FORM 6-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of March 2005
Commission File Number 001-32412
| GLENCAIRN GOLD CORPORATION |
| (Translation of registrant’s name into English) |
| 500 – 6 Adelaide St. East Toronto, ON M5C 1H6 |
| (Address of principal executive offices) |
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F
| Form 20-F | Form 40-F | X |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
| Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders. |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
| Note:Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR. |
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934.
| Yes | No | X |
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b) 82 —
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GLENCAIRN GOLD CORPORATION |
| Date: March 9, 2005 | By: “Lorna MacGillivray” Lorna MacGillivray Corporate Secretary and General Counsel |
TECHNICAL REPORT ON
LIMON MINE, NICARAGUA
- --------------------------------------------------------------------------------
PREPARED FOR
GLENCAIRN GOLD CORPORATION
NI 43-101 Report
Author:
Hrayr Agnerian M.Sc. (Applied), P. Geo.
Jason J. Cox, P.Eng
February 24, 2005
ROSCOE POSTLE ASSOCIATES INC
Toronto, Ontario.
Vancouver, B.C.
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
1 SUMMARY ........................................................1-1
Executive Summary ..............................................1-1
Technical Summary ..............................................1-9
2 INTRODUCTION AND TERMS OF REFERENCE ............................2-1
3 DISCLAIMER .....................................................3-1
4 PROPERTY DESCRIPTION AND LOCATION ..............................4-1
5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE
AND PHYSIOGRAPHY ...............................................5-1
6 HISTORY ........................................................6-1
7 GEOLOGICAL SETTING .............................................7-1
Regional Geology ...............................................7-1
Local Geology ..................................................7-1
8 DEPOSIT TYPES ..................................................8-1
9 MINERALIZATION .................................................9-1
10 EXPLORATION ...................................................10-1
11 DRILLING ......................................................11-1
12 SAMPLING METHOD AND APPROACH ..................................12-1
13 SAMPLE PREPARATION, ANALYSES AND SECURITY .....................13-1
14 DATA VERIFICATION .............................................14-1
15 ADJACENT PROPERTIES ...........................................15-1
16 MINERAL PROCESSING AND METALLURGICAL TESTING ..................16-1
17 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES ................17-1
Mineral Resources .............................................17-1
Mineral Reserve Estimation Procedures .........................17-6
18 OTHER RELEVANT DATA AND INFORMATION ...........................18-1
Mine Operations ...............................................18-1
Life of Mine Plan ............................................18-12
Environmental Considerations .................................18-13
Capital And Operating Cost Estimates .........................18-16
Economic Analysis ............................................18-19
19 CONCLUSIONS ...................................................19-1
i
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
20 RECOMMENDATIONS ...............................................20-1
21 SOURCES OF INFORMATION ........................................21-1
22 SIGNATURE PAGE ................................................22-1
23 CERTIFICATE OF QUALIFICATIONS .................................23-1
24 APPENDIX ......................................................24-1
Check Assay Results: Limon Laboratory v.s. ACME
Laboratories, Diamond Drill Holes From Pozo 1 & 2,
Santa Pancha Deposit ..........................................24-1
LIST OF TABLES
Table 1-1 Mineral Reserves and Mineral Resources ................1-2
Table 1-2 Cash Flow Model .......................................1-5
Table 1-3 Sensitivity Data ......................................1-6
Table 1-4 Production History ...................................1-18
Table 1-5 Limon Life of Mine Plan ..............................1-19
Table 4-1 Mineral Concessions List ..............................4-3
Table 6-1 Historical Production and Exploration on Other
Concessions ...........................................6-4
Table 11-1 Statistics of 2004 Exploration Work ..................11-1
Table 14-1 RPA Independent Sampling Results .....................14-2
Table 17-1 Mineral Reserves and Mineral Resources ...............17-2
Table 17-2 Mineral Resources at 3.0 g/t Au Cut-Off Grade ........17-3
Table 17-3 Reserve Replacement .................................17-10
Table 17-4 2004 Resource to Reserve Conversion .................17-11
Table 17-5 Pozo 1 & 2 Probable Mineral Reserves ................17-12
Table 17-6 Santa Pancha Mineral Resources ......................17-13
Table 18-1 Historical Mine Production ...........................18-1
Table 18-2 2004 Mine Production Details .........................18-2
Table 18-3 Limon Mine, Life of Mine Plan .......................18-12
Table 18-4 LOMP Capital Costs ..................................18-17
Table 18-5 LOMP Unit Operating Costs ...........................18-18
Table 18-6 Limon Mine, Cash Flow Model .........................18-21
Table 18-7 Sensitivity Data ....................................18-22
ii
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
LIST OF FIGURES
Figure 1-1 Cash Flow Sensitivity Graph 1-7
Figure 4-1 Limon Property, Location Map 4-4
Figure 4-2 Limon Property, Mineral Concessions Map 4-5
Figure 4-3 Surface Rights, Mina El Limon Concession 4-7
Figure 7-1 General Geology of Nicaragua 7-3
Figure 7-2 Limon Area, Local Geology 7-4
Figure 8-1 Limon Area, Geological Model of Gold Mineralization 8-3
Figure 9-1 Limon Area, Schematic cross Section 9-3
Figure 9-2 Santa Pancha Vein System, Local Geology 9-4
Figure 10-1 Limon Concession, Exploration Targets 10-6
Figure 10-2 Talavera Southwest Exploration Results 10-7
Figure 13-1 Sample Preparation and Assay Protocols,
Limon Mine Laboratory 13-2
Figure 13-2 Check Assay Results, Santa Pancha Deposit 13-6
Figure 13-3 Check Assay Data on Medium Grade Standard 13-7
Figure 16-1 Limon Mine, General Site Plan 16-3
Figure 16-2 Limon Mine, Mill Area Site Plan 16-4
Figure 18-1 Limon Mine, Talavera Site Plan 18-5
Figure 18-2 Talavera Mine Schematic 18-6
Figure 18-3 Santa Pancha Mine Development Plan 18-9
Figure 18-4 Surface Plan of Limon Open Pit 18-11
Figure 18-5 Cash Flow Sensitivity Graph 18-23
LIST OF APPENDIX FIGURES
Figure 17-1 Talavera Deposit, Vein Geology Plan View, 150 Level .........24-2
Figure 17-2 Talavera II & Talavera Sur, Cross Section A-A' ..............24-3
Figure 17-3 Talavera Deposit, SEO & Ligia Structures,
Cross Section B-B' ..........................................24-4
Figure 17-4 Talavera Deposit, Veta Nueva Vein, Cross
Section C-C' ................................................24-5
Figure 17-5 Talavera Main Vein (East Half),
Vertical Longitudinal Section ...............................24-6
Figure 17-6 Talavera Main Vein (West Half), Vertical
Longitudinal Section Long Section ...........................24-7
Figure 17-7 Santa Pancha Deposit, Pozo 1 & 2 Veins, Plan
View -30 m Level ............................................24-8
Figure 17-8 Santa Pancha Deposit, Pozo 1 & 2 Veins, Vertical
Cross Section 13,768 N ......................................24-9
Figure 17-9 Santa Pancha Deposit, Pozo 1 & 2 Veins, Vertical
Cross Section 13,910 N .....................................24-10
Figure 17-10 Santa Pancha Deposit, Pozo 1 & 2 Veins,
Vertical Cross Section 14,081 N ............................24-11
iii
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Figure 17-11 Santa Pancha Deposit, Pozo 1 & 2 Veins (Hangingwall),
Vertical Longitudinal Section .............................24-12
Figure 17-12 Santa Pancha Deposit, Pozo 1 & 2 Veins (Footwall),
Vertical Longitudinal Section .............................24-13
Figure 17-13 Santa Pancha Deposit, Pozo 1 & 2 HW2 Vein Vertical
Longitudinal Section ......................................24-14
Figure 17-14 Santa Pancha Deposit, Pozo 1 & 2 P4-BT2 Vein
Vertical Longitudinal Section .............................24-15
Figure 17-15 Santa Pancha Deposit, Pozo 4 & 5 Veins (Footwall),
Composite Plan View at Various Levels ....................24-16
Figure 17-16 Santa Pancha Deposit, Pozo 4 & 5 Veins, Vertical
Cross Section 14,583 N ....................................24-17
Figure 17-17 Santa Pancha Deposit, Pozo 4 & 5 Veins, Vertical
Cross Section 14,849 N ....................................24-18
iv
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
1 SUMMARY
EXECUTIVE SUMMARY
Roscoe Postle Associates Inc. (RPA) was retained by Mr. Michael B. Gareau,
Vice-President, Exploration of Glencairn Gold Corporation (Glencairn), to
prepare an independent Technical Report on the Limon gold mine in northern
Nicaragua. The purpose of this report is to provide our independent assessment
of the Mineral Resources and Mineral Reserves of the Talavera and Santa Pancha
deposits and review the Company's Mine Plan. The Technical Report is required to
be conformable to NI 43-101 Standards of Disclosure for Mineral Projects. RPA
visited the property from November 2 to 4, 2004, and from January 18 to 20,
2005.
Glencairn is a reporting issuer listed at the Toronto Stock Exchange (TSX).
The company, through its 95% interest in Triton Minera S.A. (TMSA), owns and
operates the Mina El Limon mineral concession and 13 exploration-stage mineral
concessions, including the past producing La India concession; all of which are
located in northwestern Nicaragua. TMSA, through its 40% interest in Inversiones
La India, S.A., holds a 40% interest in the Espinito-San Pablo mineral
concession enclosed by the La India concession.
This report discusses only the 12,000 ha Mina El Limon mineral concession,
including the Talavera underground mine, the Santa Pancha deposit, and some
small open pits. Table 1-1 below summarizes Glencairn's estimate of the Mineral
Reserves and Mineral Resources at the Mina El Limon concession, as of December
31, 2004:
1-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 1-1 MINERAL RESERVES AND MINERAL RESOURCES
Glencairn Gold - Limon Mine
Mineral Reserves
Deposit Category Tonnes Grade (g/t Contained
(Au) Ounces Au
- ---------------------------------------------------------------------------------
Talavera Proven 177,600 5.88 33,600
Probable 510,000 5.60 91,780
Santa Pancha Probable 1,064,000 4.94 169,050
Subtotal Proven 177,600 5.88 33,600
Subtotal Probable 1,574,000 5.15 260,830
- ---------------------------------------------------------------------------------
Total Underground Proven & Probable 1,751,600 5.23 294,430
Limon Vein Open Pit Probable 35,200 2.71 3,070
Additional Mineral Resources
Talavera Measured 20,500 6.30 4,100
Indicated 109,300 6.22 21,900
Limon Vein Open Pit Indicated 40,600 3.26 4,300
Santa Pancha Indicated 32,400 8.52 8,900
Subtotal Measured 20,500 6.30 4,100
Subtotal Indicated 182,300 5.97 35,100
- --------------------------------------------------------------------------------
Total Measured & Indicated 202,800 6.00 39,200
Talavera Inferred 339,000 7.29 79,500
Santa Pancha Inferred 616,800 6.76 134,100
- --------------------------------------------------------------------------------
Total Inferred 955,800 6.95 213,600
Source: Glencairn, 2005
Notes:
1. CIM definitions were followed for reserves & resources.
2. Mineral Reserves are estimated at a cutoff grade of 4.02 g/t Au for
Talavera, 3.82 g/t Au for Santa Pancha, and 1.8 g/t Au for the Limon open
pit. Additional Mineral Resources are estimated at a cutoff grade of 4.50
g/t Au for underground, and 1.8 g/t Au for the Limon open pit.
3. Mineral Reserves & Mineral Resources are estimated using an average
long-term gold price of US$375 per ounce.
4. A minimum vein width of 2.4 m was used, and a minimum mining width of 3.0
m.
5. Ore density is 2.60 t/m3.
1-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
RPA has audited the Glencairn reserve and resource estimates, and in our
opinion they are in keeping with industry practices and standards. RPA is of the
opinion that the Glencairn resource and reserve estimates at the higher cut-off
grades (4.02 g/t Au for Talavera and 3.82 g/t Au for Santa Pancha) are in
accordance with the Mineral Resource/Reserve Classification as recommended by
the CIM Committee on Mineral Resources and Mineral Reserves, as required by
NI-43-101.
ECONOMIC ANALYSIS
Glencairn has prepared a Life of Mine Plan (LOMP) that schedules production
of the Mineral Reserves (as of January 1, 2005). The mine life is forecast to be
approximately five years, ending in the 1st quarter of 2010. RPA's projection of
the pre-tax cash flow is shown in Table 1-2, expressed in US dollars (US$). The
key input parameters are:
o Production of 1,100 tonnes per day (based on 304 days per annum).
o Reserve and Resource Base: Mineral Reserves of 1.78 million tonnes at
an average grade of 5.2 g/t Au, and Measured and Indicated Mineral
Resources of 203,000 tonnes at an average grade of 6.0 g/t Au. The
Mineral Resources are additional to the Mineral Reserves.
o Total production: 1.78 million tonnes @ 5.2 g/t Au
o Annual gold production: 48,000 ounces, average.
o Metallurgical recovery of 86.6%
o Gold price of $375 per ounce.
o Silver revenue assumed to be not material
o Revenue is recognized at the time of production.
o Operating costs: $40 per tonne milled
o Capital costs: $9.1 million.
1-3
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
GLOBAL MARKETS
The principal commodities at the Limon mine are freely traded, at prices
that are widely known, so that prospects for sale of any production are
virtually assured. RPA used a gold price of US$375 per ounce for the Base Case.
The Nicaraguan currency (Cordoba) has shown a steady decline against the US
dollar over the past few years, as follows:
o February 2003 - 1 US dollar = 14.79 Cordobas
o February 2004 - 1 US dollar = 15.54 Cordobas
o February 2005 - 1 US dollar = 16.22 Cordobas
For costs originally estimated in Cordobas (for example, labour), Glencairn
applies an inflation factor of 6% per annum before converting to US dollars.
CASH FLOW ANALYSIS
The undiscounted pre-tax cash flow totals $8.8 million. The unit operating
cost is $280 per ounce of gold. Capital expenditures are estimated to total $36
per ounce, and royalties are forecast to total $22 per ounce, over the remaining
mine life. The total cost of production, including operating, capital and
royalties, is estimated to be $338 per ounce. All costs and revenue are
expressed in US dollars (US$) unless otherwise noted.
Glencairn's physical and cost data underlying RPA's cash flow model are
consistent with operations during the past several years. In view of recent gold
prices ranging from $400 per ounce to $440 per ounce, the Limon Mine is expected
to generate a positive cash flow for the period detailed in the Life of Mine
Plan.
1-4
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
Variations to the LOMP base case NPV calculated at a 5% interest rate are
detailed in Table 1-3, and graphed in Figure 1-1. The cash flow is most
sensitive to gold price, followed by operating cost. Downside possibilities
related to Santa Pancha hangingwall stability (increased costs and dilution)
have a lesser impact than the previously mentioned factors.
TABLE 1-3 SENSITIVITY DATA
Glencairn Gold - Limon Mine
Parameter Variables Units -20% -10% Base +10% +20%
- --------------------------------------------------------------------------------
Gold Price $/oz 300 338 375 413 450
Operating Cost $/tonne 32.35 36.40 40.13 44.49 48.53
Capital Cost $millions 7.3 8.2 9.1 10.0 10.9
Mine Life Mt 1.42 1.60 1.78 1.96 2.13
NPV Units -20% -10% Base +10% +20%
- --------------------------------------------------------------------------------
Gold Price $millions (8.5) (0.8) 7.0 14.8 22.5
Operating Cost $millions 19.4 13.2 7.0 0.8 (5.4)
Capital Cost $millions 8.6 7.8 7.0 6.2 5.4
Mine Life $millions 3.9 5.0 7.0 8.0 8.7
1-6
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
FIGURE 1-1 CASH FLOW SENSITIVITY GRAPH
CONCLUSIONS
Based on our review, RPA concludes that:
o The procedures used in assaying, and Mineral Reserve and Mineral
Resource estimation, are in keeping with industry standards, and are
appropriate for the deposit and mining methods.
o The resource and reserve blocks might be better outlined by using the
Contour Method of estimating Mineral Resources, in order to better
represent grade distribution.
o RPA concurs with Glencairn's Life of Mine Plan (LOMP) for five years
commencing January 1, 2005, and believes that the production targets
are achievable. Annual production should average 48,000 ounces per
year over the remaining five years of reserves.
o Maintaining stability of the hangingwall will be crucial to
successfully mining the Santa Pancha deposit
o The LOMP cash flow is most sensitive to gold price and operating cost.
o Glencairn has identified a number of promising exploration targets. In
RPA's view, continued follow up drilling and surface exploration are
warranted.
1-7
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
o There is good potential for the discovery of additional gold veins
with similar mineralization as at Talavera
o Some of the RPA check assay values are slightly higher than the Limon
laboratory results. The differences are considered to be due to the
variability in gold between the two halves of the core, and are not
cause for concern, in RPA's view.
RECOMMENDATIONS
RPA recommends that:
o Ongoing exploration efforts continue, with the goal of extending the
mine life by conversion of resources to reserves, and by delineating
extensions to existing veins in the immediate mine area.
o Ongoing exploration efforts continue to test the Santa Rosa-Uval
target and other target areas by drilling
o Glencairn continue with detailed mine planning for the Santa Pancha
deposit, including options for varying amounts of hangingwall
exposure, and evaluation of the impact on operating costs.
o Minimum mining width be investigated by measurement of existing stopes
at Talavera, and that the results be incorporated into Mineral Reserve
estimation procedures.
o A contingency be applied to Santa Pancha capital requirements. .
o A geomechanics expert be consulted when development provides access to
the Santa Pancha hangingwall.
1-8
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TECHNICAL SUMMARY
PROPERTY STATUS
Glencairn holds interests in 14 mineral concessions in northwestern
Nicaragua. The Mineral Concessions are located approximately 100 km (straight
line) northwest of Managua, the capital of Nicaragua. Production from the Limon
Mine is subject to the following royalties:
o A 3% net smelter royalty (NSR) to IAMGOLD Corporation (IAMGOLD), on
the mineral production from the Limon Mine and any other production
revenue in the future, obtained from the Limon Mine Concession and the
other mineral concessions, including La India, that were formerly part
of the original El Limon-La India exploration concession. The IAMGOLD
royalty does not apply to the Espinito-San Pablo and the Soledad de la
Cruz concessions.
o A royalty equal to 5% of the net profit of Triton Mining (USA) LLC
(Triton USA) is due to Internacional de Comercial S.A. (IDC). Triton
USA is a subsidiary of Glencairn which holds a 47.5% interest in the
Limon Mine.
o A 3% NSR on gold production, payable to the Government of Nicaragua.
The Talavera and Santa Pancha gold deposits are located within the 12,000
ha Mina El Limon mineral concession that has a term of 25 years, expiring in
2027. The property straddles the boundary of the municipalities of Larreynaga
and Telica of the Department of Leon and the municipalities of Chinandega and
Villa Nueva of the Department of Chinandega.
TMSA is the direct owner of the surface rights that underlie all of its
current mining, milling, tailings and related facilities and infrastructure at
the Limon Mine. When necessary, access agreements are negotiated and signed with
the individual surface owners for other areas within the concession not owned by
the Company. RPA understands that permits required for current mining and
milling operations, and for exploration activities are in place. Glencairn
reports that an Environmental Impact Study for mining of the Santa Pancha
deposit has been submitted and approved, and an operating permit was issued on
January 31, 2005.
1-9
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
The original purchase of the mineral concessions was made by Minera de
Occidente S.A., (subsequently renamed TMSA). TMSA is owned 47.5% by Triton
Mining Corporation (Triton), 47.5% by Triton USA, and 5% by Inversiones Mineras
S.A. (IMISA), a holding company representing the unionized mine workers of
Nicaragua. Glencairn's 95% interest in the concessions is from its 100%
ownership of Triton and Triton USA acquired as a result of a merger with Black
Hawk Mining Inc. in October 2003.
TMSA is not responsible for any type of environmental damage caused prior
to the time at which it took possession of the Limon Mine in 1994, but is
required to implement the necessary changes to reduce any existing environmental
problems. According to the existing Central Bank regulations, TMSA may freely
export and sell the gold produced and the proceeds may be repatriated without
restriction.
LOCATION AND ACCESS
The Mina El Limon mineral concession is situated along the eastern margin
of the Nicaragua Depression. The property lies within the relatively flat
lowlands of the depression itself, but contains hills with moderate relief.
Access to the Limon mine area is by paved road (approximately 125 km from
Managua) and approximately 15 km by all-season gravel road to the Village of El
Limon. The total road distance from Managua is 140 km. The Talavera underground
mine is situated approximately 4 km west of the Village of El Limon, and the
Santa Pancha deposit is situated approximately 5 km east of that village. Both
areas are accessible by gravel roads from the Limon mine site.
The climate in northwestern Nicaragua is tropical with a hot, wet season
from May through November and hotter, dry season from December through to April.
The mean annual temperature is 27(degree) C with an average annual precipitation
of two metres. The Limon Mine operates year round and is not normally affected
by the typical seasonal climatic variations.
1-10
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Electrical power for the Limon Mine operations is obtained from the
Nicaraguan national grid system with backup generators at the mine site. Water,
both industrial and potable, is drawn from local sources.
The three villages of Limon, Santa Pancha and Minvah, all located within
the mine concession, have a population of approximately 10,000 people including
many of the mine employees. Transportation to the Limon Mine is by private
vehicles and public and company buses.
The Mina El Limon mineral concession is in an area of low to moderate
relief that offers flat areas for mine infrastructure. Elevations of the mine
property range from 40 m to 300 m above mean sea level. The area is covered with
sparse vegetation consisting predominantly of grasslands and scrub brush with
widely spaced trees.
HISTORY
Historic mining and prospecting activities in the Limon district of
northwestern Nicaragua, which hosts the Limon and other gold deposits, date back
to the late 1850s. Modern mining and exploration started in 1918. Mine
production was intermittent from the 1850s to 1941, and the exact amount of gold
production is unknown for this period. Since 1941, continuous production over 63
years has amounted to more than 2.8 million ounces of gold and an unrecorded
quantity of silver (as a by-product) has been produced. Much of this production
was when the mine was under the control of Noranda Mines. Production rates in
this period started at 200 tons per day and increased to 345 tons per day.
Within the Limon Mine concession gold production has come from three
sources. These are:
o Limon vein system,
o Santa Pancha-Panteon vein system, and
o Talavera vein system.
1-11
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Minor production has also come from three other sources, namely;
Atravesada: (within Limon concession, with production of approximately 11,000 oz
Au); Rincon de Garcia (approximately 23,800 oz Au) and; Mina de Agua
(approximately 46,600 oz Au). The latter are situated some 20 km north of the
Limon Mine.
GEOLOGICAL SETTING AND MINERALIZATION
The geomorphology of Nicaragua consists of three major terranes. A
northwest striking graben, 30 km to 40 km wide, parallels the Pacific coastline
along the western margin of the country. This graben hosts up to 16 active or
recently active volcanoes and is the site of thick Quaternary to Recent volcanic
deposits. To the southwest, between the graben and the Pacific coast, a 10 km to
20 km wide belt of Tertiary, Mesozoic and Palaeozoic rocks are preserved. To the
northeast of the graben; the Tertiary, Mesozoic and Palaeozoic "basement" is
overlain by a major unit of Tertiary volcanic rocks, the Coyol
(Miocene-Pliocene) and Matagalpa (Oligocene-Miocene) Groups. The Coyol Group
hosts the known vein gold deposits in Nicaragua, including those at El Limon and
La India.
The Limon Mine is located along the eastern edge of the Nicaragua graben
within an area of low hills that contrast with the level plain of the graben
floor. Approximately 50% of the area in the general vicinity of the mine is
covered by a thin layer of Quaternary to Recent deposits of volcanic ash and
alluvium. The Mina El Limon mineral concession is underlain predominantly by
volcanic strata that are correlated with the Miocene-Pliocene Coyol Group that
is present over extensive areas of western Nicaragua.
Coyol Group rocks, exposed on the Mina El Limon mineral concession, range
from intermediate to felsic volcanic and volcaniclastic rocks that are cut by
minor intermediate to felsic hypabyssal intrusive bodies. From lowest to highest
in stratigraphic section, these rocks are as follows:
o Interstratified, massive porphyry flows and coarse volcaniclastic
rocks of intermediate composition
o Intermediate to felsic flows, domes and minor tuffs and epiclastic
rocks.
1-12
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
o Weakly stratified, intermediate to felsic tuffs and epiclastic rocks
o Massive to flow-banded, intermediate porphyritic flows.
The above units appear to be conformable and generally strike east to
northeast and dip gently south with local variability common.
Deformation is dominated by normal faulting with little evidence for
significant internal deformation of intervening fault blocks. The faults
commonly trend northeast with moderate to steep dips to the northwest as well as
southeast. A second group of faults strikes north to west-northwest, dipping
steeply to the east and/or to northeast. Apparent displacements on these faults
are tens to several hundreds of metres.
Gold mineralization in the Limon district is typical of low-sulphidation,
quartz-adularia, epithermal systems. These deposits were formed at relatively
shallow depth, typically from just below the surface to a little over one
kilometre deep, from reduced, neutral-pH hydrothermal fluids with temperatures
of (less than) 150o C to 300o C. The volcano-plutonic arc of western Nicaragua
is a common tectonic setting for these deposits. From bottom to top, the
hydrothermal alteration and the associated gold and/or sulphide mineralization
along the mineralized structures is described, as follows:
o Barren to low-grade ((less than) 1 g/t Au) structurally (fault)
controlled and constrained quartz vein, and/or hydrothermal breccias
and quartz stockworks, often with late-stage coarse-grained calcite
veining. No base metal zone is evident at Limon. Wall rock alteration
is normally minimal.
o Ore grade gold mineralization hosted in quartz veins and multi-phased
quartz breccia veins (+/- adularia, +/- pyrite less than 1%). Wall
rock alteration is absent to restricted at depth, but increasing in
width and extent near the tops of veins, in part dependent on wall
rock permeability.
o Clay alteration of variable extent and intensity, depending on wall
rock permeability and fracturing, occurs in a broader zone at the tops
and above the mineralized veins. The clay zone is zoned outward and
upward from higher temperature mixed layer clay minerals
(smectites/illite or smectites/chlorite) to lower temperature
smectites that is often accompanied by dickite or kaolinite, and
disseminated to microvein pyrite up to several percent.
1-13
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Occasional silicified horizons controlled by permeable lithologies
have been observed in this zone at Limon.
o A discontinuous to continuous, laterally extensive "blanket" of low
temperature quartz (opal and/or chalcedony) conforms to and occurs at
the interface as well as below the paleo-water table (below the vadose
zone). The quartz often includes fine-grained disseminated pyrite.
Clay alteration, principally kaolinite, is more common above the veins
and decreases in content, or is absent, laterally away from the veins.
o A near-surface zone of clay mineral alteration (kaolinite with or
without alunite and devoid of pyrite and other sulphide minerals) is
developed from acid-leaching (steam-heated alteration) in the vadose
zone above the paleo-water table. To date, no evidence of sinter
deposits has been observed at Limon.
Erosion over most of the Limon Property has removed tens to hundreds of
metres of the upper parts of the epithermal system. In the southern portion of
the property the epithermal system at Limon has been preserved from erosion to
the level of, and in places just above, the paleo-water table. Weathering has
imprinted supergene alteration on top of the described model.
The veins at Limon are quartz dominant with lesser and variable quantities
of calcite, and minor adularia. Pyrite is the predominant sulphide, but with an
average content of less than one percent. Trace amounts of chalcopyrite,
sphalerite, arsenopyrite, altaite, gold tellurides and native gold are also
reported to occur. Gold is present in both the banded quartz and silicified
breccias that form the veins. Gold is very fine grained and relatively uniformly
distributed throughout the higher grade parts of the veins; only once has
visible gold ever been reported on the Mina El Limon mineral concession.
The productive vein systems are approximately one to two kilometres long,
with vein widths from less than one metre up to 25 m. Individual ore-shoots
within the veins range from 60 m to 450 m long horizontally, and from 40 m to
290 m vertically. Strike orientations vary from north-northwest through
northeast to east-west, and dips are from 40o to near vertical. All economic
gold mineralization discovered and mined to date lies within 400 m of surface.
The productive and prospective elevations within the vein systems vary across
the district. Post-mineral faults locally disrupt and offset the veins.
1-14
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
EXPLORATION
Prior to 1995, prospecting was the prominent exploration tool in the Limon
area. Consequently, all but one exploration discovery of economic gold
mineralization was made from trenching and drilling of outcropping quartz veins.
Since there is no significant amount of sulphides or intense clay alteration
directly associated with the gold mineralization, there is no geophysical
response to the mineralized zones. RPA understands that a number of conventional
geophysical techniques (IP, EM, and magnetometer) have been applied in the past,
with little success.
Since 1996, exploration work at Limon has been directed at the discovery of
hidden, subparallel veins close to existing gold mineralization. In particular:
o Subparallel veins and extensions of known veins in the Talavera area
o Extensions of previously mined veins at the Limon and Santa Pancha
open pits.
Presently, Glencairn is carrying on an exploration program which consists
primarily of diamond drilling. The exploration targets are low sulphidation
epithermal quartz veins with gold mineralization, and the focus is on
exploration and resource definition around Talavera, at the south end of the
Limon vein, and on finding the source for auriferous quartz boulders at Santa
Rosa-Uval. Additional early exploration drilling has been ongoing to test a
number of the exploration targets within the Limon concession. In total, some
38,300 m of diamond drilling was completed in 2004.
Exploration drilling in 2004 at Santa Pancha outlined significant Mineral
Reserves. This included five areas, as follows:
o Pozo 1 & 2 Area: Drilling to the north of the old stope identified
some 919,200 tonnes at an average grade of 5.06 g/t Au. Glencairn is
of the opinion that this area "may not have been mined because it is
below the old cut-off grade of 10 g/t Au. There are no indications of
this resource in the old records." .
o Pozo 4: A certain amount of Inferred Mineral Resources were upgraded
to 133,100 tonnes of Probable Mineral Reserves at an average grade of
4.05 g/t Au.
1-15
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
o Pozo 5: No new drilling was conducted. The resource blocks were
re-evaluated; tonnage increased and average grade was reduced from
6.10 g/t Au to 4.51 g/t Au, for a net 10% reduction in ounces of gold.
o Pozo 8: Some 142,200 tonnes of Inferred Mineral Resources at an
average grade of 7.45 g/t Au were outlined by diamond drilling.
o Aparejo: Situated some five kilometres east of the Limon mill, old
trench data over a narrow vein have been used to generate small
reserve and resource blocks with higher average grades than at
Talavera. Glencairn plans to use this material and blend it with
production from Talavera to improve mill recovery.
Extensive areas of high-level argillic and silica alteration, along with
the presence of unexplained, high-grade, auriferous quartz boulders in the
southern portion of the Limon mineral concession indicates exploration potential
for hidden vein mineralization.
MINERAL RESERVES AND MINERAL RESOURCES
RPA carried out an audit of the Mineral Reserves and Mineral Resources at
Limon, and performed a number of checks to verify the various procedures and
numerical calculations used in earlier estimates. The RPA review of the
procedures and methodology of the Talavera and Santa Pancha Mineral Resource and
Mineral Reserve estimates comprised the following:
o Geological interpretation of the veins on sections and plans
o Database verification including sampling and assaying protocols.
o Drill core logging of six representative holes in the hangingwall (HW)
and footwall (FW) zones of the Santa Pancha deposit.
o Independent sampling of two holes (from the HW and FW) of the Santa
Pancha deposit and on an underground level of the Talavera deposit.
o Visit to the areas of the Santa Pancha mineral resources and
underground openings of the Talavera Mine
o Resource estimation procedures and methodology, including cutting of
high assays, minimum vein thickness, projection of drill hole and
underground assay data on vertical longitudinal sections with resource
block outlines, and spreadsheet for calculation and summary of
resource blocks.
1-16
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
o Classification of Mineral Reserves and Mineral Resources
o Preliminary mine plan, cost estimate and cut-off grades.
o Check estimate of some zones using the Contour Method.
With few exceptions, RPA found that values and compilations of gold grades
were accurately recorded and calculated as provided on sections and plans. RPA
is of the opinion that the Glencairn resource and reserve estimates are in
accordance with the Mineral Resource/Reserve Classification as recommended by
the CIM Committee on Mineral Resources/Reserves.
INDEPENDENT SAMPLING BY RPA
RPA collected a total of nine (9) samples, four from underground workings
of the Talavera Vein and five samples of split core from diamond drill holes
which have tested the Santa Pancha deposit, and sent them to SGS Laboratories in
Don Mills, Ontario, for independent assays for gold.
The RPA samples confirm the presence of gold and silver values at
essentially the same order of magnitude as the Limon laboratory assays. The
differences are considered to be due to the variability in gold between the two
halves of the core, and are not cause for concern, in RPA's view.
MINING AND MILLING OPERATIONS
The mining methods used at Talavera are longitudinal open stoping for the
primary stopes and sub-level retreat for pillar recovery. Stopes are backfilled
with unconsolidated development waste. Development of most mining areas is from
the top down; sill pillars are left at regular intervals between longhole
blocks.
The Santa Pancha deposit will be mined using cut and fill methods, with
unconsolidated waste fill coming from mine development and nearby open pit
operations. Development began in January 2005, with the first round taken to
establish a portal.
1-17
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Mine planning is at a preliminary stage. Glencairn intends to develop detailed
stope layouts, ventilation plans, and rock stability testing.
Mining operations are fully mechanized. The mine equipment is adequate to
support the current 1,150 tonnes per day operation.
The Limon mill is a nominal 1,000 tonnes per day CIP gold recovery plant.
It has demonstrated a capacity of 1,200 tonnes per day. The production records
for the past four years, as well as the forecast for the next six years are
summarized in Tables 1-4 and 1-5:
TABLE 1-4 PRODUCTION HISTORY
Glencairn Gold - Limon Mine
Units 2001 2002 2003 2004
- -----------------------------------------------------------------------
Mill feed (`000 t) 349 315 284 341
Head Grade (g/t Au) 7.0 6.2 5.7 5.1
Recovery (%) 86.3 86.8 88.1 84.6
Gold Recovered (oz) 70,351 55,388 45,851 46,135
Source: Glencairn, 2005.
1-18
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 1-5 LIMON LIFE OF MINE PLAN
Glencairn Gold - Limon Mine
Units 2005 2006 2007 2008 2009 2010 Total
- --------------------------------------------------------------------------------------
Talavera (`000 t) 265 173 83 41 54 73 688
Grade 5.7 5.3 5.7 5.2 5.4 7.1 5.7
Santa Pancha ('000 t) 170 260 302 290 1,022
Grade 5.3 5.0 4.7 4.9 4.9
Open Pit ('000 t) 67 67
Grade (g/t Au) 3.6 3.6
Mill ('000 t) 332 343 343 343 343 73 1,777
Grade (g/t Au) 5.2 5.3 5.2 4.8 5.0 7.1 6.2
Recovery (%) 85.0 86.4 87.1 87.5 87.4 85.0 86.6
Gold (oz) 47,600 50,500 49,800 46,000 47,900 14,000 256,000
Source: Glencairn, 2005.
Glencairn reports that it conducts Limon operations in compliance with all
applicable environmental requirements and further reports that it has not
received any noncompliance orders from regulators.
EXPLORATION POTENTIAL
The Limon Mine is a gold producer and on-going exploration by Glencairn
continues to extend known zones of gold mineralization along strike of the
Talavera Oeste Principal Vein, near the western extension of the Talavera Main
Vein. Recent drilling and prospecting around the Limon mine area has discovered
new target areas within zones of hydrothermal alteration. The most prominent of
these are:
o West of Talavera: The primary target is the extension of the Talavera
Sur structure. A significant intersection of 18.8 g/t Au over 7.3 m
(true width) in
1-19
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
quartz vein is reported from Drill Hole 3301. This is along the
projected southwest extension of the Talavera Sur structure.
Underground holes previously drilled to test the extension of the
Talavera Sur target resulted in encountering the new Talavera III
(TIII) Vein. Recent drilling included Hole 3300, which intersected two
adjacent zones of 4.3 g/t Au over 2.3 m (true width) and 7.6 g/t Au
over 2.7 m (true width). These intersections are interpreted to
represent the HW and FW segments of the TIII vein, adjacent to the
Victoria Vein.
o Victoria Area: Glencairn reports high-grade intersections of 15.8 g/t
Au over 36.0 m, at a depth of approximately 300 m below the surface,
in Drill Hole 3235, and 7.7 g/t Au over 15.8 m in Drill Hole 3211.
Both drill holes are situated along the flank of hydrothermal
alteration along a ridge, some 5 km west of the Limon mill. Glencairn
is investigating the significance of this intersection in terms of
using it as a guide for over-all exploration in the area.
o Santa Rosa-Uval Target: Sampling of mineralized boulders has also
detected a gold- and clay-mineral anomalous zone in an area 1.5 km to
3 km southwest of the Limon mill. Glencairn considers this to be a
prominent target area because of:
o The presence of shallow/high level clay and silica alteration,
which may indicate the presence of hidden veins.
o The presence of up to 100 auriferous quartz boulders, with
maximum value of 13 g/t Au in grab samples.
o Anomalous values ranging from 0.1 g/t Au to 0.5 g/t Au and up to
8 g/t Ag in selective sampling of scattered quartz microveins in
outcrops
o East of SEO: Drilling in this area near the main Talavera Vein
suggests that the structure remains open to the northeast.
o Pozo Bono Extension: Two holes have tested this area with one hole
intersecting 10.15 g/t Au over 1.0 m. Follow-up drilling is planned.
o Babilonia Sur: Diamond drilling in the past had intersected a wide
zone of low-grade gold, of 0.56 g/t Au over 15.6 m, with intervening
higher grades. Follow-up drilling did not replicate earlier results.
Compilation of historical drill data indicates that the initial
follow-up drilling was poorly placed to test this target; hence, it
remains a valid exploration target for the future. Glencairn also
reports that this wide intersection is likely in a hole drilled down
dip of the vein.
1-20
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
2 INTRODUCTION AND TERMS OF REFERENCE
In a proposal dated December 10 2004, Roscoe Postle Associates Inc. (RPA)
was retained by Mr. Michael B. Gareau, Vice-President, Exploration of Glencairn
Gold Corporation (Glencairn), to prepare an independent Technical Report on the
Limon gold mine in northern Nicaragua. The purpose of this report is to provide
our independent assessment of the Mineral Resources and Mineral Reserves of the
Talavera and Santa Pancha deposits, and to review Glencairn's Life of Mine Plan.
The Technical Report is required to be conformable to NI 43-101 Standards of
Disclosure for Mineral Projects. RPA visited the property from November 2 to 4,
2004, and January 18 to 20, 2005.
Glencairn is a reporting issuer listed at the Toronto Stock Exchange (TSX).
The company, through its 95% interest in Triton Minera S.A. (TMSA), owns and
operates the Mina El Limon -within the Limon mineral concession - and holds 13
exploration-stage mineral concessions located in northwestern Nicaragua. TMSA,
through its 40% interest in Inversiones La India, S.A., holds a 40% interest in
the Espinito-San Pablo mineral concession enclosed by the La India concession.
TMSA's 14 mineral concessions have 25-year terms, expiring in 2027. The
concessions, which cover a total area of approximately 81,380 ha, comprise:
o A producing gold mine - Limon Mine, which includes the Talavera
underground mine, the Santa Pancha project, some small open pits, an
1,100 tpd mill, a tailings impoundment area, and related
infrastructure. The Limon mine property consists of the 12,000 ha Mina
El Limon mineral concession.
o The formerly producing La India Mine and concessions. These consist of
three concessions, located some 40 km east of the Mina El Limon
mineral concession.
o A number of other exploration concessions at early stages of
exploration. These consist of ten mineral concessions and are located
to the north of the Limon Mine as well as between El Limon and La
India districts.
2-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
This report discusses only the Mina El Limon mineral concession and its
contained Mineral Reserves and Mineral Resources. The concession hosts numerous
lowsulphidation quartz-adularia veins with gold and silver mineralization. The
veins vary in thickness from less than one metre to five metres, extend more
than one kilometre along strike, and may extend up to 300 metres at depth.
Information for this Technical Report, supplied by Glencairn, was collected
during two site visits by RPA to the Limon mine. Technical documents and other
sources of information are listed at the end of this report. Dr. William E.
Roscoe, P.Eng., Consulting Geologist and Principal of RPA, visited the Limon
Mine from November 2 to 4, 2004. He toured the Santa Pancha area and reviewed
procedures and methodology related to the mineral resource estimate. The second
RPA site visit is described below.
The Qualified Persons for the Technical Report and their involvement are:
o Hrayr Agnerian, M.Sc (Applied), P.Geo., Consulting Geologist with RPA,
visited the Limon Mine from January 18 to 21, 2005 , including the
underground operations at the Talavera deposit and the surface
exposures of the Santa Pancha deposit. Mr. Agnerian is responsible for
the property status, geological, exploration, and mineral resource and
reserve parts of the Technical Report.
o Jason Cox, P.Eng, Senior Mining Engineer with RPA, also visited the
Limon Mine from January 18 to 21, 2005, including the underground
operations at the Talavera deposit and the surface exposures of the
Santa Pancha deposit. Mr. Cox is responsible for the mining,
processing, environmental, and economic analysis sections of the
Technical Report.
This report is prepared in accordance with the requirements of National
Instrument 43-101 (NI 43-101) of the Ontario Securities Commission (OSC) and the
Canadian Securities Administrators (CSA).
In preparation of this report, the authors reviewed technical documents and
reports on the Limon Mine supplied by Glencairn. Messrs. Agnerian and Cox also
held discussions with Glencairn staff and other professionals knowledgeable on
the project including:
2-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
o Michael Gareau, P.Geo., Vice President Exploration, Glencairn
o James Watt, P.Eng., Mine Manager, TMSA
o Kenneth T.J. Atkin, Chief Geologist, TMSA
o Pablo Venturo, Chief Engineer, TMSA
o Isidro Aguirre Salgado, Exploration Geologist, Santa Pancha Project,
TMSA
o Manuel Osorio Vega, Mine Geologist, TMSA
o Armando Tercero, Exploration Manager, TMSA
o Aquiles Quintana, Computer Technician, TMSA
o Bayardo Padilla Perez, Laboratory Manager, TMSA
For this report, RPA has carried out some independent sampling of an
underground opening along the Talavera Vein, and two diamond drill holes (cut
core) from the Santa Pancha deposit area. RPA sent these samples for independent
assays at a Canadian laboratory. RPA has not searched title to the property, and
has relied on technical data contained in reports of past exploration, mining
and development work and title documents supplied by Glencairn.
The key technical documents reviewed by RPA for this report are:
o The report entitled "Technical Report on the Nicaragua Properties of
Black Hawk Mining Inc." by RPA, dated August 12, 2003.
o The report entitled "Technical Report of the Santa Pancha Resource
Estimate for the Limon Mineral Concession of Nicaragua" by Michael B.
Gareau of Glencairn, dated November 24, 2004.
o Glencairn's estimate of the Limon Mineral Reserves and Mineral
Resources reported as of December 31, 2004, and the Life of Mine Plan.
2-3
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
3 DISCLAIMER
This report has been prepared by RPA for Glencairn Gold Corporation
(Glencairn). The information, conclusions, opinions, and estimates contained
herein are based on:
o Information available to RPA at the time of preparation of this
report,
o Assumptions, conditions, and qualifications as set forth in this
report, and,
o Data, reports, and other information supplied by Glencairn and its
subsidiary, Triton Minera S.A. (TMSA).
For technical information on the Talavera and Santa Pancha deposits, RPA
has relied on some reports by Glencairn and TMSA, as well as by other
consultants. RPA has not verified the technical information in these reports,
but has formed its opinions on the geological continuity of the mineralized
zones at Talavera and Santa Pancha, primarily on the basis of this technical
information. RPA has visited the Talavera and Santa Pancha deposits and has
taken independent samples.
While it is believed that the information contained herein is reliable
under the conditions and subject to the limitations set forth herein, this
report is based in part on information not within the control of RPA and RPA
does not guarantee the validity or accuracy of conclusions or recommendations
based upon that information that is outside the area of technical expertise of
RPA. While RPA has taken all reasonable care in producing this report, it may
still contain inaccuracies, omissions, or typographical errors.
3-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
4 PROPERTY DESCRIPTION AND LOCATION
The Limon Mine is located approximately 100 km northwest of Managua, the
capital of Nicaragua. The mine is adjacent to several small villages. Glencairn
holds interests in 14 mineral concessions in the area, covering a total of
approximately 81,380 ha (Table 41 and Figures 4-1 and 4-2).
LAND TENURE
The original purchase of the concessions was made by Minera de Occidente
S.A., subsequently renamed Triton Minera S. A. (TMSA). TMSA is owned by Triton
Mining Corporation (47.5%) and Triton Mining (USA) LLC (47.5%), both
subsidiaries of Glencairn (acquired as a result of a merger with Black Hawk
Mining Inc., in October 2003), and by Inversiones Mineras S. A. (5%), a holding
company representing the unionized mine workers of Nicaragua. Production from
the Limon Mine is subject to the following royalties:
o A 3% net smelter royalty (NSR) to IAMGOLD Corporation (IAMGOLD), on
the mineral production from the Limon Mine and any other production
revenue in the future, obtained from the Limon Mine Concession and the
other mineral concessions, including La India, that were formerly part
of the original El Limon-La India exploration concession. The royalty
was acquired by Repadre Capital Corporation (Repadre) in 1994, and
transferred to IAMGOLD upon their 2003 merger with Repadre. The
IAMGOLD royalty does not apply to the Espinito-San Pablo and the
Soledad de la Cruz concessions.
o A royalty equal to 5% of the net profit of Triton Mining (USA) LLC
(Triton USA) is due to Internacional de Comercial S.A. (IDC). Triton
USA is a subsidiary of Glencairn which holds a 47.5% interest in the
Limon Mine.
o A 3% NSR on gold production, payable to the Government of Nicaragua.
MINERAL CONCESSIONS
From 1994 until the beginning of 2002, the Limon Mine property and the
other properties were held as exploitation concessions under the previous mining
code. The Nicaraguan government enacted a new mining code and regulations
(Mining Code) in
4-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
2001. All holdings under the new Mining Code are classified as mineral
concessions. TMSA applied for and was granted, under the Mining Code, the
conversion of the old exploitation concessions to new mineral concessions in
January 2002. The new concessions, except for the Mina El Limon concession, were
configured somewhat differently than the old concessions and some of the
exploration area was reduced. The reconfigured concessions are shown in Table
4-1 and Figure 4-2.
Under the new 2001 Mining Code and regulations, the new mineral concessions
have a term of 25 years. Each concession is subject to an agreement (Acuerdo
Ministerial) issued by the government of Nicaragua. Administration of the
concessions is more flexible with the new Mining Code that allows for
amalgamation, division, and reduction of the concessions. Mineral concessions
are subject annually to surface taxes payable as two advanced instalments in
January and July of each year, starting from the granting dates in 2002, and
adjusted for any reductions in concession area. The tax rates are as follows:
o Year 1: $0.25 per hectare
o Year 2: $0.75 per hectare
o Years 3 and 4: $1.50 per hectare
o Years 5 and 6: $3.00 per hectare
o Years 7 and 8: $4.00 per hectare
o Years 9 and 10: $8.00 per hectare
o Years 11 to 25: $12.00 per hectare
Under the Mining Code, all mineral concessions include the rights to
explore, develop, mine, extract, export, and sell the mineral commodities found
and produced from the concession. TMSA is required to submit annual reports of
its activities and production statistics to the government, as well as quarterly
reports on its exploration activities. RPA understands that TMSA is in
compliance with all tax payments and report filings (Gareau, 2004).
4-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 4-1 MINERAL CONCESSIONS LIST
Glencairn Gold - Limon Mine
Certified and
Applicable Ministerial Effective Area TMSA
Concession Name Agreement Tax Date (ha) Equity(%) Tax Year
- --------------------------------------------------------------------------------------
Mina El Limon 185-RN-MC/2002 & 16-Apr-02 12,000 100 3
196-RN-MC/202
Espinito - San Pablo 186-RN-MC/2002 & 16-Apr-02 350 40 3
196-RN-MC/202
Soledad de la Cruz 288-RN-MC/2003 16-Jan-02 780 100 4
San Juan de Limay 290-RN-MC/2003 16-Jan-02 5,100 100 4
San Juan de Limay
La Grecia 291-RN-MC/2003 16-Jan-02 1,700 100 4
San Juan de Limay
Paso Real 292-RN-MC/2003 16-Jan-02 900 100 4
La India 293-RN-MC/2003 16-Jan-02 9,330 100 4
Sauce 1 294-RN-MC/2003 16-Jan-02 5,800 100 4
Sauce 2 295-RN-MC/2003 16-Jan-02 600 100 4
Sauce 3 296-RN-MC/2003 16-Jan-02 1,500 100 4
Sauce 4 297-RN-MC/2003 16-Jan-02 700 100 4
Villanueva 1 298-RN-MC/2003 16-Jan-02 5,220 100 4
Villanueva 2 299-RN-MC/2003 16-Jan-02 15,500 100 4
Bonete Limon 300-RN-MC/2003 16-Jan-02 21,900 100 4
- --------------------------------------------------------------------------------------
TOTAL 81,380
4-3
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
MINA EL LIMON MINERAL CONCESSION
The Talavera and Santa Pancha gold deposits are located within the 12,000
ha Mina El Limon mineral concession that has a term of 25 years, expiring in
2027 (Table 4-1 and Figure 4-3). The property straddles the boundary of the
municipalities of Larreynaga and Telica of the Department of Leon and the
municipalities of Chinandega and Villa Nueva of the Department of Chinandega
(Gareau, 2004).
TMSA owns, or controls through lease arrangements, the surface rights
needed for current mining, milling, tailings and related facilities, and
infrastructure at the Limon Mine (Figure 4-3). When necessary, access agreements
are negotiated and signed with the individual surface owners for other areas
within the concession not owned by the Company. RPA understands that all of the
permits required for mining and milling operations, and for exploration
activities are in place (Gareau, 2004).
TMSA is not responsible for any type of environmental damage caused prior
to the time at which it took possession of the Limon Mine in 1994, but is
required to implement the necessary changes to reduce any existing environmental
problems. According to the existing Central Bank regulations, TMSA may freely
export and sell the gold produced and the proceeds may be repatriated without
restriction (Gareau, 2004).
4-6
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
Access to the Limon Mine area is by paved road (approximately 125 km from
Managua) and approximately 15 km by all-season gravel road to the Village of El
Limon. The total road distance from Managua is 140 km. The Talavera underground
mine is situated approximately four kilometres west of the Village of El Limon,
and the Santa Pancha deposit is situated approximately five kilometres east of
the village. Both areas are accessible by gravel roads from the Limon Mine site.
The climate in northwestern Nicaragua is tropical with a hot, wet season
from May through November and hotter, dry season from December through April.
The mean annual temperature is 27(degree) C with an average annual precipitation
of two metres. The Limon Mine operates year round and is not normally affected
by the typical seasonal climatic variations.
Nicaragua in general has a moderately developed infrastructure of
communications, roads, airports, and seaports and there is a fairly high
literacy rate among the population with an ample supply of skilled and unskilled
labour (Gareau, 2004).
The city of Leon, the second largest city in Nicaragua, is situated some 45
km southwest of the Limon Mine, and the city of Esteli is situated approximately
100 km (by road) northeast from the mine. Both of them are agro-industrial
cities. Numerous towns and villages are located throughout the area and are used
as a local base for exploration activities on the various concessions.
Infrastructure support and availability of trained miners proximal to the
various concessions is limited, except in the areas immediately adjacent to the
Limon mining operations.
The mineral concessions are situated along the eastern margin of the
Nicaragua Depression. The westernmost holdings, including the Limon mining
district, lie within
5-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
the relatively flat lowlands of the depression itself and the eastern holdings,
including the La India gold district, are located in the moderate to steep
relief of the mountainous Nicaraguan Highlands (Gareau, 2004).
Electrical power for the Limon operations is obtained from the national
grid system with backup generators at the mine site. Water, both industrial and
potable, is drawn from local sources.
The three villages of Limon, Santa Pancha and Minvah, all located within
the mine concession, have a population of approximately 10,000 people including
many of the mine employees. Transportation to the Limon Mine is by private
vehicles and public and company buses.
The Mina El Limon mineral concession is in an area of low to moderate
relief that offers flat areas for mine infrastructure. Elevations of the mine
property range from 40 m to 300 m above mean sea level. Outcrops are not common
in the area but do occur along road cuts. Overburden thickness ranges from one
metre to three metres with an average thickness of approximately 1.5 m.
Overburden consists of unconsolidated conglomerate with pebbles and boulders of
volcanic rocks in a matrix of sand and minor clay. A layer of recent volcanic
ash may also comprise part of the overburden.
The area is covered with sparse vegetation consisting predominantly of
grasslands and scrub brush with widely spaced trees. The land around the Limon
Mine is used for agriculture. The villages in the area use the land to raise
cattle, but it is not used to grow crops. Wildlife in the area includes various
species of insects, lizards, snakes, armadillos, birds, and small mammals.
5-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
6 HISTORY
LIMON MINE AREA
Historic mining and prospecting activities in the Limon district of
northwestern Nicaragua, which hosts the Limon Mine and other gold deposits, date
back to the late 1850s. Modern mining and exploration started in 1918 and, since
then, approximately 2.8 million ounces of gold and an unrecorded quantity of
silver (as a by-product) have been produced from the mine concession area. The
present mining operations have been essentially continuous since start-up in
1941.
From 1941 to 1979, just over 2.0 million ounces were recovered from 4.1
million tonnes of ore while the Limon Mine was under the control of Noranda
Mines. Production rates in this period started at 200 tons per day and increased
to 345 tons per day. The following is a brief account of mining and exploration
in the area:
o In 1979 the Sandinistas nationalized the Limon Mine. Production under
national control was reported as 280,000 oz Au from an estimated 1.9
million tonnes of ore. The Limon Mine remained under national control
until privatization in March 1994, when Triton acquired control.
Triton increased production to 1,000 tonnes per day in 1995.
o In May 1998 Triton was acquired by Black Hawk Mining Inc. (Black
Hawk), in a share-for-share exchange resulting in Black Hawk's 95%
interest in the Limon Mine. Production from March 1994 to the end of
2002 totals 455,000 ounces of gold from 2.6 million tonnes of ore.
o In October 2003, Black Hawk merged with Glencairn, in a
share-for-share exchange. Production for 2003 and 2004 totaled 92,000
ounces of gold from 625,000 tonnes of ore.
Mine production has come from three areas on the Mina El Limon mineral
concession:
o The Limon vein located adjacent to the mill in the central part of the
concession
o The Santa Pancha-Panteon vein system located 5 km to the east of the
Limon mill
o The Talavera mine located 3.5 km west of the Limon mill
6-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Currently, mining is active in the Talavera area where several veins are
being mined underground via decline with truck haulage to the mill. The mining
and processing operations are described in more detail in later sections of this
report.
The Limon gold district has a long history of exploration by the various
operators, including the completion of approximately 370,000 m of diamond
drilling in more than 3,300 drill holes to date. The most recent drilling is
described in the Exploration section.
OTHER MINERAL CONCESSIONS
The only records of commercial production within the 13 other concessions
in the Limon area are from mining operations at the La India Mine, Mina de Agua
and Rincon de Garcia. The latter two ran as an extension of Noranda's Limon
operations. The ore from these mines was trucked 22 km south for processing in
the Limon mill. This area was initially identified in the 1860s, and
rediscovered in 1967. At La India, some 575,000 ounces of gold were produced
from 1938 to 1955 (Gareau, 2004).
Gold production by guirisero (artisanal miners) has been carried out for
decades in various areas throughout northwestern Nicaragua.
Noranda conducted gold exploration over various parts of the present
concessions during the 1960s and 1970s that included mapping, prospecting,
geochemistry, and locally, trenching and drilling. In the 1980s, the Nicaraguan
Government undertook site-specific exploration activity, such as the work at La
India, Mina de Agua and Rincon de Garcia, through Corporacion Nicaraguense de
Minas (INMINE), with the assistance of Soviet technical advisors.
Triton was active from 1994 through to 1997, and, more recently, Newmont
Mining Corporation (Newmont) from 2000 to 2002, under a letter of intent with
Black Hawk. Newmont's program was focussed primarily on bulk mineable gold
targets that included a combination of reconnaissance work and prospect specific
geophysics and drilling
6-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
within the Bonete Concession, adjacent to and northeast of the Limon Concession.
The drilling did not find a source for the widespread gold-bearing quartz
boulders identified at Bonete.
Table 6-1 provides a summary of the most noteworthy historical mining and
exploration activities associated with the current concessions outside of the
Limon and La India districts.
6-3
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 6-1 HISTORICAL PRODUCTION AND EXPLORATION ON OTHER CONCESSIONS
Glencairn Gold - Limon Mine
Year Company Locale Concession Comments
- -----------------------------------------------------------------------------------------------
Commercial mining:
1976-1988 Noranda Rincon de Garcia Villanueva 2 300,000 t @ 11.0 g/t Au
1972-1976 Noranda Mina de Agua Villanueva 2 105,000 t @ 14.7 g/t Au
575,000 oz Au production,
1938-1355 Noranda La India La India from 1.7 million tons @0.39
oz/ton Au
1870s Mina de Agua Villanueva 2 Limited production
Guiriseros Activity:
1970-2003 Guiriseros Cerro Quemado Villanueva 1 Surface and underground
1920s Guiriseros La Grecia San Juan de Underground workings
Limay-La Grecia
Recent Guiriseros Various San Juan de Limay Various surface workings
Exploration Activity:
2000-2002 Newmont Bonete Bonete-Limon Sampling, pits, geophysics,
drilling
2000-2002 Newmont Regional All Stream and rock sampling,
prospecting
1996-1997 Triton Rincon de Garcia Villanueva 2 Geochemistry, trenching
Mina de Agua
1996-1997 TVX La India La India Trenching, drilling &
underground sampling
1994-1995 Triton Cerro Colorado San Juan de Limay Trench sampling
1994-1997 Triton Regional Various Stream and rock sampling,
prospecting
1994-1995 Triton Cerro Quemado Villanueva 1 Mapping, geochemistry,
trenching
Mapping, geochemistry,
1983-1991 INMINE La India La India geophysics, trenching &
drilling
1982-1986 INMINE Mina de Agua Villanueva 2 Mapping, geochemistry,
geophysics, drilling
1970s Noranda Cerro Quemado Villanueva 1 Drilling
1960-70s Noranda Regional Various Geochemistry, prospecting
Source: Glencairn, 2005.
6-4
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
7 GEOLOGICAL SETTING
REGIONAL GEOLOGY
The geomorphology of Nicaragua consists of three major terranes. A
northwest striking graben, 30 km to 40 km wide, parallels the Pacific coastline
along the western margin of the country and is known as the Nicaragua Depression
(Figure 7-1). This graben hosts up to 16 active or recently active volcanoes and
is the site of thick Quaternary to Recent volcanic deposits. To the southwest,
between the graben and the Pacific coast, a 10 km to 20 km wide belt of
Tertiary, Mesozoic and Palaeozoic rocks are preserved. To the northeast of the
graben, Tertiary, Mesozoic and Palaeozoic "basement" is overlain by a major unit
of Tertiary volcanic rocks, the Coyol (Miocene-Pliocene) and Matagalpa
(Oligocene-Miocene) Groups. The Coyol Group hosts the known vein gold deposits
in Nicaragua, including those at El Limon and La India (Gareau, 2004).
LOCAL GEOLOGY
The Limon Mine is located along the eastern edge of the Nicaragua
Depression within an area of low hills that contrast with the level plain of the
graben floor. Approximately 50% of the area in the general vicinity of the mine
is covered by a thin layer of Quaternary to Recent deposits of volcanic ash and
alluvium. The Mina El Limon mineral concession is underlain predominantly by
volcanic strata that are correlated with the Miocene-Pliocene Coyol Group that
is present over extensive areas of western Nicaragua (Gareau, 2004).
Coyol Group rocks exposed on the Mina El Limon mineral concession range
from intermediate to felsic volcanic and volcaniclastic rocks that are cut by
minor intermediate to felsic hypabyssal intrusive bodies. Several generations of
mapping in Limon district have roughly divided the Coyol Group rocks into local
units that, from lowest to highest in stratigraphic succession, are as follows:
o Interstratified, massive porphyry flows and coarse volcaniclastic
rocks of intermediate composition
7-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
o Intermediate to felsic flows, domes and minor tuffs and epiclastic
rocks
o Weakly stratified, intermediate to felsic tuffs and epiclastic rocks.
o Massive to flow-banded, intermediate porphyritic flows.
The above units appear to be conformable and generally strike east to
northeast and dip gently south with local variability common. Some secondary
structures also have an easterly trend.
A relatively flat-lying and younger assemblage of volcanic rocks
unconformably overlies the volcanic and volcaniclastic rocks described above.
This younger unit occurs in the southern half of the concession and consists
mainly of breccias and conglomerates with clasts of the underlying units. It is
uncertain if this younger sequence is part of the Coyol Group (Figure 7-2).
Deformation is dominated by normal faulting with little evidence for
significant internal deformation of intervening fault blocks. The faults
commonly trend northeast with moderate to steep dips to the northwest as well as
southeast. A second group of faults strikes north to west-northwest, dipping
steeply to the east and/or to northeast. Apparent displacements on these faults
are tens to several hundreds of metres.
TECTONIC SETTING
The Limon mine is located within an area of volcanism, which is part of the
northwest trending Nicaragua Depression. This Depression represents a graben
block covering an area of approximately 10,000 km2 underlain mostly by Tertiary
to Recent volcanic rocks. Interpretation of field relationships, such as
lithologic contacts and structural features, indicates that gold bearing quartz
veins are genetically related to the west, north and northeast trending faults
with similar orientation, i.e. the latter have acted as conduits for
mineralizing solutions along complementary structures (Atkin 2005a, personal
communication). www.rpacan.com
7-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
8 DEPOSIT TYPES
Gold mineralization in the Limon and La India districts is typical of
low-sulphidation, quartz-adularia, epithermal systems. These deposits were
formed at relatively shallow depth, typically from just below the surface to a
little over one kilometre deep, from reduced, neutral-pH hydrothermal fluids
with temperatures from less than 150o C to 300o C. The volcano-plutonic arc of
western Nicaragua is a common tectonic setting for these deposits. The general
characteristics and model for this deposit type is reasonably well described in
the literature, e.g. J.W. Hedenquist et al (2000) and the geological model of
mineralization is represented in Figure 8-1. From bottom to top, the
hydrothermal alteration and the associated gold and/or sulphide mineralization
along the mineralized structures is described by Hedenquist (2004 and 2002) and
Gareau (2005), as follows:
o Barren to low-grade ((less than) 1 g/t Au) structurally (fault)
controlled and constrained quartz vein, and/or hydrothermal breccias
and quartz stockworks, often with late-stage coarse grained calcite
veining. No base metal zone is evident at Limon. Wall rock alteration
is normally minimal.
o Ore grade gold mineralization hosted in quartz veins and multi-phased
quartz breccia veins (+/- adularia, +/- pyrite less than 1%). Wall
rock alteration is absent to restricted at depth, but increasing in
width and extent near the tops of veins, in part dependent on wall
rock permeability.
o Clay alteration of variable extent and intensity, depending on wall
rock permeability and fracturing, occurs in a broader zone at the tops
and above the mineralized veins. The clay zone is zoned outward and
upward from higher temperature mixed layer clay minerals
(smectites/illite or smectites/chlorite) to lower temperature
smectites that is often accompanied by dickite or kaolinite, and
disseminated to microvein pyrite up to several percent. Occasional
silicified horizons controlled by permeable lithologies have been
observed in this zone at Limon.
o A discontinuous to continuous, laterally extensive "blanket" of low
temperature quartz (opal and/or chalcedony) conforms to and occurs at
the interface as well as below the paleo-water table (below the vadose
zone). The quartz often includes fine-grained disseminated pyrite.
Clay alteration, principally kaolinite, is more common above the veins
and decreases in content, or is absent, laterally away from the veins.
o A near-surface zone of clay mineral alteration (kaolinite with or
without alunite and devoid of pyrite and other sulphide minerals) is
developed from acid-leaching
8-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
(steam-heated alteration) in the vadose zone above the paleo-water
table. To date, no evidence of sinter deposits has been observed at
Limon.
Erosion over most of the Limon Property has removed tens to hundreds of
metres of the upper parts of the epithermal system. In the southern portion of
the property the epithermal system at Limon has been preserved from erosion to
the level of, and in places just above, the paleo-water table. Weathering has
imprinted supergene alteration on top of the described model (Gareau, 2005).
To date this is the only style of gold mineralization that has been found
and reported in the Tertiary rocks of northwestern Nicaragua. Silver is
generally a commercially minor by-product of the gold mineralization. All gold
production has been from vein and vein-breccia deposits hosted in linear
structural features; only minor occurrences of disseminated or stockwork type
epithermal precious metal mineralization have been reported in northwestern
Nicaragua. Mineral showings or deposits for other metals are not known in the
area (Gareau, 2004).
8-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
9 MINERALIZATION
Gold mineralization in the Limon district is structurally controlled and
forms veins that occupy pre-existing fault structures and extensional openings
formed during mineralization. The veins are quartz dominant with lesser and
variable quantities of calcite, and minor adularia. Pyrite is the predominant
sulphide, but with a content of less than one percent. Trace amounts of
chalcopyrite, sphalerite, arsenopyrite, altaite, gold tellurides and native gold
are also reported to occur. Gold is present in both the banded quartz and
silicified breccias that form the veins. Gold is very fine-grained within the
quartz vein, and is relatively uniformly distributed throughout the higher grade
parts of the veins; only once has visible gold been reported on the Limon mine
concession.
The productive vein systems are approximately one to two kilometres long,
with vein widths from less than one metre up to 25 m. Individual ore-shoots
within the veins range from 60 m to 450 m long horizontally, and from 40 m to
290 m vertically. Strike orientations vary from north-northwest through
northeast to east-west, and dips are from 40 degrees to near vertical. All
economic gold mineralization discovered and mined to date lies within 400 m of
surface. The productive and prospective elevations within the vein systems vary
across the district. Post-mineral faults locally disrupt and offset the vein.
The gold-bearing veins and attendant alteration are hosted within volcanic
flows, volcaniclastic strata and possibly hypabyssal intrusions of the lowest
volcanic unit. The other three gently dipping volcanic units are variously
altered by the same hydrothermal fluids that deposited the gold veins, locally
quartz stringers with low gold values are found in the massive porphyritic
andesite flows that immediately underlie the unconformity contact with the
youngest flat-lying unit. The youngest volcanic unit appears to post-date gold
mineralization because no veins or vein-related alteration has, as yet, been
identified within this unit.
9-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
The most extensive areas of argillic and quartz alteration form a corridor
that crosses the Mina El Limon mineral concession along a roughly west to east
trend, this alteration corridor is mostly located to the south of the Talavera,
Limon and Santa Pancha-Panteon vein systems and is partially capped by the
young, flat-lying volcaniclastic unit. Much of this alteration is part of the
upper, near-paleosurface component of the low-sulphidation epithermal system
that formed the productive gold veins. Preliminary mapping indicates the
presence of both distal and proximal alteration facies related to the epithermal
system. The identification of the proximal alteration facies, combined with the
presence of auriferous quartz vein boulders and silicified, steeply inclined
structures, provide exploration guides for the discovery of new gold-bearing
vein systems, and increase the exploration potential along this corridor.
A schematic section showing the spatial distribution of the gold
mineralization in the Limon area is described by Hedenquist (2004 and 2002) and
is shown in Figure 9-1, and the local geology of the Santa Pancha-Panteon vein
system is shown in Figure 9-2.
There have been no detailed mineralogical studies carried out on the Limon
ore. Glencairn, however, reports that the gold is very fine, with grain size in
the range from 5 u to 50 u. Glencairn also reports that only one occurrence (in
December 2004) of visible gold has been recorded during decades of operation at
the site.
9-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
10 EXPLORATION
Prior to 1995, prospecting was the prominent exploration tool in the Limon
area. Consequently, all but one exploration discovery of economic gold
mineralization was made from trenching and drilling of outcropping quartz veins.
Since there is no significant amount of sulphides or intense clay alteration
directly associated with the gold mineralization, there is no geophysical
response to the mineralized zones. RPA understands that a number of conventional
geophysical techniques (IP, EM, and magnetometer) have been applied in the past,
with little success.
RECENT EXPLORATION
Since 1996, exploration work at Limon has been directed at the discovery of
hidden, subparallel veins close to existing gold mineralization. In particular:
o Subparallel veins and extensions of known veins in the Talavera area
o Extensions of previously mined veins at the Limon open pit.
Presently, Glencairn is carrying on an exploration program which consists
primarily of diamond drilling. The exploration targets are low sulphidation
epithermal quartz veins with gold mineralization, and the focus is on
exploration and resource definition around Talavera, at the south end of the
Limon vein, and on finding the source for auriferous quartz boulders at Santa
Rosa-Uval. Additional early exploration drilling has been ongoing to test a
number of the exploration targets within the Limon concession. In total, some
38,300 m of diamond drilling was completed in 2004.
The highlight of exploration activities in 2004 was the addition of some
1,064,000 tonnes of Mineral Reserves at an average grade of 4.94 g/t Au, at
Santa Pancha (Table 11 and Glencairn, 2005). This included five areas, as
follows:
o Pozo 1 & 2 Area: Drilling to the north of the old stope identified
some 919,200 tonnes at an average grade of 5.06 g/t Au. Glencairn is
of the opinion that this area "may not have been mined because it is
below the old cut-off grade of 10 g/t Au. There are no indications of
this resource in the old records." (Atkin, 2005b).
10-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
o Pozo 4: A certain amount of Inferred Mineral Resources were upgraded
into 133,100 tonnes of Probable Mineral Reserves at an average grade
of 4.05 g/t Au (Glencairn, 2005)
o Pozo 5: No new drilling was conducted. The resources blocks were
re-evaluated; tonnage increased and average grade was reduced from
6.10 g/t Au to 4.51 g/t Au, for a net 10% reduction in ounces
(Glencairn, 2005).
o Pozo 8: Some 142,200 tonnes of Inferred Mineral Resources at an
average grade of 7.45 g/t Au were outlined by diamond drilling
(Glencairn, 2005).
o Aparejo: Old trench data over a narrow vein have been used to generate
small reserve and resource blocks, with higher average grades than at
Talavera. Glencairn plans to use this material and blend it with
production from Talavera to improve mill recovery (Atkin, 2005).
Exploration programs conducted by Glencairn and Black Hawk during the past
several years consisted principally of diamond drilling and were designed to
explore targets and reserve extensions located mainly in the vicinity of active
mining operations.
Glencairn has an exploration team of Nicaraguan geologists, technicians,
and support personnel located at the Limon mine. This team is directly
responsible for the exploration programs within the mineral concessions
including the 2004 drilling and trenching programs in the Mina El Limon mineral
concession including Santa Pancha. Diamond drilling services for the current
exploration program is provided by both TMSA's in-house drill department and
several external drilling contactors. Outside services, particularly for
geophysical surveys and certain geological specialties, are contracted to
independent consultants as required.
EXPLORATION POTENTIAL
Extensive areas of high-level argillic and silica alteration, along with
the presence of unexplained, high-grade, auriferous quartz boulders in the
southern portion of the Limon mineral concession indicates exploration potential
for hidden vein mineralization. Drill hole intercepts of quartz vein gold
mineralization associated with this alteration, such as at Babilonia Sur, along
the Pozo Bono Fault and the new Victoria Zone (Glencairn news
10-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
releases dated August 13, September 24, 2004 and January 17, 2005) are
identified as specific areas for follow-up exploration drilling (Gareau, 2004).
A number of conceptual exploration ideas, focussed on the southern portion
of the Mina El Limon mine concession, have been suggested by Glencairn for field
investigation. These are discussed above under the separate section of Deposit
Types.
The Limon Mine is a gold producer and on-going exploration by Glencairn
continues to extend known zones of gold mineralization along strike of the
existing veins, such as the western extension of the Talavera Main Vein. Recent
drilling and prospecting has discovered new target areas within zones of
hydrothermal alteration (Atkin, 2005a). The most prominent of these are:
WEST OF TALAVERA
The primary target is the extension of the Talavera Sur structure. A
significant intersection of 18.8 g/t Au over 7.3 m (true width) in quartz vein
is reported from Drill Hole 3301 (Figure 10-2). This is along the projected
southwest extension of the Talavera Sur structure. Underground holes previously
drilled to test the extension of the Talavera Sur target resulted in
encountering the new Talavera III (TIII) Vein. Recent drilling included Hole
3300, which intersected two adjacent zones of 4.3 g/t Au over 2.3 m (true width)
and 7.6 g/t Au over 2.7 m (true width). These intersections are interpreted to
represent the HW and FW segments of the TIII vein, adjacent to the Victoria
Vein.
RPA concurs with this interpretation and recommends drill testing of this
target. This additional drilling could add to the Mineral Resources of the Limon
Mine. This area is adjacent to the Victoria target and Glencairn this
intersection to represent the continuation of the Talavera Sur structure.
VICTORIA AREA
Glencairn reports high-grade intersections of 15.8 g/t Au over 36.0 m, at a
depth of approximately 300 m below the surface, in Drill Hole 3235, and 7.7 g/t
Au over 15.8 m
10-3
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
in Drill Hole 3211. Both drill holes are situated along the flank of
hydrothermal alteration along a ridge, some 5 km west of the Limon mill.
Glencairn is investigating the significance of this intersection in terms of
using it as a guide for over-all exploration in the area.
SANTA ROSA-UVAL TARGET
Sampling of mineralized boulders has also detected a gold- and clay-mineral
anomalous zone in an area 1.5 km to 3 km southwest of the Limon mill. Glencairn
considers this to be a prominent target area because of:
o The presence of shallow/high level clay and silica alteration, which
may indicate the presence of hidden veins
o The presence of up to 100 auriferous quartz boulders, with maximum
value of 13 g/t Au in grab samples
o Anomalous values ranging from 0.1 g/t Au to 0.5 g/t Au and up to 8 g/t
Ag in selective sampling of scattered quartz microveins in outcrops.
Glencairn is confident that this represents a geological environment
similar to the southwestern extension of the Talavera Main Vein. RPA concurs
with this interpretation and recommends continued drill testing of this target.
This additional drilling could add to the Mineral Resources of the Limon Mine.
POZO BONO EXTENSION
Two holes have tested this area with one hole intersecting 10.15 g/t Au
over 1.0 m. Follow-up drilling is planned.
NORTHEAST AND EAST OF SEO
Drilling in this area indicates that the main Talavera Sur structure may
remain open to the northeast, some 3.5 km west of the Limon mill. Drilling is
also planned for the SEN vein that subcrops.
BABILONIA SUR
Diamond drilling in the past had intersected a wide zone of low grade gold,
of 0.56 g/t Au over 15.6 m, with intervening higher grades. This area is
situated some 3 km
10-4
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
northeast of the Limon mill. Follow-up drilling did not replicate earlier
results. Compilation of historical drill data indicates that the initial
follow-up drilling was poorly placed to test this target; hence, it remains a
valid exploration target for the future. Glencairn also reports that this wide
intersection is likely in a hole drilled down dip of the vein.
10-5
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
11 DRILLING
Glencairn carries out the current diamond drilling program through a
combination of in-house and external contractor crews. Systematic testing of the
gold bearing zones was started by Black Hawk and earlier operators, by diamond
drill holes spaced 25 m to 50 m apart. This was followed by driving declines and
drifting along the various mineralized zones. To date, 369,668 m (3,313 holes)
of surface and underground drilling has been completed on the property.
Statistics of the 2004 exploration work are presented in Table 11-1.
TABLE 11-1 STATISTICS OF 2004 EXPLORATION WORK
Glencairn Gold - Limon Mine
Trenching Channel
Area/Vein (m) No. Holes (m) Sampling Samples
- --------------------------------------------------------------------------------
Talavera 76 82 12,222 22,550 33
Pozo Bono Pit 13 832 204
Santa Pancha 576 97 13,028 3,566 443
Outside Talavera 12,202
Other 700 50 11,208
- --------------------------------------------------------------------------------
Totals 1,352 229 38,284 37,528 476
Source: Glencairn, 2005
Note: Channel samples taken from surface trenches
The procedures used during the diamond drilling programs are as follows:
o Holes drilled to intercept gold mineralization at shallow depth are
set-up to produce HQ-sized core to insure good core recovery in the
weathered rock. Deeper holes, where weathering is not a concern, are
completed to produce NQ-sized core.
o The collar locations of all drill holes are surveyed and marked in the
field. A Pajari survey instrument is used to provide control
information on the directional deviation (both azimuth and
inclination) of each hole. The number of measurements taken per hole
is dependent upon the hole length and included at a minimum a
measurement at the bottom and top of each hole, and for each 100-
11-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
metre interval down the hole. RPA understands that no significant
deviation problems were encountered at Santa Pancha, which is in
keeping with survey results in the Limon area since in-hole surveying
was initiated in 1994 (Gareau, 2004). Nevertheless, RPA recommends
that additional survey measurements be taken at the start of
mineralized intersections to allow for more accurate calculation of
horizontal width of the mineralized zones.
o Lithologic logging is done on drill core and geotechnical observations
are made by company geologists. This includes marking lithologic
contacts, descriptive geology, core angles, core diameter, down hole
inclination, percent core recovery record, true thickness calculations
and graphic log depicting all down-hole data including assay values.
All information is recorded on hand written logs. Photographs are
taken of all exploration drill core and key information is summarized
in a digital database.
11-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
12 SAMPLING METHOD AND APPROACH
Materials sampled for resource and reserve estimation for Talavera and Pozo
1 & 2 (Santa Pancha area) include drill core, underground workings and surface
trenches. Core size varies from HQ and/or NQ for most surface holes to BQTK for
most underground holes. Drill core recovery at Limon is generally very good. All
samples are collected by, or under the supervision of, a geologist.
The methodology of sampling of the drill core, underground openings or
surface material is described below:
o For diamond drill holes, mineralized drill core intervals to be
sampled are identified and marked by the geologist. Sample lengths
vary from 0.5 m to 1.5 m. Visual indicators of the intervals to be
sampled includes quartz veins, silicified breccias, silicified rock
and other altered zones established for the Limon district by TMSA
geologists. Sample intervals are selected based on changes in
mineralization style, and are normally extended for two metres into
unmineralized rock. Marked sample intervals are split in half using a
saw or a mechanical splitter. A technician collects a continuous
sample of the split or sawn core
o Underground development workings that expose mineralized veins are
routinely sampled using continuous chip samples taken at waist height
perpendicular to vein contacts (for resource estimation assay data
from these samples are projected on the horizontalplane). Samples are
taken for each round of advance, giving a sample spacing of
approximately three metres along the vein strike. The complete width
of the development drift is sampled. A sample is normally taken for
each metre of vein width, and sample lengths may vary depending on the
width of the vein and changes of geology. Sampling is by a trained
technician under the supervision of the mine geologist.
o Materials sampled as part of ongoing exploration activities include
soils, boulders, rock outcrops, trenches and drill core. All samples
are taken by or under the supervision of a geologist. Exploration
samples of rock outcrops and boulders are normally taken as
discontinuous chip samples while trench samples are taken as
continuous chip samples. These exploration sample materials are used
to detect the presence of precious metals for target identification,
and are not normally used for resource estimation.
o The near surface mineral resource at Pozo 1&2 was outlined by backhoe
trenches. Trench samples are taken as continuous chip samples of the
exposed bedrock and
12-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
back fill materials. Trench sample results are only used for the
estimation of the near surface (open-pit) mineral resource (Gareau,
2004)
o Sample lengths for both drill core and trenches are normally one
metre, but vary from 0.5 m to 1.5 m, reflecting changes in the
observed geology. Each sample is assigned and tagged with a unique
sample number (Gareau, 2004).
The drill hole and underground sampling procedures employed by TMSA conform
to industry standards, in RPA's view.
12-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
13 SAMPLE PREPARATION, ANALYSES AND SECURITY
SAMPLE PREPARATION AND ASSAYS
Rock and core samples are crushed, pulverized, and fire assayed for gold
and silver on-site at the Limon mine laboratory. There are separate crushing and
pulverizing circuits for the mine grade control samples and exploration samples
(Perez, 2005).
All assays used in the Limon Mine resource and reserve estimates were done
at the Limon Mine laboratory located near the mill, warehouse and office
complex. Quality control includes the use of blanks, duplicates, standards and
internal check assays by the Limon Mine laboratory, and external check assays
performed at ACME Analytical Laboratories Ltd. (ACME) of Vancouver, B.C.,
Canada, conducted independently by the exploration group and the laboratory
manager. The laboratory currently uses a number of standard samples with the
assay values certified by an external laboratory, Lakefield Research Limited
(Lakefield) of Canada. The very fine-grained nature of the gold in the Limon
mining district greatly reduces sampling and assay variability related to coarse
gold ("nugget effect") and allows for good reproducibility of assays. To date
only one occurrence of visible gold has been reported from the Limon Mine. The
sample preparation and assay protocols are presented in Figure 13-1.
13-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
ASSAY QUALITY ASSURANCE AND QUALITY CONTROL
The quality assurance procedures and assay protocols followed by Glencairn
for underground and drill core samples at the Limon Mine were reviewed in
previous years by independent consultants and were found to conform to industry
accepted practices (SRK, 1999). These procedures are, as follows:
o Samples are handled only by the Glencairn and TMSA authorized
personnel. Samples from the mining operation are delivered by the mine
geologist or technician directly to the mine laboratory each day upon
completion of the underground sampling
o All drill core from surface and underground drill holes is taken one
or more times per shift from the drill rigs directly to a drill
logging and sampling area within the secured and guarded mine property
by authorized mine or exploration personnel. Within 48 hours, the
material core intervals (e.g. potentially mineralized intervals) are
photographed, logged and sampled; and the samples are delivered
directly to the mine laboratory.
o Each sample is assigned a unique sample number that allows it to be
traced through the sampling and analytical procedures and for
validation against the original sample site. The second half of the
split core is stored on-site as a control sample, available for review
and re-sampling if required.
Sample preparation and assays are carried out at the Limon Mine laboratory
(TMSA, 2005). RPA notes that the procedures used at this laboratory, including
the reagents and apparatus used for the assays, are similar to those used at
many commercial laboratories in Canada. In particular, they include:
o Crushing the split sample to 10 mesh and grinding it to 200 mesh
o Assays carried out on 29.2 g (1 assay-ton) sub-samples
o Cupelling after adding soda at 650(degree) C.
o Determination of the gold and silver content by gravimetric finish.
CHECK ASSAYS
Check assays and quality control-quality assurance (QA/QC) procedures are
followed at the Limon mine laboratory. These include internal check assays by
the Limon Mine laboratory, and external check assays performed at ACME, which is
ISO 9001-2000
13-3
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
certified. The check assays are conducted independently by the exploration group
and the Limon laboratory manager, and the standard samples are certified by
Lakefield.
All assays used in the Pozo 1 & 2 resource estimates were done at the Limon
laboratory located at the mine site. The procedures are as follows:
o The laboratory manager inserts standard samples, duplicate samples and
blanks routinely. One blank and one standard sample are inserted in
every batch of 24 assays. Duplicates are inserted every tenth sample
o The laboratory manager inserts blind duplicate pulps and sends pulp
samples to an external laboratory for checking.
External check assays for the 2004 drill campaign at Santa Pancha were
performed at ACME. A total of 82 sample pulps and 23 sample rejects were
submitted to ACME for check assay. In addition; eight duplicate, four blanks and
four control standard samples were also included for quality control by TMSA
exploration staff. The same samples sent to ACME were resubmitted to the Limon
laboratory for blind internal check assays. The check assay data and comparisons
are presented in Figure 13-2 and the detailed results are provided in the
Appendix.
A review of the blanks shows no evidence or concerns with contamination in
the sample preparation and assay procedure. In particular, these results
indicate that:
o The duplicates show an acceptable precision both for the Limon
laboratory and for ACME
o The reject check assay results show good comparison between the two
laboratories with no apparent bias
o The ACME pulp check assays show a tendency to report comparable, but
consistently lower values for assays greater than 8.0 g/t, however,
the control standards submitted with the blind checks to the Limon
laboratory show no apparent bias in the Limon assays.
The Limon laboratory also carries out QA/QC checks on a set of standards.
These range in concentrations from a low of 1 g/t Au to more than 8 g/t Au, and
are internal standards prepared by the Limon laboratory. Internal check assays
are monitored on a
13-4
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
daily basis. For a medium-grade standard having an average grade of 4.05 g/t Au,
and a standard deviation of 0.1174 g/t Au, the mine laboratory carried out 136
determinations during the month of November 2004, and results are shown in
Figure 13-3. These results show that:
o 87 assays (64%) were within one standard deviation (+/-1o) of the
mean.
o 49 assays (36%) were within two standard deviations (+/-2o) of the
mean.
o None of the assays were more than two standard deviations (+/-2o) of
the mean.
RPA is of the opinion the check assay results compare well with the Limon
Mine laboratory gold assays, and that the Limon assay results are acceptable and
suitable for estimation of Mineral Resources and Mineral Reserves.
SAMPLE SECURITY
The procedures for sample security are discussed under assay quality
assurance and quality control. Based on our review and discussions with field
personnel, RPA is of the opinion that sample security procedures at Limon Mine
are in keeping with industry standards. www.rpacan.com
13-5
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
14 DATA VERIFICATION BY GLENCAIRN
During the drilling campaigns data verification and quality control is done
by TMSA personnel. The quality and reliability of the data obtained from ongoing
programs is reviewed and verified by TMSA staff geologists each time there is an
update of the resource for any particular zone. Mr. Kenneth Atkin, Chief
Geologist, who is a Qualified Person in accordance with National Instrument
43-101, performs a second verification prior to finalizing a new or updated
resource estimate.
In previous years Mineral Reserve and Mineral Resource audits were
conducted by an external, independent consultant that included random checks on
the assay database against original assay certificates. In 1999, this consultant
determined that there were no material inaccuracies in the assay database and
that Black Hawk's methods and procedures are within North American industry
standards. RPA's 2003 due diligence review revealed no changes in methods or
procedures since the time of the independent consultant's report in 1999.
INDEPENDENT SAMPLING BY RPA
As part of its due diligence in 2003, RPA collected three independent
samples from drill core to confirm the general level of the TMSA laboratory
assays, and had them assayed at SGS Laboratories (SGS) in Don Mills, Ontario.
The RPA samples were taken from the remaining half core from two drill holes.
The RPA samples confirmed the presence of gold and silver values at essentially
the same order of magnitude as the El Limon laboratory assays.
For this report, RPA collected a total of nine (9) samples, four from
underground workings of the Talavera Vein and five samples of split core from
diamond drill holes which have tested the Santa Pancha deposit, and sent them to
SGS Laboratories, for independent assays for gold. Table 14-1 provides the
sample description and assay results.
14-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 14-1 RPA INDEPENDENT SAMPLING RESULTS
Glencairn Gold - Limon Mine
From Interval RPA g/t TMSA g/t
Sample No. (m) To (m) (m) Au Au Remark
- --------------------------------------------------------------------------------------------------
70801 12.16 70.35 Channel sample, TWP (Talavera) vein,
Level 153
70802 6.61 Channel sample, TWP (Talavera) vein,
Level 153
70803 3.38 4.11 Channel sample, TWP (Talavera) vein,
Level 153
70804 14.70 Channel sample, TWP (Talavera) vein,
Level 153
A026355 29.66 30.59 0.93 10.43 3.74 Drill core, Hole No. 3147, Santa
Pancha P1HW vein
A026358 30.59 31.52 0.93 41.21 21.36 Drill core, Hole No. 3147, Santa
Pancha P1HW vein
A026359 31.52 32.45 0.93 71.17 72.92 Drill core, Hole No. 3147, Santa
Pancha P1HW vein
A026360 107.02 108.05 1.03 10.41 5.52 Drill core, Hole No. 3169, Santa
Pancha P1HW vein
A026361 108.05 109.11 1.06 4.36 3.43 Drill core, Hole No. 3169, Santa
Pancha P1HW vein
Note: Samples 70801 and 70802 represent old sample No. 22744, and samples 70803
and 70804 represent old sample No. 22745.
As in 2003, the current RPA samples confirm the presence of gold values at
essentially the same order of magnitude as the Limon laboratory assays. In fact,
some of the RPA (SGS) values are slightly higher than the Limon laboratory
results. The differences are considered to be due to the variability in gold
between the two halves of the core, and are not cause for concern, in RPA's
view.
As part of our due diligence, RPA also carried out a detailed review of
diamond drill logs for Hole No. 3147, 3169, 3144, 3170 and 3224 of cross section
13795N, of the Santa Pancha deposit. RPA considers the drill hole logging and
data recording procedures to be in keeping with industry standards.
14-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
15 ADJACENT PROPERTIES
There are a number of adjacent properties as defined by NI 43-101, situated
around the Limon Mine as shown in Figure 4-2. These include:
o Bonete-Limon
o Villanueva I and II
o San Juan de Limay (Grande Portage Joint Venture)
o San Juan de Limay - La Grecia
o San Juan de Limay - Paso Real
o El Sauce I, II, III, and IV
o La India (Gold-Ore Joint Venture)
o Soledad de La Cruz
o Espinito - San Pablo
The three San Juan de Limay concessions (total, 7,700 ha) currently
constitute a joint venture with Grande Portage Resources Ltd. (Grande Portage).
Grande Portage has an option to earn a 51% interest in these concessions by
paying Glencairn a sum of US$200,000 and spending US$800,000 on exploration
within three years of the agreement (Grande Portage Press Release, October 27,
2004). Exploration work under the terms of the agreement has yet to begin.
The Tatascame area, a 1,200 ha subset of La India concession, currently
constitutes a joint venture with Gold-Ore Resources Ltd. (Gold-Ore). Gold-Ore
has an option to earn a 51% interest in these concessions by issuing 100,000
shares to Glencairn and spending US$400,000 on exploration over two years
(Gold-Ore Press Release, June 24, 2004). Recent exploration results indicate
medium to high-grade gold samples, ranging from 4.54 g/t Au to 119.4 g/t Au,
over intervals ranging from 1.6 m to 2.8 m, have been obtained in sampling along
50 m of rehabilitated underground workings on Crisolitas Vein. Gold-Ore plans to
test this area by diamond drilling in 2005 (Gold-Ore Press Release, January 6,
2005).
RPA is not aware of any exploration work currently being carried out on
lands outside of the Mina El Limon mineral concession.
15-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
16 MINERAL PROCESSING AND METALLURGICAL TESTING
The Limon mill is a nominal 1,000 tonnes per day CIP gold recovery plant.
Run of mine (ROM) ore is hauled by truck from the Talavera area and either
dumped and stockpiled in front of the primary crusher or dumped directly into
the 36-tonne capacity dump hopper feeding the jaw crusher. The hopper is fitted
with a stationary grizzly to limit the top size to the crusher. When required, a
front-end loader transfers ore from the accumulated stockpile into the hopper. A
variable speed apron feeder draws the ore from the dump hopper at a nominal rate
of 55 tonnes per hour to feed the primary jaw crusher. The primary crusher is
operated on a three shift per day, six days per week schedule. The crusher
produces a minus 150 mm, crushed ore product. The crusher discharge conveyor
delivers the ore to the crushed ore stockpile located near the semi-autogenous
grinding (SAG) mill feed hopper via a plough and chute.
A variable speed belt feeder draws the ore from SAG mill feed hopper at a
nominal rate of 42 tonnes per hour onto the SAG mill feed conveyor, then
delivers it to the SAG mill. The SAG mill discharge fines are combined with the
discharge from the ball mill in the cyclone feed pumpbox. Lime is also added to
the cyclone feed pumpbox. A cyclone feed pump feeds the mill discharges to three
operating hydrocyclones. The cyclone underflow flows by gravity to the ball mill
feed chute. Water is added automatically to the cyclone feed pumpbox to maintain
a set-point cyclone feed density. A vibrating screen cleans the cyclone overflow
of trash before it flows to the thickener tanks.
Approximately 36 hours of leach residence time is provided by the three
leach tanks at 40% to 45% solids thickener tanks underflow density. Pure oxygen
is injected through a special injector, in lieu of using compressed air, a
process that improves recovery by 5%. The leached slurry overflows from a leach
tank into the carbon-in-pulp ("CIP") carousel circuit, comprising of six tanks
on a step down elevation gradation, to allow the slurry to gravity flow. Carbon
is moved every two days by pumping out the slurry to the
16-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
loaded carbon vibrating screen. The loaded carbon batch from the loaded carbon
screen is collected in the acid wash tank to clean the carbon of calcium and
other inorganic contaminants. After acid washing, the acid is neutralized and
the alkalinity is increased. The carbon batch is then advanced to the carbon
stripping vessel. Following stripping, the carbon is washed with water to cool
the carbon and to recover all of the gold bearing solution. Washed and stripped
carbon is then regenerated in a standard rotary kiln and returned to the CIP
circuit.
The pregnant solution is circulated through the electrowinning cell then
back into the pregnant solution tank. The electrowinning cell design is a sludge
type where the majority of the gold is washed to the cell bottom and collected
by flushing with a water hose into the filter feed pumpbox. The remaining gold
cathodes and gold sludge filter cake are then both smelted to dore in the
refinery furnace.
The production records for the Limon Mill from 2001 to 2004 as well as the
forecast for 2005 to 2010, are summarized in Tables 18-1 and 18-3, respectively,
in Section 18. Recent operations have demonstrated that the mill is capable of
sustaining a rate of 1,200 tonnes per day. Mill productivity, however, has been
limited by mine production. Life of Mine Plan projections of mill performance,
are consistent with past achievements.
Metallurgical test work for several of the mineralized zones at Santa
Pancha was completed in the Limon laboratory. Metallurgical recovery tests,
based on the typical operating conditions in the Limon mill, predict an average
87.8% recovery. The test results compare well with gold recoveries obtained from
the processing of open-pit material mined adjacent to Pozo 4 at Santa Pancha in
1998 and 1999 (Gareau, 2004).
16-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
17 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES
MINERAL RESOURCES
For this Report, RPA has reviewed the Mineral Resource and Mineral Reserve
estimates of the Talavera and Santa Pancha gold deposit, as reported by
Glencairn. In November 2004, RPA reviewed the procedures and methodology to be
used for the Santa Pancha deposit. In January 2005, RPA carried out a number of
checks to verify the various procedures and numerical calculations used in
earlier estimates. This included detailed tracing of the methodology of
estimating tonnage and grade of resource and reserve blocks. With few
exceptions, RPA found that values and compilations of gold grades were
accurately recorded and calculated as provided on sections and plans. RPA then
carried out an independent check of the resource blocks by the Contour Method
because the mineralized zones within the Talavera and Santa Pancha veins include
distinct ore shoots.
Table 17-1 lists Mineral Reserves and Mineral Resources, and Table 17-2
lists the Mineral Resources at a lower cut-off grade of 3.0 g/t Au, as reported
by Glencairn at December 31, 2004 for the Limon Mine. The Mineral Resources
reported by Glencairn are in addition to the Mineral Reserves. There are areas
of higher-grade mineralization within the overall Mineral Resources and Mineral
Reserves.
17-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 17-1 MINERAL RESERVES AND MINERAL RESOURCES
Glencairn Gold - Limon Mine
Deposit Category Tonnes Grade (g/t Contained
(Au) Ounces Au
- ---------------------------------------------------------------------------------
Talavera Proven 177,600 5.88 33,600
Probable 510,000 5.60 91,780
Santa Pancha Probable 1,064,000 4.94 169,050
Subtotal Proven 177,600 5.88 33,600
Subtotal Probable 1,574,000 5.15 260,830
- ---------------------------------------------------------------------------------
Total Underground Proven & Probable 1,751,600 5.23 294,430
Limon Vein Open Pit Probable 35,200 2.71 3,070
Additional Mineral Resources
Talavera Measured 20,500 6.30 4,100
Indicated 109,300 6.22 21,900
Limon Vein Open Pit Indicated 40,600 3.26 4,300
Santa Pancha Indicated 32,400 8.52 8,900
Subtotal Measured 20,500 6.30 4,100
Subtotal Indicated 182,300 5.97 35,100
- --------------------------------------------------------------------------------
Total Measured & Indicated 202,800 6.00 39,200
Talavera Inferred 339,000 7.29 79,500
Santa Pancha Inferred 616,800 6.76 134,100
- --------------------------------------------------------------------------------
Total Inferred 955,800 6.95 213,600
Source: Glencairn, 2005
Notes:
1. CIM definitions were followed for reserves & resources.
2. Mineral Reserves are estimated at a cutoff grade of 4.02 g/t Au for
Talavera, 3.82 g/t Au for Santa Pancha, and 1.8 g/t Au for the Limon open
pit. Additional Mineral Resources are estimated at a cutoff grade of 4.50
g/t Au for underground, and 1.8 g/t Au for the Limon open pit.
3. Mineral Reserves & Mineral Resources are estimated using an average
long-term gold price of US$375 per ounce.
4. A minimum vein width of 2.4 m was used, and a minimum mining width of 3.0
m.
5. Ore density is 2.60 t/m3.
17-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 17-2 MINERAL RESOURCES AT 3.0 G/T AU CUT-OFF GRADE
Glencairn Gold - Limon Mine
Talavera Measured 24,000 5.88 4,500
Indicated 127,000 5.90 24,100
Limon Vein Indicated 40,600 3.26 4,300
Santa Pancha Indicated 122,000 4.97 19,500
Subtotal Measured 24,000 5.88 4,500
Subtotal Indicated 289,000 5.14 47,800
- ---------------------------------------------------------------------------
Total Measured & Indicted 313,600 5.19 52,400
Talavera Inferred 372,600 6.97 83,500
Santa Pancha Inferred 920,000 5.76 170,300
- ---------------------------------------------------------------------------
Total Inferred 1,292,600 6.11 253,800
Source: Glencairn, 2005
Notes:
1. CIM definitions were followed for Mineral Resources.
2. Mineral Resources are estimated at a cutoff grade of 3.0 g/t gold for
underground, and 1.60 g/t gold for open pit.
3. Mineral Resources are estimated using an average long-term gold price of
US$375 per ounce.
4. A minimum vein width of 2.4 m.
5. Bulk density is 2.60 t/m3.
RPA is of the opinion that the Glencairn resource and reserve estimates, as
stated in Table 17-1 at the higher cut-off grades (4.02 g/t Au for Talavera and
3.82 g/t Au for Santa Pancha), are in accordance with the Mineral
Resource/Reserve Classification as recommended by the CIM Committee on Mineral
Resources/Reserves.
DATABASE
Mineral reserve and resource estimates for the Limon Mine are based on data
from underground face chip sampling and mapping and from underground and surface
diamond drill holes. The drill hole data are placed in files for each drill hole
and stored digitally. The underground information is recorded in data books and
plotted manually on level plans. All drill core, survey, geological and assay
information used for the
17-3
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
resource and reserve estimates is verified and approved by the TMSA geological
staff and maintained as an on-site database.
RPA inspected some of the drill hole files and underground sampling records
and found them to be in keeping with industry standards. Glencairn notes that it
verifies the database internally, as discussed in a previous section.
ASSAY QUALITY ASSURANCE AND QUALITY CONTROL
All assays used in the Talavera and Santa Pancha resource and reserve
estimates are done at the Limon laboratory located at the mine site. The
procedures for QA/QC of assays are presented, as follows:
o The laboratory inserts standard samples, duplicate samples and blanks
routinely. One blank and one standard sample are inserted in every
batch of 24 assays. Duplicates are inserted every tenth sample. The
laboratory currently uses two standard samples with the assay values
certified by an external laboratory, Lakefield Laboratories,
Lakefield, Ontario
o In addition, the laboratory manager inserts blind duplicate pulps and
sends pulp samples to an external laboratory, ACME, for checking. For
samples from outside the mine area, duplicates are submitted by
exploration staff to ACME for check assays.
RPA has reviewed some of the quality assurance/quality control (QA/QC) data
generated by the Limon mine laboratory and by the exploration staff. For the
Limon laboratory manager's blind duplicate assays from September 2002 to May
2003, most duplicate assays were within 10% of the original assay, for assays
over 2 g/t Au. For assays less than 2 g/t Au, reproducibility is mostly within
25%. For the external check assays, results are mostly within 15% to 20%. In
RPA's view, the QA/QC procedures at the Limon laboratory are acceptable.
MINERAL RESOURCE ESTIMATION PROCEDURES
After interpretation of cross sections and level plans for the Talavera and
Santa Pancha deposits, TMSA geology staff constructs a vertical longitudinal
section for each vein. Typical cross sections, level plans, and longitudinal
sections for these two deposits
17-4
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
are shown in the Appendix (Section 24). The longitudinal sections show the mine
levels, raises, stopes, pillars and other workings, underground chip sample
assays and true widths across the vein (averaged over strike lengths of
generally 20 m to 30 m), drill hole intercepts with grade and true thickness of
the vein, and pertinent geological features such as faults.
The procedures for estimating Mineral Resources are presented, as follows:
o Data from diamond drill holes, surface trench samples and underground
channel samples are plotted on detailed cross sections, at a scale of
1:500, at 30 m intervals including all assay data. Thee data provide
the basis for the geological interpretation and estimation of average
grades of resource blocks.
o Resources are estimated for blocks superimposed on the longitudinal
sections. The block heights generally correspond to actual or planned
level and sublevel intervals of 15 m to 30 m. In some cases vertical
heights are shorter where the blocks represent mineable pillar
material between stopes. The strike length of blocks is generally 20 m
to 30 m, corresponding to the intervals over which underground chip
sample assays and true widths are averaged. In some of the veins,
larger blocks are used; up to 50 m vertical height and strike length.
o Block volume is calculated using the vertical height, strike length
and true width with an adjustment for dip of the vein.
o Block tonnage is calculated by multiplying the block volume with a
specific gravity of 2.6 t/m3. The 2.6 factor is based on 20 tests in
the Limon mill that gave an average of 2.62 g/cm3; 356 determinations
at the mine laboratory that gave an average of 2.58 g/cm3; and 82
tests at ACME laboratory in Canada that gave an average of 2.55 g/cm3.
The tests were done from 1999 to 2001. In RPA's view, 2.6 t/m(3) is an
appropriate factor. More recent tests at ACME on Santa Pancha samples
confirm the same specific gravity applies to that deposit
o Average gold grades and true vein widths of the blocks are based on
the underground chip sampling, projected down or up dip, or drill
holes within and/or adjacent the blocks. Where blocks are projected up
or down from drifts, both chip sampling and drill holes are used for
the block estimate; the underground sampling is weighted 2:1 to the
drill hole results. RPA notes that for the Santa Pancha Pozo 4 & 5
veins, the average grade of the underground drifts is an arithmetic
average, since actual sample widths are not available from old data.
RPA is of the opinion that this will have an effect in the average
grade of the deposit, although at this stage this effect cannot be
quantified. RPA, however, also notes that because of this uncertainty,
Glencairn has classified these resources as Inferred Mineral
Resources.
17-5
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
o For resource estimation, drill hole intercepts have no minimum width
for inclusion. Chip samples are included at a minimum width of 2.4 m,
and a minimum mining width of 3.0 m is used to estimate the average
grade of a resource block.
o Glencairn cuts high -grade gold assays to 60 g/t for the Talavera Sur
vein and to 25 g/t for the other veins in the Talavera mine and at
Santa Pancha. These cutting levels are based on inspection of
frequency histograms of assays for the different veins. In November
2004, RPA briefly reviewed the basis for cutting high grade assays to
these levels and considers the practice reasonable. The cutting levels
could be confirmed by comparison with mill production figures,
however, this may be a complicated exercise at the Limon Mine because
a number of different veins constitute the mill feed.
o Glencairn uses a minimum grade of 4.5 g/t Au for inclusion of blocks
as mineral resource for underground block configuration. Glencairn
also uses a lower cutoff grade of 3.0 g/t Au for reporting purposes.
MINERAL RESERVE ESTIMATION PROCEDURES
Mineral Reserves are estimated for blocks for which a mine plan exists at
the Talavera and Santa Pancha mines. Talavera is mined by longitudinal open
stoping, and Santa Pancha will be mined by cut & fill methods. Mineral Reserves
have been estimated for 13 veins, or portions of veins, in the Talavera-Ligia
vein system, and four veins in the nearby Santa Emilia-Veta Nueva veins.
Mineral Reserve and Mineral Resource estimates at the Limon Mine are made
only for gold grade. Silver grades are considered too low to warrant resource
estimation, though minor quantities of silver are produced as a by-product of
the mining operations (Gareau, 2004).
DILUTION
The procedures for estimating Mineral Reserves are presented, as follows:
o For the mineral resource blocks defined as described in the previous
section, true vein widths are diluted to a minimum width of 2.4 m. The
vein width is then diluted to a minimum mining width of 3.0 m
17-6
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
o If the original true width is less than 2.4 m, dilution is added at
zero grade to bring the minimum mining width to 3.0 m.
o If the original true width is 2.4 m or greater, 0.6 m of dilution is
added at zero grade
o A second dilution of 8% is added to the tonnage and grade of each
block at zero grade
o The grade is further adjusted by a factor (mine call factor) derived
from the previous year's mill reconciliation. For the 2004 reserve
estimate, the grade adjustment factor is 0.92, based on reconciliation
of 2003 operating results. This is consistent with mine call factors
in previous years.
Reconciliation results suggest that dilution is higher than estimated. Mine
staff have calculated that an increased minimum mining width could account for
the difference in grade. RPA has reviewed this procedure and is of the opinion
that the minimum width for longhole mining at Talavera should be investigated.
Spot observations in areas with narrow vein widths revealed stopes that appeared
wider than three metres. RPA recommends a systematic survey of currently open
stopes to evaluate actual minimum mining widths for use in reserve estimation.
At Santa Pancha, the cut & fill mining method should allow for measurement
of minimum mining width in the normal course of operations. Reserve estimation
should use measured results once they are available.
EXTRACTION
At Talavera, mine reserve blocks are forecast with pillars and expected
mine losses already removed. It is generally assumed that 100% of the ore in the
mine reserve blocks will be extracted. A few blocks in the Life of Mine Plan
have extractions less than 100% due to proximity to mined out areas.
At Santa Pancha, mining is planned to the full width of the ore, and
extraction is estimated to be 95%. Blocks incorporating sill pillars are reduced
to 85% extraction, and those near major faults or old workings range from 50% to
70% extraction.
17-7
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
In RPA's opinion, extraction estimates are appropriate for planning
purposes. Historical results suggest that there is potential for small mining
gains during operations.
CUT-OFF GRADE
Prior to forming the Life of Mine Plan, Glencairn applies cut-off grades of
4.02 g/t Au for the Talavera reserve mining block cut-off, and 3.82 g/t Au for
the Santa Pancha reserve mining block cut-off. The reserve cut-off grade
estimate is based on the break-even grade. Glencairn also uses two cut-off
grades, 4.5 g/t Au and a lower cut-off grade of 3.0 g/t Au for resource blocks
At the cash operating cost of the Life of Mine Plan (detailed in Section
18), $40.13 per tonne, gold recovery of 86.6%, and a gold price of $375 per
ounce, RPA calculates the cut-off grade to be 3.84 g/t Au. In RPA's opinion, the
Glencairn cut-off grade is appropriate for the remaining Mineral Reserves.
TMSA uses an incremental cut-off grade to evaluate marginal blocks. Using
unit costs from the TMSA 2005 Budget, and deducting G&A costs and the fixed
portion of power costs, the cost for incremental evaluation is $24.69 per tonne.
The incremental cut-off grade using that cost is 2.3 g/t Au. In RPA's opinion,
the incremental approach is a valid method for evaluating individual blocks
during operations, when there is an opportunity to mine and mill those blocks
without displacing higher-grade ore.
RPA has reviewed the mineral reserve estimation procedures and checked some
of the calculations. In RPA's opinion, the reserve estimation method and
procedures are reasonable for the Limon mine and are in keeping with industry
standards.
CLASSIFICATION
Glencairn has classified the Mineral Reserves and Mineral Resources of the
Talavera and Santa Pancha deposits into Proven and Probable categories (for
Mineral Reserves) and Measured, Indicated, and Inferred categories (for Mineral
Resources) based on drill
17-8
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
hole spacing, assay information from samples collected along underground drifts
and cross sections, and apparent continuity of mineralized lenses. Glencairn has
classified the Mineral Reserves and Mineral Resources at the cut-off grades of
4.02 g/t Au (Talavera) and 3.82 g/t Au (Santa Pancha) for the Mineral Reserves,
and at two cut-off grades, namely 4.5 g/t Au and 3.0 g/t Au for the Mineral
Resources.
RPA reviewed the reserve classification under CIM definitions and concurs
with Glencairn's classification into proven and probable categories for the
Talavera mine. Proven mineral reserves are located between or within 15 m of
underground drifts with geological and assay information. Proven reserve blocks
are up to 30 m by 30 m on longitudinal sections. Probable mineral reserves
include blocks that are within 25 m of a drift and 30 m by 30 m blocks with at
least one drill hole or adjacent to blocks defined by drill holes or drifts with
geological continuity of the vein.
RESERVE REPLACEMENT
In past years, the Limon Mine has had a good record of replacing mineral
reserves as they are mined by finding new veins and extensions to existing veins
and by converting Mineral Resources to Mineral Reserves. Table 17-3 shows the
record of reserve replacement over the last four years.
17-9
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 17-3 RESERVE REPLACEMENT
Glencairn Gold - Limon Mine
Reserve At Replacement
End of Year Mill Feed Reserve As % Of Mill
Year ('000 tonnes) For Year Replacement Feed
- ----------------------------------------------------------------------
1998 1,001.5
1999 1,029.3 361.4 389.2 108%
2000 1,047.6 348.9 367.2 105%
2001 968.6 349.4 270.4 77%
2002 973.6 314.6 319.6 102%
2003 754.6 284.1 65.1 23%
2004 1,786.8 341.2 1,373.4 403%
Reserve At Replacement
End of Year Mill Feed Reserve As % Of Mill
Year ('000 tonnes) For Year Replacement Feed
- ----------------------------------------------------------------------
1998 278.5
1999 270.5 77.5 69.5 90%
2000 266.8 102.2 98.5 96%
2001 209.4 78.6 21.2 27%
2002 193.9 63.8 48.3 76%
2003 147.5 52.1 5.7 11%
2004 297.6 54.6 204.7 375%
It can be seen that TMSA has a successful history of replacement of reserve
tonnes and ounces from 1998 to 2002. RPA notes, however, that the average
reserve grade has decreased from 8.6 g/t Au at the end of 1998 to 5.18 g/t Au at
the end of 2004 (Glencairn, 2004 and Atkin, 2005a).
During 2004, Glencairn increased the amount of the tonnage and contained
gold from the previously estimated Mineral Reserves by 250% and 163%,
respectively, as shown in Table 17-4.
17-10
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 17-4 2004 RESOURCE TO RESERVE CONVERSION
Glencairn Gold - Limon Mine
Zone/Vein 2003 Inferred Mineral 2004 Mineral Reserves Conversion (%)
Resources
Tonnes g/t Au Tonnes g/t Au Tonnes Gold
- -------------------------------------------------------------------------------
Talavera
SEO3 33,800 9.41 14,700 6.77 43 31
TS 37,800 5.96 26,200 4.68 69 54
Santa Pancha
Pozo 1&2 149,000 8.85 919,200 5.06 617 353
Pozo 4 216,600 6.70 133,100 4.05 61 37
- -------------------------------------------------------------------------------
Total 437,200 7.58 1,093,200 4.95 250 163
Source: Glencairn, 2005.
Glencairn's record of reserve replacement in recent years suggests that the
mine life could be extended by conversion of resources to reserves and
extensions to existing veins in the immediate mine area.
17-11
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
SANTA PANCHA MINERAL RESERVES AND MINERAL RESOURCES
Glencairn has provided a new Mineral Reserve estimate for the Pozo 1 & 2
area of the Santa Pancha vein system as of December 31, 2004 (Tables 17-5), and
an estimate of the Mineral Resources of the complete Santa Pancha vein system,
including the Pozo 1 & 2, as of December 31, 2004 (Table 17-6).
TABLE 17-5 POZO 1 & 2 PROBABLE MINERAL RESERVES
Glencairn Gold - Limon Mine
Vein Tonnes g/t Au Contained Oz Au
- --------------------------------------------------------------------------
CHW 463,240 5.32 79,230
CFW 253,120 4.11 33,400
NHW 4,930 4.03 640
NHW2 80,910 6.05 15,730
NFW 89,110 5.71 16,370
Tajo SP 27,840 4.60 4,120
P4 - HW 133,110 4.05 17,350
Aparejo 11,740 6.00 2,260
- --------------------------------------------------------------------------
Total 1,064,000 4.94 169,100
Source: Glencairn, 2005
Notes:
1. CIM definitions were followed for Mineral Reserves.
2. Santa Pancha Mineral Reserves are estimated at a cutoff grade of 3.82 g/t
gold and an average long-term gold price of US$375 per ounce.
17-12
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 17-6 SANTA PANCHA MINERAL RESOURCES
Glencairn Gold - Limon Mine
Indicated Mineral Resources
3.0 g/t Au cut-off grade 4.5 g/t Au cut-off grade
Contained Contained
Vein Tonnes g/t Au Oz Au Tonnes g/t Au Oz Au
- ---------------------------------------------------------------------------
P 1&2 CFW 47,275 3.73 5,675
P 1&2 NHW2 9,950 3.06 980
P 4 HW 9,650 4.38 1,360
P 5 55,125 6.47 11,470 32,400 8.52 8,900
- --------------------------------------------------------------------------
Total
Indicated 122,000 4.97 19,500 32,400 8.52 8,900
Open Pit 26,200 4.89 4,100 26,200 4.89 4,100
Inferred Mineral Resources
3.0 g/t Au cut-off grade 4.5 g/t Au cut-off grade
P1-2 CRW 41,400 5.96 7,940 41,400 5.96 7,940
P1-2 CHW 77,260 6.37 15,830 53,720 7.24 12,510
P1-2 NHW 41,530 6.64 8,860 41,540 6.64 8,860
P4-HW 94,300 7.43 22,500 72,120 8.43 19,550
P4-FWS 64,370 4.46 9,220 31,810 5.40 5,540
P4-FWC 238,540 5.11 39,200 150,360 5.89 28,460
P5 214,100 4.51 31,080 77,340 6.26 15,560
P8 142,200 7.45 34,070 142,200 7.45 34,070
Aparejo 6,300 7.93 1,600 6,300 7.93 1,600
- ------------------------------------------------------------------------
Total
Inferred 920,000 5.76 170,300 616,800 6.76 134,100
Notes:
1. CIM definitions were followed for Mineral Resources.
2. Mineral Resources are estimated at the cutoff grades shown in the above
table and an average long-term gold price of US$375 per ounce.
3. Open pit Indicated Mineral Resources estimated at the 1.6 g/t Au cut-off
grade.
17-13
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
RPA CHECK ESTIMATE
RPA reviewed the resource estimation procedures and some of the
calculations. This was done as a check on the TMSA resource estimation method.
As part of the November 2004 site visit, RPA carried out an informal estimate of
parts of the Santa Pancha CHW and CFW zones, with the assistance of TMSA staff,
using the Contour Method as a check on the resource estimation method.
In the Contour Method, grade multiplied by thickness (GT) and vein true
thickness (T) are contoured on longitudinal sections. Areas between contours are
measured in and multiplied by an average value and by density to give an
estimate of contained grams (from GT contours) and tonnes (from T contours).
Contained grams are divided by tonnes to derive an average grade. The outline of
the check resource estimate was based on the 3 g/t Au contour, the effective
cut-off grade for the resource estimate.
The RPA check estimate gave tonnage and grade results similar to the TMSA
resource estimate, and confirms the validity of the TMSA methodology.
RPA COMMENTS
RPA reviewed the resource estimation procedures and some of the
calculations. In RPA's opinion, the procedures used are appropriate for resource
estimation at the Talavera mine and the Santa Pancha deposit, and form a
reasonable basis for reserve estimation. RPA is also of the opinion that the
cut-off grade of 3 g/t Au is appropriate for reporting purposes, under NI
43-101, given the current range in the price of gold.
RPA reviewed the Mineral Reserve and Mineral Resource classification under
CIM definitions and concurs with Glencairn's classification into Proven and
Probable categories as well as the Measured, Indicated and Inferred categories
for the Talavera mine, and Indicated and Inferred categories for the Santa
Pancha deposit.
RPA notes some comments below for consideration in future resource
estimates:
17-14
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
o For all veins in the Limon area, volume and tonnage of blocks are
calculated based on the "true" thickness of the mineralized intersections.
This then is multiplied by a factor, dependent on the dip of the
mineralized zone, and projected onto the vertical longitudinal section for
mine planning purposes. RPA is of the opinion that by calculating the
horizontal thickness of the mineralized intersection, based on the
down-hole survey data at the intersection, and projecting onto the vertical
longitudinal plane would avoid any possible errors in estimating the volume
and tonnage of the block. This method is illustrated in a publication of
the Contour Method by Agnerian and Roscoe (2002).
o Based on the existing drill hole and underground assay data, some of the
blocks classified as Indicated Mineral Resources at Santa Pancha may be
upgraded into the measured category, in RPA's opinion.
o Based on the existing drill hole spacing and underground assay data, some
of the blocks classified as Inferred Mineral Resources at Santa Pancha as
well as at Talavera may be upgraded into the indicated category, in RPA's
opinion. This includes some blocks classified as Inferred because they are
low grade. RPA is of the opinion that there is sufficient drill hole
information to upgrade the classification of these blocks.
o The calculation of average grade for some blocks at Santa Pancha Pozo 4 & 5
veins is based on old underground assay data, but without any sample
lengths. RPA understands that this data is not available, which calls into
question the accuracy of the estimated grades. RPA is of the opinion that
this will have an effect in the average grade of the deposit, although at
this stage this effect cannot be quantified. RPA, however, also notes that
because of this uncertainty, Glencairn has classified these resources as
Inferred Mineral Resources, as noted above.
17-15
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
18 OTHER RELEVANT DATA AND INFORMATION
MINE OPERATIONS
The lengthy operating history at the Limon Mine provides a solid base from
which to estimate future performance. Recent production history for the Limon
Mine is presented in Table 18-1.
TABLE 18-1 HISTORICAL MINE PRODUCTION
Glencairn Gold - Limon Mine
Units 2001 2002 2003 2004
- -----------------------------------------------------------------------
Mill feed (`000 t) 349 315 284 341
Head Grade (g/t Au) 7.0 6.2 5.7 5.1
Recovery (%) 86.3 86.8 88.1 84.6
Gold Recovered (oz) 70,351 55,388 45,851 46,135
Silver Recovered (oz) 44,747 24,851 6,119 n/a
RPA notes that 2004 average production grade of 5.09 g/t Au was less than
the average budgeted grade of 5.50 g/t Au. RPA understands that this was
because:
o Development delays forced mining of underground resource blocks,
rather than planned reserve blocks, and;
o Mining at Talavera could not be maintained at 1,100 tpd. Higher than
planned replacement of higher-grade Talavera ore with lower-grade
material mined from Pozo Bono and Limon Sur open pits reduced mill
feed grades, as shown in Table 18-2.
The Life of Mine Plan accounts for production limitations at Talavera, by
blending ore from other sources to reach the planned mill feed rate of 1,100
tpd.
18-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
TABLE 18-2 2004 MINE PRODUCTION DETAILS
Glencairn Gold - Limon Mine
Talavera Mine
Month Tonnes Grade (g/t Au)
- ---------------------------------------------------------------------
January 25,795 4.56
February 24,184 4.74
March 27,609 5.72
April 21,800 4.31
May 21,609 5.85
June 23,847 4.97
July 22,324 5.90
August 25,870 6.55
September 24,294 5.65
October 25,918 6.84
November 23,877 5.24
December 24,667 4.45
- ---------------------------------------------------------------------
Total 291,794 5.41
Limon Sur Open Pit
Jan - Dec. 2004 46,331 2.35
Pozo Bono Open Pit
Jan - Dec. 2004 3,110 4.17
Total 2004 341,235 4.98
Source: Glencairn, 2005
TALAVERA MINING METHOD
The Talavera underground mine was developed with an access ramp driven from
the surface to reach the 91 m and 100 m levels in 1991, and was further deepened
during the following years to reach the 280 m level in 2001 and 300 m level in
2002. The ramp system branches on 135 m level into a West ramp, giving access to
the Talavera II, Oeste and Talavera Sur veins, and into an East ramp, giving
access to the Talavera Principal,
18-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Talavera Este, Ligia, and Santa Emilia veins. In the coming years, the Veta
Nueva veins will also be accessed from the East ramp.
The mining methods used are longitudinal open stoping for the primary
stopes and sublevel retreat for the pillar recovery. Stopes are backfilled with
unconsolidated development waste. Development historically has been top down,
with sill pillars left at regular intervals. Newer areas such as Santa Emilia
are being mined from the bottom up, without sill pillars.
The Talavera mining operation is fully mechanized. It uses trackless
equipment that includes eleven articulated haul trucks, each of 15 tonnes
capacity, four pneumatic jumbos and one hydraulic electric jumbo, four six-yard
production scooptrams equipped with remote controls, four 3 1/2-yard development
scooptrams, as well as a number ground support and service vehicles. Production
drilling is performed with two "In The Hole" (ITH) pneumatic longhole drills,
and two top hammer longhole drills. The mine equipment is adequate to support
the current 950 tonnes per day operation. Ore is transported from the stopes to
an underground ore chute, where trucks are loaded for haulage out of the mine to
the Limon processing plant, four kilometres away. Three raises provide the
necessary ventilation to the mine, as well as emergency escape routes.
The primary stopes are prepared by developing sub-levels in the vein, at 25
m intervals, from an access drift driven in the footwall, parallel to the vein.
The 25 m spacing between levels was found by Black Hawk to be the optimum
interval to achieve both productivity and reduced dilution. From the access
parallel drift, crosscuts are driven on approximately 60 m centres to the ore
and the sub-level is opened up from the footwall to the hanging wall of the
vein. An undercut is developed in both directions from the crosscut while an
uppercut is prepared in the same manner on the upper level, at a vertical
distance of 25 m. This effectively leaves 21 m from the back of the lower level
to the floor of the upper level. A slot connecting both levels is then cut at
each end of the stopes. The slot raises are driven conventionally, or using the
ITH drill and the "Drop Raising" method, which consists of drilling longholes
from the uppercut to the undercut and blasting in a retreat
18-3
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
fashion. The slot raises are advanced an average of 3.2 metres per blast. Slot
raises are 2.2 metres square in section. Typical stope preparation takes
approximately two months to complete, once access to the block is available.
Stope production begins with ore blasted in vertical slices using the slot
as the free face. Remote control scooptrams are used as the stopes are mined
longitudinally without draw points to minimize development. The minimum planned
stope width is three metres. The blasting pattern is 1.2 m by 1.5 m, with the
outside holes drilled 0.30 m inside the hanging wall and footwall contacts. The
equipment used is the ITH rig, drilling 98.4 mm diameter holes. Backfill with
unconsolidated development waste begins once the level is mined and there is a
need to mine the overlying level.
As the ramp deepens, new stopes are developed underneath previously mined
blocks. Sill pillars are thus required to allow access to new, lower ore blocks.
In this case, the upper level of the lower block is developed 15 m below the
main haulage level of the upper block, leaving an 11 m pillar. This pillar is
mined over the backfilled lower stope (i.e. after the extraction and backfilling
of both the upper and lower blocks) by a sublevel retreat method employing holes
drilled upward, removing the blasted ore with remote controlled scooptrams.
Depending on the ore thickness, a remnant pillar may be left for support,
varying between two metres and five metres, but rarely more than three metres.
The slot raise in this method is driven as a conventional raise. Drilling of the
pillars is done with the top hammer drills (Tamrock Solo A405 drills, an Atlas
conventional track drill and, occasionally, with the ITH drill), drilling holes
of 63.5 or 76.2 mm.
As can be seen in the results for 2004, increases in distance from the
active mining areas to the portal are making it difficult to achieve 1,000 tpd
from Talavera. Supplemental mill feed was added from open pit mining, a practice
that will continue until Santa Pancha production begins in 2006 (see Life of
Mine Plan).
18-4
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
SANTA PANCHA MINING METHOD
The Santa Pancha deposit extends up to 190 metres below relatively
flat-lying terrain. The vein width ranges from 3 m to 16 m, averaging eight
metres, and the dip varies from 65o to 75o. Ground conditions are expected to be
good in the footwall and in the ore, however, in the hangingwall, parallel
structures contribute to poorer rock quality than that seen in Talavera.
The mining method considered for Santa Pancha is cut & fill, using
unconsolidated waste for backfill. This method will produce less hangingwall
exposure than current longhole stoping methods used at Talavera, and should
provide better dilution control.
Once ground conditions at Santa Pancha are better known, the possibility of
longhole stoping will be investigated, however, no blocks are currently
scheduled to be mined with longhole methods.
Access will be by ramp from surface, and work on establishing the portal
has begun. The ramp will be 5 m high by 4.5 m wide, driven at a grade of 12.5%,
and located in the footwall (Figure 18-3). Horizontal levels will be driven at
40 m intervals, and cross-cuts into the ore driven from the levels. The first
cut will be developed round by round; subsequent cuts will be drilled the full
length of the vein with upholes. Cut by cut, the block will be mined upwards
towards the level 40 m above, under which a sill pillar will be left.
RPA notes that uphole drilling should yield greater productivity (more ore
can be blasted at once), however, hangingwall exposures will be greater.
Openings up to eight metres wide and eight metres high may experience ground
problems in areas where the hangingwall is weak. Should hangingwall dilution
become a problem, horizontal breasting may have to be adopted to reduce
exposure, with a corresponding reduction in productivity. Waste rock for
backfill will be supplied from underground development waste (stockpiled on
surface near the portal) or from Santa Pancha open pit waste, located
approximately 1.4 km away. Waste rock will be trucked underground and then
spread by scoop.
18-7
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Equipment will be transferred from Talavera as production there wanes. No
major additional equipment purchases are contemplated for mining Santa Pancha.
RPA notes that the change in method from longhole to cut & fill involves
increased jumbo drilling requirements, and may require higher utilization of
existing equipment, with correspondingly higher maintenance costs.
Previous mining on the Santa Pancha/Panteon vein system indicated a need
for substantial dewatering to lower the water table. TMSA estimates that volumes
up to 2,000 GPM will need to be pumped out of the mine. Pumped water will be
collected in a surface settling tank, tested for contaminants, and released into
a nearby creek. Communities downstream are expected to benefit from a reliable
water supply (the creek normally runs dry in the dry season).
Fresh air will enter the mine at the portal, draw down the ramp, onto the
main levels, and exhaust up the existing shafts (Pozos). Surface exhaust fans
will be 250 HP, 72" diameter. Auxiliary ventilation fans will draw air from this
loop and ventilate working areas. Drop raises will be installed to move air from
level to level as required.
Development began in January 2005, with the first round taken to establish
a portal. Detailed planning of stope layouts, ventilation plans, and electrical
layouts are in progress. RPA recommends that a geomechanics expert be consulted
once development provides access to the Santa Pancha hangingwall.
18-8
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
OPEN PIT MINING
Current surface production is small-scale. TMSA reports that future open
pit mining will be near surface, with low stripping ratios. Excavation is by
dozer and backhoe - drilling and blasting is not necessary. Haulage is performed
by road trucks that move ore to the central mill complex. Open pit waste will be
used in the construction of tailings dams and for backfill at Santa Pancha.
Lower-grade open pit ore has been used in the past to keep the mill
operating at 1,100 tpd when higher-grade underground ore production experiences
shortfalls, and this practice is expected to continue until Santa Pancha ore is
available.
MANPOWER
As of September 2004, the Limon Mine employed 433 people, including
temporary contractors, the exploration department, and the Managua office
(Gareau, 2004). More recently, TMSA reports that the number of contractors has
been reduced. Hourly employees belong to one of two unions, whose bargaining
agreements are negotiated every two years. A strike by one of the unions
beginning late in 2002 limited production for 2002 and 2003.
18-10
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
LIFE OF MINE PLAN
Future production, detailed in Glencairn's Limon Life of Mine Plan (LOMP)
of January 2005, is summarized in Table 18-3. The LOMP is based on the Limon
Mineral Reserves as of December 31, 2004. Mill recovery varies as a function of
mill feed source, due to differences in grinding index and gold grain size of
the various veins.
TABLE 18-3 LIMON MINE, LIFE OF MINE PLAN
Glencairn Gold - Limon Mine
Units 2005 2006 2007 2008 2009 2010 Total
- ----------------------------------------------------------------------------------------
Talavera (`000 t) 265 173 83 41 54 73 688
Grade 5.7 5.3 5.7 5.2 5.4 7.1 5.7
Santa Pancha (`000 t) 170 260 302 290 1,022
Grade 5.3 5.0 4.7 4.9 4.9
Open Pit (`000 t) 67 67
Grade (g/t Au) 3.6 3.6
Mill (`000 t) 332 343 343 343 343 73 1,777
Grade (g/t Au) 5.2 5.3 5.2 4.8 5.0 7.1 5.2
Recovery (%) 85.0 86.4 87.1 87.5 87.4 85.0 86.6
Gold (oz) 47,600 50,500 49,800 46,000 47,900 14,000 256,000
Source: Glencairn (2005)
18-12
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
ENVIRONMENTAL CONSIDERATIONS
Glencairn reports that an Environmental Impact Study for mining of the
Santa Pancha deposit has been submitted and approved. TMSA was issued an
operating permit (Resolucion Administrativa Numero 03-2005) on January 31, 2005,
from MARENA, the Ministry of the Environment.
COMPLIANCE
Glencairn reports that it operates the Limon Mine in compliance with all
applicable requirements and reports that it has not received any non-compliance
orders by regulators. Under the purchase agreement in 1994, TMSA has no
obligations for environmental damages caused by the operations prior to 1994,
however, it does have the obligation to mitigate as required.
TAILINGS MANAGEMENT
Tailings from the mill are deposited in an impoundment area (Santa Rosa)
that was established in 1998 after the old area reached capacity. The
impoundment area lies within the Santa Rosa drainage, upstream of the old
tailing disposal facilities. The Santa Rosa impoundment area was completed in
the fall of 1998.
The pond is designed so that no solution is discharged to the environment;
instead, the decanted water from the tailings pond is re-circulated to the mill.
During part of the year, the impoundment area has a positive water balance and
excess tailings pond water volume is reduced through an evaporation system
(Glencairn, 2005).
TAILINGS DAM
The impoundment area dam has been built in three stages. Since the initial
Stage I in 1998, the dam has been raised in three lifts - five metres in March
2000, three metres in June 2002, and another lift in 2004. After one more
three-metre lift, scheduled for spring
18-13
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
2005, TMSA staff calculates that the impoundment will have the capacity required
to theend of 2007 (Glencairn, 2005).
In 2003, some surface cracking was observed on the dam crest, and, as part
of the due diligence process for Glencairn, RPA retained Golder Associates to
review the status of the dam following the 2002 lift. In a report dated July 25,
2003, Golder made the following conclusions and recommendations:
"There is no direct evidence of serious stability problems with the Limon
tailings dam. The observed crest cracking is very minor and almost
certainly related to seasonal swelling and shrinkage of the clay fill.
The stability design of the Phase III raise was based on post-peak strength
parameters derived from laboratory shear strength testing. This approach is
consistent with previous recommendations (Golder, 2001); furthermore the
shear strength values appear to be reasonable.
Although the surficial layer of colluvium was apparently not sub-excavated
prior to construction of the Phase III raise, the stability design took
into account the low shear strength of the colluvium, and the toe berm was
sized to provide an overall factor of safety exceeding 1.50. This approach
is an acceptable alternative to sub-excavation.
The piezometers and the two inclinometers that were damaged during the
construction of the Phase III raise are currently being replaced. These
will be important in the future to monitor and verify the good performance
of the dam.
A tailings beach should be deposited off the upstream face of the dam;
otherwise the upstream slope may be subject to wave erosion and/or
deformation. This does not represent an immediate or serious threat to the
dam; however it could lead to a requirement for ongoing slope repairs.
The deficiencies in the construction of the overflow pipes, which were
noted by LEQ (2003), should be remedied as soon as possible.
Glencairn Gold Corporation should request information on the hydrological
design basis of the overflow pipes. This should include explicit
information on the design storm and on the design maximum operating water
level in the pond. If appropriate freeboard is not observed, a large storm
could cause an overtopping failure of the dam."
18-14
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
During the 2005 site visit, RPA observed minor crest cracking similar to
that mentioned by Golder. Monitoring equipment (piezometers and inclinometers)
was in place, and regularly-scheduled readings have not indicated any stability
problems to date. Tailings are placed by the crest to form a tailings beach, a
practice TMSA has been following since June 2002. Overflow piping was completely
removed in March 2004. Rain water inflows are now managed by a diversion ditch
surrounding the impoundment.
Construction of a new tailings impoundment area will be necessary to meet
the tailings storage requirements of the current Life of Mine Plan. A site to
the west of the current facility has been selected. TMSA reports that design and
permitting will begin shortly.
CLOSURE
Glencairn reports that there are no closure requirements (including
financial assurance) for the mine, shop, mill, and offices area, as these are
considered by the government to be of historic and tourism interest.
There are minimal closure requirements for the tailings dam. The final lift
design includes stabilization of the slopes and a reforestation plan has already
been filed with the government. TMSA has had good success in revegetating the
older tailings impoundments. Prior to construction of the new impoundment area,
an environmental impact study was completed and approved in June 1998 by MARENA,
the Ministry of Environment, with the following conditions:
o Preparation of a Closure plan of the old (North) tailings area
o Monitoring wells must be installed above and below the facility to
monitor groundwater quality
o Discharges of process water must be monitored and meet the criteria of
Decree 33-95 which provides water quality guidelines for discharge of
industrial wastewater;
o Monitor the condition and performance of the facility; and
o Personnel responsible for the tailings disposal facility must be
trained to safely operate the facility.
18-15
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Glencairn reports that it is in compliance with all of these requirements.
It is reported that the government has accepted, in writing, the closure of the
old tailings area.
A program of re-vegetation of the old tailings is in progress.
Re-vegetation on the tailings occurs naturally at a very rapid rate due to the
favourable climate and the retention of water within the former tailings cells.
A reforestation program, currently underway, significantly reduces the potential
for erosion, as well as the requirement for rehabilitation. Local varieties of
trees have been planted in two areas and a third area is the site of a vegetable
crop. The area surrounding the mine is annually subject to heavy rainfall in
October and November. Prior to its merger with Glencairn, Black Hawk had
constructed overflow channels on all of the old tailings cells in order to
eliminate erosion during the rainy season.
The Limon mine closure costs were estimated by an independent consultant.
Subsequently, they were modified by TMSA to better reflect local wage rates and
past experience. This estimate does not include the Santa Pancha underground and
open pit mines, or the proposed new tailings impoundment area, because the
estimate pre-dates these developments. RPA understands that Glencairn is in the
process of estimating closure costs for Santa Pancha.
CAPITAL AND OPERATING COST ESTIMATES
Capital and operating costs have been estimated by mine staff, based on
historical costs, and reviewed by RPA.
Capital costs for Talavera include deferred development, equipment
rebuilds, underground pump installations, and miscellaneous materials. Santa
Pancha capital costs include deferred development, ventilation system
installation, pumping systems, equipment purchases & rebuilds, and electrical
systems. Deferred development costs are calculated on a cost per metre basis,
using actual material costs from developing ramps at Talavera. Infrastructure
capital costs include tailings dam construction, light vehicles,
18-16
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
training, and buildings/mill spares. Reclamation costs are based on TMSA's
closure estimate, with $100,000 added by RPA to cover reclamation of Santa
Pancha and the new tailings pond, which were not included in TMSA's estimate. No
contingency has been applied to capital costs. The capital costs are summarized
in Table 18-4.
In RPA's opinion, capital cost estimates are reasonable. Talavera and
Infrastructure costs are well-known and predictable. Santa Pancha costs will
depend on efficient execution of the pre-production schedule, and RPA recommends
that a contingency be applied. Reclamation estimates are based on past
experience on the mine site.
TABLE 18-4 LOMP CAPITAL COSTS
Glencairn Gold - Limon Mine
Area Item Cost (`000s)
- ----------------------------------------------------------------------------
Talavera Deferred Development 1,372
Equipment 350
Pumping 200
Material 331
Santa Pancha Deferred Development 1,740
Ventilation 971
Pumping 391
Equipment 604
Surface Facilities 330
Electrical 161
Infrastructure Tailings Dams 1,141
Light Vehicles 179
Training 96
Buildings/Mill Spares 197
Closure Reclamation 1,036
- ----------------------------------------------------------------------------
TOTAL 9,096
Source: Glencairn, 2005.
18-17
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Operating costs for the Limon Mine are based on past experience, with the
exception of Santa Pancha mining costs, which were developed from first
principles by TMSA staff. Unit operating costs are summarized in the Table 18-5.
Talavera mining cost projections are approximately 8% lower than previous
years, due to haulage savings from a new underground truck chute, reduced
reliance on expatriate supervision, and increased use of low-cost ANFO in place
of high-cost high explosives.
Normally, longhole mining would be expected to be lower-cost than cut &
fill mining. Comparing Talavera costs to Santa Pancha costs, however, the
opposite is true, due to the difference in vein widths. Talavera averages close
to two metres, while Santa Pancha averages close to eight metres. The increased
tonnes per vertical meter allows cut & fill mining to be more productive than
narrow-vein longhole methods. In areas where Santa Pancha is narrow, unit costs
are expected to be higher.
TABLE 18-5 LOMP UNIT OPERATING COSTS
Glencairn Gold - Limon Mine
LOMP
Item Units 2003 2004 2005 Average
- -------------------------------------------------------------------------------------
Talavera Mining $/t Talavera ore 12.98 12.93 11.88 11.88
Santa Pancha Mining $/t Santa Pancha ore 10.45
Open Pit Mining $/t Open Pit ore 2.41 3.23 4.45 4.45
Total Mining $/t milled 14.93 13.56 12.31 12.74
Milling $/t milled 6.16 5.73 6.21 6.21
Maintenance $/t milled 1.86 3.05 3.29 3.29
Power $/t milled 7.11 7.67 7.44 7.44
G&A $/t milled 11.52 11.07 10.44 10.44
- --------------------------------------------------------------------------------------
TOTAL $/t milled 41.58 41.08 39.70 40.13
Source: Glencairn, 2005.
18-18
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
In RPA's opinion, operating costs should be as predicted, subject to normal
operating variation as seen in the historical record. Santa Pancha mining costs
remain unproven, and may vary by a greater amount, however, in RPA's opinion,
within the bounds of the sensitivity testing (see Sensitivity Analysis below).
ECONOMIC ANALYSIS
Glencairn has prepared a Life of Mine Plan that schedules production of the
Mineral Reserves (as of January 1, 2005). The mine life is forecast to be
approximately five years, ending in the 1st quarter of 2010. RPA's projection of
the pre-tax cash flow is shown in Table 18-6. The key input parameters are:
o Production of 1,100 tonnes per day (based on 304 days per annum).
o Reserve and Resource Base: Mineral Reserves of 1.78 million tonnes at
an average grade of 5.2 g/t Au, and Measured and Indicated Mineral
Resources of 203,000 tonnes at an average grade of 6.0 g/t Au.
o Total production: 1.78 million tonnes @ 5.2 g/t Au.
o Annual gold production: 48,000 ounces, average.
o Metallurgical recovery of 86.6%.
o Gold price of $375 per ounce.
o Silver revenue assumed to be not material.
o Revenue is recognized at the time of production.
o Operating costs: $40 per tonne milled.
o Capital costs: $9.1 million.
18-19
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
GLOBAL MARKETS
The principal commodities produced at the Limon Mine (gold and silver
by-product) are freely traded, at prices that are widely known, so that
prospects for sale of any production are virtually assured. RPA used a gold
price of $375 per ounce for the Base Case.
The Nicaraguan Cordoba has shown a steady decline against the US dollar
over the past few years: . o February 2003 - 1 US dollar = 14.79 Cordobas . o
February 2004 - 1 US dollar = 15.54 Cordobas . o February 2005 - 1 US dollar =
16.22 Cordobas
For costs originally estimated in Cordobas (for example, labour), Glencairn
applies an inflation factor of 6% per annum before converting to US dollars.
CASH FLOW ANALYSIS
The undiscounted pre-tax cash flow totals $8.8 million. The unit cash
operating cost is $280 per ounce of gold. Capital expenditures are estimated to
total $36 per ounce, and royalties are forecast to total $22 per ounce, over the
remaining mine life. The total cash cost of production, including operating,
capital, and royalties, is estimated to be $338 per ounce.
Glencairn's physical and cost data underlying RPA's cash flow model are
consistent with operations during the past several years. In view of recent gold
prices ranging from $400 per ounce to $440 per ounce, the Limon Mine is expected
to generate a positive cash flow for the period detailed in the Life of Mine
Plan.
18-20
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com - --------------------------------------------------------------------------------
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
Variations to the LOMP base case NPV calculated at a 5% interest rate are
detailed in Table 18-7, and graphed in Figure 18-4. The cash flow is most
sensitive to gold price, followed by operating cost. Downside possibilities
related to Santa Pancha hangingwall stability (increased costs and dilution)
have a lesser impact than the previously mentioned factors.
TABLE 18-7 SENSITIVITY DATA
Glencairn Gold - Limon Mine
Parameter
Variables Units -20% -10% Base +10% +20%
- --------------------------------------------------------------------------
Gold Price $/oz 300 338 375 413 450
Operating Cost $/tonne 32.35 36.40 40.13 44.49 48.53
Capital Cost $millions 7.3 8.2 9.1 10.0 10.9
Mine Life Mt 1.42 1.60 1.78 1.96 2.13
NPV Units -20% -10% Base +10% +20%
- --------------------------------------------------------------------------
Gold Price $millions (8.5) (0.8) 7.0 14.8 22.5
Operating Cost $millions 19.4 13.2 7.0 0.8 (5.4)
Capital Cost $millions 8.6 7.8 7.0 6.2 5.4
Mine Life $millions 3.9 5.0 7.0 8.0 8.7
18-22
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
19 CONCLUSIONS
Based on our review of the current production and past exploration data,
RPA concludes that:
o The procedures used in assaying, and Mineral Reserve and Mineral
Resource estimation, are in keeping with industry standards and are
appropriate for the deposit and mining methods.
o The resource and reserve blocks might be better outlined by using the
Contour Method of estimating Mineral Resources, in order to better
represent grade distribution.
o RPA concurs with Glencairn's Life of Mine Plan for five years
commencing January 1, 2005, and believes that the production targets
are achievable. Annual production should average 48,000 ounces per
year over the remaining five years of reserves.
o Maintaining stability of the hangingwall will be crucial to
successfully mining the Santa Pancha deposit.
o The Life of Mine Plan cash flow is most sensitive to gold price and
operating cost.
o Glencairn has identified a number of promising exploration targets. In
RPA's view, continued follow up drilling and surface exploration are
warranted.
o There is good potential for the discovery of gold veins with similar
mineralization as at Talavera.
o Some of the RPA check assay values are slightly higher than the Limon
laboratory results. The differences are considered to be due to the
variability in gold between the two halves of the core, and are not
cause for concern, in RPA's view.
19-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
20 RECOMMENDATIONS
RPA recommends that:
o Ongoing exploration efforts continue, with the goal of extending the
mine life by conversion of resources to reserves, and by delineating
extensions to existing veins in the immediate mine area.
o Ongoing exploration efforts continue to test the Santa Rosa-Uval
target and other target areas by drilling.
o Glencairn continue with detailed mine planning for the Santa Pancha
deposit, including options for varying amounts of hangingwall
exposure, and evaluation of the impact on operating costs.
o Minimum mining width be investigated by measurement of existing stopes
at Talavera, and that the results be incorporated into Mineral Reserve
estimation procedures.
o A contingency be applied to Santa Pancha capital requirements.
o A geomechanics expert be consulted when development provides access to
the Santa Pancha hangingwall.
20-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
21 SOURCES OF INFORMATION
Agnerian, H. and Roscoe, W.E., 2002, The Contour Method of Estimating Mineral
Resources: Can. Inst. Min. & Metallurgy Bulletin, v. 95 pp. 100-107,
July 2002.
Atkin, K.T.J., 2005a, Personal Communication.
Atkin, K.T.J., 2005b, December 31, 2004, Reserve Estimate and Exploration
Summary: Triton Minera, S.A. Internal Memorandum to James Watts, January
31, 2005.
Gareau, M, 2005, Personal Communication on the Description of the Type of
Epithermal Gold Mineralization at Limon, February 2005.
Gareau, M., 2004, Technical Report on the Santa Pancha Resource Estimate for
the Limon Mineral Concession of Nicaragua: Glencairn Internal (NI 43-101)
Report, November 24, 2004.
Glencairn Gold Corporation, 2005, Miscellaneous Technical Data.
Glencairn Gold Corporation, 2004, Annual Information Form (AIF), May 2004.
Gold-Ore Resources Ltd., 2005, Press Release of January 6, 2005.
Gold-Ore Resources Ltd., 2005, Press Release of June 24, 2004.
Golder Associates Ltd., 2003, Review of Phase III Tailings Dam, El Limon Mine:
Draft Technical Memorandum No. 031-118024 to Roscoe Postle Associates Inc.,
July 25, 2003.
Golder Associates Ltd., 2001, Causes of El Limon Tailings Dam Failure:
Privileged and Confidential Report No. 001-1833 to Black Hawk Mining Inc.,
August 10, 2001.
Grande Cache Resources Ltd., 2004, Press Release of October 27, 2004
Hedenquist, J., 2004, Observations on Assessment of the Santa Rosa - Uval and
Victoria Targets, El Limon Epithermal Gold Mining District, Nicaragua:
Report for Glencairn Gold Corporation, December 2004.
Hedenquist, J., 2002, Observations on Exploration Potential in the El Limon
Epithermal Gold Mining District, Nicaragua: Report for Black Hawk Mining
Ltd., April 2002.
Hedenquist, J.W., Arribas, J. and Gonzales-Urien, E., 2000, Exploration for
Epithermal Gold Deposits: Reviews in Economic Geology, Vol. 13, pp. 245-277.
21-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
Perez, B.P., 2005, Check Assay Results on Internal Laboratry Standards: TMSA
Internal Data, October to December, 2004.
Roscoe, W.E., 2004, Santa Pancha Mineral Resource Estimate: RPA Memorandum to
Michael Gareau of Glencairn Re Site Visit to El Limon from November 2 to 4,
2004, November 8, 2004.
Roscoe, W.E., Clow, G.G. and Lalonde, M.A., 2003, Technical Report on the
Nicaragua Properties of Black Hawk Mining Inc.: RPA NI 43-101 Report
Prepared for Black Hawk Mining Inc., August 12, 2003.
Steffen, Robertson and Kirsten (U.S.), Inc.,1999, Update to Technical Audit
Black Hawk Mining Inc. Triton Minera S.A. El Limon Mine, Nicaragua;
prepared for Standard Bank, New York, February 17, 1999.
Triton Minera, S.A., 2005, Manual for Laboratory Procedures for Sample
Preparation and Assaying of Samples at the El Limon Mine Laboratory (in
Spanish): Internal Company Document, January, 2005.
Venturo, P., 2005, Personal Communication.
21-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
22 SIGNATURE PAGE
This report titled "Technical Report on Limon Mine, Nicaragua" and dated
February 23, 2005 was prepared by and signed by the following authors:
| Dated at Toronto, Ontario February 24, 2005 | Hrayr Agnerian, M.Sc.(Applied), P.Geo. Consulting Geologist Roscoe Postle Associates Inc. |
| Dated at Toronto, Ontario February 24, 2005 | Jason Cox, P.Eng. Senior Mining Engineer Roscoe Postle Associates Inc. |
22-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
23 CERTIFICATE OF QUALIFICATIONS
HRAYR AGNERIAN
I, Hrayr Agnerian, M.Sc. (Applied), P.Geo., do hereby certify that:
1. I am a Consulting Geologist with Roscoe Postle Associates Inc. of Suite
501, 55 University Ave Toronto, ON, M5J 2H7.
2. I am a graduate of the American University of Beirut, Lebanon in 1966 with
a Bachelor of Science degree in Geology, of the International Centre for
Aerial Surveys and Earth Sciences, Delft, the Netherlands, in 1967 with a
diploma in Mineral Exploration, and of McGill University, Montreal, Quebec,
Canada, in 1972 with a Masters of Science degree in Geological Engineering.
3. I am registered as a Professional Geoscientist in the Provinces of Ontario
(Reg. No. 0757) and Saskatchewan (Reg. No. 4305), and as a Professional
Geologist in the Province of Quebec (Reg. No. 302). I am a Member of the
Canadian Institute of Mining, Metallurgy and Petroleum, and the Prospectors
and Developers Association of Canada, and a Fellow of the Geological
Association of Canada.
4. I have worked as a Geologist for a total of 35 years since my graduation.
My relevant experience for the purpose of the Technical Report is:
o Review and report as a consultant on more than seventy mining
operations and Projects around the world for due diligence and
regulatory requirements
o District Geologist for Canadian mining company
o Project/Exploration Geologist for several Canadian exploration
companies.
5. I have read the definition of "qualified person" set out in National
Instrument 43-101 ("NI43-101") and certify that by reason of my education,
affiliation with a professional association (as defined in NI43-101) and
past relevant work experience, I fulfill the requirements to be a
"qualified person" for the purposes of NI43-101.
6. I am responsible for overall preparation of the Technical Report, including
all sections. . I visited the Limon Mine from January 18 to 20, 2005.
7. I have had no prior involvement with the property that is the subject of
the Technical Report
8. I am not aware of any material fact or material change with respect to the
subject matter of the Technical Report that is not reflected in the
Technical Report, the omission to disclose which makes the Technical Report
misleading.
23-1
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
9. I am independent of the Issuer applying the tests set out in section 1.5 of
National Instrument 43-101.
10. I have read National Instrument 43-101F1, and the Technical Report has been
prepared in compliance with National Instrument 43-101 and Form 43-101F1.
11. I consent to the filing of this Technical Report with any stock exchange
and other regulatory authority and any publication by them, including
electronic publication in the public company files on their websites
accessible by the public, of this Technical Report.
Dated at Toronto, Ontario Hrayr Agnerian, M.Sc.(Applied), P.Geo.
February 24, 2005 Consulting Geologist
Roscoe Postle Associates Inc.
23-2
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
JASON J. COX
I, Jason J. Cox, P. Eng., do hereby certify that:
1. I am a Senior Mining Engineer with Roscoe Postle Associates Inc. of Suite
501, 55 University Ave Toronto, ON, M5J 2H7.
2. I am a graduate of the Queen's University, Kingston, Ontario, Canada, in
1996 with a Bachelor of Science degree in Mining Engineering.
3. I am registered as a Professional Engineer in the Provinces of Ontario
(Reg.# 90487158). I am a Member of the Canadian Institute of Mining,
Metallurgy and Petroleum.
4. I have worked as a Mining Engineer for a total of 8 years since my
graduation. My relevant experience for the purpose of the Technical Report
is:
o Review and report as a consultant on more than a dozen mining
operations and Projects around the world for due diligence and
regulatory requirements
o Planning Engineer to Senior Mine Engineer at three North American
mines
o Contract Co-ordinator for underground construction at an American mine
5. I have read the definition of "qualified person" set out in National
Instrument 43-101 ("NI43-101") and certify that by reason of my education,
affiliation with a professional association (as defined in NI43-101) and
past relevant work experience, I fulfill the requirements to be a
"qualified person" for the purposes of NI43-101.
6. I am responsible for Chapters 4 and 16-20 of the Technical Report.
7. I visited the Limon Mine from January 18 to 20, 2005.
8. I have had no prior involvement with the property that is the subject of
the Technical Report
9. I am not aware of any material fact or material change with respect to the
subject matter of the Technical Report that is not reflected in the
Technical Report, the omission to disclose which makes the Technical Report
misleading.
10. I am independent of the Issuer applying the tests set out in section 1.5 of
National Instrument 43-101.
11. I have read National Instrument 43-101F1, and the Technical Report has been
prepared in compliance with National Instrument 43-101 and Form 43-101F1.
12. I consent to the filing of this Technical Report with any stock exchange
and other regulatory authority and any publication by them, including
electronic publication in
23-3
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
the public company files on their websites accessible by the public, of
this Technical Report.
Dated 24th day of February, 2005.
Jason J. Cox, P. Eng.
23-4
ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com
- --------------------------------------------------------------------------------
24 APPENDIX
CHECK ASSAY RESULTS: LIMON LABORATORY V.S. ACME
LABORATORIES, DIAMOND DRILL HOLES FROM POZO 1 &
2, SANTA PANCHA DEPOSIT
- ---------------------------------------------------------------------------------------
Sample Limon Lab. Orig Limon Lab. Check Acme Lab assay Remarks
No. assay (g/t Au) assay value (g/t Au) (g/t Au)
- ---------------------------------------------------------------------------------------
137717 72.92 85.16 70.23
137718 55.85 62.02 53.20
137709 49.82 55.47 53.32
137724 39.80 27.36 27.68
137715 36.36 34.11 34.91
137720 31.54 33.60 25.33
137720 31.54 25.10 Acme duplicate
137716 28.32 28.90 28.64
137716 28.32 29.38 Limon duplicate
137708 23.28 23.52 20.30
137712 22.66 20.67 20.08
137727 22.35 26.19 24.53
137727 22.35 24.75 Limon duplicate
137728 22.32 21.53 23.04
137730 21.43 21.05 17.95
137723 21.32 20.57 22.35
137711 20.57 25.78 28.02
137714 20.26 28.75 24.83
137710 18.38 25.23 26.09
137719 16.90 15.15 15.61
137722 16.08 15.67 14.70
137729 15.56 10.80 13.23
137731 14.84 22.80 19.81
137713 14.06 19.75 16.60
137726 11.83 11.04 11.61
137725 8.02 11.52 7.21
137707 0.00 0.00 0.00 Blank
Standard 3.39 Acme Standard
- ---------------------------------------------------------------------------------------
Source: Glencairn, 2005.
- ---------------------------------------------------------------------------------------
24-1
