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43 101 2011 Technical Report On The La Colorada Project Hermosillo Mexico2 PDF
43 101 2011 Technical Report On The La Colorada Project Hermosillo Mexico2 PDF
La Colorada Project
Sonora, Mexico
Effective Date: October 15, 2011
Report Date: December 30, 2011
Report Prepared by
Contributors:
Bart Stryhas, Ph.D., C.P.G.
Bret Swanson, BE Mining, MMSAQP
Alberto Orozco, Argonaut Gold, Inc.
Richard J. Taylor, P.E., Kappes, Cassiday & Associates
Mark Allan Willow, M.Sc., C.E.M
Qualified Persons:
Bart Stryhas, Ph.D., C.P.G.
Bret Swanson, BE Mining, , MMSA
Richard J. Taylor, P.E., Kappes, Cassiday & Associates
Mark Allan Willow, M.Sc., C.E.M
SRK Consulting (U.S.), Inc.
NI 43-101 Preliminary Economic Assessment – La Colorada Project Page i
Summary (Item 1)
Property Description and Ownership
The La Colorada Project (La Colorada or the Project) hosts several gold deposits located near the
historic mining town of La Colorada, Sonora, Mexico. The project consists of approximately 37 titled
concessions in three irregular blocks. The total land package aggregates 21,412.03 ha. The deposit
was exploited during two historic mining phases. The first was an underground operation from 1860
to 1916 and the second was an open pit mine from 1994 through 2000. The mineralization is
centered about UTM coordinates 541,665m E and 3,185,795m N. The property lies about 53 km
southeast of Hermosillo, the State Capital. Compañia Minera Pitalla S.A. de C.V. (Minera Pitalla) is
the owner of the Project. Minera Pitalla is 100% owned by Argonaut Gold Inc. (Argonaut).
The La Colorada Gold District has many of the characteristics of a low sulfidization epithermal-vein
type gold-silver deposit. The district underwent a complex hydrothermal history related to
Cretaceous plutonic activity, later higher level plutonic events, and finally a mid-Tertiary vein system
which shares characteristics in common with both a deep epithermal environment and a high-level
mesothermal system. Alteration can be seen in the older metamorphic and intrusive units mostly as
silicification, hematization and argillic alteration. The Tertiary volcanic rocks in the district are clearly
post-mineral and are unaltered.
Exploration
The exploration work is composed primarily of the drillhole database which supports the resource
estimation of this report. It consists of two main data sets. The older dataset was generated by
Explorationes Eldorado S.A. de C.V. (EESA) during their work on the project in the late 1990’s. The
more recent dataset was generated by Pediment and Argonaut beginning in 2007.
The resource estimation is supported by 1,319 drillholes, totaling 154,918 m. The drillhole database
has 80,187 samples. The drillholes are generally located in a wide range of spacing and
orientations. The maximum drillhole depth is 479 m and the average is 117 m.
The La Colorada Mineral Resource estimate is reported below at a 0.1 ppm cut-off grade. The cut-
off based on a mining cost of US$1.20/t, a processing cost of US$2.70/t, Au and Ag recoveries of
60% and 30% respectively, G&A cost of $0.20/t, a no NSR and Au, Ag prices of US$1,500/oz,
US$20.00/oz respectively. The mineral resources are confined within a conceptual Whittle® pit
design based on the same parameters used for the cut-off grade and a 50° pit slope. The estimates
used in determining the resource cut-off grades do not necessarily conform to those stated in the
economic model.
Mineral Resources that are not mineral reserves do not have demonstrated economic viability.
Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution.
These mineral resource estimates include inferred mineral resources that are normally considered
too speculative geologically to have economic considerations applied to them that would enable
them to be categorized as mineral reserves. There is also no certainty that these inferred mineral
resources will be converted to Measured and Indicated categories through further drilling, or into
mineral reserves, once economic considerations are applied.
Infrastructure
The site currently has various mine site buildings, a water supply, heap leach pads, leach ponds,
power supply, access roads and plant foundations. This entire infrastructure is being upgraded and
improved. Due to the site’s extensive mining history and its regional proximity to established cities
and country infrastructure, the mine is unlikely to suffer adverse logistical or consumable supply
constraints.
For the PEA, an ultimate pit for La Colorada was constructed by SRK with three possible phases. El
Crestón and Veta Madre were designed to meet mining width limitations. The resultant pit designs
defined 32.8 Mt of potentially minable resource with an average grade of 0.72 g/t Au and average
strip ratio of 3.7:1 (W:O). At a 4 Mt production rate, it is expected the potential mine life of to be in
excess of 9 years. The production schedule targeted a consistent total mine tonnage of 24 Mt/y from
year 3 onwards and any resources mined above 4 Mt/y is stockpiled for use in years where not
enough direct RoM feed is possible.
Final dimensions of the proposed open pits detail the potential magnitude of operations and have not
been limited to infrastructure restrictions. Potential restrictions may include additional required
permitted space for future heap leach pads and partial relocation of the La Colorada Township. As
detailed engineering continues the effect of these restrictions or the elimination of the restriction
resulting from further land negotiations will be addressed during reserve estimation.
Crushing is accomplished by a two-stage, closed-circuit crushing system. The final product from the
crusher circuit is conveyed directly to the active stacking area on the leach pad by a conveying and
stacking system.
The stacked material is leached using an irrigation system for solution application. Gold and silver
bearing solutions drain to a pregnant pond where it is collected and pumped to an activated carbon
ADR (adsorption-desorption-recovery) plant.
Metallurgical test work has been ongoing with several column tests on various composite samples
and crush sizes from the various deposits have been and are being performed at the Kappes,
Cassiday & Associates (KCA) facility in Reno, Nevada.
Once the original RoM heap has been offloaded and relocated onto new liner, the area can be
reconstructed to meet current Mexican and international standards for cyanide heap leaching, and
reloaded with material from the expanded La Colorada/Gran Central open pit. Relocating of the
RoM heap will take approximately ten months, during which time the Manifestación de Impacto
Ambiental (MIA) should be approved by SEMARNAT for the construction of new heap leaching
facilities to receive additional material. The MIA is expected to be submitted to SEMARNAT in early
January 2012, with an anticipated approval during the third quarter of 2012. The as designed
expansion of the La Colorada/Gran Central open pit will require the relocation of several residences
and a community plaza. While Minera Pitalla has developed and implemented a social management
plan and program, a specific plan to deal with possible involuntary resettlement is being prepared
and preliminary discussions have taken place with state and municipal governments. The outcome
of these discussions may impact the development schedule of this expansion phase of the project.
Overall, Argonaut/Minera Pitalla are being proactive in their approach to restart the La Colorada
Mine. Remediation of the existing mine-related contamination issues are being dealt with through
the use of newer equipment and compliance with updated and more comprehensive guidelines and
standards (e.g., NOM-155-SEMARNAT-2007). Expansion of the facilities to incorporate additional
mining and processing appears to be on schedule to receive the necessary permits and
authorization in the timeframe needed.
Project Financials
The financial analysis results, shown in Table 2, indicate an NPV5% of US$278 million on a pre-tax
basis. Payback will be the first year of production assuming that permits and land purchases are in
place by mid-2012 allowing for mine production to supplement RoM stockpile processing. The
following provides the basis of the SRK LoM plan and economics:
The analysis does not include provision for salvage value; and
Operating costs are 47% of revenue.
Table 3 illustrates the effect on NPV if a 31% tax is applied to the economic model.
material with carbon stripping conducted off-site, and eventually expanded to the full plant prior to
initiation of mining from the open pits.
Opportunities exist to optimize throughput and recovery of the potentially mineable resource which
will be studied through additional column tests and equipment reviews. Additional column test work
is being completed by KCA at the present time on core material from the Project. Further work is in
progress to define metal recoveries from the El Creston and Veta Madre mining areas as well as
additional agglomeration tests to better define cement addition requirements (if any).
The use of High Pressure Grinding Rolls (HPGR) is being looked at as an option for further finer
crushing by many projects at the present time and is an option that could be examined at La
Colorada with future metallurgical programs.
The recovery curves indicate relatively slow leaching and it is almost certain that several percent
more gold recovery would be realized with a 120 day leach cycle. All future column tests should be
run at this leach cycle as a minimum.
Any additional improvements in recovery may have a significant impact on the economics of the
project.
Environmental baseline data collection was initiated in 2011 in support of the MIA application for the
expansion of the La Colorada/Gran Central open pit, and construction of new heap leaching
facilities. The MIA is expected to be submitted to SEMARNAT in early January 2012, with an
anticipated approval during the third quarter of 2012.
Visual inspection of the site suggested that the mine waste materials are benign in nature. However,
preliminary geochemical testing of the spent potentially mineable resource and waste rock materials
indicates the need for longer-term kinetic testing in order to more precisely evaluate these materials
to develop reclamation and closure plans for the site. Minera Pitalla is expected to initiate this
program during 2012.
The expansion of the La Colorada/Gran Central open pit to its full potential will require the relocation
of several residences, businesses and a community plaza. While Minera Pitalla has developed and
implemented a social management plan and program, a specific plan to deal with any involuntary
resettlement has not yet been prepared.
The current accumulations of water in the open pits suggest that lakes will be present subsequent to
mine closure. This is especially true after the pits are expanded and deepened. While the existing
water in the pits appears to be of good quality, additional studies will be necessary to determine if
the deeper pits will have an adverse effect on long-term water quality.
SRK is of the opinion that the drilling has not fully delineated the northeast projection of the El
Crestón deposit. Limited deep drilling in this area has identified potentially economic mineralization
that remains open along strike and to depth. Further drilling is required to establish the extent and
importance of this mineralization. Successful exploration in this area would lower strip ratios and
partially mitigate mining width restrictions related to a required push-back of the north east pit wall.
Additional geotechnical studies should be completed to better establish the effect of groundwater
pore-pressure on pit-wall stability.
Mine sequencing, heap leach phasing and waste dump progressions should be monitored to
anticipate additional land purchases to accommodate new leach pads and/or expanded waste
dumps. This would be especially critical if potential resource expansions are realized.
Underground voids created during past mining will require continued surveying and identification to
better ensure correct potentially mineable resource dilution and hazard identification.
There is an aggressive schedule in place for 2012 with the commencement of in-situ mining and
reprocessing of old RoM stockpiles, it is vital permits and additional land purchases are fast-tracked
to allow for full production.
Financial Conclusions
The economic analysis indicates that the profitability of the potential operation will be driven by gold
price, metal recovery and operating cost. Given the high strip ratio and low grade nature of the
deposit, there is 47% of revenue consumed by operating cost. Seventy percent of the operating
costs are mine contractor related so contract negotiations will be vital for the future profitability of the
project. To improve the project economics, increasing the metallurgical recovery, reducing stripping
ratio and continued high gold prices will be of critical importance.
Table of Contents
Summary (Item 1) ......................................................................................................................................... i
Table of Contents .......................................................................................................................................viii
1 Introduction (Item 2) .................................................................................................... 1
1.1 Terms of Reference and Purpose of the Report ................................................................................. 1
1.2 Qualifications of Consultants (SRK).................................................................................................... 1
1.2.1 Details of Inspection ................................................................................................................ 2
1.3 Reliance on Other Experts (Item 3) .................................................................................................... 2
1.3.1 Sources of Information and Extent of Reliance ....................................................................... 2
1.4 Effective Date ...................................................................................................................................... 2
1.5 Units of Measure ................................................................................................................................. 3
2 Property Description and Location (Item 4) ............................................................... 4
2.1 Property Description and Location ...................................................................................................... 4
2.2 Mineral Titles ....................................................................................................................................... 4
2.2.1 Nature and Extent of Issuer’s Interest ..................................................................................... 5
2.3 Royalties, Agreements and Encumbrances ........................................................................................ 6
2.4 Environmental Liabilities and Permitting ............................................................................................. 6
2.4.1 Required Permits and Status .................................................................................................. 7
2.5 Other Significant Factors and Risks.................................................................................................... 7
3 Accessibility, Climate, Local Resources, Infrastructure and Physiography (Item 5)15
3.1 Topography, Elevation and Vegetation ............................................................................................. 15
3.2 Climate and Length of Operating Season ......................................................................................... 15
3.3 Sufficiency of Surface Rights ............................................................................................................ 15
3.4 Accessibility and Transportation to the Property .............................................................................. 15
3.5 Infrastructure Availability and Sources.............................................................................................. 15
4 History (Item 6) ........................................................................................................... 16
4.1 Prior Ownership and Ownership Changes ....................................................................................... 16
4.2 Previous Exploration and Development Results ............................................................................... 16
4.3 Historic Mineral Resource and Reserve Estimates .......................................................................... 17
4.4 Historic Production ............................................................................................................................ 17
5 Geological Setting and Mineralization (Item 7) ........................................................ 18
5.1 Regional, Local and Property Geology ............................................................................................. 18
5.2 Significant Mineralized Zones ........................................................................................................... 19
6 Deposit Type (Item 8) ................................................................................................. 26
6.1 Mineral Deposit ................................................................................................................................. 26
6.2 Geological Model Applied ................................................................................................................. 26
List of Tables
Table 1: La Colorada Project Resource Statement(1) ........................................................................................ ii
Table 2: Economic Results Pre-Tax as of December 27, 2011 ........................................................................ v
Table 3: Economic Results After-Tax as of December 27, 2011 ...................................................................... v
Table 2.2.1: Concession Details ........................................................................................................................ 5
Table 2.2.1.1: Concession Payment Liabilities .................................................................................................. 6
Table 8.1.1: EESA Drilling Summary............................................................................................................... 30
Table 8.1.2: Pediment Drilling Summary ......................................................................................................... 30
List of Figures
Figure 2-1: Project Location Map ...................................................................................................................... 8
Figure 2-2: Project Site Map .............................................................................................................................. 9
Figure 2-3: Regional Concession Map ............................................................................................................ 10
Figure 2-4: Local Concession Map .................................................................................................................. 11
Figure 2-5: Detailed Concession Map ............................................................................................................. 12
Figure 2-6: Royalty Concession Map .............................................................................................................. 13
Figure 2-7: Surface Ownership Map................................................................................................................ 14
Figure 5-1: La Colorada Project Regional Geology......................................................................................... 22
Appendices
Appendix A: Certificate of Author
1 Introduction (Item 2)
1.1 Terms of Reference and Purpose of the Report
SRK Consulting (U.S.), Inc. (SRK) has been retained by Argonaut Gold Inc. (Argonaut), to prepare a
Canadian National Instrument 43-101 (NI 43-101) compliant Technical Report for the La Colorada
Project located in Sonora, Mexico (La Colorada or the Project). The quality of information,
conclusions, and estimates contained herein is consistent with the level of effort involved in SRK’s
services, based on: i) information available at the time of preparation, ii) data supplied by outside
sources, and iii) the assumptions, conditions, and qualifications set forth in this report. This report is
intended for use by Argonaut subject to the terms and conditions of its contract with SRK and
relevant securities legislation. The contract permits Argonaut to file this report as a Technical Report
with Canadian securities regulatory authorities pursuant to NI 43-101, Standards of Disclosure for
Mineral Projects. Except for the purposes legislated under provincial securities law, any other uses
of this report by any third party is at that party’s sole risk. The responsibility for this disclosure
remains with Argonaut. The user of this document should ensure that this is the most recent
Technical Report for the property as it is not valid if a new Technical Report has been issued.
This report provides mineral resource estimates, and a classification of resources in accordance with
the Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and
Reserves: Definitions and Guidelines, November 27, 2010 (CIM).
None of the Consultants or any associates employed in the preparation of this report has any
beneficial interest in Argonaut. The Consultants are not insiders, associates, or affiliates of
Argonaut. The results of this Technical Report are not dependent upon any prior agreements
concerning the conclusions to be reached, nor are there any undisclosed understandings concerning
any future business dealings between Argonaut and the Consultants. The Consultants are being
paid a fee for their work in accordance with normal professional consulting practice.
The following individuals, by virtue of their education, experience and professional association, are
considered Qualified Persons (QP) as defined in the NI 43-101 standard, for this report, and are
members in good standing of appropriate professional institutions. The QP’s are responsible for
specific sections as follows:
Bart Stryhas Ph.D., CPG, is the QP responsible for Sections 3 through 10 and 20. He is the
QP responsible for the Mineral Resource estimation in Section 12.
Bret Swanson BE (Mining), MMSA is the QP responsible for Sections 13, 15, 16, 18, 19, 21,
22 and 23.
Mark Willow, M.Sc., NV C.E.M., is the QP responsible for Section 17.
Richard J. Taylor, P.E., is the QP responsible for Sections 11 and 14.
Bret Swanson conducted a site visit to the project on November 14, 2011. Mr. Swanson spent one
day reviewing the potential pit sites, waste dump locations, heap leach pads, crusher, process plant
construction and general site layout.
Information on mineral titles was provided by Argonaut as compiled by Mr. Alberto Orozco,
Argonaut’s Mexico Exploration Manager. Additionally, a legal opinion on titles was compiled by
Mexico City law firm Vazquez & Associates in 2011. Specifically, Mr. Alberto Orozco and Vazquez &
Associates are responsible for Sections 2.2 and 2.3.
The Consultants used their experience to determine if the information from previous reports was
suitable for inclusion in this technical report and adjusted information that required amending. This
report includes technical information, which required subsequent calculations to derive subtotals,
totals and weighted averages. Such calculations inherently involve a degree of rounding and
consequently introduce a margin of error. Where these occur, the Consultants do not consider them
to be material.
SRK has worked with Ms. Xochitl Valenzuela Verdugo (the mine planning engineer for Argonaut) on
the development of the pit, phase and production schedule of the Gran Central deposit. Ms.
Valenzuela also designed the waste dumps and potential heap leach expansions within the La
Colorada site. Ms. Valenzuela contributed to Section 13.
Infrastructure, operating and capital cost assumptions (used in the economic model and stated in the
tables) were provided by Mr. Curtis Turner of Argonaut Gold. His contributions were reviewed by
SRK and are pertinent to Sections 15 and 18.
The La Colorada property consists of 37 titled concessions in three irregular blocks separated by
ground held by other interests (Figures 2-3 through 2-5). The total land package aggregates
21,412.03 ha. The concession details are listed in Table 2.2.1. The Ext. Sonora IV concession was
one of 19 concessions optioned from Exploraciones La Colorada S.A. de C.V. The option purchase
was subsequently exercised on 18 of these concessions; however, Ext. Sonora IV concession was
cancelled by the Direction of Mines. Exploraciones La Colorada believes it has a case for the
removal of such cancellation and is appealing the decision. For this reason Pediment signed a
second option agreement with Exploraciones La Colorada establishing that, should they win the case
against the Direction of Mines, they would transfer the concession to Compañia Minera Pitalla S.A.
de C.V. for a payment of Pediment stock. This agreement has since expired. As of this moment a
decision by the courts is still pending. Although the concession has been cancelled it has not yet
been declared “free”. Until that time, the concession is not available for others to claim.
Much of the exploration activities at La Colorada, however; occur in areas which have already
received a change of use in soils for mining activities.
Much of the exploration activities at La Colorada, however; occur in areas which have already
received a change of use in soils for mining activities.
Permits relating to the initiation of mining activities are addressed below in Section 17.
The surface rights are adequate for disposal of waste. The full exploitation of the La Colorada/Gran
Central pit and expansion of heap leach pads will require additional surface rights. It is expected that
as studies continue, the location and trade-offs governing the purchase of additional land will
become clearly defined.
4 History (Item 6)
4.1 Prior Ownership and Ownership Changes
The original La Colorada concessions were staked by Jesuit missionaries in 1740. By 1790,
Spanish miners had taken ownership. In 1860, an English company installed pumps and worked the
concessions until 1877 when they sold out to the Creston-Colorado Company. In 1888 the property
was sold to the Pan American Company. In 1895, the London Exploration Company purchased the
concessions. In 1902, the Mines Company of America took ownership. During the Mexican
Revolution in 1916, the mine closed and the facility was eventually dismantled.
In the mid 1980’s Minerales de Sotula S.A. de C.V. and Industrias Peñoles, S.A.B. de C.V. began re-
acquiring the mineral concessions. In 1991 Cia. Minera Las Cuevas S.A. de C.V a Mexican
Subsidiary of Noranda acquired an option on the project. Later that same year, HRC Development
Corp and Rotor International S.A. formed a joint venture ownership of the project called
Explorationes Eldorado S.A. de C.V. (EESA). EESA held the project until 2000 when it sold out to
Grupo Minero FG S.A.de C.V. In 2001, ownership was transferred to Explorations La Colorada, S.A.
de C.V. In 2007, Pediment Gold Corp. optioned and eventually, purchased the key concessions,
surface ownership and infrastructure mine from Exploraciones La Colorada. Further key
concessions were also acquired in 2008 and 2010 by Pediment. In 2010, Argonaut Gold acquired
Pediment Gold Corp. including the La Colorada project held under Pediment’s wholly owned
Mexican subsidiary, Compañia Minera Pitalla S.A. de C.V. (Minera Pitalla).
In 2007, Pediment Gold Corp. optioned the project from Exploraciones La Colorada, S.A. de C.V.
and began compiling the previous work accompanied by an exploration program that included
surface sampling and mapping. A drill program commenced in 2008 focusing in the known
mineralization zones of El Crestón, La Colorada/Gran Central, Veta Madre and La Verde. The
results were followed up by the +10,000 m drill program of 2009 which combined diamond and RC
drilling and had a greater focus on the Veta Madre zone.
In 1993, Mr. Chester Millar successfully undertook a pilot heap leach test of 30,760 t of run-of mine
(RoM) material, producing approximately 1,500 oz of gold. Following this, a positive feasibility study
resulted in mine construction beginning in the same year. The industrial scale phase started
successfully as a conventional open pit, RoM, cyanide heap leach operation with an activated carbon
recovery process. Mine construction started in September of 1993, with the first gold poured in
January 1994. During the second year of operations the recovery process was replaced with a
conventional Merrill-Crowe (MC) circuit. Next, a two stage crushing circuit was implemented to treat
potentially mineable resource coming from the La Colorada/Gran Central pit – this was required to
achieve economical recovery levels. Construction started during 1996 and the crushing facility
became operational in 1997. Approximately 30% of the ore was treated as RoM and dumped
directly onto the pads, with the rest being crushed in the two stage crushing plant to a size of -3/4”.
The leaching-MC circuit had a processing capacity of approximately 8,000 t of ore daily at its peak
capacity. The mine operated an average of 315 days/yr. During commercial production between
1994 and 2000, EESA produced approximately 290,000 oz of gold and about 1 million oz of silver.
EESA sold the mine and plant to a local Hermosillo mine contractor, Grupo Minero FG S.A. de C.V.
(FG), who continued limited production and decommissioning for a year or so after 2000, and is
estimated to have produced approximately 70,000 additional oz of gold. EESA and FG production
statistics cited from Diaz, 2007 and Herdrick, 2007.
Physiographically, the La Colorada Property is located in the western foothills of the Sierra Madre
Occidental mountain chain, 110 km east of the Gulf of California. Tectonically the property is located
at the boundary between the Sonoran Basin and Range Province and the Sierra Madre Occidental
Province. These intrusive rocks are contiguous with the broad batholithic belt extending along the
western margin of North America. West-directed folding and thrust faulting occurred during the Late
Cretaceous Laramide Orogeny. Basin and Range faulting, followed in the Tertiary, and constitutes
the dominant structural event in the area.
Bedrock ranges in age from Proterozoic through Cenozoic and includes high-grade metamorphic
gneisses, shelf facies sedimentary strata, extensive andesitic to rhyolitic volcanic deposits and
dioritic to granitic intrusive rocks. Basement rocks consisting of gneisses, schists and quartzites cut
by plutons dated at 1,710 and 1,750 million years are some of the oldest rocks exposed in Mexico
and reach their southernmost limit just north of La Colorada property – these rocks are considered
the cratonic basement of North America (Zawada et al, 2001). Upper Triassic clastic sedimentary
strata (conglomerate, sandstone and siltstone) of the Barranca Group unconformably overlie the
metamorphic basement rocks in scattered locations throughout east-central and southern Sonora.
Late-Cretaceous to Tertiary volcanic rocks and associated continental clastic rocks unconformably
overlie the Triassic and older rocks. These units thicken considerably eastward, where they form
extensive sequences underlying the high plateau of the Sierra Madre Occidental Mountains. There,
two distinct divisions are apparent. A lower 100-45 Ma Lower Volcanic Complex composed mainly
of andesite with interstratified rhyolitic ignimbrites and minor interstratified basalt. The overlying
Upper Volcanic Complex has been dated at 34-27 My and is composed of extensive rhyolite and
rhyodacite ignimbrites with minor interstratified basalt. It constitutes the largest ignimbrite field in the
world. The upper sequence unconformably overlies on the older sequence and infills deeply incised
paleotopography in the older rocks. Late Cretaceous to Early Tertiary plutonic rocks (diorite,
granodiorite to granite) of the Sonoran Batholith outcrop throughout the region and have been dated
from 90-40 Ma.
Blanca formation composed by bimodal volcanism of rhyolitic tuff and andesite. The youngest unit
during the Tertiary is an extension-related olivine basalt unit.
Alteration can be seen in the older metamorphic and intrusive units mostly as silicification,
hematization and argillic alteration. The Tertiary volcanic rocks in the district are clearly post-mineral
and are unaltered.
On a regional scale, basin and range faults are characterized by north-northwest striking normal
faults. Crustal blocks formed by the Basin and Range faults have moderate to steep regional dips.
Steeply-dipping east-northeast trending regional faults transverse to the main trend are also common
throughout Sonora.
El Crestón
The El Crestón and Minas Prietas veins constitute the largest vein system on the La Colorada
Property and were originally mined as separate orebodies; however they are now recognized as
being part of the same mineralized zone. El Crestón refers to the current open pit area, while Minas
Prietas is located to the east of the pit. The following description is paraphrased from Ball (1911),
quoted in Lewis (1995): The veins generally strike east to east-northeast, dipping an average of 75°
N. The veins have well-defined walls and below the 100 m level are simple with few “spurs” and
parallel veins. Apparently the best values are found where the veins were thickest. The veins of El
Crestón Mine are from north to south: New Vein, North Vein, Perry Vein, South Middle Vein and
South Vein. Although the veins are separate entities, they coalesce and bifurcate in a subparallel
series of veins. The veins are all fault controlled, with the faulting preceding the veining, but small
post-ore fault offsets of a few meters is common. Again, the following descriptions are paraphrased
from Ball (1911), quoted in Lewis (1995): New Vein apparently averaged 3 to 4 m in thickness,
approximately 250 m in length and more than 225 m deep. Its surface exposure was low grade, and
had “particularly rich” grades at depths of 100 to 225 m. The North Vein was traced for more than
1,100 m. It averages 2.5 m in width, with poor grades except near surface, where it was stoped for a
length of 325 m. Ball (1911), described the South Vein as being 850 m long with an average north
dip of 820, although it locally flattens to about 400 north. The vein averages 2.5 m in width and is
higher grade near surface for a length of 525 m, but only for 170 m in the deeper levels of the mine.
The Perky (or North Middle Vein) is a splay from the west end of the South Vein. It was about 180 m
long, with a maximum width of 1 m. According to Ball (1911) the mineralized zone was wider near
the surface because the veins converge towards each other and because there is a vein stockwork –
these two factors allowed for mining by “open cut methods”. Ball (1911) states that the greater
widths and higher grades near the surface were due to a combination of greater fracturing and
secondary (supergene) enrichment. Lithologies in the El Crestón-Minas Prietas deposit include
siltstone, shale and chert of the Paleozoic Mine Sequence; diorite, monzonite and quartz feldspar
porphyry of the intrusive suite as well as hornfels and skarn derived from the sedimentary sequence
and andesite (Lewis, 1995). Alteration styles include hematization, manganese oxides, silicification,
argillic, potassic, sericitic and chloritic affecting all rock types. Deep red hematite is a prominent and
obvious feature. Manganese oxides are apparently associated with some of the higher gold values.
Structurally, the Colorada Sur Fault is the main controlling feature. It has a variable strike which
averages 60°E and dips vertically to steeply north. Although the underground mines selectively
mined individual veins over narrow widths as described above, EESA’s open pit extracted larger
scale stockwork zones and areas of multiple veining over cumulative thickness of up to 90 m (Lewis,
1995).
Gran Central is geologically similar to El Crestón-Minas Prietas, and again is composed of quartz
veins and stockworks localized in the Gran Central Fault. It is hosted in a diorite stock which
contains roof pendants of siltstone and lesser calc-silicate hornfels. Quartz feldspar porphyry dykes
up to 2 m in width cut the diorite. The youngest rocks are a few small pre-mineral mafic dikes up to 2
m in thickness. At the eastern end of the deposit, the diorite is in fault contact with and covered by
an andesite “cap”. The andesite is less altered and oxidized than the underlying diorite and devoid
of gold values (Lewis, 1995). EESA tested the zone over a length of 450 m and a depth of 150 m,
but the old underground extends 200 to 300 m further to the west and to a depth of 300 m. The
east-west trending Gran Central Fault is the controlling structure and has a north dip averaging 50°.
The Gran Central Fault consists of a number of sub-parallel splays, where quartz veins, stockworks
and breccias zones are associated with clay-chlorite gouge. Alteration minerals are similar to those
found at El Crestón-Minas Prietas; however calcite is a common gangue mineral, and siderite veins
as well local amethyst are present (Lewis, 1995). Footwall rocks tend to be more heavily altered
than hanging wall rocks. Fine native gold is present in the deposit and some areas with visible gold
posed a minor “nugget effect” problem for EESA at Gran Central (Lewis, 1995). Sulfide minerals
ranging between 1 and 3% by volume are characteristic in the unoxidized portion of the deposit. In
the sulfide portion of the deposit, the minerals include galena, sphalerite, lesser chalcopyrite, minor
tetrahedrite and traces of chalcocite and covellite.
La Colorada Deposit
Gold-bearing quartz veins and stockworks at La Colorada are hosted in an east-west striking fault
with a north dip averaging 45°. It is hosted by rhyolite porphyry and diorite. It is within and adjacent
to the same dioritic stock which hosts the Gran Central Deposit. EESA traced the mineralization for
500 m along strike and for 100 m down dip. The zone is an average of 20 m thick. Lewis (1995)
state that according to historical records, mineralization is terminated at a depth of approximately
200 m by a flat fault, below which non-mineralized granite is present. Mineralogy and alteration are
similar to El Crestón-Minas Prietas.
Veta Madre is located 1.5 km. east of El Crestón-Minas Prietas Pit. It consists of a zone of extensive
alteration associated with the Colorada Sureste Fault. Historical miners sunk three deep sub-vertical
shafts. Rock types include siltstone, diorite, monzonite, granite, rhyolite feldspar porphyry and
dacite. EESA completed 11 trenches of different lengths and 1,566 samples were taken which
returned gold values of between 0.15 and 0.8 ppm with sporadic higher values of between 1.5 and
5.0 ppm Au. Anomalous zinc values were encountered at one location with one 4 m section grading
1.5% Zn. EESA drilled twenty one reverse-circulation drillholes totaling 2,372 m. A single diamond
hole was drilled in the area (249.9 m). These holes intersected mineralization along an east-
northeast trending structure, with a strike length of close to 500 m. Pediment has since completed
25 RC drillholes (2,098 m) in 2008- 2009, with follow-up drilling.
Regional and local geologic maps complied by Argonaut are presented in Figures 5-1 through 5-3. A
representative, geologic cross section through the La Colorado/Gran Central area is presented in
Figure 5-4.
The current authors (McMillan et al) believe that the deposits are epithermal in nature and of the low-
sulfidization type in particular. The La Colorada deposits however have been subject to burial and
as a consequence to shearing and elevated temperatures prior to being exhumed and re-exposed.
These suppositions are not merely academic, and are believed to have exploration implications – in
particular in tracing the key structural-stratigraphic traps for mineralization down-dip in the relevant
fault blocks generally west from the known mineral deposits below the Tertiary volcanic cover.
Epithermal deposits are found in the shallow parts of subaerial high-temperature hydrothermal
systems and are very important in Tertiary to Recent calc-alkaline and alkaline volcanic rocks. They
are particularly important in the Circum Pacific Volcanic Arcs and in the Mediterranean and
Carpathian regions of Europe. Host rocks are variable and include volcanic and sedimentary rocks,
diatremes and domes. Structural controls include dilatant zones related to extensional faulting and
favorable lithologies in permeable and/or brecciated host strata in the near-surface environment.
Although some mineralization can be disseminated, most common mineralization is hosted by
steeply-dipping vein systems. Both open-pit bulk mining and selective underground mining methods
are employed to exploit the deposits, depending upon the nature of the mineralized bodies. Heap-
leach treatment is possible in some oxidized deposits. In contrast some high-sulfidation deposits
can be refractory, with the gold encapsulated by sulf-arsenide minerals.
Mineral textures include banded, crustiform-colliform and lattice textures composed of platey calcite
sometimes pseudo morphed by quartz. An important feature of epithermal deposits is a pronounced
vertical zonation, with quartz veins carrying base metal sulfide mineralization at depth, becoming
silver-rich higher in the system and finally gold-rich near the top. Both low-sulfidation and high-
sulfidation epithermal deposits can be overlain by a discontinuous blanket of kaolinite-smectite,
sometimes with alunite and native sulfur, within an opaline rock that is easily eroded (Hedenquist et
al, 2000). Although some deposits display intermediate characteristics, two end member types of
deposit are generally recognized.
High-sulfidation deposits are characterized by a silicic core of leached residual vuggy silica as the
main host to the mineralization (Hedenquist et al, 2000). Major metallic minerals can include pyrite,
enargite/luzonite and covellite, with lesser quantities of native gold and electrum, chalcopyrite and
tennantite/tetrahedrite. Upward from the silicic core there is generally an upward-flaring advanced
argillic zone consisting of quartz-alunite, barite and kaolinite, and in some cases pyrophyllite, or
zunyite (Hedenquist et al, 2000). High sulfidation deposits are commonly proximal to and in some
cases hosted by a high level subvolcanic intrusive or dome – calderas constitute a particularly
important environment.
Low-sulfidation deposits typically range from veins, through stockworks and breccias to disseminated
zones. Mineralized bodies in low-sulfidation systems are commonly associated with quartz and
adularia, with carbonate minerals or sericite as the major gangue minerals. Major metallic minerals
can include pyrite/marcacite, pyrrhotite, arsenopyrite and high-iron sphalerite. Less abundant
metallic minerals include native gold and electrum, cinnabar, stibnite, Au-Ag selenides, Se sulfosalts,
galena, chalcopyrite and tetrahedrite/tennantite. Hedenquist et al (2000) state that hot spring sinter
can form above a low-sulfidation deposit and that the clay alteration associated with a deposit can
“mushroom” above the deposit towards the surface and have an aerial extent “two orders of
magnitude larger than the actual ore deposit.” In some cases mercury mineralization, and/or
geochemically anomalous As, Sb and Tl, is found near the top of the deposit and in the overlying
siliceous sinter.
According to Herdrick (2007), the La Colorada project area contains at least three parallel vein
trends on which underground and open pit mining has been conducted. Targeting of drillholes is
based on structural analysis and vertical zoning recognized in the district, as well as fluid inclusion
and alteration studies which indicate that gold mineralization exposed in the pits resulted from boiling
in the epithermal system. The upper parts of a boiling system are typically recognized as barren
alteration zones, overlying potentially gold bearing parts of the vein structure at depth. Veins are
focused along east-west and northeast-southwest trending structures that dip moderately to the
north and northwest, and cut across local skarn alteration and intrusive bodies. Surface mining was
focused along three structures, the upper parts of which flare out into stockwork zones. Eight
different structures in the La Colorada mine area appear to have older underground workings in gold
bearing quartz veins.
Age dating was undertaken on three hydrothermal sericite samples. Two are from the La Colorada
Pit and one from the Gran Central Pit (Zawada et al, 2001). The samples were subject to 40Ar/39Ar
analyses at the New Mexico Institute of Science and Technology Geochronology Research Lab in
Socorro, New Mexico, yielding respectively: 27.1 +/- 2.0 Ma, 22.45 +/-0.19 Ma and 23.83 +/- 1.6 Ma.
Two biotite samples collected from dioritic intrusions from the Gran Central Pit yielded ages of 70.4
+/-0.2 Ma and 69.9 +/- 2.2 Ma. These dates suggest that the hydrothermal alteration and associated
gold mineralizing event was Miocene in age and probably related to the Tertiary volcanic event. The
Cretaceous age for the biotite in the diorite suggests the intrusive event for the granitic plutonic rocks
was much earlier and not associated with the hydrothermal gold mineralizing event.
7 Exploration (Item 9)
7.1 Relevant Exploration Work
Argonaut has conducted surface exploration consisting of rock chip and soil sampling.
During 2011, Argonaut’s regional exploration program at La Colorada included soil sampling from the
Sombreretillo and the Los Duendes areas. Sampling was made over a spacing array of 50 m by 100
m, and nearly all samples consisted of material from the B and C horizons, with depths ranging from
20 to 45 cm. Detailed information for all samples was recorded in paper and later included in the
Surface Database. All samples were placed mainly in cloth bags, and were shipped to the laboratory.
So far, Argonaut’s geologists have taken 99 samples in the Los Duendes area, to the south of El
Creston open pit; as well as 61 soil samples from Sombreretillo, located to the Northeast of the Veta
Madre area.
In addition, a siltstone-hosted mineralized structure trending to the northwest was sampled at the Los
Duendes area, from where several rock samples with anomalous Au assays were found; turning the
area into a possible further exploration target.
General reconnaissance of two new properties, Red Norte and Red Sur, located to the south of the
La Colorada mine, has been carried out; results from that work shows presence of several North-
South trending veins and structures, which are accompanied of anomalous values of Au and Ag that
may lead to more aggressive exploration in the near future.
Soil sampling results in both areas have been positive; and, as mentioned before, a new drilling
program , partially based on surface sampling and intended to expand the resource has been
already made.
Pediment completed 133 drillholes on the project during their ownership. The details of the
Pediment drilling are outlined in Table 8.1.2.
Argonaut has completed 245 drillholes on the project to date. The details of the Argonaut drilling are
outlined in Table 8.1.3.
8.2 Procedures
8.2.1 Pediment, Reverse Circulation (RC) Drilling
Pediment used Layne de México and Globexplore Drilling S.A. de C.V., both of Hermosillo, for the
reverse circulation drilling. Drillholes were generally oriented on azimuths 180° and 160° and
inclined with dips between -45° and -90° to the south because of the predominant north dip to the
veins and stockwork zones. Brunton compass was used for marking the direction of drilling on the
pads. All drillholes contained a systematic code numbering, using a prefix indicating the year and
type of drilling and had continues numbering. Initial pads were located by handheld GPS. Upon
completion, further surveying with precision instruments was completed to obtain the exact drillhole
coordinates. RC pipe diameter was 5 1/8 inch for Lyne RC or 5.0 inch for Globexplore RC. RC
cuttings were logged coincidentally with drilling using hand lens and binocular field microscope . RC
samples were taken every 5 ft (1.52 m) regardless of lithology, alteration or mineralization. Chip
trays were set up at this sample interval. After completion of a drillhole, the site was monumented by
a marker composed of down-hole PVC pipe encased in a cement block which was labeled with the
drillhole number.
a systematic code numbering, using a prefix indicating the year and type of drilling and had
continuous numbering follow the system of Pediment. Initial pads were located by handheld GPS.
Upon completion, further surveying with precision instruments was completed to obtain the exact
drillhole coordinates. RC pipe diameter was 5.0 in for Lyne RC or 5 1/8 in for Major RC. RC cuttings
were logged coincidentally with drilling using hand lens and binocular field microscope. RC samples
were taken every 5 ft (1.52 m) regardless of lithology, alteration or mineralization. Chip trays were
set up this sample interval. After completion of a drillhole, the site was monumented by a marker
composed of down-hole PVC pipe encased in a cement block which was labeled with the drillhole
number.
All Becker hammer drillholes were drilled at a -90⁰ angle and were drilled without introducing water.
The sampling procedure on this type of drilling was similar to the one used in RC samples, with the
exception that none of the sample portions were discarded. Routinely, the sample was discharged
and split by half; 50% of the sample was bagged and stored at the storage house and the other 50%
was split again to obtain two 25% portions of the total; one of which was bagged and stored as a lab
sample witness and the other 25% was bagged, marked and shipped to the preparation laboratory.
Whenever a duplicate sample was needed, both 25% portions were split again, so four 12.5% splits
were obtained, two of which were shipped to the preparation lab and the other two were stored at the
storage house.
typically bear to the south, inclined steep to moderately. This orientation provides an oblique angle
of intersection between the predominate plane of mineralization and the drillhole. Based on the wide
range of drillhole orientations most of the sample lengths do not represent true thickness of
mineralization. In general, the drillhole intercept length is greater than the true thickness of
mineralization.
SRK is of the opinion that the drilling operations were conducted by professionals, the RC chips and
core were handled and logged in an acceptable manner by professional geologists, and the results
are suitable for support of an NI 43-101 compliant resource estimation.
All samples were dried, crushed, split and pulverized in Inspectorate’s Hermosillo prep facility. The
pulps were then sent to Inspectorate’s main U.S. facility in Reno Nevada for fire assay gold and
silver analysis.
As part of routine procedures, Inspectorate uses barren wash material between sample preparation
batches and, where necessary, between highly mineralized samples. This cleaning material is
tested before use to ensure no contaminants are present and results are retained for reference.
After certified assay results are received from Inspectorate labs, statistical and/or graphic QA/QC
analyses are applied to all control samples. Argonaut does not include any analytical batch results in
its final database that have not passed the QA/QC procedure satisfactorily.
Duplicate samples are evaluated mainly using the Spearman Rank’s correlation coefficient (R2),
which considers differences in Au-values sorting-ranks and is calculated to assure a good positive
correlation represented by the proximity of R2 to 1. In addition, the Pearson correlation coefficient is
also calculated for the original data, to verify the direct correlation level.
Figures 9-1 through 9-5 show that all Standards and Blank samples fell within acceptable limits.
Repeatability on duplicate samples results was highly acceptable; requests for several re-assays on
duplicates were triggered by high differences in results, and almost all the issues were attributed to
the presence of a minor nugget effect, seen also in previous drilling programs. Statistically, the
Spearman coefficient demonstrated a very good positive correlation level for the duplicates in the
2011 program (0.8875). The Pearson coefficient value reflects the heterogeneity of the duplicates.
Certificates of results for all reference material are issued by RockLabs, these documents contain
mainly the mean Au values and the Standard Deviation for each standard they manufacture, and this
information is taken into account to establish the tolerance limits which determine if a re-assay is
required. Reference material results that Argonaut receives from Inspectorate are graphically
analyzed as part of the QA/QC procedures.
The following description of data verification by character samples is cited directly from McMillian et
al (2009) with minor modifications of text and formatting.
During the property visit by two of the authors (McMillan and Dawson) on October 3, 2009, eleven
character samples were taken. The samples collected ranged between 0.64 and 6.03 kg., averaging
about 2 kg. They were collected with a geological pick into a plastic sample bag and delivered
personally by McMillan and Dawson on October 3 to the ALS Chemex preparation facility in
Hermosillo. The analytical results and comparative Pediment results are presented in Table 10.1.1.
The riffle split samples of the reverse circulation drill cuttings show good correlation as was
expected. The chip samples show poorer correlation – perhaps reflecting to greater variability and or
more personal bias in chip sampling.
SRK verified the electronic database to the original source data to assure validity of the data
supporting the resource estimation of this report. Argonaut supplied SRK with scanned copies of the
original drill logs or assay certificates where possible. SRK then manually compared the collar
locations, orientations/down-hole surveys and assay data within the electronic database to the
original sources. Assay certificates were only available for 67% of the assay data used to support
the current resource estimation. Eleven percent of these were validated by direct checks, no input
errors were found. Drill collar location from the EESA program were located in mine grid coordinates
and then transformed into UTM coordinates. The EESA mine grid is a truncated version of and older
UTM grid. Some of the original EESA collar coordinates are available in drill logs but due to the
transformation, direct comparison to the current coordinates was not possible. All drill collar
locations from the Pediment and Argonaut drilling were verified to the original sources. No errors
were found. Three percent of the hole orientation/down-hole surveys were verified to original data,
no errors were found.
10.2 Limitations
SRK was not limited in its access to any of the supporting data used for the resource estimation or
describing the geology and mineralization in this Technical Report.
The database verification is limited to the procedures described above. All mineral resource data
relies on the industry professionalism and integrity of those who collected and handled it. SRK is of
the opinion that appropriate scientific methods and best professional judgment were utilized in the
collection and interpretation of the data used in this report. However, users of this report are
cautioned that the evaluation methods employed herein are subject to inherent uncertainties.
Metallurgical test work has been completed and ongoing during 2011 on material drilled from the
existing RoM Leach Pad at La Colorada as well as on new PQ and HQ core drilled from the La
Colorada, La Colorada West, Gran Central and Gran Central West pit designations.
The metallurgical drillhole locations are included in the map presented in Figure 11-1.
In both cases, the amount of drilling completed for the test programs completed by KCA in 2011
would appear to be representative of the areas being examined.
For the metallurgical core drillholes developed at La Colorada, KCA received 189 five-gallon buckets
containing HQ and PQ core (1/2 split and whole core was received) and assay control sample pulps
from the La Colorada Project of Argonaut Gold, Inc. located near Hermosillo, Mexico. The core
intervals received were prepared and assayed by Inspectorate in Sparks, Nevada for gold and silver.
An additional group of core samples were received. These core samples were contained in 21
buckets and were intervals of ½ split HQ core previously assayed by La Colorada personnel. These
core intervals were from the Gran Central West area.
A total of 206 intervals were received from four separate areas of the La Colorada project. The
intervals received were representative of 13 drillholes developed from across these areas.
A total of four core composites were developed for head characterization, bottle roll leach test work,
preliminary agglomeration and column leach test work. These composites were representative of
the La Colorada, La Colorada West, Gran Central and Gran Central West areas.
Column leach tests were conducted on each of the four composites utilizing material crushed to
100% passing 25, 16, 12.5, for the La Colorada West and the Gran Central West composites and
material crushed to 100% passing 25, 16, 12.5 and 8.0 mm for the La Colorada and Gran Central
composites. An additional column test of 100% passing 9.5 mm is in progress for La Colorada West,
and core samples are in transit for planned column tests of El Creston and Veta Madre at 100%
passing 9.5 mm crush size.
The column leach tests were completed on material crushed to 100% passing 25 and 12.5 mm.
Screen analyses of the column tailings indicated that the two (2) column leach tests conducted had
similar particle sizes with 80% of the material crushed to minus 25 mm being finer than 10.5 mm and
80% of the material crushed to minus 12.5 mm finer than 8.2 mm. Gold recoveries for the two (2)
columns ranged from 43% to 46% after 78 days of leaching. Sodium cyanide consumption averaged
0.34 kg/t NaCN and ranged from 0.30 to 0.38 kg/t NaCN.
The feed material for both column leach tests were agglomerated with cement prior to leaching. The
cement added during agglomeration was approximately 2 kg/t.
Table 11.2.1: La Colorada Project Column Test Results on RoM Leach Pad Material
The results of the column leach tests conducted on the core composites are summarized in Tables
11.2.2 and 11.2.3.
Table 11.2.2: La Colorada Project Column Test Results on Core Material – Gold
Table 11.2.3: La Colorada Project Column Test Results on Core Material – Silver
It should be noted that some degree of variability was noted during the course of the column test
program reported here with regard to head assays and calculated head assays completed for
individual tests. While the exact source of this variability was not determined from the test work the
relative standard deviation for the calculated head gold values for each group were all less than 13%
and this would indicate generally good agreement between column tests.
For this test program the minus 25 mm material was leached for 48 days. The minus 16 and minus
12.5 mm material were crushed for 63 days and the material crushed to minus 8 mm were leached
for 72 days. Examination of the leach curves does indicate that leaching was continuing to some
extent when the column leach tests were ended. Although some additional recovery could possibly
be obtained with longer leaching it is believed that the crushed size of the material is the most
important factor with regard to metal recovery.
For most sets of column leach tests the minus 16 mm crushed material and the minus 12.5 mm
crushed material indicated similar type recoveries and in some cases the recoveries from the minus
12.5 mm material were lower than recoveries obtained at the 16 mm crushed size. This similarity
may be attributed to the screen analyses of these crushed products. The finer size fractions in these
two (2) crushed sizes, in some cases, were not different in weight percent.
The general recovery trend does indicate that both gold and silver recoveries do improve with finer
crushing.
For the Gran Central core composite gold recoveries ranged from 30% for material crushed to minus
25 mm to 55% on material crushed to minus 8 mm. Silver recoveries ranged from 19 to 45%.
The consumption of sodium cyanide ranged from 0.16 to 1.79 kg/t NaCN. Hydrated lime addition
averaged approximately 2 kg/t Ca(OH)2 for the material crushed between 12.5 and 25 mm. The
minus 8 mm crushed material was agglomerated with the addition of 2.01 kg/t cement.
For the Gran Central West core composite gold recoveries ranged from 41% for material crushed to
minus 25 mm to 48% on material crushed to minus 12.5 mm. Silver recoveries ranged from 24 to
40%.
The consumption of sodium cyanide ranged from 0.25 to 0.41 kg/t NaCN. Hydrated lime addition
averaged approximately 2 kg/t Ca(OH)2 for the material crushed between 12.5 and 25 mm.
For the La Colorada core composite gold recoveries ranged from 44% for material crushed to minus
25 mm to 70% on material crushed to minus 8 mm. Silver recoveries ranged from 17 to 47%.
The consumption of sodium cyanide ranged from 0.23 to 0.98 kg/t NaCN. Hydrated lime addition
averaged approximately 2 kg/t Ca(OH)2 for the material crushed between 12.5 and 25 mm. The
minus 8 mm crushed material was agglomerated with the addition of 2.01 kg/t of cement.
For the La Colorada West core composite gold recoveries ranged from 32% for material crushed to
minus 25 mm to 46% on material crushed to minus 12.5 mm. Silver recoveries ranged from 30 to
47%.
The consumption of sodium cyanide ranged from 0.17 to 0.46 kg/t NaCN. Hydrated lime addition
averaged approximately 2 kg/t Ca(OH)2 for the material crushed between 12.5 and 25 mm.
From KCA’s field experience, cyanide consumption in production heaps is usually 25 to 33% of the
laboratory column test consumption. Therefore, at the 9.5 mm crush size, a field cyanide
consumption of 0.38 kg/t can be expected. It should be noted that at the 8 mm crush size there is a
substantial increase in cyanide consumption compared to the coarser crush sizes.
In the fine crushed column tests (9.5 and 8mm) cement was used to agglomerate at 2.5 kg/t, as a
matter of standard practice for first-round fine-crush column tests. It has not been determined that
this cement agglomeration is actually required. Additional testwork is to be conducted to determine
cement requirements (if any) for each of the mining areas. In the case of fine crushing it should be
tentatively assumed that 2 kg/t cement can replace lime.
After review of historical processing data from La Colorada it was determined that no reduction from
laboratory column test work was needed as the recovery curves indicate relatively slow leaching, it is
almost certain that several percent more gold recovery would be realized with a 120 day leach cycle.
Gold recovery in the field from RoM Pad Leach material crushed to 100% passing 25 mm with a p80
size of 10.5 mm would be estimated to be 43%.
Column test recoveries along with estimated field recoveries for the four (4) areas defined by the
core material are presented in Table 11.3.1.
From existing data normalized to a common crushing size of 100% passing 9.5 mm, projected metal
recoveries are presented in tables 11.3.2 and 11.3.3.
Table 11.3.2: La Colorada Estimated Field Recoveries (Gold) at 100% Passing 9.5mm
Sample Material 25 mm 16 mm 12.5 mm 9.5 mm 8.0 mm
Gran Central Head Grade (g/t) 0.870 0.940 1.179 1.061 0.900
(60501) Gold Recovery 29% 35% 38% 47% Interpolated 52%
Gran Central West Head Grade (g/t) 1.294 1.315 1.389 1.126* --
(60502, 60553) Gold Recovery 38% 44% 45% 49% --
La Colorada Head Grade (g/t) 0.802 0.970 1.115 1.275 0.971
(60503) Gold Recovery 39% 53% 47% 61% Interpolated 68%
La Colorada West Head Grade (g/t) 0.724 0.598 0.744 0.935 In progress --
(60504) Gold Recovery 29% 45% 41% 48% Provisional Extrapolated --
Intermediate Head Grade (g/t) -- -- 1.011* 1.011* --
(60560) Gold Recovery -- -- 42% 49% --
Intermediate West Head Grade (g/t) -- -- 1.066* 1.066* --
(60561) Gold Recovery -- -- 59% 76% --
Veta Madre Core Samples En Route
El Creston Core Samples En Route
*Note: Columns still in progress (minimum 50 days)
Head values are estimated from head assays, head screens, and bottle roll leach tests
Table 11.3.3: La Colorada Estimated Field Recoveries (Silver) at 100% Passing 9.5mm
Sample Material 25 mm 16 mm 12.5 mm 9.5 mm 8.0 mm
Gran Central Head Grade (g/t) 6.50 3.56 5.90 4.85 4.97
(60501) Silver Recovery 20% 42% 33% 44% Interpolated 46%
Gran Central West Head Grade (g/t) 46.27 44.46 47.32 15.50* --
(60502, 60553) Silver Recovery 25% 35% 42% 49% --
La Colorada Head Grade (g/t) 10.01 7.97 7.90 7.04 7.29
(60503) Silver Recovery 16% 34% 36% 46% Interpolated 50%
La Colorada West Head Grade (g/t) 12.93 11.29 14.28 12.11 In progress --
(60504) Silver Recovery 31% 48% 41% 48% Provisional Extrapolated --
Intermediate Head Grade (g/t) -- -- 4.04* 4.12* --
(60560) Silver Recovery -- -- 24% 26% --
Intermediate West Head Grade (g/t) -- -- 20.59* 20.74* --
(60561) Silver Recovery -- -- 10% 13% --
Veta Madre Core Samples En Route
El Creston Core Samples En Route
*Note: Columns still in progress (minimum 50 days)
Head values are estimated from head assays, head screens, and bottle roll leach tests
Review of historical reports and production records show that overall gold recovery during operations
achieved a combined recovery of 67.3% between RoM and 25 mm crush size from all mining areas.
It is believed that using a 9.5mm crush size, a scoping-level tentative gold recovery of 60% may be
reasonably assumed for El Creston and Veta Madre mining areas until column testing of these areas
is complete. Similarly, during historical operations the silver recovery achieved was 14%. It should be
noted that the KCA testwork has shown considerably higher silver recovery in La Colorada and Gran
Central. A reasonable scoping-level tentative silver recovery of 28% may be reasonably assumed for
El Creston and Veta Madre mining areas until column testing of these areas is complete.
Additional agglomeration tests are planned to thoroughly define cement requirements (if any).
The use of High Pressure Grinding Rolls (HPGR) is being investigated as an option for crushing
material for heap leaching by many projects at the present time and is an option that can be
considered for further downstream finer crushing at La Colorada.
The resource estimation is based on the current drillhole database, digitized as-built topography of
open pits, interpreted fault structures, geologic controls and current topographic data. The
estimation of mineral resource was completed utilizing a computerized resource block model by
VULCAN® modeling software.
The resource estimation is supported by 1,319 drillholes, totaling 154,918 m. The drillhole database
has 80,187 samples. The drillholes are generally located in a wide range of spacing and
orientations. They typically bear to the south, inclined steep to moderately. This orientation provides
an oblique angle of intersection between the predominate plane of mineralization and the drillhole.
The maximum drillhole depth is 479 m and the average is 117 m. The historic drillholes are generally
short and lack down-hole surveys. Nearly all of the modern, longer holes do have down-hole
surveys. The appropriate codes for missing samples and no recovery were used during the
modeling procedures.
12.3 Geology
The resource estimation is based on a generalized geologic model consisting of a single rock type.
The mineralization is hosted all lithologies, primarily controlled by the fault and vein development.
The principal mineralization occurs as quartz veinlets and silica replacement within the La Colorada,
Gran Central, El Crestón and Veta Madre fault/vein zones. The Intermediate Zone is defined as
diffuse zone of mineralization located parallel, and midway between the Gran Central and La
Colorada structures.
Overall, the resource area has a deep level of oxidation controlled primarily by the fault/vein
development. The bedrock is typically well oxidized within the mineralized zones and less oxidized
in the barren zones. To date, Argonaut has been unable to map a discrete oxide/sulfide boundary.
All material within the current resource models is considered oxidized or transitional.
smallest mining unit. Two topographic surfaces were used to flag the location of bedrock in the block
model. Within the mined areas, open pit as-built topography was generated from historic mapping.
These were digitized and wire framed into a top of bedrock surface. Outside of the mined areas, the
top of bedrock was defined by the current topographic data. Wire frame solids of the historical
underground workings were provided by Argonaut. These were used to flag the block model so that
no resources could be tabulated from the previously mined blocks. Soil thickness varies slightly over
the deposit and is generally very thin or non-existent.
12.5 Compositing
The raw assay from each of the resource estimation domains was plotted on histograms and
cumulative distribution plots to assess appropriate capping and compositing parameters. The
original assay sample lengths range from 0.1 to 111 m with an average of 1.8 m. For the modeling,
these were composited into 5.0 m down-hole lengths. This length was chosen mainly so that at least
two average samples would be composited together and the composites would comprise each 5 m
block diameter. The histogram of the drillhole database shows a strongly negative skewed
distribution, typical for most gold deposits. The cumulative distribution curves illustrate a continuous
population set with a distinct break in slope and continuity at the upper levels of mineralization. Each
unique dataset for each resource model domain was capped independently based on the break in
slope and distribution of the cumulative distribution plot. The capping parameters and results are
listed in Table 12.5.1.
12.6 Density
Argonaut conducted density testing on the core drilling conducted in 2011. Density determinations
were made on 136 samples collected from a wide range of locations and rock types. The average
density from the Argonaut test work was 2.694 g/cm3. This test work correlates very well to historical
density test work reported by MacMillian et al (2009) who used an average density of 2.62 g/cm3.
The SRK resource models assigned the average density of 2.694 g/cm3 for all bedrock material in
the block models. The RoM pad and all waste dump material was assigned a standard density of
2.0 g/cm3.
12.8.1 La Colorada
The La Colorada grade estimation was conducted within four independent estimation domains.
Three of these are wireframe grade shell generated by Argonaut at a 0.1 ppm grade threshold. The
fourth is an indicator domain located external to the wireframes. The wireframe solids are referred to
as La Colorada, Intermediate and Gran Central. Within these wireframes, SRK flagged all blocks
that were located within 60 m along strike or dip and 20 m normal to strike and dip of all samples.
Only these flagged blocks were allowed to be estimated for grade. The indicator blocks were flagged
external to the wireframes in order to pick up any significant mineralized zones which were too small
or discontinuous to wireframe. The indicator flagging was conducted using a three pass search
strategy according to the parameter listed in Table 12.8.1.1. Length weighting was used for all three
passes.
The Au and Ag grade estimation was conducted according to the parameter listed in Table 12.8.1.2.
Only indicator blocks with a value of 0.5 and above were selected for grade estimation. This equates
to a 50% probability of being locate within the 0.1 ppm grade shell. All grade estimations used
sample length weighting. As part of the grade estimation, model validation was conducted within
each domain. Certain domains required that higher grade sample distance restrictions be applied so
the model would validate. A high-grade restriction, as listed in Table 12.8.1.2, means that any block
located beyond the distances listed cannot use any composite sample above the listed grade.
12.8.2 El Crestón
The El Crestón grade estimation was conducted within a single estimation domain. This was defined
by a wireframe grade shell generated by Argonaut at a 0.1 ppm grade threshold. Within this
wireframe, SRK flagged all blocks that were located within 60 m along strike or dip and 30 m normal
to strike and dip of all samples. Only these flagged blocks were allowed to be estimated for grade.
The Au and Ag grade estimation was conducted according to the parameter listed in Table 12.8.2.1.
All grade estimations used sample length weighting. No higher grade sample distance restrictions
were required in order to validate the model.
The Au and Ag grade estimation was conducted according to the parameter listed in Table 12.8.3.1
below. All grade estimations used sample length weighting. No higher grade sample distance
restrictions were required in order to validate the model.
The Au and Ag grade estimation was conducted according to the parameter listed in Table 12.8.4.1.
All grade estimations used sample length weighting. No higher grade sample distance restrictions
were required in order to validate the model. As part of the grade estimation, model validation was
conducted within the estimation domain. Both the Au and Ag estimations required that higher grade
sample distance restrictions be applied so the model would validate. A high-grade restriction, as
listed in Table 12.8.4.1, means that any block located beyond the distances listed cannot use any
composite sample above the listed grade.
The mineral resources have been classified as Indicated and Inferred based primarily on sample
support. Within the La Colorada, El Crestón and Veta Madre resource models, wire frame solids
were constructed about the areas where the majority of drillholes are spaced 25 m apart. The
wireframe was limited to the base of drilling. All resources within the wire frame solids were
classified as indicated. All resources located external to the wireframe solids were classified as
inferred. The RoM Pad is all classified as indicated mineral resource.
of US$1,500/oz, US$20.00/oz respectively. The mineral resources are confined within a conceptual
whittle pit design based on the same parameters used for the cut-off grade and a 50° pit slope.
Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution.
These mineral resource estimates include inferred mineral resources that are normally considered
too speculative geologically to have economic considerations applied to them that would enable
them to be categorized as mineral reserves. There is also no certainty that these inferred mineral
resources will be converted to Measured and Indicated categories through further drilling, or into
mineral reserves, once economic considerations are applied.
Table 12.12.2 illustrates the grade tonnage relationship of gold within pit 36 of the Whittle® analysis
for El Crestón.
Table 12.12.3 illustrates the grade tonnage relationship of gold within pit 36 of the Whittle® analysis
for Veta Madre.
Historical underground mining operations began in 1704 with the initial placer discovery on the site
followed by more advanced methods in the late 1800’s and early 1900’s when an estimated 3 million
ounces may have been mined from the high grade vein structures within the deposit. In 1994
Eldorado Gold commenced open pit and heap leach operations with the excavation of the El Crestón
and Gran Central Pits. Eldorado ceased mining in 2002 but operations continued through 2004
under the ownership of Minera FG.
Production at the Project is expected to begin with re-leaching of historical RoM pads thus allowing
room for additional heap leach pad space. By mid- to late 2012, it is expected that the necessary
permits will be in place for open pit mining at the Gran Central pit followed by El Crestón and Veta
Madre.
An economic model was constructed to internally test the economics of the complete resource
through achieving a positive NPV. This confirmed Argonaut’s resources detailed in the SRK report
“NI 43-101 Technical Report on Resources La Colorada Project Sonora, Mexico” are valid producing
a NPV 5% of over $120 million. After review by SRK and Argonaut, it was decided that optimization
of the production rate and more detailed phase design would add to project viability. As a result, a
smaller resource quantum was included for analysis in the Preliminary Economic Assessment which
concentrated on lowering the overall strip ratio and utilizing multiple cut-off grades to bring forward
high grade in the production schedule while maintaining a consisted overall mining rate.
For the PEA, an ultimate pit for La Colorada was constructed by SRK with three possible phases. El
Creston and Veta Madre were designed to meet mining width limitations. The resultant pit design
defined 32.8 Mt of potentially minable resource with an average grade of 0.72 g/t Au and average
strip ratio of 3.7:1 (W:O). At a 4 Mt production rate, it is expected the potential mine life of to be in
excess of 9 years. The production schedule targeted a consistent total mine tonnage of 24Mt/y from
year 3 onwards and any resources mined above 4 Mt/y was stockpiled for use in years where not
enough direct RoM feed was possible.
Final dimensions of the proposed open pits detail the potential magnitude of operations and have not
been limited to infrastructure restrictions. Potential restrictions may include additional required
permitted space for future heap leach pads and partial relocation of the La Colorada Township. As
detailed engineering continues the effect of these restrictions or the elimination of the restriction
resulting from further land negotiations will be addressed during reserve estimation.
the pit optimization results have been used as a guide for pit and waste dump construction. Inputs
used for the optimization do not necessarily conform with those quoted in the final preliminary
economic model. In all cases, measured, indicated and inferred resources have been considered
during pit optimization.
The block model parameters used for La Colorada/Gran Central are detailed in Table 13.1.1.1.
The financial assumptions made at the time of optimization are detailed in Table 13.1.1.2. The initial
capital is used to determine the mining risk associated during the optimization run and was applied to
the deposit as a whole.
The block model parameters used for El Crestón are detailed in table 13.1.1.3.
The financial assumptions made at the time of optimization for El Crestón are detailed in Table
13.1.1.4. The initial capital is used to determine the mining risk associated during the optimization
run and was applied to the deposit as a whole.
The block model parameters used for Veta Madre are detailed in table 13.1.1.5.
The financial assumptions made at the time of optimization for Veta Madre are detailed in Table
13.1.1.6. The initial capital was not used for Veta Madre given the small resource.
Figure 13-3 illustrates a cross sectional view of pit 36 when compared to underground workings,
drillholes and current topography.
Figure 13-5 illustrates a cross sectional view of pit 36 when compared to underground workings,
drillholes and current topography for El Crestón.
Figure 13-7 illustrates a cross sectional view of pit 36, drillholes and current topography for Veta
Madre.
La Colorada/Gran Central pit wall may be limited by La Colorada township if land purchases
cannot be made;
Heap leach pad sequencing may be modified to account for overlap between pit crests and
heap footprint;
Geotechnical buffers between pit crest, dump and heap toe must be defined; and
Geotechnical zones updated based on pit depth and ground water level.
There is historical geotechnical information for both La Colorada/Gran Central and El Crestón open
pits. Due to the preliminary nature of this study, a consistent inter-ramp angle of 49.10 was applied
to all designs in a triple bench configuration.
La Colorada/Gran Central has been designed with three mining phases (Figure 13-8). Phase 1 and
2 are independent of each other with access for Phase 1 originating on the south wall of the historic
pit and Phase 2 from the current central access. Phase 1 utilizes a full road width to RL 330 before
transitioning to a single access ramp whereas Phase 2 has single access for the entire phase (same
as current ramp system).
The Phase 3 pit expands from Phase 1 ramp access to a pit shell corresponding to pit shell 15 as
defined in Figure 13-2. The main ramp begins on the southern side of the pit and wraps around to
the west as the pit gets deeper. By utilizing the natural geometry of the orebody, ramps are placed
where natural pit shell variation occurs and stays away from sharp mineralization boundaries.
The southern exit of the access ramp is driven by the location of the waste dump and crusher. The
La Primavera waste dump is located to the south with capacity for the 100% of total waste produced
in Gran Central pit.
The open pit design at El Crestón is highly sensitive to ramp location and its effect on stripping ratio,
so careful placement of ramps on the southern wall was considered optimal.
The Phase 1 design at El Crestón was focused on diving into the current open pit by moving the
north wall half way to the final pit wall. There is very little opportunity to do the same on the east,
west and south walls due to mining width constraints. As the pit access currently is on the south
wall, it is envisaged that a new access on the north wall will be needed. This will provide a duel
access into and out of the pit.
Figure13-9 illustrates the location of Phase 1 and phase 2 in relation to the current topography.
Two scheduling passes were performed to ensure the mine will run with a consistent tonnage profile
and manage the variation in stripping ratios from the various phases ensuring a consistent crusher
feed. As such, the first or “RoM” schedule provided the feedstock for a second “Crusher” schedule.
The RoM schedule mined Gran Central followed by El Creston and finally Veta Madre using a total
tonnage limit of 24 Mt from year 3 onwards. When mined resources above 4 Mt/y are excavated, it
is assumed that 4 Mt is fed directly to the crusher and excess is stockpiled. The first schedule
determined the quantity of high grade (Au above 0.4), mid-grade (Au between 0.2 and 0.4) and low
grade (Au between 0.1 and 0.2). The crusher schedule balances material mined in the RoM
schedule to a flat 4 Mt after year 3 using the different grade classifications in the year they were
produced. If there is an excess, high grade is sent to the crusher first, followed by mid-grade and a
proportion of low grade is sent to a stockpile. Where there is not enough mined material, stockpile
material from previous periods is added to the high grade and mid-grade mined in a particular year.
No stockpiled material is added to the crusher schedule before it has been mined as defined in the
RoM schedule.
High grade, mid-grade and low grade were split for reporting purposed but are combined to
meet the production limit (crusher) within the economic model;
Only Veta Madre does not experience high initial strip ratios;
When combined, over 9 years of operating life is possible at 4 Mt resource per year; and
All schedules use the 5 m bench/phase volumes and follow precedent relationships.
Table 13.5.1 illustrates the annual RoM schedule for the three pits and mine costs are applied
annually based on this schedule. Table 13.5.2 shows the material fed to the crusher and forms basis
for annual crushing and processing costs.
Dumps are constructed in 15 m lifts with space for a 10 m berm. The resultant overall slope angle is
26 degrees and ramp widths of 25 m have been applied.
The El Crestón dump has been designed to a maximum height 80 m and contains storage for
144,273,860 m3.
The Primavera dump has been designed to a height of 135 m and contains storage for 71,638,642
m3.
Please refer to Figure 13-1 for the location of the waste dumps and relative size.
13.6.2 UG Voids
Underground voids are evident in the highwalls of both La Colorada/Gran Central and El Crestón pits
and SRK understands that there are extensive historical workings.
Eldorado attempted to digitize the underground workings from historical plan maps. For La
Colorada/Gran Central the location of the UG surveys appear reasonably accurate when checked
against exploration drilling and zones of high grade. For the El Crestón pit, the survey does not
appear to be complete or entirely accurate and may have been incorrectly located at the present
time. SRK is of the opinion that a concerted effort should be made to accurately locate and estimate
where potential mining voids exist for both pits. Figure 13-10 illustrates the current understanding of
UG workings.
Costs are linked to haul distance under 1 km and usually a $0.15 c/km hauling costs are added if
hauls are over 1 km.
Mobilization and demobilization are frequently under US$500 k and are not a risk in Mexican mine
operations.
13.7.3 Manpower
Due to the proximity of potential mining operations to the La Colorada village, Argonaut will focus on
hiring as many un-skilled positions locally as possible. For skilled operators, La Colorada is only a
40 min drive from the town of Hermosillo which is generally considered the center for mine personnel
within the Sonoran region. In addition, many operators and mine professionals have either been
employed at La Colorada or would like to relocate back to Hermosillo if the opportunity were to
present itself. Therefore, the hiring and retention of both operational and technical staff is unlikely to
be a limiting feature for further development of the La Colorada operation.
During operations, the projected labor force for general and administration purposes are detailed in
Table 13.7.3.1. Contractors will employ labor at their own discretion.
Gold recovery predicted from the fresh potentially mineable resource mined from the respective pits
is presented in the following table. The recovery is based on 20 column leach tests which were
conducted at the KCA laboratory in Reno, Nevada. The column leach tests were run from 48 to 72
days before termination. Gold recovery from the column tests was increasing at an average rate of
0.11% per day for the last 10 days prior to termination and it is likely overall recovery will increase
slightly with extended leach times. Based on continued extractions at a low rate with extended
leaching (120 days), KCA feels confident in predicting field extraction equal to column leach test
extraction at a minimum.
During the Phase 1 the RoM potentially mineable resource will be mined and delivered to a centrally
located crushing system and crushed with a primary jaw crusher. The potentially mineable resource
will then be conveyed to a triple deck screen with aperture sizes of 75 mm, 38 mm and 19 mm. All
material not passing the 19 mm aperture will be conveyed to a cone crusher with a closed side
setting of 19 mm and crushed. The material will then be conveyed back to the screen to remove the
P100 19 mm material product. The potentially mineable resource product passing the 19 mm
aperture will be conveyed to the leach pad with portable field conveyors and stacked with a radial
stacker in 8 m lifts. The total crushing and stacking processing rate for the previously leached mine
run potentially mineable resources on the leach pad will be 8,400 t/d.
Before mining fresh ores from the pits, an additional two cone crushers and two triple deck screens
in a closed circuit configuration will be added to the crushing circuit allowing the new potentially
mineable resource to be processed at a rate of 11,206 t/d at a 100% passing 9.5 mm crush size. All
of the triple deck screens will have aperatures of 75 mm, 38 mm and 9.5 mm. The secondary cone
crusher will operate at a 25 mm closed side setting and the tertiary crushers will operate at a 9.5 mm
closed side setting. Lime or cement, as needed, will be added to the potentially mineable resource at
approximately 2 kg/t on a conveyor for binding and protective alkalinity for cyanide leaching.
Conveyor stacking will continue to be used to stack the potentially mineable resource on the leach
pads during new potentially mineable resource processing. The production rate is depicted in the
Table 14.1.2.
After stacking the potentially mineable resource will be irrigated with a dilute cyanide solution. The
solution will be applied utilizing drip tubing to minimize evaporation. Solution will be applied at a rate
of 8-10 l/hr/m2 for 120 days. Gold bearing leach solutions, now “pregnant”, draining from the leach
pad will be directed to the pregnant pond. The pregnant solution will be pumped from the pond to
two 5-column trains of carbon columns, arranged in a cascade fashion, each containing 5 t of
activated 6x12 coconut-shell carbon. The carbon will absorb the gold and silver from the pregnant
solution. The solution will drain from the carbon columns to a barren tank where it will be refortified
with cyanide and pumped back to the leach pad.
Approximately every other day, the carbon will be removed from the first column in series and
pumped to a tank for acid washing with a dilute hydrochloric acid solution. Carbon from the
subsequent columns in series will be advanced to replace the carbon removed. After acid washing
the carbon will be pumped to a pressure vessel with a capacity of 5 t of carbon where the gold and
silver will be stripped from the carbon and placed back into solution. The gold and silver bearing
solutions will be pumped through two electrowinning cells where the precious metals will be
electroplated onto stainless steel-wool cathodes. After stripping, the carbon will be placed back into
the carbon column train in the last column in series. Periodically the carbon will be thermally
regenerated to maintain desired activity levels.
The gold and silver will be removed from the stainless steel cathodes by high pressure washing then
dried, mixed with flux reagents and smelted on-site to doré bullion. The doré bullion will be shipped
off-site for further refinement and sale. The General Project Flowsheet is presented in Section 14.2.
14.2 Flowsheet
Flowsheets have been developed for the Phase 1 RoM rehandle using a standard two stage 19mm
crushing and conveyor stacking system, with the solutions processed using conventional carbon
columns. During Phase 1 carbon stripping will be conducted by others offsite. Phase 2 uses an
expanded crushing circuit incorporating three stage crushing to 9.5 mm, conveyor stacking, carbon
adsorption columns, and full carbon stripping (pressure Zadra), acid wash, regeneration, and
electrowinning circuits.and modified Zadra pressure stripping of the loaded carbon, followed by
electrowinning.
Figures 14-1 and 14-2 present the process flow sheets designed by KCA.
Table 14.3.1 lists the global design basis derived from the mining plan and the metallurgical data.
Tables 14.3.2 through 14.3.7 detail the specific design criteria needed for each major process area
to derive sizings and characteristics for specific equipment selection and cost estimation.
The above criteria provide sufficient detail to allow for appropriate cost estimations for the processing
plant and equipment to be made.
Attached Attached
Equipment Description Design Parameters
hp kW
Cone 2 Fan 2.1 2
Cone 2 Hydraulic 21 16
Cone 2 Under Belt 14 10
Jaw Circuit Trio Magnet Trio CR42 self-cleaning magnets with stands 10.8 8.1
Cleaning Belt 7.6 5.7
Circuit 2 Trio Magnet Trio CR42 self-cleaning magnets with stands 10.8 8.1
Cleaning Belt 7.6 5.7
Circuit 3 Trio Magnet Trio CR42 self-cleaning magnets with stands 10.8 8.1
Cleaning Belt 7.6 5.7
Weightometer 0.5 0.4
115 Stacking
Grasshopper Conveyor 1 36" x 101' 34 25.4
Grasshopper Conveyor 2 36" x 101' 34 25.4
Grasshopper Conveyor 3 36" x 101' 34 25.4
Grasshopper Conveyor 4 36" x 101' 34 25.4
Grasshopper Conveyor 5 36" x 101' 34 25.4
Grasshopper Conveyor 6 36" x 101' 34 25.4
Grasshopper Conveyor 7 36" x 101' 34 25.4
Grasshopper Conveyor 8 36" x 101' 34 25.4
Grasshopper Conveyor 9 36" x 101' 34 25.4
Grasshopper Conveyor 10 36" x 101' 34 25.4
Grasshopper Conveyor 11 36" x 101' 34 25.4
Grasshopper Conveyor 12 36" x 101' 34 25.4
Grasshopper Conveyor 13 36" x 101' 34 25.4
Grasshopper Conveyor 14 36" x 101' 34 25.4
Superior Stacker Conveyor Superior 36" x 136' incl 66' telescoping conveyor 40 29.8
Superior Stacker Conveyor
40 29.8
Stinger
Superior Stacker Hydraulic 14 10.4
122 Solution Handling
VFD - 300 HP Barren Booster xxx pulse, 300HP, 480VAC, amps, with RTD inputs VFD
Pump
VFD - 300 HP Barren Booster xxx pulse, 300HP, 480VAC, amps, with RTD inputs VFD
Pump
VFD - 300 HP Barren Booster xxx pulse, 300HP, 480VAC, amps, with RTD inputs VFD
Pump
VFD - 300 HP Barren Booster xxx pulse, 300HP, 480VAC, amps, with RTD inputs VFD
Pump
Barren Wye Filter Keckley Style A, 150LB Strainer With 80 Mesh Screens NA
Barren Wye Filter Keckley Style A, 150LB Strainer With 80 Mesh Screens NA
Barren Wye Filter Keckley Style A, 150LB Strainer With 80 Mesh Screens NA
Barren Wye Filter Keckley Style A, 150LB Strainer With 80 Mesh Screens NA
Barren Wye Filter Keckley Style A, 150LB Strainer With 80 Mesh Screens NA
Barren Wye Filter Keckley Style A, 150LB Strainer With 80 Mesh Screens NA
Pregnant Solution Flowmeter 12" Endress Hauser, 10W3H, with polyurethane liners, NA
150lb flanges
Barren Solution Flowmeter 12" Endress Hauser, 10W3H, with polyurethane liners, N/A
150lb flanges
Pregnant Solution Flowmeter 12" Endress Hauser, 10W3H, with polyurethane liners, NA
150lb flanges
Barren Solution Flowmeter 12" Endress Hauser, 10W3H, with polyurethane liners, N/A
150lb flanges
Adsorption Feed Pumps 372 m3/hr @ 22.2m TDH, Tsurumi pumps, GSZ 237-4 50 37
Adsorption Feed Pumps 372 m3/hr @ 22.2m TDH, Tsurumi pumps, GSZ 237-4 50 37
Adsorption Feed Pumps 373 m3/hr @ 22.2m TDH, Tsurumi pumps, GSZ 237-4 50 37
Adsorption Feed Pumps 374 m3/hr @ 22.2m TDH, Tsurumi pumps, GSZ 237-4 50 37
Submersible Barren Pump 372 m3/hr @ 12m TDH, Tsurumi pumps, GSZ 237-6 50 37
Submersible Barren Pump 372 m3/hr @ 12m TDH, Tsurumi pumps, GSZ 237-6 50 37
Barren Booster Pump 300 224
Attached Attached
Equipment Description Design Parameters
hp kW
Barren Booster Pump 300 224
Barren Booster Pump 300 224
Barren Booster Pump 300 224
Process Solution Pump 80 m3/hr @ 40 m TDH 25 19
Excess Solution Pump 80 m3/hr @ 10 m TDH 15 11
Pregnant Solution Sampler SS with 1 liter collector N/A
Barren Solution Sampler SS with 1 liter collector N/A
Pregnant Solution Sampler SS with 1 liter collector N/A
Barren Solution Sampler SS with 1 liter collector N/A
Pond slides N/A
Pond slides N/A
Pond slides N/A
Pond slides N/A
Pond slides N/A
Pond slides N/A
Pond slides N/A
Pond slides N/A
Barren Tank 4.5x7 Open Top Tank, N/A
Barren Tank 4.5x7 Open Top Tank, N/A
Area 128, Adsorption, Acid Wash, Recovery
Instrument Air Receiver 0.2227 m3 volume N/A
Press Blowdown Air Receiver 2 m3 volume N/A
Hot Water Solution Boiler 2.62 mBTU output fuel oil fired hot water heaters 7.5
Press Blowdown Air Compressor 180 CFM @ 90 PSI 40 30
Instrument Air Compressor 15 CFM @ 90 PSI 5
Instrument Air Dryer Ingersoll Rand D25in Refrigerated Dryer 0.1
Baghouse Air Dryer Ingersoll Rand Dxxxxx Refrigerated Dryer 0.3
Electrolytic cell KCA Model 120, SS, with basket cathodes NA
Electrolytic cell KCA Model 120, SS, with basket cathodes NA
Acid Area Eye Wash & Shower Safety shower, non-heated N/A
Carbon Handling Area Eye Wash Safety shower, non-heated N/A
& Shower
Recovery Area Eye Wash & Safety shower, non-heated N/A
Shower
Carbon Fines Filter Press 82 m2 filter area, 0.9 m3 cake volume. NA
Cathode Sludge Filter Press 30m2 filter area, 0.3 m3 cake volume. NA
Ecell exhaust fan 1700 CFM, ss, with explosion proof motor, static grounding 1.5 1.1
Carbon Attritioning Hoist 1 Tonne Hoist 1 0.7
Primary Heat Exchanger (aka. SS plates, EPDM seals, Trantor Model NA
Recovery Heat Exchanger)
Secondary Heat Exchanger (aka. SS plates, EPDM seals, Trantor Model NA
Heat Up Heat Exchanger)
Tertiary Heat Exchanger (aka. SS plates, EPDM seals, Trantor Model NA
Cool Down Heat Exchanger)
Carbon Regeneration Kiln 125 KG/HR KILN 10
Carbon Attritioning Mixer Top mount, fixed speed, Lightnin 14Q1, single axial flow 1.5 1.1
impeller
Eluant Return Pump 20 m3/h @ 10 m TDH 3 2.2
Acid Injection pump 3m3/hr @ 6 m TDH 1 0.7
Carbon Transfer Pump Wemco DK3, 40m3/hr @ 16m TDH 7.5 5.6
Carbon Transfer Pump Wemco DK3, 40m3/hr @ 16m TDH 7.5 5.6
Carbon Transfer Pump Wemco DK3, 40m3/hr @ 16m TDH 7.5 5.6
Carbon Transfer Pump Wemco DK3, 40m3/hr @ 16m TDH 7.5 5.6
Acid Wash Circulation Pump 20m3/hr @ 15m TDH, Teflon lined pump, for 32% HCL 7.5 5.6
service
Acid Area Sump Pump 20m3/hr @ 25m TDH, non metalic pump, for 32% HCL 7.5 5.6
service
Carbon Area Sump Pump 20m3/hr @ 25m TDH, metallic pump for 5% carbon solids 10 7.5
Eluant pump Circuit 1 20m3/hr @ 60m TDH, Carbon steel pump 15 11.2
Attached Attached
Equipment Description Design Parameters
hp kW
Eluant drain pump 20m3/hr @ 10m TDH, Carbon steel pump 3 2.2
Carbon Fines Press Feed Pump 50m3/hr @ 73m TDH, Carbon steel pump 30 22.4
Boiler Hot Water Recirc pump Pending 25 18.6
Elution Vessel ASME vessel 1.524 x 7.8 + heads, 14.4m3 N/A
Rectifier 2000 amp, 0-6 VDC 16
Rectifier 2000 amp, 0-6 VDC 16
Barren Solution Sampler SS with 1 liter collector, N/A
Pregnant Solution Sampler KCA standard Model, SS with 1 liter collector, N/A
Barren Solution Sampler KCA standard Model, SS with 1 liter collector, N/A
Adsorption Safety Screen static safety screen, 2mx4m - 24mesh N/A
Kiln Feed Hopper Dewater Screen KCA standard screen N/A
Carbon Sizing Screen 4x8 Sizetec, dual motors each at 2.8 HP 5.6 4.2
Strip Solution Outlet Screen SS, 3" Johnson screen, 20 mesh, mounted in pipe N/A
Strip Solution Outlet Screen SS, 3" Johnson screen, 20 mesh, mounted in pipe N/A
Strip Solution Inlet Screen SS, 3" Johnson screen, 20 mesh, mounted in pipe N/A
Strip Solution Inlet Screen SS, 3" Johnson screen, 20 mesh, mounted in pipe N/A
Strip Solution Inlet Screen SS, 3" Johnson screen, 20 mesh, mounted in pipe N/A
Acid Wash Vessel Inlet Screen PVC 3" Johnson screen, 20 mesh, tank mounted N/A
Acid Wash Vessel Inlet Screen PVC 3" Johnson screen, 20 mesh, tank mounted N/A
Acid Wash Vessel Outlet Screen PVC 3" Johnson screen, 20 mesh, tank mounted N/A
Acid Wash Vessel Outlet Screen PVC 3" Johnson screen, 20 mesh, tank mounted N/A
Carbon Column #1 Train 1 4.06 X 4 M, With Wear Plates, Dart Valves, Perforated SS N/A
Distribution Plates
Carbon Column #2 Train 1 4.06 X 4 M, With Wear Plates, Dart Valves, Perforated SS N/A
Distribution Plates
Carbon Column #3 Train 1 4.06 X 4 M, With Wear Plates, Dart Valves, Perforated SS N/A
Distribution Plates
Carbon Column #4 Train 1 4.06 X 4 M, With Wear Plates, Dart Valves, Perforated SS N/A
Distribution Plates
Carbon Column #5 Train 1 4.06 X 4 M, With Wear Plates, Dart Valves, Perforated SS N/A
Distribution Plates
Feed Box 1.1x4.95x .75m Open Top Box N/A
Carbon Column #1 Train 2 4.06 X 4 M, With Wear Plates, Dart Valves, Perforated SS N/A
Distribution Plates
Carbon Column #2 Train 2 4.06 X 4 M, With Wear Plates, Dart Valves, Perforated SS N/A
Distribution Plates
Carbon Column #3 Train 2 4.06 X 4 M, With Wear Plates, Dart Valves, Perforated SS N/A
Distribution Plates
Carbon Column #4 Train 2 4.06 X 4 M, With Wear Plates, Dart Valves, Perforated SS N/A
Distribution Plates
Carbon Column #5 Train 2 4.06 X 4 M, With Wear Plates, Dart Valves, Perforated SS N/A
Distribution Plates
Feed Box 1.1x4.95x .75m OPEN TOP BOX N/A
Carbon Storage Tank 9 m3 working volume, 1.8m D x 4.0 m cylinderical section N/A
with cone bottom, open top
Stripped carbon tank, 500 kg 1.45x1.45x1.3 Sloped Bottom Tank N/A
carbon
Dewatered Carbon Holding Tank Sloped Bottom Tank N/A
Eluant Solution Storage Tank 22 m3 working capacity with 50 mm insulation & 29 ga N/A
304SS cladding
Carbon Attritioning Tank 2 m3, with 3 baffles, cone bottom N/A
Carbon Fines Tank Carbon steel, xxx m3 working volume N/A
Carbon Storage Tank 13 m3 working volume, carbon steel, cone bottom N/A
Quench Tank 13 m3 working volume, carbon steel, cone bottom N/A
Carbon Regeneration Kiln Feed 13 m3 working volume, carbon steel, sloped bottom N/A
Tank
Acid Wash Vessel 14 m3 working volume, rubber or FRP lined N/A
Acid Wash/Neutralization Mix .7 m3 working capacity hdpE N/A
Tank
Attached Attached
Equipment Description Design Parameters
hp kW
Cathode Wash Box Steel box with vapor shield N/A
Ecell Discharge Pump Tank 1.5m diameter x 1.5 meter high N/A
0.98m diameter x 0.872 meter high, 6mm rubber indise, N/A
Acid Mix sump bucket
painted outside
Carbon handling sump bucket 0.98m diameter x 0.872 meter high, painted N/A
E-Cell sump bucket 0.98m diameter x 0.872 meter high, painted N/A
Slag steel trench N/A
Area 131, Refinery
Baghouse Dust Collector 17000 m/h, 150 C, NOMEX bags, SP = 100 mm H2O, with NA
HEPA secondary filter
Dryer GRIEVE AB 700 OR SIMILAR 9
Refinery Area Eye Wash & Safety shower, non-heated N/A
Shower
Smelting Furnace Fuel oil fired, 430 HT crucible, with 1/2 hp burner blower 1 0.7
Baghouse Dust Collector Exhaust pending 30 22.4
Fan
Refinery exhaust fan 3600 CFM @ Static Pressure 0.5"
Smelting Furnace Fume Hood pending NA
Smelting Furnace Hydraulic pending 5 3.7
Power Unit
Cathode hoist 1/2ton hoist 1 0.7
Slag mill QUINN 16 X32 Ball Mill & Charge 3 2.2
Cathode Sludge Filter Feed Pump 10m3/hr @ 73m TDH, Horizontal Centrifugal 15 11.2
Recovery Area Sump Pump 20 m3/h @ 25 m TDH 10 7.5
Slag Sump Pump 150 m3/h @ 10 m TDH 20 14.9
Slag Solution Pump 150 m3/h @ 12 m TDH 15 11.2
Gravity Table Tails Pump Denver Sand Pump 1 0.7
Slag Mill Discharge Pump Denver Sand Pump 1 0.7
Slag Mill Feed Pump Denver Sand Pump 1 0.7
Granulation Water Tank 24M3 Tank NA
Slag Holding Tank 1.2M3 Working Capacity NA
Platform Scale for Fluxes 0.2
Cathode Spray Washer Pending 1
Gravity Table Diester 2
Vault Door Vault Structures Inc, Thor III Vault Door Class 2
Air Flow 26 CFM, Stroke 1-1/16", blow p/min 4000
Dore Bar Cleaner: needle Gun
Ingersoll Rand mod. 182K1
Area 134, Reagents
NaCN Mixer Lightnin 15Q2 mixer 2 1.5
NaCN Area Eye Wash & Shower Safety shower, non-heated N/A
NaCN Hoist Electric Hoist, 1
NaCN Mix Tank 2.13x2.7 tank with bag ripper (no dust cover), lid over bag N/A
ripper
NaCN Storage Tank 2.8X3.5M CLOSED TOP TANK N/A
NaCN Area Sump Pump 5 3.7
NaCN Transfer Pump 3298 1.5x1 x 5, SEAL LESS PUMP, 2 1.5
NaCN Addition Pump WIER RP20 PUMP 1 0.7
NaCN Addition Pump WIER RP20 PUMP 1 0.7
NaOH Pump 20m3/hr @ 12m TDH, Horizontal Centrifugal 3 2.2
Antiscalant pump (Elution Circuit) Vendor Supplied pumps (220 VAC, 1 Ph) 0.2
Antiscalant pump (Barren Circuit) Vendor Supplied pumps (220 VAC, 1 Ph) 0.2
Antiscalant pump (Pregnant Vendor Supplied pumps (220 VAC, 1 Ph) 0.2
Circuit)
Antiscalant pump (Pregnant Vendor Supplied pumps (220 VAC, 1 Ph) 0.2
Circuit)
NaOH Mix Tank 27M3 WORKING CAPACITY N/A
Total Attached KW 4281
The site currently (2011) has mine site buildings, water supply, heap pads, leach ponds, power
supply, access roads and plant foundations that are being upgraded and improved.
The village of La Colorada is located adjacent to the site and contains a small supply of labor (275
inhabitants) and some basic equipment. The city of Hermosillo (900,000 inhabitants) is located 45
km from the site with a large supply of skilled and unskilled labor along with most supplies and
contractors for construction and operations available. There are daily flights to Hermosillo from
Mexico City, Phoenix and Los Angeles. Hermosillo is a major mining center for Northern Mexico with
access to vendors, contractors and consultants for most reagents, supplies, equipment or services
need for exploration, construction, operations and closure.
In addition, equipment and reagents can be sourced through several major cities in the U.S., the
closest of which is through Nogales, Arizona, 177 miles north of Hermosillo via Federal Highway 15,
with an estimated travel time of 3.5 to 4 hours.
15.1.2 Power
La Colorada has a dedicated 33 KV power line and 10 MVA substation which were built by Eldorado
in 1997. The main transmission line is 23 km from the community of Estacion Torres to the Mine
site. La Colorada’s operations plan calls for a peak power load of 2.5 MVA for ADR plant, 1000 KVA
for crushing and 1500 KVA for conveying. Therefore, no upgrade to the power infrastructure is
expected at this time.
With regards to water rights, any water taken from open pit operations either ground water or surface
run-off can be used without a special permit. Water from the underground workings requires a
permit and is defined by the CNA (National Water Commission).
It is estimated that the combined water storage of El Crestón and Gran Central total at least 1 million
cubic meters of water. Dewatering will likely use an 8 inch pipe pumping a head of 150 m when pre-
strip operations encounter the water level.
A main office building built with masonry walls and metal insulated sheet roof which is big
enough for geology and site administration personnel;
A laboratory built with metal sheeting and a three unit office trailer;
A Warehouse comprised of two 48 ft containers;
A Lunch room built with a metal frame and combo sheet walls with capacity for 120 people,
including a cooking area;
A process ADR plant foundation covering 800 m2; and
A 500 m2 metal framework undergoing refurbishment.
As Golder Associates have only a design for 15 Mt of potentially minable resource, the remainder of
pad space required must come from additional land purchases. SRK and Argonaut have located a
Pad to the Northeast which would accommodate the additional pad space but no land purchases
have been made at this time and there is no guarantee that the pad location will be finalized.
Article 6 of the Mining Law states that mining exploration; exploitation and beneficiation are public
utilities and have preference over any other use or utilization of the land, subject to compliance with
laws and regulations.
Article 19 specifies the right to obtain easements, the right to use the water flowing from the mine for
both industrial and domestic use and the right to obtain a preferential right for a concession of the
mine waters.
Articles 27, 37 and 39 rule that exploration; exploitation and beneficiation activities must comply with
environment laws and regulations and should incorporate technical standards in matters such as
mine safety, ecological balance and environmental protection.
The Mining Law Regulation of February 15, 1999 repealed the previous regulation of March 29,
1993. Article 62 of the regulation requires mining projects to comply with the General Environmental
Law, its regulations, and all applicable norms.
The Mexican federal authority over the environment is the Secretaría de Medio Ambiente y Recursos
Naturales – SEMARNAT (Secretariat of the Environment and Natural Resources). SEMARNAT,
formerly known as SEDESOL, was formed in 1994, as the Secretaría de Medio Ambiente Recursos
Naturales y Pesca (Secretariat of the Environment and Natural Resources and Fisheries). On
November 30, 2000, the Federal Public Administration Law was amended giving rise to SEMARNAT.
The change in name corresponded to the movement of the fisheries subsector to the Secretaría de
Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación – SAGARPA (Secretariat of
Agriculture, Livestock, Rural Development, Fisheries and Food), through which an increased
emphasis was given to environmental protection and sustainable development.
SEMARNAT is organized into a number of sub-secretariats and the following main divisions:
INE – Instituto Nacional de Ecología (National Institute of Ecology), an entity responsible for
planning, research and development, conservation of national protection areas and approval
of environmental standards and regulations;
The federal delegation or state agencies of SEMARNAT are known as Consejo Estatal de Ecología
– COEDE (State Council of Ecology).
PROFEPA is the federal entity in charge of carrying out environmental inspections and negotiating
compliance agreements. Voluntary environmental audits, coordinated through PROFEPA, are
encouraged under the LGEEPA.
Regulation to LGEEPA on the Matter of Environmental Impact Evaluations, May 30, 2000;
Regulation to LGEEPA on the Matter of Prevention and Control of Atmospheric
Contamination, November 25, 1988;
Regulation to LGEEPA on the Matter of Environmental Audits, November 29, 2000;
Regulation to LGEEPA on Natural Protected Areas, November 20, 2000;
Regulation to LGEEPA on Protection of the Environment Due to Noise Contamination,
December 6, 1982; and
Regulation to LGEEPA on the Matter of Hazardous Waste, November 25, 1988.
Mine tailings are listed in the Regulation to LGEEPA on the Matter of Hazardous Waste. Noms
include:
construction of the dams. The rule is applicable to all generators of non-radioactive tailings
and to all dams constructed after this NOM goes into effect; and
Existing tailings dams will have to comply with the new standards on post-closure. The
NOM formally went into effect sixty (60) days after its publication date.
In the Environmental Audit, firms contract third-party PROFEPA accredited auditors, considered
experts in fields such as risk management and water quality, to conduct the audit process. During
this audit, called Industrial Verification, auditors determine if facilities are in compliance with
applicable environmental laws and regulations. If a site passes, it receives designation as a “Clean
Industry” and is able to utilize the Clean Industry logo as a message to consumers and the
community that it fulfills its legal responsibilities. If a site does not pass, the government can close
part or all of a facility if it deems it necessary. However, PROFEPA wishes to avoid such extreme
actions and instead prefers to work with the business to create an “Action Plan” to correct problem
areas.
The Action Plan is established between the government and the business based on suggestions of
the auditor from the Industrial Verification. It creates a time frame and specific actions a site needs
to take in order to be in compliance and solve existing or potential problems. An agreement is then
signed by both parties to complete the process. When a facility successfully completes the Action
Plan, it is then eligible to receive the Clean Industry designation.
PROFEPA believes this program fosters a better relationship between regulators and industry,
provides a green label for businesses to promote themselves and reduces insurance premiums for
certified facilities. The most important aspect, however, is the assurance of legal compliance
through the use of the Action Plan, a guarantee that ISO 14001 and other Environmental
Management Systems cannot make.
SIGA
Many companies in Mexico adopt the corporate policy, Sistema Integral de Gestión Ambiental
(SIGA) (Integral System of Environmental Management), for the protection of the environmental and
prevention of adverse environmental impacts. SIGA emphasizes a commitment to environmental
protection along with sustainable development, as well as a commitment to strict adherence to
environmental legislation and regulation and a process of continuous review and improvement of
company policies and programs. The companies continue to improve their commitments to
environmental stewardship through the use of the latest technologies that are proven, available, and
economically viable.
Water resources are regulated under the National Water Law, December 1, 1992 and its regulation,
January 12, 1994 (amended by decree, December 4, 1997). In Mexico, ecological criteria for water
quality is set forth in the Regulation by which the Ecological Criteria for Water Quality are
Established, CE-CCA-001/89, dated December 2, 1989. These criteria are used to classify bodies of
water for suitable uses including drinking water supply, recreational activities, agricultural irrigation,
livestock use, aquacultural use and for the development and preservation of aquatic life. The quality
standards listed in the regulation indicate the maximum acceptable concentrations of chemical
parameters and are used to establish wastewater effluent limits.
Discharge limits have been established for particular industrial sources, although limits specific to
mining projects have not been developed. NOM-001-ECOL-1996, January 6, 1997, establishes
maximum permissible limits of contaminants in wastewater discharges to surface water and national
“goods” (waters under the jurisdiction of the CONAGUA).
Daily and monthly effluent limits are listed for discharges to rivers used for agricultural irrigation,
urban public use and for protection of aquatic life; for discharges to natural and artificial reservoirs
used for agricultural irrigation and urban public use; for discharges to coastal waters used for
recreation, fishing, navigation and other uses and to estuaries; and discharges to soils and to
wetlands. Effluent limitations for discharges to rivers used for agricultural irrigation, for protection of
aquatic life, and for discharges to reservoirs used for agricultural irrigation have also been
established.
Ecological Resources
In 2000, the National Commission of Natural Protected Areas (CONANP) (formerly CONABIO, the
National Commission for Knowledge and Use of Biodiversity) was created as a decentralized entity
of SEMARNAT. As of November 2001, 127 land and marine Natural Protected Areas had been
proclaimed, including biosphere reserves, national parks, national monuments, flora and fauna
reserves, and natural resource reserves.
Ecological resources are protected under the Ley General de Vida Silvestre (General Wildlife Law).
(NOM)-059-ECOL-2000 specifies protection of native flora and fauna of Mexico. It also includes
conservation policy, measures and actions, and a generalized methodology to determine the risk
category of a species.
Forest Law, December 22, 1992, amended November 31, 2001, and the Forest Law
Regulation, September 25, 1998;
Fisheries Law, June 25, 1992, and the Fisheries Law Regulations, September 29, 1999; and
Federal Ocean Law, January 8, 1986.
All aspects related to Mine Safety and Occupational Health are regulated in Mexico by NOM-023-
STPS-2003 issued by the Secretariat of Labor. Appendix D of this regulation refers specifically to
mine ventilation and establishes all the requirement underground mines should comply with, which
are subject of regular inspections.
New tailings dams are subject to the requirements of NOM-141-SEMARNAT-2003, Standard that
Establishes the Requirements for the Design, Construction and Operation of Mine Tailings Dams.
Under this regulation, studies of hydrogeology, hydrology, geology and climate must be completed
for sites considered for new tailings impoundments. If tailings are classified as hazardous under
NOM-CRP-001-ECOL/93, the amount of seepage from the impoundment must be controlled if the
facility has the potential to affect groundwater. Environmental monitoring of groundwater and tailings
pond water quality and revegetation requirements is specified in the regulations. This regulation is
still under review.
NOM-120-ECOL-1997, November 19, 1998 specifies environmental protection measures for mining
explorations activities in temperate and dry climate zones that would affect xerophytic brushwood
(matorral xerofilo), tropical (caducifolio) forests, or conifer or oak (encinos) forests. The regulation
applies to “direct” exploration projects defined as drilling, trenching, and underground excavations. A
permit from SEMARNAT is required prior to initiating activities and SEMARNAT must be notified
when the activities have been completed. Development and implementation of a Supervision
Program for environmental protection and consultation with CONAGUA is required if aquifers may be
affected. Environmental protection measures are specified in the regulations, including materials
management, road construction, reclamation of disturbance and closure of drillholes. Limits on the
areas of disturbance by access roads, camps, equipment areas, drill pads, portals, trenches, etc.,
are specified.
17.1.4 Expropriations
Expropriation of ejido and communal properties is subject to the provisions of agrarian laws.
17.1.5 NAFTA
Canada, the United States and Mexico participate in the North American Free Trade Agreement
(NAFTA). NAFTA addresses the issue of environmental protection, but each country is responsible
for establishing its own environmental rules and regulations. However, the three countries must
comply with the treaties between themselves and the countries must not reduce their environmental
standards as a means of attracting trade
Environmental permits are required in Mexico for exploration activities and road construction as well
as mining activities and infrastructure development.
SEMARNAT will provide guidelines for the MIA. The time period for reviewing the MIA is 60 days,
although this period may be extended for complex projects. Three resolutions are possible: 1)
approval of the project; 2) conditional approval of the project, or 3) denial of the project. A bond will
be established based on the type of project and the cost for rehabilitation.
Article 18 and 19 of the Regulation of LGEEPA, on the Prevention and Control of Atmospheric
Contamination, requires mining operations to obtain an Operating License. The license largely
addresses air emissions but additional conditions can be included. Additional conditions may
prescribe activities associated with hazardous materials, safety, remediation and reclamation.
Water discharge is regulated by CONAGUA and a permit is required for most industrial discharges.
The quality of the discharge must meet NOMs, although CONAGUA may issue particular limits.
Stream Diversions
A mine site must submit a Hazardous Waste Notification to SEMARNAT prior to generating the
waste or using a hazardous waste management facility.
Currently, there are no legal provisions for mine closure, although regulations issued for the
construction and operation of new mining facilities – such as tailings dams – refer to the need to
implement post-closure measures to ensure the protection of the surrounding environment.
Fauna
Wildlife data were collected in April (dry season) and again in September (wet season). Forty-four
species amphibians and reptiles were identified in the study area; 97 species of birds, and 57
species of mammals were also identified. Of these, nine species of birds and three species of
mammals fall under some protective status according to Mexican NOMs.
Flora
Vegetation data collected during the same periods support the classification of the site into forest
and subtropical scrubland and brush zones. The studies identified 49 families, 158 genus, and 210
species of vascular plants.
Surface Water
Surface water in the area is generally of good quality, with minor exceptions. Fluoride is elevated in
both pit lakes (NOM-127-SSA1-1994), as well as Total Dissolved Solids (TDS) for use as agricultural
water (NOM-001-SEMARNAT-1996).
Groundwater
The current campaign of groundwater monitoring includes only three of the many wells installed
during the previous operations. Well MW97-5 continues to be used to monitor the potential release
and flow of process solutions from the existing heap leach facilities and process water ponds. Well
MW95-27 is also located down-gradient of the heap leach facilities, near the project property
boundary with the community. A third groundwater monitoring point being used to establish baseline
data for the current operation is the “Agua de Caseta”, the domestic water well for the town of La
Colorada. Monitoring well samples collected in April 2011 were compared to NOM-001-
SEMARNAT-1996; for the domestic well, it was compared to NOM-127-SSA1-1994. In general, the
monitoring well waters appear similar to the domestic well water, with exceedences in conductivity
and nitrite in the domestic well.
Geochemistry
hazardous materials according to Mexican NOMs. The initial ABA testing resulted in overall Acid-
Generating Potential to Acid-Neutralizing Potential (AGP:ANP) of 1.9 suggesting an indeterminate
acid rock drainage (ARD) potential. Minera Pitalla is therefore in the process of developing a kinetic
testing program to include humidity cell testing (HCT). This program has not yet been implemented.
Permitting of La Colorada has essentially been divided into two phases. First, the existing facilities
and operations are being restarted through the expedited Preventative Notice (Informe Preventivo, or
IP). The IP is intended to provide a preliminary presentation of the project, its location and potential
environmental impacts. The purpose of the IP is to provide the SEMARNAT with general information
on the project to determine whether an MIA will be required and on what basis—regional or specific
(particular). In certain instances, projects may be exempted from filing an MIA and may simply file
an IP. The exemption applies to projects for which there are NOMs in place that are implemented in
the context of pre-approved development plans or within industrial parks already approved by
SEMARNAT.
The second phase of the La Colorada restart will involve the mining of additional material of the open
pits. This will result in the construction of new heap leach pads as well as new crushing system and
expanded waste rock disposal areas. In addition, the La Colorada open pit will be expanded. This
action will result in the encroachment of the mine on the town, and the relocation and resettlement of
several residences and public plaza.
These new facilities/activities will require approval by SEMARNAT through the use of the MIA. The
anticipated submittal date of this document is January 2012. Approval is anticipated in four to six
months; approval is need by October 2012 as the activities under the IP will be coming to an end.
As with the environmental impact assessment, the land use change for the Project was also
separated into two phases. Land use change authorization for the relocated RoM heap leach pad
and new process ponds was granted by SEMARNAT on September 15, 2011.
Environmental management planning is being integrated into the overall project, primarily through
the IP and MIA processes, in accordance with Mexican NOMs and international standards and best
practices, including, but not necessarily limited to Equator Principles, International Finance
Corporation (IFC) Performance Standards (PS), and World Bank Group Environmental, Health, and
Safety Guidelines (known as the “EHS Guidelines”). The EHS Guidelines are technical reference
documents with general and industry-specific examples of Good International Industry Practice
(GIIP), as defined in IFC’s PS-3 on Pollution Prevention and Abatement. Reference to the EHS
Guidelines by IFC clients is required under PS-3. IFC uses the EHS Guidelines as a technical
source of information during project appraisal activities, as described in IFC’s Environmental and
Social Review Procedure. In addition, the “International Cyanide Management Code For The
Manufacture, Transport and Use of Cyanide In The Production of Gold” (Cyanide Code) will be
voluntarily implemented at La Colorada to promote the responsible management of cyanide,
enhance the protection of human health, and reduce the potential for environmental impacts.
In order to comply with the SMP objectives, Minera Pitalla has a Community Relations office located
in the town of La Colorada. This office is in charge of maintaining open dialogue and relations with
the locals while coordinating with the mine environmental and human resources departments. The
current SMP is fairly general is its approach, but does include descriptions of activities to be carried
out in the areas of:
With the expansion of the La Colorada open pit during the next phase of mining at the site, a detailed
resettlement plan will be needed for those residence and businesses impacted. This plan does not
currently exist and will need to be in accordance with IFC Performance Standard 5 – Land
Acquisition and Involuntary Resettlement (January 1, 2011), as well as Mexican regulations
governing forced relocation. Preliminary discussions have taken place with local and state
government officials regarding the relocation.
Table 18.1.1 illustrates the LoM Capital cost estimates with the assumption that mine operations will
be contractor based.
Table 18.1.2 details the initial capital required for 2012. Sunk costs during 2011 have not been
included in this analysis.
From 2013 through end of mine life, Table 18.1.3 illustrates the estimated sustaining capital and
closure costs for the operation.
Table 19.2.2 illustrates the effect on NPV if a 31% tax is applied to the economic model.
Environmental baseline data collection was initiated in 2011 in support of the MIA application for the
expansion of the La Colorada/Gran Central open pit, and construction of new heap leaching facilities
to receive the potentially mineable resource. The MIA is expected to be submitted to SEMARNAT in
early January 2012, with an anticipated approval during the third quarter of 2012.
stripping conducted off-site, and eventually expanded to the full plant prior to initiation of mining from
the open pits.
22.5.1 Exploration
The exploration work is composed primarily of the drillhole database which supports the resource
estimation of this report. It consists of two main data sets. The older dataset was generated by
EESA during their work on the project in the late 1990’s. The more recent dataset was generated by
Pediment and Argonaut since 2007.
The resource estimation is supported by 1,319 drillholes, totaling 154,918 m. The drillhole database
has 80,187 samples. The drillholes are generally located in a wide range of spacing and
orientations. The maximum drillhole depth is 479 m and the average is 117 m.
SRK is of the opinion that the production schedule is aggressive and close negotiations with potential
contractors will be required to determine the viability of the suggested mining rate.
Risk to plant throughputs using the plant designed here are also considered low, however, if finer
crushing is eventually deemed appropriate, it is possible that further plant upgrades will be needed
than those proposed here to maintain the design throughput.
23.2 Mining
SRK is of the opinion that the drilling has not been fully delineated to the north east of the El
Crestón deposit. There is a drillhole at depth which contains good mineralization suggesting
a continuation of grade. If this trend were to theoretically continue there are no deep holes
to prove or disprove additional grade. If exploration drilling were to be successful then the
stripping campaign and mining width restrictions on the north east wall would be alleviated.
Additional geotechnical studies should be completed to better establish the effect of
groundwater pore-pressure on pit-wall stability.
As part of detailed engineering, the sequencing of pit progression, heap leach phasing and
waste dump progression will be important to identify critical stages for additional land
purchases and/or rehandle of leach pads to provide room for potential resources.
The underground voids for El Crestón in particular require re-survey and interpretation to
ensure correct potentially mineable resource dilution and hazard identification associated
with the voids moving forward.
There is an aggressive schedule in place for 2012 with the commencement of in-situ mining
and reprocessing of old RoM stockpiles, it is vital permits and additional land purchases are
fast-tracked to allow for full production.
The use of High Pressure Grinding Rolls (HPGR) is being looked at as an option for further finer
crushing by many projects at the present time and is an option that could be examined at La
Colorada with future metallurgical programs.
The recovery curves indicate relatively slow leaching and it is almost certain that several percent
more gold recovery would be realized with a 120 day leach cycle. All future column tests should be
run at this leach cycle as a minimum.
Any additional improvements in recovery may have a significant impact on the economics of the
project.
Diaz, Jorge, 2007, La Colorada Internal reports written by Interminera, S.A. de C.V. for Pediment
Gold Corp., 23 p.
Giroux, G and Charbonneau, D., 1992, Property and Resource Evaluation of the El Crestón Deposit,
La Colorada Project, Mexico, Unpublished report for Explorations Eldorado, S.A. de C.V.
Hermosillo, Mexico, 36 p.
Giroux, G., 1999, Audit of the Resources contained within the Gran Central and La Colorada Zones,
La Colorada Mine, Mexico, Unpublished report for Explorations Eldorado, S.A. de C.V.
Hermosillo, Mexico, 30 p.
Hedenquist, J.W., Arribas, A. and Gonzales-Urien, E., 2000, Exploration for Epithermal Gold
Deposits. Reviews in Economic Geology, vol. 13, p. 245-277.
Herdrick, M. 2007, Mina La Colorada, Sonora, Mexico. Confidential reports to directors of Pediment
Exploration, 11p.
Lewis, P.D., 1995, Structural Evaluation of the La Colorada Project Area, Sonora, Mexico.
Unpublished Report by Lewis Geoscience Services Inc. for Exploraciones Eldorado, S.A. de
C.V., Hermosillo, Mexico, 25 p.
McMillan, R.H., Dawson, J.M. and Giroux, G.H., 2009, Geologic Report on the La Colorada Property
with a resource Estimate on La Colorada and El Crestón Mineralized Zones, Sonora Mexico,
prepared for Pediment Gold Corp, November 30, 2009, 141p.
Nordin, G., 1992, Geologic Report, La Colorada Property, Sonora, Mexico. Unpublished report for
Explorations Eldorado, S.A. de C.V. Hermosillo, Mexico, 76 p.
Simmons, S.F.; White, N.C. and John, D.A., 2005, Geologic Characteristics of Epithermal Precious
and Base Metal Deposits. Economic Geology 100th Anniversary Volume, p. 485-522.
Vazquez, Sierra & Garcia, S.C. 2011, Title Opinion Compania Minera Pitalla, S.A. de C.V. Mining
Concessions, October 12, 2011.
Zawada, Ross, D. Albinson, Tawn and Aneyta, Reyna, 2001, Geology of the El Crestón Gold
Deposit, Sonora State Mexico. Economic Geology Special Publication # 8, New Mines and
Discoveries in Mexico and Central America, p. 187-197.
25 Glossary
25.1 Mineral Resources
The mineral resources and mineral reserves have been classified according to the “CIM Standards
on Mineral Resources and Reserves: Definitions and Guidelines” (November 27, 2010).
Accordingly, the Resources have been classified as Measured, Indicated or Inferred, the Reserves
have been classified as Proven, and Probable based on the Measured and Indicated Resources as
defined below.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or
quality can be estimated on the basis of geological evidence and limited sampling and reasonably
assumed, but not verified, geological and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drillholes.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape and physical characteristics can be estimated with a level of confidence
sufficient to allow the appropriate application of technical and economic parameters, to support mine
planning and evaluation of the economic viability of the deposit. The estimate is based on detailed
and reliable exploration and testing information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely enough for
geological and grade continuity to be reasonably assumed.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape, physical characteristics are so well established that they can be estimated
with confidence sufficient to allow the appropriate application of technical and economic parameters,
to support production planning and evaluation of the economic viability of the deposit. The estimate
is based on detailed and reliable exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that
are spaced closely enough to confirm both geological and grade continuity.
A ‘Probable Mineral Reserve’ is the economically mineable part of an Indicated, and in some
circumstances a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility
Study. This Study must include adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at the time of reporting, that economic
extraction can be justified.
A ‘Proven Mineral Reserve’ is the economically mineable part of a Measured Mineral Resource
demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate
information on mining, processing, metallurgical, economic, and other relevant factors that
demonstrate, at the time of reporting, that economic extraction is justified.
Term Definition
supplies, ore and waste.
Sill A thin, tabular, horizontal to sub-horizontal body of igneous rock formed by the
injection of magma into planar zones of weakness.
Smelting A high temperature pyrometallurgical operation conducted in a furnace, in which the
valuable metal is collected to a molten matte or doré phase and separated from the
gangue components that accumulate in a less dense molten slag phase.
Stope Underground void created by mining.
Stratigraphy The study of stratified rocks in terms of time and space.
Strike Direction of line formed by the intersection of strata surfaces with the horizontal
plane, always perpendicular to the dip direction.
Sulfide A sulfur bearing mineral.
Tailings Finely ground waste rock from which valuable minerals or metals have been
extracted.
Thickening The process of concentrating solid particles in suspension.
Total Expenditure All expenditures including those of an operating and capital nature.
Variogram A statistical representation of the characteristics (usually grade).
25.4 Abbreviations
The following abbreviations may be used in this report.
Appendices
T: 303.985.1333
F: 303.985.9947
denver@srk.com
www.srk.com
CERTIFICATE OF AUTHOR
2. I graduated with a degree in Bachelor of Engineering in Mining Engineering from the University of
Wollongong in 1997.
4. I have worked as a Mining Engineer for a total of 14 years since my graduation from university.
5. I have read the definition of “qualified person” set out in National Instrument 43-101 (NI 43-101) and
certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101)
and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of
NI 43-101.
6. I am responsible for Sections 13, 15, 16, 18 and 19 of the report titled “NI 43-101 Preliminary Economic
Assessment, La Colorada Project, Sonora, Mexico” and dated December 30, 2011 (the “Technical
Report”) relating to the La Colorada Project.
7. I have not had prior involvement with the property that is the subject of the Technical Report.
8. As of the date of the 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 NI 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance
with that instrument and form.
11. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and
any publication by them for regulatory purposes, including electronic publication in the public company
files on their websites accessible by the public, of the Technical Report.
“Signed”
________________________________
Bret C. Swanson, MMSA [#01418QP]
QP_Cert_Swanson_Bret_2011
SRK Denver
Suite 3000
7175 West Jefferson Avenue
Lakewood, CO 80235
T: 303.985.1333
F: 303.985.9947
denver@srk.com
www.srk.com
CERTIFICATE OF AUTHOR
2. I graduated with a Doctorate degree in structural geology from Washington State University in 1988. In
addition, I have obtained a Master of Science degree in structural geology from the University of Idaho in
1985 and a Bachelor of Arts degree in geology from the University of Vermont in 1983.
4. I have worked as a Geologist for a total of 22 years since my graduation in minerals exploration, mine
geology, project development and resource estimation. I have conducted resource estimations since
1988 and have been involved in technical reports since 2004.
5. I have read the definition of “qualified person” set out in National Instrument 43-101 (NI 43-101) and
certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101)
and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of
NI 43-101.
6. I am responsible for Sections 4 through 10 and 12 of the report titled “NI 43-101 Preliminary Economic
Assessment, La Colorada Project, Sonora, Mexico” and dated December 30, 2011 (the “Technical
Report”) relating to the La Colorada Project. I have visited the Property on June 16, 2011, for one day.
7. I have not had prior involvement with the property that is the subject of the Technical Report.
8. As of the date of the 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 NI 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance
with that instrument and form.
11. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and
any publication by them for regulatory purposes, including electronic publication in the public company
files on their websites accessible by the public, of the Technical Report.
“Signed”
________________________________
Dr. Bart A. Stryhas, CPG, PhD
QP_Cert_Stryhas_Bart_2011
SRK Denver
Suite 3000
7175 West Jefferson Avenue
Lakewood, CO 80235
T: 303.985.1333
F: 303.985.9947
denver@srk.com
www.srk.com
CERTIFICATE OF AUTHOR
2. I graduated with a Bachelor's degree in Fisheries and Wildlife Management from the University of
Missouri in 1987 and a Master's degree in Environmental Science and Engineering from the Colorado
School of Mines in 1995.
3. I am a Certified Environmental Manager (CEM) in the State of Nevada (#1832) in accordance with
Nevada Administrative Code NAC 459.970 through 459.9729. Before any person consults for a fee in
matters concerning: the management of hazardous waste; the investigation of a release or potential
release of a hazardous substance; the sampling of any media to determine the release of a hazardous
substance; the response to a release or cleanup of a hazardous substance; or the remediation soil or
water contaminated with a hazardous substance, they must be certified by the Nevada Division of
Environmental Protection, Bureau of Corrective Action.
4. I have worked as BiologisUEnvironmental Scientist for a total of 18 years since my graduation from
university. My relevant experience includes environmental due diligence/competent persons evaluations
of developmental phase and operational phase mines through the world, including small gold mining
projects in Panama, Senegal, Peru and Colombia; open pit and underground coal mines in Russia;
several large copper mines and processing facilities in Mexico; and a mine/coking operation in China. My
other international experience has included oversight of work scope implementation and senior review of
local consultants performing baseline biological/ecological characterization for a number of projects,
including Los Filos Project in Mexico, the Kazan Trona Project in Turkey, the Bellavista Gold Project in
Costa Rica, the Pueblo Viejo Project in the Dominican Republic, and the Glamis San Martin Project in
Honduras. My Project Manager experience includes several site characterization and mine closure
projects. Iwork closely with the U.S. Forest Service and U.S.Bureau of Land Management on several
permitting and mine closure projects to develop uniquely successful and cost effective closure
alternatives for the abandoned mining operations. Finally, I draw upon this diverse background for
knowledge and experience as a human health and ecological risk assessor with respect to potential
environmental impacts associated with operating and closing mining properties, and have experienced in
the development of Preliminary Remediation Goals and hazard/risk calculations for site remedial action
plans under CERCLA activities according to current U.S. EPA risk assessment guidance..
5. I have read the definition of “qualified person” set out in National Instrument 43-101 (NI 43-101) and
certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101)
and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of
NI 43-101.
6. 7. I am responsible for Section 17 of the report titled "NI 43-101 Preliminary Economic Assessment, La
Colorada Project, Sonora, Mexico" and dated December 30, 2011 (the "Technical Report") relating to the
La Colorada Project. I have visited the Property on November 14, 2011, for one day.
7. I have not had prior involvement with the La Colorada property that is the subject of the Technical
Report.
8. As of the date of the certificate, to the best of my knowledge, information and belief, the Section 17
contains all scientific and technical information that is required to be disclosed to make the Technical
Report not misleading.I have read NI 43-101 and Form 43-101F1, and the Technical Report has been
prepared in compliance with that instrument and form.
9. I am independent of the issuer applying all of the tests in section 1.5 of National Instrument 43-101.
10. I have read Nl43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance
with that instrument and form
11. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and
any publication by them for regulatory purposes, including electronic publication in the public company files
on their websites accessible by the public, of the Technical Report.
“Signed”
________________________________
Mark Allan Willow, CEM Nevada #1832
QP_Cert_Willow_Mark_2011