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untitledSUITE 900 - 390 BAY STREET, TORONTO ONTARIO, CANADA M5H 2Y2
Telephone (1) (416) 362-5135 Fax (1) (416) 362 5763
RUSORO MINING LTD.
OF THE EXPANSION OF PRODUCTION AT CHOCO 10
BOLIVAR STATE, VENEZULA
3 June, 2009
Mary Jean Buchanan, Eng., M.Env., Met-Chem Canada Inc. Michael
Godard, P.Eng., Micon International Limited Christopher A. Jacobs,
CEng, MIMMM, Micon International Limited Jeremy P. Haile, P.Eng.,
Knight Piésold Ltd. Christopher R. Lattanzi, P.Eng., Micon
International Limited Dave Laudrum, P.Geo. James Leader, P.Eng.,
Micon International Limited John H. Perry, P.Geo. Sam Shoemaker,
Jr., MAusIMM Ian Ward, P.Eng. John Zbeetnoff, P.Geo.
i
4.0 PROPERTY DESCRIPTION AND LOCATION 28 4.1
LOCATION...............................................................................................................28
4.2 PERMITS AND
LICENCES.....................................................................................30
4.3 ROYALTIES, PAYMENTS AND OTHER
AGREEMENTS..................................32
5.1 TOPOGRAPHY, CLIMATE AND
VEGETATION.................................................34
5.2 ACCESS AND POPULATION
CENTRES..............................................................34
5.3 AVAILABILITY OF POWER, WATER AND
PERSONNEL................................34
12.1.1 Sampling
Programs............................................................................................59
12.1.2 Core Recovery
...................................................................................................62
13.1.1 Pre-March, 2005
................................................................................................68
13.1.2 Bolivar Gold: 2003 – March,
2006....................................................................68
13.1.3 Gold Fields Procedures
......................................................................................70
14.1.1 Summary
............................................................................................................77
14.1.2 Data Validation and
Database............................................................................77
14.1.3 Gold Fields’ Data Validation and
Database.......................................................79
14.1.4 Data Quality Conclusions
..................................................................................85
iii
17.1.1
Introduction........................................................................................................95
17.1.2 Micon Technical Data
Review...........................................................................95
17.1.3 Choco 10 Mineral
Resource...............................................................................96
17.1.4 Choco 10 Mineral Reserves
.............................................................................105
17.1.5 Statement on Choco 10 Mineral Resources
.....................................................108
20.0 INTERPRETATION AND CONCLUSIONS 188
21.0 RECOMMENDATIONS 189
List of Tables Page
Table 1.1 Choco 10 Unconstrained Mineral Resources as of
September 30, 2007 ...........3
Table 1.2 Increible 6 Mineral Resource Estimate
..............................................................4
Table 1.3 Mine Production Schedule for 20,000 t/d Mill Feed
.........................................8
Table 1.4 LOM Cash Flow
Projections............................................................................16
Table 1.5 Economic Sensitivity to Gold Price
.................................................................18
Table 1.6 Rusoro Proposed Budget for 12 Months to April, 2010
..................................21
Table 2.1 Study Team
......................................................................................................24
Table 4.1 Choco 4 and Choco 10 Title
Description.........................................................31
Table 4.2 Summary of Land Holdings for the Increible 6
Concession............................31
Table 4.3 Royalty Payments to CVG and CVG-Tecmin
.................................................33
Table 11.1 Choco 10 Deposit – Drill Spacing and Orientation
for Pre-2007
Drilling.............................................................................................................53
Table 11.2 Choco 10 - Drill Metres and Drill Types
Completed.......................................55
Table 11.3 Diamond Drill Core Recovery for Material
Type............................................55
Table 11.4 Summary and Distribution of Drilling Campaigns,
Increible 6 Project...........57
Table 11.5 Summary of Drilling Undertaken on Choco 10 and
Increible 6 Concessions, 2007-2008
..................................................................................58
Table 12.1 Summary of 2003-2004 Sample Intervals
.......................................................60
Table 12.2 Diamond Drilling Showing the Different Core Size
Proportions ....................63
Table 12.3 Summarized Logging Codes for Increible 6
....................................................65
Table 14.1 MRM Procedures Which Underpin the Mineral Resource
Quality Management
System........................................................................................80
Table 14.2 Gold Fields Assay Procedures and QC Protocols
............................................86
Table 14.3 Gold Fields QC Sample Failure
Criteria..........................................................86
Table 14.4 Micon Check Assay Data, Increible 6, December 2006
..................................88
Table 16.1 Bond Work Indices and Abrasion Parameters
.................................................92
Table 16.2 Summary of SMC Evaluations
........................................................................93
Table 16.3 Cyanidation Test
Summary..............................................................................94
Table 17.1 Choco 10 Unconstrained Mineral Resources as of
September 30, 2007 .........98
Table 17.2 Total Number of Validated Drill Holes and Drill
Metres by Hole Type and Deposit
....................................................................................................103
vii
Table 17.3 Drill Hole and Composited Sample Numbers by Drill
Hole Type and Deposit Used in Resource Model Estimation
................................................103
Table 17.4 Choco 10 Mineral Reserves as of September 30, 2007
.................................105
Table 17.5 Choco 10 Pit Design Criteria
.........................................................................106
Table 17.6 Undiscounted Lerchs-Grossmann Shell vs. Pit Design
at US$500/oz...........107
Table 17.7 Increible 6 Mineral Resource Estimate
..........................................................110
Table 17.8 Summary Statistics for 2-m Composites, Increible
6.....................................112
Table 17.9 Capping Levels Applied to Assays Prior to
Computing Composite Grades
............................................................................................................115
Table 17.10 Assay Statistics for Modelled Mineralized
Domains.....................................117
Table 17.11 Increible 6 Block Model
Parameters..............................................................122
Table 17.12 Parameters Used in the Five Passes of Grade
Interpolation ..........................123
Table 18.1 Pit Optimization Parameters,
RCP.................................................................129
Table 18.2 Pit Optimization Parameters,
VBK................................................................130
Table 18.3 Pit Optimization Parameters, Increible 6
.......................................................130
Table 18.4 Pit Optimization Parameters, Capia and Cerro Azul
.....................................130
Table 18.5 Characteristics of Optimized
Pits...................................................................132
Table 18.6 Mine Production Schedule for 20,000 t/d Mill Feed
.....................................135
Table 18.7 Annual Requirements for New Units of Mine
Equipment.............................136
Table 18.8 Historical Statistics for the Choco 10 Plant
...................................................140
Table 18.9 Electrical Demand (15,000 t/d) for Existing
Substation ................................153
Table 18.10 Electrical Demand (15,000 t/d) for New
Substation......................................154
Table 18.11 Applicable Legislation
...................................................................................164
Table 18.12 Permit Requests Put Forward to the Ministry of
Environment for Water Use for the Choco 4 and Choco 10 Concessions
................................168
Table 18.13 Permit Requests Put Forward to the Regional
Ministry of Environment or Ministry of Basic Industries and Mines
for Project Changes, New Affection Licences, and/or Exploitation
Certificates ............169
Table 18.14 Expansion Cases
Evaluated............................................................................174
Table 18.17 Mining Cost Summary
...................................................................................178
Table 18.18 Process Operating Cost
Summary..................................................................179
viii
Table 18.21 LOM Capital Cost Summary
.........................................................................181
Table 18.22 LOM Cash Flow
Projections..........................................................................183
Table 18.23 Analysis of Incremental Cash Flows
............................................................183
Table 18.24 Economic Sensitivity to Gold Price
...............................................................185
Table 19.1 Choco 10 Production Statistics,
2006-2008...................................................187
Table 21.1 Rusoro Proposed Budget for 12 Months to April,
2010 ................................190
ix
Page Figure 1.1 Location of the Choco 10 Mine, Southeastern
Venezuela.................................2
Figure 1.2 Flowsheet for Case 2 - 20,000 t/d Processing
Plant.........................................10
Figure 1.3 Overall Site Layout for 20,000 t/d
Facilities....................................................11
Figure 1.4 LOM Cash Flow Projection – Case 2
..............................................................17
Figure 1.5 NPV8 Sensitivity Diagram
...............................................................................18
Figure 4.1 Location of the Choco 10 Mine in Southeastern
Venezuela............................29
Figure 4.2 El Callao District Showing Locations of Rusoro
Concessions........................29
Figure 4.3 Location of Surface and Mineral Tenements,
Increible 6................................30
Figure 5.1 Plan Showing the Choco 10 Mining Areas and Mine
Infrastructure ...............35
Figure 5.2 Location of the Increible 6 Concession
Area...................................................36
Figure 7.1 Regional Geological Map
................................................................................41
Figure 7.2 Geological Map of the Choco 10 Area
............................................................42
Figure 7.3 Northwest-Southeast Geological Cross-Section
..............................................43
Figure 7.4 Increible 6
Geology..........................................................................................45
Figure 11.2 Location of Drilling Programs, Increible 6
......................................................57
Figure 12.1 Scatter Plot of Diamond Drill Recovery versus
Grade ....................................63
Figure 13.1 Process Map of the Sample Flow for Choco 10
Resource Definition .............70
Figure 14.1 Sample Consignment
Form..............................................................................81
Figure 14.4 Data Shed – Data
Validation............................................................................83
Figure 14.5 Assay Swapper
.................................................................................................84
Figure 17.1 Plan of Section Locations for Rosiko, Coacia
Pisolita and VBK ....................97
Figure 17.2 Schematic Cross-Section through Rosika Showing
Ore Domain Lodes and Halos
.......................................................................................................100
Figure 17.3 Schematic Cross-Section through Coacia Showing
Ore Domain Lodes and Halos
.......................................................................................................100
x
Figure 17.5 Schematic Northwest-Southeast Section through VBK
Showing Ore Domain Lodes and
Halos...............................................................................102
Figure 17.6 Schematic Relationships Between Optimized Pit
Shell and Final Design
............................................................................................................107
Figure 17.7 Distribution of All Assay Values Reporting to
Lens El1...............................114
Figure 17.8 Distribution of Assay Values Reporting to Lens
El1, Frequency Truncated at 60, Capping Level Selected at 40 g/t Au
..................................114
Figure 17.9 Typical Cross-Section Showing Geological
Interpretation Section 2175E
.............................................................................................................120
Figure 17.10 Typical Cross-Section With Geological
Interpretation 4160E ......................120
Figure 17.11 Longitudinal Section Displaying Grade Thickness
Contours for Lens
Cr1..................................................................................................................121
Figure 17.12 Longitudinal Section Displaying Grade Thickness
Contours for Lens El2
..................................................................................................................121
Figure 17.13 Typical Plan View Showing Block
Grades....................................................125
Figure 17.14 Typical Cross-Section Showing Block Grades
..............................................125
Figure 17.15 Typical Cross-Section Showing Only Indicated
Block Grades .....................126
Figure 18.1 RCP Optimized
Pit.........................................................................................132
Figure 18.3 Increible 6 Optimized Pit
...............................................................................133
Figure 18.4 Capia Optimized Pit
.......................................................................................134
Figure 18.5 Cerro Azul Optimized
Pit...............................................................................134
Figure 18.6 Overall Layout Showing Locations of the Various
Choco Pits and Waste Rock
Dumps........................................................................................137
Figure 18.7 Schematic Flow Diagram of the Existing Choco 10
Plant.............................139
Figure 18.8 Flowsheet for Case 2 20,000 t/d Processing Plant
.........................................143
Figure 18.9 Layout for Site Facilities - Case
2..................................................................144
Figure 18.10 General Arrangement Plan of the Mill Building -
Case 2.............................145
Figure 18.11 Leach/Adsorption Circuit - Case
2.................................................................147
Figure 18.12 Annual Gold Production
................................................................................176
Figure 18.13 Annual Cash Operating Costs
........................................................................177
Figure 18.14 Annual Mining Operating Costs
....................................................................178
xi
Figure 18.16 Annual G&A Operating Costs
.......................................................................181
Figure 18.17 Annual Capital
Expenditure...........................................................................182
Figure 18.19 Cumulative, Discounted, Incremental Cash Flows
versus Base Case ...........184
Figure 18.20 NPV8 Sensitivity Diagram
.............................................................................184
Figure 18.21 Comparison of NPV8 for Owner-Operated and
Contractor Mining ..............186
APPENDIX 1 Annual Cash Flow Projections APPENDIX 2 Detailed
Cross-sections for Rosika, Coacia, Pisolita and VBK Pits
1
1.0 SUMMARY Micon International Limited (Micon) was retained in
May, 2008, by Rusoro Mining Ltd. (Rusoro) to prepare a preliminary
assessment (scoping study) of the potential for increased capacity
and throughput at the Choco mill, based principally on mine
production from the Choco 10 mine and the Increible 6 property. The
Choco 10 and Increible 6 concessions are located near El Callao,
Venezuela. (See Figure 1.1). The results of the preliminary
assessment are discussed in this Technical Report. The rated
capacity of the Choco mill is currently 5,400 t/d. The preliminary
assessment considered a base case, in which the existing plant
continues to operate, but at an average rate of 5,000 t/d to
account for the harder material that will be mined in future, and
three expansion options:
Case 1 A new plant operating at 10,000 t/d. Case 2 The existing
plant (5,000 t/d) plus a new plant at 15,000 t/d, for a total
of
20,000 t/d. Case 3 A new plant with two new lines at 10,000 t/d
each, for a total of 20,000 t/d.
The preliminary assessment is based on the construction of
facilities to treat material from the existing Choco 10 mine and
the nearby Increible 6 property as an expansion of the existing
Choco 10 plant. With the exception of the construction of a new
tailings storage facility, the expanded facilities will be
essentially located within the site of the existing Choco 10
operation and represent a brownfields expansion. Rusoro’s
operations are located in the vicinity of El Callao and El Dorado,
Bolivar State, in eastern Venezuela. These comprise two operating
gold mines, Choco 10 and Isidora, and 10 exploration projects
(including development and exploration around the mines). Output
from both the Choco 10 and Isidora mines, near El Callao, is
processed through the Choco mill. (Ore from Isidora has been
processed through the Choco mill since late 2008 and reserves are
expected to be exhausted by mid-2009). Through Promotora Minera de
Guayana S.A., (PMG), the Venezuelan operating company, Rusoro owns
and operates the Choco mill and has an ownership interest of 95% in
the Choco 10 mine. Production from the Isidora mine is subject to a
joint venture with the Venezuelan government. The Increible 6 gold
property is under development and is located 4 km northeast of
Choco 10. It is 100% owned by Rusoro, through its subsidiary,
General Mining de Guyana, C.A. (General Mining).
2
Location of the Choco 10 Mine, Southeastern Venezuela
Micon was previously retained by Rusoro to audit the resource
estimate for Choco 10 and to prepare a resource estimate for
Increible 6. The Technical Reports discussing these estimates
are:
Technical Report on the PMG (Gold Fields) Choco 10 Concession and
Mine, Estado Bolivar, Venezuela, dated November 21, 2007. (Leader
et al., 2007).
Technical Report on the Increible 6 Property, Bolivar State,
Venezuela, dated
November 14, 2007, revised and updated February 14, 2008. (Laudrum
et al., 2008). 1.1 GEOLOGICAL SETTING The Choco 10 and Increible 6
mineral concessions are located within the Guyana Shield, which
occupies the northern part of the Amazon Craton between the Amazon
and Orinoco river basins. The geology of the Guyana Shield as a
whole is poorly known, reflecting minimal development and limited
access, as well as intense tropical weathering and cover across
this large area. It has been subdivided into three major geological
entities: i) Archaean rocks of the Imataca Complex; ii)
Palaeoproterozoic Trans-Amazonian granite-greenstone belts; and
iii) Palaeoproterozoic sedimentary and igneous rocks of the Roraima
Group, Uatumã Group and the Avanavero Suite. The majority of gold
mineralization is hosted by the greenstone belts.
3
The gold mineralization at Choco 10 and Increible 6 is typical of
Archaean-Proterozoic orogenic gold deposits. The deposits are
hosted in an early Proterozoic sequence of the Pastora Greenstone
Belt of the Guyana Shield. The stratigraphy comprises a tholeiitic
to calc- alkaline volcanic package, overlain by volcaniclastic and
epiclastic rocks intruded by gabbroic sills. The rock package has
been subjected to intense tropical weathering and mineralization is
dominantly structurally controlled. High-grade gold mineralization
occurs with carbonate, pyrite, silicification and quartz-veining in
lower-strain zones typically associated with crenulations, folding
and chaotic foliations. 1.2 MINERAL RESOURCES The mineral resources
reported in Leader et al., 2007 for the Choco 10 concession, and in
Laudrum et al., 2008 for the Increible 6 concession, form the basis
for the preliminary assessment which is the subject of this report.
These resource estimates include inferred resources, which are also
included in the open pit designs and production schedules for the
preliminary assessment. There is no assurance that further
exploration has, or will, result in upgrading any of these inferred
resources to the measured or indicated category, as would be
required for their inclusion in any subsequent prefeasibility or
full feasibility study. The mineral resources for Choco 10, as at
September 30, 2007, are summarized in Table 1.1 and are reproduced
from Leader et al., 2007. The resources are quoted separately for
four deposits on the property: Rosika, Coacia, Pisolita (also
referred to as RCP) and Villa Balazo- Karolina (VBK)
Table 1.1 Choco 10 Unconstrained Mineral Resources as of September
30, 2007
Measured Indicated Total M + I Inferred
Tonnes Grade Au oz
Tonnes Grade Au oz
Tonnes Grade Au oz
Tonnes Grade Au oz
Pit Material COG (g/t)
(millions) (g/t) (000) (millions) (g/t) (000) (millions) (g/t)
(000) (millions) (g/t) (000) Rosika Oxide 0.5 0.1 2.74 13 0.5 1.49
22 0.6 1.79 35 0.1 1.95 5 Trans 0.5 0.2 3.02 15 0.2 1.50 12 0.4
2.09 26 0.1 2.08 5 Fresh 0.5 1.6 3.21 165 11.1 2.23 796 12.7 2.35
961 5.9 2.12 400 Coacia Oxide 0.5 0.1 1.18 3 2.0 1.86 120 2.1 1.83
123 0.5 1.75 27 Trans 0.5 0.0 0.00 0 0.4 1.65 23 0.4 1.65 23 0.2
1.80 12 Fresh 0.5 0.0 0.00 0 3.9 2.29 287 3.9 2.29 287 3.1 1.71 171
Pisolita Oxide 0.5 0.3 2.25 24 2.0 1.45 95 2.4 1.57 119 1.3 1.09 45
Trans 0.5 0.2 2.31 18 0.3 1.90 18 0.5 2.09 36 0.3 1.35 14 Fresh 0.5
0.1 1.96 5 0.2 1.60 8 0.2 1.72 13 5.5 2.66 470 VBK Oxide 0.5 0.0
0.00 0 0.3 2.03 22 0.3 2.03 22 0.4 1.21 15 Trans 0.5 0.0 0.00 0 0.2
2.21 13 0.2 2.21 13 0.2 1.17 9 Fresh 0.5 0.0 0.00 0 35.1 2.67 3,017
35.1 2.67 3,017 25.3 2.26 1,844 S/Total Oxide 0.5 0.6 2.22 41 4.8
1.67 259 5.4 1.72 300 2.2 1.28 93 Trans 0.5 0.4 2.58 33 1.1 1.77 65
1.5 1.98 98 0.8 1.48 40 Fresh 0.5 1.7 3.15 170 50.3 2.54 4,107 52.0
2.56 4,277 39.8 2.26 2,885 Grand Total 2.6 2.86 243 56.3 2.45 4,432
58.9 2.47 4,675 42.9 2.19 3,017
1) 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.
2) Mineral resources which are not mineral reserves do not have
demonstrated economic viability.
It should be noted that the mineral resources shown in Table 1.1
include mineral reserves that support the existing operation at
Choco 10. The present preliminary assessment on the potential for
expansion of output at Choco 10 is based on the stated mineral
resources.
4
The mineral resources for Increible 6 are summarized in Table 1.2,
reproduced from Laudrum et al., 2008. The resources are quoted
separately for oxide and sulphide material for four deposits:
Culebra, Cristina, Elisa-Ingrid and Olga-Enoc. These estimates are
based on data available at June 21, 2007, and have an effective
date of September 21, 2007.
Table 1.2 Increible 6 Mineral Resource Estimate
Zone Resource
ounces) Indicated 0.5 0.79 2.39 0.06
Cristina Oxide Inferred 0.5 0.58 1.77 0.03 Indicated 0.5 1.79 1.98
0.11 Cristina
Sulphide Inferred 0.5 1.35 1.54 0.07 Indicated 0.5 1.77 2.10
0.12
Culebra Oxide Inferred 0.5 0.54 2.20 0.04 Indicated 0.5 3.78 1.84
0.22 Culebra
Sulphide Inferred 0.5 1.91 1.39 0.09 Indicated 0.5 1.19 2.04 0.08
Elisa-Ingrid
Oxide Inferred 0.5 0.73 1.71 0.04 Indicated 0.5 13.89 2.19 0.98
Elisa-Ingrid
Sulphide Inferred 0.5 11.11 2.14 0.76 Indicated 0.5 0.00 1.41 0.00
Olga-Enoc
Oxide Inferred 0.5 0.29 1.88 0.02 Indicated 0.5 0.24 1.91 0.01
Olga-Enoc
Sulphide Inferred 0.5 1.03 1.71 0.06 Indicated 0.5 3.74 2.14
0.26
Total Oxide Inferred 0.5 2.13 1.87 0.13 Indicated 0.5 19.71 2.10
1.33
Total Sulphide Inferred 0.5 15.40 1.96 0.97 Indicated 0.5 23.45
2.11 1.59
Overall Total Inferred 0.5 17.53 1.95 1.10
1) 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.
2) Mineral resources which are not mineral reserves do not have
demonstrated economic viability.
Exploration has been carried out by Rusoro on both the Choco 10 and
Increible 6 properties since the effective date of the resource
estimates quoted in Table 1.1 and Table 1.2. The results have not
been reviewed for the preliminary assessment that is the subject of
this report. Rusoro has reported that it will complete updated
mineral resource estimates for the Choco 10 and Increible 6
properties in 2009. In addition to the reported resources for the
Choco 10 and Increible 6 concessions, two other small deposits,
Capia and Cerro Azul, have been included in the preliminary
assessment. Although Gold Fields, the previous owner of the Choco
property, constructed block models for both of these deposits, no
resource estimate has been reported for either of them. In total,
the Capia and Cerro Azul deposits account for only 2.6% of the
tonnage and 1.6% of the
5
recovered gold ounces scheduled to be mined in the preliminary
assessment. They are not material to the findings of the study. 1.3
CURRENT OPERATIONS The Choco 10 mine commenced production in
August, 2005. Current operations consist of open pit mining and a
processing plant comprising conventional comminution and carbon-in-
pulp processing. The Choco 10 mine uses typical open pit mining
methods of drilling, blasting, loading and hauling. Two pits are
currently being operated within the Choco 10 concession, Pisolita
and Rosika-Coacia. The pits are located 2-3 km from the main plant.
The Choco 10 concession has a Certificate of Exploitation granted
to PMG for an area of 2,124.53 ha and a term running to December
25, 2025. The Choco 4 concession has a Certificate of Exploitation
granted to PMG for an area of 1,458.12 ha and a term running to
December 25, 2025. On January 14, 2009, Rusoro announced that for
Increible 6, “approval for the Certificate of Exploitation was
published in Venezuela’s Official Gazette on December 23, 2008”. On
receipt of the Exploitation Certificate, application will be made
for the Permit to Affect Natural Resources. 1.3.1 Property
Description and Location Choco 10 lies in an area of low hills
between elevations 200 masl and 300 masl. The area is partly
savannah and partly tropical forest. The soil is nutrient-poor and
present land use is confined to rural cultivation, cattle ranching
and minero (small mining) activity. The climate at Choco 10 is
tropical, with temperatures averaging around 25.7°C and humidity
ranging from 76% to 82%. The average annual precipitation at El
Callao is 1,325 mm. The heaviest rainfall occurs during the months
from June to August. 1.3.2 Accessibility, Local Resources and
Infrastructure A paved secondary road passes through the
concessions in Choco 10 and provides access to the town of El
Callao, about 15 km to the east of the concessions. Access to
Increible 6 from El Callao is by paved road, except for the last
two to three kilometres which are unpaved. El Callao has a
population of approximately 25,000 and is the centre of population
in the area. It is a historic gold mining centre and a number of
present and past producing mines are located nearby. The main
highway, between the regional centre of Puerto Ordaz, a major city
on the Orinoco River 190 km to the north, and other gold mining
centres of El Dorado and Kilometre 88, and the Brazilian frontier
to the south, passes through El Callao. A major high voltage 400 kV
electrical supply line carrying power from the Guri dam, and
destined for Brazil, passes near El Callao. A substation about 5 km
from the Choco
6
concessions supplies power to El Callao. The Choco 10 mine is
connected to the main electricity grid that transmits energy from
Venezuela to Brazil. A rain-dependent reservoir supplies water for
use at the mine, and this is supplemented by a well field. A
potential water supply is from the Yuruarí River, which passes
north of the concessions, approximately 8 km distant, and from
which other local mines and the El Callao municipality draw water.
Most of the personnel working at the mine live in and around El
Callao. The population is familiar with mining and can provide the
majority of the local labour force. 1.3.3 History Gold mining in
the El Callao district dates back to the early Spanish Conquest in
the 1500s in the search to find El Dorado. On October 11, 2007,
Rusoro acquired all of the Venezuelan assets of Gold Fields,
including the Choco 10 gold mine. Prior to Rusoro’s acquisition,
Gold Fields held the rights to Choco 10 and other Venezuelan assets
that were acquired through a plan of arrangement with Bolivar Gold
Corp. (Bolivar) on February 28, 2006. Under the plan of arrangement
Gold Fields acquired all of the outstanding securities in Bolivar
which it did not already hold. Gold Fields owned its interest in
the Choco 10 mine through its holding in Promotora Minera de
Guayana S.A. PMG remains the operating company for Choco 10 and is
owned 95% by Promotora Minera de Venezuela SA (Promiven) and 5% by
CVG Minerven C.A. Promiven is wholly owned by Rusoro through
Venezuela Holdings (BVI) Ltd. and Carisma Corporation AVV. There
has been a significant amount of shallow artisanal gold mining
within the Increible 6 concession in the past. There are no records
of when this work commenced or the total production to date.
Through a wholly-owned subsidiary, Rusoro acquired the Increible 6
property in 2004 and has been actively exploring it since that
time. 1.3.4 Mineral Processing and Metallurgical Testing
Metallurgical testwork carried out prior to 2008 was undertaken to
support the mineral resource estimate for Choco 10 and the
selection of the processing flowsheet for the existing mill at
Choco 10. The existing Choco mill has a rated capacity of 5,400
t/d, when treating material of average hardness. 1.3.4.1 2008
Testwork In 2008, metallurgical testing of the competent fresh rock
was conducted at the laboratory of Process Research Associates Ltd.
(PRA) in Richmond, British Columbia. A total of 200 drill core
samples of material from Increible 6 were shipped and combined into
similar ore types
7
to form nine composites. The composites consisted of three
saprolite and six hard rock samples. A total of 10 composites were
prepared from samples of material from Choco 10. Material from four
of the Choco 10 composites was prepared for hardness testing. Choco
10 composites E5, F6 and G7 underwent bottle roll leaching on 4-kg
batches in order to produce leach tailings for further testwork
Bond mill grindability tests were conducted on four typical hard
rock samples from Choco 10. The samples were also subjected to
semi-autogenous mill comminution and Bond abrasion work index
testing. SAG mill comminution (SMC) tests were carried out by Hazen
and the results sent to JKTech Pty Ltd (JKTech) in Australia for
evaluation. JKTech reported that the results from the samples
provided indicate that the material is moderately hard to hard. Two
kilograms of each of the nine composites from Increible 6 were
subjected to bottle roll testing by crushing to minus 6 mesh and
grinding to approximately 80% passing 100 µm. The 2-kg samples were
leached in sodium cyanide solution initially at 0.5g/L and then
maintained at a concentration of 0.2 g/L throughout each test. The
percentage recovery rates for gold were generally in the high 80s
and mid 90s. Leach tests for the Choco 10 composite samples
indicated that the material responded well, with gold recoveries
generally over 84%. These results demonstrate that the current
process treatment, using a grind of approximately P80 at 74 µm and
48-h leach time, is applicable to future mined material and will
result in anticipated gold recovery of 90%. The completion of the
PRA testwork program has demonstrated that further tests should be
carried out. Variability testing and optimization of such
parameters as leach retention time, carbon addition, grind size
variation, leach enhancers and oxygen uptake are recommended.
Employing a coarse gold gravity scalping circuit and flotation of
the high sulphide material, with intensive leaching of the
concentrate should be investigated on the competent material from
Choco 10 and Increible 6. This will ensure that alternative,
possibly more cost- effective treatment options are considered. 1.4
PIT OPTIMIZATION AND MINING Pit optimization and mine planning for
the preliminary assessment presented in this report are based on
mining from the Choco 10, Increible 6, Capia and Cerro Azul
deposits at a combined rate of 20,000 t/d or 7.3 Mt/y of mill feed.
The existing resource block models were used as the basis for open
pit design. Since two separate block models exist for the
Rosika-Coacia-Pisolita (RCP) and the Villa Balazo-Karolina (VBK)
areas at Choco 10, five distinct block models were used. The mine
design process involved the following steps:
Construction of economically-optimized ultimate open pit shells for
each deposit.
8
Scheduling of the production of mill feed and waste from within
each ultimate pit
shell.
Selection of the fleet of drilling, loading, hauling and auxiliary
equipment required to meet the design production schedule.
Estimation of mine capital expenditures and operating costs to the
level of accuracy
appropriate for a preliminary assessment. Open pit optimization was
completed using Gemcom Software’s Whittle 4X open pit optimization
program. For the preliminary assessment, five block models were
optimized separately and then combined to generate a production
schedule. Three different rock types (oxide, transition, and fresh)
and average gold value above a cut-off were exported into the
Whittle model. Geotechnical parameters used in the Whittle analysis
are based on work completed by Golder in 2003. Pit slopes used are
40o in oxide and transition materials, and 47o in fresh rock. Pit
optimization was based on a gold price of $700/oz. Mine operating
costs were supplied by Rusoro, based on its experience at the Choco
10 mine. Processing and general administration costs were based on
preliminary estimates appropriate to a mill throughput of 20,000
t/d. The overall mine production schedule for the five optimized
pits, as developed from iterative runs of the Whittle software, is
shown in Table 1.3.
Table 1.3 Mine Production Schedule for 20,000 t/d Mill Feed
Year Measured + Indicated
(t) Strip Ratio
(t) (g/t Au) (t) (g/t Au) 1 1,387,000 3.29 438,000 3.29 12,675,000
14,500,000 6.95 2 1,387,000 3.03 438,000 3.03 12,675,000 14,500,000
6.95 3 1,387,000 3.18 438,000 3.18 12,675,000 14,500,000 6.95 4
5,488,000 2.60 1,812,000 2.74 39,068,000 46,368,000 5.35 5
5,348,000 2.49 1,952,000 2.58 69,700,000 77,000,000 9.55 6
5,218,000 2.58 2,082,000 2.67 69,721,000 77,021,000 9.55 7
4,883,400 2.29 2,416,600 2.30 62,705,000 70,005,000 8.59 8
4,818,000 3.25 2,482,000 3.25 41,043,000 48,343,000 5.62 9
4,818,000 3.01 2,482,000 3.01 25,448,000 32,748,000 3.49
10 4,818,000 3.40 2,482,000 3.40 14,888,000 22,188,000 2.04 11
4,114,500 2.25 3,185,500 2.87 24,700,000 32,000,000 3.38 12
2,018,080 1.85 4,360,920 1.77 17,195,000 23,574,000 2.70
Totals 45,684,980 2.73 24,569,020 2.69 402,493,000 472,747,000
5.73
Various combinations of loading and haulage equipment were
investigated in the course of the preliminary assessment.
Ultimately, Caterpillar 777F haulage trucks (91 t) and a Komatsu
PC3000 hydraulic front shovel (14.5 m3) were selected for mining
and hauling ore. For
9
waste, Caterpillar 793D trucks (218 t) and a Komatsu PC5500
hydraulic front shovel (27.2 m3) were selected. This combination
provides maximum selectivity in ore and maximum productivity in
waste. The Whittle pits developed as part of this study will
require several waste storage dumps at various locations on the
property. Rusoro has designed waste rock dumps for the RCP, VBK,
Capia, and Increible 6 deposits. No waste rock dump design for the
Cerro Azul deposit has been completed to date. 1.5 PROCESSING The
Choco 10 gold recovery plant was installed and commissioned in
2005, with the majority of equipment sourced from a previously
closed operation in Canada. The existing plant has achieved
throughput rates approaching 7,000 t/d while processing saprolite
or oxidized material with low work indices. Following evaluation of
a number of expansion options, these were narrowed down to three
cases for preliminary assessment:
Case 1 A new plant operating at 10,000 t/d. Case 2 The existing
plant (5,000 t/d) plus a new plant at 15,000 t/d, for a total
of
20,000 t/d. Case 3 A new plant with two new lines at 10,000 t/d
each, for a total of 20,000 t/d.
Case 2 provided optimum results as discussed in Section 18 of this
report. The process flowsheet for the 20,000 t/d expansion is based
on retaining the existing plant, at a capacity of 5,000 t/d (to
account for the harder material that will be mined and processed),
together with new facilities for 15,000 t/d. The flowsheet is
conventional, consisting of primary crushing, two-stage milling,
cyanide leaching, carbon adsorption and elution, electro-winning
and gold smelting (See Figure 1.2). Tailings disposal is undertaken
in a valley dam, with decant solution returned as process water to
the plant. 1.6 INFRASTRUCTURE The overall site layout is shown in
Figure 1.3. The majority of infrastructure items remain essentially
unchanged for the planned expansion scenario. With the exception of
the proposed new tailings storage facility (see below), the
expanded facilities will be located within the site of the existing
Choco 10 facilities and represent a brownfields expansion of the
operation. The initial evaluation for additional requirements of a
site electrical substation and distribution lines was prepared
based on a 20,000 t/d production rate.
10
Figure 1.2 Flowsheet for Case 2 - 20,000 t/d Processing Plant
11
12
A new substation or, more specifically, an expansion of the
existing outdoor 115/4.16 kV substation, has to be built to
accommodate an additional power demand of 32.3 kVA. No modification
is required to existing installations, except for an expansion of
the existing 115 kV bus to feed the new power equipment. 1.7
TAILINGS STORAGE FACILITY A tailings storage facility (TSF) site
trade-off study was carried out by Golder in October, 2006. The
study evaluated and ranked eight potential sites, named Sites A, B,
C, D, F, G, H, and I, for storage of 80 Mt of tailings solids. The
sites were evaluated for three different tailings management
options: dilute slurry tailings, paste tailings and thickened
tailings. The sites were ranked using a number of criteria,
including:
Confining embankment volumes. Total plan area footprint. Final dam
crest and tailings surface elevations. Distances from the existing
process plant.
The study concluded that Site D is the preferred tailings storage
site based on net present cost. Paste tailings was identified as a
preferred method of tailings handling in the Golder study (Golder,
2006). However, the Golder study was based only on tailings
generated from oxide ore which are expected to comprise
approximately 30% of the future total tailings. Testwork has been
carried out to determine the geotechnical and rheological
properties of the hard rock tailings, which are expected to exhibit
superior settling characteristics that will allow dilute slurry
tailings deposition. Knight Piésold was retained by Rusoro to
complete a conceptual design of a TSF at Site D on the basis of
dilute slurry tailings as the method of tailings transport and
deposition. Site D is situated approximately 6 km east-northeast of
the current process plant, in the basin immediately northeast of
the existing TSF. The principal objectives of the design for the
TSF are to ensure protection of regional groundwater and surface
waters both during operations and in the long term, and to achieve
effective reclamation at mine closure. Geochemical testwork has not
historically been done on tailings at the Choco mine. Tailings were
generated at the PRA laboratories in November, 2008 using hard rock
core samples and will be used for geochemical testwork under the
guidance of Knight Piésold to delineate characteristics of the
tailings which will assist in the design of the TSF. Should the
tailings be considered acid generating, special management
conditions will be required so as to minimize or prevent oxidation
of the tailings. The testwork to be conducted will include:
Acid-Base Accounting (sulphur speciation, neutralization
potential).
13
Kinetic Tests (Humidity Cells, should the static testwork warrant
the longer-term
tests). The existing TSF had approximately 1.3 Mm3 of storage
capacity remaining as of April 1, 2009. At the current tailings
deposition and water reclaim rates, the facility will be full by
approximately November, 2009. The tailings deposition and water
reclaim rates were obtained from the mine staff and are assumed to
represent average conditions for 2008 and the first three months of
2009. A plan to increase the storage capacity of the existing
facility has been devised which includes the construction of
cyclone packs, located on the hills above the existing TSF and
raising of the existing dams to allow for approximately two
additional vertical metres of tailings storage. This plan should
add to the useful life of the facility and allow enough time for
construction of the new TSF. The additional capacity achieved by
raising the present dams will provide approximately 11 months of
additional storage from April 1, 2009. This should provide adequate
time for construction of the new TSF starter dam. A geotechnical
site investigation program on the preferred TSF Site D, consisting
of 11 drill holes and approximately 150 test pits, was completed in
early February, 2009. The program evaluated the geotechnical
conditions of the TSF basin and embankment foundation. Testing
included Shelby Tube sampling and Standard Penetration Testing
(SPT) in overburden soils, Packer permeability testing in bedrock,
and falling head permeability tests at various intervals in the
drill holes. Standpipe piezometers were installed in the completed
drill holes for future testing and monitoring. Two long term
monitoring wells have been installed downstream of the proposed
embankment. The surficial geology generally consists of residual
soil and weathered rock overlying fresh bedrock. The tailings
facility will comprise an earthfill confining embankment along the
north and northeast ends of the valley. The dam alignment keeps the
ultimate facility footprint, including the embankment and
downstream facilities, entirely within the Choco 4 concession. The
embankment will be raised in stages using the centreline method of
construction, reaching an ultimate elevation of approximately 240
masl. The embankment will have final slopes of no steeper than
2.5H:1V and a final minimum crest width of 15 m. The shell zones of
the embankment will be built using low-permeability residual soils
from local borrow sources, augmented with suitable non-reactive
waste rock to the extent possible. Riprap,
14
filter and drain zone materials will be imported to the site. Waste
rock from mining operations will be used as construction material
wherever feasible. 1.8 SITE WATER REQUIREMENTS Knight Piésold
undertook an analysis of site water requirements and prepared a
water management plan for the present preliminary assessment. The
water management plan for the Choco 10 operation will ensure a
sustainable long-term water supply to the mill for the base case
and the three expansion cases. The key water management facilities
include the water storage reservoir, the proposed Site D tailings
storage facility and the process plant. Other facilities that may
be used for water management are groundwater wells, the existing
TSF, flooded open pits (Rosika), a pumping scheme from the Yuruarí
River, and historical underground mine workings. Historically,
there has been a shortage of water for operations at the project
site, with interruptions to processing occurring in the past.
Remedial measures have been taken, including installation of 12
groundwater wells that are currently able to supply approximately
50 to 60 L/s, amounting to about 80% of the process water demand.
Further water shortages are not anticipated given the current
operating conditions. Water reclaim from the TSF is expected to
improve from the current conditions, as mining transitions from
oxide ores to hard rock. Settled tailings densities in the TSF
should increase, allowing a higher reclaim rate to be achieved. 1.9
ENVIRONMENTAL AND SOCIAL ISSUES Venezuela has extensive legislation
relating to the environment and social protection of the country.
In addition, there are various new legislative changes in progress.
There is no assurance that future changes in environmental
regulation will not adversely affect the operations. The nearest
community to the mine is the village of Choco while El Callao is
the closest commercial centre. There are few indigenous people in
the communities surrounding the Choco 4, Choco 10, and Increible 6
concessions, and no fully indigenous communities. Indigenous
communities are generally located farther south on the Rio Cuyuní.
The majority of the population surrounding the operations are
criolla communities, which are relatively recent, transient, and
tied to small mining activities. Cultural heritage resources have
been already impacted in the area, but should be considered for any
expansion activities in the future. Relationships and consultation
with the communities, workers, and small miners are important to
keep the mine operating. Rusoro has proven its ability to maintain
working relations with these groups since its acquisition of the
Choco mine and the Isidora mine.
15
The Choco mine management has engaged in development activities in
the communities near the mine and communities further away where
workers live. PMG agreed to work with Corporación Venezolana de
Guayana (CVG), in an addendum to the Choco 4 and Choco 10 lease
agreements, to include a formal obligation to contribute at least
$250,000/y in social contributions for the development of the
mining area after the commencement of commercial production. Choco
10 operates in accordance with the standard procedures, codes of
safety and regulations of health and effective labour safety in
Venezuela, such as Covenin Norms, LOPCYMAT and regulation of the
conditions of hygiene and industrial safety. The Choco 10
operation’s focus has been to ensure legal compliance in all its
activities. The operation is in the process of implementing an
Environmental Management System (EMS) to help manage water, various
wastes, hazardous materials, emission, hydrocarbons, energy
consumption, and other environmental protection measures.
Venezuelan law requires mining operations to rehabilitate land
disturbed by mining. The company has established a four-year plan
to fulfill the Plan for Compensatory Rehabilitation and
Reforestation of Impacted Areas. The law also requires the
development of a closure program for the operation, and it is
mandatory that an environmental audit be undertaken to determine
the real scope and magnitude of the environmental impacts produced
during the project life. PMG has entered into an agreement with a
local university (Universidad Experimental de Guayana, UNEG) to
develop a detailed decommissioning and mine closure program,
including a plan for progressive rehabilitation. This study will
need to be revised with the changes proposed in this preliminary
assessment in order to determine rehabilitation objectives and
prescriptions for the Increible 6 operation, new TSF, plant site
and waste rock storage areas. 1.10 RESULTS OF PRELIMINARY
ASSESSMENT Micon has prepared its assessment of the project on the
basis of a discounted cash flow model, from which Net Present Value
(NPV), Internal Rate of Return (IRR), payback and other measures of
project viability can be determined. Assessments of NPV are
generally accepted within the mining industry as representing the
economic value of a project after allowing for the cost of capital
invested. The objective of the study was to evaluate the potential
for expansion of the project. In order to do this, the cash flow of
the unexpanded (5,000 t/d) base case and each of three expansion
options has been forecast, enabling a comparison to be made of the
NPV of each option versus the base case. The expansion options
considered have total plant throughputs of 10,000 t/d and 20,000
t/d, as follows:
Case 1 A new plant operating at 10,000 t/d.
16
Case 2 The existing plant (5,000 t/d) plus a new plant at 15,000
t/d, for a total of
20,000 t/d. Case 3 A new plant with two new lines at 10,000 t/d
each, for a total of 20,000 t/d.
The analysis has been undertaken in United States constant dollars
of January, 2009 value, i.e., without provision for inflation.
Micon’s analysis assumes a constant gold price of $700/oz over the
full project life. It assumes, also, that the gold price of $700/oz
is received net of any applicable taxes. Capital and operating
costs have been estimated at an overall accuracy of +30% which is
considered appropriate for preliminary assessment of a mining
project of this nature. As part of its sensitivity analysis, Micon
tested a range of prices and costs 30% above and below the base
case values. All of the gold production from the Choco expansion
project is assumed to be sold within Venezuela. Nevertheless, the
cash flow forecast assumes that these revenues are received in US
dollars. Table 1.4 summarizes the life-of-mine (LOM) cash flow
projections and economic results for each of the production rate
scenarios considered in the study. This preliminary assessment is
preliminary in nature, it includes inferred mineral resources that
are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be
categorized as mineral reserves, and there is no certainty that the
preliminary assessment will be realized.
Table 1.4 LOM Cash Flow Projections
($ million)
Item
Net Sales Revenue 2,930.6 3,564.9 3,564.7 3,564.7 Total cash
operating costs 1,763.9 1,990.5 1,829.0 1,829.0 EBITDA 1,166.7
1,574.4 1,735.7 1,735.7 Capital Expenditure 93.8 305.3 307.5 362.4
Initial Contingency Sustaining Working capital movement
42.5 2.9
60.5 (12.0)
184.9 27.5
105.0 (12.0)
251.3 39.5 83.7
(12.0) Taxation payable 361.2 431.5 485.7 467.1 Net cash flow after
tax 711.7 837.6 942.5 906.2 Cash operating cost ($/oz Au) 388.50
360.23 331.04 331.04 NPV 215.1 264.8 449.8 417.1 IRR (%) n/a 34 52
41
17
Item
Case 3 2x10,000 t/d
Life of mine (years) 27.0 21.0 12.0 12.0 Payback period (years,
undisc.)1 n/a 1.8 1.7 2.4 Payback period (years, disc at 8%)1 n/a
2.2 2.1 2.9 Average annual revenue 108.5 169.8 297.1 297.1 Average
annual gold production (oz) 168.2 263.1 460.4 460.4 Operating cost
($/t) 37.7 28.3 26.0 26.0 Operating cost ($/oz) 388.5 360.2 331.0
331.0 Profitability index 4.7 1.2 1.9 1.4 Stripping ratio 7.6 5.9
5.9 5.9
1 Payback is calculated from the commissioning of an expanded
plant.
For Case 2, LOM average cash operating costs are estimated at
$26.00/t milled or $331/oz of gold produced. For Case 2, at a
discount rate of 8%/y, the NPV (NPV8) of project cash flows is $450
million over a mine life of 12 years. The undiscounted payback
period for invested capital is 1.7 years. Case 2 was selected as
the case for presentation in this Technical Report. Figure 1.4
shows the main elements of the LOM cash flow for the expansion to
20,000 t/d under Case 2.
Figure 1.4 LOM Cash Flow Projection – Case 2
(5,000+15,000 t/d)
18
The results of sensitivity analysis at a discount rate of 8%/y are
summarized in Figure 1.5. Sensitivity to gold price is also
presented in Table 1.5, showing the NPV8 and IRR for Case 2 over a
range of $250/oz above and below the base case forecast of
$700/oz.
Figure 1.5 NPV8 Sensitivity Diagram
Table 1.5 Economic Sensitivity to Gold Price
Gold Price
($/oz) NPV8
(thousand $) IRR (%)
450 (58,555) 3.7% 500 50,624 12.0% 550 154,075 20.8% 600 254,352
30.0% 650 352,208 40.1% 700 449,768 51.7% 750 547,318 66.3% 800
644,646 86.3% 850 741,975 120.7% 900 839,304 n/a 950 936,633
n/a
1.11 INTERPRETATION AND CONCLUSIONS Micon has examined the
potential for expansion of output at the Choco 10 gold operation
through consideration of the relative economics of the existing
nominal production rate of 5,000 t/d compared with 10,000 t/d, and
two alternative 20,000 t/d cases.
19
Optimum results were obtained in Case 2 for expansion to 20,000
t/d, or 7.3 Mt/y, to be achieved through the use of the existing
mill and construction of new facilities to add 15,000 t/d of
capacity. Feedstock for the expanded mill will be provided by mined
output from the existing Choco 10 operation (comprising the
presently operating Rosika, Coacia and Pisolita open pits) and
planned mine production from the Villa Balazo-Karolina pit at Choco
10 and from the Increible 6 concession which is located 4 km
northeast of Choco 10 and from the small Capia and Cerro Azul
deposits. Development of the schedule of mine output was based on
mineral resource estimates for Choco 10 and Increible 6 previously
disclosed and filed on SEDAR. On this basis, mine output supports a
mining and processing operation at a rate of 20,000 t/d for 12
years. Discounted cash flow analysis of the Choco 10 expansion
yields an NPV of $450 million at a discount rate of 8%/y and an IRR
of 52% at a gold price of $700/oz. On the basis of the analysis
described above, it is concluded that the project appears robust
and warrants study at the feasibility study level of detail. It
should be noted, however, that results from study at the
feasibility level of detail may differ from those noted above and
as discussed in this Technical Report. It is emphasized that the
resource base for Choco 10 and Increible 6 used for the preliminary
assessment includes inferred resources. There is no assurance that
further exploration will result in upgrading any of the inferred
resources to the indicated or measured category. The next stage in
the development of the expansion project for the Choco mill is
likely to be a feasibility study. Accepted professional practice,
and NI 43-101, preclude the inclusion of inferred resources as part
of the resource base for such a study. It should be noted, also,
that Rusoro has conducted exploration and drilling on the Choco 10
and Increible 6 concessions since the effective dates of the
mineral resource estimates. Rusoro has reported that it will
complete updated mineral resource estimates for the Choco 10 and
Increible 6 properties in 2009. There is no assurance that
continued exploration has, or will, result in upgrading any of
these inferred resources to the measured or indicated category, as
would be required for their inclusion in any subsequent
prefeasibility or full feasibility study. 1.12 RECOMMENDATIONS As a
result of its preliminary assessment of the expansion of output at
Choco 10, Micon recommends that Rusoro proceeds to preparation of a
project feasibility study. The following recommendations are made
for that work:
20
Update the mineral resource estimates for the Choco 10 and
Increible 6 properties in order to reflect the results of drilling
and exploration carried out since their respective effective dates
(September 30, 2007 and September 21, 2007, respectively).
Prepare mineral resource estimates for the Capia and Cerro Azul
deposits.
To the extent necessary, conduct additional drilling with the
objective of upgrading
inferred resources to the indicated category.
Re-assess the potential for underground mining of the VBK
deposit.
Continue to conclusion the metallurgical testwork program currently
in hand by PRA.
Implement the planned metallurgical testwork program to assess the
possibility of heap leaching the more competent material and
flotation plus intensive leaching of high-sulphide material.
On the basis of the results of testwork on tailings samples from
hard rock and mixed
ores, determine whether the design of the tailings storage needs to
be reassessed.
Undertake additional geochemical characterization of waste rock in
order to assist in the detailed design of waste rock storage in
order to prevent/minimize the potential for acid rock drainage from
unweathered sulphide-bearing material.
Continue the geotechnical site investigation program presently in
hand to optimize pit
slopes.
Continue with feasibility design of the TSF and undertake all
permitting activities required for construction of the new
facility.
Assess the potential for use of water collected in the existing
TSF, mined-out and
flooded open pits and historical underground workings; further
assess options to reclaim water and minimize evaporation losses, in
order to optimize the site water balance.
Optimize project design in the next stage of planning in order to
minimize
environmental impacts and risks to the extent possible.
Integrate the decommissioning and mine closure program that is
currently in hand with future feasibility studies for the Choco 10
operation.
Maintain government relations and continue efforts to obtain water
extraction and
exploitation extension permits.
21
Continue environmental management initiatives at the Choco 10 and
related sites, and prepare additional environmental management
plans for new construction and development initiatives.
Continue proactive worker and community development, communication
and support
activities. Rusoro’s proposed budget for work over the 12 month
period between May, 2009 and April, 2010, is shown in Table
1.6
Table 1.6 Rusoro Proposed Budget for 12 Months to April, 2010
Description Unit Costs $
Exploration/resource upgrades Diamond drilling 20,000 m @ $75/m
1,500,000 Assaying 10,000 samples @ $15/sample 150,000 Geology and
support 95,000 Metallurgical testwork 150 samples @ $200/sample
30,000 Environmental and permitting work all-in cost 20,000 Updated
resource models all-in cost 25,000 Subtotal 1,820,000 Contingency,
10% 180,000 Total 2,000,000 Feasibility study Technical studies
500,000 Metallurgical testwork/mill studies 100 samples @
$200/sample 20,000 Environmental and permitting work 40,000 Travel
and other support 45,000 Report preparation 55,000 Subtotal 660,000
Contingency, 10% 65,000 Total 725,000 Tailings storage facility
Technical studies (drilling) 2,000 m @ $50/m 100,000 Laboratory
testwork 200 samples @ $200/sample 40,000 Environmental and
permitting work 75,000 Report preparation 35,000 Subtotal 250,000
Contingency, 10% 25,000 Total 275,000 Grand total 3,000,000
Micon concludes that the work items and cost estimates are
reasonable and recommends that Rusoro implements its planned
program. Further work will be contingent upon the success of the
proposed program shown in Table 1.6. The effective date of the
preliminary assessment presented herein is 22 April, 2009. The
effective dates of the mineral resource estimates on which the
preliminary assessment is based are 30 September, 2007 for Choco 10
and 21 September, 2007 for Increible 6.
22
2.0 INTRODUCTION
Micon International Limited (Micon) was retained in May, 2008 by
Rusoro Mining Ltd. (Rusoro) to prepare a preliminary assessment
(scoping study) of the potential for increased capacity and
throughput at the Choco mill, based principally on mine production
from the Choco 10 mine and concessions, and the Increible 6
property. The Choco 10 and Increible 6 concessions are located near
El Callao, Venezuela. The results of the preliminary assessment are
discussed in this Technical Report. Rusoro’s operations are located
in the vicinity of El Callao and El Dorado, Bolívar State, in
eastern Venezuela. These comprise two operating mines, Choco 10 and
Isidora, and 10 exploration projects (including development and
exploration around the mines). Output from both the Choco 10 and
Isidora mines, near El Callao, is processed through the Choco mill.
Ore from Isidora has been processed through the Choco mill since
late 2008 and reserves are expected to be exhausted by mid-2009.
Rusoro owns and operates the Choco mill and has an ownership
interest of 95% in the Choco 10 mine. Production from the Isidora
mine is subject to a joint venture with the Venezuelan government.
The Increible 6 property is under development and is located 4 km
northeast of Choco 10. The preliminary assessment is based on the
construction of facilities to treat material from the existing
Choco 10 mine and the nearby Increible 6 property as an expansion
of the existing Choco 10 plant. With the exception of the
construction of a new tailings storage facility, the expanded
facilities will be essentially located within the site of the
existing Choco 10 operation and represent a brownfields expansion.
The Choco property was originally under control of Bolivar Gold
Corp. (Bolivar), through the local entity Promotora Minera de
Guayana SA (PMG), which developed the property and constructed a
mine and processing facility, currently rated at 5,400 t/d. Gold
Fields Limited subsequently purchased and operated the mine until
the acquisition by Rusoro in late 2007. PMG remains the operating
company for Choco 10 and is owned 95% by Promotora Minera de
Venezuela SA (Promiven) and 5% by CVG Minerven C.A. Promiven is
wholly owned by Rusoro through Venezuela Holdings (BVI) Ltd. and
Carisma Corporation AVV. Gold Fields completed a significant amount
of drilling, metallurgical testing and local studies which
indicated potential for increasing production. The Increible 6 gold
project is 100% owned by Rusoro through a wholly-subsidiary,
General Mining de Guayana, C.A. (General Mining) and was acquired
in 2004. Micon was retained by Rusoro in 2007, to provide an
independent audit, compliant with requirements of National
Instrument 43-101 (NI 43-101), of the Choco 10 mineral resource
estimate and to report on the technical aspects of the Choco 10
property and operating mine. This request was made following the
announcement that Rusoro had reached an agreement with Gold Fields
Netherlands Services BV (Gold Fields), a wholly-owned subsidiary of
Gold Fields Limited, whereby Rusoro acquired all of Gold Fields’
Venezuelan assets, including the producing Choco 10 mine. Micon was
also retained by Rusoro in 2007 to prepare a
23
mineral resource estimate and independent Technical Report
compliant with NI 43-101 on the Increible 6 concession. These
reports, referred to herein as Leader et al., 2007 and Laudrum et
al., 2008, were filed on SEDAR on November 29, 2007 and April 2,
2008, respectively, and are entitled:
Technical Report on the PMG (Gold Fields) Choco 10 Concession and
Mine, Estado Bolivar, Venezuela, dated November 21, 2007. (Leader
et al., 2007).
Technical Report on the Increible 6 Property, Bolivar State,
Venezuela, dated
November 14, 2007, revised and updated February 14, 2008. (Laudrum
et al., 2008). The mineral resources reported in Leader et al.,
2007 for the Choco 10 concession, and in Laudrum et al., 2008 for
the Increible 6 concession form the basis for the preliminary
assessment which is the subject of this report. These resource
estimates include inferred resources, which are also included in
the open pit designs and production schedules for the preliminary
assessment. There is no assurance that further exploration will
result in upgrading any of these inferred resources to the measured
or indicated category, as would be required for their inclusion in
any subsequent prefeasibility or full feasibility study. It should
be noted, also, that Rusoro has conducted exploration and drilling
on the Choco 10 and Increible 6 concessions since the effective
dates of the mineral resource estimates. Rusoro has reported that
it will complete updated mineral resource estimates for the Choco
10 and Increible 6 properties in 2009. There is no assurance that
continued exploration has, or will, result in upgrading any of
these inferred resources to the measured or indicated category, as
would be required for their inclusion in any subsequent
prefeasibility or full feasibility study. In addition to the
reported resources for the Choco 10 and Increible 6 concessions,
two other small deposits, Capia and Cerro Azul, have been included
in the preliminary assessment. Although Gold Fields constructed
block models for both of these deposits, no resource estimate has
been reported for either of them. In total, the Capia and Cerro
Azul deposits account for only 2.6% of the tonnage and 1.6% of the
recovered gold ounces scheduled to be mined in the preliminary
assessment. They are not material to the findings of the study.
Table 2.1 provides a summary of the preliminary assessment study
team and their areas of responsibility. Knight Piésold Ltd (Knight
Piésold) was retained directly by Rusoro. Met- Chem Canada Inc.
(Met-Chem) was retained by Micon.
24
Mineral resource estimates Prior NI 43-101 Technical Reports Mine
design Sam Shoemaker, Micon Mine schedule, mine equipment and
facilities, mining costs Sam Shoemaker/Jim Leader, Micon
Metallurgical testing Vic Bryant, Micon Process engineering Ian
Ward/Vic Bryant/Met-Chem Tailings management Knight Piésold Water
management Knight Piésold Environmental Jenifer Hill, Micon
Infrastructure and costs Met-Chem Plant design, plant capital
expenditures and operating costs Met-Chem Economic evaluation
Christopher Jacobs/Jim Leader, Micon
The Qualified Persons responsible for this report are the
following:
Mary Jean Buchanan, Eng., M.Env. Michael Godard, P.Eng. Christopher
Jacobs, C.Eng. Jeremy P. Haile, P.Eng. Christopher Lattanzi, P.Eng.
Dave Laudrum, P.Geo. James Leader, P.Eng. John Perry, P.Geo. Sam
Shoemaker, MAusIMM Ian Ward, P.Eng. John Zbeetnoff, P.Geo.
Site visits have been undertaken by Dave Laudrum and James Leader,
and others on Micon’s team, and by Knight Piésold, on the following
dates:
Victor Bryant, I.Eng, MIMM 14-16 August, 2007 Jenifer Hill,
R.P.Bio. 14-16 August, 2007 Dave Laudrum, P.Geo. 8-13 December,
2006
16 April, 2007, 14-16 August, 2007 James Leader, P.Eng. 14-16
August, 2007 15-20 October, 2007 Jeremy P. Haile, P.Eng. 8-9 April,
2008 John Perry, P.Geo. 15-20 October, 2007
Table 2.2 provides a list of the abbreviations used in this
report.
25
Term Abbreviation
Acceleration due to gravity g Acid base accounting ABA Acid rock
drainage ARD Best available technology not involving excessive cost
BATNIEC Biochemical oxygen demand BOD Carbon-in-pulp CIP
Centimetres per second cm/s Cost and freight cfr Cubic metre(s) m3
Cubic metre(s) per day m3/d Cubic metres per second m3/s Degree(s)
o Degrees Celsius oC Effective Grinding Length EGL Environmental
management plan EMP Environmental and Socio-Economic Impact
Assessment ESIA Environmental and Social Management and Monitoring
Plan ESMMP Foot(feet) ft Gallons per minute gpm Gigawatt(s) GW
Gigawatt hour(s) GWh Gram(s) g Grams per litre g/L Gold equivalent
AuEq Hertz Hz High density polyethylene HDPE Horsepower HP Hour(s)
h Hour(s) per day h/d Inch(es) in Intensity duration frequency IDF
Internal rate of return IRR Kilometre(s) km Kilopascal(s) kPa
Kilovolt(s) kV Kilovolt ampere kVA Kilowatt(s) kW Kilowatthours per
tonne kWh/t Litre(s) L Life-of-mine LOM Litres per second L/s
Megavolt ampere MVa Megawatt(s) MW Metre(s) m Metres above sea
level masl Metres per second m/s Micron(s) μm Milligrams mg
26
Term Abbreviation Milligrams per litre mg/L Millimetre(s) mm
Millimetres per year mm/y Million M Million US dollars $M Million
tonnes Mt Million tonnes per year Mt/y Million years old Ma
Minute(s) min Motor control centre MCC Net present value NPV Net
present value at discount rate of 8% per year NPV8 Neutralization
potential NP Neutralization potential ratio NPR Non-governmental
organization(s) NGO(s) Not acid generating NAG Not applicable n.a.
Ounce(s) (troy ounce) oz Parts per million ppm Parts per billion
ppb Peak ground acceleration PGA Particulate matter < 10 μm
diameter PM10 Potentially acid generating PAG Pound lb Probable
maximum precipitation PMP Public Consultation and Disclosure Plan
PCDP Reverse circulation RC Rock quality designation RQD Second s
Semi-autogenous grinding SAG Square metre(s) m2
Square kilometre(s) km2 Standard penetration test SPT Tailings
storage facility TSF Tonne(s) t Tonnes per day t/d Tonnes per hour
t/h Tonnes per year t/y Total suspended solids TSS United States
dollars $ Volt(s) V
In this report, all currency amounts are stated in US dollars ($)
or Venezuelan Bolivars, as specified, with costs and commodity
prices typically expressed in US dollars. Quantities are generally
stated in Système International d’Unités (SI) metric units, the
standard Canadian and international practice, including metric tons
(tonnes, t) and kilograms (kg) for weight, kilometres (km) or
metres (m) for distance, hectares (ha) for area, grams (g) and
grams per tonne (g/t) for gold grades (g/t Au). Gold grades may
also be reported in parts per million (ppm) or parts per billion
(ppb). Quantities of gold are typically reported in Troy ounces
(oz).
27
3.0 RELIANCE ON OTHER EXPERTS
Micon has reviewed and analyzed data provided by Rusoro, Gold
Fields and others, and has drawn its own conclusions therefrom,
augmented by its direct field examination. Micon has not carried
out any independent exploration work, drilled any holes or carried
out any extensive sampling and assaying on the Choco 10 and
Increible 6 properties. During the field visit to Choco 10, Micon
did not collect any samples to confirm the mineralization as it is
an operating gold mine and any samples collected by Micon would
only reflect the mineralization at the sample location and not
necessarily the economic nature of the mineralization at the mine.
During its visit to Increible 6, Micon selected nine samples of
quarter-core from holes drilled on the property, for independent
check assays. The results confirmed the presence of gold at similar
grades to the original assays. While exercising all reasonable
diligence in checking, confirming and testing, Micon has relied
upon Rusoro’s presentation of the Choco 10 and Increible 6 data
from both itself and previous organizations in formulating its
opinion. Micon has not reviewed any of the documents or agreements
under which Rusoro holds title to the Choco gold mine or the
underlying mineral concessions, or to the Increible 6 property, and
Micon offers no legal opinion as to the validity of the mineral
titles claimed. A description of the properties, and ownership
thereof, is provided for general information purposes only. Rusoro
has confirmed the material presented in Section 4.3 of this report
and Micon has relied upon it as input to the cash flow model for
the expansion of output at Choco 10. The existing environmental
conditions, liabilities and remediation have been described where
required by NI 43-101 regulations. These statements also are
provided for information purposes only and Micon offers no opinion
in this regard. The descriptions of geology, mineralization and
exploration are taken from reports prepared by Rusoro, its
predecessors or its consultants. The conclusions of this report
rely on data available in published and unpublished reports and
information supplied by the organizations which have conducted
exploration on the property, and information supplied by Rusoro and
its consultants. In Micon’s opinion, the information provided to
Rusoro was supplied by reputable organizations and Micon has no
reason to doubt its validity. Section 18.7 of this report has been
prepared by Jenifer Hill, R.P.Bio., Senior Environmental Consultant
with Micon.
28
4.0 PROPERTY DESCRIPTION AND LOCATION
The preliminary assessment discussed in this report is based
principally on identified mineral resources on the Choco 10 and
Increible 6 concessions. For the purpose of the preliminary
assessment, the Choco property also includes the Choco 4 concession
on which some of the production facilities and infrastructure are
located. The Choco 10 concession has a Certificate of Exploitation
granted to PMG for an area of 2,124.53 ha and a term running to
December 25, 2025. The Choco 4 concession has a Certificate of
Exploitation granted to PMG for an area of 1,458.12 ha and a term
running to December 25, 2025. The Increible 6 concession totals
2,472.5 ha in area. The Increible 6 mineral title is granted by the
Corporación Venezolana de Guayana (CVG), a regional governmental
development organization, to General Mining, for the exploration,
development and exploitation of gold, silver, zinc, copper,
chromium, tin, nickel, tungsten, vanadium, manganese, molybdenum,
niobium, cobalt and tantalum. The CVG granted General Mining a
concession leasing executed on May 13, 1991. The leasing has the
same term as the concession; two years for exploration and 20 years
for exploitation, this last term beginning on the publication date
of the Certificate of Exploitation in the Official Gazette, subject
to 10-year extensions, up to a maximum of 40 years. On January 14,
2009, Rusoro announced that “approval for the Certificate of
Exploitation was published in Venezuela’s Official Gazette on
December 23, 2008”. On receipt of the Exploitation application will
be made for the Permit to Affect Natural Resources. Surface rights
have been acquired or negotiated over a number of small areas
within the Increible 6 gold project in order to facilitate access
and drilling activities. 4.1 LOCATION The Choco 10 gold mine is
located in the southeastern part of Venezuela, in Bolívar State
(Figure 4.1), approximately 15 km west of the town of El Callao.
The mine is located on an exploitation project, which amalgamates
the Choco 10 and Choco 4 concessions (Figure 4.2). The major
industrial city of Puerto Ordaz is located 190 km northwest of El
Callao and is linked to the mine by paved road. Venezuela has a
good road infrastructure, although road conditions have been
deteriorating during the last 15 years near the mine. Under the
terms of its exploitation certificate the Company is obligated to
maintain a portion of the access road for the Choco 10 mine. The
Choco 10 mine commenced production in August, 2005. Current
operations consist of open pit mining and a processing plant
comprising conventional comminution and carbon-in- pulp processing.
The Choco 10 mine uses typical open pit mining methods of drilling,
blasting, loading and hauling. Two pits are currently being
operated within the Choco 10 concession, Pisolita and
Rosika-Coacia. The pits are located 2-3 km from the main
plant.
29
Figure 4.1 Location of the Choco 10 Mine in Southeastern
Venezuela
Figure 4.2 El Callao District Showing Locations of Rusoro
Concessions
The Increible 6 concession is located 4 km northeast of Choco 10,
as shown in Figure 4.3.
30
Figure 4.3 Location of Surface and Mineral Tenements, Increible
6
4.2 PERMITS AND LICENCES A summary description of the title and
terms of the Choco 4 and Choco 10 concessions is provided in Table
4.1.
31
Mining Rights Held by Promotora Minera de Guayana, P.M.G.,
S.A.
Titles Rights and Minerals Area and Location Term
CHOCO 4
The mining rights over this area were first granted by the MEM to
the CVG by means of a concession on May 10, 1993, which was then
leased by the CVG to PMG. Later, an exploitation permit named
“Certificate of Exploitation” was granted to the CVG on February 4,
1994.
Exploration and subsequent exploitation of alluvial and vein
manganese, niobium, tantalum, molybdenum, vanadium, chromium,
nickel, cobalt, tungsten, gold, copper, zinc, silver and tin.
Concession was originally granted for a 2,941.8570 hectares area,
El Callao Municipality, Bolívar State, Venezuela. PMG selected for
exploitation an area of 1,458.12 hectares, divided into 4 plots
(CH4- 1, CH4-2, CH4-3 and CH4-4) of 493.87, 307.40, 204.76 and
452.09 hectares, respectively.
The Choco 4 Certificate of Exploitation grants to its holder the
right to exploit the minerals for a term of 20 years commencing on
the date of publication in the Official Gazette, renewable for
periods no longer than 10 years each and no longer than 20 years in
total. Having been published on December 5, 2005, the Choco 4 CE
will expire on December 5, 2025, unless an extension is
granted.
CHOCO 10
The mining rights over this area were first granted by the MEM to
the CVG by means of a concession on May 10, 1993, which was then
leased by the CVG to PMG. Later, an exploitation permit named
“Certificate of Exploitation” was granted to the CVG on February 4,
1994.
Exploration and subsequent exploitation of alluvial and vein
manganese, niobium, tantalum, molybdenum, vanadium, chromium,
nickel, cobalt, tungsten, gold, copper, zinc, silver and tin.
Concession was originally granted for a 4,249.3490 hectares area,
El Callao Municipality Bolívar State, Venezuela. PMG selected for
exploitation an area of 2,124.53 hectares, divided into 5 plots
(CH10-1, CH10-2, CH10- 3, CH10-4 and CH10-5) of 499.95, 403.31,
389.78, 373.19 and 458.30 hectares, respectively.
The Choco 10 Certificate of Exploitation grants to its holder the
right to exploit the minerals for a term of 20 years commencing on
the date of publication in the Official Gazette, renewable for
periods no longer than 10 years each and no longer than 20 years in
total. Having been published on December 5, 2005, the Choco 10 CE
will expire on December 5, 2025, unless an extension is
granted.
Based on discussions with Choco staff, official gazettes,
exploitation permits, and monthly and quarterly reports, it is
Micon’s understanding that all permits and licences are in place to
operate the mine. In addition to the rights and titles discussed
previously, authorization was granted to occupy Choco 4 (#000439)
and Choco 10 (#000580) with expiry dates of April 8, 2014 and
February 4, 2014, respectively. The environmental permits are in
place for the mineral exploitation in Choco 4 and 10. The mine is
currently fulfilling the permit obligations. The groundwater well
field permit is also in place. Details of the Increible 6
concession are summarized in Table 4.2.
Table 4.2 Summary of Land Holdings for the Increible 6
Concession
Mineral Title Registered Company Rights Area
Increible 6 General Mining de Guayana C.A. Hard Rock and
Alluvial
2,470.53 ha
As noted above, the Certificate of Exploitation for the Increible 6
concession was approved in December, 2008.
32
In addition to the Choco 4, Choco 10 and Increible 6 concessions,
Rusoro holds title to the following concessions located in the area
of El Callao: Bochinche B1 and B2; Choco 1, 2, 6, 9, 12 and 13; and
Increible 16. Details of those concessions, which are not relevant
to the preliminary assessment discussed herein, are provided in
Leader et al., 2007. 4.3 ROYALTIES, PAYMENTS AND OTHER AGREEMENTS
When it acquired Promiven and its 70% subsidiary PMG in 2003,
Bolivar agreed to pay to the prior owner of PMG (Cemex Venezuela
C.A., or Cemex) a royalty on gold production from Choco 10 and/or
Choco 4. The royalty becomes payable once PMG’s gold production
reaches 700,000 oz of gold produced. The royalty is calculated and
paid on ounces of gold attributable to Promiven’s equity interest
in PMG. This was increased to 95% following Bolivar’s acquisition.
Once this level of production is reached, the amount of the royalty
will be calculated monthly using the average London PM fixing price
of gold during the calendar month, but will be payable quarterly in
arrears. The royalty is $10/oz, but increases to $15/oz if the
average price of gold for the relevant calendar month reaches $315
or more, and $20/oz if the average price of gold for the relevant
calendar month reaches $400 or more. If Cemex wishes to sell its
right to receive the royalty to a third party, it must first offer
it to the Company on the same terms. In addition, pursuant to the
Choco 4 and Choco 10 lease agreements between CVG and PMG, PMG must
pay a monthly production royalty to CVG and CVG Técnica Minera C.A.
(a CVG subsidiary). The royalty is paid monthly in arrears in
Venezuelan Bolivars, at the official exchange rate in place (or in
gold at the request of CVG), within the first 10 days of each
calendar month, based on the production of the immediately
preceding calendar month. It is calculated monthly, is based on the
number of ounces of gold produced and ranges between 1.0% and 3.5%,
depending on the average price of gold in the New York market for
the relevant month, as determined by CVG. This royalty amount is
subject to value added tax. As part of the exploitation phase, the
following taxes are payable upon the commencement of commercial
production from the Choco 4 and 10 concessions:
Decree Law of Mines: Exploitation Tax of 3% on gross production
based on the commercial value of the gold in the city of Caracas,
payable monthly. Pursuant to article 90 of the Decree Law of Mines
of 1999 the exploitation tax is credited towards the payment of the
surface tax. Therefore in practice no additional surface taxes will
apply.
The Choco 10 Lease Agreement originally included a monthly royalty
payable to
CVG based on monthly gold production, ranging from 0.28% to 10%,
depending on the grade of gold per ton (g/t), and a royalty to CVG
Técnica Minera (Tecmin) as a finder’s fee equivalent to a monthly
gross production royalty of 1% during the first 10 years after the
date of execution of the lease agreement. These royalties were
renegotiated between PMG and CVG on March 12, 2004 and were
substituted by a
33
gross royalty payable to CVG and CVG Tecmin calculated on
production of gold (oz Au). The CVG and CVG-Tecmin royalty is shown
in Table 4.3.
The CVG royalty includes a gross royalty on production to
CVG-Tecmin of 1% for the first 10 years of the Choco 10 lease.
Rusoro has advised that these royalties remain in place and as
summarized in Table 4.3.
Table 4.3
Royalty Payments to CVG and CVG-Tecmin
Average Gold Price (US$/oz Au) Royalty to CVG and CVG-Tecmin <
$300/oz 1.0% $300/oz to $350/oz 1.6% $350.01/oz to $375/oz 2.23%
$375.01/oz to $400/oz 2.70% $400.01 to $450/oz 3.00% >$450/oz
3.5%
The royalty payable to Cemex in connection with the acquisition of
Promiven by Carisma is detailed below:
Carisma agreed to pay Cemex a royalty of $10/oz of produced gold,
exceeding the first 700,000 oz produced by PMG. The royalty will be
paid quarterly in arrears within the first 15 days of each calendar
quarter. In addition, it will be calculated on the same proportion
as the equity interest attributable to Promiven in Promotora Minera
de Guayana C.A. (PMG). The royalty shall be increased to (i)
$15/oz, if the average price of gold is $315 or more in the London
Bullion Market, (ii) $20/oz, if the average price of gold is $400
or more in the London Bullion Market. Carisma has a right of first
refusal to purchase the royalty.
In addition to the purchase price and the royalty, Carisma agreed
to make a bonus
payment of $1,500,000 to Cemex as follows: (i) $750,000 on each of
the eighth and ninth anniversaries of the date of commencement of
commercial production, or (ii) a single instalment of $1,500,000
within 90 days of reaching a total production of 700,000 ounces of
gold.
Under the Choco 10 lease agreement, the lease holder is obliged to
pay annual surface taxes, according to a sliding scale that varies
with the age and the surface of the concession (the older and
larger the concession, the surface tax rate increases). Micon has
been informed that these taxes have been paid and are current, and
that there are no defaults in terms of existing permitting and
licencing. The information on the royalty payments was provided to
Micon by Rusoro’s predecessor, Gold Fields and has been confirmed
subsequently by Rusoro for the purpose of the present report. Micon
has not independently verified the terms and requirements of the
royalties.
34
5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE
AND PHYSIOGRAPHY The following has been extracted from Leader et
al., 2007 and Laudrum et al., 2008. 5.1 TOPOGRAPHY, CLIMATE AND
VEGETATION Choco 10 lies in an area of low hills between elevations
200 masl and 300 masl. The area is partly savannah and partly
tropical forest. The soil is nutrient-poor and present land use is
confined to rural cultivation, cattle ranching and minero (small
mining) activity. The climate at Choco 10 is tropical, with
temperatures averaging around 25.7°C and humidity ranging from 76%
to 82%. The average annual precipitation at El Callao is 1,325 mm.
The heaviest rainfall occurs during the months from June to August,
which average 150 mm of precipitation per month. During the
remainder of the year the rainfall is about 80 mm per month excep