Invicta Mine Feasibility Report 0 - Kaiser Research Online MINE FEASIBILITY STUDY ... 5.4.1 Open Pit ... Goldex prepared the basic conceptual design of the 5100 t/d concentrator plant

INVICTA MINE FEASIBILITY STUDY

prepared for ANDEAN AMERICAN MININGCORP.

audited by THE LOKHORST GROUPVENTURES, INC.

JUNE, 2009

FEASIBILITY STUDYINVICTA GOLD PROJECT

June, 2009 1

DISCLAIMER

The Invicta Project Feasibility Report summarizes the findings of a feasibility study of the Invicta gold-silver poly-metallic project.This feasibility study examines all facets of the Project including geology, resources, ore reserves, mining, metallurgy, processing,infrastructure, environmental impact assessment, and financial evaluation. The study presents the operating and capital costs ofmining and processing and it includes a financial analysis by Stanford Group - Stanford Consulting Peru SRL.

The Lokhorst Group was responsible for the auditing of all reports, assembling of all data, and compiling the report. DiscoverGeological Consultants Inc. reviewed in detail all geological work, such as drill data, underground geological information, previousand current resource data, and geochemical data. The focus of their report was to issue new and updated resource estimations.Discover filed a NI 43-101 Technical Report on September 26, 2008. Minconsult S.R.L together with Escuela de Ingenieria de Minasde la Universidad Pontificia Catolica del Peru was responsible for mine design and mine planning. Act Labs del Peru, LaboratoriaPlenge Ltda, ABR Mineria SAC, ED & ED Ingenieria, Universidad Nacional de Ingeniera performed metallurgical tests. CIMM PeruLaboratories (ISO certification) assayed core and mine samples. Lakefield Laboratory performed initial metallurgical tests. Goldexprepared the basic conceptual design of the 5100 t/d concentrator plant. Cesel Engineering performed the detailed Engineering forwater and power supply to the project as well as the environmental impact assessment (EIA) for the entire project. Stanford Group -Stanford Consulting Peru SRL performed the financial analysis. Knelson Laboratory and Met Solve performed specific metallurgicaltests.

This report was prepared for the sole and exclusive benefit of Andean American Mining; the intention of The Lokhorst Group is thatthis document exists as a whole and sections are not to be read or relied upon out of context. This document contains theexpression of the professional opinion of The Lokhorst Group based on information available at the time of preparation. The reportincludes information generated or provided by other sources as listed above. The Lokhorst Group does not warrant the accuracy orcompleteness of data supplied by outside sources. The Lokhorst Group provides this report for use only by Andean AmericanMining.


June, 2009 2

TABLE OF CONTENTS

1 EXECUTIVE SUMMARY.........................................................................................................71.1 Introduction ...............................................................................................................71.2 Ownership & History ................................................................................................111.3 Regional and Local Geology ......................................................................................111.4 Resources.................................................................................................................131.5 Quality Control .........................................................................................................141.6 Mine Design .............................................................................................................141.7 Metallurgy Testing and Design..................................................................................141.8 Reserves and LOM (life of mine) ...............................................................................151.9 Products Schedule and Commercialization ...............................................................151.10 Processing and Project Development........................................................................16

1.10.1 Processing Plant ...............................................................................................161.10.2 Ore Haulage System .........................................................................................171.10.3 Energy Supply ..................................................................................................171.10.4 Water Supply ...................................................................................................181.10.5 Access Road .....................................................................................................181.10.6 Environmental Study and Legal Permissions .....................................................181.10.7 Social Permission .............................................................................................19

1.11 Operating and Capital Costs......................................................................................201.12 Project Schedule.......................................................................................................201.13 Conclusions & Recommendations.............................................................................20

2 Author certificates.............................................................................................................232.1 Guy Lokhorst, P. Eng. ................................................................................................232.2 Victor Jaramillo, P. Geo.............................................................................................252.3 Les Tarnai, P. Eng......................................................................................................282.4 Rose Masias, MSc .....................................................................................................30

3 Background .......................................................................................................................313.1 History......................................................................................................................313.2 The Property ............................................................................................................333.3 Property Location, Service Features & Biophysical Environment ...............................35

4 Geology.............................................................................................................................384.1 Regional Geology......................................................................................................384.2 Property Geology .....................................................................................................404.3 Property Description ................................................................................................43

4.3.1 Report by Discover Geological Consultants Inc. ....................................................434.4 Section References ...................................................................................................47

5 Mining...............................................................................................................................485.1 Mining Methodology ................................................................................................485.2 Geotechnical Investigations and Assessments...........................................................495.3 Geologic Block Modeling ..........................................................................................495.4 Mine Design & Layout...............................................................................................50

5.4.1 Open Pit ...............................................................................................................505.4.2 Sublevel Stoping...................................................................................................535.4.3 Cut and Fill Stoping...............................................................................................54


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5.4.4 Shrinkage Stopes..................................................................................................555.4.5 Mine Development...............................................................................................565.4.6 Mine Plan.............................................................................................................56

5.5 Infrastructure, Equipment & Services .......................................................................575.5.1 Infrastructure.......................................................................................................575.5.2 Equipment ...........................................................................................................595.5.3 Ventilation ...........................................................................................................595.5.4 Water...................................................................................................................605.5.5 Compressed Air ....................................................................................................60

6 Metallurgy.........................................................................................................................616.1 Testing Summary......................................................................................................616.2 Gravity Separation....................................................................................................626.3 Atenea 2 Flotation....................................................................................................636.4 Z – 4 Flotation ..........................................................................................................656.5 Pucamina Flotation...................................................................................................656.6 Atenea Flotation.......................................................................................................666.7 Processing Plant .......................................................................................................71

6.7.1 Concentrator Plant – Basic Engineering ................................................................736.7.2 Primary, Secondary, & Tertiary Crushing ..............................................................746.7.3 Grinding ...............................................................................................................746.7.4 Flotation...............................................................................................................756.7.5 Thickeners & Filters..............................................................................................766.7.6 Tailings Disposition...............................................................................................77

6.8 References ...............................................................................................................787 Infrastructure ....................................................................................................................79

7.1 Power Supply ...........................................................................................................797.2 Water Supply............................................................................................................817.3 Access Roads ............................................................................................................82

8 Environmental Impact Assessment (EIA), and Community Relations ..................................848.1 Environmental Impact Assessment ...........................................................................848.2 Community Relations ...............................................................................................86

8.2.1 Community of Paran.............................................................................................878.2.2 Community of Lacsanga........................................................................................888.2.3 Community of Santo Domingo de Apache ............................................................89

8.3 Regulation Approvals Received.................................................................................909 Cost, Financing & Commercial Terms.................................................................................92

9.1 Total Operating Costs ...............................................................................................929.1.1 Operating Personnel: Mine, Plant, and Lima office. ..............................................949.1.2 Miscellaneous expenses for mine and plant .........................................................95

9.2 Cost for Underground and Open Pit Mining ..............................................................959.2.1 Mine Unit Costs....................................................................................................96

9.3 Processing Plant .......................................................................................................989.3.1 Processing Operating Costs ..................................................................................989.3.2 Miscellaneous Lima Expenses.............................................................................100

9.4 Capital Costs...........................................................................................................100


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9.5 Financial Analysis....................................................................................................1029.6 Commercial Terms and Valuation of Concentrates .................................................106

10 Engineering, Procurement and Construction...............................................................10710.1 Overview................................................................................................................10710.2 Time of Performance..............................................................................................10810.3 Critical Path Planning and Scheduling .....................................................................10810.4 Engineering ............................................................................................................109

10.4.1 Process ..........................................................................................................10910.4.2 Metallurgy .....................................................................................................11010.4.3 Civil Works .....................................................................................................11110.4.4 Structural Works ............................................................................................11110.4.5 Mechanical and Piping Design. .......................................................................11210.4.6 Electrical and Instrumentation Design ............................................................11210.4.7 Environmental Work and Permitting ..............................................................112

10.5 Quality Assurance and Quality Control....................................................................11310.6 Safety .....................................................................................................................114

10.6.1 Program Effectiveness....................................................................................11410.7 Procurement ..........................................................................................................11510.8 Construction Team .................................................................................................11510.9 Training and Development for Operating Personnel ...............................................11610.10 Communities......................................................................................................116

11 Appendix A - NI 43-101 Technical Report ....................................................................11712 Appendix B - Mine Plan...............................................................................................11813 Appendix C - Metallurgical Reports .............................................................................11914 Appendix D - Engineering Process Diagrams................................................................12015 Appendix E - Infrastructure .........................................................................................12116 Appendix F - Environmental Impact ............................................................................12217 Appendix G - Cost, Financing & Commercial Terms .....................................................12318 Appendix H - Planning.................................................................................................124

LIST OF TABLES

Table 1.1: Sulfides Concentrates Production Plan ......................................................................16Table 1.2: Gravimetric Concentrates Production Plan................................................................16Table 1.3: Base Case Metal Prices..............................................................................................21Table 3.1: Concessions and Claims of Invicta Property ...............................................................34Table 4.1: Regional Stratigraphy................................................................................................40Table 4.2: Pangea's Historical Resource Data.............................................................................45Table 4.3: 2008 NI 43-101 Resource Estimates ..........................................................................46Table 5.1: True Width Criteria of the Mineralized Zones ............................................................48Table 5.2: Mining Dilution & Recoveries ...................................................................................49Table 5.3: Mining Method Selection .........................................................................................49Table 5.4: Mine Development ..................................................................................................56Table 5.5: Ore Recovery by Year................................................................................................57Table 5.6: Equipment ................................................................................................................59Table 5.7: Required daily Volumetric Air Flow ...........................................................................59


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Table 5.8: Compressed Air Requirements ..................................................................................60Table 6.1: Group 1 Metallurgy ...................................................................................................62Table 6.2: Group 2 Metallurgy ...................................................................................................62Table 6.3: Group 3 Metallurgy ...................................................................................................62Table 6.4: Gravity Test Results...................................................................................................63Table 6.5: Overall Flotation Results ...........................................................................................63Table 6.6: Copper/Lead Separation Results ...............................................................................64Table 6.7: Overall Z-4 Flotation Results......................................................................................65Table 6.8: Overall Pucamina Flotation Results ...........................................................................66Table 6.9: Atenea Overall Flotation Results ...............................................................................66Table 6.10: Falcon Concentrator................................................................................................68Table 6.11: Wilfley Table ...........................................................................................................68Table 6.12: Jig Juba ...................................................................................................................68Table 6.13: Group 1 Ore Recovery.............................................................................................69Table 6.14: Group 2 Ore Recovery.............................................................................................69Table 6.15: Group 3 Ore Recovery.............................................................................................69Table 7.1: Consumption of Power and Estimated Energy per Month for Mine & Plant...............81Table 9.1: Summary of Ore to Plant, Concentrate Produced, and Ore Processed per day...........92Table 9.2: Total Operating Unit Cost (USD/t) Annual Summary..................................................93Table 9.3: Personnel - Mine & Plant...........................................................................................94Table 9.4: Personnel - Lima office..............................................................................................94Table 9.5: Miscellaneous Expenses for Mine and Plant ..............................................................95Table 9.6: Annual Ore Tonnages................................................................................................96Table 9.7: Mining Unit Costs......................................................................................................97Table 9.8: Annual Mine Development Costs ..............................................................................97Table 9.9: Electric Power ...........................................................................................................98Table 9.10: Annual Production and Unit Processing Costs..........................................................98Table 9.11: Annual Reagent Consumption .................................................................................99Table 9.12: Energy Costs............................................................................................................99Table 9.13: Cost for rental of equipment (450 hours/month).....................................................99Table 9.14: Operating Expenses, Lima Office ...........................................................................100Table 9.15: Invicta Project - Investment Summary ...................................................................101Table 9.16: Cash Flow USD/year ..............................................................................................102Table 9.17: Profit & Loss Statement.........................................................................................103Table 9.18: Profit & Loss versus Metal Prices...........................................................................104Table 9.19: Loan Amortization (USD) over 3 years ...................................................................104Table 9.20: Base Case Metal Prices..........................................................................................105Table 9.21: Mineral Pricing......................................................................................................106


June, 2009 6

LIST OF FIGURES

Figure 1.1: Invicta Property location map ....................................................................................9Figure 3.1: Map of Concessions and Claims ...............................................................................35Figure 3.2: Location of Invicta Property ....................................................................................36Figure 4.1: Invicta Property Regional Geology Map....................................................................39Figure 4.2: Invicta Property Geology..........................................................................................41Figure 5.1: Longitudinal View Open Pit .....................................................................................51Figure 5.2: Plan - Atenea Veins, Open Pit...................................................................................52Figure 5.3: Open Pit Phases, OP#1 and OP#2.............................................................................53Figure 5.4: Sub Level Stoping Schematic ....................................................................................54Figure 5.5: Cut and Fill Stoping Schematic .................................................................................55Figure 5.6: Shrinkage Stoping Schematic ...................................................................................56Figure 5.7: Ore Transportation System From Mine to Plant .......................................................58Figure 6.1: Processing Plant - Complete Flow Diagram...............................................................71Figure 6.2: Flotation Circuit Flow Diagram .................................................................................73Figure 6.3: Knelson Concentrators Flow Diagram.......................................................................75Figure 6.4: Thickening and Filtration Flow Diagram....................................................................76Figure 6.5: Tailings Disposition Flow Diagram ............................................................................77


June, 2009 7

1 EXECUTIVE SUMMARY

1.1 Introduction

In May 2009 Andean American Mining Corp. commissioned the Lokhorst Group and

others to perform a variety of tasks with the ultimate aim of producing a complete

feasibility study for its Invicta Gold Project. Its mineralization is complex with two phases

of gold-silver and base metal of mesothermal type. This mineralized structure takes the

form of veins and stockwork veinlets with gold, pyrite, sphalerite, galena and

chalcopyrite.

The study has been completed by various consulting companies, each of which address

different areas of expertise:

The Lokhorst Group is responsible for the auditing of all reports, assembling of

all data, and compiling the report.

Discover Geological Consultants Inc. reviewed in detail all geological work, such

as drill data, underground geological information, previous and current resource

data, and geochemical data. The focus of their report was to issue a new and

updated resource estimation. A NI 43-101 Technical Report was filed on

September 26, 2008.

Minconsult S.R.L together with Escuela de Ingenieria de Minas de la Universidad

Pontificia Catolica del Peru were responsible for mine design and mine

planning.

Act Labs del Peru, Laboratoria Plenge Ltda, ABR Mineria SAC, ED & ED

Ingenieria, and Universidad Nacional de Ingeniera performed metallurgical tests.

Lakefield Laboratory performed earlier metallurgical tests.

CIMM Peru LAB (with ISO certification) assayed all diamond drill core and mine

samples.

Goldex prepared the basic conceptual design of the 5100 t/d concentrator plant.


June, 2009 8

Cesel Engineering performed the detailed engineering for water and power

supply to the project as well as the Environmental Impact Assessment (EIA) for

the entire project.

SGS Group, South Africa performed general mineralogical ore characterization

testwork on high grade and low grade ore samples.

Knelson Laboratory and Met Solve Lab performed additional metallurgical tests.

Stanford Group, economic and finance modeling.

ACOMISA, for processing plant and tailing dams geomechanics, design and

detailed engineering.

Andean American Mining engineering team conducted a number of tasks, which have all

been reviewed and accepted or modified appropriately by The Lokhorst Group.

The Invicta Project covers a large mineral deposit. Diamond drill programs have

demonstrated a probable mineral reserve of 7.8 million tonnes. With processing,

500,000 ounces of gold, 3,200,000 ounces of silver, 41,500,000 pounds of copper,

14,300,000 pounds of lead and 5,600,000 pounds of zinc will be recovered. When in

production, an underground drilling programme will be initiated to upgrade the bulk of

inferred resources to an indicated category in the Atenea, Pucamina and Dany

mineralized structures. It is important to mention that in close proximity of the Atenea

System, there are several other mineralized structures that have yet to be tested by

drilling. These include Yurac Punta, Azulmina, Zone 8 and Flor de Loto.


June, 2009 9

Figure 1.1: Invicta Property location map

The Invicta property is located in the Western Pre-Cordillera of the Peruvian Andes in

the Huaura Province, Department of Lima, Central Coast of Peru (Figure 1.1). The

property is approximately 250 km north of Lima, and approximately 29 km east of the

city of Sayan. This provincial city provides services, supplies and facilities to the mining

industry. The Invicta Property is accessible from the capital Lima via the Panamerican

Highway, north to Huaura (160 km) and east to Sayan via Highway 16 (45 km), and

Huambay, on packed dirt road (33 km). The distance from Lima totals 238 km, which will

take around 4½ hours by car.

The elevation ranges from 2300 to 3800 meters above sea level with a generally steep

topography and surfaces covered by dry colluviums above 2500 m, and relatively

undulating to flat dry lands below 2500 m. The temperature varies with altitude and

ranges between 5˚C and 30˚C while annual precipitation ranges between 250 and


June, 2009 10

530 mm, during the rainy period from January to March. The climate is not expected to

affect operations anytime throughout the year.

The Invicta property lies close to the Huaura River, which is fed from the highlands with

yearlong flows varying between 10m³/sec in September to 73m³/sec in March. Three

creeks on the west side of the property join the river. Power supply will be obtained by

connecting into the regional grid at Sayan, around 29 km from the project site.

Currently, the closest port facility is located at El Callao, in Lima and Invicta will truck the

concentrate to this port.

Plant design is predicated on a rate of 5100 t/day, while the mine production will be

3000 t/day in Year 1, gradually increasing to 5000 t/day by Year 3 and maintained

through the life of the mine (LOM).

Leach and flotation testing by Lakefield Laboratory, Canada, and optimization by various

local laboratories show gold recovery by gravimetric and leaching processes to be

82.57-88.98% Au and 66.06-77.12% Ag from ore mined by open pit and underground

method. Blending these results with those of the flotation cycle will average total

recoveries of 87-94% Au and 79-89% Ag. The base metal recoveries are expected to

reach 70-78% Cu, 82-89% Pb and 72-87% Zn. The probable mineral reserves cover a

LOM of 5 years.

The Environmental Impact Assessment (EIA) was completed by Cesel Engineering and

submitted to the Mining Ministry on June 18, 2008. The viability approval, certificate

006-2008-MEM-AAM, was received from Ministry of Energy & Mines Department of

Director General of Environmental Affairs on January 24, 2009. Final approval of the EIA

by the Peruvian government is expected in July 2009.

Surface rights agreements have been reached with the native communities in the area.

Most of the areas are too rocky to serve for agricultural purposes.


June, 2009 11

1.2 Ownership & History

Mining activities date back from 1968 to 1969, time during which two adits were

developed in the Atenea structure The longest adit is 162 meters long and the second

39 meters long. In 1990 Leopoldo Livschitz staked 900 hectares centered also on Atenea

structure. In 1991 all activities were put on hold. In 1994 the property was declared

abandoned by the Peruvian Ministry of Mines. In 1994 Pangea Goldfields visited the

property and claimed 8,000 hectares. In 1996 exploration began with surface mapping

and trenching, underground sampling, 46 km of magnetic and 48 km of IP geophysics

surveys. Between 1997 and 1998 Pangea performed a diamond drill program with 83

holes from surface and 29 from underground, totaling 12,476 meters.

Barrick Gold acquired Pangea Peru S.A. in the year 2000. Initial property acquisition by

Andean American Mining Corp. (Andean American) entailed 5,800 hectares in early

2005. On September 9, 2005, Andean American signed an Option Agreement with

Minera ABX Exploraciones S.A (a subsidiary of Barrick Gold in Peru) to acquire a 100%

interest in the Victoria Project (now called Invicta Property). Andean American

independently acquired an additional 32,000 hectares bringing the total land position

for this project to 41,500 hectares which are now 100% owned by Invicta Mining Corp.,

a subsidiary of the Andean American Mining Group.

1.3 Regional and Local Geology

The coastal batholith is the main lithological feature along the coast of Peru. It lies

parallel to the continental margin. The batholith is divided into several complexes, one

of which is the Huaura plutonic complex, divided into diverse plutons (Santa Rosa,

Paccho, etc). These plutons are mainly composed of tonalite, diorite and granodiorite.

The age of the Batholith is Lower Cretaceous to Middle Upper Cretaceous (Cobbins,

1973).

Marine volcanics of the Casma Formation outcrop west of the batholith and are mainly

composed of massive andesite and epidotized pyroclastics. The Casma Formation is of


June, 2009 12

Lower to Mid-Cretaceous Age. Some remnants of this formation are present in the

northern part of the Invicta Property (Cobbins, 1973).

Sediments, quartzite, sandstone and limestone of the Goyllarisquizga Group were

deposited in the Lower Cretaceous. These rocks are severely faulted and folded and are

host to base metal vein and replacement deposits in central Peru.

The Calipuy volcanics were deposited during the Tertiary (Miocene) over an erosional

surface of the Goyllarisquizga Group and the volcanics of the Casma Formation. This

group is mainly composed of andesites and tuffs of intermediate to felsic composition. A

conglomerate is observed at the base of these volcanics

Calipuy Group is crosscut by dioritic and andesitic porphyries that have introduced the

mineralization to the volcanic dominion along elongated structures that show lengths of

2.7 km, striking N10˚W to EW, with widths between 0.8 m and 45 m, averaging 7.0 m.

Observation and data suggest multiple phases of mineralization. Two phases of

gold-silver plus base metal mesothermal type mineralization exist with a late-phase of

gold-silver plus copper vein type epithermal mineralization. The mesothermal

association is composed of pyrite, chalcopyrite and alteration minerals, such as epidote.

Chlorite and quartz have a wide distribution from the porphyries to the volcanic host

rocks, over long strike distances in the structures. This is named Family 1. A transitional

and mostly epithermal mineral association composed by pyrite, chalcopyrite, sphalerite,

galena and alteration minerals as quartz, pervasive chalcedonic silica, specularite and

additional chlorite and epidote comprises Family 2 and, from the high grade ore, shoots

overlapping Family 1. Both show breccias textures.

A third association, and final paragenetic stage, was introduced to the structures as

additional native gold, electrum, native silver, native copper, euhedral quartz and calcite

filling veinlets and microveinlets cross cutting the families deposited before. This

characteristic epithermal association is named Family 3 and frequently shows supergene

oxidation including free gold and silver.


June, 2009 13

For surface drilling, the size of the core varied from HQ to NQ while XRT was used for

underground drilling. For each hole, RQD data was gathered over the total length, while

density tests were only done in the mineralized zones. CIMM Perù S.A assayed a total of

3,313 samples. Most of the ore zones were re-assayed by Bondar & Clegg.

As of October 2006 to the present, Andean American has completed an additional 48

diamond drill holes for a total of 14,200 m. Most of the drill holes were infill drill holes

and some were for exploration purposes.

1.4 Resources

The mineralogical associations are typical of low sulphidation ore deposit. To date at

least 5 mineralized systems have been identified on the Invicta Project: Atenea, Yurac

Punta, Zone 8, Azulmina and Flor de Loto. The most studied is the Atenea System where

7 structures have been identified: Atenea, Pucamina, Dany, Manuel, Zone 3, Zone 5 and

Zone 7. Andean American has performed 44 km of geophysics survey (IP and Magnetics)

over this system and new areas have been identified below the surface.

Current resource estimates are from the NI 43-101 Invicta Technical Report filed on

SEDAR and dated August 29, 2008, which includes a measured and indicated resource of

7,903,000 million tonnes grading 2.11 g/t Au, 19.1 g/t Ag, 0.52% Cu and inferred

resources at 11,695,000 million tonnes grading 1.22 g/t Au, 10.1 g/t Ag and 0.27% Cu.

The measured and indicated resource of 7,903,000 tonnes has been placed by G.

Lokhorst, P.Eng., of The Lokhorst Group Ventures Inc. in the probable mineral reserve

category in this feasibility study by demonstrating the economic viability of mining this

mineralized structure. By definition a ‘probable mineral reserve’ is the economically

mineable part of an ‘indicated’ and, in some instances, ‘measured mineral resource’

where adequate information on mining, processing, metallurgical and other relevant

factors have demonstrated, at the time of reporting, economic extraction can be

justified (CIM standards on mineral resources and reserves, August 20, 2000).


June, 2009 14

1.5 Quality Control

The objective of Quality Assurance and Quality Control (QA/QC) programs on

exploration projects is to ensure that data from sampling, assaying, and recording of

geological observations are of high integrity and can be relied upon. These programs are

set up early in a project and adhere to standards that are high enough to ensure that the

accuracy and precision of the sampling and analytical process are at an acceptable level.

The Quality Assurance and Quality Control (QA-QC) program of Invicta follows a series of

integrated steps, each with a set of operating guidelines and checks to ensure data

reliability. The program is designed to ensure that assay results are accurate and precise

for the material being investigated (for a full description of the QA/QC program refer to

the filed NI 43-101 report of August 2008).

1.6 Mine Design

The geometry of the mineralization has dictated the mining methods. Some 60% of the

mineral reserves have widths greater than 4.0 meters; 23%, between 2 to 4 meters; and

7%, between 0.8 to 2.0 meters. The mining methods, as designed by Minconsult, are

sublevel stoping, cut and fill, and shrinkage, respectively. The remaining 10% will be

mined by open pit.

1.7 Metallurgy Testing and Design

In 1998 and 1999, Lakefield Laboratory Ltd. performed tests on Families 1 and 2,

producing average head grades of 4.12 g/t Au, 36.9 g/t Ag, 1.29% Cu, 0.92% Pb and

1.87% Zn. Metallurgical testing comprised crushing, grinding and gravimetric recovery

by using a Knelson concentrator; and classification and selective flotation concentration.

In the gravimetric process, recoveries of 61.4% gold and 4.8% silver were obtained. The

selective flotation produced three products: concentrates of copper averaging 26.9% Cu

and 385 g/t Ag, concentrates of lead averaging 63.2% Pb and 571 g/t Ag, and

concentrates of zinc averaging 59.2% Zn.


June, 2009 15

Between 2005 and 2008, Andean American performed additional testing at local

laboratories including Act Labs del Peru, Laboratorio Plenge Ltda, ABR Minería SAC, ED &

ED Ingeniería, Universidad Nacional de Ingeniería, Knelson, SGS and Met-Solve labs.

Optimized recovery tests by these local laboratories indicated greatly improved

recoveries. Testing of ore has indicated recoveries of gold by gravimetric plus bulk

lixiviation in a range from 78% to 94%, depending on the grade of ore and the

treatment. For silver, the recovery ranges from 50% to 89%; for copper, the recovery

ranges from 50% to 75%.

1.8 Reserves and LOM (life of mine)

A sensitivity analysis was performed using different metal prices. Using the following

metal prices generated a cut off ore value of 24 USD/t: 650 USD/oz Au, 13.75 USD/oz

Ag, 3.25 USD/lb Cu, 0.85 USD/lb Pb, and 0.90 USD/lb Zn. The probable mineral reserve

of 7.9 million tonnes has average concentrations of 2.1 g/t Au, 19.1 g/t Ag, 0.52% Cu,

0.38% Pb and 0.30% Zn.

The optimum production rate for the 7.9 million tonnes to be mined has been

determined to vary from 3,000 t/d to 5,000 t/d. The production rate for Year 1 will be

3,000 t/d, for Year 2 it will be 4,000 t/d, for Years 3, 4 and 5 it will be 5,000 t/d. The life

of mine (LOM) at these mining rates will be 5 years. MINCONSULT consultancy prepared

a mining plan (development, preparation and exploitation) to satisfy this schedule,

which consists of a detailed plan for the first 18 months and a general plan for the five

years production.

1.9 Products Schedule and Commercialization

The sulfides concentrates production plan is shown in Table 1.1.


June, 2009 16

Table 1.1: Sulfides Concentrates Production Plan

Year 1 2 3 4 5 Total

Cu (lb) 11,829,224 4,661,406 6,060,369 7,366,862 11,553,979 41,471,840

Pb (lb) 4,390,177 8,275,010 151,509 0 1,482,317 14,299,014

Zn (lb) 1,592,771 2,402,677 1,596,386 0 0 5,591,835

The delivery of the concentrates from the mine to the CORMIN warehouse located in El

Callao seaport, in Lima, is 30 USD/t for copper. All the metals payments shall be paid at

the official London Mine Exchange (LME) prices as published in the Metal Bulletin during

the quotation period.

The gravimetric concentrates production plan is presented in Table 1.2.

Table 1.2: Gravimetric Concentrates Production Plan


Total Au (oz) 79,655 108,153 148,394 116,796 47,724 500,722

Total Ag (oz) 1,021,122 523,225 465,581 582,117 623,007 3,215,052

Procesadora Sudamericana offered the best contract for smelting and refining Invicta’s

ore. The cost proposed is 9 USD/kg (without I.G.V. tax) for either gold or silver received

after smelting. The time frame is 2 working days after receipt of product from the mine.

The recovery process is 99.75% Au and 99.00% Ag. The product results in a refined

metal grade of 99.98% for both precious metals. To sell the products in the local market

would cost 0.39% of the gold prices in the market (without I.G.V. tax) and for silver 3%

of the market price (without I.G.V. tax).

1.10 Processing and Project Development

1.10.1 Processing Plant

The Basic Conceptual Engineering for the concentrator plant was prepared by GOLDEX.

This plant is designed for production of 5,100-t/d. The plant includes areas for crushers,

pre-concentrators, grinders, flotation, thickeners, filters and tailings disposal for poly-

metallic ore, which contains gold, silver, copper, lead and zinc. The crushing area


June, 2009 17

includes primary, secondary and tertiary crushing with ample storage between the

crushing stages and between the crushing and pre-concentrator area. There is a 20,000-

tonne capacity stockpile ahead of the crushing area.

The pre-concentrator area contains continuous Knelson gravimetric concentrators. The

addition of micron tables will be considered depending on tests underway at the time of

processing. The grinding circuit includes rod and ball mills. There are two flotation

circuits. The bulk flotation of lead/copper and rougher scavenger zinc will be in

cylindrical flotation cells, while the cleaning and separation stages will also be in

cylindrical cells, but of lower capacity. The flotation system is designed for high, medium

and low-grade ore operation. The thickening of concentrates will be made using

conventional high rate thickeners and the filtrate will be concentrated further with

vacuum disc filters. Copper, lead and zinc concentrates will be produced.

For tailings disposal, two “Ultra Sep” (ultra high rate thickeners) will be used and the

solids will be further concentrated with four vacuum disc filters. The dry tailings will be

conveyed to the geo-membrane lined tailings disposal site. The recovered water, which

will be about 85% of the total consumption, will be re-circulated to the concentrator

plant. The total consumption for the process is approximately 200 litres/second.

1.10.2 Ore Haulage System

The ore will be transported from the mine to the concentrator plant on an underground

mine conveyor system which will daylight above the plant site at elevation 3050 m.

From here the ore is placed on a concrete lined chute on surface to an elevation of

2900 m, at which point the ore is loaded unto 36” conveyors, taking it to a hopper at the

plant site at elevation 2380 m.

1.10.3 Energy Supply

The power supply for the project is the 220 kV national power grid. Invicta power

demand will be 4,776 kW in the first year of operation, 5,555 kW in the second year, and

at the design capacity of 6,762 kW in the third year. The project will draw power from


June, 2009 18

the national grids through the Huacho substation where it is transformed to 66 kV and

fed to the Andahuasi substation through a 34 km transmission line. The new 66 kV

Invicta power line will start at this point and will be 29 km long, terminating at the

concentrator plant substation. The substation will transform the voltage to 10 kV for the

bus bar from which the various services will be taken through transformers. Invicta at

present is negotiating the power supply contract with EDEGEL for a rate, including

transmission costs and line losses, of 0.059 USD/kWh.

1.10.4 Water Supply

The concentrator plant water supply is a combination of reclaimed water from the

processing plant and fresh water, which will be taken from a well that has been drilled

adjacent the Huaura River. CESEL engineers investigated the various alternatives and

selected the location of this well using an electric geophysics survey. The well was

subjected to a three-day test to prove its capacity to be in excess of 50 l/sec. The system

design includes a submersible pump within the well and a receiving settling tank from

which the water is pumped, by a series of three pumps, to the make up water storage

pond at the concentrator plant. From the storage pond, five smaller pumps in series will

pump make up water to the mine. The engineering report supporting the make-up

water lines includes hydraulic, hydrological, geological, hydro-geological, mechanical

and electrical aspects.

1.10.5 Access Road

There are two new roads planned for the project. One is to be built from the plant to

Paran with improvements made to the existing road from Paran to the mine. The second

will start at the main road, which connects Sayan with Huarochiri, will branch off at

Choques and end at the concentrator plant.

1.10.6 Environmental Study and Legal Permissions

The project engineering and legal departments together with CESEL engineers prepared

and submitted the “Environmental Impact Assessment” to the Ministry of Energy and


June, 2009 19

Mines on June 18, 2008. The project will meet or exceed industry standards in

environmental protection and in establishing good relations with the communities

around the Invicta site. Precautions will be taken during the construction and operating

stages of the project to minimize the impact on the surrounding communities and

environment in general. At the end of the project, the equipment will be removed, the

buildings demolished, and the project area returned to as close to the original natural

state as possible. The roads will be left in place to allow future inspections and

additional remediation if and when these would be required.

The project has the Approved Certification of absence of archaeological ruins in the

areas where work will be carried out. The viability approval, certificate 006-2008-MEM-

AAM, was received from Ministry of Energy & Mines Department of Director General of

Environmental Affairs on January 24, 2009.

1.10.7 Social Permission

Good community relations are an important part of a mining operation. Invicta

continues to work with the neighbouring communities, partnering where possible,

improving the local infrastructure, supporting local programs, and offering employment

where practical.

The company has supported local communities to the following amounts:

Paran Community Sl. 236,000.00;

Lacsanga Community Sl. 205,000.00; and,

Santo Domingo Community Sl. 5,000.00.

To date the company has assumed commitments for the following amounts:

Paran Community Sl. 200,000.00;

Lacsanga Community Sl. 100,000.00 in 2009, and USD50,000.00 annually, when

the mine exploitation begins; and

Santo Domingo Community USD 50,000.00 annually when the exploitation mine

starts up.


June, 2009 20

1.11 Operating and Capital Costs

Cost estimates were prepared jointly by Invicta engineers, MINCONSULT for mine

development, GOLDEX for the concentrator plant and CESEL Engineers for the power

and water lines.

The mine and plant costs have been predicated on the Life Of Mine operating mining

plan of 5 years, with mine production rates of 3000 t/d in Year 1, 4000 t/d in Year 2, and

5000 t/d in Years 3, 4, and 5.

The average operating cost has been estimated to be 23.82 USD/t. When including

transportation cost of concentrates, treatment charge, refining and penalties, the total

average operating cost will be 28.92 USD/t.

The capital expenditures are estimated to be USD 65.3 million, which, with the proposed

mining plan, will be recovered in the first year of operation.

1.12 Project Schedule

The schedule for the project will cover twelve months. The project includes

construction of the plant and development of the mine, water and power lines, camps,

and roads.

1.13 Conclusions & Recommendations

The mineralized structure of the Invicta Project of Andean American can be mined in an

efficient and profitable way by a combination of underground and open pit mining

methods:

The mining methods selected will ensure the greatest recovery of the ore.

The 5-year Life of Mine (LOM) is practical and the most profitable for the

probable reserve of 7.9 million tonnes of ore to be mined.

The operating cost for the mine and plant is 28.92 USD/t and the capital cost is

USD 65.3 million.


June, 2009 21

The sum of 5-years bulk revenue is USD 600.1 million and net profits are

USD 185.3 million, with a gold base price of USD 900/oz and copper base price

of USD 2.00/lb.

Detailed monthly and quarterly mining plans for Year 1 are to be generated.

An infill underground diamond drill program is recommended to upgrade the

bulk of the inferred resources to an indicated category in the Atenea, Pucamina

and Dany mineralized structures.

Stanford Group-Stanford Consulting Peru SRL performed a Financial Analysis based on

the following base case parameters (Table 1.3).

Table 1.3: Base Case Metal Prices

Year 1 Year 2 Year 3 Year 4 Year 5

Au USD/oz 921 845 864 760 600

Ag USD/oz 16 15.9 14.42 13.47 11.53

Cu USD/lb 3.28 3.02 2.41 2.25 2.05

Pb USD/lb 0.81 0.79 0.65 0.63 0.52

Zn USD/lb 0.94 1.04 1.05 0.89 0.7

Stanford conclusions:

1. Year 1 EBITDA/Sales ratio is 72.3%, decreasing over time due to change in

mineral content and decline of prices.

2. Average EBITDA/Net Investment ratio is above 158% during the first year of

operation.

3. 5-year Average return of investment of 67.8%.

4. The Stanford Net Present Value (11% discount rate) of the 5-year free cash flow

net of debt amortization amounts to USD 159 million in base case scenario.

5. Invicta Project’s NPV remains positive at higher discount rates.

6. When price levels are 20% below the base forecast the NPV for shareholders

remains USD 98.90 million and the IRR of the project at 72%.


June, 2009 22

7. Invicta would remain a profitable project even if the estimated net investment

rises up to USD 90 million.

8. For every 5% change in the operating costs of Invicta the NPV changes

approximately USD 5 million.

9. When the operating costs are 20% above the estimated value the NPV for

shareholders is calculated as USD 137.65 million.


June, 2009 23

2 AUTHOR CERTIFICATES

2.1 Guy Lokhorst, P. Eng.

I, Gijsbertus Lokhorst of the City of Victoria in the Province of British Columbia, do herebycertify that:

1. I am a mining engineer with The Lokhorst Group, 4124 Holland Ave., Victoria BC

2. I am a member of the Association Professional Engineers and Geoscientists in theProvince of British Columbia - Registration Number 8454.

3. I am a graduate of the University of British Columbia (Bachelor of Applied Science,1961).

4. I have practiced my profession as a geologist and mining engineer for 43 years in Canadaand the United States of America. I have completed investigations on coal and mineralproperties on behalf of public companies.

5. I visited Invicta project site and Lima, Peru, office from May 7th through May 14th, 2009,inclusive.

6. I personally have reviewed the data referenced in this feasibility report.

7. In addition to information collected by me, in preparing this report I relied on theoriginal records of the Invicta property, and reviewed and modified wherever necessary.

8. I have no direct or indirect interest in any of Andean American Mining Corp. and theInvicta Property, nor do I expect to acquire any such interest.

9. I have not been restricted in any way in my access to the Invicta Property, or to persons,information, data or documents that I consider relevant to this report.

10. As at the date of this certificate, I am not aware of any material fact or material changenot reflected in this report, the omission to disclose which would make this reportmisleading.

11. Andean American Mining Corp. is hereby given permission to reproduce this report, orany part of it, in a prospectus, offering memorandum or other documents as may berequired by regulatory authorities or public stock exchanges, provided however, that noportion may be used out of context in such a manner as to convey a meaning differentfrom that set out in the whole.

Dated at Victoria, British Columbia, this 30th day of June 2009.

Signed “G Lokhorst”

Gijsbertus Lokhorst

Original document with professional stamp.


June, 2009 24


June, 2009 25

2.2 Victor Jaramillo, P. Geo.


June, 2009 26


June, 2009 27


June, 2009 28

2.3 Les Tarnai, P. Eng.


June, 2009 29


June, 2009 30

2.4 Rose Masias, MSc


June, 2009 31

3 BACKGROUND

3.1 History

Exploration activities date back from 1968 to 1969, during which two adits were

developed, 162 meters long and 39 meters long. In 1990, Mr. Leopoldo Livschitz staked

an area of 900 hectares centered in the Atenea Vein. Work was put on hold in 1991 and

the property was declared abandoned in 1994 by the Department of Mines. In 1994

Pangea Peru S.A. geologists visited the property and in 1995 Pangea Peru S.A. (Pangea)

staked the property, a total of 12,500 hectares.

Between July and December 1996 Pangea Peru S.A. initiated the reconnaissance of the

Victoria Project (now called the Invicta Property) with trench channel sampling over the

main mineralized zones: Zone 1 called the ¨Atenea Vein¨, Zone 2 called the ¨Pucamina

Vein¨, Zone 3 called the ¨Juan Vein¨, Zone 4 called the ¨Dany Vein¨, and Zone’s 5, 6 and

7. Assays confirmed the occurrence of gold in most of these zones. Val d´Or Geophysics

completed an induced polarization (IP) and magnetic surveys over a total of 43 line-

kilometres. Pangea continued trench sampling and construction of the access road from

the community of Paran to the Invicta Camp.

During 1997 and 1998, a 12,400 meter diamond drill program was completed by Pangea

as well as detailed geological mapping, a stream sediment geochemical survey, and a

resource calculation. Barrick Gold acquired Pangea Peru S.A. and its entire worldly

property package in 2000.

On September 9, 2005, a subsidiary of Andean American Mining Corp., Andean

Explorations SAC (which subsequently changed its name to Invicta Mining Corp SAC) and

Minera ABX Exploraciones SA (a subsidiary of Barrick Gold Corp.) entered into an Option

Agreement to acquire 100% interest in the Victoria Project (now called Invicta Property)

On March 30, 2006 the title for the Invicta El Misti Gold SAC transferred claims and

mining concessions to Andean Explorations SAC (both subsidiaries of Andean American

Mining Corp. in Peru).


June, 2009 32

Later on April 4, 2006 Andean exercised the Option from ABX and by doing so the

project area then comprised 16,900 hectares, of which 3,700 hectares were under

option agreement from Barrick Gold Corporation (ABX in Peru). Subsequent to

exercising the Option, ANDEAN EXPLORATIONS acquired independently additional

mining claims.

Besides the shares already transferred to ABX, the following obligations remained at the

time:

Pay ABX a 1% NSR capped at 1 million US Dollars (USD 1,000,000.00) on all

mineral produced and transferred from any and all of the mining rights

comprising the Project. Andean will have the option to eliminate this obligation

at any time by paying ABX USD 1,000,000.00 cash.

Pay ABX USD 100,000.00 cash yearly as advanced royalty payments, starting

from the first anniversary considered since the Option exercise and until

production from the mining rights comprising the Project starts.

Pay ABX USD 50,000.00 cash at the end of each quarter beginning with the

commencement of production from any, some or all of the mining rights that

comprise the Project and for 16 quarters. Therefore, the amount to be paid in

total according to this clause will be USD 800,000.00. Andean will be able to pay

ABX the USD 800,000.00 at one time without penalties and at any time after

commencement of said production.

To date, Andean American has paid ABX USD 200,000 cash of the NSR with USD 800,000

cash remaining to be paid. The Invicta Property currently comprises 41,500 hectares.

As per the Option Agreement ABX will have a back-in right so that it can acquire up to

51% of the Project if more than 2.0 million ounces of gold (not gold equivalent) are

discovered and converted into proven or probable reserves as per CIM reserve

calculation specifications.


June, 2009 33

3.2 The Property

The Invicta Property is comprised of 21 mining concessions and 30 claims, and

comprises a total area of 41,500 hectares as per the following schedule in Table 3.1. All

mining claims and concessions listed in Table 3.1 and shown in the map of Figure 3.1 are

in good standing. In Peru, Mining Concessions and Claims do not have expiry dates. They

are in good standing as long as the yearly fees are paid to the Ministry of Mines.


June, 2009 34

Table 3.1: Concessions and Claims of Invicta Property

N o. N a m e A re a ( he c t a r e s ) C la im N o. T y pe

1 V I C T O R IA U N O 1 ,00 0 .00 10 33 41 95 C on c e s s ion2 V I C T O R IA D O S 40 0 .00 10 33 62 95 C on c e s s ion3 V I C T O R IA T R E S 90 0 .00 10 33 57 95 C on c e s s ion

4 V I C T O R IA C U A T R O 40 0 .00 10 19 71 96 C on c e s s ion5 V I C T O R IA S IE T E 1 ,00 0 .00 10 23 11 96 C on c e s s ion6 IN V IC T A I 1 ,00 0 .00 10 31 29 05 C on c e s s ion

7 IN V IC T A II 1 ,00 0 .00 10 31 30 05 C on c e s s ion8 IN V IC T A II I 1 ,00 0 .00 10 31 31 05 C on c e s s ion

9 IN V IC T A IV 1 ,00 0 .00 10 31 32 05 C on c e s s ion10 IN V IC T A V 90 0 .00 10 31 33 05 C on c e s s ion11 IN V IC T A VI 60 0 .00 10 31 34 05 C on c e s s ion12 IN V IC T A VI I 30 0 .00 10 83 68 05 C on c e s s ion

13 IN V IC T A VI I I 80 0 .00 10 33 63 05 C on c e s s ion14 IN V IC T A IX 80 0 .00 10 33 64 05 C on c e s s ion15 IN V IC T A X 90 0 .00 10 33 65 05 C on c e s s ion

16 IN V IC T A XI 1 ,00 0 .00 10 33 66 05 C on c e s s ion17 IN V IC T A XI I 60 0 .00 10 33 67 05 C on c e s s ion18 IN V IC T A XI I I 1 ,00 0 .00 10 16 94 06 C on c e s s ion

19 IN V IC T A XI V 1 ,00 0 .00 10 16 95 06 C on c e s s ion20 IN V IC T A XV 1 ,00 0 .00 10 16 96 06 C on c e s s ion

21 IN V IC T A XV I 30 0 .00 10 16 97 06 C on c e s s ion22 IN V IC T A XV I I 1 ,00 0 .00 10 59 69 07 C la im23 IN V IC T A XV I I I 1 ,00 0 .00 10 59 70 07 C la im

24 IN V IC T A XI X 1 ,00 0 .00 10 59 89 07 C la im25 IN V IC T A XX 1 ,00 0 .00 10 59 90 07 C la im26 IN V IC T A XX I 50 0 .00 10 60 19 07 C la im

27 IN V IX T A X X II 80 0 .00 10 60 20 07 C la im28 IN V IC T A XX I I I 1 ,00 0 .00 10 62 23 07 C la im29 IN V IC T A XX I V 1 ,00 0 .00 10 62 24 07 C la im

30 IN V IC T A XX V 1 ,00 0 .00 10 62 25 07 C la im31 IN V IC T A XX V I 90 0 .00 10 00 27 08 C la im32 IN V IC T A XX V II 80 0 .00 10 00 28 08 C la im

33 IN V IC T A XX V II I 80 0 .00 10 00 29 08 C la im34 IN V IC T A XX I X 60 0 .00 10 00 30 08 C la im35 IN V IC T A XX X 80 0 .00 10 00 31 08 C la im

36 IN V IC T A XX X I 50 0 .00 10 00 32 08 C la im37 IN V IC T A XX X I I 1 ,00 0 .00 10 00 33 08 C la im38 IN V IC T A XX X I II 1 ,00 0 .00 10 00 34 08 C la im

39 IN V IC T A XX X I V 80 0 .00 10 00 35 08 C la im40 IN V IC T A XX X V 1 ,00 0 .00 10 00 36 08 C la im

41 IN V IC T A XX X V I 80 0 .00 10 00 37 08 C la im42 IN V IC T A XX X V I I 1 ,00 0 .00 10 00 38 08 C la im43 IN V IC T A XX X V I I I 90 0 .00 10 00 39 08 C la im

44 IN V IC T A XX X I X 90 0 .00 10 00 40 08 C la im45 IN V IC T A XL 90 0 .00 10 00 41 08 C la im46 IN V IC T A XL I 60 0 .00 10 00 42 08 C la im

47 IN V IC T A XL I I 60 0 .00 10 00 43 08 C la im48 IN V IC T A XL I II 60 0 .00 10 00 44 08 C la im49 IN V IC T A XL I V 60 0 .00 10 00 45 08 C la im

50 IN V IC T A XL V 60 0 .00 10 00 46 08 C la im51 IN V IC T A XL V I 60 0 .00 10 00 47 08 C la im

T O T A L = 41 ,50 0 .00


June, 2009 35

Figure 3.1: Map of Concessions and Claims

3.3 Property Location, Service Features & Biophysical Environment

The Invicta project is located in the central-western part of the Department of Lima,

Province of Huaura, in the Districts of Paccho and Leoncio Prado


June, 2009 36

The Project is accessible from the capital of Peru, Lima, by PanAmerican Highway north

to Huaura (160 km), Highway 16 east to Sayan (45 km), and on hard surfaced road via

Huamboy to the Invicta Property (33 km). The Invicta Property location is shown in

Figure 3.2.

Figure 3.2: Location of Invicta Property


June, 2009 37

Temperatures in the summer months reach up to 34° Celsius and during winter 5°

Celsius. The climate is semi-arid most of the year with little vegetation, mainly small

plants and cacti. The topography is rugged with deep V shaped valleys cutting through

the Andes. The average elevation in the project area is 3600 meters above sea level. The

rainy season runs from December to March, with annual rainfall of 25 to 40 centimeters.

There are several small springs supplying water 12 to 15 kilometers to the East of the

Atenea Vein. The Huaura River is located in the lower lands 7.5 kilometers to the west of

the property.

Power supply and trained mining personnel are available from the town of Sayan.

Surface rights agreements have been reached with the native communities in the area.

Most of the areas are too rocky to serve for agricultural purposes.


June, 2009 38

4 GEOLOGY

4.1 Regional Geology

The Coastal Batholith is the main lithological feature along the coast of Peru. It lies

parallel to the continental margin. The Batholith is divided into several complexes, one

of which is the Huaura plutonic complex, divided into diverse plutons (Santa Rosa,

Paccho, etc). These plutons are mainly composed of tonalite, diorite and granodiorite.

The age of the Batholith is Lower Cretaceous to Middle Upper Cretaceous (Cobbins,

1973).

Marine volcanics of the Casma Formation outcrop west of the batholith and are mainly

composed of massive andesite and epidotized pyroclastics. The Casma Formation is of

Lower to Mid-Cretaceous Age. Some remnants of this formation are present in the

northern part of the Invicta Property (Cobbins, 1973).

Sediments, quartzite, sandstone and limestone of the Goyllarisquizga Group were

deposited in the Lower Cretaceous. These rocks are severely faulted and folded and are

host to base metal vein and replacement deposits in central Peru.

The Calipuy volcanics were deposited during the Tertiary (Miocene) over an erosional

surface of the Goyllarisquizga Group and the volcanics of the Casma Formation. This

group is mainly composed of andesites and tuffs of intermediate to felsic composition. A

conglomerate is observed at the base of these volcanics (see Figure 4.1).


June, 2009 39

Figure 4.1: Invicta Property Regional Geology Map

The structural domain is directly related to the Andean Orogeny. The main orientations

are 055°, 110° and 130°. These trends are associated to the strikes of thrust faults and

transform faults associated with this event.

The regional stratigraphy is presented in Table 4.1: Regional Stratigraphy.


June, 2009 40

Table 4.1: Regional Stratigraphy

4.2 Property Geology

The Invicta property is underlain by diorite, tonalite and granodiorite of the Paccho

intrusive (Coastal Batholith) overlain by a complex assemblage of volcanic to sub-

volcanic units of the Tertiary Calipuy Group (Figure 4.1).

Diorites and granodiorites cover the southwestern corner of the Victoria 1 claim and

most of the western half of the claim blocks (Figure 4.2). They are massive and generally

altered by weak to moderate propyllitic alteration with minor disseminated pyrite. In

the mineralized area, a zone of strong clay alteration is observed close to surface and

grades into propyllitic alteration at a depth of apparently less than 30 meters. This clay

alteration may be due to weathering of sulphides and of supergene origin. It could also

be related to a different hydrothermal event superimposed on the known mineralization

or a remnant of the lower portion of the epithermal environment eroded.

The volcanic rocks consist of mafic “flows” interbedded with tuffs and possible debris

flows, overlain by a diatreme-flow-dome complex, including several phreatic to phreato-

magmatic breccias and associated domes and tuff breccias. Flow banded felsic dykes,

previously described as vertically dipping ignimbrites; appear to cut all previously

mentioned units.


June, 2009 41

Figure 4.2: Invicta Property Geology

The mafic “flows” are generally massive, fine grained, and locally finely porphyritic.

These rocks were mainly observed in the western part of the property surrounding the

dioritic intrusion. Some holes drilled in Zone 4 intersected intervals of this unit within

the diorite-granodiorite intrusion. These zones possibly represent feeder dykes cutting

through the intrusion. This unit is also described in the footwall and less frequently in

the hanging wall of the Atenea Structure.

The evidence for the dome diatreme complex is visible both on surface and in the core.

Although a diatreme pipe has not observed, a number of phreato-magmatic breccias


June, 2009 42

cutting dome material and the mafic “flows” were observed on surface and in the core.

These breccias are characterized by milled matrix breccias hosting polymictic fragments

ranging from a few millimetres to several tens of centimetres grading into more

monolithic “crackle” breccias with very little matrix. In the Atenea Structure the

mineralization appears to be cutting through a pre-existing phreato-magmatic breccia

dike, often hard to discern due to strong alteration and veining.

The majority of what was previously mapped as crystal tuff or porphyritic andesite is

more likely flow-dome material. Both the dome and breccias are generally weakly

altered to weak clay and/ or weak to moderate propylitic alteration. Almost ubiquitous

is hematite staining, usually affecting the matrix and giving the rock a purple to red

coloration.

The large volume of poorly sorted and crudely bedded fragmental units are typical tuff

breccias. These include both rounded and angular fragments ranging from a few

millimeters to several tens of centimeters. In an area to the east of the Atenea

Structure, this unit locally hosts moderately to strongly siliceous fragments. This silica

alteration is massive and could have been related to low level, low temperature

hydrothermal activity. Subsequent phreatic activity destroyed these units and

incorporated them into the ejecta. A few fragments were possibly derived from the

sedimentary basement. The alteration within these rocks is similar to that described for

the dome and breccia units and mainly restricted to hematite staining and weak clay.

The unit mapped as ignimbrites or welded tuff is definitely not a pyroclastic unit. When

observed in the field, it clearly cuts the other units and generally dips close to vertical.

The presence of locally well-developed flow banding, a very common feature of rhyolitic

dykes, may have been confused for bedding. This unit appears to be a late feature and

could even be post mineral. It is generally weakly altered to clay and/ or silica and

epidote. These dikes range from aphanitic to fine grained, and are locally finely

porphyritic, generally when of larger size.


June, 2009 43

Two large masses of this material appear to have been injected along the WNW

trending structure south of the mineralized Atenea Structure. One mass is located just

north of Zone 6. The other is approximately 200 meters east of the southern end of the

Atenea Structure, to the north of the campsite.

This stratigraphic sequence is similar to the Lower Calipuy in the Ancash area which

hosts diatreme-dome complexes with restricted hydrothermal activity and few large

alteration zones. Most of the base metal vein systems in Ancash are considered to have

formed at shallow to moderate depths (in mesothermal to epithermal environments),

and lie within this part of the stratigraphy.

4.3 Property Description

Victor A. Jaramillo of Discover Geological Consultants Inc., referenced in sub-section

4.3.2, describes the property. Section 4.3.1 contains excerpts from the report.

4.3.1 Report by Discover Geological Consultants Inc.

Victor A. Jaramillo, M.Sc.A., P.Geo., a geological consultant with Discover Geological

Consultants Inc., was retained by Andean American Mining Corp. on July 31th, 2008,

with the terms of reference for this assignment consisting of undertaking a geological

review of all exploration work done at the Invicta Property from October 2006 to the

present, particularly in reference to updating the resources estimated by the writer in a

report titled “Invicta Property Technical Report” dated July 24, 2007.

Previously, Mr. Jaramillo visited the Property on February 10th, 2006 (for one day), on

February 21, 2006 (for one day) accompanied by Mr. Lindsay Bottomer (Geological

Consultant) and Mr. Luis Vela, VP Explorations for Andean Explorations (a subsidiary in

Peru of Andean American), and from September 30 to October 2, 2006 (for 3 days), and

from October 16 to the 18, 2006 (for 3 days). From these visits and after reviewing all

available data at the time, a resource infill drill program was recommended in the report

dated July 24, 2007. Mr. Jaramillo has recently reviewed in detail all geological work

completed to date, such as drill data, underground geological information, previous and

current resource data, geochemical data and maps of the property. Most recently on


June, 2009 44

August 18, 2008, Mr. Jaramillo was at Andean American’s Lima, Peru office where he

was able to review and verify that a recent resource estimate prepared by Andean

Explorations using DataMine software fully complied with the CIM Definition Standards

for Mineral Resources and Mineral Reserves. As part of due diligence on August 19,

2008 (for one day) the author visited the Invicta Property accompanied by Mr. Andrew

Gourlay, P.Geol.(President of Andean American) and Mr. Luis Vela, VP Explorations for

Andean Explorations in Peru.

With all this recent information, an updated drill database was prepared. New and

updated resource estimation is the focus of this report.

The Invicta Project is located in West-Central Peru in the department of Lima, province

of Huaura, approximately 250 kilometers by road northeast from the city of Lima, Peru.

The Invicta Property is comprised of 16 mining concessions and 30 claims held by

Andean American and 5 mining concessions held by Barrick (Minera ABX). It covers a

total area of 41,500 hectares.

The climate is semi-arid most of the year, with little vegetation. The topography is

rugged with deep V shaped valleys. Glacial springs supply water approximately 12 to 15

km East of the project.

As far as V. Jaramillo is aware, there are no pending environmental liabilities associated

with the properties and Andean will be obliged to comply with Peruvian environmental

laws and the environmental permitting process as the project advances.

The Invicta mineralized area is located near the contact of the Miocene Calipuy Volcanic

Group overlying the Cretaceous Paccho Intrusive Complex. The volcanic rocks host gold,

silver and base metal mineralized structures at Invicta. The Calipuy volcanics consist

mainly of andesites, lapilli and block tuff and welded tuff (ignimbrite).

The mineralized structures are characterized by pyrite and chalcopyrite followed by

sphalerite and galena. Some chalcocite, digenite after chalcopyrite and bornite are also


June, 2009 45

reported, with traces of tennantite. Petrographic studies done by Pangea and Andean

Explorations suggest that gold exists as free grains in fractured quartz and pyrite.

In 1998 Pangea (Aubertin and Diaz, 1998) estimated a resource of approximately

1,700,312 tonnes, grading 6.16 g/t gold, 56 g/t silver and 1% Cu, between the Atenea,

Pucamina and Zones 4 & 6. This resource was estimated using a cut-off grade of 3.0

grams/tonne gold.. Also, at a 1.0 gram/tonne gold cut-off grade, resources had been

estimated at 3,531,871 tonnes, grading 3.58 g/t gold, 33.46 g/t silver and 0.68 % copper.

All of the resources were classified as sulphides (Table 4.2).

Table 4.2: Pangea's Historical Resource Data

The historical estimates in Table 4.2 were made in accordance with the standards in

effect at the time, but such estimates were not compliant with National Instrument 43-

101 (N.I. 43-101). They are reported here for reference purposes only, and should not

be relied upon.

To bring the deposit into compliance, Andean performed a validation work program,

which was later verified by the writer, and completed an updated resource estimate.

Andean initially validated 12 blocks in the Atenea Vein. Andean American obtained

geological and analytical data (assays, widths, areas, bulk densities and re-logging core

data). Although some slight differences were found, in block area, widths and bulk

densities, Andean American determined that there was good correlation with Pangea´s

resource estimate.

The writer divided the mineralization into a mixed type (oxides + sulphides) and a

sulphide type. The bulk of the mineralization in the Atenea Vein (78%) and almost all of

the mineralization in the Pucamina Vein was classified of the sulphide type.


June, 2009 46

As of October 2006 to the present, Andean completed an additional 48 diamond drill

holes for a total of 14,200.87 meters. Most of the drill holes were infill drill holes and

some were for exploration purposes.

New underground exploration workings (Adit 3400) to explore the Atenea Structure has

totaled to date approximately 1,200 linear meters. These underground workings have

provided excellent geological information and have assisted in the measured resource

estimation provided in this report.

This report includes an updated resource estimate using geostatistical methodologies

and DATAMINE software (Table 4.3). All estimated updated resources are sulphides. The

tables below provide a summary of the current and updated resources at Invicta.

Table 4.3: 2008 NI 43-101 Resource Estimates

ATENEA STRUCTURE RESOURCES (Inverse Distance Squared)

Type Tonnes S.G. Au g/t Ag g/t Cu % Pb % Zn %

Measured 850000 2.77 2.2 29.48 0.69 0.67 0.54

Indicated 4339000 2.80 1.79 21.32 0.54 0.44 0.37

TOTAL = 5189000 1.86 22.66 0.56 0.48 0.40

INDICATED RESOURCE SUMMARY (Inverse Distance Squared)Structure Tonnes S.G. Au g/t Ag g/t Cu % Pb % Zn %

Atenea 4339000 2.80 1.79 21.32 0.54 0.44 0.37

Pucamina 1114000 2.54 2.1 6.25 0.26 0.2 0.43

Dany 659000 2.74 0.53 9.28 0.37 0.1 0.14

Ydalia 1 193000 2.69 2.12 26.63 1.00 0.27 0.21

Ydalia 2 184000 2.72 4.65 10.68 0.33 0.33 0.11

Zone 4 564000 2.72 5.49 24.61 0.73 0.15 0.13

TOTAL 7053000 2.10 17.95 0.50 0.34 0.33


June, 2009 47

SUMMARY OF MEASURED AND INDICATED RESOURCES

(Inverse Distance Squared)Type Tonnes S.G. Au g/t Ag g/t Cu % Pb % Zn %

Atenea Measured 850000 2.77 2.2 29.48 0.69 0.67 0.54

Atenea Indicated 4339000 2.80 1.79 21.32 0.54 0.44 0.37

Pucamina Indicated 1114000 2.54 2.1 6.25 0.26 0.20 0.43

Dany Indicated 659000 2.74 0.53 9.28 0.37 0.10 0.14

Ydalia 1 Indicated 193000 2.69 2.12 26.63 1.00 0.27 0.21

Ydalia 2 Indicated 184000 2.72 4.65 10.68 0.33 0.33 0.11

Zone 4 Indicated 564000 2.72 5.49 24.61 0.73 0.15 0.13

TOTAL 7903000 2.11 19.19 0.52 0.38 0.35

INFERRED RESOURCE SUMMARY (Inverse Distance Squared)Structure Tonnes S.G. Au g/t Ag g/t Cu % Pb % Zn %

Atenea 4079000 2.77 1.22 8.88 0.2 0.24 0.27

Pucamina 1103000 2.54 1.91 8.29 0.17 0.12 0.19

Dany 3124000 2.74 0.26 11.43 0.44 0.52 0.14

Ydalia 1 1334500 2.69 1.04 28.49 0.7 0.11 0.08

Ydalia 2 866000 2.72 0.51 16.17 0.47 0.1 0.24

Zona 4 1188500 2.72 1.29 13.7 0.56 0.26 0.09

TOTAL 11695000 1.22 10.14 0.27 0.24 0.23

4.4 Section References

For detailed analysis of the Invicta Property geology, drilling, mineral resources and

reserves, statistical analysis and other topics, please refer to the full report by Victor A.

Jaramillo, M.Sc.(A), P.Geo., dated August 29, 2008, of Discover Geological Consultants

Inc.

Appendix A contains the Invicta Property Resource Update Technical Report, dated

August 29, 2008, NI 43-101.


June, 2009 48

5 MINING

5.1 Mining Methodology

The study and design of mining has been under the direction of Minconsult (Eng. Jaime

Mercado) and by Invicta mining engineers. The Catholic University of Lima, Eng. Jorge

Ramirez and Eng. Jose Ardito performed Geomechanical tests for underground and

surface mining.

The objective of the mine plan is to provide a continuous source of ore to produce

streams of concentrate throughout the mine life, in an economic manner. Target

production rates of ore mined and processed were determined by optimizing

efficiencies in plant performance and mine. Production rates have been set at 3000 t/d

for Year 1, 4000 t/d for Year 2, and 5000 t/d for Years 3, 4, and 5.

The varying width and inclination of the mineralized zone and its stability characteristics

have dictated the mining method. The following true width criteria of the mineralized

zone determine the underground stoping methods are shown in Table 5.1.

Table 5.1: True Width Criteria of the Mineralized Zones

Stoping Method True Width Criteria

Sublevel Stoping true width>6m

Cut and Fill Stoping true width>2m<6m

Shrinkage Stoping true width>0.7m<2M

In addition there will be an open pit mining operation on the Atenea Vein between

elevations 3550 and 3850 m. Only 10% of total production over the life of mine will

come from open pit operations. The average waste to ore ratio is 4.9/1. The waste/ore

ratio in the first year of operation will be as high as 7/1. The open pit waste will be

required for the back filling in ‘cut and fill’ underground stope mining. The underground

fill requirement for stoping in the Atenea veins has been estimated to be 1.24 tonne and

for the Pucamina stopes 0.65 tonne. Another 1.75 tonne will be placed in the open pit,


June, 2009 49

while any waste not used for fill underground or open pit could be placed in a waste

dump located at a nearby valley site just northwest of the open pit.

Mining dilution and recoveries are assumed as shown in Table 5.2.

Table 5.2: Mining Dilution & Recoveries

Dilution Recoveries

Open Pit 0.20 m 100%

Sublevel Stoping 1.00 m 90%

Cut and Fill Stoping 0.40 m 90%

Shrinkage Stoping 0.20 m 95%

5.2 Geotechnical Investigations and Assessments

The mineralized zone is located in a regional fault, with presence of clay due to faulting

on both walls. The host rock can be andesitic porphyry which has an RMR that varies

between 60 and 70 and volcanic tuff with an RMR between 50 and 60. At the contact of

the walls and ore there is a fault zone with RMR from 5 to 15. The use of software “The

Mining Method Selection” validated from a geomechanical and economical point of

view the selection of the chosen method of mining.

Table 5.3: Mining Method Selection

5.3 Geologic Block Modeling

A geostatistical analysis of all the samples included the construction of a variogram that

in turn resulted in a model. The block model uses geological knowledge of the

StabilityVein

Estimatewidth (m)

Mineralizedzone

Hostingrock

DipsMiningmethod

Type 1 4.0 – 22 stable stable 65° - 85°Sublevelstoping

Type 2 1.5 – 4.0moderate

stablemoderate

stablesub vertical

Ascendingcut and fill

Type 3 ~0 - 1.5moderate

stablemoderate

stablesub vertical Shrinkage


June, 2009 50

mineralized structure at Invicta. The block size is 3 meters in the “X” axis and 10 meters

in the “Y” and “Z” direction, with sub blocks of 1.5 meters in the “X” direction and 5

meters in the “Y” and “Z” direction. Each block is defined using the “Inverse Distance

Squared” procedure where the value of any point is estimated by a weighted linear

combination of the nearby sample value. The weight assigned to each nearby sample is

inversely proportional to the square of its distance from the point estimated. All

resource blocks are graded with respect to the amount or percentage of metal it was

estimated to contain. The mining engineer, having determined the cost of mining, could

now decide which resource is economically mineable at a chosen mining method.

Please refer to Appendix B for further details.

5.4 Mine Design & Layout

5.4.1 Open Pit

Open pit mining will function on the Atenea Vein between elevations 3550 and 3850 m

(Figure 5.1). The benches will have a maximum height of 15 meters and will stand at an

angle of 68 degrees. Berms serving as access points along the walls and catchment areas

for loose material coming off the walls will have a width of 3.5 meters. The final pit

slope will be at 59 degrees. Ramps will have a maximum gradient of 10% and a width of

8 meters. The drilling of 6-inch diameter blast holes will be with track-based equipment,

ANFO explosives will blast rock and front-end loaders will load 30-tonne trucks.

The open pit will be mined in 2 phases, OP#1 and OP#2 as shown on Figure 5.3 Waste to

underground stoping areas will be dumped into the waste chute and drawn into the

stopes Ore from the open pit areas will be dumped in the ore pass taking it to the

crusher on the 3400 m level.


June, 2009 51

Figure 5.1: Longitudinal View Open Pit


June, 2009 52

Figure 5.2: Plan - Atenea Veins, Open Pit


June, 2009 53

Figure 5.3: Open Pit Phases, OP#1 and OP#2

5.4.2 Sublevel Stoping

Mining of the Atenea Vein will be Sublevel stoping. This method of mining is a large

production stoping method and is chosen because of this fairly regular ore body with

ore and host rock requiring little support during mine activities. The wide dimension of

the mineralized zone and its steep dip are an advantage to the mining method. The

stopes will be 45 m. high, while leaving pillars of 3 m. The sublevels, 4.5 x 4.0 m., are

driven at midpoint (22.5 m). The starting slot is cut and drawn empty, and the draw

cone cut ahead of the slot, forming a stope undercut. Stope drilling, producing 11.5 cm


June, 2009 54

diameter drill holes, is commenced at the lowermost sublevel with long-hole fan drilling.

The cone draw points will be exiting on the haulage level, in this way it will reduce tying

up ore in pillars and reduces development and maintenance costs. The loading levels are

4.5 x 4.0 m to accommodate a 4.6m³ scoop tram. It will require a ramp system in the

footwall for moving the ore from level to level.

Figure 5.4: Sub Level Stoping Schematic

5.4.3 Cut and Fill Stoping

A filled stope is one in which ground support is provided by waste material (Figure 5.5).

The ore body is extracted in small sections that are partly or completely filled before

adjacent ore is extracted. The waste material is to come from the open pit area, blasted

waste material or surface colluvial. Progress in the stope is upward, and supported

openings are extended through the fill. The ore is removed through ore raises, and

waste is moved into the stopes through waste chutes.


June, 2009 55

Figure 5.5: Cut and Fill Stoping Schematic

5.4.4 Shrinkage Stopes

This method will be applied in cases where mineralization has been limited to a width of

less than 1.5 m. Progress is upward with draw points exiting on the haulage level. After

drawing the first lift, the stope will be drilled and blasted in lifts of 2 to 3 m, as per

Figure 5.6.


June, 2009 56

Figure 5.6: Shrinkage Stoping Schematic

5.4.5 Mine Development

Mine development will consist of driving crosscuts, haulage ways, ramps, ventilation

raises, ore passes, waste chutes, and service raises. The plan is contained in Table 5.4.

Table 5.4: Mine Development

Works Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total

Dev. And Prep.Total (m)

6,627 3,040 4,245 5,831 8,279 5,323 33,345

5.4.6 Mine Plan

An economically mineable part of the Indicated and Measured Mineral Resource has

been selected for developing a practical mine plan. Studies of this Probable Mineral

Reserve have dictated a mining plan that spans a period of 5 years through a sequence

of extraction of reserve blocks. Table 5.5 indicates the yearly tonnages of ore mined,

with attending grades.


June, 2009 57

Table 5.5: Ore Recovery by Year

Diluted &Recovery Tons

Au g/t Ag g/t Cu % Pb % Zn %

YEAR 1 1,065,991 2.49 39.73 0.79 0.52 0.42

YEAR 2 1,399,755 2.57 17.89 0.42 0.63 0.49

YEAR 3 1,744,300 2.83 13.84 0.44 0.35 0.34

YEAR 4 1,797,502 2.15 13.99 0.44 0.21 0.21

YEAR 5 1,799,609 0.94 16.57 0.59 0.30 0.13

TOTAL 7,807,157 2.14 18.76 0.52 0.38 0.30

For further detailed information, please refer to Appendix B, which contains the

following Tables and Plan:

Appendix Table 1 LONG TERM MINING PLAN

Appendix Table 2 LONG TERM MINING PLAN BY MINING AREA

Appendix Table 3 RESERVE BLOCKS MINED IN YEARS 1 TO 5

Appendix Table 4 BLOCK OF MINEABLE RESERVES PER YEAR

5.5 Infrastructure, Equipment & Services

5.5.1 Infrastructure

Scoop tram and haulage trucks will haul the ore transportation inside the mine from the

Atenea Vein stope areas to the ore pass. Access to all levels will be by means of a ramp

system that runs from the 3520 m Level to 3150 m the main transport level. Ore from

the upper stopes of the Atenea Vein will be transported to a crusher on the 3400 m

Level. Subsequently, from the underground crusher location, a 1425 m long conveyor is

placed in a 15 degree inclined ramp that daylights at 3050 m elevation. At this point a

concrete-lined surface chute will carry the ore to a stockpile on elevation 2900 m, and

from here zigzagging in two steps to the plant site on two separate 36” conveyors.


June, 2009 58

Figure 5.7: Ore Transportation System From Mine to Plant


June, 2009 59

5.5.2 Equipment

The following equipment shown in Table 5.6, will be supporting the mine operation. The

required airflow, in underground workings where the equipment operates, has been

tabulated.

Table 5.6: Equipment

AirflowEquipment Power (HP) Quantity Utilization(%) cfm m³/min

Scooptram LHD AtlasCopco ST 1020

200 2 70 29,680 842

Scooptram LHD AtlasCopco ST 710

140 2 70 20,776 588

Dumper Tamrock EJC416 - 14 Ton

184 1 50 9,752 278

Simba - Atlas Copco 68 1 70 5,046 143

Jumbo Boomer H104Atlas Copco

68 2 50 7,208 204

Truck of services 100 2 50 10,600 300

Trucks of services 80 2 40 6,784 192

5.5.3 Ventilation

The mine ventilation based on regulated requirements have been determined as per

“Norms of Mining Security and Hygiene”, Chapter 3, Management of the Mining

Operations, and, Standards of the Mining Operations, Mine Ventilation, Article 204,

Item C.

The required total airflow taking into consideration altitude, personnel, the use of diesel

equipment and ANFO explosives, as well as gas dilution, has been estimated, per level of

daily production, is shown in Table 5.7.

Table 5.7: Required daily Volumetric Air Flow

Mining Rate (t/d) Airflow (cfm)

3000 114,552

4000 200,533

5000 295,416


June, 2009 60

A ventilation software program, VentSim 3.9, based on the “Theory for the Solution of

Ventilation, using the Hardy-Cross Method”, will be used to simulate long and short

term mine planning, and possible ways to mitigate poison gas accumulation, as well as

the airflow velocities and pressures.

5.5.4 Water

Water supplying the concentrator plant and the mine will be delivered through pipes

from a well struck near Huamboy, at 1050 m elevation and lifted to a pond at 2400 m,

and from there the water will be further pumped to the mine and stored in a pond at

3950 m. The capacity of the pond will be of 1,500 m3, and will be able to provide water

storage for 72 hours of continuous operation. The estimated average water

consumption for the mine 5 l/s

5.5.5 Compressed Air

Compressed air is required to run conventional mining equipment, such as jacklegs,

jumbo drills, and stopers.

The compressed air requirement is calculated according to the number of pneumatic

machines inside the mine being used simultaneously and losses due to distance from

the compressor. The estimated compressed air requirement per level of daily

production is summarized in Table 5.8.

Table 5.8: Compressed Air Requirements

Mining Rate (t/d) Airflow (cfm)

3000 877

4000 1212

5000 1488


June, 2009 61

6 METALLURGY

Testing of ore has indicated recoveries of gold by gravimetric plus bulk lixiviation in a

range from 82.57% to 88.98%, depending on the grade of ore. For silver the recovery

ranges from 66.06% to 77.12%.

The total recovery of gold and silver (gravimetric + bulk lixiviation + selective flotation)

ranges from: 87% to 94% for gold, and 79% to 89% for silver.

In the studies and calculations presented 80% of gold recovery was used for combined

gravimetric recovery and bulk flotation for the first 4 years of operation and 70% for the

fifth year, this being due to the change in ore grade. Recoveries of 50 to 65% for silver

gravimetric and bulk flotation were used, also depending on the ore grade.

The total average recovery for gold used in the metallurgical balances is between 78%

and 90%, and for silver between 60% and 75%.

It has been found that a higher release (regrinding) has a strong impact on the increase

of the gravimetric recovery of gold and silver. However, in the recovery and quality of

Cu, Pb and Zn concentrates, a higher release is not apparent.

Continuing metallurgical tests have indicated that recoveries can be optimized through

the application of micron wave tables and Knelson (CVD-continuous variable discharge)

concentrators. The plant design will be adjusted to incorporate when all of such

improvements have been finalized.

6.1 Testing Summary

The resources of Invicta Mining Corp SAC. are classified in three mineral groups.

Group 1 (Table 6.1) has contents of Au-Ag and Cu which are all recoverable. Pyrite and

chalcopyrite.


June, 2009 62

Table 6.1: Group 1 Metallurgy

t Ore g/t Au g/t Ag %Cu %Pb %Zn

2443724 1.37 17.65 0.67 0.13 0.11

Group 2 (Table 6.2) has contents of Au-Ag-Cu-Pb and Zn, all of them recoverable. Pyrite,

chalcopyrite, galena and sphalerite.



4793016 2.47 20.90 0.49 0.54 0.41

Group 3 (Table 6.3) has contents of Au and Ag which are recoverable, with quartz and

some iron oxides.



570416 2.75 5.61 0.10 0.11 0.15

The process of concentration and gravimetric was defined based on the concentration

and gravimetric tests made by Lakefield Canada, for Pangea, in 1998.

6.2 Gravity Separation

The Gravity separation tests were conducted for each ore and the results are

summarized in Table 6.4. In each of the tests the recovery was higher at the coarser

grind.


June, 2009 63

Table 6.4: Gravity Test Results

MozleyOre

Concentrate

TestNº

Grindmin

Wt%

Assayg/tAu

Assayg/tAg

% dist.Au

%dist.Ag

Tailg/tAu

Tailg/tAg

Cal.Head

Au

Cal.Head

Au

Atenea 2 2 40 0.05 1265 1168 30.20 1.70 1.59 36.80 2.22 37.40

8 32 0.25 1001 693 61.40* 4.80 1.61 35.20 4.11 36.80Z - 4 3 40 0.04 1384 649 14.30** 0.70 3.46 36.50 4.01 36.70

9 32 0.15 998 551 28.30 2.00 3.87 40.70 5.36 41.50Pucamina 4 40 0.02 8872 4344 53.10 15.90 1.93 5.20 3.70 60.70

10 32 0.13 2125 1115 63.30 15.00 1.53 8.07 4.29 9.51Atenea 1 1 40 0.02 2481 1342 8.60 1.30 5.15 19.5 5.65 19.8

(*) High calculated head(**) Low calculated head

Some of the calculated gold head values varied greatly. The Pucamina was the only ore

possessing gravity recoverable silver.

6.3 Atenea 2 Flotation

The results of the Atenea 2 ore flotation are summarized in Table 6.5.

Table 6.5: Overall Flotation Results

Assays % g/t %Distribution

TestNº

Grindmin

Product Weight%

Cu Pb Zn Au Ag Cu Pb Zn Au Ag

T2 40 Gravity conc. 0.05 - - - 1265 1168 - - - 30.20 1.70

Cu/Pb 2nd ClConc.

4.90 24.20 17.20 2.39 24.30 532 91.20 85.20 6.60 53.70 69.70

Grav+Cu/Pb2nd Cl Concs

4.96 24.00 17.00 2.36 37.60 538 91.20 85.20 6.60 83.90 71.30

Cu/Pb RoConc.

6.93 17.80 13.50 2.81 17.70 427 94.60 94.60 11.00 55.40 79.10

Grav+Cu/pbRo Concs

6.99 17.60 13.40 2.79 27.20 432 94.60 94.60 11.00 85.50 80.70

Zn 2nd ClConc

2.52 0.62 0.13 59.50 0.57 29 1.20 0.30 84.90 0.60 2.00

Zn Ro Conc 3.38 0.90 0.34 45.20 0.75 47.30 2.30 1.20 86.30 1.10 4.30

Zn Ro Tail 89.96 0.045 0.047 0.053 0.33 6.25 3.10 4.30 2.70 2.70 13.30

Head (assay) 100.00 1.30 0.99 1.77 2.22 37.40 100.0 100.00 100.00 100.00 100.0

T8 32 Gravity Conc 0.25 - - - 1001 693 - - - 61.40 4.80

Cu/Pb 2nd ClConc

4.98 23.10 13.50 9.10 22.10 448 89.10 73.20 24.20 26.70 60.50

Grav+Cu/Pb2nd Cl Conc

5.23 22.00 12.80 8.66 69.40 460 89.10 73.20 24.20 88.10 65.30

Cu/Pb RoConc

7.98 15.40 10.90 18.80 14.80 349 95.10 94.50 80.10 28.60 75.60


June, 2009 64

Assays % g/t %Distribution

TestNº

Grindmin

Product Weight%

Cu Pb Zn Au Ag Cu Pb Zn Au Ag

Grav+Cu/PbRo Concs

8.23 14.90 10.50 18.20 45.10 360 95.10 94.50 80.10 90.00 80.30

Zn 2nd ClConc

0.55 1.90 0.74 50.20 11.30 84.80 0.80 0.40 14.90 1.50 1.30

Zn Ro Conc 5.14 0.52 0.35 5.96 3.26 51.80 2.10 2.00 16.40 4.10 7.20

Zn Ro Tail 86.88 0.042 0.037 0.077 0.28 5.30 2.80 3.50 3.60 5.90 12.50

Head assay 100.00 1.29 0.92 1.87 4.12 36.90 100.0 100.00 100.00 100.00 100.0

Good results were readily obtained in the initial test but in test T8 the zinc floated in the

copper-lead circuit. Copper-lead separation was performed for this ore. The results

(Table 6.6) confirmed that separations can be successfully achieved. More copper

floated in the Pb rougher in test T2 but this was improved in the Test T8.

Table 6.6: Copper/Lead Separation Results

Assay % g/t %Distribution

TestNº

Grindmin

Product Weight% Cu Pb Zn Au Ag Cu Pb Zn Au Ag

T2 40 Overallrecoveries

Pb 1st ClConc

0.77 8.13 63.20 0.94 2.16 571 4.80 48.80 0.40 0.70 11.70

Pb Ro Conc 2.57 19.10 32.30 1.91 11.40 472 37.50 83.70 2.80 13.20 32.40

Pb RougherTail

2.34 29.90 0.64 2.91 38.50 597 53.70 1.50 3.80 40.60 37.30

Cu/Pb 2nd ClConc(Feed)

4.90 24.20 17.2 2.39 24.30 532 91.20 85.20 6.60 53.70 69.70

StageRecoveries

Pb 1st ClCon

15.62 8.13 63.20 0.94 2.16 571 5.20 57.30 6.20 1.40 16.80

Pb Ro Conc 52.31 19.10 32.30 1.91 11.40 472 41.10 98.20 41.80 24.50 46.40

Pb RougherTail

47.69 29.90 0.64 2.91 38.50 597 58.90 1.80 58.20 75.50 53.60

Cu/Pb 2nd ClConc (Feed)

100.00 24.20 17.20 2.39 24.30 532 10.00 100.00 100.00 100.00 100.00

T8 30 OverallRecoveries

Pb 1st ClConc

0.58 5.33 70.50 0.81 1.60 590 2.40 44.90 0.30 0.20 9.30

Pb Ro Conc 1.32 12.50 48.80 2.18 10.1 624 12.80 70.30 1.50 3.20 22.30

Pb RougherTail

3.66 26.90 0.71 11.60 26.40 38.50 76.30 2.80 22.70 23.40 38.20


4.98 23.10 13.50 9.10 22.10 448 89.10 73.20 24.20 26.70 60.50

StageRecoveries


June, 2009 65

Assay % g/t %Distribution

TestNº

Grindmin

Product Weight% Cu Pb Zn Au Ag Cu Pb Zn Au Ag

Pb 1st ClConc

15.62 8.13 63.20 0.94 2.16 571 2.70 60.80 1.00 0.80 15.30

Pb Ro Conc 52.31 19.10 32.30 1.91 11.40 472 14.30 95.80 6.30 12.10 36.90

Pb RougherTail

47.69 29.90 0.64 2.91 38.50 597 85.60 3.90 93.70 87.80 63.20


100.00 24.20 17.20 2.39 24.30 532 10.00 100.00 100.00 100.00 100.00

6.4 Z – 4 Flotation

The results of the Z-4 ore flotation are summarized in Table 6.7. Good results were

obtained from this Cu-Au-Ag ore. The lead recovery was low due to the low head grade.

Table 6.7: Overall Z-4 Flotation Results

Assay % g/t % Distribution

TestNº

Grindmin Product

Weight% Cu Pb Zn Au Ag Cu Pb Zn Au Ag

T3 40 Gravity Conc 0.04 - - - 1384 649 - - - 14.3 0.7

Cu/Pb 2nd Cl Conc 3.77 23.80 1.30 1.91 66.00 592 83.10 23.90 65.00 61.90 60.80

Grav+Cu/Pb 2nd ClConcs

3.81 23.50 1.29 1.89 80.40 593 83.10 23.90 65.00 76.20 61.50

Cu/Pb Ro Conc 6.68 14.40 0.92 1.20 39.80 384 89.30 30.00 72.40 66.20 70.00

Grav+Cu/Pb RoConcs

6.72 8.53 0.71 0.70 30.20 264 91.00 39.60 72.80 86.60 82.60

Cu/Pb Ro Tail 93.28 0.12 0.15 0.033 0.84 11.50 10.70 70.00 27.60 19.40 29.30

Head (assay) 100.00 1.08 0.21 0.11 4.01 36.70 100.00 100.00 100.00 100.00 100.00

T9 32 Gravity Conc 0.15 - - - 998 551 - - - 28.3 2.00

Cu/Pb 2nd Cl Conc 4.59 15.20 1.08 1.41 53.40 461 66.50 22.90 56.00 45.70 51.00


474 14.70 1.05 1.36 83.70 464 66.50 22.90 56.00 74.00 53.00

Cu/Pb Ro Conc 8.21 11.10 0.85 0.95 35.70 338 86.90 32.20 67.50 54.80 67.00

Grav+Cu/Pb RoConcs

8.36 10.90 0.83 0.93 53.20 342 86.90 32.20 67.50 83.10 69.1

6.5 Pucamina Flotation

The results of the Pucamina ore flotation are summarized in Table 6.8. The gold

recovery was 90%, with most collected by gravity. Some silver was also recovered in the

gravity circuit.


June, 2009 66

Table 6.8: Overall Pucamina Flotation Results

Assay % g/t % Distribution

TestNº

Grindmin Product

Weight% Cu Pb Zn Au Ag Cu Pb Zn Au Ag

T4 40 Gravity Conc 0.02 - - - 8872 4344 - - - 51.30 14.90

Cu/Pb 2nd Cl Conc 0.05 7.05 31.00 5.49 2578 1557 6.10 3.60 1.10 33.60 12.00


0.07 - - - 4515 2415 - - - 84.90 26.90

Cu/Pb Ro Conc 3.09 0.21 1.09 0.44 44.70 50.30 11.90 8.30 6.20 38.70 25.90

Grav+Cu/Pb RoConcs

3.11 - - - 103 78.80 - - - 90.00 40.80

Cu/Pb Ro Tail 94.79 0.049 0.38 0.22 0.34 3.30 86.90 89.50 93.80 9.00 52.10

Head (assay) 100.00 0.053 0.40 0.22 3.70 6.07 10.00 100.00 100.00 100.00 100.00

T10 32 Gravity Conc 0.13 - - - 2125 1115 - - - 63.30 15.00

Cu/Pb 2nd ClConc*

0.03 - - - 1784 1379 - - - 14.50 5.00


0.16 - - - 2052 1171 - - - 77.80 20.00

Cu/Pb Ro Conc 2.29 - - - 46.90 170 - - - 25.10 40.90

Grav+Cu/Pb RoConcs

2.42 - - - 157 220 - - - 88.40 55.90

Cu/Pb Ro Tail 97.58 0.036 0.31 0.24 0.51 4.30 - - - 11.60 44.10

Head (calc) 100.00 - - - 4.29 9.51 - - - 100.00 100.00

*Insufficient sample for assay

6.6 Atenea Flotation

The Atenea 1 ore was more difficult to treat than in Atenea 2. The selectivity in the

Cu/Pb rougher between Cu-Pb and zinc was poor. This was evidently caused by soluble

copper (and perhaps lead) activation of sphalerite. See Table 6.9 for results.

Table 6.9: Atenea Overall Flotation Results

A s s a y % g / t % D i s t r i b u t i o n

T e s tN º

N a C Ng/t

Z n S O 4

g / t P r o d u c tWeight

% C u P b Z n A u A g C u P b Z n A u A g

T1 25 0 G r a v i t y C o n c 0 . 0 2 - - - 2481 1342 - - - 8 .60 1 . 3 0

C u / P b 3 r d C l C o n c 1 . 9 2 8.17 28.60 28.10 1 2 3 3 3 3 44.9 37.8 46.00 41.80 32.20

G r a v+ Cu / Pb C l Co n cs 1 . 9 4 8.09 28.30 27.80 1 4 7 3 4 3 44.90 37.80 46.00 50.40 33.60

C u / P b R o C o n c 7 . 2 4 4.05 14.30 14.40 57.30 1 9 3 84.10 71.20 89.20 73.30 70.70

G r a v + C u / P b R o C o n c s 7 . 2 6 4.04 14.20 14.40 63.80 1 9 7 84.10 71.20 89.20 82.00 72.00

Z n 2 n d C l C o n c 0 . 2 3 2.97 14.30 2.82 34.70 1 9 5 2.00 2.30 0.60 1.40 2 . 3 0

Z n R o C o n c 3 . 3 2 0.43 1.91 0.48 5.64 40.80 4.00 4.40 1.40 3.30 6 . 8 0

Z n R o T a i l 8 9 . 4 1 0.046 0.40 0.12 0.93 4.69 11.90 24.40 9.50 14.70 21.20

H e a d ( a s s a y ) 100.00 0.35 1.45 1.17 5.65 19.80 100.0 100.0 100.0 100.0 100.0


June, 2009 67

A s s a y % g / t % D i s t r i b u t i o n

T e s tN º

N a C Ng/t

Z n S O 4

g / t P r o d u c tWeight

% C u P b Z n A u A g C u P b Z n A u A g

T5 50 500 C u / P b 2 n d C l C o n c 2 . 0 3 10.60 31.90 18.90 1 6 5 4 9 1 59.70 42.60 29.40 61.60 48.30

C u / P b R o C o n c 8 . 9 2 3.59 12.90 12.80 51.50 1 9 0 88.60 75.70 87.70 84.30 81.90

C u / P b R o T a i l 9 1 . 0 8 0.045 0.41 0.18 0.94 4.12 11.40 24.30 12.30 15.70 18.10

H e a d ( a s s a y ) 100.00 0.36 1.52 1.31 5.45 20.70 100.00 100.00 100.00 100.00 100.00

T6a 150 500 C u / P b 2 n d C l C o n c 1 . 8 8 10.70 35.70 15.90 2 2 6 5 4 4 56.80 43.70 24.70 68.70 39.90

C u / P b R o C o n c 3 . 1 7 6.60 22.30 10.50 1 3 7 3 5 0 59.30 46.00 27.40 70.00 43.20

C u / P b R o + S c a v C o n c s 5 . 5 1 5.19 19.90 15.50 88.40 2 7 4 81.00 71.40 70.50 78.70 78.80

Z n 2 n d C l C o n c 0 . 5 2 2.67 2.90 38.60 52.00 1 9 3 3.90 1.00 16.40 4.30 3 . 9 0

Z n R o u g h e r C o n c 8 . 1 3 0.37 1.00 2.82 6.23 33.00 8.40 5.30 18.90 8.20 10.50

Z n R o u g h e r t a i l 8 6 . 3 6 0.043 0.41 0.15 0.94 9.13 10.50 23.30 10.70 13.10 30.70

H e a d ( a s s a y ) 100.00 0.35 1.54 1.21 6.19 25.70 10.00 100.00 100.00 100.00 100.00

T6 150 500 C u / P b 2 n d C l C o n c 1 . 1 1 13.60 33.10 17.10 1 9 0 5 8 2 43.40 25.30 15.00 42.90 30.00

C u / P b R o C o n c 4 . 4 4 6.11 21.70 18.80 79.20 3 0 2 78.20 66.50 66.00 71.80 62.30

Z n 2 n d C l C o n c 0 . 8 8 3.01 10.10 28.60 35.80 1 9 4 7.60 6.10 19.90 6.40 7 . 9 0

Z n R o C o n c 7 . 9 8 0.48 1.58 3.40 7.24 43.30 11.20 8.70 21.50 11.80 16.10

Z n R o T a i l 8 7 . 5 8 0.042 0.41 0.18 0.92 5.30 10.60 24.80 12.50 16.50 21.60

H e a d ( a s s a y ) 100.00 0.35 1.45 1.26 4.90 21.50 100.0 100.0 100.0 100.0 100.0

T7 DDS4 SO2C u / P b 2 n d C l C o n c 1 . 1 8 6.07 22.80 36.10 2 1 6 4 6 8 20.10 18.20 36.20 51.20 23.80

C u / P b R o C o n c 5 . 5 8 5.18 19.10 18.30 68.80 2 5 2 81.20 71.90 86.90 77.20 60.80

Z n 2 n d C l C o n c 0 . 4 2 2.88 3.03 2.17 38.10 2 3 1 3.40 0.90 0.80 3.20 4 . 2 0

Z n R o C o n c 6 . 7 8 0.41 0.70 0.33 7.38 52.40 7.80 3.20 1.90 10.10 15.30

Z n R o T a i l 8 7 . 6 5 0.045 0.42 0.15 0.72 6.30 11.10 24.90 11.20 12.70 23.90

H e a d ( a s s a y ) 100.00 0.36 1.48 1.17 4.97 23.10 100.0 100.0 100.0 100.0 100.0

*One collector addition only in the Cu/Pb rougher

The following modifications were made in an effort to improve selectivity:

Lower and single stage collector addition.

Increase in ZnS04 from 0 to 500 g/t.

Increase in NaCN from 25 to 150 g/t.

Alternative depressants SO2 and DDS4 (a mixture of four depressants, including

cyanide.

The changes had little beneficial effect. Any reduction in zinc flotation was accompanied

by a similar decrease in copper and lead flotation.


June, 2009 68

From January to May 2008, tests of gravimetric, bulk flotation, differential flotation,

lixiviation were developed by ACTLABS and ABR Mineria laboratories, Juan Zegarra,

National University of Engineering and Eng. Jose Gonzalez, determining parameters that

allowed us to make corrections and finally determine the ore process for INVICTA

MINING CORP SAC for three groups, crushed, grinding- separation, gravimetric-

lixiviation of the gravimetric concentrates and total bulk concentrate, differential

flotation of the lixiviation tailing in order to obtain concentrates of copper, lead and

zinc for Group Nº 1, concentrates of copper for Group Nº2 and for group Nº3 there are

no base metal contents.

In METSO MINERALES laboratories, SOROCABA BRAZIL, evaluations of grindability of our

minerals were developed determining that:

Abrasiveness grade = 0.34

Work index for rod mill: 11.84 kWh/t to 14.54 kWh/t

In the laboratories of the National University of Engineering and EMPRESA ED & ED,

evaluations of gravimetric in FALCON SB 40 gravimetric concentrator, Wilfley table and

jig juba were developed. The results are shown in Table 6.10, Table 6.11, and Table

6.12.

Table 6.10: Falcon Concentrator

ORE GRADE RECOVERIES

g/t Au g/t Ag %Au %Ag

3.20 23.60 62.5 52.5

Table 6.11: Wilfley Table



3.15 29.79 55.04 24.45

Table 6.12: Jig Juba



3.33 29.85 37.61 14.38


June, 2009 69

From the basic and optimization tests in ACTLABS Peru and ED & ED (Eng. Jose Gonzalez)

laboratories, the consolidated processes for the three groups are getting the results

shown in Table 6.13, Table 6.14, and Table 6.15.

Table 6.13: Group 1 Ore Recovery

HIGH GRADE ORE RECOVERIES

g /t Au g/t Ag %Cu %Pb %Zn %Au %Ag %Cu %Pb %Zn

7.85 67.85 1.23 0.76 028 70.72 54.17 60.98 60.71 66.21

LOW GRADE ORE RECOVERIES


7.80 69.73 1.28 0.69 0.20 75.07 62.08 75.12 61.76 58.23




6.02 48.56 1.02 1.08 1.40 83.42 75.35 72.38 82.68 85.98



1.81 32.51 0.56 0.94 0.77 80.86 67.59 71.80 86.88 83.38




3.78 17.56 83.25 72.78



3.53 16.04 71.61 61.72

For the minerals of Group 1 a test of optimization was made varying the grades of

grinding 60, 70 and 80% 200 mesh, this will increase the recovery of the precious and

base metals. In the lixiviation the cyanide increased from 3000 ppm to 5000 ppm,

declining the consumption of 12 kg/tm of concentrates to 3.5 kg/tm. The gravimetric

concentrate and bulk flotation are reground in order to increase the total recovery of

the precious and base metals.


June, 2009 70

For the ores of Group 2 and 3 a basic test was made reaching good recoveries, pending

an optimization test in order to get good recoveries of the precious and base metals

(Copper).

The following processing diagrams of basic and optimization tests by ABR Minera SAC

are defined as follows:

Group 1: Crushing-grinding-gravimetric-total flotation-lixiviation of gravimetric

concentrates, and total flotation-flotation of copper tailing of lixiviation.


concentrates and total flotation-differential flotation of the lixiviation tailings.


concentrates and total flotation.

With these results GOLDEX S.A.C, Eng. Godofredo Barrios, prepared the Basic

engineering of the plant gravimetric and flotation.

The lixiviation plant was defined in a conventional way (agitators-clarifiers, filter of

plates, line of deaerator-precipitation). To optimize this investigations are ongoing to

use equipment like ACACIA, (reactor of intensive lixiviation), solvent extraction and

electro wining.

In Knelson Laboratories, Zimbabwe, evaluations of the use of gravimetric concentrator

CVD are being developed which will allow higher recoveries of Au. Pre-concentration

tests are also ongoing.

The test in a pilot plant will confirm gold recovery of over 80% in the lixiviation of the

gravimetric concentrates and total flotation, the time of lixiviation should be increased

in order to reduce the content of Au that pass to the concentrates. The qualities of the

concentrates will be improved with higher stage of cleaning. For zinc concentrate the

regrinding of the rougher concentrates is required.


June, 2009 71

6.7 Processing Plant

The Basic Engineering for the concentrator plant was prepared by GOLDEX (Figure 6.1).

Figure 6.1: Processing Plant - Complete Flow Diagram

This plant is designed for 5,100 t/d polymetallic ore production containing gold, silver,

copper, lead and zinc. The plant includes areas for crushing, gravimetric concentration,

grinding, flotation, thickeners, filters for concentrates and filters for tailings and tailings

disposal.

The crushing area includes primary, secondary and tertiary crushing with ample storage

between the crushing stages. There is a 20,000 tonne capacity stock pile ahead of the

crushing area.


June, 2009 72

The gravimetric concentration area includes continuous Knelson gravimetric

concentrators (CVD). Here the addition of vibrating micron wave tables is also

considered depending on tests conducted presently.

The grinding circuit includes rod and ball mills.

There are two flotation circuits (Figure 6.2). The bulk flotation, separation circuits of

Pb/Cu and rougher scavenger Zn will be in cylindrical flotation cells of 50 m³, while the

cleaning and separation stages will also be in cylindrical cells, but of lower capacity

(5 m³). The flotation system is designed for high, medium and low grade ore operation.

The thickening of concentrates will be made in conventional high rate thickeners and

the filtrate will be concentrated further with vacuum disc filters. Copper, lead and zinc

concentrates will be produced.

For tailings disposal two “Ultra Sep” (ultra high rate thickeners) will be used and the

solids will be further concentrated with four vacuum disc filters. The dry tailings will be

conveyed to the geo-membrane lined tailings disposal site.

The recovered water, which will be about 85% of the total consumption, will be re-

circulated to the concentrator plant.

The plant total consumption for the process is approximately 200 liters/second.


June, 2009 73

Figure 6.2: Flotation Circuit Flow Diagram

6.7.1 Concentrator Plant – Basic Engineering

The present study shows the Basic Conceptual Engineering for the installation of a

Concentrator Plant of 5100 t/d, which includes the Areas of Crushing, Pre-

Concentration, Grinding, Flotation, Thickeners, Filters and Tailing disposal for treatment

of polymetallic ore containing Gold, Silver, Lead, Copper and Zinc.

The concentrator plant will be located in the North East of the department of Lima,

approximately 250 km by road from Lima, in the District of Leoncio Prado, Province of

Huaura, Department of Lima and about 2300 meters above sea level. This design has

been completed on the basis of Invicta basic data with input from the technical

personnel of Invicta Mining Corp.


June, 2009 74

For better understanding of the project a descriptive summary for each Treatment Area

is presented in the following sub-sections.

6.7.2 Primary, Secondary, & Tertiary Crushing

The crushing circuit will be designed for treatment of 5100 t/d of ore in 16 hours of

operation per day, 7 days a week with equipment availability of 73 %.

As described in Section 5.4.1, primary crushing is performed in the mine and ore (-5”

diameter, or 127-mm) is transported to the stockpile. From this point, the ore is

conveyed via an apron feeder which feeds the mineral to a vibrating grizzly screen. The

ore passes through secondary and tertiary crushing. Output from these crushers is

conveyed to the two fine ore bins (fine ore size is approximately -3/8”).

6.7.3 Grinding

The grinding circuit will be designed for a daily treatment of 5100 t/d, 24 hours per day,

7 days a week with equipment availability of 98 %. As suggested by Invicta Mining Corp.

Primary, Secondary and Tertiary Grinding as well as Gravimetric Pre-Concentration will

be considered.

The parameters considered for the grinding section, according the indications of Andean

American, will be:

Input Feed: 217 t/h

Primary grinding: F80 of 6600 microns and a P80 of 650 microns.

Secondary grinding: F80 of 650 micron and a F80 of 320 microns

Tertiary grinding: F80 of 320 microns and a P80 of 50 microns.

The work index considered is 12 kWh/t

The -3/8” from the fine ore bin will be transported by a belt conveyor to a Rod Mill. The

discharge from this mill will be pumped to a Derrik classification screen. The coarse

material from the screen will pass to the secondary grinding and the discharge together

with the discharge of the rod mill via the same pump will return to the Derrick screens.


June, 2009 75

The fines from the screen will feed two Gravimetric continuous Knelson concentrators

by gravity (Figure 6.3). From these concentrators, the concentrate goes to regrinding

(Tertiary Grinding) in a Ball mill, while the residual goes to the bulk flotation.

Figure 6.3: Knelson Concentrators Flow Diagram

The regrinding mill (tertiary grinding) will work in a closed circuit with 3 cyclones D20.

The overflow from regrinding will feed another Knelson concentrator, with the purpose

of capturing the Gold and Silver present in the ore. The overflow of the cyclones will

pass to a unit flotation, which will be determined by laboratory tests made by Knelson.

6.7.4 Flotation

There are two flotation circuits: material coming to flotation from the residuals of the

continuous Knelson concentrator and overflow from the cyclones D20 which feed the

tertiary mill (subject to the laboratory tests made by Knelson).


June, 2009 76

The bulk flotation Pb/Cu and rougher-scavenger Zn will be cylindrical cells flotation,

while in the cleaning and separation stages will also be cylindrical cells but of lower

capacity. Before the flotation, conditioners will be installed for each type of ore to float.

The concentrates of Pb, Cu and Zn will be fed to their respective thickeners and filters.

The flotation system is designed for high, medium and low grade ore operation.

6.7.5 Thickeners & Filters

The thickening of the concentrates will be made in conventional high rate thickeners

and the filtrate will be concentrated with vacuum disc filters (Figure 6.4).

Figure 6.4: Thickening and Filtration Flow Diagram


June, 2009 77

The following concentrates will be produced:

Lead Concentrate.

Copper Concentrate

Zinc Concentrate.

The concentrates of Pb, Cu, and Zn will have their respective thickeners and disc filters

and the dry product will be collected in piles for each product where the shipment of

concentrates will be made.

Figure 6.5: Tailings Disposition Flow Diagram

6.7.6 Tailings Disposition

For the tailings disposition, two UltraSep thickeners will be considered (ultra high rate

thickener). The underflow of the thickeners will go to a filtrate stage (Figure 6.5) in four


June, 2009 78

vacuum disc filters. From the filters belt conveyors will transport the tailings to the

tailings pond. The filtrate will be recovered and returned to the process.

The water quantity required for the process will be 200 lit/sec. or 723 m3/h, 85%of

which will be recovered and the balance will be made-up with fresh water. The fresh

and recirculated water will be stored in their respective storage ponds located at the

concentrator plant of Invicta Mining Corp.

6.8 References

See the following documents, in Appendix C, for further process information:

ABR Minera SAC, Metallurgical, Gravimetric Test and Flotation of Polymetallic

Minerals

Universidad Nacional de Ingenieria – Pilot Plant of Ores Processing and

Extractive Metallurgy

Universidad Nacional de Ingenieria – Gravimetric Metallurgical Test

SGS Lakefield Laboratories report

ED & ED Ingenieria SAC report

Knelson CVD report

Met-Solve Laboratories

Appendix D contains engineering process drawings.


June, 2009 79

7 INFRASTRUCTURE

7.1 Power Supply

The power supply for the project is the 220 kV national power grid.

Invicta power demand will be ramped up from 4,776 kW in the first year of operation,

through 5,555 kW in the second year and reaching the design capacity of 6,762 kW the

following year. The project will take the power from the 220 kV grid at the Huacho

substation where it is transformed to 66 kV and fed to the Andahuasi substation

through a 34 km transmission line.

The new Invicta power line will start at the Andahuasi substation. This new 66 kV power

line will be 29 km long and terminate at the concentrator plant substation. Here the

power will be transformed to 10 kV and fed to a bus bar. From this 10 kV bus bar the

various services will be taken through their transformers.

CESEL Engineers completed the detailed engineering study including equipment

specification and detailed calculations:

Extension of Adahuasi substation,

29 km 66kV line with towers, from Andahuasi substation to Invicta Plant

substation,

Substation located at the Invicta Concentrator Plant; with a capacity of 10/12

MVA and 66/10 kV,

13 km 10 kV Primary power lines to supply the pumping system from Huamboy

to the Concentrator Plant and to provide power to the Mine, and

Budget estimate of the lines and substations.

Invicta is at present negotiating the power supply contract with EDEGEL, an Electric

Power Generation Company. The cost, including transmission cost and line losses, will

be 5.9 US cents/kWh.


June, 2009 80

EDEGEL is the second largest power producer in Peru. This company has hydroelectric

and thermal power stations (GN), as well as diesel power generators. The Invicta

preliminary contract is for 1500 MW with an average sale of 800 MW. The delivery of

EDEGEL energy to Huacho’s bar will be at 0.1267 cents Sl./kW-h or 0.045 USD /kW-h.

With line loss and transmission cost, the energy at the Invicta Substation will be

0.059 USD /kWh.

In consultation with REP, the owner of the Huacho substation, Invicta has found feasible

technical and economical solutions to increase the capacity of the Huacho substation.

REP has this substation ready for expansion, awaiting financing by the Ministry of Energy

and Mines. The application has been submitted in September 2008. REP estimates that

the extension of Huacho substation will be completed in 20 months.

Invicta is investigating transformer manufacturers in Peru, Brazil, Argentina and

Colombia. To date, a quotation has been received from Trafo Brasil, who specify a

manufacturing time of 8 months.

The 66 kV transmission line from Huacho to Andahuasi substation (32.8 km) is

administered by ADINELSA. Invicta has negotiated an agreement to use the

transmission line and to expand the Andahuasi substation.

The optimum solution is for Invicta to share the transformer cost and provide the

engineering study for the installation for a second transformer at Huacho that would

match the existing transformer: 30/30/10 MVA and of 220/60/10 kV. The financing is

pending and should the necessary dates of acquisition and assembly be realized, the

total investment would be assumed by the Ministry of Energy and Mines. This will also

meet the scheduled mine start-up.

Alternatively, a hydroelectric power station may be constructed with sufficient capacity

to supply energy to the mining project by using the Huaura River. This option would

provide an alternative strategy and would not depend on the power supply of a third


June, 2009 81

party. It would provide energy at a lower cost and bring about the possible sale of the

surplus power (Table 7.1).

Table 7.1: Consumption of Power and Estimated Energy per Month for Mine & Plant

YEAR 1 YEAR 2 YEAR 3

Power in peak hour (kW) 3 949.68 5140.84 5665.81

Power in non peak hour (kW) 5 091.79 6344.93 6977.70

Power in peak hour (kWh/month) 592 452.10 771125.62 849871.98

Power in non peak hour (kWh/month) 2 902 320.30 3616610.10 3977289.00

Peak Hours Month 150 Hours

Non Peak hours Month 570 Hours

Notes - In peak hours, the crushing area and water supply line will be shut down

- The peak hours are from: 6:00 PM to 11:00 PM.

YEAR 1: 3000 t/d

YEAR 2: 4000 t/d

YEAR 3: 5000 t/d

Detailed engineering and budget estimates were prepared by CESEL (Appendix E).

7.2 Water Supply

From the 53 watersheds that exist on the coast of Peru, only 5 remain with a steady

regimen of rivers. Among these is the Huaura River Basin, with unique topographic

characteristics and orographic containment that permit it to flow throughout the year.

Within the analysis of the alternatives for water supply for the operations of Invicta

Mining Corp., a hydrological evaluation was made in the sector of Huaura River and in

the stream of Paran, to identify the area to drill a well and to select an aquifer with

favorable conditions for the extraction of groundwater. Groundwater recovery comes

from the rains in the Basin of Huaura River and from the snowmelt in the high

catchment basin. In the assessed area, additional recovery of the aquifer comes from

the Paran stream.


June, 2009 82

Invicta Mining Corp., in order to meet the current and future demand requires a flow of

20 liters/second, water will be pumped from the selected area of the Huaura River at

1100 meters above sea level, near the stream of Parán confluence with the Huaura

River.

The existing well (0.35 m diameter and 47 m deep) was subjected to a three-day test

and proved its capacity to be in excess of 50 liters/second. The system design includes a

submersible pump in the well with a receiving settling tank. The water is pumped from

the well (1167 m elevation) by multi-stage centrifugal pumps to the make-up water

storage pond at the processing plant site (2295 m elevation), via three pump stations

located with equal dynamic head, and subsequently to another storage pond at the

mine site at 3662 meters above sea level. The segment from plant to mine has been

designed for a flow of 5 liters/second and five pumping stations.

The hydrogeology of the selected area to supply water to the Invicta Project is

considered a reliable source for water. Constructing the water supply system will be

technically feasible.

CESEL’s engineering report includes specifications of all make-up waterlines, pumping

stations, control systems of valves and pressure indicators, electrical equipment, and

power supply.

For detailed information refer to Appendix E.

7.3 Access Roads

There are two new roads planned. The first will provide access from the plant to the

mine which is composed of a new road from the plant to Paran and an existing road

from Paran to the Mine. The second will provide access from the main road, which

connects Sayan with Huarochiry departing from Choques and arriving at the

concentrator plant.


June, 2009 83

The first new road from the processing plant to the mine will be 3 km long. The road

starts in Paran at 2155 meters and ends at the plant at 2275 meters elevation. The

steepest two sections of the road will have a gradient of 8% and are 170 meters and 80

meters long respectively. The road will be built to a width of 5 m that will allow heavy

transport to the mine and safe transport for personnel and materials.

The new road from Choques to the processing plant will be approximately 14 km long.

The road starts at 1105 m. and ends at the plant at 2275 m elevation, a difference of

1170 meters. The road will be built in sections and to a width of 10 m, some of which

may be as steep as 12 % for short stretches. The road will allow transport of heavy and

bulky loads and prefabricated modules required in plant construction, personnel,

materials and concentrates to and from the plantsite, in a safe manner. Crews to access

waterlines and electric powerlines for any maintenance requirement will also use the

road.

All road building material is readily available at the site and it will not require developing

borrow pits for this off-highway cut and fill construction. Construction material will

consist of mainly sand, gravel, clay, and rock fragments of andesite, rhyolites and

dacites. D8 size tractors, a grader, a compactor, trucks and loaders, and a water tank

truck will be required to build the roads. The roads will be built by road building

contractors.


June, 2009 84

8 ENVIRONMENTAL IMPACT ASSESSMENT (EIA), AND COMMUNITYRELATIONS

8.1 Environmental Impact Assessment

To comply with the current environmental legislation, Invicta Mining Corp SAC hired

CESEL S.A. to prepare the Invicta Project Environmental Impact Assessment (EIA), with

the aim to evaluate, determine, and measure the environmental and socio-economical

impacts related to the project, as well as the required mitigation measures.

The legal frame for this Environmental Impact Assessment has been developed within

the current national laws and bylaws regarding the protection of the environment.

The following permits are required before the implementation of the mining project:

Permit for Use of Water: The Ministry of Agriculture requires that Andean

Explorations obtain a permit for the use of water, modifications to natural

riverbeds and/or the performance of hydraulic works within the area of

influence of the Project. Permit must be issued by the ATDR (The Irrigation

District Technical Administration Authority). The Invicta Project will use the

water that has been previously authorized.

Authorization for the Domestic and Industrial Residual Waste Treatment and

Sanitary Disposal System: this authorization is issued by DIGESA. The INVICTA

Project will obtain this permit during the mining operation.

Authorization for the use of surface land owned by third parties and/or land

available for sale. (This is required by the communities and by the state or

private owners).

Authorization for the operation of a dump yard for the treatment of domestic

solid waste or to contract companies authorized by DIGESA for the

transportation and disposal of solid and hazardous waste. (This is required by

DIGESA). The Invicta Project will obtain this permit for the mining operation.

Certification of the absence of Archeological Ruins: Granted by the INC.

Currently the Invicta mining project has the approved Certification of absence of


June, 2009 85

Archeological Ruins (CIRA) for the Mine, issued by the National Directorial

Resolution N° 191/INC. The CIRA for the plant is still an ongoing process waiting

for approval.

Studies Approved or On-Going: The Invicta Exploration Project has an “Invicta

Exploration Project Environmental Affidavit” approved by the Energy and Mining

Ministry.

Agreements or arrangements with the population: Invicta Mining Corp SAC has

registered ownership of real estate where it is stated that it has acquired the

authorization for mining exploration operations from the Communities of

Lacsanga and Santo Domingo de Apache.

Permits Obtained: Andean Explorations SAC is currently processing the permit

for the use of water. In regard to the other required permits Andean

Explorations SAC is preparing the documentation to start with the proceedings.

The project engineering and legal departments together with CESEL Engineers prepared

and submitted the “Environmental Impact Assessment” to the Ministry.

The project will meet or exceed the industry standards in environmental protection and

in establishing good relations with the communities around the Invicta site. Precautions

will be taken during the construction and operating stages of the project to minimize the

impact on the surrounding communities and the environment in general. At the end of

the project the equipment will be removed, the buildings demolished and the project

area returned to nature as close to the original state as possible. The roads will be left in

place to allow future inspections and additional remediation if and when these would be

required.

A list of “identified environmental components” is included in the study.

The EIA was presented on June 18, 2008 to the Ministry. The EIA was also submitted to

the Communities of the Area.


June, 2009 86

The project has the Approved Certification of absence of archaeological ruins in the

areas where work will be carried out. The regulatory approvals received to date are

listed in Section 8.3.

To review the complete EIA Executive Summary, please refer to Appendix F.

8.2 Community Relations

Good community relations are an important part of a mining operation. Invicta

continues to work with the neighbouring communities, partnering where possible,

improving the local infrastructure and offering employment where practical. A

representative sample of meetings and activities are described in this chapter.

Invicta has in its area of influence the communities of Paran, Lacsanga and Santo

Domingo de Apaches. Invicta has good relations with each community based on the

constant communication and understanding between the communal and local

authorities and the company. Social Assistance work is continuing and has resulted in an

atmosphere of peaceful coexistence.

Ongoing communications and assistance make a significant difference. Other Peruvian

regions such as Cajamarca and/or Piura have opposition groups to mining that hinder or

prohibit mining companies to conduct their activities.

The main support that Invicta’s neighbour communities received is primarily related to

water supply projects. The region is arid and the water must be brought by channel or

pipe from the nearest lakes to irrigate the fruit trees such as peaches and avocado

which is the main source of income.

All the neighbouring communities have allowed the development and exploration that

has been carried out to date. Invicta presented the EIA to the communities in order for

them to review, analyze and make the pertinent observations. The document was also

submitted to the Ministry of Energy and Mines, IRENA and the different municipalities

where the communities are located.


June, 2009 87

8.2.1 Community of Paran

The community of Paran is located in Leoncio Prado District, Province of Huara,

Department of Lima. This community has 120 members with the right to speak and the

right to vote in the assemblies, and approximately 280 settlers. Inside this community

are the hamlets of Santa Ana and Capia.

The commitments, supports and agreements provided by the company to the

community during the exploration stage are as follows:

In June 2006 the President of the Community received chairs, cement and iron

windows for the local community hall in a value of USD 1,200.00.

In March 2007 the irrigation pipes were repaired which were damaged by small

mud slides at a cost of USD 3,000.00

Several donations of school and sport supplies have been made for the

Educational Center No. 20337 of Paran.

Improvement to the Huamboy - Paran access road which included the widening

of the critical areas and radius of curvature between the hamlets from Huamboy

to Paran, using explosives, labour, cleaning equipment (tractor D6) and electric

drill.

Grading and cleaning the access road between Huamboy and Paran and filling

the potholes using heavy equipment (Tractor D6) and a hired labour force of

community members.

The access road Huamboy – Paran has been surface treated with molasses to

reduce dust generated by trucks, cars and light trucks.

The company has made the land survey of the access road Huamboy – Paran.

Land survey of the housing location for the mine has been made.

The land survey of the location for the mine drainage field has been made.

The company delivered 200 m. of 3” PVC pipe for the local Community.

The company delivered to the Community the study of potable water supply by

gravity.


June, 2009 88

Sl. 22,610.00 were contributed to the study of potable water supply and

installation of a sewage system in Paran. Once the study is finished, the

Community together with the Municipality will submit a financing request to the

Ministry of Housing and Construction- Program “Agua para todos”.

The company as compensation for damages in the Mining and exploration zone

has provided Sl. 175,000.00, that will be used to finance part of the Project to be

submitted to the Program “Agua para todos”.

The company is committed to building the third floor of the local Community

Center, with calamine roof and two classrooms for Paran School.

Invicta Mining has compensated the Community for opening of the trail to

Pariocoto in the amount of Sl. 25,000.00.

The Community has given authorization for the drilling of water wells in

Huamboy and for the pipe line from the well pump to the concentrator plant.

The company has committed to the Community to use tanker trucks to water

the Huamboy – Paran access road, in order to reduce the dust between the

hamlets of Santa Ana, Paran and Capia.

The Community has given authorization for the continuation of the trail to

Pariocoto zone. For this the company is committed to building a classroom and

a Health Post in Huamboy.

The company will give a financial contribution of Sl. 5,000.00 to prepare

technical studies and design to construct the classrooms and Health Post.

The community has received a computer with monitor, keyboard and other

accessories appraised at USD 600.00.

8.2.2 Community of Lacsanga

The Community of Lacsanga is located in the District Municipality of Paccho. This

community has 80 members with the right to speak and the right to vote in the

assemblies, and approximately 280 settlers. Their main activity is agriculture and in

some cases trade, inside the community and in the hamlets of La Perla and Miraflores.


June, 2009 89

The main agreements are:

Construction of a 45 km long unimproved dirt road from La Perla de Paccho

hamlet to Collaray, passing through Miraflores hamlet, at a cost of USD

45,000.00, Works took place between July and December 2006.

The Educational Institution No. 20118 of the hamlet of Miraflores received a

donation of Sl. 1,000.00.

Delivery of 3,500 meters of pipe valued at Sl. 67,468.84, which includes the

transportation and thermofusion valued at USD 9,426.50.

Invicta has the authorization to use water in the year 2008. In return Invicta

provided the community 1,000 meters of pipe line, valued at USD 8,895.25,

which includes transportation and thermofusion, at a cost of to USD 3,265.00.

The community gave permission for constructing the electric power line from

Collaray to Camp Sl. 18,000.00.

For the damage caused in the area where the mine exploration works took

place, the company gave 1,700 bags of cement and 1,000 iron rods in the

amount of Sl. 65,000.00.

Agreement was given for Grant of Easement, Usage Right and Permission of

Exploitation. The Community is in favour of Invicta Mining activities and was

given the rights of easement and usage of the surface ground where the Plant

will be built and will give permission for the exploitation. The Company is

committed to pay USD50,000.00 yearly, which will begin with the start of

operations and last until the end of extraction.

The Company has given continuous support through workshops for mothers,,

schools, and others.

8.2.3 Community of Santo Domingo de Apache

The Community of Santo Domingo de Apache is located in the Leoncio Prado District,

Province of Huaura, Department of Lima. This community has 270 members with the

right to speak and the right to vote in the assemblies.


June, 2009 90

This Community has approximately 350 settlers to which the company has provided and

is providing economic support, as well as programs of social and educational assistance.

The main source income for the community is the cultivation of peaches and the

growing of different products. The Community has a main access road (an unimproved

dirt road) to Sayan.

The Company has made the following contributions:

A computer with monitor, keyboard, printer and other accessories valued at

USD 700.00 has been delivered to Santo Domingo School No. 20339.

The amount of Sl. 2,000.00 has been also delivered as a contribution to the

community.

The company’s engineer made an evaluation for the optimization of intake,

storage and distribution of water for agricultural purposes.

To date, the relations with the three communities are good and social assistance has

been carried out and developed in order to maintain good understanding between the

company and communities. The company also encourages the participation of the

municipal authorities and the Ministry of Energy and Mines.

8.3 Regulation Approvals Received

From Ministry of Energy & Mines Department of Director General of

Environmental Affairs certificate Nº. 006-2008-MEM-AAM viability approval,

January 24, 2009.

From the National Institute of Culture. Resolution Nº. 1708/NC Archeological

Evaluation of the Invicta Project to supply electrical power for industrial use,

November 29, 2008.

From the Technical Administration of the District of Riego, Huara. Resolution

Nº. 0168/2008-GRL.DRA/ATDR authorizing the procedures for drilling of “Invicta

1” well, December 23, 2008.


June, 2009 91

From the office of Department of Utilities for the District of Riego, Huara.

Technical certificate Nº. 278-JUDRH-O&M approval to drill a cased well,

December 5, 2008.

From INRENA National Institute of Natural Resources certificate Nº. 765-2008-

INRENA-IRH Department of Hydrology to explore and study underground water

flows to drill a well, August 27, 2008.

From the Technical Administration of the District of Riega, Huara authorization

certificate Nº. 003 20082008 GRL.DRA/ATDRH approval for documenting the

hydrology studies of underground exploration, February 13, 2008.

From the Council of Consumers for the District of Riega, Huara technical

authorization Nº. 013-2008JUDRH-O&M exploration approval for water

intended to be supplied to Invicta Mine, January 11, 2007.

From the Technical Administration of the District of Riega, Huara certificate Nº.

0203/2006 GRL.DRA/ATDR authorizing use of surface water to do hydrology

studies for the Invicta Project, September 18, 2006.

From the Farmers Community of Lacsaga an extraordinary act of approval to

begin initial exploration studies, December 3, 2005.

From the Farmers Community of Paran approval to build the access trail from

Cementary to the area selected to construct the Invicta Mill, May 2, 2008.

From the Farmers Community of Paran permission granted to use the

Community road, April 29, 2008.


June, 2009 92

9 COST, FINANCING & COMMERCIAL TERMS

The Invicta Mine Project costs include:

Total Operating Costs

Mining Costs

Processing Plant Costs

Capital Costs

All costs presented as fourth quarter 2008 USD remain constant over the life of mine

and no allowance for inflation has been included.

9.1 Total Operating Costs

The mine and plant costs have been predicated on the Life Of Mine operating mining

plan of 5 years, with mine production rates of 3000 t/d in Year 1, 4000 t/d in Year 2, and

5000 t/d in Years 3,4, and 5. Cost estimates were prepared jointly by: Invicta engineers;

MINCONSULT and a Peruvian mining contractor for mine development; GOLDEX, for the

concentrator plant; and CESEL, for the power line and the water line determination.

Table 9.1: Summary of Ore to Plant, Concentrate Produced, and Ore Processed per day

Ore t/year 1,065,991 1,399,755 1,744,300 1,797,502 1,799,609

Concentrate t/year 36,258 31,568 32,143 22,033 35,071

Ore Processed t/day 3,046 3,999 4,984 5,136 5,142


June, 2009 93

Table 9.2: Total Operating Unit Cost (USD/t) Annual Summary

ITEMS year 1 year 2 year 3 year 4 year 5

Mine costs - extraction 10.02 10.08 10.15 13.48 13.06

Mine preparations anddevelopment 2.31 2.17 2.55 2.72 1.70

Energy costs for the mine 0.36 0.38 0.34 0.34 0.34

Mine personnel (socialbenefits included) 0.47 0.36 0.29 0.28 0.28

Plant costs (reagents, power,spare parts) 7.56 7.11 7.00 5.67 5.67

Disposal of filtrate tailings 0.77 0.59 0.47 0.46 0.46

Plant operating andmaintenance personnel 0.94 0.71 0.57 0.56 0.56

Administration, safety,environment, managementpersonnel 0.59 0.45 0.36 0.35 0.35

Miscellaneous mine expenses 0.69 0.52 0.42 0.41 0.41

Communities(USD 20,000/month) socialexpenses 0.23 0.17 0.14 0.13 0.13

Services personnel in Lima(social benefits included) 0.80 0.61 0.49 0.48 0.47

Miscellaneous Lima expenses 0.11 0.08 0.07 0.07 0.06

Total operating costs (beforecommercialization) 24.85 23.25 22.84 24.93 23.50

Total operating costsUSD/annum 26,491,747 32,540,125 39,846,434 44,815,066 42,283,657

Transportation ofconcentrates $30/DTM 1.02 0.68 0.55 0.37 0.58

Commercialization: treatmentcharge, refining costs,penalties 7.38 4.19 3.44 2.70 4.29

Total unit cost (Transport &commercialization included) 33.25 28.12 26.84 28.00 28.37

The unit prices are all inclusive costs, Andean American only provides water.

All costs shown in Table 9.1 unit costs are in USD/tonne. Hauling unit costs include

loading in underground methods.


June, 2009 94

9.1.1 Operating Personnel: Mine, Plant, and Lima office.

The cost of all personnel is shown in Table 9.3 and Table 9.4.

Table 9.3: Personnel - Mine & Plant

AREA TOTAL

Management Number 3USD/ month 6,000

Mine & Geology Number 23USD/ month 29,000

Plant & Labs Number 47USD/ month 37,700

Maintenance Number 22USD/ month 19,800

Administration Number 41USD/ month 24,800

Safety & Environment Number 4USD/ month 5,300

Total personnel 140

Total salary USD 122,600

Salary + Social Benefits USD 2,133,240

Table 9.4: Personnel - Lima office

Staff TOTAL

General Management number 5USD 14,500

Administration number 8USD 9,500

Financial number 5USD 7,000

Planning and Engineering number 5USD 7,500

Explorations number 3USD 10,600

Total USD 49,100Total + social benefits USD/day 71,195


June, 2009 95

9.1.2 Miscellaneous expenses for mine and plant

Table 9.5: Miscellaneous Expenses for Mine and Plant

ITEMS PERSONSDAILYUSD

TOTALUSD/month

Food for the personnel S/.20 / day 41 7.14 8,786

Food for the workers S/. 16 / day 95 5.71 16,286

Maintenance accommodations 3,000

Health, medical expenses and others 3,000

Security gear (3 times per year) (*) 136 3,400

Office supplies and expenses 4,000

3 vehicles Custer type 130.00 11,700

Fuel and maintenance for 5 Invicta trucks 5,000

Communications, telephones and Internet 2,000

Trips and traveling expenses. 4,000

(*) Thermal cloths, steel toe boots, rubber boots, gloves,respirator, TOTAL 61,171

glasses, helmet, mining lamps, charger. USD 100

9.2 Cost for Underground and Open Pit Mining

The operational mining plan dictates the tonnages mined, and by which mining methods

it is extracted. The tonnage for the LOM is reflected in Table 9.6.


June, 2009 96

Table 9.6: Annual Ore Tonnages

CF SL SK OP

YEAR MINING METHOD Tons

Cut and fill 17,559 2% 17,559year 1

Sublevel 1,048,432 98% 1,048,432

Total year 1 1,065,991

Open pit 291,276 21% 291,276

Cut and fill 35,442 3% 35,442

Shrinkage 23,470 2% 23,470

year 2

Sublevel 1,049,566 75% 1,049,566


Open pit 277,330 16% 277,330

Cut and fill 55,340 3% 55,340

Shrinkage 22,593 1% 22,593

year 3

Sublevel 1,389,037 80% 1,389,037


Open pit 162,984 9% 162,984

Cut and fill 921,362 51% 921,362

Shrinkage 174,749 10% 174,749

year 4

Sublevel 538,406 30% 538,406


Cut and fill 782,553 43% 782,553

Shrinkage 339,032 19% 339,032year 5

Sublevel 678,024 38% 678,024


TOTAL 7,807,157 1,812,256 4,703,465 559,845 731,591

23.20% 60.20% 7.20% 9.40%

9.2.1 Mine Unit Costs

Mining unit costs have been tabulated in Table 9.7. Invicta engineers and MINCONSULT

have based the costs on known contract unit prices from a Peruvian contractor, and

data.


June, 2009 97

Table 9.7: Mining Unit Costs

ActivityOpen pit(waste)

Open pit(ore.)

Cut andfill Shrinkage Sublevel

Drilling 0.21 0.21 2.96 2.89 2.8

Blasting 0.17 0.17 1.24 1.03 0.58

Secondary drilling andblasting 0.04 0.04 0 0 0

Loading 0.3 0.3 1 0 0

Hauling (*) 0.34 0.34 4.18 4.36 4.36

Safety 0.04 0.04 0.3 0.24 0.04

Support 0 0 0.5 0.17 0

Fill 0 0 3.01 0 0

Transport ore pass to plant 0 0.15 0.15 0.15 0.15

Subtotal (USD/t) 1.1 1.25 13.34 8.84 7.93

General expenses(15%) 0.17 0.19 2 1.33 1.19

Utility (10%) 0.11 0.13 1.33 0.88 0.79

Total (USD/t) 1.38 1.56 16.67 11.05 9.91

Annual mine development costs are estimated and shown in Table 9.8

Table 9.8: Annual Mine Development Costs

YEAR Total Meters USD/ year

Total year 0 9,755 7,726,772

Total year 1 3,090 2,462,130

Total year 2 4,325 3,039,980

Total year 3 5,976 4,454,486

Total year 4 8,279 4,894,058

Total year 5 5,323 3,053,388

TOTAL 36,748 27,630,814

Mine electric power costs have been tabulated and are shown in Table 9.9.


June, 2009 98

Table 9.9: Electric Power

Mining Rate t/year kW(inst.) Hours x year f.c. f.serv.

3000 t/d 1,065,991 1,234 8,400 0.85 0.75

4000 t/d 1,399,755 1,730 8,400 0.85 0.75

5000 t/d 1,792,399 1,944 8,400 0.85 0.75

Mining Rate Consumption kWh USD/kWh USD USD/t

3000 t/d 6,607,427 0.058 383,231 0.36

4000 t/d 9,263,989 0.058 537,311 0.384

5000 t/d 10,410,548 0.058 603,812 0.337

9.3 Processing Plant

The maintenance costs includes the cost of water pumping, maintenance, spare parts

and labour, and estimated as 25% of plant cost.

The personnel of the concentrator plant include laboratory personnel.

The cost for water is equivalent to the estimated taxes to be paid to INRENA for water

consumption.

9.3.1 Processing Operating Costs

The total operating costs of the processing plant are shown in Table 9.10.

Table 9.10: Annual Production and Unit Processing Costs

YEAR 0 1 2 3 4 5

CAPEX 20,100,000

Ore Weight t/year 1,065,991 1,399,755 1,744,300 1,797,502 1,799,609t/day 3,046 3,999 4,984 5,136 5,142Maintenance USD/t 2.01 1.61 1.61 1.61 1.61Reagents USD/t 4.06 4.07 4.16 2.82 2.82Personnel USD/t 0.62 0.47 0.38 0.36 0.36Energy USD/t 1.81 1.67 1.43 1.43 1.43Water USD/t 0.01 0.01 0.01 0.01 0.01

Net Process USD/t 8.50 7.83 7.58 6.23 6.23

Reagent Costs

The reagent costs for different products and tonnage are summarized in Table 9.11.


June, 2009 99

Table 9.11: Annual Reagent Consumption

TOTAL USD/t CR

USH

ING

GR

IND

ING

BU

LKC

u.P

b

Cu

.Pb

CLE

A

Pb

-Cu

SEP

Pb

CO

NC

ZnFL

OT

LIX

IVIA

TIO

N

TAIL

SA

RE

A

SUB

TOTA

L

Year 1: 3000 t/d 0 0.995 0.408 0.015 0.102 0.063 1.335 0.982 0.16 4.06

Year 2: 4000 t/d 0 1.041 0.374 0.015 0.102 0.063 1.335 0.982 0.16 4.071

Year 3: 5100 t/d 0 1.092 0.408 0.015 0.102 0.063 1.335 0.982 0.16 4.156

Year 4/5: 5100 t/d 0 1.092 0.408 0.015 0.102 0.063 0 0.982 0.16 2.821

Energy Costs for Plant

The concentrator plant loads have been established and the energy cost calculated in

USD/tonne (Table 9.12).

Table 9.12: Energy Costs

DTM t/YEAR kW(inst.)Hours

per year f.c. f.serv.Consumption

kWh $/kWh USD USD/DTM

3000 1,065,991 5,814 8,400 0.85 0.8 33,207,169 0.058 1,926,016 1.807

4000 1,399,755 7,052 8,400 0.85 0.8 40,280,681 0.058 2,336,280 1.669

5000 1,792,399 7,714 8,400 0.85 0.8 44,060,312 0.058 2,555,498 1.426

The disposal cost of filtrate tailings is itemized in Table 9.13. The costs include the rent

of the equipment.

Table 9.13: Cost for rental of equipment (450 hours/month)

USD/hr USD

Tractor D-6 89.29 40,179

Charger 966 62.50 28,125

Dump truck 30t 0.00 0

USD/month 68.304

450.00 hours x each equipment


June, 2009 100

9.3.2 Miscellaneous Lima Expenses

Table 9.14: Operating Expenses, Lima Office

USD

Rent 5,000

Water 143

Phone 2,000

Light 200

Maintenance 400

Security 1,000

Variable mobiles 1,000

Total/month 9,743

9.4 Capital Costs

All capital costs include 19% IGV tax and a 12.5% contingency. Contracts include

engineering, supervision and contractor’s overhead. The total capital cost amounts to

USD 65,316,287 and a summary of all capital requirements covering crushing, grinding,

flotation, thickeners, tailings disposal, civil works, steel and piping, water, vehicles,

buildings , and roads has been listed in Table 9.15.


June, 2009 101

Table 9.15: Invicta Project - Investment Summary

AREA Asset Amount22% BY

CONTRACTORS IGV 19%12.5%

CONTINGENCY TOTAL

EXPENSESUNTIL MAR 31'09 Intangible 12,000,000 included included 12,000,000

INVESTMENTS IN THE YEAR BEFORE START UP

Crushing Fix Asset 4,072,108 773,701 605,726 5,451,535

Grinding Fix Asset 4,111,425 781,171 611,574 5,504,170

Flotation Fix Asset 1,951,000 370,690 290,211 2,611,901

Thickeners andFilters Fix Asset 1,449,500 275,405 215,613 1,940,518

Tailing Disposal Fix Asset 2,088,100 396,739 310,605 2,795,444

FoundationWorks (civil) Fix Asset 5,510,000 1,212,200 1,277,218 999,927 8,999,345

Structural Steel& Piping Fix Asset 5,365,000 1,180,300 1,243,607 973,613 8,762,520

Water Supply Fix Asset 990,001 65,340 200,515 156,982 1,412,838

Materials andcommunities Fix Asset 468,000 30,888 94,789 74,210 667,886

ElectricalSupply Fix Asset 5,859,298 1,047,558 1,312,303 1,027,395 9,246,554

MineInvestment Intangible 10,480,814 0 1,991,355 1,559,021 14,031,190

MobileEquipment Fix Asset 512,000 97,280 76,160 685,440

Road to Plant Intangible 1,963,506 431,971 455,141 356,327 3,206,945

SUBTOTAL 44,820,752 3,968,258 9,269,912 7,257,365 65,316,287

WORKING CAPITAL FOR THREE MONTHS

Three month operating costs 1,872,906 355,852 278,595 2,507,353

FUNDS REQUIRED:

Expenses and Financing Charges: USD 12,000,000Funds required in the year before start-up 65,316,287

After start-up mine development will be paid from income from operations. 65,316,287


June, 2009 102

9.5 Financial Analysis

Project construction capital costs, preproduction expenses, and 3 months working

operating costs have been included in Table 9.15 Invicta Project – Investment Summary.

Total funds required will be USD 65,316,287.

A summary of the financial analysis is presented in Table 9.16, Table 9.17, Table 9.18,

and Table 9.19, Cash Flow Statement, Profit and Loss Statement, Profit and Loss versus

Metal Prices, and Loan Amortization respectively. The tables reflect the feasibility base

case metal price in USD as follows: Au 900/oz, Ag 12.50/oz, Cu 2.00/lb, Pb 0.50/lb, Zn

0.60/lb.

Table 9.16: Cash Flow USD/year

YEAR 0 1 2 3 4 5 TOTAL

Net Profit from P & L 29,713,355 38,619,115 59,737,490 45,391,839 11,794,146 185,255,945

Total Depreciation 12,659,911 12,952,249 14,666,947 13,781,030 11,256,151 65,316,288

IGV Reimbursement 2,507,353 6,762,559 9,269,912Operating Expenses (3

months) 2,507,353

Cash Flow fromOperations

0 49,135,825 51,571,364 74,404,438 59,172,869 23,050,298 257,334,792

Mining Royalty 1,600,049 1,735,953 2,533,092 2,121,241 1,011,988 9,002,323

Workers Participation 3,691,100 4,797,406 7,420,806 5,638,738 1,465,111 23,013,161

Income Tax 12,734,295 16,551,049 25,601,782 19,453,645 5,054,634 79,395,405

Cash Flow beforeGovernmentDeductions

0 67,161,268 74,655,771 109,960,117 86,386,493 30,582,031 368,745,681


June, 2009 103

Table 9.17: Profit & Loss Statement


Ore Weight 1,065,991 1,399,755 1,744,300 1,797,502 1,799,609 7,807,157

Ore t/day 3,046 3,999 4,984 5,136 5,142

Revenue

Total from Flotation 78,355,293 97,907,218 131,898,658 106,286,921 44,540,919 458,989,009

Total from Gravimetry 31,647,150 18,890,422 24,755,936 29,775,152 36,058,470 141,127,130

Total Revenue 110,002,444 116,797,640 156,654,594 136,062,073 80,599,389 600,116,139

Operating Costs

Mine and Lima Expenses 26,491,747 32,540,125 39,846,434 44,815,066 42,283,657 185,977,029

Concentrate Transport 1,016,673 853,713 848,010 2,990 13,297 2,734,683

Concentrate Deductions 7,862,293 5,869,726 6,000,032 4,857,525 7,720,404 32,309,980

Total Operating Costs 35,370,713 39,263,564 46,694,476 49,675,581 50,017,358 221,021,692

DepreciationFix Asset: MachineryInstalled (20%) 7,788,661 7,788,661 7,788,661 7,788,661 7,788,661 38,943,303

Mobile Equipment (25%) 138,802 138,802 138,802 138,802 555,206Balance of Plant (Life ofthe Mine) 4,732,449 5,024,787 6,739,485 5,853,568 3,467,491 25,817,779

Total Depreciation 12,659,911 12,952,249 14,666,947 13,781,030 11,256,151 65,316,288

Interest ExpensesAmount to be Financed on65,316,288

Interest 8% per annum 14,233,021 2,878,305 17,111,326Operating Profit beforeMining Royalty, Taxes

and Workers'Participation 47,738,799 61,703,522 95,293,170 72,605,463 19,325,879 296,666,833

Mining Royalty% on Revenue: 1% first 60million

and 2% on the Balance 1,600,049 1,735,953 2,533,092 2,121,241 1,011,988 9,002,323Operating Profit beforeTaxesand Workers'Participation 46,138,750 59,967,570 92,760,078 70,484,221 18,313,892 287,664,510

Workers Participation 8% 3,691,100 4,797,406 7,420,806 5,638,738 1,465,111 23,013,161

Profit before Income Tax 42,447,650 55,170,164 85,339,272 64,845,484 16,848,780 264,651,350

Income Tax 30% 12,734,295 16,551,049 25,601,782 19,453,645 5,054,634 79,395,405

Net Profit 29,713,355 38,619,115 59,737,490 45,391,839 11,794,146 185,255,945


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Table 9.18: Profit & Loss versus Metal Prices

1 2 3 4 5 TOTAL

Conservative 28,777,854 31,051,221 44,642,621 30,284,608 7,229,339 141,985,642

Base 29,713,355 38,619,115 59,737,490 45,391,839 11,794,146 185,255,945

Optimistic 73,377,420 78,682,135 87,832,171 60,517,291 20,294,826 320,703,843

Table 9.19: Loan Amortization (USD) over 3 years

Installments Principle InterestPrinciple

paidFixed

Payment Balance

1 73,154,243 731,542 2,712,082 3,443,624 70,442,1612 70,442,161 704,422 2,739,202 3,443,624 67,702,9593 67,702,959 677,030 2,766,594 3,443,624 64,936,3644 64,936,364 649,364 2,794,260 3,443,624 62,142,1045 62,142,104 621,421 2,822,203 3,443,624 59,319,9016 59,319,901 593,199 2,850,425 3,443,624 56,469,4767 56,469,476 564,695 2,878,929 3,443,624 53,590,5478 53,590,547 535,905 2,907,719 3,443,624 50,682,8289 50,682,828 506,828 2,936,796 3,443,624 47,746,033

10 47,746,033 477,460 2,966,164 3,443,624 44,779,86911 44,779,869 447,799 2,995,825 3,443,624 41,784,04412 41,784,044 417,840 3,025,784 3,443,624 38,758,26013 38,758,260 387,583 3,056,041 3,443,624 35,702,21914 35,702,219 357,022 3,086,602 3,443,624 32,615,61715 32,615,617 326,156 3,117,468 3,443,624 29,498,14916 29,498,149 294,981 3,148,643 3,443,624 26,349,50717 26,349,507 263,495 3,180,129 3,443,624 23,169,37818 23,169,378 231,694 3,211,930 3,443,624 19,957,44719 19,957,447 199,574 3,244,050 3,443,624 16,713,39820 16,713,398 167,134 3,276,490 3,443,624 13,436,90821 13,436,908 134,369 3,309,255 3,443,624 10,127,65322 10,127,653 101,277 3,342,347 3,443,624 6,785,30523 6,785,305 67,853 3,375,771 3,443,624 3,409,53424 3,409,534 34,095 3,409,529 3,443,624 6

TOTAL 9,492,739 73,154,237 82,646,971

In October 2008 the Lima Stanford Group - Stanford Consulting Peru SRL was

commissioned by Andean American Mining to perform a financial and sensitivity

analysis on the Invicta Project data available. By using Bloomberg’s market forecast of

metal prices a set of ‘Optimistic, Base, and Conservative’ metal prices for each year of


June, 2009 105

the LOM were created. In their analysis the metal forecast prices of the ‘Base Case’ were

used (Table 9.20).

Table 9.20: Base Case Metal Prices

Year 1 Year 2 Year 3 Year 4 Year 5

Au USD/oz 921 845 864 760 600

Ag USD/oz 16 15.9 14.42 13.47 11.53

Cu USD/lb 3.28 3.02 2.41 2.25 2.05

Pb USD/lb 0.81 0.79 0.65 0.63 0.52

Zn USD/lb 0.94 1.04 1.05 0.89 0.7

Stanford’s summary conclusions were:

Year 1 EBITDA/Sales ratio is 72.3%, decreasing over time due to change in

mineral content and decline of prices

Average EBITDA/Net Investment ratio is above 158% during the first year of

operation.

5 year Average return of investment of 67.8%.

The Net Present Value (11% discount rate) of the 5-year Free Cash Flow net of

debt amortization amounts to USD 159 million in base case scenario.

Invicta Project’s NPV remains positive at higher discount rates

When price levels are 20% below the base forecast the NPV for shareholders

remains USD 98.90 million and the IRR of the project at 72%.

Invicta would remain a profitable project even if the estimated net investment

rises up to USD 90 million.

For every 5% change in the operating costs of Invicta the NPV changes

approximately USD 5 million.

When the operating costs are 20% above the estimated value the NPV for

shareholders is calculated as USD 137.65 million.

Please refer to Appendix G for Stanford’s complete power point presentation.

Special Note: Revenue in the Stanford presentation is higher than those in the text of

this feasibility report. The results from Knelson Laboratories in Zimbabwe for CVD


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(continuous variable discharge) technology had only just become available and those

results were incorporated in the Stanford analysis. The CVD tests indicated higher

recoveries for all metals. It is Invicta’s intent to further examine the CVD technology

and change the processing plant design and add the required number of Knelson CVD

cones.

9.6 Commercial Terms and Valuation of Concentrates

The concentrates valuation is based on prices shown in Table 9.21.

Table 9.21: Mineral Pricing

Metal Unit Low Medium High Actual Projected

Gold USD/oz 450 550 650 854 1000

Silver USD/oz 8 10 13.75 15.25 20.00

Copper USD/lb 1.5 2.25 3.35 3.39 4.00

Lead USD/lb 0.5 1.00 1.50 0.88 1.00

Zinc USD/lb 0.8 1.25 1.50 0.76 1.25

The total recovery used for gold in the metallurgical balances are 78% to 90%, and for

silver 60% to 75%. However, in the last laboratory metallurgical tests, the total recovery

of gold and silver (gravimetric + bulk lixiviation + selective flotation) ranges from: 87% to

94% for gold and 79% to 89% for silver.

Two companies, Consorcio Minero Cormin S.A. and Procesadora Sudamericana, have

prepared commercial terms for the purchase of gold, silver, copper, lead, and zinc

concentrates. These letters are available in their entirety in Appendix G.


June, 2009 107

10 ENGINEERING, PROCUREMENT AND CONSTRUCTION

10.1 Overview

The construction and engineering management team will be providing services that

include working methods and systems to effectively plan, schedule and organize,

monitor, control and report all the activities that make up the total program of the

Invicta project scope of work as well as those of all engineering and construction

contractors.

The status of the Invicta Project is as follows:

The main road to the concentrator plant has been surveyed and the secondary road

connecting Paran to the mine is plotted on the topographical maps.

The mining plan has been laid out and the adits, drifts, crosscuts and raises have been

located.

The first and critical activities of the project are the construction of the access roads and

driving the tunnels and raises in the mine.

Certificates have been obtained from the Ministry regarding the absence of

archeological remains in the areas affected by the project. The Environmental Impact

Assessment that was submitted to the Ministry in June 2008 is in the final approval

stage. Permits from the neighboring communities have been obtained to build the plant,

the roads, and the water and power lines on their lands.

Equipment with long delivery times has been purchased to allow adherence to the 12 to

15 months construction timeframe; in particular, the rod and ball mills, bridge crane and

the four tailings disc filters.

Site preparation will start as soon as the heavy equipment is brought up to the plant site

at 2,300 m elevation. The main building has been designed, and the contractor for the

supply and erection of the steel has been selected. The erection of the building steel


June, 2009 108

frame and the installation of the bridge crane will allow speedy erection of tanks and

equipment inside the main building.

The remaining engineering work will be finished while the site preparation and the

building steel erection are completed. Inquiry specifications, comparisons of tenders

and purchase orders will be issued for long delivery items, such as transformers.

10.2 Time of Performance

Pre-production mine development will require approximately 12 months to complete. A

high probability exists that mine development work will yield minable ore, which will be

stockpiled to provide feed for the concentrator plant.

Although construction of the water line from the well to the plant site is not on the

critical path the detail design for this system is well under way.

The required power line section from the Andahuasi substation is not on the critical

path, but the high voltage switchgear that is required at the Andahuasi substation will

be a priority.

10.3 Critical Path Planning and Scheduling

The attached schedule (Appendix H) shows the critical path identified to-date. Items on

the critical path will be carefully monitored and reported on the bi-weekly schedule

issue. Any delay will be immediately identified and measures will be taken to rectify the

situation.

Regular expediting and inspection will be done by internationally recognized firms in the

equipment suppliers’ workshops. These reports will be reviewed together with the

schedule issues.

The first critical step for a successful project is detailed preplanning in conjunction with

the contractors and vendor representatives. Our past experience has proven that early,


June, 2009 109

thorough preplanning leads to a more successful construction program both in time and

money.

Constructability reviews of preliminary engineering drawings often lead to construction

method and design changes, which can have a positive impact on both the cost and

schedule.

Changes made during the initial stages of a project are by far the most cost effective and

have the least impact on the project schedule. These changes are then integrated into

the master project schedule and cost control systems.

Wherever possible the activities will start as early as possible. This will take the pressure

off the construction teams and will allow for correction of activities where delay may be

developing.

10.4 Engineering

10.4.1 Process

The conceptual engineering for the process of the 5,100 t/d capacity concentrator plant

is now completed. This project includes areas for crushing, pre-concentration, grinding,

flotation, thickening, filtration and tailings disposal.

Process flow diagrams were prepared by Goldex SAC and are now being finalized as a

gravity flow flash flotation circuit.

The crushing circuit is designed to treat 5,100 t/d of ore in a 16 hour, seven day per

week operation. Primary crushing will take place in the mine and the ore conveyed to a

20,000 tonne storage pile near the concentrator plant at 2,300 m elevation.

The crushing circuit has three stages of crushing and screening feeding the fine ore bins

ahead of the pre-concentration. Material from the pre-concentrators will be fed to the

grinding circuit which consists of a rod mill producing material of 500 micron size


June, 2009 110

feeding Knelson concentrators, Regrinding in a ball mill to 250 micron size followed by

another set of Knelson concentrators.

From the grinding circuit the material will be pumped to the flotation circuit which has

bulk flotation (Pb/Cu) and rougher-scavenger (Zn) flotation. Concentrates of Cu, Pb and

Zn will be fed to their respective thickeners and filters.

For tailings disposal UltraSep (ultra high rate) thickeners are considered. The underflow

from the thickeners will be pumped to four vacuum disc filters.

The recovered water will be recirculated for reuse, while the dry tailings will be

conveyed to the tailings disposal site approximately 400 m from the plant.

The water requirement of the above process is 200 l/s. The recovered water is 85%. The

balance will be made up from well water.

Power requirement of the process is 6,760 kW at the production rate of 5,100 t/d.

10.4.2 Metallurgy

The following is a summary of the metallurgical process research undertaken by Invicta

Mining Corp.

Invicta has a low sulphidation ore deposit with gold, silver, copper, lead and zinc

content. Considering the above metal content several metallurgical tests were

conducted in order to optimize the recovery process.

In February 2008 ABR Minera conducted exploratory gravimetric tests and bulk flotation

with basic metals of groups, each group with high, medium and low amounts of metals.

The results show 90% plus recovery of gold with 10% plus by gravimetric, 65% through

bulk concentrate and 10% in pyrite concentrate.


June, 2009 111

In March 2008 the National University of Engineering (UNI) conducted optimization tests

of gravimetric and bulk flotation. Vibrating tables have improved the gravimetric

recovery of gold to 70%.

In April 2008 ED & ED Ingenieria y Servicios SAC, conducted a second gravimetric

optimization test vibrating tables confirming 68% gold recovery before differential

flotation.

In October 2008 high grade and low grade ore from the Invicta mine was tested by

Knelson Laboratories with 80 to 82% gold recovery by gravimetry.

Tests are currently being conducted combining gravimetry with flash flotation as well as

testing the recovery of Micron Wave tables in order to reach gold recovery of 98%. The

test results are shown in the Metallurgy section of this study.

10.4.3 Civil Works

Engineering for the “civil works” includes the site preparation for the concentrator

plant, the survey and detail design of the 13 km access road to the concentrator plant,

the 2.3 km road from Paran to the mine, design of the tailings dams, and design of the

building and equipment foundations.

To date the topographical maps for the roads, the tailing storage areas, the mine site

and plant site have been prepared. The roads have been surveyed and the design of the

main tailings dam has been completed. The mine camp, cook house and office layout

has been designed. Preliminary design of the ball mill foundation has been prepared.

10.4.4 Structural Works

Preliminary design of the concentrator plant main building is completed. Detail design of

the ancillary buildings, such as the plant office, control room, motor control center

(MCC), mechanical and electrical maintenance buildings, vehicle maintenance shop,

warehouse, bunk houses and cook house is under way.


June, 2009 112

10.4.5 Mechanical and Piping Design.

A well has been drilled and proven in a 72 hour test that it is capable of supporting the

project. Detail design is now complete for the water supply system to the plant and to

the mine. Preliminary design is complete for the crushing circuit. Process flow diagrams

for the balance of the concentrator plant are being reviewed and modified to

incorporate the gravimetry and flash flotation systems.

All major equipment has been sized and tanks designed ready to be issued for price

inquiry.

10.4.6 Electrical and Instrumentation Design

Motors have been sized for all major equipment. Total power requirement of the

project has been calculated and the transmission line detail design has been completed.

Discussions were held with the owners of the Andahuasi substation to allow the

installation of the necessary high voltage switchgear on their property.

Preliminary design of the substation at the plant has been done.

Process controls will be supplied by the vendors of the crushing and grinding circuits,

the thickener and filter systems as well as the tailing thickener and filters. Process

control of the balance of plant will be designed in house.

10.4.7 Environmental Work and Permitting

Environmental Impact Assessment (EIA) has been submitted to the ministry in June

2008. The questions posed by the ministry have been satisfactorily answered,

community meetings were held with ministry representatives. We expect to receive the

official approval in the near future.

Archeological certificate (CIRA) to certify the absence of archeological remains from the

mine site has been received. Similar certificates for the plant site and the tailings

disposal site have been applied for. These certificates are expected to be issued shortly.


June, 2009 113

Permission from the Communities and Municipalities has been received for the use of

the land for the water and power lines and the satellite buildings at the mine area.

Permission to build the concentrator plant is expected shortly.

Permission from the Huacho Municipality (ATDR) for drilling of the well has been

received. Application for the use of the water from ATDR is under way.

Permission for the use of the water from the Institute of National Resources (INRENA) is

a three stage process. First; the permit to study the use of the water is required.

Request has been made and permit received. Second; detail study has to be completed

and submitted. A study was made by CESEL and submitted. Third; this study has to be

approved by INRENA. Approval is expected shortly.

Building permit, plumbing permit and electrical permit have to be requested from the

Communities and Municipalities as detail design drawings are completed. These permits

are usually given as soon as the National Civil Defense reviews and approves them.

10.5 Quality Assurance and Quality Control

Quality workmanship is important to Andean American Mining in all facets of its

operations. Their team has numerous construction qualifications all based on sound

Quality Assurance systems and effective Quality Control procedures.

Invicta’s philosophy is “Doing it Right the First Time”, producing a design based on

sound engineering principles, in compliance with all applicable guidelines, codes and

standards that will result in a safe and operable facility.

The quality management system is designed to provide services that meet

requirements. Invicta’s management and staff are firmly committed to, and trained in,

the successful practicing of this program. The level of quality expected will be

established and communicated to all project team members at the beginning of the

project, and all work will be performed to that level of quality.


June, 2009 114

The proposed project execution plan was developed based on the recognition that those

who actually perform the work within their respective department can best accomplish

compliance with quality requirements. Program requirements for control, surveillance

and documentation provide the necessary confidence to project management that

activities affecting quality are in compliance with the established criteria.

Invicta measures its quality performance by:

The degree of design rework between the Issued for Review documents and the

Issued for Construction package

Engineering, procurement, and vendor compliance with milestone dates in the

Procurement Plan;

Construction rework due to engineering or vendor errors or omissions;

Performance against budget;

Performance against schedule;

10.6 Safety

Safety is paramount in Andean American’s Invicta Project construction program. The

company recognizes the importance of putting safety first in the project design, project

construction, and in field support activities. Therefore, at the start of the project,

Andean American will develop a project-specific safety execution plan, which will

include a project specific safety program

10.6.1 Program Effectiveness

The effectiveness of the safety program depends upon the active participation and

personal cooperation of all employees and positive coordination of their efforts toward

carrying out the following responsibilities:

Proper planning of all work to minimize personal injury, property damage and

loss of productive efforts.


June, 2009 115

Establish and maintain a safety culture, which will provide early detection and

correction of unsafe practices and conditions.

Establish and implement safety education and accident prevention programs

designed to stimulate and maintain the interest and active participation of all

personnel involved.

10.7 Procurement

A catalogue of potential vendors has been compiled with their budget price proposals.

Contract bids have been received for the supply of pump systems, electric motors and

crushers as well as for supply and installation of the power lines, water lines, thickeners

and buildings. Inquiries were sent to freight forwarding companies and their bids have

been compared and evaluated.

10.8 Construction Team

Members of Invicta management team have extensive and proven heavy industrial

construction backgrounds with the necessary experience for the successful execution of

this project.

The management team indicated on the organization charts presented are personnel

with many years of international experience working with multiple engineering

disciplines and construction groups. The management group experience covers

numerous mining projects; including gold, silver, copper, lead, zinc, uranium,

molybdenum and rare earth; as well as petrochemical plants, pipelines, compressor

stations, power dams, LNG, Propane/Butane plants, steam plants and a variety of

projects in the forest products industries.

Bringing this valuable experience to the Invicta Project ensures the completion of this

project within budget and schedule expectations


June, 2009 116

10.9 Training and Development for Operating Personnel

Invicta Project plans to bring on board the operating and maintenance personnel early.

Approximately three months before start up, the training of the operating personnel by

professional trainers will begin. At that time some of the equipment will already be in

the testing stage, which is very useful for the operators to witness.

The maintenance personnel will be present during the testing and commissioning of the

equipment that will give them a better insight of the critical features of the equipment

that they will have to maintain later on.

10.10Communities

There are three neighbouring communities Paran, Lacsanga and Santo Domingo de

Apache. Invicta has been working with these three communities since the beginning of

2008 (described in detail in Section 9). The company has been assisting with the design

and supply of some of the needed community infrastructure. The company has also

provided school supplies and workshops for women.


June, 2009 117

11 APPENDIX A - NI 43-101 TECHNICAL REPORT


June, 2009 118

12 APPENDIX B - MINE PLAN

Appendix Table 1: Metal Prices

Appendix Table 2: Mine Plan

Appendix Table 3: Long Term Mining Plan by Mining Area

Appendix Table 4: Block of Mineable Reserves per Year


June, 2009 119

13 APPENDIX C - METALLURGICAL REPORTS

Contents

ABR Minera SAC, Metallurgical, Gravimetric Test and Flotation of PolymetallicMinerals

Universidad Nacional de Ingenieria – Pilot Plant of Ores Processing and ExtractiveMetallurgy

Universidad Nacional de Ingenieria – Gravimetric Metallurgical Test

SGS Lakefield Laboratories report

ED & ED Ingenieria SAC report

Knelson CVD report

Met-Solve Laboratories


June, 2009 120

14 APPENDIX D - ENGINEERING PROCESS DIAGRAMS

Engineering Drawings


June, 2009 121

15 APPENDIX E - INFRASTRUCTURE

CESEL Calculation

Water Supply document


June, 2009 122

16 APPENDIX F - ENVIRONMENTAL IMPACT

Environmental Impact Assessment Report


June, 2009 123

17 APPENDIX G - COST, FINANCING & COMMERCIAL TERMS

Consorcio Minero Cormin S.A. Report

Procesadora Sudamericana Report

Stanford Presentation Slides


June, 2009 124

18 APPENDIX H - PLANNING

Critical Path and Scheduling

Purchasing Schedule

Documents

Invicta Mine Feasibility Report 0 - Kaiser Research Online MINE FEASIBILITY STUDY ... 5.4.1 Open Pit ... Goldex prepared the basic conceptual design of the 5100 t/d concentrator plant