2011, N.I. 43-101 Technical Report On The La Colorada Project

Transcription

NI 43-101 Technical Report on Resources
La Colorada Project
Sonora, Mexico
Effective Date: October 15, 2011
Report Date: December 8, 2011
Report Prepared for
Argonaut Gold Inc.
77 King Street West
Toronto-Dominion Centre, Suite 400
Toronto, ON M4K 0A1
Canada
Report Prepared by
SRK Consulting (U.S.), Inc.
7175 West Jefferson Avenue, Suite 3000
Lakewood, CO 80235
SRK Project Number: 203900.020
Contributors:
Bart Stryhas, Ph.D., C.P.G.
Alberto Orozco, Argonaut Gold, Inc.
Richard J. Taylor, P.E., Kappes, Cassiday & Associates
Qualified Persons:
Bart Stryhas, Ph.D., C.P.G.
Richard J. Taylor, P.E., Kappes, Cassiday & Associates
NI 43-101 Technical Report on Resources – La Colorada Project
Page i
Summary (Item 1)
Property Description and Ownership
The La Colorada Project (La Colorada or the Project) hosts several gold deposits located near the
historic mining town of La Colorada, Sonora, Mexico. The project consists of approximately 37 titled
concessions in three irregular blocks. The total land package aggregates 21,412.03 ha. The deposit
was exploited during two historic mining phases. The first was an underground operation from 1860
to 1916 and the second was an open pit mine from 1994 through 2000. The mineralization is
centered about UTM coordinates 541,665m E and 3,185,795m N. The property lies about 53 km
southeast of Hermosillo, the State Capital. Compañia Minera Pitalla S.A. de C.V. (Minera Pitalla) is
the owner of the Project. Minera Pitalla is 100% owned by Argonaut Gold Inc. (Argonaut).
Geology and Mineralization
The geology of La Colorada consists of Paleozoic to Early Mesozoic metasediments cut by Upper
Cretaceous volcanics. All of these units are intruded by Tertiary intrusives that include granitic to
dioritic phases and andesitic porphyry. Late-Cretaceous to Tertiary volcanic rocks and associated
continental clastic rocks unconformably overlie the Triassic and older rocks. There are two distinct
divisions of the volcanics. A lower 100 to 45 My Lower Volcanic Complex is composed mainly of
andesite with interstratified rhyolitic ignimbrites and minor interstratified basalt. The overlying Upper
Volcanic Complex has been dated at 34 to 27 My and is composed of extensive rhyolite and
rhyodacite ignimbrites with minor interstratified basalt. It constitutes the largest ignimbrite field in the
world. The upper sequence unconformably overlies on the older sequence and infills deeply incised
paleotopography in the older rocks. Late Cretaceous to Early Tertiary plutonic rocks (diorite,
granodiorite to granite) of the Sonoran Batholith outcrop throughout the region and have been dated
from 90 to 40 My.
The La Colorada Gold District has many of the characteristics of a low sulfidization epithermal-vein
type gold-silver deposit. The district underwent a complex hydrothermal history related to
Cretaceous plutonic activity, later higher level plutonic events, and finally a mid-Tertiary vein system
which shares characteristics in common with both a deep epithermal environment and a high-level
mesothermal system. Alteration can be seen in the older metamorphic and intrusive units mostly as
silicification, hematization and argillic alteration. The Tertiary volcanic rocks in the district are clearly
post-mineral and are unaltered.
Exploration
The exploration work is composed primarily of the drillhole database which supports the resource
estimation of this report. It consists of two main data sets. The older dataset was generated by
Explorationes Eldorado S.A. de C.V. (EESA) during their work on the project in the late 1990’s. The
more recent dataset was generated by Pediment and Argonaut beginning in 2007.
The resource estimation is supported by 1,319 drillholes, totaling 154,918 m. The drillhole database
has 80,187 samples. The drillholes are generally located in a wide range of spacing and
orientations. The maximum drillhole depth is 479 m and the average is 117 m.
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La Colorada_NI 43-101 Technical Report on Resources_203900.020_004_20111208
December 8, 2011
Page ii
Metallurgy
Metallurgical test work has been ongoing with several column tests on various composite samples
and crush sizes from the various deposits have been and are being performed at the Kappes,
Cassiday & Associates (KCA) facility in Reno, Nevada.
Gold and silver recovery based on 20 column tests conducted at the KCA laboratory in Reno,
Nevada running from 48 to 72 days resulted in recoveries of 44% for gold and 33% for silver.
Opportunities exist to optimize throughput and recovery of the ore which will be studied through
additional column tests and equipment reviews. Additional column test work is being completed by
KCA at the present time on core material from the Project. This test work is focused on a finer crush
size of minus 12.5 mm. If finer crushing is to be examined as a possible processing alternative
additional agglomeration test work will be required.
Recovery curves developed for La Colorada indicate very slow leaching and it is likely that several
percent more gold recovery will be realized with a 90 day leach cycle. It is recommended that all
future column tests be run at this leach cycle as a minimum.
Mineral Resource Estimate
The mineral resource estimations are based on geologic models consisting of a single rock type, cut
by numerous fault/vein zones. All model blocks are 5 m x 5 m x 5 m in the x,y,z directions,
respectively. Each model block is assigned a unique specific gravity based on direct measurement
of the various rock types. All block grade estimates were made using 3 m down-hole composites.
An Inverse Distance Weighting to the second power estimation algorithm was used for all gold grade
and silver estimations. The results of the resource estimation provided a CIM classified Indicated
and Inferred Mineral Resource. The mineral resources have been classified as Indicated and
Inferred based primarily on sample support. All resources supported primarily by drilling at 25 m
centers are classified as indicated and all resources supported by wider spaced drilling were
classified as inferred.
The La Colorada Mineral Resource estimate is reported below at a 0.1 ppm cut-off grade. The cutoff based on a mining cost of US$1.20/t, a processing cost of US$2.70/t, Au and Ag recoveries of
60% and 30% respectively, G&A cost of $0.20/t, a no NSR and Au, Ag prices of US$1,500/oz,
US$20.00/oz respectively. The mineral resources are confined within a conceptual Whittle® pit
design based on the same parameters used for the cut-off grade and a 50° pit slope.
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December 8, 2011
Page iii
Table 1: La Colorada Project Resource Statement(1)
Deposit
La Colorada
El Crestón
Veta Madre
RoM Pad
All Deposits
Class
Au Cut-off
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
Tonnes
(000s)
29,900
2,500
14,400
2,200
2,900
0
2,700
50,000
4,700
Au (g/t)
0.724
1.204
0.618
0.887
0.491
0.665
0.429
0.664
1.044
Au oz
(000s)
696
95
287
63
46
0.2
38
1,067
158
Ag (g/t)
5.1
8.4
12.1
13.3
3.3
2.4
36.5
8.7
10.6
Ag oz
(000s)
4,905
661
5,635
944
307
0.7
3,200
14,047
1,605
Source: SRK
(1) Rounded to reflect approximation
Mineral Resources that are not mineral reserves do not have demonstrated economic viability.
Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution.
These mineral resource estimates include inferred mineral resources that are normally considered
too speculative geologically to have economic considerations applied to them that would enable
them to be categorized as mineral reserves. There is also no certainty that these inferred mineral
resources will be converted to Measured and Indicated categories through further drilling, or into
mineral reserves, once economic considerations are applied.
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December 8, 2011
Page iv
Table of Contents
Summary (Item 1) ......................................................................................................................................... i
1 Introduction (Item 2) .................................................................................................... 1
1.1
Terms of Reference and Purpose of the Report.................................................................................1
1.2
Qualifications of Consultants (SRK)....................................................................................................1
1.2.1
1.3
Details of Inspection ................................................................................................................2
Reliance on Other Experts (Item 3) ....................................................................................................2
1.3.1
Sources of Information and Extent of Reliance.......................................................................2
1.4
Effective Date......................................................................................................................................2
1.5
Units of Measure .................................................................................................................................2
2 Property Description and Location (Item 4)............................................................... 3
2.1
Property Description and Location......................................................................................................3
2.2
Mineral Titles.......................................................................................................................................3
2.2.1
Nature and Extent of Issuer’s Interest.....................................................................................4
2.3
Royalties, Agreements and Encumbrances........................................................................................5
2.4
Environmental Liabilities and Permitting .............................................................................................5
2.4.1
2.5
Required Permits and Status ..................................................................................................5
Other Significant Factors and Risks....................................................................................................6
3 Accessibility, Climate, Local Resources, Infrastructure and Physiography (Item 5)14
3.1
Topography, Elevation and Vegetation.............................................................................................14
3.2
Climate and Length of Operating Season.........................................................................................14
3.3
Sufficiency of Surface Rights ............................................................................................................14
3.4
Accessibility and Transportation to the Property ..............................................................................14
3.5
Infrastructure Availability and Sources..............................................................................................14
3.5.1
Port access............................................................................................................................15
3.5.2
Power ....................................................................................................................................15
3.5.3
Water Supply.........................................................................................................................15
3.5.4
Site Structures.......................................................................................................................15
3.5.5
Waste Disposal .....................................................................................................................16
3.5.6
Potential Heap Leach Pad Areas ..........................................................................................16
4 History (Item 6)........................................................................................................... 17
4.1
Prior Ownership and Ownership Changes .......................................................................................17
4.2
Previous Exploration and Development Results...............................................................................17
4.3
Historic Mineral Resource and Reserve Estimates ..........................................................................18
4.4
Historic Production ............................................................................................................................18
5 Geological Setting and Mineralization (Item 7)........................................................ 19
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5.1
Regional, Local and Property Geology .............................................................................................19
5.2
Significant Mineralized Zones ...........................................................................................................20
6 Deposit Type (Item 8)................................................................................................. 27
6.1
Mineral Deposit .................................................................................................................................27
6.2
Geological Model Applied .................................................................................................................27
7 Exploration (Item 9) ................................................................................................... 30
7.1
Relevant Exploration Work ...............................................................................................................30
7.2
Surveys and Investigations ...............................................................................................................30
7.2.1
7.3
Exploration Rock and Soil Sampling .....................................................................................30
Significant Results and Interpretation ...............................................................................................30
8 Drilling (Item 10)......................................................................................................... 31
8.1
Type and Extent ................................................................................................................................31
8.2
Procedures........................................................................................................................................32
8.3
8.2.1
Pediment, Reverse Circulation (RC) Drilling .........................................................................32
8.2.2
Pediment Core Drilling. .........................................................................................................32
8.2.3
Argonaut Reverse Circulation (RC) Drilling...........................................................................32
8.2.4
Argonaut Core Drilling. ..........................................................................................................33
8.2.5
Argonaut RoM Pad Drilling....................................................................................................33
Interpretation and Relevant Results..................................................................................................33
9 Sample Preparation, Analysis and Security (Item 11)............................................. 36
9.1
Methods ............................................................................................................................................36
9.1.1
Reverse Circulation Drill Samples.........................................................................................36
9.1.2
Diamond Drill Core Samples .................................................................................................36
9.2
Security Measures ............................................................................................................................36
9.3
Sample Preparation ..........................................................................................................................36
9.4
QA/QC Procedures and Results .......................................................................................................37
9.5
Opinion on Adequacy........................................................................................................................38
10 Data Verification (Item 12) ......................................................................................... 44
10.1 Procedures........................................................................................................................................44
10.2 Limitations .........................................................................................................................................45
10.3 Data Adequacy..................................................................................................................................45
11 Mineral Processing and Metallurgical Testing (Item 13)......................................... 46
11.1 Testing and Procedures ....................................................................................................................46
11.2 Relevant Results ...............................................................................................................................46
11.3 Recovery Estimate Assumptions ......................................................................................................49
11.4 Additional Test Work .........................................................................................................................50
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12 Mineral Resource Estimate (Item 14)........................................................................ 52
12.1 Qualified Persons for the Mineral Resource Estimate ......................................................................52
12.2 Drillhole Database.............................................................................................................................52
12.3 Geology.............................................................................................................................................52
12.4 Block Model.......................................................................................................................................52
12.5 Compositing ......................................................................................................................................53
12.6 Density ..............................................................................................................................................54
12.7 Variogram Analysis ...........................................................................................................................54
12.8 Grade Estimation ..............................................................................................................................54
12.8.1 La Colorada...........................................................................................................................54
12.8.2 El Crestón..............................................................................................................................55
12.8.3 Veta Madre............................................................................................................................56
12.8.4 RoM Pad ...............................................................................................................................56
12.9 Model Validation................................................................................................................................57
12.10Resource Classification ....................................................................................................................59
12.11Mineral Resource Statement ............................................................................................................59
12.12Mineral Resource Sensitivity.............................................................................................................60
13 Adjacent Properties (Item 23) ................................................................................... 63
14 Other Relevant Data and Information (Item 24) ....................................................... 64
15 Interpretation and Conclusions (Item 25) ................................................................ 65
15.1.1 Exploration ............................................................................................................................65
15.1.2 Mineral Resource Estimate ...................................................................................................65
15.1.3 Metallurgy ..............................................................................................................................65
15.2 Significant Risks and Uncertainties...................................................................................................66
16 Recommendations (Item 26) ..................................................................................... 67
16.1 Mineral Resources ............................................................................................................................67
16.2 Metallurgy and Processing................................................................................................................67
17 References (Item 27) .................................................................................................. 68
18 Glossary...................................................................................................................... 69
18.1 Mineral Resources ............................................................................................................................69
18.2 Mineral Reserves ..............................................................................................................................69
18.3 Definition of Terms ............................................................................................................................70
18.4 Abbreviations ....................................................................................................................................71
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List of Tables
Table 1: La Colorada Project Resource Statement(1) ....................................................................................... iii
Table 2.2.1: Concession Details........................................................................................................................4
Table 2.2.1.1: Concession Payment Liabilities..................................................................................................5
Table 8.1.1: EESA Drilling Summary...............................................................................................................31
Table 8.1.2: Pediment Drilling Summary .........................................................................................................31
Table 8.1.3: Argonaut Drilling Summary..........................................................................................................32
Table 10.1.1: MacMillian et al (2001) Comparative Sampling Results............................................................44
Table 11.2.1: La Colorada Project Column Test Results on RoM Leach Pad Material ..................................47
Table 11.2.2: La Colorada Project Column Test Results on Core Material – Gold.........................................47
Table 11.2.3: La Colorada Project Column Test Results on Core Material – Silver .......................................48
Table 11.3.1: La Colorada Project Estimated Field Recoveries......................................................................50
Table 12.4.1: Block Model Limits.....................................................................................................................53
Table 12.5.1: Assay Capping Parameters.......................................................................................................54
Table 12.8.1.1: La Colorada Indicator Estimation Parameters........................................................................55
Table 12.8.1.2: La Colorada Grade Estimation Parameters ...........................................................................55
Table 12.8.2.1: El Crestón Grade Estimation Parameters ..............................................................................56
Table 12.8.3.1: Veta Madre Grade Estimation Parameters ............................................................................56
Table 12.8.4.1: RoM Pad Grade Estimation Parameters ................................................................................56
Table 12.9.1: Grade Estimation Characteristics ..............................................................................................58
Table 12.9.2: Statistical Model Validation........................................................................................................59
Table 12.9.3: Nearest Neighbor Model Validation...........................................................................................59
Table 12.11.1: La Colorada Project Resource Statement (1) ...........................................................................60
Table 12.12.1: Gran Central Grade Tonnage..................................................................................................61
Table 12.12.2: El Crestón Grade Tonnage......................................................................................................61
Table 12.12.3: Veta Madre Grade Tonnage....................................................................................................62
Table 18.3.1: Definition of Terms ....................................................................................................................70
Table 18.4.1: Abbreviations .............................................................................................................................71
List of Figures
Figure 2-1: Project Location Map ......................................................................................................................7
Figure 2-2: Project Site Map..............................................................................................................................8
Figure 2-3: Regional Concession Map ..............................................................................................................9
Figure 2-4: Local Concession Map..................................................................................................................10
Figure 2-5: Detailed Concession Map .............................................................................................................11
Figure 2-6: Royalty Concession Map ..............................................................................................................12
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December 8, 2011
Page viii
Figure 2-7: Surface Ownership Map................................................................................................................13
Figure 5-1: La Colorada Project Regional Geology.........................................................................................23
Figure 5-2: La Colorada/Gran Central Pit Area Geology.................................................................................24
Figure 5-3: El Crestón Pit Area Geology .........................................................................................................25
Figure 5-4: La Colorada/Gran Central Area Cross Section Geology ..............................................................26
Figure 8-1: 2011 Argonaut Drillhole Location Map..........................................................................................35
Figure 9-1: Blank Analyses Performance Chart ..............................................................................................39
Figure 9-2: Certified Standard OxE86 Performance Chart..............................................................................40
Figure 9-3: Certified Standard OxF65 Performance Chart..............................................................................41
Figure 9-4: Certified Standard SG40 Performance Chart ...............................................................................42
Figure 9-5: Field Duplicate Performance Chart...............................................................................................43
Figure 11-1: Metallurgical Drill Hole Locations ................................................................................................51
Appendices
Appendix A: Certificate of Author
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December 8, 2011
1
Introduction (Item 2)
1.1
Terms of Reference and Purpose of the Report
Page 1
SRK Consulting (U.S.), Inc. (SRK) has been retained by Argonaut Gold Inc. (Argonaut), to prepare a
Canadian National Instrument 43-101 (NI 43-101) compliant Technical Report on Resources for the
La Colorada Project located in Sonora, Mexico (La Colorada or the Project). The quality of
information, conclusions, and estimates contained herein is consistent with the level of effort involved
in SRK’s services, based on: i) information available at the time of preparation, ii) data supplied by
outside sources, and iii) the assumptions, conditions, and qualifications set forth in this report. This
report is intended for use by Argonaut subject to the terms and conditions of its contract with SRK
and relevant securities legislation. The contract permits Argonaut to file this report as a Technical
Report on Resources with Canadian securities regulatory authorities pursuant to NI 43-101,
Standards of Disclosure for Mineral Projects. Except for the purposes legislated under provincial
securities law, any other uses of this report by any third party is at that party’s sole risk. The
responsibility for this disclosure remains with Argonaut. The user of this document should ensure
that this is the most recent Technical Report on Resources for the property as it is not valid if a new
Report on Resources has been issued.
This report provides mineral resource estimates, and a classification of resources in accordance with
the Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and
Reserves: Definitions and Guidelines, November 27, 2010 (CIM).
1.2
Qualifications of Consultants (SRK)
The Consultants preparing this report are specialists in the fields of geology, exploration, mineral
resource and mineral reserve estimation and classification, underground mining, geotechnical,
environmental, permitting, metallurgical testing, mineral processing, processing design, capital and
operating cost estimation, and mineral economics.
None of the Consultants or any associates employed in the preparation of this report has any
beneficial interest in Argonaut. The Consultants are not insiders, associates, or affiliates of
Argonaut. The results of this Report on Resources are not dependent upon any prior agreements
concerning the conclusions to be reached, nor are there any undisclosed understandings concerning
any future business dealings between Argonaut and the Consultants. The Consultants are being
paid a fee for their work in accordance with normal professional consulting practice.
The following individuals, by virtue of their education, experience and professional association, are
considered Qualified Persons (QP) as defined in the NI 43-101 standard, for this report, and are
members in good standing of appropriate professional institutions. The QP’s are responsible for
specific sections as follows:
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x
Bart Stryhas, Ph.D., CPG, is the QP responsible for Sections 3 through 10 and 13. He is the
QP responsible for the Mineral Resource estimation in Section 12.
x
Richard J. Taylor, P.E., is the QP responsible for Section 11.
December 8, 2011
Page 2
1.2.1 Details of Inspection
Bart Stryhas conducted a site visit of the project on June 16, 2011. Dr. Stryhas spent one day on
site reviewing the regional and local geology, drilling, logging and sampling procedures, In addition,
the QA/QC procedures were reviewed and resource estimation strategy was formulated with site
geologist and engineers.
1.3
Reliance on Other Experts (Item 3)
The Consultant’s opinion contained herein is based on information provided to the Consultants by
Argonaut throughout the course of the investigations. SRK has relied upon the work of other
consultants in the project areas in support of this Report on Resources. The sources of information
include data and reports supplied by Argonaut personnel.
Information on mineral titles was provided by Argonaut as compiled by Mr. Alberto Orozco,
Argonaut’s Mexico Exploration Manager. Additionally, a legal opinion on titles was compiled by
Mexico City law firm Vazquez & Associates in 2011. Specifically, Mr. Alberto Orozco and Vazquez &
Associates are responsible for Sections 2.2 and 2.3.
The Consultants used their experience to determine if the information from previous reports was
suitable for inclusion in this report and adjusted information that required amending. This report
includes technical information, which required subsequent calculations to derive subtotals, totals and
weighted averages. Such calculations inherently involve a degree of rounding and consequently
introduce a margin of error. Where these occur, the Consultants do not consider them to be
material.
1.3.1 Sources of Information and Extent of Reliance
Mr. Alberto Orozco has contributed the majority of the information contained within Sections 4, 5, 9,
10 and 11.
1.4
Effective Date
The effective date of this report is October 15, 2011.
1.5
Units of Measure
The metric system has been used throughout this report. Tonnes are metric of 1,000 kg, or 2,204.6
lb. All currency is in U.S. dollars (US$) unless otherwise stated.
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December 8, 2011
2
Property Description and Location (Item 4)
2.1
Property Description and Location
Page 3
The Project consists of an historic, open pit, heap leach gold mine. The mine consists of two main
pits, La Colorada/Gran Central and El Crestón, a partially reclaimed heap leach pad and several
office and support buildings. The pits and facilities are located within 37 titled mineral concessions
totaling 21,412.03 ha. The project is located in northwestern Mexico, in the town of La Colorada,
Sonora State, 53 km southeast of the city of Hermosillo, the State Capital. The mineralization is
centered about UTM coordinates 541,665m E and 3,185,795m N. (Figures 2-1 and 2-2)
2.2
Mineral Titles
The following information on the mineral titles was provided by Argonaut Gold Inc. as compiled by
Mr. Alberto Orozco, Argonaut’s Mexico Exploration Manager. Additionally, a legal opinion from
Mexico City law firm Vazquez & Associates was compiled in October of 2011 (Vazquez, 2011). The
results of this work conclude that all 37 of Argonaut’s concessions are valid in full force and effect.
The La Colorada property consists of 37 titled concessions in three irregular blocks separated by
ground held by other interests (Figures 2-3 through 2-5). The total land package aggregates
21,412.03 ha. The concession details are listed in Table 2.2.1. The Ext. Sonora IV concession was
one of 19 concessions optioned from Exploraciones La Colorada S.A. de C.V. The option purchase
was subsequently exercised on 18 of these concessions; however, Ext. Sonora IV concession was
cancelled by the Direction of Mines. Exploraciones La Colorada believes it has a case for the
removal of such cancellation and is appealing the decision. For this reason Pediment signed a
second option agreement with Exploraciones La Colorada establishing that, should they win the case
against the Direction of Mines, they would transfer the concession to Compañia Minera Pitalla S.A.
de C.V. for a payment of Pediment stock. This agreement has since expired. As of this moment a
decision by the courts is still pending. Although the concession has been cancelled it has not yet
been declared “free”. Until that time, the concession is not available for others to claim.
In the mid 1980’s Minerales de Sotula S.A. de C.V. and Industrias Peñoles, S.A.B. de C.V. began reacquiring the mineral concessions. In 1991, Cia. Minera Las Cuevas S.A. de C.V a Mexican
Subsidiary of Noranda acquired an option on the project. Later that same year, HRC Development
Corp and Rotor International S.A. formed a joint venture ownership of the project called
Explorationes Eldorado S.A. de C.V. (EESA). EESA held the project until 2000 when it sold out to
Grupo Minero FG S.A.de C.V. In 2001, ownership was transferred to Explorations La Colorada, S.A.
de C.V. In 2007, Pediment Gold Corp. optioned and eventually, purchased the key concessions,
surface ownership and infrastructure mine from Exploraciones La Colorada.
Further key
concessions were also acquired in 2008 and 2010 by Pediment. In 2010, Argonaut Gold acquired
Pediment Gold Corp. including the La Colorada project held under Pediment’s wholly owned
Mexican subsidiary, Compañia Minera Pitalla S.A. de C.V. (Minera Pitalla).
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December 8, 2011
Page 4
Table 2.2.1: Concession Details
Concession
Title
No.
187663
199425
199424
198975
Valid
Surface
(ha)
From
To
8.8206 17-Sep-1990 16-Sep-2040
19.6494 19-Apr-1994 18-Apr-2044
0.1300 19-Apr-1994 18-Apr-2044
5.8738 11-Feb-1994 10-Feb-2044
Acquired By
Sonora II
Contract with Exploraciones La Colorada
Sonora VI
El Crestón
LULU
Demasías del
199929
0.7715 17-Jun-1994 16-Jun-2044 Contract with Exploraciones La Colorada
Crestón
Sonora V
211758
Sonora III
211974
51.0269 18-Aug-2000 17-Aug-2050 Contract with Exploraciones La Colorada
Sonora I
211856
157.9862 28-Jul-2000 27-Jul-2050 Contract with Exploraciones La Colorada
Fracción
211958
Sonora III
La Muculufa
211945
Sonora IV
211788
Vicenza
211757
La Cruz
217502
Crestón Dos
3-Dec-2002 2-Dec-2052 Contract with Exploraciones La Colorada
218680
109.7378
Fracc.III
Crestón Dos
218679
4.4918
Fracc.II
Crestón Dos
218678
344.5873
Fracc. I
Crestón Tres
218869
466.5758 23-Jan-2003 22-Jan-2053 Contract with Exploraciones La Colorada
Neri
232307
Ext Sonora IV
207597
443.0047
Pending
Pending Pending
Sandra Luz
199219
12.9455 16-Mar-1994 15-Mar-2044 Contract with Peñoles
Las Tinajitas
206409
140.0000 16-Jan-1998 15-Jan-2048 Contract with Peñoles
Vicky
206407
24.0000 16-Jan-1998 15-Jan-2048 Contract with Peñoles
Rosalía
213745
7.9760 12-Jun-2001 11-Jun-2051 Contract with Peñoles
Claudia
213214
32.7380
6-Apr-2001
5-Apr-2051 Contract with Peñoles
Sandra Luz fracc.1
216046
0.3766
2-Apr-2002
Sandra Luz Fracc.2
216047
0.0173
2-Apr-2002
Carmelita
214065
150.0000 10-Aug-2001 9-Aug-2051 Contract with Minera Recami, S. A. de C. V.
Los Pilares
214187
249.0328 10-Aug-2001 9-Aug-2051 Contract with Minera Recami, S. A. de C. V.
El Crestoncito
231252
1.1693 25-Jan-2008 24-Jan-2058 Contract with Minera Recami, S. A. de C. V.
LCA
231232 13233.3690 25-Jan-2008 24-Jan-2058 Staking
LCA2
232278 2000.0000 16-Jul-2008 15-Jul-2058 Staking
Dos Fracc.I
231247
117.8470 25-Jan-2008 24-Jan-2058 Staking
Dos Fracc.II
231248
5.2974 25-Jan-2008 24-Jan-2058 Staking
Dos Fracc. III
231249
22.7623 25-Jan-2008 24-Jan-2058 Staking
Noria
235259
18.2630
4-Nov-2009 3-Nov-2059 Staking
Red Norte 1
237088 3325.9782 29-Oct-2010 28-Oct-2060 Staking
Mabelina
237242
0.1600 26-Nov-2010 25-Nov-2060 Staking
(1) Royalties with Exploraciones La Colorada, S. A. de C. V.
a. 2% NSR for underground-mining production
b. 3% NSR for open-pit production
c. Buy-out clause only exists for underground production royalty. The 2%NSR can be bought out for
payment of USD$300,000.00
d. There is no buy-out clause for open-pit mining royalty.
Associated
Royalties
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
(1)
Yes
Yes
(1)
Yes
(1)
(1)
Yes
(1)
Yes
Pending
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
single cash
2.2.1 Nature and Extent of Issuer’s Interest
All mineral titles are held through Argonaut’s wholly owned Mexican subsidiary, Compañía Minera
Pitalla S.A. de C.V. (Minera Pitalla). Under Mexican mining regulations, it is necessary to pay a tax
for the “Mining Rights” twice annually (first and second semester). This tax is calculated based on
the surface area of a concession and does increase over time. The amounts payable (in Mexican
pesos) for each individual concession are shown in Table 2.2.1.1. The company has informed the
writers that all payments have been made for 2011. The next payments are due before the end of
December 2011. Argonaut holds the surface rights and legal access to 1,048 ha of the concession
package. This is shown in Figure 2-7.
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December 8, 2011
Page 5
Table 2.2.1.1: Concession Payment Liabilities
Concession
Title number
Carmelita
Los Pilares
Crestoncito
NERI
SONORA V
SONORA III
SONORA I
FRACC SONORA II
LA MUCULUFA
LA CRUZ
CRESTON TRES
CRESTON DOS FRACC. III
CRESTON DOS FRACC. II
CRESTON DOS FRACC. I
SONORA IV
VICENZA
SONORA VI
EL CRESTON
LULU
DEMASIAS EL CRESTON
SONORA II
LCA
LCA2
Dos Fracc I
Dos Fracc II
Dos Fracc III
LAS TINAJITAS
VICKY
SANDRA LUZ
SANDRA LUZ FRACC. 1
SANDRA LUZ FRACC. 2
ROSALIA
CLAUDIA
NORIA
Red Norte 1
Mabelina
2.3
214065
214187
231252
232307
211758
211974
211856
211958
211945
217502
218869
218680
218679
218678
211788
211757
199425
199424
198975
199929
187663
231232
232278
231247
231248
231249
206409
206407
199219
216046
216047
213745
213214
235259
237088
237242
1st Semester
Payment (Pesos)
2010
9,483.00
15,744.00
9.00
2.00
31,263.00
3,226.00
9,988.00
2,389.00
1,518.00
49.00
14,754.00
3,470.00
143.00
10,896.00
35,054.00
164.00
2,187.00
15.00
654.00
86.00
982.00
100,574.00
15,200.00
896.00
41.00
173.00
15,578.00
2,671.00
1,441.00
24.00
2.00
505.00
2,070.00
-
2nd Semester
Payment (Pesos)
2011
9,483.00
15,744.00
9.00
2.00
31,263.00
5,678.00
17,580.00
4,204.00
2,671.00
98.00
29,497.00
6,938.00
284.00
21,785.00
61,696.00
164.00
2,187.00
15.00
654.00
86.00
982.00
100,574.00
15,200.00
896.00
41.00
173.00
15,578.00
2,671.00
1,441.00
24.00
2.00
888.00
3,643.00
139.00
16,896.00
1.00
Royalties, Agreements and Encumbrances
Certain claims held by Argonaut have a royalty payment. These claims and the royalty burdens are
listed in Table 2.2.1. The specific concession with royalty burdens are shown in Figure 2-6.
2.4
Environmental Liabilities and Permitting
2.4.1 Required Permits and Status
Exploration activities at La Colorada operate under the NORMA-120 issued by the Federal
environmental agency SEMARNAT. The NORMA-120 is not an issued permit, but rather a set of
regulations that allow exploration to take place. To work under the NORMA, a Company can present
a report of initiation of exploration activities and then carry out its exploration staying under a
BAS/SC
December 8, 2011
Page 6
percentage of affectation and observing a set of rules that include, road and pad dimensions,
disposal of waste, etc.
Much of the exploration activities at La Colorada, however; occur in areas which have already
received a change of use in soils for mining activities.
2.5
Other Significant Factors and Risks
SRK is unaware of any other significant factor or risks to access, title or the right to perform work on
the project.
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December 8, 2011
La Colorada Project
Sonora, Mexico
Source: Argonaut Gold Inc., 2011
Figure 2-1
Project Location Map
La Colorada Project
Sonora, Mexico
Project Site Map
Figure 2-2
La Colorada Project
Sonora, Mexico
Figure 2-3
Regional Concession Map
La Colorada Project
Sonora, Mexico
Local Concession Map
Figure 2-4
La Colorada Project
Sonora, Mexico
Detailed Concession Map
Figure 2-5
La Colorada Project
Sonora, Mexico
Royalty Concession Map
Figure 2-6
La Colorada Project
Sonora, Mexico
Surface Ownership Map
Figure 2-7
3
Accessibility, Climate, Local Resources,
Infrastructure and Physiography (Item 5)
3.1
Topography, Elevation and Vegetation
Page 14
The project is located in the basin-and-range geological province which is dominated by alternating
ranges and valleys bound by normal faults. This general geomorphology predominates in the district
of La Colorada with the hills being easily identifiable by Tertiary volcanic rocks that have been tilted
about 15° to the west. Elevations at La Colorada range between 400 and 650 meters above sea
level. The pit areas and the current exploration zones of Veta Madre and La Verde at located in
rather smooth-topography zones. Argonaut completed a flight and photogrammetric reconstitution
during 2011 that covers a total area of 3,343 hectares with the main historic production areas at its
center. Vegetation consists of extensive mesquite and paloverde trees, cactus and sparse grass
cover.
3.2
Climate and Length of Operating Season
The La Colorada property lies within the Sonora Desert climatic region. It has an arid climate, with
summer temperatures sometimes exceeding 47 °C. Winter temperatures vary from mild to cool in
January and February. Rainfall is affected by the North American Monsoon, with over two-thirds of
the average, 19.3 cm of rain falling between the months of July and September. The weather at the
project allows for operation during the entire year.
3.3
Sufficiency of Surface Rights
Since 2008, Pediment Gold Corp. acquired the main surface rights for the La Colorada mine and the
La Primavera Ranch that cover an area of 1,046.8 ha.
The surface rights are adequate for disposal of waste. The full exploitation of the La Colorada/Gran
Central pit and expansion of heap leach pads will require additional surface rights. It is expected that
as studies continue, the location and trade-offs governing the purchase of additional land will
become clearly defined.
3.4
Accessibility and Transportation to the Property
The village of La Colorada and the La Colorada Property are located 40 km southeast of Hermosillo
city, in the State of Sonora, Mexico. Access is via paved Highway 16, which continues east to the
town of Yécora and the city of Chihuahua.
3.5
Infrastructure Availability and Sources
The village of La Colorada is located adjacent to the site and contains a small supply of labor (275
inhabitants) and some basic equipment. The city of Hermosillo (900,000 inhabitants) is located 45
km from the site with a large supply of skilled and unskilled labor along with most supplies and
contractors for construction and operations available. There are daily flights to Hermosillo from
Mexico City, Phoenix and Los Angeles. Hermosillo is a major mining center for Northern Mexico with
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December 8, 2011
Page 15
access to vendors, contractors and consultants for most reagents, supplies, equipment or services
need for exploration, construction, operations and closure.
In addition, equipment and reagents can be sourced through several major cities in the U.S., the
closest of which is through Nogales, Arizona, 177 miles north of Hermosillo via Federal Highway 15,
with an estimated travel time of 3.5 to 4 hours.
3.5.1 Port access
Equipment or reagents that are not available in Hermosillo can be accessed by the port of Guaymas,
an industrial sized port on the located in Sonora on the California Gulf Coast. Travel from Guaymas
to Hermosillo is 138 km on Federal Highway 15, with an approximate travel time of 1.5 to 2 hours.
3.5.2 Power
La Colorada has a dedicated 33 KV power line and 10 MVA substation which were built by Eldorado
in 1997. The main transmission line is 23 km from the community of Estacion Torres to the Mine
site. La Colorada’s operations plan calls for a peak power load of 2.5 MVA for ADR plant, 1000 KVA
for crushing and 1500 KVA for conveying. Therefore, no upgrade to the power infrastructure is
expected at this time.
3.5.3 Water Supply
The water supply used during production by Eldorado Gold Ltd. (1994-2000) and Grupo Minero FG
(2000-2003) came from the dewatering of underground workings, the Wyman shaft and Open pit
dewatering.
With regards to water rights, any water taken from open pit operations either ground water or surface
run-off can be used without a special permit. Water from the underground workings requires a
permit and is defined by the CNA (National Water Commission).
It is estimated that the combined water storage of El Crestón and Gran Central total at least 1 million
cubic meters of water. Dewatering will likely use an 8 inch pipe pumping a head of 150 m when prestrip operations encounter the water level.
3.5.4 Site Structures
The mine site structures are composed of:
BAS/SC
x
A main office building built with masonry walls and metal insulated sheet roof which is big
enough for geology and site administration personnel;
x
x
A laboratory built with metal sheeting and a three unit office trailer;
A Warehouse comprised of two 48 ft containers;
x
x
A Lunch room built with a metal frame and combo sheet walls with capacity for 120 people,
including a cooking area;
A process ADR plant foundation covering 800 m2; and
x
A 500 m2 metal framework undergoing refurbishment.
December 8, 2011
Page 16
3.5.5 Waste Disposal
Two primary waste dumps have been located to store waste from the project. The Gran Central and
El Crestón dumps and are located on land owned by Argonaut. The El Crestón dump has potential
storage for 144.3 million m3. The Primavera dump has potential storage for 71.6 million m3.
3.5.6 Potential Heap Leach Pad Areas
Golder Associates have completed a heap leach design plan within the current site footprint. They
currently have a design for 15 Mt of potentially minable resource. If additional minable resource is
identified, the remainder of pad space required must come from additional land purchases. SRK and
Argonaut have located a potential pad site to the Northeast which would accommodate the additional
pad space but no land purchases have been made at this time and there is no guarantee that the
pad location will be finalized.
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December 8, 2011
4
History (Item 6)
4.1
Prior Ownership and Ownership Changes
Page 17
The original La Colorada concessions were staked by Jesuit missionaries in 1740. By 1790,
Spanish miners had taken ownership. In 1860, an English company installed pumps and worked the
concessions until 1877 when they sold out to the Creston-Colorado Company. In 1888 the property
was sold to the Pan American Company. In 1895, the London Exploration Company purchased the
concessions. In 1902, the Mines Company of America took ownership. During the Mexican
Revolution in 1916, the mine closed and the facility was eventually dismantled.
In the mid 1980’s Minerales de Sotula S.A. de C.V. and Industrias Peñoles, S.A.B. de C.V. began reacquiring the mineral concessions. In 1991, Cia. Minera Las Cuevas S.A. de C.V a Mexican
Subsidiary of Noranda acquired an option on the project. Later that same year, HRC Development
Corp and Rotor International S.A. formed a joint venture ownership of the project called
Explorationes Eldorado S.A. de C.V. (EESA). EESA held the project until 2000 when it sold out to
Grupo Minero FG S.A.de C.V. In 2001, ownership was transferred to Explorations La Colorada, S.A.
de C.V. In 2007, Pediment Gold Corp. optioned and eventually, purchased the key concessions,
surface ownership and infrastructure mine from Exploraciones La Colorada.
Further key
concessions were also acquired in 2008 and 2010 by Pediment. In 2010, Argonaut Gold acquired
Pediment Gold Corp. including the La Colorada project held under Pediment’s wholly owned
Mexican subsidiary, Compañia Minera Pitalla S.A. de C.V. (Minera Pitalla).
4.2
Previous Exploration and Development Results
In the early nineties, Compañía Minera Las Cuevas invested $350,000.00 in exploration at La
Colorada, including reverse-circulation drilling. Later, EESA carried out systematic exploration on
the Project, focusing mostly in the El Crestón-Minas Prietas zone, but with great detail also in the La
Colorada/Gran Central zones. During the 1990’s, EESA continued its exploration program and
explored other zones such as Veta Madre, La Verde and Los Duendes. EESA conducted geological
mapping, surface sampling of rock and soils, geophysical programs, trenching and core and reversecirculation drilling. Other studies were also conducted by request of EESA, such as geotechnical
studies for pit-slope stability, metallurgical tests and mineralogical and petrographical studies. EESA
operated an open-pit, heap-leach operation starting in the El Crestón pit and in later years in the La
Colorada/Gran Central areas. Small-scale production also took place in the Los Duendes area,
southeast of the El Crestón pit.
In 2007, Pediment Gold Corp. optioned the project from Exploraciones La Colorada, S.A. de C.V.
and began compiling the previous work accompanied by an exploration program that included
surface sampling and mapping. A drill program commenced in 2008 focusing in the known
mineralization zones of El Crestón, La Colorada/Gran Central, Veta Madre and La Verde. The
results were followed up by the +10,000 m drill program of 2009 which combined diamond and RC
drilling and had a greater focus on the Veta Madre zone.
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December 8, 2011
4.3
Page 18
Historic Mineral Resource and Reserve Estimates
Various historical resource estimations have been completed on the project including; Nordin 1992,
Giroux and Charbonneau 1992 and Giroux 1999. All of the “historical” estimations are super
seceded by the current NI 43-101 compliant resource estimation discussed in Section 12 of this
report.
4.4
Historic Production
Mining activity in the district dates as far back as the mid 1700’s when Jesuit missionaries
discovered and later began mining the Minas Prietas zone. In the mid 1800’s and English company
installed pumps which allowed them to reach deeper levels and expanded the mining capacity at La
Colorada. The Pan American Company of New York began the first cyanidation process at La
Colorada by the late 1800’s. Several foregoing companies conducted underground mining from the
Minas Prietas, La Verde, Gran Central and Amarillas zones from this time until the early 1900’s;
however, political unrest related to the Mexican revolution caused mining to stop as the facilities had
to be evacuated. Only small-scale gambusino activity continued after that until exploration activity
resumed in 1991.
In 1993, Mr. Chester Millar successfully undertook a pilot heap leach test of 30,760 t of run-of mine
(RoM) material, producing approximately 1,500 oz of gold. Following this, a positive feasibility study
resulted in mine construction beginning in the same year. The industrial scale phase started
successfully as a conventional open pit, RoM, cyanide heap leach operation with an activated carbon
recovery process. Mine construction started in September of 1993, with the first gold poured in
January 1994. During the second year of operations the recovery process was replaced with a
conventional Merrill-Crowe (MC) circuit. Next, a two stage crushing circuit was implemented to treat
ore coming from the La Colorada/Gran Central pit – this was required to achieve economical
recovery levels. Construction started during 1996 and the crushing facility became operational in
1997. Approximately 30% of the ore was treated as RoM and dumped directly onto the pads, with
the rest being crushed in the two stage crushing plant to a size of -3/4”. The leaching-MC circuit had
a processing capacity of approximately 8,000 t of ore daily at its peak capacity. The mine operated
an average of 315 days/yr. During commercial production between 1994 and 2000, EESA produced
approximately 290,000 oz of gold and about 1 million oz of silver. EESA sold the mine and plant to a
local Hermosillo mine contractor, Grupo Minero FG S.A. de C.V. (FG), who continued limited
production and decommissioning for a year or so after 2000, and is estimated to have produced
approximately 70,000 additional oz of gold. EESA and FG production statistics cited from Diaz, 2007
and Herdrick, 2007.
BAS/SC
December 8, 2011
Page 19
5
Geological Setting and Mineralization (Item 7)
5.1
Regional, Local and Property Geology
The following is cited directly from McMillian et al (2009) with minor modifications of text and
formatting.
Physiographically, the La Colorada Property is located in the western foothills of the Sierra Madre
Occidental mountain chain, 110 km east of the Gulf of California. Tectonically the property is located
at the boundary between the Sonoran Basin and Range Province and the Sierra Madre Occidental
Province. These intrusive rocks are contiguous with the broad batholithic belt extending along the
western margin of North America. West-directed folding and thrust faulting occurred during the Late
Cretaceous Laramide Orogeny. Basin and Range faulting, followed in the Tertiary, and constitutes
the dominant structural event in the area.
Bedrock ranges in age from Proterozoic through Cenozoic and includes high-grade metamorphic
gneisses, shelf facies sedimentary strata, extensive andesitic to rhyolitic volcanic deposits and
dioritic to granitic intrusive rocks. Basement rocks consisting of gneisses, schists and quartzites cut
by plutons dated at 1,710 and 1,750 million years are some of the oldest rocks exposed in Mexico
and reach their southernmost limit just north of La Colorada property – these rocks are considered
the cratonic basement of North America (Zawada et al, 2001). Upper Triassic clastic sedimentary
strata (conglomerate, sandstone and siltstone) of the Barranca Group unconformably overlie the
metamorphic basement rocks in scattered locations throughout east-central and southern Sonora.
Late-Cretaceous to Tertiary volcanic rocks and associated continental clastic rocks unconformably
overlie the Triassic and older rocks. These units thicken considerably eastward, where they form
extensive sequences underlying the high plateau of the Sierra Madre Occidental Mountains. There,
two distinct divisions are apparent. A lower 100-45 Ma Lower Volcanic Complex composed mainly
of andesite with interstratified rhyolitic ignimbrites and minor interstratified basalt. The overlying
Upper Volcanic Complex has been dated at 34-27 My and is composed of extensive rhyolite and
rhyodacite ignimbrites with minor interstratified basalt. It constitutes the largest ignimbrite field in the
world. The upper sequence unconformably overlies on the older sequence and infills deeply incised
paleotopography in the older rocks. Late Cretaceous to Early Tertiary plutonic rocks (diorite,
granodiorite to granite) of the Sonoran Batholith outcrop throughout the region and have been dated
from 90-40 Ma.
The area of La Colorada is covered by Mid-Cambrian to lower Ordovician quartzites and
metalimestones; carboniferous limestones and sandstones; Triassic oligomictic conglomerate,
limestones and shales; and Upper Cretaceous volcanic tuffs ranging in composition from andesite to
rhyolite. The previous units are intruded by Paleocene to Oligocene age intrusives that include
granite, granodiorite, diorite and andesitic porphyry. These intrusives are interpreted to be the result
of the active continental margin stage of this region with the subduction of the Farallon Plate beneath
the North American plate. This was followed by a continental extension stage and continental rifting
of the Basin and Range province during the Tertiary which generated the youngest lithological units
represented in the area. The base of this tectonic stage is represented in the area by the Early
Miocene Báucarit formation, which is composed of continental conglomerates and sandstones
interbedded with basaltic to andesitic volcanic rocks. This is overlain by the Late Miocene Lista
BAS/SC
December 8, 2011
Page 20
Blanca formation composed by bimodal volcanism of rhyolitic tuff and andesite. The youngest unit
during the Tertiary is an extension-related olivine basalt unit.
Alteration can be seen in the older metamorphic and intrusive units mostly as silicification,
hematization and argillic alteration. The Tertiary volcanic rocks in the district are clearly post-mineral
and are unaltered.
On a regional scale, basin and range faults are characterized by north-northwest striking normal
faults. Crustal blocks formed by the Basin and Range faults have moderate to steep regional dips.
Steeply-dipping east-northeast trending regional faults transverse to the main trend are also common
throughout Sonora.
5.2
Significant Mineralized Zones
The significant mineralized zone of this Report on Resources include the El Crestón, La
Colorada/Gran Central, and Veta Madre Zones. The following descriptions are cited directly from
McMillian et al (2009) with minor modifications of text and formatting.
El Crestón
The El Crestón and Minas Prietas veins constitute the largest vein system on the La Colorada
Property and were originally mined as separate ore bodies; however they are now recognized as
being part of the same mineralized zone. El Crestón refers to the current open pit area, while Minas
Prietas is located to the east of the pit. The following description is paraphrased from Ball (1911),
quoted in Lewis (1995): The veins generally strike east to east-northeast, dipping an average of 75°
N. The veins have well-defined walls and below the 100 m level are simple with few “spurs” and
parallel veins. Apparently the best values are found where the veins were thickest. The veins of El
Crestón Mine are from north to south: New Vein, North Vein, Perry Vein, South Middle Vein and
South Vein. Although the veins are separate entities, they coalesce and bifurcate in a subparallel
series of veins. The veins are all fault controlled, with the faulting preceding the veining, but small
post-ore fault offsets of a few meters is common. Again, the following descriptions are paraphrased
from Ball (1911), quoted in Lewis (1995): New Vein apparently averaged 3 to 4 m in thickness,
approximately 250 m in length and more than 225 m deep. Its surface exposure was low grade, and
had “particularly rich” grades at depths of 100 to 225 m. The North Vein was traced for more than
1,100 m. It averages 2.5 m in width, with poor grades except near surface, where it was stoped for a
length of 325 m. Ball (1911), described the South Vein as being 850 m long with an average north
dip of 820, although it locally flattens to about 400 north. The vein averages 2.5 m in width and is
higher grade near surface for a length of 525 m, but only for 170 m in the deeper levels of the mine.
The Perky (or North Middle Vein) is a splay from the west end of the South Vein. It was about 180 m
long, with a maximum width of 1 m. According to Ball (1911) the mineralized zone was wider near
the surface because the veins converge towards each other and because there is a vein stockwork –
these two factors allowed for mining by “open cut methods”. Ball (1911) states that the greater
widths and higher grades near the surface were due to a combination of greater fracturing and
secondary (supergene) enrichment. Lithologies in the El Crestón-Minas Prietas deposit include
siltstone, shale and chert of the Paleozoic Mine Sequence; diorite, monzonite and quartz feldspar
porphyry of the intrusive suite as well as hornfels and skarn derived from the sedimentary sequence
and andesite (Lewis, 1995). Alteration styles include hematization, manganese oxides, silicification,
argillic, potassic, sericitic and chloritic affecting all rock types. Deep red hematite is a prominent and
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December 8, 2011
Page 21
obvious feature. Manganese oxides are apparently associated with some of the higher gold values.
Structurally, the Colorada Sur Fault is the main controlling feature. It has a variable strike which
averages 60°E and dips vertically to steeply north. Although the underground mines selectively
mined individual veins over narrow widths as described above, EESA’s open pit extracted larger
scale stockwork zones and areas of multiple veining over cumulative thickness of up to 90 m (Lewis,
1995).
Gran Central Deposit
Gran Central is geologically similar to El Crestón-Minas Prietas, and again is composed of quartz
veins and stockworks localized in the Gran Central Fault. It is hosted in a diorite stock which
contains roof pendants of siltstone and lesser calc-silicate hornfels. Quartz feldspar porphyry dykes
up to 2 m in width cut the diorite. The youngest rocks are a few small pre-mineral mafic dikes up to 2
m in thickness. At the eastern end of the deposit, the diorite is in fault contact with and covered by
an andesite “cap”. The andesite is less altered and oxidized than the underlying diorite and devoid
of gold values (Lewis, 1995). EESA tested the zone over a length of 450 m and a depth of 150 m,
but the old underground extends 200 to 300 m further to the west and to a depth of 300 m. The
east-west trending Gran Central Fault is the controlling structure and has a north dip averaging 50°.
The Gran Central Fault consists of a number of sub-parallel splays, where quartz veins, stockworks
and breccias zones are associated with clay-chlorite gouge. Alteration minerals are similar to those
found at El Crestón-Minas Prietas; however calcite is a common gangue mineral, and siderite veins
as well local amethyst are present (Lewis, 1995). Footwall rocks tend to be more heavily altered
than hanging wall rocks. Fine native gold is present in the deposit and some areas with visible gold
posed a minor “nugget effect” problem for EESA at Gran Central (Lewis, 1995). Sulfide minerals
ranging between 1 and 3% by volume are characteristic in the unoxidized portion of the deposit. In
the sulfide portion of the deposit, the minerals include galena, sphalerite, lesser chalcopyrite, minor
tetrahedrite and traces of chalcocite and covellite.
La Colorada Deposit
Gold-bearing quartz veins and stockworks at La Colorada are hosted in an east-west striking fault
with a north dip averaging 45°. It is hosted by rhyolite porphyry and diorite. It is within and adjacent
to the same dioritic stock which hosts the Gran Central Deposit. EESA traced the mineralization for
500 m along strike and for 100 m down dip. The zone is an average of 20 m thick. Lewis (1995)
state that according to historical records, mineralization is terminated at a depth of approximately
200 m by a flat fault, below which non-mineralized granite is present. Mineralogy and alteration are
similar to El Crestón-Minas Prietas.
Veta Madre Zone
Veta Madre is located 1.5 km. east of El Crestón-Minas Prietas Pit. It consists of a zone of extensive
alteration associated with the Colorada Sureste Fault. Historical miners sunk three deep sub-vertical
shafts. Rock types include siltstone, diorite, monzonite, granite, rhyolite feldspar porphyry and
dacite. EESA completed 11 trenches of different lengths and 1,566 samples were taken which
returned gold values of between 0.15 and 0.8 ppm with sporadic higher values of between 1.5 and
5.0 ppm Au. Anomalous zinc values were encountered at one location with one 4 m section grading
1.5% Zn. EESA drilled twenty one reverse-circulation drill holes totaling 2,372 m. A single diamond
hole was drilled in the area (249.9 m). These holes intersected mineralization along an east-
BAS/SC
December 8, 2011
Page 22
northeast trending structure, with a strike length of close to 500 m. Pediment has since completed
25 RC drill holes (2,098 m) in 2008- 2009, with follow-up drilling.
Regional and local geologic maps complied by Argonaut are presented in Figures 5-1 through 5-3. A
representative, geologic cross section through the La Colorado/Gran Central area is presented in
Figure 5-4.
BAS/SC
December 8, 2011
La Colorada Project
Sonora, Mexico
Regional Geology
Figure 5-1
La Colorada Project
Sonora, Mexico
La Colorada/Gran Central Pit Area Geology
Figure 5-2
La Colorada Project
Sonora, Mexico
El Crestón Pit Area Geology
Figure 5-3
La Colorada Project
Sonora, Mexico
La Colorada/Gran Central Area
Cross Section Geology
Figure 5-4
6
Page 27
Deposit Type (Item 8)
The following descriptions of deposit types are cited directly from McMillian et al (2009) with minor
modifications of text and formatting.
6.1
Mineral Deposit
La Colorada Gold District has many of the characteristics of a low sulfidization epithermal-vein type
gold-silver deposit. Although there are differences, such as the more sheared and deformed nature
of the La Colorada deposits, the authors (McMillian et al, 2009) believe that La Colorada could be an
outlier of the prolific Sierra Madre Occidental trend of gold-silver deposits that traverses much of
central Mexico. Zawada et al (2001) from fluid inclusion studies, state that “La Colorada district
underwent a complex hydrothermal history related to Cretaceous plutonic activity, later higher level
plutonic events, and finally a mid-Tertiary vein system which shares characteristics in common with
both a deep epithermal environment and a high-level mesothermal system.” Zawada et al (2001) go
on to state that “features indicative of a deep epithermal environment include abundant multistage
coarse and fine grained crystalline quartz bands, with gold deposition more abundant in the finer
grained stages; abundant primary growth zones indicative of open-space filling under hydrostatic
pressure conditions; and the absence of low temperature silica phases such as chalcedony or
recrystallized amorphous silica, which are typically present within the mineralized zones of higher
epithermal systems” .
The current authors (McMillan et al) believe that the deposits are epithermal in nature and of the lowsulfidization type in particular. The La Colorada deposits however have been subject to burial and
as a consequence to shearing and elevated temperatures prior to being exhumed and re-exposed.
These suppositions are not merely academic, and are believed to have exploration implications – in
particular in tracing the key structural-stratigraphic traps for mineralization down-dip in the relevant
fault blocks generally west from the known mineral deposits below the Tertiary volcanic cover.
6.2
Geological Model Applied
Discussion of the general characteristics of epithermal Au-Ag deposits follows and is believed to be
relevant. Recently epithermal-type Au-Ag deposits in the Pacific Rim and in Eurasia have been the
source of much of the world’s new gold supply. This has resulted in an improved understanding of
epithermal-type precious metal deposits and has allowed for construction of models which could be
very useful in future exploration of the La Colorada Property. The following comments are based
largely on recent papers by Hedenquist et al (2000) and Simmons et al (2005).
Epithermal deposits are found in the shallow parts of subaerial high-temperature hydrothermal
systems and are very important in Tertiary to Recent calc-alkaline and alkaline volcanic rocks. They
are particularly important in the Circum Pacific Volcanic Arcs and in the Mediterranean and
Carpathian regions of Europe. Host rocks are variable and include volcanic and sedimentary rocks,
diatremes and domes. Structural controls include dilatant zones related to extensional faulting and
favorable lithologies in permeable and/or brecciated host strata in the near-surface environment.
Although some mineralization can be disseminated, most common mineralization is hosted by
steeply-dipping vein systems. Both open-pit bulk mining and selective underground mining methods
are employed to exploit the deposits, depending upon the nature of the mineralized bodies. Heap-
BAS/SC
December 8, 2011
Page 28
leach treatment is possible in some oxidized deposits. In contrast some high-sulfidation deposits
can be refractory, with the gold encapsulated by sulf-arsenide minerals.
Mineral textures include banded, crustiform-colliform and lattice textures composed of platey calcite
sometimes pseudo morphed by quartz. An important feature of epithermal deposits is a pronounced
vertical zonation, with quartz veins carrying base metal sulfide mineralization at depth, becoming
silver-rich higher in the system and finally gold-rich near the top. Both low-sulfidation and highsulfidation epithermal deposits can be overlain by a discontinuous blanket of kaolinite-smectite,
sometimes with alunite and native sulfur, within an opaline rock that is easily eroded (Hedenquist et
al, 2000). Although some deposits display intermediate characteristics, two end member types of
deposit are generally recognized.
High-sulfidation deposits are characterized by a silicic core of leached residual vuggy silica as the
main host to the mineralization (Hedenquist et al, 2000). Major metallic minerals can include pyrite,
enargite/luzonite and covellite, with lesser quantities of native gold and electrum, chalcopyrite and
tennantite/tetrahedrite. Upward from the silicic core there is generally an upward-flaring advanced
argillic zone consisting of quartz-alunite, barite and kaolinite, and in some cases pyrophyllite, or
zunyite (Hedenquist et al, 2000). High sulfidation deposits are commonly proximal to and in some
cases hosted by a high level subvolcanic intrusive or dome – calderas constitute a particularly
important environment.
Low-sulfidation deposits typically range from veins, through stockworks and breccias to disseminated
zones. Mineralized bodies in low-sulfidation systems are commonly associated with quartz and
adularia, with carbonate minerals or sericite as the major gangue minerals. Major metallic minerals
can include pyrite/marcacite, pyrrhotite, arsenopyrite and high-iron sphalerite. Less abundant
metallic minerals include native gold and electrum, cinnabar, stibnite, Au-Ag selenides, Se sulfosalts,
galena, chalcopyrite and tetrahedrite/tennantite. Hedenquist et al (2000) state that hot spring sinter
can form above a low-sulfidation deposit and that the clay alteration associated with a deposit can
“mushroom” above the deposit towards the surface and have an aerial extent “two orders of
magnitude larger than the actual ore deposit.” In some cases mercury mineralization, and/or
geochemically anomalous As, Sb and Tl, is found near the top of the deposit and in the overlying
siliceous sinter.
According to Herdrick (2007), the La Colorada project area contains at least three parallel vein
trends on which underground and open pit mining has been conducted. Targeting of drill holes is
based on structural analysis and vertical zoning recognized in the district, as well as fluid inclusion
and alteration studies which indicate that gold mineralization exposed in the pits resulted from boiling
in the epithermal system. The upper parts of a boiling system are typically recognized as barren
alteration zones, overlying potentially gold bearing parts of the vein structure at depth. Veins are
focused along east-west and northeast-southwest trending structures that dip moderately to the
north and northwest, and cut across local skarn alteration and intrusive bodies. Surface mining was
focused along three structures, the upper parts of which flare out into stockwork zones. Eight
different structures in the La Colorada mine area appear to have older underground workings in gold
bearing quartz veins.
Age dating was undertaken on three hydrothermal sericite samples. Two are from the La Colorada
Pit and one from the Gran Central Pit (Zawada et al, 2001). The samples were subject to 40Ar/39Ar
analyses at the New Mexico Institute of Science and Technology Geochronology Research Lab in
BAS/SC
December 8, 2011
Page 29
Socorro, New Mexico, yielding respectively: 27.1 +/- 2.0 Ma, 22.45 +/-0.19 Ma and 23.83 +/- 1.6 Ma.
Two biotite samples collected from dioritic intrusions from the Gran Central Pit yielded ages of 70.4
+/-0.2 Ma and 69.9 +/- 2.2 Ma. These dates suggest that the hydrothermal alteration and associated
gold mineralizing event was Miocene in age and probably related to the Tertiary volcanic event. The
Cretaceous age for the biotite in the diorite suggests the intrusive event for the granitic plutonic rocks
was much earlier and not associated with the hydrothermal gold mineralizing event.
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December 8, 2011
7
Exploration (Item 9)
7.1
Relevant Exploration Work
Page 30
Argonaut has conducted surface exploration consisting of rock chip and soil sampling.
7.2
Surveys and Investigations
7.2.1 Exploration Rock and Soil Sampling
Selected surface rock samples were collected by qualified Mexican geologists together with
appropriate geological-technical data, including UTM coordinates, lithology and mineralization
recorded in field books. The samples are placed in standard plastic rock sample bags, tagged and
the locations recorded in a master database. The plastic bags are sealed using plastic pull ties. All
samples are taken to the office facilities within the La Colorada project.
During 2011, Argonaut’s regional exploration program at La Colorada included soil sampling from the
Sombreretillo and the Los Duendes areas. Sampling was made over a spacing array of 50 m by 100
m, and nearly all samples consisted of material from the B and C horizons, with depths ranging from
20 to 45 cm. Detailed information for all samples was recorded in paper and later included in the
Surface Database. All samples were placed mainly in cloth bags, and were shipped to the laboratory.
So far, Argonaut’s geologists have taken 99 samples in the Los Duendes area, to the south of El
Creston open pit; as well as 61 soil samples from Sombreretillo, located to the Northeast of the Veta
Madre area.
7.3
Significant Results and Interpretation
Small outcrops of Qtz+Ox mineralized structures with anomalous Au values were sampled at the
Sombreretillo area, to the northeast of Veta Madre; these structures are hosted by dacitic rocks with
strong presence of Qtz veinlets, and they are parallel to the mineralization trend of the Veta Madre
area. Recently received assay results of around 50 rock samples from the Sombreretillo area, have
helped Argonaut’s exploration personnel to design a new drill program, which is currently under
review and it is programmed to be implemented in the near future.
In addition, a siltstone-hosted mineralized structure trending to the northwest was sampled at the Los
Duendes area, from where several rock samples with anomalous Au assays were found; turning the
area into a possible further exploration target.
General reconnaissance of two new properties, Red Norte and Red Sur, located to the south of the
La Colorada mine, has been carried out; results from that work shows presence of several NorthSouth trending veins and structures, which are accompanied of anomalous values of Au and Ag that
may lead to more aggressive exploration in the near future.
Soil sampling results in both areas have been positive; and, as mentioned before, a new drilling
program , partially based on surface sampling and intended to expand the resource has been
already made.
BAS/SC
December 8, 2011
8
Page 31
Drilling (Item 10)
The majority of the drilling which supports the current resource estimation was conducted by the
three most recent owners of the project including; EESA, Pediment and Argonaut.
8.1
Type and Extent
EESA completed 874 drillholes on the project during their ownership. The details of the EESA
drilling are outlined in Table 8.1.1.
Table 8.1.1: EESA Drilling Summary
Drilling by Area and DH Type:
El Crestón Pit
Gran Central Pit
La Colorada Pit
La Verde
NE Extension
Veta Madre
El Represo
Los Duendes
Colorada Norte
Colorada Sur
Total
RC/Percussion
Number
m
381 42,047.62
150 18,358.70
158 23,254.71
33
1,439.00
28
2,266.00
21
2,372.00
1
279.20
24
639.00
32
3,526.00
46
4,226.00
874 98,408.23
Diamond Core
Number
m
26
3,327.85
27
3,400.10
18
3,439.10
0
0.00
2
314.00
0
0.00
3
204.00
32
1,670.00
0
0.00
0
0.00
108 12,355.05
Pediment completed 133 drillholes on the project during their ownership.
Pediment drilling are outlined in Table 8.1.2.
Total Drilled
Number
m
407
45,375.47
177
21,758.80
176
26,693.81
33
1,439.00
30
2,580.00
21
2,372.00
4
483.20
56
2,309.00
32
3,526.00
46
4,226.00
982
110,763.28
The details of the
Table 8.1.2: Pediment Drilling Summary
Total Drilling:
RC
DD (with precollar)
Total
Drilling By Area:
El Crestón Pit
Gran Central Pit
La Colorada Pit
La Verde
NE Extension
Veta Madre
Leach pads
Waste Pads
Total
2008
Number
m
22 4,314.64
0
0.00
22 4,314.64
2
3
1
7
5
4
0
0
22
358.20
580.60
341.40
1,327.60
964.70
742.14
0.00
0.00
4,314.64
2009
Number
m
105 7,533.86
5 1,518.70
110 9,052.56
36
9
13
18
4
21
4
5
110
2,886.78
1,214.28
1,580.15
1,109.46
237.75
1,356.36
60.96
606.82
9,052.56
2010
Number
m
1 353.57
0
0.00
1 353.57
1
0
0
0
0
0
0
0
1
353.57
0.00
0.00
0.00
0.00
0.00
0.00
0.00
353.57
Total
Number
m
128 12,202.07
5
1,518.70
133 13,720.77
39
12
14
25
9
25
4
5
133
3,598.55
1,794.88
1,921.55
2,437.06
1,202.45
2,098.50
60.96
606.82
13,720.77
Argonaut has completed 245 drillholes on the project to date. The details of the Argonaut drilling are
outlined in Table 8.1.3.
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December 8, 2011
Page 32
Table 8.1.3: Argonaut Drilling Summary
Total drilling:
RC
DD (with precollar)
Total
Drilling by area:
El Crestón Pit
Gran Central Pit
La Colorada Pit
La Verde
NE Extension
Veta Madre
Leach Pads
Waste Pads
Total
Number
142
76
218
m
23,810.95
11,635.07
35,446.02
12
69
64
9
0
64
16
11
245
2,470.40
12,045.27
10,451.15
1,908.05
0.00
8,571.15
385.55
402.33
36,233.90
Source: Minera Pitalla Drilling Summary – 2011
8.2
Procedures
8.2.1 Pediment, Reverse Circulation (RC) Drilling
Pediment used Layne de México and Globexplore Drilling S.A. de C.V., both of Hermosillo, for the
reverse circulation drilling. Drillholes were generally oriented on azimuths 180° and 160° and
inclined with dips between -45° and -90° to the south because of the predominant north dip to the
veins and stockwork zones. Brunton compass was used for marking the direction of drilling on the
pads. All drill holes contained a systematic code numbering, using a prefix indicating the year and
type of drilling and had continues numbering. Initial pads were located by handheld GPS. Upon
completion, further surveying with precision instruments was completed to obtain the exact drillhole
coordinates. RC pipe diameter was 5 1/8 inch for Lyne RC or 5.0 inch for Globexplore RC. RC
cuttings were logged coincidentally with drilling using hand lens and binocular field microscope . RC
samples were taken every 5 ft (1.52 m) regardless of lithology, alteration or mineralization. Chip
trays were set up at this sample interval. After completion of a drillhole, the site was monumented by
a marker composed of down-hole PVC pipe encased in a cement block which was labeled with the
drillhole number.
8.2.2 Pediment Core Drilling.
Pediment used Layne de Mexico of Hermosillo for its core drilling. Layne drilled with a skid mounted
Cummins B-20 diamond drill rig. This equipment was used to drill 5 new holes, and 2 existing holes
were re-entered. All holes were drilled using HQ diameter bits. The entire hole was sampled. In the
mineralized zones samples were collected at regular 1.0 m or less, intervals. In zones with no
obvious mineralization, samples were collected at 3.0 m intervals.
8.2.3 Argonaut Reverse Circulation (RC) Drilling.
Argonaut used Layne de México and Major Drilling de Mexico S.A, de C.V., both of Hermosillo, for its
RC drilling. Drillholes were oriented on azimuth 180° and inclined with dips between -45° and -90° to
the south following Pediment´s drill scheme. The drill plan design was to infill at 25 m spacing.
Brunton compass was used for marking the direction of drilling on the pads. All drillholes contained
BAS/SC
December 8, 2011
Page 33
a systematic code numbering, using a prefix indicating the year and type of drilling and had
continuous numbering follow the system of Pediment. Initial pads were located by handheld GPS.
Upon completion, further surveying with precision instruments was completed to obtain the exact
drillhole coordinates. RC pipe diameter was 5.0 in for Lyne RC or 5 1/8 in for Major RC. RC cuttings
were logged coincidentally with drilling using hand lens and binocular field microscope. RC samples
were taken every 5 ft (1.52 m) regardless of lithology, alteration or mineralization. Chip trays were
set up this sample interval. After completion of a drillhole, the site was monumented by a marker
composed of down-hole PVC pipe encased in a cement block which was labeled with the drillhole
number.
8.2.4 Argonaut Core Drilling.
Argonaut used Landdrill International Mexico S.A. de C.V. and Falcon Perforaciones de Mexico S.A.
de C.V. both of Hermosillo and GDA Servicios Mineros S.A. de C.V. of Chihuahua for its core drilling.
Two drills were skid-mounted and two were buggy-mounted diamond drill rigs. Some of the holes
were drilled using PQ diameter bits in order to obtain metallurgical samples, others used HQ
diameter bits to obtain exploration samples. Sampling procedures followed the protocols established
by Pediment as described above.
8.2.5 Argonaut RoM Pad Drilling
A Becker-Hammer rig contracted from Layne de Mexico was used to drill test the RoM leach pad and
Waste dumps at La Colorada. This type of drilling drives casing with a percussion hammer without
the necessity of rotation. The casing is a double wall drive pipe with a large center opening which
allows even large cobbles to be lifted without prior crushing. Since drilling and casing are combined
in one operation, this method provides a continuous and generally, more accurate sample of the
geological formation being drilled. Since the RoM pad and waste dumps consist of uncrushed rock,
the Becker was chosen to get as much recovery in the coarse size as possible. The Becker hammer
used at La Colorada had a 9-in outer diameter and 6-in inner diameter with dual tube drill pipe.
Layne reported the rig being able to commonly lift 4-in cobbles.
All Becker hammer drill holes were drilled at a -90 angle and were drilled without introducing water.
The sampling procedure on this type of drilling was similar to the one used in RC samples, with the
exception that none of the sample portions were discarded. Routinely, the sample was discharged
and split by half; 50% of the sample was bagged and stored at the storage house and the other 50%
was split again to obtain two 25% portions of the total; one of which was bagged and stored as a lab
sample witness and the other 25% was bagged, marked and shipped to the preparation laboratory.
Whenever a duplicate sample was needed, both 25% portions were split again, so four 12.5% splits
were obtained, two of which were shipped to the preparation lab and the other two were stored at the
storage house.
8.3
Interpretation and Relevant Results
Reputable contractors using industry standard techniques and procedures have conducted the La
Colorada drilling. The historic drilling was conducted to the industry best practices of the time. This
work has defined several large zone of anomalous gold mineralization within the El Crestón, La
Colorada/Gran Central, and Veta Madre Zones. Figure 8-1 shows the locations of the Argonaut
drillholes. The drillholes are generally located in a wide range of spacing and orientations. They
BAS/SC
December 8, 2011
Page 34
typically bear to the south, inclined steep to moderately. This orientation provides an oblique angle
of intersection between the predominate plane of mineralization and the drillhole. Based on the wide
range of drillhole orientations most of the sample lengths do not represent true thickness of
mineralization. In general, the drillhole intercept length is greater than the true thickness of
mineralization.
SRK is of the opinion that the drilling operations were conducted by professionals, the RC chips and
core were handled and logged in an acceptable manner by professional geologists, and the results
are suitable for support of an NI 43-101 compliant resource estimation.
BAS/SC
December 8, 2011
La Colorada Project
Sonora, Mexico
Drillhole Location Map
Figure 8-1
Page 36
9
Sample Preparation, Analysis and Security (Item 11)
9.1
Methods
9.1.1 Reverse Circulation Drill Samples
RC samples were collected every 5 ft or 1.52 m. The rig is equipped with a cyclone with both a
vertical and a lateral discharge. Material from the vertical discharge passes through a second splitter
to obtain two samples. One of the splits is discarded and the other is split again to obtain two new
samples. These final two samples are bagged in previously-marked plastic (dry material) or
micropore bags (wet material) and sealed with plastic pull ties. One of the bags is weighed and
collected for assay, while the other reject is stored at the La Colorada warehouse as a duplicate in
case further checks are required. QA/QC field duplicates are prepared by splitting the reject once
and keeping one half for storage, the other half is then split again and bagged as a field duplicate to
go for assay. The sampling process is performed by trained local workers under the supervision of
one experienced worker and a project geologist. At the end of the day or shift, all sample bags for
assay are taken to the La Colorada office and organized there, inserting the corresponding QA/QC
samples containing blanks and standards.
9.1.2 Diamond Drill Core Samples
Samples were first marked by the geologist after geological logging, RQD and photography was then
completed. Sample splits were collected dry, using either a manual or a hydraulic core splitter. In
the case of filed duplicates, the samples had to be split twice, making sure representative parts were
used in both sample bags. Weights for all samples were recorded prior to sending to the lab.
Sample splitting was performed by local trained workers under the supervision of Argonaut’s
qualified geologist. Core boxes are stored at a warehouse in La Colorada using plastic boxes which
are properly marked with drillhole number and intervals contained in meters.
9.2
Security Measures
All Argonaut drill and surface samples taken at the Project were stored and secured in the Project’s
office. Sample transfer to the assay lab were regularly scheduled three times a week. The samples
were collected by Inspectorate directly at the site. Personnel from the lab would sign off after the
samples were loaded into the truck, then the samples were delivered to the preparation laboratory in
Hermosillo. The laboratory itself would ship processed pulps for assay in their laboratories in the
U.S.
9.3
Sample Preparation
All of Argonauts samples were prepared and analyzed by Inspectorate Labs, Hermosillo, Mexico.
Inspectorate is fully independent of Argonaut; it is not an ISO certified laboratory but does follow the
“Bureau Veritas” code of ethics.
All samples were dried, crushed, split and pulverized in Inspectorate’s Hermosillo prep facility. The
pulps were then sent to Inspectorate’s main U.S. facility in Reno Nevada for fire assay gold and
silver analysis.
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December 8, 2011
Page 37
As part of routine procedures, Inspectorate uses barren wash material between sample preparation
batches and, where necessary, between highly mineralized samples. This cleaning material is
tested before use to ensure no contaminants are present and results are retained for reference.
Inspectorate’s sample preparation and fire assay procedures are as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Sample is logged in and weighed.
Sample is dried in ovens.
Sample is crushed to 80% <2 mm or better.
The crusher is cleaned with compressed air after each sample.
Sample is split using Jones Riffle until up to 250 g sample remains.
Sample is packed and the reject is returned to original bag and stored.
Sample from step 5 is pulverized to 85% passing -200 mesh or better.
Pulps are shipped to Reno, Nevada.
Au and Ag are assayed by fire assay using Atomic Absorption Spectrometry (AAS) finish,
with 50 g nominal sample weight.
10. 30 additional elements are assayed by ICP using aqua regia digestion and read with ICPAES.
9.4
QA/QC Procedures and Results
Argonaut’s practice is to insert one control sample (standards, blanks and duplicates) at 10-sample
intervals through an entire drill hole. The control sample inserted each time is in sequence as
standard, blank and field duplicate. This repeats for as many QA/QC sample intervals as the drill
hole requires. Standards used are commercially produced by Rocklabs and include different gold
grades and two material types: oxide and sulfide. The material type is selected to match the type of
mineralization being sampled in the drill hole. Commercial blanks are also purchased from
Rocklabs. Field duplicates are prepared during drilling as described in Section 9.1.
After certified assay results are received from Inspectorate labs, statistical and/or graphic QA/QC
analyses are applied to all control samples. Argonaut does not include any analytical batch results in
its final database that have not passed the QA/QC procedure satisfactorily.
Duplicate samples are evaluated mainly using the Spearman Rank’s correlation coefficient (R2),
which considers differences in Au-values sorting-ranks and is calculated to assure a good positive
correlation represented by the proximity of R2 to 1. In addition, the Pearson correlation coefficient is
also calculated for the original data, to verify the direct correlation level.
Figures 9-1 through 9-5 show that all Standards and Blank samples fell within acceptable limits.
Repeatability on duplicate samples results was highly acceptable; requests for several re-assays on
duplicates were triggered by high differences in results, and almost all the issues were attributed to
the presence of a minor nugget effect, seen also in previous drilling programs. Statistically, the
Spearman coefficient demonstrated a very good positive correlation level for the duplicates in the
2011 program (0.8875). The Pearson coefficient value reflects the heterogeneity of the duplicates.
Certificates of results for all reference material are issued by RockLabs, these documents contain
mainly the mean Au values and the Standard Deviation for each standard they manufacture, and this
information is taken into account to establish the tolerance limits which determine if a re-assay is
BAS/SC
December 8, 2011
Page 38
required. Reference material results that Argonaut receives from Inspectorate are graphically
analyzed as part of the QA/QC procedures.
9.5
Opinion on Adequacy
SRK is of the opinion that the analytical work performed by Inspectorate is valid and suitable for use
in resource estimation. The fire assay method is an industry accepted analytical technique to
determine Au and Ag content in exploration samples. The QA/QC program employed by Argonaut
meets current industry standards and the results of this work indicate good precision and accuracy of
the analytical results.
BAS/SC
December 8, 2011
Source: Argonaut Gold Inc, 2011
La Colorada Project
Sonora, Mexico
Blank Analyses Performance Chart
Figure 9-1
La Colorada Project
Sonora, Mexico
Certified Standard OxE86 Performance Chart
Figure 9-2
La Colorada Project
Sonora, Mexico
Certified Standard OxF65 Performance Chart
Figure 9-3
La Colorada Project
Sonora, Mexico
Certified Standard SG40 Performance Chart
Figure 9-4
La Colorada Project
Sonora, Mexico
Figure 9-5
Field Duplicate Performance Chart
Page 44
10 Data Verification (Item 12)
10.1 Procedures
Two data verification procedures have been employed to verify the data in this report. The first
involves 11 character samples collected by McMillian et al (2009); the second is verification of the
electronic data base completed by SRK.
The following description of data verification by character samples is cited directly from McMillian et
al (2009) with minor modifications of text and formatting.
During the property visit by two of the authors (McMillan and Dawson) on October 3, 2009, eleven
character samples were taken. The samples collected ranged between 0.64 and 6.03 kg., averaging
about 2 kg. They were collected with a geological pick into a plastic sample bag and delivered
personally by McMillan and Dawson on October 3 to the ALS Chemex preparation facility in
Hermosillo. The analytical results and comparative Pediment results are presented in Table 10.1.1.
The riffle split samples of the reverse circulation drill cuttings show good correlation as was
expected. The chip samples show poorer correlation – perhaps reflecting to greater variability and or
more personal bias in chip sampling.
Table 10.1.1: MacMillian et al (2001) Comparative Sampling Results
Duplicate and Character Rock Chip and RC Drill Cutting Samples – La Colorada Mine area
Sample No
(1)
Easting
(1)
Northing
MD001
54282
3185654
MD002
542840
3185640
MD003
542920
3185760
MD004
542920
3185760
MD005
542920
3185760
MD006
541233
3185777
MD007
541345
3185642
Description
El Crestón pit ramp. 2 m chip sample on bench between
Pediment Samples 324282 and 324283. N-trending
vuggy quartz veinlets to 1 cm. cutting red weathering
hornfelsed argillite. 20 cm. N-trending, steeply-dipping
felsic dyke cuts sediments.
El Crestón pit ramp. 2 m chip sample on bench between
Pediment Samples 324264 and 324265. Quartz vein
stockwork cutting altered argillite. ~75 to 80% quartz.
El Crestón pit. 2 m chip sample on bench duplicating
Pediment Sample 324224. 0.5 to 2 cm. quartz vein swarm
trends SW cutting red baked argillite. Broken granodiorite
intrusive dykes to 0.5 m.
El Crestón pit. 2 m chip sample on bench duplicating
Pediment Sample 324223. 0.5 to 2 cm. quartz vein swarm
trends SW cutting red baked argillite. Broken granodiorite
intrusive dykes to 0.5 m.
El Crestón pit. 10 to 15 cm. gouge zone in same location
as MD003. Duplicates Pediment Sample 324222.
La Colorada pit. 1.5 m sample of La Colorada vein. Vein
is intensely oxidized but contains fine pyrite, galena and
sphalerite and some vuggy quartz. Vein (which is a
stockwork of fine veinlets) dips ~ 500 N. Duplicates
Pediment Sample 434696.
Gran Central pit. 3 m chip sample of 1.4 m highly altered
shear zone dipping NE ~450. Drusy quartz, maroon and
red Fe oxides and some Mn. Duplicates Pediment
Sample 434806.
Duplicate riffle split of RC hole sample 40556.
MD008
MD009
MD010
MD011
(1) NAD 27 Mexico, Zone 12K
(2) all samples assayed by ALS-CHEMEX
BAS/SC
Au ppm
(2)
this work
Au ppm
Pediment
(2)
Gold
0.11 0.014 0.026
0.53 0.197 0.111
0.18
0.138
0.35
0.103
2.45
0.485
0.95
0.164
0.32
4.71
0.77
1.77
1.55
1.3
0.776
2.289
1.472
0.969
December 8, 2011
Page 45
SRK verified the electronic database to the original source data to assure validity of the data
supporting the resource estimation of this report. Argonaut supplied SRK with scanned copies of the
original drill logs or assay certificates where possible. SRK then manually compared the collar
locations, orientations/down-hole surveys and assay data within the electronic database to the
original sources. Assay certificates were only available for 67% of the assay data used to support
the current resource estimation. Eleven percent of these were validated by direct checks, no input
errors were found. Drill collar location from the EESA program were located in mine grid coordinates
and then transformed into UTM coordinates. The EESA mine grid is a truncated version of and older
UTM grid. Some of the original EESA collar coordinates are available in drill logs but due to the
transformation, direct comparison to the current coordinates was not possible. All drill collar
locations from the Pediment and Argonaut drilling were verified to the original sources. No errors
were found. Three percent of the hole orientation/down-hole surveys were verified to original data,
no errors were found.
10.2 Limitations
SRK was not limited in its access to any of the supporting data used for the resource estimation or
describing the geology and mineralization in this Report on Resources.
The database verification is limited to the procedures described above. All mineral resource data
relies on the industry professionalism and integrity of those who collected and handled it. SRK is of
the opinion that appropriate scientific methods and best professional judgment were utilized in the
collection and interpretation of the data used in this report. However, users of this report are
cautioned that the evaluation methods employed herein are subject to inherent uncertainties.
10.3 Data Adequacy
It is SRK’s opinion that the drillhole data is adequate to support to resource estimation of this report.
BAS/SC
December 8, 2011
Page 46
11 Mineral Processing and Metallurgical Testing (Item
13)
All information contained within this section was provided by Kappes, Cassiday & Associates (KCA)
in Reno, Nevada.
Metallurgical test work was completed in 2011 on material drilled from the existing RoM Leach Pad
at La Colorada as well as on new PQ and HQ core drilled from the La Colorada, La Colorada West,
Gran Central and Gran Central West pit designations.
The metallurgical drillhole locations are included in the map presented in Figure 11-1.
In both cases, the amount of drilling completed for the test programs completed by KCA in 2011
would appear to be representative of the areas being examined.
11.1 Testing and Procedures
For the RoM Leach Pad sample a group of nineteen (19) buckets of material were received at KCA
in Reno, Nevada. The received material was stage crushed to 100% passing 25 millimeters and a
portion of this material then crushed to 100% passing 12.5 mm in order to develop crushed material
for head characterization, bottle roll leach test work, agglomeration test work and column leach test
work.
For the metallurgical core drill holes developed at La Colorada, KCA received one hundred and
eighty nine (189) 5 gallon buckets containing HQ and PQ core (1/2 split and whole core was
received) and assay control sample pulps from the La Colorada Project of Argonaut Gold, Inc.
located near Hermosillo, Mexico. The core intervals received were prepared and assayed by
Inspectorate in Sparks, Nevada for gold and silver.
An additional group of core samples were received. These core samples were contained in twenty
one (21) buckets and were intervals of ½ split HQ core previously assayed by La Colorada
personnel. These core intervals were from the Gran Central West area.
A total of two hundred and six (206) intervals were received from four (4) separate areas of the La
Colorada project. The intervals received were representative of thirteen (13) drill holes developed
from across these areas.
A total of four (4) core composites were developed for head characterization, bottle roll leach test
work, preliminary agglomeration and column leach test work. These composites were representative
of the La Colorada, La Colorada West, Gran Central and Gran Central West areas.
Column leach tests were conducted on each of the four (4) composites utilizing material crushed to
100% passing 25, 16, 12.5 mm for the La Colorada West and the Gran Central West composites and
material crushed to 100% passing 25, 16, 12.5 and 8.0 mm for the La Colorada and Gran Central
composites.
11.2 Relevant Results
The results of the column leach tests conducted on the RoM Leach Pad material are summarized in
Table 11.2.1.
BAS/SC
December 8, 2011
Page 47
The column leach tests were completed on material crushed to 100% passing 25 and 12.5 mm.
Screen analyses of the column tailings indicated that the two (2) column leach tests conducted had
similar particle sizes with 80% of the material crushed to minus 25 mm being finer than 10.5 mm and
80% of the material crushed to minus 12.5 mm finer than 8.2 mm. Gold recoveries for the two (2)
columns ranged from 43% to 46% after 78 days of leaching. Sodium cyanide consumption averaged
0.34 kg/t NaCN and ranged from 0.30 to 0.38 kg/t NaCN.
The feed material for both column leach tests were agglomerated with cement prior to leaching. The
cement added during agglomeration was approximately 2 kg/t.
Table 11.2.1: La Colorada Project Column Test Results on RoM Leach Pad Material
The results of the column leach tests conducted on the core composites are summarized in Tables
11.2.2 and 11.2.3.
Table 11.2.2: La Colorada Project Column Test Results on Core Material – Gold
BAS/SC
December 8, 2011
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Table 11.2.3: La Colorada Project Column Test Results on Core Material – Silver
It should be noted that some degree of variability was noted during the course of the column test
program reported here with regard to head assays and calculated head assays completed for
individual tests. While the exact source of this variability was not determined from the test work the
relative standard deviation for the calculated head gold values for each group were all less than 13%
and this would indicate generally good agreement between column tests.
For this test program the minus 25 mm material was leached for 48 days. The minus 16 and minus
12.5 mm material were leached for 63 days and the material crushed to minus 8 mm were leached
for 72 days. Examination of the leach curves does indicate that leaching was continuing to some
extent when the column leach tests were ended. Although some additional recovery could possibly
be obtained with longer leaching it is believed that the crushed size of the material is the most
important factor with regard to metal recovery.
For most sets of column leach tests the minus 16 mm crushed material and the minus 12.5 mm
crushed material indicated similar type recoveries and in some cases the recoveries from the minus
12.5 mm material were lower than recoveries obtained at the 16 mm crushed size. This similarity
may be attributed to the screen analyses of these crushed products. The finer size fractions in these
two (2) crushed sizes, in some cases, were not different in weight percent.
The general recovery trend does indicate that both gold and silver recoveries do improve with finer
crushing.
For the Gran Central core composite gold recoveries ranged from 30% for material crushed to minus
25 mm to 55% on material crushed to minus 8 mm. Silver recoveries ranged from 19 to 45%.
The consumption of sodium cyanide ranged from 0.16 to 1.79 kg/t NaCN. Hydrated lime addition
averaged approximately 2 kg/t Ca(OH) 2 for the material crushed between 12.5 and 25 mm. The
minus 8 mm crushed material was agglomerated with the addition of 2.01 kg/t cement.
BAS/SC
December 8, 2011
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For the Gran Central West core composite gold recoveries ranged from 41% for material crushed to
minus 25 mm to 48% on material crushed to minus 12.5 mm. Silver recoveries ranged from 24 to
40%.
averaged approximately 2 kg/t Ca(OH) 2 for the material crushed between 12.5 and 25 mm.
For the La Colorada core composite gold recoveries ranged from 44% for material crushed to minus
25 mm to 70% on material crushed to minus 8 mm. Silver recoveries ranged from 17 to 47%.
averaged approximately 2 kg/t Ca(OH) 2 for the material crushed between 12.5 and 25 mm. The
minus 8 mm crushed material was agglomerated with the addition of 2.01 kg/t of cement.
For the La Colorada West core composite gold recoveries ranged from 32% for material crushed to
minus 25 mm to 46% on material crushed to minus 12.5 mm. Silver recoveries ranged from 30 to
47%.
averaged approximately 2 kg/t Ca(OH) 2 for the material crushed between 12.5 and 25 mm.
From KCA’s field experience, cyanide consumption in production heaps is usually 25 to 33% of the
laboratory column test consumption. Therefore, at the 16 mm crush size, a field cyanide
consumption of 0.14 kg/t can be expected. It should be noted that at the 8 mm crush size there is a
substantial increase in cyanide consumption, and the field consumption at this finer crush size can
be expected to be higher, in the range of 0.40 kg/t.
11.3 Recovery Estimate Assumptions
When examining the results from laboratory column test work and projecting this to estimated field
recoveries the recoveries obtained from laboratory columns are typically reduced by 3 percentage
points. In a similar manner, silver recoveries are typically adjusted by up to 5 percentage points.
After review of historical processing data from La Colorada it was determined that no reduction from
laboratory column test work was needed. As the recovery curves indicate very slow leaching, it is
almost certain that several percent more gold recovery would be realized with a 90 day leach cycle.
Gold recovery in the field from RoM Pad Leach material crushed to 100% passing 25 mm with a p80
size of 10.5 mm would be estimated to be 43%.
Column test recoveries along with estimated field recoveries for the four (4) areas defined by the
core material are presented in Table 11.3.1.
BAS/SC
December 8, 2011
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Table 11.3.1: La Colorada Project Estimated Field Recoveries
11.4 Additional Test Work
Additional column test work is being completed by KCA at the present time on core material from the
Project. This test work is focused on finer crushing (minus 12.5 mm).
If finer crushing is to be examined as a possible processing alternative additional agglomeration test
work will be required.
BAS/SC
December 8, 2011
La Colorada Project
Sonora, Mexico
Metallurgical Drill Hole Locations
Figure 11-1
Page 52
12 Mineral Resource Estimate (Item 14)
12.1 Qualified Persons for the Mineral Resource Estimate
Dr. Bart Stryhas constructed the geologic and mineral resource model discussed below. He is
responsible for the resource estimation methodology, mineral resource classification and resource
statement. Dr. Stryhas is independent of the issuer applying all of the tests in Section 1.5 of NI 43101.
The resource estimation is based on the current drillhole database, digitized as-built topography of
open pits, interpreted fault structures, geologic controls and current topographic data. The
estimation of mineral resource was completed utilizing a computerized resource block model by
VULCAN® modeling software.
12.2 Drillhole Database
The drillhole database was compiled by Argonaut and is determined to be of good quality. The
database consists of four, Microsoft Excel® spreadsheets containing collar locations surveyed in
UTM grid coordinates, drillhole orientations with some down hole deviation surveys, assay intervals
with gold and silver analyses by fire assay and geologic intervals with rock types.
orientations. They typically bear to the south, inclined steep to moderately. This orientation provides
an oblique angle of intersection between the predominate plane of mineralization and the drillhole.
The maximum drillhole depth is 479 m and the average is 117 m. The historic drillholes are generally
short and lack down-hole surveys. Nearly all of the modern, longer holes do have down-hole
surveys. The appropriate codes for missing samples and no recovery were used during the
modeling procedures.
12.3 Geology
The resource estimation is based on a generalized geologic model consisting of a single rock type.
The mineralization is hosted all lithologies, primarily controlled by the fault and vein development.
The principal mineralization occurs as quartz veinlets and silica replacement within the La Colorada,
Gran Central, El Crestón and Veta Madre fault/vein zones. The Intermediate Zone is defined as
diffuse zone of mineralization located parallel, and midway between the Gran Central and La
Colorada structures.
Overall, the resource area has a deep level of oxidation controlled primarily by the fault/vein
development. The bedrock is typically well oxidized within the mineralized zones and less oxidized
in the barren zones. To date, Argonaut has been unable to map a discrete oxide/sulfide boundary.
All material within the current resource models is considered oxidized or transitional.
12.4 Block Model
Four block models were used to estimate the current resources. Each block model was constructed
within the UTM coordinate limits listed in Table 12.4.1. A 5 m x 5 m x 5 m (x,y,z) block size was
chosen as an appropriate dimension based on the current drillhole spacing and a potential open pit,
BAS/SC
December 8, 2011
Page 53
smallest mining unit. Two topographic surfaces were used to flag the location of bedrock in the block
model. Within the mined areas, open pit as-built topography was generated from historic mapping.
These were digitized and wire framed into a top of bedrock surface. Outside of the mined areas, the
top of bedrock was defined by the current topographic data. Wire frame solids of the historical
underground workings were provided by Argonaut. These were used to flag the block model so that
no resources could be tabulated from the previously mined blocks. Soil thickness varies slightly over
the deposit and is generally very thin or non-existent.
Table 12.4.1: Block Model Limits
Model
La Colorada
El Crestón
Veta Madre
RoM Pad
Orientation
Easting
Northing
Elevation
Easting
Northing
Elevation
Easting
Northing
Elevation
Easting
Northing
Elevation
UTM Minimum
540,850
3,185,365
100
542,000
3,185,200
100
543,900
3,185,325
220
541,725
3,186,125
390
UTM Maximum
541,845
3,186,160
550
543,250
3,186,300
550
545,000
3,186,075
500
542,175
3,186,400
430
Block Size(m)
5
5
5
5
5
5
5
5
5
5
5
5
12.5 Compositing
The raw assay from each of the resource estimation domains was plotted on histograms and
cumulative distribution plots to assess appropriate capping and compositing parameters.
The
original assay sample lengths range from 0.1 to 111 m with an average of 1.8 m. For the modeling,
these were composited into 5.0 m down-hole lengths. This length was chosen mainly so that at least
two average samples would be composited together and the composites would comprise each 5 m
block diameter. The histogram of the drillhole database shows a strongly negative skewed
distribution, typical for most gold deposits. The cumulative distribution curves illustrate a continuous
population set with a distinct break in slope and continuity at the upper levels of mineralization. Each
unique dataset for each resource model domain was capped independently based on the break in
slope and distribution of the cumulative distribution plot. The capping parameters and results are
listed in Table 12.5.1.
BAS/SC
December 8, 2011
Page 54
Table 12.5.1: Assay Capping Parameters
Model
Total Number
of Samples
La Colorada
3,101
Intermediate
2,187
Gran Central
4,760
El Crestón
7,184
Veta Madre
1,067
RoM Pad
270
Metal
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Capping
Level (ppm)
50
200
27
150
33
281
13
140
2.1
15
1.4
65
Number of
Samples
Capped
13
9
6
5
12
10
68
89
32
19
15
32
Minimum
Capped
Maximum
Capped
51.7
222
33.1
200
50
288
13.2
142
2.1
15.2
1.41
65.2
356
1,031
67
420
224
499
432
1,874
25
49
17
155
Net Loss of
Metal From
Capping (%)
8.4
2.2
1.8
12.5
4.8
0.2
14.7
2.3
7.2
2.6
15.3
2.4
12.6 Density
Argonaut conducted density testing on the core drilling conducted in 2011. Density determinations
were made on 136 samples collected from a wide range of locations and rock types. The average
density from the Argonaut test work was 2.694 g/cm3. This test work correlates very well to historical
density test work reported by MacMillian et al (2009) who used an average density of 2.62 g/cm3.
The SRK resource models assigned the average density of 2.694 g/cm3 for all bedrock material in
the block models. The RoM pad and all waste dump material was assigned a standard density of
2.0 g/cm3.
12.7 Variogram Analysis
Variogram analysis was attempted on the composite samples to quantify the geo-statistical
characteristics of the Au data. The resultant variograms were predominantly of very poor quality
regardless of orientation. For this reason, all grade estimations were made using an Inverse
Distance Squared (ID2) algorithm.
12.8 Grade Estimation
Four unique block models were used to generate the total resource estimation of this report. The
grade estimation procedures of each are addressed below.
12.8.1 La Colorada
The La Colorada grade estimation was conducted within four independent estimation domains.
Three of these are wireframe grade shell generated by Argonaut at a 0.1 ppm grade threshold. The
fourth is an indicator domain located external to the wireframes. The wireframe solids are referred to
as La Colorada, Intermediate and Gran Central. Within these wireframes, SRK flagged all blocks
that were located within 60 m along strike or dip and 20 m normal to strike and dip of all samples.
Only these flagged blocks were allowed to be estimated for grade. The indicator blocks were flagged
external to the wireframes in order to pick up any significant mineralized zones which were too small
or discontinuous to wireframe. The indicator flagging was conducted using a three pass search
BAS/SC
December 8, 2011
Page 55
strategy according to the parameter listed in Table 12.8.1.1. Length weighting was used for all three
passes.
Table 12.8.1.1: La Colorada Indicator Estimation Parameters
Search Rotation
(z,y,x)
Estimation
Pass
First
Second
Third
355,-46,0
Search Distances
(z,y,x) m
5,5,5
30,30,5
60,60,5
Min/Max #
Samples
½
3/5
3/5
Octant
Restriction
None
2/octant
2/octant
The Au and Ag grade estimation was conducted according to the parameter listed in Table 12.8.1.2.
Only indicator blocks with a value of 0.5 and above were selected for grade estimation. This equates
to a 50% probability of being locate within the 0.1 ppm grade shell. All grade estimations used
sample length weighting. As part of the grade estimation, model validation was conducted within
each domain. Certain domains required that higher grade sample distance restrictions be applied so
the model would validate. A high-grade restriction, as listed in Table 12.8.1.2, means that any block
located beyond the distances listed cannot use any composite sample above the listed grade.
Table 12.8.1.2: La Colorada Grade Estimation Parameters
Estimation
Domain
Search
Rotation
(z,y,x)
La Colorada
intermediat
e
355,-46,0
Gran
Central
Indicator
Blocks
Estimation
Pass
First
Second
Third
First
Second
Third
First
Second
Third
First
Second
Third
Search
Distances
(z,y,x) m
5,5,5
35,35,15
85,85,25
5,5,5
35,35,15
85,85,25
5,5,5
35,35,15
85,85,25
5,5,5
35,35,15
85,85,25
Min/Max #
Samples
1/3
3/8
3/8
1/3
3/8
3/8
1/3
3/8
3/8
1/3
3/8
3/8
Octant
Restriction
None
2/octant
2/octant
None
2/octant
2/octant
None
2/octant
2/octant
None
2/octant
2/octant
Au High
Grade
Distance
Restriction
None
Ag High
Grade
Distance
Restriction
None
>35ppm<40m
None
>20ppm<30m
None
>25ppm<20m
>25ppm<20m
None
>25ppm<20m
>25ppm<20m
None
>8ppm<50m
12.8.2 El Crestón
The El Crestón grade estimation was conducted within a single estimation domain. This was defined
by a wireframe grade shell generated by Argonaut at a 0.1 ppm grade threshold. Within this
wireframe, SRK flagged all blocks that were located within 60 m along strike or dip and 30 m normal
to strike and dip of all samples. Only these flagged blocks were allowed to be estimated for grade.
All grade estimations used sample length weighting. No higher grade sample distance restrictions
were required in order to validate the model.
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December 8, 2011
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Table 12.8.2.1: El Crestón Grade Estimation Parameters
Search Rotation
(z,y,x)
340,-50,0
Estimation Pass
First
Second
Third
Search Distances
(z,y,x) m
5,5,5
35,35,20
85,85,45
Min/Max #
Samples
1/3
3/8
3/8
Octant Restriction
None
2/octant
2/octant
12.8.3 Veta Madre
The Veta Madre grade estimation was conducted within a single estimation domain. This was
defined by a wireframe grade shell generated by Argonaut at a 0.1 ppm grade threshold. Within this
wireframe, SRK flagged all blocks that were located within 30 m along strike or dip and 30 m normal
to strike and dip of all samples. Only these flagged blocks were allowed to be estimated for grade.
The Au and Ag grade estimation was conducted according to the parameter listed in Table 12.8.3.1
below. All grade estimations used sample length weighting. No higher grade sample distance
restrictions were required in order to validate the model.
Table 12.8.3.1: Veta Madre Grade Estimation Parameters
Search Rotation
(z,y,x)
60,0,0
Estimation
Pass
First
Second
Third
Search Distances
(z,y,x) m
5,5,5
50,25,25
75,35,35
Min/Max #
Samples
1/3
3/8
3/8
Octant
Restriction
None
2/octant
2/octant
12.8.4 RoM Pad
The RoM Pad grade estimation was conducted within a single estimation domain. This was defined
by a wireframe solid generated by SRK. The solid is based on surveyed topography of the existing
RoM Pad assuming a planer base. This material represents previously mined and partially leached
RoM ore. All grade estimations are based on the Becker hammer drill samples discussed in Section
8.2.5.
All grade estimations used sample length weighting. No higher grade sample distance restrictions
were required in order to validate the model. As part of the grade estimation, model validation was
conducted within the estimation domain. Both the Au and Ag estimations required that higher grade
sample distance restrictions be applied so the model would validate. A high-grade restriction, as
listed in Table 12.8.4.1, means that any block located beyond the distances listed cannot use any
composite sample above the listed grade.
Table 12.8.4.1: RoM Pad Grade Estimation Parameters
Search
Rotation
(z,y,x)
0,0,0
BAS/SC
Estimation
Pass
First
Second
Third
Search
Distances
(z,y,x) m
5,5,5
35,35,10
100,100,15
Min/Max #
Samples
1/3
3/5
2/5
Octant
Restriction
None
2/octant
2/octant
Au High Grade
Distance
Restriction
None
Ag High Grade
Distance
Restriction
>1.2ppm<35m
>60ppm<50m
December 8, 2011
Page 57
12.9 Model Validation
Four techniques were used to evaluate the validity of the block model. First, during the ID2 grade
estimation; the estimation pass, the number of samples used, the number of drillholes used and the
average distance to samples was stored. This data was checked to evaluate the performance of the
sample selection parameters discussed above. The results for each estimation are listed are listed
in Table 12.9.1. Second, the interpolated block Au grades were visually checked on sections and
bench plans for comparison to the composite assay grades. Third, statistical analyses were made
comparing the estimated block grades in each domain to the composite sample data supporting the
estimation. The results in Table 12.9.2 show average block grade slightly below the average sample
grades. Fourth, nearest neighbor estimations were run using a single composite to estimate each
block model within the same parameters used for the ID2 grade model. The total contained gold
ounces, at a zero cut-off grade in the nearest neighbor model were compared to the Au ID2 grade
model at the same cut-off. The results are listed in Table 12.9.3. These show that in general, metal
is not being manufactured during the modeling process. All four-model validation tests described
above provided good confidence in the resource estimation.
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December 8, 2011
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Table 12.9.1: Grade Estimation Characteristics
Model/Domain
LC-La Colorada
LC intermediate
LC-Gran Central
LC-Indicator
El Crestón
Veta Madre
RoM Pad
BAS/SC
Criteria
st
% Blocks Estimated in 1 Pass
nd
% Blocks Estimated in 3rd Pass
Average Number of Samples Used Per Block
Average Number of Drillholes Used Per Block
Average Distance to Samples
% Blocks Estimated in 1st Pass
% Blocks Estimated in 2nd Pass
nd
st
Result
11
72
17
5.8
2.8
23
10
65
25
5.6
3.1
25
13
72
15
6
2.7
21
16
55
29
4.6
2.8
24
12
72
16
6
2.5
22
7
72
21
5
2.2
25
3
40
57
4.0
2.3
36
December 8, 2011
Page 59
Table 12.9.2: Statistical Model Validation
Structural
Domain
LC_La Colorada
LC- intermediate
LC- Gran
Central
LC-Indicator
El Crestón
Veta Madre
RoM Pad
Metal
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Au
Ag
Average Composite
Grade Au (g/t)
1.215
8.072
0.592
4.579
1.139
8.946
0.405
5.154
0.729
13.991
0.402
2.451
0.446
36.247
Average Block Grade
Au (g/t)
1.210
6.570
0.585
4.572
1.054
8.601
0.402
4.319
0.674
13.545
0.316
2.112
0.415
36.177
% Difference Comps to
Blocks
0.4
18.6
1.1
0.1
7.4
3.9
0.6
16.2
7.5
3.2
21.5
13.8
7.0
0.2
Table 12.9.3: Nearest Neighbor Model Validation
2
2
Model
La Colorada
El Crestón
Veta Madre
RoM Pad
ID Au
Grade
0.026343
0.682285
0.315806
0.428428
2
ID Tonnes
(M)
1,225.0
21.081
5.897
2.724
ID Au
Metal
(M)
32.265
14.383
1.862
1.167
NN Au
Grade
0.026226
0.715987
0.331218
0.421483
NN
Tonnes
(M)
1,225.0
21.081
1.862
2.724
NN Au
Metal
32.122
15.094
1.953
1.148
% Diff Au
Metal ID2 to
NN
0.44
-4.9
-4.9
1.6
12.10Resource Classification
Mineral Resources are classified under the categories of Measured, Indicated and Inferred according
to CIM guidelines. Classification of the mineral resources reflects the relative confidence of the
grade estimates and the continuity of the mineralization. This classification is based on several
factors including; sample spacing relative to geological and geo-statistical observations regarding the
continuity of mineralization, data verification to original sources, specific gravity determinations,
accuracy of drill collar locations, accuracy of topographic surface, quality of the assay data and many
other factors, which influence the confidence of the mineral estimation. No single factor controls the
mineral resource classification rather each factor influences the end result.
The mineral resources have been classified as Indicated and Inferred based primarily on sample
support. Within the La Colorada, El Crestón and Veta Madre resource models, wire frame solids
were constructed about the areas where the majority of drillholes are spaced 25 m apart. The
wireframe was limited to the base of drilling. All resources within the wire frame solids were
classified as indicated. All resources located external to the wireframe solids were classified as
inferred. The RoM Pad is all classified as indicated mineral resource.
12.11Mineral Resource Statement
The La Colorada Mineral Resources are reported below in table 12.11.1 based on a 0.1 g/t Au cut-off
grade. The cut-off is supported by a mining cost of US$1.20/t, a processing cost of US$2.70/t, Au
and Ag recoveries of 60% and 30% respectively, G&A cost of $0.20/t, a no NSR and Au, Ag prices
BAS/SC
December 8, 2011
Page 60
of US$1,500/oz, US$20.00/oz respectively. The mineral resources are confined within a conceptual
whittle pit design based on the same parameters used for the cut-off grade and a 50° pit slope.
Table 12.11.1: La Colorada Project Resource Statement (1)
Deposit
La Colorada
El Crestón
Veta Madre
RoM Pad
All Deposits
Class
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Au Cut-off
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
Tonnes
(000s)
29,900
2,500
14,400
2,200
2,900
0
2,700
50,000
4,700
Au (g/t)
0.724
1.204
0.618
0.887
0.491
0.665
0.429
0.664
1.044
Au oz
(000s)
696
95
287
63
46
0.2
38
1,067
158
Ag (g/t)
5.1
8.4
12.1
13.3
3.3
2.4
36.5
8.7
10.6
Ag oz
(000s)
4,905
661
5,635
944
307
0.7
3,200
14,047
1,605
Source: SRK
(1) Rounded to reflect approximation
Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution.
These mineral resource estimates include inferred mineral resources that are normally considered
too speculative geologically to have economic considerations applied to them that would enable
them to be categorized as mineral reserves. There is also no certainty that these inferred mineral
resources will be converted to Measured and Indicated categories through further drilling, or into
mineral reserves, once economic considerations are applied.
12.12Mineral Resource Sensitivity
The grade versus tonnage distributions of the Mineral Resources are presented in Table 12.12.1
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December 8, 2011
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Table 12.12.1: Gran Central Grade Tonnage
Cut-off
0
0.1 (1)
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
Indicated
Au (g/t)
Tonnage
0.22 101,339,238
0.72
29,835,081
0.90
22,925,487
1.09
17,745,032
1.28
14,094,104
1.47
11,533,243
1.64
9,633,684
1.83
8,172,323
2.01
6,973,649
2.20
5,942,912
2.40
5,179,647
2.58
4,546,734
2.78
4,001,432
2.96
3,576,774
3.13
3,222,616
3.29
2,945,339
3.47
2,676,859
3.61
2,474,382
3.77
2,290,715
3.92
2,121,061
4.07
1,971,199
Ounces
716,693
694,126
662,771
621,167
579,074
543,950
508,632
479,999
451,146
421,216
399,176
377,061
357,861
340,431
324,385
311,675
298,844
287,563
277,821
267,467
257,768
Cut-off
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
Inferred
Au (g/t)
Tonnage
0.06 49,257,396
1.21
2,451,354
1.43
2,024,967
1.62
1,739,185
1.79
1,536,588
1.98
1,344,792
2.16
1,194,302
2.34
1,071,583
2.51
965,254
2.71
865,474
2.91
773,695
3.01
735,062
3.1
702,874
3.2
667,410
3.27
640,005
3.37
607,610
3.5
569,274
3.57
547,541
3.64
527,736
3.71
507,367
3.77
491,054
Ounces
95,020
95,363
93,099
90,584
88,430
85,607
82,939
80,618
77,894
75,407
72,386
71,135
70,053
68,665
67,286
65,833
64,059
62,846
61,760
60,518
59,520
Total Ounces
811,713
789,490
755,870
711,751
667,504
629,557
591,571
560,617
529,041
496,624
471,561
448,196
427,914
409,096
391,671
377,509
362,903
350,409
339,581
327,985
317,287
(1) Base Case
Table 12.12.2 illustrates the grade tonnage relationship of gold within pit 36 of the Whittle® analysis
for El Crestón.
Table 12.12.2: El Crestón Grade Tonnage
Cutoff
0
0.1 (1)
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
Au (g/t)
0.17
0.62
0.75
0.89
1.03
1.18
1.33
1.48
1.63
1.78
1.94
2.1
2.24
2.38
2.51
2.64
2.76
2.89
2.99
3.11
3.22
Indicated
Tonnage
54,830,616
14,438,662
11,224,319
8,875,845
6,949,397
5,541,893
4,483,904
3,694,548
3,066,198
2,578,409
2,155,377
1,836,350
1,588,897
1,394,817
1,248,174
1,107,780
993,965
896,602
821,916
743,696
679,647
Ounces
299,683
287,812
270,652
253,975
230,131
210,248
191,734
175,798
160,686
147,558
134,436
123,984
114,429
106,730
100,726
94,026
88,200
83,308
79,011
74,361
70,361
Cutoff
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
Au (g/t)
0.06
0.89
1.04
1.2
1.36
1.54
1.67
1.82
1.95
2.09
2.25
2.36
2.46
2.56
2.66
2.76
2.85
2.96
3.04
3.13
3.22
Inferred
Tonnage
33,088,488
2,199,713
1,830,869
1,518,096
1,270,077
1,064,923
941,923
824,301
732,400
649,313
571,543
522,598
481,969
444,976
411,685
379,954
352,761
323,796
304,349
281,141
262,517
Ounces
63,829
62,943
61,218
58,569
55,534
52,727
50,573
48,233
45,917
43,631
41,345
39,653
38,119
36,624
35,208
33,716
32,323
30,814
29,746
28,292
27,177
Total
Ounces
363,513
350,755
331,871
312,544
285,665
262,974
242,307
224,031
206,603
191,189
175,781
163,636
152,548
143,354
135,933
127,742
120,524
114,123
108,758
102,653
97,538
(1) Base Case
BAS/SC
December 8, 2011
Page 62
Table 12.12.3 Illustrates the grade tonnage relationship of gold within pit 36 of the Whittle® analysis
for Veta Madre.
Table 12.12.3: Veta Madre Grade Tonnage
Cutoff
0
0.1 (1)
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
Inferred
Au (g/t)
Tonnage
0.27
5,264,158
0.45
3,183,008
0.52
2,540,084
0.64
1,789,691
0.74
1,330,645
0.83
1,013,543
0.92
771,974
1.01
574,880
1.09
440,856
1.16
337,190
1.24
245,491
1.32
169,657
1.43
104,393
1.56
59,942
1.67
41,084
1.76
29,297
1.84
21,552
1.94
13,470
2
10,103
2.05
7,745
2.07
6,398
Ounces
45,697
46,051
42,466
36,826
31,658
27,047
22,834
18,668
15,449
12,575
9,787
7,200
4,800
3,006
2,206
1,658
1,275
840
650
510
426
(1) Base Case
BAS/SC
December 8, 2011
Page 63
13 Adjacent Properties (Item 23)
There are no adjacent properties to the Project.
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December 8, 2011
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14 Other Relevant Data and Information (Item 24)
There is no other relevant data or information.
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December 8, 2011
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15 Interpretation and Conclusions (Item 25)
15.1.1 Exploration
The exploration work is composed primarily of the drillhole database which supports the resource
estimation of this report. It consists of two main data sets. The older dataset was generated by
EESA during their work on the project in the late 1990’s. The more recent dataset was generated by
Pediment and Argonaut since 2007.
orientations. The maximum drillhole depth is 479 m and the average is 117 m.
15.1.2 Mineral Resource Estimate
The mineral resource estimations are based on geologic models consisting of a single rock type, cut
by numerous fault/vein zones. All model blocks are 5 m x 5 m x 5 m in the x,y,z directions,
respectively. Each model block is assigned a unique specific gravity based on direct measurement
of the various rock types. All block grade estimates were made using 3 m down-hole composites.
An Inverse Distance Weighting to the second power estimation algorithm was used for all gold grade
and silver estimations. The results of the resource estimation provided a CIM classified Indicated
and Inferred Mineral Resource. The mineral resources have been classified as Indicated and
Inferred based primarily on sample support. All resources supported primarily by drilling at 25 m
centers are classified as indicated and all resources supported by wider spaced drilling were
classified as inferred.
15.1.3 Metallurgy
Preliminary indications are that higher metal recovery may be realized through finer crushing. This
should be studied further with additional metallurgical testwork. As such, it is expected that
recoveries stated here are achievable at a minimum and the risk of realizing lower recoveries is
considered low.
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December 8, 2011
Page 66
15.2 Significant Risks and Uncertainties
Risk Area
Resources
Database
Exploration data
Quality
Sufficiency/Adequacy
Assaying
Surveying
Geology
Geology and Resource Modeling
Geological modeling
Resource modeling approach
Geostatistical analysis
Resource estimate
Metallurgical Test Work/Processing Facilities
Metallurgical Test Work
Ore type definition
BAS/SC
Risk Level
Low
Low
Low
Low
Low
Low
Moderate
Moderate
Low
Low
Low
Low
Low
December 8, 2011
Page 67
16 Recommendations (Item 26)
16.1 Mineral Resources
The mineral resources estimated in this report are significant and additional technical study is
recommended. A Preliminary Economic Assessment is recommended to further evaluate the
potential of the project. This work would be a single phase of additional study, typically expected to
cost in the order of $100,000 to $200,000.
16.2 Metallurgy and Processing
Additional column test work is being completed by KCA focusing on finer crushing (minus 12.5 mm).
If finer crushing shows potential as a possible processing alternative, additional agglomeration test
work will be required.
The current recovery curves indicate very slow leaching and it is almost certain that several percent
more gold recovery would be realized with a 90 day leach cycle. It is recommended that all future
column tests should be run at this leach cycle as a minimum.
If finer crushing and agglomeration is eventually determined to be a viable processing option,
additional engineering and optimization of the flowsheet is recommended.
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December 8, 2011
Page 68
17 References (Item 27)
Ball, S.H.,1911, Geological Report on the property of the Mines Company of America, 22 p.
Diaz, Jorge, 2007, La Colorada Internal reports written by Interminera, S.A. de C.V. for Pediment
Gold Corp., 23 p.
Giroux, G and Charbonneau, D., 1992, Property and Resource Evaluation of the El Crestón Deposit,
La Colorada Project, Mexico, Unpublished report for Explorations Eldorado, S.A. de C.V.
Hermosillo, Mexico, 36 p.
Giroux, G., 1999, Audit of the Resources contained within the Gran Central and La Colorada Zones,
La Colorada Mine, Mexico, Unpublished report for Explorations Eldorado, S.A. de C.V.
Hermosillo, Mexico, 30 p.
Hedenquist, J.W., Arribas, A. and Gonzales-Urien, E., 2000, Exploration for Epithermal Gold
Deposits. Reviews in Economic Geology, vol. 13, p. 245-277.
Herdrick, M. 2007, Mina La Colorada, Sonora, Mexico. Confidential reports to directors of Pediment
Exploration, 11p.
Lewis, P.D., 1995, Structural Evaluation of the La Colorada Project Area, Sonora, Mexico.
Unpublished Report by Lewis Geoscience Services Inc. for Exploraciones Eldorado, S.A. de
C.V., Hermosillo, Mexico, 25 p.
McMillan, R.H., Dawson, J.M. and Giroux, G.H., 2009, Geologic Report on the La Colorada Property
with a resource Estimate on La Colorada and El Crestón Mineralized Zones, Sonora Mexico,
prepared for Pediment Gold Corp, November 30, 2009, 141p.
Nordin, G., 1992, Geologic Report, La Colorada Property, Sonora, Mexico. Unpublished report for
Explorations Eldorado, S.A. de C.V. Hermosillo, Mexico, 76 p.
Simmons, S.F.; White, N.C. and John, D.A., 2005, Geologic Characteristics of Epithermal Precious
and Base Metal Deposits. Economic Geology 100th Anniversary Volume, p. 485-522.
Vazquez, Sierra & Garcia, S.C. 2011, Title Opinion Compania Minera Pitalla, S.A. de C.V. Mining
Concessions, October 12, 2011.
Zawada, Ross, D. Albinson, Tawn and Aneyta, Reyna, 2001, Geology of the El Crestón Gold
Deposit, Sonora State Mexico. Economic Geology Special Publication # 8, New Mines and
Discoveries in Mexico and Central America, p. 187-197.
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December 8, 2011
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18 Glossary
18.1 Mineral Resources
The mineral resources and mineral reserves have been classified according to the “CIM Standards
on Mineral Resources and Reserves: Definitions and Guidelines” (November 27, 2010).
Accordingly, the Resources have been classified as Measured, Indicated or Inferred, the Reserves
have been classified as Proven, and Probable based on the Measured and Indicated Resources as
defined below.
A Mineral Resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic
material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has
reasonable prospects for economic extraction.
The location, quantity, grade, geological
characteristics and continuity of a Mineral Resource are known, estimated or interpreted from
specific geological evidence and knowledge.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or
quality can be estimated on the basis of geological evidence and limited sampling and reasonably
assumed, but not verified, geological and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drillholes.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape and physical characteristics can be estimated with a level of confidence
sufficient to allow the appropriate application of technical and economic parameters, to support mine
planning and evaluation of the economic viability of the deposit. The estimate is based on detailed
and reliable exploration and testing information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely enough for
geological and grade continuity to be reasonably assumed.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape, physical characteristics are so well established that they can be estimated
with confidence sufficient to allow the appropriate application of technical and economic parameters,
to support production planning and evaluation of the economic viability of the deposit. The estimate
is based on detailed and reliable exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that
are spaced closely enough to confirm both geological and grade continuity.
18.2 Mineral Reserves
A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource
demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate
information on mining, processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve
includes diluting materials and allowances for losses that may occur when the material is mined.
A ‘Probable Mineral Reserve’ is the economically mineable part of an Indicated, and in some
circumstances a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility
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December 8, 2011
Page 70
Study. This Study must include adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at the time of reporting, that economic
extraction can be justified.
A ‘Proven Mineral Reserve’ is the economically mineable part of a Measured Mineral Resource
demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate
information on mining, processing, metallurgical, economic, and other relevant factors that
demonstrate, at the time of reporting, that economic extraction is justified.
18.3 Definition of Terms
The following general mining terms may be used in this report.
Table 18.3.1: Definition of Terms
Term
Assay
Composite
Cut-off Grade (CoG)
Dilution
Dip
Fault
Footwall
Gangue
Grade
Hangingwall
Hydrocyclone
Igneous
Kriging
Lithological
LoM Plans
Material Properties
Mineral/Mining Lease
Sedimentary
Stratigraphy
Strike
Sulfide
Variogram
BAS/SC
Definition
The chemical analysis of mineral samples to determine the metal content.
Combining more than one sample result to give an average result over a larger
distance.
The grade of mineralized rock, which determines as to whether or not it is economic
to recover its gold content by further concentration.
Waste, which is unavoidably mined with ore.
Angle of inclination of a geological feature/rock from the horizontal.
The surface of a fracture along which movement has occurred.
The underlying side of an orebody or stope.
Non-valuable components of the ore.
The measure of concentration of gold within mineralized rock.
The overlying side of an orebody or slope.
A process whereby material is graded according to size by exploiting centrifugal
forces of particulate materials.
Primary crystalline rock formed by the solidification of magma.
An interpolation method of assigning values from samples to blocks that minimizes
the estimation error.
Geological description pertaining to different rock types.
Life-of-Mine plans.
Mine properties.
A lease area for which mineral rights are held.
Pertaining to rocks formed by the accumulation of sediments, formed by the erosion
of other rocks.
The study of stratified rocks in terms of time and space.
Direction of line formed by the intersection of strata surfaces with the horizontal
plane, always perpendicular to the dip direction.
A sulfur bearing mineral.
A statistical representation of the characteristics (usually grade).
December 8, 2011
Page 71
18.4 Abbreviations
The following abbreviations may be used in this report.
Table 18.4.1: Abbreviations
Abbreviation
A
AA
A/m2
ANFO
Ag
Au
AuEq
°C
CCD
CIL
CoG
cm
cm2
cm3
cfm
ConfC
Crec
CSS
CTW
°
dia.
EIS
EMP
FA
ft
ft2
ft3
g
gal
g/L
g-mol
gpm
g/t
ha
HDPE
hp
HTW
ICP
ID2
ID3
IFC
ILS
kA
kg
km
km2
koz
kt
kt/d
kt/y
kV
kW
kWh
BAS/SC
Unit or Term
ampere
atomic absorption
amperes per square meter
ammonium nitrate fuel oil
silver
gold
gold equivalent grade
degrees Centigrade
counter-current decantation
carbon-in-leach
cut-off grade
centimeter
square centimeter
cubic centimeter
cubic feet per minute
confidence code
core recovery
closed-side setting
calculated true width
degree (degrees)
diameter
Environmental Impact Statement
Environmental Management Plan
fire assay
foot (feet)
square foot (feet)
cubic foot (feet)
gram
gallon
gram per liter
gram-mole
gallons per minute
grams per tonne
hectares
Height Density Polyethylene
horsepower
horizontal true width
induced couple plasma
inverse-distance squared
inverse-distance cubed
International Finance Corporation
Intermediate Leach Solution
kiloamperes
kilograms
kilometer
square kilometer
thousand troy ounce
thousand tonnes
thousand tonnes per day
thousand tonnes per year
kilovolt
kilowatt
kilowatt-hour
December 8, 2011
Abbreviation
kWh/t
L
L/sec
L/sec/m
lb
LHD
LLDDP
LOI
LoM
m
m2
m3
masl
MARN
MDA
mg/L
mm
mm2
mm3
MME
Moz
Mt
MTW
MW
Ma
My
NGO
NI 43-101
OSC
oz
%
PLC
PLS
PMF
ppb
ppm
QA/QC
RC
RoM
RQD
SEC
sec
SG
SPT
t
t/h
t/d
t/y
TSF
TSP
µm
V
VFD
W
XRD
y
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Unit or Term
kilowatt-hour per metric tonne
liter
liters per second
liters per second per meter
pound
Long-Haul Dump truck
Linear Low Density Polyethylene Plastic
Loss On Ignition
Life-of-Mine
meter
square meter
cubic meter
meters above sea level
Ministry of the Environment and Natural Resources
Mine Development Associates
milligrams/liter
millimeter
square millimeter
cubic millimeter
Mine & Mill Engineering
million troy ounces
million tonnes
measured true width
million watts
million annum
million years
non-governmental organization
Canadian National Instrument 43-101
Ontario Securities Commission
troy ounce
percent
Programmable Logic Controller
Pregnant Leach Solution
probable maximum flood
parts per billion
parts per million
Quality Assurance/Quality Control
rotary circulation drilling
Run-of-Mine
Rock Quality Description
U.S. Securities & Exchange Commission
second
specific gravity
standard penetration testing
tonne (metric ton) (2,204.6 pounds)
tonnes per hour
tonnes per day
tonnes per year
tailings storage facility
total suspended particulates
micron or microns
volts
variable frequency drive
watt
x-ray diffraction
year
December 8, 2011
NI 43-101 Report on Resources – La Colorada Project
Appendices
Appendices
BAS/SC
December 8, 2011
Appendix A: Certificate of Author
SRK Denver
Suite 3000
7175 West Jefferson Avenue
Lakewood, CO 80235
T: 303.985.1333
F: 303.985.9947
denver@srk.com
www.srk.com
CERTIFICATE OF AUTHOR
I, Bart A. Stryhas Ph.D. CPG#11034 do hereby certify that:
1. I am a Principal Resource Geologist of:
7175 W. Jefferson Ave, Suite 3000
Denver, CO, USA, 80235
2. I graduated with a Doctorate degree in structural geology from Washington State University in 1988. In
addition, I have obtained a Master of Science degree in structural geology from the University of Idaho in
1985 and a Bachelor of Arts degree in geology from the University of Vermont in 1983.
3. I am a current member of the American Institute of Professional Geologists.
4. I have worked as a Geologist for a total of 22 years since my graduation in minerals exploration, mine
geology, project development and resource estimation. I have conducted resource estimations since
1988 and have been involved in technical reports since 2004.
5. I have read the definition of “qualified person” set out in National Instrument 43-101 (NI 43-101) and
certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101)
and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of
NI 43-101.
6. I am responsible for Sections 1, 3 through 10 and 13 of the report titled “NI 43-101 Technical Report on
Resources, La Colorada Project, Sonora, Mexico” and dated December 8, 2011 (the “Technical Report”)
relating to the La Colorada Project. I have visited the Property on June 16, 2011, for one day.
7. I have not had prior involvement with the property that is the subject of the Technical Report.
8. As of the date of the certificate, to the best of my knowledge, information and belief, the Technical Report
contains all scientific and technical information that is required to be disclosed to make the technical
report not misleading.
9. I am independent of the issuer applying all of the tests in Section 1.4 of National Instrument 43-101.
10. I have read NI 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance
with that instrument and form.
U.S. Offices:
Anchorage
Denver
Elko
Fort Collins
Reno
Tucson
QP_Cert_Stryhas_Bart_TRR_20111208
907.677.3520
303.985.1333
775.753.4151
970.407.8302
775.828.6800
520.544.3688
Mexico Office:
Canadian Offices:
Group Offices:
Guadalupe, Zacatecas
52.492.927.8982
Saskatoon
Sudbury
Toronto
Vancouver
Yellowknife
Africa
Asia
Australia
Europe
North America
South America
306.955.4778
705.682.3270
416.601.1445
604.681.4196
867.873.8670
SRK Consulting
Page 2
11. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and
any publication by them for regulatory purposes, including electronic publication in the public company
files on their websites accessible by the public, of the Technical Report.
Dated this 8th day of December, 2011.
“Signed”
________________________________
Dr. Bart A. Stryhas, CPG, PhD
QP_Cert_Stryhas_Bart_TRR_20111208

2011, N.I. 43-101 Technical Report On The La Colorada Project

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