EXHIBIT 99.2
GRYPHON GOLD CORPORATION
CANADIAN NI 43-101
TECHNICAL REPORT
PRELIMINARY SCOPING STUDY OF PROJECT DEVELOPMENT
FOR
THE BOREALIS GOLD PROJECT, NEVADA, USA
LATITUDE 38 DEGREES 23' NORTH
LONGITUDE 118 DEGREES 46' WEST
JUNE 7, 2004
PREPARED BY:
BEHRE DOLBEAR & COMPANY, INC.
600 17TH STREET, SUITE 2100 SOUTH
DENVER, CO 80202
TEL: 303-620-0020
FAX: 303-620-0024
E-MAIL: DENVER@DOLBEAR.COM
BEHRE DOLBEAR PROJECT 03-038B
BEHRE DOLBEAR
BEHRE DOLBEAR & COMPANY (USA), INC.
founded 1911 MINERALS INDUSTRY CONSULTANTS
June 7, 2004
Mr. Allen S. Gordon
President and CEO
Gryphon Gold Corporation
1153 Bergen Parkway
Su M290
Evergreen, CO 80432-9501
Mr. Gordon:
Behre Dolbear & Company (USA), Inc. (Behre Dolbear) is pleased to enclose for
Gryphon Gold Corp. (Gryphon Gold) three copies of its report entitled A
PRELIMINARY SCOPING STUDY OF PROJECT DEVELOPMENT FOR THE BOREALIS GOLD PROJECT,
NEVADA, USA.
Behre Dolbear has worked closely with Gryphon Gold and its other consultants in
modeling the mineral resources and evaluating mine development alternatives at
the Borealis Project, and this report presents the findings of the combined
team. Succinctly, these findings are that the existing three-phase project
business plan is well-conceived, is the current optimum plan, and is supported
by the extensive project database available from more than 20 years of past work
on the project. Immediate implementation of the phased plan is warranted. There
are multiple types of gold resources at Borealis, providing Gryphon Gold
potential flexibility in its future mine development options and suggesting the
current optimum plan be reevaluated as the project advances.
This report is prepared in accordance with guidelines in Canadian NI43-101. If
you have questions, please address them to Qingping Deng, the Qualified Person
of this technical report, in Denver or to Donald Cooper. Donald Cooper can be
contacted at his email address: dkc1777@comcast.net or his direct telephone:
215-702-8974. We appreciate the confidence Gryphon Gold placed in Behre Dolbear.
Sincerely,
Behre Dolbear & Company
BEHRE DOLBEAR & COMPANY (USA), INC.
100 Park Avenue - Suite 1600, New York, NY 10017 212-684-4438 fax 212-684-4150
DENVER GUADALAJARA HONG KONG LONDON NEW YORK SANTIAGO SYDNEY TORONTO VANCOUVER
www.dolbear.com
TABLE OF CONTENTS
1.0 EXECUTIVE SUMMARY .................................................... 1
1.1 Location ........................................................ 2
1.2 Ownership ....................................................... 3
1.3 Access and Infrastructure ....................................... 3
1.4 History ......................................................... 3
1.5 Geology and Mineralization ...................................... 4
1.6 Drill Hole Database ............................................. 5
1.7 Mineral Resources and Mining Potential .......................... 5
1.8 Oxide Open Pit Development Sequence ............................. 7
1.9 Conclusions ..................................................... 8
2.0 INTRODUCTION AND TERMS OF REFERENCE .................................. 10
3.0 DISCLAIMER ........................................................... 12
4.0 PROPERTY DESCRIPTION AND LOCATION .................................... 13
4.1 Location ........................................................ 13
4.2 Property Description and Ownership .............................. 13
4.3 Permits ......................................................... 14
5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND
PHYSIOGRAPHY ......................................................... 16
5.1 Access .......................................................... 16
5.2 Climate and Physiography ........................................ 16
5.3 Existing Site Conditions, Infrastructure and Available
Services ........................................................ 16
6.0 HISTORY .............................................................. 18
6.1 History ......................................................... 18
6.2 Past Production ................................................. 18
7.0 GEOLOGIC SETTING ..................................................... 20
7.1 Regional Geology ................................................ 20
7.2 Local Geology ................................................... 20
7.2.1 Miocene and Younger Igneous and Sedimentary Rocks ......... 20
7.2.2 Structure ................................................. 22
8.0 DEPOSIT TYPE ......................................................... 23
9.0 MINERALIZATION ....................................................... 24
10.0 EXPLORATION .......................................................... 25
11.0 DRILLING ............................................................. 27
12.0 SAMPLING METHOD AND APPROACH ......................................... 28
12.1 General ......................................................... 28
12.2 Freedom Flats Example ........................................... 28
12.3 Drill Hole Database ............................................. 29
13.0 SAMPLE PREPARATION, ANALYSIS AND SECURITY ............................ 30
13.1 Analyses and quality Control .................................... 30
13.2 Security ........................................................ 30
14.0 DATA VERIFICATION .................................................... 31
15.0 ADJACENT PROPERTIES .................................................. 32
16.0 MINERAL PROCESSING AND METALLURGICAL TESTING ......................... 33
16.1 Metallurgy ...................................................... 33
16.2 Processing ...................................................... 34
i
17.0 MINERAL RESOURCE ESTIMATES ........................................... 37
17.1 Mineral Resources ............................................... 37
17.1.1 In-Situ Mineral Resources in Main Borealis
Project Area ............................................. 37
17.1.2 In-Situ Mineral Resources at Jamies Ridge, Cerro
Duro and Purdy's Peak .................................... 42
17.1.3 Mineral Resources from Existing Heaps and Stockpiles ..... 42
17.2 Mining Potential Analysis ....................................... 43
17.2.1 Mining Potential for the In-situ Mineral Resources in the
Main Project Area Using Heap Leaching and an
ADR Recovery Plant ....................................... 43
17.2.2 Mining Potential for the Heaps, Dumps and Stockpiles ..... 46
17.2.4 Mining Potential of Freedom Flats Using a 2,000tpd Sulfide
Mill Combined with Heap Leaching ......................... 46
18.0 OTHER RELEVANT DATA AND INFORMATION .................................. 49
19.0 INTERPRETATION AND CONCLUSIONS ....................................... 50
20.0 RECOMMENDATIONS ...................................................... 51
20.1 Phased Business Plan ............................................ 51
20.2 Re-development Alternatives ..................................... 51
20.3 Oxide Open Pit Development Sequence ............................. 52
21.0 REFERENCES ........................................................... 54
22.0 DATE ................................................................. 55
23.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORT ON DEVELOPMENT
PROPERTIES AND PRODUCTION PROPERTIES ................................. 56
23.1 Mining .......................................................... 56
23.1.1 Surface Mining ........................................... 56
23.1.2 Underground Mining ....................................... 56
23.2 INFRASTRUCTURE .................................................. 58
23.3 Environmental Considerations .................................... 61
23.4 Costs and Financial Analysis .................................... 62
23.4.1 Capital Costs ............................................ 62
23.4.2 Operating Costs .......................................... 62
23.4.3 Financial Analysis ....................................... 63
24.0 CERTIFICATE OF AUTHORS ............................................... 65
25.0 ILLUSTRATIONS ........................................................ 67
APPENDICES
Appendix 1: In-Situ Mineral Resource Model in Main Borealis Project Area
Appendix 2: Preliminary Cash Flow Model
Appendix 3: Phase 1 Drilling-Sampling-Testing Program Summary
ii
LIST OF TABLES
Table 1.1 Measured/Indicated Mineral Resources of the Borealis
Project ..................................................... 6
Table 1.2 Inferred Mineral Resources of the Borealis Project .......... 6
Table 1.3 Potentially Mineable Resources (PMR) @ $375/oz Au Price of
the Borealis Project ........................................ 7
Table 4.1 Major Anticipated Construction and Operating Permits and
Approvals for the Borealis Project .......................... 15
Table 6.1 Reported Past Borealis Production, 1981-1990 ................ 19
Table 17.1 In-Situ Measured/Indicated Mineral Resources of the Borealis
Project ..................................................... 37
Table 17.2 In-Situ Inferred Mineral Resources of the Borealis Project .. 38
Table 17.3 In-Situ Mineral Resources of the Freedom Flats Zone by
Oxidation State ............................................. 38
Table 17.4 Mineral Resources of the Jamies Ridge, Cerro Duro and Purdy's
Peak ........................................................ 42
Table 17.5 Inferred Mineral Resources Summary Existing Heaps, Dumps and
Stockpiles .................................................. 43
Table 17.6 Calculation of Grade and Tonnage in Stockpiles and Waste
Dumps ....................................................... 43
Table 17.7 Heap Leach Pit Optimization Parameters for the Borealis
Project ..................................................... 44
Table 17.8 Heap-Leach Processing Pit Optimization Results for Freedom
Flats Deposit ............................................... 45
Table 17.9 Heap-Leach Processing Pit Optimization Results For Borealis,
Polaris, East Ridge and Northeast Ridge Deposits ............ 46
Table 17.10 Mill Pit Optimization Parameters for the Borealis Project ... 47
Table 17.11 Mill/Heap-Leach Processing Pit Optimization Results for
Freedom Flats Zone .......................................... 48
Table 23.1 Operating Costs - Existing Heaps & Dumps and New Oxide &
Sulfide Resource ............................................ 63
Table 23.2 Financial Analysis: Heap Leaching and ADR Plant (All five
pits) ....................................................... 63
Table 23.3 Financial Analysis: Combined Heap Leach and Sulfide Mill .... 64
LIST OF FIGURES
Figure 1.1 Mineral deposits and the Borealis property .................. 1
Figure 4.1 Location map of the Borealis project ........................ 13
Figure 5.1 Photograph of Borealis district, circa 1991. View to the
east, with Freedom Flats pit in the foreground. ............. 17
Figure 7.1 Geologic map of the Borealis project area ................... 21
Figure 15.1 Location of Borealis property and other nearby gold mining
properties .................................................. 32
Figure 16.1 Overall Flow Diagram ........................................ 36
Figure 17.1 Tonnage-grade curves of indicated mineral resources inside
the 0.01 opt gold mineral envelope for the Graben zone ...... 39
Figure 17.2 Tonnage-grade curves of measured/indicated mineral resources
inside the 0.01 opt gold mineral envelope for the Freedom
Flats zone .................................................. 39
Figure 17.3 Tonnage-grade curves of measured/indicated mineral resources
inside the 0.01 opt gold mineral envelope for the Borealis
zone ........................................................ 40
Figure 17.4 Tonnage-grade curves of indicated mineral resources inside
the 0.01 opt gold mineral envelope for the Polaris zone ..... 40
Figure 17.5 Tonnage-grade curves of measured/indicated mineral resources
inside the 0.01 opt gold mineral envelope for the East Ridge
zone ........................................................ 41
Figure 17.6 Tonnage-grade curves of measured/indicated mineral resources
inside the 0.01 opt gold mineral envelope for the Northeast
Ridge zone .................................................. 41
Figure 23.1 Proposed underground workings with high-grade orebodies in
Graben and Freedom Flats deposits (looking N35 degrees E, dip
+5 degrees) ................................................. 57
Figure 23.2 Proposed underground workings with low-grade orebodies in
Graben and Freedom Flats deposits (looking N35 degrees E, dip
+5 degrees) ................................................. 58
Figure 23.3 Site General Layout ......................................... 60
iii
1.0 EXECUTIVE SUMMARY
Gryphon Gold Corporation (Gryphon Gold) controls the Borealis gold property
situated in Mineral County, Nevada through an option from Golden Phoenix
Minerals, Inc. (Golden Phoenix), the current 100 percent lease holder of the
property.
The purpose of this report is to develop a preliminary scoping plan for
re-development and operation of the Borealis Gold Project, to maximize the value
of the project and to present a plan to advance the project to production. As
part of this work, new resource models were developed for six mineralized zones
including Freedom Flats, Graben, Borealis, Polaris, East Ridge and Northeast
Ridge (Figure 1.1). Behre Dolbear, working closely with Gryphon Gold and its
other consultants, has prepared new resource models and compiled this conceptual
report on the property, and its development alternatives.
(GRAPHIC OMITTED)
FIGURE 1.1 MINERAL DEPOSITS AND THE BOREALIS PROPERTY.
(not to scale)
The Borealis property has a long history of past exploration and past gold
production. The property currently is known to host, or is believed to host,
several types of gold mineralization and gold resources. The most important gold
resources available for development or re-development include:
- partially leached heaps and low grade/waste stockpiles;
- low to moderate grade, in-place oxide resources in the sidewalls or
under the pit bottoms of five previously-mined open pits, including
the Freedom Flats, Borealis, Polaris, East Ridge and Northeast Ridge
pits;
- high grade sulfide resources in the new, unmined Graben deposit and
under the floor of the previously mined Freedom Flats pit;
1
- certain limited resources in the Cero Duro and Jamies Ridge area at a
distance of approximately three miles from the core resource area; and
- inferred oxide resources with very limited drilling at a variety of
locations on the large land position.
Gryphon Gold has developed a phased Business Plan for re-development of the
Borealis Project. After obtaining the necessary permits to conduct drilling and
metallurgical testing, the major phases of the Business Plan are:
- PHASE 1: evaluate the existing leach pads and mine dump materials for
the possibility of releaching and gold production;
- PHASE 2: further evaluate the remaining oxide ores in the district
that could be mined and transported to the new leach pad; and
- PHASE 3: evaluate the deeper high-grade sulfide mineralization found
in numerous areas of the property, including exploration of the Graben
deposit.
The prime purpose of these phased evaluations is, if warranted, to put the
various resources into production and produce gold expeditiously.
The mine re-development concepts presented in the report were formulated giving
consideration to and utilizing the existing information base available from
previous operators, from Gryphon Gold's current partner, Golden Phoenix, and
that developed recently by Gryphon Gold's staff and consultants. This
information consists of several thousand pages of documents and data gathered
during more than 20 years of exploration, development, mining, and post-mining
reclamation activities at Borealis. Using the extensive information available, a
team composed of Gryphon Gold, its consultants and Behre Dolbear ('the Team')
has collaborated on this review for re-development of the Borealis Project.
The Team initially researched the available data for information on the existing
resources in heaps and dumps and the remaining oxide resources adjacent to the
existing pits. Subsequently mineral envelopes and gold grade models were
developed for each of the mineralized zones. Oxide/transition/sulfide boundaries
for the Freedom Flats and Graben deposits were derived from the drill log data.
The next step was to develop scoping costs, recoveries and other required
parameters to enable a Lerchs Grossman pit optimization analysis to be performed
on the Freedom Flats, Borealis, Polaris, East Ridge, and North East Ridge zones.
These analyses were carried out on the five zones to evaluate the mining
potential. A generous additional waste allowance of 25 percent for the ramps has
been added to the pit optimization results because ramps are not included in the
parameters for pit optimization.
As the Borealis re-development project advances, certain additional information
needs to be gathered to allow for verification of historical results,
confirmation of the proposed concepts, further engineering and planning, and
optimization of the mine re-development. Specifically, the next priority will be
to develop additional confirmational information with the drilling and
metallurgical test work on the existing heaps and dumps, the remnant surface
oxide resources and the Graben resource area.
1.1 LOCATION
The Borealis gold property is located in southwest Nevada, approximately 12
airline miles southwest of the town of Hawthorne in the Walker Lane mineral belt
and 12 miles northeast of the California border. Hawthorne is about 100 airline
miles southeast of Reno and 260 miles northwest of Las Vegas.
The property lies in Mineral County, Nevada, in Sections 4-11, 15-18, 20, 21
Township 6 North, Range 29 East; Sections 1, 2 Township 6 North and Range 28
East; and Sections 35, 36 Township 7 North, Range 28 East. The approximate
center of the property is at longitude 118 degrees 45' 34" North and latitude 38
degrees 22' 55" West.
2
1.2 OWNERSHIP
The Borealis gold property consists of 632 contiguous unpatented lode mining
claims of approximately 20 acres each for a total of about 12,640 acres plus one
millsite claim; 215 of these claims have been re-staked recently from January
through May 2004.
The Borealis property is a joint venture between Gryphon Gold and Golden
Phoenix. Gryphon Gold, through its subsidiary, Borealis Mining Company, has the
right to acquire a 50 percent interest in the Borealis property upon incurring
qualified expenditures on work programs or making payments to Golden Phoenix in
the aggregate of US$5 million over a four-year period beginning July 2003.
Gryphon Gold, through Borealis Mining, will be the operator and manager of the
property.
Gryphon Gold has the right to acquire an additional 20 percent interest by
incurring an additional US$4 million in expenditures or alternatively by either
advancing the project to initial production or delivering to Golden Phoenix a
feasibility study for mine production based on a mineable reserve of at least
500,000 ounces of gold during the 18 months following the initial four-year
period.
The Borealis gold resource is subject to a siding scale NSR royalty based on the
price of gold; The NSR is equal to the price of gold divided by 100 expressed as
a percentage.
1.3 ACCESS AND INFRASTRUCTURE
Access to the property is gained from a gravel road located about 2 miles south
of Hawthorne from State Highway 359. Hawthorne is about 125 highway miles
southeast of Reno.
The Borealis project site has been reclaimed to the standards of the early
1990's. No buildings or power lines located on the surface remain although a
major trunk line exists about 2 miles from the property.
The nearest available services for both mine development work and mine
operations is in the small town of Hawthorne, located about 12 miles to the east
of the project area via a wide, well-maintained gravel road. Hawthorne has
substantial housing available, fuel supplies and a sufficient infrastructure to
take care of basic needs. For other services, Reno is located about 125 miles to
the northwest and could supply any material required for the development or mine
operations.
1.4 HISTORY
The Borealis property has a long history of past exploration and past gold
production.
Houston Oil and Minerals Company, who acquired the property from the Whitney
Partnership, which became the Borealis Partnership, discovered the original
Borealis gold deposit in 1978. Commercial production commenced three years later
in October 1981. The property was sold when Tenneco Inc. acquired the assets of
Houston Oil and Minerals in 1981. Tenneco minerals operated the mine until
October 1986, when the mine and other metal properties of Tenneco were sold to
Echo Bay Mines. Echo Bay completed mining of the most easily accessible oxide
gold deposits (although some remain) in January 1990 and a multiyear reclamation
program was begun.
The total of past gold production from the Borealis project was approximately
10.6 million tons of ore averaging 0.057 ounces per ton (opt) gold.
In 1992 Santa Fe Pacific Gold entered into a joint venture with Echo Bay Mines
to explore for high-grade gold sulfide ores. Their work included data
compilation and reverse circulation and core drilling of 29 deep holes. Santa Fe
had success in identifying new sulfide-zone gold mineralization, but terminated
the joint venture because of a pending merger with Newmont Mining Corporation.
Echo Bay terminated their lease agreement with the Borealis Partnership in 1996
following completion of reclamation.
3
In late 1996, J. D. Welsh Inc. leased the property from the Borealis
Partnership. Mr. Welsh had previously performed contract reclamation work for
Echo Bay and was responsible for monitoring the drain down of the leach pads.
During this time, he had recognized the excellent remaining gold potential, and
upon signing the lease, immediately joint ventured the project with Cambior
Exploration (USA). Cambior performed a major compilation program and in 1998
followed up by drilling 10 holes with some success in extending the Graben
deposit (5 holes) and in identifying new sulfide-zone gold mineralization (5
holes). They terminated the joint venture in late 1998 because of severe budget
constraints within Cambior.
During the Cambior joint venture period, Golden Phoenix Minerals, Inc. agreed
with Welsh to buy Welsh's lease rights for cash and stock. In 2001, Golden
Phoenix completed the 100 percent purchase of the lease rights and assumed full
control of the property. During the purchase period, Golden Phoenix researched
the records and entered remaining drill hole information into a digital
database, resulting in new resource estimations.
In 2003, Golden Phoenix optioned the Borealis property to Gryphon Gold.
1.5 GEOLOGY AND MINERALIZATION
Gold mineralization at Borealis is hosted by Miocene andesite flows and laharic
breccias, and volcaniclastic tuffs, which all strike northeasterly and dip
shallowly to the northwest. Underlying the Tertiary volcanics, and locally in
fault contact, is Cretaceous granodiorite with inclusions of older metamorphic
rocks. Pediment gravels cover the altered-mineralized volcanic rocks at lower
elevations along the mountain front and overlie some of the best exploration
targets.
Structures are dominantly northeast-striking faults with steep northwest dips,
and generally west-northwest-striking faults with steep southerly dips. Both of
these fault systems lie on regional trends of known mineralized systems; thus
Borealis appears to be at a major intersection of mineralized trends.
A number of pre-mineral faults in the district may have been feeders for
hydrothermal mineralization, which often followed the planes of the faults or
formed "pipes". Emplacement mechanisms of the pipes included explosive
brecciation followed by pervasive silification and sulfide/precious metal
introduction. It is likely that the pipe-like deposits may have been initially
localized along the intersections of small second order faults with the major
feeder structures. The pipe-like Freedom Flats deposit, and others, probably
formed through this mechanism.
The surface "footprint" of these pipes is rather small and they can be easily
missed with patterns of widely spaced drill holes. Once a higher-grade pipe is
suspected, fences of drill holes with a 50-foot spacing may have to be used, but
even this spacing may not be adequate to accurately define the high grade pipes.
Some deposits at the project site, such as Borealis, have a generally flatter
tabular shape, and may have formed parallel to, or within, gently dipping
volcanic flows.
Alteration and mineralization most closely associated with ore-grade material
are vuggy silica and pyrite, often in breccia. Outward from the central vuggy
silica zone is kaolinite-quartz-pyrite, followed by kaolinite-pyrite, and a
broad propylitic halo. Advanced argillic alteration with alunite may have
overprinted kaolinite-bearing zones.
During its emplacement, finely disseminated gold found in the Borealis
mineralizing system was enclosed in pyrite and through natural oxidation, this
gold was released and made available to extraction by cyanidation. Limited
evidence suggests coarse gold exists. Gold still bound in pyrite or
pyrite-silica is not easily recovered by a simple cyanide heap leach operation.
4
1.6 DRILL HOLE DATABASE
The drill hole database used for the current resource model contains 1,747 drill
holes with a total drilled length of 510,712 feet. Those holes were drilled by
different historical operators on the property. Drill hole types include diamond
core holes, reverse circulation (RC) holes and rotary holes. Mineralized zones
covered by these drill holes include the Freedom Flats, Graben, Borealis,
Polaris, East Ridge and Northeast Ridge.
There are an additional 487 drill holes with a total drilled length of 103,562
feet in the Cerro Duro, Jamies Ridge, and Purdy's Peak area, at approximately
three miles distance northwest of the current in-situ resource modeling area,
but they have not been included in this resource study. The total existing
drilling for the entire Borealis project, therefore, is 2,234 holes with a total
drilled length of 614,274 feet.
Drill hole sampling length is generally 5 feet for the RC holes, but it varies
for the core holes based on the geological intervals. Sampling length is up to
25 feet for some of the early rotary holes. Gold assays in parts per billion
(ppb) and opt are provided for most of the sampling intervals. Silver assays in
parts per million (ppm) and opt are also provided for some of the sampling
intervals.
The drill holes database was compiled and verified by Golden Phoenix. Behre
Dolbear did not conduct a confirmation review of the database.
1.7 MINERAL RESOURCES AND MINING POTENTIAL
Tables 1.1 and 1.2 summarize the measured/indicated mineral resources and the
inferred mineral resources respectively for the Borealis project.
The in-situ mineral resources for the Freedom Flats, Graben, Borealis, Polaris,
East Ridge and Northeast Ridge zones are based on a resource model develop
jointly by Behre Dolbear and Gryphon Gold for the current study. The in-situ
mineral resources for the Jamies Ridge, Cerro Duro, and Purdy's Peak zones are
based on pre-existing resource models. The mineral resource for existing heaps
and stockpiles are based on historical information and resource modeling.
5
TABLE 1.1
MEASURED/INDICATED MINERAL RESOURCES OF THE BOREALIS PROJECT
(CUTOFF GOLD GRADE = 0.01 OPT)
MINERALIZED ZONE CATEGORY K TONS AU (OPT) AU (K OZS)
- ---------------- --------- -------- -------- ----------
measured 1,452.4 0.055 79.4
Freedom Flats indicated 1,293.6 0.036 47.0
-------- ----- -----
total 2,746.0 0.046 126.4
======== ===== =====
Graben indicated 2,292.5 0.076 173.8
measured 491.8 0.055 27.0
Borealis indicated 1,395.5 0.050 69.8
-------- ----- -----
total 1,887.3 0.051 96.8
======== ===== =====
Polaris indicated 1,148.1 0.026 29.6
measured 970.6 0.019 18.0
East Ridge indicated 1,591.1 0.018 28.8
-------- ----- -----
total 2,561.7 0.018 46.8
======== ===== =====
measured 521.9 0.022 11.6
Northeast Ridge indicated 1,141.7 0.023 26.0
-------- ----- -----
total 1,663.6 0.023 37.6
======== ===== =====
Jamies Ridge and
Cerro Duro* indicated 1,499.0 0.035 52.0
Purdy's Peak* indicated 1,024.0 0.030 31.0
MEASURED 3,436.7 0.040 136.0
-------- ----- -----
TOTAL INDICATED 11,385.5 0.040 458.0
-------- ----- -----
TOTAL 14,822.2 0.040 594.0
======== ===== =====
* Cutoff grades for these mineral resources are unknown.
TABLE 1.2
INFERRED MINERAL RESOURCES OF THE BOREALIS PROJECT
(CUTOFF GOLD GRADE = 0.01 OPT)
MINERALIZED ZONE K TONS AU (OPT) AU (K OZS)
---------------- -------- -------- ----------
Freedom Flats 412.0 0.037 15.2
Graben 10,372.2 0.052 534.2
Borealis 365.7 0.035 12.7
Polaris 195.5 0.021 4.1
East Ridge 242.6 0.017 4.0
Northeast Ridge 536.7 0.023 12.6
Heaps and Stkpls. 16,312.0 0.019 304.4
-------- ----- -----
TOTAL 28,436.7 0.031 887.2
======== ===== =====
6
The mining potential for an open-pit heap-leach operation has been analyzed
using all mineral resource categories and assumed cost and economic parameters
for the Borealis project and is summarized in Table 1.3. The potentially
mineable resources (PMR) for the in-situ mineral resources in the Freedom Flats,
Borealis, Polaris, East Ridge and Northeast Ridge zones are based on
Lerchs-Grossmann (LG) pit optimization analysis with some additional mining
dilution and mining loss. A 25 percent waste allowance for ramp design has been
added to the waste tonnage in the LG pits. Mineral resources from Jamies Ridge,
Cerro Duro, and Purdy's Peak were not used for the mining potential analysis.
All the tonnages in the existing heaps and stockpiles are included in Table 1.3
as PMR.
TABLE 1.3
POTENTIALLY MINEABLE RESOURCES (PMR) @ $375/OZ AU PRICE OF THE BOREALIS PROJECT
@ 0.01 opt Rec. Au (Internal Cutoff)
RECOV. AU CONTAINED GOLD
PMR ------------- -------------- WASTE
DEPOSITS K TONS OPT K OZS OPT K OZS K TONS
-------- ------ ----- ----- ----- ------ ------
Freedom Flats 333 0.046 15.4 0.092 30.5 887
Borealis 527 0.068 35.7 0.090 47.6 2,058
Polaris 416 0.025 10.3 0.033 13.8 1,702
E. Ridge 776 0.018 14.3 0.025 19.0 198
N.E. Ridge 626 0.026 16.1 0.034 21.5 1,916
Heaps & Stkpls. 16,312 0.019 304.4 Nil
------ ----- ---- ----- ----- -----
TOTAL 18,990 0.023 436.8 6,761
====== ===== ==== ===== ===== =====
1.8 OXIDE OPEN PIT DEVELOPMENT SEQUENCE
The plan outlined below assumes that permitting allows timely completion of the
designed drilling program and the drilling program defines sufficient oxide ore
to justify development. Having obtained the tonnages and grades of all the
resources available for treatment in a heap leach oxide ore plant, a decision
can be made leading to one of three alternates: build an oxide ore treatment
plant, explore for additional oxide ore, or postpone the oxide plant and proceed
directly to the exploration of the Graben. Assuming a successful drilling and
metallurgical testing program on the existing heaps and dumps, and a positive
production decision on an oxide ore processing plant, the following steps will
be implemented:
1. WATER SUPPLY: The adjacent water wells will be reactivated, a pipeline to
the property will be constructed, and a storage tank adjacent to the
planned facilities will be built. (Additional discussion is provided in the
section on Infrastructure.)
2. PAD CONSTRUCTION: The ground between Leach Pad 3 and Leach Pad 2 will be
leveled and graded; the first phase of a fully-lined leach pad, designed
ultimately to contain 10-12 million tons of crushed ore, will be
constructed.
3. INITIAL HEAP MINING: A mining and crushing contractor will be engaged for
all mining. Initially, only a loader and one or two trucks will be needed
to pick up and transport to a secondary crushing installation the partially
crushed existing heaps containing 4-5 million tons of economic materials.
The crusher will be adjacent to the heap. Equipment sizing will likely be
in the range of 75-ton rear dump trucks and 10-12 cu.yd. front-end loaders,
the latter being used to load and haul when the mining face and the crusher
are close enough to each other. Mining costs for the existing heaps and
dumps are expected to be very low, as no drilling and blasting and probably
no haulage trucks will be required. It is also possible that this material
could be transported to the crusher with a simple portable conveyor system.
4. POWER SUPPLY: A power generating plant and fuel storage tank will be
purchased and installed to initially provide power for the crusher,
portable offices, etc. Additional generating units will be added later to
power a
7
2-stage crusher and pumps, etc., for the processing plant. (Additional
discussion is provided in the section on Infrastructure.)
5. BUILD ADR PLANT: An ADR plant sized to treat leach solutions from a
2-million ton per year ore mining operation will be purchased and installed
adjacent to the heap leach pad. Lined ditches, piping, pumps, and ponds
will be added. All oxide ore and the higher recovery transition ore will be
treated by heap leaching, followed by an ADR carbon plant. The lower
recovery transition ore and any sulfide ore encountered will either be left
in situ for future mining, sent to a custom mill, or stockpiled until a
sulfide ore treatment plant is available to process it.
6. BEGIN MINING IN-SITU ORE: The mining contractor will be contracted to bring
in additional equipment to commence stripping and mining of the in-situ ore
and waste in the Freedom Flats, Borealis, Polaris East Ridge and North East
Ridge. Mining of the ore from the existing pits, however, will require
drilling, blasting, loading and hauling of ore to the crusher as well as
waste removal to a suitable nearby location.
7. EXPAND CRUSHING: It is also planned to use a contractor to do the crushing,
which will be to 3/4 in or 1/2 in depending upon the results of the test
work. Most of the existing heaps will require only secondary crushing, as
they have already been partially crushed, but the existing "waste dumps"
will require two stages of crushing. Before the existing, partially
crushed, heap ore is exhausted, the crushing contractor will bring in a
primary crushing unit to crush the existing, economic run-of-mine heaps, as
well as the ore from Freedom Flats, and four other small open pits.
8. OXIDE EXPLORATION: While the existing heaps, stockpiles, dumps and known
open-pit oxide resources are being processed, exploration for additional
oxide ore on the property will be carried out.
9. UNDERGROUND EXPLORATION/DEVELOPMENT: As soon as mining in the Freedom Flats
pit has proceeded to a sufficient depth, an underground mining contractor
will be engaged to drive an exploration/production decline into the Graben
high-grade underground deposit.
10. GRABEN INFILL DRILLING: Definitive exploration drilling of the Graben will
then be done from this decline and its associated crosscuts.
1.9 CONCLUSIONS
As a result of its analysis, the evaluation Team summarizes and concludes that:
1. EXCELLENT EXPLORATION POTENTIAL: The Borealis district has exploration
potential that far exceeds the currently identified mineral resources.
Discovery potential includes oxide mineralization adjacent to exiting pits,
new oxide deposits within the large land position, sulfide mineralization
below and adjacent to the existing pits, sulfide mineralization elsewhere
on the property, particularly at the high-grade Graben deposit and its
apparent extensions to the north.
2. MULTIPLE TYPES OF GOLD RESOURCES AND DEVELOPMENT ALTERNATIVES: Multiple
types of gold resources exist at Borealis and multiple mine development
options are available to Gryphon Gold. Additional sampling, testing and
engineering are warranted. As the business environment evolves and as
additional project information becomes available, the preferred development
plan and the alternative development plans should be frequently
reevaluated.
3. IMMEDIATE ADVANCEMENT OF THE PHASED BUSINESS PLAN: Based on the currently
available information, the preferred course of action for Gryphon Gold is
the immediate advancement of the Phased Business Plan outlined in this
report.
4. PROCESS HEAPS AND DUMPS: Depending upon the results of the anticipated
drill program, the initial development phase is to process the existing
heaps and dumps. Break-even cutoff grades for the existing heaps and dumps
are sufficiently low that at least 5 to 6 million tons and perhaps as much
as 10 million tons of this material could provide economic feed to the heap
leach recovery plant.
8
5. FREEDOM FLATS & OTHER PITS: The second development phase is expected to
focus on in-place mineralization, with the expansion to mining of resources
at the Freedom Flats, Borealis, Polaris, East Ridge and North East Ridge
pits. This option should be viable at a gold price of $350 per ounce or
higher. When combined with 5 million tons or more of the existing heaps and
dumps, the resources should be able to justify the construction of an ADR
gold recovery plant to process solutions from a 1.5 million to 2.0 million
ton per year heap leach operation.
6. EXPLORATION AND DEVELOPMENT OF DEEP HIGH-GRADE DEPOSITS: Cash flow from the
oxide plant can be used for the exploration and development of the deeper
high-grade sulfide mineralization in the Graben deposit.
7. POSITIVE IMPACT OF GOLD PRICES: Based on scoping-level financial analysis
current gold prices encourage the development of the Borealis Property.
9
2.0 INTRODUCTION AND TERMS OF REFERENCE
Gryphon Gold Corp. (Gryphon Gold) controls the Borealis gold property situated
in Mineral County, Nevada, approximately 12 miles southwest of the town of
Hawthorne, through an option from Golden Phoenix Minerals, Inc. (Golden
Phoenix), the current owner of the property. Gryphon Gold can earn a 50 percent
interest in the Borealis property upon incurring qualified expenditures on work
programs or making payments to Golden Phoenix in the aggregate of US$5 million
over a four-year period beginning July 2003. Gryphon Gold has the right to
acquire an additional 20 percent interest by incurring an additional US$4
million in expenditures or alternatively by either advancing the project to
initial production or delivering to Golden Phoenix a feasibility study for mine
production based on a mineable reserve of at least 500,000 ounces of gold during
the 18 months following the initial four-year period.
The Borealis property has been previously mined by Echo Bay, a major US gold
mining company, and other companies, but has remaining gold resources suitable
for exploitation by a small to medium gold mining operation.
The purpose of this report is to develop a preliminary scoping plan for
re-development and operation of the Borealis Gold Project, to maximize the value
of the project and to present a plan to advance the project to production. As
part of this work, new resource models were developed for six mineralized zones
including Freedom Flats, Graben, Borealis, Polaris, East Ridge and Northeast
Ridge (Figure 1.1).
Behre Dolbear and Company, Inc. (Behre Dolbear), working closely with Gryphon
Gold and its other consultants, has prepared new resource models and compiled
this conceptual report on the property, and its development alternatives.
Dr. Qingping Deng, Ph.D., C.P. Geol., Director of Ore Reserves and Mine Planning
of Behre Dolbear, is the Qualified Person for this preliminary scoping study and
this technical report. Dr. Deng, together with Gryphon's technical personnel and
consultants, performed the mineral resource estimation and mining potential
analysis for the Borealis property and is the author of this technical report.
Dr. Deng visited the Borealis property on November 16th, 2003, observed existing
site condition and reviewed selective core intercepts of the mineralization.
Other Behre Dolbear personnel contributed to the study include:
- Mr. Michael D. Martin, Senior Associate of Behre Dolbear, acted as
Behre Dolbear's project surface mining engineer, who, together with
Gryphon's technical personnel and consultants, developed the mining
capital costs and operating costs for the study, and completed the
open pit mining analysis and preliminary financial analysis. Mr.
Martin also visited the Borealis property on November 16th, 2003;
- Mr. Richard Kunter, Senior Associate of Behre Dolbear, acted as Behre
Dolbear's project metallurgist, who, together with Gryphon's technical
personnel and consultants, conducted the preliminary processing
analysis and developed the processing capital costs and operating
costs for the study;
- Mr. Charles Tatman, Senior Associate of Behre Dolbear, acted as Behre
Dolbear's underground mining engineer, who conducted a brief
underground mining analysis for the project; and
- Mr. William Gee, Senior Associate of Behre Dolbear, acted as Behre
Dolbear's project advisor, and has provided supervision and quality
control for the study and reviewed the technical report.
Other outside consultants to Gryphon Gold who have contributed to the study
include:
- Mr. Don East, P.E., Senior Geotechnical Engineer, Knight Piesold: Heap
and pad design, waste containment systems;
10
- Ms. Barbara Filas, P.E., President and Environmental Engineer, Knight
Piesold: Mine development and environmental permit acquisition;
- Mr. Jaye T. Pickarts, P.E., Senior Metallurgical Engineer, Knight
Piesold: Metallurgical and process flowsheet development;
- Mr. Robert W. Reisinger, P.E., Senior Environmental Engineer, Knight
Piesold: Permits and environmental planning;
- Mr. Michael G. Skurski, P.E., Senior Geotechnical Engineer, Knight
Piesold: Heap and pad layout; and
- Mr. Roger C. Steininger, Ph.D., C.P.Geol., Independent consulting
Geologist: Mine geology.
The new mine re-development concepts presented in the report were formulated
giving consideration to and utilizing the existing information base available
from previous operators, from Gryphon Gold's current partner, Golden Phoenix,
from others, and from that developed recently by Gryphon Gold's staff and
consultants, including Behre Dolbear. This information consists of several
thousand pages of documents and data gathered during more than 20 years of
exploration, development, mining, and post-mining reclamation activities at
Borealis, and includes exploration results, geophysical surveys, mineralogical
results, geologic interpretations, metallurgical testing, design engineering,
operating results, technical correspondence and scientific publications.
Using the extensive information available, a team composed of Gryphon Gold, its
consultants and Behre Dolbear (The Team) has conducted this review for
re-development of the Borealis Project. The Team initially researched the
available data for information on the previous resource estimates and the
remaining oxide resources adjacent to the existing pits on US Forest Service
land only. Resources on BLM land were not included. Subsequently geologically
controlled mineral envelopes and gold grade models were developed for each of
the mineralized zones. Oxide/transition/sulfide boundaries for the Freedom Flats
and Graben deposits were derived from drill log data. The next step was to
develop scoping level cost estimates, recoveries and other required parameters
to enable a Lerchs Grossman pit optimization analysis to be performed on the
remaining identified resource zones. These analyses were carried out on the five
pits to evaluate the mining potential. An additional waste allowance of 25
percent for the ramps has been added to the pit optimization results. Finally,
using parameters applicable to the existing heaps and dumps, break-even cut-off
grades for these resources were calculated as a guide to the drilling and
metallurgical testing program.
This report is based on information provided by Gryphon Gold and others
including documents, reports, spreadsheets, and geostatistical/mine planning
data. The historical database has not been independently verified. As the
Borealis re-development project advances, certain additional information will be
gathered which will allow for verification of historical results, confirmation
of the proposed concepts, further engineering and planning, and optimization of
the mine re-development. Specifically, the next priority will be developing
additional information with the drilling and metallurgical test work on the
existing heaps and dumps, the remnant surface oxide resources and the Graben
resource area.
Behre Dolbear frequently undertakes minerals property studies as part of the
business and qualifications of the firm. Behre Dolbear is familiar with the
mineral resource/reserve definitions and disclosure requirements of NI 43-101,
to which the mineral resource classification in this report conform. Neither
Behre Dolbear nor any of its associates involved in this project have any direct
pecuniary or contingent interests of any kind in Gryphon Gold or its mining
properties. Behre Dolbear is to receive a fee for its work based on time
expended, expenses incurred, and the firm's fee schedule.
The units commonly used in the United States, short tons of 2,000 pounds (tons),
troy ounces per short ton (opt), miles, feet, etc. are the major units used in
this report. Where metric units are used, such is noted. The currency used is
United States dollars.
11
3.0 DISCLAIMER
The opinions expressed in this report are based on the available historical
information as supplied by previous mine operators, Golden Phoenix and Gryphon
Gold. Behre Dolbear has exercised all due care in reviewing the supplied
information and believes that the basic assumptions are factual and correct and
the interpretations are reasonable. Although Behre Dolbear has independently
analyzed some of the data, the accuracy of the results and conclusions from the
review rely on the accuracy of the supplied data. Behre Dolbear has relied on
the supplied information and has no reason to believe that any material facts
have been withheld, or that a more detailed analysis may reveal additional
material information. However, Behre Dolbear did not undertake a program of
independent sampling, drilling, or assaying and therefore does not accept
responsibility for any errors or omissions in the supplied information and does
not accept any consequential liability arising from investment or other
financial decisions or actions resulting from them.
Estimates of mineral resources are inherently forward-looking statements subject
to error. Although resource estimates require a high degree of assurance in the
underlying data when the estimates are made, unforeseen events and
uncontrollable factors can have significant adverse or positive impacts on the
estimates. Actual results will inherently differ from estimates. The unforeseen
events and uncontrollable factors include: geologic uncertainties including
inherent sample variability, metal price fluctuations, variations in mining and
processing parameters, and adverse changes in environmental or mining laws and
regulations. The timing and effects of variances from estimated values cannot be
accurately predicted.
GEOLOGIC UNCERTAINTY AND INHERENT VARIABILITY: although the estimated resources
may have been delineated with appropriately spaced drilling, there is inherent
variability between duplicate samples taken adjacent to each other and between
sampling points that cannot be reasonably eliminated. There may also be unknown
geologic details that have not been identified or correctly appreciated at the
current level of delineation. This results in uncertainties that cannot be
reasonably eliminated from the estimation process. Some of the resulting
variances can have a positive effect and others can have a negative effect on
mining and processing operations. Acceptance of these uncertainties is part of
any mining operation.
METAL PRICE VARIABILITY: the price for gold fluctuates in response to many
factors beyond anyone's ability to predict. The prices used in making the
resource estimates are disclosed and differ from daily prices quoted in the news
media. The percentage change in the price of a metal cannot be directly related
to the estimated resource quantities, which are affected by a number of
additional factors. For example, a 10 percent change in price may have little
impact on the estimated resource quantities and affect only the resultant
positive cash flow, or it may result in a significant change in the amount of
resources. Because mining occurs over a number of years, it may be prudent to
continue mining for some periods during which cash flows are temporarily
negative for a variety of reasons including a belief that the low price is
temporary and/or the greater expense incurred in closing a property permanently.
VARIATIONS IN MINING AND PROCESSING PARAMETERS: the parameters used in
estimating mining and processing efficiency are based on testing and experience
with previous operations. While the parameters used have a reasonable basis,
various unforeseen conditions can occur that may materially affect the
estimates. In particular, past operations indicate that care must be taken to
ensure that proper ore grade control is employed and that proper steps are taken
to ensure that the leaching operations are executed as planned. The mining
contracts for the mines include clauses addressing these issues to help ensure
planned requirements are met. Nevertheless, unforeseen difficulties may occur in
planned operations.
CHANGES IN ENVIRONMENTAL AND MINING LAWS AND REGULATIONS: The project currently
complies with existing environmental and mining laws and regulations affecting
its operations. The resource estimates contain cost estimates based on
compliance with current laws and regulations. While there are no currently known
proposed specific changes in these laws or regulations that will affect the
Borealis project, significant changes have affected past mining industry
operations and no assurance can be given that such changes will not occur in the
future.
12
4.0 PROPERTY DESCRIPTION AND LOCATION
4.1 LOCATION
The Borealis gold resource is located in southwest Nevada, approximately 12
airline miles southwest of the town of Hawthorne in the Walker Lane mineral belt
and 12 miles northeast of the California border. Hawthorne is about 100 airline
miles southeast of Reno and 260 miles northwest of Las Vegas.
The property lies in Mineral County, Nevada, in Sections 4-11, 15-18, 20, 21
Township 6 North, Range 29 East; Sections 1,2 Township 6 North and Range 28
East; and Sections 35, 36 Township 7 North, Range 28 East. The approximate
center of the property is at longitude 118 degrees 45' 34" North and latitude 38
degrees 22' 55" West. Figure 4.1 shows the location and access of the Borealis
project.
(LOCATION MAP-GRAPHIC OMITTED)
FIGURE 4.1 LOCATION MAP OF THE BOREALIS PROJECT.
4.2 PROPERTY DESCRIPTION AND OWNERSHIP
The following property description and agreement are provided by Gryphon Gold.
Behre Dolbear has not reviewed this information.
The Borealis gold property consists of 632 contiguous unpatented mining claims
of approximately 20 acres each for a total of about 12,640 acres plus one
millsite claim; 215 of these claims have been re-staked recently from January
through May 2004. The property is controlled by Gryphon Gold Corporation through
an option agreement with Golden Phoenix Minerals, Inc., the current 100 percent
lease holder of the property, whereby Gryphon Gold can earn a joint venture
interest in the property.
Gryphon Gold Corp., through its subsidiary--Borealis Mining Company, has the
right to acquire a 50% interest in the Borealis property upon incurring
qualified expenditures on work programs or making payments to Golden Phoenix in
the aggregate of US$5 million over a four-year period beginning July 2003 as
follows:
- US$0.8 million in the first year ending July 2004;
- US$1.0 million in the second year ending July 2005;
13
- US$1.5 million in the third full year ending July 2006; and
- US$1.7 million in the fourth year ending July 2007.
Gryphon Gold, through Borealis Mining, will be the operator and manager of the
property.
Gryphon Gold has the right to acquire an additional 20 percent interest by
incurring an additional US$4 million in expenditures or alternatively by either
advancing the project to initial production or delivering to Golden Phoenix a
feasibility study for mine production based on a mineable reserve of at least
500,000 ounces of gold during the 18 months following the initial four-year
period.
The Borealis gold resource is subject to a NSR royalty held by the Borealis
Partners based on an agreement signed in 2001 with Golden Phoenix Minerals, Inc.
The royalty is a sliding scale based on the price of gold; the NSR is equal to
the price of gold divided by 100 expressed as a percentage. For example, at a
price of $300 per ounce of gold the royalty would be 3 percent NSR, at a price
of $400 per ounce the royalty would be 4 percent NSR and at a price of $500 per
ounce the royalty would be 5 percent NSR, and so on.
4.3 PERMITS
Major anticipated construction and operating permits with actual or projected
application and approval dates for the Borealis project are summarized in Table
4.1 by Knight Piesold.
Permitting of a redeveloped mine at Borealis will fall within the jurisdiction
of the US Forest Service (USFS), which will be the lead agency, according to
Knight Piesold (2003). In addition the Nevada Division of Environmental
Protection (NDEP) will subject the project to its Water Pollution Control
Program, administered by the state Bureau of Mining Regulation and Reclamation.
Approval of the Plan of Operations for exploration to conduct drilling of 137
drill holes and to conduct some geotechnical and environmental shallow pit
sampling has been received from the USFS for activities within the footprint of
the previous Borealis Mine disturbance. In addition the Reclamation Permit for
Exploration project has been received from NDEP. It is anticipated that an
Environmental Assessment (EA) would be required to redevelop the Borealis heap
leach and mine.
14
TABLE 4.1
MAJOR ANTICIPATED CONSTRUCTION AND OPERATING PERMITS AND
APPROVALS FOR THE BOREALIS PROJECT
Actual/Projected
Approving Application Actual/Projected
Permit/Approval Name Authority Date Approval Date
-------------------- ---------- ---------------- ----------------
PRECONSTRUCTION PHASE
Exploration Plan of Operations USFS Nov-03 May-04
Reclamation Permit for Exploration Project NDEP Nov-03 May-04
Plan of Operations (POO) (Requires EA or EIS) USFS Jun-04 Aug-04
Right-of-Way Permits USFS Jul-04 Aug-04
Review of State Water and Air Permits USEPA Dec-04
Section 404 Permit ACOE Sep-04 Dec-04
Air Quality Permit to Construct NDEP Sep-04 Dec-04
Water Pollution Control Discharge Permit (WPCP) NDEP Jun-04 Aug-04
National Pollution Discharge Elimination
System (NPDES) NDEP Sep-04 Dec-04
NPDES - Stormwater NDEP Sep-04 Dec-04
Solid Waste Disposal NDEP Sep-04 Dec-04
Reclamation Permit for a Mining Operation NDEP Jun-04 Aug-04
Permit to Appropriate the Public Water NDWR May-04 Jul-04
Industrial Artificial Pond Permit NDOW Sep-04 Dec-04
Sewage Disposal Plans NDOH Sep-04 Dec-04
Drinking Water Supply NDOH Sep-04 Dec-04
County
Special Use Permit Planning Sep-04 Dec-04
Commission
County
Building Permit Planning Sep-04 Dec-04
Commission
PRE-OPERATIONS PHASE
Air Quality Permit to Operate NDEP Oct-04 Jan-05
Dredging Permit NDOW Oct-04 Jan-05
Review Project to Determine Impact on Cultural
Resources NDHP Oct-04 Jan-05
State
Notification of Opening or Closing of Mines Inspection Oct-04 Jan-05
of Mines
Training Plan MSHA Oct-04 Jan-05
Radio Station Authorization FCC Oct-04 Jan-05
Nevada
Hazardous Materials Storage Permit State Fire Oct-04 Jan-05
Marshal
OPERATIONS PHASE
Periodic Reporting/Update on Above-Listed
Permits Varies Varies Varies
ACOE - United States Army Corps of Engineers
FCC - Federal Communications Commission
MSHA - Mine Safety and Health Administration
NDEP - Nevada Division of Environmental Protection
NDHP - Nevada Division of Historic Preservation
NDOH - Nevada Division of Health/Consumer Protection Services
NDOW - Nevada Division of Wildlife; NDWR - Nevada Division of Water Resources
USEPA - United States Environmental Protection Agency
USFS - United States Forest Service.
15
5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
5.1 ACCESS
Access to the property is gained from a gravel road located about 2 miles south
of Hawthorne from State Highway 359 (Figure 4.1). Hawthorne is about 125 highway
miles southeast of Reno.
5.2 CLIMATE AND PHYSIOGRAPHY
The elevation on the property ranges from 7,200 feet to 8,200 feet above sea
level. This relatively high elevation makes the summers moderate with high
temperatures in the 90 degrees F range. Winters can be cold and windy with
temperatures dropping to 0 degrees F. Average annual precipitation is 10 inches,
part of which occurs as up to 60 inches of snowfall.
5.3 EXISTING SITE CONDITIONS, INFRASTRUCTURE AND AVAILABLE SERVICES
The Borealis project site (Figure 5.1) has been reclaimed to the standards of
the early 1990's, before new, more modern state regulations were promulgated.
The pits and the project boundary are fenced for public safety. Currently,
access to the pits and leach pad areas is gained through a locked gate. No
buildings or power lines located on the surface remain although a major trunk
line exists about 2 miles from the property. All roads in the project area
follow two tracks with most placed on the old haul roads.
The nearest available services for both mine development work and mine
operations is in the small town of Hawthorne, located about 12 miles to the east
of the project area via a wide, well-maintained gravel road. Hawthorne has
substantial housing available, fuel supplies and a sufficient infrastructure to
take care of basic needs. For other services, Reno is located about 125 miles to
the northwest and could supply any material required for the development or mine
operations.
The infrastructure for the proposed mining operation will be discussed in
details in Section 23.2 of this report.
16
(GRAPHIC OMITTED)
FIGURE 5.1 PHOTOGRAPH OF BOREALIS DISTRICT, CIRCA 1991. VIEW TO THE EAST,
WITH FREEDOM FLATS PIT IN THE FOREGROUND.
17
6.0 HISTORY
6.1 HISTORY
Borealis was considered part of the old Ramona mining district, a poorly known
region, which until 1981 had only limited gold production of less than 1,000
ounces of gold. Houston Oil and Minerals Company, who acquired the property from
the Whitney Partnership, which became the Borealis Partnership, following a
submittal examination, discovered the original Borealis gold deposit in 1978.
Commercial production commenced three years later in October 1981. The property
was sold when Tenneco Inc. acquired the assets of Houston Oil and Minerals in
1981. Tenneco minerals operated the mine until October 1986, when the mine and
other metal properties of Tenneco were sold to Echo Bay Mines. Echo Bay
completed mining of the most easily accessible oxide gold deposits (although
some remain) in January 1990 and a multiyear reclamation program was begun. Echo
Bay chose to close the mine instead of continuing development of the remaining
oxide gold deposits because of impending new environmental closure regulations
and the desire to focus on developing their McCoy/Cove gold deposits south of
Battle Mountain, Nevada.
In 1990, Billiton Minerals examined the property and drilled 28 RC holes for a
total of 8,120 feet. In 1992 Santa Fe Pacific Gold entered into a joint venture
with Echo Bay Mines to explore for high-grade gold sulfide ores. Their work
included data compilation and reverse circulation and core drilling of 32 deep
holes. Santa Fe had success in identifying new sulfide-zone gold mineralization,
but terminated the joint venture because of a pending merger with Newmont Mining
Company. Echo Bay terminated their lease agreement with the Borealis Partnership
in 1996 following completion of reclamation.
In late 1996, J. D. Welsh Inc. leased the property from the Borealis
Partnership. Mr. Welsh had previously performed contract reclamation work for
Echo Bay and was responsible for monitoring the drain down of the leach pads.
During this time, he had recognized the excellent remaining gold potential, and
upon signing the lease, immediately joint ventured the project with Cambior
Exploration (USA) (Cambior). Cambior performed a major compilation program and
in 1998 followed up by drilling 10 holes with some success in extending the
Graben deposit (5 holes) and in identifying new sulfide-zone gold mineralization
(5 holes). They terminated the joint venture in late 1998 because of severe
budget constraints within Cambior.
During the Cambior joint venture period, Golden Phoenix Minerals, Inc. agreed
with Welsh to buy Welsh's lease rights for cash and stock. In 2001, Golden
Phoenix completed the 100 percent purchase of the lease rights and assumed full
control of the property. During the purchase period, Golden Phoenix researched
the records and entered remaining drill hole information into a digital
database, resulting in new resource estimations.
In 2003, Golden Phoenix optioned the Borealis property to Gryphon Gold
Corporation (Gryphon Gold). Gryphon Gold is in the process of earning a 50
percent interest in the Borealis project and may subsequently increase that
interest to 70 percent, with the current owner, Golden Phoenix retaining the
remaining 30 percent.
6.2 PAST PRODUCTION
In the Borealis project area, several gold deposits have been defined by
drilling and some of them have been partially mined. Reports on past production
vary. The past gold production from the Borealis pits, as reported by recent
operating companies at Borealis, is tabulated in Table 6.1. In this dataset, the
total of past gold production was approximately 10.6 million tons of ore
averaging 0.057 ounces per ton (opt) gold. The average silver content of ore
mined from all eight pits was probably in the range of five ounces of silver for
each ounce of gold. It is likely that about 1.5 million ounces of silver was
shipped from the property in the dore bullion.
18
TABLE 6.1
REPORTED PAST BOREALIS PRODUCTION, 1981-1990
OPEN PIT MINE TONS GRADE (OPT AU) CONTAINED GOLD (OZ)
------------- ---------- -------------- -------------------
Borealis 1,488,900 0.103 153,360
Freedom Flats 1,280,000 0.153 195,800
Jaime's/Cerro Duro/Purdy 517,900 0.108 55,900
East Ridge 795,000 0.059 46,900
Gold View 264,000 0.047 12,400
---------- ----- -------
TOTAL 4,345,800 0.107 464,360
========== ===== =======
RUN OF MINE ORE
East Ridge 2,605,000 0.021 54,700
Polaris (Deep Ore Flats) 250,000 0.038 9,500
Gold View 396,000 0.009 3,500
Northeast Ridge 3,000,000 0.025 75,000
---------- ----- -------
TOTAL 6,251,000 0.023 142,700
========== ===== =======
GRAND TOTAL 10,596,800 0.057 607,060
========== ===== =======
19
7.0 GEOLOGIC SETTING
7.1 REGIONAL GEOLOGY
The Borealis district lies within the Walker Lane structural zone near the
western margin of the Basin and Range structural province. Mesozoic
metasedimentary and metavolcanic rocks that are intruded by Cretaceous granitic
rocks underlie the main portion of the Wassuk range, which hosts the Borealis
district. The Mesozoic basement rocks are exposed east of the Borealis mine
area.
The oldest Tertiary rocks are rhyolite tuffs. They are present only locally in
small isolated outcrops, and most were probably eroded prior to the deposition
of the younger volcanic rocks. The rhyolitic tuffs may be correlative with
regionally extensive Oligocene rhyolitic ignimbrites found in the Yerington area
to the north and within the northern Wassuk Range. A thick sequence of older
Miocene andesitic volcanic rocks typically unconformably overlies the Mesozoic
basement along the western edge of the Wassuk Range. The age of the andesites is
poorly constrained due to limited regional dating, but an age of 19 to 15 Ma is
suggested. ("Ma" refers to million years before present.) In the Aurora
district, located 11 miles southwest of Borealis, andesitic agglomerates and
flows dated at 15.4 to 13.5 Ma methods overlie Mesozoic basement rocks and host
gold-silver mineralization. Based on these data, a broader age range for these
older andesites in the Borealis area is 19 to 13.5 Ma. Rocks of the Miocene
Wassuk Group overlie older andesites and underlie much of Fletcher Valley, a
late Tertiary structural basin located west of the mine. The Wassuk Group is up
to 8,200 feet thick near its type locality, and consists of a sequence of
interbedded, fluvio-lacustrine, andesitic sedimentary rocks with less abundant
andesitic lava flows, and ranges in age from 13 Ma to 8 Ma. Pliocene and
Quaternary fanglomerates and pediment gravels overlie the Wassuk Group and
thicken in the direction of Fletcher Basin to 300 feet.
7.2 LOCAL GEOLOGY
In the main Borealis mine area, the older andesitic rocks are subdivided into
three informal units, which exceed 1,000 to 1,200 feet in thickness. The
stratigraphy consists of the Basal and Middle Andesite units, which are
laterally extensive and constitute the predominant bedrock, and the Upper Tuff
unit, which is more restricted. These units are cut by steeply dipping northeast
trending faults that probably provided conduits for mineralizing hydrothermal
fluids. Figure 7.1 illustrates the local geology of the Borealis project.
7.2.1 MIOCENE AND YOUNGER IGNEOUS AND SEDIMENTARY ROCKS
The Basal Andesite is the oldest unit and is composed predominantly of andesitic
flow breccias, with less abundant lava flows and minor lahars. The unit is often
mottled, ranging from light gray-green to purple-brown. The rocks typically are
weakly porphyritic, containing small feldspar and minor hornblende and biotite
phenocrysts. Flow breccias consist of andesite clasts in the weakly altered
groundmass of feldspar and clay minerals. These features cause the unit to be
poorly indurated and incompetent. The Basal Andesite exceeds 500 feet in
thickness and lies unconformably on, or is in fault contact with Mesozoic
basement rocks. The Basal Andesite is a very poor host rock, and virtually no
production has occurred from it.
The Middle Andesite unit is composed of green, weakly to moderately porphyritic
andesite lava flows that are more massive and indurated than those of the
underlying Basal Andesite. The lavas contain 10 to 25 percent phenocrysts of
feldspar with less abundant phenocrysts of biotite, hornblende, and pyroxene.
The unit is as much as 300 feet thick in the Freedom Flats deposit, and the unit
is present at all of the deposits in the district where it is often a major ore
host, particularly for low-grade gold mineralization.
20
(MAP-GRAPHIC OMITTED)
FIGURE 7.1 GEOLOGIC MAP OF THE BOREALIS PROJECT AREA.
(Note that the Borealis deposit is referred to as the
"Deep Ore Flats" deposit in this figure.)
Overlying the older andesite units is the Upper Tuff. This unit consists of a
complex interbedded sequence of volcaniclastic sedimentary rocks, lava flows of
intermediate to mafic composition, and less abundant tuffs. The Upper Tuff is
host to some of the gold mineralization in the Freedom Flats and Borealis gold
deposits.
The post-mineralization Wassuk Group, including the volcaniclastic sediments of
the Coal Valley Formation consists of andesitic sedimentary rocks and andesite
flows, which overlie the Upper Tuff. Lying above the Wassuk Group are pediment
gravels. The older gravel contains abundant clasts of opaline and chalcedonic
silica. The younger gravel contains clasts of unaltered and propylitized
andesitic country rocks with less abundant clasts of silicified rock.
Intrusive rocks found in the Borealis area are difficult to recognize due to
intense alteration of the host rocks and intrusive rocks. In the Freedom Flats
pit, a fine- to medium-grained, intrusive biotite andesite porphyry was
identified and contains up to 40 percent phenocrysts. This intrusive may be
related to the igneous heat engine that drove the gold-bearing hydrothermal
system in the Borealis district.
21
7.2.2 STRUCTURE
The dominant structures in the Borealis district are northeast-striking faults,
which form a series of horsts and grabens. The main Borealis mine area is
located within a down dropped block composed of Miocene rocks, bounded along the
southeast side by a major northeast-striking normal fault. Mesozoic basement
rocks lie along the southeast side of the fault east of the Borealis mine site.
Motion along most of the northeast striking faults in the Borealis district
appears to be normal, although some faults display strike slip motion. In the
main part of the district, rocks are mostly down dropped on the northwest side
of these faults. All these major faults have acted as conduits for hydrothermal
fluids or loci for intrusion of silicified and mineralized hydrothermal
breccias.
To the west of the main Borealis area is the Cerro Duro/Jaime's Ridge deposit
area. The structure in this part of the district is a dominant, east-west
trending normal fault that separates the Mesozoic granites from the Miocene
volcanic host rocks. This fault is responsible for localizing mineralization in
this part of the district.
22
8.0 DEPOSIT TYPE
The Borealis gold mineralization, in the Ramona Mining District, is hosted by
Miocene andesite flows and laharic breccias, and volcaniclastic tuffs, which all
strike northeasterly and dip shallowly to the northwest. Underlying the Tertiary
volcanics, and locally in fault contact, is Cretaceous granodiorite with
inclusions of older metamorphic rocks. In the areas of some fault zones, the
granitic basement rocks are weakly altered and limonite stained.
Pediment gravels cover the altered-mineralized volcanic rocks at lower
elevations along the mountain front and overlie some of the best exploration
targets.
Structures are dominantly northeast-striking faults with steep northwest dips,
and generally west-northwest-striking faults with steep southerly dips. Both of
these fault systems lie on regional trends of known mineralized systems; thus
Borealis appears to be at a major intersection of mineralized trends.
A number of pre-mineral faults in the district may have been feeders for
hydrothermal mineralization, which often followed the planes of the faults or
formed "pipes". Emplacement mechanisms of the pipes included explosive
brecciation followed by pervasive silification and sulfide/precious metal
introduction. It is likely that the pipe-like deposits may have been initially
localized along the intersections of small second order faults with the major
feeder structures. The pipe-like Freedom Flats deposit, and others, probably
formed through this mechanism.
The surface "footprint" of these pipes is rather small and they can be easily
missed with patterns of widely spaced drill holes. Once a higher-grade pipe is
suspected, fences of drill holes with a 50-foot spacing may have to be used, but
even this spacing may not be adequate to accurately define the high grade pipes.
Echo Bay geologists also describe missing small very high-grade pods (>0.5 opt
Au) of mineralization due to possible loss of fines during drilling.
Some deposits at the project site, such as Borealis, have a generally flatter
tabular shape, and may have formed parallel to, or within, gently dipping
volcanic flows.
Alteration and mineralization most closely associated with ore-grade material
are vuggy silica and pyrite, often in breccia. Outward from the central vuggy
silica zone is kaolinite-quartz-pyrite, followed by kaolinite-pyrite, and a
broad propylitic halo. Advanced argillic alteration with alunite may have
overprinted kaolinite-bearing zones.
The silver to gold ratio generally averages 5:1 in the mineralized zones, and
silver commonly forms a discontinuous halo around, and overlaps the central gold
mineralization. Arsenic and antimony are strongly anomalous in a broad envelope.
Recent field work has identified an early stage of silica-pyrite mineralization
with trace elements such as arsenic, antimony, and mercury, but this early stage
is largely devoid of precious metal content. Recognition of this early, barren
silica alteration is important, in order to avoid it when locating and
optimizing drilling programs. Post-mineral faulting is common, and needs to be
identified accurately, especially where ore grade mineralization is terminated
by a fault.
23
9.0 MINERALIZATION
During its emplacement, finely disseminated gold found in the Borealis
mineralizing system was enclosed in pyrite and through natural oxidation, this
gold was released and made available to extraction by cyanidation. Limited
evidence suggests coarse gold exists. Gold still bound in pyrite or
pyrite-silica is not easily recovered by a simple cyanide heap leach operation.
24
10.0 EXPLORATION
This preliminary scoping study has been carried out based on historical data
generated by previous operators of the Borealis property. Gryphon Gold did not
conduct any new drilling and sampling on the property for this study.
Gryphon Gold began a drilling program on existing leach pads in early May 2004
to better define the mineral resources on the leach pads.
The Borealis district has exploration potential that far exceeds the currently
identified mineral resources. Discovery potential includes oxide mineralization
adjacent to exiting pits, new oxide deposits within the large land position,
sulfide mineralization below and adjacent to the existing pits, sulfide
mineralization elsewhere on the property, particularly at the high-grade Graben
deposit and its apparent extensions to the north. Gryphon Gold's geologic
consultants speculate that the Borealis district could contain 4 to 6 million
ounces of gold and estimate a 90 percent chance for the discovery of a 1 million
ounce resource, over and above the resources already identified.
The following describes some of the areas that have gold-bearing rock reported
in drill holes or areas that are on trend or at depth that haven't been tested.
- GRABEN: The Graben deposit is a north-trending, mineralized zone that
appears to have at least three mineralized bodies similar to the
original Freedom Flats deposit. These have yet to be fully delineated
by drilling. The trend remains open to the north and has been traced
by geophysical surveys, which suggest that this is a superior
exploration target;
- NORTH GRABEN EXTENSION: Prior surface exploration has defined an
extension of the mineralized structural trend identified in the Graben
deposit. This new target is defined by an aeromagnetic anomaly with a
coincident IP anomaly;
- FREEDOM FLATS: The silicified breccia pipe under the current resource
has been inadequately drill tested. Several deeper holes have
intercepted gold mineralization another 500 feet below the current pit
bottom. Limited drill evidence and structural reconstruction of
geology in the pit suggests that a second breccia pipe may exist a
short distance to the south of the pit. Additional drilling is planned
to define the limits of the southwest edge of the deposit and the
edges of the mineralized pipe found in the bottom of the pit. These
holes will be from 200 to 300 feet deep and will total about 6,000
feet of reverse circulation drilling;
- BOREALIS: Beneath the Borealis deposit ranging from 250 to 500 feet
below the surface, several holes intercepted a flat lying to shallowly
dipping mineralized zone that has yet to be fully delineated.
Furthermore, the Borealis deposit is cut on the northwest side by the
extension of the Freedom Flat fault and a portion of the Borealis
deposit may be in this down-dropped block. Additional drilling is
planned to better define the limits of the mineralization along edges
of the old Borealis pit for mining purposes. These planned holes will
be 100 to 200 feet deep and will total about 5,000 feet of reverse
circulation drilling;
- POLARIS: Additional drilling is planned to better define the limits of
the mineralization along edges of the existing pit for mining
purposes. These planned holes will be 100- to 200-feet deep and will
total about 5,000 feet of reverse circulation drilling;
- CROCODILE RIDGE: This silicified zone is an extension of the Borealis
deposit to the northeast. Several holes have intercepted low-grade
gold mineralization. Additional and deeper drilling is required to
fully test this target;
- EAST RIDGE: The feeder zone to the East Ridge deposit has never been
drill tested. This zone lies either underneath the current pit or lies
to the south and originates from a major fault zone bringing up
basement granite. Additional drilling is planned to better define the
limits of the mineralization along the south flank and bottom of the
existing pit for mining purposes. These planned holes will be 50- to
200-feet deep and will total about 7,000 feet of reverse circulation
drilling;
- NORTHEAST RIDGE: As with East Ridge, the feeder zone to the Northeast
Ridge deposit has never been drill tested. This untested zone lies
either underneath the current pit or lies to the south and originating
from a
25
major fault zone. Additional drilling is planned to better define the
limits of the mineralization around the pit for mining purposes. These
planned holes will be 50- to 150-feet deep and will total about 4,000
feet of reverse circulation drilling;
- CERRO DURO: The Cerro Duro deposit is localized along the major Cerro
Duro fault zone and is a classic breccia pipe. Additional deeper
drilling into the root zone of this pipe is required and new drilling
should be done to identify other blind pipes that may also be
localized along this fault;
- JAIME'S RIDGE: Several drill holes drilled to the west of the Jaime's
Ridge deposit identified some low-grade mineralization along splays of
the major Cerro Duro fault system. Additional drilling should be
conducted to determine if mineable reserves could be found in the
area; and
- PURDY'S PEAK: The Purdy's Peak mineralization needs to be further
drilled with deeper holes and offset holes. The area lies at the
juncture of two faults along trend with the Cerro Duro fault system.
26
11.0 DRILLING
The drill hole database used for the main Borealis project area contains 1,747
drill holes with a total drilled length of 510,712 feet (Table 11.1). Those
holes were drilled by different historical operators on the property. Drill hole
types include diamond core holes, reverse circulation (RC) holes and rotary
holes. Some of the core holes have down-hole survey information. Mineralized
zones covered by these drill holes include the Freedom Flats, Graben, Borealis,
Polaris, East Ridge and Northeast Ridge. All the six mineralized zones except
Graben have been partially mined by previous operators of the project; the
Borealis and Polaris pits have been back-filled with waste from the Freedom
Flats pit. There are additional 487 drill holes with a total drilled length of
103,562 feet in the Cerro Duro, Jamies Ridge, and Purdy's Peak area, at
approximately three miles distant northwest of the current in-situ resource
modeling area, but they have not been included in this resource study. The total
existing drilling for the entire Borealis project, therefore, is 2,234 holes
with a total drilled length of 614,274 feet.
TABLE 11.1
DRILL HOLES USED FOR THE CURRENT STUDY
ZONE NUMBER OF HOLES TOTAL LENGTH (FT)
---- --------------- -----------------
Graben 143 111,465
Freedom Flats 201 109,011
Borealis 518 113,415
Polaris 239 48,257
East Ridge 253 40,791
Northeast Ridge 393 87,773
----- -------
TOTAL 1,747 510,712
===== =======
Drill hole sampling length is generally 5 feet for the RC holes, but it varies
for the core holes based on the geological intervals. Sampling length is up to
25 feet for some of the early rotary holes. Gold assays in parts per billion
(ppb) and troy ounces per short ton (opt) are provided for most of the sampling
intervals. Silver assays in parts per million (ppm) and opt are also provided
for some of the sampling intervals. Silver grade was not modeled in this study.
Historical records indicate a silver to gold ratio of approximately 5:1.
27
12.0 SAMPLING METHOD AND APPROACH
12.1 GENERAL
Behre Dolbear has not reviewed information on the sampling methods and
approaches, and the following information from Gryphon Gold and Golden Phoenix
is provided for general reference.
The Borealis Mine operated from 1981 through 1990 producing 10.7 million tons of
ore averaging 0.059 ounces of gold per ton from seven open pits. The mined ore
contained 635,000 ounces of gold (Eng, 1990) of which approximately 500,000
ounces (475,000 oz through 1989) of gold were recovered through a heap leach
operation. This historic production can be considered a bulk sample of the
deposits validating the database that was used for feasibility studies and
construction decisions through the 1980s. With over 2,200 drill holes in the
database that was compiled over a 20-year period by major companies, the amount
of information on the project is extensive. It is primarily these data that have
been used in this study as the foundation of the current resource estimate. The
bulk of the data was collected beginning in 1978, the year of discovery of the
initial ore-grade mineralization, and was continuously collected through the
1980s to the final year of full production, 1989, with limited mining and
leaching operations continuing into 1990. Subsequent explorers through the 1990s
added to the database.
Specific detailed information on sampling methods and approaches by the various
mine operators has not been found in the historic mine information; however, an
early report by John T. Boyd Co. (1981) reported that the "drilling, sampling
and analytical procedures as well as assay checks were reviewed by Dames and
Moore and reported as acceptable by industry standards." In addition information
in reports, monthly reports and memos give some clues to the sampling methods
and approaches. The early work describes between 7 and 9 percent of all samples
being re-assayed, and higher grade intervals were re-assayed most frequently
with approximately 20 percent of these intervals assayed again (Ivosevic, 1979).
Also there are many references to "assay checks" in the drill-hole data through
the years of operation with comparisons of assays of the same pulps and also of
assays of different splits from the same sample intervals. Results of these
comparisons generally were reported to be reasonably close. High-grade intervals
often showed more variability in their assays. Santa Fe Pacific (1994) performed
check assays on their drilling and found 23 percent variability in the
high-grade assays. Their geologist reported, "rather than reflecting relative
differences in the labs, I believe the difference is due to the inherent
variability in the core. Perhaps we would have been better served to take the
entire remaining core [for the check assay material] instead of sawing it in
half again (resulting in a 1/4 split)." This observation indicates that using
larger rather than smaller samples is probably better, and it may be suggestive
that coarse gold could be causing some, if not most, of the variability.
Echo Bay Mines did some quality checks on their drill cuttings sampling and
assaying methods as part of their evaluation of the property prior to and
following its purchase from Tenneco Minerals, finding that the results were
reliable and representative. During their exploration and development programs
they also drilled a number of core holes twinned with reverse circulation rotary
drill holes to compare assay results in the same areas. Echo Bay concluded that
the vast bulk of drilling, which was RC rotary, probably undervalued the gold
mineralization, especially in higher grade zones. Anecdotal information from
former Echo Bay management indicates that the mine consistently gave better
results in terms of higher grade and better recovery of gold than planned or
expected.
12.2 FREEDOM FLATS EXAMPLE
The principal orebody discovered by Echo Bay Mines in 1986 was the Freedom Flats
deposit. The exploration, geology, and mineralization of the Freedom Flats gold
deposit are described by Eng (1990). He reports that in Echo Bay's
reconciliation of the Freedom Flats reserves, "actual mine production exceeded
the original model reserve in grade and contained ounces by about 30 percent."
In order to explain this discrepancy, he states, "due to the narrow linear trend
of the mineralization, the deposit was drilled-out on 15 m (50 ft) centers along
fences 30 m (100 ft) apart.
28
In-fill drilling was conducted between fences on 15-21 m (50-70 ft) centers
where thick, high-grade mineralization was intersected. Holes were drilled
around the perimeter of the deposit on 30 m (100 ft) centers to close-off all
mineralization. A total of 99 [reverse-circulation] rotary holes were drilled in
the main deposit area totaling 17,069 m (56,000 ft). All holes were drilled
vertically. Due to the presence of abundant clay, most holes were drilled with
water and foam injection; samples were collected using Jones splitters. In
addition to rotary drilling, four HQ core holes totaling 819 m (2,687 ft) were
drilled primarily to obtain material for column leach metallurgical testing.
Although continuous assays were not available for most of the core holes due to
metallurgical sampling, the results of limited assaying suggested that the
rotary holes underestimated the gold grades. The most likely cause for this
discrepancy was the loss of fines during wet drilling." Later in his report he
states that the discrepancy also may be due in part to the small size of many of
the higher grade (+0.5 opt Au) ore pods, which were not intersected in
close-spaced (50 ft) drilling. A third possible explanation not mentioned by
Echo Bay is the probability of coarse gold particles not being sampled or
assayed.
At least 10 percent of the resources reported here are subject to the same
potential underreporting of gold values, because of their location at the bottom
and below the Freedom Flats open pit using drill-hole data from Echo Bay's
program. In addition the Graben mineralized zones are of the same general grades
and geologic character as the Freedom Flats deposit and may have the same
issues.
The presence of coarse gold and its effect on assay variability may have been
overlooked by previous operators of the Borealis Mine. Coarse gold has been
reported in the district from small-scale placer operations and also from the
initial Houston Oil and Minerals Company geologists in the district who found
visible gold in the surface outcrops of old prospect pits and other minor
workings along highly mineralized structures.
12.3 DRILL HOLE DATABASE
The database used for this study consists of 2,234 drill holes with a total
footage of 614,274 feet and 115,580 assayed intervals. Many of the high-grade
intervals were assayed more than once to check and confirm the actual grades, so
the total number of assays significantly exceeds 115,580. The average depth of
holes is 275 feet but the bulk of the holes are less than 200 feet with a
significant number of holes in selective locations extending 1,000-2,000 feet to
test deeper mineralization. The average assayed interval was 5.3 feet with the
bulk of the samples representing 5-foot intervals.
The first drilling was completed by Houston Oil and Minerals, which is the
discoverer of the original Borealis deposit and the developer of the mine.
Tenneco Minerals acquired Houston Oil and Minerals and continued operating the
mine and drilling for new deposits. Echo Bay Mines acquired Tenneco Minerals in
1986 and continued all operations and drilling until the mine was shut down in
1990. Throughout the 1990's Billiton Minerals (no drill holes), Santa Fe Pacific
Gold (32 drill holes), J.D. Welsh & Associates (11 shallow drill holes in a
heap), and Cambior Exploration (USA) (10 drill holes) continued exploring and
evaluating the property thus adding to the database.
Santa Fe compiled the initial version of the computer database of drill holes
used in this study with subsequent companies contributing to it. Golden Phoenix
thoroughly checked the accuracy and completeness of the database by individually
checking each of the 2,234 holes' survey and assay data compared line by line to
the original survey and assay sheets, and revising the database where necessary.
29
13.0 SAMPLE PREPARATION, ANALYSIS AND SECURITY
Behre Dolbear has not reviewed information on sample preparation, analyses and
security, and the following includes information from Gryphon Gold and Golden
Phoenix for general reference.
Houston Oil and Minerals, Tenneco, and Echo Bay Mines are reported to have used
standard sample preparation and analytical techniques in their exploration and
evaluation efforts, but detailed descriptions have not been found. The fact that
a successful mine was developed producing about 500,000 ounces of gold indicates
that their techniques of sampling, sample preparation, analysis, and security
produced results that were representative and reliable. No reports of the
detailed sample preparation and analytical techniques have been found in the
extensive body of mine information available.
Most of the drill-hole assaying was accomplished by major laboratories that were
in existence at the time of the drilling programs. Various labs including
Monitor Geochemical, Union Assaying, Barringer, Chemex, Bondar-Clegg,
Metallurgical Laboratories, Cone Geochemical, the Borealis Mine lab, and others
were involved in the assaying at different phases of the exploration and mining
activity.
13.1 ANALYSES AND QUALITY CONTROL
Early work on the property appeared to rely on assay standards that were
supplied by the laboratories doing the assaying. However, Echo Bay Mines (1986)
was reported to be using seven internal quality control standards for their
Borealis Mine drill-hole assaying program. The seven standards ranged in gold
concentrations from 170 ppb to 0.37 ounces per ton. Assay labs involved in the
round robin standards analyses were Cone Geochemical, Chemex, and the Borealis
Mine lab, and the precision of the three labs was excellent (+/- 1 to 8%) for
the higher gold grades (0.154-0.373 opt); acceptable (+/- 3 to 14%) for the
lower grades (0.029-0.037 opt); and fair (+/- 4 to 20%) for the geochemical
anomaly grades (0.009 opt to 170 ppb). These data provide an initial estimation
of the precision and accuracy of gold analyses of Borealis mineralization.
During 1986 Echo Bay instructed Chemex (1986) to analyze duplicate samples for
five selected drill holes. A comparison was made of (a) 1/2 assay-ton fire assay
with a gravimetric finish versus (b) 1/2 assay-ton fire assay with an atomic
absorption finish versus (c) hot cyanide leach of a 10-gram sample. The 1/2
assay-ton fire assay - gravimetric and the 1/2 assay-ton fire assay - AA gave
essentially the same results. However the hot cyanide leach gave results that
were 5-11percent higher in one comparison and significantly lower in another,
prompting Chemex to conclude that cyanide leach assaying was not appropriate for
Borealis samples. The great majority of the assays in the database are based on
fire assays.
13.2 SECURITY
Nothing is known of the sample security arrangements made by the previous
operators, but since the mines each produced the amounts of gold predicted or
higher, we can assume the security was adequate. The same assumption is true for
most of the subsequent explorers of the property--Billiton, Santa Fe Pacific,
and Cambior--which were all substantial companies and probably used sound
procedures.
30
14.0 DATA VERIFICATION
Behre Dolbear has not verified the data used in this study, and the following
includes information from Gryphon Gold and Golden Phoenix Minerals for general
reference.
The drill-hole database was verified by Golden Phoenix (2004, personal
communication) during an 8-month intensive effort by reviewing every one of the
2,234 drill holes and over 115,580 assays on original sheets and comparing them
line by line with the database and ensuring that only accurate information was
in the database. Where several valid assays were found for a single interval
they were averaged to determine the grade used in the database. Drill-hole
collar location surveys on original sheets were also compared to the database
information and improved where necessary. Down-hole survey information on
original sheets for the deeper holes were also reviewed and compared with the
database to ensure its accuracy.
Information presented above describes the limitations imposed by the lack of
certain historical records on verification of the data. Based on operating
results, it is apparent that the sampling, sample preparation, assaying, and
security of samples were conducted in a professional manner for the time period
in which the samples were collected and processed. Based on the results of
mining that has been done, these assumptions appear to be correct.
Representative drill-hole samples, such as pulps and coarse rejects, from the
drilling done prior to 1990 are not available and thus there is no way to verify
the accuracy of the assay results. A program of check analyses is in progress
for the drilling done in the 1990s following the closing of the mine, and all
new drilling programs will have defined sampling protocols and systems of
quality assurance and control designed or approved by a Qualified Person.
31
15.0 ADJACENT PROPERTIES
The nearest mining property to the Borealis gold resource area is the Esmeralda
Project (formerly the Aurora Mine) owned and operated by Metallic Ventures
(Figure 15.1). The following information comes from their website.
The Aurora District has had historical production of approximately 1.8 million
ounces of gold from as many as 30 veins. The mineralized system is a low
sulfidation-type with gold and minor silver in banded quartz-adularia-sericite
veins hosted by Tertiary volcanics. The Esmeralda Project currently is
undergoing underground development and mining, reactivation of a 350-tpd CIL
mill, and exploration for more resources. The mine produced its first bullion,
which was sent to a refinery in late March, and its first sale of bullion in
April 2004.
The Aurora and Borealis Districts are separated by approximately 8 miles and
appear to line up on a northeast-southwest trend of mineralized districts named
the Aurora-Borealis trend.
(LOCATION MAP-GRAPHIC OMITTED)
FIGURE 15.1 LOCATION OF BOREALIS PROPERTY AND
OTHER NEARBY GOLD MINING PROPERTIES.
32
16.0 MINERAL PROCESSING AND METALLURGICAL TESTING
16.1 METALLURGY
During a substantial portion of the earlier operation of Borealis, the ore was
crushed to a nominal 1 1/2 inch product and the fines agglomerated with 10 lbs
per ton of cement with a 20 percent solution of sodium cyanide added at a rate
of 0.5 lbs per ton. It is anticipated that the reclaimed existing heaps and ore
recovered from existing pits will be crushed to a nominal passing 1/2 to
3/4-inch product and the fines agglomerated with cement and cyanide solution.
Based on an average ore grade of 0.10 ounces gold per ton for oxide, transition,
and sulfide, the expected recoveries for the ore from the Freedom Flats pit are
80 percent for oxide, 55 percent for transition material and 20 percent for
sulfide material.
A Merrill Crowe type circuit was used in past operations, necessitating a
retorting of the zinc precipitates prior to smelting to remove the mercury. The
current operation is proposing to use an activated carbon circuit for recovery
of the precious metal values. While the presence of substantial quantities of
silver in solution will necessitate more frequent carbon stripping, the
simplicity of operation is considered an advantage.
The amount of precious metal loading on the carbon can be increased by a
judicious choice of high-activity carbon, which will mitigate some of the
necessity for more frequent stripping. Further, gold cyanide complexes will
supplant silver cyanide and mercury cyanide complexes along with base metal
cyanide complexes when the loading capacity of the carbon is near. In practice,
this means that the leading carbon column can be loaded to near capacity,
increasing the amount of gold cyanide complex loaded onto the carbon. The silver
cyanide complex will be pushed off the leading carbon column to adsorb onto less
loaded carbon in the carbon column train. The mercury cyanide complex will tend
to load onto the final column in the carbon column train. As the solution flows
are changed to effectively advance the carbon columns in the sequence, the
silver and mercury complexes will continue to unload and reload onto subsequent
columns.
As a practical operation matter, this loading progression can be continued for
some time without special consideration. However, it is possible to take
advantage of the loading and unloading profile after sufficient volumes of
pregnant solutions have been passed through the carbon column sequence. When
there is sufficient loading to warrant recovery of the silver and mercury
concentrations, the carbon from the final carbon column can be removed and
treated separately to recover a high mercury and silver loading.
It will be important to take precautions at all elevated temperature process
steps to ensure adequate capture of any gaseous mercury. These areas include the
stripping area with hot strip solutions and the electrowinning cells, which will
collect any mercury that does strip from the carbon. Routine continuous air
monitoring for mercury is recommended in the gold room.
33
16.2 PROCESSING
The Borealis Project will be a heap leach of gold containing ore with a pregnant
solution pond, a stripped solution pond, and a storm water pond. A carbon
adsorption plant will be used to recover gold and silver contained in the
pregnant solution that has been leached from the heaped ore. This ore will be
crushed and then agglomerated with lime, cement, and dilute cyanide solution to
start the dissolution process. The agglomerated ore will be stacked onto a heap
leach pad and sprinkled with dilute cyanide solution to continue the dissolution
of the contained gold and silver. The pregnant solution containing the dissolved
gold and silver will be recovered from the bottom of the heap and stored in a
pregnant solution pond. The pregnant solution will be pumped from the pond
through a series of carbon containing columns where the precious metals will be
removed from solution and adsorbed onto the carbon. The stripped solution will
be pumped to a stripped solution pond from where it will be recycled to the top
of the heap after adjusting pH and cyanide content as needed.
Gold bearing rock will be processed through the crusher and agglomerator and
placed on the heap for leaching. The leach pad will be a permanent pad for
continuous placement of daily agglomerated ore. The heap will continue to grow
in size by the daily tonnage placed on it. The ore placed onto the pad will be
continuously leached throughout the life of the operation. While most of the
contained precious metal in newly placed ore will be leached in the first 30
days of leaching, the gold will continue to solubilize over the life of the
leaching operation at a continually reducing rate.
The heap leach operation will require about 50 gallons of fresh makeup water per
ton of ore processed (0.21 tons water/ton ore). The ultimate tons of leach
solution per ton of ore over the life of the heap leach will be 3.5 to 4.0 tons;
however the majority of this solution volume will be recycled stripped leach
solution. The volume of leach solution in circulation will continue to increase
over the active life of the heap while new additions of ore are incrementally
added. During the wash stage of the heap, the solution volume in circulation
will stay constant with makeup for evaporation losses only. After the leach
solution meets environmental requirements for discharge, a substantial portion
of the accumulated solution volume would be available for discharge.
The heap leach will require the largest volume of circulating solutions in the
operation. As the volume of the heap increases during each year and from year to
year, the volume of re-circulating leach solutions will continue to increase
until the last ore is placed onto the leach pad. By the end of the first year
when 2 million tons of ore have been placed onto the leach pad, approximately
100 million gallons of leach solution will be contained within the heap and the
ponds. The fresh water makeup will be 50 gal/ton or 208 gpm. The heap recycle
solutions will be in the order of 2500 gpm. By the end of the 5th year, 10
million tons of ore will have been placed onto the leach pad; approximately 450
million gallons will be contained within the heap and the ponds. This has an
allowance for evaporative loss of solution in the order of 5 gal/ton over the 5
year life of the leaching operation. The fresh makeup water will remain at 50
gal/ton or 208 gpm. The recycle solutions from the heap with a 45 day retention
time in residence will be in the order of 7000 gpm. The carbon adsorption plant
will process the recycle solution at the rate of recycle flows, which will vary
over the life of the plant as above. Some of the fresh water makeup will be
introduced via the carbon adsorption plant to wash carbon during the strip
cycle.
The crushing/agglomeration operation for incoming ore will utilize mostly strip
solution from the strip solution pond in order to provide pH control and dilute
cyanide to start the leaching. The cement and any needed lime will also be added
during the agglomeration operation. The freshly agglomerated ore will be
transported to the heap and left to cure for 2 or more days prior to application
of recycle solution. The loss of stripped solution to agglomeration will be made
up by fresh water additions to the recycle solution to maintain the water
balance requirements. Other comparatively minor uses of fresh water will be for
dust control in the crushing circuit, conveyor transfer points, and roadways.
The consumption for these uses has been included with the overall consumption
per ton of new ore.
The minimum total fresh water required for processing plant operations on a
daily basis is 208 gpm or 300,000 gals/day. The first year of operations, the
recycled process solution rate will be in the order of 2500 gpm or 3.6 million
gals/day. By the fifth year, the fresh water required will remain at 208 gpm or
300,000 gals/day. The recycled process solution rate will have increased to be
in the order of 8000 gpm or 11.52 million gals/day.
34
The pregnant solution from the heaps is drained to a pregnant solution storage
pond from which it is pumped through a carbon adsorption gold recovery plant to
a stripped solution pond. From the stripped solution pond the solution is
recycled back to the heap for leaching and to the agglomeration drum for
agglomerating new ore to be placed onto the leach pad. Fresh makeup water is
added to the carbon plant during washing and to the stripped solution pond as
reagent makeup water and replacement water for the recycle water used in
agglomeration.
The proposed total annual consumptive use of water, including plant losses, dust
control, and domestic use in the plant is 100 million gallons/year or about 306
acre-feet per year.
Pumping for dewatering purposes prior to or during the mine life is not
anticipated, as the majority of the ore for leaching will be reclaimed from
existing heaps that are topographically above ground. Some ore that could be
obtained from pit areas is near current pit surfaces. The water table in this
area is substantially below the pit floors. Any meteoric water accumulated in
the pit is expected to dissipate through the pit floor fractures to the water
table below, as is the current situation.
Although none is anticipated, if there were to be any dewatering requirement,
the dewatered volume could readily be absorbed into the recycle solution in the
process reducing the need for fresh water addition on a 1 for 1 basis.
A simplified process flowsheet is provided as Figure 16.1.
35
(GRAPHIC OMITTED)
17.0 MINERAL RESOURCE ESTIMATES
17.1 MINERAL RESOURCES
17.1.1 IN-SITU MINERAL RESOURCES IN MAIN BOREALIS PROJECT AREA
An in-situ resource model has been developed for this conceptual study of the
Borealis project. Mineralized zones included in the resource model include
Freedom Flats, Graben, Borealis, Polaris, East Ridge and Northeast Ridge. This
resource modeling is a joint effort between Gryphon Gold and Behre Dolbear.
Procedures and parameters for the analysis include inputs from both parties.
Database, procedures and parameters used for developing the resource model as
well as resource classification are discussed in details in Appendix 1.
Assuming that the drill hole database used for the resource estimation is
reliable, the estimated mineral resources are classified as measured, indicated
and inferred categories. The in-situ measured/indicated mineral resources for
the six mineralized zones of the Borealis project in the block models are
summarized in the Table 17.1 using a gold cutoff grade of 0.010 ounce per ton
(opt). The inferred mineral resources are summarized in Table 17.2.
Tonnage-grade curves of the measured/indicated mineral resources for each
mineralized zone are presented in Figures 17.1 to 17.6 and the corresponding
resource figures by cutoff are listed in Appendix 1.
The mineral resources for the Freedom Flats zone are also separated into oxide,
mixed and sulfide zones (Table 17.3). The mineral resources for the Graben zone
are mostly sulfide, whereas the mineral resources for Borealis, Polaris, East
Ridge and Northeast Ridge are mostly oxide.
TABLE 17.1
IN-SITU MEASURED/INDICATED MINERAL RESOURCES OF THE BOREALIS PROJECT
(CUTOFF GOLD GRADE = 0.01 OPT)
MINERALIZED ZONE CATEGORY K TONS AU (OPT) AU (K OZS)
- ---------------- --------- -------- -------- ----------
Freedom Flats measured 1,452.4 0.055 79.4
indicated 1,293.6 0.036 47.0
-------- ----- -----
total 2,746.0 0.046 126.4
======== ===== =====
Graben indicated 2,292.5 0.076 173.8
Borealis measured 491.8 0.055 27.0
indicated 1,395.5 0.050 69.8
-------- ----- -----
total 1,887.3 0.051 96.8
======== ===== =====
Polaris indicated 1,148.1 0.026 29.6
East Ridge measured 970.6 0.019 18.0
indicated 1,591.1 0.018 28.8
-------- ----- -----
total 2,561.7 0.018 46.8
======== ===== =====
Northeast Ridge measured 521.9 0.022 11.6
indicated 1,141.7 0.023 26.0
-------- ----- -----
total 1,663.6 0.023 37.6
======== ===== =====
TOTAL MEASURED 3,436.7 0.040 136.0
INDICATED 8,862.5 0.042 375.0
-------- ----- -----
TOTAL 12,299.2 0.042 511.0
======== ===== =====
37
TABLE 17.2
IN-SITU INFERRED MINERAL RESOURCES OF THE BOREALIS PROJECT
(CUTOFF GOLD GRADE = 0.01 OPT)
MINERALIZED ZONE K TONS AU (OPT) AU (K OZS)
- ---------------- -------- -------- ----------
Freedom Flats 412.0 0.037 15.2
Graben 10,372.2 0.052 534.2
Borealis 365.7 0.035 12.7
Polaris 195.5 0.021 4.1
East Ridge 242.6 0.017 4.0
Northeast Ridge 536.7 0.023 12.6
-------- ----- -----
TOTAL 12,124.7 0.048 582.8
======== ===== =====
TABLE 17.3
IN-SITU MINERAL RESOURCES OF THE FREEDOM FLATS ZONE
BY OXIDATION STATE
(CUTOFF GOLD GRADE = 0.01 OPT)
CATEGORY ZONE K TONS AU (OPT) AU (K OZS)
-------- ------- ------- -------- ----------
measured/indicated oxide 550.3 0.047 25.8
mixed 392.8 0.048 18.8
sulfide 1,802.9 0.045 81.8
------- ----- -----
TOTAL 2,746.0 0.046 126.4
======= ===== =====
inferred oxide 11.5 0.037 0.4
mixed 45.8 0.046 2.1
sulfide 354.7 0.036 12.7
------- ----- -----
TOTAL 412.0 0.037 15.2
======= ===== =====
38
(GRAPHIC OMITTED)
FIGURE 17.1 TONNAGE-GRADE CURVES OF INDICATED MINERAL RESOURCES INSIDE THE 0.01
OPT GOLD MINERAL ENVELOPE FOR THE GRABEN ZONE.
(GRAPHIC OMITTED)
FIGURE 17.2 TONNAGE-GRADE CURVES OF MEASURED/INDICATED MINERAL RESOURCES
INSIDE THE 0.01 OPT GOLD MINERAL ENVELOPE FOR THE FREEDOM FLATS ZONE.
39
(GRAPHIC OMITTED)
FIGURE 17.3 TONNAGE-GRADE CURVES OF MEASURED/INDICATED MINERAL RESOURCES INSIDE
THE 0.01 OPT GOLD MINERAL ENVELOPE FOR THE BOREALIS ZONE.
(GRAPHIC OMITTED)
FIGURE 17.4 TONNAGE-GRADE CURVES OF INDICATED MINERAL RESOURCES INSIDE THE
0.01 OPT GOLD MINERAL ENVELOPE FOR THE POLARIS ZONE.
40
(GRAPHIC OMITTED)
FIGURE 17.5 TONNAGE-GRADE CURVES OF MEASURED/INDICATED MINERAL RESOURCES
INSIDE THE 0.01 OPT GOLD MINERAL ENVELOPE FOR THE EAST RIDGE ZONE.
(GRAPHIC OMITTED)
FIGURE 17.6 TONNAGE-GRADE CURVES OF MEASURED/INDICATED MINERAL RESOURCES
INSIDE THE 0.01 OPT GOLD MINERAL ENVELOPE FOR THE NORTHEAST RIDGE ZONE.
41
17.1.2 IN-SITU MINERAL RESOURCES AT JAMIES RIDGE, CERRO DURO AND PURDY'S PEAK
The Jamies Ridge, Cerro Duro and Purdy's Peak deposits are located about three
miles northwest of the current study area, and they are also part of the entire
Borealis project. No new resource models have been constructed for these
deposits. The in-situ mineral resources are extracted from previous records
(Table 17.4) by Gryphon Gold without review.
TABLE 17.4
MINERAL RESOURCES OF THE JAMIES RIDGE, CERRO DURO AND PURDY'S PEAK
ZONE RESOURCE CATEGORY K TONS AU (OPT) AU (K OZS)
---- ----------------- ------ -------- ----------
Jamies Ridge and
Cerro Duro Indicated 1,499 0.035 52.0
Purdy's Peak Indicated 1,024 0.030 31.0
----- ----- ----
TOTALS 2,523 0.033 83.0
===== ===== ====
* Cut-off grades are not available.
17.1.3 MINERAL RESOURCES FROM EXISTING HEAPS AND STOCKPILES
The mineral resources for the existing heaps were derived mostly from the
reports of the previous operator of the property, Echo Bay Mines (Table 17.5).
The grades of the resources are generally based on rough metallurgical balance
calculation. However, the grade for the Tailings Re-leach Heap is based on four
recent test drill holes, and the grade for the Secondary Heap is based on an
estimate by J. D. Welsh (1996).
The mineral resources for waste dumps and stockpiles are based on comparison of
the current resource models with the past production records by Gryphon Gold.
The difference between the resource model and production records are considered
as material sent to the waste dumps and stockpiles (Table 17.6). As historical
data indicates the total tonnages for the dumps and stockpiles are 5.432 million
tons, a waste tonnage of 1.218 million tons with zero grade is added to the
material in Table 17.6, resulting in a resource of 5.432 million tons with an
average gold grade of 0.022 opt containing 118,200 ounces of gold. The location,
tonnage and grade of these heap, dump and stockpile resources remain to be
verified by drilling.
Behre Dolbear believes that the mineral resources from the heaps, waste dumps
and stockpiles can only be classified as inferred resources at the resent time.
The confidence level, however, will increase significantly when the planned
drilling to verify the location and grades of these mineral resources is
completed.
42
TABLE 17.5
INFERRED MINERAL RESOURCES SUMMARY
EXISTING HEAPS, DUMPS AND STOCKPILES
ZONE K TONS AU OPT AU (K OZS)
---- ------ ------ ----------
RESIDUAL IN HEAPS
Tailings Re-leach 1,720 0.019 32.0
Secondary 1,910 0.020 38.2
Freedom Flats 1,249 0.030 37.0
Run-of-Mine #1 0,800 0.011 12.0
Run-of-Mine #2 2,201 0.010 22.0
N.E. Ridge Run-of-Mine 3,000 0.015 45.0
------ ----- -----
SUB-TOTAL- HEAPS 10,880 0.017 186.2
DUMPS & STOCKPILES 5,432 0.022 118.2
------ ----- -----
TOTAL 16,312 0.019 304.4
====== ===== =====
TABLE 17.6
CALCULATION OF GRADE AND TONNAGE IN STOCKPILES AND WASTE DUMPS
TOTAL RESOURCE PRODUCTION WASTE & STOCKPILES
---------------------- ---------------------- ----------------------
ZONE K TONS OPT K OZS K TONS OPT K OZS K TONS OPT K OZS
---- ------ ----- ----- ------ ----- ----- ------ ----- -----
Fr. Flats 1,443 1.119 171.1 1,250 0.149 186.5 not meaningful
Borealis 2,926 0.067 195.5 1,500 0.103 153.9 1,426 0.029 41.6
Polaris 0,148 0.037 5.5 0,250 0.038 9.5 not meaningful
E. Ridge 6,037 0.028 167.8 4,060 0.029 117.6 1,977 0.025 50.2
NE Ridge 3,811 0.027 101.4 3,000 0.025 75.0 811 0.033 26.4
------ ----- ----- ------ ----- ----- ----- ----- -----
TOTALS 14,531 0.046 667.6 10,060 0.054 542.5 4,214 0.028 118.2
====== ===== ===== ====== ===== ===== ===== ===== =====
17.2 MINING POTENTIAL ANALYSIS
An analysis has been undertaken for the mining potential of the in-situ mineral
resources of the Borealis project. As this is a preliminary scoping study, all
measured, indicated and inferred mineral resources have been used in the mining
potential analysis.
17.2.1 MINING POTENTIAL FOR THE IN-SITU MINERAL RESOURCES IN THE MAIN PROJECT
AREA USING HEAP LEACHING AND AN ADR RECOVERY PLANT
The project development concept is based on a conventional open-pit mining and
heap-leach processing project. Pit optimization using the Lerchs-Grossmann
algorithm has been used for generating optimized pit shells at assumed economic
and pit design conditions for the Freedom Flats, Borealis, Polaris, East Ridge
and Northeast Ridge deposits. The Graben is not included in the pit optimization
as it is currently considered as an underground mining target because of its
depth, and further information is needed in order to evaluate its surface mining
potential. All resource categories, including measured, indicated and inferred,
have been used for pit optimization. Diluted mineral
43
resources within the optimized pit shells with a waste tonnage allowance for
ramp design are considered as the mining potential for the project.
Cost parameters and metallurgical recoveries used for the pit optimization are
summarized in Table 17.7. Five gold prices, $350, $375, $400, $450 and $500 per
troy ounce, are used for the analysis in order to see the project sensitivity
over the gold price variation. Maximum pit slope used for the analysis is 45
degrees for the Freedom Flats deposit and 50 degrees for the other deposits.
In-situ gold grades have been discounted by 4 percent before being used for pit
optimization and mining potential summary. This is equivalent to applying a
dilution factor of 4.2 percent at zero grade and a mining loss factor of 4
percent for the operation. These additional mining dilution and mining loss
factors over the dilution built into the resource model are based on Behre
Dolbear's experiences with similar gold projects. The dilution factor and mining
loss factors should be adjusted based on the production reconciliation in future
mine production.
TABLE 17.7
HEAP LEACH PIT OPTIMIZATION PARAMETERS FOR THE BOREALIS PROJECT
ITEM DEPOSIT PARAMETER
- ---- ------------- -------------
mining cost (ore and waste) all $0.85/ton
G&A Cost (ore only) all $0.40/ton
processing cost (ore only) all $3.50/ton
gold recovery oxide Freedom Flats 80%
mixed Freedom Flats 55%
sulfide Freedom Flats 20%
oxide others 75%
refining cost all $3.00/ounce
Internal cutoff grades based on recoverable gold grade and diluted gold grade
have been calculated for each zone of each deposit using all the operating costs
except for the mining cost. This internal cutoff grade is used to separate ore
and waste for the current conceptual study.
Diluted mineral resources above the internal cut-off gold grade and the waste
material within the optimized pit shells at various assume economic conditions
for different deposits are summarized by Tables 17.8 and 17.9. A waste tonnage
allowance of 25 percent for ramp design has been added on the pit optimization
results in the Tables.
44
TABLE 17.8
HEAP-LEACH PROCESSING PIT OPTIMIZATION RESULTS FOR FREEDOM FLATS DEPOSIT
INTERNAL CUTOFF (OPT)
AU --------------------- RESOURCE RECAU RECAU AU AU
PRICE ZONE RECAU* AU TONS OPT OZS OPT OZS
- ----- ------- ------ ----- --------- ------ ------ ------ ------
$350/ oxide 0.011 0.014 165,231 0.0516 8,526 0.0645 10,657
ounce mixed 0.011 0.021 115,307 0.0380 4,382 0.0691 7,968
sulfide 0.011 0.057 45,538 0.0511 2,327 0.2554 11,630
----- ----- --------- ------ ------ ------ ------
Total 326,076 0.0467 15,235 0.0928 30,256
===== ===== ========= ====== ====== ====== ======
waste** 854,231
strip ratio 2.62
$375/ oxide 0.011 0.013 170,384 0.0508 8,656 0.0635 10,819
ounce mixed 0.011 0.019 116,384 0.0378 4,399 0.0687 7,996
sulfide 0.011 0.053 45,923 0.0508 2,333 0.2540 11,664
----- ----- --------- ------ ------ ------ ------
Total 332,691 0.0463 15,388 0.0916 30,479
===== ===== ========= ====== ====== ====== ======
waste** 887,309
strip ratio 2.67
$400/ oxide 0.010 0.012 174,769 0.0501 8,756 0.0626 10,941
ounce mixed 0.010 0.018 126,692 0.0360 4,561 0.0655 8,298
sulfide 0.010 0.049 48,308 0.0488 2,357 0.2440 11,787
----- ----- --------- ------ ------ ------ ------
Total 349,769 0.0448 15,674 0.0887 31,026
===== ===== ========= ====== ====== ====== ======
waste** 930,675
strip ratio 2.66
$450/ oxide 0.009 0.011 187,461 0.0488 9,148 0.0609 11,416
ounce mixed 0.009 0.016 145,384 0.0340 4,943 0.0619 8,999
sulfide 0.009 0.044 58,385 0.0439 2,563 0.2192 12,798
----- ----- --------- ------ ------ ------ ------
Total 391,230 0.0426 16,654 0.0849 33,214
===== ===== ========= ====== ====== ====== ======
waste** 1,237,501
strip ratio 3.16
$500/ oxide 0.008 0.010 194,308 0.0480 9,327 0.0599 11,639
ounce mixed 0.008 0.014 153,307 0.0331 5,074 0.0602 9,229
sulfide 0.008 0.039 62,077 0.0419 2,601 0.2096 13,011
----- ----- --------- ------ ------ ------ ------
Total 409,692 0.0415 17,002 0.0827 33,879
===== ===== ========= ====== ====== ====== ======
waste** 1,347,213
strip ratio 3.29
* RecAu - recoverable gold;
** A waste tonnage allowance for ramp design of 25% has been added to the
waste tonnage in the optimized pit shell to ensure a correct financial
analysis.
45
TABLE 17.9
HEAP-LEACH PROCESSING PIT OPTIMIZATION RESULTS
FOR BOREALIS, POLARIS, EAST RIDGE AND NORTHEAST RIDGE DEPOSITS
INTERNAL CUTOFF
(OPT)
AU --------------- RESOURCE RECAU RECAU AU AU WASTE** STRIP
PRICE DEPOSIT RECAU* AU TONS OPT OZS OPT OZS TONS RATIO
- ----- ---------- ------- ----- --------- ----- ------- ----- ------- ---------- -----
$350 Borealis 0.011 0.015 450,963 0.074 33,416 0.099 44,555 1,408,150 3.12
/oz Polaris 0.011 0.015 319,407 0.026 8,193 0.034 10,924 1,270,371 3.98
East Ridge 0.011 0.015 674,963 0.019 12,858 0.025 17,144 175,555 0.26
NE Ridge 0.011 0.015 488,889 0.028 13,750 0.038 18,333 1,667,039 3.31
----- ----- --------- ----- ------- ----- ------- ---------- ----
TOTAL 0.011 0.015 1,934,222 0.035 68,217 0.047 90,956 4,471,115 2.31
===== ===== ========= ===== ======= ===== ======= ========== ====
$375 Borealis 0.011 0.014 526,815 0.068 35,718 0.090 47,624 2,057,781 3.91
/oz Polaris 0.011 0.014 416,000 0.025 10,327 0.033 13,770 1,702,225 4.09
East Ridge 0.011 0.014 775,704 0.018 14,254 0.025 19,005 197,778 0.25
NE Ridge 0.011 0.014 625,778 0.026 16,145 0.034 21,527 1,916,299 3.06
----- ----- --------- ----- ------- ----- ------- ---------- ----
TOTAL 0.011 0.014 2,344,297 0.033 76,444 0.043 101,925 5,874,083 2.51
===== ===== ========= ===== ======= ===== ======= ========== ====
$400 Borealis 0.010 0.013 556,445 0.065 36,141 0.087 48,188 2,081,485 3.74
/oz Polaris 0.010 0.013 459,852 0.024 11,243 0.033 14,991 1,899,261 4.13
East Ridge 0.010 0.013 903,112 0.018 15,917 0.024 21,223 234,074 0.26
NE Ridge 0.010 0.013 777,482 0.024 18,660 0.032 24,879 2,261,484 2.91
----- ----- --------- ----- ------- ----- ------- ---------- ----
TOTAL 0.010 0.013 2,696,891 0.030 81,961 0.041 109,282 6,476,304 2.40
===== ===== ========= ===== ======= ===== ======= ========== ====
$450 Borealis 0.009 0.012 685,037 0.057 38,996 0.076 51,994 2,957,033 4.32
/oz Polaris 0.009 0.012 512,000 0.024 12,250 0.032 16,333 2,142,225 4.18
East Ridge 0.009 0.012 1,268,149 0.016 20,259 0.021 27,012 387,408 0.31
NE Ridge 0.009 0.012 964,742 0.022 21,128 0.029 28,170 2,439,263 2.53
----- ----- --------- ----- ------- ----- ------- ---------- ----
TOTAL 0.009 0.012 3,429,928 0.027 92,632 0.036 123,509 7,925,928 2.31
===== ===== ========= ===== ======= ===== ======= ========== ====
$500 Borealis 0.008 0.011 1,114,075 0.047 52,640 0.063 70,187 9,129,561 8.19
/oz Polaris 0.008 0.011 702,815 0.022 15,444 0.029 20,592 3,067,411 4.36
East Ridge 0.008 0.011 1,624,891 0.015 24,008 0.020 32,010 523,704 0.32
NE Ridge 0.008 0.011 1,420,446 0.019 27,379 0.026 36,505 3,524,450 2.48
----- ----- --------- ----- ------- ----- ------- ---------- ----
TOTAL 0.008 0.011 4,862,227 0.025 119,471 0.033 159,295 16,245,126 3.34
===== ===== ========= ===== ======= ===== ======= ========== ====
* RecAu - recoverable gold;
** A waste tonnage allowance for ramp design of 25% has been added to the
waste tonnage in the optimized pit shell to ensure correct financial
analysis.
17.2.2 MINING POTENTIAL FOR THE HEAPS, DUMPS AND STOCKPILES
All the resources from heaps, dumps and stockpiles in Table 17.5 are considered
as potentially mineable resources in this study. Further study is needed to
determine their economics.
17.2.4 MINING POTENTIAL OF FREEDOM FLATS USING A 2,000TPD SULFIDE MILL COMBINED
WITH HEAP LEACHING
An additional mining potential analysis has also been conducted for the Freedom
Flats zone, assuming open-pit mining and a 2,000 ton per day sulfide mill
combined with heap-leach processing for the lower-grade material. The heap-leach
Lerchs-Grossman (LG) pit generated in Section 17.2.1 was used as the starting
surface for LG pit optimization for additional mill operation mining potential.
The combination of the heap-leach pit and the mill pit was considered as the LG
pit for the combined mill/heap-leach operation. Gold prices used for the mill LG
pit optimization are the same as those used for heap-leach LG pit optimization.
Cost parameters and metallurgical recoveries for the mill LG pit optimization
are listed in Table 17.10.
46
TABLE 17.10
MILL PIT OPTIMIZATION PARAMETERS FOR THE BOREALIS PROJECT
ITEM PARAMETER
- ---- -----------
mining cost (ore and waste) $0.85/ton
Crushing & processing cost (ore only) $12.00/ton
G & A cost (ore only) $0.40/ton
gold recovery oxide 80%
mixed 80%
sulfide 90%
refining cost $3.00/ounce
Material above the mill cutoff grade inside the combined mill/heap-leach LG pit
is considered as the mill mining potential; material below the mill cutoff grade
but above the heap-leach cutoff grade inside the combined mill/heap-leach LG pit
is considered as heap-leach mining potential (Table 17.11). Again, a ramp was
not designed for this pit but a waste allowance of 25 percent has been added to
the indicated waste.
47
TABLE 17.11
MILL/HEAP-LEACH PROCESSING PIT OPTIMIZATION RESULTS FOR FREEDOM FLATS ZONE
INTERNAL CUTOFF (OPT)
AU RESOURCE ------------------------ TONS RECAU RECAU AU AU
PRICE TYPE ZONE RECAU* AU OPT OZS OPT OZS
- ----- -------- ------- ------ ----- --------- ------ ------ ------ ------
$350/ mill oxide 0.036 0.045 56,615 0.1031 5,837 0.1289 7,298
ounce mixed 0.036 0.045 47,538 0.0973 4,625 0.1216 5,781
sulfide 0.036 0.040 73,615 0.1801 13,258 0.2001 14,730
--------- ------ ------ ------ ------
SUBTOTAL 177,768 0.1334 23,721 0.1564 27,809
========= ====== ====== ====== ======
heap oxide 0.011 0.014 112,846 0.0251 2,832 0.0313 3,532
leach mixed 0.011 0.021 70,615 0.0186 1,313 0.0338 2,387
--------- ------ ------ ------ ------
SUBTOTAL 183,461 0.0226 4,146 0.0323 5,919
========= ====== ====== ====== ======
Total 361,229 0.0771 27,866 0.0934 33,728
========= ====== ====== ====== ======
waste** 1,295,481
strip ratio 3.59
$375/ mill oxide 0.033 0.041 70,154 0.0898 6,300 0.1123 7,878
ounce mixed 0.033 0.041 58,154 0.0859 4,995 0.1073 6,240
sulfide 0.033 0.037 77,154 0.1740 13,425 0.1932 14,906
--------- ------ ------ ------ ------
SUBTOTAL 205,462 0.1203 24,720 0.1413 29,024
========= ====== ====== ====== ======
heap oxide 0.011 0.013 104,538 0.0238 2,488 0.0297 3,105
leach mixed 0.011 0.019 62,923 0.0178 1,120 0.0324 2,039
--------- ------ ------ ------ ------
SUBTOTAL 167,461 0.0215 3,608 0.0307 5,143
========= ====== ====== ====== ======
Total 372,923 0.0760 28,328 0.0916 34,168
========= ====== ====== ====== ======
waste** 1,341,348
strip ratio 3.60
$400/ mill oxide 0.031 0.039 79,000 0.0834 6,589 0.1043 8,240
ounce mixed 0.031 0.039 65,231 0.0804 5,245 0.1005 6,556
sulfide 0.031 0.034 83,077 0.1661 13,799 0.1845 15,328
--------- ------ ------ ------ ------
SUBTOTAL 227,308 0.1128 25,632 0.1325 30,123
========= ====== ====== ====== ======
heap oxide 0.010 0.012 101,000 0.0230 2,323 0.0287 2,899
leach mixed 0.010 0.018 67,538 0.0170 1,148 0.0310 2,094
--------- ------ ------ ------ ------
SUBTOTAL 168,538 0.0206 3,471 0.0296 4,992
========= ====== ====== ====== ======
Total 395,846 0.0735 29,103 0.0887 35,116
========= ====== ====== ====== ======
waste** 1,488,751
strip ratio 3.76
$450/ mill oxide 0.028 0.035 106,769 0.0701 7,485 0.0876 9,353
ounce mixed 0.028 0.035 94,154 0.0657 6,186 0.0821 7,730
sulfide 0.028 0.031 93,615 0.1529 14,314 0.1698 15,896
--------- ------ ------ ------ ------
SUBTOTAL 294,538 0.0950 27,984 0.1120 32,979
========= ====== ====== ====== ======
heap oxide 0.009 0.011 87,000 0.0211 1,836 0.0263 2,288
leach mixed 0.009 0.016 61,769 0.0153 945 0.0281 1,736
--------- ------ ------ ------ ------
SUBTOTAL 148,769 0.0187 2,781 0.0270 4,024
========= ====== ====== ====== ======
Total 443,307 0.0694 30,765 0.0835 37,003
========= ====== ====== ====== ======
waste** 1,810,099
strip ratio 4.08
$500/ mill oxide 0.025 0.031 129,615 0.0626 8,114 0.0782 10,136
ounce mixed 0.025 0.031 117,000 0.0583 6,821 0.0728 8,518
sulfide 0.025 0.028 99,615 0.1454 14,484 0.1615 16,088
--------- ------ ------ ------ ------
SUBTOTAL 346,230 0.0850 29,419 0.1003 34,741
========= ====== ====== ====== ======
heap oxide 0.008 0.010 70,308 0.0193 1,357 0.0240 1,687
leach mixed 0.008 0.014 45,231 0.0135 611 0.0246 1,113
--------- ------ ------ ------ ------
SUBTOTAL 115,539 0.0170 1,968 0.0242 2,800
========= ====== ====== ====== ======
Total 461,769 0.0680 31,387 0.0813 37,541
========= ====== ====== ====== ======
waste** 1,898,365
strip ratio 4.11
* RecAu - recoverable gold;
** A waste tonnage allowance for ramp design of 25% has been added to the
waste tonnage in the optimized pit shell to ensure a correct financial
analysis.
48
18.0 OTHER RELEVANT DATA AND INFORMATION
Behre Dolbear is not aware of any other relevant data and information for the
current preliminary scoping study of project development of the Borealis project
that have not been discussed in this report.
49
19.0 INTERPRETATION AND CONCLUSIONS
As a result of its analysis, the evaluation Team summarizes and concludes that:
- EXCELLENT EXPLORATION POTENTIAL: The Borealis district has exploration
potential that far exceeds the currently identified mineral resources.
Discovery potential includes oxide mineralization adjacent to existing
pits, new oxide deposits within the large land position, sulfide
mineralization below and adjacent to the existing pits, sulfide
mineralization elsewhere on the property, particularly at the
high-grade Graben deposit and its apparent extensions to the north.
- MULTIPLE TYPES OF GOLD RESOURCES AND DEVELOPMENT ALTERNATIVES:
Multiple types of gold resources exist at Borealis and multiple mine
development options are available to Gryphon Gold. Additional
sampling, testing and engineering are warranted. As the business
environment evolves and as additional project information becomes
available, the preferred development plan and the alternative
development plans should be frequently reevaluated.
- IMMEDIATE ADVANCEMENT OF THE PHASED BUSINESS PLAN: Based on the
currently available information, the preferred course of action for
Gryphon Gold is the immediate advancement of the Phased Business Plan
outlined in this report.
- PROCESS HEAPS AND DUMPS: Depending upon the results of the anticipated
drill program, the initial development phase is to process the
existing heaps and dumps. Break-even cutoff grades for the existing
heaps and dumps are sufficiently low that at least 5 to 6 million tons
and perhaps as much as 10 million tons of this material could provide
economic feed to the heap leach recovery plant.
- FREEDOM FLATS & OTHER PITS: The second development phase is expected
to focus on in-place mineralization, with the expansion to mining of
resources at the Freedom Flats, Borealis, Polaris, East Ridge and
North East Ridge pits. This option should be viable at a gold price of
$350 per ounce or higher. When combined with 5 million tons or more of
the existing heaps and dumps, the resources should be able to justify
the construction of an ADR gold recovery plant to process solutions
from a 1.5 million to 2.0 million ton per year heap leach operation.
- EXPLORATION AND DEVELOPMENT OF DEEP HIGH-GRADE DEPOSITS: Cash flow
from the oxide plant can be used for the exploration and development
of the deeper high-grade sulfide mineralization in the Graben deposit.
- POSITIVE IMPACT OF GOLD PRICES: Based on scoping-level financial
analysis current gold prices are quite encouraging for the Borealis
Property.
50
20.0 RECOMMENDATIONS
The Borealis property hosts multiple types of gold resources which provide
multiple mine development options, or sequences of options. This situation
allows Gryphon Gold increased business flexibility and reduced risks. The
optimum mine development option is currently considered to be the staged
approach outlined in Gryphon Gold's business plan. Details of this proposed
sequence and its implications are discussed below. In addition, alternative
development sequences are described. As the business environment evolves and as
additional project information becomes available, the recommended plan and the
alternatives should be reconsidered.
20.1 PHASED BUSINESS PLAN
Gryphon Gold has developed a phased Business Plan for re-development of the
Borealis Project. After obtaining the necessary permits to conduct drilling and
metallurgical testing, the major phases of the Business Plan are:
- PHASE 1: evaluate the existing leach pads and mine dump materials for
the possibility of releaching and gold production;
- PHASE 2: further evaluate the remaining oxide ores in the district
that could be mined and transported to the new leach pad; and
- PHASE 3: evaluate the deeper high-grade sulfide mineralization found
in numerous areas of the property, including exploration of the Graben
deposit.
The prime purpose of these phased evaluations is, if warranted, to put the
various resources into production and produce gold expeditiously.
20.2 RE-DEVELOPMENT ALTERNATIVES
The development scenario in Gryphon Gold's Business Plan is considered the Base
Case. Development alternatives to the Base Case might include:
- MEGA-OPEN PIT: Investigate the feasibility of mining the Freedom Flats
and Graben resources by open pit methods;
- IMMEDIATE GRABEN ACCESS: Proceed directly to the exploration and, if
warranted, the pre-development of the Graben resource, without
retreatment of the existing resources, etc. An exploration adit could
be driven almost immediately from the current bottom of the Freedom
Flats pit;
- DISTRICT OXIDE EXPLORATION: Postpone exploration of the Graben and
explore the large land holdings for additional oxide and/or sulfide
resources;
- CUSTOM MILL HIGH GRADE: Consider the nearby custom mill or a small
used sulfide mill to treat transition and sulfide ore from the Freedom
Flats pit and the four other small pits;
- SIMULTANEOUS GRABEN AND OXIDE: Mine only the oxide ore and the higher
recovery transition ore from the Freedom Flats pit down to an
elevation, which allows the Graben exploration adit to be driven. The
remainder of the transition ore and all the sulfide ore would either
be stockpiled or left in place in the pit bottom until a sulfide
treatment plant was built to treat Graben ore. All economic existing
resources would be heap leached to provide exploration funding; and
- SIMULTANEOUS GRABEN AND HEAPS: Postpone mining the Freedom Flats pit;
drive the Graben exploration adit, and process the economic existing
heaps and dumps
51
With the possible exception of the first alternative, which still needs to be
tested, the other options all have merit but will become more or less important
depending upon the results of the test work on the existing heaps and dumps. At
the present level of knowledge, the Base Case holds the best promise.
The current plan of securing the necessary permits and completing the drilling
and metallurgical test work on the existing heaps and dumps should be expedited.
A detailed description of the drill program is provided in the Appendices of
this report.
20.3 OXIDE OPEN PIT DEVELOPMENT SEQUENCE
The plan outlined below assumes that permitting allows timely completion of the
designed drilling program and the drilling program defines sufficient oxide ore
to justify development. Having obtained the tonnages and grades of all the
resources available for treatment in a heap leach oxide ore plant, a decision
can be made leading to one of three alternates: build an oxide ore treatment
plant, explore for additional oxide ore, or postpone the oxide plant and proceed
directly to the exploration of the Graben. Assuming a successful drilling and
metallurgical testing program on the existing heaps and dumps, and a positive
production decision on an oxide ore processing plant, the following steps will
be implemented:
1. WATER SUPPLY: The adjacent water wells will be reactivated, a pipeline to
the property will be constructed, and a storage tank adjacent to the
planned facilities will be built. (Additional discussion is provided in the
section on Infrastructure.)
2. PAD CONSTRUCTION: The ground between Leach Pad 3 and Leach Pad 2 will be
leveled and graded; the first phase of a fully-lined leach pad, designed
ultimately to contain 10-12 million tons of crushed ore, will be
constructed.
3. INITIAL HEAP MINING: A mining and crushing contractor will be engaged for
all mining. Initially, only a loader and one or two trucks will be needed
to pick up and transport to a secondary crushing installation the partially
crushed existing heaps containing 4-5 million tons of economic materials.
The crusher will be adjacent to the heap. Equipment sizing will likely be
in the range of 75-ton rear dump trucks and 10-12 cu.yd. front-end loaders,
the latter being used to load and haul when the mining face and the crusher
are close enough to each other. Mining costs for the existing heaps and
dumps are expected to be very low, as no drilling and blasting and probably
no haulage trucks will be required. It is also possible that this material
could be transported to the crusher with a simple portable conveyor system.
4. POWER SUPPLY: A power generating plant and fuel storage tank will be
purchased and installed to initially provide power for the crusher,
portable offices, etc. Additional generating units will be added later to
power a 2-stage crusher and pumps, etc., for the processing plant (ADR or
carbon plant). (Additional discussion is provided in the section on
Infrastructure.)
5. BUILD ADR PLANT: An ADR plant sized to treat leach solutions from a
2-million ton per year ore mining operation will be purchased and installed
adjacent to the heap leach pad. Lined ditches, piping, pumps, and ponds
will be added. All oxide ore and the higher recovery transition ore will be
treated by heap leaching, followed by an ADR carbon plant. The lower
recovery transition ore and any sulfide ore encountered will either be left
in situ for future mining, sent to a custom mill, or stockpiled until a
sulfide ore treatment plant is available to process it.
6. BEGIN MINING IN-SITU ORE: The mining contractor will be contracted to bring
in additional equipment to commence stripping and mining of the in-situ ore
and waste in the Freedom Flats and four other small open pits containing
oxide ore. Mining of the ore from the existing pits, however, will require
drilling, blasting, loading and hauling of ore to the crusher as well as
waste removal to a suitable nearby location.
7. EXPAND CRUSHING: It is also planned to use a contractor to do the crushing,
which will be to 3/4 in or 1/2 in depending upon the results of the test
work. Most of the existing heaps will require only secondary crushing, as
52
they have already been partially crushed, but the existing "waste dumps"
will require two stages of crushing. Before the existing, partially
crushed, heap ore is exhausted, the crushing contractor will bring in a
primary crushing unit to crush the existing, economic run-of-mine heaps, as
well as the ore from Freedom Flats, and four other small open pits.
8. OXIDE EXPLORATION: While the existing heaps, stockpiles, dumps and known
open-pit oxide resources are being processed, exploration for additional
oxide ore on the property will be carried out.
9. UNDERGROUND EXPLORATION/DEVELOPMENT: As soon as mining in the Freedom Flats
pit has proceeded to a sufficient depth, an underground mining contractor
will be engaged to drive an exploration/production decline into the Graben
high-grade underground deposit.
10. GRABEN INFILL DRILLING: Definitive exploration drilling of the Graben will
then be done from this decline and its associated crosscuts.
53
21.0 REFERENCES
Chemex, November 1986, Report on Fire Assay and Cyanide Leach Results Reported
to Tenneco, Hawthorne, During the 1986 Season; 5 pages,
Echo Bay Mines, August 1986, Monthly Report (by Tony Eng); 6 pages.
Eng, T., 1990, Geology and Mineralization of the Freedom Flats Gold Deposit,
Borealis Mine, Mineral County, Nevada; Echo Bay Mines report, 39 pages.
Ivosevic, S.W., April 1979, 1978 Progress Report on Borealis Au Project, Ramona
District, Mineral County, Nevada; Houston International Minerals Co. report, 86
pages.
John T. Boyd Co., January 1981, Reserve Study and Mining Plan, Borealis Project,
Mineral County, Nevada; 103 pages.
Knight Piesold Consulting, June 2003, Borealis Project Engineering and
Environmental Evaluation and Pre-Feasibility Cost Estimates, Report of Findings;
43 pages.
Santa Fe Pacific Mining, July 1993, Monthly Activity Report; 5 pages.
54
22.0 DATE
This Technical Report, on A Preliminary Scoping Study of Project Development for
The Borealis Gold Project, Nevada, USA, is dated June 7th, 2004.
55
23.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORT ON DEVELOPMENT
PROPERTIES AND PRODUCTION PROPERTIES
23.1 MINING
23.1.1 SURFACE MINING
All mining and crushing will be done by a contractor. Until the contractor has
been selected, the exact number of units utilized and their manufacturer is
unknown. However, the sizes of primary equipment will likely be 50-75 ton
haulage trucks (Caterpillar model 773 or 775 or the equivalent), 12-15 cu-yd.
front-end loaders (Caterpillar model 992 or equivalent) and blast hole drills to
drill 6 1/4-inch diameter holes in 20-foot high benches (Ingersoll Rand model
DM-30 or the equivalent).
Drill pattern will likely approximate 15x15 feet and blasting agent will be
ANFO, either bagged or in bulk from an ANFO truck. Auxiliary equipment employed
by the contractor will likely include tracked and rubber-tired dozers, a motor
grader and a water truck, and miscellaneous small support equipment.
Depending upon the final production schedule and the size of the equipment
fleet, the work schedule in the mine should be either one or two 10-hour shifts
per day, five days per week. The crusher schedule will parallel that of the
mine.
Initially only a loader and one or two trucks will be needed to pick up and
transport to a secondary crushing installation the partially crushed existing
heaps containing 4 to 5 million tons of economic material. The crushing plant
will be located as close as possible to the heaps, so that it may be possible
for the loader to tram the material directly to the crusher without the use of
trucks.
Part way through this mining operation, the contractor will bring in additional
equipment to commence stripping and mining of the Freedom Flats Pit. A primary
crusher will also be added ahead of the secondary to crush the Freedom Flats
material as well as the uncrushed material in the existing economic run-of-mine
heaps and low grade stockpiles.
As soon as open pit mining of the Freedom Flats pit has progressed deep enough,
an underground mining contractor will be engaged to drive the Graben exploration
decline.
Power and water supply systems, etc., are described in the infrastructure
section of this report (Sec. 23.2).
23.1.2 UNDERGROUND MINING
The oxide development plan outlined above states that when mining in the Freedom
Flats pit has proceeded sufficiently, an underground mining contractor will be
engaged to drive an exploration/production decline into the Graben high-grade
underground deposit. Definitive exploration drilling of the Graben will then be
done from this decline and its associated crosscuts. It is expected that
successful exploration of the Graben will lead to the construction of a sulfide
ore treatment plant, which will start up while the oxide ore plant is still
operating.
A higher degree of definition is required for deposits to be mined underground.
This is seldom achievable, at reasonable costs, from surface drill holes. The
proximity of the Freedom Flats open-pit allows for underground exploration of
the Graben deposit via a lower cost decline. The decline can be driven to
facilitate underground exploration and then serve in the future as the main
access to the mine.
The decline should be collared at least 30 feet above the floor of the open-pit
and driven at a gradient not to exceed minus 15%. A 10 foot by 10 foot
exploration-only decline will likely be driven first. However, ideally an
18-foot wide by 16.5-foot high dual purpose decline, sufficiently large to
accommodate the size of haulage trucks to meet
56
the 1,000 to 2000 ton per day production requirements could be chosen and this
will be considered when the time comes. (The cost savings of driving a smaller
cross section decline required for underground exploration and later enlarging
the cross section to meet production requirements are not usually realized since
the rule of thumb is that it costs 75% of the original costs to strip the
original decline to the larger size).
The lateral development is initially intended for exploration drilling and then
for underground mine development. The initial lateral is developed where the
decline ends at the mid point of the mineralization, running parallel to the
footwall. At a later date, the decline would be extended down to the lowest
elevation of the mineralization. A third drift would come off of the decline and
go across the top of the deposit, again in the footwall.
The underground exploration program should consist of diamond drilling, driving
drifts through the deposit, geotechnical data collection, and obtaining a bulk
sample for metallurgical testing. The required drill hole spacing varies with
the grade and thickness of the ore zones; however, it is seldom more than
50-foot centers and can be as close as 10-foot centers.
The geotechnical data variability of the deposit will determine the mining
method to be selected. The team believes that likely mining methods would be
either sub-level open stoping with delayed fill or a combination of cut and fill
and drift and fill. Paste fill may be suitable. Direct mining costs vary from
$25.00 per ton to $35.00 per ton with $4.00 to $5.00 in additional cost for mine
G & A.
Figures 23.1 and 23.2 are schematics of the Graben resource with conceptual
exploration and development layouts.
(GRAPHIC OMITTED)
FIGURE 23.1 PROPOSED UNDERGROUND WORKINGS
WITH HIGH-GRADE OREBODIES IN
GRABEN AND FREEDOM FLATS DEPOSITS (LOOKING N35 DEGREES E, DIP +5 DEGREES).
57
(GRAPHIC OMITTED)
FIGURE 23.2 PROPOSED UNDERGROUND WORKINGS WITH LOW-GRADE OREBODIES IN
GRABEN AND FREEDOM FLATS DEPOSITS (LOOKING N35 DEGREES E, DIP +5 DEGREES).
23.2 INFRASTRUCTURE
Infrastructure issues are covered in several places within this report. Outlined
below are the major components of infrastructure for Borealis.
PLANT ROADS AND FENCING: Two lane roads will be provided for access to plant
facilities on the site. The main access road from the existing road will be
upgraded and relocated as required. The roads will be surfaced to preserve their
integrity, with ditches and culverts to accommodate local runoff. A graded
parking lot will be provided for owner's employees and contractor's employees.
Fencing will enclose the process area, solution ponds, the generator
sets/substation and the propane tank.
PLANT DRAINAGE: Runoff from buildings and plant facilities will be collected and
recycled to process facilities or treated as required.
OFFICES, CHANGE HOUSE, LUNCH ROOM AND LABORATORY: Standard manufactured trailers
on concrete slabs, insulated and air-conditioned, will be provided to
accommodate these facilities.
SEWAGE DISPOSAL: A septic tank and leach field will be installed to take care
initially of the small work force, but sized for the expansion to cover the
workforce at the Graben and a sulfide mill.
TRUCK SHOP: The contractor will be asked to supply maintenance facilities for
his equipment. A small one-bay prefabricated structure will be built for the
owner's small equipment.
WAREHOUSE: A mine equipment warehouse will not be required. Spare parts for the
processing plant will be stored in a trailer on a slab, adjacent to the plant.
58
COMPRESSED AIR: Service air connections located throughout the process area will
be supplied with plant air at 100psi from one 150cfm compressor. Instrument air
will be supplied through the plant system through an air drier and filter.
PROPANE FUEL SYSTEM; Propane fuel will be used for building heat, for firing the
steam boiler, rotary kiln, and melting furnace and for hot water. A 10,000
gallon steel tank will be provided for propane storage. The tank will have
concrete spread footings, a vaporizer, and an unloading station and will be
located in a fenced area.
POWER SUPPLY: Total electrical load is expected to be approximately 2 MW. The
crushing plant will be the largest load and the contractor may bring his own
generators. There is a power line that passes relatively close to the property
and could be tapped into, although an expensive transformer would be required.
At this point in time, it is expected that power will be supplied by generators,
although the economics of using the existing power line will be examined.
WATER SUPPLY: Gryphon Gold is applying for water rights from land located
approximately 5 miles from the minesite. There are two existing wells and a
pipeline, all left over from the previous mining operations, and they may still
be useable. Water will be initially required only for the heap leaching
operations, but later will also be required for a sulfide mill to treat the ore
from the Graben. Because there is an over-allotment of water rights in the area,
it is possible that the size of the two types of operations may have to be
limited by the available water.
A simplified site/facilities map is provided as Figure 23.3.
59
(GRAPHIC OMITTED)
23.3 ENVIRONMENTAL CONSIDERATIONS
Environmental and permitting considerations at Borealis have been investigated
by Knight Piesold (environmental engineer and consultant) and their work on the
project is ongoing. This section provides a summary of the environmental
considerations and is excerpted from Gryphon Gold's due diligence on the
Borealis project in June 2003.
Knight Piesold has visited the Borealis project site, met with key permitting
agencies and reviewed the materials in the NBMRR files. Knight Piesold has
developed leach pad and process solution collection system concepts that appear
to accommodate the required production for the project. It appears that the
overall project environmental and reclamation commitments will be in line with
those that are generally accepted by the Nevada mining industry and regulatory
community. There are no fatal flaws in the Borealis Mine Development Project
according to Knight Piesold (Knight Piesold, 2003).
Important findings include:
- NO OBVIOUS REASONS THAT EXTRAORDINARY COMMITMENTS REQUIRED: The fact
that the Borealis project has been historically mined and successfully
reclaimed will contribute well to the permitting process. Reclamation
practices have been proven at this site and can be demonstrated
through the baseline environmental inventories relative to the
reclamation program implemented in the early 1990s. Many of the
questions that persist in greenfield mine developments have already
been answered at Borealis through years of mining operations, closure,
reclamation and monitoring programs upon which contemporary programs
can be cost-efficiently tiered.
- ALL RECLAMATION ACTIVITIES WERE COMPLETED BY 1994: Closure activities
for the site included rinsing the heaps until pH and cyanide levels in
the effluent had stabilized to acceptable levels. Pad side slopes were
first graded to approximately be a 3H:1V (horizontal to vertical)
slope to cover the exposed liner footprint, covered with a layer of
plant growth media excavated from the Freedom Flats area, and planted
with a mixture of native and non-native seed.
- CRITICAL BASELINE DATA TO DOCUMENT IMPACT OF PAST OPERATIONS: There
are certain environmental evaluations that routinely must be completed
in order to provide the information against which project impacts are
measured. Both the US Forest Service (USFS) and the Nevada Bureau of
Mining Regulation and Reclamation (NBMRR) have requirements to profile
existing conditions and to evaluate what effects will result from
implementing the project plans on those resources. Given the historic
mining use of the land and potential existing contamination at the
site, it will be important to make sure that the baseline data
delineate the current site conditions, especially in the area of the
heap leach pads, in order to clearly document the background
conditions against which the Joint Venture's activities can be
measured.
- ENVIRONMENTAL INVENTORY: Background information on geology, air
quality, soils, biology, water resources, social and economic
conditions, and cultural resources will need to be assembled. Some of
this information is available in historical project records on file
with both NBMRR and USFS. However, having reviewed the quality of
information contained in the NBMRR files, it is Knight Piesold's
opinion that additional information must be generated in order to
support approvable decision packages submitted to the agencies.
- DEVELOPMENT WITHIN FOOTPRINT OF PAST MINING: Preliminary site
development concepts suggest that both Phases 1 and 2 can be
accomplished within the footprint of the previous Borealis Mine land
disturbance. The apparent shape and size of mineralized zones
identified in the Graben Zone suggest higher-grade sulfide deposits
that may be amenable to underground mining activities. While it is
conceivable that additional exploration may prove a substantial gold
resource amenable to open pit mining, the current information suggests
that underground development is a more plausible option at this time,
and may be more straightforward to permit.
- THREE PHASED PERMITTING PROCESS: A three-phased permitting process has
been scoped. In order to maintain the nomenclature established by
Golden Phoenix in their press release, the first permitting phase will
be referred to as Phase 0, which would proceed immediately after the
due diligence decision is made
61
and will be fast tracked to define the exploration activities needed
to prove the mineral resource, condemn the pad sites and support
infrastructure, and obtain environmental baseline data to support the
permitting packages for Phase 1 and 2 of the project. Phases 1 and 2
would be permitted as a single application, and development of the
application package would proceed immediately after completion of the
Phase 0 package, and concurrent with the Phase 0 field program.
Concurrent exploration activities in the Graben zone and other
exploration targets would be included in the Phase 1 and 2 permit
package. Development of Phase 3 resources, assuming exploration
program success, would follow later in the project life. For the
purposes of the Phase 1 and 2 permitting, the Phase 3 development
would be introduced and evaluated as a reasonably foreseeable
cumulative impact of the project.
23.4 COSTS AND FINANCIAL ANALYSIS
This section provides preliminary capital expenditures, operating costs, and
financial analysis of Freedom Flats and four small open pits.
23.4.1 CAPITAL COSTS
Capital costs for the initial Phase 1 redevelopment at Borealis are estimated as
approximately $5.759 million, with the cost components as follows.
Permitting & Project Management $1,265,000
Mining and crushing - by contractor $ 150,000
Processing
ADR plant for 2 million tpy of ore (used) $1,500,000
Pad construction
1st Phase (per Knight Piesold estimate of $3.5 million) $1,687,000
Infrastructure
Power, water, trailer office, etc., (estimated range of
$0.3-0.4 M) $ 400,000
Reclamation Bond
Required up-front payment of total amount of $2.8 million $ 500,000
ECPM $ 257,000
----------
TOTAL $5,759,000
==========
23.4.2 OPERATING COSTS
The following tabulation (Table 23.1) summarizes the costs listed in the
parameters for the heaps and dumps and for the new oxide and sulfide resource
operations. The Team assembled these scoping-level costs utilizing contractor
bids for similar, nearby operations in Nevada, as well as the overall experience
of the members of the Team.
62
TABLE 23.1
OPERATING COSTS - EXISTING HEAPS & DUMPS AND NEW OXIDE & SULFIDE RESOURCE
NEW RESOURCE
EXISTING HEAP ----------------
ITEM AND DUMPS OXIDE SULFIDE
- ---- ------------- ------ -------
Mining Ore & Waste $/ton 0.30 0.85 0.85
Crushing-Single Stage $/ton 0.85 -- --
Crushing-Two-stage $/ton 1.25 1.25 1.25
Stacking $/ton 0.25 0.25 --
Processing $/ton 2.00(1) 2.00(1) 10.75(2)
G&A $/ton 0.40 0.40 0.40(3)
Refining $/ounce 3.00 3.00 3.00
Notes:
1. Assumes 2-million tpy operation
2. Assumes 700,000 tpy operation. Includes concentrate treatment cost.
3. Assumes concurrent operations with the oxide plant
23.4.3 FINANCIAL ANALYSIS
Summarized below in Tables 23.2 and 23.3 are financial analyses of two
development scenarios, both evaluated with a gold price of $350 per ounce. Using
the operating costs listed in Table 23.1, the heap leaching and ADR plant
scenario has a cash cost of $183 per ounce and the sulfide milling combined with
a heap leach operation scenario has a cash cost of $155 per ounce. Gryphon
Gold's preliminary cash flow analysis is included in the Appendices of this
report.
TABLE 23.2
FINANCIAL ANALYSIS: HEAP LEACHING AND ADR PLANT (ALL FIVE PITS)
RESOURCE
Potentially Mineable Resource:
2,260,300 tons @ recov. grade of 0.0369 opt = 83,452 recov. ozs
Waste: 5,325,500 tons (incl. 25% allowance for ramps)
REVENUES = 83,452 ozs x ($350-$12.25-$3.0)
= 83,452 x 334.75 = $27.935million
COSTS
Mining Waste: 5,325 kt x $0.85 = $ 4.526 M
Mining Ore: 2,260 kt x $0.85 = $ 1.921 M
Crush, Stack, Process Ore 2,260 kt x $3.50 = $ 7.910 M
General & Administration: 2,260 kt x $0.40 = $ 0.904 M
---------
Total Costs = $15.261 M
FINANCIAL RESULTS
Net Cash Flow Before Capex = $12.674 M
Cash Cost per Recovered Ounce = $182.87/oz
Net Cash Flow per Recov. Ounce = $151.87/oz
63
TABLE 23.3
FINANCIAL ANALYSIS: COMBINED HEAP LEACH AND SULFIDE MILL
(Freedom Flats zone only)
RESOURCE
Potentially Mineable Resource:
Heap Leach: 183,461 tons @ recov. grade of 0.0226 = 4,146 recov. Ozs
Sulfide: 177,768 tons @ recov. grade of 0.1334 = 23,721 recov. Ozs
Waste: 1,295,481 tons (incl. 25% allowance for ramps)
REVENUES = 27,866 ozs x ($350-12.25-3.00)
= 27,866 ozs x 334.75 = $9.328 M
COSTS
Mining Waste: 1,295.5 kt x $0.85 = $1.101 M
Mining Ore: 361.2 kt x $0.85 = $0.307 M
Crush, Stack, Process Oxide
Ore: 183.5 kt x $3.50 = $0.642 M
Crush and Process Sulfide Ore 177.8 kt x $12.00 = $2.134 M
General & Administrative: 361.2 kt x $0.40 = $0.146 M
--------
Total Costs = $4.330 M
FINANCIAL RESULTS
Net Cash Flow Before Capex = $4.998M
Cash Cost per Recov. Oz = $155.39
Net Cash Flow per recov. Oz = $179.36
64
24.0 CERTIFICATE OF AUTHORS
BEHRE DOLBEAR
BEHRE DOLBEAR & COMPANY, INC.
600 Seventeenth Street, Suite 2100 South
Denver, CO 80202 USA
Phone: 303-620-0020
Fax: 303-620-0024
Email: denver@dolbear.com
I, Qingping Deng, Ph.D., C.P.Geol., do hereby certify that:
1. I am currently employed as the Director of Ore Reserves and Mine Planning
by:
Behre Dolbear & Company, Inc.
600 Seventeenth Street, Suite 2100 South
Denver, CO 80202
USA
2. I graduated with a degree of B.Sc. in Geology and a degree of M.Sc. in
Geology from the Central South Institute of Mining and Metallurgy in China
in 1981 and 1984. I graduated with a degree of Ph.D. in Geology from the
University of Texas at El Paso in 1990.
3. I am a Certified Professional Geologist of the American Institute of
Professional Geologists with a certification number of 10515.
4. I have worked as a geologist and ore reserve specialist for a total of 20
years since my graduation from university.
5. I have read the definition of "qualified person" set out in National
Instrument 43-101 ("NI 43-101") and certify that by reason of my education,
affiliation with a professional association (as defined in NI 43-101) and
past relevant work experience, I fulfill the requirements to be a
"qualified person" for the purposes of NI 43-101.
6. I am responsible for the preparation of the technical report titled A
Preliminary Scoping Study of Project Development for the Borealis Gold
Project, Nevada, USA, dated June 7th, 2004 (the "Technical Report")
relating to the Borealis gold property. I visited the Borealis property on
November 16th, 2004, reviewed the typical core intercepts of the
mineralization, and observed the existing site conditions.
7. I had prior involvement with the property that is the subject of this
Technical Report. I completed a brief resource/reserve review of the
Borealis gold property for Behre Dolbear & Company, Inc. in 2003.
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.
9. I am independent of the issuer applying all of the tests in section 1.5 of
National Instrument 43-101.
65
10. I have read National Instrument 43-101 and Form 43-101F1, and the Technical
Report has been prepared in compliance with that instrument and form.
11. I consent to the filing of the Technical Report with any stock exchange and
other regulatory authority and any publication by them, including
electronic publication in the public company files on their websites
accessible by the public, of the Technical Report.
Dated this 7th day of June, 2004.
/s/ Qingping Deng (SEAL)
- ------------------------------------------
Qingping Deng Ph.D. C.P. Geol. (CPG 10515)
66
25.0 ILLUSTRATIONS
All illustrations for this technical report are included in the body of the
report with the text from which they are referenced or in the Appendixes.
67
APPENDIX 1:
IN-SITU MINERAL RESOURCE MODEL IN MAIN BOREALIS PROJECT AREA
68
APPENDIX 1
IN-SITU MINERAL RESOURCE MODEL IN MAIN BOREALIS PROJECT AREA
An in-situ resource model has been developed for the conceptual study of the
Borealis project. Mineralized zones included in the resource model include
Freedom Flats, Graben, Borealis, Polaris, East Ridge and Northeast Ridge. This
resource modeling is a joint effort between Gryphon Gold and Behre Dolbear.
Procedures and parameters for the analysis include inputs from both parties.
Database, procedures and parameters used for developing the resource model, as
well as resource classification are discussed in details below.
A1.1 DATABASE
A1.1.1 DRILL HOLE DATABASE
The drill hole database used for the resource modeling was compiled and verified
by Golden Phoenix. No database quality verification has been conducted by Behre
Dolbear for the current study. Behre Dolbear did note a few inconsistencies in
the database, which were checked with Golden Phoenix and/or Gryphon Gold and
corrections ware made if necessary.
The drill hole database used for the main Borealis project area contains 1,747
drill holes with a total drilled length of 510,712 feet (Table A1.1). Those
holes were drilled by different operators on the property. Drill hole types
include diamond core holes, reverse circulation (RC) holes and rotary holes.
Some of the core holes have down-hole survey information. Mineralized zones
covered by these drill holes include the Freedom Flats, Graben, Borealis,
Polaris, East Ridge and Northeast Ridge. All the six mineralized zones except
Graben have been partially mined by previous operators of the project; the
Borealis and Polaris pits have been back-filled with waste from the Freedom
Flats pit. There are additional 487 drill holes with a total drilled length of
103,562 feet in the Cerro Duro, Jamies Ridge, and Purdy's Peak area, at
approximately three miles distant northwest of the current in-situ resource
modeling area, but they have not been included in this resource study. The total
existing drilling for the entire Borealis project, therefore, is 2,234 holes
with a total drilled length of 614,274 feet.
TABLE A1.1
DRILL HOLES USED FOR THE CURRENT STUDY
ZONE NUMBER OF HOLES TOTAL LENGTH (FT)
- ---- --------------- -----------------
Graben 143 111,465
Freedom Flats 201 109,011
Borealis 518 113,415
Polaris 239 48,257
East Ridge 253 40,791
Northeast Ridge 393 87,773
----- -------
TOTAL 1,747 510,712
===== =======
Drill hole sampling length is generally 5 feet for the RC holes, but it varies
for the core holes based on the geological intervals. Sampling length is up to
25 feet for some of the early rotary holes. Gold assays in parts per billion
(ppb) and troy ounces per short ton (opt) are provided for most of the sampling
intervals. Silver assays in parts per million (ppm) and opt are also provided
for some of the sampling intervals. Silver grade was not modeled in this study.
Historical records indicate a silver to gold ratio of approximately 5:1.
The oxidation zones of most of the drill holes in the Freedom Flats and Graben
deposits were provided by Gryphon Gold based on available original drill hole
logs; they were used to construct an oxidation model for the two deposits.
69
A1.1.2 TONNAGE FACTORS
The historical tonnage factor used for the project by different companies varies
widely. Based on recent information on bulk density measurements for the
project, the following tonnage factors were used in this study:
Freedom Flats: 13 ft(3)/ton
Graben high-grade (inside the 0.1 opt Au envelope): 12 ft(3)/ton
Graben low-grade (outside the 0.1 opt Au envelope): 13 ft(3)/ton
Other four deposits: 13.5 ft(3)/ton
A1.1.3 TOPOGRAPHY
Three topographic surfaces were provided by Golden Phoenix for the project,
including the original topography before mining, the topography at the end of
open pit mining activity and the current topography. The current topography is
different from the topography at the end of open pit mining because of
post-mining reclamation and back-filling of the Borealis and Polaris pits.
The topography at the end of the mining was used to model the current in-situ
mineralization of the project. Material between the original topography before
mining and the topography at the end of mining is considered as mined material.
A1.2 GEOLOGICAL MODELING
Two geological models have been created for the resource modeling: a gold grade
mineral envelope and an oxidation state model.
A1.2.1 GOLD GRADE MINERAL ENVELOPE
Gold grade mineral envelopes on cross sections have been produced by a
consulting geologist of Gryphon Gold. Cross sections used for the mineral
envelope modeling are oriented in east-west direction for the Graben deposit and
at the azimuth of 318 degrees for the other deposits. Cross section spacing is
50 feet for the Graben and Freedom Flats deposits and 100 feet for the other
deposits.
Original assay intervals were used for generating the mineral envelopes. A
high-grade envelope at the cutoff gold grade of 0.10 opt and a low-grade
envelope at the cutoff gold grade of 0.01 opt were defined on the cross sections
for the Graben and the Freedom Flats deposits, whereas only a low-grade mineral
envelope at the gold cutoff grade of 0.01 opt was defined for the other
deposits.
The high-grade and the low-grade envelopes were digitized from the cross
sections for the Graben and the Freedom Flats deposits. The Graben mineral
envelopes were modified by Behre Dolbear based on 3-D relations of drill hole
intercepts. Solids were created from these section outlines by projecting the
outlines perpendicular to the section lines. The projection distance is
generally half of the section spacing, i.e. 25 feet, but it is as large as 75
feet from the section line if no outlines were defined in adjacent sections.
These solids were used to code the mineral envelopes to drill hole assay
intervals and model blocks.
The mineral envelopes used for the resource modeling of the Borealis, Polaris,
East Ridge and Northeast Ridge deposits were produced in a slightly different
manner. The section outlines were generated on cross sections at 50-foot
intervals and oriented at the azimuth of 318 degrees using the 20-foot
composites on computer screen by Behre Dolbear. The section mineral envelopes
defined by the Gryphon Gold consultant were only used as a check. In general,
the two mineral envelopes agree reasonably well.
Figure A1.1 shows the 0.01 opt gold low-grade mineral envelope solids for the
six deposits of the Borealis project, and Figure A1.2 shows the 0.10 opt gold
high-grade mineral envelope solids for the Freedom Flats and Graben deposits.
70
(GRAPHIC OMITTED)
FIGURE A1.1 THE 0.01 OPT GOLD LOW-GRADE MINERAL ENVELOPE SOLIDS FOR THE SIX
MINERALIZED ZONES OF THE BOREALIS PROJECT (LOOKING DOWN VERTICALLY).
(GRAPHIC OMITTED)
FIGURE A1.2 THE 0.10 OPT GOLD HIGH-GRADE MINERAL ENVELOPE SOLIDS FOR THE FREEDOM
FLATS AND GRABEN ZONES (LOOKING N15 DEGREES W, -45 DEGREES).
A1.2.2 OXIDATION STATE MODEL
The oxidation model for the Graben and Freedom Flats deposits was created based
on drill hole oxidation state information generated by the Gryphon Gold
consultant. The drill hole intervals were separated into oxide, mixed and
sulfide according to the distribution of oxide and sulfide minerals. A surface
was created at the bottom of the oxide intervals, and a second surface was
created at the top of sulfide intervals. The volume between the two surfaces is
defined as the mixed zone. There are two oxide intervals for a few of the drill
holes in the database, the
71
second oxide interval and the mixed and/or sulfide intervals above it were
considered as the mixed zone in this model. Model blocks were separated into
oxide, mixed and sulfide based on the two surfaces. Different metallurgical
recoveries have been used for different oxidation zones in this study.
No oxidation model has been produced for Borealis, Polaris, East Ridge and
Northeast Ridge deposits. Most of the drill holes in these four deposits have
been terminated within the oxide zone. Therefore, the entire deposits are
considered as oxide in this study. In order to account for some possible mixed
and sulfide material below the oxide zone, the oxide heap-leaching gold recovery
used for mining potential analysis has been reduced from 80 percent to 75
percent.
A1.3 ASSAY STATISTICS AND GRADE CAPPING
Length-weighted classic statistics of gold assays within the defined mineral
envelopes for the six mineralized zones of the Borealis project are summarized
in Tables A1.2 and A1.3. For the Freedom Flats and Graben zones, the assay
intervals used for the statistical summary are the actual intervals used to
define the mineral envelopes. For the other four zones, however, the assay
intervals are coded from the mineral envelopes defined by the 20-foot composites
using a majority rule, i.e. an assay interval is considered inside the envelope
if more than 50 percent of the interval is inside the envelope.
72
TABLE A1.2
LENGTH-WEIGHTED GOLD ASSAY STATISTICS WITHIN THE MINERAL ENVELOPES,
FREEDOM FLATS AND GRABEN ZONES
MINERALIZED CUTOFF LENGTH MEAN STAN. MIN. MAX. COEF.
ZONE ZONE (OPT) (FEET) (OPT) DEV. (OPT) (OPT) VAR.
----------- ------------ ------ ------ ----- ----- ----- ----- -----
Freedom oxide 0.00 2,960 0.310 0.349 0.000 3.203 1.125
Flats 0.10 2,590 0.348 0.358
high-grade 0.20 1,450 0.507 0.413
(inside 0.50 455 0.927 0.520
0.10 opt
ME) mixed 0.00 830 0.275 0.291 0.000 2.065 1.058
0.10 730 0.307 0.296
0.20 380 0.453 0.351
0.50 95 0.909 0.448
sulfide 0.00 985 0.222 0.181 0.000 1.690 0.815
0.10 865 0.246 0.181
0.20 435 0.347 0.209
0.50 35 0.900 0.392
subtotal 0.00 4,775 0.286 0.313 0.000 3.203 1.096
0.10 4,185 0.320 0.321
0.20 2,265 0.467 0.377
0.50 585 0.922 0.501
Freedom oxide 0.00 6,535 0.042 0.033 0.000 0.308 0.788
Flats 0.01 6,085 0.045 0.033
low-grade 0.02 4,840 0.053 0.032
(inside 0.01 0.05 2,050 0.079 0.033
opt ME but
outside 0.10 mixed 0.00 2,685 0.034 0.027 0.000 0.154 0.795
opt ME) 0.01 2,305 0.039 0.025
0.02 1,795 0.046 0.025
0.05 590 0.075 0.022
sulfide 0.00 4,872 0.034 0.039 0.000 0.488 1.149
0.01 4,112 0.039 0.039
0.02 2,765 0.052 0.043
0.05 990 0.088 0.055
Subtotal 0.00 14,092 0.038 0.034 0.000 0.488 0.914
0.01 12,502 0.042 0.034
0.02 9,400 0.051 0.035
0.05 3,630 0.081 0.039
Freedom Total 0.00 18,867 0.100 0.193 0.000 3.203 1.926
Flats 0.01 17,077 0.111 0.201
0.02 13,965 0.132 0.216
0.05 8,145 0.203 0.232
Graben high-grade 0.00 1,728 0.251 0.361 0.007 3.592 1.440
(inside 0.1 0.10 1,253 0.322 0.402
opt ME) 0.20 583 0.536 0.511
0.50 171 1.081 0.676
low-grade 0.00 7,164 0.030 0.064 0.000 1.620 2.129
(inside 0.01 0.01 5,772 0.036 0.070
but outside 0.02 3,574 0.050 0.086
0.1 opt ME) 0.05 1,106 0.094 0.145
total 0.00 8,829 0.073 0.191 0.000 3.592 2.610
0.01 7,494 0.086 0.205
0.02 5,287 0.116 0.238
0.05 2,706 0.197 0.311
73
TABLE A1.3
LENGTH-WEIGHTED GOLD ASSAY STATISTICS WITHIN THE MINERAL ENVELOPES,
BOREALIS, POLARIS, EAST RIDGE AND NORTHEAST RIDGE ZONES
CUTOFF LENGTH MEAN STAN. MIN. MAX. COEF.
ZONE (OPT) (FEET) (OPT) DEV. (OPT) (OPT) VAR.
---- ------ ------ ----- ----- ----- ----- -----
Borealis 0.000 15,778 0.067 0.133 0.000 1.810 1.975
0.010 13,094 0.080 0.142
0.020 9,867 0.102 0.158
0.050 5,468 0.158 0.194
Polaris 0.000 4,111 0.028 0.036 0.000 0.337 1.279
0.010 3,081 0.035 0.038
0.020 1,851 0.050 0.044
0.050 528 0.098 0.057
East Ridge 0.000 16,076 0.026 0.039 0.000 0.940 1.514
0.010 13,210 0.030 0.042
0.020 7,203 0.044 0.053
0.050 1,635 0.093 0.096
Northeast Ridge 0.000 17,245 0.025 0.029 0.000 0.640 1.171
0.010 14,040 0.029 0.031
0.020 7,430 0.042 0.037
0.050 1,725 0.085 0.058
Gold assay grades are generally un-capped, except for an extremely high grade
sample in the Borealis deposit. Gold grade for this sample was reduced from 4.34
opt to 1.80 opt, which is about the grade of the second highest grade sample in
the deposit.
The probability plots of the gold assays within the mineral envelopes generally
show good log-normal distributions (Figures A1.3 to A1.8).
A1.4 COMPOSITING AND VARIOGRAPHY
The original assays were composited by length to composites by mineral
envelopes, i.e. only assays in the same mineral envelope are composited
together. The composite length is 10-foot for the Freedom Flats and Graben
deposits, and 20-foot for the other four deposits. Length-weighted statistics of
gold grades for the length composites of various zones are summarized in Tables
A1.4 and A1.5. These length composites are used for variography study and grade
estimation.
74
(GRAPH OMITTED)
FIGURE A1.3 GOLD ASSAY GRADE PROBABILITY DISTRIBUTION INSIDE 0.01 OPT GOLD
MINERAL ENVELOPE FOR THE GRABEN ZONE.
(GRAPH OMITTED)
FIGURE A1.4 GOLD ASSAY GRADE PROBABILITY DISTRIBUTION INSIDE 0.01 OPT GOLD
MINERAL ENVELOPE FOR THE FREEDOM FLATS ZONE.
75
(GRAPH OMITTED)
FIGURE A1.5 GOLD ASSAY GRADE PROBABILITY DISTRIBUTION INSIDE 0.01 OPT GOLD
MINERAL ENVELOPE FOR THE BOREALIS ZONE.
(GRAPH OMITTED)
FIGURE A1.6 GOLD ASSAY GRADE PROBABILITY DISTRIBUTION INSIDE 0.01 OPT GOLD
MINERAL ENVELOPE FOR THE POLARIS ZONE.
76
(GRAPH OMITTED)
FIGURE A1.7 GOLD ASSAY GRADE PROBABILITY DISTRIBUTION INSIDE 0.01 OPT GOLD
MINERAL ENVELOPE FOR THE EAST RIDGE ZONE.
(GRAPH OMITTED)
FIGURE A1.8 GOLD ASSAY GRADE PROBABILITY DISTRIBUTION INSIDE 0.01 OPT GOLD
MINERAL ENVELOPE FOR THE NORTHEAST RIDGE ZONE.
77
TABLE A1.4
LENGTH-WEIGHTED GOLD COMPOSITE STATISTICS WITHIN THE MINERAL ENVELOPES,
FREEDOM FLATS AND GRABEN ZONES
MINERALIZED CUTOFF LENGTH MEAN STAN. MIN. MAX. COEF.
ZONE ZONE (OPT) (FEET) (OPT) DEV. (OPT) (OPT) VAR.
- ------------ ------------ ------ ------ ----- ----- ----- ----- -----
Freedom oxide 0.00 2,990 0.315 0.323 0.000 3.152 1.026
Flats 0.10 2,710 0.343 0.327
high-grade 0.20 1,570 0.486 0.367
(inside 0.50 505 0.861 0.446
0.10 opt
ME) mixed 0.00 815 0.263 0.219 0.000 1.176 0.835
0.10 740 0.285 0.218
0.20 385 0.410 0.240
0.50 90 0.775 0.229
sulfide 0.00 960 0.220 0.145 0.000 1.196 0.661
0.10 885 0.233 0.143
0.20 425 0.324 0.159
0.50 30 0.783 0.300
subtotal 0.00 4,765 0.287 0.282 0.000 3.152 0.983
0.10 4,335 0.311 0.285
0.20 2,380 0.445 0.327
0.50 625 0.845 0.416
Freedom oxide 0.00 6,605 0.042 0.028 0.000 0.183 0.662
Flats 0.01 6,345 0.044 0.027
low-grade 0.02 5,135 0.050 0.026
(inside 0.01 0.05 2,040 0.075 0.024
opt ME but
outside 0.10 mixed 0.00 2,670 0.034 0.025 0.000 0.121 0.730
opt ME) 0.01 2,330 0.038 0.023
0.02 1,890 0.044 0.022
0.05 560 0.072 0.019
sulfide 0.00 4,817 0.034 0.033 0.000 0.321 0.967
0.01 4,182 0.039 0.033
0.02 2,900 0.049 0.034
0.05 985 0.082 0.040
subtotal 0.00 14,092 0.038 0.029 0.000 0.321 0.779
0.01 12,857 0.041 0.029
0.02 9,925 0.049 0.028
0.05 3,585 0.077 0.029
Freedom total 0.00 18,857 0.101 0.180 0.000 3.152 1.791
Flats 0.01 17,452 0.108 0.185
0.02 14,520 0.127 0.198
0.05 8,170 0.201 0.239
Graben high-grade 0.00 1,728 0.251 0.305 0.021 2.365 1.213
(inside 0.1 0.10 1,314 0.308 0.330
opt ME) 0.20 605 0.506 0.403
0.50 210 0.903 0.464
low-grade 0.00 7,164 0.030 0.044 0.000 0.767 1.466
(inside 0.01 0.01 6,084 0.035 0.047
but outside 0.02 3,828 0.047 0.055
0.1 opt ME) 0.05 996 0.090 0.095
total 0.00 8,829 0.073 0.165 0.000 2.365 2.258
0.01 7,812 0.083 0.174
0.02 5,556 0.110 0.200
0.05 2,693 0.194 0.262
78
TABLE A1.5
LENGTH-WEIGHTED GOLD COMPOSITE STATISTICS WITHIN THE MINERAL ENVELOPES,
BOREALIS, POLARIS, EAST RIDGE AND NORTHEAST RIDGE ZONES
CUTOFF LENGTH MEAN STAN. MIN. MAX. COEF.
ZONE (OPT) (FEET) (OPT) DEV. (OPT) (OPT) VAR.
- ---- ------ ------ ----- ----- ----- ----- -----
0.000 15,792 0.067 0.109 0.000 1.800 1.628
0.010 15,046 0.070 0.111
Borealis 0.020 10,887 0.092 0.124
0.050 5,690 0.147 0.152
0.000 4,130 0.028 0.025 0.000 0.193 0.913
Polaris 0.010 3,730 0.030 0.026
0.020 2,220 0.041 0.028
0.050 525 0.078 0.037
0.000 16,076 0.026 0.034 0.000 0.755 1.299
0.010 15,211 0.027 0.035
East Ridge 0.020 7,378 0.041 0.045
0.050 1,435 0.088 0.088
0.000 17,250 0.025 0.022 0.000 0.204 0.882
Northeast 0.010 16,030 0.026 0.022
Ridge 0.020 7,890 0.039 0.026
0.050 1,550 0.078 0.035
Variogram models have been developed from the length composites for the Freedom
Flats, Borealis, East Ridge and Northeast Ridge deposits (Table A1.6). The
composite density is insufficient for variogram modeling for the Graben and
Polaris deposits. For the Freedom Flats deposit, all composites within the
high-grade and low-grade envelopes were used together for the variogram
modeling. A two-structure spherical variogram model was produced for each of the
four deposits (Figures A1.9 to A12.).
TABLE A1.6
VARIOGRAM MODELS FOR THE BOREALIS PROJECT
DEPOSIT DIRECTION AZIM DIP C(0) C(1) C(2) A(1) A(2)
- ------- ---------- ---- --- ---- ---- ---- ---- ----
major 48 0 0.30 0.35 0.35 40 180
Freedom semi-major 138 0 35 115
Flats minor 0 -90 40 92
major 60 0 0.40 0.30 0.30 100 180
Borealis semi-major 150 0 60 120
minor 0 -90 20 40
major 40 0 0.20 0.60 0.20 125 250
East Ridge semi-major 130 0 115 230
minor 0 -90 60 70
major 50 0 0.40 0.30 0.30 70 290
Northeast semi-major 140 0 60 110
Ridge minor 0 -90 60 110
C(0) - nugget; C(1) - sill of the first structure; C(2)- sill of the second
structure;
a(1) - range of the first structure; a(2) - range of the second structure.
79
(GRAPH OMITTED)
(GRAPH OMITTED)
(GRAPH OMITTED)
FIGURE A1.9 VARIOGRAM MODELS OF 10-FOOT COMPOSITE GOLD GRADES
FOR THE FREEDOM FLATS ZONE.
80
(GRAPH OMITTED)
(GRAPH OMITTED)
(GRAPH OMITTED)
FIGURE A1.10 VARIOGRAM MODELS OF 20-FOOT
COMPOSITE GOLD GRADES FOR THE BOREALIS ZONE.
81
(GRAPH OMITTED)
(GRAPH OMITTED)
(GRAPH OMITTED)
FIGURE A1.11 VARIOGRAM MODELS OF 20-FOOT
COMPOSITE GOLD GRADES FOR THE EAST RIDGE ZONE.
82
(GRAPH OMITTED)
(GRAPH OMITTED)
(GRAPH OMITTED)
FIGURE A1.12 VARIOGRAM MODELS OF 10-FOOT COMPOSITE
GOLD GRADES FOR THE NORTHEAST RIDGE ZONE.
A1.5 GRADE ESTIMATION
83
Two block models have been constructed for the Borealis project. The first block
model with a block size of 10x10x10 feet is used to model the Freedom Flats and
Graben zones, and the second block model with a block size of 20x20x20 feet is
used to model the Borealis, Polaris, East Ridge and Northeast Ridge zones.
Definitions of the two block models are summarized in Table A1.7.
TABLE A1.7
BLOCK MODEL DEFINITIONS FOR THE BOREALIS PROJECT
FROM TO RANGE BLOCK SIZE NUM OF
MODEL DIRECTION (FEET) (FEET) (FEET) (FEET) BLOCKS
----- --------- --------- --------- ------ ---------- ------
Graben- northing 445,500 448,500 3,000 10 300
Freedom easting 1,320,000 1,323,000 3,000 10 300
Flats elevation 5,700 7,150 1,450 10 145
Borealis- northing 448,000 459,000 11,000 20 550
Polaris- easting 1,320,000 1,329,000 9,000 20 450
Ridges elevation 6,300 8,600 2,300 20 115
The model blocks were coded with the defined 0.01 opt and 0.10 opt gold mineral
envelopes using the majority rule; i.e. a block is considered inside a mineral
envelope if more than 50 percent of the block volume is inside the mineral
envelope solid. Model blocks for the Graben-Freedom Flats zones have also been
coded with the defined oxidation zones.
Different grade estimation methods were used for different zones and different
mineral envelopes in this study.
For the Freedom Flats and Graben zones, the method of Inverse Distance to the
third power (ID3) is used to estimate block grades inside the low-grade mineral
envelopes (within the 0.01 opt envelope but outside the 0.1 opt envelope); and
the nearest neighbor method (NN) method is used to estimate block grade inside
the high-grade mineral envelopes. The NN is a polygonal method and the block
grade is estimated by the nearest composite to the block centroid. The purpose
of using the NN method is to eliminate the amount of dilution in grade
estimation for the high-grade portion of the zones. The search ellipsoid
parameters for grade estimation are listed in Table A1.8. The number of
composites used for the ID3 method ranges from two to eight, with a maximum of
two from any single drill hole. Both the low-grade and high-grade envelopes are
treated as hard boundaries in grade estimation; only composites within an
envelope are used to estimate model blocks within the envelope.
TABLE A1.8
GRADE ESTIMATION SEARCH PARAMETERS FOR THE FREEDOM FLATS AND GRABEN ZONES
SEARCH DISTANCE (FT)
AZIM OF DIP OF DIP OF --------------------------
MINERALIZED MINERAL MAJOR MAJOR SEMI-MAJOR MAJOR SEMI-MAJOR MINOR
ZONE ENVELOPE AXIS AXIS AXIS AXIS AXIS AXIS
- ----------- ---------- ------- ------ ---------- ----- ---------- -----
Freedom high-grade 48 0 0 216 216 216
Flats low-grade 48 0 0 216 138 110.4
high-grade 10 0 -45 250 250 100
Graben low-grade 10 0 -45 250 250 100
For the Borealis, East Ridge and Northeast Ridge zones, a three-pass ordinary
kriging (OK) procedure is used for block grade estimation; whereas a three-pass
Inverse Distance to the second power (ID2) procedure is used for the Polaris
deposit. The purpose of utilizing the three-pass procedure is to overcome the
weakness of over-smoothing of OK and ID2 grade estimation algorithms. Search
parameters for these four deposits are listed in Table A1.9. In general, the
search distance decreases from pass one to pass three, and the block grade
estimated by a later pass replaces the block grade estimated by a earlier pass
if the block grade is estimated a grade by both passes. The number of composites
used to estimate a block ranges from two to six, with a maximum of two from any
single drill hole. The 0.01 opt gold mineral envelope has also been treated as a
hard boundary in grade estimation.
84
TABLE A1.9
GRADE ESTIMATION SEARCH PARAMETERS
FOR THE BOREALIS, POLARIS, EAST RIDGE AND NORTHEAST RIDGE ZONES
SEARCH DISTANCE (FT)
AZIM OF DIP OF DIP OF --------------------------
MAJOR MAJOR SEMI-MAJOR MAJOR SEMI- MINOR
ZONE PASS AXIS AXIS AXIS AXIS MAJOR AXIS AXIS
---- ---- ------- ------ ---------- ----- ---------- -----
Borealis I 60 0 0 180 120 40
II 60 0 0 90 60 20
III 60 0 0 45 30 10
Polaris I 75 0 0 200 150 50
II 75 0 0 100 75 25
III 75 0 0 50 37.5 12.5
East Ridge I 40 0 0 250 230 70
II 40 0 0 100 92 28
III 40 0 0 50 46 14
Northeast Ridge I 50 0 0 290 110 110
II 50 0 0 100 38 38
III 50 0 0 50 19 19
A1.6 RESOURCE CLASSIFICATION
Resource classification was based on the anisotropy distance from a block
centroid to the nearest composite and the number of composites and/or number of
drill holes used for the block grade estimation, assuming the database used for
the resource model is reliable. The classification criteria for each resource
category in each deposit are summarized by Table A1.10. Only indicated and
inferred mineral resources have been defined and the indicated resource category
distance has been limited to 40 feet for the Graben zone as it is still in a
very early stage of exploration; drill hole density is much lower and no
variogram models can be generated from the drilling data for the Graben zone.
TABLE A1.10
RESOURCE CLASSIFICATION CRITERIA FOR THE BOREALIS PROJECT
DISTANCE NUM OF NUM OF
ZONE CATEGORY (FEET) COMPOSITES HOLES
---- --------- ------------------------- -------------------------- --------------------------
Freedom Flats measured Less than or equal to 40 Greater than or equal to 3 --
indicated Less than or equal to 85 Greater than or equal to 2 --
inferred Less than or equal to 216 Greater than or equal to 1 --
Graben indicated Less than or equal to 40 Greater than or equal to 2 --
inferred Less than or equal to 250 Greater than or equal to 1 --
Borealis, Polaris, measured Less than or equal to 40 -- Greater than or equal to 2
East Ridge, Northeast indicated Less than or equal to 85 Greater than or equal to 2 --
Ridge inferred Less than or equal to 290 Greater than or equal to 2 --
85
A1.7 IN-SITU MINERAL RESOURCE STATEMENT
The in-situ measured/indicated mineral resources under the mined topography for
the six mineralized zones of the Borealis project in the block models are
summarized in the Table A1.11 using a gold cut-off grade of 0.010 opt. The
in-situ inferred mineral resources for the same mineralized zones are summarized
in Table A1.12.
The mineral resources for the Freedom Flats zone are also separated into oxide,
mixed and sulfide zones (Table A1.13). The mineral resources for the Graben zone
are mostly sulfide, whereas the mineral resources for Borealis, Polaris, East
Ridge and Northeast Ridge are mostly oxide.
TABLE A1.11
IN-SITU MEASURED/INDICATED MINERAL RESOURCES OF THE BOREALIS PROJECT
(CUTOFF GOLD GRADE = 0.01 OPT)
MINERALIZED
ZONE CATEGORY K TONS AU (OPT) AU (K OZS)
----------- --------- -------- -------- ----------
Freedom Flats measured 1,452.4 0.055 79.4
indicated 1,293.6 0.036 47.0
-------- ----- -----
total 2,746.0 0.046 126.4
======== ===== =====
Graben indicated 2,292.5 0.076 173.8
measured 491.8 0.055 27.0
Borealis indicated 1,395.5 0.050 69.8
-------- ----- -----
total 1,887.3 0.051 96.8
======== ===== =====
Polaris indicated 1,148.1 0.026 29.6
East Ridge measured 970.6 0.019 18.0
indicated 1,591.1 0.018 28.8
-------- ----- -----
total 2,561.7 0.018 46.8
======== ===== =====
Northeast Ridge measured 521.9 0.022 11.6
indicated 1,141.7 0.023 26.0
-------- ----- -----
total 1,663.6 0.023 37.6
======== ===== =====
TOTAL MEASURED 3,436.7 0.040 136.0
INDICATED 8,862.5 0.042 375.0
-------- ----- -----
TOTAL 12,299.2 0.042 511.0
======== ===== =====
TABLE A1.12
IN-SITU INFERRED MINERAL RESOURCES OF THE BOREALIS PROJECT
(CUTOFF GOLD GRADE = 0.01 OPT)
MINERALIZED ZONE K TONS AU (OPT) AU (K OZS)
- ---------------- -------- -------- ----------
Freedom Flats 412.0 0.037 15.2
Graben 10,372.2 0.052 534.2
Borealis 365.7 0.035 12.7
Polaris 195.5 0.021 4.1
East Ridge 242.6 0.017 4.0
Northeast Ridge 536.7 0.023 12.6
-------- ----- -----
TOTAL 12,124.7 0.048 582.8
======== ===== =====
86
TABLE A1.13
IN-SITU MINERAL RESOURCES OF THE FREEDOM FLATS ZONE
BY OXIDATION STATE
(CUTOFF GOLD GRADE = 0.01 OPT)
CATEGORY ZONE K TONS AU (OPT) AU (K OZS)
-------- ------- ------- -------- ----------
measured/indicated oxide 550.3 0.047 25.8
mixed 392.8 0.048 18.8
sulfide 1,802.9 0.045 81.8
------- ----- -----
TOTAL 2,746.0 0.046 126.4
======= ===== =====
inferred oxide 11.5 0.037 0.4
mixed 45.8 0.046 2.1
sulfide 354.7 0.036 12.7
------- ----- -----
TOTAL 412.0 0.037 15.2
======= ===== =====
Tonnage-grade curves of the measured/indicated mineral resources for each
mineralized zone are presented in Figures A1.13 to A1.18 and the corresponding
resource figures by cutoff are listed in Tables A1.14 to A1.19. The inferred
mineral resources by cutoff for the six mineralized zones are summarized in
Tables A1.20 to A1.25.
(GRAPH OMITTED)
FIGURE A1.13 TONNAGE-GRADE CURVES OF INDICATED MINERAL RESOURCES INSIDE THE
0.01 OPT GOLD MINERAL ENVELOPE FOR THE GRABEN ZONE.
87
(GRAPH OMITTED)
FIGURE A1.14 TONNAGE-GRADE CURVES OF MEASURED/INDICATED MINERAL RESOURCES
INSIDE THE 0.01 OPT GOLD MINERAL ENVELOPE FOR THE FREEDOM FLATS ZONE.
(GRAPH OMITTED)
FIGURE A1.15 TONNAGE-GRADE CURVES OF MEASURED/INDICATED MINERAL RESOURCES
INSIDE THE 0.01 OPT GOLD MINERAL ENVELOPE FOR THE BOREALIS ZONE.
88
(GRAPH OMITTED)
FIGURE A1.16 TONNAGE-GRADE CURVES OF INDICATED MINERAL RESOURCES
INSIDE THE 0.01 OPT GOLD MINERAL ENVELOPE FOR THE POLARIS ZONE.
(GRAPH OMITTED)
FIGURE A1.17 TONNAGE-GRADE CURVES OF MEASURED/INDICATED MINERAL RESOURCES
INSIDE THE 0.01 OPT GOLD MINERAL ENVELOPE FOR THE EAST RIDGE ZONE.
89
(GRAPH OMITTED)
FIGURE A1.18 TONNAGE-GRADE CURVES OF MEASURED/INDICATED MINERAL RESOURCES
INSIDE THE 0.01 OPT GOLD MINERAL ENVELOPE FOR THE NORTHEAST RIDGE ZONE.
TABLE A1.14
INDICATED MINERAL RESOURCE BY CUTOFF OF THE GRABEN ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 2292.5 0.076 173.8
0.02 1698.7 0.097 164.9
0.03 1190.9 0.128 152.9
0.04 924.8 0.156 143.8
0.05 747.2 0.182 136.0
0.06 613.9 0.210 128.7
0.07 533.0 0.232 123.6
0.08 456.3 0.258 117.9
0.09 419.9 0.274 114.9
0.10 398.6 0.283 112.9
0.11 347.5 0.309 107.5
0.12 325.1 0.323 104.9
0.13 297.4 0.341 101.4
0.14 273.5 0.359 98.2
0.15 243.8 0.386 94.0
0.16 229.7 0.400 91.8
0.17 199.6 0.435 86.9
0.18 195.6 0.441 86.2
0.19 184.8 0.456 84.2
0.20 175.8 0.469 82.4
90
TABLE A1.15
MEASURED/INDICATED MINERAL RESOURCE BY CUTOFF OF THE FREEDOM FLATS ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 2745.7 0.046 126.3
0.02 2189.1 0.054 117.8
0.03 1465.4 0.068 100.2
0.04 925.9 0.088 81.8
0.05 588.8 0.114 66.9
0.06 422.6 0.137 58.0
0.07 317.8 0.161 51.2
0.08 254.0 0.183 46.5
0.09 199.5 0.210 41.9
0.10 181.5 0.222 40.2
0.11 164.1 0.234 38.4
0.12 136.6 0.258 35.3
0.13 122.4 0.274 33.5
0.14 116.0 0.282 32.7
0.15 106.4 0.294 31.3
0.16 96.5 0.308 29.7
0.17 94.7 0.311 29.4
0.18 83.0 0.331 27.4
0.19 74.6 0.347 25.9
0.20 66.7 0.365 24.3
TABLE A1.16
MEASURED/INDICATED MINERAL RESOURCE BY CUTOFF OF THE BOREALIS ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 1887.3 0.051 96.8
0.02 1382.5 0.064 89.0
0.03 961.7 0.082 78.9
0.04 748.1 0.096 71.7
0.05 586.6 0.110 64.4
0.06 388.7 0.138 53.7
0.07 286.7 0.165 47.2
0.08 226.3 0.189 42.7
0.09 180.7 0.215 38.9
0.10 140.8 0.249 35.1
0.11 119.3 0.275 32.9
0.12 98.7 0.309 30.5
0.13 87.2 0.334 29.1
0.14 76.8 0.361 27.7
0.15 74.0 0.369 27.3
0.16 66.6 0.393 26.1
0.17 61.6 0.411 25.3
0.18 58.6 0.423 24.8
0.19 51.0 0.459 23.4
0.20 47.7 0.477 22.8
91
TABLE A1.17
INDICATED MINERAL RESOURCE BY CUTOFF OF THE POLARIS ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 1148.1 0.026 29.6
0.02 665.0 0.033 22.0
0.03 299.2 0.044 13.2
0.04 129.6 0.058 7.5
0.05 67.1 0.069 4.7
0.06 32.9 0.085 2.8
0.07 21.9 0.096 2.1
0.08 14.2 0.108 1.5
0.09 10.7 0.116 1.2
0.10 7.1 0.127 0.9
0.11 5.9 0.131 0.8
0.12 4.1 0.138 0.6
0.13 3.0 0.144 0.4
0.14 1.8 0.151 0.3
0.15 0.6 0.164 0.1
0.16 0.6 0.164 0.1
TABLE A1.18
MEASURED/INDICATED MINERAL RESOURCE BY CUTOFF OF THE EAST RIDGE ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 2561.7 0.018 46.6
0.02 846.7 0.027 22.4
0.03 192.9 0.038 7.3
0.04 59.6 0.048 2.8
0.05 20.8 0.055 1.2
0.06 4.3 0.061 0.3
TABLE A1.19
MEASURED/INDICATED MINERAL RESOURCE BY CUTOFF OF THE NORTHEAST RIDGE ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 1663.5 0.023 37.6
0.02 720.3 0.033 23.6
0.03 266.3 0.049 12.9
0.04 135.3 0.063 8.6
0.05 72.9 0.080 5.8
0.06 59.9 0.085 5.1
0.07 34.3 0.102 3.5
0.08 29.6 0.107 3.2
0.09 24.8 0.111 2.8
0.10 16.0 0.119 1.9
0.11 9.5 0.129 1.2
0.12 7.1 0.134 1.0
0.13 1.2 0.185 0.2
0.14 1.2 0.185 0.2
0.15 1.2 0.185 0.2
0.16 1.2 0.185 0.2
0.17 1.2 0.185 0.2
0.18 1.2 0.185 0.2
92
TABLE A1.20
INFERRED MINERAL RESOURCE BY CUTOFF OF THE GRABEN ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------- -------------- ----------
0.01 10372.2 0.052 534.2
0.02 8304.4 0.061 502.4
0.03 5570.3 0.078 436.2
0.04 3878.2 0.098 378.1
0.05 2578.9 0.124 320.3
0.06 1781.7 0.156 277.4
0.07 1394.5 0.181 252.5
0.08 1149.9 0.204 234.5
0.09 991.7 0.223 221.0
0.10 921.7 0.233 214.5
0.11 787.8 0.254 200.3
0.12 723.7 0.267 192.9
0.13 665.8 0.279 185.6
0.14 594.2 0.296 175.9
0.15 521.7 0.317 165.5
0.16 452.4 0.342 154.9
0.17 392.7 0.370 145.1
0.18 380.4 0.376 142.9
0.19 355.9 0.389 138.4
0.20 355.8 0.401 142.5
TABLE A1.21
INFERRED MINERAL RESOURCE BY CUTOFF OF THE FREEDOM FLATS ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 412.0 0.04 15.2
0.02 258.8 0.05 13.2
0.03 155.1 0.07 10.6
0.04 103.9 0.09 8.9
0.05 82.1 0.10 8.0
0.06 73.5 0.10 7.5
0.07 64.5 0.11 6.9
0.08 53.8 0.11 6.1
0.09 49.2 0.12 5.7
0.10 47.9 0.12 5.6
0.11 38.3 0.12 4.6
0.12 2.1 0.25 0.5
0.13 2.1 0.25 0.5
0.14 1.7 0.28 0.5
0.15 1.7 0.28 0.5
0.16 1.5 0.30 0.4
0.17 1.5 0.30 0.4
0.18 1.5 0.30 0.4
0.19 1.5 0.30 0.4
0.20 1.5 0.30 0.4
93
TABLE A1.22
INFERRED MINERAL RESOURCE BY CUTOFF OF THE BOREALIS ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 365.7 0.035 12.7
0.02 245.4 0.044 10.9
0.03 133.0 0.062 8.2
0.04 105.1 0.069 7.2
0.05 90.5 0.073 6.6
0.06 46.1 0.091 4.2
0.07 35.1 0.100 3.5
0.08 22.1 0.117 2.6
0.09 14.8 0.132 2.0
0.10 14.2 0.133 1.9
0.11 6.2 0.174 1.1
0.12 5.6 0.180 1.0
0.13 5.0 0.187 0.9
0.14 3.3 0.215 0.7
0.15 2.7 0.230 0.6
0.16 2.7 0.230 0.6
0.17 2.7 0.230 0.6
0.18 2.1 0.245 0.5
0.19 2.1 0.245 0.5
0.20 2.1 0.245 0.5
TABLE A1.23
INFERRED MINERAL RESOURCE BY CUTOFF OF THE POLARIS ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 195.5 0.021 4.1
0.02 108.4 0.026 2.8
0.03 20.1 0.036 0.7
0.04 4.1 0.051 0.2
0.05 0.6 0.072 0.0
0.06 0.6 0.072 0.0
0.07 0.6 0.072 0.0
TABLE A1.24
INFERRED MINERAL RESOURCE BY CUTOFF OF THE EAST RIDGE ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 242.6 0.017 4.0
0.02 46.2 0.024 1.1
0.03 5.0 0.039 0.2
0.04 2.2 0.045 0.1
0.05 0.5 0.057 0.0
0.06 0.1 0.061 0.0
94
TABLE A1.25
INFERRED MINERAL RESOURCE BY CUTOFF OF THE NORTHEAST RIDGE ZONE
CUTOFF (AU OPT) K TONS GRADE (AU OPT) AU (K OZS)
- --------------- ------ -------------- ----------
0.01 536.7 0.023 12.6
0.02 250.4 0.033 8.3
0.03 75.5 0.055 4.2
0.04 52.4 0.065 3.4
0.05 31.4 0.079 2.5
0.06 28.8 0.082 2.4
0.07 22.5 0.087 2.0
0.08 21.3 0.088 1.9
0.09 3.6 0.094 0.3
0.10 0.6 0.105 0.1
95
APPENDIX 2
PRELIMINARY CASH FLOW MODEL
96
APPENDIX 2
PRELIMINARY CASH FLOW MODEL
Attached below is a preliminary cash flow analysis for the Borealis Gold project
as prepared by Gryphon Gold. The projections, estimates and forecasts contained
in this analysis are forward looking statements that have been prepared by the
management of Gryphon Gold and are based upon assumptions that Gryphon Gold
believes are reasonable. Projections are necessarily speculative in nature, and
it can be expected that some or all of the assumptions underlying the
projections will not materialize or will vary significantly from actual results.
Accordingly, the projections are only an estimate and are based on data that is
assumed to be reliable but which has not been independently verified by Gryphon
Gold. Actual results may vary from the projections, and the variations may be
material.
97
BOREALIS GOLD PROJECT April 12, 2004
PRELIMINARY CASH FLOW ANALYSIS
(100% Project Basis)
2003 2004 2005
-------- ------------------ --------------------------
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
--- --- --- --- --- --- --- --- ------- -------
MATERIAL MOVEMENT + GOLD/SILVER RECOVERED
HEAPS
Short Tons Reprocessed
from Existi 10,880,000 ton -- -- -- -- -- -- -- -- 320,000 480,000
Au Grade (Oz/ton) 0.017 oz per ton -- -- -- -- -- -- -- -- 0.030 0.030
Mined Ounces 185,673 oz -- -- -- -- -- -- -- -- 9,600 14,400
Recovery Factor 65% % -- -- -- -- -- -- -- -- 65% 65%
Ounces - Au oz -- -- -- -- -- -- -- -- 6,200 9,400
DUMPS AND STOCKPILES
Total Dumps and Stockpiles 4,214,000 ton -- -- -- -- -- -- -- -- -- --
Au Grade (Oz/ton) 0.028 oz per ton -- -- -- -- -- -- -- -- -- --
Mined Ounces 117,542 oz -- -- -- -- -- -- -- -- -- --
Recovery Factor 75% % -- -- -- -- -- -- -- -- -- --
Ounces Silver -- -- -- -- -- -- -- -- -- --
Ounces - Au oz -- -- -- -- -- -- -- -- -- --
SURFACE MINE HEAP LEACH
Short Tons of Newly
Mined Ore 4,783,298 ton -- -- -- -- -- -- -- -- -- --
Waste 10,421,346 ton
Au Grade (Oz/ton) 0.043 oz per ton -- -- -- -- -- -- -- -- -- --
Mined Ounces 204,476 oz -- -- -- -- -- -- -- -- -- --
Recovery Factor 73% % -- -- -- -- -- -- -- -- -- --
Ounces - Silver oz -- -- -- -- -- -- -- -- -- --
Ounces - Au oz -- -- -- -- -- -- -- -- -- --
SURFACE MINE - MILL GRADE
Total Surface High Grade 1,200,000 ton -- -- -- -- -- -- -- -- -- --
Waste 4,800,000 ton -- -- -- -- -- -- -- -- -- --
Au Grade (Oz/ton) 0.135 oz per ton -- -- -- -- -- -- -- -- -- --
Mined Ounces 162,500 oz -- -- -- -- -- -- -- -- -- --
Recovery Factor 90% -- -- -- -- -- -- -- -- -- --
Ounces - Silver 609,375 oz -- -- -- -- -- -- -- -- -- --
Ounces - Au 146,250 oz -- -- -- -- -- -- -- -- -- --
DEEP HIGH GRADE
Short Tons of Underground
Ores 2,160,000 ton -- -- -- -- -- -- -- -- -- --
Au Grade (Oz/ton) 0.402 oz per ton -- -- -- -- -- -- -- -- -- --
Silver Grade (Oz/ton) 2.01 oz per ton -- -- -- -- -- -- -- -- -- --
Mined Gold Ounces 868,000 ton -- -- -- -- -- -- -- -- -- --
Recovery Factor 90% -- -- -- -- -- -- -- -- -- --
Mined Silver Ounces
(rough est) 4,340,000 oz per ton -- -- -- -- -- -- -- -- -- --
Silver Recovery 75% -- -- -- -- -- -- -- -- -- --
Ounces - Silver 3,255,100 oz -- -- -- -- -- -- -- -- -- --
Ounces - Au 781,200 oz -- -- -- -- -- -- -- -- -- --
--- --- --- --- --- --- --- --- ------- -------
GOLD OUNCES RECOVERED -- -- -- -- -- -- -- -- 6,200 9,400
=== === === === === === === === ======= =======
SILVER OUNCES RECOVERED -- -- -- -- -- -- -- -- -- --
=== === === === === === === === ======= =======
2006 2007
---------------------------------- ------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
------- ------- ------- ------- --------- ------- ------- -------
MATERIAL MOVEMENT + GOLD/SILVER RECOVERED
HEAPS
Short Tons Reprocessed
from Existi 10,880,000 ton 449,000 400,000 400,000 400,000 400,000 160,000 150,000 --
Au Grade (Oz/ton) 0.017 oz per ton 0.030 0.020 0.020 0.020 0.020 0.020 0.020 --
Mined Ounces 185,673 oz 13,470 8,000 8,000 8,000 8,000 3,200 3,000 --
Recovery Factor 65% % 65% 65% 65% 65% 65% 66% 67% --
Ounces - Au oz 8,800 5,200 5,200 5,200 5,200 2,100 2,000 --
DUMPS AND STOCKPILES
Total Dumps and Stockpiles 4,214,000 ton -- -- 200,000 -- -- 300,000 300,000 600,000
Au Grade (Oz/ton) 0.028 oz per ton -- -- 0.029 -- -- 0.031 0.031 0.031
Mined Ounces 117,542 oz -- -- 5,800 -- -- 9,300 9,300 18,600
Recovery Factor 75% % -- -- 70% -- -- 70% 70% 70%
Ounces Silver -- -- 14,500 -- -- 23,250 23,250 46,500
Ounces - Au oz -- -- 4,060 -- -- 6,510 6,510 13,020
SURFACE MINE HEAP LEACH
Short Tons of Newly
Mined Ore 4,783,298 ton 240,000 186,076 100,000 100,000 390,963 268,296 150,000 244,665
Waste 10,421,346 ton 628,735 537,750 312,254 312,254 1,289,752 925,862 596,592 621,214
Au Grade (Oz/ton) 0.043 oz per ton 0.093 0.096 0.099 0.099 0.062 0.038 0.034 0.031
Mined Ounces 204,476 oz 22,272 17,888 9,900 9,900 24,065 10,118 5,100 7,467
Recovery Factor 73% % 60% 68% 75% 75% 75% 75% 75% 75%
Ounces - Silver oz 55,680 44,720 24,750 24,750 60,163 25,294 12,750 18,667
Ounces - Au oz 13,363 12,218 7,425 7,425 18,049 7,588 3,825 5,600
SURFACE MINE - MILL GRADE
Total Surface High Grade 1,200,000 ton -- -- -- -- -- -- -- --
Waste 4,800,000 ton -- -- -- -- -- -- -- --
Au Grade (Oz/ton) 0.135 oz per ton -- -- -- -- -- -- -- --
Mined Ounces 162,500 oz -- -- -- -- -- -- -- --
Recovery Factor 90% -- -- -- -- -- -- -- --
Ounces - Silver 609,375 oz -- -- -- -- -- -- -- --
Ounces - Au 146,250 oz -- -- -- -- -- -- -- --
DEEP HIGH GRADE
Short Tons of Underground
Ores 2,160,000 ton -- -- -- -- -- -- -- --
Au Grade (Oz/ton) 0.402 oz per ton -- -- -- -- -- -- -- --
Silver Grade (Oz/ton) 2.01 oz per ton -- -- -- -- -- -- -- --
Mined Gold Ounces 868,000 ton -- -- -- -- -- -- -- --
Recovery Factor 90% -- -- -- -- -- -- -- --
Mined Silver Ounces
(rough est) 4,340,000 oz per ton -- -- -- -- -- -- -- --
Silver Recovery 75% -- -- -- -- -- -- -- --
Ounces - Silver 3,255,100 oz -- -- -- -- -- -- -- --
Ounces - Au 781,200 oz -- -- -- -- -- -- -- --
------- ------- ------- ------- --------- ------- ------- -------
GOLD OUNCES RECOVERED 22,200 17,400 16,700 12,600 23,200 16,200 12,300 18,600
======= ======= ======= ======= ========= ======= ======= =======
SILVER OUNCES RECOVERED 55,700 44,700 39,300 24,800 60,200 48,500 36,000 65,200
======= ======= ======= ======= ========= ======= ======= =======
2008 2009 2010 2011
--------- --------- --------- ---------
MATERIAL MOVEMENT + GOLD/SILVER RECOVERED
HEAPS
Short Tons Reprocessed
from Existi 10,880,000 ton 500,000 500,000 500,000 1,220,000
Au Grade (Oz/ton) 0.017 oz per ton 0.019 0.019 0.019 0.016
Mined Ounces 185,673 oz 9,300 9,300 9,300 19,092
Recovery Factor 65% % 65% 65% 65% 65%
Ounces - Au oz 6,045 6,045 6,045 12,410
DUMPS AND STOCKPILES
Total Dumps and Stockpiles 4,214,000 ton 900,000 637,000 500,000 300,000
Au Grade (Oz/ton) 0.028 oz per ton 0.029 0.026 0.025 0.025
Mined Ounces 117,542 oz 26,100 16,517 12,500 7,500
Recovery Factor 75% % 75% 75% 75% 75%
Ounces Silver 65,250 41,293 31,250 18,750
Ounces - Au oz 19,575 12,388 9,375 5,625
SURFACE MINE HEAP LEACH
Short Tons of Newly
Mined Ore 4,783,298 ton 1,190,000 1,140,000 523,298 250,000
Waste 10,421,346 ton 1,962,423 1,862,423 872,087 500,000
Au Grade (Oz/ton) 0.043 oz per ton 0.031 0.031 0.031 0.033
Mined Ounces 204,476 oz 37,350 35,700 16,466 8,250
Recovery Factor 73% % 75% 75% 75% 75%
Ounces - Silver oz 93,375 89,250 41,166 20,625
Ounces - Au oz 28,013 26,775 12,350 6,188
SURFACE MINE - MILL GRADE
Total Surface High Grade 1,200,000 ton 50,000 250,000 350,000 200,000
Waste 4,800,000 ton 200,000 1,000,000 1,400,000 800,000
Au Grade (Oz/ton) 0.135 oz per ton 0.150 0.180 0.157 0.100
Mined Ounces 162,500 oz 7,500 45,000 55,000 20,000
Recovery Factor 90% 90% 90% 90% 90%
Ounces - Silver 609,375 oz 28,125 168,750 206,250 75,000
Ounces - Au 146,250 oz 6,750 40,500 49,500 18,000
DEEP HIGH GRADE
Short Tons of Underground
Ores 2,160,000 ton -- 60,000 250,000 400,000
Au Grade (Oz/ton) 0.402 oz per ton -- 0.250 0.420 0.420
Silver Grade (Oz/ton) 2.01 oz per ton -- 1.25 2.10 2.10
Mined Gold Ounces 868,000 ton -- 15,000 105,000 168,000
Recovery Factor 90% -- 90% 90% 90%
Mined Silver Ounces
(rough est) 4,340,000 oz per ton -- 75,000 525,000 840,000
Silver Recovery 75% -- 75% 75% 75%
Ounces - Silver 3,255,100 oz -- 56,300 393,800 630,000
Ounces - Au 781,200 oz -- 13,500 94,500 151,200
--------- --------- --------- ---------
GOLD OUNCES RECOVERED 60,400 99,200 171,800 193,400
========= ========= ========= =========
SILVER OUNCES RECOVERED 186,800 355,600 672,500 744,400
========= ========= ========= =========
2012 2013 2014 Total
--------- --------- --------- ----------
MATERIAL MOVEMENT + GOLD/SILVER RECOVERED
HEAPS
Short Tons Reprocessed
from Existi 10,880,000 ton 1,000,000 1,000,000 -- 7,879,000
Au Grade (Oz/ton) 0.017 oz per ton 0.015 0.015 -- 0.01938
Mined Ounces 185,673 oz 15,000 15,000 -- 152,662
Recovery Factor 65% % 65% 65% -- 65%
Ounces - Au oz 9,750 9,750 -- 99,345
DUMPS AND STOCKPILES
Total Dumps and Stockpiles 4,214,000 ton 477,000 -- -- 4,214,000
Au Grade (Oz/ton) 0.028 oz per ton 0.025 -- -- 0.028
Mined Ounces 117,542 oz 11,925 -- -- 117,542
Recovery Factor 75% % 75% -- -- 73%
Ounces Silver 29,813 -- -- 293,855
Ounces - Au oz 8,944 -- -- 86,007
SURFACE MINE HEAP LEACH
Short Tons of Newly
Mined Ore 4,783,298 ton -- -- -- 4,783,298
Waste 10,421,346 ton -- -- -- 10,421,346
Au Grade (Oz/ton) 0.043 oz per ton -- -- -- 0.043
Mined Ounces 204,476 oz -- -- -- 204,476
Recovery Factor 73% % -- -- -- 73%
Ounces - Silver oz -- -- -- 511,190
Ounces - Au oz -- -- -- 148,818
SURFACE MINE - MILL GRADE
Total Surface High Grade 1,200,000 ton 150,000 100,000 100,000 1,200,000
Waste 4,800,000 ton 600,000 400,000 400,000 4,800,000
Au Grade (Oz/ton) 0.135 oz per ton 0.100 0.100 0.100 0.135
Mined Ounces 162,500 oz 15,000 10,000 10,000 162,500
Recovery Factor 90% 90% 90% 90% 90%
Ounces - Silver 609,375 oz 56,250 37,500 37,500 609,375
Ounces - Au 146,250 oz 13,500 9,000 9,000 146,250
DEEP HIGH GRADE
Short Tons of Underground
Ores 2,160,000 ton 450,000 500,000 500,000 2,160,000
Au Grade (Oz/ton) 0.402 oz per ton 0.400 0.400 0.400 0.402
Silver Grade (Oz/ton) 2.01 oz per ton 2.00 2.00 2.00 2.01
Mined Gold Ounces 868,000 ton 180,000 200,000 200,000 868,000
Recovery Factor 90% 90% 90% 90% 90%
Mined Silver Ounces
(rough est) 4,340,000 oz per ton 900,000 1,000,000 1,000,000 4,340,000
Silver Recovery 75% 75% 75% 75% 75%
Ounces - Silver 3,255,100 oz 675,000 750,000 750,000 3,255,100
Ounces - Au 781,200 oz 162,000 180,000 180,000 781,200
--------- --------- --------- ----------
GOLD OUNCES RECOVERED 194,200 198,800 189,000 1,261,600
========= ========= ========= ==========
SILVER OUNCES RECOVERED 761,100 787,500 787,500 4,669,800
========= ========= ========= ==========
2003 2004
--------- ----------------------------------------------
Q3 Q4 Q1 Q2 Q3 Q4
---- --- --------- --------- ----------- -----------
BOREALIS PROJECT REVENUE
Gross Gold Revenue $ 375 per Ounce $-- $-- $ -- $ -- $ -- $ --
Gross Silver Revenue $ 6.00 per Ounce -- -- -- -- -- --
NSR paid to Borealis Partners 3.8% -- -- -- -- -- --
NSR per Ounce $ per oz -- -- -- -- -- --
--- --- --------- --------- ----------- -----------
REVENUE (Net of Royalty) $-- $-- $ -- $ -- $ -- $ --
=== === ========= ========= =========== ===========
ESTIMATED PROJECT OPERATING COSTS
Heap Remining $ 0.30 per ton $-- $-- $ -- $ -- $ -- $ --
Low Grade Stockpiled Material $ 0.30 per ton -- -- -- -- -- --
New Oxide Ore Mining (surface) $ 0.85 per ton -- -- -- -- -- --
New Surface Mining Waste $ 0.70 per ton -- -- -- -- -- --
Underground Mining $ 40.00 per ton -- -- -- -- -- --
Heap Crush - Single Stage $ 0.85 per ton -- -- -- -- -- --
Heap Crush - Two Stage $ 1.25 per ton -- -- -- -- -- --
Heap Stacking $ 0.25 per ton -- -- -- -- -- --
Heap Leach Processing $ 2.00 per ton -- -- -- -- -- --
Mill (high grade) $ 12.00 per ton -- -- -- -- -- --
G&A $800,000 per year -- -- -- -- -- --
Reclamation Fund
Cash Accural $ 0.12 per ton -- -- -- -- -- --
Reclamation Expenditures -- -- -- -- -- --
--- --- --------- --------- ----------- -----------
TOTAL PROJECT OPERATING COSTS $-- $-- $ -- $ -- $ -- $ --
=== === ========= ========= =========== ===========
DIRECT CASH OPERATING COST PER OUNCE $-- $-- $ -- $ -- $ -- $ --
E
A
R $-- $-- $ -- $ -- $ -- $ --
DEPLETION DEPRECIATION AMORTIZATION
Depletion 15% $-- $-- $ -- $ -- $ -- $ --
Depreciation/Amortization (life of mine) $-- $-- $ -- $ -- $ -- $ --
--- --- --------- --------- ----------- -----------
TOTAL DD&A $-- $-- $ -- $ -- $ -- $ --
=== === ========= ========= =========== ===========
ALLOWANCE FOR INCOME TAXES 38% $-- $-- $ -- $ -- $ -- $ --
EARNINGS AFTER TAXES $-- $-- $ -- $ -- $ -- $ --
ESTIMATED PROJECT CAPITAL EXPENDITURES
Phase 1 Mine Development
Permitting-Engineering-Project Management $-- $-- $ 361,000 $ 235,100 $ 254,000 $ 228,800
Initial Production Capacity (target 50k-oz/yr) -- -- -- -- -- --
Phase 1 Resource Expansion Drilling 50,000 100,000 100,000
Phase 2 - Expanding Production Capacity -- -- -- -- -- --
Phase 2 Resource Expansion Drilling -- -- -- -- -- --
Phase 3a - UG Mine Pre-Development -- -- -- -- -- --
Phase 3a Resource Expansion Drilling -- -- -- -- -- --
Phase 3b UG Development -- -- -- -- -- --
Phase 3b Resource Expansion Drilling -- -- -- -- -- --
--- --- --------- --------- ----------- -----------
Subtotal Capital Expenditure For Mine
Development -- -- 361,000 285,100 354,000 328,800
--- --- --------- --------- ----------- -----------
Working Capital - First fills -- -- -- -- -- --
Sustaining Capital -- -- -- -- -- --
--- --- --------- --------- ----------- -----------
TOTAL PROJECT CAPITAL EXPENDITURES $-- $-- $ 361,000 $ 285,100 $ 354,000 $ 328,800
=== === ========= ========= =========== ===========
AFTER TAX PROJECT CASH FLOW
+ Total Project Revenue (net of NSR) $-- $-- $ -- $ -- $ -- $ --
- Estimated Project Operating Costs $-- $-- $ -- $ -- $ -- $ --
= Earnings before Iterest Taxes Depreciation
Amortization $-- $-- $ -- $ -- $ -- $ --
- DDA $-- $-- $ -- $ -- $ -- $ --
= Income Before Taxes $-- $-- $ -- $ -- $ -- $ --
- Allowance for Taxes $-- $-- $ -- $ -- $ -- $ --
= Earnings After Taxes $-- $-- $ -- $ -- $ -- $ --
- NPI $-- $-- $ -- $ -- $ -- $ --
+ DDA $-- $-- $ -- $ -- $ -- $ --
= Cash Flow before Capital Expenditures $-- $-- $ -- $ -- $ -- $ --
--- --- --------- --------- ----------- -----------
- Total Project Capital Expenditures $-- $-- $ 361,000 $ 285,100 $ 354,000 $ 328,800
NET AFTER TAX CASH FLOW $-- $-- $(361,000) $(285,100) $ (354,000) $ (328,800)
--- --- --------- --------- ----------- -----------
CUMULATIVE AFTER TAX CASH FLOW $-- $-- $(361,000) $(646,100) $(1,000,100) $(1,328,900)
=== === ========= ========= =========== ===========
PRE-TAX PROJECT CASH FLOW
PRETAX CASH FLOW $-- $-- $(361,000) $(285,100) $ (354,000) $ (328,800)
--- --- --------- --------- ----------- -----------
CUMULATIVE PRETAX CASH FLOW $-- $-- $(361,000) $(646,100) $(1,000,100) $(1,328,900)
=== === ========= ========= =========== ===========
2005
--------------------------------------------------
Q1 Q2 Q3 Q4
----------- ----------- ----------- -----------
BOREALIS PROJECT REVENUE
Gross Gold Revenue $ 375 per Ounce $ -- $ -- $ 2,325,000 $ 3,525,000
Gross Silver Revenue $ 6.00 per Ounce -- -- -- --
NSR paid to Borealis Partners 3.8% -- -- (87,200) (132,200)
NSR per Ounce $ per oz -- -- 14.06 14.06
----------- ----------- ----------- -----------
REVENUE (Net of Royalty) $ -- $ -- $ 2,237,800 $ 3,392,800
=========== =========== =========== ===========
ESTIMATED PROJECT OPERATING COSTS
Heap Remining $ 0.30 per ton $ -- $ -- $ 96,000 $ 144,000
Low Grade Stockpiled Material $ 0.30 per ton -- -- -- --
New Oxide Ore Mining (surface) $ 0.85 per ton -- -- -- --
New Surface Mining Waste $ 0.70 per ton -- -- -- --
Underground Mining $ 40.00 per ton -- -- -- --
Heap Crush - Single Stage $ 0.85 per ton -- -- -- --
Heap Crush - Two Stage $ 1.25 per ton -- -- -- --
Heap Stacking $ 0.25 per ton -- -- 80,000 120,000
Heap Leach Processing $ 2.00 per ton -- -- 640,000 960,000
Mill (high grade) $ 12.00 per ton -- -- -- --
G&A $800,000 per year -- -- 200,000 200,000
Reclamation Fund
Cash Accural $ 0.12 per ton -- -- 38,700 58,100
Reclamation Expenditures -- -- -- --
----------- ----------- ----------- -----------
TOTAL PROJECT OPERATING COSTS $ -- $ -- $ 1,054,700 $ 1,482,100
=========== =========== =========== ===========
DIRECT CASH OPERATING COST PER OUNCE $ -- $ -- $ 170 $ 158
E
A
R $ -- $ -- $ 1,183,100 $ 1,910,700
DEPLETION DEPRECIATION AMORTIZATION
Depletion 15% $ -- $ -- $ 335,700 $ 508,900
Depreciation/Amortization (life of mine) $ -- $ -- $ 32,400 $ 49,200
----------- ----------- ----------- -----------
TOTAL DD&A $ -- $ -- $ 368,100 $ 558,100
=========== =========== =========== ===========
ALLOWANCE FOR INCOME TAXES 38% $ -- $ -- $ 309,700 $ 514,000
EARNINGS AFTER TAXES $ -- $ -- $ 505,300 $ 838,600
ESTIMATED PROJECT CAPITAL EXPENDITURES
Phase 1 Mine Development
Permitting-Engineering-Project Management $ 130,800 $ 80,800 $ 80,800 $ --
Initial Production Capacity (target 50k-oz/yr) 265,000 2,332,000 1,947,000 --
Phase 1 Resource Expansion Drilling 100,000 100,000 50,000 --
Phase 2 - Expanding Production Capacity -- -- -- --
Phase 2 Resource Expansion Drilling -- -- -- 150,000
Phase 3a - UG Mine Pre-Development -- -- -- --
Phase 3a Resource Expansion Drilling -- -- -- --
Phase 3b UG Development -- -- -- --
Phase 3b Resource Expansion Drilling -- -- -- --
----------- ----------- ----------- -----------
Subtotal Capital Expenditure For Mine
Development 495,800 2,512,800 2,077,800 150,000
----------- ----------- ----------- -----------
Working Capital - First fills -- -- 527,400 741,100
Sustaining Capital 12,000 -- 25,000 --
----------- ----------- ----------- -----------
TOTAL PROJECT CAPITAL EXPENDITURES $ 507,800 $ 2,512,800 $ 2,630,200 $ 891,100
=========== =========== =========== ===========
AFTER TAX PROJECT CASH FLOW
+ Total Project Revenue (net of NSR) $ -- $ -- $ 2,237,800 $ 3,392,800
- Estimated Project Operating Costs $ -- $ -- $ 1,054,700 $ 1,482,100
= Earnings before Iterest Taxes Depreciation
Amortization $ -- $ -- $ 1,183,100 $ 1,910,700
- DDA $ -- $ -- $ 368,100 $ 558,100
= Income Before Taxes $ -- $ -- $ 815,000 $ 1,352,600
- Allowance for Taxes $ -- $ -- $ 309,700 $ 514,000
= Earnings After Taxes $ -- $ -- $ 505,300 $ 838,600
- NPI $ -- $ -- $ -- $ --
+ DDA $ -- $ -- $ 368,100 $ 558,100
= Cash Flow before Capital Expenditures $ -- $ -- $ 873,400 $ 1,396,700
----------- ----------- ----------- -----------
- Total Project Capital Expenditures $ 507,800 $ 2,512,800 $ 2,630,200 $ 891,100
NET AFTER TAX CASH FLOW $ (507,800) $(2,512,800) $(1,756,800) $ 505,600
----------- ----------- ----------- -----------
CUMULATIVE AFTER TAX CASH FLOW $(1,836,700) $(4,349,500) $(6,106,300) $(5,600,700)
=========== =========== =========== ===========
PRE-TAX PROJECT CASH FLOW
PRETAX CASH FLOW $ (507,800) $(2,512,800) $(1,447,100) $ 1,019,600
----------- ----------- ----------- -----------
CUMULATIVE PRETAX CASH FLOW $(1,836,700) $(4,349,500) $(5,796,600) $(4,777,000)
=========== =========== =========== ===========
2006
------------------------------------------------
Q1 Q2 Q3 Q4
----------- ----------- ---------- ----------
BOREALIS PROJECT REVENUE
Gross Gold Revenue $ 375 per Ounce $ 8,325,000 $ 6,525,000 $6,262,500 $4,725,000
Gross Silver Revenue $ 6.00 per Ounce 334,200 268,200 235,800 148,800
NSR paid to Borealis Partners 3.8% (324,700) (254,700) (243,700) (182,800)
NSR per Ounce $ per oz 14.06 14.07 14.09 14.06
----------- ----------- ---------- ----------
REVENUE (Net of Royalty) $ 8,334,500 $ 6,538,500 $6,254,600 $4,691,000
=========== =========== ========== ==========
ESTIMATED PROJECT OPERATING COSTS
Heap Remining $ 0.30 per ton $ 134,700 $ 120,000 $ 120,000 $ 120,000
Low Grade Stockpiled Material $ 0.30 per ton -- -- 60,000 --
New Oxide Ore Mining (surface) $ 0.85 per ton 204,000 158,200 85,000 85,000
New Surface Mining Waste $ 0.70 per ton 440,100 376,400 218,600 218,600
Underground Mining $ 40.00 per ton -- -- -- --
Heap Crush - Single Stage $ 0.85 per ton -- -- 170,000 --
Heap Crush - Two Stage $ 1.25 per ton 300,000 232,600 125,000 125,000
Heap Stacking $ 0.25 per ton 172,300 146,500 175,000 125,000
Heap Leach Processing $ 2.00 per ton 1,378,000 1,172,200 1,400,000 1,000,000
Mill (high grade) $ 12.00 per ton 2,880,000 1,032,900 -- --
G&A $800,000 per year 200,000 200,000 200,000 200,000
Reclamation Fund
Cash Accural $ 0.12 per ton 83,400 70,900 84,700 60,500
Reclamation Expenditures -- -- -- --
----------- ----------- ---------- ----------
TOTAL PROJECT OPERATING COSTS $ 5,792,500 $ 3,509,700 $2,638,300 $1,934,100
=========== =========== ========== ==========
DIRECT CASH OPERATING COST PER OUNCE $ 261 $ 202 $ 158 $ 154
E
A
R $ 2,542,000 $ 3,028,800 $3,616,300 $2,756,900
DEPLETION DEPRECIATION AMORTIZATION
Depletion 15% $ 1,250,200 $ 980,800 $ 938,200 $ 703,700
Depreciation/Amortization (life of mine) $ 122,300 $ 102,300 $ 111,500 $ 94,300
----------- ----------- ---------- ----------
TOTAL DD&A $ 1,372,500 $ 1,083,100 $1,049,700 $ 798,000
=========== =========== ========== ==========
ALLOWANCE FOR INCOME TAXES 38% $ 444,400 $ 739,400 $ 975,300 $ 744,400
EARNINGS AFTER TAXES $ 725,100 $ 1,206,300 $1,591,300 $1,214,500
ESTIMATED PROJECT CAPITAL EXPENDITURES
Phase 1 Mine Development
Permitting-Engineering-Project Management $ -- $ -- $ -- $ --
Initial Production Capacity (target 50k-oz/yr) -- -- -- --
Phase 1 Resource Expansion Drilling
Phase 2 - Expanding Production Capacity 133,000 253,000 253,000 253,000
Phase 2 Resource Expansion Drilling 200,000 200,000 150,000 150,000
Phase 3a - UG Mine Pre-Development -- -- 55,900 55,900
Phase 3a Resource Expansion Drilling -- -- 500,000 500,000
Phase 3b UG Development -- -- -- --
Phase 3b Resource Expansion Drilling -- -- -- --
----------- ----------- ---------- ----------
Subtotal Capital Expenditure For Mine
Development 333,000 453,000 958,900 958,900
----------- ----------- ---------- ----------
Working Capital - First fills -- -- -- --
Sustaining Capital 12,000 -- -- --
----------- ----------- ---------- ----------
TOTAL PROJECT CAPITAL EXPENDITURES $ 345,000 $ 453,000 $ 958,900 $ 958,900
=========== =========== ========== ==========
AFTER TAX PROJECT CASH FLOW
+ Total Project Revenue (net of NSR) $ 8,334,500 $ 6,538,500 $6,254,600 $4,691,000
- Estimated Project Operating Costs $ 5,792,500 $ 3,509,700 $2,638,300 $1,934,100
= Earnings before Iterest Taxes Depreciation
Amortization $ 2,542,000 $ 3,028,800 $3,616,300 $2,756,900
- DDA $ 1,372,500 $ 1,083,100 $1,049,700 $ 798,000
= Income Before Taxes $ 1,169,500 $ 1,945,700 $2,566,600 $1,958,900
- Allowance for Taxes $ 444,400 $ 739,400 $ 975,300 $ 744,400
= Earnings After Taxes $ 725,100 $ 1,206,300 $1,591,300 $1,214,500
- NPI $ -- $ -- $ -- $ --
+ DDA $ 1,372,500 $ 1,083,100 $1,049,700 $ 798,000
= Cash Flow before Capital Expenditures $ 2,097,600 $ 2,289,400 $2,641,000 $2,012,500
----------- ----------- ---------- ----------
- Total Project Capital Expenditures $ 345,000 $ 453,000 $ 958,900 $ 958,900
NET AFTER TAX CASH FLOW $ 1,752,600 $ 1,836,400 $1,682,100 $1,053,600
----------- ----------- ---------- ----------
CUMULATIVE AFTER TAX CASH FLOW $(3,848,100) $(2,011,700) $ (329,600) $ 724,000
=========== =========== ========== ==========
PRE-TAX PROJECT CASH FLOW
PRETAX CASH FLOW $ 2,197,000 $ 2,575,800 $2,657,400 $1,798,000
----------- ----------- ---------- ----------
CUMULATIVE PRETAX CASH FLOW $(2,580,000) $ (4,200) $2,653,200 $4,451,200
=========== =========== ========== ==========
2007
-----------------------------------------------
Q1 Q2 Q3 Q4 2008 2009
---------- ---------- ---------- ----------- ----------- -----------
BOREALIS PROJECT REVENUE
Gross Gold Revenue $ 375 per Ounce $8,700,000 $6,075,000 $4,612,500 $ 6,975,000 $22,650,000 $37,200,000
Gross Silver Revenue $ 6.00 per Ounce 361,200 291,000 216,000 391,200 1,120,800 2,133,600
NSR paid to Borealis Partners 3.8% (339,800) (238,700) (181,100) (276,200) (891,400) (1,475,000)
NSR per Ounce $ per oz 14.04 14.04 14.04 14.09 14.06 14.06
---------- ---------- ---------- ----------- ----------- -----------
REVENUE (Net of Royalty) $8,721,400 $6,127,300 $4,647,400 $ 7,090,000 $22,879,400 $37,858,600
========== ========== ========== =========== =========== ===========
ESTIMATED PROJECT OPERATING COSTS
Heap Remining $ 0.30 per ton $ 120,000 $ 48,000 $ 45,000 $ -- $ 150,000 $ 150,000
Low Grade Stockpiled Material $ 0.30 per ton -- 90,000 90,000 180,000 270,000 191,100
New Oxide Ore Mining (surface) $ 0.85 per ton 332,300 228,100 127,500 208,000 1,011,500 969,000
New Surface Mining Waste $ 0.70 per ton 902,800 648,100 417,600 434,800 1,373,700 1,303,700
Underground Mining $ 40.00 per ton -- -- -- -- -- 2,400,000
Heap Crush - Single Stage $ 0.85 per ton -- 255,000 255,000 510,000 765,000 541,500
Heap Crush - Two Stage $ 1.25 per ton 488,700 335,400 187,500 305,800 1,487,500 1,425,000
Heap Stacking $ 0.25 per ton 197,700 182,100 150,000 211,200 647,500 569,300
Heap Leach Processing $ 2.00 per ton 1,581,900 1,456,600 1,200,000 1,689,300 5,180,000 4,554,000
Mill (high grade) $ 12.00 per ton -- -- -- -- -- 720,000
G&A $800,000 per year 200,000 200,000 200,000 200,000 200,000 200,000
Reclamation Fund
Cash Accural $ 0.12 per ton 95,700 88,100 72,600 102,200 313,400 282,800
Reclamation Expenditures -- -- -- -- -- --
---------- ---------- ---------- ----------- ----------- -----------
TOTAL PROJECT OPERATING COSTS $3,919,100 $3,531,400 $2,745,200 $ 3,841,300 $11,398,600 $13,306,400
========== ========== ========== =========== =========== ===========
DIRECT CASH OPERATING COST PER OUNCE $ 169 $ 218 $ 223 $ 207 $ 189 $ 134
E
A
R $4,802,300 $2,595,900 $1,902,200 $ 3,248,700 $11,480,800 $24,552,200
DEPLETION DEPRECIATION AMORTIZATION
Depletion 15% $1,308,200 $ 919,100 $ 697,100 $ 1,063,500 $ 3,431,900 $ 5,678,800
Depreciation/Amortization (life of mine) $ 220,000 $ 187,600 $ 151,200 $ 248,600 $ 1,536,200 $ 4,260,000
---------- ---------- ---------- ----------- ----------- -----------
TOTAL DD&A $1,528,200 $1,106,700 $ 848,300 $ 1,312,100 $ 4,968,100 $ 9,938,800
========== ========== ========== =========== =========== ===========
ALLOWANCE FOR INCOME TAXES 38% $1,244,200 $ 565,900 $ 400,500 $ 735,900 $ 2,474,800 $ 5,553,100
EARNINGS AFTER TAXES $2,029,900 $ 923,300 $ 653,400 $ 1,200,700 $ 4,037,900 $ 9,060,300
ESTIMATED PROJECT CAPITAL EXPENDITURES
Phase 1 Mine Development
Permitting-Engineering-Project Management $ -- $ -- $ -- $ -- $ -- $ --
Initial Production Capacity (target 50k-oz/yr) -- -- -- -- -- --
Phase 1 Resource Expansion Drilling
Phase 2 - Expanding Production Capacity 1,588,300 1,508,300 -- -- -- --
Phase 2 Resource Expansion Drilling 100,000 100,000 -- -- -- --
Phase 3a - UG Mine Pre-Development 141,300 312,100 312,100 312,100 -- --
Phase 3a Resource Expansion Drilling 500,000 500,000 500,000 500,000 -- --
Phase 3b UG Development -- -- -- 398,000 12,155,000 17,121,000
Phase 3b Resource Expansion Drilling -- -- -- -- 1,000,000 1,000,000
---------- ---------- ---------- ----------- ----------- -----------
Subtotal Capital Expenditure For Mine
Development 2,329,600 2,420,400 812,100 1,210,100 13,155,000 18,121,000
---------- ---------- ---------- ----------- ----------- -----------
Working Capital - First fills -- -- -- -- 2,000,000 --
Sustaining Capital 25,000 -- -- -- 200,000 200,000
---------- ---------- ---------- ----------- ----------- -----------
TOTAL PROJECT CAPITAL EXPENDITURES $2,354,600 $2,420,400 $ 812,100 $ 1,210,100 $15,355,000 $18,321,000
========== ========== ========== =========== =========== ===========
AFTER TAX PROJECT CASH FLOW
+ Total Project Revenue (net of NSR) $8,721,400 $6,127,300 $4,647,400 $ 7,090,000 $22,879,400 $37,858,600
- Estimated Project Operating Costs $3,919,100 $3,531,400 $2,745,200 $ 3,841,300 $11,398,600 $13,306,400
= Earnings before Iterest Taxes Depreciation
Amortization $4,802,300 $2,595,900 $1,902,200 $ 3,248,700 $11,480,800 $24,552,200
- DDA $1,528,200 $1,106,700 $ 848,300 $ 1,312,100 $ 4,968,100 $ 9,938,800
= Income Before Taxes $3,274,100 $1,489,200 $1,053,900 $ 1,936,600 $ 6,512,700 $14,613,400
- Allowance for Taxes $1,244,200 $ 565,900 $ 400,500 $ 735,900 $ 2,474,800 $ 5,553,100
= Earnings After Taxes $2,029,900 $ 923,300 $ 653,400 $ 1,200,700 $ 4,037,900 $ 9,060,300
- NPI $ -- $ -- $ -- $ -- $ -- $ --
+ DDA $1,528,200 $1,106,700 $ 848,300 $ 1,312,100 $ 4,968,100 $ 9,938,800
= Cash Flow before Capital Expenditures $3,558,100 $2,030,000 $1,501,700 $ 2,512,800 $ 9,006,000 $18,999,100
---------- ---------- ---------- ----------- ----------- -----------
- Total Project Capital Expenditures $2,354,600 $2,420,400 $ 812,100 $ 1,210,100 $15,355,000 $18,321,000
NET AFTER TAX CASH FLOW $1,203,500 $ (390,400) $ 689,600 $ 1,302,700 $(6,349,000) $ 678,100
---------- ---------- ---------- ----------- ----------- -----------
CUMULATIVE AFTER TAX CASH FLOW $1,927,500 $1,537,100 $2,226,700 $ 3,529,400 $(2,819,600) $(2,141,500)
========== ========== ========== =========== =========== ===========
PRE-TAX PROJECT CASH FLOW
PRETAX CASH FLOW $2,447,700 $ 175,500 $1,090,100 $ 2,038,600 $(3,874,200) $ 6,231,200
---------- ---------- ---------- ----------- ----------- -----------
CUMULATIVE PRETAX CASH FLOW $6,898,900 $7,074,400 $8,164,500 $10,203,100 $ 6,328,900 $12,560,100
========== ========== ========== =========== =========== ===========
2010 2011 2012 2013
----------- ----------- ------------ ------------
BOREALIS PROJECT REVENUE
Gross Gold Revenue $ 375 per Ounce $64,425,000 $72,525,000 $ 72,825,000 $ 74,550,000
Gross Silver Revenue $ 6.00 per Ounce 4,035,000 4,466,400 4,566,600 4,725,000
NSR paid to Borealis Partners 3.8% (2,567,300) (2,887,200) (2,902,200) (2,972,800)
NSR per Ounce $ per oz 14.06 14.06 14.06 14.06
----------- ----------- ------------ ------------
REVENUE (Net of Royalty) $65,892,700 $74,104,200 $ 74,489,400 $ 76,302,200
=========== =========== ============ ============
ESTIMATED PROJECT OPERATING COSTS
Heap Remining $ 0.30 per ton $ 150,000 $ 366,000 $ 300,000 $ 300,000
Low Grade Stockpiled Material $ 0.30 per ton 150,000 90,000 143,100 --
New Oxide Ore Mining (surface) $ 0.85 per ton 444,800 212,500 -- --
New Surface Mining Waste $ 0.70 per ton 610,500 350,000 -- --
Underground Mining $ 40.00 per ton 10,000,000 16,000,000 18,000,000 20,000,000
Heap Crush - Single Stage $ 0.85 per ton 425,000 255,000 405,500 --
Heap Crush - Two Stage $ 1.25 per ton 654,100 312,500 -- --
Heap Stacking $ 0.25 per ton 380,800 442,500 369,300 250,000
Heap Leach Processing $ 2.00 per ton 3,046,600 3,540,000 2,954,000 2,000,000
Mill (high grade) $ 12.00 per ton 3,000,000 4,800,000 5,400,000 6,000,000
G&A $800,000 per year 200,000 200,000 200,000 200,000
Reclamation Fund
Cash Accural $ 0.12 per ton 214,600 262,600 233,200 181,500
Reclamation Expenditures -- -- -- (2,500,000)
----------- ----------- ------------ ------------
TOTAL PROJECT OPERATING COSTS $19,276,400 $26,831,100 $ 28,005,100 $ 26,431,500
=========== =========== ============ ============
DIRECT CASH OPERATING COST PER OUNCE $ 112 $ 139 $ 144 $ 133
E
A
R $46,616,300 $47,273,100 $ 46,484,300 $ 49,870,700
DEPLETION DEPRECIATION AMORTIZATION
Depletion 15% $ 9,883,900 $11,115,600 $ 11,173,400 $ 11,445,300
Depreciation/Amortization (life of mine) $ 8,003,400 $ 9,807,800 $ 10,916,100 $ 12,943,300
----------- ----------- ------------ ------------
TOTAL DD&A $17,887,300 $20,923,400 $ 22,089,500 $ 24,388,600
=========== =========== ============ ============
ALLOWANCE FOR INCOME TAXES 38% $10,917,000 $10,012,900 $ 9,270,000 $ 9,683,200
EARNINGS AFTER TAXES $17,812,000 $16,336,800 $ 15,124,800 $ 15,798,900
ESTIMATED PROJECT CAPITAL EXPENDITURES
Phase 1 Mine Development
Permitting-Engineering-Project Management $ -- $ -- $ -- $ --
Initial Production Capacity (target 50k-oz/yr) -- -- -- --
Phase 1 Resource Expansion Drilling
Phase 2 - Expanding Production Capacity -- -- -- --
Phase 2 Resource Expansion Drilling -- -- -- --
Phase 3a - UG Mine Pre-Development -- -- -- --
Phase 3a Resource Expansion Drilling -- -- -- --
Phase 3b UG Development -- -- -- --
Phase 3b Resource Expansion Drilling 3,000,000 3,000,000 3,000,000 3,000,000
----------- ----------- ------------ ------------
Subtotal Capital Expenditure For Mine
Development 3,000,000 3,000,000 3,000,000 3,000,000
----------- ----------- ------------ ------------
Working Capital - First fills -- -- -- --
Sustaining Capital 450,000 200,000 200,000 450,000
----------- ----------- ------------ ------------
TOTAL PROJECT CAPITAL EXPENDITURES $ 3,450,000 $ 3,200,000 $ 3,200,000 $ 3,450,000
=========== =========== ============ ============
AFTER TAX PROJECT CASH FLOW
+ Total Project Revenue (net of NSR) $65,892,700 $74,104,200 $ 74,489,400 $ 76,302,200
- Estimated Project Operating Costs $19,276,400 $26,831,100 $ 28,005,100 $ 26,431,500
= Earnings before Iterest Taxes Depreciation
Amortization $46,616,300 $47,273,100 $ 46,484,300 $ 49,870,700
- DDA $17,887,300 $20,923,400 $ 22,089,500 $ 24,388,600
= Income Before Taxes $28,729,000 $26,349,700 $ 24,394,800 $ 25,482,100
- Allowance for Taxes $10,917,000 $10,012,900 $ 9,270,000 $ 9,683,200
= Earnings After Taxes $17,812,000 $16,336,800 $ 15,124,800 $ 15,798,900
- NPI $ -- $ -- $ -- $ --
+ DDA $17,887,300 $20,923,400 $ 22,089,500 $ 24,388,600
= Cash Flow before Capital Expenditures $35,699,300 $37,260,200 $ 37,214,300 $ 40,187,500
----------- ----------- ------------ ------------
- Total Project Capital Expenditures $ 3,450,000 $ 3,200,000 $ 3,200,000 $ 3,450,000
NET AFTER TAX CASH FLOW $32,249,300 $34,060,200 $ 34,014,300 $ 36,737,500
----------- ----------- ------------ ------------
CUMULATIVE AFTER TAX CASH FLOW $30,107,800 $64,168,000 $ 98,182,300 $134,919,800
=========== =========== ============ ============
PRE-TAX PROJECT CASH FLOW
PRETAX CASH FLOW $43,166,300 $44,073,100 $ 43,284,300 $ 46,420,700
----------- ----------- ------------ ------------
CUMULATIVE PRETAX CASH FLOW $55,726,400 $99,799,500 $143,083,800 $189,504,500
=========== =========== ============ ============
2014 Total
------------ ------------
BOREALIS PROJECT REVENUE
Gross Gold Revenue $ 375 per Ounce $ 70,875,000 $473,100,000
Gross Silver Revenue $ 6.00 per Ounce 4,725,000 $ 28,018,800
NSR paid to Borealis Partners 3.8% (2,835,000) $(18,792,000)
NSR per Ounce $ per oz 14.06 --
------------ ------------
REVENUE (Net of Royalty) $ 72,765,000 $482,326,800
============ ============
ESTIMATED PROJECT OPERATING COSTS
Heap Remining $ 0.30 per ton $ -- $ 2,363,700
Low Grade Stockpiled Material $ 0.30 per ton -- $ 1,264,200
New Oxide Ore Mining (surface) $ 0.85 per ton -- $ 4,065,900
New Surface Mining Waste $ 0.70 per ton -- $ 7,294,900
Underground Mining $ 40.00 per ton 20,000,000 $ 86,400,000
Heap Crush - Single Stage $ 0.85 per ton -- $ 3,582,000
Heap Crush - Two Stage $ 1.25 per ton -- $ 5,979,100
Heap Stacking $ 0.25 per ton -- $ 4,219,200
Heap Leach Processing $ 2.00 per ton -- $ 33,752,600
Mill (high grade) $ 12.00 per ton 6,000,000 $ 29,832,900
G&A $800,000 per year 200,000 $ 3,400,000
Reclamation Fund
Cash Accural $ 0.12 per ton 59,300 $ 2,302,300
Reclamation Expenditures (302,400) $ (2,802,400)
------------ ------------
TOTAL PROJECT OPERATING COSTS $ 25,956,900 $181,654,400
============ ============
DIRECT CASH OPERATING COST PER OUNCE $ 137 $ 144
E
A
R $ 46,808,100 $300,672,400
DEPLETION DEPRECIATION AMORTIZATION
Depletion 15% $ 10,914,800 $ 72,349,100
Depreciation/Amortization (life of mine) $ 12,505,200 $ 61,291,400
------------ ------------
TOTAL DD&A $ 23,420,000 $133,640,500
============ ============
ALLOWANCE FOR INCOME TAXES 38% $ 8,887,500 $ 63,472,200
EARNINGS AFTER TAXES $ 14,500,600 $103,559,700
ESTIMATED PROJECT CAPITAL EXPENDITURES
Phase 1 Mine Development
Permitting-Engineering-Project Management $ -- $ 1,371,300
Initial Production Capacity (target 50k-oz/yr) -- $ 4,544,000
Phase 1 Resource Expansion Drilling $ 500,000
Phase 2 - Expanding Production Capacity -- $ 3,988,600
Phase 2 Resource Expansion Drilling -- $ 1,050,000
Phase 3a - UG Mine Pre-Development -- $ 1,189,400
Phase 3a Resource Expansion Drilling -- $ 3,000,000
Phase 3b UG Development -- $ 29,674,000
Phase 3b Resource Expansion Drilling -- $ 14,000,000
------------ ------------
Subtotal Capital Expenditure For Mine
Development -- 59,317,300
------------ ------------
Working Capital - First fills (3,268,500) $ --
Sustaining Capital 200,000 $ 1,974,000
------------ ------------
TOTAL PROJECT CAPITAL EXPENDITURES $ (3,068,500) $ 61,291,300
============ ============
AFTER TAX PROJECT CASH FLOW
+ Total Project Revenue (net of NSR) $ 72,765,000 $482,326,800
- Estimated Project Operating Costs $ 25,956,900 $181,654,400
= Earnings before Iterest Taxes Depreciation
Amortization $ 46,808,100 $300,672,400
- DDA $ 23,420,000 $133,640,500
= Income Before Taxes $ 23,388,100 $167,031,900
- Allowance for Taxes $ 8,887,500 $ 63,472,200
= Earnings After Taxes $ 14,500,600 $103,559,700
- NPI $ -- $ --
+ DDA $ 23,420,000 $133,640,500
= Cash Flow before Capital Expenditures $ 37,920,600 $237,200,200
------------ ------------
- Total Project Capital Expenditures $ (3,068,500) $ 61,291,300
NET AFTER TAX CASH FLOW $ 40,989,100 $175,908,900
------------ ------------
CUMULATIVE AFTER TAX CASH FLOW $175,908,900
============ ============
PRE-TAX PROJECT CASH FLOW
PRETAX CASH FLOW $ 49,876,600 $239,381,100
------------ ------------
CUMULATIVE PRETAX CASH FLOW $239,381,100
============ ============
Borealis Appendix 2 excel sheets
Page 1 of 1
APPENDIX 3
PHASE 1 DRILLING-SAMPLING-TESTING PROGRAM
99
APPENDIX 3
PHASE 1 DRILLING-SAMPLING-TESTING PROGRAM
The following Phase-1 drilling-sampling-testing program was developed by Gryphon
Gold. Drilling, which is designed to support initial production and to identify
new resources falls into several discrete categories, as outlined below.
1. Organize all of the core, drill chips, and coarse rejects from previous
Borealis drilling into a Hawthorne, NV warehouse. Select samples for
confirmation assaying;
2. Drilling existing heaps and dumps;
3. Drilling at the margins of previously mined areas where near surface
oxidized gold mineralization is projected into the walls of the pits;
4. Drilling under the Borealis and Freedom Flats pits where high-grade gold in
unoxidized rock may exist;
5. Continue definition of the Graben deposit to expand the resource and
develop a resource; and
6. Drill targets outside of the main Borealis area where new gold deposits may
be discovered.
Proposals for each drilling program are detailed below and in the included
table, along with a proposed timeframe. Except for the heap/dump and Graben
drilling, all of the proposed holes would be drilled with a reverse circulation
drill. Heaps and dumps will be drilled with a sonic drill. The Graben would
probably be tested with some combination of rotary and core drilling.
DRILL SAMPLES FROM PREVIOUS DRILLING
The initial step of this proposed program would be to organize existing drill
core, rotary chips, and coarse rejects into a Hawthorne warehouse. These
materials are currently located in three containers in Hawthorne. Once organized
in a warehouse the material will be readily available for geological study,
re-assaying, and metallurgical and engineering testing.
Once the reorganization is completed, a program of re-assaying and check
assaying will be developed. This will likely include, but not be restricted to,
re-assaying coarse rejects and pulps (if available) and sawing core for selected
intervals to validate assays found in the database.
BOREALIS HEAPS AND DUMPS
The specifics of this program are outlined in two memos by Donald E. Ranta
(2003). The only modifications proposed here are to relocate several drill sites
from the sides of heaps to the nearest point on the top of the heap. These new
hole locations will produce equivalent information, and can be drilled with a
sonic drill. This will require the mobilization of only one drill to the
property, rather than two if the sides of the heaps were drilled with a reverse
circulation drill, as originally proposed. Drilling can commence as soon as the
permit is approved and a sonic drill is available.
DRILLING AT MARGINS OF DEPOSITS
Gold mineralization at the East Ridge and Northeast Ridge deposits has not been
completely mined along the southeast margins, below the pits, and possibly
between the mined areas. Gold grade contouring of these deposits indicate that
near surface oxidized gold mineralization extends into these areas. At the East
Ridge deposit, a fence of six holes is initially proposed at the southeastern
edge of the pit. If these holes identify mineable mineralization, a second fence
of holes is proposed 100 feet to the southeast. Continual fences of holes are
proposed at 100-foot setouts until the edge of mineralization is defined. One
fence of holes should be drilled at a time and the assays received before a
decision is made on subsequent fences of holes. There is a possible extension of
mineralization below the pit, and two holes are proposed to determine its
extent. Sufficient drill hole locations exist in the current permit application
to drill the initial fence of holes to the southeast, and the holes within the
pit. Drilling can commence as soon as the permit is issued and a suitable drill
is available. Any additional fences of holes to the southeast will have to be
permitted.
100
Four holes are also proposed to test for continuation of mineralization between
the East Ridge and Northeast Ridge deposits. Sites for these holes are not in
the permit that is under review. Therefore, additional permitting will be
required.
Mineralization along the southeast and northwest margins of the Northeast Ridge
deposit has not been fully defined. Five holes are proposed at the margins of
the pit to test possible extensions to the northwest and southeast. If these
holes do not completely define mineralization, additional holes will be
proposed. None of this proposed drilling is in the current permit application.
POSSIBLE HIGH-GRADE GOLD UNDER EXISTING PITS
Past drilling has revealed the presence of high-grade unoxidized gold
mineralization below the Borealis and Freedom Flats pits. Drilling below the
Borealis pit encountered higher-grade gold mineralization to the northeast of
the mine. Echo Bay identified a resource of about 182,000 tons with an average
grade of 0.054 opt Au, based on a few vertical holes. Within this resource there
are several higher-grade intervals. Mineralization appears to be open in all
directions. Two 900 foot angle holes are proposed to test the higher grade
portions of this deposit to determine how extensive the mineralization might be,
and if additional drilling is warranted. The current permit application contains
locations that are sufficient to drill these holes. Drilling could commence upon
approval of the permit and the availability of a suitable drill rig.
There is an indication of high-grade gold along the southeast margin of the
Freedom Flats pit. Two 900 foot angle holes are proposed to test this area, and
if successful will precipitate a more extensive drilling program. The current
permit application contains locations that are sufficient to drill these holes.
Drilling could commence upon approval of the permit and the availability of a
suitable drill rig.
GRABEN DEPOSIT
The Graben deposit has been incompletely drilled and a large geophysical anomaly
suggests that there may be a substantial northern extension to the deposit.
Initially, six 1,000-foot angle holes are proposed to test extensions of the
higher-grade zones within the area of known mineralization and to test the
extension of the deposit to the north. The exact location for these holes will
be determined once a new geological model is completed. The current permit
application should have sufficient locations so that these six holes can be
drilled. Drilling could begin in a couple of months.
DRILLING OUTSIDE OF THE DISTURBED AREA
Beyond the targets considered in this proposal there are several areas of
alteration and mineralization that have not been adequately explored. Additional
drilling proposals will be put forth as the geology of each area is better
understood. The table below shows the proposed drill locations and depths.
101
TABLE A3.1
DRILL HOLE LOCATIONS
DEPOSIT SECTION ORIENTATION DEPTH COMMENTS
------- ------- ----------- ------- --------------------------------
East Ridge 54 -90 100 ft 1st fence along southeast margin
56 -90 200 ft 1st fence along southeast margin
64 -90 250 ft 1st fence along southeast margin
65 -90 300 ft 1st fence along southeast margin
66 -90 300 ft 1st fence along southeast margin
56 -90 200 ft 2nd fence along southeast margin
64 -90 250 ft 2nd fence along southeast margin
65 -90 300 ft 2nd fence along southeast margin
66 -90 300 ft 2nd fence along southeast margin
59 NW -70 200 ft Under pit
61 NW -70 200 ft Under pit
Northeast Ridge 15 -90 200 ft Margins of deposit
16 -90 200 ft Margins of deposit
17 -90 200 ft Margins of deposit
26 -90 200 ft Margins of deposit
35 -90 200 ft Margins of deposit
Between deposits 69 -90 200 ft
70 -90 400 ft
70 -90 400 ft
70 -90 400 ft
71 -90 400 ft
Borealis deposit 37 NW -70 900 ft
35 NW -70 900 ft
Freedom Flats 38 NW -70 1000 ft
41 NW -70 1000 ft
Graben NW -70 1000 ft Six holes in the planning stage
102