Embed Size (px)
Citation preview
Technical Report Preliminary Assessment Cerro del Gallo Project
Guanajuato, Mexico
16th April 2010
Prepared for San Antón Resource Corporation
Toronto, Canada
Prepared by
Tim Carew, P.Geo.
Reserva International Reno, Nevada
Bill Fleshman
Project Manager Kings Minerals NL (Geologist, FAusIMMCP)
John Skeet COO Kings Minerals NL (Metallurgist, MAusIMM)
Contributors: Rafael Puente - San Anton Resources Senior Geologist (MS Geology) Carlos Ortiz - San Anton Resources (Environmental Engineer) Jon Errey - Sedgman Metals Engineering Services, Perth, Western Australia Mike James - Gemcom Software International Inc.
1
TABLE OF CONTENTS SECTION 1. SUMMARY (ITEM 3) .................................................................................................................. 7
1.1 Executive Summary ..................................................................................................... 7 1.2 Technical Summary ..................................................................................................... 8
SECTION 2. INTRODUCTION (ITEM 4) ...................................................................................................... 14 2.1 Terms of Reference .................................................................................................... 14 2.2 Sources of Information ............................................................................................... 15
SECTION 3. RELIANCE ON OTHER EXPERTS (ITEM 5) ........................................................................ 15 SECTION 4. PROPERTY DESCRIPTION AND LOCATION (ITEM 6) ..................................................... 16
4.1 Concessions .............................................................................................................. 16 4.2 Net Smelter Return Royalties ...................................................................................... 19 4.3 Land Ownership (Surface Rights) ................................................................................ 19 4.4 Environmental Matters and Permits ............................................................................. 20
SECTION 5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, PHYSIOGRAPHY AND FLORA AND FAUNA (ITEM 7) .................................................... 20
5.1 Accessibility .............................................................................................................. 20 5.2 Local Resources and Infrastructure .............................................................................. 21 5.3 Climate ..................................................................................................................... 22 5.4 Physiography ............................................................................................................. 22 5.5 Flora and Fauna ......................................................................................................... 22
SECTION 6. HISTORY (ITEM 8) ................................................................................................................... 23 SECTION 7. GEOLOGICAL SETTING (ITEM 9) ......................................................................................... 23
7.1 Tectonic Setting ......................................................................................................... 23 7.2 Regional Geology ...................................................................................................... 25 7.3 Local Geology ........................................................................................................... 26
SECTION 8. DEPOSIT TYPES (ITEM 10) ..................................................................................................... 31 SECTION 9. MINERALIZATION (ITEM 11) ................................................................................................ 32 SECTION 10. EXPLORATION (ITEM 12) ...................................................................................................... 33 SECTION 11. DRILLING (13) 34
11.1 San Antón de las Minas S.A. de C.V. (SAM) ................................................................ 34 11.2 Drill Hole Direction and Pattern .................................................................................. 35 11.3 Reverse Circulation (RC) Drilling ............................................................................... 38 11.4 Diamond Core Drilling ............................................................................................... 38 11.5 Surveying .................................................................................................................. 39 11.6 Geological Logging .................................................................................................... 39 11.7 Electronic Data Capture .............................................................................................. 41
SECTION 12. SAMPLING METHOD AND APPROACH (ITEM14) ............................................................ 42 12.1 RC Chip Sampling ..................................................................................................... 42 12.2 Diamond Core Sampling............................................................................................. 43
2
SECTION 13. SAMPLE PREPARATION, ANALYSES AND SECURITY (ITEM 15) ............................... 43 13.1 Assaying Methods ...................................................................................................... 43 13.2 Duplicate Samples ..................................................................................................... 45 13.3 Standard Reference Samples ....................................................................................... 51 13.4 Blanks ...................................................................................................................... 59 13.5 Sample Security ......................................................................................................... 59
SECTION 14. DATA VERIFICATION (ITEM 16) .......................................................................................... 60 SECTION 15. ADJACENT PROPERTIES (ITEM 17) ..................................................................................... 61 SECTION 16. METALLURGICAL TESTING (ITEM 18) .............................................................................. 61
16.1 Heap Leach Test Work ............................................................................................... 61 16.2 Comminution Test Work ............................................................................................ 66 16.3 Agitated Leach Test Work .......................................................................................... 67 16.4 Flotation Test Work ................................................................................................... 67 16.5 Future Test Work ....................................................................................................... 68
SECTION 17. MINERAL RESOURCE ESTIMATES (ITEM 19) .................................................................. 69 17.1 Geological Modelling ................................................................................................. 69 17.2 Resource Estimation Database ..................................................................................... 73 17.3 Compositing and Flagging .......................................................................................... 73 17.4 Statistical Analysis ..................................................................................................... 73 17.5 Bulk Density ............................................................................................................. 74 17.6 Block Model .............................................................................................................. 75 17.7 Model Grade Estimation ............................................................................................. 76 17.8 Model Validation ....................................................................................................... 77 17.9 Resource Classification .............................................................................................. 79 17.10 Resource Estimate ...................................................................................................... 79 17.11 Resource Estimate Risks ............................................................................................. 80 17.12 Pit Optimization ......................................................................................................... 80
SECTION 18. OTHER RELEVANT DATA AND INFORMATION (ITEM 20) ........................................... 87 SECTION 19. ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT
PROPERTIES (ITEM 25) ........................................................................................................... 87 19.1 Scoping Study (Preliminary Assessment) ..................................................................... 87 19.2 Mining ...................................................................................................................... 87
19.2.1 Mine Production Schedule .............................................................................. 88 19.3 Process Facilities ....................................................................................................... 92
19.3.1 Crushing / Stacking Facility ............................................................................ 92 19.3.2 Heap Leach Pad ............................................................................................. 93 19.3.3 ADR Facility ................................................................................................. 93 19.3.4 Metal Recovery Facility .................................................................................. 93 19.3.5 Reagent Facility ............................................................................................. 93
19.4 Infrastructure ............................................................................................................. 93 19.4.1 Power Distribution ......................................................................................... 94
3
19.4.2 Water Supply ................................................................................................. 94 19.4.3 Service Facilities ............................................................................................ 94 19.4.4 Information and Communication Systems ........................................................ 94 19.4.5 Roads and Run-off Control ............................................................................. 94 19.4.6 Non-mining Mobile Equipment ....................................................................... 94
19.5 Site Layout ................................................................................................................ 95 19.6 Environmental and Social Considerations ..................................................................... 95
19.6.1 Environmental ............................................................................................... 95 19.6.2 Community Principles .................................................................................... 96 19.6.3 Closure and Rehabilitation .............................................................................. 96
19.7 Project Implementation ............................................................................................... 96 19.7.1 Implementation Assumptions .......................................................................... 97 19.7.2 Project Health, Safety and Environment ........................................................... 97 19.7.3 Implementation Schedule ................................................................................ 97
19.8 Markets ..................................................................................................................... 97 19.9 Royalties ................................................................................................................... 98 19.10 Taxes ........................................................................................................................ 98 19.11 Capital Cost ............................................................................................................... 98
19.11.1 Heap Leach Direct Costs ................................................................................. 99 19.11.2 Heap Leach Indirect Costs ............................................................................ 100 19.11.3 Heap Leach Owners Cost .............................................................................. 101 19.11.4 Heap Leach Contingency .............................................................................. 102 19.11.5 Carbon-in-Leach and Crusher Expansion Capital Estimate ............................... 102 19.11.6 Sustaining Capital ........................................................................................ 103
19.12 Operating Cost ......................................................................................................... 104 19.12.1 Operations Labour ........................................................................................ 105 19.12.2 Basis of Estimate .......................................................................................... 105 19.12.3 Contingency ................................................................................................ 106 19.12.4 Sedgman Metals Engineering Services Review ............................................... 106
19.13 Economic Analysis .................................................................................................. 107 19.13.1 Metal Prices ................................................................................................. 107 19.13.2 Finance ....................................................................................................... 108 19.13.3 Economic Analysis ....................................................................................... 108 19.13.4 Sensitivity Analysis ...................................................................................... 108
SECTION 20. INTERPRETATION AND CONCLUSIONS (ITEM 21) ....................................................... 112 SECTION 21. RECOMMENDATIONS (ITEM 22) ....................................................................................... 114 SECTION 22. REFERENCES (ITEM 23) ....................................................................................................... 117 DATE AND QUALIFIED PERSON CERTIFICATES ..................................................................................... 121
4
LIST OF TABLES
Table 1-1 Cerro del Gallo Mineral Resource 7 Table 1-2 Gold Domain at 0.2/gt Au Cut-Off 7 Table 1-3 Material potentially suitable for heap leaching within the re-modelled Gold Domain. 8 Table 1-4 Optimized Pit Shell Resources (US$900/oz Au & US$15/oz Ag) 8 Table 1-5 LoM Yearly Mine Production Summary Mine Production Schedule 11 Table 1-6 Capital Cost Estimate +/-30% 12 Table 1-7 Operating Cost Estimate 13 Table 1-8 Metal Prices 13 Table 1-9 Financial Evaluation Values (Before Tax) 14 Table 4-1 Concession status 18 Table 11-1 SAM Drilling Summary 35 Table 13-1 Certified Values of Standard Samples 52 Table 16-1 lists the samples used in the tests. 61 Table 17-1 Summary of the Drill Hole Database. 73 Table 17-2 Block Model Construction 75 Table 17-3 Cerro del Gallo Mineral Resource 79 Table 17-4 Economic Parameters – Whittle Optimization (Heap 4-5.5 Mtpa) 81 Table 17-5 Economic Parameters – Whittle Optimization (CIP 2.8 Mtpa) 81 Table 17-6 Whittle Rock Codes Incorporating Oxidation. 82 Table 17-7 Whittle® Pit Optimization Results by Gold Price 83 Table 17-8 Process vs. Cut-Off 85 Table 17-9 Optimized Pit Shell Resources (US$900/oz Au & US$15/oz Ag 87 Table 17-10 Material Breakdown by Category 87 Table 19-1 Conceptual Annual Mine Schedule 91 Table 19-2 Metallurgical Design Criteria 92 Table 19-3 Capital Cost Estimate +/-30% 99 Table 19-4 Direct Capital Cost Breakdown 100 Table 19-5 Indirect Cost Breakdown 101 Table 19-6 Owners Cost Breakdown 101 Table 19-7 Capital Cost Estimate for the CIL Expansion 103 Table 19-8 Sustaining Capital Breakdown 103 Table 19-9 Operating Cost Estimate by Area Life-of-Mine 104 Table 19-10 Operating Cost Estimate by Area and Expense Type 104 Table 19-11 Employee Remuneration 105 Table 19-12 60:40 Metal Price 108 Table 19-13 36 Month Average Metal Prices 108 Table 19-14 Sensitivity Factor Applied 109 Table 19-15 Profit and Loss Statement 111 Table 21-1 Feasibility Program Costs 116
5
LIST OF FIGURES
Figure 4-1 Location Map 17 Figure 4-2 Concession Map 19 Figure 5-1 Infrastructure Map 21 Figure 7-1 Tectonic Setting 24 Figure 7-2 Regional Geology 25 Figure 7-3 Local Geology 27 Figure 11-1 San Antón Regional Drill Hole Location. 36 Figure 11-2 Cerro del Gallo Drill Hole Location 37 Figure 13-1 Field Re-splits – Gold 46 Figure 13-2 Field Re-splits – Silver 47 Figure 13-3 Field Re-splits – Copper 48 Figure 13-4 Lab Re-splits – Gold 49 Figure 13-5 Lab Re-splits – Silver 49 Figure 13-6 Lab Re-splits – Copper 50 Figure 13-7 CRM Standard Graphs 59 Figure 16-1 30 Day Leach Recovery Gold 64 Figure 16-2 30 Day Leach Recovery Silver 65 Figure 16-3 Column Test Gold Recovery vs Time 66 Figure 16-4 Column Test Silver Recovery vs Time 66 Figure 17-1 Cerro del Gallo Geological Model Extents 70 Figure 17-2 Cerro del Gallo Section 71 Figure 17-3 Cerro del Gallo Section 1027CD Oxidation and Fault Wire-Frames. 72 Figure 17-4 Bulk Density vs. Down Hole Depth 75 Figure 17-5 Screen Capture Oblique E-W Section Gold Block Model View to NW. 76 Figure 17-6 Au Block Model Plans for 2,140 mRL 77 Figure 17-7 Au Block Model along Section 1027CD with view to NW. 77 Figure 17-8 Block Model Validation XY Plot 78 Figure 17-9 Block Model Validation QQ Plot 78 Figure 17-10 Block Validation Swath Plots 78 Figure 17-11 Selected Whittle Pits – Cross-Section 1027CD (Looking North-West) 85 Figure 17-12 Selected Whittle Pits – Planview 2180L Elevation 86 Figure 19-1 -Life of Mine Material Balance 89 Figure 19-2 Heap Leach and CIL Material Balance 90 Figure 19-3 Conceptual Site Layout 95 Figure 19-4 IRR Sensitivity 109 Figure 19-5 NPV Sensitivity 110
6
SECTION 1. SUMMARY (ITEM 3)
1.1 Executive Summary
San Anton Resources Corporation (SARC) contracted Tim Carew, P.Geo of Reserva International (Reserva) and Jon Errey of Sedgman Metals Engineering Services to assist in the compilation and review of sections of this Technical Report on the Cerro del Galleo Project located within the SARC’s San Anton Property, Mexico. The authors have also relied on input from co-authors and the SARC’s staff consisting of qualified professionals (QP’s) under the NI-43-101 guidelines. The purpose of this report is to:
• support a revised estimate of the Mineral Resources consisting of the potential economic material that could be treated with conventional cyanide leaching (heap leach, cyanide-in-leach),
• update metallurgical test work completed that focused on the cyanide extractable gold and silver mineralization within the Cerro del Gallo gold domain,
• detail the work completed towards open pit optimization together with a yearly forecast of annual production, and
• lastly to review the results of the preliminary assessment.
The next stage of the project will be a feasibility study to be completed in the last quarter of 2010. Resource Statement
In “Technical Report on the Cerro del Gallo deposit within the San Antón Property Mexico” (2008) Golder Associates reported the resource using a 0.2 g/t Au cut-off grade in the gold domain and a 0.07 % Cu cut-off grade in the intrusive and copper domains Table 1-1.
Table 1-1 Cerro del Gallo Mineral Resource
Class Mt Au g/t Ag g/t Cu % Measured 225 0.35 13 0.11 Indicated 236 0.19 10 0.11
Measured + Indicated 461 0.27 11 0.11 Inferred 166 0.11 7 0.10
The Technical Report (2008) also reported resources by domain, copper, intrusive and the gold domain. The reported resource within the gold domain is shown in Table 1-2.
Table 1-2 Gold Domain at 0.2/gt Au Cut-Off
Class Mt Au g/t Ag g/t Cu % Measured 129 0.54 12 0.09 Indicated 80 0.38 8 0.08
Measured + Indicated 209 0.48 11 0.08 Inferred 20 0.30 7 0.09
7
At the completion of drilling in 2008, a re-logging and reinterpretation program concentrated on capitalizing on the significantly more weathered and oxidized material within the higher grade gold zone. The estimated potentially suitable material for heap leaching is reported in Table 1-3.
Table 1-3 Material potentially suitable for heap leaching within the re-modelled Gold Domain.
Class Mt Au g/t Ag g/t
Measured 88.5 0.63 8 Indicated 40.2 0.47 12
Measured + Indicated 128.8 0.59 12 Inferred 3.2 0.46 10
Tim Carew, P.Geo. of Reserva International reviewed the block model and parameters utilized to calculate this latest resource estimate and found the methods and results conforms to the definitions as stated by NI43-101 and defined by the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines adopted by the CIM Council on December 11, 2005.
Following the completion of additional metallurgical test work it was determined that the potentially economic material could be treated with conventional cyanide extraction. Pit optimization testing was conducted by Reserva using Gemcom Whittle optimization software and using a gold price of $900/ounce and silver price of $15/ounce Table 1-4.
Table 1-4 Optimized Pit Shell Resources (US$900/oz Au & US$15/oz Ag)
Resource Category
Tonnes (Millions)
Au (g/t)
Ag (g/t)
Au (Moz)
Ag (Moz)
Measured 60.2 0.68 14.0 1.31 27.0 Indicated 9.7 0.56 11.2 0.16 3.5
Total 69.9 0.66 13.6 1.49 30.5 The project is now preparing to complete additional work as part of a feasibility study to be completed in the last quarter of 2010. 1.2 Technical Summary
Location
The San Antón Property is located in the state of Guanajuato in central Mexico, approximately 270 km northwest of Mexico City. The San Antón Property fully incorporates the San Antón de las Minas mining district, centred 23 km east northeast of Guanajuato city and the historic Guanajuato Mining District where production from 1700 to 2004 is reported to be 1.14 billion ounces of silver and 6.5 million ounces of gold. Although the Guanajuato Mining District has a long history of silver and gold mining and production extending back to 1558, production records at San Antón only date back to the 1860’s although mining is reported from Spanish colonial times. San Antón lies within the central-southern segment of the world-class Mexican Gold-Silver Belt.
8
The San Antón Property covers an area of 25,269 hectares (approximately 15 km north-south by 16 km east-west) and consists of a total of twelve granted, contiguous mining concessions all owned by San Antón de las Minas S.A. de C.V. (SAM). The concessions entirely cover the San Antón de las Minas mining district, including the old mines formerly worked for high grade vein-hosted gold-silver mineralization.
The San Antón Property is wholly owned by SAM, a resident Mexican company owned 64.3% by San Antón Resource Corporation Inc. (SARC) and 35.7% by Desarrollos Mineros San Luis S.A. de C.V. (DMSL). DMSL’s ultimate holding company is Goldcorp Inc. (Goldcorp) a Canadian company.
Geology
The San Antón Property is located within the Mesozoic Sierra Madre Oriental terrane and 80 km north of the west northwest trending Trans-Mexico Neovolcanic Belt. The Sierra Madre Oriental terrane is a thin skinned fold-thrust belt of Laramide age (Late Cretaceous-Early Tertiary). High level felsic intrusions emplaced into the western two thirds of the terrane provided the mechanism for hydrothermal activity and mineral deposition.
The San Antón Property is known to host a variety of styles of mineral deposits, including porphyry copper-gold deposits, intrusion-related gold deposits, epithermal silver-gold deposits, and gold-copper skarn deposits. All of these styles of mineralization are known to occur within the property concessions held by SAM. Historic mining within the San Antón de las Minas area was concentrated on epithermal veins, however, the main area of present interest is the large low grade bulk mineable copper-gold-silver deposit at Cerro del Gallo where a significant mineral resource has been identified.
Data
In 2004, SAM commenced evaluation of the Cerro del Gallo deposit. Samples are sent to SGS Canada Inc. Minerals Services (SGS) in Toronto, Canada for the routine analysis. SGS has a sample preparation facility at Durango, Mexico. SAM routinely inserts Quality Assurance and Quality Control (QAQC) controls into the sample stream, that includes the insertion of 1 Certified Reference Material (CRM) for every 40 samples, 1 blank for every 100 samples, and 1 coarse reject (field duplicate) for every 50 samples. The QAQC sample results confirm the data to be of suitable quality for resource estimation purposes.
There are a total of 433 drill holes completed to date on the Cerro del Gallao project, totalling 114,221m, comprised of a combination of Reverse Circulation (RC) and Diamond Core (DDH) drill holes. Within this database 354 were drilled to test the gold-silver-copper mineralization at Cerro del Gallo. No historical drilling has been included in the resource estimation, with all of the data being generated by SAM since 2004.
An updated resource estimate within the larger copper resource previously reported in Technical Report 2008 was completed that concentrated on the gold domain. The gold and silver Cerro del Gallo mineralization was re-modelled following a careful re-logging program. The principle gold domain was modelled based on gold grades greater than a nominal 0.3 g/t Au using lithological boundaries, alteration, and structural models. The low-grade gold domain predominantly occurs within the hydrothermally altered felsic tuff sequence adjacent to the major intrusives, but also in part transects the major intrusive. The copper domain that was reported in the Technical Report 2008 forms an outer copper-silver-rich zone also within the altered felsic tuff sequence and was based on gold equivalent grades nominally greater than 0.3 g/tAuEq. The mineralization appears to be constrained within the altered tuff sequence, with some apparent structural controls on the limits of the alteration. All major constraining faults were modelled, being the western N-S orientated sub-vertical dipping faults, the northern E-W trending sub-vertical La Paz Faults, and the southern E-W trending, shallowly south dipping Southern Thrust Fault. A shale sequence was also modelled as a constraining contact along the eastern side of the deposit. The outer limit of the alteration domain appears to have been defined by these major constraining faults and or
9
drilling, except in the south-eastern and north-western areas. An oxidation model was also created to assist in the interpretation of potentially cyanide leachable material.
Interpretation of the low-grade gold domains was undertaken on 50 m spaced drill sections orientated along a bearing of 030º and 210º. Wire-frames or solids were constructed using GEMS (Gemcom 3d Software). A predominantly sub-vertical contact between the major intrusive domain and the alteration domain has been modelled, whilst the gold and copper domains appear to be concentrically zoned around the main intrusive domain. The geological boundaries have been interpreted, or where appropriate projected, from drilling to below the extent of the block model (1,600 m RL). End points of the domains were projected 25 m from the last section.
Gold Domain Resource Estimation Process
Drill hole data used for the resource estimation was first composited to 3 m, and subsequent capping of the high-grade tails. The composites were then tagged with a numeric code corresponding to the model domain. Gold, and silver grades for 10 x10x 10 m blocks were estimated by Inverse Distance Squared or IDP2. Hard boundaries were used between all domains.
Validation of the resource model included: (i) visual comparison of composite grades against the interpolated model grades, and (ii) block validation (swath) plots by easting, northing and RL to assess the conformance of the block average grade against the drill hole data. Visual inspection of sections and plans showing drill hole composite and block gold values showed good agreement.
The mineral resources have been estimated and classified based on the assumption of a large-scale bulk mining and with heap leach and carbon-in-leach recovery. Therefore based on the proposed operational scenario and taking into account the type of deposit, style of mineralization, favourable geometry, location of infrastructure, prevailing metal prices, and similar mining projects in Mexico and Australia, such as Peñasquito and Cadia respectively, the Mineral Resource is reported with a 0.2 g/t Au cut-off grade in the gold domain.
The mineral resource at Cerro del Gallo was classified into Inferred, Indicated, and Measured Mineral Resource categories according to the CIM guidelines referred to in NI43-101.
For this resource estimate a dry bulk density of 2.65t/m3 was applied to all domains below the weathered surface. Above the modelled weathered surface a dry bulk density of 2.5t/m3, was applied to the domains. The density model is based on the analysis of 895 HQ core samples.
Mine
Conventional open pit mining methods would be used to access the material. For the purpose of this study, it was assumed that a mining contractor would conduct the operations providing operators, supervision, maintenance, consumables, mining plant and equipment. The Company would provide management, mining technical services and all non-mining functions. The preliminary mine production schedule is shown in Table 1-5.
10
Table 1-5 LoM Yearly Mine Production Summary Mine Production Schedule
Year Material Processed
Tonnes
Strip Ratio
Feed Grade Metal Recovered Au g/t
Ag g/t
Au oz
Ag oz
Au Eq1 oz
1 4,000,000 0.04 0.72 18.3 57,276 863,519 71,6682 4.000,000 0.46 0.71 19.0 64,033 1,324,127 86,1023 5,426,540 0.88 0.60 13.9 68,910 1,306,472 90,6844 5,500,000 0.45 0.72 14.7 88,230 1,168,851 107,7115 5,468,620 1.26 0.85 16.0 99,436 973,658 115,6636 5,500,000 1.62 0.55 15.9 69,564 855,059 83,8157 5,515,068 1.29 0.61 15.7 75,245 905,595 90,3388 5,500,000 0.47 0.70 12.0 83,907 731,351 96,0969 5,500,000 0.98 0.72 12.7 83,080 707,113 94,865
10 5,500,000 0.84 0.57 10.0 70,215 545,257 79,30211 5,515,068 0.54 0.59 11.5 69,819 633,965 80,38512 5,500,000 0.24 0.70 10.2 80,968 576,380 90,57513 3,973,151 0.55 0.61 11.2 58,686 407,017 65,47014 2,970,440 0.14 0.60 8.6 37,359 252,987 41,57515 0 0 2,739 25,849 3,170
Totals 69,861,558 0.74 0.66 13.6 1,009,466 11,277,199 1,197,419 Gold equivalence (“AuEq”) has been calculated based on a US$900/oz gold price and US$15/oz silver price. The gold equivalent of the metal recovered was calculated using the following formula: AuEq = Au + (Ag / 60). Process Facility
The processing method for weathered and oxidized mineral resource at Cerro del Gallo is based on a conventional cyanide heap leach facility designed to treat 4 – 5.5 million tonne per annum of stacked material (decreasing to 2.7 Mtpa by year 4). The heap leach operation consists of a staged crushing plant, an overland conveyor to the heap leach pad, agglomeration drum, mobile conveyors and a stacker for placement of the material. A carbon adsorption/desorption/regeneration facility is sized to recover the gold and silver from the leach solution. A carbon-in-leach (CIL) circuit is included in year 4 to process the fresh or non oxidized material at a rate of 2.8 Mtpa. The final product is a gold-silver doré bar to be shipped to a commercial refinery.
Environment and Community Relations
The Project will develop an Environmental and Social Impact Assessment document in compliance with Mexican requirements. The required studies and documentation will be submitted to SEMARNAT for approval. The Project will conduct its own documented community consultation process in advance of submitting the EIA documentation to the Mexican government. This will allow the company to meet its obligation for prior consultation and for the communities’ concerns to be adequately incorporated into the Project.
Project Implementation
The project is based on a combination of turn-key equipment suppliers and specialized contractors to execute the planned work. Contractors to supply the labour and equipment to construct their scope of supply plus mobilize/demobilize the construction equipment required to execute their work.
11
All the facilities to be erected on site and the project engineered, procured and managed by contractor(s) reporting to the Owner's Project Director. The contractor(s) acting as the Owner's agent in hiring specialized contractors, procuring materials and equipment for the project and managing the overall site.
Capital Cost Estimate
The capital cost estimate for the detailed engineering and construction of an open pit mine, processing facility and infrastructure, initially processing 4Mtpa of material by heap leaching, is $82 million. The estimate is summarized in Table 1-6. The additional capital required for the addition of the 2.8 Mtpa CIL plant and extra crushing capacity is US$68 million. Sustaining capital for expansion of the heap leach pad, process equipment replacement and closure was estimated at US$30.7 million.
Table 1-6 Capital Cost Estimate +/-30%
Cost
(000’s US$)
Direct Cost
Mining 1,850 Process 41,150 Infrastructure 9,360 Subtotal 52,360
Indirect Costs
EPCM 6,310 Construction 8,660 Subtotal 10,850
Direct + Indirect Costs 63,210
Owners Costs 8,660
Contingency 10,260
Project Cost 4mtpa Heap Leach 82,130
For Additional 2.8mtpa CIL Facility + Crusher Expansion (including 19% contingency)
68,262
Life of mine sustaining capital 30,673
12
Operating Cost Estimate
The average direct cash operating cost to mine, process the 69.9Mt of material via heap leach and CIL over the 14 year mine life, transport and refining of doré is estimated at $8.51 per tonne processed. A breakdown of the estimate by area is in Table 1-7.
Table 1-7 Operating Cost Estimate
Area Unit Cost
(USD/t Processed)
Distribution %
Mine 3.35 39.4 Process (HL&CIL) 4.50 52.9 Admin 0.59 6.9
Refining/Transport 0.06 0.8 Total 8.51 100.0
The life of mine average net direct cash operating cost of gold with by-product credits for silver is $422 per ounce of gold for the base case metal price scenario.
Economic Analysis
The project has been valued using a discounted cash flow model. All the evaluations are reported in pre-tax dollars with all costs and revenues expressed in fourth quarter 2009 US dollars. Project capital cost estimates for pre-production, working and sustaining capital costs have been included in the cash flow projection. A 12 month engineering and construction schedule has been assumed. An allowance from the salvage and resale of equipment at the end of mine life was not included. It was assumed that the project will be fully equity financed. No escalation or foreign exchange variance has been applied to the financial analysis.
The economic benefits of the project were evaluated using US$900/oz gold price and US$15/oz silver price. For comparison, Table 1-8 gives average metal prices determined by accepted industry methods, those being 60:40 (60% 36 month average plus 40% two year futures price) and a straight past 36 month average. The metal prices determined by these methodologies are given below as at the end of March 2010.
Table 1-8 Metal Prices
Metal
60:40 Value (USD)
36 Month Value (USD)
Gold $992 per troy ounce $886 per troy ounce
Silver $15.83 per troy ounce $14.65 per troy ounce
The base case metal price evaluation (US$900/oz gold, US$15/oz silver) generates a pre-tax operating cash flow of US$259 million, with a payback period of 2.13 years for the initial heap leach development, a 37.1% IRR, and a net present value of US$118 million at a project discount rate of 8%, over the 14 year mine life. Project direct cash operating cost after by-product credits average is US$422/oz Au.
13
The financial evaluation results in before tax dollars on a discounted cash flow basis are presented in Table 1-9.
Table 1-9 Financial Evaluation Values (Before Tax)
Before Tax Econmics 60:40 Value (USD)
Base Case (USD)
36 Month Value (USD)
NPV @0% $356m $259m $241m
NPV @8% $224m $118m $108m
IRR 48.6 37.1 34.9
The economic sensitivity analysis illustrated that the project is most sensitive to changes in revenue due to variation in gold price, gold recovery and operating cost.
Conclusions and Recommendations
The results of the open pit optimization followed by the Preliminary Assessment indicate that the project should proceed to a Feasibility Study. The feasibility study is scheduled to commence by mid 2010.
SECTION 2. INTRODUCTION (ITEM 4)
2.1 Terms of Reference
This Technical Report has been prepared for San Antón Resource Corporation (SARC). SARC has requested that the independent qualified persons review and update the previous Technical Report (31st July 2008) to reflect current conditions at, and the proposed development of, its Cerro del Gallo Project in Guanajuato, Mexico. This report has been prepared in accordance with the formatting requirements of National Instrument 43-101 (‘NI 43-101’) and Form 43-101F1 (Standards of Disclosure for Mineral Properties).
The purpose of the Technical Report is to summarise the results of a preliminary assessment for the design, procurement, construction, and commissioning of a gold-silver heap leach operation at the Cerro del Gallo Project (Project). The study includes a preliminary mine schedule, operating and capital cost estimates, and financial analysis. All costs are reported in US dollars. This report has been prepared based upon information sources listed in the reference section.
14
2.2 Sources of Information
The independent qualified persons according to NI 43-101 for this report are Mr. Tim Carew, P.Geo of Reserva International LLC. (Reserva) and Mr. Jon Errey of Sedgman Metals – Intermet Engineering. Mr. Carew completed a current inspection of the property on 15th of December 2009. At that time he reviewed the surface areas of the Cerro del Gallo project, drilling results, sampling and shipping procedures, geological and geotechnical logging techniques, surveying records and documentation procedures with the field geological personnel. Mr. Carew is responsible for the overall review of Section 17 of the report, and specifically for the preparation of Section 17.8 (Block Model Validation) and Section 17.12 (Pit Optimization), using cost and recovery data supplied by SARC
Non independent Qualified Persons (QP) from SARC personnel have contributed or authored sections of the report. These personnel have extensive experience in the fields of geology, exploration, mineral resource and mineral reserve estimation and classification, mining, geotechnical, environmental, permitting, mineral processing, process design, capital and operating cost estimation, and metallurgical testing disciplines and are in good standing of appropriate professional institutions. Bill Fleshman (Project Manager San Anton) was responsible for managing the re-logging and modeling program and resource estimation of the gold domain. John Skeet (COO Kings) has compiled those sections dealing with the economic evaluation including operating and cash costs. Sedgman Metals Engineering Services (Sedgman) in Perth, independently reviewed the capital cost estimate for the crusher and heap leach development, the operating costs and the heap leach metallurgical parameters used for the scoping study. SECTION 3. RELIANCE ON OTHER EXPERTS (ITEM 5)
The authors have relied on the following qualified persons to provide information during the preparation of this report: Messrs John Skeet (Project Director, SARC), Bill Fleshman (Project Manager, SARC) to provided corporate information, drilling and assay data from the exploration work, resource and geological models, metallurgical testing results and commercial data. The information supplied by SARC also includes data and documents referred to in ITEM 23 References. The authors determined if the data from the previous reports was suitable for inclusion in this Technical Report. The authors consider the information to be of a good quality and have no reason to believe that any of the information is inaccurate.
A summary of the concession details has been included in compliance with NI 43-101. Some of the original concession documents have been viewed by SARC personnel in the Luismin office at Durango and details recorded. These details are consistent with information provided by Luismin on 8 May 2006 regarding the current status of the concessions as reported to Luismin by the Mexican Mines Department. An independent search for verification by the authors has not been undertaken for the report.
15
SECTION 4. PROPERTY DESCRIPTION AND LOCATION (ITEM 6)
The San Antón Property is wholly owned by SAM, a resident Mexican company owned 64.3% by San Antón Resource Corporation Inc. (SARC) and 35.7% by Desarrollos Mineros San Luis S.A. de C.V. (DMSL). DMSL’s ultimate holding company is Goldcorp Inc. (Goldcorp) a Canadian company.
The San Antón Property is located (Figure 4-1) in the state of Guanajuato in central Mexico, approximately 270 km northwest of Mexico City. Cerro del Gallo (Hill of the Rooster) is located at latitude 21° 04’ 28”N, longitude 101° 01’ 38”W. The San Antón Property lies within the Municipality of Dolores Hidalgo C.N.I. (Cuna de la Independencia Nacional). The San Antón Property fully incorporates the San Antón de las Minas mining district, centred 23 km east northeast of Guanajuato city and the historic Guanajuato Mining District where production from 1700 to 2004 is reported to be 1.14 billion ounces of silver and 6.5 million ounces of gold. Although the Guanajuato Mining District has a long history of silver and gold mining and production extending back to 1558, production records at San Antón only date back to the 1860’s although mining is reported from Spanish colonial times. San Antón lies within the central-southern segment of the world-class Mexican Gold-Silver Belt.
The San Antón Property is located on the Instituto Nacional de Estadística Geografía e Informática (INEGI) Guanajuato 1:50,000 scale topographic map (F14-C43), and Guanajuato 1:250,000 scale geological sheet F14-7. The coordinate system used for all maps and sections in this report is Universal Transverse Mercator (UTM) NAD27 (Mexico) Zone 14.
4.1 Concessions
The San Antón Property covers an area of 25,269.73 hectares (approximately 15km north-south by 16km east-west) and consists of a total of twelve granted, contiguous mining concessions all owned by San Antón de las Minas S.A. de C.V. (SAM) (Table 4-1). The concessions entirely cover the San Antón de las Minas mining district, including the old mines formerly worked for high grade vein-hosted gold-silver mineralization.
Luismin held title on five mining concessions (La Libertad, Nuevo San Antón, El Cipres, Ave de Gracia and Dolores) prior to the joint venture agreement with KMN. Luismin purchased mining concession (San Antón) from the Santa Fe Mining Cooperative (Sociedad Cooperativa Minero Metalúrgica Santa Fe de Guanajuato), known generally as the ‘Cooperative’ on 29 April 2004. Since the agreement with KMN five mining concessions have been granted (San Antón KM, San Antón KM Dos, and San Antón KM Tres, San Antón KM Cuatro and La Libertad Dos), and one mining concession purchased (San Luis Rey).
16
Figure 4-1 Location Map
17
Table 4-1 summarizes the status of the concessions and a map showing the location of the concessions is shown in Figure 4-2. With expenditure by SAM of over US$10 million over the past 2 years the minimum expenditure requirements will have been met for the concessions.
Table 4-1 Concession status
Name Title Area Concession Grant Expiry Number (ha) Type Date Date
La Libertad T-198427 32 Mining 26.11.1993 25.11.2043
San Antón T-205335 2,200.97 Mining 08.08.1997 07.08.2047
Nuevo San Antón T-208424 4,483.22 Mining 27.10.1998 26.10.2048
El Cipres T-210168 13.75 Mining 10.09.1999 09.09.2049
San Luis Rey T-212914 186 Mining 13.02.2001 12.02.2051
Dolores T-220922 1,665.00 Mining 28.10.2003 13.02.2052
Ave de Gracia T-216707 64.28 Mining 17.05.2002 16.05.2052
San Antón KM T-224100 11,252.92 Mining 05.04.2005 04.04.2055
San Antón KM Dos T-224371 188.80 Mining 29.04.2005 28.04.2055 San Antón KM Tres T-229340 3,461.79 Mining 11.04.2007 10.04.2057 San Antón KM Cuatro T-235511 1,703.00 Mining 11.12.2009 10.11.2059
La Libertad Dos T-235551 18.00 Mining 19.01.2010 18.01.2060 Total 2,5269.73Ha
18
Figure 4-2 Concession Map
4.2 Net Smelter Return Royalties
The San Antón concession T-205335 is subject to a 4% Net Smelter Return (NSR) royalty comprising of 2% NSR royalties to each of Fideicomiso de Fomento Minero and Consejo de Recursos Minerales (now named Servicio Geológico Mexicano (SGM)). .
The La Libertad (T-198427), Nuevo San Antón (T-208424), El Cipres (T-210168), Ave De Gracia (T-216707) and Dolores (T-220922) concessions are subject to a 3% NSR royalty to Corporación Turística Sanluis, S.A. de C.V.
4.3 Land Ownership (Surface Rights)
The San Antón Property covers private land owned by individuals having small land holdings each of a few hectares. There are no ejidos (community owned lands) present in the San Antón de las Minas community. SAM owns freehold title and has surface rights to land totalling 656,267m2 including Cerro del Gallo (620,131m2), a field office in San Antón (6,927m2), and the Dolores Shaft (29,209m2). For the purpose of access and exploration around Cerro del Gallo land access and compensation agreements have been obtained with the relevant landowners. The terms of the contract allow for access and the construction of access tracks and drill pads as required for work programs. Compensation is paid to
19
landowners for surface disturbance to land caused by the construction of access tracks and drill sites. SAM currently is in negotiation for the surface rights to the land required for the project. Relations with the landowners during the exploration process have been positive. 4.4 Environmental Matters and Permits
The consulting group of Huristica Ambiental have been contracted to manage the environmental studies and permitting requirements for the Cerro del Galleo project. Huristica has a proven track record of successful environmental management of mining projects in Mexico.
As part of the development plan for the San Antón Property, a surface water baseline study commenced in October 2005 and updated in August 2006. This study conforms to federal government standard NOM-127-SSAL1-1994; which is the most comprehensive national standard, and has the most stringent limits. Sampling points were selected across an area ranging from upstream of the San Antón Project to downstream at the Peñuelitas dam near the city of Dolores Hidalgo. The primary objective of the study was to record the physio-chemical characteristics of the quality of surface water at the commencement of exploration in the area and prior to potential development of the property.
Subsequent to the first surface water sampling program a surface water monitoring program has been developed to Mexican national standards in order to monitor seasonal water flow and water quality at strategic points throughout the property area. Additional baseline environmental studies included air quality dust monitoring which commenced in February 2008 and with the installation of a weather station (VAISALA WXT510) in January 2008.
SECTION 5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, PHYSIOGRAPHY AND FLORA AND FAUNA (ITEM 7)
5.1 Accessibility
This section is primarily summarized from the 2008 Technical Report. The San Antón Property is located in the central region of Guanajuato state, approximately mid-way between the cities of Guanajuato and Dolores Hidalgo (Figure 5-1). The centre of the property area is 23 km east northeast of Guanajuato, the state capital, and 270 km northwest of Mexico City, the nation’s capital. The property site has year round and unrestricted access provided by a good network of local roads and tracks.
20
Figure 5-1 Infrastructure Map
The principal access route to the area is by sealed Federal Highway 110, then 17km of a well maintained all-weather good quality gravel road. The journey by road takes approximately 20 minutes to complete from Dolores Hidalgo and approximately 1 hour from Guanajuato. There is an international airport at Leon, 30 minutes from Guanajuato along a four lane toll freeway. An inland port facility will integrate the international airport and is currently under construction by the state government. In addition to the international airport at Leon there are five local airports and one interstate airport within a 3 hour drive of the property area. Rail services are available within 20 km of Cerro del Gallo.
5.2 Local Resources and Infrastructure
The San Antón Property is located within a region of well established infrastructure. The property area is well serviced by road, rail, and air services, power and water supplies, and skilled and semi-skilled local labor. Surrounding cities are capable of providing most of the services required for supporting a major mining operation.
Guanajuato municipality has a population of 153,364 inhabitants (official INEGI projection 2008) while Dolores Hidalgo C.N.I. has a population of 134,641 inhabitants (official INEGI projection 2007). The community of San Antón de las Minas covers an area of 2,167 hectares. From INEGI records (2005) the San Antón de las Minas community has a population of 473 inhabitants living in 78 dwellings at an occupancy rate of 6.1 people per house.
21
San Antón de las Minas community facilities consist of a public kinder-garden, a public primary school, a public secondary school, health center, a Catholic church, and four small general stores that satisfy local consumption. The community receives a local TV signal and has a regular daily bus service to the nearby city of Dolores Hidalgo. Mobile telephone services are available at San Antón. A plentiful supply of semi-skilled and unskilled labor is available in the local community.
Electricity is supplied to the San Antón de las Minas community through a 115 kV, three phase power line operated by the Comisión Federal de Electricidad “CFE” (Mexican Federal Power Authority), which passes over the southern flank of the Cerro del Gallo deposit and can be easily upgraded. Power supply is generally reliable and comes from the main Dolores Hidalgo to Guanajuato power line.
There are a number of potential sources of water in the area, including groundwater from aquifers and local streams that drain the property area. Several large dams have been constructed in the surrounding area; including the Peñuelitas Dam that has a capacity of 23.8 Mm3 located 15 km from Cerro del Gallo near the city of Dolores Hidalgo.
5.3 Climate
The municipality of Dolores Hidalgo is classified as semi-arid. The climate is generally dry with sporadic, often violent rainstorms in the hot, summer months. Average annual precipitation is 564 mm mainly from May to September. The winter months are cool and dry. Temperatures range from a maximum of 36.5°C in summer to a minimum of 3.8°C in winter. The average yearly temperature is 17.4°C. The prevailing wind is westerly in winter, from the south and southwest in the spring, while during the summer and fall it is east-by-northeasterly. The dominant wind direction is east-northeast with an average speed of 16 km/hr.
5.4 Physiography
The San Antón Property is situated in the physiographic region known as the Sierra Madre Oriental. Elevations in the area range from 1,800 m to 2,670 m, with the top of Cerro del Gallo having an elevation of 2,310 m. Cerro del Gallo is located along the flank of the San Antonio Mountain Range which trends generally 20° NW. Along the western side of the property spurs from the rugged Guanajuato Mountain Range extend into the property area. This rugged mountain range extends north-westerly to Zacatecas.
Cerro del Gallo is a prominent conical-shaped hill within an undulating landscape. Other significant peaks in the area are Cerro de la Bufa (Hill of the Joke), with an elevation of 2,500 m, Picacho Santa Cruz (Peak Santa Cruz) at 2,670 m, and Picacho Los Cardos (Peak of the Thistles) at an elevation of 2,670 m.
5.5 Flora and Fauna
There are no endangered or threatened vegetation species or animal life as protected by Mexican environmental regulations in the San Antón Property (2001 report by Instituto de Ecologia del Estado de Guanajuato – IEEG, for the State of Guanajuato).
22
SECTION 6. HISTORY (ITEM 8)
This section is primarily summarized from the 2008 Technical Report. The Consejo de Recursos Minerales, the Mexican equivalent of a Department of Mines, commenced an assessment of the San Antón de las Minas area in March 1977 as part of a combined federal and state government program to encourage new investment in the mining industry. This activity followed on from the declaration of the national mining reserve “Villalpando” covering the Carmen-Providencia vein system in the mid-1970’s (Bravo 1979). The mining reserve covers an area of 3,850ha. Work by the Consejo de Recursos Minerales consisted mainly of regional geological mapping and stream sediment geochemistry, prospect evaluation, and airborne magnetics. The Consejo de Recursos Minerales (1992) reported disseminated copper mineralization averaging 0.4% in a quartz monzonite stock at Cerro del Gallo.
The Cooperativa was the first company to explore the area in recent times with work commencing in 1982. The company held an interest in the area until 2004 when it sold the project to Luismin S.A. de C.V. (Luismin), however no work was completed in their last 4 years of ownership. The Cooperativa concentrated their work on the Carmen-Providencia vein system where they rehabilitated the Dolores shaft to the 90m level, re-opened the La Mora adit, and commenced development of the Carmen adit along a section of the Carmen vein near the Dolores shaft. Only 2 truckloads of ore totalling 20.9 tons and estimated to average 82g/t Ag and 2.15g/t Au were mined from the Dolores underground workings (Sociedad Cooperativa Minero Metalúrgica Santa Fé de Guanajuato internal assay certificates). The company also completed a regional geological mapping program covering the Carmen-Providencia vein system and Cerro del Gallo. Trenching was completed along the Carmen-Providencia vein system and at Cerro del Gallo. The Cooperativa drilled 6 diamond core holes for a total of 1,571.10m and excavated 2 shallow trenches at Cerro del Gallo. The first hole, Bno 251, was drilled in late 1983 on the outer western flank of Cerro del Gallo and intersected 24.55m grading 0.22g/t Au and 21g/t Ag from 3.6m. Only select intervals where quartz veins were recognized were assayed for gold and silver, and while chalcopyrite was recorded in the drill logs, copper was not assayed.
Luismin commenced exploration at San Antón in about 1994 on 2 small contiguous claim blocks totalling 110ha surrounded entirely by tenure owned by the Cooperativa. The claims covered half of Cerro del Gallo and the Ave de Gracia epithermal vein system. Most of their work was completed between 1996 and 2000 and all work was focused on Cerro del Gallo. Luismin completed a program of rock chip sampling (616 samples), trenching (10 trenches), 3 lines of dipole-dipole IP surveying (70.6km), and drilling (15 holes for 3,551.3m). Declining metal prices from 2000 and subsequent years resulted in exploration budget constraints and the demise of work at Cerro del Gallo.
The operating company San Antón de las Minas S.A. de C.V. (SAM) was formed with the signing of a joint venture agreement between Kings Minerals and Luismin on 22 July 2004.
SECTION 7. GEOLOGICAL SETTING (ITEM 9)
This section is primarily summarized from the 2008 Technical Report. 7.1 Tectonic Setting
Cerro del Gallo is located in central Mexico, in the Mesa Central physiographic province in the intersection of two geological provinces; the Sierra Madre Oriental (SMOr) and the Trans-Mexican Volcanic Belt (TMVB) (Figure 7-1).
23
The Sierra Madre Oriental geologic province consists of Mesozoic marine strata deformed by the Laramide orogeny (80-55Ma) that rest over Paleozoic and Precambrian basement which was not involved in the deformation; the Cenozoic deformation is minimal. The Sierra Madre Oriental province is elongated in a north-northwest direction over a length of 1500km and varies in width from 200km in the north to 500km in the south (de Cserna 1989).; Mesozoic marine deposition commenced in the Late Triassic and continued to the Late Cretaceous until the onset of the Laramide orogeny. High level granitic, monzonitic and granodioritic stocks were emplaced in the western two-thirds of the Sierra Madre Oriental terrene with few intrusions emplaced along the eastern frontal belt adjacent to the Gulf Coastal Plain (de Cserna 1989).
The Trans Mexican Volcanic Belt is described as a continental margin volcanic arc containing active volcanoes of middle to late Miocene age and younger which extends obliquely across most of Mexico (Demant, A., 1978). The belt is composed of variability of volcanic rocks and ages, since Oligocene to Recent. The belt represents a wide range of volcanic types that include: stratavolcanoes, cineritic and scoria cones, calderas, maars, sheld volcano and pyroclastic dikes.
The Sierra Madre Oriental terrane western limits are transitional to the Sierra Madre Occidental terrane and its eastern boundary extends to the low-lying Gulf Coastal Plain. The area developed as an accretionary wedge to a westward subduction zone. High level granitic, monzonitic and granodioritic stocks were emplaced in the western two-thirds of the Sierra Madre Oriental terrane with few intrusions emplaced along the eastern frontal belt adjacent to the Gulf Coastal Plain (de Cserna 1989). The intrusions produced some important skarn deposits and more importantly provided the mechanism for hydrothermal activity and mineral deposition.
Figure 7-1 Tectonic Setting
24
7.2 Regional Geology
The oldest rocks in the Cerro del Gallo area are a deformed and regionally metamorphosed volcano-sedimentary sequence of Triassic to Cretaceous age (Randall et al 1994; Consejo de Recursos Minerales 1992). Consejo de Recursos Minerales referred to these rocks as the Esperanza Formation. The Esperanza Formation takes its name from the type sequence of sedimentary rocks at Esperanza Dam, 3km from Guanajuato and was described as carbonaceous and calcareous shale interbedded with arenite, limestone and andesite to basaltic flows, all weakly metamorphosed to phyllites, slates and marble. The thickness of this unit exceeds 600m and its age has been assigned to the Cretaceous based on recognition of radiolaria (Dávila-A, 1987). The Esperanza Formation is correlated with Jurassic rocks corresponding to Zacatecas Formation in Peñon Blanco mining district in Zacatecas and Charcas mining district in San Luis Potosí (Consejo de Recursos Minerales, 1992).
Around Cerro del Gallo the Esperanza Formation consists of layered sediments of argillaceous, silty argillaceous and arenaceous composition, and fragmental volcanic rocks of broadly intermediate composition, all the deposits has been affected by lower greenschist facies regional metamorphism. The sedimentary and volcanic rocks around Cerro del Gallo form an inlier referred to in this report as the Esperanza Inlier (informal name) which is surrounded by Tertiary age rhyolitic flows, rhyolitic tuffs, trachyte-andesite and andesites (Figure 7-2).
Phyllite rocks at several localities near San Antón de las Minas are currently mined for clay for use in the local ceramic industry at Dolores Hidalgo. The phyllitic rocks have a characteristic red colour. Vitromex S.A. de C.V. is presently operating a large quarry at their Cerrito Colorado phyllite deposit 2.5km southeast of Cerro del Gallo.
Figure 7-2 Regional Geology
25
A swarm of basaltic dykes intrude rocks of the Esperanza Inlier, predominantly along northwest trending fracture zones. The basaltic dykes contain olivine and xenoliths of altered felsic volcanogenic rock (Mason 2005a). The lack of overprinting metamorphic and hydrothermal alteration minerals confirms these rocks were emplaced post peak regional deformation and felsic magmatism. They are evident in airborne magnetic imagery as high amplitude discontinuous linear and circular magnetic anomalies often emplaced along the same structural zones as the larger epithermal silver-gold vein systems.
In addition to numerous gold, silver and some mercury occurrences in the district there are a surprising number of tin occurrences in the region which are concentrated in a northwest-southeast trending belt that includes Cerro del Gallo. Alluvial tin deposits are reported 20km northwest of Cerro del Gallo, and other tin occurrences are reported 12km south-southwest of Cerro del Gallo, at La Sauceda located 20km southwest of Cerro del Gallo, and nearby at La Tapona, and 30km south-southeast of Cerro del Gallo. Granite is reported in the vicinity of La Sauceda. These tin occurrences and mapped granitic intrusive rocks suggest the possibility of a previously unrecognized magmatic province that may be prospective for further intrusion-related copper-gold deposits.
7.3 Local Geology
Clastic Sedimentary and Volcanoclastic Sedimentary Host Rocks
The Esperanza Formation in the San Antón de las Minas area consists of a conformable sequence of siliciclastic sediments and fragmental volcanogenic rocks (Figure 7-3). Four volcanic events are recognized and hiatuses in volcanic eruptions are marked by periods of limestone and black shale deposition (Groves 2008). These hiatuses are also marked by coarse agglomerate beds indicating a major eruption at the end of a volcanic cycle, or at the commencement of a new volcanic eruptive event (Groves 2008). The stratigraphy strikes broadly east-west and dips northerly at 30-40°, except in the vicinity of Cerro del Gallo where dips steepen to greater than 60° (Groves 2008). The stratigraphic thickness of the Esperanza Formation has not been determined, and is not known. Similarly, the age of the rocks is not known, however similar rocks within the Guanajuato district have an age assigned to the Cretaceous period based on recognition of radiolaria (Davila and Martinez 1987 in Randall et al 1994). Alternatively, the Consejo de Recursos Minerales (1992) infer a Triassic-Jurassic age based on stratigraphic correlation of similar rocks found in the Zacatecas mining district.
Esperanza Formation basement rocks around Cerro del Gallo can be broadly subdivided into three lithostratigraphic packages based on the predominance of a lithologic type within the stratigraphic sequence. To the south of the Cerro del Gallo intrusive complex a siliciclastic sedimentary sequence is recognized and consists dominantly of shale and interbedded arenite with minor lenses of conglomerate (Groves 2008). Shale units display plane parallel bedding lamination and often show evidence of slumping and soft sediment deformation structures such as load casts. This package is conformably overlain by a sequence of fragmental volcanogenic rocks of intermediate bulk composition which are the host rocks for the Cerro del Gallo copper-gold-silver deposit (Mason 2005a, Mason 2006a).
26
27
27
Figure 7-3 Local Geology
The stratigraphy to the north and ea edominantly sedimentary with minor
Gallo is relatively planar with consistent shallow to moderate
Gallo are dominated by siliciclastic sediments while
ut the Esperanza Formation and consist of massive to bedded
in unconformably by a sequence of tuff of rhyolitic composition. A
ntrusive Rocks
alkaline felsic intrusive rocks of granodioritic to rhyolitic composition form an
on the small conical hill at Cerro del Gallo. It forms an upright elongate
st of Cerro del Gallo is prvolcaniclastic horizons (Groves 2008).
Stratigraphy to the west of Cerro del northerly dips while stratigraphy east of Cerro del Gallo is strongly deformed with tight folding and complex stratigraphic facies changes (Groves 2008).
The northern, eastern and southern sides of Cerro del the western side is dominated by volcanogenic tuffs (Groves 2008). There is a pronounced asymmetry of the stratigraphic sequence and structural style longitudinally either side of Cerro del Gallo. The andesitic volcanics at Cerro del Gallo may have formed part of an emergent volcanic edifice related to a stratavolcano developed on a regional northerly trending deep seated suture. This hypothesis would explain the steeper dips observed in tuffs and clastic sediments on the flanks of Cerro del Gallo, and ash-flow textures (Mason 2005b) reported in volcanogenic rocks. The root zone of this stratavolcano would also be the most favourable site for emplacement of felsic intrusions of the Cerro del Gallo intrusive complex with the strongly porphyritic texture in the felsic intrusive suggestive of high level emplacement and formation at relatively shallow depth.
Limestone-dominant units occur througholimestone, limey shale and carbonaceous limestone. The units are generally thin bedded and contain extensive carbonate (calcite) veining. The limestone beds dip northerly at approximately 30° and are conformable within the sequence.
The Mesozoic basement is overlalower Oligocene age is inferred for these rhyolitic tuffs based on similar rocks dated at Cerro de la Bufa near Guanajuato using the K-Ar method with a reported age of 37±3 Ma (Consejo de Recursos Minerales 1992).
Felsic I
Multiple phases of calc intrusive complex emplaced at high crustal level into a relatively flat lying volcanogenic tuff sequence. This suite of felsic intrusives indicates progressive fractionation of a magma chamber at depth. A sub-volcanic environment is postulated. An Oligocene age for intrusion emplacement is inferred based on the spatial and temporal association of similar intrusive felsic rocks with epithermal silver-gold mineralization at Guanajuato.
The main intrusive is centred stock of granodioritic to monzogranitic composition (Mason 2005b, Mason 2006b), which was previously described as a quartz monzonite (Consejo de Recursos Minerales 1992), and a quartz monzonite porphyry (Rowins 2000b). The surface exposure of this intrusive is 600m long and up to 300m wide, elongate along an axis trending 350° TN with local reverse faulting on the north border (Groves 2008) (Figure 7-3). Its geometry is indicative of structural anisotropy during emplacement. A smaller en echelon subsidiary intrusive of dacitic/tonalitic to granodioritic composition (Mason 2005b) southeast of the main intrusion may be connected to the main granodioritic to monzogranitic intrusion at a depth of greater than 500m below surface. At surface the smaller intrusion is 380m long and up to 140m wide, elongate along an axis trending 350° TN (Groves 2008). The temporal relationship of these intrusives to each other is not known. Both intrusions are truncated and displaced at the southern end by a post mineralization sinistral fault trending 290°TN. The main monzogranitic intrusive is coarsely porphyritic with equant quartz phenocrysts ~2-4mm and K-feldspar phenocrysts to ~2mm. The smaller subsidiary granodioritic intrusion consists of very coarsely porphyritic quartz phenocrysts to 10mm and blocky prismatic plagioclase phenocrysts replaced by sericite, and a trace of anatase or sphene (Mason 2005b). Gold-silver-copper-mineralization is spatially associated with the silicification stockwork alteration, and fracturing-faulting episodes.
28
The contact between the main central felsic intrusive and wall rocks is often intensely silicified over a width of up to 25-30m (Groves 2008). Petrographic investigation of wall rocks adjacent to the felsic
complex. They consist mainly of porphyritic dykes containing K-feldspar and quartz
the Cerro del Gallo
minerals, but contain
, Rayas and Sirena mines vary from 28.4±4 to 27.4±0.4 Ma
around the main felsic intrusive and intensity decreases rprinting hydrothermal events result in complex alteration
rothermal alteration
intrusive confirm these rocks contain >30% K-feldspar (Mason 2005a, Mason 2006b). The intensity of silicification in some places along the contact is so intense that the original lithology cannot be identified. A thin siliceous cap up to 2m thick of bladed and lattice textured cherty quartz extends over the top of Cerro del Gallo giving the hill the appearance of a “rooster’s comb”, hence the name Cerro del Gallo or “Hill of the Rooster”. The siliceous cap extends along the axis of elongation of the outcropping felsic intrusion and is up to 130m wide and 400m long, centred on the peak of Cero del Gallo. This siliceous cap is suggestive of the top of the felsic intrusive system, and weathering and erosion have unroofed the carapace.
Post mineralization intrusives of rhyodacitic to rhyolitic composition are common within, and around, the intrusive phenocrysts to 1mm. These rocks appear to contain different phenocryst assemblages and bulk compositions suggesting they may be derived from different parts of a differentiated magma chamber at depth (Mason 2005b). The intrusives display little or no hydrothermal alteration, in contrast to strong potassic alteration shown by the central felsic intrusive, and are interpreted to be late stage, metal-depleted intrusive dykes emplaced during the waning stages of the magmatic event.
It is notable that ilmenite, and/or its alteration product leucoxene which commonly consists mostly of rutile and partly of anatase or sphene, is present in all felsic intrusives formingintrusive complex. Magnetite has not been identified in any felsic intrusive rocks.
Rowins (2000a) classified Cerro del Gallo as a reduced porphyry copper-gold deposit. These reduced porphyry copper-gold deposits lack primary hematite, magnetite and sulphateabundant hypogene pyrrhotite, commonly have carbonic ore fluids, and are associated with ilmenite-bearing, reduced I-type granitoids. These deposits are relatively copper-poor and gold-rich, and commonly cluster in districts or provinces.
The age of the mineralization is not known. At Guanajuato K-Ar determinations on adularia from ore shoots along the Veta Madre in the Torres(Taylor 1971 in Randall et al 1994). In the Peregrina mine adularia gave ages of 30.7±0.3 to 29.2±2 Ma (Gross 1975 in Randall et al 1994). Significantly, a monzonite intrusive in the Rayas mine hosts a deep ore shoot and this intrusive rock appears to be contemporaneous with mineralization (Randall et al 1994). If similar lithologic, spatial and temporal relationships exist at San Antón then the age of the Cerro del Gallo felsic intrusive complex and copper-gold-silver mineralization could be around 30 Ma (middle Oligocene), similar to Guanajuato.
Hydrothermal Alteration and Wall Rocks
Hydrothermal alteration is zoned concentricallyoutwards from the central intrusive. Ovepatterns that are difficult to map as discrete areas. There is a general absence of destructive primary textures except along sections of the contact of the main intrusive with the wallrocks.
Potassic alteration is the dominant style of alteration in the core of the hydrothermal system which centred on the main felsic intrusive. The tuffaceous wallrocks have experienced pervasive hydto form fine grained replacement assemblages of albite, K-feldspar, biotite, sericite, quartz, sphene, rutile and pyrite (Mason 2005b; Mason 2007). Random orientation of hydrothermal biotite confirms it formed in a static stress field, sometime later than the regional metamorphic event (Mason 2005b). Thin fractures were filled mainly by K-feldspar, biotite, pyrrhotite, and chalcopyrite, but locally grade into thicker granular textured veins dominated by quartz with minor biotite, chlorite, calcite, pyrite, pyrrhotite, chalcopyrite, molybdenite and bismuthinite (Mason 2005b).
29
Hydrothermal propylitic alteration overprints potassic alteration within both the felsic intrusives and wallrocks, and extends laterally beyond the zone of potassic alteration surrounding Cerro del Gallo.
son
clastic and clastic host rock sequence, however they are of and do not form useful or persistent stratigraphic marker beds. The skarns represent strong
Propylitic alteration extends over a radius of up to 1km from the peak of Cerro del Gallo (Figure 7-3). It is more extensive on the western side of Cerro del Gallo. Propylitic alteration consists of pervasive replacement assemblages of albite, chlorite, calcite, sulphides (pyrite, chalcopyrite, marcasite, sphalerite, galena, arsenopyrite and stannite), sphene and leucoxene/rutile (Mason 2007). Thin veinlets and fracture fillings associated with this event are filled by assemblages of calcite, chlorite, quartz, sulphides (pyrite, pyrrhotite, marcasite, sphalerite, chalcopyrite, galena), and uncommon tourmaline, fluorite and hematite (Mason 2007). Where present in these fracture fillings quartz is subhedral in texture, in contrast with the granular quartz textures in veinlets associated with the higher temperature potassic event. Comparable H2O-CO2 and H2O-CO2-NaCl fluid inclusions are observed in vein quartz of the propylitic event suggesting a genetic link between the propylitic and potassic fluids. Minor thin fracture seals of the propylitic event are observed cutting some potassic altered and veined rocks confirming that lower temperature propylitic-style alteration occurred subsequent to potassic style alteration (Mason 2007).
Phyllic-style alteration is restricted to localised areas at the north end of Cerro del Gallo. Phyllic alteration consists of sericite/fuchsite, quartz, pyrite, trace chalcopyrite, bornite, anatase and tourmaline (Ma2006b). Bornite is not common at Cerro del Gallo. In one area of phyllic alteration the primary rock is considered to be an auto-brecciated porphyritic granitoid which suffered fracturing and invasion of by abundant hydrothermal fluid (Mason 2006b).
Skarn Rocks
Skarns have been identified within the volcanolimited extent pervasive high temperature metasomatic hydrothermal alteration of precursor fine grained silicate rocks, possibly felsic tuffs, or argillaceous or arenaceous and calcareous sediments, with complete destruction of primary minerals and textures. Cerro del Gallo skarns are fine grained pyroxene-rich rocks, classified as gold-rich distal skarns.
30
SECTION 8. DEPOSIT TYPES (ITEM 10)
The Cerro del Gallo copper-gold-silver deposit can be considered to be a member of a distinct subclass of “reduced” porphyry-style copper-gold mineralization as first proposed by Rowins (2000c). These reduced porphyry copper-gold deposits lack primary hematite, magnetite and sulphate minerals, but contain abundant hypogene pyrrhotite, commonly have carbonic ore fluids, and are associated with ilmenite-bearing, reduced I-type granitoids (Rowins 2000c). Cerro del Gallo displays all these features. In addition, there is a consistent pattern of higher temperature potassic alteration overprinted by lower temperature propylitic-style mineral alteration. Propylitic alteration boundaries are gradational and irregular, and more widespread than potassic alteration. This alteration pattern is consistent with many other porphyry copper-gold deposits throughout the world. Tellurium-bearing minerals are also common in porphyry copper-gold deposits, as they are at Cerro del Gallo.
The Cerro del Gallo copper-gold-silver deposit also has characteristics supporting an intrusion-related gold system (IRGS) model as proposed by (Thompson et al 1999; Rowins 2000c; Champion 2005; Hart 2005). IRGS deposits are typically found in continental tectonic settings inboard of convergent plate boundaries, often where the regional metallogeny is characterized by tungsten-tin magmatic provinces, felsic intrusives have an intermediate oxidation state between ilmenite and magnetite series with a gold-enriched metal assemblage derived from igneous fractionation, and a distinctive metallogenic signature of gold, bismuth, tin and tungsten. Hydrothermal fluids are carbonic, and pyrrhotite is common.
San Anton Project has several epithermal veining systems, one of which, the Ave de Gracias, transects Cerro del Gallo. None of the vein systems have had chemical determination for classification of sulphidation type, although there are several geological characteristics similar to low sulphidation epithermal deposits, all them determined by geological mapping and geological description. Some of these characteristics are: a) sericite or illite ± adularia, clorite alteration minerals; b) filling cavities/porosities vein type, banding and hydrotermal breccias; c) carbonate replacement textures; d) low content of bulk sulphur, low presence base metals (Pb, Zn).
In and around the Cerro del Gallo deposit there is also massive sulphide mineralization however, these occurrences need further investigation. These rocks are composed of more than 60% of sulphides, with variable quantities of pyrite, pyrrhotite, chalcopyrite, sphalerite, arsenopyrite and galena and are normally stratabound unless remobilized. In the earlier logging programs these occurrences of massive sulphides were described as skarns. Similar occurrences are reported in the Mesozoic rocks of the Guanajuato districts (Randall, et al., 1994).
31
SECTION 9. MINERALIZATION (ITEM 11)
This section is primarily summarized from the 2008 Technical Report. Both felsic intrusive and tuff wallrocks are mineralized at Cerro del Gallo. Mineralization is disseminated and vein or fracture controlled and extends from 200m to 400m outward from the felsic intrusive. Fluid over pressuring led to brittle fracturing of these rocks and subsequent development of an extensive network of fine fractures and stockwork vein development. There are at least two periods of fracturing and veining.
The strongest gold mineralization is associated with quartz stockwork veining within the wallrock annulus around the felsic stock, and diminishes outward accompanied by reduced fracture density and quartz veining. Sulphides make up less than 2% by volume of the mineralized rocks. Gold-copper mineralization is zoned concentrically around the felsic intrusive with higher grade gold mineralization within a wallrock annulus proximal to the felsic intrusion, and higher grade copper mineralization outwards of the gold zone. In general there is an antipathetic relationship between gold and copper grade. Zinc mineralization is anomalous outside the copper zone. Metal zonation boundaries are gradational and there is an overlap in the gold-copper zone and the copper-zinc zone, although normally the mineralized zinc zone is stratabound in marine sediments and siliciclastic deposits. Molybdenite is rarely observed, but where present is found in the felsic intrusive and silicified contact with the wallrock tuffs.
Pyrite [FeS2] is the dominant iron sulphide mineral with accessory pyrrhotite [Fe1-xS] and marcasite [FeS2] dispersed throughout the mineralized system. Pyrite occurs in two forms; as euhedral to subhedral cubic crystals and crystal aggregates in veins and disseminations of primary origin, and also as fine-grained porous ragged patches of retrogressive origin after pyrrhotite (Mason 2005a). Pyrrhotite is most common in the outer copper zone. It is magnetic and in sufficient concentration to form a high amplitude magnetic anomaly around the felsic intrusive. This magnetic anomaly is donut-shaped. Pyrrhotite is often selectively replaced by clean pyrite, pseudo-colloform melnikovite pyrite, and marcasite (Mason 2006a). It is likely that pyrrhotite and pyrite formed together at an early stage during the main potassic alteration event, but was quickly over grown by pyrite (Mason 2005a). Most sulphide minerals are fine grained with grains generally being <0.5mm in diameter with the exception of arsenopyrite which is slightly coarser grained. Pyrite is free of arsenic (Townend 2006).
Native gold occurs as free grains within vein quartz and inclusions within pyrite, chalcopyrite and bismuthinite. Gold grains range in size from generally 0.5-4 microns in diameter to rarely 10-20 microns (Mason 2005a; Mason 2006a; Townend 2006). Electron-probe microanalysis on a limited number of native gold grains indicates gold has a fineness of 860-880 with silver as the other mineral accompanying gold (Mason 2006b, Mason 2007). In terms of geochemistry and all elements assayed, gold has the strongest correlation with bismuth.
Silver-bearing minerals are abundant, however the dominant silver-bearing mineral is not known at this time. Galena and cosalite [Pb2Bi2S5] are both argentiferous, containing 2-3% silver sequestered in the lattice (Mason 2005a). Silver also occurs as small grains of native silver and pavonite [(Ag,Cu)(Bi,Pb)3S5] (Rowins 2000b), possible ruby silver (Torres 1997), as either pyrargyrite [Ag3SbS3] or proustite [Ag3AsS3], 1-2 microns in diameter, and tetrahedrite [Cu12Sb4S13]. Native silver grains contain significant amounts of antimony, up to 8% weight percent (Mason 2005b). Pavonite is commonly associated with the main felsic intrusive, while tetrahedrite is common in the wallrocks (Rowins 2000b). Townend (2006) identified fahlore, a general name for the tennantite-tetrahedrite series of copper sulphosalts, rather than tetrahedrite. As may be expected, there is a very strong correlation between silver and lead in the geochemical data.
Chalcopyrite [CuFeS2] is the most common base metal sulphide phase and occurs in fracture veinlets associated with intense silicification and as disseminations. Chalcopyrite occurs in both granular quartz veins accompanying potassic alteration, and euhedral quartz veins accompanying propylitic alteration. Chalcopyrite is commonly closely associated with pyrite and marcasite, and rarely as inclusions in coarse
32
arsenopyrite (Townend 2006). Traces of bornite [Cu5FeS4] have also been reported (Mason 2006b; Townend 2006), however this mineral is not volumetrically significant. Minor secondary copper minerals including malachite [Cu2(CO3)(OH)2] and azurite [Cu3(CO3)2(OH)2] have formed through weathering processes and are present in surface rocks and near surface rocks. Native copper, covellite [CuS] and chalcocite [Cu2S] are found deeper in the regolith profile, and their formation is attributed to supergene weathering processes.
A variety of bismuth-bearing minerals are present including bismuthinite [Bi2S3] which contains inclusions of native bismuth and tetradymite [Bi2Te2S] (Mason 2005a; Townend 2006), cosalite Pb2Bi2S5, hessite [(Ag,Bi)2(Te,S)], tsumoite [Bi(Te,S)] (Mason 2006a), and baksanite [Bi6Te2S3] (Mason 2007). Both bismuthinite and tetradymite contain selenium in the crystal lattice (Mason 2005a). Cosalite contains 2-3% silver (Townend 2006).
Most of the bismuth-bearing minerals also contain tellurium, including hessite [(Ag,Bi)2(Te,S)], tsumoite [Bi(Te,S)], baksanite [Bi6Te2S3], tetradymite [Bi2Te2S], and Ag-Se-Te bearing galena.
Selenium is also present in several minerals. Electron-probe microanalysis confirms galena, bismuthinite and tetradymite grains contain minor amounts of selenium (Mason 2005a). Multi-element scans confirm high selenium values (>40ppm) are directly correlated with high silver values in some samples. This geochemical association suggests aguilarite [Ag4SeS] may be also present in trace amounts.
Other primary base metal sulphide phases include galena [PbS] and sphalerite [(Zn,Fe)S]. Sphalerite commonly contains inclusions of, and is intergrown with chalcopyrite (Townend 2006). Electron-probe microanalysis confirms some galena grains contain 2-4% silver (Mason 2005a, Mason 2005b; Townend 2006). Arsenopyrite [FeAsS] is relatively common, occurring as coarse discrete grains often associated with chalcopyrite. Antimony minerals are rare and include bournonite [CuPbSbS3] (Rowins 2000b), and crystalline cervantite [Sb2O4] (Torres 1997). Traces of molybdenite, scheelite, and cassiterite and are also reported (Townend 2006).
Gangue minerals include abundant quartz, and accessory plagioclase, muscovite, chlorite, biotite, Ca-amphibole, ilmenite, calcite, siderite (Townend 2006), and tourmaline (Mason 2006b).
SECTION 10. EXPLORATION (ITEM 12)
The San Antón property lies approximately 20 km to the east of the historic Guanajuato Mining Field which was discovered in 1548. There is evidence of widespread prospecting activity in the San Antón de las Minas area and limited production; however few records of these early activities have been located.
The area is prospective for porphyry copper-gold/ IRGS and low sulphidation epithermal vein systems. A number of old prospects are reported throughout the area.
The exploration works on San Antón Project involves drilling (reverse circulation & diamond core) and several sampling programs; including stream sediment, BLEG, Niton® soil and conventional soil sampling. All these programs are described in Technical Report 2008.
SAM commenced regional exploration away from Cerro del Gallo in mid-December 2006 with work focused initially on the Dolores, Empalizada and Espiritu Santo segments of the 3.5km long Carmen-Providencia low sulphidation epithermal vein system located 1.75km west of Cerro del Gallo. This program was followed shortly later by work on the San Luis Rey epithermal vein system located 3.6km south of Cerro del Gallo, and the Ave de Gracia epithermal vein system extending from the western flank of Cerro del Gallo to the Dolores shaft. Work on these epithermal vein systems culminated in the drilling of 18 holes into the Dolores segment, 26 holes into the Empalizada segment, and 14 holes into the Espiritu Santo segment of the Carmen-Providencia vein system. A further 13 holes were drilled at San
33
Luis Rey. Most holes tested the upper level of the epithermal vein systems to a depth of 150-300 meters below the current land surface.
Several encouraging silver-gold intersections are reported over a strike length of 1,000m from the Dolores-Empalizada segment of Carmen-Providencia vein system. Deeper drilling is required to test the down-dip and down-plunge extension of these intersections for an increase in grade and width of the vein system at greater depth. To date drilling along the Carmen-Providencia vein system has been confined to a vertical interval of 300m below surface between elevations of 1900 to 2200m ASL. In the Guanajuato Mining District the orebodies mined previously are located over a vertical interval of 900m between elevations of 1650m and 2550m ASL. The ore shoots are inferred to have a possible shallow southeast plunge as interpreted from simplified longitudinal sections shown by Randall et al 1994.
In addition to the drilling programs discussed above, surveys were completed to evaluate the potential of the property to host both epithermal and Cerro del Gallo styles of mineralization. These programs included aerial magnetic surveys, BLEG stream sediment surveys, Niton® x-ray fluorescence (XRF) geochemical soil surveys and conventional -80 mesh. The results of these programs were discussed in Technical Report 2008. Additional follow up work including drilling is required to test anomalies from these surveys.
SECTION 11. DRILLING (13)
Historical drilling by both the Cooperative and Luismin have not been used for the resource estimate. This section is primarily summarized from the 2008 Technical Report.
11.1 San Antón de las Minas S.A. de C.V. (SAM)
SAM completed a limited RC drilling program in December 2004. The main objective of this drill program was to validate and verify previous exploration results and concurrently evaluate the postulated optimum drill direction at the Cerro del Gallo deposit.
SAM commenced resource definition drilling at Cerro del Gallo in April 2005 with the objective of testing coincident multi-element geochemical and geophysical anomalies extending beyond the boundaries of the initial Inferred Mineral Resource estimate. In June 2005 SAM commenced diamond orientated core drilling twinning reverse circulation drill holes from surface.
SAM continued resource definition drilling and commenced metallurgical test work drilling at Cerro del Gallo during 2006 through May 2008. The objective of this program was to test and define the higher gold grade annulus associated with the coincident multi-element geochemical and geophysical anomalies surrounding Cerro del Gallo and to undertake detailed geotechnical and metallurgical test work diamond core drilling.
Drilling to date at the Cerro del Gallo deposit by SAM is summarized in Table 11-and shown in Figure 11-1.
34
Table 11-1 SAM Drilling Summary
Company Year RC Diamond Core Total
Drill Holes
Total Meters No
Meters No
Meters Holes Holes
SAM 2004 3 335.3 -- -- 3 335.3 SAM 2005 80 14,885.10 9 5,403.15 89 20,288.25 SAM 2006 109 24,042.26 31 12,936.10 140 36,978.36 SAM 2007 63 13,838.87 30 15,452.17 93 29,291.04 SAM 2008 25 6,493.76 4 2,592.75 29 9,086.51 Total 280 59,595.29 74 36,384.17 354 95,979.46
11.2 Drill Hole Direction and Pattern
The drill hole direction was determined by SAM based on a requirement to intersect all identified dominant quartz-sulphide vein sets at the highest angle possible. Fracturing and veining is intense at Cerro del Gallo and it is assumed that at least some of the Cu-Au-Ag mineralization is spatially, temporally and genetically associated with vein and brittle fracture sets. This assumption is supported, in part, by various orientations of structures and veins observed in old workings on Cerro del Gallo.
Evaluation of the Cerro del Gallo porphyry deposit by SAM is based on a nominal grid of 50 m spaced sections oriented 030º/210º TN and 50 m spaced drill collars with predominantly 60º inclined drilling for diamond core and reverse circulation drill holes along section planes. Some infill drilling of 60º inclined drill holes on a 50 m and 25 m line spacing and 25 m collar separation has also been completed in the northeast area. Drill holes are drilled along sections in both the 030º and 210º directions (Figure 11-2).
Drilling has been completed over an area of approximately 1500 m in a north-south direction and 1400 m in an east-west direction centred on the peak of Cerro del Gallo. Drill holes have been drilled to a maximum depth of 700 m below surface, with the large majority of holes drilled to a depth of less than 300 m below surface due to the limited capabilities of the drilling equipment.
35
Figure 11-1 San Antón Regional Drill Hole Location.
36
Figure 11-2 Cerro del Gallo Drill Hole Location
37
11.3 Reverse Circulation (RC) Drilling
A Prospector W-750 articulated, buggy-mounted all-terrain RC drill unit in near-new condition has been used for the RC program. The drill unit is built by Foremost Industries LP, Calgary Alberta Canada and is ideally suited to the property conditions. The drill unit is equipped with a standard Sullair air compressor delivering 900 cfm free air at 350 psi pressure, however, a second compressor and booster are used to deliver a total of 1700 cfm at 900 psi pressure. The additional air volume and pressure enables holes to be drilled deeper while keeping samples dry. The RC system utilizes 3¾ inch outside diameter dual-tube drill pipe with 1⅞ inch inside diameter tubes with centre return and face sampling hammer bits. Ground engaging tools consist of custom-made 4¾ inch to 5½ inch diameter diamond impregnated face sampling hammer bits.
The RC system of drilling recovers geological samples for assaying and logging through the centre of the double wall pipe and the sample is discharged at the surface by a cyclone directly onto a contractor supplied free standing three tier stainless steel Jones-type riffle splitter. The drill unit is capable of drilling angled holes to depths up to 350 meters under ideal conditions.
The drill rig is fitted with an in-line blow back system that enables air to be passed down through the inner sample tube of the drill string to remove ground water ingress immediately prior to the start of drilling of the next rod. The use of this system enables samples to be kept dry for deeper hole depths and under higher ground water volumes than conventional systems.
The contractor has performed at a high level of efficiency and produced high quality and representative RC chip samples for geochemical analysis and geological assessment. Good sample return has continually been achieved due to the combination of the availability of high air volume and high air pressures. Drill holes are terminated immediately when samples become wet. High flow rates of ground water were occasionally intersected in narrow fracture zones resulting in the abandonment of drill holes prior to the planned depth.
11.4 Diamond Core Drilling
The core drilling program was carried out by an Atlas Copco CS-1500 truck-mounted long stroke core drill and all normal support equipment was used. The CS-1500 is a top drive drill with a 10 foot stroke. The core drill has a dump mast and capacity to drill to 700 meters of HQ (63.5 mm diameter) diamond core under ideal conditions. Drill rods and core barrels are Atlas Copco HTWL and NTWL series. Holes are planned to be drilled in HQ, however should difficult ground conditions be encountered then provision is made to complete the hole in NQ (47.6 mm diameter) size.
The majority of diamond core recovered to date by SAM is HQ (63.5 mm) size.
The diamond core is re-configured to its original in situ state to form a continuous cylinder. The diamond core holes are logged as follows:
• Mark-up “south side” of diamond core for sawing longitudinally in half;
• Photograph each core tray in wet and dry mode in natural light using a digital camera mounted on a tripod;
• Geotechnical logging including core recovery, RQD measurements;
• Geological descriptions including lithological, alteration and mineralization logging; and
• Structural logging using Ballmark® imprints to determine vein and fracture orientations (dip and strike) with the assistance of a goniometer.
38
11.5 Surveying
The San Antón area lies within Universal Transverse Mercator (UTM) Zone 14 and all measurements are recorded by SAM in North American Datum 1927 (NAD27) for Mexico.
Down-hole surveys are completed in all core and RC holes drilled by SAM. An Eastman (Pee-Wee) single shot down-hole camera was used during the first drilling program in December 2004. The Eastman down-hole camera measures azimuth and inclination. A Reflex Ez-Shot™ electronic solid-state single shot drill-hole survey tool was used for subsequent drilling programs. The Reflex Ez-Shot™ digital camera measures azimuth, inclination, magnetic field strength and temperature. Error limits are quoted at ±0.5º for azimuth, ±0.2º for inclination, ±50 nT for magnetic field, and ±1ºC for temperature. The camera is built by Reflex Instrument AB, Vallentuna, Sweden. RC holes are routinely surveyed at the completion of each hole. Down-hole surveys are completed just below casing, then at various depths (depending on the rate of change in azimuth and/or inclination), and at the bottom of the hole. Core holes are surveyed as drilling proceeds at nominal 30 m intervals down the hole. All down-hole surveys are taken outside the rods to provide reliable azimuth information. In general RC holes tend to steepen by a few degrees and as expected veer slightly in direction of drill rotation. The core holes tend to veer in azimuth and steepen along paths of least resistance but deviation in most holes is negligible.
All core drilling is undertaken using oriented HQ drill core. Core orientation is achieved using the Ballmark® system. Ballmark® is a core orientation system that creates the orientation mark as and when the core is broken at the bottom of the hole. It does this by indent marking a soft disc with a non-magnetic free moving ceramic ball which, because of gravity, lies at the bottom or low side of an inclined hole. Ballmark® is unique in that it marks the orientation of the core at the time the core breaks, whereas other systems mark core after it is broken with the risk of it not being in situ. The Ballmark® system is a simple, accurate, and reliable method that eliminates uncertainty when orientating diamond drill core.
Structural measurements on orientated diamond drill core are determined using a goniometer and recorded during routine geotechnical logging procedures.
Drill collar positions are established by a geologist using a hand held Garmin Etrex Vista GPS unit programmed to record data in NAD 27 for Mexico. The planned drill azimuth is established using a Brunton compass, offset by about 3 m from the planned drill collar to ensure the hole is collared at the planned co-ordinates on the section. The azimuth is spray-painted on the ground or marked by continuous flagging tape and the drill rig is lined up against this orientation by the site geologist. The declination of the drill is checked on the mast by the site geologist on setup and again after the casing is established.
Upon completion of each drill hole, the collars are marked with a square concrete cap (approximately 40 by 40 cm) and inscribed with the drill hole number. Drill collar positions are surveyed using a hand held Garmin Etrex Vista GPS unit immediately the rig moves off the hole, and later by an independent contract surveyor using either a GPS – Total Station or Total Station (utilizing a polygon established by GPS – Total Station). Accuracy of the handheld GPS unit is estimated to be 4 m for the x and y coordinates. This data is recorded on the drill log sheet when entered into the database at the end of each hole. The accuracy of the Total Station is 10 cm (x, y, z) and GPS-Total Station is sub-centimetre provided adequate control is in place.
11.6 Geological Logging
RC drill samples were logged at five foot intervals (1.52 m) on-site in natural daylight at the time of drilling. A split from each interval was sieved, washed in a bucket of water and logged visually, using a hand lens for specific mineral identification, microstructure or texture recognition. Specific logging criteria for each sample included: weathered/fresh rock oxidation interface, colour, lithology, species of primary sulphide minerals and estimate of quantity of ground water, depth to standing water table, depth
39
of dry sampling, commencement of wet sampling, record of wet samples. Summary log sheets are written up on site at the conclusion of each hole. Representative chips from each five foot interval were collected and retained at the time of logging in plastic sample chip trays stored at the San Antón field office. Dilute HCl acid (10%) was used to confirm the presence of carbonate minerals. Tungsten and stainless steel scribes were used to test mineral and rock hardness. A pencil magnet was used to confirm and identify magnetic minerals. Drill holes were recorded systematically and methodically by the geologist as hand written logs onto a pre-printed log sheet template database and merged with assay results emailed directly from the laboratory at a later date, prior to the implementation of acQuire in late 2007.
The original log sheet template was in a simple Microsoft Excel spreadsheet format that was developed to record all detailed information relevant to each hole, including hole identification, coordinates (in NAD27 for Mexico), depth, sample number (including duplicate and standard samples) assay values, relevant geological information, sample condition (dry, moist or wet), base of oxidation, water occurrence and sample weight. The logging codes for geological information in the template were primarily based on the logging codes established by previous explorer Luismin for their diamond core and RC drill programs but are continually being updated when new relevant information is encountered. This template was used as the basis for the direct data entry system utilized as part of the acQuire data management system.
The geological information is recorded using a numeric code ranging from a 0 (not visible) to 3 (strong), and grouped into:
i. Alteration (silicic, sericitic, argillic, chloritic, potassic, phyllic, propylitic).
ii. Mineralization (pyrite, pyrrhotite, chalcopyrite, galena, sphalerite, molybdenite, arsenopyrite, oxidation status).
iii. Structure (fracture and shear planes, hydrothermal and tectonic breccias, quartz and sulphide veins, stockworking). Structure is not logged in RC chips and only logged in diamond drill core.
Additional geological information includes lithology which is recorded as a three digit numeric code, and colour which is coded by a straight forward two letter alpha code and in parts including a two letter qualifier e.g. Lt = light and Dk = dark.
The diamond core is collected from the drill site by a geologist and taken to the core yard located at the Dolores Shaft. The core is first washed by a field technician and left to dry in preparation for photography and core mark up.
All core drilled is orientated using the BALLMARK® orientation system. The core is marked up first with a red orientation line (depicting the bottom of the core) and the “south side” of the core is highlighted with direction arrows down the hole to ensure continuity in sampling. The core is then marked every meter in blue with the depth and meter mark, both on the core and on the core box, and finally structures and defects are highlighted in green on the core.
Once the core has been marked up, each core tray is photographed in wet and dry mode in natural light using a digital camera. The core is then geotechnically logged (core recovery, RQD measurements) and structurally logged using a specified coding system to identify hardness, weathering, defects Cα (core dip angle) and Cβ (core dip direction). The Ballmark imprints are used to assist in determining vein and fracture orientations (dip and strike) with the assistance of a goniometer (Model 76).
The core is geologically logged using the same coding as that used in the RC logging with geological information recorded using a 0 (not visible) – 3 (strong) code and grouped into:
i. Alteration: silicic, sericitic, argillic, chloritic, potassic, phyllic and propylitic.
ii. Mineralization: (pyrite, pyrrhotite, chalcopyrite, galena, sphalerite, molybdenite, arsenopyrite, oxidation status).
40
iii. Structure: (fracture and shear planes, hydrothermal and tectonic breccias, quartz and sulphide veins, stockworking).
As for the RC logging additional geological information including lithology is recorded as a three digit numeric code, and colour which is coded by a straight forward two letter alpha code and in parts including a two letter qualifier e.g. Lt = light and Dk = dark.
Bulk density samples (whole core) are collected at approximately 30 m intervals through the entire hole. The core is then sawn longitudinally in half and sampled at 1 m intervals, taking the “south side” as the sample and leaving the “north side” to be stored in the core boxes.
At the completion of the 2008 drilling program a re-logging program was initiated. The drill core and RC chips were re-logged in the Cerro del Gallo deposit. This program focussed on the previously modelled gold domain. Cross-sections were constructed using Gemcom software every 50m aligned parallel to the principle drill direction. Cross-sections were systematically constructed of the lithologies, structures and alteration. All RQD for the drill core was re-estimated using the core photos to maintain consistence, one geologist performed all of the measurements. This data was then utilized to create models of the felsic intrusive, shale unites, massive sulphides, main structural faults and the low-grade gold domains. Finally a set of cross-sections were constructed interpreting the oxidation boundaries.
11.7 Electronic Data Capture
In December 2007 acQuire Technology Solutions assisted by Golder Associates completed the implementation of the acQuire data management system. Up until then the data from the field log sheets was entered into a digital database (primarily a MS Excel spreadsheet and then converted into a MS Access relational database) at the completion of the hole. The MS Excel spreadsheet was created with a series of validation criteria in the form of pull down menus for each data entry that restricts what can be entered into each field and significantly reduces transcription errors, which were included as the coded libraries for the acQuire data management system.
Assay results are received from SGS (Toronto) in electronic (by email) and hardcopy format. The electronic results are provided in CSV (comma delineated) format. The acQuire database has been established to import the CSV files directly therefore minimizing the potential for any human error associated with entering assay data.
This digital data was emailed from the laboratory to the site database manager at San Antón. Hard copies of the assay results were mailed from the laboratory to the SARC Toronto office where they were collated and filed.
Processing software utilized during the drill program included MapInfo, Discover, Vulcan and Gemcom. MapInfo and Discover are 2D geological software that are utilized in the production of maps, drill hole plans, and cross sections. Vulcan and Gemcom are 3D geological software that was utilized in the production of plans and cross-sections to facilitate the generation of the geological model used for resource estimation.
Laboratory repeat sample assay values, laboratory second split sample assay values, SGS check and QAQC assay values, and field duplicate sample assay results form part of the quality control/quality assurance program and these values have not been used in resource calculations. In accordance with industry standard procedure only the original assay values, rather than the average value, have been incorporated into the database for resource calculations, although repeat, second split and duplicate assay values, together with the assay results of the quality control standards are preserved in the primary database.
41
SECTION 12. SAMPLING METHOD AND APPROACH (ITEM14)
This section is primarily summarized from the 2008 Technical Report. 12.1 RC Chip Sampling
RC samples were collected by three samplers under direct supervision of a geologist experienced with RC drilling and sampling techniques who was on-site at all times while drilling and sampling was in progress. Sampling procedures and sample numbers were constantly checked and monitored by the rig geologist and senior sampler. Sample depths were cross-checked with the driller and/or offsider at regular intervals, commonly at a rod change, and hole depth validated against the corresponding logged depth recorded by the geologist on the log sheet. Sample numbers were also checked by the senior sampler against the geologist’s log sheet.
Samples were collected continuously at 5 foot (1.52 m) intervals from the drill collar at surface to the bottom of the hole. The 5 foot sample interval is based on an imperial rod string used by the drilling contractor. Drill rods are 10 feet in length and a 20 foot stand was drilled as a single movement to generate 4 samples. RC drill chips were discharged continuously into the splitter by a cyclone while drilling was progressing. A plastic bag is taped around the spigot outlet on the cyclone and used to direct the discharging sample across the full width of a 16 slot riffle splitter. A free standing, stainless steel, three tier Jones-type riffle splitter was used to split the RC samples to one eighth. The splitter vanes are 25 mm wide which is adequate for RC samples and the rill plate angle is 60º. The splitter is fitted with a pneumatic vibrator connected to the air compressor on the drill to enhance gravity induced sample flow downwards through the splitter. The splitter was positioned directly beneath the spigot outlet of the cyclone, eliminating the need to manually handle the sample and thus reducing potential sample contamination and sample loss. The splitter is configured to collect the laboratory sample (1/8) from a single catch tray at the base of the splitter, while the bulk reject sample (7/8) is collected from catch trays at 3 different levels that are emptied by hand progressively into a UV stabilized large plastic bag. When a duplicate (field re-split) sample is required to be taken (1 in 50 samples) the entire bulk sample (i.e. all three sample catch trays) are passed through the riffle splitter again. The field re-split sample represents 10.9% of the original sample. All samples are weighed at the drill site to provide a record of sample recovery. This method of primary sample size reduction for laboratory geochemical analysis ensures maximum sample representivity is preserved and is standard industry practice.
In some locations groundwater is intersected in the last few meters of a drill hole in sufficient quantities that the sample is delivered wet. The wet samples are collected under the cyclone in a large heavy duty plastic bag then split by pouring into pairs of stainless steel catch trays. The trays are placed side-by-side and the sample is poured over the juxtaposed sides. One tray is then poured over another two trays to achieve a 1/4 split, and so on. The trays are then washed. Accurate splitting of wet samples is always a difficult process, however this procedure is considered adequate for the small number of samples involved. Wet samples are noted on the log sheet by the geologist so that the sample integrity can be monitored when the assays are returned. The wet samples are bagged and left on rocks or branches to decant excess water through the pores in the sample bag until the sample is air dried.
Samples for geochemical analysis were placed in synthetic micro-pore bags, pre-numbered using a unique 5 digit numerical system, while the larger bulk reject samples were placed in UV stabilized plastic bags pre-numbered by down hole depth. A pre-numbered tear off paper tag from the sample book controlling the numbering system was removed during prior bag mark up and placed in the corresponding marked micro-pore bag as a check prior to sample collection and for control through the various stages of sample preparation in the laboratory.
42
Sample collection is systematic and precise in accordance with strict procedural protocols. The splitter and all sampling equipment are cleaned with compressed air after each sample is collected. The laboratory sample is bagged from a single catch tray at the base of the splitter while the bulk reject sample is collected from three additional catch trays that were emptied into a UV stabilized large plastic bag. The geochemical sample is placed directly into a pre-addressed polyweave sack for dispatch to the Société Generale de Surveillance (SGS) sample preparation laboratory in Durango. Each geochemical sample is weighed on-site at the time of collection and consistently average between 2.5–4 kg in mass throughout the program. Variation in sample mass is attributed to drill bit diameter, sulphide content and type of lithology with no irregular sample volumes reported. Sample spillage is close to negligible during the entire program and well within error limitations for this type of sampling procedure. Sample loss is restricted primarily to dust venting from the top of the cyclone and is within acceptable operational limits and industry standards. The bulk reject sample is retained on site, laid out in rows of approximately 40 samples. Bags are folded in half and the succeeding sample is placed over the folded half of the previous sample to keep all samples “clean and uncontaminated”. Holes are terminated when the sample becomes wet, because wet samples are prone to contamination and are of lower integrity for analysis. RC sample material flowed through the splitter vanes freely at all times, so binding of fine or damp material was never a problem. All samples collected are submitted for assay. Strict procedures were implemented to maintain security of all samples at all times until collected on-site by a representative of SGS.
Samples are collected in a manner consistent with good industry standards and methodology, and can be considered representative of the sub-surface rock formations and underlying mineralization. RC samples collected during this program can be therefore considered reliable for analytical work.
12.2 Diamond Core Sampling
Most of the diamond core recovered is HQ (63.5 mm) size and on rare occasions when a size reduction is required due to fractured ground conditions NQ (47.6 mm) is recovered. The core is re-configured to its original in situ state to form a continuous cylinder. The core is firstly marked longitudinally with a felt tipped pen and then marked at 1.0 m intervals for sampling for assay. The 1.0 m sample intervals are sawn transversely using a Target core saw with a 10” diameter diamond studded saw blade. The core is then sawn longitudinally in half. Only the “south side” of the core is sampled for assay, preserving a continuous longitudinal section of core for further investigation (the “north side”). The half sawn “south side” core is then progressively bagged for assay in 1.0 m intervals. Each 1 m sample interval is marked on the inside of the core tray. For core hole SA-047 a Longyear manual core splitter was used from surface to a depth of 253 m, however much of this core was extensively fractured prior to sampling and the quality of the sample submitted for assay was not compromised using this method. All diamond core since drill hole number SA-047 is half sawn.
SECTION 13. SAMPLE PREPARATION, ANALYSES AND SECURITY (ITEM 15)
This section is primarily summarized from the 2008 Technical Report.
13.1 Assaying Methods SGS Canada Inc. Minerals Services in Toronto, Ontario, Canada was the primary laboratory used for routine element analysis of drill, rock-chip, soil, and stream sediment samples from the San Antón Property. The SGS-Toronto facility is ISO 9002 registered, and ISO/IEC 17025 accredited for Specific Tests under the Standards Council of Canada (SCC) No.456. SGS Canada Inc. Mineral Services is a member of the world wide SGS Group. This laboratory was inspected by SAM personnel accompanied by a representative from Golder Associates in March 2007.
43
SGS has a sample preparation facility in Durango (Durango State), Mexico that is within a one day drive of the San Antón Property. Sample pulps were prepared in the Durango sample preparation facility prior to air-freight to the Toronto laboratory in Canada for analysis. Durango is located approximately 600 km northwest of San Antón. During November 2007 the Durango facility commenced fire assay for gold. This laboratory has been inspected by SAM personnel on multiple occasions, the last visit being in February 2008.
SGS collect drill, rock-chip, soil, and stream sediment samples from the San Antón Property and transport them to Durango by vehicle. At the laboratory, samples are sorted and routinely oven dried at 105ºC, if necessary (SGS Code DRY 10). After drying, RC and core samples are crushed to 90% passing 2 mm (10#) using a Terminator crusher (manufactured by TM Engineering, Vancouver) prior to riffle splitting a sub-sample of ~1,000 g for pulverizing (SGS Code CRU25). The sample is riffle split using a stainless steel splitter with slots 1.3 cm apart and 14 chutes. One in 20 samples were initially weighed after drying and after sample preparation to monitor dust and sample loss during preparation up until early November 2006 and as no significant dust loss was recorded this practice was ceased. The 1,000 g sub-sample is pulverized to 90% passing 75 μm (200#) (SGS Code PUL47) using a Labtech ESSA LM2 ring mill with a standard bowl. A sub-sample of approximately 200-250 g is then sent to SGS Toronto for analysis (Rabone and Hatcher, 2005).
Drill samples were initially routinely assayed for gold, silver, copper, lead, zinc, molybdenum and bismuth up until October 2005. Gold, silver and copper are the three dominant, potentially economic elements in the Cerro del Gallo porphyry deposit. Gold values are routinely determined by fire assay using a 30 g sample pulp with instrumental Atomic Absorption Spectrometry (AAS) finish (SGS Method FAA313). SGS claim this method is best suited for samples containing low levels of gold. The analytical range for this method is ideal for the vast majority of gold values encountered in the Cerro del Gallo deposit. The lower detection limit for this method is quoted to be 5 ppb and the upper limit is now quoted to be 10,000 ppb. The upper limit for this method until about March 2006 was 2,000 ppb. All samples assaying greater than 1,000 ppb gold are routinely re-assayed by fire assay on a 30 g sample pulp using a gravimetric finish (SGS Method FAG303). This is an “ore grade” method for high gold values. The lower detection limit for this method is 0.03 ppm. This work commenced at the beginning of November 2005. Previously all samples greater than 2,000 ppb Au were re-assayed using this gravimetric method (Rabone and Hatcher, 2005).
Silver and copper values are determined using a three acid (HF-HNO3-HCl), near total digest with AAS finish in accordance with SGS Method AAS21E. Up until October 2005 the silver and copper values were determined using a four acid, near total digest with AAS finish in accordance with SGS Method AAS40E. The AAS21E method uses a 2.0 g sample and is most applicable to samples containing low levels of silver (less than 300 ppm) and copper (less than 10,000 ppm). Silver values are determined with a lower detection limit of 0.3 ppm and an upper limit of 300 ppm. Over range silver values are quantified by one of two methods. Generally when the AAS21E method is applied and sample assay values are greater than 300 ppm Ag the chemist can readily estimate where the approximate value lies. If the assay value is between 300-1,000 ppm Ag then the AAA50 method is used. AAA50 is an “ore grade” method for silver. If it appears to be greater than 1,000 ppm Ag then the fire assay method for silver is used (SGS Method FAG303). Up until November 2005 all silver analyses greater than 300 ppm were re-analysed by lead collection fire assay using a 30 g sample and finished by gravimetric weighing of the bead. The lower detection limit for silver using this method is 3 ppm. Fire assay for silver below 1,000 ppm is not as accurate as the AAA50 or AAS21E method. From November 2005, samples containing over range silver values greater than 300 ppm and up to 1,000 ppm are assayed by SGS Method AAA50. In this method a 2.0 g sample is digested using an aggressive mixed four acid attack consisting of HF-HNO3-HClO4-HCl. Copper values are also determined on the same solution with a lower detection limit of 0.5 ppm and an upper range limit of 10,000 ppm. Copper values over 10,000 ppm (“ore grade”) are determined by sodium
44
peroxide fusion/Inductively Coupled Plasma Optical Emission Spectrometry (ICP-OES) finish on the solution (SGS Method ICA50) (Rabone and Hatcher, 2005).
The Cerro del Gallo copper-gold-silver deposit contains anomalous amounts of lead, zinc, arsenic and bismuth, plus a number of elements of interest. Drill samples were routinely assayed for lead, zinc, molybdenum and bismuth up to October 2005 with values determined by ICP-OES on a 0.2 g sample using SGS Method ICP40B. The solution was prepared from a separate sample to the solution used for silver and copper determination by AAS finish. Sample decomposition was achieved using an aggressive, mixed four acid attack, consisting of HF-HNO3-HClO4-HCl. Lead values were determined with a lower limit of detection of 2 ppm, zinc values down to 0.5 ppm, molybdenum to 1 ppm, and bismuth values to 5 ppm. The upper limit for lead and zinc values using this method is 10,000 ppm. Over-range base metal elements, including copper, were re-assayed by ore grade analysis Method ICA50. This is a sodium peroxide fusion/ICP-AES analysis. The method has a lower detection limit of 0.01%, and no upper limit (Rabone and Hatcher, 2005).
Since October 2005 drill samples have been routinely assayed for a standard suite of 32 elements using SGS Method ICP40B. More recently over range base metals greater than 10,000 ppm have been analysed using the SGS ore grade analysis method ICP90Q which has a lower detection of 0.01%.
13.2 Duplicate Samples Field duplicate (or field re-split) samples were collected on-site from the bulk reject sample. Duplicate samples were taken every 50 samples and assigned a unique sequential number in the sample stream. They were inserted 35 samples onwards in the sample stream from the original sample. Duplicate samples and their assigned value are pre-recorded on the log sheets and sample books and bagged at the time of drilling.
The analytical results of the field re-splits for values of economic interest, assigned as 5 times the detection limit, have been plotted on Half Absolute Relative Difference (HARD) graphs (Shaw 1997). Golder Associates recommended a target of 90% of the duplicate pairs having less than 10% HARD. However, for some styles of mineralization where the nugget effect is high, this may not be achievable in practice. Thompson and Howarth charts (Fitness for Purpose Charts) were then used to plot all of the field re-splits and review whether the HARD values greater than 10% difference are material to the study (Thompson 1973).
The gold field duplicates are presented in Figure 13-1, which shows that the HARD target has not quite been met, but is acceptable for this style of mineralization and analytical detection limits. The silver field duplicates are shown in Figure 13-2, which show that the HARD target has not quite been met, but is acceptable for this style of mineralization and analytical detection limits. The copper field duplicates are shown in Figure 13-3, which show that the HARD target has been met.
Lab duplicate (or lab re-split) samples were collected at the laboratory at a frequency of 1 in 12 samples or less. These are taken from the pulp sample and recorded as duplicates by the laboratory. The gold lab duplicates are presented in Figure 13-4, which shows that the HARD target has been met. The silver lab duplicates are shown in Figure 13-5, which show that the HARD target has been met. The copper lab duplicates are shown in Figure 13-6, which show that the HARD target has been met.
45
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
HAR
D %
Proportion of Sample Pairs
HARD for 532 sample pairs for Au_ppm
0.001
0.010
0.100
1.000
10.000
0.001 0.010 0.100 1.000 10.000
Abs.
Diff
.
Mean
Fitness For Purpose Chart for 643 sample pairs for Au_ppm above a Detection Limit of 0.005 ppm and a target RSD of 10% shows that 327 of the samples (51%) are below
the 50th percentile and 540 of the samples (84%) are below the 90th percentile
Abs. Diff. 50%tile 90%tile
Figure 13-1 Field Re-splits – Gold
46
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
HAR
D %
Proportion of Sample Pairs
HARD for 625 sample pairs for Ag_ppm
0.001
0.010
0.100
1.000
10.000
100.000
0.100 1.000 10.000 100.000 1000.000
Abs.
Diff
.
Mean
Fitness For Purpose Chart for 707 sample pairs for Ag_ppm above a Detection Limit of 0.3 ppm and a target RSD of 10% shows that 430 of the samples (61%) are below
the 50th percentile and 613 of the samples (87%) are below the 90th percentile
Abs. Diff. 50%tile 90%tile
Figure 13-2 Field Re-splits – Silver
47
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
HAR
D %
Proportion of Sample Pairs
HARD for 708 sample pairs for Cu_ppm
0.00
0.01
0.10
1.00
10.00
100.00
1000.00
10000.00
1 10 100 1000 10000 100000
Abs.
Diff
.
Mean
Fitness For Purpose Chart for 741 sample pairs for Cu_ppm above a Detection Limit of 10 ppm and a target RSD of 10% shows that 493 of the samples (67%) are below the
50th percentile and 681 of the samples (92%) are below the 90th percentile
Abs. Diff. 50%tile 90%tile
Figure 13-3 Field Re-splits – Copper
48
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
HAR
D %
Proportion of Sample Pairs
HARD for 3160 sample pairs for Au_ppm
Figure 13-4 Lab Re-splits – Gold
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
HAR
D %
Proportion of Sample Pairs
HARD for 3466 sample pairs for Ag_ppm
Figure 13-5 Lab Re-splits – Silver
49
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
HAR
D %
Proportion of Sample Pairs
HARD for 3815 sample pairs for Cu_ppm
Figure 13-6 Lab Re-splits – Copper
50
13.3 Standard Reference Samples Standard reference samples were purchased by SAM from Ore Research & Exploration Pty Ltd. Eight standards (certified reference materials or CRM) with different elements and grades were used by SAM, plus a quartz blank. They are conventional pulped standards with a particle size of -20 µm to -75 µm. The standards were supplied with a detailed “Certificate of Analysis”. Results of the standards used during all SAM drilling program are shown below in Table 13-1and graphs located in Figure 13-7.
Standards were routinely inserted into the sample stream every 40 samples.
From Figure 13-7 it can be seen that the gold standards were close to, or just above, the certified values, while the copper and silver standards were consistently slightly under the certified values. From the graphs in Figure 13-7, which show the variation over time, with upper and lower limits defined as ±10% of the CRM, it can be seen that there is still some variability occurring for each standard that may, in part, be due to inhomogeneity of the CRM or imprecision of the analytical technique. Some misallocated CRM Codes have been identified. Some batches were re-assayed by the laboratory when multiple standards from one batch reported outside of the defined limits. The change in assay values for these batches was not significant.
51
Table 13-1 Certified Values of Standard Samples
CRM Code Element Submitted Certified Value
Mean Value
Difference
OREAS 15Pa Au ppm 268 1.02 1.00 -2%
OREAS 15Pb Au ppm 213 1.06 1.11 +5%
OREAS 15Pc Au ppm 248 1.61 1.66 +3%
OREAS 50P Au ppb 143 727 712 -2%
Cu % 0.691 0.690 0%
OREAS 50Pb Au ppb 186 841 844 0%
Cu % 0.744 0.697 -6%
OREAS 51P Au ppb 312 430 426 -1%
Cu % 0.728 0.704 -3%
OREAS 52Pb Au ppb 45 307 314 +2%
Cu % 0.334 0.300 -10%
OREAS 53P Au ppb 366 380 381 0%
Cu % 0.413 0.384 -7%
OREAS 53Pb Au ppb 31 623 633 +2%
Cu % 0.546 0.496 -9%
OREAS 60P Au ppm 80 2.60 2.66 +2%
Ag ppm 4.9 4.7 -3%
OREAS 62Pa Au ppm 78 9.64 9.22 -4%
Ag ppm 18.4 17.6 -4%
OREAS 22P Au ppb 737 <5 -
Quartz Blank Au ppb 93 - -
52
OREAS 15Pa
OREAS 15Pb
53
OREAS 15Pc
OREAS 50Pb
54
OREAS 50Pb
OREAS 51P
55
OREAS 51P
OREAS 52Pb
56
OREAS 52Pb
OREAS 53P
57
OREAS 53P
OREAS 53Pb
58
Figure 13-7 CRM Standard Graphs
OREAS 53Pb
13.4 Blanks Blanks were routinely inserted into the sample stream at every 100th sample. Generally the blanks reported as below detection (less than 5 ppb), with 1% of the samples reporting above 50 ppb and up to a maximum of 190 ppb, which may imply minor cross-contamination or precision errors close to the detection limit.
13.5 Sample Security All RC and DDH samples collected are immediately bagged, tied and placed collectively in larger polyweave bags and then sealed prior to collection. These samples are then securely stored until collected by SGS personnel. Samples collected at the RC drill rig are under constant surveillance around the clock until collected by SGS personnel. Samples collected from DDH core are stored at the secure core yard facility under constant surveillance until collected by SGS personnel.
SGS personnel from Durango collected samples from the San Antón Property approximately twice weekly and transported the samples directly to Durango.
59
SECTION 14. DATA VERIFICATION (ITEM 16)
Golder (2006) previously verified the assay data integrity as used for the Cerro del Gallo resource estimate by undertaking a random comparison of approximately 5% of the database records against the original hard copy assay certificates. Only the Au (ppb), Au (g/t), Ag (g/t), and Cu (ppm) were compared. No discrepancies were found. A check was also done comparing the lithological logging to the core photos. No significant errors were found.
As part of the implementation of the acQuire data management system, all original assay results as received from SGS were used to re-establish the assay database and a cross-check against the original MS Access database highlighted no significant errors.
An extract from the acQuire drill hole database was supplied to Golder Associates who loaded and partially validated the data in MS Access. This partial validation primarily checked the structure of the database, such as gaps in the data and mismatches between collar, survey, assay and geology data. It also highlights outliers for each individual field. Only minor corrections to the drill hole database were required, which were completed prior to the data being used for resource estimation.
During the re-log program assay values were plotted on new log sheets and cross checked with the original drill logs. At this same time drill collars and surveys were also checked against in the data base before the data was imported into GEMS.
60
SECTION 15. ADJACENT PROPERTIES (ITEM 17)
No information is available on adjacent properties. At the time of writing this report there was open ground to the east, southwest and north of the property. Exploraciones Mineras Parreña S.A. de C.V., a subsidiary of Peñoles, has lodged an application for a large tract of land south of, and abutting the San Antón Property.
SECTION 16. METALLURGICAL TESTING (ITEM 18)
This section is primarily taken from the 2008 Technical Report. Additional information has been included to discuss relevant heap leach test-work in more detail reflecting the decision to proceed initially with a heap leach process flow sheet. It also retains the information from the entire metallurgical test program that investigated, milling followed by leaching and copper flotation followed by leaching.
The heap leach test data is considered to be preliminary as the majority of results are intermittent bottle roll tests. Two column tests were completed on one drill hole considered to be representative of the ‘oxide’low-grade domain. Additional metallurgical testing will be done to further define the performance and components of the proposed flow sheet.
Metallurgical test work began in 2006 and has been performed on drill core and RC chip samples using two Australian metallurgical laboratories. The samples have been tested either on a hole basis or as composites combining multiple holes. The first two phases of work were performed by Independent Metallurgical Laboratories Pty Ltd, Welshpool, Australia and the last four by SGS Lakefield Oretest Pty Ltd, Malaga, Australia. JKTech was also utilized to determine comminution characteristics.
The test work initially focused on samples from the Gold Zone and process options to recover gold and silver. The process options considered included heap leach, bulk leach and feed upgrading followed by leaching. As more exploration data was collected and understanding of the mineralization developed identification of additional zones designated as Copper and Intrusive Zone were included in the resource. This lead to a metallurgical program in 2007 to determine if copper could be recovered by flotation along with gold and silver.
The focus of the latest phase of tests (2009) has been to examine further the amenability of the gold zone material to heap leaching. Nine drill core samples were collected representing three different classifications of material (weathered, oxidized and fresh) for intermittent bottle roll tests.
16.1 Heap Leach Test Work
Ten Gold Zone samples were tested with a 96 hour intermittent bottle roll cyanide leach test at two different feed crush sizes (6 @ P100 <3.36 mm and 4 @ P100 <6.35 mm). An additional 18 tests (9 samples) have been recently completed using 30 day intermittent bottle roll tests with each sample tested at two different feed crush sizes (P100 <19 mm and P100 <6.35 mm).
Table 16-1 lists the samples used in the tests.
The target operating conditions for the tests were initial solids at 40% (w/w) and pH maintained between 10 and 10.5 for the duration of the test. In the case of the 96 hour tests cyanide concentration was 1000 ppm initially and maintained at 500 ppm while for the 30 day tests cyanide was maintained at 1000 ppm for the entire test.
61
Table 16-1 Bottle Roll Test Sample Details
Drill Hole Id Sample Type Domain
Rock Type Weathering Hole Depth Head Assay
From (m)
To (m)
Au (g/t)
Ag (g/t) Cu (g/t)
SA 002 Core Gold Tuff Fresh 13 65 1.0 27 1000 SA 007 Core Gold QSWK Fresh 100 150 1.1 12 1000 SA 010 Core Gold Tuff Fresh 9 130 1.2 9 1200 SA 058 RC Gold QSWK Fresh 27 55 1.6 9 1300 SA 061 RC Gold Tuff Fresh 76 108 0.8 6 1300 SA 071 RC Gold Tuff Fresh 145 166 2.0 4 1200 SA 078 RC Gold Sil Fresh 18 44 0.7 48 1700 SA 168 Core Gold Tuff Fresh 88 103 0.6 9 1306 SA 199 Core Gold Tuff Fresh 38 53 0.6 27 1202 SA 283 Core Gold Sil Fresh 12 30 0.8 56 1490
SA 168/250 Core Gold Tuff Weathered 3.1/16 12.2/
21 2.2 23 1482 SA 232 Core Gold Tuff Weathered 6 21 0.7 16 706 SA 276 Core Gold Int Weathered 3.1 18.3 0.7 12 214
SA 011 Core Gold Tuff Oxidised 51 127 0.5 18 500 SA 0471 Core Gold Tuff Oxidised 21 36 0.8 6 1443 SA 0472 Core Gold Tuff Oxidised 110 125 1.2 22 1187 SA 057 RC Gold Tuff Oxidised 73 105 0.5 48 900 SA 062 RC Gold Tuff Oxidised 69 88 3.2 7 500 SA 209 Core Gold Tuff Oxidised 76 91 1.2 13 371
The results of the tests are presented in Table 16-2 and Table 16-3. The 96 hour results did not provide a definitive trend in the behaviour of the material classifications since the variation in recovery within each classification was significant. Seven of the ten samples were classified as fresh and the remaining three are oxidised. It was anticipated that in general oxidized material would have better gold and silver extraction than fresh material. There is a wide variation in extraction of all three metals with copper extraction being directly related to the quantity of secondary copper species in the sample. The gold kinetic performance is favourable with recoveries approaching maximum in 24 hours with silver and copper kinetics being slower.
62
Table 16-2 96 Hour Test Results
Drill Hole Id
Weathering Crush
P100 (mm)
Au Recovery
(%)
Ag Recovery
(%)
Cu Recovery
(%)
NaCN Consumption
(kg/t)
Lime Consumption
(kg/t) SA 002 Fresh 6.3 28.37 8.20 3.81 0.55 0.46 SA 007 Fresh 6.3 44.14 12.45 6.64 0.55 0.50 SA 010 Fresh 6.3 34.44 11.54 5.49 0.67 0.58 SA 058 Fresh 3.36 78.32 31.82 13.58 0.47 0.80 SA 061 Fresh 3.36 46.18 20.39 13.82 0.74 1.94 SA 071 Fresh 3.36 50.46 35.72 38.94 1.67 2.74 SA 078 Fresh 3.36 51.41 23.63 22.86 1.76 0.99 SA 011 Oxidised 6.3 36.44 17.50 20.88 0.70 1.68 SA 057 Oxidised 3.36 47.77 57.39 59.91 3.16 3.19 SA 062 Oxidised 3.36 71.30 55.02 71.72 1.57 2.50
Table 16-3 30 Day Test Results
Drill Hole Id
Weathering Crush
P100 (mm)
Au Recovery
(%)
Ag Recovery
(%)
Cu Recovery
(%)
NaCN Consumption
(kg/t)
Lime Consumption
(kg/t) SA 283 Fresh 6.35 39.48 20.69 19.28 1.56 0.51 SA 283 Fresh 19 25.48 17.90 16.64 1.09 0.42 SA 168 Fresh 6.35 31.18 23.12 11.57 1.52 0.60 SA 168 Fresh 19 22.65 16.07 11.66 1.23 0.55 SA 199 Fresh 6.35 21.97 9.71 7.10 1.14 0.33 SA 199 Fresh 19 15.12 6.65 3.40 0.67 0.33
SA 0471 Oxidised 6.35 60.44 50.26 56.94 2.75 5.89 SA 0471 Oxidised 19 45.11 31.92 46.94 2.32 5.10 SA 0472 Oxidised 6.35 46.45 40.81 53.99 2.30 4.88 SA 0472 Oxidised 19 37.12 36.48 45.04 1.78 3.59 SA 209 Oxidised 6.35 51.27 48.41 49.44 0.83 1.74 SA 209 Oxidised 19 48.88 47.24 40.29 0.62 1.61
SA 276 Weathered 6.35 81.66 56.68 19.98 0.49 2.98 SA 276 Weathered 19 72.32 27.86 14.99 0.71 2.80 SA 232 Weathered 6.35 69.04 56.00 40.58 1.23 4.49 SA 232 Weathered 19 66.44 36.33 39.03 1.18 4.23 SA 250 / SA 168
Weathered 6.35 65.80 52.21 45.30 2.49 8.13
SA 250 / SA 168
Weathered 19 52.42 40.80 44.83 2.38 7.40
The 30 day test results indicated that a finer feed crush size distribution gave better extractions, there is variability in the extractions within and between weathering classifications and the kinetics for gold extraction are favourable (Figure 16-1). The general trend is that gold extraction is highest in weathered
63
material and lowest in fresh material. Variation in the results could be the results of a number of factors including head grade, crush size distribution, assaying and material classification.
0
10
20
30
40
50
60
70
80
90
100
0 48 96 144 192 240 288 336 384 432 480 528 576 624 672 720
Recovery (%
)
Leach Time (hours)
Gold Recovery vs Leach Time @ 6.35mm
Weathered Oxidised Fresh
Figure 16-1 30 Day Leach Recovery Gold
The conclusions are weathered and oxidised material is amenable to heap leaching while fresh material is better suited to alternate processing (i.e. crushing, grinding and agitated leach). The kinetics of the gold extraction are favourable with better than 50% of the total extracted gold leached in the first 24 hours in the 30 day 6.35 mm material tests and two of the weathered samples exceeded 80%. Silver kinetics is slower than gold and in the weathered and oxidised material the rates are similar (Figure 16-2).
The quantity of secondary copper species in the resource and leach behaviour must be understood as copper concentration has the potential to significantly impact on the size of the carbon circuit and cyanide consumption.
64
0
10
20
30
40
50
60
70
80
90
100
0 48 96 144 192 240 288 336 384 432 480 528 576 624 672 720
Recovery (%
)
Leach Time (hours)
Silver Recovery vs Leach Time @ 6.35mm
Weathered Oxidised Fresh
Figure 16-2 30 Day Leach Recovery Silver
Two column tests (0.15 m diameter by 2 m high) using sample from SA 276, weathered material, were performed with a crush size of P80 12.5 mm and 6.35 mm. The material was agglomerated with cement, NaCN solution and water before being placed in the column. The quantity of cement selected was based on the results of agglomeration and percolation tests. The columns were irrigated at 10 l/m2/hr with a 300 ppm cyanide solution. Each column was irrigated for 24 hours with barren solution then the resulting pregnant solution was stripped with carbon for 24 hours and the cycle repeated for 60 days.
Figure 16-3 and Figure 16-4 illustrate the gold and silver recovery by time for the two tests. The gold recovery results are favourable but the silver recovery is lower than expected which will require further investigation. Additional testing will be performed in order to establish the trends between material classification, crush size, head grade and metallurgical performance.
65
0
20
40
60
80
100
0 5 10 15 20 25 30
Recovery (%
)
Leach Time (days)
Gold Recovery
6.3 mm 12.5 mm
Figure 16-3 Column Test Gold Recovery vs Time
0
20
40
60
80
100
0 5 10 15 20 25 30
Recovery (%
)
Leach Time (days)
Silver Recovery
6.3 mm 12.5 mm
Figure 16-4 Column Test Silver Recovery vs Time
16.2 Comminution Test Work
The comminution data indicates that the material is more competent than average, is resistant to impact breakage and requires slightly more than average grinding energy. The material is amenable to SAG milling. Seventy UCS tests were completed with an average of 82 MPa, the highest value was 180 Mpa with 69% of values less than 100 MPa and 94% of values less than 150 MPa. The average Bond Work Indices from 21 holes are shown in Table 16-4.
66
Table 16-4 Bond Work Indices Results
Abrasion Bond Work Index (kWh/t) Index Crushing Rod Mill Ball Mill RWI:BWI
0.4 10.5 21.6 17.5 1.24
Four samples were tested by JKTech and the results (Table 16-5) compared to their database. The findings were that the material is considered moderately abrasive, categorized as moderately hard to hard and the parameters do not indicate anything unusual about the material.
Table 16-5 JKTech Results
Sample DWi A b A*b SG SA 156 6.4 63.97 0.63 40.49 2.59 SA 160 6.6 57.27 0.69 39.32 2.60 MC 1 7.2 54.46 0.68 37.22 2.69 MC 2 7.7 73.13 0.48 35.24 2.70
16.3 Agitated Leach Test Work
Sixty bulk agitated vat leach tests were completed on both individual samples and two composites (Master Composite 1 – shallow material and Master Composite 2 – deep material) from the Gold Zone. The feed grind size was varied between P80 150µm and 75µm and cyanide concentrations were also varied. Another process option also investigated was feed upgrading utilizing either flotation or gravity separation and subjecting the lower mass of material to a a concentration of cyanide. Six gravity concentration tests using a centrifugal device at three different primary grinds were completed using master composite 1 and 2 as the feed. Fifty bench scale batch flotation tests with the master composite and the individual samples from the composite involved generating a rougher concentrate followed by intensive leaching, 5 w/v NaCN, and the tail stream leached predominately at 0.1 w/v NaCN. The flotation conditions utilized were concentrate collection for 23 to 28 minutes using copper sulphate as an activator, potassium amyl xanthate and A208 as collectors, and pH between 7.5 and 8.0. These conditions were established from twenty sighter tests.
The leach test work indicated that gold was readily recoverable using a cyanide leach process with good kinetics and flotation followed by leaching of both products achieved the best overall results. The amount of silver and copper recovered to the leach solution was a function of the silver and copper minerals present in the mineralized material. Upgrading the feed material to produce a reduced mass for leaching was best achieved using a flotation process.
16.4 Flotation Test Work
In 2007 investigation into the recovery of copper to a saleable concentrate was initiated. Four samples from drill holes in the Copper Zone were collected. SGS Lakefield Oretest was provided with a scope of work that include ‘ore’ characterization, comminution parameter determination, rougher flotation sighter
67
testing to establish preliminary parameters and rougher concentrate cleaning tests to establish that a saleable grade concentrate could be produced.
The QEMSCAN analysis of the grain size of each mineral indicates that pyrite has the highest average grain size (30 µm) followed by quartz (28 µm), chalcopyrite (17 µm), muscovite (15 µm) and plagioclase feldspar (13 µm). The average grain size of bornite is 5 µm and chalcocite is 4 µm.
Rougher concentrate has been produced in 119 tests using both Gold and Copper Zone material. A series of batch rougher tests were completed on the Copper Zone composite to establish the preliminary grind, pH and collector scheme to maximize copper, gold and silver recovery to the rougher concentrate while minimizing iron sulphide mineral recovery. Six primary and two secondary collector combinations were tested. The tests indicate that a primary grind of P80 106µm, pH 9.5 with A9810 as the primary collector and no secondary collector gave the best rougher flotation response. The majority of Gold Zone samples have not yet been tested with the same collector scheme as the copper composite. Comparison of the data indicates that the rougher performance is similar when the mineralized material contains copper as chalcopyrite.
Sixteen batch single stage open circuit cleaner tests were performed to establish preliminary cleaner parameters. The parameters investigated included regrinding rougher concentrate, utilization of iron sulphide mineral depressants and pH modifiers. Eight subsequent tests were performed once the cleaner parameters were established using the individual drill hole samples from the copper composite and 3 additional samples from the Gold Zone. The conditions utilized were regrinding to P80 38µm, sodium metabisulphate as iron depressant and pH 11.5 using lime as the modifier.
The cleaner concentrate grade from the Copper Zone tests achieved mid to high teens in a single cleaning stage at good stage recoveries while the Gold Zone sample results were influenced by lower copper head grades and low chalcopyrite mineralization. The results indicate that multi-stage closed circuit cleaning would need to be utilized in order to consistently generate a copper concentrate grade that would be saleable. A single locked cycle test was performed with the copper composite to establish that multi-stage cleaning with cleaner tails recycle could consistently generate a saleable grade copper concentrate. A total of six cycles were completed and the average concentrate copper grade was 23% for the last three cycles. An ICP scan of the copper concentrate indicated that the following smelter contract penalty elements will need to be tracked in the future development of the flow sheet and minimized where possible: arsenic, bismuth, lead and zinc.
The results of the flotation test work indicate that copper can be recovered to a saleable grade concentrate from Copper and Gold Zone material. Variation in copper metallurgy is a function of head grade and quantity of chalcopyrite in the mineralized material. One of the key parameters to be established is the minimum copper head grade that will produce an appropriate copper concentrate grade and recovery. The recovery of gold to copper concentrate is likely to be low due to an association of some of the gold with iron minerals. Gold is recovered to the rougher and scavenger concentrate but is subsequently rejected to the cleaner tail in the concentrate cleaning stage.
16.5 Future Test Work
The future metallurgical testing for the Cerro del Gallo heap leach flow sheet will include:
• Comminution characterisation (i.e. abrasion index, crushing work index);
• Impact of High Pressure Grinding Rolls on extraction;
• Determination of optimum feed crush size;
• Detailed metallurgical variability test work (Column Tests);
• Heap behaviour (i.e. agglomeration, permeability);
68
• Determine impact of local water sources and recycle water on metallurgy;
• Solution metal recovery characterisation;
• Bulk agitated leach tests to confirm previous leach results for fresh rock type material;
• Develop equipment design parameters.
Samples of the three material classifications at varying depths will be taken from within the Gold Zone and tested both individually to establish the extent of variability in metallurgical response and as composites to reflect the potential heap composition based on the mining plan.
SECTION 17. MINERAL RESOURCE ESTIMATES (ITEM 19)
17.1 Geological Modelling
This section is primarily taken from the 2008 Technical Report with updates from the recent re-logging and re-modelling program of the gold domain during 2009. The Cerro del Gallo gold domain was re-modelled following an extensive program to re-log the core and RC chips. This program involved logging the drill holes on cross-sections spaced at 50m and systematically interpreting the geology with emphasis on gold mineralization controls. The previously defined gold domain was modelled into three low-grade domains based on the primary rock types and alteration, which was further sub-divided based on the predominant metal occurrence. The gold domains are gold-rich zones based on gold grades greater than a nominal 0.3 g/t Au that predominantly occurs within the hydrothermally altered felsic tuff sequence adjacent to the major intrusives, but also in part transects the major intrusives (Figure 17-1), especially proximal to the Southern Thrust Fault. The copper domain forms an outer copper-silver-rich zone also within the altered felsic tuff sequence and was based on gold equivalent grades nominally greater than 0.3 g/tAuEq. The copper domain included in the Technical Report 2008 was not re-modelled. The mineralization appears to be constrained within the altered tuff sequence, with some apparent structural controls on the limits of the alteration.
All major constraining faults were modelled, being the western N-S orientated sub-vertical dipping faults, the northern E-W trending sub-vertical La Paz Faults, and the southern E-W trending, shallowly south dipping Southern Thrust Fault (Figure 17-2). A shale sequence was also modelled as a constraining contact along the eastern side of the deposit. The outer limit of the alteration domain appears to have been defined by these major constraining faults and or drilling, except in the south-eastern and north-western areas.
Interpretation of the domains was undertaken on 50 m spaced drill sections orientated along a bearing of 030º and 210º. A predominantly sub-vertical contact between the major intrusive domain and the alteration domain has been modelled, whilst the gold and copper domains appear to be concentrically zoned around the main intrusive domain (Figure 17-2). The geological boundaries have been interpreted, or where appropriate projected, from drilling to below the extent of the block model (1,600 m RL).
Wire frames or solids were created using GEMS (Gemcom) for the three low-grade gold domains (1000, 1103 and 1105). The surface projection of the modelled low-grade extents compared against geological mapping is shown in Figure 17-1, where the outer limit of the copper domain is shown as a blue line, whilst the outer limit of the re-modelled low-grade gold domain is shown as a solid black line.
As part of the re-logging and re-modelling program an oxidation model was also created. This model was then used to create a density model and was also used to assign metallurgical recoveries based on the available test results. . The oxidation boundary is strongly influenced by fracture density proximal to the main intrusive and the structural zones. The oxidation boundary below the weathering horizon was found to extend to significant depths along the fault zones. Figure 17-3 is an example of the oxidation model
69
superimposed on the structure wire-frames. The oxidation, particularly on the Northeast is strongly controlled by the parallel faults that form fault or shear zones up to 100 to 200m in width.
Figure 17-1 Cerro del Gallo Geological Model Extents
70
Figure 17-2 Cerro del Gallo Section
71
FAULT ZONES
Figure 17-3 Cerro del Gallo Section 1027CD Oxidation and Fault Wire-Frames.
72
17.2 Resource Estimation Database
The drill hole database used for this study consists of 354 drill holes as summarized below in Table 17-1.
A combination of RC and DDH drill holes were utilized, with all of the data being generated by SAM since 2004.
Table 17-1 Summary of the Drill Hole Database.
COMPANY YEAR RC HOLES
RC METERS
CORE HOLES
CORE METERS
TOTAL DRILL HOLES
SAM 2004 3 335.3 - 3SAM 2005 80 14,885.1 9 5,403.15 89SAM 2006 109 24,042.26 31 12,936.1 140SAM 2007 63 13,838.87 30 15,452.17 93SAM 2008 25 6,493.76 4 2,592.75 29
TOTAL 280 58,620.60 74 36,384.17 354
17.3 Compositing and Flagging
The variable down hole sampling length used at Cerro del Gallo in different drilling programs (RC vs Core) provides drill hole samples of non-uniform volume support. For statistics and resource estimation the samples were composited to 3 m to provide uniform length support and better reflect the potential bulk mining scenario. These composites were then flagged with the relevant solid code. The codes were then used to impose hard boundaries during the block model interpolation procedure for gold and silver.
17.4 Statistical Analysis
Although the RC and DDH drill hole data is of different volume support a previous study by Golder (2007) indicated that there were no significant differences between the distributions of these data types and therefore both drill types were combined for resource estimation.
The coefficients of variation for most of the element/domain combinations are relatively low, suggesting that the distributions are not strongly skewed and that the grade estimation process will not be strongly affected by the high grade tails of the distributions. The cumulative probability plots show few outlier values (Technical Report 2008). For the block grade estimation these high grade tails were cut to the 4g/t for gold values and 100 g/t for Ag values.
73
17.5 Bulk Density
A total of 895 HQ core samples were selected to represent the major lithologies for bulk density determination by SAM using the Caliper Method (Rabone and Hatcher, 2005) as follows:
1. The ends of the core were cut with a saw perpendicular to the longitudinal axis of the core; 2. The core was then dried; 3. The diameter of the core was measured with a digital caliper at three points and averaged; 4. The length of core was measured with a steel tape measure; and 5. The mass of the dry core was determined using scientific scales with a quoted accuracy of
±0.01 gram.
The core samples represented primarily fresh silicified felsic tuffs and felsic intrusive rocks which are typical host rocks to the primary copper-gold-silver mineralization at Cerro del Gallo. A graph of bulk density against down hole depth, shown in Table 17-4, displays a consistent set of values between 2.55 and 2.75 g/cm3. Some of the higher values are associated with 22 “skarn” (massive sulphides) samples that averaged 2.83 g/cm3. A total of 631 samples were logged as alteration/volcanics and averaged 2.68 g/cm3, while 228 samples were logged as intrusive (quartz monzonite) and averaged 2.63 g/cm3. Fourteen peripheral sediment samples averaged 2.70 g/cm3.
For the resource estimate, a dry bulk density of 2.65 g/cm3 was applied to all domains below the weathering surface. A density of 2.5g/cm3 was applied to domains above the weathering surface based on the model created during the recent re-modelling program.
74
-650
-600
-550
-500
-450
-400
-350
-300
-250
-200
-150
-100-5
002.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
ISB
D
DEPTH (mdh)
Sedi
men
tsSk
arn
Intr
usiv
esAl
tera
tion-
Volc
anic
s
Figure 17-4 Bulk Density vs. Down Hole Depth
17.6 Block Model
Based on the copper-gold-silver porphyry-style mineralization, the drill hole spacing, composite length, and a potential bulk mining scenario, a block size of 10 m N by 10 m E by 10 m RL was chosen, as listed in Table 17-2. The model was rotated -300 degrees at an angle perpendicular to the dominant drilling direction.
Table 17-2 Block Model Construction
East (X) North (Y) RL (Z)
Origin (m) 288900 233100 1,600
Extent (m) 1300 1250 800
Block Size (m) 10 10 10
The block model was coded with the geological domains using the listed wire frames and priorities. The gold domain forms an anulus in the brittle fracture zone around the intrusive stock (Figure 17-5).
75
Figure 17-5 Screen Capture Oblique E-W Section Gold Block Model View to NW.
17.7 Model Grade Estimation
Golder (2007) demonstrated that there were no significant correlations between Au, Ag and Cu at Cerro del Gallo and therefore these grade variables can be estimated independently. Copper was not modelled in this re-interpretation (see Technical Report 2008).
Grade estimation was by inverse distance squared (IDP2). Grade continuity was assumed to be isotropic for Au and Ag. For Au and Ag, hard boundaries were used to interpolate grades into the low-grade shells.
Three search passes were used for the grade estimation as follows:
1st pass a minimum of 9 samples and maximum of 15 samples 50 m by 50 m by 50 m (X, Y and Z) maximum 3 samples per drill hole i.e. at least 4 drill holes were used 2nd pass a minimum of 7 samples and maximum of 15 samples 100 m by 100 m by 100 m (X, Y and Z) maximum 3 samples per drill hole i.e. at least 3 drill holes were used 3rd pass a minimum of samples and maximum of 15 samples 150 m by 150 m by 150 m (X, Y and Z) maximum 2 samples per drill hole
76
17.8 Model Validation
Visual checks were made of the block model at all stages of construction to verify that the appropriate flagging and domaining was undertaken. Visual checks comparing the drill hole data to the estimated block grades was also undertaken. No obvious errors were noted. Screen plots of the block model were generated as part of the validation, with the 2,140 mRL plans shown as an example in Figure 17-6 and an oblique east-west section in Figure 17-7.
Figure 17-6 Au Block Model Plans for 2,140 mRL
Figure 17-7 Au Block Model along Section 1027CD with view to NW.
The estimated grades in the block model were also validated by comparing them with the grades of the composited drill hole data, as scatter plots and QQ plots, as shown in Figure 17-8 and Figure 17-9. The plots show that the block model is smoothed (the variance of the blocks is lower than the variance of the samples). The block model was also checked for global bias using swath plot checks between IDP2 estimates and the declustered composite data (nearest neighbour estimates), showing local averages along easting, northing and elevation (Figure 17-10). The graphs compare closely except at the highest elevation, but where the number of samples is very low.
Shale
Felsic intrusive core Low Grade Domain
1000 77
Figure 17-8 Block Model Validation XY Plot
Figure 17-9 Block Model Validation QQ Plot
0
0.05
0.1
0.15
0.2
0.25
0.3
0 500 1000 1500
AU (g
/t)
Easting
San Anton Swath Plot Au
ID2 Model
0
0.05
0.1
0.15
0.2
0.25
0.3
0 500 1000 1500AU
(g/t)
Northing
San Anton Swath Plot Au
ID2 Model Nearest Neighbor Au
0
0.05
0.1
0.15
0.2
0.25
0.3
0 500 1000 1500
AU (g
/t)
Northing
San Anton Swath Plot Au
ID2 Model Nearest Neighbor Au
0
10000
20000
30000
40000
50000
60000
0 500 1000 1500
No.
Blo
cks/
Com
posi
tes
Easting
San Anton Swath Plot Au
ID2 Model Nearest Neighbor Au78
San Anton Swath Plot Au San Anton Swath Plot Au
17.9 Resource Classification
After a visual review of the parameters generated during the grade estimation, such as number of samples, number of holes, estimation pass, etc, the following criteria were used to classify the mineral resource in accordance with NI43-101 guidelines:
• Measured Mineral Resource: first pass with closest drill hole a minimum of 9 samples with 4 drill holes located within 50 m of the block centroid;
• Indicated Mineral Resource: a minimum of 7 samples with 3 drill holes located within 100 m of the block centroid; and
• Inferred Mineral Resource: all remaining blocks within the interpreted mineralized domains.
Blocks in Domains 99 and all blocks below 1,600 were not assigned a resource classification. The former was due to lack of confidence in geological continuity. The latter was considered to be the maximum depth with reasonable prospects of eventual economic extraction with the prevailing metal prices. Blocks failing to meet the criteria to be interpolated in the first three search passes were also not assigned a resource classification.
17.10 Resource Estimate
The mineral resources have been estimated and classified based on the assumption of a large scale bulk mining and conventional heap leach circuit with an additional carbon-in-leach circuit added after the fourth year of mining. Based on the proposed operational scenario and taking into account the type of deposit, style of mineralization, favourable geometry, location of infrastructure, prevailing metal prices, and similar mining projects in Mexico and Australia, such as Peñasquito and Cadia respectively, the Mineral Resource is reported with a 0.2 g/t Au cut-off grade in the low-grade domains (1000, 1103 and 1105). The Mineral Resource estimated for 10 x 10 x 10 m (X, Y, Z dimensions) blocks is shown in Table 17-3, for the low-grade domains.
Table 17-3 Cerro del Gallo Mineral Resource
Class Mt Au g/t Ag g/t
Measured 88.5 0.63 13 Indicated 40.2 0.47 10
Measured + Indicated 128.8 0.59 12 Inferred 3.2 0.46 10
79
17.11 Resource Estimate Risks
Risks pertaining to the Mineral Resource estimate include: • Geological interpretation with respect to local short range controls on the mineralization, such
as fracture veinlet orientations in relation to drilling;
• The identification of significant fracture zones on which any potential post mineralization movement is not fully understood. However, no significant displacements have been recognized to date;
• The Mineral Resource is sensitive to Au cut-off grades.
17.12 Pit Optimization
Pit optimization was performed using Whittle® software to define potential pit resources, using reasonable estimates of economic and pit slope parameters. The final parameters incorporate mining, metallurgy, and processing inputs developed in this study. Optimization used only measured and indicated category (M&I) material for processing. All inferred category material is considered waste. Resource block sizes of 10m by 10m by 10m were used for the reserve estimate, utilizing both vertical and angled drill hole data, which has been composited. Given the smoothing effect of the compositing, and the additional smoothing inherent in the interpolation of blocks of this size, Reserva considers the 10m x 10m by 10m blocks to be representative of the dilution that will occur given the equipment planned for mining, and for this level of study. Varying gold prices are used to evaluate the sensitivity of the deposit to the price of gold as well as to develop a strategy for optimizing project cash flow in Life of Mine (LOM) schedules. Cash-flow optimization is achieved by mining phases that optimize at a lower price first, followed by push backs or phases to mine to the ultimate pit limit. It should be noted that the optimization was constrained in the north-west sector of the pit to prevent the encroachment of the generated pit on the San Anton drainage. This restriction was imposed as there are possible environmental and social issues in this regard. The removal of this constraint represents a potential upside in the event that an engineering solution is developed to address these issues Economic Parameters Tables 17-4 and 17-5 summarize the economic parameters used for pit optimization.
80
Table 17-4 Economic Parameters – Whittle Optimization (Heap 4-5.5 Mtpa)
Oxide Material Partial Oxide Material Units Au Ag Au Ag
Metal Recovery 75% 55% 55% 45%
Metal Price US$/oz 900.00 15.00 900.00 15.00
Price US$/g 28.936 0.482 28.936 0.482
Payable 99.75% 99.75% 99.75% 99.75%
Payable price US$/g 28.86 0.48 28.86 0.48
Transport US$/oz 0.048 0.048 0.048 0.048
US$/g 0.002 0.002 0.002 0.002
Refining Costs US$ / oz 1.450 0.200 1.450 0.200
US$/g 0.047 0.006 0.047 0.006
Total Selling Costs US$/g 0.048 0.008 0.048 0.008
Mine Gate Revenue US$/g 28.815 0.473 28.815 0.473
Other Whittle Inputs Oxide POX
Mining Costs Waste US$/t rock moved 1.63 1.96
Ore US$/t rock moved 1.63 1.96
Processing Cost US$/t processed 3.50 3.50
Admin Cost US$/t processed 0.68 0.68
Table 17-5 Economic Parameters – Whittle Optimization (CIP 2.8 Mtpa)
Fresh Material Units Au Ag
Metal Recovery 78% 20%
Metal Price US$/oz 900.00 15.00
Price US$/g 28.936 0.482
Payable 99.75% 99.75%
Payable price US$/g 28.86 0.48
Transport US$/oz 0.048 0.048
US$/g 0.002 0.002
Refining Costs US$ / oz 1.450 0.200
US$/g 0.047 0.006
Total Selling Costs US$/g 0.048 0.008
81
82
Mine Gate Revenue US$/g 28.815 0.473
Other Whittle Inputs Fresh
Mining Costs Waste US$/t rock moved 1.96
Ore US$/t rock moved 1.96
Processing Cost US$/t processed 6.93
Admin Cost US$/t processed 0.75
A simplified rock type model based on oxidation state was developed for optimization purposes, given that metal recoveries were estimated for weathered (oxidized), partially oxidized and fresh material (Table 17-6). The main domain rock type for the main low-grade domain (1000) was adapted based on the interpreted oxide state model as follows:
Table 17-6 Whittle Rock Codes Incorporating Oxidation.
Oxide State Code Whittle RX Type Code Weathered 600 Oxide 1000
Strongly Oxidized 800 Partially Oxidized 1010 Weakly Oxidized 700 Partially Oxidized 1010
Fresh 500 Fresh 1020
Base prices of US$900/oz for gold and US$15/oz for silver were used for economic analysis, although pits were also optimized with gold prices ranging from US$300 to US$1,100/oz using US$20/oz increments. Pit Slope Parameters In the absence of any detailed geotechnical information, default pit slopes of 45º were used in all sectors for pit optimization. Pit Optimization Results Table 17-7 shows the pit optimization results by the gold price used to create individual Whittle® pit shells. The base case of US$900/oz Au and US$15/oz Ag is highlighted.
Table 17-7 Whittle® Pit Optimization Results by Gold Price
Price Ore Contained Gold Contained Silver Waste Total Strip
(US$/Oz) Tonnes (g) (g/t) (Oz) (g) (g/t) (Oz) Tonnes Tonnes Ratio
300 7,344,200 6,233,910 0.849 200,425 145,040,908 19.75 4,663,170 1,026,856 8,371,056 0.14
320 10,220,594 8,300,141 0.812 266,856 185,692,947 18.17 5,970,162 1,338,664 11,559,258 0.13
340 12,121,491 9,584,727 0.791 308,156 213,054,622 17.58 6,849,860 1,290,484 13,411,975 0.11
360 14,380,857 11,296,301 0.786 363,184 241,964,800 16.83 7,779,343 1,739,139 16,119,996 0.12
380 16,331,609 12,483,767 0.764 401,362 269,482,492 16.50 8,664,057 1,970,561 18,302,170 0.12
400 18,416,511 13,896,252 0.755 446,775 301,847,305 16.39 9,704,609 2,275,260 20,691,771 0.12
420 20,104,116 15,067,995 0.749 484,447 327,053,240 16.27 10,514,998 2,818,912 22,923,028 0.14
440 21,275,299 15,781,361 0.742 507,382 347,341,373 16.33 11,167,276 2,986,126 24,261,425 0.14
460 23,635,797 17,385,047 0.736 558,942 387,168,819 16.38 12,447,757 4,508,435 28,144,232 0.19
480 27,139,847 19,635,698 0.724 631,302 443,383,286 16.34 14,255,093 5,992,619 33,132,466 0.22
500 28,600,194 20,578,773 0.720 661,622 467,038,124 16.33 15,015,613 6,553,653 35,153,847 0.23
520 33,675,525 24,414,477 0.725 784,943 559,012,164 16.60 17,972,645 13,066,852 46,742,377 0.39
540 40,332,333 29,173,243 0.723 937,941 626,098,805 15.52 20,129,529 17,943,910 58,276,243 0.44
560 42,256,404 30,462,470 0.721 979,390 649,932,841 15.38 20,895,810 19,256,767 61,513,171 0.46
580 43,773,954 31,378,589 0.717 1,008,844 668,633,024 15.28 21,497,035 19,768,614 63,542,568 0.45
600 45,397,860 32,378,565 0.713 1,040,994 686,909,105 15.13 22,084,624 20,607,474 66,005,334 0.45
620 47,193,014 33,488,937 0.710 1,076,694 708,879,710 15.02 22,790,995 21,929,387 69,122,401 0.46
640 49,690,464 35,009,665 0.705 1,125,586 736,987,698 14.83 23,694,687 24,251,654 73,942,118 0.49
660 50,967,464 35,714,096 0.701 1,148,234 752,249,151 14.76 24,185,354 24,959,656 75,927,120 0.49
680 52,423,278 36,557,313 0.697 1,175,344 767,961,766 14.65 24,690,526 26,170,267 78,593,545 0.50
83
84
Whittle® Pit Optimization Results by Gold Price (Continued)
Price Ore Contained Gold Contained Silver Waste Total Strip
(US$/Oz) Tonnes (g) (g/t) (Oz) (g) (g/t) (Oz) Tonnes Tonnes Ratio
700 54,614,378 37,860,154 0.693 1,217,231 789,469,698 14.46 25,382,021 28,899,423 83,513,801 0.53
720 55,690,128 38,411,501 0.690 1,234,958 802,661,003 14.41 25,806,131 29,484,592 85,174,720 0.53
740 57,181,928 39,292,185 0.687 1,263,272 816,422,655 14.28 26,248,578 31,669,498 88,851,426 0.55
760 59,063,428 40,317,152 0.683 1,296,226 835,683,340 14.15 26,867,823 34,074,671 93,138,099 0.58
780 62,092,078 42,062,413 0.677 1,352,337 862,531,012 13.89 27,730,995 38,869,077 100,961,155 0.63
800 64,625,478 43,557,225 0.674 1,400,396 888,615,488 13.75 28,569,630 43,589,740 108,215,218 0.67
820 65,574,178 43,984,015 0.671 1,414,118 902,032,891 13.76 29,001,009 44,371,191 109,945,369 0.68
840 66,448,678 44,408,590 0.668 1,427,768 912,869,121 13.74 29,349,402 45,422,784 111,871,462 0.68
860 67,667,678 45,073,923 0.666 1,449,159 927,196,497 13.70 29,810,037 47,903,180 115,570,858 0.71
880 68,907,878 45,709,089 0.663 1,469,580 939,963,421 13.64 30,220,503 50,138,512 119,046,390 0.73
900 69,965,228 46,259,154 0.661 1,487,265 950,305,240 13.58 30,553,000 52,092,879 122,058,107 0.74
920 71,178,928 46,857,365 0.658 1,506,498 964,452,070 13.55 31,007,831 54,415,980 125,594,908 0.76
940 72,011,028 47,268,447 0.656 1,519,715 973,054,044 13.51 31,284,391 56,144,506 128,155,534 0.78
960 74,849,178 48,535,433 0.648 1,560,449 1,019,808,629 13.63 32,787,584 61,245,354 136,094,532 0.82
980 75,893,278 48,982,668 0.645 1,574,828 1,035,942,020 13.65 33,306,285 63,047,022 138,940,300 0.83
1000 76,338,478 49,139,437 0.644 1,579,868 1,042,942,870 13.66 33,531,367 63,348,830 139,687,308 0.83
1020 77,178,528 49,476,864 0.641 1,590,717 1,056,032,196 13.68 33,952,198 64,764,904 141,943,432 0.84
1040 78,124,578 49,917,432 0.639 1,604,882 1,067,222,121 13.66 34,311,962 67,006,553 145,131,131 0.86
1060 78,628,078 50,151,883 0.638 1,612,419 1,072,154,325 13.64 34,470,536 68,260,850 146,888,928 0.87
1080 79,449,578 50,530,030 0.636 1,624,577 1,081,859,889 13.62 34,782,577 70,420,768 149,870,346 0.89
1100 80,000,778 50,751,851 0.634 1,631,709 1,090,378,595 13.63 35,056,460 71,517,710 151,518,488 0.89
Marginal, or internal, cut-off grades are calculated in the Whittle optimization process and are applied on a block-by-block basis. The calculated cut-off grades for the base price of US$900/oz gold and US$15/oz silver are as follow:
Table 17-8 Process vs. Cut-Off
Material Type Process Cut-Off (g/t) Gold Silver
Fresh Mill 0.342 81.17 Partially Oxidized Heap 0.244 18.18
Oxide Heap 0.179 14.84
Note that when there are two or more elements with cut-offs, Whittle uses an approach which has the same effect as using an equivalent metal. If the sum of the grades divided by the corresponding cut-offs is greater than one, then the material is processed.
Figure 17-11 shows selected Whittle® pits on cross-section 1027CD. The shape of the deposit creates a natural saddle in the middle of the deposit. This saddle is about 200m wide at the 2180m elevation. Figure 17-12 shows a plan of the 2180m bench with Whittle® pit outlines for select pits.
Figure 17-11 Selected Whittle Pits – Cross-Section 1027CD (Looking North-West)
85
Figure 17-12 Selected Whittle Pits – Planview 2180L Elevation
The Whittle pit shells shown in Figure 17-11 were selected as possible phases or pushbacks for use in the Life-of-Mine (LOM) scheduling process, leading to a preliminary mine production schedule for economic evaluation purposes. The US$340 Au pit shell is used as the basis for the first stage of mining as it exhibits a low strip ratio and contains in the order of two years of ore for heap processing. This pit shell mines near-surface material lying above the central poorly mineralized (Au) core of the deposit, and on the SW flank. The US$480 Au pit shell also exhibits a low strip ratio and corresponds to a possible Phase 2. This phase largely expands mining to the south of the central core, and establishes mining on the NE flank. The remaining phases up to the base case $900 Au pit expand the mining to depth to the South and SE of the central core, and were selected with reduction of stripping hurdles in the scheduling process and mining width in mind. At a gold price of US$900/oz and silver price of US$15/oz, resources within the pit were estimated at 69.9 Mt comprising 0.66g/t gold and 13.6g/t silver, or 1.49 million ounces of gold and 30.5 million ounces of silver (Table 17-9). The conceptual strip ratio is 0.74:1.
86
Table 17-9 Optimized Pit Shell Resources (US$900/oz Au & US$15/oz Ag
Resource Category Tonnes
(Millions) Au
(g/t) Ag
(g/t) Au
(Moz) Ag
(Moz) Measured 60.2 0.68 14.0 1.31 27.0 Indicated 9.7 0.56 11.2 0.16 3.5
Total 69.9 0.66 13.6 1.49 30.5 A breakdown of material by category in the base case pit is presented in table 17-10.
Table 17-10 Material Breakdown by Category
Material Type Tonnes (Millions) Gold Grade (g/t) Silver Grade (g/t)
Oxide 14.4 0.58 16.7 Partially Oxidized 27.2 0.70 11.4
Fresh 28.3 0.66 14.1 Total 69.9 0.66 13.6
SECTION 18. OTHER RELEVANT DATA AND INFORMATION (ITEM 20)
The writers are not aware of any other material information that should be presented in this technical report to ensure that the resource estimate and preliminary assessment are presented transparently.
SECTION 19. ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES (ITEM 25)
19.1 Scoping Study (Preliminary Assessment)
A scoping study (preliminary assessment) for the development and exploitation of the Cerro del Gallo deposit to recover gold and silver has been completed. The scoping study is based on measured and indicated resources as detailed in the preceding sections. The following sections give the basis and the outcome of the Cerro del Gallo study. 19.2 Mining
Due the geometry and proximity to the surface of the gold and silver resources within the Cerro del Gallo gold deposit, open pit mining methods will most likely be the most suitable mining method and this has been assumed for the PA.
87
88
It has been assumed that all mining activities will be carried out by a mine operations contracting company with SAM providing management, geology, engineering and planning, and survey services.
Cost estimates based on similar operations and recent data have been used and are based on conventional open pit mining equipment and methods. For the near surface weathered material a cost of US$1.63 per tonne mined has been used. For the more competent oxide and fresh rock material, an average cost of US$1.93 per tonne mined has been used.
19.2.1 Mine Production Schedule
Gemcom MineSched was used to generate a preliminary mine schedule for Cerro del Gallo based on a combined heap leach/carbon-in-leach operation and using the Whittle® software pit optimization results.
For the study, an annual mine schedule was developed using large blocks. It is expected that block sizes will decrease, as the resolution of the schedule requires shorter time periods. When it comes to shorter term scheduling as part of a full feasibility study, it is recommended to use a block size of 10 x 10 and double bench or 5 x 5 with a single bench depending on the resolution required. This will maintain the pit wall slope that is required to correctly mine the hillsides. The schedule used for the study has not been optimised and there is still more work to be completed to ensure that all ‘ore’ stockpiles are kept to minimum levels. This may affect the grade distribution over the life of the operation but not the overall average grades for the gold and silver.
After investigating the block model and the material distribution it was decided that each individual material class could support its own location without causing continuity problems or problems with spatial relationships. These locations were constructed using constraint files in Gemcom Surpac. Mining the correct amount of each material is important in this schedule; a single resource has been created for each material class. In reality this would be considered a single resource fleet for the purposes of reporting in a long-term schedule. When generating reports the individual resource values can be aggregated to give an overall resource value. With a large number of locations and an intimate relationship between the material classes many spatial relationships were defined to ensure no undermining occurred. Quality targets were set higher than the highest grade to ensure, where possible, maximum grade was selected from the mining locations for processing. The Minesched software system was used to generate a series of charts created to assist in the analysis (Figure 19-1 and Figure 19-2). Graphical results were created to validate the schedule and periods were written back to the block model.
Figure 19-1 -Life of Mine Material Balance
89
Figure 19-2 Heap Leach and CIL Material Balance
90
91
Table 19-1 Conceptual Annual Mine Schedule
San Anton Resource Corporation - Cerro del Gallo Scoping Study
Heap Leach CIP Option 4
4-5.5Mtpa Heap then 2.7Mtpa Heap + 2.8Mtpa CIL
Mine Production Forecast
Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Total
Weathered Ore (tonne)
3,873,605 3,313,252 3,783,129 1,709,798 1,873 536,613 393,675 166,458 29,302 140,719 297,660 86,758 19,062 14,351,904
Au (g/t) 0.70 0.60 0.51 0.56 1.72 0.34 0.42 0.43 0.42 0.43 0.43 0.43 0.43 0.58
Ag (g/t) 18 20 14 14 20 13 15 15 12 16 16 16 16 16.6
Oxide Ore (tonne) 126,395 686,748 1,643,412 2,190,202 2,698,127 2,163,387 2,313,722 2,533,542 2,670,698 2,559,281 2,409,738 2,613,242 1,154,089 1,436,609 27,199,190
Au (g/t) 1.42 1.23 0.80 0.78 0.93 0.58 0.55 0.64 0.79 0.53 0.59 0.72 0.62 0.65 0.70
Ag (g/t) 15 15 14 13 13 14 16 12 11 7 10 8 9 7 11.4
Fresh Ore (tonne) 1,600,000 2,768,620 2,800,000 2,807,671 2,800,000 2,800,000 2,800,000 2,807,671 2,800,000 2,800,000 1,533,831 28,317,794
Au (g/t) 0.80 0.77 0.57 0.69 0.77 0.67 0.61 0.60 0.68 0.60 0.56 0.66
Ag (g/t) 18 19 18 16 12 14 12 12 12 12 10 14.1
Waste (tonne) 160,000 1,840,000 4,800,000 2,500,000 6,900,000 8,900,000 7,100,000 2,600,000 5,400,000 4,600,000 3,000,000 1,300,000 2,200,000 425,521 51,725,521
.
Material Mined (tonne)
4,160,000 5,840,000 10,226,540 8,000,000 12,368,620 14,400,000 12,615,068 8,100,000 10,900,000 10,100,000 8,515,068 6,800,000 6,173,151 3,395,961 121,594,409
Ore Produced 4,000,000 4,000,000 5,426,540 5,500,000 5,468,620 5,500,000 5,515,068 5,500,000 5,500,000 5,500,000 5,515,068 5,500,000 3,973,151 2,970,440 69,868,888
Strip Ratio (Waste:Ore) 0.04 0.46 0.88 0.45 1.26 1.62 1.29 0.47 0.98 0.84 0.54 0.24 0.55 0.14 0.740
19.3 Process Facilities
For this study base case was established and used to generate a reasonable capital cost estimate for the total development.
The base case for this study is summarised below.
• Commencement of heap leach at a process rate of 4 million tonnes per annum (Mtpa) treating primarily weathered material from near the surface.
• Expanding crusher to 5.4 Mtpa and feeding the heap leach at this higher rate for one year.
• Commencing processing of fresh material through the carbon-in-leach plant (CIL) during the fourth year of operations and reducing the feed to the heap leach.
• Combined heap leach (2.7 Mtpa) and CIL (2.8 Mtpa) operating by year 5.
The metallurgical recovery of the pay metals used is based on the metallurgical test results from the Gold Zone 30 day tests and material classifications. The final overall recovery also includes process recovery losses and the final values were benchmarked against other operations and projects (Table 19-1).
Table 19-2 Metallurgical Design Criteria
Weathering Classification
Process Gold Recovery
Design (%)
Silver Recovery
Design (%)
Weathered Ore Heap Leach 75 55
Oxidized Ore Heap Leach 55 45
Fresh Ore Carbon-in-Leach
78 20
A capital cost for the crushing plant and the heap leach facility has been built up from quotations and unit cost estimates. This cost has been reviewed and commented on by Sedgman Metals Engineering Services (Sedgman) and their comments are provided at the end of this section. The capital cost estimate for the 2.8 Mtpa CIL circuit and associated facilities has been estimated from the costs of several similar projects completed over the past 3 years. 19.3.1 Crushing / Stacking Facility The equipment assumed for the crushing plant consists of conventional equipment typical for this duty. Project specifications were sent to major suppliers and costs and recommendation were provided for the
92
purposes of the study. Additional cost estimates were included for overland and stacking conveyors based on a conceptual site layout.
19.3.2 Heap Leach Pad The heap leach pad design and cost estimate is based on a permanent pad employing a two part liner system of a compacted layer of low permeability soil with a HPDE synthetic liner.
It has been assumed that an initial pad area will be developed then expanded over the life of an operation.
Included in the design are three process ponds (pregnant, intermediate, and barren) installed to contain the heap leach solutions. The process ponds have a double synthetic liner and fitted with leak detection. A full irrigation utilising drip emitters is also included.
The water management system has been designed to accommodate a 100 year, 24 hour storm event. A storm water pond with a single HDPE liner is provided to capture water collected in the pad area during rainfall events and any potential process pond overflows. An emergency hydrogen peroxide detoxification plant to reduce the cyanide content of the solution to safe levels, in the event discharge becomes necessary has been included.
19.3.3 ADR Facility The adsorption-desorption-regeneration (ADR) facility for the recovery of gold and silver consists of the following major items:
• Carbon-in-column (CIC) circuit to handle up to 600m3 per hour of pregnant solution flow
• Carbon desorption or stripping circuit based on a conventional Anglo American Research Laboritories (AARL) split elution method
• A rotary gas fired carbon regeneration kiln
A Merrill-Crowe facility was considered but not considered necessary for the metal loadings estimated.
19.3.4 Metal Recovery Facility Conventional electrowinning cells, cell sludge filtration equipment and smelting furnace have been sized appropriately for the estimated metal production.
19.3.5 Reagent Facility Allowances have been included for all reagent requirements for the heap leach and CIL circuits and environmental safeguards.
19.4 Infrastructure
Infrastructure to support the operation includes the following facilities:
• access roads
• site utilities and services: power distribution, fuel storage and distribution, water treatment and distribution, wastewater collection and treatment, and compressed air
• service buildings
• surface water management facilities
• waste handling facility and landfill site
• fleet of mobile equipment for roads, yard and other site services
• communication and information systems
93
19.4.1 Power Distribution Power is assumed to be supplied from the main Dolores Hidalgo to Guanajuato 115kV three phase overhead power transmission line operated by the Comisión Federal de Electricidad (Mexican Federal Power Authority).
The high voltage power line passes near the proposed open pit and waste dump area. A spur line can be constructed to connect the line to the project switchyard. The switchyard can be built close to the crushing facility.
19.4.2 Water Supply Total net makeup water required from all sources is estimated at 140 m3 per hour. It has been assumed that raw water will come from bores and environmental surface water run-off dams and pumped to a storage tank near the process plant. .
19.4.3 Service Facilities Services that have been allowed for in the study include the following:
• Diesel fuel storage and distribution to cater for all operational requirements
• Workshops and warehouse
• Administration building
• Dry canteen
• Ablutions located at various locations around the site
• Assay laboratory for mine and process plant samples and environmental monitoring
• Plant nursery
Personnel will reside in the surrounding towns and villages and there are no plans to erect a permanent camp. Personnel will either drive their own vehicle or bussed to site from centralized pick-up sites.
19.4.4 Information and Communication Systems A satellite based communications system combined with local radios and repeater network has been included.
19.4.5 Roads and Run-off Control Road construction is assumed to consist mostly of all-weather gravel construction with some allowance for paved sections around parts of the process and workshop facilities.
Surface water from within the catchment area encompassing the mining and processing areas is planned to be collected in environmental control dams and directed to the process circuits as part of the make-up water requirement.
19.4.6 Non-mining Mobile Equipment A fleet of mobile equipment has been included for personnel transport, safety, process facility maintenance, general operational purposes and support for workshop activities
94
19.5 Site Layout
The conceptual site layout includes the mine, waste dump, crushing facility, overland conveyor route to the nearest practical site for the heap leach pad (HLP) as shown in Figure 19-3. The HLP is based on 4 pads of 8 Mt capacities each. Areas for the process and storm water ponds and process facilities are shown.
Figure 19-3 Conceptual Site Layout
19.6 Environmental and Social Considerations
SAM has selected Heuristica Ambiental to be the lead environmental consultant responsible for collecting baseline data and obtaining required regulatory approvals. Heuristica has a proven track record of successful environmental permitting in Mexico.
19.6.1 Environmental The Secretaria de Medio Ambiente y Recursos Naturales (SEMARNAT), a Federal government department, is the chief agency regulating environmental matters in Mexico and is responsible for EIA approvals of projects in Mexico. The Federal government is responsible for all natural resource management in Mexico and has numerous departments that manage the different resources areas i.e. Comision Nacional del Agua (CNA) has authority over all the matters concerning water rights and
95
activities that affect underground and surface water supplies, Instituto National de Antropologia e Historia (INAH) is responsible for cultural heritage management.
The Project will develop an Environmental and Social Impact Assessment document in compliance with Mexican requirements. The required studies and documentation will be submitted to SEMARNAT for approval.
Baseline studies for the Environmental Impact Assessment (EIA) have been scoped and consultants have been selected. Heuristica Ambiental has completed the Flora and Fauna Inventory as well the Forest Inventory.
19.6.2 Community Principles SAM already has an active community consultation program and provides resources and funding for several community groups and activities. A baseline community survey has been prepared and will be conducted as the Project advances.
Integral to the MIA-P approval process is that SEMARNAT conducts a public consultation period for the Project once the MIA-P has been submitted and during their assessment timeframes. SEMERNAT will not approve the MIA-P document until general agreement with the community on the Project has been reached.
The Project will conduct its own documented community consultation process in advance of submitting the EIA documentation to the Mexican government. This will allow the company to meet its obligation for prior consultation and for the communities’ concerns to be adequately incorporated into the Project. This process will also allow time for negotiation and agreement on issues that the community has concern over, prior to the formal Mexican government consultation period for the EIA.
The Project will develop a community complaints register and procedure so that a documented process exists for dealing with any community grievances during the Project implementation and operational phases.
19.6.3 Closure and Rehabilitation A detailed closure and rehabilitation plan will be developed for the project. The closure plan will be designed to minimize environmental impacts associated with the project. Principles of the Best Environmental Practice (BEP) for closure planning will be applied during development of this plan. The plan will be reviewed on an ongoing basis during the operation of the facilities and modified as appropriate to meet all regulatory standards and requirements. It is anticipated that the plan will include the following remediation and reclamation plans as a minimum:
• Closure and reclamation of the heap leach facilities.
• Closure and reclamation of the open pit area.
• Closure and reclamation of the waste rock stockpile.
• Closure and reclamation of the sediment ponds.
• Closure and reclamation of access and haul roads.
• Closure of all buildings, facilities and equipment.
19.7 Project Implementation
The Feasibility Study period has been assumed to require 12 months to complete. During this phase other investigations and permit applications will be undertaken in parallel with the engineering program.
96
This work is summarised as follows:
• Metallurgical testing
• Environmental baseline studies
• Investigations into water and power availability
• Community consultation
• MIA-P approval
• Water and construction permitting
19.7.1 Implementation Assumptions The project will be engineered, procured and managed by contractor(s) reporting to the Owner's Project Director. The contractor(s) will act as the Owner's agent in hiring specialized contractors, procuring materials and equipment for the project and managing the overall site.
The primary assumptions are:
• labour requirements will be sourced primarily in Mexico
• specialized contractors will be used to execute the planned work
• all major equipment and facilities will be erected on site
19.7.2 Project Health, Safety and Environment The project will implement safety and training programmes and workplace health and safety standards and environmental controls which conform to all applicable Mexican standards. The target will be to achieve zero incidents (i.e. safety and environmental) through all the project phases.
19.7.3 Implementation Schedule The total duration of the implementation program is 12 months, including commissioning. The program duration is conditional on the following:
• The preparation and submission of the MIA-P document, community consultations and the assessment and approval period by SEMARNET of the MIA-P are completed as scheduled.
• Any long lead items are ordered in the feasibility stage.
• All statutory approvals and permits are in place at the start of design engineering.
• Engineering at the completion of the Feasibility Study will be sufficiently advanced to allow contract awards and purchase orders to be issued immediately upon project approval.
19.8 Markets
Operations at Cerro del Gallo are anticipated to produce an annual average of 72,000 ounces of gold and 805,000 ounces of silver in the form of doré bar.
The processing facility will produce a high grade silver-gold doré which is expected to be readily marketable. For this study it was assumed that an established refiner in North America would refine the doré and either purchase or return the refined metal based on typical refining contract terms. The bars will be trucked to the refiner. The contract terms assumed were obtained from a project with a similar product.
The refining terms assumed are:
• Delivery Transportation cost to refinery by owner
97
• Refining Treatment Charge $0.20/oz net weight received
• Gold Return 99.75% of assayed contents
• Silver Return 99.75% of assayed contents
• Refining Charge $1.45/oz gold credit
At this time no discussions or agreements have been made with any refiners for the future product from the operation.
19.9 Royalties
A Net Smelter Return royalty of 4% has been applied based on the gross revenue received by the mine less costs incurred subsequent to doré production, which includes refining, transportation, and insurance costs.
19.10 Taxes
The project will ultimately be subject to Mexican Tax law but for the purposes of this preliminary assessment all economic evaluations have been completed on a pre-tax basis.
19.11 Capital Cost
The order of magnitude capital cost estimate was prepared in constant third quarter 2009 US dollars with an expected range of accuracy of +/-30%. The capital cost for the detailed engineering and construction of an open pit mine, processing facility and infrastructure to initially process 4Mtpa of material by heap leach is US$82.1million. The estimate is summarized in Table 19-3. The additional capital estimated for the 2.8Mtpa CIL plant plus additional crushing capacity is US$68.3 million. Sustaining capital for periodic expansion of the heap leach pad, process equipment replacement over the life of the project and closure is estimated at US$30.7 million.
98
Table 19-3 Capital Cost Estimate +/-30%
Cost
(000’s US$)
Direct Cost
Mining 1,850 Process 41,150 Infrastructure 9,360 Subtotal 52,360
Indirect Costs
EPCM 6,310 Construction 8,660 Subtotal 10,850
Direct + Indirect Costs 63,210
Owners Costs 8,660
Contingency 10,260
Project Cost 4mtpa Heap Leach 82,130
For Additional 2.8mtpa CIL Facility + Crusher Expansion (including 19% contingency)
68,262
Life of mine sustaining capital 30,673
The capital cost estimate accuracy is a function of project definition and the amount of completed engineering. The order of magnitude capital cost estimate relies on preliminary information, budgetary vendor quotes, similar project benchmarks and the assumptions outlined in the study.
19.11.1 Heap Leach Direct Costs The detailed breakdowns of the direct costs are shown in Table 19-4. Direct costs include the following:
• Mine Preproduction Development
• Procurement of process equipment
• Labour for equipment installation
99
• Contractor provided construction equipment
• Supply and installation of bulk materials
• Buildings
• Procurement and installation of utilities and distribution systems (electricity, water, IT, communications)
The direct cost estimate for the mine was developed from the calculation of preproduction material requirements for overliner for the heap leach pad and the contract mining rate. The process facility estimate was developed utilising vendor quotes for major equipment (i.e. crushers, feeders, screens, overland conveyor, pad and pond liner, heap leach piping, and ADR facility) and benchmarks from similar projects.
Infrastructure costs were estimated from bench marks for building costs, publicly available cost information and the total value was cross-checked by benchmarking costs associated with anticipated road construction, water infrastructure, utility installations and buildings required for the operation.
Table 19-4 Direct Capital Cost Breakdown
Cost Area Distribution
Total Distribution
USD 000's % % Direct Cost Mining $1,850 3.5 2.3 Crushing $20,082 38.4 24.5 Overland Conveyor $5,985 11.4 7.3 Leach Pad Conveying $3,307 6.3 4.0 Heap Leach Pad and Ponds $6,253 11.9 7.6 ADR Facility $5,527 10.6 6.7 Infrastructure $9,355 17.9 11.4Sub-Total Direct Costs $43,021 100.0 61.1
19.11.2 Heap Leach Indirect Costs Indirect costs include:
• Engineering, Procurement and Construction Management Fee
• Other Indirect Cost
o Construction Accommodation, Catering and Housekeeping
o Temporary construction buildings and services
o Commissioning & start up
o Site Security
o Fire, Medical and Safety
o Mobilization and demobilization
• Freight
100
The indirect cost estimate is based on industry standard percentages of total direct costs Table 19-5. The project is anticipated to have a low level of complexity because of the location and use of well proven process facilities. The percentages utilised for indirect costs are as follows:
• EPCM 10% of direct costs
• Other Indirect 7% of direct costs
Freight was calculated by applying a factor to the mechanical equipment cost.
Table 19-5 Indirect Cost Breakdown
Cost Cost Distribution
Total Distribution
Indirect Cost EPCM $6,314 58.2 7.7 Construction Indirects $3,536 32.6 4.3 Freight $1,005 9.3 1.2 Sub-Total Indirect Costs $10,855 100.0 13.2
19.11.3 Heap Leach Owners Cost The owners cost was developed to account for costs associated with management of the project during execution (Owners Team), land purchase, implementation of an operating organisation, first fills and spares inventory, consultants during project execution and non-mining mobile fleet. The cost estimate is summarised in Table 19-6.
Table 19-6 Owners Cost Breakdown
Cost Cost Distribution
Total Distribution
USD 000's % % Owners Cost First Fills $1,031 11.9 1.3 Spares $359 4.1 0.4 Mobile Equipment $617 7.1 0.8 Labour $2,495 28.8 3.0 Land $2,426 28.0 3.0 Consultants $1,733 20.0 2.1 Sub-Total Owners Costs $8,661 100.0 13.0
First fills were estimated assuming one month consumption of material would be placed into the diesel, reagent storage facilities and warehouse. The process maintenance spares were estimated based on the capital cost of the equipment and consumption of maintenance consumables from the operating cost estimate.
101
Mobile equipment costs were a first principle estimate based on the required equipment and publicly available pricing.
Labour is comprised of two components, the team that will manage the project during the execution phase and the operating labour costs associated with implementing the operating organisation, employee indoctrination and training before commissioning. Senior management, technical and senior operating / maintenance employees were recruited based on the need to participate in employee selection, write operating / maintenance manuals, establish training programs, etc. Operating and maintenance personnel were assumed to start two months before commissioning, with management and technical personnel four months ahead of commissioning if not involved in the operating organisation implementation activities.
The land associated with the mine and facilities must be purchased before construction can proceed. Based on the site layout and land ownership registry the properties that would need to be purchased were indentified and the value per hectare established based on previous SAM purchases.
The costs associated with utilising consultants for recruiting, permitting, legal, development of training programmes, etc. during the execution phase were based on previous experience.
19.11.4 Heap Leach Contingency Contingency is a provision of funds for additional costs unallocated in the capital cost estimate due to the current level of project definition. Contingency does not include costs associated with variation in FOREX, escalation or project finance costs. A contingency factor between 10 and 30% was applied to the individual line items in the estimate based on the level of information available, area complexity and thoroughness of the vendor quote used to develop the mechanical equipment costs. The total amount of $10.26 million is proportionate with the level of accuracy of the cost estimate and project complexity.
19.11.5 Carbon-in-Leach and Crusher Expansion Capital Estimate The capital cost estimate for the expansion of the crushing plant to 5.5 Mtpa and the addition of a 2.8 Mtpa CIL processing facility is estimated at $68.2 million. The crusher expansion was estimated using quotes from addition crushing equipment and appropriate installation and ancillary equipment cost factors. The estimate for the CIL facility was estimated by analysing published capital costs from several similar developments, scaling the costs using the ‘six tenths’ rule and averaging the costs. This is a +/-30 percent estimate and considered appropriate for this level of study.
102
Table 19-7 Capital Cost Estimate for the CIL Expansion
Cost Area
Distribution Total
Distribution
USD % % Direct Cost Crushing $5,700,000 12.9 8.4 Ore Storage & Grinding $12,603,217 28.6 18.5 Leaching $16,931,114 38.4 24.8 Tailings Storage Facility $3,800,300 8.6 5.6 Infrastructure $5,000,195 11.4 7.3 Sub-Total Direct Costs $44,034,826 100.0 64.5 Indirect Cost EPCM $5,504,353 58.1 8.1 Construction Indirects $3,963,134 41.9 5.8 Sub-Total Indirect Costs
$9,467,488 100.0 13.9
Owners Cost First Fills $494,084 10.1 0.7 Spares $800,000 16.3 1.2 Labour $1,364,325 27.8 2.0 Land $1,547,480 31.5 2.3 Consultants $700,000 14.3 1.0 Sub-Total Owners Costs $4,905,889 100.0 7.2 Contingency $9,853,494 14.4 Project Total $68,261,697 100.0
19.11.6 Sustaining Capital Sustaining capital was estimated at $30.7 million to cover expenditures for expanding the heap leach pad and replacement of process equipment Table 19-8. The leach pad cost was calculated from first principles in the same manner as the initial capital cost while the cost for process equipment replacement was based on a percentage of the process facility direct cost. A site rehabilitation cost to decommission the mine, process facility and heap leach pad area was also included.
Table 19-8 Sustaining Capital Breakdown
Area Cost Distribution USD 000's %
Process Equipment $5,391 17.6 Leach Pad Expansion $22,932 74.8 Rehabilitation/Closure (less salvage value of $2.5m) $2,350 7.7 Total $30,673 100.0
103
19.12 Operating Cost
Operating costs have been prepared in fourth quarter 2009 United States Dollars. The average operating cost for the combined heap leach/carbon-in-leach is $8.51 per processed tonne. An operating cost contingency was included in the estimate.
The annual net direct cash operating cost for the operation to mine and process 4Mtpa are presented by area in and by area / expense type in Table 19-9 and Table 19-10.
Table 19-9 Operating Cost Estimate by Area Life-of-Mine
Area Unit Cost
(USD/t Processed)
Distribution %
Mine 3.35 39.4 Process (HL&CIL) 4.50 52.9 Admin 0.59 6.9
Refining/Transport 0.06 0.8 Total 8.51 100.0
Table 19-10 Operating Cost Estimate by Area and Expense Type
Heap Leach 4-5.5 Mtpa
Heap Leach 2.7
Mtpa
Carbon in Leach 2.8
Mtpa
Area Cost per Cost per Cost per Comment Mining - Ore 1.93 1.93 1.93 per mined tonne (Oxide & Fresh) 1.63 1.63 1.63 per mined tonne (Weathered) Mining - Waste 1.87 1.87 1.87 per mined tonne Mine Technical Department 494,307 494,307 494,307 per annum Stockpile Recovery 0.70 per tonne Processing 3.50 3.31 6.12 per tonne of processed ore General & Administration 0.48 0.38 0.25 per tonne of processed ore Operating Cost 0.20 0.18 0.32 per tonne of processed ore Dore Refining Charges: Dore Transport & Insurance 0.05 USD/oz dore
104
Refining Cost Dore 0.20 USD/oz dore Gold 1.45 USD/oz Silver 0.00 USD/oz Refinery Payment Gold 99.75% Silver 99.75%
19.12.1 Operations Labour It has been assumed that a mining contractor would conduct the open-pit operations providing operators, supervision, maintenance, consumables, mining plant and equipment. SAM would provide management, mining technical services and all non-mining functions. Management and process plant personnel would be direct hired into the operations organisation.
Process personnel complements were established based on a two 12 hour shift per day, four-on four-off rotation, 7 day per week operation for all unit operations. Management, support and technical personnel will work 8 hours a day, five days per week schedule. Some operational support positions will work 12-hour day shift only, four-on four-off rotation, 7 days per week schedules.
To establish the number of personnel required for each shift position each employee was assumed to be unavailable 11% of the time due to holiday, training and absenteeism. This means that for every two shift positions in the roster an additional employee is required.
The operational organisation has been established based on the utilisation of outsourcing for specialists (e.g. engineering, process control), maintenance rebuild and major shutdown services
Salaries were determined from available public salary information from other projects in Mexico. The fully loaded salaries for each position including benefits and all other employment costs by position category are summarised in Table 19-11.
Table 19-11 Employee Remuneration
Position Description Annual Salary Salary Category MXN USD
1 Junior Operator / Maintenance 150,000 11,187 2 Intermediate Operator / Maintenance 225,000 16,780 3 Senior Operator / Maintenance 300,000 22,374 4 Supervisor / Technical 500,000 37,290 5 Manager / Superintendent 1,000,000 74,579 6 Senior Management 1,500,000 111,869
19.12.2 Basis of Estimate The operating cost estimate has been generated using vendor quotes, benchmarks from similar operations, test results, first principles, public data, and internal data.
105
Mine The contract mining cost was benchmarked against similar open pit mining operations and advanced studies for projects in Mexico. A cost of $1.93/tonne moved for material that is classified as oxidized and fresh, PEM and waste, was utilized to cover the costs associated with development, drilling, blasting, load and haul, mine vehicle consumables, and maintenance. Material classified as weathered, PEM and waste, will not require blasting and the cost per tonne moved was set at 1.63/tonne moved. This cost also includes the owners’ mine management and technical team that will manage the contractor, perform mine planning and grade control functions. A team of 17 people was included to perform these functions and remuneration by position. An operating expense was assigned to each employee to cover miscellaneous operating supplies, safety gear, stationary, etc.
Process Plant The primary operating costs in the process facility are consumables, labour and energy. The staffing requirement was developed from internal experience and confirmed against benchmarks. A workforce of 70 employees was included to manage, operate and maintain the process facilities for the initial 4 million tonne per annum heap leach. Additional staffing has been included for the operation of the carbon-in-leach plant.
Process plant consumables were estimated in three major categories; energy, operating and maintenance consumables. Operating consumables such as reagents have been scaled up and estimated using a combination of test work consumption figures and industry standards. Commodity unit pricing was obtained from vendor quotes. Other recently completed studies and publicly available data. Liner consumption for the crushers was estimated based on the Bond Abrasion Index.
Electricity requirements were estimated from preliminary equipment motor sizing and benchmarks.
The maintenance consumables have been estimated by applying a factor (5%) to the equipment capital costs to account for parts (i.e. mechanical, electrical, piping, instrumentation) with a further factor applied to account for operating supplies.
The costs to refine the doré were estimated using the refining costs for a similar operation in Mexico. Transport costs were estimated from benchmarks and are based on the assumption that doré is shipped to Salt Lake City, Utah.
Administration Operating cost in this area primarily consists of labour for the following groups: Senior Management, Finance, Procurement, IT/Communications, Human Resources, Environment and Occupational Health, and Safety. A workforce of 36 people was included and an operating expense was assigned to each employee to cover miscellaneous operating supplies, safety gear, stationary, etc. An allocation was assumed to cover expenses associated with telecommunications, consultants, travel, insurance costs.
19.12.3 Contingency
A 5% contingency factor was applied to the overall operating cost estimate to account for the level of detail utilised in the operating cost estimate.
19.12.4 Sedgman Metals Engineering Services Review
Sedgman Metals Engineering Services (Sedgman) in Perth, independently reviewed the capital cost estimate for the crusher and heap leach development, the operating costs and the heap leach metallurgical
106
parameters used for the scoping study. The capital costs of US$82m for the 4mtpa crushing/heap leach plant are the costs recommended for the scoping study following their review. After reviewing the operating costs and making adjustments as per the recommendations, the heap leach processing costs were estimated at US$3.54 per tonne plus an allowance for contingency. Sedgman listed several risks and recommendations in their review in moving forward with a full feasibility study. Sedgman also reviewed the metallurgical test work completed to date and commented on the recoveries used for the scoping study.
From the limited test work completed for the scoping study, Sedgman consider that while the slightly lower gold recovery of 72% would have been recommended the 75% used is within the degree of accuracy for this level of study and may possibly be achieved in an operational setting following further optimisation test work.
Sedgman has recommended significantly more test work be undertaken for the full feasibility study to gain more confidence in gold and silver recoveries and reagent consumptions for the different material types as well as a detailed engineering study.
An estimate, made by “San Anton Resource Corporation”, of an additional US$68m for the inclusion of a 2.8 million tonne per annum CIL plant has been included in the scoping study. This estimate is based on the costs of several similar projects completed over the past 3 years.
19.13 Economic Analysis
The Project has been economically evaluated using a before-tax discounted cash flow model. All the evaluations, costs and revenues are in last quarter 2009 US dollars. Project capital cost estimates for pre-production, working and sustaining capital costs have been included in the cash flow projection. A 12 month engineering and construction schedule has been assumed. No allowance from the salvage and resale of equipment at the end of operating life was included. The major assumptions used in the economic analysis and sensitivity study are outlined in the subsequent sections.
19.13.1 Metal Prices Project revenue was forecast using US$900 per ounce for gold and US$15 per ounce for silver. Metal prices have been applied to life of mine production without any allowance for future variation or hedging.
For comparison gold and silver prices are given below determined from standard methods; the 60:40 method, (60% of the value is the past 36 month average and 40% is the two year future market price) and the 36 month average metal price. These prices are shown in Tables 19-12 and Table 19-13 up to end of March 2010.
107
Table 19-12 60:40 Metal Price
Metal 60:40 Value (USD)
2Year Future Price (USD)
Future Price Source
Gold $992 per troy ounce $1,151 per troy ounce COMEX
Silver $15.83 per troy ounce $17.62 per troy ounce COMEX
Table 19-13 36 Month Average Metal Prices
Metal 36 Month Value (USD)
Price Source
Gold $886 per troy ounce London Fix
Silver $14.65 per troy ounce London Fix
19.13.2 Finance It was assumed that the project will be fully equity financed therefore no leverage or debt expense has been applied to the financial analysis.
19.13.3 Economic Analysis The mine plan, estimated metal recoveries, capital and operating costs, sustaining capital and working capital identified in the previous sections were inputs into the financial model.
The base case metal price evaluation (US$900/oz gold, US$15/oz silver) generates a pre-tax operating cash flow of US$259 million, with a payback period of 2.13 years for the initial heap leach development, a 37.1% IRR, and a net present value of US$118 million at a project discount rate of 10%, over the 14 year mine life. Project direct cash operating cost after by-product credits average is US$422/oz Au.
The profit and loss statement is provided below in Table 19-15 19.13.4 Sensitivity Analysis Sensitivity evaluations were performed on the base case metal price project cash flow by applying factors ranging from a maximum of -20% to +20% for capital and operating costs, and variation on net revenue examined through alterations in metal price and recovery. Each of the sensitivities was applied independently and the variations examined are listed in Table 19-14.
108
Table 19-14 Sensitivity Factor Applied
Parameter Case 1 Case 2 Case 3 Case 4 CAPEX -20% -10% +10% +20% OPEX -20% -10% +10% +20% Au Price -20% -10% +10% +20% Au Recovery -5% -2.5% +2.5% +5% Ag Price -20% -10% +10% +20% Ag Recovery -5% -2.5% +2.5% +5%
The effects on IRR and NPV at the project discount rate of 8% are shown graphically in Figure 19-4 and Figure 19-5, respectively. The project is most sensitive to changes in revenue due to variation in gold price and recovery followed by operating cost and least sensitive to capital cost and silver recovery and price.
0%
10%
20%
30%
40%
50%
60%
80% 90% 100% 110% 120%
PROJECT
INTERN
AL RA
TE OF RE
TURN
VARIANCE
Au Price Au Recovery OPEX CAPEX Ag Price Ag Recovery
Figure 19-4 IRR Sensitivity
109
The economic analysis illustrates that the project is most sensitive to variation in the price and recovery of gold. If the price of gold is decreased by 10%, IRR will decrease by 11.5% and NPV by $48M, whereas a 10% price increase will increase the IRR by 10.5% and NPV by $48M. If gold recovery increases from an overall average of 68% to 73% the IRR improves by 6.3% and NPV by $22M while a decrease to 63% recovery has both IRR and NPV decreasing by the same values. Change to the operating cost has similar impact. If operating cost increases by 10% the IRR decreases by 6.9% and NPV by $32M, whereas a 10% Operating cost decrease will increase the IRR by 6.3% and NPV by $32M. A capital cost increase of 10% results in IRR decrease of 4.7% and NPV by $7.5M, whereas a 10% decrease in Capex will increase the IRR by 5.8% and NPV by $7.5M.
0
50
100
150
200
80% 90% 100% 110% 120%PROJECT
NET
PRE
SENT VALU
E @ 8% (M
ILLION
USD
)
VARIANCE
250
Au Price Au Recovery OPEX Ag Price CAPEX Ag Recovery
Figure 19-5 NPV Sensitivity
110
Table 19-15 Profit and Loss Statement
Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total
Production Mine Production (Mtonne) 4,160 5,840 10,227 8,000 12,369 14,400 12,615 8,100 10,900 10,100 8,515 6,800 6,173 3,396 0 121,594 Heap Leach Production (Mtonne) 4,000 4,000 5,427 3,900 2,700 2,700 2,707 2,700 2,700 2,700 2,707 2,700 1,173 1,437 0 41,551 Carbon in Leach Production (Mtonne) 0 0 0 1,600 2,769 2,800 2,808 2,800 2,800 2,800 2,808 2,800 2,800 1,534 0 28,318 Dore Bar (tr oz) x1000 921 1,388 1,375 1,257 1,073 925 981 815 790 615 704 657 466 290 29 12,287 Gold (tr oz) x1000 57 64 69 88 99 70 75 84 83 70 70 81 59 37 3 1,009 Silver (tr oz) x1000 864 1,324 1,306 1,169 974 855 906 731 707 545 634 576 407 253 26 11,277 Gold Equivalent (tr oz) x1000 72 86 91 108 116 84 90 96 95 79 80 91 65 42 3 1,197 Profit and Loss Statement Revenue (USD): x1000 Payment Gold (USD) $900 51,419 57,485 61,864 79,208 89,268 62,451 67,551 75,328 74,585 63,035 62,680 72,689 52,686 33,539 2,459 906,248 Payment Silver (USD) $15.00 12,920 19,812 19,548 17,489 14,568 12,794 13,550 10,943 10,580 8,158 9,486 8,624 6,090 3,785 387 168,735 Total Revenue (USD) 64,340 77,298 81,412 96,697 103,837 75,245 81,101 86,271 85,165 71,194 72,166 81,314 58,775 37,324 2,846 1,074,983 Expenses (USD): x1000 Mining (7,351) (10,661) (18,809) (15,271) (23,951) (27,591) (24,297) (15,921) (21,199) (19,669) (16,659) (13,514) (12,271) (7,023) 0 (234,188) Processing Heap (14,000) (14,000) (18,993) (13,650) (9,450) (8,937) (8,961) (8,937) (8,937) (8,937) (8,961) (8,937) (3,883) (4,755) 0 (141,339) Processing CIP 0 0 0 (9,792) (16,944) (17,136) (17,183) (17,136) (17,136) (17,136) (17,183) (17,136) (17,136) (9,387) 0 (173,305) Administration (2,720) (2,720) (3,690) (2,652) (3,414) (3,108) (3,117) (3,108) (3,108) (3,108) (3,117) (3,108) (2,253) (1,679) 0 (40,901) Dore Transport & Refining (311) (437) (441) (439) (410) (330) (352) (324) (316) (254) (276) (280) (200) (126) (11) (4,507) Total Operating Expenses (24,383) (27,818) (41,932) (41,805) (54,169) (57,102) (53,910) (45,426) (50,696) (49,104) (46,196) (42,975) (35,743) (22,970) (11) (594,240) Royalty (%NSR) x1000 4% (2,561) (3,074) (3,239) (3,850) (4,137) (2,997) (3,230) (3,438) (3,394) (2,838) (2,876) (3,241) (2,343) (1,488) (113) (42,819) Total Other Expenses (2,561) (3,074) (3,239) (3,850) (4,137) (2,997) (3,230) (3,438) (3,394) (2,838) (2,876) (3,241) (2,343) (1,488) (113) (42,819) Net Operating Income x1000 37,396 46,405 36,241 51,042 45,531 15,146 23,961 37,407 31,075 19,252 23,095 35,097 20,689 12,866 2,721 437,924 Net Direct Cash Cost Ore (US$/t ore processed) $6.10 $6.95 $7.73 $7.60 $9.91 $10.38 $9.78 $8.26 $9.22 $8.93 $8.38 $7.81 $9.00 $7.73 $- $8.51 Net Direct Cash Cost Gold jnf((USD/oz) (US$/oz) $426 $434 $609 $474 $545 $821 $716 $541 $610 $699 $662 $531 $609 $615 $4 $589 Net Direct Cash Cost Gold with by-product credits (USD/oz) $200 $125 $325 $276 $398 $637 $536 $411 $483 $583 $526 $424 $505 $514 $(137) $422 Net Direct Cash Cost Gold Eq (USD/oz) $340 $323 $462 $388 $468 $681 $597 $473 $534 $619 $575 $474 $546 $552 $3 $496
111
SECTION 20. INTERPRETATION AND CONCLUSIONS (ITEM 21)
The San Antón Project is located in the state of Guanajuato, approximately 270 km northwest of Mexico City. The San Antón Property fully incorporates the San Antón de las Minas mining district, centred 23 km east northeast of Guanajuato city. The property is prospective for low-sulphidation gold-silver an IRGS deposits. The author (Tim Carew) has visited the property and reviewed the data base and interpretation procedures and found no notable errors. The exploration and drilling programs conducted by SAM have been carried out using standard industry procedures. Similarly the resource methodology including block modeling procedures was completed in a manner following CIM guidelines. Cerro del Gallo Gold-Silver-Copper Deposit Drilling at Cerro del Gallo, which had started late in 2004 was stopped in May 2008. At the completion of the drilling, geological interpretations were re-evaluated as part of the development study that was in progress at the time. The main focus was the complete re-logging and reinterpretation of all generated and collected geological data. During this work program the new information generated and the changes in the market conditions and commodity prices led to the consideration of other alternatives for the development of this large and well defined Cerro del Gallo deposit. The drill core re-logging program revealed the existence of significantly more weathered and oxidized material within the relatively higher grade gold zone of the deposit and early in 2009 this became the primary focus of the work at Cerro del Gallo. Metallurgical test work to assess the heap leaching potential of the material within the ‘gold zone’ commenced towards the end of June 2009. The results of this work have indicated that the material will be suitable for heap leaching and the decision has been made to proceed to more detailed test work. Work on the environmental study required for the development of the project commenced in 2009 to enable a relatively fast development schedule upon a positive decision to proceed with heap leaching at Cerro del Gallo. Regional Exploration Regional exploration within the San Antón project has included a wide spectrum of industry standard programs including geochemistry, handheld Niton® XRF multi-element soil analysis geological and geophysical and high density regional stream sediment Bulk Leach Extractable Gold (BLEG) sampling programs (Technical Report 2008). The conventional -80 mesh B-horizon soil sampling was completed at the Southern soil copper-molybdenum-gold anomaly to fully cover and define the eastern limitation of this geochemical anomaly, and at the West Tranquilino copper anomaly to validate Niton® XRF analyser soil results. The handheld Niton® XRF soil program covered an area of 12.5 km2 centred over the Cerro del Gallo deposit. A total of 10 geochemical anomalies were identified based on individual or coincident values greater than either 100 ppm Cu, 120 ppm Pb or 230 ppm Zn; except for the Southern anomaly, which is based on coincident values greater than 60 ppm Cu, 5 ppm Mo and 22 ppb Au. A total of 8 previously defined targets within a 2-3 km radius of the Cerro del Gallo deposit were tested by 13 drill holes. Of these, a single diamond core hole, SA-359 was drilled at the Wildcat Cu-Pb-Zn geochemical anomaly . This hole intersected encouraging mineralisation including 119.3 m @ 0.17% Cu, 0.04 g/t Au, 30 g/t Ag from 570.0 m, plus several zones of anomalous zinc-lead mineralisation, including 25.0 m @ 0.31% Zn and 0.10% Pb from 545.0 m. This intersection of copper-silver mineralisation indicates that the
112
Cerro del Gallo deposit extends northwards for at least a further 150 metres. Copper-silver mineralisation is open at depth and along strike. Of the remaining 12 drill holes, several holes intersected anomalous zinc ± lead mineralisation. This zinc ± lead mineralisation is interpreted to extend beyond the gold-silver-copper mineralisation at Cerro del Gallo, however none of the other 9 recently identified geochemical soil anomalies have yet been drilled. A high density regional stream sediment BLEG sampling program was completed throughout the tenement area. In total 12 gold anomalies greater than 4 ppb Au, not associated with known historic mine workings, were defined.
113
SECTION 21. RECOMMENDATIONS (ITEM 22)
Results of the preliminary assessment indicate the Cerro del Gallo project is technically and financially robust at this level of evaluation. It is recommended the project be advanced to a feasibility level of development. This section outlines the ongoing work that will be focused upon in the immediate future. The identified items are the main activities and additional activities may be identified as the work progresses. Geotechnical Study A consultant will be engaged to review the geotechnical ground conditions for the planned open pit and all supporting infrastructure such as plant site, waste dump, and heap leach pad. They will provide design criteria for civil foundations as well as for all open pit slopes. Mine Planning A consultant will be engaged to review the mine production rate, equipment selection, and cut-off grade strategy. They will apply geotechnical design parameters to the open pit wall slope angles and conduct pit optimisations. They will develop mine production schedules that will optimise pit wall slope angles and staged mine development to meet processing requirements and maximise NPV, as well as developing a long term waste and stockpile strategy. They will compile capital and operating costs estimates and provide a statement of Mineral Reserves. Topographical Survey A contractor will be engaged to acquire aerial photography over the entire project area and compile a digital elevation model suitable to produce detailed topographic contours over specific areas of interest at either 5 or 2 metre contour intervals. Metallurgical Test Program Testing of material will be necessary to define process criteria for equipment design and selection, and supply inputs for the operating cost estimate. The test program will consist of comminution tests, leach tests, carbon adsorption studies, cyanide detoxification studies and optimization studies (crush size and reagent quantities). Sample derived primarily as quarter core from the resource drilling will be utilised to determine if any comminution or leach variability exists in the material to be processed. A mineralogical study (QEMSCAN) will be performed to assist in the optimization of the flow sheet by examining ore and leach tails. Recent studies have indicated that potential recovery improvements are possible when High Pressure Grinding Rolls (HPGR) is used in the comminution circuit. San Antón material is classified as hard and comminution cost savings could be obtained by utilising this technology. Engineering An engineering consulting company (US based) with experience in Mexico and heap leach plant design will be selected and utilised to design and cost the project to ±15% accuracy for the capital cost and ±10% for commissioning, operating, sustaining capital and closure costs. To achieve these levels of accuracy 15 to 25% of the engineering will need to be completed. Some of the work to be completed include drawings for quantity take offs, specifications and fixed price bids for major equipment, detailed process plant drawings, layout drawings for all infrastructure and buildings, detailed implementation schedule, risk analysis, contingency analysis, cost estimates, etc. The final document will describe the installation to be built, provide the support to complete all financing requirements and be the control document for future project costs and performance guarantees.
114
Water Supply Study Water supply options will be investigated based on the quantity required for the operation. The studies could include surface water catchment, impoundment area catchment, the existence of a lower aquifer and redundant volume in the Peñuelitas Dam. The program will also include the work necessary to obtain water licenses for the project. Change of Surface Use There is a requirement to change the surface use of the land from agriculture to mining. This will require an assessment of the value of the land and a subsequent calculation to determine the fee payable for to the Mexican government. This amount has been estimated based on other projects and the land area to be changed. Land Purchase Options Private land holdings in and around the project site will need to be purchased. An allowance has been made to cover 10 percent purchase price options for this land based on what is considered to be the upper limit of the land purchase prices. Environmental Study Proposals to complete the studies required for the generation of an Environmental and Social Impact Assessment document have been obtained. Documentation will be generated and submitted to SEMARNAT (Mexican Gov. Agency) for approval. The costs for this work and obtaining the various construction and building permits for the project are incorporated into this area. The estimated expense for the recommended feasibility study program is $5.9 million and the breakdowns are shown in Table 21-1.
115
Table 21-1 Feasibility Program Costs
Description Estimated Cost
Engineering/Metallurgical/Consulting
350,000 • Resource & Mining consultants
300,000 • Metallurgical Test Program
1,200,000 • Feasibility Study
80,000 • Topographical Survey
Environmental & Land Management
80,000 • Water Supply Study
1,160,000 • Environmental Study
231,000 • Land Use Change
300,000 • Land Purchase Option Agreements
Owners Team
720,000 • General Administration Costs
790,000 • Management and Supervision
160,000 • Geological Staff
Contingency 537,000
TOTAL 5,908,000
116
SECTION 22. REFERENCES (ITEM 23)
Baker, T., 2002. Emplacement depth and carbon dioxide-rich fluid inclusions in intrusion-related gold deposits. Economic Geology, August 2002; v97, no5, pp1111-1117.
Bravo, C. J., 1979. Estudio Geológico Geoquímica del área de San Antón de las Minas, Municipio de Dolores Hidalgo GTO. Technical Archive Consejo de Recursos Minerales.
Champion, D., 2005. Prospects look good in North Queensland. AusGeo News September 2005, 79: pp3-6.
Comision Nacional del Aqua, 2001. National Commission of Water CNA “Sistema de Informacion Geografica del Agua”, July 2001.
Consejo de Recursos Minerales, 1992. Monografía geológico-minera del estado de Guanajuato. Secretaria de Energía, Minas E Industria Paraestatal 35, pp55-57.
De Cserna, Z., 1989. An outline of the geology of Mexico. In: Bally AW and Palmer AR (eds), The Geology of North America - An Overview. Boulder, Colorado, Geological Society of America, The Geology of North America, Volume A, pp233-264.
Golder Associates, 2006. NI43-101 Technical Report on the San Antón Property, Mexico – 021-05763009, Golder Associates Pty Ltd, 2nd October 2006.
Golder Associates, 2007. NI43-101 Technical Report on the Cerro del Gallo deposit within the San Antón Property, Mexico – 023-05763009, Golder Associates Pty Ltd, 27th April 2007.
Groves, I., 2008. San Antón Project, Cerro del Gallo Cu-Au-Ag Deposit, Guanajuato State, Mexico. Unpublished report by Insight Geology Pty Ltd for San Antón de las Minas S.A. de C.V., January 2008.
Hart, C.J.R., 2005. Classifying, distinguishing and exploring for intrusion-related gold systems. The Gangue 87:pp1-9.
Independent Metallurgical Laboratories Pty Ltd, April 2006 Cerro del Gallo Testwork Program (SA002, SA007, SA010 & SA011) for Kings Minerals NL, Project No 2401.
Independent Metallurgical Laboratories Pty Ltd, April 2006 Cerro del Gallo Testwork Program (SA057, SA058, SA061, SA062, SA071 & SA078) for Kings Minerals NL, Project No 2419..
Instituto de Nacional de Estadistica y Geografia e Informatica (INEGI), 2003. Cauderno Estadistico Municipal de Dolores Hidalgo.
Mason, D.R., 2005a. Petrographic descriptions for eleven rock samples from the San Antón project, Mexico. March 2005. Unpublished report no. 3064 by Mason Geoscience Pty Ltd for KMN NL.
Mason, D.R., 2005b. Petrographic descriptions for rock samples from Cerro del Gallo porphyry system (San Antón), and from Valenciana, central Mexico. August 2005. Unpublished report no. 3104 by Mason Geoscience Pty Ltd for KMN NL.
Mason, D.R., 2006a. Petrographic descriptions and interpretation for four drill chip skarn rock samples from the Cerro del Gallo porphyry system (Mexico). January 2006. Unpublished report no. 3149 by Mason Geoscience Pty Ltd for KMN NL.
Mason, D.R., 2006b. Petrographic study of 12 drill core rock samples from the Cerro del Gallo gold prospect, Mexico. June 2006. Unpublished report no. 3196 by Mason Geoscience Pty Ltd for KMN NL.
117
Mason, D.R., 2007. Petrographic study of ten drill core rock samples from Cerro del Gallo porphyry system (San Antón). Unpublished report by Mason Geoscience Pty Ltd for KMN NL.
Rabone, G., and Hatcher, R.M., 2005. Report on the 2005 Exploration Program at San Antón Project, Guanajuato, Mexico, December 2005. Unpublished internal company report for KMN NL.
Randall, J.A., Saldana, E.A., and Clark, K.F., 1994. Exploration in a volcano-plutonic center at Guanajuato, Mexico. Economic Geology, v.89, pp1722-1751.
Rowins, S.M., 2000a. Reduced porphyry copper-gold deposits: A new variation on an old theme. Geology: June 2000, v28, no.6, pp491-494.
Rowins, S.M., 2000b. Preliminary results of a geochemical investigation of porphyry Cu-Au-Mo (Ag-Pb-Zn) and epithermal Ag-Au mineralization at the San Antón deposit, Guanajuato Mexico. Unpublished report to Luismin S.A. de C.V. August 2000.
Rowins, S.M., 2000c. A model for the genesis of “reduced” porphyry copper-gold deposits. The Gangue: October 2000: Issue 67, 1-7.
SGS Lakefield Oretest Pty Ltd, February 2007 Metallurgical Testwork Conducted on Two Master Composite Samples of Gold/Silver Ore from the Cerro del Gallo Project, Job No. 10008.
SGS Lakefield Oretest Pty Ltd, October 2007 An Investigation by High Definition Mineralogy into the Mineralogical Characteristics of Exploration Drill Core Samples from the Cerro del Gallo Project, Project BAMF#00077.
SGS Lakefield Oretest Pty Ltd, November 2007 Comminution, Flotation and Cyanide Leach Testwork on Eight Cerro del Gallo Deposit Variability Composites, Job No. 10103.
SGS Lakefield Oretest Pty Ltd, September 2009 Cerro del Gallo Heap Leach Amenability Testwork, Job No. 10467.
Shaw, W. J., 1997. Validation of sampling and assaying quality for bankable feasibility studies. The Resource Database Towards 2000, Wollongong, pp41-49. (Australasian Institute of Mining and Metallurgy: Melbourne).
Sociedad Cooperativa de Minero Metalurgica Santa Fé de Guanajuato, 2000. Certificado de Ensaye. Unpublished.
Stewart, R. NI43-101 Technical Report on the Cerro del Gallo deposit within the San Antón Property, Mexico, SARC, 31st July 2008.
Thompson, M., and Hogarth, R.J., 1973. The rapid estimation and control of precision by duplicate determinations: The Analyst, v. 98, pp153-160.
Thompson, J.F.H., Sillitoe, R.H., Baker, T., Lang, J.R., and Mortensen, J.K., 1999. Intrusion-related gold deposits associated with tungsten-tin provinces. Mineralium Deposita, 34:pp323-334.
Torres, J.M., 1997. Proyecto San Antón, studio petrografico. Unpublished report prepared for Luismin.
Townend, R., 2006. Screening, TBE separations of four composite samples, Optical/SEM examination of four polished sections and XRD of gangue. Unpublished report by Roger Townend and Associates, Consulting Mineralogists.
118
GLOSSARY Silver Ag Atomic Absorption Spectrometry AAS Australian Institute of Geoscientists AIG American Standard Code for Information Interchange ASCII Above Sea Level ASL Gold Au Gold Equivalent AuEq Australasian Institute of Mining and Metallurgy AusIMM Bulk Leach Extractable Gold BLEG Canadian Institute of Mining, Metallurgy and Petroleum CIM Canadian National Instrument 43-101 NI43-101 Centimeter cm
m3 Cubic meter Cubic feet per minute cfm Sociedad Cooperativa Minero Metalurgica Santa Fé de Guanajuato Cooperative Certified reference material CRM Comma Separated Values CSV Copper Cu Co-efficient of variation CV
o Degree (survey) oC Degrees Celsius
Diamond drill hole DDH Desarrollos Mineros San Luis S.A. de C.V. DMSL Global Positioning System GPS Goldcorp Inc. Goldcorp Golder Associates Pty Ltd Golder Grams g Grams per tonne g/t Greater than > Greater than or equal to ≥ Half Absolute Relative Difference HARD Hectare (10,000 m2) ha Hour hr Inductively Coupled Plasma Atomic Emission Spectroscopy ICPAES Inductively Coupled Plasma Optical Emission Spectroscopy ICPOES Instituto Nacional de Estadística Geográfica e Informática INEGI Intrusion-related Gold System IRGS Kilogram kg Kilometer km Kilovolt kV Kings Minerals NL KMN Left Hand Side LHS Less than < Less than or equal to ≤ Luismin S.A de C.V. Luismin Metric tonne t Micrometer (micron) μm Millimeter mm Million M Megaannum (Million Years) Ma MegaPascal MPa Microsoft MS Million tonnes Mt Minute (survey) ′ North American Datum NAD
119
Net Smelter Return NSR Nano-tesla nT Ordinary Kriging OK Ounce oz Parts per billion ppb Parts per million ppm Pounds per square inch psi Quality Assurance and Quality Control QAQC Quantile-Quantile QQ Percent % Registered trademark ® Reverse circulation drill hole RC Right Hand Side RHS Relative level RL Rock Quality Designation RQD San Antón de las Minas S.A. de C.V. SAM San Anton Resource Corporation Inc. SARC Second (survey) “ System for Electronic Document Analysis and Retrieval SEDAR Secretaria del Medio Ambiente y Recursos Naturales SEMARNAT Societe Generale de Surveillance SGS
km2 Square kilometer m2 Square meter
True North TN Toronto Stock Exchange TSX United States dollars US$ Universal Transverse Mercator UTM Ultraviolet UV Vitromex S.A. de C.V. Vitromex X-Ray Fluorescence XRF
120
CERTIFICATE OF TIMOTHY J. CAREW I, Tim Carew, P. Geo. do hereby certify that:
1. I am the Principal of : Reserva International LLC P.O. Box 19848 Reno, NV 89511 USA
2. I have graduated from the following Universities with degrees as follows: a. University of Rhodesia, B.Sc. Geology 1973 b. University of Rhodesia, B.Sc. (Hons) Geology 1976 c. Royal School of Mines (UK) M.Sc. Mineral Prod. Management 1982
3. I am a member in good standing of the following professional associations:
a. Association of Professional Engineers and Geoscientists of British Columbia b. Institute of Mining, Metallurgy and Materials c. Canadian Institute of Mining and Metallurgy d. Society of Mining Engineers
4. I have worked in mining geology and engineering for over 35 years since my graduation from the
University of Rhodesia. 5. I have read the definition of “Qualified Person” set out in National Instrument 43-101 (“NI 43-
101”) and certify that by reason of my education, affiliation with professional associations and past relevant work experience, I fulfill the requirements to be a “Qualified Person” for the purposes of NI 43-101.
6. I am responsible for the overall review of Section 17, and the preparation of Section 17.8, and
Section 17.12 of the technical report titled “Technical Report Preliminary Assessment Cerro del Gallo Project Guanajuato, Mexico” and dated April 16th, 2010 (the “Technical Report”) relating to the Cerro del Gallo property. I visited the Cerro Del Gallo property for two days December 16th, 2009.
7. I have not had prior involvement with the property that is the subject of the Technical Report.
8. I am not aware of any material fact or material change with respect to the subject matter of
Section 17 of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading.
9. I am independent of the issuer applying all of the tests in section 1.4 of NI 43-101.
10. I have read NI 43-101 and Form 43-101F1, and the Technical Report has been prepared in
compliance with that instrument and form. Dated this 16th day of April, 2010 (signed) Tim Carew Signature of Qualified Person
121
Bill Fleshman 16025 Edmands Dr.
Reno, NV 89511 Telephone: 775-219-5791
Email: [email protected]
CERTIFICATE of AUTHOR
I, Bill Fleshman do hereby certify that: 1. I am a Senior Consulting Geologist contracted to:
San Anton Resources Corporation Camin Ex Hacienda de Duran No. 8677 Col. Mellado C.P. 36010 Gunajuato, Gto., Mexico 2. I graduated with a Bachelor of Science degree in geology from Western Washington State University in 1973. 3. I am a Charter Professional and Fellow of the Australian Institute of Mining and Metallurgy. In addition I am a Member of the Society for Mining, Metallurgy and Exploration (SME). 4. I have worked as a geologist for a total of 35 since my graduation from university. 5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. 6. I am responsible for the preparation of sections: 1, 2, 3, 17.1, 17.2, 17.3, 17.9 and 17.10 for the technical report titled Technical Report Preliminary Assessment Cerro del Gallo Project Guanajuato, Mexico and dated April 16, 2010 (the “Technical Report”) relating to the Cerro del Gallo property. I have spent approximately two years on the property. 7. I have had prior involvement with the property that is the subject of the Technical Report. The nature of my prior involvement is I am the resident project manager. My involvement has included coordinating geologic core and RC logging, geologic and resource modeling, block model construction and mineral resource estimates. 8. I am not aware of any material fact or material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading.
122
9. I am not independent of the issuer applying all of the tests in section 1.4 of National Instrument 43-101. My income as a geologist is derived from payment from Kings Minerals N.L. which owns 71.3% of San Anton Resource Corporation. 10. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance with that instrument and form. 11. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report. Dated this16th day of April, 2010. Signed Bill R. Fleshman Project Manager San Anton Resource Corporation
John Skeet
123
23 Drummond Steet Carlton, VIC 3053
AUSTRALIA +61 3 9077 1423 (Telephone)
Email: [email protected]
CERTIFICATE of AUTHOR
I, John Skeet do hereby certify that: 2. I am the Chief Operating Officer of Kings Minerals NL and a Metallurgist contracted to:
San Anton Resources Corporation Camin Ex Hacienda de Duran No. 8677 Col. Mellado C.P. 36010 Gunajuato, Gto., Mexico 2. I graduated with a Bachelor of Applied Science degree in Metallurgy from the University of Ballarat. 3. I am a Member of the Australian Institute of Mining and Metallurgy. In addition I am a Member of the Society for Mining, Metallurgy and Exploration (SME). 4. I have worked as a metallurgist for a total of 23 since my graduation from university. 5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. 6. I am responsible for the preparation of sections: 1, 16, 19, 20 and 21 for the technical report titled Technical Report Preliminary Assessment Cerro del Gallo Project Guanajuato, Mexico and dated April 16, 2010 (the “Technical Report”) relating to the Cerro del Gallo property. I have visited the property several times since 2006. 7. I have had prior involvement with the property that is the subject of the Technical Report. The nature of my prior involvement is as a consultant and later as Chief Operating Officer of Kings Minerals NL. My involvement has included management of technical work, administrative work and overall project direction. 8. I am not aware of any material fact or material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading. 9. I am not independent of the issuer applying all of the tests in section 1.4 of National
124
125
Instrument 43-101. My income as a the Chief Operating Officer of Kings Minerals NL and as a metalurgist is derived from payment from Kings Minerals NL which owns 71.3% of San Anton Resource Corporation. 10. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance with that instrument and form. 11. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report. Dated this16th day of April, 2010. Signed John Skeet Chief Operating Officer – Kings Minerals NL For San Anton Resource Corporation
