TMM : TSX-V : C$1.72 | C$235.6M | Speculative Buy , Target C$2.60 ?

• Resource and throughput expansion potential at San Francisco; reiterate

SPECULATIVE BUY rating, raise target price to $2.60 from $2.25

Investment recommendation

We reiterate our SPECULATIVE BUY recommendation on the shares of Timmins Gold

Corp. with a target price of C$2.60 per share, up from C$2.25 previously.

Investment highlights

• Reserve/Resource Growth Potential: A revised Reserve/Resource estimate and mine

plan for the San Francisco mine is expected to be released in September. Based on the

drilling to date, reserves have the potential to expand to 800,000-900,000 ounces of

gold. Given the prospective land package, we see potential for the reserve base to

expand to 1.0-1.2 million ounces of gold in 2011.

• Throughput Expansion: The San Francisco mine has been designed to accommodate a

modular expansion of the throughput. By mid-2011, with resource additions, we

believe that TMM will be in a position to ramp up its throughput to 16,000 tpd, from

roughly 12,000 tpd currently. This should enable TMM to ramp up its annual gold

production to 100,000-130,000+ ounces of gold per year over the remainder of the

mine life.

Valuation

We have increase our estimate of mineable reserves for the San Francisco mine to 1.0

million ounces of gold. Based on our discussions with the company, we have also adjusted

our model to reflect limited cash taxes payable from the San Francisco mine until mid-

2012. The net impact is an increase in our peak gold price NAVPS (5%, US$1300/oz Au)

estimate to C$2.57, up from C$2.14 previously. We value the shares of TMM based on a

1.0x multiple to our peak gold price NAVPS.