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APOGEE MINERALS LTD.
TECHNICAL REPORT ON THE PRELIMINARY ASSESSMENT OF THE PULACAYO PROJECT, PULACAYO TOWNSHIP, POTOSÍ DISTRICT, QUIJARRO PROVINCE, BOLIVIA
June 25th, 2010
R. Pressacco, M.Sc.(A), P.Geo. G. Harris, CEng, MIMMM M. Godard, P.Eng. C. Jacobs CEng, MIMMM
SUITE 900 - 390 BAY STREET, TORONTO ONTARIO, CANADA M5H 2Y2 Telephone (1) (416) 362-5135 Fax (1) (416) 362 5763
TABLE OF CONTENTS Page 1.0
SUMMARY .................................................................................................................... 1
2.0
INTRODUCTION AND TERMS OF REFERENCE............................................... 13
3.0
RELIANCE ON OTHER EXPERTS ......................................................................... 15
4.0 PROPERTY DESCRIPTION AND LOCATION .................................................... 16 4.1 LOCATION ............................................................................................................... 16 4.2 PROPERTY STATUS ............................................................................................... 17 4.2.1 Overview of Bolivian Mining Law .................................................................... 17 4.2.2 Project Ownership .............................................................................................. 19 5.0
ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ....................................................... 22 5.1 ACCESS..................................................................................................................... 22 5.2 CLIMATE AND PHYSIOGRAPHY ........................................................................ 22 5.3 LOCAL RESOURCES AND INFRASTRUCTURE ................................................ 23
6.0
HISTORY ..................................................................................................................... 25
7.0 GEOLOGICAL SETTING ......................................................................................... 28 7.1 REGIONAL GEOLOGY ........................................................................................... 28 7.2 DISTRICT GEOLOGY ............................................................................................. 30 7.3 LOCAL GEOLOGY .................................................................................................. 32 7.3.1 Structural Geology ............................................................................................. 34 7.3.2 Hydrothermal Alteration .................................................................................... 35 8.0
DEPOSIT TYPES ........................................................................................................ 36
9.0
MINERALIZATION ................................................................................................... 39
10.0 EXPLORATION .......................................................................................................... 43 10.1 TOPOGRAPHIC SURVEY ....................................................................................... 43 10.2 GEOLOGICAL MAPPING AND SAMPLING ........................................................ 44 10.3 GEOPHYSICAL SURVEY ....................................................................................... 45 11.0 DRILLING ................................................................................................................... 48 11.1 ASC BOLIVIA LDC (2002-2005) ............................................................................ 48 11.2 APOGEE (JAN 2006 – MAY 2008).......................................................................... 48 11.3 APOGEE (JUN 2008 – SEP 2009) ............................................................................ 49 12.0
SAMPLING METHOD AND APPROACH .............................................................. 51
13.0
SAMPLE PREPARATION, ANALYSES AND SECURITY .................................. 53
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14.0
DATA VERIFICATION ............................................................................................. 56
15.0 ADJACENT PROPERTIES ....................................................................................... 61 15.1 SAN CRISTOBAL .................................................................................................... 61 15.2 SAN VINCENTE ....................................................................................................... 61 16.0 MINERAL PROCESSING AND METALLURGICAL TESTING ........................ 63 16.1 METALLURGICAL TESTWORK ........................................................................... 63 16.1.1 RDi Preliminary Metallurgical Results, March 2003 ........................................ 63 16.1.2 UTO Metallurgical Testwork, August 2009 ...................................................... 65 16.2 MINERAL PROCESSING ........................................................................................ 73 17.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES ................... 74 17.1 INTRODUCTION ..................................................................................................... 74 17.2 DESCRIPTION OF THE DATABASE .................................................................... 74 17.3 TOPOGRAPHIC SURFACE ..................................................................................... 75 17.4 HISTORICAL MINE WORKINGS .......................................................................... 75 17.5 METAL PRICE SELECTION ................................................................................... 77 17.6 DOMAIN MODELING ............................................................................................. 79 17.7 TREND ANALYSIS.................................................................................................. 83 17.8 GRADE CAPPING .................................................................................................... 85 17.9 COMPOSITING METHODS .................................................................................... 88 17.10 BULK DENSITY ....................................................................................................... 90 17.11 VARIOGRAPHY....................................................................................................... 90 17.12 BLOCK MODEL CONSTRUCTION ....................................................................... 91 17.13 BLOCK MODEL VALIDATION ............................................................................. 94 17.14 MINERAL RESOURCE CLASSIFICATION CRITERIA ....................................... 94 17.15 RESPONSIBILITY FOR THE ESTIMATE ............................................................. 95 17.16 MINERAL RESOURCE ESTIMATE ....................................................................... 95 18.0 OTHER RELEVANT DATA AND INFORMATION ............................................. 98 18.1 MINING ..................................................................................................................... 98 18.1.1 Mining Method and Design ............................................................................... 98 18.1.2 Mine Development and Production Schedule .................................................... 99 18.1.3 Mining Equipment ........................................................................................... 103 18.2 PROCESSING ......................................................................................................... 105 18.2.1 Pulacayo Process Plant Option ........................................................................ 105 18.2.2 Toll Milling Option .......................................................................................... 111 18.3 INFRASTRUCTURE .............................................................................................. 114 18.3.1 Power Supply ................................................................................................... 114 18.3.2 Water Supply.................................................................................................... 115 18.3.3 Ancillary Buildings .......................................................................................... 115 18.3.4 Roads ................................................................................................................ 115 18.4 ENVIRONMENTAL AND SOCIAL ASPECTS .................................................... 116 18.4.1 Environmental Conditions ............................................................................... 116 18.4.2 Social Conditions ............................................................................................. 117
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18.4.3 Impact Assessment, Mitigation, and Management .......................................... 118 18.4.4 Permitting Process............................................................................................ 119 18.4.5 International Financing .................................................................................... 120 18.4.6 Consultation ..................................................................................................... 120 18.4.7 Environmental and Social Capital and Operating Costs .................................. 121 18.5 PROJECT ECONOMICS ........................................................................................ 121 18.5.1 Macro-economic Assumptions ........................................................................ 122 18.5.2 Production Schedules ....................................................................................... 122 18.5.3 Revenue ............................................................................................................ 123 18.5.4 Capital Costs .................................................................................................... 124 18.5.5 Operating Costs ................................................................................................ 128 18.5.6 Project Schedule ............................................................................................... 131 18.5.7 Cash Flow Forecast .......................................................................................... 131 18.5.8 Sensitivity Studies ............................................................................................ 134 19.0
INTERPRETATION AND CONCLUSIONS ......................................................... 140
20.0
RECOMMENDATIONS ........................................................................................... 142
21.0
REFERENCES ........................................................................................................... 145
22.0
SIGNATURES ............................................................................................................ 148
23.0
CERTIFICATES ........................................................................................................ 149
24.0
APPENDICES ............................................................................................................ 154
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LIST OF TABLES Page Table 1.1
Summary of Mineral Resources, Pulacayo Deposit...........................................2
Table 1.2
LOM Production Forecast at a Cut off Value of 200 g/t Ag Eq. .......................3
Table 1.3
Concentrate Grades and Recovery at Forecast Average Head Grade ................3
Table 1.4
Summary of Base Case Capital Expenditure .....................................................5
Table 1.5
Summary of Base Case Operating Costs ...........................................................5
Table 1.6
Project Base Case - LOM Cash Flow Summary ................................................6
Table 1.7
Toll-Milling Option - LOM Cash Flow Summary.............................................9
Table 6.1
List of Significant Intersections (ASC, 2002) ..................................................27
Table 10.1
Summary Table of Rock Chip Sampling Completed by Apogee ....................45
Table 14.1
Comparison of Micon Check-Assay Results from Drill-hole PUD045 ...........59
Table 16.1
Head Assays of the Pulacayo Metallurgical Composites.................................63
Table 16.2
High/High Grade Locked-Cycle Flotation Tests .............................................65
Table 16.3
Locked-Cycle Flotation Tests Assay Results...................................................67
Table 16.4
Locked Cycle Test Results-No Desliming Prior to Flotation ..........................68
Table 16.5
Metallurgical Balance, Deslimed Prior to Float, Medium Grade Test 4 .........69
Table 16.6
Locked Cycle Test Results - Desliming Prior to Flotation ..............................71
Table 16.7
Concentrate Grades and Recovery at Forecast Average Head Grade ..............73
Table 17.1
Summary of the Pulacayo Drill Hole Database as at October 14, 2009 ..........75
Table 17.2
Summary of the Input Values and NSR Factors, Pulacayo Project .................80
Table 17.3
Summary Statistics for Raw Samples Contained within the Mineralized Domain Model .................................................................................................86
Table 17.4
Summary Statistics for 1.0 m Composite Samples Contained within the Mineralized Domain Model .............................................................................89
Table 17.5
Summary of Variographic Parameters for 1.0 m Composite Samples, Pulacayo Project ..............................................................................................91
Table 17.6
Summary of Block Model Parameters, Pulacayo Project ................................92
Table 17.7
Block Model Validation Results, Pulacayo Project .........................................94
Table 17.8
Summary of Mineral Resources, Pulacayo Deposit.........................................96
Table 17.9
Comparison of Capped vs Uncapped Grades, Pulacayo Deposit ....................96
Table 18.1
Mineral Resources above Silver Equivalent Cut off Values of 125 to 275 g/t Ag Eq. .......................................................................................................102
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Table 18.2
Base Case LOM Production at a Cut off Value of 200 g/t Ag Eq. ................103
Table 18.3
Base Case LOM Production Schedule ...........................................................103
Table 18.4
Mobile Mine Equipment List .........................................................................104
Table 18.5
Pulacayo Process Design Criteria ..................................................................105
Table 18.6
Pulacayo Bond Work Index (kWh/st) ............................................................106
Table 18.7
Base Case LOM Processing Schedule ...........................................................122
Table 18.8
NSR Parameters .............................................................................................123
Table 18.9
Summary of Base Case Capital Expenditure .................................................124
Table 18.10
Mining Capital Costs .....................................................................................125
Table 18.11
Process Capital Expenditure ..........................................................................126
Table 18.12
Toll Milling-Pulacayo Site Capital Expenditure ............................................127
Table 18.13
General and Administrative Capital Expenditure ..........................................127
Table 18.14
Tailings Storage Facilities-Capital Expenses (from EPCM Report)..............128
Table 18.15
Average Unit Operating Costs for Mining ($/t mined) ..................................129
Table 18.16
Process Plant Labour Costs (from EPCM Report).........................................129
Table 18.17
Process Plant Cash Operating Costs ..............................................................130
Table 18.18
Processing Costs - Toll Milling at Don Diego Mill .......................................130
Table 18.19
General and Administrative Costs .................................................................130
Table 18.20
Environmental and Social Operating Costs ...................................................131
Table 18.21
Project Base Case - LOM Cash Flow Summary ............................................132
Table 18.22
Project Base Case Production and Cash Flow Projection ..............................133
Table 18.23
Toll-Milling Option - LOM Cash Flow Summary.........................................136
Table 18.24
Toll Milling Option – Production and Cash Flow Projection (275 g/t Ag Eq cut off) ......................................................................................................137
Table 19.1
Summary of Mineral Resources, Pulacayo Deposit.......................................140
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LIST OF FIGURES Figure 1.1
Page Base Case Cash Flow Summary ........................................................................7
Figure 1.2
Base Case Sensitivity Chart (NPV After tax) ....................................................7
Figure 1.3
NPV versus Cut-Off Grade for On-Site Milling ................................................8
Figure 1.4
Toll-Milling Option – Annual Cash Flow Summary .........................................9
Figure 4.1
Location Map, Pulacayo Project ......................................................................16
Figure 4.2
Outline of Mineral Concessions, Pulacayo Project ..........................................20
Figure 4.3
Drill-hole Locations Relative to the Property Outline, Pulacayo Project. .......21
Figure 6.1
Huanchaca Mining Company of Bolivia, circa 1890 .......................................25
Figure 6.2
Schematic Longitudinal Projection of the Silver Grades, Veta Tajo ...............26
Figure 7.1
Regional Geology of Bolivia ...........................................................................28
Figure 7.2
General Geology of the Pulacayo Area, Potosí District, Bolivia .....................29
Figure 7.3
Local Geology of the Pulacayo-Paca Area, Potosí District, Bolivia................31
Figure 7.4
Detail Geology of the Pulacayo Area, Potosí District, Bolivia ........................33
Figure 8.1
Epithermal Mineral Deposit Model .................................................................36
Figure 8.2
Alteration Mineral Distribution in a Low Sulphidation System ......................37
Figure 9.1
Drusy Vein Containing Sphalerite, Galena and Pyrite ....................................39
Figure 9.2
Example of a Massive Sulphide-Filled Vein, Pulacayo Deposit .....................40
Figure 9.3
Example of Veinlet and Disseminated Mineralization ....................................40
Figure 9.4
Example of a Quartz-Galena-Sphalerite-Filled Vein, Pulacayo Deposit .........41
Figure 9.5
Longitudinal View of the Stratigraphic Sequence, Pulacayo Deposit .............42
Figure 10.1
Topographic Survey Crew, Pulacayo Project ..................................................44
Figure 10.2
Induced Polarization Survey Coverage Area, Pulacayo Project ......................45
Figure 10.3
Induced Polarization Chargeability Results, Pulacayo Project ........................46
Figure 12.1
Bulk Density Determinations, Pulacayo Project, Bolivia ................................52
Figure 13.1
Sample Preparation Flowsheet, Pulacayo Project, Bolivia ..............................53
Figure 13.2
Particle Size Analyses of Exploration Samples, Pulacayo Project ..................54
Figure 14.1
General View of the Diamond Drilling Operation, Pulacayo Project ..............56
Figure 14.2
Comparison of Silver Check-Assay Results, Pulacayo Project .......................59
Figure 14.3
Comparison of Zinc Check-Assay Results, Pulacayo Project .........................60
Figure 14.4
Comparison of Lead Check-Assay Results, Pulacayo Project .........................60
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Figure 15.1
Location of the San Cristobal property ............................................................61
Figure 15.2
Schematic diagram showing San Vicente property .........................................62
Figure 16.1
Sample Preparation at Pulacayo Core Shack ...................................................65
Figure 16.2
Bench Flotation Cells at Universidad Técnica de Oruro .................................66
Figure 16.3
Open Circuit Float Test Parameters - Desliming Prior to Float -Test 4...........70
Figure 16.4
Silver Grade vs % Recovery without Desliming prior to Flotation .................72
Figure 16.5
Silver Grade vs % Recovery when 75% Silver Recovered from Deslimed Clays ................................................................................................72
Figure 17.1
Vertical Longitudinal Projection of the Mined Out Areas as at 1945, Pulacayo Project ..............................................................................................77
Figure 17.2
Selected Views of Digital Models of Historical Workings, Pulacayo Project ..............................................................................................................78
Figure 17.3
Plan and Longitudinal Views of the Nominal $40/t NSR Solid ......................81
Figure 17.4
Cross Section 740300E Showing the Outline of the Nominal $40/t NSR Domain Model .................................................................................................82
Figure 17.5
Contoured Silver Values for the Nominal $40/t NSR Domain Model, Pulacayo Project ..............................................................................................83
Figure 17.6
Contoured Zinc Values for the Nominal $40/t NSR Domain Model, Pulacayo Project ..............................................................................................84
Figure 17.7
Contoured Lead Values for the $40/t NSR Domain Model, Pulacayo Project ..............................................................................................................84
Figure 17.8
Contoured NSR Values for the Nominal $40/t NSR Domain Model, Pulacayo Project ..............................................................................................85
Figure 17.9
Silver Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project................................................................................86
Figure 17.10 Zinc Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project ..............................................................................................87 Figure 17.11 Lead Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project ..............................................................................................87 Figure 17.12 Copper Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project................................................................................88 Figure 17.13 Sample Length Histogram for Samples within the Mineralized Domain, Pulacayo Project ..............................................................................................89 Figure 17.14 Specific Gravity Histogram for Samples Within the Mineralized Domain, Pulacayo Project................................................................................90
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Figure 17.15 Longitudinal and Isometric Views of the Mineral Resources, Pulacayo Project ..............................................................................................................97 Figure 18.1
Plan View of the Existing Development Working and the Planned Mine Infrastructure ..................................................................................................100
Figure 18.2
Isometric View Looking North and Showing the Resource Model the Planned Development and the Mined Out Areas...........................................101
Figure 18.3
Grade-tonnage Curve for Mineral Resource vs Silver Equivalent Cut-off Grade ..............................................................................................................102
Figure 18.4
Town of Pulacayo as Viewed From the Mill Site ..........................................106
Figure 18.5
Pulacayo Flowsheet (from EPCM report) ......................................................108
Figure 18.6
Diagramatic location of Tailings Storage Facility (NTS) ..............................109
Figure 18.7
Starter Dam Design (from EPCM report) ......................................................110
Figure 18.8
Conceptual Plan View of the Tailings Storage Facility .................................111
Figure 18.9
Don Diego Mill, Crushing and Fine Ore Bin .................................................112
Figure 18.10 Don Diego Plant Flowsheet ...........................................................................113 Figure 18.11 NSR Value of Payable Metals .......................................................................124 Figure 18.12 Base Case Cash Flow Summary ....................................................................132 Figure 18.13 Base Case Sensitivity Chart (NPV After tax) ................................................134 Figure 18.14 NPV versus Cut-Off Grade for On-Site Milling ............................................135 Figure 18.15 Toll-Milling Option - Cash Flow Summary ..................................................136 Figure 18.16 Toll-Milling Option - Sensitivity ...................................................................138 Figure 18.17 On-Site Milling versus Toll-Milling Option ..................................................139
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LIST OF ABBREVIATIONS Item Apogee Minerals Limited Apogee Minerals Bolivia S.A. ASC Bolivia LDC Apex Silver Mines Corporation Corporación Minera de Bolivia Golden Minerals Company Micon International Limited EPCM Consoltores S.R.L. Resource Development Inc. Universidad Técnica de Oruro
Abbreviation AML Apogee ASC ASMC COMIBOL GMC Micon EPCM RDi UTO
United States Dollar Bolivian Bolivianos Canadian Institute of Mining, Metallurgy and Petroleum Canadian National Instrument 43-101 Atomic Absorption Spectroscopy centimetre(s) Degrees, Celsius gram(s), kilograms, milligrams grams per metric tonne hectare(s) hour Internal Rate of Return litre(s) Life of mine metre(s), centimetre, millimetre, kilometre Net Present Value (discounted at rate %/y) Net Smelter Return Not available/applicable Ordinary Kriging Ounce (troy) Parts per million, part per billion Parts per Percent(age) Pound (avoirdupois) Programmable Logic Controler Quality Assurance/Quality Control Reduced Level Second (time) Silver Equivalent grade Specific Gravity Sub-level open stoping Système International d’Unités Tailings storage facility Tonne (metric), thousands, millions tonne per day, tonne per year Universal Transverse Mercator Year(s)
$ or US$ BOB CIM NI 43-101 AAS cm o ,C g, kg, mg g/t ha h IRR L LOM m, cm, mm, km NPVrate NSR n.a. OK oz ppm, ppb ppm % lb PLC QA/QC RL s Ag Eq SG SLOS SI TSF t, t 000, Mt t/d, t/y UTM y
x
1.0
SUMMARY
Introduction At the request of Mr. Joaquin Merino-Marquez, Exploration Manager of the wholly-owned subsidiary of Apogee Minerals Ltd. (AML), Apogee Minerals Bolivia S.A. (Apogee), Micon International Limited (Micon) has been engaged to perform a preliminary assessment of the Pulacayo project and prepare a Technical Report in compliance with the requirements set out in Canadian National Instrument (NI) 43-101. Previously, Micon prepared technical reports for AML dated March, 2007 and December, 2008 and describing its resource estimates on the Paca and Pulacayo properties, respectively. Micon understands that: Apogee, under an agreement dated March 8, 2006, acquired the right to earn a sixty percent (60%) interest in both the Paca and Pulacayo properties from ASC Bolivia LDC (ASC), a subsidiary of Apex Silver Mines Corporation (ASMC) which had previously conducted exploration on the properties; effective March 24, 2009, Golden Minerals Company (GMC) became the successor to the assets of ASMC (renamed Golden Service Company). On January 26, 2010, AML announced that it had entered into a non-binding term sheet (the "Term Sheet") with GMC to acquire the Pulacayo Deposit. Upon completion of the proposed transaction, AML will be able to acquire a 100% interest in the property. Pursuant to the Term Sheet, the Company would acquire all of the issued and outstanding shares of a Cayman based company that is a wholly-owned subsidiary of GMC, which indirectly holds a 100% interest in the Pulacayo deposit. In consideration, AML would issue 5,000,000 common shares in AML upon closing of the transaction and an additional 3,000,000 common shares in AML plus a cash fee in the amount of $500,000 eighteen (18) months following closing of the transaction. Completion of the acquisition is subject to negotiation and execution of a definitive agreement, necessary board approvals and receipt of all required regulatory and securities approvals, including the approval of the TSX Venture Exchange, along with other customary closing conditions. Geology & Resources The Pulacayo epithermal deposit is hosted by sedimentary and igneous rocks of Silurian and Neogene age. The sedimentary rocks are composed of diamictites, sandstone and shale. The Neogene-aged rocks are mostly of volcanic-sedimentary origin and are composed of conglomerate, sandstones, reddish conglomerates, reddish-brown clay, whitish rhyolite tuff, andesite lava flows, dacitic-rhyolite domes and andesite porphyry. The principal mineralized structure at Pulacayo is known as “Veta Tajo”, which was historically the main silver producer in the Pulacayo mine. The Veta Tajo is part of a larger structural system that is oriented approximately east-west and dips 75° to 90° south. The
1
width of this vein varies from less than 1 metre to several metres. The structure is filled with quartz, barite, pyrite, sphalerite, galena and silver sulpho-salts. Apogee has carried out detail geological mapping and sampling at surface and in the old underground workings, followed up by a topographic survey, geophysical survey, and diamond drilling. Between January, 2006 and September, 2009, four phases of drilling were carried out. A simple, upright, whole-block model with the long axis of the blocks measuring 10 m (strike) x 10 m (height) x 2 m (width) and oriented along an azimuth 100° was constructed using the Gemcom-Surpac version 6.1.1 mine planning software package. Micon then carried out a geostatistical analysis of the deposit using the results of this drilling. Taking account of the topographic mapping, plans and sections pertaining to the extent of previous mine workings, trend analysis, metal prices and potential metallurgical recoveries, Micon then prepared an estimate of the mineral resource. Mineral resources reported from within the mineralized domain are given in Table 1.1. The effective date of this estimate is October 14, 2009. Table 1.1 Summary of Mineral Resources, Pulacayo Deposit Classification Indicated Inferred
Tonnes 4,892,000 6,026,000
Ag (g/t) 79.96 98.26
Pb (%) 0.79 0.78
Zn (%) 1.64 1.68
(1) Tonnages have been rounded to the nearest 1,000 tonnes. Average grades may not sum due to rounding. (2) Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. (3) The quantity and grade of reported inferred resources in this estimation are conceptual in nature and there has been insufficient exploration to define these inferred resources as an indicated or measured mineral resource. And it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category.
Mining Sub-level open stoping (SLOS) with backfill is the mining method which Micon considers most suitable for underground mining at Pulacayo. The average value of the resource justifies the use of backfill as opposed to leaving pillars in-situ. SLOS mining with backfill also gives a reduced risk of surface subsidence. SLOS is a more productive method, even in relatively narrow stopes, when compared to cut and fill mining. The mine is accessible through the San Leon Adit (4,130 m RL), which has a nominal arched profile of 2.2 m (high) by 2.0 m (wide). It is Micon’s opinion that the most efficient method of access and ore haulage is through the adit. Two new inclined ramps and two decline ramps are planned. They will access the ore above and below the 4130 m level, respectively. The inclined ramps will be developed from the 2
enlarged San Leon adit, starting from the FW to the south of the ore body. The decline ramps will be developed from the enlarged San Leon adit. Ventilation air will be exhausted through multiple vent raises to surface. Main fans will be located on the surface end of each raise. Intake air will be drawn in through the north and south ends of the San Leon adit. This will ensure that both the primary and emergency means of egress are situated in intake air. For mine planning purposes, a silver-equivalent cut-off grade of 200 g/t Ag Eq. was selected. Silver equivalent grades were calculated using metal prices $14.66/oz for silver, $0.98/lb for lead and $1.05/lb for zinc. The mineable portion of the mineral resources considered in this preliminary assessment are as given in Table 1.2, and have been modified to account for estimated mining losses and mining dilution. Table 1.2 LOM Production Forecast at a Cut off Value of 200 g/t Ag Eq.
Class Indicated Inferred
Resource t 000 1,793 2,456
Ag g/t 143.4 162.2
Pb % 1.0 1.0
Zn % 2.1 1.9
Ag Metal kg 257,000 398,300
Pb Metal t’000 18.83 25.30
Zn Metal t 000 36.94 47.40
Mineral resources which are not mineral reserves do not have demonstrated economic viability.
Processing The metallurgical testwork shows that a lead and zinc concentrate can be produced using a conventional flotation flowsheet. The base case for this preliminary assessment considers a milling capacity averaging 1,800 t/d over 360 d/y. Concentrate grades and recovery at the forecast headgrade are shown in Table 1.3 Metallurgical testwork at the UTO laboratory was completed in February, 2010, testing low medium and high grade composite samples. The medium grade assayed 181g/t silver, 0.69% lead, and 2.45% zinc, approximating the average mill head grade forecast of 154.2 g/t silver. Table 1.3 Concentrate Grades and Recovery at Forecast Average Head Grade
Product Mill Feed Lead concentrate Zinc concentrate Tailings
Mass Yield dmt/d 1800 29 59 1713
Grade
Percent Recovery (%)
Ag g/t
%Pb
%Zn
Ag
Pb
Zn
154.2 6220 873 28.5
1.0 51.0 0.85 0.22
2.0 3.72 53.0 0.19
100.0 63.9 18.6 17.6
100.0 77.6 2.7 19.7
100.0 3.0 87.7 9.3
There is a significant amount of clay generating rock in the material that negatively affects concentrate grades and recoveries, and that could negatively affect reclaim water clarity and
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deposition density in the Tailings Storage Facility. Further metallurgical tests for the clay fraction are recommended for later stages of project development, to guide refinements to the process flowsheet and equipment selection. There are four deleterious elements in the Pulacayo material that will affect the lead concentrate net smelter returns and so should be recalculated in future models. In the medium grade lead concentrate, the concentration of these elements were arsenic (3,940 g/t), copper (2.80%), antimony (3.44%), and zinc (4.19%). The toll-milling option considered as an alternative scenario in the study was based on processing of the Pulacayo material off site at the Don Diego lead/zinc mill located 40 km east of Potosi. Although toll milling scenarios using higher cut-off grades were found to be economic, the results were found to be inferior to the base case (with on-site milling) at all cut-offs tested in the study up to 275 g/t Ag equivalent. The results suggest that toll milling could be regarded as a potential fall-back position should on-site milling not be possible for any reason. Infrastructure For the base case, a new Tailing Storage Facility (TSF) will be required at Pulacayo. A capital cost estimate for this has been prepared on the basis of a conceptual layout. No design has yet been prepared for the TSF. Existing power supply is inadequate and will require upgrading. The option selected is to tie into the San Cristobal-Punutuma 220 kV transmission line, the closest point to which is 10 km from Pulacayo. The base case assumes that the current water supply pipeline serving Pulacayo town will remain operational and can be used to supply the mine. Thus, the estimated cost of replacing this line (US$ 1.41 million) has not been included in the base case. Environment and Social The project area is affected by historical mine workings that are causing acidic drainage and metal contamination to enter the surrounding air and water. Project development needs to take these into consideration. New development must consider whether operations can be isolated from historical contaminants, be integrated with historical works to clean up some of the contamination, or historical contaminants can be remediated prior to new development. Regardless, definition and documentation of historical contamination is important so that the company can manage its risks. Potential social effects on Pulacayo include increased income from direct employment, increased demand for local services and suppliers, and an influx of workers. Potential adverse social effects and pressures on housing and infrastructure will need to be effectively managed. A community development plan should be developed in concert with the
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community to help ensure economic benefits are realized in the community. Social and health effects should be considered for any small-scale miners who are still active in the Pulacayo area. Economics The economics of the Pulacayo project have been assessed under two scenarios:
In the first scenario, which forms the base case for this report, a processing facility is built on-site to treat the material mined from underground, and concentrates of zinc and lead are produced for shipment to port. Silver credits are obtained for both products.
Alternatively, no processing facility is constructed and, instead, the mine ships ROM material to the Don Diego process plant, where it is toll treated. This scenario is treated as a sensitivity case, the cash flow from which is then compared to the base case.
In each case, production rates and all other assumptions are kept the same to allow the relative value of each scenario to be determined. Table 1.4 shows a summary of the capital required for the base case. Table 1.4 Summary of Base Case Capital Expenditure Capital Cost Summary
Initial US$ (M) 18.48 27.77 3.00 2.53 2.00 15.63 69.41
Mining Processing Tailings Infrastructure & indirect Environmental & Social Contingency Total
Base case cash operating costs are given in Table 1.5. Table 1.5 Summary of Base Case Operating Costs Operating Cost Summary Mining Processing General & Administrative Total
5
US$/t 22.60 12.77 2.33 37.70
Sustaining US$ (M) 15.06 0.15 4.35 2.22 5.87 27.65
Table 1.6 presents the project base case LOM cash flow summary, and Figure 1.1 provides a summary of the main components of the annual cash flow for the base case. Table 1.6 Project Base Case - LOM Cash Flow Summary LOM ($ 000) 178,537 203,519 382,056 15,282 366,774
$/t treated 42.02 47.90 89.92 3.60 86.32
$/oz Ag 11.81 13.46 25.27 1.01 24.26
NPV8 (2010) 115,503 131,665 247,168 9,887 237,281
Operating Costs Mining costs Processing costs General & Administrative costs Total cash operating cost
96,027 54,257 9,902 160,186
22.60 12.77 2.33 37.70
6.35 3.59 0.65 10.59
62,500 35,115 6,396 104,011
Net Operating Margin
206,587
48.62
13.66
133,270
Capital Expenditure
97,060
22.84
6.42
83,268
Pre-tax Cash Flow
109,527
25.78
7.24
50,002
Taxation
29,023
6.83
1.92
17,013
Net Cash Flow After Tax
80,504
18.95
5.32
32,988
NSR Silver only NSR Co-products NSR value less Royalty
This preliminary assessment is preliminary in nature; it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary assessment will be realized. On a pre-tax basis, at a discount rate of 8 %/y, the base case cash flow evaluates to a net present value (NPV8) of $50.0 million, and has in internal rate of return (IRR) of 24.0%. After tax, the NPV and IRR are estimated to be $33.0 million and 19.6%, respectively. Payback on the undiscounted cash flow after tax occurs in Year 3 and, over the life-of-mine (LOM) period, the net cash flows before and after tax are $109.5 and $80.5 million, respectively. On an annual basis, the estimate of maximum funding required before positive cash flow is $89.5 million.
6
Figure 1.1 Base Case Cash Flow Summary 80 NetCashFlow
60
Royalty
40
Taxation WorkingCapital
Capital
(20)
Opcosts
Yr9
Yr8
Yr7
Yr6
Yr5
Yr4
CumC/Flow
Yr3
(80)
Yr2
CumDCF
Yr1
(60)
Yr‐1
NetRevenue
Yr‐2
(40)
Yr‐3
USDmillion
20
The sensitivity of the base case cash flow after tax to changes in product pricing, operating costs and capital expenditure is shown in Figure 1.2. Figure 1.2 Base Case Sensitivity Chart (NPV After tax) 100 80
NPV(8%)USDmillion
60 40 20 0 (20)
70
75
80
85
ProductPrice (21.4 (12.1 (2.9)
6.1
90
95
100 105 110 115 120 125 130
15.1 24.1 33.0 41.9 50.8 59.7 68.5 77.4 86.2
Opcosts
56.9 52.9 49.0 45.0 41.0 37.0 33.0 29.0 25.0 21.0 17.0 13.0
9.0
Capex
57.4 53.3 49.2 45.2 41.1 37.1 33.0 28.9 24.9 20.8 16.7 12.7
8.6
7
Micon evaluated the base case (on site milling) using a series of cut-off grades to determine the optimum grade/tonnage combination for the project. The results (Figure 1.3) show that project NPV and IRR are maximized when applying a cut-off grade of 200 g/t Ag Eq. Micon therefore selected this value of the cut-off grade for its base case economic assessment of the project in this study.
35.0
35.0%
30.0
30.0%
25.0
25.0%
20.0
20.0%
15.0
15.0%
10.0
10.0%
IRR(%)
NPV($million) |MinngCost ($/t)
Figure 1.3 NPV versus Cut-Off Grade for On-Site Milling
5.0%
5.0
0.0%
.0 125
150
175 200 225 Cutoffgrade(g/tAgEq) NPV
Mining$/t
250
275
IRR(%)
The study also considered an alternative to the on-site milling of material mined at Pulacayo. For this purpose, it was assumed that crushed material was taken by road to Uyuni and thence by rail to the Don Diego mill for toll treatment. Savings in the process plant and tailings dam construction costs result in a reduction of approximately $33.1 million in capital invested before positive cash flow, with $56.4 million required for toll-milling compared to $89.5 million in the base case. Nevertheless, Table 1.7 and Figure 1.4 show that, although payback on the undiscounted cash flow occurs in Year 4, the LOM net cash flow after tax of $43.1 million is $37.4 million less than is forecast in the base case ($80.5 million). Moreover, the toll-milling option does not appear to maximize project value since, at a cutoff of 200 g/t Ag Eq, its NPV8 of $14.5 million is $15.5 million less than the base case ($33.0 million). Even at a cut-off of 275 g/t Ag Eq, the after-tax NPV8 of $16.4 million for the toll milling option is $1.2 million less than for the base case ($17.6 million) at that cut-off. Nevertheless, because of the reduction of capital, at cut-off grades above 250 g/t Ag Eq, toll milling appears to offer an improved internal rate of return, with IRR of 19.4% and 20.7% after tax at 250 g/t and 275 g/t respectively, compared to rates of 18.6% and 17.6% respectively in the base case.
8
Table 1.7 Toll-Milling Option - LOM Cash Flow Summary Using 200 g/t Ag Eq Cutoff LOM ($ 000) 178,537 203,519 382,056 15,282 366,774
$/t treated 42.02 47.90 89.92 3.60 86.32
$/oz Ag 11.81 13.46 25.27 1.01 24.26
Operating Costs Mining costs Processing costs General & Administrative costs Total cash operating cost
96,027 145,486 9,902 251,415
22.60 34.24 2.33 59.17
6.35 9.62 0.65 16.63
62,500 94,121 6,396 163,017
Net Operating Margin
115,359
27.15
7.63
74,264
Capital Expenditure
56,374
13.27
3.73
50,396
Pre-tax Cash Flow
58,985
13.88
3.90
23,868
Taxation
15,878
3.74
1.05
9,339
Net Cash Flow After Tax
43,107
10.15
2.85
14,529
NSR Silver only NSR Co-products NSR value less Royalty
NPV8 (2010) ($ 000) 115,503 131,665 247,168 9,887 237,281
Figure 1.4 Toll-Milling Option – Annual Cash Flow Summary 80
NetCashFlow
60
Royalty
40
Taxation WorkingCapital
0 Capital (20) Opcosts (40) NetRevenue (60) CumDCF
9
Yr7
Yr6
Yr5
Yr4
Yr3
Yr2
Yr1
Yr‐1
Yr‐2
(80)
Yr‐3
USDmillion
20
CumC/Flow
Interpretation and Conclusions The project base case comprises the development of an underground mine connecting to existing workings though a new adit portal, extraction using a sub-level open-stoping method with backfill, feeding 1,800 t/d to a new milling and flotation plant on site, for the production and sale of lead and zinc concentrates containing economically important silver values, and storage of flotation tailings in a new, purpose-built facility adjacent to the new plant. The preliminary assessment of this base case shows it to be economic, with an IRR of 24% and NPV8 of $50.0 million before tax. Payback is in Year 3, leaving one further year of full production. An alternative scenario, with toll-milling of the underground mine production at the Don Diego mill, is also shown to be potentially economic, albeit at higher cut-off grades. This option has a reduced capital requirement, resulting in an improved IRR before tax of 27.5%, although the NPV8 is lower ($16.4 million after tax). Recommendations A complete list of recommendations is given is Section 20. Micon recommends, inter alia:
Analysis of duplicate samples as part of the Quality Control program should be carried out at a laboratory that is a separate corporate entity from the laboratory that conducted the primary analyses.
Detailed modeling of the narrow higher grade vein structures, should a local estimate of the amount of material amenable to underground mining be needed. In support of this local estimate, additional information in the form of in-fill drilling should be obtained.
The position, shape and content of the mined out stopes, and the position and geometry of the existing development should be determined by appropriate methods to an appropriate degree of accuracy as project development advances.
In consideration of the range of specific gravities observed in the sample data, Micon recommends that should the project proceed to a more advanced state, additional density measurements should be taken from samples chipped from the walls of the existing mine workings to assist in filling in the gaps in the spacing of the information. The density of each block in the model should be estimated so as to provide a more accurate local estimate of tonnage. Care will need to be taken in order to obtain an accurate specific gravity measurement for samples that are porous.
A program of geotechnical characterization of the wall rocks should be carried out in support of mine design.
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A detailed geotechnical study should be carried out, that will provide the basis of more detailed mine planning.
With respect to metallurgy:
Complete pressure-filter moisture tests on the lead and zinc concentrates to confirm concentrate moistures will be less than 8 wt%. This is required for transport by ship. If this is limit is not attainable, a disk-filter, gas fired dryer or an atmospheric drying pad may be required.
Review and modify the flowsheet and equipment selection to maximize silver recovery from the clay fraction.
Bench tests should be completed to determine how the clay fraction responds in the TSF, both for reclaim water clarity and deposition density for TSF volume calculations.
For the toll milling option, recalculate the ore transport charges from the Pulacayo mine to the Don Diego mill, after the road improvements to Highway 701 are completed, which should be around the first quarter of 2011 (see description in Section 18.3.4). The direct trucking of ore on this route would significantly reduce the transport charges, since Highway 701 is the most direct route between Pulacayo and Don Diego.
Environmental and Social Considerations:
Waste rock should not be used for construction.
The waste rock and tailings disposal design and water management plans need to consider the acid generating and metal leaching properties of the waste rock and tailings.
It is recommended that the impact assessment further document the extent of historical contamination.
It is recommended that further project design take historical works into consideration and remediate historical contaminants where possible.
Community consultation should continue and a Community Development Plan be developed in concert with the community.
With respect to Project Development:
Project exploration and development should proceed together. The base case would be significantly strengthened by additional mineral resources to extend the LOM further beyond the payback period.
11
The toll-milling scenario remains attractive while resource tonnage is limited – this can therefore be viewed as a fall-back scenario should exploration meet with only limited success in locating additional resources.
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2.0
INTRODUCTION AND TERMS OF REFERENCE
At the request of Mr. Joaquin Merino-Marquez, Exploration Manager of the wholly-owned subsidiary of Apogee Minerals Ltd. (AML), Apogee Minerals Bolivia S.A. (Apogee), Micon International Limited (Micon) has been engaged to perform a preliminary assessment of the Pulacayo project and prepare a Technical Report in compliance with the requirements set out in Canadian National Instrument (NI) 43-101. Previously, Micon prepared technical reports for AML dated March, 2007 and December, 2008 and describing its resource estimates on the Paca and Pulacayo properties, respectively. Micon understands that: Apogee, under an agreement dated March 8, 2006, acquired the right to earn a sixty percent (60%) interest in both the Paca and Pulacayo properties from ASC Bolivia LDC (ASC), a subsidiary of Apex Silver Mines Corporation (ASMC) which had previously conducted exploration on the properties; effective March 24, 2009, Golden Minerals Company (GMC) became the successor to the assets of ASMC (renamed Golden Service Company). On January 26, 2010, AML announced that it had entered into a non-binding term sheet (the "Term Sheet") with GMC to acquire the Pulacayo Deposit. Upon completion of the proposed transaction, AML will be able to acquire a 100% interest in the property. Pursuant to the Term Sheet, the Company would acquire all of the issued and outstanding shares of a Cayman based company that is a wholly-owned subsidiary of GMC, which indirectly holds a 100% interest in the Pulacayo deposit. In consideration, AML would issue 5,000,000 common shares in AML upon closing of the transaction and an additional 3,000,000 common shares in AML plus a cash fee in the amount of $500,000 eighteen (18) months following closing of the transaction. Completion of the acquisition is subject to negotiation and execution of a definitive agreement, necessary board approvals and receipt of all required regulatory and securities approvals, including the approval of the TSX Venture Exchange, along with other customary closing conditions. In the present study, Micon has performed a preliminary assessment of the potential for underground mining of the higher grade portions of the Pulacayo resource. It is reasoned that limiting the scope of the study to this aspect will allow a baseline evaluation to be established, against which any additional value to be gained from a larger-scale open-pit mining operation can be measured at a later date. Accordingly, this study does not consider any potential open-pit mining. The study does consider an important trade-off, between (i) the construction of a new treatment plant and tailings storage facility near the mine and (ii) contracting out processing of the resource to a toll milling plant. In either case, the product of this processing is assumed to be concentrates which will be sold to a third party for further processing, and hence project revenues are the net smelter return, after deduction of concentrate transport costs.
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The study has been carried out by Micon personnel, utilizing technical information warranted by the client and which it has reviewed and found to be reasonable and appropriate, within the +/-30% level of accuracy expected of a scoping study. Mr. Reno Pressacco P.Geo., Micon’s senior geologist at that time, conducted a site visit to the Pulacayo project area between March 26 and 29, 2008, while drilling was in progress. Mr. Pressacco was responsible for preparation of the mineral resource estimate upon which this preliminary assessment is based. Micon’s senior metallurgist, Mr. Michael Godard P.Eng., and senior mining engineer, Mr. Geraint Harris, CEng., visited the project area between July 29 and 30, 2009, and between August 6 and 7, 2009, respectively. They were able to hold discussions with Apogee personnel on site and make an independent assessment of the project area and associated infrastructure before preparing, respectively, the processing and mining sections of this preliminary assessment. Unless otherwise indicated, all currency amounts are stated in United States dollars ($ or US$) or Bolivian Bolivianos (BOB). For the 12 months ending 31 March, 2010, the average rate of exchange was approximately BOB 7.17/US$. The project has employed the metric system of measurement, consequently weight will be expressed in metric tonnes (tonnes), frequencies in Hertz (Hz), distance in metres (m) or kilometres (km), area in hectares (ha) and silver values in grams per metric tonne (g/t Ag). In some cases, equipment is sized in imperial lengths (feet or inches), horsepower (hp) and kilowatt hours per short ton (kWh/st).
14
3.0
RELIANCE ON OTHER EXPERTS
Micon has reviewed and evaluated the data pertaining to the mineralization found on the Pulacayo project located in Pulacayo Township, Potosí District, Bolivia that was provided to it by Apogee and its consultants, and has drawn its own conclusions therefrom. Micon has not carried out any independent exploration work, drilled any holes or carried out any sampling and assaying other than described in this report. While exercising all reasonable diligence in checking, confirming and testing it, Micon has relied upon the data presented by Apogee, and found in public domain documents in conducting its technical review. Micon is pleased to acknowledge the helpful cooperation of Apogee’s management including Mr. Joaquin Merino Marquez, all of whom made available any and all data requested, and responded promptly, openly and helpfully to all questions, queries and requests for material. The status of the mineral concessions under which Apogee holds title to the surface and mineral rights for these properties has not been investigated or confirmed by Micon, and Micon offers no opinion as to the validity of the mineral title claimed by Apogee. The description of the property, and ownership thereof, as set out in this report, is provided for general information purposes only. As well, the substance of the various option agreements has not been investigated or confirmed by Micon, and Micon offers no opinion as to the validity of the terms set out therein. The essential terms of these agreements outlined in this report are provided for general information purposes only. Micon has relied on the estimate of environmental remediation (mine closure) costs provided in a report prepared by EPCM Consoltores S.R.L. of Bolivia (EPCM) for Apogee, Micon understands that EPCM has relevant local experience in the requirements of Bolivian environmental legislation as it pertains to mine closure.
15
4.0 4.1
PROPERTY DESCRIPTION AND LOCATION
LOCATION
The Pulacayo prospect is located 18 km east of the city of Uyuni (Canton of Pulacayo, Quijarro Province) in the Department of Potosí in southwestern Bolivia, 460 km southsoutheast of the capital city, La Paz, and 130 km southwest of Potosí, the department capital (Figure 4.1). Figure 4.1 Location Map, Pulacayo Project
Pulacayo is accessible by paved and good gravel highways from La Paz via Oruro (560 km), and by good gravel road from Potosí (189 km). Unpaved sections are generally navigable the whole year although they may present some level of difficulty during the rainy season. The tourist town of Uyuni, on the edge of the large Salar de Uyuni (salt lake) provides limited local services. It has railway connections with the cities of Oruro, Potosí, Villazon, and to the borders with Argentina and Chile. Uyuni has a small gravel airstrip which permits the operation of light aircraft. There are several small hotels, hostels, restaurants, schools,
16
medical and dental facilities and internet cafes. Apex’s San Cristóbal Mining Company has constructed a gravel road from San Cristóbal, approximately 100 km southwest of Uyuni, to the border with Chile. 4.2
PROPERTY STATUS
4.2.1
Overview of Bolivian Mining Law
The granting of mining concessions in Bolivia is governed by the Constitution (Constitución Política del Estado), the Mining Code (Código de Minería) supplemented by certain Supreme Decrees that rule taxation, environmental policies, administrative matters, and the like. Rights to mineral resources, which are fundamentally the property of the Bolivian state, can be granted for their exploitation but the Bolivian state is prohibited from transferring title to them, according to Article 136 of the Constitution. Bolivian companies, foreign companies or individuals, with the exception of minors, government agents, armed forces members, policemen, or their relatives, may own mining concessions. Foreigners, pursuant to Article 25 of the Constitution and Article 17 of the Mining Code, are not authorized to own mining concessions or real estate property within a buffer zone of 50 km surrounding the Bolivian international borders, but they may enter into joint venture agreements on the frontier regions. In March, 1997, Bolivia enacted Law No. 1777 to revise its CODIGO DE MINERIA (Mining Code), to promote private ownership of mineral properties and to enable COMIBOL, the state-owned mining corporation, to lease or joint venture mineral properties which are subject to state-owned mineral leases. The Codigo de Mineria (1997) is available in an official Spanish-English side-by-side version which facilitates understanding the Bolivian mining code. Key features are:
There is only one type of mining license, a “La Concesion Minera”, which is comprised of 25 ha units, named “cuadricula minera”. A maximum of 2,500 units is allowed for a mining concession. There is no limitation to the number of concessions that can be held by a company or an individual.
Field staking is not required; concessions are applied for on 1:50,000 scale base maps.
The owner of the concession has exclusive rights to all minerals within the concession.
Annual rents, payable in January of each year, are BOB 9/ha in the first 5 years and BOB 18/ha thereafter (approximately $1.00/ha and $2.00/ha, respectively).
If the title holder continues to make the “patentes payment” on time the term of the mining concession is indefinite. 17
Mining concessions cannot be transferred, sold or mortgaged.
Provision is made for surface access, compensation and arbitration with private land owners, if any. (NB: private ownership of surface lands outside of major cities is limited).
Historical mining concessions, 1 ha “pertenencia minera”, applied for and granted according to the system governed by the old, pre-1967, Mining Code remain valid if the owners have complied with the “Catastro Minero”, an obligatory registration of the mining concessions that existed prior to the implementation of the new Mining Code. This registration involves the legal audit of the titles and the verification of the technical information of the mining concessions, to be included in a digital format on the database of the Bolivian National Service of Geology and Technical of Mines (SERGEOTECMIN).
Mining concessions, both “cuadrículas” and “pertenencias” must have their “Título Ejecutorial” registered with the “Mining Registry” that is part of the SERGEOTECMIN and before the Real State Registration Office.
Simultaneous with the introduction of the new mining code in 1997 were a number of taxation reforms. Bolivian taxes are now fully deductible by foreign mining companies under US corporate income tax regulations.
Taxes applicable are:
Mining Royalty (Regalía Minera) equivalent to 1-7% of the gross sales value of the mineral. The tax is paid before the mineral is exported or sold in the local market (in this case only 60% of the tax is paid).
Profits tax of 25% on net profits [Gross income – (expenses+costs)]; losses can be carried forward indefinitely. An additional 12.5% is paid when metals/minerals reach extraordinary market prices.
Mineral production is subject to a Value Added Tax of 13%.
The Ministry of Mining and Metallurgy is responsible for mining policy. Servicio Geologico y Tecnico Minero de Bolivia (SERGEOTECMIN) – the Bolivian Geological Survey, a branch of the Ministry, is responsible for management of the mineral titles system. SERGEOTECMIN also provides geological and technical information and maintains a USGS-donated geological library and publications distribution centre. Also, tenement maps are available from SERGEOTECMIN, which has a GIS based, computerized map system. Exploration and subsequent development activities require various degrees of environmental permits, which various company representatives have advised are within normal international standards. Permits for drill road construction, drilling and other ground disturbing activities
18
can be readily obtained in 2 – 4 months, or less, upon submission of a simple declaration of intent and plan of activities. 4.2.2
Project Ownership
Details of ownership of the Pulacayo project properties are complicated by multi-layered option and joint venture agreements. Apogee’s Option/JV agreement with Apex’s Bolivian subsidiary, ASC Bolivia LDC (Agreement I), allows Apogee to earn interests in two earlier agreements that ASC had established with the Pulacayo Mining Cooperative and COMIBOL (Agreements II, III). A brief summary of this information, as provided by Apogee’s legal counsel, is given as Appendix I to this report. The project’s environmental requirements have been completed in compliance with the Environment Law (Law Nº 1333) and the Environmental Regulation for the Mining Activities. A certificate of exemption has been obtained for the exploration phase. An audit of the Environmental Base Line (ALBA) was carried out between December, 2007 and July, 2008 by Mining Consulting & Engineering “MINCO S.R.L.” Its audit report summarizes the work carried out during the Environmental Assessment, and includes:
A compilation of information on the local vegetation, animals, soil, water, air, etc. More than 500 samples collected in the area of interest support the conclusions and recommendations of the report;
An evaluation of the social impact of the project;
An evaluation of the area contaminated during previous mining activities, including tailings, abandoned facilities, acid waters, scrap, etc;
An evaluation of other environmental liabilities.
The location of the various concessions comprising the property holdings for the Pulacayo project is presented in Figure 4.2. The location of the drill-holes and the Pulacayo deposit relative to the concession boundaries are shown in Figure 4.3.
19
Figure 4.2 Outline of Mineral Concessions, Pulacayo Project
N
20
Figure 4.3 Drill-hole Locations Relative to the Property Outline, Pulacayo Project.
Paca Deposit
Drill-holes shown by black triangles.
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5.0
5.1
ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ACCESS
Bolivia, is the highest and most isolated country in South America, with diverse geographic and climatic conditions ranging from snow capped peaks and high altitude plateaus to vast, low-lying grasslands and rainforests. Climate and geography have influenced population settlement, mineral discovery and subsequent development of transportation and infrastructure. Bolivia is landlocked, without direct seaport access. A reasonably well developed rail system exists with connections south to Argentina, east to Brazil and west to Chile and the port of Antofa*gasta. Rail service from Uyuni connects with Oruro, Atocha, Tupiza, and Villazon (on the border with Argentina). Uyuni is also connected by railway to Chile through Estación Abaroa. Disused rail lines exist between Uyuni-Potosí and Oruro-La Paz. International air travel to Bolivia is via Miami (American Airlines), Mexico City, Brazil, Chile (LAN), Argentina and Peru (Taca). Bolivian airlines AeroSur fly regular internal flights between major cities, with three flights a week to Uyuni city. In 2008, ASC began constructing a lighted airstrip at the San Cristóbal Mine, approximately one hour’s drive to the west on a well maintained gravel road, with completion expected in 2012. The principal highways are generally of a quite reasonable standard; heavy trucks and buses dominate the road traffic outside of the major cities and, for the most part, road freight service functions adequately even to small remote villages. However, secondary roads can be best described as “tracks” and winding, single lane roads are often precariously carved out of steep slopes. The Pulacayo project is accessed from La Paz by means of a paved road, which runs to the area of Huari, passing through Oruro. It can also be accessed by the road between Oruro (gravel) and Potosí (paved) and from Potosí to Uyuni by a good quality gravel road. Paving of the road from Potosí to Uyuni began in 2007 and was scheduled for completion in 2010. 5.2
CLIMATE AND PHYSIOGRAPHY
Two Andean mountain chains run through western Bolivia, with many peaks rising to higher than 6,000 m. The western Cordillera Occidental Real forms the western boundary with Peru and Chile; the Cordillera Oriental Real runs southeast from Lake Titicaca then turns south across central Bolivia to join with the Cordillera Central along the southern border with Argentina. Between these two mountain chains is the Altiplano, a high plain with an altitude of 3,500 – 4,000 m. East of the Cordillera Central is a lower altitude region of rolling hills and fertile basins with a Mediterranean climate. To the north, the Andes fall away into the tropical lowlands of the Amazon Basin in Brazil.
22
Climate within Bolivia is altitude related. The rainy period lasts from November to March (summer). Of the major cities, only Potosí receives regular snowfalls between February and April at the end of the rainy season, although La Paz and Oruro do occasionally receive light snow flurries. On the Altiplano and in higher altitude areas, sub-zero temperatures are frequent at night throughout the year. Snow capped peaks are present year round at elevations greater than 5,250 m. The Pulacayo project area is located within the Fourth Geomorphological Province of Bolivia (Eastern Andes), immediately to the southwest of the Cosuño Caldera. Topographical relief is gentle to moderate, with elevations between 4,000 and 4,500 m amsl. The Paca and Pulacayo Domes stand out as topographic highs. Major valleys are shaped by permanent rivers fed by water draining the snow capped volcanic peaks, such as the Cosuño Caldera, and thermal hot springs scattered about the same volcanic complexes. The principal river is the Pucamayu (Río Rojo), which empties directly into the Salar de Uyuni. A small tributary, the Irpa Mayu River, collects runoff from local gorges like the Pacasmayo, Phusamayu, and others, and joins the Totora Mayu to form the Capilla River which eventually joins the regional Pucamayu. Pulacayo has a semi-arid climate, with annual rainfall around 100 mm and mean summer temperatures of 12°C between October and March. Winters are cold with minimum temperatures of -26°C and maximums of 18°C between June and July; mean temperature is 5.5°C. In general, the monthly annual mean temperatures range from a minimum of 1.5°C to a maximum of 21.5°C (Source: SENAMHI interpolated from nearby stations: www.senamhi.gov.bo and response to a request by Apogee). 5.3
LOCAL RESOURCES AND INFRASTRUCTURE
Bolivia is a natural resources rich country with a significant production history of silver and tin and secondary production of gold, copper, antimony, bismuth, tungsten, sulphur and iron. To the south and east, sizeable reserves of natural gas exist but their development and export is a contentious national issue, exacerbated by the absence of a seaport. The country has an abundance of hydroelectric power and transmission lines which parallel the road system connecting most of the major settlements. Remote villages generally have diesel generators which run only infrequently during evening hours. Power from the hydroelectric plants of Landara, Punutuma, and Yura (reconditioned by a joint venture between COMIBOL and the Valle Hermoso Electrical Company) passes a few kilometres south of Pulacayo via the national network and a high tension line constructed by the San Cristóbal Company. Telephone service and internet access are available in most areas and cellular telephone service is widespread, although coverage is patchy and international connectivity unreliable. Local communication services in the area are better than average for rural Bolivia. There is an ENTEL-based long-distance telephone service, a GSM signal for cell phones, and two
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antennae for reception and transmission of signals from national television stations. Apogee has installed a satellite receiver to provide internet access; this service is shared with the Cooperative Social del Riesgo Compartido (Shared Risk Cooperative). Exploration in Bolivia by international companies has been minimal in recent years; Newmont, Coeur d’Alene, Pan American Silver, Glencore and Apex (now Golden Minerals Company) are the most notable international companies represented in Bolivia in recent years. Several junior mining companies are also reported to have been active more recently. Due to perceived political instability and threatened changes to mining taxation there has been a decline in foreign investment to the mining sector. Basic exploration services are available within Bolivia: there are several small diamond core drilling contractors; ALS/Chemex, an international geochemical laboratory group, operates a sample preparation facility in Oruro; SGS operates an inspectorate service in La Paz; and other local assay facilities also exist. The Bolivian National School of Engineering operates a technical college in Oruro (Universidad Técnica de Oruro), including a Mineral Processing department with laboratory testing facilities, which provides commercial services to the mining industry. Competent junior-intermediate geologists, metallurgists, mining engineers and chemists are available in the country. Used mining equipment is plentiful, although most new equipment is imported from Chile or Peru where abundant mining services and supplies are available. At the peak of mining activity, more than 100 years ago, the population of Pulacayo surpassed 10,000. Today, there remain about 600 people. Demographically, the population is divided into a civil sector (people outside of mining activities) and a sector composed of “cooperativistas” (people dedicated to mining activities: Cooperativa Minera Pulacayo Ltda. (Pulacayo Mining Cooperative). The village of Pulacayo has a state-run school, and medical services are provided by the state Caja Nacional de Seguros (National Insurance Fund): a hospital and a clinic each function independently. The encampment has numerous dwellings, some of which are the property of COMIBOL while others belong to private individuals. Some COMIBOL properties have been donated to the “cooperativistas”; some are partly paid for by people who do not reside in the encampment, but keep the dwellings. As part of the Shared Risk Contract, COMIBOL puts the use of this infrastructure at the disposal of the project (Figure 5.5). Potable water for the encampment is supplied from a long-established dam (Yana Pollera) located 28 km from Pulacayo, in the Cerro Cosuño.
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6.0
HISTORY
The discovery of mineralization and the subsequent mining of rich silver deposits at Pulacayo date back to the Spanish Colonial Period (c. 1545). Details of actual production during this period are unknown. However, examination of the remnants of Colonial town sites suggests there was a sizable workforce on the property. In 1833, Mariano Ramírez rediscovered the Pulacayo deposit and, in 1857, Aniceto Arce founded the Huanchaca Mining Company of Bolivia (Figure 6.1) with the support of French investors. The operation ceased at the beginning of the 20th century when water problems in lower levels of the mine halted mining activity. Figure 6.1 Huanchaca Mining Company of Bolivia, circa 1890
In 1927, Mauricio Hochschild bought the property. The Veta Cuatro vein was intersected at an elevation of approximately -266 m, and continued down-dip to the -776 m elevation where it had a strike length of 750 m. During this time the 2.8 km long San Leon access tunnel was developed to facilitate ore haulage, and the first recorded exploration work in the area was undertaken. In 1952 the Bolivian government nationalized the mines and administration of the Pulacayo deposit passed into the hands of COMIBOL (the National mining enterprise), which continued operating the mine until closing in 1959 due to “exhaustion of the reserves and rising costs of exploitation”. COMIBOL also imposed cutbacks on exploration at this time.
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Historical data from face and back sampling were used by COMIBOL to identify trends of the high grade silver ore shoots for the Veta Tajo, and its contour map of the silver grades is presented in longitudinal view in Figure 6.2. Figure 6.2 Schematic Longitudinal Projection of the Silver Grades, Veta Tajo (Source: COMIBOL Internal Report, 1958)
In 1962 the Cooperativa Minera Pulacayo (a local group) was founded and leased the mine from COMIBOL. The Cooperative continues to conduct rudimentary, small scale mining to the present day, exploiting narrow, very high grade silver mineralization in the upper levels of the mine, above the San Leon adit level. Exploration of the Pulacayo area recommenced toward the end of the 1980’s with various mining and exploration companies targeting epithermal silver and gold mineralization in the volcanic-intrusive system in the Pulacayo area. In 2001, ASC initiated an exploration program in the district and signed agreements with the Pulacayo Mining Cooperative and COMIBOL (see Appendix I). ASC completed regional and detailed geological mapping, topographic surveying and sampling of the old historical workings. Subsequently ASC completed 3 drill campaigns at Pulacayo, totalling 3,130 m of diamond drilling. ASC concluded that silver-lead-zinc mineralization and hydrothermal alteration in the district are controlled by a strong east-west fracturing system developed in the andesitic rocks hosting the Tajo Vein. Significant results from the drilling programs were reported by ASC in a press release dated October 23, 2002 and are summarized in Table 6.1.
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Table 6.1 List of Significant Intersections (ASC, 2002) Hole N°
PUD004 PUD005 PUD006 PUD007 PUD007 PUD010 PUD011 PUD013 PUD013 PUD015 PUD015 PUD018 PUD019 PUD019 PUD020 PUD021 PUD022 PUD022 PUD022 PUD022 PUD022 PUD024 PUD024 PUD024 PUD024 PUD024 PUD024 PUD025
From (m) 284.80 96.15 105.55 60.00 70.00 364.40 110.00 36.55 104.40 159.10 172.75 105.50 85.00 83.50 141.80 131.55 160.80 62.00 128.55 138.40 148.00 97.00 99.65 110.40 149.00 189.40 212.40 89.60
To (m) 285.70 114.00 108.00 63.45 96.80 375.35 121.00 58.00 106.50 160.85 174.00 109.60 87.00 94.00 142.50 178.40 163.50 63.30 130.00 140.45 148.56 100.35 100.35 111.60 151.00 190.70 216.30 91.70
Intercept (m)
True Width (m)
0.90 17.85 2.45 3.45 26.80 11.35 11.00 21.45 2.10 1.75 1.25 4.10 2.00 10.50 0.70 46.85 2.25 1.30 1.45 2.05 0.56 3.35 0.70 1.20 2.00 1.30 3.90 2.10
0.64 8.00 2.00 2.00 20.00 6.50 5.50 10.50 1.50 1.20 1.00 4.00 2.00 10.00 0.50 25.00 2.00 1.00 1.20 1.50 0.50 2.50 0.50 1.00 1.00 1.00 3.00 2.00
Ag (g/t) 712.8 521.2 2676.8 1178.3 517.2 181.9 191.6 54.2 653.9 101.7 162.8 132.0 143.0 85.2 144.0 37.0 250.4 103.0 131.0 229.0 354.0 295.0 1120.0 602.0 412.0 181.0 379.4 186.0
Pb (%) 1.0 2.2 5.9 3.4 2.3 1.4 9.6 2.1 4.3 1.0 2.3 1.1 4.0 1.0 0.5 2.1 2.5 3.5 6.1 5.7 20.3 15.4 0.1 2.1 1.3 3.5
Zn (%) 1.7 2.4 2.5 3.6 4.2 5.0 9.8 4.3 6.7 2.9 5.5 4.4 5.8 4.9 7.5 5.8 2.6 2.7 5.9 5.4 17.8 6.3 0.3 1.7 3.9 5.7
In March, 2006, Apogee entered into an Option/Joint Venture agreement with ASC (see Appendix I) and commenced the exploration of the Pulacayo-Paca project shortly thereafter. Details regarding the exploration work carried out by Apogee are presented in Chapters 10 and 11, below.
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7.0 7.1
GEOLOGICAL SETTING
REGIONAL GEOLOGY
The geology of Bolivia is well described in various Bolivian government reports, including Soruco (2000), and various international journals and publications. National and regional scale geological maps are available from SERGEOTECMIN in La Paz. Some historical exploration reports are also held in its library. The principal geological provinces of Bolivia are shown in Figure 7.1, and the regional geology of central and southwestern Bolivia and the Pulacayo/Paca area is shown in Figure 7.2. The following paragraphs are from the US Geological Survey in USGS Bulletin 1975 (edited). Figure 7.1 Regional Geology of Bolivia
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Figure 7.2 General Geology of the Pulacayo Area, Potosí District, Bolivia
“In southwestern Bolivia, the Andes Mountains consist of three contiguous morphotectonic provinces, which are, from west to east, the Cordillera Occidental, the Altiplano, and the Cordillera Oriental. The basem*nt beneath the area, which is as thick as 70 km, is believed to be similar to the rocks exposed immediately to the east, in the Cordillera Oriental, where a polygenic Phanerozoic fold and thrust belt consists largely of Paleozoic and Mesozoic marine shales and sandstones. Deposited mostly on Precambrian basem*nt, the rocks of the Cordillera Oriental were deformed during at least three tectonic-orogenic cycles, the Caledonian (Ordovician), the Hercynian (Devonian to Triassic), and the Andean (Cretaceous to Cenozoic). The Altiplano is a series of high, intermontane basins that formed primarily during the Andean cycle, apparently in response to folding and thrusting. Its formation involved the eastward underthrusting of the Proterozoic and Paleozoic basem*nt of the Cordillera Occidental, concurrent with the westward overthrusting of the Paleozoic miogeosynclinal rocks of the Cordillera Oriental. These thrusts resulted in continental foreland basins that received as much as 15,000 m of sediment and interlayered volcanic rocks during the Cenozoic. Igneous activity accompanying early Andean deformation was primarily focused further west, in Chile. During the main (Incaico) pulse of Andean deformation, beginning in the Oligocene and continuing at least until the middle Miocene, a number of volcano-
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plutonic complexes were emplaced at several localities on the Altiplano, particularly along its eastern margin with the Cordillera Oriental, and to the south. In Pleistocene time, most of the Altiplano was covered by large glacial lakes. The great salars of Uyuni and Coipasa are Holocene remnants of these lakes. The Cordillera Occidental consists of late Miocene to Recent volcanic rocks, both lava flows and ashflow tuffs, primarily of andesitic to dacitic composition, that have been erupted in response to the subduction of the Nazca plate beneath the continent of South America. This underthrusting continues, and many of the volcanoes that form the crest of the Andes and mark the international border with Chile are presently active”.
Soruco (2000) describes the geology of the Cordillera Oriental in some detail (edited): “The Bolivian Cordillera Oriental is a well defined geographic, geomorphological and geological unit. It is an extension of the same chain in Peru and continues southwards into Argentina. It is limited to the west by the Coniri and San Vicente faults, which separate it from the Altiplano, and to the east by the Main Front Thrust as the limit with the Subandean Ranges. This cordillera has the highest elevations in the Bolivian territory, reaching altitudes close to 6,500 m above sea level, with the presence of sectors of permanent snow and glacial development Tectonically, the Cordillera Oriental can be divided into two sectors, separated by a deep lineament formed by the Cordillera Real Fault Zone. This lineament possibly pertains to a reactivated paleosuture. The sector west from this lineament pertains to the Huarina Fold-Thrust Belt. Geologically, the Cordillera Oriental holds the country’s most complete stratigraphic sequence, with Proterozoic to Recent rock outcrops and marine to continental sequences. The facies are also varied, mostly clastic, but with the development of carbonate shelves in the Upper Carboniferous and Permian and volcanic and volcanoclastics in different systems, but mostly in the Cenozoic. During most of the Lower Paleozoic, it constituted an intracratonic basin, from shallow to deep, with some compressive and extension phases separating the main tectonic sedimentary cycles. It goes on later to make up foreland and backarc continental basins, with important compressive phases with intense associated magmatism”.
7.2
DISTRICT GEOLOGY
The following description of the regional geological framework is based on work done by geologists of companies which have explored the area and from GEOBOL (now SERGEOTECMIN) publications. In particular, interpretations by ASC from the Hoja Geológica Uyuni (Uyuni Geological Leaflet), published by GEOBOL on a scale of 1:250,000 and by Apogee’s geologists, who have worked in the region for many years (Figure 7.3).
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Figure 7.3 Local Geology of the Pulacayo-Paca Area, Potosí District, Bolivia
The Pulacayo project is located on the western flank of a regional anticline in a geological environment composed of sedimentary and igneous rocks of the Silurian, Tertiary and Quaternary ages on the western flank of the Cordillera Oriental, very close to the CordilleraAltiplano boundary. The following major regional structures and geological features have influenced the local geology and mineralization:
Uyuni-Khenayani Fault: This structure is located about 4 km west of Pulacayo. It is a reverse fault which appears to control the position of volcanic complexes (Cuzco, Cosuño, Pulacayo and San Cristóbal) and their respective mineralized areas
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(Pulacayo, Cosuño, El Asiento, Carguaycollu and San Cristóbal). This structure places Tertiary sediments in contact with the Paleozoic formations.
Cosuño Caldera: Located a few kilometres north-northeast of Paca (a mineralized dome 10 km north of Pulacayo). This is a prominent, collapsed elliptical caldera structure with associated subsidiary domes and extensive ignimbrite deposits which partially cover the area of study.
Anticlinal Axis: The mineralized zones are almost all positioned on the west flank of a north-south striking anticline, which is primarily comprised of Silurian sediments overlain by Tertiary lacustrine formations. Within the anticline structure, a sedimentary sequence of clay, sandstone, and conglomerates of reddish colour, located between the Upper Oligocene (Chatiann) and the Lower Miocene (Aquitanian) time periods, forms the base of the stratigraphic column.
Intrusive bodies: Prominent Lower Miocene dacitic-andesitic domes and stocks that are associated with phases of resurgence of the calderas (Pulacayo, Tazna, Ubina and Chorolque calderas) stand out and intrude the sedimentary units. A later volcanic phase of the Miocene and Pliocene ages is represented in the anticlinal structure by volcanic pyroclastic and outflows of lava of andesitic and rhyolitic composition. The upper limit of the lithologic sequence is represented by well-developed ignimbrites, as a product of the intense activity of the Cosuño Caldera. The radiometric age dates for the intrusive centres of Animas, Chorolque, Tazna, and Santa Ana, located from 40 km to 60 km to the southeast of the Pulacayo district are between 13.8 and 16.8 Ma.
7.3
LOCAL GEOLOGY
SERGEOTECMIN has mapped and named the most relevant Tertiary volcanic-sedimentary formations in the Pulacayo area. Apogee geologists have remapped the Pulacayo area at 1:1,000 scale and the detailed geology is presented in Figure 7.4. The stratigraphic sequence that outcrops in the Pulacayo area is comprised of three Tertiary sedimentary units: Potoco Formation – Ciclo Andino I, bottom-, (Pérez, 1963), the San Vicente (Courty, 1907) and Quehua Formation – Ciclo Andino II, top-, (Geobol, 1963). The economic mineralization in Pulacayo is hosted by the sediments of the Quehua Formation and the Pulacayo andesites.
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Figure 7.4 Detail Geology of the Pulacayo Area, Potosí District, Bolivia
The following paragraphs describe briefly the geology of the various formations. Potoco Formation (Tpo) (Eocene, 50 Ma – Oligocene 30 Ma) The unit was deposited in the backarc and foreland basin of the Eastern Cordillera. The Potoco Formation forms the base of the Tertiary sequence. It consists of dark red-purple colour interbedded conglomerates, clays and sandstone lenses up to 2 m thick. The total thickness of this unit is unknown and it is present only in the Pulacayo area.
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San Vicente Formation (TSV) (Oligocene, 30 Ma – 25 Ma) This unit outcrops to the north of the Pulacayo (Cosuño) and forms the base of the sequence identified in the northern area. It comprises a thick layer of clast-supported polymictic conglomerate, containing dominantly subrounded clasts of quartzite of Palaeozoic origin that are up to 25 cm in diameter. The conglomerate matrix is composed of medium-grained sandstone and clay. Fragments of Cretaceous sandstones and/or of the Potoco Formation are also seen. The unit as a whole is coloured dark purple to dark reddish and its thickness is approximately 150 m. The San Vicente formation presents a diversity of continental environments: alluvial fan prograding facies, braided river fluvial and lacustrine. All these facies have marked volcanic influence. A good exposure of the contact with intrusive rocks can be observed at the exit of the San Leon tunnel at Pacamayo where the sediments are partially altered close to the contact with the Pulacayo Dome. Quehua Formation (TQH) (Geobol’s Quechua Fm) (Lower Miocene, 20 Ma – 15 Ma) Unconformably overlying the San Vicente Formation, this formation is composed of an intercalation of layers of clay and tuffaceous sandstone, reddish brown in colour to whitish green-grey in the altered areas, containing isolated conglomerate lenses and coarse-grained sandstone. Near the top of the formation there is a 20-m thick conglomerate layer. The sedimentary sequence is intruded by different subvolcanic pulses, all of which constitute the Pulacayo dome complex. J. Pinto in 1988 described the andesitic rocks of the Rotchild and Megacristal units as pre-mineral and the dacitic-andesitic rocks of the Paisano unit as post-mineralization in age. Hydrothermal breccias bodies were also mapped within the dome complex. 7.3.1
Structural Geology
The mineralized systems in Pulacayo are hosted by the Tertiary sediments and volcanic rocks of the Pulacayo dome complex. The complex, which is tens of kilometres in length, constitutes a corridor of several domes having a close spatial relationship with a north-south oriented regional fault. Polymetallic mineralization occurs along east-west oriented fault systems, of which the best known is the Tajo Vein System (TVS) emplaced in the southern side of the Pulacayo dome complex., The Tajo vein bifurcates in the andesitic rocks to form separate veins, which collectively form a dense network of veinlets along strike. The bifurcating, polymetallic veins are commonly separated by altered andesitic rock that contains disseminated sulphide mineralization. The TVS is almost 2,700 m along strike at surface and continues to depth of at least 1,000 m, the lowest level in the underground mine. In the upper levels the vein system is about 120 m
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in width. The polymetallic veins exhibit a sigmoidal geometry along strike, believed to be the result of sinistral movement along the north-south oriented regional fault 7.3.2
Hydrothermal Alteration
A local scale alteration system, which can be observed over an area of at least 3.0 km in length by 2.0 km in width has been mapped at Pulacayo. The hydrothermal activity is interpreted to have begun in the upper Tertiary, as can be implied from observation of the Oligocene altered sediments. There is no absolute dating on hydrothermal minerals, consequently the age of the hydrothermal alteration can only be inferred from cross-cutting relationships. Several assemblages of hydrothermal alteration have been recognized: propylitic, sericitic, moderate-advanced argillic, and siliceous alterations. It is possible to observe and map the different alteration assemblages in a traverse through the San León tunnel. Different alteration assemblages and intensities appear in different lithologies. The premineral domes (Rotchild and Megacristal) typically contain an extensive moderate argillic alteration that changes to an intense argillic alteration with closer proximity to the veins and disseminated-stockwork zones. A halo of intense silicification measuring a few centimetres in width is developed in the veins and veinlets walls. The moderate argillic alteration disappears gradually into a propylitic alteration halo at the borders of the Rotchild and Megacristal domes. The Paisano dome unit, interpreted as post mineralization in age, does not contain any observable hydrothermal alteration. The sedimentary sequence often contains a symmetric alteration halo related to the sulphide mineralized veins. From the centre of the vein outwards, the alteration grades to a silicified halo at the wall contacts and gradually into an argillic alteration with further distance from the vein wall. There is a very distinct change in colour from light green to dark red when the rock is fresh. The Pulacayo deposit is a typical polymetallic deposit where galena, sphalerite, barite, sulfosalts, pyrite, quartz and minor chalcopyrite are the major minerals. The sulphide mineralization occurs in veins, veinlets, disseminations in argillic altered rock and stockworks. The veinlets, disseminations and stockwork predominate in the andesitic rocks of the Rotchild and Megacristal domes. In the sediment the mineralization is restricted to narrow veins. The main vein exploited to date is the Tajo vein, which is rarely wider than 3 m.
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8.0
DEPOSIT TYPES
Epithermal mineral deposits are found in numerous locales world-wide. This class of mineral deposit has been recognized since the seminal work of Lindgren (1922) but has only received focused attention as exploration targets over the last 20 years. This work has revealed that precious metal mineralization occurs in two basic and distinct end-member styles. Both styles of mineralization are the result of heated, circulating water that is associated with the intrusion of an igneous body to within 2-4 km of the topographic surface. These intrusions are typically felsic to intermediate in composition, are of calc-alkaline affinity and are currently believed to play an important role in the source of the precious metals and the initial hydrothermal fluid composition. As these waters rise towards the surface they undergo physical and chemical changes that control the style of alteration and the locations at which the precious metals deposit. Many epithermal mineral deposits have been discovered in the western parts of North and South America and have been found to have been formed during three discrete geologic periods – Cretaceous (approximately 100 – 65 million years), Eocene (55 – 40 million years) and Pliocene (5 – 2 million years). Figure 8.1 presents an illustration of the relationship of these intrusions to the location of epithermal mineral deposits. Figure 8.1 Epithermal Mineral Deposit Model
The two end member mineralization styles differ in fundamental aspects. The High Sulphidation (HS) deposits are formed by very acidic hydrothermal solutions and have
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characteristic alteration assemblages that include quartz, alunite, and kaolinite. These deposits are generally hosted by rock units that exhibit the effects of interaction with extremely acidic solutions. In general terms this style of mineralization is found in close association to the source of heat and is typically found in spatial relation to bi-modal volcanic rocks (rhyolite and andesite) that reflect the presence of the underlying intrusions. Low Sulphidation (LS) deposits are formed by the circulation of hydrothermal solutions that are near-neutral in pH, resulting in very little acidic alteration with the host rock units. The characteristic alteration assemblages include illite, sericite and adularia that are typically hosted by either the veins themselves or in the vein wall rocks. The hydrothermal fluid can travel either along discrete fractures where it may create vein deposits or it can travel through a permeable lithology such as a poorly welded ignimbrite flow, where it may deposit its load of precious metals in a disseminated deposit. In general terms this style of mineralization is found at some distance from the source of heat. Figure 8.2 illustrates the spatial distribution of the alteration and veining found in a hypothetical low-sulphidation hydrothermal system. Figure 8.2 Alteration Mineral Distribution in a Low Sulphidation System
A great body of academic research has been completed on this deposit type in the past 20 years. A recent review of the salient geological features is provided in Sillitoe and Hedenquist (2003) and a summary of exploration techniques and approaches for these types of deposits is provided in Hendquist et al. (2000). The mineralization at Pulacayo is a typical low sulphidation epithermal deposit containing precious and base metals associated with volcanic rocks. The main geological characteristics of Pulacayo are:
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The sulphide mineralization is hosted by Tertiary volcanic rocks of intermediate composition. These rocks form part of a dome complex, which outcrops at surface. The mineralized body is composed of stockwork, narrow veins and veinlets, and disseminations in the argillic-altered rock controlled by an east-west oriented normal fault system. The width of the mineralization varies from 40 m to 120 m.
Sedimentary rocks intruded by the dome complex constitute the host rock for a bonanza type, high grade vein (Veta Tajo), with high silver and base metals content. The vein structure rarely is wider than 3 m and continues into the overlying stockwork and disseminated zone in the volcanic rocks.
The sulphide mineralization extends along strike for 2,700 m and by almost 1,000 m to depth, of which 450 m are hosted in the volcanic unit and 550 m are hosted in the sedimentary unit.
The mineral assemblage is relatively simple: barite, quartz, pyrite, calcite as gangue minerals; and galena, sphalerite, tetrahedrite, and other silver sulfo-salts as ore minerals. There is also minor chalcopyrite and jamesonite. The internal texture of the veins is generally banded and drusy with segments containing almost massive sulphides. A vertical zonation appears to exist where base metals increase at depth and silver content is higher at mid levels.
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9.0
MINERALIZATION
The Pulacayo epithermal deposit is hosted by sedimentary and igneous rocks of Silurian and Neogene age. The sedimentary rocks are composed of diamictites, sandstone and shale. The Neogene-aged rocks are mostly of volcanic-sedimentary origin and are composed of conglomerate, sandstones, reddish conglomerates, reddish-brown clay, whitish rhyolite tuff, andesite lava flows, dacitic rhyolite domes and andesite porphyry. The hydrothermal alteration assemblage is characterized by different mineral associations that can be classified as propylitic, argillic, sericitic, silicification, and opaline alteration styles. These alteration types form a semi-concentric zoning, which starts from the centre of the dome and moves towards the outer edge. The spatial distribution of the alteration halos is sinter silica, silica zone, sericitic zone, argillic zone and propylitic zone. However, these alteration halos are influenced locally by the presence of mineralized structures. The spatial distribution of the hydrothermal alteration is used as an indicator for the presence of mineralized structures. As was mentioned above, there is a strong relationship between the type of alteration and the presence of veins. The advanced argillic alteration is usually found in the walls of the veins, grading into less intense argillic alteration and then into a propylitic zone away from the vein walls (Figure 9.1). The thickness of the advance argillic alteration envelope varies from few centimetres to several metres in width. Figure 9.1 Drusy Vein Containing Sphalerite, Galena and Pyrite
Note the advanced argillic alteration halo in the vein walls.
At the Pulacayo deposit, as in many other hydrothermal deposits, the existence of a system of normal faults is interpreted to have acted as the conduit (feeder) for the mineralizing fluids. As the fluids circulate along the fractures, changes in temperature, pressure and the redox
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state between the wall rock and fluid provoke the alteration and precipitation of the sulphide mineralization in the open spaces forming veins and as disseminated minerals (Figure 9.2). The veins typically contain banded and drusy textures with intervals of massive sulphide mineralization that are usually less than a metre wide. Between major veins, the sulphide mineralization occurs in veinlets measuring on the order of millimetres to several centimetres in width, as well as occurring as disseminations in the altered rock (Figure 9.3). Figure 9.2 Example of a Massive Sulphide-Filled Vein, Pulacayo Deposit
Figure 9.3 Example of Veinlet and Disseminated Mineralization Comprising Tetrahedrite, Sphalerite, Galena and Quartz, Pulacayo Deposit
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The principal mineralized structure at Pulacayo is known as “Veta Tajo”, which was historically the main silver producer in the Pulacayo mine. The Veta Tajo is part of a larger structural system that is oriented approximately east-west and dips 75° to 90° south. The width of this vein varies from less than 1 m to several m. The structure is filled with quartz, barite, pyrite, sphalerite, galena and silver sulpho-salts (Figure 9.4). Figure 9.4 Example of a Quartz-Galena-Sphalerite-Filled Vein, Pulacayo Deposit
As described above, two distinct types of rocks are present: volcanic rocks belonging to the dome complex and sedimentary rocks. The dome complex is interpreted to be intruding the pile of sediments and sits above them, forming topographic hills (Figure 9.5). The mineralized structures are believed to behave differently with each rock type. In the sedimentary rocks there are usually one to three well define narrow mineralized structures, with no or very little disseminated mineralization present in between. These veins are very continuous in the sedimentary rocks, but when they enter into the volcanic rocks they change their character and spread out into multiple veins and veinlets forming almost a true stockwork. The width of the mineralized zone can reach up to 120 m. The contact between the dacitic-andesitic volcanic rocks and the sedimentary rocks is typically found about 500 m below the surface.
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Figure 9.5 Longitudinal View of the Stratigraphic Sequence, Pulacayo Deposit
The high grade parts of Veta Tajo have been mined out as a single vein in both lithologies leaving behind all the lower grade veinlets, secondary veins, stockwork and dissemination that occur in the volcanic rocks. The deepest level of mining in Veta Tajo is -825 m from surface, however, sulphide mineralization is known to continue below this level. The mine ceased operation at this level because of the high cost of extraction in those days and also due to water problems. Apparently the veins exhibit variable characteristics from meso-thermal at depth to epithermal closer to the surface. Fluid inclusion studies in sphalerite found temperatures of formation that vary from 180ºC to 235ºC. Measurements of salinity vary between 6.4 and 10.90% in equivalent weight of NaCl (Villalpando & Ueno, 1987, at Villalpando et al. 1993). Technical information on the Veta Tajo System has been gathered sporadically over the years, but a coordinated scientific approach to the geology, mineralogy and metallogeny is necessary to understand the mineralizing system. Furthermore the Veta Tajo System is not the only sulphide mineralized zone known to be present within the dome complex. Other sub-parallel structural systems containing indications of sulphide mineralization have been found along the northern contact of the dome complex. As well, breccia bodies up to 100 m in diameter containing galena and manganese stockwork zones with anomalous silver values are also present in that area.
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10.0
EXPLORATION
Apogee Minerals Bolivia S.A. commenced an exploration program in Pulacayo in January, 2006, after the company signed a JV agreement with ASC. Since then, Apogee has carried out detail geological mapping and sampling at surface and in the old underground workings, followed up by a topographic survey, geophysical survey, and diamond drilling. The Apogee exploration work also covered the Paca prospect, located 10 km to the north of Pulacayo. The Paca deposit is included within the limits of the exploration licenses. In brief, exploration drilling at the Paca deposit has been carried out on a nominal 50 m by 50 m pattern that has outlined silver-zinc-lead mineralization along a strike length of 500 m and to a depth of approximately 175 m in Zona Principale, the largest of the three modeled domains. A mineral resource estimate was prepared in March, 2007, the details of which are presented in Pressacco and Gowans (2007). This mineral resource estimate suggests that 18,416,000 tonnes of material at an average grade of 43 g/t Au, 1.16% Zn and 0.68% Pb are present in the Inferred Resource category which could conceptually be exploited by means of open pit mining methods. The location of the Paca deposit relative to the Pulacayo deposit has been presented in Figure 4.3, above. 10.1
TOPOGRAPHIC SURVEY
A topography survey on the Pulacayo-Paca areas was carried out under contract by Eliezer Geodesia y Topografia which is independent of Apogee and is based in La Paz, Bolivia. The survey covered an area of 24 km2 using the WGS84, Zone 19 South Datum. The coordinates of the reference point known as the GCP CM-43 were obtained from the IGM (Instituto Geografico Militar), (Figure 10.1). The equipment used by the contractor company included four Total Stations LEICA, models TCR 407, TC 703, TC 605L, and TC 600. As part of the field work, Eliezer Geodesia y Topografia also picked up the collars of those completed drill-holes and established 12 lines for an Induced Polarization survey, of which 7 were located in the Pulacayo area and 5 in the Paca area to the north. The stations were spaced at 50 m intervals along each line. The topographic map for the Pulacayo-Paca area was constructed with topographic contours at two metre intervals, with less than 0.5 m of error. The new topographic map was used as the base map to establish road access, geological mapping and surface sampling as well as for locating drill collars.
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Figure 10.1 Topographic Survey Crew, Pulacayo Project
10.2
GEOLOGICAL MAPPING AND SAMPLING
ASC completed a 1:5,000 geological map of Pulacayo in 2003; however, this map only covered a portion of the area of interest. This map was initially used by Apogee’s geologists as the geological reference until they completed their own map at a 1:1,000 scale that covered all the exploration licenses, including both the Pulacayo and Paca areas. The results of the geologic mapping program have been presented in Figure 7.4 above. COMIBOL provided ASC all of the old underground mine plan maps of the Pulacayo mine. Using this information, ASC reconstructed a 3D model for the underground mine. Recently Apogee modified the mine 3D model to its new topographic map as described in detail in Chapter 17.4, below. Apogee carried out a surface sampling campaign at Pulacayo in 2005. The sampling consisted mostly of rock chip samples taken from outcrops. The objective was to characterize the alteration patterns and locate the presence of sulphide mineralization both at surface and in the accessible zones of the underground mine. A total of 549 samples were collected from the following areas: Andesita, Ramales, Paisano, Veta Tajo and Veta Cuatro. Veta Tajo and Veta Cuatro are the historical veins mined at Pulacayo, and are oriented approximately eastwest. The Andesitas and Ramales areas are located to the east the Tajo Vein System and the Paisano area is located to the south of Tajo Vein System. Table 10.1 shows the maximum assay values obtained in the rock chip samples collected from the various areas. Micon recommends that the rock chip sample results that were collected in 2005 from the Veta Tajo and Veta Cuatro areas be integrated into the drill-hole/sampling database.
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Table 10.1 Summary Table of Rock Chip Sampling Completed by Apogee
10.3
No. of Samples
Location
5 121 196 43 184
Andesita Ramales 1,2 and 3 Paisano Hill Veta Tajo Veta Cuatro
Maximum Values Ag Pb Zn (g/t) (%) (%) 300 2.38 0.5 809 7.84 0.3 325 4.43 0.05 58 1.45 2.36 13.1 0.07 1.13
GEOPHYSICAL SURVEY
An Induced Polarization geophysical survey was carried out between November and December, 2007 over the Pulacayo and Paca areas by Fractal S.R.L (Fractal), a geophysical consultant company independent of Apogee. The survey used a dipole-dipole electrode configuration with readings taken every 50 m. Seven geophysical lines oriented north-south and separated by 400 m with stations every 50 m covered the Pulacayo area (Figure 10.2). Figure 10.2 Induced Polarization Survey Coverage Area, Pulacayo Project
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The orientation of the geophysical lines is approximately perpendicular to the east-west strike of the Tajo Vein system. Another five lines covered the Paca area. The total distance of survey coverage is 29 line km. The Induced Polarization survey revealed several areas of anomalous readings. The resistivity values were seen to vary between 8 to 600 ohm/m – the low values in electric resistivity were interpreted to represent weakly altered rocks while the high resistivity values were interpreted to represent siliceous bodies. The chargeability values were seen to vary between 2 and 20 mV/m, with chargeability values below 7 mV/m being interpreted to represent the background values (Figure 10.3). Figure 10.3 Induced Polarization Chargeability Results, Pulacayo Project
Red=high chargeability areas, Blue=low chargeability areas.
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The results of the geophysical survey led Fractal to conclude that an east-west oriented zone of anomalous readings measuring some 450 m in width is present in the Pulacayo area. The highest chargeability values are seen in lines LPY4, LPY5 and LPY6, between stations 0 and -900, and they are also coincident with high resistivity values. This has been interpreted as a block of rock with some degree of silicification that contains disseminated sulphide mineralization. Similarly, high chargeability anomalies are seen to coincide with the location of the Tajo Vein System, which is located between stations -750 and -900. This is seen particularly well along the LPY4 and LPY6 lines. Moderately anomalous values in chargeability that are located at the edges of the main anomalous zone have been interpreted as altered rocks, which could be related with a mineralized vein system at depth.
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11.0
DRILLING
Since the Pulacayo mine was closed in 1959, no exploration was carried out until 2002, when ASC initiated a diamond drilling campaign. In 2006, Apogee Minerals S.A. (Apogee) signed a Joint Venture agreement with ASC and commenced an initial exploration program that was completed in May, 2008. 11.1
ASC BOLIVIA LDC (2002-2005)
Between July, 2002 and November, 2003 ASC carried out the first phase of drilling, consisting of 14 diamond holes totalling 3,095 m in length (PUD001 to PUD017). Eleven holes were drilled from surface and another three from drill stations located in the underground mine. The contract drilling company, Leduc Drilling S.R.L., performed the drilling with two Longyear rigs, models LF-140 and LY-44. Four holes (PUD003, PUD013, PUD001 and PUD014) did not intercept the target due to technical problems. However, the results in the other ten holes were encouraging enough to continue drilling. The second phase of drilling by ASC commenced in February, 2003. This phase had considered 10 holes, however, the program was terminated after the first two holes were completed (PUD025 and PUD026) and totalled 554 m in length. Both holes were drilled from drill stations located in the underground mine by Drilling Bolivia Ltda, the contract drilling company. ASC re-initiated the phase II drilling program in September, 2003, completing eight holes totalling 1,302 m in length (PUD018 to PUD024 and PUD027). Six holes were completed from surface-based locations and another two holes were completed from drill stations located in the underground mine. The contract drilling company Maldonado Exploraciones S.R.L. was hired to complete the phase II drilling program and it used Longyear, model LY-44 and LF-70 drilling rigs. The drilling contractors encountered serious problem during the phase II program due to the terrain conditions and the drilling technique. As a result, some of the holes (PUD020, PUD021 and PUD023) were abandoned before reaching the target depths. Despite the excellent results obtained in these two phases of drilling, ASC decided not to continue with the exploration in Pulacayo. As a result, no drilling was carried out in Pulacayo during 2004 or 2005. 11.2
APOGEE (JAN 2006 – MAY 2008)
The first drilling phase undertaken by Apogee took place between January and June, 2006. The Phase I program consisted of 19 holes (PUD028 to PUD042) totalling 4,148 m in length. Four of the holes were completed from drill stations located in the underground mine and another 15 holes were completed from surface-based locations. The main objective of the Phase I program was to corroborate the previous drilling results obtained by ASC, during which several new drill-holes were completed to attempt to twin the results obtained by previous ASC holes. The Phase I program was also successful in
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demonstrating the presence of significant amounts of disseminated, veinlet, and stockwork sulphide mineralization located between the high grade veins that were exploited by the old and narrow underground mine workings. Between June, 2006 and February, 2007, Apogee decided to prioritize the exploration work at the Paca project. More than 25,000 m of diamond drilling was completed at the Paca deposit, resulting in a postponement of drilling at Pulacayo. The results of the exploration drilling programs at the Paca deposit are described in Pressacco and Gowans (2007). Apogee re-initiated drilling activities at Pulacayo in November, 2007. During this Phase II drilling program, Apogee completed 14 holes (PUD043 to PUD056) totalling 3,745 m in length. All of the Phase II drill-holes were drilled from surface-based locations. In general, the results of the Phase II drilling program were better than expected by Apogee. Some intercepts, such as that in hole PUD045, contained grades up to 262.5 g/t Ag, 0.79% Pb and 2.93% Zn over a core length of 61.00 m. The Phase II drilling program was successful in demonstrating that the Tajo Vein System was not only a disseminated, veinlet, and stockwork sulphide mineralized system that measured more than 100 m wide, but also contained high grade mineralized shoots that were not exploited by the previous operators of the mine. On the basis of the results of the Phase II drilling program, Apogee believed that another campaign of drilling was warranted. The Phase III drilling program took place between January and May, 2008. During this phase, 54 holes were completed (PUD057 to PUD110) that totalled 14,096 m in length. Eight of the Phase III drill-holes were completed from drill stations located in the underground mine, and the rest of the drill-holes were completed from surface-based locations. The Leduc Drilling S.R.L Company performed Apogee’s Phase I drilling campaign, while the Fujita Core Drilling Company carried out the Phase II and III drilling campaigns. Longyear rigs, models LF44, LM-55, LF-90 and LM-90, were used for the three phases of drilling. The diameter of the drill core for most of the holes was HQ (63.5 mm) with some exception where the diameter had to be reduced to NQ (47.6 mm) to traverse the old mine underground workings. 11.3
APOGEE (JUN 2008 – SEP 2009)
Apogee plans the drilling programs with the help of geological sections. The coordinates of the collars of the surface-based drill holes are set by the field geologist using a hand-held GPS unit, with the azimuth and inclination of the hole being set using a compass and a clinometer. The coordinates of the collars of the underground-based drill holes are set by a surveying team, with the azimuth and inclination of the holes being set using transits. The drill-hole deviation is determined at approximately 50 metre intervals using both Tropari and Reflex survey tools. The core is stored at the drill-site in wooden core-boxes containing approximately three m of core each. The sides of the core boxes are marked with the hole identification, box number and the depth intervals of the hole. Every run of core is separated
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by a wooden tag indicating the depth of the hole. Once the hole is completed, it is sealed and monumented with cement. A PVC pipe is put in the collar, which has been closed with a plug. A metallic plate that records the company name , hole identification, easting and northing coordinates, elevation, final depth and the “start and end” drilling dates is placed next to the drill-hole collar. The core boxes are transported by 4WD pick-ups to the core shack that is located in the town of Pulacayo, a distance of about 5 km. The core was then examined by the supervising geologist, and the depths of geological, structural, or alteration features were marked. An examination of the distribution of magnetic intensity of the drill core was conducted using a hand-held magnet. Descriptions of the lithologies, alteration styles and intensities, structural features, occurrences and orientations of quartz veins, occurrences of visible gold, and the style, amount and distribution of sulphide minerals, were then recorded in the diamond drill logs by the geologist.
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12.0
SAMPLING METHOD AND APPROACH
All of Apogee’s drill-holes at the Pulacayo prospect were completed using equipment to produce core with an HQ diameter, with the exception of some drill-holes in which drilling conditions required the reduction to an NQ diameter. Drill core was collected twice daily by Apogee geologists from the drill site and transported by truck to the company core yard at the Pulacayo townsite, at average distance of 5 km. Hole number and box numbers were marked on each core box by the drilling contractor prior to transportation. Wooden markers were placed in the core boxes after each run (nominally 3.0 m). Upon arrival at the core yard, company technicians aligned and reconstructed the core together when possible and marked individual depth marks at one metre intervals on the core and in the core box walls. Core recovery was measured between core blocks and noted on a data entry sheet. The core was then geologically logged and sample intervals were determined by the geologist. Generally the entire drill-hole was sampled on a 1-m basis; however, occasionally in the few holes with very bad recoveries, composite 2 – 5 m samples were taken. As well, sample lengths are adjusted to reflect significant features observed in the core such as changes in the geology, alteration or mineralization. In general, stockwork and disseminated mineralization was sampled separately from mineralization occurring as more massive veins. In the last phase of drilling, only the zones containing obvious mineralization and the immediately adjacent wall rocks were sampled. Sample numbers were assigned to each sample interval, the sample interval was marked on the core and the sample number written on the core box wall. An aluminum tag with the sample information on it (i.e. sample number, from and to, geologist initials and date), is also affixed in the core box with staples. Pictures of the core are taken after the boxes are marked, then the core is cut in half using a diamond saw and returned to the core box. Friable core was cut in half with a knife. Samples were taken in 1-m lengths and, in certain cases, at shorter lengths, with each sample put in a polyethylene bag. The sample number was written on the outside of the bag and the corresponding sample ticket was inserted into the bag. No missing or misidentified sample bags were reported. The type of mineralization in Pulacayo is mainly composed of sulpho-salt minerals, containing silver, and lead and zinc sulphides, with very rare or no native silver or gold. Therefore, little “nugget effect” is expected. The overall recovery has been over 90% in most of the cases regardless of the type of rock (i.e. andesite, dacite, sandstone or conglomerate). Poor recovery was encountered only when intercepting old underground workings.
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A total of 1,208 samples were sent to the laboratory of Bondar Clegg, Canada, from the first phase of drilling by ASC. A total of 15,454 samples were sent to the ALS-Chemex preparation facility in Oruro, Bolivia by Apogee., which were then analyzed at the ALSChemex facility located in Lima, Peru. Silver, zinc, lead and copper concentrations were determined using an aqua regia digestion followed by analysis using the ALS method codes AA46 and AA62 that employed Atomic Absorption Spectroscopy (AAS). For those samples containing greater than 300 g/t Ag, the gold values were determined using the same digestion method but using the Au-AA26 analytical method that employs a Fire Assay-Atomic Absorption finish on a 50 g aliquot. A total of 1,161 sample pulps from drill-holes PUD043 to PUD056 were analyzed a second time as replicates through the analytical method ALS AA46 specific element analysis using aqua regia digest followed by AAS determination (Ag, Zn, Pb, Cu), and fire assay-AAS method for samples with silver values exceeding 300 ppm. A total of 133 sample pulps, corresponding to drill-holes PUD045 and PUD063, were analyzed a second time using the ME-MS-61 method at ALS-CHEMEX, Lima, Peru, for 47 elements. As part of the Apogee Quality Control protocols, approximately 5% of the total (594 samples) were re-analyzed by a second laboratory, ALS-Chemex in La Serena (Chile), by the following techniques; ALS Analytical Codes AA46 and AA62 – specific element analysis using aqua regia digest followed by AAS determination (Ag, Zn, Pb, Cu). A comprehensive tabulation of significant results obtained from the drilling programs at the Pulacayo project was presented in Pressacco and Shoemaker (2008). Density measurements were taken every 10 m in zones where there was no observed mineralization; one density measurement per sample was determined when the core contained obvious mineralization (Figure 12.1). Changes in lithology, type or intensity of alteration, were also considered for density. Figure 12.1 Bulk Density Determinations, Pulacayo Project, Bolivia
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13.0
SAMPLE PREPARATION, ANALYSES AND SECURITY
Apogee does not perform any sample preparation or analytical work itself. All such work has been completed by ALS Chemex (ALS) of Lima, Peru. ALS is a respected international analytical service which is accredited with NATA and complies with standards of ISO 9001:2000 and ISO 17025:1999. It utilizes standard analytical methodology and employs a variety of international standards for quality control purposes. Samples were transported from field projects to the ALS sample preparation facility in Oruro, Bolivia by Apogee personnel or a reputable commercial carrier. Sample dispatch forms were utilized to list all samples in each shipment and laboratory personnel crosschecked samples received against this list, reporting any irregularities by fax or email to the site. ALS prepared a flow chart describing the sample preparation procedures for Apogee samples (Figure 13.1). Figure 13.1 Sample Preparation Flowsheet, Pulacayo Project, Bolivia
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All samples are weighed upon receipt and prepared using ALS preparation procedure PREP31B which consists of crushing the entire sample to >70% -2 mm, then splitting off 1 kg and pulverizing to better than 85% passing 75 micron (Figure 13.2). The coarse rejects are returned to Apogee for storage on site at Pulacayo. Figure 13.2 Particle Size Analyses of Exploration Samples, Pulacayo Project
Perform particle size analysis (Apogee) -2mm % Passing
100% 95% 90% 85% 80% 75% 1
26 51 76 101 126 151 176 201 226 251 276 301 326 351 376 401 426 451 476
Real Values
Base line 85%
work orders
Samples from ASC’s drill campaign (2002-2003) were analyzed at ALS’s facility in Vancouver, BC, Canada; samples from Apogee’s programs (2006- ) were analyzed at ALS’s facility in Lima, Peru. All analytical testing is performed utilizing a variety of industrial standard analytical techniques, including (i) ALS Analytical Code ME-MS41-50 element analysis using aqua regia digestion followed by ICP-AES analysis, (ii) ALS Analytical Codes AA46 and AA62 specific element analysis using aqua regia digestion followed by AAS determination (Ag, Zn, Pb, and Cu), and (iii) Fire Assay-AAS finish, for samples with Ag values >300 ppm. ALS inserts its own quality control samples (reference materials, blanks and duplicates) on each analytical run, based on the rack sizes associated with the method. The rack size is the number of samples, including QC samples, included in a batch. The blank is inserted at the beginning, standards are inserted at random intervals, and duplicates are analyzed at the end of the batch. All data gathered for quality control samples – blanks, duplicates and reference materials – are automatically captured, sorted and retained in the QC database. If any assay for reference materials, duplicates, or blanks falls beyond the control limits established, it is automatically flagged red by the computer system for serious failures, and yellow for borderline results. Apogee has instituted internal QA/QC procedures. Control samples (reference materials, blanks and duplicates) are routinely inserted in the batches. “Field Blanks” were prepared from a source of unmineralized quartzite outcropping near Pulacayo, and comprised a “coarse blank”. A commercial blank was purchased as the “fine blank”. Apogee also 54
purchased “commercial standards” (Certified Reference Material), brand WCM, types PB128 and PB-124. Field and commercial blanks and standards were inserted at least 1 in every 50 samples to ensure the presence of enough control samples in each rack. Duplicate samples, comprised of ¼ core, and duplicate samples of pulp were re-analyzed and both were taken random. Duplicate samples are given a new, unique number. Finally and as part of the QCAC procedures, the ALS facility in La Serena, Chile, was used as a second laboratory for cross laboratory analysis. The results of all of the standards, as well as the targets and double samples, are monitored constantly by using Evaluation Software and Quality Control in Reports while preparing the QA/QC respectively, accompanied by graphs by dates and by drill-holes, with the assistance of appointed personnel. There were not any significantly abnormal results detected in the samples. A full description of the Quality Control results has been provided in Pressacco and Shoemaker (2008).
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14.0
DATA VERIFICATION
Micon’s senior geologist, Mr. Reno Pressacco P.Geo., conducted a site visit to the Pulacayo project area between March 26 and 29, 2008 to examine the general site conditions present there. A small number drill pads were visited where discussions were undertaken that examined the drilling procedures that are employed. At the time of Micon’s site visit, one drill rig was in operation (Figure 14.1). Micon found that the drilling program was being carried out to the highest standards currently being practiced in the mining industry and observed that the geological staff was highly motivated and enthusiastic. Figure 14.1 General View of the Diamond Drilling Operation, Pulacayo Project
Micon continued its data verification by reviewing the drill core logging and sampling procedures and by comparing the geology and mineralization in several drill-holes against the descriptions in the drill logs completed by the Apogee geologists. Micon found that the logging of the drill core was carried out to the highest degree of quality and noted no significant errors or omissions in the descriptions of the geology and mineralization. Micon compared the assay results presented in three drill logs against the observed mineralization for the respective section of drill core and found that the assays correlated well with the
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visual observations. Micon observed that the sampling procedures are adequate to the mineralization found at the Pulacayo deposit. During the course of its inspection of the drill core, Micon noted that a number of the drillholes intersected mined out stopes from the historical mining activities at Pulacayo. In some cases the stopes are represented by a clay-like material (possibly uncemented back-filled tailings), loose rock-fill, or voids. In some cases where the drill-holes intersected open stopes, the drilling contractor was able to continue the drill-hole beyond the stoped area, while in other cases the drill-hole had to be terminated at the far stope wall. In conducting spot checks of the density measurements from drill core, Micon noted that the procedures employed previously consisted of the selection of a small piece of drill core with the intention of being representative of a longer interval (generally tens of m) of drill core. In some cases, Micon noted that this resulted in a significant variance locally and attributes this to sample bias. In other words, the selection of the small piece of drill core was not representative of the larger interval. Micon recommends that remedial actions be undertaken wherein additional density measurements be taken on a detailed scale within the zone of stockworking and veining in support of an accurate estimate of the tonnage of the mineral resource. As well, Micon also noted that the mineralized intervals contain intervals that are porous to varying degrees, with little attendant permeability. Micon must point out that current industry best practice includes employing the wax-seal method for cores containing porosity. An audit of the field version of the drill-hole database as at March 29, 2008 was conducted by selecting approximately 10% of the drill-holes. Micon understands that this field version of the database is not the most complete version, as the most up-to-date version of the database is maintained in the La Paz office. Micon understands that the field database is updated on a periodic basis, approximately once per month, so that the most recent drill-hole information may not be reflected in the field version of the database. In conducting its audit, Micon compared the information contained within the paper copies of the selected drill logs with the information contained in the digital database. The detailed results of this comparison have been recorded separately and have been supplied to Apogee at the Pulacayo site. In brief Micon views the findings for the most part as housekeeping items such as:
Disagreement in the drill-hole co-ordinates between the paper logs and the digital database is common. Micon suspects that this is due to more current information being utilized in the digital database from such activities as ground-truthing or detailed survey pick-ups following completion of the drill-holes. Micon recommends that the most current drill-hole location information be included with the drill logs. As well, Micon recommends that the drilling method (DD, RC) and size of drill-hole (HQ, NQ, etc) be recorded on the drill-hole logs.
There are common occurrences where the digital database contained down-hole deviation information, however, no such information can be found in the paper logs.
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Micon recommends that the down-hole deviation information be included with the drill logs.
Micon noted that the digital database contained information in regard to the core recovery, however, no records of this information could be found with the paper logs. Micon noted that the core recovery is recorded by the core shack technicians by hand on pre-printed forms, and recommends that these originals be included with the drill logs.
Micon noted that the results of the specific gravity tests are included in some of the drill-hole logs reviewed, however, no digital equivalent could be found. Micon suspects that this information is contained in a separate digital file and recommends that the density information be included as either a separate tab in the drill-hole database, or as a separate column in the assay table.
In examining the assay portion of the database, Micon noted that neither originals nor copies of the laboratory certificates are contained with the paper drill logs, and are not located at the field site (assay certificates are stored at the La Paz office). Micon recommends that either original assay certificates or good quality copies of the assay certificates be included with the paper drill logs.
Micon noted that the results of the QA/QC samples are currently recorded in the main assay table, along with the remainder of the assay records. As was discussed at Pulacayo, this manner of treatment will result in extensive data import errors for many of the commercial mine modeling softwares, and Micon recommends that such QA/QC data as blanks, standards, duplicates, and replicates be recorded as separate tabs in the main database.
As well, it was noted that assay values of less than detection limits were entered in the assay table using the “1000 >1000 0 n/a
%Cu 1.79 1.29 0.02 0.09
%Sb g/tHg 1.65 2.81 0.77 11.30 0.02 0.31 0.067347 0.74663
g/tAs 3940 457 1145 1153
g/tCd 261 >1000 156 n/a
%Cu 2.22 0.43 0.02 0.08
%Sb g/tHg 3.96 2.79 0.30 13.71 0.01275 0.31 0.107931 0.857532
g/tAs 2530 502 1865 1829
g/tCd 346 >1000 12 n/a
The back calculated lead and zinc head grades matched the composite head grades in Table 16.1, which indicates the metals balance for this test is reasonably accurate. For comparison, the 2003 RDi locked-cycle test is summarized in Table 16.2. A “grade vs. recovery” relationship can be developed. The relationship between silver head grades and recovery are shown in Figure 16.4 and Figure 16.5 (see page 72).
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Table 16.4 Locked Cycle Test Results-No Desliming Prior to Flotation
High/HighGradeLocked‐CycleFlotationTest(fromRdiReport,Mar2003) Description %weight g/tAg %AgDist %Pb %PbDist Leadconcentrate 3.10 10891 63.4 62.20 88.8 Zincconcentrate 5.00 3303 31.3 0.90 2.1 Tails(notreported) head 100.00 519 2.20 HighGradeLocked‐CycleFlotationTest Description %weight g/tAg %AgDist %Pb %PbDist Leadconcentrate 2.39 6620 56.0 52.40 78.8 Zincconcentrate 3.76 2010 26.7 1.25 3.0 Tails 93.85 52 17.3 0.31 18.3 head 100.00 283 100.0 1.59 99.99 MediumGradeLocked‐CycleFlotationTest Description %weight g/tAg %AgDist %Pb %PbDist Leadconcentrate 1.20 6220 33.7 51.00 74.3 Zincconcentrate 3.70 2990 49.7 0.85 3.8 Tails 95.10 39 16.7 0.19 21.9 head 100.00 222 100.0 0.83 99.99 LowGradeLocked‐CycleFlotationTest Description %weight g/tAg %AgDist %Pb %PbDist Leadconcentrate 0.53 2600 30.1 46.70 34.7 Zincconcentrate 1.28 749 20.9 4.32 7.7 Tails 98.19 23 49.1 0.42 57.6 head 100.00 46 100.0 0.72 100.00
%Zn 4.46 61.50
%ZnDist 3.9 87.6
3.96 %Zn 7.94 57.00 0.33 2.64
%ZnDist 7.2 81.1 11.7 100.0
%Zn 3.72 58.30 0.43 2.61
%ZnDist 1.7 82.6 15.7 100.0
%Zn 9.72 44.80 0.51 1.13
%ZnDist 4.6 51.0 44.5 100.0
Ultra-fines generated from the Pulacayo ore appear to be the reason for the low silver recovery in the medium and low grade sample. 16.1.2.2
The Effect of Fines on the Pulacayo Resource
As noted in the RDi report, the sample contained a significant amount of clay material which created problems in flotation pulp rheology. The 2009 testwork also identified issues with the clays in the Pulacayo ore. For this discussion, fines are defined as any particle with a diameter smaller than 44 microns, and clays as particles with diameters smaller than 2 microns. Also, “desliming” is defined as removing the clay fraction from the slurry. Clay causes problems by:
Significantly reducing the separation efficiencies between mineral and gangue in flotation. Clay particles preferentially follow the water into either the concentrate or to the tailings resulting in lower concentrate grade and lower recovery. 68
Blinding the filter cloth and retaining water in the filter cake when dewatering the concentrates.
Slow settling rates in the TSF water-cap column; hence, reclaiming water from the TSF may be problematic unless it is treated.
It is recommended that the clays in the Pulacayo ore be further studied to determine their effects on concentrate filtering, reclaim water clarity, and TSF deposition density for future design. The test program at UTO called for one open-circuit float test to be done with desliming of the slurry prior to flotation. Figure 16.3 shows the test procedure, described in the UTO report, which generated the results of test 4, as given in Table 16.5. Table 16.5 Metallurgical Balance, Deslimed Prior to Float, Medium Grade Test 4 Products Pb-Ag Flotation 2º Pb Cleaner 1º Pb Cleaner Pb Rougher Zn-Ag Flotation 2º Zn Cleaner 1º Zn Cleaner Zn Rougher Underflow Overflow Total Tailings Calculated Head Grade
Weight % 0.68 0.20 0.85 1.73 2.97 0.37 1.41 4.75 71.22 22.31 93.52 100.00
% Pb 57.00 29.20 6.47 29.04 0.29 0.72 1.14 0.58 0.13 0.35 0.18 0.70
Lead % Dist. 55.49 8.42 7.81 71.72 1.23 0.38 2.30 3.91 13.22 11.15 24.37 100.00
Silver g/t Ag % Dist. 10,000 35.49 7,270 7.65 1,790 7.88 5,666 51.02 679 10.49 338 0.64 2,900 21.35 1,314 32.48 16 5.93 91 10.57 34 16.50 192 100.00
% Zn 5.78 4.80 3.90 4.75 55.40 11.25 13.80 39.60 0.12 1.21 0.38 2.32
Zinc % Dist. 1.70 0.42 1.42 3.54 70.92 1.78 8.42 81.12 3.69 11.65 15.34 100.00
The cyclone overflow, which is the deslimed fraction product, contained 10.57% of the silver which was sent to tails. If this silver can be recovered, it could potentially increase silver recovery by 10%. If this silver clay-fraction can be recovered it would also have to be cleaned to concentrate grade. Sodium fluosilicate was used to depress the clays in Test 4 and in the other flotation tests. Lime was also used to control pH for differential flotation and to disperse the clay to help improve the concentrate grade. The treatment of the silver clayfraction requires further metallurgical tests, before final selection of the process flowsheet and equipment. The generation of clays in the grinding circuit needs to be kept to a minimum. For this reason, cyclone separation efficiencies will be an important consideration when the selection of grinding circuit equipment is done.
69
Figure 16.3 Open Circuit Float Test Parameters - Desliming Prior to Float -Test 4
70
RDi reported the clay as coming from the 30% mica/illite, and 10% kaolinite in the host rock. In addition, the OTX Mineralogy report (January, 2003), indentifies tuffaceous clastite as a clay-generating rock. No further mineralogical testing on the clays is considered necessary. Particle size distributions (PSD), and assaying of size fractions on the flotation feed done by UTO shows that the clay content increases with decreasing grade. The medium grade had 22.31% fines in the float feed, and the low grade has 26.65% fines in the float feed. This is also backed up by the size analyses on the flotation tails showing increasing amounts of clay (including silver-bearing clay) going to tails with decreasing head grades. As the head grade decreases, clays have an increasingly detrimental effect on concentrate grade and recovery. Table 16.6 shows increase silver recovery calculated by adding 75% of the silver in the slime fraction to concentrate, instead of sending it to tails. This is practical using fine recovery equipment and using SG differentials between oxides clays and metal clays with centrifuges, spirals, and/or desliming cones, etc. These recovery numbers were used in Table 16.7 to forecast the concentrate grades and recovery used in the economic assessment. Table 16.6 Locked Cycle Test Results - Desliming Prior to Flotation
HighGradeLocked‐CycleFlotationTests(deslimed) Description %weight g/tAg %AgDist 2.14 9670 69.89 Leadconcentrate 3.69 1080 13.46 Zincconcentrate 75.43 32 8.16 Floattails 18.74 134 8.49 COFtotails 94.17 52 16.65 Totaltails 100.00 296 100 Backcalculatedhead MediumGradeLocked‐CycleFlotationTests(deslimed) Description %weight g/tAg %AgDist 0.8 12250 47.49 Leadconcentrate 3.56 1460 25.12 Zincconcentrate 75.59 48 17.52 Floattails 20.05 102 9.87 COFtotails 95.63 59 27.39 Totaltails 100.00 207 100 Backcalculatedhead LowGradeLocked‐CycleFlotationTests(deslimed) Description %weight g/tAg %AgDist 0.87 3390 67.53 Leadconcentrate 1.55 318 8.45 Zincconcentrate 71.76 11 18.1 Floattails 25.82 10 5.92 COFtotails 97.58 11 24.03 Totaltails 100 45 100 Backcalculatedhead
71
%Pb
%PbDist
%Zn
%ZnDist
53.4
76.98
5.52
4.27
1
2.49
59
78.68
0.23 0.7
11.7 8.84
0.27 1.43
7.37 9.69
0.32
20.54
0.5
17.06
1.48
100.01
2.77
100.01
%Pb
%PbDist
%Zn
%ZnDist
56.93 0.74
61.51 3.55
5 51.4
1.83 83.66
0.24
24.42
0.42
14.51
0.39
10.52
1.25
11.45
0.27 0.74
34.94 100
0.59 2.19
25.95 111.45
%Pb
%PbDist
%Zn
%ZnDist
50.5
62.12
19.65
14.85
1.24
2.03
53.3
72.03
0.27
27.44
0.21
13.12
0.23
8.41
0.2
4.49
0.26 0.71
35.85 100
0.21 1.15
17.61 104.49
The zinc head grade distributions (highlighted above, in yellow) indicate the need for UTO to further refine the reported metallurgical balance. Figure 16.4 show the grade recovery curve for straight flotation without desliming prior to flotation, and Figure 16.5 is the grade recovery curve assuming desliming prior to flotation, but then adding 75% of the fine silver back to the concentrates to obtain the final silver recovery. Figure 16.4 Silver Grade vs % Recovery without Desliming prior to Flotation 100 %
95 90
R e c o v e r y
85 80 75 70 65
y=0.0875x+54.483 R²=0.826
60 55 50 0
100
200
300
400
500
600
Silvergradeg/t
Figure 16.5 Silver Grade vs % Recovery when 75% Silver Recovered from Deslimed Clays 100 %
95 90
R e c o v e r y
85 80 75 70 65 y=0.0333x+77.319 R²=0.8299
60 55 50 0
100
200
300 Silvergradeg/t
72
400
500
600
The final calculation, as shown in Table 16.7, estimates the mass yield, concentrate grades and recoveries consistent with the predicted mill feed grade. Table 16.7 Concentrate Grades and Recovery at Forecast Average Head Grade
Product Mill Feed Lead concentrate Zinc concentrate Tailings
16.1.2.3
Mass Yield dmt/d 1800 29 59 1713
Grade
Percent Recovery (%)
Ag g/t
%Pb
%Zn
Ag
Pb
Zn
154.2 6220 873 28.5
1.0 51.0 0.85 0.22
2.0 3.72 53.0 0.19
100.0 63.9 18.6 17.6
100.0 77.6 2.7 19.7
100.0 3.0 87.7 9.3
Deleterious Elements on Smelter Returns
The Pulacayo ore contains four deleterious elements which will decrease the value of the lead concentrate. The composition of the lead concentrate from the medium grade sample included arsenic (0.394%), copper (2.80%), antimony (3.44%), and zinc (4.19%). The zinc concentrate had lower concentrations of these elements. The medium grade lead and silver concentrates assays were used in the economic model and NSR calculations.
16.2
MINERAL PROCESSING
Mineral Processing options are described in Section 18 of this report.
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17.0 17.1
MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES
INTRODUCTION
An initial drilling program during the 2008 field season at the Pulacayo project has been successful in outlining a broad zone of relatively low grade disseminated- and stringer-style silver-zinc-lead mineralization along a strike length of approximately 750 m and from surface to a vertical depth of approximately 500 m. This mineralization was the subject of an initial mineral resource estimate that was prepared prior to the completion of the drilling program which used all drill hole data up to and including hole PUD-110 (Pressacco and Shoemaker, 2008). This zone contains occasional higher grade intervals that consist of relatively narrow sulphide-rich veins, stockwork breccias and breccia zones. Drilling continued subsequent to the crystallization date of the initial mineral resource estimate such that an additional 29 drill holes were completed, largely from a drill station established within the existing underground workings, and targeted an area of higher grade mineralization with the objective of providing sufficient in-fill information to improve the confidence of the mineral resource estimate in that area. All of the core for these additional 29 drill holes was logged geologically and, due to budgetary constraints, the core from all holes was assayed, except for six drill holes (PUD-134 to PUD-139, inclusive). The initial mineral resource estimate completed in 2008 contemplated three possible production scenarios including extraction of mineralized material by means of an open pit mine only, and underground mine only and a combination of open pit and underground mining. The objective of this updated mineral resource estimate is to provide a global estimate of the tonnage and average grade of the mineralized material present using a conceptual operational scenario in which mineralized material will be extracted by means of underground mining methods, with zinc-silver and lead-silver concentrates being produced either via an on-site concentrator or by means of a toll-milling agreement with an existing concentrating facility located elsewhere in the region. 17.2
DESCRIPTION OF THE DATABASE
A digital database containing the additional 29 drill holes was provided by Apogee to Micon wherein such information as collar location, down-hole survey, lithology, density measurements and assays was stored in comma delimited format. This drill hole information was modified slightly so as to be compatible with the format requirements of the GemcomSurpac v6.1.1 mine planning software and was merged into the existing drill hole database. A number of additional tables were created during the process of developing a grade block model of the mineralization found at Pulacayo to store such information as composite assays, zone composites and assorted domain codes. A description of the revised database is provided in Table 17.1. In all, the database contains information for 138 drill holes that comprise surface-based drill holes completed by Apex Silver and recent surface- and underground-based drill holes that
74
were completed by Apogee. A listing of the collar information for the initial 109 drill holes was provided in Pressacco and Shoemaker (2008) and a listing of the collar information for the additional 29 drill holes is provided in Appendix II. Table 17.1 Summary of the Pulacayo Drill Hole Database as at October 14, 2009 Table Name assay_capped assay_raw assay_raw2 collar comp_1m ddh_composites styles survey translation zone_flags
17.3
Data Type interval interval interval
Table Type time-independent time-independent time-independent
interval interval
time-independent time-independent
interval
time-independent
Records 3,805 0 17,443 138 4,172 76 5 706 0 154
TOPOGRAPHIC SURFACE
The topography in the Pulacayo area ranges in elevation from approximately 4,100 m to 4,500 m amsl and consists largely of rolling to steep-sided slopes along incised valleys. For the most part the surficial materials are comprised of in-situ weathered, colluvial and alluvial deposits with occasional low rock outcroppings. A detailed topographic survey was carried out by Apogee in 2008 where each two-metre contour and all important topographical features such as roads and shaft collars were surveyed in using a total station and a series of reflecting prisms that were held in place by field crews. In such a manner Apogee has generated a high quality topographical map for an area that measures approximately 2,600 m in an east-west direction and 1,600 m in a northsouth direction. 17.4
HISTORICAL MINE WORKINGS
The Pulacayo project has a long history of mining as discussed in Chapter 6 above. This mining activity has resulted in an extensive network of shafts, winzes, level development and stoping dating back to the early 1800’s. Records relating to this historical mining activity are available from such sources as private company files and from the offices of COMIBOL to varying degrees of detail. In 2008, Apogee had conducted an initial review of the records contained within the COMIBOL offices in La Paz and was successful in locating some level plans for the upper levels, along with a vertical longitudinal projection depicting the mined out areas that dates to 1945, corresponding to the end of the mining activities by the Hochschild group. The mine was nationalized in 1952 and was operated by COMIBOL, which Micon understands had the primary focus of conducting pillar recovery where available and exploiting high grade areas of mineralization deeper in the mine. The mine subsequently closed in 1959 and experienced a renewed period of activity when the
75
“cooperativas” (an informal collection of local individuals) began intermittent mining activities that focussed on exploiting very narrow (on the order of 0.5 m), high grade structures. Mining activities by the cooperativas continues to this day. While still using the metric system of measurement, the entire historical underground infrastructure was completed using a surveying co-ordinate system that is different from that employed by Apogee. Digital copies of the level plans were provided to Micon which proceeded to adjust the location of the workings to Apogee’s project grid using the location of the shafts shown on the level plans and their corresponding locations on the new, highquality topographic survey as control points. Micon used the Gemcom-Surpac mine modeling package to carry out this transformation and found that, for the most part, the adjustment from the historical coordinate system to Apogee’s survey system required only a simple shift of the northing and easting coordinates. A minor adjustment was required in elevation, but no rotation was required. Comparison of the final location of the shafts against the information provided from the detailed topographic surface suggested that the transformed locations of the shafts are accurate to within 5 m. It is to be noted that the source data for the model of the levels in the mine are the historical level plans, which contain little to no information regarding the grade or slope of the levels. In reality, the grade of the floor of the levels is typically excavated at a slight incline (typically on the order of +0.5% to +1% for track-based underground mining operations) in order to allow drainage of water. However, considering the age of the workings in the upper levels, a strong possibility exists that transportation of the muck was carried out with the assistance of pit-ponies where the floor of the drift can be established at steeper inclines. Given the lack of detailed information regarding the inclination of the floor of the drifts, for the purposes of the initial mineral resource estimate Micon assumed an inclination of zero (i.e. a flat floor) for all of the levels modeled. As well, for the purposes of the initial mineral resource estimate, Micon assumed a constant cross-sectional dimension of 3.0 m (width) x 3.7 m (height) for all of the modeled drifts on the basis of the results of examination of the indicated drift widths on a number of the level plans. Should the project proceed to a more advanced state, Micon recommends that the precise location and inclination of the levels be established by detailed survey methods. As well, it is to be noted that the level plans for three of the upper levels have not been located (the 4252, 4282 and 4316 metre levels). Micon recommended that efforts continue to be directed towards location of the records of these levels and integration of their results with the remainder of the model of the mine workings. In respect of the mined out areas, the only source of information that could be located was a vertical longitudinal projection that was found in the files of COMIBOL (Figure 17.1). It can be seen that sufficient information is contained to determine the location and extent of the mined out areas relative to the levels, shafts and winzes. However, detailed examination of the development on many levels reveals that the location of the stoped area cannot be determined with confidence because of the presence of a number of parallel drifts that are
76
oriented along the strike of the mineralization, each of which could have been used as access and haulage ways for extracted mineralized material. Because of this uncertainty, and until further information is found to the contrary, Micon assumed that stoping was carried out for each of the parallel drifts and that the stopes extended completely up to the next level above. Figure 17.1 Vertical Longitudinal Projection of the Mined Out Areas as at 1945, Pulacayo Project
A major shortcoming of the longitudinal projection method of presentation is that the width of the mined out stopes cannot be determined. The width of the modeled stopes was estimated from a description of the mining presented in Ahlfeld and Schneider-Scherbina (1964) that describes the widths of the stopes as ranging from 1.1 to a maximum 6 m. For the purposes of this initial mineral resource estimate, Micon assumed a constant, average stope width of 3 m for the model of the mined out voids. Micon recommends that should the project proceed to a more advanced state, the shape and location of the mined out stopes be determined by appropriate methods to an appropriate degree of accuracy. Plan and longitudinal images of the resulting digital model of the mined out areas are presented in Figure 17.2. 17.5
METAL PRICE SELECTION
The prices of zinc, lead and silver are cyclical, responding to the supply and demand relationship and influenced to a degree by market speculation and technical analyses. The metal prices have varied widely since the year 2000 and the prices for each of the three metals have recently retreated from their former high levels. Given the cyclical nature of metal prices it is not reasonable to utilize the metal price at any one point in time, as it is certain that the price will change in the future.
77
Figure 17.2 Selected Views of Digital Models of Historical Workings, Pulacayo Project
78
While experience has shown that it is difficult at best to predict what the future metal prices will be, a reasonable alternative is to utilize an average metal price over a time period rather than using the metal prices at the close of any particular business day. In this manner a degree of averaging is applied to the cyclical nature of the metals prices and longer-term trends in the metal prices begin to be taken into account. For the purposes of this mineral resource estimate, Micon has chosen to use the average silver price of the 36-month period ending August 31, 2009, resulting in a value of $13.81/oz (source: Kitco web site) and representing the trading range of the metal for that period. Since the selection of this average metal price, in the period September 1, 2009 to March 31, 2010, the daily price fix of silver in London has varied between a low of $14.74/oz and a high of $18.84/oz. The prices of both lead and zinc have gone through a trough in late 2008 and early 2009 and are now significantly above their lows. In the absence of a more formal metal price forecast, Micon believes that an appropriate method of selection of metal prices for lead and zinc is to examine the longest term forward contract price for each metal that is available on the London Metal Exchange, as it is believed that these forward prices are the best reflection as to where the industry as a whole believes that the metal prices will be during the period under consideration. As of August 2009, the London Metal Exchange 27-month forward seller price for zinc was $0.864/lb) and the 15-month forward seller price for lead was $0.859/lb). 17.6
DOMAIN MODELING
Based upon its experience in the preparation of the initial mineral resource estimate, Micon concluded that the relationship of the mineralization to host lithology indicated that the composition of the hosting lithologic units bears little to no influence upon the concentration or distribution of the mineralization. Examination of the metal distributions intersected in the drill hole assay data reveals that the distribution of the metals varies widely from one sample to the next, such that a potential economic return of any given sample can be achieved by any of the three metals in any given sample. Consequently, for the updated mineral resource estimate, Micon proceeded to prepare a domain model that attempted to represent the distribution of the mineralization that exceeded estimated operational costs only. For the purposes of this updated mineral resource estimate, Micon judged that the most appropriate method to deal with the polymetallic nature of the mineralization was to apply a Net Smelter Return (NSR) to the assay data. This method recognizes that more than one metal can contribute to a potential revenue stream and proceeds to derive a factor that accounts for such items as recovery to concentrate, metal prices payable fraction, penalties, treatment and refining charges and freight. In this manner, a set of factors are derived that convert the in-situ grades to net revenue for each metal. The revenue for each metal is summed to arrive at a NSR value for a given sample.
79
Given that the exact values of many of these input parameters are not known at such an early point in the project’s development, estimates were derived on the basis of the best available information from a variety of sources including initial test work results and Micon’s experience with current smelter terms for zinc and lead concentrates in the region. A summary of these factors is provided in Table 17.2, however, due to confidentiality reasons, details of the smelter terms cannot be disclosed. Table 17.2 Summary of the Input Values and NSR Factors, Pulacayo Project Item Metal Price Recovery to Concentrate NSR Factor
Silver $13.81/oz 31.3% to zinc conc 63.4% to lead conc 0.33 per g Ag
Zinc $0.86/lb 87.6% to zinc conc 3.9% to lead conc 15.29 per % Zn
Lead $0.86/lb 2.1% to zinc conc 88.8% to lead conc 13.87 per % Pb
The NSR value was then calculated for each sample within the assay database. For purposes of construction of a domain model of potentially economic mineralization a nominal NSR value of $40/t was applied as a modeling constraint on in-situ block values.. The NSR value was displayed on the drill hole traces and was used to establish the outline of the mineralized zone on cross-sections that were spaced at 50 metre centres (viewing windows of +/- 25 m). The locations of the mineralized contacts were “snapped” to the observed location in the individual drill holes such that the sectional interpretations “wobbled” in three dimensional space, to either side of the section plane. In all, interpretation was carried out on 19 cross-sections along a strike length of 950 m and to a depth of approximately 450 m, and the resulting “wobbly polylines” were then linked together to form a three-dimensional solid of the mineralized zone (Figures 17.3 and 17.4). Examination of drill core revealed that a cap of oxidized material was present throughout the project area. Based upon visual observations, Micon views the effect of this oxidation as altering original silver-zinc-lead-bearing hypogene minerals to their oxide, carbonate or sulphate equivalents. Given that no metallurgical test work has been completed on this material, on the basis of its experience, Micon believes that the presence of the oxidation in the mineralized zone will have a negative effect upon the metal recoveries and the quality of the resulting concentrates. To that end, a model of the oxide-sulphide transition was created from drill hole data and was used to code the block model accordingly. During the course of preparing the cross sectional interpretation of the NSR domain, a number of intervals were noted in the drill holes for which no assay information was available. In some cases these non-sampled intervals fell inside the NSR domain model, and so were likely to result in an estimation error on a local basis. Micon elected to adopt a conservative approach and assumed that the non-sampled intervals that lay within the NSR domain contained zero metal values. In all, two drill holes were affected (PUD024: 227.40234.60 m and DDH PUD074: 345.82-351.00 m, 351.71-354.70 m, 355.24-358.00 m).
80
Figure 17.3 Plan and Longitudinal Views of the Nominal $40/t NSR Solid
81
Figure 17.4 Cross Section 740300E Showing the Outline of the Nominal $40/t NSR Domain Model
82
17.7
TREND ANALYSIS
An analysis of the trends of the various components of the mineralization such as silver, zinc and lead grades was conducted to assist in the understanding of the spatial distribution and any zonation of these items within the limit of the mineralized domain. In order to prepare longitudinal views of the metal distribution, the composite silver, zinc and lead grades contained within the three-dimensional model of the mineralized zone were extracted from the database using the Composite by Geology function of the GemcomSurpac software. The resulting data points were projected in longitudinal view for treatment and analysis. Longitudinal views of the contoured silver, zinc, lead grades, along with the contoured NSR values are presented in Figures 17.5, 17.6, 17.7, and 17.78 respectively. Figure 17.5 Contoured Silver Values for the Nominal $40/t NSR Domain Model, Pulacayo Project
83
Figure 17.6 Contoured Zinc Values for the Nominal $40/t NSR Domain Model, Pulacayo Project
Figure 17.7 Contoured Lead Values for the $40/t NSR Domain Model, Pulacayo Project
84
Figure 17.8 Contoured NSR Values for the Nominal $40/t NSR Domain Model, Pulacayo Project
Although a number of small-scale trends are evident in these images at varying orientations, the overall trends for the distribution of silver, zinc and lead are generally parallel to the strike of the mineralizing system (i.e. azimuth 100°) with a horizontal plunge (i.e. no plunge or rake within the plane of the mineralized system). 17.8
GRADE CAPPING
Examination of the drill core and the raw assay results indicates that high grade samples are present within the data set that typically are associated with narrow veins/veinlets of semimassive to massive sulphides. These veinlets typically have limited vertical and lateral continuity, consequently Micon elected to limit the influence of the high grade values by capping of the grades. All of the raw samples contained within the mineralized domain were coded and extracted from the database for examination. The descriptive statistics of these samples are provided in Table 17.3 and frequency histograms are presented in Figures 17.9, 17.10, 17.11 and 17.12.
85
Table 17.3 Summary Statistics for Raw Samples Contained within the Mineralized Domain Model Item Arithmetic Mean
108.81
AgCap 1,8000 97.99
Length-Weighted Mean
100.55
92.94
0.76
0.76
1.70
1.67
0.03
0.03
Standard Error
6.34
3.79
0.03
0.02
0.04
0.03
0.00
0.00
Median
19.00
19.00
0.36
0.36
1.20
1.20
0.01
0.01
Mode
6.00
6.00
0.00
0.00
0.00
0.00
0.01
0.01
390.77
233.77
1.59
1.47
2.21
1.99
0.11
0.08
3.59
2.39
1.94
1.81
1.22
1.12
3.25
2.55
3.89
2.52
2.09
1.94
1.30
1.19
3.53
2.66
Standard Deviation Coefficient of Variation-Arithmetic Coefficient of Variation-Weighted Sample Variance
Ag(g/t)
Pb (%)
Zn (%)
0.82
PbCap 15 0.81
1.82
ZnCap 11.5 1.78
Cu (%) 0.04
CuCap 1.0 0.03
152,704.21
54,650.40
2.54
2.15
4.90
3.97
0.01
0.01
Kurtosis
342.71
24.46
73.27
35.11
18.21
7.63
368.81
56.75
Skewness
15.37
4.59
6.84
5.15
3.51
2.51
15.50
6.63
10,000.00
1,800.00
28.70
15.00
23.20
11.50
3.29
1.00
Minimum
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.00
Maximum
10,000.00
1,800.00
28.70
15.00
23.20
11.50
3.29
1.00
Sum
414,028.65
372,854.35
3,126.47
3,087.98
6,916.02
6,777.57
120.52
115.14
3,805
3,805
3,805
3,805
3,805
3,805
3,424
3,535
Range
Count
Figure 17.9 Silver Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project Upper Tail Histogram of Raw Silver Assays Within the Mineralized Domain Model Pulacayo Project (n=3,805) 100 90 80
Frequency
70 60 50 40
Grade Cap = ~1,800 g/t Ag (18 Samples)
30 20 10 0
Ag (g/t)
86
Figure 17.10 Zinc Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project Upper Tail Histogram of the Zinc Raw Assays Within the Mineralized Domain Model (n=3,805) 500 450 400
Frequency
350 300 250 200 150 100
Grade Cap = 11.5% Zn (32 Samples)
50 0
Zn (%)
Figure 17.11 Lead Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project Upper Tail Histogram of Lead Raw Assays Within the Mineralized Domain Model (n=3,805) 200 180 160
Frequency
140 120 100 80 60
Grade Cap = 15% Pb (13 Samples)
40 20 0
Pb (%)
87
Figure 17.12 Copper Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project Upper Tail Histogram of the Copper Raw Assays Within the Mineralized Domain Model (n=3,424) 1000 900 800
Frequency
700 600 500 400 300
Grade Cap = 1.0% Cu 5 Samples
200 100 0
Cu (%)
Based upon the distribution of the silver, zinc and lead grades, Micon believes that 1,800 g/t Ag, 11.5% Zn and 15% Pb are appropriate capping values for this mineralized domain. The descriptive statistics of the capped samples are provided in Table 17.3. 17.9
COMPOSITING METHODS
The selection of an appropriate composite length for samples contained within the mineralized domain model began with an examination of the distribution of the sample lengths within the domain model (Figure 17.13). The sample lengths ranged from a minimum of 0.2 m to a maximum of 68 m in length, with many samples being 1.0 m in length. Consequently, Micon elected to utilize a composite length of 1.0 m in consideration of the relationship between composite length and block size. All samples were composited to an equal length of 1.0 m using the down-hole compositing function of the Surpac-Gemcom mine modeling software. In this function, compositing begins at the point in a drill hole at which the zone of interest is encountered and continues down the length of the hole until the end of the zone of interest is reached. As often happens, the thickness of the mineralized zone encountered by any given drill hole is not an equal multiple of the composite length. In these cases, if the remaining length was 75% or greater of the composite length (in this case 0.75 m), the composite was accepted as part of the data set. The remaining sample lengths less than 75% of the composite length were retained for consideration so as to provide as accurate a grade estimate for the footwall margins of the
88
domain model as possible. A comparison of the descriptive statistics for the capped and uncapped sample values for the composited data is presented in Table 17.4. Figure 17.13 Sample Length Histogram for Samples within the Mineralized Domain, Pulacayo Project Histogram of Sample Lengths for Samples Within the Mineralized Domain Model 3500
3000
Frequency
2500
2000
1500
1000
500
0 0.25
0.5
0.75
1
1.25
1.5
1.75
2
2.25
2.5
2.75
3
More
Sample Length (m)
Table 17.4 Summary Statistics for 1.0 m Composite Samples Contained within the Mineralized Domain Model
Item Mean Standard Error Median Mode Standard Deviation Coefficient of Variation Sample Variance Kurtosis Skewness Range Minimum Maximum Sum Count
Ag_gt 102.16 5.01 19.00 0.00 323.50
AgCap 1,800 94.39 3.37 19.00 0.00 217.71
Pb % 0.77 0.02 0.36 0.00 1.40
PbCap 15 0.77 0.02 0.36 0.00 1.33
Zn % 1.72 0.03 1.15 0.00 2.04
ZnCap 11.5 1.69 0.03 1.15 0.00 1.87
Cu % 0.04 0.00 0.01 0.01 0.11
CuCap 1.0 0.03 0.00 0.01 0.01 0.08
3.17 104,651.59 325.98 14.07 9,808.80 0.00 9,808.80 426,212.63 4,172
2.31 47,396.19 24.15 4.51 1,800.00 0.00 1,800.00 393,807.36 4,172
1.81 1.95 59.00 6.03 26.70 0.00 26.70 3,221.77 4,172
1.73 1.76 32.93 4.91 15.00 0.00 15.00 3,194.19 4,172
1.18 4.17 17.13 3.32 23.20 0.00 23.20 7,192.83 4,172
1.10 3.49 7.65 2.45 11.50 0.00 11.50 7,067.10 4,172
2.98 0.01 335.68 14.44 3.23 0.00 3.23 127.88 3,574
2.44 0.01 58.96 6.59 1.00 0.00 1.00 118.27 3,759
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17.10 BULK DENSITY Apogee collected information regarding the bulk density (specific gravity) on a systematic basis for all of the recent drilling programs. The density of the core was determined by the core technicians using the Archimedes method on selected samples of core. The resulting information was transferred to an Excel spreadsheet where the host lithology of the measured sample was paired with the specific gravity determination. The resulting spreadsheet was provided to Micon which proceeded to extract those specific gravity measurements that were contained within the $40/t NSR domain model and determined the average densities of the resulting data set. In all, 2,744 specific gravity measurements were included within the $40/t NSR mineralized domain. A frequency histogram displaying the distribution of the specific gravity measurements is presented in Figure 17.14. It can be seen that the average specific gravity for the mineralization contained within the $40/t NSR domain model is 2.40 t/m3. Figure 17.14 Specific Gravity Histogram for Samples Within the Mineralized Domain, Pulacayo Project Histogram of Bulk Densities for All Samples Contained Within the Mineralized Domain Model (n=2,744) 350
Mean Density = 2.40 tonnes/m3 300
Frequency
250
200
150
100
50
0 1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4
More
Density
17.11 VARIOGRAPHY The analysis of the variographic parameters of the mineralization found in the mineralized domain at the Pulacayo deposit began with the construction of down-hole variograms using the capped, 1.0 metre composited sample data with the objective of determining the global nugget (C0) for silver, zinc and lead. Considering the low average grade of copper that is found within the mineralized domain, the copper grades were not modeled. The down-hole variogram results were confirmed by construction of omni-directional variograms, and good model fits were obtained. An evaluation of any anisotropies that may 90
be present in the data was successful in the generation of variograms for the three principal directions for each of the three metals. A summary of the variographic parameters is presented in Table 17.5, and the variograms are presented in Appendix III. Table 17.5 Summary of Variographic Parameters for 1.0 m Composite Samples, Pulacayo Project Item Variogram Type Nugget (Downhole) Sill (C1-Downhole) Range (m) Nugget (OmniDirectional) Sill (C1-OmniDirectional) Range (m) Major Axis: Orientation Angular Tolerance Sill (C1) Range (m) Semi Major Axis: Orientation Angular Tolerance Sill (C1) Range (m) Minor Axis: Orientation Angular Tolerance Sill (C1) Range (m) Major Axis (Pass 2, Short Range) Semi-Major Axis Minor Axis Major/Semi-Major Ratio Major/Minor Ratio Number of Points Range for Pass 1 (Long Range) Minimum Number of Points Maximum Number of Points Search Ellipse Type
Silver (D2) Spherical NUGGET: 33,052 21,086 21
Lead (D4) Spherical
Zinc (D6) Spherical
1.05 0.71 7
2.10 1.38 18
0.88 0.77 6
1.95 1.55 17
-30° 280° 45° 24,058 64
-40° 280° 30° 1.08 67
-50° 280° 45° 1.73 59
+60° 280° 45° 23,788 20
+50° 280° 30° 1.82 24
+40° 270° 45° 1.56 57
29,727 26,893 22 ANISOTROPIES:
0° 010° 0° 010° 45° 30° 4,590 0.33 4 4 SEARCH ELLIPSE: 65m@280°(-30°) 65m@280°(-40°)
60m@280°(-50°)
20m@280°(+60°) 5m@010°(0°) 3.2 13 4,221 140m
25m@280°(+50°) 5m@010°(0°) 2.6 13 4,221 140m
60m@280°(+40°) 5m@010°(0°) 1.0 12 4,221 140m
2 8 Quadrant
2 8 Quadrant
2 8 Quadrant
0° 010° 45° 0.28 3
17.12 BLOCK MODEL CONSTRUCTION A simple, upright, whole-block model with the long axis of the blocks measuring 10 m (strike) x 10 m (height) x 2 m (width) and oriented along an azimuth 100° was constructed 91
using the Gemcom-Surpac version 6.1.1 mine planning software package using the parameters presented in Table 17.6. A number of attributes were also created to store such information as metal grades by the various interpolation methods, distances to and number of informing samples, domain codes, oxidation state, mined out status, and resource classification codes. The block dimensions were selected primarily in an attempt to have relevance to the selection of underground mining methods. These block dimensions may require revision at a later date as new information permits the identification of appropriate mining methods, or should the project scope become better defined. Table 17.6 Summary of Block Model Parameters, Pulacayo Project Type Minimum Coordinates Maximum Coordinates User Block Size Min. Block Size Rotation
Y (Northing) 7744100 7745100 2 2 10.000
Attribute Name zn_kvar ag_avgdist
Type Real Real
Decimals 3 1
Background -99 0
ag_cap_id2 ag_cap_nn ag_cap_ok ag_id2_nosample
Real Real Real Integer
2 2 2 -
0 0 0 0
ag_id2_nosample _pass2 ag_id2_nsr
Integer
-
Real
-
ag_id2_pass_no ag_kvar ag_nearest
Integer Real Real
2 1
0 0 0
ag_ok_nosample
Integer
-
block_nsr_id2 classification density lith_code mined_out oxidation_code pb_avgdist
Real Integer Real Integer Integer Character Real
2 1
0 0 2.28 100 1 sulf 0
pb_cap_id2 pb_cap_nn pb_cap_ok pb_id2_nsr
Real Real Real Real
2 2 2 -
0 0 0 0
92
X (Easting) 739700 740900 10 10 0.000
Z (Elevation) 3900 4600 10 10 0.000
Description Average Distance of Informing Samples, Silver Silver by Inverse Distance, Squared Silver by Nearest Neighbour Silver by Ordinary Kriging Number of Informing Samples, Silver, Inverse Distance Number of Informing Samples, Long Range Pass Silver NSR from ID2 Grade (Ag_gt * 0.37) 1=Short Range, 2=Long Range Kriging Variance, Silver Distance to Nearest Informing Sample, Silver Number of Informing Samples, Silver OK Ag_id2_nsr + Zn_id2_nsr + Pb_id2_nsr 1=Measured, 2=Indicated, 3=Inferred Rock=2.28, Air=0 403=$14 NSR Domain 0=Mined Out (Void), 1=In Situ OX=oxidized, SULF=unoxidized Average Distance of Informing Samples, Lead Lead by Inverse Distance, Squared Lead by Nearest Neighbour Lead by Ordinary Kriging Lead NSR from ID2 Grade (Pb_pct * 22.64)
Attribute Name pb_kvar pb_nearest
Type Real Real
Decimals 3 1
Background -99 0
pb_nosample_pas s1 pb_nosample_pas s2 pb_pass_no zn_avgdist
Integer
-
Integer
-
Integer Real
1
0 0
zn_cap_id2 zn_cap_nn zn_cap_ok zn_id2_nsr
Real Real Real Real
2 2 2 -
0 0 0 0
zn_id2_pass_no zn_nearest
Integer Real
1
0 0
zn_nosample_pas s1 zn_nosample_pas s2
Integer
-
Integer
-
Description Distance to Nearest Informing Sample, Lead Number of Informing Samples for Pass 1, Lead Number of Informing Samples for Pass 2, Lead 1=Short Range, 2=Long Range Average Distance of Informing Samples, Zinc Zinc by Inverse Distance, Squared Zinc by Nearest Neighbour Zinc by Ordinary Kriging Zinc NSR from ID2 Grade (Zn_pct * 14.07) 1=Short Range, 2=Long Range Distance to Nearest Informing Sample, Zinc Number of Informing Samples for Pass 1, Zinc Number of Informing Samples for Pass 2, Zinc
Metal grades were interpolated into the individual blocks for the mineralized domain initially using the variogram ranges and parameters presented in Table 17.5 above, after which it was apparent that the density of the drill hole information was not sufficient to provide a full fill of all the blocks. Consequently, a two-pass approach was taken in order to achieve a filling of most of the blocks contained within the domain models. In this approach a first pass interpolation is carried out using a long range of 140 m for the search ellipse in order to provide as complete a filling of the blocks as possible. This is followed by a shorter range pass that uses the search ellipse parameters derived from the variographic analysis that reinterpolates and overwrites the grades of the blocks that are located closer to the informing samples. The interpolation was carried out using Ordinary Kriging (OK), Inverse Distance Squared (ID2) and Nearest Neighbour (NN) interpolation methods for silver, zinc and lead. During the course of these interpolation runs, such additional information as the pass number, distance to the nearest informing sample, average distance of informing samples, number of informing samples per block and the kriging variance was also recorded for each block. Hard domain boundaries were used in which only data contained within the $40/t NSR domain model were allowed to be used to estimate the grades of the blocks, and only those blocks within the domain limits were allowed to receive grade estimates. Subsequent to interpolation of the block densities and metal grades, the densities of those blocks that fell within the model of the mined out stopes was set to zero on the assumption that all mined stopes do not contain any backfill.
93
17.13 BLOCK MODEL VALIDATION Validation efforts for the mineral resource estimate for the Pulacayo deposit began with a comparison of the average block grades for the capped and uncapped metal values against the respective informing composite samples. As well, the volumes reported from the block model were compared to the volumes of the solid model of the $40/t NSR mineralized domain. The reconciliation is presented in Table 17.7. It can be seen that there is a good correlation for the average block grades estimated using the three interpolation methods, and between the average estimated block grades with the informing composite samples. As well, there is a good fit between the reported volumes for the mineralized domain model, with the block model reporting slightly less volume in comparison to the original solid model. It is to be noted that this reconciliation report compares the volume and grades inside the mineralized domain model against the informing data and is not corrected for the mined out material. In contrast, the tonnage reported in Table 17.8 takes into account the ‘zero’ density of the mined-out stopes. Table 17.7 Block Model Validation Results, Pulacayo Project Volume
Tonnes
5,261,400
11,832,000
5,256,544
Ag Nocap Ag Cap Pb Nocap Pb Cap Zn Nocap Block– Model - Inverse Distance, Power 2 95.04 86.82 0.80 0.79 1.62 Block– Model - Ordinary Kriging 95.18 87.28 0.80 0.80 1.63 Block– Model - Nearest Neighbour 102.18 92.87 0.82 0.81 1.66 1m Composites 102.16 94.39 0.77 0.77 1.72 Solid Volume Block model is reporting +4,856 m3 (
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