43101 santa ana

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43101 santa ana

  1. 1. Environment &SustainabilityJ07.82.13.02Revision Number 0Bear Creek Mining CorporationFeasibility StudySanta Ana ProjectPuno, PerúNI 43-101 Technical Report Prepared for: Bear Creek Mining Corporation 1050 – 625 Howe Street Vancouver, BC V6C 2T6 Canada Prepared by: Ausenco Vector Independent Mining Consultants, Inc. Resource Development Inc. Report Date: 21 October 2010 Endorsed by QP: Scott Elfen, PE; John Marek, PE; Deepak Malhotra, PhD, Sean Currie, P.Eng., and Thomas Wohlford, CPG.
  2. 2. ContentsEnvironment & Sustainability 1J07.82.13.02 Revision Number 0 1Bear Creek Mining Corporation 1Feasibility Study Santa Ana Project Puno, Perú NI 43-101 Technical Report 11 Summary 11.1 Introduction and Executive Summary 11.2 Property Description 21.3 Geology 21.4 Resources and Reserves 21.5 Mining Plan 31.6 Metallurgy 51.7 Processing 51.8 Infrastructure 61.9 Environmental, Permitting and Closure 71.10 Project Execution 71.11 Operating Cost Estimate 71.12 Capital Cost Estimate 81.13 Economic Analysis 81.14 Opportunities 91.14.1 Organic Growth 91.14.2 Exploration Upside 91.14.3 Enhanced Silver Recovery 91.14.4 Operating Cost Reductions 91.15 Conclusions & Recommendations 102 Introduction 112.1 Terms of Reference and Purpose of the Report 112.2 Project Team and Responsibilities 113 Reliance on Other Experts 144 Property Description and Location 155 Accessibility, Climate, Local Resources, Infrastructure and Physiography 175.1 Access 175.2 Climate 175.3 Local Resources 17Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  3. 3. 5.4 Infrastructure 175.5 Physiography 186 History 197 Geologic Setting 208 Deposit Types 219 Mineralization 229.1 General 229.2 SEM 2210 Exploration 2611 Drilling 2712 Sampling Method and Approach 2913 Sample Preparation, Analysis and Security 3013.1 Analytical Procedure 3013.2 Quality Control Procedures (QA/QC) 3013.3 Sample Security 3114 Data Verification 3214.1 Review of the Incremental Data collected between March 2009 and June 2010 3214.2 Certificate Check 3214.3 Standards 3314.4 Blanks 3514.5 Pulp Check Assays 3714.6 Half Core Duplicates Samples 4415 Adjacent Properties 4716 Mineral Processing and Metallurgical Testing 4816.1 Metallurgical Test Work 4816.1.1 Metallurgical Testing – Phase I 4816.1.1.1 Test Procedures 4816.1.1.2 Test Results and Conclusions 4816.1.2 Metallurgical Testing – Phase II 4916.1.2.1 Bottle Roll Tests 4916.1.2.2 Column Tests 4916.1.2.3 Cyanide Amenability Tests (Shaker) 5016.1.3 Metallurgical Testing – Phase III 5116.1.3.1 Sample Selection 5116.1.3.2 Bottle Roll Tests 5316.1.3.3 Column Leach Tests 53Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  4. 4. 16.1.3.4 Comminution Testing 5616.1.4 Process Selection 5616.2 Silver and Gold Recovery 5617 Mineral Resources and Mineral Reserve Estimates 5717.1 Block Model 5717.1.1 Data Base 5717.1.2 Rock Type and Estimation Boundaries 5817.1.3 Density Assignment 6017.1.4 Block Grade Estimation 6017.1.5 Bottom Limit 6317.1.6 Classification 6317.2 Mineral Resources and Mineral Reserves 6317.2.1 Mineral Reserves 6417.3 Mineral Resources 6818 Other Relevant Data and Information 7019 Interpretations and Conclusions 7120 Recommendations 7221 References 7322 Date and Certificates of Authors 7523 Additional Requirements for Technical Reports on Development Properties 8223.1 Mining 8223.1.1 Summary 8223.1.2 Introduction 8223.1.3 Project Production Rate Consideration 8423.1.4 Economic Pit Limits 8423.1.5 Phase Designs 8823.1.6 Mine Plan and Production Schedules 9123.1.6.1 Description of the Schedule 9323.1.6.2 Alternative Mine Schedules 10523.1.7 Waste and Stockpile Storage 10723.1.8 Mine Operations and Equipment 10823.2 Mineral Processing 11223.2.1 Flowsheets 11223.2.2 Mass Balance 11223.2.3 Piping and Instrumentation 112Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  5. 5. 23.2.4 Production Plan 11223.2.5 Process Description 11223.2.5.1 Crushing 11323.2.6 Ore Transport 11523.2.7 Irrigation System 11523.2.8 Leaching 11523.2.8.1 Cyanide Solution Pumping 11523.2.8.2 Pregnant Solution Collection 11523.2.8.3 Pregnant Solution Pumping 11523.2.9 Merrill-Crowe Plant 11623.2.9.1 Clarification 11623.2.9.2 Deaeration 11623.2.9.3 Precipitation 11823.2.10 Smelting Process 11823.2.10.1 Retorting 11823.2.10.2 Smelting 11923.2.11 Chemical Reagents 11923.2.11.1 Lime Addition 11923.2.11.2 Sodium Hydroxide 11923.2.11.3 Sodium Cyanide 12023.2.11.4 Antiscalant 12023.2.11.5 Lead Nitrate 12023.2.11.6 Zinc Dust 12023.2.11.7 Precoat 12023.2.11.8 Body Feed 12023.2.11.9 Hydrogen Peroxide 12023.2.11.10 Copper Sulphate 12123.2.11.11 Reagent Requirements 12123.3 Infrastructure 12123.3.1 Power 12123.3.2 Access Road 12223.3.2.1 Mine Access Road 12223.3.2.2 Main Haul Road 12223.3.2.3 Auxiliary Access Road 12223.3.2.4 Diversion Access Road 122Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  6. 6. 23.4 Geotechnical 12323.4.1 Geotechnical Units 12323.4.2 Piezometric Level 12423.4.3 Foundation Level 12423.4.4 Open Pit / Pit Slopes 12523.4.5 Heap Leach Facility Construction 12623.4.5.1 Design Criteria and Approach 12723.4.5.2 Leach Pad Materials Description 12723.4.5.3 Underdrain System 12923.4.5.4 Liner System 12923.4.5.5 Solution Collection System 12923.4.6 Process Ponds Construction 12923.4.6.1 Design Criteria and Approach 13023.4.6.2 Process Ponds Materials Description 13123.4.6.3 Underdrain System 13123.4.6.4 Liner System 13123.4.7 Waste Rock Facility Construction 13123.4.7.1 Design Criteria and Approach 13223.4.7.2 Waste Rock Facility Material Descriptions 13323.4.7.3 Underdrain System 13323.4.8 Seismicity and Seismic Hazards 13323.4.9 Instrumentation and Monitoring 13423.5 Markets 13423.6 Environmental Considerations and Permitting 13623.7 Health, Safety, Environment and Community 13623.7.1 Hydrogeological Evaluation 13623.7.1.1 Field Investigations 13623.7.1.2 Conceptual Hydrogeological Model 13723.7.1.3 Simulation of Groundwater Inflow to Proposed Open-Pit Areas 13723.7.2 Water Supply 13723.7.2.1 Water Well Fields 13723.7.2.2 Water Pipeline 13823.7.3 Waste Geochemistry 13823.7.3.1 Sampling 13823.7.3.2 Results 139Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  7. 7. 23.7.3.3 Conclusions 13923.7.4 Closure 13923.7.4.1 Reclamation and Closure by Facility 14023.7.4.2 Post Closure 14123.7.4.2.1 Maintenance 14123.7.4.2.2 Monitoring 14123.8 Project Execution 14123.9 Economic Analysis 14223.9.1 Economic Model 14223.9.1.1 General Criteria 14223.9.1.2 Mine and Process Production 14223.9.1.3 Average LoM Operating Costs 14323.9.1.4 Capital Cost Summary 14423.9.1.5 Sustaining Cost Summary 14423.9.1.6 Working Capital 14623.9.1.7 Base Case Analysis 14623.9.1.8 Sensitivity Analysis to Base Case 14723.9.1.9 Economic Model 14823.9.2 Taxes and Royalties 15023.10 Opportunities 15023.10.1 Finer Crushing 15023.10.2 Northern Extension 15123.10.3 Longer Mine Life 15323.10.4 Deep Potential 15324 Illustrations 154TablesTable 1.1 Reserve and Resource Estimate 3Table 1.2 Key Project Assumptions 4Table 1.3 Annual Crusher Feed (tonnes and grade) 4Table 1.4 Capital Cost Summary 8Table 1.5 Cost Sensitivities 9Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  8. 8. Table 2.1 Santa Ana Responsibility Matrix 12Table 4.1 Santa Ana Project Mining Concessions 15Table 14.1 Half Core Questionable Intervals 44Table 16.1 Phase I Metallurgical Test Results 48Table 16.2 Santa Ana Core Composites, Phase II Bottle Roll Test Results 49Table 16.3 Santa Ana Core Composites, Phase II Column Test Results 50Table 16.4 Santa Ana Core Composites, All Shaker Test Results 50Table 16.5 Phase III Master Composite Description 51Table 16.6 Phase III Bottle Roll Test Results 53Table 16.7 Phase III Column Test Results 54Table 16.8 Phase III Column Test Reagent Consumptions 54Table 17.1 Santa Ana Block Model Parameters 57Table 17.2 Kriging Parameters for Silver and Zinc Indicator Grade Breaks 61Table 17.3 Kriging Parameters for Block Grade Estimation 62Table 17.4 Inverse Distance Estimation for Bottom Limit of Grades 63Table 17.5 Santa Ana Floating Cone Input Data 65Table 17.6 Mine Production Schedule, Santa Ana Feasibility Study 67Table 17.7 Process Schedule with Stockpile Reclaim 68Table 17.8 Mineral Reserves and Mineral Resources 69Table 23.1A Mine Production Schedule 83Table 23.2A Production Schedule for Potential Low Tonnage Pit 105Table 23.3A Production Schedule for Potential Large Tonnage Pit 106Table 23.4 Mine Major Equipment Fleets for Development of Contractor Costs 110Table 23.5 Contractor Manpower Requirements 111Table 23.6 Retorting Process 119Table 23.7 Primary Reagent Consumption 121Table 23.8 Dore Transport and Refining Costs 136Table 23.9 Project Development Plan 142Table 23.10 General Model Criteria 142Table 23.12 Operating Cost 143Table 23.13 Capital Cost Summary 144Table 23.14 Sustaining Cost 145Table 23.15 Base Case Sensitivities 146Table 23.16 Silver Price Sensitivities 147Table 23.17 Capital Cost and Operating Cost Sensitivities 147Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  9. 9. Table 23.18 Sensitivities on Recovery 147Table 23.19 Base Case Financial Cash Flow 149Table 23.20 Northern Extension Drilling 152FiguresFigure 1.1 Mine Schedule Summary 5Figure 4.1 Location Map of Santa Ana 16Figure 9.1 Thickness of 20g/t Silver, Contours on 30, 50, 100 m 23Figure 9.2 East-West Section at 8,157,700N, Silver Grades 15, 45, 100, 200 g/t 24Figure 9.3 East-West Section at 8,158,300N, Silver Grades 15, 45, 100, 200 g/t 25Figure 11.1 Drillhole Location Map 28Figure 14.1 2006, 2007 and 2008 Assay Standards Greater than 1.0 g/t 34Figure 14.2 2009 and 2010 Assay Standards Greater than 1.0 g/t 35Figure 14.3 Results of Sep-2010 Blanks from RockLabs Standards 37Figure 14.4A XY Plot 2009 Data, ALS- Chemex Silver vs. Inspectorate Silver Check 38Figure 14.5A XY Plot 2010 Data, ALS-Chemex Silver vs. Inspectorate Silver Check 40Figure 14.6 XY Plot, ALS-Chemex Zinc vs. Inspectorate Zinc Check 42Figure 14.7 XY Plot, ALS-Chemex Lead vs. Inspectorate Lead Check 43Figure 14.8A XY Plot of Half Core Duplicates 45Figure 16.1 Master Composite Sample Location Map 52Figure 16.2 Column Test Recovery vs. Time 55Figure 17.1 Illustration of Zone Codes, 3990 Elevation 59Figure 17.2 Final Pit Configuration 66Figure 23.1 Floating Cone Guide to Final Pit Design (at $13.00 Ag) 86Figure 23.2 Nested Cones on the 4200 Level 87Figure 23.3 Ultimate Pit Configuration 89Figure 23.4 Pit Phase at the 4200 m Bench 90Figure 23.5 Graphic Summary Mine Production Schedule 92Figure 23.6 Phase Open Pit at the End of Preproduction 94Figure 23.7 Phase Open Pit End Year 1 95Figure 23.8 Phase Open Pit End Year 2 96Figure 23.9 Phase Open Pit End Year 3 97Figure 23.10 Phase Open Pit End Year 4 98Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  10. 10. Figure 23.11 Phased Open pit End Year 5 99Figure 23.12 Phase Open Pit End Year 6 100Figure 23.13 Phase Open Pit End Year 7 101Figure 23.14 Phase Open Pit End Year 8 102Figure 23.15 Phase Open Pit End Year 9 103Figure 23.16 Phase Open Pit End Year 10 104Figure 23.17 Santa Ana Heap Crushing Flowsheet 114Figure 23.18 Process Flowsheet 117Figure 23.19 Access Roads General Layout 123Figure 23.20 Santa Anas Heap Leach Pad First Stage Layout 126Figure 23.21 Santa Anas Leach Pad Ultimate Phase Layout 128Figure 23.22 Santa Anas Process Ponds Layout 130Figure 23.23 Santa Anas Waste Rock Facility Layout 132Figure 23.24 NPV Sensitivity Analysis 148Figure 23.25 IRR Sensitivity Analysis 148Figure 23.26 Silver Recovery vs. Ore Grain Size 151Figure 23.27 Northern Drilling Location Map 152Figure 23.28 Current Mine Plan Production vs. Extended Life Alternate Plan 153Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  11. 11. 1 Summary This Technical Report summarizes the results of an updated resource determination and a Feasibility Study (FS) for the Santa Ana Silver Project in Peru. This work was completed by three engineering companies working as a team on behalf of Bear Creek Mining Corporation (Bear Creek). The three companies and their responsibilities are as follows: • Ausenco Vector (Vector) provided design and cost estimation for the process plant, heap leach facilities and all infrastructure items required for project development. Vector also assembled the cash flow analysis of the FS, and acted as the primary author of this Technical Report. The preparation of this report and analysis of the data are the responsibility of Vector except for those areas listed below which were performed by IMC and RDI; • Independent Mining Consultants, Inc. (IMC) developed the estimated reserves and resources, mine plan, and mining costs for the FS. IMC also supervised the parts of the reports dealing with geology and sampling; and • Resource Development, Inc. (RDI) was responsible for review and interpretation of the process test results, development of the flow sheet, development of the process design criteria and the quantity of the consumable items in the process plant.1.1 Introduction and Executive Summary The results of the Feasibility Study are as follows: • The Santa Ana project can be in production within the second half of 2012; • Proven and Probable Mineral Reserves containing 63.2 million ounces of silver are currently defined at Santa Ana; • Santa Ana Project pre-tax NPV of $85.3 million at a 5% discount rate and IRR of 25.3% at $14.50 per ounce silver. After tax net present value of $66.5 million and IRR 21.8%; • 11 year mine life producing 44.2 million ounces of silver; • Average annual saleable silver production of 4.6 million ounces per year for the first 6 years; • Cash cost of $9.02 per ounce silver for the 11 years LOM; • Capital costs of $68.8 million with Capital Payback in 3.4 years at $14.50/oz Ag; • At $22.92 per ounce silver (London Silver spot price fix from October 6, 2010), the project would have a pre-tax IRR of 70.2% and an NPV at 5% of $341 million. On an after tax basis the IRR would be 52.6% and NPV $232 million; • At silver prices of $22.92 per ounce, free cash flow estimated at $46 million per year for the first 6 years with a 1.4 year pay back; • Numerous upside opportunities are being explored including increase of silver recovery, reductions in cash costs, and an extended mine life plan to include an additional 35.7 million ounces of silver; and • The Santa Ana deposit remains open, mainly at depth and to the north where the northernmost holes contain up to 22 meters @ 124 g/t Ag from surface.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 1
  12. 12. 1.2 Property Description The Santa Ana Project is located about 120 km south-southeast of the city of Puno, in southern Peru. The elevation in the deposit area varies from 4150 to 4300 meters. The deposit contains silver, zinc and lead mineralization. Zinc and lead mineralization is not currently considered to be economic because it is not recovered in the heap leach processing method utilized in this FS. This report focuses on the evaluation of the economic recovery of silver. The deposit outcrops and is roughly 1.5 km long in the north-south orientation and approximately 0.75 wide in the east-west orientation. The deposit is best described as a high-level, low- temperature epithermal polymetallic silver deposit hosted within volcanic units. Bear Creek controls 5400 hectares of mineral concessions that encompass the Santa Project through claims held 100% by Bear Creek.1.3 Geology The Santa Ana property occupies a broad volcanic upland that lies between extensive exposures of thin-bedded grey lithic sandstones and red beds that underlie the volcanics to the north and south. The central and western portion of the upland is occupied by a sequence of fine-grained andesite flows that strike generally north and dip to the west at angles ranging from 15° to 45°. To the west, these flows are capped by coarse-grained dacitic porphyry that is, in turn, overlain unconformably by a thick sequence of dacitic volcanoclastic rocks. The andesite flows are the mineral hosts. Earlier descriptions of the mineralization described a northern Anomaly A and a southerly Anomaly B. Drilling has connected these zones so that they represent major structural orientations that contain continuous mineralization. The sandstones exposed to the north and south likely underlie the host volcanic field. Total thickness of the volcanic package is not well known.1.4 Resources and Reserves The mineral resource is based on a block model developed by IMC and a floating cone pit geometry that was used to assure that the resource has reasonable expectation of economic extraction. The FS and the reserve and resources are based on an updated resource estimation described in a press release dated 7 October 2010. The mine sequencing performed as part of this FS by IMC is based upon 60,458 meters of drilling and assays in 349 diamond drillholes and trenches completed through June 2010. Measured and Indicated Resources contained within the Feasibility Study design pit were used to determine final pit limits and thus converted respectively into Proven and Probable Reserves. In addition to reserves, 72.8 million ounces of silver remain in measured and indicated resources occurring outside of the Feasibility Study pit. Table 1.1 presents the reserves and resources of the Santa Ana project.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 2
  13. 13. Table 1.1 Reserve and Resource Estimate Mineral Reserves (Cut-off Grade variable 27 to 24 g/t silver by year) Contained Silver Lead Zinc Category kt Silver (g/t) (%) (%) (million oz.) Proven 8,951 57.6 0.37 0.66 16.6 Probable 28,126 51.5 0.33 0.55 46.6 Proven+Probable 37,077 53.0 0.34 0.58 63.2 Mineral Resources in Addition to Reserves (Cut-off Grade = 15 g/t Silver) Measured 13,386 34.6 0.30 0.51 14.9 Indicated 51,337 35.1 0.30 0.50 57.9 Measured+Indictated 64,723 35.0 0.30 0.50 72.8 Inferred 21,632 40.6 0.32 0.49 28.2 Note: no lead and zinc will be recovered.1.5 Mining Plan The Santa Ana deposit lends itself to development by conventional open pit hard rock mining techniques. Consequently, a floating cone computer algorithm was applied to the block model to establish the mineral resource component of the block model. Economic value was applied to silver only with a metal sales price of $13.00/troy oz. resulting in a variable cut-off grade of between 24 and 27 g/t silver. No economic consideration has been applied to lead or zinc; however, a slight benefit is realized through by-product gold recovery. The mining plan was developed by IMC. The mine plan was developed using conventional open pit methods using 63t trucks and 8.6 m3 wheel loaders mining on 5 m high benches. The mine requires minimal pre-production waste stripping of 2.97 million tonnes. During the life of the project the overall stripping ratio will 1.96:1 (Waste:Ore). For the first nine and a half years of the operation, ore will be directly shipped from the pit to the crusher where the trucks will dump the ore directly into the crushing system. After crushing the ore will be loaded using an automated conveyor loading system and then be hauled to the heap leach where the ore will be placed in cells and leached using weak cyanide solution. In addition to the direct dump ore, the mining plan calls for a low-grade stockpile to be built up in the first 5 years of the mining. The low-grade stockpile will contain 2,964 kt of ore having an average grade of 29.9 g/t. The low-grade stockpile will be fed through the crusher once the main mining activity has ceased. Waste will be hauled to a single waste storage facility located approximately 1 km southwest of the pit. The plan for the operation of the mine is to use a contract miner. IMC developed mining costs of $1.68 per tonne of material mined (ore and waste) and $0.71 per tonne for the rehandling of the crushed ore onto the heap leach. Separate budgetary quotes were received from local mining contractors and closely matched the detailed estimate prepared by IMC. Table 1.2 indicates key assumptions used in the development of the FS.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 3
  14. 14. Table 1.2 Key Project Assumptions Item Description Value Annual Ore Production 3,600,000 tonnes (Year 1 to end of mine life) Overall Process Recovery – Silver 70 percent Total Processed Material 37,077,000 t Average Silver Grade 53.0 g/t Recovered Silver 44.2 million oz. Overall stripping ratio 1.96:1 Life of mine (mining only) 9.5 years Life of mine (processing) 11.2 years Table 1.3 presents annual tonnes and grade of the ore fed to the crusher and placed on the heap leach. Table 1.3 Annual Crusher Feed (tonnes and grade) Silver Grade Time kt (g/t) Year 1 3,600 58.4 Year 2 3,600 60.5 Year 3 3,600 59.1 Year 4 3,600 57.6 Year 5 3,600 59.0 Year 6 3,600 55.6 Year 7 3,600 53.1 Year 8 3,600 49.7 Year 9 3,600 47.0 Year 10 3,600 37.0 Year 11 1,077 29.9 Total 37,077 53.0 Figure 1.1 illustrates the variation in the tonnes of the different material moved by year.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 4
  15. 15. Figure 1.1 Mine Schedule Summary1.6 Metallurgy Six column leach test have been completed at McClelland Labs and over one-hundred leach amenability tests. The results have consistently demonstrated that the Santa Ana ore responds well to conventional heap leaching techniques. The overall recovery is expected to be 70% silver for minus ¾-inch crushed material. More recent column tests indicate that further improvements in recovery to 75 percent silver can be achieved by crushing the ore to minus 3/8-inch. McClelland Laboratories is currently performing a column test on minus 3/8-inch crushed material and the Company will release the results when this long-term test is finished. Initial results strongly indicate an improvement in recovery and acceleration of the silver leaching.1.7 Processing Santa Ana is an epithermal polymetallic deposit hosted within volcanic rocks with significant quantities of primary silver. Considering its proximity to the surface, the ore will be mined in an open pit operation. The main operations are blasting, ore transportation to the crushing plant which will comprise two crushing stages and one classification stage, heap leaching and recovery by Merrill-Crowe extraction.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 5
  16. 16. The crushed ore, 80 percent passing 19mm (¾-inch) will be conveyed to the coarse ore stockpile with a live capacity of approximately 6 hrs. The reclaim system will consist of one fixed conveyor stockpile to withdraw material from the stockpile and deliver onto trucks. Trucks will be used to transport the ore from the crushed ore stockpile to the heap leach pad. A sodium cyanide solution will be irrigated on the heap to dissolve silver minerals and the pregnant solution will be sent to the Merrill-Crowe plant to produce a silver-zinc precipitate, which will be smelted to produce a Dore bar containing mainly silver. The operation will treat 10,000 tpd and the estimated life of mine is 11.3 years. The design considers a heap leaching process and the average silver content is 53 g/t. The metallurgical recovery of silver by the leaching process is 70% with a 360 day leach recovery cycle. The leach cycle is divided into a 120 day primary leach and a 240 day secondary leach occurring in the lower levels of the heap. The estimated monthly production is 306,255 ounces of silver. The Merrill-Crowe plant was designed to treat 571 m3/hr of pregnant solution in order to assure the production mentioned above. The design includes an effluent detoxification plant to treat 120 m3/hr of solution with low cyanide content. This detoxification plant will only operate under special circumstances such as excess of barren solution produced during the rainy season. The estimated installed power is 3,547 kW, the maximum draw power is 1,683 kW and the estimated critical consumption is 1,445 kW. The estimated power consumption is 1,132,027 kW-hr per month. Emergency backup will be provided by diesel generators of 1,500 kW of continuous service at 4,000 meters above sea level. This equipment will assure the operation of equipment critical to the metallurgical process. The requirement of water for the operation is approximately 3.86 litres per second during the first year of operation. If the leaching operation starts in the dry season (May to September), the requirement of water will be higher. The opposite will occur during the wet season (November to April). At the start of operations, the storm water pond should contain no less than 42,000 m3 of water. When the rainy season starts, it will be important to collect the rain water through the leach pad. The estimated direct cost of the investment for processing is US$ 12,359,000 million and the indirect cost is US$ 2,740,000 million. The total cost of the investment (Capex) is US$ 15,009,000 million. The details of the capital cost estimate are presented in Section 23.9. The estimated operating cost of the process is 2.644 dollars per tonne of ore processed or 1.186 dollars per ounce of silver. The details of the operating cost estimate are presented in Section 23.9.1.8 Infrastructure The project has favourable infrastructure. Access will be via a good 8 km gravel road that will be a combination of a new and improved roads requiring mostly upgrading. The new road will connect to the existing paved highway connecting the Bolivian border to the port of Ilo, Peru. The mine is 42 km from an electrical substation at Pomata and the project includes building a transmission line to the mine. The project has an excellent site for the heap leach pad resulting in a low capital and operating cost as the plant will be located immediately adjacent to the heap leach pad and ponds. The site is close to a very large alluvial aquifer that is replenished by a flowing river in the valley; wells have been drilled in the aquifer and sufficient water is available to provide water for the mine’s needs. Steps are being taken to acquire the necessary permits for water use. A 12 km pipeline from the wells to the mine will be built to transport the water.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 6
  17. 17. 1.9 Environmental, Permitting and Closure The project has been designed to meet industry standards of environmental compliance. The heap leach and solution ponds have been designed industry standards of containment and stability. The waste rock storage facilities are designed to capture and manage any flows that may originate from the waste rock. Finally an initial closure plan has been developed that will provide covers the both the heap leach and waste rock facilities that will result in safe and environmentally compliant closure of the mine. The lab tests on spent ore and waste rock have shown that the site has a very low potential to produce acid rock drainage (ARD). The Company is currently advancing the permitting process and expects to submit the Environmental and Social Impact Assessment (ESIA) to the Peruvian authorities before the end of 2010. All additional necessary permitting will be processed once the ESIA has been approved by the national government. The Company has maintained good working relationships with the local communities.1.10 Project Execution The project is expected to be developed into a mine over the next 24 months. The figure below illustrates the major parts of the development plan. First the company expects to present the ESIA to the Peruvian authorities prior to the end of 2010. There will then be a period of review by the government that is expected to last 6 to 9 months. In late 2010 and early 2011, the detailed project engineering is expected to commence and is estimated to be completed in approximately 9 months. Following ESIA approval the Company is expected to advance the permitting process by obtaining the necessary construction and operating permits. In late 2011, once the proper permits are obtained, the principal off-site project infrastructure is expected to be developed. This will include the power line, the upgrading of the access road, the construction of the water supply pipeline and drilling of any additional production water wells. Any temporary construction housing will be installed in preparation for the on-site construction. Finally, the onsite construction is expected to start in the nd 2 quarter of 2012, or earlier depending on the end of the rainy season and continue through the dry season. Commercial production is expected to start in early part of the fourth quarter of 2012, or earlier if the rainy season permits liner installation sooner. Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Item / Period 2010 2011 2011 2011 2011 2012 2012 2012 2012 ESIA Review Detailed Engineering Permitting Off-site Infrastructure Construction Site Development Production1.11 Operating Cost Estimate Mining costs were prepared on a year-by-year basis with costs varying mostly due to changing haulage distances. The life-of-mine average mining costs will be $1.68 per tonne of the total material moved. The cost for hauling and placing ore on the pad will be $0.71 per tonne. The process costs are estimated to be $3.19 per tonne of processed ore and the G&A is estimated to be $1.17 per processed tonne or $4.2 million per year. The average life-of-mine, on site operating costRev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 7
  18. 18. per ounce of silver will be $8.35. Including refining charges, doré transport and Peruvian production royalties, the average cash cost per ounce will be $9.02.1.12 Capital Cost Estimate The project capital cost estimate has been prepared by two independent engineering companies. The mining costs were prepared by Independent Mining Consultants of Tucson, Arizona, and the process heap leach and infrastructure costs have been prepared by Ausenco Vector of Peru. The initial start up capital is estimated to be $68.8 million and the total life of mine capital cost is estimated to be $83.8 million. The initial capital equates to $1.56 per ounce of silver recovered. The life of mine capital costs used in the financial model includes detailed long-term plans for heap leach expansions as well as ongoing mine closure and monitoring. Sustaining capital expenditures are estimated at an average $1.4 million per year over the 11-year life of the mine. Tabulated below are the Capital costs for each of the principal areas. Table 1.4 Capital Cost Summary Item Cost Civil Works $13,598,000 Water Supply $3,215,000 Process Plant $15,099,000 Auxiliary Facilities $5,859,000 Water Distribution $2,403,000 Electrical (LT & Distribution) $9,709,000 Crusher System $4,763,000 Preproduction Mine Development & Equipment $9,909,000 Owners Costs $4,226,000 Total Initial Capital $68,781,000 The estimates of the Capital Costs have been prepared to a feasibility level with a 15% contingency applied to the estimates. An additional 15% has been added for Engineering Procurement and Construction Management (EPCM).1.13 Economic Analysis The project has a pre-tax internal rate of return (IRR) of 25.3%, a net present value of $85.3 million at a 5% discount rate and earnings before interest, taxes, depreciation and amortization (EBITDA) of $144 million over the 11-year life based upon $14.50 per ounce silver. Recovered silver production in the first six years averages 4.6 million ounces per year and the project is expected to produce an average of 4.0 million payable ounces of silver per year over the 11-year mine-life. Based upon a $14.50 silver price, the project achieves payback of capital in approximately 3.4 years. The Feasibility Study has been prepared using cost bids and estimates and production forecasts provided by qualified engineering consulting groups who have recent bids and cost structure experience relating to various Peruvian mining projects under development. The project is sensitive to metal price and recovery. Additionally, given that the cash costs per ounce are $9.02 per ounce of silver, the project is also sensitive to variations in operating costs.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 8
  19. 19. The project is least sensitive to capital cost variations and this can be explained by the relatively low cost of $1.56 per produced ounce for the initial capital. Sensitivities to various parameters are summarized below: Table 1.5 Cost Sensitivities Case IRR NPV @ 5% NPV @ 0% Base Case 25% $85.3M $143.6M Recovery +10% 34% $127.4M $203.5M Recovery -10% 16% $43.1M $83.5M Metal Price +10% 34% $129.4M $206.5M Metal Price -10% 16% $41.0M $80.5M Initial Capital Cost +10% 23% $79.0M $136.7M Initial Capital Cost -10% 28% $91.6M $150.5M Operating Cost +10% 20% $59.1M $106.6M Operating Cost -10% 31% $111.5M $180.5M Metal Prices Oct. 6, 2010 - $22.92/oz Ag 70% $341.1M $508.0M Note: Base case price is $14.50/oz Silver; London Silver spot price fix from October 6, 2010 = $22.92/oz Ag .All values are pre-tax.1.14 Opportunities The study has identified areas of opportunities that will be analysed immediately in detailed engineering, column leach test work and future exploration:1.14.1 Organic Growth The Feasibility Study leaves 36 million ounces of measured and indicated silver resources in either stockpiles or pit walls that can lead to expanded mine life on the order of 50%. Relatively minor additional capital will be required in order to increase the size of the heap leach pad and waste dump sites for which there is ample area for expansions (see Sections 23.4.5 and 23.12.3).1.14.2 Exploration Upside The deposit is still open at depth, to the north and northwest, and the “North” anomaly is under- explored.1.14.3 Enhanced Silver Recovery Analysis of the recently completed column leach studies indicates that higher recoveries are likely with a slightly finer crush size. At 80% passing 3/8 inch crush size the anticipated recovery is 75% of the silver and initial results from test work indicate the speed of silver recovery is greatly improved.1.14.4 Operating Cost Reductions The project is sensitive to operating costs. The Company and its consultants believe that, once the project is in operation, many of the reagent consumption levels used in the Feasibility Study will be reduced with a beneficial effect on the operating costs. Additionally, assuming that a finer crush size is chosen, there is potential to reduce the cash costs by $0.30 to $0.40 per ounce resulting fromRev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 9
  20. 20. accelerated silver leaching rates and increased recoveries. Details of the finer crushing potentials are provided in Section 23.10.1.1.15 Conclusions & Recommendations This Report recommends proceeding with detailed engineering and permitting based on: • Positive economics with excellent exposure to up-side silver prices; • Well-defined resources open to expansion and potential conversion to reserves; • Favourable infrastructure; heap leach, power and access; • Available local water supply; • Well-defined permitting path; and • Local community acceptance. The study has identified areas of opportunities that will be analysed in ongoing engineering studies and test work: • Reduce the crush size to minus 3/8” to improve silver recovery and leaching rate; • Investigate reducing the process plant footprint to reduce capital costs; and • As the sensitivity analysis shows, the project is sensitive to operating costs. BCM and its consultants will explore opportunities for reducing operating costs mainly through reducing reagent consumption both in ongoing leaching tests and after operations start-up.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 10
  21. 21. 2 Introduction2.1 Terms of Reference and Purpose of the Report Ausenco Vector (Vector) was commissioned by Bear Creek Mining Corporation (BCM) to prepare a feasibility study and independent National Instrument 43-101 Technical Report on the Santa Ana Silver Project. The Project is located in south-eastern Peru. The feasibility study includes data and information provided by Vector and other professional and consultants. This work was started in June 2009 and summarized in a 7 October 2010 press release. This report is intended for the use of BCM for the development and advancement of the Santa Ana Project. This document presents a feasibility study with technical statements of resources, reserves and results of an economic model. This report meets the requirements for NI 43-101 and the resources and reserve definitions defined therein. This report utilizes metric units. Tonnes are defined as metric tonnes and ktonnes are 1000 metric tonnes. Metal grade of silver are in grams per metric tonne. Metal grades of lead and zinc are in percent by weight. All tonnages reported in this document are dry tonnes.2.2 Project Team and Responsibilities The reserve and resources was updated based on all available drillhole assay information as of May 2010 by IMC with John Marek acting as qualified person for update of reserve and resources. Mine plans, production schedules, and mine cost estimates were developed by IMC with John Marek acting as the qualified person for these tasks. Review and interpretation of process testing, development of a preliminary process flow sheet, and process cost estimation was the responsibility of RDI with Deepak Malhotra Ph.D. acting as qualified person. Preliminary design of the heap leach pad and estimation of costs for project infrastructure requirements were the responsibility of Ausenco Vector with Scott Elfen, Sean Currie and Thomas Wohlford acting as the qualified persons. John Marek, Scott Elfen, Sean Currie and Thomas Wohlford have all visited the project. The most recent site visit was completed Mr. Wohlford 24-30 July 2010. Table 2.1 lists the contributors to the FS and the Qualified Persons (QP) responsible for the report.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 11
  22. 22. Table 2.1 Santa Ana Responsibility Matrix Report Title Responsible Party Section 1 Summary Scott Elfen, Vector 2 Introduction Scott Elfen, Vector 3 Reliance on Other Experts Scott Elfen, Vector 4 Property Description and Location Scott Elfen, Vector Accessibility, Climate, Local Resources, 5 Scott Elfen, Vector Infrastructure and Physiography 6 History Scott Elfen, Vector 7 Geologic Setting John Marek, IMC 8 Deposit Types John Marek, IMC 9 Mineralization 9.1 General John Marek, IMC 9.2 SEM Deepak Malhotra, RDI 10 Exploration John Marek, IMC 11 Drilling John Marek, IMC 12 Sampling Method and Approach John Marek, IMC 13 Sample Preparation, Analysis and Security John Marek, IMC 14 Data Verification John Marek, IMC 15 Adjacent Properties Scott Elfen, Vector 16 Mineral Processing and Metallurgical Testing Deepak Malhotra, RDI Mineral Resources and Mineral Reserve 17 John Marek, IMC Estimates 18 Other Relevant Data and Information All 19 Interpretations and Conclusions Scott Elfen, Vector 20 Recommendations Scott Elfen, Vector 21 References Scott Elfen, Vector 22 Date and Certificates of Authors Additional Requirements for Technical 23 Reports on Development Properties 23.1 Mining John Marek, IMC 23.2 Mineral Processing Deepak Malhotra, RDI 23.3 Infrastructure Sean Currie, Vector 23.4 Geotechnical Sean Currie, Vector 23.5 Markets Scott Elfen, Vector 23.6 Environmental Considerations and Permitting Scott Elfen, Vector Thomas Wohlford, 23.7 Health, Safety, Environment and Community Vector 23.8 Project Execution Scott Elfen, VectorRev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 12
  23. 23. Report Title Responsible Party Section 23.9 Economic Analysis Scott Elfen, Vector 23.10 Opportunities 23.10.1 Finer Crushing Deepak Malhotra, RDI 23.10.2 Northern Extension John Marek, IMC 23.10.3 Longer Mine Life John Marek, IMC 23.10.4 Deep Potential John Marek, IMC 24 Illustrations Scott Elfen, VectorRev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 13
  24. 24. 3 Reliance on Other Experts Project coordination and communication was the responsibility of Marc Leduc, Chief Operating Officer for Bear Creek Mining who is also a qualified person under the definitions within NI 43-101. Bear Creek Mining Corp. has provided much of the information regarding the project property situation as well as background information on the property. Where possible, the authors have confirmed information provided by Bear Creek or previous authors by comparison against other data sources or by field observation. Where checks and confirmations are not possible, the authors have assumed that all information supplied is complete and reliable within normally accepted limits of error. During the normal course of the work, we have not discovered any reason to doubt that assumption. Vector has not specifically reviewed or audited the property ownership documents at Santa Ana. Vector has relied on the opinion of Peruvian legal counsel to Bear Creek Mining. Estudio Grau Abogados provided a letter dated 19 October 2010 to Bear Creek Mining outlining the property ownership at Santa Ana and signed by Juan Carlos Escuder (partner), and Edgardo Portaro (Associate) which has been reviewed by Vector as support to the information provided in Section 4.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 14
  25. 25. 4 Property Description and Location The Santa Ana Property is located approximately 45 km west of Desaguadero, a small city located near the Bolivian – Peruvian border southwest of Lake Titicaca. Santa Ana is 120 km south of the much larger city of Puno in the Department of Puno in south-eastern Peru. The Santa Ana property covers an area of 5,400 hectares in an area to the south of the village of Huacullani. The approximate UTM grid coordinates for the centre of the main portion of the property are 8,158,000 m North and 466,000 m East using the Prov. S. Am ’56 map datum (zone 19). The property consists of six claims: the Karina 9-A, Karina 1, Karina 2, Karina 5, Karina 6 and Karina 7. Bear Creek has executed its option to acquire 100% interest in the six mineral claims which comprises 5,400 hectares. The claims were subject to payments under a finders fee agreement to a Peruvian individual of which $15,000 was paid upon receipt of title and $15,000 was paid upon initiation of drilling. In addition, in accordance with the finder’s fee agreement, the property is subject to a 3% payment of the direct exploration expenditures to a maximum payment of $280,000. The mineral titles were held on behalf of the Company by a third party. The Company initiated a process to transfer the titles to its name under a Supreme Decree, whereby a foreign controlled entity, such as Bear Creek Mining Corporation, can hold title to mineral rights located within the 50 kilometre border zone of Peru. The Company made a total payment of $7,000 to the third party upon transfer of title. This process was completed late in 2007 and the company now holds clear title to the claims. Table 4.1 presents a list of the claims and their sizes. Table 4.1 Santa Ana Project Mining Concessions Concession Identification Size Name Code (Hectares) Karina 9-A 010146204 1000.00 Karina 1 010146304 700.00 Karina 2 010146404 1000.00 Karina 5 010367604 700.00 Karina 6 010367804 1000.00 Karina 7 010367704 1000.00Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 15
  26. 26. Figure 4.1 Location Map of Santa AnaRev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 16
  27. 27. 5 Accessibility, Climate, Local Resources, Infrastructure and Physiography5.1 Access Access to the property is obtained by driving west 44 km from Desaguadero on paved and gravel roads to the village of Huacullani, then south on a good dirt road another 4.9 km to the project site. In good weather, two-wheel drive vehicles can easily access the property; off road or wet weather travel requires four-wheel drive vehicles.5.2 Climate The climate of the region is typical of the high Andes of Peru. There is a pronounced dry season with little precipitation from May through September and a pronounced wet season from January through March. The temperatures are mild with average daytime high temperature above freezing. Occasionally, the overnight temperatures drop below freezing. There are no climatic conditions that would cause the project great operational difficulty. The largest concern will be managing stormwater but this is a concern at all mine sites and can be managed with proper controls. Vegetation is primarily the stiff bunch grass found at these altitudes in the Andes. Trees are nearly absent. The property lies within a volcanic upland to the south of Huacullani. Elevations generally vary from 4150 to 4300 meters above mean sea level. A stream flows through the broad valley east of the deposit, which might be developed to provide some of the water requirements for mining and processing.5.3 Local Resources Local resources are beneficial for resource projects. Huacullani is a small provincial town with small scale farming as the primary economic activity. Local farming is mostly limited to growing of market vegetables (potatoes and corn) and the herding of sheep, alpaca and cattle. The recently utilized exploration labour force came from the nearby communities. There is no history of mining in the area during the recent past.5.4 Infrastructure Infrastructure is in-place for mine development with a good paved highway 8 km north of the project. Water for mining operations could be obtained from a large river located 10 km to the north of the project (next to the paved highway). Power for exploration was supplied by generators but for a mining operation a power line will be constructed and connected to the national grid at the sub- station located in Pomata (43 km to the northeast). The project area has a moderate topography so the construction of site access roads is easy compared to other projects in Peru where there is more severe topography. There is only one small structure within the project property and the exploration group used it during the drilling phase for offices and accommodations. The mine development plan describes installation of all new site infrastructure for the project.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  28. 28. 5.5 Physiography The physiographic features are moderate to gentle and access is easy to all parts of the project either by 4x4 truck or on foot. The project is located at the top of a mesa shaped mountain with the top of the mesa forming a gentle bowl shape. The sides of the mesa are more rugged than the project site: consequently, the access road from Huacullani to the top of the mesa is more sinuous and steeper than other roads in the area. The project is located at the 4200 meter elevation on average.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  29. 29. 6 History Bear Creek Mining Corporation became aware of old Colonial workings on the Santa Ana property and began a concerted exploration campaign during the second half of 2004. Otherwise, little is known of the exploration history of the property. The Spanish in the Colonial era had a modest, vein mining and exploration operation here with most of the workings concentrated at the southern end of the deposit.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  30. 30. 7 Geologic Setting The Santa Ana property occupies a broad volcanic upland that lies between extensive exposures of thin-bedded gray lithic sandstones and red beds of the Puno group (Cretaceous to lower-Tertiary) that underlie both Huacullani and the region to the south of the ore body. The central and western portion of the upland is occupied by a sequence of fine-grained andesite flows and autobreccias that possibly belong to the Tertiary Tacaza group, strike generally north or northeast and dip to the west at angles ranging from 15° to 60°. To the west these Tertiary flows are capped by a coarse- grained dacitic porphyry that, in turn, is overlain unconformably by a thick sequence of Miocene- Pliocene dacitic volcanoclastic rocks. The andesite flows, autobreccias and dacitic porphyry are the mineral hosts. Earlier descriptions of the mineralization described a northern Anomaly A and a southerly Anomaly B. Recent drilling has connected these zones so that they represent major structural orientations that contain continuous mineralization. The andesite volcanic unit host the mineralization including veins and bulk tonnage material. Quartz-feldspar porphyry intrusives host minor mineralization in the northern Anomaly B and in the canyon south of Huacullani. The best evidence of attitude in the andesite rocks is the ledges of outcrop that, from a distance, appear to be flows striking north-northeast and dip west at 15° to 60°. This attitude would be in general accord with the attitude of some overlying flows observed to the west. Presumably, the sandstones exposed to the north and south underlie the host volcanic field in the central part of Anomaly B. Total thickness of the volcanic package is not well defined.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  31. 31. 8 Deposit Types The Santa Ana deposit is typical of intermediate-sulfidation polymetallic silver-bearing vein and stockwork deposits that, although epithermal, represent mineralization both laterally and vertically distal to an intrusive source rather than the shallow, very high-level mineralization commonly associated with hot springs systems. These kinds of deposits are typically distal to porphyry copper systems and characterized by quartz, galena, sphalerite, pyrite, magnetite-pyrite, minor chalcopyrite and rhodochrosite mineralization in the sulfide zone with variable amounts of silver, generally in the form of argentite. Barite is locally abundant occurring as an important gangue mineral. Depending on the host rocks available, these deposits occur as discreet veins, brecciated bodies, stockwork systems, or replacement deposits (in calcareous rocks). The oxidized portions of these deposits generally contain cerrusite, abundant manganese wad or other manganese oxides, abundant iron oxides and small amounts of argentite and cerargyrite. Both oxide and sulfide zones commonly contain economic mineralization in typical deposits of this type.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  32. 32. 9 Mineralization9.1 General The majority of mineralization is within two major structural trends and hosted within the andesite unit. Both vein and disseminated mineralization occur within these trends, with higher grade associated within veins, vein swarms, breccias and open space fillings. Brecciation associated within the broad structural zones are thought to be tectonic in origin, with occasional overprints of hydrothermal brecciation. The host rock has been described as primarily volcanic andesites with minor dykes and intrusive. XMOD analysis of 12 drillholes describes K-feldspars as the predominant gangue mineral, followed by illite and chlorite. The quartz content is low at less than 10%. The carbonate content is less than 5%. Figure 9.1 is a thickness map of plus 20g/t silver at Santa Ana. The north-south trend of the northern two thirds of the deposit can be seen on this map. The southern third of the deposit is generally oriented north-easterly. This appears to be caused by a flexure in the structure where it bends to the west. Figure 9.2 is an east-west cross section through the southern portion of the deposit, and Figure 9.3 is an east-west section through the northern portion of the deposit. Both sections illustrate the generally vertical character of the mineralization. Higher grade zones within the deposit are ubiquitous but are not particularly continuous. The percentage of high grade (plus 200g) intercepts is relatively constant from drillhole to drillhole, but the continuity of those zones is spatially limited.9.2 SEM A scanning electron microscope (SEM) study of 12 drillholes identifies argentite as the predominate silver mineralization. Argentite accounts for 85% of the total silver in the samples. Arsenopolybasite (AgCu)16 As2S11 and McKinstyrite (AgCu)2S were identified as the other silver bearing minerals in the study. Native silver was identified in one sample as a microscopic inclusion in barite. The zinc sulfide mineral sphalerite and the lead mineral galena were free of included silver. The silver mineralization was mostly associated with goethite and pyrite. The relative order of cyanide solubility of the silver mineralization is: • Mineral Solubility • Argentite 90% • McKinstyrite ±60% • Arsenopolybasite ±40% The SEM study indicates low levels of cyanocide minerals. The cyanocide minerals are covellite and the manganese oxide sulfosalts.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  33. 33. Figure 9.1 Thickness of 20g/t Silver, Contours on 30, 50, 100 mRev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  34. 34. Figure 9.2 East-West Section at 8,157,700N, Silver Grades 15, 45, 100, 200 g/tRev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  35. 35. Figure 9.3 East-West Section at 8,158,300N, Silver Grades 15, 45, 100, 200 g/tRev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project
  36. 36. 10 Exploration Bear Creek conducted exploration activities since mid-2004 at Santa Ana. Drilling finished in May 2010. Drilling activities are summarized in Section 11. Exploration work at Santa Ana included detailed surface mapping, sampling of outcrops, hand trenching with channel sampling, geophysics, and diamond drilling. Surface trench data has not been used in the estimation of the resource, but was used as an exploration guide for drill site selection. Bear Creek is unaware of exploration efforts on the property prior to its work in the district. Local prospectors and Colonial Spanish workings may have been the only prior work on the site.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 26
  37. 37. 11 Drilling Bear Creek has utilized HQ-size diamond core drilling methods for all drillhole sampling at Santa Ana. The drilling contractor, Bradley, utilized LD- 250 skid mounted drills. Most completed drillholes consisted of 70-degree angle holes at Santa Ana in order to cross cut the near vertical mineralization. Drillhole collar surveys were completed using hand held GPS units, with an accuracy of ±3 meters, and then followed up with a survey by a total station with three geodesic points of order “B” located on the property from the closest IGN (Geographic National Institute) point on the Peruvian national grid. Down hole surveys were not completed in the exploration holes. The orientation of each exploration drillhole is based on the orientation of the drill mast. In addition to the exploration borings, thirteen geotechnical, oriented core holes were completed. Downhole surveying was completed within each geotechnical, oriented core boring indicating a deviation of 1 to 2 degrees. Drillhole collars are currently abandoned with a concrete marker with pertinent drill data inscribed on the marker at the collar. As of June 2010, the following drilling information was completed, including logs and assays. IMC received the data for the determination of this resource. Santa Ana Drill Data as of June 2010 • 349 drillholes • 60,143.1 meters of drilling • 28,694 assay intervals • 28,694 intervals assayed for silver, zinc, lead, and copper. New holes added to the Santa Ana database since February 2009 • 43 drillholes • 4,567.85 meters of drilling • 1,978 assay intervals • 1,978 intervals assayed for silver, zinc, lead, and copper. Drill core is logged and split at site. Half core is transported to a commercial sample preparation lab as outlined in Section 12 on sampling method and approach. Figure 11.1 presents a drillhole location map for Santa Ana as of June 2010. The holes coloured blue were available in the February 2009 database. Holes plotted in red were added between February 2009 and June 2010. The plot outline also represents the physical size of the block model assembled for the current resource estimates.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 27
  38. 38. The drilling at Santa Ana is of sufficient density and of proper orientation to support the estimation of resources as reported in Section 17.0. True thickness and grade of the mineralization is defined by multiple holes at Santa Ana due to the bulk character of the deposit. The true thickness Santa Ana is the overall width and depth of the deposit which is in the range of 300 to 500m. Figure 11.1 Drillhole Location MapRev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 28
  39. 39. 12 Sampling Method and Approach All mineral sampling for determination of economic resources was collected from HQ-size diamond drill core. The core is logged and split on site. Split core is then delivered to a commercial lab for preparation. Drill sampling is typically completed on two meter intervals, as marked by Bear Creek field geologists. Core is split in half using manual mechanical core splitters and half-core is returned to the core boxes. Bear Creek staff then collect each half split 2-meter core sample interval and mark the samples using duplicate sample tag: one tag in the sample bag, and the other sample tag retained and recorded with the drillhole designation and interval sampled. The assay lab, therefore, has the sample tag number, but does not have the drillhole ID designation or sample interval for any of the samples. Samples are bagged by Bear Creek personnel and are transported by a vehicle driven by Bear Creek employees from the Santa Ana camp site to Puno for shipment by the Cruz del Sur bus line from Puno to Lima, Peru. The analytical lab, ALS Chemex, picks up the samples at the bus station for transport to the lab in Lima, where the samples are prepared for analysis. Bear Creek has implemented a procedure for determination of sample density. Whole core samples are weighed on site before sample splitting. Core samples are subsequently air dried and weighed in air. Then the samples are coated with paraffin and weighed in air again. Finally the samples are immersed in water and the water displacement is measured. As of June 2010, Bear Creek completed 843 density determinations. Most of the samples represent the andesite rock unit, with a few dykes, post mineralized rock and sedimentary units represented in the 843 samples. The average dry density of all 814 mineralized andesite samples was 2.47, and the average dry density for all 30 post mineralized and sedimentary samples was 2.18. Results presented in this report include all available density data to date. The sampling method applied by Bear Creek is reliable due to the use of large diameter drill core. The method is not susceptible to the impacts of ground water inflows and down hole contamination as are other drilling procedures. Core recoveries are good and their does not appear to be any drilling related factors that could affect the reliability of the results.Rev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 29
  40. 40. 13 Sample Preparation, Analysis and Security The analytical laboratory, ALS-Chemex performs sample preparation and analyses at its facilities in Lima, Peru. The laboratory is located at Calle 1 LT-1A Mz-D, esq. Calle A, Urb. Industrial Bocanegra, Callao 01, Lima, Peru. ALS Chemex is an internationally known analytical laboratory commonly used by the mining industry. ALS Chemex has been the primary lab for all of Bear Creek’s analytical results for the Santa Ana Project. Half core samples are retrieved at the Lima bus station by ALS-Chemex personnel and logged into the ALS-Chemex tracing system for preparation and assay. Samples are crushed and pulverized to create a sample pulp, using standard crushing and pulverizing equipment and procedures. Samples are first dried at 110-120°C and then crushed with either an oscillating jaw crusher or a roll crusher. The ALS-Chemex procedure for crushed material is that more than 70 percent of the sample must pass a 2mm (#10 mesh) screen. The entire sample is crushed, and a portion, typically 250g, is subdivided for pulverizing using a rifle splitter. The remainder of the crushed material, the coarse reject, is returned to Bear Creek for storage. The split portion derived from the crushing process is pulverized using a ring mill. The ALS Chemex procedure is to pulverize the sample such that more than 85 percent of the sample is finer than 75 microns (#200 mesh); producing a sample pulp. A portion of the sample pulp is used in the sample digestion and analytical process to achieve and assay result. As a result of the data review and verification discussed in this section and the following section, IMC and John Marek (qualified person for mineral reserves and mineral resources) have formed the opinion that the Santa Ana sample preparation, analysis, and security have resulted in a data base that is reliable for the estimation of mineral reserves and mineral resources as described in Section 17.0.13.1 Analytical Procedure Bear Creek selected the ore-grade acid digestion with atomic absorption spectroscopy (AAS) AAS finish as the analytical method (ALS code AA62b) for the mineralization at Santa Ana. The ore- grade digestion is a three-acid digestion procedure using hydrofluoric, nitric, and perchloric acids for maximum digestion of the sample. This method, followed by hydrochloric acid leach and AAS analysis, will provide accurate silver analyses in the range of 1.0 to 1,000 g/t Ag. Similar methods of ore-grade digestion are used for the lead, zinc, and copper analyses. ICP methods are used for determining gold and other trace elements. When higher gold values are anticipated, gold values are also determined using fire-assay preparation and AAS finish.13.2 Quality Control Procedures (QA/QC) A QA/QC program to verify consistency of analytical results has been in place since Bear Creek started work at Santa Ana. The QA/QC procedures are summarized below and discussed in more detail in the following paragraphs. • Certified standards and blanks are periodically inserted by Bear Creek personnel in the sample submission stream to ALS Chemex; • Check assays on pulps are submitted to a third party lab; andRev: 0Date: October 2010J07.82.13.02: Feasibility Study – NI 43-101 Technical Report – Santa Ana Project 30

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