Escolar Documentos
Profissional Documentos
Cultura Documentos
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
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. Compaia 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).
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 1990s. 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.
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Page ii
Class
Au Cut-off
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
Tonnes
(000s)
29,900
2,500
14,400
2,200
2,900
0
2,700
50,000
4,700
Au (g/t)
0.724
1.204
0.618
0.887
0.491
0.665
0.429
0.664
1.044
Au oz
(000s)
696
95
287
63
46
0.2
38
1,067
158
Ag (g/t)
5.1
8.4
12.1
13.3
3.3
2.4
36.5
8.7
10.6
Ag oz
(000s)
4,905
661
5,635
944
307
0.7
3,200
14,047
1,605
Source: SRK
Effective Date: October 15, 2011
(1) Rounded to reflect approximation
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
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Page iii
improved. Due to the sites 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.
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Page iv
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:
Capital costs of US$26million, comprised of initial capital costs of US$14.4 million, and
sustaining capital over the LoM of US$11.7 million;
Mine closure cost, included in the above estimates is US$4 million;
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Page v
The analysis does not include provision for salvage value; and
Operating costs are 47% of revenue.
Value
Units
121,219
32,753
438
kt
kt
koz
$722,668
($3,505)
$719,163
($10,323)
$708,840
000s
000s
000s
000s
000s
$/t-crushed
$7.22
$2.36
$0.55
($1.93)
$8.20
000s
000s
000s
$236,371
$77,288
$18,000
($63,166)
$268,493
$440,347
$14,488
$11,700
$0
$414,159
$278,274
Units
$/oz-Au
$539.51
$176.41
$41.08
($144.18)
$612.83
000s
000s
Table 3 illustrates the effect on NPV if a 31% tax is applied to the economic model.
Table 3: Economic Results After-Tax as of December 27, 2011
Description
Operating Margin
Initial Capital
LoM Sustaining Capital
Income Tax
Cash Flow Available for Debt Service
NPV 5%
Value
$440,347
$14,488
$11,700
$93,919
$320,240
$200,899
Page vi
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.
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Page vii
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.
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Page viii
Table of Contents
Summary (Item 1) ......................................................................................................................................... i
Table of Contents .......................................................................................................................................viii
Page ix
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Page x
Page xi
17 Environmental Studies, Permitting and Social or Community Impact (Item 20) 110
17.1 Related Information ......................................................................................................................... 110
17.1.1 Mining Law and Regulations ............................................................................................... 110
17.1.2 General Environmental Laws and Regulations ................................................................... 110
17.1.3 Other Laws and Regulations ............................................................................................... 113
17.1.4 Expropriations ..................................................................................................................... 114
17.1.5 NAFTA ................................................................................................................................. 114
17.2 Operating and Post Closure Requirements and Plans ................................................................... 114
17.2.1 Permitting Process .............................................................................................................. 114
17.2.2 Environmental Impact Permit .............................................................................................. 115
17.2.3 Other Permits and Licenses ................................................................................................ 115
17.2.4 Concession Title for Underground Water Extraction ........................................................... 115
17.3 La Colorada Environmental and Permitting Status ......................................................................... 116
17.3.1 Environmental Baseline Data .............................................................................................. 116
17.3.2 Environmental Permitting .................................................................................................... 117
17.4 Social and Community .................................................................................................................... 118
17.4.1 Social Management Planning ............................................................................................. 118
Page xii
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
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Page xiii
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Page xiv
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
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Page xv
Appendices
Appendix A: Certificate of Author
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Introduction (Item 2)
1.1
Page 1
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 SRKs
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 partys 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).
1.2
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.
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Page 2
1.3
1.4
Effective Date
The effective date of this report is October 15, 2011.
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1.5
Page 3
Units of Measure
The metric system has been used throughout this report. Tonnes are metric of 1,000 kg, or 2,204.6
lb. All currency is in U.S. dollars (US$) unless otherwise stated.
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2.1
Page 4
The Project consists of an historic, open pit, heap leach gold mine. The mine consists of two main
pits, La Colorada/Gran Central and El Crestn, a partially reclaimed heap leach pad and several
office and support buildings. The pits and facilities are located within 37 titled mineral concessions
totaling 21,412.03 ha. The project is located in northwestern Mexico, in the town of La Colorada,
Sonora State, 53 km southeast of the city of Hermosillo, the State Capital. The mineralization is
centered about UTM coordinates 541,665m E and 3,185,795m N. (Figures 2-1 and 2-2)
2.2
Mineral Titles
The following information on the mineral titles was provided by Argonaut Gold Inc. as compiled by
Mr. Alberto Orozco, Argonauts Mexico Exploration Manager. Additionally, a legal opinion from
Mexico City law firm Vazquez & Associates was compiled in October of 2011 (Vazquez, 2011). The
results of this work conclude that all 37 of Argonauts concessions are valid in full force and effect.
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 Compaia 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.
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Page 5
Title
No.
187663
199425
199424
198975
Valid
Surface
(ha)
From
To
8.8206 17-Sep-1990 16-Sep-2040
19.6494 19-Apr-1994 18-Apr-2044
0.1300 19-Apr-1994 18-Apr-2044
5.8738 11-Feb-1994 10-Feb-2044
Acquired By
Sonora II
Contract with Exploraciones La Colorada
Sonora VI
Contract with Exploraciones La Colorada
El Crestn
Contract with Exploraciones La Colorada
Lulu
Contract with Exploraciones La Colorada
Demasas del
199929
0.7715 17-Jun-1994 16-Jun-2044 Contract with Exploraciones La Colorada
Crestn
Sonora V
211758
280.9564 30-Jun-2000 29-Jun-2050 Contract with Exploraciones La Colorada
Sonora III
211974
51.0269 18-Aug-2000 17-Aug-2050 Contract with Exploraciones La Colorada
Sonora I
211856
157.9862 28-Jul-2000 27-Jul-2050 Contract with Exploraciones La Colorada
Fraccin
211958
37.7795 28-Jul-2000 27-Jul-2050 Contract with Exploraciones La Colorada
Sonora III
La Muculufa
211945
24.0000 28-Jul-2000 27-Jul-2050 Contract with Exploraciones La Colorada
Sonora IV
211788
554.4622 28-Jul-2000 27-Jul-2050 Contract with Exploraciones La Colorada
Vicenza
211757
1.4686 30-Jun-2000 28-Jun-2050 Contract with Exploraciones La Colorada
La Cruz
217502
1.5488 16-Jul-2002 15-Jul-2052 Contract with Exploraciones La Colorada
Crestn Dos
3-Dec-2002 2-Dec-2052 Contract with Exploraciones La Colorada
218680
109.7378
Fracc.III
Crestn Dos
218679
4.4918
3-Dec-2002 2-Dec-2052 Contract with Exploraciones La Colorada
Fracc.II
Crestn Dos
3-Dec-2002 2-Dec-2052 Contract with Exploraciones La Colorada
218678
344.5873
Fracc. I
Crestn Tres
218869
466.5758 23-Jan-2003 22-Jan-2053 Contract with Exploraciones La Colorada
Neri
232307
0.2275 18-Jul-2008 17-Jul-2058 Contract with Exploraciones La Colorada
Ext Sonora IV
207597
443.0047
Pending
Pending Pending
Sandra Luz
199219
12.9455 16-Mar-1994 15-Mar-2044 Contract with Peoles
Las Tinajitas
206409
140.0000 16-Jan-1998 15-Jan-2048 Contract with Peoles
Vicky
206407
24.0000 16-Jan-1998 15-Jan-2048 Contract with Peoles
Rosala
213745
7.9760 12-Jun-2001 11-Jun-2051 Contract with Peoles
Claudia
213214
32.7380
6-Apr-2001
5-Apr-2051 Contract with Peoles
Sandra Luz Fracc.1
216046
0.3766
2-Apr-2002
1-Apr-2052 Contract with Peoles
Sandra Luz Fracc.2
216047
0.0173
2-Apr-2002
1-Apr-2052 Contract with Peoles
Carmelita
214065
150.0000 10-Aug-2001 9-Aug-2051 Contract with Minera Recami, S. A. de C. V.
Los Pilares
214187
249.0328 10-Aug-2001 9-Aug-2051 Contract with Minera Recami, S. A. de C. V.
El Crestoncito
231252
1.1693 25-Jan-2008 24-Jan-2058 Contract with Minera Recami, S. A. de C. V.
LCA
231232 13233.3690 25-Jan-2008 24-Jan-2058 Staking
LCA2
232278 2000.0000 16-Jul-2008 15-Jul-2058 Staking
Dos Fracc.I
231247
117.8470 25-Jan-2008 24-Jan-2058 Staking
Dos Fracc.II
231248
5.2974 25-Jan-2008 24-Jan-2058 Staking
Dos Fracc. III
231249
22.7623 25-Jan-2008 24-Jan-2058 Staking
Noria
235259
18.2630
4-Nov-2009 3-Nov-2059 Staking
Red Norte 1
237088 3325.9782 29-Oct-2010 28-Oct-2060 Staking
Mabelina
237242
0.1600 26-Nov-2010 25-Nov-2060 Staking
(1) Royalties with Exploraciones La Colorada, S. A. de C. V.
a. 2% NSR for underground-mining production
b. 3% NSR for open-pit production
c. Buy-out clause only exists for underground production royalty. The 2%NSR can be bought out for
payment of USD$300,000.00
d. There is no buy-out clause for open-pit mining royalty.
Associated
Royalties
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
Yes
(1)
Yes
(1)
(1)
Yes
(1)
Yes
Pending
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
single cash
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Page 6
2.3
Title number
214065
214187
231252
232307
211758
211974
211856
211958
211945
217502
218869
218680
218679
218678
211788
211757
199425
199424
198975
199929
187663
231232
232278
231247
231248
231249
206409
206407
199219
216046
216047
213745
213214
235259
237088
237242
1st Semester
Payment (Pesos)
2010
9,483.00
15,744.00
9.00
2.00
31,263.00
3,226.00
9,988.00
2,389.00
1,518.00
49.00
14,754.00
3,470.00
143.00
10,896.00
35,054.00
164.00
2,187.00
15.00
654.00
86.00
982.00
100,574.00
15,200.00
896.00
41.00
173.00
15,578.00
2,671.00
1,441.00
24.00
2.00
505.00
2,070.00
-
nd
2 Semester
Payment (Pesos)
2011
9,483.00
15,744.00
9.00
2.00
31,263.00
5,678.00
17,580.00
4,204.00
2,671.00
98.00
29,497.00
6,938.00
284.00
21,785.00
61,696.00
164.00
2,187.00
15.00
654.00
86.00
982.00
100,574.00
15,200.00
896.00
41.00
173.00
15,578.00
2,671.00
1,441.00
24.00
2.00
888.00
3,643.00
139.00
16,896.00
1.00
2.4
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Page 7
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.
2.5
BAS/SC
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 2-1
Project Location Map
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 2-2
Project Site Map
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 2-3
Regional Concession Map
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 2-4
Local Concession Map
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 2-5
Detailed Concession Map
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 2-6
Royalty Concession Map
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 2-7
Surface Ownership Map
3.1
Page 15
The project is located in the basin-and-range geological province which is dominated by alternating
ranges and valleys bound by normal faults. This general geomorphology predominates in the district
of La Colorada with the hills being easily identifiable by Tertiary volcanic rocks that have been tilted
about 15 to the west. Elevations at La Colorada range between 400 and 650 meters above sea
level. The pit areas and the current exploration zones of Veta Madre and La Verde at located in
rather smooth-topography zones. Argonaut completed a flight and photogrammetric reconstitution
during 2011 that covers a total area of 3,343 hectares with the main historic production areas at its
center. Vegetation consists of extensive mesquite and paloverde trees, cactus and sparse grass
cover.
3.2
3.3
3.4
3.5
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History (Item 6)
4.1
Page 16
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 1980s Minerales de Sotula S.A. de C.V. and Industrias Peoles, S.A.B. de C.V. began reacquiring 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 Pediments wholly owned
Mexican subsidiary, Compaia Minera Pitalla S.A. de C.V. (Minera Pitalla).
4.2
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4.3
Page 17
4.4
Historic Production
Mining activity in the district dates as far back as the mid 1700s when Jesuit missionaries
discovered and later began mining the Minas Prietas zone. In the mid 1800s and English company
installed pumps which allowed them to reach deeper levels and expanded the mining capacity at La
Colorada. The Pan American Company of New York began the first cyanidation process at La
Colorada by the late 1800s. Several foregoing companies conducted underground mining from the
Minas Prietas, La Verde, Gran Central and Amarillas zones from this time until the early 1900s;
however, political unrest related to the Mexican revolution caused mining to stop as the facilities had
to be evacuated. Only small-scale gambusino activity continued after that until exploration activity
resumed in 1991.
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.
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Page 18
5.1
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Page 19
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.
5.2
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Page 20
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 60E and dips vertically to steeply north. Although the underground mines selectively
mined individual veins over narrow widths as described above, EESAs open pit extracted larger
scale stockwork zones and areas of multiple veining over cumulative thickness of up to 90 m (Lewis,
1995).
Gran Central Deposit
Gran Central is geologically similar to El Crestn-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 Crestn-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 Crestn-Minas Prietas.
Veta Madre Zone
Veta Madre is located 1.5 km. east of El Crestn-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-
BAS/SC
Page 21
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.
BAS/SC
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 5-1
Regional Geology
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 5-2
La Colorada/Gran Central Pit Area Geology
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 5-3
El Crestn Pit Area Geology
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 5-4
La Colorada/Gran Central Area
Cross Section Geology
Page 26
6.1
Mineral Deposit
La Colorada Gold District has many of the characteristics of a low sulfidization epithermal-vein type
gold-silver deposit. Although there are differences, such as the more sheared and deformed nature
of the La Colorada deposits, the authors (McMillian et al, 2009) believe that La Colorada could be an
outlier of the prolific Sierra Madre Occidental trend of gold-silver deposits that traverses much of
central Mexico. Zawada et al (2001) from fluid inclusion studies, state that La Colorada 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. Zawada et al (2001) go
on to state that features indicative of a deep epithermal environment include abundant multistage
coarse and fine grained crystalline quartz bands, with gold deposition more abundant in the finer
grained stages; abundant primary growth zones indicative of open-space filling under hydrostatic
pressure conditions; and the absence of low temperature silica phases such as chalcedony or
recrystallized amorphous silica, which are typically present within the mineralized zones of higher
epithermal systems .
The current authors (McMillan et al) believe that the deposits are epithermal in nature and of the lowsulfidization 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.
6.2
BAS/SC
Page 27
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 highsulfidation 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
BAS/SC
Page 28
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.
BAS/SC
Exploration (Item 9)
7.1
Page 29
Argonaut has conducted surface exploration consisting of rock chip and soil sampling.
7.2
7.3
BAS/SC
Page 30
8.1
RC/Percussion
Number
m
381 42,047.62
150 18,358.70
158 23,254.71
33
1,439.00
28
2,266.00
21
2,372.00
1
279.20
24
639.00
32
3,526.00
46
4,226.00
874 98,408.23
Diamond Core
Number
m
26
3,327.85
27
3,400.10
18
3,439.10
0
0.00
2
314.00
0
0.00
3
204.00
32
1,670.00
0
0.00
0
0.00
108 12,355.05
Total Drilled
Number
m
407
45,375.47
177
21,758.80
176
26,693.81
33
1,439.00
30
2,580.00
21
2,372.00
4
483.20
56
2,309.00
32
3,526.00
46
4,226.00
982
110,763.28
2008
Number
m
22 4,314.64
0
0.00
22 4,314.64
2
3
1
7
5
4
0
0
22
358.20
580.60
341.40
1,327.60
964.70
742.14
0.00
0.00
4,314.64
2009
Number
m
105 7,533.86
5 1,518.70
110 9,052.56
36
9
13
18
4
21
4
5
110
2,886.78
1,214.28
1,580.15
1,109.46
237.75
1,356.36
60.96
606.82
9,052.56
2010
Number
m
1 353.57
0
0.00
1 353.57
1
0
0
0
0
0
0
0
1
353.57
0.00
0.00
0.00
0.00
0.00
0.00
0.00
353.57
Total
Number
m
128 12,202.07
5
1,518.70
133 13,720.77
39
12
14
25
9
25
4
5
133
3,598.55
1,794.88
1,921.55
2,437.06
1,202.45
2,098.50
60.96
606.82
13,720.77
Argonaut has completed 245 drillholes on the project to date. The details of the Argonaut drilling are
outlined in Table 8.1.3.
BAS/SC
Page 31
Number
142
76
218
m
23,810.95
11,635.07
35,446.02
12
69
64
9
0
64
16
11
245
2,470.40
12,045.27
10,451.15
1,908.05
0.00
8,571.15
385.55
402.33
36,233.90
8.2
Procedures
BAS/SC
Page 32
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.
8.3
BAS/SC
Page 33
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.
BAS/SC
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 8-1
Drillhole Location Map
Page 35
9.1
Methods
9.2
Security Measures
All Argonaut drill and surface samples taken at the Project were stored and secured in the Projects
office. Sample transfer to the assay lab were regularly scheduled three times a week. The samples
were collected by Inspectorate directly at the site. Personnel from the lab would sign off after the
samples were loaded into the truck, then the samples were delivered to the preparation laboratory in
Hermosillo. The laboratory itself would ship processed pulps for assay in their laboratories in the
U.S.
9.3
Sample Preparation
All of Argonauts samples were prepared and analyzed by Inspectorate Labs, Hermosillo, Mexico.
Inspectorate is fully independent of Argonaut; it is not an ISO certified laboratory but does follow the
Bureau Veritas code of ethics.
All samples were dried, crushed, split and pulverized in Inspectorates Hermosillo prep facility. The
pulps were then sent to Inspectorates main U.S. facility in Reno Nevada for fire assay gold and
silver analysis.
BAS/SC
Page 36
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.
Inspectorates sample preparation and fire assay procedures are as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
9.4
BAS/SC
Page 37
required. Reference material results that Argonaut receives from Inspectorate are graphically
analyzed as part of the QA/QC procedures.
9.5
Opinion on Adequacy
SRK is of the opinion that the analytical work performed by Inspectorate is valid and suitable for use
in resource estimation. The fire assay method is an industry accepted analytical technique to
determine Au and Ag content in exploration samples. The QA/QC program employed by Argonaut
meets current industry standards and the results of this work indicate good precision and accuracy of
the analytical results.
BAS/SC
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc, 2011
Figure 9-1
Blank Analyses Performance Chart
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc, 2011
Figure 9-2
Certified Standard OxE86 Performance Chart
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc, 2011
Figure 9-3
Certified Standard OxF65 Performance Chart
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc, 2011
Figure 9-4
Certified Standard SG40 Performance Chart
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc, 2011
Figure 9-5
Field Duplicate Performance Chart
Page 43
(1)
Easting
(1)
Northing
MD001
54282
3185654
MD002
542840
3185640
MD003
542920
3185760
MD004
542920
3185760
MD005
542920
3185760
MD006
541233
3185777
MD007
541345
3185642
Description
El Crestn pit ramp. 2 m chip sample on bench between
Pediment Samples 324282 and 324283. N-trending
vuggy quartz veinlets to 1 cm. cutting red weathering
hornfelsed argillite. 20 cm. N-trending, steeply-dipping
felsic dyke cuts sediments.
El Crestn pit ramp. 2 m chip sample on bench between
Pediment Samples 324264 and 324265. Quartz vein
stockwork cutting altered argillite. ~75 to 80% quartz.
El Crestn pit. 2 m chip sample on bench duplicating
Pediment Sample 324224. 0.5 to 2 cm. quartz vein swarm
trends SW cutting red baked argillite. Broken granodiorite
intrusive dykes to 0.5 m.
El Crestn pit. 2 m chip sample on bench duplicating
Pediment Sample 324223. 0.5 to 2 cm. quartz vein swarm
trends SW cutting red baked argillite. Broken granodiorite
intrusive dykes to 0.5 m.
El Crestn pit. 10 to 15 cm. gouge zone in same location
as MD003. Duplicates Pediment Sample 324222.
La Colorada pit. 1.5 m sample of La Colorada vein. Vein
is intensely oxidized but contains fine pyrite, galena and
sphalerite and some vuggy quartz. Vein (which is a
stockwork of fine veinlets) dips ~ 500 N. Duplicates
Pediment Sample 434696.
Gran Central pit. 3 m chip sample of 1.4 m highly altered
shear zone dipping NE ~450. Drusy quartz, maroon and
red Fe oxides and some Mn. Duplicates Pediment
Sample 434806.
Duplicate riffle split of RC hole sample 40556.
Duplicate riffle split of RC hole sample 40494.
Duplicate riffle split of RC hole sample 40492.
Duplicate riffle split of RC hole sample 40493.
MD008
MD009
MD010
MD011
(1) NAD 27 Mexico, Zone 12K
(2) All samples assayed by ALS-CHEMEX
BAS/SC
Au ppm
(2)
this work
Au ppm
Pediment
(2)
Gold
0.18
0.138
0.35
0.103
2.45
0.485
0.95
0.164
0.32
4.71
0.77
1.77
1.55
1.3
0.776
2.289
1.472
0.969
Page 44
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.
BAS/SC
Page 45
BAS/SC
Page 46
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
BAS/SC
Page 47
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%.
BAS/SC
Page 48
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 KCAs 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.
BAS/SC
Page 49
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
Gran Central
(60501)
Gran Central West
(60502, 60553)
La Colorada
(60503)
La Colorada West
(60504)
Intermediate
(60560)
Intermediate West
(60561)
Veta Madre
El Creston
25 mm 16 mm 12.5 mm
0.870
0.940
1.179
29%
35%
38%
1.294
1.315
1.389
38%
44%
45%
0.802
0.970
1.115
39%
53%
47%
0.724
0.598
0.744
29%
45%
41%
--1.011*
--42%
--1.066*
--59%
Core Samples En Route
Core Samples En Route
9.5 mm
1.061
47% Interpolated
1.126*
49%
1.275
61% Interpolated
0.935 In progress
48% Provisional Extrapolated
1.011*
49%
1.066*
76%
8.0 mm
0.900
52%
--0.971
68%
-------
BAS/SC
Page 50
Table 11.3.3: La Colorada Estimated Field Recoveries (Silver) at 100% Passing 9.5mm
Sample Material
Gran Central
(60501)
Gran Central West
(60502, 60553)
La Colorada
(60503)
La Colorada West
(60504)
Intermediate
(60560)
Intermediate West
(60561)
Veta Madre
El Creston
25 mm 16 mm 12.5 mm
6.50
3.56
5.90
20%
42%
33%
46.27
44.46
47.32
25%
35%
42%
10.01
7.97
7.90
16%
34%
36%
12.93
11.29
14.28
31%
48%
41%
--4.04*
--24%
--20.59*
--10%
Core Samples En Route
Core Samples En Route
9.5 mm
4.85
44% Interpolated
15.50*
49%
7.04
46% Interpolated
12.11 In progress
48% Provisional Extrapolated
4.12*
26%
20.74*
13%
8.0 mm
4.97
46%
--7.29
50%
-------
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.
BAS/SC
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 11-1
Metallurgical Drillhole Locationss
Page 52
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 Crestn 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.
Page 53
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.
Table 12.4.1: Block Model Limits
Model
La Colorada
El Crestn
Veta Madre
RoM Pad
Orientation
Easting
Northing
Elevation
Easting
Northing
Elevation
Easting
Northing
Elevation
Easting
Northing
Elevation
UTM Minimum
540,850
3,185,365
100
542,000
3,185,200
100
543,900
3,185,325
220
541,725
3,186,125
390
UTM Maximum
541,845
3,186,160
550
543,250
3,186,300
550
545,000
3,186,075
500
542,175
3,186,400
430
Block Size(m)
5
5
5
5
5
5
5
5
5
5
5
5
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.
BAS/SC
Page 54
Total Number
of Samples
La Colorada
3,101
Intermedia
2,187
Gran Central
4,760
El Crestn
7,184
Veta Madre
1,067
RoM Pad
270
Metal
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Capping
Level (ppm)
50
200
27
150
33
281
13
140
2.1
15
1.4
65
Number of
Samples
Capped
13
9
6
5
12
10
68
89
32
19
15
32
Minimum
Capped
Maximum
Capped
51.7
222
33.1
200
50
288
13.2
142
2.1
15.2
1.41
65.2
356
1,031
67
420
224
499
432
1,874
25
49
17
155
Net Loss of
Metal From
Capping (%)
8.4
2.2
1.8
12.5
4.8
0.2
14.7
2.3
7.2
2.6
15.3
2.4
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
BAS/SC
Page 55
strategy according to the parameter listed in Table 12.8.1.1. Length weighting was used for all three
passes.
Table 12.8.1.1: La Colorada Indicator Estimation Parameters
Search Rotation
(z,y,x)
355,-46,0
Estimation
Pass
First
Second
Third
Search Distances
(z,y,x) m
5,5,5
30,30,5
60,60,5
Min/Max #
Samples
3/5
3/5
Octant
Restriction
None
2/octant
2/octant
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.
Table 12.8.1.2: La Colorada Grade Estimation Parameters
Estimation
Domain
Search
Rotation
(z,y,x)
La Colorada
Intermedia
355,-46,0
Gran
Central
Indicator
Blocks
Estimation
Pass
First
Second
Third
First
Second
Third
First
Second
Third
First
Second
Third
Search
Distances
(z,y,x) m
5,5,5
35,35,15
85,85,25
5,5,5
35,35,15
85,85,25
5,5,5
35,35,15
85,85,25
5,5,5
35,35,15
85,85,25
Min/Max #
Samples
1/3
3/8
3/8
1/3
3/8
3/8
1/3
3/8
3/8
1/3
3/8
3/8
Octant
Restriction
None
2/octant
2/octant
None
2/octant
2/octant
None
2/octant
2/octant
None
2/octant
2/octant
Au High
Grade
Distance
Restriction
None
>35ppm<40m
None
>20ppm<30m
None
Ag High
Grade
Distance
Restriction
None
>25ppm<20m
>25ppm<20m
None
>25ppm<20m
>25ppm<20m
None
>8ppm<50m
12.8.2 El Crestn
The El Crestn 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.
BAS/SC
Page 56
Estimation Pass
First
Second
Third
Search Distances
(z,y,x) m
5,5,5
35,35,20
85,85,45
Min/Max #
Samples
1/3
3/8
3/8
Octant Restriction
None
2/octant
2/octant
Estimation
Pass
First
Second
Third
Search Distances
(z,y,x) m
5,5,5
50,25,25
75,35,35
Min/Max #
Samples
1/3
3/8
3/8
Octant
Restriction
None
2/octant
2/octant
BAS/SC
Estimation
Pass
First
Second
Third
Search
Distances
(z,y,x) m
5,5,5
35,35,10
100,100,15
Min/Max #
Samples
1/3
3/5
2/5
Octant
Restriction
None
2/octant
2/octant
Au High Grade
Distance
Restriction
None
Ag High Grade
Distance
Restriction
>1.2ppm<35m
>60ppm<50m
Page 57
BAS/SC
Page 58
LC-La Colorada
LC Intermedia
LC-Gran Central
LC-Indicator
El Crestn
Veta Madre
RoM Pad
BAS/SC
Criteria
% Blocks Estimated in 1st Pass
% Blocks Estimated in 2nd Pass
% Blocks Estimated in 3rd Pass
Average Number of Samples Used Per Block
Average Number of Drillholes Used Per Block
Average Distance to Samples
% Blocks Estimated in 1st Pass
% Blocks Estimated in 2nd Pass
% Blocks Estimated in 3rd Pass
Average Number of Samples Used Per Block
Average Number of Drillholes Used Per Block
Average Distance to Samples
% Blocks Estimated in 1st Pass
% Blocks Estimated in 2nd Pass
% Blocks Estimated in 3rd Pass
Average Number of Samples Used Per Block
Average Number of Drillholes Used Per Block
Average Distance to Samples
% Blocks Estimated in 1st Pass
% Blocks Estimated in 2nd Pass
% Blocks Estimated in 3rd Pass
Average Number of Samples Used Per Block
Average Number of Drillholes Used Per Block
Average Distance to Samples
% Blocks Estimated in 1st Pass
% Blocks Estimated in 2nd Pass
% Blocks Estimated in 3rd Pass
Average Number of Samples Used Per Block
Average Number of Drillholes Used Per Block
Average Distance to Samples
% Blocks Estimated in 1st Pass
% Blocks Estimated in 2nd Pass
% Blocks Estimated in 3rd Pass
Average Number of Samples Used Per Block
Average Number of Drillholes Used Per Block
Average Distance to Samples
% Blocks Estimated in 1st Pass
% Blocks Estimated in 2nd Pass
% Blocks Estimated in 3rd Pass
Average Number of Samples Used Per Block
Average Number of Drillholes Used Per Block
Average Distance to Samples
Result
11
72
17
5.8
2.8
23
10
65
25
5.6
3.1
25
13
72
15
6
2.7
21
16
55
29
4.6
2.8
24
12
72
16
6
2.5
22
7
72
21
5
2.2
25
3
40
57
4.0
2.3
36
Page 59
Metal
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Au
Ag
% Difference Comps to
Blocks
0.4
18.6
1.1
0.1
7.4
3.9
0.6
16.2
7.5
3.2
21.5
13.8
7.0
0.2
Model
La Colorada
El Crestn
Veta Madre
RoM Pad
ID Au
Grade
0.026343
0.682285
0.315806
0.428428
ID Tonnes
(M)
1,225.0
21.081
5.897
2.724
ID Au
Metal
(M)
32.265
14.383
1.862
1.167
NN Au
Grade
0.026226
0.715987
0.331218
0.421483
NN
Tonnes
(M)
1,225.0
21.081
1.862
2.724
NN Au
Metal
32.122
15.094
1.953
1.148
% Diff Au
Metal ID2 to
NN
0.44
-4.9
-4.9
1.6
BAS/SC
Page 60
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.
Table 12.11.1: La Colorada Project Resource Statement (1)
Deposit
La Colorada
El Crestn
Veta Madre
RoM Pad
All Deposits
Class
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Au Cut-off
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
Tonnes
(000s)
29,900
2,500
14,400
2,200
2,900
0
2,700
50,000
4,700
Au (g/t)
0.724
1.204
0.618
0.887
0.491
0.665
0.429
0.664
1.044
Au oz
(000s)
696
95
287
63
46
0.2
38
1,067
158
Ag (g/t)
5.1
8.4
12.1
13.3
3.3
2.4
36.5
8.7
10.6
Ag oz
(000s)
4,905
661
5,635
944
307
0.7
3,200
14,047
1,605
Source: SRK
Effective Date: October 15, 2011
(1) Rounded to reflect approximation
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.
BAS/SC
Page 61
Indicated
Au (g/t)
Tonnage
0.22 101,339,238
0.72
29,835,081
0.90
22,925,487
1.09
17,745,032
1.28
14,094,104
1.47
11,533,243
1.64
9,633,684
1.83
8,172,323
2.01
6,973,649
2.20
5,942,912
2.40
5,179,647
2.58
4,546,734
2.78
4,001,432
2.96
3,576,774
3.13
3,222,616
3.29
2,945,339
3.47
2,676,859
3.61
2,474,382
3.77
2,290,715
3.92
2,121,061
4.07
1,971,199
Ounces
716,693
694,126
662,771
621,167
579,074
543,950
508,632
479,999
451,146
421,216
399,176
377,061
357,861
340,431
324,385
311,675
298,844
287,563
277,821
267,467
257,768
Cut-off
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
Inferred
Au (g/t)
Tonnage
0.06 49,257,396
1.21
2,451,354
1.43
2,024,967
1.62
1,739,185
1.79
1,536,588
1.98
1,344,792
2.16
1,194,302
2.34
1,071,583
2.51
965,254
2.71
865,474
2.91
773,695
3.01
735,062
3.1
702,874
3.2
667,410
3.27
640,005
3.37
607,610
3.5
569,274
3.57
547,541
3.64
527,736
3.71
507,367
3.77
491,054
Ounces
95,020
95,363
93,099
90,584
88,430
85,607
82,939
80,618
77,894
75,407
72,386
71,135
70,053
68,665
67,286
65,833
64,059
62,846
61,760
60,518
59,520
Total Ounces
811,713
789,490
755,870
711,751
667,504
629,557
591,571
560,617
529,041
496,624
471,561
448,196
427,914
409,096
391,671
377,509
362,903
350,409
339,581
327,985
317,287
Table 12.12.2 illustrates the grade tonnage relationship of gold within pit 36 of the Whittle analysis
for El Crestn.
Table 12.12.2: El Crestn Grade Tonnage
Cutoff
0
0.1 (1)
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
Au (g/t)
0.17
0.62
0.75
0.89
1.03
1.18
1.33
1.48
1.63
1.78
1.94
2.1
2.24
2.38
2.51
2.64
2.76
2.89
2.99
3.11
3.22
Indicated
Tonnage
54,830,616
14,438,662
11,224,319
8,875,845
6,949,397
5,541,893
4,483,904
3,694,548
3,066,198
2,578,409
2,155,377
1,836,350
1,588,897
1,394,817
1,248,174
1,107,780
993,965
896,602
821,916
743,696
679,647
Ounces
299,683
287,812
270,652
253,975
230,131
210,248
191,734
175,798
160,686
147,558
134,436
123,984
114,429
106,730
100,726
94,026
88,200
83,308
79,011
74,361
70,361
Cutoff
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
Au (g/t)
0.06
0.89
1.04
1.2
1.36
1.54
1.67
1.82
1.95
2.09
2.25
2.36
2.46
2.56
2.66
2.76
2.85
2.96
3.04
3.13
3.22
Inferred
Tonnage
33,088,488
2,199,713
1,830,869
1,518,096
1,270,077
1,064,923
941,923
824,301
732,400
649,313
571,543
522,598
481,969
444,976
411,685
379,954
352,761
323,796
304,349
281,141
262,517
Ounces
63,829
62,943
61,218
58,569
55,534
52,727
50,573
48,233
45,917
43,631
41,345
39,653
38,119
36,624
35,208
33,716
32,323
30,814
29,746
28,292
27,177
Total
Ounces
363,513
350,755
331,871
312,544
285,665
262,974
242,307
224,031
206,603
191,189
175,781
163,636
152,548
143,354
135,933
127,742
120,524
114,123
108,758
102,653
97,538
BAS/SC
Page 62
Table 12.12.3 illustrates the grade tonnage relationship of gold within pit 36 of the Whittle analysis
for Veta Madre.
Table 12.12.3: Veta Madre Grade Tonnage
Cutoff
0
0.1 (1)
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
Inferred
Au (g/t)
Tonnage
0.27
5,264,158
0.45
3,183,008
0.52
2,540,084
0.64
1,789,691
0.74
1,330,645
0.83
1,013,543
0.92
771,974
1.01
574,880
1.09
440,856
1.16
337,190
1.24
245,491
1.32
169,657
1.43
104,393
1.56
59,942
1.67
41,084
1.76
29,297
1.84
21,552
1.94
13,470
2
10,103
2.05
7,745
2.07
6,398
Ounces
45,697
46,051
42,466
36,826
31,658
27,047
22,834
18,668
15,449
12,575
9,787
7,200
4,800
3,006
2,206
1,658
1,275
840
650
510
426
BAS/SC
Page 63
Page 64
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.
Type
Gran Central
Value
Au
Ag
grams
grams
Re-block in Whittle
Slope
Geological
X
Y
Z
No. X
No. Y
No. Z
Combine 2 2 1
Value
5
5
5
260
220
90
Slope Angle
Zone
1 Mix
2 Dump
50
30
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.
BAS/SC
Page 65
Type
Reference Mining Cost
Processing Cost
Rock Type
Process Name
Rock type 1
Ore Selection Method
Process Cost ($/crushed-t)
General and Administration
Au
Ag
Recoveries
Value
1.2
Heap
Mix
Cash Flow
2.70
0.20
0.6
0.3
t.oz
t.oz
$1,500
$20
5
0.20
Optimization
Revenue factor range
0.3-2 86 factors
$32,000,000
8%
3,000,000
The block model parameters used for El Crestn are detailed in table 13.1.1.3.
Table 13.1.1.3: El Crestn Model Parameters
Whittle Parameter
Block Model Restriction
Base Units
Measured, Indicated, Inferred
Type
El Crestn
Value
Au
Ag
grams
grams
Re-block in Whittle
Slope
Geological
X
Y
Z
No. X
No. Y
No. Z
Combine 2 2 1
Value
5
5
5
250
220
90
Slope Angle
Zone
1 Mix
2 Dump
BAS/SC
50
30
Page 66
The financial assumptions made at the time of optimization for El Crestn are detailed in Table
13.1.1.4. The initial capital is used to determine the mining risk associated during the optimization
run and was applied to the deposit as a whole.
Table 13.1.1.4: El Crestn Financial Assumptions
Whittle Parameter
Mining Cost
Type
Value
1.2
Process Name
Rock type 1
Selection Method
Process Cost ($/ore t)
General and Administration
Au
Ag
Recoveries
Heap
Mix
Cashflow
2.70
0.20
0.6
0.3
t.oz
t.oz
1,500
20
5
0.20
Optimization
Revenue factor range
0.3-2 86 factors
$32,000,000
8%
3,000,000
The block model parameters used for Veta Madre are detailed in table 13.1.1.5.
Table 13.1.1.5: Veta Madre Model Parameters
Whittle Parameter
Block Model Restriction
Base Units
Measured, Indicated, Inferred
Type
Veta Madre
Value
Au
Ag
grams
grams
Geological
X
Y
Z
No. X
No. Y
No. Z
Combine 2 2 1
5
5
5
220
150
56
Value
1 Mix
Slope Angle
50
Re-block in whittle
Slope
Zone
BAS/SC
Page 67
The financial assumptions made at the time of optimization for Veta Madre are detailed in Table
13.1.1.6. The initial capital was not used for Veta Madre given the small resource.
Table 13.1.1.6: Veta Madre Financial Assumptions
Whittle Parameter
Mining Cost
Type
Reference Mining Cost
Processing Cost
Rock Type
Process Name
Rock type 1
Selection Method
Process Cost ($/crushed-t)
General and Administration
Au
Ag
Recoveries
Value
1.2
Heap
Mix
Cash Flow
2.70
0.20
0.6
0.3
t.oz
t.oz
1,500
20
5
0.20
Optimization
Revenue factor range
0.3-2 86 factors
0
8%
3,000,000
BAS/SC
Page 68
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 Crestn 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.
BAS/SC
Page 69
Unit
Degrees
Digress
m
m
m
m
%
Value
49.1
65
15
6
27
15
10
BAS/SC
Page 70
Phase 1
15,788,765
4,856,112
10,932,653
2.25
116,254
882,098
0.74
5.65
Phase 2
7,016,348
1,751,735
5,264,613
3.01
86,711
382,528
1.54
6.79
Phase 3
52,373,539
10,927,982
41,445,557
3.79
256,385
1,947,112
0.73
5.54
Total
75,178,652
17,535,829
57,642,823
3.29
459,349
3,211,738
0.81
5.70
Phase 1
14,046,258
1,640,484
12,405,774
7.56
43,626
783,440
0.83
14.85
Phase 2
59,211,668
10,574,919
48,636,749
4.60
211,460
4,168,218
0.62
12.26
Total
73,257,926
12,215,403
61,042,524
5.00
255,086
4,951,658
0.65
12.61
Total
5,535,267
3,002,090
2,533,177
0.84
43,841
285,387
0.45
2.96
Page 71
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.
Comments about the schedule include:
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.
BAS/SC
Page 72
BAS/SC
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
6,000,000
1,152,641
4,847,359
4.21
45,047
273,835
1.22
7.39
12,000,000
2,663,632
9,336,368
3.51
90,422
589,994
1.06
6.89
24,000,000
4,018,013
19,981,987
4.97
89,905
853,003
0.70
6.60
23,627,390
4,947,177
18,680,213
3.78
89,257
781,109
0.56
4.91
7,096,084
3,064,470
4,031,613
1.32
85,989
454,249
0.87
4.61
2,455,178
1,689,896
765,283
0.45
58,730
259,547
1.08
4.78
372,610
0
372,610
16,903,916
1,648,022
15,255,895
9.26
43,673
783,908
0.82
14.79
21,544,822
925,908
20,618,914
22.27
13,832
235,293
0.46
7.90
6,000,000
1,152,641
4,847,359
4.21
45,047
273,835
1.22
7.39
12,000,000
2,663,632
9,336,368
3.51
90,422
589,994
1.06
6.89
24,000,000
4,018,013
19,981,987
4.97
89,905
853,003
0.70
6.60
24,000,000
4,947,177
19,052,823
3.85
89,257
781,109
0.56
4.91
24,000,000
4,712,492
19,287,508
4.09
129,662
1,238,157
0.86
8.17
24,000,000
2,615,803
21,384,197
8.18
72,562
494,841
0.86
5.88
Year 7
Year 8
Total
75,178,652
17,535,829
57,642,823
3.29
459,349
3,211,738
0.81
5.70
24,000,000
5,191,084
18,808,916
3.62
99,302
2,259,253
0.59
13.54
10,436,578
4,450,389
5,986,189
1.35
98,279
1,673,203
0.69
11.69
73,257,926
12,215,403
61,042,524
5.00
255,086
4,951,658
0.65
12.61
24,000,000
5,191,084
18,808,916
3.62
99,302
2,259,253
0.59
13.54
5,535,267
3,002,090
2,533,177
0.84
43,841
285,387
0.45
2.96
15,971,845
7,452,479
8,519,366
1.14
142,120
1,958,590
0.59
8.17
5,535,267
3,002,090
2,533,177
0.84
43,841
285,387
0.45
2.96
153,971,845
32,753,322
121,218,523
3.70
758,276
8,448,782
0.72
8.02
Page 73
BAS/SC
1
1,152,641
1,152,641
45,047
273,835
1.22
7.39
2
2,663,632
2,663,632
90,422
589,994
1.06
6.89
3
4,000,000
4,000,000
89,820
851,257
0.70
6.62
4
4,000,000
4,000,000
84,741
694,692
0.66
5.40
5
4,000,000
2,640,311
1,359,689
126,252
1,141,757
0.98
8.88
6
4,000,000
2,968,840
1,031,160
79,176
639,097
0.62
4.97
1,384,197
7
4,000,000
4,000,000
93,442
2,008,642
0.73
15.62
8
4,000,000
4,000,000
116,767
1,393,550
0.91
10.84
9
4,937,049
110,406
4,826,644
32,609
855,958
0.21
5.39
4,937,049
Total
32,753,322
17,535,829
15,217,493
758,276
8,448,782
0.72
8.02
6,321,246
Page 74
10
Total
31.0
46.1
47.7
45.4
64.9
48.7
53.5
67.3
29.6
3.9
31.0
235.3
238.2
303.6
275.9
399.9
281.0
659.1
576.2
366.1
65.0
235.3
0.6
1.2
1.2
1.1
1.2
0.8
0.3
0.3
0.1
0.0
0.6
2.6
5.6
8.1
6.6
9.0
5.3
9.4
6.5
4.1
0.0
2.6
BAS/SC
Relocation of RoM;
Crushing of RoM;
Leaching of RoM;
Page 75
13.6.2 UG Voids
Underground voids are evident in the highwalls of both La Colorada/Gran Central and El Crestn 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 Crestn 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.
BAS/SC
Page 76
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.
BAS/SC
Page 77
BAS/SC
No. of People
1
1
1
1
1
1
6
1
1
3
2
1
2
10
2
5
4
11
1
2
6
4
8
1
3
2
27
54
La Colorada Project
Sonora, Mexico
Source: SRK, 2011
Figure 13-1
La Colorada Site Layout
La Colorada Project
Sonora, Mexico
Source: SRK, 2011
Figure 13-2
La Colorada/Gran Central Whittle Results
La Colorada Project
Sonora, Mexico
Source: SRK, 2011
Figure 13-3
La Colorada/Gran Central Pit Shell Section View
La Colorada Project
Sonora, Mexico
Source: SRK, 2011
Figure 13-4
El Crestn Pit Graph
La Colorada Project
Sonora, Mexico
Source: SRK, 2011
Figure 13-5
El Crestn Pit Shell Section View
La Colorada Project
Sonora, Mexico
Source: SRK, 2011
Figure 13-6
Veta Madre Pit Shells
La Colorada Project
Sonora, Mexico
Source: SRK, 2011
Figure 13-7
Veta Madre Pit Section
La Colorada Project
Sonora, Mexico
Source: SRK, 2011
Figure 13-8
Location of La Colorada/Gran Central
Phase 1, 2 and Phase 3 Designs
La Colorada Project
Sonora, Mexico
Source: SRK, 2011
Figure 13-9
Location of El Crestn
Phase 1 and Phase 2 Designs
La Colorada Project
Sonora, Mexico
Source: SRK, 2011
Figure 13-10
Current Understanding of
Underground Workings
Page 88
BAS/SC
Page 89
Tonnes
Gran Central
La Colorada
Intermediate
Veta Madre
El Creston
Total
12,351,289
9,398,839
8,910,673
2,577,878
12,215,403
45,454,082
Au
Grade
g/t
0.809
0.855
0.488
0.500
0.650
0.695
Ag
Grade
g/t
6.97
5.18
3.32
3.24
12.61
5.24
Au Contained
Ounces
Ag Contained
Ounces
321,137
258,484
139,804
41,440
255,277
1,016,143
2,767,809
1,565,291
951,130
268,533
4,952,380
10,505,143
Au Recovery
Estimate @ P100
9.5 mm
48%
55%
63%
60%
60%
55%
Ag Recovery
Estimate @ P100
9.5 mm
47%
47%
20%
28%
28%
35%
Au Recovered
Ounces
Ag Recovered
Ounces
154,146
140,874
87,378
24,864
153,166
560,428
1,300,870
735,687
190,226
75,189
1,386,666
3,688,639
BAS/SC
Page 90
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.
Table 14.1.2: La Colorada Crushing and Processing
Unit
TPH Nominal
TPH Design
Operating Days (24 hr)
%Availability
TPD
TPY
Phase 1
350
500
360
70%
8,400
3,024,000
Phase 2
467
667
360
70%
11,206
4,034,016
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.
BAS/SC
Page 91
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 dor bullion. The dor 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.
Unit
336,000 / 4,000,000
P100 9.5mm
P100 19mm
360
0.7 g/t
6 g/t
0.40 g/t
50 g/t
55%@P1009.5mm
45%@P10019mm
35%@P1009.5mm
6%@P10019mm
8
86
1.55
0.38
2
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.
BAS/SC
Page 92
Unit
70%
467 tonne/hr
667 tonne/hr
9.00
0.1973
365
2
12
Jaw, Screen and 2 cones recycle to 2 screens
TBD
Loader/Trucks
Fixed Grizzly
Jaw
5 CSS
Cone
25mm
Cone
9.5mm
3 each 3 Deck Horizontal
38 mm
19 mm
9.5 mm
36 inch
No
Yes
1.6
Field Conveyor Stacker
36 inch
36 x 136
Radial wheel drive
BAS/SC
0.3m clay
1.5mm LLDPE (single)
1.5mm HDPE (double)
1.5mm HDPE (double)
1.5mm HDPE (single)
yes
Drip Emitters
8 10
120
1060
1270
Magnetic Flowmeter with Totalizer
97%
Page 93
Open to Atmosphere
Carbon Adsorption
Cascade Columns
61.2m3/h/m2
2
5
1060
1270
95%
5,000 g Au Ag metal
5-tonne circuit
Open to Atmosphere
Pressure Zadra
3 to 5/Week
0.48 t/m3
2.5by/h
135C
450 kPa
2 cells in parallel
Indoors
Electrowinning
SS Anodes
85 C
Indoors
Tilting
3 to 4 max
Assumed Not Required
The above criteria provide sufficient detail to allow for appropriate cost estimations for the processing
plant and equipment to be made.
BAS/SC
Page 94
BAS/SC
Design Parameters
200 ton rock box
Pioneer 48x22 XHD Apron Feeder w/drive
Pioneer 60x14 HD Mesabi screen w/ stand, conveyor
Pioneer 3055 jaw plant
48x60 secondary screen feed conveyor
36x60 conveyor
36x100 grasshopper to bypass surge
42x120 fines collection conveyor with stands
Kolberg 42x125 radial stacker
8x20 screen
JCI Kodiak 400 portable cone plant
Attached
hp
Attached
kW
52
65
21
240
240
40
27
34
40
96
3.4
11
77
14
14
77
39
48
16
179
179
30
20
25
30
72
3
8
57
10
10
57
240
240
4.8
2.1
21
14
96
3.4
11
77
14
14
27
77
14
14
14
34
179
179
4
2
16
10
72
3
8
57
10
10
20
57
10
10
10
25
240
240
4.8
2.1
21
14
27
77
14
14
14
34
179
179
4
2
16
10
20
57
10
10
10
25
240
240
4.8
179
179
4
Equipment Description
Cone 2 Fan
Cone 2 Hydraulic
Cone 2 Under Belt
Jaw Circuit Trio Magnet
Cleaning Belt
Circuit 2 Trio Magnet
Cleaning Belt
Circuit 3 Trio Magnet
Cleaning Belt
Weightometer
115 Stacking
Grasshopper Conveyor 1
Grasshopper Conveyor 2
Grasshopper Conveyor 3
Grasshopper Conveyor 4
Grasshopper Conveyor 5
Grasshopper Conveyor 6
Grasshopper Conveyor 7
Grasshopper Conveyor 8
Grasshopper Conveyor 9
Grasshopper Conveyor 10
Grasshopper Conveyor 11
Grasshopper Conveyor 12
Grasshopper Conveyor 13
Grasshopper Conveyor 14
Superior Stacker Conveyor
Superior Stacker Conveyor
Stinger
Superior Stacker Hydraulic
122 Solution Handling
VFD - 300 HP Barren Booster
Pump
VFD - 300 HP Barren Booster
Pump
VFD - 300 HP Barren Booster
Pump
VFD - 300 HP Barren Booster
Pump
Barren Wye Filter
Barren Wye Filter
Barren Wye Filter
Barren Wye Filter
Barren Wye Filter
Barren Wye Filter
Pregnant Solution Flowmeter
Barren Solution Flowmeter
Pregnant Solution Flowmeter
Barren Solution Flowmeter
Adsorption Feed Pumps
Adsorption Feed Pumps
Adsorption Feed Pumps
Adsorption Feed Pumps
Submersible Barren Pump
Submersible Barren Pump
Barren Booster Pump
BAS/SC
Design Parameters
36" x 101'
36" x 101'
36" x 101'
36" x 101'
36" x 101'
36" x 101'
36" x 101'
36" x 101'
36" x 101'
36" x 101'
36" x 101'
36" x 101'
36" x 101'
36" x 101'
Superior 36" x 136' incl 66' telescoping conveyor
Page 95
Attached
hp
2.1
21
14
10.8
7.6
10.8
7.6
10.8
7.6
0.5
Attached
kW
2
16
10
8.1
5.7
8.1
5.7
8.1
5.7
0.4
34
34
34
34
34
34
34
34
34
34
34
34
34
34
40
25.4
25.4
25.4
25.4
25.4
25.4
25.4
25.4
25.4
25.4
25.4
25.4
25.4
25.4
29.8
40
29.8
14
10.4
NA
NA
NA
NA
NA
NA
NA
N/A
NA
N/A
50
50
50
50
50
50
300
37
37
37
37
37
37
224
Equipment Description
Design Parameters
Page 96
Attached
hp
300
300
300
25
15
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Attached
kW
224
224
224
19
11
N/A
N/A
40
5
7.5
30
0.1
0.3
NA
NA
N/A
N/A
N/A
NA
NA
1.5
1
NA
1.1
0.7
NA
NA
1.5
10
1.1
3
1
7.5
7.5
7.5
7.5
7.5
2.2
0.7
5.6
5.6
5.6
5.6
5.6
7.5
5.6
10
15
7.5
11.2
Equipment Description
Design Parameters
BAS/SC
Page 97
Attached
hp
3
30
25
N/A
16
16
N/A
N/A
N/A
N/A
N/A
5.6
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4.2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Attached
kW
2.2
22.4
18.6
N/A
N/A
N/A
N/A
N/A
Equipment Description
Design Parameters
BAS/SC
Page 98
Attached
hp
N/A
N/A
N/A
Attached
kW
N/A
N/A
N/A
NA
9
N/A
1
30
0.7
22.4
NA
5
3.7
1/2ton hoist
QUINN 16 X32 Ball Mill & Charge
10m3/hr @ 73m TDH, Horizontal Centrifugal
20 m3/h @ 25 m TDH
150 m3/h @ 10 m TDH
150 m3/h @ 12 m TDH
Denver Sand Pump
Denver Sand Pump
Denver Sand Pump
24M3 Tank
1.2M3 Working Capacity
1
3
15
10
20
15
1
1
1
NA
NA
0.2
1
2
Pending
Diester
Vault Structures Inc, Thor III Vault Door Class 2
Air Flow 26 CFM, Stroke 1-1/16", blow p/min 4000
Ingersoll Rand mod. 182K1
Lightnin 15Q2 mixer
Safety shower, non-heated
Electric Hoist,
2.13x2.7 tank with bag ripper (no dust cover), lid over bag
ripper
2.8X3.5M CLOSED TOP TANK
3298 1.5x1 x 5, SEAL LESS PUMP,
WIER RP20 PUMP
WIER RP20 PUMP
20m3/hr @ 12m TDH, Horizontal Centrifugal
Vendor Supplied pumps (220 VAC, 1 Ph)
Vendor Supplied pumps (220 VAC, 1 Ph)
Vendor Supplied pumps (220 VAC, 1 Ph)
2
N/A
1
N/A
N/A
5
2
1
1
3
0.7
2.2
11.2
7.5
14.9
11.2
0.7
0.7
0.7
1.5
3.7
1.5
0.7
0.7
2.2
0.2
0.2
0.2
0.2
N/A
4281
Page 99
BAS/SC
Consumption Unit
kg/t
kg/t
kg/t
kg/t
kg/strip
kg/batch
kg/strip
kg/strip
L/t Carbon
ppm
kg/strip
kg/troy oz
L/strip
L/regen batch
L/smelt
Consumption
0.03
0.1
2
0.38
48
50
9.8
480
150
6
150
2
1,239
2,891
156
Annual Consumption
121
403
8,064
1,532
193,536
201,600
3
125
195
41,522
39
1,018
322
433
32
Unit
tonnes/year
tonnes/year
tonnes/year
tonnes/year
tonnes/year
tonnes/year
tonnes/year
tonnes/year
m3/year
l/year
tonnes/year
tonnes/year
m3/year
m3/year
m3/year
La Colorada Project
Sonora, Mexico
Source: Kappes, Cassiday & Associates, 2011
Figure 14-1
Process Flow Sheet
La Colorada Project
Sonora, Mexico
Source: Kappes, Cassiday & Associates
Figure 14-2
Process Flow Sheet Phase 2 Fine Crushing to 9.5 mm New Ore
Page 102
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 Coloradas 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.
Page 103
It is estimated that the combined water storage of El Crestn 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 prestrip 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;
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Page 104
Volume
Tonnes
Accumulated Tonnes
102,368
572,953
738,325
752,258
712,584
678,376
647,523
615,328
572,741
516,915
404,004
185,617
174,026
974,020
1,255,153
1,278,839
1,211,393
153,239
1,100,789
1,046,058
973,660
878,756
686,807
315,549
174,026
1,148,046
2,403,198
3,682,037
4,893,430
6,046,669
7,147,458
8,193,515
9,167,175
10,045,931
10,732,738
11,048,286
11,048,286
198,976
209,183
219,648
218,189
211,807
235,012
329,658
327,596
203,296
338,259
355,611
373,402
370,921
360,072
399,520
560,419
556,913
345,603
338,259
693,870
1,067,272
1,438,193
1,798,265
2,197,786
2,758,204
3,315,117
3,660,720
3,660,720
14,887,745
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.
Table 15.1.6.2: Conceptual Pad Space
Lift
9 Lifts
Pad Northeast
Volume
21,786,409
Tonnes
37,036,895
Accumulated Tonnes
37,036,895
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La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 15-1
La Colorada 10 MVA Substation
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 15-2
Wyman Shaft and 10 Dewatering Line
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 15-3
Mine Site Office Buildings
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold, Inc., 2011
Figure 15-4
Heap Leach Pad Design
Page 109
Month
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov(1)
Dec(1)
PM Fix
1,356
1,373
1,424
1,474
1,510
1,529
1,573
1,756
1,772
1,665
1,700
1,700
12 mo Average
1,245
1,268
1,294
1,321
1,346
1,371
1,402
1,447
1,489
1,516
1,544
1,569
24 mo Average
1,120
1,137
1,158
1,183
1,207
1,231
1,258
1,291
1,324
1,350
1,373
1,397
36 mo Average
1,036
1,049
1,061
1,077
1,094
1,112
1,130
1,155
1,181
1,205
1,231
1,256
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Site Area
Geomembrane
Crusher and Grasshoppers
Process Plant
Construction Of Heap Pad
RoM Pad Relocation
Cyanide
Electrical Installation
Electrical Installation
Amount (US$)
572,228
1,567,900
2,875,176
1,013,216
3,301,991
945,000
229,481
143,926
Page 110
BAS/SC
INE Instituto Nacional de Ecologa (National Institute of Ecology), an entity responsible for
planning, research and development, conservation of national protection areas and approval
of environmental standards and regulations;
Page 111
The federal delegation or state agencies of SEMARNAT are known as Consejo Estatal de Ecologa
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.
Under LGEEPA, a number of regulations and standards related to environmental impact
assessment, air and water pollution, solid and hazardous waste management and noise have been
issued. LGEEPA specifies compliance by the states and municipalities, and outlines the
corresponding duties.
Applicable regulations under LGEEPA include:
Regulation to LGEEPA on the Matter of Environmental Impact Evaluations, May 30, 2000;
Mine tailings are listed in the Regulation to LGEEPA on the Matter of Hazardous Waste. Noms
include:
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Page 112
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.
Page 113
environmental stewardship through the use of the latest technologies that are proven, available, and
economically viable.
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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
Page 114
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
Page 115
Environmental permits are required in Mexico for exploration activities and road construction as well
as mining activities and infrastructure development.
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Page 117
hazardous materials according to Mexican NOMs. The initial ABA testing resulted in overall AcidGenerating 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.
BAS/SC
Page 118
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 IFCs 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 IFCs 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.
The Minera Pitalla environmental management system will be predicated on International
Standardization Organization (ISO) 14001 type systems, and include:
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Page 119
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.
BAS/SC
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold, Inc., 2011
Figure 17-1
Construction and Start-up Authorization for Industrial Facilities
Page 121
Table 18.1.2 details the initial capital required for 2012. Sunk costs during 2011 have not been
included in this analysis.
Table 18.1.2: Initial Capital Breakdown as of December 27, 2011
Item
Primary/Secondary Crushers
Heap Leach Pad & Ponds
ADR Plant
Power System
Leach Water System
Infrastructure
Sustaining Capital
Permitting
Pre-feas/Feas - 3rd party
Land Acquisition
Total Capital
From 2013 through end of mine life, Table 18.1.3 illustrates the estimated sustaining capital and
closure costs for the operation.
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Page 122
Unit Cost
$1.54
$2.36
$0.55
$10.13
Unit
/t-mined
/t-crushed
/t-crushed
/t-crushed
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Page 123
US$/oz
$1,575.00
$21.00
$8.00
3.00%
3.00%
units
/oz
/oz
/oz
NSR on applicable oz
NSR on applicable oz.
BAS/SC
An overall average metallurgical recovery rate of 55.1% Au and 27.1% Ag over the LoM;
Capital costs of US$26million, comprised of initial capital costs of US$14.4 million, and
sustaining capital over the LoM of US$11.7 million;
The analysis does not include provision for salvage value; and
Page 124
Value
Units
121,219
32,753
438
kt
kt
koz
$722,668
($3,505)
$719,163
($10,323)
$708,840
000s
000s
000s
000s
000s
$/t-crushed
$7.22
$2.36
$0.55
($1.93)
$8.20
000s
000s
000s
$236,371
$77,288
$18,000
($63,166)
$268,493
$440,347
$14,488
$11,700
$0
$414,159
$278,274
Units
$/oz-Au
$539.51
$176.41
$41.08
($144.18)
$612.83
000s
000s
Table 19.2.2 illustrates the effect on NPV if a 31% tax is applied to the economic model.
Table 19.2.2: Economic Results After-Tax as of December 27, 2011
Description
Operating Margin
Initial Capital
LoM Sustaining Capital
Income Tax
Cash Flow Available for Debt Service
NPV 5%
Value
$440,347
$14,488
$11,700
$93,919
$320,240
$200,899
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Page 125
-10%
273,000
281,000
306,000
-5%
276,000
279,000
292,000
Base
278,000
278,000
278,000
5%
281,000
277,000
264,000
10%
284,000
276,000
251,000
BAS/SC
-10%
197,000
203,000
220,000
-5%
199,000
202,000
210,000
Base
201,000
201,000
201,000
5%
203,000
200,000
191,000
10%
205,000
199,000
182,000
Page 126
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Page 127
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Page 128
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Page 129
stripping conducted off-site, and eventually expanded to the full plant prior to initiation of mining from
the open pits.
Risk Level
Low
Low
Low
Low
Low
Low
Moderate
Moderate
Low
Low
Low
Moderate
Moderate
Low
Low
Low
Low
Low
Low
Low
Moderate
Low
Low
Low
Low
Low
Low
Moderate
Low
Low
Moderate
Low
Low
Low
Low
Moderate
Low
Low
Moderate
Low
Low
Low to Moderate
Moderate
Risk Area
Power
Water
Access
Transportation
Surface facilities
Capital Costs
Capital cost programs
Sustaining capital
Operating Costs
Forecast costs used in resource determination
Currency split of domestic to foreign currency
Financial Model
Model verification
Revenue calculations
Management and Staffing
Implementation Plan & Schedule
Page 130
Risk Level
Low
Low
Low
Low
Low
Low
Low
Low
Low
Moderate
Low
Low
Low
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 1990s. 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.
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Page 131
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Page 132
Visual inspection of the site suggested that the mine waste materials are relatively benign in
nature. However, inconclusive 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, and develop adequate 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 a possible involuntary resettlement has not yet been prepared.
Water in the open pits suggests that lakes will be present post closure, especially if the pits
are expanded and deepened. While the current water in the existing lakes appears to be of
good quality, additional studies will be necessary to determine if the materials to be exposed
in the deeper portions of the pits will affect the long-term quality of the water.
23.2 Mining
SRK is of the opinion that the drilling has not been fully delineated to the north east of the El
Crestn 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.
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Page 133
US$
100,000
200,000
50,000
200,000
550,000
BAS/SC
Page 134
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Page 135
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.
A Mineral Resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic
material in or on the Earths crust in such form and quantity and of such a grade or quality that it has
reasonable prospects for economic extraction.
The location, quantity, grade, geological
characteristics and continuity of a Mineral Resource are known, estimated or interpreted from
specific geological evidence and knowledge.
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.
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Page 136
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.
Crushing
Cut-off Grade (CoG)
Dilution
Dip
Fault
Footwall
Gangue
Grade
Hangingwall
Haulage
Hydrocyclone
Igneous
Kriging
Level
Lithological
LoM Plans
LRP
Material Properties
Milling
Mineral/Mining Lease
Mining Assets
Ongoing Capital
Potentially Mineable
Resource Reserve
Pillar
Sedimentary
Shaft
BAS/SC
Definition
The chemical analysis of mineral samples to determine the metal content.
All other expenditures not classified as operating costs.
Combining more than one sample result to give an average result over a larger
distance.
A metal-rich product resulting from a mineral enrichment process such as gravity
concentration or flotation, in which most of the desired mineral has been separated
from the waste material in the potentially mineable resource.
Initial process of reducing potentially mineable resource particle size to render it
more amenable for further processing.
The grade of mineralized rock, which determines as to whether or not it is economic
to recover its gold content by further concentration.
Waste, which is unavoidably mined with potentially mineable resource.
Angle of inclination of a geological feature/rock from the horizontal.
The surface of a fracture along which movement has occurred.
The underlying side of an orebody or stope.
Non-valuable components of the ore.
The measure of concentration of gold within mineralized rock.
The overlying side of an orebody or slope.
A horizontal underground excavation which is used to transport mined potentially
mineable resource.
A process whereby material is graded according to size by exploiting centrifugal
forces of particulate materials.
Primary crystalline rock formed by the solidification of magma.
An interpolation method of assigning values from samples to blocks that minimizes
the estimation error.
Horizontal tunnel the primary purpose is the transportation of personnel and
materials.
Geological description pertaining to different rock types.
Life-of-Mine plans.
Long Range Plan.
Mine properties.
A general term used to describe the process in which the potentially mineable
resource is crushed and ground and subjected to physical or chemical treatment to
extract the valuable metals to a concentrate or finished product.
A lease area for which mineral rights are held.
The Material Properties and Significant Exploration Properties.
Capital estimates of a routine nature, which is necessary for sustaining operations.
See Mineral Reserve.
Rock left behind to help support the excavations in an underground mine.
Pertaining to rocks formed by the accumulation of sediments, formed by the erosion
of other rocks.
An opening cut downwards from the surface for transporting personnel, equipment,
La Colorada_NI 43-101 PEA_203900.020_14_SC
Term
Sill
Smelting
Stope
Stratigraphy
Strike
Sulfide
Tailings
Thickening
Total Expenditure
Variogram
Page 137
Definition
supplies, ore and waste.
A thin, tabular, horizontal to sub-horizontal body of igneous rock formed by the
injection of magma into planar zones of weakness.
A high temperature pyrometallurgical operation conducted in a furnace, in which the
valuable metal is collected to a molten matte or dor phase and separated from the
gangue components that accumulate in a less dense molten slag phase.
Underground void created by mining.
The study of stratified rocks in terms of time and space.
Direction of line formed by the intersection of strata surfaces with the horizontal
plane, always perpendicular to the dip direction.
A sulfur bearing mineral.
Finely ground waste rock from which valuable minerals or metals have been
extracted.
The process of concentrating solid particles in suspension.
All expenditures including those of an operating and capital nature.
A statistical representation of the characteristics (usually grade).
25.4 Abbreviations
The following abbreviations may be used in this report.
Table 26.4.1: Abbreviations
Abbreviation
A
AA
A/m2
ANFO
Ag
Au
AuEq
C
CCD
CIL
CoG
cm
cm2
cm3
cfm
ConfC
Crec
CSS
CTW
dia.
EIS
EMP
FA
ft
ft2
ft3
g
gal
g/L
g-mol
gpm
g/t
BAS/SC
Unit or Term
ampere
atomic absorption
amperes per square meter
ammonium nitrate fuel oil
silver
gold
gold equivalent grade
degrees Centigrade
counter-current decantation
carbon-in-leach
cut-off grade
centimeter
square centimeter
cubic centimeter
cubic feet per minute
confidence code
core recovery
closed-side setting
calculated true width
degree (degrees)
diameter
Environmental Impact Statement
Environmental Management Plan
fire assay
foot (feet)
square foot (feet)
cubic foot (feet)
gram
gallon
gram per liter
gram-mole
gallons per minute
grams per tonne
Abbreviation
ha
HDPE
hp
HTW
ICP
ID2
ID3
IFC
ILS
kA
kg
km
km2
koz
kt
kt/d
kt/y
kV
kW
kWh
kWh/t
L
L/sec
L/sec/m
lb
LHD
LLDDP
LOI
LoM
m
m2
m3
masl
MARN
MDA
mg/L
mm
mm2
mm3
MME
Moz
Mt
MTW
MW
Ma
My
NGO
NI 43-101
OSC
oz
%
PLC
PLS
PMF
ppb
ppm
QA/QC
RC
RoM
BAS/SC
Page 138
Unit or Term
hectares
Height Density Polyethylene
horsepower
horizontal true width
induced couple plasma
inverse-distance squared
inverse-distance cubed
International Finance Corporation
Intermediate Leach Solution
kiloamperes
kilograms
kilometer
square kilometer
thousand troy ounce
thousand tonnes
thousand tonnes per day
thousand tonnes per year
kilovolt
kilowatt
kilowatt-hour
kilowatt-hour per metric tonne
liter
liters per second
liters per second per meter
pound
Long-Haul Dump truck
Linear Low Density Polyethylene Plastic
Loss On Ignition
Life-of-Mine
meter
square meter
cubic meter
meters above sea level
Ministry of the Environment and Natural Resources
Mine Development Associates
milligrams/liter
millimeter
square millimeter
cubic millimeter
Mine & Mill Engineering
million troy ounces
million tonnes
measured true width
million watts
million annum
million years
non-governmental organization
Canadian National Instrument 43-101
Ontario Securities Commission
troy ounce
percent
Programmable Logic Controller
Pregnant Leach Solution
probable maximum flood
parts per billion
parts per million
Quality Assurance/Quality Control
rotary circulation drilling
Run-of-Mine
La Colorada_NI 43-101 PEA_203900.020_14_SC
Abbreviation
RQD
SEC
sec
SG
SPT
t
t/h
t/d
t/y
TSF
TSP
m
V
VFD
W
XRD
y
BAS/SC
Page 139
Unit or Term
Rock Quality Description
U.S. Securities & Exchange Commission
second
specific gravity
standard penetration testing
tonne (metric ton) (2,204.6 pounds)
tonnes per hour
tonnes per day
tonnes per year
tailings storage facility
total suspended particulates
micron or microns
volts
variable frequency drive
watt
x-ray diffraction
year
Appendices
Appendices
BAS/SC
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
907.677.3520
303.985.1333
775.753.4151
970.407.8302
775.828.6800
520.544.3688
Mexico Office:
Canadian Offices:
Group Offices:
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Saskatoon
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306.955.4778
705.682.3270
416.601.1445
604.681.4196
867.873.8670
SRK Consulting
Signed
________________________________
Bret C. Swanson, MMSA [#01418QP]
QP_Cert_Swanson_Bret_2011
Page 2
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
U.S. Offices:
Anchorage
Denver
Elko
Fort Collins
Reno
Tucson
QP_Cert_Stryhas_Bart_2011
907.677.3520
303.985.1333
775.753.4151
970.407.8302
775.828.6800
520.544.3688
Mexico Office:
Canadian Offices:
Group Offices:
Guadalupe, Zacatecas
52.492.927.8982
Saskatoon
Sudbury
Toronto
Vancouver
Yellowknife
Africa
Asia
Australia
Europe
North America
South America
306.955.4778
705.682.3270
416.601.1445
604.681.4196
867.873.8670
SRK Consulting
Page 2
11. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and
any publication by them for regulatory purposes, including electronic publication in the public company
files on their websites accessible by the public, of the Technical Report.
Dated this 30th day of December, 2011.
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
907.677.3520
303.985.1333
775.753.4151
970.407.8302
775.828.6800
520.544.3688
Mexico Office:
Canadian Offices:
Group Offices:
Guadalupe, Zacatecas
52.492.927.8982
Saskatoon
Sudbury
Toronto
Vancouver
Yellowknife
Africa
Asia
Australia
Europe
North America
South America
306.955.4778
705.682.3270
416.601.1445
604.681.4196
867.873.8670
SRK Consulting
Page 2
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
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.
QP_Cert_Willow_Mark_2011