Canariaco PFS

Caariaco Norte Copper Project Pre-Feasibility Study Progress Report
Submitted to: Candente Copper Corp. Date: 11 March 2011 Project No.: 165270
IMPORTANT NOTICE This report was prepared exclusively for Candente Copper Corp. (Candente). The quality of information, conclusions and estimates contained herein is consistent with the level of effort involved in AMECs services and based on: i) information available at the time of preparation, ii) data supplied by outside sources and iii) the assumptions, conditions, and qualifications set forth in this report. This report is intended to be used by Candente only, subject to the terms and conditions of its contract with AMEC. Any other use of this report by any third party is at that partys sole risk.
CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT
CONTENTS Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7 Section 8 Section 9 Section 10 Section 11 Section 12 Section 13 Section 14 Section 15 Section 16 Section 17 Section 18 Section 19 Executive Summary Introduction Geology Mine Plan and Production Metallurgy Process Tailings and Waste Rock Management Infrastructure and Ancillary Facilities Surface Water Management Environmental Considerations Conceptual Closure Plan Project Execution Plan Capital Cost Estimate Operating Cost Estimate Marketing Financial Evaluation Risks and Opportunities Conclusions Recommendations
Project No.: 165270 11 March 2011
TOC i
APPENDICES Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F Appendix G Appendix H Appendix I Appendix J Appendix K Appendix L Trade-Off Studies Resource and Geology Mining Data Design Criteria Metallurgical Testwork and Material Balance Drawings, Flowsheets, and Lists Tailings Management EPCM Schedule Port Facilities Estimating Marketing Financial Analysis
TOC ii
CONTENTS EXECUTIVE SUMMARY ....................................................................................................... 1 1.0 Introduction ................................................................................................................ 1 1.1 Purpose and Objectives of Report .................................................................. 1 1.2 Terms of Reference ....................................................................................... 2 1.3 Project Background and History ..................................................................... 2 1.4 Property Location, Description, and Access ................................................... 3 1.5 Legal Status ................................................................................................... 5 1.5.1 Land Tenure ....................................................................................... 5 1.5.2 Surface Rights .................................................................................... 5 1.5.3 Permits ............................................................................................... 5 1.6 Report Conventions ....................................................................................... 7 Geology and Mineral Resources ................................................................................ 8 Mine Plan and Production ........................................................................................ 11 3.1 Summary...................................................................................................... 11 3.2 Pit Optimization ............................................................................................ 11 3.3 Mine Production Schedule ........................................................................... 12 3.4 Waste Dump and Access Roads .................................................................. 14 Metallurgy ................................................................................................................ 16 4.1 Testwork ...................................................................................................... 16 4.1.1 Phase I (2005 2007) ...................................................................... 16 4.1.2 Phase IIA (2008)............................................................................... 16 4.1.3 Phase IIB (2010)............................................................................... 17 4.2 Recovery ...................................................................................................... 17 Process ................................................................................................................... 18 5.1 Process Description ..................................................................................... 18 5.2 Process Water System ................................................................................. 21 5.3 Concentrate Receiving and Loadout at Port Site .......................................... 21 Tailings Management Facility .................................................................................. 22 Infrastructure and Ancillary Facilities........................................................................ 23 7.1 Mine Site Facilities ....................................................................................... 23 7.2 Port Site Infrastructure ................................................................................. 24 Surface Water Management .................................................................................... 26 Environmental Considerations ................................................................................. 27 Conceptual Closure Plan ......................................................................................... 28 Project Execution ..................................................................................................... 29 Capital Cost Estimate .............................................................................................. 30
2.0 3.0
4.0
5.0
6.0 7.0
8.0 9.0 10.0 11.0 12.0
Executive Summary TOC i
13.0 14.0 15.0 16.0 17.0 18.0
Operating Cost Estimate .......................................................................................... 31 Concentrate Marketing ............................................................................................ 32 Financial Evaluation................................................................................................. 33 Risk and Opportunities ............................................................................................ 36 Conclusions ............................................................................................................. 37 Recommendations ................................................................................................... 38
TABLES
Table 2-1: Table 2-2: Table 3-1: Table 3-2: Table 3-3: Table 3-4: Table 12-1: Table 13-1: Table 15-1: Table 15-2: Table 15-3: Mineral Resource Statement for Caariaco Norte at a 0.2% Cu Cutoff Grade (David Thomas P. Geo., Effective Date 8 November 2010) ......................................................... 9 Mineral Resource Statement for Caariaco Norte at Various Cutoffs (David Thomas P. Geo., Effective Date 8 November 2010). .................................................................... 10 Reference Mine Operating Costs by Unit Operation ....................................................... 11 Process Costs ................................................................................................................. 12 Base Case Pit Optimization Volumetric Results ............................................................. 13 LOM Production Schedule .............................................................................................. 14 Summary of Capital Costs ............................................................................................... 30 Average On-Site Operating Costs ................................................................................... 31 Caariaco Norte Project Financial Summary .................................................................. 33 Results of Sensitivity Analysis ......................................................................................... 34 Summary of Capital Costs by Major Discipline ............................................................... 35
FIGURES
Figure 1-1: Figure 1-2: Figure 1-3: Figure 3-1: Figure 5-1: Figure 5-2: Figure 5-3: Figure 7-1: Figure 15-1: General Location Map ....................................................................................................... 1 Property Access Routes and Infrastructure....................................................................... 4 Caariaco Concessions held by Candente Copper Corp. (as of 29 October 2010) ......... 6 Waste Rock Storage Facility and Initial Road Alignments .............................................. 15 Process Overview General Diagram ............................................................................ 18 Process Overview Block Diagram ................................................................................ 19 Concentrator General Arrangement ................................................................................ 20 General Arrangement of Project Facilities....................................................................... 23 Graph of Sensitivity Analysis Results for Base Case ...................................................... 34
Executive Summary TOC ii
EXECUTIVE SUMMARY 1.0

1.1
Introduction
Purpose and Objectives of Report
Candente Copper Corp. (Candente) is 100% owner of the Caariaco Norte project, a copper property in the Caaris District of Province of Ferenafe, Per, approximately 110 km northeast of the city of Chiclayo (Figure 1-1). AMEC was retained in early 2010 to develop the Caariaco Norte Prefeasibility Study. The purpose of this Prefeasibility Progress Report is to describe the status of the project as of December 2010; to provide an economic evaluation of the projects potential to justify future expenditures; to identify areas requiring further study; and to plan future work programs. To assist in meeting these objectives, this progress report includes a capital cost estimate with an accuracy of 20%.
Figure 1-1: General Location Map
Executive Summary Page 1
1.2
Terms of Reference
Candente is evaluating the development of the Caariaco Norte project in Per. Candente commissioned AMEC to prepare this report with input from its subconsultant Ausenco Sandwell. Before commencing with the design basis, a number of trade-off studies were completed to evaluate recommendations identified during the scoping study as well as to optimize the design basis. The studies included conveyance of waste to the tailings management facility for dam construction, a plant site location study, tailings and waste rock management facility alternatives, process plant throughput optimization, location of the waste rock management facility, evaluation of options for copper concentrate treatment, evaluation of in-pit crushing and conveying, and evaluation of pit electrification, The progress report addresses the status of work for mineral resources, the mine plan, processing and support facilities, site access, transportation of materials and equipment, port requirements, environmental permitting, reclamation, closure, construction, project implementation, capital and operating costs, and financial evaluation.
1.3
Project Background and History

Copper was first discovered at Caariaco Norte in the 1970s. Phases of exploration and drilling in the 1970s and 1990s were sporadic until Candente initiated its exploration efforts in 2004. INGEMMET identified four centres of alteration and mineralization during exploration in 1971. In 1973 INGEMMET carried out a total of 1,500 m of drilling in the Caariaco Norte zone, consisting of five separate 300 m deep vertical holes. In 1994, Placer Dome Exploration Inc. (Placer Dome) optioned the Caariaco property from the Peruvian Government and carried out a more detailed geological mapping and rock-chip sampling program with some 2,200 m of trenching and 80 test pits. In the Caariaco Norte zone, three inclined diamond drill holes, totalling 854 m, were completed in 1995. Placer Dome dropped its option in 1997. Billiton Exploration and Mining Per B.V. (Billiton) optioned the Caariaco property from the Peruvian Government in 1999. An eight-hole diamond drilling program that included three holes (555.7 m) in the Caariaco Norte zone, three holes (472.5 m) in the Caariaco Sur zone, and two (+100 m) in the Quebrada Verde zone were completed. Billiton dropped its option in 2000. The prevailing copper price (less than 80 cents per pound from 1997 to 2001) and difficult option deals with the Peruvian Government were the catalysts to both Placer Dome and Billiton dropping their options on the property.
In February 2002, Candente Copper Corp. (Candente), through the Peruvian subsidiary Caariaco Copper Per S.A. (CCPSA) (formerly Exploraciones Milenio S.A., EMSA), acquired 100% ownership of the Caariaco property. CCPSA commenced exploration in January 2004 and drilled a total of 218 holes across the Caariaco Norte zone to delineate the current resource. Other work included geological mapping from 2004 to 2008 and diamond drilling in 2008 for metallurgical samples and geotechnical investigation. In addition, SRK Consulting (Canada) Inc. (SRK) completed a Preliminary Economic Assessment (PEA) in 2008. INGEMMET, Placer Dome, and Billiton compiled resource estimates for the Caariaco Norte zone: INGEMMET estimated resources of 8.84 Mt of probable resource at an average grade of 0.78% Cu and 0.001% Mo, and 380.6 Mt of possible resource at a variable grade of between 0.45% and 0.80% Cu and 0.001% to 0.003% Mo. Placer Dome believed the Caariaco property had the potential to host in excess of 800 Mt grading better than 0.5%, of which 365 Mt was estimated in Caariaco Norte. Billiton concluded that the Caariaco Norte zone contained a minimum of 320 Mt at an average grade of 0.45% Cu. The resource estimates outlined above are included solely for completeness. They do not comply with NI 43-101 standards, and the validity of the results is not confirmed.
1.4
Property Location, Description, and Access

The Caariaco property is located at latitude 0605' south and longitude 7917' west, in the Western Cordillera of the Peruvian Andes, in the Caaris District of the Province of Ferreafe, Department of Lambayeque of Northwestern Per. The property is approximately 700 km northwest of Lima and approximately 110 km northeast of the city of Chiclayo in Per (Figure 1-1). The Caariaco Norte project area and mineral resource lie along the eastern side of the continental divide at elevations ranging between 2,700 and 3,600 masl. The topography varies from steep incised valleys at lower elevations to open grassy highlands. Within the mineral resource area, the topography is challenging, with fingers of sub-tropical forests extending up the small valleys. Annual summer and winter temperatures range between 3C and 20C. The region receives between 830 mm and 1,700 mm of rain each year, with the wet season extending from November to March. Climatic conditions are not expected to affect ground-based operations. Therefore, mine operations have been scheduled year-round, 24 h/d.
The Caariaco property is accessible by road from Lima via the city of Chiclayo (Figure 1-2). Either the Pan-American Highway (700 km, 11-hour trip) or one of three daily commercial airline flights can be taken from Lima to Chiclayo. The route from Chiclayo to the Caariaco property is currently a 149 km, 6-hour trip along mostly unimproved roads via Incahuasi. The road is not currently suitable for heavy trucks, and there is no landing strip on the property. At present the Caariaco property has a fully established camp and catering facility for 100 persons. Core-handling facilities and weather stations are also in place on site. Before project operations begin, a 220 kV overhead transmission line will be installed from the local utility substation at Carhuaquero, a distance of 57 km from the mine site. Peruvian freight forwarders have recommended three ports that could be used to import materials for construction purposes: Callao, Paita, and Salaverry.
Figure 1-2: Property Access Routes and Infrastructure
1.5
1.5.1
Legal Status
Land Tenure
The Caariaco property comprises a total area of 20,590 ha in 26 concessions. Three porphyry copper zones, Caariaco Norte, Caariaco Sur, and Quebrada Verde, have been identified on the Caariaco property. Candente, through its Peruvian subsidiary CCPSA, holds a 100% interest in the Caariaco property. Figure 1-3 is a plan of the concessions in UTM coordinates (PSAD 56, Zone 17).
1.5.2
Surface Rights
The owner of the surface rights is the Comunidad Campesina San Juan Bautista de Caaris (the Campesina). Under Peruvian Law 24656, Candente is required to have a valid agreement with the Campesina to undertake exploration. The previous agreement expired in December 2009, and Candente is in the process of negotiating a new three-year access agreement.
1.5.3
Permits
The Caariaco property does not have any known environmental liabilities. A Class B EA was conducted by GEMA Consultants (GEMA) for Candente, as required in law when trenching, drilling, or other major work is performed. GEMA also conducted a Class C EA and obtained a Class C Permit from the Peruvian government for advanced drilling and exploration work at Caariaco. Candente is carrying out environmental baseline studies and monitoring. A social and EIA study framework has been prepared and the work is in progress. Once these studies are completed to levels in accordance with the requirements of the Peruvian Government and meet the guidelines set out in the Equator Principles, then a process of obtaining all the required environmental, construction, and mining permits will be undertaken. The main permit requirements identified to date for the start of construction and mining operations are summarized below. Environmental Impact Assessment (EIA), Studies and Permits Water Authorization Archaeological Evaluation Mining Plan and Closure Plan Mining Operation Certificate (COM) Easement by Agreement Procedure of Real Servitude Construction Permit
Figure 1-3:
Caariaco Concessions held by Candente Copper Corp. (as of 29 October 2010)
Municipality Permits to Construct Labour Permits Surface Water Use Licence Ground Water Use Licence Sanitary Authorization for Waste Water Treatment Permits to Build Roads Transportation deed for controlled substances and products Beneficiation Concession (necessary to process the mineral) Authorization to start Operation.
1.6
Report Conventions
All monetary values are expressed in third quarter 2010 U.S. dollars. Unless otherwise noted, metric units of measurement are used throughout, usually in abbreviated form.
2.0
Geology and Mineral Resources

The Caariaco project contains a major porphyry-copper-gold deposit, Caariaco Norte, and two porphyry copper-gold-mineralized centres that are at a prospect stage of evaluation, Caariaco Sur and Quebrada Verde. The deposit and prospects were identified by exploration programs conducted by the Peruvian Servicio Nacional de Geologa y Minera (Ingemmet), Placer Dome Exploration Inc. (Placer Dome), Billiton Exploration and Mining Per B.V. (Surcusal Peruana), and Candente Copper Corporation (Candente) between 1994 and 2010. Caariaco Norte is an example of a primary porphyry-copper-gold system. The Caariaco Norte Early to Late Tertiary polyphase intrusive-breccia complex is approximately 1.7 km in strike extent, 1.1 km wide, and has been drilled to a depth of about 770 m. Copper mineralization was introduced as a series of events closely following the emplacement of each of the three major intrusive units and the polymictic breccia unit. In general, the highest copper grades (>0.5% Cu) occur in the biotitefeldspar porphyry and polymictic breccia units. Intermediate copper grades (0.35% to 0.5% Cu) are most common in the hydrothermal breccia and the coarse quartz porphyry, and the lowest grades (0.2% to 0.35% Cu) dominate in the crowded quartz feldspar porphyry, tourmaline breccia, and volcanic host rocks. Mineralization occurs primarily as disseminations and in fractures, sulphide and quartz veins, faults, and breccias. Fracture density is the single most important factor influencing copper grades, although breccias and faults can locally be important. Three main zones have been recognized in the deposit: a variable-thickness leached cap, minor supergene copper mineralization under the leached cap, and hypogene copper mineralization, the main component of the deposit. Drilling on the project consists of 263 core holes (75,672.31 m), including geotechnical, metallurgical, and hydrogeological drilling. Fifteen of the drill holes (3,483 m) were completed prior to Candentes involvement; the remaining 248 core holes (72,189.7 m) were drilled by Candente. The majority of the drilling has been accompanied by a quality assurance/quality control (QA/QC) program, which has included submission of blanks, standard reference materials (SRMs), and check assays and was generally performed in accordance with exploration best practices and industry standards. A number of data verification programs and audits have been performed over the project history, primarily in support of technical reports. No errors or omissions were noted during these reviews.
Mineral resource estimates are based on 225 core holes (67,485.06 m) from the INGEMMET, Placer Dome, Surcusal Peruana, and Candente drill programs. The cutoff date for the estimation is 18 July 2010. Candente provided geological interpretations for modelling purposes, from which AMEC created bench polygons and models. Seven estimation domains for copper, gold, and silver were defined following evaluation of statistical distributions of lithological and alteration units. Drill hole data were composited into 6 m lengths using no geological or domain boundaries. Outlier copper, gold, and silver grades were capped; outlier arsenic grades were not capped. AMEC estimated copper, gold, silver, and arsenic grades by estimation domains using primarily ordinary kriging (OK) interpolation. Inverse distance weighting to the second power (ID2) was used to interpolate gold and silver in domains where variography was not considered sufficiently robust. Density values were assigned to blocks based upon the lithological codes. Blocks were classified as Measured, Indicated, or Inferred based on a combination of composite numbers and distance from the nearest composite. Reasonable prospects of economic extraction were assessed by applying preliminary economic constraints within an open pit shell. Mining and process costs, as well as process recoveries, were defined from ongoing AMEC studies for the project. AMEC defined a cutoff value of 0.2% Cu for reporting mineral resources from these parameters. Mineral resources are tabulated in Table 2-1. The Qualified Person for the Mineral Resource estimate is David Thomas, P.Geo. Mineral resources are reported using a long-term copper price of US$2.50/lb, a gold price of $1,035/oz, and a silver price of US$17.25/oz, and have an effective date of 8 November 2010.
Table 2-1: Mineral Resource Statement for Caariaco Norte at a 0.2% Cu Cutoff Grade (David Thomas P. Geo., Effective Date 8 November 2010)
Grade Category Measured Indicated Measured + Indicated Inferred
Note:
1 2 3
Contained Metal Ag g/t 1.9 1.6 1.7 1.5 Copper (Blb) 3.977 4.964 8.941 2.165 Gold (Moz) 0.958 1.081 2.039 0.448 Silver (Moz) 24.656 30.403 55.059 13.547
Tonnage Mt 406.6 596.5 1,003.0 293.3
Cu % 0.44 0.38 0.40 0.33
Au g/t 0.07 0.06 0.06 0.05
Mineral Resources base case is reported at a 0.2% Cu cutoff grade Mineral Resources are reported as undiluted. A LerchsGrossmann pit shell was used to constrain the Mineral Resources to assess reasonable prospects of eventual economic extraction Mineral Resources are reported using a long-term copper price of US$2.50/lb, a gold price of US$1,035/oz, and a silver price of US$17.25/oz Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade, and contained metal content Tonnage and grade measurements are in metric units. Gold and silver contained ounces are reported as troy ounces, copper contained pounds as Imperial pounds
The sensitivity of the Mineral Resource to a reduction or increase in copper cutoff grades is shown in Table 2-2, with the base case highlighted.
Table 2-2: Mineral Resource Statement for Caariaco Norte at Various Cutoffs (David Thomas P. Geo., Effective Date 8 November 2010).
Grade Cutoff Cu (%) Measured 0.14 0.2* 0.3 Indicated 0.14 0.2* 0.3 Measured + Indicated 0.14 0.2* 0.3 Inferred 0.14 0.2* 0.3 419.4 293.3 157.7 0.28 0.33 0.41 0.04 0.05 0.06 1.3 1.5 1.7 2.634 2.165 1.433 0.561 0.448 0.281 17.002 13.547 8.539 1,106.2 1,003.0 752.4 0.38 0.40 0.45 0.06 0.06 0.07 1.6 1.7 1.8 9.332 8.941 7.533 2.152 2.039 1.696 58.592 55.059 44.534 680.7 596.5 414.3 0.35 0.38 0.43 0.05 0.06 0.06 1.5 1.6 1.7 5.283 4.964 3.945 1.166 1.081 0.843 33.124 30.403 23.135 425.6 406.6 338.1 0.43 0.44 0.48 0.07 0.07 0.08 1.9 1.9 2.0 4.049 3.977 3.588 0.986 0.958 0.853 25.467 24.656 21.399 Tonnage Mt Cu % Au g/t Ag g/t Copper (Blb) Contained Metal Gold (Moz) Silver (Moz)
* Base case Note: 1 Mineral Resources base case is reported at a 0.2% Cu cutoff grade 2 Mineral Resources are reported as undiluted. 3 A LerchsGrossmann pit shell was used to constrain the Mineral Resources to assess reasonable prospects of eventual economic extraction 4 Mineral Resources are reported using a long-term copper price of US$2.50/lb, a gold price of $1,035/oz ,and a silver price of US$17.25/oz 5 Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade, and contained metal content 6 Tonnage and grade measurements are in metric units. Gold and silver contained ounces are reported as troy ounces, copper contained pounds as Imperial pounds
Caariaco Norte is part of an extensive porphyry intrusive complex that also includes the Caariaco Sur and Quebrada Verde zones. The exploration programs completed to date are appropriate to the style of the deposits and prospects within the project. Exploration potential remains within the Caariaco Sur and Quebrada Verde prospects, and Caariaco Norte is still open at depth and at the central-west part of the deposit.
3.0
3.1
Mine Plan and Production

Summary
The mining schedule provides for a nominal process plant throughput of 34.7 Mt/a, or 95,000 t/d. The mine plan is based on diluted Measured and Indicated mineral resources contained in a Lerchs-Grossmann (LG) optimized pit shell generated at metal prices of $2.25/lb Cu, $930/oz Au, and $15/oz Ag. The estimated geologic resource is the basis for the mine design and production schedule. The mine plan generates a total of 728.2 Mt of process plant feed and 713.5 Mt of waste at a strip ratio of 0.98:1 over a mine operating life of 22 years. Conventional, large-scale, bulk mining methods will be used to develop a single pit, with the peak mine production rate of 200 kt/d being achieved with a mine fleet that includes 311 mm diameter blasthole drills, two 43 m3 rope shovels, one 43 m3 front-end loader, and twenty-one 290 tonne haul trucks working on 15 m benches. Pit dewatering will be undertaken by a combination of vertical dewatering wells and horizontal drains in areas where the hydraulic conductivities are low. At the time of this report, the prefeasibility geotechnical input necessary for mine design was still pending. The mine plan presented herein is therefore limited to a preliminary assessment level of accuracy and will be updated to prefeasibility level upon receipt of the necessary geotechnical information.
3.2
Pit Optimization
The reference mining cost developed for the pit shell generation is US$1.27/t of waste ore material mined. The breakdown by unit operation is shown Table 3-1.
Table 3-1:
Item Drilling Blasting Loading Hauling Support General Mine Expense Mining Sustaining Capex Total
Reference Mine Operating Costs by Unit Operation

Ore/Waste (US$/t) 0.06 0.23 0.09 0.42 0.19 0.11 0.16 1.27
A combined ore-based cost of US$3.57/t milled was used for pit optimization. breakdown of the individual ore-based costs is shown in Table 3-2.
Table 3-2:
Item Processing Mill Sustaining Capex Allowance G&A Closure Cost Allocation Total
The
Process Costs
Value (US$/t milled) 2.67 0.28 0.54 0.08 3.57
Table 3-3 shows the results for a base-case pit optimization considering only Measured and Indicated mineral resources. The revenue factor (RF) 1.00 LG shell contains 946.3 Mt at 0.38% Cu, 0.06 g/t Au, and 1.65 g/t Ag above the marginal cutoff of US$ 3.57/t milled, at a strip ratio of 1.29:1. All volumetrics presented are as reported by Whittle.
3.3
Mine Production Schedule

For the purposes of this progress study, a mine plan was generated using LG pit shells adjusted by minimum mining width. The input parameters utilized for the mine plan development included a mine life between 18 and 22 years, a life-of-mine (LOM) head grade of no less than 0.40% Cu, and a strip ratio of less than 1:1. The mine plan results in a total of 728.2 million tonnes (Mt) of mill feed and 713.5 Mt of waste (0.98:1 strip ratio) over a 22-year mine operating life. The LOM plan focuses on achieving the required mill feed production rate, mining higher-grade material early in the schedule, and balancing strip ratios. The LOM mine production schedule is shown in Table 3-4.
Table 3-3:
Pit Shell # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 * 38 39 40 41
Base Case Pit Optimization Volumetric Results

Total Tonnes (Mt) 56 107 148 166 219 265 300 368 520 562 654 710 799 874 1006 1,099 1,228 1,327 1,442 1,519 1,589 1,627 1,642 1,751 1,763 1,813 1,855 1,875 1,928 1,977 1,989 1,996 2,027 2,029 2,069 2,093 2,163 2,166 2,179 2,205 2,215 Ore Tonnes (Mt) 34 71 100 114 151 183 206 251 337 365 416 448 497 534 594 633 683 718 759 783 805 818 823 853 856 869 879 883 897 909 912 913 919 920 928 932 946 947 949 954 956 Strip Ratio 0.7 0.5 0.5 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.7 0.7 0.8 0.8 0.9 0.9 1.0 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.1 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.3 1.3 1.3 1.3 1.3 Cu (%) 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Au (g/t) 0.11 0.10 0.10 0.09 0.09 0.09 0.09 0.08 0.08 0.08 0.08 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 Ag (g/t) 2.33 2.23 2.18 2.12 2.08 2.03 2.00 1.94 1.90 1.88 1.84 1.82 1.79 1.77 1.74 1.73 1.71 1.70 1.68 1.68 1.67 1.67 1.67 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 As (g/t) 253.3 309.5 311.2 294.4 286.7 280.2 280.8 258.1 250.0 245.4 245.0 245.2 241.6 243.4 241.9 242.0 239.8 241.8 239.8 240.4 240.9 239.9 239.9 240.1 240.2 240.8 240.6 241.0 241.2 241.1 241.0 241.1 241.4 241.4 241.7 241.5 241.6 241.6 241.6 241.6 241.6 NSR ($) 22.0 20.4 19.7 19.3 18.6 18.0 17.7 17.1 16.5 16.3 16.0 15.8 15.5 15.3 15.1 15.0 14.9 14.8 14.7 14.7 14.7 14.6 14.6 14.6 14.6 14.6 14.6 14.6 14.5 14.5 14.5 14.5 14.5 14.5 14.5 14.5 14.4 14.4 14.4 14.4 14.4 Cu (Mlb) 419 815 1,115 1,252 1,595 1,882 2,085 2,455 3,198 3,416 3,831 4,075 4,459 4,745 5,213 5,524 5,918 6,206 6,526 6,736 6,904 6,994 7,036 7,277 7,305 7,416 7,478 7,515 7,632 7,712 7,737 7,752 7,803 7,807 7,873 7,893 8,011 8,019 8,035 8,055 8,073 Metal Content Au Ag (koz) (koz) 123 228 307 347 440 516 567 671 860 910 1,010 1,065 1,155 1,214 1,316 1,384 1,468 1,527 1,596 1,635 1,671 1,692 1,699 1,747 1,752 1,772 1,788 1,795 1,815 1,832 1,836 1,838 1,848 1,849 1,860 1,866 1,886 1,888 1,891 1,898 1,900 2,539 5,070 6,982 7,812 10,104 11,928 13,261 15,674 20,594 22,028 24,595 26,172 28,569 30,441 33,257 35,130 37,529 39,203 41,095 42,266 43,329 43,925 44,139 45,603 45,781 46,446 46,924 47,133 47,810 48,345 48,504 48,569 48,888 48,911 49,298 49,519 50,231 50,282 50,377 50,604 50,686
Revenue Factor 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 0.54 0.56 0.58 0.60 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76 0.78 0.80 0.82 0.84 0.86 0.88 0.90 0.92 0.94 0.96 0.98 1.00 1.02 1.04 1.06 1.08
* Pit shell at RF 1.00
Table 3-4:
LOM Production Schedule

Plant Feed Mt) 27.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 7.0 728.2 Waste Mined (Mt) 46.2 45.3 40.3 40.3 38.7 38.3 38.3 38.3 38.3 38.3 38.3 38.3 38.3 38.3 38.3 37.5 29.3 25.9 13.5 6.8 4.3 1.7 0.4 713.5 Total Mat (Mt) 47.5 71.7 75.0 75.0 73.4 73.0 73.0 73.0 73.0 73.0 73.0 73.0 73.0 73.0 73.0 72.2 64.0 60.6 48.1 41.4 38.9 36.4 7.4 1,441.7 Strip Ratio 35.65 1.71 1.16 1.16 1.12 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.08 0.85 0.75 0.39 0.20 0.12 0.05 0.06 0.98 NSR ($/t) 17.6 19.3 17.2 14.9 17.3 16.4 16.4 15.9 14.2 11.6 11.2 13.4 14.9 15.8 16.1 15.5 12.0 11.0 13.2 16.5 17.5 18.7 15.1 Copper (%) 0.46 0.50 0.45 0.39 0.45 0.43 0.43 0.41 0.37 0.32 0.31 0.36 0.39 0.42 0.42 0.41 0.33 0.30 0.36 0.43 0.46 0.49 0.40 Gold (g/t) 0.08 0.09 0.08 0.06 0.08 0.08 0.08 0.08 0.07 0.05 0.04 0.05 0.06 0.07 0.07 0.07 0.05 0.04 0.05 0.07 0.07 0.07 0.07 Silver (g/t) 2.46 2.14 1.83 1.95 2.03 1.96 1.82 1.67 1.52 1.32 1.38 1.60 1.70 1.72 1.76 1.63 1.27 1.30 1.50 1.76 1.76 1.99 1.71 Arsenic (g/t) 468 305 261 354 278 231 184 156 163 208 307 302 263 194 200 153 168 264 241 279 174 236 243
Year -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Total
Ore Mined (Mt) 1.3 26.4 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 7.0 728.2
3.4
Waste Dump and Access Roads

A single elongated waste rock management facility (WRMF) will be developed adjacent to the pit, extending along the valley as illustrated in Figure 3-1. Bottom-up methods will be used for construction. Preliminary waste rock characterization suggests that potentially acid generating (PAG) rock will be present, and so encapsulation storage methods may be required. The primary ore crusher will be installed on the rim of the ultimate pit, northeast of the pit centroid.
Figure 3-1:
Waste Rock Storage Facility and Initial Road Alignments
4.0
4.1
Metallurgy
Testwork
Two major phases of testwork have been conducted for the Candente project. The first consisted of process development to define the type of processing most applicable to the deposit mineralization. This was followed by more detailed work in the second phase to optimize process conditions and develop economic parameters to progress the project. This second phase was affected by the financial crisis of 2008, however, when the work was interrupted. Definition work resumed in 2010 with further development of process parameters to allow primary equipment selection. The goal of the 2010 work was to support the prefeasibility study in progress during 2010. The testwork established the key design parameters, as follows: For a feed grade of 0.40% Cu, a recovery of 89.7% is forecast at the target grind. Recovery will vary with feed grade. The concentrate grade was 30.6% Cu after partial roasting, with arsenic being lowered to non-penalty limits. The grind was established at 200 m with a JKSimMet Axb value of 52.1 and a Bond Ball mill work index of 11.0.
4.1.1
Phase I (2005 2007)

Initial resource development identified potentially leachable copper mineralization. From 2005 to 2006, Kappes, Cassidy & Associates (KCA) assessed the potential of leaching samples containing high levels of cyanide-soluble copper. Initial recoveries were variable and lower than anticipated. In response, further new samples were obtained from twinned drill holes and sent to SGS Lakefield Research Chile (SGS) for bottle-roll and column leaching testwork. The results at SGS Chile were similar to those from KCA. Drilling in 2007 indicated the presence of a significantly larger copper resource with predominantly sulphide copper mineralization. Therefore, the testwork program was revised to assess the metallurgical response of the sulphide copper mineralization to flotation. The 2007 work confirmed that additional testwork focusing on the flotation of the sulphide mineralization was warranted.
4.1.2
Phase IIA (2008)

Based on the positive initial sulphide flotation testwork, comminution, and flotation testwork was initiated at SGS in early 2008. Although this work was halted prematurely of its goal because of the world economic situation in late 2008, it had by this time provided adequate information on the grinding and flotation responses to confirm that a smeltable
concentrate could be produced. Sufficient detail was available to define metallurgical challenges, particularly impurities (As, Sb) in the concentrate and the potential mitigation strategy.
4.1.3
Phase IIB (2010)

Another phase of work for Caariaco Norte began in 2010 with the initial goal of continuing the definition of ore characteristics to support a prefeasibility study. During the preliminary design evaluations, it became apparent that there was an opportunity to enhance the value of the deposit by utilizing a new approach to reduce arsenic and antimony in the bulk copper concentrate. The early work in this program consisted of testing for the optimum rougher flotation feed size, regrind feed size, and rougher and cleaner reagent additions. Products from this testwork were further analyzed for mineralogy, chemistry, and settling quality. The results indicated that it was possible to use a coarser grind and still maintain recovery through the employment of a dual collector system. Later work on the test material focused on establishing that the improvements were robust and the solution proposed for the penalty elements would work. This latter testworkthe application of partial roastinghas been demonstrated to proof-of-concept level.
4.2
Recovery
The principal elements of the flowsheet have been established with indicative recoveries of 89% Cu, 55% Au, and 50% Ag in a >26% Cu concentrate delivered to the roaster; a >30% Cu concentrate delivered to the smelter; and arsenic as a penalty element controlled to a level where no impact on concentrate marketability is anticipated over the life of mine.
5.0
5.1
Process
Process Description
The process design is for a concentrator with a nominal processing capacity of 95,000 t/d of ore from the open pit. The mineral processing and the roasting/acid plants are based on conventional technology and industry proven equipment. Figure 5-1 is a general overview diagram of the process and Figure 5-2 is a block diagram showing the major processing steps.
Figure 5-1: Process Overview General Diagram
ROM Ore from Open Pit
Crushing
Grinding
Flotation
Concentrate
Tails
Pyrite Flotation
Tailings Management Facility
Filtration
Sulphuric acid plant
Concentrate Roast / Impurity Stabilization
Sulphuric acid
Treated Concentrate
Figure 5-2:
Process Overview Block Diagram
Gyratory Crusher
Coarse Ore Stockpile
SAG Mill
Ball Mill
Pebble Recirculation
Vibrating Screen
Roughers Tailings Thickener
1st Cleaners
1st Cleaners Scavengers Process Water Storage De-Pyritization Flotation System
Regrind Mill
2nd Cleaners Concentrate Thickener Concentrate Filter Press
Tailings Pond
SULPHURIC ACID PLANT
GAS TREATMENT
SOLIDS CAPTURE
Concentrate Storage Roaster Acid

STABILIZATION CIRCUIT
Calcine Storage
Run-of-mine (ROM) ore from the open pit will be crushed and conveyed to the concentrator where the ore will be ground to liberate the mineral values from the host rock and then separated by flotation. The bulk copper-silver-gold sulphide concentrate produced will be filtered and introduced into the roasting plant. There the concentrate will undergo a partial oxidative roast, which will remove the arsenic and part of the sulphur into the gaseous phase. The gas will be scrubbed to capture particulate matter and the arsenic into solution. This solution will report to a stabilization circuit that will remove any valuable copper and convert the arsenic to scorodite, which will be filtered and transferred to the tailings management facility (TMF). After removal of the arsenic, the gas containing sulphur dioxide will be processed through a modular plant to produce saleable sulphuric acid. The copper precipitate and solid calcine produced from the roaster will be agglomerated and stockpiled. Trucks will transport the combined concentrate to the port facilities, where it will be placed on ocean-going vessels for transport to overseas smelters. Figure 5-3 is a general arrangement diagram of the concentrator.
Figure 5-3:
Concentrator General Arrangement
5.2
Process Water System

Water used for processing purposes will be derived from several sources: water reclaimed from the TMF water from pit dewatering internal plant water recycled from the tailings thickener and the copper concentrate thickener water from the waste rock seepage recovery system fresh water from Rio Caariaco for specific plant requirements.
5.3
Concentrate Receiving and Loadout at Port Site

Copper concentrate from the process plant will be transported by truck to the Marine Terminal Muchik (MTM) in northern Per, a planned port development by Lumina Copper (Lumina). Candente will construct and operate its own concentrate receiving, storage, and reclaim facilities at the terminal and will share marine handling facilities with Lumina. Annual throughput from Caariaco Norte is projected to average approximately 400,000 tonnes.
6.0

The proposed location for the tailings management facility (TMF) is a tributary in the upper reaches of the Quebrada Yerma valley. The starter dam will be constructed with locally borrowed earthfill and rockfill sourced from within the impoundment area. An embankment height of 105 m is required to store one year of tailings production from the process plant. The main embankment will be raised in stages above the starter dam using cycloned sand and the centreline construction method. At present the ultimate height of the TMF is predicted to be 270 m. A seepage collection (SC) impoundment will be provided downstream of the main TMF embankment. The SC impoundment is designed to retain cyclone sand drainage, embankment seepage, and runoff from the embankment and contributing catchment. The SC embankment will be constructed of compacted earthfill / rockfill with appropriate filter / transition zones and will have a low-permeability bituminous geomembrane liner on the upstream face. This design is based on similar embankment designs previously permitted and constructed in Per. During the initial construction period, it will be necessary to divert surface water around the areas of construction, primarily at the TMF and SC embankments. The start-up design includes cofferdams and diversion systems in both areas for this purpose. The cofferdams are designed as earthfill / rockfill structures with filter/transition zones and with a bituminous geomembrane liner on the upstream face. Both embankments have been designed with emergency spillways to pass waters resulting from larger storm events. One of the design objectives for the TMF is to keep the PAG tailings saturated at all times once placed within the TMF impoundment. To achieve this, the PAG tailings will be deposited subaqueously and be flooded with a minimum 2 m of water cover. Mineral processing over the operating life of the mine will result in the production of approximately 30,000 m3 of scoroditethe stable ferric arsenate byproduct from the partial roast process incorporated in the process flowsheet to manage arsenic levels in the concentrate. Scorodite represents approximately 0.011% of the total waste material to be stored in the TMF. It is currently planned to provide a separate lined containment facility for this byproduct and the facility will be capped at closure. Water from the TMF will be reclaimed to the process plant during operations. The TMF reclaim barge will be designed to provide a flow rate 3,380 m3/h.
7.0
7.1
Infrastructure and Ancillary Facilities

Mine Site Facilities
The mine site facilities are divided into three general areas: the mine, the plant site, which includes buildings and structures for repair and maintenance of mine and plant equipment, and the camp area, which includes facilities for personnel accommodations, administration, and security. Other support facilities and services include site access, power supply and distribution, water supply, explosive storage and handling, communications systems and waste disposal facilities at the site. An overall general arrangement of the development sites is shown in Figure 7-1. Project infrastructure will also include facilities at the Marine Terminal Muchik (MTM), a planned development by Lumina Copper Corp (Lumina) in northern Per. Here, Candente will have its own dedicated concentrate receiving, storage, and reclaim facilities but will share general site services and loadout / ship berthing equipment with Lumina.
Figure 7-1:
General Arrangement of Project Facilities
Access to the plant site will be via a new 42 km single-lane gravel road, branching off the existing Corral Quemado Road running along the Huacabamba Valley. The alignment follows a new bridge crossing over Ro Huacabamba and then passes through challenging terrain, rising at a constant grade of 8% until it reaches the ridge top between the Yerma and Caariaco valleys near the TMF. On-site roads will be provided for vehicle access to facilities and remote structures. General access roads will be two-way, service roads will be one-way with pullouts, and mine haul roads will be one-or two-way as required and wide enough to accommodate the Komatsu 930E or similar haul trucks. To meet regulatory requirements, blasting agents for mining operations will be stored on the opposite side of the ridgeline to the north of the site, just off the main access road, a safe distance away from occupied or significant structures. Separate sites will be provided for a bulk emulsion plant, an ammonium nitrate storage area, and a detonator magazine. Fresh water for site services will be obtained from a fresh water reservoir constructed as part of the Ro Caariaco diversion around the WRMF. Fresh water will be used for process make-up water, fire water, and to supply the potable water treatment plant (PWTP). The reservoir will also provide start-up water for the process plant until sufficient reclaim water is available in the TMF to furnish continual supply, estimated to be two months after start-up. Normally, most process water is derived from thickener overflow, reclaim water pumped from the TMF, and other reclaim sources. Electrical power will be supplied to the Caariaco Norte site by a 220 kV overhead transmission line from the local utility substation at Carhuaquero, a distance of 57 km from the mine site. The incoming transmission line will terminate at a new main site substation for the transformation of power from the transmission voltage level of 220 kV to the site distribution/utilization level of 25 kV. The anticipated connected load for operation is 148 MW with an average load of 95 MW and power factor of 95%. Emergency power will be produced by standby diesel generating units rated for a nominal 4.5 MW to provide power to mine and process equipment and the permanent camp in the event of a utility power failure. Diesel fuel will be stored in four 500 m3 tanks, providing more than two weeks of supply the event of fuel delivery disruption or power failure.
7.2
Port Site Infrastructure

The port site infrastructure for the project will be at the MTM, a planned development by Lumina Copper southeast of the town of Eten and the existing Consorcio Terminales Eten liquid bulk terminal in Northern Per. Copper concentrate from the mine will be transported by truck to MTM at a rate of approximately 400,000 t/a. The loading berth at the port will be designed to accommodate up to 50,000 DWT loaded Handymax vessels.
This study assumes that the berthing facility, the trestle conveyor leading out to the berth, and the shiploader will be shared with Lumina Copper. Some service buildings and utilities throughout the port site, such as fire, process, and potable water supply and sanitary waste disposal, would also be shared, whereas concentrate receiving, storage, and reclaim facilities for the Caariaco Norte product would be independently developed and operated by Candente. Concentrate reclaimed from storage will be conveyed to the pipe conveyor, shared with Lumina, then to the berth conveyor that feeds the travelling shiploader. Power supply for the Candente facilities will be delivered to a substation at the concentrate storage and handling facility at 4.16 kV from the power auxiliary distribution system planned by Lumina Copper. The marine berth will be constructed 3.2 km from shore at a water depth of -15.0 m, as required for the design 50,000 DWT Handymax vessel. Vessel operations for export of Candente product will be scheduled in conjunction with Lumina to avoid berthing conflicts.
8.0
Surface Water Management

The climate data for the site was updated with the information available from the existing camp and data from the El Limon and Incahuasi weather stations. The hydrologic data for the site were determined for various return periods using frequency analysis. The surface water management plan for the Caariaco Norte project will preserve to the maximum extent possible the non contact status of surface waters. Waters that come into contact with project facilities will be contained and treated, if necessary, so that any water released to the environment meets the applicable water quality regulatory guidelines. A system of impoundments, embankments, diversions and spillways will be developed during construction to handle runoff from construction-related activities. This system will continue to be developed through operations to ensure sustainable water management. Water will be impounded upstream of the WRMF to supply the freshwater makeup requirements of the process plant. A diversion channel will be constructed to direct the Ro Caariaco around the WRMF. Contact water from the facilities in the areas of the pit, process plant, and WRMF will be collected and, depending on quality requirements, utilized as mill process water. Precipitation on the TMF and runoff draining into the TMF will be impounded to ensure a minimum water cover is maintained over the tailings and to provide reclaim water for process plant requirements. At closure, the TMF spillway will be designed to handle flows generated from probable maximum flood (PMF). The site water balance estimates that water release from the TMF will not be required until the end of the mine life.
9.0
Environmental Considerations
Candente initiated the Environmental Impact Assessment (EIA) for the Caariaco project in 2007 and baseline environmental assessments are ongoing. The site of the Caariaco Norte project, in Northern Per, is an area environmentally similar to the surrounding region that extends into Ecuador and Columbia and is subject to distinct wet and dry seasons. Hydrological investigations show that naturally acidic waters are present in mineralized areas within the project footprint. Dissolved metals have been found to be above Probable Effect Levels (PEL) within the project footprint, but this is not unusual for mineralized areas, where PELs are routinely exceeded. Due to steep slopes and the high clay and fines contents, soils within the region are typically unstable. Current air quality is characteristic of rural, non-industrialized areas, with no contaminants at concentrations of concern to human health. The project ecosystem consists of moors and cloud forests at higher elevations and cultivated land at lower elevations. No native fish species were found within the rivers and creeks at the project site, but introduced trout were identified downstream in the main stem of Ro Caariaco. Native species were found within the lower basin of both Ro Caariaco and Quebrada Yerma and in Ro Huancabamba, approximately 40 km from the project site. The community of San Juan de Caaris (CSJC) holds the surface rights in the proposed Caariaco project development area. This community comprises approximately 25 villages and 1,500 primary social groups. The main village of Caaris is adjacent to a northeast tributary of Ro Caariaco, approximately 2.5 km downstream of the project. Vehicle access to the villages is limited, and most residents are involved in subsistence agriculture.
10.0
Conceptual Closure Plan

Reclamation of the Caariaco Norte project in Per will meet Peruvian environmental regulations and International Finance Corporation (IFC) Environmental, Health and Safety Guidelines for Mining (IFC, 2007). The primary objectives for reclamation and closure are to safeguard future public health and safety, to minimize impacts on the local environment by ensuring physical, chemical, and ecological integrity of the site features, and, where practical, to return the disturbed areas to their pre-mining land use. The Caariaco Norte project consists of six general areas: open pit mine area plant site, camp site, and other ancillary infrastructure TMF, including the tailings and reclaim pipelines WRMF and diversion channel access roads and power transmission lines port facilities. The first four areas comprise the reclamation areas for the project. Responsibility and control of reclamation and closure for the last two areas will be transferred to the government or other corporations at closure. In general, at closure of the mine, the open pit mine will be allowed to flood, and overflow water will be managed at the WRMF water treatment plant. A permanent water cover will be maintained on the TMF, and any exposed tailings beaches will be capped with leached cap material to promote revegetation. The WRMF will be covered with a non-acidgenerating cover to reduce infiltration of precipitation. All seepage and runoff from the TMF and WRMF will be collected in seepage collection impoundments and treated for discharge if required.
11.0
Project Execution
The project execution schedule duration is currently 30 months from Notice to Proceed through to final completion of the second ball mill line within the process plant. The key milestones for the project include the following: Notice to Proceed ..............................................................................1 January 2013 Start Site Establishment Work ..........................................................4 January 2013 Start Access Road to Site ...................................................................... 1 April 2013 Start Concrete Works ............................................................................. 1 April 2013 Start Tailings Dam ................................................................................... 1 July 2013 Start Pre-stripping (mine) ..................................................................1 October 2013 Permanent Power Complete ................................................................ 30 June 2014 Diversion Dam Complete ........................................................... 30 September 2014 Start Mining .......................................................................................1 October 2014 Process Plant Mechanical Complete .......................................... 30 December 2014 Ready to Deliver Ore .........................................................................1 January 2015 1st Ball Mill Line Commissioned ......................................................25 January 2015 Diversion Channel Complete ..........................................................30 January 2015 2nd Ball Mill Line Commissioned .......................................................... 30 June 2015 A peak workforce of approximately 1,500 people is anticipated at the site during the construction phase.
12.0
Capital Cost Estimate

The total estimated Owner-operated capital cost to design and build the Caariaco Norte Copper Project in Per at 95,000 t/d, is $1.599 billion. This cost assumes an Owneroperated mining fleet and process plant, and self-performed preproduction development. The estimate covers the direct field costs of executing the project, plus the Owners indirect costs associated with design, construction, and commissioning. The estimate is summarized in Table 12-1. The capital cost estimate for the financial model base case assumes open pit mining by the owner with leased supply of mobile mining equipment including scheduled additions and replacements. The estimated capital cost for the financial base case is $1.437 billion. A summary of the financial base case capital costs is provided in Table 15-3. All costs are expressed in Q3 2010 U.S. dollars with no allowance for escalation, interest or financing fees, taxes or duties, or working capital during construction. The level of accuracy for the estimate is 20% of estimated final costs, as per AACE Class 4 definition.
Table 12-1: Summary of Capital Costs
Area Mining Process Plant On Site Infrastructures Tailings Management Project Access Road Water Diversion Port Site Facilities Total Direct Owners Cost Indirects Total Indirects Contingency Total Capital Cost Escalation (excluded) Working Capital (included in Financial Analysis) Total Cost ($000) 326,615 381,277 133,444 101,527 38,795 50,753 26,887 1,059,298 52,899 243,076 295,975 243,903 1,599,176 1,599,176
13.0
Operating Cost Estimate

The operating costs for the Caariaco Norte project are based on an Owner-operated mining fleet and process facility and have been prepared in Q3 2010 U.S. dollars. The operating cost estimate excludes: contingency allowance for escalation sales tax concentrate shipping copper smelter treatment and refining charges import duties. The operating cost estimates have been assembled by area and component, based on estimated staffing levels, consumables, and expenditures, according to the mine plan and process design. Average operating costs are shown in Table 13-1.
Table 13-1: Average On-Site Operating Costs
Area Mining Processing General & Administration Total On-Site Operating Costs Unit $/t processed $/t processed $/t processed $/t processed US$ 2.74 3.11 0.43 6.28 Unit $/lb Cu $/lb Cu $/lb Cu $/lb Cu US$/lb Cu 0.360 0.408 0.056 0.824
14.0
Concentrate Marketing
The marketing assessment for the Caariaco Norte project is based on metallurgical data to date and reports commissioned from Neil S. Seldon & Associates Ltd. (NSA)1 to examine the copper concentrate and acid markets. NSA provides a commentary and outlook on concentrate marketability, and related smelter charges, including treatment, refining, penalty details, payment timing, metal accountability, and other contract terms. NSA has not contacted any smelters to specifically discuss the marketability of the Caariaco Norte concentrates. An evaluation of the marketability of sulphuric acid by-product from the proposed roasting facility was completed by Caliper Metals Corp (CMC) on behalf of NSA2. Future supply demand for both local Peruvian and Chilean acid markets suggests a net deficit for the near term. CMC has indicated that, from a project perspective, this is a positive project inclusion as domestic options are likely to increase, although Chile remains a viable export alternative. From a chemical quality standpoint, the Caariaco Norte concentrate production is anticipated to be readily acceptable to smelters. At 32% Cu and with sulphur content around 20%, the higher copper and lower sulphur content of the partially roasted concentrate is seen as important to smelters today. The copper content of concentrates for mines such as Escondida are falling and as a result, smelter input blends have fallen to plus/ minus 28%. The anticipated quality of the copper concentrate to be produced is based on metallurgical testing carried out by SGS Lakefield in Santiago and Outotec (Sweden) AB. Other than arsenic, which has been managed by the partial roasting process, no other significant deleterious constituents are anticipated, although it should be noted that antimony is near the normal penalty levels before concentrate roasting and significantly below penalty limits afterwards. Overall, the concentrates are considered to be of good quality.
1 2
For internal use only and not for publication. For internal use only and not for publication.
15.0
Financial Evaluation
Four cases were assessed through the financial evaluation: Case 1 Client Owner Operated Case 2 Contract Mining Case 3 Leased Mining Equipment (Base Case) Case 4 Leased Mining, Mill, and Electrical Equipment. The case identified below as the base case is Case 3, Leased Mining Equipment. Unless otherwise specified, discussions and numbers within this section are related to the base case. Table 15-1 summarizes the key physical, technical, and after-tax financial parameters for the progress report. Work was based on a long-term copper price reverting to $2.25/lb and an oil price of $80/bbl. The total mine site cash operating cost based on leased mining equipment is US$6.28/t processed, or $0.82/lb Cu produced. The all-in C13 cash cost, including concentrate transportation, off-site smelting and refining, applicable taxes, and by-product credits for gold, silver and sulphuric acid, is US$0.99/lb Cu. Sensitivity analysis was performed on the base case taking into account variations in the metal price, operating cost, foreign exchange, and mining cost. Analysis shows that the Caariaco project is most sensitive to changes in metal prices, which directly affects the revenue stream. The project is less sensitive to capital expenditure and operating cost, although those sensitivities are very similar. The results are illustrated in Table 15-2 and Figure 15-1. Because the project is priced in U.S. dollars, the effects of exchange rate variation do not apply in the current model, although in reality some equipment, supplies, and services will be priced in Euros and the local Peruvian currency.
Table 15-1: Caariaco Norte Project Financial Summary
Unit Copper Price Total Mined Ore Milled Strip Ratio Grade Copper Contained Copper Copper Recovery Payable Copper On-Site Operating Costs Net Smelter Return Acid Revenue Production Costs $/lb Mt Mt t:t % Mlb % Mlb $M $M $M $M LOM 2.25 1,442 728 0.98:1 0.4 6,431 89.7 5,556 4,572 12,582 269 4,951 6.28 17.28 0.37 6.80 0.82 2.27 0.05 0.89 $/t milled $/lb Cu
Brook Hunt cost category C1 = net direct cash cost. See Appendix L.
Unit Royalties Closure and Salvage Costs Earnings Before Income Tax (EBIT) Total Taxes Total Capital Net Cash, pre-tax Net Cash, after-tax NPV Undiscounted, after-tax $M $M $M $M $M $M $M
LOM 338 58 7,505 2,142 1,508 5,998 3,855 3,855 1,063 18.8 21.2 4.1 1,437 1,508
$/t milled 0.46 0.08
$/lb Cu 0.06 0.01
NPV @ 8%, after-tax

IRR, after-tax Mine Life Payback Year Total Start-Up Capital Total LOM Capital
$M $M
% years years $M $M
Table 15-2: Results of Sensitivity Analysis

Change in Factor Factor Exchange rate Capital expenditure Operating expenditure Metal price -30% 932 1,323 1,312 (195) -20% 932 1,193 1,185 182 -10% 932 1,062 1,059 557 0% 932 932 932 932 10% 932 802 806 1,307 20% 932 671 679 1,681 30% 932 541 552 2,056
Figure 15-1: Graph of Sensitivity Analysis Results for Base Case

Candente - Sensitivity of NPV @ 8%
2,500
NPV @ 8% (US$ million)
2,000 1,500 1,000

Price
Capex
Opex
500 0 (500) -40% -30% -20% -10% 0% 10% 20% 30% 40% Change in Factor
Xrate
Table 15-3 summarizes the initial capital cost of the project for the base case of leased mining equipment. The preliminary capital cost reflects prefeasibility level estimates for all areas with the exception of the mine and where geotechnical assessment for the mine bench and overall pit slope remains outstanding. The total capital cost is US$1,437 million, including contingency and other indirect costs. Another $71 million is required in sustaining capital.
Table 15-3: Summary of Capital Costs by Major Discipline
Area Prestripping Mining Infrastructure & Equipment Processing Plant & Acid Plant On Site Infrastructures Tailings Management Project Access Road Water Diversion and Reservoir Port Site Facilities Total Direct Owners Cost Indirects Total Indirects Contingency Total Capital Cost Escalation (excluded) Working Capital (included in Financial Analysis) Total 2010 ($000) 70,008 101,942 381,277 133,444 101,527 38,795 50,753 26,887 904,633 52,899 243,076 295,975 236,522 1,437,160 1,437,160
16.0
Risk and Opportunities

A number of risks and opportunities were identified during the course of the study, many of which will be pursued as the project develops. Key risks to the project include sensitivity to metal price and geotechnical design of the 900m+ pit highwall. Other, more minor risks include escalation in commodity pricing, geotechnical design of the tailings management facility embankment, and design considerations for the waste rock management facility diversion channel. The project financials are most sensitive to metal prices and capital cost. In the current economic climate, metal pricing for copper and gold is strong and is expected to remain so into the initial years of production at Caariaco Norte. A significant decrease in copper price would affect the projected cash flow for the project. A geotechnical site investigation program has been proposed and planned to support geotechnical pit design at a prefeasibility level. The data from the site investigations are considered to be key in understanding the joint patterns and geotechnical complexities associated with the highwall (approximately 925 m high) and the sensitivity of the highwall slope to pit depressurization and rock mass strength. These investigations may result in a design change in the pit slope angles which will have a consequent effect on the stripping ratio and project mining costs. Key opportunities include optimization of the mine plan for the initial 18-month production period, additional drilling to increase Measured and Indicted (MI) resources, and delineating additional resources in the area of Caariaco Norte. Optimizing the mine plan for the first 18 months of operations to maximize the IRR and reduce project payback period is recommended as the mine plan develops. Additional drilling is recommended to be continued in the vicinity of Caariaco Norte with the objective of reclassifying Inferred resources to Indicated and/or Measured resources There is good potential to discover and delineate additional resources at the Caariaco Sur and Quebrada Verde targets near the Caariaco Norte deposit and expanding the overall resource base.
17.0
Conclusions
AMEC has applied industry-standard mining, process design, construction methods, and economic evaluation practices in this assessment of the Caariaco Norte project. Sufficient and representative samples and information were available to estimate a mineral resource, conduct metallurgical testing, and complete this prefeasibility progress report. Sufficient work has been undertaken on the permitting and environmental aspects of the project to gain an understanding of the regulatory requirements that will need to be met to construct, operate, and close the mine. After the currently proposed pit is mined, the Caariaco Norte deposit will still contain resources, particularly at depth. In this study, the Whittle optimization analysis and subsequent mine design were based on a copper price of $2.25/lb. If a higher copper price were used, then the optimal Whittle shell could be expected to expand, and the total mill feed and mine life would increase. The Caariaco Sur deposit has been interpreted previously to contain a potential resource, but limited exploration drilling has been carried out to date. Considering preliminary indications that Caariaco Sur material contains minimal arsenic, it represents an exploration target that could make ore blending an option and potentially eliminate some of the arsenic mitigation requirements currently included in this study. The process plant, as designed, will handle 95,000 t/d through a typical crushing and twostage grinding circuit. The primary flotation circuit will produce a bulk concentrate that will be reground and upgraded in a three-stage cleaner circuit. The results of ongoing metallurgical testwork indicate that the ore responds positively to the typical grinding and conventional flotation methodologies for such deposits. In this study, AMEC has begun optimizing a concentrator flowsheet that appears to be viable with respect to the known mineralization of the deposit. The Outotec partial roast process has been confirmed to reduce the levels of impurities in the concentrate to below smelter penalty limits and will produce a saleable concentrate throughout the mine life. Based on the additional data, updated knowledge, and refined assumptions at this stage of study, the results show that the project achieves a 18.8% post-tax IRR at a long term copper price of $2.25/lb. The copper price required to produce a breakeven cash flow (discounted at 8% and post-tax) is $1.75/lb based on a flat copper price and flat prices of $1,015/oz gold and $15.85/oz silver. The sensitivity analyses show that the project is most sensitive to copper price, followed by grade, capital cost, and operating cost, in that order. AMEC recommends that, should Candente management deem the economic possibilities to be worth pursuing, they proceed with information-gathering to advance the project to a feasibility study level. Upon performing the necessary sampling and testwork, a feasibility
study could improve the construction and operational design, scheduling, costing, and economic analysis.
18.0
Recommendations
The following are the main recommendations for the completion of a feasibility study: Site investigations, including drilling, test pitting, packer tests, and seismic lines, to provide additional samples and information for: geotechnical and structural characterization hydrological mapping increased definition of the mineral resource waste rock characterization and metallurgical variability testwork Six-month program estimated to cost $4 million. Metallurgical and mineral processing tests should include, but not be limited to: characterization of mineralization in various parts of the deposit optimization of flotation recovery and reagent use confirmation of current processing assumptions such as concentrate thickening and filtration rates confirmation testing of acid production quantities further testing of the behaviour of arsenic mineralization in flotation further characterization of mill feed variability confirmation testing of arsenic reduction in concentrate to reflect deposit variability Eight-month program estimated to cost $1.0 million. ML/ARD testing and development of a PAG/non-PAG rock model Six-month program estimated to cost $0.25 million. Pursuit of environment assessment and permitting. Estimated cost $2 million. Conduct a feasibility study. Estimated cost $6.1million.
CONTENTS 2.0 INTRODUCTION ....................................................................................................2-1 2.1 Purpose and Objectives of Report ...............................................................2-1 2.2 Terms of Reference ....................................................................................2-2 2.3 Project Background and History ..................................................................2-3 2.3.1 INGEMMET .....................................................................................2-3 2.3.2 Placer Dome ....................................................................................2-3 2.3.3 Billiton ..............................................................................................2-4 2.3.4 Candente Copper Corp. ...................................................................2-4 2.3.5 Historical Resource Estimates .........................................................2-5 2.4 Property Location, Description, and Access ................................................2-5 2.4.1 Property Location ............................................................................2-5 2.4.2 Description ......................................................................................2-6 2.4.3 Access .............................................................................................2-7 2.4.4 Infrastructure ...................................................................................2-8 2.4.5 Local Resources ..............................................................................2-8 2.5 Legal Status ................................................................................................2-9 2.5.1 Land Tenure ....................................................................................2-9 2.5.2 Surface Rights .................................................................................2-9 2.5.3 Mining Law ......................................................................................2-9 2.5.4 Mineral Concession Law ................................................................2-12 2.5.5 Exploitation ....................................................................................2-12 2.5.6 Environmental Regulations ............................................................2-12 2.5.7 Environmental Impact Assessment (EIA) .......................................2-13 2.5.8 Environmental Management Plan (EMP) .......................................2-13 2.5.9 Permits ..........................................................................................2-13 2.6 Caariaco Trade-off Studies......................................................................2-14 2.6.1 Conveying Waste Rock to Tailings Area for Embankment Construction ..................................................................................2-15 2.6.2 Plant Site Relocation .....................................................................2-15 2.6.3 Tailings and Waste Dump Alternatives ..........................................2-15 2.6.4 Plant Throughput ...........................................................................2-16 2.6.5 Location of Waste Rock Management Facility ...............................2-17 2.6.6 Options for Reduction of Arsenic in Caariaco Norte Concentrate .2-17 2.6.7 In-Pit Crushing and Conveying ......................................................2-17 2.6.8 Pit Electrification ............................................................................2-17 2.7 Report Organization and Conventions.......................................................2-18
TABLES
Table 2-1: Table 2-2: Existing Routes from Chiclayo to Caariaco ................................................................... 2-8 Caariaco Concessions held by Candente Copper Corp. (as of 29 October 2010) ..... 2-10
TOC i
FIGURES
Figure 2-1: Figure 2-2: Figure 2-3: Figure 2-4: General Location Map ..................................................................................................... 2-1 View of Caariaco Project Mineral Resource Area ......................................................... 2-6 Existing Caariaco Property Access Routes and Infrastructure ..................................... 2-7 Caariaco Concessions held by Candente Copper Corp. (as of 29 October 2010) ..... 2-11
TOC ii
2.0
2.1
INTRODUCTION
Purpose and Objectives of Report
Candente Copper Corp. (Candente) is 100% owner of the Caariaco Norte project, a copper property in the Caaris District of Province of Ferenafe, Per, approximately 110 km northeast of the city of Chiclayo (Figure 2-1). AMEC was retained in early 2010 to develop the Caariaco Norte Prefeasibility Study. The purpose of this Prefeasibility Progress Report is to describe the status of the project as of December 2010; to provide an economic evaluation of the projects potential to justify future expenditures; to identify areas requiring further study; and to plan future work programs. To assist in meeting these objectives, this progress report includes a capital cost estimate with an accuracy of 20%.
Figure 2-1: General Location Map
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2.2
Terms of Reference
Candente is evaluating the development of the Caariaco Norte project in Per. Candente commissioned AMEC to prepare this report with input from its subconsultants as listed below. The progress report addresses the status of work for mineral resources, the mine plan, processing and support facilities, site access, transportation of materials and equipment, port requirements, environmental permitting, reclamation, closure, construction, project implementation, capital and operating costs, and financial evaluation. AMEC Americas Limited and Affiliate AMEC Earth & Environmental (AMEC) overall study compilation geologic modelling mine planning flowsheet development design of process facilities design of site support facilities development of logistics program equipment pricing, excluding equipment associated with the port facility quantity estimation for major civil and structural components capital cost estimates for mine, process facilities, and on-site facilities operating cost estimates for mining, process, transport, and administration, excluding the port concentrate and acid marketing study (subconsultant Neil S. Seldon & Associates Ltd.) financial evaluation development of project plan and schedule specification and management of environmental and socioeconomic baseline studies, including impact analysis permitting requirements reclamation planning baseline environmental data geotechnical engineering to support the mine pit and tailings management facility (TMF) site water management mine waste rock management design of the TMF closure cost estimate.
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Candente and Affiliates specification and management of metallurgical testwork program proof of concept testing for roasting facility. Ausenco Sandwell design of port facilities.
2.3
Project Background and History

Copper was first discovered at Caariaco Norte in the 1970s during a regional exploration program carried out by the Peruvian Servicio Nacional de Geologa y Minera (INGEMMET), in cooperation with a British Geological Survey team (Wilson, 1999)1. Phases of exploration and drilling in the 1970s and 1990s were sporadic until Candente initiated its exploration efforts in 2004.
2.3.1
INGEMMET
INGEMMET identified four centres of alteration and mineralization during exploration in 1971. This included stream sediment sampling and a detailed geochemical study of the Ro Caariaco valley. Geological mapping at 1:25,000 defined 9 km2 of alteration and mineralization. This area was then investigated more closely by means of soil and rock chip sampling, detailed surficial mapping, and diamond drilling. In 1973 INGEMMET carried out a total of 1,500 m of drilling in the Caariaco Norte zone, consisting of five separate 300 m deep vertical holes. Induced Polarization (IP) geophysical surveys were completed across parts of the Caariaco Norte zone the following year.
2.3.2
Placer Dome
In 1994, Placer Dome Exploration Inc. (Placer Dome) optioned the Caariaco property from the Peruvian Government and carried out a more detailed geological mapping and rock-chip sampling program. Some 2,200 m of trenching and 80 test pits were dug across the Caariaco Norte and Caariaco Sur zones; this led to petrographic studies and a re-interpretation of INGEMMETs geophysical surveys. In the Caariaco Norte zone, three inclined diamond drill holes, totalling 854 m, were completed in 1995. Placer Dome dropped its option in 1997.
Wilson, A.J., 1999: Caariaco Project, Lambayeque, Northern Per: Unpublished internal geological report prepared for Billiton Exploration and Mining Per B.V.
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2.3.3
Billiton
Billiton Exploration and Mining Per B.V. (Billiton) optioned the Caariaco property from the Peruvian Government in 1999 and completed an access road to Billitons exploration camp at Caariaco Sur. The exploration program included geological mapping, systematic soil and chip sampling, and both IP and ground magnetic geophysical surveys. This was followed by an eight-hole diamond drilling program that included three holes (555.7 m) in the Caariaco Norte zone, three holes (472.5 m) in the Caariaco Sur zone, and two (+100 m) in the Quebrada Verde zone. Petrographic samples were collected and studied, and sequential leach testing was carried out on drill core samples from Caariaco Norte. IP and ground magnetic surveys were also undertaken over the Caariaco Sur and Quebrada Verde zones. Billiton dropped its option in 2000. The prevailing copper price (less than 80 cents per pound from 1997 to 2001) and difficult option deals with the Peruvian Government were the catalysts to both Placer Dome and Billiton dropping their options on the property.
2.3.4
Candente Copper Corp.

In February 2002, Candente Copper Corp. (Candente), through the Peruvian subsidiary Caariaco Copper Per S.A. (CCPSA) (formerly Exploraciones Milenio S.A., EMSA), acquired 100% ownership of the Caariaco property at auction. Following the auction, and prior to completing financing for the property, Candente engaged Knight Pisold to conduct a fatal flaw analysis of the property, to identify potential locations for leach pads and waste stockpiles, and to prepare an overview of the permit requirements for the project. CCPSA commenced exploration on the property in January 2004 and drilled a total of 218 holes across the Caariaco Norte zone to delineate the current resource, as follows: 12 holes for 2,647 m in 2004 24 holes for 7,388 m in 2005 46 holes for 15,984 m in 2006 123 holes for 31,337 m in 2007 13 holes for 3,570m in 2008. Other work was also undertaken: During 2004, programs for geological mapping, prospecting, ground magnetic geophysics, rock-chip sampling, petrographic studies, bulk sampling for leach column testing, and re-logging of existing drill core were carried out. In 2005, additional detailed geological mapping programs were undertaken and drill core was sampled and re-assayed. Eight holes were analyzed by ICP and 36 holes were fire-assayed for gold.
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Through 2006, the geological mapping programs continued, survey beacons were established, and bulk samples were taken for leach column testing. Diamond drilling continued from March until mid-September 2008 for metallurgical sample procurement, geotechnical drilling, and deep resource delineation. Candente commissioned NI 43-101-compliant technical reports authored by James A. Currie in 2004, James McCrea in 2005 and May 2006 (modified in June 2006), Merit International Consultants Ltd. in June 2006, and Minefill Services in January 2007. Candente also commissioned a Preliminary Economic Assessment (PEA) by SRK Consulting (Canada) Inc. (SRK) in November 2008.
2.3.5
Historical Resource Estimates

INGEMMET, Placer Dome, and Billiton compiled resource estimates for the Caariaco Norte zone: INGEMMET, based on two drill hole intersections, estimated resources of 8.84 Mt of probable resource at an average grade of 0.78% Cu and 0.001% Mo, and 380.6 Mt of possible resource at a variable grade of between 0.45% and 0.80% Cu and 0.001% to 0.003% Mo. Placer Dome believed the Caariaco property had the potential to host in excess of 800 Mt grading better than 0.5%, of which 365 Mt was estimated in Caariaco Norte. Billiton concluded that the Caariaco Norte zone contained a minimum of 320 Mt at an average grade of 0.45% Cu (based on analysis of a 1,000 m x 600 m x 200 m block) and an average specific gravity of 2.7. It was noted, however, that poorly constrained zones of >0.6% Cu existed within the block and totalled approximately 19% of the overall block (60 Mt). The resource estimates outlined above are included solely for completeness. They do not comply with NI 43-101 standards, and the validity of the results is not confirmed.
2.4
2.4.1
Property Location, Description, and Access

Property Location
The Caariaco property is located at latitude 0605' south and longitude 7917' west, in the Western Cordillera of the Peruvian Andes, in the Caaris District of the Province of Ferreafe, Department of Lambayeque of Northwestern Per (map sheet 13-E Incahuasi). The property is approximately 700 km northwest of Lima and approximately 110 km northeast of the city of Chiclayo in Per (Figure 2-1).
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2.4.2
2.4.2.1
Description
Physiography The Caariaco Norte project area and mineral resource lie along the eastern side of the continental divide at elevations ranging between 2,700 and 3,600 masl. The topography varies from steep incised valleys at lower elevations to open grassy highlands (Figure 2-2). Within the mineral resource area, the topography is challenging, with fingers of sub tropical forests extending up the small valleys. These forests transition into open grasslands and broad valleys as the elevation increases (>3,000 masl) to the north of the main mineralized zone.
Figure 2-2: View of Caariaco Project Mineral Resource Area
Vegetation at higher elevations consists mainly of ichu and other types of natural grasses used for livestock grazing. Localized agriculture plots for subsistence farming are maintained in the forested valleys. The community of Caaris, within temperate highlands north of the mineral resource area, is agriculturally based. The main crops are potatoes, maize, and a variety of vegetables and herbs. 2.4.2.2 Climate The property crosses several climatic zones and temperatures may vary by up to 10C with altitude from the lower forested valleys to the upper grassy ridges. Annual summer and winter temperatures range between 3C and 20C. The region receives between 830 mm and 1,700 mm of rain each year, with the wet season extending from November to March. Periods of precipitation are generally of short duration, from 1 to 2 hours. The prevailing winds at the mine site are from the southeast and are generally light to moderate, with maximum gusts up to 90 km/h. Climatic conditions are not expected to affect ground-based operations, although helicopter-supported activities and four-wheel drive roads could be less functional during the rainy seasons. Therefore, mine operations have been scheduled year-round, 24 h/d, with no allowance for shutdowns due to weather-related events.
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2.4.3
Access
The Caariaco property is accessible by road from Lima via the city of Chiclayo (Figure 2-3). Either the Pan-American Highway (700 km, 11-hour trip) or one of the thrice daily commercial airline flights can be taken from Lima to Chiclayo. The route from Chiclayo to the Caariaco property is currently a 149 km, 6-hour trip along mostly unimproved roads via Incahuasi. The road is not currently suitable for heavy trucks, and there is no landing strip on the property. Road travel time from Chiclayo to the Caariaco site is summarized in Table 2-1.
Figure 2-3: Existing Caariaco Property Access Routes and Infrastructure
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Table 2-1:
Route
Existing Routes from Chiclayo to Caariaco

Distance (km) 260 24 6 290 50 67 30 2 149 81 97 2 180 Paved Road Unimproved Road 4x4 Access Road to Camp Paved Road Secondary Gravel Road Drivable Track 4x4 Access Road to camp Road/Trail/Type Paved Road Unimproved Road Horse Trail
Chiclayo Motupe Pucara Pucara Caaris Caaris Caariaco Total Chiclayo H. da. Batan Grande H. da. Batan Grande Incahuasi Huyllurpampa Huyllurpampa Road Terminus Road Terminus Caariaco Total Chiclayo Motupe Motupe Road Terminus Road Terminus Caariaco Total
Note: After Currie (2004) and van Egmond (2006).
2.4.4
Infrastructure
At present the Caariaco property has a fully established camp and catering facility for 100 persons. Core-handling facilities and weather stations are also in place on site. Core storage and detailed logging are done at Candentes secure facility in Chiclayo. The camp is situated near Ro Caariaco and has ample water supply. Electricity is generated on site. Before project operations begin, a 220 kV overhead transmission line will be installed from the local utility substation at Carhuaquero, 57 km south of the mine site. Peruvian freight forwarders have recommended three ports that could be used for construction purposes: Callao, Paita, and Salaverry. These are discussed in more detail in Section 12, Project Execution Plan, of this report.
2.4.5
Local Resources
Per has a long history of mining. Consequently, mining professionals and machine operators are generally available in most population centres. Candente is expected to be able to source Peruvian personal for virtually all mine administration and operation requirements. Supplies and other normal services are available at Chiclayo. Specialist exploration services, such as drilling and geophysical and geochemical analyses, are usually contracted out of Lima.
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2.5
2.5.1
Legal Status
Land Tenure
The Caariaco property comprises a total area of 20,590 ha in 26 concessions as listed in Table 2-2. Three porphyry copper zones, Caariaco Norte, Caariaco Sur, and Quebrada Verde, have been identified on the Caariaco property. Candente, through its Peruvian subsidiary CCPSA, holds a 100% interest in the Caariaco property. Figure 2-4 is a plan of the concessions in UTM co-ordinates (PSAD 56, Zone 17).
2.5.2
Surface Rights
It is a requirement of the Peruvian Government that any property developer either purchase the surface rights, or make an appropriate agreement with the surface rights owner, for access to a property. The holders of mining concessions are protected under the Peruvian Constitution and Civil Code, but their concession rights do not confer ownership of the land. Thus, the owner of a mining concession must deal with the registered land owner to obtain the right of access to fulfill the production obligations inherent in the concession grant. All transactions and contracts pertaining to a mining concession must be registered with the Public Mining Registry in the event of subsequent disputes in law. The issue of land tenure continues to be of significance in Per, not least because the national cadastral system for agricultural land ownership is not always accurate. The owner of the surface rights is the Comunidad Campesina San Juan Bautista de Caaris (the Campesina). Under Peruvian Law 24656, Candente is required to have a valid agreement with the Campesina to undertake exploration. The previous agreement expired in December 2009, and Candente is in the process of negotiating a new three-year access agreement.
2.5.3
Mining Law
The General Mining Law of Per is administered by the Ministry of Energy and Mines (Ministerio de Energa y Minas, MEM or Ministry). The law was changed in the mid-1990s to encourage development of the countrys considerable mineral resources. The law defines and regulates different categories of mining activity according to the stage of a projects development. Details of the law were consolidated in the Single Revised Text of the General Mining Law of 1992 (Government document D.S. No. 01492-EM, 19926).
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Table 2-2:
*Note: Area granted may be less than the area applied for due to overlapping with pre-existing concessions.
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Figure 2-4:
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2.5.4
Mineral Concession Law

Ownership of mineral claims is controlled by mining concessions that are established using UTM coordinates to define areas of interest measured in hectares. Individual concessions must have a minimum size of 100 ha and a maximum size of 1,000 ha. New concessions must be orientated north-south; pre-existing concessions are based on the punto de partido system and can be of any orientation. Mining titles are irrevocable and perpetual, as long as the required annual maintenance fees (derecho vigencia) are up to date and fully paid to MEM by 30 June each year following the granting of a concession. The fees are paid in advance. The annual fee for metallic mineral concessions is $3/ha for each concession that is either actually acquired or pending (petitorio). The concession holder must reach a minimum level of commercial production of $100/ha in mineral sales within eight years of the concession being granted. If there is no production income after eight years, then the annual fee increases to $4/ha until the 14th year and to $10/ha thereafter.
2.5.5
Exploitation
The concession holder must sustain a minimum level of annual commercial production greater than $100/ha in gross sales before the end of the 6th year following the granting of the concession. If the concession has been put into production within the six-year period, then the annual rental fee remains the same up to the beginning of Year 9, when it increases to $4/ha for Years 9 to 14. The annual fee rises to $10/ha for each year thereafter. If the concession has not been put into production within a six-year period, then the annual rental increases from the first semester of the 7th year to $9 ($3 for derecho vigencia, plus a $6 penalty) until the minimum production level is met. If, by the start of the 12th year from granting a concession the minimum production level is not been achieved, then the annual fee increases to $23/ha ($3 for derecho vigencia, plus a $20 penalty). A concession holder can, however, be exonerated from paying penalties if he/she can demonstrate that at least ten times the penalty for the total concession was invested during the previous year. The investment must be documented, and it must be accompanied by a copy of the relevant annual tax statement (declaracin jurada de impuesto a la renta) and payment of the annual fees. A concession will terminate if the annual rental is not paid either for three years in total over the period that the concession is held, or for two consecutive years over the period the concession is held.
2.5.6
Environmental Regulations
The environment and environmental compliance are reported to be key issues for the Peruvian Government, especially with regard to mining and processing operations. The current legislation (Regulation on Protection of Environment DSN No. 016-93) was
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updated in 2003. According to the available information (source: www.minem.gob.pe), The General Mining Law of Per can require concession holders to prepare: an Environmental Evaluation (Evaluacin Ambiental, or EA) for mining exploration programs an Environmental Impact Assessment (Estudio de Impacto Ambiental, or EIA) if either renewed mining or milling activity is to take place or existing operations are to be expanded by more than 50% an Environmental Management Plan that establishes a companys environmental compliance plan for mining and milling operations a Mine Closure Plan (Plan de Cierre) prior to mining construction and operation.
2.5.7
Environmental Impact Assessment (EIA)

When applying to receive a new mining or processing concession, to increase the size of existing processing operations by more than 50%, or to execute any other mining project, an EIA must be submitted to MEM: The purpose of an EIA is to identify environmental problems that could arise as a result of mining or metallurgical activity. (An EIA is prepared instead of a Programa de Adecuacin y Manejo Ambiental, or PAMA.) An EIA must indicate the applying companys intention to spend at least 1% of annual sales on environmental expenditures. The Ministry is required to approve/disapprove an EIA within 180 days of its submission. If a response is not received within 45 days, then the EIA may be assumed to be (automatically) disapproved.
2.5.8
Environmental Management Plan (EMP)

An EMP establishes a companys environmental compliance plan. The scope of environmental compliance includes considerations of the impact on the environment of mining disturbance, capital investments in environmental control, monitoring systems, waste management control, and site restoration. This is part of the EIA and needs to be revised annually and submitted to the DGAAM if any change is required.
2.5.9
Permits
The Caariaco property does not have any known environmental liabilities. A Class B EA was conducted by GEMA Consultants (GEMA) for Candente, as required in law when
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trenching, drilling, or other major work is performed. GEMA also conducted a Class C EA and obtained a Class C Permit from the Peruvian government for advanced drilling and exploration work at Caariaco. Candente is carrying out environmental baseline studies and monitoring. A social and EIA study framework has been prepared and the work is in progress. Studies include determining the geochemical characteristics of the waste and ore grade rock, assessing the localized mine area for a potential water supply, and reviewing social and community conditions. Once these studies are completed to levels in accordance with the requirements of the Peruvian Government and meet the guidelines set out in the Equator Principles, then a process of obtaining all the required environmental, construction, and mining permits will be undertaken. The main permit requirements identified to date for the start of construction and mining operations are summarized below. These will be investigated more fully for the feasibility study along with plans and procedures to obtain the permits. Environmental Studies and Permits (EIA) Water Authorization Archaeological Evaluation Mining Plan and Closure Plan Mining Operation Certificate (COM) Easement by Agreement Procedure of Real Servitude Construction Permit Municipality Permits to Construct Labour Permits Surface Water Use Licence Ground Water Use Licence Sanitary Authorization for Waste Water Treatment Permits to Build Roads Transportation deed for controlled substances and products Beneficiation Concession (necessary to process the mineral) Authorization to Start Operation.
2.6
Caariaco Trade-off Studies

A number of trade-off studies were carried out during the study. A brief summary of each is provided below; the full reports are included in Appendix A.
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2.6.1
Conveying Waste Rock to Tailings Area for Embankment Construction

This report (Trade-off #1) investigated the opportunity to transport waste rock from the mine to the TSF area for use in the tailings embankment construction. Three scenarios were considered: trucking the waste to the WRMF, conveying waste to the TMF through the ridge to the northeast of the pit, with the tailings pipelines following the conveyor route; and conveying waste to the TMF with the tailings pipelines following the road. A plan and high-level cost estimate was developed for each scenario. The cost comparison showed that conveying waste to the tailings area and using the material for embankment dam construction had an economic advantage. This option was recommended, but the decision was dependent on the final agreed construction technique for the embankment over the life of the mine. A further trade-off study (see Trade-off #3 below) found that using cyclone sand to construct the embankment was the preferred option, and so the base case, trucking waste to the waste rock management facility, has been adopted has been used in this study.
2.6.2
Plant Site Relocation

This report investigated the possibility of relocating the plant site to the west, over the ridge line, assuming that waste rock would be conveyed through a tunnel to the tailings area and used for the tailings embankment construction. Only two sites were considered: one just to the northeast of the pit (base case), and another the opposite end of the tunnel, with both ore and waste being conveyed through a slightly larger tunnel. The main benefits for relocating west of the ridge were flatter terrain and a more centralized facility arrangement with larger laydown areas for ease of construction. The costs developed for the preceding waste rock study and combined with these benefits it was recommended that the relocation option be pursued. Upon further assessment, once Trade-off Study #3 (below) was completed and there was no need to convey the waste rock to the tailings dam, it was agreed the base case site northeast of the pit was preferred.
2.6.3
Tailings and Waste Dump Alternatives

This report (Trade-off #3) compared potential storage of tailings at two sites: Site 8A, a tributary in the upper reaches of the Quebrada Yerma, and Site 8B, within the Ro Caariaco valley, near the camp site. The study also considered alternative embankment construction materials, such as waste rock, borrowed material, or cyclone sands; downstream or centreline construction techniques; thickening the tailings for disposal; the location of the WRMF; and diversion of Ro Caariaco.
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The evaluation found no significant reduction in capital cost associated with constructing at Site 8B, given its proximity to the process facilities. Considering the potential socioeconomic risks associated with this location, Site 8A was favoured. The assessment also concluded that, pending cyclone sand ABA testing, the relatively low cost of the cyclone sand approach using centreline construction for the tailings embankment, was preferred.
2.6.4
Plant Throughput
Trade-off #4 involved a comparative scoping level assessment to identify logical plant throughput levels based on known information, then performing an NPV analysis of the various options considering Capex, Opex, and mine life for each case. Design criteria and a cost and performance model of the concentrator and concentrate treatment facility were developed to analyze throughput. Grind size was an important parameter. A grind size of 150 to 200 m was identified as the most appropriate for economical copper recovery. A preliminary, qualitative analysis of suitable mining equipment sizes and numbers was conducted, and a very high level mine plan was then developed for the various throughput options. Five different production scenarios were assessed (66, 75, 83, 105, and 120 kt/d), and the Whittle model used to prepare the mine schedule was applied to perform a financial analysis. From the point of view of cost analysis, the options were similar. The 83 kt/d rate at 150 m grind was adopted for several reasons: it provided process flexibility for future upgrade to higher tonnages; the grind size could potentially require less up-front capital and is more inline with industry operational benchmarks; it allows the use of a partial roasting facility of a similar size (and consequently cost) as those currently being constructed elsewhere; and the waste volume increased incrementally on raising the throughput to 105 kt/d. As the prefeasibility study progressed, the updated geological model was completed. Prior to the new resource being issued, the grind recovery testwork results were received indicating that 200 m would be economical. AMEC modelled the tonnage increase this would provide, i.e., 95,000 t/d, which prompted dual reagent suite testwork to maintain recovery and AMEC mining to confirm that the new resource would support this tonnage with the same mine design criteria and mine life. Consequently, the design throughput was changed to 95,000 t/d.
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2.6.5
Location of Waste Rock Management Facility

This report (Trade-off #5) evaluated options for the location of the WRMF and subsequent diversion of the Ro Caariaco. This involved a high-level estimate of capital and operating costs. Three scenarios were considered: Option 1, a WRMF in the Rio Caariaco valley with a diversion channel and 80 m high diversion dam; Option 2, also a WRMF in the Ro Caariaco valley but with a smaller footprint, a diversion tunnel, and a 15 m high diversion dam; and Option 3, no WRMF in the Ro Caariaco valley, where the waste rock would be conveyed through in the ridge to the northwest. Although Option 2 had significant advantages for construction and closure, the capital cost and NPV of Option 1 was lower. It was therefore recommended that the WRMF be constructed in the Ro Caariaco valley with a diversion channel with an 80 m high diversion dam. This concept was adopted for the study and has been incorporated into the overall designs and cost estimates.
2.6.6
Options for Reduction of Arsenic in Caariaco Norte Concentrate

Trade-off #6 assessed various technologies for reducing arsenic in the concentrates to marketable, ideally non-penalty, levels. The options were partial roasting, alkaline sulphide leaching, and the CESL process. Partial roasting was found to be the most economical approach.
2.6.7
In-Pit Crushing and Conveying

This report (Trade-off #7) was prepared by Candente to assess the option of in-pit crushing and conveying of both ore and waste rock, versus hauling ROM material to the edge of the pit, where a crusher would be stationed permanently. Crushed material would then be conveyed to the mill. In-pit crushing increases the up-front capital cost in equipment and infrastructure compared to the additional ongoing cost of diesel for pit-rim crushing. Based on a review of the pit design and on experience, it was decided that the manner of pit development does not warrant the installation of an in-pit crushing and conveying system, and a permanent crusher station on the pit rim was selected.
2.6.8
Pit Electrification
This report (Trade-off #8) was prepared by Candente to assess the use of electrical versus diesel-powered equipment for production drilling and loading in both ore and waste areas.
Page 2-17
An NPV and sensitivity analysis found that electrification had higher up-front capital costs for equipment and power distribution, but savings in ongoing operating costs. The size of pit favoured electrification.
2.6.9
Concentrate Pipeline Option Evaluation

AMEC prepared this report (TDM-007) to compare the truck and pipeline options for transporting concentrate from the mine to a new port at Eten. Costs for each option were prepared, and an economic analysis was carried out for each case. Other considerations such as safety, health, and environmental requirements were assessed at a preliminary high level. At this stage, increases in traffic flow and potential disruptions due to heavy rain and washouts are considered to have only minor impact. Based upon the marginal pre-tax cash flows, without allowances for escalation or inflation, the trucking option had the better net present value and was adopted for this study.
2.7
Report Organization and Conventions

This report is presented in 19 numbered text sections and Appendices A through L. Depending on length and practicality, some of the appendices are provided in electronic format only. Where relevant, bibliographic and report references are listed at the end of each section. All monetary values are expressed in third quarter 2010 U.S. dollars. Unless otherwise noted, metric units of measurement are used throughout, usually in abbreviated form. For reference, the following list includes both metric and Imperial units of measurement. Standard Abbreviations for Units of Measure
Above mean sea level ................................................................................................. Ampere ....................................................................................................................... Annum (year) .............................................................................................................. Billion .......................................................................................................................... Billion years ago.......................................................................................................... British thermal unit ...................................................................................................... Candela....................................................................................................................... Centimetre .................................................................................................................. Cubic centimetre ......................................................................................................... Cubic feet per second ................................................................................................. Cubic foot .................................................................................................................... amsl A a G Ga Btu cd cm 3 cm 3 ft /s or cfs 3 ft
Page 2-18
Cubic inch ................................................................................................................... Cubic metre................................................................................................................. Cubic yard ................................................................................................................... Day ............................................................................................................................. Days per week ............................................................................................................ Days per year (annum) ............................................................................................... Dead weight tonnes .................................................................................................... Decibel adjusted ......................................................................................................... Decibel ........................................................................................................................ Degree ........................................................................................................................ Degrees Celsius.......................................................................................................... Degrees Fahrenheit .................................................................................................... Diameter ..................................................................................................................... Dry metric ton.............................................................................................................. Foot ............................................................................................................................. Gallon (US) ................................................................................................................. Gallons per minute (US) ............................................................................................. Gigajoule ..................................................................................................................... Gram ........................................................................................................................... Grams per litre ............................................................................................................ Grams per tonne ......................................................................................................... Greater than ................................................................................................................ 2 Hectare (10,000 m ) .................................................................................................... Hertz ........................................................................................................................... Horsepower................................................................................................................. Hour ............................................................................................................................ Hours per day ............................................................................................................. Hours per week ........................................................................................................... Hours per year ............................................................................................................ Inch ............................................................................................................................. Joule ........................................................................................................................... Joules per kilowatt-hour .............................................................................................. Kelvin .......................................................................................................................... Kilo (thousand) ............................................................................................................ Kilocalorie ................................................................................................................... Kilogram ...................................................................................................................... Kilograms per cubic metre .......................................................................................... Kilograms per hour...................................................................................................... Kilograms per square metre ........................................................................................ Kilojoule ...................................................................................................................... Kilometre ..................................................................................................................... Kilometres per hour..................................................................................................... Kilonewton ..................................................................................................................
in 3 m 3 yd d d/wk d/a dwt dBa dB C F dmt ft USgal USgpm GJ g g/L g/t > ha Hz hp h h/d h/wk h/a " J J/kWh K k kcal kg 3 kg/m kg/h 2 kg/m kJ km km/h kN
Page 2-19
Kilopascal.................................................................................................................... Kilovolt ........................................................................................................................ Kilovolt-ampere ........................................................................................................... Kilovolts....................................................................................................................... Kilowatt ....................................................................................................................... Kilowatt hour ............................................................................................................... Kilowatt hours per short ton (US) ................................................................................ Kilowatt hours per tonne (metric ton) .......................................................................... Kilowatt hours per year ............................................................................................... Kilowatts adjusted for motor efficiency ........................................................................ Less than .................................................................................................................... Litre ............................................................................................................................. Litres per minute ......................................................................................................... Megabytes per second ................................................................................................ Megapascal................................................................................................................. Megavolt-ampere ........................................................................................................ Megawatt .................................................................................................................... Metre ........................................................................................................................... Metres above sea level .............................................................................................. Metres per minute ....................................................................................................... Metres per second ...................................................................................................... Metric ton (tonne) ........................................................................................................ Micrometre (micron) .................................................................................................... Microsiemens (electrical) ............................................................................................ Miles per hour ............................................................................................................. Milliamperes ................................................................................................................ Milligram...................................................................................................................... Milligrams per litre ....................................................................................................... Millilitre ........................................................................................................................ Millimetre..................................................................................................................... Million .......................................................................................................................... Million cubic yards ....................................................................................................... Million gallons ............................................................................................................. Million gallons per minute............................................................................................ Million tonnes .............................................................................................................. Minute (time) ............................................................................................................... Month .......................................................................................................................... More than .................................................................................................................... Newton ........................................................................................................................ Newtons per metre...................................................................................................... Ohm (electrical)........................................................................................................... Ounce ......................................................................................................................... Parts per billion ...........................................................................................................
kPa kV kVA kV kW kWh kWh/st kWh/t kWh/a kWe < L L/min Mb/s MPa MVA MW m masl m/min m/s t m s mph mA mg mg/L mL mm M 3 Myd USMgal USMgpm Mt min mo > N N/m oz ppb
Page 2-20
Parts per million .......................................................................................................... Pascal (newtons per square metre) ............................................................................ Pascals per second..................................................................................................... Percent........................................................................................................................ Percent moisture (relative humidity) ............................................................................ Phase (electrical) ........................................................................................................ Pound(s) ..................................................................................................................... Pounds per square inch .............................................................................................. Power factor ................................................................................................................ Quart ........................................................................................................................... Revolutions per minute ............................................................................................... Second (plane angle) .................................................................................................. Second (time).............................................................................................................. Short ton (2,000 lb) ..................................................................................................... Specific gravity ............................................................................................................ Square centimetre....................................................................................................... Square foot ................................................................................................................. Square inch ................................................................................................................. Square kilometre ......................................................................................................... Square metre .............................................................................................................. Thousand tonnes ........................................................................................................ Tonne (1,000 kg)......................................................................................................... Tonnes per day ........................................................................................................... Tonnes per hour.......................................................................................................... Tonnes per year .......................................................................................................... Total dissolved solids .................................................................................................. Total suspended solids ............................................................................................... Volt .............................................................................................................................. Week ........................................................................................................................... Weight/weight ............................................................................................................. Wet metric ton ............................................................................................................. Yard ............................................................................................................................ Year (annum) .............................................................................................................. Year (US) ....................................................................................................................
ppm Pa Pa/s % % RH Ph lb psi pF qt rpm " s st SG 2 cm 2 ft 2 in 2 km 2 m kt t t/d t/h t/a TDS TSS V wk w/w wmt yd a yr
Page 2-21
CONTENTS 3.0 GEOLOGY .............................................................................................................3-1 3.1 Summary.....................................................................................................3-1 3.2 Project History .............................................................................................3-4 3.2.1 Comment on Project History ..........................................................3-6 3.3 Exploration ..................................................................................................3-6 3.3.1 Grids and Surveys .........................................................................3-7 3.3.2 Geological Mapping.......................................................................3-8 3.3.3 Geochemistry ................................................................................3-8 3.3.4 Pits and Trenches .......................................................................3-10 3.3.5 Geophysical Surveys ...................................................................3-10 3.3.6 Geotechnical and Hydrogeology..................................................3-10 3.3.7 Other Studies ..............................................................................3-10 3.3.8 Exploration Potential ...................................................................3-11 3.3.9 Comment on Exploration .............................................................3-11 3.4 Geological Setting .....................................................................................3-11 3.4.1 Regional Geology ........................................................................3-11 3.4.2 Deposit Model .............................................................................3-14 3.4.2.1 Comment on Deposit Model ........................................3-16 3.4.3 Caariaco Norte Deposit Geology ...............................................3-16 3.4.3.1 Lithologies ...................................................................3-17 3.4.3.2 Alteration .....................................................................3-19 3.4.3.3 Structures....................................................................3-23 3.4.4 Prospects ....................................................................................3-23 3.4.4.1 Caariaco Sur .............................................................3-24 3.4.4.2 Quebrada Verde..........................................................3-25 3.4.5 Comment on Geological Setting ..................................................3-25 3.5 Mineralization ............................................................................................3-25 3.5.1 Comment on Mineralization .........................................................3-27 3.6 Drilling .......................................................................................................3-27 3.6.1 Drill Contractors ..........................................................................3-32 3.6.2 Drill Methods ...............................................................................3-33 3.6.3 Geological Logging......................................................................3-33 3.6.4 Collar Surveys .............................................................................3-34 3.6.5 Down-hole Surveys .....................................................................3-34 3.6.6 Recovery .....................................................................................3-34 3.6.7 Caariaco Norte Drilling ..............................................................3-34 3.6.8 Comment on Drill Programs ........................................................3-35 3.7 Sample Preparation ..................................................................................3-36 3.7.1 Geochemical Sampling ...............................................................3-36 3.7.2 Pit and Trench Sampling .............................................................3-36 3.7.3 Core Sampling ............................................................................3-36 3.7.4 Quality Assurance and Quality Control ........................................3-36 3.7.5 Density/Specific Gravity...............................................................3-37
TOC i
3.8
3.9 3.10
3.11
3.12 3.13 3.14 TABLES

Table 3-1: Table 3-2: Table 3-3: Table 3-4: Table 3-5: Table 3-6: Table 3-7: Table 3-8:
3.7.6 Comment on Sample Preparation ...............................................3-37 Sample Preparation, Analyses, and Security.............................................3-38 3.8.1 Analytical Laboratories ................................................................3-38 3.8.2 Sample Preparation and Analysis ................................................3-39 3.8.2.1 Candente ....................................................................3-39 3.8.3 Quality Assurance/Quality Control Programs...............................3-40 3.8.3.1 Candente ....................................................................3-41 3.8.4 Databases ...................................................................................3-42 3.8.5 Sample Security ..........................................................................3-43 3.8.6 Sample Storage ..........................................................................3-43 Comment on Sample Preparation, Analyses, and Security .......................3-43 Data Verification ........................................................................................3-44 3.10.1 Currie, 2004 ................................................................................3-44 3.10.2 MineFill, 2007 ..............................................................................3-45 3.10.3 SRK, 2008 ...................................................................................3-45 3.10.4 AMEC, 2010 ................................................................................3-46 3.10.5 Comment on Data Verification .....................................................3-46 Mineral Resource Estimation.....................................................................3-47 3.11.1 Database .....................................................................................3-47 3.11.2 Topography .................................................................................3-47 3.11.3 Models ........................................................................................3-48 3.11.4 Composites .................................................................................3-49 3.11.5 Exploratory Data Analysis ...........................................................3-50 3.11.6 Variography .................................................................................3-52 3.11.7 Grade Capping ............................................................................3-52 3.11.8 Estimation Methodology ..............................................................3-53 3.11.9 Density ........................................................................................3-54 3.11.10 Model Validation ..........................................................................3-55 3.11.11 Mineral Resource Classification ..................................................3-56 Assessment of Reasonable Prospects of Economic Extraction .................3-56 Mineral Resource Statement .....................................................................3-58 3.13.1 Comment on Mineral Resource Estimation .................................3-60 References................................................................................................3-60
Mineral Resource Statement for Caariaco Norte at a 0.2% Cu Cutoff Grade (David Thomas P. Geo., Effective Date 8 November 2010) ..................................................... 3-3 Mineral Resource Statement for Caariaco Norte at Various Cutoffs (David Thomas P. Geo., Effective Date 8 November 2010) ..................................................... 3-4 Exploration Summary Table........................................................................................... 3-6 Project Stratigraphic Column ....................................................................................... 3-17 Drill Summary............................................................................................................... 3-30 Drill Hole Intercept Summary Table ............................................................................. 3-35 Specific Gravity Values Used in 2010 Mineral Resource Estimate ............................. 3-37 Summary of Drill Data used for Caariaco Norte Resource Estimate ......................... 3-47
TOC ii
Table 3-9: Table 3-10: Table 3-11: Table 3-12: Table 3-13: Table 3-14: Table 3-15: Table 3-16: Table 3-17: Table 3-18: Table 3-19:
Description of Lithological Units ................................................................................... 3-48 Domain Definition ......................................................................................................... 3-49 Contact Matrix Defined for Copper Domains ............................................................... 3-52 Contact Matrix Defined for Gold Domains ................................................................... 3-52 Outlier Thresholds for Copper, Gold, and Silver .......................................................... 3-53 Estimation Parameters for All Elements ...................................................................... 3-54 Summary of Statistics Comparing OK and NN Estimates ........................................... 3-56 Optimization Parameters for Resource Pit Shell ......................................................... 3-57 Copper Process Recoveries ........................................................................................ 3-57 Marginal Cutoff Calculation .......................................................................................... 3-58 Mineral Resource Statement for Caariaco Norte at a 0.2% Cu Cutoff Grade (David Thomas P. Geo., Effective Date 8 November 2010) ................................................... 3-58 Table 3-20: Mineral Resource Statement for Caariaco Norte at Various Cutoffs (David Thomas P. Geo., Effective Date 8 November 2010) ................................................... 3-59
FIGURES
Figure 3-1: Figure 3-2: Figure 3-3: Figure 3-4: Figure 3-5: Figure 3-6: Figure 3-7: Figure 3-8: Figure 3-9: Figure 3-10: Figure 3-11: Figure 3-12: Figure 3-13: Figure 3-14: Figure 3-15: Geochemical and Ground Geophysical Anomalies, Caariaco Sur, and Quebrada Verde .............................................................................................................................. 3-9 Regional Geology Map ................................................................................................ 3-12 Regional Stratigraphic Column .................................................................................... 3-13 Geological Map, Caariaco Norte ................................................................................ 3-20 Geological Drill Section 9,326,300N ............................................................................ 3-21 Geological Drill Section 690,800E ............................................................................... 3-22 Prospect Location Plan and Geological Map ............................................................... 3-24 Example Vertical Section (9,326,300N) with 15 m Composite Coloured by Cu (%) Ranges Overlapping Lithological Interpretation ........................................................... 3-28 Example Vertical Section (9,326,300N) with 15 m Composite Coloured by Au (ppb) Ranges ......................................................................................................................... 3-29 Example Vertical Section (9,326,300N) with 15 m Composite Coloured by Ag (g/t) Ranges ......................................................................................................................... 3-30 Drill Hole Location Plan, Caariaco Norte ................................................................... 3-31 Drill Hole Location Plan, Caariaco Sur and Quebrada Verde .................................... 3-32 Box Plot for Copper (%) by Domain ............................................................................. 3-51 Box Plots for Silver (%) by Domains ............................................................................ 3-51 Vertical Section (9,326,500) with Blocks and 15 m Composites Grades for Copper (Corridor of 100 m). Block Color Ranges are for Cu in % .......................................... 3-55
TOC iii
3.0
3.1
GEOLOGY
Summary
The Caariaco project contains a major porphyry-copper-gold deposit, Caariaco Norte, and two porphyry copper-gold-mineralized centres that are at a prospect stage of evaluation, Caariaco Sur and Quebrada Verde. The deposit and prospects were identified by exploration programs conducted by the Peruvian Servicio Nacional de Geologa y Minera (Ingemmet), Placer Dome Exploration Inc. (Placer Dome), Billiton Exploration and Mining Per B.V. (Surcusal Peruana), and Candente Copper Corporation (Candente) between 1994 and 2010. These programs included regional and detailed mapping, stream sediment, grab, rock, and soil sampling, trenching and pitting, core drilling, ground geophysical surveys, mineralization characterization studies, and metallurgical testing of samples. Petrographic studies and density measurements on the different lithologies have also been carried out. Caariaco Norte is an example of a primary porphyry-copper-gold system. The Caariaco Norte Early to Late Tertiary polyphase intrusive-breccia complex is approximately 1.7 km in strike extent, 1.1 km wide, and has been drilled to a depth of about 770 m. The complex has intruded Early Tertiary volcanic units of the Llama and Porculla Formations of the Calipuy Group. Three major intrusive generations have been identified, a crowded quartz-feldspar porphyry, a biotite-feldspar porphyry, and a coarse quartz porphyry. These intrusive units are cross-cut by feldspar porphyry dykes. Three breccia bodies that post-date the intrusive rocks are also recognized: hydrothermal breccias, tourmaline breccias, and polymictic breccias. Copper mineralization was introduced as a series of events closely following the emplacement of each of the three major intrusive units and the polymictic breccia unit. In general, the highest copper grades (>0.5% Cu) occur in the biotitefeldspar porphyry and polymictic breccia units. Intermediate copper grades (0.35% to 0.5% Cu) are most common in the hydrothermal breccia and the coarse quartz porphyry, and the lowest grades (0.2% to 0.35% Cu) dominate in the crowded quartz feldspar porphyry, tourmaline breccia, and volcanic host rocks. Alteration forms distinct concentric zones with a central potassic alteration; central to intermediate, overlapping, and partly overprinting phyllic, argillic, and advanced argillic alteration; and fringing propylitic and minor silicic alteration. Alteration intensity is directly related to the intensity of fracturing in the hosting lithologies and brecciation in the polymictic breccia unit. Locally, alteration distribution and intensity are controlled by northeast- and northwest-trending faults. Mineralization occurs primarily as disseminations and in fractures, sulphide and quartz veins, faults, and breccias. Fracture density is the single most important factor influencing copper grades, although breccias and faults can locally be important.
Page 3-1
Three main zones have been recognized in the deposit: a variable-thickness leached cap, minor supergene copper mineralization under the leached cap, and hypogene copper mineralization, the main component of the deposit. Hypogene copper mineralization consists mainly of chalcopyrite, chalcocite, and covellite, with lesser enargite and minor bornite, tennantite, and digenite. Supergene copper consists of chalcocite and covellite. Drilling on the project consists of 263 core holes (75,672.31 m), including geotechnical, metallurgical, and hydrogeological drilling. Fifteen of the drill holes (3,483 m) were completed prior to Candentes involvement; the remaining 248 core holes (72,189.7 m) were drilled by Candente. Core was logged for geological and geotechnical parameters. Drill collar locations were picked up by a surveyor using a total station instrument. Down-hole surveys were performed using Pajari, Sperry Sun, or Reflex EZ-Shot instruments. Several primary, independent assay laboratories have been used for routine analyses over the project history. Copper analyses were typically performed by three-acid digest and atomic absorption (AA) finish, although four-acid digest and colorimetry methods have also been used. Gold assays were typically by fire assay with atomic absorption finish. Other elements were analyzed using inductively-coupled plasma (ICP). The majority of the drilling has been accompanied by a quality assurance/quality control (QA/QC) program, which has included submission of blanks, standard reference materials (SRMs), and check assays. A number of data verification programs and audits have been performed over the project history, primarily in support of technical reports. No errors or omissions were noted during these reviews. Legacy drill core, drilled prior to Candentes ownership, was relogged. Candente drilled three pairs of twinned holes to verify grade uniformity at short distances. In general, similar average grades were noted over the same depth intervals. Mineral resource estimates are based on 225 core holes (67,485.06 m) from the Ingemmet, Placer Dome, Surcusal Peruana, and Candente drill programs. The cutoff date for the estimation is 18 July 2010. Candente provided geological interpretations for modelling purposes, from which AMEC created bench polygons and models. Seven estimation domains for copper, gold, and silver were defined following evaluation of statistical distributions of lithological and alteration units. Drill hole data were composited into 6 m lengths using no geological or domain boundaries. Outlier copper, gold, and silver grades were capped; outlier arsenic grades were not capped. AMEC estimated copper, gold, silver and arsenic grades by estimation domains using primarily ordinary kriging (OK) interpolation. Inverse distance weighting to the second power (ID2) was used to interpolate Au and Ag in domains where variography was not considered sufficiently robust. Density values were assigned to blocks based upon the lithological codes. Blocks were classified as Measured, Indicated, or Inferred based on a combination of composite numbers and distance from the nearest composite.
Page 3-2
Reasonable prospects of economic extraction were assessed by applying preliminary economic constraints within an open pit shell. Mining and process costs, as well as process recoveries, were defined from ongoing AMEC studies for the project. AMEC defined a cutoff value of 0.2% Cu for reporting mineral resources from these parameters. Additional data has been included in Appendix B. Mineral resources are tabulated in Table 3-1. The Qualified Person for the Mineral Resource estimate is David Thomas, P.Geo. Mineral resources are reported at a longterm copper price of US$2.50/lb, a gold price of $1,035/oz, and a silver price of US$17.25/oz, and have an effective date of 8 November 2010. The sensitivity of the Mineral Resource to a reduction or increase in copper cutoff grades is shown in Table 3-2, with the base case highlighted.
Note:
1 2 3
Tonnage Mt 406.6 596.5 1,003.0 293.3
Cu % 0.44 0.38 0.40 0.33
Au g/t 0.07 0.06 0.06 0.05
Page 3-3
Table 3-2:
Mineral Resource Statement for Caariaco Norte at Various Cutoffs (David Thomas P. Geo., Effective Date 8 November 2010)
Grade Contained Metal Ag g/t 1.9 1.9 2.0 1.5 1.6 1.7 1.6 1.7 1.8 1.3 1.5 1.7 Copper (Blb) 4.049 3.977 3.588 5.283 4.964 3.945 9.332 8.941 7.533 2.634 2.165 1.433 Gold (Moz) 0.986 0.958 0.853 1.166 1.081 0.843 2.152 2.039 1.696 0.561 0.448 0.281 Silver (Moz) 25.467 24.656 21.399 33.124 30.403 23.135 58.592 55.059 44.534 17.002 13.547 8.539 Tonnage Mt 425.6 406.6 338.1 680.7 596.5 414.3 1,106.2 1,003.0 752.4 419.4 293.3 157.7 Cu % 0.43 0.44 0.48 0.35 0.38 0.43 0.38 0.40 0.45 0.28 0.33 0.41 Au g/t 0.07 0.07 0.08 0.05 0.06 0.06 0.06 0.06 0.07 0.04 0.05 0.06
Cutoff Cu (%) Measured 0.14 0.2* 0.3 Indicated 0.14 0.2* 0.3 Measured + Indicated 0.14 0.2* 0.3 Inferred 0.14 0.2* 0.3
3.2
Project History
Copper was first discovered at Caariaco Norte in the period 1967 to 1970, during a regional stream sediment sampling program carried out by the Peruvian Servicio Nacional de Geologa y Minera (Ingemmet), in cooperation with a British Geological Survey team. This work identified a copper anomaly, A-2. Subsequently, from 1971 to 1974, Ingemmet undertook a detailed geochemical study of the Ro Caariaco valley, which delineated three centres of alteration and copper mineralization, designated Canariaco Norte, Canariaco Sur, and Quebrada Verde. The geochemistry was supported by geological mapping, rock chip and soil sampling, induced polarization/resistivity (IP) and ground magnetic geophysical surveys, and core drilling of five drill holes (1,500 m). Thin section and petrographic studies were also performed. A mineral resource estimate was undertaken at the conclusion of this work.
Page 3-4
Placer Dome Exploration Inc. (Placer Dome) optioned the area from the Peruvian Government in 1994. Work completed included geological mapping, rock chip sampling, trenching (2,200 m) and pitting (80 test pits), petrographic studies, re-interpretation of the available Ingemmet IP/resistivity data, three core holes (853.91 m), and a very preliminary estimate of tonnage and grade. This work identified a porphyry copper system related to a Late Tertiary intrusive-breccia complex emplaced into Early Tertiary, Calipuy Group volcanic basement of andesite to rhyolite pyroclastics and flows. However, in 1997, the option was not exercised and reverted to the Peruvian Government. During 1999, Billiton Exploration and Mining Per B.V. (Surcusal Peruana) took up an option from the Peruvian Government. The work program comprised geological mapping, soil and rock chip sampling, IP/resistivity and ground magnetic geophysical surveys, and seven core holes (1,128.7 m). Petrographic samples were collected and studied, and sequential leach copper analysis was carried out on some of the drill core. A resource estimate was completed in 1999. The option was dropped in 2000, with the property returning to the Peruvian Government. The property was subsequently put up for auction. Candente Copper Corp., through its wholly-owned Peruvian subsidiary Canariaco Copper Per SA (CCPSA), acquired 100% ownership of the project in February 2002. Since that date, Candente has completed geological mapping, prospecting, IP/resistivity and ground magnetic geophysicical surveys, rock chip sampling, petrographic studies, bulk sampling for metallurgical testing, and re-logging of existing drill core. A total of 248 core holes (72189.7 m) were drilled to the end of 2008. Mineral resources were first estimated on behalf of Candente in 2004 and were updated in 2006 and 2008. A preliminary economic assessment (PEA) was undertaken in 2006. The study envisaged conventional open pit mining of the Caariaco Norte deposit, with mineralization crushed, then placed on a heap leach pad. Copper recovery was planned through a solvent extraction-electrowinning (SXEW) plant to produce copper cathode. Mining would commence at 30,000 t/d and expand to 60,000 t/d. The financial analysis, using the costs and assumptions at the time, indicated a positive financial outcome. In 2008, a revised PEA was undertaken, because additional leach testing had indicated that heap leaching recoveries were erratic, and a more robust metallurgical process was required. The production rate from the proposed open pit was 75,000 t/d, feeding a conventional process plant consisting of semi-autogenous grinding (SAG), ball mills, and a flotation circuit to produce copper concentrate. The financial analysis, using the costs and assumptions at the time, indicated a positive financial outcome. The mineral resource update performed by AMEC in 2010 supersedes the resource estimate used in the PEA, and the PEA results should be considered historical.
Page 3-5
3.2.1
Comment on Project History

The exploration programs completed in the period 1994 to 2010 have identified three porphyry copper-gold-mineralized centres, at Caariaco Norte, Caariaco Sur, and Quebrada Verde. Caariaco Norte was the subject of two preliminary economic assessments, in 2006 and 2008, which indicated that additional detailed studies were warranted.
3.3
Exploration
Exploration activities such as geological mapping and geochemical sampling have been performed by Candente and predecessor companies Ingemmet, Placer Dome, and Surcusal Peruana. Contractors were used for activities such as geophysical surveys and core drilling. Exploration activities on the project have included regional and detailed mapping, stream sediment, grab, rock, and soil sampling, trenching and pitting, core drilling, ground geophysical surveys, mineralization characterization studies, and metallurgical testing of samples. Petrographic studies and density measurements on the different lithologies have also been carried out. A summary of the work programs completed to the report effective date are summarized in Table 3-3.
Table 3-3:
Year 19671970 19711974
Exploration Summary Table

Operator Ingemmet Ingemmet Work Undertaken Regional stream sediment sampling. Identified anomalous copper in drainages surrounding the Caariaco Norte deposit Geological mapping at 1:25,000 scale defined 9 km2 of alteration and mineralization, with three distinct centres identified. Limited soil and rock chip sampling; numbers of samples unknown Nine trenches; locations unknown. A total of 23 rock chip samples taken from the trenches and analysed for Cu and Mo. Infill geological mapping at 1:5,000 scale; this detailed mapping was hampered by dense vegetation and steep topography IP/resistivity ground geophysics over Caariaco Norte Five vertical core drill holes completed at Caariaco Norte to depths of 300 m for 1,500 m total drilling. A total of 579 core samples were collected along 3 m or 1.5 m lengths and analysed for Cu and Mo. A total of 66 composite geological samples were analysed for total copper (TCu), Mo, Ag, and Au. Thin section and petrographic studies on selected drill core samples Mineral resource estimate Geological mapping at 1:1,000 scale at Caariaco Norte; preliminary geological mapping, scale not known, at Caariaco Sur Soil and rock chip sampling over an area of about 1.3 km x 1.5 km at Caariaco Norte. A total of 715 rock chip samples assayed for Au, Cu, Mo, (and some for Ag and As). Reconnaissance rock chip and grab sampling at Caariaco Sur Trenching (2,200 m) and pitting (80 test pits) at Caariaco Norte and Caariaco Sur Re-interpretation of Ingemmet IP/resistivity data; the re-interpretation noted some correlation between copper grades and chargeability and/or resistivity. It was also noted that some of the strongest IP targets had not been drilled by Ingemmet Three core holes (853.91 m) at Caariaco Norte Petrographic studies on selected drill core samples Mineral resource estimate
19941997
Placer Dome
Page 3-6
Year 19992000
Operator Surcusal Peruana
Work Undertaken Geological mapping; scale unknown Soil and rock chip sampling. Sampled outcrops in the streams south of the drilled area at Caariaco Norte. Low-level Cu anomalies (<500 ppm) were collected from phyllically-altered quartz porphyry at Caariaco Norte. The northern side of the quartz porphyry generated additional surface copper anomalies (500 to 2000 ppm Cu) in outcrops of basaltic andesite. In the outcrops around the drill holes in the northern part of the quartz porphyry, gold graded in the 100 to 200 ppb Au range. In the southern half of the system, the grades were generally in the 40 to 100 ppb Au range. Soil samples were only taken at Caariaco Sur and Quebrada Verde, and outlined co-incident Cu, Au and Mo anomalies over a 750 m diameter area with smaller anomalies of copper and gold adjacent to this target. Soil sample line spacing was typically 200 m with 100 m infill where initial results were favourable. Sample spacing was 50 m along the lines. IP/resistivity and ground magnetic geophysical surveys on four lines at Caariaco Norte. For the IP survey, a dipole dipole array, with electrode spacing of 100 m, was used. The results were not useful because only a very weak current was received at the potential electrode. The ground magnetic data used the same lines and spacings; no domains of magnetite destruction could be defined. Seven core holes (1,128.7 m) drilled at Caariaco Norte, Caariaco Sur, and Quebrada Verde Petrographic studies on selected drill core samples Seqential leach copper analysis on 12 samples from two intervals of core; results indicated that the mineralization was potentially bio-heap leachable. Mineral resource estimate Geological mapping, including 1:2,000 scale at Caariaco Norte and Caariaco Sur. Preliminary mapping of the Caariaco Sur and Quebrada Verde zones was also carried out to assess soil geochemistry anomalies outside of the main mineralized zones. Zones of silicification and quartz vein stockwork exist peripheral to the main circular feature at Caariaco Sur. Structural measurements. A total of 311 structural measurements including faults, veins, fractures etc. were collected Prospecting, rock chip and grab sampling. A total of 148 rock samples were collected in 2002 to 2004 from surface for gold, total copper and 35-element inductively-coupled plasma (ICP) analyses. In addition, a number of PIMA and petrology samples were collected to define favourable alteration including alunite and sericite and to define the various igneous phases. A total of 392 soil geochemistry samples and 355 rock samples were collected over the geophysical grid at Caariaco Sur and Quebrada Verde in 2008. Soils with elevated levels of copper of up to 5,720 ppm (0.57%) and gold up to 330 ppb covering over an area of 0.9 km x 1.4 km and potassic alteration mapped over a length of 2.3 km at Caariaco Sur. Anomalous levels of copper of up to 2,200 ppm (0.22%) and up to 497 ppb gold in soils cover an area of approximately 0.7 km x 0.9 km at Quebrada Verde. Re-logging of existing drill core 20 line km of IP/resistivity and ground magnetic geophysics. Outlined areas of magnetite destruction and delineated the various alteration zones and helped confirm and/or identify old/new fault structures at Caariaco Norte. A coincident magnetic high; IP/resistivity low and chargeability high identified at Caariaco Sur. A large IP chargeability high centered on a resistivity anomaly and covering an area of 0.8 km x 2.0 km identified at Quebrada Verde. Petrographic studies on selected drill core samples. Four bulk samples for leach testing collected in 2004. 248 core holes (72,189,7 m) at Caariaco Norte, Caariaco Sur, and Quebrada Verde
2002 to present
Candente
3.3.1
Grids and Surveys

Servicios Geogrficos y Medio Ambiente S.A.C. (GEMA) was contracted in 2004 to establish the coordinates of four survey control points for site survey work. All survey data were based from these control points. The points were established by differential GPS set on the point for one hour and using the 1 order base station in Lima. Accuracy of these initial control points is not known. UTM coordinates were reported in PSAD 56. In June 2006, GEMA was contracted to re-establish five high-precision survey control points to be used at the project as the base points for all surveying. Monuments were re-
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built using rebar and concrete to permanently secure their position. GEMA re-established the points with a differential GPS set on the point for three hours and using the 0 order station Piura as base. Accuracy was established at 1 mm. Reference point UTM data were reported in WGS-84, which is the main datum used for surveying in Per. The calculated PSAD-56 UTM data were also reported. In June 2006 the entire project was changed over from PSAD-56 (zone 17) to WGS-84 UTM (zone 17). All survey work on the project prior to the re-establishment of the control points and the datum switch was re-done. The project grid corresponds to the WGS-84 (zone 17) UTM grid. Topographic data were based on aerial photograph coverage provided by Horizons South America S.A.C. Aerial Mapping Services.
3.3.2
Geological Mapping
Regional and detailed geological mapping was completed by Ingemmet, Placer Dome, and Candente in a number of phases. Map scales varied from regional (1:25,000) to prospect scale (1:1,000). Map results were used to identify lithologies, areas of quartz veining, alteration, and silicification, and sulphide outcrops that warranted additional work. Air photos were interpreted to identify areas that required additional geological mapping and sampling. During the mapping program, structural measurements were collected from faults, veins, and fractures to provide additional structural detail for geological interpretations.
3.3.3
Geochemistry
Stream sediment, soil, and rock chip sampling was done to evaluate the mineralization potential and generate targets for core drilling at Caariaco Norte, Caariaco Sur, and Quebrada Verde. Sampling was performed by Ingemmet, Placer Dome, Surcusal Peruana, and Candente. Stream sediment sampling completed by Ingemmet at 100 m spacing along the drainages of Ro Caariaco during early exploration phases identified elevated copper and gold values. Rock chip sampling outlined coppergoldsilvermolybdenum mineralization associated with quartz porphyry outcrops at Caariaco Norte, Caariaco Sur, and Quebrada Verde. Soil sampling provided the initial drill target areas for Caariaco Norte. Soils with elevated levels of copper of up to 5,720 ppm (0.57%) and gold up to 330 ppb, covering an area of over 0.9 km x 1.4 km, were defined at Caariaco Sur. Anomalous levels of copper of up to 2,200 ppm (0.22%) and up to 497 ppb gold in soils cover an area of approximately 0.7 km x 0.9 km at Quebrada Verde (Figure 3-1).
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Figure 3-1:
Geochemical and Ground Geophysical Anomalies, Caariaco Sur, and Quebrada Verde
Note: Figure courtesy Candente Copper Corp.
PIMA alteration studies undertaken by Candente were used to define favourable alteration styles for mineralization, including alunite and sericite, and to define the various igneous phases.
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3.3.4
Pits and Trenches

Ingemmet excavated nine trenches and took a total of 23 rock chip samples. Placer Dome completed trenching (2,200 m) and pitting (80 test pits) at Caariaco Norte and Caariaco Sur.
3.3.5
Geophysical Surveys
Geophysical surveys, comprising IP/resistivity and ground magnetics, were completed at Caariaco Norte, Caariaco Sur, and Quebrada Verde by Ingemmet, Surcusal Peruana, and Candente. Results of the surveys prior to the Candente work were considered inconclusive due to wide line spacings. Candente completed 20 line km of combined IP/resistivity and ground magnetic surveys. The ground magnetic surveys at Caariaco Norte outlined areas about 0.7 km x 0.9 km of magnetite destruction and addition, thus delineating the various alteration zones and helping to confirm and/or identify old/new fault structures. A coincident magnetic high, IP/resistivity low and chargeability high was identified at Caariaco Sur. A large IP chargeability high centred on a resistivity anomaly and covering an area of 0.8 km x 2.0 km was identified at Quebrada Verde (refer to Figure 3-1).
3.3.6
Geotechnical and Hydrogeology

Geotechnical drilling has been undertaken to test the orientations of the feldspar porphyry dykes and to test the orientation of the polymictic breccia. All drill holes after drill hole C06-045 have been logged for standard geotechnical parameters. Following a visit by SRK personnel in late 2008, geotechnical logging parameters were revised. All drill holes after C07-189 were logged using the revised protocols. Candente has also carried out geotechnical mapping of trench exposures (veins, joints, and faults) and strength testing using a point load tester. As part of a hydrogeological data acquisition program overseen by Ground Water International, piezometer pipe was installed in some of the core drill holes, and packer tests were completed in 12 of those holes. Two holes were drilled specifically for hydrogeological testing on the ridge to the west of the area that contains the estimated mineral resources.
3.3.7
Other Studies
Petrography and mineralogical studies in support of mineralogical and geological interpretations have been completed by Ingemmet, Placer Dome, Surcusal Peruana, and Candente.
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3.3.8
Exploration Potential
Caariaco Norte is part of an extensive porphyry intrusive complex that also includes the Caariaco Sur and Quebrada Verde zones. The three deposits cover an area with a minimum length of 5 km and average width of 2 km. The porphyry complex is covered entirely by the Caariaco property. Geological mapping and geophysics and geochemical sampling by Candente and Surcusal Peruana in 1999 (including limited drilling) indicate a strong potential for additional porphyry copper-gold mineralization within the Caariaco Sur and Quebrada Verde zones. Locally, mineralization at Caariaco Norte is still open at depth and at the central-west part of the deposit.
3.3.9
Comment on Exploration
The exploration programs completed to date are appropriate to the style of the deposits and prospects within the Project. The petrographic research work supports the genetic and affinity interpretations. Exploration potential remains within the Caariaco Sur and Quebrada Verde prospects, and Caariaco Norte is still open at depth and at the central-west part of the deposit.
3.4
3.4.1
Geological Setting
Regional Geology
A regional geological plan for the project area is shown in Figure 3-2. Basement rocks comprise pelitic schists of the Precambrian to Early Paleozoic Olmos Complex that are unconformably overlain by Late TriassicEarly Jurassic La Leche Formation marine sediments that have minor intercalated volcanic units. An Early to Late Jurassic volcano-sedimentary sequence, the Oyotn Formation, overlies the earlier units. Following regional uplift, erosion, and subsequent subsidence, the lower portion of the Goyllarisquizga Group, a regionally extensive quartz arenite, was unconformably deposited on the earlier lithologies. In turn, the arenite was overlain by Early Cretaceous to mid-Late Cretaceous marls, shales, and limestone.
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Figure 3-2:
Regional Geology Map
Note: Figure courtesy Candente Copper Corp. Grid squares on the plan are 4 km x 4 km.
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In the Early Tertiary, volcanic units of the Llama and Porculla Formations of the Calipuy Group were erupted, followed by uplift and erosion. Renewed volcanic activity commenced with the eruption of volcanic rocks of the Huambos Formation during the Late Tertiary. Porphyry stocks, breccias, and dykes that are also Late Tertiary in age intrude the Cretaceous and Early Tertiary units (Figure 3-3). Age dating using K/Ar and ReOs on intrusive rocks, breccias, and alteration minerals in the Caariaco Norte deposit returned dates ranging from 15.8 Ma to 17.9 Ma (Mathur, 2008; Casselman et al., 2008).
Figure 3-3: Regional Stratigraphic Column
A number of circular features/intrusions have been identified district-wide (refer to Figure 3-3). A single circular feature that measures 8 km x 10 km encompasses all three mineralized centres in the project area. This feature is centred on, or close to, major fault intersections, suggesting that the emplacement of the intrusive complex has been localized by fault intersections (Murphy, 2004). Faults that have been identified at a regional scale consist of two, parallel, long-range, northwestsoutheast-trending district-scale faults. One bisects the project area, and the second fault is approximately 7 km to the northeast. The northwestsoutheast faults have a probable conjugate northeastsouthwest fault set that tends to be of medium range. These faults appear to control the location and development of the intrusivebreccia complexes and related mineralization and alteration in the project area.
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3.4.2
Deposit Model
The Caariaco Norte deposit is considered to be an example of a primary porphyrycopper system. The following discussion of the typical nature of porphyry-copper deposits is sourced from Sillitoe (2010), Berger et al. (2008), and Sinclair (2006). Porphyry-copper systems commonly define linear belts, some many hundreds of kilometres long, as well as occurring less commonly in apparent isolation. The systems are closely related to underlying composite plutons, at paleo-depths of 5 km to 15 km, which represent the supply chambers for the magmas and fluids that formed the vertically elongate (>3 km) stocks or dyke swarms and associated mineralization. Commonly, several discrete stocks are emplaced, resulting in either clusters or structurally controlled alignments of porphyry-copper systems. The rheology and composition of the host rocks may strongly influence the size, grade, and type of mineralization generated in porphyry-copper systems. Individual systems have life spans of circa 100,000 years to several million years, whereas deposit clusters or alignments, as well as entire belts, may remain active for 10 million years or longer. Deposits are typically semi-circular to elliptical in plan view. In cross-section, ore-grade material in a deposit typically has the shape of an inverted cone with the altered, but lowgrade, interior of the cone referred to as the barren core. In some systems, the barren core may be a late-stage intrusion. The alteration and mineralization in porphyry-copper systems are zoned outward from the stocks or dyke swarms, which typically comprise several generations of intermediate to felsic porphyry intrusions. Porphyry copper-gold-molybdenum deposits are centred on the intrusions, whereas carbonate wall rocks commonly host proximal copper-gold skarns and less commonly, distal base metal and gold skarn deposits. Beyond the skarn front, carbonate-replacement copper and/or base metal-gold deposits, and/or sediment-hosted (distal-disseminated) gold deposits can form. Peripheral mineralization is less conspicuous in non-carbonate wall rocks but may include base metal- or gold-bearing veins and mantos. Data compiled by Singer et al. (2008) indicate that the median size of the longest axis of alteration surrounding a porphyry copper deposit is 4 to 5 km, while the median size area of alteration is 7 to 8 km2. High-sulphidation epithermal deposits may occur in lithocaps above porphyry-copper deposits, where massive sulphide lodes tend to develop in deeper feeder structures and precious metal-rich, disseminated deposits form within the uppermost 500 m. Porphyry-copper mineralization occurs in a distinctive sequence of quartz-bearing veinlets as well as in disseminated forms in the altered rock between them. Magmatichydrothermal breccias may form during porphyry intrusion, with some breccias containing high-grade mineralization because of their intrinsic permeability. In contrast, most phreatomagmatic breccias, constituting maardiatreme systems, are poorly mineralized
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at both the porphyry copper and lithocap levels, mainly because many such phreatomagmatic breccias formed late in the evolution of systems. Copper mineral assemblages are a function of the chemical composition of the fluid phase and the pressure and temperature conditions affecting the fluid. In primary, unoxidized or non-supergene-enriched ores, the most common oresulphide assemblage is chalcopyrite bornite, with pyrite and minor amounts of molybdenite. Some porphyry copper deposits also contain significant concentrations of hypogene chalcocite and covellite as in the Butte (Montana, USA) and Resolution (Nevada, USA) porphryry deposits. In supergene-enriched ores, a typical assemblage can comprise chalcocite + covellite bornite, whereas, in oxide ores, a typical assemblage could include malachite + azurite + cuprite + chrysocolla, with minor amounts of minerals such as carbonates, sulphates, phosphates, and silicates. Typically, the principal copper sulphides consist of millimetre-scale grains, but may be as large as 1 to 2 cm in diameter and, rarely, pegmatitic (larger than 2 cm). Alteration zones in porphyry-copper deposits are typically zoned and classified on the basis of mineral assemblages and consist of potassic, propylitic, phyllic and argillic zones. In silicate-rich rocks, the most common alteration minerals are K-feldspar, biotite, muscovite (sericite), albite, anhydrite, chlorite, calcite, epidote, and kaolinite. In silicaterich rocks that have been altered to advanced argillic assemblages, the most common minerals are quartz, alunite, pyrophyllite, dickite, diaspore, and zunyite. In carbonate rocks, the most common minerals are garnet, pyroxene, epidote, quartz, actinolite, chlorite, biotite, calcite, dolomite, K-feldspar, and wollastonite. Other alteration minerals commonly found in porphyry-copper deposits are tourmaline, andalusite, and actinolite. Porphyry-copper systems are initiated by injection of oxidized magma saturated with sulphur- and metal-rich, aqueous fluids from cupolas on the tops of the subjacent parental plutons. The sequence of alterationmineralization events is principally a consequence of progressive rock and fluid cooling, from >700 to <250C, caused by solidification of the underlying parental plutons and downward propagation of the lithostatichydrostatic transition. Once the plutonic magmas stagnate, the high-temperature, generally twophase hyper-saline liquid and vapour responsible for the potassic alteration and contained mineralization at depth and early overlying propylitic and advanced argillic alteration, respectively, gives way, at <350C, to a single-phase, low- to moderate-salinity liquid that causes the sericitechlorite and sericitic alteration (phyllic)and associated mineralization. This same liquid also causes mineralization of the peripheral parts of systems, including the overlying lithocaps. The progressive thermal decline of the systems combined with syn-mineral paleo-surface degradation results in the characteristic overprinting (telescoping) and partial to total reconstitution of older by younger alterationmineralization types (argillic). Meteoric water is not required for formation of this alterationmineralization sequence, although its late ingress is common.
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3.4.2.1
Comment on Deposit Model Caariaco Norte is considered to be an example of a porphyry system based on the following: Multiple emplacements of successive intrusive phases and a variety of breccias are present. Copper-bearing igneous rocks are intrusive into host volcanic and sedimentary rocks. Mineralization is spatially, temporally, and genetically associated with the intrusive breccia activity and hydrothermal alteration of the intrusive and breccia bodies. Large zones of veining and stockwork mineralization, together with minor disseminated and replacement mineralization, occur throughout large areas of intrusivebreccia and hydrothermally altered rock. Hydrothermal alteration is extensive and zoned, which is common to porphyry-copper deposits. The alteration assemblages are consistent with the physico-chemical conditions of a porphyry environment. Mineralization is focused in well-developed quartzsulphide stockworks; veins, crackle, and breccia zones are also present. The tenor of the copper and gold grades is typical of a porphyry deposit. The large tonnage is also typical.
3.4.3
Caariaco Norte Deposit Geology

The Caariaco Norte deposit is hosted within a multiphase intrusivebreccia complex approximately 1.7 km in strike extent and 1.1 km wide. The deposit has been drill-tested to a depth of approximately 770 m and remains open at depth. The majority of the copper-gold mineralization is hosted within the intrusive and breccia units, but locally extends for variable distances into the enclosing volcanic units. Intrusive units comprise approximately 55% to 60% of the deposit, breccias approximately 30% to 35%, and premineral volcanic rocks approximately 5% to 10%. The intrusive units are nested and collectively roughly oval in shape, with older intrusive rocks being cut by successively younger intrusive bodies. In general, the intrusive units are northsouth-trending, steeply dipping bodies. The breccia units cut the intrusive units, are oval to circular in shape, and are steeply plunging. The dykes generally strike northwestsoutheast with a steep southwesterly dip. The shape and positioning of the intrusive, breccias, and dyke units was largely controlled by northwestsoutheast- and northeastsouthwest-trending faults (Casselman et al., 2008).
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3.4.3.1
Lithologies Table 3-4 presents a stratigraphic column for the project area. The following sections on lithologies have been taken from Casselman et al. (2008).
Table 3-4:
Unit Breccias
Project Stratigraphic Column

Rock Code IBxP TBx IBxH FP CQP BFP CQFP VC Rock Type Breccia (youngest) Breccia (middle) Breccia (oldest) Dykes Intrusive (youngest) Intrusive (middle) Intrusive (oldest) Calipuy Volcanic Description Polymictic breccia Tourmaline breccia Hydrothermal breccia Feldspar porphyry dykes Coarse quartz porphyry Biotite feldspar porphyry Crowded quartz feldspar porphyry Pre-mineral andesitic, dacitic and rhyolitic volcanics
Intrusives
The oldest rocks, ascribed to the Early Tertiay Calipuy Group, are a series of dacite tuffs with lesser, bedded, rhyolite tuffs overlain by andesite porphyry flows and pyroclastic rocks. Andesite pyroclastic rocks and flows dominate on the western, northern and southern sides of the intrusive complex where elevations are higher. The eastern side of the intrusive complex is lower in elevation, and thus the dacite and rhyolite volcanic rocks that underlie the andesite volcanic rocks are exposed adjacent to the intrusive complex. Three major intrusive generations have been identified. The oldest intrusive unit is a crowded quartzfeldspar porphyry (CQFP), which consists of 1% to 3% quartz eyes, 35% feldspar phenocrysts, and 3% to 5% hornblendebiotite. Grain sizes of the constituents range from 1 to 2 mm. The unit is interpreted as dioritic in composition. The middle intrusive unit is a biotitefeldspar porphyry (BFP) interpreted to be granodioritic in composition, with 3% to 5% quartz eyes, 15% to 20% feldspar phenocrysts, 2% to 5% euhederal biotite, and traces of hornblende. Grain sizes typically range from 3 to 5 mm. The youngest intrusive unit, a coarse quartz porphyry (CQP), consists of 5% to 10% quartz eyes (grain size range from 3 to 5 mm), 15% to 20% euhedral feldspar crystals (<3 mm) and traces of biotite (1 to 2 mm). The CQP is interpreted to be of quartz monzonitic composition. The youngest intrusive stage is a set of feldspar porphyry dykes/breccias (FP) that range in thickness from 2 m to 30 m and have a northwestsoutheast strike, with a steep, southwesterly dip. The dykes have a fine-grained ground mass with 10% to 20% feldspar phenocrysts (3 to 10 mm) and 5% to 10% hornblende phenocrysts (2 to 8 mm). The dykes commonly display cooling contacts. Where the dykes intersect the breccias, dyke fragments occur as large (>10 m), rotated, and weakly fractured blocks within the
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breccias. The dykes have been only weakly altered and contain minor copper mineralization where they have been fractured, brecciated, and crackle-brecciated near the south margin of the hydrothermal breccia unit. Three breccia bodies that post-date the intrusive rocks are recognized. The oldest unit, hydrothermal breccia (IBxH), consists of matrix-supported angular to sub-angular biotite feldspar porphyry and crowded quartzfeldspar porphyry fragments that display little or no evidence of transport. Fragment sizes within the central part of the breccia are generally 1 to 5 cm in a fine-grained matrix. Near the southern margin of the breccia, there is a high component of feldspar porphyry dyke fragments up to tens of metres in size. The unit is not well mineralized, with copper grades related to the inclusion of mineralized porphyry fragments. The margins of the hydrothermal breccia can show crackle brecciation. The middle tourmaline breccia (TBx) has a fine-grained matrix consisting of quartz and tourmaline. The unit is extensive and was emplaced along the northeastern margin of the intrusive bodies. Breccia fragments are angular to sub-angular, 1 to 10 cm in size, and include clasts of the biotitefeldspar porphyry, crowded quartzfeldspar porphyry, and the hydrothermal breccia. The margin of the breccia shows crackle brecciation. The breccia is not mineralized, apart from copper grades related to the inclusion of mineralized porphyry fragments. The youngest breccia unit, polymictic breccia (IBxP), is a late-stage breccia with an erratic shape, cross-cutting all earlier units. Sub-rounded to rounded clast fragments include vein quartz, all three intrusive units, and the two earlier breccia phases. Fragments range from 0.5 to 10 cm with the breccia margins often grading into a crackle breccia. The unit shows multiple breccia pulses, the last of which is a fluidized micro-breccia with rounded fragments that are typically <3 mm in size, cross-cutting all other pulses. Copper mineralization occurs in both the matrix and the fragments. Mineralization occurs primarily as disseminations and in fractures, sulphide and quartz veins, faults, and breccias. Fracture density is the single most important factor influencing copper grades and alteration intensity, although breccias and faults can locally be important. Copper mineralization was introduced as a series of events closely following the emplacement of each of the intrusive units and the polymictic breccia unit. Initially, copper mineralization comprised chalcopyrite and minor bornite, introduced following emplacement of each of the crowded quartzfeldspar porphyry and biotitefeldspar porphyry units, with the greatest amount introduced following emplacement of the biotite feldspar porphyry unit. This event was followed by introduction of chalcocite, covellite, minor tennantitedigenite, following emplacement of the coarse quartz porphyry unit. The mineralizing process terminated with enargite, chalcocite and covellite, minor tennantite digenite, introduced concurrently with emplacement of the polymictic breccia unit (Casselman et al., 2008).
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Near surface, the deposit has been intensely weathered, resulting in the formation of a leached cap that contains less than 0.05% Cu, trace pyrite and tenorite, and variable concentrations of limonite, goethite, jarosite, and hematite. The leached cap varies significantly in thickness, ranging from less than a metre to as much as 120 m, averaging approximately 40 to 50 m in thickness. The water table is at, or near, surface. A geological plan for the deposit is presented in Figure 3-4 (Van Egmond et al., 2008). Figures 3-5 and 3-6 are drill sections through the deposit. 3.4.3.2 Alteration The alteration forms distinct concentric zones with a central potassic alteration; central to intermediate, overlapping, and partly overprinting phyllic, argillic, and advanced argillic alteration; and fringing propylitic and minor silicic alteration. Alteration intensity is directly related to the intensity of fracturing in the hosting lithologies and brecciation in the polymictic breccia unit. Locally, alteration distribution and intensity are controlled by northeast- and northwest-trending faults. The following sections on alteration have been taken from Casselman et al.(2008). Phyllic and argillic alteration dominate in the upper 50 to 300 m in the southern half of the deposit and the upper 100 m to locally 150 m in the northern half of the deposit (excluding overburden and the leached cap). At depth, most of the northern and southern halves of the deposit under the layer of phyllic and argillic alteration is dominated by potassic alteration. Alteration type descriptions are as follows: Potassic alteration consists of variable proportions of secondary potassic feldspar and biotite, chlorite and magnetite. Associated with deposition of chalcopyrite and minor bornite. Propylitic alteration comprises illite, chlorite, epidote, and smectite. Associated with deposition of chalcopyrite and minor bornite. Found mainly outside the deposit margin, but can locally occur within the deposit. Propylitic alteration can extend for significant distances outside of the intrusivebreccia complex into the bordering volcanic rocks. It is often associated with silicic alteration near the margins of the deposit.
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Figure 3-4:
Geological Map, Caariaco Norte
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Figure 3-5:
Geological Drill Section 9,326,300N
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Figure 3-6:
Geological Drill Section 690,800E
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Phyllic alteration includes sericite and quartz with variable concentrations of quartz veinlets and stockworks (0.5 cm to 1.5 cm thick). Associated with deposition of chalcocite, covellite, and minor tennantite and digenite. Commonly intermixed with argillic alteration. Affected parts of the crowded quartzfeldspar porphyry and biotite feldspar porphyry units and all of the coarse quartz porphyry and polymictic breccia units. Late-stage phyllic alteration has extended along northeast- and northwesttrending faults outwards from the polymictic breccia unit, and affected units distal from the polymictic breccia unit Argillic alteration consists of kaolinite and illite. Associated with deposition of chalcocite, covellite, and minor tennantite and digenite. It is commonly assocated with phyllic alteration. Affected parts of the crowded quartzfeldspar porphyry and biotitefeldspar porphyry units and all of the coarse quartz porphyry and polymictic breccia units. Advanced argillic alteration comprises alunite, kaolinite, pyrophyllite, and dickite. Associated with deposition of enargite, chalcocite, and covellite, and minor tennantite and digenite. It is commonly associated with late-stage phyllic alteration. Primarily associated with the polymictic breccia unit, but also has variably affected the bordering coarse quartz porphyry and biotitefeldspar porphyry units. Has extended along northeast- and northwest-trending faults outwards from the polymictic breccia unit, and affected units distal from the polymictic breccia unit. Silicic alteration comprises very fine grained pervasive silica. Associated with chalcopyrite and minor bornite. It is found mainly at the deposit margin, but can locally occur within the deposit. Silicic alteration can extend outside of the intrusivebreccia complex into the bordering volcanic rocks. 3.4.3.3 Structures The northwestsoutheast- and the northeastsouthwest-trending fault sets appear to control the emplacement of the intrusive phases at Caariaco Norte, as well as the distribution of copper mineralization and alteration. In addition, the faults form structural corridors for late-stage polymictic breccias and associated alteration and mineralization. The smaller set of northwestsoutheast-oriented faults control dyke emplacement (Casselman et al., 2008).
3.4.4
Prospects
Prospect locations are shown in Figure 3-7.
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Figure 3-7:
Prospect Location Plan and Geological Map
3.4.4.1
Caariaco Sur The Caariaco Sur deposit is 1.3 km southwest of Caariaco Norte on a large area of potassic alteration with a coincident copper-gold-molybdenum soil geochemical anomaly having approximate dimensions of 1,400 m x 900 m. A large, coincident magnetic high,
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IP/resistivity low, and chargeability high was identified coincident with the soil geochemical anomaly and area of potassic alteration. Candente has interpreted the prospect as a porphyry-copper-gold centre dominated by potassic alteration with chalcopyrite-bornite-molybdenite mineralization and anomalous CuAuMo grades (refer to Figure 3-1). The host rocks to the mineralized intrusions are Calipuy Group andesite volcanic rocks. Two main intrusions were noted from geological mapping, an early 750 m x 500 m quartz monzonite stock, and a later diorite stock with an area of approximately 100 m x 50 m. A third intrusive phase may also exist (Sillitoe, 1999). 3.4.4.2 Quebrada Verde The Quebrada Verde prospect is 3.2 km south of Caariaco Norte and 1.5 km south of Caariaco Sur. Strongly anomalous levels of copper and gold in soil samples cover an area of 0.7 km x 0.9 km. A large IP chargeability high centred on resistivity anomaly and magnetic high and covering an area of 0.8 km x 2.0 km occurs coincident with the soil geochemical anomalies (refer to Figure 3-1). Candente staff have interpreted the prospect as a porphyry copper-gold centre. The one historic drill hole did not test the geochemical/geophysical target. Quebrada Verde host rocks consist of a 1 km x 750 m diorite porphyry stock that intruded Calipuy Group andesite volcanic rocks (Wilson, 1999). A satellite stock of the same diorite porphyry measuring 400 m x 400 m is located 200 m to the northeast. An east-west striking, post-mineralization granodiorite dyke, with dimensions of approximately 1 km x 100 m, intruded the volcanic rocks and the larger diorite porphyry stock.
3.4.5
Comment on Geological Setting

Knowledge of the deposit settings, lithologies, and structural and alteration controls on mineralization within the Caariaco Norte deposit is sufficient to support Mineral Resource estimation. The nearby Caariaco Sur and Quebrada Verde prospects are at an earlier stage of exploration, and the lithologies, structural, and alteration controls on mineralization are currently insufficiently understood to support estimation of Mineral Resources.
3.5
Mineralization
Although all of the lithologic units listed in Table 3-3 host mineralization, the average grades vary. In general, the highest copper grades (>0.5% Cu) occur in the biotite-feldspar porphyry and polymictic breccia units. Intermediate copper grades (0.35% to 0.5% Cu) are most common in the hydrothermal breccia and the coarse quartz
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porphyry, and the lowest grades (0.2% to 0.35% Cu) are found in the crowded quartz feldspar porphyry, tourmaline breccias, and volcanic host rocks. The feldspar porphyry dykes typically do not contain copper grades unless the dykes have been fractured, brecciated, or crackle-brecciated near the south margin of the hydrothermal breccia, where they have been weakly mineralized (average copper grade range of 0.1% to 0.2% Cu). A Qemscan examination of core samples selected for metallurgical testwork in 2008, performed by SGS Metallurgical Laboratories in Santiago, Chile, indicated the predominant minerals and mineral associations present in the Caariaco Norte samples are: Copper mineral species dominantly chalcopyrite, covellite, chalcocite, and enargite, with minor bornite, tennantite, and digenite, and trace tetrahedrite. Copper sulphide minerals are mainly associated with pyrite and other sulphide gangue minerals. Non-metallic gangue minerals quartz and micas/biotite/chlorite/clay group Sulphide gangue mineral pyrite, which is present as liberated pyrite or in association with other sulphide minerals. Copper mineralization paragenesis (Casselman et al., 2008) comprised the following stages: initially, chalcopyrite (bornite) + pyrite intermediate, chalcocite and covellite (tennantite, digenite) pyrite last, enargite, chalcocite, and covellite (tennantite, digenite) + pyrite Copper minerals and pyrite are disseminated, veined, and fracture-hosted, with copper grades directly related to the intensity of fracturing and alteration type and intensity. Higher grades are associated with potassic, phyllic, and argillic alteration and less commonly with propylitic and silicic alteration. Casselman et al. (2008) interpret that chalcopyrite (bornite) was deposited initially with the coarse quartz-feldspar porphyry and biotite-feldspar porphyry units, and with potassic and propylitic alteration. As the system evolved, chalcocite and covellite (tennanite, digenite) developed in association with the coarse quartz porphyry and with phyllic and argillic alteration, and overprinted and replaced chalcopyrite (bornite) and potassic and propylitic alteration in the central and upper parts of the deposit. Enargite, chalcocite, and covellite (tennantite, digenite) associated with advanced argillic and phyllic alteration was the last to form. These minerals are typically restricted in distribution to the polymictic breccia unit and the adjacent coarse quartz porphyry and biotitefeldspar porphyry units, where they occur as disseminations, clots, veins, and fracture coatings cutting earlierformed chalcopyrite, chalcocite, covellite, potassic, propylitic, phyllic, and argillic alteration.
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Chalcopyrite (bornite), chalcocite, covellite, and enargite (tennantite, digenite) are primarily hypogene in origin, with only limited development of supergene chalcocite and covellite (Mathur, 2008). In the opinion of Candente staff, between the water table being at or near the present topographic surface and the active erosive environment, any supergene chalcocite and covellite that formed is being rapidly removed. Locally thin (<30 m) discontinuous layers of supergene chalcocite and covellite occur immediately under the leach cap. Pyrite is common in all alteration types, averaging approximately 5% throughout the deposit as disseminations, veins, and fracture coatings. Magnetite is less common and primarily associated with chalcopyrite (bornite) in potassic alteration. Tourmaline is restricted to the matrix of the tourmaline breccia unit. Gold and silver values are anomalous throughout the deposit; however, higher gold grades only occur with higher copper grades. Gold grades range, on average, between 0.04 g/t Au and 0.11 g/t Au and silver grades average 1.3 g/t Ag to 2.5 g/t Ag throughout the different rock types in the deposit (Bonson et al., 2008). Molybdenum (Mo) grades are low, averaging <40 ppm, and are slightly higher on the margins and at depth in the deposit (Bonson et al., 2008). Molybdenum grades are unlikely to be economically recoverable based on current information. Figures 3-8, 3-9, and 3-10 are cross-sections through the Caariaco Norte deposit showing copper, gold, and silver grades, respectively.
3.5.1
Comment on Mineralization
The mineralization style and setting of the Caariaco Norte deposit are sufficiently well understood to support Mineral Resource estimation.
3.6
Drilling
Drilling on the project consists of 263 core holes (75,672.31 m), including geotechnical, metallurgical, and hydrogeological drilling for all three targets, Caariaco Norte, Caariaco Sur, and Quebrada Verde. Table 3-5 is a drill summary by operator. Drill hole locations for the Caariaco Norte deposit are shown in Figure 3-11. Figure 3-12 shows the locations of the drill holes completed at Caariaco Sur and Quebrada Verde. In this section, all drilling completed prior to Candentes involvement in the project is termed legacy data.
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Figure 3-8:
Example Vertical Section (9,326,300N) with 15 m Composite Coloured by Cu (%) Ranges Overlapping Lithological Interpretation
Note: Grid squares are 200 m x 200 m
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Figure 3-9:
Example Vertical Section (9,326,300N) with 15 m Composite Coloured by Au (ppb) Ranges
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Figure 3-10: Example Vertical Section (9,326,300N) with 15 m Composite Coloured by Ag (g/t) Ranges
Table 3-5:
Year 19711974 19941997 19992000
Drill Summary
Project Operator Ingemmet Placer Dome Surcusal Peruana Deposit or Prospect Caariaco Norte Caariaco Norte Caariaco Norte Caariaco Sur Quebrada Verde Caariaco Norte Caariaco Norte Caariaco Norte Caariaco Norte Caariaco Norte Caariaco Sur Core Number Holes 5 3 3 3 1 12 24 46 123 41 2 263 Metres 1,500.0 853.91 555.7 473.0 100.0 2,647.38 7,388.87 15,983.55 31,357.2 13,772.1 1,040.6 75,672.31
2004 2005 2006 2007 2008 Total
Candente
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Figure 3-11: Drill Hole Location Plan, Caariaco Norte
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Figure 3-12: Drill Hole Location Plan, Caariaco Sur and Quebrada Verde
Note: Figure from Huanqui et al. (2002). Billiton = Surcusal Peruana
3.6.1
Drill Contractors
The Ingemmet program drill contractor was Craelius Tarratest Peruana S.A., which utilized three Long Year machines (two model 34s and one model 38). No information is available for the contractors for the Placer Dome and Surcusal Peruana drill programs.
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The Candente drill programs used Pac Rim Drilling SA, a Peruvian subsidiary of Kluane Drilling Corp, which provided standard man-portable Hydrocore rigs.
3.6.2
Drill Methods
The Ingemmet program used NCD core size to 50 m, NXWL (60.7 mm core diameter) to 170 m, and BXWL (48.4 mm core diameter) thereafter. Both 10 ft (3 m) and 5 ft (1.5 m) core barrels were used. No information is available on the core size for the Placer Dome drilling; however, the Surcusal Peruana drill program used BQ diameter (36.5 mm). The Candente programs initially used NTW (56 mm) diameter core. During the 2005 drill program, ground conditions and depth required a reduction to a BTW core diameter (42 mm) in drill holes 05-014 at 302.35 m and 05-019 at 268 m). In 2006 and 2007, all drill holes less than 325 m in depth were drilled with NTW diameter core; holes deeper than 325 m needed to be reduced to BTW at around 250 m to 300 m depth, to allow the machine to drill to the planned depth. The 2008 drill program employed HQ (63.5 mm diameter) or NQ (47.6 mm diameter) core sizes. For the Candente programs, core was transferred to wooden core boxes. Rock quality descriptions (RQD) measurements were performed at the drill site. The boxes were then closed and transported by porters hired by Candente to the project core processing facility, where the core was photographed and logged for geologic and geotechnical information. No information is available on the method of core transportation used during the earlier drill programs by Ingemmet, Placer Dome, or Surcusal Peruana.
3.6.3
Geological Logging
During detailed core mark-up at the logging facility, Candente geologists perform firstpass geological logging of the core. This initial log identifies lithological boundaries, major structures, leaching depth, and broad mineralization intervals. In tandem with the logging, the geologist notes where major sample breaks should be placed at lithological boundaries. A second phase of detailed core logging is carried out immediately after cutting on the preserved split core at Candentes core storage facility in Chiclayo, where each core is logged for lithology, structure, veining, alteration, and mineralization. All logged descriptions are indexed to 2 m sample intervals, so that the mineralization, veining, structure, lithology, and alteration affecting any sample are known. Core from all other legacy drill campaigns has been re-logged by Candente.
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3.6.4
Collar Surveys
Candente drill collar locations were picked up by a surveyor using a total station instrument. All legacy drill collars were picked up by survey in 2006 and tied into the project grid.
3.6.5
Down-hole Surveys
For the 2004 drill program, down-hole surveys were undertaken using a Pajari analog survey tool with a timed locking compass and inclinometer. Readings were taken at the drill machine to confirm true vertical holes. Any spurious readings were discarded and a second survey was done at the same depth. The 2005 program used the same instrumentation and procedures as in 2004. However, a number of the 2005 program drill holes do not have down-hole survey data due to a malfunction in the instrument. All the drill holes from the 2006 and 2007 drill programs were down-hole surveyed with a Sperry Sun single-shot down-hole survey tool supplied by the drilling company. The 2008 program drill holes were down-hole surveyed for dip and azimuth at 50 m intervals with a Reflex EZ-Shot digital down-hole survey tool. Selected drill cores from the 2006 and 2008 drill programs were oriented for geotechnical purposes using an A.C.E. tool.
3.6.6
Recovery
Drill core recovery data from the legacy drill campaigns are not available. Candente staff have recorded core lengths and calculated core recoveries and RQD at the sites of the drill holes. AMEC reviewed the core recovery data from drill holes C07-164 through to C08-244 and found a trend of decreasing copper grade with decreasing core recovery. The copper grades decrease from 0.3% to 0.2% at a core recovery of 80%; however, only 2% of the data are affected. There is a low risk of a very low number of assays having a negatively biased copper grade because of low core recoveries.
3.6.7
Caariaco Norte Drilling

The central part of the deposit has been delineated at a nominal, but not regular, spacing due to relief restrictions. In this area, the drill grid spacing is 75 m x 75 m with most of the core holes drilled vertically. On the deposit margins, drill spacing widens to as much as 100 m x 100 m. Drill hole depths range from 14 m to 766 m, averaging 290 m. Drill hole orientations are typically vertical, but have also been drilled at angles ranging from 45 to 75.
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The relationship between true widths, drill intercepts, lithologies, and copper grades for drill hole intervals in selected drill holes are shown on the cross-sections included in Section 3.5. Example drill intercepts for the deposits, summarized in Table 3-6, are illustrative of nature of the mineralization. The example drill holes contain sulphide intersections and areas of higher grade in lower-grade intervals.
Table 3-6: Drill Hole Intercept Summary Table
From (m) 76 12 27.25 52.4 52.4 70.6 34.9 To (m) 300.25 357.95 46.95 98.0 98.0 271.0 363.0 Drill Intercept Interval (m) 224.25 345.95 19.7 45.6 237.0 200.4 328.1 Copper Grade (Cu%) 0.79 0.49 0.96 1.01 0.605 0.812 0.911 Gold Grade (g/t Au) 0.140 0.045 0.142 0.145 0.111 0.129 0.169 Silver Grade (g/t Ag) 2.58 2.46 2.19 3.01 1.99 2.48 2.20
Deposit Caariaco Norte Caariaco Norte Caariaco Norte Caariaco Norte Caariaco Norte Caariaco Norte Caariaco Norte
Hole ID C07-200 C05-020 C08-213 C08-213 C06-074 C07-144 C06-076
Note: Depending on the dip of the drill hole and the dip of the mineralization, drill intercept widths are typically greater than true widths.
3.6.8
Comment on Drill Programs

The quantity and quality of the lithological, geotechnical, collar, and down-hole survey data collected in the exploration and infill drill programs are sufficient to support Mineral Resource estimation, as follows: Core logging meets industry standards for copper, gold, and silver exploration. Collar surveys have been performed using industry-standard instrumentation. Down-hole surveys were performed using industry-standard instrumentation. Recovery data from core drill programs are acceptable. Geotechnical logging of drill core meets industry standards for planned open pit operations. Depending on the dip of the drill hole and the dip of the mineralization, drill intercept widths are typically greater than true widths. Drill orientations are generally appropriate for the mineralization style and have been drilled at orientations that are optimal for the orientation of mineralization for the bulk of the deposit area. Drill orientations are shown in the example cross-sections in Section 3.5 and can be seen to appropriately test the mineralization. The sections display typical drill hole
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orientations for the deposits, show summary assay values using colour ranges for assay intervals that include areas of non-mineralized and very low grade mineralization, and outline areas where higher-grade intercepts can be identified within lower-grade sections. The sections confirm that sampling is representative of the copper, gold, and silver grades in the deposits, reflecting areas of higher and lower grades. The drill hole intercepts summarized in Table 3-5 appropriately reflect the nature of the copper, gold, and silver mineralization. No factors were identified with the data collection from the drill programs that could affect Mineral Resource estimation.
3.7
3.7.1
Sample Preparation
Geochemical Sampling
No information is available on the sampling methods for the Ingemmet, Placer Dome, or Surcusal Peruana geochemical sampling programs. Soil and other geochemical samples taken by Candente were typically 2 to 5 kg in weight.
3.7.2
Pit and Trench Sampling

No information is available on the sampling methods for the Ingemmet and Placer Dome geochemical sampling programs.
3.7.3
Core Sampling
Drill core generated by Ingemmet and Placer Dome was halved; no information is available as to the typical sample intervals. The Surcusal Peruana drill core was halved and sampled on 2 m intervals. Candente drill core is halved using a circular rock saw. Samples are 2 m in length unless a geological contact is present within the sample interval. In those instances, the sample interval is terminated at the contact. The subsequent sample interval terminates at the next metre depth mark that allows a minimum sample length of 1.5 m.
3.7.4
Quality Assurance and Quality Control

The quality assurance and quality control (QA/QC) programs for the project are discussed in Section 3.8.3.
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3.7.5
Density/Specific Gravity
A total of 9,424 bulk density readings were taken by Candente personnel during core logging using a weight-in-air and weight-in-water method. Samples were taken every 10 m to 20 m to include all rock and alteration types. Data were recorded for drill hole ID, depth, rock type, alteration, weight in air, and weight submerged in water. As a part of the update to the 2008 mineral resource estimate, 550 bulk density determinations were collected by Candente personnel from drill core intervals and submitted to ALS Chemex (Lima) for density determinations. The determinations were performed using a wax-coated immersion technique (specialty assay procedure OA-GRA08a). AMEC assigned constant specific gravity values to each lithological rock type (Table 3-7).
Table 3-7: Specific Gravity Values Used in 2010 Mineral Resource Estimate
Specific Gravity Oxide 3 (g/cm ) VC CQFP BFP CQP FP IBXH TBX IBXP 2.13 2.33 2.19 2.17 2.03 2.17 2.17 2.17 Sulphide 3 (g/cm ) 2.51 2.50 2.48 2.50 2.56 2.50 2.45 2.50
3.7.6
Comment on Sample Preparation

All collection, splitting, and bagging of core samples were carried out by company personnel, who varied depending on the date of the drill program. No factors were identified with the drilling programs that could affect Mineral Resource estimation. The sizes of the sampled areas are representative of the distribution and orientation of the mineralization. The figures in Section 3.5 show approximate drill hole collar traces in relation to the orientation of the mineralization. The figures also show drill hole assay intervals, including areas of non-mineralized and very low grade mineralization, and confirm that sampling is representative of the gold, silver, and copper grades in the deposit, reflecting areas of higher and lower grades.
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The sampling methods are acceptable, meet industry-standard practice, and are adequate for Mineral Resource estimation purposes, based on the following: Data are collected following industry-standard sampling protocols. Sample collection and handling of core were undertaken in accordance with industry-standard practices, with procedures in place to limit potential sample losses and sampling biases. Sample intervals in core, comprising average 2 m intervals, are considered to be adequately representative of the true thicknesses of mineralization. Not all drill material may be sampled depending on location and alteration. Gravity determination procedures are consistent with industry-standard procedures. There are sufficient acceptable specific gravity determinations to support the specific gravity values utilized in tonnage interpolations.
3.8
Sample Preparation, Analyses, and Security

From project inception to date, project staff employed by Candente and predecessor companies were responsible for the following: sample collection core splitting preparation of samples for submission to the analytical laboratory sample storage sample security.
3.8.1
Analytical Laboratories
Several primary assay laboratories have been used for routine analyses over the project history. Ingemmet used the Plenge Laboratory in Lima and the Ingemmet internal laboratory, also located in Lima. No information is available as to accreditation of the laboratories at the time sampling was performed. Placer Dome utilized the SGS-XRAL (SGS) laboratory in Lima, which was independent of Placer Dome. No information is available as to accreditation of the laboratory at the time sampling was performed. For the Surcusal Peruana sampling, sample preparation was undertaken by ALS Chemex in Trujillo and primary analysis by ALS Chemex in Lima. The umpire laboratory was SGS. Both laboratories were independent of Surcusal Peruana. No information is available as to accreditation of the laboratories at the time sampling was performed.
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Activation-Skyline Laboratories (Actlabs) in Lima, Per, performed all of the sample preparation and the majority of the analyses for the Candente programs. Actlabs is independent of Candente and holds ISO:9000 accreditation for the Peruvian laboratory. Inductively-coupled plasma (ICP) analyses were performed by the Ancaster, Canada, Actlabs laboratory, which has Standards Council of Canada (SCC) accreditation for International Standards Organization (ISO) 17025. Some analyses for the re-analysis of pre-2008 core samples for gold and ICP were undertaken by ALS Chemex in Lima. ALS Chemex is independent of Candente and holds ISO:9000 accreditation for the Peruvian laboratory. ACME Laboratories (ACME), Lima, was used as a check laboratory for pulp analyses. ACME is independent of Candente and holds ISO:9000 accreditation for the Peruvian laboratory.
3.8.2
Sample Preparation and Analysis

Limited information is available on the sample preparation and analysis methods for Ingemmet or Placer Dome. Ingemmet samples were analyzed for Cu and Mo, and more rarely Au and Ag, using a colorimetric analytical method. Surcusal Peruana samples were 200 g splits of a 1 kg, 200 mesh homogenized sample. A split from each sample pulp was assayed for Au (fire assay with atomic absorption finish, 10 ppb detection limit) and Cu, Pb, Zn, Mo, and As (multi-acid, total digest), with an atomic absorption (AA) finish for each element. SGS completed check assays on a split of 1 in 20 pulps using the same analytical procedures as the initial analysis performed by ALS Chemex.
3.8.2.1
Candente Sample Preparation Sample preparation for the Candente samples included drying, then crushing with a jaw crusher to >70% less than 10 mesh. The sample is thoroughly blended using a riffle splitter. A sub-split is taken, which is pulverized to >95% less than 150 mesh, and this pulp is submitted for analysis. Copper Each sample was subject to total copper and sequential copper leaching analysis, which returns results for acid-soluble, cyanide-soluble and residual copper grades. Total copper analysis was performed using a three-acid digest and AA finish (laboratory method ME-3 or three-acid digestion).
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The sequential leach analysis consisted of: an initial leach step, where samples were dissolved in sulphuric acid and the copper grade was determined by AA to give the acid-soluble copper value a secondary leach step, where samples were dissolved in sodium cyanide and the copper grade determined by AA to give the cyanide-soluble copper value a third leach step, where the samples were dissolved using a three-acid digest and the copper grade determined by AA finish to give the residual copper value. For any given sample, copper grades were obtained by adding the three parts of the sequential copper analysis. Results are compared to the copper grade reported in the total copper analysis; if the sum of the sequential leach grades differs by >0.03% from the total copper grade, then the analysis is repeated for both parts of the process. Gold The sample for gold analysis is taken from the remaining pulps after copper analysis. The 250 g pulps are homogenized and a 30 g split is weighed out for fire assay fusion, cupelled to obtain a bead, and digested with aqua regia, followed by an AA finish, with a detection limit of 5 ppb Au (Actlabs code EF1). Gold assays were done for only some of the original pre-2008 drilling. These were analyzed by fire assay (FA) with an atomic absorption finish (FA-AA) on a 30 g sample. The rest of the samples were not systematically analyzed for gold until a large analysis infill campaign was conducted in March 2008. Owing to the large volume of samples, analyses were split between Actlabs and ALS Chemex. The FA-AA method on a 30 g sample was used by both laboratories. The FA-AA method on a 30 g sample was used for the 2008 drill campaign, with all analyses performed by Actlabs. Inductively-coupled Plasma Multi-element Actlabs used a 36-element inductively-coupled plasma optical emission spectrometry (ICP-OES) method following aqua regia digestion (laboratory code 1E3). ALS Chemex performed a 33-element ICP atomic emission spectroscopy (AES) method after four-acid digestion (laboratory code ME-ICP61).
3.8.3
Quality Assurance/Quality Control Programs

There is no information on any quality assurance/quality control (QA/QC) programs for Ingemmet and Placer Dome.
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Surcusal Peruana used blanks (crushed quartz every 20 samples), standard reference materials (SRM: one in every 20 samples), and check assays (one in every 20 samples). In Surcusal Peruanas protocol, a blank sample was not to be submitted adjacent to an SRM sample, but could not be any more than 10 samples away from an SRM. Chain-ofcustody and sample preparation protocols were also part of Surcusal Peruanas QA/QC program at Caariaco. 3.8.3.1 Candente Duplicates No field duplicates were used in the 2004 drilling program but were included from drill hole C05-013 of the 2005 drill program. Field duplicates typically comprised quarter drill core. Coarse reject duplicates were run on drill holes C04-007 and C05-023. Pulp duplicates were taken at Actlabs every 10th sample. Candente has consistently sent 5% of pulps prepared and analyzed by Actlabs to independent laboratories for check assays on total copper analyses. Five percent of the samples from drill holes C04-001 to C06-082 were sent to ACME Laboratories, Lima, for analysis by four-acid digestion of a 0.25 g pulp split. For drill holes C07-083 to C07-202, 5% of the samples were sent to SGS Laboratories, Lima, for analysis using the same analytical procedures as the original assay work (three-acid digestion on a 0.25 g split). All independent checks included standards, blanks, and duplicates. Pulp duplicates were also made during all independent laboratory checks at ACME and SGS. During 2010, Candente sent a suite of 530 pulp reject samples to the SGS laboratory in Lima for check analyses on silver ICP analyses. The samples were analyzed by four-acid digest on a 0.3 g pulp split (method ICP40B). The samples were randomly selected from drill holes throughout the area drilled by Candente. All independent checks included standards, blanks, and duplicates. Peruaa Blanks Field blank material is obtained from a barren outcrop of volcanic host rock situated beyond the alteration halo at Caariaco. Blanks are submitted at a frequency of one in 30 samples, so that each laboratory batch of 80 will always have at least two blanks. Field blank fail limits are set at 0.05% Cu or five times the detection limit of 0.01%. Standard Reference Materials Candente has used six commercially available SRMs, purchased from CDN Laboratories in Vancouver, Canada. SRMs are submitted at a frequency of one in 30 samples, so that each laboratory batch of 80 will always have at least two SRMs. An additional two SRMs were purchased from Geostats Pty. in Australia specifically for use in the ICP check
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assays conducted during 2010. The selected SRMs have low-grade silver contents that are close to the average silver grade of the Caariaco Norte deposit. During 2006, SGS was retained to prepare two SRMs from unweathered outcrops from the Caariaco property for sequential leach analysis. Where the copper value of the SRM was outside the acceptable value specified for the standard by CDN Laboratories (two standard deviations from the mean), they were failed. Re-analysis of failed copper standards was not carried out at time of drilling. This was mainly due to the fact that most batches contained two, or sometimes three, standards. If one standard failed but the other did not, the batch was considered to be acceptable, particularly if the other QA/QC samples (blanks and duplicates) did not fail. Re-sampling Candente conducted an extensive re-sampling program of historical pre-2004 drill hole data. Nine out of eleven historical holes were re-sampled. Only holes C73-001 and C73-005 were not re-sampled. C73-001 was twinned by C04-001, and C73-005 did not have significant copper grades. Sections of the old core were quartered and sent to Actlabs, Lima, for processing. Given the state of the legacy drill core after several moves, composite samples of up to 20 m were made within mineralization types and between fixed blocks to ensure proper metreage measurements. A comparison between the original and the Candente assays shows an acceptable correlation between the datasets. Based on this, all of the historical data were added to the final database, and the Candente assays from the re-sampling program were excluded because of the composite lengths. Twin Holes Candente drilled three pairs of twinned holes to verify grade uniformity at short distances. Two of the twin sets (holes C04-007 with C07-104 and C04-023 with C07-106) show similar average grades over the same depth intervals. The third twin set (C04-005 with C07-146) shows significantly higher average grades in the original hole from 2004 than in its twin drilled in 2007. This may indicate that a vertically oriented mineralized vein set was intercepted in one drill hole and not the other.
3.8.4
Databases
All date in the field are recorded in written form in field books, log books, sample sheets, logging forms or shipping forms. Various phases of record keeping are repeated in the subsequent step to confirm recorded values or numbers.
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All field data are entered into Excel tables either in the Caariaco camp or at the Candente Lima office. Errors in data entry picked up during the verification stage can be confirmed and corrected from filed data. Data from third parties such as laboratories or survey contractors are generally supplied in digital and printed form. These records are printed out and kept in binders for reference during data verification.
3.8.5
Sample Security
Sample security at the Caariaco project during the Candente drilling programs relied upon the remote nature of the site and the fact that the samples were always attended or locked at the sample dispatch facility. Sample collection and transportation have always been undertaken by company or laboratory personnel using company vehicles. Drill samples were picked up at site by a freight firm using a dedicated vehicle, and transported to the sample preparation facility. Pulps were transported by laboratory personnel to the appropriate analytical facility. Chain-of-custody procedures consisted of filling out sample submittal forms that were sent to the laboratory with sample shipments to ensure that all samples were received by the laboratory.
3.8.6
Sample Storage
Prior to the construction of an access road into camp, all core was stored on racks within secure storage facilities. In October 2007, all existing core was moved to a secure core storage facility in Chiclayo, close to Candentes regional offices, and thereafter core boxes were transported directly to the new core storage facility for detailed logging and permanent storage.
3.9
Comment on Sample Preparation, Analyses, and Security

The quality of the copper, gold, and silver analytical data is sufficiently reliable to support Mineral Resource estimation. Sample preparation, analysis, and security are performed in accordance with exploration best practices and industry standards, as follows: Geochemical sampling covered sufficient area, was adequately spaced to generate first-order geochemical anomalies, and thus was representative of first-pass exploration sampling. Drill sampling has been adequately spaced to first define, then infill, copper and gold anomalies to produce prospect-scale and deposit-scale drill data. Drill hole spacing varies with depth. Drill hole spacing in the central core of the deposit can be about 50 m and is 75 m x 75 m on average, due to drill pad location restrictions as a result of
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the topography. Drill hole spacing increases with depth as the number of holes decreases and holes deviate, and is wider on the edges of the deposit. Sample preparation for samples that support Mineral Resource estimation has followed a similar procedure since 2004. The preparation procedure is in line with industrystandard methods for coppergoldsilver deposits. Core from drill programs was analyzed by independent laboratories using industry-standard methods for copper, gold, and silver analysis. Limited information is available on the QA/QC employed for the earlier drill programs; however, twin drill holes confirm the grades and lithologies, and the core from the drill programs has been re-assayed, so that the data can be accepted for use in estimation. Typically, Candente drill programs included insertion of blank, duplicate, and SRM samples. The QA/QC program results do not indicate any problems with the analytical programs. Therefore, the copper, gold, and silver analyses from the core drilling are suitable for inclusion in Mineral Resource estimation. The collected data were subject to validation by built-in program triggers that automatically checked data on upload to the database. Verification is performed on all digitally collected data on upload to the main database, and includes checks on surveys, collar coordinates, lithology data, and assay data. The checks are appropriate and consistent with industry standards Sample security has relied upon the fact that the samples were always attended or locked in the on-site sample preparation facility. Chain-of-custody procedures consist of filling out sample submittal forms that are sent to the laboratory with sample shipments ensure that all samples are received by the laboratory. Current sample storage procedures and storage areas are consistent with industry standards.
3.10
Data Verification
A number of data verification programs and audits have been performed over the project history, primarily in support of technical reports.
3.10.1
Currie, 2004
During a site visit to support the completion of a technical report, Currie (2004) traversed the entire Caariaco Norte zone, examining numerous outcrops. Four samples were taken from outcrop material and trenches. Analyses indicated that the assays from the outcrops were consistent with the grades seen in drill holes.
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3.10.2
MineFill, 2007
MineFill performed detailed data verification for all available data from 1973 to 2006; only verified assay information was used in the estimation of mineral resources. Assay values were deemed verified when the original signed assay certificate or photocopy was present and the database reflected the assay certificate values accordingly. The sample numbers and assay values on the certificates were called out by an individual, as another individual located the corresponding sample numbers within the database and verified the assay values. The data were marked as verified, corrected, or unverified, accordingly. Of the five holes drilled by Ingemmet in 1973, only three were verified. The remaining 88 core holes in the 2007 database were completely verified and corrected for use in mineral resource estimates.
3.10.3
SRK, 2008
SRK undertook the following checks: detailed verification of assays using signed assay certificates assay verification from electronic laboratory files verification of down-hole survey data verification of drill hole positions in field comparison of Cu grades from re-sampling of historical drill holes to original data verification of Cu assay data from twinned drill holes comparison of Cu assays from different analytical procedures comparison of Cu assays from vertical versus inclined holes collection and independent analysis of check assay samples. SRK noted no errors or omissions in the data that were reviewed that could affect mineral resource estimation. SRK also selected a suite of 21 core samples for independent analysis at ALS Chemex, Vancouver, by four-acid digest and ICP-AES. Samples were chosen on the basis of their Cu grade (determined by Candente), lithology, mineralization type (presence of leachable Cu), and age of drill hole, in an effort to reflect the variability in the deposit and the consistency of analytical results over time. Samples comprised bags of pieces of quartered core samples taken over a 2 m interval in an attempt to ensure that the sampled interval coincided with a Candente sample interval. However, the very fractured, rubbly nature of the recovery of several intervals meant that the samples reflected a sample of gravel-sized core fragments, rather than split core. On the whole, SRKs comparisons of results with the original Candente assays yielded relatively good agreement. Graphic evaluation of the data indicated that approximately 65% and 90% of paired data fell below the 10% and 20% absolute relative difference lines. Significantly, there was no strong bias within the data, with points falling above and
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below the parity line. The data did not, in SRKs opinion, show an obvious correlation between the relative difference in lithology, mineralization, grade, or time of assay. SRK also concluded that the reasonable correlation between the results from its checks using a four-acid digestion technique with ICP finish and those obtained by Candente using a three-acid leach and AA finish further confirmed that the three-acid leach technique was suitable for the Caariaco mineralization.
3.10.4
AMEC, 2010
AMEC reviewed 1,930 copper, gold, silver, and molybdenum assays, or 5.6% of the analytical data in the database, as a verification of the data quality. No errors were noted and the analytical data were considered suitable to support Mineral Resource estimation.
3.10.5
Comment on Data Verification

Data verification for the project has been performed by external consultancies, primarily in support of technical reports. The data verification programs undertaken on the data collected from the project adequately support the geological interpretations and the analytical and database quality, and therefore support the use of the data in Mineral Resource estimation: No major sample biases were identified from the QA/QC programs that were completed. Historic drill core from predecessor companies was re-analyzed. The historical values were found to be sufficiently in accordance with the re-assay values that they were deemed acceptable for use. The collected sample data adequately reflect deposit dimensions, true widths of mineralization, and the style of the deposit. External reviews of the database have been undertaken in support technical reports, producing independent assessments of the database quality. No significant problems with the database, sampling protocols, flowsheets, check analysis program, or data storage were noted. Two generations of independent sampling supports the mineralization grades reported by Candente. Drill data are typically verified prior to Mineral Resource estimation by running a software program check.
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3.11
Mineral Resource Estimation

Mineral Resource estimates were prepared by AMEC employees David G. Thomas, P.Geo., Senior Resource Geologist, and Rodrigo Alves Marinho, Principal Geologist.
3.11.1
Database
The 2010 AMEC mineral resource estimate uses 15 additional core drill holes that were not considered in the November 2008 estimate because analytical results were not available to SRK at the previous estimate cutoff date. The estimation database consists of 225 core holes (67,485.06 m of core, of which 66,584.29 m have assay intervals) from the Ingemmet, Placer, Surcusal Peruana, and Candente drill programs (Table 3-8).
Table 3-8:
Campaign Ingemmet Placer Dome Billiton Candente 2004 Candente 2005 Candente 2006 Candente 2007 Candente 2008 Total*
Summary of Drill Data used for Caariaco Norte Resource Estimate

No. Holes* 3 3 3 12 24 46 109 25 225 Min. Length (m) 300.00 181.36 166.50 152.40 135.60 160.70 14.25 240.00 14.25 Max. Length (m) 300.00 350.00 197.20 300.12 501.40 594.25 766.60 704.10 766.60 Avg. Length (m) 300.00 284.64 185.23 220.62 307.83 347.47 263.26 400.11 298.65 Total (m) 900.00 853.91 555.70 2,647.38 7,387.87 15,983.55 28,935.60 10,221.05 67,485.06
*Metallurgical drill holes not included in this table
The drill database was provided by Candente as MS Excel spreadsheets with a cutoff date of 18 July 2010. AMEC imported the collar, survey, lithology, alteration, and assay data into GEMS (version 6.2.4), a commercial mining software program. GEMS validation routines were used to check for overlapping intervals, missing intervals, and consistent drill hole lengths between tables. No errors were reported.
3.11.2
Topography
Topographic contour limits were based on a photogrammetric interpretation undertaken on aerial photograph coverage provided by Horizons South America S.A.C. Aerial Mapping Services, which was accurate to 1 m (x, y, z). Errors noted in the digital terrain model (DTM) by SRK (2009) were surveyed using a Sokkia total station instrument. These points were used in conjunction with the original topographic data to minimize the differences found. Although AMEC did not find a constant elevation difference between the surveyed collars and the DTM, AMEC is of the opinion that further investigation is
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required for the next level of study to provide the precision necessary for earth-movement estimates.
3.11.3
Models
Candente provided interpretations of the lithological units summarized in Table 3-9 on north-south and east-west vertical sections spaced 100 m apart.
Table 3-9: Description of Lithological Units
Description Volcanic Crowded Feldspar Quartz Porphyry Biotite Feldspar Porphyry Coarse Quartz Porphyry Feldspar Porphyry Igneous Hydrothermal Breccia Tourmaline Breccia Igneous Polymictic Breccia
Lithological Unit VC CQFP BFP CQP FP IBXH TBX IBXP
As the lateral extent of the lithological interpretations are not fully defined by drill data in some areas of the deposit, AMEC expanded the interpretation beyond the limits of the available drill hole information to cover the block model extents. Although AMEC considers such extrapolation to be reasonable, AMEC recommends that additional drilling be performed to increase the level of confidence of the lithological interpretation in these areas. The drilling completed post-2008 was added to the interpretations. AMEC created bench polygons and extruded the bench plan polygons to the mid-point distance to the adjacent polygons to create lithological solids. Eastwest oriented, 100 m spaced vertical sections for alteration types and intensities were prepared by Candente. These were simplified by AMEC, and the resulting bench plan polygons were extended beyond the limits of the available drill hole information to cover the block model extents. AMEC recommends that a full review of the alteration interpretation be completed on vertical sections reconciled to bench plans for the next level of study. Estimation domains were defined following evaluation of statistical distributions of lithological and alteration units. AMEC created a total of seven domains for copper and four domains for gold and silver (Table 3-10).
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Table 3-10: Domain Definition

Element Copper Domain Code 10 20 30 40 50 60 70 Gold and Silver 10 20 30 40 Lithological Units VC, CQFP VC, CQFP BFP, IBXP BFP, IBXP CQP, IBXH, TBX CQP, IBXH, TBX FP VC, CQFP, CQP, FP VC, CQFP, CQP, FP BFP, IBXH, TBX, IBXP BFP, IBXH, TBX, IBXP Alteration Units Weak argillic All but weak argillic Weak argillic All but weak argillic Weak argillic All but weak argillic Weak argillic, propylitic, intermediate argillic, phyllic All but advanced argillic Advanced argillic All but advanced argillic Advanced argillic
These domains were flagged to blocks, back-tagged to composites, and used as the basis for matching samples and blocks during the estimation process. For the definition of arsenic domains, AMEC used a probabilistic approach considering an arsenic cutoff grade of 250 ppm as the threshold for low- and high-grade populations. AMEC defined a supergene-enriched domain that was considered only for the estimate of copper grades. The supergene layer in the Caariaco Norte deposit is thin and laterally discontinuous. Copper mineralization at Caariaco Norte is related to porphyry intrusions, breccias, and potassic, propylitic, phyllic, argillic, and advanced argillic alteration; however, the limits of mineralization in the deposit are not well known. AMEC recommends building a mineral zonation model for the next phase of study. A combination of lithology, alteration, and mineral zones should provide more robust support for the mineralized envelope and the definition of grade estimation domains.
3.11.4
Composites
Although the nominal sample length for assays is 2 m, sample lengths in the Caariaco Norte assay database range from 0.45 m to 100.3 m; such long intervals correspond to non-mineralized zones or to intervals of non-sampling. In order to normalize the weight of influence of each sample, AMEC regularized the assay intervals by compositing the drill hole data into 6 m lengths using no geological or domain boundaries. AMEC then backtagged the 6 m composites using the lithological and alteration solid shapes and assigned estimation domain codes.
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3.11.5
Exploratory Data Analysis

Exploratory data analysis comprised basic statistical evaluation of the 6 m composites for copper, gold, silver, and arsenic. Box plots indicated that copper displayed similar grade distributions in those domains that had no weak argillic alteration. The biotite-feldspar porphyry and polylithic breccia units (BFP and IBXp) are preferentially mineralized and have higher average grades for all metals. Figure 3-13 shows the copper box plots for each domain. Coefficient of variation (CV) values for copper are low, around and below 1, in all domains but domain 10, which consists of volcanic rocks (VC) and the crowded quartz-feldspar porphyry (CQFP), where the CV is 1.5 for uncapped copper composite values. Average gold grades are very low (below 0.1) in all domains, but box plots indicate that the combination of biotite feldspar porphyry (BFP) and the different types of breccia (IBxP, TBx, and IBxH) host most of the higher-grade gold mineralization where such mineralization is associated with any alteration type other than advanced argillic. All domains have low CV values for gold (less than 2), which confirms the low variability of the gold grades. AMEC used for the same domains for silver as defined for gold because of their good correlation (Figure 3-14). Silver displays similar average grades and grade ranges to gold. A higher spread of silver grade ranges was observed in domain 10. From the analysis of cumulative distribution plots, AMEC defined a threshold of 250 ppm As for low- and high-grade arsenic populations relative to this deposit. By splitting the data, AMEC reduced the global CV from 1.7 to 0.7 and 1.1 for low- and high-grade samples, respectively. Arsenic values (>400 ppm) are concentrated in the northwest and south-centre parts of the deposit, and AMEC could not clearly define domains based on lithology, alteration, or a combination of both. AMEC recommends that once the mineralogical model has been constructed, the arsenic distribution should be evaluated along the interpreted units. Contact analyses were completed for copper (Table 3-11) and gold (Table 3-12) composite values, and AMEC defined soft, firm, and hard boundaries from this analysis. To represent the firm contacts, AMEC shared samples only during the first estimation pass.
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Figure 3-13: Box Plot for Copper (%) by Domain
Figure 3-14: Box Plots for Silver (%) by Domains
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Table 3-11: Contact Matrix Defined for Copper Domains

Domains 10 20 30 40 50 60 70 10 0 1 0 1 1 1 1 20 1 0 21 0 0 0 1 30 0 21 0 1 21 1 21 40 1 0 1 0 1 0 1 50 1 0 21 1 0 1 21 60 1 0 1 0 1 0 1 70 1 1 21 1 21 1 0
Note: 0 = soft; 1 = hard; 21 = firm
Table 3-12: Contact Matrix Defined for Gold Domains

Domains 10 20 30 40 10 0 21 1 1 20 21 0 1 21 30 1 1 0 1 40 1 21 1 0
Note: 0 = soft; 1 = hard; 21 = firm
3.11.6
Variography
AMEC used Sage2001 software to construct down-hole and directional correlograms for the estimation domains for copper, gold, silver, and arsenic. For arsenic, AMEC also created correlograms for the 250 ppm As indicator threshold and subsequent grade correlograms for low- and high-grade domains. Domains that displayed soft boundaries were grouped. For copper and gold, AMEC used spherical models to fit the experimental correlograms. A combination of exponential and spherical models was used for silver, depending on domain.
3.11.7
Grade Capping
AMEC evaluated probability plots to define grade outliers for copper, gold, and silver by estimation domains. Outlier values typically occur in the upper 1% of the distribution. Copper and gold values were capped at the thresholds defined. For silver, outlier values were controlled by using a restricted search ellipse with a radius of 25 m x 25 m x 15 m during grade estimation. AMEC did not restrict extremely high arsenic values. The grade thresholds for the different element outliers are shown in Table 3-13.
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Table 3-13: Outlier Thresholds for Copper, Gold, and Silver

Element Copper (%) Domain Code 10 20 30 40 50 60 70 10 20 30 40 10 20 30 40 Threshold 1.10 2.00 2.50 2.50 1.10 1.20 1.10 130 530 12 12 17 17
Gold (ppb)
Silver (ppm)
3.11.8
Estimation Methodology
The block model consists of regular blocks (15 m x 15 m x 15 m) with no rotation. The block size was chosen such that geological contacts are reasonably well reflected and to support an open pit mining scenario. AMEC estimated copper, gold, silver, and arsenic grades by estimation domains using ordinary kriging (OK) interpolation for the majority of domains. Inverse distance weighting to the second power (ID2) was used to interpolate Au and Ag in domains 20 and 40 where variography was not considered sufficiently robust. Estimation domains are shown in Table 3-14. The process included the following: Grade estimation was completed in three passes. Sample sharing was based upon the matrix determined from contact profiles. Search orientations for all domains were based upon variogram orientations. A minimum of 3 to 11 and a maximum of 9 to 15 drill hole composites were required for estimation; this varied by element and estimation pass. The estimate of arsenic grades was divided into low- and high-grade populations and the final grade calculated by weighting grades by the respective probability, as shown in the following formula:
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As_final grade = As_hg * Prob_hg + As_lg * Prob_lg

where As_hg = estimated arsenic grade from high-grade samples As_lg = estimated arsenic grade from low-grade samples Prob_hg = probability of block being high grade Prob_lg = probability of block being low grade
Table 3-14: Estimation Parameters for All Elements

Search Ellipse Rotation () Element Ag Domain 10 & 20 Pass 1 2 3 30 & 40 1 2 3 Au 10 & 20 1 2 3 30 & 40 1 2 3 Cu 10 & 30 1 2 3 20, 40, 50 & 60 70 1 2 3 1 2 3 As High and Low 1 2 3 Z -57 -57 -57 50 50 50 -17 -17 -17 15 15 15 -93 -93 -93 -87 -87 -87 -25 -25 -25 44 44 44 Y 25 25 25 25 25 25 -10 -10 -10 90 90 90 -30 -30 -30 -11 -11 -11 0 0 0 -20 -20 -20 Z 6 6 6 -128 -128 -128 -16 -16 -16 -6 -6 -6 92 92 92 63 63 63 0 0 0 65 65 65 X 100 200 400 120 240 420 65 130 195 130 260 450 100 200 300 65 190 310 50 100 200 50 100 240 Ranges (m) Y 50 100 200 65 130 350 65 130 195 125 250 450 120 240 360 45 135 225 75 150 300 20 40 80 Z 75 150 300 35 70 280 90 180 270 60 120 250 80 160 240 90 270 450 100 200 400 100 200 400 Min. No. Comp 5 5 3 5 5 3 5 5 3 5 5 3 11 6 3 11 6 3 11 6 3 5 5 3 Max. No. Comp 15 15 12 15 15 12 15 15 12 15 15 12 15 15 9 15 15 12 15 15 12 15 15 12 Max. Comp. /Hole 3 3 3 3 3 3 3 3 3 3 3 3 5 5 4 5 5 4 5 5 4 3 3 3
3.11.9
Density
AMEC assigned density values to blocks based upon the lithological codes. In AMECs opinion, these density values are reasonable for use in mineral resource estimation at this preliminary level of study, but recommends executing a continuous program of specific gravity determinations from core samples using preferably the same laboratory and
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determination procedures. Section 3.7.5.
Density values used in the estimate are discussed in
3.11.10
Model Validation
AMEC validated the Caariaco Norte block model to ensure appropriate honouring of the input data. A nearest-neighbour (NN) model was created to validate the OK model. Detailed visual inspection of block grade versus composited data was completed in section and plan view. The visual inspection of block grade versus composited data showed a good reproduction of the data by the model. Figure 3-15 illustrates a vertical section from the modelling. There is good agreement between the estimated grades and composite grades. Only blocks classified as Measured or Indicated are plotted in this figure. A comparison between the OK and NN estimates was completed to check for global bias in the copper, gold, silver, and arsenic grade estimates. Differences were within acceptable levels and no global biases were noted in the estimates (Table 3-15).
Figure 3-15: Vertical Section (9,326,500) with Blocks and 15 m Composites Grades for Copper (Corridor of 100 m). Block Color Ranges are for Cu in %
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Table 3-15: Summary of Statistics Comparing OK and NN Estimates

Model OK NN OK NN OK NN OK NN Element Cu (%) Cu (%) Au (ppb) Au (ppb) Ag (ppm) Ag (ppm) As (ppm) As (ppm) Domain All All All All All All All All Min. 0.00 0.01 0.3 1.5 0.2 0.1 2.6 1.0 Max. 1.81 1.89 274.5 456.0 39.6 236.7 2,946.7 2,963.9 Mean 0.37 0.36 59.5 59.7 1.6 1.6 236.2 234.9 CV 0.43 0.58 0.53 0.70 0.50 1.30 0.90 1.20 Diff. OK/NN 1.6% -0.3% 0.0% 0.6%
Note: CV = coefficient of variation
Swath plot validation compared average grades from OK and NN models along different directions. Except in areas where drilling is currently limited, the swath plots indicated good agreement for all variables. The degree of smoothing due to kriging was assessed by considering change-of-support correction using Hermetian polynomials. AMEC considered blocks from all copper domains; the results show a smoothing of 4% in copper grades but 7% more tonnes above the 0.2% Cu cutoff, resulting in a difference of only 1% in contained metal. The kriging smoothing is within acceptable ranges.
3.11.11
Mineral Resource Classification

AMEC used the following criteria to pre-classify blocks into categories as: Measured mineral resources: Composites from a minimum of three drill holes within 75 m radius from a block centroid, or samples from two drill holes with the closest sample within 25 m of the block centroid. Indicated mineral resources: Samples from a minimum of two drill holes within 110 m distance of the block centroid. Blocks that were not classified as Measured or Indicated but had a composite within 135 m from the block centroid were classified as Inferred. Remaining blocks were not classified. AMEC used a semi-automated process to smooth the initial classification and avoid islands or isolated blocks of different categories.
3.12
Assessment of Reasonable Prospects of Economic Extraction

AMEC assessed the classified blocks for reasonable prospects of economic extraction by applying preliminary economics for potential open pit mining methods. The assessment does not represent an economic analysis of the deposit, but was used to determine reasonable assumptions for the purpose of determining the mineral resource. Mining and
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process costs, as well as process recoveries, were defined from ongoing AMEC studies for the project. A large bulk mining open pit operation is envisioned for Caariaco Norte, featuring large rope shovels working on 15 m benches. A single pit with internal phases is projected to provide mill feed at a rate of 95,000 t/d. AMEC defined a pit shell, optimized using Whittle (version 4.3) software, based on the parameters listed in Table 3-16. The metal prices represent long-term estimates for mineral resources. The metallurgical recovery for copper is variable depending on the grade range and is shown in Table 3-17.
Table 3-16: Optimization Parameters for Resource Pit Shell
Mining Costs Waste Mining Reference Cost Mining Sustaining Capex Allowance Total Reference Mining Costs Process +Tailings + G&A Cost Mill Sustaining Capex Allowance Closure Costs Allocation Total Ore Based Costs Cu Price Au Price Ag Price Selling Cost Cu Recovery Au Recovery Ag Recovery Overall Pit Slope(s) Unit US$/t mined US$/t mined US$/t mined US$/t milled US$/t milled US$/t milled US$/t milled US$/lb US$/oz US$/oz US$/lb % % % Degree Value 1.11 0.16 1.27 3.32 0.28 0.10 3.70 2.50 1,035.00 17.25 0.40 variable by grade, refer to Table 3-17 55 50 38
Note: The mining cost increases incrementally with height and depth ($0.015 per 15 m bench above 2,800 m, $0.03 per 15 m bench below 2,800 m). No dilution or mining loss adjustments were applied. The overall pit slope assumption is based on limited geotechnical data and will likely change when results from the planned geotechnical drilling become available.
Table 3-17: Copper Process Recoveries

% Cu Head Grade 0.60 0.50 0.40 0.30 0.20 0.15 0.10 Recovery (%) 93.1 91.8 89.7 86.3 79.4 72.5 58.8
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AMEC defined a marginal cutoff of 0.14% Cu (see details in Table 3-18) and selected a base case 0.2% Cu cutoff for mineral resource reporting based on the operating cutoffs of other comparable copper mines in South America.
Table 3-18: Marginal Cutoff Calculation
Parameters Processing Cost (US$/t) Recovery (%) Price (US$/lb) Selling Cost (US$/lb) Cutoff Cu (%) Value 3.70 58.8 2.5 0.40 0.14
3.13
Mineral Resource Statement

Mineral Resources for the project were classified under the 2005 CIM Definition Standards for Mineral Resources and Mineral Reserves by applying a cutoff grade that incorporated mining and recovery parameters, and were constrained to a pit shell based on commodity prices. Mineral Resources are tabulated in Table 3-19. The Qualified Person for the Mineral Resource estimate is David Thomas, P.Geo. Mineral resources are reported at a longterm copper price of US$2.50/lb, a gold price of US$1,035/oz, and a silver price of US$17.25/oz, and have an effective date of 8 November 2010.
Note:
1 2 3
Tonnage Mt 406.6 596.5 1,003.0 293.3
Cu % 0.44 0.38 0.40 0.33
Au g/t 0.07 0.06 0.06 0.05
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The numbers reported in Table 3-19 differ from those in the Candente press release of 1 November 2010. The table incorporates additional Ag and As assay results from ICP tests for some holes drilled during the 2008 campaign for which final assay results were not available for the full suite of elements at the time of the press release. The differences relate to the contained metal tonnages in this table and the press release, and are not material. The tonnes and grades are the same. The sensitivity of the Mineral Resource to a reduction or increase in copper cutoff grades is shown in Table 3-20, with the base case highlighted.
Table 3-20: Mineral Resource Statement for Caariaco Norte at Various Cutoffs (David Thomas P. Geo., Effective Date 8 November 2010)
Grade Cutoff Cu (%) Measured 0.14 0.2* 0.3 Indicated 0.14 0.2* 0.3 Measured + Indicated 0.14 0.2* 0.3 Inferred 0.14 0.2* 0.3 419.4 293.3 157.7 0.28 0.33 0.41 0.04 0.05 0.06 1.3 1.5 1.7 2.634 2.165 1.433 0.561 0.448 0.281 17.002 13.547 8.539 1,106.2 1,003.0 752.4 0.38 0.40 0.45 0.06 0.06 0.07 1.6 1.7 1.8 9.332 8.941 7.533 2.152 2.039 1.696 58.592 55.059 44.534 680.7 596.5 414.3 0.35 0.38 0.43 0.05 0.06 0.06 1.5 1.6 1.7 5.283 4.964 3.945 1.166 1.081 0.843 33.124 30.403 23.135 425.6 406.6 338.1 0.43 0.44 0.48 0.07 0.07 0.08 1.9 1.9 2.0 4.049 3.977 3.588 0.986 0.958 0.853 25.467 24.656 21.399 Tonnage Mt Cu % Au g/t Ag g/t Copper (Blb) Contained Metal Gold (Moz) Silver (Moz)
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3.13.1
Comment on Mineral Resource Estimation

Mineral Resources for the project were estimated on the basis of core drill data to industry best practices and conform to the requirements of CIM (2005). Areas of uncertainty that could materially affect the Mineral Resource estimates include: long-term commodity price assumptions long-term exchange rate assumptions operating and capital assumptions used metal recovery assumptions used. Any changes to the slope angle of the pit wall resulting from the availability of more-detailed geotechnical information would affect the pit shell used to constrain the mineral resources. Geotechnical designs for the open pit may change when results from the planned geotechnical drill holes are available. Geotechnical data are required to allow the estimation of Mineral Reserves.
3.14
References
Berger, R.B., Ayuso, R.A., Wynn, J.C., and Seal, R.R., 2008: Preliminary Model of Porphyry Copper Deposits: U.S. Geological Survey Open-File Report 20081321, 55 p. Bonson, C., Nowak, M., Doerksen, G., Johnston, A., and van Egmond, R., 2008: Technical Report Caariaco Norte Project, Department of Lambayeque, Per: technical report prepared by SRK Consulting Ltd for Candente Resource Corp., effective date 11 July 2008 Bonson, C., Campbell, R., Bender, M., Doerksen, G., Johnston, A., Meyer, T., Nowak, M., Pilotto, D., Van Egmond, R., Critikos, P., Ostolaza, R., and Huanani, A., 2009: Revised Preliminary Economic Assessment Technical Report, Caariaco Norte Project, Per: technical report prepared by SRK Consulting Ltd for Candente Resource Corp., effective date 30 November 2008 Canadian Institute of Mining, Metallurgy and Petroleum (CIM), 2000: CIM Standards for Mineral Resources and Mineral Reserves, Definitions and Guidelines: Canadian Institute of Mining, Metallurgy and Petroleum, August, 2000 http://www.jogmec.go.jp/mric_web/tani/cimstandard.pdf Canadian Institute of Mining, Metallurgy and Petroleum (CIM), 2003: Estimation of Mineral Resources and Mineral Reserves, Best Practice Guidelines: Canadian Institute of Mining, Metallurgy and Petroleum, 23 November 2003, http://www.cim.org/committees/estimation2003.pdf. Canadian Institute of Mining, Metallurgy and Petroleum (CIM), 2005: CIM Standards for Mineral Resources and Mineral Reserves, Definitions and Guidelines: Canadian
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Institute of Mining, Metallurgy and Petroleum, December 2005, http://www.cim.org/committees/CIMDefStds_Dec11_05.pdf. Collins, J., McCrea, J., and Rokosh, J., 2006: Caariaco Copper Project, Per, Preliminary Assessment and Economic Evaluation Report: technical report prepared by Merit Consultants for Candente Resource Corp., effective date 28 June 2006 Casselman, M.J., Lutynski, P., Van Egmont, R., Cayo, E. and Bernuy, E., 2008: Drill Holes For Metallurgical Characterization of the Canariaco Norte Deposit, 2008 Currie, J.A., 2004: Technical Report On The Caariaco Copper Porphyry Prospect Department Of Lambayeque Northern Per Latitude 6 05 S Longitude 70 17 E, technical report prepared for Candente Resource Corp., August 2004 Huangui, F., Freeze, J.C., and Coder, J.M., 2002: Geological Report On The Caariaco Copper-Gold Porphyry Prospect Department Of Lambayeque Northwest Per NTS 13-E 70 17 E 6 05 S: technical report prepared for Candente Resource Corp., effective date 9 August 2002 Journel, A., G., and Huijbregts, Ch., J., 1978: Chapter 5: Selection and Estimation of Reserves: in Mining Geostatistics p. 472-490, Blackburn Press, 600 p. Mathur,R: Cu Isotope Measurements Used to Identify Primary and Secondary Cu Minerals from the Porphyry Copper Deposit, Canariaco Norte McCrea, J.A., 2005: Technical Report on the Caariaco Copper Porphyry Prospect Department of Lambayeque Northwest Per: technical report prepared for Candente Resource Corp., effective date 22 April 2005 McCrea, J.A., 2006: Technical Report on the Caariaco Copper Porphyry Prospect Department of Lambayeque Northwest Per: technical report prepared for Candente Resource Corp., effective date 27 April 2006 Murphy, F., 2004: Structural Analysis Canariaco Property, Per Sillitoe, R.H., 2000: Role of Gold-Rich Porphyry Models in Exploration: in S.G. Hagerman and P.H. Brown, eds., Gold in 2000, Reviews, Economic Geology, v. 13, pp. 311346 Sillitoe, R.H., 1999: Comments on Geology and Potential of the Caariaco Porphyry Copper Prospect, Northern Per: Unpublished internal geological report for prepared for Billiton Exploration and Mining Per B.V., 10 p. Sillitoe, R.H., 2010: Porphyry Copper Systems: Economic Geology, v. 105, pp. 3-41 Sinclair, W.D., 2006: Consolidation and Synthesis of Mineral Deposits Knowledge Porphyry Deposits: report posted to Natural Resources Canada website 30 January 2006, 14 p. <http://gsc.nrcan.gc.ca/mindep/synth_dep/porph/index_e.php>, accessed 28 August, 2010
Page 3-61
Stone, D.M.R., Godden, S., Van Egmond, R., and Tosney, J.R., 2007: Updated Technical Report and Preliminary Economic Assessment on the Caariaco Nort Porphyry Copper Project Starter Pit Option: technical report prepared by Minefill Services Inc. for Candente Resource Corp., effective date 18 April 2007 Wilson, A.J., 1999: Caariaco Project, Lambayeque, Northern Per: Unpublished internal geologic report prepared for Billiton Exploration and Mining Per B.V Van Egmond, R., Bernuy, E., Cayo, E., Casselman, M.J., 2008: Updated Surface Geology Map for Canariaco Norte
Page 3-62
CONTENTS 4.0 MINE PLAN AND PRODUCTION ...........................................................................4-1 4.1 Summary.....................................................................................................4-1 4.2 Mining Method ............................................................................................4-1 4.3 Design Criteria ............................................................................................4-1 4.4 Block Model NSR and Dilution Calculations ................................................4-2 4.5 Pit Geotechnical Design Recommendations................................................4-3 4.6 Pit Hydrogeology .........................................................................................4-5 4.7 Pit Optimization ...........................................................................................4-8 4.7.1 Whittle Block Model......................................................................4-8 4.7.2 Mining Costs ....................................................................................4-8 4.7.3 Processing Costs.............................................................................4-9 4.7.4 Metal Price and Recovery ..............................................................4-10 4.7.5 Results ..........................................................................................4-10 4.7.6 Sensitivity Analysis ........................................................................4-10 4.8 Mine Production Schedule ........................................................................4-13 4.8.1 LG Shells and Cutoff Selection ......................................................4-13 4.8.2 Schedule Results...........................................................................4-14 4.9 Waste Dump and Access Roads ...............................................................4-23 4.10 Mine Equipment Fleet ...............................................................................4-24
TABLES
Table 4-1: Calculation Parameters .................................................................................................. 4-2 Table 4-2: Copper Recoveries ........................................................................................................ 4-3 Table 4-3: Design Sector Slope Recommendations ....................................................................... 4-5 Table 4-4: Packer Test Data from GWI, 2008 ................................................................................. 4-6 Table 4-5: Rock Type Attributes ...................................................................................................... 4-8 Table 4-6: Reference Mine Operating Costs by Unit Operation ..................................................... 4-9 Table 4-7: Process Costs ................................................................................................................ 4-9 Table 4-8: Base Case Pit Optimization Volumetric Results .......................................................... 4-11 Table 4-9: LG Sensitivity Optimization Results ............................................................................. 4-13 Table 4-10: Mineral Resources within Pit Phases .......................................................................... 4-16 Table 4-11: LOM Production Schedule ........................................................................................... 4-16 Table 4-12: Total Material Mined (kt) by Phase ................................................................................ 4-19 Table 4-13: Mine Equipment Requirements ................................................................................... 4-25 Table 4-14: Primary Equipment Productivities ................................................................................ 4-26
TOC i
FIGURES
Figure 4-1: Figure 4-2: Figure 4-3: Figure 4-4: Figure 4-5: Figure 4-6: Figure 4-7: Figure 4-8: Figure 4-9: Figure 4-10: Figure 4-11: Figure 4-12: Figure 4-13: Figure 4-14: Figure 4-15: Geotechnical Design Sectors......................................................................................... 4-4 Horizontal Drain Design ................................................................................................. 4-7 Estimated Pit Inflows through Time ............................................................................... 4-7 Pit-by-Pit Graph Size vs. Value Analysis .................................................................. 4-12 Selected LG Shells identified in Pit-by-Pit Graph ........................................................ 4-15 3D View of Pit Shapes, looking Northeast ................................................................... 4-15 Material Movement by Period ...................................................................................... 4-18 Mill Feed Characteristics by Year ................................................................................ 4-18 Pit Development at End of Year -1 (pre-strip) .............................................................. 4-20 Pit Development at End of Year 1 ............................................................................... 4-20 Pit Development at End of Year 4 ............................................................................... 4-21 Pit Development at End of Year 8 ............................................................................... 4-21 Pit Development at End of Year 14 ............................................................................. 4-22 Pit Development at End of Year 18 ............................................................................. 4-22 Waste Rock Management Facility and Initial Road Alignments .................................. 4-24
TOC ii
4.0
4.1
MINE PLAN AND PRODUCTION

Summary
This section outlines the parameters and procedures used to design the open pit mine, estimate the in-pit mineral resource, and establish a practical mining schedule for a nominal process plant throughput of 34.7 Mt/a, or 95,000 t/d. The mine plan is based on diluted Measured and Indicated mineral resources contained in a Lerchs-Grossmann (LG) optimized pit shell generated at metal prices of $2.25/lb Cu, $930/oz Au, and $15/oz Ag. This section also reviews the open pit equipment requirements, key consumables, and labour requirements. The estimated geologic resource, as described in Section 3 of this document, is the basis for the mine design and production schedule. The mine plan generates a total of 728.2 Mt of process plant feed and 713.5 Mt of waste at a strip ratio of 0.98:1 over a mine operating life of 22 years. Conventional, large-scale, bulk mining methods will be used to develop a single pit, with the peak mine production rate of 200 kt/d being achieved with a mine fleet that includes two rope shovels, one large front-end loader, and 21 haul trucks. At the time of this report, geotechnical information from the planned site investigations for prefeasibility level slope design recommendations for the mine design was still pending. The mine plan presented herein is therefore limited to a preliminary assessment level of accuracy and will be updated to prefeasibility level upon receipt of the necessary geotechnical information.
4.2
Mining Method
Large-scale conventional bulk open pit mining has been selected for Caariaco, featuring 311 mm diameter blasthole drills, 43 m3 rope shovels, and 290 tonne haul trucks working on 15 m benches. A single pit with internal phases will provide process feed at a rate of 95,000 t/d. Selection of the throughput rate was based on an initial trade-off study performed in June 2010; this study is included in Appendix A. A follow-up analysis in September 2010, incorporating the latest available metallurgical test results and the updated AMEC resource model, resulted in the selection of a feed rate of 95,000 t/d.
4.3
Design Criteria
The design criteria for the study were developed by AMEC with input from Candente. These include metal prices, recoveries, smelter terms, shipping costs, royalties, and other
Page 4-1
physical parameters. Key items are presented as appropriate in the following sections. The complete design criteria checklist is included in Appendix C.
4.4
Block Model NSR and Dilution Calculations

Revenue is generated from the sale of copper concentrates, which contain payable coproducts of gold and silver. Copper metal recoveries are variable with head grade. To capture the multi-element and variable recovery complexity, Net Smelter Return (NSR) values were calculated for cutoff application and block valuation during pit optimization. The NSR parameters are shown in Table 4-1.
Table 4-1:
Parameter Metal Prices Cu Au Ag Process Recoveries Cu Au Ag Metal Deductions Cu Au Ag Percentage Payable in Metals Cu Payable Au Payable Ag Payable Refining Charges in Metals Cu Refining Charge Au Refining Charge Ag Refining Charge Concentrate Costs and Penalties Concentrate Transport to Port Port Costs Insurance Ocean Freight Concentrate Treatment Charges Royalty Royalties Other Parameters Moisture % 6.50 % g/t g/t % % % US$/payable lb US$/payable oz US$/payable oz US$/wmt US$/wmt US$/wmt US$/wmt US$/wmt % 1.0 1.00 30.00 96.50 90.00 90.00 0.075 5.00 0.40 21.00 11.21 2.50 37.00 75.00 2.50
Calculation Parameters
Unit US$/lb US$/oz US$/oz % % % Value 2.25 930.00 15.00 Variable see Table 4-2 55.00 50.00
Page 4-2
Copper recovery was modeled as variable based on copper head grades. The recoveries applied to copper are shown in Table 4-2.
Table 4-2: Copper Recoveries
Copper Head Grades (%) 0.100 to 0.125 0.125 to 0.175 0.175 to 0.250 0.250 to 0.350 0.350 to 0.450 0.450 to 0.550 0.550 to 100.0 Recovery (%) 58.8 72.5 79.4 86.3 89.7 91.8 93.1
Visual inspection of the block model shows good continuity of the ore zones with general gradational changes across economic cutoff boundaries. Ore loss and dilution adjustments were performed by applying a mixing zone across economic boundaries. No additional ore loss was applied. The NSR calculations and dilution/mining loss adjustments were performed using custom scripts in MineSight. This procedure used three scripts to: calculate the NSR from the pre-diluted grades adjust the dilution/mining losses across economic boundaries defined by the marginal NSR cutoff, with Inferred material being treated as waste. A second set of block model grade items (CuDil, AuDil, AgDil, AsDil) was populated. calculate the diluted NSR (NSRD) from the above diluted grades. The NSRD was then used for pit optimization and cutoff application for mine planning. A memo providing a detailed description of the process and the calculation scripts is included in Appendix C. The resulting NSR values are different from those presented in the financial model due to simplifications required for block-by-block calculations.
4.5
Pit Geotechnical Design Recommendations

A site investigation program has been proposed and planned to support geotechnical pit slope design recommendations at a prefeasibility level. The data from the site investigations are considered to be key in understanding the joint patterns and geotechnical complexities associated with the highwall (approximately 925 m high) and the sensitivity of the highwall slope to pit depressurization and rock mass strength.
Page 4-3
Candente therefore requested that AMEC provide credible slope angles to be used to develop preliminary LG pit shapes. A geotechnical analysis was performed, based on the following: site visits by AMEC geotechnical engineers to inspect the core additional testing of selected core samples review of the existing geotechnical and hydrogeological database, which includes a preliminary economic assessment (PEA) issued by SRK Consulting in November 2008 and a preliminary geotechnical report completed by Minefill Services in May 2007. A memo documenting this analysis is provided in Appendix C. The geotechnical analysis considered three design sectors, as shown in Figure 4-1. The recommended slope parameters for each sector are shown in Table 4-3. For the purposes of pit optimization, sectors 1 and 2 were combined and flattened to account for ramp and geotechnical berm locations, resulting in overall slopes of 35 and 44 for Sectors 1+2 and 3, respectively.
Figure 4-1: Geotechnical Design Sectors
Page 4-4
Table 4-3:
Design Sector 1 2 3
Design Sector Slope Recommendations

Geotechnical Berm Inter-ramp Angle (degrees) 38 38 48 Width (m) 50 50 50 Vertical Interval (m) 250 250 250 Overall Slope Max Slope Angle (degrees) 35 35 45 Max Slope Height (m) 925 925 500
4.6
Pit Hydrogeology
Hydrogeologic information from numerous packer tests completed in the pit area was assessed; the data are shown in Table 4-4. Several of the packer test results indicate hydraulic conductivities greater than 1 x 10-6 m/s, some from relatively deep test intervals. While the test locations and subsequent test results do not originate in the pit walls, the testing does indicate that permeable features such as faults or fracture zones are present at depth. Pit dewatering will therefore be undertaken by a combination of vertical dewatering wells, specifically constructed in these permeable features, and horizontal drains in areas where the hydraulic conductivities are lower than about 1 x 10-7 m/s. To determine potential dewatering requirements, the bedrock has been divided into three regimes. The upper regime, generally less than 100 m deep, could be dewatered with vertical wells if the hydraulic conductivities were high enough; this should be confirmed moving into the next phase of the study. The intermediate regime, at 100 m to 300 m depth, is generally of low permeability and will be depressurized with horizontal drains. In this case there is evidence that higher-permeability structures are present down to 300 m, indicating that vertical wells may be required in these areas at depth within the pit. The deeper regime, below 300 m, will be depressurized by horizontal drains. Typical drain designs are shown in Figure 4-2. Modelled estimates of pit inflows through time are shown in Figure 4-3. These estimates are based on a simplistic 2D model using an arbitrary excavation staging taken to 15 years and include no specific perimeter dewatering system. The modelling method is described in a memo dated 25 October 2010 in Appendix C. The analysis assumes uniform hydraulic conductivity, no structures with higher-permeability units, and that all water reports to the pit walls and from there to the sump(s). No dewatering wells are included in this preliminary design; if they were, then the model rate of inflow would reduce, at least partially. Given the degree of uncertainty at this stage, however, both horizontal and vertical wells have been allowed for in the capital cost estimate. The model and water balance will be refined on receipt of additional hydrogeologic information from the planned drilling program, and the inflow predictions will be extended to the 22-year mine life during further investigations during the next phase of study.
Page 4-5
Table 4-4:
Packer Test Data from GWI, 2008

Test Interval Depth (mbgs) Average Vertical Depth (mbgs) 58.50 94.54 133.60 202.50 73.96 105.99 41.17 76.25 43.35 91.70 135.85 102.35 184.65 102.19 230.15 133.25 224.75 73.40 146.15 205.60 40.30 91.10 147.80 220.27 281.99 41.92 105.92 182.12 245.39 47.28 86.93 146.34 188.27 230.19 265.25 223.33 271.34 38.91 74.70 120.08 268.75 80.84 35.23 Test Section Length (m) 3.00 24.32 31.50 45.00 28.88 31.92 21.30 30.40 20.00 30.00 30.00 30.00 30.00 39.52 30.40 20.00 19.91 30.00 40.00 40.00 20.00 20.00 24.40 34.96 39.52 19.76 19.76 19.76 39.62 33.44 33.44 39.52 34.96 39.52 30.40 41.04 39.52 28.88 30.40 41.04 38.00 39.52 29.75
Boring ID DDH-C07_145
Test 1 2 3 4 1 2 1 2 1 2 3 1 2 1 2 1 2 1 2 3 1 2 3 4 5 1 2 3 4 1 2 3 4 5 6 1 2 1 2 3 4 1 1
Top 57.00 82.38 117.85 180.00 59.52 90.03 30.52 61.05 33.35 76.70 120.85 87.35 169.65 82.43 214.95 123.25 214.79 58.40 126.15 185.60 30.30 81.10 135.60 202.79 262.23 32.04 96.04 172.24 225.58 30.56 70.21 126.58 170.79 210.43 250.05 202.81 251.58 24.47 59.50 99.56 249.75 61.08 20.35
Bottom 60 106.70 149.35 225.00 88.40 121.95 51.82 91.45 53.35 106.70 150.85 117.35 199.65 121.95 245.35 143.25 234.70 88.40 166.15 225.60 50.30 101.10 160.00 237.75 301.75 51.80 115.80 192.00 265.20 64.00 103.65 166.10 205.75 249.95 280.45 243.85 291.10 53.35 89.90 140.60 287.75 100.60 50.10
K (m/s) 3.5E-06 8.1E-07 3.4E-07 1.5E-07 7.0E-07 4.0E-07 4.2E-07 3.0E-06 1.6E-07 3.3E-06 1.1E-07 1.2E-06 2.4E-07 3.4E-08 4.1E-08 6.1E-08 4.1E-10 5.9E-08 1.1E-06 3.9E-08 9.7E-07 1.3E-06 2.8E-07 9.8E-08 4.9E-08 1.1E-06 9.2E-07 5.1E-06 1.0E-08 9.4E-07 5.7E-06 1.0E-05 1.4E-05 1.6E-07 6.2E-07 1.6E-07 2.6E-06 7.6E-07 3.0E-07 2.9E-07 2.0E-07 3.9E-07 1.2E-06
Lithology Volcanic Rock Volcanic Rock Volcanic Rock Volcanic Rock Volcanic Rock Intrusive Rock Hydrothermal Breccia Hydrothermal Breccia Intrusive Rock Intrusive Rock Intrusive Rock Intrusive Rock Hydrothermal Breccia Intrusive Rock Volcanic Rock Hydrothermal Breccia Hydrothermal Breccia Intrusive Rock Intrusive Rock Intrusive Rock Hydrothermal Breccia Hydrothermal Breccia Hydrothermal Breccia Hydrothermal Breccia Hydrothermal Breccia Intrusive Rock Intrusive Rock Intrusive Rock Intrusive Rock Hydrothermal Breccia Hydrothermal Breccia Hydrothermal Breccia Hydrothermal Breccia Hydrothermal Breccia Hydrothermal Breccia Intrusive Rock Intrusive Rock Volcanic Rock Volcanic Rock Intrusive Rock Volcanic Rock Volcanic Rock Volcanic Rock
DDH~C07~147 DDH~C07~148 DDH~C07~149
DDH~C07~150 DDH~C07~152 DDH~C07~154 DDH~C07~155
DDH~C07~156
DDH~C07~157
DDH~C07~158
DDH~C07~159 DDH~C07~160
DDH~C07~162 DDH~C07~164
Note: mbgs = metres below ground surface
Page 4-6
Figure 4-2:
Horizontal Drain Design
Figure 4-3:
Estimated Pit Inflows through Time
Note: Graph illustrates inflows based on a 2D model and does not incorporate dewatering systems.
Page 4-7
4.7
4.7.1
Pit Optimization
Whittle Block Model
The mining block model described in Section 4.4 was imported into Whittle for LG pit shell optimization. The resources captured in Whittle were verified by comparing an inventory of the global tonnages and grades above zero copper undiluted cutoffs. Prior to import to Whittle, model attributes were created to represent the different rock type attributes required for the LG shell generation, shown Table 4-5.
Table 4-5:
Rock Type inf ind meas nogo undef
Rock Type Attributes

Attribute Inferred Indicated Measured Crusher Limit Undefined material
Given the project execution schedule requirements, the ore crusher and conveyor corridor were finalized in advance of the mine planning activities, based on preliminary LG analysis performed on the PEA resource model. To protect against mining out the ore crusher and conveyor corridor, a special rock type labelled nogo was created using a 60 m offset. In Whittle, a very high mining cost adjustment factor (MCAF) was applied to this rock type. The grades imported into Whittle consist of the diluted NSR and each of the diluted metal grades. The block valuation was performed on the NSRD grade only. The diluted metal grades were carried in Whittle for reporting purposes only. All discussion of grades in the rest of this mining section refer to diluted grades. The original 15 x 15 x 15 m blocks were re-blocked on a 2 x 2 x 2 basis to a final size of 30 x 30 x 30 m to improve calculation speed.
4.7.2
Mining Costs
The reference mining cost developed for the pit shell generation is US$1.27/t total for waste and ore material mined. The breakdown by unit operation is shown Table 4-6. Costs are based on a first-principles cost estimate from a previous preliminary mine plan. Incremental haulage costs were based on the increased distance from the pit rim (estimated at level 2,800 m) and are as follows: for every bench 15 m above the pit rim, an increase in haulage costs of US$0.015/t
Page 4-8
for every bench 15 m below the pit rim, an increase in haulage costs of US$0.030/t. Applying this reference mining cost and the elevation-based cost adjustment factors to the preliminary mine plan results in an average mining cost of $1.42/t mined.
Table 4-6:
Item Drilling Blasting Loading Hauling Support General Mine Expense Mining Sustaining Capex Total
Reference Mine Operating Costs by Unit Operation

Ore/Waste (US$/t) 0.06 0.23 0.09 0.42 0.19 0.11 0.16 1.27
4.7.3
Processing Costs
A combined ore-based cost of US$3.57/t milled was used for pit optimization. The breakdown of the individual ore-based costs is shown in Table 4-7. The processing cost component represents a first-principles build-up of costs for crushing, grinding, flotation, tailings management, concentrate treatment, and acid plant operation. The G&A estimate is also from a first-principles cost build-up. The closure cost allocation is based on applying the PEA closure cost of $53 million over an assumed 20-year mine life. Because the ore-waste delineation was performed using an NSR block value, the combined ore-based cost of US$3.57/t milled represents the marginal breakeven cutoff grade.
Table 4-7:
Item Processing Mill Sustaining Capex Allowance G&A Closure Cost Allocation Total
Process Costs
Value (US$/t milled) 2.67 0.28 0.54 0.08 3.57
Page 4-9
4.7.4
Metal Price and Recovery

To account for the NSRD grade, which includes the contribution of metal prices, smelting and refining terms, downstream costs, and recoveries, the Whittle NSR metal price and recovery were set to 1.0 and the sell cost to zero.
4.7.5
Results
Table 4-8 shows the results for a base-case pit optimization considering only Measured and Indicated mineral resources. The revenue factor (RF) 1.00 LG shell contains 946.3 Mt at 0.38% Cu, 0.06 g/t Au, and 1.65 g/t Ag above the marginal cutoff of US$ 3.57/t milled, at a strip ratio of 1.29:1. All volumetrics presented in this section are as reported by Whittle. The best-case NPV @ 8%, shown as a continuous blue line in Figure 4-4, is the NPV (pre Capex) for a schedule that mines each shell in sequence. Although this is not a practical mining sequence because the shells are too narrow for the equipment, it is of interest because it demonstrates the theoretical maximum NPV. The worst-case NPV, shown as a continuous red line, assumes that the entire shell is mined bench by bench. This would eliminate any internal phases, removing the ability to delay the mining of some of the waste material, thereby decreasing the NPV of the schedule. The best-case and worst-case scenarios provide an upper and lower boundary that a mineable schedule would fall within it. Selection and scheduling of a collection of shells that have approximate minimum mining width spacing and reasonable access will result in NPV values below the theoretical best case and above the worst case.
4.7.6
Sensitivity Analysis
Sensitivity optimization runs were performed to determine the impact of changes to pit slopes and operating costs, as shown in Table 4-9. The runs were performed at a single RF of 0.64, matching the shell selected for the ultimate pit shape. The results show that the LG pit shells are more sensitive to a pit slope reduction of 2 than an increase of 2. As well, the LG pit shells are more sensitive to a 10% increase in Opex than a 10% decrease.
Page 4-10
Table 4-8:
Pit Shell # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 * 38 39 40 41
Base Case Pit Optimization Volumetric Results

Total Tonnes (Mt) 56 107 148 166 219 265 300 368 520 562 654 710 799 874 1006 1,099 1,228 1,327 1,442 1,519 1,589 1,627 1,642 1,751 1,763 1,813 1,855 1,875 1,928 1,977 1,989 1,996 2,027 2,029 2,069 2,093 2,163 2,166 2,179 2,205 2,215 Ore Tonnes (Mt) 34 71 100 114 151 183 206 251 337 365 416 448 497 534 594 633 683 718 759 783 805 818 823 853 856 869 879 883 897 909 912 913 919 920 928 932 946 947 949 954 956 Strip Ratio 0.7 0.5 0.5 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.7 0.7 0.8 0.8 0.9 0.9 1.0 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.1 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.3 1.3 1.3 1.3 1.3 Cu (%) 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Au (g/t) 0.11 0.10 0.10 0.09 0.09 0.09 0.09 0.08 0.08 0.08 0.08 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 Ag (g/t) 2.33 2.23 2.18 2.12 2.08 2.03 2.00 1.94 1.90 1.88 1.84 1.82 1.79 1.77 1.74 1.73 1.71 1.70 1.68 1.68 1.67 1.67 1.67 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 NSR ($) 22.0 20.4 19.7 19.3 18.6 18.0 17.7 17.1 16.5 16.3 16.0 15.8 15.5 15.3 15.1 15.0 14.9 14.8 14.7 14.7 14.7 14.6 14.6 14.6 14.6 14.6 14.6 14.6 14.5 14.5 14.5 14.5 14.5 14.5 14.5 14.5 14.4 14.4 14.4 14.4 14.4 Cu (Mlb) 419 815 1,115 1,252 1,595 1,882 2,085 2,455 3,198 3,416 3,831 4,075 4,459 4,745 5,213 5,524 5,918 6,206 6,526 6,736 6,904 6,994 7,036 7,277 7,305 7,416 7,478 7,515 7,632 7,712 7,737 7,752 7,803 7,807 7,873 7,893 8,011 8,019 8,035 8,055 8,073 Metal Content Au (koz) 123 228 307 347 440 516 567 671 860 910 1,010 1,065 1,155 1,214 1,316 1,384 1,468 1,527 1,596 1,635 1,671 1,692 1,699 1,747 1,752 1,772 1,788 1,795 1,815 1,832 1,836 1,838 1,848 1,849 1,860 1,866 1,886 1,888 1,891 1,898 1,900 Ag (koz) 2,539 5,070 6,982 7,812 10,104 11,928 13,261 15,674 20,594 22,028 24,595 26,172 28,569 30,441 33,257 35,130 37,529 39,203 41,095 42,266 43,329 43,925 44,139 45,603 45,781 46,446 46,924 47,133 47,810 48,345 48,504 48,569 48,888 48,911 49,298 49,519 50,231 50,282 50,377 50,604 50,686
Revenue Factor 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 0.54 0.56 0.58 0.60 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76 0.78 0.80 0.82 0.84 0.86 0.88 0.90 0.92 0.94 0.96 0.98 1.00 1.02 1.04 1.06 1.08
* Pit shell at RF 1.00
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Figure 4-4:
Pit-by-Pit Graph Size vs. Value Analysis
Page 4-12
Table 4-9:
Parameters Slopes
LG Sensitivity Optimization Results

Slopes Unit degrees $/t $/t kt kt kt W:O $/t milled % g/t g/t klb koz koz klb % kt % kt % Base Case 35 and 44 1.270 3.570 717,241 724,592 1,441,833 1.01 15.31 0.40 0.067 1.72 6,388,167 1,553 39,756 -2 33 and 42 same same 655,396 710,131 1,365,527 1.08 15.30 0.404 0.068 1.74 5,837,340 1,430 36,560 -550,828 -9 -61,845 -9 -76,306 -5 +2 37 and 46 same same 762,810 672,149 1,434,959 0.88 15.36 0.406 0.067 1.72 6,827,665 1,644 42,233 439,498 7 45,569 6 -6,874 0 +4 39 and 48 same same 791,726 637,739 1,429,465 0.81 15.37 0.406 0.067 1.72 7,086,483 1,700 43,833 698,316 11 74,485 10 -12,368 -1 +6 41 and 50 same same 818,695 597,894 1,416,589 0.73 15.40 0.407 0.067 1.72 7,345,923 1,753 45,327 957,755 15 101,454 14 -25,244 -2 +10% same 1.397 3.927 641,650 586,074 1,227,724 0.91 15.51 0.409 0.069 1.75 5,785,639 1,422 36,143 -602,529 -9 -75,591 -11 -214,109 -15 Opex -10% same 1.143 3.213 745,026 773,806 1,518,832 1.04 15.21 0.402 0.067 1.72 6,602,787 1,597 41,080 214,620 3 27,785 4 76,999 5
Reference Mining Cost Ore Based Costs Millfeed Waste Total Material Strip Ratio NSR grade Cu grade Au grade Ag grade Cu Contained Au Contained Ag Contained Delta Cu content Delta Millfeed Delta Total Material Mined
4.8
4.8.1
Mine Production Schedule

LG Shells and Cutoff Selection
For the purposes of this progress study, a mine plan was generated using LG pit shells adjusted by minimum mining width. The next iteration of mine planning will require pit phase designs, considering pioneering access to upper benches, internal ramp access, minimum mining widths, and depressurizing and dewatering requirements. The input parameters utilized for the mine plan development included a mine life between 18 and 22 years, a life-of-mine (LOM) head grade of no less than 0.40% Cu, and a strip ratio of less than 1:1. To meet these criteria, a series of constant LOM elevated cutoffs were tested on the collection of nested pit shells. The capacity of the waste rock management facility may potentially impose a restriction on the size of the ultimate pit. Shell 19 (RF=0.64) combined with a NSR cutoff of $5.2/t milled met the desired targets. Internal to the selected ultimate LG pit shell, three intermediate phase mining shapes were established. Shells 3, 9, and 15 were selected for phase development based on their ability to maximize grade and reduce pre-stripping requirements early in the LOM, while keeping the process plant at full production capacity in high-level Whittle
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schedules. These shells were adjusted for a minimum mining width of 60 m (2 x the 30 m re-blocked block dimension). Because the starter pit had a relatively low east-side wall, which was predominantly in relatively competent rock, it was re-generated using a 40 overall slope in the upper wall of sectors 1 and 2. The selected unadjusted LG shells are identified in the pit-by-pit graph in Figure 4-5. The continuous green line in the graph represents the NPV of the specified case, that being a schedule created using shells 3, 9, 15, and 19. A 3D view of the pit shapes is shown in Figure 4-6. During the next iteration of mine planning, AMEC recommends that cutoff optimization be performed in conjunction with the use of a more-detailed shell selection methodology. Although the proposed site layout and topography do not lend themselves to the space required for a substantial low-grade stockpile, a cutoff profile featuring elevated cutoffs in the early years could still improve project value without stockpiling. Cutoff optimization can provide economic benefits with or without stockpiling low-grade material. Both approaches should be evaluated to establish the value of a low-grade stockpile to the project. If the value of the low-grade stockpile sufficiently exceeds the cost of displacing waste rock storage to make the space for the stockpile, then it should be incorporated into the plan. The minimum mining width pit shapes were exported to MineSight for volumetrics determination. The combined diluted Measured and Indicated materials by phase, using an internal cutoff grade of $5.20/t NSR (as reported from MineSight), are shown in Table 4-10.
4.8.2
Schedule Results
The mine plan results in a total of 728.2 million tonnes (Mt) of mill feed and 713.5 Mt of waste (0.98:1 strip ratio) over a 22-year mine operating life. The LOM plan focuses on achieving the required mill feed production rate, mining higher-grade material early in the schedule, and balancing strip ratios. As described above, the mine was divided into four phases with the intent of maximizing grade in the early years, reducing pre-stripping requirements in the early years, and maintaining process plant production at 95,000 t/d (except in Year 1, when the plant is expected to achieve 80% of its capacity based on AMEC experience with similar projects). The LOM mine production schedule is shown in Table 4-11.
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Figure 4-5:
Selected LG Shells identified in Pit-by-Pit Graph
Figure 4-6:
3D View of Pit Shapes, looking Northeast
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Table 4-10: Mineral Resources within Pit Phases

Phase 1 2 3 4 Total Ore (Mt) 84.7 244.6 244.2 154.7 728.2
Waste (Mt) 36.6 154.2 241.9 280.8 713.5
Total Mat (Mt) 121.4 398.8 486.1 435.5 1,441.7
Strip Ratio 0.43 0.63 0.99 1.82 0.98
NSR ($/t) 20.5 15.5 13.7 14.0 15.1
Copper (%) 0.53 0.41 0.37 0.38 0.40
Gold (g/t) 0.10 0.07 0.06 0.05 0.07
Silver (g/t) 2.20 1.81 1.57 1.53 1.71
Note: MineSight volumetrics do not exactly match those generated in Whittle
Table 4-11: LOM Production Schedule

Ore Mined (Mt) 1.3 26.4 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 7.0 728.2 Plant Feed Mt) 27.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 34.7 7.0 728.2 Waste Mined (Mt) 46.2 45.3 40.3 40.3 38.7 38.3 38.3 38.3 38.3 38.3 38.3 38.3 38.3 38.3 38.3 37.5 29.3 25.9 13.5 6.8 4.3 1.7 0.4 713.5 Total Mat (Mt) 47.5 71.7 75.0 75.0 73.4 73.0 73.0 73.0 73.0 73.0 73.0 73.0 73.0 73.0 73.0 72.2 64.0 60.6 48.1 41.4 38.9 36.4 7.4 1,441.7 Strip Ratio 35.65 1.71 1.16 1.16 1.12 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.08 0.85 0.75 0.39 0.20 0.12 0.05 0.06 0.98 NSR ($/t) 17.6 19.3 17.2 14.9 17.3 16.4 16.4 15.9 14.2 11.6 11.2 13.4 14.9 15.8 16.1 15.5 12.0 11.0 13.2 16.5 17.5 18.7 15.1 Copper (%) 0.46 0.50 0.45 0.39 0.45 0.43 0.43 0.41 0.37 0.32 0.31 0.36 0.39 0.42 0.42 0.41 0.33 0.30 0.36 0.43 0.46 0.49 0.40 Gold (g/t) 0.08 0.09 0.08 0.06 0.08 0.08 0.08 0.08 0.07 0.05 0.04 0.05 0.06 0.07 0.07 0.07 0.05 0.04 0.05 0.07 0.07 0.07 0.07 Silver (g/t) 2.46 2.14 1.83 1.95 2.03 1.96 1.82 1.67 1.52 1.32 1.38 1.60 1.70 1.72 1.76 1.63 1.27 1.30 1.50 1.76 1.76 1.99 1.71 Arsenic (g/t) 468 305 261 354 278 231 184 156 163 208 307 302 263 194 200 153 168 264 241 279 174 236 243
Year -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Total
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The production schedule for Caariaco was developed by generating by phase, by bench volumetrics with Minesight software and by scheduling the volumetrics with a spreadsheet-based scheduling tool. Preproduction stripping was scheduled within Year -1, with Year 1 representing the commencement of processing at a throughput projection at 80% of maximum, allowing for plant ramp-up after commissioning. Approximately 8 km of pit access construction will be required during Year -2 and another 4 km in Year -1. The mining schedule attempts to reflect the challenges of developing multiple phases in steep terrain. The average mining rate is approximately 185 kt/d with a peak of 205.4 kt/d in Years 2 and 3. Material movement is shown in Figure 4-7 and process plant feed characteristics by year in Figure 4-8. Material movement by phase is shown in Table 4-12. Material rehandle required during access and mining of the upper benches was not included in the estimate for this level of study. The mine plan and equipment productivities assume that a small, short-term stockpile will be provided near the primary ore crusher to act as a buffer between the mine and mill; howeve, no blending of stockpiled material has been included in this schedule. To illustrate the progression of mining, 3D images of end-of-period pit surfaces are shown for Years -1, 1, 4, 8, 14, and 18 in Figures 4-9 to 4-14. Pit development during these years is summarized below. Year -1 Pit development begins with pre-stripping on both the northwestern and southwestern tops to open up Phases 1 and 2. A total of 46.2 Mt of waste and 1.3 Mt of ore will be released and stockpiled; the ore will be used for processing in Year 1. The northwestern pre-stripping drops Phase 1 down to 2,980 masl and the northern part of Phase 2 to 3,055 masl, while the southwestern pre-stripping brings the southern part of Phase 2 down to 3,205 masl. The top part of Phase 2 is divided into northern and southern sections to expose ore in the northern section earlier and reduce preproduction stripping requirements. Small quantities of Phases 3 and 4 are mined as pioneering work to establish a workable mining width. Year 1 Processing begins with 26.4 Mt of direct feed ore delivered from Phases 1 and 2, plus 1.3 Mt of stockpile rehandle. In the northern section of the pit, Phase 1 is mined to 2,845 masl and Phase 2 is mined to 2,980 masl. On the southern part, Phase 2 is mined to 3,115 masl. Total mill feed consists of 27.7 Mt at 0.46 %Cu. A total of 45.3 Mt of waste is mined, resulting in a strip ratio of 1.71:1. Phases 3 and 4 are dormant until Years 4 and 8, respectively. Years 2 to 4 Mining in Phase 1 advances to 2,710 masl. Phase 2 reaches 2,830 masl and is no longer divided, with the northern and southern parts merging at 2,920 masl. Phase 3 starts in Year 4, mining only waste to 3,130 masl. Plant feed head grade decreases from 0.5% Cu to 0.39% Cu over these years because ore from the relatively higher grade Phase 1 is decreasing, and more lower-grade ore is produced from Phase 2. A total of 34.7 Mt of mill feed and 40 Mt of waste are produced per year, for an average strip ratio of 1.16.
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Figure 4-7:
Material Movement by Period
Figure 4-8:
Mill Feed Characteristics by Year
Page 4-18
Table 4-12: Total Material Mined (kt) by Phase
Page 4-19
Figure 4-9:
Pit Development at End of Year -1 (pre-strip)
Figure 4-10: Pit Development at End of Year 1
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Years 5 to 8 Phase 1 mining is completed to a bottom elevation of 2,620 masl in Year 5, and mining continues in both Phase 2 (2,665 masl) and Phase 3 (2,935 masl) with the addition of the final Phase 4 in Year 8 (3,205 masl). Average plant feed head grade averages at 0.43% Cu. Annual waste production is 38.3 Mt, resulting in a strip ratio of 1.11. Years 9 to 14 Mining in Phase 2 is completed to the 2,470 masl pit bottom in Year 14, Phase 3 reaches 2,635 masl, and Phase 4 continues down to 2,920 masl. Mill feed is produced from Phase 2 and Phase 3 while only waste is produced from Phase 4. Annual waste production is 38.3 Mt, resulting in a strip ratio of 1.11. Years 15 to 18 Mining in Phase 3 is completed to the 2,350 m pit bottom in Year 18, and Phase 4 reaches 2,695 masl. Each year, 34.7 Mt of plant feed is delivered at an average head grade of 0.36% Cu. Waste mining begins to tail off and average annual waste production is 26.6 Mt, resulting in a strip ratio of 0.77:1. Years 19 to 22 All mining is from Phase 4, which is completed to its ultimate depth at 2,320 masl. Each year, 34.7 Mt of mill feed is delivered, with the exception of Year 22, which produces 7.0 Mt. The average head grade during these years is 0.44 % Cu. Total waste production is only 13.2 Mt, resulting in an average strip ratio of 0.11:1. Detailed pit phase and access design will be required during the next phase of mine planning. Mine scheduling will need to consider the time required to develop access to the upper parts of the phases and the requirements to bridge drainages.
4.9
Waste Dump and Access Roads

A single elongated waste rock management facility (WRMF) will be developed adjacent to the pit, extending along the valley as illustrated in Figure 4-15. Bottom-up methods will be used for construction. Preliminary waste rock characterization suggests that potentially acid generating (PAG) rock will be present, and so encapsulation storage methods may be required. More rock geochemistry information is required to develop a waste rock characterization block model and plan for handling these materials. This work is recommended for the next phase of study. A more detailed discussion of the preliminary waste rock qualities is provided in Section 10, Environmental Considerations. The primary ore crusher will be installed on the rim of the ultimate pit, northeast of the pit centroid. Haul road access to the crusher will be via roads internal to the pit for earlier phases, with the final phase utilizing an external road incorporated into the waste management facility from its lowest daylight point. Preliminary road alignments were generated to estimate quantities for road construction for inclusion in the capital cost estimate. These road alignments are shown in magenta in Figure 4-15.
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Figure 4-15: Waste Rock Management Facility and Initial Road Alignments
4.10
Mine Equipment Fleet

Large-scale mining equipment was selected for the conventional bulk open pit mining approach and to meet the required ore and waste mining rates. Mining will be performed on 15 m benches, with production drilling performed by electric 311 mm diameter blasthole drills. Rope shovels of 43 m3 bucket size were selected for loading activities, as they were a good match to the material movement requirements and the 15 m mining bench. A 40 m3 front-end loader (FEL) will assist with production and rehandle from the short-term stockpile and will act as a backup to the rope shovels. Haul trucks of 290 tonne capacity were selected in an effort to minimize the fleet size and match the loading unit and material movement requirements. A fleet of suitably sized support and ancillary equipment has been specified. Mine support activities include access road construction, pit cleanup, in-pit ramp maintenance,
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haul road maintenance, dozing, road grading, haul road dust control, and water diversion and management. Primary equipment requirements were calculated from engineering estimates of productivities, activities, and quantities of material moved. Haul profiles from a previous preliminary plan were used to estimate truck requirements. Support and ancillary equipment unit requirements were determined by estimates of activities. The peak mine equipment requirements are shown in Table 4-13 and primary equipment productivities are shown in Table 4-14. Mine staffing and labour requirements are presented in Section 14, Operating Cost Estimate. A detailed LOM breakdown of the labour and staffing requirements is provided in Appendix C.
Table 4-13: Mine Equipment Requirements
Equipment Type Primary Equipment P&H 4100C Shovel L2350 Front-end Loader 930E Haul Truck Sandvik 1190E Drill Sandvik DP1500 Drill Subtotal Primary Equipment Support Equipment Cat D11R Track Dozer Cat D10T Track Dozer Cat 24M Motor Grader Cat 16M Motor Grader Cat RTD834 Rubber-tired Dozer Cat 785C Water Truck Cat 365DL Track Excavator Cat 330DL Track Excavator HM400 Articulated Truck Subtotal Support Equipment Ancillary Equipment General Service Truck Hiab 105 Crane Truck (10 t) Mine Rescue Ambulance Komatsu WA320 Wheel Loader w/ Tire Handler Adanac Fuel Lube Truck Cat P36000 Forklift Personnel Bus Pickup Truck Lighting Plant 20 kW Lowbed Tractor Trailer No. of Units 2 1 21 3 2 29 2 3 1 2 2 2 1 1 3 17 2 1 1 2 3 1 2 16 8 1
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Equipment Type Cat 988 MCS Cable Reeler Liebherr LTM 55 Mobile Crane Flygt Pump 104 kW Flygt Pump 65 kW McElroy Pipe Fuser Mobile Jaw Crusher Subtotal Ancillary Equipment Total
No. of Units 1 1 1 2 2 1 45 91
Table 4-14: Primary Equipment Productivities

Equipment Type Daily Productivity P&H 4100C Shovel L2350 Front-end Loader 930E Haul Truck Sandvik 1190E Drill Sandvik DP1500 Drill Hourly Productivity P&H 4100C Shovel L2350 Front-end Loader 930E Haul Truck Sandvik 1190E Drill Sandvik DP1500 Drill t / op hr / unit t / op hr / unit t / op hr / unit m / op hr m / op hr 5251.6 3209.3 605.0 23.2 27.2 kt / day / unit kt / day / unit kt / day / unit m / day / unit m / day / unit 84.9 35.6 9.8 379.7 361.1 Unit of Measure Value
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CONTENTS 5.0 METALLURGY .......................................................................................................5-1 5.1 Summary.....................................................................................................5-1 5.1.1 Testwork ..........................................................................................5-1 5.1.1.1 Phase I (2005 2007) ..................................................... 5-1 5.1.1.2 Phase IIA (2008).............................................................. 5-2 5.1.1.3 Phase IIB (2010).............................................................. 5-2 5.1.2 Recovery .........................................................................................5-3 5.2 Phase I Program Results (2005 2007) .....................................................5-3 5.2.1 Leachability Testwork ......................................................................5-3 5.2.2 Concentration Testwork ...................................................................5-5 5.2.3 Comminution Testwork ....................................................................5-7 5.2.4 Flotation Testwork ...........................................................................5-7 5.2.4.1 Effect of Grind Size .......................................................... 5-7 5.2.4.2 Effect of Collectors and pH .............................................. 5-8 5.2.4.3 Effect of Sulphidization .................................................... 5-9 5.2.4.4 Cleaner Flotation (2005-2007) ......................................... 5-9 5.2.4.5 Locked-Cycle Tests (2005-2007) ................................... 5-11 5.3 Phase IIA Program Results (2008) ............................................................5-14 5.3.1 Introduction....................................................................................5-14 5.3.2 Mineralization ................................................................................5-15 5.3.3 Sampling and Sample Preparation (2008) .....................................5-16 5.3.4 Comminution Testwork Development .........................................5-20 5.3.5 Flotation Primary Flotation Test (2008) .......................................5-20 5.3.5.1 Effect of Primary Grind Size(2008) ................................ 5-21 5.3.5.2 Effect of Collectors and Frothers (2008) ........................ 5-22 5.3.5.3 Effect of Pulp pH............................................................ 5-28 5.3.5.4 Sulphidization Tests (2008) ........................................... 5-28 5.3.6 Flotation Cleaner Flotation Tests ................................................5-31 5.3.6.1 Regrind Tests (2008) ..................................................... 5-31 5.3.6.2 Effect of Pulp pH on Cleaner Flotation(2008) ................. 5-33 5.3.6.3 Cleaner Kinetics (2008) ................................................. 5-36 5.3.7 Comminution Testwork Variability ...............................................5-36 5.3.7.1 Crushing Testwork (2008) ............................................. 5-36 5.3.7.2 SAG Mill Testwork ......................................................... 5-37 5.3.7.3 Bond Mill Work Index Testwork ..................................... 5-39 5.3.7.4 Abrasion Testwork ......................................................... 5-41 5.4 Phase II Program Results (2010) ..............................................................5-41 5.4.1 Introduction....................................................................................5-41 5.4.2 Flotation Primary Flotation Test ..................................................5-44 5.4.2.1 Effect of Primary Grind Size (2010) ............................... 5-44 5.4.2.2 Effect of Collectors (2010) ............................................. 5-47 5.4.2.3 Effect of Cleaning .......................................................... 5-51 5.4.2.4 Locked-Cycle Tests ....................................................... 5-54
TOC i
5.5 5.6 TABLES

Table 5-1: Table 5-2: Table 5-3: Table 5-4: Table 5-5: Table 5-6: Table 5-7: Table 5-8: Table 5-9: Table 5-10: Table 5-11: Table 5-12: Table 5-13: Table 5-14: Table 5-15: Table 5-16: Table 5-17: Table 5-18: Table 5-19: Table 5-20: Table 5-21: Table 5-22: Table 5-23: Table 5-24: Table 5-25: Table 5-26: Table 5-27: Table 5-28: Table 5-29:
Tailings Generation ....................................................... 5-54 Concentrate Generation for SolidLiquid Separation and Roasting Tests............................................................... 5-54 5.4.3 Solid-Liquid Separation Tests (Tailings and Concentrate) .............5-55 5.4.4 Roasting Testwork .........................................................................5-57 5.4.4.1 Chemical Reactions ....................................................... 5-57 5.4.4.2 Testwork ........................................................................ 5-60 Mineralogy (2010) .....................................................................................5-62 Recovery ...................................................................................................5-69
5.4.2.5 5.4.2.6
ICP Analysis of Scoping Composites ............................................................................ 5-6 Comminution Tests Results ........................................................................................... 5-7 Effect of Grind Size on Rougher Recovery .................................................................... 5-8 Collector vs. Recovery for CN Composite ..................................................................... 5-9 Collector vs. Recovery for BS Composite ...................................................................... 5-9 Collector vs. Recovery for CPY Composite ................................................................... 5-9 Final Concentrate Grade vs. Regrind Size for CN Composite .................................... 5-10 Final Concentrate Grade vs. Regrind Size for BS Composite ..................................... 5-10 Final Concentrate Grade vs. Regrind Size for CPYComposite ................................... 5-11 Locked-Cycle Test Results for CN (2005-2007) .......................................................... 5-13 Locked-Cycle Test Results for BS (2005-2007) .......................................................... 5-13 Locked-Cycle Test Results for CPY (2005-2007) ........................................................ 5-13 Elemental Analysis of Locked-Cycle Concentrates (2005-2007) ................................ 5-14 Principal Assays for Phase IIA Composites ................................................................. 5-19 Full Assays for Phase IIA Composites ......................................................................... 5-19 Comminution Test Results (2008) ............................................................................... 5-20 Particle Sizes at Various Regrind Levels ..................................................................... 5-31 Summary of JKDWT Data............................................................................................ 5-37 Comparison of Deposit JKDWT Values Against SGS Database ................................. 5-37 Summary of SMC and JKDWT Data ........................................................................... 5-38 Comparison of SMC Deposit Values Against SGS Database (2008).......................... 5-39 Composite Characteristic ............................................................................................. 5-42 Composition of 2010 Program Samples ...................................................................... 5-43 Samples for Solid-Liquid Separation and Roasting Tests ........................................... 5-54 Test Results on Bulk Concentrate Settling .................................................................. 5-57 Elemental Analysis of Composite Feeds ..................................................................... 5-61 Elemental Analysis of Composite Products ................................................................. 5-61 Mineral Composition of Feed Samples (MCP1 14) .................................................. 5-63 Mineral Composition of Feed Samples (MCP15 28) ................................................ 5-63
FIGURES
Figure 5-1: Recovery vs. Rougher Grind Size ................................................................................. 5-8
TOC ii
Figure 5-2: Figure 5-3: Figure 5-4: Figure 5-5: Figure 5-6: Figure 5-7: Figure 5-8: Figure 5-9: Figure 5-10: Figure 5-11: Figure 5-12: Figure 5-13: Figure 5-14: Figure 5-15: Figure 5-16: Figure 5-17: Figure 5-18: Figure 5-19: Figure 5-20: Figure 5-21: Figure 5-22: Figure 5-23: Figure 5-24: Figure 5-25: Figure 5-26: Figure 5-27: Figure 5-28: Figure 5-29: Figure 5-30: Figure 5-31: Figure 5-32: Figure 5-33: Figure 5-34: Figure 5-35: Figure 5-36: Figure 5-37: Figure 5-38: Figure 5-39: Figure 5-40: Figure 5-41: Figure 5-42: Figure 5-43: Figure 5-44: Figure 5-45: Figure 5-46: Figure 5-47:
Copper Grade vs. Regrind Size at pH 12 (2005-2007) .............................................. 5-11 Lock-Cycle Test Flowsheet .......................................................................................... 5-12 Locations of Metallurgical Samples for Development Composites in Late 2008 ......... 5-17 Locations of Metallurgical Samples for Variability Testing in Late 2008 ..................... 5-18 Rougher Flotation Procedure ....................................................................................... 5-21 Effect of Primary Grind on Cu Recovery ...................................................................... 5-22 Collector Type vs. Rougher Recovery for Composite CPY ......................................... 5-23 Collector Type vs. Rougher Recovery for Composite ENT ......................................... 5-23 Collector Type vs. Rougher Recovery for Composite MIX .......................................... 5-24 Collector Type vs. Rougher Recovery for Composite SEC ......................................... 5-24 Rougher Recovery vs. Collector Type for all Composites ........................................... 5-25 Rougher Recovery vs. Frother Type for all Composites (collector AP-3330) .............. 5-25 Rougher Recovery vs. Frother Type for all Composites (collector AP-3477) .............. 5-26 Recovery vs. Grade for Different Frother Types for CPY (collector AP-3330) ............ 5-26 Recovery vs. Grade for Different Frother Types for ENT (collector AP-3330) ............ 5-27 Recovery vs. Grade for Different Frother Types for MIX (collector AP-3330) ............. 5-27 Recovery vs. Grade for Different Frother Types for SEC (collector AP-3330) ............ 5-28 Recovery vs. Grade at Different pH for CPY (collector AP-3330) ............................... 5-29 Recovery vs. Grade at Different pH for ENT (collector AP-3330) ............................... 5-29 Recovery vs. Grade at Different pH for MIX (collector AP-3330) ................................ 5-30 Recovery vs. Grade at Different pH for SEC (collector AP-3330) ............................... 5-30 Schematic of Open Cleaner Tests ............................................................................... 5-31 Concentrate Grade vs. Level of Regrinding for CPY ................................................... 5-32 Concentrate Grade vs. Level of Regrinding for ENT ................................................... 5-32 Concentrate Grade vs. Level of Regrinding for MIX .................................................... 5-33 Concentrate Grade vs. Level of Regrinding for SEC ................................................... 5-33 Concentrate Grade vs. pH for CPY ............................................................................. 5-34 Concentrate Grade vs. pH for ENT .............................................................................. 5-34 Concentrate Grade vs. pH for MIX............................................................................... 5-35 Concentrate Grade vs. pH for SEC ............................................................................. 5-35 Distribution of Bond Rod Mill Work Indices .................................................................. 5-40 Distribution of Bond Ball Mill Work Indices .................................................................. 5-40 Distribution of Bond Abrasion Indices .......................................................................... 5-41 Rougher Flotation Procedure ....................................................................................... 5-44 GrindCu Recovery Curves for Composites ACP, ACS, and ACL .............................. 5-45 Primary Grind vs. Rougher Recovery for ACP Test Summary .................................... 5-46 Primary Grind vs. Rougher Recovery for ACS Test Summary .................................... 5-46 Primary Grind vs. Rougher Recovery for ACL Test Summary .................................... 5-47 Copper Recovery vs. Collector for ACP Test Summary .............................................. 5-48 Copper Recovery vs. Collector for ACS Test Summary .............................................. 5-49 Copper Recovery vs. Collector for ACL Test Summary .............................................. 5-49 Gold Recovery vs. Collector for ACP Test Summary .................................................. 5-50 Gold Recovery vs. Collector for ACS Test Summary .................................................. 5-50 Gold Recovery vs. Collector for ACL Test Summary................................................... 5-51 GradeRecovery Curve for Different Collectors ACP Test Summary ..................... 5-52 GradeRecovery Curve for Different Collectors ACS Test Summary ..................... 5-53
TOC iii
Figure 5-48: Figure 5-49: Figure 5-50: Figure 5-51: Figure 5-52: Figure 5-53: Figure 5-54: Figure 5-55: Figure 5-56: Figure 5-57: Figure 5-58: Figure 5-59: Figure 5-60: Figure 5-61: Figure 5-62:
GradeRecovery Curve for Different Collectors ACL Test Summary ..................... 5-53 Underflow Slurry Density vs. Flocculant Addition for ACS .......................................... 5-55 Underflow Slurry Density vs.Flocculant Addition for ACL ............................................ 5-56 Overflow Clarity vs. Flocculant Addition for ACS ......................................................... 5-56 Overflow Clarity vs. Flocculant Addition for ACL ......................................................... 5-57 Partial Roasting Flowsheet .......................................................................................... 5-58 Impurity Stabilization Flowsheet .................................................................................. 5-59 Mineral Composition of Feed Samples (MCP1 14) .................................................. 5-64 Mineral Composition of Feed Samples (MCP15 28) ................................................ 5-64 Cu Species Composition in Feed Samples (MCP1 14) ............................................ 5-65 Cu Species Composition in Feed Samples (MCP15 28) .......................................... 5-66 Mineralogical Composition of ACP, ACS & ACL Composites ..................................... 5-67 Cu Species Composition in Rougher Concentrates (Composite ACP) ....................... 5-67 Cu Species Composition in Rougher Concentrates (Composite ACS) ....................... 5-68 Cu Species Composition in Rougher Concentrates (Composite ACL) ....................... 5-68
TOC iv
5.0
5.1
5.1.1
METALLURGY
Summary
Testwork
Two major phases of testwork have been conducted for the Candente project. The first consisted of process development to define the type of processing most applicable to the deposit mineralization. This was followed by more detailed work in the second phase to optimize process conditions and develop economic parameters to progress the project. This second phase was affected by the financial crisis of 2008, however, when the work was interrupted. Definition work resumed in 2010 with further development of process parameters to allow primary equipment selection. The goal of the 2010 work was to support the prefeasibility study in progress during 2010. Ultimately, further work will be required to define the variability of the ore characteristics sufficiently to support a feasibility study. All relevant reports have been included in Appendix E. The testwork established the key design parameters, as follows: For a feed grade of 0.40% Cu, a recovery of 89.7% is forecast at the target grind. Recovery will vary with feed grade. The concentrate grade was 30.6% Cu after partial roasting, with arsenic being lowered to non-penalty limits. The grind was established at 200 m with a JKSimMet Axb value of 52.1 and a Bond Ball mill work index of 11.0.
5.1.1.1
Phase I (2005 2007) Initial resource development identified potentially leachable copper mineralization. From 2005 to 2006, Kappes, Cassidy & Associates (KCA) assessed the potential of leaching samples containing high levels of cyanide-soluble copper. The leaching testwork consisted of bottle-roll leach tests and column leach tests. Initial recoveries were variable and lower than anticipated. In response, further new samples were obtained from twinned drillholes and sent to SGS Lakefield Research Chile (SGS) for bottle-roll and column leaching testwork. The results at SGS Chile were similar to those from KCA. Drilling in 2007 indicated the presence of a significantly larger copper resource with predominantly sulphide copper mineralization. Therefore, the testwork program was revised to assess the metallurgical response of the sulphide copper mineralization to flotation. In late 2007, SGS re-composited untreated samples remaining from the leaching testwork program into three master composites for scoping-level comminution and flotation testwork. These samples were not considered to be representative of the entire primary sulphide deposit but were used for a process development program. The 2007
Page 5-1
work was encouraging and confirmed that additional testwork focusing on the flotation of the sulphide mineralization was warranted. Principal development composites were: CPY .............................. primary sulphides composite CN ................................ secondary sulphides composite BS................................. composite from breccia lithology. 5.1.1.2 Phase IIA (2008) Based on the positive initial sulphide flotation testwork, comprehensive comminution and flotation testwork was initiated at SGS in early 2008. Fresh samples were collected and composited, then subjected to comminution and flotation tests with the objective of defining metallurgical parameters for a feasibility study. Although this work was halted prematurely of its goal because of the world economic situation in late 2008, it had by this time provided adequate information on the grinding and flotation responses to confirm that a smeltable concentrate could be produced. Sufficient detail was available to define metallurgical challenges, particularly impurities (As, Sb) in the concentrate and the potential mitigation strategy. Principal development composites were: CPY .............................. a predominantly hypogene mineralization type that is primarily chalcopyrite ENT............................... a mixed mineralization type that has elevated arsenic values from the multi-element analysis MIX ............................... a mixed mineralization type that contains several copper sulphide minerals SEC .............................. a mineralization type that contains predominantly enriched minerals such as chalcocite, covellite, bornite, enargite, and tennantite. 5.1.1.3 Phase IIB (2010) Another phase of work for Caariaco Norte began in 2010 with the initial goal of continuing the definition of ore characteristics to support a prefeasibility study. During the preliminary design evaluations, it became apparent that there was an opportunity to enhance the value of the deposit by utilizing a new approach to reduce arsenic and antimony in the bulk copper concentrate. The early work in this program consisted of testing for the optimum rougher flotation feed size, regrind feed size, and rougher and cleaner reagent additions. Products from this testwork were further analyzed for mineralogy, chemistry, and settling quality. The results
Page 5-2
indicated that it was possible to use a coarser grind and still maintain recovery through the employment of a dual collector system. Later work on the test material focused on establishing that the improvements were robust and the solution proposed for the penalty elements would work. This latter testworkthe application of partial roastinghas been demonstrated to proof-of-concept level, and therefore key development work is recommended to advance this approach. Principal development composites were: ACP .............................. selection of samples containing chalcopyrite and arsenic minerals ACS .............................. selection of samples containing secondary copper sulphide (covellite, chalcocite, bornite) and arsenic minerals ACL ............................... selection of samples with low content of As (<0.03%As). In 2011, work is planned to progress to the level of locked-cycle testwork. This work has been designed to define the variability of metallurgy in terms of grindability, recovery and the response of concentrates to roasting.
5.1.2
Recovery
The principal elements of the flowsheet have been established with indicative recoveries of 89% Cu, 55% Au, and 50% Ag in a >26% Cu concentrate delivered to the roaster; a>30% Cu concentrate delivered to the smelter; and arsenic as a penalty element controlled to a level where no impact on concentrate marketability is anticipated over the life-of-mine.
5.2
5.2.1
Phase I Program Results (2005 2007)

Leachability Testwork
The Caariaco deposit contains significant levels of leachable copper minerals including chalcocite, covellite, digenite, and enargite. As a result, initial metallurgical testwork at KCA focused on the assessment of the leaching characteristics of the ore. From 2005 to 2006 KCA analyzed samples containing high levels of cyanide-soluble copper. The leaching testwork comprised bottle-roll leach tests and column leach tests. Initial recovery results were variable and lower than anticipated. In response, new samples were obtained in 2007 from twinned drill holes and sent to SGS for bottle-roll and column leaching testwork. A major bottle-roll testwork program was conducted on 55 composites drawn from 12 metallurgical drill holes in various parts of the Caariaco Norte deposit. Hydrometal, Inc. (then Hydrometal LLC), engaged by Candente to assess the leaching results, released a draft report in December 2007, and a final draft was issued in February 2008.
Page 5-3
The SGS results confirmed previous testwork by KCA that not all the soluble-copper minerals in the ore were completely leachable. Results were variable and indicated potential recoveries of 60% to 70% of the contained leachable copper. These SGS results were similar to those from KCA. Material containing less than 40% chalcopyrite and less than 0.1% arsenic generally leached well. These values are recommended as break points for predicting leachability, especially when combined with QLT (Quick Leach Test) results, as reported earlier. Materials containing more than 40% chalcopyrite or 0.1% arsenic are likely to be refractory when leached directly. The behaviour of both the chalcopyrite and chalcocite followed the expected leach patterns. However, the behaviour of the enargite, covellite, and bornite did not. The leachability of the various copper minerals in the Caariaco ore was found to be as follows: Chalcocite >> Enargite > Bornite > Covellite >> Chalcopyrite Earlier work had suggested that the presence of enargite might be detrimental to leach recovery. However, QemScan mineralogical studies by SGS on the heads and residues from the bottle-roll tests clearly failed to support this conclusion. In all, head samples from 54 of the 55 composites were evaluated, along with nine of the residues. This work indicated that on a gross basis, there was very little difference in the general sample makeup. Virtually all samples were dominated by quartz and mica/chlorite. Forty of the composites contained at least 80% quartz plus mica/chlorite, and four contained more than 90%. Quartz dominated in 40 of the samples, while mica, chlorite, and clays dominated in 14. Four samples also contained a significant amount of plagioclase/albite (more than 20% of the total mineralization). These four samples contained less than 30% quartz. Pyrite was the dominant sulphide, ranging from 1% to 11% in the head samples, while most of the composites (60%) contained between 4% and 8% pyrite. With the climatic conditions at Caariaco, this much pyrite in a typical heap or dump leach operation would be potentially acid generating (PAG) in situ, likely reducing the amount of acid that would need to be purchased and added externally. The conclusions of the leachability work were as follows: Chalcocite leaches to a high degree in all material, and extraction is not inhibited by the presence of other copper minerals. These other minerals also have to leach to some extent to account for the observed recovery levels. Chalcopyrite is the most refractory copper-bearing mineral in the Caariaco ore. It undergoes little if any dissolution, and its content obviously increases in the leach residues due to dissolution of the other copper minerals.
Page 5-4
Enargite proved to be less refractory than expected. In most of the samples it leached well and contributed to the observed recovery. The only case where the enargite did not appear to leach was when the arsenic content exceeded 0.1%, leading to very high enargite content relative to the other copper minerals. Bornite was found to leach reasonably well, decreasing in six of the nine samples. Covellites behaviour was unexpected, as it did not appear to leach as well as either enargite or bornite. This may be somewhat misleading because covellite is also being formed as an intermediate reaction product when chalcocite is leached. Overall, material containing less than 40% chalcopyrite and less than 0.1% As appears likely to leach well. Material containing more than 40% chalcopyrite and/or more than 0.1% As is likely to be refractory. The gangue in Caariaco ore is dominated by quartz and micas/chlorites. Quartz is the most common mineral in most of the samples. Only a few samples contained appreciable plagioclase (20% to 30%). Pyrite is the dominant sulphide, ranging from 1% to 11%. Most samples contained 4% to 8% pyrite and are likely to generate acid in situ during a typical heap or dump leach operation. Mineral grain size is fine, and the mineral associations tend to be complex. Chalcopyrite:pyrite and chalcopyrite:bornite are the most common binary associations.
5.2.2
Concentration Testwork
Drilling in 2007 indicated the presence of a significantly larger copper resource with predominantly sulphide copper mineralization. The fact that the potentially leachable copper mineralogy was now a smaller part of the total copper resource, combined with the variable copper leachability, led Candente management to conclude that development of the project based solely on a leaching process was not the best approach. Therefore the testwork program was revised to assess the metallurgical response of the sulphide copper mineralization to flotation. In late 2007, SGS re-composited untreated samples remaining from the leaching testwork program into three master composites for scopinglevel comminution and flotation testwork. These samples were not considered to be representative of the entire primary sulphide deposit but were used for a process development program. The 2007 work was encouraging and confirmed that additional testwork focusing on the flotation of the sulphide mineralization was warranted. Fifty-five samples for compositing had originally been sent to SGS for leachability testwork. The classification of these composites was based on sequential copper analysis of twinned holes. The samples were half HQ size core in all cases except holes 104 (CO4-007) and 106 (CO5-023), which were quarter core. From these 55 composites, five
Page 5-5
domains were identified for preliminary flotation testwork composites based on lithology, alteration, and type of copper minerals present, as follows: CPY .............................. mainly chalcopyrite (to CPY composite) Cu CN (Cc, Cv) ............ mainly chalcocite and/or covellite (to CN composite) Bs. IBxP ........................ mainly igneous breccia polylithic lithology (to BS composite) Bs. IBxH........................ mainly intrusive breccia hydrothermal lithology (to BS composite) En ................................. high enargite content (not tested during this initial phase). Table 5-1 provides a chemical analysis of the composites.
Table 5-1:
Constituent Al As Ba Be Bi Ca Cd Co Cr Cu Fe Ga Hg In K La Li Mg Mn Mo Na Nb Ni, P Pb S Sb Sc Se Sn Sr Te Ti V Zn Zr
ICP Analysis of Scoping Composites

Unit % % g/t g/t g/t % g/t g/t g/t % % g/t g/t g/t % g/t g/t % g/t g/t % g/t g/t % g/t % % g/t g/t g/t g/t g/t % g/t g/t g/t CPY 5.88 0.0076 343 <0.50 <1 0.39 1 8 94 0.46 2.69 21 <5 <5 >2 10 12 0.80 159 59 1.80 <1 8 0.04 <2 1.89 <5 6 <5 <10 60 <1 0.13 41 84 45 BS 7.07 0.0426 374 1.70 <1 0.27 5 7 92 0.69 3.34 25 <5 <5 >2 10 <10 0.64 77 27 1.07 1 4 0.04 4 2.74 35 7 <5 <10 78 <1 0.08 45 98 42 CN 6.37 0.0458 284 <0.5 <1 0.16 6 9 121 0.71 2.89 21 <5 <5 >2 8 <10 0.37 42 25 0.73 <1 8.8 0.04 4 2.41 45 8 <5 <10 139 <1 0.11 43 86 44
Page 5-6
To prepare these samples for column leaching testwork to determine the viability of heap leaching, they were crushed to 100% -25 mm and classified into screen fractions. The material was then re-sampled and re-composited to make flotation composites. To conserve costs and reduce turn-around time, the two breccia composites were combined into a single breccia composite (BS), and the enargite composite was not tested.
5.2.3
Comminution Testwork
The objective of the grinding testwork was to establish the hardness of the material and to produce sized feed material for the flotation work. The results of the preliminary comminution work are presented in Table 5-2.
Table 5-2:
Composite CPY BS CN
Comminution Tests Results

BWI, kW-h/t 13.3 13.3 12.2 Ai 0.12 0.11 0.16
5.2.4
Flotation Testwork
The objective of flotation testwork was to identify an industry-standard, cost-effective approach to maximize copper recovery and concentrate copper grade. A standardized approach was sought for all sample types. The testwork assessed the effect of primary grind size, regrind size, bulk and cleaning pH, and the amount and types of collector and frother on the flotation response. The potential of using sulphidization to enhance recovery was also explored.
5.2.4.1
Effect of Grind Size Several rougher flotation tests were performed at different particle sizes (P80 of 75, 106, 150, 212, and 250 m) and at pH 10 for each of the three composite types (Table 5-3 and Figure 5-1). There was little performance difference for the P80between 106 m and 150 m. The 2% recovery improvement from grinding down to P80 75 m would, based on the results of a subsequent throughput analysis, probably be offset by the higher OPEX and CAPEX of the primary grind and cleaner circuits, as the mass pull was higher. Therefore, a P80 of 150 m was recommended for later testwork.
Page 5-7
Table 5-3:
Effect of Grind Size on Rougher Recovery
Figure 5-1:
Recovery vs. Rougher Grind Size
5.2.4.2
Effect of Collectors and pH Several rougher flotation tests were carried out to determine the best reagents to obtain a high copper recovery. Various flotation reagents were evaluated using a constant primary grind P80 of 106 m at pH 10. The best flotation results of the three composites (Tables 5-4, 5-5, and 5-6) were obtained with the collector AP-3894 and methyl isobutyl carbinol (MIBC) frother. Several tests were carried out to evaluate the effect of primary grinding on the rougher performance (grade and recovery) using this reagent pair.
Page 5-8
Table 5-4:
Collector vs. Recovery for CN Composite
Table 5-5:
Collector vs. Recovery for BS Composite
Table 5-6:
Collector vs. Recovery for CPY Composite
Further separate tests were carried out at a P80 of 150 m with the addition of collector AP-3498 (25 g/t) and frother MIBC (10 g/t). The flotation tests conducted at pH values of 7.2, 11, and 12 indicated that 10 is the optimum pH for the rougher flotation stage. This pH gave acceptable results for all the composites tested. 5.2.4.3 Effect of Sulphidization Sulphidization agents are often used to improve the floatability of semi-oxide minerals and can improve bornite flotation kinetics significantly. Tests were carried out at a P80 of 150 m and pH 10 with the addition of collector AP-3498 (25 g/t) and frother MIBC (10 g/t). Results indicate that flotation performance (recovery and grade) was not improved by the addition of a sulphidizing reagent. 5.2.4.4 Cleaner Flotation (2005-2007) For the open cleaner tests, the rougher concentrate was produced at a P80 of 150 m with the addition of collector AP-3894 and frother MIBC. This rougher concentrate was then reground and floated in two cleaning stages and one cleaner-scavenger stage. The effects of pulp pH and regrind size were also evaluated. Results indicate that the
Page 5-9
concentrate grade is sensitive to cleaning flotation pH and regrind size. Good performance is indicated for a P80 of 37 m (80% passing 400 mesh) for composite CN (Table 5-7) and BS (Table 5-8); however, a finer regrind is required for composite CPY (Table 5-9) to obtain commercial concentrate grades. The regrind P80 used for the design criteria in this study was 30 m, which is the average of the regrind P80s that give the best performance. Figure 5-2 shows the response of final concentrate grade to regrind size. The effect of pH is important to obtain good concentrate grades with composite CPY, where a pH of 12 was found to be necessary. For the other two composites, it is possible to produce acceptable final concentrate grades with much lower flotation pH in the cleaning stage. Modification or optimization of the pH in the cleaners is planned for future testwork phases.
Table 5-7: Final Concentrate Grade vs. Regrind Size for CN Composite
Table 5-8:
Final Concentrate Grade vs. Regrind Size for BS Composite
Page 5-10
Table 5-9:
Final Concentrate Grade vs. Regrind Size for CPY Composite
Figure 5-2:
Copper Grade vs. Regrind Size at pH 12 (2005-2007)

Cu grade vs Re-grind Size
45 40 35 30
Cu grade, %
25 20 15 10 CPY 5 0 10 20 30 40 P80, m 50 60 70 80 BS CN
5.2.4.5
Locked-Cycle Tests (2005-2007) A locked-cycle test (or closed-cycle test) is a repetitive series of batch tests used to simulate a continuous circuit, where the final cycles of the test are expected to mimic a continuous circuit. For Caariaco, the batch tests were continued in an iterative manner for six cycles. The final products from each cycle (final concentrate and tailings) were filtered and removed from further processing. At the end of the test, all of the products, final and intermediate, were dried, weighed, and subjected to chemical analysis. Results
Page 5-11
were then balanced and a metallurgical projection was calculated. procedure is shown in Figure 5-3.
The locked-cycle
In this phase of testwork, one locked-cycle test (LCT) was done per composite type. The LCT objectives were to: produce a closed metallurgical projection for the sample tested assess whether the flowsheet and reagent scheme are stable in a closed circuit. The locked-cycle tests for each composite were carried out under the following conditions: Primary grind ................ P80 150 m Primary pH ................... 10 Collector ....................... 25 g/t AP-3894 Frother .......................... 10 g/t MIBC Regrind ......................... P80 of 20 m for CPY and a P80 of 37 m for CN and for BS Cleaner pH ................... 12 for CPY and 11.5 for CN and for BS For all composites, stability was reached over the last three cycles.
Figure 5-3: Lock-Cycle Test Flowsheet
Page 5-12
Recovery for the CN composite (Table 5-10) was 84.5% Cu with a final concentrate grade of 26.5% Cu. This is a relatively low grade for a mineral of secondary type. To obtain better concentrate grade it would be necessary to use a regrind finer than the P80 of 37 m that was selected and to use a pH in the cleaner stage higher than the level of 11.5 that was used for the locked-cycle test. Subsequent mineralogy showed that fine associations with pyrite limit the final concentrate grade possible for the CN domain but that the concentrate grade is suitable for smelting. The final concentrate grade for the BS composite was 26.6% Cu with 81% recovery (Table 5-11). A recovery of 89% Cu with a concentrate grade of 25.5% Cu was achieved for the CPY composite (Table 5-12). The copper concentrate grade could possibly improve with a third cleaning stage. Table 5-13 provides a detailed analysis of the three locked-cycle test concentrates.
Table 5-10: Locked-Cycle Test Results for CN (2005-2007)
Grade Product Cl. Conc. Ro. tail + scv. tail Ro. Conc Calc. Head Weight % 2.23 97.8 11.05 100 Cu % 26.5 0.11 5.581 0.7 Fe % 21.9 2.6 18 3.1 Mo % 0.1 0.01 0.02 0.01 Cu% 84.5 15.5 88.2 100 Recovery Fe % 15.9 84.1 63.9 100 Mo % 14.3 85.7 21.1 100
Table 5-11: Locked-Cycle Test Results for BS (2005-2007)

Grade Product Cl. Conc. Ro. tail + scv. tail Ro. Conc Calc. Head Weight % 1.8 98.2 9.68 100 Cu % 26.6 0.114 5.176 0.59 Fe % 23.531 2.88 16.59 3.135 Mo % 0.1 0.01 0.02 Cu % 81 19 84.8 100 Recovery Fe % 13 87 51.2 100 Mo % 14.5 85.5 37.2 -
Table 5-12: Locked-Cycle Test Results for CPY (2005-2007)

Grade Product Cl. Conc. Ro. tail + scv. tail Ro. Conc Calc. Head Weight % 1.42 98.6 12.38 100 Cu % 25.5 0.045 3.021 0.41 Fe % 27.8 2.4 15.36 2.8 Mo % 0.2 0 0.03 0.01 Cu % 89 11 91.7 100 Recovery Fe % 14.5 85.5 67.8 100 Mo % 43 57 52.4 100
Page 5-13
Table 5-13: Elemental Analysis of Locked-Cycle Concentrates (2005-2007)
Note: The (-) sign indicates values below the detection limit of the method.
5.3
5.3.1
Phase IIA Program Results (2008)

Introduction
Based on the positive initial sulphide flotation testwork, a comprehensive level of comminution and flotation testwork was initiated at SGS in early 2008. Fresh samples were collected and composited, then subjected to comminution and flotation tests with the objective of defining metallurgical parameters for a feasibility study. This work was halted prematurely because of the world economic situation in late 2008. However, by this point the work had provided adequate information on the grinding and flotation responses required to generate a smeltable concentrate. Sufficient detail was available to define
Page 5-14
metallurgical challenges, particularly impurities (As, Sb) in the concentrate and the potential mitigation requirement. While flotation testwork was sufficient for a preliminary flowsheet, the grinding work had advanced further, and a large amount of information had been developed about the grinding characteristics of the material. Candente commissioned Transmin to supervise the scoping, prefeasibility, and variability level comminution and flotation testwork programs. The testwork was performed by SGS in Santiago with the objective of developing a suitable process flowsheet and reagent suite for treatment of the Caariaco ores. The results and findings presented herein are based upon metallurgical results from a series of comminution and flotation tests performed by SGS between April and October 2008. This testwork was performed on Caariaco ore composites identified as CPY, MIX, ENT, and SEC. Variability results to date were received for the grinding testwork, but the variability flotation testwork was delayed until Phase IIB or later. Tests results indicated that traditional flotation technology could be used to concentrate copper into commercial grade concentrate with good recoveries. Based on preliminary arsenic recovery assumptions at this time, the LOM average grade of As in the Cu concentrate was estimated to be 1.3%.
5.3.2
Mineralization
A QEMSCAN examination of the samples indicated that the following minerals and mineral associations are predominant in the Caariaco Norte samples: Predominant copper mineral species are chalcopyrite, covellite, chalcocite, bornite, enargite, tennantite, and tetrahedrite Predominant non-metallic gangue minerals are quartz and a mica/biotite/chlorite/clay group Copper sulphide minerals are mainly associated with pyrite and other sulphide gangue minerals Predominant sulphide gangue mineral is pyrite, which is present as liberated pyrite or in association with other sulphide minerals. The copper minerals have the following compositions: Chalcopyrite ................. CuFeS2 Bornite ......................... Cu5- Error! Hyperlink reference not valid.FeS4 Covellite........................ CuS Chalcocite .................... Cu2S Enargite ........................ Cu3AsS4
Page 5-15
Tennantite .................... Cu12As4S13 Tetrahedrite .................. Cu12Sb4S13
5.3.3
Sampling and Sample Preparation (2008)

The composites for this testwork were sourced from two drilling campaigns: material composited in late 2007 from existing drill core material composited in late 2008 from existing drill core. A total of 14 holes were drilled strictly to obtain samples for the testwork. The locations of these metallurgical drill holes are shown in Figures 5-4 and 5-5. The following parameters were used to generate metallurgical domains for sampling the Caariaco Norte mineral resource: geographical areas depth lithology alteration copper grade copper mineralization (as determined by sequential leach results) minor element grades. The impact of each domain factor on metallurgical performance was again evaluated, and it was determined that copper mineralization was more important than lithology or alteration; therefore, the samples were grouped into four master composites: CPY .............................. a predominantly hypogene mineralization type that is primarily chalcopyrite ENT............................... a mixed mineralization type that has elevated arsenic values from the multi-element analysis MIX ............................... a mixed mineralization type that contains several copper sulphide minerals SEC .............................. a mineralization type that contains predominantly enriched minerals such as chalcocite, covellite, bornite, enargite, and tennantite.
Page 5-16
Figure 5-4:
Locations of Metallurgical Samples for Development Composites in Late 2008
Page 5-17
Figure 5-5:
Locations of Metallurgical Samples for Variability Testing in Late 2008
11
1 4 2 6 8 7 12 17 9 13 15 16 14 10 5
Samples delivered to SGS were divided into 28 subsamples and then composited for metallurgical testing by applying several criteria, including copper residual assays, iron content, mineralogy, sample location, and the ratio of cyanide-soluble copper to total copper. The five main alteration types and the seven main rock types seen in Caariaco Norte are all present in proportional amounts in the four master composites selected. The principal assays are shown in Table 5-14 and a full elemental set of assays in Table 5-15.
Page 5-18
Table 5-14: Principal Assays for Phase IIA Composites

Composite CPY MIX ENT SEC Au g/t 0.08 0.08 0.1 0.1 Ag g/t <1 2 2 2 As g/t <0.005 0.022 0.047 0.025 Cu % 0.356 0.551 0.678 0.485 Cu (H ) % 0.017 0.056 0.097 0.091
+
Cu (CN) % 0.027 0.201 0.436 0.323
Cu (R) % 0.298 0.287 0.139 0.062
Fe % 2.72 3.33 2.86 2.21
Note: Cu (H+) = acid soluble, Cu (CN) = cyanide soluble, Cu(R) = remainder.
Table 5-15: Full Assays for Phase IIA Composites

Element Au Ag Ca Mg K Na As Cu Fe Cu(H+) Cu(CN) Cu(Res) Sulphur S Ag Al As Ba Be Bi Ca Cd Co Cr Cu Fe Ga Hg In
Unit g/t ppm % % % % % % % % % % % % ppm % ppm ppm ppm ppm % ppm ppm ppm % % ppm ppm ppm
CPY 0,08 -1 0,15 0,48 1,29 0,45 -0,005 0,356 2,72 0,017 0,027 0,298 1,49 1,57 -1 7,02 10 337 -0,5 -1 0,23 -1 12 119 0,35 2,92 19 -5 -5
MIX 0,08 2 0,17 0,47 2,04 0,45 0,022 0,551 3,33 0,056 0,201 0,287 2,51 2,51 -1 6,62 185 228 0,5 -1 0,2 4 11 119 0,55 3,9 20 -5 -5
ENT 0,1 2 0,05 0,3 1,71 0,45 0,047 0,678 2,86 0,097 0,436 0,139 2,68 3 -1 6,11 404 223 -0,5 -1 0,05 7 7 122 0,68 2,96 20 -5 -5
SEC 0,1 2 0,03 0,21 2,05 0,34 0,025 0,485 2,21 0,091 0,323 0,062 1,93 2,04 -1 6,63 213 2163 2,4 -1 0,04 3 6 135 0,46 2,27 20 -5 -5
Element K La Li Mg Mn Mo Na Nb Ni P Pb S Sb Sc Se Sn Sr Te Ti V Zn Zr Hg Al Fe Ti Mn Si
Unit % ppm ppm % ppm ppm % ppm ppm % ppm % ppm ppm ppm ppm ppm ppm % ppm ppm ppm ppm % % % % %
CPY >2 19 12 0,52 353 57 0,79 -1 18,2 0,04 10 1,51 -5 11 -5 -10 46 -1 0,35 45 199 59 -0,1 6,73 3,08 0,32 0,04 32,33
MIX >2 15 -10 0,53 251 30 0,7 -1 8,5 0,03 7 2,71 11 12 -5 -10 58 -1 0,38 71 167 45 0,2 6,36 3,78 0,36 0,02 33,56
ENT >2 12 -10 0,33 93 22 0,73 -1 4,2 0,02 15 3,02 49 8 -5 -10 86 -1 0,24 31 182 45 -0,1 5,05 3,08 0,22 0,01 34,8
SEC >2 11 -10 0,28 79 33 1,07 -1 5,4 0,02 14 1,95 15 8 -5 -10 104 -1 0,28 30 93 21 -0,1 6,48 2,32 0,24 -0,01 34,29
Note: The (-) sign indicates values below the detection limit of the method.
Page 5-19
5.3.4
Comminution Testwork Development

The 2008 comminution testwork consisted of two sets of tests. The first was conducted to support process development and an interim report, and included: Crushing work index (CWI) SAG Power Index (SPI) Bond Rod mill work index (RWI) Bond Ball mill work index (BWI) Abrasion Index (AI). While the second set of tests were variability comminution tests, completed after the SRK PEA report was issued. Testwork results are summarized in Table 5-16.
Table 5-16: Comminution Test Results (2008)
Composite CPY MIX ENT SEC MinnovEx Crushing Index 26 98 98 96 BWI kW-h/t 9.8 10.9 11.3 9.2 SPI min 72.4 48.3 49.8 56.5 Ai 0.1114 0.1301 0.1949 0.0945
Compared to the scoping study composites, the ball mill work index results (BWI) were significantly lower for this phase of work and also for the subsequent variability composites. However, because no composite material from the scoping study remains that could be retested, this anomaly will remain. Both results are from the same laboratory, equipment, and procedures. Because the program summarized in Table 5-16 was far more comprehensive, it was recommended that these values rather than the scoping study values be used moving forward.
5.3.5
Flotation Primary Flotation Test (2008)

Primary flotation was conducted with six stages of roughing. Collector, frother type, dosage and pulp pH were varied to evaluate their effect on mineral flotation performance. The duration of each flotation test was 18 minutes. A schematic of the sequence is shown in Figure 5-6.
Page 5-20
Figure 5-6:
Rougher Flotation Procedure

Mineral
Grinding Rougher Cu Final Tailing
0-1 min, Conc Rougher 1 1-2 min, Conc Rougher 2 2-4 min, Conc Rougher 3 4-8 min, Conc Rougher 4 8-12 min, Conc Rougher 5 12-18 min, Conc Rougher 6
5.3.5.1
Effect of Primary Grind Size(2008) The effect of grind size (P80 at 75, 100, 150, 200, and 250 m) on the flotation performance of the Phase II composites was evaluated. Several tests were carried out at 25 g/t of collector A3894, 10 g/t of frother MIBC, pH 10 (maintained through addition of lime), and 33% slurry density. Although finer grinding improved the copper recovery, a primary grind of P80 125 m was deemed to be optimum. The CPY composite particularly showed a marked improvement between 106 m and 150 m. The tests showed (Figure 5-7) a substantial variance in recovery between the composites, in the following order: MIX > ENT > SEC > CPY. The last two composites, SEC and CPY, yielded 86% and 85%, respectively, after six-stage rougher flotation at 150 m. The CPY composite was more sensitive to primary grind size than the other two types. Figure 5-7shows a noticeable increase in copper recovery when the grind size is reduced from 150 m to 100 m.
Page 5-21
Figure 5-7:
Effect of Primary Grind on Cu Recovery

Effect of K80 on Cu recovery
100 90 80 70
Recovery Cu %
60 50 40 30 20 10 0 0 50 100 150 K80 200 250 300 PYC MIX ENT SEC
5.3.5.2
Effect of Collectors and Frothers (2008) Collector screening tests were performed on the Phase IIA composites to investigate the selectivity for copper recovery. Tests were completed at a grind size of 125 m, pH 10, collector types AP-3894, AP-3330, PAX, AP-3477, AP-404, AP-3926, AP-3302 and with frother (MIBC) addition. Higher copper selectivity was observed for all composites using collectors AP-3330, AP-3477, and AP-3894. The addition of AP-3894 appears to increase the concentrate copper grade of the ENT composite significantly. The results for the composites CPY, ENT, MIX, and SEC are shown in Figures 5-8 to 5-11. Although the AP-3302 showed fairly good selectively in all composite types, it also yielded a lower overall recovery at the typical rougher concentrate grade range required to ensure good overall recovery. This is demonstrated in Figure 5-12. Frother screening tests were carried out on the process development composites at a grind size of 125 m, pH 10, frother types MIBC, D-250, H-76 and TEB and with the addition of collectors AP-3330 (25 g/t) and AP-3477 (25 g/t). The results indicate that copper recovery and grade benefit most from the use of AP-3330 / MIBC (Figures 5-13 to 5-18).
Page 5-22
Figure 5-8:
Collector Type vs. Rougher Recovery for Composite CPY
EFFECT COLLECTOR COMPOSITE CPY

100 90 80 70
Recovery Cu %
60 50 40 30 20 10 0 0 2 4 6 Grade Cu % 8 10 12 3330 PAX AP-3477 404 AP-3926 AP-3302
Figure 5-9:
Collector Type vs. Rougher Recovery for Composite ENT

EFFECT COLLECTOR COMPOSITE ENT
AP-3330 PAX AP-3477 AP-404 AP-3926 AP-3302
100 90 80
Recovery Cu %
70 60 50 40 30 20 10 0 0 5 10 15 Grade Cu % 20 25
30
Page 5-23
Figure 5-10: Collector Type vs. Rougher Recovery for Composite MIX
EFFECT COLLECTOR COMPOSITE MIX

100 90 80
Recovery Cu %
3330 PAX AP-3477 AP-404 AP-3926 A-3302
70 60 50 40 30 20 10 0 0 5 10 Grade Cu % 15 20
25
Figure 5-11: Collector Type vs. Rougher Recovery for Composite SEC
EFFECT COLLECTOR COMPOSITE SEC
100 90 80 70
Recovery Cu %
60 50 40 30 20 10 0 0 2 4 6 8 10 12 14 16 18 Grade Cu % AP-3330 PAX AP-3477 A-404 AP-3926 AP-3302
Page 5-24
Figure 5-12: Rougher Recovery vs. Collector Type for all Composites
Collector Screening Test 100 10
90
80
70
Cu recovery, %
60
50
40
30
20
10
0 AP-3330 PAX AP-3477 Collector CPY MIX ENT SEC CPY Cu, % MIX Cu, % ENT Cu, % SEC Cu, % AP-404 AP-3926 AP-3302
Figure 5-13: Rougher Recovery vs. Frother Type for all Composites (collector AP-3330)
Frother Screening Test (collector AP-3330) 100 95 90 85 80 75 70 65 8
Cu recovery, %
50 45 40 35 30 25 20 15 10 5 0 MIBC D250 Frother CPY MIX ENT SEC CPY Cu, % MIX Cu, % ENT Cu, % SEC Cu, % H76 TEB
Note: Frother screening test (collector AP-3330)
Page 5-25
Cu grade, %
60 55
Cu grade, %
Figure 5-14: Rougher Recovery vs. Frother Type for all Composites (collector AP-3477)
Frother Screening Test (collector AP-3477) 100 95 90 85 80 75 70 65 8
Cu recovery, %
50 45 40 35 30 25 20 15 10 5 0 MIBC D250 Frother CPY Cu, % H76 TEB
CPY
MIX
ENT
SEC
MIX Cu, %
ENT Cu, %
SEC Cu, %
Figure 5-15: Recovery vs. Grade for Different Frother Types for CPY (collector AP-3330)
COLLECTOR AP-3330/EFFECT FROTHER COMPOSITE CPY
100 90 80 70
Recovery Cu %
60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 Grade Cu % 250 76-A TEB MIBC
Page 5-26
Cu grade, %
60 55
Figure 5-16: Recovery vs. Grade for Different Frother Types for ENT (collector AP-3330)
COLLECTOR AP-3330/EFFECT FROTHER COMPOSITE ENT
100 90 80 70
Recovery Cu %
60 50 40 30 20 10 0 0 1 2 3 4 5 Grade Cu % 6 7 8 9 10 250 76-A TEB MIBC
Figure 5-17: Recovery vs. Grade for Different Frother Types for MIX (collector AP-3330)
COLLECTOR AP-3330/EFFECT FROTHER COMPOSITE MIX
100 90 80 70
Recovery Cu %
60 50 40 30 20 10 0 0 1 2 3 4 Grade Cu % 5 6 7 8 250 76-A TEB MIBC
Page 5-27
Figure 5-18: Recovery vs. Grade for Different Frother Types for SEC (collector AP-3330)
COLLECTOR AP-3330/EFFECT FROTHER COMPOSITE SEC
100 90 80 70
Recovery Cu %
60 50 40 250 30 20 10 0 0 1 2 3 4 Grade Cu % 5 6 7 8 76-A TEB MIBC
5.3.5.3
Effect of Pulp pH Several tests on the prefeasibility composites were conducted at natural pH and at pH 9, 10, 11, and 12. Tests were performed at a grind size of 125 m with the addition of collector AP-3330 (25 g/t) and frother MIBC (20 g/t). Natural pH values corresponding to composites CPY, MIX, SEC, and ENT are 6.2, 6.57, 6.65, and 5.37, respectively. A noticeable decrease in copper recovery occurs at natural pH for ENT and SEC mineral samples. At pH 9 and 10, good performance was obtained (recovery and grade), with particularly higher concentrate copper grades at pH 10 for all composites. Performance is shown in Figures 5-19 to 5-22.
5.3.5.4
Sulphidization Tests (2008) Tests were completed at a grind size of 125 m, pH 10, and the addition of collector AP-3330 (25 g/t) and frother MIBC (10 g/t). The effect of adding the reagent NaHS (50 g/t and 100 g/t) on the mineral response to flotation was evaluated. The composites CPY, MIX, and SEC showed better copper recoveries without the addition of NaHS. However, the addition of 50 g/t of NaHS did slightly improve copper recovery for the ENT composite.
Page 5-28
Figure 5-19: Recovery vs. Grade at Different pH for CPY (collector AP-3330)
CPY Effect of pH
100 90 80
Cu recovery, %
70 60 50 40 30 20 10 0 1 2 3 4
Cu grade, %
pH9 pH11 pH12 pH10 pH Natural
Figure 5-20: Recovery vs. Grade at Different pH for ENT (collector AP-3330)
ENT Effect of pH 100 90 80
Cu recovery, %
pH10 pH natural pH9 pH 11 pH12
70 60 50 40 30 20 10 0 3
10
Cu grade, %
Page 5-29
Figure 5-21: Recovery vs. Grade at Different pH for MIX (collector AP-3330)
MIX Effect of pH 100 90 80
Cu recovery, %
70 60 50 40 30 20 10 0 3
pH9 pH11 pH12 pH10 pH natural
6
Cu grade, %
Figure 5-22: Recovery vs. Grade at Different pH for SEC (collector AP-3330)
SEC Recovery/Grade 100 90 80 70 60 50 40 30 20 10 0 3 4 5 Cu grade, % 6
Cu recovery, %
pH 10 pH natural pH 9 pH11 pH12 7 8
Page 5-30
5.3.6
5.3.6.1
Flotation Cleaner Flotation Tests

Regrind Tests (2008) Tests were performed on the prefeasibility composites with a primary grind size of 125 m, pH 10, cleaner pH 11.5 and AP-3330 (25 g/t) and MIBC (10 g/t). Regrinds were evaluated at times of 4, 8, and 12 minutes rather than specific P80 sizes to facilitate lab work with the small sample mass available. Figure 5-23 is a schematic of the workflow employed. The CPY composite required 4 minutes of regrinding to achieve optimal grade-recovery relationship in batch tests; the other three composites required between 8 and 12 minutes (Table 5-17 and Figures 5-24 to 5-27). Locked-cycle tests and detailed mineralogy were conducted as necessary to further define the regrind requirements for each composite.
Figure 5-23: Schematic of Open Cleaner Tests
Mineral Grinding Rougher Ro. Tail
Re grinding Cleaner 1a Cl. Scav. Cl. Scav. Tail
Cleaner 2a
Cl. 2 Tail
Cleaner 3a
Cl. 3 Tail
Co. Cleaner
Table 5-17: Particle Sizes at Various Regrind Levels

CPY Regrind Time Minutes 0 4 8 12 P80m 102 68 35 29 -400 # % 58,5 71.0 83.1 88.5 MIX P80m 100 68 36 28 -400 # % 57.6 69.5 81.5 87.5 ENT P80m 83 67 51 37 -400 # % 55.5 63.5 71.7 81.0 SEC P80m 99 67 35 30 -400 # % 59.4 71.0 82.5 88.2
Page 5-31
Figure 5-24: Concentrate Grade vs. Level of Regrinding for CPY

(Open Cycle Cleaner Tests)
100 90
Composite CPY Effect of Regrind
0 80 70
Recovery Cu %
4 8 12
60 50 40 30 20 10 0 0 5 10 15 20
25
Grade Cu %
Figure 5-25: Concentrate Grade vs. Level of Regrinding for ENT
Composite ENT. Effect of Regrind

100 90 80
Recovery Cu %
0 4 8 12
70 60 50 40 30 20 10 0 0 5 10 15 20 25 30
35
Grade Cu %
Page 5-32
Figure 5-26: Concentrate Grade vs. Level of Regrinding for MIX

Composite MIX. Effect of Regrind
100 90 80
Recovery Cu %
0 4 8 12
70 60 50 40 30 20 10 0 0 5 10 15 20
25
Grade Cu %
Figure 5-27: Concentrate Grade vs. Level of Regrinding for SEC
Composite SEC. Effect of Regrind

100 90 80
Recovery Cu %
70 60 50 40 30 20 10 0 0 5 10 15 20 Grade Cu % 25 30 35 40 0 4 8 12
5.3.6.2
Effect of Pulp pH on Cleaner Flotation (2008) Several cleaner flotation tests were conducted at pH 11, 11.5 and 12 at a grind size of 125 m with the addition of AP-3330 (25 g/t) and frother MIBC (20 g/t). A pH of 11.5 achieved satisfactory although not optimal results for all composites tested at this stage (Figures 5-28 to 5-31).
Page 5-33
Figure 5-28: Concentrate Grade vs. pH for CPY

(Open Cycle Cleaner Tests)
Composite CPY. Effect of pH

100 90 80 70
Recovery Cu %
60 50 40 30 20 10 0 0 2 4 Grade Cu % 6 8 10 11,0 11,5 12,0
Figure 5-29: Concentrate Grade vs. pH for ENT

Composite ENT. Effect of pH
100 90 80 70
Recovery Cu %
60 50 40 30 20 10 0 0 5 10 Grade Cu % 15 20 25 11,0 11,5 12,0
Page 5-34
Figure 5-30: Concentrate Grade vs. pH for MIX

Composite MIX. Effect of pH
100 90 80 70
Recovery Cu %
60 11,0 50 40 30 20 10 0 0 5 10 15 Grade Cu % 20 25 30 11,5 12,0
Figure 5-31: Concentrate Grade vs. pH for SEC

Composite SEC. Effect of pH
100 90 80 70
Recovery Cu %
11,0 11,5 12,0
60 50 40 30 20 10 0 0 5 10 15 20 25 30 35 40 45 Grade Cu %
Page 5-35
5.3.6.3
Cleaner Kinetics (2008) Tests were carried out to determine the optimum flotation time for cleaner and cleaner-scavenger flotation. Tests were run at a primary grind size P80 of 125 m, pH 10 and the addition of AP-3330 (25 g/t) and frother MIBC (10 g/t). Flotation times were as follows: First-stage cleaner ................................ 0.5, 1, 2, and 4 minutes Cleaner-scavenger ................................ 1, 2, 4, 7, and 11 minutes Cleaner flotation time must achieve a balance between satisfactory copper recovery and good selectivity against slow-floating gangue minerals. At least 3 minutes per stage is required for good copper recovery, but more time will increase gangue pull to the concentrate, reducing the concentrate grade and possibly increasing the recirculating load. It has been indicated from previous testwork that longer flotation times would lead to increased recovery of precious metals in this material.
5.3.7
Comminution Testwork Variability

The second set of testwork concentrated on defining the level of comminution variability across the orebody to provide information suitable for a later prefeasibility or feasibility study. This 2008 comminution testwork consisted of the followed tests: Crushing work index (CWi) SAG mill comminution (JKSMC) Drop weight test (JKDWT) Specific gravity (SG) Bond rod mill work index (RWi) Bond ball mill work index (BWi) Abrasion Index (Ai). The samples used in this testwork were 48 composite samples formed from material sourced from the 2008 metallurgical drilling campaign. These 48 samples were subjected to all tests except drop-weight tests, which were limited to 10 samples and were used to provide a calibration between the JKDWT and JKSMC tests.
5.3.7.1
Crushing Testwork (2008) The Bond crushing work index test (CWi) is used to calculate the net power requirements for sizing crushers, the required closed-sized settings for cone crushers, or the open-size settings for gyratory and jaw crushers for a given product size. Caariaco variability crushing work indices in the range of 4 to 12 kWh/t, are typical of porphyry copper
Page 5-36
deposits but are significantly lower than those reported in the PEA. The 80th percentile of the CWi was found to be 13 kWh/t. 5.3.7.2 SAG Mill Testwork The JKTech drop-weight test (JKDWT) and the SMC (abbreviated version of the dropweight test) aim to estimate crushing energy requirements and specific parameters (energy and sizing data) that can be used in grinding circuit modelling and simulation using the JKSimMet software. The JKDWT data are presented in Table 5-18 and are developed further and compared against the SGS database of test results (2008) in Table 5-19. The SMC data are provided in Tables 5-20 and 5-21.
Table 5-18: Summary of JKDWT Data Table 5-19: Comparison of Deposit JKDWT Values Against SGS Database
Page 5-37
Table 5-20: Summary of SMC and JKDWT Data
Page 5-38
Table 5-21: Comparison of SMC Deposit Values Against SGS Database (2008)
5.3.7.3
Bond Mill Work Index Testwork The variability testwork indicates an average bond rod mill work index (RWi) of just over 10 kWh/t. This, in conjunction with the BWi of just under 10 kWh/t, indicates that the ore is a soft to moderately soft type. Figure 5-32 summarizes the grindability data from the 48 variability composites. The 80th percentile of hardness was found to be 11.9 kWh/t for RWi.
Page 5-39
Ball mill work indices in the range of 9 to 12 kWh/t confirm the results of the process development composites by showing a soft to moderately soft ore type. Figure 5-33 summarizes the grindability data from the 48 variability composites. The 80thpercentile for hardness was 12.7 kWh/t.
Figure 5-32: Distribution of Bond Rod Mill Work Indices
Bond Rod Mill Index 100 90 80 70
Percentile, %
60 50 40 30 20 10 0 6 8 10 RWI, kW-h/t 12 14 16
Figure 5-33: Distribution of Bond Ball Mill Work Indices

Bond Ball Mill Index 100 90 80 70
Percentile, %
60 50 40 30 20 10 0 7.20
8.20
9.20
10.20
11.20
12.20
13.20
14.20
15.20
16.20
BWI, kW-h/t
Page 5-40
5.3.7.4
Abrasion Testwork The abrasion index can be used to determine steel media and liner wear in crushers, rod mill, and ball mills. The range of abrasion index numbers is shown in Figure 5-34. The average abrasion index was less than 0.1, which may indicate that the selected variability composites correspond to a non-abrasive ore. Figure 5-34 summarizes the abrasion data from the 48 variability composites. At the 80th percentile, the abrasion index is around 0.12, which is the basis of the steel values used for the operating cost.
Figure 5-34: Distribution of Bond Abrasion Indices
Abrasion Index 100 90 80 70
Percentile, %
60 50 40 30 20 10 0 0.011
0.061
0.111 Ai
0.161
0.211
Note: Abrasion index (variability testing)
5.4
5.4.1
Phase II Program Results (2010)

Introduction
Work resumed in 2010 under the supervision of Transmin based on the results obtained in 2008. It was essentially a continuation of the process development and employed the same drill inventory of samples to provide components of the composites. This work had the following metallurgical objectives: defining three composites from the samples remaining from inventory set aside for flotation variability work to complete the grinding and flotation process development work confirming the reagent selection and parameters of final process development generating sufficient sample of tailings for geochemical characterization, establishing the particle size distribution for the design of tailings systems, chemical characterization of effluents and environmental studies
Page 5-41
generating sufficient concentrate production to allow proof-of-concept testwork in roasting. New composites were created from the samples used for the variability composites according to the following criteria: ACP .............................. selection of samples containing chalcopyrite and arsenic minerals ACS .............................. selection of samples containing secondary copper sulphide (covellite, chalcocite, bornite) and arsenic minerals ACL ............................... selection of samples with low As content (<0.03%As). The emphasis of this work was to assess the impact of arsenic and other penalty elements relative to the principal types of mineralogy. Table 5-22 summarizes the distribution of weight for each composite. Table 5-23 lists the samples selected for the formation of composites ACP, ACS, and ACL. These same materials were used to provide samples for the variability comminution work performed in 2008.
Table 5-22: Composite Characteristic
Composite ACP ACS ACL Composition As, Cpy As, Cv, Cc, Bo low As No. of Samples 27 20 8 Weight (kg) 135 100 80 Cu % 0.46 0.55 0.43 As % 0.02 0.03 0.01 Comment Arsenic comp primary Arsenic comp secondary Arsenic comp low As
Page 5-42
Table 5-23: Composition of 2010 Program Samples

Weight Composite Name CP-01 CP-02 CP-03 CP-05 CP-06 CP-07 CP-08 CP-09 CP-10 CP-11 CP-12 CP-13 CP-14 CP-15 CP-16 CP-17 CP-19 CP-20 CP-21 CP-22 CP-23 CP-24 CP-25 CP-26 CP-27 CP-28 CP-30 CP-31 CP-32 CP-33 CP-34 CP-39 CP-40 CP-41 CP-42 CP-43 CP-44 CP-45 CP-46 CP-47 CP-48 Mineralogy py, cpy, bo, tnn, (cv) py, bo, cpy, (en) py, bo, en py, en, cpy, tnn, (cv) py, en, tnn, (cv) py, en, tnn (cpy, cv) py, en, tnn, (cv) py, en, bo py, cpy, (bo), mg py, cpy, mg py, cpy, mg py, cpy py, cpy py, cc, cpy, (hem) py, cpy, (hem) py, cv, bo, en py, cpy, bo py, cpy, (en) py, bo, en, cpy py, bo, en, (cpy) py, cc, cpy, en py, (bo, cpy) py, cv, cpy, (en) py, bo, en, cpy py, cc, bo, en py,(cpy) py, cpy, cv py, cpy py, cc, en py, cpy py, cpy, bo py, bo, cpy, (en) py, cpy, (bo, en) py, en py, en py, cpy, cv, cc py, cpy, (bo) py, cpy, (bo, en) py, cpy, bo, en py, cpy, (bo, en) py, cpy, bo, (en) Core Sample 484 262 780 68 22 303 332 278 154 30 118 73 249 243 149 93 237 223 90 326 152 101 465 439 332 219 404 177 145 148 180 138 48 157 160 Other 37 37 37 37 20.2 8 51.77 26.8 25.55 26.3 20.7 38.4 22.35 16.8 26.2 22.25 Total 484 262 780 105 59 340 369 278 174 30 118 73 257 243 149 93 237 223 90 326 152 101 465 439 332 219 404 177 145 148 180 52 165 26 75 178 198 22 17 26 22 CuT % 0.64 0.94 0.53 0.66 0.53 0.62 0.35 0.88 0.29 0.36 0.34 0.40 0.41 0.34 0.29 0.25 0.32 0.28 0.40 0.72 0.67 1.18 0.71 0.49 0.59 0.53 0.41 0.44 0.51 0.49 0.26 0.27 0.21 0.15 0.60 0.62 0.50 0.43 0.17 0.51 Assays As (ppm) 1,025 277 1,761 217 724 764 342 739 669 110 82.6 82.6 951 45.3 135 202 As (%) 0.10 0.03 0.18 0.022 0.072 0.076 0.034 0.07 0.07 0.01 0.01 0.01 0.10 0.00 0.01 0.02 kg 20 20 20 20 20 20 20 20 20 5 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 5 20 20 20 5 5 5 10 Weight Remain 464 242 760 85 39 320 349 258 154 25 98 53 237 223 129 73 217 203 70 306 132 81 445 419 312 199 384 157 125 128 160 32 145 21 55 158 178 17 12 21 12 ACP 0.25 0.25 0.25 0.25 1.00 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 1.00 1.00 0.50 Ratio ACS 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 1.00 0.25 1.00 0.50 ACL 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 ACP 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Weight (kg) ACS 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 ACL 10 10 10 10 10 10 10 10 -
Page 5-43
5.4.2
Flotation Primary Flotation Test

Primary flotation was conducted with six stages of roughing. Collector, frother type, dosage and pulp pH were varied to evaluate their effect on mineral flotation performance. The duration of each flotation test was 18 minutes. A schematic of the sequence is shown in Figure 5-35.
Figure 5-35: Rougher Flotation Procedure
Mineral Grinding Rougher Cu Final Tailing
0-1 min, Conc Rougher 1 1-2 min, Conc Rougher 2 2-4 min, Conc Rougher 3 4-8 min, Conc Rougher 4 8-12 min, Conc Rougher 5 12-18 min, Conc Rougher 6
5.4.2.1
Effect of Primary Grind Size (2010) The effect of grind size (P80 at 120, 150, 175, 200, and 250 m) on the flotation performance of the three composites (at the conditions developed in 2008) was evaluated. All tests were performed as rougher kinetic tests with six stages using 25 g/t of collector A3894 and 10 g/t of frother MIBC. Tests were conducted at pH of 10 (maintained through addition of lime) and 33% slurry density. The results are summarized in Figure 5-36. As expected, there was a decrease in recovery when using a coarser grind for all three composites. However, the impact of increasing from 150 m to 200 m was considered minor for all composite types. Indeed, recoveries for the ACS composite increased slightly with the coarser grind. The results were sufficiently encouraging to develop a comparison model based on preliminary capital and operating costs at the various sizes versus revenue. In this model, the cost of power was assumed to be $0.05/kWh and reagent loading was kept constant as per the test. The capital equipment was maintained at the same level.
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Figure 5-36: GrindCu Recovery Curves for Composites ACP, ACS, and ACL 100.0 95.0
Rougher Recovery, % Cu
90.0 85.0 80.0 75.0 70.0 65.0 60.0 55.0 50.0 100 150 200 250 ACP ACS ACL
Primary Grind P80, m
The modelling was done by comparing recoveries at a constant rougher grade of 4%. The mass pull was examined to determine the impact on regrinding and whether energy requirements here would outweigh the benefits produced elsewhere. For all ore types, the increase in throughput and decrease in overall cost outweighed recovery loss and the required cost increases in regrinding. In all three cases, the comparison model showed that it was economically beneficial to move from a primary grind of 150 m to 200 m, as it allowed a greater amount of metal to be recovered per unit of expenditure. The results for the individual composites are presented in Figures 5-37 to 5-39.
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Figure 5-37: Primary Grind vs. Rougher Recovery for ACP Test Summary
Figure 5-38: Primary Grind vs. Rougher Recovery for ACS Test Summary
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Figure 5-39: Primary Grind vs. Rougher Recovery for ACL Test Summary
5.4.2.2
Effect of Collectors (2010) Grind size was held constant at a P80 of 150 m, and all tests were performed as rougher kinetic tests with six stages. The base case was the flotation recipe developed in 2008, which used 25 g/t of collector A3894 and 10 g/t of frother MIBC, pH 10, and a slurry density of 33%. The goals of the collector tests were to increase the recovery of both copper and gold into the concentrate. At the end of the 2008 test campaign, further testwork had indicated that the A3894 gave more favourable results than A3330 and A3894 was used afterwards. Other reagents that were tested included a potassium xanthate collector (PAX), MX945 (also called GoldMax) produced by Cytec Industries Inc. at 30, 40, and 50 g/t, and mixed reagent suites at 25 g/t in the following combinations: 75% A-3894 and 25% PAX 75% A-3477 and 25% PAX 75% A-3894 and 25% SIBX 40% A-3894, 40% A-3477, and 20% PAX.
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A-3894 is an alkyl-alkyl thionocarbamate collector that is selective against pyrite; is a dithiophosphate collector reagent that is fairly selective against pyrite; and potassium amyl xanthate that is a very strong collector and not all that selective pyrite. SIBX is sodium isobutyl xanthate, which is weaker and more selective pyrite than PAX.
A-3477 PAX is against against
In these rougher tests, the best overall recovery performance was achieved by the 75% A-3894 and 25% PAX combination. Not only was copper performance better, but gold performance was also substantially upgraded from previous work. The combination of 75% A-3894 and 25% PAX provided the best overall recoveries for both Cu and Au. Although no cleaning tests were available, it was projected that it would be possible to make a saleable concentrate similar to that achieved in 2008. The kinetic curves indicated that the performance of the 75% A-3894 and 25% PAX curve at the rougher stage was generally as good as the 100% A-3894 curve and, in the case of the ACS material, actually better. Cu recoveries for each composite are detailed in Figures 5-40 to 5-42 and gold recoveries in Figures 5-43 to 5-45.
Figure 5-40: Copper Rougher Recovery vs. Collector for ACP Test Summary
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Figure 5-41: Copper Rougher Recovery vs. Collector for ACS Test Summary
Figure 5-42: Copper Rougher Recovery vs. Collector for ACL Test Summary
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Figure 5-43: Gold Recovery vs. Collector for ACP Test Summary
Figure 5-44: Gold Recovery vs. Collector for ACS Test Summary
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Figure 5-45: Gold Recovery vs. Collector for ACL Test Summary
5.4.2.3
Effect of Cleaning Following the change in both primary grind and reagent suite for the rougher flotation, the resulting course of action was to conduct a testing campaign that examined the combined impact of the coarser primary grind and the different reagent suite. Grind size was held constant at a P80 of 200m and all tests were performed as rougher kinetic tests with six stages. The base case was the flotation recipe developed in 2008 with the use of 25 g/t of collector A3894 and 10 g/t of frother MIBC, pH 10, and a slurry density of 33% in rougher flotation. The second case used the mixed reagent approach of 25 g/t (75% A-3894 and 25% PAX), pH 10 and a slurry density of 33% in rougher flotation. The concentrates produced by this rougher approach were then cleaned in three stages utilizing different levels of pH to remove the pyrite at a regrind P80 of approximately 35 m. The unoptimized results (Figures 5-46 to 5-48) indicate that the cleaning requires a high pH level of approximately 12 to produce reasonable copper concentrate grades. In addition, the mixed reagent did not perform as well as the sole use of A3894. The mixture was a particular disadvantage for the ACP material and also slightly worse for ACS, but fairly similar for ACL. Subsequent analysis of the testwork indicated that collector was not added properly in cleaning. At the time of reporting, mineralogical and size analysis was underway to further investigate the cause of the cleaning seen with the
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mixed reagent suite. Although there will be a compensating effect in the impurity roasting step, which will see an uplift in final copper concentrate grade suitable for sale, it is recommended that more material be obtained for a series of locked-cycle tests to examine this aspect in more detail. No results from this testwork were available for gold values in either the concentrate or the tails streams, so it was not possible to evaluate the impact of mixed reagents on gold cleaning.
Figure 5-46: GradeRecovery Curve for Different Collectors ACP Test Summary
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Figure 5-47: GradeRecovery Curve for Different Collectors ACS Test Summary
Figure 5-48: GradeRecovery Curve for Different Collectors ACL Test Summary
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5.4.2.4
Locked-Cycle Tests Although locked-cycle testwork is planned to assess the new target grind, combined with the solo A3894 reagent addition or the mixed reagent addition suite, no locked-cycle testwork has been performed at the time of writing.
5.4.2.5
Tailings Generation Flotation testwork was performed to develop the tailings flotation flowsheet and provide sample suitable for ABA testing. This testwork took place using the flowsheet developed in 2008, at a primary grind of 150 m, a regrind of approximately 35 m and the addition of 25 g/t of A3894 collector.
5.4.2.6
Concentrate Generation for SolidLiquid Separation and Roasting Tests Additional testwork was performed on all three composites (ACP, ACS, ACL) to produce feed for proof-of-concept roasting testwork by Outotec Oyj (Outotec). The flowsheet developed in 2008 was used for this testwork, applying a primary grind of 150 m, a regrind of approximately 35 m, and the addition of 25 g/t of A3894 collector. (At the time, the 200 um grind and dual reagent suite had not yet been identified as beneficial.) The sample composition for this work is summarized in Table 5-24.
Table 5-24: Samples for Solid-Liquid Separation and Roasting Tests
Composite ACP ACS ACL Composition As, Cpy As, Cv, Cc, Bo low As % Cu 0.46 0.55 0.43 Weight kg 135 100 80 Remained kg 105 70 50 Concentrate kg 2.4 1.6 1.1 Tailings g 103 68 49
Sample preparation consisted of cutting charges for the bulk flotation tests to be carried out in a D5 Denver cell 1 ft3 in size. Approximately 107 kg of ACP, 72 kg of ACS, and 50 kg of ACL material were ground to the required P80 and then floated in batches of 10 kg. The rougher concentrates were reground to the required P80 before proceeding with the cleaner-scavenger tests. The rougher and cleaner scavenger tailings were then combined into a single final tailing for each composite. The pulp tailings from the ACS and ACL composites were sent to the OutotecChile (Antofagasta) laboratory for dynamic thickening and filtration tests. The concentrates were sent to Outotec in Sweden for testing after taking a small amount for assay purposes. The analysis of these concentrates and the roasting results are included in Section 5.4.4.
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5.4.3
Solid-Liquid Separation Tests (Tailings and Concentrate)

The objective of the tailings thickening tests for the ACS and ACL composites was to determine the sedimentation rate, the solids contents in the underflow, the clarity of the liquid (overflow), the required dosage of flocculant, and the unitary area of the thickener. Several flocculants were tested including SNF-2040, Rheomax-1010, Magnafloc-1011, Rheomax-1050 and SNF-603-SH at flocculant dosing of 6, 10, and 14 g/t. Magnaflo-1011 was slightly superior to the SNF-2040 and was the one selected. The thickening tests showed that the required underflow slurry densities could be achieved for all the flocculant addition rates at the three loading levels of 0.30, 0.50, and 0.70 t/m2h (Figures 5-49 and 5-50). The thickening tests also showed that the required overflow slurry clarities could be achieved for most of the Magnafloc 1011 flocculant addition rates at the three loading levels (Figures 5-51 and 5-52).
Figure 5-49: Underflow Slurry Density vs. Flocculant Addition for ACS
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Figure 5-50:Underflow Slurry Density vs. Flocculant Addition for ACL
Figure 5-51: Overflow Clarity vs. Flocculant Addition for ACS
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Figure 5-52: Overflow Clarity vs. Flocculant Addition for ACL
Bulk concentrate settling was also tested, this time by SGS; the results are reported in Table 5-25. All concentrates showed good settling performance. The final percent solids results are best for the ACL material, followed by the ACS, and finally the ACP, but all are at 60% or above.
Table 5-25: Test Results on Bulk Concentrate Settling
Floc Conc g/t g/t g/t Settling Velocity (mm/s) 4.17 4.50 4.47 Final %Solids in UF 60.1 63.2 65.2 Unit Area 2 m /h/t 0.33 0.31 0.32
Test 1 2 3
Sample ACP ACS ACL
Flocculant A-110 A-110 A-110
5.4.4
5.4.4.1
Roasting Testwork
Chemical Reactions Partial roasting removes sulphur and arsenic from copper concentrate as volatile oxides and, in the case of arsenic, volatile sulphides. This technology is known as magnetitegiving roasting and has been used at the Boliden smelter for over 80 years. Heat from
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partial oxidation decomposes concentrate minerals. represented below:
The reactions are simplistically
Chalcopyrite: 2CuFeS2 (T>550C) Cu2S + S(g) + 2FeS .........................................(1) Enargite: 2Cu3AsS4 (T>550C) 3Cu2S + As2S3(g) +2S(g) ......................................(2) Pyrite: FeS2 (T>550C) FeS + S(g) .........................................................................(3) Subsequent oxidation reactions convert most of the sulphur and arsenic gases to oxides: S + O2 SO2 + heat ...................................................................................................(4) As2S3 + 9/2O2 As2O3(g) + 3SO2 + heat ...................................................................(5) Iron sulphide is partially oxidized: 3FeS + 5O2 Fe3O4 + 3SO2 + heat ...........................................................................(6) To the extent that the thermal decomposition reactions take place above the bed where the oxygen partial pressure is negligible, arsenic sulphide and sulphur vapour may be exhausted with the roaster gas, and so a secondary reaction zone with extra air addition may be required after removal of solids by cyclones. Heat generated in this zone is not useful for decomposition, so the overall heat balance requires low moisture in the feed. Sketch flowsheets of the selected partial roast arsenic reduction processes are presented in Figures 5-53 and 5-54.
Figure 5-53: Partial Roasting Flowsheet
Air
Secondary oxidation
Gas & dust
Clean Gas to Acid Plant Water
Concentrate (low moisture )
Fluid Bed Roaster
Cyclone (s ) Heat Exchanger (Cooler )
Quench
Gas Scrubber
Calcine cooler Air Copper Concentrate <0 .2 % As < 0 . 1 % Sb to Storage & Loadout
Wet Gas
As 2 O 3 & Dust to Stabilization
Figur 3.1-1: Arsenic Removal by Partial Roasting e
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Figure 5-54: Impurity Stabilization Flowsheet
Quenching and wet scrubbing of the gas (approximately 12% to 15% SO2, 1% to 2%O2, balance nitrogen) removes water-soluble As2O3 along with fine partially oxidized copper and iron minerals and insolubles not captured by the cyclones. It is expected, based on industrial experience with the Outotec process that the arsenic captured in the scrubber solution will be fully oxidized arsenic (i.e., no residual As2S3 in the scrubber slurry). It is also assumed that iron, copper, and insolubles captured in wet scrubbing are approximately in proportion to their abundance in the concentrate. In this system, it is expected that the arsenic will dissolve in the quench/scrub liquor as As2O3 (solubility in hot (90C) water >100 g/L). Ferric arsenate will also dissolve due to the presence of SO2: 2FeAsO4 + 3SO2 +H2O 2FeSO4 + As2O3 + H2SO4 .................................................(7) Proportions of other iron minerals will also dissolve as ferrous sulphate and thiosulphate. The copper will be selectively precipitated as sulphide in the presence of sulphur dioxide and iron sulphide.
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With reference to Figure 5-54, arsenic stabilization is achieved by: conditioning the scrubber slurry in closed atmospheric tanks with sparged SO2 to complete the dissolution of arsenic and precipitation of copper thickening and filtration to separate insoluble residue (copper sulphides, gold, and silicates) from the arsenic-iron-sulphate solution oxidation of the solution to generate scorodite (ferric arsenate): 2FeSO4 + As2O3 +3/2O2 + 2H2O FeAsO4.2H2O ...............................................(8) additional neutralization to precipitate iron as a residue stabilizer filtration of the stabilized ferric-arsenate, followed by disposal of the cake into a dedicated area of the tailings management facility. Cleaned gas for the concentrated acid manufacture proceeds to a conventional sulphuric acid manufacturing plant. 5.4.4.2 Testwork Concentrates produced from the ACP, ACS, and ACL composites were sent to Outotec in Sweden for testing. The objective was to reduce the As and Sb in the concentrate to levels that would have low or no penalty elements and thus enhance the marketability of the product. The roasting tests were performed in a rotating kiln at fixed temperature. Each concentrate was tested at four different temperatures: 600C, 650C, 700C, and 725C with a residence time of 30 minutes for each test. A stable reducing environment was achieved by adding a flow of SO2 gas. The resulting calcines were analyzed for both sintering tendencies and elemental composition. Elemental analyses of the composites feed material and composite products are shown in Table 5-26 and Table 5-27. At 700C. the roasting tests show that the expected arsenic content will normally result in a calcine with a residual arsenic content of 0.05% to 0.2% unless calcium is present either in the gangue or from the reagent systems. The ACL calcine achieved the best result at 700C, producing a concentrate that would not incur a smelter penalty. The ACS calcine also achieved good performance at 700C and typically would not incur a smelter penaltyor, if so, it would be minor. The ACP calcine, did not perform as expected at the 700C test temperature and contained a level of arsenic that would incur a penalty. This may be due to the presence of excess lime used for pH control in the cleaning circuit. It may be necessary to examine this issue in additional work by determining ways to either reduce lime levels in the plant (e.g., pre-roast concentrate washing), blend with other concentrates, or treat the concentrate further.
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It is highly recommended that further composite preparation for testing of the partial roasting process be correlated to the mine plan so that the results would be more representative of what will be processed through the LOM.
Table 5-26: Elemental Analysis of Composite Feeds
Table 5-27: Elemental Analysis of Composite Products
Levels of antimony were found to reduce by 50% to 60%, well below penalty levels. The silver and gold content in the concentrate and calcine was not analyzed at this level of testing, but these elements are expected to behave in the same way as copper. The average increase in copper level in the concentrate was 6%; both silver and gold are likely to follow the same trend. Since the concentrate is very fine, however, about 5% of the gold and silver are likely to pass to the gas stream where they should be recovered by the downstream processes. The roasting tests did not show any problems related to sintering.
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All concentrates had a P80 of 50 m or less, with approximately 20% of the material smaller than 10 m. This suggests that 5% of the calcine will report to the scrubbing circuit for capture at that point.
5.5
Mineralogy (2010)
Samples were divided into four size fractions (100, 200, 400, and -400 mesh), and one grain mount was prepared per size fraction. This mount was polished and analyzed using the Particle Mineralogical Analysis (PMA) method, which allows for the complete mineralogical analysis of the sample, identifying mineral types and properties, and measuring average grain size. The mineralogical analysis of the three rougher concentrates indicates the following characteristics: Chalcopyrite is the main ore mineral with values between 6.06 wt% and 9.30 wt%. The main gangue in the samples is quartz, pyrite, and sericite/muscovite. Other gangue includes plagioclase/albite, chlorite, clays, Ti oxides, and biotite. The fine fraction (-400 mesh) has low amounts of pyrites and is primarily phyllosilicates. In the ACP and ACL rougher concentrates, the copper occurs mainly as chalcopyrite (70.7% and 71.7%, respectively). The remaining copper is from bornite, enargite, covellite, chalcocite/digenite, and trace tetrahedrite. In the ACS rougher concentrate, the copper occurs as chalcopyrite (49.1%), bornite (19.4%), enargite (12.3%), covellite (12.9%), chalcocite/digenite, and trace tetrahedrite. Copper sulphide liberation increases with decreased particle fraction size. Copper sulphides are predominantly associated with pyrites and silicates/phyllosilicates. Mineral and copper species compositions are shown in Tables 5-28 and 5-29 and Figures 5-55 through 5-62.
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Table 5-28: Mineral Composition of Feed Samples (MCP1 14)
Table 5-29: Mineral Composition of Feed Samples (MCP15 28)
Page 5-63
Figure 5-55: Mineral Composition of Feed Samples (MCP1 14)
Figure 5-56: Mineral Composition of Feed Samples (MCP15 28)
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Figure 5-57: Cu Species Composition in Feed Samples (MCP1 14)
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Figure 5-58: Cu Species Composition in Feed Samples (MCP15 28)
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Figure 5-59: Mineralogical Composition of ACP, ACS & ACL Composites
Figure 5-60: Cu Species Composition in Rougher Concentrates (Composite ACP)
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Figure 5-61: Cu Species Composition in Rougher Concentrates (Composite ACS)
Figure 5-62: Cu Species Composition in Rougher Concentrates (Composite ACL)
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5.6
Recovery
The metallurgical recovery estimates were derived from the 2010 testwork detailed in Sections 5.4.2.1 and 5.4.2.2 and based on the following criteria: flotation test results using the optimum reagent mixture of 75% A-3894 and 25% PAX for each of the three composites (ACP, ACS, ACL), the rougher recoveries achieved at concentrate mass pulls resulting in 4% Cu grade an adjustment of the recovery numbers, using a constant tails approach, because the grades used in testwork are higher than the average deposit grades further modification of the recovery model taking into account the coarser grind being used for the process flowsheet design, whereas the testwork was done at a fine particle grind size a reduction of 1% in copper recovery to reflect the lower recovery expected following flotation cleaner stages. Copper recoveries are expected to vary with feed grade ranging from 93.1% at 0.6% Cu and 58.8% at 0.1% Cu. The metallurgical response of gold and silver has not been assessed to the same degree as copper; however, based on the testwork completed to date, gold and silver recoveries are projected to be 55% and 50% respectively. Given that the results for the three composites were weighted equally, further definition of the distribution of these sample types and their representation in the LOM plan is recommended. This can be achieved through a variability flotation testwork program, which is currently planned for the next phase of work.
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CONTENTS 6.0 PROCESS ..............................................................................................................6-3 6.1 Process Design Criteria...............................................................................6-3 6.1.1 Design Basis ...................................................................................6-3 6.1.2 Design Parameters ..........................................................................6-3 6.2 Process Description ....................................................................................6-3 6.2.1 Overview .........................................................................................6-3 6.2.2 Open Pit Primary Crushing and Conveying ......................................6-9 6.2.2.1 General............................................................................ 6-9 6.2.2.2 Primary Crushing Station ............................................... 6-10 6.2.3 Coarse Ore Storage and Reclaim ..................................................6-10 6.2.4 Grinding .........................................................................................6-12 6.2.4.1 General.......................................................................... 6-12 6.2.4.2 SAG Mill and Pebble Recycle ........................................ 6-12 6.2.4.3 Ball Mills and Cyclone Classification .............................. 6-13 6.2.4.4 Design Considerations Grinding ................................. 6-14 6.2.5 Flotation.........................................................................................6-15 6.2.5.1 Rougher Flotation .......................................................... 6-15 6.2.5.2 Bulk Cleaner Flotation ................................................... 6-18 6.2.5.3 Design Considerations Flotation Area ......................... 6-20 6.2.6 Concentrate Dewatering ................................................................6-21 6.2.7 Tailings Thickening and Disposal ..................................................6-21 6.2.8 Roasting and Stabilization .............................................................6-23 6.2.8.1 Summary ....................................................................... 6-23 6.2.8.2 Partial Roasting ............................................................. 6-23 6.2.8.3 Impurity Stabilization...................................................... 6-24 6.2.8.4 Agglomeration ............................................................... 6-26 6.2.8.5 Acid Plant ...................................................................... 6-27 6.3 Reagents and Grinding Media ...................................................................6-28 6.3.1 Flotation Reagents ........................................................................6-28 6.3.2 Grinding Media ..............................................................................6-29 6.3.3 Product Stabilization Reagents ......................................................6-29 6.4 Process Water System ..............................................................................6-29 6.5 Process Control, Sampling, and Assay .....................................................6-30 6.5.1 Process Control System ................................................................6-30 6.5.2 Field Instrumentation .....................................................................6-31 6.5.3 Sampling .......................................................................................6-31 6.5.4 Assay Laboratory...........................................................................6-32 6.6 Concentrate Receiving and Loadout at Port Site .......................................6-32
TABLES
Table 6-1: Key Process Design Criteria .......................................................................................... 6-4
TOC i
FIGURES
Figure 6-1: Figure 6-2: Figure 6-3: Figure 6-4: Figure 6-5: Figure 6-6: Figure 6-7: Figure 6-8: Figure 6-9: Figure 6-10: Figure 6-11: Figure 6-12: Figure 6-13: Figure 6-14: Figure 6-15: Figure 6-16: Figure 6-17: Figure 6-18: Process Overview General Diagram .......................................................................... 6-6 Process Overview Block Diagram .............................................................................. 6-7 Concentrator General Arrangement .............................................................................. 6-8 Primary Crushing, Conveying, and Coarse Ore Stockpile ............................................. 6-9 Coarse Ore Reclaim System ....................................................................................... 6-11 General Arrangement of Coarse Ore Stockpile ........................................................... 6-11 SAG Mill Pebble Recirculation ..................................................................................... 6-12 Ball Mill Circuit.............................................................................................................. 6-14 Flotation Circuits .......................................................................................................... 6-16 General Arrangement of Flotation Circuits .................................................................. 6-17 Rougher Flotation Circuit ............................................................................................. 6-18 Regrind Mill and 1st Cleaner Flotation ......................................................................... 6-19 2nd Cleaner Flotation and Copper Concentrate Thickener ......................................... 6-20 Copper Concentrate Thickener .................................................................................... 6-21 Arsenic Removal Circuit ............................................................................................... 6-24 Partial Roasting General Arrangement ........................................................................ 6-25 Partial Roasting Circuit Flowsheet ............................................................................... 6-26 Stabilization Circuit ...................................................................................................... 6-27
TOC ii
6.0
6.1
6.1.1
PROCESS
Process Design Criteria
Design Basis
The process design is for a concentrator with a nominal processing capacity of 95,000 t/d of ore from the open pit. Process design criteria for the facilities are based on the following: testwork, supervised by Transmin, performed at SGS-Santiago in 2008, 2009, and 2010, using samples obtained during a 2008 drilling campaign roasting testwork, supervised by Candente and performed at Outotecs facilities in 2010. Where data were not available at the time of flowsheet development, AMEC developed criteria for the sizing and selection of equipment based on comparable industry applications, benchmarking, and the use of modern modelling and simulation techniques. Further testwork is required to develop the information needed to support process design criteria and variability responses for use in the feasibility study.
6.1.2
Design Parameters
Key design criteria for the Caariaco process plant are listed in Table 6-1. Full details may be found in Appendix D.
6.2
6.2.1
Process Description
Overview
The mineral processing and the roasting/acid plants are based on conventional technology and industry proven equipment. Figure 6-1 is a general overview diagram of the process and Figure 6-2 is a block diagram showing the major processing steps. Run-of-mine (ROM) ore from the open pit will be crushed and conveyed to the concentrator where the ore will be ground to liberate the mineral values from the host rock and then separated by flotation. The bulk copper-silver-gold sulphide concentrate produced will be filtered and introduced into the roasting plant. There the concentrate will undergo a partial oxidative roast, which will remove the arsenic and part of the sulphur into the gaseous phase. The gas will be scrubbed to capture particulate matter and the arsenic into solution. This solution will report to a stabilization circuit that will remove any valuable copper and convert the arsenic into scorodite, which will be filtered and transferred to the tailings management facility (TMF).
Page 6-3
Table 6-1:
Project Throughput Project life Annual Daily
Key Process Design Criteria

Unit years t/a t/d days % %wt mm sg % g/t g/t % % % % % % t No. of haul trucks mm mm t kWh/t kWh/t kWh/t Value 22 34,675,000 95,000 365 94 3.0 1,000 2.67 0.40 0.05 1.80 0.50 89.7 55.0 50.0 26.0 30.6 290 1.5 Gyratory 168 125 85,000 SAB 9.4 10.2 11.0 52.1 1.0 0.64
Operating Time Days per year Plant availability Run of Mine Ore Moisture content Run-of-mine top size Specific gravity Nominal feed grade Cu Au Ag Design feed grade Cu Overall plant recovery (nominal) Cu LOM average Au LOM average Ag LOM average Copper grade in flotation bulk copper concentrate Copper grade in roaster calcine Primary Crushing Haul truck capacity Dump pocket capacity Crusher type Crusher OSS Discharge P80 Coarse Ore Storage and Reclaim Live storage Grinding Circuit configuration Grinding Parameters Crusher work index (average) Bond rod mill work index (average) Bond ball mill work index (average) JKTech ore breakage test results A b ta
Page 6-4
Project Primary grinding Mill type P80 Secondary grinding Mill type Ball Mill circulating load Cyclones P80 Flotation Rougher Concentrate Recovery, Cu Grade, Cu Flotation cells Residence time Regrind Work index Circuit product size, P80 Cleaner Stage 1 Concentrate Recovery, Cu Grade, Cu Flotation cells Residence time Cleaner Stage 2 Concentrate Recovery, Cu Grade, Cu Flotation cells Residence time Cleaner Scavengers Concentrate Recovery, Mass Grade, Cu Copper Concentrate Thickening and Filtration Thickener underflow density Tailings Thickening Thickener underflow density Reagents Collector 1 Collector 2 Frother Flocculant Lime
Unit mm % m
Value SAG 3.4 Ball 250 200
% of mill feed % min kWh/t m
94 4.00 18 15.00 30
% of mill feed % min
92.5 20 10
% of mill feed % min
89.7 26.00 20
% of mill feed % wt% solids wt% solids -
0.59 2.00 65 55 AP 3894 PAX MIBC -
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Figure 6-1:
Process Overview General Diagram

ROM Ore from Open Pit
Crushing
Grinding
Flotation
Concentrate
Tails
Pyrite Flotation
Filtration
Sulphuric acid plant
Concentrate Roast / Impurity Stabilization
Sulphuric acid
Treated Concentrate
After removal of the arsenic, the gas containing sulphur dioxide will be processed through a modular plant to produce saleable sulphuric acid. The copper precipitate and solid calcine produced from the roaster and its cyclones will be agglomerated and stockpiled. Trucks will transport the combined concentrate to the port facilities, where it will be placed on ocean-going vessels for transport to overseas smelters. Figure 6-3 shows the general arrangement of the concentrator. The following sections describe each part of the process in more detail. Appendix F provides complete process flow diagrams, general arrangement drawings of the process facilities, and full design criteria.
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Figure 6-2:
Process Overview Block Diagram
Gyratory Crusher
Coarse Ore Stockpile
SAG Mill
Ball Mill
Vibrating Screen
Roughers Tailings Thickener
1st Cleaners
1st Cleaners Scavengers Process Water Storage De-Pyritization Flotation System
Regrind Mill
2nd Cleaners Concentrate Thickener Concentrate Filter Press
Tailings Pond
GAS TREATMENT
SOLIDS CAPTURE
Concentrate Storage Roaster Acid

STABILIZATION CIRCUIT
Calcine Storage
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Figure 6-3:
Concentrator General Arrangement
Page 6-8
6.2.2
6.2.2.1
Open Pit Primary Crushing and Conveying

General The primary crushing and conveying area includes the crusher station at the pit rim, the overland conveyor, and the coarse ore stockpile (COS); Figure 6-4 is a simplified flow diagram of the systems. The area includes the following major equipment: one fixed crushing station complete with a truck dump hopper, gyratory crusher, support structure, rock breaker, maintenance crane, surge bin, apron feeder, and intermediate conveyor one overland conveyor to transport crushed material to the stockpile.
Figure 6-4: Primary Crushing, Conveying, and Coarse Ore Stockpile
Crusher Feed Hopper
Gyratory Crusher
Apron Feeder
Dust Collection Self Cleaning Magnet
Coarse Ore Stockpile At Plant Site
Page 6-9
6.2.2.2
Primary Crushing Station The primary crushing station will be a fixed 60 x 89 inch gyratory crusher housed in a concrete structure and served by a mobile maintenance crane. Laydown areas within crane access will be provided at the foot of the station. Mine haul trucks with a capacity of up to 290 tonnes each will dump ROM ore directly into the dump pocket of the crusher. The ramp will be constructed of waste rock and provide truck access to two sides of the dump hopper. Crushed ore will fall into a pocket below the crushe, which in turn discharges to an apron belt feeder. The feeder will draw ore from the surge pocket at a controlled rate using a variable-speed drive and will discharge to sacrificial coarse ore conveyor No. 1. The conveyor will incorporate a magnet to remove tramp metal and a metal detector to detect remaining tramp metal in the bulk material and thus prevent damage to downstream equipment. Coarse ore conveyor No.1 will be 39 m long, inclined at 5, and will feed coarse ore conveyor No. 2 for delivery from the crushing station to the coarse ore stockpile (COS). Conveyor No. 2 will be loaded at a 5 angle, which transitions to a 16 conveying angle after a 500 m radius vertical curve. The overall length of this conveyor is approximately 970 m with a lift of 244 m. The head end of conveyor No. 2 is cantilevered to accommodate the conical coarse ore stockpile. The overland conveyor system from the crusher discharge belt feeder to the COS is sized for a design capacity of 6,900 t/h. The conveyors will not be covered. Elevated sections will be housed in open galleries, but transfer points will be housed in chutes and equipped with dust suppression spray nozzles to reduce dust generation.
6.2.3
Coarse Ore Storage and Reclaim

The COS will be conical and have a live capacity of 85,000 tonnes and additional dead capacity of 280,000 tonnes. The COS will not be covered. The purpose of the stockpile is to create a buffer between the mining and crushing operations and the process plant so that the plant can continue to receive ore from the stockpile when there are intermittent stoppages of feed from the crusher or the mine. A track dozer will be used to push ore into the feeders when ore needs to be reclaimed from the dead section of the stockpile during upstream maintenance activities. Ore will be reclaimed from the stockpile with four in-line belt feeders installed in a concrete tunnel below the stockpile. The belt feeders are sized such that three will normally operate at the required capacity with one on standby. In the event that one operating conveyor is down for maintenance or repair, two can still supply the design tonnage to the SAG mill without using the standby unit. The belt feeders will discharge ore at a controlled rate onto the SAG mill feed conveyor. The feeders will be inclined at 5 to accommodate the geometry of the SAG mill feed conveyor.
Page 6-10
Figure 6-5 is a flowsheet of the coarse ore reclaim system, and Figure 6-6 shows the position of the COS relative to the other mill site processing facilities.
Figure 6-5: Coarse Ore Reclaim System
Coarse Ore Stockpile At Plant Site
Track Dozer
Head chute Apron Feeder
Dust Collection
SAG Mill Feed Conveyor
Figure 6-6:
General Arrangement of Coarse Ore Stockpile
Page 6-11
The SAG mill feed conveyor will deliver the reclaimed ore from the stockpile to the SAG mill and also receive oversize material from the pebble circuit and SAG mill balls, which will be discharged back into the SAG mill. The SAG mill feed conveyor will be approximately 165 m long with a 15 m lift and a design capacity of 6,300 t/h.
6.2.4
6.2.4.1
Grinding
General The grinding circuit configuration will consist of an open-circuit SAG mill followed by two ball mills in closed circuit with cyclones. Pebblesmaterial greater than 15 mm leaving the SAG millwill first be screened out by a trommel screen and then passed over the SAG mill discharge screen to remove the fines and wash the material before recycle back to the SAG mill feed conveyor. The undersize from the two screens will be combined and transferred to the cyclone feed pumpbox. The average final product size from the grinding circuit will be 80% passing 200 m. Total line throughput will average 95,000 t/d.
6.2.4.2
SAG Mill and Pebble Recycle The purpose of this circuit is to prepare the feed material for the ball mill circuit, which liberates the minerals for maximum recovery in the concentrator. In particular, the SAG mill coarsely classifies the widely varying feed size, resulting in homogenized feed size distribution to the ball milling circuit. Pebbles produced by the SAG mill will be directed to the pebble recirculation system. This consists of three conveyors that transport the oversized material back onto the SAG mill feed conveyor for return to the SAG mill. The pebble recirculation conveyors are sized for a design capacity of 1,300 t/h. The need for a pebble crusher is not foreseen at this time. Figure 6-7 is a simplified flowsheet of the SAG and pebble recycle circuit.
Figure 6-7: SAG Mill Pebble Recirculation
Process Water Lime SAG Mill Coarse Ore Stockpile Trommel Screen Vibrating Screen
SAG Discharge Pumps
Ball Mill Circuit
Page 6-12
The SAG mill will be a 38 ft diameter x 20 ft effective grinding length (EGL) mill, powered by a 24 MW gearless motor drive. The mill will be operated at a ball load of between 15% and 18% by volume, a total mill loading of 26%, and a rotation at 78% of critical speed. The grates will initially be installed with a 75 mm gap, wearing to approximately 90 mm. The pulp lifters will be radial; grate flux will be achieved by adequate discharge cavity depth and proper throat design. The SAG mill discharge, with a top size of 90 mm, will pass through a trommel screen from where most of the finely ground material will report directly to the SAG discharge mill pumpbox. The remainder will pass onto a 3.6 m wide x 7.3 m long vibrating screen equipped with a 15 mm screen deck. Undersize from the vibrating screen will collect in the SAG discharge pumpbox and be pumped to the ball mill discharge pumpbox. Given the coarse nature of the feed, two installed pumps are considered necessary in this position. The washed pebbles in the vibrating screen oversize will be conveyed back to the SAG mill feed belt. Solid lime will be added to the SAG mill feed to suppress the flotation of pyrite while recovering the copper, gold, and silver minerals in the rougher flotation circuit. 6.2.4.3 Ball Mills and Cyclone Classification The purpose of this circuit is to prepare the rougher flotation feed to allow for the most efficient liberation point for the material, minimizing the use of overall concentrator grinding power while maintaining target recovery. The grinding circuit will have two 26 ft x 40 ft overflow ball mills, each driven by two 7,500 kW single-pinion, fixed-speed drives on either side of the mill, operating in parallel. Figure 6-8 is a simplified flowsheet of the ball mill circuit. The SAG mill transfer pump will feed a distribution box that splits the feed between two cyclone feed pumpboxes, one coupled with each ball mill. Each pumpbox will have a single variable-speed pump feeding a cluster of ten 30" cyclones. The average 80% passing particle size will be 200 m. Cyclone overflows will contain approximately 35% solids. Each cyclone cluster overflow stream will be sampled and the sample analyzed by a particle size analyzer before the stream feeds into the flotation circuit. Cyclone cluster underflow will report to the ball mill. The ball mills will operate at a ball load of between 30% and 33% by volume, a total mill loading of 35%, and a rotation at 76% of critical speed. A grizzly will protect each cyclone feed pump from large rocks or balls that may be discharged from the mills during upset conditions. Ball mill discharge will join the SAG mill discharge in the mill discharge pumpbox. Collectors will be added to the mill discharge pumpbox to prepare the material for subsequent flotation.
Page 6-13
Figure 6-8:
Collector Process Water
Ball Mill Circuit
SAG Mill Discharge Ball Feed Hopper Cyclone Cluster Grizzly Sampler For Particle Size Analysis Flotation Circuit
Ball Mill No. 1
Ball Mill Rejects Tote Flotation Circuit
Ball Feed Hopper Cyclone Cluster Grizzly
Sampler For Particle Size Analysis
Ball Mill No. 2
Ball Mill Rejects Tote
6.2.4.4
Design Considerations Grinding Spills from the SAG and ball mills will be collected in a common sump. Large sump pumps at the low point will handle spilled water and fine solids. The trench is designed such that coarse spilled material can be removed by a large wheel loader. A re-lining aisle will be provided at both the SAG and ball mill feed trunnions. The feed chutes for all mills will be handled by a self-propelled cart. There will be one lining machine for the SAG mills and another for the ball mills. Jib cranes by the feed-end trunnions will facilitate liner handling, and sufficient area will be provided for stacking new and used liners and for handling by large fork-lift trucks. Liners will be lifted onto the reline floor by a mobile crane prior to start of re-line activities. Hydraulic bolt-removal tools will be provided. The mill lubrication sets will be in enclosed rooms above the maximum slurry level of the sump containment, within easy gravity reach of the lubrication return lines.
Page 6-14
Grinding balls will be delivered in bulk by truck and tipped into storage bins. The grinding balls will be introduced batch-wise to the ball mill feed chutes by means of automatic feeders and conveyors.
6.2.5
Flotation
The objective of this circuit is to recover the minerals containing copper, gold, and silver into a bulk concentrate. The concentrate will subsequently be treated by partial roasting to prepare it for commercial sale. The design of the flotation circuit maximizes the recovery of these valuable minerals at the lowest overall capital and operating cost. A simplified flowsheet of the flotation circuit is shown in Figure 6-9, and a general arrangement of the flotation area is shown in Figure 6-10. Depending on the mine source location, the mill feed material may at times contain higher amounts of clay minerals and pyrite. Copper minerals and some pyrite, along with significant entrained and locked non-sulphide gangue, will be recovered in rougher flotation and then be reground to further liberate the minerals from each other. The rougher tailings will still have significant levels of pyrite, which will be removed in a flotation circuit positioned near the TMF to produce material that can be used as cyclone sand for construction of the tailings dam (see Section 6.3.6). The rougher concentrate will be upgraded in two stages of cleaning and sent to the bulk concentrate thickener.
6.2.5.1
Rougher Flotation The objective of this circuit is to maximize gangue rejection while simultaneously maximizing valuable mineral recovery to the cleaner upgrade circuits. The feed will have been ground to a point of sufficient liberation for material recovery to the upgrading circuit. The simplified rougher circuit flowsheet is shown in Figure 6-11. The average 80% passing particle size will be 200 m. Cyclone overflow will be at approximately 35% solids. The cyclone overflow stream will be sampled and the sample analyzed by a particle size analyzer before the stream reports to a distributor and is divided between two rows of six 300 m3 tank-type flotation cells (12 cells total). At 95,000 t/d, the total rougher residence time will be 18 minutes to obtain an average copper recovery of 91% before cleaning. A mixture of A3894 and potassium amyl xanthate (PAX) will be used as a collector.
Page 6-15
Figure 6-9:
Ball Mill Cyclone Clusters
Flotation Circuits
Roughers
Tailings Thickener Roughers Densification Cyclones 1st Cleaners
1st Cleaner Scavengers
1st Cleaners
1st Cleaner Scavengers
Regrind Mills
2nd Cleaners
Copper Concentrate Thickener
Page 6-16
Figure 6-10: General Arrangement of Flotation Circuits
Page 6-17
Figure 6-11: Rougher Flotation Circuit

MIBC Lime Collector Ball Mill Cyclone Clusters
Roughers Tailings Thickening
Roughers
1st Cleaners Scavenger Concentrate
Regrind Mills Densification Cyclones
The rougher concentrate will collect in a series of launders and be directed to a single pumpbox. Two rougher concentrate pumps, one operating and one standby, will feed the regrind circuit. Frother (MIBC) is added in the flotation circuit, and additional lime is added to the roughers to achieve a pH of approximately 9.8. 6.2.5.2 Bulk Cleaner Flotation The objective of this circuit is to maximize copper concentrate grade without unduly sacrificing recovery. This is achieved by: adjusting reagent combinations to perform selective recovery and rejection of valuable and gangue minerals, respectively regrinding the feeds and certain of the process streams to achieve a higher level of liberation recycling the process streams through unit operations to allow multiple attempts at recovery of high-value minerals.
Page 6-18
The copper cleaner circuit will have one regrind and two cleaner upgrading steps. The flowsheets are shown in Figures 6-12 and 6-13. The rougher concentrate will be sent directly to densifying cyclones before entering the regrind mill circuit, consisting of two M10,000 IsaMill units. These regrind mills will reduce the concentrate particle size to 30 m for discharge to the 1st cleaner circuit of four 100 m3 mechanical tank cells. The 1st cleaner concentrate reports to the 2nd cleaner feed. The tails from the 1st cleaners enter the 1st cleaner scavengers, consisting of four 100 m3 mechanical tank cells. The 1st cleaner scavenger concentrate is recirculated back to the feed of the regrind mill system, while the 1st cleaner scavenger tails join the bulk flotation tails. The 2nd cleaners will consist of four column cells and use recirculating pumps to feed a sparger assembly. The 2nd cleaner concentrate is the final concentrate and is sent to the concentrate thickener. The 2nd cleaner tails are recycled back to the feed of the 1st cleaners. All the cleaner columns employ specialized sparger technology, which requires a circulating pump to pass material through a cavitation air mixer or similar equipment. This type of technology has been selected to ensure effective cleaning performance. Lime and frother are the principal reagents in the cleaning circuit. Lime is used as the primary pH modifier throughout and is added at the regrind mills as required to depress pyrite.
Figure 6-12: Regrind Mill and 1st Cleaner Flotation
Densification Cyclones
Lime Frother Rougher Concentrate 1st Cleaners 2nd Cleaner Tails 1st Cleaners 1st Cleaner Scavengers 1st Cleaner Scavengers
Regrind Mills 2nd Cleaners Tailings Thickener
Page 6-19
Figure 6-13: 2nd Cleaner Flotation and Copper Concentrate Thickener

1st Cleaner Concentrate Frother
2nd Cleaners
Copper Concentrate Thickener Process Water Storage
1st Cleaners Feed Distributor Concentrate Filter Press
6.2.5.3
Design Considerations Flotation Area The plant is oriented to take maximum advantage of gravity. The floor of the flotation area slopes downward toward the tail of each bank at approximately 11%. This allows the tank cells to be arranged with a level control valve between each tank, providing good level control and hence control of the froth-pulling rate. The concentrate is gathered in launders and directed into the appropriate pumpbox. The process plant will not be enclosed within a building, and overhead cranes have not been incorporated into the design. Therefore, provision has been made in the general arrangement for mobile crane access and process plant lifting requirements. Standby process pumps will be available for each duty in the flotation plant; these pumps will be equipped with redundant discharge lines rather than valving arrangements. The use of columns for copper concentrate has been assumed from typical industry practice cleaning, rather than being based on testwork results. Columns are commonly used for this purpose at numerous large-scale copper operations worldwide.
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6.2.6
Concentrate Dewatering
The final concentrate will be fed into the copper concentrate thickener where flocculant will be added to assist material settling. While the thickener overflow is recycled to the process water system, the thickened underflow is stored in a concentrate storage tank. Material from the concentrate storage tank is fed in batches to the pressure filters for the reduction of overall concentrate moisture content to 8%. Figure 6-14 shows the thickener and filtration circuits. After filtration, the concentrate will be transferred by a reversible loadout conveyor to a storage silo with sufficient capacity for 8 hours of concentrate delivery. The reversible conveyor design allows the material to be discharged directly to a final product storage silo awaiting shipment to the port or to the roaster feed stockpile for further treatment. Concentrate from the roaster feed stockpile is fed to the roaster circuit for partial roasting to remove impurities (Section 6.3.7).
Figure 6-14: Copper Concentrate Thickener
2nd Cleaner Concentrate Flocculant
Process Water Storage Copper Concentrate Thickener
Copper Concentrate Stock Tank
Concentrate Filters
Concentrate Discharge Conveyor
6.2.7
Tailings Thickening and Disposal

The role of the tailings thickener is primarily to recycle solution at the process plant that would otherwise report to the TMF with the flotation tailings, thereby significantly reducing
Page 6-21
the volume of decant solution to be pumped back to the plant from the TMF. The tailings thickener underflow will be pumped to the final tailings pumpbox at a density of 55%. Any discharges from the process plant are also added to the tailings pumpbox at this point. From the pumpbox at elevation 2,930 m, the tailings will be pumped by means of a twostage pumping system (with installed spare) through a 1,050 mm diameter HDPE pipeline to a high point at elevation 2,990 m approximately 650 m north of the plant site, along the main access road. From there the tailings will flow by gravity a distance of 11,600 m through 1,050 mm (42") diameter pipe to the pyrite flotation circuit at elevation 2,985 m. Decreasing the pyrite content of the tailings will permit them to be used as construction material for the tailings dam. The tailings line will enter the pyrite flotation plant at the TMF and discharge to a mixing, dampening tank where potassium amyl xanthate (PAX) and frother will be added before the material passes to two 300 m3 self-aerated flotation cells. The pyrite-rich froth is removed and diverted directly to the TMF for subaqueous encapsulation. The pyrite flotation underflow material is pumped through a 1,050 mm (42") pipeline to a cyclone plant on the northern abutment of the tailings storage embankment, 6,800 m away. The cyclone plant will be installed at 2,750 m elevation for use during the initial years of operation and will be moved to 2,980 m elevation for final deposition as the dam height increases. The cyclone plant will separate the tailings flow into a sands component and a slimes component. The sand, which comprises approximately 24% of the total tailings stream, will be used for construction of the tailings embankment, while the slimes, the remaining 76%, will be used to form a beach on the upstream side of the embankment. The sand production plant will consist of 22 Recyclone units, plus four on standby, to produce sand material with a nominal fines content (passing No. 200 sieve by weight) of 13%; details of the plant design are provided in Appendix G. The tailings sands will exit the cyclones at a pulp density of approximately 74%, requiring the use of positive displacement pumps. Because of the high pressures needed for pumping this material, the slurry will be pumped through a HDPE-lined 350 mm (14") carbon steel pipe to 150 mm (6") diameter spigot pipes. The spigots will be spaced at 50 m intervals to evenly distribute the sand slurry along the downstream side of the embankment, where it will be spread and compacted by dozers. The slimes component will be pumped to the upstream side of the embankment through a 900 mm (36") diameter HDPE pipeline to 300 mm (12") diameter spigots spaced 50 m apart along the embankment crest. The slimes will form a beach to help raise the embankment by the centreline construction method. All tailings piping will be surface-run in a right-of-way alongside the main access road. The pipes will be weighed down by evenly spaced soil anchors to prevent snaking in response to changes in process pressures or air temperature.
Page 6-22
6.2.8
6.2.8.1
Roasting and Stabilization

Summary The filtered flotation concentrate from the process plant will contain arsenic at levels that would impair its marketability. Arsenic will therefore be removed from the concentrate by the industrially proven Partial Roasting process, which converts the arsenic to its (air oxidation) trioxide (As2O3) form. Figure 6-15 shows the major processing steps. The arsenic trioxide, recovered scrubbing the roaster off-gas with water, will need to be stabilized before disposal in a separate lined impoundment within the TMF, separated from the flotation tailings. The arsenic is oxidized and reacts with dissolved iron to produce stable, highly insoluble scorodite (ferric arsenate). During the partial roast, some of the sulphur in the concentrate is oxidized to sulphur dioxide (SO2) and must be removed from the scrubbed (arsenic-free) off-gas. The technology selected for removal is conversion to concentrated sulphuric acid in a conventional package plant. The sulphuric acid will be an upgraded, marketable byproduct. The partially roasted concentrate will be agglomerated as required for shipment and smelting. The partial roasting, impurity stabilization, and agglomerating processes are described further below.
6.2.8.2
Partial Roasting The concentrate is introduced into a fluid bed roaster operating at a temperature and controlled air flow rate conducive to partial oxidation to release the arsenic and a portion of the sulphur into the gas stream, while maintaining a suitable level of sulphur in the concentrate for smelting requirements. The gas stream is cleaned of fine particles in dust cyclones and then further oxidized with more air before being quenched and scrubbed. The resulting scrubbed slurry containing arsenic and particulate matter reports to a stabilization circuit. The concentrate from the roaster and the dust cyclone underflow will be agglomerated in a calcine cooler and then transported by screw conveyor to a storage bin. This is the final concentrate product that will be trucked to the port facilities. Figure 6-16 and 6-17 show the general arrangement and flowsheet for the roasting facilities.
Page 6-23
Figure 6-15: Arsenic Removal Circuit

CFB Roaster
Cyclones
Scrubber
Acid Plant Pkg
Dry Calcine Bin
Conditioning Leach
Acid to Market
Agglomeration
S/L (Thickening, Filtration)
Filtration
Concentrate To Market
Arsenic Stabilization (Settling & Oxidation)
Arsenical Waste Impoundment
6.2.8.3
Impurity Stabilization The slurry from gas scrubbing reports to a stabilization circuit for the recovery of any valuable copper and conversion of the arsenic into ferric arsenate, which will be filtered and disposed of within the TMF. The remaining gas, containing sulphur dioxide, passes though a modular acid gas plant to produce an upgraded, saleable sulphuric acid. The scrubber slurry passes to conditioning leach tanks where sulphur dioxide (SO2), a concentrated bleed stream from the acid manufacturing plant, is added. The role of the SO2 is to create an acidic reducing environment where arsenic and iron are leached out while copper is precipitated with the SO2 to form a copper sulphide. After this controlled reaction, the discharge from the tanks is sent to a fine copper thickener where the precipitated copper sulphide and insolubles (silica, etc.) are thickened to a level that permits filtration. The filtered material will be stored in a surge bin that discharges to agglomeration. The overflow from the fine copper thickener, containing dissolved arsenic and iron, is sent to the impurity stabilization circuit. Air is introduced together with limestone to create a stable ferric arsenate material also known as scorodite, a naturally occurring mineral, in the presence of excess iron.
Page 6-24
Figure 6-16: Partial Roasting General Arrangement
FANS
ROASTER
ELECTROSTATIC PRECIPITATOR
Page 6-25
Figure 6-17: Partial Roasting Circuit Flowsheet
Concentrate Storage Stockpile
Roaster Feed Bin
Dust Cyclones Solids Capture Roaster Feed Screw Conveyor
Gas Oxidation, Quenching, Scrubbing
Sulphuric Acid Plant
Stabilization Circuit Roaster
Cyclone Calcine Discharge Screw Conveyor Dry Calcine Storage Bin
This material is precipitated out of solution in these tanks and is transported to a stabilized product thickener. There the material is thickened and then pumped to a surge tank feeding a filtration circuit that filters out the stable arsenic-containing sludge. The filtered cake is stored in a stockpile before being trucked to a dedicated, lined impoundment within the TMF. The overall stabilization circuit is shown in Figure 6-18. 6.2.8.4 Agglomeration As shown in Figure 6-18, calcine from the roaster and dust cyclones (dry) and copper sulphide (wet) from the stabilization circuit are withdrawn from their respective storage bins and fed to an agglomerator where the moisture content is adjusted accordingly. Intense mixing in this unit results in uniform wetting, blending, and formation of granular agglomerates. The agglomerated material is non-dusting and has favourable material handling properties.
Page 6-26
Figure 6-18: Stabilization Circuit

Roaster Wet Scrub Gas discharge
SO2 Acid Storage
Solids discharge Conditioning Leach Tanks
Lime Fine Copper Thickener
Fine Copper Filter
Stabilized Product Thickener Air
Fine Copper Product Bin
Stabilized Product Receiving Tank Process Water Moisture Control Disc Agglomerator Stabilized Product Filter
Dry Calcine Storage Bin
Stabilized Product Stockpile Final Product Storage Stockpile Tailings Management Facility
6.2.8.5
Acid Plant The acid plant will be a modular package plant that will utilize current industry technology and meet environmental guidelines. In a typical acid plant flowsheet, the roaster off-gas first passes through a scrubber to be cleaned of all fine dust and particulate matter. The SO2-containing gas is then sent to a droplet eliminator and on to a cooling tower where the gas is cooled by means of circulating weak acid. The gas passes through wet electrostatic precipitators for removal of the finest particles and acid aerosols and is then diluted with atmospheric air and conveyed to a drying tower irrigated with sulphuric acid (96%) flowing countercurrent to the gas. Through this contact, the acid absorbs the moisture in the SO2 gas and heat is released. The sulphuric acid is collected and cooled. The gas from the tower is transported to a converter section where the cold SO2 gas is reheated before entering the first in a series of catalyst beds. SO3 is formed as the gas passes through successive catalyst beds. The gas then enters an adsorption tower where the SO3 is adsorbed by circulating acid, which is collected and transferred to an
Page 6-27
acid handling system. The gas stream passes through a final adsorption tower, where the remaining SO3 is recovered, and then through a high-efficiency mist eliminator and into the final discharge stack. The emissions from the acid plant will meet all environmental regulations for air and water quality.
6.3
Reagents and Grinding Media

Solid and liquid reagents will be stored in a fenced area, the solid reagents either under cover or in containers and the liquids in either tote containers or bulk tanks. As required, the reagents will be delivered to the concentrator mixing area and prepared for distribution into the system. Each reagent mixing tank will be ventilated to control emissions. The storage and mixing facilities in this area will also have a separate sump system.
6.3.1
Flotation Reagents
The principal flotation reagents for the process are listed below: A3894 liquid flotation collector, promoter PAX potassium amyl xanthate, a strong collector MIBC the frother used in flotation Lime used to control circuit pH Flocculant reagent used to help settle solids in the thickeners. Reagents will generally be delivered in tote bags or tote containers. Storage capacity will be provided for a six-week supply of unmixed reagents. Where reagents are to be diluted, storage will also be provided for a one-day supply of mixed reagent. The mix tanks will be located on the floor above the day tanks. Mixed reagents will be pumped to destination points around the flotation plant. In the case of the tailings de-sulphurization flotation plant, xanthate and neat MIBC will be mixed at the concentrator and shipped by truck to a day-storage tank at the facility. Lime required for pH control will be shipped in trucks as pebble quicklime from Chiclayo on the Peruvian coast. The quicklime will be pneumatically transferred into a silo, reclaimed when needed, slaked in a vertical stirred mill, and stored in holding tanks sized for a two-day supply. Lime slurry will be metered to the plant from a continuous, pressurized loop line with provision to add lime for pH control to the following addition points: SAG mill feed chute, rougher distribution box, regrind cyclone feed pumpbox, 1st cleaner flotation cells, tailings box and tailings thickener feed tank.
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6.3.2
Grinding Media
Steel grinding media will be trucked in bulk from Lima and be loaded into storage bins at site. The SAG mill balls will be added directly to the SAG mill feed conveyor from a bin above it, while the ball mills will be fed by conveyors from the bins that hold their media. The media for the IsaMill regrind mills will be shipped from Europe in 1 tonne tote bags and will be loaded into the mills by vendor-supplied equipment.
6.3.3
Product Stabilization Reagents

Sulphur dioxide provided as a bleed stream from the acid production plant will be used as a reductant in the conditioning leach circuit. Limestone will be necessary as a neutralizing reactant for any excess SO2 (sulphuric acid) produced from the acid plant that cannot be upgraded for sale. Flocculant will be used as a settling aid in the fine copper and stabilized product thickeners.
6.4
Process Water System

Water used for processing purposes will be derived from several sources: water reclaimed from the TMF water from pit dewatering internal plant water recycled from the tailings thickener and the copper concentrate thickener water from the waste rock seepage recovery system fresh water from Ro Caariaco for specific plant requirements. Recycle and dewatering water will be stored in two tanks sized to provide total process water requirements for three hours. The water will be delivered by gravity flow to the plant operating floor at a nominal pressure of 50 psi. Most process water will be used in grinding and flotation, with lesser amounts used for washing, flushing, and general cleanup. Booster pumps will be added where higher pressures are required. Fresh water will be used where clean water is required for the following plant systems: spray water in the flotation columns cooling water for the mill drives and lubrication systems cooling water for plant air compressors reagent mixing gland seal water.
Page 6-29
Fresh water for process demand will be obtained from the fresh/firewater tank at the mill site and supplied to the plant operating floor mill by gravity flow at a nominal pressure of 100 psi. Booster pumps will be added where higher pressures are required. The bottom section of the fresh/firewater tank will be reserved for fire water storage (800 m3), and the upper section will hold 1,400 m3 of fresh water for process and other uses. If the fresh water system were interrupted for a significant period, then the needs listed above would be met from the process water system. Water supply and distribution are discussed further in Section 8.7.
6.5
6.5.1
Process Control, Sampling, and Assay

Process Control System
Process control will be from a central control room where the operator can perform remote start-up and shut-down. In addition, operators will carry portable computing pads (with wireless links) to provide them with control information updates. A plant-wide radio system will be used for communications. The process control system for the plant will consist of a network of distributed controllers and human-machine-interface (HMI) equipment. The control system, HMI stations, and all associated communications equipment will be of current technology that has proven to be efficient and reliable in similar installations. The system will be capable of direct expansion to control all equipment required to meet possible future requirements of the mine. The system design will include the following features: The processors, configuration tools, and operator interface(s) will reside on a peer-topeer network. The peer-peer network will be redundant and self-healing. The remote I/O network will be redundant and self-healing. All controllers, HMIs, servers, and communication equipment will be backed up by uninterruptible power supply units (UPS). Programming software will be IEC 6-1131-3 compliant supporting ladder logic and function block. HMIs will be located in the main process plant control room. Field-mounted HMIs will be located as required. The control system will include an Instrument Device Management software application for tracking instrument calibration, configuration, and health. Motor control will be integrated to the main control system via DeviceNet or Profibus. Variable-frequency drive (VFD) control will be integrated to the main control system using a communications system such as DeviceNet, Profibus, Ethernet, or Modbus communications.
Page 6-30
Third-party control systems and packaged equipment PLCs will communicate with the main plant control system via fibre-optic communications link. The vendor will nominate the preferred bus protocol. The control system components, processors, power supplies, I/O modules, and data communications equipment will be housed in floor-standing cabinets in electrical rooms. The main plant control system will tie directly to the field instrumentation, which is based on Conventional 4-20 mA dc signal currents using HART SMART instruments technology. Control system analog I/O will include HART communications capabilities. Fibre-optic technology will be implemented for the network(s). The control system will be capable of linking directly through a gateway to the plant office local area network (LAN). The gateway device will include firewall protection for security.
6.5.2
Field Instrumentation
Instrumentation and control equipment will be used and applied for measurement and control of process variables such as pressure, level, flow, temperature, density, weight, and speed. The degree of instrumentation will be sufficient for safe and efficient control of the process by a minimum number of operators. All instrumentation will be standard catalogue products from suppliers. Where practical, identical components will be used to promote component interchangeability, minimize spare parts, and simplify service and repairs. The project will implement 4 to 20 mA isolated with HART Protocol as the standard for measurement instruments and control valves.
6.5.3
Sampling
Grinding and regrinding cyclone overflowsprimary cyclone overflow and cleaner regrind mill dischargewill be continuously sampled for particle size analysis. An on-stream x-ray fluorescent analyzer (OSA) will provide continuous analyses of solids content, copper, iron, arsenic, antimony, and sulphur content to enable operators and supervisory control systems to optimize flotation and respond to upset conditions. The OSA system will pull samples from the following points: flotation feed rougher concentrate rougher tailings 1st cleaner feed
Page 6-31
1st cleaner scavenger tailings 2nd cleaner feed 2nd cleaner concentrate.
6.5.4
Assay Laboratory
A laboratory facility will be provided at the mine site for metallurgical, environmental and analytical services. The facility will be housed in its own building, isolated from the mill, and will have five main components: sample preparation instrument analysis (AA, Leco, x-ray, ICP) wet chemistry (titrations) fire assaying environmental analysis. The assay group will analyze samples for: mine grade control concentrator OSA calibration metallurgical testwork metallurgical accounting plant discharge control samples environmental compliance. The lab will be able to conduct instrumental analysis for up 200 samples per day. The main analytical parameters will be copper, gold, silver, iron, antimony, arsenic, and sulphur. Metallurgical testwork will concentrate on the optimization of processes within the plant. Design of the assay lab is based on two 12-hour shifts per day for preparation and analysis.
6.6
Concentrate Receiving and Loadout at Port Site

Copper concentrate from the process plant will be transported by truck to the Marine Terminal Muchik (MTM) in northern Peru, a planned port development by Lumina Copper (Lumina). Candente will construct and operate its own concentrate receiving, storage, and reclaim facilities at the terminal and will share marine handling facilities with Lumina. Annual throughput from Caariaco Norte is projected to average approximately 400,000 tonnes.
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Trucks arriving at the terminal will unload the concentrate product into a truck unloading station consisting of a hopper feeding a conveyor system into the storage building. All trucks will be weighed before and after unloading and will be washed on arrival and before departure. Wash water will be collected and treated at the port facility. The concentrate storage building will be fully enclosed and have a normal operating capacity of 46,000 tonnes. The incoming concentrate will be distributed into piles by a travelling portal stacker at an average rate of 50 t/h (80 t/h maximum). A front-end loader (FEL) will reclaim the concentrate from a storage pile and dump it into either of two fixedposition hopper feeders. These feeders will in turn deposit the concentrate into the reclaim conveyor, which will be set in a recessed area below the main floor level of the building. The conveyors will be enclosed in galleries to minimize fugitive dust emissions to the atmosphere and will be fitted with a vacuum system to clean up spilled concentrate or settled concentrate dust. The reclaim conveyor will include a process scale to monitor the amount of concentrate being loaded. Outside the building, the reclaim conveyor will be housed in a gallery that connects initially to the sampling station and then through to a transfer tower for material transfer to a shipping pipe conveyor running along a 3.2 km long trestle from the shore to the shiploading berth. The concentrate is transferred again to the berth conveyor, which travels along the length of the berth to provide coverage to the tripper that feeds the shiploader. More details on these facilities are provided in Section 8.13, Port Site Infrastructure.
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CONTENTS 7.0 TAILINGS MANAGEMENT FACILITY ....................................................................7-1 7.1 Summary.....................................................................................................7-1 7.1.1 Approach and Concept ....................................................................7-1 7.1.2 TMF Location Trade-off ...................................................................7-2 7.1.3 Design Criteria .................................................................................7-2 7.1.4 Environmental Assessment .............................................................7-3 7.2 Description of TMF ......................................................................................7-3 7.2.1 Starter Embankment ........................................................................7-8 7.2.2 Main Embankment ...........................................................................7-8 7.2.3 TMF Seepage Collection Impoundment .........................................7-12 7.2.4 Construction Diversion Structures..................................................7-12 7.2.5 Scorodite Management Facility ......................................................7-13 7.3 Design Criteria ..........................................................................................7-16 7.4 Operational Data .......................................................................................7-17 7.5 Tailings Management ................................................................................7-19 7.5.1 Cycloned Tailings Underflow and Overflow Distribution .................7-19 7.5.2 Tailings Headers and Raising System ...........................................7-19 7.5.3 Placement and Compaction of Sands at TMF Embankment ..........7-19 7.5.4 Closure ..........................................................................................7-20 7.6 Quantity and Cost Estimating ....................................................................7-20 7.7 Information Required for Further Stages of Design ...................................7-20 7.7.1 Tailings and SC Embankment Sites...............................................7-20 7.7.2 Tailings Impoundment ...................................................................7-21 7.7.3 Tailings Deposition Technology .....................................................7-21
TABLES
Table 7-1: Table 7-2: Table 7-3: Table 7-4: Table 7-5: Tailings Production and Embankment Raising ............................................................. 7-11 TMF Embankment Design Criteria ................................................................................ 7-16 Seepage Collection Impoundment Design Criteria and Data ....................................... 7-17 Scorodite Management Facility Design Criteria and Data ......................................... 7-17 Caariaco Norte Project Operational Data.................................................................... 7-18
FIGURES
Figure 7-1: Figure 7-2: Figure 7-3: Figure 7-4: Figure 7-5: Figure 7-6: Figure 7-7: TMF General Arrangement at Start-up ........................................................................ 7-4 TMF General Arrangement at Closure ......................................................................... 7-5 TMF Typical Sections 1 of 2 ......................................................................................... 7-6 TMF Typical Section 2 of 2 .......................................................................................... 7-7 TMF Storage Elevation.................................................................................................. 7-10 Scorodite Management Facility General Arrangement and Typical Sections ........... 7-14 Scorodite Management Facility Details ...................................................................... 7-15
TOC i
7.0
7.1
7.1.1
TAILINGS MANAGEMENT FACILITY

Summary
Approach and Concept
This report section presents the proposed design for the Caariaco Norte tailings management facility (TMF). The design represents a reasonably conservative approach with appropriate contingencies as required for a prefeasibility level assessment. During the prefeasibility work, a trade-off study was conducted to determine the preferred TMF location and method of construction. Minimizing socioeconomic impacts and physical footprint, the available geochemical characterization and topographical data, and effective cost management were all contributing factors in the selection of the TMF location and embankment construction method. The proposed TMF embankment will utilize the centreline construction method using compacted non-acid-generating (NAG) cyclone sands. The proposed location is a tributary valley within the headwaters the Quebrada Yerma watershed. The facility has been designed to withstand the seismic activity associated with a maximum credible earthquake (MCE) and to contain the inflow design flood (IDF) and probable maximum flood (PMF) as appropriate to the stage of construction. The bulk tailings exiting the process plant will be pumped to a sulphide flotation circuit for removal of sulphide minerals, primarily pyrite. The sulphide flotation concentrate (overflow) will be pumped to the TMF where it will be deposited subaqueously. The sulphide flotation tailings (underflow) will be pumped to the cyclone sand plant (CSP). The CSP fine sand overflow will be deposited directly into the TMF. The CSP underflowcoarse, sulphide-free NAG sandwill be pumped along the embankment crest and used for cell-type construction. Water from the TMF will be reclaimed to the process plant during operations. The TMF presented in this report is designed to manage tailings for mine operations at a processing rate of 95,000 t/d for 19 years as per the preliminary mine plan. Subsequent to completion of this facility design an updated mine plan was developed that extended the mine life to 22 years. To accurately reflect this change, the TMF design will be updated during the next phase of project study. Nevertheless, the current facility represents a reasonable assessment of the associated costs for the project based on the known conditions. The TMF design is currently at a preliminary prefeasibility level; additional information from planned site investigations is required to bring the design to prefeasibility level.
Page 7-1
7.1.2
TMF Location Trade-off

Candente and AMEC identified two locations that had suitable topography for the construction of an embankment and sufficient volume for containment of the projected life-of-mine tailings: the Quebrada Yerma valley (8A) and the Ro Caariaco valley (8B). A trade-off study was undertaken to assess the availability of construction materials such as waste rock, local borrow, and cyclone sand; to compare downstream and centreline embankment construction methods for each option; and to evaluate alternative tailings depositions technologies such as high-density thickening (see Appendix G). Capital and LOM operating costs were then compared and weighed against the potential socioeconomic impacts and physical footprint. The trade-off concluded that the Quebrada Yerma valley was the preferable location for building either a cyclone sand or waste rock embankment with centreline construction, or a waste rock embankment with downstream construction for the deposition of thickened, sloped tailings. It was decided to opt for cyclone tailings, largely because the cost was somewhat lower, and because cycloning tailings for dam construction is a technology with a much longer operational history than high-density thickening. The trade-off should be re-visited early in the feasibility phase, after more site investigation information is available on embankment foundations, potential borrow areas and materials, and groundwater levels, and more advanced, site-specific capital and operating cost information has been developed.
7.1.3
Design Criteria
The design criteria are commensurate with appropriate governance literature and/or industry standards as appropriate for this level of study. All applicable regulations and statutes have been observed during the design process. The key criteria adopted for design of the TMF are summarized below; further details are provided in Section 7.4 and Appendix D. The design incorporates sufficient freeboard to manage the projected tailings volume and inflow design flood (IDF) at different stages of the mine life. For Years 1 to 5 of the mine life, the IDF corresponds to the 1-in-1,000 year, 5-day storm event. For Years 6 to 19, the IDF corresponds to the probable maximum flood (PMF) 30-day storm event. The criteria for closure are less demanding than for operations because an embankment spillway has been designed and will be constructed to safety manage the PMF 24-hour event. In accordance with the preceding IDF criteria, a minimum of 3 m freeboard will provided above the tailings and water level at all times. This comprises 2 m for dynamic settlement, static settlement, and wave run-up due to wind action, and 1 m of dry freeboard as a contingency.
Page 7-2
The tailings starter embankment will be constructed to provide storage for a minimum of one year of tailings production as well as the design stormwater and freeboard requirements. The impoundment will be operated to ensure that the tailings remain saturated at all times to inhibit oxidation. A sulphide flotation circuit will be installed adjacent to the TMF to remove sulphide minerals (primarily pyrite) from the tailings. The non-sulphide tailings will feed the cyclone sand plant and will be non-acid generating (NAG). The coarse cyclone underflow will be used to construct the tailings embankment. The fine sand overflow stream will be deposited in the TMF.
7.1.4
Environmental Assessment
The site setting, geology, vegetation, hydrology, climate, and tectonic characteristics are important factors in determining the nature of the water and waste management facilities that will be most appropriate for the project. To date, the ongoing Environmental Impact Assessment (EIA) work has not focused on the Quebrada Yerma valley, and so more information is required to fully assess this location for tailings management. AMEC has recommended that the EIA and future site investigation plans be expanded into this area to support the next stage of design.
7.2
Description of TMF
The Caariaco Norte TMF will provide storage for all tailings produced over the projected life of the mine. The main components of the TMF are as follows: starter embankment main embankment seepage collection (SC) facility construction diversion structures scorodite management facility. General arrangements of the TMF at start-up and at closure are shown in Figures 7-1 and 7-2. Associated typical sections are shown in Figures 7-3 and 7-4.
Page 7-3
Figure 7-1:
TMF General Arrangement at Start-up
Page 7-4
Figure 7-2:
TMF General Arrangement at Closure
Page 7-5
Figure 7-3:
TMF Typical Sections 1 of 2
Page 7-6
Figure 7-4:
TMF Typical Section 2 of 2
Page 7-7
7.2.1
Starter Embankment
The TMF starter embankment will be an earthfill / rockfill structure with appropriate filter and transition zones constructed of locally borrowed fill materials from within the impoundment footprint and potentially excess cut from the access road construction. Beginning at the upstream side, where a filter zone will impede the passage of tailings solids, the materials in the graded zones become progressively coarsen advancing downstream. More detail on the grain size distributions and other engineering characteristics of the material zones will be provided in future stages of design. The starter embankment will be constructed with 2H:1V upstream and downstream slopes and a 10 m wide crest. It has been sized to store one year of tailings production from the process plant as well as appropriate freeboard allowances for storage of the IDF, dynamic and static settlements, wave run-up, and contingency. The starter embankment will have a maximum height of 105 m (measured vertically at the embankment centreline) and contain a total volume of 12.5 Mm3 of fill material. It is recommended that the starter embankment position and storage requirements be reassessed and optimized during the next stage of design. The slope design required for satisfactory stability will depend primarily on the ground conditions encountered under the proposed embankment structure. This will be analyzed during the next stage of study using limit-equilibrium models once data are available from the planned geotechnical site investigations. At present there is no plan to store water in the TSF for use during start-up. The starter embankment design is illustrated in plan and section in Figures 7-1 and 7-3, respectively.
7.2.2
Main Embankment
The TMF embankment will be raised in stages as a compacted cycloned sand shell above the starter embankment using cycloned sands and centreline construction methods. The cyclone sand plant (CSP) will initially be installed on the right abutment of the TMF embankment at approximately elevation 2,820 masl to produce the cycloned sand required for the downstream shell. As the embankment is raised, the CSP will be moved to a platform at elevation 2,960 masl. This relocation concept will be reassessed at the next stage of study, as there may be an opportunity to move the sands to the embankment for construction by means of gravity flow. Feed to the cyclone plant will be the tailings from a sulphide flotation circuit that will remove the sulphide minerals. The sulphide flotation concentrate will have acidgenerating potential and will therefore be stored subaqueously within the tailings
Page 7-8
impoundment Subaqueous deposition limits oxygen contact with the sulphide minerals, thereby substantially reducing the potential to produce acid. The CSP will consist of 22 Cavex Recyclone units with 4 standby units. This system will produce cyclone underflow with a nominal fines content (passing No. 200 sieve, by weight) of 13%. This type of material would be considered free-draining, unlikely to support a significant phreatic surface within the embankment fill, and so will result in an inherently more stable embankment structure. Information from Weir Minerals on the cyclone system design is provided in Appendix G. The coarse sands will be pumped to the embankment and discharged on the downstream slope of the embankment. The discharge points will be moved periodically to build the embankment up evenly. A bulldozer will be used to further distribute and compact the coarse sands over the embankment. Solution released after emplacement will be collected in the seepage collection system at the base of the embankment and be pumped back into the TMF. Fine sands will be deposited directly within the TMF impoundment via spigots placed uniformly across the embankment crest. The final embankment crest elevation will be 2,950 masl. The increase in storage elevation over time is shown in Figure 7-5. The tailings production and embankment raising schedule for operations is provided in Table 7-1. This schedule was based on the tailings sand production analyses performed by Weir Minerals for a typical tailings feed. The TMF embankment has been designed with a final downstream slope of 2H:1V, similar to the Kemess tailings dam currently under construction. The embankment will ultimately be 270 m high and require a total volume of 78 Mm3 of cycloned sand. There is also precedent for cyclone sand embankments of this height both within Peru (currently in operation) and other countries. At Los Pelambres, both the Quillayes and El Mauro tailings embankments are currently being constructed as cycloned sand operations with proposed final heights of over 200 m. An embankment of this height will entail some specialized considerations for slope stability, such as the potential for particle crushing during later stages of the construction period. The design of the embankment will be analyzed in more detail during the next phase of study after the results of planned site investigations are available to assess foundation conditions.
Page 7-9
Figure 7-5:
TMF Storage Elevation
Page 7-10
Table 7-1:
Tailings Production and Embankment Raising

Available Volume for Tailings3 In TMF Impoundment (m3) 141,340 548,291 1,283,856 2,562,044 4,555,155 7,319,609 10,968,380 15,606,310 21,174,055 28,041,060 36,232,760 45,999,044 57,620,783 71,359,899 87,663,095 104,722,246 126,613,619 151,521,751 179,290,088 209,896,632 243,357,792 279,651,578 318,798,396 360,871,482 406,053,861 454,531,624 506,278,005 In TMF Impoundment (m3) 132,008 286,228 542,475 924,359 1,444,478 2,121,807 2,965,890 3,988,621 5,235,707 6,723,074 8,495,216 10,599,374 13,090,030 15,927,741 19,105,161 23,018,633 27,441,930 32,355,108 37,756,367 43,646,548 50,024,058 56,895,122 64,277,965 72,204,167 80,694,711 86,913,043 101,000,000 Total (m3) 273,348 834,519 1,826,331 3,486,403 5,999,633 9,441,416 13,934,270 19,594,931 26,409,763 34,764,135 44,727,976 56,598,419 70,710,813 87,287,641 106,768,256 127,740,878 154,055,549 183,876,859 217,046,456 253,543,180 293,381,850 336,546,700 383,076,361 433,075,649 486,748,572 541,444,667 607,278,005 In TMF Impoundment (tonnes) 161,127 625,052 1,463,596 2,920,730 5,192,877 8,344,354 12,503,953 17,791,193 24,138,423 31,966,809 41,305,346 52,438,910 65,687,693 81,350,285 99,935,928 119,383,360 144,339,525 172,734,796 204,390,701 239,282,160 277,427,883 318,802,799 363,430,171 411,393,489 462,901,401 518,166,052 577,156,926 Tonnages In TMF Embankment3 (tonnes) 53,709 208,351 487,865 973,577 1,730,959 2,781,451 4,167,984 5,930,398 8,046,141 10,655,603 13,768,449 17,479,637 21,895,898 27,077,160 32,478,774 39,131,675 46,651,281 55,003,683 64,185,824 74,199,132 85,040,899 96,721,707 109,272,541 122,747,084 137,181,008 147,752,173 171,700,000 Total (Mt) 0.2 0.8 2.0 3.9 6.9 11.1 16.7 23.7 32.2 42.6 55.1 69.9 87.6 108.4 132.4 158.5 191.0 227.7 268.6 313.5 362.5 415.5 472.7 534.1 600.1 665.9 748.9 Production Year 0.01 0.02 0.06 0.11 0.20 0.33 0.49 0.69 0.94 1.2 1.6 2.0 2.6 3.2 3.9 4.6 5.6 6.7 7.9 9.2 10.6 12.2 13.8 15.6 17.6 19.5 21.9
Elevation Tailings Suface1 2,680 2,690 2,700 2,710 2,720 2,730 2,740 2,750 2,760 2,770 2,780 2,790 2,800 2,810 2,820 2,830 2,840 2,850 2,860 2,870 2,880 2,890 2,900 2,910 2,920 2,930 2,940 2,950 Embankment Crest2 2,693 2,703 2,713 2,723 2,733 2,743 2,753 2,763 2,773 2,783 2,793 2,803 2,813 2,823 2,833 2,843 2,853 2,863 2,873 2,883 2,893 2,903 2,913 2,923 2,933 2,943 2,950 2,963
Notes: 1. Elevation is at upstream TMF embankment face. From that point, deposited slope is 0.5% downward. 2. Elevation of embankment crest uses an approximate total freeboard of 13 m. 3. Assume a maximum of 25% of tailings reports to TMF embankment.
Another prefeasibility assumption that needs to be confirmed is the availability of enough cyclone underflow tailings for all embankment raises. The prefeasibility design requires approximately 80% of the CSP coarse underflow tailings to be available for placement on the embankment at all times during construction to maintain adequate storage and freeboard. This will addressed during subsequent stages of design when additional information becomes available on the variability of tailings particle size distribution. In the event that the embankment raising schedule cannot be fully met using cyclone underflow
Page 7-11
tailings, then a minor amount of earthfill / rockfill material may be needed to augment the embankment fill. Completion of the TMF will involve the construction of four saddle embankments later in the mine life.
7.2.3
TMF Seepage Collection Impoundment

A seepage collection (SC) impoundment has been designed downstream of the main TMF embankment, as shown in plan and section in Figures 7-1 and 7-4, respectively. The SC embankment design is based on similar designs previously permitted and constructed in Peru and includes a compacted earthfill / rockfill embankment with filter / transition zones and a low-permeability, bituminous geomembrane liner on the upstream face. The impoundment has been specifically designed to retain cyclone sand drainage, embankment seepage, and runoff from the embankment and contributing catchment. Other alternatives such as the following should be considered in future stages of design: low-permeability core soil (clay-core) embankments with rockfill shells clay liner on the upstream face alternative geomembrane materials. Trade-off studies should be undertaken to determine the most appropriate design considering the availability of local borrow materials and costs for supplying and installing synthetic and/or imported materials. Slope stability design for the SC embankment will also depend primarily on foundation conditions, for which data will be available after the planned site investigation program has been completed. The SC impoundment is sized to contain the accumulated precipitation from the 1:25-year wet year. In addition, the SC embankment design includes an emergency spillway sized to manage the peak flow during a PMF event. The embankment will reach a maximum height of 50 m (measured vertically at the embankment centreline), creating 1.25 Mm3 of storage volume. It is anticipated that the SC impoundment will collect water during the operational life of the TMF. During post-closure, the SC embankment could serve as a reservoir for ongoing treatment before release to the downstream environment, depending on the water quality at that time.
7.2.4
Construction Diversion Structures

Surface water will need to be diverted around the areas of construction during the preproduction period. This will include primarily the TMF main embankment, the TMF SC embankment, the WRMF diversion embankment, and the WRMF SC embankment. The
Page 7-12
start-up design includes cofferdams and diversion systems for these areas. The TMF and its SC embankment diversion structures are illustrated in plan and section in Figures 7-1 and 7-4, respectively. The cofferdams have been designed as earthfill / rockfill structures with filter and transition zones and a bituminous geomembrane liner on the upstream face. The TMF cofferdam will also have a low-level outlet structure to allow passage of base flows, which will be conveyed and discharged downstream of the construction area, away from the starter embankment and seepage collection embankment. The embankments have also been designed with emergency spillways to manage water from larger storm events.
7.2.5
Scorodite Management Facility

Mineral processing over the operating life of the mine will result in the production of approximately 30,000 m3 of scoroditethe stable ferric arsenate byproduct from the partial roast process incorporated in the process flowsheet to manage arsenic levels in the concentrate. Scorodite represents approximately 0.011% of the total waste material to be stored in the TMF. It is currently planned to provide a separate lined containment facility for this byproduct. The facility will be capped at closure. Conceptual designs for the facility are illustrated in Figures 7-6 and 7-7.
Page 7-13
Figure 7-6:
Scorodite Management Facility General Arrangement and Typical Sections
Page 7-14
Figure 7-7:
Scorodite Management Facility Details
Page 7-15
7.3
Design Criteria
The criteria adopted for the design of the TMF embankment structures are summarized in Table 7-2. Design criteria and data for the seepage collection impoundments and for the scorodite management facility are summarized in Table 7-3 and Table 7-4.
Table 7-2:
TMF Embankment Design Criteria

Value 0.7 g Comments / Reference CDA Dam Design Guidelines, corresponding to Extreme Hazard Classification CDA Dam Design Guidelines (modified by AMEC), corresponding to Extreme Hazard Classification. This criterion assumes that the IDF will be stored (i.e., no emergency spillway available). Precip = 535 mm Runoff volume = 2.2 Mm3 CDA Dam Design Guidelines (modified by AMEC), corresponding to Extreme Hazard Classification. This criterion assumes that the IDF will be stored (i.e., no emergency spillway available). Precip = 2,547 mm Runoff volume = 10.2 Mm3 CDA Dam Design Guidelines (modified by AMEC), corresponding to Extreme Hazard Classification. This criterion assumes that an operating / emergency spillway will be present. Precip = 881 mm Peak flow depth in spillway = 3 m AMEC assumption experience in similar projects
Data 1:10,000-year return period earthquake
Inflow Design Flood (IDF) Tailings Embankment Years 1 to 5 1:1,000-year, 5-day event Corresponding freeboard = up to 10 m Operation Years 6 to 19 PMF, 30-day event Corresponding freeboard = 10 to 15 m
Closure and Post-Closure
PMF, 24-hour event Corresponding freeboard = 3 m
Tailings Embankment Dry Freeboard Dynamic settlement (due to earthquake), static settlement, and wave run-up (due to wind) Dry (contingency) freeboard Starter embankment slopes Final embankment downstream slope Minimum starter embankment tailings storage capacity Mill start-up water storage requirement Slope Stability Factors of Safety Pseudostatic conditions End-of-construction condition Static conditions Maximum fines (passing No. 200 sieve, by weight) for tailings embankment solids
2m
1m Upstream and Downstream = 2H:1V 2H:1V 1 year of production No start-up water required from TMF 1.0 1.3 1.5 13%
AMEC assumption experience in similar projects To be constructed of borrowed fill material earthfill / rockfill. Requires free-draining, well-compacted sand and a competent foundation material. AMEC / Candente AMEC / Candente
CDA Dam Design Guidelines 2007; MEM, Gua Ambiental para el Manejo de Relaves Mineros 1995 CDA Dam Design Guidelines 2007; MEM, Gua Ambiental para el Manejo de Relaves Mineros 1995 CDA Dam Design Guidelines 2007; MEM, Gua Ambiental para el Manejo de Relaves Mineros 1995 To maintain a free-draining embankment fill.
Page 7-16
Table 7-3:
Seepage Collection Impoundment Design Criteria and Data

Data Value Impoundment must store 1.5 Mm (1 in 25 wet year) Corresponds to precipitation of 254 mm
3
Comments / Reference AMEC 24-hour, 1:100-year runoff event as a minimum
Seepage flow from tailings sand flow-off Environmental design flood
Table 7-4:
Scorodite Management Facility Design Criteria and Data

Data Value Within TMF 3 30,000 m Assume lined impoundment because geochemical characteristics not yet determined Comments / Reference Fully-lined facility, separate cell. AMEC / Candente AMEC experience with similar materials
Location Total volume Geochemical characteristics
7.4
Operational Data
The preliminary prefeasibility design of the Caariaco Norte TMF is based on the operational data provided from various engineering disciplines, as summarized in Table 7-5.
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Table 7-5:
Caariaco Norte Project Operational Data

Data Value 8A (Quebrada Yerma valley) Centerline 95,000 t/d 4,600 t/d 89,000 t/d Reference Candente / AMEC Candente / AMEC AMEC AMEC AMEC
TMF Site Embankment raise construction method Tailings Solids Production Rates Total tailings Sulphide flotation product Sulphide tailings product (feed to tailings cyclones) Specific Gravity of Tailings Products Total tailings Sulphide flotation product Sulphide tailings product (feed to tailings cyclones) Tailings Production Tonnage Total tailings Sulphide flotation product Sulphide tailings product (feed to tailings cyclones) In situ dry density of tailings solids within tailings Impoundment (cyclone underflow) In situ compacted dry density of tailings solids in tailings embankment (cyclone overflow) Particle Size Distribution Total tailings Sulphide flotation product Sulphide tailings product (feed to tailings cyclones)
2.65 3.3 2.63
AMEC AMEC (reference value based on typical value for pyrite) AMEC
637.8 Mt 31.3 Mt 606.5 Mt 1.14 g/cm3 1.7 g/cm3
AMEC AMEC AMEC AMEC experience with similar projects. AMEC experience with similar projects.
P80 = 200 m P80 = 150 m Particle Size (mm) 0.841 0.595 0.420 0.297 0.210 0.149 0.105 0.074 0.053 0.037 Percent Passing by Weight 100.00 99.95 99.28 95.96 88.91 79.81 69.76 59.72 50.59 41.62 40% 30% 40% 9 to 10 Tailings after sulphide removal should be NAG and non-metal leaching
AMEC AMEC AMEC
Pulp Density Total tailings Sulphide flotation product Sulphide tailings product (feed to tailings cyclones) pH of tailings products Tailings material ARD/ML potential
AMEC AMEC AMEC AMEC AMEC
Page 7-18
7.5
7.5.1
Tailings Management
Cycloned Tailings Underflow and Overflow Distribution
The underflow and overflow produced by the cyclone plant will be pumped through separate headers to the crest of the embankment, where discharge spigots will placed at regular intervals along the embankment crest. Coarse sands discharge from the underflow spigots will be directed to the downstream side of the embankment and used to raise the embankment. Discharge from the fine sands overflow spigots will be directed into the TMF for containment. As designed by Weir Minerals (see Appendix G), the tailings underflow will exit the cyclones at a pulp density of approximately 74%. This material will need to be pumped by positive displacement pumps to overcome the high operational heads in the cyclone and distribution systems. Details of the tailings pump selection and distribution system and provided in Appendix G. The plant and distribution system will be assessed in more detail during the next stage of design. Specific aspects to be assessed include: the possibility of using a single CSP location for the life of mine use of positive displacement pumps or centrifugal pumps for underflow pumping, or gravity flow the possible advantages of decreasing or increasing the pulp density to allow gravity flow of cyclone sands, particularly in the early years of the mine life embankment drain-off pumpback cyclone underflow dilution configuration of tailings distribution headers and spigots for both overflow to the impoundment area and underflow to the embankment.
7.5.2
Tailings Headers and Raising System

The tailings header pipelines will be placed on a pipe support system for progressive raising of the embankment crest. This is typical for cyclone sand embankments. The header pipes will discharge into smaller-diameter spigots located at nominal spacing to construct the paddocks at the downstream area of the embankment.
7.5.3
Placement and Compaction of Sands at TMF Embankment

To maintain a stable slope for the TMF embankment, the tailings sands will need to be placed in paddocks or cells at the TMF embankment. These will be near-horizontal areas within the body of the embankment. The tailings will be spread and compacted by bulldozers (nominally a Caterpillar D8-size).
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7.5.4
Closure
The design objective for the TMF is to keep the PAG tailings saturated at all times within the impoundment. To achieve this, the PAG tailings will be deposited subaqueously, encapsulated with NAG sands, and be flooded with a minimum 2 m of water cover. Based on the current water balance, the median depth of water cover in the embankment will be 8 m. It is recommended that the water quality and excess water discharge schedule be re-evaluated in the next phase of work to reduce the water cover at closure while determining if there is potential to discharge water and what treatment technology, if any, may be required.
7.6
Quantity and Cost Estimating

Estimated quantities for the phases of mine developmentinitial construction, operations, and closureare detailed in Appendix G and were used in developing the cost estimates for this report. The quantities were calculated primarily using CAD software packages designed for this type of calculation. The accuracy of the methods used is considered suitable for prefeasibility-level studies, but additional site data, including geotechnical assessment, are required for the TMF design as a whole to meet a prefeasibility level of accuracy.
7.7
Information Required for Further Stages of Design

Additional data are required to complete a full prefeasibility design, specifically: geological/geotechnical characterizations and data from the TMF area geotechnical/rheological testing data from tailings products. Further geotechnical investigations required to advance the TMF design to the feasibility level are described below.
7.7.1
Tailings and SC Embankment Sites

Geotechnical drilling and test pitting will be required at the embankment sites. Drilling will include sampling of the soil units for visual classification and geotechnical laboratory testing. Bedrock coring will be required. Bedrock geology must be defined and any problematic bedrock (e.g., limestone) or structure (weak sedimentary rock such as claystones, etc.) identified. Some boreholes extended into bedrock should be angled to intercept any sub-vertical geologic structure that may control secondary hydraulic conductivity of the bedrock, including potential faulting in the valley bottom that may control the valley alignment and seepage control requirements. Packer permeability testing will be conducted within the bedrock to obtain a profile of hydraulic conductivity versus depth in the valley bottom and on the abutments. Piezometers and groundwater monitoring wells will be installed in select boreholes in support of baseline studies.
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Geophysical survey methods such as seismic refraction may be useful along and across the embankment axes to calibrate and extend borehole information.
7.7.2
Tailings Impoundment
Investigations within the tailings impoundment itself will focus on identifying and quantifying of potential borrow areas for embankment construction and ongoing raises. These investigations will also assess the overall hydrogeology of the impoundment area, with particular emphasis on the continuity and thickness of the overburden material, which could possibly form a natural impoundment liner along the valley slopes. For the diversion structures, test pits will be required along the axis of the proposed cofferdams to confirm ground conditions (overburden versus bedrock excavation). Upon collection and review of the site investigation information, an analysis of slope stability for the TMF embankment and other major components can be performed. The site investigation should also be planned to obtain data to enable feasibility-level estimates of seepage from the TMF impoundment.
7.7.3
Tailings Deposition Technology

A cyclone sand embankment construction method was selected for the purposes of the prefeasibility progress report. During future stages of design, the tailings deposition technology should be re-evaluated once relevant information from site investigations is available, particularly on embankment foundation conditions and potential borrow material sources, and using more accurate cost estimating information. This comparison will also depend on the results of geochemical testing on waste rock, which will, in part, determine its suitability as a potential embankment construction material.
Page 7-21
CONTENTS 8.0 INFRASTRUCTURE AND ANCILLARY FACILITIES ..............................................8-1 8.1 Summary.....................................................................................................8-1 8.1.1 Mine Site Infrastructure....................................................................8-2 8.1.2 Port Site Infrastructure .....................................................................8-4 8.2 Site Selection and Facility Arrangement ......................................................8-5 8.3 Site Conditions ............................................................................................8-6 8.3.1 Terrain .............................................................................................8-6 8.3.2 Climate ............................................................................................8-6 8.4 Plant Site Buildings .....................................................................................8-9 8.4.1 Mine Truckshop ...............................................................................8-9 8.4.2 Truck Wash Station .......................................................................8-11 8.4.3 Mill Maintenance Shop ..................................................................8-11 8.4.4 Blasting Agent Facilities .................................................................8-12 8.4.4.1 Location ......................................................................... 8-12 8.4.4.2 Bulk Emulsion Plant ....................................................... 8-12 8.4.4.3 Detonator Magazine ...................................................... 8-13 8.4.4.4 Ammonium Nitrate Storage Structure ............................ 8-13 8.5 Camp and Administration Area..................................................................8-13 8.5.1 Personnel Accommodations ..........................................................8-15 8.5.2 Main Administration Building..........................................................8-16 8.6 Roads .......................................................................................................8-16 8.6.1 Access Road to Site ......................................................................8-16 8.6.2 On-Site Roads ...............................................................................8-17 8.6.3 Existing Roads...............................................................................8-18 8.7 Water Supply and Distribution ...................................................................8-18 8.7.1 Fresh Water ...................................................................................8-18 8.7.2 Process Water ...............................................................................8-19 8.7.2.1 Reclaim Water System .................................................. 8-19 8.7.2.2 Waste Rock Seepage Recovery System ....................... 8-19 8.7.2.3 Pit Dewatering System .................................................. 8-20 8.7.3 Potable Water ................................................................................8-20 8.7.4 Fire Water......................................................................................8-21 8.8 Power Supply and Distribution ..................................................................8-22 8.8.1 Power Supply ................................................................................8-22 8.8.2 Main Substation .............................................................................8-22 8.8.3 Main Power Transformers .............................................................8-23 8.8.4 Site Power Distribution ..................................................................8-23 8.8.4.1 General.......................................................................... 8-23 8.8.4.2 Open Pit Mine Power Supply ......................................... 8-23 8.8.4.3 Process Plant and Ancillary Services Power Supply ...... 8-24 8.8.5 Electrical and Control Rooms ........................................................8-24 8.8.6 Lighting ..........................................................................................8-25 8.8.7 Emergency Standby Power ...........................................................8-25
TOC i
8.9
8.10
8.11 8.12 8.13
Fuel Storage and Distribution ....................................................................8-26 8.9.1 Diesel Fuel Tank Farm ..................................................................8-26 8.9.2 Lubricating Oils and Hydraulic Fluids .............................................8-27 Waste Handling and Disposal ...................................................................8-27 8.10.1 Waste Disposal Facilities ...............................................................8-27 8.10.2 Incinerator .....................................................................................8-28 8.10.3 Solid Waste Handing .....................................................................8-30 8.10.4 Waste Recycling ............................................................................8-30 8.10.5 Sewage Management ....................................................................8-31 8.10.5.1 Sewage Treatment Plant ............................................... 8-31 8.10.5.2 Sewage Collection System ............................................ 8-32 Communications .......................................................................................8-32 Site Security ..............................................................................................8-33 Port Site Infrastructure ..............................................................................8-34 8.13.1 Design Considerations...................................................................8-34 8.13.2 On-Shore Port Facilities .................................................................8-34 8.13.2.1 Truck Unloading Station ................................................ 8-34 8.13.2.2 Concentrate Storage Building ........................................ 8-37 8.13.2.3 Concentrate Shiploading ............................................... 8-37 8.13.2.4 Ancillary Facilities and Services ..................................... 8-38 8.13.2.5 Power Supply and Distribution ....................................... 8-38 8.13.2.6 Waste Handling and Disposal ........................................ 8-38 8.13.3 Marine Facilities.............................................................................8-39 8.13.3.1 Off-Shore Berth ............................................................. 8-39 8.13.3.2 Berth Alignment and Mooring ........................................ 8-39
TABLES
Table 8-1: Table 8-2: Table 8-3: Table 8-4: Table 8-5: Table 8-6: Potable Water Requirements at Mine Site .................................................................... 8-21 Plant Equipment Utilization Voltages ............................................................................ 8-24 Selection of Lighting Fixtures ........................................................................................ 8-25 Storage Requirements for Potentially Hazardous Oils and Fluids ................................ 8-27 Waste Quantities for Incineration .................................................................................. 8-29 Sewage Volumes to be Treated .................................................................................... 8-32
FIGURES
Figure 8-1: Figure 8-2: Figure 8-3: Figure 8-4: Figure 8-5: Figure 8-6: General Arrangement of Project Facilities ...................................................................... 8-1 Mine Site General Arrangement...................................................................................... 8-7 Plant Site General Arrangement ..................................................................................... 8-8 Layout of Camp and Administration Area ..................................................................... 8-14 Onshore Facilities General Arrangement ................................................................... 8-35 Marine Terminal Berthing and Mooring General Arrangement .................................. 8-36
TOC ii
8.0
8.1
INFRASTRUCTURE AND ANCILLARY FACILITIES

Summary
The mine site facilities are divided into three general areas: the mine, the plant site, which include buildings and structures for repair and maintenance of mine and plant equipment, and the camp area, which includes facilities for personnel accommodations, administration, and security. Other support facilities and services include site access, power supply and distribution, water supply, explosive storage and handling, communications systems and waste disposal facilities at the site. An overall general arrangement of the development sites is shown in Figure 8-1. Project infrastructure will also include facilities at the Marine Terminal Muchik (MTM), a planned development by Lumina Copper in northern Peru. Here, Candent will have its own dedicated concentrated receiving, storage, and reclaim facilities but will share general site services and ship berthing / loadout equipment with Lumina. All drawings referred to in this section are provided in Appendix F. Site Conditions and design criteria are included in Appendix D.
Figure 8-1: General Arrangement of Project Facilities
Page 8-1
8.1.1
Mine Site Infrastructure

The mine truckshop will be the main services complex on site. The complex will contain maintenance shops for the mine mobile equipment fleet, warehouse space, first aid, a change room, dispatch area, lunchroom facilities, and offices for mine operations. It will also service all light- and medium-duty vehicles used on the site, including personnel buses and pickup trucks. A truck washdown pad, fuelling station, and ready-line for mine vehicles will be constructed nearby. A single-lane haul road will connect the truckshop to the pit area via the primary crusher station. A mill maintenance shop adjacent to the process plant will service all stationary mill equipment such as pumps, instruments and motors. Accommodation facilities will be constructed to house a construction crew of approximately 1,500 persons in a combination of single, double, and four-person occupancy rooms. The facilities will be converted to single- and double-occupancy rooms for the operations staff, expected to be around 600 persons. Facilities will include areas for a kitchen, dining room, recreation, medical facility, office space for camp administration, and security for check-in / check-out. A two-storey main administration building will be constructed adjacent to the camp. The lower floor will be an open office arrangement and the second floor will have enclosed offices for senior staff. The building will include areas for reception, training, conferences, and storage. With adequate planning, it could be built early enough to accommodate the initial construction management and administration staff. Access to the plant site will be via a new 42 km single-lane (7 m wide) gravel road branching off the existing Corral Quemado Road along the Huancabamba Valley. The alignment follows a new bridge crossing over Ro Huancabamba and then passes through challenging terrain, rising at a constant grade of 8% until it reaches the ridge top between the Yerma and Caariaco valleys near the tailings management facility (TMF). The road then widens to 11 m to accommodate the surface-run tailings and reclaim pipelines running to and from the plant site. Continuation of the road to the process plant includes a single high point about 1,200 m away from the plant. This permits any pipeline drainage required in the event of a power failure, for example, to flow to the existing low points at each end of the line, eliminating the need for any other emergency dump ponds along the route On-site roads will be provided for vehicle access to facilities and remote structures. General access roads will be two-way and 8 m wide, service roads will be one-way and 5 m wide with pullouts, and mine haul roads will be one-or two-way as required and wide enough to accommodate the Komatsu 930E or similar haul trucks. To meet regulatory requirements, blasting agents for mining operations will be stored on the opposite side of the ridgeline to the north of the site, just off the main access road, a
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safe distance away from occupied or significant structures. Separate sites will be provided for a bulk emulsion plant, an ammonium nitrate storage area, and a detonator magazine. Fresh water for site services will be obtained from a fresh water reservoir constructed as part of the Ro Caariaco diversion around the waste rock management facility (WRMF). Fresh water will be used for process make-up water, fire water, and to supply the potable water treatment plant (PWTP). The reservoir will also provide start-up water for the process plant until sufficient reclaim water is available in the TMF to furnish continual supply, estimated to be two months after start-up. Normally, most process water is derived from thickener overflow, reclaim water pumped from the TMF, and other reclaim sources. Regular fresh water makeup is required for approximately 5% of total process flows, where the water has to be of higher quality. The PWTP will be designed to provide sufficient potable water for the construction workforce. The water will be pumped to the camp and administration buildings and flow by gravity to the other site facilities. Both fresh and potable water will be trucked to the bulk emulsion plant as required. Fire water will be stored in a combined fire/fresh water tank equipped with a fire pump module and diesel backup pump to provide fire water to the camp facilities, but the flow to the plant area will be by gravity flow. A system of fire hydrants and stand pipes will be installed in strategic locations in and around the buildings. In addition, sprinkler systems will be installed in the accommodation facilities, administration offices, assay lab, office areas, and warehouse areas of the shops. Electrical power will be supplied to the Caariaco Norte site by a 220 kV overhead transmission line from the local utility substation at Carhuaquero, a distance of 57 km from the mine site. The incoming transmission line will terminate at a new main site substation for the transformation of power from the transmission voltage level of 220 kV to the site distribution/utilization level of 25 kV. The anticipated connected load for operation is 148 MW with an average load of 95 MW and power factor of 95%. Power will be supplied to the various mine facilities through radial feeders originating at the main substation and routed on site through cable tray in pipe racks, either installed on overhead powerlines, direct buried, or in duct banks. Step-down transformers will provide equipment utilization voltages from the site distribution voltage. All process electrical and control rooms will be modular units constructed off site with all electrical controls and instrumentation equipment installed, wired, and completely tested before shipment to site. Emergency power will be produced by standby diesel generating units sized to provide power to mine and process equipment and the permanent camp in the event of a utility power failure. The standby power plant will consist of three gensets and be rated for a nominal 4.5 MW. In addition, an uninterruptible power supply (UPS) system will provide
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backup power to critical control systems, and emergency battery power packs will supply backup power to the fire alarm system and emergency egress lighting fixtures. The site communications system will cover the complete voice, data, fax, Internet/email and radio communications requirements for the process and camp facilities. The system will be designed to meet all regulatory requirements needed for operating approvals. The mine communications system will be independent of the rest of the system. Diesel fuel will be stored in four 500 m3 tanks, providing more than two weeks of supply the event of fuel delivery disruption or power failure. The fuel tanks will be installed within HDPE-lined, bermed enclosures to provide secondary containment for any spillage or sudden tank failure. The fuel will be used to run the construction / emergency generators and will be piped to the re-fuelling station near the truckshop. Solid waste from the plant site will be handled and disposed of in an environmentally acceptable manner in accordance with legal requirements and best industry practices. As applicable, waste will either be incinerated, disposed of in a landfill, recycled, or removed off site to special handling facilities. A sewage treatment plant (STP), sized for the complete construction workforce, will be built on site. The plant will be self-contained in an enclosure housing all mechanical and electrical equipment and will be designed to produce effluent that complies with Peruvian regulations for effluent quality. Sewage will be collected from the different sources through a network of pipelines, holding tanks, lift stations, and a pumper truck, where necessary. Treated effluent will be discharged directly to the environment during construction and to the TMF during operations.
8.1.2

The port site infrastructure for the project will be at the Marine Terminal Muchik (MTM), a planned development by Lumina Copper southeast of the town of Eten and the existing Consorcio Terminales Eten liquid bulk terminal in Northern Peru. Copper concentrate from the mine will be transported by truck to MTM at a rate of approximately 400,000 t/a. The loading berth at the port will be designed to accommodate up to 50,000 DWT loaded Handymax vessels. This study assumes that the berthing facility, the trestle conveyor leading out to the berth, and the shiploader will be shared with Lumina Copper. Some service buildings and utilities throughout the port site, such as fire, process, and potable water supply and sanitary waste disposal, would also be shared, whereas concentrate receiving, storage, and reclaim facilities for the Caariaco Norte product would be independently developed and operated by Candente. Concentrate from the mine will be delivered to the port by truck, unloaded into a dump hopper, and sent to a storage building sized to meet expected package sizes for
Page 8-4
concentrate export and the anticipated schedule of vessel arrivals, including an allowance for vessel delays due poor weather or hurricane conditions en route to the port. Concentrate reclaimed from the storage pile will be conveyed initially to a sampling station, then to a transfer tower to the shipping pipe conveyor shared with Lumina, then to the berth conveyor, which in turn travels along the length of the berth to a towed tripper that feeds the travelling shiploader. All conveyor systems will be enclosed in galleries to minimize fugitive emissions of concentrate dust into the atmosphere. Power supply for the Candente facilities will be delivered to a substation at the concentrate storage and handling facility at 4.16 kV from the power auxiliary distribution system planned by Lumina Copper. The substation will include incoming 4.16 kV switchgear and a step-down transformer. As at the mine site, waste handling and disposal will be managed in an environmentally acceptable manner in accordance with legal requirements. The marine berth will be constructed 3.2 km from shore at a water depth of -15.0 m, as required for the design 50,000 DWT Handymax vessel. Dredging to permit berth construction closer to shore was deemed uneconomical. The design and orientation of the berth are intended to minimize wave and swell action. A system of spread moorings will help to prevent ships from colliding with the berth during loading operations and to reduce loads on the mooring lines. Vessel operations for export of Candente product will be scheduled in conjunction with Lumina to avoid berthing conflicts.
8.2
Site Selection and Facility Arrangement

(Drawings 165270-0000-C-1002/3)
At the start of the study, two potential plant sites were reviewed. One site was slightly north of the mine site, on a relatively level area at a nominal elevation of 2,920 m, and the other was to the west, on the opposite side of the ridgeline that separates the tailings and mine site area. The second site required that a tunnel be cut through the ridgeline to allow ore and waste material to pass via two separate conveyors. Following a trade-off study that included alternative methods for constructing the tailings dam, it was determined that the most cost effective option was to keep the site adjacent to the mine and put the waste rock management facility (WRMF) within the Caariaco valley, as illustrated in Figure 8-2. Considering the topographical challenges, the next relatively level area was chosen for the camp and administration facilities. This area is adjacent to the access road, approximately 1 km north of the plant site at a nominal elevation of 3,075 m. The
Page 8-5
intervening ridgeline thus serves as a barrier against the noise of the mining and milling operations (Figure 8-2). The plant facilities were arranged to maximize use of the available area, as shown in Figure 8-3. The plant configuration, with the flotation cells positioned from northwest to southeast, intentionally uses the natural grade for gravity flow from one cell to the next through the circuit. The truckshop, being downslope of the plant, will be constructed on a lower bench to minimize cut-and-fill earthworks quantities. The location of the primary crusher was based on a number of parameters such as its proximity to the pit to minimize haul distances; its elevation in relation to the COS as limited by the maximum grade of the COS feed conveyor; and suitable ground adjacent to the pit. Site selection for fuel storage and the construction / emergency gensets took into consideration the available, suitably flat terrain and a position that was amenable for mining activities and mitigated noise issues for the camp. The explosives facilities were situated as close as practically possible to the mine in accordance with industry standards and guidelines for safe distances from significant structures.
8.3
8.3.1
Site Conditions
Terrain
The project mine site is located in an area of rugged topography with steep hills separated by narrow, deep valleys containing stream and river channels. No industrial development exists in this part of Peru, and the region is sparsely populated. Subsistence farming is the primary occupation of the local residents.
8.3.2
Climate
The property crosses several climatic zones, and at any given time temperatures vary by up to 10 or more with altitude from the lower forested valleys to the upper grassy ridges. Annual summer and winter temperatures range between 3C and 20C. The region receives between 830 mm and 1,700 mm of rain each year, with the wet season extending from November to March. Periods of precipitation are generally of short duration, from 1 to 2 hours. The prevailing winds at the mine site are from the southeast and are generally light to moderate with maximum gusts of 90 km/h. Climatic conditions are not expected to affect ground-based operations, although helicopter-supported activities and four-wheel drive roads could be less functional during the rainy seasons. Therefore, mine operations have been scheduled year-round, 24 h/d, with no allowance for shutdowns due to weather-related events.
Page 8-6
Figure 8-2:
Mine Site General Arrangement
Page 8-7
Figure 8-3:
Plant Site General Arrangement
Page 8-8
Details are provided (Appendix D).
in
the
Site
Conditions
Specification
#165270-C-SP-001
8.4
8.4.1
Plant Site Buildings

Mine Truckshop
(Drawings 165270-0000-A-1001/1002/1003)
The mine truckshop will be the main services complex on site. It will cover a total ground area of 6,850 m2, with eave and hook heights of 23 m and 17 m, respectively. The facility will be organized along a 4 m wide central service aisle with the services spaced on either side. The complex will contain maintenance facilities for the mine mobile equipment fleet, warehouse space, first aid, lockers, lunchroom facilities and a machine shop. A change room and dispatch area for the mine operations crew will be provided on the second floor and offices on the third floor above one bay of the building. The total office and general use areas will cover 2,100 m2 over the three floors. Lockers on the ground floor are intended for the transportation department. The building will be mostly an open-air structure with a single-skin, metal-clad roof and some partial single-skin wall cladding extending up high enough to protect the crane from the elements. Several bays housing personnel facilities and more-sensitive service equipment will be fully enclosed. Personnel facilities will be air-conditioned, and all air-conditioned spaces will be insulated. The warehouse, tire storage, and lube/oil storage areas will be roofed over and secured with chain link fencing. The mine truckshop will also be used to service all light- and medium-duty vehicles used on the site, including personnel buses, pickup trucks, and other vehicles. The building facilities are described below: four 15 m x 21 m bays for mine mobile and heavy equipment maintenance, including three with embedded rails in the floor to allow for tracked vehicles. Two 30/10 tonne overhead cranes will service these bays. one 15 m x 21 m bay for servicing light vehicle equipment, serviced by one of the 30/10 tonne overhead cranes one 15 m x 21 m bay for general welding tasks, serviced by one of the 30/10 tonne overhead cranes one 15 m x 21 m bay for tire changes one 15 m x 21 m bay for vehicle lubrication
Page 8-9
one roofed 15 m x 21 m bay for tire repair, including an adjacent area for air compressors one roofed 15 m x 21 m bay adjacent to the lube/oil bay for all bulk lubricant systems, including storage tanks, pumps, compressors, and high-pressure water pumps one 15 m x 21 m bay for general fabrication, platework, and other welding tasks, serviced by one of the 30/10 tonne overhead cranes one 15 m x 21 m bay equipped with an array of machining and fabrication tools and modern welding equipment (auto wire feed and spray welding) for machine component rebuilds, fully enclosed and serviced by its own 10 tonne overhead crane one 15 m x 21 m bay serving as an electrical shop, suitably equipped to perform maintenance associated with the mine equipment electrical components such as wheel motors and dewatering pump motors. This bay will be fully enclosed and serviced by its own 10 tonne overhead crane. two 15 m x 21 m bays to provide ancillary spaces such as locker rooms, a lunchroom, offices, first aid, a tool crib, an electrical room, and a compressor room. A second floor above will house the mine dry and dispatch facilities. A third floor above will house offices for mine operations and maintenance personnel. This arrangement will allow for rapid and easy organization and reporting at the start and end of each shift. four 15 m x 21 m bays consisting of covered high storage for the main warehouse one 25 m x 40 m wash pad outside and away from the building (see Section 8.4.2 below for more details). The superstructure and foundations will be designed for all environmental and operating loads. The building will be constructed with reinforced concrete foundations and a preengineered and prefabricated steel superstructure delivered to site for installation and erection. Pre-assembly will include the double-bay overhead cranes and the three-storey section inside the truckshop. All reinforced concrete works, namely foundations and suspended concrete on metal deck floors, will be supplied and installed on site. The foundations will include building columns supported by spread footings and pedestals with grade beams spanning between pedestals above footings. The footings will typically be placed at 2 m below grade for strength, stability, and to avoid settlement. Two longitudinal trenches and sumps will be provided inside the building for surface drainage. The design incorporates a 5 m wide concrete apron around the perimeter of the building. The layout of the mine truckshop provides for ease of maintenance operations for a mine fleet supporting a nominal 95,000 t/d operation. The shop can be expanded by relocating the lube and tire shop to another pad and adding repair facilities into this space if necessary.
Page 8-10
Accumulated used oil from the truckshops and associated facilities will be disposed of in an approved manner, either on or off site. Used air filters, oil filters, hoses, and solvents that cannot be incinerated will be collected, sorted in the on-site sorting facility, and disposed of off site according to the Peruvian regulation requirements.
8.4.2
Truck Wash Station

A separate truck wash station will be provided in an open area adjacent to the truckshop for manual truck washing. The facility will consist of a heavy slab on grade with water cannons at the sides, and no roof. A water tank and a pump system will be supplied as part of the package. The water, oil, and mud mixture resulting from washing will drain into a reclaim separation/storage system. The reclaim area is divided into two sections, one for the separated water, which will be recirculated to the wash system. Any oil in the recycled water will be skimmed off in an oil-water separator prior to re-use. The collected oil will be disposed of according to Peruvian guidelines. The other section will be fitted with a sloped slab to allow loader/bobcat access to clean out the settled mud and soil. The collected muck will be disposed of appropriately, either on site or off site as required. All concrete slabs, walls, and foundations will be placed on a minimum of 2 m compacted structural fill to prevent foundation settlement and concrete cracking.
8.4.3
Mill Maintenance Shop

(Drawings 165270-0000-A-1004/1005)
The mill maintenance shop will service all stationary mill equipment such as pumps, instruments, and motors. Located southwest of the concentrator building, the shop will cover a total ground area of 2,000 m2 organized around open millwright, welding, and machine shops with an enclosed electrical/instrumentation shop at one end and an enclosed warehouse at the other. The building will contain the following facilities: electrical and instrumentation shops machine and millwright shops welding shop tool crib and warehouse space allowed for a rubber repair shop. The building will be a mostly open-air structure with a single-skin, metal-clad roof and some partial single-skin wall cladding higher up to protect the crane from the rains. A 10 tonne overhead crane will be provided in the welding area and a 7.5 tonne overhead crane in the electrical shop. The electrical and instrumentation shops and the warehouse, which will house the more-sensitive service equipment, will be fully enclosed. The warehouse area will include a modular 3 m x 3 m office, and the open shop area will include two offices with washrooms in a 12 m x 3 m modular unit. This section of the
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warehouse area will be enclosed and climate-controlled for the storage of sensitive electronic equipment spares. The shop structure and foundations will be designed for all environmental and operating loads. The building will be constructed with reinforced concrete foundations and a preengineered and prefabricated steel structure.
8.4.4
8.4.4.1
Blasting Agent Facilities

(Drawing 165270-0000-C-1003)
Location The location of the blasting agent facilities is halfway between the TMF and the camp area, south of the main access road, as shown in Figure 8-2. The three sites with necessary utilities will be provided to a licensed blasting contractor to establish and manage a bulk emulsion plant, an ammonium nitrate storage facility, and a detonator storage magazine. The contractor will also supply packaged explosives, initiation systems, cast primers, and accessories. Each site will be designed with increased security and in accordance with industry standards and guidelines for safe distances of explosives from significant structures. The terrain also provides a natural barrier between the blasting facilities and the mine and camp infrastructure. The location, just off the main access road, is convenient for both the delivery of ammonium nitrate and the transport of explosives to the mine site.
8.4.4.2
Bulk Emulsion Plant The bulk emulsion manufacturing plant will be a continuous-process facility supplied, installed, and operated by a manufacturer experienced in the production of blasting agents. The plant will be installed on a graded gravel pad about 70 m x 110 m in size, fenced and gated for security. The blasting contractor will produce and transport the bulk emulsion and ANFO (ammonium-nitrate fuel-oil) mixture to the mine drill holes in bulkblend trucks. The plant will consist of the following structures: emulsion manufacturing module ammonium nitrate storage bins workshop/office building and electrical room security shed truck storage and wash bay complete with wash-down water treatment system fuel oil storage fresh water tank and septic holding tank. Candente will provide the following facilities to the blasting contractor:
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power Internet and communications connections fresh water delivered by tanker truck sewage removal from a septic tank to the STP. Wash water from the wash-down bay will be collected in a large sump where solids will settle out before the water is recirculated to the wash system. Any oil in the recycled water will be skimmed off in an oil/water separator prior to re-use. The settled solids will be mucked out regularly and disposed of appropriately either on site or off site as required. 8.4.4.3 Detonator Magazine A secure fenced detonator magazine will be provided for the storage of packaged detonators, primers, and priming accessories. These materials will be stored in an explosives-certified container supported on concrete sleepers laid on a gravel surface. 8.4.4.4 Ammonium Nitrate Storage Structure Ammonium nitrate (AN) prills will be delivered to site in 1 tonne plastic-lined tote bags packed in standard shipping containers and stored in a secure, fenced area about 30 m x 35 m, sized to store approximately 800 tonnes in double-stacked bags. This is equivalent to about 10 days supply for the 95,000 t/d operation.
8.5
Camp and Administration Area

(Drawing 165270-0000-C-1007)
The camp and administration area is shown in Figure 8-4. The main facilities are the sleeping dormitories, administration offices, and construction/standby power plant. Supporting infrastructure includes an incinerator, water storage tanks, potable water treatment plant (PWTP), and sewage treatment plant (STP). The site development plans will also incorporate a helipad and control centre for operational requirements and emergency medical evacuations.
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Figure 8-4:
Layout of Camp and Administration Area
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8.5.1
Personnel Accommodations
The camp will be constructed to initially house the approximately 1,500-person construction workforce and will then be converted to permanent housing for the operations staff of 600 persons. To save on space and overall construction costs, the dormitory units will be two storeys high and will consist of prefabricated modules shipped to site for assembly, thereby minimizing on-site labour requirements. The camps will consist of the following: dormitories with ablution facilities, toilets, and self-serve laundry food preparation and serving facilities medical clinic recreation facilities and small commissary. The construction camp will also have a check-in and administration office module. Dormitory rooms during construction will accommodate: four people per room with a common washcar for trades and labourers. The intention is to have two of the staff on opposite shifts so that only two people are sleeping in a room at any one time. two people per room, each on opposite shifts, with shared en suite for skilled trades and supervisors one person per room with private en suite for superintendents and management. For operations, beds will be removed from each of the rooms to provide the following sleeping arrangements: two people per room, each on opposite shifts, with a common washcar for trades and labourers one person per room with shared en suite for skilled trades and supervisors one person per room with private en suite for superintendents and management. Dining rooms will be sized for breakfast and dinner sittings of up to 750 workers at a time. Facilities will also be available to prepare brown-bag lunches that can be taken to the work areas. Kitchens will be sized accordingly and will have sufficient cooler and freezer storage. The recreation facilities will include a fitness area with gym equipment, two TV viewing areas with seating for 50, and computer stations. The superintendent and management dorms will be wired to allow connection of personal TVs and computers. All camps will be pre-engineered and prefabricated modular-type structures erected over reinforced concrete foundations. The structures and foundations will be designed for all environmental and operating loads, and for the foundation loads provided by the module
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vendor. The structural units will include all interior furnishings. consist of concrete footings and pedestals.
The foundations will
The camp will have a medical clinic equipped to treat general injuries and sicknesses, to stabilize serious cases for medivac to off-site health facilities, and to dispense drugs and medications as necessary. The clinic will have six beds, three of which will be in single rooms with adjoining washrooms. The facilities will include an emergency operating room, recovery room, x-ray room, two consulting/examination rooms, pharmacist office, doctors office, nurses office, nursing station, waiting room, and related support services. An ambulance garage and helipad for medivac will be stationed adjacent to the clinic. Separate entrances will be provided for walk-in patients and emergency cases. The clinic will be constructed of modularized prefabricated units, complete with all equipment and furniture, and installed near the camp facility. A standby diesel generator will provide electricity during emergencies.
8.5.2
Main Administration Building

(Drawing 165270-0000-A-1006/1007)
The main administration building will be constructed on a pad adjacent to the camp. The building will be a two-storey, pre-engineered steel structure. With adequate planning, the facility will be built early in the construction phase and used for construction administration. The lower floor will generally be an open office arrangement and the second floor will have more enclosed offices for senior staff. The building will include a reception area, training room, conference room, washrooms, photocopy, and storage rooms. The building will be constructed on reinforced concrete foundations with elevated concrete slab on a metal deck floor.
8.6
8.6.1
Roads
Access Road to Site
(Drawings 165270-0000-C-2001 to -2004)
Road access to the site will be via Corral Quemado Road, which runs along the Huancabamba Valley. The main access road to the site will be constructed off the Corral Quemado Road from a point roughly 2 km east of the Yerma Valley. The road will be designed to meet Peruvian guidelines, as presented in the Peruvian road design manual Manual De Diseo Geometrico Para Carreteras, and will be suitable for the transport of concentrate, freight, and equipment, including all oversized equipment needed for construction and operation of the mine/plant facilities. The entrance to the road will be controlled, thereby restricting the road to authorized vehicles only. All users will need two-way radios, as the road is planned to be radio-controlled to increase safety and usability.
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The access road will be roughly 42 km long, single-lane, with an overall travel width of 7 m, including shoulders, and road pullouts every 1 km. A bridge will be required to cross Ro Huancabamba. Once on the south side of the Huancabamba Valley, the road will follow the terrain at a fairly constant gradient of 8% for about 24 km, then start to level out as it reaches the top of the ridge line between the Yerma and Caariaco valleys at elevation 2,900 m. From here it will continue south along the ridge line for another 5 km toward the tailings management facility (TMF). At the TMF, the road will turn east toward the mine site for another 13 km. This last stretch of road will be 4 m wider to accommodate the two tailings and reclaim pipelines. The road will ascend at an average gradient of about 1.5% to a high point at elevation 2,990 m approximately 800 m from the plant site, then descend at a fairly constant down-gradient of 8% to the plant site at elevation 2,930 m. Due to the regional topography, the route navigates through challenging terrain for much of its length and is mostly in cut. Fills were kept to a minimum because the terrain is generally steeper than the natural angle of repose of most fill materials and therefore cannot be placed economically. It is planned to use the excess cut material to construct the starter embankment of the TMF. At present, the only bridge required for the main access road is the one over Ro Huancabamba; however, some culvert crossings will be needed. Two of the larger crossings will consist of three parallel culverts, 3 m in diameter. Smaller diameter culverts will be installed as required. All culverts will be of appropriate diameter to accommodate design flows. The culverts will require inlet and outlet structures and armouring to protect the road structure during storms and floods. If necessary, the culverts will be designed with riprap, gabions, or other erosion/sediment control measures. Check-dams and coarse bar screens will be installed upstream of the inlets to slow stream velocities and prevent blockages; routine maintenance will be required to keep the culverts free of debris. Roadside drainage structures will be incorporated into the road structure. The road route will be reviewed and optimized once more accurate contour data are obtained during the feasibility study. Following this phase, a road reconnaissance field trip will be recommended along the proposed route, with a geotechnical site investigation to follow to confirm the route.
8.6.2
On-Site Roads
The mine site will need a network of general vehicle access roads around facilities, service roads to remote structures, and haul roads. These will often be an extension of yard areas and not always delineated separately. The general access roads will be twoway and 8 m wide, the service roads will be one-way and 5 m wide with pullouts, and the
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haul roads will be one-way or two-way depending on requirements and have a travel width that will accommodate the Kamatsu 930E or similar haul truck. The roads will have the following safety features: rock safety berms for haul roads mandatory and advisory traffic signs speed limit signs radio communications systems between trucks pullouts every kilometre on one-way roads. Further details of the site roads are provided in the Civil Design Criteria (Appendix D).
8.6.3
Existing Roads
The site is currently accessible via an existing road from Chiclayo that generally parallels the Pan-American Highway, 700 km north of Lima. The project site is a 6-hour drive northeast of Chiclayo. The routing includes a combination of paved and gravel roads for approximately 150 km, passing through numerous small villages. Conditions worsen to a rough 4x4 only road as it nears the site. This access can be particularly difficult during heavy rains because of the poor drainage and low-quality road conditions. There is no landing strip on the property. The road is currently unsuitable for heavy trucks and therefore cannot be used for construction access. Construction traffic will need to wait until the new access road connecting the site to the Corral Quemado Road is completed.
8.7
8.7.1
Water Supply and Distribution

Fresh Water
Raw water for potable, process make-up and other uses at the mine site will be obtained from a freshwater reservoir filled by surface water runoff and rainwater. The reservoir will be established upstream of the mine waste rock management facility (WRMF), behind a lined earth dam. Minimum elevation of the water level in the reservoir is estimated to be 2,775 m. The water will be pumped from a barge in the reservoir to the fresh/fire gravity head tank at elevation 3,000 m through a carbon steel pipeline that will transition to HDPE once the pressure head drops to an acceptable level. The pipe will be surface-laid along the side of the service road and buried as necessary for protection in higher traffic areas. The barge in the reservoir will be equipped with four vertical turbine pumps (three operating, one standby) sized to deliver up to 375 m/3 of flow. The fresh/fire water tank will be sized for 2 hours of fire reserve (800 m3) and 4 hours of process reserve (1,400 m3).
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8.7.2
Process Water
Process water for the plant will come from four sources: recycle water from the copper concentrate and bulk thickeners; pit dewatering water; seepage return water from the WRMF; and reclaim water pumped from the TMF. Thickener overflow and TMF reclaim are the primary sources. Water from the pit and seepage from the WRMF will be unreliable sources of process water because quantities depend on rainfall. Fresh water makeup is required for about 5% of total process flows, where the water has to be of higher quality (see section 6, Processing, for details on the recycle water systems).
8.7.2.1
Reclaim Water System The TMF reclaim barge will be designed to provide a flow rate 3,380 m3/h (allowing for a 15% design factor) against a total dynamic head of 275 m based on a 95,000 t/d operation. Reclaim water from the tailings pond will be pumped from a pump barge through a 12,200 m long pipeline back to the process plant. The reclaim water barge will be supplied with four 20" vertical turbine pumps, including one installed spare, each with 1,750 hp motors. As the elevation the TMF increases over time, the static head will decrease accordingly, allowing pump stages to be removed and power demand to be reduced. The reclaim water pipeline will be laid alongside the tailings pipeline back to the plant site and terminating at the process water tanks. The first 7,900 m section will be 36" diameter carbon steel pipe and the rest will be 42" diameter HDPE pipe. The carbon steel pipe is needed where internal line pressures exceed those recommended for HDPE pipe. It has been determined that the TMF will not contain enough water for the reclaim system during the initial two-month commissioning and start-up phase of the process plant. Therefore, water from the freshwater reservoir will be used to supply the needed start-up water of roughly 4.2 Mm3 (two months supply). Because the freshwater pumping system cannot deliver the required flow, it is planned to install the reclaim pump barges into the freshwater reservoir temporarily and relocate them after the two-month start-up window. To minimize downtime during the relocation of the barges to the TMF, all reclaim piping and support infrastructure will be pre-installed with only the barges needing to be relocated and connected before operations can be restarted.
8.7.2.2
Waste Rock Seepage Recovery System Runoff and seepage water that come into contact with the waste rock stored in the WRMF will be collected in a downstream impoundment. The impoundment will be sized to store roughly 2.5 Mm3 of contact water during the wet season to lower the pumping requirements to a reasonable flow rate. Runoff rates will fluctuate throughout the year, but to meet storm runoff criteria, a 1,040 m3/h pump barge will need to be installed to pump the water to the process tank at elevation 2,965 m. Because of the lower elevation
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of the water level in the impoundment, at 2,445 m, static head plus fictional losses will equate to a total pressure head of 620 m. To meet this pressure demand, a booster station will be required about halfway up the 5,000 m long pipeline to pump the water to the process water tanks. The barge and booster pump modules will be sized equally with similar components to simplify operations and maintenance requirements. Each module will be supplied with four 14" vertical turbine pumps, including one installed spare, each with 500 hp motors. The pipeline to the process tanks will be approximately 5,000 m of 16" diameter carbon steel pipe to accommodate the high pressures in the line. The pipeline will run along a service road that runs between the plant site and the impoundment. With the ultimate WRMF blocking easy access to the impoundment, it was deemed practical to incorporate the service road and pipeline into the development of the WRMF. As the WRMF expands from the preproduction pile, the pipeline and road will be moved and incorporated into the face of the pile as it advances north. 8.7.2.3 Pit Dewatering System A pit dewatering system will be maintained and operated throughout the life of the mine to collect contact water for either reuse in the process during operations or, if deemed necessary, for treatment before discharge once mining is completed. The pit development will incorporate ditches and drainage channels that will direct runoff water to central collection sumps. It is currently anticipated that one central sump will be established on the north side of the pit during the initial stages of pit development, with a second one installed in the southern part of the pit as it develops in later years. The sumps will be sized to contain the 100-year return period, 24-hour duration rainfall event, with a barge-mounted pumping system capable of pumping out the water over a 14-day period. The barge pumping systems and 18" diameter pipelines running out of the pit will be sized to handle a maximum capacity of 780 m3/h each. From the pit rim to the process water tank, the pipeline will be increased to 24" diameter to take the combined flow of 1,560 m3/h. Each barge will be supplied with four 14" vertical turbine pumps, including one installed spare, each with 1,000 hp motors.
8.7.3
Potable Water
Potable water will be produced from the raw water stored in the fresh/fire water tank. Water will be pumped to a PWTP located on the camp site pad capable of producing potable water for the construction workforce of 1,500 and later for the smaller operations workforce of approximately 650. The plant will be a self-contained system complete with piping, valving, electrical components, and instrumentation inside a steel container. The container will be mounted on structural steel skids to minimize on-site installation requirements. The plant will be provided with ventilation units suitable for summer temperatures on site.
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Physical contamination will be removed by efficient filtering and pre-treatment. The minimum treatment for surface water will be chemically assisted rapid-sand filtration and disinfection. This will include chemical mixing, coagulation, flocculation, solids separation, and filtration. The chlorinator will have the capacity to dose enough chlorine to overcome the demand and to maintain the required concentration of free or combined chlorine. The treated potable water will be stored in an adjacent steel storage tank with a storage volume based on the estimated 24-hour demand for the construction workforce of 1,500 people. This will allow for approximately two days of storage for the operations workforce of 650. Potable water storage requirements at the mine/plant site are summarized in Table 8-1.
Table 8-1: Potable Water Requirements at Mine Site
Unit people people L/person/day L/day L/day Value 1,500 600 200 300,000 120,000
Design Parameter Construction and Operations Maximum construction camp workforce Operations camp workforce Water flow rate requirement Average water flow: during construction during operations
The potable water will be pumped and distributed through a network of underground pipes to the camp and administration buildings. Given the camp pad elevation of 3,080 m, potable water can be supplied to the rest of the plant site by gravity flow, without pumping. Distribution piping will branch off the main feed lines to provide potable water to the various facilities at the plant site. The pipelines will be designed for: internal pressures external loads surge pressures caused by normal valve operations or emergency valve closures.
8.7.4
Fire Water
Fire protection water for the facilities will be stored in the lower section of the freshwater tank at elevation 3,000 m. This elevation permits fire water to flow to the process plant area by gravity, but a fire pump module will be provided to supply fire water to the camp area. The fire pump module will consist of an electric pump, a diesel backup pump, and a jockey pump to maintain pressure in the fire piping distribution network. The fire water storage and pipe distribution network are designed to meet a fire demand of 110 L/s for two hours.
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All firewater piping will have a pressure rating of 1,240 kPa (180 psi) or higher to meet design guidelines. Fire loops will be provided around all the main facilities to supply hydrants installed at minimum 100 m spacing. Steel protection ground posts will be erected around each hydrant. In addition, sprinkler systems will be installed in the accommodation facilities, administration offices, assay lab, office areas, and warehouse areas of the shops. A fire line will also be extended to one hydrant in the primary crusher building area.
8.8
8.8.1
Power Supply and Distribution

Power Supply
Electrical power will be supplied to the Caariaco Norte site by a 220 kV overhead transmission line from the local utility substation at Carhuaquero, a distance of 57 km from the mine site. The incoming transmission line will terminate at a new main site substation consisting of incoming circuit breakers, disconnect switches, power transformers, switchgear, and protective equipment for the transformation of power from the transmission voltage level of 220 kV to the site distribution/utilization level of 25 kV. Emergency power will be produced by a standby power generating station sized to provide power to essential components of the mine and process equipment and the permanent camp in the event of a utility power failure. The anticipated electrical load for the Caariaco Norte site is as follows: Connected load ..................................... 148 MW Average load ......................................... 95 MW Power factor .......................................... 95%
8.8.2
Main Substation
The main substation will be adjacent to the mill, where the largest loads are located, to minimize cabling costs and losses. The substation will include the following equipment: incoming dead-end structure structures and bus system metering transformers main incoming circuit breaker high-voltage isolation switches two power transformers (see below) substation electrical room to house the metering, protective relaying, and main site distribution switchgear.
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The transformer secondaries will be connected to a primary distribution centre (PDC) to distribute power to the site. Feeders from the substation will be run in cable tray or on powerlines to the area loads.
8.8.3
Main Power Transformers

The main substation will consist of two power transformers rated as follows: 220 kV25 kV 60/80/100 MVA ONAN/ONAF/ONAF 3 phase, 60 Hz automatic on-load tap-changer and grounding resistors. The self-cooled and forced-air-cooled ratings are continuous. Each transformer is capable of meeting the total load requirements of the mine in the event of a single transformer outage.
8.8.4
8.8.4.1
Site Power Distribution

General The mine facilities will be supplied with power through radial feeders originating at the main substation and routed on site either using cable tray in pipe racks, installed on overhead powerlines, direct buried or in duct banks. The site distribution voltage will be 25 kV, 3 phase, 60 Hz. Step-down transformers will provide equipment utilization voltages from the site distribution voltage. The electrical distribution equipment will consist of switchgear, transformers, starters, and feeder breakers for the motor and non-motor loads in common line-ups. Lighting and small power applications will be fed from transformers and power panel in the electrical rooms, as required. Cabling will use armoured, jacketed copper conductors with ground, shielded cables in heavy duty aluminum ladder tray systems, and overhead pole lines. Transformers will be located in the process area electrical rooms and will be dry type.
8.8.4.2
Open Pit Mine Power Supply The primary power supply to the mine will be two 25 kV, feeds from the PDC switchgear in the main substation. Ultimately, the pit will have a pole line around the pit with taps
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down to portable substations to power the electric shovels and drills. Additional provision is included for pit dewatering. 8.8.4.3 Process Plant and Ancillary Services Power Supply The process plant distribution voltage will be 25 kV obtained from the PDC switchgear in the main substation. The switchgear will feed the following areas: grinding area, including SAG mill, ball mill and all other grinding loads with cable in tray crushing area loads overhead pole line flotation area cable in tray regrind and reagents cable in tray roasting plant cable in tray tailings, reclaim water, fresh water, and ancillary services overhead pole lines. Plant equipment utilization voltages will be as summarized in Table 8-2.
Table 8-2: Plant Equipment Utilization Voltages
Voltages 25 kV 3 phase high-resistance grounded 4.16 kV 3 phase high-resistance grounded 480 V 3 phase high-resistance grounded 480 V 3 phase high-resistance ground (maximum hp rating to be determined at time of order) 4.16 kV 3 phase high-resistance grounded 120 V 1 phase solidly grounded 480 V 3 phase high-resistance grounded 220 V 1 phase solidly grounded 220 V 1 phase solidly grounded 220 V 1 phase solidly grounded 220 V 1 phase or 208 V 3 phase solidly grounded 277 V / 480 V 1 or 3 phase solidly grounded 480 V 3 phase high-resistance grounded
Plant Equipment Grinding Mill Motors All drives over 200 hp All drives 0.5 hp 200 hp Motors with VFD up to 500 hp Motors with VFD over 500 hp Small drives below 0.5 hp Electrical Heaters over 1.8 kW Electrical Heaters up to 1.8 kW Lighting Small power & instrumentation Heat tracing: Short lengths Long lengths Welding Receptacles
8.8.5
Electrical and Control Rooms

To minimize field labour costs, the pre-assembled electrical rooms will be distributed around the site and situated as close as possible to the major electrical loads. All process electrical and control rooms will be modular units assembled off site. The rooms will be installed outdoors on elevated steel structures adjacent to process areas or
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indoors on elevated structures. The rooms will be self-supporting and designed for road shipment, lifting, and transport to site. All electrical controls and instrumentation equipment will be installed, wired, and completely tested before shipment. The rooms will be built to meet a one-hour fire rating. All openings will be sealed and made water- and dust-tight by using approved fire-retardant materials. All electrical rooms will have two means of egress at opposite ends of the room. Doors to the rooms will be supplied with panic exit type hardware. Each room will also have an equipment door sized to permit the largest piece of equipment to be installed/removed without removing the door from its hinges. The floors of the rooms will be elevated a minimum of 20 cm (8 inches) above the adjacent process concrete floors. No liquid or fluid piping will be routed through electrical rooms. The electrical rooms and control rooms will be pressurized, air-conditioned, and designed in accordance with occupancy regulations. Non-process buildings will incorporate electrical rooms as required and shown on the layouts as integral parts of the building.
8.8.6
Lighting
Lighting at the plant site will be task-oriented. Lighting fixtures will be selected for the various lighting tasks, as shown in Table 8-3. Emergency lighting will be provided to meet the requirements of the applicable codes and standards.
Table 8-3:
Task High bay Low bay Electrical rooms Control rooms and offices Outdoor operations areas
Selection of Lighting Fixtures

Lighting Fixture metal halide sodium vapour metal halide sodium vapour rapid start-cool white fluorescent rapid start-warm white fluorescent High-pressure sodium vapour
8.8.7
Emergency Standby Power

Diesel generators will provide emergency power to selected mine and process loads and the permanent camp complex. These units will start automatically on power failure and will be equipped with automatic transfer switches to supply all the essential services at the plant site, including emergency lighting, rake drives, agitators, and selected pumps for system protection.
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The standby power plant will consist of three gensets and be rated for a nominal 4.5 MW. Control of the emergency power loads will be through the process control system. This system will stagger starts, automatically start and stop loads to keep process tanks properly agitated, and run equipment such as lubrication pumps on the large mills and mine requirements. An uninterruptible power supply (UPS) system will provide backup power to critical control systems. The UPS equipment will be sized to permit operations to shut down and back up the computer and control systems to facilitate start-up on restoration of normal (utility) power. Emergency battery power packs will supply backup power to the fire alarm system and emergency egress lighting fixtures.
8.9
8.9.1
Fuel Storage and Distribution

Diesel Fuel Tank Farm
The main diesel fuel storage tanks will be installed by the standby generators, just south of the accommodation area. Fuel will be stored in single-walled, above-ground tanks within HDPE-lined, bermed enclosures to provide secondary containment in the event of the sudden tank failure. Spillage resulting from a broken valve or hose will also be contained within the secondary containment. The fuel farm will consist of four diesel fuel tanks, each with a storage capacity 500 m3. The total 2 ML will provide more than two weeks supply for the mine and mill requirements based on a daily consumption rate of 125,000 L/d. The number of tanks required could potentially be reduced in future phases of the project when it is planned to provide two access routes into the site. Diesel fuel will be delivered regularly by tanker truck up the main access road. From the storage tank, the diesel fuel will be pumped through a buried pipeline to a refuelling station nearer the mining operation. The refuelling station will be used to refuel mine haul trucks that have been repaired/serviced in the truckshop and to fill the fuel tanker, which will refuel the large haul trucks in the pit. The dispensing station will also accommodate the smaller vehicles and equipment on site. As noted, the secondary containments will be lined with an impermeable membrane and sized for 110% of the largest tank capacity plus an allowance for rainfall. The volume of freeboard will be sufficient to contain the rainfall from a 25-year, 24-hour storm event. In addition, the berm will be far enough from the tank wall that a jet of fuel squirting from a pinhole leak will be contained within the berm perimeter. All small fuel storage containers, such as 200 L drums used to store jet fuel, gasoline, or waste oil, will be installed on a stable storage rack, and again placed within an
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impermeable containment capable of capturing at least 110% of the total capacity of the largest storage container. As rainwater collects in containment facilities, it will be drained via a manually controlled drain valve and line installed through the dike wall. The valve will normally be locked to prevent unauthorized discharges. The valve will remain closed and locked at all times until the diked area collects enough rainwater to require draining. If an oil-sheen or any accumulated oil is observed, it will be removed from the water by an oil-water separator before draining the water. Collected pollutants will be disposed of in accordance with environmental regulations. The fuel dispensing facility will consist of a fuel module and a concrete pad for secondary containment to avoid leakage of fuel to the environment. Rainwater collected in the refuelling area will be cleaned by an oil-water separator. No oil or fuel will be allowed to enter the environment.
8.9.2
Lubricating Oils and Hydraulic Fluids

Lubricating oils, hydraulic fluids, and other potentially hazardous substances will be stored in large on-site storage tanks. Mobile or portable oil storage tanks, drums, and other small containers will be stored in secondary containments capable of holding the contents of the largest container. Empty containers will be returned to suppliers for re-use. The storage requirements for these substances are shown in Table 8-4.
Table 8-4:
Substance Hydraulic fluid, motor oil, transmission fluid, and waste oil Heavy-duty grease, gear compound, drive-train fluid, and grease compound Paint and solvents Acetylene/Oxygen Propane
Storage Requirements for Potentially Hazardous Oils and Fluids

Storage Single-walled, above-ground tank in a secondary containment Drums Cans in approved / bunded enclosure Tanks in approved enclosure, marked / protected Tanks in approved enclosure, marked / protected
8.10
8.10.1
Waste Handling and Disposal

Waste Disposal Facilities
Waste from operations at both the mine/plant site and the port site will include: hazardous waste, including waste chemicals and petroleum products dry sludge cake from sewage treatment plants waste from building and equipment maintenance
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domestic waste inert waste from construction sites biological (hazardous) waste from medical facilities. Wastes will be disposed of in an environmentally acceptable manner in accordance with legal requirements to prevent their direct or indirect discharge to any watercourse or groundwater. Waste can be classified as: hazardous waste that must be stored before being shipped off site waste that can be incinerated solid waste that will be sorted, some of which will be recycled non-hazardous solid waste that can be placed in the landfill. Hazardous waste will be stored temporarily at the mine/plant site in drums protected by secondary containments before being sent off site for disposal at special handling facilities.
8.10.2
Incinerator
An incinerator will be utilized on site to burn select material during the construction and operations phases of the project. The waste burned in the incinerator will consist of: camp waste and the organic component of garbage sewage sludge cake waste oil construction waste. The waste will not be homogenous, and its characteristics may vary considerably; characteristics such as moisture, density, and heat content have been assumed based on industry standards. Inappropriate materials, including reactive/explosive chemicals and items containing heavy metals, will not be burned in the incinerator. To avoid the need for pre-sorting at the incinerator, waste will be sorted at source to keep inappropriate materials out of the waste feed. Estimated waste quantities are shown in Table 8-5. The incinerator will have the following main components: primary and secondary combustion chambers fuel burners, day tanks, and piping packages stack and air pollution control system waste heat boiler system continuous-emissions monitoring system wet-ash conveyor main control panel.
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Table 8-5:
Waste Quantities for Incineration

Unit People People kg/person/day kg/person/day kg/person/day kg/d kg/d kg/d kg/d kg/d kg/d Value 1,500 600 2 0.75 3 3,000 1,125 4,500 1,200 450 1,800
Design Parameter Project workforce: Maximum construction camp workforce Operations camp workforce Waste generation rates: food waste and food packaging dewatered sewage sludge general waste Waste amounts during construction: food waste and food packaging dewatered sewage sludge general waste Waste amounts during operations: food waste and food packaging dewatered sewage sludge general waste
Non-hazardous combustible solid wastes will be burned regularly in the incinerator at the mine site. The incinerator will operate on diesel and waste oil. The incinerator will be designed as a continuous-feeding type unit, sized to accommodate the peak waste flow from the construction workforce and to operate daily over 24 hours. During operations, when waste generation will decrease because of the smaller operations workforce, daily burning time will be reduced. In both cases, the hourly waste burning rate is the same, and the same scrubber can be used regardless of the daily waste generation rate. The incinerator will be constructed from steel plate, suitably reinforced with structural steel members. They will be provided as self-contained systems, complete with piping, valving, electrical components, and instrumentation. In addition, they will be mounted on structural steel skids to minimize on-site installation. Units will be factory assembled in packages but knocked down for transport. Each incinerator will be based on a concrete slab within a fenced, gravelled area. The fencing will be 2 m high diamond mesh, partially buried to prevent animal burrowing. Sheet metal roofing will cover the complete incinerator enclosure, and sheet metal will be attached to the upper 2 m section of the walls. The roof area has been designed to provide coverage for personnel and machines during operations and maintenance, and for two days storage of waste. The supplementary waste-oil burner, complete with an oil pump and blower, will burn waste oil at about 3 to 5 USgal/h.
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Each incinerator will be complete with a stack to ensure that emission gases are vented efficiently to the atmosphere. The stack will be free-standing, made of steel, and refractory-lined where required. What remains in the primary combustion chamber after burning is sterile, non-combustible material, such as metals and glass, and a non-toxic, non-leaching ash that is safe for disposal on site. During construction, ash from the incinerator at the mine site will be buried in the waste dumps. During mine operations, ash from the mine site will be buried in an active mine waste dump.
8.10.3
Solid Waste Handing

Solid non-hazardous waste will be managed in an environmentally responsible manner, promoting material recycling, coupled with a policy of awareness to reduce waste at the point of consumption. Non-hazardous material will be recycled if possible, buried if biodegradable, and burned in the incinerator if not suitable for burial. Hazardous waste will be segregated and transported according to international (Transport of Dangerous Goods) conventions to suitable disposal facilities in Peru or other countries.
8.10.4
Waste Recycling
Wastes will be recycled where practicable to reduce landfill requirements. Waste materials such as tires and conveyor belting will be shipped off site for recycling. Materials that offer recycling opportunities will be stored in the fenced solid waste sorting facility at the mine site before being removed off site to a recycling facility. Steel bins and dumpsters will be provided around each major facility at the mine and port sites for collecting recyclable waste. These containers will be transported regularly to the recycling facility, where the contents will be sorted and stored. Hazardous and toxic waste, including lead-acid batteries, fluorescent lamp ballasts, and chemicals, will be stored temporarily in sealed steel or plastic drums in a waste transfer area and then be shipped off site for disposal or recycling. Waste materials will be stored in suitable containers at points of generation. The containers will be large enough to hold all waste materials generated between collection periods. Animal-proof refuse containers, which will be serviced regularly, will be provided at buildings for domestic waste. Special containers will be constructed for spilled liquids and to prevent access by insects and wildlife. Storage areas and containers will be kept tidy and will be covered to prevent wastes from being dispersed by water, wind, or animals. Waste from the source points will be sorted into designated containers. Storage containers will include steel drums, plastic and steel bins, boxes, and dumpsters. Wastes
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from these containers will be transferred to appropriate bags or containers for transportation off site. Where non-hazardous wastes cannot be recycled or incinerated, they will be disposed of in a designated landfill that will be managed in accordance with general industry standards.
8.10.5
8.10.5.1
Sewage Management
Sewage Treatment Plant A sewage treatment plant will be provided at the mine site. The plant will be modular and sized to treat the larger construction workforce. For operations, the plant will be reduced in size for the smaller workforce by removing surplus tanks and equipment. The sewage plant equipment will be supplied in self-contained units within building enclosures that house all mechanical and electrical equipment. The plants will also include ventilation, lighting, and cooling systems. Although proprietary methods may differ, sewage treatment generally consists of the following processes: screening grit removal primary treatment (sedimentation) secondary treatment (biological) final settlement tertiary treatment (filtration) disinfection sludge dewatering. The sewage treatment plants will be designed to produce effluent complying with the requirements of the Peruvian regulations for effluent quality. Sources of influent to the sewage treatment plant will include: black water from toilets and urinals grey water from hand basins in dormitories and washrooms grey water from showers grey water from laundries grey water and food waste from kitchen sinks. The estimated volumes of sewage to be treated at the mine site are shown in Table 8-6.
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Table 8-6:
Sewage Volumes to be Treated

Unit people people L/ person/day L/d L/d h Value 1,500 600 200 300,000 120,000 10 1.5
Design Parameter Mine/Plant Site Maximum construction camp workforce Operations camp workforce Sewage flow rate Average sewage flow: during construction during operations Peaking factor (peak flow/average flow) Peak duration
8.10.5.2
Sewage Collection System The sewage treatment plant (STP) will be located downhill from the construction and permanent camps, as shown in Figure 8-4. Sewage from the camp will flow by gravity through buried PVC pipes to the STP. Sewage from the plant and truckshop will be collected in holding tanks and pumped by a grinder pump through buried HDPE force mains to the STP for treatment. Toilets in outlying sites such as the primary crusher or explosives mixing plant will be equipped with approved closed holding tanks that will be collected in sewage tank trucks and delivered to the STP. During operations, the mine site sewage effluent will be pumped through an HDPE force main to the tailings pumpbox. During construction, the treated effluent will need to be discharged directly to the environment because the TMF will not be functional. The sewage sludge cake will be burned in the incinerator.
8.11
Communications
The Caariaco Norte site communications system will cover the complete voice, data, fax, Internet/email, mobile and radio communications requirements for the process and camp facilities. The system includes built-in redundancy with the provision for continuous service with key equipment failure and UPS backup power for each communications system cluster. The proposed system comprises: External satellite communication system gigabyte (1000Base) onsite fibre communications system
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key equipment built-in redundancy to enable hot equipment change without loss of service network-based upon LAN environments per building forming a single WAN voice, data, fax, Internet, and video (1000Base T devices) capabilities satellite/radio equipment electronics installed in a communications modular building. Equipment includes antennas, dishes, snow shields, cabinets, transceivers, power supplies, and all other system requirements. Outdoor electrical/electronics are housed in NEMA 4X enclosures. fibre-optic based cabling and modules communications equipment, including servers, routers, switches, controllers, security firewall, modems, and balance of system requirements UPS backup supply for a minimum 1 hour supply with system fully loaded modular design suitable for expansion, maintenance, and trouble-shooting cabinets, cabinet wiring, and equipment mounting software and associated licences VoiP, Data, VoiP/Data receptacles for installation by others using CAT5e or CAT6 twisted-pair cabling trunked radio system, including all electronics, antennas, base stations, handheld radios, mobile radios, chargers and holsters, and setup application to federal authorities for all radio frequency licences antenna towers including aircraft lights, ladders, work and rest platforms, and UPS core CATV equipment, including satellite dish, DVD array, and distribution equipment IP telephony system, including installation and setup, all phone sets including phone booths, electrical rooms, offices, reception areas, and conference rooms support services for installation of communications equipment and pre-test the equipment prior to the shipment of the module to site support services for commissioning of the complete communications systems. On consultation with the surrounding residents, communication systems will be installed in local community centres.
8.12
Site Security
A gatehouse will be provided at the entrance to the main access road off the Corral Quemado Road. This will restrict access to authorized vehicles only. In addition, a
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guardhouse will be erected farther up the main access road, just ahead of the TMF, to register and inspect incoming and outgoing traffic to and from the site.
8.13
8.13.1

Design Considerations
Copper concentrate from the Caariaco Norte mine will be transported by truck to the Marine Terminal Muchik (MTM), a planned development by Lumina Copper Corp (Lumina) southeast of the town of Eten and the existing Consorcio Terminales Eten liquid bulk terminal in Northern Peru. Annual throughput is expected to be 400,000 tonnes. The loading berth will be designed to accommodate up to 50,000 DWT loaded Handymax vessels. It is assumed for this study that the berthing facility, the trestle conveyor leading out to the berth, and the shiploader will be shared with Lumina Copper. Service buildings and utilities throughout the port site would also be shared, whereas concentrate receiving, storage, and reclaim facilities for the Caariaco Norte product would be independently developed and operated by Candente. Belt conveyors will transport concentrate from the Candente truck unloading facility to the storage building and from the storage building to the shipping conveyor. As part of the sustainable aspects in the design, conveyor systems will be enclosed in galleries to minimize fugitive emissions of concentrate dust into the surrounding environment. In addition, a vacuum system will be installed throughout all conveyor galleries for cleaning up spilled concentrate or settled concentrate dust. The conveyor galleries will be provided with flexible vacuum hoses long enough to cover the connecting areas along the conveyors. The marine terminal site plan is shown in Figures 8-5 and 8-6.
8.13.2
8.13.2.1
On-Shore Port Facilities

Truck Unloading Station The truck unloading system will consist of an integrated truck dump hopper and feeder conveyor, both installed at ground level. The hopper is sized for a minimum of two full 30 tonne truckloads of concentrate and will be attached to the skirt of the feeder conveyor to prevent concentrate spillage during unloading. The feeder will have a volumetric capacity of up to 80 tonnes and a throughput capacity of 50 t/h, with a peak of 80 t/h.
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Figure 8-5:
Onshore Facilities General Arrangement
Page 8-35
Figure 8-6:
Marine Terminal Berthing and Mooring General Arrangement
Page 8-36
An adjustable trim gate at the hopper discharge will profile the concentrate being drawn from the hopper and prevent the feeder conveyor from being overloaded. The feeder conveyor passes the concentrate to a receiving conveyor, which ascends and enters the southwest side of the concentrate storage building. The concentrate is then distributed into stock piles by a travelling portal stacker at an average rate of 50 t/h, designed to handle a peak rate of up to 80 t/h. The truck unloading facility will be fitted with a dust collection system to control dust generated during the unloading process. The unit will be installed outside the concentrate storage building enclosure and will include an induced draft fan sized for 30,000 cfm. The intake duct will be positioned near the receiving hopper. The collected dust will be discharged automatically into a bin that will be emptied manually back into the receiving hopper when full. 8.13.2.2 Concentrate Storage Building The proposed concentrate storage building will be constructed with reinforced concrete foundations, a floor slab, perimeter retaining walls, and a steel-frame roof. The building will be fully enclosed to contain dust and protect the concentrate from contamination and the elements. The building will have a vehicle door, personnel doors at both ends of the building, and access doors to the reclaim conveyor area for maintenance and cleanup. The design operating capacity of 46,000 tonnes considers the expected package sizes for concentrate export and the anticipated schedule of vessel arrivals, including an allowance for vessel delays due poor weather, such as hurricane conditions en route to the port. Copper concentrate will be reclaimed from the storage pile by a front-end loader, (FEL), which will supply concentrate into one of two fixed-position hopper feeders on one side of the building. The hopper feeders will, in turn, feed the concentrate to the reclaim conveyor, set in a recessed area below the main floor level of the building. The reclaim conveyor will be equipped with a process scale to monitor the amount of concentrate being loaded. On exiting the building, the reclaim conveyor will be housed in a gallery that connects initially to a sampling station and then to a transfer tower, where the concentrate will be shifted to the shipping pipe conveyor shared with Lumina. 8.13.2.3 Concentrate Shiploading The shipping pipe conveyor will be carried over the 3.2 km long trestle from the shore to the berth. The concentrate will then be transferred to the berth conveyor, which in turn travels along the length of the berth to provide coverage for a towed tripper that feeds the travelling shiploader.
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The shipping pipe conveyor, berth conveyor, shiploader with towed tripper, and related marine equipment will all be shared between Lumina and Candente. Vessel operations for export of Candente product will be scheduled in conjunction with Lumina to avoid berthing conflicts. For safety and operational reasons, control systems will be established to ensure continuous communication between the Candente reclaiming operations at the concentrate storage building and shiploading operations at the berth by Lumina. 8.13.2.4 Ancillary Facilities and Services Other facilities to be provided at the port site to support Caariaco Norte operations include the following: maintenance building warehouse administration building cafeteria and change-rooms. These facilities will be shared with the adjacent Lumina Copper facilities. The following site services will also be shared with Lumina Copper: fire water process water potable water sanitary waste process waste. 8.13.2.5 Power Supply and Distribution Power supply for the port site will be delivered to an on-shore substation at the Caariaco concentrate handling facility from the planned Lumina facility power auxiliary distribution system at 4.16 kV, 3 phase, 3 wire, 60 Hz. The substation will include incoming 4.16 kV switchgear and a step-down transformer. 8.13.2.6 Waste Handling and Disposal Sewage Collection System Sewage from the port site buildings will flow by gravity through a PVC pipe to a pumping chamber and be pumped through a HDPE pipe to an equalization chamber owned by Lumina Copper for treatment. The sewage pipes will have intermediate manholes for inspection.
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Other Wastes Other wastes from operations at the port site will include: hazardous waste, including waste chemicals and petroleum products waste from building and equipment maintenance domestic waste inert waste from construction sites. Wastes will be disposed of in an environmentally acceptable manner in accordance with legal requirements to prevent their direct or indirect discharge to any watercourse or groundwater. Hazardous waste will be stored temporarily at the port site in drums protected by secondary containments before being sent off site for disposal at special handling facilities.
8.13.3
8.13.3.1
Marine Facilities
Off-Shore Berth The berth will be constructed 3.2 km from shore at a water depth of -15.0 m, as required for the design 50,000 DWT Handymax vessel. Dredging the seabed to provide a channel for vessels to berth closer to shore is not recommended because sediment transport in the shallow water is substantial, and the dredged pocket would quickly fill with sediment materials. Frequent maintenance dredging would be required to maintain the draft in the channel and berth pocket, which would significantly increase the operational costs of the terminal. Vessels approaching from the west and southwest will have an open and clear approach with no apparent navigational hazards. It is recommended that navigational aids be provided to guide arriving vessels toward the berth. The marine terminal port is expected to operate 24 h/ad.
8.13.3.2
Berth Alignment and Mooring The berth face will be aligned in the direction of the predominant waves at 210 from the shore line. The approach trestle carrying the loadout conveyor will run perpendicular to the shoreline at a small angle to the berth face. The berth will be exposed to wave and swell action, and significant swell-induced vessel motion is expected. A system of spread moorings will prevent ships from colliding with the berth during loading operations and will reduce loads on the mooring lines. The minimum standoff for the design vessel is 7 m.
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The spread moorings will consist of seven mooring buoys and a quick-release hook installed on the shiploader platform. Four of the buoys will be at the bow, and three, plus the quick-release hook, at the stern. The spread mooring arrangement will allow the vessel to align with the dominant swell direction (facing west). The buoys will be connected to either three-chain mooring legs with a stockless anchor or to a deadman at the seabed.
Page 8-40
CONTENTS 9.0 SURFACE WATER MANAGEMENT ......................................................................9-1 9.1 Summary.....................................................................................................9-1 9.2 Introduction .................................................................................................9-2 9.3 Site Climate Data ........................................................................................9-2 9.4 Site Hydrology .............................................................................................9-3 9.5 Water Balance ............................................................................................9-4 9.5.1 Water Balance Modelling .................................................................9-4 9.5.2 Water Balance Description and Data ...............................................9-6 9.5.2.1 General Description ......................................................... 9-6 9.5.2.2 TMF Embankment and Seepage Recovery Impoundment .................................................................. 9-9 9.5.2.3 Process Plant and Cyclone Sand Plant ........................... 9-9 9.5.2.4 Open Pit ........................................................................ 9-10 9.5.2.5 WRMF Runoff Collection and Seepage Recovery ......... 9-10 9.5.2.6 Freshwater Reservoir .................................................... 9-10 9.5.2.7 Closure Water Management .......................................... 9-11 9.5.3 Water Balance ...............................................................................9-11 9.6 Water Management Structures..................................................................9-14 9.6.1 General..........................................................................................9-14 9.6.2 TMF Spillway .................................................................................9-15 9.6.3 Diversion Channel around the WRMF ...........................................9-16 9.6.4 Freshwater Diversion Embankment and Impoundment..................9-20 9.6.5 Seepage Collection Embankments and Impoundments .................9-22
TABLES
Table 9-1: Table 9-2: Table 9-3: Table 9-4: Table 9-5: Table 9-6: Details of Local Meteorological Stations ....................................................................... 9-2 Climate Data for the Water Balance .............................................................................. 9-3 Short-Duration Precipitation Frequency Analysis for Project Site ................................. 9-4 Long-Duration Precipitation Frequency Analysis for Project Site ................................. 9-4 TMF Water Balance over the Mine Life ....................................................................... 9-12 Overall TMF Water Balance for Closure Year ............................................................. 9-12
FIGURES
Figure 9-1: Figure 9-2: Figure 9-3: Figure 9-4: Figure 9-5: Figure 9-6: Water Balance Schematic Operations ....................................................................... 9-5 Water Balance Schematic Closure............................................................................. 9-7 Catchment Areas and Water Management Structures ................................................. 9-8 Water and Solids Elevations in the TMF during Operation ......................................... 9-13 Tailings Management Facility Spillway........................................................................ 9-17 Waste Rock Management Facility Diversion Channel Plan and Profile................... 9-18
TOC i
Figure 9-7: Figure 9-8: Figure 9-9:
Waste Rock Management Facility Diversion Channel Sections .............................. 9-19 Waste Rock Management Facility River Diversion Embankment ............................ 9-21 Waste Rock Management Facility Seepage Recovery Embankment ......................... 9-23
TOC ii
9.0
9.1
SURFACE WATER MANAGEMENT

Summary
The climate database for the site was updated with the information available from the existing camp and data from the El Limon and Incahuasi weather stations. Mean annual precipitation and mean annual evaporation were determined to be 1,025 mm and 393 mm, respectively, and the annual runoff coefficient for vegetated natural areas was estimated to be 0.52. The hydrologic data for the site were determined for various return periods using frequency analysis. The 24-hour, 100-year intensity was determined to be 254 mm and the 24-hour probable maximum precipitation (PMP) intensity to be 881 mm. These values have been incorporated into the design of the key water management structures on site. The surface water management plan for the Caariaco Norte project will preserve to the maximum extent possible the non contact status of surface waters. Waters that come into contact with project facilities will be contained and treated if necessary so that any water released to the environment always meets the applicable water quality regulatory guidelines. A system of impoundments, embankments, diversions, and spillways will be developed immediately when construction commences to handle runoff from construction-related activities. This system will continue to be developed through construction and operations to ensure that water discharged to the environment meets the guidelines The project will affect two main catchment areas: the Caariaco valley, where most of the facilities (WRMF, open pit, and process plant) will be constructed, and the Quebrada Yerma valley, which is the proposed location for the TMF. Water will be impounded upstream of the WRMF to supply the freshwater makeup requirements of the process plant. A diversion channel will be constructed to direct excess water from Ro Caariaco around the WRMF. Contact water from the facilities in the area of the pit, process plant, and WRMF will be collected immediately downstream of the WRMF and be used as mill makeup water; the excess will be discharged to Ro Caariaco via water treatment plants. Because most of this water is consumed by the mill, the site water balance indicates that such discharges are only expected toward the end of the mine life. Precipitation falling on the TMF and runoff draining into the TMF will be impounded to ensure a minimum water cover is maintained over the tailings. Excess water will be directed to the process plant as makeup water. At closure, a TMF spillway will be constructed on the west saddle embankment to route stormwater flows to the Quebrada Yerma. The TMF spillway will be designed for the probable maximum flood (PMF).
Page 9-1
The site-wide water balance estimates that water release from the TMF would not be required until the end of the mine life. Nevertheless, if significant storm events made it necessary to release water during operations to reduce the storage volume in the TMF, then the water would be treated, if required, prior to release.
9.2
Introduction
The purpose of this section is to summarize information relating to the climate, hydrology, site water balance, and water management structures for the Caariaco Norte project. The site water balance model is based on current topography, climate data, facility layouts, process parameters, and key construction activities. Reasonable assumptions have been made, based on experience and industry norms, where information is not yet available. The climate and hydrology data, site water balance, and water management structure design will be updated as the project advances and more information is gathered.
9.3
Site Climate Data

Monthly precipitation and evaporation data are available for two weather stations in the area: El Limon (El. 1,029 masl) and Incahuasi (El. 3,078 masl). Some data are also available from a third weather station at the project site (El. 3,083 masl), but are incomplete. Precipitation records are available for only two partial years, and no evaporation data have been recorded here. Details of the meteorological stations are provided in Table 9-1. The three sets of data were correlated to estimate precipitation and evaporation on site. The El Limon station dataset covers ten years, from 1995 to 2004, and the Incahuasi dataset four years, from 1995 to 1998. Precipitation estimates for the project site are based on El Limon data because of the longer period of record, but evaporation estimates are based on Incahuasi because its elevation is similar to that at the project site. In any case, this is a short period of record for all stations and will be updated as more information is collected. The monthly and annual climatic data used to develop the site water balance for this study are summarized in Table 9-2 and discussed briefly below.
Table 9-1:
Station El Limon Incahuasi Project Site
Details of Local Meteorological Stations

Longitude 7919' 7919' 7916' Latitude 0555' 0614' 066' Altitude (masl) 1,029 3,078 3,083 Period of Record 10 years 4 years 8 months
Page 9-2
Table 9-2:
Parameter
Climate Data for the Water Balance

Jan 67.4 6.6 34.8 100 6.6 32.2 8.2 17.5 3.3 Feb 167.9 16.4 86.7 249.1 16.4 19.5 5.0 120.3 22.7 Mar 201.5 19.7 104.1 298.9 19.7 20.7 5.3 149.4 28.2 Apr 156.4 15.3 80.8 232 15.3 21.0 5.3 105.3 19.9 May 85.4 8.3 44.1 126.8 8.3 27.0 6.9 32.2 6.1 Jun 29.3 2.9 15.1 43.5 2.9 30.0 7.6 0.0 0.0 Jul 14.7 1.4 7.6 21.8 1.4 42.5 10.8 0.0 0.0 Aug 3.4 0.3 1.8 5.0 0.3 52.3 13.3 0.0 0.0 Sep 35.7 3.5 18.4 53.0 3.5 41.3 10.5 0.0 0.0 Oct 90.2 8.8 46.6 133.8 8.8 37.8 9.6 35.4 6.7 Nov 75.0 7.3 38.7 111.3 7.3 36.6 9.3 24.0 4.5 Dec 98.4 9.6 50.8 146 9.6 32.1 8.2 44.8 8.5 Annual 1,025 100 530 1,521 100 393.0 100 528.9 100
Mean Precipitation Distribution Total Precipitation (mm) Distribution (%) 10-Year Wet and Dry Precipitation 1:10 Year Dry Total Precipitation (mm) 1:10 Year Wet Total Precipitation (mm) Distribution (%) Mean Evaporation Distribution Total Evaporation (mm) Distribution (%) Mean Runoff Distribution Total Runoff (mm) Distribution (%)
Mean annual precipitation (rainfall only) is estimated to be 1,025 mm, as derived from the monthly precipitation data for the El Limon station, adjusted for altitude by a factor of 2.9 based on the limited project site precipitation data available at this time. The factor should be reviewed as more information becomes available from the project site. A frequency analysis, including the altitude adjustment factor, was performed on the data from the El Limon station to determine the 1:10-year wet and dry annual and monthly precipitation at the project site. These values were used to test the sensitivity of the water balance to extreme events. Based on monthly evaporation data from the Incahuasi station, mean annual evaporation at the project site is estimated to be 393 mm. Potential evapo-transpiration data from the Incahuasi station were used in conjunction with the project site precipitation data to determine the mean annual and monthly runoff distribution for the project site. The annual runoff coefficient for vegetated undisturbed areas was estimated to be 0.52. It is recommended that hydrometric stations be installed to measure flows at the project site.
9.4
Site Hydrology
A frequency analysis was performed on the altitude-adjusted El Limon station maximum 24-hour and 30-day precipitation data to determine short- and long-term duration intensities for various return periods; these are shown in Tables 9-3 and 9-4. The PMP values were calculated according to the Hershfield method and would be used for the design of diversion ditches, spillways, impoundments, and embankments on the project site.
Page 9-3
Table 9-3:
Return Period (Years) 2 5 10 20 50 100 200 500 1,000 PMP
Short-Duration Precipitation Frequency Analysis for Project Site

Duration (h) 0.25 31 40 47 53 61 67 73 81 87 212 0.5 37 49 57 65 75 82 90 99 107 263 1 Intensity (mm) 45 60 70 79 91 101 110 122 131 327 74 100 117 133 154 170 185 206 222 572 90 121 142 162 188 207 227 252 272 710 109 148 173 198 230 254 278 309 333 881 6 12 24
Table 9-4:
Return Period (Years) 2 5 10 20 50 100 200 500 1,000 PMP 1 109 148 173 198 230 254 278 309 333 881
Long-Duration Precipitation Frequency Analysis for Project Site

Duration (d) 2 132 180 211 242 281 311 340 379 409 1,094 3 147 202 237 272 316 350 383 427 460 1,241 4 159 219 258 295 344 381 417 465 501 1,358 5 170 233 275 315 367 406 445 496 535 1,456 6 178 245 290 332 387 428 469 524 565 1,541 7 186 256 303 347 405 448 491 548 591 1,617 8 Intensity (mm) 193 266 314 361 421 466 511 570 614 1,686 199 275 325 373 435 482 528 590 636 1,749 205 284 335 385 449 497 545 608 656 1,807 216 299 353 406 473 524 575 642 692 1,913 230 318 377 432 505 560 614 685 739 2,051 249 345 409 470 549 609 668 746 805 2,244 265 368 436 501 586 650 713 796 859 2,406 278 387 459 528 618 685 752 840 907 2,547 9 10 12 15 20 25 30
The 10-year period of record for the El Limon station is a very short time frame for performing a frequency analysis, and inaccuracies can be expected for longer return periods. The frequency analysis should therefore be revisited when more information becomes available for both the EI Limon station and the project site.
9.5
9.5.1
Water Balance
Water Balance Modelling
A water balance model has been developed to estimate the monthly water balance for the Caariaco project during pre-mining (construction), mining operations, and closure (one typical year). Figure 9-1 is a schematic of the overall water balance based on the current water management plan during mining operations.
Page 9-4
Figure 9-1:
Water Balance Schematic Operations
Page 9-5
The water balance model includes the average annual precipitation and evaporation values and is tested for wet and dry years by using the 1:10-year dry and wet conditions. The water levels within the TMF are used in the model to determine release rates, reclaim rates, and freshwater requirements. The following five areas are key input or output locations affecting the water balance: TMF embankment and seepage recovery impoundment process plant and cyclone sand plant open pit WRMF runoff collection and seepage recovery freshwater collection and diversion embankment. Figure 9-2 is a schematic of the overall water balance during closure. One typical closure year was analyzed to show the impacts on the site.
9.5.2
9.5.2.1
Water Balance Description and Data

General Description The water balance in this report simulates average conditions for mine operations at a processing rate of 95,000 t/d for 19 years as per the preliminary mine plan. Subsequent to completion of this water balance an updated mine plan was developed that extended the mine life to 22 years. To accurately reflect this change, the water balance will be updated during the next phase of project study. Nevertheless, the current water balance represents a reasonable assessment of the project based on the known conditions. The following key mining activities will affect water management during these years: Year -1 (January) Freshwater diversion embankment constructed upstream of the WRMF and the TMF embankment is started. Year 1 (January) Mining operations commence. Year 19 (August) Mining operations cease and closure commences. All contact water associated with road runoff will be directed to sediment control containments. Diversion ditches will route clean non-contact water away from the pit and around the WRMF to existing natural channels downstream or to the freshwater reservoir. The available data and assumptions used in the water balance for the five key project areas are outlined below. The catchment areas delineated for the site are shown in Figure 9-3.
Page 9-6
Figure 9-2:
Water Balance Schematic Closure
Page 9-7
Figure 9-3:
Catchment Areas and Water Management Structures
Page 9-8
9.5.2.2
TMF Embankment and Seepage Recovery Impoundment During construction of the TMF starter embankment, water will be retained upstream by a coffer dam and diverted around the construction activities until the starter embankment is complete. Toward the later years of the mine life, north and east saddle embankments will be required to manage the tailings and water cover in the TMF. Based on the current water balance, the TMF has sufficient storage capacity to permit treatment and discharge of contact water to be delayed until the end of the mine life. The requirement for treatment and release of water will be optimized in later stages of project design. The TMF seepage recovery impoundment and systems have been designed to capture seepage from the cyclone sands construction activities at the main embankment and to pump the captured water into the TMF impoundment. The seepage recovery collection and monitoring wells will return captured water to the seepage recovery impoundment.
9.5.2.3
Process Plant and Cyclone Sand Plant Based on the preliminary mine plan, approximately 633 Mt of tailings will be generated over the mine operating life at a process throughput of 95,000 t/d. Freshwater requirements for this throughput level are estimated to be 307 m3/h, consisting of groundwater captured by wells constructed around the perimeter of the pit and water from the reservoir upstream of the WRMF. The average total plant water requirement is approximately 2,900 m3/h. Other sources of water reporting to the process plant will include moisture in the ore feed at approximately 118 m3/h, pit dewatering, seepage recovered from the WRMF, and reclaim water from the TMF. Tailings from the plant will proceed via a pyrite flotation circuit to the cyclone sand plant (CSP), which will operate year-round once mining has commenced. The water balance estimates that approximately 24% of the tailings will be diverted by the CSP to generate coarse sand for use in shell construction of the TMF embankment; the rest will report to the TMF impoundment for deposition. The tailings solids have the following characteristics: tailings deposited dry density ............................. 1.1 t/m3 tailings slurry density .......................................... 55% tailings specific gravity ....................................... 2.65 cyclone sand dry density.................................... 1.7 t/m3 cyclone sand saturation ..................................... 35% cyclone sand specific gravity ............................. 2.37
Page 9-9
9.5.2.4
Open Pit The final pit area is estimated to be approximately 216 ha. For the water balance, the pit has been projected to expand at a rate of approximately 1 ha per month during mining operations. Nevertheless, this will be directly correlated to the mine plan in the next phase of study. The pit groundwater inflow was modelled using SeepW. The initial inflows during the early years of the mine life are estimated to be approximately 5.3 L/s, increasing to 100 L/s after full mine development. Direct precipitation and surface runoff not captured by diversion structures, contingent on its quality, will be pumped to the process plant during mining operations. If water quality is unsuitable for use within the process plant, then it will be pumped to the tailings thickener. Approximately 70% of the flows entering the pit will be captured via pit wall dewatering wells, and the remaining 30% will be pumped to the process plant via the pit sumps. To the extent possible, water flows from non-contact areas potentially draining toward the pit will be diverted to the freshwater reservoir upstream of the diversion embankment.
9.5.2.5
WRMF Runoff Collection and Seepage Recovery Ro Caariaco will be diverted through a lined channel beginning upstream of the WRMF and rejoin the existing river channel downstream of the WRMF seepage recovery embankment. Water associated with the WRMF, including waste rock moisture and direct precipitation runoff, will be collected in the seepage recovery system and, depending on its quality, be pumped to the process plant. The system design also includes downstream seepage collection and monitoring wells. Any seepage captured by the collection wells will be pumped via the WRMF seepage recovery impoundment to the process plant. Surface water flows from non-contact areas that could potentially flow into the WRMF from the east side of the valley will be collected in the diversion channel and diverted, along with Ro Caariaco, downstream of the WRMF seepage recovery systems.
9.5.2.6
Freshwater Reservoir The freshwater reservoir created upstream of the diversion embankment will supply freshwater makeup requirements for operations. Surface runoff west of the pit will be directed to the reservoir by diversion structures. Catchment areas for the diversion structures are shown in Figure 9-3.
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9.5.2.7
Closure Water Management The current mine closure water management plan includes the construction of two water treatment plants (WTPs), one downstream of the TMF and the other downstream of the WRMF. The WTPs will be designed to treat surplus water that cannot be retained within the surge capacity of the WRMF water management systems or the TMF, and will discharge to the environment from holding ponds. The discharge water quality will meet regulatory criteria for receiving waters. The surface channel that diverts Ro Caariaco around the WRMF during operations will remain in place upon closure. The design flow, and subsequent size of the surface channel, during closure will be determined in the next phase of study and will include failure consequence analysis. The pit will begin filling upon mine closure. Further field studies and modelling will be carried out to confirm whether the pit can be allowed to overflow to the WRMF or whether the water level will need to be maintained at a certain height below the pit rim to maintain it as a groundwater sink. Any surplus water will be directed to the WTP downstream of the WRMF, treated to meet regulatory discharge criteria, and released to the environment. Water associated with the WRMF will be directed from the WRMF seepage collection impoundment to the WTP downstream of the WRMF. Based on the current water balance, water will need to be released from the TMF during closure to maintain the required freeboard and water cover above the tailings. Water quality modelling during subsequent design stages of this project will predict if water treatment will be required before release and assist in selecting the appropriate treatment technology.
9.5.3
Water Balance
Water balance models for average, wet, and dry conditions were developed with monthly increments, based on the inputs summarized in Section 9.3 above. The water balance allows the TMF to act as a water storage facility to manage wet season surges and dry season evaporation. The wet and dry site conditions were also used to check the availability of water in the TMF for reclaim. It was determined that no reclaim requirements for the process plant would be affected in any of the models. All other areas of the site are used as both inputs to the water balance and for other aspects of the mine design, such as required pumping capacities and pipeline sizing. Only the average water balance results, summarized in Table 9-5, are presented in this report. Over the life of the mine, the largest water flows to and from the TMF are tailings slurry water (T7) and reclaim water to the process plant (T10), respectively. As discussed earlier, no water is released from the TMF during mine operations (T9), and
Page 9-11
approximately 40 Mm3 would form the tailings water cover in the TMF at the end of the mine life. Although the current TMF design impounds this water, the potential for release from the TMF before the end of the mine life will be assessed in later stages of project design. Reducing the depth of water cover over the tailings has the potential to reduce the embankment construction requirements and associated costs. Figure 9-4 illustrates the tailings and water levels in the TMF over the life of the mine without water release to the environment. Table 9-6 illustrates the water balance at mine closure. During closure, all process-related inputs and outputs to the TMF cease such that precipitation becomes the dominant TMF water inflow. Treated water discharged from the WTP (T9) is the largest water output during closure.
Table 9-5:
Item Inflows to the TMF (T8) TMF Impoundment Precipitation * (T5) TMF Catchment Area Runoff (T7) Tailings Slurry Water Inflow Volume ** (S3) TMF Seepage Recovery Impoundment Pumpback Total Inflows to the TMF Outflows from the TMF (T4) TMF Impoundment Evaporation (S1) + (T2) Potential Seepage Collected (T10) Reclaim Water to Process Plant from the TMF (T11) Water Retained in Tailings within the TMF TMF Impoundment Volume Total Outflows from the TMF * Refer to Figure 9-1 of operations water balance schematic. ** Varies with cyclone sand production 60.32 49.27 484.58 71.10 665.27 23.19 9.13 336.42 256.35 40.18 665.27
TMF Water Balance over the Mine Life

Value (Mm3)
Table 9-6:
Item
Overall TMF Water Balance for Closure Year

Value (Mm3) 40.18 5.37 1.53 47.08 2.04 0.95 3.92 40.18 47.08
Inflows to the TMF Initial TMF Impoundment Volume (T8) Precipitation on the TMF Impoundment (T5) Runoff from TMF Catchment Area Total Inflows to the TMF Outflows from the TMF (T4) TMF Impoundment Evaporation (S1) + (T2) Seepage Collected (T9) Water to WTP for Treatment and Discharge from the TMF TMF Impoundment Volume Total Outflows from the TMF Note: Refer to Figure 9-2 for closure water balance schematic.
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Figure 9-4:
Water and Solids Elevations in the TMF during Operation
Page 9-13
9.6
9.6.1
Water Management Structures

General
A high-level trade-off study was carried out to assess alternative settings for the WRMF and the method of diverting Ro Caariaco around it (Appendix A). The study examined three alternatives: Option 1 Large WRMF in Ro Caariaco valley. Ro Caariaco would be diverted around the east side of the WRMF through a 6.4 km surface channel that would also collect runoff from the drainage area to the east of the WRMF. The channel would remain in place through closure and need to be maintained in perpetuity. A 70 m high embankment would be required upstream of the WRMF to divert the river. Option 2 Smaller footprint WRMF in Ro Caariaco valley. Ro Caariaco would be diverted around the east side of the WRMF through a 2.9 km tunnel through the mountain. This tunnel would remain in place through closure and need to be maintained in perpetuity. A surface channel would also be required on the east side of the WRMF to collect runoff from the drainage area to the east of the WRMF. A 15 m high embankment would be required upstream of the WRMF to divert the river. Option 3 No WRMF in Ro Caariaco valley. The waste rock would be transported via conveyor in a tunnel through the ridge to the northwest of the process plant. This tunnel would only be used during mining operations and would be decommissioned at closure. This option would not require diversion of Ro Caariaco. On a capital cost basis, Options 1 and 2 were carried forward for net present value (NPV) analysis. Option 1 (6.4 km diversion channel) was found to have the lowest capital and life-of-mine costs. The costs are not absolute, however, and were developed on a relative basis without benefit of geotechnical information. In addition, they did not consider design, permitting, or closure costs. Based on these assumptions, the cost for Option 3 was approximately $20 million to $40 million higher than for Options 1 and 2. On this basis, AMEC recommended Option 1 for the prefeasibility study. Nevertheless, site geotechnical and environmental investigations are recommended at the feasibility stage of the project to determine the slope conditions for diversion channel and access road construction. These findings could lead to changes in the relative difference between the options and in the WRMF and Ro Caariaco diversion configurations. Numerous structures will be required on site for water management (see Figure 9-3) and are summarized as follows: The TMF spillway required at closure will be designed to manage the 24-hour PMP and resulting flows from the TMF impoundment, so that the structural integrity of the embankment is not compromised in the event of a storm of this magnitude.
Page 9-14
A diversion channel is required to route the Ro Caariaco headwater drainage area around the proposed WRMF and to collect additional surface runoff to the east of the WRMF. This channel has been designed for the 24-hour, 100-year precipitation event. This diversion channel will remain in operation after closure. A diversion channel will be required to divert the catchment area west of the pit to the freshwater reservoir upstream of the proposed diversion embankment for the WRMF. A diversion channel will be required to divert the catchment area northwest of the pit to the WRMF seepage collection system or to the pit pumping systems. Various other minor diversion ditches will be required at the process plant and other project site areas. A freshwater diversion embankment, channel inlet, and impoundment are required to manage outflows to the WRMF diversion channel. Seepage collection embankments and impoundments are required downstream of both the WRMF and the TMF. Preliminary designs for the main channels and embankments are discussed below. Plans for the minor diversion ditches will be developed at a more detailed level of design.
9.6.2
TMF Spillway
The TMF spillway will be constructed around the west saddle embankment during mine closure to divert excess flows associated with storm events to the Quebrada Yerma. The spillway is designed so that the flows do not compromise the structural integrity of the TMF. A PMP storm event was used as the inflow design flood (IDF) input for design of the TMF spillway. The peak 24-hour PMF to the TMF is estimated to produce a flow of 731 m3/s. Routing this flow of water through the TMF reservoir and a V shaped inlet spillway channel would attenuate the flow to approximately 6.5 m3/s. The reduction results from temporary storage in the impoundment; this increases the surface elevation of the TMF reservoir and water is then channelled at a lower rate over a longer period of time. The spillway will have 2:1 side-slopes, a channel slope of 0.1%, and be approximately 2 m deep. The V-shaped channel (no bed width) will transition to a 5 m wide trapezoidal channel section with 2:1 side-slopes once the existing ground slope steepens, and will tie into an existing gully. If the spillway and channel are not constructed in rock, then riprap may be required for erosion protection, the need for which will be determined in future work. Figure 9-5 shows a plan, profile, and cross-sections of the proposed TMF closure spillway.
Page 9-15
9.6.3
Diversion Channel around the WRMF

The diversion channel around the east side of the WRMF is designed to serve two purposes: to divert Ro Caariaco around the WRMF to divert non-contact water from east of the WRMF downstream to Ro Caariaco. The peak 24-hour, 100-year inflow to the freshwater impoundment at the upper end of the diversion channel is estimated to be 288 m3/s. Routing the water through the impoundment would result in an estimated 100-year, 24-hour attenuated outflow at the channel of 50 m3/s. As previously discussed, the reduction in flow results from the water being stored temporarily in the impoundment, then released at a lower outflow rate over a longer period of time. The diversion ditch will intercept runoff from the catchment east of the WRMF, thus increasing the flow at the outlet to approximately 100 m3/s. A road along the west side of this channel will form its embankment to the west. The upper reaches will be constructed as a 5.5 m wide trapezoidal section with 2:1 side-slopes. The initial channel slope of 2% will reduce to 1% as it transitions to a spillway chute to direct the flow back into Ro Caariaco downstream of the WRMF seepage collection system. The spillway chute section will increase to a 21 m wide trapezoid with 2:1 side-slopes and a slope of 15% at Station 4+300, as shown in Figure 9-6. The increase in width will assist in energy dissipation and in minimizing potential erosion issues associated with the chute spillway. Both the channel and the chute spillway will require riprap protection against erosion. A liner or a filter layer may also be required, depending on the bed material. Figures 9-6 and 9-7 provide a plan, profile, and cross-sections of this preliminary channel and spillway. Based on the hydrobiological assessment conducted at the project site (Section 10, Evnironmental Considerations), which indicates that no native fish species are present in Ro Caariaco, the current channel design does not consider fish migration.
Page 9-16
Figure 9-5: Tailings Management Facility Spillway
Page 9-17
Figure 9-6:
Waste Rock Management Facility Diversion Channel Plan and Profile
Page 9-18
Figure 9-7:
Waste Rock Management Facility Diversion Channel Sections
Page 9-19
9.6.4
Freshwater Diversion Embankment and Impoundment

An embankment will be constructed upstream of the WRMF at the headwaters of Ro Caariaco to create a water diversion structure and a freshwater impoundment, as shown in Figure 9-8. The embankment will incorporate a 5 m deep inlet to the WRMF diversion channel. The impoundment is sized to manage surge flows into the reservoir and outflows to the diversion channel. During the initial two months of start-up operations only, the estimated freshwater requirement for the process plant is 2,990 m3/h because no water will be reclaimed from the TMF during this time. After this, the average freshwater requirement for the process plant is approximately 250 m3/h. The highest flows in Ro Caariaco occur during the wet season between February and April. To minimize impact on the Ro Caariaco flows, the current execution plan commences operations in that period. The freshwater impoundment will be used to supplement flow to the process plant. During start-up, flows from the diverted area east of the WRMF will be captured in the diversion channel and conveyed to the confluence of Ro Caariaco with the unnamed tributary that flows past the village of Caaris. Although flows in Ro Caariaco will be reduced at that point, the execution plan has been specifically designed to satisfy both the process plant and the minimum flow requirements in Ro Caariaco. Considering this water supply plan for start-up, flows in Ro Caariaco downstream of the WRMF may be reduced by 50% to provide freshwater to the process plant. Because the river flows are highest at this time of year, however, a significant amount of water would still be available in downstream areas. After the first two months of operation, flows in the Ro Caariaco at the first confluence downstream of the village of Caaris will be more than 90% of the original levels. Impacts on the downstream flows are expected to be minimal. The community of Caaris does not obtain its fresh water from Ro Caariaco, but from an unnamed tributary northeast of the river. There will be no impact on or reduction of flow in the tributary and therefore no effect on water supply for the community during construction, operations, or closure.
Page 9-20
Figure 9-8:
Waste Rock Management Facility River Diversion Embankment
Page 9-21
9.6.5
Seepage Collection Embankments and Impoundments

Two seepage recovery embankments and respective impoundments will be constructed, one downstream of the TMF and the other downstream of the WRMF. Figure 9-9 shows the layout and sections of the WRMF seepage recovery facilities. Collected seepage water will be pumped back into the TMF during operations and upon closure to the WTP downstream of the TMF. Seepage water collected from the WRMF during operations will be pumped to the process plant and to the WTP downstream of the WRMF during closure.
Page 9-22
Figure 9-9:
Waste Rock Management Facility Seepage Recovery Embankment
Page 9-23
CONTENTS 10.0 ENVIRONMENTAL CONSIDERATIONS ..............................................................10-1 10.1 Summary...................................................................................................10-1 10.2 Biophysical Project Components ...............................................................10-2 10.2.1 Area of Environmental Influence ....................................................10-2 10.2.2 Physical Environment ....................................................................10-4 10.2.2.1 Climate and Weather ..................................................... 10-4 10.2.2.2 Soils and Land Use ....................................................... 10-4 10.2.2.3 Hydrology ...................................................................... 10-4 10.2.2.4 Water Quality and Sediment Management .................... 10-5 10.2.2.5 Air Quality and Noise ................................................... 10-10 10.2.3 Ecosystems and Biodiversity .......................................................10-11 10.2.4 Environmental Effects of the Project ............................................10-13 10.2.5 Mitigation and Management.........................................................10-13 10.3 Socioeconomic Component ....................................................................10-14 10.3.1 Socioeconomic Area of Influence ................................................10-14 10.3.2 Resettlement Assessment ...........................................................10-16 10.4 Legal Framework ....................................................................................10-17 10.4.1 General Legal Framework ...........................................................10-17 10.4.1.1 Mining Regulation ........................................................ 10-17 10.4.1.2 General Environmental Law......................................... 10-18 10.4.1.3 Environmental Impact Assessment National System Law.............................................................................. 10-18 10.4.2 Specific Legal Framework ...........................................................10-19 10.4.2.1 Environmental Protection Rule on Mining and Metallurgical Activities ................................................. 10-19 10.4.2.2 Mining Closure Regulations ......................................... 10-19 10.4.2.3 Water Quality and Effluents ......................................... 10-19 10.4.2.4 Air Quality and Emissions ............................................ 10-19 10.4.2.5 Flora and Fauna .......................................................... 10-20 10.4.2.6 Archaeology ................................................................ 10-20 10.4.2.7 Solid Wastes ............................................................... 10-21 10.4.2.8 Social and Community Relationships ........................... 10-21 10.4.3 Summary of Legal Framework .....................................................10-22 10.5 Permitting Requirements .........................................................................10-24 10.5.1 Summary of Permits and Authorizations ......................................10-24 10.5.2 Pre-Construction Permits .............................................................10-28 10.5.2.1 Surface Land Use ........................................................ 10-28 10.5.2.2 Archaeological Assessment ......................................... 10-29 10.5.2.3 EIA and Closure Plan .................................................. 10-29 10.5.2.4 Other ........................................................................... 10-29 10.5.3 Construction and Operations Permits ..........................................10-31 10.5.3.1 Construction Phase ..................................................... 10-31 10.5.3.2 Operations Phase ........................................................ 10-31 10.5.4 Permitting Process ......................................................................10-32
TOC i
TABLES
Table 10-1: Ro Caariaco Monthly and Annual Discharges (m /s) (1965-1995) / Caariaco Station .......................................................................................................................... 10-5 Table 10-2: Summary Results of Project Stream Flow Measurements (September 2007) ............ 10-7 Table 10-3: Summary of Water Quality Results .............................................................................. 10-9 Table 10-4: Air and Noise Measurement Stations......................................................................... 10-10 Table 10-5: Protected and Endemic Bird Species in Project Area ................................................ 10-12 Table 10-6: Access to Village of Caaris ...................................................................................... 10-15 Table 10-7: Applicable Legal Framework ...................................................................................... 10-22 Table 10-8: Major Licences and Permits Required Pre-Construction Phase ............................. 10-26 Table 10-9: Major Licences and Permits Required Construction Phase ................................... 10-27 Table 10-10: Major Licences and Permits Required Operations Phase ...................................... 10-28
3
FIGURES
Figure 10-1: Project Area of Influence .............................................................................................. 10-3 Figure 10-2: Locations of Hydrology Stations ................................................................................... 10-6 Figure 10-3: Locations of Water Quality Monitoring Stations ........................................................... 10-8
TOC ii
10.0
ENVIRONMENTAL CONSIDERATIONS
The Environmental Impact Assessment (EIA) for the Caariaco project was initiated in 2007 by Candente. The information in this report is derived from ongoing baseline studies and is related mainly to the biophysical component, the socioeconomic component and the permitting process. All biophysical and socioeconomic information presented here is based on baseline site investigations from 2007 to2010. More baseline site studies are planned for 2011 to complete the Environmental Impact Assessment (EIA).
10.1
Summary
The site of the Caariaco Norte project is in Northern Peru, in an area environmentally similar to the surrounding region that extends into Ecuador and Columbia. Baseline environmental assessments are ongoing. Findings to date include the following: The project site is subject to distinct wet and dry seasons. Hydrological investigations show that naturally acidic waters are present in mineralized areas within the project footprint. The background levels for copper in water in mineralized areas are approximately 15% greater than for non-mineralized areas. With regard to sediments, study results were compared to Canadian guidelines because Peru has no background guidelines. Dissolved metal levels were found to be significantly above Probable Effect Levels (PEL) within the project footprint, but this is not unusual for mineralized areas, where PELs are routinely exceeded. Due to steep slopes and the high clay and fines contents, soils within the region are typically unstable. Current air quality is characteristic of rural, non-industrialized areas, with no contaminants at concentrations of concern to human health. The project ecosystem consists of moors and cloud forests at higher elevations and cultivated land at lower elevations. This ecosystem extends through Ecuador and into Columbia. The intense study of the project area has provided a greater understanding of the biodiversity within the ecosystem. No native fish species were found within the rivers and creeks at the project site, but introduced trout were identified downstream in the main stem of Ro Caariaco. Native species were found within the lower basin of both Ro Caariaco and Quebrada Yerma and in Ro Huancabamba, approximately 40 km from the project site. Some of the key environmental considerations for the project are as follows: water flows and quality possible effects of construction and mining activities on the surrounding natural habitat potential latent effects on protected species potential soil erosion.
Page 10-1
These key issues will be addressed through project environmental management and engineering controls. Other measures, such as restoration of ground cover, will only be possible at closure. The community of San Juan de Caaris (CSJC) holds the surface rights in the proposed Caariaco project development area. This community comprises approximately 25 villages and 1,500 primary social groups (see Section 10.3 for an explanation of community, village, and primary social groups in the Peruvian context). The main CSJC village of Caaris is adjacent to a northeast tributary of Ro Caariaco, approximately 2.5 km from the project site. Vehicle access to the villages is limited, and most residents are involved in subsistence agriculture. Resettlement of primary social groups who will be directly affected by mining and processing operations is a key socioeconomic consideration for the project moving forward. Section 10.2 describes the biophysical aspects of the project, Section 10.3 outlines socioeconomic conditions, and 10.4 outlines the laws and regulations applicable to the project, followed by the permitting requirements for pre-construction, construction, and operations.
10.2
10.2.1
Biophysical Project Components

Area of Environmental Influence
The Caariaco Norte project site is on the Atlantic side of the Andes, within the Western Cordillera mountain range. Figure 10-1 shows the project area of influence, including the access road to the Huancabamba valley, the project facilities, the open pit area, and the drainages that will be affected by project development. The area of environmental influence is formed by the upper Ro Caariaco basin and the mid-basin of Quebrada Yerma, at altitudes ranging from 2,400 and 3,200 masl. The waste rock management facility (WRMF), diversion embankment, and WRMF seepage recovery embankment will be in the Caariaco valley. The open pit, process plant, camp, and other auxiliary facilities will be on the west side of the valley. The tailings management facility (TMF) will be in the basin of Quebrada Yerma. Both Ro Caariaco and Quebrada Yerma flow into Ro Huancabamba. Tributaries of Ro Caariaco upstream of the WRMF diversion embankment include Quebradas Verde and Soron. The village of Caaris (within the CSJC) is adjacent to an unnamed tributary of Ro Caariaco, on the east side of the Caariaco valley and approximately 2.5 km from the project site.
Page 10-2
Figure 10-1: Project Area of Influence
Page 10-3
10.2.2
10.2.2.1
Physical Environment
Climate and Weather Situated on the Atlantic watershed of the Andes, the project site is subject to high humidity and frequent fogs. The area has a strong seasonality; the wet season extends from January and April. The proposed facilities lie within a number of different microclimates. The lower regions, at 2,400 masl, have a warm climate with an average annual temperature of 15C, whereas the elevated regions, up to 3,200 masl, are frequently subject to fog and have an average temperature of 10C.
10.2.2.2
Soils and Land Use Changes in land use resulting from project implementation will have consequences for the agricultural or forestry potential of the soils within the project area. Of the total agricultural area that the project will eventually affect by the end of the mine life, only 20 ha are actively farmed at present. Analysis of topography, satellite information, and site surveys shows sloped landforms over large tracts of the project area. Soil instability due to the less-competent component materials, mainly clay and fine sand, is a project design consideration for the PFS and will remain a key consideration moving forward. Project design will also consider appropriate programs of conservation and revegetation of disturbed soils, as set out in the conceptual reclamation and closure plan (presented in overview in Section 11). As a guiding principle, all soils with value for reclamation, i.e., thick enough to warrant salvage, will be stockpiled to the extent practical. A detailed reclamation plan, based on information on the volume and quality of soils on the site, will be developed before project construction and operation. This information will be obtained during the detailed design phase. The plan will be updated periodically as required and as the project evolves.
10.2.2.3
Hydrology Most of the project infrastructure will be constructed in the basins of Ro Caariaco and Quebrada Yerma. Potential changes in the local water cycles, including water flow volumes and infiltration rates, are key considerations for the project. As discussed in Section 9, Surface Water Management, the period of greatest change to the local water cyclethe first two months of operationsis currently planned to coincide with the wet season, when there would be minimal impact to the downstream environment. Historical data from the Ro Caariaco hydrometric station are available for a 31-year period (1965 to 1995) and are summarized in Table 10-1. Four hydrological assessments have been completed to date, and it is planned to add to the dataset during the next phase of the study. Figure 10-2 is a location map for the stations.
Page 10-4
Table 10-1: Ro Caariaco Monthly and Annual Discharges (m /s) (1965-1995) / Caariaco Station
Monthly Discharges Average Discharge (m3/s) Standard Deviation Maximum Discharge (m3/s) Minimum Discharge (m /s)
3
Jan 2.67 1.16 6.10 1.00
Feb 2.98 1.19 6.20 0.90
Mar 3.85 1.62 9.20 1.90
Apr 3.83 1.59 8.90 1.60
May 2.79 0.94 5.40 1.00
Jun 2.48 0.94 4.90 0.70
Jul 1.99 0.86 5.50 0.90
Aug 1.68 0.49 2.60 0.40
Sep 1.75 0.67 3.80 0.50
Oct 2.14 0.86 4.40 0.90
Nov 1.95 1.00 6.70 0.40
Dec 2.26 0.91 4.70 0.70
Annual 2.53 0.55 3.87 1.41
Staff gauges were installed at 30 stations around Ro Caariaco and tributaries (indicated on Figure 10-2). At the time of these original hydrological assessments, the proposed TMF location was in the Quebrada Pilco Yacu valley, but as a result of the trade-off study discussed in Section 7, Tailings and Waste Rock Management, it has since been relocated to the Quebrada Yerma valley. Table 10-2 summarizes results for the 2007 measurements. This was the only year of data for locations within the project influence area. These measurements will be used as inputs to populate models for use as design tools and aids to developing management plans during construction and operation of the project. Studies to date indicate that most of the streams are permanent and flows predominantly respond to seasonal precipitation, with maximum rates of discharge between March and May and minimum rates between August and September. 10.2.2.4 Water Quality and Sediment Management Water quality is closely related to hydrology, land use, and slope stability. The project design considers an overall water conservation strategy to minimize potential impact on water resources resulting from project development, and to control any impacts that do occur. Under a philosophy of zero discharge, fresh water (non-contact water) will be diverted around project components (tailings, waste rock, process plant, roads, and auxiliary facilities) and returned to original streams. Runoff and slopes will be controlled to prevent soil loss, and potentially contaminated (contact) water will be returned to the mine process, minimizing releases to the environment. Facilities to manage non-contact water will include diversion channels and structures, the freshwater reservoir and redirection of Ro Caariaco to avoid contact with the WRMF, and diversion structures for Quebrada Yerma to bypass the TMF. Considerations for contact water include catchment, seepage and runoff, treatment, monitoring, and return of potentially contaminated water to the process plant or the TMF. A preliminary water management plan is discussed in Section 9; more comprehensive water management plans will need to be developed during the detailed engineering phase.
Page 10-5
Figure 10-2: Locations of Hydrology Stations
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Table 10-2: Summary Results of Project Stream Flow Measurements (September 2007)
UTM Coordinates East North (m) (m) 690,931 691,134 691,461 689,016 689,086 689,180 689,536 689,537 689,623 690,442 690,655 690,649 690,780 690,740 690,909 691,465 691,900 688,160 687,927 687,899 687,670 690,073 691,838 688,619 688,746 688,984 688,550 686,248 686,367 692,122 9,327,098 9 327,020 9 326,627 9 326,028 9 326,184 9 326,156 9 326,218 9 326,280 9 326,214 9 326,380 9 326,416 9,326,666 9 326,576 9 326,090 9 326,390 9,326,612 9 326,450 9 325,428 9 326,206 9 326,642 9 328,132 9 327,986 9 326,456 9 328,448 9 328,742 9 329,078 9 329,628 9 345,226 9 345,838 9 343,352 Altitude (masl) 2,943 2,856 2,740 3,430 3,390 3,375 3,305 3,329 3,296 2,849 2,871 2,969 2,868 2,960 2,864 2,721 2,680 3,461 3,349 3,271 3,045 3,264 2,675 3,050 3,043 2,996 2,914 1,078 1,081 1,044 Discharge (L/s) 8.4 8.6 32 0.13 1.41 0.4 4.2 0.98 4.8 7.6 23.6 0.5 2 1 20 54.7 82.8 1 9.5 4.7 44.7 1.4 601.5 1.5 3.3 17.9 18.7 165.4 12739.1 859.8
River/Creek Quebrada Oso Quebrada Oso Quebrada Oso Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Norte Quebrada Pilco Yacu Quebrada Pilco Yaco Quebrada Pilco Yacu Quebrada Pilco Yacu Quebrada Achicamonte Ro Jatun Yacu Quebrada Popa Quebrada Popa Quebrada Popa Quebrada Popa Quebrada Yerma Ro Huancabamba Ro Caariaco
Station OS-01 OS-02 OS-03 NO-01 NO-02 NO-03 NO-04 NO-05 NO-06 NO-07 NO-08 NO-09 NO-10 NO-11 NO-12 NO-13 NO-14 PI-01 PI-02 PI-03 PI-04 AC-01 JA-01 PO-01 PO-02 PO-03 PO-04 YE-01 HU-01 CA-01
In summary, non-contact waters will be diverted around the project to the maximum extent practical. Contact water will be contained, collected, and treated if necessary before release. During construction, sediment ponds will be constructed where necessary to contain and settle out suspended sediments. Once the TMF starter embankment has been constructed, water from construction activities upstream of the TMF will be directed there. During the studies conducted between 2007 and 2010, samples were collected throughout the area of the Ro Caariaco basin, part of the Quebrada Yerma basin, and reaches of Ro Huancabamba. Figure 10-3 shows the locations of water quality sampling sites. Results for stations closest to the pit area are summarized in Table 10-3.
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Figure 10-3:
Locations of Water Quality Monitoring Stations
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Table 10-3: Summary of Water Quality Results

Monitoring Stations K-01 K-03 K-04 March 2010 K-05 S-09 K-23 V-03 ECA1 Category 3 Animal Drinking Water 6,5 - 8,4 >5 <= 5000 0.1 0.01 0.50 1 0.0010 0.05 24 April 2010
Type of Sample Parameters In-Situ Temperature pH Eh Dissolved Oxygen Conductivity Discharge Flow Physical Assessment Total Dissolved Solids Total Suspended Solids Total Metals Arsenic (As) Cadmium (Cd) Copper (Cu) Iron (Fe) Mercury (Hg) Lead (Pb) Zinc (Zn)
Unit C mv mg/L S/cm L/s mg/L mg/L mg/L mg/L mg/L mg/L mg/L mg/L mg/L
S.W. 11.7 7.21 -7.00 7 16 4810.8 30 12 <0.001 <0.0002 0.04 0.706 <0.0001 <0.001 0.01
S.W. 12.2 6.70 19.00 7 90 306.2 92 4 <0.001 <0.0002 0.172 0.128 <0.0001 <0.001 0.016
S.W. 11.9 4.52 139.00 8 43 72.4 67 <1 <0.001 <0.0002 0.234 0.322 <0.0001 <0.001 0.015
S.W. 11.9 6.81 12.00 7 95 432.0 97 3 <0.001 <0.0002 0.178 0.135 <0.0001 <0.001 0.012
S.W. 10.15 7.18 -7 7.21 18.9 253.0 31.00 <1 <0.001 <0.0002 0.031 <0.001 <0.0001 <0.001 <0.009
S.W. 11.4 7.21 3.00 6 16 857.4 19 2 <0.001 <0.0002 0.002 0.182 <0.0001 <0.001 0.028
S.W. 11.45 7.87 -27 6.67 17.1 229.9 21.00 2.00 0.002 <0.0002 0.003 0.12 <0.0001 <0.001 0.032
Irrigation 6,5 - 8,5 >= 4 < 2000 0.05 0.005 0.20 1 0.0010 0.05 2
Note: S.W. = Surface Water 1. Water Quality Standards (Peru) D.S.N 002-2008-MINAM
The background total copper concentrations in water are higher in mineralized areas than in non-mineralized areas. Acidic to slightly acidic pH levels have been identified only at Stations K-03, K-04, and K-05 at the confluence of the Oso and Norte watersheds, which are the main watersheds intersected by the open pit, and their surrounding area, presumably due to the nature of parent material of the nearby hill-slopes and the dominant mineralization in the area. The natural mineralization is also reflected in the results for conductivity and total dissolved solids. At present there are no Peruvian background guidelines for sediment levels. Upon comparison to Canadian guidelines, water samples from the area showed mercury, arsenic and lead contents above Probable Effect Levels (PEL), with copper and zinc nearly 50% above Interim Guidelines (ISQGs). This is not unusual for naturally occurring mineralized areas where PELs are routinely exceeded.
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10.2.2.5
Air Quality and Noise AMEC assessed the baseline air quality in the project area on four separate occasions. The station locations are listed in Table 10-4. The results indicate that air quality is typical of rural, non-industrialized areas, with no contaminants at concentrations of concern to human health.
Table 10-4: Air and Noise Measurement Stations
Site Visit May-07 May-07 May-07 May-07 May-07 Sep-07 Sep-07 Sep-07 Sep-07 Sep-07 Sep-07 Sep-07 May-11 May-11 May-11 May-11 May-11 May-11 May-11 May-11 May-11 May-11 May-11 May-11 May-11
Datum: PSAD56 17S
Code EAC-01 EAC-02 EAC-03 EAC-04 EAC-05 EAC-01 EAC-03 EAC-04 EAC-06 EAC-07 EAC-08 EAC-09 EAC-01 EAC-03 EAC-04 EAC-06 EAC-07 EAC-08 EAC-09 ERC-10 EAC-11 EAC-12 EAC-01 EAC-02 EAC-06
UTM_N* 9,326,314 9,327,536 9,328,142 9,327,902 9,325,907 9,326,314 9,328,142 9,327,902 9,326,338 9,325,756 9,326,138 9,327,528 9,326,314 9,328,142 9,327,902 9,326,338 9,325,756 9,326,138 9,327,528 9,323,913 9,323,573 9,321,489 9,326,294 9,327,163 9,326,338
UTM_E* 691,795 690,542 685,865 687,893 688,738 691,795 685,865 687,893 689,253 688,612 687,708 689,523 691,795 685,865 687,893 689,253 688,612 687,708 689,523 689,704 688,244 686,763 691,730 690,292 689,253
Altitude (masl) 2,748 3,229 3,160 3,102 3,495 2,748 3,160 3,102 3,376 3,507 3,352 3,420 2,748 3,160 3,102 3,376 3,507 3,352 3,420 3,413 3,583 3,768 2,761 2,920 3,376
Date 5/27/2007 5/28/2007 5/29/2007 5/30/2007 6/1/2007 9/26/2007 9/30/2007 9/29/2007 9/27/2007 10/2/2007 10/1/2007 9/28/2007 5/20/2008 5/23/2008 5/24/2008 5/21/2008 5/29/2008 5/25/2008 5/22/2008 5/27/2008 5/28/2008 5/26/2008 5/2/2010 4/30/2010 5/1/2010
Project construction and operating activities will be controlled to minimize the generation of emissions and fugitive dust that could alter the air quality. Key sources for dust are from mining operations: haul truck traffic, blasting, and material handling, both ore and waste. Stationary source emissions, such as those from generators, will comply with or be lower than Peruvian emission regulations for these types of equipment. In the case of
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Caariaco, the mine will be supplied with power from the national electric grid, and so generator emissions will be limited. Stack emissions from the roaster will be controlled through off-gas scrubbing, using BACT (best available control technology) for emission control. Exhaust emissions from mobile equipment will comply with Peruvian guidelines. The mine equipment maintenance program will ensure that vehicles are maintained properly so that emissions comply with the original manufacturers specifications. Potential air quality impacts from fugitive and stationary sources will be assessed with the aid of an air dispersion model to predict areas of potential exceedance of air quality guidelines. Particular focus will be placed on predicting the impacts of the roaster and acid plant. Emission control measures will be site specific as much as possible. To date, four noise level assessments have been conducted at the same locations shown in Table 10-4 to obtain background data for the site under various conditions. Results indicate the site is typical of rural, non-industrialized areas with few non-natural noise sources. Additional noise modelling will be conducted once the equipment fleet has been decided upon and the locations of major stationary noise sources have been set. Construction and operations scenarios will be modelled and the results used to focus control and management measures on mitigating potential effects on health of residents and workers and minimizing potential impact on local wildlife.
10.2.3
Ecosystems and Biodiversity

Ground surfaces at the highest altitudes in the project area are covered by wet grasslands, locally known as moors (3,200 to 3,600 masl), and cloud forests1 (2,600 to 3,200 masl). At lower altitudes (below 2,800 masl), the ground is cultivated land, currently used for grazing, or recently abandoned cultivated land covered by native vegetation. Very little primary forest or undisturbed land is found below 2,800 masl. The moorland ecosystem traditionally extends from Colombia in the north to the Huancabamba Depression in Peru in the south. The moors in the project area had not had not been recorded before and are now considered to constitute the southern extent of this ecosystem along the axis of the Western Cordillera. The ecosystem is deeply fragmented and affected by human activities along most of its length. Biodiversity is the sum total of different plant and animal species and their support communities and ecosystems in a particular placefrom a microcosm to the entire earth. Indicators of biodiversity are measures used to rank biodiversity in a particular frame of reference (e.g., microcosm). A common index is the number of different species of plants or animals in the frame of reference. Operationally, for assessment purposes, biodiversity is taken to mean the number of rare and/or endangered species.
Cloud forests are so called because they occur in an area where clouds rising on mountain slopes routinely impinge on the forest canopy.
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The project area has been studied more intently than the surrounding region with respect to biodiversity indicators such as species richness (for orchids in particular, with more than 150 species recorded), level of endemism (for amphibians, orchids, insects, and small mammals), and the presence of endangered species (more than 20, including especially mountain tapir and spectacled bear). These studies have resulted in a greater understanding of the biodiversity of the overall region. All of the protected and endangered species recorded or sited within the greater project footprint are also found in similar habitats within Peru or in neighbouring countries. Studies conducted by AMEC have shown that an abundant number of orchid species are present within the larger project footprint, and species previously known in Ecuador and Colombia have also been identified. This is not surprising, as orchids are the most diverse family of flowering plants in the world. Candente has initiated an orchid relocation program, as described below. The ongoing baseline studies have also sighted more than 180 bird species within the project area and Ro Huancabamba, including thirteen endangered and endemic species, as shown in Table 10-5; all species listed on the table are resident. Twenty-three protected species of mammals have been recorded in the greater project footprint, including the spectacled bear and the mountain tapir. AMEC specialists have observed spectacled bears and have begun documenting footprints and their locations, hair samples, and feeding locations. Candente plans to commission a relocation assessment for endangered and protected mammals as part of the next phase of study.
Table 10-5: Protected and Endemic Bird Species in Project Area
Common Name Bearded Guan Ecuadorian Ground Dove Pacific Parrotlet Spot-Throated Hummingbird Purple-throated Sunangel Rainbow Starfrontlet Collared Antshrike Maran Crescentchest Unicolored Tapaculo Maran Thrush Buff-bellied Tanager Black-capped Sparrow Drab Seedeater Species Penelope barbata Columbina buckleyi Forpus coelestis Leucippus taczanowskii Heliangelus viola Coeligena iris Sakesphorus bernardi Melanopareia maranonica Scytalopus unicolor Turdus maranonicus Thlypopsis inornata Arremon abeillei Sporophila simplex INRENA EN IUCN VU Endemic EBAs 46 45 45 048, 051 46 46 048, 045 48 48 48 048, 045 45
NT
NT X X
Candente has conducted studies that provide the necessary information for the future relocation of protected orchid and amphibian species. The orchid relocation study includes population assessments and the construction and implementation of two orchid
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nurseries at two different altitude levels to experiment with transplantation techniques. The amphibians study includes population assessments and the evaluation of potential relocation sites. The hydrobiological assessment reported no native species of fish in Ro Caariaco or Quebrada Yerma at stations within the area of environmental influence of the project. Native species, especially catfish, have been found in the lower basin of both waterbodies and in Ro Huancabamba, approximately 40 km downstream of the project site. Introduced trout were found downstream in the main stem of Ro Caariaco. Candente is planning to support a national conservation initiative for the creation of a 60,000 ha National Park south of the project for the protection of similar habitats and species.
10.2.4
Environmental Effects of the Project

Key considerations for evaluating the potential environmental effects of the project are as follows: Potential alteration of the quality or volume of water from the two watersheds within the area of influence of the project Effects on water quality and volume will be minimized to the extent practicable through water management practices and monitoring programs. Change in land use and effect on montane cloud forests Effects on the natural habitat will mainly be limited to the areas of the open pit and the WRMF and will be mitigated in development of the mine. The remaining project components are predominantly situated in abandoned agricultural zones or areas that have already been modified by other human activities. Effects on protected species Mine development, increased traffic volumes, and the noise generated during construction and operation of the project are factors that will be managed to minimize effects on protected species, along with potential relocation measures. Potential for soil erosion The methods outlined in the following subsection will be implemented to minimize the potential for soil erosion resulting from vegetation removal required for project construction.
10.2.5
Mitigation and Management

A considerable amount of human activity has taken place in the area up to this time, including primarily agricultural activities and, to a lesser extent, previous mineral exploration, and much of the area is no longer pristine; however, Candente has been proactive in measuring background conditions and assessing mitigation strategies.
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A comprehensive water management program will be developed and implemented during detailed engineering prior to project construction. The key objective of the water management plan is to minimize negative effects on quality and quantity of water in the drainage basins in which the project is located, through all project phases from construction through operation, closure, and post closure. The project footprint within areas that contain the cloud forests has been minimized to the greatest extent practical consistent with safe operation of the mine. Where possible, forest cover will be re-established following mine closure. Revegetation of areas previous affected by humans will also be assessed as part of a no net loss approach. Candente has initiated and plans to continue a program of orchid cultivation to provide the necessary information for the future relocation of protected species. Where possible, rare plant species will be protected or transplanted; where practical, the habitats of rare fauna will be maintained as functioning ecological units. Soil erosion will be mitigated by three principal methods: minimizing disturbance of vegetated areas stabilizing disturbed areas to prevent erosion through mechanical (compaction) and bioengineering (replanting, live cuttings) means reclaiming and revegetating disturbed areas as soon as practical after disuse.
10.3
10.3.1
Socioeconomic Component
Socioeconomic Area of Influence
The Caariaco project lies within the Region of Lambayeque, in Ferreafe province, in the Caaris2 district of northern Peru. In addition to this political administrative division, the community of San Juan de Caaris3 (CJSC) holds the surface rights in the proposed Caariaco project development area. In Peru, a peasant community is defined as a group of families with collective rights over land property. These communities are enrolled in the Public Register Office and are considered a legal entity, such as an association or company. The community must renew its registration every two years by presenting a complete list of their active membersmainly adult men. A village is defined as a group of houses in a rural area. A social group consists of a number of people interacting and sharing an objective and
Peru is divided politically and administratively into regions, provinces, and districts; the latter are the basic units for the political-administrative management of the State. Distribution of the budget for public and social programs to support poverty reduction is channelled through these districts. Rural communities are one of the oldest types of organization in the Peruvian countryside. Although their origins are ancient, at present they are modern institutions of territorial character and are recognized by the Peruvian State, which grants them legal existence and identity. Castillo, Pedro. Las comunidades campesinas en el siglo XXI: Balance jurdico. En Qu sabemos de las comunidades campesinas? Lima, 2007.
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norms. For example, the peasant community itself is a social group encompassing a number of primary social groups. The CJSC was formally recognized by the State on 10 October 1956, and it now comprises more than 25 villages and about 1,500 primary social groups. The CJSC village of Caaris is adjacent to an unnamed tributary to Ro Caariaco, on the east side of the Caariaco valley, about 2.5 km from the project site. According to the National Institute for Statistics (INEI), Caaris has 323 inhabitants grouped in 81 families. A program to determine the number of primary social groups within Caaris is being planned. The origins of the community are pre-Hispanic and despite transformations over centuries, it retains the main characteristics that have allowed it to organize and govern the undeveloped territory in which is located. These include: partial collective management of the natural resources within its territory lands, water, forest, natural pasture its own social organization in which authorities and representatives are democratically chosen. The community board, which is elected every two years, is the body that represents the Community Assembly composed of all members of the community. Road infrastructure and access to CJSC and surrounding farmhouses is limited, with the closest paved road leading to the nearest intermediate cities such as Chiclayo (Lambayeque Region) and Jan (Cajamarca Region) still more than 40 km away. Table 10-6 lists the existing means of access from Lima to the village of Caaris in the central part of the territory of CJSC.
Table 10-6: Access to Village of Caaris
Route Lima Chiclayo Chiclayo Olmos Olmos Pucar Pucar Caaris Total Means of Transport Aeroplane Truck paved road Truck paved road Truck secondary gravel road Travel Time (hours) 1.0 1.5 2.0 3.0 7.5
With the exception of the access road and power line, the project components for this study will be constructed along the basin of Ro Caariaco and Quebrada Yerma, covering altitudes ranging from 2,400 to 3,600 masl and falling within different archaeological zones. The territory includes villages, agricultural areas or individual plots, collective-use grasslands, and the Caaris woods area. In the latter case, the forest is parcelled among landholders, but it is also recognized that all forest area in the CJSC is a common community resource, especially for water collection.
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The residents of CJSC are defined according to the United Nations Statistical Commission as both absolute and relatively poor. In 2007 AMEC (Peru) conducted a survey of households in the community and found that living standards are well below the national average. For example, the study showed that 86% of families have monthly incomes of less than US$100. Another important indicator of vulnerability is the high rate of illiteracy, which reaches 46%. Adequate sanitation is scarce; the survey found that more than 50% of homes have no piped water. Water supply is derived directly from streams that are also used for cattle, ablution, and defecation and as waste receptacles for plastics, cans, and domestic residues. Ninety-five percent of families use wood obtained from the cloud forests for cooking within their abodes, without adequate exhaust, leading to a high rate of respiratory diseases, especially among women and children who spend most of their time inside the house. Most members of the community, 87.6%, are involved in subsistence agricultural production of various crop types suited to the variety of microclimates and ecological zones found in the Caariaco basin. Andean tubers a (potatoes, ocas, ollucos) are cultivated at the highest elevations, above 3,000 masl,, where there is also abundant natural grass land for cattle grazing. Maize, beans, and peas are grown at mid-altitudes between 2,000 and 3,000 masl, and fruit crops dominate at elevations below 2,000 masl. The lack of funding sources for irrigation prevents farmers from taking greater advantage of the diverse growing conditions; only 15.4% of plots are irrigated by means of rustic channels. Farmers have few opportunities to sell their products to the regional market because most crops are consumed locally. Given the socioeconomic and cultural characteristics of the CJSC, the population within the direct area of influence of the project, according to IFC standards, falls into the category of a vulnerable indigenous group, meaning they are excluded from economic development processes, and whose livelihoods are directly linked to the local natural resources4. Therefore, the socioenvironmental studies and management plans to be developed for the project will follow the IFC standards, which are recognized as a warranty of higher performance level for investment in mining projects.
10.3.2
Resettlement Assessment
The development of the Caariaco Norte project will potentially require the resettlement of social groups in the immediate project impact area. In assessing the results and costs of this resettlement, studies and planning will address several key factors: A socioeconomic baseline and inventory of goods will be developed that recognizes the current residential condition of those individuals to be resettled and the fair
Development Policy and Standards on Social and Environmental Sustainability IFC, 2006
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agricultural value of their lands. This framework will allow the project to evaluate stakeholder requirements. Studies will address the allocation of forested areas in CJSC. The community as a whole is recognized as a landholder, and projects will be implemented to mitigate the potential changes in biodiversity, forestry, ethno-biological resources, and potentially water quality and volume in the basin. As discussed previously, an orchid cultivation program has already been initiated, and Candente plans to protect, transplant, or relocate other rare species. A social risk study will be undertaken at both a regional and local level that recognizes and acknowledges the perceptions of stakeholders and other interest groups with regard to the potential impacts of the project, including the amount and quality of water, the change in land use, and the potential effects on downstream populations. The local population will be encouraged to participate in varying aspects of project development through a Health, Safety, Environment, and Community (HSEC) Management System that incorporates the IFC5 Development Standards. This management system will be implemented from the initial stages of the project to lay the appropriate foundations for socially responsible management for the life of the project.
10.4
Legal Framework
This section outlines the legal framework in Peru that will serve as the basis for permitting requirements for the project. Spanish abbreviations for English terms are shown in brackets.
10.4.1
10.4.1.1
General Legal Framework

Mining Regulation The main regulation for the mining and metallurgical sector is the Consolidated Text (TUO) of the General Mining Law, Supreme Decree (DS) 014-92-EM and the Environmental Protection Regulations approved by DS 016-93-EM and its amendment approved by DS 059-93-EM. The Ministry of Energy and Mines (MINEM) is the overall governing body for mining-related legislation.
The development standards that will have to be included in the Management System and the Social and Environmental Assessment are related to the following topics: a) work and labour conditions, b) prevention and reduction of pollution, c) health and safety of the community, d) land acquisition and involuntary resettlement, e) biodiversity conservation and natural resources sustainable management, f) indigenous peoples and cultural heritage. For each of these issues, the IFC has developed the Performance Standards to be included in Environmental Impact Studies and Management Plans of Projects interested in receiving support of the World Bank.
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10.4.1.2
General Environmental Law In Peru, environmental regulations are governed by the Political Constitution of Peru (1993) and the General Environmental Law, Law 28611, as amended by Law 29263, and Legislative Decree 1055 (D. Leg.). Law 28611 establishes the legal framework for environmental management, including principles and basic rules to ensure the effective exercise of the right to a healthy, balanced, and appropriate environment for the full development of life. Its intent is to promote effective environmental management and environmental protection, with the aim of improving the quality of life of the population and sustainable development of the country. The provisions of this law and its supplementary rules are binding on any person or entity, public or private, that affects soils, both surface and underground, maritime areas, lakeside, hydrology, hydrogeology, and airspace within the national territory. The Ministry of Environment (MINAM) was created 13 May 2008 by D. Leg. 1013 with the aim of conserving the environment by fostering and ensuring sustainable, responsible, rational, and ethical use of natural resources and the environment that sustains them. Its stated mission is to assist the comprehensive social, economic, and cultural development of human individuals in harmony with their environment; and to thereby ensure for present and future generations the right to enjoy a balanced and suitable environment for the development of life.
10.4.1.3
Environmental Impact Assessment National System Law Law 27446, Law of the National Environmental Impact Assessment, as amended by D. Leg. 1078, created the Environmental Impact Assessment National System (SEIA) as a unique and coordinated system for the identification, prevention, monitoring, control, and early correction of negative environmental impacts of human actions resulting from an investment project. It also seeks to establish a uniform process that includes requirements, stages, and scope of environmental impact assessments for investment projects and establishes mechanisms to ensure citizen participation in the process of environmental impact assessment. This law provides for the categorization of investment projects according to their environmental risk: Category I Environmental Impact Statements, Category II Semi-detailed Environmental Impact Study, and Category III Detailed Environmental Impact Study. It also provides environmental protection criteria to consider in evaluating investment projects. The regulation of Law 27446 was approved by DS 019-2009-MINAM.
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10.4.2
10.4.2.1
Specific Legal Framework

Environmental Protection Rule on Mining and Metallurgical Activities The Environmental Protection Rule on Mining and Metallurgical Activities was approved by DS 016-93-EM and amended by DS 059-93-EM. The rule states that the holder of a mining and metallurgy activity/project is responsible for emissions, discharges, and waste disposal to the environment that result from the processes carried out on the project site. To this end, it is the duty of the project holder to avoid and prevent those elements and/or substances that in concentrations and/or over a period of long exposure that could exceed the maximum permissible levels and have adverse effects on the environment. This rule defines the environmental duties that mining operators must meet to operate a mining project and the authorities responsible for approving environmental studies and auditing mining and metallurgical activities.
10.4.2.2
Mining Closure Regulations Mine Closure Law 28090 sets out the obligations of a company with regard to rehabilitation, closure, and post-closure activities for a mining operation. DS 033-2005EM approved the specific rule for the Mining Closure Law. Mining companies are required to prepare and submit closure plans that define the steps to be taken, including costs, to protect the environment from solids, liquids, and gases generated by mining work. The law mandates the establishment of an Environmental Guarantee at the early stages of a project to avoid the possibility of a lack of funds in future.
10.4.2.3
Water Quality and Effluents The instruments of current legislation protecting the natural water resource are supported by the Water Resources Law 29338 and its rule approved by DS 001-2010-AG. Also, in July 2008 MINAM promulgated DS 002-2008-MINAM approving the National Surface Water Quality Standards (ECA). DS 010-2010-MINAM establishes the maximum permissible levels for discharge of effluents from mining and metallurgical activities. These limits apply to all new operations and projects. Mining projects currently in operation must comply with the limits established in Ministerial Resolution (RM) 011-96-EM/VMM; however, DS 010-2010MINAM provides a maximum period of 20 months for current operations to adjust to the new limits.
10.4.2.4
Air Quality and Emissions DS 074-2001-PCM and its complement DS 069-2003-PCM established the National Air Quality Standards. In addition, DS 003-2008-MINAM approved new standards for sulphur
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dioxide, benzene, total hydrocarbons, PM2.5, and hydrogen sulphide. For the mining sector, RM 315-96-EM/VMM sets the maximum permissible levels of elements and compounds present in the gaseous emissions resulting from mining and metallurgical activities. 10.4.2.5 Flora and Fauna Law 29376 repealed D. Leg. 1090 and reinstates Law 27308, Law of Forestry and Wildlife, and its regulation approved by DS 014-2001-AG (and amendments), which regulate and monitor the sustainable use and conservation of forest resources and wildlife in the country. Peruvian legislation regulates the protection of endangered species through its membership in the international CITES, or Convention on International Trade in Endangered Species. This convention regulates the trade of endangered species of flora and fauna. The CITES convention was ratified by Law 21080 on 21 January 1975. In addition, DS 034-2004-AG approved the list of threatened fauna species in Peru, which includes mammals, birds, reptiles, and amphibians, and prohibits the use, hunting, transportation, and/or export of wildlife species for commercial purposes not authorized by the Department of Management and Wildlife (DGFFS). DS 043-2006-AG approved the official categorization of endangered species of flora and established prohibitions on the use or acquisition of species on the official list for commercial purposes. 10.4.2.6 Archaeology The following instruments of current legislation protect Perus archaeological heritage and regulate the activities that require archaeological studies: Political Constitution of Peru (1993) According to Article 21, all deposits and archaeological remains are considered Cultural Patrimony of the Nation, whether expressly stated or temporarily presumed as such. Penal Code This code governs the protection of cultural heritage and is accompanied by sanctions (Articles 226 to 230). Any intentional destruction of any archaeological site or any archaeological object is classified as a crime against cultural property that leads to imprisonment and fines. Regulation of Archaeological Research (RS 004-2000-ED) This rule governs the approval procedure for archaeological assessment and the process for obtaining a Certificate of Nonexistence of Archaeological Remains (CIRA), which is required for the implementation of mining projects.
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DS 022-2002-ED This covers the National Culture Institutes (INC) Single Text of Administrative Procedures (TUPA). The INC is now an integral part of the Ministry of Culture, which was created by Law 29565 (July 2010), and standards are currently being developed to adapt the different administrative INC procedures to the new structure of the Ministry of Culture. Applications for archaeological assessments, CIRA, and other procedures are submitted to the General Directorate of Archaeology. 10.4.2.7 Solid Wastes Law 27314, General Law of Solid Wastes, amended by D. Leg. 1065, and its regulation approved by DS 057-2004-PCM state the technical and legal requirements for solid waste management. They also provide procedures for the gradual implementation of new management systems for projects, considering technical and economic feasibility, geographic location, human health, and the environment. The Solid Waste Law establishes that the Ministry of Transportation and Communications (MTC) regulates and governs the transportation of hazardous wastes under DS 0212008-MTC, National Regulation for Transport of Hazardous Materials and Wastes, and its amendment DS 030-2008-MTC. 10.4.2.8 Social and Community Relationships Article 89 of the Political Constitution of Peru recognizes the legal existence and legal status of peasant and native communities. These communities are autonomous in their organization, community work, free use of their territories, and economic and administrative issues. Rural Communities Law 24656 defines peasant communities as public interest organizations with legal status. These constitute families who live and control the land related to the community for economic and cultural ancestral ties. The Law of Private Investment for Development of Economic Activities in Peruvian and Rural Communities and Native Lands 26505, Articles 10 and 11, were reinstated in accordance with Law 29261, which establishes the conditions to be followed by mining concession holders to obtain permission for use of surface lands from the peasant communities where a mining project is located. Also, in May 2008 MINEM approved DS 028-2008-EM, Rule for Consultation and Citizen Participation in the Mining Sector, and in June 2008 approved the complementary regulation RM 304-2008-EM/DM. Both regulate the process of citizen participation in the mining sector and outline the mechanisms for consultation and public participation during the development of mining projects.
Page 10-21
Evaluation of the social aspects of the Caariaco project must consider the MINEM guidelines established in the Guide to Community Relations.
10.4.3
Summary of Legal Framework

Table 10-7 lists the main laws and regulations applicable to the Caariaco Norte project.
Table 10-7: Applicable Legal Framework

Legal Instrument General Framework Political Constitution of Peru D. L. 757 (repealed in part) Law 28245 DS 008-2005-PCM Law 27446 DS 019-2009-MINAM Law 26842 Law 28611 D. Leg. 1055 Law 29263 D. Leg. 1013 Mining Specific Framework DS 016-93-EM DS 059-93-EM DS 020-2008-EM RM 167-2008-EM/DM Law 28090 DS 033-2005-EM Law 28721 DS 059-2005-EM D. Leg. 1042 DS 014-92-EM DS 031-2007-EM RS 052-2004-SUNARP/SN DS 042-2003-EM DS 052-2010-EM DS 028-2008-EM RM 304-2008-EM/DM Air Quality and Emissions DS 074-2001-PCM DS 069-2003-PCM 22/06/01 14/07/03 Air Quality Standards Complementary regulation of Appendix 01 of DS 074-2001-PCM 28/04/93 10/12/93 02/04/08 10/04/08 14/10/03 15/08/05 06/07/04 07/12/05 26/06/08 02/06/92 26/06/07 09/02/04 13/12/03 17/08/10 27/05/08 26/06/08 Environmental Protection Rule for Mining and Metallurgical Activities Amendment of the Environmental Protection Regulation for Mining and Metallurgical Activities Environmental Regulation for Mining Exploration Activity Established the TOR for environmental studies in exploration projects Closure Mine Law Regulation for Closure Mine Law Environmental Liabilities Law Regulation for Environmental Liabilities Law Amendment of Environmental Liabilities Law Title XI of the TUO of the General Mining Law about Environment Regulation for Organization and Functions of the Ministry of Energy and Mines Regulation for Mining Rights and Claims Registry Establishes Previous Commitments as a Requirement for the Development of Mining Activities Amendment of DS 042-2003-EM Regulations for Consultation and Citizen Participation in the Mining Sector Complementary Regulation of DS 028-2008-EM detailing the mechanisms for citizen participation in the mining sector. 30/12/93 13/11/91 08/06/04 28/01/05 16/03/01 25/09/09 20/07/97 13/09/05 27/06/08 01/10/08 14/05/08 Political Constitution of Peru in 1993. Title III, Chapter II "The Environment and Natural Resources" Framework Law for Private Investment Growth in Peru Framework Law of the National Environmental Management System Rule of the Framework Law of the National Environmental Management System Law of Environmental Impact Assessment National System Rule of Law 27446 Health General Law Environmental General Law Amendment of the Environmental General Law Amendment of the Environmental General Law Approves the Law of Creation, Organization and Functions of the Ministry of Environment Date Description
Page 10-22
Legal Instrument DS 003-2008-MINAM RM 315-96-EM/VMM
Date 22/08/08 16/07/96
Description Air Quality Standards for sulphur dioxide, benzene, total hydrocarbons, hydrogen sulphide and PM2.5 Maximum Permissible Levels of elements and compounds present in gaseous emissions coming from Mining and Metallurgical Operations Environmental Noise Quality Standards Regulation for Safety and Occupational Health of Mining Activities Law Regulating the Use of Ionizing Radiation Sources Regulation for Law Regulating the Use of Ionizing Radiation Sources Non Ionizing Radiation National Standards Law of Water Resources Regulation of Law of Water Resources Surface Water Quality National Standards Maximum Permissible Levels for Liquid Effluents from Mining - Metallurgical activities (applicable to existing operations) Maximum Permissible Levels for Liquid Effluents from Mining - Metallurgical activities (applicable to new projects) Law of Organizations and Functions of the Ministry of Agriculture. Law of Private Investment for Development of Economic Activities in National and Rural and Native Communities Lands Regulation for Law 26505 Regulation for Soil Survey Regulation for the Land Classification Rules Using Major Capacity Organic Law for the Sustainable Use of Natural Resources Law of the Conservation of Biological Diversity Regulation for the Law of Conservation and Sustainable Use of Biological Diversity Repealed the D. Leg. 1090 and reinstated the Law 27308, its regulation and amendments Law of Forestry and Wildlife Regulation of the Law 27308 Regulation of the Law of Natural Protected Areas Categorization of Threatened Species of Flora Categorization of Endangered Species of Wild Fauna Law of Hydrocarbons Environmental Protection Regulation for Hydrocarbon Activities Regulation for Safe Hydrocarbon Storage Regulation for the Sale of Liquid Fuels and Other Derivatives of Hydrocarbons Regulation for Safe Hydrocarbon Transportation Solid Wastes General Law Regulation for Solid Wastes General Law Law of Terrestrial Transport of Hazardous Materials and Wastes
Noise and Non-Ionizing Radiation DS 085-2003-PCM DS 055-2010-EM Law 28028 DS 039-2008-EM DS 010-2005-PCM Law 29338 DS 001-2010-AG DS 002-2008-MINAM RM 011-96-EM/VMM DS 010-2010-MINAM D. Leg. 997 Soils Law 26505 DS 011-97-AG DS 033-85-AG DS 017-2009-AG Law 26821 Law 26839 DS 068-2001-PCM Law 29376 Law 27308 D.S 014-2001-AG DS 038-2001-AG DS 043-2006-AG DS 034-2004-AG Hazardous Materials Law 26221 DS 015-2006-EM DS 052-93-EM DS 030-98-EM DS 026-94-EM Solid and Dangerous Wastes Law 27314 DS 057-2004-PCM Law 28256 21/07/00 24/07/04 19/06/04 19/08/93 02/03/06 18/11/93 03/08/98 10/05/94 17/07/95 13/06/97 12/04/85 02/09/09 26/06/97 16/07/97 21/06/01 10/06/09 16/07/2000 09/04/01 26/06/01 13/07/06 18/09/04 24/10/03 25/07/01 18/07/03 19/07/08 02/02/05 31/03/09 24/03/10 31/07/08 13/01/96 21/08/10 13/03/08
Water Quality Water Resources Effluents
Natural Resources and Biological Diversity (Vegetation, Flora, Fauna)
Page 10-23
Legal Instrument DS 021-2008-MTC DS 030-2008-MTC Cultural Heritage Law 29565 Law 28296 RS 060-95-ED RS 004-2000-ED Law 24656 Law 26505 Law 29261
Date 10/06/08 01/10/08
Description Regulation for the Law of Terrestrial Transport of Hazardous Materials and Wastes Amendment of the Regulation for the Law of Terrestrial Transport of Hazardous Materials and Wastes Law that created the Ministry of Culture General Law of National Cultural Heritage Regulation for Exploration and Archaeological Excavations Regulation for Archaeological Research Peasant Communities General Law Law of Private Investment for Development of Economic Activities in National and Rural and Native Communities Lands Law which repeals D. Leg. 1015 and 1073, and reinstates the articles 10 and 11 of Law 26505, Law of Private Investment for Development of Economic Activities in National and Rural and Native Communities Lands Regulation for Safety and Occupational Health of Mining Activities Record of Incidents Safety Auditing
22/07/2010 22/07/04 02/08/95 25/01/00 14/04/87 17/07/95 21/09/08
Social Aspects and Community Participation
Safety and Occupational Health DS 055-2010-EM RD 087-2000-EM RD 128-2001-EM 22/08/10 19/05/00 19/10/01
D.L. = Decree Law; D.Leg. = Legislative Decree; DS = Supreme Decree; RS = Supreme Resolution; RM =: Ministerial Resolution; RD = Directoral Resolution.
10.5
10.5.1
Permitting Requirements
Summary of Permits and Authorizations
In accordance with the requirements of the Peruvian Legal Framework and Ministry of Energy and Mines, Candente must initiate a process to obtain all environmental, construction, and mining permits that pertain to the project. The main permit requirements identified to date for the start of construction and mining operations are summarized below. Environmental Studies and Permits (EIA) Water Authorization Archaeological Evaluation Closure Plan Mining Operation Certificate (COM) Easement by Agreement Construction Permit Municipality Permits to Construct Labour Permits Surface Water Use Licence Groundwater Use Licence
Page 10-24
Sanitary Authorization for Waste Water Treatment Permits to Build Roads Transportation Deed for controlled substances and products Beneficiation Concession (necessary to process the mineral) Authorization to Start Operation. Lists of major permits and authorizations required for the project pre-construction, construction, and operations phases are compiled in Tables 10-8, 10-9, and 10-10. Each permit is tabulated along with the associated reviewing agency and a priority rating of high, medium, or low. The tables set out durations in business days. Twenty-two business days per month is considered to be the average for those procedures for which the legal deadline has been set in calendar days. The estimated time frames shown in the tables represent an optimal approach to time management in administrative procedures. Candente has committed to staying apprised of changes in Peruvian environmental and mining regulations, which are currently being updated. The legislation will need to be reviewed continuously to identify all the social and environmental studies, permits, and authorizations required, as well as the permitting process and the timeline itself so that it can match the project schedule with the licensing schedule.
Page 10-25
Table 10-8: Major Licences and Permits Required Pre-Construction Phase

Priority High Licence, Permit, or Authorization Acquisition of land or permission for surface land use Deadline (approximate business days) Legal deadline: Not determined Estimated Time: It is difficult to determine since it depends on the location of the project components that overlap in the individual area of the community or the holders. Legal Deadline: 22 business days Estimated Time: 110 business days Legal Deadline: 22 business days Estimated Time: 90 business days Legal Deadline: 88 business days Estimated Time: 160 business days Legal Deadline: 130 business days Estimated Time: 150 business days Legal Deadline: Not determined Estimated Time: Could be constituted at the most in 20 days. Legal Deadline: 120 business days Estimated Time: 182 business days Legal Deadline: 90 business days Estimated Time: 172 business days Legal Deadline: 66 business days Estimated Time: 145 business days Legal Deadline: 60 business days Estimated Time: 60 business days Legal Deadline: 15 business days Estimated Time 45 business days Legal Deadline: 20 business days Estimated Time: 65 business days Legal Deadline: 30 business days Estimated Time: 60 business days Legal Deadline: Not determined Estimated Time: It is not possible to be determined, due to fact that a specific procedure for the granting of this authorization does not exist Legal Deadline: Not determined Estimated Time: It is not possible to be determined due to that the terms could vary depending on each Municipality. Legal Deadline: 30 business days Estimated Time: 45 business days Legal Deadline: 60 business days Estimated Time: 75 business days Legal Deadline: 5 business days Estimated Time: 30 business days
Archaeological Assessment Project: Archaeological Evaluation with/without excavations Archaeological rescue Certificates of Nonexistence of Archaeological Remains (CIRA) Approval of Environmental Impact Assessment (EIA) Mine Closure Plan Approval Constitution of Financial Guarantee for the Mine Closure Plan
Granting of Concession of Benefit Granting of Mining Transport Concession Granting of Definite Electrical Concession Establishment of Electricity Easement Licence of water use: For population or domestic use/for mining purposes Favourable technical report for direct consumers of liquid fuel Deforesting permit to holders of operation and activities other than forestry Medium Authorization for crossing access roads
Permissions and Licences in the corresponding municipality
Service of operation for terrestrial transport of workers by highway Authorization for the construction or modification of public or private airports or airfields Low Approval of Investment in Public Service Infrastructure
Page 10-26
Table 10-9: Major Licences and Permits Required Construction Phase

Priority High Licence, Permit, or Authorization Registration in the Registry of Hydrocarbon Direct Consumers, Packaging Plants and Sales Outlets Authorization to give private telecommunication services Operation Licence for an explosives deposit Explosive Handler Licence Issuance of Transportation of Explosives Guide Issuance of special operation permits for the service of self ground transportation of hazardous materials and / or wastes. Special Vehicle authorization for the ground transport of materials and / or hazardous wastes by road. Drivers Licence of special category for ground transport of hazardous materials and / or wastes by road Medium Health Authorization of the Drinking Water Treatment System Authorization of the Treatment System and disposal of Domestic Wastewater: a) Release; b) Reuse; c) Infiltration in the ground (includes septic tanks). Authorization of the Treatment System and Disposal of Industrial wastewater for: a) Release; b) Reuse Permissions and Licences from the corresponding municipality Deadline (approximate business days) Legal Deadline: 5 business days Estimated Time: 40 business days Legal Deadline: 90 business days Estimated Time: 90 business days Legal Deadline: 11 business days Estimated Time: 64 business days Legal Deadline: 2 business days Estimated Time: 40 business days Legal Deadline: 2 business days Estimated Time: 40 working days Legal Deadline: 30 business days Estimated Time: 45 business days Legal Deadline: 30 business days Estimated Time: 45 business days Legal Deadline: 30 business days Estimated Time: 45 business days Legal Deadline: 30 business days Estimated Time: 65 business days Legal Deadline: 30 business days Estimated Time: 65 business days Legal Deadline: 30 business days Estimated Time: 65 business days Legal Deadline: Not determined Estimated Time: It is not possible to determine because the terms could vary depending on each Municipality. Legal Deadline: 30 days capable Estimated Time: 45 business days Legal Deadline: 60 business days Estimated Time: 75 business days Legal Deadline: 15 business days. Estimated Time: 40 business days Legal Deadline: 15 business days Estimated Time: 10 business days Legal Deadline: 7 business days Estimated Time: 25 business days Legal Deadline: 7 business days Estimated Time: 25 business days Legal Deadline: 30 business days Estimated Time: 60 business days
Technical inspection of private or public airfield Granting of operation or closing authorization of public or private airports or airfields Operation and / or renovation authorization of private clinic or hospital. Issuance of proof of categorization and registry of medical offices, medical centres, clinics, private hospitals, dental clinics Use of fixed and portable radiation meters Storage and / or possession of radioactive materials Low Establishment of Health Certificate
Page 10-27
Table 10-10: Major Licences and Permits Required Operations Phase

Priority High Licence, Permit, or Authorization Authorization to start / restart activities of exploitation in metal or non-metal mining claims (includes the mining plan) Mining Operation Certificate Semi-annual authorization for use of explosives, supplies and related materials (can be extended once to one year) Medium Registration or renewal registration only for the control of chemical materials and controlled products or updated information Permissions and Licences before the corresponding municipality Deadline (approximate business days) Legal Deadline: 30 business days Estimated Time: 65 business days Legal Deadline: 30 business days Estimated Time: 85 business days Legal Deadline: 23 business days Estimated Time: 65 business days Legal Deadline: 3 business days Estimated Time: 10 business days Legal Deadline: Not determined Estimated Time: It is not possible to be determined due to that the terms could vary depending on each Municipality. Legal Deadline: 30 business days Estimated Time: 22 business days or 30 days calendar Legal Deadline: 1 business day Estimated Time: 5 business day
Safety Technical Inspection in Multidisciplinary Civil Defense.
Low
Monthly reports of the special ledgers of chemical supplies and controlled products kept manually or by electronic means even when there is no movement
10.5.2
Pre-Construction Permits
This section describes some of the high-priority permits Candente must acquire before starting the construction phase. The process for obtaining permits for construction and operations will depend on whether all required pre-construction permits have been obtained.
10.5.2.1
Surface Land Use As noted earlier, the area proposed for project development is within the lands of the Community of San Juan de Caaris (CSJC). CSJC is recognized by the Peruvian Government as the owner and the beneficiary of the surface lands in their name. To ensure that it can access all project facility sites, Candente must reach an agreement with the representatives of CSJC to acquire permission for use of the surface area. Candente currently has an agreement in place with CSJC to proceed with environmental, social, and engineering studies. An agreement is pending for the use of surface lands for construction and mining operations. A second-level negotiation for access will also be required, mainly for the open pit area, which is parcelled among individual holders. The time required for Candente to acquire the surface rights needed for the project will depend on the willingness of the other parties to negotiate and the formalities that must be met to ensure that all parties recognize the validity of any and all agreements on land disposition.
Page 10-28
10.5.2.2
Archaeological Assessment Mining projects in Peru must ensure that the development property is assessed for the potential presence of historical or archaeological remains (Archaeological Assessment Project). Depending on the results of the assessment, the area in question could be subject to an Evaluation of Archaeological Excavations by the Directorate General of the Archaeological Heritage of the National Institute of Culture (INC)6 or by an archaeologist registered on the National Register of Archaeologists, which is managed by the INC. This evaluation, in turn, could lead to the need for an Archaeological Rescue Project, as recommended by the National Technical Committee of Archaeology. On completion and approval of the assessment or rescue project, as appropriate, a CIRA, or Certificate of Nonexistence of Archaeological Remains, will be available for the property. To date, Candente has carried out the Archaeological Assessment Project for the open pit area. The results showed that the open pit and surrounding forested areas have no archaeological sites or remains. It is suspected that other forested areas within the project footprint will have similar results. All other project components are located in grasslands or cultivated areas. As a result, INC issued CIRA 2008-403 to Candente for the open pit and surrounding area: 300 ha plus a perimeter zone of 7 km. To initiate construction activities, Candente must obtain CIRA(s) for the other project facility areas. Because the other project facility areas are mainly grasslands or cultivated areas, it is not possible to predict whether they contain archaeological sites or remains without further study.
10.5.2.3
EIA and Closure Plan According to the Environmental Protection Rule on Mining and Metallurgical Activities, Candente must define all the components of the project as part of an Environmental Impact Assessment (EIA). Many regulatory procedures and permits depend directly on approval of the EIA. The EIais currently in progress; the results to date are discussed in Section 10.2. According to DS 033-2005-EM, a Closure Plan must be submitted within a maximum period of one year from approval of the EIS. However, for the project activities to proceed in a timely manner, it is recommended that the Closure Plan be submitted within three months of approval of the EIS.
10.5.2.4
Other Once the EIS is submitted to the MINEM, applications can be prepared and submitted for other permits as listed below and shown as high-priority items in Table 10-8; however, no approvals can be granted until the EIA has been approved.
INC now part of the Ministry of Culture
Page 10-29
Granting of Concession of Benefit Granting of Mining Transport Concession Granting of Definite Electrical Concession Establishment of Electrical Easement Licence of water use for domestic or mining purposes Favourable technical report for direct consumers of liquid fuel Deforesting permit to holders of operations and activities other than forestry Receipt of these authorizations is subject to various conditions and procedures; items of particular note are discussed below. Electrical Easement Candente will need an electrical easement if its electrical supply line crosses an area owned by local residents or third parties. The easement cannot be granted until the final concession is approved. Water Use The National System of Water Resources was established by Hydrological Resources Law 29338 and its regulations (DS 001-2010-AG), which stipulate that the National Water Authority (ANA) is responsible for granting water use rights through decentralized offices, known as Local Water Administrators (ALA), in each main regional basin. The ALA of the Jan Basin will be responsible for granting the water use licence for the Caariaco project. The licence must take into account all requirements and procedures under the current legislation. According to the ANA, water licence studies include hydrological information, a site description, downriver water use estimations, and a water balance study. In addition, a feasibility-level hydraulic engineering description is required for all facilities related to water capture. All of these items are currently included in either the EIA or the engineering studies. Road Use Authorization for crossing existing access roads or rail lines falls under the Single Text of Administrative Procedures (TUPA) of the Ministry of Transport and Communications (MTC), but the General Directorate of Roads and Railways has not established specific procedures for obtaining permissions for such crossings. In practice, however, it is appropriate to request permission to cross existing roads and rail tracks because they are public property. Supreme Decree No. 034-2007-MTC and its Annex provide details on road classifications as national, regional, or municipal.
Page 10-30
If any project facilities or access-ways are located in a surface area considered by the Provincial Municipality of Ferreafe as an Urban Housing Development or Urban Expansion Area, then Candente must obtain all required permits from the Municipality. DS 021-2008-MTC approved the National Regulation of Land Transport of Hazardous Materials and Waste, which seeks to regulate the activities, processes, and operations of ground transportation of hazardous materials and wastes. These procedures have not yet been incorporated into the MTCs TUPA, but this is expected to change. The MTC will be the competent authority for the licensing of vehicles to transport hazardous materials and wastes, including explosives. This responsibility was previously held by the Directorate for Control of Security Services, Control of Firearms, Ammunition, and Explosives for Civilian Use (DICSCAMEC). Use of Explosives In accordance with Article 243 of DS 055-2010-EM, Rules of Safety and Occupational Health in Mining Activities, a Certificate of Mining Operation must be in place for the use of explosives, accessories, and blasting agents in mining activities. The certificate holder must be registered with DICSCAMEC.
10.5.3
Construction and Operations Permits

Once all permits required for the pre-construction phase have been obtained, the following licences and permits are deemed most critical (Tables 10-4 and 10-5).
10.5.3.1
Construction Phase registration on the hydrocarbons register of direct consumers, packaging plants, and sales outlets authorization for the private provision of telecommunications services licence for the operation of an ammunition depot authorization for eventual use of explosives and related materials Explosives Handlers Licence issuance of the explosives transit guide.
10.5.3.2
Operations Phase Authorization to start exploitation activities in metallic mining concessions Mining Operation Certificate (COM) Technical Security Inspection in Multidisciplinary Civil Defense permits and licences from municipalities (Ferreafe and Caaris)
Page 10-31
semi-annual authorization for use of explosives, supplies, and related materials (global authorization) registration or updated registration or information for the control of chemicals and controlled products monthly reports on the special registers of chemicals and controlled products, kept manually or electronically, even when there have been no changes.
10.5.4
Permitting Process
On 25 September 2009, the Ministry of Environment (MINAM) approved the rule for the Environmental Impact Assessment System Law (DS 019-2009-MINAM), under the provision that sector environmental authorities update or develop standards relating to environmental impact assessment that are appropriate to the intent of the law, within a period not exceeding 180 calendar days from the day following the publication of the law. In accordance with legally established criteria, the deadline expired on 25 March 2010. In the short term, therefore, responsibility for defining and detailing specific terms of reference (TOR) for mining project EIAs will remain with the Ministry of Energy and Mines (MINEM). Possible implications for managing mining projects upon the transfer of regulations from MINEM to MINAM are outlined below. The time required for baseline and EIA preparation could increase if the TOR and scope of the EIS need to be more detailed than required in the current mining environmental regulation (DS 016-93-EM). This assumes that project engineering will have been completed to the feasibility level and that the public consultation program has been approved and is underway. MINEM will need to consult with MINAM, the National Water Authority (ANA), and the Ministry of Agriculture (MINAG) and address their opinions and observations in a period of no more than 60 days. This process will be incorporated within the 120-day (calendar days) period allowed for the General Directorate of Environmental Mining Affairs (DGAAM) of the MINEM to submit the first project evaluation report. According to present regulations the DGAAM of MINEM can submit two reports of observations and a final approval/disapproval report. This could take between 10 and 12 months. While the EIA is being evaluated by the authorities, the detailed Closure Plan (CP) must be assembled for presentation within a year after approval of the EIA. Assuming there are no significant changes to the project design or engineering closure design presented as part of the EIA, it would be preferable to finish the CP no more than three months after EIA approval, considering that CP evaluation and approval is like to take approximately nine months.
Page 10-32
After approval of the EIA and/or the CP, permits for pre-construction will be granted and applications will be submitted for construction- and operations-phase permits. Once the construction phase is initiated, the most important permit is the Mining Operation Certificate (COM), which allows the start of operations.
Page 10-33
CONTENTS 11.0 CONCEPTUAL CLOSURE PLAN .........................................................................11-1 11.1 Summary...................................................................................................11-1 11.2 Introduction ...............................................................................................11-2 11.2.1 General..........................................................................................11-2 11.2.2 Reclamation Objectives .................................................................11-2 11.2.3 Site Facilities .................................................................................11-3 11.3 Final Closure and Reclamation Measures .................................................11-3 11.3.1 Open Pit Mine ................................................................................11-4 11.3.2 Process Plant, Camp Site, and Ancillary Infrastructure ..................11-4 11.3.2.1 Process Plant ................................................................ 11-5 11.3.2.2 Camp Site, Ancillary Buildings, and Infrastructure ......... 11-6 11.3.3 Tailings Management Facility ........................................................11-8 11.3.4 Waste Rock Management Facility and Ro Caariaco Diversion Channel .........................................................................................11-8 11.3.5 Access Roads and Power Lines ....................................................11-9 11.4 Post-Closure Monitoring ............................................................................11-9 11.5 Reclamation Studies ...............................................................................11-10 11.6 Opinion of Probable Cost for Closure ......................................................11-10
TABLES
Table 11-1: Opinion of Probable Cost for Closure and Reclamation of Caariaco Norte Project 11-11
TOC i
11.0
11.1
CONCEPTUAL CLOSURE PLAN

Summary
Reclamation of the Caariaco Norte project in Peru will meet Peruvian environmental regulations and International Finance Corporation (IFC) Environmental, Health and Safety Guidelines for Mining (IFC, 2007). The primary objectives for reclamation and closure are to safeguard future public health and safety, to minimize impacts on the local environment by ensuring physical, chemical, and ecological integrity of the site features, and, where practical, to return the disturbed areas to their pre-mining land use. The Caariaco Norte project consists of six general areas: open pit mine area plant site, camp site, and other ancillary infrastructure tailings management facility (TMF), including the tailings and reclaim pipelines waste rock management facility (WRMF) and Ro Caariaco diversion channel access roads and power transmission lines port facilities. The first four areas comprise the reclamation areas for the project and are the focus of the following closure concepts. Responsibility and control of reclamation and closure for the last two areas will be transferred to the government or other corporations at closure. In general, at closure of the mine, the open pit mine will be allowed to flood, and overflow water will be managed at the WRMF seepage collection facility. A permanent water cover will be maintained on the TMF, and any exposed tailings beaches will be capped with leached cap material to promote revegetation. The WRMF will be covered with a non-acid-generating cover to reduce infiltration of precipitation. All seepage and runoff from the TMF and WRMF will be collected in the respective seepage collection impoundments and, if required, treated before discharge. Buildings and infrastructure will be salvaged or resold. All non-hazardous materials and demolition debris will be disposed of appropriately. All hazardous materials will be removed from the site for proper disposal. Above-grade concrete foundations will be razed to ground level, and foundations on surface will be broken up. Disturbed areas at the process plant and camp sites will be graded and revegetated. Post-closure monitoring would include annual geotechnical inspections and water quality monitoring. The estimated cost to complete the closure and reclamation activities is $57,652,000. The accuracy of the cost estimate is limited by the availability of data for this level of mine planning. The closure plan, reclamation plan, and cost estimate will be revised as the project develops.
Page 11-1
11.2
11.2.1
Introduction
General
Reclamation of the site will meet Peruvian environmental regulations and International Finance Corporation (IFC) Environmental, Health and Safety Guidelines for Mining (IFC, 2007), both of which require mine closure plans. The IFC guidelines state that closure and post-closure activities should be considered as early as possible in the planning and design stages. The reclamation and closure plan will evolve hand-in-hand with the design as the project proceeds through feasibility and permitting. Site-specific knowledge will be gained during mine development and operations, and the closure plan will be updated to incorporate this knowledge in addition to the environmental and social conditions and circumstances at the time of closure.
11.2.2
Reclamation Objectives
The primary reclamation and closure objectives will be to: minimize adverse socioeconomic impacts and maximize socioeconomic benefits to the local communities ensure that future public health and safety are not compromised ensure that the after-use of the site is beneficial and sustainable to the communities in the long term return the areas disturbed by mining operations to their pre-mining land use, where practical ensure the physical, chemical, and ecological integrity of site features. These reclamation objectives will be met by developing a plan that: where possible, returns the site to a viable self-sustaining ecosystem compatible with the surrounding environment and post-mining land use ensures the natural integration of disturbed areas into the surrounding landscape and, where possible, restores the overall natural conditions of the mine site ensures the long-term physical stability of engineered structures ensures the chemical stability of mining products so that water resources are protected and sustained returns the land to the pre-mining level of productivity or higher, wherever possible
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develops measures to prevent or minimize discharges of contaminants to surface water, groundwater, air, and soils meets or exceeds applicable regulatory requirements and standards for protection of human health and the environment presents a durable and cost-effective strategy that minimizes the long-term expenditure of post-closure maintenance and monitoring. Notwithstanding these objectives, it will not be possible to fully return some areas to their pre-development conditions because of the physical changes that will result from mining operations. Closure and post-closure plans will include appropriate after-care and continued monitoring of the site, emissions, and related potential impacts. The minimum recommended duration of post-closure monitoring is five years after chemical and physical stability has been achieved. Reductions in monitoring frequency will be a function of environmental performance and regulatory requirements.
11.2.3
Site Facilities
The Caariaco Norte project consists of six general areas: open pit mine area plant site, camp site, and other ancillary infrastructure tailings management facility (TMF), including the tailings and reclaim pipelines waste rock management facility (WRMF) and Ro Caariaco diversion channel access roads and power transmission lines port facilities. The first four areas comprise the reclamation areas for the project and are the focus of the following closure concepts. Responsibility and control of reclamation and closure for the last two areas will be transferred to the government or other corporations at closure.
11.3
Final Closure and Reclamation Measures

Final closure and reclamation activities normally proceed after the end of mining activities, but Candente plans to undertake progressive reclamation where feasible to enhance the overall remediation of the site. As with the other closure scenarios, procedures at Caariaco Norte will be site-specific to accomplish the results described below. The plan will be updated as the project progresses. In general, all buildings, tanks, and infrastructure not required for post-closure activities will be cleaned, demolished, and removed from site. Concrete foundations will be razed to ground level and broken up. Once the site is cleared of all infrastructure, the building
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sites disturbed by mining operations will be re-graded to promote natural drainage and minimize erosion. Where practical, the surface will be covered with a suitable thickness of NAG leached cap material (to be determined from reclamation studies through operations) to encourage natural revegetation. The access roads, power lines, and port facilities are excluded from this conceptual closure plan. At this stage of the project it is considered appropriate that Candente could negotiate with the appropriate groups to transfer control of this infrastructure.
11.3.1
Open Pit Mine

At the cessation of mining, all man-made equipment and materials with salvage value, such as mining equipment, piping, pumps, and electrical cable, will be removed from the open pit and then from the site. All equipment and materials with no salvage value will be cleaned of potentially hazardous materials and disposed of in a permitted on-site landfill. Non-salvageable, inert materials from other areas of the site will also be placed in the landfill. Except those required to maintain the water management system, haul roads into the open pit will be decommissioned and barricaded to prevent access at closure. A berm will be built around the perimeter of the open pit and warning signs placed at regular intervals. At closure, the open pit will be allowed to flood. At the time this closure plan was prepared, however, the mine plan was still under development, and the time frame for pit flooding has not yet been determined; it will be refined in future study phases. Water inflows will be from direct precipitation, runoff from the catchment area above the open pit, and regional groundwater flow. Where possible, a diversion ditch will be constructed north of the pit to direct non-contact surface water toward the reclaimed plant and camp site. The open pit will be allowed to fill to an elevation that permits it to serve as a groundwater sink and to contain all open pit contact water. The water level in the open pit will be maintained by pumping to the water treatment plant downstream of the WRMF seepage collection system, where it will be treated and released as required.
11.3.2
Process Plant, Camp Site, and Ancillary Infrastructure

The process plant includes the mill building, concentrate storage building, roasting plant, gas treatment/acid production plant, and primary crusher and conveyors. The camp site includes the administrative building, the dorm and associated living facilities, and propane storage. Ancillary infrastructure includes the truckshop buildings, emergency power generation and distribution systems, potable water treatment plant, sewage treatment plant, and explosives facilities.
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After being cleaned and hazardous wastes have been removed, all buildings, tanks, and infrastructure not required for post-closure activities will be demolished. Concrete foundations will be razed to ground level and broken up to reduce ponding of water. Once the site is cleared of all infrastructure, the entire camp and process plant areas disturbed by the mining operations will be re-graded to promote natural drainage and minimize erosion. The process plant and the camp sites will be covered with NAG leached cap material to encourage natural revegetation where practical. Further details for final closure and reclamation of specific site features are described below. 11.3.2.1 Process Plant All remaining ore, including material in the coarse ore stockpile, will be processed. The process plant will then be decommissioned by flushing in-process material through the circuit, including all flotation cells, tanks, thickeners, and pipelines. The flushed inprocess material will either be recovered as concentrate and shipped off site for smelting, or report as tailings to the TMF. All in-plant sumps and floors will be cleaned of inprocess material at the same time. All remaining milling agents and chemicals will be shipped off site for use at a similar facility, recycled through the original supplier, or disposed of through a government-approved disposal facility. Once cleaned of in-process materials, the following reclamation measures will be initiated to decommission and remove the processing facilities: Process equipment and building systems will be inspected and cleaned of all potentially hazardous materials such as lubricating oil, hydraulic fluid, and batteries. Potentially hazardous materials will be packed in appropriate containers and shipped off site for recycling or disposal at a government-approved facility. Once cleaned, equipment and material with a salvage value will be removed from the site and sold. Equipment with no salvage value will be removed and disposed of appropriately. Once all equipment and wiring have been removed from the plant, the internal and external structures, tankage, and building shell itself will be demolished. Material with a salvage value will be shipped off site and sold. Inert material with no salvage value will be removed and disposed of appropriately. All above-grade concrete foundations within the mill, such as pump bases and grinding mill foundations, will be backfilled. The concrete debris will be removed and disposed of appropriately. All at-grade concrete floor slabs will be broken up in situ to prevent water from ponding. The area will be re-graded with local soils as required. Any excess concrete will be removed and disposed of appropriately.
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Soil and foundation materials around the plant area will be inspected for evidence of metals and/or hydrocarbon contamination. A soil remediation plan will be developed and implemented based on this assessment. Metal-contaminated materials will be excavated and disposed of appropriately. Hydrocarbon-contaminated soils will be excavated and treated in an on-site landfarm or shipped to an approved off-site facility for disposal. 11.3.2.2 Camp Site, Ancillary Buildings, and Infrastructure Warehouse/Maintenance At closure the warehouse/maintenance buildings and other support buildings will be removed. All equipment and building systems will be inspected and cleaned of all potentially hazardous materials such as lubricating oil, hydraulic fluid, and batteries. Potentially hazardous materials will be packed in appropriate containers and shipped from site for recycling or disposal at government-approved facilities. Once cleaned, equipment and material with a salvage value will be removed from the site and sold. Equipment and material with no salvage value will be removed and disposed of appropriately. Once all equipment and wiring have been removed from the buildings, the internal and external structures and building shells will be demolished. Material with salvage value will be shipped off site and sold. Material with no salvage value will be removed and disposed of appropriately. All above-grade concrete foundations within the buildings will be backfilled or broken up. Any concrete debris will be removed and disposed of appropriately. All at-grade concrete floor slabs will be broken up in situ to prevent ponding of water. The area will be re-graded with local soils as required. Any excess concrete will be removed and disposed of appropriately. Soil and foundation materials around infrastructure will be inspected for evidence of metals and/or hydrocarbon contamination. A soil remediation plan will be developed and implemented based on this assessment. Metal-contaminated materials will be excavated and disposed of appropriately. Hydrocarbon-contaminated soils will be excavated and treated in a landfarm or shipped to an approved off-site facility for disposal. Fuel Facilities At mine closure, the on-site fuel station and tanks and propane tanks will be drained and cleaned. The drained fuel or propane will be transferred to tank trucks and shipped off site. Oil and waste water produced during cleaning will be separated, and the reclaimed oil will be packed into drums for shipment and disposal off site. The cleaned tanks will
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either be shipped off site and sold for their salvage value or be dismantled and disposed of in an approved off-site facility. Fuel piping and distribution equipment will similarly be cleaned and then dismantled. The diked fuel containment area will be cleaned and razed. The liner will be cut up, decontaminated, and removed with demolition debris to an on-site permitted landfill. The area will be graded as necessary and allowed to revegetate naturally. Similar procedures will be followed to decommission the oil storage tank and burner unit on the domestic waste incinerators. Any remaining inventory of waste oil will be transferred into drums or a tank truck and be shipped off site for use elsewhere or for disposal through a government-approved facility. Potable Water and Sewage Treatment Plants The potable water and sewage treatment plants will be decommissioned, cleaned, and removed from site as previously described for other buildings and structures. The potable water treatment plant will be decommissioned and shipped off site to be sold for its salvage value. All equipment and building systems will be inspected and cleaned of all hazardous materials such as lubricating oil, hydraulic fluid, and batteries. Potentially hazardous materials will be packed in appropriate containers and shipped off site for recycling or disposal at a government-approved facility. The sewage treatment plant will be washed out and drained. All equipment and building systems will be inspected and cleaned of all hazardous materials such as lubricating oil, hydraulic fluid, and batteries. Potentially hazardous materials will be packed in appropriate containers and shipped off site for recycling or disposal at a government-approved facility. It is assumed at this level of study that local workers retained for long-term maintenance and post-closure activities will only require small mobile on-site potable water or sewage treatment facilities, which will be procured if required. Electrical Substations The electrical substations and power distribution system will continue to be used to support the local communities and post-closure water management facilities, and so will not be decommissioned. Water Distribution Systems The water management systems required for the water treatment plants will not be decommissioned. The remainder of the water management infrastructure will be dismantled and removed. The freshwater wells will be decommissioned by removing the
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pumps and all above-ground equipment and then backfilling or sealing the wells by other acceptable means. All above-ground water distribution piping and tankage will be dismantled; salvageable components will be shipped off site and sold, and nonsalvageable inert materials will be disposed of appropriately. Below-ground piping will be truncated at ground entry and exit points at a depth of about 1 m below surface. The buried pipeline sections will be left in place, and the truncation points will be backfilled with clean fill. Any residual chemicals from the potable water system will be shipped off site for use elsewhere. The chemical dosage and handling equipment will be cleaned, dismantled, and sold. Site Landfarm Depending upon the volume of hydrocarbon-contaminated solids present on site at closure, they may either be shipped off site for disposal at an approved facility or treated in an on-site landfarm. If a landfarm is constructed, then it will be decommissioned after closure when all hydrocarbon-contaminated soils have been remediated. Once the landfarm is no longer required, the remediated soils will be removed from the site and used as growth media or as cover for reclaimed facilities. The underlying barriers will be removed and disposed of off site. The landfarm area will then be re-graded to prevent water ponding, and the oil-water separator will be removed and disposed of appropriately. The area will be revegetated.
11.3.3

A permanent water cover will be maintained on the TMF post-closure. Any exposed tailings beaches will be covered with NAG leached cap material to hasten natural revegetation and prevent dust emissions. A permanent closure spillway will be constructed near the saddle embankments. All seepage and runoff from the TMF will be collected in a seepage collection impoundment and treated for discharge as required. The TMF water treatment plant is expected to remain in operation until testing indicates that no further treatment is required to meet emission limit values and receiving water quality standards. The TMF embankments will be inspected by qualified geotechnical engineers to ensure long-term physical stability.
11.3.4
Waste Rock Management Facility and Ro Caariaco Diversion Channel

The current mine plans show that the WRMF will cover approximately 250 ha and contain an estimated 713.5 Mt of waste rock. Estimates of waste rock volumes will be refined as the project develops. For the purpose of closure planning, it is assumed that the WRMF will have both nonpotentially acid generating (non-PAG) and potentially acid generating (PAG) components.
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Both types of waste rock will be covered with a layer of fine-grained, non-PAG, leached cap material to reduce infiltration of precipitation and allowed to naturally revegetate. All runoff and seepage from the WRMF will be collected and treated at a water treatment plant as required. The volume of runoff and seepage will be minimized by retaining the Ro Caariaco diversion channel in the post-closure period. The channel will divert clean surface water around the WRMF. Regular inspections by qualified engineers and maintenance of the channel will be required to ensure its long-term physical stability.
11.3.5
Access Roads and Power Lines

Discussions will be held with the appropriate authorities to transfer control of the access roads and power lines to the government or community on final closure.
11.4
Post-Closure Monitoring
Monitoring will be undertaken to ensure that the reclamation and closure activities are successful. Ongoing monitoring and maintenance will be required for the TMF, the WRMF, the Ro Caariaco diversion channel, and the water treatment plants. This monitoring has been separated into two phases: reclamation and closure monitoring post-closure monitoring and maintenance. Reclamation and closure monitoring begins at the end of mining and continues until reclamation and closure activities have ceased. The post-closure monitoring phase will begin after site reclamation. The level of monitoring required for these phases will be a function of the environmental performance of the site and national requirements. Post-closure monitoring requirements will be detailed in the operational monitoring program, which will be updated regularly during the life of the mine to focus on the key issues at the time. The following generic discussion of the monitoring program is based on the current mine design and known monitoring requirements. During the transition from mine operations to reclamation and closure, water management operations will continue, including, where necessary, the collection and treatment of runoff and seepage from site facilities until testing shows that no further treatment is required to meet emission limit values and/or receiving water quality standards. The need for environmental monitoring is expected to decline and eventually terminate once the project facilities have been fully decommissioned and the site has been reclaimed. Reductions in monitoring frequency will be a function of environmental performance and regulatory requirements.
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The main elements of the monitoring program during the early reclamation and closure phase are assumed to be as follows: continued surveillance of applicable monitoring stations monitoring of water quality in the open pit and TMF monitoring of water treatment plant discharges and points downstream of the discharges annual inspections of the WRMF, TMF, and open pit by a qualified professional geotechnical engineer. The monitoring program is likely to reduce in scope and intensity after the closure period as reclamation goals and endpoints are achieved. Clear identification of the endpoints, such as water quality parameters, will be key to the development and implementation of the monitoring program. Long-term monitoring requirements will be detailed in the operational monitoring program, which will be updated regularly during mining operations.
11.5
Reclamation Studies
Reclamation studies will be conducted throughout the operation of the mine to develop the most effective and viable methods to completely reclaim the mine facilities at the end of operations. Progressive reclamation will also give an indication of final performance and will lessen the work required at closure. Reclamation studies will include, but not be limited to: revegetation test plots, including the evaluation of potential cover materials and amendments identification of new reclamation techniques and technologies that reduce costs and increase efficiencies and environmental protection. Wherever practical, Candente will continue to work cooperatively with the local community, research institutions, and/or government agencies to develop and execute the reclamation studies.
11.6
Opinion of Probable Cost for Closure

AMEC has developed a prefeasibility level cost estimate for the anticipated closure and reclamation activities discussed in this section. The estimated total cost for all activities is US$57,650,000, including a 30% contingency (Table 11-1).
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Table 11-1: Opinion of Probable Cost for Closure and Reclamation of Caariaco Norte Project
Task 1 2 3 4 5 Subtotal Contingency 30% Total Description Open pit mine Plant site, camp site, and ancillary infrastructure Waste rock management facility and diversion channel Tailings management facility Post-closure monitoring Estimated Cost (US$) 6,010,000 2,695,000 15,342,000 15,200,000 5,100,000 44,347,100 13,305,000 57,652,000
The accuracy of the cost estimate is limited by the availability of data at the prefeasibility level of mine planning. Unit rates for closure and reclamation activities were based on comparison with similar South American projects. Estimates of time required to complete tasks were based on comparison with similar South American projects and previous AMEC experience. The closure and reclamation plan and the cost estimate will be revised as the project develops.
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CONTENTS 12.0 PROJECT EXECUTION .......................................................................................12-1 12.1 Summary...................................................................................................12-1 12.2 General Execution Strategy ......................................................................12-4 12.2.1 Project Organization and Staffing ..............................................12-4 12.2.2 Engineering Strategy.................................................................12-5 12.2.3 Basic Engineering and Procurement .........................................12-5 12.2.4 Detailed Engineering .................................................................12-6 12.2.5 Contract Strategy ......................................................................12-8 12.2.5.1 Direct Contracts / Work Packages .........................12-8 12.2.5.2 Service Contracts ................................................12-10 12.2.6 Procurement ...........................................................................12-10 12.3 Site Access .............................................................................................12-12 12.4 Weather ..................................................................................................12-12 12.4.1 General ...................................................................................12-12 12.4.2 Water Management ................................................................12-12 12.5 Construction Execution ...........................................................................12-13 12.5.1 Camp Requirements ...............................................................12-13 12.5.2 Aggregate and Concrete Production .......................................12-13 12.5.3 Mine / Mill Site.........................................................................12-14 12.5.3.1 Open Pit ..............................................................12-14 12.5.3.2 Crushers, Conveyors, and Coarse Ore Stockpile 12-14 12.5.3.3 Process Plant ......................................................12-14 12.5.3.4 Infrastructure .......................................................12-15 12.5.3.5 Tailings Management Facility ..............................12-15 12.6 Traffic/Logistics .......................................................................................12-15 12.6.1 Construction Volumes .............................................................12-15 12.6.2 Project Logistics Organization .................................................12-16 12.6.2.1 Project Logistics Group .......................................12-16 12.6.2.2 Freight-Forwarding ..............................................12-16 12.6.2.3 Customs Clearance .............................................12-16 12.6.2.4 Logistics Management System ............................12-16 12.6.3 Logistics Infrastructure and Services .......................................12-17 12.6.3.1 Off-shore Consolidation Centres .........................12-17 12.6.3.2 Ocean Transport .................................................12-17 12.6.3.3 Ports in Peru .......................................................12-17 12.6.3.4 Marshalling Yards and Warehouses ....................12-21 12.6.3.5 Road Transport ...................................................12-22 12.6.3.6 Airports and Air Freight........................................12-26 12.6.3.7 Hazardous and Dangerous Goods ......................12-27 12.6.4 Project Containers ..................................................................12-27 12.6.5 Personnel Transport ...............................................................12-27 12.7 Project Master Schedule .........................................................................12-27 12.8 Project Controls.......................................................................................12-29
TOC i
12.8.1 Scheduling ..............................................................................12-29 12.8.2 Cost Control ............................................................................12-30 12.9 Commissioning and Operational Readiness ............................................12-30 12.9.1 Operator Training ....................................................................12-30 12.9.2 Commissioning Program .........................................................12-31 12.10 Health, Safety, Environment, and Community (HSEC) ............................12-31 12.10.1 Safety .....................................................................................12-32 12.10.2 Security ...................................................................................12-33 TABLES
Table 12-1: Long-Lead Equipment and Packages ........................................................................ 12-5
FIGURES
Figure 12-1: Figure 12-2: Figure 12-3: Figure 12-4: Figure 12-5: Figure 12-6: Figure 12-7: Figure 12-8: Figure 12-9: Figure 12-10: Figure 12-11: High Level Execution Schedule ................................................................................. 12-3 Ports and Transport Infrastructure in Peru ............................................................... 12-18 Port of Callao ........................................................................................................... 12-19 Port of Paita ............................................................................................................. 12-20 Port of Salaverry ...................................................................................................... 12-21 Highway 1B, North of Mopute (view 1 of 2) ............................................................. 12-23 Highway 1B, North of Mopute (view 2 of 2) ............................................................. 12-23 Section of Corral Quemado Road at Lower Elevation along River .......................... 12-24 Limited Clearance Envelope on Road between Chiclayo and Project Site ............. 12-24 Waiting to Pass Washout on Road North of Mopute ............................................... 12-25 Toll Booth near Intersection of Highway 1B and Corral Quemado Road (bypass required) ................................................................................................................... 12-25 Figure 12-12: High Level Execution Schedule ............................................................................... 12-28
TOC ii
12.0
12.1
PROJECT EXECUTION
Summary
The execution plan outlines the scope and sequence of events for the permitting, engineering, procurement, and construction phases of the Caariaco Norte Copper Project, from current prefeasibility stage, onto feasibility and initiation of preliminary and basic engineering, through detailed engineering, site construction, and commissioning and start-up activities. The plan describes the engineering, procurement, project schedule, site access, logistics, and keys to project success. While Health, Safety, Environment, and Community (HSEC) issues are considered at every step of the project, they gain prominence in the field during construction activities. The major differences between this Execution Plan and that outlined in the PEA study are summarized below: Mill throughput has been increased to 95,000 t/d. Diversion of the river around the waste dump will be via a channel rather than a tunnel. The tailings management facility (TMF) has been relocated. With the exception of the starter dam, the TMF embankments will be constructed of cycloned tailings. A pyrite flotation circuit has been included in the tailings processing operation. The route of the access road has been altered. Construction now includes a roaster and acid plant. The execution plan is premised on the following key assumptions: The mine throughput and process will not change from the prefeasibility study. Any changes will require review of the plan, estimate, and schedule. Conditional Approval will be given in June 2012 and Notice to Proceed is given no later than January 2013. Upgrading of the pioneer access to site will commence at the beginning of 2013 to enable early site preparation and camp setup. Site capture works will commence between these dates, including mobilization, staging, road upgrades, pioneer road construction, and establishing the construction camp and services. Sufficient funds will be made available for the basic and detailed engineering and procurement phases to support the construction schedule.
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Candente Copper Corp. will establish a project group to undertake the execution of the project under an EPCM organizational structure. The Candente team will be supported by outside specialist consultants to perform the EPCM work. Candente organization for operations will be established during the project execution phase and will be engaged as the customer of the project. Local contractors will be available to carry out most of the work, minimizing the import of people and equipment. Existing local ports are available to import equipment and materials coming from out of the country. Access from the port to the site access road has no restrictions for freight size (e.g., bridges and tunnels). Suitable aggregates for structural fill and concrete production are available or can be produced on site. During construction, camp units will be purchased to meet future operations requirements, and the rest of the units will be hired as needed. Upon completion of construction, the basic camp will be upgraded to house the operations personnel and the remaining units will be utilized on site for additional accommodation for contractors and other personnel. To meet the target commissioning date of October 2014, it is recommended that long-lead procurement start in January 2012. The project execution schedule duration is currently 30 months from Notice to Proceed through to final completion of the second ball mill line within the process plant. The key milestones for the project include the following: Notice to Proceed........................................................................1 January 2013 Start Site Establishment Work ....................................................4 January 2013 Start Access Road to Site ................................................................ 1 April 2013 Start Concrete Works ....................................................................... 1 April 2013 Start Tailings Dam............................................................................. 1 July 2013 Start Pre-stripping (mine) ............................................................1 October 2013 Permanent Power Complete .......................................................... 30 June 2014 Diversion Dam Complete ..................................................... 30 September 2014 Start Mining .................................................................................1 October 2014 Commence Plant Commissioning ...............................................1 October 2014 Process Plant Mechanical Complete .................................... 30 December 2014 Ready to Deliver Ore ..................................................................1 January 2015 1st Ball Mill line Commissioning Complete ................................25 January 2015
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Diversion Channel Complete ....................................................30 January 2015 2nd Ball Mill line Commissioned ..................................................... 30 June 2015 A high level schedule of these major activities is provided in Figure 12-1.
Figure 12-1: High Level Execution Schedule
EXECUTION PLAN Rev A - August 2010 ACTIVITY ENVIRONMENTAL PERMITTING STUDIES AND APPROVALS Notice to proceed ENGINEERING DESIGN PROCUREMENT AND CONTRACTS SITE CAPTURE PORT by Others ACCESS ROADS TRANSMISSION LINE TO SITE PROCESS PLANT TAILINGS INFRASTRUCTURE OPEN PIT 2010 2011 2012 2013 2014 2015 DURATION Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
LEGEND General Activity At Risk Activity Critical Milestones Activities by Others
The Caariaco project has both advantages and challenges related to execution. Advantages are as follows: Caariaco is a green fields site that has a relatively hospitable climate. Both rainfall and temperatures are moderate. The elevation is reasonable, and it will be possible to place the camp adjacent to the mine and plant site. Access to water for operations is nearby, reducing piping requirements. The current configuration of the site and mill is not overly complex. Power, although not currently available, should be readily supplied from a relatively close power station, and the government is planning works in the area before power is needed at the site.
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Caariaco has an agreement in place with another company that plans to construct a port facility before Canariaco begins operations. Canariaco would share the use of that facility, helping to reduce the scope of this part of the project. Labour should be readily accessible locally. Execution challenges are mainly centred around topography. At present, there is no suitable access for construction. The characteristically steep terrain at the site and surrounding areas will complicate construction of the project access road and other site roads, but this should be manageable through good planning. Elevations at the site vary, and flat land for laydown areas is at a premium. The key to project execution success is ensuring that site access is available before Notice to Proceed is issued. No site capture is planned before this date. An existing 4x4 road to the site will be used before the proposed main access road is completed. Facilities already on site include an exploration camp and a helipad, which can be used in the early stages of site establishment. During the initial stages of execution, the construction of the water containment dam in the river and the associated diversion ditch will commence to allow sufficient water storage prior to start-up. Access to the pit area for pre-stripping works is also a key consideration. A light fleet of diesel-powered equipment will be used in the early stages of pre-stripping. A peak workforce of approximately 1,500 people is anticipated at the site during the construction phase. Early recruitment will be required to hire qualified workers and to establish various training programs, including those designed to employ residents of local communities in order to develop skills required to participate in mine development and subsequent operations. The health and safety of people and the protection of the environment and community are imperative and integral to all aspects of the project execution.
12.2
12.2.1
General Execution Strategy

Project Organization and Staffing
Project execution will be managed by a composite team consisting primarily of EPCM contractor personnel reporting to the Owners project team, supplemented by selected operations personnel. A contract stripping fleet will be engaged early on for pre-stripping activities on site; the Owners team will ramp up before plant start-up. The plant operations team will be mobilized and will be responsible for development of operational readiness, training manuals, procedures, and policies, and will also participate in quality control and commissioning. Once the project is commissioned, the construction team will be demobilized and the operations team will assume responsibility for the project.
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12.2.2
Engineering Strategy
Project systems and equipment will be designed to local, Canadian and international standards as appropriate and will include a maximum of pre-assembly and modularization of components, consistent with cost optimization. The project systems will be designed in the metric system of units. Some of the work designated for the engineering phase of the project will be initiated prior to project approval. It is essential that the original equipment manufacturers (OEMs) be involved in the initial stages and that the degree of their involvement, input, and output is agreed upon. This will eliminate a large amount of rework and additional costs. The vendors of major equipment will be required to provide technical support engineers to oversee the installation of vendor equipment. In addition, support will be required during inspection, commissioning, and for training.
12.2.3
Basic Engineering and Procurement

Regulatory approval for initiating work in the field is expected to be received at the end of December 2012. To meet the commissioning target date, it is recommended that the engineering design and detailing start in July 2012 and the long-lead procurement phase start in January 2012. The main scope of work for basic engineering covers critical equipment and final definition of major equipment and facilities with long-lead procurement cycles. Examples are the construction camps and services, SAG and ball mills, primary crusher, mining equipment, and power transformers. The procurement plan will designate priority for each of these packages based on delivery durations and the construction schedule. A list of equipment falling in this category is shown in Table 12-1.
Table 12-1:
Item Mining shovels Mine haul trucks SAG mill and ball mill Mill motors and starter/switchgear Semi-mobile crushing station (primary crusher) Flotation tank cells Overland belt conveyors package Mill feed and pebble conveyors Power transformers
Long-Lead Equipment and Packages

Delivery (weeks) 70 40 60 60 70 50 65 45 52
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A more-detailed listing of scope of work items for basic engineering is as follows: provide support for environmental permitting prepare and issue the EPCM contractor project execution plans finalize the contracting strategy, including the development of construction and contract work packages finalize the procurement plan and strategy prepare specifications and procurement packages for long-lead equipment hold long-lead equipment vendor meetings to finalize technical details and place orders prepare contracts for the construction camp, logging and site clearing, and bulk earthworks begin the preparation of detailed process and instrumentation diagrams (P&IDs) update the logistics plan develop a capital cost report format.
12.2.4
Detailed Engineering
Detailed engineering will form part of the engineering design and detailing phase of the project and will lag but run in parallel with basic engineering. Detailed engineering of the plant site will start July 2012, and all engineering is planned to be completed by July 2013 to support construction of the access road and process plant starting in early 2013. The TMF design will be completed by July 2013 to allow earthworks to follow directly after this. The scope of work will include all engineering, procurement, and contracting activities to deliver a safe and operable mine, processing plant, and auxiliary site facilities to meet Candente performance requirements. This includes the estimation and procurement of all bulks required for free-issue to contractors, including first-fills of oils and lubricants. The scope of work for the detailed engineering phase will be to: finalize P&IDs incorporating recommendations from basic engineering HAZOP to suit vendor packages and revised process flow diagrams (PFDs) conduct HAZOPs and issue recommendations conduct Risks and Opportunities session (update existing risk register) finalize equipment list finalize line list finalize all piping and equipment specifications implement procurement plan and place orders for balance of equipment and packages finalize equipment load list model process plant equipment, using 3D PDMS (plant design management system)
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model piping in 3D PDMS conduct model reviews for plant operation and maintenance conduct constructability review finalize layouts and building sizes generate pipe support package generate piping specialty items list finalize piping material take-offs (MTOs) and prepare piping isometrics develop procurement packages and procure controls and instrumentation (C&I), electrical, and piping components develop project QA/QC plan finalize construction and contract work packages finalize logistics plan finalize construction plan, including HSEC establish project management and materials database finalize the operational readiness plan monitor capital costs provide home office support for field engineers through the construction phase. Document control procedures will be implemented to provide regular monitoring and tracking of all project documents. Engineering deliverables and vendor documentation will be loaded into a master document list along with associated completion dates. Progress for each deliverable will be monitored by engineering disciplines and evaluated against the master schedule to ensure completion dates are maintained to support the procurement, contracting, and construction activities. The project estimate will be structured around a defined work breakdown structure. When engineering overall reaches approximately 30% completion, and basic engineering is complete, the project estimate will be updated to incorporate any changes in scope, schedule, or execution strategy. When engineering reaches 70% completion, a definitive estimate and schedule will be prepared for use in monitoring costs and progress for the rest of the project. Cost control during the engineering and procurement phases of the project will consist of weekly updates of planned versus actual hours and expenditures. Engineering costs will be monitored against engineering hours and actual productivity versus planned productivity. Capital expenditures will be tracked against the control estimate, with executed purchase orders evaluated against the estimated costs. Comprehensive monthly cost reports will be produced to identify any cost trends and develop any required mitigation plans. Changes and trends will be monitored and controlled through a change order and trending system that incorporates the appropriate approval process to meet Candente corporate requirements.
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Construction costs will be updated weekly to identify trends and monitor cost performance. Costs will be tracked at the construction work package level, with detailed reports generated monthly. Formal construction contract change order procedures will be developed for change control and will be utilized to control and monitor construction costs and schedule changes.
12.2.5
Contract Strategy
The following contracting strategy for the execution plan has been used for the basis of the prefeasibility study estimate. The strategy is based on the assumption that project delivery will be under the direction and coordination of an EPCM contractor. Contract packages will be prepared to allow local contractors to quote. Some construction activities such as concrete work may be divided into appropriate packages so that local companies can compete. During detailed design, a survey of contractor availability and willingness to contract under the assumed terms will be undertaken. Most packages will be firm price or firm unit price contracts. Contractors will provide their own bussing for workers as required. Fuel will be provided to the contractors at a per litre cost. Fuel supply will be at a central point.
12.2.5.1
Direct Contracts / Work Packages
Project Access Road Firm price for mobilization and demobilization and unit rates for work. Upgrade existing road and bridges as required as part of site capture. Contractor will be responsible for accommodation arrangements off site; space will be provided at construction camp for staging works from the site. Initial Site Preparation Firm price for mobilization and demobilization and unit rates for work. Starting directly after Notice to Proceed. Works would include site establishment, environmental controls, and installation of services such as water and sewer. Contractor will be responsible for on-site accommodation for own workforce. Earthworks Firm price for mobilization and demobilization and unit rates for work. Clearing the plant site, including roads and locations of proposed on-site facilities. Construction of major earthworks, including the plant site, access road, site-wide access roads, plant site area, and truckshop area. Camp Firm price for supply and installation of permanent camp and mob and demob. Design, supply, and erection of the camp, the EPCM site offices, construction lunchrooms, and ablution facilities. Aggregates & Batch Plant Firm price for mob and demob, unit rate for crushing & screening of aggregates and batching & delivery of concrete. Mobile crushing and screening plant will be set up once Notice to Proceed is given to commence stockpiling aggregates for civil and concrete works. Batch plant includes concrete trucks to batch and deliver concrete to pour site. Includes supply of cement and additives.
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Site-Wide Concrete and Buried Services Installation Firm price with unit rates. Detailed excavation, forming, and pouring, supply, and placement of all embeds, stripping, and backfill with structural fill for all concrete works. Work includes the installation of all buried services and utilities within the process plant site and truckshop areas, including electrical grounding, water lines, firewater mains and hydrants, and sewage lines. Construction Power Firm price for powerline plus cost reimbursable. Supply and install powerline from transmission connection to plant site and distribution of construction power. Structural Steel Firm price for mob and demob with unit rates. This will be divided into two contractsfabrication and delivery as one contract, and erection as the other. Work would include detailing, supply, and erection of the process mill building, and supply and erection of cladding and roofing. Process Plant Mechanical/Piping Firm price. Mechanical and piping from the primary crusher through to, and including, the process plant. Commissioning and start-up assistance will be cost-reimbursable. Site rough grading, concrete, and buried services to the site by others. Process Plant Electrical/Instrumentation Firm price. Electrical, instrumentation, and controls from the primary crusher through to, and including, the process plant. Site Power Firm price. This would be divided into two contractsmain substation and power, including emergency power as one contract, and electrical distribution and instrumentation, including yard lighting and grounding, as the other. Truckshop, Mill Maintenance, and Warehouses Firm price. Vertical contract, from the concrete anchor bolts up, to design, supply, construct, and commission the truckshop complex, mill maintenance facility, and warehouse building. Vendor start-up assistance and operator training will be cost-reimbursable. Site rough-grading, concrete, and buried services to the site by others. TMF Embankments Charge-out-rate (clearing and earthworks) and unit rates with firm price for mob and demob (embankment construction). Clearing and earthworks for the TMF embankment and associated water management structures. Construction of the tailings embankment, including preparation of materials filter zones. Includes foundation preparation and spreading and compacting mass rockfill provided. Concrete and aggregate supply by others. Tailings and reclaim pipelines and facilities will be one package. Diversion/Seepage Embankments and Diversion Channel Charge-out-rate (clearing and earthworks) and unit rates with firm price for mob and demob (embankment and channel construction). Clearing and earthworks for the diversion and seepage embankments, diversion channel, and associated water management facilities. Construction of the embankments and channel, including preparation of materials
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filter zones. Includes foundation preparation and spreading and compacting mass rockfill. Concrete and aggregate supply by others.
12.2.5.2 Service Contracts
Catering Firm price for mob and demob plus unit rate per camp-day. Provide catering, house-keeping, and janitorial services for the construction site. Surveying Per day rate. Workers and equipment to support site-wide survey control. Security Per day rate. Provide site security services. Site Geotechnical QA Per day rate. Includes QA/QC for concrete, soils. Fuel Supply Supply of construction fuel, including fuel tanks and dispensing equipment. Medical Services Per day rate. Provide site medical services. Emergency evacuation equipment and medical equipment could be Owner-supplied. General Site Services Fixed fee plus cost-reimbursable. Site-wide general services such as waste transfer station operation, camp maintenance, generator operation and maintenance, site garbage removal from each major work area, sanitary pumpout services, etc., fuel dispensing and reconciliation, light vehicle maintenance. Personnel Transport Daily or per trip rate. Personnel transport (bus) between site, camp, and air terminal. Drill & Blast Unit rates with firm price mob and demob. Contractor to supply own storage facilities. Includes supply of all materials, designs, drilling, and blasting.
12.2.6
Procurement
For the Caariaco project, procurement will consist of planning, purchasing, contracts execution, and materials management, which together form the overall procurement work for the EPCM phase of the project. A preliminary list of major and minor equipment, materials, and services, as well as contracting packages, has been developed to form the basis for the prefeasibility study. The detailed strategy and procurement plans will be finalized during basic engineering. Procurement activities will begin early so that potential suppliers of major equipment and providers of third-party design services can be identified and approached. The EPCM contractor will conduct a procurement planning session to provide the foundation for the procurement plan and will address the following issues:
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at project start-up, initiate and implement a scope clarification and project options checklist, which will be reviewed with Candente, to establish and clarify details pertaining to commercial and procurement-related activity review and integrate Candente procurement polices into a project procedure guideline confirm procurement packages, including definition of supply, design-supply, and design-supply-erect packages establish a qualified vendors list, including identification of local suppliers of goods and materials identify items to be procured by the project versus those to be supplied by installation contractors work with the transport logistics and construction management groups to establish a process for freight-forwarding and site warehousing as part of the overall logistics plan develop vendor QA/QC and shop inspection plans develop a strategy to maximize regional and local benefits as required and defined by Candente align vendor drawing schedule requirements with engineering work milestone packages and construction milestones develop a detailed procurement schedule. The Procurement Plan will be prepared during basic engineering, in conjunction with the detailed engineering and construction schedule. Once the detailed procurement plan is finalized and approved, and the related key target dates have been established for all activities, the approved procurement procedures will be implemented immediately throughout the project. The procurement plan will be detailed in the overall project schedule. If a trend develops that indicates slippage, then a specific recovery plan will be developed immediately to ensure the target dates are met. Procurement will be prioritized so that long-lead major equipment is selected and locked-in during basic engineering; vendor data are received in time to support basic and detail engineering; and equipment and components delivery suits the overall project schedule. Complete firm price quotations will be solicited and price breakdowns requested based on the Procurement Plan developed for the project. Potential suppliers will be screened so that requests for quotations can focus on suppliers that have the ability and interest to best serve the project needs. Bid lists will be as approved by Candente.
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12.3
Site Access
A detailed description of existing and proposed site access roads is provided in Section 8, Infrastructure, of this report. The site can be accessed via a rough 4x4 road for site establishment, although a more suitable road is required before bringing major equipment on site. Timely completion of the site access works is key to ensuring project completion in the scheduled period. Existing Access Road This road is approximately 87 km long and will be upgraded as part of the initial activities and used to access the site during site establishment. It would be unsuitable for use during the major construction phase and operational purposes. Project Access Road Construction of the permanent access road will start April 2013 and be completed April 2014. The access road will be constructed from both ends simultaneously. Once constructed, a security checkpoint at the intersection with the main road will be set up to control all traffic using the road. Site Access Road As part of the above works, the access road from the TMF to the site will also be constructed upon Notice to Proceed to enable access for early earthworks. Other Site Roads A number of other site roads will be constructed to allow access to work areas. Some of these roads will be difficult to construct because of complexities due to the steep terrain, but they must be completed to meet the project schedule.
12.4
12.4.1
Weather
General
The site is not subject to extreme weather. Average annual rainfall is not excessive and temperatures are relatively mild. As such, no special management of conditions resulting from adverse weather is needed during construction.
12.4.2
Water Management
Because of the steep terrain at the site, erosion control will be an important aspect of construction. All diversion drains, sediment ponds, and other required sediment and erosion control measures will be constructed before earthworks begin. Cut-off drains will divert runoff from adjoining catchments around the site to reduce the amount of contact water that would require treatment. Water management on site will start January 2013 with construction of the diversion channel. Approximately half the final length of the diversion channel required to allow pit waste dumping will be completed by the start of October 2013. Waste disposal of
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material stripped and excavated at the plant site is not dependent on the diversion channel. Work on the main diversion dam will commence in April 2013 and be completed by October 2014. The water stored behind this dam will be the primary source of water for the plant at start-up.
12.5
12.5.1
Construction Execution
Camp Requirements
Off-site Camps Camp facilities for any off-site construction works, such as the road and transmission line, will be the responsibility of the contractors. The access road contractor will provide a camp at the road head adjacent to the existing main road. The earthworks contractor for the TMF and seepage collection dam will provide a construction camp near the TMF. Rooms will be available in the plant site construction camp for workers engaged in construction of the power lines and access road near the plant site. Construction / Permanent Camp A camp will be provided at the plant site for the use of contractors at a per person per day cost. The Construction Manager will be responsible for the camp. Each contractor will be responsible for garbage and waste removal; disposal sites will be designated by the Construction Manager. Both the construction camp and the permanent camp will be placed in the same location, between the mill / mine site and the tailings area, to allow easy access for most of the workforce both during construction and operations. Earthworks to prepare the construction camp site will commence in January 2013, closely followed by installation of the camp services. The construction camp will be ready by May 2013. Additional units will be brought in as required to meet demand, with the expected peak being in the order of 1,500 beds. The core, which includes the kitchen, dining, and recreation facilities, will remain in place for the permanent camp. Permanent camp units used during construction will also remain in place once construction is complete. These units will be upgraded to suit operational requirements.
12.5.2
Aggregate and Concrete Production

It is currently assumed that a suitable source of rock for producing concrete aggregates will be found and quarried on site adjacent to the work areas. A mobile crushing and screening plant will be established for the production of aggregates for civil and concrete purposes. A concrete batch plant will also be erected on site to supply and deliver ready-mix concrete to the concreting contractor. Quality control and inspection will be the responsibility of the Construction Manager.
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12.5.3
12.5.3.1
Mine / Mill Site

Open Pit
Preproduction pit activities will start during the construction period. Pre-stripping work will commence using contract labour and diesel equipment in September 2013, before the electrical power system is commissioned, to achieve the required quantities of stripping before start-up. Once electricity is available, the mine fleet will be mobilized to commence mining and delivery of ore independently of the pre-stripping work, before the truckshop and warehouse facilities are complete.
12.5.3.2 Crushers, Conveyors, and Coarse Ore Stockpile
Earthworks related to the crusher and overland conveyor will commence in January 2013. Construction of MSE walls and concrete placement for the permanent crusher are planned to start soon after, while concrete work for the overland conveyor will start two months later. All facilities will be complete and ready for plant commissioning in December 2014.
12.5.3.3 Process Plant
The process plant will be a large central structure housing the mills, flotation cells, several related ancillary structures, process systems, and tankage. Upon Notice to Proceed, early construction activities will focus on the plant site area. Earthworks will start immediately to ensure start-up in January 2015. Once the mill building platform has been excavated, work on the grinding section will begin with the building perimeter foundations, followed by the mill mat foundations and mill piers, all starting in April 2013. Buildings will not be enclosed. Mill shells and other large equipment will be placed in the building as erection progresses. Delivery of these items is required to start by July 2013. Work in the flotation end of the building will also begin with the building perimeter foundations to enable steel erection to proceed in a sequenced fashion, commencing in July 2013, as footings are completed. The acid plant, roaster, coarse ore storage, tailings thickener, overland conveyor, and primary crusher are included as part of the process plant. Mechanical completion, electrical work, piping, and material transport installations will begin as soon as major equipment installations are completed in October 2013. All of the work culminates in the first ball mill line being completed by the end of January 2015 and the second ball mill line following at the start of July 2015. Start-up water will be supplied from the diversion impoundment.
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12.5.3.4
Infrastructure
A transmission line is required to provide power to the site. Work on the line will start upon Notice to Proceed. The power supply system is expected to be commissioned and the pit electrified so that the bulk of the pre-strip work can be carried out with the large mining equipment. Construction power will be one of the site capture activities and be completed early in the construction schedule. Ancillary buildings are located primarily in three areas on the site. Earthworks in the plant site area, which also includes the truckshop, diesel storage area, warehouse, shops, and mine dry, will commence in January 2013. The camp and administration area is planned to be complete by June 2014. The emulsion and explosives storage area, set a safe distance away from other facilities, will be used during pre-stripping and earthworks drill-and-blast activities.
12.5.3.5 Tailings Management Facility
Details of the tailings management facility (TMF) for the project are provided in Section 7 of this report. Work on the coffer dams, starter embankment, seepage collection embankment, and arsenic residue storage facility will commence in July 2013. Construction will continue until December 2014 when the starter dam is complete and the TMF system is ready for plant start-up.
12.6
Traffic/Logistics
Logistics will be a critical to the success of the project.
12.6.1
Construction Volumes
Inbound freight during construction is classified into the following types based on the group respondible for its procurement and delivery to the project site:. Project-Supplied Plant and Materials All project-supplied plant and materials procured offshore will be supplied FOB from a designated port of export. The vendor responsible for transport will arrange for transfer to the project of goods at the port of import, from where the projexct will assume responsibility for transportation to the project site.
With some execptions, project-supplied equipment and materials procured domestically will be supplied ex-works, with the project assuming responsibilty for its transport to the project site. Exceptions will include structural steel, cement, and fuel, which will be procured under terms of delivery into storage at the project site.
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Contractors Construction Plant and Materials Contractors will be responsible for transport and logistics of all equipment and materials necessary for the completion of their scope of work, with the exception of temporary contruction infrastructure and facilities to be supplied by the project. Project-Supplied Infrastructure and Facilities The following project-supplied facilities and equipment will be procured delivered to the project site: construction camps, fuel storage and distribution, waste collection and disposal, laydown areas and warehousing, heavy-lift cranes, and other common services such as ambulances and fire-fighting equipment. Project-Supplied Construction Materials and Supplies These include fuel, food, and supplies for the contruction camps, and other consumables, which wil be procured delivered to to the project site.
12.6.2
12.6.2.1
Project Logistics Organization

Project Logistics Group
Overall responsibility for project logistics will reside with the Project Logistics Group (PLG), who will be responsible to ensure that equipment and materials are delivered safely and cost effectively in accordance with the project schedule and in observance of project requirements such as applicable local legislation and regulations. The PLG Mamager will report to the Project Materials Manager. PLG will work closely with enginering and construction, suppliers and vendors, and third-party service providers, including freight forwarders, customs brokers, transport companies, and other logistics service providers.
12.6.2.2 Freight-Forwarding
The project freight forwarder will be responsible for arranging the transport of project cargos by ocean carrier or airline from point of purchase through to release at the port of discharge.
12.6.2.3 Customs Clearance
The customs broker will represent the project in front of the SUNAT, the Peruvian Customs authorities, who will authorize the import of materials and equipment based on the shipping documentation submitted along with payment and any technical information requested by the authorities. The customs broker will coordinate pre-clearance processes and pre-shipment inspection with freight forwarders.
12.6.2.4 Logistics Management System
A project-wide logistics management system will be used for all project-supplied equipment and materials. This will be linked to the integrated ERP system and will
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provide interfaces to contracts, procurement, and payment systems, as well as external parties.
12.6.3
12.6.3.1
Logistics Infrastructure and Services

Off-shore Consolidation Centres
The use of off-shore consolidation centres will be decided upon as part of a total cost of delivery analysis once orders have been placed for major equipment and materials, vendores have assigned the work to subcontractors, and the sourcing, timing, and volume of freight are known with greater certainty.
12.6.3.2 Ocean Transport
The project, through its agents, will arrange for the ocean transport to Peru for all project-supplied equipment and materials procured offshore. Most equipment and materials will be delivered by container and break-bulk lines that make scheduled calls at ports in Peru. As with the decision to use off-shore consolidation centres, the decision to use charter ships for transport of break-bulk cargoes is best made once the selected vendors have assigned the work to subcontractors and the sourcing, timing, and volume of freight are known with greater certainty.
12.6.3.3 Ports in Peru
Peruvian freight forwarders recommend three ports: Callao, Paita, and Salaverry (Figure 12-2). Each of these ports is described in the following subsections. Upon initial assessment, the port of entry will be Callao or Paita,depending on the ocean carrier and its ports of call, customs regulations, the availability of heavy-lift cranes and other transport services locally, the route survey of roads and highways between the port and the mine site, and ,of course, the total cost of delivery.
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Figure 12-2: Ports and Transport Infrastructure in Peru
Port of Callao
The Port of Callao (122'43"S, 778'48"W) is Peru's main commercial port (Figure 12-3). Located about 24 km southwest of Lima and 1,005 km south of the project site, it handled more than 20.7 Mt of cargo in 2007. The port is administered by La Empresa Nacional de Puertos ENAPU S.A. (ENAPU).
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The port occupies an area 47 ha, has 28 berths, and has 26.5 ha of storage area, including 2.1 ha of covered space and 24.3 ha given over to container terminals. The maximum depth of water available at the berth face is 11 m. There is limited onshore crane capacity, and most vessels load and discharge using their own cranes; however, local cranes, including those for heavy-lifts up to 96 tonne capacity, are available for hire. Callao is the main port in Peru for the receipt of imported cargoes because several other ports are designated as originating ports only. Cargoes often clear customs through Callao and then connect to final destination by cabotage. The port offers a wide range of third-part stevedoring, logistics, and transportation service providers. With about 2,500 calls a year, the port is served by both regular and tramp lines. Container shipping lines making regular calls at Callao include APL, Mearsk, MSC, Hapag Lloyd, CMA CGM, and CSAV. Break-bulk lines calling at the port include BBC, Seaboard, CCNI, and Transmares.
Figure 12-3: Port of Callao
Port of Paita
The Port of Paita (54'41"S, 816'55"W), the northernmost main port in Peru (Figure 12-4), is 60 km west of the city of Piura and 551 km by road from the project site. As part of the privatization of port operations in Peru, Concenssion Terminales Portuarios Euroandinos (TPE) officially took over the administration from ENAPU on 7 October 2009.
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The finger wharf is 365 m long x 36 m wide and has four ship berths. Maximum available water depth at the berth face is about 10 m. Principal cargoes handled through the port include bulk and bagged fishmeal, bulk grains and fertilizers, phosphorous rock, and general cargoes and containers. The capacity of the berth to accept heavy loads is not known and would have to be confirmed with the port operator. Shore-side crane capacity is limited, and most vessels use their own cranes to load and discharge cargoes. Local facilities include warehouses and open laydown areas. The availability of local transport and logistics services are limited. Container shipping lines calling regularly at Paitia include APL, Mearsk, MSC, Hapag Lloyd, CMA CGM, and CSAV. Break-bulk lines call only under full-load inducement. Local shipping agents report that customs regulations currently prohibit direct imports through Paita. Therefore, all inbound cargoes would have to clear customs in Callao, or the project would have to obtain customs clearance authorization before shipment to discharge at Paita.
Figure 12-4: Port of Paita
Port of Salaverry
The Port of Salaverry (813'S, 7859'W) is 550 km by road north of Lima and 445 km by road from the project site (Figure 12-5). The operator is ENAPU.
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Because it is exposed to constant swell and is subject to silting, the Salaverry is in fact an artificial harbour formed by a 700 m long breakwater. Even with the breakwater protection, however, operations at the berth are affected by ocean swells. Dredging operations are constant. The port has two finger wharves, each approximately 230 m long and providing four ship berths. Maximum available water depth at the berth face is about 8 m. Shore-side crane capacity is limited, and most vessels use their own cranes to load and discharge cargoes. Local facilities include warehouses and open laydown areas, but the availability of local transport and logistics services is limited. The capacity of the berth to accept heavy-loads is not known and would have to be confirmed with the port operator. While it was once a regular call, the port is no longer a scheduled port-of-call for lines serving Peru. Break-bulk carriers would only call at Salaverry under full-load inducement. As with Paita, local shipping agents report that customs regulations currently prohibit direct imports through Salaverry. Therefore, all inbound cargoes would have to clear customs in Callao, or the project would have to obtain custom clearance authorization before shipment to and discharge at Salaverrry.
Figure 12-5: Port of Salaverry
12.6.3.4
Marshalling Yards and Warehouses
All projected-supplied material and equipment procured off shore that cannot be moved directly to site will be staged in a marshalling yard adjacent to the port operated by a third
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party. Such cargoes include, for example, freight awaiting customs clearance, which will be stored in a clearly identified and fenced, bonded-goods area; or those for which limited storage area is available on site. Hazardous and dangerous cargoes will be stored a secured area, with access restricted to authorized personnel only. Special loads, such as those requiring escort of special equipment, will be staged in the marshalling yard to await transport to site. Less-than-full truck loads will be staged to await consolidation with other loads. Goods arriving at a port in containers subject to demurrage will be unloaded and re-loaded into project containers that will then be used for storage of these materials at the project site.
12.6.3.5 Road Transport
Road Network For this study the proposed transport route was adopted from the port of Callao. Ultimately the choice of port and associated road access will be dependent upon the ocean carrier and their ports of call, customs regulations, the availability of heavy-lift cranes and other transport services locally, the route survey of the roads and highways between the port and the mine site, and ,of course, the total cost of delivery. The main highway, Peru Highway 1, which runs parallel to the coast, connects the ports of Callao and Paita with Chiclayo. From Chiclayo, the road route to the mine follows a paved, Highway 1B north through Motupe (Figures 12-5 and 12-6) until it intersects with Highway 3N, the Corral Quemado Road, just south of the town of Olmos. After passing through La Pilca, the Corral Quemado Road climbs along a series of high ridges before descending to follow the river valley (Figure 12-8). Grades along the route are reported to be steep in places and should be surveyed to ensure they do not exceed the permissible limits for heavy-haul transport. On narrow roads through towns and villages, oversize loads will occupy almost the entire width of the road, and overhead wires will, where they cannot be lifted, limit the maximum permissible load height (Figure 12-9). Oversize loads will either have to by-pass these locations or be scheduled for transport during off-peak hours. Eight bridges were noted to have posted load limits of only 36 tonnes, whereas others had load limits of up to 60 tonnes. Because the gross vehicle weight of the heaviest loads will exceed bridge load capacities, these bridges will have to be surveyed to determine their maximum permissible load capacities, available clearance envelope, and estimated cost of temporary works, if required. Heavy rains from January to March cause numerous rockfalls and washouts, forcing road maintenance crews to work continuously to keep the road open (Figure 12-10). The bridge at El Silencio, for instance, was reported to have been recently flooded-out and closed for a month, stopping all traffic. At higher elevations, dense fog reduces visibility to near zero and traffic slows to a crawl for extended periods. A toll gate on the outskirts
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of Chiclayo has a bypass for oversize loads. Another bypass will need to be constructed at a second toll gate just past the intersection of the Highway 1B and the Corral Quemado Road (Figure 12-11). There are no fuelling stations of note between Chiclayo and the mine site.
Figure 12-6: Highway 1B, North of Mopute (view 1 of 2)
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Figure 12-7: Highway 1B, North of Mopute (view 2 of 2)
Figure 12-8: Section of Corral Quemado Road at Lower Elevation along River
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Figure 12-9: Limited Clearance Envelope on Road between Chiclayo and Project Site
Figure 12-10: Washout on Road North of Mopute washout has since been repaired
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Figure 12-11: Toll Booth near Intersection of Highway 1B and Corral Quemado Road (bypass required)
Highway Regulations Regulations for dimensions and weight limits on standard loads are as follows: Gross vehicle weight ............................................................................ 48 tonnes Maximum length ........................................................................................... 20 m Maximum width ........................................................................................... 2.6 m Maximum height ................................... 4.10 m general cargo/ 4.6 m containers Loads whose dimensions or weight exceed those specified for a standard load, but which are less than the following, require a permit, but not a detailed route survey with analysis of bridges and culverts along the route: Gross vehicle weight ........................................................................... 60 tonnes Maximum length ........................................................................................... 25 m Maximum width ........................................................................................... 4.5 m Maximum height ............................................................................................ 5 m Loads requiring permits must be accompanied by escort cars and police escorts
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Truck Transport A contract will be awarded for national trucking of regular loads of project-supplied plant and materials. A second contract will be awarded for transport of overweight and oversize loads. In addition to managing the transport of project requirements over local roads, the trucking contractor will provide a daily service between Lima for the transport of construction consumables, supplies, and materials required urgently on site. The heavy-haul contractor will survey the routes between the ports of Callao, Salaverry, and Paita and the mine site to establish the limiting dimensions and weights that can be transported along these routes. This contractor will obtain all necessary licences and permits, determine what upgrades are required for existing roads, bridges, and infrastructure to accommodate project cargo, and coordinate with local municipalities and authorities for the movement of these loads. Determining the critical load profile for design of access road upgrades and selecting the haulage equipment are subject to a final road survey, haulage equipment specifications, and the outcome of a modularization study.
12.6.3.6 Airports and Air Freight
The major airport in the region is Capitn FAP Jos A. Quiones Gonzles International Airport in Chicalyo. As the principal airport of Lambayeque, it is served by a several local passenger airlines. The runway is about 2,520 m long. Equipment and materials procured offshore and required urgently on site, where size or weight does not exceed carriers limits, will be flown by international freight carriers to Lima for customs clearance and be trucked to site. It is not known if the Chiclayo airport is certified to handle international freight.
12.6.3.7 Hazardous and Dangerous Goods
Hazardous and dangerous goods will be stored in clearly marked and, if necessary, fenced areas. Access to these areas will be restricted to authorized personnel.
12.6.4
Project Containers
During construction, containers will serve two purposes. On receipt at the port of import, materials transported in containers provided by a shipping line will be transhipped to a project container to avoid demurrage on the ocean container. They will also be used to store equipment and materials procured domestically that must not be stored in the open.
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12.6.5
Personnel Transport
Private vehicle access to the mine site will be limited to those issued a visitors pass. Construction contractors will provide bus service for their own personnel. Except for those who live locally, project construction staff on rotation will be transported to Chiclayo site by a bus fleet contracted by the project. Project managers and staff based in Lima who need to attend meetings on site will use the twice-weekly charter flight passenger service to Chiclayo, where a bus chartered by the project will transport them to site.
12.7
Project Master Schedule

The project schedule is an essential planning tool for project success. The schedule will alert management to the need for timely corrective actions to ensure the project finishes on time. The EPCM project schedule, provided in Appendix H, has been developed to reflect the project scope of work and supports the project execution plan. Key milestones, engineering design, long-lead procurement items, major contracts, construction, and commissioning have all been incorporated into the master schedule. This schedule will form the basis for all future detailed schedule revisions, management reporting, resource loading, and cash flow projections. A high level summary schedule of the EPCM project schedule is provided in Figure 12-12. During project execution, a detailed master schedule will be prepared and updated at regular intervals to monitor progress, track changes, and forecast trends. Engineering and procurement deliverables will be monitored for compliance with budgets and milestones. Weekly updates and detailed monthly reports will be issued and recovery plans developed where necessary to maintain scheduled progress for key engineering and procurement deliverables. Construction activities will be developed in detail with the construction contractors, and all tasks will be loaded into the master schedule according to the project work breakdown structure. Productivity will be monitored weekly against the tasks to ensure scheduled completion of construction work packages. Progress will be measured by earned value analysis to forecast construction productivity. Particular attention will paid to critical path activities and milestones to ensure the overall construction program maintains the targeted completion date. Detailed monthly schedule updates will be provided to identify trends, track changes, and report on completion relative to approved milestones. The project schedule for the construction phase of the project shows an estimated project duration of 25 months from the start of construction to commissioning and start-up of the first plant processing train. The schedule will identify critical path tasks and key milestones, which in turn determine the overall project duration.
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Figure 12-12: High Level Execution Schedule

EXECUTION PLAN Rev A - August 2010 ACTIVITY ENVIRONMENTAL PERMITTING STUDIES AND APPROVALS Notice to proceed ENGINEERING DESIGN PROCUREMENT AND CONTRACTS SITE CAPTURE PORT by Others ACCESS ROADS TRANSMISSION LINE TO SITE PROCESS PLANT TAILINGS INFRASTRUCTURE OPEN PIT 2010 2011 2012 2013 2014 2015 DURATION Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
LEGEND General Activity At Risk Activity Critical Milestones Activities by Others
One of the keys to achieving the schedule is timely procurement of long-delivery equipment, not only for delivery of that equipment, but also for release of critical vendor information required for detailed engineering.
12.8
Project Controls
Project controls will encompass estimating, scheduling, cost control, and progress control, along with all associated reporting. Change control is also included and will cover monitoring, reporting, and control of project costs against a control budget prepared during the engineering design stage. The definitive project cost estimate is planned to be prepared when detailed engineering reaches 70% completion. The EPCM schedule will be the tool for measuring progress. The project master schedule will be developed and updated regularly throughout the project.
12.8.1
Scheduling
The planning process will establish goals, milestones, key relationships, engineering, procurement, and construction priorities and the project critical path. The project master schedule is the framework from which the Plan date is established for all activities. The
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schedule will provide detail and resource logic for engineering, procurement, and construction activities. The following key activities will form the basis of the schedule: mechanical completion, pre-commissioning, commissioning, and start-up sequences for main process systems critical design activities and interfaces critical connection requirements (process and services) placement of purchase orders for major equipment with long-lead times main milestones for material take-offs, manufacturing, purchasing, on-site delivery, and installation vendor critical design information (vendor data) definition and award of main construction contracts. During project development, schedule monitoring will track the progress of the following: drawings and documents for engineering and construction work packages monthly updates of the schedule as purchases are made and firm dates are established for the delivery of vendor drawings, equipment, and materials changes made as engineering develops and the construction sequence for various elements and work packages is adjusted schedule adjustments to reflect Project Change Notices (PCNs) affecting the schedule. During project execution, the detailed master schedule will be updated at regular intervals to monitor progress, track changes, and forecast trends. Engineering and procurement deliverables will be monitored for compliance with the budgets and milestones. Weekly updates and detailed monthly reports will be issued and, where necessary, recovery plans will be developed to maintain scheduled progress for key engineering and procurement deliverables. Construction activities will be developed in detail with the construction contractors, and all tasks will be loaded into the master schedule according to the project WBS. Productivity will be monitored weekly against the tasks to ensure scheduled completion of construction work packages (CWPs). Earned value progress measurement will be utilized to analyze and forecast construction productivity. Particular attention will paid to critical path activities and milestones to ensure the overall construction program maintains the targeted completion date. Detailed monthly schedule updates will be provided to identify trends, track changes, and report schedule to approved milestones. The EPCM master schedule is included in Appendix H.
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12.8.2
Cost Control
Effective cost control is critical to the success of projects. Commencing with the feasibility estimate, the cost control process must be transparent, reliable, and timely. From an information management standpoint, four main processes can be defined, as outlined below. Information is entered into a Project Control Structure and is continuously updated to manage the budget, detect any potential deviations, and provide accurate and timely cost trend information. A change control procedure will be implemented to validate any change, identify the nature of the change, and determine whether the budget will vary or not. The primary objective of cost control is to maintain, through multiple procedures, a constant forecast of the project final cost updating weekly during the execution phase. A control estimate will be prepared when detailed engineering is approximately 70% complete to provide a detailed breakdown of costs for control purposes. The estimate will be prepared according to Class 2 of the American Association of Cost Engineers (AACE). All cost information for original budgets, forecasted costs, and cost changes will be reported on regularly in a format tailored to the project requirements.
12.9
12.9.1
Commissioning and Operational Readiness

Operator Training
The local communities will be a source of both skilled and unskilled labour, but development of the project will require some skilled labour from outside the region.Work opportunities within the district are scarce, only 4.9% of the population has wage work. The working age populations skills and qualifications are very low and intensive training will be required, even for the less demanding positions. As there are no mining projects in the area the population has no experience in mining or related side businesses (catering, security, cleaning). Outside of the project influence area, the principal towns of Chiclayo and Cajamarca could provide a higher rate of qualified personnel with a broader experience in the mining sector. The best philosophy for a stable workforce is to make the hiring of local employees a priority for the long term. Given the shortage of skilled labour in the mining industry and the desire for local hire, training will be a key aspect of the project. The Candente operations group will need to develop both on-site and off-site training programs to mitigate potential problems with an untrained workforce during start-up.
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12.9.2
Commissioning Program
Commissioning and start-up will be preceded by mechanical completion and pre-commissioning. Mechanical completion is generally defined as the installation of the facility in accordance with the contract, drawings, specifications, and vendor documentation. Pre-commissioning is generally defined as running the system without feed. Equipment is started and stopped through the programmable logic controller (PLC) or the distribution control system (DCS) to ensure all safety and process interlocks are functioning properly. At this time, the Owners team and the EPCMs check-out team should integrate to ensure the operational understanding is clear. The completion of these pre-commissioning activities signifies the transfer from EPCM contractor to Owner. Turnover packages and their documentation will complete the process, together with as built drawings. The commissioning phase begins when feed is introduced to the process plant. The Owner generally takes responsibility for this phase with assistance from the EPCM contractor and installation contractors. Commissioning will be done as per the traditional five-step system in place: C1 = static checks C2 = dynamic commissioning C3 = cold commissioning C4 = hot commissioning C5 = ramp-up to full production. A complete pre-commissioning and commissioning plan and schedule by system should be developed before these activities commence.
12.10
Health, Safety, Environment, and Community (HSEC)

The EPCM contractor will prepare a site-specific HSEC program for the project, which will be based on: corporate HSEC policies and procedures of the Owner corporate HSEC policies and procedures of the EPCM contractor the Health, Safety and Reclamation Code for Mines in Peru the Occupational Health and Safety (OHS) regulations where applicable under the inspection jurisdiction of local agencies HSEC risk assessment of the site environmental permit requirements and site regulations current industry practice. The program will set the minimum requirements for the project, including the level and frequency of statistical reporting. The program will form part of the standard tender
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documents, and all contractors will be requested to prepare their own site-specific HSEC programs, based on their corporate standards, that must meet or exceed the project HSEC program. Construction safety will be managed and monitored by the EPCM contractors qualified safety personnel throughout the construction program. Safety management and responsibility will transition to the Owners safety team before the commissioning phase of the project. Before the start of construction, the safety management staff will meet with the applicable Mines Inspector to review the site HSEC plan, address any concerns of the local agencies, and establish a working relationship with agency representatives. An Environmental Management System will be implemented. During construction, management of the environmental program will by the EPCM contractor s environmental staff in conjunction with Candentes environmental team. Management and monitoring of the environmental program will be based on the site-specific permit requirements for the project. Responsibility for environmental management will fully transition to the Candente team at the start of the commissioning phase.
12.10.1
Safety
On-site emergency medical facilities will be provided during the construction phase. These will consist of first aid facilities equipped to comply with local agency and Candente standards, with specific provisions made for work on a remote site. Medical personnel will be appropriately qualified, with communications links established to off-site medical expertise. Procedures and arrangements for emergency medical evacuations will be established before the start of construction. Each phase of the work will require individual procedures as the nature, location, and scope of the construction work changes. The emergency medical staff and facilities will be capable of handling industrial construction incidents. They will be equipped with an ambulance and fire truck for incidents and evacuations, and will be supported by pre-arranged access to emergency air medivacs to the nearest suitable hospital if needed.
12.10.2
Security
Security issues in terms of unauthorized access or removal of or damage to property are anticipated. Contracted security staff will be present on site during construction to monitor the camp and construction areas and the project access points. Security policies and procedures will be developed before the start of construction and will be included in all tender and purchase order packages, with a requirement that all personnel and contractors on site comply with the site environmental program. Responsibility and operation of the security program will transition to the Candente team prior to commissioning. The Candente operational security programs will be in force
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during commissioning and will be incorporated into the commissioning procedures and planning.
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CONTENTS 13.0 CAPITAL COST ESTIMATE .................................................................................13-1 13.1 Summary...................................................................................................13-1 13.2 Estimate Support Documents ....................................................................13-2 13.3 Estimate Responsibility .............................................................................13-2 13.4 Currency ...................................................................................................13-3 13.5 Work Breakdown Structure .......................................................................13-3 13.6 Basis of Estimate ......................................................................................13-3 13.6.1 Direct Costs ...................................................................................13-3 13.6.1.1 Development of Quantities and Costs........................... 13-3 13.6.1.2 Instrumentation............................................................. 13-5 13.6.1.3 Equipment and Material Pricing .................................... 13-5 13.6.1.4 Direct Field Labour ....................................................... 13-6 13.6.1.5 Growth and Waste Factors ........................................... 13-7 13.6.1.6 Mine ............................................................................. 13-8 13.6.1.7 Process Plant ............................................................... 13-8 13.6.1.8 On-Site Infrastructure ................................................... 13-9 13.6.1.9 Tailings Management ................................................... 13-9 13.6.1.10 Project Access Road .................................................. 13-10 13.6.1.11 Water Diversion .......................................................... 13-10 13.6.1.12 Port Site ..................................................................... 13-10 13.6.2 Indirect Costs...............................................................................13-10 13.6.2.1 Temporary Construction Facilities and Services ......... 13-11 13.6.2.2 Construction Equipment ............................................. 13-12 13.6.2.3 Construction Catering and Housekeeping .................. 13-12 13.6.2.4 EPCM ......................................................................... 13-12 13.6.2.5 Freight ........................................................................ 13-12 13.6.2.6 Vendors Representatives........................................... 13-13 13.6.2.7 Start-up and Commissioning ...................................... 13-13 13.6.2.8 Taxes and Duties ....................................................... 13-13 13.6.2.9 Capital Spares and Warehouse Supplies ................... 13-13 13.6.2.10 First Fills ..................................................................... 13-13 13.6.2.11 Owners Costs ............................................................ 13-13 13.7 Contingency ............................................................................................13-14 13.8 Escalation ...............................................................................................13-14 13.9 Working Capital .......................................................................................13-14 13.10 Sustaining Capital ...................................................................................13-15 13.11 Capital Cost Exclusions...........................................................................13-15
TABLES
Table 13-1: Summary of Capital Costs ............................................................................................ 13-1 Table 13-2: Capital Cost Estimate Input ........................................................................................... 13-2
TOC i
Table 13-3: Conversion Rates based on Q3 2010 ........................................................................... 13-3 Table 13-4: Hourly Labour Rate ....................................................................................................... 13-7 Table 13-5: Labour Productivity Factors .......................................................................................... 13-7 Table 13-6: Summary of Growth and Waste Factors ....................................................................... 13-8 Table 13-7: Mine Capital Costs ........................................................................................................ 13-8 Table 13-8: Concentrator Capital Costs ........................................................................................... 13-9 Table 13-9: On-Site Infrastructure .................................................................................................... 13-9 Table 13-10:Port Site Capital Costs ................................................................................................ 13-10 Table 13-11:Indirect Capital Costs .................................................................................................. 13-11
TOC ii
13.0
13.1
CAPITAL COST ESTIMATE

Summary
The total estimated Owner-operated capital cost to design and build the Caariaco Norte Copper Project in Peru at 95,000 t/d, as described in this report, is $1.599 billion. This cost assumes an Owner-operated mining fleet and process plant, and self-performed preproduction development. The estimate covers the direct field costs of executing the project, plus the Owners indirect costs associated with design, construction, and commissioning. The estimate is summarized in Table 13-1; a detailed estimate is provided in Appendix J along with the Basis of Estimate document for the project. All costs are expressed in 3rd quarter (Q3) 2010 U.S. dollars. No allowance has been included for escalation, interest or financing fees, taxes or duties, or working capital during construction. The level of accuracy for the estimate is 20% of estimated final costs, as per AACE Class 4 definition.
Table 13-1: Summary of Capital Costs
WBS 1000 2000 3000 4000 5000 5300 7000 9000 9100 PP11 Area Mining Process Plant On Site Infrastructures Tailings Management Project Access Road Water Diversion Port Site Facilities Total Direct Owners Cost Indirects Total Indirects Contingency Total Capital Cost Escalation (excluded) Working Capital (included in Financial Analysis) Total 2010 ($000) 326,615 381,277 133,444 101,527 38,795 50,753 26,887 1,059,298 52,899 243,076 295,975 243,903 1,599,176 1,599,176
Page 13-1
13.2
Estimate Support Documents

The capital cost estimate was based on the following documents and information: process flow diagrams project scope of facilities equipment list design criteria general arrangement drawings electrical single-line diagram supplemental sketches where required major equipment budget quotations from vendors budget pricing for bulk materials regional climatic data discipline material takeoffs project development schedule project execution plan project work breakdown structure (WBS) and code of accounts AMEC in-house data.
13.3
Estimate Responsibility
The estimate reflects the combined efforts of Candente, AMEC, and Ausenco. AMEC was responsible for the coordination of all data being assembled into the estimate. Ausenco provided cost input appropriate to a prefeasibility-level study for the port site. Table 13-2 outlines the responsibilities of each company for providing capital cost information.
Table 13-2: Capital Cost Estimate Input

Consultant Candente Copper Corp. (Candente) AMEC Responsibility Owners costs Designs and estimates for site layout, mining, surface materials handling, process plant, product storage and loading, ancillary buildings, tailings pipelines, on-site utilities, incoming transmission lines and substations, power distribution, control systems, tailings management facilities, water management facilities, environmental, closure costs, overall compilation of all direct costs, and construction indirect costs (EPCM, camp, catering, temporary facilities, construction services, spares, vendor reps, commissioning, first fills, freight, contingency) Port site development and utilities, concentrate receiving, storage, and handling design, quantities, estimate
Ausenco Sandwell Engineering Inc
Page 13-2
13.4
Currency
Conversion rates from other currencies, as used for commodity guidelines, are illustrated in Table 13-3 based on Q3 2010 U.S. dollars.
Table 13-3: Conversion Rates based on Q3 2010
U.S. Currency 1.00 1.00 1:00 1:00 1:00 Currencies Cdn EURO PEN AUS GBP Exchange 1.1111 0.7752 2.8570 1.3130 0.6803
Note: Currency conversion rates discussed with AMEC and determined by Candente
13.5
Work Breakdown Structure

The estimate was developed in accordance with the prefeasibility study criteria, philosophy, and preliminary project design. The work breakdown structure (WBS) is provided in detail in the Basis of Estimate document in Appendix J.
13.6
Basis of Estimate
The project scope developed in the Basis of Estimate, December 2010, forms the basis of the capital cost estimate. A number of facility designs reflect the results of trade-off studies conducted during the course of the prefeasibility phase. Where engineering assessment was performed for the designs, the cost impact is included in the capital cost buildup. For designs where engineering assessment was incomplete, an allowance was made and added to the capital estimate in the appropriate cost area.
13.6.1
13.6.1.1
Direct Costs
Development of Quantities and Costs Engineering material take-offs are based on neat line quantities derived from project drawings and sketches. Normal and acceptable allowances were included for each discipline as appropriate. Conceptual quantities were prepared where drawing information was not available. Metric units are assumed throughout the estimate. Bulk material components include cement, miscellaneous structural steel (stairs, handrails, ladders), building materials, and associated building construction items. These were priced with base cost as freight on board (FOB) from Callao, Peru. Freight costs to transport materials from Houston and other ports to Callao and on to the site are included in indirect costs. Pricing was based on information received from vendor budget
Page 13-3
quotations, historical data, and recently awarded purchase orders for similar materials on other projects. An allowance for contractor wastage and loss is included. All construction materials were assumed to be supplied from South America, North America, and the U.K. Costs for the items listed below are a combination of budget pricing from local suppliers contacted specifically for this project and relevant in-house data. Civil Allowances for bulking or compaction of materials were made in the unit prices and are not included in the estimates of earthworks quantities. Quantities in the plant and port site areas are based on mapping of ground topography at 1 m contours. Mass earthworks estimates were based on soils studies, Autodesk Land Desktop models (or equivalent), drawings, and sketches. Detailed excavation and backfill quantities for earthworks related to buildings and structures were developed for each area, based on estimated foundation sizes. Civil construction equipment was estimated on a unit basis, developed using historical data. Unit costs include fuel and maintenance. The cost of diesel fuel trucked to site during construction is estimated to be $0.72/L based on $80/bbl oil. For aggregate production, allowances are included for a crusher (400 t/h) and screening plant to be set up at the plant site to process 2 Mt of material, and for a mobile crusher (100 t/h) to process 0.3 Mt of material for access road construction. The estimate and reuse assumptions include: excavation in soil, 70% re-use for backfill and 30% to waste dump (2.5 km haul); excavation in rock, 100% re-use for rockfill and haul to crusher for road-surfacing material. An equipment productivity loss averaging 20% on earthworks activities is incorporated in the estimate. This accounts for machine efficiency, machine downtime, shift turn-around, weather delays, and site conditions, based upon a 10-hour single working shift and 9 production months per year. Concrete Quantities and classifications were determined from preliminary drawings, with allowances made for overpour and wastage. The unit rate includes the preparation of aggregate material, transport and stockpiling, supply of cement, batching of concrete, transport and placing, formwork, reinforcing steel, and concrete finishing. The rate was derived for the project from suppliers in Peru. Embedded Metal Quantities were determined from preliminary sketches. The unit price, developed from historical data, includes supply, fabrication, and installation (based on carbon steel fabrication) of embedded metal and anchor bolts. Structural Steel Quantities and breakdowns were based on preliminary GA drawings and material take-offs. Weights include allowances for connections and base plates. The unit price includes steel purchase, detailing, fabrication, and erection labour. The rate was derived for the project from international suppliers.
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Mechanical Equipment The equipment was itemized and priced as per the project equipment list. Motors were identified and are included with equipment costs. Vendor budget quotations were obtained for all major items based on preliminary specifications. Installation hours were obtained from in-house data and vendor guidelines, where appropriate. Mechanical (plate-work and tanks) Plate-work weights were calculated from relevant drawings where available and from sketches, with allowances made for necessary stiffeners, weirs, launders, etc. The unit prices, developed from historical data, include material purchase, detailing, fabrication, and installation. Overland Piping Overland and buried underground services piping quantities were based on the overall site plan and profile drawings. The unit price, from both projectspecific quotes and historical data, includes materials, fabrication, wastage, pipe handling, and testing. Process Piping The cost of process and service piping (within battery limits) was based on a percentage of the total equipment cost for the area. These factor allowances for the various areas are based on historical data. The unit prices for large equipment are based on quotes. Factors for the small equipment include materials purchase, shop and field fabrication, and installation. Electrical The electrical estimate was based on single-line diagrams and connected loads detailed in the flowsheets. Major electrical equipment prices were based on quotations. Bulk material prices were based on current in-house pricing. The costs of electrical items, within battery limits of the plant downstream of MCC starters, are based on a percentage of the total equipment cost within the area. These factor allowances for the various areas are based on historical data. Lengths for overhead lines and high-voltage cable were obtained from the overall plot plan. The building lighting and grounding estimate was based on a dollar per square metre allowance for the area of the building. 13.6.1.2 Instrumentation Allowances were made for instruments, wiring, support stands, and tubing based on an equipment factor. 13.6.1.3 Equipment and Material Pricing Budget quotes were obtained from vendors for each piece of significant equipment with a value greater than $250,000 and include the following: point of manufacture cost in Q3 2010 U.S. dollars delivery duration
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cost of estimated spares vendor assistance costs shipping weight and dimensions export packing freight from point of manufacture to marshalling location at Callao, Peru. Where possible, budget cost quotations were requested from three vendors. All other equipment prices were based on telephone quotations with email confirmation or in-house data for recently completed or quoted projects. Quotes were received for 70% of the total mechanical equipment value. 13.6.1.4 Direct Field Labour Labour rates were calculated using typical Peruvian wages and benefits based on recent cost surveys. These were blended with expatriate support labour to achieve appropriate crew mixes. Labour work hours and rotations will be based on the following: Local labour 10 days on, 3 days off, 10-hour days Overseas foreign labour 6 weeks on 2 weeks off, 10-hour days The all-inclusive labour cost per hour is based on the following criteria: base labour wage rate overtime premiums and casual overtime allowance benefits and burdens insurance appropriate crew mixes small tools and consumables temporary facilities and services such as construction buildings, shops, office supplies field office overheads home office overheads construction supervision general expense and profit fire watch first aid and safety supplies ongoing and final clean-up contractor survey retention and safety bonuses mobilization and de-mobilization travel costs and travel time
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living-out allowance for local labour only. For the work described in this report, the hourly labour rates shown in Table 13-4 were used for the various trade crews. Labour productivity factors were applied against North American work hours to accommodate available construction knowledge or training levels of field craft, extended work weeks, remote project location, and weather. These factors are shown in Table 13-5.
Table 13-4: Hourly Labour Rate
Area Civil Concrete Structural Steel Architectural Mechanical Piping Electrical Instrumentation HVAC Painting and Insulation Rate ($/h) 14.00 14.00 15.00 13.50 15.75 15.75 15.50 15.50 15.75 12.50
Table 13-5: Labour Productivity Factors

Area Civil (included in unit rate) Structural Earthworks Concrete Steel Architectural Mechanical Piping Electrical Instrumentation HVAC Coatings Factor 1.00 2.13 2.00 2.25 2.00 2.40 2.43 2.25 2.25 2.43 2.05
13.6.1.5
Growth and Waste Factors The growth and wastage factors used in the estimate are summarized in Table 13-6. Growth factors are based upon the level of development of the design at the current stage in the study. As the project progresses from prefeasibility through the various study phases, the level of detail in the design will increase and the growth factor will decrease.
Page 13-7
Table 13-6: Summary of Growth and Waste Factors

Discipline Earthworks Concrete Structural Steel Mechanical Factor (%) 5 5 15 5 2 1 5 10 2 5 10 Remarks Swelling and compaction factors included in the individual unit rates, by material type Concrete supply costs includes provision for over-pour and wastage in unit rate To cover connections, stiffeners, clips, base plates, and gussets in the quantity On equipment less than $2M On equipment more than $2M and less than $5M On equipment more than $5M For fittings and routing on overland piping quantities For plant process and service piping quantities (no growth on allowances) On equipment more than $2M On equipment less than $2M On cable quantities
Piping Electrical
13.6.1.6
Mine Mine capital costs include the mine mobile equipment, pre-stripping, mine access roads, earthworks associated with water diversion around the mind, dewatering, and drainage, and the explosives facilities. The explosives emulsion plant will be provided by a contractor based on bulk supply and is included in the contractors rate buildup. The mine capital costs total $327 million, as outlined in Table 13-7.
Table 13-7: Mine Capital Costs
Area Open Pit Mine Development Mine Mobile Equipment Mine Infrastructure (including truckshop) Total ($000) 75,545 207,539 43,531 326,615
13.6.1.7
Process Plant This area includes all process equipment and structures from the primary crusher to the tailings management and reclaim water systems, as well as concentrate handling and loadout on site. The direct capital cost of the process plant is $381 million, as detailed in Table 13-8.
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Table 13-8: Concentrator Capital Costs

Area Primary Crushing and Conveying Concentrator Total ($000) 53,925 327,352 381,277
13.6.1.8
On-Site Infrastructure This area covers the infrastructure and facilities required to support the mine/mill operations, including plant site preparation, civil costs, and permanent accommodations. Site and services capital totals $133 million, as outlined in Table 13-9.
Table 13-9: On-Site Infrastructure
Area Site Preparation & Civil Works On-site Service Roads Non Process Facilities Plant Mobile Equipment Bulk Storage Utilities / Services Communication Power Supply and Distribution (including transmission lines) Total ($000) 10,834 21,667 20,747 12,938 2,143 17,327 2,417 45,371 133,444
13.6.1.9
Tailings Management This area covers the tailings embankment construction and facilities, including seepage infrastructure and reclaim costs. The direct capital totals $101.5 million, as outlined in Table 13-9.
Table 13-10: Tailings Management
Area Tailings Dam Tailing Pipeline Tailings Seepage Pump Station and Pipeline De-Pyrite Flotation Plant Arsenic Residue Storage Facility Reclaim Barge Waste Dump Seepage Pump Station and Pipeline Total ($000) 44,584 13,549 8,161 2,800 231 21,651 10,551 101,527
Page 13-9
13.6.1.10 Project Access Road This area covers the project access road from Corral Quernado Road to the site. Direct capital costs total $39 million. 13.6.1.11 Water Diversion This area covers the construction of a diversion channel around the proposed waste management facility, including the freshwater diversion embankment and associated seepage infrastructure and facilities. Water diversion capital totals $51 million, as outlined in Table 13-9.
Table 13-11: Water Diversion
Area Diversion Channel Construction Diversion System Freshwater Diversion Embankment Waste Rock Seepage Collection Embankment Total ($000) 37,386 2,833 7,743 2,791 50,753
13.6.1.12 Port Site Costs for the port site facilities to be constructed by Candente include port site development and utilities, and concentrate receiving, storage, and handling. The shiploader and dock are being built and paid for by Lumina; Candente is paying a usage fee, which is carried in the operating costs. Candente direct construction costs at the port total $27 million, as outlined in Table 13-10.
Table 13-10: Port Site Capital Costs
Area Port Development Port Site Facilities & Services Total ($000) 25,323 1,564 26,887
13.6.2
Indirect Costs
Indirect costs for the project total $296 million and include the services required to support the construction activities as listed in Table 13-11.
Page 13-10
Table 13-11: Indirect Capital Costs

Area Temporary Construction Facilities & Services Construction Equipment Construction Accommodation & Catering Freight Vendors Representatives Start-up and Commissioning EPCM Capital and Warehouse Spares First Fills Owners Costs Total ($000) 50,057 26,750 13,500 48,090 2,850 1,500 84,083 8,049 8,198 52,899 295,976
13.6.2.1
Temporary Construction Facilities and Services This account includes all temporary buildings and services required during construction and commissioning. The estimate of $50 million was based on durations from the construction schedule and in-house data for material purchases. These include, but are not limited to: temporary construction warehouses and service facilities construction utilities waste handling construction communications construction management and Owners office equipment and supplies temporary construction power and distribution construction equipment rental and crane over 90 tonnes site maintenance medical services material off-loading pre-site access drug testing scaffolding laydown areas site security services site surveying janitorial services site bussing safety training soils and concrete testing.
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13.6.2.2
Construction Equipment The estimate of $27 million for construction equipment is based on historical data and an allowance of $7.50 per work hour. It does not include the following: supply and operation of the batch plant and concrete transit trucks, which are included in the concrete supply unit prices rental of earthmoving equipment, which is included in the civil costs.
13.6.2.3
Construction Catering and Housekeeping Construction camp sizing was based on camp loading and the construction schedule. The estimate includes a 1,500-person camp at the plant site. The camp will be purchased and used during the construction period and be refurbished in the first year of operations. Costs for purchase of the camp facilities are included in the direct permanent accommodation costs. Allowances are included in the indirect costs for housekeeping and catering services during the construction phase of the project. The cost of $13.5 million is based on direct labour hours, obtained from in-house data on similar projects, with an additional allowance to cover the following: EPCM staff vendor representatives contractors supervision and staff suppliers personnel Owners personnel. Costs were estimated and provided for the supply of camp site services such as water treatment, sewage, and associated miscellaneous piping.
13.6.2.4
EPCM The capital cost estimate of $84 million was based on a percentage of the DFC. The EPCM estimate for the shiploading port facilities was prepared by Ausenco, also based on a percentage.
13.6.2.5
Freight Freight costs of $48 million were estimated from information provided by vendor quotes to staging areas in either Houston or Callao and Pita. Where information was not provided, freight costs to the staging area were estimated based on previous experience and historical data. Freight costs from marshalling areas for ocean and barging were based on estimated loads and weights together with the freight rates.
Page 13-12
13.6.2.6
Vendors Representatives Vendor representative costs of $3 million were based on information provided by the vendors or on historical data for similar projects. Travel time of two days portal-to-portal was included in the vendor time required on site. Airfares, lodging, and other out-ofpocket expenses were accounted for as a rate per round-trip. Cost has been included in the Indirects for the assistance of vendor representatives during installation.
13.6.2.7
Start-up and Commissioning One month of contractor assistance in pre-commissioning and commissioning of the plant has been included as well as costs for the EPCM contractors assistance during this period, totalling $1.5 million.
13.6.2.8
Taxes and Duties Taxes and duties are excluded from the capital cost estimate and included within the financial analysis.
13.6.2.9
Capital Spares and Warehouse Supplies Costs were estimated at $8 million. Spare parts are based on an allowance of 6% of the process and 5% of the mobile equipment purchase value. Wear spares such as liners, pump impellers, and conveyor belting are treated as operations inventory and are carried in Working Capital in the financial analysis. Some commissioning spares were provided by vendors, and the remaining were estimated based on historical data.
13.6.2.10 First Fills First fills of $8 million is an allowance for the acquisition of necessary consumables to cover the initial grinding charge and one months supply of grinding media and reagents for operation of the concentrator. 13.6.2.11 Owners Costs Candente prepared the Owners costs of $53 million for the capital cost estimate based on a percentage of the direct costs and experience with projects of similar magnitude and complexity. Owners costs are incurred from the beginning, with the project authorization, until completion of the commissioning program, assumed to be one month after mechanical completion of the project. Costs after this point are treated as operating costs.
Page 13-13
The bulk of these costs consist of employees and contracted services according to descriptions in Section 12, Project Execution Plan, of this document. The following costs are incorporated within the items: PM salary/benefits design phase housing/relocation travel including home trips labour/supplies/training/pre start-up insurance environmental and construction permits laboratory, office, and shop equipment lists and costs land purchase third-party consulting forest clearing and replanting. Costs for project acquisition, prior feasibility studies, environmental assessment baseline work and reporting, and other project costs preceding the project authorization are not included in the capital cost estimate.
13.7
Contingency
Contingency accounts for unforeseen costs within the project scope and was calculated using an average (of both direct and indirect capital costs) factor of 18%, which is believed to be appropriate for the level of engineering work performed in the preparation of this prefeasibility progress report. Contingency has been applied to all the capital cost estimates in this report, excluding working and sustaining capital. Input variables used in calculating the contingency are a result of information gathered from all parties involved in the basis of the estimate. The contingency is $244 million, resulting in an overall estimate of $1.599 billion. The contingency does not allow for items beyond the scope of work or under exclusions, as listed below. A breakdown of the contingency is provided in appendix J.
13.8
Escalation
Escalation is excluded from the estimate.
13.9
Working Capital
Working capital is excluded from the estimate and is a separate line item in the financial model.
Page 13-14
13.10
Sustaining Capital
Sustaining capital for replacement of the mine and plant mobile equipment, tailings dam construction, water management and treatment facilities, electrical equipment, and community support is estimated to be $196.75 million over the life of the project. Sustaining capital includes the following: capital replacement of mine and plant mobile equipment pit dewatering and drainage control systems replacement of electrical equipment freight cost catering cost EP cost.
13.11
Capital Cost Exclusions

The following items were specifically excluded from the capital cost estimate: cost of financing and interest during construction costs due to currency fluctuations operating costs working capital cost of previous and further study changes to design criteria scope changes or accelerated schedule changes in Peruvian law site mitigation identification and removal of currently unidentified contaminated soils (major oil and fuel spills, heavy metals, pesticides, asbestos solids) deferred capital other duties and taxes closure and reclamation (included in financial model) schedule delays such as those caused by: scope changes delay in notice to proceed labour disputes unavailability of sufficient or experienced craft labour undefined geotechnical or environmental conditions unidentified or adverse subsurface soil conditions other external influences receipt of information beyond the control of EPCM contractors.
Page 13-15
CONTENTS 14.0 OPERATING COST ESTIMATE ...........................................................................14-1 14.1 Summary...................................................................................................14-1 14.2 Basis of Estimate ......................................................................................14-2 14.2.1 Wages and Salaries ..................................................................14-2 14.2.2 Schedules of Work ....................................................................14-2 14.2.3 Energy Costs ............................................................................14-2 14.2.4 Transportation Costs .................................................................14-3 14.3 Mine Operating Costs ...............................................................................14-3 14.3.1 Summary ..................................................................................14-3 14.3.2 Basis of Mine Operating Cost Estimate .....................................14-5 14.3.3 Mine Personnel .........................................................................14-6 14.3.4 Mine Expenses .........................................................................14-8 14.3.4.1 Drilling, Blasting, Loading, and Hauling .................14-8 14.3.4.2 Mine Support .......................................................14-10 14.3.4.3 General Mine .......................................................14-10 14.3.5 Equipment Operating Costs ....................................................14-11 14.4 Process Operating Costs ........................................................................14-11 14.4.1 Summary ................................................................................14-11 14.4.2 Process Personnel ..................................................................14-12 14.4.3 Consumables ..........................................................................14-13 14.4.4 Process and Ancillary Power Consumption Costs ...................14-14 14.4.5 Process Plant Maintenance Supplies Cost ..............................14-15 14.5 General and Administrative Operating Costs...........................................14-15 14.5.1 Summary ................................................................................14-15 14.5.2 Site Services ...........................................................................14-16 14.5.3 Access Road Maintenance .....................................................14-16 14.5.4 Environment ............................................................................14-16 14.5.5 Miscellaneous .........................................................................14-16
TABLES
Table 14-1: Table 14-2: Table 14-3: Table 14-4: Table 14-5: Table 14-6: Table 14-7: Table 14-8: Table 14-9: Table 14-10: Table 14-11: Average Operating Costs ............................................................................................ 14-1 Typical Labour Costs ................................................................................................... 14-2 Annual Direct Mine Operating Costs ($000) ................................................................ 14-4 LOM Mining Cost by Category ($000) ......................................................................... 14-4 Mining Staff and Labour............................................................................................... 14-7 LOM Operating Costs by Activity ................................................................................. 14-9 LOM Support Costs ................................................................................................... 14-10 LOM General Mine Costs .......................................................................................... 14-11 Average Annual Processing Costs ............................................................................ 14-12 Process Plant Personnel ........................................................................................... 14-13 Liner and Grinding Media Annual Costs .................................................................... 14-14
TOC i
Table 14-12: Process Reagent Annual Costs ................................................................................. 14-14 Table 14-13: Average Annual Power Consumption ........................................................................ 14-15 Table 14-14: Summary of G&A Cost Estimate ............................................................................... 14-15
FIGURES
Figure 14-1: LOM Mining Cost Breakdown ...................................................................................... 14-5
TOC ii
14.0
14.1
OPERATING COST ESTIMATE

Summary
The operating costs for the Caariaco Norte project are based on an Owner-operated mining fleet and process facility and have been prepared in third quarter 2010 U.S. dollars. The operating cost estimate excludes: contingency allowance for escalation sales tax concentrate shipping copper smelter treatment and refining charges import duties. In addition to the Owner-operated mining fleet, a number of options were developed during the course of the study for financial analysis, including: Contractor mining fleet Owner-operated/leased mining fleet Owner-operated/leased mining fleet with leased electrical supply and processing equipment, including crushing, grinding, and flotation. Details for these options are provided in Section 16, Financial Evaluation. The Owner-operated case is the basis for the remainder of this section. The operating cost estimates have been assembled by area and component, based on estimated staffing levels, consumables, and expenditures, according to the mine plan and process design. Average operating costs are shown in Table 14-1. Detailed calculations, spreadsheets, and backup reports for the operating costs are included in Appendix J.
Table 14-1: Average On-Site Operating Costs
Area Mining Processing General & Administration Total On-Site Operating Costs Unit $/t processed $/t processed $/t processed $/t processed US$ 2.74 3.11 0.43 6.28 Unit $/lb Cu $/lb Cu $/lb Cu $/lb Cu US$/lb Cu 0.360 0.408 0.056 0.824
Page 14-1
14.2
14.2.1
Basis of Estimate
Wages and Salaries
Average salary and wage rates used were based on AMEC in-house data from recent projects in South America. All positions and job classifications were categorized into the one of eight levels for the calculation of labour costs. The various levels and typical job classifications within each are summarized in Table 14-2. The calculation of all-in labour costs includes an allocation of 50% above the costs shown in Table 14-2 to cover all statutory payments, company-sponsored benefit plans and programs, and costs associated with vacation, sick leave, and absenteeism.
Table 14-2: Typical Labour Costs
Typical Positions Manager Superintendent, Chief Engineer General Foreman, Engineer, Geologist Supervisor, Planner, Accountant Equipment Operator, Technician, Tradesman Clerk, Apprentice Trainee, Assistant Operator Labourer Level Level 0 Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Annual Salary or Wages ($) 250,000 120,000 80,000 60,000 30,000 25,000 20,000 15,000
14.2.2
Schedules of Work
The work schedule assumes production will operate 24 h/d, 7 d/wk, 365 d/a. Considering the location of the proposed Caariaco Norte mine and the lack of immediate local accommodations, the mine will construct a camp to house employees. The camp will be complete with dormitories, a cafeteria, and recreational facilities. Employees will work 12 h/d on a 3-weeks-in/3-weeks-out schedule.
14.2.3
Energy Costs
Diesel Based on a WTI average price of US$80.00 per barrel, a diesel cost of $0.72/L, including delivery, was used for operating cost calculations. The diesel cost was confirmed with multiple Peruvian sources.
Page 14-2
Electricity The power price for the project was based on costs submitted by a Peruvian utility provider at $50.51/MWh. The cost includes the price of power, connection fee, transmission costs, and the cost of generation.
14.2.4
Transportation Costs
Transportation costs are included within the costs for supplies and materials calculated for mining and processing and are based on conventional highway truck supply. Costs per tonne were based on quotations from local trucking firms. Transport cost for supplies and materials priced from the closest port to site is $25/t. Transport from Lima is $35/t, and an allowance of $260/t, based on quotations from freight-forwarders, is included to cover both sea and land freight for bulk goods procured internationally.
14.3
14.3.1
Mine Operating Costs

Summary
The mine operating cost estimate incorporates costs for operating and maintenance labour, staff, and operating and maintenance supplies for each year. Operating and maintenance supplies are based on a combination of in-house and vendor-supplied data and are exclusive of taxes. Consumables (fuel, explosives, supplies etc.) were calculated from expected use, unit consumptions, and allowances for minor items, based on inhouse information combined with first principle costs developed for project specifics. The annual direct production mining cost estimates are shown in Table 14-3 and the LOM totals in Table 14-4. A percentage breakdown of the LOM production costs is illustrated in Figure 14-1. All mining costs are based on production Years 1 to 22. Preproduction costs have been capitalized and are included in the capital cost estimate. Detailed annual costs are provided in Appendix C.
Page 14-3
Table 14-3: Annual Direct Mine Operating Costs ($000)

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Total Labour 15,586 15,795 15,795 15,795 15,839 15,795 15,795 15,795 15,839 15,548 15,548 15,548 15,590 15,548 15,548 15,296 14,511 13,508 12,384 12,429 12,553 7,684 323,729 Fuel & Lube 27,898 26,913 26,319 26,356 26,796 25,050 26,113 27,968 27,007 24,640 24,794 22,810 24,380 24,104 25,283 25,195 22,216 16,649 15,675 17,848 20,157 6,766 510,939 Power 1,445 1,490 1,490 1,476 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,466 1,321 1,256 1,016 887 838 790 190 28,391 Consumables, Parts, Other 49,425 72,583 54,898 55,260 70,623 58,141 58,122 68,152 57,162 52,531 53,800 51,389 46,658 47,485 64,659 54,820 45,942 40,410 40,149 37,482 38,946 13,552 1,132,190 Total 94,354 116,781 98,501 98,888 114,731 100,459 101,503 113,388 101,481 94,191 95,615 91,220 88,101 88,610 106,956 96,632 83,925 71,582 69,094 68,598 72,446 28,192 1,995,248 $/t mined 1.32 1.56 1.31 1.35 1.57 1.38 1.39 1.55 1.39 1.29 1.31 1.25 1.21 1.21 1.48 1.51 1.39 1.49 1.67 1.76 1.99 3.80 1.38 $/t milled 3.40 3.37 2.84 2.85 3.31 2.90 2.93 3.27 2.93 2.72 2.76 2.63 2.54 2.56 3.09 2.79 2.42 2.06 1.99 1.98 2.09 4.04 2.74
Table 14-4:
LOM Mining Cost by Category ($000)

Total 114,152 101,710 303,170 205,359 944,514 266,757 45,587 14,000 1,995,248 $/t mined 0.08 0.07 0.21 0.14 0.66 0.19 0.03 0.01 1.38 $/t milled 0.16 0.14 0.42 0.28 1.30 0.37 0.06 0.02 2.74
Operating Costs Admin/Overhead Drilling Blasting Loading Hauling Support Ancillary Dewatering Total
Page 14-4
Figure 14-1: LOM Mining Cost Breakdown Total Mine Overhead, 6% Drilling, 5%
Pit Dewatering, 1% Ancillary, 2%
Blasting, 15% Support, 14% Loading, 10%
Hauling, 47%
14.3.2
Basis of Mine Operating Cost Estimate

Operating costs were derived by applying equipment productivities, equipment hourly operating costs, labour requirements, and wages and salaries to the production forecast. Hourly and supervision labour will work 12-hour shifts, 2 shifts per day, on a 1-week-on/ 1-week-off shift rotation. With the exception of the blasting crew and general labourers, all hourly labour and supervisory personnel will rotate between day and night shifts. Management and technical support staff will work the day-shift only, with the exception of the Mine Shift Supervisor, who will rotate with the crews. Equipment operator labour requirements and supplies are based on equipment hours and installed machines calculated from engineering estimates of productivities and activities, quantities of material moved, and hourly equipment operating rates. Other support labour within the mining operation was determined by engineering estimates of activities. The supply costs for production and ancillary equipment include such items as fuel, tires, lubricants, ground-engaging tools, and other consumables. Higher-cost items are based on supplier quotations, and minor costs are taken from recent projects. Maintenance labour requirements and supplies for production and support equipment are also based on calculated equipment hours, hourly equipment operating rates, estimates
Page 14-5
of mechanical availabilities, and maintenance labour intensities for each fleet type. The costs for maintenance labour, spare parts, major components, and consumables (including lubricants) are included in the build-up of unit operating costs.
14.3.3
Mine Personnel
The mine will be headed by the Mine Superintendent, who will report to the General Manager. Open pit operations functions include drilling, blasting, loading, and hauling of ore and waste, haul road construction/maintenance, and mine dewatering. The number of operators is based on the annual equipment requirements and the crew schedule, ensuring that sufficient operators are available on each crew to operate the equipment. Mine maintenance will be overseen by a maintenance superintendent with overall property-wide maintenance responsibilities. The number of mine maintenance personnel is based on the number of major pieces of equipment. Over the life of mine, the ratio of maintenance personnel to pieces of equipment is approximately 1.25. The ratio of maintenance labourers to operators is approximately 0.49 over the life of mine. Property-wide maintenance staff counts are shown in Table 14-5 and further details of staffing assignments are provided in Appendix C. Labour costs associated with the engineering department, under the direction of the technical services superintendent, and the geology department, under the direction of the chief geologist, are also covered in this area. Staff and labour requirements vary over the mine life and are shown by period in Appendix C. Maximum numbers of staff and hourly personnel are shown in Table 14-5.
Page 14-6
Table 14-5: Mining Staff and Labour

Position Mine Operations Department Fixed Personnel Tool Crib Attendant Warehouse Attendant General Mine Labourer Trainee Water Management Labourer Mine Superintendant Mine General Foreman Mine Shift Supervisor Mine Trainer Clerk Blast Supervisor Subtotal Mine Operations Mine Maintenance Department Fixed Personnel Light Duty Mechanic Lube Truck Driver Apprentice HV Electrical Mine (General) Manager Maintenance Superintendant Mobile Maintenance General Foreman Mobile Maintenance Supervisor Maintenance Planner Clerk (Maintenance) Clerk/Assistant (Planning) Electrical General Foreman Subtotal Mine Maintenance Engineering Department Fixed Personnel Chief Mining Engineer Senior Mining Engineer Mining Engineer Mine Technologist Surveyor Geotechnical Engineer Dispatcher Subtotal Engineering Geology Department Fixed Personnel Chief Geologist Senior Geologist Geologist 1 1 2 2 2 2 6 4 1 4 21 4 4 4 4 1 1 2 4 2 2 1 1 30 4 4 8 4 4 1 2 4 1 2 2 36 No.
Page 14-7
Position Sampling Technician Subtotal Geology Total Fixed Personnel Equipment Operators Primary Equipment P&H 4100C Shovel L2350 Front-end Loader 930E Haul Truck Sandvik1190E Drill Sandvik DP1500 Drill Subtotal Primary Equipment Support Equipment Komatsu D475A Track Dozer Komatsu D375A Track Dozer Cat 24M Motor Grader Komatsu GD825A Motor Grader Komatsu WD900 Rubber-tired Dozer Komatsu HD785 Water Truck Cat 365DL Track Excavator Cat 330DL Track Excavator Cat 740 Articulated Truck Subtotal Support Equipment Equipment Maintenance Personnel Loading Hauling Drilling Support Subtotal Maintenance Total Mine Operators & Maintenance Total Mining Workforce
No. 4 8 95
8 4 84 12 8 116 6 9 2 4 4 4 3 1 12 45 9 32 8 30 78 239 334
14.3.4
14.3.4.1
Mine Expenses
Drilling, Blasting, Loading, and Hauling These categories include both operating and maintenance costs. All costs are based on associated production equipment hours as provided in Appendix C. A breakdown of the operating costs for each category is shown in Table 14-6.
Page 14-8
Table 14-6: LOM Operating Costs by Activity

Item Drilling Operating Costs Personnel Costs Materials & Supplies Maintenance Costs Personnel Costs Materials & Supplies Drilling Total Blasting Operating Costs Materials & Supplies External Services Blasting Total Loading Operating Costs Personnel Costs Materials & Supplies Maintenance Costs Personnel Costs Materials & Supplies Loading Total Hauling Operating Costs Personnel Costs Materials & Supplies Maintenance Costs Personnel Costs Materials & Supplies External Services Hauling Total 73,857 499,349 27,696 331,066 12,545 944,514 10,988 31,225 7,912 155,234 205,359 284,141 19,029 303,170 6,917 50,783 101,710 17,293 26,717 Cost ($000)
The Materials & Supplies category captures all costs for maintenance and repair: parts, ground-engaging tools, undercarriage, special wear items, structures, buckets, bodies, drill bits, drill consumables, all based on recent in-house projects, and the shipping associated with these parts. External Services include contractor and professional service charges. Yearly operating cost summaries are provided in Appendix C. Powder factor calculations were used to design drill pattern sizes and annual drill requirements. Allowances of 5% were applied to cover re-drills in all material. Drill
Page 14-9
accessory costs are based on estimated life and unit prices from in-house data. Fuel supply is based on a price of $0.72/L. The power cost used is 0.0505/kWh. Explosives will be supplied as a down the hole service. A quotation was received in which a monthly service charge was given, as well as costs for consumables. The monthly service charge was applied equally for all periods, while consumables costs varied with blasting requirements. Diesel fuel, water, and power will be supplied by mine operations. 14.3.4.2 Mine Support Mine support includes pit cleanup, in-pit ramp maintenance, haul road maintenance, dozing, road grading, haul road dust control, and water control. A breakdown of the support operating costs is shown in Table 14-7. Yearly operating costs are detailed in Appendix C.
Table 14-7: LOM Support Costs
Item Support Operating Costs Personnel Costs Materials & Supplies Maintenance Costs Personnel Costs Materials & Supplies External Services Total Support Ancillary Materials & Supplies Total Ancillary 45,587 45,587 28,420 107,845 1,356 266,757 Cost ($000)
42,873 86,262
14.3.4.3
General Mine This category includes costs for the following: general mine equipment mine water management mine labourers and training mine supervisory staff maintenance supervisory staff
Page 14-10
engineering and geology grade control software user fees engineering and geotechnical supplies external engineering support. A breakdown of the general mining costs is shown in Table 14-8. This category contains costs for engineering and geotechnical supplies, training, travel, consulting services, sampling, software licensing and maintenance, and crusher plant operation. The yearly overhead requirements are detailed in Appendix C.
Table 14-8: LOM General Mine Costs
Item Personnel Costs Dewatering Consulting/Professional Services Other Expenses Total Cost ($000) 108,212 14,000 2,640 3,300 128,152
14.3.5
Equipment Operating Costs

Operating costs for the mine mobile equipment were built up from two basic components; operating costs and maintenance costs. Operating costs include operator labour costs, diesel and electrical power, tires, and other consumables. Maintenance costs include maintenance personnel costs, lube, oil and filters, undercarriage, ground-engaging tools, special wear items, and repair and maintenance reserve. Hourly consumption rates and costs were estimated using in-house and manufacturer data. A yearly breakdown of operating costs for each fleet is provided in Appendix C.
14.4
14.4.1
Process Operating Costs

Summary
Processing costs include the costs of operating and maintaining the processing facilities, from the primary crusher through to concentrate loadout, as well as treatment of concentrate in the on-site roasting facility, production of by-product sulphuric acid, provision of process and reclaim water pumping, and tailings management. Tailings management includes pumping mill tailings to the tailings management facility and treatment of some of the tailings to remove pyrite and other sulphide materials for continuous placement of sands on the tailings dam. The processing costs account for the
Page 14-11
expenses associated with purchasing consumables, equipment maintenance, personnel, and power consumption. Consumables costs include items such as crusher liners, mill liners, grinding media, all chemical reagents, and an allocated cost for office / laboratory supplies. The reagent costs are inclusive of freight for shipping the items to site. Workforce organization, salaries, and hourly costs were based on AMEC in-house data for recent South American projects. Equipment maintenance supplies and materials are estimated as a percentage of the capital cost of equipment. Power consumption was derived from the estimated load of individual pieces of equipment on the equipment list. The average annual processing costs are shown in Table 14-9.
Table 14-9: Average Annual Processing Costs
Item Labour Reagents and Consumables Power Maintenance Supplies Total Average ($/a) 24,526,600 37,529,300 39,083,800 6,729,800 107,869,500 $/t Milled 0.71 1.08 1.13 0.19 3.11
14.4.2
Process Personnel
The processing operations will be led by the Mill Superintendent, who will report directly to the site General Manager. All employees will operate on a 3-weeks-in/3-weeks-out schedule with a staggered rotation. Buildup of the process workforce is summarized in Table 14-10.
Page 14-12
Table 14-10: Process Plant Personnel

Staff Process Plant Staff Mill Superintendent Operations General Foreman Operations Shift Foreman Chief Metallurgist Senior Metallurgist Plant Metallurgist Chief Assayer Assay Technician Sample Prep Trainer Clerk Total Plant Staff Process Plant Labour Control Room Operator and Assistant Crusher Operator and Assistant Grinding Operator and Assistant Dewatering Operator and Assistant Flotation Operator Filtration Operator Reagent Mixing Utility Operator WTP/STP/Labourer Total Plant Labour Total Plant Personnel 1 1 4 1 6 8 2 8 8 1 2 42 8 12 10 8 12 4 4 2 18 78 120 Number of Positions
14.4.3
Consumables
The major process consumables consist of grinding media and flotation reagents. Crusher liner and the grinding liner consumptions were calculated based on wear rates per tonne of mill feed and steel unit costs on recent vendor quotations for this project. Grinding media consumption for the SAG and primary ball mills was estimated by using the standard AMEC modified Bond method for ball consumption. Costs associated with crushing and grinding liner replacements and grinding media are summarized in Table 14-11. Freight-associated charges were based on a rate of $35/t for cargo transport from Lima for SAG and ball mill media and liners, and of $260/t for ceramic regrind media and rubber liners sourced in Belgium.
Page 14-13
Table 14-11: Liner and Grinding Media Annual Costs

Item Primary Crusher Concaves/Mantles SAG Mill Liners Ball Mill Liners Regrind Mill Liners SAG Mill Media Ball Mill Media Regrind Mill Media Total Steel
* including freight
Annual Cost * ($) 156,000 3,155,400 2,305,900 160,000 11,650,800 9,570,300 2,348,400 29,346,800
Flotation reagent consumptions were derived from laboratory testwork and scaled up to plant consumption rates based on industrial experience from other operating sites. Reagent unit costs are based on third quarter 2010 quotations FOB Lima. Lime costs are FOB a northern Peru port. Annual costs, inclusive of freight to site, are listed in Table 14-12.
Table 14-12: Process Reagent Annual Costs
Reagent Lime AP3894 MIBC PAX Flocculant Roaster Reagents Total Reagents
* including freight
Annual Cost * ($) 2,258,500 2,470,600 1,131,600 823,500 1,248,300 250,000 8,182,500
14.4.4
Process and Ancillary Power Consumption Costs

Average annual power consumption in the process plant and associated areas is summarized in Table 14-13. Power consumption was estimated at an average of 773,937 MWh/a. The power consumption in the pit is provided in Section 14.3.
Page 14-14
Table 14-13: Average Annual Power Consumption

Area Mine Dewatering Process Plant Roaster and Acid Plant Camp Fresh and Reclaim Water Systems Total Site Demand MWh/a 37,361 610,367 48,202 21,327 56,680 773,937
14.4.5
Process Plant Maintenance Supplies Cost

Maintenance supplies costs are inclusive of materials for laboratory, plant, and equipment maintenance as well as operating materials. The estimated costs were determined using factors and allowances consistent with similar operations.
14.5
14.5.1
General and Administrative Operating Costs

Summary
The general and administrative (G&A) operating costs are the labour and overhead expenses for cost centres that are not directly linked to the mining and process disciplines. G&A for each cost centre was estimated either from first principles or input from AMEC based on other operations. Maintenance costs have been assigned to G&A to cover maintenance costs not specific to either the process plant or mine. A summary of G&A annual operating costs is shown in Table 14-14. breakdown of the G&A costs is included in Appendix J.
Table 14-14: Summary of G&A Cost Estimate
Detail Site Services Access Road Maintenance Environment Freight Charges Miscellaneous Total Average Total ($/a) 6,414,900 1,253,500 2,250,000 1,406,600 3,500,000 14,825,000 $/t milled 0.19 0.04 0.06 0.04 0.10 0.43
A detailed
Page 14-15
14.5.2
Site Services
Costs associated with site services include camp operations, transportation costs for personnel, general site vehicle operation and maintenance, communications, security, medical and safety supplies, computer hardware and software, office supplies, and domestic water treatment. Camp and catering includes food costs, fixed costs for administration of camp and catering services, housekeeping and laundry costs, janitorial services, labour costs, and profit margin. Based on AMEC in-house data, the daily estimated allowance is $17.26 per person. The costs of operating the construction camp are included under the capital cost section of the estimate. All other costs are allowances based on averages for similar operations.
14.5.3
Access Road Maintenance

The cost of maintaining the access road to site, a distance of approximately 47 km, plus the power line to be installed along its alignment, is $26,000 / km / annum based on a quotation received during the previous phase of the study.
14.5.4
Environment
The environmental-associated costs include environmental monitoring requirements and costs for ongoing construction equipment and materials for the various containment impoundments and diversions on site.
14.5.5
Miscellaneous
Cost allowances include off-site training and attendance at conferences, insurance, corporate services and travel, community development, and various consulting and legal fees. Costs for annual insurance premiums and fees are based on preliminary discussions and a quote received from Marsh Canada Limited, a risk and insurance services firm.
Page 14-16
CONTENTS 15.0 MARKETING ........................................................................................................15-1 15.1 Summary...................................................................................................15-1 15.2 Concentrate Product Quality .....................................................................15-1 15.3 Production .................................................................................................15-2 15.4 Market Treatment Charges .......................................................................15-3 15.5 Long-Term Smelter Charges .....................................................................15-4 15.5.1 Payable Metals ..............................................................................15-5 15.5.2 Refining Charges ...........................................................................15-5 15.5.3 Penalties........................................................................................15-5 15.5.4 Payment ........................................................................................15-5 15.5.5 Concentrate Market .......................................................................15-5 15.6 Acid Market ...............................................................................................15-6
TABLES
Table 15-1: Analysis* of Copper (Cu) Concentrate (calcine, d.b.) ................................................... 15-2 Table 15-2: Mining Production Parameters ...................................................................................... 15-3 Table 15-3: Projected Annual TC/RC Levels ................................................................................... 15-4
FIGURES
None
TOC i
15.0
15.1
MARKETING
Summary
This section presents the marketing assessment for the Caariaco Norte project. Assumptions are based on metallurgical data to date and reports commissioned from Neil S. Seldon & Associates Ltd. (NSA) (Appendix K)i to examine the copper concentrate and acid markets. NSAs commentary and outlook on concentrate marketability and related smelter charges, including treatment, refining, penalty details, payment timing, metal accountability, and other contract terms, are based on NSA market knowledge and use of data available in the public domain. NSA has not contacted any smelters to specifically discuss the marketability of the Caariaco Norte concentrates. As the project progresses through the next phase of study, it is recommended that some contact be made with smelters to discuss the acceptability of the proposed calcine from the Caariaco project and associated treatment and refining charges. A high-level evaluation of the marketability of sulphuric acid by-product from the proposed roasting facility was completed by Caliper Metals Corp (CMC) on behalf of NSA (Appendix K)ii. Future supply demand for both local Peruvian and Chilean acid markets suggests a net deficit for the near term. CMC has indicated that, from a project perspective, this is a positive project inclusion as domestic options are likely to increase, although Chile remains a viable export alternative. CMCs opinion on long-term prices in Chile and Peru is in the range of $75 to $85/t. All costs in this section reflect U.S. dollars.
15.2
Concentrate Product Quality

The anticipated quality of the copper concentrate to be produced is based on metallurgical testing carried out by SGS Lakefield in Santiago and Outotec (Sweden) AB and is discussed in Section 5, Metallurgy, of this report. The relevant parameters are presented in Table 15-1. More information on the concentrate treatment circuit is provided in Section 6, Processing. Other than arsenic, no other significant deleterious constituents are anticipated, although it should be noted that antimony is near the normal penalty levels before roasting of the concentrate occurs and significantly below penalty limits post roast. Overall, the concentrates are considered to be of good quality.
Page 15-1
Table 15-1: Analysis* of Copper (Cu) Concentrate (calcine, d.b.)

Element Copper Iron S (sulphide) Gold Silver Arsenic Antimony Bismuth Cadmium Cobalt Chlorine Lead Molybdenum Nickel Zinc Aluminum Oxide Calcium Oxide Chromium (III) Oxide Magnesium Oxide Manganese Oxide Potassium Oxide Silica Sodium Oxide Titanium Dioxide Vanadium Pentoxide
* Preliminary analysis
Symbol Cu Fe 2S Au Ag As Sb Bi Cd Co Cl Pb Mo Ni Zn Al2O3 CaO Cr2O3 MgO MnO K2O SiO2 Na2O TiO2 V2O5
Unit % % % g/t g/t % % % % % % % % % % % % % % % % % % % %
Average 31 27.5 20 3.4 113 0.2 0.1 0.075 0.001 0.003 0.05 0.023 0.1 0.008 0.25 3.8 0.06 0.04 0.3 0.001 0.75 9.1 0.25 0.25 0.001
15.3
Production
This progress report is based on the preliminary production parameters for Years 1 to 22 as shown in Table 15-2 and detailed in Section 4, Mine Plan and Production.
Page 15-2
Table 15-2: Mining Production Parameters

Copper Concentrate Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Life of Mine Ore Milled (kt) 27,740 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 34,675 6,974 728,214 Dry Weight (tonnes) 376,500 517,600 459,700 399,200 463,500 436,200 436,500 423,000 377,700 311,600 303,700 360,200 400,800 424,700 432,800 415,400 324,900 297,900 357,900 445,200 471,300 102,500 8,538,800 Grade (% Cu) 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 30.6 Copper Contained (klb) 253,900 349,100 310,000 269,200 312,600 294,200 294,400 285,200 254,700 210,100 204,800 242,900 270,300 286,400 291,800 280,200 219,100 200,900 241,400 300,300 317,800 69,100 5,758,400 Gold Contained (oz) 39,800 56,000 51,400 39,000 46,700 47,700 49,900 49,600 44,300 32,700 26,100 32,900 37,600 41,500 43,900 42,100 30,300 24,000 29,400 41,400 45,300 8,500 860,100 Silver Contained (oz) 1,204,700 1,190,500 1,022,000 1,087,900 1,130,400 1,094,000 1,015,600 933,400 845,300 738,300 769,300 889,400 944,900 959,700 982,500 907,900 705,800 722,100 838,100 979,400 979,400 222,800 20,163,400
15.4
Market Treatment Charges

The estimation of treatment and refining charges for the study is based on long term projections (post 2013) contained in a report prepared by Neil S. Seldon & Associates Ltd. (Appendix K) and current AMEC in-house data. The key determinants for future treatment and refining charges (TC/RC) are the supply/demand balance for copper concentrates, smelter economics, and spot market activity as assessed by NSA. NSA indicated that the annual benchmark numbers have essentially troughed and that a gradual increase can be expected over the next two to three years, resulting in treatment charges approaching equilibrium levels around 2013. Until late summer 2010, it was a reasonable forecast that 2011 levels would remain similar to those in 2010, raising the
Page 15-3
question of how much levels could increase year-by-year, assuming no major unforeseen changes. However, in late September and October 2010, there was a dramatic increase in spot terms, which rose to approximately $80.00 TC and $0.08 RC, and higher, but have since fallen back. In summary, NSA suggests the scenario shown in Table 15-3 for the period beginning in 2011.
Table 15-3: Projected Annual TC/RC Levels
2011 Annual TC $/dmt RC c/lb PP PP Base PP % PP Cap 60/65 6/6.5 N/A N/A N/A N/A 2012 Annual 65/70 6.5/7 N/A N/A N/A N/A 2013 Annual 70/5 7/7.5 N/A N/A N/A N/A Long-term 77.50 7.75 $2.50 +5 5 cents
Looking forward to post 2012, charges will ultimately be required to approach a sustainable economical level for the smelting industry. Given such economics and the expectation of higher copper prices, reflecting the falling dollar value, price participation or some form of price sharing, such as a step up in the level of TC/RC at higher prices, could eventually reappear, as indicated in the table above. For simplicity, NSA suggests the following longer-term assumptions: $77.50 TC, $0.0775 RC, and a PP formula of plus 5% above a price of $2.50, with a cap of $0.05 in constant dollars. TC and RC are not the only terms used in valuing concentrates, however. Payments and deductions are a matter of negotiation and will vary with many factors, including supply, demand, and customs in individual markets. NSA suggests the terms outlined in Section 15.5 below as an indication of standard long-term smelter charges, based on CIFFO (Cost Insurance and Freight Free Out) delivery to smelter ports. Analyst opinions on long-term projections for smelter TC/RCs vary. According to NSA the long-term projection is $77.5 and $7.75 for TC and RC, respectively. For the financial analysis (see Section 16, Financial Evaluation), AMEC used TC and RC levels of $75/t and $7.50/t, respectively. Following discussions with NSA regarding the probable range on long-term projection, the benchmarked figures used by AMEC were determined to be reasonable and fell within the range considered by NSA.
15.5
Long-Term Smelter Charges

AMEC used the following smelter terms: Treatment Charge ..................... $75 per dmt CIFFO main smelter port
Page 15-4
15.5.1
Payable Metals
Copper....................................... pay 96.5% with a minimum deduction of 1 unit Silver ......................................... g/dmt pay 90% Gold: <1 gram per dmt ................... no payment 1 to 3 grams per dmt............. pay 90% 3 to 5 grams per dmt............. pay 93%
15.5.2
Refining Charges
Copper....................................... $0.075 per pound payable copper Gold ........................................... $5 to $7 per ounce Silver ......................................... $0.40 to $0.70
15.5.3
Penalties
Arsenic ...................................... $3.00 per 0.1% over 0.2% Antimony ................................... $3.00 to $4.00 per 0.1% over 0.1% Bismuth ..................................... $3.00 to $5.00 per 0.01% over 0.03 to 0.05% AMEC used a penalty limit of 0.2% for arsenic, which differs from NSAs recommendation of 0.1%. As noted previously, the smelter term assumptions are at a high level and preliminary in nature, given that no contact has been made with smelters regarding specific Caariaco concentrates.
15.5.4
Payment
Provisional ................................. 90% 3 to 15 days after vessel arrival in Asia, India Final........................................... 10% balance when all facts known
15.5.5
Concentrate Market
From a chemical quality standpoint, the Caariaco Norte concentrate production is anticipated to be readily acceptable to smelters. At 32% copper and with sulphur content around 20% the higher copper and lower sulphur content of the partially roasted concentrate is seen as important to smelters today as the copper content of concentrates for mines such as Escondida are falling, and as a result, smelter input blends have fallen to plus/ minus 28%.
Page 15-5
15.6
Acid Market
The partial roasting facility would generate approximately 140 kt/a of by-product sulphuric acid. Caliper Metals Corp (CMC), on behalf of NSA, was commissioned to produce a high-level evaluation of the marketability of the acid both domestically in Peru and in the export market. CMCs report (Appendix K) was received in January 2011. Specific focus areas of the evaluation include detail on the historical and future supply demand fundamentals both in-country, within Peru and for Chile, which is the logical export counterparty. The following commentaries are extracts from the report. Acid markets in Chile and Peru are centred on the consumption of acid for SX/EW leach processes and metallurgical acid supply. Chile in particular has evolved into an intensive user of acid to supply its large and growing base of SX/EW production. It is anticipated that total SX/EW production volumes will remain significant and will fully utilize domestic Chilean acid-producing capacity and still require additional imports. The acid market dynamics in Peru are considerably different and on a reduced scale. Operations and developments in copper mining are still in the early stages relative to potential. The future project profile for Peru predicts strong growth and when implemented will affect the acid trade flow significantly. The trend is set for Peru to transition from a net exporter to a more balanced market in the next decade. Perus geographic proximity to Chiles SX/EW -consuming northern regions offers competitive advantages over deliveries of Chilean domestic acid from central regions. The Chile/Peru supply demand balances remain in net deficit for the period examined ending in 2017. From a Peruvian acid producer perspective, this is particularly positive as domestic options increase while Chile remains a viable export alternative. Long-term acid prices (FOB Tampa) are forecast to be in the range of $60/t to $70/t. Volatility, however, will be high due to sudden changes in supplydemand patterns both on a global and regional basis and the slow corrective response times inherent in the industry. It is also assumed that the markets specific to Peru and Chile will carry a premium to the global price owing to the persistent structural deficit forecast over the next decade. Premiums will likely be in the $10 to $15 range assuming global surpluses are not significant. Therefore, long-term prices in Chile and Peru are expected to be in the range of $75/t to $85/t, with considerable volatility. Market opportunities for Caariaco Norte acid will arise both domestically and in northern Chile. When reviewing logistics related to the export market, the main acid terminals in
Page 15-6
Peru are located in the south at Pisco and Ilo to service export volumes from Cajamaquilla and Ilo. While it is possible to deliver by truck to the Pisco facility, the distance is considerable. Investigation of possible terminal installations in the north should be reviewed and could be tied to planned concentrate port facilities. Known ocean freight rates from PiscoIlo into Mejillones are approximately $20/t to $30/t. Given the preliminary status of this evaluation, high-level total export delivery costs are likely to be $60/t to $80/t, depending on whether a northern port can be used versus Pisco. For the purpose of this progress report, AMEC used a long-term acid price of $90/t based on preliminary discussions with CMC and NSA in October 2010. A more detailed market study for domestic and export acid markets is recommended for the feasibility study.
i ii
For internal use only and not for publication For internal use only and not for publication
Page 15-7
CONTENTS 16.0 FINANCIAL EVALUATION ...................................................................................16-1 16.1 Summary and Conclusions .......................................................................16-1 16.2 Valuation Methodology ..............................................................................16-1 16.3 Financial Model Parameters ......................................................................16-2 16.3.1 Mineral Resource and Mine Life ....................................................16-2 16.3.2 Metallurgical Balance.....................................................................16-2 16.3.3 Transport and Insurance Charges .................................................16-2 16.3.4 Metal Prices and Foreign Exchange ..............................................16-3 16.3.5 Operating Costs.............................................................................16-3 16.3.6 Capital Costs .................................................................................16-3 16.3.7 Royalties........................................................................................16-4 16.3.8 Working Capital .............................................................................16-4 16.3.9 Taxes ............................................................................................16-4 16.3.10 Reclamation ...............................................................................16-5 16.3.11 Financing ...................................................................................16-5 16.3.12 Inflation ......................................................................................16-5 16.3.13 Salvage Value............................................................................16-5 16.4 Results and Sensitivity Analysis ................................................................16-5
TABLES
Table 16-1: Table 16-2: Table 16-3: Table 16-4: Table 16-5: Table 16-6: Long-Term Metal Price Assumptions ............................................................................ 16-1 Base Case Metallurgical Copper Recovery .................................................................. 16-2 Base Case Prices for Financial Evaluation ................................................................... 16-3 Base Case Cashflow ..................................................................................................... 16-7 Cashflow Analysis for Four Cases ................................................................................ 16-8 Results of Sensitivity Analysis for Base Case with NPV @ 8% .................................... 16-8
FIGURES
No table of figures entries found.
Page 16-1
16.0
16.1
FINANCIAL EVALUATION
Summary and Conclusions
The results of the economic analysis discussed in this section represent forward-looking information as defined under Canadian securities law. The results depend on inputs that are subject to a number of known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those presented here. All costs included in this section are in US$. Four cases were assessed using the financial model: Case 1 Client Owner Operated Case 2 Contract Mining Case 3 Leased Mining Equipment Case 4 Leased Mining, Mill, and Electrical Equipment. The case identified herein as the base case is Case 3, Leased Mining Equipment. Unless otherwise specified, discussions and numbers within this section are related to the base case. The long-term metal prices adopted for the project are listed in Table 16-1.
Table 16-1: Long-Term Metal Price Assumptions
Metal Cu Au Ag Unit $/lb $/oz $/oz Price 2.25 1,015.00 15.85
When valuing the project at a standard 8% discount rate after tax, the resulting net present value (NPV) for the base case is $1,063 million with an internal rate of return (IRR) of 18.8%. The project is most sensitive to metal prices and capital cost but less sensitive to operating costs.
16.2
Valuation Methodology
The project has been evaluated using a discounted cash flow (DCF) analysis. Cash inflows consist of annual revenue projections for the mine and two years of preproduction. Cash outflows such as capital, operating costs, and taxes are subtracted from the inflows to arrive at the annual cash flow projections. To reflect the time value of money, annual net cash flow (NCF) projections are discounted back to the project valuation date using several discount rates. The discount rate appropriate to a specific project depends on many factors, including the type of
Page 16-1
commodity and the level of project risks, such as market risk, technical risk, and political risk. The discounted present values of the cash flows are summed to arrive at the projects net present value (NPV). In addition to NPV, internal rate of return (IRR) and payback period are also calculated. The IRR is defined as the discount rate that results in an NPV equal to zero. Cash flows are taken to occur at the end of each period. Capital cost estimates have been prepared for initial development and construction of the project and for ongoing operations (sustaining capital). The resulting net annual cash flows are discounted back to the date of valuation end-ofyear 2010 dollars and totalled to determine NPVs at the selected discount rates. The IRR is calculated as the discount rate that yields a zero NPV. The payback period is calculated as the time needed to recover the initial capital spent.
16.3
16.3.1
Financial Model Parameters

Mineral Resource and Mine Life
The Mineral Resource is discussed in Section 3, Geology, of this report and the mine life in Section 4, Mine Plan and Production. In the financial model it was assumed that a total resource of 728 Mt was mined through open pit methods. The mineralized material is to be processed at an average rate of 34.7 Mt/a.
16.3.2
Metallurgical Balance
The mineral processing and metallurgy are discussed in Sections 5 and 6. Because Caariaco Norte Candente will be a primary copper producer, particular attention has been placed on the relationship between copper grade and recovery. Recovery and grade assumptions are summarized in Table 16-2.
Table 16-2: Base Case Metallurgical Copper Recovery
Item Cu Grade Cu Recovery Cu Recovered to Concentrate Unit % % Avg k lb/a Value 0.4 89.7 262
16.3.3
Transport and Insurance Charges

The product will be transported by road to the closest harbour and shipped to international consumers at a cost of $781 million over the life of the mine. This includes a 0.15% insurance premium based on the value of the transported product.
Page 16-2
16.3.4
Metal Prices and Foreign Exchange

To reflect some of the advantage that Caariaco Norte is expected to gain from the current high price scenario; AMEC applied the following reverting cost curve values to estimate future metal prices for each case. Use of reverting curves is based on the industry consensus view that long-term metal prices will tend to revert to a level that is lower (or higher) than current bullish (or bearish) spot prices. The spot price is used as the starting point, and the rate at which reversion occurs is measured from observation of historical prices.
Table 16-3: Base Case Prices for Financial Evaluation
Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Copper $/lb 2.92 2.77 2.65 2.56 2.50 2.44 2.40 2.37 2.34 2.32 2.25 2.25 Gold $/oz 1,159 1,132 1,111 1,094 1,080 1,069 1,060 1,052 1,046 1,041 1,015 1,015 Silver $/oz 20.96 20.00 19.25 18.64 18.15 17.76 17.43 17.17 16.95 16.76 15.85 15.85
16.3.5
Operating Costs
The operating costs for the project are discussed in Section 14. The project does not appear to be sensitive to changes in operating cost. Life-of-mine operating costs are estimated to be $1.24/lb recovered Cu, including smelter and transport costs, for the base case.
16.3.6
Capital Costs
Capital costs are detailed in Section 13 of this report and summarized in the project cash flow analysis in Appendix L. Four different scenarios were investigated. For the base case, the mobile mining equipment is leased from equipment vendors. Start-up capital costs for the base case, which excludes the leased equipment, are estimated at $1,437 million for the mine construction phase as well as $71 million in sustaining capital to replace mining and other equipment during the life of the mine. In terms of the Peruvian Tax Law, mining equipment and the processing plant are depreciated over the
Page 16-3
life of the asset, based upon 5 to 10 year replacement periods. The rest of the capital items are depreciated over the life of the mine. The other three scenarios assessed include full Owner purchase and operated mine and process facilities, contractor mining, and full lease of process and electrical equipment in addition to mining equipment. The capital cost for the full Owner-operated and financed option is $1,599 million for pre-production capital and $206 million to sustain the operation. If the contract mining option were considered, then the cost could be reduced to $1,405 million and $63 million for preproduction and sustaining capital, respectively. The cost of the option involving full lease of mine and major process and electrical equipment reduces to $1,191 million and $207 million.
16.3.7
Royalties
Royalty payments are calculated as a function of metal revenue recovered from the areas that are subject to royalty agreements. A sliding scale is applied to the royalties, calculated on the positive pre-tax cash flow after recovery of the capital expenditure and operating expenses. The royalty is 1% on the first $60,000,000, 2% on the next $60,000,000, and 3% on pre-tax cash flow over $120,000,000. Over the life of the mine, the NPI royalty is estimated to total $338 million.
16.3.8
Working Capital
Working capital is considered to be a temporary use of funds, incurred at the start up of operations and intended to fund mining and production operations until the receipt of revenues. As revenues and costs typically vary from year to year, the working capital will also change each year. However, all working capital is theoretically recovered at the end of the project. The formal definition of working capital is current asset value minus current liabilities. For the sake of simplicity, a good approximation for this project is three months of operating costs, which was used in this analysis. Working capital reaches a level of $66 million in the first year of operation and a life-of-mine maximum of $82 million the following year.
16.3.9
Taxes
AMEC does not provide detailed tax analysis, but has attempted to apply the relevant allowances, deductions, and taxes to the maximum advantage of Candente based on other projects in Peru. A labour profit-sharing tax of 8% is applied to net taxable income. This is then deductible before the 30% corporate income tax rate is applied. AMEC recommends that Candente should engage a suitably qualified and experienced tax professional during the next phase of the project to investigate this in depth. Based on the current financial evaluation, taxes remitted to the Peruvian Government could
Page 16-4
potentially amount to $1,661 million. An additional $481 million could potentially be paid out as labour profit-sharing tax.
16.3.10
Reclamation
Decommissioning and reclamation are expected to continue for some time after the end of production, for an initial estimated total cost of $58 million.
16.3.11
Financing
The base case economic analysis is based on the leasing the mining equipment; this was compared to a 100% Owner-financed option and a contract miner option. Indicative financing terms were received from vendors, and average lease terms were applied to all the leased equipment. These terms were 3% deposit and the balance repayable over five years at 5% interest. It is suggested that detailed lease terms be applied in the financial model for the next level of study to assess possible opportunities to improve the project returns.
16.3.12
Inflation
The base case economic analysis assumes that no inflationary adjustments are made. Capital and operating costs are based on fourth quarter 2010 US dollars.
16.3.13
Salvage Value
No salvage value was incorporated into the model; it is assumed at this early stage of investigation that the cost of demolition will negate the salvage value. If funds are generated through the sale of assets at the end of the project, then these will be invested back in the company to assist in covering the cost of mine closure. The current investigations suggest that there is potential for the mine to continue operating after the currently assumed life of mine.
16.4
Results and Sensitivity Analysis

The pre-tax cumulative cash flow for the base case is US$5,998 million with an IRR of 26.8%. The cash flow analysis shows that the project will generate a positive cash flow in all operating years except Year -2 and Year -1 on a pre-tax basis. The annual positive cash flow results in a payback period of 2.9 years. At an 8% discount rate, the pre-tax net present value (NPV) of the project is US$1,983 million. On an after-tax basis, the cumulative net cash flow is $3,855 million and the IRR is 18.8%. Again, all operating years except Year -2 and Year -1 show a positive cash flow. Payback period is 4.1 years. At an 8% discount rate, the after-tax NPV is $1,063 million.
Page 16-5
A simplified cashflow spreadsheet of the base case is included as Table 16-4. Four cases were assessed using the financial model: Case 1 Client Owner Operated Case 2 Contract Mining Case 3 Leased Mining Equipment (Base Case for this study) Case 4 Leased Mining, Mill and Electrical Equipment The cash flow analysis for all the cases are included as Table 16-5. Sensitivity analysis was performed on the base case taking into account variations in the metal price, operating cost, foreign exchange, and mining cost. Analysis shows that the Canariaco project is most sensitive to changes in metal prices, as this directly affects the revenue stream. The analysis shows that the project is less sensitive to capital expenditure and operating cost. The sensitivities of the two costs are very similar. Considering that the project is priced in US dollars, the effects of exchange rate variation do not apply in the current model, although in reality some equipment, supplies, and services will be priced in Euros or the local Peruvian currency. The results of the sensitivity analysis are shown in Table 16-6 and Figure 16-1.
Page 16-6
Table 16-4: Base Case Cashflow

Cash Flow
Calendar year Project year Production year Metal prices Gold Silver Copper Pay Metal Gold Silver Copper Pay Value Gold Silver Copper Total Concentrate transport Land freight Port storage & handling Ocean freight Insurance charges Total Smelting Treatment Cu refining Au refining Ag refining Total Net Smelter Return Acid Revenue NSR Plus Acid Revenue Production costs Mining Process G&A Acid Lease Payment - Mining Total Royalty payment Net Smelter Return Stage 1 royalty Stage 2 royalty Stage 3 royalty Net profits royalty Closure & salvage Closure costs Total Earnings Earnings before taxes, depreciation & amortization Deductible interest Earnings before taxes, depreciation & amortization Taxation Earnings before taxes Deductions Depreciations Total Deductions Net taxable income Labour Profit Sharing Tax Taxable Income subject to Corporate Tax Corporate income tax Total tax paid Net earnings Capital expenditure Construction capital Sustaining capital Working capital Debt drawdown Debt repayment Total Net project cash flow Pre-Tax After tax Life of Mine 2012 1 -3 2013 2 -2 2014 3 -1 2015 4 1 2016 5 2 2017 6 3 2018 7 4 2019 8 5 2020 9 6 2021 10 7 2022 11 8 2023 12 9 2024 13 10 2025 14 11 2026 15 12 2027 16 13 2028 17 14 2029 18 15 2030 19 16 2031 20 17 2032 21 18 2033 22 19 2034 23 20 2035 24 21 2036 25 22
US$/oz US$/oz US$/lb Kozs Kozs Klbs US$000 US$000 US$000 US$000 791 18,014 5,555,529 832,910 308,989 13,289,674 14,431,573 357,437 (192,019) (110,274) (457,188) (21,647) (781,128)
1,159 20.96 2.92 37.70 976.39 253,064 43,688 20,461 739,664 803,814 2.5% (8,747) (5,023) (20,826) (1,206) (35,801)
1,132 20.00 2.77 52.03 1,069.81 336,744 58,910 21,399 932,530 1,012,839
1,111 19.25 2.65 47.74 918.38 295,653 53,045 17,676 784,407 855,127
1,094 18.64 2.56 36.18 977.62 259,975 39,585 18,224 666,692 724,501
1,080 18.15 2.50 43.39 1,015.86 304,860 46,867 18,441 760,981 826,288
1,069 17.76 2.44 44.25 983.14 281,809 47,302 17,456 688,536 753,294
1,060 17.43 2.40 46.33 912.68 282,018 49,105 15,909 677,430 742,443
1,052 17.17 2.37 46.03 838.83 273,986 48,432 14,399 649,317 712,148
1,046 16.95 2.34 41.12 759.61 247,269 43,018 12,872 579,758 635,648
1,041 16.76 2.32 30.39 663.46 200,857 31,629 11,122 466,952 509,703
1,015 15.85 2.25 23.46 691.29 196,419 23,815 10,957 441,942 476,714
1,015 15.85 2.25 29.53 799.24 237,031 29,972 12,668 533,320 575,960
1,015 15.85 2.25 33.77 849.12 260,894 34,272 13,459 587,011 634,741
1,015 15.85 2.25 38.50 862.40 275,006 39,082 13,669 618,764 671,515
1,015 15.85 2.25 40.79 882.95 279,781 41,404 13,995 629,507 684,906
1,015 15.85 2.25 39.06 815.92 269,536 39,645 12,932 606,456 659,033
1,015 15.85 2.25 27.23 634.23 208,298 27,638 10,052 468,670 506,360
1,015 15.85 2.25 21.58 648.94 193,218 21,901 10,286 434,740 466,927
1,015 15.85 2.25 26.41 753.14 235,688 26,807 11,937 530,298 569,042
1,015 15.85 2.25 37.16 880.13 287,149 37,717 13,950 646,086 697,753
1,015 15.85 2.25 40.68 880.15 309,493 41,286 13,950 696,360 751,597
1,015 15.85 2.25 7.68 200.25 66,780 7,790 3,174 150,255 161,220
US$000 US$000 US$000 US$000 US$000
(11,639) (6,684) (27,712) (1,519) (47,555)
(10,219) (5,869) (24,331) (1,283) (41,701)
(8,986) (5,160) (21,394) (1,087) (36,627)
(10,537) (6,051) (25,088) (1,239) (42,916)
(9,740) (5,594) (23,191) (1,130) (39,655)
(9,748) (5,598) (23,208) (1,114) (39,667)
(9,470) (5,438) (22,547) (1,068) (38,524)
(8,547) (4,908) (20,349) (953) (34,757)
(6,942) (3,987) (16,529) (765) (28,223)
(6,789) (3,899) (16,164) (715) (27,567)
(8,193) (4,705) (19,506) (864) (33,268)
(9,017) (5,179) (21,470) (952) (36,618)
(9,505) (5,459) (22,631) (1,007) (38,603)
(9,670) (5,553) (23,024) (1,027) (39,275)
(9,316) (5,350) (22,181) (989) (37,836)
(7,200) (4,135) (17,142) (760) (29,235)
(6,678) (3,835) (15,901) (700) (27,115)
(8,146) (4,678) (19,396) (854) (33,074)
(9,925) (5,700) (23,631) (1,047) (40,302)
(10,697) (6,143) (25,470) (1,127) (43,437)
(2,308) (1,326) (5,496) (242) (9,371)
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
(640,244) (416,665) (3,955) (7,205) (1,068,069) 12,582,376 269,306 12,851,683
(29,164) (18,980) (188) (391) (48,723) 719,289 12,267 731,557
(38,808) (25,256) (260) (428) (64,752) 900,533 16,324 916,856
(34,072) (22,174) (239) (367) (56,852) 756,574 14,332 770,906
(29,961) (19,498) (181) (391) (50,031) 637,843 12,602 650,445
(35,133) (22,865) (217) (406) (58,621) 724,751 14,778 739,529
(32,477) (21,136) (221) (393) (54,227) 659,412 13,661 673,073
(32,501) (21,151) (232) (365) (54,249) 648,527 13,671 662,198
(31,575) (20,549) (230) (336) (52,690) 620,934 13,282 634,215
(28,496) (18,545) (206) (304) (47,551) 553,340 11,986 565,327
(23,148) (15,064) (152) (265) (38,629) 442,851 9,737 452,587
(22,636) (14,731) (117) (277) (37,761) 411,386 9,521 420,907
(27,317) (17,777) (148) (320) (45,561) 497,131 11,490 508,621
(30,067) (19,567) (169) (340) (50,142) 547,981 12,647 560,627
(31,693) (20,625) (193) (345) (52,856) 580,057 13,331 593,388
(32,243) (20,984) (204) (353) (53,784) 591,847 13,562 605,409
(31,063) (20,215) (195) (326) (51,799) 569,397 13,066 582,463
(24,005) (15,622) (136) (254) (40,017) 437,108 10,097 447,205
(22,267) (14,491) (108) (260) (37,126) 402,686 9,366 412,052
(27,162) (17,677) (132) (301) (45,272) 490,696 11,425 502,121
(33,092) (21,536) (186) (352) (55,166) 602,284 13,920 616,204
(35,667) (23,212) (203) (352) (59,435) 648,724 15,003 663,727
(7,696) (5,009) (38) (80) (12,823) 139,025 3,237 142,263
US$000 US$000 US$000 US$000 US$000 US$000
(1,995,248) (2,265,380) (311,342) (62,838) (316,092) (4,950,902)
(94,354) (86,296) (11,860) (2,862) (31,842) (227,214)
(116,781) (107,870) (14,825) (3,809) (38,104) (281,389)
(98,501) (107,869) (14,825) (3,344) (37,069) (261,608)
(98,888) (107,869) (14,825) (2,941) (37,051) (261,574)
(114,731) (107,869) (14,825) (3,448) (37,051) (277,925)
(100,459) (107,869) (14,825) (3,188) (9,054) (235,394)
(101,503) (107,869) (14,825) (3,190) (682) (228,070)
(113,388) (107,869) (14,825) (3,099) (854) (240,035)
(101,481) (107,869) (14,825) (2,797) (1,171) (228,143)
(94,191) (107,869) (14,825) (2,272) (2,003) (221,161)
(95,615) (107,869) (14,825) (2,222) (2,325) (222,856)
(91,220) (107,869) (14,825) (2,681) (1,928) (218,524)
(88,101) (107,869) (14,825) (2,951) (2,330) (216,077)
(88,610) (107,869) (14,825) (3,111) (21,271) (235,686)
(106,956) (107,869) (14,825) (3,165) (21,904) (254,720)
(96,632) (107,869) (14,825) (3,049) (21,843) (244,218)
(83,925) (107,869) (14,825) (2,356) (21,674) (230,649)
(71,582) (107,869) (14,825) (2,185) (21,522) (217,984)
(69,094) (107,869) (14,825) (2,666) (4,405) (198,860)
(68,598) (107,869) (14,825) (3,248) (1,143) (195,683)
(72,446) (107,869) (14,825) (3,501) (433) (199,074)
(28,192) (21,695) (2,982) (755) (433) (54,057)
US$000 US$000 US$000 US$000 US$000
12,582,376 (125,824) (112,624) (99,424) (337,871)
719,289 (7,193) (6,593) (5,993) (19,779)
900,533 (9,005) (8,405) (7,805) (25,216)
756,574 (7,566) (6,966) (6,366) (20,897)
637,843 (6,378) (5,778) (5,178) (17,335)
724,751 (7,248) (6,648) (6,048) (19,943)
659,412 (6,594) (5,994) (5,394) (17,982)
648,527 (6,485) (5,885) (5,285) (17,656)
620,934 (6,209) (5,609) (5,009) (16,828)
553,340 (5,533) (4,933) (4,333) (14,800)
442,851 (4,429) (3,829) (3,229) (11,486)
411,386 (4,114) (3,514) (2,914) (10,542)
497,131 (4,971) (4,371) (3,771) (13,114)
547,981 (5,480) (4,880) (4,280) (14,639)
580,057 (5,801) (5,201) (4,601) (15,602)
591,847 (5,918) (5,318) (4,718) (15,955)
569,397 (5,694) (5,094) (4,494) (15,282)
437,108 (4,371) (3,771) (3,171) (11,313)
402,686 (4,027) (3,427) (2,827) (10,281)
490,696 (4,907) (4,307) (3,707) (12,921)
602,284 (6,023) (5,423) (4,823) (16,269)
648,724 (6,487) (5,887) (5,287) (17,662)
139,025 (1,390) (790) (190) (2,371)
US$000 US$000
(57,650) (57,650)
(57,650) (57,650)
US$000 US$000 US$000
7,505,260 7,505,260
484,564 484,564
610,251 610,251
488,402 488,402
371,536 371,536
441,662 441,662
419,696 419,696
416,472 416,472
377,352 377,352
322,383 322,383
219,941 219,941
187,509 187,509
276,983 276,983
329,912 329,912
342,100 342,100
334,734 334,734
322,963 322,963
205,243 205,243
183,787 183,787
290,340 290,340
404,252 404,252
446,991 446,991
28,185 28,185
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
7,505,260 (1,487,717) 6,017,543 (481,403) 5,536,139 (1,660,842) (2,142,245) 5,363,014
484,564 (200,436) (200,436) 284,128 (22,730) 261,398 (78,419) (101,150) 383,415
610,251 (139,740) (139,740) 470,511 (37,641) 432,870 (129,861) (167,502) 442,749
488,402 (140,126) (140,126) 348,275 (27,862) 320,413 (96,124) (123,986) 364,416
371,536 (140,216) (140,216) 231,320 (18,506) 212,814 (63,844) (82,350) 289,186
441,662 (102,619) (102,619) 339,042 (27,123) 311,919 (93,576) (120,699) 320,963
419,696 (46,785) (46,785) 372,911 (29,833) 343,078 (102,923) (132,756) 286,940
416,472 (45,656) (45,656) 370,816 (29,665) 341,150 (102,345) (132,010) 284,461
377,352 (45,871) (45,871) 331,481 (26,518) 304,963 (91,489) (118,007) 259,345
322,383 (46,107) (46,107) 276,276 (22,102) 254,174 (76,252) (98,354) 224,029
219,941 (45,743) (45,743) 174,198 (13,936) 160,263 (48,079) (62,015) 157,926
187,509 (45,430) (45,430) 142,079 (11,366) 130,713 (39,214) (50,580) 136,929
276,983 (45,329) (45,329) 231,655 (18,532) 213,122 (63,937) (82,469) 194,514
329,912 (45,309) (45,309) 284,602 (22,768) 261,834 (78,550) (101,318) 228,593
342,100 (46,217) (46,217) 295,883 (23,671) 272,212 (81,664) (105,334) 236,766
334,734 (46,385) (46,385) 288,349 (23,068) 265,281 (79,584) (102,652) 232,082
322,963 (46,911) (46,911) 276,052 (22,084) 253,968 (76,190) (98,274) 224,689
205,243 (46,959) (46,959) 158,284 (12,663) 145,621 (43,686) (56,349) 148,894
183,787 (46,805) (46,805) 136,983 (10,959) 126,024 (37,807) (48,766) 135,022
290,340 (46,496) (46,496) 243,845 (19,508) 224,337 (67,301) (86,809) 203,532
404,252 (46,469) (46,469) 357,783 (28,623) 329,160 (98,748) (127,371) 276,881
446,991 (45,742) (45,742) 401,250 (32,100) 369,150 (110,745) (142,845) 304,147
28,185 (26,365) (26,365) 1,820 (146) 1,675 (502) (648) 27,537
US$000 US$000 US$000 US$000 US$000 US$000
(1,437,159) (70,438) 0 0 0 (1,507,597)
(606,908)
(818,909)
(11,342) (65,754) (7,460) (16,482) (1,977) 6,409 (4,746) 1,277 (4,453) (5,660) (5,804) 11,448 (1,975) 1,828 (1,722) (2,705) (861) 3,915 (2,499) 3,379 (4,191) (260) (1,865) (342) (19,217) (226) (3,358) (5,399) (5,770) (4,927) (4,089) 2,985 (451) 5,542 3,696 3,291 (1,013) (1,631) 60,628
(606,908)
(818,909)
(77,096)
(23,942)
4,431
(3,469)
(10,113)
5,643
(147)
(4,427)
3,054
880
(4,451)
(2,207)
(19,443)
(8,756)
(10,697)
(1,104)
5,092
3,696
3,291
(1,013)
(1,631)
60,628
US$000 US$000
5,997,662 3,855,417
(606,908) (606,908)
(818,909) (818,909)
407,468 306,319
586,310 418,808
492,833 368,847
368,067 285,717
431,549 310,850
425,340 292,583
416,324 284,314
372,925 254,917
325,437 227,083
220,821 158,807
183,059 132,478
274,776 192,307
310,469 209,150
333,344 228,010
324,037 221,385
321,859 223,585
210,334 153,985
187,484 138,718
293,632 206,823
403,239 275,869
445,360 302,515
88,813 88,165
Summary of Cash Flow

Cumulative net cash flow Undiscounted Net present value Discounted at 4% Discounted at 6% Discounted at 8% Discounted at 10% Discounted at 15% Internal rate of return Payback period US$000
Pre-Tax
5,997,662
After tax
3,855,417
4,500 4,000 3,500
Project Net Present Value (After Tax)

0% 4% 6% 8% 10% 15% 0% 5,998 3,395 2,589 1,983 1,521 763 3,855 2,040 1,481 1,063 746 231
US$000 Years
26.8% 2.9
18.8% 4.1
US$ Million
US$000 US$000 US$000 US$000 US$000
3,395,140 2,588,605 1,983,089 1,520,971 763,306
2,040,471 1,481,321 1,063,416 746,126 231,322
3,000 2,500
2,000
1,500 1,000 500
Previous results: Summary of Cash Flow

Cumulative net cash flow Undiscounted Net present value Discounted at 4% Discounted at 6% Discounted at 8% Discounted at 10% Discounted at 15% Internal rate of return Payback period US$000
Pre-Tax
5,649,010
After tax
3,575,069
0%
2%
4%
6%
8%
10%
12%
14%
16%
Discount Rate (%)
US$000 US$000 US$000 US$000 US$000 US$000 Years
3,182,681 2,414,132 1,835,905 1,394,074 669,592 25.2% 3.1
1,882,125 1,355,417 960,035 658,907 169,109 17.7% 4.4
8.4% 9.3% 10.8% 13.2% 36.8%
Page 16-7
Table 16-5: Cashflow Analysis for Four Cases

Case 3 Base Base Case Case Value Value Case 1 Owner Owner Operated Operated Value Value Case 2 Contract Contract Mining Mining Value Value Case 4 Equip. Equip. Lease Lease Value Value
Item Metal Prices Copper Gold Silver Pre-Tax IRR CNCF* NPV 8% NPV 10% Payback After Tax IRR CNCF* NPV 8% NPV 10% Payback
Unit
$/lb $/oz $/oz % $000,000 $000,000 $000,000 Years % $000,000 $000,000 $000,000 Years
2.25 1015 15.85 1 26.8 5,998 1,983 1,521 2.9 18.8 3,855 1,063 746 4.1
3.00 1015 15.85 1 37.2 9,823 3,520 2,796 2.1 26.5 6,319 2,053 1,567 3.0
2.25 1015 15.85 25.8 6,017 1,968 1,501 3.0 18.1 3,868 1,041 720 4.2
3.00 1015 15.85 35.8 9,842 3,504 2,776 2.3 25.5 6,331 2,031 1,541 3.1
2.25 1015 15.85 27.0 5,754 1,919 1,476 2.8 18.8 3,696 1,021 717 4.0
3.00 1015 15.85 37.8 9,579 3,456 2,751 2.1 26.7 6,162 2,011 1,538 2.9
2.25 1015 15.85 29.9 5,847 1,989 1,547 2.6 20.7 3,759 1,087 786 3.9
3.00 1015 15.85 42.0 9,672 3,525 2,822 1.9 29.6 6,222 2,077 1,607 2.7
*CNCF = cumulative net cashflow
Table 16-6: Results of Sensitivity Analysis for Base Case with NPV @ 8%
Factor
Exchange rate Capital expenditure Operating expenditure Metal price
-30%
932 1,323 1,312 (195)
-20%
932 1,193 1,185 182
Change in Factor -10% 0% 10%

932 1,062 1,059 557 932 932 932 932 932 802 806 1,307
20%
932 671 679 1,681
30%
932 541 552 2,056
Page 16-8
Figure 16-1: Graph of Sensitivity Analysis Results for Base Case

Candente - Sensitivity of NPV @ 8%
2,500
NPV @ 8% (US$ million)
2,000 1,500 1,000

Price
Capex
Opex
500 0 (500) -40% -30% -20% -10% 0% 10% 20% 30% 40% Change in Factor
Xrate
Page 16-9
CONTENTS 17.0 RISK AND OPPORTUNITIES ...............................................................................17-1 17.1 Summary...................................................................................................17-1 17.2 Risks .........................................................................................................17-1 17.2.1 High-Risk Items .............................................................................17-1 17.2.2 Medium-Risk Items ........................................................................17-4 17.2.3 Low-Level Risks ............................................................................17-5 17.2.4 Very Low Risk Items ......................................................................17-6 17.3 Opportunities.............................................................................................17-6 17.3.1 High-Level Opportunities ...............................................................17-6 17.3.2 Medium-Level Opportunities ..........................................................17-6 17.3.3 Low-Level Opportunities ................................................................17-6 17.3.4 Very Low Level Opportunities ........................................................17-8
TABLES
Table 17-1: Risk and Opportunities Classification ............................................................................ 17-2 Table 17-2: Caariaco Project Risks ................................................................................................ 17-3 Table 17-3: Caariaco Project Opportunities ................................................................................... 17-7
FIGURES
None
TOC i
17.0
17.1
RISK AND OPPORTUNITIES

Summary
This section summarizes the key risks and opportunities that have been identified during the course of the prefeasibility study for the Caariaco Norte project to date. Risk exposures are not static, and the evaluation will need to be updated as the project proceeds. The risks are ranked by priority in Section 17.2 and described in terms of areas that should be investigated further as the project continues into the feasibility and subsequent basic and detailed engineering phases. The risks were rated by factors (F), which were calculated as the product of probability (P) and impact (I). Each of these two categories was ranked from 1 to 5 for increasing likelihood and severity, respectively. For example: (P of 4) (I of 3) = F of 12. The highest risk rating possible would therefore be 25. Strategies and a proposed course of action were identified for each risk. The risk factors were then evaluated for probability and impact post-implementation of the proposed strategies or actions. For all risks identified thus far, the severities could be decreased to very low after implementing the proposed actions. The opportunities identified during the prefeasibility study to date are described in Section 17.3. Table 17-1 summarizes all identified risks and opportunities according to their probability and impact classification.
17.2
Risks
The identified risks are summarized in Table 17-2. Details for each risk are provided below, organized according to the risk classification shown in the table.
17.2.1
High-Risk Items
Geotechnical Design of +900 m Pit Highwall The current design is based on assessment of scoping level information, visual inspection of available core, and limited physical testing of available material. The data from the planned site investigations are considered to be key in increasing the understanding of the joint patterns and geotechnical complexities associated with the highwall (approximately 925 m high) and the sensitivity of the highwall slope to pit depressurization and rock mass strength. If future geotechnical investigations result in a change in the overall pit slope angles, then the stripping ratio and consequently project mining costs, could be affected considerably.
Page 17-1
Table 17-1: Risk and Opportunities Classification

5
P r o b a b i l i t y
3.3
3.4
3.2
2.2
3.11, 3.12, 3.13
3.19
3.7, 3.8, 3.9, 3.14
3.5, 3.10
2.4
2.18
2.11, 2.12
3.1, 3.17
3.6, 3.15, 3.16, 3.18
2.1, 2.6, 2.9, 2.14, 2.15, 2.16
2.13
1 -5 -4 -3 Opportunities -2 -1
2.3, 2.5, 2.10, 2.17
2.7
2.8
1 Impact
3 Threats
Priority Bands
Compound Opportunity Risk Score (Probability x Impact) Very Low Low Medium High Very High 0 to -5 -6 to -10 -11 to -15 -16 to -20 -21 to -25 Very Low Low Medium High Very High Compound Threat Risk Score (Probability x Impact) Very Low Low Medium High Very High 0 to 5 6 to 10 11 to 15 16 to 20 21 to 25 Very Low Low Medium High Very High
Probability 1 2 3 4 5 Very Low Low Medium High Very High % <10 10-30 30-50 50-70 >70 Opportunity -1 -2 -3 -4 -5
Impact Very Low Low Medium High Very High Threat 1 2 3 4 5
Page 17-2
Table 17-2: Caariaco Project Risks

Risk No. 2.1 2.2 2.3 Risk Rating Risk Description Naturally occuring land slides into diversion channel Dust load from COS Risk Owner P 4 4 I 3 2 2 Score 12 8 4 Classification Proposed Strategies / Actions Slope stability assessment for Feasibility Study. Possible rerun of tradeoff study for diversion channel vs tunnel option Determine whether the COS requires cover for dust control mitigation - arsenic content Minimize downtime by installing all reclaim piping and valves prior to shutdown of process and have a detail schedule/plan in place P 2 4 1 Risk Rating I 2 1 1 Score 4 4 1 Post-Action Classification Very Low Very Low Very Low
Geotechnical Process
Medium Low Very Low
2.4
2.5 2.6
2.7
2.8 2.9
2.10 2.11 2.12 2.13
2.14
2.15 2.16 2.17 2.18
Downtime during relocation of Reclaim Barges from Fresh Water Civil 2 pond to TMF The narrowness of the road will cause constructability issues during construction of the pipeline by restricting access to the site as the equipment necessary to install the pipeline will block the road for Owner 4 extended periods of time. Similarly, during operations, repair and maintenance on the pipelines will further restrict access to and from the plant site. The stockpile feed conveyor having Materials an inclination greater than 14 3 Handling degrees Geotechnical risk associated with a Geotechnical 4 +900m highwall The design of the main access road is based on low quality contour data possibly leading a less then optimal Civil 3 design with the risk of it not being feasible to construct in some sections. Obtaining permits for project Owner 2 Laydown has been taken up by the Roasting Plant. There are no other Construction/ 4 locations in the vacinity of the plant Operations to create laydown areas. Project delay due to market conditions driving delivery of long Construction 3 lead capital equipment Decrease in copper metal price Owner 3 Escalation in commodity pricing Owner 3 Port available for 50,000 DWT in Owner 3 Phase 2 Cyclone sand dam construction is dependent on availability of Geotechnical 3 sufficient sized material in the tailings slurry Definition of foundation conditions Geotechnical/Civ 3 for TMF and TMF embankment il ARD/ML potential of cyclone sands Geotechnical/Civ 3 used for TMF dam construction il Availability of borrow material for Geotechnical/Civ 3 TMF embankment il Eurpoean sourced capital is Owner 3 sensitive to exchange rate
Low
Schedule movements and prioritize road access requirements.
Very Low
2 4
6 16
Low High
Material tests to confirm whether conveying at greater than 14 degrees is suitable. Modify the conveyor geometry to reduce the inclination below 14 degrees. Complete geotechnical assessment of slope during Feasibility Study The route needs to be flown and a more accurate contour data set developed for design purposes. May need to look at alternate road alignments. Continue to work with Community Will need to manage supplies at a remote location and bring to site on an as needed basis Advance engineering and purchase of long lead equipment Market driven Market driven Continue to work with Lumina on port development Additional testwork to confirm availabiltiy of material in required particle size range Field investigations Testwork Field investigations Market driven
1 2
1 2
1 4
Very Low Very Low
12
Medium
Very Low
5 2
10 8
Low Low
1 2
5 2
5 4
Very Low Very Low
2 4 4 3
6 12 12 9
Low Medium Medium Low
1 3 3 2
1 4 4 3
1 12 12 6
Very Low Medium Medium Low
Low
Very Low
4 4 3 2
12 12 9 6
Medium Medium Low Low
2 2 1 3
2 2 1 2
4 4 1 6
Very Low Very Low Very Low Low
Page 17-3
17.2.2
Medium-Risk Items
Metal Price The project financials are most sensitive to metal prices and capital cost. In the current economic climate, metal pricing for copper and gold is strong and is expected to remain so into the initial years of production at Caariaco Norte. A significant decrease in copper price would affect the projected cash flow for the project. Escalation in Commodity Pricing In line with the sensitivity to metal prices and capital cost, significant increases in commodity pricing are a risk in the current economic climate and would directly affect the project cash flow through capital and operating costs. Obtaining Permits for Project Many applications for permits will need to be filed to allow for timely execution of project work. Receipt of the necessary permits for project development will depend on the completion of an Environmental and Social Impact Assessment that is acceptable to the relevant regulatory agencies in Peru and the negotiation of surface access rights for the project area from the local community. A comprehensive ESIA for the Canariaco project is currently underway under the guidance of AMEC Earth and Environmental. During the prefeasibility phase, it has taken longer than Candente anticipated to negotiate drilling permits with the local community. While the community continues to support the project, the permit application has been delayed for more than six months. Other applications could potentially encounter similar delays. By continuing to work closely with the local communities, Candente is confident that this risk can be managed Main Access Road Routing The design of the main access road is based on lowquality contour data. This could lead to a less-than-optimum design with a risk that the road may not be constructible in some sections. Aerial or land reconnaissance followed by more detailed geotechnical investigations along the proposed road routing is recommended to decrease the risk in the design of this road. Landslide and Diversion Channel A naturally occurring landslide was observed to have taken place in the vicinity of the proposed diversion channel. The functionality of the channel may be at risk. Further assessment of the valley slopes will be required to assess the severity of this risk and whether it can be mitigated through regular maintenance of the channel. TMF Foundation Foundation conditions for the embankment and impoundment affect stability, seepage considerations, and geological risks to the impoundment. No sitespecific investigations have been carried out to date. ARD/ML Potential Cyclone Sand used for TMF Dam Construction The proposed pyrite flotation circuit will remove a large portion of the pyrite, thus reducing the ARD potential significantly. During future stages of design, additional geochemical evaluation will be necessary to determine if the product has residual ARD or metalsleaching potential at neutral pH.
Page 17-4
17.2.3
Low-Level Risks
Width of Tailings Line Access Road The tailings line access road has been designed with a single lane. Because the equipment necessary to install the pipeline will block the road for extended periods of time, the restricted width could block access to the site. Similarly, access to and from the plant site could be restricted during operation, repair, and maintenance of the pipeline. Use of the road will need to be scheduled and prioritized for vehicular access. Coarse Ore Stockpile and Dusting The open-air design of the coarse ore stockpile is typical of many operating mines however, it could result in non-compliant dust loading during dry periods. Dust suppression or a stockpile cover may be required. Stockpile Feed Conveyor Incline Angle The design incline angle of the stockpile feed conveyor is 14. Testwork is required to confirm that this angle is appropriate for this material. Delivery of Long-Lead Capital Equipment Market conditions may increase delivery schedules for long-lead capital equipment items. Equipment may need to be secured and purchased earlier than anticipated. Construction Laydown Area There is limited laydown area for construction purposes in the vicinity of the process plant. A suitable area nearby must be identified. Port Availability It has been assumed based on discussions with Lumina that the marine facilities to be developed by Lumina will be for its Phase 2 development, i.e., capacity for fully loaded vessel sizes of up to 50,000 dwt (instead of 33,000 dwt) and a berth in 15 m water depth. This should be confirmed in negotiations with Lumina, because acceptable berth availabilities for Candente will only be possible if the Phase 2 implementation is complete. Cyclone Sand Dam Construction The primary risk for construction of the TMF embankment with cyclone sands is that a very high proportion of cyclone underflow, around 80%, needs to be available as sand at all times. The cyclone product modelling is based on a hypothetical particle size distribution for the feed to the cyclones. Future stages of design need to verify that the required volume of underflow for raising of the tailings embankment is available throughout the constructed life of the embankment. If this is not the case, then it could be necessary to place additional borrowed material into the dam or possibly change to an alternative material for dam construction. Availability of Embankment Construction Materials A very large volume of fill material is required for the starter embankment. This could be a risk to cost and schedule if the borrow materials are not available close to the embankment site.
Page 17-5
Exchange Rate Capital expenditures for materials that may be sourced in Europe and consequently priced in Euros may be sensitive to exchange rates, which therefore represents some risk.
17.2.4
Very Low Risk Items

Relocation of Barges from Freshwater Reservoir to TMF The execution plan for the plant start-up includes relocation of the barge from the freshwater reservoir to the TMF. If not executed well, then start-up could be delayed.
17.3
Opportunities
The identified opportunities for the project are summarized in Table 17-3. These opportunities are discussed below in accordance with the classification shown in the table.
17.3.1
High-Level Opportunities
18 Month Mine Plan The mine plan for the first 18 months of operations should be optimized to maximize the IRR and reduce the project payback period.
17.3.2
Medium-Level Opportunities
Resource Estimate Additional drilling should be continued in the vicinity of Caariaco Norte with the objective of reclassifying Inferred resources to Indicated and/or Measured resources Additional Resources There is good potential to discover and delineate additional resources at the Caariaco Sur and Quebrada Verde targets near the Canariaco Norte deposit. Materials for Tailings Dam Construction A trade-off study including, among other factors, the available geochemical characterization data, was conducted to determine the method of tailings dam construction. A more in depth trade-off assessment is recommended to confirm the dam construction methodology that would incur the lowest life-of-mine costs.
17.3.3
Low-Level Opportunities
Leasing of Equipment The possibility of leasing equipment for the mine, mill, and electrical infrastructure should be evaluated to determine if it could improve the project economics.
Page 17-6
Table 17-3: Caariaco Project Opportunities

Opp No. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Opp Rating Opportunity Description Reduce costs by reducing target concentrate copper grade Optimize tonnage throughput based on ore hardness Optimize mineplan for first 18 months Leasing of equipment to reduce initial capital cost Reduction in roaster operating costs via optimization of arsenic feed grades Increased recoveries for low grade material. Reduce capital costs by removing final tailings thickener from flowsheet Reduce transport cost for concentrate by shipping dry Reduce capital cost - COS conveyor - wrap around motor Reduce the cost of the Stockpile Feed conveyor Additional drilling for resource estimate Additional resources Use waste rock for tailings dam construction Additional hydrologic data could reduce costs associated with designs to manage storm flow volumes Transport of tailings cyclone underflow by gravity Decrease tailings deposition volume TMF site location and management plan to be updated to confirm optimum economic selection Tailings Management Plan to be further developed and optimized Finance terms for lease equipment Opp Owner Process Process/Geolog y/Mining Geology/Mining Mining/Process/ Electrical Mining/Process Process Process P 2 4 4 4 3 2 3 I -3 -1 -4 -2 -1 -2 -2 Score -6 -4 -16 -8 -3 -4 -6 Classification Low Very Low High Low Very Low Very Low Low Proposed Strategies / Actions Testwork and tradeoff study in Feasibility Study Populate resource block model with ore hardness Domaining of supergene layer (20 m) representing the first 18 months of production Some work completed in PFS. Further investigation may be warranted. Evaluate arsenic distribution in deposit and optimize mine plan. Some ore may not require roasting. Testwork to be conducted for Feasibility Study Evaluate potential in a trade off study in Feasibility Study Tradeoff study of dry vs re-wetted calcined concentrate. Capital and operating costs for trucking from site to port Tradeoff study for wound rotor vs wrap around motor for COS feed conveyor during Feasibiltiy Study Split the stockpile feed conveyor into 2 conveyors. Having a short conveyor feeding the stockpile will reduce the the amount of structural steel required for the cantilivered head end due to much lower forces being transmitted by the conveyor. Increase classification of Inferred to Indicated and or Measured resources Discover and delineate additional resources at Canariaco Sur and Quebrada Verde Characterisation of waste rock for tailings dam construction Continue with data collection
3.8 3.9
Process Electrical
3 3
-2 -2
-6 -6
Low Low
3.10
Materials Handling
-1
-3
Very Low
3.11 3.12 3.13
Geology Geology Geotech/ Mining Civil
3 3 3
-4 -4 -4
-12 -12 -12
Medium Medium Medium
3.14
-2
-6
Low
3.15 3.16 3.17 3.18 3.19
Civil Civil Civil Civil Owner
2 2 2 2 3
-2 -2 -3 -2 -3
-4 -4 -6 -4 -9
Very Low Very Low Low Very Low Low
Evaluation of design Testwork of tailings and compaction rates and ulitimate settling density Update of tradeoff study Design development Discussion with vendors
Concentrate Copper Grade The target grade for the copper concentrate should be assessed to optimize the overall costs related to handling, transportation and treatment. Final Tailings Thickener A trade-off study is required to determine if overall tailings and reclaim water handling costs could be reduced by eliminating the tailings thickener from the process flowsheet.
Page 17-7
Concentrate Shipping Costs The potential to reduce overland shipping costs from the plant to the port by transporting dry instead of wet concentrate should be evaluated. Coarse Ore Conveyor Motor A trade-off study should be completed for a wound rotor motor versus a wrap-around motor on the coarse ore stockpile conveyor. Hydrologic Data More-accurate data and a longer period of record could help reduce design storm flows and volumes. TMF Site Location and Management Technology Although a trade-off study was carried out to select the preferred TMF site and tailings management technology as part of the preliminary prefeasibility work, it is recommended that these aspects continue to be reconsidered, given that this is a critical feature of the project. New technologies could also arise to make alternative tailings management schemes more favourable. Finance Terms The equipment finance terms used in the financial model are comparable to those used elsewhere in the industry for junior mining companies. As the project reaches a more advanced stage of development, and if a major mining company obtains a major share in Candente, then there may be potential to negotiate more-favourable lease terms.
17.3.4
Very Low Level Opportunities

Low-Grade Recoveries Testwork is required to evaluate process recoveries for lowgrade material. Further testwork and optimization of process parameters could result in higher recoveries. Concentrate Roasting Requirements The arsenic distribution in the resource should be evaluated in more detail and optimized in the mine plan to reduce costs associated with roasting. Ore Hardness The mill tonnage throughput should be optimized through an ore hardness model in the block model. Stockpile Feed Conveyor A trade-off study should be completed to evaluate a single stockpile feed conveyor versus splitting it into two sections. A short conveyor would the amount of structural steel required for the cantilevered head by transmitting lower forces to the structure. Transport of Tailings Cyclone Underflow The possibility of transporting diluted tailings underflow from the cyclone plant to the TMF by gravity alone should be investigated to save on pumping costs; this could, however, be offset by additional costs for higher reclaim pumping.
Page 17-8
Tailings Deposition Volume Based on more detailed tailings deposition modelling, it might be possible to store the tailings more efficiently and reduce the height of the final embankment. Tailings Management Plan Evaluation of the tailings management system and cyclone sand embankment raising system as a whole could result in operational and cost savings. This could include alternative pumping and piping arrangements, or varying the method of tailings sand placement and compaction at the tailings embankment.
Page 17-9
CONTENTS 18.0 CONCLUSIONS ...................................................................................................18-1
TOC i
18.0
CONCLUSIONS
AMEC has applied industry-standard mining, process design, and construction methods and economic evaluation practices in this assessment of the Caariaco Norte project. Sufficient and representative samples and information were available to estimate a mineral resource, conduct metallurgical testing, and complete this prefeasibility study progress report. Sufficient work has been undertaken on the permitting and environmental aspects of the project to gain an understanding of the regulatory requirements that will need to be met to construct, operate, and close the mine. After the currently proposed pit is mined, the Caariaco Norte deposit will still contain resources, particularly at depth. In this study, the Whittle optimization analysis and subsequent mine design were based on a copper price of $2.25/lb. If a higher copper price were used, then the optimal Whittle shell could be expected to expand, and the total mill feed and mine life would increase. The Caariaco Sur deposit has been interpreted previously to contain a potential resource, but limited exploration drilling has been carried out to date. Considering preliminary indications that Caariaco Sur material contains minimal arsenic, it represents an exploration target that could make ore blending an option and potentially eliminate some of the arsenic mitigation requirements currently included in this study. The process plant, as designed, will handle 95,000 t/d through a typical crushing and twostage grinding circuit. The primary flotation circuit will produce a bulk concentrate that will be reground and upgraded in a three-stage cleaner circuit. The results of ongoing metallurgical testwork indicate that the ore responds positively to the typical grinding and conventional flotation methodologies for such deposits. In this study, AMEC has begun optimizing a concentrator flowsheet that appears to be viable with respect to the known mineralization of the deposit. The Outotec partial roast process has been confirmed to reduce the levels of impurities in the concentrate to below smelter penalty limits and will produce a saleable concentrate throughout the mine life. Based on the additional data, updated knowledge, and refined assumptions at this stage of study, the results show that the project achieves a 18.8% post-tax IRR at a long term copper price of $2.25/lb. The copper price required to produce a breakeven cash flow (discounted at 8% and post-tax) is $1.75/lb based on a flat copper price and flat prices of $1,015/oz Au and $15.85/oz Ag. The sensitivity analyses show that the project is most sensitive to copper price, followed by grade, capital cost, and operating cost, in that order. The project is very sensitive to metal prices and to be economic requires a copper price above $2.00/lb, depending on the hurdle rate and assuming none of the other opportunities for economic improvement are realized. The project may permit the hedging of metal prices to mitigate metal price risks.
Page 18-1
AMEC recommends that, should Candente management deem the economic possibilities to be worth pursuing, they proceed with information-gathering to advance the project to a feasibility study level. Upon performing the necessary sampling and testwork, a feasibility study could improve the construction and operational design, scheduling, costing, and economic analysis.
Page 18-2
CONTENTS 19.0 RECOMMENDATIONS.........................................................................................19-1 19.1 General .....................................................................................................19-1 19.2 Recommendations for Feasibility Study ....................................................19-1 19.3 Recommendations from Progress Report..................................................19-2 19.3.1 Geology....................................................................................19-2 19.3.2 Mining ......................................................................................19-3 19.3.3 Metallurgy ................................................................................19-4 19.3.4 Tailings Management Facility ...................................................19-5 19.3.5 Infrastructure ............................................................................19-6 19.3.6 Surface Water Management .....................................................19-6 19.3.7 Environmental Considerations ..................................................19-7 19.3.8 Execution Plan .........................................................................19-7 19.3.9 Marketing .................................................................................19-7 19.3.10 Financial Evaluation .................................................................19-8
TOC i
19.0
19.1
RECOMMENDATIONS
General
Typical of most mining ventures, a large number of risks and opportunities could affect the outcome of the Caariaco Norte project. Many of these risks and opportunities are based on the current level of scientific information, (such as drilling and testwork results), or lack of control over external drivers (metal price, exchange rates). Higher-level engineering studies are therefore recommended to reduce and manage the risks and to refine the opportunities. General recommendations include reassessing the mine plan to see if increasing the strip ratio, for example, could extend the life of the mine, assumed for the current study to be 21 years, and proceeding with further confirmation testwork of the process flowsheet during the variability program planned for the next phase of study. Further environmental evaluation is also recommended. Specifically, considering the potential for air emissions associated with the roaster operation, a program of air monitoring should be initiated to establish baseline conditions at the project site. It is also recommended that a study be undertaken to determine the potential project development impacts and should include socioeconomic assessments of any potential relocation requirements.
19.2
Recommendations for Feasibility Study

Following are the main recommendations for the completion of a feasibility study: Site investigations, including drilling, test pitting, packer tests, and seismic lines to provide additional samples and information for: geotechnical and structural characterization hydrological mapping increased definition of the mineral resource waste rock characterization and metallurgical variability testwork Six-month program estimated to cost $4 million. Metallurgical and mineral processing tests should include, but not be limited to: characterization of mineralization in various parts of the deposit further crushing and milling characterization optimization of flotation recovery and reagent use confirmation of current processing assumptions such as concentrate thickening and filtration rates confirmation testing of acid production quantities
Page 19-1
further testing of the behaviour of arsenic mineralization in flotation further characterization of mill feed variability confirmation testing of arsenic reduction in concentrate to reflect deposit variability Eight-month program estimated to cost $1.0 million. ML/ARD testing and development of a PAG/non-PAG rock model Six-month program estimated to cost $0.25 million Pursuit of environment assessment and permitting. Estimated cost $2 million. Conduct a feasibility study. Estimated cost $2.5 million.
19.3
Recommendations from Progress Report

Recommendations presented in the report are summarized below by area.
19.3.1
Geology
Eastwest oriented, 100 m spaced vertical sections for alteration types and intensities were prepared by Candente. These were simplified by AMEC, and the resulting bench plan polygons were extended beyond the limits of the available drill hole information to cover the block model extents. AMEC recommends that a full review of the alteration interpretation be completed on vertical sections reconciled to bench plans for the next level of study. Copper mineralization at Caariaco Norte is related to porphyry intrusions, breccias, and potassic, propylitic, phyllic, argillic, and advanced argillic alteration; however, the limits of mineralization in the deposit are not well known. AMEC recommends building a mineral zonation model for the next phase of study. A combination of lithology, alteration, and mineral zones should provide more robust support for the mineralized envelope and the definition of grade estimation domains. Topographic contour limits were based on a photogrammetric interpretation undertaken on aerial photographs accurate to 1 m (x, y, z). Errors noted in the digital terrain model (DTM) by SRK (2009) were surveyed. These points were used in conjunction with the original topographic data to minimize the differences found. Although AMEC did not find a constant elevation difference between the surveyed collars and the DTM, AMEC is of the opinion that further investigation is required for the next level of study to provide the precision necessary for earth-movement estimates.
Page 19-2
From the analysis of cumulative distribution plots, AMEC defined a threshold of 250 ppm As for low- and high-grade arsenic populations relative to this deposit. By splitting the data, AMEC reduced the global CV from 1.7 to 0.7 and 1.1 for low- and high-grade samples, respectively. Arsenic values (>400 ppm) are concentrated in the northwest and south-centre parts of the deposit, and AMEC could not clearly define domains based on lithology, alteration, or a combination of both. AMEC recommends that once the mineralogical model has been constructed, the arsenic distribution should be evaluated along the interpreted units. AMEC assigned density values to blocks based upon the lithological codes. In AMECs opinion, these density values are reasonable for use in mineral resource estimation at this preliminary level of study, but recommends executing a continuous program of specific gravity determinations from core samples using preferably the same laboratory and determination procedures. Because the lateral extents of the lithological interpretations are not fully defined by drill data in some areas of the deposit, AMEC expanded the interpretation beyond the limits of the available drill hole information to cover the block model extents. Although AMEC considers such extrapolation to be reasonable, additional drilling should be performed to increase the level of confidence of the lithological interpretation in these areas.
19.3.2
Mining
A single elongated waste rock management facility (WRMF) will be developed adjacent to the pit, extending along the valley. Bottom-up methods will be used for construction. Preliminary waste rock characterization suggests that potentially acid generating (PAG) rock will be present, and so encapsulation storage methods may be required. More rock geochemistry information is required to develop a waste rock characterization block model and plan for handling these materials. This work is recommended for the next phase of study. To determine potential dewatering requirements, the bedrock has been divided into three regimes. The upper regime, generally less than 100 m deep, could be dewatered with vertical wells if the hydraulic conductivities were high enough; this should be confirmed moving into the next phase of the study. For the purpose of this progress study, a mine plan was generated using LG pit shells adjusted by minimum mining width. The next iteration of mine planning will require pit phase designs that consider pioneering access to upper benches, internal ramp access, minimum mining widths, and depressurizing and dewatering requirements. During the next iteration of mine planning, AMEC recommends that cutoff optimization be performed in conjunction with the use of a more-detailed shell selection methodology. Although the proposed site layout and topography do not lend themselves to the space required for a substantial low-grade stockpile, a cutoff profile
Page 19-3
featuring elevated cutoffs in the early years could still improve project value without stockpiling. Cutoff optimization can provide economic benefits with or without stockpiling low-grade material. Both approaches should be evaluated to establish the value to the project of a low-grade stockpile. If the value sufficiently exceeds the cost of displacing waste rock storage to make the space for the stockpile, then it should be incorporated into the plan. A site investigation program has been proposed and planned during the prefeasbility study, but not yet conducted, to support geotechnical pit design at a prefeasibility level. The data from the site investigation are considered to be key in understanding the joint patterns and geotechnical complexities associated with the highwall (approximately 925 m high) and the sensitivity of the highwall slope to pit depressurization and rock mass strength. It is recommended that this program be completed to further the development of the open pit geotechnical design.
19.3.3
Metallurgy
The roasting tests show that the expected arsenic content will normally result in a calcine with a residual arsenic content of 0.05% to 0.2% unless calcium is present either in the gangue or from the reagent systems. The ACL and ACS calcines produced a concentrate that would not incur a smelter penaltyor, if so, it would be minor. The ACP calcine, did not perform as expected and contained a level of arsenic that would incur a penalty. This may be due to the presence of excess lime used for pH control in the cleaning circuit. It may be necessary to examine this issue in additional work by determining ways to either reduce lime levels in the plant (e.g., pre-roast concentrate washing), blend with other concentrates, or treat the concentrate further. Given that the results for the three composites were weighted equally, further definition of the distribution of these sample types and their representation in the LOM plan is recommended. This can be achieved through the variability flotation testwork program currently planned for the next phase of work. The unoptimized cleaner flotation results indicate that the cleaning requires a high pH level of approximately 12 to produce reasonable copper concentrate grades. In addition, the mixed reagent did not perform as well as the sole use of A3894. The mixture was a particular disadvantage for the ACP material and also slightly worse for ACS but fairly similar for ACL. Subsequent analysis of the testwork indicated that collector was not added properly in cleaning. At the time of reporting, mineralogical and size analysis was underway to further investigate the cause of the cleaning seen with the mixed reagent suite. Although there will be a compensating effect in the impurity roasting step, which will see an uplift in final copper concentrate grade suitable for sale, it is recommended that more material be obtained for a series of locked-cycle tests to examine this aspect in more detail.
Page 19-4
It is recommended that further composite preparation for testing of the partial roasting process be correlated to the mine plan so that the results would be more representative of what will be processed through the LOM. Further testwork is required to define the variability of the ore characteristics and to develop the information needed to support process design criteria and variability responses for use in the feasibility study.
19.3.4

The starter embankment will have a maximum height of 105 m (measured vertically at the embankment centreline) and contain a total volume of 12.5 Mm3. It is recommended that the starter embankment position and storage requirements be reassessed moving in the next phase of work to optimize the design. The design objective for the TMF is to keep the PAG tailings within the TMF impoundment saturated at all times. To achieve this, the PAG tailings will be deposited subaqueously and flooded with a minimum 2 m of water cover. At this time it is uncertain when the water quality in the TMF will be acceptable for discharge. Delaying discharge, i.e., holding excess water above the minimum requirement of 2 m, will result in the build-up of a surplus of water within the impoundment. The water quality and excess water discharge schedule should be re-evaluated in the next phase of work. The proposed seepage collection (SC) embankment design includes a compacted earthfill / rockfill embankment with filter / transition zones and a low-permeability, bituminous geomembrane on the upstream face. This is based on similar embankment designs previously permitted and constructed in Peru. Other alternatives such as the following should be considered during the next phase of work: low-permeability core soil (clay-core) embankments with rockfill shells clay liner on the upstream face alternative geomembrane materials. Trade-off studies should be conducted to determine the most appropriate design, considering the availability of local borrow materials and the costs to supply and install synthetic and/or imported materials. Approximately 80% of the underflow tailings will need to be available for placement at the tailings embankment at all times during raise construction to maintain adequate storage and freeboard. This level of availability must be confirmed during subsequent stages of design, when additional information on anticipated tailings particle size distribution would be available. In the event that the dam raising schedule cannot be fully met using cyclone underflow tailings, it could be necessary to augment the dam fill with earthfill / rockfill material.
Page 19-5
Geotechnical drilling and test pitting is required at the embankment sites. The work should include: drill sampling of the soil units for visual classification and geotechnical laboratory testing bedrock coring to define the bedrock geology and any problematic bedrock such as limestone or weak sedimentary rock structures such as claystones angling some of the boreholes extended into bedrock to intercept any sub-vertical geologic structure that may control the secondary hydraulic conductivity of the bedrock, including potential faulting in the valley bottom that may control the valley alignment packer permeability testing within the bedrock to obtain a profile of hydraulic conductivity versus depth in the valley bottom and on the abutments installing piezometers and groundwater monitoring wells in select boreholes to support baseline studies. The use of geophysical survey methods such as seismic refraction along and across the dam axes is recommended to calibrate and extend borehole information.
19.3.5
Infrastructure
The route of the access road to site will be reviewed and optimized once moreaccurate contour data are obtained during the feasibility study. Following this phase, a road reconnaissance field trip will be recommended, followed by a geotechnical site investigation to confirm the route.
19.3.6
Surface Water Management

Potential evapo-transpiration data from the Incahuasi station were used in conjunction with the project site precipitation data to determine the mean annual and monthly runoff distribution for the project site. It is recommended that hydrometric stations be installed to measure surface water flows at the project site. Mean annual precipitation at or the project site (rainfall only) is estimated to be 1,025 mm. This estimate is derived from monthly precipitation data for the El Limon station, adjusted for altitude by a correlation factor of 2.9 based on the limited project site precipitation data available at this time. The correlation factor should be reviewed as more information is acquired from the site climate monitoring station. The 10-year period of record for the El Limon station is a limited time frame for performing a frequency analysis, and inaccuracies can be expected for longer return periods. The frequency analysis should therefore be revisited when more information becomes available for both the EI Limon station and the project site.
Page 19-6
19.3.7
Environmental Considerations
Historical data from the Ro Caariaco hydrometric station are available for a 31-year period. Four hydrological assessments have been completed to date. Further data will be acquired during the next phase of the study. Twenty-three protected mammal species have been recorded within the greater project footprint area. Candente plans to commission a relocation assessment for endangered and protected mammals as part of the next phase of study.
19.3.8
Execution Plan
To meet the target commissioning date of October 2014, it is recommended that long-lead procurement start in January 2012. The ports of Callao and Paita in Peru are considered possible points of delivery for construction materials. The main highway, Peru Highway 1, which runs parallel to the coast, connects both ports with Chiclayo, the nearest major city to Caariaco Norte. . From Chiclayo, the road route to the mine follows a paved, Highway 1B north through Motupe until it intersects with Highway 3N, the Corral Quemado Road, just south of the town of Olmos. After passing through La Pilca, the Corral Quemado Road climbs along a series of ridges before descending to follow the river valley. Grades along the route are reported to be steep in places and should be surveyed to ensure they do not exceed the permissible limits for heavy-haul transport.
19.3.9
Marketing
NSA has not contacted any smelters to specifically discuss the marketability of the Caariaco Norte concentrates. As the project progresses through the next phase of study, it is recommended that some discussions be held with smelters to discuss the acceptability of the proposed calcine from the Caariaco project and associated treatment and refining charges. For the purpose of this progress report, AMEC used a long-term acid selling price of $90/t based on preliminary discussions with CMC and NSA in October 2010. A more detailed market study for domestic and export acid markets is recommended for the feasibility study. When reviewing logistics related to the export market, the main acid terminals in Peru that service export volumes from Cajamaquilla and Ilo are in the south, at Pisco and Ilo. While it is possible to deliver by truck to the Pisco facility, the distance is considerable. Investigation of possible terminal installations in the north should be reviewed and could be tied to planned concentrate port facilities.
Page 19-7
19.3.10
Financial Evaluation
Various tax allowances are granted by the Peruvian Government, including one on capital expenditure that benefits the local communities. In AMECs opinion, Candente should engage a suitably qualified and experienced tax professional during the next phase of the project to investigate this in depth. Indicative financing terms were received from vendors, and average lease terms were applied to all the leased equipment. It is suggested that detailed lease terms be applied in the financial model for the next level of study to assess possible opportunities to improve the project returns.
Page 19-8

Canariaco PFS

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Canariaco PFS

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Caariaco Norte Copper Project Pre-Feasibility Study Progress Report

CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

Project No.: 165270 11 March 2011

CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

Project No.: 165270 11 March 2011

CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

8.0 9.0 10.0 11.0 12.0

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Executive Summary TOC i

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CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

EXECUTIVE SUMMARY 1.0

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CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

Project Background and History

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CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

Property Location, Description, and Access

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CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

Caariaco Concessions held by Candente Copper Corp. (as of 29 October 2010)

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CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

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CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

Geology and Mineral Resources

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CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

Tonnage Mt 406.6 596.5 1,003.0 293.3

Cu % 0.44 0.38 0.40 0.33

Au g/t 0.07 0.06 0.06 0.05

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CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

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CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

Mine Plan and Production

Reference Mine Operating Costs by Unit Operation

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Mine Production Schedule

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CANDENTE COPPER CORP. CAARIACO NORTE PROJECT PREFEASIBILITY PROGRESS REPORT

Base Case Pit Optimization Volumetric Results