone, which is now well defined, corresponds to the continuation at depth of the mineralized zones that are presently mined above the -400 m level. The mineralization undergoes an inflection southward between the -400 m and -500 m levels, before returning with a high dip southward at depth. The average width of the deep C Zone resource is approximately 4.5 metres, which is above the average of 2.7 metres in mineralized zones above the -400 m level. Also, it seems that the number of gold-bearing quartz veins inside the alteration zone of the C Zone is slightly greater, with approximately 60% of the drill holes inside the first resource containing some visible gold, which translates into a higher average grade. Island Gold Lower mineral resources also include 6 additional zones that are sub-parallel to the C Zone.

2015 Results

	2015		2014		2013
Total tonnes of Ore and waste mined	535,601		453,243		484,992
Gold Produced
Tonnes milled	242,137		230,828		239,766
Head grade (g/t)	7.31		5.91		4.57
Gold recovery (%)	96.8		96.3		96.1
Ounces produced	55,040		42,206		33,836
Revenues	77,721		58,971		50,487
Gold Sold
Ounces sold	52,363		42,078		35,113
Average selling price per ounce	1,481		1,398		1,434
Cash cost per ounce	1,034		982		1,124
AISC per ounce	1,460		1,317		1,495
Average selling price per ounce (US$)	1,158		1,266		1,392
Cash cost per ounce (US$)	808		889		1,092
AISC per ounce (US$)	1,141		1,192		1,452
Sustaining costs	22,330		14,110		13,034
Project and non-sustaining exploration costs	35,494		12,538		20,909

Production

Total tonnes mined, including ore and waste, were 535,601, an 18% increase over 453,243 tonnes of ore and waste mined in 2014. Development ore increased significantly by 79% bringing the development ore to total ore ratio to almost 50%. The amount of development ore is expected to decrease in future years, which should correspondingly reduce costs. Waste mined increased by 26% to 294,895 tonnes from 233,867 tonnes in 2014, in line with the mine’s accelerated development plans.

242,137 tonnes of ore were processed in 2015 at an average grade of 7.31 g/t resulting in a total production of 55,040 ounces. This compared to 2014 when 230,828 tonnes of ore were processed at average grade of 5.91 g/t resulting in 42,206 ounces of gold produced. Cash costs per ounce increased to CAN$1,034 from CAN$982 in 2014, as the impact of higher development ore was partially offset by higher grades during the year. In U.S. dollar terms, cash costs per ounce decreased from US$889 to US$808, due to the weakened Canadian dollar during the year. All-in sustaining costs (AISC) of CAN$1,460 per ounce was higher than AISC of CAN$1,317 in 2014, due to higher sustaining costs during the year. Sustaining costs for the year were $22.3 million or 58% higher than $14.1 million in 2014, as the mine spent $10.3 million on buildings, equipment, ventilation, electrical upgrades and tailings expansion, $9.1 million on extension of the East Ramp and $2.9 million on

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exploration and delineation drilling. 52,363 ounces of gold were sold during the year at an average realized gold price of CAN$1,481 per ounce (US$1,158) generating revenues of $77.6 million, an increase of 32%, as compared to 42,078 ounces sold in 2014 at an average realized gold price of CAN$1,398 per ounce (US$1,266) that generated $58.8 million in revenues.

For the 12 months ended December 31, 2014, gold production was 42,206 ounces as 230,828 tonnes of ore were processed at an average grade of 5.91 g/t. This compared to 2013 results, in which 239,766 tonnes of ore were processed at an average grade of 4.57 g/t resulting in gold production of 33,836 ounces. The higher year-over-year gold production reflects a 29% improvement in grade, partially offset by a slight 4% decrease in processed tonnage. The grade improved with the increased cut-off grade from 3 g/t to 3.75 g/t and also with the mining of higher grade areas: Extension 2, Goudreau and C Zone at depth. Cash costs at Island Gold decreased year-over-year to CAN$982 (US$889) from CAN$1,124 (US$1,092) in 2013, with the improvement being driven by the higher recovered grade. This was partially offset by a higher year-over-year mining cost per tonne, which stemmed from a greater amount of development work and a lower amount of processed tonnage year-over-year, as well as the short-term rental of crushing equipment from an outside supplier. AISC per ounce dropped to $1,317 from $1,495 in 2013, largely due to lower cash costs and also as 8% higher sustaining costs in 2014 ($14.1 million vs $13.0 million) were spread over 20% higher number of ounces sold.

During the year, the Corporation strategically leveraged the devalued Canadian dollar, to invest in accelerated development at the Island Gold Mine. With a seven-year mine life based on reserves, the Corporation has pre-developed more than three years of production life.

As part of its strategy of accelerated development and potential production expansion at Island Gold Mine, the Corporation invested $48.9 million in 2015. This included $7.8 million for extending the main ramp to a depth of 740 metres, $8.5 million for a secondary eastern ramp to a depth of 500 metres and $4.8 million for an exploration drift that extends to the east by approximately 440 metres. A $2.8 million delineation drilling program of 50,089 metres was also completed in 2015. Other significant infrastructure upgrades included $8.7 million for the tailings dam expansion, $5.0 million for electrical upgrades and $1.6 million for bunkhouse buildings.

Project capital in 2016 will continue to focus on unlocking the potential of the Island Gold Mine and is primarily allocated to accelerated mine development as well as related infrastructure upgrades and equipment purchases as described in the PEA.

The amount of handled waste is expected to begin diminishing in 2016, which will reduce costs and increase profitability, while also freeing up capacity for additional ore tonnage as a greater percentage of mining is migrated to the lower levels of the mine.

Development of the main access ramp, or West Ramp, will continue to be advanced by the contractor, and is expected tobe extended from its current depth of -740 metres to a depth of approximately -860 metres before the end of 2016.

The Corporation continues to use its own teams to advance the secondary East Ramp, located approximately 450 metres to the east of the main access ramp. This ramp will open development and mining for 2015 and 2016 on the Extension 1 and Extension 2 areas of the mine below the -400 metre level. The main objective is to increase mining flexibility moving forward by splitting mining efforts between the Western and Eastern parts of the deposit.

Approximately 2,500 metres of ore development and 5,300 metres of waste development is expected to be completed during the year. It is expected that by the end of 2016, the east ramp will reach a vertical depth of 655 metres. Given the significant near-mine exploration potential identified directly to the east of the main deposit area considered in the PEA, the Corporation will review the optimal location of the dual ramp system as described in the PEA, in order to accommodate any additional resources located outside the scope of the PEA.

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Exploration and Delineation drilling

Richmont’s objective is to increase the reserves and the resources of this property and the Corporation remains confident regarding the long-term possibilities for Island Gold.

The Delineation drilling program in the Lower C Zone that was included in the 2015 PEA successfully converted nearly 80% of the inferred resources and increased reserves by 206% to 561,700 ounces of gold, net of depletion.

Exploration costs at Island Gold in 2015 increased to $4.6 million from $0.8 million in 2014 as a result of increased exploration drilling during the year, which included two drilling programs that were initiated in the latter part of the year. The objective of the first drilling program (63,500 metres) was to test the east and west extensions of the Island Gold deposit from surface and underground along strike as well as to test for new deposits within the regional Goudreau shear Zone. The second is a deep directional drilling program (23,000 metres) to test the potential for higher grade resources at depth below the 1,000 metre level. The entire drilling program is expected to be completed by the end of June 2016.

Highlights from the drilling at the end of 2015 include:

Near-Mine Lateral Exploration:

Approximately 19,348 metres of a planned 36,000 metres (5,000 metres from the 450 metre level and 31,000 metres from the 620 metre level) have been completed to date. The drilling is focused on east-west targets that are contiguous to the main deposit area considered in the PEA.

Deep Directional Drilling:

The objective of the deep drilling program is to test the deposit at depth and to increase confidence in the vertical extension of the deposit for potential resource growth. To date, approximately 6,272 metres (4 holes) of the planned 23,000 metres of drilling have been completed, including 3 pilot holes and 1 exploration hole.

Eastern Lateral Exploration:

Drilling results to date from the exploration drilling program to the east of the main deposit area successfully demonstrated the potential to increase the resource inventory to the east of the mine.

Approximately 6,500 metres of a planned 12,000 metres (7,000 metres from surface and 5,000 metres from the 340 metre level) have been completed to date with results indicating potential extension of the system to the east, including a new area of interest located approximately 600 metres to the east of the main deposit, below and to the east of the Goudreau Zone.

Western Lateral Exploration:

Drilling results to date from the west of the main deposit area provided additional confidence in the potential extension of the mineralized system. Drilling has been suspended in this area and is expected to resume in 2016.

Approximately 5,900 metres of a planned 8,000 metres (2,500 metres from surface and 5,500 metres from the 190 metre level) have been completed to date and results show potential extensions of the known deposit.

Regional Surface Exploration:

A 7,500 metre regional exploration program that was previously announced to test the east and west regional extensions of the Island Gold deposit along strike as well as for new deposits within the Goudreau shear zone has been launched in early 2016. For more details, see February 26, 2016 press release.

For full details, please refer to the December 21, 2015 press release entitled “ Richmont Mines Provides Exploration Update for Island Gold ”.

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Drilling

Most of the delineation/definition drill holes are planned on vertical cross-sections, in order to intercept mineralized zones at right angles along a grid spacing of 20 metres by 20 metres. Drilling operations are performed by a drilling contractor, under the supervision of the geological staff at the Island Gold Mine. Underground drill holes are BQ or NQ calibre. Core recovery is approximately 100%. The drill core is logged in detail by experienced and highly skilled staff, following established guidelines for the Island Gold Mine. A rock quality designation (“RQD”) analysis was completed for most of the drill holes drilled in the 2015 program and the RQD for the zones are generally excellent (› 90%). The interpretation and development of each section was completed after receipt of the drill hole assays and section plots. This interpretation served to complete the reserve and resource estimates.

Sampling

The drill hole sampling approach coincides with lithological contacts. Samples have a minimum length of 0.3 metres and a maximum length of one metre. The core recovery is very good and can be considered to be representative.

The panel (or chip) sampling method consisted of taking horizontal representative samples of the geology (units or alteration) that was exposed either in the face or in the adjacent walls. The samples weighed an average of 1.5 kg to 2 kg for a zone of 1.5 vertical metres by 0.3 to 1.0 horizontal metres. Each face was sampled and the number of assays varied based on the geology and the opening.

The drill cores and chip samples are representative and the mineralization style, with the presence of quartz veins and free gold, shows a nugget effect.

Assays

During 2015, core samples were sent mainly to Expert Laboratory (LabExpert) in Rouyn-Noranda, Québec. Underground muck and chip samples were sent to Wesdome (Wesdome) Laboratory in Wawa, Ontario.

Gold assays are completed by fire assay with 30 g of material with either a gravimetric or AA finish. The cut-off for gravimetric versus AA finish, has been established at 3 g/t Au. The detection limit for gold is 3 ppb. Rejects and pulps are kept by the laboratory or stored at the Island Gold site. These methods and the routine sample preparation are described in the following section. A detailed procedure can be found in the Technical Report for the Island Gold Mine as of December 31, 2015, which will be filed under the Corporation’s profile on the SEDAR website at www.sedar.com.

The step-by-step procedure for sample analyses is briefly described as follows:

1. Dry samples, if required;

2. Crush total sample to ½ inch (Jaw Crusher);

3. Split approximately 350 g using a Riffle Jones;

4. Remaining rejects are placed in a plastic bag and packed in cartons with sample numbers listed on the outside;

5. Pulverize the 350 g sample;

6. Homogenize the pulp: it is then ready for assay;

7. Samples are then analyzed by fire assay with an absorption atomic or gravimetric finish. A total of 30 g of representative material are subjected to the fire assay and to gravimetric finish.

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Quality Control

In 2007, during the course of the geological confirmation program, an evaluation of “Quality Assurance/Quality Control” (“QA/QC”) data was done to address the three main areas of analytical determination protocols, namely: (i) contamination, (ii) accuracy, and (iii) precision, as measured by the results obtained from field and analytical blank standards, certified reference standards and an assortment of specific duplicate samples collected and/or prepared, in addition to the regular samples submitted to the laboratory. A certified standard and blank assay were run with each sample batch. In addition, a replicate assay was run on every 10 ^th sample to check reproducibility of the assays.

The results of the field and analytical blanks used to monitor potential contamination during sample processing and assaying indicate that no significant contamination is likely to have occurred during the sampling/assaying programs completed for 2007.

In 2015, ASL Solution audited the Island Gold Mine QA/QC program which consists of insertion blanks and certified reference materials to samples submitted to the laboratory (Wesdome, LabExpert and ActLab). Each laboratory has its own QA/QC program with the addition of analytical blank standards and certified reference standards to each batch of assays. Also, some core and chip sample duplicates were taken in 2015 and sent to the laboratories as part of the QA/QC program. ASL Solutions concluded that the Richmont assay quality control program meets or exceeds industry standards and gold assays from the 2015 drill campaign are considered to be reliable for the purpose of resource estimation.

The assays supporting the Island Gold Mineral Resource estimate are based on sample preparation and analytical protocols that meet standard industry practice.

Security of Samples

In 2005, the core logging facility and core storage area were established on the Kremzar Mine and milling site. A trailer was installed on site and was used as a core logging facility. A separate room was installed for core sawing and sample preparation. In 2012, a new coreshack was built near the old one on the Island Gold Mine site.

The cores are stored outdoors in covered racks or as separate cross-piles. There is a gate on the mine access road and there are personnel working on site at all times. Individual sample bags are sealed. The samples are placed in large rice fiber bags and placed on pallets. Samples are transported by a third party transportation company. The underground channel samples are shipped to the River Gold laboratory in Wawa, Ontario, by Island Gold staff.

Mineral Reserve Estimates

Proven and Probable Reserves at Island Gold were increased by 206%, net of 2015 mining depletion. As of December 31, 2015, total Proven and Probable Reserves at the Island Gold Mine were 561,700 gold ounces, of which 485,000 ounces, are located in zones below –400 metres. This compared to the Proven and Probable Reserves of 183,750 gold ounces at the end of December 2014. The updated Reserve estimate reflects the 50,089 metres of delineation drilling completed during the year, which successfully replaced Reserves that were mined during the year and enabled the conversion of nearly 80% of the resources from the Lower C Zone that were included in the 2015 Preliminary Economic Assessment (“PEA”). Proven and Probable reserves at December 31, 2013 were 143,500 ounces of gold. Please refer to the detailed Mineral Reserve table on page 63.

Capping of the Lower C Zone is 95 g/t. At the end of 2014, capping was reduced from 95 to 70 g/t Au for the B Zone and from 40 to 31 g/t Au for the D, D1 and E1E zones following a new statistical review.

Roscoe Postle Associates Inc. (RPA) was retained to review and audit the Island Gold Mineral Reserve estimates. The review was started in January 2016 and was completed in February 2016.

Mineral reserve estimates were realized on December 31, 2015 by Raynald Vincent, P. Eng., M.G.P., and Jean Bastien, P. Eng. MBA, employees of the Corporation, who are qualified persons under NI 43-101. Factors and

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parameters used in the determination of the mineral reserve estimates are based on the knowledge of the employees of the Island Gold Mine as of December 31, 2015.

The mineral reserve estimates were carried out in accordance with NI 43-101 recommendations and regulations. Mineral reserves were classified according to the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) classification and adopted by the CIM Council on December 11, 2005. All standards generally accepted in the mineral industry as well as NI 43-101 recommendations and CIM regulations for both mineral resource and reserve estimates have been fully complied with.

Mineral Reserve Estimates

General

The database and the parameters used to estimate the mineral reserves are based on the results from 2015, the forecast for 2016 and information available as at December 31, 2015. The technical parameters were reviewed by Daniel Adam, P.Geo., Ph.D., Vice-President, Exploration, an employee of the Corporation. Dilution and ore recovery factors used in the reserve estimate are based on mining methods. These factors and parameters will be updated on an annual basis in order to account for changes in mining operations.

The conversion of mineral resources to reserves is based on economic studies. As per NI 43-101, only mineral resources in the Measured and Indicated categories can be used to establish the estimate of mineral reserves.

See “ITEM 3. KEY INFORMATION – D. Risk Factors – Risks associated with the Mining Industry – The estimates of mineral reserves and forecasts of the production are subject to numerous uncertainties, and the production and recovery of reserve estimates appearing in the Annual Report may not be realized ” for a discussion of the risks inherent in estimating reserves and production.

Technical Parameters

The main parameters used to estimate mineral reserves as at December 31, 2015 are as follows:

• A cut-off grade of 4.00 g/t Au estimated using a gold price of CAN$1,300 per ounce and an exchange rate of CAN$1.2037/US$1.00;

• Grades were capped at 75 g/t Au for all zones, with the exception of Island Gold lower zones: 95 g/t for the C, 70 g/t for the B, 40 g/t for the G and G1 and 31 g/t for the D, D1 and E1E;

• A minimum true thickness of 2.0 metres based on the mining method (longitudinal long holes);

• An average rock density of 2.82 t/m ³ is defined, 2.80 t/m ³ for Island Gold lower zones;

• Ore mining recovery: 95% for designed stopes - pillars between stopes have been excluded;

• External dilution: an average dilution rate of 19% of waste at a grade of 0.5 g/t Au is assumed for stopes. A dilution rate of 30% at a grade of 0.5 g/t Au is assumed for development;

• Excluded mill recovery of approximately 96%.

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Estimation Methods

At the Island Gold Mine, the Gemcom GEMS 6.7 software was used to prepare the resource estimation. The reserve and resources estimates were calculated following two distinct methods. Reserve estimation was done with block model using an inverse distance to the power 2 calculation for Island Main, Lochalsh and Goudreau sectors and also Island Gold lower D, D1, E1E, G and G1 zones. Ordinary Kriging has been used for Extension 1 and 2 as well as for Island Gold lower C and B zones. The polygonal method was used for Extension 3 resource estimation.

Regardless of the methods used, composites were established by the geological department for each drill hole and underground development face. The diamond drill hole composites were determined following an interpretation on vertical cross-sections and horizontal plans while the development composites were interpreted using the face mapping and assay results of each development face. Once individual composites were determined, each one was tagged in the database according to their individual zone name. Individual pierce points were generated on longitudinal sections for each zone. These longitudinal sections are a representation of an average plane through each mineralized zone.

For the polygonal method, construction of the polygons is completed on longitudinal sections. An area of influence of 20 metres was determined for the development composite and the diamond drill holes. A 10 metre influence was used on the lateral extremities of the development composite to limit their influence. When all polygons are generated, a combination of the development and drill hole pierce points is created. After the ore block limits are determined and the grade and tonnes of each reserve block are calculated, specific dilution and ore recovery are factored into the final reserve estimate.

All of the geo-scientific data collected at the Island Gold Mine are entered into a Gemcom database. Internal procedures have been prepared in order to validate the information in the database. All of this work is performed by the Island Gold Mine geology department and all steps, from data entry to layout drawings, follow strict and established procedures, including crosschecks to ensure full validity. Access to all databases is restricted to selected personnel in order to ensure complete integrity.

Cut-off Grade

The cut-off grade for stopes was established at 4.00 g/t Au. This cut-off was calculated using, among other things, 2015 production costs and anticipated 2016 production costs.

Reserve Classification

More detailed descriptions regarding classification of mineral reserves at the Island Gold Mine are set out below.

Proven Mineral Reserves

Ore development was completed above, below or on both levels of the ore block. If only one level was developed, a minimum drill spacing of 20 metres was necessary to confirm the vein continuity. An economic study was done by the engineering department of the Island Gold Mine to validate the block as reserves.

Probable Mineral Reserves

No development was done above or below the ore block. Since the information from the ore development was lacking, a maximum drill hole spacing of 20 metres center to center was necessary to validate the vein continuity inside the ore block. Economic study was done by the engineering department of the Island Gold Mine to validate the block as reserves.

Dilution of 19% and mining recovery rates of 95% are included in the reserve estimation.

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As of December 31, 2015, the mineral reserves of the Island Gold Mine are estimated at:

1	Before mill recovery of 96%.

As of December 31, 2015, the mineral reserves at Island Gold were 561,700 ounces of gold, calculated using a long-term gold price of CAN$1,300 per ounce, an exchange rate of CAN$1.2037 = US$1.00, and an expected mine life of approximately seven years.

Mining Operations and Metallurgy

The extraction method is by longitudinal long holes with a maximum panel length fixed by a hydraulic radius of 4.5.

The Island Gold ore is hauled by truck to the Kremzar mill located at an approximate distance of 0.8 km from the portal of the ramp. The Kremzar mill is a traditional gold recovery mill using a conventional Carbon in Pulp (“CIP”) process, with circuits for crushing, grinding, gold cyanidation and carbon-in-pulp and two electrowinning (“EW”) cells.

Gold recovery of the CIP circuit at the Kremzar mill is approximately 96%.

Location and Property Description

The Beaufor Mine property along with other adjacent properties such as Pascalis, Perron, Colombière, Courvan and Perron Blocks 2 and 3, are located approximately 20 kilometres northeast of the town of Val-d’Or, in the Abitibi-East county, in the Province of Quebec.

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Description of Mining Rights

The property, which contains the mineral reserves and resources of the Beaufor and W Zone mines, consists of a series of adjacent mining rights subdivided into three projects: Perron, Beaufor, and Pascalis. Another group of properties adjacent to the mine includes the Courvan project (containing the past producing Bussière Mine), the Colombière project and the Perron Block 2 and Block 3 projects.

Property	Number of	Area	Expiration date
	mining	(ha)
	titles
Beaufor	1	112.91	Mining concession 280PTA: 01/31/2016
Colombière	10	226.90	Claims expire on 04/05/2017
Courvan	33	1,106.91	Mining concession 295 and 280PTB: 01/31/2016 and 31 claims expire on 03/04/2017
Pascalis	1	37.50	Mining Lease BM 750: 06/02/2016
Perron	12	261.99	2 mining leases BM 858: 03/11/2023 and BM 1018: 09/16/2033 and 10 claims expire on 05/04/2017
Perron Blocks 2 and 3	8	164.96	Claims expire 11/23/2016
Total	65	1,911.17

All of these claims are expected to be renewed before the anniversary date by applying excess credits available or by the execution of the required works. For the mining leases, taxes are paid to the government every year and for mining concessions, geological work is performed to keep them in good standing. Richmont Mines has an internal procedure and an external control to ensure appropriate follow up regarding claim expiry dates. One isolated claim, Perron Block 4, was allowed to lapse as it was not viewed as prospective and no work was conducted on the block. All the other mining claims, mining concessions and mining leases were in good standing in 2015 and are expected to remain so in 2016. A detailed list and map of locations can be found in the Technical Report for the Beaufor Mine as of December 31, 2015 which was filed on March 24, 2016 under the Corporation’s profile on the SEDAR website at www.sedar.com .

Ownership of Mining Rights

All the mining titles of the Beaufor property are held by Richmont Mines.

Mining Royalties

All the Beaufor division’s properties are subject to the payment of royalties and financial contractual obligations. Details can be found in the Technical Report for the Beaufor Mine as of December 31, 2015, which was filed on

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March 24, 2016 under the Corporation’s profile on the SEDAR website at www.sedar.com.

Beaufor Property (Royalty payable on 50% of the production)

The Beaufor production is subject to a quarterly royalty payment to Hecla Mining Company (formerly Aurizon Mines Ltd):

Gold Price (US$/oz)	Royalties per ounce on 50% of ounces produced
<300	CAN$0.00
300– 325	CAN$17.00
325– 350	CAN$18.50
350– 375	CAN$20.00
375– 400	CAN$22.50
400– 500	CAN$24.00
>500	CAN$30.00

Perron Property and Perron Block 2 (payable on 100% of the production)

The Perron property is subject to a quarterly royalty payment to Hecla Mining Company (formerly Aurizon Mines Ltd):

Gold Price (US$/oz)	Royalties per ounce produced
<300	CAN$0.00
300– 325	CAN$17.00
325– 350	CAN$18.50
350– 375	CAN$20.00
375– 400	CAN$22.50
400– 500	CAN$24.00
>500	CAN$30.00

Perron Block 3

The Perron Block 3 property is subject to a 2% NSR payable to Northwest Gold Corporation (“Northwest”). The Northwest NSR is payable when the gold price is higher than US$300 per ounce.

Pascalis (payable on 100% of the production)

The Pascalis property is subject to a 25% NPI royalty payable to New Pascalis Mines Limited.

Colombière (payable on 100% of the production)

The Colombière property is subject to a 2% NSR payable to IAMGOLD Corporation (formerly Cambior Inc.).

Environmental Obligations and Permits

Over 75% of the development waste material is either hoisted or trucked from the underground mine to the surface and placed in a waste dump. The waste rock is not acid generating and does not require any particular environmental measures.

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The latest revision of the closure plan was submitted in February 2014 in collaboration with ROCHE engineering firm and approved by the Ministère de l’Énergie et des Ressources naturelles (“MERN”) November 6, 2014. The next revision must be submitted no later than February 27, 2019. The total closure cost estimate is $790,100 and only includes the Beaufor Mine site. Camflo Mill is an independent entity that has its own separate closure plan. As of December 31, 2015, Richmont has provided a financial security for the closure costs of the Beaufor Mine site totaling $595,006 to the Québec MERN. The final payment is expected to be made on November 6 ^th 2016.

The Corporation is of the opinion that all necessary permits and authorizations have been requested and obtained.

Infrastructure

Two active mine shafts are located on the Beaufor Mine site: the Perron No. 5 shaft is currently used for hoisting and the Pascalis shaft is used for the ventilation air intake. A raise between the 1,250 level and surface is used as an escape way. A ramp collar is located 350 metres southeast of the Perron shaft. The ramp provides access to the 350 Zone to the west.

A series of buildings have been erected including warehouses, workshops, garages, core shack and offices.

There are no milling or tailings activities on site.

The waste pad is permitted for a maximum capacity of 880,000 tonnes and currently holds 560,000 tonnes. The waste rock is non-acid generating.

The settling pond has a maximum usable volume of 3,335,000 litres and is sufficient for the mining activities.

There were a total of 129 employees and 29 independent contractors as of December 31, 2015 active at the Beaufor Mine.

Location of Mineralized Zones

The mineralized zones, including the mineral reserves and mineral resources, underground infrastructure and the waste pad are located on mining concession 280 PTA of the Beaufor property, mining lease 750 of the Pascalis property and mining leases 858 and 1018 of the Perron property.

Accessibility

The mines can be accessed from Highway 117 by going east from Val-d’Or to the Perron Road, and then north towards the village of Perron. The mines can also be accessed by using the secondary road 397 from Val-d’Or to Val-Senneville, and then going south on Paré Road to the village of Perron.

Climate

The average annual precipitation is approximately 914 mm, with the highest level of precipitation occurring in September (approximately 102 mm). Snowfalls occur between October and May, with the greatest amount of snowfall occurring between November and March. The monthly average for that period is about 50 mm (expressed in mm of water).

The average daily temperature in Val-d’Or is 1.2° C, which is slightly above freezing. The average temperature for July reaches 17.2° C, while in January the average temperature falls to –17.2° C. The lowest temperature measured was -43.9° C and the highest temperature measured was 36.1° C. Although the temperature of the area is below the freezing point an average of 209 days per year, mining operations are not affected by the climate.

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Local Resources and Infrastructure

The area is well served by existing infrastructure and human resources. The population of the town of Val-d’Or is approximately 32,000 people. The town is accessible from the national road network and commercial flights are available daily at the local airport. The town also hosts an appropriate base of suppliers and manufacturers for the mining industry.

A railroad is located a few km to the south of the property and power is supplied by Hydro-Québec.

The ore from the Beaufor Mine is hauled by truck to the Camflo Mill located at an approximate distance of 49 km from the mine site. Waste rock is stored on site.
Skilled administrative personnel, technicians, geologists, mining engineers and experienced miners are available in the area.

Physiography

The regional landscape is typical of the Abitibi lowlands, with its small rolling hills and widespread swamps, and its mixed forests of broadleafs and conifers. The forest cover is relatively young, as a forest fire devastated the area in 1942. The elevation is approximately 300 metres above sea-level.

Exploration History

Intermittent exploration fieldwork has been conducted on the Beaufor property since the 1930s. Following a development period, Aurizon Mines (50%) and Louvem (50%) started commercial production at the Beaufor Mine in January 1996. In August 2000, Aurizon Mines stopped mining operations at the Beaufor Mine. In spring 2001, Aurizon Mines transferred the mining rights of the Perron, Beaufor, Pascalis, Colombière and Courvan properties to Richmont Mines for an amount of $1.8 million. In September 2001, Richmont Mines undertook construction work to secure the stability of the crown pillar and commercial production resumed at the Beaufor Mine jointly with Louvem in January 2002. In March 2010, the Beaufor Mine reached the notable historical production milestone level of 1,000,000 gold ounces over its mine life. In June 2010, Richmont Mines acquired all of the issued and outstanding shares of Louvem not already owned by Richmont Mines. As a result of this transaction, Richmont Mines owns a 100% interest in the Beaufor Mine and has assumed ownership of all Louvem properties.

Geological Setting

Regional Geology

The mining town of Val-d’Or is located in the southeastern part of the Abitibi greenstone belt formed of Archean volcanic and sedimentary rocks of the Superior Province. The mining camp of Val-d’Or is located in the Malartic area, which is comprised of a volcanic pile including ultramafic, basaltic and rhyolitic flows. The Bourlamaque granodiorite intrusion hosts significant gold concentrations, namely at the Beaufor Mine.

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Beaufor Mine Geology

The Beaufor, Perron, Pascalis, Colombière and Courvan properties belong to the same gold-bearing hydrothermal system with a similar geometry. The Beaufor deposit is included in the Bourlamaque granodiorite. Gold mineralization occurs in veins associated with shear zones that moderately dip south. The mineralization is associated with quartz-tourmaline veins resulting from the filling of shear and extension fractures. The gold-bearing veins show a close association with mafic dykes intruding on and undercutting the granodiorite. The dykes seem to have influenced the structural control of the gold-bearing veins.

Mineralization

Gold-bearing veins at the Beaufor Mine consist of quartz-tourmaline-pyrite veins, typical of Archean epigenetic lode gold deposits, that cross-cut the Bourlamaque Batholith. Mafic dykes that predate the mineralization are associated with shear-hosted gold-bearing veins. Shallowly dipping extensional gold-bearing veins are commonly observed at the Beaufor Mine. Shear zones striking N70 ^o and dipping steeply to the southwest control the opening and gold enrichment of veins.

All the gold-bearing veins are contained in a strongly-altered granodiorite in the form of chlorite-silica forming anastomosing corridors of 5 m to 30 m in thickness. The veins at the Beaufor Mine form panels of more than 300 m in length by 350 m in height. The thickness of the veins varies from 5 cm to 5 m. The zones are limited by the Beaufor fault (N115 ^o /65 ^o -75 ^o ) at 380 metres from the surface and by a parallel system of shears (N70 ^o /sub vertical).

2015 Results

	2015		2014		2013
Gold Produced
Tonnes milled	125,447		115,573		124,570
Head grade (g/t)	6.64		6.86		5.89
Gold recovery (%)	98.6		97.9		97.8
Ounces produced	26,411		24,959		23,076
Revenues	39,714		33,624		32,669
Gold Sold
Ounces sold	26,875		24,006		23,028
Average selling price	1,474		1,399		1,417
Cash cost per ounce	995		946		1,082
AISC per ounce	1,216		1,024		1,186
Average selling price (US$)	1,153		1,267		1,376
Cash cost per ounce (US$)	778		856		1,051
AISC per ounce (US$)	951		927		1,152
Sustaining costs	5,942		1,880		2,392
Project and non-sustaining exploration costs	340		1,733		1,929

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Production

In 2015, total tonnes milled increased by 9% to 125,447 as compared to 115,573 tonnes milled in 2014. The higher tonnes were offset by slightly lower grades, resulting in a 6% increase in gold production as compared to the prior year (26,411 ounces versus 24,959 ounces). Cash costs per ounce increased by 5% to $995 from $946 a year earlier, largely due to higher waste development and higher milling costs allocated from Camflo Mill, as the mill processed fewer tonnes during the year. AISC per ounce increased by 19% to $1,216 from $1,024 in the prior year due to higher sustaining exploration costs, higher sustaining capital for Q Zone development and higher capital at the Camflo Mill, which are recorded within the Beaufor Mine AISC per ounce.

For 2014, a total of 115,573 tonnes of ore were processed from the Beaufor Mine at an average grade of 6.86 g/t for an annual production of 24,959 ounces. This compared to tonnage of 124,570 at an average grade of 5.89 g/t, and gold production of 23,076 ounces in 2013. Cash costs at the Beaufor Mine for the 12 months of 2014 decreased 13% to CAN$946 (US$856) from the prior year’s level of CAN$1,082 (US$1,051), which was primarily a function of the improved grade.

Exploration

Proven and Probable Reserves at the Beaufor Mine property increased to 63,850 gold ounces at December 31, 2015, a 95% increase over the 32,750 gold ounces at December 31, 2014. There was an increase of 31,100 ounces, net of depletion. The conversion to reserves from the Q Zone accounted for 80% of the reserves increase.

With the approval of the exploitation of the Q Zone, the mine life of Beaufor has been extended to more than 2 years. The Beaufor mining history suggests a strong potential to extend the mine’s life beyond that period. Mine site exploration is now focused on three fronts: 1) expand Q Zone at depth and westward along strike, 2) build new resources in the upper mine, particularly in the extension of the old Perron Mine and 3) test the previously discovered deep R Zone for continuity from the new Q Zone infrastructure.

In 2015, the Corporation conducted a surface drilling campaign on the southern part of the Beaufor property near the northern boundary of the Courvan property. Ten holes were completed during summertime for a total of 5,968 metres. Drilling demonstrated that the geological context prevailing at the Beaufor deposit extends 1.2 km to the south. The same key lithological units (chloritized granodiorite, dioritic dykes and ductile shear zone) were recognized during core logging. Several significant quartz veins within altered granodiorite were encountered at depth varying between 50m and 450m, however those structures were barren.

Drilling

At Beaufor Mine, most of the drill holes are planned on vertical cross-sections in order to undercut the shear veins at right angles. Drilling programs are sub-divided into two main categories:

• Exploration drilling using a 40 to 80 metre by 40 to 80 metre grid;

• Definition drilling based on a 10 to 20 metre by 10 to 20 metre grid.

Drilling operations are performed by a drilling contractor, under the supervision of the geological staff at the Beaufor Mine. Underground drill holes are LTK48 (35.6 mm) and BQTK (40.7 mm) calibre. The core recovery is better than 90%, including the fault zones where the RQD (“rock quality designation”) is more than 75%. Detailed descriptions of the drill core are prepared in accordance with established Beaufor Mine guidelines by experienced and qualified personnel.

The Corporation is planning 15,540 metres of definition drilling and 24,480 metres of exploration drilling at the Beaufor Mine in 2016.

No drilling is planned on the Colombière and Courvan properties.

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Sampling

Sampling of the rock mass is performed using drill cores and blasted rock. Results of the drill core analyses as well as the grades of ore samples taken in the car wagon are taken into account for mineral reserve estimation. The weight of each sample is around 0.5 kg per 5 tonne wagon. For development purposes, the weight of each sample is around 0.5 kg per 12-15 tonnes of blasted rock. There are currently no face-sampling “chips” taken at the Beaufor mine.

In definition drill holes, samples are collected between 0.5 m and 1 metre intervals, and frequently include both vein material and wall rocks, since veins are often less than 1 metre thick. Core recovery is over 90%. The entire core is then analyzed at the chemical assay laboratory.

For exploration holes, the length of the sample varies from 0.5 to 1 metre. The core is sawed in half using a core saw. The recuperation of core is over 90%.

Assays

ALS Minerals Laboratories in Val-d’Or was selected to analyze the samples from the Beaufor Mine. This laboratory is certified ISO 9001-2000 for the supply of assays and geochemical analysis services by QMI, an ISO certification firm.

The step-by-step procedure for sample analysis is briefly described as follows:

• Upon receipt of sample bags, all sample numbers are verified and entered into the Laboratory Information Management System (LIMS), a sample tracking system used by the laboratory;

• Samples are dried and crushed to 70% passing 2 mm using a jaw crusher. A representative sub-sample weighing 250 to 300 g of the –2 mm fraction is prepared using a “Riffle Jones” splitter. The sub-sample is then pulverized to 85% passing –200 mesh using a ring pulverizer;

• Samples are then analyzed by fire assay with gravimetric finish using 30 g per sample.

Quality Control

The laboratory’s quality control program, at different steps of the process, includes:

• Crushing, pulverizing, weighing: daily monitoring;

• Fire assay: 1 blank, 2 standards and 3 duplicates are inserted in each batch of 84 samples.

A second quality control program established at the Beaufor Mine involves the insertion of blanks and standards. Furthermore, rejects for all samples between 10 g/t Au and 100 g/t Au are systematically re-assayed.

Security of Samples

Samples are gathered in plastic boxes by the Beaufor Mine geological personnel and stored in a core shack. The samples are collected by the laboratory staff and brought to the laboratory directly. Historical production and milling data indicate reliability of the laboratory results. When there is doubt as to the location of a sample, the sampling number or any other anomaly, the data is not used for resource estimation.

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Mineral Reserve Estimates

In 2015, the mineral reserve estimates for the Beaufor Mine were performed by Jessy Thelland, P.Geo. and Louis Nkoy, P.Eng., employees of Richmont Mines and qualified persons pursuant to NI 43-101. The methodology and procedures for mineral reserve estimates have been adopted from a study completed in 2006 by Golder Associates, an independent firm. The database, factors and parameters used in the determination of the mineral reserves are based on the available information as of December 31, 2015. However, these parameters are revised on an annual basis in order to take into consideration the experience gathered from the current mining operation.

The mineral reserve estimates are carried out in accordance with NI 43-101. Mineral reserves are classified according to the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) classification as adopted by the CIM Council on August 20, 2000. All standards generally accepted in the mineral industry as well as NI 43-101 requirements and CIM regulations for mineral reserve estimates have been fully complied with in this study.

All the geo-scientific data collected at the Beaufor Mine is grouped into two main databases. Internal procedures have been prepared in order to validate the information in the databases. All the work performed by the Beaufor Mine geology department, from data entry to layout drawings follows strict and established procedures, including crosschecks to ensure full validity. Access to all databases is restricted to selected personnel in order to ensure complete integrity.

Mineral Reserve Estimates

The database and the parameters used to estimate the mineral reserves are based on past mining experience and the information available as of December 31, 2015. The parameters were reviewed and modified by Golder Associates in 2006. Thus, both the dilution and the ore recovery factors by mining methods used in the reserve estimate are based on actual results obtained in 2015. All these factors and parameters are updated on an annual basis in order to account for changes in the mining operations.

The conversion of mineral resources to reserves is based on economic feasibility. An economic study is done for each resource block or group of resource blocks, and if positive, the resource can be converted into reserve. As per NI 43-101, only mineral resources in the Measured and Indicated categories can be used to establish the estimate of mineral reserves.

The budgeted costs used are based on actual and historic data of the mining operation and are updated to reflect actual experience and any changes in the prevailing economic situation.

See “ITEM 3. KEY INFORMATION - D. Risk Factors – Risks Associated with the Mining Industry – The estimates of mineral reserves and forecasts of the production are subject to numerous uncertainties, and the production and recovery of reserve estimates appearing in the Annual Report may not be realized” for a discussion of the risks inherent in estimating reserves and production.

Technical Parameters

The basis and the parameters used for reserve estimation are given in the following sections.

Mining Methods

The two major underground extraction methods currently used at the Beaufor Mine are the room and pillar and long-hole methods, while only the long-hole mining method was used at the W Zone Mine.

Room and Pillar Mining Method

• Geometry: stope width of 6 metres in the plane of the vein with in-stope pillars of 2.5 metres x 2.5 metres;

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• Maximum dip of vein: 40°;

• Ore mining recovery: 80% used in the economic evaluation;

• Internal dilution: the ore block is designed with a true thickness of 2.4 metres. The drilling intercepts are projected to the same lengths. The minimum mining width is 2.4 metres. The dilution grade is assumed to be 0 g/t Au;

• External dilution: a dilution of 5% at a grade of 0 g/t Au is added in the determination of the economic mineral reserves.

Long-Hole Mining Method

• Geometry: maximum panel length of 25 metres;

• Minimum dip of vein: 45°;

• Ore mining recovery: 100% for designed stopes with all pillars between stopes clearly identified during the process of mineral reserve estimation, and 90% for the stopes not yet designed;

• Internal dilution: minimum mining width is 2.4 metres. The drilling intersections are projected to a minimum width of 2.4 metres;

• External dilution: a dilution rate of 10% for waste at a grade of 0 g/t Au is assumed for primary stopes.

Cut-off Grades

Cut-off grade averages have been calculated based on both developed and un-developed workings for the two major mining methods used at the Beaufor Mine, which are room and pillar and long-hole.

The main criteria are as follows:

• No profit margin is built into the estimate;

• Deferred development costs or capital expenditures are not used;

• Only the price of gold is taken into account in the economic calculation;

• The price of gold used was US$1,080 per ounce using an exchange rate of CAN$1.2037:US$1.00;

• Operating costs include fixed costs budgeted for 2016 and variable costs (production and development) based on the results from January to October 2015 for each method.

Results of the cut-off grade study by mining method for both developed and undeveloped underground workings are listed in the following table:

Reserve Classification

More detailed descriptions about the classification of reserves at the Beaufor Mine are detailed below.

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Proven Mineral Reserves

At the Beaufor Mine, Proven reserves are based on ore blocks developed from drifts or raises up to a maximum of 8 metres from these openings. The level of accuracy of the economic evaluation in the estimation of reserves is that of a feasibility study.

Probable Mineral Reserves

The mineral reserve estimate in the Probable category is based on an economic study in order to determine the economically mineable part of an Indicated mineral resource. At the Beaufor Mine, Probable reserves extend to a maximum of 10 metres from drilling data. Dilution and mining recovery rates are included in the reserve estimation.

In accordance with the mineral reserve estimation, the mineral reserves of the Beaufor Mine as at December 31, 2015, are estimated as follows:

Reserve Categories	Tonnes		Grade		Au 1
	(metric)		(g/t Au)		(oz)
Proven	35,600		7.31		8,350
Probable	266,500		6.48		55,500
Total (Proven + Probable)	302,100		6.57		63,850

1	Before mill recovery of 98.0%.

Mining Operations and Metallurgy

The two major underground mining methods currently used at the Beaufor Mine are the room and pillar and long-hole methods.

Ore from the Beaufor Mine is trucked to the Corporation’s 100% owned Camflo Mill, which is located approximately 49 kilometres from the mine site. The Camflo Mill, with a rated capacity of 1,200 tonnes per day, is a Merrill-Crow conventional type mill with circuits for crushing, grinding, gold cyanidation and precipitation using zinc powder.

The historic average rate of recovery of the mill is 98% when ore extracted from the Beaufor Mine is milled. No major operating problems have been experienced at this mill and none are anticipated in the near future. The usual maintenance and repairs are carried out when deemed appropriate.

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There was no gold production from W Zone Mine in 2015, as the operation was closed in the second quarter of 2014.

	2015		2014		2013 1
Gold Produced
Tonnes milled	-		36,789		23,185
Head grade (g/t)	-		4.25		3.28
Gold recovery (%)	-		97.5		95.1
Ounces produced	-		4,900		2,324
Revenues	-		6,938		3,096
Gold Sold
Ounces sold	-		4,929		2,326
Average selling price	-		1,405		1,328
Cash cost per ounce	-		992		1,441
AISC per ounce	-		1,010		1,961
Average selling price (US$)	-		1,272		1,265
Cash cost per ounce (US$)	-		899		1,373
AISC per ounce (US$)	-		915		1,869
Sustaining costs	-		88		1,209
Project and non-sustaining exploration costs	-		-		-

1	Includes only data following the beginning of commercial production on October 1, 2013.

In 2014, a total of 36,789 tonnes of ore were processed from the W Zone at an average grade of 4.25 g/t for annual production of 4,900 ounces. This compared to 23,185 tonnes at an average grade of 3.28 g/t, and gold production of 2,324 ounces in the prior year. Cash costs at the operation were CAN$992 (US$899) in 2014, versus CAN$1,441 (US$1,373) in 2013, with the decrease reflecting the discontinuation of development costs when operations were closed in the second quarter of 2014.

Location and Property Description

The Monique Mine is located 25 km east of Val-d’Or, in the province of Quebec. The property is located approximately 10 km east of the Beaufor Mine and 50 km from the Corporation’s Camflo Mill.

Description of Mining Rights

The Monique property consists of 17 claims and 1 mining lease covering a total area of 546.16 ha. More specifically, it covers the northern part of lots 38 to 45 in Range VIII and the southern part of lots 36 to 45 in Range IX of the Louvicourt township.

The mining lease (1012) was obtained on February 14, 2012, from the Ministère de l’Énergie et des Ressources naturelles du Québec, and the environmental certificates of authorization for an open pit operation were received at the beginning of 2013. Open pit mining ended in January 2015, and surface infrastructure was removed during the year. Monique mine is now closed.

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A detailed list and map of locations can be found in the Monique NI 43-101 technical report dated September 13, 2013, and filed under the Corporation’s profile on the SEDAR website at www.sedar.com. All the mining titles were in good standing in 2013, and Richmont expects that they will remain so in the future.

Mining Royalties

As part of Richmont’s successful acquisition of the outstanding 19% interest in the Monique property a 0.38% NSR (Net Smelter Return) royalty was granted to SOQUEM, payable at the time the property reaches commercial production.

Similarly, Richmont Mines assumed existing royalty obligations on 8 of the property’s 17 claims, payable to Exploration Concorde Ltd., and equal to 5% net profit interest. The northern part of five of these claims are now partly covered by the Mining Lease 1012; however the present open pit lies outside of the original limit of these claims.

Environmental Obligations and Permits

A closure plan was developed in conjunction with Roche Ltd, Consulting Group, and was submitted to the Ministère de l’Énergie et des Ressources naturelles (“MERN”) on March 18, 2013. Financial guarantees amounting to $947,663 have been submitted to MERN at the end of 2015.

The Corporation is of the opinion that all the necessary permits and authorizations have been requested and obtained.

Geological Setting

Mineralization

Gold mineralization on the Monique property is mainly associated with three deformation zones that cross the property with an orientation of 280° and a 75° - 80° dip to the north. Gold mineralization is defined by a network of quartz/tourmaline/carbonate veins and veinlets, measuring 1 cm to 10 cm, with disseminated sulphides in the altered wall rocks. Free gold is frequently observed in the veins. A total of 12 gold zones have been observed on the property over the years, the most promising being the A, B, G and J zones.

The mineralized zones have been defined from surface to a depth of 400 m (in the G and J zones). They vary in width from less than 1 m to almost 20 m. Mineralized lenses extend laterally over few hundred metres. Gold is generally associated with 1% to 5% finely disseminated pyrite, and visible gold is common in the quartz and carbonate veins and veinlets. Albite and fuschite alteration are locally observed.

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2015 Results

In early January 2013, Richmont announced that it had received the required mining permits for the Monique property. Following the completion of a bulk sample in the second quarter of 2013, and the subsequent completion of the three month pre-production phase, the Monique open pit Mine began commercial production on October 1, 2013. Mining activities were continuous during all the 2014 year.

Operating results

	2015		2014		2013 1
Gold Produced
Tonnes milled	224,673		283,009		60,536
Head grade (g/t)	2.37		2.71		2.35
Gold recovery (%)	96.7		96.0		93.6
Ounces produced	16,580		23,675		4,274
Revenues	26,298		32,663		3,961
Gold Sold
Ounces sold	17,657		23,490		2,976
Average selling price	1,486		1,387		1,328
Cash cost per ounce	782		910		1,290
AISC per ounce	798		958		2,304
Average selling price (US$)	1,162		1,256		1,265
Cash cost per ounce (US$)	612		824		1,230
AISC per ounce (US$)	625		867		2,196
Sustaining costs	277		1,119		3,016
Project and non-sustaining exploration costs	-		2		221

Mining activities at the Monique open-pit ceased at the end of January 2015 as the mine was fully depleted and a low-grade stockpile, at an average grade of 2.37 g/t, was established for future processing. The majority of the stockpile was processed over the balance of the year, with approximately 16,000 tonnes remaining that was processed in January 2016. Total tonnes milled in 2015 were 21% lower as compared to prior year’s tonnage of 283,009. Consequently, gold production of 16,580 ounces in 2015 was 30% lower than 23,675 ounces produced in 2014. Cash costs and AISC per ounce were $782 (US$612) and $798 (US$625) respectively, lower than cash costs and AISC for 2014 of $910 per ounce (US$824) and $958 (US$867) respectively, as mining operations ceased and stockpiles were processed for most part of the year. Non-cash charges of $250 per ounce were included in 2015 cash costs and AISC, relating to mining costs incurred and paid for in 2014, but which were accounted for when the resulting ounces were sold.

A total of 283,009 tonnes of ore were processed at an average grade of 2.71 g/t from the Monique Mine during the 12 months of 2014. This compared to processed tonnage of 60,536 tonnes at an average grade of 2.35 g/t and consequent production of 4,274 ounces in 2013, which included only 3 months of commercial production. Annual cash costs of CAN$910 (US$824) reflect the distribution of costs over a full year of production in 2014, versus the higher cash costs of CAN$1,290 (US$1,230) during the first three months of commercial operation in 2013 as production was being ramped up.

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Mineral Reserve Estimates

The mineral reserves estimate was carried out under the supervision of Daniel Adam, P.Geo., Ph.D., Vice-President, Exploration (Ordre des Géologues du Québec #229), an employee of Richmont. He is a qualified person and member of a professional association as defined by NI 43-101 requirements.

This mineral inventory was realized in accordance with the recommendations and regulations as set by the NI 43-101 committee.

An NI 43-101 technical report was completed for the first Reserve estimation of the Monique property on July 1 ^st , 2013, and was filed on SEDAR on September 13, 2013.

Reserve Classification

As at December 31, 2015, the Monique open-pit was depleted with no more Mineral Reserves on the property.

Mining Operations and Metallurgy

Open pit mining was completed at the end of January 2015. Stockpiled ore was processed at the Camflo Mill in 2015, with the exception of a small amount to be processed early in 2016.

For information of exploration properties, and exploration costs for last three years, including estimates for 2016, refer to sections ‘Property interests’ and ‘Exploration and project evaluation expenditures on pages 27 and 28 of this Annual Report.

The Francoeur Mine was closed on November 30, 2012 and ceased mining operations on March 6, 2013 (within the meaning of federal regulations).

On March 3, 2016, Globex Inc. (“Globex”) announced that it has signed a Binding Letter of Intent with Richmont Mines Inc. wherein Globex will acquire 100% interest in the Francoeur Mine, Arntfield Mine and a large package of mining concessions, mining leases and claims in Beauchastel and Dasserat Townships, west of Rouyn-Noranda, Quebec. Globex has agreed to pay Richmont a 1.5% Net Smelter Royalty (NSR) on a portion of the property that includes the former Francoeur mine and Arncoeur property up to a total of $1,300,000 after which the NSR will be reduced to 0.5% NSR.

As part of the transaction, Globex will transfer title of 11 claims located in Beauchastel Township adjoining the East boundary of Richmont’s Wasamac gold property to Richmont. These claims will be subject to a 0.5% NSR. More details are provided in the March 3, 2016 press release issued by Globex.

Location and Property Description

The Francoeur property is located 25 km west of Rouyn-Noranda, Abitibi, Beauchastel Township, ranges IV and V, lots 1 to 9.

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Description of Mining Rights

The Francoeur property consists of 16 mining claims, 3 mining concessions and 5 mining leases totalling approximately 505 ha.

Number of mining titles	Area	Expiration date
	(ha)
16 mining claims	170.57	Claims expire between 04/24/2016 and 05/23/2017
3 mining concessions	230.21	Mining concessions 194, 322 and 326: 01/31/2016
5 mining leases	103.95	Mining leases 776, 825, 826 ,849 and 1006 expire between 07/13/2018 and 06/26/2032
24	504.73

All of these claims are anticipated to be renewed before the anniversary date by applying excess credits available or by the execution of the required works. For the mining leases, taxes are paid to the government every year to keep them in good standing. For mining concessions, geological work is performed to keep it in good standing and taxes are paid every year. Richmont Mines has an internal procedure and an external control to insure appropriate follow up regarding claim expiry dates. All the mining claims, mining concessions and mining leases were in good standing in 2015 and are expected to be in good standing for 2016. A detailed list and map of locations can be found in the amended technical report for the Francoeur Gold Property as of August 17, 2012 filed under the Corporation’s profile on the SEDAR website at www.sedar.com.

Ownership of Mining Rights

All mining titles on the Francoeur property are held by Richmont Mines.

Mining Royalties

There are no royalties or back-in-rights related to any of the mining claims, mining leases and mining concessions.

Environmental Obligations and Permits

Following the announcement of the end the mining activities, Richmont Mines stopped mine dewatering on March 18, 2013 and ceased mining operations on March 6, 2013 (within the meaning of federal regulations). The notice of final cessation of mining activities was sent April 4, 2014 to MDDELCC. Richmont has begun the preliminary cleaning and restoration work on this property and awarded a contract to a consultant for the Environmental Site Assessment on May 2014. They made a site assessment based on historical activities (phase I) and made collection and chemical analysis of soil and groundwater samples on the site (phase II). Following these results, decontamination work began in 2014 and continued in 2015. At the end of 2015, some contaminated soils are still present below the hoist room. This building will have to be removed in order to complete the rehabilitation.

Geological Setting

Mineralization

The ore zones of the Francoeur deposits are generally made up of distinct lenticular and tabular bodies up to one metre in thickness, and form buff or beige coloured bands, called BB bands. All the BB bands are mainly composed of carbonate, albite, pyrite and minor amounts of quartz and rutile, with trace amounts of sericite and gold.

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Instead, the gold emplacement apparently developed in the shear zone and is partially related to albitite dikes. The nature of the contacts of gold ore bodies with enclosing mylonitic schist is quite variable.

The BB bands display a wide variety of textures ranging from a foliated micro-breccia, to more common fine grained and very well laminated rock. They contain on average 20 to 40 g/t Au and the grade can reach 50 g/t Au locally. The gold is commonly in its native form and is very fine-grained. Gold grains are usually associated with small pyrite crystals, but a proportion is also disseminated in the finely recrystallized carbonate-albite matrix.

Mineral Reserve Estimates

All the results of the definition drilling done in 2011 and in the beginning of 2012 were used to do the re-estimation of the Francoeur mineral reserve and resource in June 2012. Technical parameters used for this reserve and resource estimation are described in the Technical Report filed on SEDAR on August 17, 2012.

At the end of 2013, there were no more reserves at the Francoeur Mine, as the last shipment of ore was sent to the Camflo Mill in March 2013 and the mine was subsequently closed.

Location and Property Description

The Wasamac property is located approximately 15 km west of Rouyn-Noranda, Quebec, within the heart of the Abitibi gold mining district.

Description of Mining Rights

The Wasamac property consists of 3 mining concessions (CM 349, CM 364, and CM 370 for 757.65 ha) and a mining claim (CDC20098 for 1.71 ha) which cover a total area of 759.36 hectares in the Beauchastel township.

Ownership of Mining Rights

The Corporation owns 100% of the Wasamac property.

Mining Royalties

There are no royalties or back-in-rights related to any of the mining concessions.

Location of Mineralized Zones

The main mineralized zones currently known on the Wasamac property are located within the Wasa shear zone. This shear zone runs through the center of the property, and has an east-west orientation and a dip of about 50° to the North.

Exploration History

In 2002, Richmont re-activated exploration work on the Wasamac property in an attempt to evaluate the down plunge extension of zones 1 and 2 at depth.

In 2011, a total of approximately 52,000 metres of drilling was completed on the Wasamac property.

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In March 2012, the Corporation announced the results of an independent NI 43-101 compliant Preliminary Economic Assessment (“PEA”) for the Wasamac gold project. According to the PEA which assumed a gold price of CAN$1,350 (US$1,300) per ounce, the estimated total potential mine life would be 14 years with production of 6,000 tonnes per day, and an annual production of 140,000 ounces of gold. The PEA similarly estimated that the total life of mine recovered production would be 1.75 million ounces of gold at an average cash cost of US$688 per ounce, or CAN$46.15 per tonne. The undiscounted cash flows of this project were estimated to be $405 million with an internal rate of return of 7% and a payback of 8 years.

Following 2012 drilling results, Richmont announced that scheduled technical work and permitting efforts would continue as planned in 2013 at Wasamac; however, no additional exploration and development activities would be undertaken on the asset. This decision was made following several months of project optimization studies, which caused Richmont to conclude that alternative scenarios did not currently offer a meaningful economic improvement in the current gold price environment, over the initial Preliminary Economic Assessment outlined in the Corporation’s March 28, 2012 press release.

Geological Setting

Mineralization

The Wasa shear zone runs through the centre of the property in an east-west fashion. This shear zone, which trends at an azimuth of 265°, has a 50-60° dip to the north and a maximum thickness of 80 metres. To the west, the shear zone splits into two separate branches and becomes thinner, while to the east, the shear zone weakens as well and displays an average thickness of 25 metres. This shear zone is characterized by the development of a strong mylonitic fabric and an intense hydrothermal alteration which completely destroyed the primary structures and textures of the protolith. Mineral assemblages of rocks within the shear zone consist of chlorite, carbonate, hematite, albite and sericite in the middle of the zone. Gold is associated with a dissemination of fine pyrite in the altered portions of the shear zone.

Drilling

2015 Program

One exploration hole was completed in 2015 to test the extension of a small gold mineralized zone located south of the Wasamac shear zone. This hole was done in order to keep the mining titles in good standing. Only a few gold values were encountered.

On the next page you will find a map of the Corporation’s properties.

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National Instrument 43-101 – Standards of Disclosure of Mineral Projects

Mineral reserve estimations for the Corporation’s material properties were established by “qualified persons” as defined under NI 43-101, and their names are set out in the table below. These reserve estimations were reviewed by Mr. Daniel Adam, P.Geo., Ph.D., Vice-President, Exploration, an employee of Richmont Mines.

Mines	Qualified Persons	Titles
Beaufor Mine	Jessy Thelland, P.Geo.	Chief Geologist, Beaufor Mine
	Marc-André Lavergne, P.Eng	Manager, Beaufor Mine and Camflo Mill divisions
	Louis Nkoy, P.Eng.	Chief Engineer
Island Gold Mine	Raynald Vincent, P.Eng., M.G.P.	Chief Geologist
	Jean Bastien, P.Eng., MBA	Technical Services Manager
Francoeur Property	Marc-André Lavergne, Eng.	Former Francoeur Mine Manager
	Daniel Adam, P.Geo., Ph.D.	Vice-President, Exploration Corporate division
	Pierre Rivard, P.Geo.	Former Production Geologist
Wasamac Project	Daniel Adam, P.Geo., Ph.D.	Vice-President, Exploration, Corporate division
Monique Mine	Daniel Adam, P.Geo., Ph.D.	Vice-President, Exploration, Corporate division

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The profitability of gold mining is directly related to the market price of gold as compared to the cost of production. Gold prices fluctuate widely and are affected by numerous factors, including expectations with respect to the rate of inflation, exchange rates (specifically the U.S. dollar relative to other currencies), interest rates, global and regional political and economic situations and governmental policies with respect to gold holdings by a nation’s central bank. The demand and supply of gold usually affect gold prices but not necessarily in the same manner as supply and demand affect the prices of other commodities. The amount of gold available for sale includes a combination of mine production, stock and gold bullion held by governments, public and private financial institutions, industrial organizations and private individuals. As the amounts produced in any single year account for a small portion of the total available supply of gold, normal variations in current production do not have a significant impact on the supply of gold or its price.

The following table sets out the annual average gold price (London PM fix) in U.S. over the past five years:

		Exchange
	(US$)	rate 1	(CAN$)
2011	1,572	0.99	1,556
2012	1,669	1.00	1,669
2013	1,411	1.03	1,453
2014	1,266	1.10	1,393
2015	1,160	1.28	1,485
As at April 19, 2016	1,192	1.36	1,621
1 Source: Bank of Canada

Gold can be sold on numerous markets throughout the world and it is not difficult to ascertain its market price at any particular time. Richmont Mines is not dependent upon the sale of its gold to any one customer because of the large number of available gold purchasers.

Richmont Mines may occasionally use put and call options on gold, and forward sales contracts on gold and U.S. dollars. All such contracts are previously approved by the Corporation’s Board of Directors.

Gold dore bars are transported between the mills and the refinery by commercial armoured truck. These bars are refined at the Royal Canadian Mint of Ottawa refinery under a service contract at competitive rates. Refined metal is sold on the spot market to commercial bullion dealers (or under forward sales contracts if previously approved by the Corporation’s Board of Directors).

In 2015, 2014 and 2013, Richmont Mines had not entered into any gold derivatives contracts.

Richmont Mines’ principal business activities include the production of gold from mining development, extraction and processing of minerals, and mining exploration to maintain and increase its ore reserves. These operations are subject to various levels of control and strict government regulations, such as laws and regulations with respect to activities related to natural resources and the protection of the environment.

Environmental protection legislation applicable to the Canadian mining industry mandates high standards for the reduction or elimination of emissions, deposits, and issuance or release into the environment of contaminants caused by the extraction or processing of ore. In addition, certificates of authorization must be obtained in advance for the construction and commercial operation of a mine, plant, concentrator or refinery, since such types of operations that are specific to the mining industry may result in emissions, deposits, issuance or release of contaminants into the environment or may affect the quality of the environment.

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Quebec & Ontario

Provincial legislation in Quebec and Ontario in mining matters includes the acquisition and ownership of mining titles, safety standards, royalties and mining taxes. The Mining Act provides for the rehabilitation and restoration of lands affected by mining activities. In Ontario, approval for any plan for the rehabilitation and restoration of land affected by a Corporation’s operations is given by the Ministry of Northern Development and Mines (“MNDM”), while in Quebec it is given by the Ministère des Ressources naturelles (“MRN”). Corporations must comply with the plan and provide a financial guarantee to that effect.

In Quebec, when a corporation commences mining operations, it must submit its rehabilitation and closure plan before the beginning of its activities. In Ontario, the plan must be approved before the beginning of commercial production; moreover, a local public consultation must also be held.

The Ministries may enjoin a corporation which has already ceased its mining operations on a particular site to perform the rehabilitation and restoration work required by the presence of tailings. In the event that the Corporation does not comply with such requirements, the MRN and the MNDM may have the rehabilitation and restoration work executed by a third party, at the Corporation’s expense.

Richmont Mines does not foresee any specific difficulty in meeting the requirements under the Mining Act (Quebec) and the Mining Act (Ontario).

Richmont Mines holds certificates of authorization issued by the Ministère du Développement durable, de l’Environnement, et de la Lutte contre les Changements Climatiques (the “MDDELCC”) with respect to its mining operations in Quebec (Beaufor Mine, W Zone Mine, Monique Mine and Camflo Mill) and by the Ontario’s Ministry of the Environment for its Island Gold Mine, located in Ontario.

See Exhibit 8.1 to this Annual Report.

See Section B. “Business Overview” above.

ITEM 4A.	UNRESOLVED STAFF COMMENTS

None.

ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The discussion and analysis of the operating results and financial position of the Corporation for the three years ended December 31, 2015, 2014 and 2013 should be read in conjunction with the Corporation’s consolidated financial statements and the accompanying notes included in this Annual Report. Notice should also be taken of the cautionary statement regarding forward-looking statements on page 4 of this Annual Report, in particular with respect to trend and other forward looking information and disclosure regarding the Corporation’s contractual obligations.

The preparation of financial statements involves making estimates and assumptions that have a significant impact on the reported amounts of revenues, expenses, assets and liabilities. The items most dependent on the use of estimates include the useful life of assets, amortization and depletion calculations based on proven and probable reserves, impairment test of property, plant and equipment, calculation of asset retirement obligations, share based remuneration expense, dismantling costs and severance costs, the evaluation of provisions and contingent liabilities, start of advanced exploration phase, start of commercial production, recoverability of credits relating to resources and credits on duties refundable for losses as well as deferred income and mining taxes. Consequently, future results may differ from these estimates.

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Year ended December 31, 2015 compared to year ended December 31, 2014 and year ended December 31, 2013

(all dollar amounts are in thousands of Canadian dollars unless otherwise stated except for share and per ounce data).

Overview

Gold Prices

Gold price has been very volatile during 2015 due to uncertainty in global growth and the timing of a US Federal Reserve rate increase, creating more uncertainty among both, investors and gold producers. The gold price has fallen for the third consecutive year – down about 8% in 2015 alone. Following graph shows the gold price trend for last five years.

Historical five years gold prices

Inflation and the U.S. dollar are two major forces behind gold’s prices. In 2015, they didn’t work in gold’s favor. The collapse of the price of oil has kept inflation in check, which worked against gold because of its role as a hedge against rising prices. The U.S. dollar was strong throughout the year, as the effects of an improving US economy impacted its currency — another blow for gold, whose price performs contrary to the value of the dollar, as gold, which is priced in US dollars, becomes more expensive in other currencies. On December 16, 2015, the US Federal Reserve lifted short term interest rates for the first time in nine years. Given current economic conditions, the Fed took a dovish approach by indicating a gradual increase in future rates. This had minimal impact on gold prices.

The volatility in gold prices in 2015 makes it difficult to forecast 2016 prices with any kind of certainty. However with the uncertainty around interest rates removed, we expect the gold market to return to focus on fundamentals in the industry characterized by declining supply and still robust physical demand.

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Production

(ounces of gold)	2015		2014		2013
Island Gold	55,040		42,206		33,836
Beaufor	26,411		24,959		23,076
Monique	16,580		23,675		4,274 1
W Zone	-		4,900		2,324 1
Total production	98,031		95,740		63,510

1	Includes only data following the beginning of commercial production on October 1, 2013.

Richmont produced 98,031 ounces of gold in 2015, which exceeded the increased annual production guidance of between 87,000 and 95,000 ounces that was announced on August 6, an increase of 2% over 2014. Island Gold Mine accounted for 56% of total 2015 production, which largely offset the decrease in production from Quebec operations. Since 2013, production has increased by 54%. This increase has primarily been driven by strong performance from the Island Gold Mine and by the contribution of the Monique Mine, which began commercial production in the fourth quarter of 2013.

The Island Gold Mine produced a record 55,040 ounces in 2015, 16% above annual production guidance levels and 30% above the 42,206 ounces of gold produced in 2014. The increase is largely due to a 24% increase in grade to 7.31 g/t as compared to 5.91 g/t in 2014. Production for 2014 was a 25% increase over the 33,836 ounces produced in 2013, primarily due to a 29% improvement in grade to 5.91 g/t as compared to 4.57 g/t in 2013.

The Beaufor Mine produced 26,411 ounces in 2015, a 6% improvement over 2014 gold production of 24,959 ounces. The improvement was driven by 9% higher tonnage offset by 3% lower grade as compared to the prior year. Production for 2014 was an 8% improvement over 2013 production of 23,076 ounces. Production of 16,580 ounces at the Monique open-pit mine was 30% lower than the prior year, as the mine was depleted early in the 2015 year, at which point the operation started processing the lower grade stockpile.

Investments

As part of its strategy of accelerated development and potential production expansion at Island Gold Mine, the Corporation invested $48.9 million in 2015. This included $7.8 million for extending the main ramp to a depth of 740 metres, $8.5 million for a secondary eastern ramp to a depth of 500 metres and $4.8 million for an exploration drift that extends to the east by approximately 440 metres. A $2.8 million delineation drilling program of 50,089 metres was also completed in 2015. Other significant infrastructure upgrades included $8.7 million for the tailings dam expansion, $5.0 million for electrical upgrades and $1.6 million for bunkhouse buildings.

Richmont invested $23.1 million in its assets in 2014, a decrease from the $41.9 million in 2013. The decrease largely reflects the lower development costs associated with the Monique Mine following its commencement of commercial production in the fourth quarter of 2013, lower investments in the W Zone following the decision to cease operations in the second quarter of 2014, and decreased year-over-year investments at the Island Gold Mine.

Summary of Operational and Financial Results

Net earnings in 2015 were $6.8 million or $0.12 per share, compared to net earnings in 2014 of $8.2 million or $0.18 per share and to a net loss in 2013 of ($34.3 million) or ($0.87) per share.

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The cash and cash equivalent balance was $61.0 million at December 31, 2015, an increase of $25.7 million over the $35.3 million at December 31, 2014. The cash and cash equivalent balance was $17.6 million at December 31, 2013.

At December 31, 2015, Richmont had working capital of $47.3 million compared with $34.8 million at December 31, 2014 and $14.0 million at December 31, 2013.

Changes to accounting policies

New Accounting Pronouncements

There were no new accounting pronouncements for annual periods beginning on or after January 1 ^st , 2015.

Future Accounting Pronouncements

At the date of authorization of these consolidated financial statements, new standards, amendments and interpretations to existing standards have been published by the International Accounting Standards Board (“IASB”) but are not yet effective, and have not been adopted early by the Corporation.

Management anticipates that all of the pronouncements not yet effective will be adopted in the Corporation’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Corporation’s financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Corporation’s consolidated financial statements.

IFRS 9 – Financial instruments (IFRS 9)

In July 2014, the IASB published IFRS 9 which replaces IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). IFRS 9 introduces improvements which include a logical model for classification and measurement of financial assets, a single, forward-looking “expected loss” impairment model and a substantially-reformed approach to hedge accounting. IFRS 9 is effective for annual reporting periods beginning on or after January 1, 2018. Earlier application is permitted. The Corporation has yet to assess the impact of this new standard on its consolidated financial statements.

IFRS 15 – Revenues from contracts with Customers (IFRS 15)

In May 2014, the IASB published IFRS 15 which replaces IAS 18 Revenue, IAS 11 Construction Contracts and some revenue-related interpretations. IFRS 15 establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized at a point in time or over time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. IFRS 15 is effective for annual reporting periods beginning on or after January 1, 2018. Earlier application is permitted. The Corporation has yet to assess the impact of this new standard on its consolidated financial statements.

IFRS 16 – Leases (IFRS 16)

In January 2016, the IASB published IFRS 16 which replaces IAS 17 Leases. IFRS 16 eliminates the classification as an operating lease and requires lessees to recognize a right-of-use asset and a lease liability in the statement of financial position for all lease with exemptions permitted for short-term leases and leases of low value assets. In addition, IFRS 16: changes the definition of a lease; sets requirements on how to account for the asset and liability, including complexities such as non-lease elements, variable lease payments and options periods; changes the accounting for sale and leaseback arrangements; largely retains IAS 17’s approach to lessor accounting and introduces new disclosure requirements. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019 with early application permitted in certain circumstances. The Corporation has yet to assess the impact of this new standard on its consolidated financial statements.

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Revenue

Total annual revenues increased 9% in 2015 to $143.7 million from $132.2 million in 2014, due to the 3% increase in the number of gold ounces sold and a 6% increase in the average realized gold price in Canadian dollars. For the 2015 fiscal year, a total of 96,895 ounces of gold were sold at an average realized price of CAN$1,480 (US$1,157) per ounce. This compared to gold sales of 94,503 ounces at an average realized price of CAN$1,396 (US$1,264) per ounce in 2014, and gold sales of 63,443 in 2013 at an average realized price of CAN$1,419 (US$1,378) per ounce.

The Island Gold Mine sold 52,363 ounces of gold in 2015 at an average realized price of CAN$1,481 (US$1,158) as compared to 42,078 ounces of gold sold in 2014 at an average realized price of CAN$1,398 (US$1,266), and 35,113 ounces of gold in 2013 at an average price of CAN$1,434 (US$1,392).

The Beaufor Mine sold 26,875 ounces of gold at an average realized sale price of CAN$1,474 (US$1,153) versus 24,006 ounces of gold sold at an average realized price of CAN$1,399 (US$1,267) in 2014, and 23,028 ounces of gold sold at an average realized price of CAN$1,417 (US$1,376) per ounce in 2013.

The Monique Mine sold 17,657 ounces of gold in 2015 at an average realized price of CAN$1,486 (US$1,162) as compared to 23,490 ounces of gold sold in 2014 at an average realized price of CAN$1,387 (US$1,256) and 2,976 ounces of gold sold at an average realized price of CAN$1,328 (US$1,265) in its first three months of commercial production during the last quarter of 2013.

There were no sales from the W Zone Mine in 2015, as the operations were closed in the second quarter of 2014. The W Zone Mine contributed gold sales of 4,929 ounces at an average price of CAN$1,405 (US$1,272) in 2014, and gold sales of 2,326 ounces at an average price of CAN$1,328 (US$1,265) in 2013.

Expenses

Cost of sales for 2015 was $118.3 million, an increase of 6% over 2014, due to higher volumes of ore mined at Island Gold and Beaufor, and a higher ratio of development ore to production ore at Island Gold, which were partially offset by lower milled tonnage at Monique. Cost of sales at Island Gold was 40% higher in 2015 due to increased tonnage and the higher ratio of higher-cost development ore to production ore mined during the year. Salaries and contractor costs increased as the mine increased ore production and focused on new maintenance initiatives for equipment and electrical installations. Depreciation increased over the prior year due to a higher depreciation rate per ounce of gold and a 3% increase in ounces sold. Cost of sales at Beaufor increased mainly due to a 9% increase in tonnage over the prior year. Monique reported much lower cost of sales, as the mine was depleted early in the year and only the stockpiles were processed over the balance of the year. Cash costs increased by 2% to $977 per ounce (US$764) in 2015 from $956 (US$866) in 2014, that include 5% higher costs at both Island Gold and Beaufor, which were partially offset by 14% lower costs at Monique and the impact of a 3% increase in ounces sold.

2014 cost of sales increased 30% over prior year levels to $111.9 million, with 87% of this increase attributable to the higher costs associated with a full year of commercial operations at the Monique Mine in 2014, versus only three months in 2013. Cost of sales levels at the Island Gold Mine increased 9% year-over-year, largely due to higher cost per tonne attributable to the previously announced expense associated with the scheduled installation of a new cone crusher at the end of the second quarter, and the rental of a temporary primary jaw crusher and conveyor during the fourth quarter while new crushing equipment was being installed. The Beaufor Mine contributed $25.0 million toward consolidated cost of sales, below prior year levels due to lower tonnage. Operating costs at the Corporation’s Camflo Mill increased slightly as capacity utilisation was maximized with the contribution of a full year of Monique ore, and also increased marginally at the W Zone as remaining areas were mined prior to the cessation of operations at the end of the second quarter. The average cash cost of production decreased by a notably 15% in Canadian dollars to CAN$956 (US$866) in 2014 from CAN$1,128 (US$1,095) in 2013, primarily driven by improved grades at all three of the Corporation’s operating mines, and the resulting higher gold sales.

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Royalties for 2015 were $2.0 million or 16% lower than 2014 royalties of $2.3 million due to an adjustment from previous years. The amount of royalties paid out in 2014 increased to $2.3 million from $1.9 million the prior year, driven by higher royalty levels at all three of the Corporation’s operating mines as a result of the higher gold ounce production levels. 2013 royalty payments decreased to $1.9 million from $2.3 million in 2012, reflecting lower royalty levels at the Island Gold Mine as a result of the 16% year-over-year decrease in gold ounces sold and lower gold prices. This was only partially mitigated by slightly higher royalties at the Beaufor Mine as a result of increased gold sales in 2013, and royalties at both the Monique and W Zone mines following their transition into commercial production.

The Corporation is subject to pay the following royalties:

• Beaufor Mine and the W Zone Mine: $30 per ounce produced on 50% of the production from Beaufor property, $30 per ounce produced from Perron property and a 25% net profit interest royalty per ounce produced from Pascalis property;

• Island Gold Mine: a 3% net smelter return royalty per ounce produced from the Lochalsh claims, a 2% net smelter return royalty in addition to a 15% net profit interest royalty per ounce produced from the Goudreau claims and a 4.38% net smelter return royalty and a 10.38% net profit interest royalty per ounce produced from Goudreau Lake property;

• Monique Mine: a 0.38% smelter return royalty per ounce produced.

Royalty payments could be payable on other properties if such other properties are brought into commercial production.

Custom milling – In 2015, Richmont processed 55,337 tonnes of ore from local mining companies in the Abitibi region, to utilize excess milling capacity at its Camflo Mill. The Corporation did not process any custom milling ore in 2014 and in 2013.

Administration - Administration expenses totaled $9.8 million in 2015 versus $7.6 million in 2014. This represented a $2.2 million increase over 2014, reflecting higher salaries attributable to the greater number of employees, severance of the Executive Chairman and higher share-based compensation and consultant-related costs in the current period.

Administration expenses of $7.6 million in 2014 were slightly higher than $7.5 million in 2013. However, excluding severance payments in both periods, administration expenses in 2014 were 12% below the 2013 levels. The total cost in 2014 reflects lower levels of salaries and related benefits stemming from the decrease in the number of administrative employees, the effects of which were offset by higher severance compensation following the departure of the President and CEO in early July, and departure of the CFO in September.

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Exploration and project evaluation –Richmont Mines continued to make investments related to exploration and project evaluation as shown below:

(in thousands of $)	2015		2014	2013
	$		$	$
Exploration costs Mines
Island Gold	4,600		771	4,532
Beaufor	2,679		1,733	1,929
	7,279		2,504	6,461
Exploration costs - Other properties
Wasamac	94		169	1,102
Monique	-		2	221
Other	32		154	347
Project evaluation	521		357	474
Exploration and project evaluation before depreciation and exploration tax credits	7,926		3,186	8,605
Depreciation	41		71	229
Exploration tax credits	(532	)	515	(959	)
	7,435		3,772	7,875

 

Accretion expense of asset retirement obligations – The Corporation’s production and exploration activities are subject to various federal and provincial laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Corporation conducts its operations so as to protect public health and the environment. The Corporation has recorded the asset retirement obligations of its mining sites on the basis of management’s best estimates of future costs, based on information available on the reporting date. Best estimates of future costs are the amount the Corporation would reasonably pay to settle its obligation on the closing date. Future costs are discounted using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the liability. Such estimates are subject to change based on modifications to laws and regulations or as new information becomes available. This charge was $82 thousand in 2015 as compared to $111 thousand in 2014, and $81 thousand in 2013.

Loss (gain) on disposal of long-term assets – The loss (gain) on disposal of long-term assets includes the following items:

(in thousands of $)	2015		2014		2013
	$		$		$
Exploration mining assets	-		493		-
Mining equipment	(102	)	146		105
	(102	)	639		105

 

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Impairment loss on W Zone Mine

Property, plant and equipment that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is determined on the basis of value-in-use. For the purpose of this test, the Corporation has determined that each mine site represented a cash-generating unit.

Subsequent to 2013 production and a re-interpretation of the geology following exposure from mining, the reserve base of the W Zone Mine was significantly reduced. As a result of this reduction, and the ensuing impact on expected future production from this operation, the Corporation took a $13.5 million, or $0.34 per share, non-cash write-down on the asset base in the fourth quarter of 2013. A discount rate of 9% was used by the Corporation to determine the value-in-use.

Mining and Income Taxes

(in thousands of $)	2015		2014		2013
	$		$		$
Current taxes	1,698		78		785
Future taxes	99		427		7,209
	1,797		505		7,994

For the fiscal year 2015, the mining and income tax expense was $1.8 million, which includes $1.0 million of federal income taxes payable and $0.8 million of mining taxes payable.

For the fiscal year 2014, mining and income taxes totaled $0.5 million. This amount mainly includes $2.3 million of mining and income tax, or 27% of the pre-tax income of $8.7 million, offset by a $1.2 million credit on mining duties from previous years, and the $0.3 million reversal of a 2010 charge that had been booked (for part XII-6 of the tax return of a subsidiary), but will no longer have to be paid by the Corporation.

For the fiscal year 2013, mining and income taxes totalled $8.0 million, including a write-off of $7.5 million of deferred income and mining tax assets. In the charge there is an amount of $0.5 million for current tax expense and a same amount booked against exploration expense.

Net loss from discontinued operation

At the end of November 2012, management made the decision to cease commercial gold production at the Francoeur Mine. This Mine was part of the Corporation’s Quebec segment. As a result, revenues, expenses and losses relating to the discontinuation of this operation were segregated from the Corporation’s results from continuing operations, and are shown as a single line item in the consolidated income statement. The remaining property, plant and equipment from this mine were valued at their recoverable amount, and the majority of these assets are now redeployed within the Corporation’s other mines. The recoverable value of assets was established by three internal experts with the necessary expertise to determine the value of mining assets. They evaluated the fair value for each asset considering the general condition of the asset as well as the actual conditions of the market. Total charges related to the mine closure including asset write-down, closure costs and operational losses, totaled $1.1 million in 2013 after mining and income taxes.

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Net Earnings (loss)

The Corporation generated net earnings of $6.8 million, or $0.12 per share for the fiscal year 2015, a decrease over net earnings of $8.2 million or $0.18 per share in 2014, due to higher exploration expenditures at Island Gold and higher administration costs as compared to 2014. Net earnings on per share basis were 33% lower also because of increase in share capital resulting from issuance of 9.625 million common shares on a bought-deal basis in February 2015.

Net earnings for 2014 were $8.2 million, or $0.18 per share, a significant improvement over 2013 net loss from continuing operations of ($33.2) million, or ($0.84) per share, which included charges totaling $22.1 million, or $0.56 per share, stemming from a non-cash write-down of the W Zone Mine assets, a write-off of deferred income and mining tax assets, and a write-off of financing costs following the termination of a debt-financing agreement. The annual variance in results also reflects the 49% increase in the number of gold ounces sold, and a 15% decrease in the average cash cost per ounce stemming from improved mined grades at all three operating mines, the effects of which were only partially mitigated by the slight 2% decrease in the average sales price per ounce in Canadian dollar terms.

Balance Sheet

Assets

The total assets of Richmont increased to $207.1 million from $148.8 million at the end of 2014 and $123.3 million at the end of 2013.

The Corporation’s cash balance was $61.0 million at December 31, 2015, a $25.7 million, or 73%, increase from the $35.3 million balance at December 31, 2014. Year-end cash levels includes $42.4 million of cash generated from operations, $36.1 million of net proceeds from a bought deal financing completed in February 2015 reduced by investment of $52.1 million in property, plant and equipment during the year, largely spent on the ongoing development of the Island Gold Mine.

Cash balance of $35.3 million at December 31, 2014, up from the $17.6 million balance at December 31, 2013, included investments of $23.1 million in property, plant and equipment during the year, which were more than offset by $27.3 million of cash generated from operations and the $10.7 million of net proceeds from a bought deal financing completed in April 2014.

Working capital of $47.3 million as of December 31, 2015 was an increase of $12.5 million as compared to December 31, 2014. The increase is largely attributable to an increase of $25.7 million in cash and an increase of $2.0 million in receivables, partially offset by a decrease of $2.5 million in inventories, a decrease of $3.3 million exploration tax credits receivable, and an increase of $9.4 million in current liabilities.

At December 31, 2014, Richmont had working capital of $34.8 million compared with $14.0 million at December 31, 2013. The $20.8 million increase is mainly attributable to a $17.7 million increase in the Corporation’s cash balance, a $4.7 million increase in inventories, a $2.0 million increase in income and mining taxes payable, and a $1.0 million increase in the current portion levels of long-term debt related to advance Island Gold Mine royalty payments payable to a third party in January 2015.

Liabilities

The liabilities of Richmont were $53.5 million as at December 31, 2015 and are composed of current liabilities, asset retirement obligations, royalty payments payable, finance lease obligations, contract payment holdbacks, long-term share based compensation, closure allowance and deferred income and mining tax liabilities.The liabilities of the Corporation were $40.8 million as at December 31, 2014, compared with $37.0 million at December 31, 2013.

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Asset retirement obligations

The rate used to determine the future value of the obligations is based on the expected life of the operation and varies between 3.0% and 3.5% (between 3.0% and 3.5% in 2014) while the rate reflecting the current market assessments (adjusted for the risks specific to this liability) used to determine the present value of the obligations varies between 0.6% and 1.3% (between 1.0% and 1.6% in 2014). The payments schedule was determined by taking into account the proven and probable reserves (and a portion of measured and indicated resources for Island Gold Mine), the estimated annual production level and the estimated mine life. The following table sets forth the estimated cash flows of future retirement costs used in the calculation of the asset retirement obligations for the year ended December 31, 2015:

(in thousands of $)			Anticipated
	Total amount		cash flow
	of the estimated		payment
	cash flow		schedule
2015	$
Island Gold Mine	2,217		2023
Beaufor Mine and W Zone Mine	1,386		2019
Camflo Mill	4,289		2019
Monique Mine	1,541		2016 and after
Francoeur Mine	849		2016 and after
	10,282

Long-Term Debt

Long-term debt includes the following financial liabilities:

	(in thousands of $)	December 31,		December 31,
		2015		2014
		$		$
	Royalty payments payable a)	1,000		2,000
	Finance lease obligations b)	6,057		2,912
	Contract payment holdbacks c)	1,500		1,116
	Long-term share-based compensation (note 7.2 c)	1,234		982
	Closure allowance d)	537		513
		10,328		7,523
	Current portion	3,064		1,799
		7,264		5,724

 

 

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	(in thousands of $)	Minimum lease payments due
		2016		2017		2018		2019		Total
	December 31, 2015:
	Lease payments	2,306		2,633		937		632		6,508
	Finance charges	(242	)	(142	)	(52	)	(15	)	(451	)
	Net present values	2,064		2,491		885		617		6,057

 

Deferred income and mining tax assets and liabilities

Note 12 of the Corporation’s consolidated financial statements included in this Annual Report provides detailed information about tax reconciliation as well as deferred income and mining tax assets and liabilities.

Shareholders’ equity

Shareholders’ equity totaled $153.6 million as at December 31, 2015 as compared to $108.0 million as at December 31, 2014 and with $86.4 million as at December 31, 2013. At December 31, 2015, Richmont Mines had 58,339,963 shares outstanding, 812,500 warrants, 2,199,630 options granted under its stock option plans, 800,000 options outside of the Corporation’s plans and 193,400 restricted share units under the Corporation’s long-term incentive plan. At December 31, 2014, Richmont Mines had 48,276,223 shares outstanding, 812,500 warrants, 2,911,450 options granted under its stock option plans, 800,000 options outside of the Corporation’s plans and 186,900 restricted share units under the Corporation’s long-term incentive plan. At December 31, 2013, Richmont Mines had 39,596,103 shares outstanding, 812,500 warrants, 3,439,950 options granted under its stock option plans and 324,675 options outside of the Corporation’s plans.

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Commitments and contingencies

Commitments

The Corporation is subject to pay the following royalties:

• Beaufor Mine and the W Zone Mine: $30 per ounce produced on 50% of the production from Beaufor property, $30 per ounce produced from Perron property and a 25% net profit interest royalty per ounce produced from Pascalis property;

• Island Gold Mine: a 3% net smelter return royalty per ounce produced from the Lochalsh claims, a 2% net smelter return royalty in addition to a 15% net profit interest royalty per ounce produced from the Goudreau claims and a 4.38% net smelter return royalty and a 10.38% net profit interest royalty per ounce produced from Goudreau Lake property;

• Monique Mine: a 0.38% smelter return royalty per ounce produced.

Royalty payments could be payable on other properties if such other properties are brought into commercial production.

On August 5, 2014, the Corporation announced that it had signed a definitive agreement to acquire the outstanding 31% ownership of four patented claims on the Island Gold Mine property, thereby increasing its ownership of these claims to 100% from 69% previously. The 31% ownership held by the third party was acquired by the Corporation in return for a 3% net smelter return royalty (NSR) that is payable on 100% of mineral production from the four claims. As part of this agreement, the Corporation made an advance royalty payment of $1.0 million at the closing of the transaction, made a payment of $1.0 million on January 3, 2015 and made an additional payment of $1.0 million on January 3, 2016. In the event that there is production from these claims, advance royalty payments will continue, and will decrease to $0.3 million as of January 3, 2017, and will be paid annually until such time as a total of $5.1 million has been paid in royalties (including advance royalties) to the third party, after which advance royalty payments will cease. All advance royal payments will be credited against any future NSR payments.

The Corporation is committed, under two operating leases expiring in December 2017 and May 2020, to pay a total sum of $0.9 million for office space. Minimum rental payments amount to $0.3 million for 2016 and 2017 and $0.1 million for 2018 to 2020. One operating lease is subject to sublease expiring in December 2017, for an annual amount of $0.1 million.

The Corporation entered into six financial lease agreements for mobile equipment during the year ended December 31, 2015 (five financial lease agreements in 2014). These financial lease agreements have a carrying value of $6.1 million. At the end of these contracts, the Corporation benefits from an option of a lower purchase price.

In March 2012, the Corporation signed agreements with several employees considered as key personnel. These agreements incorporate a retention payment (“Retention Awards”) provided certain conditions are met by the employee, most notably that the employee continues his or her employment with the Corporation until March 2017. These retention payments would be payable in 2017 in either of the Corporation’s common shares or cash, at the discretion of the employee, with the number of common shares to be determined by the current value of the common shares at the time of payment. As at December 31, 2015, the total amount that could be paid as Retention Awards under these agreements is $1.8 million. ($2.0 million as at December 31, 2014).

In light of a modification to the Quebec Mining Law, the financial guarantee for each of the Corporation’s Quebec mining sites must now cover 100% of the anticipated restoration work costs for each mining site. Consequently, the Corporation increased the letters of credit issued as financial guarantee by $1.0 million in 2014 and by $1.8 million in 2015 and must increase the financial guarantees by $1.2 million in 2016.

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In mid-October 2013, the Corporation announced that it had signed a land and mining rights agreement with Argonaut Gold Inc. (“Argonaut”), owner of the Magino Gold Project that is adjacent to the Corporation’s Island Gold Mine. This Agreement was slightly modified in June 2014. Under the revised terms, Argonaut will receive one claim in its entirety and surface and mining rights down to a depth of 400 metres on six claims. It will also receive surface rights on two claims down to a depth of 100 metres. The Corporation will receive two additional claims for a total of three and mining rights below a depth of 400 metres on three claims. As previously reported, under the terms of the Agreement, the Corporation will receive a net payment of $2.0 million in cash from Argonaut upon completion of the land transactions, which are now expected to take place in 2016.

Please refer to the contractual obligations table on page 85.

Contingencies

The Corporation is involved in the following legal proceedings against the Corporation:

Management is of the opinion that the basis of the legal proceedings against the Corporation is unfounded and, consequently, no provision has been accounted for in the financial statements in this respect.

Furthermore, in 2013, the Corporation began legal procedures against its former Monique Mine mining contractor for work that had been poorly executed or not executed at all. In November 2014, the Corporation received a defense and counterclaim from this former contractor for an amount of $15.5 million. Management is of the opinion that the basis of this counterclaim is unfounded and, consequently, no provision has been accounted for in the financial statements in this respect. As at December 31, 2015, a contract holdback amount of $1.0 million remains unpaid by the Corporation related to this work.

As at April 19, 2016, Richmont Mines is not aware of any other legal proceedings involving the Corporation.

Critical Accounting Estimates

The preparation of financial statements requires the use of estimates and the formulation of assumptions that have a significant impact on revenue and expenses as well as on the amounts of assets and liabilities. The following factors represent the estimates that management considers the most significant, and for which the actual amounts may differ considerably thereby affecting operating results.

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Mineral reserves

The main parameters used to determine the mineral reserves of Island Gold, Beaufor Mine and Monique Mine ¹ are the following:

Basis of depletion of mining sites in production

Property, plant and equipment of mining sites in production are depleted according to the units-of-production method to write down the cost to residual value. Management estimates the residual value of property, plant and equipment based on the estimated fair value as of the financial position date. For these assets, the depletion rate is calculated based on the number of ounces of gold sold in proportion to the number of ounces in proven and probable reserves and, for Island Gold Mine, a portion of measured and indicated resources.

The Corporation estimates its reserves and resources using information compiled by qualified persons who work for the Corporation. This information relates to geological data on the size, depth and shape of the deposit and requires geological assessments to interpret the data. The assessment of proven and probable reserves and measured and indicated resources is based on factors such as the estimated exchange rate, price of metals, capital investments required and production costs stemming from geological assumptions based on the size and grade of the deposit. Changes in proven and probable reserves and measured and indicated resources could have an impact on the net carrying amount of property, plant and equipment, asset retirement obligations, recognition of deferred tax assets and amortization, depreciation and depletion expenses.

Asset retirement obligations

The Corporation assesses its asset retirement obligations annually. Determining these obligations requires significant estimates and assumptions due to the numerous factors that affect the amount ultimately payable. Such factors include estimates of the scope and cost of restoration activities, legislative amendments, known environmental impacts, the effectiveness of reparation and restoration measures and changes in the discount rate. This uncertainty may lead to differences between the actual expense and the allowance. At the date of the statement of financial situation, asset retirement obligations represent management’s best estimate of the charge that will result when the actual obligation is terminated.

Impairment test of property, plant and equipment

Determining if there are any facts and circumstances indicating impairment loss or reversal of impairment losses is a subjective process involving judgment and a number of estimates and interpretations in many cases. When an indication of impairment loss or a reversal of an impairment loss exists, the recoverable amount of the individual asset must be estimated. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs must be determined.

In 2015, no impairment tests were required, because there was no indication that an impairment loss could exist. In 2014, the assumption used in the asset valuation process was a price of CAN$1,300 per ounce of gold in 2015, CAN$1,370 per ounce of gold in 2016 and CAN$1,374 per ounce of gold in 2017 and after. These prices were used in order to estimate future revenues and are based on an average of recent prices.

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In the process of measuring expected future cash flows, management makes assumptions about future operating results, such as future metal production (proven and probable reserves and, for Island Gold Mine, a portion of measured and indicated resources), estimated future metal prices, operating costs, capital and site restoration expenses and estimated future foreign exchange rates. These assumptions relate to future events and circumstances. Actual results may differ from estimated results.

Income taxes and deferred mining taxes

The Corporation is subject to taxes from different tax jurisdictions. Management continually evaluates the likelihood that its deferred tax assets could be realized. This requires management to assess whether it is probable that sufficient taxable income will exist in the future to utilize these losses within the carry-forward period. The Corporation also maintains allowances for uncertain tax positions that, in its opinion, appropriately reflect the risks related to the tax positions subject to discussions, audits, differences of opinion and appeals with the tax authorities or that are otherwise uncertain. These allowances are determined using best estimates of the amount payable based on a qualitative assessment of all relevant information. These allowances are reassessed at the end of each financial reporting period to determine if the amount is sufficient. However, audits by the tax authorities could subsequently result in an additional liability. Upon the definite resolution of a tax issue resulting in a tax amount that differs from the initially recognized tax expense, the difference is recognized in the tax expense of the period of definitive settlement.

Share-based compensation expense

The estimation of share-based payment costs requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The Corporation has made estimates as to the volatility of its own shares, the probable life of options and the time of exercise of those options. The model used by the Corporation is the Black-Scholes model. The Corporation similarly evaluated the expected extinguishments for each remuneration program within the parameters of each individual program.

Dismantling costs and severance costs

The Corporation estimates dismantling costs and severance costs by making assumptions such as retention of employees and timing of dismantling. The uncertainty of these estimations may lead to differences between the actual expenses and the estimated costs.

Recoverability of credits relating to resources and credits on duties refundable for losses

Uncertainties related to the review by government authorities of the Corporation’s current and prior years’ claims for the refundable tax credit relating to resources and the credit on duties refundable for losses, based on qualifying exploration expenditures under the Taxation Act (Quebec) and the Mining Tax Act (Quebec), require management to assess whether these claims will be settled in full or in part. Uncertainties exist with respect to the interpretation of tax legislation and regulations by government authorities, the amount of expenditures that may be disallowed by such authorities as a result of their interpretation of tax legislation and regulations and the timing of recovery of the credits.

Start of advanced exploration phase

The Corporation evaluates the potential of each project to determine when the project should progress from the exploration phase to the advanced exploration phase. Once management has determined that a project has demonstrated a potential for development, and an economic analysis supports its commercial viability and its economic benefit, the project moves into the advanced exploration phase once approval has been given by the Board of Directors. Expenditures related to the project are capitalized as of this time.

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Start of commercial production

Management assesses the stage of completion of each advanced exploration project to determine when it begins commercial production. The Corporation considers a number of criteria to determine when a mine enters into commercial production, thereby resulting in reclassification from “Advanced exploration project” to “Mining site in production”. The following criteria are used:

• Production capacity achieved

• Recovered grade

• Stage of completion of development work

Provisions and contingent liabilities

Judgments are made as to whether a past event has led to a liability that should be recognized in the consolidated financial statements or disclosed as a contingent liability. Quantifying any such liability often involves judgments and estimations. These judgments are based on a number of factors including the nature of the claims or dispute, the legal process and potential amount payable, legal advice received, past experience and the probability of a loss being realized. Several of these factors are sources of estimation uncertainty.

Reconciliation of total cash cost per ounce to production costs:

( in thousands of $ other than exchange rate and per ounce data )	2015		2014		2013
Operating costs as per note 4 of the consolidated financial statements (CAN$)	92,719		87,984		69,688
Royalties as per note 4 of the consolidated financial statements (CAN$)	1,953		2,335		1,910
Total cash costs (CAN$)	94,672		90,319		71,598
Ounces of gold sold	96,895		94,503		63,443
Total cash cost in CAN$/per ounce	977		956		1,128
Average exchange rate (US$/CAN$)	1.2787		1.1045		1.0299
Total cash cost in US$/per ounce	764		866		1,095

 

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Reconciliation of cost of sales to cash costs and to all-in sustaining costs per ounce sold for 2015, 2014 and 2013

2015			Island Gold		Beaufor		Monique		Corporate		Total RIC
(in thousands of $, except per share amounts)
Gold sold (ounces)			52,363		26,875		17,657		-		96,895
Cost of sales			72,413		29,419		16,502		-		118,334
Depreciation and depletion			(18,291	)	(2,675	)	(2,696	)	-		(23,662	)
Cost of sales, excluding depreciation expense			54,122		26,744		13,806		-		94,672
Cash cost ($/ounce)			1,034		995		782		-		977
Sustaining costs			22,330		5,942		277		106		28,655
Corporate general and administrative costs			-		-		-		9,809		9,809
All-in sustaining costs			76,452		32,686		14,083		9,915		133,136
All-in sustaining costs ($/ounce)			1,460		1,216		798		102		1,373
2014	Island Gold		Beaufor		Monique		W Zone		Corporate		Total RIC
(in thousands of $, except per share amounts)
Gold sold (ounces)	42,078		24,006		23,490		4,929		-		94,503
Cost of sales	51,766		26,338		27,421		6,373		-		111,898
Depreciation and depletion	(10,429	)	(3,637	)	(6,031	)	(1,481	)	-		(21,578	)
Cost of sales, excluding depreciation  expense	41,337		22,701		21,390		4,892		-		90,320
Cash cost ($/ounce)	982		946		910		992		-		956
Sustaining costs	14,110		1,880		1,119		88		-		17,197
Corporate general and administrative
costs	-		-		-		-		7,627		7,627
All-in sustaining costs	55,447		24,581		22,509		4,980		7,627		115,144
All-in sustaining costs ($/ounce)	1,317		1,024		958		1,010		81		1,219
2013	Island Gold		Beaufor		Monique		W Zone		Corporate		Total RIC
(in thousands of $, except per share  amounts)
Gold sold (ounces)	35,113		23,028		2,976		2,326		-		63,443
Cost of sales	47,475		27,725		4,675		5,957		-		85,832
Depreciation and depletion	(7,992	)	(2,800	)	(837	)	(2,605	)	-		(14,234	)
Cost of sales, excluding depreciation  expense	39,483		24,925		3,838		3,352		-		71,598
Cash cost ($/ounce)	1,124		1,082		1,290		1,441		-		1,128
Sustaining costs	13,034		2,392		3,016		1,209		837		20,488
Corporate general and administrative
costs	-		-		-		-		7,514		7,514
All-in sustaining costs	52,517		27,317		6,854		4,561		8,351		99,600
All-in sustaining costs ($/ounce)	1,495		1,186		2,304		1,961		132		1,569

 

As at December 31, 2015, Richmont had a cash balance of $61.0 million, a $25.7 million, or 73%, increase from the $35.3 million balance at December 31, 2014. The increased cash balance islargely due to the net proceeds of $36.1 million from the bought deal financing completed in the first quarter.

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The Corporation’s cash balance of $35.3 million at December 31, 2014 was an increase from the $17.6 million balance at December 31, 2013,largely due to the $10.7 million of net proceeds from a bought deal financing completed in April 2014 and net free cashflow generation.

Most of the restricted deposits relate specifically to site restoration. As at December 31, 2015, the Corporation has $117 thousand in restricted deposits with the Quebec government, $708 thousand in restricted deposits with the Ontario government and a credit facility is available to the Corporation up to an amount of $5.9 million for the issuance of letters of credit as guarantees for the settlement of asset retirement obligations. The credit facility has a fixed annual fee of 0.95% (0.95% in 2014). The following table provides the allocation of restricted deposits and letters of credit issued as at December 31, 2015:

(in thousands of $)	2015		2014
	$		$
Restricted deposits
Island Gold Mine (Island Gold Deep and Lochalsh property)	708		601
Beaufor Mine	107		107
Other	10		10
	825		718
Other	6		298
	831		1,016
Letters of credit 1
Camflo Mill	2,505		1,332
Island Gold Mine (Kremzar property)	979		979
Francoeur Mine	471		314
Monique Mine	948		948
Beaufor Mine	488		-
	5,391		3,573

1

Since June 30, 2014, letters of credit have been secured by a first rank movable mortgage for a maximum amount of $6,785, guaranteed by equipment and mobile equipement which has a net carrying value of $21,151 ($14,667 in 2014). Prior to that, letters of credit were secured by the guaranteed investment certificate.

Cash flows from operating activities

In 2015, cash flows from operations increased to $42.4 million from $27.3 million in 2014. This increase was driven by a decrease in non-cash working capital items of $8.1 million as compared to an increase in non-cash working capital of $6.9 million in 2014. Cash flow from operations before working capital adjustments were almost in-line with the prior year, as 9% higher revenues during the year were offset by 6% higher cost of sales, 97% higher exploration and project evaluation costs and 29% higher administration costs in 2015.

Cash flows from operations increased from $3.5 million in 2013 to $27.3 million in 2014. This increase reflects net earnings in 2014 of $8.2 million, or $0.18 per share, compared with a net loss of ($34.3) million or ($0.87) per share in 2013 reflecting a 49% increase in ounces of gold sold and a 15% decrease, in Canadian dollars, of the average cash cost of production primarily driven by improved grades and the resulting higher gold sales. Futhermore Richmont spent $3.8 million in exploration costs in 2014 compared to $7.9 million in 2013.

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Cash flows used in investing activities

The Corporation invested $48.9 million in 2015 focussing largely on the accelerated development and potential production expansion at Island Gold Mine. This included $7.8 million for extending the main ramp to a depth of 740 metres, $8.5 million for a secondary eastern ramp to a depth of 500 metres and $4.8 million for an exploration drift that extends to the east by approximately 440 metres. A $2.8 million delineation drilling program of 50,089 metres was also completed in 2015. Other significant infrastructure upgrades included $8.7 million for the tailings dam expansion, $5.0 million for electrical upgrades and $1.6 million for bunkhouse buildings.

Investments in assets of $23.1 million in 2014 were significantly lower than 2013 investments of $41.9 million. The decrease was largely due to the lower development costs associated with the Monique Mine following its commencement of commercial production in the fourth quarter of 2013, lower investments in the W Zone following the decision to cease operations in the second quarter of 2014, and decreased year-over-year investments at the Island Gold Mine.

(in thousands of $)	2015		2014		2013
	$		$		$
Island Gold Mine	48,938		20,168		27,770
Beaufor Mine	1,390		1,623		980
W Zone Mine	-		234		3,779
Monique Mine	-		21		8,358
Other	1,770		1,006		1,001
Total	52,098		23,052		41,888

Cash flows from financing activities

On February 11, 2015, the Corporation issued a total of 9.625 million common shares on a bought-deal basis through a syndicate of underwriters, at a price of $4.00 per share. This included the entire over-allotment option of 1.125 million common shares, and generated aggregate gross proceeds of $38.5 million. A share issue cost of $2.4 million was incurred relating to the issuance of common shares.

In 2015, the Corporation issued 438,740 common shares (630,120 in 2014 and 30,000 in 2013) following the exercise of stock options and received cash proceeds in the amount of $0.7 million ($1.1million in 2014 and $0.1 million in 2013).

On April 23, 2014, the Corporation issued a total of 8.05 million common shares on a bought-deal basis through a syndicate of underwriters, at a price of $1.45 per share. This included the entire over-allotment option of 1.05 million shares, and generated aggregate gross proceeds of $11.7 million. An expense of $0.9 million was incurred relating to the issuance of common shares.

On January 3, 2015, the Corporation made an advance royalty payment of $1.0 million at the closing of a transaction to acquire the outstanding 31% ownership of four patented claims on the Island Gold Mine property, thereby increasing its ownership of these claims to 100% from 69% previously.

According to the terms of a Senior Secured Credit Facility established in 2013, 812,500 warrants were issued to the lender, each warrant allowing for the acquisition of one common share at a price of $2.45 prior to August 2016. These warrants vested immediately and an amount of $0.4 million was registered in shareholder’s equity in contributed surplus and the counterpart as financing costs.

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