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Gary H. Giroux, P. Eng., Giroux Consultants Ltd.
James H Gray, P. Eng., Moose Mountain Technical Services
Mark E. Smith, P.E.., RRD International Corp.
.
6 December 2010
Diamond core drilling at La Viruela, Main Zone, La India project, 2010 (photo by Cruz Paez).
Resource Geosciences de Mexico SA de CV
6 December 2010 Preliminary Economic Assessment, La India Gold Prospect, Municipio of Sahuaripa, Sonora,
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Table of Contents
Item Page
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6 December 2010 Preliminary Economic Assessment, La India Gold Prospect, Municipio of Sahuaripa, Sonora,
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8 History .................................................................................................................................... 64
11 Mineralization.......................................................................................................................... 78
11.1 General .......................................................................................................................... 78
11.2 North Zone, comprising Cieneguita, Española, Cochis, La India areas ............................ 78
11.3 Main Zone, comprising La Viruela, La Cruz, and Cerro de Oro ........................................ 82
11.4 Tarachi ........................................................................................................................... 87
11.5 Construction of Oretype Domain/Resource Model ........................................................... 89
12 Exploration.............................................................................................................................. 91
12.1 Geologic Mapping and Geochemical/Mineralogical Sampling .......................................... 91
12.2 Airborne Electromagnetic and Magnetic Survey. ............................................................. 92
12.2.1 Procedure .............................................................................................................. 92
12.2.2 Results ................................................................................................................... 92
12.3 Induced Polarization Survey. .......................................................................................... 96
12.3.1 Procedure .............................................................................................................. 96
12.4 Ground Magnetic Survey – 2009..................................................................................... 98
12.5 Ground Magnetic Survey - 2010 .................................................................................... 98
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6 December 2010 Preliminary Economic Assessment, La India Gold Prospect, Municipio of Sahuaripa, Sonora,
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List of Figures
Item Page
Figure 16.7. ALS Chemex assay results on chart showing certified mean and 2X standard deviation
range for standard E, OxH52................................................................................................. 124
Figure 16.8. ALS Chemex assay results on chart showing certified mean and 2X standard deviation
range for standard F, OxC58. ................................................................................................ 125
Figure 16.9. ALS Chemex assay results on chart showing certified mean and 2X standard deviation
range for standard G, OxH55. ............................................................................................... 125
Figure 16.10. ALS Chemex assay results on chart showing certified mean and 2X standard deviation
range for standard H, OxC752 .............................................................................................. 126
Figure 16.11. Percentile plot absolute relative differences of field, preparation, and lab duplicates.127
Figure 16.12. Percent relative difference Au assay, rig splits......................................................... 128
Figure 16.13. Percent relative difference Au assay, coarse reject split. ......................................... 129
Figure 16.14. Percent relative difference Au assay, pulp re-assays. .............................................. 130
Figure 16.15. Plot comparing regular fire assay and screen fire assay analytical results................ 131
Figure 16.16. Plot comparing Acme and ALS Chemex fire assay analytical results. ...................... 132
Figure 16.17. Percent relative difference, ACME check assay vs. ALS Chemex assay. ................. 132
Figure 16.18. Comparison Au assays, twin pair DDH07-28 and RC06-52. .................................... 133
Figure 16.19. Comparison Au assays, twin pair DDH07-27 and RC06-54. .................................... 134
Figure 16.20. Comparison Au assays, twin pair DDH08-55 and RC06-73. .................................... 134
Figure 16.21. Comparison Au assays, twin pair DDH07-19 and RC07-142.................................... 135
Figure 16.22. Comparison Au assays, twin pair DDH07-13 and RC06-89. .................................... 135
Figure 16.23. Comparison Au assays, twin pair DDH07-23 and RC06-94. .................................... 136
Figure 16.24. Comparison Au assays, twin pair DDH07-22 and RC06-69. .................................... 136
Figure 16.25. Comparison Au assays, twin pair DDH07-12 and RC06-44. .................................... 137
Figure 16.26. Comparison Au assays, twin pair DDH07-14 and RC07-106.................................... 137
Figure 16.27. Comparison Au assays, twin pair DDH07-20 and RC07-155.................................... 138
Figure 16.28. Comparison Au assays, twin pair DDH08-42 and RC06-45. .................................... 138
Figure 16.29. Comparison Au assays, twin pair DDH07-15 and RC07-161.................................... 139
Figure 16.30. Comparison Au assays, twin pair DDH08-54 and RC07-145.................................... 139
Figure 16.31. Comparison Au assays, twin pair DDH07-16 and RC07-147.................................... 140
Figure 16.32. Comparison Au assays, twin pair DDH07-17 and RC07-148.................................... 140
Figure 16.33. Comparison Au assays, twin pair DDH07-30 and RC07-113.................................... 141
Figure 16.34. Comparison Au assays, twin pair DDH07-18 and RC07-117.................................... 141
Figure 16.35. Comparison Au assays, twin pair DDH08-50 and RC07-119.................................... 142
Figure 16.36. Comparison Au assays, twin pair DDH07-24 and RC07-131.................................... 142
Figure 16.37. Comparison Au assays, twin pair DDH07-35 and RC08-98. .................................... 143
Figure 16.38. Comparison Au assays, twin pair DDH07-37 and RC06-60. .................................... 143
Figure 16.39. Comparison Au assays, twin pair DDH07-39 and RC07-101.................................... 144
Figure 16.40. Comparison Au assays, twin pair DDH07-57 and RC07-190.................................... 144
Figure 16.41. Comparison Au assays, twin pair DDH08-65 and RC07-193.................................... 145
Figure 16.42. Comparison Au assays, twin pair DDH08-64 and RC07-102.................................... 145
Figure 16.43. Comparison Au assays, triplet DDH08-58, RC07-103, and RC08-377. .................... 146
Figure 16.44. Comparison Au assays, twin pair DDH08-62 and RC06-58. .................................... 146
Figure 16.45. Comparison Au assays, twin pair DDH08-61 and RC08-289.................................... 147
Figure 16.46. Comparison Au assays, twin pair DDH08-63 and RC08-395.................................... 147
Figure 17.1. Adjacent exploration properties map. ........................................................................ 151
Figure 19.1. Histograms of sample weights................................................................................... 162
Figure 19.2. Cumulative frequency plot for gold based on core recovery. ...................................... 163
Figure 19.3. Location map showing mineralized zones and drill hole collars. ................................. 164
Figure 19.4. Scatter plot of Fire Assay Gold (x axis) vs. Screen Analysis Au (y axis). Data has been
log transformed. .................................................................................................................... 168
Figure 19.5. Lognormal cumulative frequency plot for Au in core and RC Main A Zone. ............... 169
Figure 19.6. Lognormal cumulative frequency plot for Au in core and RC Main B Zone. ................ 170
Figure 19.7. Lognormal cumulative frequency plot for Au in core and RC North Zone. .................. 170
Figure 19.8. Lognormal cumulative frequency plot for Au composites in Domain 3. ....................... 172
Figure 19.9. Lerchs-Grossman cases 1-12, includes pad liner cost, slope=45. .............................. 196
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6 December 2010 Preliminary Economic Assessment, La India Gold Prospect, Municipio of Sahuaripa, Sonora,
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Figure 19.10. Lerchs-Grossman cases 1-12, excludes pad liner cost, slope=45. ........................... 197
Figure 19.11. Base case LG shells ($900/oz Au) for La India Project. ........................................... 199
Figure 19.12. Main model West-East cross section at 3,176,095 North, looking North................... 200
Figure 19.13. Main model West-East cross section at 3,176,495 North, looking North................... 201
Figure 19.14. North model West-East cross section at 3,178,690 North, looking North................... 202
Figure 19.15. North model West-East cross section at 3,179,115 North, looking North.................. 203
Figure 21.1. Base case open pit LG shells, areas for value ranking............................................... 207
Figure 21.2. North design pits used for scheduling, sequenced by value ranking........................... 208
Figure 21.3. Main design pits used for scheduling, sequenced by value ranking............................ 209
Figure 21.4. Pit design slope parameters. ..................................................................................... 210
Figure 21.5. Design pits used for scheduling with roads, dumps, leach pad, and infrastructure...... 212
Figure 21.6. Final surface, post mining and waste dump reclamation. ........................................... 216
Figure 22.1. Process flowsheet. .................................................................................................... 228
Figure 23.1. Construction schedule............................................................................................... 244
Figure 25.1. La India Project cash flow sensitivity chart................................................................. 267
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6 December 2010 Preliminary Economic Assessment, La India Gold Prospect, Municipio of Sahuaripa, Sonora,
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List of Tables
Table Page
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List of Appendices
Appendix Page
Appendix A. Summary of significant drill intercepts, 2004 through 22 January 2010 reverse
circulation and diamond drilling. ............................................................................................ 285
Appendix B. Summary of significant drill intercepts, 2010 reverse circulation and diamond drilling,
Tarachi area, not part of resource estimate database.. .......................................................... 311
Appendix C. Summary of reverse circulation drilling where water was injected during drilling (“wet
drilling technique”): 2005, 2006, 2007, and 2008 reverse circulation drilling. .......................... 312
Appendix D. Summary of blank material certification assays. ........................................................ 316
Appendix E. RC and diamond core drillholes in resource estimate database, Main Zone: collar
location, orientation, and total depth summary table. ............................................................. 317
Appendix F. RC and diamond core drillholes in resource estimate database, North Zone: collar
location, orientation, and total depth summary table. ............................................................. 328
Appendix G. Semi-variograms, Main and North Zone oretype domains 1, 2, 3, 5, 6, 12, 17, & 18. . 335
Appendix H. Bulk density data information from Kappes Cassiday and Associates........................ 363
Appendix I. Period-end maps, pit, waste rock dump, and road status at end of production periods.367
3 EXECUTIVE SUMMARY
3.1 Introduction
The La India project comprises multiple volcanic rock hosted, high sulfidation,
epithermal gold systems. Grayd Resource Corporation has been actively exploring
the project since 2004. Work completed to date includes geologic mapping,
geochemical rock chip sampling, airborne geophysical surveys, ground geophysical
surveys, photogrammetric topographic mapping, diamond drilling, reverse circulation
drilling, baseline environmental surveys, and metallurgical testing. In 2007 Grayd
commissioned Giroux Consultants Ltd and Resource Geosciences de Mexico SA de
CV to provide an independent mineral resource estimate and CSA NI43-101
compliant Technical Report for the La India project. An Inferred mineral resource
estimate was published in February 2008. After completion of an additional 12,130
meters of reverse circulation drilling and an additional 2,640 meters of diamond core
drilling, in August 2008 Grayd commissioned Giroux and RGM to create an updated
CSA NI 43-101 compliant resource estimate for the project, which was published in
February 2009. Since that time and up until 22 January 2010 Grayd has completed
an additional 11,976 meters of reverse circulation drilling in 134 drillholes and an
additional 2,444 meters of diamond core drilling in 37 drillholes. In January 2010
Grayd commissioned Resource Geosciences de Mexico SA de CV and Giroux
Consultants Ltd to prepare an updated independent mineral resource estimate and
CSA43-101 compliant Technical Report for the La India project, which was
published in June 2010.
In July 2010, Grayd Resources commissioned the authors of this report to produce a
Preliminary Economic Assessment of the La India project, based upon the
Measured, Indicated and Inferred resources defined for the Main and North Zones
and published in the June 2010 Technical Report. This report comprises the
Preliminary Economic Assessment of the La India project using mineral resource
and cost data current as of the date of publication of this report. This Technical
Report updates the previously released CSA NI43-101 compliant Technical Reports
authored by Ebert (2004), Gray (2006), Gray and Giroux (2008), Gray and Giroux
(2009), and Gray and Giroux (2010). This report has been prepared to meet
Canadian Securities Administrators National Instrument 43-101 standards. The
report provides a summary of the geology of the project, an independent estimate of
a mineral resource, and the results preliminary engineering and cost studies related
to the economic viability of the project.
Matthew D. Gray Ph.D., C.P.G., James H. Gray, P. Eng., Mark E. Smith P.E., and
Gary Giroux, P.Eng. served as Qualified Persons as per definitions of CSA NI43-101
for the preparation of this Technical Report. This Technical Report updates the
previously released CSA NI43-101 compliant Technical Reports authored by Ebert
(2004), Gray (2006), Gray and Giroux (2008), and Gray and Giroux (2009).
Surface rights in the project area are owned by the Matarachi Ejido (agrarian
community) and private parties. All Measured, Indicated and Inferred project
resources lie within privately owned or possessed land. For all identified target
areas Grayd Resources has executed surface access lease agreements with the
property owners or possessors allowing Grayd access to conduct exploration work.
Existing agreements permit exploration activities only. Exploitation and production
activities will require execution of new lease or purchase agreements. Grayd is
currently negotiating to acquire the surface rights needed for project development.
The defined mineral resource for the project, and all lands required for infrastructure
as proposed in this Technical Report, are wholly contained within three privately held
properties: Rancho Bronces y Bajios (aka La Cieneguita), Rancho La Amargosa,
and Ranch El Duraznito. The legal standing of surface rights has not been verified
by the authors or RGM. As detailed in Item 6.1.2 of this Technical Report, a
preliminary review of title status for these properties indicates that they have not
been re-titled to reflect changes in legal ownership following the death of original
owners. Until corrected titles are issued for these properties, Grayd cannot execute
legally binding surface rights agreements that are required to obtain Federal
environmental permits for mine construction and operation. The current agreements
with the land possessors are sufficient to permit exploration activities that are
conducted under the auspices of environmental regulation NOM-120, as described
in Item 6 of this Technical Report.
The first gold discovery in the region, as recorded by Spanish colonials, was made in
1673 at Ostimuri. The gold deposit at Mulatos was discovered by the Spaniards in
1806, but it is likely that indigenous peoples exploited the native gold bearing
oxidized zone of the Mulatos deposit prior to the colonial epoch. Small scale mining
has been semi-continuous in the district during the last two centuries (Consejo de
Recursos Minerales, 1992). Much of the early mining and all of the small-scale
present mining (hand mining by local artisanal miners) targets oxidized fractures
containing fine-grained visible gold. Small underground mines and prospects are
present throughout the La Cruz and La Viruela areas. Local residents state that the
La Cruz - La Viruela property was intermittently mined at a small scale during the
early 1920’s and 30’s. Modern exploration work has been conducted at the La
Viruela-La Cruz property. In the late 1980’s New Golden Sceptre Minerals and
New Goliath Minerals completed approximately 2,000m of percussion drilling. In the
early 1990’s Noranda acquired the rights to La Cruz - La Viruela and completed
2,616m of reverse circulation drilling (Jenkins, 1994) In 1993 San Fernando Mining
Company Ltd. acquired the property and conducted further drilling, including 10
diamond drillholes totaling 2,268m at La Viruela and 11 diamond drillholes at La
Cruz totaling 1,292m (McDougall, 1995).
Grayd Resource Corporation has been actively exploring the project since 2004.
Work completed to date includes geologic mapping, geochemical rock chip
The La India project lies within the Sierra Madre Occidental (SMO) province, a
regionally extensive Eocene to Miocene volcanic field which extends southeast from
the United States-Mexico border to central Mexico. The La India project lies within
the western limits of the SMO in an area dominated by outcrops of andesite and
dacitic tuffs, overlain by rhyolites and rhyolitic tuffs, that have been affected by large
scale N-NW striking normal faults and intruded by granodiorite and diorite stocks.
Incised fluvial canyons have cut the uppermost strata and expose the Lower Series
volcanic strata.
In diamond drill campaigns carried out in 2004, 2007, 2008, 2009, and through 22
January 2010, Grayd Resource completed 7,557 meters of BQ, HQ, and PQ
diameter diamond core drilling in 102 drillholes at the La Viruela, La Cruz, Cerro de
Oro, Cieneguita, and Española areas. Seven diamond core holes within the
resource area were used exclusively for metallurgical testing, thus 95 diamond
drillholes totaling 7,208 meters constrain the resource estimate presented in this
report.
In 2005, 2006, 2007, 2008, 2009, and through 22 January 2010,, Grayd Resource
completed 45,334 meters of 5 ¼ inch diameter reverse circulation drilling in 542
drillholes. Of these, 32 were exploration holes or were drilled outside of the modeled
resource domains, thus 510 drillholes totaling 40,871 meters constrain the resource
estimate presented in the June 2010 Technical Report.
Industry standard sampling methods were utilized to collect the reverse circulation
drillhole samples. Center return 5 ¼” diameter bits were used. Drilling was
conducted dry unless significant water production or hole plugging required the use
of wet drilling methods. While drilling in dry conditions compressed air was used to
force drill cuttings up the drill string for collection. Cuttings were forced into a
cyclone and Jones splitter as drilling progressed. When drilling in wet conditions,
water and compressed air were injected into the hole to force cuttings up the drill
string and a rotary splitter was employed. Samples were collected from initiation to
termination of the drill hole, at intervals of 1.524m (5 feet) m.
In 2006, 2007, and 2009 Grayd Resource commissioned Kappes, Cassiday &
Associates (KCA) to conduct preliminary metallurgical tests on reverse circulation
cuttings and drill core obtained from the Main and North Zones (Albert, 2007a,
Kappes, Cassiday & Associates, 2008; 2009; 2010a; 2010b). Samples selected for
testing represented the economically important mineralized domains. Reverse
circulation drill cuttings and drill core samples were subjected to bottle roll tests over
96 hours conducted on material milled to 80% passing 0.075mm mesh. Oxide
material yielded gold extractions of 85 to 96% with cyanide consumption of 0.31 to
1.78 kg/tonne, whereas sulfide material yielded gold extractions of 5 to 86% and
cyanide consumptions of 1.09 to 6.81 kg/tonne. Bottle roll tests for silver extraction
from oxide material yielded recoveries of 18 to 95%, but because of the low silver
content of the majority of the La India mineralized material, silver is not considered
to be of economic significance. KCA conducted flotation tests on two samples of
sulfide material, 36372 C and D. Material was ring and puck pulverized to 80%
minus 0.106mm and unoptimized flotation tests were completed using a Denver D-1
flotation machine. KCA determined that for these two samples, 94% of the
contained gold reports to the rougher flotation concentrate Albert, 2007b).
Metallurgical test work completed on drill core from the 2007, 2008, and 2009 drill
campaigns included physical testing (rock densities and Bond Work Index testing),
head analysis, milled bottle roll leach test work, gravity concentration test work,
agglomeration and percolation test work, column leach test work, and environmental
test work. All preparation, assaying and metallurgical studies were performed
utilizing accepted industry standard procedures. Thirteen composites representing
oxide material from nine distinct ore domains were analyzed (Albert, 2007a; Kappes
Cassiday and Associates, 2008, 2009, 2010a, 2010b). Column leach tests for gold
extraction indicate that the oxide material at La India is amenable to standard
cyanide heap leach processing. Column leach tests of 12.5mm crushed material
yielded gold recoveries from 62 to 94%. Column leach tests of 25mm crushed
material yielded gold recoveries from 79 to 97%. Column leach tests for silver
extraction generally yielded low recoveries (2 to 26%) regardless of crush size.
Silver is not considered to be of economic significance and silver recoveries have
not been a focus of the continuing metallurgical studies. Multi-element analyses
indicated that the La India samples do not contain any elements detrimental to
cyanide leaching (Kappes, Cassiday and Associates, 2008). Expected gold
recoveries by ore type, in a conventional cyanide extraction and heap leach process,
are summarized in Table 3.1. Additional metallurgical testing is required to
accurately define appropriate processing methods and expected metal recoveries for
the La India mineralization.
Main 1 Dacite 89
Main 2 Silica Massive 73
Main 2A Silica Massive / Alunite 80
Main 3 Silica Vuggy / Alunite 71
Main 5 Silica Clay Structures 88
Main 6 Silica Body (C de O) 75
North 11 Dacite 89
North 12 Silica Massive 62
North 12A Silica Massive / Alunite 94
North 14 Silica Clay 88
North 17 Intrusive 88
North 18 Silica Breccia 92
The current CSA NI43-101 compliant resource estimate for the project was
presented by Gray and Giroux (2010) in the June 2010 project Technical Report.
This Preliminary Economic Assessment is based upon the June 2010 resource
estimate. Geologists in the employ of Grayd Resources collaborated with Resource
Geosciences de Mexico and Giroux Consultants Ltd. to create resource models for
the drill tested mineralized areas. Two target areas have been the focus of
exploration and resource development drilling: the North Zone, which comprises the
La Cieneguita, Española, Cochis, and La India areas, and the Main Zone, which
comprises the La Viruela, La Cruz, and Cerro de Oro areas. The models are based
upon the geologically supported assumptions that gold distributions and related
hydrothermal alteration assemblages are controlled by lithologic and structural
features. Separate models were created for the geologically similar but spatially
distinct Main and North Zones. The Main Zone model is constrained by 314 reverse
circulation drillholes totaling 29,779 meters and 64 diamond drillholes totaling 4,947
meters. The North Zone model is constrained by 196 reverse circulation drillholes
totaling 11,092 meters and 31 diamond drillholes totaling 2,261 meters. Geologic
and assay data for the drillholes were input into MicroMine modeling software, which
project geologists then used to create and interpret three dimensional solids
representing geologic domains of internally consistent geologic and/or alteration
characteristics. Solids were created by wireframe modeling. The solids model was
based upon lithologies and alteration mineral assemblages mappable in outcrop and
in drill core and drill cuttings. The solids model was reviewed by Qualified Persons
Gray and Giroux and determined to be suitable for purposes of estimating a
Measured, Indicated, and Inferred mineral resource. Gray provided independent
on-site QA/QC reviews of the drilling and sampling procedures, crosschecked the
drillhole data against original assay certificates, conducted independent sampling,
verified via statistical analysis that the project drillhole database is reliable and
accurate and may be used for resource estimation purposes, and independently
reviewed and verified the resource geologic model. Giroux conducted further
statistical review of the data to verify the integrity of the database.
The 2004, 2006, 2007, 2008, 2009, and January 2010 exploration and drilling
campaigns have provided sufficient data to allow for estimation of CSA NI43-101
compliant Measured, Indicated, and Inferred resource estimates (Gray and Giroux,
2010). The La India project hosts a Measured and Indicated gold resource of
760,000 contained ounces contained in 26.77 M tonnes at a grade of 0.883 gpt,
calculated at a 0.40 gpt cutoff, as summarized in Table 3.2. The La India project
hosts an Inferred gold resource of 506,000 ounces contained in 19.73Mt @ 0.798
gpt Au, calculated at a 0.40 gpt cutoff grade, as summarized in Table 3.3.
Of the Measured and Indicated resource, 603,000 ounces (21.6M tonnes at a grade
of 0.867 gpt Au) are contained in oxidized material (Table 3.4). Of the Inferred
resource, 378,000 ounces (14.3 Mt @ 0.82 gpt Au at a 0.40gpt cutoff) are contained
in oxide material (Table 3.5). Column testing for oxide material indicates that the
material may be amenable to treatment by conventional cyanide heap leach gold
recovery methods.
Table 3.2. Measured and Indicated mineral resource estimate, all material types, all areas, La
India project.
TOTAL ALL ZONES - MEASURED PLUS INDICATED RESOURCE
Au Cutoff Tonnes> Cutoff Grade > Cutoff
Au
(gpt) (tonnes) (gpt) Au (grams) Au Ounces
0.10 61,650,000 0.517 31,900,000 1,024,000
0.20 48,230,000 0.619 29,900,000 960,000
0.30 36,090,000 0.745 26,900,000 864,000
0.40 26,770,000 0.883 23,600,000 760,000
0.50 20,180,000 1.025 20,700,000 665,000
0.60 15,570,000 1.167 18,200,000 584,000
0.70 12,250,000 1.308 16,000,000 515,000
0.80 9,870,000 1.443 14,200,000 458,000
0.90 8,100,000 1.573 12,700,000 410,000
1.00 6,800,000 1.693 11,500,000 370,000
Table 3.3. Inferred mineral resource, all material types, all areas, La India project.
TOTAL ALL ZONES - INFERRED RESOURCE
Au Cutoff Tonnes> Cutoff Grade > Cutoff
Au
(gpt) (tonnes) (gpt) Au (grams) Au Ounces
0.10 117,170,000 0.303 35,500,000 1,143,000
0.20 62,130,000 0.443 27,500,000 886,000
0.30 34,150,000 0.606 20,700,000 665,000
0.40 19,730,000 0.798 15,700,000 506,000
0.50 13,540,000 0.961 13,000,000 418,000
0.60 9,910,000 1.113 11,000,000 355,000
0.70 7,540,000 1.259 9,500,000 305,000
0.80 5,900,000 1.402 8,300,000 266,000
0.90 4,800,000 1.530 7,300,000 236,000
1.00 4,040,000 1.641 6,600,000 213,000
Table 3.4. Measured and Indicated mineral resource, oxide material only, all areas, La India
project.
TOTAL ALL ZONES OXIDES - MEASURED PLUS INDICATED
RESOURCE
Au Cutoff Tonnes> Cutoff Grade > Cutoff
Au
(gpt) (tonnes) (gpt) Au (grams) Au Ounces
0.10 44,870,000 0.542 24,300,000 781,000
0.20 35,980,000 0.638 23,000,000 738,000
0.30 28,230,000 0.745 21,000,000 677,000
0.40 21,630,000 0.867 18,800,000 603,000
0.50 16,580,000 0.995 16,500,000 530,000
0.60 12,770,000 1.129 14,400,000 463,000
0.70 10,040,000 1.259 12,600,000 407,000
0.80 8,100,000 1.383 11,200,000 360,000
0.90 6,620,000 1.502 9,900,000 320,000
1.00 5,510,000 1.614 8,900,000 286,000
Table 3.5. Inferred mineral resource estimate, oxide material only, all areas, La India project.
TOTAL ALL ZONES OXIDES - INFERRED RESOURCE
Au Cutoff Tonnes> Cutoff Grade > Cutoff
Au
(gpt) (tonnes) (gpt) Au (grams) Au Ounces
0.10 66,140,000 0.343 22,700,000 730,000
0.20 39,710,000 0.474 18,800,000 605,000
0.30 22,990,000 0.641 14,700,000 474,000
0.40 14,340,000 0.820 11,800,000 378,000
0.50 10,210,000 0.973 9,900,000 319,000
0.60 7,390,000 1.135 8,400,000 270,000
0.70 5,630,000 1.289 7,300,000 233,000
0.80 4,370,000 1.444 6,300,000 203,000
0.90 3,580,000 1.577 5,600,000 181,000
1.00 3,070,000 1.680 5,200,000 166,000
In the LG study, only gold is used to generate revenues for oxidized material. All
sulfide mineralization is treated as waste rock. Overall slope angles of 40°, 45° and
50° are used for the LG evaluations. Net value is computed for each block for the
economic pit optimizations, which include variable ore costs and recoveries by
domain, and weighted average specific gravities. Potential ore is defined for
purposes of the LG analyses by internal dollar / tonne ($/t) cutoffs that include ore
mining ($2.05/t), general/administration ($1.50/t) and variable ore processing costs
by domain. A total of 72 runs (12 prices total x 3 slopes x 2 cases) were conducted
for each deposit model to test sensitivities to:
• gold prices ranging from $270 to $1260/oz (12 prices total), in 10%
increments from the base price of $900/oz,
The base case $900/oz Au LG shells contain 46.6 million tonnes grading 0.69 g Au/t
of Measured, Indicated and Inferred mineral resources. These figures do not include
any provisions for ore dilution or mining loss. Contained troy ounces of gold are
estimated at 1,029,000, of which about 899,000 ounces are considered potentially
recoverable. Tonnages are based on in-situ weighted average densities stored in
the block models, which range from 1.97-2.51 t/m 3 in the Main deposit and 1.97-2.63
t/m 3 in the North deposit. Average in-situ densities within the base case LG shells
are 2.23 and 2.33 t/m3 for the Main and North deposits, respectively. Tables 3.7 and
3.8 list the contained Measured plus Indicated, and Inferred mineral resources,
respectively, for the base case LG shells. All of the mineral resources presented in
Tables 19.35 and 19.36 are classified as Measured, Indicated and Inferred, and as
defined in Canadian NI 43-101, should not be considered mineral reserves until at
least a Pre-Feasibility study has been completed.
Table 3.7. Base case ($900/oz) Lerchs-Grossman, contained Measured, and Indicated
resources.
Base Case ($900/oz Au) Lerchs-Grossmann – Contained Measured & Indicated Mineral Resources
MnlRes* Contained Recov Au Recov
Deposit Ktonnes Au g/t Oz Au g/t Oz Au Net $/t
Main 16,272 0.71 373,500 0.56 291,800 7.99
North 13,814 0.66 295,300 0.58 258,900 8.83
Total 30,085 0.69 668,800 0.57 550,700 8.38
* Mineral resources above internal Net $/t cutoff without adjustments for dilution or
loss.
About 65% of the mineral resource tonnages contained within the base case LG
shells are classified as Measured and Indicated, with the remainder being Inferred.
The Main deposit area contains about 51% of the project’s total mineral resources,
weighted by tonnage.
Based on the LG Base Case economic Pit20 ($900/oz Au) detailed pit designs have
been done to include detailed slope parameters and ramps. These are summarized
in Table 3.9 as pit delineated resources. At this PEA level of study these resources
include Measured, Indicated, and Inferred classes and are used in the production
schedule and economic analysis for evaluation purposes only. They are not deemed
reserves and MMTS does not present them as having economically assured
profitability at this stage of study.
Table 3.9. Detailed pit designs based on base Lerchs-Grossman, MII pit resources
Detailed Pit Designs Based 0n Base Lerchs-Grossmann – MII Pit Resources
MnlRes* Contained Recov Au Recov
Deposit Ktonnes Au g/t Oz Au g/t Oz Au Net $/t
Main 25,478 0.64 522,500 0.50 411,600 8.44
North 23,956 0.63 487,100 0.56 432,100 9.91
Total 49,434 0.64 1,009,600 0.53 843,700 9.15
3.8 Mining
The mine planning and engineering work includes determining the economic pit limit,
detailed pit designs, calculating in pit resources, and production scheduling, based
on the resource model described above. Mining, capital and operating cost
estimates have then been estimated for the mine plan based on typical costs for this
type and size of operation.
The grouped LG pits were converted to designed pits with ramps using double
benching and 45o inter-ramp slopes to get a truer estimate of waste rock and
stripping ratio. Figures 21.2 and 21.3 show the final design pits used for production
scheduling, for the North and Main areas respectively. The bench height used for
the pit designs in the current preliminary economic assessment (PEA) is based on
the block height in the 3D model, which is 6 meters. Figure 21.5 displays the layout
of the final design pits used for production scheduling, along with preliminary
locations for minesite infrastructure, and Table 3.10 shows the design pit phase
tonnages, grades, strip ratio, and values used for sequencing and scheduling.
A preliminary mine production schedule for the La India project is developed from
the Measured, Indicated, and Inferred mineral resources contained within each of
the design pit phases. The combined North and Main ore-grade mineral resources
used for scheduling are as indicated in Table 3.10.
A schedule optimization program has been used to simulate open pit mining for a
maximum leach processing rate of 6,000,000 tpy and a total mining capacity of
10,000,000 tpy. Only oxide mineral resources above the internal Net $/tonne cutoffs
(see Table 3.10) are considered as leach material for purposes of developing the
PEA mine production schedule. Benches are mined from the upper most benches
downward within each pit phase.
Mining is initiated in the North area deposits, and the Main area deposits are brought
into the schedule as determined by the program. Table 3.11 summarizes the
resulting mine production schedule for the PEA of the La India project. Feed to the
crushing plants and leach pads will total 49.4 million tonnes over the life of the mine,
which is projected at just under 9 years total. 832,000 ounces will be recovered in
total, at an average leach recovery of approximately 84%.
Table 3.11. Mine production schedule based on Measured, Indicated, and Inferred mineral
resources.
Avg Rec
Leach Avg Insitu Contained Au (Rec Recovered Waste Total Ktonnes Strip
Year (Ktonnes) Au (g/t) Au (Koz) g/t) Au (Koz) Ktonnes Mined Ratio
1- Qtr1 1,050 0.78 26 0.63 21 1,707 2,757 1.63
1- Qtr2 1,050 0.81 27 0.66 22 1,376 2,426 1.31
1- Qtr3 1,300 0.83 35 0.67 28 1,433 2,733 1.10
1- Qtr4 1,300 0.84 35 0.73 30 895 2,195 0.69
2 5,100 0.70 114 0.64 104 3,348 8,448 0.66
3 5,800 0.61 114 0.58 106 2,559 8,359 0.44
4 5,894 0.58 110 0.49 92 3,152 9,046 0.53
5 5,600 0.73 132 0.55 99 4,417 10,017 0.79
6 5,510 0.44 78 0.38 66 6,773 12,283 1.23
7 5,924 0.72 137 0.58 108 4,504 10,428 0.76
8 5,750 0.51 95 0.46 84 3,112 8,862 0.54
9 5,153 0.56 92 0.46 75 2,312 7,465 0.45
Totals 49,431 0.63 996 0.53 832 35,588 85,019 0.72
Notes: 1- Pit resources are based on the net $/tonne cutoff value for full blocks
2- D0 / ND0 domain material types are always waste
3- Reserves have 5% loss and 5% dilution applied
4- Excludes North Pit 26 and Area 13 of Main Pit 25
* Includes Measured, Indicated and Inferred mineral resources, 5% mining dilution, and 5%
mining loss. Inferred mineral resources have a great amount of uncertainty as to their
existence and as to whether they can be mined legally or economically. It cannot be assumed
that all or any part of Inferred mineral resources will ever be upgraded to a higher category.
For purposes of equipment selection and cost estimation for this preliminary
assessment, open pit mining will be conducted from 6-m benches using small scale
equipment. Mobility is an important consideration in equipment selection where
three to four pits will be mined concurrently.
The mine will be scheduled for continuous operations using four rotating crews, each
working 12-hour shifts. Leach material will be hauled to crushing-screening-
agglomeration plants located near the proposed leach pad. The crushed and
agglomerated leach feed material will then be transported by conveyors and a
stacker onto the leach pad.
Waste rock haulage will be directed to one of five sites, four in the North pit area and
one in the Main pit area. These dump sites were selected for their close proximity to
mining areas and natural confinement for regrading and water management
considerations. Some ongoing reclamation of the waste rock dumps will be
accomplished since the first north pit mined will accommodate much of the other
north pits’ waste through backfilling.
Table 3.12 summarizes the primary mine equipment requirements for the project.
Post mining reclamation will be done using the mining equipment at the end of
mining and final flushing of the leach pad. Accumulated funds from the reclamation
bond will fund this work. More detailed planning will require future studies in
conjunction with environmental studies.
A rotating, four-crew system will be used to staff mine operations and maintenance
craft labor positions. These crews will work 12-hour shifts. Table 3.13 summarizes
the total mine personnel requirements, including supervision and technical staff.
Mine manpower levels range from 120 in the final year of production mining (year 9)
to a peak of 223 that are projected for Years 4-7.
Mine Operations:
Subtotal Mine
Operations 148 148 148 148 148 148 156 156 156 156 116 78
Mine Maintenance:
Subtotal Mine
Maintenance 43 43 43 43 43 43 43 43 43 43 33 27
Mine Supervision &
Technical:
Subtotal Mine
Supv/Tech 24 24 24 24 24 24 24 24 24 24 21 15
Total Mine
Personnel: 215 215 215 215 215 215 223 223 223 223 170 120
La India mining cost estimates are in second quarter 2010 U.S. dollars and
exclude taxes and duties. No inflationary escalation factors have been applied
to these cost projections. All cost estimates for this PEA should be
considered scoping level in accuracy (i.e., ±35%).
Mine equipment unit prices are from MMTS’s data base, derived from recent vendor
quotations for similarly sized equipment and industry cost guides. Sustaining capital
is also included in the estimates, accounting for fleet expansions where necessary
and replacements of aging units. Table 3.14 summarizes the mine capital
expenditures over the life of the La India project. Mine capital expenditures
throughout the mine life are projected at $40.7 million. This includes working capital
for mine operations.
Mine operating costs were derived from numerous sources including nearby
operations, equipment handbooks, and typical industry estimates. La India mine
operating cost estimates cover: pit operations (i.e., drilling, blasting, loading and
hauling); waste dump maintenance; construction of internal haul roads, sumps and
safety berms; maintenance of all mine roads and safety berms; operating and
maintenance labor; mine department supervision and technical services; and other
earthworks as may be required for day to day mining operations. Exploration costs
are not included in the operating cost estimates presented in this section. Over the
life of the project, mine operating costs for La India are projected at $174.2 million,
averaging $19.7 million per year. This equates to $2.05 per tonne of material mined
(leach feed and waste), or $3.52 per tonne of leach feed processed. Unit mining
costs are summarized in Table 3.15, and the annual mining costs are summarized in
Table 3.16.
The operating life of the La India project is estimated at 8.85 years assuming an
average leach feed processing rate of 16,400 tpd. There is no preproduction
stripping period. However, road and site development work must be completed
before production can begin.
3.9 Processing
Flowsheet selection was based upon results of laboratory test work. The process
flowsheet includes a three-stage crushing plant followed by a heap leach operation.
Gold is extracted by an ADR carbon plant. The process flowsheet is based on an
ore processing rate of 6.0 million dry tonnes per year (17,150 dry tonnes per day).
Design criteria are summarized in Table 3.17
Process operating costs were developed for all of the different ore types, or
Domains. The process costs did not include any mine or general and administrative
costs as these were covered elsewhere. The costs were estimated by specific
operating area and included; Crushing and Conveying, Leaching, Plant, Refinery,
and Laboratory. All process maintenance and manpower, including process
supervision is included.
The basis for the major consumables and Mexican National labor were taken from
current costs from similar heap leach operations in Mexico. For the process section
2 ex-patriot employees were included, and assumed to be from North America. The
process operations of Crushing and Conveying, Leaching, Plant and Laboratory
were based on a 24-hour operation and staffed by 3 separate work crews, working
on a 12-hour shift basis. The Refinery work schedule is only 1 12-hour shift per day.
All costs are presented in 2010 U.S. Dollars. An exchange rate of 12 Nuevo Pesos
(Pesos or “NP”) per dollar was assumed.
Gold production for La India was calculated from the mine production schedule and
the overall recovery for each ore type as determined by the testwork completed by
Kappes Cassiday & Associates and is summarized in Table 3.19.
Table 3.19. Mine production schedule.
Units Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total
Ore to Pads kt 4,700 5,100 5,800 5,895 5,600 5,510 5,924 5,750 5,153 44,279
Gold Grade of Ore g/t 0.82 0.70 0.61 0.58 0.73 0.44 0.72 0.51 0.55 0.70
Contained Gold oz 123,606 114,468 113,760 109,774 132,239 78,409 136,714 94,828 91,849 995,649
Cum Contained Gold oz 123,606 238,074 351,835 461,609 593,849 672,258 808,972 903,800 995,649
Ultimate Recovery % 82% 86% 88% 87% 84% 84% 83% 84% 84% 84%
Recoverable Gold oz 100,749 103,389 106,143 91,195 98,271 65,627 108,496 83,180 75,087 832,138
Cum. Recoverable Gold oz 100,749 204,138 310,281 401,476 499,747 565,375 673,870 757,050 832,138
Gold Recovered oz 85,829 106,573 106,143 91,195 98,271 65,627 108,496 83,180 75,087 11,736 832,138
Cum Recovered Gold oz 85,829 192,402 298,545 389,740 488,011 553,639 662,134 745,314 820,402 832,138
Recoverable Inventory oz 14,920 11,736 11,736 11,736 11,736 11,736 11,736 11,736 11,736 0 0
From the start of construction, it will take approximately 12 months to build the
project. A construction schedule is presented in Figure 23.1.
Exploration and mining activities in Mexico are subject to control by the Secretaria
del Medio Ambiente y Recursos Naturales (Secretary of the Environment and
Natural Resources), known by its acronym SEMARNAT. The La India project is not
included within any specially protected, Federally designated ecological zones,
therefore basic exploration activities are regulated under Norma Oficial Mexicana
NOM-120-ECOL-1997. NOM120 allows for activities including mapping,
geochemical sampling, geophysical surveys, mechanized trenching, road building,
and drilling. Most exploration activities can be permitted utilizing NOM120. Mine
construction and operation activities generally require preparation of:
Properly prepared MIA and CUS applications and mine operating permits for a
project that does not affect Federally protected biospheres or ecological reserves
can usually be approved in 12 months.
Thus far exploration work at La India has been conducted under the auspices of
NOM120. Because the limits for surface disturbance permitted under NOM 120 are
being approached in the Main Zone, further exploration or development work in the
La Viruela-La Cruz area that creates additional surface disturbance will require a
Change of Land Use (Cambio de Uso de Suelo) permit. This permit cannot be
issued until such time that Grayd has a formally registered surface rights agreement
with the owner of legal record of the affected land. Grayd is currently negotiating to
acquire the surface rights needed for further project development at the Main Zone.
Exploration activities in the North Zone and Tarachi area may continue to be carried
out under the terms of NOM 120.
The project is not located in an area with a special Federal environmental protection
designation and no factors have been identified that would be expected to hinder
Permits that would be required for the construction and operation of a mine as
described in this Technical Report are summarized in Table 6.2. The Mulatos mine,
a large scale, open pit, cyanide heap leach gold mine, presently operates in the
Municipality and encountered no impediments to receipt of needed permits. Should
these permits be solicited for the La India project, no obstacles to obtaining them are
anticipated provided that Grayd obtains the necessary surface rights and design and
mitigation criteria meet all applicable standards.
Economic pit optimization was run using a US $900/oz gold price. The following
assumptions were made in the evaluation:
and from Year PP to closure, as presented in Item 25.3 and Tables 3.21
and 3.22.
- Pre-production (construction) estimated at 9-12 months (Year PP). Note
that the project economic summary given below is based starting from
year PP or the start of construction.
- Mine life is nine years of production plus year 10 of residual production
and the rinsing of the heaps.
- Leach Plant gold recovery estimated by various material type, as indicated
by testwork - average 84%.
- Gold production schedule is based on leach time estimates from testwork.
Not all gold is produced in the year stacked. Recoverable gold inventory
is assumed to stabilize after year 2 and come out in year 10.
- Net Smelter Return includes dore’ transportation and refining, and a
0.50% NSR royalty from the North Zone. Costs for purchasing NSRs as
per various agreements are included in capital costs.
- Revenue and expenses are recognized at the time of production.
- Income from the salvage value at the end of the project’s life is from the
mining equipment only.
- Costs for land purchase and more detailed engineering of $7.9 million
prior to initializing construction. Since these costs would be incurred
before the start of construction, and may in fact be incurred more than 2
years before the start of production, analyses of the NPV and IRR for the
project were made considering both the case of from Year -2 to closure
and from Year PP to closure, as presented in Item 25.3 and Tables 3.21
and 3.22.
- Pre-production capital cost estimate is $72.7 million.
- Sustaining capital cost is estimated at $31.9 million.
Operating Costs
Mining operating costs are presented in Item 21. Process costs are discussed in
Item 22. Each material type has an unique process cost dependent upon the
physical properties of the rock (i.e. crushing index) and the reagent consumption in
column tests. Details are given in Item 22. General and Administration costs were
developed based on information from operating mines and were then checked that
they are reasonable for the La India project.
3.14.2 Taxes
1) the greater of the regular income tax (“ISR”), and the single rate business tax or
flat tax (“IETU”), and
3.14.3 Income Tax and Single Rate Business Tax or Flat Tax
Mexico’s corporate income tax is 30% through December 31, 2012. The rate will be
reduced to 29% in 2013 and 28% in 2014 and future years. An income tax rate of
28% has been used in the economic model.
Mexico also has a flat tax that applies to corporations. The flat tax is an alternative
tax that does not replace the corporate income tax and is calculated on a cash-flow
basis, generally when business receipts are collected and business expenditures,
including capital expenditures, are made. A flat tax rate of 17.5% has been used in
the economic model.
Corporations are required to calculate both their income tax liability and their flat tax
liability for each fiscal year, and pay whichever is higher.
Value-added tax is assessed on the sale of goods and services, leasing and imports.
The rate is 16% and is imposed on all activities conducted within Mexican territory,
11% in the US/Mexican border region and 0% for all exports, which includes the sale
of gold. Value-added tax paid on purchases is refundable as long as the expenses
are business related and are deductible for income tax purposes. The economic
model assumes a value-added tax rate of 16%, and that all value-added tax paid will
be refunded.
The projected cash flow for the La India project is summarized in Table 3.20.
Based on the time period from pre-construction year -2 through closure, on a stand-
alone basis the project returns the pre-tax cash flows presented in Table 3.21.
Table 3.21. Project Cash flows and IRR, Year pre-construction -2 through closure.
Price Gold Undiscounted Cash Flow NPV @ 5% Discount IRR Payback
Scenario (US$/oz) (millions US) (millions US) (%) Years
$850 $175 $105 31% N.A.
Based on the time period from construction (year PP) through closure, on a stand-
alone basis the project returns the pre-tax cash flows presented in Table 3.22.
Table 3.22. Project cash flows and IRR, Year PP through closure.
Price Gold Undiscounted Cash Flow NPV @ 5% Discount IRR Payback
Scenario (US$/oz) (millions US) (millions US) (%) Years
$850 $184 $124 38% 3.4
Base Case $950 $267 $187 51% 2.6
2 Week $1355 $603 $441 103% 1.4
Average (i)
i. Source: www.kitco.com. 10 trading day average London PM Fix from Oct. 6, 2010-Oct 19, 2010.
The Total Cash Cost is $505/oz gold produced. The LOM capital cost is US$126/oz
gold produced, for a Total Production Cost of US$631/oz gold produced.
Key economic risks were examined by running cash flow sensitivities on:
- Recovered gold
- Capital Costs
- Operating Costs
- Gold Price
Sensitivity over the base case were calculated for a range of -20% to +20%
variations of the base case parameters listed above. Variance of gold recovery has
the same effect as variance of gold price, however gold recovery cannot increase
beyond 100% thus sensitivity to gold recovery was not studied beyond a 10%
increase. All were done with a 5% NPV. The project is most sensitive to gold price
and recovered gold (which have the same impact). This is followed by the operating
costs with the capital cost being the least sensitive to the economics of the project.
Sensitivities are summarized in Table 3.23 and shown in Figure 3.1.
$300
$250
$200
Gold Recovered
$50
$0
-20% -10% Base 10% 20%
3.15 Conclusions
The La India project hosts a CSA NI43-101 compliant Measured, Indicated and
Inferred resource comprising:
For purposes of the Preliminary Economic Assessment of the La India project, the
subject of this report, engineering studies and operating and capital cost estimates
were made for a mine designed to exploit only the only oxide resources. Detailed pit
designs have been done to include detailed slope parameters and ramps. These are
summarized as pit delineated resources as follows:
At this PEA level of study these resources include Measured, Indicated, and Inferred
classes and are used in the production schedule and economic analysis for
evaluation purposes only. They are not deemed reserves and MMTS does not
present them as having economically assured profitability at this stage of study.
Based on the time period from construction (year PP) through closure, a $950
USD/oz. gold price, and the capital and operating costs detailed in this report, on a
stand-alone basis the project returns:
The authors of this report believe that the Preliminary Economic Assessment of the
project indicates that the La India project has high potential to be developed into a
profitable mine, and the identified Measured, Indicated and Inferred mineral resource
is economically significant, however engineering and economic studies must be
completed to greater levels of detail before statements can be made about the
project’s potential economic viability. The authors believe that the results of this
PEA merit the continuance of the economic evaluation of the project to the
Feasibility level, with the objective of obtaining data required to assess the project’s
economic potential.
3.16 Recommendations
Work to date has identified a gold resource likely to be of economic significance and
a Preliminary Economic Assessment indicates potential to develop a profitable and
economically significant mine. The positive conclusion to the PEA warrants that the
current resource area of the project be advanced to either a Pre-Feasibility or
Feasibility level of confidence.
Exploration to date in the Tarachi area has outlined a large mineralized system
whose limits are still unknown. Recommended work includes trying to define
resources in the area with current significant gold intersections and continued
exploration of the rest of the property to identify other potential resource areas. In
addition, the claim area should be expanded and exploration efforts continue onto
the expanded property.
- Complete an infill drilling program and update the resource block model, with
the goal of upgrading the Inferred mineralization to the Measured or Indicated
classifications.
- Complete a step-out drill program to increase the resource base to extend the
mine life or increase the production throughput.
- Acquire more detailed topographical information.
- Collect geotechnical data required for detailed pit slope, mine haul road,
waste dump and pad and pond designs. This work will entail drilling waste in
the highwall areas and under the pad and pond areas, rock strength testing,
geological mapping and modeling, and hydro-geological assessments.
- Create a hydrogeology model.
- Continue the ARD testwork and develop a waste rock management plan.
- Undertake trade-off study on contractor versus owner-mining.
- Confirm optimum mining equipment size.
- Purchase land required for further development and eventual exploitation of
the deposit should be purchased. Failure to do so will impede receipt of
environmental permits needed to conduct feasibility level studies.
The total cost of the program is estimated at $13.0M USD, as itemized in Table 3.24.
Opportunities exist to improve the economic performance of the project and should
be investigated, including:
- Increase Resource. In the area west and south of the current Main zone pits,
there is a possibility for a moderate (50,000 to 100,000 ounce) increase in
oxide resources that report as ore in the pit optimization program. This
increase would be from a combination of new resource that recent work
shows may be present and current resource that would be “mineable” with the
addition of the new resource. Further drilling is required to test this
opportunity.
- Vendor financing. Vendor financing could provide reduced initial capital costs
and lower company risk. Indicative quotes from vendors will be required to
evaluate this opportunity.
4.1 Introduction
The authors of this report, were asked by Grayd Resource Corporation to perform an
Preliminary Economic Assessment of the La India gold project in Sonora, Mexico.
Grayd Resource Corporation has been actively exploring the project since 2004.
Work completed to date includes geologic mapping, geochemical rock chip
sampling, airborne geophysical surveys, ground geophysical surveys,
photogrammetric topographic mapping, diamond drilling, reverse circulation drilling,
baseline environmental surveys, and metallurgical testing. In 2007 Grayd
commissioned Giroux Consultants Ltd and Resource Geosciences de Mexico SA de
CV to provide an independent mineral resource estimate and CSA NI43-101
compliant Technical Report for the La India project. An inferred mineral resource
estimate was published in February 2008. After completion of an additional 12,130
meters of reverse circulation drilling and an additional 2,640 meters of diamond core
drilling, in August 2008 Grayd commissioned Giroux and RGM to create an updated
CSA NI 43-101 compliant resource estimate for the project, which was published in
February 2009. Since that time and up until 22 January 2010 Grayd has completed
an additional 11,976 meters of reverse circulation drilling in 134 drillholes and an
additional 2,444 meters of diamond core drilling in 37 drillholes. In January 2010
Grayd commissioned Resource Geosciences de Mexico SA de CV and Giroux
Consultants Ltd to prepare an updated independent mineral resource estimate and
CSA43-101 compliant Technical Report for the La India project, which was
published in June 2010.
In July 2010, Grayd Resources commissioned the authors of this report to produce a
Preliminary Economic Assessment of the La India project, based upon the CSA
NI43-101 compliant resources as of June 2010 (Gray and Giroux, 2010).
This report comprises the Preliminary Economic Assessment of the La India project
using mineral resource and cost data current as of the date of publication of this
report. This Technical Report updates the previously released CSA NI43-101
compliant Technical Reports authored by Ebert (2004), Gray (2006), Gray and
Giroux (2008), Gray and Giroux (2009), and Gray and Giroux (2010). This report
has been prepared to meet Canadian Securities Administrators National Instrument
43-101 standards. The report provides a summary of the geology of the project, an
independent estimate of a mineral resource, and the results preliminary engineering
and cost studies related to the economic viability of the project.
This Technical Report bases the economic analysis on the CSA NI43-101 compliant
resource estimate prepared by Giroux (Gray and Giroux, 2010) and integrates the
contributions of:
Matthew D. Gray Ph.D., C.P.G., James H. Gray, P. Eng., Mark E. Smith, P.E., and
Gary Giroux, P.Eng., served as Qualified Persons as per definitions of CSA NI43-
101 for the preparation of this Technical Report. Contributors to the report and the
Qualified Person responsible for each item is presented are Table 4.1.
Table 4.1. Contributors and responsible Qualified Persons for PEA report.
Responsible
Items Contributor(s) QP
Summary, Conclusions, Recommendations All All
General Project Overview MG All
Claim Status and Agreements MG MG
Surface Rights MG MG
Critical Components MG All
Review of Current Resource GG GG
Ore Resource Exploration Potential MG MG
Information Required for
Feasibility JG MG/GG
Mining Bench Height Analysis JG JG
Mine Plan JG JG
Mine Access Roads JG JG
Mine Waste Storage JG JG
Water Management JG/HS/MG JG
Equipment - Mining JG JG
Equipment - Hauling JG JG
Equipment - Support JG JG
Mine Reclamation MG/PA/JG/MS MG/MS/JG
Capex JG JG
Opex JG JG
Information Required for
Feasibility JG JG
Processing Metallurgical Review FHL MS
Crush size FHL MS
Process flowsheet FHL MS
Lift Height Analysis FHL MS
Pad and Pond Location and
Design CM/FHL/MS MS
Pad construction CM/MS MS
Equipment - Crushing FHL MS
Equipment - Stacking FHL MS
Water Balance FHL/HS/MG MS
Water Source HS/MG MS
Gold Recovery Plant FHL MS
Gold Recovery by Year FHL MS
Pad and Pond Reclamation MS MS
Capex FHL/CM MS
Opex FHL MS
Contributors
Jim Gray, P. Eng., senior partner of Moose Mountain Technical Services (MMTS),
an independent consulting firm contracted by Grayd Resource, visited the project,
reviewed the available geologic data, and conducted independent analyses to
accomplish the requested task.
project. This report was prepared following the guidelines of CSA National
Instrument 43-101.
In the preparation of this report the authors have relied on their own observations
and independent assay data, supplemented by information obtained through review
of both published and unpublished documents and maps. In addition to the author’s
own observations and assay data, sources of information regarding location and
dimensions of mineralized showings, mines, veins, and the mineralized grades,
include:
Geologic, geophysical, and assay data collected and published by the Consejo
de Recursos Naturales (National Resource Council) and its successor, the
Servicio Geologico Mexicano (Mexican Geological Survey), a Mexican Federal
agency.
Data that was not generated by the authors has not been independently verified,
except as noted in Item 16 of this report. Where information from unverified sources
is relevant to interpretations and discussions of the economic potential of the project,
the source of information is explicitly mentioned. The authors do not accept
responsibility for the interpretations and representations made in this report where
they were the result of erroneous, false, or misrepresented data.
Sonora office reviewing assay data and conducting QA/QC evaluations of the
reliability and integrity of the project drillhole database. Prior to the field visit and
data review conducted for the purposes of the author’s Technical Report released in
2006, M Gray had been directly involved in mineral exploration programs in the
region, including portions of the La India project, but had not conducted detailed
examinations of the La India project.
Jim Gray, P.Eng., the Qualified Person as defined by CSA NI43-101, responsible
for Items 19.14, 19.15, 21, 23, 25, and the related components of Items 3, 24, 26,
and 27 conducted site visits to the project on 1 and 2 May 2010.
Gary H. Giroux, P. Eng, MASc. the Qualified Person as defined by CSA NI43-101,
responsible for Items 19.1 through 19.12 and related components in Items 3, 26, and
27, did not visit the project. Giroux worked with a geologic model and drillhole
database provided by Grayd Resources and verified by M Gray.
The professional opinions expressed in this report are based in part on data and
information generated by and obtained from Grayd Resources Corporation, its
subcontractors, previous operators of the project, and public domain sources. The
authors of this report have excercised all reasonable care in reviewing the supplied
information and believe that the basic information provided is accurate. Data that
was not generated by the authors has not been independently verified, except as
noted in Item 16 of this report. Where information from unverified sources is
relevant to interpretations and discussions of the economic potential of the project,
the source of information is explicitly mentioned. Data was obtained from both
public domain and private sources as follows:
Appropriate scientific methods and best professional judgment were utilized in the
collection and interpretation of data discussed in this report. However, users of this
report are cautioned that the evaluation methods used herein are subject to inherent
uncertainties and assumptions, over which the authors have no control. These
uncertainties and assumptions are stated herein. Users of this report are hereby
advised to be aware of and understand these uncertainties and assumptions.
The center of the project area is located at UTM Zone 12, 709,000E 3,174,000N,
North American Datum 27, or North Latitude 28o 40’ 41” West Longitude 108o 51’
40”, North American Datum 27 Mexico.
All geographic references in this report utilize North American Datum 27 (NAD27)
unless otherwise stated.
Mining and exploration rights in Mexico are controlled by the Federal Government.
Prior to 2006, exploration and mining rights were assigned to third parties by the
granting of “exploration” and “exploitation” concessions, each with differing validity
periods and tax and assessment obligations. Mining law reform in December 2005
simplified the concession regime, and all new concessions are “mining concessions”
which are valid for a 50 year period and are renewable. Upon enactment of the
mining law reform, all previously issued “exploration” and “exploitation” concessions
automatically converted to “mining concessions” with the effective date of title the
same as that of the previously titled “exploration” or “exploitation” concession. The
mining concessions are administered by the Direccion General de Minas (DGM), a
subsecretariat of the cabinet level Secretaria de Economia. To maintain
concessions in good legal standing, concession holders are obligated to pay semi-
annual tax payments and to annually file documentation of exploration or
development work at the concession.
Pursuant to a letter of intent dated November 10, 2003 and a definitive agreement
dated December 18, 2003, Grayd was granted an option to acquire a 100%
interest in two mining claims located totaling 476.6 hectares in Sonora State,
Mexico. Consideration for the acquisition consists of cash payments in the
aggregate of US $555,000 payable as follows:
A one-time bonus payment of US $0.50 per ounce of gold on reserves that are
proven and recoverable, as determined by a bankable feasibility study, will be
payable to the owners of the property within nine months from the
commencement of production. The owners will also retain a 1% net smelter
royalty (“NSR”) on the property, one-half of which may be purchased by the
Company for US $750,000.
A finder’s fee of 315,000 common shares was paid in connection with the
acquisition of the property.
Triple A Concession
Pursuant to an agreement dated January 21, 2004 and amended December 12,
2008, the Company was granted an option to acquire a 100% interest in a 6,592-
hectare mining claim located in Sonora State, Mexico. The property is subject to a
2% net smelter royalty. The Company is able to purchase 50% of the net smelter
royalty at any time with a payment of US$1,500,000. Consideration for the
acquisition consists of cash payments in the aggregate of US$816,000 payable as
follows:
A finder’s fee in the aggregate of 300,000 common shares was paid in connection
with the acquisition of the property.
La Cruz Concession
Pursuant to a letter of intent dated September 2, 2004 and a definitive agreement
dated December 23, 2004, Grayd was granted an option to acquire a 100%
interest in a 65.2 hectare mining claim located in Sonora State, Mexico.
Consideration for the acquisition consists of cash payments in the aggregate of
US $150,000 payable as follows:
San Fer claim group, comprising the contiguous San Fer 1, San Fer 2, San Fer 3,
San Fer 4 Fracc.1 , San Fer 4 Fracc. 2, and San Fer 4 Fracc. 3 Concessions,
Sonora State, México.
Pursuant to a letter of intent dated October 4, 2004 and a definitive agreement
dated December 3, 2004, Grayd was granted an option to acquire a 100% interest
in a 242.4 hectare mining claim group located in Sonora State, Mexico.
Consideration for the acquisition consists of cash payments in the aggregate of
US $57,000 and the issue of 220,000 common shares as follow:
Pay US $20,000 (paid) and issue 75,000 common shares (issued) on or before
the first anniversary date; and
Pay US $25,000 (paid) and issue 85,000 common shares (issued) on or before
the second anniversary date.
Pilar claim group, comprising 18,794 hectares contained in the El Pilar, Sta. Cruz
Pilar Fracc. 1, and Sta. Cruz Pilar Fracc. 2 concessions.
In May 2006 Grayd acquired mineral rights to these concessions which adjoin the
previously acquired claim block on the west side. Terms of the concession
agreement include staged cash payments over 5 years totaling US$750,000
payable as follows:
The property is subject to a 2% NSR of which 1.5% can be bought back for US$3
million.
Tarachi Fraccion claim group comprising 117.25 hectares contained in the Tarachi
Fracc. 1, Tarachi Fracc. 2. and Tarachi Fracc. 3 concessions which are located
northwest of the previously acquired claim block.
The claims were ceded to Grayd for a cash payment of $25,000 USD. The
property is not subject to any NSR or further obligations.
Tarachi claim group comprising 1,258 hectares contained in the Tarachi, Tarachi-1,
Tarachi-2. And Tarachi-3 concessions which are located northwest of the previously
acquired claim block.
Pursuant to an agreement dated May 19, 2006 and amended December 12,
2008, the Company was granted an option to acquire a 100% interest in the
Tarachi exploration concessions. The property is subject to a 2% net smelter
Surface rights in and adjacent to the Measured, Indicated, and Inferred resource
defined at the La India project area are owned by the Matarachi Ejido (agrarian
community) and private parties. All of the Measured, Indicated and Inferred project
resources lie within privately owned or possessed land (Figure 6.3). For all identified
target areas Grayd Resources has executed surface access lease agreements with
the property owners or possessors, allowing Grayd access to conduct exploration
work. Existing agreements permit exploration activities only. Exploitation and
production activities will require execution of new lease or purchase agreements.
Grayd is currently negotiating the purchase of surface rights required for
development of the La India gold deposit. The legal standing of the ownership of
surface rights has not been verified by the author or RGM.
Surface rights in exploration areas away from the currently defined resource and the
development area contemplated in this study are owned by the Matarachi Ejido, the
Tarachi Eijdo, and various private land owners. No work is currently being
undertaken on land owned by the Tarachi Eijdo. In the area of the Tarachi drilling,
surface access for exploration is covered by six separate agreements with private
landowners (Figure 6.4). Agreements are currently being negotiated for access to
ranches to the north of this to allow road construction and drilling.
Ejidos are communal agrarian and/or ranching societies formed as part of the
Mexican government’s post-revolutionary agrarian reform policies. Ejido land is
collectively owned by the Ejido members. The collectively owned land may be
leased but cannot be purchased by private parties or corporations. Constitutional
reforms enacted in the 1990’s permit the Ejidos to privatize the collectively owned
land such that it may be freely combined, rented, or sold. Over 50% of the surface
area of Mexico is assigned to Ejidos, and most major mines in Mexico are developed
on Ejido lands where land tenure is secured by the mining companies via special
lease arrangements defined by Federal Mining Law as Temporary Occupations, or
alternatively, via direct purchase of Ejido lands that have been privatized following
Federally prescribed procedures (PROCEDE). Ejido lands are not required for
development of the currently defined La India mineral resource, however some
satellite exploration targets are located in Matarachi Ejido lands.
No mineral resources have been defined within Ejido Matarachi lands, nor are Ejido
lands required for the siting of infrastructure as contemplated in this Technical
Report, however, the Puertos and Cebadilla exploration targets lie partly within Ejido
Matarachi lands. Grayd has conducted exploration on Matarachi Ejido lands under
the auspices of a written exploration contract with the community whereby
exploration access is granted and Grayd pays compensation of $5,000 USD per
year. Additional compensation fees for road and drill pad construction are
negotiated on a case-by-case basis, commensurate with the value of the land
affected.
A review of Municipal public land registry records did not find information for this 150
hectare property. The reputed owners are the Biebrich family. They have
communicated to Grayd that they have a valid notarized and executed sale-
purchase agreement (“escritura”) for the property, but they have not submitted it to
the Public Land Registry for inscription. A failure to inscribe the land transfer in the
land registry does not impair their ownership rights. The executed sale-purchase
contract has not been examined, but it is said to be in the name of the late Jose
Biebrich Torres, whose son, Jose Biebrich Melendez has inherited the property.
Grayd has conducted exploration on the property under the auspices of a written
exploration contract with Jose Biebrich Melendez under which Grayd is allowed to
conduct surface exploration including road construction and drilling in consideration
for an annual payment of $9,000 USD. This agreement also grants Grayd the right
to occupy the ranch house and ancillary buildings and to construct and use field
camps and storage buildings within the property.
Grayd had previously entered into an exploration access agreement for this 853
hectare parcel, however no mineral resources were defined within this parcel, nor is
this parcel required for the siting of infrastructure as contemplated in this Technical
Report and Grayd has allowed its access agreement to lapse.
6.4 Mineralization
Numerous abandoned small mines and exploration workings are present within the
property area. Nearly all are developed on or below zones of intense silicic
alteration, accompanied by varying amounts of iron-oxide staining. Controls on
mineralization include both high angle structural zones or veins, and stratigraphic
contacts. The metals produced or sought were gold and silver. The mineralized
occurrences for which a resource estimate is presented are described in Item 11 of
this report. Other mineralized zones have been previously described in the July
2006 Technical Report published for the project (Gray, 2006).
6.6 Permits
Exploration and mining activities in Mexico are subject to control by the Secretaria
del Medio Ambiente y Recursos Naturales (Secretary of the Environment and
Natural Resources), known by its acronym SEMARNAT. The La India project is not
included within any specially protected, Federally designated ecological zones,
therefore basic exploration activities are regulated under Norma Oficial Mexicana
NOM-120-ECOL-1997. NOM120 allows for activities including mapping,
geochemical sampling, geophysical surveys, mechanized trenching, road building,
and drilling. If each particular activity does not exceed a defined threshold for
surface disturbance, which varies by activity, and if in aggregate these activities will
affect less than 25% of the project surface area, the project operator is required only
to inform SEMARNAT in writing of the proposed exploration activities. If after 5 days
SEMARNAT has not formally objected, work may proceed immediately. NOM120
defines the impact mitigation procedures that must be followed for each activity.
Properly prepared MIA and CUS applications and mine operating permits for a
project that does not affect Federally protected biospheres or ecological reserves
can usually be approved in 12 months.
Thus far exploration work at La India has been conducted under the auspices of
NOM120. Because the limits for surface disturbance permitted under NOM 120 are
being approached in the Main Zone, further exploration or development work in the
La Viruela-La Cruz area that creates additional surface disturbance will require a
Change of Land Use (Cambio de Uso de Suelo) permit. This permit cannot be
issued until such time that Grayd has a formally registered surface rights agreement
with the owner of legal record of the affected land. Grayd is currently negotiating to
acquire the surface rights needed for further project development at the Main Zone.
Exploration activities in the North Zone and Tarachi area may continue to be carried
out under the terms of NOM 120.
Permits that would be required for the construction and operation of a mine as
described in this Technical Report are summarized in Table 6.2. The Mulatos mine,
a large scale, open pit, cyanide heap leach gold mine, presently operates in the
Municipality and encountered no impediments to receipt of needed permits. Should
these permits be solicited for the La India project, no obstacles to obtaining them are
anticipated provided that Grayd obtains necessary surface rights and design and
mitigation criteria meet all applicable standards.
Water rights in Mexico are established and governed by the “Law of National
Waters”, as interpreted by the 1994 “Regulation of the Law of National Water”,
which sets forth the manner in which water rights may be acquired and creates and
empowers the National Water Commission (CNA) to regulate water rights.
Applications for licenses or allotments may be filed with the CNA by both individual
persons and corporations in a manner similar to application for a mining concession.
A nominal fee is charged for filing the water concession application and when a
water right is granted and exercised, quarterly payments are due to the CNA.
Surface water is free for domestic or animal use as long as flow is not significantly
diminished. The CNA regulates all other use of surface and underground water.
The CNA establishes “Basin Councils” to promote and regulate short, medium, and
long-term hydraulic development within basins determined by the CNA. The basin
councils in turn function through the participation of accredited organizations of
water users, license holders, or allotment holders within the basin. Surface water is
distributed in accord with established national, regional, and local priorities as
modified by available water and existing allotments. Pricing of surface water is
determined by several factors including: hydrologic region; water use; water quality
(potable or non-potable); and by whether or not a subsidized price has been
negotiated. Hydrologic regions are designated by the CNA and applied to
municipalities (counties) as a whole. They do not relate directly to either surface
drainage basins or to underground aquifers but are established on the basis of water
availability. The CNA annually publishes a water-rate table setting the cost to use
water within each of the hydrologic regions it designates. Each municipality within
each state is classified within one of the designated regions. The La India project
lies within a region where water for industrial use is priced at $5.3909 Pesos/m3.
Therefore, mining operations could expect to pay $0.45 USD/m 3 at current
conversion rates. If the water contains more than 2,500 milligrams per liter of
dissolved solids and the CNA considers the water unfit for standard use, it may
waive the pumping charge.
The CNA determines the hydraulic balance within basins for the purpose of
assessing subsurface water availability. Basins may be classified as under-
subscribed, over-subscribed, or in balance. Subsurface water rights for under-
subscribed basins may be freely acquired by filing the corresponding application and
satisfying the requirements set forth by the CNA. Subsurface water rights for basins
that are either in balance or are over-subscribed are more difficult to acquire and
involve transfer of existing subsurface water rights. Pricing of subsurface water is
determined by the CNA in exactly the same manner as surface water.
Grayd has estimated that mining and processing operations at La India will require a
total of 187 m3 of fresh water per hour (825 gallons per minute, 52 liters per second)
or 1.6 million m3 per year. Grayd and its hydrologic consultants have determined
that developing a subsurface water supply is the most expedient method of obtaining
water for mine operations.
Surface water for the project area comes from the Rio Yaqui catchment basin. The
Plutarco Elias Calles dam that forms the Plutarco Elias Calles, or as it is more
popularly known, the El Novillo Reservoir, located 80 km northwest of La India,
captures the Rio Yaqui. The reservoir’s storage capacity is 3,026 million m 3 of
water. Surface water rights related to water captured by the El Novillo Reservoir are
mostly controlled by the downstream irrigation districts. Grayd does not intend to
use surface waters from the Rio Yaqui basin.
The project lies within the Valle de Rio Yaqui hydrologic basins defined by the CNA.
According to Grayd’s hydrogeological consultants, underground water is believed to
be available in sufficient quantity and quality in the project area. The Valle de Rio
Yaqui basin is designated by the CNA as “freely concessionable” (“libre
alumbramiento”). This designation applies to basins where the CNA has determined
that the aquifer can support additional water extraction without exceeding the natural
aquifer recharge, and a water user may apply for and be granted a water
concession.
The property is located between the towns of Tarachi and Matarachi. These towns
offer little infrastructure beyond rural telephone service and small Federally
subsidized grocery stores. Most basic services are available in Sahuaripa. The
population of the district is estimated to be a few thousand with most of the
inhabitants involved in small mining operations, ranching, and/or subsistence
farming. Like most areas of the Sierra Madre, production and transport of marijuana
and opium poppy forms an important but unquantified part of the local economy.
These illicit activities have not adversely affected exploration at the project or mine
development and operation at the nearby Mulatos gold mine. An adequate supply of
labor for mining operations can be drawn from the region.
The nearest international airport is located at Hermosillo. Unpaved airstrips for light
aircraft exist at Matarachi, Tarachi, and the Mulatos mine.
The property is in the Sierra Madre Mountains of eastern Sonora. The topography
consists of long ridges separated by steep V- shaped valleys. Elevations range from
1200 meter ASL to over 2000 meter ASL. Areas of low relief in the western portion
of the project area are suitable locations for mill sites, leach pads, waste dumps, and
other mine related infrastructure.
The climate in the area is semi-arid with variable seasonal temperatures ranging
from 35oC in the summer and -2oC in the winter, with occasional frost at higher
elevations. The area experiences torrential rainfall occurring from July to September
and the driest months being March to May. Exploration activities may be conducted
year round, although summer rains may cause occasional closings of river and
arroyo crossings.
8 HISTORY
The first gold discovery in the region, as recorded by Spanish colonials, was made in
1673 at Ostimuri. The gold deposit at Mulatos was discovered by the Spaniards in
1806, but it is likely that indigenous peoples exploited the native gold bearing
oxidized zone of the Mulatos deposit prior to the colonial epoch. Small scale mining
has been semi-continuous in the district during the last two centuries (Consejo de
Recursos Minerales, 1992). Much of the early mining and all of the small-scale
present mining (hand mining by local artisanal miners) targets oxidized fractures
containing fine-grained visible gold. The mineralization described for the mines
in this section is not necessarily indicative of the mineralization at the La
India, Sonora property. The Mulatos gold deposit is located 6.5 km from the
property and is reported to have produced over 400,000 oz gold prior to 1905.
(Southworth, 1905). Alamos Gold Inc, a TSX traded public company, now controls
the Mulatos deposit and operates a large scale open pit mine at Mulatos. At
commissioning of the mine, Alamos Gold reported a proven and probable mining
reserve of 36.4Mt grading 1.65 gpt Au, for a total mineable reserve of approximately
1.9M oz. Au, part of a Measured and Indicated resource of 62.2 Mt grading 1.51 gpt
Au, for a total contained gold resource of approximately 3M ounces (Alamos Gold
Quarterly Report. 3rd Quarter 2005). A remaining proven and probable mining
reserve of 61.6 Mt @ 1.21 gpt Au, containing 2.38M oz. gold was reported as of 31
December 2009 (Alamos Gold 2009 AIF, 2010). Alamos Gold states that these
mineral reserve estimates follow the required disclosure for reserves and resources
outlined in NI43-101. The author has not reviewed the data and the author cannot
comment on the accuracy of the resource estimates. The estimates were obtained
from sources believed to be reliable but cannot be verified.
Small underground mines and prospects are present throughout the La Cruz and La
Viruela areas. Local residents state that the La Cruz - La Viruela property was
intermittently mined at a small scale during the early 1920’s and 30’s. On the basis
of the size of the mine workings, the author estimates no more than 10,000 tonnes
of material was extracted from all of the historic workings in the La Viruela-La Cruz
area. Modern exploration work has been conducted at the La Viruela-La Cruz
property, contained within the La Viruela, Continuacion SE La Viruela, La Cruz,
Tayopita, Soledad, and Ampliacion Soledad claims. In the late 1980’s New Golden
Sceptre Minerals and New Goliath Minerals completed approximately 2,000m of
percussion drilling. In the early 1990’s Noranda acquired the rights to La Cruz - La
Viruela and completed 2,616m of reverse circulation drilling. Drill logs and assay
results generated by these drill programs are not available to the author or Grayd,
but Jenkins (1994) reported that at least 72 holes were drilled, with at least 32
drillholes located in the La Viruela area and at least 35 at La Cruz. The drillholes at
La Viruela ranged from 20 to 126m in depth, whereas the drillholes at La Cruz
ranged from 21 to 102m depth. Jenkins (1994) summarized drill results indicating
that intercepts of >0.3 gpt Au were common, with the most significant reported
intercepts at La Viruela being 52m @ 1.03 gpt and 38m @ 2.68 gpt Au, whereas at
La Cruz, the most significant drill intercepts were 20m @ 6.15 gpt Au and 24m @
1.17 gpt Au. This data is historical in nature and has not been verified by the author.
In 1993 San Fernando Mining Company Ltd. acquired the property and conducted
further drilling, including 10 diamond drillholes totaling 2,268m at La Viruela and 11
diamond drillholes at La Cruz totaling 1,292m (McDougall, 1995). Drill logs and
assay results generated by the drill programs are not available to the author or
Grayd, but McDougall (1995) reported that the most significant intercepts generated
by San Fernando Mining Company Ltd. were 28m @ 1.96 gpt Au at La Viruela and
27.5m @ 2.24 gpt Au at La Cruz. This data is historical in nature and has not been
verified by the author.
9 GEOLOGICAL SETTING
The La India project lies within the Sierra Madre Occidental (SMO) province, a
regionally extensive Eocene to Miocene volcanic field which extends southeast from
the United States-Mexico border to central Mexico. The total thickness of the
volcanic sequence is approximately 2km, and it rests upon Mesozoic clastic and
calcareous sedimentary rock. The volcanic field is comprised of two distinct volcanic
sequences, an older andesitic and dacitic series, and a younger, pyroclastic
dominated rhyolitic series. The traditional nomenclature refers to these as the Serie
Volcanica Inferior (Lower Series) and Serie Volcanica Superior (Upper Series). The
Lower Series is approximately 1km thick and is dominated by Paleocene and
Eocene andesitic lavas and pyroclastic deposits, with interbedded volcaniclastic
strata. Silicic volcanic units are present but are a minor component. The volcanic
strata of the Lower Series are cut by calc-alkaline intrusives. The Upper Series
unconformably overlies the Lower Series with erosional disconformity and comprises
a 1km thick sequence dominated by Oligocene and early-Miocene dacitic and
rhyolitic pyroclastic strata and volcaniclastic strata. Most significant metal
occurrences in the SMO are hosted by rocks of the Lower Series or the underlying
Mesozoic strata.
The La India project lies within the western limits of the SMO in an area dominated
by outcrops of andesitic to dacitic tuffs that were intruded by granodiorite and diorite
stocks, and overlain by rhyolitic tuffs, basaltic-andesite lavas, and a large pile of late
conglomerates. These rocks lie within a northwest-trending zone of Miocene
extension that disrupted the regional stratigraphy along N-NW striking normal faults
causing large-scale rotation of blocks with predominantly east-northeast inclinations.
(Figure 9.1). Incised fluvial canyons have cut the uppermost strata and expose the
Lower Series volcanic strata.
Figure 9.1. Regional geologic map, summarized from Servicio Geologico Mexicano.
The La India project area is underlain by the Lower Series volcanic sequence
comprised of Paleocene andesitic and dacitic volcanic rocks interbedded with
epiclastic rocks of similar composition (Figures 9.2 to 9.4). The andesitic volcanic
rocks are the oldest Cenozoic rocks at La India and include a lower sequence of
lavas, tuffs and epiclastic rocks. Atop the andesite is an upper sequence of biotite-
pyroxene trachyandesitic and dacitic flow-domes and tuffs. These rocks overlie the
lower andesites with erosional disconformity, and fine grained dacitic tuffs
interbedded with epiclastic rocks mark the contact. Two 40Ar/39Ar age determinations
on plagioclase returned Paleocene ages for the lower andesitic and upper dacitic
sequences (62.6 Ma and 55.8 Ma, respectively). Dacite and feldspar porphyries
intruded the andesitic and dacitic volcanic rocks at La India (Longo, 2006a, Longo et
al., 2010), and a granodiorite intruded andesitic volcanic rocks at the southern limit
of the project area (Moore, 2006). Two 40Ar/39Ar ages of plagioclase from the
porphyries yielded Eocene ages of 43.3 Ma and 36.9 Ma. Thick (100-500 m)
deposits of rhyolitic ignimbrite overlie the older andesite and dacite. These rocks are
named the Nopal Ignimbrite, and one 40Ar/39Ar age of biotite yielded an upper
Eocene age of 33.9 Ma. Upper series rocks include basaltic-andesite lavas and flow
breccias that overlie the Nopal ignimbrites with erosional disconformity. One
40
Ar/39Ar age from a whole rock sample of lava yielded an Oligocene age of 28.2 Ma.
These lavas are both overlain by and interbedded with alluvial conglomerates. Upper
series Oligocene rhyolitic ignimbrites have not been recognized within the
concession boundaries. The rocks at La India strike west-northwest and dip 25 to 30
degrees east-northeast in the southern portion of the project area (Moore, 2005),
and dip 15 to 25 degrees west and southwest in the northern portion of the project
area. The La India-La Viruela-La Cruz area comprises one of several high sulfidation
epithermal mineralization centers recognized in the Mulatos district (Staude, 2001).
Silica alteration is both strataform and discordant. Strataform layers of silica are
localized at the base of the dacitic tuffs within the epiclastic rocks (Figure 9.5).
Silicification coincident with zones of higher grade gold mineralization is controlled
by high angle faults and fractures. Geological mapping and surface rock chip
sampling has identified zones of gold-bearing silica, silica alunite, and argillic
alteration from numerous localities within the project area. The most extensive
surface outcrops of altered and gold-bearing rock are found at the La India, La
Viruela, La Cruz, Cerro de Oro, Espanola, Cieneguita, Espanola, and Cochis areas
and these have been the focus of drill testing and host the mineral resource
described in this report. Another significant zone of outcropping gold mineralization
has been identified at the Los Tubos area located 2 km east of the La Cruz area.
This area offers potential to host additional resources, but as of the effective date of
this report this target has only been partially drill tested and a resource has not been
calculated.
Volcanic stratigraphy in the Tarachi area is similar to La India (Figures 9.6 to 9.8).
The area is underlain by a thick package (>300 m) of dacitic and trachyandesitic
porphyritic rocks and tuffs. These rocks are genetically related to flow-dome
complexes and interpreted as temporally related to the Eocene upper dacitic
sequence at La India. Basaltic-andesite dikes strike WNW and intruded the dacitic
sequence. Rhyolitic ignimbrites with a basal conglomerate overlie the dacites with
erosional disconformity. The conglomerates contain cobbles of mineralized dacite,
and the overlying ignimbrites are fresh and considered post-mineral. The rhyolitic
ignimbrites may be temporally associated to the upper Eocene Nopal Ignimbrite of
La India. Atop the rhyolite ignimbrites are thick (+100 m) piles of conglomerates
interbedded with basaltic-andesite lavas that are concentrated toward the
conglomerates base. Gold mineralization is entirely hosted within the underlying
dacitic sequence. A later episode of Miocene extension characterized by a series of
NW-trending normal faults shaped the region and reactivated old N-NE faults. The
volcanic rocks and conglomerates were torn apart and separated into rotated blocks
of strata that now strike predominantly northwest and dip 10-25 degrees northeast to
25 degrees southwest.
Figure 9.2. Geologic map encompassing the Cieneguita, La Viruela-La Cruz, and Cerro de Oro
areas.
Figure 9.3. Volcanic stratigraphic column of the La India area as determined by T Longo.
Figure 9.4. 40Ar/39Ar ages of the lower Cenozoic volcanic rocks from the La India area
displayed as a function of stratigraphic position. Two 40Ar/39Ar determinations returned
middle Miocene ages from post-mineral supergene alunite. The span of time for the Laramide
porphyry event is referenced in the upper right.
Figure 9.5. Drillhole fence diagram through Viruela - La Cruz zone. General orientation
looking northeast.
Figure 9.8. Detailed geologic map of the Tarachi area as determined by T. Longo.
10 DEPOSIT TYPES
The mineral occurrences present in the Cieneguita, La India, and Main Zones of the
project area, and the deposit type being sought, are volcanic hosted, epithermal,
high sulfidation (HS) gold-silver deposits. Such deposits may be present as veins
and/or disseminated deposits. Some of the most intensely studied and described
HS deposits include Summitville, Colorado (Stoffregen, 1987; Gray and Coolbaugh,
1994), Goldfield, Nevada (Ransome, 1909, Ashley, 1974; Vikre, 1989), Lepanto,
Philippines (Hedenquist et al, 1998) and Julcani, Peru (Petersen et al. 1977; Deen et
al. 1994). Based upon these studies and others, excellent compilations of general
characteristics and genetic and empirical models have been presented by Hayba et
al. (1985), Heald et al. (1987), Berger and Henley (1988) and Arribas (1995).
General characteristics of HS deposits include: located within plutonic-volcanic arcs;
associated with intermediate calc-alkaline rocks, often in dome complexes; alteration
mineral assemblages indicative of high temperature acidic hydrothermal fluids,
including an advanced argillic assemblage characterized by one or more of
pyrophyllite, alunite, dickite, kaolinite, and diaspore; silicification and acid leaching of
principal hydrothermal fluid conduits (forming the clichéd “vuggy silica” alteration);
presence of minerals indicative of high sulfidation states, principally the sulfosalt
enargite or its low temperature polymorph luzonite; economically important
quantities of Au and/or Ag and/or Cu; and alteration zoning typified by a central zone
of silica alteration flanked by a zone of advanced argillic alteration, which in turn is
surrounded by illite dominated argillic alteration.
Over of 380,000 ounces per year of Sierra Madre gold production currently comes
from this type of deposit. Some currently exploited examples are listed below. The
mineralization described for the mines in this section is not necessarily
indicative of the mineralization at the La India, Sonora property.
At the Tarachi prospect, surface outcrop mapping and drillhole data indicates that
the gold system there exposed is best classified as a low sufidation epithermal gold
deposit. Low sulfidation deposits may be present as veins and/or disseminated
deposits and hosted by intrusive, volcanic, and sedimentary rocks. Features
common to such deposits (Buchanan, 1981; Hayba et al., 1985; Heald et al., 1987;
Bonham, 1988; Berger and Henley, 1989; Albinson et al., 2001) include:
11 MINERALIZATION
11.1 General
This North Zone is underlain by andesitic and felsic fragmental volcanic strata.
Stratigraphically controlled zones of silica alteration and gold mineralization are
restricted to the felsic units and crop out extensively at the Cieneguita, Española,
and Cochis areas. The mineralized strata dip gently to the west, and the silicified
zones crop out as prominent ridge capping units and dip slopes. The silicified strata
are 30 to 60m thick, with downdip extent of 300m or more. The La Cieneguita zone
is semi-continuously exposed for over 1,300m of strike length, and erosional or fault
offset remnants of the silicified zone are exposed at the Española and Cochis areas
located to the east and southeast respectively. Oxidation is intense and complete
throughout the total thickness of the mineralized zone.
The inactive La India mine workings are developed in argillized porphyritic dacite
intrusive that underlies silicified felsic fragmental strata. The silicification appears to
be controlled by both stratigraphy and by high angle structures and may be part of
the silicified zone exposed to the north at the La Española and La Cieneguita areas.
In contrast to other mineralized zones in the region, where gold is generally
restricted to silicified zones, at the La India mine significant gold mineralization
occurs in argillized volcanic units. The La India area is also unusual in that thus far,
it is the only gold occurrence in the project area that is also associated with
disseminated copper mineralization, and recent drilling has demonstrated a Au-Cu-
Mo metal assemblage in mineralized porphyry. Gold and copper mineralization is
associated with quartz stockwork veinlets in the dacite with quartz-sericite-
tourmaline alteration. This style of mineralization and alteration is characteristic in
other Cu-Au porphyry-style deposits of the Sonora, Mexico. Coxcomb textured and
drusy quartz veins with molybdenite and pyrite that resemble D-veins in the dacite
porphyry are found at depths of 200 to 300 m below surface.
North Zone oretype domains were defined by H Smit and F Bourke of Grayd
Resources on the basis of alteration mineral assemblages and the form or control of
gold occurrence (Smit, 2008). M Gray reviewed the domain definitions and agreed
that the oretype domains identified are appropriate for the deposit and valid for
resource estimation purposes. The domain descriptions presented by Smit (2008
and personal communication) are summarized as follows:
Domain 18: Silicified and clay altered breccia, controlled by low angle
structural zone, continuous and correlated between drillholes only in the north
part of the Cieneguita area. Occurs at the base of Domain 12 and is
observed in drill core and underground workings as a zone of brecciated
massive silicified dacite and the underlying silica and clay altered andesite,
containing abundant hematite in fractures.
Figures 11.1 and 11.2 demonstrate the typical morphology of the most significant
North Zone ore domains and the spatial relationships between them. Drill results
are summarized in Appendix A of this report.
Figure 11.1. Section 706,300E, Cieneguita area, North Zone, showing relationships between
oretype domains 12, 14 and 18.
Figure 11.2. Section 3,179,175 Cieneguita area North Zone, showing relationships between
oretype domains 11, 12 and 18.
The Main Zone target area is comprised of the La Viruela, La Cruz, and Cerro de
Oro areas where gold concentrations are hosted by 6 distinct oretype domains.
Oretype domains were defined by H Smit and F Bourke of Grayd Resources on the
basis of alteration mineral assemblages and the form or control of gold occurrence
(Smit, 2008). M Gray reviewed the domain definitions and agreed that the oretype
domains identified are appropriate for the deposit and valid for resource estimation
purposes. The domain descriptions presented by Smit (2008 and personal
communication) are summarized as follows:
Domain 1: Dacite unit, variably altered to silica, clay and alunite mineral
assemblages, in the La Viruela and La Cruz areas. This domain is defined
both by lithology and alteration. Alteration is most intense in areas of high
angle structures and is in general most intense in the Viruela area. Where
quartz phenocrysts are preserved conclusive identification of the dacite is
possible, whereas in other cases the unit is defined on the basis of its
consistent stratigraphic position overlying the Domain 2 stratiform massive
silica unit.
Domain 2: Massive silica unit, developed primarily in dacitic tuff, but also may
be developed in contact zone with andesites and dacites in the La Viruela and
La Cruz areas. Forms intense stratiform zones of silica replaced rock, locally
with hydrothermal clays. Field relationships indicate that the massive
silicification predated the economically important gold deposition event.
Domain 3: Vuggy silica-silica alunite unit. Silica alunite altered rock, typically
developed in fine grained andesite tuffs, often with distinct vuggy silica
texture, found in the La Viruela area. Mapping and drillhole data demonstrate
that the distribution of this unit is controlled by high-angle northeast-striking
structures and by the lower contact of the Domain 2 massive silica unit. It
typically forms an irregular layer developed at the base of Domain 2 in the La
Viruela area and narrow high angle tabular bodies that follow northeast
structures. A silica-clay altered andesite zone is present at La Viruela,
occurring in gradational contact with the lower contact of Domain 3, reflecting
a decreasing alteration intensity in the andesite tuff. In the La Cruz area, it
occurs at the base of the Domain 2 massive silica unit. In the 2009 resource
model this material was modeled separately as Domain 4, but subsequent
drilling and analysis showed that the silica-clay altered zone is a gradational
zone at the boundary of the other domains, is volumetrically insignificant, and
cannot be accurately modeled as a distinct unit. Domain 4 is no longer used
in the resource model and the mineralized silica-clay altered zones at the
periphery of Domains 2 and 3 are included within the respective domains.
clay altered andesite with irregular quarts veinlets and stockworks that cannot
be specifically correlated between drillholes. Occurs stratigraphically lower
than Domain 2. Drillhole data indicates that this alteration style is at least in
part centered about an andesitic-dacitic porphyry body. It also occurs
peripheral to the silica bodies (Domain 6) in the La Cruz area. Where
unoxidized contains 3 to 5% disseminated pyrite.
Figures 11.3 to 11.5 demonstrate the typical morphology of the Main Zone ore
domains and the spatial relationships between them. Drill results are summarized in
Appendix A of this report.
Locally, auriferous hydrothermal breccias are developed along high angle faults and
they appear to post date all other alteration and mineralization events The silica-
alunite alteration zones at La Viruela and La Cruz are continuous for hundreds of
meters along strike, but have been offset by northwest striking high angle normal
faults (Longo, 2006a, 2006b, 2006c). Oxidation extends to depths of greater than
100m along structural zones and the majority of the drill tested mineralization is
oxide material. Highest grades and continuity of mineralization are found in the La
Viruela area, but mineralization of varying tenor and style is continuous between the
La Viruela, La Cruz, and Cerro de Oro areas.
Figure 11.3. Section 3,176,600 La Viruela area showing typical morphologies and spatial
relationships of Main Zone ore domains 1, 2, and 3.
Figure 11.4. Section 3,176,100 La Cruz area showing typical morphologies and spatial
relationships of Main Zone ore domains 5 and 6.
Figure 11.5. Section 3,176,500N Viruela West area showing morphology of Main Zone ore
domain 7.
11.4 Tarachi
The mineralization at Tarachi was only recently discovered and is as of yet only
partially understood. The hydrothermal alteration mineral assemblages observed at
Tarachi contrast with those of the Cieneguita, La India, and Main zones; the latter
are characterized by massive, pervasive silica-alunite alteration, which has thus far
not been observed at Tarachi. Stratigraphic controls to mineralization are dominant
in the Cieneguita, La India, and Main zones, but at Tarachi structural controls
appear to be more important than stratigraphic controls. A further difference is the
presence of sheeted quartz veins at Tarachi, which locally host high grade gold
concentrations and minor amounts of molybdenite. A schematic sketch of the
mineralization style at Tarachi is presented as Figure 11.6.
Gold mineralization in the Tarachi area is associated with sheeted and banded black
to gray quartz veins hosted in dacite. Gold is strongly associated with molybdenum
and to a lesser degree with Zn and Mn. Concentrations of sheeted and banded
quartz veins define central zones of gold mineralization that are progressively
enveloped by 1-5 m-wide zones of kaolinite-dickite alteration mineral assemblages
that grade outward to illite-smectite-magnetite-pyrite and distal chlorite-zeolite-
calcite-hematite-pyrite alteration assemblages. At least three stages of quartz
veining has been identified as follows: 1) early stage black quartz breccia and veins
with irregular vein walls with <0.1-0.5g/t Au, 10-80 ppm Mo, >100 ppm Zn, illite-
smectite alteration; (2) later banded and sheeted quartz veins with >0.5-5.0 g/t Au
(up to 22.9 g/t), >100 ppm Mo (up to 0.4% Mo), < 100 ppm Zn, kaolinite-smectite
±dickite alteration; and (3) latest barren tan banded quartz veins with planar vein
walls and brassy pyrite fracture coatings. Concentrations of quartz veining has been
identified in four zones known as Las Huejas, Llano, Llano Grande, and Rodado
(Figure 11.7). Veins strike predominately E-W to NE. In the Llano zone the quartz
veining is concentrated along the margins of a westerly trending, fine-grained
basaltic-andesite dike. The margins of the dike provided a permeable pathway for
the fluid flow (Figure 11.6). No one genetic model has been applied to the mineral
occurrences at Tarachi, however, both low-sulfidation epithermal Au-Ag vein and
Maricunga-style Au porphyry models have been proposed as possible analogies.
Further work is required before a deposit type is defined for Tarachi.
Surface mapping and sampling have outlined a greater than five square area with
gold potential. Tarachi is expected to be a focus of future drill programs at the La
India project.
11.7. Geologic map of Tarachi area shoing location and trneds of gold bearing quartz veins as
determined by T. Longo. Legend is same as that of Figure 9.8.
The oretype solids model was created in MicroMine by Grayd geologists H Smit and
F Bourke. After appropriate oretype domain definitions were determined for the
North and Main Zones, as described in Items 11.2 and 11.3 of this report, each
drillhole in the resource model database was coded to the oretype domains that it
intersected. A 3-D wire frame of oretype solids was created in MicroMine, and then
projected into 25m spaced north-looking cross sections. The oretype solids on
section were independently reviewed by M Gray, who suggested changes to insure
that the oretype solids faithfully reflected drillhole data and known geologic controls
to gold distribution. H Smit and F Bourke of Grayd reinterpreted the oretype domain
model on section and plan, and the 3-D wireframe solids were adjusted to respect
the revised sectional and plan view interpretations. The new 3-D oretype solids
were then projected onto 25m spaced north-looking sections and independently
checked by M Gray who verified that they faithfully respected all drillhole data,
respected the known geologic controls to mineralization, and were geologically
reasonable. A 10x10x6m (x,y,z) block model was cut from the oretype solids. The
block model, together with the complete drillhole database, was passed to Giroux
Consulting Ltd of Vancouver, British Columbia, who in turn conducted geostatistical
studies to determine appropriate grade interpolation parameters, which
subsequently were used by Giroux to estimate Au grades for each block, as
described in Item 19 of this report. Topographic surface control for the model was
12 EXPLORATION
Mapping and rock chip sampling has been conducted for approximately one third of
the claim block, with activities focused on the La India concessions, the Tarachi
concessions, the La Viruela-La Cruz area, and the central portion of the Triple A
claim. Mapping at 1:20,000 scale identified zones of interest that were later mapped
at scales of 1:5,000. In 2004 mapping was conducted by consultant geologist
Shane Ebert Ph.D., P. Geo., and by RGM senior partner M. Castellanos. During
2005 and 2006 mapping programs were conducted by RGM staff geologists J.
Gonzalez, E. Paez, M. Tovar, and by Newmont Mining geologists T. Longo, S.
Moore, and J. Trujillo. Mapping completed during 2007 and 2008 was by RGM
geologists, Grayd geologist T. Longo, and consultant C Greig. Mapping in 2009 and
2010 was conducted by T Longo and RGM geologists. Rock chip sampling of altered
zones was conducted concurrent with the mapping and were analyzed by an
independent international laboratory, ALS Chemex. Details of the sampling program
are presented in Item 14 of this report. Representative samples of alteration zones
were analyzed by short wave infrared spectrographic analyses (PIMA Field
Spectrometer) to determine alteration mineral assemblages.
12.2.1 Procedure
The HoistEM system utilizes a simple coplanar geometry with the transmitter and
receiver loops suspended 30 m beneath the aircraft. The HoistEM receiver 2
is a
single-turn 10 m diameter coil with an effective area of 10,000 m including
preamplifier gain. The data acquisition system samples 112 channels of 101 µs
width commencing 54 µs after the end of the current turn-off ramp. In addition,
another 12 high-frequency early-time channels of 25.25 µs width are sampled.
During data processing these 124 channels are integrated into 21 working channels
between 65.70 µs and 12.676 ms. The transmitter current is nominally 2
300 amps
into a single-turn 22 m diameter loop with an output of 120,000 Am . Alternating
positive and negative transmitter pulses consist of an on-ramp of 800 µs, current on-
time of 4.2 ms and off-ramp of 40 µs. The base frequency of the system was set to
30 Hz due to the local power line frequency of 60 Hz. In addition of the EM,
magnetics data were recorded using an elegant standalone towed-bird cesium
magnetometer system. The magnetometer sensor was clamped on the 30 m
suspension cable 10 m above the EM system.
Lines were spaced 100 m apart on east-west lines with the vertices for the survey
block those of the concession package. The aircraft altitude was specified for a
nominal height of 80 m which placed the EM transmitter and receiver at 50 m above
ground and the magnetometer at 60 m above ground. A histogram of the laser
altimeter showed an actual average of 60 to 65 m above ground surface for the EM
receiver. Resistivity slices and sections were computed using Newmont’s in-house
developed algorithms.
12.2.2 Results
A total of 17 target areas were defined by the airborne geophysics and mapping
programs, as listed in Table 12.2 and shown in Figures 12.1 through 12.5. Detailed
descriptions of each target may be found in the 2006 Technical Report previously
released for the La India project (Gray, 2006).
Figure 12.1. Resistivity depth slice at 50m, red is most resistive, blue is least resistive.
Figure 12.2. Resistivity depth slice at 100m, red is most resistive, blue is least resistive.
Figure 12.3. Resistivity depth slice at 150m, red is most resistive, blue is least resistive.
Figure 12.4. Resistivity depth slice at 200m, red is most resistive, blue is least resistive.
Total field magnetic data is presented in Figure 12.5. The magnetic features
discerned correlate with regional lithologic and structural features and are useful
aids to the geologic mapping.
Figure 12.5. Total field magnetic plot. Red denotes area of greatest magnetic response.
12.3.1 Procedure
In June 2005, features identified by the airborne Hoist EM survey were further
investigated by means of ground based, pole-dipole time domain induced
polarization surveys. Approximately 30 line-kilometers were completed (Figure
12.6). Detailed discussion of the survey results were presented in the 2006
Technical Report for the La India project (Gray, 2006). The objective of the survey
was to determine the most likely explanation of the previously identified resistors by
determining their three dimensional morphology. Survey parameters according to
Foley (2006b) were:
Figure 12.6. Induced polarization ground geophysical survey lines (in red). Triple A and La
India claim boundaries shown in black.
In June of 2009, Gradient Geophysics Inc. spent 9 days with one operator in the
Main Zone resource area of the property conducting a magnetometer survey. A
GEM system GSM–19W, overhauser “walking” magnetometer field roving unit and a
GEM system GSM–19, overhauser base station magnetometer were used. The
roving unit was set up to take time, magnetometer (nT) and real time GPS in WGS
84 coordinate system at every 2 seconds. This translates to approximately every 2
meters. The base Station was set up to take time and magnetometer readings every
30 seconds and data was corrected using base station readings on a daily basis.
A ground magnetic survey was completed over the north part of the Main zone and
the North zone. It in part overlapped with the northern part of the 2009 survey in the
Main zone. Lines were east-west, spaced 50 m apart and readings were taken
every 12.5 m. The survey outlined the same magnetic-bearing intrusive bodies on
the west side of the main zone that the 2009 survey outlined. A large area of higher
response in the north part of the 2010 grid has not yet been explained.
At Tarachi, lines were run north-south 100 m apart. Readings were taken every
12.5m. The survey showed higher magnetic response over areas underlain by
basalt. An area of higher magnetic response in the northwest corner of the grid has
not yet been explained.
12.5.3 Tubos
A small grid with 3 east-west lines was surveyed at the Tubos prospect. A magnetic
high in the east part of the grid has not been explained to date.
A GDD Tx II transmitter was used to inject current on a two seconds on, two
seconds off duty cycle. Current was injected at 50m to 100m intervals using three
long (75 cm) electrodes with the ground soaked with a salt solution to improve the
ground contact.
Two remote stations, consisting of four long electrodes, were employed during each
3DIP survey. Due to the size of the La India and Tarachi grids more than one
transmitter location was used and, as a result, multiple remote locations were
needed. To achieve better depth penetration and lower noise, when surveying on a
given half of the grid the remote on the opposite side was used. For example, on the
La India grid, the east remote was used when surveying the western half of the grid.
An IP survey was conducted over the central part of the La India grid, where drilling
had indicated potential for a copper+/-gold+/-molybdenum porphyry. Line spacing
for the IP was 100m in the central part of the area surveyed and 200 m for the
outside lines. Results show moderate to high chargeability in areas with known
pyrite and copper +/- molybdenum mineralization. They do not indicate the
presence of a large porphyry-type deposit. Higher resistivity responses occur where
there is silica-alunite altered rock at or near surface.
12.6.2 Tarachi
At Tarachi, an IP survey was conducted over all the lines that were used in the
magnetic survey. A moderate to high chargeability was found over most of the north
and west parts of the gird. Drilling shows this area has ubiquitous pyrite in the rock.
Highest chargeability appears to be related to 3 to 5% brassy pyrite in fractures.
Low chargeability zones in the area of the higher chargeability are underlain by the
upper rhyolite. The lows are interpreted to be the result of not getting the current
through the very competent post-mineral rhyolite into the underlying rocks. This is
supported by the fact that RC-10-577 and 578, drilled to test under the rhyolite,
intersected altered and pyritic dacites though the IP showed lower chargeability in
the area.
The best gold intercepts to date are on the edges of the IP chargeability. However,
additional drilling in other areas is required to better correlate the geophysical
signature with gold potential.
Resistivity shows some weak patterns that have not been explained to date.
The small grid at Tubos has a moderate chargeability in the center and shows a
moderate resistor on the east side. There is not enough data to properly evaluate
the response, however the results indicate that additional geophysics may help to
sort out the geology and mineral potential of the area.
High resolution airphotos of the project area were produced as part of the
photogrammetric process.
13 DRILLING
Drilling campaigns have been conducted on the property by Grayd Resource every
year since 2004 and continue to the present day. Previous operators conducted
exploration drilling in the La Cruz and La Viruela areas, as discussed in Item 8 of this
report. Drillhole logs and assay data from the historical La Cruz and La Viruela
programs are not available to the author nor to Grayd Resource and do not form part
of the project database. For purposes of the resource estimate, data from 95
diamond drillholes and from 510 reverse circulation drillholes completed as of 22
January 2010 were included in the database. All drillholes completed by Grayd
Resources are shown in Figures 13.1, 13.2, 13.3, and 13.4.
In 2004, Grayd Resource completed 1,224 meters of BTW diameter (4.2 cm)
diamond drilling in 11 drillholes within the La India claim at the northern portion of
the claim block Three holes were completed at the La Cieneguita target (North
Zone), one at La Española (North Zone), and seven at the La India target (North
Zone). Drill targets were selected on the basis of rock chip geochemical anomalies
and silica-alunite alteration exposed in surface outcrops. All drill holes were inclined
at approximately –50 degrees and most were drilled due east in order to test
interpreted NE- and NW-striking structures and stratigraphic controls of gold
distribution. Ten of the eleven drillholes intersected gold mineralization, results of
which were presented in the July 2006 Technical Report (Gray, 2006). Drilling was
conducted by Canrock Drilling Services SA de CV. Core logging and sampling was
conducted by staff geologists of Resource Geosciences de Mexico SA de CV,
supervised by Hans Smit, P. Geo., Vice President, Exploration, Grayd Resource Inc.
Logging and sampling was carried out at the project exploration camp located at the
La Amargosa ranch. Core was split with a diamond disk saw, with one half sent for
assay and the other half preserved in the core library. Core recoveries in
mineralized zones averaged greater than 85 percent.
In 2005, 2006, 2007, 2008, 2009, and through 22 January 2010,, Grayd Resource
completed 45,334 meters of 5 ¼ inch diameter reverse circulation drilling in 542
drillholes (Figures 13.1 to 13.4). Drilling was conducted by Layne de Mexico SA de
CV, subsidiary of Layne Drilling Inc. All drillhole collars were surveyed using
differential correction GPS equipment. Silver State Surveys of Oro Valley, Arizona
was contracted to conduct downhole gyroscopic surveys of RC drillholes. Downhole
deviation of drillholes generally does not exceed a few degrees relative to the
planned azimuths and dips. The downhole survey data is included in the project
database and controls the projection of drillhole intercepts used in constructing the
resource model. Logging of drill cuttings and sampling was conducted by staff
geologists of Resource Geosciences de Mexico SA de CV, directed by Hans Smit,
Vice President, Exploration, Grayd Resource Inc. Logging and sampling of reverse
circulation drill cuttings was carried out at the drill site. Samples generated were
split by cyclone and by rotary or Jones splitter. One quarter split of the sample was
sent for assay and the remainder was stored on site in a warehouse at the
exploration camp. Reverse circulation drilling was used both for general exploration
and for resource definition drilling. A total of 510 RC drillholes comprising 40,871
meters are located within the resource area and constrain the resource model
(Appendices E and F). Significant mineralized intercepts are presented in Appendix
A.
Figure 13.1. Map showing all drillhole locations, resource development and exploration, La
India project.
Figure 13.2. North Zone: Location map of diamond and reverse circulation drillholes
completed by Grayd Resource, 2004 through 22 January 2010.
Figure 13.3. Main Zone: Location map of diamond and reverse circulation drillholes
completed by Grayd Resources, 2004 through 22 January 2010.
In 2007 and 2008 Grayd Resource completed 3,948 meters of HQ and PQ diameter
diamond core drilling in 54 drillholes (Appendices E and F, Figures 13.1 to 13.3).
Seven of the drillholes completed within the block model area were used exclusively
for metallurgical testing and do not form part of the resource model database.
Drilling was conducted by Layne de Mexico SA de CV, subsidiary of Layne Drilling
Inc., and Britton Brothers Drilling, a subsidiary of Boart Longyear. All drillhole collars
were surveyed using differential correction GPS equipment. During drilling, Layne
conducted downhole surveys using the Reflex downhole surveying instrument. Data
indicates that borehole deviation from the initial azimuth and inclination was minimal,
seldom exceeding a few degrees. Diamond core holes drilled by Britton Brothers
were not surveyed during drilling, but were later re-entered and gyroscopically
surveyed by Silver State Surveys of Oro Valley, Arizona. Core logging and sampling
was conducted by staff geologists of Resource Geosciences de Mexico SA de CV,
directed by Hans Smit, P. Geo., Vice President, Exploration, Grayd Resource Inc.
Logging and sampling was carried out at the project exploration camp located at the
La Amargosa ranch. Core was split with a diamond disk saw, with one half sent for
assay and the other half preserved in the core library. Geologic information from
the core holes was used to guide interpretation of lithological and alteration contacts,
assays of core samples constrain the resource estimate, and core samples were
used for specific gravity determinations.
of future drill programs at the La India project. Drillhole locations and a drillhole
intercept summary for the 2010 Tarachi drill program is presented in Appendix B.
Concurrent with geologic mapping, project geologists collected surface rock chip
samples of outcropping zones of altered and mineralized rock. Geologists who have
participated in surface rock chip sampling programs include: Hans Smit, P. Geo.,
Vice President Exploration of Grayd Resources; geologists in the employ of
Resource Geosciences de Mexico SA de CV; consulting geologists under contract to
Grayd Resource; and geologists employed by Newmont Mining assigned to the
project. In excess of 9,000 rock chip samples have been collected and analyzed.
The objective of the sampling was to characterize the mineral deposit type(s) and to
define zones of gold enrichment within the extensive alteration zones. Samples were
collected from the entirety of the project claim block. Surface sample locations were
selected to be representative of the geologic feature being investigated. Continuous
channel sample was collected by chipping and collecting rock along a line
perpendicular to the orientation of the structure or feature being sampled. Samples
collected were channel samples, 1 to 2m in length. All samples were collected by
hand, using hardened steel chisels, picks, and geological hammers. Samples were
placed in 7.5 x 12” cloth drawstring sample bags. Sample weights varied from 1.5 to
2.5 kg. Sample spacing was variable, and was a function of exposure of mineralized
or altered rock. Sample numeration was in ascending order, using sample numbers
and sample tags provided by the analytical laboratory. Sample locations were
marked in the field with red spray paint, fluorescent plastic flagging, and aluminum
tags. Sample descriptions, location data, and multi-element assay data were
captured in digital format for importation into map generation and interpretation
software applications.
Surface sample data is not used for estimation of the mineral resources.
Drill core was continuously sampled from inception to termination of the drillhole.
Sample intervals were typically 1m, and varied from this only when geologic contacts
were used to limit a sample interval or poor recoveries necessitated grouping of
sample intervals. Drill core diameter for 2004 drilling was B thin wall (BTW, 4.2cm).
Drill core diameter for 2007 drilling was HQ (6.35cm) and PQ (8.5cm). Drill core
diameter for the 2008 drilling was HQ, whereas 2009 and 2010 drilling was NTW.
Sample intervals were marked on the core by project geologists. One half split of the
core was collected for analysis and one half was retained in the core library. Core
was split with a diamond disk saw.
Industry standard sampling methods were utilized to collect the reverse circulation
drill hole samples. Center return 5 ¼” diameter bits were used. Drilling was
conducted dry unless significant water production or hole plugging required the use
of wet drilling methods. While drilling in dry conditions compressed air was used to
force drill cuttings up the drill string for collection. Cuttings were forced into a
cyclone and Jones splitter as drilling progressed. When drilling in wet conditions,
water and compressed air were injected into the hole to force cuttings up the drill
string and a rotary splitter was employed. Samples were collected from initiation to
termination of the drill hole, at intervals of 1.524m (5 feet). Quarter split sample
weights were approximately 5.9 kg. Of a total of 33,358 meters of reverse
circulation drilling used in the resource model, 3,078 meters (9.2 % of total) was
drilled using wet methods. Intervals drilled wet are as listed in Appendix C.
Surface rock chip samples were collected manually and recovery was 100%.
Surface rock chip samples are not used in the resource estimation
Average recovery for diamond drill core samples was 83% for BQ diameter core
and 85% for HQ diameter core. Faulted and fractured rock formations in the North
Zone created difficult drilling conditions and affected core recovery. Average core
recovery for drillholes in the Main Zone was 86% whereas average core recovery for
drillholes in the North Zone was 82%. Although no statistical bias of gold assays
was noted as a factor of core recovery, as discussed in Item 19 of this report, core
sample intervals with less than 31% recovery were judged to be insufficient to
accurately represent the interval samples thus 523 core sample assays were
removed from the resource model database.
Because of the variable nature of the rock types, fragmentation, and void spaces, it
was not possible to quantify recovery factors for the reverse circulation samples.
Silver State Surveys of Oro Valley, Arizona was contracted to collect caliper
measurements of borehole diameter on a select number of drillholes. Silver State
reported that re-entered 14 RC drillholes and collected caliper measurements.
Silver State advised Grayd that borehole walls are stable and smooth and that no
formations likely to cause downhole contamination were present. Borehole diameter
at collar seldom varied by more than 10% from the bit diameter of 5 ¼ inches (13.34
cm) and diameters generally decreased downhole as a factor of bit wear. Diameter
decrease of as much as 1 inch (2.54 cm) was observed. The average weight of
quarter split RC samples was 5.9 kg, which corresponds to approximately 50% of
the estimated mass of a quarter split of a 1m long, 0.127m (5”) diameter column
without voids and specific gravity of 2.5.
In the opinion of the author, samples collected are of high quality and representative
of the mineralized areas being evaluated.
Diamond and reverse circulation drillholes were selected to target specific geological
or geophysical features, with orientations selected to intersect the interpreted
structural and/or stratigraphic controls of mineralization. Because many drillholes
targeted zones hosting both NW- and NE- striking structures, the majority of the
drillholes were drilled due E or due W in order to test both orientations. With the
exception of the 54 reverse circulation drill sample intervals and the 523 core
samples of low recovery, as discussed in Item 14.2 of this report, drill sample
recovery was adequate to provide representative results for the tested features.
The sample recovered for first 6 meters of most reverse circulation drillholes
consisted of blown out cuttings captured at the collar during setting of surface
casing, thus are not true RC samples. Where drillholes collared in or near the
bedrock surface, these samples are considered relevant data and 1,207 samples of
this type are included in the database, but are tagged as casing samples to allow for
a separate treatment should it be deemed necessary. For the purposes of the
resource estimates presented in this report, these samples are treated identically to
the true RC samples.
Diamond core – reverse circulation twin pairs are available for 30 sets of RC and
DDH drillholes drilled at approximately the same location. Variations between the
mineralized intervals intersected by the RC and diamond drillholes are within the
expected normal range of variability and no bias of gold intercepts related to drilling
method is observed, as is discussed in Item 16 of this report. Statistical comparison
of the entire RC drillhole database to the complete DDH database also indicates no
bias between the sample sets, as more fully discussed in Item 19.
Regular sample intervals of 1.52m were used for reverse circulation drillholes. With
few exceptions, a 1m sample interval was used for diamond core holes. When
geologic contacts between materials likely to be of strikingly different grade were
recognized in drill core, sample intervals were adjusted to avoid mixing different
mineralization types in a single sample.
It is the author’s opinion that sample preparation, security, and analytical procedures
used were adequate to insure the integrity and reliability of the sample data base.
15.1 Personnel
Surface rock chip samples, drill core samples, and reverse circulation drill cutting
samples were collected by project geologists and technicians employed by
Resource Geosciences de Mexico SA de CV or by geologists employed by
Newmont Mining. Hans Smit, P. Geo., Vice President Exploration of Grayd
Resource supervised drilling programs and participated in surface sampling
programs conducted in 2004, but neither he nor other employees, officers, directors,
or associates of Grayd were directly involved in drillhole sample collection or
preparation.
Each sample was dried and the entire sample was crushed to better than 70%
passing a 2 mm (Tyler 10 mesh) screen. Using a riffle splitter, a split of up to 250
grams was taken and pulverized to better than 85% passing a 75 micron (Tyler 200
mesh) screen.
Gold content was first analyzed utilizing standard fire assay fusion, followed by
Atomic Absorption Spectroscopy (AAS). For those samples that yielded assays
greater than 10,000 ppb Au (or 10 gpt Au), the sample was assayed again utilizing
standard fire assay fusion, followed by gravimetric analysis. Metallic or screen fire
assays were conducted on select samples, as described in Item 16 of this report.
The two standard fire assay methods and their detection and upper limits are
described below.
Metal: Gold
Sample Decomposition: Fire Assay Fusion
Analytical Method: Atomic Absorption Spectroscopy (AAS)
A prepared sample is fused with a mixture of lead oxide, sodium carbonate, borax,
silica and other reagents as required, inquarted with 6 mg of gold-free silver and
then cupelled to yield a precious metal bead.
The bead is digested for ½ hour in dilute nitric acid. Hydrochloric acid is then added
and the solution is digested for an additional hour. The digested solution is cooled,
diluted to 7.5 ml with demineralized water, homogenized and then analyzed by
atomic absorption spectrometry. The detection limit is 5 ppb (.005 gpt) and the
upper limit is 10,000 ppb (10 gpt).
Metal: Gold
Sample Decomposition: Fire Assay Fusion
Analytical Method: Gravimetric
A prepared sample is fused with a mixture of lead oxide, sodium carbonate, borax,
silica and other reagents in order to produce a lead button. The lead button
containing the precious metals is cupelled to remove the lead. The remaining gold
and silver bead is parted in dilute nitric acid, annealed and weighed as gold. Silver,
if requested, is then determined by the difference in weights. Optionally, blanks with
known silver and gold content can be assayed at the same time to determine the
correction factor for silver loss in the fusion and cupellation. The detection limit is 50
ppb (.05 gpt) and the upper limit is 1,000 gpt.
All other elements listed below were analyzed utilizing Inductively Coupled Plasma -
Atomic Emission Spectroscopy (ICP - AES) methods. The method and the detection
and upper limits for each element are described in Table 15.1 below.
A prepared sample (0.50 grams) is digested with aqua regia for at least one hour in
a hot water bath. After cooling, the resulting solution is diluted to 12.5 ml with
demineralized water, mixed and analyzed by inductively coupled plasma-atomic
emission spectrometry. The analytical results are corrected for inter-element
spectral interferences.
Detection Upper
Element Symbol Limit Limit
* Aluminum Al 0.01% 15 %
Antimony Sb 2 ppm 1%
Arsenic As 2 ppm 1%
* Barium Ba 10 ppm 1%
* Beryllium Be 0.5 ppm 0.01 %
Bismuth Bi 2 ppm 1%
Boron B 10 ppm 10,000
ppm
Cadmium Cd 0.5 ppm 0.05 %
* Calcium Ca 0.01% 15 %
* Chromium Cr 1 ppm 1%
Cobalt Co 1 ppm 1%
Copper Cu 1 ppm 1%
* Gallium Ga 10 ppm 1%
Iron Fe 0.01% 15 %
* Lanthanum La 10 ppm 1%
Lead Pb 2 ppm 1%
* Magnesium Mg 0.01% 15 %
Manganese Mn 5 ppm 1%
Mercury Hg 1 ppm 1%
Molybdenum Mo 1 ppm 1%
Nickel Ni 1 ppm 1%
Phosphorus P 10 ppm 1%
* Potassium K 0.01% 10 %
* Scandium Sc 1 ppm 1%
Silver Ag 0.2 ppm 0.01 %
* Sodium Na 0.01% 10 %
* Strontium Sr 1 ppm 1%
Sulfur S 0.01 % 10 %
* Thallium Tl 10 ppm 1%
* Titanium Ti 0.01% 10 %
* Tungsten W 10 ppm 1%
Uranium U 10 ppm 1%
Vanadium V 1 ppm 1%
Zinc Zn 2 ppm 1%
16 DATA VERIFICATION
16.3.1 General
16.3.2 Mapping
16.3.3 Assays
16.3.3.1 Blanks
During the 2004 diamond drill program project geologists inserted blank samples
into the sample stream at an interval of one blank sample every 50 samples on
regular intervals. Blank material during the 2004 diamond drill program was
prepared from manually crushed post-mineral rhyolite that outcrops in the project
area. Numerous assays of the rhyolite prior to initiation of the drill program failed to
detect gold above the 0.005 ppm assay limit, however these blank samples are not
“certified” samples prepared by round robin laboratory testing of a bulk homogenized
sample. Detection of gold in these blank samples is not definitive proof of sample
preparation or analytical errors, as the possibility that the blank sample itself
contains some gold cannot be completely discounted. Nonetheless, these blank
samples are an indicator of potential sample preparation and/or analytical errors. A
total of 30 blanks were inserted into the diamond drill core sample stream and 29 of
the blanks were preceded by a core sample containing detectable gold. In 6 of
these 29 cases, the blank sample also returned a detectable gold assay. The blank
samples that were immediately preceded by the highest grade drill core samples
tended to yield the highest measured gold concentrations, with a maximum “blank”
assay of 0.025 ppm gold. If it is assumed that the blank samples truly are “blank”
and do not contain gold above the 0.005 ppm detection limit, then these data are
consistent with a slight and immaterial amount of contamination during sample
preparation. This possible error is not considered significant. Three diamond
drillholes from the 2004 campaign completed in the Cieneguita area were used for
estimation of mineral resources.
In 2006 a certified blank was prepared for project use. The blank sample was used
beginning with reverse circulation drillhole RC06-15 and diamond drillhole DDH07-
12. The blank sample was prepared from mechanically crushed and homogenized
unaltered andesite that outcrops in the project area. A bulk sample of the andesite
was collected and sent to Sonora Sample Preparation (Hermosillo, Sonora) for
crushing and homogenization. After the sample was homogenized multiple samples
(n= 55) were sent to two independent laboratories in Vancouver, BC: Acme and IPL.
Assay results indicate that this material contains less than 5 ppb gold, with a
maximum of 7 ppb Au, a minimum of <2 ppb Au, a mean of 2.4 ppb (calculated
setting <2 ppb assays to 2 ppb) and standard deviation of 0.9, thus this material is a
suitable blank for quality control purposes (Appendix D). During the 2006, 2007,
2008, 2009 and January 2010 diamond and reverse circulation drill programs,
project geologists inserted blank samples into the sample stream at an interval of
one blank sample approximately every 40 samples on irregular intervals. Blanks
were inserted into the sample stream such that they were preceded by zones
interpreted to be mineralized. These blank samples are a useful indicator of
potential sample preparation and/or analytical errors.
A total of 876 certified blanks, equivalent to approximately 2.4% of all drill samples
submitted by Grayd for assay, were inserted into the drill sample stream and 844 of
these blanks were preceded by a sample containing detectable gold. In 601 of
these 844 cases, the blank sample also returned a detectable gold assay (Figures
16.1 and 16.2 and Tables 16.1 and 16.2). A total of 74 blank samples yielded in
excess of 0.020 gpt Au and 6 blanks assayed greater than 0.100 gpt Au. The blank
samples that were immediately preceded by drill cutting samples in excess of 4.0
ppm Au tended to yield the highest measured gold concentrations (Figure 16.2). The
maximum “blank” assay of 0.64 ppm gold was preceded by a sample assaying 4.99
ppm Au. The highest-grade sample that preceded a blank assayed 32.2 ppm Au and
the following blank assayed 0.078 ppm. When blank samples yielded anomalous
gold concentrations, the blanks and samples in sequence were re-assayed. If it is
assumed that the blank samples truly are “blank” and do not contain gold above the
0.005 ppm detection limit, then these data are consistent with a slight and immaterial
amount of contamination during sample preparation. This possible error is generally
less than 0.02 gpt, and is notable only for the highest grade samples and is not
considered significant for purposes of resource estimation.
Figure 16.2. Gold assays, certified blanks and samples immediately preceding blanks, 2006
through Jan 2010 drill programs.
16.3.3.2 Standards
During the 2004 diamond drilling program standards were inserted into the sample
stream approximately every 40 samples. Three different standards of different gold
grades were used. The standards were prepared and certified by CDN Resource
Laboratories Ltd. of Canada. The standards were in the form of pulps and were
inserted into the sample stream after the laboratory had completed its sample
preparation. Standards CDN-GS-1, CDN-GS-10, and CDN-GS-13 were used. A
comparison of standard assay results from ALS Chemex to the certified assay
means for the standards indicates that the assays obtained during the 2004 diamond
drilling program are reliable. The interested reader may find details of the 2004 drill
program presented in the July 2006 La India Technical Report (Gray, 2006) and
available on SEDAR.
During the 2006, 2007, 2008, and 2009 diamond core and reverse circulation drill
programs, standards were inserted into the sample stream approximately every 40
samples. Six different standards of different gold grades were used. A total of 892
standards, equivalent to approximately 2.4% of all drill samples submitted by Grayd
for assay, were certified reference standards. The standards were prepared and
certified by Rocklabs Ltd. of New Zealand. The standards were subjected to round
robin testing and verification by multiple commercial laboratories. The standards
were in the form of pulps and were inserted into the sample stream after the
laboratory had completed its sample preparation, thus the standards serve to test
the analytical accuracy of the lab, but do not address the issue of contamination
during sample preparation.
A comparison of standard assay results from ALS Chemex to the certified assay
means for the standards indicates that the assays obtained during the Grayd drilling
programs are reliable, although the Chemex assays may be slightly and immaterially
understating gold contents in the drill samples. The ALS Chemex assay data shows
a slight negative bias of less than 3 % for standards at grades greater than 0.6 gpt
Au, (Table 16.2 and Figures 16.3 to 16.10). The data suggests that the ALS
Chemex assays may slightly understate gold contents for concentrations at or near
the average deposit grade.
0.90
0.85
Au (ppm)
0.80
0.75
0.70
637742
637820
637480
637539
637660
668540
668640
668680
668780
668880
668980
669040
669140
669240
669380
669480
670040
670180
670280
670380
670440
681040
681140
681240
681340
681440
Au assay, Standard A, ALS Chemex mean mean +2 std dev mean -2 std dev2
Figure 16.3. ALS Chemex assay results on chart showing certified mean and 2X standard
deviation range for standard A, OxF41.
1.20
1.10
Au (ppm)
1.00
0.90
0.80
12580
12740
12940
13140
13340
21540
21741
21940
22140
22340
637780
637580
668580
668840
669080
669280
669440
670150
670340
681180
681380
681580
681780
681940
715140
715340
684040
684241
684540
684763
684880
753183
753382
753540
753840
754040
754340
754540
754740
754940
756140
756340
756540
756740
756940
Au assay, Standard B, ALS Chemex mean mean +2 std dev mean -2 std dev2
Figure 16.4. ALS Chemex assay results on chart showing certified mean and 2X standard
deviation range for standard B, OxG38.
0.70
0.65
Au (ppm)
0.60
0.55
0.50
357400
372180
372540
372900
388980
417820
418180
429040
429720
471180
472540
472900
512920
514280
514640
515000
515380
515740
516100
516460
516820
517220
517460
521280
590120
590480
590840
631140
631500
632360
633220
633500
641080
641440
642600
681740
684080
684340
684640
684840
715080
715380
753140
753440
753684
753980
754241
754480
754780
756080
756380
756680
756880
768180
768540
768900
769280
836120
836480
840347
840760
840960
841320
841680
842080
842440
842800
863720
864040
864400
864680
865040
865400
865760
866120
886100
887280
Au assay, Standard C, ALS Chemex mean mean +2 std dev mean -2 std dev2
Figure 16.5. ALS Chemex assay results on chart showing certified mean and 2X standard
deviation range for standard C, OxE42.
0.50
Au (ppm) 0.45
0.40
0.35
0.30
12681
12780
12880
12980
13080
13180
13280
13380
13480
21580
21681
21780
21880
21980
22070
22180
22270
22380
22470
Axis Title
Au assay, Standard D, ALS Chemex mean mean +2 std dev mean -2 std dev2
Figure 16.6. ALS Chemex assay results on chart showing certified mean and 2X standard
deviation range for standard D, OxD43.
1.50
1.40
1.30
Au (ppm)
1.20
1.10
1.00
111780
112070
112270
143040
143580
143820
313020
313260
313500
313740
313980
357220
357680
357920
358220
358500
372340
372700
388900
417860
418220
429080
429640
471100
471460
472820
515100
515300
515660
516020
516260
516500
516740
517100
81170
81370
81740
82140
82438
82680
82960
89270
89580
89870
Au assay, Standard E, ALS Chemex mean mean +2 std dev mean -2 std dev2
Figure 16.7. ALS Chemex assay results on chart showing certified mean and 2X standard
deviation range for standard E, OxH52.
0.30
0.25
Au (ppm)
0.20
0.15
112030
143080
143620
313060
313460
313860
357260
357560
357960
358340
372380
388820
417900
418500
429800
471500
512620
514320
514920
515460
516060
516540
517140
521200
590160
590760
631300
633140
634280
641600
768340
769060
836280
840538
842600
863640
864200
81240
81780
82270
82640
83000
89430
89940
Au assay, Standard F, ALS Chemex mean mean +2 std dev mean -2 std dev2
Figure 16.8. ALS Chemex assay results on chart showing certified mean and 2X standard
deviation range for standard F, OxC58.
1.40
1.30
Au (ppm)
1.20
1.10
512880
514240
514600
514840
517300
521360
590320
590680
631100
631460
632200
633060
633420
641040
641400
641760
768140
768460
768740
769020
769360
836200
840100
840497
840680
840920
841280
841640
842000
842280
842640
843000
863800
864240
864560
864880
865240
865600
865960
866320
887120
887480
Au assay, Standard G, ALS Chemex mean mean +2 std dev mean -2 std dev2
Figure 16.9. ALS Chemex assay results on chart showing certified mean and 2X standard
deviation range for standard G, OxH55.
0.22
0.22
0.21
Au (ppm)
0.21
0.20
0.20
0.19
Au assay, Standard H, ALS Chemex mean mean +2 std dev mean -2 std dev2
Figure 16.10. ALS Chemex assay results on chart showing certified mean and 2X standard
deviation range for standard H, OxC752
Field duplicates collected at the drill rig were inserted into the sample stream at a
ratio of one duplicate every 40 samples. A total of 702 field duplicates, equivalent to
approximately 1.9% of all drill samples submitted by Grayd for assay, were inserted
into the drill sample stream. Field duplicates consist of a ¼ rig split of the RC drilling
chips collected from the same ½ split that yields the sample sent to the lab. Field
duplicates were submitted blind to the laboratory, i.e. the lab could not distinguish
which samples were field duplicates. A consistent policy on duplicate numeration
was not followed. About 70 % of the duplicates were submitted as the sample
immediately following the original sample, and the remainder were submitted out of
sequence with the original sample. To eliminate statistical noise associated with
assays at or near the detection limit, for statistical evaluation of the data set, sample
pairs with mean gold contents of less than 3 times the detection limit of .005 ppm
were excluded. The rig split duplicates show no bias (~1%) compared to originals
and 90% of rig split duplicates have less than 35% absolute relative difference from
originals (Figure 16.11 and 16.12 and embedded table). Both relative and absolute
values of differences are highest at lower grade ranges. The precision
demonstrated by the rig split duplicates is within normal ranges observed for gold
deposits and the data indicates the sampling is reliable and adequate for resource
estimation purposes.
90.0
80.0
70.0
Percent Absolute Relative Difference
60.0
50.0
40.0
30.0
20.0
10.0
0.0
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
Percentile Rank
Figure 16.11. Percentile plot absolute relative differences of field, preparation, and lab
duplicates.
50.0
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0
-50.0
-60.0
-70.0
-80.0
-90.0
-100.0
0.000 0.200 0.400 0.600 0.800 1.000 1.200 1.400 1.600 1.800 2.000
Mean Assay, Au in ppm, Original-Duplicate Sample Pair
50.0
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0
-50.0
-60.0
-70.0
-80.0
-90.0
-100.0
0.000 0.200 0.400 0.600 0.800 1.000 1.200 1.400 1.600 1.800 2.000
Mean Assay, Au in ppm, Original-Duplicate Sample Pair
A total of 1,414 lab duplicates, equivalent to approximately 3.9% of all drill sample
pulps, were re-assayed by ALS Chemex. Lab duplicates consist of a repeat
analyses of an already prepared and analyzed sample pulp. The pulp re-assays
show less than a 2% bias compared to the original assay and 90% of laboratory
pulp duplicates have less than 13% absolute relative difference from originals
(Figures 16.11 and 16.14 and embedded table). Both relative and absolute values
of differences are highest at lower grade ranges. The precision demonstrated by the
pulp re-assays is within normal ranges observed for gold deposits and the data
indicates the sampling is reliable and adequate for resource estimation purposes.
50.0
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0
-50.0
-60.0
-70.0
-80.0
-90.0
-100.0
0.0000 0.2000 0.4000 0.6000 0.8000 1.0000 1.2000 1.4000 1.6000 1.8000 2.0000
Mean Assay, Au in ppm, Original-Duplicate Sample Pair
ALS Chemex conducted metallic or screen fire assays on 176 samples selected
from mineralized intervals of varying grades. Metallic or screen fire assays test
specifically for the occurrence of gold in the coarse fraction of a sample and the
possibility of an inhomogeneous distribution of coarse particulate gold relative to the
sample size (a phenomena commonly referred to as “nugget effect”). Coarse reject
material from the sample submitted to ALS Chemex for the regular fire assay was
used. The material was screened into two size fractions, plus 100m mesh and less
than 100 mesh. Both fractions were weighed. Multiple analyses of the fine fraction
were performed and the entirety of the coarse fraction was fire assayed. Using the
gold content determined for each size fraction and their respective weights, a gold
content for the entire sample was calculated. This gold content was then compared
to the gold assay returned by standard fire assay of the same sample. A comparison
of results in shown in Figure 16.15. Results from the two methods are nearly
identical. The regression line between the two data sets has a slope of 1.036 and a
correlation coefficient of .972 and the overall mean and assay distribution for the two
data sets are similar, with a 5% difference in mean gold grade between the two
sample populations (table embedded in Figure 16.15). The data indicate that
heterogeneous distribution of gold or “nugget effect” is not a concern for the drillhole
data set. Because no significant bias is present between the data sets, and the
overwhelming majority of assays are standard fire assay, in cases where both
standard fire assay and metallics assays are available, the standard fire assays
were used in the resource model database.
20
Metallics vs. Standard Fire Assay
15
Au ppm, metallics assay
10
0
0 5 10 15 20
Au ppm, fire assay
Figure 16.15. Plot comparing regular fire assay and screen fire assay analytical results.
Subsequent to receipt of assay results from ALS Chemex, pulps were selected and
sent to Acme Analytical Laboratories in Vancouver, British Columbia for analyses.
The objective of the testing was to verify the results provided by ALS Chemex. A
total 595 pulps, corresponding to 1.6% of the database, were assayed by Acme.
Results from the two labs are nearly identical. (Figure 16.16 and 16.17) and the
overall means for the two data sets are within 1%. (table embedded in Figure 16.16).
The data indicate that analytical results provided by ALS Chemex are reliable and
suitable for use in resource estimation.
1.80
1.60
1.40
Au in ppm, ACME assay
1.20
1.00
0.80
0.60
0.40
0.20
0.00
0 1 2
Au in ppm, ALS Chemex assay
Figure 16.16. Plot comparing Acme and ALS Chemex fire assay analytical results.
50.00
40.00
30.00
20.00
10.00
0.00
-10.00
-20.00
-30.00
-40.00
-50.00
-60.00
-70.00
-80.00
-90.00
-100.00
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
Mean Assay, Au in ppm, Original-Duplicate Sample Pair
Figure 16.17. Percent relative difference, ACME check assay vs. ALS Chemex assay.
12
RC DDH Twin, Cerro de Oro Area, separation 6m
10
6
gpt Au
0
0 10 20 30 40 50 60 70 80 90
-2
meters
DDH-07-28 RC-06-52
7
RC DDH Twin, Cerro de Oro Area, separation 4m
4
gpt Au
0
0 10 20 30 40 50 60 70 80 90 100
-1
meters
DDH-07-27 RC-06-54
5
RC DDH Twin, Cerro de Oro Area, separation 6m
3
gpt Au
0
0 20 40 60 80 100 120 140 160
-1
meters
DDH-08-55 RC-06-73
10.0
RC DDH Twin, Cerro de Oro Area, separation 1m
9.0
8.0
7.0
6.0
gpt Au
5.0
4.0
3.0
2.0
1.0
0.0
0 50 100 150 200 250
meters
DDH-07-19 RC-07-142
12
RC DDH Twin, La Cruz Area, separation 2m
10
6
gpt Au
0
0 10 20 30 40 50 60 70 80 90
-2
meters
DDH-07-13 RC-06-89
2.5
RC DDH Twin, La Cruz Area, separation 2m
1.5
gpt Au
0.5
0
0 10 20 30 40 50 60 70 80
meters
DDH-07-23 RC-06-94
0.8
RC DDH Twin, La Cruz Area, separation 2m
0.7
0.6
0.5
gpt Au
0.4
0.3
0.2
0.1
0
0 10 20 30 40 50 60 70 80 90
meters
DDH-07-22 RC-06-69
12
RC DDH Twin, La Cruz Area, separation 7m
10
6
gpt Au
0
0 20 40 60 80 100 120 140 160 180
-2
meters
DDH-07-12 RC-06-44
1.2
RC DDH Twin, La Cruz Area, separation 1m
1.0
0.8
gpt Au
0.6
0.4
0.2
0.0
0 20 40 60 80 100 120 140 160 180 200
meters
DDH-07-14 RC-07-106
1.6
RC DDH Twin, La Cruz Area, separation 2m
1.4
1.2
1.0
gpt Au
0.8
0.6
0.4
0.2
0.0
0 20 40 60 80 100 120 140
meters
DDH-07-20 RC-07-155
3.5
RC DDH Twin, Viruela Area, separation 3m
2.5
2
gpt Au
1.5
0.5
0
0 20 40 60 80 100 120 140 160
meters
DDH-08-42 RC-06-45
10.0
RC DDH Twin, Viruela Area, separation 3m
9.0
8.0
7.0
6.0
gpt Au
5.0
4.0
3.0
2.0
1.0
0.0
0 20 40 60 80 100 120
meters
DDH-07-15 RC-07-161
20.0
RC DDH Twin, Viruela Area, separation 7m
18.0
16.0
14.0
12.0
gpt Au
10.0
8.0
6.0
4.0
2.0
0.0
0 10 20 30 40 50 60 70 80
meters
DDH-08-54 RC-07-145
8.0
RC DDH Twin, Viruela Area, separation 4m
7.0
6.0
5.0
gpt Au
4.0
3.0
2.0
1.0
0.0
0 20 40 60 80 100 120 140
meters
DDH-07-16 RC-07-147
10.0
RC DDH Twin, Viruela Area, separation 2m
9.0
8.0
7.0
6.0
gpt Au
5.0
4.0
3.0
2.0
1.0
0.0
0 10 20 30 40 50 60 70 80 90
meters
DDH-07-17 RC-07-148
3.0
RC DDH Twin, Viruela Area, separation 4m
2.5
2.0
gpt Au
1.5
1.0
0.5
0.0
0 10 20 30 40 50 60
meters
DDH-07-30 RC-07-113
7.0
RC DDH Twin, Viruela Area, separation 3m
6.0
5.0
4.0
gpt Au
3.0
2.0
1.0
0.0
0 20 40 60 80 100 120
meters
DDH-07-18 RC-07-117
20.0
RC DDH Twin, Viruela Area, separation 8m
18.0
16.0
14.0
12.0
gpt Au
10.0
8.0
6.0
4.0
2.0
0.0
0 10 20 30 40 50 60 70 80 90 100
meters
DDH-08-50 RC-07-119
1.0
RC DDH Twin, Viruela Area, separation 4m
0.9
0.8
0.7
0.6
gpt Au
0.5
0.4
0.3
0.2
0.1
0.0
0 20 40 60 80 100 120
meters
DDH-07-24 RC-07-131
12.0
RC DDH Twin, Viruela Area, separation 8m
10.0
8.0
gpt Au
6.0
4.0
2.0
0.0
0 20 40 60 80 100 120 140 160
meters
DDH-07-35 RC-07-98
20
RC DDH Twin, Cieneguita Area, separation 2m
18
16
14
12
10
gpt Au
0
0 10 20 30 40 50 60
-2
meters
DDH-07-37 RC-06-60
6
RC DDH Twin, Cieneguita Area, separation 5m
4
gpt Au
0
0 5 10 15 20 25 30 35 40
meters
DDH-07-39 RC-07-101
6.0
RC DDH Twin, Cieneguita Area, separation 7m
5.0
4.0
gpt Au
3.0
2.0
1.0
0.0
0 5 10 15 20 25 30 35 40 45
meters
DDH-07-57 RC-07-190
18.0
RC DDH Twin, Cieneguita Area, separation 6m
16.0
14.0
12.0
10.0
gpt Au
8.0
6.0
4.0
2.0
0.0
0 10 20 30 40 50 60 70 80
meters
DDH-08-65 RC-07-193
4.5
RC DDH Twin, Cieneguita Area, separation 2m
4.0
3.5
3.0
2.5
gpt Au
2.0
1.5
1.0
0.5
0.0
0 10 20 30 40 50 60 70
meters
DDH-08-64 RC-07-102
9
RC DDH Twin, Cieneguita Area, separation 10m RC103 -DDH58,
separation 15m RC377-DDH58, separation 25m RC103-RC377
8
5
gpt Au
0
0 10 20 30 40 50 60 70 80
meters
8
RC DDH Twin, Española Area, separation 3m
4
gpt Au
0
0 5 10 15 20 25 30 35 40 45
-1
meters
DDH-08-62 RC-06-58
6.0
RC DDH Twin, Española Area, separation 7m
5.0
4.0
gpt Au
3.0
2.0
1.0
0.0
0 10 20 30 40 50 60 70 80 90 100
meters
DDH-08-61 RC-08-289
12.0
RC DDH Twin, Española Area, separation 4m
10.0
8.0
gpt Au
6.0
4.0
2.0
0.0
0 10 20 30 40 50 60 70
meters
DDH-08-63 RC-08-395
M. Gray cross checked the project database against original certified assay sheets
and verified that data was correctly transcribed. Gray verified the electronic
database used by Giroux for resource estimation. The database was provided to
Gray directly by Giroux, and it was compared to certified assay sheets provided to
Gray directly by ALS Chemex. No errors were discovered in the database and it
faithfully reflects the certified assay data. At various times during field visits to the
project the author collected rock chip samples from outcrop, RC cuttings from the
splitter at the drill rig, and drill cutting reject samples from the second split of reverse
circulation drill samples stored on site. The samples were delivered by the author to
ALS Chemex for assay. The resultant database is too small to allow for meaningful
statistical analyses, but the analytical results confirmed the gold mineralization
indicated by previous sampling at the project, as summarized in Table 16.4.
17 ADJACENT PROPERTIES
Numerous historic mine workings and prospects are present with the region that
hosts the La India project, but public domain or historic information is available only
for the Mulatos mine property of Alamos Gold Incorporated, which is immediately
adjacent to, and partly surrounded by, the claims comprising the La India gold
project. The Mulatos mine is located 5.8 km to southwest from the nearest portion of
the Grayd claim block (Figure 17.1). A remaining proven and probable mining
reserve of 61.6 Mt @ 1.21 gpt Au, containing 2.38M oz. gold was reported as of 31
December 2009 (Alamos Gold AIF, 2009). Alamos Gold also reports a proven and
probable minable reserve of 1.6Mt @ 1.58 gpt Au containing 79,600 ounces gold in
oxide ore at the La Yaqui deposit, located 5.7 km east from the nearest portion of
the Grayd claim block (Alamos Gold AIF, 2009). These mineable mineral reserve
estimates are said to follow the required disclosure for reserves and resources
outlined in NI43-101. The author has not reviewed the data and the author cannot
comment on the accuracy of the resource estimates. The estimates were obtained
from sources believed to be reliable but cannot be verified.
Alamos Gold has identified and partially drill tested two exploration targets near the
Grayd concessions. In a public release of information, dated 29 November 2004,
which by Canadian Securities Administrators regulations is available on SEDAR
(System for Electronic Data Analysis and Retrieval), Alamos Gold reported that
reverse circulation drilling at Cerro El Realito, located 1,400 meters east of the La
India target (Figure 17.1), yielded drill intercepts of as much as 24.4 m @ 5.98 gpt
Au. The alteration zone extends to the boundary of the claims controlled by Grayd
and is contiguous with the La India alteration zone. In the 2005 Annual Report
(available on SEDAR), Alamos Gold reported summary results of reverse circulation
drilling at the El Jaspe prospect. El Jaspe is surrounded on the west, north and east
sides by Grayd’s Triple A claim, and at its closest point is only 500m distant from the
Triple A claim boundary (Figure 17.1). Alamos reported that drill holes intersected a
blind zone of gold-silver-copper mineralization hosted by pyritized and silicified
volcanics. The downdip extent of the mineralized zone projects toward the Grayd
claims. Intercepts of 6.1m @ 2.25 gpt Au, 7.6m @ 1.46 gpt Au, and 13.7m @ 0.85
gpt Au were reported. The author has not reviewed the data and the author cannot
comment on the accuracy of these reported mineralized intercepts. The information
was obtained from sources believed to be reliable but cannot be verified. The
mineralization described for the adjacent properties is not necessarily
indicative of the mineralization at the La India, Sonora property.
Historic mining of silver ores is reported from the La Chipriona mine, located 1.5km
north of the La Cieneguita area, but production data is not available to the author.
18 METALLURGICAL TESTING
18.1 General
Beginning in 2007 and continuing until the present, Kappes, Cassiday & Associates
(KCA) of Reno, Nevada has conducted the metallurgical studies for the La India
Project of Grayd Resources. Metallurgical test work has included physical testing
(rock densities and Bond Work Index testing), head analysis, milled bottle roll leach
test work, gravity concentration test work, agglomeration and percolation test work,
column leach test work and environmental test work. All sample preparation,
assaying and metallurgical studies were performed utilizing accepted industry
standard procedures. To date, a total of 22 column leach tests and 30 bottle roll
leach tests have been completed.
Results from metallurgical test work have been formally reported in reports prepared
and issued by KCA (Albert, 2007a, Kappes, Cassiday & Associates, 2008; 2009;
2010a; 2010b). Samples selected for testing represented the economically
important mineralized domains.
Metallurgical testing is ongoing and additional test results have been reported
informally by KCA by e-mail but have not yet been presented in a formal report. The
ongoing work is not included in this study; however, these data have been reviewed
to verify that there are no contradictory results.
In three periods of work, separate core interval samples were used to generate a
total of 13 metallurgical composites. These core composites were tested by both
bottle roll and column leach methods. Also, rejects from reverse circulation and core
drill holes used to generate another 17 composite samples used for bottle roll
testing. These samples are a good representation of the different potential ore zones
and varying lithologies known to exist at La India. The sample composites are
presented in Table 18.1.
Whole core from 2007 drill holes (HQ and one PQ diameter) was used to generate 7
separate composites for testing. The composites were used for bottle roll leach
tests and each composite was used to create -12.5 and a -50mm samples for
column leach tests, excepting one composite of D18 that was only column tested at -
12.5 mm. (13 column and 7 bottle roll tests total). In addition, the 7 composites
were used for a suite of physical and environmental test work.
In 2009, 4 composites were created using half core from 2008 drilling (HQ diameter).
These were used for bottle roll leach tests and for column leach testing at -9.5 mm
and -25mm, excepting one composite of high grade material that was only tested at -
15.5 mm. (7 column and 4 bottle roll tests total). In addition, the 4 composites were
used for a suite of physical and environmental test work.
In 2010, two composites were created from half core from 2009 HQ diameter drill
holes. Each had a bottle roll test and a column leach test at -25mm.
Other bottle roll tests were performed over the last 4 years on composites created
from coarse assay rejects from RC and core drilling.
Upon receipt each core interval was inventoried, weighed and assigned a KCA
Sample Number. Sample preparation was completed to provide test material stage
variably crushed to 100% -50mm, -25mm, -12.5mm or -9.5mm The staged crushed
material was utilized in column leach testing.
Rock density tests were completed on randomly selected pieces of whole HQ and
PQ core. The pieces selected were approximately 5 to 8 centimeters in length and
were selected from each core interval received from the La India Project. The
procedure utilized by KCA for rock density determination is based upon ASTM Test
Method C914, “Standard Test Method for Rock Density and Volume of Solid
Refractories by Wax Immersion”.
Test work was completed on each separate composite by Phillips Enterprises, LLC
of Golden, Colorado (Phillips) for rod mill grindability tests, ball mill grindability tests
and abrasion tests.
Head analyses were completed on the composite samples from the La India Project.
A weighted portion of the head material was crushed to nominal 1.70 millimeters.
Two (2) 500 gram portions were split out and pulverized individually to minus 0.106
millimeters. Each pulverized portion was then assayed utilizing standard fire assay
methods for gold and silver.
A portion of one of the 500 gram pulverized portions for each separate composite
was assayed semi-quantitatively by means of an ICAP-OES for an additional series
of elements and for whole rock analyses. In addition to these semi-quantitative
analyses, the samples were assayed by quantitative methods for total carbon, total
sulfur (sulfur speciation) and mercury. A cyanide soluble copper shake test was also
conducted on a portion of the pulverized head material from each composite.
Head screen analyses with assays by size fraction were completed on portions of
head material utilized for each separate column leach test.
A total of 30 bottle roll leach tests were conducted on both core composites and on
some selected rejects intervals from reverse circulation and core drilling. A weighted
portion of the head material from each core and reverse circulation interval
composites was crushed to nominal 1.70 millimeters and a 1,000 gram portion was
split out. The 1,000 gram portion was either pulverized or ball milled to minus 0.106
millimeters (80% minus 0.075 millimeters) and then utilized for a cyanide bottle roll
leach test.
A higher grade sample, the Cieneguita - High Grade (D18) composite material, was
the only sample tested for gravity concentration processing. A 1,000 gram portion of
the minus 1.70 millimeter crushed material from the composite was milled utilizing a
stainless steel ball mill to achieve an expected P80 of 0.075 mm. The milled material
was then run through a Falcon SB40 Concentrator. Results indicated that 23% of the
contained gold and 26% of the contained silver could be concentrated into a portion
weighing 26% by weight of the feed material. Due to the lack of any real
concentration, gravity testing was discontinued.
The percolation tests were conducted in small columns at a range of cement levels
with no compressive load applied. The purpose of the percolation tests was to
examine the permeability of the material under various agglomeration cement levels
on staged crushed material. Percolation problems were not encountered.
Subsequent testing strongly indicated that these crush sizes were finer than actually
required. Since the adopted crush size was determined to be 100 % minus 25
millimeters further testing of agglomeration was not done.
A total of 22 separate column leach tests were completed utilizing material from
composites generated from the core material received from the La India Project.
Column leach tests were conducted on material stage crushed to 100% minus 50
millimeters, 100% minus 25 millimeters, 100% minus 12.5 millimeters and 100%
minus 9.5 millimeters. Screen analyses with assays by size fraction were completed
on each separate column leach test residue. After screening, each size fraction was
weighed and pulverized. The individual pulverized samples were submitted for gold
and silver analyses by standard fire assay methods. Column test recovery results
were based upon carbon assays vs. the calculated head (carbon assays + tail
assays).
A total of 222 separate core interval samples were used for the rock density
measurements. Densities varied from a low of 1.33 grams per cubic centimeter to a
high of 3.17 grams per cubic centimeter depending upon varying lithology and
sample location. These density measurements plus an additional 31 measurements
from D17 core and surface rock samples were used in the geological and resource
estimation models.
A summary of the rod mill grindability tests, ball mill grindability tests and abrasion
tests as determined by Phillips for the different samples tested is presented in Table
18.2.
The results of bottle roll leach tests are presented in Table 18.3.
Table 18.3. Bottle roll leach test results.
Head Calculated
Average, Head, Avg. Tails, Au Leach Consumption Addition
KCA Au Au Au Extracted, Time, NaCN, Ca(OH)2,
Sample No. Sample Description gms/tonne gms/tonne gms/tonne % days kg/tonne kg/tonne
The results of the laboratory column leach tests were used to establish recoveries
for the various ore types known to exist at La India. Table 18.4 presents the results
of the column leach tests conducted by KCA. Test numbers refer to KCA test
number.
38308 A Silica Structure – La Cruz & 1.69 1.71 0.40 77 50 126 0.53 1.00
38308 B Cerro de Oro 1.69 1.77 0.33 81 12.5 140 0.88 2.00
38314 A Cieneguita – High Grade 9.00 9.01 0.55 94 12.5 126 3.22 3.03
41724 B Viruela High Grade 12.88 13.25 0.78 94 9.5 91 1.60 0.00
Table 18.5 presents the column test results by Domain which were used to
determine gold recovery, major reagent consumption, and abrasion index.
Test results on the same composites show similar recoveries between -12.5mm and
-50mm columns for Domains 1, 5 and 6. Recoveries were higher for Domains 2, 3
and 12 in the -12.5mm columns in comparison to the -50mm columns. Testing at -
9.5 mm and -25mm on the same composites showed similar recoveries for Domains
3 and 12A. The recoveries for Domain 2 and Domain 3 at -25mm were higher than
the recoveries for column tests at -12.5mm. (These are on different composites).
Therefore, a crush size of -25mm is considered the optimum crush size for the
project. A test of high-grade Domain 3 material had very high recoveries, indicating
that recovery of gold within high grade material should not be a problem.
Table 18.6 presents a summary of gold recoveries by Domain which were used for
gold production estimates later in this report. The recoveries determined by KCA
were reduced by 2 % with the exception of test 38348, on Domain 12 which was had
a head grade of 0.40 g/t Au, which is much lower than the core and RC twin of the
hole used to make the metallurgical composite, and the average grade of Domain
12. The abrasion indices were later used to help estimate differential crushing costs
for harder, more abrasive ores.
Main 1 Dacite 89
Main 2 Silica Massive 73
Main 2A Silica Massive / Alunite 80
Main 3 Silica Vuggy / Alunite 71
Main 5 Silica Clay Structures 88
Main 6 Silica Body (C de O) 75
North 11 Dacite 89
North 12 Silica Massive 62
North 12A Silica Massive / Alunite 94
North 14 Silica Clay 88
North 17 Intrusive 88
North 18 Silica Breccia 92
19.1 Introduction
For the purposes of this report, Gary Giroux of Giroux Consultants Ltd. has reviewed
the mineral resource estimate contained in the 15 June 2010 Technical Report and
in particular has reviewed the methodology and classification, and confirms that the
work done in that previous report was reasonable and appropriate and that he is
satisified that the resource estimate discussed in Item 19 of this report is in
compliance with the requirements set out in CSA NI43-101.
As part of the reverse circulation drill program, the weight for each sample was
recorded before processing. A study of 29,171 sample weights for each of the
deposits showed the weights ranged between a low of 0.28 kg to a high of 107.52 kg
with a mean weight of 23.67 kg (Figure 19.1). A threshold of 2.5 standard deviations
below the mean value, a weight of 1.64 kg was used as an acceptable cutoff.
Samples with weights below 1.64 kg (a total of 54) were removed from the data base
and 5 m composites were formed assuming the gaps were simply missing data. The
assumption was that, for these low sample weights, there was too much of a 5 ft.
sample run missing to consider these samples representative.
29171 N
5 23.67446 M
8.80907 S
3
Percent
0
0
20
40
60
80
100
SAMP_WT (kg)
A similar exercise was completed for drill core with low core recovery. A total of
6,814 drill core samples had core recovery measured. The results ranged from a
low of 0.15% to the maximum 100%. The mean value was 81.3 % with a standard
deviation of 25.2. Using a threshold of 2 S.D. below the mean as a cutoff samples
with core recovery less than 31% were not used for the resource estimate. A total of
523 core samples with low core recovery were not used in the estimate. The sample
statistics for these 523 samples varied from a low of 0.002 gpt Au to a high of 10.95
gpt Au with a mean of 0.42 gpt Au. With the low core recovery, however, these
samples were not considered representative of the sample interval and as a result
were left out of the resource estimate.
The overall data base was reduced by 1.6% as a result of removing RC samples
with low sample weights and core samples with low core recovery.
A further test was completed to determine if a bias existed in the core samples that
were removed. A lognormal cumulative frequency plot ( Figure 19.2) was produced
showing all gold assays from samples with core recovery ≥ 31% (in red) and all gold
assays from samples with core recovery < 31% (in green). There is virtually no
difference between the grade distributions between these two sample sets and as a
result no bias is indicated. The removal of the low recovery samples is conservative
99.9
99.5
99.0
1.0
0.5
0.1
95
90
80
70
60
50
40
30
20
10
5
1000 10
3
100 10
2
10 10
1
estimate)
1 1
0.1 10
-1
0.001 10
-3
95
90
80
70
60
50
40
30
20
10
5
99.9
99.5
99.0
1.0
0.5
0.1
Percent
Figure 19.2. Cumulative frequency plot for gold based on core recovery.
The data base for the La India Project consisted of drill hole data from two different
mineralized zones shown in Figure 19.3. The zones are the North Zone consisting
of Cieneguita, Española, El Cochi, and La India, and the Main Zone consisting of the
combined La Viruela, La Cruz and Cerro de Oro areas. These two zones while in
similar lithologies and alteration are treated independently due to their geographical
locations.
Figure 19.3. Location map showing mineralized zones and drill hole collars.
The Main Zone consists of the La Viruela, La Cruz, and Cerro de Oro areas. The
2010 data base for this zone consisted of 314 reverse circulation drill holes with a
total of 29,779 m and 64 diamond drill holes totaling 4,947 m. (see Appendix E for
a list of drill holes used in this study). Diamond drill holes DDH-07-25, 31, 32, 33, 34
and 36 were drilled within the resource area but were sent in their entirety to KCA for
metallurgical studies and were not used in the resource study.
A Main Zone geologic model was built by Grayd geologists that differentiated 6
separate mineralized domains, as described in Item11.3 of this report:
D1 = Dacite
D2 = Silica Massive – Silica Alunite
D3 = Silica Vuggy – Silica Alunite
D5 = Silica Clay with Structures
D6 = Silica Bodies
D7 = Porphyry
D0 = Lower waste unit
Assays were back tagged based on their location relative to these 6 domains. Table
19.1 summarizes the assay statistics for each domain. Samples not assayed but
within the mineralized domains were assigned a value of 0.001 gpt Au.
Table 19.1. Summary of gold in assays at Main Zone sorted by geologic domains.
Domain D1 D2 D3 D5 D6 D7 D0
Au (gpt) Au (gpt) Au (gpt) Au (gpt) Au (gpt) Au (gpt) Au (gpt)
Number of Samples 3,007 3,592 1,909 4,841 1,187 171 10,054
Mean Grade 0.267 0.443 1.329 0.427 1.443 0.214 0.097
Standard Deviation 0.950 1.938 5.154 1.346 1.933 0.287 0.166
Minimum Value 0.001 0.002 0.001 0.001 0.001 0.002 0.002
Maximum Value 23.50 94.80 152.00 52.3 14.50 2.16 9.41
Coefficient of Variation 3.56 4.38 3.88 3.16 1.34 1.34 1.71
The assays for these units were evaluated using lognormal cumulative frequency
plots to determine if capping was required and if so at what levels.
A similar exercise was conducted for gold in the remaining Main Zone domains. The
capping strategy is summarized in Table 19.3.
Domain Strategy
Capping Level Number of
Au (gpt) Assays Capped
1 2SDAMP2 15.0 3
2 2SDAMP2 14.0 5
3 2SDAMP3 20.0 6
5 2SDAMP2 11.0 7
6 2SDAMP1 13.0 2
7 2SDAMP1 3.4 0
0 2SDAMP2 1.5 11
Note: 2SDAMP2 means 2 Standard Deviations above the mean of population 2
Table 19.4 shows the effects of capping on each of the domains. The mean grade
in Domains 1 to 6 was slightly reduced and the coefficient of variation was reduced
to far more reasonable levels.
Domain D1 D2 D3 D5 D6 D7 D0
Au (gpt) Au (gpt) Au (gpt) Au (gpt) Au (gpt) Au (gpt) Au (gpt)
Number of Samples 3,007 3,592 1,909 4,841 1,187 171 10,054
Mean Grade 0.262 0.412 1.187 0.402 1.441 0.214 0.096
Standard Deviation 0.858 0.990 2.248 0.775 1.924 0.287 0.129
Minimum Value 0.001 0.002 0.001 0.001 0.001 0.002 0.001
Maximum Value 15.00 14.00 20.00 11.00 13.00 2.16 1.50
Coefficient of Variation 3.27 2.40 1.89 1.93 1.33 1.34 1.35
The data base for the North zone consisted of 31 diamond drill holes totaling 2,261
m and a total of 196 reverse circulation holes totaling 11,092 m (see Appendix F for
listing of drill holes used). The North Zone is made up of the Cieneguita, El Cochi,
La India and Espanola Zones. Drill hole DDH-07-40 was drilled within the resource
area but was sent to KCA for metallurgical testing and was not used in the resource
estimate.
A geologic solid model was produced by Grayd geologists with some similar units to
the Main Zone outlined, as described in Item 11.2 of this report. Domains modeled
include:
D11 – Dacite
D12 - Silica Massive
D14 - Silica Clay
D17 - Porphyry
D18 - Silica Breccia
D0 - Lower Waste Unit
The assays were tagged with domain codes with simple statistics for gold presented
as Table 19.5. Samples not assayed but within the mineralized domains were
assigned a value of 0.001 gpt Au.
Table 19.5. Summary of gold in assays at North Zone sorted by geologic domains.
The distribution of gold within each domain was examined using lognormal
cumulative frequency plots. A similar strategy was used in the North Zone domains
as was used in the Main Zone domains. The capping levels for each domain in the
North Zone are tabulated in Table 19.6.
Domain Strategy
Capping Level Number of
Au (gpt) Assays Capped
11 2SDAMP2 2.2 5
12 2SDAMP2 8.0 5
14 2SDAMP2 6.5 1
17 2SDAMP2 4.3 2
18 2SDAMP3 24.0 4
Note: 2SDAMP2 means 2 Standard Deviations above the mean of population 2
Table 19.7. Summary of capped gold in assays at North Zone sorted by geologic
domains.
A check for coarse gold was made and described in the 2009 report (Gray and
Giroux, 2009) and is repeated here for completeness and summarized in Figure
19.4. No further checks were run in the 2009 drill program.
“As a check on the assay method and to determine if gold was lost during the
sampling and fire assay procedure, a total of 153 samples were assayed by screen
analysis. The mean grade for gold from fire assay was 3.55 gpt compared to 3.49
gpt from screen analysis. The correlation coefficient between the two data sets was
0.9846. As shown in the Figure 19.4 below there is no indication of bias between
the two sample sets with the best fit regression line mirroring the equal value line.
The sampling precision between the two methods was ± 6.6 %. As the vast majority
of samples were analyzed by fire assay techniques there is no reason to insert or
substitute the screen analysis results for these 153 samples.”
Figure 19.4. Scatter plot of Fire Assay Gold (x axis) vs. Screen Analysis Au (y axis).
Data has been log transformed.
Both diamond drill core and reverse circulation drilling methods have been utilized
on this project. A study comparing core assays to RC assays was completed in the
2009 report (Gray and Giroux, 2009). This study is updated below with the 2009 drill
holes included. To determine if any bias exists between the two drilling methods the
gold grade distributions for each method were compared in several areas that
contained both sampling types.
Using this graphical method to compare the two styles of drilling will show if a
sampling bias exists. Figures 19.5 to 19.7 show the three areas. In all three cases
the two sample types show roughly parallel grade distributions over all the grade
classes. The slight variations are well within reason and there appears to be no
sampling bias present. Both styles of drilling are used in this estimate.
99.9
99.5
99.0
1.0
0.5
0.1
95
90
80
70
60
50
40
30
20
10
5
2 2
10 10
10 1 10 1
Au in Core Holes
1 1
AU (g/t)
Au in RC Holes
-1 -1
10 10
-2 -2
10 10
-3 -3
10 10
95
90
80
70
60
50
40
30
20
10
1.0
0.5
0.1
99.9
99.5
99.0
Percent
Figure 19.5. Lognormal cumulative frequency plot for Au in core and RC Main A Zone.
99.9
99.5
99.0
1.0
0.5
0.1
95
90
80
70
60
50
40
30
20
10
5
2 2
10 10
1 1
10 10
Au in Core Holes
1 1
AU (g/t)
Au in RC Holes
-1 -1
10 10
-2 -2
10 10
-3 -3
10 10
99.9
99.5
99.0
95
90
80
70
60
50
40
30
20
10
1.0
0.5
0.1
Percent
Figure 19.6. Lognormal cumulative frequency plot for Au in core and RC Main B Zone.
99.9
99.5
99.0
1.0
0.5
0.1
95
90
80
70
60
50
40
30
20
10
2 2
10 10
1 1
10 10
Au in Core Holes
1 1
AU (g/t)
10
-1
Au in RC Holes 10
-1
-2 -2
10 10
-3 -3
10 10
99.9
99.5
99.0
95
90
80
70
60
50
40
30
20
10
1.0
0.5
0.1
Percent
Figure 19.7. Lognormal cumulative frequency plot for Au in core and RC North Zone.
19.6 Composites
Drill holes were passed through the various domain solids and assigned a code to
sections contained in each solid. Uniform down hole 5 m composites were produced
that honored the boundaries of each solid. Small intervals at the boundaries of
solids less than 2.5 m were combined with adjoining intervals to produce a uniform
support of 5 ± 2.5 m. The statistics for gold in 5 m composites for all zones are
presented in Tables 19.8 and 19.9. Assays from core holes with core recovery less
than 31% and assays from reverse circulation holes with sample weights less than
1.64 kg were not used to form composites and in some cases where these assays
were in strings composites were not formed at all.
Table 19.8. Summary of gold in 5m composites at Main Zone sorted by geologic domains.
Domain D1 D2 D3 D5 D6 D7 D0
Au (gpt) Au (gpt) Au (gpt) Au (gpt) Au (gpt) Au (gpt) Au (gpt)
Number of Samples 832 998 513 1,426 337 53 2,936
Mean Grade 0.261 0.418 1.165 0.397 1.429 0.213 0.096
Standard Deviation 0.686 0.685 1.645 0.633 1.672 0.212 0.101
Minimum Value 0.002 0.006 0.011 0.003 0.006 0.010 0.002
Maximum Value 12.62 8.06 14.52 8.99 9.18 1.12 0.96
Coefficient of Variation 2.63 1.64 1.41 1.59 1.17 1.00 1.06
Table 19.9. Summary of gold in 5m composites at North Zone sorted by geologic domains.
19.7 Variography
Each of the domains in each mineral zone was modeled independently when
sufficient data was present. The strategy in each case was to first produce pairwise
relative semivariograms in the four principal horizontal directions namely azimuths
090, 0, 045 and 135 and then in the vertical direction. Based on the horizontal
results the interior angles between the two longest horizontal ranges were modeled
to determine the longest horizontal range and direction. The vertical plane
perpendicular to this was then modeled until the maximum direction of continuity in
the vertical plane was identified.
For Domain 1 (Dacite) gold showed the best horizontal continuity of 120 m along
azimuth 80o dip 0o. The vertical plane perpendicular to this showed the longest
continuity of 120 m along azimuth 170o dip -45o. The orthogonal third direction was
azimuth 350o dip -45o and showed a range of 30 m. A similar procedure was used
to model gold in Domains 2 (Silica Massive), Domain 3 (Silica Vuggy), Domain 5
(Silica Clay with Structures) and Domain 6 (Silica Bodies). There was insufficient
data to develop a model for Domain 7. The model for Domain 17, the intrusive in the
North zone, was used. The parameters are shown in Table 19.11 and the graphs are
shown in Appendix G.
When the Grayd geologist reviewed the semivariogram results, Domain 3 was
identified as problematic. Within a background mineralization higher grade
structures exist but are too few to model effectively. As a result an indicator
approach was tried. The Domain 3 composites were plotted on a lognormal
cumulative frequency plot (Figure 19.8).
exceeding 4 gpt and might represent the high grade structures. The remaining
populations 4 to 6 represent the background style of mineralization.
Semivariograms were then produced for the indicators (0’s and 1’s) and modeled
with nested spherical models showing a anisotropy with the direction of maximum
continuity along azimuth 030o.
The background populations (values below 3.6 gpt Au) in Domain 3 were then
modeled independently. The longest continuity in the horizontal plane was along
azimuth 100o.
Domain 12 was modeled using pairwise relative semivariograms and the maximum
continuity for gold of 120 m was determined to be along azimuth 130 dip 0. The
second longest direction was 100 m along azimuth 220 dipping -35. There were too
few sample pairs within Domains 11 and 14 to establish a model so the model for
Domain 12 was applied. For Domain 18, the contact zone, a single anisotropic
model was fit to the dip and strike of the zone as determined from surface mapping.
The parameters are shown in Table 19.11 and the graphs are shown in Appendix G.
No specific gravity determinations were taken in Domain 18, the silica breccia / silica
clay unit within the North Zone. Since the unit is a mixture of silica (brecciated) and
clay alteration, a combined specific gravity was used. From Domain 12 (silica
massive) SG = 2.63 and silica clay from Domain 14 SG = 1.97, an average of 2.30
was determined. Since there are areas with brecciation and likely some open space
close to surface the SG for Domain 18 was reduced (5%) to 2.18. Unit D0 the lower
waste unit was assumed to have an SG of 2.22 similar to dacite.
Within the block model specific gravity was applied by domain with blocks containing
more than one domain having a weighted average.
MAIN ZONE
Lower Left Corner 706125 E Column Size 10 m 138 cols.
(no Rotation) 3175295 N Row Size 10 m 151 rows
Top of Model 1905 Elev. Level Size 6 m 93 levels
NORTH ZONE
Lower Left Corner 705595 E Column Size 10 m 211 cols.
(no Rotation) 3177215 N Row Size 10 m 243 rows
Top of Model 1907 Elev. Level Size 6 m 85 levels
For each model the proportion of each block below the topographic surface was
recorded as well as the proportion of each domain present.
Gold grades were interpolated into blocks containing some percentage of Domains
11, 12, 14, 17 and 18 by ordinary kriging. All domains used hard boundaries so only
composites from a particular domain were used to estimate that domain. The kriging
exercise was completed in a series of passes with an expanding search ellipse tied
to the ranges of the domains semivariogram. For Pass 1 a minimum of 4
composites were required within a search ellipse with dimensions equal to ¼ the
semivariogram range. For blocks not estimated in Pass 1 a second pass using a
search ellipse with dimensions equal to ½ the semivariogram range in each direction
was used. A third pass using the full range and a fourth pass using twice the range
completed the kriging exercise. In all cases a maximum of 3 composites were
allowed from a single hole. In all cases if more than 12 composites were found in
any given pass the closest 12 were used. The lower waste unit Domain 0 was not
estimated. For blocks with some percentage of D0 present the average of the
Domain 0 composites was used, a value of 0.073 gpt Au.
The final grade for the block was a weighted average of all domains present. The
kriging search parameters and number of blocks estimated during each pass are
tabulated in Table 19.13.
Note: Due to the fact numerous blocks contain multiple domains a fifth pass was sometimes made to
fill in grades of domains not previously estimated.
Gold grades have been interpolated into blocks containing some percentage of
Domains 1, 2, 5, 6 and 7 using ordinary kriging. Domain 3 was estimated using a
combination of ordinary kriging and indicator kriging.
Each domain was estimated independently using hard boundaries between the
domains with the exception of Domain 7. Because of the few composites within
Domain 7 and the close proximity to Domain 3, Domain 7 was estimated using a soft
boundary between Domain 7 and Domain 3 composites.
An estimation for gold was attempted into every block that had some proportion of a
domain present. The estimation procedure was completed in a series of passes with
an expanding search ellipse. The dimensions for the search ellipse were tied into
the appropriate semivariogram for each domain. A first pass in each domain used a
search ellipse with dimensions equal to ¼ of the semivariogram range. A minimum
of 4 composites were necessary to estimate the block. Only composites from the
domain being estimated were used. For blocks not estimated in pass 1 a second
pass using search ellipse dimensions equal to ½ the semivariogram were used.
Again a minimum of 4 composites were required to estimate the block. A third and
in some cases a fourth pass was completed using the full range and twice the
semivariogram range respectively. In all cases if more than 12 composites were
found in any given search the closest 12 were used. A maximum of 3 composites
were allowed from any single drill hole.
For Domain 3 a different approach was used due to the higher grade structures
present in this domain. First a “low grade” gold value was estimate for each block
containing some percentage of Domain 3 from composites less than 3.6 gpt Au
using the approach described above. Next an indicator value between 0 and 1 was
estimated for each block by kriging the 0 or 1 indicators. This value represents the
relative proportion of “high grade” present in the block. Next a value for the “high
grade” was estimated by ordinary kriging the composites in Domain 3 that were ≥
3.6 gpt Au. For blocks with a kriged indicator value greater than 0.0 but not
estimated, the average grade of the high grade composites, 6.03 gpt Au was
inserted. Finally the weighted average gold was determine for all Domain 3 blocks
estimated as follows:
For blocks containing some percentage of the D0 waste unit the average grade of
the D0 composites, a value of 0.096 gpt Au, was inserted. The final grade for the
total block was a weighted average of all domains present.
Note: Due to the fact numerous blocks contain multiple domains a fifth pass was sometimes made to
fill in grades of domains not previously estimated.
Tonnages were determined for each block based on the block volume (10 x 10 x 6
m) times the weighted average specific gravity for the block times the proportion of
the block below surface topography.
Each block in the Main and North Zone was also compared to the oxidation surface
established from drill logs. The proportion of the block above the oxide surface was
used to produce a tonnage of oxide present.
19.11 Classification
19.11.1 Introduction
Based on the study herein reported, delineated mineralization of the La India Project
is classified as a resource according to the following definition from National
Instrument 43-101 and CIM (2005):
limits and that variation from the estimate would not significantly affect
potential economic viability. This category requires a high level of
confidence in, and understanding of, the geology and controls of the
mineral deposit.”
For blocks within the Main Zone completely contained within Domains 1, 2, 3, 5 or 6
the classification was Measured if estimated in Pass 1 using ¼ of the semivariogram
range or Indicated in estimated in Pass 2 using up to ½ the semivariogram range
and Inferred if estimated in Pass 3 or 4. All blocks estimated completely within
Domain 7 were classed Inferred due to the relative lack of data and the inability to
establish a semivariogram model. For blocks containing two or more domains the
classification was similar to above based on the domain estimated in the highest
pass. For example if a block contained Domains 1, 2 and 3 and Domain 1 and
Domain 3 were estimated in pass 3 while Domain 2 was estimated in pass 2 the
block was classified Inferred. After this classification procedure was completed
blocks were examined visually and isolated pockets of Measured were downgraded
to Indicated.
19.12 Results
The geologic continuity of the various zones within the La India deposit has been
established through diamond drilling, RC drilling and surface mapping. Grade
continuity can be quantified by semivariogram analysis.
The results have been tabulated for the portion of blocks within the mineralized
domains. This assumes one could mine to the domain boundaries. Since the D0
unit of waste is a tabular slice at the bottom of the model it may be possible, with
good grade control to limit the amount of dilution including this unit would cause.
The La India project hosts a Measured and Indicated gold resource, currently
estimated at 760,000 contained ounces contained in 26.77 M tonnes at a grade of
0.883 gpt, calculated at a 0.40 gpt cutoff, as summarized in Table 19.15. The La
India project hosts an Inferred gold resource of 506,000 ounces contained in
19.73Mt @ 0.798 gpt Au, calculated at a 0.40 gpt cutoff grade, as summarized in
Table 19.16.
Tables 19.17 to 19.22 summarize the resource estimates for the North and Main
Zones separately. A possible economic open pit cut-off of 0.40 gpt Au has been
highlighted although at this time no economic studies have been completed and as a
result the true economic cutoff is unknown.
Table 19.15. Measured and Indicated mineral resource estimate, all material types, all areas,
La India project.
TOTAL ALL ZONES - MEASURED PLUS INDICATED RESOURCE
Au Cutoff Tonnes> Cutoff Grade > Cutoff
Au
(gpt) (tonnes) (gpt) Au (grams) Au Ounces
0.10 61,650,000 0.517 31,900,000 1,024,000
0.20 48,230,000 0.619 29,900,000 960,000
0.30 36,090,000 0.745 26,900,000 864,000
0.40 26,770,000 0.883 23,600,000 760,000
0.50 20,180,000 1.025 20,700,000 665,000
0.60 15,570,000 1.167 18,200,000 584,000
0.70 12,250,000 1.308 16,000,000 515,000
0.80 9,870,000 1.443 14,200,000 458,000
0.90 8,100,000 1.573 12,700,000 410,000
1.00 6,800,000 1.693 11,500,000 370,000
Table 19.16. Inferred mineral resource, all material types all areas, La India project.
TOTAL ALL ZONES - INFERRED RESOURCE
Au Cutoff Tonnes> Cutoff Grade > Cutoff
Au
(gpt) (tonnes) (gpt) Au (grams) Au Ounces
0.10 117,170,000 0.303 35,500,000 1,143,000
0.20 62,130,000 0.443 27,500,000 886,000
0.30 34,150,000 0.606 20,700,000 665,000
0.40 19,730,000 0.798 15,700,000 506,000
0.50 13,540,000 0.961 13,000,000 418,000
0.60 9,910,000 1.113 11,000,000 355,000
0.70 7,540,000 1.259 9,500,000 305,000
0.80 5,900,000 1.402 8,300,000 266,000
0.90 4,800,000 1.530 7,300,000 236,000
1.00 4,040,000 1.641 6,600,000 213,000
For both zones the proportion of each block above the oxidation surface was
recorded and this material is classified as oxidized. Of the Measured and Indicated
resource, 603,000 ounces (21.6M tonnes at a grade of 0.867 gpt Au) are contained
in oxidized material (Table 19.23). Of the Inferred resource, 378,000 ounces (14.3
Mt @ 0.82 gpt Au at a 0.40gpt cutoff) are contained in oxide material (Table 19.24).
Tables 19.25 to 19.30 summarize the oxide resource estimates for the North and
Main Zones separately.
Table 19.23. Measured and Indicated mineral resource, oxide material only, all areas, La India
project.
TOTAL ALL ZONES OXIDES - MEASURED PLUS INDICATED
RESOURCE
Au Cutoff Tonnes> Cutoff Grade > Cutoff
Au
(gpt) (tonnes) (gpt) Au (grams) Au Ounces
0.10 44,870,000 0.542 24,300,000 781,000
0.20 35,980,000 0.638 23,000,000 738,000
0.30 28,230,000 0.745 21,000,000 677,000
0.40 21,630,000 0.867 18,800,000 603,000
0.50 16,580,000 0.995 16,500,000 530,000
0.60 12,770,000 1.129 14,400,000 463,000
0.70 10,040,000 1.259 12,600,000 407,000
0.80 8,100,000 1.383 11,200,000 360,000
0.90 6,620,000 1.502 9,900,000 320,000
1.00 5,510,000 1.614 8,900,000 286,000
Table 19.24. Inferred mineral resource estimate, oxide material only, all areas, La India
project.
TOTAL ALL ZONES OXIDES - INFERRED RESOURCE
Au Cutoff Tonnes> Cutoff Grade > Cutoff
Au
(gpt) (tonnes) (gpt) Au (grams) Au Ounces
0.10 66,140,000 0.343 22,700,000 730,000
0.20 39,710,000 0.474 18,800,000 605,000
0.30 22,990,000 0.641 14,700,000 474,000
0.40 14,340,000 0.820 11,800,000 378,000
0.50 10,210,000 0.973 9,900,000 319,000
0.60 7,390,000 1.135 8,400,000 270,000
0.70 5,630,000 1.289 7,300,000 233,000
0.80 4,370,000 1.444 6,300,000 203,000
0.90 3,580,000 1.577 5,600,000 181,000
1.00 3,070,000 1.680 5,200,000 166,000
Table 19.28. Main Zone, Measured plus Indicated oxide mineral resource.
For comparison the 2010 results are compared to those estimated from 2007 drilling
and reported in Gray and Giroux, Feb. 2008 and the 2008 drilling reported in Gray
and Giroux March 2009, for total (oxide plus sulfide) resource as summarized in
Table 19.31.
Table 19.31. Comparison between Jan. 2008 (drilling through 2007), Jan 2009 (drilling through
2008) and May 2010 (drilling through 22 January 2010) resource estimates.
To verify the block model cross sections on 25 m spacing and level plans on 10 m
levels were produced showing the geologic domains, the drill holes with assays and
the estimated blocks. These cross sections and level plans were reviewed by
several Grayd geologists and both authors. This process, completed in April of
2010, resulted in several changes to the geologic three dimensional model. A
similar review of the current model has established confidence in both the modeling
parameters and the grades estimated.
After the updated resource estimate was completed, M Gray examined the changes
between the 2009 and 2010 resource models and verified that they were reasonable
based on the new drillhole information and changes to the ore domain models.
Compared to the 2009 resource model and estimate, the 2010 model and estimate
has added resources, as measured by contained ounces gold, at both the Main and
North Zones, as summarized in Table 19.33. Infill drilling in the Main Zone raised
much of the Indicated material to Measured classification, resulting in a decrease of
The increase in contained gold was more pronounced in the North Zone. Infill
drilling of the Cieneguita area and development of resources on its extension onto
the newly acquired Rumorosa claim resulted in an increase of Indicated resources
by 108,000 ounces and Inferred resources by 65,000 ounces.
Table 19.33. Comparison of contained gold, 2010 resource model to 2009 resource model.
Main Zone contained ounces Au North Zone contained ounces Au
Year MZ Meas MZ Ind MZ Inf NZ Meas NZ Ind NZ Inf
In the LG study, only gold is used to generate revenues for oxidized material. All
sulfide mineralization is treated as waste rock. Overall slope angles of 40°, 45° and
50° are used for the LG evaluations. Mineral resources classified as Measured,
Indicated and Inferred are allowed to be considered as potential ore in the LG
analyses.
Net value is computed for each block for the economic pit optimizations, which
include variable ore costs and recoveries by domain, and weighted average specific
gravities. Potential ore is defined for purposes of the LG analyses by internal dollar
/ tonne ($/t) cutoffs that include ore mining ($2.05/t), general/administration ($1.50/t)
and variable ore processing costs by domain. A total of 72 runs (12 prices total x 3
slopes x 2 cases equals 72 cases) are included for each deposit model to test
sensitivities to:
• gold prices ranging from $270 to $1260/oz (12 prices total), in 10%
increments from the base price of $900/oz,
The results of the LG pit limit analyses for the 45° pit slopes are presented in Tables
19.35 and 19.36, including and excluding pad liner costs, respectively. All of the
mineral resources presented in Tables 19.35 and 19.36 are classified as Measured,
Indicated and Inferred, and as defined in Canadian NI 43-101, should not be
considered mineral reserves until at least a Pre-Feasibility study has been
completed. Tonnages are based on in-situ weighted average densities stored in the
block models, which range from 1.97-2.51 t/m3 in the Main deposit and 1.97-2.63
t/m 3 in the North deposit. Average in-situ densities within the base case LG shells
are 2.23 and 2.33 t/m3 for the Main and North deposits, respectively. The base
case, at $900/oz Au, is highlighted in bold typeface in the Tables.
Table 19.35. Lerchs-Grossman cases 1 – 12; includes pad liner cost; slope = 45
Contained Measured, Indicated and Inferred Mineral Resources
Main Ore Wste Total Strip Au Avg ContainAu Au Rec Rec Au Net $
Price Case# (ktonnes) (ktonnes) (ktonnes) Ratio g/t (kOunces) g/t (kOunces) (k$)
$ 270 1 1,199 916 2,115 0.76 1.57 61 1.23 47 $ 1,526.8
$ 360 2 4,505 4,668 9,173 1.04 1.27 183 0.96 140 $ 5,894.3
$ 450 3 7,495 7,225 14,720 0.96 1.10 266 0.85 205 $ 18,191.9
$ 540 4 11,180 10,219 21,399 0.91 0.98 351 0.76 272 $ 35,612.3
$ 630 5 14,563 10,998 25,561 0.76 0.87 408 0.68 317 $ 58,234.1
$ 720 6 17,617 11,683 29,300 0.66 0.80 453 0.62 353 $ 84,357.1
$ 810 7 20,285 12,393 32,678 0.61 0.75 488 0.59 382 $ 113,020.9
$ 900 8 22,812 12,980 35,792 0.57 0.70 517 0.55 406 $ 144,336.7
$ 990 9 26,496 15,775 42,271 0.60 0.66 560 0.52 442 $ 177,134.5
$ 1,080 10 29,598 17,888 47,486 0.60 0.62 593 0.49 469 $ 213,324.0
$ 1,170 11 31,544 18,586 50,130 0.59 0.60 610 0.48 484 $ 251,353.6
$ 1,260 12 33,734 19,241 52,975 0.57 0.58 629 0.46 499 $ 290,869.6
North
$ 270 1 2,605 4,436 7,041 1.70 1.58 132 1.39 117 $ 1,213.4
$ 360 2 5,734 7,011 12,745 1.22 1.28 236 1.13 208 $ 11,915.2
$ 450 3 9,217 8,741 17,958 0.95 1.06 315 0.94 279 $ 29,343.8
$ 540 4 12,042 9,375 21,417 0.78 0.94 365 0.84 325 $ 52,406.9
$ 630 5 14,737 9,860 24,597 0.67 0.86 406 0.76 361 $ 79,090.6
$ 720 6 17,866 11,453 29,319 0.64 0.78 450 0.70 400 $ 108,215.0
$ 810 7 19,896 11,847 31,743 0.60 0.74 473 0.66 421 $ 140,370.8
$ 900 8 21,648 12,261 33,909 0.57 0.71 492 0.63 437 $ 174,209.2
$ 990 9 23,507 12,706 36,213 0.54 0.67 509 0.60 453 $ 209,265.9
$ 1,080 10 25,037 12,968 38,005 0.52 0.65 522 0.58 464 $ 245,794.4
$ 1,170 11 26,803 13,481 40,284 0.50 0.62 537 0.55 477 $ 283,080.5
$ 1,260 12 28,249 13,731 41,980 0.49 0.60 548 0.54 486 $ 321,558.6
Total
$ 270 1 3,804 5,352 9,156 1.41 1.58 193 1.34 164 $ 2,740.1
$ 360 2 10,239 11,679 21,918 1.14 1.27 419 1.06 347 $ 17,809.5
$ 450 3 16,712 15,966 32,678 0.96 1.08 581 0.90 485 $ 47,535.7
$ 540 4 23,222 19,594 42,816 0.84 0.96 717 0.80 596 $ 88,019.2
$ 630 5 29,300 20,858 50,158 0.71 0.86 814 0.72 678 $ 137,324.7
$ 720 6 35,483 23,136 58,619 0.65 0.79 903 0.66 754 $ 192,572.1
$ 810 7 40,181 24,240 64,421 0.60 0.74 961 0.62 803 $ 253,391.7
$ 900 8 44,460 25,241 69,701 0.57 0.71 1,008 0.59 843 $ 318,545.9
$ 990 9 50,003 28,481 78,484 0.57 0.67 1,069 0.56 894 $ 386,400.4
$ 1,080 10 54,635 30,856 85,491 0.56 0.63 1,115 0.53 933 $ 459,118.4
$ 1,170 11 58,347 32,067 90,414 0.55 0.61 1,147 0.51 960 $ 534,434.1
$ 1,260 12 61,983 32,972 94,955 0.53 0.59 1,176 0.49 985 $ 612,428.3
* Measured, Indicated and Inferred mineral resources without adjustments for dilution or loss.
Inferred mineral resources have a great amount of uncertainty as to their existence and as to whether
they can be mined legally or economically. It cannot be assumed that all or any part of Inferred
mineral resources will ever be upgraded to a higher category.
Table 19.36. Lerchs-Grossman cases 13 – 24; excludes pad liner cost; slope = 45
Contained Measured, Indicated and Inferred Mineral Resources
Main Ore Wste Total Strip Au Avg ContainAu Au Rec Rec Au Net $
Price Case# (ktonnes) (ktonnes) (ktonnes) Ratio g/t (kOunces) g/t (kOunces) (k$)
$ 270 13 1,366 1,025 2,391 0.75 1.53 67 1.19 52 $ 1,802.1
$ 360 14 4,925 4,701 9,626 0.95 1.22 194 0.93 148 $ 7,038.3
$ 450 15 8,535 8,020 16,555 0.94 1.07 293 0.82 226 $ 20,096.2
$ 540 16 12,249 10,336 22,585 0.84 0.94 370 0.73 286 $ 38,450.2
$ 630 17 15,661 10,972 26,633 0.70 0.84 424 0.66 330 $ 62,196.0
$ 720 18 18,381 11,500 29,881 0.63 0.78 462 0.61 361 $ 89,327.6
$ 810 19 21,223 12,459 33,682 0.59 0.73 498 0.57 391 $ 118,757.3
$ 900 20 23,917 13,055 36,972 0.55 0.69 528 0.54 415 $ 150,862.1
$ 990 21 27,448 15,636 43,084 0.57 0.64 568 0.51 449 $ 184,834.2
$ 1,080 22 30,608 17,848 48,456 0.58 0.61 601 0.48 476 $ 221,964.9
$ 1,170 23 32,665 18,509 51,174 0.57 0.59 619 0.47 491 $ 260,705.4
$ 1,260 24 34,720 18,942 53,662 0.55 0.57 635 0.45 504 $ 300,948.3
North
$ 270 13 3,026 4,688 7,714 1.55 1.53 149 1.34 131 $ 1,679.7
$ 360 14 6,157 7,188 13,345 1.17 1.25 247 1.10 217 $ 13,252.3
$ 450 15 9,883 8,722 18,605 0.88 1.03 327 0.91 290 $ 31,829.4
$ 540 16 12,772 9,280 22,052 0.73 0.92 376 0.81 334 $ 55,790.5
$ 630 17 15,873 10,569 26,442 0.67 0.83 423 0.74 376 $ 82,827.0
$ 720 18 18,636 11,361 29,997 0.61 0.77 458 0.68 408 $ 113,313.2
$ 810 19 20,686 11,809 32,495 0.57 0.72 481 0.64 428 $ 146,060.0
$ 900 20 22,672 12,284 34,956 0.54 0.69 501 0.61 445 $ 180,330.9
$ 990 21 24,318 12,699 37,017 0.52 0.66 516 0.59 459 $ 216,018.7
$ 1,080 22 25,912 12,936 38,848 0.50 0.64 529 0.56 470 $ 253,082.3
$ 1,170 23 27,686 13,463 41,149 0.49 0.61 543 0.54 482 $ 290,896.8
$ 1,260 24 29,265 13,854 43,119 0.47 0.59 555 0.52 492 $ 329,773.2
Total
$ 270 13 4,392 5,713 10,105 1.30 1.53 216 1.30 183 $ 3,481.8
$ 360 14 11,082 11,889 22,971 1.07 1.24 440 1.02 365 $ 20,290.7
$ 450 15 18,418 16,742 35,160 0.91 1.05 620 0.87 516 $ 51,925.6
$ 540 16 25,021 19,616 44,637 0.78 0.93 746 0.77 620 $ 94,240.8
$ 630 17 31,534 21,541 53,075 0.68 0.84 847 0.70 706 $ 145,023.0
$ 720 18 37,017 22,861 59,878 0.62 0.77 920 0.65 768 $ 202,640.8
$ 810 19 41,909 24,268 66,177 0.58 0.73 979 0.61 819 $ 264,817.3
$ 900 20 46,589 25,339 71,928 0.54 0.69 1,029 0.57 861 $ 331,193.0
$ 990 21 51,766 28,335 80,101 0.55 0.65 1,084 0.55 907 $ 400,852.9
$ 1,080 22 56,520 30,784 87,304 0.54 0.62 1,130 0.52 946 $ 475,047.2
$ 1,170 23 60,351 31,972 92,323 0.53 0.60 1,162 0.50 973 $ 551,602.2
$ 1,260 24 63,985 32,796 96,781 0.51 0.58 1,190 0.48 996 $ 630,721.5
* Measured, Indicated and Inferred mineral resources without adjustments for dilution or loss.
Inferred mineral resources have a great amount of uncertainty as to their existence and as to whether
they can be mined legally or economically. It cannot be assumed that all or any part of Inferred
mineral resources will ever be upgraded to a higher category.
The “Net$” column is the net value of the pit, with all costs deducted. This item is
used to determine the “ultimate” pit for the life-of-mine scheduling analysis. Figures
19.9 and 19.10 graphically represent the pit parameters. From these graphs, it’s
notable that the ultimate pit size does not vary significantly if the pad liner cost is
included or excluded. It is also noted that for pit shells smaller than the base case
price, pit mineable resource is more sensitive than shells larger than the base case.
Therefore cases below the base case gain ounces more significantly where a large
mineable resource has a large effect on the return on capital. The cases larger than
the base case have a lesser gain in size and therefore will not contribute as much
return on capital for the equivalent increased risk. Case# 20, the base case at $900
gold price, excluding pad liner costs, and at a 45o pit slope, has been chosen as the
final pit to give a more robust economic pit resource limit for scheduling. Cost and
price sensitivity can then be done in the cash flow for the selected ultimate pit size.
Main
700
Summary of L-G Pit Cases 1-12
$350,000.00 60,000 600
$300,000.00 A
50,000 500
U u
(
S 1
$250,000.00
40,000 0
$ O 400
0
$200,000.00 u
Net $ (k$) 0
(
)
20,000 200
0 $100,000.00 s
Total (kTONNES)
s
10,000 100
)
$50,000.00
$0.00 - -
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
North
600
Summary of L-G Pit Cases 1-12
$350,000.00 45,000
500
40,000
$300,000.00 A
U 35,000 u
(
1 400
S $250,000.00
30,000 0
$ O
0
$200,000.00 u 300
25,000 0
Net $ (k$) INSITU Au (kOunces)
(
1 n
'
0 $150,000.00 20,000 Ore (kTONNES) c Rec Au (kOunces)
s 200
0 Wste (kTONNES) e
)
15,000
0 $100,000.00 s
Total (kTONNES)
s 10,000
100
)
$50,000.00
5,000
$0.00 - -
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
Figure 19.9. Lerchs-Grossman cases 1-12, includes pad liner cost, slope=45.
Main
700
Summary of L-G Pit Cases 13-24
$350,000.00 60,000 600
$300,000.00 A
50,000 500
U u
(
S 1
$250,000.00
40,000 0
$ O 400
0
$200,000.00 u
Net $ (k$) 0
n INSITU Au (kOunces)
(
)
20,000 200
0 $100,000.00 s
Total (kTONNES)
s
10,000 100
)
$50,000.00
$0.00 - -
13 14 15 16 17 18 19 20 21 22 23 24 13 14 15 16 17 18 19 20 21 22 23 24
North
600
Summary of L-G Pit Cases 13-24
$350,000.00 50,000
500
45,000
$300,000.00 A
U 40,000 u
(
1 400
S $250,000.00 35,000 0
$ O
30,000 0
$200,000.00 u 300
Net $ (k$) 0
n INSITU Au (kOunces)
(
1 25,000 '
0 $150,000.00 Ore (kTONNES) c Rec Au (kOunces)
20,000 s 200
0 Wste (kTONNES) e
)
0 $100,000.00 15,000 s
Total (kTONNES)
s 10,000 100
)
$50,000.00
5,000
$0.00 - -
13 14 15 16 17 18 19 20 21 22 23 24 13 14 15 16 17 18 19 20 21 22 23 24
Figure 19.10. Lerchs-Grossman cases 1-12, excludes pad liner cost, slope=45.
The base case $900/oz Au LG shells contain 46.6 million tonnes grading 0.69 g Au/t
of Measured, Indicated and Inferred mineral resources. These figures do not include
any provisions for ore dilution or mining loss. Contained troy ounces of gold are
estimated at 1,029,000, of which about 899,000 ounces are considered potentially
recoverable. Tables 19.37 and 19.38 below list the contained Measured plus
Indicated, and Inferred mineral resources, respectively, for the base case LG shells.
Table 19.37. Base case ($900/oz) Lerchs-Grossman, contained Measured, and Indicated
resources.
Base Case ($900/oz Au) Lerchs-Grossmann – Contained Measured & Indicated Mineral Resources
MnlRes* Contained Recov Au Recov
Deposit Ktonnes Au g/t Oz Au g/t Oz Au Net $/t
Main 16,272 0.71 373,500 0.56 291,800 7.99
North 13,814 0.66 295,300 0.58 258,900 8.83
Total 30,085 0.69 668,800 0.57 550,700 8.38
* Mineral resources above internal Net $/t cutoff without adjustments for dilution or
loss.
About 65% of the mineral resource tonnages contained within the base case LG
shells are classified as Measured and Indicated, with the remainder being Inferred.
The Main deposit area contains about 51% of the project’s total mineral resources,
weighted by tonnage.
Figure 19.11 illustrates the base case LG shells within the Main and North deposit
areas. Potential haul roads, dumps, and surface facilities are located in Figure
19.11 for reference. Note that while Floating Cone pits are not guaranteed to be
optimal, LG pit shells are deemed to be optimized pits. However, these pits are not
minable as is, requiring roads and a designed pit wall configuration. Detailed pit
designs have been generated from the optimized pit shells and are broken out as
individual pits, to be mined in a prescribed sequence. This is the basis of the life-of-
mine scheduling described in Item 21.
Figures 19.12 through 19.15 are west-east cross sections looking north through the
Main and North area models displaying topography, selected LG pit shells ($450 Au
through $1080 Au, at $90 increments), color-coded 3-D model (weighted average)
gold block grades, and the oxide / sulfide surface (in bold orange). The base case
LG pit at a $900 Au price is in bold red.
Figure 19.11. Base case LG shells ($900/oz Au) for La India Project.
Figure 19.12. Main model West-East cross section at 3,176,095 North, looking North.
Figure 19.13. Main model West-East cross section at 3,176,495 North, looking North.
Figure 19.14. North model West-East cross section at 3,178,690 North, looking North.
Figure 19.15. North model West-East cross section at 3,179,115 North, looking North.
Based on the LG Base Case economic Pit20 ($900/oz Au) detailed pit designs have
been done to include detailed slope parameters and ramps. These are described in
Item 21 but summarized in Table 19.39 as pit delineated resources. At this PEA
level of study these resources include Measured, Indicated, and Inferred classes
and are used in the production schedule and economic analysis for evaluation
purposes only. They are not deemed reserves and MMTS does not present them as
having economically assured profitability at this stage of study.
Table 19.39. Detailed pit designs based on base Lerchs-Grossman, MII pit resources
Detailed Pit Designs Based 0n Base Lerchs-Grossmann – MII Pit Resources
MnlRes* Contained Recov Au Recov
Deposit Ktonnes Au g/t Oz Au g/t Oz Au Net $/t
Main 25,478 0.64 522,500 0.50 411,600 8.44
North 23,956 0.63 487,100 0.56 432,100 9.91
Total 49,434 0.64 1,009,600 0.53 843,700 9.15
To the best of the author’s knowledge, all relevant data has been presented in this
report.
21 MINING
The mine planning and engineering work includes determining the economic pit limit,
detailed pit designs, calculating in pit resources, and production scheduling, based
on the resource model described in the preceding section. The resource model and
the mining engineering work have been done using MineSight® software. Mining,
capital and operating cost estimates have then been estimated for the mine plan
based on typical costs for this type and size of operation. These components of the
study are described in the following sections.
Some of these pit shells are small distinct cones but are in close proximity to each
other and will be mined more efficiently when combined together. From the ranking
of the smaller pit areas, in the Main deposit a set of five pits, ranked from highest to
lowest value, has been designed: MP21, MP22, MP23, MP24, and MP25. Similarly
the North deposit pit sequence is defined by five additional sets of pits, ranked from
highest to lowest value: NP21, NP23, NP22, NP24, and NP25. Note that the lower
value LG pit shells are excluded from the production scheduling as being either too
small or too marginal in value.
The grouped LG pits were converted to designed pits using double benching and
45o inter-ramp slopes to get a truer estimate of waste rock and stripping ratio. Pit
ramps have a maximum slope of 10%, and a bank face angle of 70 o is assumed.
Figures 21.2 and 21.3 display the final design pits used for production scheduling,
for the North and Main areas respectively.
Figure 21.1. Base case open pit LG shells, areas for value ranking.
Figure 21.2. North design pits used for scheduling, sequenced by value ranking.
Figure 21.3. Main design pits used for scheduling, sequenced by value ranking.
The detailed designs for the pit areas indicated above are based on the pit design
parameters as listed below in Table 21.1 and shown in Figure 21.4.
Table 21.1. Pit design parameters.
o o
Inter-Ramp Slope (maximum ) 45
o o
Bank Face Angle ( ) 70
Bench Stacking (@ 6m / bench) 2 (Double-Benches)
Berm Width (every 2nd bench) 7.6m
Road Grade (maximum) 10%
Road Width – Double Lane 13.8m
Road width – Single Lane 9.2m
Bench Height
Bench Height
Berm Width
Bank Face Angle
The bench height used for the pit designs in the current preliminary economic
assessment (PEA) is based on the block height in the 3D model, which is 6 meters.
The pits are to be mined using double benching, i.e., 2-6m benches per stack, with a
7.6m berm width every other 6m bench (or one double bench stack), as shown in
Figure 21.4. An overall 45 degree inter-ramp slope is achieved using the 7.6 m
berm width along with a 70o bank face angle.
Roads are 10 percent maximum, with external roads at a double-lane width, and
most inter-pit ramps using a single lane width (due to their short spans.) Pit access
and haulage roads are designed for 28-t off-highway haulage trucks (CAT 730
articulated). Access roads to the working areas will be single lane at 9.2 m wide, but
active haulage roads are double lane at 13.8 m wide – sufficient for two way traffic,
berms and ditches. The smaller truck size requires a narrower road and is expected
to be more efficient for accessing the small pit bottoms of the numerous pit areas.
Table 21.2 displays the design pit phase tonnages, grades, strip ratio, and values
used for sequencing and scheduling.
Note pit MP25 is mined last since it requires moving the haul road.
The pit designs developed for this scoping-level mining study contain mineral
resources that are adjusted to include 5% mining dilution at average grades of 0.14
g Au/t in the North area and 0.15 g Au/t in the Main area. Ore losses of 5% are also
assumed.
Figure 21.5 displays the layout of the final design pits used for production
scheduling, along with preliminary locations for minesite infrastructure. These
include the mine access road, haulage roads, carbon adsorption plant, truck shop
location, leach pad, and prospective waste rock disposal sites.
One leach pad is to be employed west and south of the North pits with the crusher at
approximately the 1560 elevation. This minimizes ore haulage distances since the
average haulage distance to the crusher is about the same for the North and Main
pits. The carbon plant and the truck shop site are centrally located between the two
deposits and near the crusher.
Figure 21.5. Design pits used for scheduling with roads, dumps, leach pad, and infrastructure.
A preliminary mine production schedule for the La India project is developed from
the Measured, Indicated, and Inferred mineral resources contained within each of
the design pit phases. The combined North and Main ore-grade mineral resources
used for scheduling are as indicated in Table 21.2 above.
The MineSight® schedule optimization program (MSSP) has been to simulate open
pit mining for a maximum ore processing rate of 6,000,000 tpy. Table 21.3
summarizes the parameters used to generate the mine production schedule and,
subsequently, to estimate mine equipment and manpower requirements.
Table 21.3. Mine production scheduling parameters.
Combined annual ore and waste production rate 10 million tonnes
Annual maximum crushing rate 6 million tonnes
Mine operating hours per shift 12
Mine operating shifts per day 2
Mine operating days per week 7
Scheduled mine operating days per year 365
Number of mine crews 4
An allowance of 5 days per annum was made for weather delays and/or shutdowns
for holidays. Otherwise, pit operations are scheduled around the clock. Ore feed for
the first two years of operations is limited to 4.7 million tonnes and 5.1 million tones,
respectively, to account for a gradual ramp-up of the crushing plants and sinking rate
(benches mined per year) restrictions. Mine sinking rates were typically limited to a
maximum of twelve to fifteen 6-m benches per year to allow adequate time for
drilling, sampling, blasting, assaying, grade control staking and loading operations.
This is equivalent to just over one bench mined every month.
Only oxide mineral resources above the internal Net $/tonne cutoffs (see Table 21.1)
are considered as leach material for purposes of developing the PEA mine
production schedule. The scheduling program sequences the necessary material by
bench and by phase, for each time period.
The mining phases in each deposit area are initially input in the highest to lowest
economic order. The scheduling program reorders the mining based on numerous
criteria, including maximizing value period-by-period, pre-stripping, and sink rate.
Benches are mined from the upper most benches downward within each pit phase.
Concurrent phase mining is allowed for advanced stripping purposes and to maintain
acceptable sink rates. Mining is initiated in the North area deposits, and the Main
area deposits are brought into the schedule as determined by the program. The
North and Main areas must be developed simultaneously to have sufficient ore
exposure for consistent ore processing/leaching and to manage sinking rates within
each of the pits.
Table 21.4 summarizes the resulting mine production schedule for the PEA of the La
India project.
No preproduction is necessary since there is no waste capping the deposits, i.e., ore
occurs on the surface, or near surface, in sufficient quantities to meet production
requirements immediately upon commencement of mining. Feed to the crushing
plants and leach pads will total 49.4 million tonnes over the life of the mine, which is
projected at just under 9 years total. 832,000 ounces will be recovered in total, at an
average leach recovery of approximately 84%.
Table 21.4. Mine production schedule based on Measured, Indicated, and Inferred mineral
resources.
ORE Avg Insitu Contained Avg Rec Au Recovered Waste Total Ktonnes Strip
Year (Ktonnes) Au (g/t) Au (Koz) (Rec g/t) Au (Koz) Ktonnes Mined Ratio
1 - Qtr1 1,050 0.78 26 0.63 21 1,707 2,757 1.63
1 - Qtr2 1,050 0.81 27 0.66 22 1,376 2,426 1.31
1 - Qtr3 1,300 0.83 35 0.67 28 1,433 2,733 1.10
1 - Qtr4 1,300 0.84 35 0.73 30 895 2,195 0.69
2 5,100 0.70 114 0.64 104 3,348 8,448 0.66
3 5,800 0.61 114 0.58 106 2,559 8,359 0.44
4 5,894 0.58 110 0.49 92 3,152 9,046 0.53
5 5,600 0.73 132 0.55 99 4,417 10,017 0.79
6 5,510 0.44 78 0.38 66 6,773 12,283 1.23
7 5,924 0.72 137 0.58 108 4,504 10,428 0.76
8 5,750 0.51 95 0.46 84 3,112 8,862 0.54
9 5,153 0.56 92 0.46 75 2,312 7,465 0.45
Totals 49,431 0.63 996 0.53 832 35,588 85,019 0.72
Notes: 1 - Pit resources are based on the net $/tonne cutoff value for full blocks
2 - D0 / ND0 is always waste
3 - Reserves have 5% loss and 5% dilution applied
4 - Excludes North Pit 26 and Area 13 of Main Pit 25
* Includes Measured, Indicated and Inferred mineral resources, 5% mining dilution, and 5% mining loss. Inferred mineral resources
have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. It cannot be
assumed that all or any part of Inferred mineral resources will ever be upgraded to a higher category.
Ore production varies from year-to-year in that the scheduling program tries to
balance a target of 100,000 ounces recovered gold per annum against sink rate
limits and the total material mining capacity.
Peak material handling rates during Years 5-7 average just under 30,000 tpd of total
material. External mine haul road construction and other site preparation work
precedes production mining on a pit by pit requirement basis.
Figure 21.6 displays the final surface after mining and waste dump reclamation.
Appendix I contains mining progress maps (i.e., Year-End Plan Maps) at several
stages of mining, displaying pit and waste dump progress.
Figure 21.6. Final surface, post mining and waste dump reclamation.
For purposes of equipment selection and cost estimation for this preliminary
assessment, open pit mining will be conducted from 6-m benches using small scale
equipment, including:
The mine equipment and manpower requirements are derived from the operating
parameters presented in Table 21.2 and the production schedule listed in Table
21.3. Essentially, the mine will be scheduled for continuous operations using four
rotating crews, each working 12-hour shifts, four days on and four days off,
averaging 41.5 hours per week. No preproduction stripping operations are required,
excluding mine road construction and general site preparation.
1. MD1 - Main dump located west-southwest of the Main deposit area for
phases MP21 through MP25,
2. ND1 - North dump situated between north phases NP21 and NP23 for NP21,
Dumping elevations for each waste material site are summarized in Table 21.5.
These dump sites were selected for their close proximity to mining areas and natural
confinement for regrading and water management considerations. Storm run-off will
not require re-routing using additional drainage ditches since the natural drainage
will can handle the flow. Pits and waste rock dumps are situated on higher ground
away from major drainages such that neither flooding of pits or dumps nor acid rock
drainage is anticipated.
Some ongoing reclamation of the waste rock dumps will be accomplished since the
first north pit mined (NP21) will accommodate much of the other north pits’ waste
through backfilling. More detailed work will be required on this in future planning.
Blasthole drill productivities are estimated at nearly 750 tonnes per hour using a
blasthole pattern of 5 m by 5 m, with 0.8 m of subgrade drilling, and a powder factor
of 0.33 kg per tonne of rock. Effective drill penetration rates of 27 m per hour are
assumed. A fleet of three drills is estimated to cover the required production plus
down time and scheduling losses, with 2.4 drills operating on average. A crawler-
type percussion drill will also be needed for secondary breakage, road construction
and short-term backup to the primary blasthole drills.
Four 4.0-m3 front-end loaders and one 3.0-m 3 shovel will serve as the primary
loading units, each working with 28-t off-highway haul trucks, having an effective
payload of 25 tonnes. The productivity of this loader/shovel combination is
estimated at 10,000,000 tonnes per year. Four to five operating loaders will be
required. One of the 4.0-m 3 front-end loaders can also provide for ROM ore
stockpile rehandling, bench toe cleanup work, berm maintenance and other
miscellaneous loading requirements.
Ore haulage profiles range from 1.8 to 4.2 km one-way for the North pit hauls, and
waste profiles vary between 0.4 and 3.5 km one-way, including pit NP21 backfill.
Ore haulage profiles range from 1.7 to 4.9 km one-way for the Main pit hauls, and
waste profiles vary between 0.6 and 2.3 km one-way. Truck fleet requirements, with
utilizations of approximately 71%, reach a maximum of seventeen units during Years
4-7. A fleet of sixteen trucks is estimated for the first three years of production and
the last two years.
Auxiliary equipment for roads and dump maintenance, heap leach and other support
operations will include:
Table 21.6 summarizes the major mine equipment requirements for the project.
Post mining reclamation will be done using the mining equipment at the end of
mining and final flushing of the leach pad. Accumulated funds from the reclamation
bond will fund this work. More detailed planning will require future studies in
conjunction with environmental studies.
A rotating, four-crew system will be used to staff mine operations and maintenance
craft labor positions. These crews will work 12-hour shifts. Table 21.7 summarizes
the mine personnel requirements, including supervision and technical staff. Mine
manpower levels range from 120 in the final year of production mining (year 9) to a
peak of 223 that are projected for Years 4-7.
Total Mine Personnel: 215 215 215 215 215 215 223 223 223 223 170 120
La India mining cost estimates are in second quarter 2010 U.S. dollars and exclude
taxes and duties. No inflationary escalation factors have been applied to these cost
projections. All cost estimates for this PEA should be considered scoping level in
accuracy (i.e., ±35%).
Mine equipment unit prices are from MMTS’s data base, derived from recent vendor
quotations for similarly sized equipment and industry cost guides. Sustaining capital
is also included in the estimates, accounting for fleet expansions where necessary
and replacements of aging units. Costs are estimated for ancillary equipment, which
includes: explosives storage and handling, small excavating and transport
equipment, an all-terrain crane, a fuel/lube truck, mechanic field trucks, tire handling
equipment, forklifts, light plants and assorted light vehicles. Allowances are made
for shop equipment, pit water handling systems, radio communications, office
equipment and software, initial mine haul road construction, spare parts and
supplies inventories, contingency and salvage value at the end of mining.
Table 21.8 summarizes the mine capital expenditures over the life of the La India
project.
Table 21.8. Mine capital expenditures summary.
Cost Description U.S. $ x 1000
Initial equipment purchases (through Year 2) 26,100
Mine haul road construction and site preparation 7,200
Spares inventory 1,500
Sustaining / Working Capital 4,000
Sustaining equipment purchases 3,100
Spares recovery and equipment salvage (4,500)
Closure earthworks and reclamation 3,200
Total Mine Capital 40,700
Mine capital expenditures throughout the mine life are projected at $40.7 million.
This includes working capital for mine operations.
The above capital costs exclude the truck shop, wash pad, tire shop, fuel and
lubricant storage and pumping systems, mine offices and power distribution
systems. These are included in the mine facilities capital estimates presented later
in this report.
Costs were derived from numerous sources including nearby operations, equipment
handbooks, and typical industry estimates.
La India mine operating cost estimates cover: pit operations (i.e., drilling, blasting,
loading and hauling); waste dump maintenance; construction of internal haul roads,
sumps and safety berms; maintenance of all mine roads and safety berms; operating
and maintenance labor; mine department supervision and technical services; and
other earthworks as may be required for day to day mining operations. Exploration
costs are not included in the operating cost estimates presented in this section. The
mine production schedule presented in Table 21.4 and equipment unit productivity
estimates were used to calculate operating shifts and manpower requirements,
which in turn are used to derive mine operating costs.
Unit operating costs for major equipment incorporate manufacturer estimates of fuel
and lubricant consumption. Up-to-date industry cost estimation guides and industry
contacts, are used to estimate hourly operating costs, which are subsequently
adjusted for local labor rates and supply costs. The mining cost estimates were
based on energy prices of $0.59/liter for diesel fuel, and $0.55/kg for ANFO and
$0.75/kg for emulsion costs (at a 75%:25% ratio, respectively). Mining operations
will not consume electricity as all equipment will be diesel powered.
Mine operating and maintenance labor rates range between $1.45 and 3.80 per
hour, which are commensurate with similar Mexican operations. Fringe benefits,
which include overtime pay adjustments, were estimated at 100% of the base labor
costs.
Over the life of the project, mine operating costs for La India are projected at $174.2
million, averaging $19.7 million per year. This equates to $2.05 per tonne of
material mined (ore and waste), or $3.52 per tonne of ore processed. Unit mining
costs are summarized in Table 21.9, and the annual mining costs are summarized in
Table 21.10.
Production (ktonnes):
Ore 1,050 1,050 1,300 1,300 5,100 5,800 5,894 5,600 5,510 5,924 5,750 5,153 49,431
Waste 1,707 1,376 1,433 895 3,348 2,559 3,152 4,417 6,773 4,504 3,112 2,312 35,588
Total Material 2,757 2,426 2,733 2,195 8,448 8,359 9,046 10,017 12,283 10,428 8,862 7,465 85,019
Mine Operating Costs 5,647,700 4,969,600 5,598,500 4,496,400 17,305,600 17,123,300 18,530,600 20,519,700 25,161,600 21,361,600 18,153,700 15,292,600 174,161,100
The operating life of the La India project is estimated at 8.85 years assuming an
average ore processing rate of 16,400 tpd. There is no preproduction stripping
period. However, road and site development work must be completed before
production can begin. The mining cash flow is summarized in Table 21.11, with the
value and cost parameters used summarized in Table 21.12.
Net Mining Cash Flow (1000's US $) $ (28,769) $ 5,284 $ 8,774 $ 12,230 $ 15,064 $ 46,999 $ 46,005 $ 32,690 $ 39,281 $ 4,051 $ 43,344 $ 23,119 $ 26,550 $ 274,621
22 PROCESSING
Flowsheet selection was based upon results of laboratory test work. The process
flowsheet includes a three-stage crushing plant followed by a heap leach operation.
Gold is extracted by an ADR carbon plant. The process flowsheet is based on an
ore processing rate of 6.0 million dry tonnes per year (17,150 dry tonnes per day). A
simplified process flowsheet is presented in Figure 22.1.
Run-of-mine (ROM) ore is trucked from the mine and dumped directly into the
Primary Gyratory Crusher. An apron feeder reclaims the primary crushed ore from
the gyratory discharge pocket and feeds the Primary Crusher Discharge Conveyor
(Conveyor # 1) The Primary Crusher Discharge Conveyor feeds the Primary
Crushed Ore Stockpile.
The Primary Crushed Ore Stockpile has a live capacity of 120,000 tonnes. However
by dozer pushing the total stockpile can be increased to contain up to 500,000
tonnes. Crushed ore is reclaimed from the pile by 4 vibrating feeders which load the
primary crushed ore onto the Secondary Crushing Plant Feed Conveyor (Conveyor
# 2), which is equipped with a metal detector and magnet.
Ore from the Secondary Crushing Plant Feed Conveyor is transported to the
Secondary Crusher Vibrating Screen. Screen undersize material by-passes the
Secondary Standard Cone Crusher directly to the Secondary Crusher Discharge
Conveyor (Conveyor # 3). Screen oversize material feeds the MP 800 standard-
head cone crusher. The Secondary Cone Crusher discharges on the Secondary
Crusher Discharge Conveyor.
Lime addition for pH control is added to the Final Crusher Product Conveyor
(Conveyor # 6) which feeds a series of grasshopper-type portable conveyors and a
self-propelled radial stacker for heap construction.
The leach pad design is based on a total capacity of 50 million dry tonnes. The final
pad will be approximately 667 m x 900 m built in three separate phases. Phase 1 will
be approximately 250,000 square meters (667m x 375m). Phase 2 and 3 built in
Year 3 and Year 6 respectively will each be 175,000 square meters (667m x 263m).
Ultimate height will be approximately 100 meters (measured vertically at the
maximum depth). The leach pad liner system consists of an 80 mil low density
polyethylene (LDPE) geomembrane overlying geosynthetic clay liner (GCL) on
prepared subgrade. Compacted clay may be used in some areas in place of GCL. It
is anticipated that the ore will be stacked in lifts that are 6 meters high. Once a
reasonable area of the pad is stacked with ore, piping and drip emitters will be
placed on the ore for distribution of cyanide leach solution. Solution draining from the
leach pad will be collected in a solution collection ditch with the ability to route the
solution either the barren or pregnant collection ponds. A ditch diversion system
diverts the natural runoff from uphill catchment areas around the phased heap leach
pad.
Solution ponds consist of a Barren Solution Pond, a Pregnant Solution Pond and an
emergency Storm Water Pond. The Barren and Pregnant Solution Ponds are each
sized at 2.5 million gallons. The Storm Water Pond will be designed to store rain
water to minimize fresh water consumption and also to contain the volume of
solution that will be produced from a 100-year /24-hour storm event. The Storm
Water Pond is ultimately sized at 28 million gallons. The Storm Water Pond could be
built in three phases as the leach pad is expanded. The initial phase would contain
12 million gallons. When Phase 2 and Phase 3 of the leach pad are built the pond
would be expanded by 8 million gallons for each separate pad expansion. The
Barren and Pregnant Ponds are double lined and equipped with leak collection and
recovery systems. The single lined emergency Storm Water Pond is available in
case of an extreme storm event. If this occurs, the excess solution will be routed to
the Storm Water Pond and later used to supply make-up water.
The pregnant solution will be pumped to the carbon adsorption circuit. The solution
will be pumped across a stationary trash screen for trash removal. The carbon
adsorption circuit consists of a series of five cascading carbon columns. The solution
flows counter current to the flow of carbon and the solution overflow from the final
column will discharge onto a carbon safety screen to catch any entrained carbon.
The barren solution that will discharge from the final carbon column drains to the
barren solution pond. Cyanide solution, liquid caustic and antiscalent are added to
the barren as needed. Barren solution is then pumped back to the leach pad. The
loaded carbon from the first carbon column is advanced to the
desorption/regeneration circuits. At this point of the process, the carbon in each
column will be advanced one column and either regenerated or fresh carbon will be
placed in the fifth carbon column. Recessed impeller pumps will be used to move
carbon between the columns and to the loaded carbon screen.
The loaded carbon will be advanced to the loaded carbon screen for dewatering and
then the loaded carbon is transferred into an acid wash tank. The acid wash
removes any scale that accumulates on the surface of the activated carbon. At the
conclusion of the acid wash cycle, a dilute caustic solution will be used to wash the
carbon and to neutralize the acid solution. The wash solution will be discharged to
the barren ponds for use in the heap leaching circuit. Then, the washed carbon
transfer pump will move the carbon from the acid wash tank to the carbon strip
vessel.
The caustic soda strip solution is pumped through in-line heaters and a heat
exchanger before entering the bottom of the strip vessel. The pregnant solution that
flows out of the top of the strip vessel will flow to an electrowinning cell. At the
conclusion of the strip cycle, the stripped carbon will be pumped to the stripped
carbon dewatering screen. The dewatered carbon will discharge into the carbon
reactivation kiln feed hopper. The processed carbon will be thermally regenerated in
the carbon reactivation kiln to maintain its activity. Regenerated carbon is
discharged into a carbon quench tank.
Gold will be plated onto knitted-mesh steel wool cathodes in the electrowinning cell.
Cathodes go a wash station where the gold-bearing sludge and any remaining steel
wool will be removed. The gold-bearing sludge and steel wool will be retorted to
remove any mercury. The retort residue will be mixed with fluxes and then smelted
in an induction furnace to produce gold doré and slag. The doré will be transported
to a refiner for further purification. Slag is processed to remove prills for re-melting in
the furnace.
All power for the project will be supplied by diesel generators. Estimated power
required for the process plant is 3.9 megawatts.
22.3.2 Laboratory
The design particle crush size is minus 25 millimeters however, ore types found to
leach adequately at coarser sizes could bypass the tertiary crushing circuit. Based
on experience gained during actual operations, the crush size for each ore type may
be modified as conditions permit. The process design criteria are presented in Table
22.1.
Secondary Crusher
Type Standard Cone Crusher
Size mm MP 800
Motor kw 600
Closed Side Setting mm 32
Crusher Product, 80 % Minus mm 30
Secondary Crusher Discharge Conveyor
Type Belt
Width mm 1,372
Motor kw 50
Tertiary Crusher Screen
Type Vibrating, Double Deck
Size mm 2,428 x 6,096
Top Screen Deck Aperture mm 38
Bottom Screen Deck Aperture mm 25
Motor kw 40
Tertiary Crusher
Short-Head Cone
Type Crusher
Size mm MP 800
Motor kw 600
Closed Side Setting mm 16
Crusher Product, 80% minus mm 20
Tertiary Crusher Discharge Conveyor
Type Belt
Width mm 1,372
Motor kw 50
Tertiary Crusher Transfer Conveyor
Type Belt
Width mm 1,372
Motor kw 50
Final Crusher Product Conveyor
Type Belt
Width mm 1,372
Motor kw 50
Leach Pad Conveyors
Type Belt
Width mm 1,372
Quantity 9
Motor kw 50
Radial Stacker
Type Belt
Width mm 1,372
Motor kw 50
Leach Pad
Ultimate Design mt 50,000,000
Ultimate Height m 100
Lift Height m 6
Motor kw 100
Capacity l/m 23,000
Carbon Columns & Handling
Power kw 20
Capacity l/m 23,000
Quantity 5 Cascade Type
Acid Wash System
Power kw 5
Carbon Capacity mt 3
Carbon Strip Vessel
Power kw 4
Carbon Capacity mt 3
Heat Exchanger
Power kw 10
Type Skid Mounted
Electrowinning Cell
Power kw 45
Capacity m3 3.0
Regeneration Furnace
Power kw 225
Carbon Capacity mt 3
Mercury Retort Oven
Power kw 80
Induction Dore Furnace
Power kw 80
Process operating costs were developed for all of the different ore types, or
Domains. The process costs did not include any mine or general and administrative
costs as these were covered elsewhere. The costs were estimated by specific
operating area and included; Crushing and Conveying, Leaching, Plant, Refinery,
and Laboratory. All process maintenance and manpower, including process
supervision is included.
The basis for the major consumables and Mexican National labor were taken from
current costs from similar heap leach operations in Mexico. For the process section
2 ex-patriot employees were included, and assumed to be from North America. The
process operations of Crushing and Conveying, Leaching, Plant and Laboratory
were based on a 24-hour operation and staffed by 3 separate work crews, working
on a 12-hour shift basis. The Refinery work schedule is only 1 12-hour shift per day.
All costs are presented in 2010 U.S. Dollars. An exchange rate of 12 Nuevo Pesos
(Pesos or “NP”) per dollar was assumed.
Tables 22.3 through 22.8 provide the details of the process operating costs.
Table 22.3. Crushing and conveying operating cost estimates, 2010 USD.
North 12 North 18
Main 1 Main 2A SM Main 2 Silica Main 3 Silica Main 5 Silica Main 6 Silica Silica North 12A North 14 Silica
Ore types crushed to – 25 mm Dacite /Alunite Massive Vuggy Structures Bodies Massive SM / Alunite Silica Clay Breccia
North 11 North 17
Dacite Intrusive
Abrasion Index 0.23 0.74 0.74 0.40 0.01 0.71 0.78 0.52 0.01 0.78
Operating and Maintenance Manpower $893,400 $893,400 $893,400 $893,400 $893,400 $893,400 $893,400 $893,400 $893,400 $893,400
Primary Wear Parts $323,718 $487,179 $487,179 $378,205 $150,000 $477,564 $500,000 $416,667 $250,000 $300,000
Secondary Wear Parts $776,923 $1,169,231 $1,169,231 $907,692 $400,000 $1,146,154 $1,200,000 $1,000,000 $600,000 $800,000
Tertiary Wear Parts $776,923 $1,169,231 $1,169,231 $907,692 $400,000 $1,146,154 $1,200,000 $1,000,000 $600,000 $800,000
Other Wear Parts $258,974 $389,744 $389,744 $302,564 $150,000 $382,051 $400,000 $333,333 $200,000 $300,000
Screens $258,974 $389,744 $389,744 $302,564 $150,000 $382,051 $400,000 $333,333 $200,000 $300,000
Conveyor Belting $647,436 $974,359 $974,359 $756,410 $375,000 $955,128 $1,000,000 $833,333 $500,000 $750,000
Conveyor Parts $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 $400,000
Power $2,516,573 $2,516,573 $2,516,573 $2,516,573 $2,516,573 $2,516,573 $2,516,573 $2,516,573 $2,516,573 $2,516,573
Micellaneous (supplies & services) $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000
$7,152,922 $8,689,460 $8,689,460 $7,665,101 $5,734,973 $8,599,075 $8,809,973 $8,026,639 $6,459,973 $7,359,973
$1.30 $1.58 $1.58 $1.39 $1.04 $1.56 $1.60 $1.46 $1.17 $1.34
Table 22.4. Leaching and plant operating cost estimates, 2010 USD.
North 12 North 18
Main 1 Main 2A SM Main 2 Silica Main 3 Silica Main 5 Silica Main 6 Silica Silica North 12A North 14 Silica
Dacite /Alunite Massive Vuggy Structures Bodies Massive SM / Alunite Silica Clay Breccia
North 11 North 17
Dacite Intrusive
Leaching
Operating and Maintenance Manpower $/Year $445,860 $445,860 $445,860 $445,860 $445,860 $445,860 $445,860 $445,860 $445,860 $445,860
Piping and Solution Distribution $/Year $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000
Power $/Year $487,042 $487,042 $487,042 $487,042 $487,042 $487,042 $487,042 $487,042 $487,042 $487,042
Water $/Year $736,969 $736,969 $736,969 $736,969 $736,969 $736,969 $736,969 $736,969 $736,969 $736,969
Miscellaneous Supplies $/Year $143,290 $143,290 $143,290 $143,290 $143,290 $143,290 $143,290 $143,290 $143,290 $143,290
Sub-total $/Year $2,313,161 $2,313,161 $2,313,161 $2,313,161 $2,313,161 $2,313,161 $2,313,161 $2,313,161 $2,313,161 $2,313,161
$/tonne $0.42 $0.42 $0.42 $0.42 $0.42 $0.42 $0.42 $0.42 $0.42 $0.42
Reagents $/tonne $0.78 $0.68 $0.66 $0.89 $1.71 $0.46 $0.88 $0.79 $1.71 $2.26
$/tonne $1.20 $1.10 $1.08 $1.31 $2.13 $0.88 $1.30 $1.21 $2.13 $2.68
Plant
Operating and Maintenance Manpower $/Year $442,260 $442,260 $442,260 $442,260 $442,260 $442,260 $442,260 $442,260 $442,260 $442,260
Power $/Year $391,299 $391,299 $391,299 $391,299 $391,299 $391,299 $391,299 $391,299 $391,299 $391,299
Miscellaneous Supplies $/Year $83,356 $83,356 $83,356 $83,356 $83,356 $83,356 $83,356 $83,356 $83,356 $83,356
Sub-total $/Year $916,915 $916,915 $916,915 $916,915 $916,915 $916,915 $916,915 $916,915 $916,915 $916,915
$/tonne $0.17 $0.17 $0.17 $0.17 $0.17 $0.17 $0.17 $0.17 $0.17 $0.17
Reagents $/tonne $0.13 $0.13 $0.13 $0.13 $0.13 $0.13 $0.13 $0.13 $0.13 $0.13
$/tonne $0.29 $0.29 $0.29 $0.29 $0.29 $0.29 $0.29 $0.29 $0.29 $0.29
Table 22.5. Refining and laboratory operating cost estimates, 2010 USD.
Main 2 Main 3 Main 5 Main 6 North 12 North 12A North 18
Main 1 Main 2A Silica Silica Silica Silica Silica SM / North 14 Silica
Dacite SM /Alunite Massive Vuggy Structures Bodies Massive Alunite Silica Clay Breccia
North 11 North 17
Dacite Intrusive
Refining
Operating and Maintenance Manpower $/Year $285,060 $285,060 $285,060 $285,060 $285,060 $285,060 $285,060 $285,060 $285,060 $285,060
Power $/Year $97,825 $97,825 $97,825 $97,825 $97,825 $97,825 $97,825 $97,825 $97,825 $97,825
Miscellaneous Supplies $/Year $38,288 $38,288 $38,288 $38,288 $38,288 $38,288 $38,288 $38,288 $38,288 $38,288
Sub-total $/Year $421,173 $421,173 $421,173 $421,173 $421,173 $421,173 $421,173 $421,173 $421,173 $421,173
$/tonne $0.08 $0.08 $0.08 $0.08 $0.08 $0.08 $0.08 $0.08 $0.08 $0.08
Reagents $/tonne $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
$/tonne $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10
Laboratory
Operating and Maintenance Manpower $/Year $475,620 $475,620 $475,620 $475,620 $475,620 $475,620 $475,620 $475,620 $475,620 $475,620
Miscellaneous Supplies $/Year $47,562 $47,562 $47,562 $47,562 $47,562 $47,562 $47,562 $47,562 $47,562 $47,562
Sub-total $/Year $523,182 $523,182 $523,182 $523,182 $523,182 $523,182 $523,182 $523,182 $523,182 $523,182
$/tonne $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10
Reagents $/tonne $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01
$/tonne $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10
Leaching
Lime $0.286 $0.286 $0.215 $0.358 $0.323 $0.143 $0.286 $0.295 $0.323 $0.434
NaCN $0.484 $0.377 $0.434 $0.518 $1.369 $0.299 $0.580 $0.479 $1.369 $1.814
Antiscalant $0.014 $0.014 $0.014 $0.014 $0.014 $0.014 $0.014 $0.014 $0.014 $0.014
$0.784 $0.677 $0.662 $0.890 $1.706 $0.455 $0.880 $0.787 $1.706 $2.261
Plant
NaOH $0.013 $0.013 $0.013 $0.013 $0.013 $0.013 $0.013 $0.013 $0.013 $0.013
Carbon $0.116 $0.116 $0.116 $0.116 $0.116 $0.116 $0.116 $0.116 $0.116 $0.116
$0.128 $0.128 $0.128 $0.128 $0.128 $0.128 $0.128 $0.128 $0.128 $0.128
Gold production for La India was calculated from the mine production schedule and
the overall recovery for each ore type as determined by the testwork completed by
Kappes Cassiday & Associates.
From the size of the initial leach pad and the pad loading schedule the leach cycle
was determined. The recovery profile by quarter was taken from the leach recovery
versus tonnes of solution applied to ores that was developed by Kappes Cassiday.
Quarter: 1 2 3 4 5 Total
Main 1 Dacite 70% 0% 14% 4% 1% 89%
Main 2 Silica Massive 50% 0% 12% 8% 3% 73%
Main 2A Silica Massive / Alunite 54% 0% 13% 8% 5% 80%
Main 3 Silica Vuggy / Alunite 50% 0% 12% 5% 4% 71%
Main 5 Silica Clay Structures 70% 0% 14% 3% 1% 88%
Main 6 Silica Body (C de O) 56% 0% 13% 4% 2% 75%
North 11 Dacite 70% 0% 14% 4% 1% 89%
North 12 Silica Massive 45% 0% 11% 4% 2% 62%
North 12A Silica Massive / Alunite 72% 0% 16% 4% 2% 94%
North 14 Silica Clay 70% 0% 14% 3% 1% 88%
North 17 Intrusive 70% 0% 14% 3% 1% 88%
North 18 Silica Breccia 70% 0% 14% 5% 3% 92%
The mine schedule for Year 1 was given on a quarterly basis. Although the mine
schedule for Year 2 was given on an annual basis for the basis of the production
calculations, Year 2 was divided into 4 equal quarters. The recovery profiles were
then applied to the quarterly mine-production to calculate the production and the
remaining recoverable inventory in the heaps. It was assumed that inventory
remained constant after 2 years and recoveries were then at equilibrium. All
inventories were recovered in Year 10 after mine production ended. Mine
production is summarized in Table 22.9.
Table 22.9. Mine production schedule.
Units Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total
Ore to Pads kt 4,700 5,100 5,800 5,895 5,600 5,510 5,924 5,750 5,153 44,279
Gold Grade of Ore g/t 0.82 0.70 0.61 0.58 0.73 0.44 0.72 0.51 0.55 0.70
Contained Gold oz 123,606 114,468 113,760 109,774 132,239 78,409 136,714 94,828 91,849 995,649
Cum Contained Gold oz 123,606 238,074 351,835 461,609 593,849 672,258 808,972 903,800 995,649
Ultimate Recovery % 82% 86% 88% 87% 84% 84% 83% 84% 84% 84%
Recoverable Gold oz 100,749 103,389 106,143 91,195 98,271 65,627 108,496 83,180 75,087 832,138
Cum. Recoverable Gold oz 100,749 204,138 310,281 401,476 499,747 565,375 673,870 757,050 832,138
Gold Recovered oz 85,829 106,573 106,143 91,195 98,271 65,627 108,496 83,180 75,087 11,736 832,138
Cum Recovered Gold oz 85,829 192,402 298,545 389,740 488,011 553,639 662,134 745,314 820,402 832,138
Recoverable Inventory oz 14,920 11,736 11,736 11,736 11,736 11,736 11,736 11,736 11,736 0 0
23.1 Construction
From the start of construction, it will take approximately 12 months to build the
project. A construction schedule is presented in Figure 23.1. Costs for construction
are outlined in Item 21.
To connect the minesite with the road used by the Mulatos Mine for access and
transport of all materials will require 4 km of new road construction. As the existing
access roads to the site are not suitable for large trucks, this new access road will
need to be one of the first construction items completed.
23.3 Camp
The man-camp will be one of the first items to construct because of the need to
house the construction workers for the project. An initial tent-type temporary camp
will be replaced by the permanent man- camp built of more sturdy materials. There
will be an estimated 438 employees, with 2/3 if these in camp at any one time. With
additional room for contractors and visitors, this results in a need for accommodation
for 350 people at any one time. Senior management will have their own rooms.
Other employees will be housed with 2 to 4 people sharing a room. Camp will
include a kitchen and dining hall, recreation room, first aid room and dry rooms for
both men and women.
The camp will be placed in a location sufficiently removed from the operations to
provide a quiet location well removed from blasting and crushing activities. The
camp has been tentatively located in an area north of the mine workings. However,
the location should be reviewed.
Initially, office space will be provided by portable trailers. These will be replaced by
a permanent office and warehouse structure located close to, or adjoining, the
truckshop. Room will be required for management, security and visiting contractors
and consultants.
The office and warehouse will be located in the central operating area where the
current exploration camp is situated.
23.5 Truckshop
A truckshop including an open aired but covered area for large equipment and a
smaller enclosed area will be constructed at the same time as the other
infrastructure before the mine is opened. It will be located in the central operating
area.
The process flowsheet and details of the plant site are given in Section xxx. The
plant site will consist of a crushing plant and related stockpiles, the heap leach pad
and ponds, the gold recovery plant and a laboratory.
23.7 Crusher
The crushing plant will be one of the critical path items of the project and will require
early procurement of the crushing equipment. Geotechnical investigations will be
required in the proposed location to ensure that the underlying substrate is stable.
However, as the overburden is thin in this location, stability is not likely to be an
issue.
23.9 Laboratory
A laboratory will be constructed adjacent to, or as part of, the gold recovery plant.
The laboratory will be bought as a modularized unit constructed off-site and then
transported to site. It will need to be operational before mining commences so that
ore/waste determinations can be made.
The heap leach pad and ponds are the items which require the most extensive
construction. There is currently no geotechnical information under the pad location.
It is situated in a gently-sloped valley with rock close to the surface. Stability is not
expected to be an issue, but geotechnical investigations and more detailed
engineering are a high-priority for further analysis. Further investigation of the area
is also required to develop a better cost estimate for pad construction.
In this study, a geosynthetic clay liner (GCL) is modeled under the main pad liner as
there is no known area of suitable clay identified close by. Additional exploration for
a clay source is warranted.
Current information indicates that it will not be possible to acquire rights to surface
water. It is possible to acquire rights to sub-surface water. It is estimated that 187
m3 per hour (825 gpm) of water will be required for process make-up water, dust
suppression, camp and miscellaneous uses. Work to ensure this volume of water
can be extracted by wells is a high priority. Development of the actual wells and
related infrastructure will be undertaken early in the construction period.
This power plant facility will consist of 3 each 2000 KW diesel power generation
units. This facility is needed to generate the power for the entire project. The power
plant will be started along with the man-camp, offices, and laboratory in order to
provide all power requirements. It will be located in the central operating area.
There will be temporary generators utilized until this facility is in production.
A secure fuel storage and dispensing facility will be built in the central operating
area. All fuel for operating equipment, vehicles and power generation will be stored
in the facility. For protection, all storage will have a secondary containment system.
A lubricant and waste oil storage site will be included in the facility.
Sewage systems will be constructed for the camp and for the office complex. An
incinerator, dump area for inert waste and boneyard will be built to handle camp and
operational waste. A secure area will be constructed to store hazardous waste until
it is transported off-site for disposal at appropriate facilities.
While there are few people living in the area around the site, a security fence will be
placed around the camp and the central operating area. Fencing to keep out
animals, especially cattle, will be constructed around the entire operational site.
Costs not directly related to mining of material or the crushing and leaching of ore
and the recovery and sales of gold have been grouped under General and
Administration (G&A). This includes the cost for housing workers in a camp and
costs related to worker health and safety. A summary of G&A costs are given in
Table 23.1.
Senior management will consist of the General Manager and the Mine, Processing
and General and Administration managers who will report directly to the General
Manager. All management costs for mining and processing are included in the
mining and processing costs. The costs for the General Manager and General and
Administration manager and related support are in General and Administration
costs.
People responsible to develop and conduct worker health and safety programs will
include emergency responders/safety trainers, nurses and a doctor. A small team
of security people will be required at all times. During gold pours and dore transport,
additional security will be required. An estimated 21 people will be employed in the
Worker Health and Safety and Security department.
To reduce the risk during dore shipment, the cost of flying the dore out by helicopter
has been included in this study.
In this study, it has been assumed that the camp will be built by the company, but
will be operated by a contractor. Nine people will be employed to mange this
contract, organize transport to and from the site for equipment, material and workers
and to supervise maintenance of the access road. The access road maintenance
will be by contractors.
All costs for camp, logistics and freight have been included in G&A.
Water diversion structures will be constructed to keep surface water from flowing
into the pad, mine pits, waste dumps and other operational areas. Surface drainage
from disturbed areas which have no potential to produce chemical or metal
contamination will be directed into small ponds to allow sediments to settle out
before discharging to the environment.
Testing of 32 samples indicates that some of the rock types at La India are
potentially acid generating. While much of the waste rock is oxidized material with
low sulfide and metal content, there is no carbonate or other minerals in the rock to
neutralize the acid potential. Therefore, rock with even low amounts of sulfide can
be potentially acid generating. A more detailed investigation of Acid Rock Drainage
(ARD) and metal leaching potential is underway and a Mine Waste Handling Plan
will be developed before mining commences. The initial testing indicates that most
of waste rock where mining will start in the North Zone is not potentially acid
generating.
The final wall of the mine will commonly be in material that contains 3 to 5% pyrite.
As with the waste rock, further characterization of the rock that will comprise the final
walls is underway in order to develop predictions on the long-effects on surface
water chemistry from drainage of the completed mine pits.
Groundwater effects could potentially come from the pad and ponds (if the liners
leak) and from the waste rock piles. Therefore, monitoring wells will be constructed
below the heap leach pad and waste rock dumps . A systematic sampling program
will be developed to ensure any effects the operation has on groundwater are
detected and appropriate changes to the operation can be made to negate these
effects.
The primary potential effect on air quality will be because of dust. Costs for
watering the road have been included in this study. An air quality monitoring
program will be initiated to ensure worker health and the environment are not
adversely affected by air quality.
All operational areas will be fenced to keep animals out. A no hunting policy will be
enforced amongst workers. Waterfowl are not common in the area. However, if
required, a system to keep birds from landing in the operational ponds will be
devised.
Special wastes such as waste oil, glycol coolant, solvent fluids, used oil filters, used
batteries, and contaminated fuel, will be handled, stored, transported, and disposed
of in accordance with appropriate Hazardous Waste Regulations
Putrescible organic food wastes generated from the camp accommodation facilities
will be burned in an on-site incinerator. Ash produced by the incinerator will be
buried in the landfill site along with other inert non-recyclable materials.
The wastewater disposal systems for the camp and office areas will be engineered,
constructed, and maintained under the direction of a qualified professional.
24.7 Reclamation
Reclamation will be undertaken during mining activities where possible, but the
majority of work will occur after the completion of mining and final gold recovery.
The reclamation land use objective will be to return the land to a grazing area for
cattle and wildlife habitat. Closure objectives include securing the site to assure
physical safety of people, protecting wildlife, protecting surface and groundwater
quality and quantity, minimizing erosion and controlling fugitive dust. To accomplish
these objectives, the following key elements will be included in the reclamation plan:
1. Chemical stabilization, accomplished through rinsing and neutralizing the
heap and stabilizing waste dumps and mine pits
2. Physical stabilization, accomplished through slope grooming, and the
application of topsoil and revegetation;
3. Control of surface waters; and
4. Monitoring effluent chemistry from the pad and water draining the mine waste
and pit areas.
An outline of the key components of the reclamation plan is given in this section.
Further detailing of these components will be required before construction
commences. During operation, the reclamation plan will be revised further.
All topsoil harvested during construction will be stockpiled for future use. However,
the site is expected to be deficient of organic matter and other soils to support
revegetation. Therefore, during operations topsoil will be created. This will be done
by combining compostable materials with suitable native soils and natural topsoil.
The produced topsoil will be stockpiled for future use; this process must start early
since green wastes require time to compost before they are suitable to use as soil
amendments.
Possible sources for organic matter include:
- Chipped wood, bark and brush from site clearing activities (from the entire
site including the mine and waste dumps), beginning with the initial site
clearing and including subsequent phases of expansion of the heap, waste
dumps and open pits;
- Composted organic fractions from solid wastes (especially food wastes) from
the camp and canteen; and,
- Composted sewage sludge from the on-site disposal systems (ideally
composted with the solid waste organic fraction).
Capital costs include the purchase of a wood chipper, tractor and rototiller.
24.7.2 Camp
All camp buildings will be removed upon completion of the operation
and the area graded and seeded.
Water diversion structures around the mine pits will be upgraded if required to
ensure long-term operation. In most places, the final walls will result in an open cut
more than a pit. Material around the top of pits will be stabilized, and fenced off if
required but there is no plan not re-contour pit walls.
Some concurrent reclamation of mine pits is built into the mine plan with the partial
backfilling of one north pit occurring as mining progresses.
Mine waste dumps and roads will be reclaimed both concurrently and post mining.
Mine roads and waste dumps will be re-sloped, re-contoured, have topsoil added,
and be re-seeded. The concurrent reclamation that can be completed during
production will allow the usage of mine equipment within the operating cost
framework to minimize closure costs.
An estimate of $3,200,000 has been made for the post-mining closure costs which is
included in the Mining Sustaining capital. Re-grading is allocated at a cost of
$0.85(US) per cubic meter of material. Growth media and preparation is costed at
$4,000(US) per hectare, and re-seeding is estimated to cost $2,000 per hectare.
The waste dumps encompass a total area of approximately 2.1 cubic meters for re-
grading and approximately 55 hectares for growth media and re-seeding.
Short and longer term monitoring of slope stabilities will be provided until deemed
stable.
24.7.6 Roads
During reclamation, steep slopes on roads will be stabilized and any culverts
removed. Drainage bars will be constructed to keep water from flowing down the
road bed. Except for the access road, surfaces will be scarified and seeded.
The following activities will be completed during the operating life of the project,
beginning in year 3 of operations and continuing until the cessation of operations:
In the first five years of operation detailed closure and monitoring plans will be
developed considering the as-built facilities and the projected as-stacked heap.
These plans will be of sufficient detail to allow the start of concurrent closure
activities as well as planning for final closure.
Laboratory and field data will be collected to support geochemical and heap
neutralization modeling and to allow accurate prediction of both the neutralization
process and effluent chemistry following closure. Laboratory testing will include
leach columns and kinetic testing to simulate long-term geochemistry. Field testing
will include testing either pilot heaps or cells created inside the commercial heap to
verify the laboratory data. By year 7 geochemical modeling will be completed to
allow predictive modeling of effluent quality from the closed heap.
As the leach pad expands the lower portions of the surface water diversion systems
will be in their final locations, and then they will be upgraded to meet permanent
standards for erosion and storm size. This will also apply to the outlet structures
and any associated erosion works. These upgrades will begin in about year 5.
Once Phase 2 of the leach pad is constructed portions of the Phase 1 heap slopes
will be in their permanent configuration and leaching will have ceased. At this time,
estimated to start in year 6, final grooming, capping and revegetation of these
slopes, along with associated surface water and erosion controls, will be
implemented.
The plans developed during concurrent closure will require final revisions to
accommodate both lessons learned and the final configuration of the heap and
roads. This will also include final as-built surveys of the facilities.
This process consists primarily of recirculating cleaner water through the heap, and
treating the effluent to reduce contained metals and neutralize the pH. Initially the
recirculated solutions will be process solutions, diluted by normal rainfall, with pH
buffered to normal leaching levels to allow complete extraction of gold, silver and
other metals. Once the concentrations of soluble metals are sufficiently low, the pH
will be reduced to below 8.0 and rinsing will continue until the target cyanide levels
are achieved. Individual areas of the heap, simulating approximately the normal
leach areas, will be rinsed and neutralized so that the capacity of the drainage
system and plant are properly utilized. Once the target levels for the controlled
constituents (pH, metals and CN) are reached, the heap will be allowed to sit idle
through at least one wet season and the effluent chemistry monitored to ensure the
targets are maintained. If any of the constituents exceed the targets, then rinsing
will be repeated. If the geochemical modeling suggests any potential to produce
acidic drainage, then the post-rinse pH will be left elevated to off-set this potential.
Industry history has shown that, with very few exceptions, the rinsing stage of a gold
heap produces more value in gold than the neutralization stage costs to complete.
In fact, most large gold heaps continue operating profitably in the “rinse” mode for
years beyond the end of mining. And this has been the case even with sustained
low metal prices. Since this gold production is not recognized in the economic
forecast for the project, the value is properly credited against closure costs. Thus,
the closure cost estimate includes zero net cost for the rinsing/neutralization stage.
In most cases the heap slopes will remain in the as-stacked configuration, with only
clean up of benches and minor regarding to promote proper drainage. In some
cases where slope stability has been an issue during operations, some flattening of
the slopes may be required as part of final closure. The required final slopes will be
determined based on testing and analysis. In general, the slopes of the heap will be
angle-of-repose lifts followed by nominally flat benches to create a stable over-all
slope. Some areas may be graded to combine several benches to allow creation of
permanent access roads or other features. The lower portions of the entire
perimeter of the heap will be graded to spread the ripios so that all exposed liner is
covered.
The crest of the heap and the benches, as well as any disturbed ground in the
vicinity (except roads and diversions to remain) will be covered with topsoil,
supplemental nutrients as needed, and seed. For high-erosion prone areas some
rapid growing, annual species of exotics may be used but the revegetation plan will
emphasize the use of locally harvested native species. Experience has shown that
locally harvested seeds have the highest survival rates and are the best suited to
local soil and climate factors. Over the heap non-food species will be preferred to
avoid accumulation of any metals in the food chain. The cost estimate includes
harvesting and purchasing seed and purchasing fertilizer annually for the first three
years; afterwards the maturing vegetation will generate sufficient seed and organic
mass to support robust growth.
The solution and emergency ponds and pump stations will remain in place and in
service for the first few years to allow management of heap effluents. The ponds
may remain in service permanently to provide seasonal water to livestock and
wildlife. This is a matter for further consideration.
Except for the light mobile equipment (truck, backhoe, bulldozer) to remain on-site
during the post-closure care and monitoring period, all equipment will be sold for
scrap. Most of this equipment will be in serviceable condition and thus will probably
be sold at a profit (i.e., sales proceeds exceed decommissioning costs).
Roads and diversion works that are to remain in service post-closure will be
upgraded to meet the closure design. Generally this will mean that the surfacing
will be more robust and that the dimensions of drainage facilities will be enlarged to
meet a larger design storm. Culverts will be replaced with surface crossings since
culverts are only serviceable for 10-20 years (and are targets for theft).
24.8.11 Fencing
All fencing around the pad and pond areas will be removed as the land is intended to
return to grazing and wildlife habitat. Further, maintaining fencing would not likely to
be successful in the long-term.
After the completion of final closure, the site will require regular maintenance for the
first approximately 3 years post-closure or until there is no further signs of changing
conditions. During this period, the site will be inspected every calendar quarter (3
months) and maintenance activities will be planned immediately following each wet
season and following any unseasonal major storm events. The purpose of this is to
ensure the drainage and erosion control measures are working as planned, and to
allow the recently revegetated areas to mature and properly take hold.
Maintenance work will consist of light manual labor (ditch tending, rubble removal,
and so forth), and light equipment (backhoe and bulldozer) work to regrade or groom
any areas showing signs of distress or erosion.
Once the site stops showing signs of seasonal distress and the functionality of the
facilities has been field proofed, and when the geochemical performance matches
predictive modeling, periodic inspection and maintenance activities can be reduced
in frequency; initially to annually and eventually to only after unusually high rainfall
periods.
The quality of the water draining from the heap will require monitoring and
comparison to the predicted chemistry. If the measured water quality significantly
varies from that predicted, in an unfavorable manner, then the geochemical model
will be revised and new forecasts prepared. In the extreme case additional rinsing
and neutralization of the heap may be required. More likely it will only be required to
extend the short-term maintenance period.
The ponds will remain in service indefinitely. Water collected in the ponds will be
tested with each inspection cycle and if the water quality does not meet discharge
standards then that water will be recirculated to the heap and/or evaporated. The
ponds will likely accumulate sediments and precipitates as water accumulates and
evaporates. These sediments will require periodic removal and can be buried within
the heap. This will probably continue for at least one year post-closure and may be
needed for up to five years, depending upon the effectiveness of the erosion control
measures and re-vegetation efforts.
Maintaining a healthy, robust biological system will improve both the physical and
geochemical performance of the closed heap. Thus, the periodic inspections will
pay special attention to the biological environment, the health of the vegetated areas
as well as the health of the down-stream riparian habitats and surrounding
vegetative areas. Reseeding and replacement of some topsoil will be planned
annually for the first approximately 3 years. Biological monitoring will continue as
long as physical monitoring does, and at least until all habitat and vegetative areas
have been stable for multiple years and through extreme wet and dry seasons.
Heap drainage will be tested and when clean discharged to the downstream
drainages. In the short-term some periods when the water cannot be discharged
will be provided for, and in these cases solution will be pumped on top of the heap
as irrigation water for the revegetated areas. Costs for this program will principally
be pump maintenance and provision of electrical power (i.e., diesel fuel) from the
generating station.
If the geochemistry of the heap effluent supports closing the ponds, then they will be
decommissioned and closed at such time. The liners will be perforated and the
ponds backfilled with permeable waste rock or rinsed ripios. Heap effluent will
continue to flow into the backfilled ponds, which will now act as infiltration basins.
Alternatively, if the geochemistry is stable and water quality acceptable, one or more
of the ponds will be left in place as water storage facilities to support agricultural
activities.
Except for the items listed below, the costs for concurrent closure are included in the
normal operating and sustaining capital cost estimates. All cost estimates assume
economies of scale achieved by the company and do not include contractor
overhead, profit, or contingency. Nor are other indirect costs included. All activities
requiring mobile equipment assume that the operational fleet will be available and
thus the closure activities are not burdened with the fleet capital expense (or that
any equipment to be purchased at closure will be funded by proceeds of selling used
equipment for no net cost). Closure costs are as summarized in Table 24.1.
Concurrent Closure:
Engineering Design (year 5) $ 120,000
Monitoring Plans (physical, geochemical, biological; yr 5) $ 35,000
Geochemical modeling (and supporting test work; yr 5) $ 180,000
Topsoil generation (years 3 to 10)
Mobile equipment $ 20,000
$20,000/year x 8 years $ 160,000
TOTAL CONCURRENT CLOSURE: $ 515,000
Final Closure:
Engineering Design, Survey, Monitoring Plans (yr 9) $ 100,000
Heap Rinsing & Neutralization -- 0 --
Slope Grooming, Stabilization, Topsoil & Revegetation
Seed & fertilizer, 3 yrs x $10,000/yr (yrs 10-12) $ 30,000
50 hectares x $15,000/ha (yrs 10-12) $ 750,000
Ponds & Pump Stations -- 0 --
Physical & Mobile Equipment -- 0 --
Roads, Diversion Works & Erosion Control
5 km x $30,000/km $ 150,000
TOTAL FINAL CLOSURE: $1,030,000
25 ECONOMIC ANALYSIS
Economic pit optimization has been run using a US $900/oz gold price. Only oxide
material was considered in the assessment. Details of the pit optimization and mine
production schedule are given in Item 21. Gold recoveries are based on column
tests as detailed in Item 18. Different recoveries are used for different material
types.
Capital and operating costs are derived from a number of sources including actual
costs for similar cost items, quotes and best estimates by experienced people.
Both pre-tax and after-tax Cash Flow Projections are generated from the Life of Mine
(LOM) production schedule and capital and operating cost estimates.
25.1.1 Assumptions
25.1.2 Production
25.1.4 Revenue
- Costs for land purchase and more detailed engineering of $7.9 million prior to
initializing construction. Since these costs would be incurred before the start
of construction, and may in fact be incurred more than 2 years before the start
of production, analyses of the NPV and IRR for the project were made
considering both the case of from Year -2 to closure and from Year PP to
closure, as presented in Item 25.3 and Tables 25.1, 25.2, and 25.3.
- Pre-production capital cost estimate is $72.7 million.
- Sustaining capital cost is estimated at $31.9 million.
Total $72.7M
Mining operating costs are presented in Item 21. Process costs are discussed in
Item 22. Each material type has an unique process cost dependent upon the
physical properties of the rock (i.e. crushing index) and the reagent consumption in
column tests. Details are given in section Item 22. General and Administration
costs were developed based on information from operating mines and were then
checked that they are reasonable for the La India project.
25.2 Taxes
1) the greater of the regular income tax (“ISR”), and the single rate business tax or
flat tax (“IETU”), and
25.2.1 Income Tax and Single Rate Business Tax or Flat Tax
Mexico’s corporate income tax is 30% through December 31, 2012. The rate will be
reduced to 29% in 2013 and 28% in 2014 and future years. An income tax rate of
28% has been used in the economic model.
Mexico also has a flat tax that applies to corporations. The flat tax is an alternative
tax that does not replace the corporate income tax and is calculated on a cash-flow
basis, generally when business receipts are collected and business expenditures,
including capital expenditures, are made. A flat tax rate of 17.5% has been used in
the economic model.
Corporations are required to calculate both their income tax liability and their flat tax
liability for each fiscal year, and pay whichever is higher.
Value-added tax is assessed on the sale of goods and services, leasing and imports.
The rate is 16% and is imposed on all activities conducted within Mexican territory,
11% in the US/Mexican border region and 0% for all exports, which includes the sale
of gold. Value-added tax paid on purchases is refundable as long as the expenses
are business related and are deductible for income tax purposes. The economic
model assumes a value-added tax rate of 16%, and that all value-added tax paid will
be refunded.
The projected cash flow for the La India project is summarized in Table 25.1.
Based on the time period from pre-construction year -2 through closure, on a stand-
alone basis the project returns the pre-tax cash flows presented in Table 25.2.
Table 25.2. Project Cash flows and IRR, Year pre-construction -2 through closure.
Price Gold Undiscounted Cash Flow NPV @ 5% Discount IRR Payback
Scenario (US$/oz) (millions US) (millions US) (%) Years
$850 $175 $105 31% N.A.
Based on the time period from construction (year PP) through closure, on a stand-
alone basis the project returns the pre-tax cash flows presented in Table 25.3.
Table 25.3. Project cash flows and IRR, Year PP through closure.
Price Gold Undiscounted Cash Flow NPV @ 5% Discount IRR Payback
Scenario (US$/oz) (millions US) (millions US) (%) Years
$850 $184 $124 38% 3.4
Base Case $950 $267 $187 51% 2.6
2 Week $1355 $603 $441 103% 1.4
Average (i)
ii. Source: www.kitco.com. 10 trading day average London PM Fix from Oct. 6, 2010-Oct 19, 2010.
The Total Cash Cost is $505/oz gold produced. The LOM capital cost is US$126/oz
gold produced, for a Total Production Cost of US$631/oz gold produced.
Key economic risks were examined by running cash flow sensitivities on:
- Recovered gold
- Capital Costs
- Operating Costs
- Gold Price
Sensitivity over the base case were calculated for a range of -20% to +20%
variations of the base case parameters of capital cost, operating cost, and gold
price. Variance of gold recovery has the same effect as variance of gold price,
however gold recovery cannot increase beyond 100% thus sensitivity to gold
recovery was not studied beyond a 10% increase. All analyses were done with a
5% NPV. The sensitivities are shown on Table 25.4 and Figure 25.1.
The project is most sensitive to gold price and recovered gold (which have the same
impact). This is followed by the operating costs with the capital cost being the least
sensitive to the economics of the project.
$300
$250
$200
Gold Recovered
$50
$0
-20% -10% Base 10% 20%
The La India project comprises multiple high sulfidation, epithermal gold systems
hosted by a volcanic sequence comprised of andesitic and felsic extrusive volcanic
strata with interbedded epiclastic volcaniclastic strata of similar composition. The La
Viruela-La Cruz area comprises one of several high sulfidation epithermal
mineralization centers recognized in the region (Staude, 2001).
Grayd Resource Corporation has been actively exploring the project since 2004.
Work completed to date includes: geologic mapping; geochemical rock chip
sampling; airborne geophysical surveys; ground geophysical surveys;
photogrammetric topographic mapping; 7,208 meters of diamond drilling in 95
resource model drillholes; drilling of 7 diamond core holes for metallurgical sampling;
40,871 meters of reverse circulation drilling in 510 resource model drillholes;
completion of 30 bottle roll metallurgical tests; and completion of 22 column leach
tests of 13 composite samples representing the most significant ore domains.
At the Tarachi exploration prospect, Grayd has completed a total of 27 diamond core
drillholes totaling 6,276 m and 8 reverse circulation drillholes totaling 1,926m.
Surface sampling and drill results from the Tarachi area have outlined a mineral
system in excess of five square kilometers in area. Nearly all of the 35 Tarachi
drillholes to date intersected significant mineralized widths containing greater than
0.20 gpt Au, with local higher grade intervals. Many of the Tarachi holes were
mineralized at the end of the hole and the lateral extents of mineralization are
unknown. The Tarachi prospect has potential to host a large gold resource. The
Tarachi drillholes are not part of the resource model database and resources have
not yet been defined for the Tarachi area.
The drilling campaigns successfully met their objective of providing sufficient data to
allow for estimation of a CSA NI43-101 compliant Measured, Indicated and Inferred
resource estimate for the Main and North Zones. Resources have not yet been
defined for the Tarachi area. The La India project hosts:
Of the Measured and Indicated resource, 603,000 ounces (21.6M tonnes at a grade
of 0.867 gpt Au) are contained in oxidized material. Of the Inferred resource,
378,000 ounces (14.3 Mt @ 0.82 gpt Au) at a 0.40gpt cutoff) are contained in oxide
material. Column leach tests of 12.5mm crushed material yielded gold recoveries
from 62 to 94%. Column leach tests of 25mm crushed material yielded gold
recoveries from 79 to 97%, an indication that the oxide material may be amenable to
treatment by conventional cyanide heap leach gold recovery methods.
For purposes of the Preliminary Economic Assessment of the La India project, the
subject of this report, engineering studies and operating and capital cost estimates
were made for a mine designed to exploit only the only oxide resources.
About 65% of the mineral resource tonnages contained within the base case LG
shells are classified as Measured and Indicated, with the remainder being Inferred.
The Main deposit area contains about 51% of the project’s total mineral resources,
weighted by tonnage.
Based on the LG Base Case economic Pit20 ($900/oz Au) detailed pit designs have
been done to include detailed slope parameters and ramps. These are summarized
as pit delineated resources as follows:
At this PEA level of study these resources include Measured, Indicated, and Inferred
classes and are used in the production schedule and economic analysis for
evaluation purposes only. They are not deemed reserves and MMTS does not
present them as having economically assured profitability at this stage of study.
Based on the time period from construction (year PP) through closure, a $950
USD/oz. gold price, and the capital and operating costs detailed in this report, on a
stand-alone basis the project returns:
The optimized economic pit limits based on the oxide zone of the La India resource
model produce a significant mineable resource. These results are based on scoping
level design and include Measured, Indicated, and Inferred resource classes so the
design level of detail does not signify economic viability at this time, but it does
indicate the project has significant economic potential. The positive economic
interpretation is based on the following points:
- The scoping study economic pit optimizations (LG), pit designs, and mine
planning are based on the inclusion of all Measured, Indicated, and Inferred
mineralized rock. To realize, or exceed, the results of this study at the next
stage of the project will require the Inferred material to be upgraded to
Measured or Indicated resource class.
- The mine plan is based on conventional truck shovel mining, feeding a heap
leach process, and is similar to other surface operations in the area. This
operating plan has a low technical risk for viable operations and regulatory
approval in this region.
- Capacity still exists within the planned heap leach dump, and for mine waste
dumping. A larger operation can be considered if regional exploration
indicated an increase in resources.
- A smaller sized equipment fleet has been considered for this scoping study
on the basis that it allows for flexibility in planning and also for getting into the
“tighter” mining areas of the numerous smaller sized pits. However, the
economic, and other, impacts should be studied for considering larger sized
loader and truck fleets in conjunction with more detailed mine planning.
- Pit slope designs are based on average overall slopes. The impact of flatter
slope is demonstrated to be not significant to the overall results. However for
more detailed levels of study geotechnical investigations will be needed to
improve the accuracy of the estimate of the pit slopes for the numerous pit
areas.
The authors of this report deem the La India open pit gold mining project to be viable
at the Preliminary Economic Assessment level of study and should be advanced to a
Pre-Feasibility or Feasibility Study level.
27 RECOMMENDATIONS
Work to date has identified a gold resource likely to be of economic significance and
a Preliminary Economic Assessment indicates potential to develop a profitable and
economically significant mine. The positive conclusion to the PEA warrants that the
current resource area of the project be advanced to either a Pre-Feasibility or
Feasibility level of confidence.
Exploration to date in the Tarachi area has outlined a large mineralized system
whose limits are still unknown. Recommended work includes trying to define
resources in the area with current significant gold intersections and continued
exploration of the rest of the property to identify other potential resource areas. In
addition, the claim area should be expanded and exploration efforts continue onto
the expanded property.
- Complete an infill drilling program and update the resource block model, with
the goal of upgrading the Inferred mineralization to the Measured or Indicated
classifications.
- Complete a step-out drill program to increase the resource base to extend the
mine life or increase the production throughput.
- Acquire more detailed topographical information.
- Collect geotechnical data required for detailed pit slope, mine haul road,
waste dump and pad and pond designs. This work will entail drilling waste in
the highwall areas and under the pad and pond areas, rock strength testing,
geological mapping and modeling, and hydro-geological assessments.
- Create a hydrogeology model.
- Continue the ARD testwork and develop a waste rock management plan.
- Undertake trade-off study on contractor versus owner-mining.
- Confirm optimum mining equipment size.
- Purchase land required for further development and eventual exploitation of
the deposit should be purchased. Failure to do so will impede receipt of
environmental permits needed to conduct feasibility level studies.
The total cost of the program is estimated at $13.0M USD, as itemized in Table 27.1.
27.2 Opportunities
A trade-off study on the equipment sizing to obtain the optimal fleet size may result
in cost reductions.
Backfilling of the mined out pits should be evaluated as a means to reduce operating
costs.
The current analysis is based on processing only oxide material. The resource
includes a significant amount of gold in sulfide material. Initial testing of sulfide
Domain 6 material in 2005 showed very low recoveries in cyanide bottle rolls but
indicated that the gold could be recovered in a sulfide concentrate. At this point
there is not enough of this material to consider the construction of a mill.
However, further bottle rolls of sulfide Domain 3, 5, 7 and 17 material showed higher
recoveries and subsequently three column tests of sulfide material were completed.
These included two of Domain 17 and one of Domain 5. All were done with -25mm
(-1inch) material. The two column tests on Domain 17 material had 40 and 60%
recovery and the Domain 5 test had 70% recovery. As expected, lime and cyanide
consumptions were higher than for the oxide material, but were not unreasonable.
At a 0.3 g/t cut-off, there are approximately 250,000 ounces in Domains 3, 5, 7 and
17 in Measured, Indicated and Inferred resource in the May 2010 calculation.
(Domains 7 and 17 are the same material, with 7 in the Main zone and 17 in the
north zone). Much of this material could possibly be economically processed with the
current development plan. The sulfide material immediately underlies the oxide
material, so waste to ore ratios would be low if the sulfide was mined. Further
columns tests to confirm recoveries and reagent costs are recommended.
In the area west and south of the current Main zone pits, there is a possibility for a
moderate (50,000 to 100,000 ounce) increase in oxide resources that report as ore
in the pit optimization program. This increase would be from a combination of new
resource that recent work shows may be present and current resource that would be
“mineable” with the addition of the new resource. Further drilling is required to test
this opportunity.
The current assessment is based on the mining equipment being owned and
operated by the company. A capital cost reduction of $34M could be achieved if
mining was done entirely by a contractor. ($26M initial and $8M sustaining). There
would also be a reduction in project risk for the company and may result in a
smoother start-up because the contractor could provide a management team that
has worked together previously. Presumably, contract mining will result in higher
costs per tonne operating costs than currently modelled. Indicative quotes from
contractors will be required to evaluate this opportunity.
Vendor financing could provide reduced initial capital costs and lower company risk.
Indicative quotes from vendors will be required to evaluate this opportunity.
There may be improved recoveries from that modeled due to the very long
secondary leach cycles available on a conventional (multi-stack) heap. A couple
percentage points is a reasonable estimate for what this increased recovery may be,
however it is very hard to estimate beforehand.
down-slope conveyors and gravity pipelines. It will take detailed work to estimate
the cost and benefits of any alternative energy source.
Exploration for new resource zones continues at La India. The discovery of a new
resource area could significantly change the project economics.
28 REFERENCES
Alamos Gold Incorporated, 2005, Quarterly Report, 3rd Quarter 2005, published on
System for Electronic Document Analysis and Retrieval (SEDAR),
http://www.sedar.com.
Albert, T.E., 2007a, La India project review: cyanide bottle roll tests, private report
prepared by Kappes Cassiday and Associates for Grayd Resources, 21 May 2007.
Albert, T.E., 2007b, Flotation Tests – La India Project, KCA Project Code: 285
C/7900, private report prepared by Kappes Cassiday and Associates for Grayd
Resources, 3p., 11 July 2007.
Albinson, T., Norman, D., Cole, D., and Chomiak, B., 2001, Controls on formation of
low-sulfidation epithermal deposits in Mexico: Constraints from fluid inclusion and
stable isotope data: in New Mines and Mineral Discoveries in Mexico and Central
America, Special Publication Number 8 of the Society of Economic Geologists, p. 1 -
32.
Ashley, R.P., 1974: Goldfield mining district. Nevada Bureau of Mines Geologic
Report 19, p. 49-66.
Berger, B.R., and Henley, R.W., 1989, Advances in the understanding of epithermal
gold silver deposits with special reference to the western United States: in The
Geology of Gold Deposits: the Perspective in 1988, Economic Geology Monograph
6, Keays, W.R., Ramsey, W.R.H., and Groves, D.I., editors, The Society of
Economic Geologists.
Bonham, H.F. Jr., 1988, Models for volcanic-hosted epithermal precious metal
deposits: in Bulk minable precious metal deposits of the western United States
Symposium Proceedings, Schafer, R.W., Cooper, J.J., and Vikre, P.G. editors,
Geological Society of Nevada.
Deen, J. A., Rye, R.O., Munoz, J.L., and Drexler, J.W., 1994: The magmatic
hydrothermal system at Julcani, Peru: Evidence from fluid inclusions and hydrogen
and oxygen isotopes. Economic Geology v. 89 p. 1924-1938.
Foley, A., 2006a, La India Hoist EM acquisition report, private report dated April
2006, prepared for Newmont Mining Corporation and Grayd Resource Corporation,
6 pages.
Foley, A., 2006b, La India Pole-Dipole acquisition report, private report dated April
2006, prepared for Newmont Mining Corporation and Grayd Resource Corporation,
31 pages.
Glamis Gold Corporation, 2006, First Quarter Report, published on System for
Electronic Document Analysis and Retrieval (SEDAR), http://www.sedar.com.
Gray, Matthew D., 2006, Summary report of the La India gold project, CSA NI43-101
compliant Technical Report, prepared for Grayd Resource Corporation, 14 July
2006, 155p., published on System for Electronic Document Analysis and Retrieval
(SEDAR), http://www.sedar.com.
Gray, M.D, and Giroux, G., 2008, February 2008 inferred mineral resource, La India
gold project, Municipio of Sahuaripa, Sonora, Mexico, CSA43-101 compliant
Technical Report, Grayd Resource Corporation, 22 February 2008, 158p., published
on System for Electronic Document Analysis and Retrieval (SEDAR),
http://www.sedar.com.
Gray, M.D, and Giroux, G., 2009, February 2009 inferred mineral resource, La India
gold project, Municipio of Sahuaripa, Sonora, Mexico, CSA43-101 compliant
Technical Report, Grayd Resource Corporation, 26 March 2009, 200p., published on
System for Electronic Document Analysis and Retrieval (SEDAR),
http://www.sedar.com.
Gray, M.D, and Giroux, G., 2010, May 2010 measured, indicated and inferred
mineral resource, La India gold project, Municipio of Sahuaripa, Sonora, Mexico,
CSA43-101 compliant Technical Report, Grayd Resource Corporation, 15 June
2010, 237p., published on System for Electronic Document Analysis and Retrieval
(SEDAR), http://www.sedar.com.
Gray, J.E., and Coolbaugh, M.F., 1994: Geology and geochemistry of Summitville,
Colorado: An epithermal acid-sulfate deposit in a volcanic dome. Economic
Geology v. 89 p. 1906-1923.
Hayba, D.O., Bethke, P.M., Heald, P., and Foley, N.K., 1985: Geologic, mineralogic,
and geochemical characteristics of volcanic-hosted epithermal precious metal
deposits. Reviews in Economic Geology v. 2 p. 129-167.
Heald, P., Foley, N.K., and Hayba, D.O., 1987: Comparative anatomy of volcanic-
hosted epithermal deposits: acid-sulfate and adularia-sericite types. Economic
Geology v. 82 p. 1-26.
Jenkins, D.M., 1994, Geological report on La Viruela Project, Sonora State, Mexico,
private report dated 13 April 1994 prepared for San Fernando Mining Company, 40
pages.
Kappes, Cassiday & Associates, 2010a, Bottle roll leach test work - La India project,
report of metallurgical testwork, March 2010, KCA Project Code: 285 C/7900, private
report prepared by Kappes Cassiday and Associates for Grayd Resources, 4p.,
March 2010.
Longo, T., 2006a, La India field review report, 27 February 2006, private report
prepared for Newmont Mining Corporation and Grayd Resource Corporation, 43
pages.
Longo, T., 2006b, La India February 2006 monthly report, 28 February 2006, private
report prepared for Newmont Mining Corporation and Grayd Resource Corporation,
6 pages.
Longo, T., 2006c, La India progress report, 28 March 2006, private report prepared
for Newmont Mining Corporation and Grayd Resource Corporation, 9 pages.
Longo, A. A., Paez-Beltran, E., Smit H., Bourke, F. M., and Prefontaine, M., 2010,
Geology of the La India Gold Deposit, Mulatos District, Sonora, Mexico, in Great
Basin Evolution and Metallogeny, Geological Society of Nevada Symposium
Proceedings, Reno/Sparks, Nevada, May 14-22, 2010, in press.
Moore, S., 2005, Results and exploration concepts from geologic mapping, La
India/La Viruela map areas, private report dated 6 December 2005, prepared for
Newmont Mining Corporation and Grayd Resource Corporation, 6 pages.
Moore, S., 2006, La India Project, Duraznito South area, results of mapping
February 2006, private report dated 18 March 2006, prepared for Newmont Mining
Corporation and Grayd Resource Corporation, 13 pages.
Petersen, U., Noble, D.C., Arenas, M.J., and Goodell, P.C., 1977: Geology of the
Julcani mining district, Peru. Economic Geology v.72 p. 931-949.
Ransome, F.L., 1909: The association of alunite with gold in the Goldfield district.
Economic Geology v.2 p. 667-692.
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report prepared for Grayd Resources Inc, November 2008, 4 pages.
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published by Secretaria de Fomento Colonizacion, Industria y Comercio, Gobierno
de Mexico, 260 pages.
Vikre, P. G., 1989: Ledge formation at the Sandstorm and Kendall gold mines,
Goldfield, Nevada. Economic Geology v. 84 p. 2115-2138.
29 STATEMENT OF QUALIFICATION
I, Matthew Dean Gray, of Calle Real No. 68, Hermosillo, Sonora, Mexico, do hereby certify:
Signed:______________________________________ Date:______________________
Matthew D. Gray, Ph.D., C.P.G. #10688
2) I am a graduate of the University of British Columbia in 1970 with a B.A. Sc. and in
1984 with a M.A. Sc., both in Geological Engineering.
4) I have practiced my profession continuously since 1970. I have had over 30 years
experience calculating mineral resources. I have previously completed resource
estimations on a wide variety of precious metal deposits both in B.C. and around the
world, including La Colorada, La Jojoba and Lluvia de Oro in the State of Sonora
Mexico , Livengood in Alaska and Kisladag in Turkey
5) I have read the definition of “qualified person” set out in National Instrument 43-101
and certify that by reason of education, experience, independence and affiliation with
a professional association, I meet the requirements of an Independent Qualified
Person as defined in National Instrument 43-101.
7) I have previously completed a resource estimation on this property in 2008 (Gray &
Giroux, Feb. 22, 2008), in 2009 (Gray & Giroux, March 26, 2009) and in 2010 ( Gray
& Giroux, June 15, 2010). All of these reports are available on SEDAR. The
resource estimate completed in 2010 is the basis for the PEA in this report.
8) As of the date of this certificate, to the best of my knowledge, information and belief,
the technical report contains all scientific and technical information that is required to
be disclosed to make the technical report not misleading.
9) I am independent of the issuer applying all of the tests in section 1.4 of National
Instrument 43-101.
10) I have read National Instrument 43-101 and the technical report has been prepared
in compliance with National Instrument 43-101.
I, Mark E. Smith, P.E., of Incline Village, Nevada, USA, hereby certify that:
1. I am a US citizen and professional engineer with offices at 759 Eagle Drive, Incline
Village, Nevada, USA. I have practiced my profession continuously since 1979 and I
have over 30 years of experience in mining and mineral processing working
worldwide.
2. I am a registered civil and geotechnical engineer in the State of California
(#CE35469 and #G2082), a registered professional engineer (civil) and water rights
surveyor in the Nevada (#6546 and #701), a registered professional engineer (civil
and structural) in the Idaho and Utah, and a registered professional engineer (civil) in
Texas and South Dakota. I am a Registered Member of the Society for Mining,
Metallurgy & Exploration (#3005800) and a member of the Instituto de Ingeríos de
Minas del Peru.
3. I am a member of the Advisory Board for the College of Engineering, University of
Nevada, Reno, Nevada. I am the qualifying officer for contractor’s licenses for
general building and general engineering construction (A and B) in the State of
California (#648517) for XVEI (formerly known as Vector Engineering).
4. I graduated from the University of Nevada, Reno (M.Sc. Civil Engineering with
honors) in 1986, and the University of California, Davis (B.Sc. Civil Engineering) in
1979. I also studied geological engineering, groundwater hydrology and rock
mechanics at the University of Utah, Salt Lake City (1979-1980).
5. I have read the definition of "qualified person" set out in National Instrument 43-101
("NI 43-101") and certify that by reason of my education, affiliation with a
professional association (as defined in NI 43-101) and past relevant work
experience, I am a "qualified person" for the purposes of NI 43-101.
6. The Technical Report to which this certificate applies is titled “6 December 2010
Preliminary Economic Assessment, La India Gold Project, Municipio of Sahuaripa,
Sonora, Mexico” and dated 6 December 2010 and I am responsible for Items 18, 22
and Item 23 and the related components of Items 3, 26, and 27.
7. I have visited the La India Property on April 7 and 8, 2010.
8. I have not had prior involvement with the property that is the subject of the Technical
Report.
9. As of the date of this certificate, to the best of my knowledge, information and belief,
the technical report contains all scientific and technical information that is required to
be disclosed to make the technical report not misleading.
10. I am independent of the issuer applying all of the tests in section 1.4 of National
Instrument 43-101.
11. I have read National Instrument 43-101 and Form 43-101F1, and the Technical
Report has been prepared in compliance with that instrument and form.
12. I consent to the filing of the Technical Report with any stock exchange and other
regulatory authority and any publication by them for regulatory purposes, including
electronic publication in the public company files on their websites accessible by the
public.
“signed”
________________________
Signature of Qualified Person
Mark E. Smith, P.E.
Appendix A. Summary of significant drill intercepts, 2004 through 22 January 2010 reverse
circulation and diamond drilling.
Appendix B. Summary of significant drill intercepts, 2010 reverse circulation and diamond
drilling, Tarachi area, not part of resource estimate database..
Length To Width Au
Zone Hole East North Azimuth Dip From (m)
(m) (m) (m) gpt
RC-10-
88.4 24.4 0.35
Tarachi 583 700200 3185073 135 -50 254.5 64.0
RC-10-
13.7 236.2 222.5 0.50
Tarachi 582 699985 3184981 110 -60 269.8
including 160.0 230.1 70.1 0.95
RC-10-
7.6 112.8 105.2 0.18
Tarachi 581 700412 3185114 130 -60 160.0
RC-10-
77.7 208.8 131.1 0.19
Tarachi 580 699824 3185364 150 -60 306.3
RC-10-
13.7 99.1 85.3 0.31
Tarachi 579 700129 3185166 315 -60 233.2
RC-10-
42.7 228.6 185.9 0.29
Tarachi 578 700183 3185264 135 -60 243.8
RC-10-
132.6 245.4 112.8 0.39
Tarachi 577 700340 3185615 225 -50 245.4
RC-10-
99.1 134.1 35.1 0.24
Tarachi 576 700342 3185616 45 -60 213.4
DDH-10-
Tarachi 169 700534 3185643 350 -60 226
DDH-10-
Tarachi 168 700535 3185643 170 -60 194
DDH-10-
6 250 244.0 0.85
Tarachi 167 700179 3184990 225 -60 250.0
108 198 90.0 1.21
DDH-10- No significant
Tarachi 166 699573 3185783 135 -60 324.8 intersection
DDH-10- No significant
Tarachi 165 700264 3185730 315 -60 327.9 intersection
DDH-10-
161.0 166.0 5.0 0.70
Tarachi 164 700271 3185725 135 -60 207.4
DDH-10- No significant
Tarachi 163 700346 3184824 315 -60 253.2 intersection
DDH-10-
9.0 46.0 37.0 0.38
Tarachi 162 700122 3185039 315 -60 349.2
DDH-10-
373.6 136.0 247.0 111.0 0.43
Tarachi 161 699984 3184960 290 -60
including 144.0 158.0 14.0 1.07
DDH-10-
Tarachi 24.0 142.0 118.0 0.38
160 700069 3184879 315 -60 205.9
including 41.0 75.0 34.0 0.62
DDH-10-
Tarachi 9.0 141.0 132.0 0.50
159 700174 3184927 315 -60 199.8
including 68.0 105.0 37.0 0.86
DDH-10-
Tarachi 410.7 11.0 253.0 212.0 0.31
158 699984 3184960 110 -60
including 152.0 184.0 32.0 0.69
DDH-10-
Tarachi 0.0 180.0 180.0 0.28
157 700129 3185152 135 -60 179.95
including 101.0 123.0 22.0 0.74
DDH-10-
Tarachi 157.1 15.3 157.1 141.9 0.23
153 700247 3185095 270 -60
including 23.8 55.8 32.0 0.43
DDH-10-
Tarachi 146.0 154.0 8.0 0.67
152 700364 3185283 270 -60 189.1
DDH-10-
Tarachi 3.0 16.0 16.0 0.41
151 700364 3185283 110 -60 138.8
DDH-10-
Tarachi 55.0 117.0 62.0 0.40
150 700029 3184940 10 -60 164.7
DDH-10-
Tarachi 0.0 191.0 191.0 0.85
149 700029 3184940 110 -60 221.2
including 98.0 186.0 88.0 1.54
including 146.0 180.0 34.0 2.23
DDH-10-
Tarachi 8.0 212.0 204.0 0.47
148 700259 3185096 60 -60 212.0
including 22.0 96.0 74.0 0.95
DDH-10-
Tarachi 7.0 110.0 103.0 0.18
147 700256 3184844 10 -60 151.0
DDH-10-
93.0 93.0 0.27
Tarachi 129 700281 3184882 270 -85 93 0.0
including 0.0 9.0 9.0 1.22
DDH-10-
100.6 100.6 0.27
Tarachi 128 700281 3184882 90 -75 100.65 0.0
including 0.0 36.0 36.0 0.51
DDH-10-
109.0 109.0 0.28
Tarachi 127 700281 3184882 145 -85 164.7 0.0
including 0.0 19.0 19.0 0.58
including 87.0 109.0 22.0 0.57
DDH-10-
94.0 94.0 0.43
Tarachi 126 700281 3184882 144 -71 303.3 0.0
DDH-10-
159.0 159.0 0.22
Tarachi 125 700128 3185028 135 -70 300.4 0.0
DDH-10-
302.0 296.0 0.21
Tarachi 124 700403 3185129 290 -70 301.95 6.0
DDH-10-
165.5 163.3 0.33
Tarachi 123 700281 3184882 273 -69 276.4 2.2
including 2.2 58.0 55.8 0.71
Appendix C. Summary of reverse circulation drilling where water was injected during drilling
(“wet drilling technique”): 2005, 2006, 2007, and 2008 reverse circulation drilling.
19
RC-06-
86.87 181.36 94.49
22
RC-06-
35.05 36.58 1.52
28
RC-06-
53.34 114.30 60.96
28
RC-06-
35.05 36.58 1.52
29
RC-06-
18.29 21.34 3.05
36
RC-06-
48.77 108.20 59.44
36
RC-06-
59.44 135.64 76.20
37
RC-06-
128.02 163.07 35.05
44
RC-06-
89.92 141.73 51.82
45
RC-06-
92.96 150.88 57.91
47
RC-06-
77.72 141.73 64.01
62
RC-06-
77.72 89.92 12.19
74
RC-06-
50.29 135.64 85.34
73
RC-06-
32.00 71.63 39.62
94
RC-07-
41.15 50.29 9.14
100
RC-07-
108.20 173.74 65.53
106
RC-07-
35.05 44.20 9.14
108
RC-07-
42.67 56.39 13.72
113
RC-07-
89.92 114.30 24.38
127
RC-07-
45.72 50.29 4.57
156
RC-07-
64.01 68.58 4.57
168
RC-07-
109.73 144.78 35.05
168
RC-07-
134.11 230.12 96.01
169
RC-07-
50.29 53.34 3.05
170
RC-07-
41.15 44.20 3.05
190
RC-07-
67.06 83.82 16.76
193
RC-07-
18.29 51.82 33.53
194
RC-07-
47.24 68.58 21.34
198
RC-07-
83.82 149.35 65.53
209
RC-07-
144.78 150.88 6.10
212
RC-07-
160.02 164.59 4.57
226
RC-07-
38.10 121.92 83.82
236
RC-07-
121.92 141.73 19.81
236
RC-07-
21.34 254.51 233.17
239
RC-07-
135.64 140.21 4.57
243
RC-07-
21.34 38.10 16.76
252
RC-07-
41.15 53.34 12.19
254
RC-08-
10.67 22.86 12.19
277
RC-08-
53.34 73.15 19.81
290
RC-08-
92.96 144.78 51.82
342
RC-08-
13.72 19.81 6.10
363
RC-08-
0.00 56.39 56.39
378
RC-08-
22.86 53.34 30.48
380
RC-08-
0.00 35.05 35.05
382
RC-08- 0.00 35.05 35.05
383
RC-08-
0.00 35.05 35.05
385
RC-08-
0.00 68.58 68.58
386
RC-08-
0.00 28.96 28.96
387
RC-08-
0.00 44.20 44.20
388
RC-08-
0.00 59.44 59.44
389
RC-08-
0.00 28.96 28.96
390
RC-08-
0.00 64.01 64.01
391
RC-08-
0.00 38.10 38.10
392
RC-08-
0.00 44.20 44.20
393
RC-08-
0.00 65.53 65.53
394
RC-08-
0.00 59.44 59.44
395
RC-08-
0.00 59.44 59.44
400
RC-08-
0.00 141.73 141.73
401
RC-08-
0.00 65.53 65.53
402
RC-08-
6.10 59.44 53.34
404
RC-08-
15.24 105.16 89.92
408
RC-08-
7.62 74.68 67.06
412
Total 3,078.48
Appendix E. RC and diamond core drillholes in resource estimate database, Main Zone: collar
location, orientation, and total depth summary table.
DDH-08-
47 706,990 3,176,563 1,864 62.0 Viruela DDH Main Zone
DDH-08-
48 706,896 3,176,553 1,839 78.8 Viruela DDH Main Zone
DDH-08-
49 706,896 3,176,549 1,838 103.5 Viruela DDH Main Zone
DDH-08-
50 706,954 3,176,411 1,807 88.0 Viruela DDH Main Zone
DDH-08-
51 706,904 3,176,460 1,815 80.2 Viruela DDH Main Zone
DDH-08-
52 706,792 3,176,526 1,822 84.4 Viruela DDH Main Zone
DDH-08-
53 706,734 3,176,453 1,802 54.0 Viruela DDH Main Zone
DDH-08-
54 706,799 3,176,464 1,804 65.5 Viruela DDH Main Zone
DDH-08-
55 707,312 3,175,573 1,663 102.8 Cerro de Oro DDH Main Zone
DDH-08-
56 706,652 3,176,442 1,769 51.7 Viruela DDH Main Zone
DDH-09-
66 706,887 3,176,572 1,845 79.3 Viruela DDH Main Zone
DDH-09-
67 706,850 3,176,565 1,841 71.7 Viruela DDH Main Zone
DDH-09-
68 706,894 3,176,552 1,838 80.8 Viruela DDH Main Zone
DDH-09-
69 706,967 3,176,617 1,846 51.9 Viruela DDH Main Zone
DDH-09-
70 706,969 3,176,615 1,846 80.5 Viruela DDH Main Zone
DDH-09-
71 706,891 3,176,518 1,824 90.4 Viruela DDH Main Zone
DDH-09-
72 706,806 3,176,550 1,827 68.6 Viruela DDH Main Zone
DDH-09-
73 706,846 3,176,470 1,809 79.3 Viruela DDH Main Zone
DDH-09-
74 706,827 3,176,441 1,795 56.4 Viruela DDH Main Zone
DDH-09-
75 706,882 3,176,653 1,822 67.1 Viruela DDH Main Zone
DDH-09-
76 706,879 3,176,653 1,822 50.3 Viruela DDH Main Zone
DDH-09-
77 706,818 3,176,658 1,809 30.5 Viruela DDH Main Zone
DDH-09-
78 706,821 3,176,658 1,809 38.1 Viruela DDH Main Zone
DDH-09-
79 706,946 3,176,573 1,860 57.9 Viruela DDH Main Zone
DDH-09-
80 707,021 3,176,455 1,839 82.4 Viruela DDH Main Zone
DDH-09-
81 707,042 3,176,481 1,850 85.4 Viruela DDH Main Zone
DDH-09-
82 707,229 3,176,429 1,807 77.8 La Cruz DDH Main Zone
DDH-09-
83 707,348 3,176,377 1,821 80.8 La Cruz DDH Main Zone
DDH-09-
84 707,274 3,176,478 1,823 80.8 La Cruz DDH Main Zone
DDH-09-
85 707,004 3,176,485 1,844 61.0 Viruela DDH Main Zone
DDH-09-
86 706,849 3,176,472 1,809 61.0 Viruela DDH Main Zone
DDH-09-
87 706,809 3,176,476 1,812 59.5 Viruela DDH Main Zone
DDH-09-
88 706,778 3,176,581 1,808 51.9 Viruela DDH Main Zone
DDH-09-
89 706,733 3,176,449 1,801 61.0 Viruela DDH Main Zone
DDH-09-
90 706,914 3,176,413 1,795 61.0 Viruela DDH Main Zone
DDH-09-
91 706,972 3,176,415 1,811 70.0 Viruela DDH Main Zone
DDH-09-
92 707,363 3,176,405 1,825 51.9 La Cruz DDH Main Zone
DDH-09-
93 707,342 3,175,552 1,652 66.9 Cerro de Oro DDH Main Zone
DDH-09-
94 706,893 3,176,552 1,838 61.0 Viruela DDH Main Zone
RC-05-14 707,270 3,176,189 1,788 254.5 La Cruz RC Main Zone
RC-06-15 706,564 3,176,351 1,762 266.7 Viruela Root RC Main Zone
RC-06-16 707,258 3,175,983 1,737 196.6 La Cruz RC Main Zone
RC-06-17 707,211 3,176,124 1,776 170.7 La Cruz RC Main Zone
RC-06-19 706,978 3,175,875 1,694 217.9 Cerro de Oro N RC Main Zone
RC-06-20 706,972 3,175,874 1,694 153.9 Cerro de Oro N RC Main Zone
RC-06-21 706,974 3,175,874 1,694 35.1 Cerro de Oro N RC Main Zone
RC-06-24 707,189 3,175,542 1,700 108.2 Cerro de Oro RC Main Zone
RC-06-25 707,040 3,175,646 1,707 120.4 Cerro de Oro RC Main Zone
RC-06-26 707,085 3,175,645 1,722 138.7 Cerro de Oro RC Main Zone
RC-06-29 707,270 3,176,192 1,788 138.7 La Cruz RC Main Zone
RC-06-30 707,338 3,176,280 1,807 99.1 La Cruz RC Main Zone
RC-06-31 707,339 3,176,279 1,807 86.9 La Cruz RC Main Zone
RC-06-32 707,336 3,176,325 1,819 121.9 La Cruz RC Main Zone
RC-06-33 707,342 3,176,276 1,806 121.9 La Cruz RC Main Zone
RC-06-34 707,306 3,176,224 1,789 71.6 La Cruz RC Main Zone
RC-06-35 707,306 3,176,226 1,790 111.3 La Cruz RC Main Zone
RC-06-36 707,302 3,176,224 1,789 108.2 La Cruz RC Main Zone
RC-06-37 707,222 3,176,173 1,778 135.6 La Cruz RC Main Zone
RC-06-38 707,160 3,176,235 1,770 189.0 La Cruz RC Main Zone
RC-06-39 707,323 3,176,184 1,763 152.4 La Cruz RC Main Zone
Appendix F. RC and diamond core drillholes in resource estimate database, North Zone:
collar location, orientation, and total depth summary table.
Drillhole Easting Northing Elev Depth Area Type Zone
Appendix G. Semi-variograms, Main and North Zone oretype domains 1, 2, 3, 5, 6, 12, 17, & 18.
Appendix H. Bulk density data information from Kappes Cassiday and Associates.
.
Rock Density Test Work
Rock density tests were completed on randomly selected pieces of whole HQ and
PQ core. The pieces selected were approximately 5 to 8 centimeters in length and
were selected from each core interval received from the La India Project.
The procedure utilized by KCA for rock density determination is based upon the
ASTM Method C914, Standard Test Method for Rock Density and Volume of Solid
Refractories by Wax Immersion.
A summary of the average rock density for each composite sample is presented in
Table 3-1.
Table 3-1.
Summary of Composite Rock Densities
An apparatus used for melting wax is required. A container heated by hot water,
preferably thermostatically controlled, is satisfactory. The water should be heated to
only slightly above the melting point of the wax to avoid flashing of the wax vapors.
Vapors given off by molten wax ignite spontaneously at above 400°F (205°C) and
should not be allowed to come in contact with the heating element or open flame.
The container should be large enough to permit the dipping of the specimen into the
melted wax so that a uniform surface coating of wax is achieved.
Fully refined paraffin wax that has a known constant density, K, that does not
change after repeated melting and cooling cycles is required. The paraffin waxes
generally used are commercially available and have density values in the range of
0.87 to 0.91 g/cm 3. These waxes melt at approximately 135°F (57°C).
A balance capable of determining the weights of the specimens to a minimum of four
significant figures is required. Thus, specimens weighing from 100 to 999 g should
be weighed to a minimum of one decimal place. Those from 10 to 99 g should be
weighed to two decimal places and so on.
The individual test specimen was dried to a constant weight by heating to 105 -
110°C to remove entrapped moisture which would affect the rock density
determination. Any loose material or soil was removed from the test specimen.
An initial weight, W, of the test specimen in grams was measured to four significant
figures and the weight recorded.
The test specimen was then coated with wax by dipping the specimen into the
container of melted wax. Care was taken not to entrap air bubbles under the wax. If
found, these bubbles were pressed out so that the wax conformed exactly to the
surface of the specimen. Holes in the wax coating were closed by additional dipping
in the melted wax so that the surface was completely sealed.
A wax coated weight, P, of the test specimen in grams to four significant figures was
taken and the weight recorded.
The balance was then counterbalanced with a device to suspend the specimen in
place while immersed in water, Figure 3-1.
Figure 3-1
Counterbalance Device Utilized for Water Immersion Weight
Rock
Water
Balance
The total volume, V1, of the wax coated test specimen (specimen including the wax
coating) was calculated in cubic centimeters as follows;
V1 = P – S
This assumes that 1 cubic centimeter (cm 3) of water weighs 1.0 gram. This is true to
within 3 parts per thousand (ppt) for distilled water at room temperature.
The volume of the wax coating on the test specimen, V2, was calculated in cubic
centimeters as follows;
V2 = (P – W)/K
The volume of the test specimen, V, was then calculated by subtracting the volume
of the wax coating from the total volume as calculated in step 11 above.
V = V1 – V2
The rock density, D, of the test specimen in grams per cubic centimeters (g/cm 3)
was calculated as the quotient of the initial weight divided by the volume of the test
specimen, excluding the volume of wax.
D = W/V
Appendix I. Period-end maps, pit, waste rock dump, and road status at end of production
periods.
The surface contour maps displayed in this appendix depict the production schedule
developed for the current PEA, displaying the pit, waste dump, and road
configurations at various stages of mining. The end of the first five years of mining,
and the final period (year 9) before reclamation, are provided.
The truck shop area, leach pad and other processing facilities, and surface features
such as drainages, are also shown for reference.
End of Year 3
End of Year 4
End of Year 5
End of Year 9