EXHIBIT 1
NVI MINING LTD.
A WHOLLY-OWNED SUBSIDIARY
OF BREAKWATER RESOURCES LTD.
MYRA FALLS OPERATION
VANCOUVER ISLAND, BRITISH COLUMBIA
NI 43-101 TECHNICAL REPORT
PREPARED BY:
Torben Jensen, P.Eng.
Vice President, Engineering
Breakwater Resources Ltd.
July 30, 2004
Myra Falls Technical Report
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TABLE OF CONTENTS
SUMMARY .......................................................................1
1.0 INTRODUCTION AND TERMS OF REFERENCE......................................5
2.0 PROPERTY DESCRIPTION AND LOCATION........................................6
3.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND
PHYSIOGRAPHY............................................................11
3.1 SITE FACILITIES.........................................................11
3.2 POWER GENERATION........................................................11
4.0 HISTORY.................................................................13
5.0 GEOLOGICAL SETTING......................................................15
6.0 DEPOSIT TYPES...........................................................18
7.0 MINERALIZATION..........................................................20
7.1 COPPER-LEAD-ZINC-IRON RICH MINERAL ASSEMBLAGE...........................21
7.2 COPPER-RICH SULPHIDES:..................................................21
7.3 GOLD-SILVER ASSEMBLAGE:.................................................21
8.0 EXPLORATION.............................................................22
8.1 THE 1960'S..............................................................23
8.2 THE 1970'S..............................................................23
8.3 THE 1980'S..............................................................23
8.4 THE 1990'S..............................................................24
8.5 2000 TO PRESENT.........................................................24
9.0 DRILLING................................................................25
10.0 SAMPLING METHOD AND APPROACH............................................27
10.1 CORE HANDLING...........................................................27
10.2 CORE LOGGING............................................................27
10.3 SAMPLING METHODOLOGY....................................................27
11.0 SAMPLE PREPARATION, ANALYSES AND SECURITY...............................28
12.0 DATA VERIFICATION.......................................................29
13.0 ADJACENT PROPERTIES.....................................................30
14.0 MINERAL PROCESSING AND METALLURGICAL TESTING............................31
14.1 TAILINGS DISPOSAL.......................................................33
15.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES..........................34
16.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES
AND PRODUCTION PROPERTIES...............................................37
16.1 MINING OPERATIONS.......................................................37
16.2 RECOVERABILITY..........................................................37
16.3 MARKETS.................................................................38
16.4 CONTRACTS...............................................................38
16.5 ENVIRONMENTAL CONSIDERATIONS............................................38
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Myra Falls Technical Report
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16.5.1 ENVIRONMENTAL PERMITS AND LICENSES.................................39
16.5.2 PROVINCIAL PARK USE PERMITS........................................39
16.5.3 PROVINCIAL ENVIRONMENTAL PERMITS...................................39
16.5.4 RECLAMATION PERMITS................................................39
16.5.5 RECLAMATION AND CLOSURE PLAN.......................................39
16.5.6 RECLAMATION AND CLOSURE SECURITY...................................39
16.6 TAXES.................................................................40
16.7 CAPITAL AND OPERATING COST ESTIMATES..................................40
16.8 ECONOMIC ANALYSIS.....................................................40
16.9 PAYBACK...............................................................42
16.10 MINE LIFE.............................................................43
17.0 OTHER RELEVANT DATA AND INFORMATION.....................................44
18.0 INTERPRETATION AND CONCLUSIONS..........................................45
19.0 RECOMMENDATIONS.........................................................46
20.0 REFERENCES..............................................................47
LIST OF TABLES
TABLE I - REPORTED MINERAL RESERVES AND RESOURCES..............................1
TABLE II - HISTORICAL PRODUCTION DATA: 1995-2003...............................2
TABLE III - FORECAST PRODUCTION: 2004-2010.....................................2
TABLE IV - LONG-TERM PRICING ASSUMPTIONS.......................................3
TABLE V - PROJECTED OPERATING RESULTS: 2004 - 2011.............................3
TABLE 2-1 - MYRA FALLS MINING LEASES...........................................7
TABLE 2-2 - MYRA FALLS FREEHOLD TITLE TO MINERALS..............................7
TABLE 2-3 - MYRA FALLS TWO POST MINING CLAIMS..................................8
TABLE 7-1 - MYRA FALLS DEPOSIT MINERALOGY.....................................20
TABLE 8-1 - EXPLORATION - MINING - DEVELOPMENT CYCLES.........................22
TABLE 9-1 - ANNUAL DIAMOND DRILL FOOTAGE BY TYPE AND LOCATION...............25
TABLE 15-1 - REPORTED MINERAL RESERVES AND RESOURCES..........................34
TABLE 15-2 - MINERAL RESOURCES................................................35
TABLE 15-3 - MINERAL RESERVES.................................................36
TABLE 16-1 - HISTORICAL PRODUCTION DATA: 1995-2003............................38
TABLE 16-2 - FORECAST PRODUCTION: 2004-2010...................................40
TABLE 16-3 - LONG-TERM PRICING ASSUMPTIONS ...................................41
TABLE 16-4 - PROJECTED OPERATING RESULTS: 2004 - 2011.........................41
TABLE 16-5 - SENSITIVITIES....................................................42
LIST OF FIGURES
FIGURE 2-1 - MYRA FALLS OPERATION LOCATION MAP.................................6
FIGURE 2-2 - MINERAL TITLE AT MYRA FALLS MINE.................................9
FIGURE 2-3 - MAJOR INFRASTRUCTURE LOCATION...................................10
FIGURE 3-1 - MYRA FALLS GENERAL SITE PLAN.....................................12
FIGURE 5-1 - GENERAL GEOLOGY MAP OF VANCOUVER ISLAND.........................15
FIGURE 5-2 - SICKER GROUP STRATIGRAPHY.......................................16
FIGURE 5-3 - SCHEMATIC GEOLOGICAL CROSS SECTION AT MYRA FALLS................17
FIGURE 6-1 - LOCATION OF VHMS DEPOSITS AT MYRA FALLS OPERATIONS...............18
FIGURE 14-1 - MYRA FALLS CONCENTRATOR FLOWSHEET...............................32
FIGURE 16-1 - MYRA FALLS EXPLORATION POTENTIAL................................43
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Myra Falls Technical Report
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SUMMARY
NVI Mining Ltd. ("NVI" or the "Company"), a wholly-owned subsidiary of
Breakwater Resources Ltd. ("Breakwater") is the sole owner of the
zinc-copper-gold mining and milling operation at Myra Falls on Vancouver Island,
British Columbia, Canada. Breakwater Resources Ltd. purchased 100 percent of
Boliden Westmin (Canada) Limited on July 23, 2004, and subsequently changed the
name of the Company to NVI Mining Ltd.
The Myra Falls operation ("MFO") is located in Strathcona-Westmin Provincial
Park in central Vancouver Island, British Columbia. The mine is linked by an
asphalt road to the port of Campbell River, 90 kilometres away, where most of
the employees live. Campbell River is an important local centre on the east
coast of Vancouver Island which is connected by road to the provincial capital,
Victoria, and has air links to Vancouver.
The mineral deposits comprise complex metal-zoned volcanogenic massive sulphides
contained in the 450 metre thick Myra Formation of the Sicker Group volcanic
assemblage. The Myra Formation hosts a geologically diverse collection of
mineralized bodies including polymetallic massive sulphides, polymetallic
disseminated sulphides, zoned pyritic massive sulphides and stringer sulphide
zones. The principal minerals are sphalerite, pyrite and chalcopyrite with minor
galena, bornite, tennantite and locally significant secondary copper.
The mineral resource and mineral reserve estimates have been classified in
accordance with the CIM Standards on Mineral Resources and Reserves Definitions
and Guidelines adopted by the CIM Council on August 20, 2000, that classifies
the mineral resources into measured, indicated and inferred categories and
mineral reserves into proven and probable categories.
Reported mineral reserves and resources are as follows:
TABLE I - REPORTED MINERAL RESERVES AND RESOURCES
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31 DECEMBER, 2003 31 DECEMBER, 2002
TONNES ZN CU AU AG TONNES ZN CU AU AG
(000S) (%) (%) g/t g/t (000S) (%) (%) g/t g/t
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Proven and Probable Reserves 7,747 6.3 1.2 1.2 40 8,347 6.7 1.2 1.2 40
Measured and Indicated Resources* 10,388 7.8 1.4 1.7 56 11,041 8.1 1.4 1.6 56
Inferred Resources 2,284 4.9 1.1 1.4 57 2,478 4.9 1.1 1.4 54
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*Measured and Indicated Resources include Proven and Probable Reserves.
The current mineral reserve estimate is sufficient for another seven years of
production. Being an underground operation, additional mineralization tends to
be delineated as mining proceeds. There is potential to further expand the
mineral reserve base within the existing operations area as only 50 percent of
the Myra Falls property has been explored.
Mining and milling have been carried out on this site since 1966 with a total of
23.9 million tonnes being mined to the end of 2003 producing 2.3 billion pounds
of zinc and 770 million pounds of copper. The MFO consists of a 1.25 million
tonne per annum underground mine, a milling and flotation plant and associated
infrastructure.
There are currently two active underground mines - the H-W and the Battle-Gap -
both accessed through a common 716 metre deep vertical shaft. Mining involves
three methods - sub-level stoping, drift-and-fill and room and pillar mining.
Mined material is loaded by scooptrams into
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Myra Falls Technical Report
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haul trucks and then transported via a system of ore-passes and electric-powered
trains to an underground crusher. Ground control is a significant portion of the
mining cycle.
Processing involves final crushing, rod and ball milling and flotation with a
recently added gravity circuit to improve gold recovery. The final products are
zinc concentrate, copper concentrate and a gold concentrate from the gravity
circuit. Zinc and copper concentrates produced at Myra Falls are transported to
the port of Campbell River for export by ship to world markets. Tailings are
deposited in a tailings facility near the plant but up to 55 percent of tailings
are returned underground for use as fill material. A paste tails plant was
recently commissioned which will extend the life of the tailings facility.
The operation currently employs 358 employees. All of the hourly employees are
represented by the Canadian Auto Workers Union - Local 3019.
Production statistics for the past nine years are given in Table II below.
TABLE II - HISTORICAL PRODUCTION DATA: 1995-2003
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1995 1996 1997 1998 1999 2000 2001 2002 2003
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Milled Tonnes 000 t 1,197 1,268 1,257 1,047 740 1,167 979 774 1,036
Head Grades
Zinc % 2.7 3.9 5.4 5.6 5.7 5.0 6.5 7.3 6.5
Copper % 2.0 1.6 1.5 1.7 1.6 1.7 1.6 1.2 1.4
Gold g/t 1.9 1.7 1.6 1.6 1.6 1.6 1.5 1.5 1.5
Silver g/t 22.5 21.9 21.3 22.9 19.8 26.7 25.1 46.6 44.1
Mill Recoveries
Zinc % 82.7 88.3 91.0 88.8 90.1 88.8 90.8 89.2 85.3
Copper % 89.5 87.6 86.7 87.3 86.5 87.0 85.4 71.5 76.7
Gold % 32.6 39.5 39.1 39.4 36.7 39.4 44.1 53.7 53.5
Silver % 63.1 64.3 64.8 65.1 63.9 69.7 71.1 77.1 74.1
Concentrate
Zinc 000 t 53.2 87.1 113.9 95.5 69.2 94.8 105.5 93.1 108.0
Copper 000 t 84.7 67.9 63.7 60.2 40.0 66.9 49.6 27.6 42.9
Contained Metal
Zinc 000 t 26.8 44.0 61.3 51.8 37.9 52.2 57.9 50.4 57.4
Copper 000 t 21.8 17.6 16.5 15.5 10.4 17.5 13.2 6.8 10.7
Gold 000 oz 28.3 27.8 24.6 21.6 13.6 24.2 20.3 19.9 27.3
Silver 000 oz 442.0 424.9 388.9 356.4 204.7 524.6 387.5 601.0 720.9
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A long-term plan has been developed to the year 2010 that is based on mining and
processing only the proven and probable mineral reserves at a rate of up to 1.19
million tonnes per annum.
Table III shows the forecast production for years 2004 to 2010.
TABLE III - FORECAST PRODUCTION: 2004-2010
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Total
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Milled tonnes 000 t 7,577
Head Grades
Zinc % 7.0
Copper % 1.3
Gold g/t 1.4
Silver g/t 46.0
Mill Recoveries
Zinc % 91.5
Copper % 76.1
Concentrate Prod.
Zinc 000 t 889
Copper 000 t 287
Contained Metal
Zinc 000 t 530
Copper 000 t 97
Gold 000 oz 334.1
Silver 000 oz 11,328
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A financial model was prepared based on the metal prices, currencies and
treatment and refining charges listed in Table IV.
TABLE IV - LONG-TERM PRICING ASSUMPTIONS
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Commodity Prices
Zinc US(cent)/lb. 51.2
US$/t 1,129
Copper US(cent)/lb. 98.0
US$/t 2,160
Gold US$/oz 379
Silver US$/oz 5.61
Exchange Rates US$/C$ 1.33
Treatment Charges
Zinc US$/t 160
Copper US$/t 62
Refining Charges
Copper US(cent)/lb. 6.2
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Projected operating costs for the years 2004 through 2011 are summarized in
Table V.
TABLE V - PROJECTED OPERATING RESULTS: 2004 - 2011
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Total
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Milled Tonnes 000 t 7,577
Payable Metal
Zinc 000 lbs. 908,016
Copper 000 lbs. 155,352
Silver 000 oz 4,739
Gold oz 105,067
Smelter Revenue 000's 913,251
Smelter Treatment Charges (294,175)
Transportation (67,963)
Operating Cost (452,312)
Operating Cash Flow 98,801
Mining Tax (1,976)
Capital 000's (88,269)
Cashflow 8,556
US$/lb./Payable Zinc 0.440
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Operating Cost/t Milled 59.70
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Myra Falls Technical Report
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Operating and capital costs were developed to coincide with the forecast
production plan. Projected operating costs are consistent with historical
numbers and average $59.70 per tonne milled over the period. Capital costs
include required mine development, equipment replacement and the completion of
the upgrade to the tailings management facility. In addition, allowances have
been included in 2011 for closure.
The long-term plan estimates the production of 0.9 billion pounds of payable
zinc and 155 million pounds of payable copper.
The long-term plan is sensitive to metal prices, exchange rates, operating and
capital costs, head grade and smelter charges.
Breakwater should review the potential of increasing resources and reserves at
the Myra Falls operation and implement an exploration plan once this review has
been carried out.
Exploration work must be conducted in the near future to determine the existence
of deposits; determine the extent to which mineral resources can be upgraded to
mineable tonnage; and endeavour to make such material available for mining
within the current mine plan.
CAUTIONARY STATEMENT ON FORWARD LOOKING STATEMENTS
This Report may include certain forward-looking statements (within the meaning
of applicable U.S. securities laws) relating to Breakwater, NVI and the MFO,
including mineral resource and mineral reserve estimates, production capacities,
operating and capital costs, exchange rates, products to be produced and demand
for such products. Inherent in such forward-looking statements are risks and
uncertainties well beyond the ability of Breakwater or NVI to predict or
control. Actual results and developments are likely to differ, and may differ
materially, from those expressed or implied by the forward-looking statements
contained in this Report. These forward-looking statements should not be relied
upon as representing any party's views as of any date subsequent to the
effective date of this Report.
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Myra Falls Technical Report
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1.0 INTRODUCTION AND TERMS OF REFERENCE
The Myra Falls technical report has been prepared to satisfy National Instrument
43-101 Section 4.2 - Obligation to File a Technical Report in Connection with
Certain Written Disclosure Concerning Mineral Projects on Material Properties.
Breakwater purchased 100 percent of Boliden Westmin (Canada) Limited, the sole
owner of the zinc-copper-gold mining and milling operation at Myra Falls on
Vancouver Island, British Columbia, Canada which constitutes a material change
in respect of the affairs of Breakwater. Subsequently, Breakwater changed the
name of the Company to NVI Mining Ltd. The technical report has been prepared in
support of the first time disclosure by Breakwater of mineral resources and
mineral reserves for the Myra Falls operation.
Information and data has been collected from two visits to the site by the
author. The first visit was from January 6-13, 2004, and the second visit was
from March 4-5, 2004. Information collected included monthly operating reports
which detail operating costs and mill recoveries, geological reports on
exploration and mineral reserves, closure plans, the 2004 mine operating budget
and the long term plan for the MFO.
The views expressed by the author in this technical report have been based on
the fundamental assumptions that the required management resources and
pro-active management skills and access to adequate capital necessary to achieve
the long-term plan projections for the mining assets are provided as projected.
The author has conducted a comprehensive review and assessment of all material
issues likely to influence the future operations of the MFO. The long-term plan,
as provided to the author has been reviewed in detail for appropriateness,
reasonableness and viability, including the existence of, and justification for,
any departures from historical performance. Where material differences were
found, these were discussed with site personnel and adjusted where considered
appropriate. The author considers that the resulting projections have been based
upon sound reasoning, engineering judgement and achievable mine plans, within
the context of the risks associated with the global mining industry.
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Myra Falls Technical Report
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2.0 PROPERTY DESCRIPTION AND LOCATION
The MFO is located at the southern end of Buttle Lake in Strathcona-Westmin
Provincial Park on Vancouver Island, British Columbia at a latitude of 49o 33'
14" N and a longitude of 125o 33' 38" W. Strathcona-Westmin Provincial Park is a
class "B" provincial park that covers all of the Company's land holdings and is
surrounded by the class "A" Strathcona Provincial Park. The Myra Falls mine
operates under the Strathcona-Westmin Master Plan and is the only provincial
park in British Columbia in which mining is permitted.
FIGURE 2-1 - MYRA FALLS OPERATION LOCATION MAP
[PICTURE]
From Boliden Westmin (Canada) Limited
Myra Falls mining properties comprise 3,637.59 hectares held under surveyed
mining leases, surveyed freehold title to minerals and unsurveyed two post
mining claims.
Title to mineral claims and mining leases is issued and administered by the
Mineral Titles Branch, Ministry of Energy and Mines ("MEM"), and is subject to
all provisions in the Mineral Tenure Act. A claim or lease title conveys to the
holder the right to all minerals as defined in the Mineral Tenure Act and which
were available at the time of location or have subsequently become available
under the terms of the Act.
The total area held by mining lease is 2,209.97 hectares. Title to the land is
maintained by yearly rental payments to the MEM. There are no work requirements
for maintaining a lease. Each
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Myra Falls Technical Report
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lease is for a fixed term, which is renewable. The title gives the right to
exploit the minerals, subject to obtaining all other mining production permits.
TABLE 2-1 - MYRA FALLS MINING LEASES
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Tenure number Disposition name Area Lease issue date End of lease term NTS map area
(hectares)
surveyed
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1 201320 Lease 26 496.20 27-Mar-1986 27-Mar-2007 092F/12E
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2 201321 Lease 27 680.20 27-Mar-1986 27-Mar-2007 "" ""
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3 201322 Lease 28 508.10 27-Mar-1986 27-Mar-2007 "" ""
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4 201323 Lease 29 493.80 27-Mar-1986 27-Mar-2007 "" ""
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5 201324 Lease 51 31.67 04-Jul-1962 04-Jul-2021 "" ""
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2,209.97
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Freehold title to minerals is maintained by payment of a Mineral Land tax.
Freehold title is administered by the Land Title Branch, Ministry of Attorney
General. The total land area is 317.62 hectares. All of the lands have been
surveyed as district lots.
TABLE 2-2 - MYRA FALLS FREEHOLD TITLE TO MINERALS
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District lot Original name Parcel ID number Area (hectares) Date of original NTS map area
number grant
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1 L1340 PEARL 000-312-576 13.07 23-Aug-1965 092F/12E
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2 L1341 betty (lower case) 000-049-328 7.77 23-Aug-1965 092F/12E
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3 L1342 ELWOOD 000-312-584 6.59 23-Aug-1965 092F/12E
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4 L1344 BEAR PAW 000-039-195 19.32 26-Jan-1972 092F/12E
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5 L1345 BEAVER PAW 000-039-209 19.79 26-Jan-1972 092F/12E
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6 L1346 RIGHT PAW 000-039-187 20.36 26-Jan-1972 092F/12E
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7 L1347 LEFT PAW 000-039-217 14.00 26-Jan-1972 092F/12E
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8 L1659 MINK 000-039-336 15.54 20-May-1964 092F/12E
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9 L1660 LYNX 000-049-352 11.64 23-Aug-1965 092F/12E
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10 L1661 COUGAR 000-049-379 10.89 23-Aug-1965 092F/12E
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11 L1663 BLUE GROUSE 000-049-387 8.14 23-Aug-1965 092F/12E
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12 L1664 BLUE JAY 000-049-409 9.19 23-Aug-1965 092F/12E
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13 L1665 RED SQUIRREL 000-049-425 11.54 20-May-1964 092F/12E
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14 L1666 GREY SQUIRREL 000-049-468 10.96 23-Aug-1965 092F/12E
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15 L1667 BESSIE B. 000-049-476 18.68 20-May-1964 092F/12E
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16 L1668 SOUTH PAW 000-049-492 17.67 26-Jan-1972 092F/12E
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17 L1669 WEST PAW 000-049-506 20.40 26-Jan-1972 092F/12E
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18 L1670 NORTH PAW 000-049-557 12.95 26-Jan-1972 092F/12E
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19 L1671 EAST PAW 000-049-573 20.85 26-Jan-1972 092F/12E
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20 L1971 BOULDER 000-312-592 11.94 26-Jan-1972 092F/12E
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21 L1972 BARITE 000-312-631 18.11 26-Jan-1972 092F/12E
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22 L1973 RAVEN 000-312-649 11.72 26-Jan-1972 092F/12E
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23 L1974 BETTY 000-312-649 6.50 26-Jan-1972 092F/12E
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317.62
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All mining claims are unsurveyed two post claims. The approximate area is 1,100
hectares. A mining claim provides exclusive exploration rights only, that are
maintained by the continual
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performance and reporting of work by due dates (anniversaries of recording). The
current due dates for work are in 2007, due to a recent filing.
TABLE 2-3 - MYRA FALLS TWO POST MINING CLAIMS
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Tenure number Disposition name Approximate Original recorded Due date for next NTS map area
area date assessment work
(hectares)
unsurveyed
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1 201378 W. NO. 17 25 24-May-1961 24-May-2007 092F/12E
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2 201370 W. NO. 7 25 24-May-1961 24-May-2007 "" ""
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3 201371 W. NO. 8 25 24-May-1961 24-May-2007 "" ""
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4 201372 W. NO. 10 25 24-May-1961 24-May-2007 "" ""
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5 201373 W. NO. 12 25 24-May-1961 24-May-2007 "" ""
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6 201374 W. NO. 13 25 24-May-1961 24-May-2007 "" ""
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7 201375 W. NO. 14 25 24-May-1961 24-May-2007 "" ""
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8 201368 W. NO. 5 25 24-May-1961 24-May-2007 "" ""
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9 201377 W. NO. 16 25 24-May-1961 24-May-2007 "" ""
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10 201367 W. NO. 4 25 24-May-1961 24-May-2007 "" ""
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11 201379 W. NO. 18 25 24-May-1961 24-May-2007 "" ""
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12 201376 W. NO. 15 25 24-May-1961 24-May-2007 "" ""
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13 201369 W. NO. 6 25 24-May-1961 24-May-2007 "" ""
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14 201366 W. NO. 3 25 24-May-1961 24-May-2007 "" ""
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15 201492 W-100 25 13-Jun-1963 13-Jun-2007 "" ""
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16 201461 W-75 25 03-Apr-1962 03-Apr-2007 "" ""
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17 201462 W-76 25 03-Apr-1962 03-Apr-2007 "" ""
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18 201463 W-77 25 03-Apr-1962 03-Apr-2007 "" ""
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19 201464 W-78 25 03-Apr-1962 03-Apr-2007 "" ""
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20 201465 W-79 25 03-Apr-1962 03-Apr-2007 "" ""
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21 201486 W-80 25 17-May-1962 17-May-2007 "" ""
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22 201487 W-81 25 17-May-1962 17-May-2007 "" ""
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23 201491 W-87 25 08-Nov-1962 08-Nov-2007 "" ""
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24 201415 W 56 25 22-Dec-1961 22-Dec-2007 "" ""
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25 201493 W-116 FR 25 13-Aug-1963 13-Aug-2007 "" ""
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26 201494 W-121 25 08-May-1964 08-May-2007 "" ""
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27 201495 W-122 25 08-May-1964 08-May-2007 "" ""
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28 201488 W-82 25 17-May-1962 17-May-2007 "" ""
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29 201407 W. NO. 64 25 18-Jan-1962 18-Jan-2007 "" ""
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30 201380 W. NO. 19 25 24-May-1961 24-May-2007 "" ""
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31 201381 W. NO. 20 25 24-May-1961 24-May-2007 "" ""
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32 201403 W. NO. 59 25 18-Jan-1962 18-Jan-2007 "" ""
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33 201404 W. NO. 61 25 18-Jan-1962 18-Jan-2007 "" ""
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34 201460 W-74 25 03-Apr-1962 03-Apr-2007 "" ""
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35 201406 W. NO. 63 25 18-Jan-1962 18-Jan-2007 "" ""
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36 201459 W-72 25 03-Apr-1962 03-Apr-2007 "" ""
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37 201408 W. NO. 65 25 18-Jan-1962 18-Jan-2007 "" ""
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38 201409 W. NO. 66 25 18-Jan-1962 18-Jan-2007 "" ""
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39 201410 W. NO. 67 25 18-Jan-1962 18-Jan-2007 "" ""
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40 201411 W. NO. 68 25 18-Jan-1962 18-Jan-2007 "" ""
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41 201412 W. NO. 69 25 18-Jan-1962 18-Jan-2007 "" ""
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42 201413 W. NO. 70 25 18-Jan-1962 18-Jan-2007 "" ""
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43 201414 W. NO. 71 25 18-Jan-1962 18-Jan-2007 "" ""
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44 201405 W. NO. 62 25 18-Jan-1962 18-Jan-2007 "" ""
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1,110
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The location of all known mineralized zones, mineral resources, mineral reserves
and mine workings, existing tailings ponds, and waste deposits relative to the
property boundaries can be found on Figures 2-3, 3-1 and 6-1.
The Company owns 100 percent of the property. There are no royalties, back-in
rights, payments or other agreements and encumbrances to which the property is
subject.
Environmental liabilities and permits are discussed in Section 16.5.
In addition to the land holdings at the mine site, the Company leases a 2.14
hectare upland property on Tyee Spit for storage and shiploading of concentrates
at the Discovery Terminal facility in Campbell River. The land is held under a
sublease with the Campbell River Indian Band Development Company ("CRIBCO") who
in turn lease this First Nations reserve land (under permit number 5556-172 in
the Indian Land Registry) from the Government of Canada. The lease of the upland
property expires on December 31, 2011. The Company also leases a 5.95 hectare
water lot from the Province of British Columbia which expires in 2016.
FIGURE 2-2 - MINERAL TITLE AT MYRA FALLS MINE
[PICTURE]
From Boliden Westmin (Canada) Limited
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FIGURE 2-3 - MAJOR INFRASTRUCTURE LOCATION
[PICTURE]
From Boliden Westmin (Canada) Limited
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3.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
The site is linked by a 90 kilometre paved road to Campbell River on the east
coast of Vancouver Island and also by paved road to the west coast of Vancouver
Island via the town of Gold River. In addition to mining, the main industries in
and around Campbell River, a community of some 30,000 inhabitants, are forestry,
pulp/paper, fishing and tourism. The town is connected by road to the provincial
capital, Victoria, 270 kilometres away and there are regular air services to
Vancouver.
The mine and other installations are located on the floor of the Myra Valley at
an elevation of around 275 metres above sea level. On both sides of the valley
are steep, rugged mountains rising to around 1,850 metre above sea level. The
lower slopes are covered by forest comprising fir, hemlock and cedar. Alpine
meadow occurs at higher elevations and the summits are bare rock with local
glacial ice.
Precipitation is high, reaching the equivalent of 2,500 millimetres of rain per
year, which may include up to three metres of snow in winter. The temperature
may range from 28o C in summer to -18o C in winter.
3.1 SITE FACILITIES
The MFO consists of a 1.25 million tonne per annum underground mine, a milling
and flotation plant and associated infrastructure. There are currently two
active underground mines - the H-W and the Battle-Gap - both accessed through a
common 716-metre-deep vertical shaft.
The central office, workshop and warehouse are located adjacent to the mine
(Figure 3-1). There are also underground maintenance shops for mining equipment
in the H-W mine and Battle-Gap mine. There is a camp facility at the mine site
for those employees required to work extended shift schedules. Otherwise,
personnel live in Campbell River or elsewhere in the surrounding region.
The concentrates produced at the mill are transported 90 kilometres in 38-tonne
truck/trailer units to the Discovery Terminal at Campbell River where the
Company operates concentrate storage and loading facilities. These include a
covered concentrate storage area with a capacity of 20,000 tonnes each for zinc
and copper concentrates as well as docking and loading facilities capable of
handling 30,000 - 50,000-tonne vessels.
3.2 POWER GENERATION
The MFO uses between 15 megawatts of power during the winter and 12 megawatts of
power during the summer. All power is generated on site.
There are two hydro-electric power stations on site fed by lakes above the mine
site. Jim Mitchell Lake feeds the 8.2 megawatt Thelwood power station which is
driven by a Gilkes impulse pelton wheel. Tennent Lake feeds the 3.0 megawatt
Tennent power station which is also driven by a Gilkes impulse pelton wheel,
similar to the Thelwood unit.
In addition to the hydro plants, a 12 megawatt diesel generating plant is
maintained. During the wet months, both hydro plants operate at maximum capacity
and diesel generators provide the
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remaining 4 megawatts of power. Depending on lake levels, as little as 0.5
megawatts of hydro electric power is available during the dry season.
FIGURE 3-1 - MYRA FALLS GENERAL SITE PLAN
[PICTURE]
From Boliden Westmin (Canada) Limited
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4.0 HISTORY
There have been over 100 years of mineral exploration activity in central
Vancouver Island and over three decades of active mining at Myra Falls.
In 1918, James Cross and Associates of Victoria staked claims in the Myra
Falls/Buttle Lake area covering the H-W, Lynx, Price and Myra mines. Today,
these claims make up a sizeable portion of the Myra Falls property holdings.
Following the discovery of the Lynx mineralization, evaluating the underground
deposits was the next challenge. The Paramount Mining Co. of Toronto started the
first development work in the area during the 1920's, but inconclusive findings,
along with the remoteness of the area and depressed metal prices, resulted in
little work being done in the Myra Valley until 1959, when the Reynolds
Syndicate acquired the claims. This group then sold the claims to Western Mines
Limited in 1961.
In 1966, the Lynx mine started as an open pit operation and by late 1967 was
producing 860 tonnes per day containing gold, silver, copper, lead and zinc. As
mining of the Lynx open pit continued, diamond drilling established underground
mineral reserves. A shaft was sunk to a depth of 335 metres with horizontal
levels at 46 metre intervals. Exploration results were favourable and the
company decided to bring this underground operation into production. The Lynx
open pit mine was completed in 1975. The Lynx underground mine produced
approximately 8,500 tonnes per month until operations were suspended in 1993.
Prior to 1966, the year Western Mines Limited built the 50 kilometre highway
along the east side of Buttle Lake, all workers, construction equipment,
materials and supplies were transported to the site by boat or barge on Buttle
Lake.
The Myra mine deposits were discovered in late 1969 and underground development
quickly accessed these high-grade deposits. This mine operated from 1972 to 1986
and produced over one million tonnes that was rich in gold, silver and zinc.
The Price mine, another of the three original deposits discovered in the area,
lies adjacent to the Myra mine, but on the other side of Mt. Myra. This mine's
development has been limited and it has not yet been brought into production.
In 1972, Brascan Resources Ltd. acquired a controlling interest in Western Mines
Limited.
In 1976, an aggressive exploration program was initiated to offset the
inevitable decline in the Lynx and Myra mineral reserves. In late 1979, this
program was successful in locating the large massive sulphide deposit now known
as the H-W deposit, named after Harold Wright, the first President of Western
Mines Limited.
In 1981, Western Mines Limited merged with Brascan Resources to become Westmin
Resources Ltd. Between 1982 and 1985, a new tailings disposal facility was
installed and commissioned.
Following additional drilling, development and feasibility studies at the new
H-W mine, a 716-metre, six-compartment shaft was completed. This is serviced by
a 49 metre-high headframe. In 1985, after completion of a 1.4 kilometre conveyor
to the new mill, the mill itself and a number of support facilities, initial
production averaged 2,700 tonnes per day. Mill production capacity was later
increased to 3,650 tonnes per day in 1989.
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In 1991, the Battle and Gap deposits were discovered. The Lynx underground mine
closed in 1993. In 1995, the Marshall deposit was discovered. In 1996, mining in
the Battle-Gap zone commenced.
Boliden Limited acquired the MFO through its take-over, in January 1998, of
Westmin Resources Ltd. and subsequently transferred the Myra Falls assets to its
wholly-owned subsidiary, Boliden Westmin (Canada) Limited (BWCL).
In December 1998, Boliden temporarily suspended mining operations at Myra Falls
and successfully implemented an action plan to deal with difficult ground
conditions. The plan included stope and access route rehabilitation and
development as well as maintenance work. Mining operations resumed at Myra Falls
in March 1999.
The operation was shutdown from December 2001 to March 2002 as the organization
was restructured to compete with falling metal prices.
On July 23, 2004, Breakwater Resources Ltd. purchased all the outstanding shares
of the Company from Boliden Limited. Subsequently, Breakwater changed the name
of the Company to NVI Mining Ltd.
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5.0 GEOLOGICAL SETTING
Volcanic hosted massive sulphide ("VHMS") deposits on Vancouver Island,
including those at Myra Falls, are hosted by ancient island arc systems of the
Paleozoic Sicker Group. The Sicker Group is considered part of the allochthonous
Wrangellia terrane, which in turn is part of the Insular Belt of the Canadian
Cordillera.
FIGURE 5-1 - GENERAL GEOLOGY MAP OF VANCOUVER ISLAND
[PICTURE]
(From British Columbia Geological Survey)
The Wrangellia terrane has three major volcano-sedimentary cycles and can be
traced for 2,000 kilometres from the southern tip of Vancouver Island northward
to south-central Alaska. At Myra Falls, the oldest volcanic cycle is the
Devonian to Mississippian aged Sicker Group volcanic rocks, which are
conformably overlain by limestone of the Permian aged Buttle Lake Formation. The
second volcanic cycle is the Vancouver Group; comprised of Triassic aged
Karmutsen Formation tholeiitic volcanic rocks, overlain by limestone of the
Quatsino Formation. The third cycle is the Bonanza Group volcanic rocks.
The Sicker Group is exposed on Vancouver Island in several fault-bounded uplifts
(Fig. 5-1). At Myra Falls, the Sicker Group, in order of decreasing age,
comprises the basement Price Formation andesite, Myra Formation felsic to mafic
volcanic rocks, Thelwood Formation mafic fine-grained volcaniclastic rocks,
Flower Ridge Formation mafic breccias and sills, and Buttle Lake limestone.
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FIGURE 5-2 - SICKER GROUP STRATIGRAPHY
[PICTURE]
(Adapted from Juras, 1987)
The Price Formation (Fig. 5-2) is the stratigraphic basement within the Buttle
Lake uplift and is at least 300 metres thick consisting of feldspar, +/-
pyroxene, porphyritic basaltic andesite flows and flow breccias with lesser
volcaniclastic deposits. Rocks from this unit are moderate to strongly altered
with chlorite + epidote + albitic plagioclase +/- actinolite assemblages.
The Myra Formation is 310 to 440 metres thick and conformably overlies the Price
Formation. The Myra Formation consists of rhyolitic volcanic flows,
volcaniclastic, and intrusive rocks with lesser sedimentary units. The volcanic
rocks are predominantly intermediate in composition, consisting of flows and
flow breccias, and subaqueous volcaniclastic rocks emplaced by sediment gravity
flow processes. Sedimentary units include heterolithic volcaniclastic breccia
and lesser sandstone, siltstone, argillite, and chert.
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FIGURE 5-3 - SCHEMATIC GEOLOGICAL CROSS SECTION AT MYRA FALLS
{PICTURE]
(From Chong, Becherer, Sawyer, Palmer and Bakker, 2003)
The Thelwood Formation conformably, and in places unconformably, overlies the
Myra Formation. The Thelwood Formation is 270 to 500 metres thick and is
characterized by thin-bedded, fine-grained mafic volcaniclastic turbidites,
tuffs, volcaniclastic debris flows, and penecontemporaneous mafic sills.
Turbidite beds are 5 to 30 centimetres thick and grade upward from
coarse-grained crystal-lithic mafic sandstone to pale green, laminated
siltstone-mudstone. Volcanic debris flows are 1 to 10 centimetres thick,
moderately well sorted, crudely stratified, and consist mainly of gravel to
pebble-sized mafic clasts. Mafic sills are 1 to 10 metres thick
The VHMS deposits are hosted by the Myra Formation and are associated with two
rhyolite horizons, the at-depth H-W Horizon and the near-surface Lynx-Myra-Price
("L-M-P") Horizon (Fig. 5-3).
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6.0 DEPOSIT TYPES
The Myra Falls property has 12 known deposit areas. Each deposit area represents
a cluster of individual lenses. Six of the twelve known deposits have pre-mining
tonnages greater than 1.0 million tonnes. The overall average deposit size for
the Myra Falls VHMS district is 3.4 million tonnes with grades of 1.8 percent
copper, 0.4 percent lead, 5.7 percent zinc, 2.0 g/t gold, and 38.2 g/t silver.
Deposits within the mineral resource range from 0.2 million tonnes for the
relatively undefined copper-rich Trumpeter Zone to 22.1 million tonnes for the
pyrite-rich polymetallic H-W deposit.
FIGURE 6-1 - LOCATION OF VHMS DEPOSITS AT MYRA FALLS OPERATIONS
[PICTURE]
[PICTURE]
(From Chong, Becherer, Sawyer, Palmer and Bakker, 2003)
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VHMS mineralization associated with the H-W Horizon is typically at or proximal
to the Price Formation andesite contact. VHMS deposits immediately overlying the
Price Formation andesite contact are the 22 million tonne H-W deposit and the
six million tonne Battle deposit. The H-W Horizon also has subordinate but
economically significant mineralization within stacked lenses located 10 to 70
metres above the larger deposits. In mine terminology these stacked lenses are
known as Upper Zone mineralization. In the Battle deposit area, Upper Zone
mineralization is hosted by felsic volcaniclastic rocks proximal to the base of
or within quartz feldspar porphyry flow-dome complexes.
VHMS mineralization in the L-M-P Horizon is located in the upper portion of the
Myra Formation. These deposits were the first to be exploited on the property
due to their surface exposure. The L-M-P mineral lenses are high-grade
polymetallic VHMS deposits having spatial associations to rhyolite rocks in the
stratigraphic footwall and a mafic sill located in the immediate hangingwall.
The near surface L-M-P Horizon has a 7.2 million tonne pre-mining mineral
resource with an average deposit size of 2.4 million tonnes. There are an
estimated 120 individual lenses within the Lynx deposit along a 2,750 metre
strike length. The mineralization occurs as a folded and faulted array of lenses
varying in size from 10,000 to 150,000 tonnes. Lens dimensions range from 3 to 6
metres thick, 30-60 metre dip length and 90 to 120 metre strike length.
The deposits in the Upper Rhyolite, the Lynx, Myra and Price zones are roughly
aligned along a parallel trend south west of - and at a higher level than - the
main H-W - Battle-Gap trend.
The at-depth H-W Horizon has a current pre-mining mineral resource of 33.7
million tonnes with an average deposit size of 3.7 million tonnes. Deposits
within the H-W Horizon are primarily classified as zinc-copper type and include
the H-W deposit and its adjacent lenses. The Battle and Gap deposits also fall
within the zinc-copper group in spite of their high lead and zinc values
relative to other deposits on the property.
Also, the H-W Horizon is the zinc-lead-copper deposit type exemplified by the
Ridge Zone West, Ridge Zone East, and Marshall Zones. These deposits are located
approximately one kilometre west of the current infrastructure. They may
represent distal mineralization peripheral to the main hydrothermal system.
Wide-spaced exploration style diamond drilling has been carried out on these
deposits. Other zinc-copper deposit types west of the Battle deposit area may
remain to be discovered.
There are a number of smaller sulphide lenses between and beyond the main
deposits. These include the Extension and the 43 Block, which represent part of
the current mineral reserve, as well as more outlying bodies such as the
Trumpeter, Marshall and Ridge Zones which already contribute to the mineral
resource. The last three may contribute more with further exploration.
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7.0 MINERALIZATION
Sulphide mineralogy at Myra Falls is typical of most VHMS deposits. The common
sulphide minerals present in order of decreasing abundance are pyrite,
sphalerite, chalcopyrite, and galena. Less common sulphides are pyrrhotite,
arsenopyrite (Walker, 1985) and the copper-rich sulphides bornite, renierite,
and anilite (Robinson, 1992; Sinclair, 2000).
Common sulfate and sulphosalt minerals present are barite and tennantite,
respectively. A late stage silver-gold rich mineral assemblage includes
stromeyerite and electrum (Sinclair, 2000). Table 7-1 lists the deposit minerals
present at Myra Falls, their general chemical formulas, and some of the more
significant elemental associations.
TABLE 7-1 - MYRA FALLS DEPOSIT MINERALOGY
[PICTURE]
Three main mineral assemblages have been identified. These are a
copper-lead-zinc-iron rich mineral assemblage, a copper-rich mineral assemblage,
and a late stage silver-gold rich
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assemblage for the Battle deposit. Since the Battle deposit has a similar but
enhanced sulphide mineralogy relative to other deposits at Myra Falls, the
assemblages outlined by Sinclair (2000) will be used to discuss the deposit
mineralogy.
7.1 COPPER-LEAD-ZINC-IRON RICH MINERAL ASSEMBLAGE
Common minerals for the copper-lead-zinc-iron assemblage are pyrite, sphalerite,
galena, chalcopyrite, and tennantite.
Pyrite has a wide range of textures including microscopic framboids, ring
structures, fine-grained disseminated euhedra, fine-grained spongy pyrite, and
annealed coarse-grained porphyroblasts (Robinson, 1992; Sinclair, 2000). The
framboids, ring structures, and fine-grained spongy pyrite are interpreted as
primitive textures formed during VHMS mineral deposition (Sinclair, 2000).
Coarse-grained porphyroblasts and cataclastic textures are interpreted to be the
result of metamorphism and deformation. Pyrite has gold and arsenic associations
identified by ion microprobe (Wilson, 1993) with gold values between 25-1000
ppb.
In the Battle-Gap deposit and Upper Zone areas much of the sphalerite is a
low-iron variety averaging approximately 0.6 wt. percent (Robinson, 1992; and
Sinclair, 2000) and is commonly referred to as "honey" sphalerite. In the H-W
and Lynx deposits the sphalerite is darker gray in colour due to a relatively
higher iron content. In thin section, sphalerite crystals exhibit textures
resulting from metamorphism. These textures include coarsening of individual
crystals, 120 degree triple points between sphalerite crystals, and the
migration of chalcopyrite to triple point junctions and grain boundaries
(Sinclair, 2000).
Galena at Myra Falls occurs as recrystallized anhedral masses and grains
interlocked with tennantite and barite. Chalcopyrite is generally remobilized.
The sulphosalt present is the arsenic-rich end member tennantite.
7.2 COPPER-RICH SULPHIDES:
Bornite is common within the Gap deposit, Upper Zone mineralization, the Bornite
lens and the NE portion of the H-W Main lens. Renierite, also known as orange
bornite, occurs as rounded grains in bornite, or in sphalerite where bornite is
abundant. Anilite is a "blue" copper rich sulphide that is part of the
chalcocite group (Robinson, 1992; Sinclair, 2000).
Trace minerals are rutile, tellurides and colusite. The tellurides of altaite,
hessite, and pilsenite commonly occur as microscopic inclusions in tennantite
and galena. Colusite occurs exclusively in the Gap and Upper Zone deposits as
rounded blebs in sphalerite, pyrite, and bornite (Sinclair, 2000).
7.3 GOLD-SILVER ASSEMBLAGE:
Gold within the Gap and Upper Zone mineralization above the Battle deposit
occurs as submicroscopic inclusions at grain boundaries and scattered grains of
gold or electrum (Sinclair, 2000). In 2000, a mine geology staff member observed
a one metre thick gold enriched barite bed with stromeyerite-tennantite-electrum
(+/-manganese) veining located in the immediate hangingwall to the polymetallic
zinc-lead-copper-barium enriched portion of the H-W deposit. This baritic bed
sample had an outstanding total metallic precious metal assay of 5,000 grams of
gold per tonne and 5,379 grams of silver per tonne.
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8.0 EXPLORATION
The first documented exploration and mineral prospecting in central Vancouver
Island began in 1865 with the John Buttle expedition. The expedition ventured
from the west coast fishing village of Tofino, up Bedwell Sound and the Bedwell
River valley into what is now the southern margin of Strathcona Park. This was
the first recorded sighting of what is now Buttle Lake.
In 1910, the Price Ellison Expedition ventured into the Buttle Lake area.
Ellison's recommendation to the provincial legislature led to the Strathcona
Park Act in 1911, protecting the first and oldest provincial park in British
Columbia. Mineral prospecting and staking was opened up shortly afterwards and
the first claims were staked in 1918. The outcome was the discovery of the
surface expressions for the Lynx, Myra, and Price deposits in Myra and Thelwood
valleys. Sporadic exploration continued until 1961.
In 1961, Western Mines Limited acquired the property from the Reynolds
Syndicate. Exploration and mineral definition drilling focused on the Lynx
showings in Myra valley outlining an initial mining reserve of 1.9 million
tonnes. Mining started in the Lynx open pit in 1966 and was quickly followed by
underground mining.
Since the opening of the Lynx mine, there have been four subsequent phases of
exploration, development and mining ("E-D-M") from four past and current
producing mines. Each cycle has taken about a decade to run its course, with
some minor overlap (Table 8-1). Initiation of each cycle commenced with the need
to discover new resources, as existing resources were being depleted.
TABLE 8-1 - EXPLORATION - MINING - DEVELOPMENT CYCLES
[PICTURE]
(From Chong, Becherer, Sawyer, Palmer and Bakker, 2003)
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8.1 THE 1960'S
Exploration during the 1960's emphasized the near surface Lynx showings (Fig.
6-1). Development and mining began on the Lynx open pit in 1966 at a rate of 600
to 900 tonnes per day. Underground mining followed shortly thereafter, with an
original mineral reserve estimate of 1.9 million tonnes. Boat access to the
property was upgraded with the building of a road along the east shoreline of
Buttle Lake. The road connected the mine site to the town of Campbell River.
Surface infrastructure facilities were constructed with much of the raw material
being logged, milled, or excavated on site.
8.2 THE 1970'S
Durng the 1970's, exploration, development, and mining continued on the near
surface L-M-P Horizon showings and deposits. The Lynx mine continued to operate
and production began at the Myra mine during 1972 at a rate of 200 to 400 tonnes
per day. Total production from the Myra mine was 1.0 million tonnes at 3 grams
of gold per tonne, 160 grams of silver per tonne, 1.0 percent copper, 1.5
percent lead, and 9.5 percent zinc.
In 1976, recognizing a decline in the mineral inventory, an aggressive
exploration program was launched. The exploration program utilized recent
developments in the understanding of VHMS deposits from the Canadian Shield.
One key development was the understanding that deposits are hosted in relatively
thick, multi-cyclic volcanic piles, and sulphide mineralization is found in the
second or higher cycle, at or near the base of the host cycle. The base of the
host Myra Formation for the L-M-P deposits was not defined at the time.
Following assessment of the property for its volcanic stratigraphy, structural
deformation, style of mineralization and hydrothermal alteration, a decision to
drill the north limb of the Myra anticline below the L-M-P Horizon was made.
This decision was rewarded by discovery of the large tonnage H-W deposit, 400
metres below the Myra valley floor in December, 1979.
8.3 THE 1980'S
H-W deposit delineation, development, and production was the focus for the
1980's, concurrent with exploration of both the L-M-P Horizon and the newly
discovered H-W Horizon. Accelerated diamond drilling on the H-W deposit resulted
in a positive production decision and the H-W mine was commissioned in 1985.
Continued exploration lead to the discovery of along-strike equivalents of both
mineralized horizons. Discoveries were made on the West G and S Zones of the
L-M-P Horizon. On the new H-W Horizon, discoveries were made immediately
northeast of the H-W deposit on the 42 and 43 Block lenses.
Approximately three kilometres west of the H-W deposit, crosscuts spaced 150
metres apart were driven north of the existing Lynx mine workings during 1988.
These crosscuts provided diamond drill platforms to explore the newly
interpreted H-W Horizon trend. As a result of exploration diamond drilling in
1989 and 1990, over fifty mineralized intersections were cored on what is now
known as the Ridge Zone West and Ridge Zone East areas. These intersections
range from 0.2 to 22.5 metres in thickness. A preliminary mineral resource
estimate of 668,000 tonnes was outlined in both the Ridge East and Ridge West
Zones.
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8.4 THE 1990'S
Following confirmation of strike length continuity of the H-W Horizon westward
for at least three kilometres and availability of new diamond drill platforms,
an exploration program was launched to target the H-W Horizon between the Ridge
Zones and the main H-W deposit (Fig. 6-1). In 1991, this program intersected
33.1 metres of massive sulphide mineralization in the Gap lens.
Subsequent discoveries of this exploration program were the Battle and the
Extension deposits. Other peripheral discoveries on the H-W horizon during this
time frame included the Trumpeter Zone, located approximately one kilometre east
of the H-W deposit. In 1995, the Marshall Zone was discovered approximately one
kilometre northwest of the Battle deposit lenses.
A positive production decision was subsequently made for the Battle and Gap
deposits with production beginning in 1995. Underground production from the Lynx
mine was terminated in 1992 due to poor economics, however, limited access is
still available for ventilation and exploration purposes.
8.5 2000 TO PRESENT
Recent exploration efforts have been directed towards upgrading indicated and
inferred mineral resources of the Ridge Zone West and Marshall Zones, located
one kilometre west and northwest of the current infrastructure. The Price
deposit, located to the east in Thelwood valley, has also been revisited.
Diamond drilling for new undiscovered VHMS deposits has yet to be successful
during the current E-D-M cycle. Based on financial constraints, an interim
decision has curtailed development of strategically positioned underground
diamond drill platforms for targets on the western and northern portions of the
property. Development of diamond drill platforms is essential as the western
half of the property lies under the 1,520 metre high Phillips Ridge.
Definition diamond drilling is currently delineating the Extension Zone and 43
Block. The Extension Zone is located between the H-W and Battle Zone deposits
and extends over a one kilometre strike length. The 43 Block definition diamond
drilling is nearing completion; mining of initial stoping blocks on this
structurally deformed lens commenced in 2001. Near surface mineral resources of
the high-grade Lynx deposit S-Zone of the L-M-P Horizon have also been outlined.
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9.0 DRILLING
Diamond drilling has generally been done in-house with the exception of surface
drilling. The MFO employs a total of seven underground diamond drills with the
bulk of the core currently drilled at AQTK size with lesser amounts of core up
to and including HQ.
The MFO underground drill fleet includes the following:
o 3 Gopher 30 HP electric hydraulic drills - rated to 300 ft AQTK
o 1 Gopher air powered drill - rated to 200 ft AQTK
o 1 Advanced 2000 125 HP electric hydraulic drill - rated to 3000 ft
NQ2
o 1 Boyles Computerized B20 125 HP electric hydraulic - rated to 3000
ft NQ2
o 1 Hydracore 2000 75 HP electric hydraulic - rated to 1500 ft BQTK
Due to the location of the mine on the floor of a steep-sided valley, the
logistics of drilling from surface have always been difficult. Thus, drilling
from underground has been a necessary and expensive part of exploration. As a
result, the level of exploration effort has tended to vary over the years with
intensive campaigns coinciding with periods when investment requirements
elsewhere in the company were low. Peaks of exploration activity occurred in
1969-70, 1980-82 and 1990-92 and resulted in the discovery of the Myra, H-W and
Battle deposits (Section 8.0).
TABLE 9-1 - ANNUAL DIAMOND DRILL FOOTAGE BY TYPE AND LOCATION
- ---------------------------------------------------------------------------------------
Type Location 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------
Definition Drilling Battle-Gap 8,870 5,172 19,074 23,294 18,779
Extension 11,115 3,778 - - -
H-W 10,473 11,116 18,051 13,174 11,819
Surface Pit - - 169 377 -
Subtotal (metres) 30,458 20,066 37,294 36,845 30,598
Exploration Drilling H-W 999 - - 354 2,452
Price 432 - 6,446 2,078 -
Lynx - - 6,846 12,747 12,603
Surface - - - 2,006 933
Subtotal (metres) 1,431 - 13,292 17,185 15,988
Total (metres) 31,889 20,066 50,586 54,030 46,586
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Exploration drilling from the Lynx mine in 1999, 2000 and 2001 was carried out
to assess the Ridge Zone West and Marshall Zones (Section 8.5).
Surveying of diamond drill holes varies depending on the type of drilling. All
exploration holes are surveyed both at the collar and at depths down the hole.
Definition drill holes usually only have the collar location surveyed. Accushot,
Sperri-Sun and Tropari (Pajari) are all used to survey holes.
Core recovery at Myra Falls is usually very good and generally exceeds 95
percent.
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All of the drill hole information is entered in Minesight/Compass (referred to
as Medsystem in previous years) modeling software. Separate drill hole databases
are kept for the H-W mine and the Battle-Gap mine. The mine grid is rotated 48
degrees clockwise from true north. Drill sections are spaced fifteen metres
apart. Fan diamond drilling on the sections from near-in development levels
defines the shape and grade of the deposits. Delineation drilling information is
combined with the available surface or underground exploration drilling
information to form the master drill hole database for each model.
The assay intervals are typically one metre long in mineralized rock. The assay
database includes assays for gold, silver, copper, lead, zinc, iron, and barite.
Generalised geologic intervals are abstracted from the drill logs and added to
the database so that rock codes can be plotted in cross section along the drill
hole trace.
Values for density and net smelter return ("NSR") are calculated for each assay
interval. The density formula is based on a theoretical back-calculation from
assay values of the percents of sphalerite, chalcopyrite, galena, pyrite and
barite in the sample and assumes that unmineralized rock has a density of 2.70
tonnes per cubic metre. The formula for rock density is: Density =
795047.4/(294,460-1463.8*Zn-476.1*Cu-2913*Fe-2207.6*Pb-2003.2*Ba) tonnes per
cubic metre.
The cut-off grade for mining is based on the NSR value of the material. NSR
values are calculated for each interval based on the individual assays, the
recoveries of the elements into their respective concentrates, minesite
operating costs, ocean freight and transportation costs and smelter treatment
and refining costs. Because of its importance, NSR is used to help delineate the
mineralized lenses on the assay cross sections.
Mineralization is divided into various types, based on the metal zonation and
location. These mineralized types are drawn in section and assigned a "lens
code". The boundaries for the various mineralized types are developed for every
15 metres and are later interpolated onto intermediate cross sections every five
metres. The H-W model consists of 310 cross sections at a spacing of five metres
and the Battle-Gap model consists of 206 cross sections at the same spacing.
Mineralization boundaries are drawn on computer screen and categorized by the
lens code. In the H-W mine, the lens codes tend to reflect the mineralization
type such as stringer zone, massive copper-pyrite core, high zinc, high-grade
polymetallic mineralization, and so on. In the Battle-Gap mine, lens codes have
been assigned to the geographically distinct lenses although these lenses are
also mineralogically distinct from one another.
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10.0 SAMPLING METHOD AND APPROACH
All exploration work is conducted under the direct supervision of a qualified
person at the site.
10.1 CORE HANDLING
The diamond driller places the drill core in labeled boxes showing the drill
hole number and with marking blocks showing depth down the hole. The core boxes
are sealed (taped) at the drill site and delivered to the geology core logging
areas for geologic logging and sampling.
10.2 CORE LOGGING
The geologist responsible or his designate prepares the drill core for logging.
This includes core box opening and stacking of used boxes and lids for re-use.
The drill hole is logged on computer using the MFO rock descriptions in the
appropriate format. Sections selected for assay or analysis are split, sawn or
pieced out as appropriate.
10.3 SAMPLING METHODOLOGY
Samples are collected under the supervision of a qualified person. Sampling
methodology is dependent on type of drilling (exploration, definition or
in-stope) and the homogeneity of material. In any case, maximum sample interval
will be 1.5 metres or less if justified by visible significant variation in
grade or mineralogy. Where samples are split or sawn, they are done so in an
unbiased manner. Whole core is assayed in most definition and in-stope
applications. Surface exploration core is split with one half of the core
retained.
Where alternate pieces of core are to be assayed, the individual pieces do not
exceed 15 centimetres in length. If they are specifically required, procedures
such as geotechnical logging and core photography are incorporated prior to core
sampling.
The samples along with sample tag are placed in a plastic bag and then
transported in crates to the assay laboratory located on the mine site.
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11.0 SAMPLE PREPARATION, ANALYSES AND SECURITY
All sample preparation is carried out on-site in the Company's assay laboratory
by the Company's own employees. Sample preparation is accomplished by drying,
jaw crushing, cone crushing, riffle splitting to 200-400 grams, ring pulverizing
and homogenizing. Samples that are greater than 97 percent passing 100 micron
mesh are then analyzed.
Samples are analyzed individually for percent copper, lead, zinc, iron and
cadmium. Samples (0.1 grams) are digested with a hydrochloric/nitric acid
combination and read on the Atomic Absorption Spectrophotometer (AA) using
certified Canmet pulp standards Mp-1a, CCu-1c, CZn-3.
High-grade zinc (greater than 38 percent) samples (0.25-0.5 grams) are titrated
with potassium ferrocyanide using CZn-3 as a pulp standard and an in-house pulp
as a control sample.
Gold and silver samples (15 grams) are analyzed by fire assaying using 1/2 assay
ton weights and the resulting gold/silver beads are weighed with a micro
balance.
The assay laboratory quality control program consists of quarterly and blind
spot check sample assay comparisons with external certified laboratories.
Certified standards, control samples and special laboratory techniques are also
used to maintain the quality control program.
All assayers perform quarterly assays on copper and zinc composite samples. The
results are tabulated and compared to outside laboratory assays. An average of
the differences for each assayer and the laboratory as a whole, are calculated
and used to track accuracy and precision. The standard deviation for the assay
laboratory is calculated for each method.
Once a month, a blind spot check sample is sent to the assay laboratory and is
processed by the buckerman. Five sub-samples (200-300 grams each) are generated
and four of these are distributed within the routine samples of the laboratory.
One sample is sent to Chemex Labs for analysis. The geology department tabulates
an internal and external comparison of the results.
The majority of the current underground diamond drilling is for definition
purposes to aid mine planning. There is not a sample security program in effect
for these samples, nor is one required.
When surface exploration drilling is carried out, a diligent security program is
in effect in which the sample is taken directly from the core logging facility
and delivered to the assay laboratory under the supervision of a qualified
person. As well, additional sample security consists of ensuring the bucking
room and assay laboratory are locked when authorized employees are not working.
The sampling, sample preparation, security and analytical procedures are
appropriate and acceptable for this operation.
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12.0 DATA VERIFICATION
The Myra Falls operation has a program of data verification in place. Individual
assays are received electronically from the assay laboratory with a paper copy
follow-up. The assays are electronically transferred into a sample file which is
merged with the core logging and subsequently entered into Compass. Assay
results are manually checked against the drill log. Assays are also checked in
Compass to determine anomalous outlyers.
The author has not personally verified the data.
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13.0 ADJACENT PROPERTIES
The MFO is located in Strathcona-Westmin Provincial Park. The park is a class
"B" provincial park that covers all of the Company's land holdings and is
surrounded by the class "A" Strathcona Provincial Park. The Myra Falls mine
operates under the Strathcona-Westmin Master Plan. This is the only provincial
park in British Columbia in which mining is permitted.
As such, there are no adjacent properties.
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14.0 MINERAL PROCESSING AND METALLURGICAL TESTING
The Myra Falls concentrator has a rated capacity of 1.4 million tonnes per year
and produces zinc and copper/precious metals concentrates. The original Myra
Falls concentrator was constructed in 1966 and was later replaced in 1985 by the
current concentrator that has been progressively modernized since that time. In
1990, the zinc and copper flotation circuits were streamlined by adding column
cells and reducing the re-circulation load which resulted in improved zinc
recovery. In 1992, a Knelson gravity concentrator was added to each grinding
circuit to improve gold recovery.
At surface, the muck is transported from the H-W mine headframe to the mill by a
1.4 kilometre long conveyor belt. This conveyor belt discharges into a 3,600
tonne coarse ore bin at the concentrator. Secondary and tertiary cone crushing
and screening reduces the mill feed to less than 16 milimetre by 28 milimetre
size. Two 3,500 tonne fine ore bins receive this crushed material.
The concentrator has two parallel grinding and rougher flotation circuits, each
capable of treating 2,000 tonnes per day. Rod mill discharge is pumped to a pair
of Krebs D20LB cyclones. Cyclone underflow is ball mill feed and is 80 percent
to 85 percent solids. Product from the grinding circuit is 75 percent to 80
percent passing through 200 micron mesh. Cyclone underflow is then passed
through a Knelson gold concentrator that recovers coarse free gold. Gold and
silver recoveries are about 53 percent and 74 percent, respectively.
The resultant mill slurry is then processed by two copper rougher flotation
circuits producing a copper final concentrate which reports to the 9.8 metre
diameter copper concentrate thickener. Copper rougher scavenger tails and copper
cleaner scavenger tails are conditioned and then split into two zinc rougher
circuits.
Zinc rougher concentrate from both of the circuits is combined and pumped to the
zinc regrind pump box where copper sulfate and collector blend are added to
reactivate zinc and lime is added to adjust pH, aiding iron depression. The zinc
final column concentrate reports to the 9.8 metre diameter zinc concentrate
thickener, whereas the column tail reports to the zinc regrind circuit.
Zinc and copper recoveries during 2003 ran at 85 percent and 77 percent
respectively. Zinc and copper concentrates are then pressure filtered to remove
water.
Concentrate is transported from the property in 38-tonne truck/trailer units 90
kilometres to Discovery Terminal, a deep-sea docking facility located in
Campbell River where the concentrate is loaded onto barge or ship.
Mill flotation tailings slurry is pumped from the mill to a cyclone plant where
the fine particles in the tailings are separated from the total tailings mass.
The cyclone underflow (coarse, sand fraction) is pumped to the underground
hydraulic backfill plant near the mine shaft/main office complex for subsequent
distribution in mined-out areas underground.
The cyclone overflow (fines) slurry is pumped to a high-capacity thickener that
recovers the solids in the underflow at 55 percent solids. The thickener
overflow (clear effluent) is recycled to the milling process.
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FIGURE 14-1 - MYRA FALLS CONCENTRATOR FLOWSHEET
[PICTURE]
From Boliden Westmin (Canada) Limited
The thickener underflow slurry (55 percent solids) is pumped to a bank of vacuum
disc filters where the slurry density is increased to 85 percent solids. The
filtered product and thickener underflow slurry are combined at a ratio of 60:40
and mixed in a paddle mixer. The mixture then discharges from the paddle mixer
into a positive-displacement pump. The paste tailings are pumped to a deposition
site along the northern perimeter of the tailings pond. The paste tailings plant
was commissioned during the summer of 2003.
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14.1 TAILINGS DISPOSAL
The surface tailings disposal facility ("TDF") is a surface tailings impoundment
created by upstream raises of fill. The tailings dam is approximately 1,400
metres long and 28 metres high. Drainage from the 43 hectare facility reports to
a water treatment plant and a series of settling ponds before being released to
Myra Creek. The TDF receives 50 percent of the whole tailings stream, with the
other 50 percent reporting underground as cemented hydraulic fill (via the
backfill plant).
In 1987, a geotechnical audit of the TDF by independent experts, indicated that
the facility did not satisfy the recommended operating design standard (a
one-in-475-year earthquake event) for seismic stability. Boliden examined
several alternatives for strengthening the facility and selected a proposal that
will enable it to exceed the recommended operating design standard and meet the
recommended closure standard of a one-in-1,000-year earthquake event. At the end
of the second quarter of 1999, Boliden received permission from the British
Columbia government authorities to implement its proposal and began construction
work on the "TDF Upgrade Project".
The originally approved schedule called for completion of all components by
2004. In 2003 however, following the construction and commissioning of the paste
tailings plant, a construction extension was requested from, and approved by,
the provincial authorities. The current schedule calls for the completion of the
upgrade in 2007.
As of January 1, 2004, an estimated 575,000 cubic metres of storage space is
available in the TDF, equating to approximately 22 months (November 2005)
capacity. While the TDF storage space is being consumed, the Lynx Pit tailings
area will be constructed and will have sufficient storage capacity to
accommodate tailings for an additional 11 years (until 2017).
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15.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES
The mineral resource and reserve estimates were prepared by the following
employee of the Company under the supervision of Torben Jensen, Vice President,
Engineering of Breakwater:
F. Bakker, P. Geo, Project Geologist
The mineral resource and mineral reserve estimates have been classified in
accordance with the CIM Standards on Mineral Resources and Reserves Definitions
and Guidelines adopted by the CIM Council on August 20, 2000, that classifies
the mineral resources into measured, indicated and inferred categories and
mineral reserves into proven and probable categories.
Reported mineral reserve and resource estimates are as follows:
TABLE 15-1 - REPORTED MINERAL RESERVES AND RESOURCES
- ------------------------------------------------------------------------------------------------------------------
31 DECEMBER, 2003 31 DECEMBER, 2002
TONNES ZN CU AU AG TONNES ZN CU AU AG
(000S) (%) (%) g/t g/t (000S) (%) (%) g/t g/t
- ------------------------------------------------------------------------------------------------------------------
Proven and Probable Reserves 7,747 6.3 1.2 1.2 40 8,347 6.7 1.2 1.2 40
Measured and Indicated Resources* 10,388 7.8 1.4 1.7 56 11,041 8.1 1.4 1.6 56
Inferred Resources 2,284 4.9 1.1 1.4 57 2,478 4.9 1.1 1.4 54
- ------------------------------------------------------------------------------------------------------------------
*Measured and Indicated Resources include Proven and Probable Reserves.
The mineral reserve and resource estimates are developed using the
Minesight/Compass (referred to as Medsystem in previous years) modelling
software. Separate block models are maintained for the H-W mine and the
Battle-Gap mine. The drill hole databases, from which these models were built,
are constantly being updated, and intermediate resources are calculated
periodically. The mineral reserves and resources are estimated as at year end
and published once per year unless there is a material change in such mineral
reserve or resource necessitating additional public disclosure.
The H-W and Battle-Gap block models are oriented along the mine grid and have a
block size of five metres north by five metres east by four metres vertically.
The grade estimation of blocks is accomplished by an
inverse-distance-to-the-third power algorithm. The grade of a given block is
estimated using only composites with the same lens code as the block's lens
code. The maximum number of composites used to estimate a block is ten, the
minimum is two and the maximum number from any one drill hole is three. The
search ellipse, whose major and intermediate axes are oriented horizontally, is
50 metres along strike (x direction), 25 metres along the dip plane (y
direction), and 15 metres vertically (z direction). Block partials for
mineralized lenses, mine openings, and material removed from the mining reserve
for technical reasons are determined from cross section boundaries.
The block model mineral resources are classified into measured, indicated and
inferred categories based on the distance of a block from its nearest composite:
o Measured = Highest degree of confidence (0-20 percent error in
contained metal) - a maximum of 15 metres from a given diamond
drill hole.
o Indicated = Lower degree of confidence (20-70 percent error in
contained metal) - a
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maximum of 30 metres from a given diamond drill hole.
o Inferred = Low confidence (70-100 percent error in contained
metal) - maximum of 50 metres from a given diamond drill hole.
The mineral resources are listed in Table 15-2 below:
TABLE 15-2 - MINERAL RESOURCES
As of December 31, 2003 (including Mineral Reserves)
-----------------------------------------------------------------------------------------------------------
Area Status Tonnes Zinc Copper Lead Gold Silver
(000 t) (%) (%) (%) (g/t) (g/t)
-----------------------------------------------------------------------------------------------------------
43 Block Measured 633 5.4 1.6 0.4 1.9 37.4
Battle 3,000 11.6 1.4 0.9 1.0 51.8
Extension 261 5.4 1.7 0.4 1.2 28.9
Gap 515 14.1 2.0 1.0 2.4 129.2
H-W-Mine 1,727 5.7 1.6 0.5 2.1 49.5
Sub-Total 6,136 9.2 1.6 0.7 1.6 55.2
43 Block Indicated 150 2.6 0.8 0.3 0.8 18.7
6-Level 114 6.9 0.4 1.2 1.6 122.9
Battle 372 7.4 0.9 0.7 0.9 56.0
Extension 349 4.6 1.5 0.4 0.9 54.4
Gap 41 12.5 1.3 1.5 1.5 94.9
H-W 1,581 2.7 1.3 0.3 1.8 26.4
Lynx 241 11.5 2.0 1.2 3.3 105.0
Marshall 589 5.8 0.6 0.8 2.0 98.8
Price 399 9.4 1.4 1.3 2.3 74.9
Ridge-West 416 8.4 1.1 0.9 2.3 76.5
Sub-Total 4,252 5.6 1.1 0.6 1.8 58.2
-----------------------------------------------------------------------------------------------------------
Total Mineral Resources* 10,388 7.8 1.4 0.7 1.7 56.4
Inferred Mineral Resources 2,284 4.9 1.1 0.6 1.4 57.4
-----------------------------------------------------------------------------------------------------------
* Measured and Indicated Resources include Proven and Probable Reserves.
Mineral reserves, as reported in Table 15-3 below, comprise mineralized areas
which:
(a) have been drilled and/or otherwise sampled to the knowledge
level of measured or indicated resources;
(b) are considered accessible and extractable from currently-active
mine workings and are included in the current mining plan; and
(c) have an NSR value equal to or exceeding a predetermined cut-off
value.
A separate extraction factor and dilution rate is applied to each mining area to
calculate mineral reserve tonnages and grades. The result is regarded as a
mineable mineral reserve with proven and probable status.
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TABLE 15-3 - MINERAL RESERVES
As of December 31, 2003
- -------------------------------------------------------------------------------------------------------------------------
Area Status Extraction Dilution Diluted NSR Zinc Copper Lead Gold Silver
Factor Tonnes (%) (%) (%) (g/t) (g/t)
(000 t)
- -------------------------------------------------------------------------------------------------------------------------
43 Block Proven 72% 28% 583 $55 4.2 1.2 0.3 1.5 29.2
Battle 69% 33% 2,764 $79 8.8 1.1 0.6 0.8 38.3
Extension 72% 31% 247 $51 4.1 1.3 0.3 0.9 22.1
Gap 71% 30% 477 $110 10.8 1.6 0.8 1.8 99.4
H-W-Mine 71% 25% 1,529 $61 4.7 1.3 0.5 1.7 40.5
Sub-Total Proven 70% 30% 5,600 $73 7.2 1.2 0.6 1.2 42.5
43 Block Probable 53% 33% 106 $23 1.9 0.5 0.2 0.5 12.7
6 Level - - - - - - - - -
Battle 60% 31% 291 $52 5.4 0.7 0.6 0.7 46.9
Extension 72% 31% 330 $46 3.6 1.1 0.3 0.7 41.6
Gap 15% 30% 8 $89 8.1 1.6 0.4 0.7 133.2
H-W-Mine 43% 22% 832 $35 1.9 1.0 0.1 1.4 13.3
Lynx 5% 115% 28 $68 6.2 1.3 0.6 1.0 53.8
Marshall - - - - - - - - -
Price 61% 30% 318 $76 7.5 1.1 1.0 1.5 44.8
Ridge-West 43% 31% 234 $78 7.6 0.9 0.8 2.0 65.3
Sub-Total Probable 52% 29% 2,147 $50 4.1 1.0 0.4 1.2 33.5
- -------------------------------------------------------------------------------------------------------------------------
Total Proven & Probable 65% 29% 7,747 $67 6.3 1.2 0.5 1.2 40.0
- -------------------------------------------------------------------------------------------------------------------------
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16.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES
AND PRODUCTION PROPERTIES
16.1 MINING OPERATIONS
Myra Falls currently operates two underground mines: the H-W mine which
commenced production in 1985 and the Battle-Gap mine that commenced significant
production in 1997. The H-W mine is accessed by a 716 metre deep,
six-compartment vertical shaft serviced by a 49 metre high headframe. The shaft
is linked to the production areas by 14 kilometres of ramps and lateral
development. The Battle-Gap mine is linked to the H-W shaft by a 1.8 kilometre
long drift on the 18 level (Fig. 6-1). All men and materials are transported to
and from both mines via the H-W shaft.
Mining in the H-W mine is now mainly restricted to the recovery of pillars. Most
primary stopes have been mined out and backfilled with cement-stabilised
hydraulic backfill material. A recent mine planning reassessment has identified
future production opportunities in the H-W mine. The main production method in
the H-W mine is sub-level stoping with longhole drilling.
Mining in the Battle-Gap zone applies sub-level stoping and drift-and-fill
mining techniques according to the ground conditions. Opened in 1997, this mine
is still focused on primary production. Hydraulic backfilling is applied here as
well. Up to 55 percent of tailings generated by the mill is returned underground
as fill material in H-W and Battle-Gap zones.
Loaded by rubber-tired diesel scoop-trams and hauled to ore passes, the blasted
material falls by gravity to the Main Haulage Level (24-level). Mineralized
material is transported by electric locomotives to the primary jaw crusher
located underground on the 25-level in the H-W mine. Trains are loaded and sent
to the crusher according to specific tramming schedules designed to even out
grade variations. Mineralized material is crushed to less than 150 millimetres
(6 inches) in a 1.2 metre by 1.1 metre (48 inch by 42 inch) jaw crusher and
hoisted to the surface in two counterbalanced 11.5-tonne-capacity skips to a
100-tonne storage bin in the headframe. From there the mineralized material is
transported by a 1,400 metre long conveyor to a 3,600 tonne coarse ore storage
bin at the concentrator.
Ground control is achieved by means of rockbolts, screening, shotcreting and
tight filling of voids. In the Battle-Gap zone, high rock pressures arising from
the mine's location under Mount Phillips, demands vigilance.
The operation currently employs 358 employees. All of the hourly employees are
represented by the Canadian Auto Workers Union - Local 3019. The collective
agreement was a seven-year contract expiring on June 30, 2004. The Company is
currently in negotiations with the union, regarding the terms of a new
collective agreement. The mill operates 24 hours per day, year round. The mine
operates on two 10 hour shifts per day. Haulage is run on a continuous basis
while other mining activities operate five days per week.
16.2 RECOVERABILITY
The Myra Falls mill has been producing zinc and copper/precious metals
concentrates for several years. Table 16-1 indicates the recoverability of the
various metals.
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TABLE 16-1 - HISTORICAL PRODUCTION DATA: 1995-2003
- ------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003
- ------------------------------------------------------------------------------------------------------------------
Milled Tonnes 000 t 1,197 1,268 1,257 1,047 740 1,167 979 774 1,036
Head Grades
Zinc % 2.7 3.9 5.4 5.6 5.7 5.0 6.5 7.3 6.5
Copper % 2.0 1.6 1.5 1.7 1.6 1.7 1.6 1.2 1.4
Gold g/t 1.9 1.7 1.6 1.6 1.6 1.6 1.5 1.5 1.5
Silver g/t 22.5 21.9 21.3 22.9 19.8 26.7 25.1 46.6 44.1
Mill Recoveries
Zinc % 82.7 88.3 91.0 88.8 90.1 88.8 90.8 89.2 85.3
Copper % 89.5 87.6 86.7 87.3 86.5 87.0 85.4 71.5 76.7
Gold % 32.6 39.5 39.1 39.4 36.7 39.4 44.1 53.7 53.5
Silver % 63.1 64.3 64.8 65.1 63.9 69.7 71.1 77.1 74.1
Concentrate
Zinc 000 t 53.2 87.1 113.9 95.5 69.2 94.8 105.5 93.1 108.0
Copper 000 t 84.7 67.9 63.7 60.2 40.0 66.9 49.6 27.6 42.9
Contained Metal
Zinc 000 t 26.8 44.0 61.3 51.8 37.9 52.2 57.9 50.4 57.4
Copper 000 t 21.8 17.6 16.5 15.5 10.4 17.5 13.2 6.8 10.7
Gold 000 oz 28.3 27.8 24.6 21.6 13.6 24.2 20.3 19.9 27.3
Silver 000 oz 442.0 424.9 388.9 356.4 204.7 524.6 387.5 601.0 720.9
- ------------------------------------------------------------------------------------------------------------------
Zinc and copper recoveries during 2003 ran at 85 percent and 77 percent
respectively. Gold and silver recoveries are about 53 percent and 74 percent,
respectively during 2003.
16.3 MARKETS
The Myra Falls zinc, copper and Knelson concentrates are sold mainly to
customers in Asia.
16.4 CONTRACTS
Contracts governing the sale of concentrate to customers are within market
parameters. The zinc, copper and Knelson concentrates are primarily sold to
customers in Asia. Most sales are on renewable contracts with terms ranging from
three to five years. There are currently no hedging or forward sales contracts.
There are currently no long-term arrangements in place covering the
transportation of the concentrates by vessel.
16.5 ENVIRONMENTAL CONSIDERATIONS
The Myra Falls mine is located within the Strathcona-Westmin Provincial Park.
The park was established as a Class B park inside the boundaries of the
Strathcona Provincial Park, which is a larger Class A park and covers a total
area of 231,000 hectares. The Class B park designation was established in 1989
to allow Westmin's mining interests to continue as industrial development cannot
proceed within a Class A provincial park.
Although the Company's mineral claims cover more than 3,600 hectares, the
surface area affected by the Myra Falls mine is less than 170 hectares.
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16.5.1 ENVIRONMENTAL PERMITS AND LICENSES
Mining and milling activities at Myra Falls are conducted pursuant to various
environmental permits, including waste water and air emission permits issued
under the British Columbia Waste Management Act, mining and reclamation permits
issued under the Mines Act and park use permits issued under the Park Act.
Operations at Myra Falls are conducted in substantial compliance with all of
these permits.
All environmental permits and licenses are registered in the name of BWCL
(consistent with other permits associated with Mining, and Health and Safety).
16.5.2 PROVINCIAL PARK USE PERMITS
The MFO holds Park Use Permits issued by the British Columbia Ministry of Parks
for mining and power generation. The permits are valid for a period of 27 years
commencing June 1, 1985, (expiry May 31, 2012) and are renewable.
16.5.3 PROVINCIAL ENVIRONMENTAL PERMITS
The MFO holds three Waste Management Branch Permits issued by the British
Columbia Ministry of Water Land and Air Protection ("MWLAP"). As well, the mine
holds valid water licenses issued by the MWLAP for Tennent Lake power generation
and for water take and diversion.
The site also operates a drinking water distribution system under a permit
issued by the British Columbia Ministry of Health.
16.5.4 RECLAMATION PERMITS
The Myra Falls site currently operates under a Reclamation Permit issued by the
MEM. The permit contains the Ministry's reclamation requirements including
financial security obligations by the Permittee.
16.5.5 RECLAMATION AND CLOSURE PLAN
A revised "Conceptual Closure Plan" for the MFO was filed with the Chief
Inspector of Mines, MEM on December 22, 2003, to meet the requirements under the
British Columbia Mines Act and Reclamation Code. The report details closure
techniques and methods for all site components complete with cost estimates to
implement the plan. The revised reclamation and closure capital costs are
estimated at $10.3 million.
16.5.6 RECLAMATION AND CLOSURE SECURITY
Reclamation Permit M-26 was amended on April 1, 1998, by the Chief Inspector of
Mines in consultation with other provincial ministries, federal departments and
agencies. The permit contains conditions for reclamation and security
requirements. In fulfillment of its obligations Boliden Limited provided
security in the form of irrevocable letters of credit ("LCs") issued by a
chartered bank payable to the British Columbia Minister of Finance. As of
December 31, 2003, the mine has posted a sum of $10.8 million plus $2.6 million
in security in lieu of the deferred TDF Seismic Upgrade Program for 2001 (total
amount of $13.4 million). Pursuant to the terms
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of the agreement with Boliden Limited, Breakwater has agreed to substitute
letters of credit for the Boliden LCs, on or before June 30, 2005.
16.6 TAXES
The MFO is subject to a Net Revenue Tax and a Net Current Proceeds tax under the
British Columbia Ministry of Provincial Revenue, Mineral Tax Act.
The Mineral Tax Act provides for the Crown's financial share of mineral
production in two ways. The primary way is to receive 13 percent of a producer's
profit that is in excess of a normal return on investment over the life of a
mine. This is referred to as Net Revenue Tax. To minimize any disincentive to
investment, the province does not receive this share until the producer's
investment and a reasonable return on it have been recovered.
The second way is to receive 2 percent of operating cash flow from production in
each year. This is referred to as Net Current Proceeds Tax. It is intended to
provide compensation for depletion of the resource when production yields less
than a reasonable profit for the producer. To avoid double taxation, the Mineral
Tax Act provides that the Net Current Proceeds Tax can be deducted from Net
Revenue Tax.
Net Current Proceeds tax provides for a "minimum" tax requiring any mine that is
recovering more than its current operating costs will pay some tax at the low
rate. However, if a mine is not recovering its operating costs, Net Current
Proceeds tax is zero and no tax is payable.
16.7 CAPITAL AND OPERATING COST ESTIMATES
Operating and capital costs were developed to coincide with the forecast
production plan (Table 16-2). Projected operating costs are consistent with
historical numbers and are expected to average $59.70 per tonne milled over the
period.
Myra Falls is going through a phase of capital commitment that will enable the
mine to operate at least until the end of current mineral reserves with little
capital expenditure past 2008. Several new mineralized zones are included in the
future mining plan, to replace reducing production from the H-W mine.
Substantial underground and surface development needs to be undertaken to
facilitate mining of these mineralized zones. Capital costs include required
mine development, equipment replacement and the completion of the upgrade to the
TDF. In addition, allowances have been included in 2011 for closure.
16.8 ECONOMIC ANALYSIS
A long-term plan has been developed to the year 2010 that is based on mining and
processing only the proven and probable reserves at a rate of up to 1.19 million
tonnes per annum. Table 16-2 shows the total forecast production for years 2004
to 2010.
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Myra Falls Technical Report
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TABLE 16-2 - FORECAST PRODUCTION: 2004-2010
------------------------------------------------
Total
------------------------------------------------
Milled tonnes 000 t 7,577
Head Grades
Zinc % 7.0
Copper % 1.3
Gold g/t 1.4
Silver g/t 46.0
Mill Recoveries
Zinc % 91.5
Copper % 76.1
Concentrate Prod.
Zinc 000 t 889
Copper 000 t 287
Contained Metal
Zinc 000 t 530
Copper 000 t 97
Gold 000 oz 334.1
Silver 000 oz 11,328
------------------------------------------------
A financial model has been prepared based on the metal prices, currencies and
treatment and refining charges listed in Table 16-3.
TABLE 16-3 - LONG-TERM PRICING ASSUMPTIONS
------------------------------------------------
Commodity Prices
Zinc US(cent)/lb. 51.2
US$/t 1,129
Copper US(cent)/lb. 98.0
US$/t 2,160
Gold US$/oz 379
Silver US$/oz 5.61
Exchange Rates US$/C$ 1.33
Treatment Charges
Zinc US$/t 160
Copper US$/t 62
Refining Charges
Copper US(cent)/lb. 6.2
------------------------------------------------
Standard commercial terms are currently in place for payable metal as well as
for smelter penalties.
Projected total operating results for the years 2004 through 2011 summarized in
Table 16-4.
TABLE 16-4 - PROJECTED OPERATING RESULTS: 2004 - 2011
($Cdn 000's)
------------------------------------------------
Total
------------------------------------------------
Milled Tonnes 000 t 7,577
Payable Metal
Zinc 000 lbs. 908,016
Copper 000 lbs. 155,352
Silver 000 oz 4,739
Gold oz 105,067
Smelter Revenue 000's 913,251
Smelter Treatment Charges (294,175)
------------------------------------------------
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Myra Falls Technical Report
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------------------------------------------------
Transportation (67,963)
Operating Cost (452,312)
Operating Cash Flow 98,801
Mining Tax (1,976)
Capital 000's (88,269)
Cashflow 8,556
US$/lb./Payable Zinc 0.440
------------------------------------------------
Operating Cost/t Milled 59.70
------------------------------------------------
The long-term plan estimates the production of 0.9 billion pounds of payable
zinc and 155 million pounds of payable copper.
The long-term plan is sensitive to metal prices, exchange rates, operating and
capital costs, grade and smelter charges.
TABLE 16-5 - SENSITIVITIES
($Cdn 000's)
- ---------------------------------------------------------------------------------------------------------
Cash Cost Cash Flow NPV 8% NPV 10% NPV 12%
US$/lb Zn ($ `000) ($ `000) ($ `000) ($ `000)
- ---------------------------------------------------------------------------------------------------------
Base Case (Table 16-4) Zn $0.512/lb.
Cu $0.980/lb.
Exchange 0.75 0.44 8,556 6,597 6,096 5,609
A. Metal Price
Zn Price + $0.05/lb. 0.46 46,293 34,293 32,662 30,564
- $0.05/lb. 0.42 (29,367) (21,924) (20,640) (19,511)
Cu Price + $0.05/lb. 0.43 14,596 11,205 10,428 9,693
- $0.05/lb. 0.45 2,515 1,989 1,762 1,524
Zn+Cu Price + $0.05/lb. 0.45 52,334 39,555 36,996 34,648
- $0.05/lb. 0.43 (35,406) (26,531) (24,973) (23,595)
Prices Mar 12, 2004 Zn $0.502/lb. 0.40 42,155 32,595 30,627 28,808
Cu $1.330/lb.
B. Exchange Rate + $0.05 US/Cdn 0.47 (29,412) (22,155) (20,899) (19,793)
- $0.05 US/Cdn 0.41 51,950 39,459 36,947 34,640
C. Cost
Operating Cost + 10% 0.48 (35,771) (26,964) (25,411) (24,036)
- 10% 0.42 30,720 23,379 21,849 20,432
Capital Cost + 10% 0.44 (271) (109) (216) (353)
- 10% 0.44 17,383 13,304 12,410 11,571
D. Grade
Zn Grade Change + 10% 0.42 43,165 32,551 30,405 28,431
Zn Grade Change - 10% 0.47 (26,053) (19,356) (18,214) (17,214)
Cu Grade Change + 10% 0.43 26,745 20,658 19,360 18,149
Cu Grade Change - 10% 0.46 (9,635) (7,464) (7,170) (6,933)
E. Smelter Charges
Zn Charges + $10/t con 0.45 (3,063) (2,121) (2,072) (2,061)
Cu Charges + $10/t con 0.44 4,828 3,754 3,421 3,088
- ---------------------------------------------------------------------------------------------------------
16.9 PAYBACK
The Myra Falls operation is a well established mine which has paid back its
original capital. The operating scenario depicted in Table 16-4 indicates that
all future capital will be paid back.
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July, 2004 Page 42
Myra Falls Technical Report
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16.10 MINE LIFE
Existing proven and probable mineral reserves are sufficient for at least seven
years of production. Being an underground operation, additional mineralization
tends to be delineated as mining proceeds. There is potential for existing
mineral resources to be converted to reserves as well as potential for
additional new discoveries as only 50 percent of the Myra Falls property has
been explored.
Since the start-up of mining more than thirty years ago approximately 30 million
tonnes of mineral reserves and resources have been discovered, with over 23
million tonnes of mineralized material being mined. Recent additions have been
found by diamond drilling in the vicinity of existing reserves and through a
systematic review of old data which has facilitated re-visiting of previously
abandoned areas.
FIGURE 16-1 - MYRA FALLS EXPLORATION POTENTIAL
[PICTURE]
Steep topography on either side of the Myra Valley makes diamond drilling from
surface impractical over much of the Company's property. Despite many years of
exploration, over half of the Company's mineral properties at Myra Falls remain
untested. The lateral extents of the L-M-P and the H-W Horizons have not been
fully defined. A third rhyolite horizon remains untested. Compared to other
Archean VHMS regions in Canada and the world, the Sicker Group rocks on
Vancouver Island have strong potential to host additional VHMS deposits. A
sustained commitment to exploration development and diamond drilling along
mineralized will continue this success into the future.
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July, 2004 Page 43
Myra Falls Technical Report
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17.0 OTHER RELEVANT DATA AND INFORMATION
This section does not apply.
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July, 2004 Page 44
Myra Falls Technical Report
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18.0 INTERPRETATION AND CONCLUSIONS
The MFO has a major mineralizing system comprised of mineralized zones of many
types and sizes, often of exceptional grade. The current property mineral
reserves provide an estimated mine life of approximately seven years if
production is limited to the area around the Battle and H-W mines. Sufficient
additional tonnages are contained in the measured, indicated and inferred
resource categories to potentially double the current mine life, however,
exploration work must be conducted in the near future to determine the extent to
which these mineral resources can be upgraded to mineable tonnage and to ensure
these areas are developed for mining within the time frame of the current mine
plan.
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July, 2004 Page 45
Myra Falls Technical Report
- --------------------------------------------------------------------------------
19.0 RECOMMENDATIONS
Historically, a consistent and committed funding level for exploration programs
resulted in successful identification of additional mineral reserves and
resources and consequently added to the life of the mine.
As stated earlier, there is potential to upgrade mineral resources and identify
new deposits. To accomplish the foregoing it is recommended that the Company:
o complete a review of the potential for increasing mineral
resources and reserves at the MFO;
o prepare and implement an exploration program based on such
review;
o initiate annual exploration programs;
o conduct drilling from better-situated drill platforms -- more
proximate to the target;
o conduct additional underground development which is required due
to the complex range of mineralized body sizes and shapes.
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July, 2004 Page 46
Myra Falls Technical Report
- --------------------------------------------------------------------------------
20.0 REFERENCES
Bakker, F., 2003. January 2003 Geological Resources and Mining reserves for Myra
Falls Operations. Boliden-Westmin (Canada) Limited internal company report.
Bakker, F., 2004. January 2004 Geological Resources and Mining reserves for Myra
Falls Operations. Boliden-Westmin (Canada) Limited internal company report.
Chong, A., Becherer, A., Sawyer, R., Palmer, K., and Bakker, F. Massive Sulphide
Deposits at Myra Falls Operations, Vancouver Island, British Columbia, Joint
G.A.C.-M.A.C.-S.E.G. Field Trip, May 2003 Part A - Field Trip Guide.
Hayward, L., 2001. Gold Recovery Study at Myra Falls, British Columbia, Canada.
Unpublished M.Sc. Thesis, Leicester University, United Kingdom.
Juras, S.J., 1987. Geology of the Polymetallic Volcanogenic Buttle Lake Camp,
with Emphasis on the Price Hillside, Central Vancouver Island, British Columbia,
Canada. Unpublished Ph.D. Thesis, University of British Columbia.
Jones, S., 2001. Geology and Alteration of the Hangingwall "Cap" Rocks of the
Myra Falls VHMS District, British Columbia, Canada. Unpublished Ph.D. study,
University of Tasmania, Australia.
Pearson, C.A., 1993. Mining Zinc-Rich Massive Sulfide Deposits on Vancouver
Island, British Columbia. In International Symposium - World Zinc '93. Hobart,
Australia, pp. 75-84.
Pearson, C.A., April 2003. Review of Potential Exploration Targets at Myra Falls
Operations, Pearson Geological Services.
Robinson, M., 1992. Geology, Mineralisation and Alteration of the Battle Zone,
Buttle Lake Camp, Central Vancouver Island Southwestern British Columbia.
M.A.Sc. Thesis, University of British Columbia, 268p.
Sinclair, B.J., 2000. Geology and Genesis of the Battle Zone VHMS Deposits, Myra
Falls District, British Columbia, Canada. Unpublished Ph.D. Thesis, University
of Tasmania.
Walker, R.R., 1981, Density of Ores and Rocks in the H-W Mine, Inter-Office
Letter, Western Mines Limited.
Walker, R.R., 1985. Westmin Resources' Massive Sulphide Deposits, Vancouver
Island; Geological Society of America, Cordilleran Section Meeting, May 1985,
Vancouver, B.C., Field Trip Guidebook, pp. 1-13.
Weirmar, M., 2004, Myra Falls Land Holdings, personnel communication from
Boliden Westmin (Canada) Limited Consultant.
Westmin Resources Limited, December 19, 1995, Short form Prospectus.
Westmin Resources Limited, May 20, 1997, 1996 Annual Information Form.
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July, 2004 Page 47
Myra Falls Technical Report
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Westmin Resources Limited, February 17, 1997, Prospectus, Goldman, Sachs & Co.,
Trilon International Inc.
Winters Company, February 1997, Review of Ore Reserves and Mining Practices Myra
Falls Operations, Westmin Resources Limited, Vancouver Island, British Columbia.
- --------------------------------------------------------------------------------
July, 2004 Page 48
Breakwater Resources Ltd. Tel.: 416-363-4798
Suite 950, 95 Wellington St. W. Fax: 416-363-1315
Toronto, Ontario Email: tjensen@breakwater.ca
M5J 2N7
CERTIFICATE of Author
I, Torben Jensen, P.Eng., do hereby certify that:
1. I am Vice President, Engineering of:
Breakwater Resources Ltd.
Suite 950, 95 Wellington St. W.
Toronto, Ontario
M5C 2N7
2. I graduated with a diploma in Mining Engineering Technology from
Haileybury School of Mines in 1975. In addition, I graduated with a
diploma in Mining Engineering from the South Dakota School of Mines,
Rapid City, South Dakota in 1978.
3. I am licensed by Professional Engineers Ontario (PEO) since 1992.
4. I have practiced my profession continuously since 1975. I have held
positions in the mining industry in underground coal mining and both
underground and surface metal mining in engineering, construction,
operating and management roles including Chief Mining Engineer for
Hillsborough Resources Ltd. (1985-1995), Manager of Engineering for
Black Hawk Mining Inc. (1995-1997), Manager of Engineering and North
American Exploration for Breakwater Resources Ltd. (1997-2003) and Vice
President, Engineering for Breakwater Resources Ltd. (2003 - present).
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 described 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 all sections of the technical
report titled NVI Mining Ltd., A Wholly-Owned Subsidiary of Breakwater
Resources Ltd., Myra Falls Operation, Vancouver Island, British
Columbia, NI 43-101 Technical Report and dated July 30, 2004, (the
"Technical Report") relating to the Myra Falls property. I visited the
property twice to review geology, exploration, infrastructure and
development. The first visit was from January 6-13, 2004, and the second
visit was from March 4-5, 2004.
7. I have had prior involvement with the property that is the subject of
the Technical Report. The nature of my prior involvement is a due
diligence review in September, 2000, when the property was originally
for sale.
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 not independent of the issuer applying all of the tests in section
1.5 of National Instrument 43-101. I am currently an insider of
Breakwater Resources Ltd.
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 for
regulatory purposes, including electronic publication in the public
company files on their websites accessible by the public, of the
Technical report.
Dated this 30th Day of July, 2004
Signed "Torben Jensen"
-------------------
Torben Jensen, P.Eng.,
Vice President, Engineering
Breakwater Resources Ltd.
Breakwater Resources Ltd. Tel.: 416-363-4798
Suite 950, 95 Wellington St. W. Fax: 416-363-1315
Toronto, Ontario Email: tjensen@breakwater.ca
M5J 2N7
CONSENT OF AUTHOR
TO: BRITISH COLUMBIA SECURITIES COMMISSION
ALBERTA SECURITIES COMMISSION
SASKATCHEWAN FINANCIAL SERVICES COMMISSION, SECURITIES DIVISION
THE MANITOBA SECURITIES COMMISSION
COMMISSION DES VALEURS MOBILIERES DU QUEBEC
OFFICE OF THE ADMINISTRATOR, NEW BRUNSWICK
NOVA SCOTIA SECURITIES COMMISSION
REGISTRAR OF SECURITIES, PRINCE EDWARD ISLAND
SECURITIES COMMISSION OF NEWFOUNDLAND AND LABRADOR
ONTARIO SECURITIES COMMISSION
GOVERNMENT OF YUKON
GOVERNMENT OF NORTHWEST TERRITORIES
GOVERNMENT OF NUNAVUT
TORONTO STOCK EXCHANGE
I, Torben Jensen, P.Eng., do hereby consent to the filing of the written
disclosure of the technical report titled NVI Mining Ltd, A Wholly-Owned
Subsidiary of Breakwater Resources Ltd., Myra Falls Operation, Vancouver Island,
British Columbia, NI 43-101 technical report and dated July 30, 2004 (the
"Technical Report"), and to the filing of the technical report with the
securities regulatory authorities referred to above.
I also certify that I have read the written disclosure being filed and I do not
have any reason to believe that there are any misrepresentations in the
information derived from the Technical Report contains any misrepresentation of
the information contained in the Technical Report.
Dated this 30th Day of July, 2004
Signed "Torben Jensen"
- ------------------------
Torben Jensen, P.Eng.,
Vice President, Engineering
Breakwater Resources Ltd.