El Zancudo Technical Report NI-43-101 Redwood …...month by crushing and grinding followed by agitated cyanide leach and Merrill Crowe precipitation using zinc powder. In January

v3, 31 July 2010

Stewart D. Redwood, P.O. Box 0832-1784, World Trade Center, Panama City, Republic of Panama. Tel/Fax: +507 201 7613. Email:[email protected]. Website: www.sredwood.com.

NI 43‐101 TECHNICAL REPORT

For the

El Zancudo Project, Department of Antioquia, Republic of Colombia

For

Tapestry Resource Corp. Suite 600, 660 Burrard Street, Vancouver, British Columbia, V6C 2X8, Canada

Gran Colombia Gold, S.A. c/o Global International Line, Calle 90, No. 19‐A‐46, Office 602, Bogota, Colombia

By

Stewart D. Redwood, PhD, FIMMM Consulting Geologist

6 April 2010

Tapestry Resource Corp - Gran Colombia Gold, S.A. El Zancudo Technical Report Redwood, 6 April 2010

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1 TABLE OF CONTENTS

1.1 Table of Contents 1 TABLE OF CONTENTS............................................................................................................... 2 1.1 Table of Contents ............................................................................................................ 2 1.2 List of Tables ................................................................................................................... 3 1.3 List of Figures .................................................................................................................. 3

2 SUMMARY ............................................................................................................................... 5 2.1 Introduction .................................................................................................................... 5 2.2 Property Description and Location ................................................................................. 5 2.3 History ............................................................................................................................. 6 2.4 Geology and Mineralization ............................................................................................ 7 2.5 Exploration, Drilling and Sampling .................................................................................. 8 2.6 Data Verification ............................................................................................................. 8 2.7 Mineral Processing and Metallurgical Testing ................................................................ 9 2.8 Mineral Resource and Mineral Reserve Estimates ......................................................... 9 2.9 Interpretation and Conclusions ...................................................................................... 9 2.10 RECOMMENDATIONS ................................................................................................... 10

3 INTRODUCTION AND TERMS OF REFERENCE ....................................................................... 13 3.1 Purpose of Report ......................................................................................................... 13 3.2 Sources of Information ................................................................................................. 13 3.3 Terms of Reference ....................................................................................................... 14

4 RELIANCE ON OTHER EXPERTS .............................................................................................. 16 5 PROPERTY DESCRIPTION AND LOCATION ............................................................................. 17 5.1 Property Location .......................................................................................................... 17 5.2 Property Description ..................................................................................................... 18 5.2.1 Scoria Reprocessing Contract ................................................................................... 22

5.3 Colombian Mining Law ................................................................................................. 23 5.4 Environmental Regulations and Liabilities .................................................................... 26 5.5 Surface Rights ............................................................................................................... 27 5.6 Water Rights ................................................................................................................. 28

6 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ..... 29 6.1 Accessibility ................................................................................................................... 29 6.2 Climate .......................................................................................................................... 29 6.3 Local Resources and Infrastructure .............................................................................. 29 6.4 Physiography ................................................................................................................. 30

7 HISTORY ................................................................................................................................ 32 7.1 Colombian Gold Mining History .................................................................................... 32 7.2 El Zancudo History ........................................................................................................ 32 7.3 Sabaletas Scoria Plant Production ................................................................................ 35

8 GEOLOGICAL SETTING ........................................................................................................... 36 8.1 Regional Geology .......................................................................................................... 36


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8.2 Project Geology ............................................................................................................. 36 9 DEPOSIT TYPES ...................................................................................................................... 40 10 MINERALIZATION .............................................................................................................. 41 11 EXPLORATION ................................................................................................................... 46 12 DRILLING ........................................................................................................................... 46 13 SAMPLING METHOD AND APPROACH .............................................................................. 47 14 SAMPLE PREPARATION, ANALYSIS AND SECURITY ........................................................... 47 15 DATA VERIFICATION .......................................................................................................... 47 16 ADJACENT PROPERTIES ..................................................................................................... 49 17 MINERAL PROCESSING AND METALLURGICAL TESTING .................................................. 50 18 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES .............................................. 51 19 OTHER RELEVANT DATA AND INFORMATION .................................................................. 51 20 INTERPRETATION AND CONCLUSIONS ............................................................................. 52 21 RECOMMENDATIONS ....................................................................................................... 53 22 REFERENCES ...................................................................................................................... 56 23 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES ................................................................................................... 59 24 Date ................................................................................................................................... 60 25 CERTIFICATE OF AUTHOR .................................................................................................. 61 26 ANNEX 1: Coordinates for the mining concessions at El Zancudo ................................... 63 27 ANNEX 2: Certificate of analysis of check samples ........................................................... 67

1.2 List of Tables Table 2.1 Estimated budget to carry out Stage 1 exploration program at El Zancudo. .............. 11 Table 2.2 Estimated budget to carry out Stage 2 exploration program at El Zancudo. .............. 11 Table 3.1 List of abbreviations ..................................................................................................... 15 Table 5.1 Description of CDI mining concession contracts and exploration licenses at El Zancudo

project. .................................................................................................................................. 20 Table 12.1 Diamond drilling carried out by CDI at Independence Mine, El Zancudo (1999 to

2003). .................................................................................................................................... 46 Table 15.1 Description and results of check sampling. ............................................................... 48 Table 21.1 Estimated budget to carry out Stage 1 exploration program at El Zancudo. ............ 54 Table 21.2 Estimated budget to carry out Stage 2 exploration program at El Zancudo. ............ 54

1.3 List of Figures Figure 5.1 Location map of El Zancudo Project, Department of Antioquia, Colombia ................ 17 Figure 5.2 Location Map of El Zancudo Project. .......................................................................... 18 Figure 5.3. Map of CDI mining concession contracts and applications at El Zancudo. ................ 21 Figure 6.1 Panoramic view of El Zancudo Project looking west. ................................................. 30 Figure 7.1 Historical gold roaster chimneys and village of Sitio Viejo. ........................................ 34


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Figure 8.1 Geological Map of El Zancudo Mine. ........................................................................... 38 Figure 8.2 Geological cross‐sections of El Zancudo. .................................................................... 39 Figure 10.1 Distribution of historical mine workings at El Zancudo. ........................................... 42 Figure 10.2 Current layout of the Independencia Mine. ............................................................. 43 Figure 10.3 Paragenetic sequence of mineralization at the El Zancudo deposit. ....................... 45


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2 SUMMARY

2.1 Introduction This report was prepared by Dr. Stewart D. Redwood, FIMMM, at the request of Tapestry Resource Corp. (Tapestry) and Gran Colombia Gold, S.A. (Gran Colombia, together the Companies). The terms of reference were to produce a Technical Report as defined in Canadian Securities Administrators’ National Instrument 43‐101, and in compliance with Form 43‐101F1 (Technical Report) and Companion Policy 43‐101CP for the El Zancudo Project in Colombia. The effective date of the report is 6 April 2010. Gran Colombia is a Panama domiciled gold exploration, development and mining company focused on prospective producing, development‐stage and exploration‐stage gold properties. On 30 June 2010, Tapestry announced that it had entered into a letter agreement with Gran Colombia effective 30 June 2010, relating to a reverse takeover transaction, pursuant to which Tapestry proposes to acquire all of the issued and outstanding securities of Gran Colombia in exchange for the issuances of common shares in the capital of Tapestry by way of a three‐cornered amalgamation (the Gran Colombia Transaction). The Gran Colombia Transaction is expected to be effected by way of a three‐cornered amalgamation, pursuant to which a wholly‐owned Panamanian subsidiary of Tapestry will amalgamate with Gran Colombia, with the amalgamated Panamanian company being a wholly‐owned subsidiary of Tapestry. Tapestry will change its name to Gran Colombia Gold Corp. (the Resulting Issuer). Under the terms of the Gran Colombia Transaction, each Gran Colombia shareholder will receive one common share in the capital of the Resulting Issuer for every common share of Gran Colombia held. Upon completion of the Gran Colombia Transaction, the Resulting Issuer will carry on the business of mineral production, development and exploration. The Gran Colombia Transaction is scheduled to close on or about 6 August 2010.

2.2 Property Description and Location The El Zancudo Project is located in the Municipalities of Titiribi, Angelopolis and Armenia, Department of Antioquia, Republic of Colombia at 6° 04’ 30” N – 75° 47’ 26” W. Gran Colombia has agreed to the assignment and sale‐purchase of the mining concessions comprising the El Zancudo project through an agreement signed with Consorcio de Inversionistas, C.D.I., S.A. (CDI), a privately‐owned Colombian company, dated 29 January 2010, whereby CDI will assign


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the mining concession contracts, exploration license, requests for mining concessions and all assets associated with these to Gran Colombia or an affiliate or subsidiary of Gran Colombia. The closing date of the agreement is 30 April 2010. The purchase price is US$ 15.0 million, payable in four tranches. CDI owns or controls, directly or indirectly, eight adjoining mining concession contracts and applications at El Zancudo with a total area of 6,001.595 hectares (ha), or 60.0 square kilometers. Six of the concessions have contracts which are registered in the National Mining Registry, with a total area of 2,619.4450 ha. Another concession, mining concession No. 5849, has a signed contract and is at the National Mining Registry awaiting registration. The eighth, Exploration License No. 4985, is an expired exploration license for which application for a concession contract has been submitted and awaits approval. CDI has a contract with Proyecto Sabaletas, S.A.S. (formerly Proyecto Sabaletas, E.U.) (Sabaletas) granting Sabaletas the right to recover gold and silver from scoria at the locality of Sitio Viejo, located on mining concession contract No. 5521. The scoria is glassy slag in dumps from historical roasting operations carried out to recover gold and silver. As consideration for the rights granted by CDI to Sabaletas, CDI is entitled to a monthly payment in cash equal to a percentage of the value of the sales of the marketable minerals in the relevant month. The percentages 6.5% when the tenor of the gold in the reprocessed scoria is less that 6.5 g/t, and 7.0% when the tenor of the gold in the reprocessed scoria is equal to or greater than 6.5 g/t. Sabaletas made an advance payment to CDI of Colombian Pesos (COP) 900,000,000, equivalent to about US$ 465,838, from which there is a schedule of deductions from the monthly payments.

2.3 History Mining has been carried out in the El Zancudo district since 1793. The most important companies were the Sociedad de El Zancudo, formed in 1848, and the Sociedad de Otra‐Mina. The peak production period was from 1885 to 1930. Gold was recovered from the ore by roasters from 1851. The El Zancudo mine was closed in 1945 and subsequent production has been on a small scale. The Sociedad de El Zancudo reported production of 4,157.89 kg (129,325 ounces) of gold and 30,818.81 kg (958,570 ounces) of silver from 284,370 tonnes of ore in the 11 year period between 1912 and 1922. Total production from the Titiribi district has been estimated at between 48,230 kg and 64,300 kg (1.5 to 2.0 Moz) of gold equivalent.

Since 1985, several studies have been made to extract gold and silver from the slag dumps at Sitio Viejo. These have historical proven and probable reserve of 574,000 tonnes grading 4.40


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g/t gold and 222.25 g/t silver (Flores, 1991). These reserve should be considered as historical data only and are not compliant with the current CIM standards and definitions required by the Canadian NI 43‐101 “Standards for Disclosure of Mining Projects”.

CDI acquired the project in 1993 with the objective of producing gold and silver from the scoria and from underground vein mining. CDI built a pilot plant at Sitio Viejo to treat the scoria in 1994. They have rehabilitated the Independencia Mine, La Matilde Mine, and El Castaño Mine, and built a treatment plant at the Independencia Mine with capacity of 120 tonnes per day (tpd) to concentrate ore by gravimetry and flotation. Concentrates were roasted and trucked to the pilot plant at Sitio Viejo for cyanidation. CDI state that the plant was never fully operational due to low metal prices and debt problems. The mine and two plants are kept on care and maintenance by CDI.

Sabaletas started operation of a plant to recover gold and silver from the re‐treatment of scoria in August 2009 under contract from CDI. The plant has a capacity to treat 6,000 tonnes per month by crushing and grinding followed by agitated cyanide leach and Merrill Crowe precipitation using zinc powder. In January 2010, the plant processed 5,600 tonnes of scoria and recovered 17,600 grams (about 565.8 ounces) of gold with a recovery of 65% gold, and 388 kg (about 12,474 ounces) of silver with a recovery of 51% silver. The head grade is stated by Sabaletas to be 4 to 5 g/t gold.

2.4 Geology and Mineralization The El Zancudo deposit is located on the western side of the Central Cordillera of the Colombian Andes which is separated from the Western Cordillera to the west by the River Cauca. The El Zancudo deposit lies within the Romeral terrane, an oceanic terrane comprising metamorphosed mafic to ultramafic complexes, ophiolite sequences and oceanic sediments of probable Late Jurassic to Early Cretaceous age. The Romeral terrane is partially covered by continental sediments of the Oligocene to Lower Miocene age Amagá Formation, comprising gray to green colored conglomerates, sandstones, shales and coal seams. The Titiribi‐El Zancudo porphyry of Late Miocene age intrudes the Arquia Complex schists and Amagá Formation sedimentary rocks. Gold mineralization is related to the emplacement of the porphyry stocks.

The host rocks to gold mineralization are schists of the Arquia Complex, sedimentary rocks of the Amagá Formation, and the Late Miocene andesite porphyry intrusions. The sediments have been folded into several synclines cut by high angle reverse faults with strike of N10W to N20W, and a steep dip of 50 to 70° east. Veining in the Independencia Mine is also controlled by the reverse faults.


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The known mineralization is gold‐silver veins of the epithermal to mesothermal, intermediate sulfidation type. Mineralization occurs in multiple veins which have been exploited over a strike length of more than 3,500 m. The average vein width is 0.35 m, and varies up to 0.50 to 0.80 m. The known vertical extent of mineralization is at least 900 m. Gold mineralization occurs in two zones at El Zancudo, the Upper Zone and the Lower Zone. Mineralization in the Upper Zone occurs in flat‐lying veins and disseminations in conglomerates and sandstones at or near the base of the sediment sequence at and above the unconformity with the underlying schists. Mineralization in the Lower Zone is hosted by N‐S striking, steeply‐dipping veins in green schists and accessed by several long cross‐cuts. The minerals, in order of abundance, are pyrite, galena, arsenopyrite, sphalerite, silver‐sulfosalts, bournonite, boulangerite and jamesonite, with minor chalcopyrite, pyrrhotite, native gold or electrum, and native silver. The gangue minerals are quartz, calcite and clay minerals. The clay minerals identified are kaolinite, muscovite and sericite. Wall rock alteration is sericite, carbonate and disseminated sulfides.

2.5 Exploration, Drilling and Sampling Despite a long history of gold and silver mining, the El Zancudo deposit has not been systematically explored. CDI’s focus was to develop gold and silver production from the scoria dumps and from the Independencia Mine. As a consequence, very little exploration was carried out by CDI. The limited programs of exploration carried out by CDI were mainly surface geological mapping, and also surveying and channel sampling of veins in the Independencia Mine workings. CDI carried out programs of diamond drilling at the Independencia Mine in 1999 and 2002‐03 for a total of 998.2 m in 6 holes. CDI assayed samples from veins for gold and silver at a local laboratory understood to be in Medellin and to be uncertified. The sample preparation and analysis methods are not known, and no quality assurance – quality control (QA/QC) program was carried out.

2.6 Data Verification The author has verified the data used upon in this report by visiting the property and confirming the geology and mineralization, and by carrying out independent check sampling. Nine check samples were taken and analyzed at SGS del Perú S.A.C., El Callao, Peru. The results the presence of high grades of gold and silver in the veins at the Independencia Mine and in the slag at Sitio Viejo, with gold grades up to 36.0 g/t over 0.25 m and grades up to 2,147 g/t over 0.25 m.


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2.7 Mineral Processing and Metallurgical Testing The gold in the sulfide ore at El Zancudo is refractory due to the very fine grained gold size and encapsulation in pyrite, arsenopyrite and other sulfides. There are three ore treatment plants on the project, two of which are owned by CDI and are inactive, and the third is owned by Sabaletas and is actively re‐processing scoria to recover gold and silver. CDI has a 20 tpd pilot plant at Sitio Viejo with agitated cyanide leach tanks. CDI also has 120 tpd plant at the Independencia Mine which has crushing, milling and flotation to produce a sulfide concentrate, which was then processed at the Sitio Viejo pilot plant to extract gold and silver by re‐grinding, agitated cyanide leach, and Merrill Crowe precipitation with zinc. CDI state that neither of these plants has ever operated on a commercial basis. The Sabaletas plant is located at Sitio Viejo and recovers gold and silver from the re‐treatment of scoria under contract from CDI. It has been in operation since August 2009. The plant has a capacity to treat 6,000 tonnes per month by crushing, grinding, agitated cyanide tanks and Merrill Crowe precipitation.

2.8 Mineral Resource and Mineral Reserve Estimates There are no mineral resource and mineral reserve estimates for the property that are compliant with the current CIM standards and definitions required by the Canadian NI 43‐101 “Standards for Disclosure of Mining Projects”.

2.9 Interpretation and Conclusions El Zancudo is a major old mining district with no modern exploration. There has been extensive historical mining for gold and silver. The project has good exploration potential to encounter additional mineralization on extensions of the veins along strike to the north and south of the Independencia Mine, and above and below the main level. There is also potential to encounter at depth multiple additional veins to the west of the Independencia Mine that have been mapped on surface and mined at shallower levels. The mine has the infrastructure and potential to achieve small scale gold and silver production from high grade veins in a relatively short time period. El Zancudo has potential for bulk mineable gold and silver mineralization in zones of good structural preparation where a sufficiently high density of veining has developed, and/or in


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zones where sufficient volumes of disseminated mineralization have developed in sedimentary rocks. The low angle veins and splays in thrust duplexes provide good structural dilational sites to focus fluid flow and are favorable sites for potential bulk mineable gold. The low angle duplexes may be blind to surface exploration and have probably been overlooked and under‐represented in historical mining and exploration. El Zancudo also has potential for bulk mineable porphyry gold‐copper mineralization related to porphyry intrusions. These are most likely to occur in the south part of the El Zancudo licenses close to the centers of porphyry intrusions.

2.10 RECOMMENDATIONS A two‐stage exploration program is recommended with the following objectives:

• Define mineral resources in veins in the Independencia and other mines in order to achieve underground gold‐silver production in the short term;

• Explore for potentially bulk mineable zones of vein and/or disseminated gold‐silver mineralization;

• Explore for porphyry gold‐copper mineralization. Stage 1: Data compilation, check sampling, and surface and underground exploration to define drill targets. Estimated time 6 months. The work should include the following:

• Build a digital database and geological model by compiling all previous sampling from underground, drilling and surface, and compiling all mine plans and geological maps;

• Carry out a check sampling program to verify the previous sampling; • Carry out additional sampling program of the veins in accessible mines and carry out a

survey of the veins and mine workings where necessary; • Implement a QA‐QC program for sampling and use a certified laboratory for assaying; • Soil survey to explore for new vein and bulk tonnage targets; • Airborne magnetic and radiometric survey to explore for bulk tonnage targets; • Carry out mapping and sampling on surface and of other old mine workings in El

Zancudo to determine the potential for additional resources and define other exploration targets on the properties;

• Carry out reconnaissance mapping and sampling on concession contracts no. 5849 and 5954 which lie to the west and north of the areas of known mineralization;

• The outcome of the Stage 1 program is to define drill targets on surface and underground.


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The estimated costs for the Stage 1 exploration program are US$ 600,000 and are listed in Table 2.1.

Item US$ (000)Compile database 200Check sampling and additional sampling and survey program

100

Mapping and sampling El Zancudo surface 100Reconnaissance mapping, rock sampling, soil survey 150Airborne geophysics 50Total 600

Table 2.1 Estimated budget to carry out Stage 1 exploration program at El Zancudo.

Stage 2: Carry out diamond drill program, estimate mineral resources, carry out metallurgical test work and carry out a NI 43‐101 Preliminary Economic Assessment (PEA) focused on the Independencia Mine and other accessible mines. Also preliminary drilling of surface targets. Estimated time 6 months. The work should include the following:

• Diamond drill program (5,000 m) from the Independencia Mine to test the extension of veins to the north, south and at depth, and of additional veins to the west;

• Mineral resource estimate of the veins; • Metallurgical test work of the veins; • Preliminary Economic Assessment for underground production from the Independencia

Mine using the existing plants. • Preliminary diamond drill program (2,000 m) of any potentially bulk mineable or

porphyry targets identified in the Stage 1 program. The estimated costs for the Stage 2 exploration program are US$ 2,000,000 and are listed in Table 2.2

Item US$ (000)Diamond drilling Independencia 5,000 m 1,000Metallurgy Independencia 250Mineral resource estimate Independencia 100Preliminary Economic Assessment Independencia 250Diamond drilling bulk targets surface 2,000 m 400Total 2,000



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The total cost of the Stage 1 and Stage 2 exploration programs is US$ 2,600,000 and the estimated time to completion is 12 months. Following the successful completion of the Stage 1 and Stage 2 exploration programs, a mine re‐development program and budget can be made for the Independencia Mine. In addition, a second stage drill program can be planned for any potentially bulk mineable targets identified in the Stage 1 and Stage 2 exploration programs.


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3 INTRODUCTION AND TERMS OF REFERENCE

3.1 Purpose of Report Dr. Stewart D. Redwood, Consulting Geologist, prepared this independent Qualified Person’s Technical Report of the El Zancudo Project in the Municipalities of Titiribi, Angelopolis and Armenia, Department of Antioquia, Republic of Colombia for Tapestry and Gran Colombia. The report is based on information known to the author as of 6 April 2010, which is the effective date of the report. Gran Colombia has agreed to the assignment and sale‐purchase of the mining concessions comprising the El Zancudo Project, through an agreement signed with CDI. This report is intended to provide a technical summary of the El Zancudo Project.

3.2 Sources of Information The author visited the property on 18 February 2010, accompanied by Eugenio Alvarez of CDI, who is in charge of the project on site, and Hernan Ortiz, Consultant Geologist, who carried out work on El Zancudo for CDI in 2003 and is familiar with the geology of the project. The author revised plans and reports at CDI’s office in Sitio Viejo, went underground at the Independencia Mine, visited briefly the CDI processing plants at the Independencia Mine and at Sitio Viejo, and visited the scoria dumps and scoria re‐processing plant at Sitio Viejo accompanied by Miguel Angel Alvarez Salazar, Mine Engineer, Sabaletas. Jorge Neher and Rubén Eduardo Luján of Despacho de Abogados miembros de Macleod Dixon, S.C. (a Law Firm member of Macleod Dixon) (Macleod Dixon), Caracas, Venezuela, as the international and leading legal counsel to the Companies, in coordination with a local Colombian law firm, provided legal information about the project. The project has been described in a lot of unpublished reports about geology, mineralization, sampling, metallurgy, mining, processing and economic studies by various authors and companies, as well as in internal reports and reports for government filing by CDI. The re‐treatment of the scoria has also been the subject of a lot of technical and feasibility studies. Some of these reports were available at the CDI mine office in Sitio Viejo at the time of the project inspection and were borrowed to write this report (Carillo, 2003, 2004; CDI, 1994, 2007; James, 2006; PPM, 2002, 2003). The list of references in the reports consulted show the existence of a lot of other reports which were not seen. In addition there are a lot of un‐filed documents at the CDI mine office. The author considers that he has seen the most important


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reports and that there are no significant omissions of information. The reports that were consulted, as well as other published government, academic, and individual papers, are listed in Section 21 “References” of this report.

3.3 Terms of Reference The terms of reference were to prepare a Technical Report as defined in Canadian Securities Administrators’ National Instrument 43‐101, Standards of Disclosure for Mineral Projects, and in compliance with Form 43‐101F1 (Technical Report) and Companion Policy 43‐101CP. A list of the abbreviations used in the report is provided in Table 3.1. All currency units are stated in US dollars, unless otherwise specified. Quantities are generally expressed in the metric International System (SI) of units, including metric tonnes (t), kilograms (kg) and grams (g) for weight; kilometers (km) and meters (m) for distance; hectares (ha) for area; and grams per metric tonne (g/t) for gold and silver grades. Metal grades may also be reported in parts per million (ppm). Precious metal quantities may also be reported in Troy ounces (ounces, oz).

Description Abbreviation Anno Domini, years after the birth of Christ AD

Department of Antioquia Antioquia

Years before the birth of Christ BC

Bolsa de Valores de Colombia BVG

Canadian Institute of Mining, Metallurgy and Petroleum CIM

Canadian National Instrument 43‐101 NI 43‐101

Centimeter(s) cm

Colombian Peso COP

Consorcio de Inversionistas, C.D.I., S.A. CDI

Degree(s) o

Degrees Celsius oC

Department of Antioquia Antioquia

United States’ Dollar(s) US$

Gran Colombia Gold, S.A. Gran Colombia

Environmental Impact Study (Estudio de Impacto Ambiental) EIA

Environmental Management Plan (Plan de Manejo Ambiental) PMA

Gram(s) g

Grams per metric tonne g/t

Greater than >

Hectare(s) Ha

High sulfidation epithermal HS


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Colombian Institute of Geology & Mining (Instituto Colombiano de Geología y Minería) INGEOMINAS

Intermediate sulfidation epithermal IS

Kilogram(s) kg

Kilometer(s) km

Less than <

Liter(s) l

Liters per second l/s

Low sulfidation epithermal LS

Despacho de Abogados miembros de Macleod Dixon, S.C. Macleod Dixon

Meter(s) m

Million tonnes Mt

Million Troy ounces Moz

Million years Ma

Millimeter(s) mm

Mine Plan PTO

Mineros S.A. Mineros

Mining Energy Planning Unit (Unidad de Planeacion Minero Energetica) UPME

Ministry of Mines and Energy (Ministerio de Minas y Energia) MME

Molar percentage mol %

National Mining Registry (Registro Minero Nacional) RMN

Not available/applicable n.a.

Ounces (Troy) Oz

Parts per million ppm

Percent(age) %

Plus +

Plus or minus + / ‐

Proyecto Sabaletas, S.A.S. Sabaletas

Quality Assurance/Quality Control QA/QC

Republic of Colombia Colombia

Second s

Sistema de Informació Minero Colombiano SIMCO

Sulfur activity logfS2

Système International d’Unités SI

Tapestry Resource Corp. Tapestry

Tonne (metric) t

Tonnes (metric) per day tpd

Universal Transverse Mercator UTM

Year Y

Table 3.1 List of abbreviations


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4 RELIANCE ON OTHER EXPERTS The author has relied on information supplied by Gran Colombia and CDI for the property description and environmental permitting and has not carried out independent verification of these. The author has also received technical information from Gran Colombia and CDI’s geologists and management and has done his best to verify the reliability of this information. The opinions expressed in this report are based on the available information and geologic interpretations as provided by the companies. The author regularly consulted with Jorge Neher and Rubén Eduardo Luján of Macleod Dixon, Caracas, Venezuela, as the international and leading legal counsel to the Companies, in coordination with a local Colombian law firm. The following are also thanked for providing data, hosting the site visit and discussions:

• Eugenio Alvarez, CDI • Hernan Ortiz, Consultant Geologist • Miguel Angel Alvarez Salazar, Mine Engineer, Sabaletas.

Alba Nury Gallego, a Colombian PhD geology candidate at Shimane University, Matsue, Japan is thanked for providing copies of her papers on the mineralogy of El Zancudo and for discussions about the geology.


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5 PROPERTY DESCRIPTION AND LOCATION

5.1 Property Location

The El Zancudo Project is located in the Municipalities of Titiribi, Angelopolis and Armenia, Department of Antioquia (Antioquia), Republic of Colombia (Colombia) (Figure 5.1). El Zancudo is approximately 27 km south of the city of Medellin, the capital of the Department of Antioquia (Figure 5.2). The latitude and longitude for the CDI office in Sitio Viejo village located on the property is 6° 04’ 30” N – 75° 47’ 26” W; the UTM coordinates for the same point are 0412437 ‐0671385, with an altitude of 1,302 m (datum WGS84, Zone 18N); and the Colombian system Arena coordinates are 1,142,399 – 1,163,526, altitude 1,282 m (Colombia West Zone). The village of Sitio Viejo is 1.5 km north of the town of Titiribi. The properties are bounded on the west side by the River Cauca, and on the south side by Sierra Vetas.

Figure 5.1 Location map of El Zancudo Project, Department of Antioquia, Colombia


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Figure 5.2 Location Map of El Zancudo Project.

5.2 Property Description Gran Colombia, a privately‐owned Panamanian company, and CDI, a privately‐owned Colombian company, have entered into a sale‐purchase agreement dated 29 January 2010 whereby CDI will assign the mining concession contracts, exploration license, requests for mining concessions and all assets associated with these to Gran Colombia or an affiliate or subsidiary of Gran Colombia. The affiliate company will be Zancudo Gold Corp., a Panamanian company that is currently being formed with a branch in Colombia and which will be wholly and directly owned by Gran Colombia. The closing date of the agreement is 30 April 2010. The purchase price is US$ 15.0 million, payable as follows:


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• US$ 1.0 million advance on or before 29 January 2010 (paid). • US$ 4.0 million on or before the closing date 29 April 2010. • US$ 5.0 million on or before 29 October 2010. • US$ 5.0 million on or before 29 April 2011.

CDI can elect to receive part or all of the payments in cash or shares of a company affiliated to Gran Colombia which is listed on a North American stock exchange, except for the deposit which was payable in cash. CDI owns or controls, directly or indirectly, eight adjoining mining concession contracts and applications at El Zancudo with a total area of 6,001.595 ha, or 60.0 square kilometers. The concession contracts and applications are listed in Table 5.1, and the coordinates are given in Annex 1. Six of the concessions have contracts which are registered in the National Mining Registry, with a total area of 2,619.4450 ha. Another concession, mining concession No. 5849, has a signed contract and is at the National Mining Registry awaiting registration. The eighth, Exploration License No. 4985, is an expired exploration license for which application for a concession contract has been submitted and awaits approval, and is described in more detail in the next paragraph. All of the rights and interest in the contracts and applications owned by Ezequiel Llanes Cotes, Minera La Apertura, S.A. and Ary Pernett Márquez will be assigned directly to an affiliate of Gran Colombia. For the property description the author has relied on information supplied by the legal counsel to Gran Colombia, and has not verified this independently. Exploration license No. 4985 was requested on 13 October 1999 when the Mining Code in force and effect was the one of 1988, under which exploration licenses could only be awarded for one year in the event that the area covered by the license was of up to 100 ha, two years in the event that the area covered by the license was of more than 100 ha and up to 1,000 ha, and five years in the event that the area covered by the license was of more than 1,000 ha. Since the area covered by exploration license No. 4985 was less than 100 hectares (i.e. 52.9 ha), the exploration license was accordingly granted for one year. The owner of exploration license No. 4985 currently has a legal right to be awarded by the Governor of Antioquia a concession contract covering the area covered by that exploration license, regardless of the fact that the exploration license itself has expired. To that end, Ary Pernett Márquez has requested the award of such concession contract and has submitted all information required by the Governor of Antioquia for that purpose. The award of the concession contract is currently at the stage of technical evaluation and, if positively evaluated, will result in the award and execution of the contract.


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Contract Number

Registration Code

License Status License Owner Area (Ha) Date of Registry Date of Expiry

5911 HGIE-07 Contract

Minera La Apertura S.A. & Consorcio de Inversionistas C.D.I., S.A.

147.1120 09 May 2006 08 May 2036

5747 HDWA-02 Contract Ezequiel Llanes Cotes 603.9200 01 February 2008 31 January 2038 5954 HFSG-01 Contract Ezequiel Llanes Cotes 1,503.5250 07 October 2005 06 October 2035

5835 HEPO-05 Contract Minera La Apertura S.A. 53.5680 31 August 2004 30 August 2034

5765 HCPN-02 Contract Minera La Apertura S.A. 61.3200 02 September 2002 01 September 2032

5521 FDHK-01 Contract

Consorcio de Inversionistas C.D.I., S.A.

250.0000 07 January 1998 07 January 2028

4985 HEOM-12 Exploration (1) Ary Pernett Marquez 52.9000 11 March 2008 10 March 2009

5849 Pending Contract (2)

Consorcio de Inversionistas C.D.I., S.A.

3,329.0250 Pending 30 years from registration

Note 1: Exploration license expired. Concession contract pending negotiation and execution.

Note 2: Concession contract signed 14 December 2009 and sent to National Mining Registry for registration on 30 December 2009. Registration of the contract is pending (as of 6 April 2010).

Table 5.1 Description of CDI mining concession contracts and exploration licenses at El Zancudo project. Table supplied by Gran Colombia. Information current as of 6 April 2010.

The entrance to the Independencia adit and the processing plant are located outside of being outside of CDI’s concession contract number 5521 and on a mining concession belonging to third party. Under Colombian mining law, the adit or infrastructure of a mine (processing plant, tailings ponds, waste dumps, portals, etc.) may be located outside the boundaries of a concession provided that the concession holder has a right to use such land per a lease, easement or by being the land owner. In the specific case of the Independencia mine, the adit and the processing plant are outside the boundaries of concession 5521. However Zancudo Gold Sucursal Colombia, a subsidiary of Gran Colombia Gold S.A., is the owner of the land where such facilities are located.


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Figure 5.3. Map of CDI mining concession contracts and applications at El Zancudo, showing towns, mines and

plants. Grid is Colombian system.


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5.2.1 Scoria Reprocessing Contract CDI has signed a scoria reprocessing contract with Sabaletas granting Sabaletas the right to recover gold and silver from scoria at the locality of Sitio Viejo, located on mining concession contract No. 5521. The scoria is glassy slag in dumps from historical roasting operations carried out to recover gold and silver. Sabaletas is a subsidiary of Mineros S.A. (Mineros), a Colombian corporation whose shares are traded on the Colombian Stock Exchange (Bolsa de Valores de Colombia ‐ BVG). The Contract was executed on 4 January 2010 and superseded a prior contract of 17 July 2008, but is effective as of the commencement of reprocessing works in 2009. Under the Contract, CDI grants Sabaletas a temporary and exclusive right to conduct, for its own account and at its own risk, reprocessing works on certain scorias (slags) of gold and silver found, at the time of execution of the Contract, on a land lot at Sitio Viejo in the Municipality of Titiribi and leased by CDI, which scoria resulted from a prior exploitation in the area covered under mining concession contract No. 5521. The Contract does not extend to reprocessing or works on any natural deposits that may exist in that area. The Contract remains effective until Sabaletas deems that all the marketable minerals have been separated from the scoria, but in any event for a period not to exceed seven (7) years. Sabaletas cannot assign the Contract without the prior written authorization of CDI, save for the fact that Sabaletas may freely assign the Contract to Mineros without that authorization of CDI. For its part, if and once assigned, Mineros cannot re‐assign the Contract without the prior written authorization of CDI. CDI cannot assign the Contract without the prior written authorization of Sabaletas, save for the fact that CDI may freely assign the Contract to any assignee of its mining concession contract No. 5521. However, any assignment of the scoria or of the leasehold interest in the land lot by CDI triggers a penalty clause, unless the assignee explicitly agrees to be assigned the Contract and to become a party to it. As consideration for the rights granted by CDI to Sabaletas, CDI is entitled to a monthly payment in cash and in Colombian Pesos equal to a percentage of the value of the sales of the marketable minerals in the relevant month. The percentages are as follows:

• 6.5% when the tenor of the gold in the reprocessed scoria is less that 6.5 g/t; and


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• 7.0% when the tenor of the gold in the reprocessed scoria is equal to or greater than 6.5 g/t.

In order to be credited to the consideration payable by Sabaletas to CDI under the Contract, Sabaletas delivered to CDI an advance payment of nine hundred million Colombian Pesos (COP) 900,000,000, equivalent to about US$ 465,838 based on the current exchange rate1. The amount of this advance payment is to be deducted from the monthly payment payable as consideration by Sabaletas to CDI, as follows:

• Forty Five Million Colombian Pesos (COP 45,000,000, equal to about US$ 23,292), if the volume of milled scoria in the relevant month is between 6,000 and 7,000 tons;

• Forty Million Colombian Pesos (COP 40,000,000, equal to about US$ 20,704), if the volume of milled scoria in the relevant month is between 5,000 and 6,000 tons;

• Thirty Five Million Colombian Pesos ($35,000,000, equal to about US$ 18,116), if the volume of milled scoria in the relevant month is between 4,500 and 5,000 tons; and

• Thirty Million Colombian Pesos ($30,000,000, equal to about US$ 15,528), if the volume of milled scoria in the relevant month is less than 4,500 tons.

Sabaletas must arrange and obtain the servitudes and other rights necessary to ensure the peaceful performance of the reprocessing works and procure the necessary permits to reprocess, store, commercialize and transport the minerals separated from the scoria. In order to guarantee the performance of the obligations of CDI under the Contract (particularly, those relating to the proper use of the advance payment received from Sabaletas), CDI granted a registered non‐possessory pledge on certain assets to Sabaletas and issued a blank promissory note with instructions to the order of Sabaletas.

5.3 Colombian Mining Law Mining in Colombia is governed by the Mining Law 685 of 2001. It was modified by Mining Law 1382 of 9 February 2010. The mining authorities in Colombia are as follows:

• Ministry of Mines and Energy (Ministerio de Minas y Energia, MME): The highest mining authority in the country.

1 Exchange rate of COP 1,932 to US$ 1.00 as of 30 March 2010.


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• INGEOMINAS (Instituto Colombiano de Geología y Minería or Colombian Institute of Geology and Mining): The MME had delegated the administration of mineral resources to INGEOMINAS and some Department Mining Delegations. INGEOMINAS has two departments, the Geological Survey (Servicio Geológico), and the Mines Department (Servicio Minero) which is responsible for all mining contracts except where responsibility for the administration has been passed to the Departmental Mining Delegations.

• Departmental Mining Delegations (Gobernaciones Delegadas): These administer mining contracts in the Departments with the most mining activity (Antioquia, Caldas, Bolivar, Boyaca, Norte Santander, Cesar and Guajira).

• Mining Energy Planning Unit (Unidad de Planeación Minero Energética, UPME): Provides technical advice to the MME regarding planning for the development of the mining and energy sector and maintains the System of Colombian Mining Information (Sistema de Información Minero Colombiano, SIMCO).

All mineral resources belong to the state and can be explored and exploited by means of concession contracts granted by the state. Under the Mining Law of 2001, there is a single type of concession contract covering exploration, construction and mining which is valid for 30 years and can be extended for another 20 years. Concession contract areas are defined on a map with reference to a starting point (punto arcifinio) and distances and bearings, or map coordinates. A surface tax (canon superficial) has to be paid annually in advance during the exploration and construction phases of the concession contract. This is defined as 1 minimum daily wage per hectare per year for years 1 to 5 (about US$ 8.65), 1.25 minimum daily wages per hectare per year for years 6 and 7 (about US$ 10.81), and 1.5 minimum daily wages per hectare per year for year 8 (about US$ 12.97). The 2010 Mining Law does not define the property tax for years 9 to 11. A reasonable interpretation could be that the property tax for year 9 should be 1.5 minimum daily wages per hectare and per year (the same as for year 8), and for years 10 and 11 should be 1.75 minimum daily wages per hectare and per year, on the basis that this provision appears to understand that the property tax should be increased every two years by 0.25 minimum daily wages per hectare and per year. This issue requires clarification from the Ministry of Mines and Energy. The minimum daily wage in 2010 is COP 17,166.67 which, at the present exchange rate of COP 1,915 = US $1.00 (1 April 2010), is about US $8.96. The minimum daily wage is adjusted annually.


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The application process for a concession contract is as follows:

1. Application submitted. The application form costs COP 500,000 (about US$ 260). 2. Technical study by the mining authority to determine whether there is any overlap with

other contracts or applications. The applicant is notified. 3. Under the modifications to the Mining Law of 2010, the surface tax has to be paid within

three days of the notification of the technical study of free areas. 4. Once the surface tax is paid, the contract is prepared and signed. 5. The contract is inscribed in the National Mining Registry (Registro Minero Nacional,

RMN). The concession contract has three phases:

1. Exploration Phase.

• Starts once the contract is registered in the National Mining Registry. • Valid for 3 years plus up to 4 extensions of 2 years each, for a maximum of 11

years. • Annual surface tax. • Requires an annual Environmental Mining Insurance Policy for 5% of the value of

the planned exploration expenditure for the year. • Present a mine plan (PTO) and an Environmental Impact Study (Estudio de

Impacto Ambiental or EIA) for the next phase.

2. Construction Phase.

• Valid for 3 years plus a 1 year extension. • Annual surface tax payments continue as in Exploration Phase. • Requires an annual Environmental Mining Insurance Policy for 5% of the value of

the planned investment as defined in the PTO for the year. • Environmental License issued on approval of Environmental Impact Study.

3. Exploitation Phase.

• Valid for 30 years minus the time taken in the exploration and construction phases, and is renewable for 30 years.

• Annual Environmental Mining Insurance Policy required. • No annual surface tax. • Pay royalty based on regulations at time of granting of the Contract.


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Royalties payable to the state are 4% of gross value at the mine mouth for gold and silver and 5% for copper (Law 141 of 1994, modified by Law 756 of 2002). For the purposes of royalties the gold and silver price is 80% of the average of the London afternoon fix price for the previous month. The most important changes in the Mining Law of 2010 are:

• The exploration phase can now be up to 11 years, rather than 5 years. • The contract length is reduced to 50 years (30 years + 20 year extension) from 60 years

(30 + 30). • The surface tax is the same for all sizes of concession, and increases from year 6. • The surface tax for year 1 has to be paid within three days of notification of the free

areas. • The first year of the surface tax on all applications in process has to be paid within three

months by 9 May 2010. • Once an application or contract is dropped or expires for whatever reason, the area

does not become free for taking again for a period of 30 days. The Mining Law of 2001 allows for mining titles granted under previous laws to continue to be governed by the terms of the previous laws, including Decree‐Law 2655 of 1988. In addition, applications made under the 1988 Mining Law can continue the application process under the terms of the old law and be granted a license under the 1988 law. Under the 1988 law, an exploration license is issued for 2 years and is renewable for 1 year. This is followed by an exploitation license which is valid for 10 years, and may be renewed for another 10 years.

5.4 Environmental Regulations and Liabilities The Mining Law 685 of 2001 requires an Environmental Mining Insurance Policy for each concession contract. In addition, the Law states that an Environmental Impact Study (EIA) has to be presented at the end of the Exploration Phase if the concession is to proceed to the Construction Phase. The EIA must be approved and an Environmental License issued before the Exploitation Phase can begin, subject to an Environmental Management Plan (Plan de Manejo Ambiental or PMA). In addition, exploitation requires a Permit for springs, Forest Use Permit, Certificate of Vehicular Emissions, Emissions Permit, and River Course Occupation Permit. Exploration activities require an Environmental Management Plan (PMA) and a Surficial Water Concession.


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The only CDI mining concession which is currently at the exploitation stage is concession contract No. 5521. CDI has requested an Environmental License for this concession contract and has submitted all information requested by the competent environmental authority in order to obtain it. As of this date, CDI has obtained from the competent environmental authority a water concession and a permit for discharges, which cover all of the activities with an environmental impact that are currently conducted by CDI on that concession contract. CDI thus has all of the necessary environmental permits required to conduct the mining activities that it is currently conducting. CDI should continue with the procedure to obtain the Environmental License and then to submit any relevant Environmental Management Plans. The El Zancudo project has potential environmental liabilities due to past and current mining activities including:

• Surface disturbance and degradation including deforestation. • Waste rock and tailings from past mining operations. • Contamination of soil and water by mercury, cyanide, arsenic, acid drainage, heavy

metals and solids from past mining operations. Under Colombian mining and environmental laws, CDI is responsible for any environmental remediation and any other environmental liabilities based on actions or omissions occurring from and after the entry into force and effect of the relevant concession contract, exploration license or mining request, as applicable, even if such actions or omissions occurred at a time when a third party was the owner of the relevant mining title. On the other hand, CDI is not responsible for any such remediation or liabilities based on actions or omissions occurring before the entry into force and effect of the relevant concession contract, exploration license or mining request, as applicable, from historical mining by previous owners and operators, or based on the actions or omissions of third parties who carry out activities outside of the mining title (such as illegal miners).

5.5 Surface Rights In Colombia there is no need to have surface ownership to access the subsoil. The Mining Law provides the mining servitudes and the possibility of expropriation of the surface, in case it is required, since the mining activity is considered to be in the public interest. CDI owns the surface rights over a land lot located in the District of Sitio Viejo, Municipality of Titiribi, with an approximate area of 4.51 hectares. In addition, CDI leases (as lessee) the surface rights over four separate land lots, as follows:


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1. A land lot located in the District of Sitio Viejo, Municipality of Titiribi with an

approximate area of 5,000 square meters, where the scoria to be reprocessed by Sabaletas under contract from CDI is located;

2. A land lot located in the District of Sitio Viejo, Municipality of Titiribi with an approximate area of 3,000 square meters, where the reprocessing plant is located;

3. A land lot located in the District of Sitio Viejo, Municipality of Titiribi, at the mine of El Castaño; and

4. A land lot located in the District of Sitio Viejo, Municipality of Titiribi, at an area locally known as La Matilda.

5.6 Water Rights There are water rights on two of the mining concessions, as follows:

1. Concession contract No. 5521, where CDI has water rights of 0.05 liters per second (l/s) from La Maní or Las Tinajas streams; and

2. Concession contract No. 5765, where Minera La Apertura, S.A. has water rights of 10 l/s from the Amagá stream.


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6 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

6.1 Accessibility The property located 27 km south west of Medellin and 62 km by road. It is a one‐and‐a‐half hour drive by paved road from Medellin via route 25 south to Caldas, then route 60 west through Amagá, and turn off to Titiribi, and an unpaved road to the village of Sitio Viejo. There is an international airport located in Medellin with flights to the USA, Panamá, Venezuela, Ecuador, Peru and Chile.

6.2 Climate Climatic zones vary with elevation and are defined as hot (>24°C) below 1,000 m; temperate (18°C to 24°C) between 1,000 m and 2,000 m; and cold above 2,000 m (12°C to 18°C). El Zancudo is situated mostly within the temperate zone where the climate is warm and humid with an annual rainfall of approximately 1,500 to 2,000 mm. Rainfall has a bimodal distribution with the wettest months in from March to May and again from September to December. The ecological zones defined on the Holdridge Life Zone climatic classification system are zoned by elevation:

• Premontane (subtropical) wet forest transitional to tropical moist forest and dry forest; defined as temperatures >24°C, annual rainfall of 1,500 mm to 2,800 mm, and elevation of 700 m to 1,000 m.

• Premontane (subtropical) wet forest defined as temperatures of 18°C to 24°C, rainfall of 2,000 mm to 4,000 mm, and elevation of 1,000 m to 1,900 m. The main areas of mining at El Zancudo are in this zone.

• Lower montane (warm temperate) wet forest defined as temperatures of 12°C to 18°C, rainfall of 2,000 mm to 4,000 mm, and elevation of 1,900 m to 2,900 m.

Most of the original forest cover has been cleared for settlement, agriculture and grazing. Land is used for cattle grazing, coffee, sugar cane, citrus fruit, bananas, and mining.

6.3 Local Resources and Infrastructure El Zancudo is 175 km west of the Pacific Ocean and 230 km south of the Caribbean Sea and Atlantic Ocean. The nearest port is Buenaventura on the Pacific Ocean. The nearest railhead is


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at Medellin. There are plans to re‐build the railway between Medellin and La Felisa, Caldas which would re‐open the national railway network between the Pacific (Buenaventura) and Atlantic Oceans (Puerto Berrio on the Magdalena River).

Field personnel for the exploration program are available from the towns of Sitio Viejo and Titiribi and neighboring districts. The district is expected to be able to supply the basic workforce for any future mining operation. Titiribi is supplied by electrical power on the Colombian national power grid. The region has high rainfall and there are ample water resources available. Water rights belong to the state and are governed by Decree 1541 (1978). For any mining purposes, applications for water concessions are made to CORANTIOQUIA (Corporación Autónoma Regional del Centro de Antioquia).

Figure 6.1 Panoramic view of El Zancudo Project looking west.

Titiribi town and Sierra Vetas on the left; Sitio Viejo in middle; Las Juntas creek in foreground; Amagá River on left. Historical mining at El Zancudo has occurred on the ridge from above Sitio Viejo north to the Amagá valley.

The Independencia Mine portal is in the valley lower left. Photo S. Redwood.

6.4 Physiography The El Zancudo – Titiribi district is located on the western side of the Central Cordillera (Cordillera Central) of Colombia on the east side of the Cauca River. The topography in the area is abrupt with a relief of about 1,750 m between the Cauca River at 450 m elevation on the west side of the project and the peaks of the nearby mountains south of Titiribi of up to about 2,200 m elevation. A general view is shown in Figure 5.1. The El Zancudo veins outcrop on the north trending ridge of the mountain of Sierra Vetas at altitudes of between 900 and 1,350 m. The area is bounded on the east side by the valley of the north‐flowing Las Juntas creek, on the north side by the valley of the west‐flowing Amagá River, and on the west side by the Cauca River which is a major, north‐flowing river in a deep valley that separates the Western and


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Central Cordilleras. The river has an average flow rate from 500 to 600 cubic meters per second.


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7 HISTORY

7.1 Colombian Gold Mining History Colombian historical gold production is estimated between 29 Moz and 35 Moz from the Spanish conquest in 1537 until the start of the California gold rush in 1848, making Colombia the largest gold producer of the Spanish empire and the second in South America after much larger Brazil (Restrepo, 1952). Seventy‐five percent of this production came from the Departments of Antioquia and Caldas, with the Marmato project located near the border between the two. Colombian gold production between 1514 and 1934 has been estimated at 49 Moz which makes Colombia number one in South America with 38% of the total production (Emmons, 1937). Two‐thirds of the gold production was from placer deposits. Subsequent Colombian production is estimated at 30 Moz by the Banco de la Republica (Shaw 2000), which gives Colombia a total recorded historical gold production of approximately 80 Moz. Gold production between 2000 and 2008 ranged from 15.5 tonnes (t) to 46.5 t (0.50 Moz to 1.50 Moz) of gold per year. Gold production in 2008 was 34.3 tonnes (1.10 Moz). This recent production has earned Colombia a ranking which has ranged from 2nd to 5th largest gold producer in South America and 12th to 20th largest in the world (Boletín Estadístico de Minas y Energía, 1999‐2005. Ministerio de Minas y Energia, Colombia, 2008). The above figures indicate the great historical importance of Colombian gold production and, given that there has been no modern gold exploration until very recently, indicate the high exploration potential of the country. The Middle Cauca region, where El Zancudo is located, was occupied for two thousand years before the Spanish conquest by farmers, potters, gold miners and goldsmiths of the Quimbaya culture (500 BC to 1600 AD). The Quimbaya culture was noted for some of the finest gold workmanship in Colombia. It was part of the greater Chibcha culture which occupied the present day countries of Colombia, Panamá and Costa Rica and formed the largest Amerindian group between the Incas and the Aztecs.

7.2 El Zancudo History Mining has been carried out in the El Zancudo district since 1793. During the 1800’s and early 1900s, production of polymetallic ores containing gold, silver, zinc, lead, copper, antimony and arsenic came from at least 14 principal mines within a 3 km radius of Titiribi. One of the early companies was Sociedad de Minas de Antioquia, formed in 1828. The most important company


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was the Sociedad de El Zancudo, formed in 1848. A smaller company was Sociedad de Otra‐Mina. The peak production period was from 1885 to 1930. The El Zancudo mine was closed in 1945 and subsequent production has been on a small scale. (Grosse, 1926, p. 314‐317; CDI, 1994; James, 2006).

The Sociedad del Zancudo reported production of 4,157.89 kg (129,325 ounces) of gold and 30,818.81 kg (958,570 ounces) of silver from 284,370 tonnes of ore in the 11 year period between 1912 and 1922. The recovered grade was 14.62 g/t gold and 108.37 g/t silver. Free gold produced was 53.5% of the total gold, the balance being by smelting.(Grosse, 1926, p. 314‐317).

Total production from the Titiribi district has been estimated at between 48,230 kg and 64,300 kg (1.5 to 2.0 Moz) of gold equivalent (James, 2006).

The first gold ore roaster was installed in 1851 and the second in 1861‐62 in Sabaletas, and was later moved to Sitio Viejo. The high grade ore was hand cobbed (hand selected) and sent directly to the roasters. The lower grade ore was crushed in 5 stamp mills with 300 stamp pistons in total, operated hydraulically. The sands were concentrated by gravity on Wilfley tables and “German” tables, and the fines by flotation. Free gold was panned from the concentrates of the Alto Chorros mines. The concentrate from the other mines was smelted using locally‐produced coal, where it was separated by pooling into a primary matte, containing the precious metals, and slag. The primary mattes were refined through progressive oxidation of a mass of crude molten lead. Other metals such as arsenic and lead were also oxidized, leaving a bottom residue of molten precious metals. After 1910 hydrometallurgical processes were introduced to treat the primary matte by sulfidization to recover silver, leaving a gold‐bearing residue which was treated by cyanidation (Grosse, 1926, p. 314‐317; Flores, 1991 quoted in James, 2006). The roasters and smelters were at Sitio Viejo, where two of the twelve brick chimneys still stand (Figure 7.1).

Between 1985 and 1993 the company Compañia de Reciclaje Minero, S.A. (COREMINE) carried out studies to extract gold and silver from the slag dumps at Sitio Viejo (Flores, 1991). These and subsequent studies are summarized in a report by James (2006). The slag dumps have historical proven and probable reserve of 574,000 tonnes grading 4.40 g/t gold and 222.25 g/t silver (Flores, 1991, quoted in James, 2006). These reserve should be considered as historical data only and are not compliant with the current CIM standards and definitions required by the Canadian NI 43‐101 “Standards for Disclosure of Mining Projects”.

Mining contract 5521 was returned to the owner Compañia Minera El Escorial S.O.M., which subsequently made an agreement with CDI in 1993 to produce gold and silver from the scoria


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and from underground vein mining. CDI built a pilot plant at Sitio Viejo to treat the scoria in 1994.

Figure 7.1 Historical gold roaster chimneys and village of Sitio Viejo.

Photo S. Redwood.

CDI has rehabilitated the Independencia Mine, La Matilde Mine, and El Castaño Mine since 1998, located on Mining Contracts 5521 and 5911. A treatment plant was built at the Independencia Mine with capacity of 120 tpd to concentrate ore by gravimetry and flotation. Concentrates were roasted and trucked to the pilot plant at Sitio Viejo for cyanidation. CDI state that the plant was never fully operational due to low metal prices and debt problems. The mine and two plants are kept on care and maintenance by CDI. CDI made an in‐house estimation of reserves and resources in 2003 (Ortiz, 2003), but this does not comply to CIM and NI 43‐101 reporting standards and is not quoted in this report. An economic study of the Independencia Mine was made by James (2006). CDI carried out small scale exploitation of these mines from 2002 until recently, but they are currently inactive. Production in 2006, for example, was 3.488 kg (112 ounces) gold and 9.438 kg (303 ounces) silver (CDI, 2007).


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7.3 Sabaletas Scoria Plant Production Sabaletas started operation of a plant to recover gold and silver from the re‐treatment of scoria in August 2009 under contract from CDI. The plant has a capacity to treat 6,000 tonnes per month. It consists of three stages of crushing and two stages of grinding in ball mills to 70% passing minus 325 mesh (minus 44 microns), followed by gold and silver dissolution in agitated cyanide tanks and Merrill Crowe precipitation using zinc powder. The plant commercializes the zinc precipitate containing gold and silver to a smelter in Medellin. In January 2010, the plant processed 5,600 tonnes of scoria and recovered 17,600 grams (about 565.8 ounces) of gold with a recovery of 65% gold, and 388 kg (about 12,474 ounces) of silver with a recovery of 51% silver. The head grade is stated by Sabaletas to be 4 to 5 g/t gold. There is no NI 43‐101 compliant mineral resource or reserve estimate for the scoria at Sitio Viejo. The Sabaletas plant was brought from the locality of Sabaletas, about 6 km south east of Sitio Viejo, and re‐erected at Sitio Viejo. At Sabaletas the plant also re‐processed scoria to extract gold and silver until the scoria was mined out. It is estimated to have re‐processed about 70,000 tonnes of scoria with a grade of 8.0 g/t gold. The scoria at Sabaletas was derived from historical roasting of ore from El Zancudo; the ore was transported to Sabaletas where there was a source of coal as fuel for the roasters.


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8 GEOLOGICAL SETTING

8.1 Regional Geology The El Zancudo deposit is located on the western side of the Central Cordillera of the Colombian Andes which is separated from the Western Cordillera to the west by the River Cauca. The El Zancudo deposit lies within the Romeral terrane, an oceanic terrane comprising metamorphosed mafic to ultramafic complexes, ophiolite sequences and oceanic sediments of probable Late Jurassic to Early Cretaceous age (Cediel & Cáceres, 2000; Cediel et al., 2003). This terrane was accreted to the continental margin along the Romeral Fault, which lies east of the El Zancudo, in the Aptian (125 to 110 Ma). Movement on the Romeral Fault was dextral indicating that terrane accretion was highly oblique from the southwest. These Arquia Complex schists rocks form the host rock to veins at El Zancudo. The Romeral fault zone is marked by dismembered ophiolitic rocks, including glaucophane schist, in a tectonic mélange and is interpreted as a terrane suture marking an old subduction zone. The Romeral terrane is bounded on the west side by the Cauca Fault. Further west, additional oceanic and island arc terranes were subsequently accreted to the Western Cordillera in the Paleogene and Neogene periods, culminating in the on‐going collision of the Choco (or Panamá) arc since the late Miocene. This reactivated the Cauca and Romeral faults with left lateral and reverse movements (Cediel & Cáceres, 2000; Cediel et al., 2003).

The Central Cordillera is formed of continental crust of Proterozoic and Paleozoic‐age comprising metasediments, amphibolites and gneisses.

The Romeral terrane is partially covered by continental sediments of the Oligocene to Lower Miocene age Amagá Formation, comprising gray to green colored conglomerates, sandstones, shales and coal seams. This is also a host to vein mineralization at El Zancudo.

The Titiribi‐El Zancudo porphyry intrudes the Arquía Complex schists and Amagá Formation sedimentary rocks. Gold mineralization is related to the emplacement of the porphyry stocks. The porphyry has been dated by potassium‐argon method on hornblende from Cerro el Corcovado at Titiribi at 9.0 +/‐ 0.9 Ma and 7.8 +/‐ 1.0 Ma (Gonzalez, 1976). The ages of intrusion, alteration and mineralization are thus Late Miocene.

8.2 Project Geology The geology of the El Zancudo mine has been described by Grosse (1929, p. 300‐317), Emmons (1937, p. 258‐260), CDI (1994, 2007), PPM (2002, 2003), and Carillo (2003, 2004). This section is


37

based on these descriptions and personal observations by the author. The geology is shown in Figure 8.1and cross‐sections in Figure 8.2.

The host rocks are schists of the Late Jurassic to Early Cretaceous Arquia Complex, Oligocene to Lower Miocene continental sedimentary rocks of the Amagá Formation, and Late Miocene andesite porphyry intrusions.

The Arquia Complex schists are dark green and hard, with intervals of black, graphitic schist. The schistosity is NS to NW and they dip steeply to the west.

The sedimentary rocks of the Amagá Formation Lower Member are unconformable on the schists with a basal coarse to medium grained conglomerate followed by sandstone with carbonaceous beds, carbonaceous sandy mudstone, gray claystone, and in the upper part a violet claystone with thick lenses of sandstone. The stratigraphic thickness preserved is up to 50 m.

The schists and sediments are cut by minor andesite porphyry intrusions with the form of dikes and sills. These are on the northern side of a porphyry intrusion centered on Sierra Vetas to south of Titiribi, described in some reports as a laccolith.

There are deposits of recent colluvium at the towns of Titiribi and Sitio Viejo.

The sediments have been folded into several synclines which generally have only the west limb preserved with shallow to sub‐vertical dip of bedding to the east. The east side of the synclines are cut by high angle reverse faults with strike of N10 to 20W, and steep dip of 50 to 70° east. The faults are named, from east to west, Juntas, Troya, Zancudo, Las Manuelas, Del Puente and La Cascada. The three eastern synclines are named, from east to west, Sitio Viejo, Troya, and Zancudo. The Troya syncline has both limbs preserved.

Some of the porphyry dikes are controlled by the reverse faults.

Quartz‐sulfide veining in the Independencia Mine is also controlled by the reverse faults. There are also flat‐lying vein splays. There is later minor reverse offset of both the steep and flat lying veins along the reverse faults.

The steep reverse faults that control the porphyry dikes and veining are interpreted to be a series of stacked thrust ramps and thrust flats. The thrust ramps dip to the east and verge to the west. Fault movement continued until after the veining.


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Figure 8.1 Geological Map of El Zancudo Mine. Source: CDI. Map made by V.M. Carrillo & H.H. Ortiz, 2003 for CDI.


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Figure 8.2 Geological cross-sections of El Zancudo.

From top to bottom, sections A-A’ (along Independencia Mine cross-cut), B’B’, C’C’ and D-D’. Source: CDI. Sections accompany map made by V.M. Carrillo & H.H. Ortiz, 2003 for CDI.


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9 DEPOSIT TYPES The El Zancudo deposit has been mined underground for high grade gold and silver in quartz veins. There is also some disseminated gold and silver mineralization in sedimentary rocks adjacent to veins. The known vein mineralization is of the epithermal to mesothermal, intermediate sulfidation type. This type of mineralization is considered to be porphyry related. A porphyry gold‐copper system, Cerro Vetas, occurs to the south of the El Zancudo deposit, and is considered to have been the source of the hydrothermal fluids. The El Zancudo veins extend from the porphyry deposit for 3,500 m to the north. The mineralization straddles the epithermal to mesothermal transition as defined by a temperature of 300°C (Heald et al., 1987). El Zancudo has potential for bulk mineable gold and silver mineralization in zones where a sufficiently high density of veining is developed, or zones where sufficient volumes of disseminated mineralization are developed. El Zancudo also has potential for bulk mineable porphyry gold‐copper mineralization related to porphyry intrusions. No potentially bulk mineable epithermal gold‐silver or porphyry gold‐copper mineralization has been identified at El Zancudo, but these styles of mineralization represent exploration targets. Epithermal gold and silver deposits of both vein‐style and bulk‐tonnage style are grouped into high sulfidation (HS), intermediate sulfidation (IS) and low sulfidation (LS) types based on the sulfidation states of their hypogene sulfide assemblages (Hedenquist et al., 2004). The sulfidation state describes the sulfur activity (logfS2). HS deposits are also called “acid sulfate”, LS deposits “adularia‐sericite” and IS deposits were very often previously included with LS deposits, and sometimes called a “high sulfide plus high base metal” or “quartz‐sulfide‐gold+/‐copper” subtypes. HS deposits contain sulfide‐rich assemblages of high sulfidation state, typically pyrite with enargite, luzonite, famatinite, and covellite, hosted by leached silicic rock with a halo of advanced argillic minerals. In contrast, LS deposits contain the low‐sulfidation pair pyrite‐arsenopyrite, and only minor quantities of sulfides which occur in banded veins of quartz, chalcedony and adularia plus subordinate calcite. Very minor amounts of copper (usually less than 100 ppm to 200 ppm) are present as chalcopyrite or, less commonly, tetrahedrite‐tennantite. Pyrrhotite is present in trace amounts in only some LS deposits. As the name implies, IS deposits possess sulfidation states between those of HS and LS types, typically with stability of chalcopyrite, tetrahedrite‐tennantite, and Fe‐poor sphalerite, but lacking appreciable arsenopyrite and pyrrhotite.


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10 MINERALIZATION Mineralization at El Zancudo occurs in multiple veins which have been exploited over a strike length of more than 3,500 m. The average vein width is 0.35 m, and varies up to 0.50 to 0.80 m. The known vertical extent of mineralization is at least 900 m. Gold mineralization occurs in two zones at El Zancudo, the Upper Zone and the Lower Zone. Mineralization in the Upper Zone occurs in flat‐lying veins and disseminations in conglomerates and sandstones at or near the base of the sediment sequence at the unconformity with the underlying schists. These were mined in subhorizontal structures near surface at El Zancudo and Otra‐Mina and most of the historical gold production came from these. A near continuous zone of flat lying veins is described west of the El Zancudo Fault over a strike length of 1,500 m with a strike of N30W and a width of up to 400 m from Cerro Agujas in the north to Bajos Chorros in south, and fans in width from south to north, up to 400 m wide (Figure 10.1) (PPM, 2002, 2003).

Mineralization in the Lower Zone is hosted by N‐S striking, steeply‐dipping veins in green schists. These were mined by several long cross‐cuts with the levels defined in meters above La Independencia level, namely: Chaverra (+269 m level), Castaño (+230 m), Sucre (+189 m), Palma (+189 m), Troya (+140 m) and La Independencia (0 m level, at 923 m altitude) (Figure 10.1). These were all made before 1923 (they are described in Grosse, 1926).

The Independencia Mine has been re‐habilitated by CDI and has a cross‐cut 740 m long in direction 254°. The current layout is shown in Figure 10.2. Drifts and stopes have been developed on four veins (Colmena, Platanal and splays) over a strike length of about 300 m and up to 125 m above the Independencia level.


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Figure 10.1 Distribution of historical mine workings at El Zancudo.

Source: PPM (2003), Fig. 8


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Figure 10.2 Current layout of the Independencia Mine.

Source: CDI. Plan dated 2003. Grid squares 50 m apart. The minerals, in order of abundance, are pyrite, galena, arsenopyrite, sphalerite, silver‐sulfosalts, bournonite, boulangerite and jamesonite, with minor chalcopyrite, pyrrhotite, native gold or electrum, and native silver (Gallego et al., 2005; Gallego & Akasaka, 2007). The gangue minerals are quartz, calcite and clay minerals. The clay minerals identified are kaolinite, muscovite and sericite. Wall rock alteration is sericite, carbonate and disseminated sulfides. There is a vertical zonation of the mineralization. The veins in the Upper Zone are hosted by sediments and impregnations in sediments and are generally flat‐lying. They are characterized by pockets of stibnite, and sphalerite is more abundant than galena. Free gold is more abundant due to oxidation.


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The veins in the Lower Zone are hosted by schists and are steeply dipping. They are characterized by an abundance of arsenopyrite, which increases with depth. Gold becomes refractory as the amount of arsenopyrite increases. Gallego & Akasaka (2007) describe the gold or electrum to occur as inclusions in sphalerite, pyrite, arsenopyrite, and may also be partially surrounded by pyrite, arsenopyrite, sphalerite, and tetrahedrite. About 80% of the gold grains are below 30 microns in size. Much of the gold occurs as small inclusions of less than 10 microns in pyrite and arsenopyrite, or intergrown with other minerals. A small proportion of gold occurs in fractures in other minerals. A small percentage is coarse grained (greater than 100 microns). The average Au/Ag ratio is 72/28, and it varies from 67/33 to 74/26 (Gallego et al., 2005). Native gold is defined as electrum when the silver content is greater than 20% (Gaines et al., 1997). Native silver occurs in minor amounts as small grains in contact with silver‐rich sulfosalts. The silver‐bearing sulfosalts identified are argentian tetrahedrite ((Cu,Fe)12As4S13) – freibergite ((Ag,Cu,Fe)12Sb4S13) solid solution, andorite (PbAgSb3S6), miargyrite (AgSbS2), diaphorite (Pb2Ag3Sb3S8), and owyheeite (Pb10Ag3Sb11S28). The lead‐antimony sulfosalts are bournonite (CuPbSbS3), jamesonite (Pb4FeSb6S14), and boulangerite (Pb5Sb4S11). The FeS content of sphalerite varies from 0.91 molar percentage (mol %) in the early generation, and higher FeS in the later stages which show zoning from 4 to 20 mol %, with a dominant range of 9 to 16 mol % FeS. The paragenesis summarized below and is shown in Figure 10.3 (Gallego & Akasaka, 2007):

• Stage 1: sphalerite (low Fe), pyrite, arsenopyrite, galena, electrum(?), quartz. • Stage 2a: sphalerite (high Fe), pyrite, arsenopyrite, electrum, quartz. • Stage 2b: sphalerite (higher Fe), pyrite, arsenopyrite, galena, tetrahedrite, Pb‐Cu

sulfosalts, Ag‐Sb sulfosalts, Pb‐Ag‐Sb sulfosalts, carbonates. The temperature of formation of the mineralization has been estimated by Gallego & Akasaka (2007, 2009) as between 134 and >350°C by the following methods:

• 300 – 420°C, estimated minimum and maximum temperatures from the FeS content of sphalerite coexisting with pyrite and the silver content of electrum;

• 10 – 250°C from chemical composition of tetrahedrite group minerals; • 134 – 263°C homogenization temperature for Type 1 primary fluid inclusions in quartz

and 264 to >350°C homogenization temperature of Type 2 primary fluid inclusions in quartz.

• 144 – 215°C homogenization temperature for primary fluid inclusions in carbonates.


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The temperature of mineral deposition decreased from Stage 1 to Stage 2b and was accompanied by an increase in sulfur fugacity, resulting in deposition of iron‐rich sphalerite and sulfosalts. The gangue mineralogy changed from quartz to carbonate. These temperatures straddle the mesothermal to epithermal transition as defined by a temperature of 300°C (Heald et al., 1987).

Figure 10.3 Paragenetic sequence of mineralization at the El Zancudo deposit.

Source: Gallego & Akasaka, 2007, Fig. 9.


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11 EXPLORATION Despite a long history of gold and silver mining, the El Zancudo deposit has not been systematically explored. CDI’s focus was to develop gold and silver production from the scoria dumps and from the Independencia Mine. As a consequence, very little exploration was carried out by CDI. The limited programs of exploration carried out by CDI were mainly surface geological mapping, and also surveying and channel sampling of veins in the Independencia Mine workings. These programs are summarized in reports by Carillo (2003, 2004), CDI (1994, 2007), and PPM (2002, 2003).

12 DRILLING CDI carried out programs of diamond drilling at the Independencia Mine in 1999 (one hole from surface) and 2002‐03 (five holes drilled within the mine), for a total of 998.2 m in 6 holes. The drill contractor was Geominas. The objective of the drilling appears to have been to check the continuity of veins for underground mine development. The holes and vein intersections are plotted on a plan of the Independencia Mine. Vein and sulfide intervals were assayed for Au and Ag. It is not known which lab was used and no assay certificates or drill report have been found. The core is stored in metal boxes in the CDI field office in Sitio Viejo.

Hole No. Location Azimuth (degrees)

Inclination (degrees) Length (m)

CDI‐01‐1999 Surface above Independencia Mine 223 ‐52 590.72 CDI‐02‐2002 Independencia Mine 255 ‐50 62.20 CDI‐03‐2003 Independencia Mine 246 ‐17 85.00 CDI‐04‐2003 Independencia Mine 280 ‐11 50.13 CDI‐05‐2003 Independencia Mine 91 ‐15 60.15 CDI‐06‐2003 Independencia Mine 275 ‐5 150.00 Total (m) 998.20

Table 12.1 Diamond drilling carried out by CDI at Independence Mine, El Zancudo (1999 to 2003). Source: Compiled by author from a CDI plan.

No other drilling has been carried out at El Zancudo to the author’s knowledge.


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13 SAMPLING METHOD AND APPROACH CDI’s focus was to develop gold and silver production from the scoria dumps and from the Independencia Mine. As a consequence, very little exploration has been carried out by CDI. The only sampling that has been carried out has been channel sampling of veins in the Independencia and other Mine, and sampling of vein intersections in drill core.

14 SAMPLE PREPARATION, ANALYSIS AND SECURITY CDI assayed samples from veins for gold and silver at a local laboratory understood to be in Medellin and to be uncertified. The sample preparation and analysis methods are not known. No quality assurance – quality control program was carried out. It is recommended that search be made for sample sheets and assay certificates at the CDI mine office in Sitio Viejo, and a sample database be built.

15 DATA VERIFICATION The author has verified the data used upon in this report by visiting the property and confirming the geology and mineralization, and by carrying out independent check sampling. Channel samples were taken by the author of veins in the main level of the Independencia Mine and grabs from the slag piles at Sitio Viejo that are being re‐processed by Sabaletas. The author supervised the collection of the samples using hammer and chisel. The samples were collected in plastic bags, a tear‐off number from a sample description card inserted, and sealed with cable ties. The samples were delivered in person to SGS (ISO 9001 certified) in Medellin for preparation, and analyzed at the SGS del Perú S.A.C. laboratory in El Callao, Peru for analysis. The sample descriptions and summary of results is shown in Table 15.1 and the assay certificate number MC1000114 is given in Annex 2. SGS del Perú S.A.C. analyzed samples for gold by fire assay (30 g sample) with an AA finish (code FAA313; detection limits 5 ppb to 5000 ppb), and for silver with an aqua regia digestion and an AAS finish (code AAS12CP), or 3‐acid digestion with AAS finish (code AAS42C); detection limits in both are 0.3 ppm to 500 ppm). Multielement geochemical analyses were done by two different methods. One method (ICM40B) uses a four acid digestion and both ICP‐AES and ICP‐MS for 50 elements (Ag, Al, As, Ba*, Be*, Bi, Ca*, Cd, Ce, Cr*, Co, Cs, Cu, Fe*, Ga*, Ge*, Hf*, In*, K*, La*, Li*, Lu*, Mg*, Mn*, Mo, Na*, Nb*, Ni*, P*, Pb, Rb*, S*, Sb, Sc*, Se, Sn*, Sr*, Ta*, Tb, Te*, Th*, Ti*, Tl*, U*, V*, W*, Y*, Yb*, Zn*, Zr*). The second method (ICP12B) uses a two acid


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(HNO3 and HCl) digestion and both ICP‐AES and ICP‐MS for 38 elements (Ag, Al, As, Ba*, Be*, Bi, Ca*, Cd, Co, Cr*, Cu, Fe*, Ga*, Hg, K*, La*, Mg*, Mn*, Mo, Na*, Nb*, Ni*, P*, Pb, S*, Sb, Sc*, Sn*, Sr*, Ti*, Tl*, V*, W*, Y*, Zn*, Zr*). SGS indicates that the analysis is partial for elements marked * and depends on the mineralogy. Over limit gold values were repeated by fire assay with a gravimetric finish (method FAG303) and a lower limit of detection of 0.02 g/t. Over limit samples for silver grades (above 100 ppm), arsenic (above 1%), iron (above 15%), lead (above 1%) and zinc (above 1%) were repeated by four acid digestion and atomic absorption (method AAS41B). Over limit sulfur samples (above 10%) were repeated by the LECO method (method CSA24V).

Sample Location Vein Width

(m) Au g/t

Ag g/t

As ppm

Cu ppm

Pb ppm

Zn ppm

6611 Independencia Mine Colmena Split 0.25 5.03 57.8 8,470 59.6 340 1,154.5

6612 Independencia Mine Colmena Split 0.12 15.61 279 2.29 173.2 1,038 4,571.5

6613 Independencia Mine La Colmena 0.25 32.47 376 4.3 383.1 7,894 24,800

6614 Independencia Mine Colmena Split 0.20 23.06 696 3.58 635.8 1.39 22,800

6615 Independencia Mine La Colmena 0.35 4.514 11.2 8,449 43.8 761 1,256.4

6616 Independencia Mine

La Colombiana 0.25 36.00 2147 6.65 868.8 15,700 13,400

6617 Independencia Mine Platanal 0.65 1.007 46.9 1,978 33.9 127 157.9

6618 Sitio Viejo Slag pile Grab 4.599 132 782 306.6 2,345 8,766.6 6619 Sitio Viejo Slag pile Grab 4.489 82.9 311 365.1 1,546 5,401.1

Table 15.1 Description and results of check sampling.

The results of the independent check sampling confirm the presence of high grades of gold and silver in the veins at the Independencia Mine at El Zancudo and in the slag at Sitio Viejo. Gold grades are up to 36.0 g/t over 0.25 m, and silver grades up to 2,147 g/t over 0.25 m. These are accompanied by high values of arsenic up to 6.65%, lead up to 1.57%, zinc up to 2.48% and antimony up to 8,663 ppm. Copper grades are low (up to 868 ppm).


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16 ADJACENT PROPERTIES The El Zancudo project is located in the Middle Cauca Gold Belt. This extends for about 260 km in a north‐south direction (N10‐20W) from Buritica and Frontino in the north to La Colosa in the south. The gold mineralization in the belt is of intermediate sulfidation epithermal style (as at El Zancudo) and porphyry style. This is part of the Central Porphyry sub‐belt of Early to Late Miocene age defined by Sillitoe et al. (1982), with the gold mineralization related to the emplacement of the porphyry stocks.

The most significant gold deposits in the Middle Cauca Gold Belt are the Marmato and La Colosa deposits. Marmato is an intermediate sulfidation deep epithermal deposit where Medoro Resources Ltd have defined a NI 43‐101 measured and indicated mineral resource of 7.5 Moz gold grading 0.95 g/t in 245 Mt, with 48 Moz silver grading 6.09 g/t, at a cut‐off grade of 0.30 g/t gold. In addition there is an inferred resource of 2.2 Moz gold grading 0.92 g/t in 75.8 Mt with 13.4 Moz silver grading 5.51 g/t (Medoro Resources Ltd press release, 8 March 2010).

La Colosa, near Cajamarca, Tolima, is a porphyry gold deposit discovered by AngloGold Ashanti Ltd (AGA) in 2008 , with a JORC inferred mineral resource of 12.9 Moz gold grading 0.86 g/t in 468.8 Mt, at a cut‐off grade of 0.30 g/t gold (AGA press release, 6 May 2008).

The Titiribi project lies adjacent to and south of El Zancudo and is owned by Goldplata Resources Ltd (Goldplata). The project was explored by Goldplata in conjunction with Gold Fields Ltd of South Africa in 1998, and by De Beira Goldfields Ltd and later Windy Knob Resources Ltd, both of Australia, in 2007 to 2009. Goldplata has recently entered into a sale agreement with Sunward Resources Ltd., Vancouver (Sunward Resources Ltd press release, 9 March 2010). The Cerro Veta porphyry gold‐copper deposit on the Titiribi property has a NI 43‐101‐compliant inferred mineral resource of 3.7 Moz gold at 0.5 g/t gold in 230 Mt, and 0.46 Mt copper at 0.2% (Montgomery, 2010).


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17 MINERAL PROCESSING AND METALLURGICAL TESTING The gold in the sulfide ore at El Zancudo is refractory due to the very fine grained gold size and encapsulation in pyrite, arsenopyrite and other sulfide, as shown by studies by Gallego & Mabel (2003), Gallego et al. (2005) and others. Historically, the ore was treated by roasting to recover the gold and silver. Currently, gold and silver is recovered from the smelter slag by fine grinding and cyanidation. The Independencia plant is designed to produce a sulfide concentrate, which is then roasted and subject to cyanidation. Test work has also been carried out on bio‐oxidation of the sulfide prior to cyanidation (Perez & Ramirez, 1998; Gallego & Zapata, 2003). There are currently three ore treatment plants on the project, two of which are owned by CDI and are inactive, and the third is owned by Sabaletas and is actively re‐processing scoria to recover gold and silver. CDI have a pilot plant at Sitio Viejo built in 1994. It has a capacity of 20 tpd and has 8 small agitated cyanide leach tanks. It was built as a pilot plant to treat the scoria. Later it was used to extract gold and silver from roasted sulfide concentrates from the mill at the Independencia Mine. CDI constructed a plant at the Independencia Mine in about 1978. This has a capacity of 120 tpd and consists of crushing, milling and flotation to produce a sulfide concentrate. This concentrate was processed at the Sitio Viejo pilot plant to extract gold and silver by re‐grinding, agitated cyanide leach, and Merrill Crowe precipitation with zinc. Neither of the CDI plants has ever operated on a commercial basis. CDI state that this was not due to metallurgical or technical reasons, but due to other commercial factors such as low metals prices at the time of completion, and lack of working capital. The Sabaletas plant is located at Sitio Viejo and recovers gold and silver from the re‐treatment of scoria under contract from CDI. It has been in operation since August 2009. The plant has a capacity to treat 6,000 tonnes per month. It consists of three stages of crushing and two stages of grinding in ball mills to 70% passing minus 325 mesh (minus 44 microns), followed by gold and silver dissolution in agitated cyanide tanks and Merrill Crowe precipitation using zinc powder. The plant commercializes the zinc precipitate containing gold and silver to a smelter in Medellin. In January 2010, the plant processed 5,600 tonnes of scoria and recovered 17,600 grams (about 565.8 ounces) of gold with a recovery of 65% gold, and 388 kg (about 12,474


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ounces) of silver with a recovery of 51% silver. The head grade is stated by Sabaletas to be 4 to 5 g/t gold.

18 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES There are no mineral resource and mineral reserve estimates for the property that are compliant with the current CIM standards and definitions required by the Canadian NI 43‐101 “Standards for Disclosure of Mining Projects”.

19 OTHER RELEVANT DATA AND INFORMATION There are no other relevant data and information to be reported.


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20 INTERPRETATION AND CONCLUSIONS

• El Zancudo is a major old mining district with no modern exploration. There has been extensive historical mining for gold and silver.

• Gold and silver mineralization occurs in veins in schists, younger sediments and intrusive andesite porphyry.

• High grade gold is hosted by steep quartz veins in schists at deeper levels, and by low angle veins in sediments at shallow levels.

• In the upper levels, veins and replacements in the sediments at or near the basal unconformity with the schist formed a large stratiform body according to old reports.

• The mineralization is intermediate sulfidation, epithermal to mesothermal in style. The veins extend for 3.5 km to the north of a porphyry gold‐copper system, which is interpreted to be the source of the fluids.

• The Independencia Mine has been re‐opened by CDI, and requires further rehabilitation. It comprises a long cross‐cut and drives along two main veins and several splays.

• There is good exploration potential to encounter additional mineralization on extensions of the veins along strike to the north and south of the Independencia Mine, and above and below the main level. There is also potential to encounter at depth multiple additional veins to the west of the Independencia Mine that have been mapped on surface and mined at shallower levels.

• CDI have two plants on the site, a 120 tpd flotation plant and a 20 tpd cyanide plant. These are not currently in operation and are on care and maintenance.

• The gold is partly refractory and the veins have a high arsenic content. The gold can be extracted by gravity and flotation, fine grinding and cyanide leach. Additional metallurgical test work is recommended.

• The mine has the infrastructure and potential to achieve small scale gold and silver production from high grade veins in a relatively short time period.

• El Zancudo also has potential for bulk mineable gold and silver mineralization in zones of good structural preparation where a sufficiently high density of veining has developed, and/or in zones where sufficient volumes of disseminated mineralization have developed in sedimentary rocks. The low angle veins and splays in thrust duplexes provide good structural dilational sites to focus fluid flow and are favorable sites for potential bulk mineable gold. The low angle duplexes may be blind to surface exploration and have probably been overlooked and under‐represented in historical mining and exploration.

• El Zancudo also has potential for bulk mineable porphyry gold‐copper mineralization related to porphyry intrusions. These are most likely to occur in the south part of the El Zancudo licenses close to the centers of porphyry intrusions.


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21 RECOMMENDATIONS A two‐stage exploration program is recommended with the following objectives:

• Define mineral resources in veins in the Independencia and other mines in order to achieve underground gold‐silver production in the short term;

• Explore for potentially bulk mineable zones of vein and/or disseminated gold‐silver mineralization;

• Explore for porphyry gold‐copper mineralization. Stage 1: Data compilation, check sampling, and surface and underground exploration to define drill targets. Estimated time 6 months. The work should include the following:

• Build a digital database and geological model by compiling all previous sampling from underground, drilling and surface, and compiling all mine plans and geological maps;

• Carry out a check sampling program to verify the previous sampling; • Carry out additional sampling program of the veins in accessible mines and carry out a

survey of the veins and mine workings where necessary; • Implement a QA‐QC program for sampling and use a certified laboratory for assaying; • Soil survey to explore for new vein and bulk tonnage targets; • Airborne magnetic and radiometric survey to explore for bulk tonnage targets; • Carry out mapping and sampling on surface and of other old mine workings in El

Zancudo to determine the potential for additional resources and define other exploration targets on the properties;

• Carry out reconnaissance mapping and sampling on concession contracts no. 5849 and 5954 which lie to the west and north of the areas of known mineralization;

• The outcome of the Stage 1 program is to define drill targets on surface and underground.

The estimated costs for the Stage 1 exploration program are US$ 600,000 and are listed in Table 21.1.


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Item US$ (000)Compile database 200Check sampling and additional sampling and survey program

100

Mapping and sampling El Zancudo surface 100Reconnaissance mapping, rock sampling, soil survey 150Airborne geophysics 50Total 600


Stage 2: Carry out diamond drill program, estimate mineral resources, carry out metallurgical test work and carry out a NI 43‐101 Preliminary Economic Assessment (PEA) focused on the Independencia Mine and other accessible mines. Also preliminary drilling of surface targets. Estimated time 6 months. The work should include the following:

• Diamond drill program (5,000 m) from the Independencia Mine to test the extension of veins to the north, south and at depth, and of additional veins to the west;

• Mineral resource estimate of the veins; • Metallurgical test work of the veins; • Preliminary Economic Assessment for underground production from the Independencia

Mine using the existing plants. • Preliminary diamond drill program (2,000 m) of any potentially bulk mineable or

porphyry targets identified in the Stage 1 program. The estimated costs for the Stage 2 exploration program are US$ 2,000,000 and are listed in Table 21.2.

Item US$ (000)Diamond drilling Independencia 5,000 m 1,000Metallurgy Independencia 250Mineral resource estimate Independencia 100Preliminary Economic Assessment Independencia 250Diamond drilling bulk targets surface 2,000 m 400Total 2,000


The total cost of the Stage 1 and Stage 2 exploration programs is US$ 2,600,000 and the estimated time to completion is 12 months.


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Following the successful completion of the Stage 1 and Stage 2 exploration programs, a mine re‐development program and budget can be made for the Independencia Mine. In addition, a second stage drill program can be planned for any potentially bulk mineable targets identified in the Stage 1 and Stage 2 exploration programs.


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22 REFERENCES

Carillo, V.M., 2003. Cartografía Geológica de la Licencia 5521 (Escala 1:5000) y Programa de Exploración de las Propiedades Mineras de CDI S.A.: Región de Titiribi, Departamento de Antioquia, Colombia. Report for Consorcio De Inversionistas, C.D.I., S.A., 30 December 2003, 47 p.

Carillo, V.M., 2004. Cartografía Geológica de las Propiedades Mineras de CDI S.A.: Contrato de Concesión 5747, y Licencia 4985‐S21, Escala 1:5,000, Municipio de Titiribi, Departamento de Antioquia, Colombia. Report for Consorcio De Inversionistas, C.D.I., S.A., 7 April 2004, 22 p.

CDI, 1994. Informe Anual, Permiso 5521, Titiribi, Antioquia, Republica de Colombia. Report by Consorcio De Inversionistas, C.D.I., S.A., 15 October 1994, 165 p.

CDI, 2007. Informe Anual de Labores Por el Año 2006, Respeto al Contrato de Concesión Nro. 5521. Report by Consorcio De Inversionistas, C.D.I., S.A., 2007, 25 p.

Cediel, F., Shaw, R. P. & Cáceres, C., (2003), Tectonic Assembly of the Northern Andean Block. In: Bartolini, C., Buffler, R. T. & Blickwede, J., eds, The Circum‐Gulf of Mexico and the Caribbean: Hydrocarbon habitats, basin formation, and plate tectonics. American Association of Petroleum Geologists Memoir 79, p. 815‐848.

Cediel, F. & Cáceres, C., (2000), Geological Map of Colombia. Bogotá, Colombia, Geotec Ltda, 3rd edition. 7 thematic maps at 1:1,000,000 scale.

Emmons, W.H., (1937), Gold Deposits of the World. First Edition. New York & London, McGraw‐Hill Book Company, Inc., 562 p.

Flores, A., 1991. Titiribi Mining and Slag Recycling Project, Colombia, S.A. Summary Report – Feasibility for Compañia de Reciclaje Minero (COREMINE), June 1991 (quoted in James, 2006).

Gaines, R.V., Skinner, E.C.W., Foord, E.E., Mason, B., & Resenzweig, 1997. Dana’s New Mineralogy: The System of Mineralogy of James Dwight Dana and Edward Salisbury Wright, 8th Edition. New York, John Wiley & Sons, Inc., 1,819 p.

Gallego, A.N. & Akasaka, M., 2007. Silver‐bearing and Associated Minerals in El Zancudo Deposit, Antioquia, Colombia. Resource Geology, 57 (4), 386‐399.

Gallego, A.N. & Akasaka, M., 2009. Argentotetrahedrite‐freibergite solid solution from the El Zancudo deposit as a geothermometer of ore mineralization. Annual Meeting of the Japan Association of Mineralogical Sciences, Sapporo, 8‐10 September 2009, p. 70.

Gallego, A. & Zapata, D.M., 2003. Caracterización mineralógica como soporte para la implementación y mejoramiento del proceso de extracción de oro, Mina de oro El Zancudo, Titiribí, Antioquia. Graduate thesis, Universidad Nacional de Colombia, Medellin, 203 p.


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Gallego, A.N., Zapata, D.M. & Márquez, M.A., 2005. Mineralogía aplicada a la definición del tipo de refractariedad en la mina de oro El Zancudo, Titiribí, Antioquia. Boletín de Geología, Vol. 27, No. 2, p. 87‐97.

Gonzalez, H., 1976. Geologia de cuadrangulo J‐8 Sonson. Ingeominas, Informe 1704, 421p.

Grosse, E., 1926. Estudio Geologico del Terciario Carbonifero de Antioquia. Berlin, Dietrich Reimer (Ernst Vohsen), 361 p.

Heald, P., Foley, N.`K., & Hayba, D. O., (1987), Comparative Anatomy of Volcanic Hosted Epithermal Deposits: Acid‐Sulphate and Adularia‐Sericite Types. Economic Geology, 82, p. 1‐26.

Hedenquist, J. W., Sillitoe, R. H. & Arribas, A., (2004), Characteristics of and exploration for high‐sulfidation epithermal gold‐copper deposits. In: Cooke, D. R., Deyell, C. & Pongratz, J., 24 Ct Au Workshop. Tasmania, Center for Ore Deposit Research (CODES) Special Publication 5, p. 99 to 110.

James, J.A.A., 2006. El Zancudo Property, Municipality of Titiribi, Department of Antioquia, Republic of Colombia. Preliminary Due Diligence Report. Report by J.A. Mine, Inc., Denver, Colorado for Reservas Minerales de Colombia, S.A., 20 June 2006, 18 p plus annexes.

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Sillitoe, R. H., Jaramillo, L., Damon, P. E., Shafiqullah, M. & Escovar, R., (1982), Setting, Characteristics, and Age of the Andean Porphyry Copper Belt in Colombia. Economic Geology, 77, p. 1837 to 1850.


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23 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES

The El Zancudo Project is neither a development property nor a production property.


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24 Date The effective date of this report is 6 April 2010.


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25 CERTIFICATE OF AUTHOR I, Stewart D. Redwood, FIMMM, hereby certify that:

1. I am a Consulting Geologist with address at P.O. Box 0832‐1784, World Trade Center, Panama City, Republic of Panama.

2. I am responsible for the preparation of the technical report entitled “NI 43‐101 Technical Report for the El Zancudo Property, Department of Antioquia, Republic of Colombia”, dated 6 April 2010.

3. I graduated from Glasgow University with a First Class Honours Bachelor of Science

degree in Geology in 1982, and from Aberdeen University with a Doctorate in Geology in 1986.

4. I am a Fellow of The Institute of Materials, Minerals and Mining, Number 47017.

5. I have worked as a geologist for 28 years and have been involved in mineral exploration,

mine site geology, mineral resource and reserve estimations and feasibility studies on numerous gold, precious metal and base metal deposits in South and Central America, the Caribbean, North America, Europe, Asia and Australia.

6. I have read the definition of “Qualified Person” set out in National Instrument 43‐101

(NI 43‐101) and certify that by reason of my education, affiliation with a professional organization (as defined in NI 43‐101) and past relevant work experience, I fulfill the requirements to be a “Qualified Person” for the purposes of NI 43‐101.

7. I visited the project most recently on 18 February 2010 for one day.

8. I am the author of all the sections of the technical report entitled “NI 43‐101 Technical

Report for the El Zancudo Property, Department of Antioquia, Republic of Colombia”, dated 6 April 2010.

9. I am independent of the issuer applying all of the tests in Section 1.4 of NI 43‐101.

10. I have visited the property on a previous occasion and, apart from that, have had no other prior involvement with the property.


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11. I have read NI 43‐101 and the Technical Report has been prepared in compliance with that instrument.

12. As of the date of the certificate, to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.

13. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them, including electronic publication in the company files on their websites accessible by the public, of the Technical Report.

Dated 6 April 2010 “Signed” Signature of Qualified Person Stewart D. Redwood Print Name of Qualified Person


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26 ANNEX 1: Coordinates for the mining concessions at El Zancudo Information supplied by legal counsel to Gran Colombia and valid as of 6 April 2010. Coordinates in Colombian system (Gaussian). The coordinates are given in the original Spanish-style numbering system with a comma (,) instead of a decimal point (.), and points (.) instead of commas (,) for thousands and millions.

Coordinates for Boundaries of Concession Contract Nº 5911

SECTOR POINT COORDINATE“X” OR NORTH

COORDINATE “Y” OR EAST

1 1 1.165.100 1.142.245 1 2 1.166.569 1.142.245 1 3 1.166.569 1.141.265 1 4 1.165.000 1.141.265 1 5 1.165.000 1.141.580 1 6 1.165.100 1.141.580


AREA

POINT COORDINATE X COORDINATE Y

1 1 1.166.560 1.141.245 1 2 1.164.980 1.141.245 1 3 1.164.980 1.141.580 1 4 1.163.000 1.141.580 1 5 1.163.000 1.139.000 1 6 1.165.065 1.139.000 1 7 1.165.065 1.140.750 1 8 1.166.560 1.140.750


AREA


1 1 1.167.100 1.141.535 1 2 1.167.100 1.141.455 1 3 1.167.005 1.141.455


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1 4 1.167.005 1.143.975 1 5 1.167.090 1.143.975 1 6 1.167.090 1.145.135 1 7 1.166.000 1.145.135 1 8 1.166.000 1.146.000 1 9 1.170.000 1.146.000 1 10 1.170.000 1.143.005 1 11 1.169.015 1.143.005 1 12 1.169.015 1.139.000 1 13 1.168.095 1.139.000 1 14 1.168.095 1.141.535


SECTOR


1 1 1.166.800 1.136.495 1 2 1.166.240 1.136.495 1 3 1.166.240 1.137.200 1 4 1.166.415 1.137.200 1 5 1.166.415 1.137.900 1 6 1.166.240 1.137.900 1 7 1.166.240 1.138.000 1 8 1.166.606 1.138.000 1 9 1.166.606 1.137.022 1 10 1.166.800 1.137.022


SECTOR


1 1 1.166.240 1.136.495 1 2 1.166.240 1.135.400 1 3 1.166.800 1.135.400 1 4 1.166.800 1.136.495


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Starting Point (Punto Arcifinio) located in the following coordinates: Coordinate North: 1.163.078,00 Coordinate East: 1.141.600,00. Additional coordinates to be calculated according to the following information:

P-1 P-2 NS GRAD MIN SEG EW DISTANCE

0 1 N 0 0 0.00 E 2.000.,0

1 2 N 90 0 0.00 E 1.250.00

2 3 S 0 0 0.00 W 2.000,00

3 1 S 90 0 0.00 W 1.250,00

Coordinates for Boundaries of Exploration License Nº 4985

SECTOR


1 1 1.166.076,80 1.140.730 1 2 1.165.076,80 1.140.730 1 3 1.165.076,80 1.140.344 1 4 1.166.076,80 1.140.344 1 5 1.166.076,80 1.140.730 2 1 1.165.345 1.142.265 2 2 1.165.098 1.142.265 2 3 1.165.098 1.142.844 2 4 1.165.345 1.142.844 2 5 1.165.345 1.142.265

Coordinates for Boundaries of Concession Contract Nº 5849 (pending registration with the National Mining Registry)

SECTOR


1 1 1.168.121 1.138.020

1 2 1.166.220 1.138.020

1 3 1.166.220 1.137.900


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1 4 1.165.500 1.137.900

1 5 1.165.499 1.137.200

1 6 1.166.219 1.137.201

1 7 1.166.220 1.136.000

1 8 1.160.000 1.136.000

1 9 1.160.000 1.138.989

1 10 1.162.040 1.138.990

1 11 1.162.040 1.138.895

1 12 1.163.000 1.138.895

1 13 1.163.000 1.138.980

1 14 1.165.085 1.138.980

1 15 1.165.085 1.139.110

1 16 1.167.105 1.139.110

1 17 1.167.105 1.141.530

1 18 1.168.090 1.141.530

1 19 1.168.090 1.138.980

1 20 1.169.020 1.138.980

1 21 1.169.020 1.143.000

1 22 1.169.979 1.143.000

1 23 1.169.979 1.136.000

1 24 1.166.820 1.136.000

1 25 1.166.819 1.137.022

1 26 1.168.121 1.137.022


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27 ANNEX 2: Certificate of analysis of check samples Assay certificate no. MC1000114 from SGS del Perú, S.A.C. for check samples from El Zancudo taken by the author.


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Documents

El Zancudo Technical Report NI-43-101 Redwood …...month by crushing and grinding followed by agitated cyanide leach and Merrill Crowe precipitation using zinc powder. In January