LOM Capital Expense and Sustaining Capital per ounce is $1266.00 including Operating Cost and Royalties.
Sustaining capital of $21.1 million has been budgeted in the financial model. The reader should note that the PEA report contains a large sustaining capital cost allocation (contingency) which was incorporated in the financial model to support underground development, diamond drilling and equipment. These costs will be used to both increase the confidence and further define the resource blocks. It is expected that capital for primary development and exploratory diamond drilling will be funded from cash flow generated by the project.
The economic analysis is based, in part, on Inferred Resources, and is preliminary in nature. Inferred Resources are considered too geologically speculative to have mining and economic considerations applied to them and to be categorized as Mineral Reserves. There is no certainty that economic forecasts on which this PEA is based will be realized.
The Resource
The PEA is based on Roscoe Postle Associates Inc. (RPA)'s independent Mineral Resource Estimate, in accordance with National Instrument 43-101 (NI43-101) and Form 43-101F1 guidelines (see Press Release dated Oct 23, 2012) which defined an Indicated mineral resource of 1,258,400 tonnes at 4.81 g/t Au totalling 194,600 ounces of gold and Inferred mineral resources of 796,000 tonnes at 4.7 g/t Au representing 120,000 ounces. These resources are reported at a base case cut-off grade of 2.75 g/t Au and individual high assays have been capped at 60.0 g/t.
Proposed Mining Plan and Processing
A mine production rate of 600 tonnes per day was selected as being optimum for the mineralized structures contained within the Clavos deposit. This tonnage was based on a 2.75 g/t cut-off proposed tonnage estimate, with a 60.0 g/t cut grade, and would permit a life of mine of seven years to extract 70% of the outlined mineral resource estimated tonnage of Indicated 1,258,400 tonnes plus Inferred 796,000 tonnes.
Both Indicated and Inferred resources (70%) were included in the mine design, scheduling of mineralized material extraction and economic analysis for the Clavos JV deposit.
In the Clavos JV mine plan, there is readily available 847,133 tonnes of the 1,148,900 tonnes to be extracted prior to having to extract the remaining 301,767 tonnes which includes removing the crown pillar. The remaining 30% of the Indicated and Inferred resource estimate was not included in the mineralized material extraction scheduling process.
A 23 month period to permit mine dewatering, mine rehabilitation, definition/delineation diamond drilling and pre-stope development scheduling is envisaged to achieve a full production rate of 600 tonnes per day, or 210,000 tonnes per year based on 350 operating days per year.
During this 23 month period, the following mineralized material will have been delivered to a custom milling facility for processing, and Clavos JV will have produced the gold as detailed below:
Year 13rd Quarter 3,500 tonnes 801.3 oz (Au)4th Quarter 14,000 tonnes 2,428.0 oz (Au)Year 21st Quarter 21,875 tonnes 3,629.9 oz (Au)2nd Quarter 26,250 tonnes 3,616.0 oz (Au)3rd Quarter 30,625 tonnes 4,091.5 oz (Au)4th Quarter 35,000 tonnes 5,147.0 oz (Au)Year 31st Quarter 39,375 tonnes 5,556.3 oz (Au)2nd Quarter 43,750 tonnes 5,862.5 oz (Au)3rd Quarter 48,125 tonnes 6,240.8 oz (Au)TOTAL 262,500 tonnes 37,373.4 oz (Au)
