Resources were estimated using ordinary kriging (OK) for copper and molybdenum using constrained estimates for the two intrusive units and for the sedimentary unit. Separate variogram models were applied to all lithologies in the Aguila deposit.
Copper equivalent grades were calculated for all estimated blocks. The copper equivalent calculation was based on long term metal price assumptions of US$2.85 per pound of copper and US$13.85 per pound of molybdenum oxide (MoO3) and metallurgical recoveries for intrusive rocks of 93% for copper and 91% for molybdenum. Recoveries used for the sedimentary unit were 83% for copper and 82% for molybdenum. The copper equivalent calculation used is a post recovery equivalent.
Mineral resources for the Aguila project have been classified according to CIM's Definition Standards for Mineral Resources and Mineral Reserves (December 2005). The mineral resources were classified into indicated and inferred mineral resource categories based on drill hole spacing and variogram ranges. Indicated mineral resource categorization was based on the first pass interpolation where to classify a block as indicated there had to be a minimum of 2 drill holes within 60 metres or less of the block. The indicated mineral resources must form a contiguous minable unit in the deposit so a solid model was constructed based upon a two hole minimum interpolation to outline blocks in the vicinity of these parameters that form a contiguous unit. Blocks within this classification wireframe solid were classified as Indicated as they represent block estimates made with a good level of confidence. All other blocks inside of the geological solid models or inside the 0.1% copper grade shell represent estimates with a lower level of confidence and are, therefore, classified as Inferred. Blocks outside the grade shell or geological solids, not in the grade shell, were not interpolated or classified. Additional infill drilling and sampling is required to support a higher classification. It cannot be assumed that all or any part of an inferred mineral resource will be upgraded to an indicated or measured mineral resource as a result of continued exploration.
Mineral Resource Statement
The Aguila deposit is amenable for open pit and underground extraction so to assist with the interpretation of the mineral resource estimate, a conceptual pit shell was developed using a Lerch-Grossman algorithm. The material outside the resulting conceptual pit shell was considered as available for underground mining. Material outside the conceptual pit shell was determined using a 0.26 CuEq% cut-off. The following assumptions were used to determine potential economic cut-off grades for the deposit:
-- Metal price assumptions of US$2.85 per pound for copper and US$13.85 per pound for molybdenum oxide;-- Metallurgical recoveries used for molybdenum were 91% for intrusives and 82% for sediments;-- Metallurgical recoveries used for copper were 93% for intrusives and 83% for sediments;-- Metallurgical, general and administration cost of US$4.25 per tonne of feed;-- Open pit slope of 50 degrees, mining cost of US$1.25 per tonne mined; and sub level caving underground mining method with a mining cost of approximately $US10.00 per tonne mined.
Based on these above assumptions, the author considers that classified resource blocks above grades of 0.22 percent copper equivalent and 0.26 percent copper equivalent show reasonable prospect for economic extraction for open pit and underground mining, respectively. Mineral resources were estimated in conformity with CIM's generally accepted Estimation of Mineral Resource and Mineral Reserve Best Practices Guidelines. The mineral resources may be affected by further infill and exploration drilling that may result in increases or decreases in subsequent resource estimates. While the Company believes that no legal, political, environmental or other risks exist that could materially affect the potential development of the mineral resources of the Aguila Project, the mineral resources may be affected by subsequent assessments of mining, environmental, processing, permitting, taxation, socio-economic and other factors in the future. The Mineral Resource Statement presented in Table 1 was prepared by an independent Qualified Person as this term is defined in National Instrument 43-101. The effective date of the mineral resource statement is May 29, 2013.