Vallecillo Project

Locality

The Vallecillo Project covers an area of 179 square kilometres, and is located approximately 50 kilometres northeast of Ovalle and some 25 kilometres north of the Mollacas Project, at an altitude of 1,800 to 2,500 metres above mean sea level.

Geology

The project hosts porphyry related base and precious metal mineralisation that occurs in an arcuate polymetallic belt that has been defined on the basis of a soil geochemical sampling program conducted by Metminco during 2009 and 2010 (Figure 1). Four polymetallic targets have been identified (namely targets V1 to V4), of which the V1 target (La Colorada deposit) has been drilled extensively, such that a mineral resource has been estimated in accordance with the JORC Code (2004) (Table 1 and Appendix 1).

Figure 1: Polymetallic belt defined by soil geochemical sampling.

The mineralisation at La Colorada is hosted by a porphyry related breccia, which contains gold, silver, zinc, lead and copper mineralisation. The mineralisation displays a horizontal zonation, with gold, silver and lead grades showing a general increase in a northerly direction (over the strike extent of the mineralised zone), as opposed to copper grades which increase in a southerly direction.  Zinc grades by comparison tend to be relatively consistent.  From a depth perspective, the high grade zones invariable occur at depths of less than 300 metres below surface, and hence render the deposit amenable to open pit mining (Figure 2).

Figure 2: Schematic Sections through La Colorada showing distribution of zinc values.


 

Mineral Resource Estimate

A mineral resource estimate was first completed for the La Colorada deposit in July 2009 by SRK Consulting (Chile) S.A., based on 29 drill holes totalling 8,492 metres.  In October 2012 a further mineral resource estimate was completed based on 21,500 metres of drilling (Table 1).

Table 1: Mineral Resource Statement for La Colorada Gold-Zinc Project, Chile, SRK Consulting (Chile) S.A. October 11, 2012.

Category Tonnes (million) Gold (g/t) Silver (g/t) Zinc (%) Cu (%) Lead (%)
Measured 5.5 0.84 9.99 1.12 0.06 0.32
Indicated 2.6 0.80 10.23 0.94 0.07 0.35
Measured + Indicated 8.1 0.82 10.06 1.06 0.06 0.33
Inferred 0.8 0.50 8.62 0.48 0.12 0.17
Note: 
a) Reported at a cut-off of 0.2g/t gold. Rounding may result in minor discrepancies.
b) Resource estimated by SRK Consulting (Chile) S.A.

Drilling Program

A drilling program comprising 9,155 metres of diamond drilling and 3,768 metres of reverse circulation drilling was completed in Q4 of 2011. The 12 reverse circulation drill holes targeting the Portezuelo Cu-Au porphyry target to the west of the polymetallic belt returned uneconomic Cu, Mo and Au grades.

The diamond drilling program, which focussed on the La Colorada deposit (28 drill holes) and some of the adjoining polymetallic targets (6 drill holes), was completed in early Q1 2012. The drill holes completed at La Colorada formed part of a 25 x 25 metre drilling grid (Figure 3) aimed at upgrading the July 2009 Mineral Resource Estimate into predominantly Measured and Indicated Mineral Resource categories.

Figure 3: Phase 3 drilling program at La Colorada – targeting a 25 x 25 metre drilling grid.


Analytical results received for the drill holes completed at La Colorada are summarised under the Significant Results - Table 4 Section of the website.

Figure 4 graphically depicts the distribution of the zinc grades associated with the La Colorada deposit based on the drilling completed to-date.

Figure 4:  Contour map showing distribution of Zn grades at La Colorada.  




Discussion of results

The in-fill drill program completed at the La Colorada deposit in Q1 2012 has, in conjunction with the prior drill results, formed the basis of the current geological model for the deposit.  In total 75 drill holes have been completed (21,528 metres), of which 51 drill holes were diamond drill holes (14,936 metres), and the balance were reverse circulation holes (6,592 metres).

With the completion of the October 2012 Mineral Resource Estimate by SRK Consulting (Chile) S.A., 91% of the mineral resource was converted to Measured and Indicated Mineral Resource categories. However, when compared with the prior mineral resource estimate, it is evident that there has been a reduction in both tonnage and grade (Au, Ag and Zn grades), which translates to an estimated reduction of 230,000oz in gold equivalent terms (31%).

Following the completion of the October 2012 Mineral Resource Estimate, an internal scoping study is to be undertaken in 2013 to ascertain the economics of La Colorada as a polymetallic, open pit, mining operation using a metallurgical process that provides for a gravity circuit in combination with a conventional sulphide flotation circuit.

Further exploration work is planned on the broader project area to identify additional La Colorada type polymetallic occurrences based on the geological model developed. 

Metallurgical testwork

Preliminary metallurgical testwork for the La Colorada deposit, completed in early 2010, indicates that the best metallurgical performance is obtained by combining gravity concentration, flotation and cyanidation of the gravity concentrate and bulk concentrate. The metallurgical balance indicates that it is possible to recover 92% of the gold by cyanide leaching of the gravity concentrate and bulk sulphide concentrate. By comparison, the zinc concentrate assays 55% with a recovery of 93%.


APPENDIX 1


Sensitivity of mineral resource to Au cut-off grade for La Colorada Gold-Zinc Project
.