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Mineral Resource Estimate Notes and Parameters:
1. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves;2. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues, although the Company is not aware of any such issues;3. The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred resources as an Indicated or Measured mineral resource and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured mineral resource category.4. Gold Equivalent was calculated on the basis of 1 gram gold = 60 grams silver.
The resource estimate was derived from applying AuEq cut-off grades to the block model and reporting the resulting tonnes and grade for potentially mineable areas. The mined tonnage from previous operations was insignificant and was not removed from the block model. The AuEq calculation ratio is derived from the following:
Au Price = US$1,592/oz Au Recovery = 95%Ag Price = US$32.76/oz Ag Recovery = 77%Therefore the Au/Ag ratio is ($1,572/$32.76)/(95%/77%) = 60:1
The following calculations based on similar open pit and underground operations to that anticipated at San Albino demonstrate the rationale supporting the AuEq cut-off grade that determines the potentially economic portion of the mineralized domains:
Underground Au Cut-Off Grade Calculation ($US)
Au Price $1,592/oz (24 month approx. trailing average price Oct 31/12)Mining Cost $48/tonne minedProcess Cost (3,000tpd) $20/tonne milledGeneral/Administration $5/tonne mined
Therefore, the AuEq cut-off grade for the underground portion of the resource estimate is calculated as follows:
Operating costs per ore tonne = ($48 + $20 + $5) = $73/tonne(($73)/(($1,592/oz x 95% Recovery)/31.1035) = 1.5g/t
Open Pit Au Cut-Off Grade Calculation ($US)
Au Price US$1,592/oz (24 month approx. trailing average price Oct 31/12)Process Cost (3,000tpd) $20/tonne milledGeneral/Administration $5/tonne mined
Therefore, the AuEq cut-off grade for the open pit portion of the resource estimate is calculated as follows:
Operating costs per ore tonne = ($20 + $5) = $25/tonne(($25/(($1,592/oz x 95% Recovery)/31.1035) = 0.51g/t Use 0.5g/t
The open pit resource model was further investigated with a Whittle pit optimization to ensure a reasonable stripping ratio was applied and a reasonable assumption of potential economic extraction could be made. The following parameters were utilized in the pit optimizations:
Au Price US$1,592/oz (24 month trailing average price Oct 31/12)Ag Price US$32.76/oz (24 month trailing average price Oct 31/12)Au Recovery 95%Ag Recovery 77%Ore Mining Cost $3/tonne minedWaste Mining Cost $3/tonne minedProcess Cost $20/tonne processedGeneral & Administration $5/tonne processedPit Slopes 45 degrees
