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Mineral Ridge

Introduction
The 5,617 hectare (13,879 acre) Mineral Ridge property is located ~6 km northwest of the town of Silver Peak and 56 km southwest of Tonopah in Esmeralda County, Nevada. Scorpio Gold holds a 70% interest in the project with joint venture partner Elevon, LLC (30%).

Prior to Scorpio Gold's acquisition in March 2010, Mineral Ridge historically produced ~575,000 ounces of gold, including ~170,000 ounces from open pit and ~405,000 ounces from underground mining operations. Upon acquiring its interest, the Company commenced major site rehabilitation to bring the project to a fully operational status. Pre-production mining commenced in the Drinkwater pit on May 31, 2011 and the Company achieved commercial production status effective January 1, 2012.

Mineral Ridge is a conventional open pit heap leaching operation. Gold and silver bearing solution from the leach pad is collected in the pregnant pond and processed through carbon columns in the ADR plant for recovery of the precious metals from leachate on carbon. Loaded carbon is shipped to Metals Research in Kimberley, Idaho for processing into doré. The doré bars are then delivered to Johnson Matthey's refinery in Salt Lake City for further refining of the precious metals into separate 99.9% pure gold and silver bars.


Current Operations
THIRD QUARTER 2017

Production at Mineral Ridge in Q3 2017 totalled 4,935 ounces of gold and 2,588 ounces of silver compared to 9,981 ounces of gold and 4,630 ounces of silver in Q3 of 2016. Gold and silver production for the first nine months of 2017 totalled 15,336 ounces of gold and 7,947 ounces of silver, representing decreases of 46.3% and 38.3%, respectively, over the same period in 2016. The lower metal production is attributed to fewer tons being mined and processed as a result of the decreasing size of the Mary LC and Brodie pits and slower mining rates as current production in these pits winds down.A summary of the Q3 2017 operating results is presented in the Company's October 27, 2017 news release.

Current mining is expected to continue through the first week of November 2017, at which time mining will be suspended while evaluations are conducted by Mine Technical Services ("MTS") on the mine's remaining internal resources for a NI-43-101 compliant resource and reserve estimate and updated mine plan. Based on the positive results from the recently completed feasibility study, the Company intends to pursue financing for the construction of a 4,000 TPD milling facility with CIL recovery and dry stack tailings circuit. The Company also intends to add additional run of mine resources, when confirmed by MTS, to the already confirmed heap leach resource for processing and recovery of the contained precious metals. Construction of the milling facility will begin once financing is obtained and the Plan of Operations Amendment and Water Pollution Control permit are approved and issued. Permit approval is expected in early 2018.

SECOND QUARTER 2017

Production at Mineral Ridge in Q2 of 2017 totalled 4,660 ounces of gold and 2,505 ounces of silver. A summary of the Q2 2017 operating and financial results is presented in the Company's August 8, 2017 and August 29, 2017 news releases with complete details provided in the Q2 2017 Financial Statements and Management Discussion & Analysis.

HIGHLIGHTS FOR THE SECOND QUARTER ("Q2") ENDED JUNE 30, 2017 AND SUBSEQUENT EVENTS
  • 4,660 ounces of gold were produced at the Mineral Ridge mine during Q2 of 2017, compared to 10,089 ounces during Q2 of 2016.
  • Revenue of $6.3 million, compared to $12.4 million during Q2 of 2016.
  • Total cash cost per ounce of gold sold(1) of $968 compared to $879 during Q2 of 2016.
  • Mine operating earnings of $1.1 million compared to $3.1 million during Q2 of 2016.
  • Net loss of $0.3 million ($0.00 basic and diluted per share), compared to net earnings of $1.2 million ($0.01(2) basic and diluted per share) during Q2 of 2016.
  • Adjusted net earnings(1) of $0.5 million ($0.00 basic and diluted per share) compared to $2.2 million ($0.01 basic and diluted per share) for Q2 of 2016.
  • Adjusted EBITDA(1) of $1.0 million ($0.00 basic and diluted per share) compared to $2.8 million ($0.02 basic and diluted per share) during Q2 of 2016.
  • On July 12, the Company reported a measured and indicated mineral resource estimation of 121,700 ounces of gold contained on the heap leach pads at the Mineral Ridge Mine.
  • August, the Company announced the initiation of a bankable feasibility study with the objective to support the proposed financing and construction of a mill facility at Mineral Ridge to process the heap leach material and potentially mineralized material mined in the future.

HIGHLIGHTS FOR THE SIX MONTHS ENDED JUNE 30, 2017
  • 10,401 ounces of gold were produced at the Mineral Ridge mine, compared to 18,597 ounces produced during the six months ended June 30, 2016.
  • Revenue of $16.2 million, compared to $21.9 million during the six months ended June 30, 2016.
  • Total cash cost per ounce of gold sold(1) of $911, compared to $844 during the six months ended June 30, 2016.
  • Mine operating earnings of $3.5 million, compared to $4.9 million during the six months ended June 30, 2016.
  • Net loss of $0.2 million ($0.00 basic and diluted per share), compared to net earnings of $2.3 million ($0.01 basic and diluted per share) during the six months ended June 30, 2016.
  • Adjusted net earnings(1) of $1.9 million ($0.01 basic and diluted per share), compared to $3.3 million ($0.02 basic and diluted per share) during the six months ended June 30, 2016.
  • Adjusted EBITDA(1) of $3.0 million ($0.02 basic and diluted per share), compared to $4.4 million ($0.02 basic and diluted per share) million during the six months ended June 30, 2016.
(1)This is a non-IFRS measure; refer to Non-IFRS Measures section of this press release and the Company's Management Discussion & Analysis for Q2 of 2016 for a complete definition and reconciliation to the IFRS results reported in the Company's financial statements for Q2 of 2016.
(2) Please see Equity section of the MD&A.


Deposits
In 2014, the Company reported an updated Life of Mine Plan ("LOM Plan") for the Mineral Ridge Operation that included the Drinkwater, Mary, Mary LC, and the five satellite deposits, Brodie, Bluelite, Solberry, Wedge and Oromonte (see July 21, 2014 news release). More recently, the Company developed an updated mine plan that included the Mary LC, Bluelite, Solberry, Missouri and the Brodie phase A, phase B and SE pits. To date, the Drinkwater, Bluelite, Solberry, Missouri, Brodie phase A and Wedge pit resources have been depleted. Scheduled mining continues in the Mary LC and Brodie phase B and SE pits which extend mining through the first week of November 2017.

Permitting for mining in the Custer, Oromonte, Drinkwater High Wall and Bunkhouse Extension areas is expected in Q1 of 2018, at which time the Company will evaluate the economics of mining these areas.

Property Map (PDF 2.9 Mb)
Operations Area Map (PDF 4.2 Mb)
Operations Area Map with Drill Hole Locations (PDF 2.6 Mb)

Bunkhouse Hill Target Area

The Bunkhouse Hill area extends northeast of the Mary LC pit. Drilling in 2015 intersected significant mineralization extending 250 meters northeast of the Mary LC pit at vertical depths of 50 to 150 meters. Fifteen RC holes were drilled in 2016 to further test and delineate the economics for extending the Mary LC pit into this area.

Geologically, the Bunkhouse Hill target is the immediate down-dip extension of the mineralization present in the Mary LC pit. The mineralization at Bunkhouse dips at 39° NE vs. the more typical 25-30° NE dip of the Mary LC mineralization. This dip change is spatially related to a change in geology, whereby the mineralized zone transitions from being hosted in felsic intrusive rocks to sedimentary rocks of the Wyman formation. Mapping work has shown how important this rheological contrast is in the formation of ore zones. The Bunkhouse target is currently defined over a ~150 x 450 meter area and mineralization remains open down dip to the northeast.

Bunkhouse Hill Drill Cross Sections




Bunkhouse Hill Section - Center

Bunkhouse Hill Section +150

Bunkhouse Hill Section -150



Oromonte Deposit

The Oromonte target occurs over a 300 x 500 meter area situated between the Solberry and Wedge deposits. A small mineral resource estimate for the deposit based on 53 RC drill holes was reported in the 2014 LOM Plan. Follow-up drilling in 2014-2016 intersected significant mineralization at vertical depths ranging from near surface to 150 meters depth across the target area.

The mineralization at Oromonte is interpreted to be a continuation of the mineralized horizon(s) between the Solberry and Wedge deposits that have been offset by normal faulting. The occurrence of a higher-grade zone of mineralization at depth is thought to be related to a rheological contrast between the basement granite and a later intrusion of alaskite (leucogranite). The difference in deformational behaviour of the two rock types under stress may have caused greater structural damage and fluid flow within the mineralizing structures in this area, resulting in a higher-grade zone of mineralization. The Oromonte deposit was subsequently down-dropped by late-stage normal faulting. A generalized geological model of the mineralization is presented in the Oromonte Cross Section.

Although not accessible by open pit mining, the deeper mineralization at Oromonte may be amenable to underground extraction should further results support underground development. Historical underground workings occur in the Wedge deposit area approximately 180 meters to the east.

Oromonte Drill Plan (PDF 2.2 Mb)

Oromonte Cross Section (PDF 350 Kb)

Custer Deposit

Discovered in 2015, the Custer deposit lies along trend of and ~500 meters southeast of the Mary LC deposit. Structurally, Custer is very similar to the Drinkwater deposit, having far less of the post-mineral faulting and folding that was predominant in the Mary and Mary LC deposits. As a result, the mineralization at Custer is quite continuous and predictable. Definition drilling in 2016 followed up on a highly successful first-pass drilling program in 2015. A total of 81 holes have now outlined the Custer mineralized zone over a 150 x 200 meter area at depth (see May 3, 2016 news release). The Custer deposit is in the permitting process for future consideration of open-pit mining.

Geology & Mineralization
The Mineral Ridge gold deposits are located on the northeast flank of the Silver Peak Mountain Range. This range lies in the southern reaches of the Great Basin, within the Walker Lane structural corridor. Walker Lane is a 100-km-wide region of right lateral, wrench-faulting which separates the Sierra Nevada batholith to the west and southwest and the Great Basin to the east and northeast.

Mineral Ridge is an anticlinal dome found on the eastern flank of the Silver Peak Range. It has been interpreted as an uplifted metamorphic core complex where unmetamorphosed and unfolded Cambrian strata are in detachment-fault contact with underlying deformed granitoids and Precambrian metamorphic rocks of the core complex. Auriferous quartz lenses of the central gold-quartz district are concordant with foliation in the metasedimentary host rocks of the Precambrian Wyman Formation. Transitional contacts were observed between quartz and alaskite (commonly pegmatitic), and between alaskite and peraluminous two-mica granite, strongly suggesting that the alaskite, quartz, and ore metals were derived hydrothermally from residual granite melt and aqueous fluids.

The property is located on a typical "Nevada Structural System" which is known to control gold mineralization.

To date, seven well-defined gold bearing structures have been documented on the property as follows:
  1. The North-Northeast Eagles Nest Fault
  2. The North-Northeast Coyote Fault
  3. The Northwest BW Normal Fault
  4. The North-Northwest Gillian Fault
  5. The Northeast Mary/Drinkwater Cross Fault
  6. The North-Northwest Mary/Drinkwater Cross Fault
  7. The North-Northwest Black Warrior Intersection Fault
The known mineralized zones occur over an area of approximately 4,300 m (14,000 ft) north-south and 4,600 m (15,000 ft) east-west. Individual zones can be as much as 43 m (140 ft) thick, usually consisting of a higher-grade 1.5 to 9.0 m wide halo surrounded by a lower-grade mineralized envelope. Two or more high-grade zones are commonly observed stacked on one another. Gold deposition is structurally controlled, and some of the highest grade material is found in mineralization shoots that are at an oblique angle to the direction of movement of the upper plate slab.

Gold is present as native gold and electrum, and generally occurs as rounded, angular, irregularly shaped and elongated inclusions and intergrowths in quartz, frequently associated with micaceous minerals or carbonates occupying interspatial spaces or fracture filling. Gold is also frequently associated with goethite, sometimes with relict pyrite, and on occasions intergrown with sphalerite, galena, anglesite/cerrusite and pyrite.

Mineral Resource & Reserve Estimate
On July 12, 2017 the Company reported the Mineral Ridge leach pad resource estimate by Mine Technical Services ("MTS") of Reno, Nevada. As of June 29, 2017 the leach pad contained an estimated 7.1 MT at an average grade of 0.017 oz./ton or 121,700 ounces of gold in the Measured & Indicated category. Since June 29, 2017, newly mined material from the available open-pit resource has been placed on the pad and will continue to be placed through October 2017. The material added in this time period is not included as it has not been validated as part of the current mineral resource estimate.

It is assumed that as the leach pad is mined, there will be no selectivity of the material to be processed, and therefore, the mineral resources presented represent a global estimate of the tonnage and grade.

Ordinary Kriging was used for the gold resource estimation with Inverse Distance, Inverse Distance Squared and Nearest Neighbor estimates serving as validation models. Silver estimates were run using a single Inverse Distance model and a Nearest Neighbor estimate as a validation model.

For reasonable prospects of eventual economic extraction, the gold price used is the 3-year trailing average gold price through June 2017. The process recovery is that obtained by Kappes, Cassiday & Associates ("KCA") test-work using reasonable mill-scenario. The processing cost was provided by Mineral Ridge using actual Mineral Ridge Mine labor costs, and conceptual mill processing costs estimated by Novus for a 4,000 tpd mill operation.

Table 1: Mineral Ridge Mineral Resource Estimate
Mineral Resource Classification Tons
(kt)
Au
(opt)
Ag
(opt)
Contained
Au (koz)
Contained
Ag (koz)
Measured 2,895 0.017 0.016 48.5 46.4
Indicated 4,220 0.017 0.018 73.2 74.1
Measured & Indicated 7,115 0.017 0.017 121.7 120.4
Inferred 76 0.016 0.027 1.2 2.0

Notes:
  1. The effective date of the Mineral Resource estimate is June 29, 2017.
  2. The Qualified Person for the estimate is Mr Ian Crundwell, P.Geo.
  3. Mineral Resources are quoted only for the Mineralized Leach Pad.
  4. Mineral Resources are contained within the Mineral Ridge leach pad facility with the following assumptions:
    a. A long-term gold price of US$1,216/oz.
    b. Assumed process costs are US$11/t.
    c. Metallurgical recovery for gold is 91%.
  5. Rounding may result in apparent differences between when summing tons, grade and contained metal content.
  6. Tonnage and grade measurements are in Imperial units. Grades are reported in opt.
  7. The resource estimate was prepared with reference to CIM Definition Standards for Mineral Resources and Mineral Reserves (2014) and CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (2003).
  8. The resource estimate was prepared by qualified persons, Todd Wakefield, MSc, SME, Ian Crundwell, BSc, PGeo and Mike Drozd, PhD, SME of Mine Technical Services Ltd.
  9. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Given the nature of the reclaimed material on the heap leach pad and the method of mining, the assumption is that all material will be mined and processed, less any material left in place due to permit restrictions and facility location. Allowance has been made for facility location which excludes 260,000 tons, which must remain in place, according to the heap material mining and tailings placement design completed by Newfields.

Based on the criteria above, the Mineral Reserve Estimate is provided in Table 2 below. Given the positive economic analysis of the Project, the mill feed material can in fact be considered a Mineral Reserve.

Table 2: Mineral Ridge Mineral Reserve Estimate
Mineral Reserve Classification Tons
(kt)
Au
(opt)
Ag
(opt)
Contained
Au (koz)
Contained
Ag (koz)
Proven 2,895 0.017 0.016 48.5 46.4
Probable 4,220 0.017 0.018 73.2 74.1
Less Material Remaining in Place (260) 0.017 0.017 (4.5) (4.6)
Total Proven & Probable 6,855 0.017 0.017 117.2 115.9

Notes:
  1. Mineral Resources are contained within the Mineral Ridge leach pad facility with the following assumptions:
    a. A long-term gold price of US$1,216/oz.
    b. Assumed process costs are US$11/t.
    c. Metallurgical recovery for gold is 91%.
  2. Rounding may result in apparent differences between when summing tons, grade and contained metal content.
  3. Tonnage and grade measurements are in Imperial units. Grades are reported in opt.
  4. The reserve estimate was prepared by qualified person, Ian Crundwell, BSc, PGeo of Mine Technical Services Ltd.

A NI 43-101 compliant technical report in support of the reserve estimate and the associated feasibility study will be filed on SEDAR within 45 days of the Company's October 10, 2017 news release.

Feasibility Study
On October 10, 2017 the Company reported a positive feasibility study on reprocessing the heap leach residual material at its Mineral Ridge property. The study was undertaken by Novus Engineering Inc. ("Novus"), Mine Technical Services ("MTS") and NewFields.

About 68% recovery of gold was realized from the previous heap leach operations at Mineral Ridge. Sonic core drilling was completed to create a mineral resource estimate from the heap pad, which was previously issued by MTS on July 12, 2017. Independent testing of the residual heap leach material indicates 91% recovery by further grinding the heap material and reprocessing using the carbon-in-leach ("CIL") process. Novus was engaged by Scorpio Gold to design a processing facility and develop capital expenditure ("CAPEX") and operating expenditure ("OPEX") estimates related to the new processing facility. NewFields developed the methodology for "mining" the heap residual material and for returning the tailings material from the processing facility to the lined pad. NewFields also provided the CAPEX and OPEX estimates related to the mining and filtered-tailings placement activities. Scorpio Gold provided information on the balance of project costs and general and administrative cost estimates. The economic highlights of the project are presented in Table 1 below.

Table 1: Economic Highlights


Defined terms not otherwise defined herein shall have the meanings ascribed to them under the heading "Units of Measure" in this news release.

Drilling

A total of 3,671 ft (1,119 m) of drilling in 34 sonic core drill holes was completed to test the grade of the leach pad material. Sonic drill core was placed in plastic bags in nominal 2.5 ft (0.76 m) intervals at the drill rig by the drillers and transferred to the Mineral Ridge assay laboratory on site after the completion of each drill hole by Mineral Ridge, LLC ("Mineral Ridge") geologists. At the Mineral Ridge assay laboratory, the material from the sample bags was composited into 10 ft (3 m) intervals, dried, disaggregated, split to 250 g, and sent to Florin Analytical Services ("Florin") in Reno for gold and silver assay. At Florin, the entire sample was pulverized to 80% passing 75 microns, homogenized, and gold determined by one-assay ton fire assay and AAS finish and silver determined by four-acid digestion and AAS finish.

Blanks, standards, and duplicates were inserted into the sample sequence by Mineral Ridge prior to sending the samples to Florin for analysis to determine the quality of the Florin gold assays. Standards and blanks indicate that Florin assays are acceptably accurate and there is no significant carryover contamination. Duplicate pairs returned poor precision and screen fire assays indicate that coarse gold is likely a contributing factor in the poor precision of the duplicate results. The 2017 Florin gold assay data are sufficiently accurate and precise for use in mineral resource estimation.

Mineral Resources and Mineral Reserves

There has been no change to the mineral resource estimate as disclosed in the press release dated August 14, 2017.

The mineral resources are comprised of material contained entirely within the leach pad as of June 29, 2017. While newly mined material from the available open-pit resource will continue to be placed on the heap leach pad through October 2017, the material added in this time period is not included as it has not been validated as part of the current mineral resource estimate.

It is assumed that as the leach pad is mined, there will be no selectivity of the material to be processed, and therefore, the mineral resources presented represent a global estimate of the tonnage and grade.

Ordinary Kriging was used for the gold resource estimation with Inverse Distance, Inverse Distance Squared and Nearest Neighbor estimates serving as validation models. Silver estimates were run using a single Inverse Distance model and a Nearest Neighbor estimate as a validation model.

For reasonable prospects of eventual economic extraction, the gold price used is the 3-year trailing average gold price through June 2017. The process recovery is that obtained by Kappes, Cassiday & Associates ("KCA") test-work using reasonable mill-scenario. The processing cost was provided by Mineral Ridge using actual Mineral Ridge Mine labor costs, and conceptual mill processing costs estimated by Novus for a 4,000 tpd mill operation.

Table 2: Mineral Ridge Mineral Resource Statement
Mineral Resource Classification Tons
(kt)
Au
(opt)
Ag
(opt)
Contained
Au (koz)
Contained
Ag (koz)
Measured 2,895 0.017 0.016 48.5 46.4
Indicated 4,220 0.017 0.018 73.2 74.1
Measured & Indicated 7,115 0.017 0.017 121.7 120.4
Inferred 76 0.016 0.027 1.2 2.0

Notes:
  1. The effective date of the Mineral Resource estimate is June 29, 2017.
  2. The Qualified Person for the estimate is Mr Ian Crundwell, P.Geo.
  3. Mineral Resources are quoted only for the Mineralized Leach Pad.
  4. Mineral Resources are contained within the Mineral Ridge leach pad facility with the following assumptions:
    a. A long-term gold price of US$1,216/oz.
    b. Assumed process costs are US$11/t.
    c. Metallurgical recovery for gold is 91%.
  5. Rounding may result in apparent differences between when summing tons, grade and contained metal content.
  6. Tonnage and grade measurements are in Imperial units. Grades are reported in opt.
  7. The resource estimate was prepared with reference to CIM Definition Standards for Mineral Resources and Mineral Reserves (2014) and CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (2003).
  8. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Conversion from Mineral Resources to Mineral Reserves is relatively straightforward. Given the nature of the reclaimed material on the heap leach pad and the method of mining, the assumption is that all material will be mined and processed, less any material left in place due to permit restrictions and facility location. Allowance has been made for facility location which excludes 260,000 tons, which must remain in place, according to the heap material mining and tailings placement design completed by Newfields.

Based on the criteria above, the Mineral Reserve Estimate is provided in Table 3 below. Given the positive economic analysis of the Project, the mill feed material can in fact be considered a Mineral Reserve.

Table 3: Mineral Ridge Mineral Reserve Estimate
Mineral Reserve Classification Tons
(kt)
Au
(opt)
Ag
(opt)
Contained
Au (koz)
Contained
Ag (koz)
Proven 2,895 0.017 0.016 48.5 46.4
Probable 4,220 0.017 0.018 73.2 74.1
Less Material Remaining in Place (260) 0.017 0.017 (4.5) (4.6)
Total Proven & Probable 6,855 0.017 0.017 117.2 115.9

Notes:
  1. Mineral Resources are contained within the Mineral Ridge leach pad facility with the following assumptions:
    a. A long-term gold price of US$1,216/oz.
    b. Assumed process costs are US$11/t.
    c. Metallurgical recovery for gold is 91%.
  2. Rounding may result in apparent differences between when summing tons, grade and contained metal content.
  3. Tonnage and grade measurements are in Imperial units. Grades are reported in opt.

Mineral Processing

The proposed processing plant will be conventional and will re-process gold heap leach residual material at a rate of 4,000 tpd with an equipment availability of 92% (365 d/a). The process flowsheet developed for the Mineral Ridge heap leach residues is a combination of conventional comminution using ball-mills, and CIL cyanidation to recover gold and silver. The process plant will produce a gold and silver loaded activated carbon product from the CIL circuit. Based on the annual average throughput, and leaching and refinery recoveries, the process plant is estimated to produce approximately 22,583 oz of gold and 5,886 oz of silver from the mill feed grading 0.0171 opt gold and 0.0169 opt silver. The estimated gold and silver recoveries in the CIL circuit are 91% and 24% respectively. The loaded carbon will be shipped off-site to a refinery to recover the gold and silver. Refinery recovery is estimated in 99.4%.

The process plant will consist of:
  • Reclaiming area including mixing and holding tanks
  • Grinding circuit consisting of two parallel ball mills
  • A Pre-leach thickener
  • Carbon in leach cyanidation
  • Tailings thickening and filtration

The process flowsheet was developed based on parameters established from test work conducted by KCA mainly from 2014 to 2017, as well as Novus' engineering experience. The size selection of the grinding mills was based on the amenability of the reclaimed ore to grinding determined through test programs performed by laboratories. The CIL tank sizing was based on leaching times determined by test work and using scale-up factors and experience.

Test programs evaluated several options for treating the reclaimed Mineral Ridge heap leach material. Samples showed regular to poor responses to conventional flotation. The CIL process was chosen as the best available alternative due to higher gold recoveries. As part of the study, several areas for optimization and simplification were identified in the process plant design, which reduced operational and capital requirements.

The major criteria used in the plant design to process 4,000 tpd equivalent to 1,460,000 tpa is outlined in Table 4.

Table 4: Major Design Criteria
Criteria Unit Value
Daily Processing Rate tpd 4,000
Operating Days per Year d/a 365
Operating Schedule - two shifts/day; 12 hours/shift
Mill Feed Grade -- Average opt 0.0171
Metal Recovery - CIL % Au 91
Metal Recovery - CIL % Ag 24
Refining Recovery - Au & Ag % 99.4
Reclaimed Ore Particle Size, 80% passing in 0.14
Grinding / CIL Availability % 92
Milling and CIL Process Rate tph 181.2
Ball Mill Grinding Particle Size, 80% passing mesh 200
Ball Mill Circulating Load % 300
Bond Ball Mill Work Index kWh/t 15.3
CIL slurry feed density % 45
CIL residence time h 36
Final tailings cake moisture % 15

The grinding plant will receive material from the previous heap leaching operation. This material will be reclaimed, scalped to remove trash, and mixed with water to form slurry of approximately 55% solids. The slurry will then be transferred to a holding tank and pumped to the ball mill pump box. The design contemplates two ball mills operating in parallel, with a shared pump box for both mills and dedicated cyclone clusters for each ball mill. The cyclone overflow has a design 80% passing size of 200 mesh (74 microns) and feeds a pre-leach linear trash screen. The cyclone underflow will return to the two ball mills. The mills are designed to process 2,000 tpd each. The linear trash screen undersize reports by gravity to the pre-leach high-rate thickener where the slurry is flocculated and thickened to a density of 60% solids. The thickener overflow is recycled to the process water pond for reuse and the thickener underflow reports to the leaching circuit.

The leaching circuit will consist of four tanks operating in series with a total residence time of 36 hours. The slurry density will be adjusted by recycling the overflow from the tailings thickener for the CIL circuit to operate at 45% solids. It is expected that the slurry will arrive at the CIL circuit at a pH of 10.5; adjustments will be made to maintain the required pH level, as necessary. Slurry will flow by gravity to each tank. Dissolved gold and silver in the slurry will be adsorbed onto activated carbon and discharged from the circuit at a designed rate of two tons per day. Every 14 days bagged loaded carbon will be transported to an external facility for final gold and silver recovery, and carbon regeneration and recycling. The current operation at Mineral Ridge is a heap-leach operation, which uses reactivated carbon to adsorb gold from the pregnant leach solution. The existing carbon handling infrastructure, which includes carbon receiving, attritioning, sizing, sampling, and loading is suitable for the new process.

The CIL tailings will pass through a carbon safety screen to capture fugitive loaded carbon, and will report to a tailings thickener for cyanide solution recovery. The tailings thickener overflow will be recycled to the leach feed while the underflow will be sent to the tailings filters, where additional cyanide solution will be recovered. The filter cake at a designed moisture of 15% will be transported by existing grasshopper conveyors to the tailings pad. The tailings filter cake will be placed on the lined heap leach pad.

Infrastructure

The existing site infrastructure at the Mineral Ridge property is in good repair and is deemed suitable to support the envisioned operations in the feasibility study. The following items were reviewed and found suitable for use for the project.

Substation and power distribution: additional distribution costs were considered in the CAPEX estimate. The main substation was found suitable to support ongoing activities.
  • Maintenance facilities: no expansion necessary.
  • Fuel storage: suitable as is.
  • Roads: suitable as is.
  • Water Supply and Management: suitable as is.
  • Assay Lab: suitable as is.
  • Offices: suitable as is.
  • Lined pad for tailings storage: expansion required and included in the CAPEX estimate.
  • Carbon handling facility: suitable as is.

Economic Analysis

The economic viability of the project has been evaluated using constant dollar, unleveraged (no financing), after-tax discounted cash flow (DCF) methodology. This valuation method requires projecting material balances estimated from operations and calculating resulting economics. Economic value is calculated from sales of metal plus net equipment salvage value and bond collateral less cash outflows such as operating costs, management fees, capital costs, working capital changes, any applicable taxes and reclamation costs. Resulting annual cash flows are used to calculate the net present value (NPV) and internal rate of return (IRR) of the project.

The NPV 5 is $16.5 million and the IRR is 22.5%, with payback 2.9 years from the end of construction. The project's economic metrics are most sensitive to changes in grade and metals price, and less sensitive to changes in operating and capital costs.

Permitting and duration of construction timetables are such that first production is scheduled to commence start of third quarter 2019. Table 5 sets for the production schedule, grades and recoveries that result in salable metal.

Table 5: Production Schedule


Gold prices for all project years are forecast at $1,250/oz, less $0.50/oz. of gold per contract with buyer. Forecast silver prices are from a June 30, 2017 CIBC Global Mining Group, Analyst Consensus Commodity Price Forecasts study, less $0.01/oz. of silver per contract with buyer. The price of silver varies year over year between $19.28/oz to $19.82/oz, with an average price over the project life of $19.76/oz. Table 6 shows ounces of metal for sale, prices and resulting revenues. Given the terms of the selling agreement (payment five days following placement for sale) and production inventory time due to shipping from the mill to the stripper and then to the refinery (stripping time is 16 days and refining 7 days, inclusive of transport time), receipt of payment for revenues is delayed by 28 days. The cash impact of these timing differences is noted in the last two lines of Table 6 and, combined with accounts payable changes is noted as working capital in Table 9: Cash Flow.

Table 6: Salable Ounces, Price and Revenue and Working Capital Changes


Operating costs are summarized in Table 7.

Table 7: Operating Costs


Capital costs, reclamation bond collateral, reclamation costs and recovery of bond collateral are summarized in Table 8.

Table 8: Capital, Bond and Reclamation Costs</html>


Table 9: Cash Flow


Figure 1: Cash Flow Chart


Figure 2: NPV Sensitivity


Figure 3: IRR Sensitivity


Risks

The following have been identified as contingent in the advancement of the project:
  • Financing,
  • A timely completion of the permitting process.

Units of Measure

Unless otherwise defined herein, the following defined terms have the following meanings:

foot ft
meter m
gram g
ounce oz
pound lb
ton (short = 2,000 lb) t
ounces per ton opt
kilo (x 1,000) k
million (x 1,000,000) M
hour h
minute min
year y
day d
annum a
tons per hour tph
tons per day tpd
tons per annum tpa
US gallon gal
cubic feet ft3
US gallons per minute gpm
US dollars $

Qualified Persons

The following Qualified Persons as defined by NI 43-101 participated in the preparation of the feasibility study:

Qualified Person Company QP Responsibility/Role
Mr. Todd Wakefield, MSc, SME Mine Technical Services Geology
Mr. Ian Crundwell, P. Geo. Mine Technical Services Mineral Resources and Mineral Reserves
Mr. Paul Kaplan, P.E. NewFields Environment Studies and Permitting
Mr. Gordon John Cooper, P. Eng. Novus Engineering Inc. Mineral Processing
Mr. Amritpal Singh Gosal, P. Eng. Novus Engineering Inc. Infrastructure and Plant Design


Technical Reports