Quimsacocha Gold Mine Development

The property consists of four mining concessions covering an aggregate area of approximately 12,967 ha and is located in southern Ecuador, 30 km SW of the city of Cuenca at an elevation of 3,600 m.

The project is accessible via a partly paved road from Cuenca, the third largest city in Ecuador, and from Machala, the second largest port in the country. The electrical power grid is accessible within 25 km of the project. The project also benefits from a large population pool in the surrounding communities.

The mineral reserve was estimated at 10.0 Mt grading 6.8 g/t Au for 2,075,000 ounces at 3.0 g/t gold cut-off grade. Based on a 90% recovery the net recoverable gold was calculated at 1,514,000 oz.

The underground mine would employ the post pillar cut and fill method, which is a selective mining method and it will require backfill for stability. During the 18 month pre-production period two ramps that would provide access to the lower part of the deposit would be developed. Mining costs have been established at an average of $36.95 per tonne milled over the mine life, including paste backfill costs.

A 3,000 tonnes per day conventional flotation plant would be built on site. The resulting copper, gold and silver concentrate will be shipped to sea level for the second step of processing, consisting of oxidation of the sulphide minerals using an autoclave, followed by carbon-in-leach for gold extraction and recovery. The copper recovery will be accomplished by cementation on iron.

Based on metallurgical testwork, the recoveries are forecast to be 90% for gold, 92% for copper and 77% for silver. In addition to the 202,000 ounces of gold produced on average every year, some1.0 million ounces of silver and 9.3 million pounds of copper will be produced.

During the first three years of production, Quimsacocha will produce on average 224,000 ounces of gold per year at an average grade of 7.1 g/t Au and with cash costs averaging $214 per ounce before royalties and profit sharing. Over a projected mine life of 7.5 years, the current deposit would produce an average of 202,000 ounces of gold per year at an average cash cost of $272 per ounce.

The mining and processing method selected will limit environmental impact at the mine site, as about 20% of the processed ore will be shipped as concentrate, and of the remaining 80% concentrator tailings, 60% will be returned underground in paste backfill, leaving only 20% of original feed material to be stored in a surface containment facility.

The company plans to bring the mine into production in 2011.

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