Advanced Gold Projects
Cuiú Cuiú
Coringa
Other Gold Projects
Mato Velho
União
Porquinho
Maranhense
Bauxite
Location
An option agreement was originally signed by Chapleau Resources on the Coringa gold project in July 2006. Coringa is comprised of 19,093 ha and is located in the state of Para, immediately south of the Mato Velho project. Access is via a 36 km gravel road from the main BR 163 highway and the project is located 75 km south of the town of Novo Progreso.
History
The area has been worked by local miners since the late 1970's. Alluvial workings in the streams draining the steep ridges, and evidence of surface and underground operations on the many quartz veins cutting the felsic host rock can be seen throughout the area. There are no official records of gold production from Coringa. However, local sources estimate that approximately 10 tons of gold was taken out of this area.
Extensive strike lengths (up to 6.65 km) can be seen on the structures. Individual veins have generally only been worked to a depth of 20 to 30m with the depth of the artisanal workings limited to the zone of weathering and saprolite development. Deeper workings extending to 75 m depth also exist in some areas such as Mai de Leite.
No previous drilling had taken place on the property until Chapleau commenced drilling on March 24, 2007.
Geology and Mineralization
Coringa lies within the southern part of the Tapajós Mineral Province which is located within the northern portion of the Pre-Cambrian Amazon craton, where middle Proterozoic granites, felsic metavolcanic rocks and minor meta-sedimentary sequences are exposed. The principal structural trend evident throughout the Coringa Property is northwest (300° - 315°). Less prominent structures are oriented north-northwest (320° - 340°). The mineralized structures are coincident with the north-northwest trend, and are hosted by both granites and rhyolites. The strike length of the main shear/vein system is about seven (7) km. There are at least four (4) additional mineralized structures, and in total Coringa has mineralized structures extending over at least ten (10) km strike length. The average strike is 335° and structures mainly dip to the northeast at an average dip of 80°. The width of the veins varies from 0.2 to 2.6 m. The most significant alteration is sericitization which in general occurs as narrow halos surrounding the mineralization.
High-grade gold mineralization is frequently associated with quartz veins containing a significant amount of base metal sulphides (up to 8% Pb and 6% Zn in the Guaxebinha-Meio-Onza Block), or as in the Serra Block, high gold grades are co-incident with quartz and pyrite.
In order to fast track drilling, initial exploration was focused on a 5 by 7 km area with known vein systems and historic workings. To date, a total of 81 diamond drill holes have been completed totaling 8785.08m.
High grade gold, silver, lead and zinc values have been confirmed along the Galena-Boca block which extends over approximately 400m strike length. Gold mineralization occurs within silicified, quartz veins and sericite-altered shear zones surrounded by propylitic alteration envelopes within granite, rhyolites and volcanic breccias. The main sulphide minerals are pyrite, galena, chalcopyrite and sphalerite which together reach levels between 0.5% and 20.0%. Mineralization is open at depth, and two ore shoots have been identified thus far. Drilling to date in this part of the vein system has returned values that include 21.04g/t Au over 1.5m (DDH34) and 20.89 g/t Au over 1.5m (DDH4)
At Serra, gold, silver, lead, zinc and copper mineralization has been intersected over 700m strike with values which include 29.31g/t Au over 1.5m (DDH1) and 22.47g/t Au over 1.5m (DDH42). Two ore shoots dipping to the SE have been identified at Serra thus far.
Gold mineralization at Meio extends over at least 1.1 km.and is sub-vertical with an average thickness of 1.36m. Higher grade zones of mineralization plunge approximately 63 degrees to the southeast. Holes, 11, 62, 65, 68 and 67 define one such zone, which has an average weighted grade of 18.48 g/t Au over a true thickness of 2.08 m. Another high grade gold zone is defined by holes 78, 79 and 81 with an average weighted grade of 19.92 g/t gold over a true thickness of 1.1 m. In addition, the presence of shallow 10-12 m deep historic shafts and artisanal workings beyond the limit of the current drilling is further evidence that the mineralized structure extends towards the southeast and the northwest.
An IP survey (104.7km), together with a 90 line-km ground magnetic survey has highlighted at least 23 new targets which remain to be tested.
GALENA - Selected Drill Holes
| Drill Hole ID | From (m) | To (m) | Interval (m) | Grade g/t Au |
|---|---|---|---|---|
| DDH30 | 49.6 | 51.1 | 1.5 | 19.25 |
| DDH34 | 65.9 | 67.4 | 1.5 | 21.04 |
| DDH29 | 44.5 | 46.0 | 1.5 | 14.41 |
| DDH04 | 74.0 | 75.5 | 1.5 | 20.89 |
| DDH36 | 78.5 | 79.9 | 1.4 | 8.99 |
SERRA BLOCK - Selected Drill Holes
| Drill Hole ID | From (m) | To (m) | Interval (m) | Grade g/t Au |
|---|---|---|---|---|
| DDH01 | 33.0 | 34.5 | 1.5 | 29.31 |
| DDH41 | 60.5 | 62.0 | 1.5 | 14.82 |
| DDH42 | 38.0 | 39.5 | 1.5 | 22.47 |
| DDH57 | 97.0 | 98.5 | 1.5 | 16.08 |
| DDH61 | 98.5 | 100.0 | 1.5 | 15.97 |
| DDH38 | 36.2 | 37.8 | 1.6 | 9.08 |
MEIO BLOCK - Selected Drill Holes
| Drill Hole ID | From (m) | To (m) | Interval (m) | Grade g/t Au |
|---|---|---|---|---|
| DDH11 | 50.0 | 52.0 | 2.0 | 23.67 |
| DDH62 | 56.0 | 59.0 | 3.0 | 65.77 |
| Incl. | 57.5 | 58.0 | 0.5 | 149.80 |
| DDH65 | 113.5 | 118.5 | 5.0 | 3.57 |
| Incl. | 116.5 | 117.0 | 0.5 | 10.81 |
| DDH67 | 107.5 | 109.0 | 1.5 | 23.45 |
| Incl. | 108.5 | 109.0 | 0.5 | 36.65 |
| DDH68 | 149.0 | 155.0 | 6.0 | 4.28 |
| Incl. | 154.0 | 155.0 | 1.0 | 16.83 |
| DDH71 | 58.9 | 63.9 | 5.0 | 6.06 |
| Incl. | 60.4 | 61.4 | 1.0 | 22.53 |
| DDH72 | 121.0 | 127.0 | 6.0 | 1.24 |
| Incl. | 123.8 | 124.4 | 0.6 | 11.4 |
| DDH78 | 32.0 | 33.0 | 1.00 | 1.15 |
| 127.4 | 129.1 | 1.7 | 23.27 | |
| DDH79 | 57.6 | 60.1 | 2.5 | 25.23 |
| Incl. | 58.6 | 59.1 | 0.5 | 68.73 |
| DDH81 | 61.05 | 62.6 | 1.5 | 7.28 |
| DDH82 | 36.0 | 38.0 | 2.0 | 10.12 |
| DDH83 | 88.0 | 89.1 | 1.1 | 10.02 |
| DDH84 | No significant mineralization | |||
| DDH85 | 123.7 | 125.2 | 1.5 | 0.65 |
| 135.7 | 136.7 | 1.0 | 1.53 | |
| DDH86 | 86.4 | 88.4 | 2.0 | 0.70 |
| 96.4 | 98.0 | 1.6 | 1.90 | |
| DDH87 | No significant mineralization | |||
| DDH88 | No significant mineralization | |||
| DDH90 | No significant mineralization | |||
| DDH91 | No significant mineralization | |||
| DDH92 | 65.8 | 67.4 | 1.6 | 0.98 |
| DDH93 | 64.0 | 64.5 | 0.5 | 3.81 |
| 99.6 | 100.1 | 0.5 | 7.48 | |
GUAPO OESTE ZONE - Selected Drill Holes
| Drill Hole ID | From (m) | To (m) | Interval (m) | Grade g/t Au |
|---|---|---|---|---|
| DDH94 | 26.6 | 29.2 | 2.6 | 7.52 |
| 119.7 | 120.3 | 0.6 | 1.91 |
ONÇA ZONE - Selected Drill Holes
| Drill Hole ID | From (m) | To (m) | Interval (m) | Grade g/t Au |
|---|---|---|---|---|
| DDH95 | 64.7 | 65.2 | 0.5 | 10.03 |
MÃE DE LEITE ZONE - Selected Drill Holes
| Drill Hole ID | From (m) | To (m) | Interval (m) | Grade g/t Au |
|---|---|---|---|---|
| DDH96 | 123.2 | 124.5 | 1.3 | 7.89 |
| DDH98 | 46.0 | 55.0 | 9.0 | 1.95 |
| includes | 48.5 | 49.5 | 1.0 | 13.86 |
BRAVO ZONE - Selected Drill Holes
| Drill Hole ID | From (m) | To (m) | Interval (m) | Grade g/t Au |
|---|---|---|---|---|
| DDH97 | No significant results | |||
Mineral Resource
Global Resource Engineering Ltd. completed the independent NI 43-101 mineral resource estimate in October 2009. The resource includes 269,500 measured and indicated troy ounces of gold representing 982,291 tonnes at an average grade of 8.53 g/t gold and 98,224 inferred troy ounces of gold representing 327,054 tonnes at an average grade of 9.34 g/t ton gold on a diluted basis and using a 2 g/t gold cut-off. Table 1 below presents the Coringa mineral resource by block at a 2 g/t gold cut-off grade.
Table 1
Coringa Mineral Resource, 2 g/t Gold Cut-Off Grade (Diluted) October 8, 2009
Resource Area |
Tonnes |
Au (troy oz) |
Au (g/t) |
|---|---|---|---|
MEASURED |
|||
Serra |
210,405 |
58,120 |
8.59 |
Meio |
173,710 |
50,343 |
9.01 |
Galena |
96,012 |
23,001 |
7.45 |
Eloy Juara |
17,708 |
3,884 |
6.82 |
INDICATED |
|||
Serra |
336,004 |
103,611 |
9.59 |
Meio |
92,917 |
19,757 |
6.61 |
Galena |
38,142 |
8,098 |
6.60 |
Eloy Juara |
17,393 |
2,636 |
4.71 |
TOTAL MEASURED & INDICATED |
|||
All Areas |
982,291 |
269,450 |
8.53 |
INFERRED |
|||
Serra |
280,794 |
94,294 |
10.44 |
Meio |
41,715 |
3,594 |
2.68 |
Galena |
3,735 |
268 |
2.23 |
Eloy Juara |
810 |
68 |
2.61 |
TOTAL INFERRED |
|||
All Areas |
327,054 |
98,224 |
9.34 |
The complete NI 43-101 report on the Coringa project has been filed on SEDAR and may be accessed through the following link www.sedar.com. Additional information with respect to the resource estimate is set out in the Company's press release dated October 08, 2009.
Preliminary Economic Assessment Summary
Independent consultants, Global Resource Engineering Ltd (GRE), completed a Preliminary Economic Assessment (PEA) for the Coringa gold project. Full details of the Coringa PEA in the form of a National Instrument 43-101 technical report have been filed on SEDAR and maybe accessed through the following link www.sedar.com. Additional information on the PEA is also set out in the Company's press release dated May 05, 2010.
The PEA was based on the resources defined in Table 1. Although the project contains significant values of silver, lead, copper, and zinc, these metals were not included in the resource estimation.
Table 1. Gold Resources, with Dilution
| Cutoff Grade (Au g/t) | 2 g/t | 3 g/t | 4 g/t | 5 g/t |
|---|---|---|---|---|
| MEASURED + INDICATED (tonnes) | 982,291 | 830,460 | 675,114 | 563,046 |
| INFERRED (tonnes) | 327,054 | 239,620 | 198,647 | 178,123 |
| MEASURED + INDICATED (Au g/t) | 8.53 | 9.64 | 11.06 | 12.37 |
| INFERRED (Au g/t) | 9.34 | 11.86 | 13.60 | 14.65 |
| MEASURED + INDICATED (Au troy oz) | 269,450 | 257,388 | 239,984 | 223,914 |
| INFERRED (Au troy oz) | 98,224 | 91,334 | 86,828 | 83,873 |
Key Parameters and Results of the Preliminary Economic Model include:
| Project Life: | 7.6 years |
| Ounces Recovered: | 240,837oz |
| Operating Cash Cost: | US$418/oz |
| Av. Annual Oz Recovered: | 36,490oz |
| Initial Capex: | US$26.4M |
| LOM Capex: | US$50.0M |
| IRR | 34% |
| Payback period | 3.7 years |
| 0% NPV: | US$56.7M |
| 5% NPV: | US$41.3M |
| Ore t/d: | 400tpd |
| Process Recovery: | 93.8% (LOM average). |
| Contingency: | 15% on operating costs and 20% on capital costs. |
The PEA indicates a robust Internal Rate of Return ("IRR") of 34% and a Net Present Value ("NPV") of US$41M (assuming a 5% discount rate and a gold price of US$950/troy oz. (oz). The project payback period is 3.7 years.
A detailed mine layout and sequence was completed to estimate the project cash flows on a yearly basis. The mine layout was divided into 3 separate areas based on the 3 primary resource areas identified which contain 98% of the gold resource at the 3 gpt Au cutoff: Serra (71%), Guaxeninha-Meio-Onza (Meio) (19%), and Galena (8%) (see Figures)
Detailed mine layouts were completed for each resource block based on the surface topography and mineralized area above the cutoff grade. The mineralized area for each block was divided into discrete stopes. A mine sequence was developed for concurrently mining each resource block over the mine life with an average of 8 active stopes.
A conventional Carbon in Leach (CIL) milling circuit is the most attractive method for treating the Coringa ores. Metallurgical testing was completed on two composites (Serra and Meio), representing 90% of the estimated resource. This testing indicates the ore is free milling with a 99% Au recovery for the Serra composite and 98% recovery for the Meio composite. Plant recoveries were estimated at 5% below the testing results or 94% and 93% respectively.
Capital costs were estimated for all facilities, mine equipment, preproduction development, permitting and working capital based on published average costs for 2009, current manufacturer and vendor quotes, and professional experience.
Table 2. Start-Up Capital Summary
| Capital Category | Total Capital Cost (US$) |
|---|---|
| Plant Site Complex | $15,654,000 |
| Mine Equipment | $13,286,496 |
| Surface & Underground Facilities | $4,094,912 |
| Preproduction Development | $2,279,873 |
| Permitting | $1,500,000 |
| Working Capital | $700,000 |
| Total | $37,515,281 |
All capital costs include a 20% contingency except for preproduction development which includes a 15% contingency since they were calculated through detailed unit costs estimates.
A detailed design was completed for a tailings storage facility (TSF) along with a subsequent capital estimate based on quantities and unit costs. Closure cost for the TSF were estimated based on this detailed design.
Operating costs were estimated on a unit basis for all mine operations by estimating equipment hours and materials for a set operating unit (Table 3).
Labor costs were estimated separately from unit operations costs by calculating the required number of employees for one man coverage and multiplying by the required number for each workforce. Labor costs were sourced from a Brazilian salary survey completed by a reputable firm in 2009. The average operating costs over the life of the mine are shown in Table 3 below.
The results of the PEA study are presented in Table 4 below.
Table 3. Average Operating Costs
| Average cost | $US |
|---|---|
| Operating cost per tonne of ore | $117 |
| Total cost per tonne of ore | $173 |
| Operating cost per ounce gold recovered | $418 |
| Total cost per ounce gold recovered | $625 |
Table 4. Economic Model Results
| Result Category | $US 1,000s |
|---|---|
| (Cumulative Cash Flow) NPV@0% | $56,652 |
| NPV@5% | $41,265 |
| NPV@10% | $29,568 |
| IRR | 34% |
Economic Model Sensitivity
Three separate sensitivity analyses were completed for variations in gold price, capital costs, and operating costs. The model is most sensitive to gold price and least sensitive to capital costs. The project is very robust and is still economic under any one of the following scenarios: either a gold price of $US 750/troy oz., a capital cost increase of 50%, or an operating cost increase of 50%.
Table 5. Sensitivity to Gold Price
| Sensitivity to Gold Price | Cumulative Cash Flow | NPV @ 5% | NPV @ 10% | IRR |
|---|---|---|---|---|
| $750 | $16,771,879 | $8,142,165 | $1,608,755 | 11% |
| $800 | $26,794,211 | $16,470,255 | $8,641,704 | 18% |
| $850 | $36,746,905 | $24,735,180 | $15,617,100 | 23% |
| $900 | $46,699,598 | $33,000,106 | $22,592,497 | 29% |
| $950 | $56,652,292 | $41,265,031 | $29,567,893 | 34% |
| $1,000 | $66,604,986 | $49,529,957 | $36,543,289 | 39% |
| $1,050 | $76,557,680 | $57,794,882 | $43,518,685 | 44% |
| $1,100 | $86,510,373 | $66,059,808 | $50,494,082 | 49% |
| $1,150 | $96,456,458 | $74,320,036 | $57,466,086 | 54% |
| $1,200 | $106,357,891 | $82,548,532 | $64,415,178 | 59% |
The above Table shows that project economics are most sensitive to gold price. Cumulative cash flow and NPV at a 5% discount rate vary from $US 16.8M and $US 8.1M at a gold price of $US 750/oz. to $US 106.4M and $US 82.5M at a gold price of $US 1,200/oz. respectively.
Figure 1. Sensitivity to Operating Costs
The above figure demonstrates the model sensitivity to operating costs at a fixed gold price of $US 950/oz. Cumulative cash flow and NPV at a 5% discount rate vary from a low of $US 29.3M and $US 17.0M at 150% of the planned operating costs to a high of $US 78.8M and $US 58.7M at 90% of the planned operating costs respectively. This shows the project is very robust and still generates a good return (IRR of 17%) at 150% of the planned operating costs.
Figure 2. Sensitivity to Capital Costs
The above figure demonstrates the model sensitivity to capital costs at a fixed gold price of $US 950/oz. Cumulative cash flow and NPV at a 5% discount rate vary from a low of $US 48.1M and $US 31.3M at 150% of the planned capital costs to a high of $US 68.2M and $US 51.2M at 90% of the planned capital costs respectively. Again, this illustrates the hardiness of the project as it still generates a very good return (IRR of 24%) at 150% of the planned operating costs.
Economc Model Optimization
Quantitaive model optimization was completed for 2 separate issues: increasing the ramp grades and increasing the cutoff grade. Two additional ramp grades were analysed : 12% and 15%. Both will decrease the amount of development required during preproduction as well as during the mine life. The table below illustrates the results of a high level analysis of changing the ramp grades.
An increase of the cutoff grade from 3 g/t Au to 4 g/t Au was also evaluated. Stope tonnages and grades were recalculated using the higher cutoff value and then re-sequenced over the mine life. Production rates were kept the same at 200 tpd for Year 2 and 400 tpd for the remainder of the mine life. Increasing the cutoff grade to 4 gpt reduces the mined resource from 861,000 tonnes at 9.21 g/t Au to 724,000 tonnes at 10.46 gpt Au. Project life is also reduced from 7.6 years to 6.6 years. The table below summarizes the expected benefits of increasing the cutoff grade to 4 gpt Au.
Table 6. Model Optimization - Ramp Grades
| Ramp Grade | (base case) 10% | 12% | 15% |
|---|---|---|---|
| (Cumulative Cash Flow) NPV@0%, $US 1,000s | $56,652 | $57,177 | $57,639 |
| NPV@5%, $US 1,000s | $41,265 | $41,746 | $42,149 |
| NPV@10%, $US 1,000s | $29,568 | $30,013 | $30,370 |
| IRR | 34% | 35% | 35% |
Table 7. Model Optimization - Cutoff Grades
| Cutoff Grade g/t Au | (base case) 3 g/t |
4 g/t |
|---|---|---|
| (Cumulative Cash Flow) NPV@0%, $US 1,000s | $56,652 | $57,998 |
| NPV@5%, $US 1,000s | $41,265 | $43,915 |
| NPV@10%, $US 1,000s | $29,568 | $32,967 |
| IRR | 34% | 40% |
The present PEA study indicates strong project economics, and in several respects the specific steps required to advance the project to feasibility level are similar to those that would be required to advance the project to a pre-feasibility level. Magellan is currently engaged in a 3000m-diamond drill program designed to further expand the existing resource. Drilling is expected to be completed by the end of June, 2010 and a decision regarding the commencement of a feasibility study will be taken during the third quarter of 2010.
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