EX-99.1 2 pea8k.htm

 

NI 43-101 Technical Report Preliminary Economic Assessment Florida Canyon Zinc Project Amazonas Department, Peru

Effective Date: July 13, 2017

Report Date: August 3, 2017

 

 

Report Prepared for

   

Image result for milpo logo

Votorantim Metais Holding S.A.                         Solitario Zinc Corp.

43 John F. Kennedy Ave., 3rd floor                    4251 Kipling Street. Suite 390

Luxembourg, L-1855                                         Wheat Ridge, Colorado 80033

 

Report prepared by

 

 

SRK Consulting (U.S.), Inc.

1125 Seventeenth Street, Suite 600

Denver, CO 80202

 

SRK Project Number: 181700.110

 

 

Signed by Qualified Persons:

Walter Hunt, CPG / Solitario Zinc Corp, COO

J.B. Pennington, MSc, CPG, AIPG / SRK Principal Mining Geologist Daniel H. Sepulveda / SRK Associate Consultant (Metallurgist)

Joanna Poeck, BEng Mining, SME-RM, MMSAQP / SRK Senior Consultant (Mining Engineer) Jeff Osborn, BEng Mining, MMSAQP / SRK Principal Consultant (Mining Engineer)

James Gilbertson, MCSM, CGeol, FGS / SRK Principal Exploration Geologist John Tinucci, PhD, PE / SRK Principal Consultant (Geotechnical Engineer)

 

Reviewed by:

Kent Hartley, P.E. (Mining Engineer)

 1 

 

 

 

Table of Contents

1Summary 13
1.1Technical Economics 13
1.2Property Description and Ownership 16
1.3Geology and Mineralization 16
1.4Status of Exploration, Development and Operations 17

1.4.1 History 17

1.4.2 Exploration Status 17

1.4.3 Development and Operations 18

1.5Mineral Processing and Metallurgical Testing 18
1.6Mineral Resource Estimate 19
1.7Mineral Reserve Estimate 21
1.8Mining 21
1.9Recovery Methods 23
1.10Project Infrastructure 23
1.11Environmental Studies and Permitting 24
1.12Conclusions and Recommendations 24

1.12.1 General 24

1.12.2 Mineral Resource Estimate 25

1.12.3 Mineral Processing and Metallurgical Testing 25

1.12.4 Mineral Reserve Estimate 26

1.12.5 Mining Methods 26

1.12.6 Recovery Methods 27

1.12.7 Project Infrastructure 27

1.12.8 Environmental Studies and Permitting 27

1.12.8 RecommendationsWork Programs and Costs 28

2Introduction 29
2.1Terms of Reference and Purpose of the Report 29
2.2Qualifications of Consultants (SRK) 29
2.3Details of Inspection 30
2.4Sources of Information 30
2.5Effective Date 30
2.6Units of Measure 30
3Reliance on Other Experts 31
4Property Description and Location 32
4.1Property Location 32
 2 

 

4.2Mineral Titles 34

4.2.1 Nature and Extent of Issuer’s Interest 39

4.2.2 Property and Title in Peru 39

4.3Royalties, Agreements and Encumbrances 40
4.4Environmental Liabilities and Permitting 40

4.4.1 Required Exploration Permits and Status 40

4.4.2 Required Mining Permits 40

4.5Other Significant Factors and Risks 41
5Accessibility, Climate, Local Resources, Infrastructure and Physiography 42
5.1Topography, Elevation and Vegetation 42
5.2Accessibility and Transportation to the Property 42
5.3Climate and Length of Operating Season 43
5.4Sufficiency of Surface Rights 43
5.5Infrastructure Availability and Sources 43

5.5.1 Proximity to Population Center 45

5.5.2 Power 45

5.5.3 Water 45

5.5.4 Mining Personnel 45

5.5.5 Potential Mine Infrastructure Areas 46

6History 48
6.1Prior Ownership and Ownership Changes 48
6.2Previous Exploration and Development Results 48
6.3Historical Mineral Resource and Reserve Estimates 48
6.4Historical Production 49
7Geological Setting and Mineralization 50
7.1Regional Geology 50
7.2Local Geology 52

7.2.1 Lithology and Stratigraphy 52

7.2.2 Structure 53

7.2.3 Alteration 54

7.2.4 Mineralization 54

7.3Property Geology 55
7.4Significant Mineralized Zones 57
8Deposit Type 58
8.1Mineral Deposit 58
8.2Geological Model 58
 3 

 

9Exploration 60
9.1Relevant Exploration Work 60
9.2Surveys and Investigations 60
9.3Sampling Methods and Sample Quality 60
9.4Significant Results and Interpretation 60
10  Drilling66
10.1Type and Extent 66
10.2Procedures 68
10.3Interpretation and Relevant Results 68
11Sample Preparation, Analysis and Security 70
11.1Sampling Methods 70

11.1.1 Sampling for Geochemical Analysis 70

11.1.2 Sampling for Density Measurement 70

11.2Security Measures 70
11.3Sample Preparation for Analysis 71
11.4QA/QC Procedures 73

11.4.1 Standards 73

11.4.2 Blanks 74

11.4.3 Duplicates 74

11.4.4 Actions 75

11.5Opinion on Adequacy 75
12Data Verification 76
12.1Procedures 76
12.2Limitations 76
12.3Opinion on Data Adequacy 77
13Mineral Processing and Metallurgical Testing 78
13.1Testing and Procedures 78
13.2Relevant Results 78

13.2.1 Mineralogy 78

13.2.2 Recovery and Concentrate Grades 79

13.2.3 Hardness 82

13.2.4 Reagents 83

13.3Recovery Projections 83
13.4Significant Factors and Recommendations 84
14Mineral Resource Estimate 85
14.1Geology and Mineral Domain Modeling 86
14.2Drillhole Database 88

14.2.1 Database 88

 4 

 

14.2.2 Topography and Sample Locations 89

14.2.3 Oxidation Classification in Drillhole Logging 89

14.3Drilling Data Analysis 89

14.3.1 Capping 90

14.3.2 Compositing 90

14.4Density 91
14.5Variogram Analysis and Modeling 92
14.6Block Model 92

14.6.1 Model Specifications 92

14.6.2 Model Construction 93

14.7Grade Estimation 94
14.8Zinc, Lead, and Silver Recovery Calculation 96
14.9Zinc Equivalent Grade Calculation 96
14.10Model Validation 97

14.10.1 SRK Grade Estimate vs Votorantim Grade Estimate 97

14.10.2 Visual Comparison 97

14.10.3 Comparative Statistics 98

14.11Resource Classification 98
14.12Mineral Resource Statement 99
14.13Mineral Resource Cut-off Grade Determination 99
14.14Mineral Resource Sensitivity 100
14.15Relevant Factors 100
15Mineral Reserve Estimate 101
16Mining Methods 102
16.1Proposed Mining Methods 107
16.2Geotechnical Input for Mine Design 108

16.2.1 Geotechnical Characterization 108

16.2.2 Stress Field and topography 110

16.2.3 Cut and Fill parameters 110

16.2.4 Sub-level Open Stoping Parameters 111

16.2.5 Crown Pillar 113

16.2.6 Sill Pillar Dimensioning 113

16.2.7 Ground Support 114

16.2.8 Tailings Backfill 117

16.3Mine Design 117

16.3.1 Net Smelter Return 118

16.3.2 Operating Costs 120

 5 

 

16.3.2 Stope Optimization 121

16.3.4 Mining Recovery and Dilution 122

16.3.5 Cut-off Evaluation 123

16.3.6 Mining Methods 124

16.3.7 Mine Plan Resource 128

16.3.8 Development Layout 129

16.3.8 Waste Rock Management and Backfilling 136

16.4Mine Production Schedule 136
16.5Mine Services 139

16.2.1 Underground Mine Equipment 139

16.2.2 Electrical 139

16.5.3 Ventilation 139

16.2.4 Mine Personnel 141

16.2.5 Health and Safety 141

17Recovery Methods 142
17.1Processing Projections and Methods 142
17.2Processing Methods and Flow Sheet 142
17.3Consumables Requirement 144
18Project Infrastructure 146
18.1Infrastructure and Logistics Requirements 146

18.1.1 Access and Local Communities 146

18.1.2 Site Water Management 147

18.1.3 Project Facilities 148

18.1.4 Power Supply and Distribution 150

18.2Project Logistics 152
18.3Tailings Management 153
19Market Studies and Contracts 155
19.1Contracts and Status 155
20Environmental Studies, Permitting and Social or Community Impact 156
20.1Required Permits and Status 156

20.1.1 Required Exploration Permits and Status 156

20.1.2 Required Mining Permits 156

20.2Environmental Monitoring Results 157
20.3Groundwater 159
20.4Environmental Issues 159
20.5Mine Closure 160
20.3.1Post Mining Land Use 160
 6 

 

20.3.2Portals and Vents 160
20.3.3Buildings and Infrastructure 160
20.3.4Roads and Miscellaneous Disturbance 161
20.3.5Tailings Facility 161
20.6Post Closure Plans 161
20.7Reclamation and Closure Cost Estimate 162
20.8Post-Performance or Reclamations Bonds 162
20.9Social and Community 162
21Capital and Operating Costs 164
21.1Capital Cost Estimates 164

21.1.1 Basis for Capital Cost Estimates 165

21.2Operating Cost Estimates 168

21.2.1 Basis for Operating Cost Estimates 168

22Economic Analysis 170
22.1External Factors 170
22.2Main Assumptions 171
22.3Taxes, Royalties and Other Interests 172
22.4Results 173
22.5Base Case Sensitivity Analysis 179
22.6Conservative Metal Price Alternative Analysis 181

22.6.1 Impact to Mine Planning 182

22.6.2 Impact to Economics 183

23Adjacent Properties 189
24Other Relevant Data and Information 190
25Interpretation and Conclusions 191
25.1General 191
25.2Mineral Resource Estimate 191
25.3Mineral Processing and Metallurgical Testing 192
25.4Mineral Reserve Estimate 193
25.5Mining 193
25.6Recovery Methods 193
25.7Project Infrastructure 193
25.8Environmental Studies and Permitting 194
25.9Capital and Operating Costs 194
25.10Economics 195
26Recommendations 196
 7 

 

26.1Recommended Work Programs 196

26.1.1 Engineering Studies (Prefeasibility Level) 196

26.1.2 Drilling 197

26.1.3 Mining 197

26.2Work Program Costs 197
27  References199
28  Glossary201
28.1Mineral Resources 201
28.2Mineral Reserves 201
28.3Definition of Terms 202
28.4Abbreviations 203

 

 

List of Tables

Table 1-1: Indicative Economic Results (US$) 14

Table 1-2: Capital Costs 15

Table 1-3: Operating Costs 15

Table 1-4: Operating Costs 15

Table 1-5: Florida Canyon Metal Recoveries by Material Type 18

Table 1-6: Mineral Resource Statement for the Florida Canyon Zn-Pb-Ag Deposit, Amazonas Department, Peru, SRK Consulting (U.S.), Inc., July 13, 2017 21

Table 1-7: Mine Plan Resource for the Florida Canyon Zn-Pb-Ag Deposit, Amazonas Department, Peru, SRK Consulting (U.S.), Inc., July 21, 2017 22

Table 1-8: Mine Plan Resource Average Process Recovery 22

Table 1-9: Summary of Costs for Recommended Work 28

Table 4-1: List of Minera Bongará Mineral Claims 35

Table 4-2: List of Minera Chambara Mineral Claims 36

Table 5-1: Distance and Travel Time to Florida Canyon Project from Lima, Peru 43

Table 6-1: Mineral Resource Statement for the Florida Canyon Zn-Pb-Ag Deposit, Amazonas Department, Peru, SRK Consulting (U.S.), Inc., 05 June, 2014 49

Table 10-1: Downhole Survey Data Point Spacing 68

Table 11-1: Analytical Codes and Methods 71

Table 11-2: Analyzed Elements and Method Detection Limits 72

Table 11-3: Summary of SRM Statistics for Lead 73

Table 11-4: Summary of SRM Statistics for Zinc 73

Table 11-5: Summary of Duplicate Samples 74

Table 13-1: Summary of Florida Canyon Metallurgical Test Work 78

Table 13-2: Mineralogy of Sulfide Composite 79

 8 

 

Table 13-3: Mineralogy of Oxide Composite 79

Table 13-4: Metallurgical Tests – Selected Results 81

Table 13-5: Hardness Test Results 82

Table 13-6: Florida Canyon Metal Recoveries by Material Type 83

Table 14-1: Statistics of Raw Assays – All Intervals 89

Table 14-2: Statistics of Raw Assays Manto Intervals Only 90

Table 14-3: Item ID’s and Descriptions 91

Table 14-4: Statistics of All Composites Inside Mantos 91

Table 14-5: Block Model Specifications 92

Table 14-6: Block Model Item Descriptions 93

Table 14-7: Additional SRK Block Model Item Descriptions 93

Table 14-8: Variogram and Grade Estimation Parameters 95

Table 14-9: Comparison of Composite and Block Grades 98

Table 14-10: Mineral Resource Statement for the Florida Canyon Zn-Pb-Ag Deposit, Amazonas Department, Peru, SRK Consulting (U.S.), Inc., July 13, 2017 99

Table 16-1: Rock Mass Classification Parameters 109

Table 16-2: Stope Stability Graph Input Parameters 112

Table 16-3: Proposed Stope Dimensions 113

Table 16-4: Parameters for the Barton Method 115

Table 16-5: Estimated Support According to the Barton Method 116

Table 16-6: Expected Processing Recoveries 118

Table 16-7: NSR Calculation Parameters for Stope Optimization 119

Table 16-8: Example NSR Calculation 120

Table 16-9: Operating Costs Used for Determining Potential Mining Shapes 121

Table 16-10: Stope Optimization Parameters for Base Case Analysis 121

Table 16-11: Mine Plan Resource for the Florida Canyon Zn-Pb-Ag Deposit, Amazonas Department, Peru, SRK Consulting (U.S.), Inc., July 21, 2017 128

Table 16-12: Mine Plan Resource Average Process Recovery 128

Table 16-13: Development Design Assumptions 130

Table 16-14: Development Quantities 130

Table 16-15: LoM Backfill and Cement Quantities by Type 136

Table 16-16: Florida Canyon Production Schedule 138

Table 16-17: Mine Equipment 139

Table 16-18: Estimated Airflow Requirements – Central/North and Northwest Areas 140

Table 16-19: Estimated Airflow Requirements – F1 (San Jorge) 140

Table 16-20: Estimated Airflow Requirements - SAM 140

Table 16-21: Hourly and Salaried Personnel (On Site) 141

Table 17-1: Florida Canyon PEA Level Throughput and Concentrate Production Projections 142

 9 

 

Table 17-2: Overland Conveying from Underground Portals to the Process Plant 143

Table 20-1: Environmental Monitoring During Mining Exploration 158

Table 21-1: Florida Canyon Capital Estimate Summary 165

Table 21-2: Florida Canyon Underground Mine Equipment Acquisition Schedule 166

Table 21-3: Florida Canyon Offsite, Site, Power, Water and Backfill Infrastructure 167

Table 21-4: Florida Canyon Operating Costs Summary 168

Table 22-1: Florida Canyon Price Assumptions 170

Table 22-2: Florida Canyon Net Smelter Return Terms 170

Table 22-3: Florida Canyon Product Logistics Cost 171

Table 22-4: Florida Canyon Mine Production Assumptions 171

Table 22-5: Florida Canyon Mill Production Assumptions 172

Table 22-6: Florida Canyon Royalty Rates 173

Table 22-7: Florida Canyon Indicative Economic Results (Dry Basis) 175

Table 22-8: Florida Canyon LoM Annual Production and Revenues 176

Table 22-9: Florida Canyon Cash Costs 178

Table 22-10: Alternate Market Forecast Metal Prices 181

Table 22-11: Florida Canyon Alternate Case Indicative Economic Results (Dry Basis) 185

Table 22-12: Florida Canyon Alternate Case LoM Annual Production and Revenues 186

Table 22-13: Florida Canyon Cash Costs 188

Table 25-1: Florida Canyon Operating Costs Summary 194

Table 26-1: Summary of Costs for Recommended Work 198

Table 28-1: Definition of Terms 202

Table 28-2: Abbreviations 203

 

 

 

List of Figures

Figure 1-1: Florida Canyon Metal Recoveries Relative to ZnO/ZnT Ratio 19

Figure 4-1: Project Location Map 33

Figure 4-2: Map of Mineral Claims 38

Figure 5-1: Photograph of the Florida Canyon Project Area 42

Figure 5-2: Project Access Road 44

Figure 5-3: Photograph of Drilling Camp at Project Site 44

Figure 5-4: Potential Mine Infrastructure Locations 47

Figure 7-1: Regional Geologic Map 51

Figure 7-2: Project Area Stratigraphic Column 52

Figure 7-3: Florida Canyon Project Geologic Map 56

Figure 7-4: Cross Section of the Project Geologic Model 57

 10 

 

Figure 8-1: Mississippi Valley-Type Deposit Schematic Model 59

Figure 9-1: Florida Canyon Area Prospect and Geochemistry Map 62

Figure 9-2: Regional Geochemical Results 64

Figure 9-3: Florida Canyon Area Simplified Geology, Resource and Drillhole Map 65

Figure 10-1: Project Drilling History 66

Figure 10-2: Geologic Map with Drillhole Locations 67

Figure 12-1: Photograph of Project Core Lithology Reference Sample Library 76

Figure 13-1: Metallurgical Sample ResultsZinc and Lead Head Grades 80

Figure 13-2: Florida Canyon Metal Recoveries Relative to ZnO/ZnT Ratio 83

Figure 14-1: North-South Longitudinal Section of Geologic Model 87

Figure 14-2: Florida Canyon Geological and Structural Map Projected on Topography 87

Figure 14-3: Geological Cross Section of Karen-Milagros Domain 88

Figure 14-4: Oblique View of Mineral Domains 88

Figure 14-5: Estimation BLOCK Zones 94

Figure 14-6: Grade-Tonnage Curve for Contained ZnEq% 100

Figure 16-1: Overview of Florida Canyon Mineralized Bodies 104

Figure 16-2: Section View of the F1 Mineralized Body and Nearby Mantos (9,352,100N - Looking North) ..105 Figure 16-3: Section View of the SAM Mineralized Body and Nearby Mantos (9,352,530N - Looking North)

...........................................................................................................................................................106

Figure 16-4: Southwest to Northeast Section View Showing the Dome Structure of Mantos (Looking Northwest)

...........................................................................................................................................................106

Figure 16-5: UCS Strength Testing Summary 110

Figure 16-6: Empirical Stability Graph for Stope Geometries in Chambara 2 112

Figure 16-7: Grimstad and Barton Ground Support Estimate 114

Figure 16-8: Section View Showing Resource and Re-blocked Model (9,353,600N - Looking North) 117

Figure 16-9: Section View Showing Blocks Removed from Inventory 122

Figure 16-10: Plan View of F1 Area Showing Cut and Fill and Longhole Blocks 125

Figure 16-11: Section View Showing Typical Longhole Level Layout (Elevation 1981) 126

Figure 16-12: Example Drift and Fill Layout, M10 Manto 127

Figure 16-13: Florida Canyon Mining Inventory 129

Figure 16-14: Plan View of Mining Blocks and Development Layout 131

Figure 16-15: Rotated View of Mining Blocks and Development Layout – All Areas (Looking Northeast) 132

Figure 16-16: Rotated View of Mining Blocks and Development Layout – All Areas (Looking Northwest) ...133

Figure 16-17: Rotated View of Mining Blocks and Development Layout – Drift and Fill/Cut and Fill (Looking Northeast) 134

Figure 16-18: Rotated View of Mining Blocks and Development Layout – F1 and SAM (Looking Northwest)

...........................................................................................................................................................135

Figure 16-19: Rotated View of Mining Blocks Showing Production Schedule 137

Figure 17-1: Florida Canyon PEA Level Process Flow Sheet 145

 11 

 

Figure 18-1: Florida Canyon General Location 146

Figure 18-2: Florida Canyon Existing and New Road Construction 147

Figure 18-3: Florida Canyon Site General Arrangement 149

Figure 18-4: Florida Canyon Third Power Supply Alternative 151

Figure 18-5: Typical 30 Tonne Concentrate Transport Truck 152

Figure 18-6: Port and Smelter Locations 153

Figure 22-1: Florida Canyon After-Tax Free Cash Flow and Equivalent Metal Production 174

Figure 22-2: Metal Participation in Revenue – Florida Canyon 177

Figure 22-3: Florida Canyon Cumulative NPV Curves (after tax) 179

Figure 22-4: Florida Canyon NPV Sensitivity to Hurdle Rate 180

Figure 22-5: Florida Canyon NPV Sensitivity (US$000’s) 181

Figure 22-6: Mine Plan Resource colored by Sensitivity NSR (rotated view, looking Northeast) 183

Figure 22-7: Florida Canyon Alternate Case After-Tax FCF and Equivalent Metal Production 184

Appendices

Appendix A: Certificates of Qualified Persons

 12 

 

1Summary

This report was prepared as a National Instrument 43-101 (NI 43-101) Technical Report, Preliminary Economic Assessment (Technical Report or PEA) by SRK Consulting (U.S.), Inc. (SRK), for Votorantim Metais Holding S.A. (Votorantim) with Solitario Zinc Corp. (Solitario), (collectively, owners) on the Florida Canyon Zinc Project located in Amazonas Department, Peru (Florida Canyon or Project). The Project name was changed in 2017 from Bongará, as it was called previously, to Florida Canyon.

This study represents the advancement of the Project from a 2014 Technical Report on Resources, to this 2017 PEA. Highlights of this PEA include a thirteen-year life-of-mine underground mine plan, comminution and flotation of zinc and lead concentrates at a nominal production rate of 2,500 mill throughput tonnes per day followed by dry-stack tailings storage. Site infrastructure includes line power to the site, water distribution systems, a townsite and access roads for construction and re-supply as well as for concentrate transport to the point of sale.

A key development in the preparation of this PEA was the addition of new metallurgical data that provided an accurate ratio of zinc oxide to zinc sulfide. The ratio allowed block-by-block recovery to be estimated. For each block in this polymetallic (zinc-lead-silver) deposit a Net Smelter Return value was calculated, making the definition of mineable mineralization independent of material type. The deposit naturally contains a high percentage of zinc sulfide mineralization; but using the new approach, most of the transition and some of the oxide materials are also suitable for flotation processing when they carry sufficient recoverable metal.

This Technical Report was prepared in support of a press release issued by the owners on August 2, 2017, in which economic results were reported. Those economic results are summarized herein.

 

1.1Technical Economics

Technical economic results for this PEA are summarized below and in Table 1-1 through Table 1-4.

·Mill Throughput Rate: 2,500 tonnes per day (t/d);
·Mine Life: 12.5 years;
·Recoverable Metal of 1.643 billion pounds zinc, 165 million pounds (Mlb) lead and 2 million ounces (Moz) silver;
·Average Recovery: 80% for zinc 74% for lead, 52% for silver;
·Initial Capital Cost: US$214 million;
·Life of Mine Capital Cost: US$296 million and Sustaining Capital of US$83 million;
·Underlying NSR-Royalty: 1.0%;
·All-in Cost per Zinc-Equivalent Payable Pound: US$0.73;
·Average Payable Annual Zinc Production: 131.4 Mlb; Average run-of Mine Zinc Grade: 8.34%;
·Average Payable Annual Lead Production: 13.2 Mlb; Average Lead Grade: 0.90%;
·Average Payable Annual Silver Production: 168 thousand ounces (koz); Average Silver Grade: 11.31 grams per tonne (g/t);
·After tax NPV at 8%: US$198 million;
·After tax Internal Rate of Return (IRR): 24.7%; and
·After tax payback Period: 2.6 years.

 13 

 

Table 1-1: Indicative Economic Results (US$)

 

Description Value Units
Market Prices    
Silver 16.50 US$/oz
Lead 1.00 US$/lb
Zinc $1.20 US$/lb
Estimate of Cash Flow (all values in $000s)    
Concentrate Net Return   $/oz-Ag
Silver Sales $32,957 $0.02
Lead Sales $156,937 $0.11
Zinc Sales $1,675,977 $1.20
Total Revenue $1,865,871 $1.34
Treatment, Smelting and Refining Charges ($337,076)  
Freight, Impurities & Third Parties ($96,935) ($0.07)
Gross Revenue $1,431,860  
Royalties ($61,734) ($0.04)
Net Revenue $1,370,126  
Operating Costs    
Open Pit Mining $0 $0.00
Underground Mining ($228,547) ($0.16)
Process ($144,063) ($0.10)
G&A ($39,153) ($0.03)
Ordinary Rights $0 $0.00
Total Operating ($411,764) ($0.29)
Operating Margin (EBITDA) $958,362  
Initial Capital ($213,667)  
LoM Sustaining Capital ($82,722)  
Income Tax ($224,873)  
After Tax Free Cash Flow $437,100  
Payback 2.59 years
After-Tax IRR 24.7%  
NPV @: 8% $197,521  

Source: SRK, 2017

 14 

 

Table 1-2: Capital Costs

 

Description Initial (US$000’s) Sustaining (US$000’s) LoM (US$000’s)
Development 12,293 35,741 48,033
Vent Raises 686 672 1,358
Underground Mining Equipment 24,625 2,474 27,099
Surface Crushing & Conveying 1,430 0 1,430
Offsite Infrastructure 16,227 0 16,227
Site Facilities 14,697 0 14,697
Process Plant 60,000 0 60,000
Power Supply 2,472 0 2,472
Water Supply 250 0 250
BackFill Infrastructure 13,200 0 13,200
Cement Rockfill Infrastructure 200 0 200
Tailings Storage Facility 12,854 11,814 24,668
Owner's 14,595 0 14,595
Contingencies 40,138 0 40,138
Sustaining Capital 0 26,272 26,272
Closure 0 4,920 4,920
Total Capital $213,667 $81,893 $295,559

Source: SRK, 2017

 

 

 

Table 1-3: Operating Costs

 

Period Total Cost (US$/t-Ore)
Underground Mining 20.43
Process 12.88
G&A 3.50
Total $36.81

Source: SRK, 2017

 

 

 

Table 1-4: Operating Costs

 

 

Description

LoM (US$000’s) LoM (US$/t-Ore) LoM (US$/lb-Zn)
Underground Mining 228,547 20.43 0.16
Process 144,063 12.88 0.10
G&A 39,153 3.50 0.03
Total Operating $411,764 $36.81 $0.29

Source: SRK, 2017

 

 

 

Alternative Economic Case Study

 

The owners also requested SRK to evaluate the Project economics under a specific alternative metal price structure. This alternative used a pricing of US$1.06/lb, US$0.88/lb, and US$18.19/oz for zinc, lead, and silver respectively. The alternative case also used a higher discount rate of 9%. All other economic inputs were kept the same as the base case.

 15 

 

Results of the alternative case study:

·All-in Cost per Zinc Pound Recovered: US$0.72;
·After tax NPV at 9%: US$106 million;
·After tax Internal Rate of Return (IRR): 19.1%; and
·After tax payback Period: 3.2 years.

Both the base case and alternative case economics are detailed in Section 22 of this report.

 

1.2Property Description and Ownership

The Florida Canyon Zinc Project (the Project) is owned and operated by Minera Bongará S.A., a joint venture between Solitario and Votorantim in existence since 2006. Florida Canyon is an advanced mineral exploration project comprised of sixteen contiguous mining concessions, covering approximately 12,600 hectares (ha). The concession titles are in the name of Minera Bongará. All of these concessions are currently titled.

The Minera Bongará concessions are completely enveloped by a second group of thirty-seven contiguous mining concessions, covering approximately 30,700 ha. The concession titles are in the name of Minera Chambara, also owned by the Owners. Of the thirty-seven concessions, twelve titles are pending.

Votorantim, as operator of the joint venture company Minera Bongará, has entered into a surface rights agreement with the local community of Shipasbamba which controls the surface rights of the Project. This agreement provides for annual payments and funding for mutually agreed upon social development programs in return for the right to perform exploration work including road building and drilling. From time to time, Votorantim also enters into surface rights agreements with individual private landowners within the community to provide access for exploration work.

The Project is located in the Eastern Cordillera of Peru at the sub-Andean front in the upper Amazon River Basin. It is within the boundary of the Shipasbamba community, 680 kilometer (km) north- northeast of Lima and and 245 km northeast of Chiclayo, Peru, in the District of Shipasbamba, Bongará Province, Amazonas Department. The Project area can be reached from the coastal city of Chiclayo by the paved Carretera Marginal road. The central point coordinates of the Project are approximately 825,248 East and, 9,352,626 North (UTM Zone 17S, Datum WGS 84). Elevation ranges from 1,800 meters above sea level (masl) to approximately 3,200 masl. The climate is classified as high altitude tropical jungle in the upper regions of the Amazon basin. The annual rainfall average exceeds 1 meter

(m) with up to 2 m in the cloud forest at higher elevations.

 

1.3Geology and Mineralization

The Project is located within an extensive belt of Mesozoic carbonate rocks belonging to the Upper Triassic to Lower Jurassic Pucará Group and equivalents. This belt extends through the central and eastern extent of the Peruvian Andes for nearly 1000 km and which is the host for many polymetallic and base metal vein and replacement deposits in the Peruvian Mineral Belt. Among these is the San Vicente Mississippi Valley Type (MVT) zinc-lead deposit that has many similarities to the Florida Canyon deposit and other MVT occurrences in the Project area.

 16 

 

Known zinc, lead and silver mineralization in the Project area is hosted in dolomitized limestone of the Chambara Formation subunit 2 in the Pucará Group. The structure at Florida Canyon is dominated by a N50º-60ºW trending domal anticline cut on the west by the Sam Fault and to the east by the Tesoro- Florida Fault. In the Project area, the three prospective corridors for economic mineralization studied in detail are San Jorge, Karen-Milagros, and Sam. In these areas, dolomitization and karsting is best developed in proximity to faulting and fracturing associated with each structural zone. In turn, these structures provided access for the altering fluids to flow laterally into stratigraphic horizons with more permeable sedimentary characteristics.

The primary zinc-lead-silver mineralization of the Florida Canyon deposit occurs as sphalerite and galena. Sphalerite is low iron and together, zinc and lead sulfide is 70% of the mineable material. At shallow depths, these sulfide minerals are altered to smithsonite, hemimorphite, and cerussite and collectively referred to as oxides. The mineral suite is low in pyrite.

 

1.4Status of Exploration, Development and Operations

 

1.4.1 History

Prior to the discovery of mineral occurrences by Solitario in 1994, no mineral prospecting had been done on the Property and no concessions had been historically recorded. In 1995 and later, Solitario and its joint venture partners staked the current mineral concessions in the Project area.

In 1996, Cominco Ltd. formed a joint venture partnership (JV) with Solitario. This agreement was terminated in 2000 and Solitario retained ownership of the property. Between 1997 and 1999, Cominco completed geologic mapping, geophysical surveys, surface sampling, and 82 diamond drillholes.

In 2006, Votorantim and Solitario formed a JV for the exploration and possible development of the property. As the operator of the JV company, Votorantim has carried out surface diamond core drilling, geologic mapping, surface outcrop sampling, underground exploration and drifting and underground drilling programs. As of August 15, 2013, Votorantim had completed 404 diamond drillholes which, when combined with the previous drilling of Cominco, totals 117,260 m.

There has not been any commercial mining in the Project area. The only underground excavation has been 700 m of underground drifting by Votorantim to provide drill platforms at the San Jorge area. A subsidiary of Hochschild Mining PLC tested open pit mining for a short time at the Mina Grande deposit off of Project properties near the village of Yambrasbamba, 18 km northeast of Florida Canyon, where Solitario had previously defined an oxidized zinc resource by pitting.

 

1.4.2 Exploration Status

The focus of Votorantim’s most recent exploration work at the Project has been resource definition drilling with HQ-diameter core in the San Jorge and Karen-Milagros areas. Drilling in the San Jorge area was completed underground from an adit, while drilling in the Karen-Milagros area was completed from surface.

Future exploration work will focus on infill drilling between the Karen-Milagros, San Jorge and Sam areas. Mineralization is open to the north and south and remains largely untested to the east of the Tesoro Fault and west of the Sam fault where greater target depths have lowered the near-term drilling priority.

 17 

 

1.4.3 Development and Operations

Road access to the Bongará region is provided primarily by the Carretera Marginal paved highway connecting the port city of Chiclayo to Pedro Ruiz (inland). Travel time to Pedro Ruiz takes on average 6 hours by car. It is a regional commerce center with hotels, restaurants, communication and a population estimated to be 10,000. The immediate Project area is not populated but there are several small villages nearby, which are supported by subsistence farming.

Current access to the Project is by foot, mule or helicopter. A road is under construction from the community of Shipasbamba. The Project area has little existing infrastructure with only an access road under construction and a number of primitive camps and drill pads. Drilling has been accomplished using helicopter support from the village of Shipasbamba which lies 10 km to the southeast. A Project core shed, office and sample storage facility is located in Shipasbamba.

 

1.5Mineral Processing and Metallurgical Testing

Votorantim retained a metallurgical consultant, Smallvill S.A.C. of Lima, Peru (Smallvill) to perform metallurgical studies on Florida Canyon mineralization types in 2010, 2011 and 2014. All the metallurgical testing programs aimed to produce commercial quality concentrates from a polymetalic lead-zinc mineralization. The tested samples show heads grades significantly higher when compared to other known mineral deposits in the region. SRK has relied heavily on these studies for recovery and cost forecasting to develop cut-off grades for resource reporting.

The majority of the resource is sulfide. The Florida Canyon sulfide resource consists of zinc and lead sulfides in a limestone matrix where zinc is in higher proportions than lead. There are no deleterious elements present in concentrates in high enough levels to trigger smelter penalties.

The 2014 metallurgical testing focused on quantifying recovery in the transitional and oxide material as it relates to a measurable zinc oxide:zinc total ratio (ZnO/ZnT). The ratio was determined from 2,813 samples from 423 drillholes with good spatial representation. Depending on their availability and applicability, samples were taken from either coarse rejects or pulp samples. The ratio was estimated into the block model for each metal of interest. SRK developed a sliding-scale recovery curve for each metal using the ratio.

The recovery estimates for Florida Canyon relative to ZnO/ZnT are illustrated in Figure 1-1. Table 1-5 provides the recovery estimates by material type.

Table 1-5: Florida Canyon Metal Recoveries by Material Type

 

Parameter   Material Type  
  Sulfide Mixed Oxide
ZnOx/ZnT Ratio <= 0.2 0.2 to 0.8 >= 0.8
Zn Recovery 93% (-0.8833 (ZnOx/ZnT) + 1.1067) * 100 40%
Pb Recovery 84% (-0.7333 (ZnOx/ZnT) + 0.9867) * 100 40%
Ag Recovery 56% (-0.4 (ZnOx/ZnT) + 0.64) * 100 32%

Source: SRK, 2017

 18 

 

 

 

 

Source: SRK, 2017

Figure 1-1: Florida Canyon Metal Recoveries Relative to ZnO/ZnT Ratio

 

 

Anticipated concentrate grades used in cut-off grade calculations are 50% for both zinc and lead concentrates, the latter containing associated silver.

SRK sees opportunities for more advanced test work to optimize the metallurgical flow sheet. Previous test work used conventional procedures that were not specific to Florida Canyon material types. Similarly, fines encountered in previous work were not handled appropriately, resulting in sub-optimal flotation. Sample selection is a key element and more site-specific test work is expected to enhance overall recovery projections at the next level of study.

 

1.6Mineral Resource Estimate

Since the 2013 resource estimate (SRK, 2013), Millpo conducted a considerable amount of resampling and metallurgical test work to determine recoverable sulfide and oxide grades for both zinc and lead to better understand recoverable metal in the deposit. This work led to a change in the definition of oxide, transition, and sulfide domains. In the 2013 model, oxide, transition, and sulfide domains were developed based on core logging and then individual metallurgical recoveries were assigned as to each domain. Following the 2014 metallurgical test work, it was determined that a quantitative approach utilizing the ratio of estimated oxide zinc grade to estimated total zinc grade would provide the best representation of the recoverable resource.

The 2017 resource model was built by Votorantim and validated by SRK. Development of the 2017 resource estimate involved two separate grade estimations. First, primary reporting grades were estimated using the same samples as the 2013 resource estimate. This estimate assigned the grades from which metal quantities were calculated in the resource. A second resource estimate was conducted using the Votorantim 2014 sample program to assign sulfide and oxide grades for both zinc and lead. These grades were used to calculate a zinc oxide to total zinc ratio (ZnOx/ZnT), which was then used to determine if material was oxide, sulfide, or mixed and to assign a recovery to each modeled block based on that ratio.

 19 

 

The Mineral Resource estimate was based on a 3-D geological model of major structural features and stratigraphically controlled alteration and mineralization. A total of 23 mineral domains were interpreted from mineralized drill intercepts, comprised mostly of 1 m core samples. The project is in metric units. Zinc, lead and silver were estimated into model blocks using Ordinary Kriging (OK). Oxide, Sulfide and Mixed material types were determined based on the ZnOx/ZnT ratio. Density was determined from a large percentage (55%) of measured values, which were used to develop equations for density assignment based on rock type and kriged metal content of the samples.

Resources were reported to Measured, Indicated and Inferred classification compliant with CIM definitions according to NI 43-101 guidance. Blocks classified as Measured were estimated by Ordinary Kriging using at least three composites within 25 m in the major and semi-major search directions and 10 m in the minor search direction. Blocks classified as Indicated were estimated by Ordinary Kriging using at least three composites within 50 m in the major and semi-major search directions and 20 m in the minor search direction. Blocks classified as inferred were estimated by Ordinary Kriging using at least two composites within 100 m in the major and semi-major search directions and 40 m in the minor search direction. A fourth category was flagged in the model including blocks estimated beyond the limits above.

SRK validated the Votorantim model using the following criteria:

·SRK independent grade estimate compared to the Votorantim grade estimate;
·Visual comparative analysis between composite and block grades; and
·Statistical comparison of global averages of the original composite values and the model estimates.

SRK concludes that the model is adequate if not slightly conservative for the deposit and is suitable for use in preliminary mine planning.

The Mineral Resource estimate for the Florida Canyon zinc-lead-silver deposit is presented in Table 1-6.

 20 

 

Table 1-6: Mineral Resource Statement for the Florida Canyon Zn-Pb-Ag Deposit, Amazonas Department, Peru, SRK Consulting (U.S.), Inc., July 13, 2017

 Zn Eq Contained

 

 

 

Category

 

Mass (kt)

Zn Grade Pb Grade

Ag

Grade

ZnEq Grade Zn Contained Pb Contained Ag Contained Zn Eq Contained
(%) (%) (g/t) (%) (kt) (klb) (kt) (klb) (kg) (koz) (kt) (klb)
Measured 1,285 13.13 1.66 19.42 14.68 169 372,200 21 46,900 25,000 800 189 415,900
Indicated 1,970 11.59 1.45 17.91 12.95 228 503,500 29 63,200 35,300 1,130 255 562,700

Measured

+

Indicated

 

3,256

 

12.2

 

1.53

 

18.51

 

13.63

 

397

 

875,700

 

50

 

110,100

 

60,300

 

1,930

 

444

 

978,600

Inferred 8,843 10.15 1.05 13.21 11.16 898 1,978,900 93 204,900 116,900 3,760 986

2,174,80

0

 

 

Source: SRK, 2017

·Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves.
·Grades reported in this table are "contained" and do not include recovery.
·Mineral resources are reported to a 2.8% recovered zinc-equivalent (RecZnEq%) cut-off grade.
oAssuming the average recoveries for the resource, this corresponds to non-recovered cut-off grade of 3.6% contained ZnEq%.
·RecZnEq% was calculated by multiplying each block grade by its estimated recovery, then applying mining costs, processing costs, general and administrative (G&A) costs, smelting costs, and transportation costs to determine an equivalent contribution of each grade item to the Net Smelter Return.
oMining costs, processing, G&A, smelting, and transportation costs total US$74.70/t.
oMetal price assumptions were: Zinc (US$/lb 1.20), Lead (US$/lb 1.0) and Silver (US$/oz 17.50),
oAs the recovery for each element was accounted for in the RecZnEq%, recoveries were not factored into the calculation of the 2.8% cut-off grade.
oAverage metallurgical recoveries for the resource are: Zinc (79%), Lead (72%) and Silver (50%)
oThe equivalent grade contribution factors used for calculating RecZnEq% were: (1.0 x recovered Zn%) + (0.807 x recovered Pb%) + (0.026 x recovered Ag ppm).
·The contained ZnEq% grade reported above was calculated by dividing the RecZnEq% grade by the calculated zinc recovery.
·Density was calculated based on material types and metal grades. The average density in the mineralized zone was

3.01 g/cm3.

·Mineral Resources, as reported, are undiluted.
·Mineral Resource tonnage and contained metal have been rounded to reflect the precision of the estimate and numbers may not add due to rounding.

 

 

 

1.7Mineral Reserve Estimate

No Mineral Reserves were estimated as part of this PEA.

 

1.8Mining

Both longhole open stoping with backfill and cut and fill mining methods have been selected for the mine planning work. The mining method selection was based on the mineralization shape, orientation, and the desire to put tailing material underground. Geotechnical assessment of the orebody shape and ground conditions confirmed the mining method selection. The design parameters have been laid out using empirical design methods based on similar case histories. Cut and fill opening sizes are 3 m x 3 m and stopes are 3 m wide x 16 m in height.

An NSR approach was used to calculate the value of a block. Two products will be produced, lead and zinc concentrates. The lead concentrate will contain a payable amount silver. Stope optimization within VulcanTM software was used to determine potentially economically minable material, based on the NSR value and a cut-off of US$42.93 for cut and fill areas, and a cut-off of US$41.40 for longhole areas. The stope optimizer output shapes were visually inspected and isolated blocks (i.e., small blocks far from larger groups of blocks or where additional development is not practical or economically feasible) were removed from the mining block inventory. The resource model was queried against the final stope optimization shapes to determine tonnes and grade of material inside the shapes and mining dilution and recovery factors were applied.

 21 

 

A development layout was created to provide access to the mining levels and to tie levels into ramps. Access to the underground workings will be via three main portals (San Jorge, P01 and P03). An additional portal (P02) will be used primarily for ventilation, and three additional drifts will daylight to facilitate ventilation.

The tonnes and grade of the resource material contained within the mining blocks, adjusted by recovery and dilution, and categorized by the resource classification is provided in Table 1-7. The mine plan resource consists of a total of 11.2 Mt with an average grade of 8.34% Zn, 0.90% Pb, and

11.3 g/t Ag and is made up of Measured, Indicated, and Inferred material. Estimated average dilution, processing recoveries and the ZnOx/ZnT ratio is also provided in Table 1-8.

Table 1-7: Mine Plan Resource for the Florida Canyon Zn-Pb-Ag Deposit, Amazonas Department, Peru, SRK Consulting (U.S.), Inc., July 21, 2017

 

 

Category

Mass Zn Grade Pb Grade Ag Grade NSR *

ZnEq

**

Zn Contained Pb Contained Ag Contained ZnEq ** Contained
  (kt) (%) (%) (g/t) (US$/t) (%) (kt) (kt) (kg) (kt)
Measured 1,293 10.64 1.33 15.60 197.12 12.38 138 17 20,157 160
Indicated 2,011 8.77 1.08 13.44 166.85 10.22 176 22 27,026 206
M&I 3,303 9.51 1.18 14.28 178.69 11.05 314 39 47,182 365
Inferred 7,883 7.86 0.78 10.07 135.36 9.03 619 62 79,354 712
Total Mine Design

 

11,187

 

8.34

 

0.90

 

11.31

 

148.16

 

9.66

 

933

 

101

 

126,536

 

1,081

Source: SRK, 2017

* NSR is calucalted using variable recoveries based on sulfide/oxide ratios (recovery ranging from 32%-93%), a Zn price of US$1.20/lb, a Pb price of US$1.00/lb, an Ag price of US$17.50/oz. The transportation charge is US$70.00/t conc, Zn treatment charge of US$115/t conc, Pb treatment charge of US$100/t conc, Zn refining charge of US$0.115/lb Zn, and Pb refining charge of US$0.1/lb Pb. These factors were used for mine planning and vary somewhat from the final economic model.

** ZnEq estimate is based on a NSR value of US$19.62 per 1% Zn. The US$19.62 is calculated using a Zn price of US$1.20/lb, a Pb price of US$1.00/lb, an Ag price of US$17.50/oz. The ZnEq also includes TC/RC and transportation costs and assumes an average Zn recovery of 78.15% which differs somewhat from that presented in the economic model. An example of the NSR to ZnEq calculation is (148.16/19.62)/0.7815.

 

 

 

Table 1-8: Mine Plan Resource Average Process Recovery

 

  Process Recovery  
Ag (%) Pb (%) Zn (%) ZnOx/ZnT Ratio Dilution
Mine Plan Resource 51.7 74.3 79.8 0.26 34%

Source: SRK, 2017

 

 

 

The PEA is preliminary in nature, that it includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the PEA will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

A production schedule was generated using iGantt software. The schedule targeted a production rate of 2,500 t/d (912,500 mineralized tonnes per year).

 22 

 

1.9Recovery Methods

Given the location of the deposit, it is anticipated three underground portals will be producing mineralized material at any given time. Because of the challenging topography and road conditions, trucking Run-of-Mine (ROM) mineralized material would demand a lengthy route from the underground portals to the plant’s location. Instead, SRK has designed a set of conventional overland conveyors with a maximum slope of 20° to simplify the operation and significantly reduce the cost of transferring mineralized material from the mine portals to the process plant. A portable, primary jaw crusher is to be installed at each underground mine portal to ensure the ROM is adequately sized for the conveying system.

Florida Canyon mineralized material will be processed using a conventional concentration plant consisting of three stage crushing, grinding using a single-stage ball mill to 80% minus 44 microns, and differential flotation to produce two final products: a zinc concentrate and a lead concentrate containing payable silver. The concentrate will be truck transported to the point of sale. Tailings will be used as backfill or filtered and conveyed to a dry stack tailings storage facility.

The mill will process 2,500 t/d of fresh mineralized material, and produce approximately 287 t of zinc concentrate grading 50% Zn, 1% Pb, and 0.6 g/t Ag and approximately 46 t of lead concentrate grading 50% Pb, 8.4 g/t Ag, and 6% Zn.

The power requirements for the projected milling operation is estimated at maximum 3.5 MW. Power for milling operations will be supplied by a third-party as line power at an estimated cost of US$0.084/kWh. The water requirement for the mill at a capacity of 2,500 t/d is estimated at maximum 20 liters per second. Water for processing will be acquired from surface water sources and as recycled water from tailings dewatering operations. Reagents and grinding balls, will be supplied by road from Pedro Ruiz and stored locally.

There are potential synergies for processing oxide mineralization at Florida Canyon using expertise that Votorantim has gained at the Vazante and Morro Agudo mines in Brazil. These other existing operations have demonstrated success recovering hemimorphite, smithsonite, and hydrozincite, which may improve future recovery projections for Florida Canyon.

 

1.10Project Infrastructure

Florida Canyon is a greenfield project with no substantive existing infrastructure. The communities in the region are small and cannot support the operation from an infrastructure standpoint so a camp will be required. The infrastructure requirements for the Project will include an upgrade to the existing 26 km access road and the construction of an additional 24 km of support roads for access to mine portals, plant, and other infrastructure.

Site facilities will include the processing plant, mine, crushers and conveyors for ore/waste transportation, mine backfill systems including a paste backfill plant and cemented rock fill plant, water supply piping and tank, a dry stack TSF, 400 person camp, septic system, potable water treatment system, site power distribution, health/safety environmental office, mine office, mine dry, rescue and first aid building, security gate house, truck scale, truck wash, laboratory, incinerator system, fuel storage and pumping system.

 23 

 

Makeup water for the processing plant will be supplied from a local creek through a piping system to a storage tank that will also provide fire system water. The majority of the water requirements will be provided by rainfall and recycle water from the dry stack tailings storage facility (TSF) returned to the processing plant facility. A third-party will supply line power through a hydroelectric power generator, transmission line, and substation owned by the third party with costs recovered through an electricity surcharge over the life of the Project. Zinc concentrate will be transported by 30 t over the road trucks to the Votorantim Cajamarquilla smelter near Lima. Lead concentrate will be trucked to the Port of Callao near Lima, and shipped to an overseas lead smelter.

 

1.11Environmental Studies and Permitting

Environmental permits for mineral exploration programs are divided into two classes. Class I permits allow construction and drilling for up to 20 platforms with a maximum disturbance of 10 ha. A Class II permit provides for more than 20 drill locations or for a disturbance area of greater than 10 ha. Votorantim has filed applications for and received Class II permits for various phases of the Project and has filed and received the required associated permits.

Permitting requirements for mining include an Estudio de Impacto Ambiental (EIA) that describes in detail the mining plan and evaluates the impacts of the plan on environmental and social attributes of the property. Baseline studies include air quality, surface and groundwater quality, flora and fauna surveys, archeological surveys and a study of the social conditions of the immediate property and an area of interest that includes local communities. Public meetings are required in order that local community members can learn about and comment on the proposed operation. Many of the baseline studies required for mining have been completed by Votorantim.

 

1.12Conclusions and Recommendations

 

1.12.1 General

The Florida Canyon Zinc Project is a significant greenfields potentially underground mineable high- grade zinc deposit containing associated lead and silver. The Project has a large land position and strong technical and financial backing through Solitario’s earn-in JV partner Votorantim. While this document represents the first formal economic evaluation of the Project, Votorantim and Cominco report having previously spent over US$60 million on drilling, test work and strategic planning for development (Solitario, 2014). Current projections in the zinc metal market suggest a near-term reduction in zinc supply as current major producers exhaust reserves.

SRK’s site visit to the project on the ground in northern Peru found it to be a well-organized facility, with current QA/QC protocols in place for drilling data verification and validation. Material handling, core storage and security were all at or above industry standards.

SRK used a number of methods to validate the Votorantim resource block model starting with a face-to-face meeting with the modeler and following on with a thorough audit of the model source data, geologic modeling techniques, grade and tonnage estimation methods and classification protocols. SRK found these to be in line with industry standards, having been produced with recognized mining software, defensible data and reasonable assumptions. SRK was able to independently validate the model results.

A significant component of the SRK input to this PEA was the development of the underground mine plan. Because Florida Canyon is a polymetallic zinc-lead-silver deposit, each model block in the mine model was evaluated on an NSR basis, which included an estimate of recovery. Recovery was developed from a robust 2014 metallurgical campaign that characterized all expected material types. A recovered grade by block was used to build the underground stoping plan, complete with access, ventilation and an assessment of mine recovery and dilution.

 24 

 

SRK is unaware of any environmental, permitting, legal, title, taxation or marketing factors that could limit or affect the resource stated in this document. The project will benefit from additional infill and exploration drilling, additional process-metallurgical test work, detailed engineering studies for infrastructure and tailings management and forward planning to clearly define concentrate transport and smelter costs.

 

1.12.2 Mineral Resource Estimate

The current exploration model for the Project has been applied successfully in drillhole planning and resource definition. There is low risk to the Project if no additional exploration is completed. However, additional drilling for resource definition has a strong potential to expand the known resource extent and upgrade Inferred resources to Measured and Indicated. The most prospective targets include:

·Extension drilling south of the San Jorge zone and northeast of the Karen-Milagros zones are considered the highest priority to increase high-grade zinc sulfide mineralization. Both zones are open in the recommended areas of drill testing;
·Infill drilling several large un-drill tested areas surrounded by mineralized zones within the mineralized footprint has the potential to significantly increase resources;
·Extension drilling peripheral to the currently defined mineralized footprint; and
·Further develop drill targets over the 20 km long northern Florida Canyon mineralized corridor where large areas of strong zinc in soil and rock chip geochemistry indicate the potential for additional mineralized zones.

At present, the deposit is open laterally to the north and south as well as to the west and east on the downthrown sides of the horst that defines the limits of exploration to date. Gaps in the drill pattern within the footprint of the existing drilling provide another opportunity to increase resources where drill spacing limits the continuity of stratigraphically controlled mineralization. A constraint on effective exploration and delineation drilling in these areas is the access to drilling stations due to the rugged terrain. The completion of a road into the area will help to expedite future drilling and development programs by providing increased access and lowering costs.

The discovery of the high-angle, high-grade San Jorge zone has prompted more emphasis on angled drilling, where most of the historic drilling is vertical to near-vertical and is therefore ineffective at locating and defining near-vertical structures. These “break-through” structures have been mapped on surface in several locations, but due to logistical constraints, have not been adequately drill tested for their down-dip continuity. Similarly, there appear to be additional drill targets at the intersection of the high-angle structures and the flat manto zones, where grades are locally enhanced. These concentrations may be present within the existing drilling footprint, but require additional drilling to delineate. The high grade and potential tonnage of such targets provide an incentive to locate and further define resources of this geometry.

 25 

 

 

1.12.3 Mineral Processing and Metallurgical Testing

Processing of sulfide mineralization (zinc-lead-silver) from the Florida Canyon deposit is straight forward using conventional flotation to a concentrate followed by offsite smelting. Producing a commercial quality zinc concentrate from mixed material needed to incorporate Dense Media Separation methods (DMS) in order to maintain high recoveries (80+%). A conventional flotation approach reached commercial quality (about 50% Zn) at the expense of lower metal recovery, with a similar outcome for the lead concentrate. It is SRK’s opinion that conventional flotation should be able to achieve enhanced commercial level results (grade and recovery) under improved crushing, grinding, and flotation conditions.

Available information about silver is very limited. The laboratory developed a relationship between lead's head grade and silver grade in the final lead concentrate. This relationship follows what is typically observed in this type of deposit, therefore as this stage of development it is assumed to be valid, but SRK recommends confirming it in the next testing phase of the project.

To optimize recovery and grade when attempting to reach separation of the zinc and lead minerals into their respective commercial quality concentrates, SRK recommends approaching the selection of samples for the next phase of metallurgical sampling and testing:

·The core logging needs to incorporate attributes like clay percent, clay type, RQD, oxide content, sulfide content;
·Assaying of the core should include whole rock analysis; and
·Collect samples for metallurgical testing representing distinctive zones in the deposit. Grade variability should be secondary criteria when selecting samples, but they must be reasonably close to what a potential mining operation would be able to deliver to the mill.

 

1.12.4 Mineral Reserve Estimate

There were no Mineral Reserves estimated for this PEA.

 

1.12.5 Mining Methods

Depending upon the geometry of the mineralized zones, SRK selected longhole stoping to be used in steeply dipping zones and mechanized drift-and-fill extraction methods in shallowly dipping mantos. Conventional room and pillar mining on a checkerboard pattern could be applied to specific zones of the Florida Canyon project, particularly in lower grade areas, and should be considered in future trade- off studies at the prefeasibility level. Cemented paste backfill will be placed underground to increase mining recovery and to stabilize mined-out areas. Adits will provide access from the surface to the mineralized zones currently defined in the mine plan.

Sub-level open stoping parameters for this study were based on empirical relations from case histories. As the project advances, additional geotechnical stability modeling using numerical methods is recommended. Karst topography is prevalent in the district and karst caverns were encountered during the excavation of the San Jorge Adit. Additional geotechnical and hydrogeological evaluation of this condition is required to ensure safe operating conditions in the underground mining. A crown pillar of 30 m has been used for planning. This assumption should be reevaluated in future work. Overall, a cost-benefit analysis of ground support, dilution, mine recovery, and ventilation should be undertaken at the next level of study.

Operating costs, which ultimately define NSR value and drive stope designs, were developed from benchmarks, analogous projects in the region, and commercial cost sources. SRK recommends a revision of these costs from first principles as the project advances.

 26 

 

 

SRK notes that there are likely opportunities to improve the production schedule. Opportunities include improved sequencing of high grade material and, potentially, a decrease in the pre-production timeframe. A more detailed design and schedule with corresponding trade-off studies, as well as more detailed construction timeframe estimates, would be required for the next phase of study.

 

1.12.6 Recovery Methods

The Florida Canyon polymetallic zinc-lead-silver deposit can be processed using a conventional concentration plant consisting of three-stage crushing, grinding using ball mill, and differential flotation to produce two final products: a zinc concentrate and a lead concentrate. Detailed sizing and costing of the processing plant components will follow additional metallurgical testing proposed in this study. Power supply and water supply appear to be fairly well defined for the project, though additional studies may be needed to refine these services and the costs of these services to the project.

 

1.12.7 Project Infrastructure

The Florida Canyon deposit is located in steep terrain in a remote part of northern Peru with moderate to high rainfall. These geographic and climatic conditions pose challenges to both access and infrastructure development.

As presently understood, the key support services of power supply and water supply are available and part of a district-wide infrastructure improvement campaign being implemented by the Peruvian government and related third-party providers. The most significant advancement in the infrastructure investigation for the PEA was identifying the probability of hydroelectric power distribution to the site, as a lower cost alternative to on-site power generation. Water supply for operations appears to be straight forward, with abundant surface water available for mineral processing and camp support.

The infrastructure component with the largest footprint and projected cost is the tailings storage facility. As part of this study, SRK has evaluated this as a dry stack facility in order to achieve geotechnical stability and reduce the area requiring reclamation. Trade-off studies are warranted to optimize moisture content, binding characteristics, and placement and compaction methods during tailings placement.

 

1.12.8 Environmental Studies and Permitting

Additional environmental baseline studies are required for further project development.

Impact to groundwater is expected to be minimal as underground surface exposures are minor and future exposed sulfides are not acid generating. There are no groundwater wells required for processing or potable water supply. There will be little or no surface area disturbance related to waste rock placement.

Tailings are predicted to have low amounts of iron sulfide and to be geochemically stable with respect to acid rock drainage. There is also substantial neutralization capacity in the carbonate host rocks to mitigate acid generation. Residual lead and zinc sulfides have low acid-generating capacity; however, they are subject to metal leaching and therefore require compaction during placement.

SRK recommends in future studies to design the tailings surface and spillway stormwater structure and evaluate options to reduce or eliminate the long-term obligation for monitoring and maintenance.

 27 

 

 

1.12.8 Recommendations – Work Programs and Costs

SRK acknowledges, after examination of the Project data set, that there have been a significant number of technical studies completed by Votorantim, many of which are beyond PEA. Therefore, the work elements listed in Table 1-9 represent mostly prefeasibility and feasibility level engineering and drilling to support those studies.

At the juncture where prefeasibility level engineering has been completed, the Project will likely warrant further public reporting to an international standard (JORC, or NI 43-101). Technical information required to achieve this level of project development are listed in Table 1-9. A cost estimate for these work elements is included in the table.

Table 1-9: Summary of Costs for Recommended Work

 

Work Program Estimated Assumptions/Comments
Engineering Studies Cost US$  
Metallugical variability and recovery optimization test work 500,000 Commercial Laboratory
Prefeasibility Study (PFS) and Trade-off Studies 600,000 Votorantim or consultant engineer
Subtotal Studies $1,100,000  
Drilling   Salaried new hire or contract PM
Exploration Drilling 2,100,000 20 holes to 350 m at US$300/m
Resource Conversion Drilling 2,100,000 20 holes to 350 m at US$300/m
Metallurgical Drilling for Flotation and Comminution 1,225,000 10 PQ holes to 350 m at US$350/m
Geotechical Drilling for Mining 500,000 10 holes oriented to 100 m at US$500/m
Geotechnical Drilling for Foundation Stability 225,000 50 holes to 30 m at US$150/m
Hydrogeological Drilling 600,000 4 holes to 300 m at US$500/m
Subtotal Drilling $6,750,000  
Studies + Drilling 7,600,000  
Contingency at 15% 1,435,000  
Total $9,285,000  

Source: SRK, 2017

 28 

 

2Introduction
2.1Terms of Reference and Purpose of the Report

This report was prepared as a National Instrument 43-101 (NI 43-101) Technical Report, Preliminary Economic Assessment (Technical Report or PEA) by SRK Consulting (U.S.), Inc. (SRK), with Votorantim Metais Holding S.A. (Votorantim) with Solitario Zinc Corp. (Solitario), (collectively, owners) on the Florida Canyon Zinc Project located in Amazonas Department, Peru (Florida Canyon or Project). The Project name was changed in 2017 from Bongará, as it was called previously, to Florida Canyon. Some of the figures in this report still reference Bongará. The reader is advised to use Bongará interchangeably with Florida Canyonwhen reviewing those figures.

This study represents the advancement of the Project from a 2014 Technical Report on Resources, to this 2017 PEA. Highlights of this PEA include a thirteen-year life-of-mine underground mine plan, comminution and flotation of zinc and lead concentrates with at a production rate of 2,500 t/d followed by dry-stack tailings storage. Site infrastructure includes line power to the site, water distribution systems, a townsite and access roads for construction and re-supply as well as for zinc concentrate transport to a point of sale at the Cajamarquilla smelter.

The quality of information, conclusions, and estimates contained herein is consistent with the level of effort involved in SRK’s services, based on: i) information available at the time of preparation, ii) data supplied by outside sources, and iii) the assumptions, conditions, and qualifications set forth in this report. This report is intended for use by the owners subject to the terms and conditions of its contract with SRK and relevant securities legislation. The contract permits the owners to file this report as a Technical Report with Canadian securities regulatory authorities pursuant to NI 43-101, Standards of Disclosure for Mineral Projects. Except for the purposes legislated under provincial securities law, any other uses of this report by any third party is at that party’s sole risk. The responsibility for this disclosure remains with the issuing companies. The user of this document should ensure that this is the most recent Technical Report for the property as it is not valid if a new Technical Report has been issued.

The PEA is preliminary in nature, that it includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the PEA will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

This report provides Mineral Resources, and a classification of resources prepared in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and Reserves: Definitions and Guidelines, May 10, 2014 (CIM, 2014).

 

2.2Qualifications of Consultants (SRK)

The Consultants preparing this technical report are specialists in the fields of geology, exploration, Mineral Resource and Mineral Reserve estimation and classification, underground mining, geotechnical, environmental, permitting, metallurgical testing, mineral processing, processing design, capital and operating cost estimation, and mineral economics.

The following individuals, by virtue of their education, experience and professional association, are considered Qualified Persons (QP) as defined in the NI 43-101 standard, for this report, and are members in good standing of appropriate professional institutions. QP certificates of authors are provided in Appendix A. The QP’s are responsible for specific sections as follows:

 29 

 

·Walter Hunt, CPG, an employee of Solitario, is the QP responsible for Sections 2, 4 and parts of 20;
·J.B. Pennington, CPG is the QP responsible for Sections 5-10, 12, 14, 23, 24 and part of 1, 20, 25, and 26;
·Joanna Poeck, PE, MMSA is the QP responsible for Sections 15-16 and part of 1, 25 and 26;
·Jeff Osborn BEng Mining, MMSA is the QP responsible for Section 18-19, 21-22 and part of 1, 25 and 26;
·Daniel Sepulveda, RM-SME is the QP responsible for Sections 13, 17, the capital and operating cost for processing in Section 21, and part of 1, 25 and 26; and
·James Gilbertson, CGeol is the QP responsible for Section 11, the site visit, inspection of geological sampling and data collection practices, and review of resource estimation practices.
·John Tinucci, PhD, PE is the QP responsible for Section 16.2.

 

2.3Details of Inspection

James Gilbertson, C. Geol., of SRK Exploration Services (U.K.), visited the Florida Canyon Project site and core storage facility in Shipasbamba, Peru on May 5 to 7, 2014. This trip included a follow-up visit to Votorantim’s Lima, Peru office on May 9, 2014. Mr. Gilbertson is a Chartered Geologist in the Geological Society of London, and a Qualified Person in the discipline of resource geology, according to NI 43-101 requirements.

 

2.4Sources of Information

The sources of information include data and reports supplied by Solitario personnel and representatives of Votorantim, as well as documents cited throughout the report and referenced in Section 27.

 

2.5Effective Date

The effective date of this report is July 13, 2017.

 

2.6Units of Measure

The metric system has been used throughout this report. Tonnes are metric of 1,000 kg, or 2,204.6 lb. All currency is in U.S. dollars (US$) unless otherwise stated.

 30 

 

3Reliance on Other Experts

The Consultants used their experience to determine if the information from previous reports was suitable for inclusion in this technical report and adjusted information that required amending. This report includes technical information, which required subsequent calculations to derive subtotals, totals and weighted averages. Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, the Consultants do not consider them to be material.

Items such as mineral titles and agreements have not been independently reviewed by SRK and SRK did not seek an independent legal opinion of these items.

 31 

 

 

4Property Description and Location
4.1Property Location

The Florida Canyon Zinc Project (the Project, formerly called Bongará) is located in the Eastern Cordillera of Peru at the sub-Andean front in the upper Amazon River Basin. It is within the boundary of the Shipasbamba community, 680 km north-northeast of Lima and and 245 km northeast of Chiclayo, Peru, in the District of Shipasbamba, Bongará Province, Amazonas Department (Figure 4-1). The Project area can be reached from the coastal city of Chiclayo by the paved Carretera Marginal road. The central point coordinates of the Project are approximately 825,248 East and, 9,352,626 North (UTM Zone 17S, Datum WGS 84). Elevation ranges from 1,800 masl to approximately 3,200 masl. The climate is classified as high altitude tropical jungle in the upper regions of the Amazon basin. The annual rainfall average exceeds 1 m with up to 2 m in the cloud forest at higher elevations.

 32 

 

 

 

 

Source: Votorantim, 2013b

 

Figure 4-1: Project Location Map

 33 

 

4.2Mineral Titles

Florida Canyonis a mineral exploration project comprised of sixteen contiguous mining concessions covering approximately 12,600 ha (Table 4-1). The concession titles are in the name of Minera Bongará and are subject to the Minera Bongará joint venture agreement between Solitario and Votorantim. All of these concessions are currently titled.

The Minera Bongará concessions are completely enveloped by a second group of thirty-seven contiguous mining concessions, covering approximately 30,700 ha (Table 4-2). The concession titles are in the name of Minera Chambara. Of the thirty-seven concessions, twelve titles are pending. Claim areas are shown in Figure 4-2.

According to Peruvian law, concessions may be held indefinitely, subject only to payment of annual fees to the government. At the time of this study, concession payments were current for Minera Bongará claims, with 2017 fees of US$122,600 (Table 4-1). The fees for Minera Chambara total US$140,530 and these fees do not include the additional nine Charlita claims filed in January, 2017, which are still pending (Table 4-2). Minera Chambara, a Peruvian company also subject of a separate joint venture agreement between Votorantim and Solitario, holds mineral concessions surrounding the Minera Bongará claims but which do not contain any of the resources subject of this economic analysis.

Votorantim, who has served as operator of the joint venture company Minera Bongará, entered into a surface rights agreement with the local community of Shipasbamba which controls the surface rights of the Project. This agreement provides for annual payments and funding for mutually agreed upon social development programs in return for the right to perform exploration work including road building and drilling.

 34 

 

Table 4-1: List of Minera Bongará Mineral Claims

 

Concession Name Number Status Hectares Claim Date 2017 Holding Fees (US$) District
BONGARA CINCUENTICINCO 10233396 Titled 1,000 8/7/1996 23,000.00 FLORIDA/SHIPASBAMBA
BONGARA CINCUENTICUATRO 10233296 Titled 600 8/7/1996 13,800.00 FLORIDA/SHIPASBAMBA
BONGARA VEINTISIETE 10783595 Titled 300 6/26/1995 6,900.00 SHIPASBAMBA
DEL PIERO UNO 10338505 Titled 1,000 11/2/2005 9,000.00 FLORIDA/SHIPASBAMBA
DEL PIER DOS 10338405 Titled 600 11/2/2005 5,400.00 FLORIDA/SHIPASBAMBA
DEL PIERO TRES 10338605 Titled 700 11/2/2005 6,300.00 FLORIDA/SHIPASBAMBA
DEL PIERO CUATRO 10000206 Titled 500 1/3/2006 4,500.00 FLORIDA/SHIPASBAMBA
DEL PIERO CINCO 10000306 Titled 1,000 1/3/2006 9,000.00 SHIPASBAMBA
DEL PIERO SEIS 10204507 Titled 1,000 3/23/2007 9,000.00 CAJARURO/FLORIDA
VM 42 10190507 Titled 1,000 3/21/2007 9,000.00 CAJARURO/FLORIDA/ SHIPASBAMBA
VM 74 10193707 Titled 1,000 3/21/2007 9,000.00 SHIPASBAMBA
VM 75 10193807 Titled 1,000 3/21/2007 9,000.00 SHIPASBAMBA
VM 94 10045708 Titled 900 1/28/2008 2,700.00 FLORIDA/SHIPASBAMBA
VM 95 10045808 Titled 500 1/28/2008 1,500.00 FLORIDA
VM 97 10046008 Titled 1,000 1/28/2008 3,000.00 FLORIDA/SHIPASBAMBA
VM 98 10046108 Titled 500 1/28/2008 1,500.00 FLORIDA/SHIPASBAMBA
Total         $122,600.00  

Source: Solitario, 2017

 35 

 

Table 4-2: List of Minera Chambara Mineral Claims

 

Concession Name Number Status Hectares Claim Date 2017 Holding Fees (US$) District
ANGIE KAROLL TRES 10387906 Titled 900 1/3/2006 8,100.00 CAJARURO
ANGIE KAROLL CUATRO 10388106 Titled 300 1/3/2006 2,700.00 CAJARURO
BONGARA VEINTIDOS M 10053315 Titled 1000 1/5/2015 3,000.00 CAJARURO/ YAMBRASBAMBA
BONGARA VEINTITRES M 10053215 Titled 671.9322 1/5/2015 2,015.80 YAMBRASBAMBA
CAROLINA 1 M 10106114 Title Pending 500 1/2/2014 1,500.00 YAMBRASBAMBA
CAROLINA 2 M 10106014 Titled 500 1/2/2014 1,500.00 FLORIDA/ YAMBRASBAMBA
CHARITO 2007 10199807 Titled 1000 3/23/2007 9,000.00 CAJARURO/ SHIPASBAMBA
DEL PIERO SIETE 10205907 Titled 1000 3/23/2007 9,000.00 CAJARURO/ YAMBRASBAMBA
DEL PIERO OCHO 10205807 Titled 1000 3/23/2007 9,000.00 CAJARURO/ YAMBRASBAMBA
MINA 4 M 10052215 Titled 300 1/5/2015 900.00 CAJARURO
SAN JOSECITO M 10052015 Title Pending 1000 1/5/2015 3,000.00 CAJARURO/ YAMBRASBAMBA
TIA VIOLETA M 10113114 Title Pending 1000 1/2/2014 3,000.00 YAMBRASBAMBA
VIOLETA 1 M 10113214 Titled 1000 1/2/2014 3,000.00 FLORIDA/ YAMBRASBAMBA
VM 29 10189207 Titled 1000 3/21/2007 9,000.00 CAJARURO
VM 30 10189307 Titled 1000 3/21/2007 9,000.00 CAJARURO
VM 33 10189707 Titled 1000 3/21/2007 9,000.00 CAJARURO
VM 34 10189607 Titled 1000 3/21/2007 9,000.00 CAJARURO
VM 36 10190107 Titled 1000 3/21/2007 9,000.00 CAJARURO
VM 37 10189907 Titled 1000 3/21/2007 9,000.00 CAJARURO
VM 39 10190207 Titled 1000 3/21/2007 9,000.00 CAJARURO/JAMALCA
VM 40 10190407 Titled 1000 3/21/2007 9,000.00 CAJARURO/JAMALCA/ SHIPASBAMBA
VM 96 10045908 Titled 271.4725 1/28/2008 814.42 FLORIDA
VM 99 10046208 Titled 244.745 1/28/2008 734.24 FLORIDA/ SHIPASBAMBA
VM 100 10046308 Titled 1000 1/28/2008 3,000.00 JAZAN/ SHIPASBAMBA
VM 101 10046408 Titled 1000 1/28/2008 3,000.00 JAZAN/SANJERONIMO/ SHIPASBAMBA
VM 102 10046508 Titled 600 1/28/2008 1,800.00 SANJERONIMO/ SHIPASBAMBA
VM 133 10134708 Titled 600 2/6/2008 1,800.00 JAZAN/ SHIPASBAMBA
VM 311 10099610 Titled 555.282 2/1/2010 1,665.85 FLORIDA/ YAMBRASBAMBA
             
CHARLITA 5B M 10049017 Title Pending 600 1/2/2017 0.00 FLORIDA/ YAMBRASBAMBA
CHARLITA 5A M 10049117 Title Pending 800 1/2/2017 0.00 FLORIDA/ YAMBRASBAMBA
CHARLITA 4 M 10049217 Title Pending 1000 1/2/2017 0.00 FLORIDA/ YAMBRASBAMBA
CHARLITA 3 M 10049317 Title Pending 1000 1/2/2017 0.00 CAJARURO/FLORIDA/ YAMBRASBAMBA
CHARLITA 2 M 10049417 Title Pending 1000 1/2/2017 0.00 CAJARURO/FLORIDA/ YAMBRASBAMBA

 36 

 

 

Concession Name Number Status Hectares Claim Date 2017 Holding Fees (US$) District
CHARLITA 1B M 10049517 Title Pending 900 1/2/2017 0.00 CAJARURO/ YAMBRASBAMBA
CHARLITA 1A M 10049617 Title Pending 1000 1/2/2017 0.00 CAJARURO/ YAMBRASBAMBA
BONGARA 60A M 10049717 Title Pending 1000 1/2/2017 0.00 YAMBRASBAMBA
BONGARA 57 M 10049817 Title Pending 1000 1/2/2017 0.00 YAMBRASBAMBA
Total         $140,530.30  

Source: Solitario, 2017

 37 

 

 

 

Source: Solitario2017

Figure 4-2: Map of Mineral Claims

 38 

 

 

4.2.1 Nature and Extent of Issuer’s Interest

Bongará

The Project is controlled by Minera Bongará S.A., and is subject to a joint venture agreement between Votorantim and Solitario since 2006. Votorantim is the operator of the Project and is responsible for keeping the property in good standing. Current ownership is 39% Solitario, 61% Votorantim. Votorantim will earn a 70% interest in Minera Bongará by continuing to fund all project expenditures through a feasibility study with no payback by Solitario. Votorantim is required to offer a loan facility at market rates for repayment of Solitario’s portion of construction capital. Solitario repays the loan through 50% of its project cash flow.

On August 15, 2006, an Agreement Letter was signed between Solitario, Minera Bongará and Votorantim Metais. The Letter defined the commitment of Votorantim to fund US$1.0 million in an annual mineral exploration program, which began in late October 2006.

On March 24, 2007, a definitive agreement superseding the Letter Agreement was signed between the Companies. This definitive agreement (Agreement) provides that the project interest owned by Votorantim and Solitario will be held through the ownership of shares in the joint operating company Minera Bongará , which controls 100% of the mineral rights and assets of the project.

Chambara

Current Chambara Ownership is 85%/15% Solitario/Votorantim. Votorantim may increase their interest to 49% of Minera Chambara by completing cumulative expenditures of US$6.25 million. Votorantim may further increase their interest to 70% by funding a feasibility study and providing a loan for Solitario’s 30% of construction capital. Solitario will repay the loan through 80% of its cash flow from production.

 

4.2.2 Property and Title in Peru

Mining in Peru is governed by the General Mining Law, which specifies that all mineral assets belong to the federal government. Mining concessions granted to individuals or other entities authorize the title holder to perform all minerals related activates from exploration to exploitation and, once titled, are irrevocable for so long as the fees are paid to the federal government on time. A provisional claim is applied for and title is granted if no other claim exists over the same area. A claim can only be granted in multiples of a quadricula, which is a 100 ha plot, up to a maximum size of 1,000 ha. No monumentation of the claim boundary in the field is necessary.

Annually a payment of US$3.00/ha (US$1.00 for a “small miner”) must be made by the 30th of June or the first business day thereafter to the Ministry of Energy and Mines (MEM) or the claim is automatically forfeited. Any claim not in commercial production exceeding a pro-rated average of US$100/ha for any year after the sixth anniversary incurs a penalty payment of US$6.00 added to the annual payment. If, by the 12th anniversary, commercial production has not been achieved then the penalty increases to US$20.00. The penalties are waived if the title holder shows that investments for each claim exceed ten times the value of the penalty for any given year.

Concessions are real assets and are subject to laws of private property. Foreign entities have the same rights as Peruvians to hold claims except for a zone within 50 km of international borders. Title holders have a right of access and development of minerals but an agreement is required with private property surface rights owners and formalized “Communities”. To ratify an agreement with a Community a majority of all members must vote in favor of the agreement as written. A recently issued law (as modified) also requires formal consultation with indigenous tribes in certain areas.

 39 

 

4.3Royalties, Agreements and Encumbrances

Peru imposes a sliding scale net smelter return royalty (NSR) on all precious and base metal production of 1% on all gross proceeds from production up to US$60,000,000, a 2% NSR on proceeds between US$60,000,000 and US$120,000,000 and a 3% NSR on proceeds in excess of US$120,000,000. No other royalty encumbrances exist for the Project.

Corporate income tax in Peru is charged at a flat rate of 30%. However, mining companies must also pay an additional tax varying from 2 to 8.4% of net operating profit.

 

4.4Environmental Liabilities and Permitting

 

4.4.1 Required Exploration Permits and Status

Environmental permits for mineral exploration programs are divided into two classes. Class I permits allow construction and drilling for up to 20 platforms with a maximum disturbance of 10 ha. A Class II permit provides for more than 20 drill locations or for a disturbance area of greater than 10 ha.

Class I permits require little more than a notification process for approval. Class II drilling permits require an environmental impact declaration (DIA), a permit for harvesting trees (if applicable), an archeological survey report (CIRA), a water use permit (ALA) and a Closure Plan.

Votorantim has previously filed applications for and received Class II permits for various phases of the Project and has filed and received the required associated permits. The 2017 review of existing exploration permit status indicates that only the archeological permits and the latest tree harvesting permit are still valid.

During exploration, Votorantim has developed a Social Management Plan with several programs ongoing in the community including:

·Communication, Information and Coordination Program with Residents
·Attention to Concern, Claims and Conflict Resolution Program
·Support Program for Participatory Environmental Monitoring and Information Workshops
·Recruitment and Training Program for Local Labor
·Support Program for Sustainable Socioeconomic Development
·Community Support Program in Education and Training.

 

4.2.2 Required Mining Permits

Permitting requirements for mining include an Estudio de Impacto Ambiental (EIA) that describes in detail the mining plan and evaluates the impacts of the plan on environmental and social attributes of the property. Baseline studies include air quality, surface and groundwater quality, flora and fauna surveys, archeological surveys and a study of the social conditions of the immediate property and an area of interest that includes local communities. Many of the baseline studies required for mining have been completed by Votorantim. Public meetings are required in order that local community members can learn about and comment on the proposed operation. Social outreach has been clearly demonstrated during Votorantim’s exploration efforts as described above.

Specific authorizations, permits and licenses required for future mining include:

·EIA (as modified during the mine life);
·Mine Closure Plan and Final Mine Closure Plan within two years of end of operation;

 40 

 

·Certificate of Nonexistence of Archaeological Remains;
·Water Use License (groundwater and/or surface water);
·Water construction authorization;
·Sewage authorization;
·Drinking water treatment facility license;
·Explosives use license and explosives storage licenses;
·Controlled chemicals certificate;
·Beneficiation concession;
·Mining authorization;
·Closure bonding; and
·Environmental Management Plan approval.

Information on environmental monitoring was limited in the SRK document review. Nevertheless, the need for additional monitoring in at least one dry and one wet period will be required for the EIA including terrestrial and aquatic fauna and flora and groundwater level and quality.

 

4.5Other Significant Factors and Risks

There are no known significant factors or risks affecting access, title or right or ability to perform work on the property that are not discussed herein.

 41 

 

5Accessibility, Climate, Local Resources, Infrastructure and Physiography
5.1Topography, Elevation and Vegetation

The Project area elevation ranges between 1,800 and 3,200 masl, with areas of steep topography consisting of prominent escarpments and deep valleys. Dense jungle or forest vegetation covers the Project area, as shown in Figure 5-1.

 

 

 

Source: Solitario, 2014

Figure 5-1: Photograph of the Florida Canyon Project Area

 

 

 

5.2Accessibility and Transportation to the Property

Road access to the Bongará region is provided primarily by the Carretera Marginal paved highway connecting the port city of Chiclayo to Pedro Ruiz Gallo (inland). Travel time to Pedro Ruiz takes on average 6 hours by car. Pedro Ruiz is a regional commerce center with hotels, restaurants, communication and a population estimated to be 10,000. The immediate Project area is not populated but there are several small villages nearby.

 42 

 

 

The access routes to the town of Pedro Ruiz near the Florida Canyon Project area, as well as the distance and road conditions are summarized in Table 5-1.

Table 5-1: Distance and Travel Time to Florida Canyon Project from Lima, Peru

 

Route Distance (km) Travel time (hours) Access
Lima-Chiclayo 800 1 hour 20 min air
    10 hours asphalt
Chiclayo-Pedro Ruiz Gallo 300 6 hours asphalt
Total   10 hours air
    1 ½ days ground

Source: Solitario, 2014

 

 

 

5.3Climate and Length of Operating Season

The climate at the Project is high altitude tropical jungle. The annual temperature at elevations between 1,000 masl and 2,000 masl averages around 25°C. Most precipitation occurs during the rainy season, between November and April. The annual rainfall average exceeds 1 m with up to 2 m in the cloud forest at higher elevations. Although exploration can continue year-round, surface exploration is more difficult during the rainy season when visibility hampers helicopter supported programs and muddy conditions hinder ground travel.

 

5.4Sufficiency of Surface Rights

The Project concession package provides legal basis for entry, exploration and mining. However, agreements are required with local surface rights owners prior to surface disturbing activities. Through the exploration period conducted to date, Votorantim has signed bi-annual agreements for the use of Surface Lands. These agreements establish the commitments and counter-commitments to which both parties are bound (Company and community or private owner).

 

5.5Infrastructure Availability and Sources

The Project area has little existing infrastructure with only an access road under construction and a number of primitive camps and drill pads (Figure 5-2 and Figure 5-3). Drilling has been accomplished using helicopter support from the village of Shipasbamba which lies 10 km to the southeast. The Project core shed and sample storage facility is located in Shipasbamba.

Proposed infrastructure presented as part of this PEA includes the following:

·Portal facilities (3) for underground mine access;
·Mobile crushing plant at portals;
·Water storage and supply piping;
·Process plant;
·Conveyor systems for ore and tailings;
·Dry stack TSF;
·Surface access roads;
·Powerlines from offsite power supply; and
·Mine camp, accommodations, water treatment facility.

 43 

 

 

 

 

Source: Votorantim, 2013a

Figure 5-2: Project Access Road

 

 

 

 

Source: Solitario, 2014

Figure 5-3: Photograph of Drilling Camp at Project Site

 44 

 

5.5.1 Proximity to Population Center

The Project has an office in Pedro Ruiz and a core shed and heliport located in the town of Shipasbamba nearer the deposit. No services are available in Shipasbamba. Drill sites, field camps and underground workings are located 10 km northwest of Shipasbamba. The small community of Florida is 1 to 2 km south of the drill camps on the foot trail from Tingo to the Project. Florida is a one to two hour walk from the largest field camp at El Roso. Road construction is planned to connect the drill camps and Florida.

Pedro Ruiz is the nearest town with commercial service including retail, hotels, restaurants and maintenance services. The nearest largest city with regular air service is Chiclayo, a coastal port city or Jaen, a small city approximately three hours by road. A paved air strip is available for private aircraft at Bagua Grande two hours from Pedro Ruiz on the Carretera Marginal road.

The small population near the Project is supported by subsistence farming. Saleable crops include coffee, rocoto pepper, yucca, fruit and vegetables. Cedar trees are also harvested and used in local construction.

 

5.5.2 Power

There is currently no substantive line power near the site. SRK considered a diesel-powered generator option for power supply. However, a third-party supplier, Energoret S.A.C, has a hydropower generation and transmission development project that will be located in close proximity to the mine. The Energoret system will generate 20 MW of power from a plant on a tributary to the Utcubamba River. Energoret indicates that half of the project, approximately 10 MW, has already been committed. The plant is designed to provide power to the city of Bagua Grande, west of their project, and to Pedro Ruiz to the east of Florida Canyon. Energoret indicates that it will invest in a transmission line to the Florida Canyon mine site and a substation on site.

 

5.5.3 Water

The operation will require water for use for processing, mining, dust suppression and potable consumption. The processing facility will utilize recycled water from the tailings facility and rainfall shed from the tailings for the majority of the processing needs. It is anticipated that there will be some ground water that will be encountered in the mine and captured in sumps and decantation basins for mine water needs.

Tesoro Creek, a small local drainage, has been used for domestic water supply by nearby residents. Clean water from this creek may be used for make-up process water, for fire suppression and for domestic requirements. It will be piped by gravity from the creek to a water storage tank. A small treatment plant will be utilized for potable water needs for town site and other support areas.

 

5.5.4 Mining Personnel

No trained mining personnel reside near the Project. Untrained labor is readily available from local communities where few employment opportunities exist. Peru is a mature mining country with a mobile workforce. Abundant trained labor is present in all categories of mining throughout Peru.

 45 

 

 

5.5.5 Potential Mine Infrastructure Areas

Potential sites for mine infrastructure, including a processing plant, tailings impoundment and waste rock storage are located east of the San Jorge deposit. A schematic diagram of planned infrastructure is shown in Figure 5-4. A detailed discussion of planned infrastructure for the Project is found in Section 18 of this report.

 46 

 

 

 

 

 

Source: SRK, 2017

Figure 5-4: Potential Mine Infrastructure Locations

 47 

 

6History
6.1Prior Ownership and Ownership Changes

Prior to the discovery of mineral occurrences by Solitario in 1994, no mineral prospecting had been done on the Property and no concessions had been historically recorded. In 1995 and later, Solitario staked the current mineral concessions in the Project area.

In 1996, Cominco Ltd. formed a joint venture partnership (JV) with Solitario. This agreement was terminated in 2000 and Solitario retained ownership of the property.

In 2006, and Solitario formed a JV with Votorantim for the exploration and possible development of the property.

 

6.2Previous Exploration and Development Results

In 1993 through 1995, Solitario executed a program of pitting and drilling at the previously known Mina Grande and Mina Chica oxide zinc prospects located 18 km northeast of the Project area. Solitario subsequently identified the Crystal prospect nearby and other zinc occurrences in the general area. The Florida Canyon zinc deposit was located through follow-up of an anomaly generated during a regional program of stream sediments in 1994.

In 1997 to 1999, Cominco Ltd. completed various types of field work including geologic mapping, geophysical surveys, surface sampling, and diamond drilling. The scope of these programs is summarized below.

·Geologic mapping at 1:1,000 scale covering 352 ha in the Project area. Mapping was conducted within Florida Canyon and its tributaries aided by cut trails. Mapping has been validated by Votorantim.
·Known mineralized outcrops in the Project area were cleared and sampled and a total of 347 rock chip channel samples were collected. This sampling consisted of channels with individual samples of thicknesses up to 2.0 m at non-regular spacing.
·Sediment sampling of major drainages and streams was completed with consistent 500 m spacing along the drainages.
·Soil samples were collected along topographic contour lines spaced vertically 50 m apart but with irregular lateral spacing. Part of this soil sampling followed the crests of hills, especially in the western part of Florida Canyon, mainly to identify mineralized linear structures. A total of 600 samples were collected.
·Diamond drilling between 1997 and 2000 totaled 82 holes and 24,781 m.
·An Induced Polarization (IP) geophysical survey in 3 lines covered 5.2 linear km. Two lines were located along the drainages A and B of the northern part of Florida Canyon with dipole- dipole spacing at 150 m, and a third line with dipole-dipole spacing a = 100 m along the southern sector of the Sam Fault target. Cominco also surveyed 6.5 km of radial lines from holes FC-41 and FC-47, drilled in 1999.

 

6.3Historical Mineral Resource and Reserve Estimates

The current Mineral Resource Statement for the Florida Canyon zinc-lead-silver deposit was prepared in June of 2014 pursuant to the requirements of NI 43-101. The statement is presented in Table 6-1.

 48 

 

Table 6-1: Mineral Resource Statement for the Florida Canyon Zn-Pb-Ag Deposit, Amazonas Department, Peru, SRK Consulting (U.S.), Inc., 05 June, 2014

 

 

Category

Mass Grade Contained Metal (millions)
Zn Pb Ag ZnEq Zn Pb Ag ZnEq
(Mt) (%) (%) (g/t) (%) (Mlbs) (Mlbs) (Moz) (Mt) (Mlbs)
Measured 1.43 13.02 1.85 19.3 15.45 410.0 58.3 0.884 0.221 486.5
Indicated 1.35 12.51 1.71 17.1 14.74 372.6 50.9 0.744 0.199 438.8
Measured + Indicated 2.78 12.77 1.78 18.2 15.10 782.5 109.2 1.628 0.420 925.3
Inferred 9.07 10.87 1.21 12.2 12.44 2,173.0 241.5 3.554 1.130 2,487.6

Source: SRK, 2014

·Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves;
·Mineral resources are reported to an NSR zinc-equivalent (ZnEq%) cut-off grade based on metal price assumptions*, metallurgical recovery assumptions**, mining costs, processing costs, general and administrative (G&A) costs, and NSR factors***. Mining costs, processing, G&A, and transportation costs total US$51.30/t.
·*Metal price assumptions considered for the calculation of metal equivalent grades are: Zinc (US$/lb 0.95), Lead (US$/lb 0.95) and Silver (US$/oz 20.00),

·          **Cut-off grade calculations assume variable metallurgical recoveries as a function of grade and relative metal distribution. Average metallurgical recoveries for sulfide and oxide respectively are: Zinc (93.1%, 73%), Lead (84.8, 0%) and Silver (55.6%, 0%)

·*** NSR factors for calculating cut-off grades were: ZnEq% = Zn% * 1 + Pb% * 0.74 + Ag g/t * 0.02
·Resulting cut-off grades used in this resource statement were 4.1% ZnEq for sulfide, 5.0% ZnEq for oxide, and 4.5% ZnEq for mixed material types.
·Zinc equivalency for reporting in situ resources was calculated using:

· ZnEq (%) = Zn (%) + 1.0 * PB (%) + 0.03 * Ag (g/t)

·Density was calculated based on material types and metal grades. The average density in the mineralized zone was 2.91 g/cm3 as a function of the zinc and lead sulfide mineral content.
·Mineral Resources as reported are undiluted.
·Mineral resource tonnage and contained metal have been rounded to reflect the precision of the estimate, and numbers may not add due to rounding.

o       There are no Mineral Reserves previously developed for the deposit.

 

 

 

6.4Historical Production

There has not been any commercial mining in the Project area. The only underground excavation has been 700 m of underground drifting by Votorantim to provide drill platforms at the San Jorge area.

A subsidiary of Hochschild Mining PLC tested open pit mining for a short time at the Mina Grande deposit off of the claims held by Votorantim and Solitario near the village of Yambrasbamba, 18 km northeast of Florida Canyon, where Solitario had previously defined an oxidized zinc resource by pitting.

 49 

 

7Geological Setting and Mineralization

Information presented herein is derived from material provided by Votorantim and Solitario, including Cominco reports, and was verified and augmented by SRK during a site visit in May 2014.

 

7.1Regional Geology

The Project is located within an extensive belt of Mesozoic carbonate rocks belonging to the Upper Triassic to Lower Jurassic Pucará Group and equivalents. This belt extends through the central and eastern extent of the Peruvian Andes for nearly 1000 km and is the host for many polymetallic and base metal vein and replacement deposits in the Peruvian Mineral Belt. Among these is the San Vicente Mississippi Valley Type (MVT) zinc-lead deposit that has many similarities to the Florida Canyon deposit and other MVT occurrences in the Project area. A regional geologic map is shown in Figure 7-1.

 50 

 

 

 

Source: Solitario, 2014

Figure 7-1: Regional Geologic Map

 51 

 

 

7.2Local Geology

 

7.2.1 Lithology and Stratigraphy

A schematic stratigraphic column developed by Cominco and refined by Votorantim shows the major geologic rock units in the Project area (Figure 7-2). The basement rocks are the Pre-Cambrian Marañón Complex consisting of gneisses, mica-schists, phyllites and quartzites. These are overlain by an angular unconformity with the overlying Permo -Triassic Mitu Group composed of a sequence of redbeds consisting of polymictic conglomerates interspersed with beds of fine-grained sandstones.

 

 

 

Source: Votorantim, 2013b, translated by Solitario

Figure 7-2: Project Area Stratigraphic Column

  

Overlying the Mitu Group is the Pucará Group of Triassic - lower Jurassic age, which hosts the zinc- lead-silver mineralization of the Florida Canyon Project. The Pucará Group is divided into the Chambara Formation at the base, the Aramachay Formation in the middle and the Condorsinga Formation on top.

 52 

 

The Chambara formation has an approximate thickness between 650 m and 750 m in the project area, and consists of crinoidal packstone, wackstones and rudstones. It is divided into three members in the Florida Canyon vicinity; from bottom to top, they are Chambara 1, Chambara 2 and Chambara 3. The bulk of known zinc mineralization is hosted in Chambara 2. The stratigraphy between the distinctive Coquina (CM) and Intact Bivalve (IBM) paleontological marker horizons in Chambara 2 define a sequence of permeable higher energy facies within the Chambara 2 that control much of the especially strong dolomitization within the sequence.

The Aramachay formation lies concordantly on the Chambara with a variable thickness between 150 m and 250 m, consisting of a monotonous sequence of black and limonitic lutites and bitumen with thin interbedded nodular limestones. The Condorsinga Formation concordantly lies above, with restricted outcrop distribution due to erosion. It consists of calcareous gray mudstones with thicknesses varying between 150 m and 300 m.

The Corontochaca Formation of Upper Jurassic age lies unconformably on the Pucará Group. It outcrops in erosional remnants and is locally more than 300 m thick consisting of a package of monotonous oligomictic and polymictic fluvial calcareous sediments and colluvial limestone breccias with local fragments of Paleozoic or Precambrian fragments.

The Goyllarisquizga Formation occurs in angular unconformity over the Corontochaca and Pucará Group and is present mainly in the eastern and western sections of the Project area. It consists of poorly sorted yellowish to white sandstone deposited in coastal marine to fluvial-deltaic environments. It also contains some thin, lenticular intercalations of siltstones and mudstones whitish to reddish. The thickness ranges from 300 to 400 m.

 

7.2.2 Structure

The following discussion of structural geology in the Project area is adapted in part from an internal report by Cominco (2000).

The structure at Florida Canyon is dominated by a N50º-60ºW trending domal anticline (or doubly- plunging anticline) as defined from the base of Chambará 2 structural contour map in Figure 7-2. This domal anticline is cut on the west by the Sam Fault and to the east by the Tesoro-Florida Fault. The Sam Fault, which has been defined by drilling, has a north-south to northeast trend and a steep 80 to 85º westerly dip. The Sam Fault has an apparent scissor dip-slip displacement of >120 m in the north and <50 m in the south. To the south its trace is uncertain and complicated by northwest and possibly east-west structures. This appears to have been a long-lived structure, with its last strike-slip displacement being dextral. A facies change in the Chambará 2 from high energy to the east of the fault to low energy to the west many be due to original depositional features during growth fault formation that has important exploration implications.

At Florida Canyon there are also well defined northwest and northeast fracture systems, which appear to have important controls on the location of mineralization. Mineralized structures occur in conjugate fractures, with N10º-50ºE trends present at a number of mineralized surface outcrops while trends of N50º-80ºW are identified at other showings. Mineralization of mantos within the Karen-Milagros area appears to be preferentially controlled by northeast feeder structures.

The Tesoro-Florida Fault defining the eastern limits of most drilling to date is a N15º-30ºW trending structure, part of a regional lineament, and defined by an escarpment. It is interpreted to have a steep dip, with its sense of motion not having been defined, but with the east block being structurally lower than the west block, which results in significantly deeper drilling on the east fault block to reach the Chambará 2 stratigraphy. Because most of the work has concentrated further west on the San Jorge, Karen Milagros and Sam Fault areas there is little information on the Tesoro-Florida Fault, but it likely has similarly complex splays as the Sam Fault and may be, like the Sam fault, a controlling feeder for untested mineral potential in the eastern area.

 53 

 

At both the Karen-Milagros and San Jorge areas, feeder structures have an important control on the mineralized mantos but also represent a significant portion of the resource as steeply dipping structural fillings and replacement. The displacement along these structures is not large although the exact throw is often difficult to ascertain due to the strong alteration and later mineralization. The interpretation of displacement is further obscured by likely subtle variation in thickness and lithology of local stratigraphic units on either side of structures due to growth faulting.

Pre-mineral karsting also played a role in controlling mineralization along with simple structural filling and passive replacement adjacent to conduits. Replacement of karst fragments and cave sediments are commonly observed in larger structurally controlled mineralized bodies. The configuration of mineralized structures as they control and merge with manto replacements often take the form of Christmas–tree breakthrough structures and will likely be shown to represent a larger proportion of the resource as more horizontally oriented drilling from underground workings supplants the dominantly high angle surface drilling performed to date.

Post mineral structure and karsting overprints earlier structural trends and controls in part oxidized remobilized mineralization.

 

7.2.3 Alteration

The alteration and solution overprints in the Florida Canyon deposit include dolomitization, pseudobrecciation and karstification, mainly affecting the limestones of Chambara 2 and locally Chambara 1 and 3. Dolomitization and karstification occurred in multiple events spatially overlapping the structural corridors Sam, San Jorge and Karen-Milagros. Dolomitization was an important control on the movement of mineralizing fluids and has been studied and logged in detail throughout all of the drilling campaigns. It is also modeled in this study as a limiting constraint on mineralization.

The alteration halo is open in all directions and is especially pervasive in the stratigraphic interval lying between the paleontological marker horizons CM (Coquina Marker) and IBM (Intact Bivalve Marker) of the Chambara 2 formation. The alteration halo is composed mostly of medium and coarse-grained crystalline dolomite replacing calcareous packstone, rudstones, floatstones and wackestones. Mostly the dolomitic rudstones, and locally the packstones, transform laterally when in proximity of faults and major fractures (Sam, San Jorge and Karen-Milagros) to mineralized pseudobreccias and karst structures.

 

7.2.4 Mineralization

The zinc-lead-silver mineralization of the Florida Canyon deposit occurs as sulfides hosted in dolomitized zones of the Chambara 2 Formation. Dolomite paragenesis and later sulfide mineralization are controlled by a combination of porosity, permeability and structural preparation. Metals occur in sphalerite and lesser galena, which contains silver. Minor mineralization is hosted in limestones, but the bulk of sphalerite and galena is hosted in dolomite.

In a number of core samples, the mineralization has very sharp contacts along the dolomitization boundary. Characteristic mineralization textures include massive and disseminated mantos mineralization in dissolution breccias, collapse breccias and pseudobreccias. The different breccias and vein types are structurally controlled by faults of north-south and northeast-southwest direction.

 54 

 

The mineralization is characterized by the presence of sphalerite, galena and locally pyrite. Sulfide replacements occur in dolomitized limestone of variable grain sized and in solution breccias with white dolospar and lesser amounts of late generation calcite. Pyrite content is generally low, with percentages averaging less than 2% by volume. Sphalerite in mineralized sections has variable grain size from 0.1 to greater than 5 mm, with colors ranging from dark brown through reddish brown to light brown. It occurs as individual crystals or in massive form, sometimes displaying colloform textures with bands of slightly differing color zoning, indicators of polyphase hydrothermal deposition.

Early fine-grained sphalerite has evidence of later deformation and reactions to secondary mineralizing fluids. A second phase of more massive sphalerite mineralization is observed within the core of the deposit. These crystals are coarse-grained, regular, euhedral and show very little evidence of any post-depositional deformation. The sphalerite is contemporaneous with fine to coarse grained galena and is often overprinted with a later stage coarse-grained, euhedral galena.

The presence of zinc oxides, locally to considerable depths, is due to syngenetic oxidation, with later contributions of basin-derived connate water and movement of rainwater through fractures that leached the limestones and formed significant karst cavities.

 

7.3Property Geology

The areas of current exploration interest are the Karen/Milagros, San Jorge and Sam Fault deposits. These mineralized zones are hosted in the dolomitized Chambará 2 sub-unit of the Pucará Group carbonates, bracketed by the Coquina and Intact Bivalve Marker beds. Geologic mapping and modeling includes refining the extents of Chambará 2, and further defining the steeply dipping feeder structures to predict additional zinc-lead-silver mineralization. The outcrop geology of the deposit area is shown in Figure 7-3, with emphasis on the Chambará Formation.

 55 

 

 

 

Source: Solitario, 2014

Figure 7-3: Florida Canyon Project Geologic Map

 56 

 

 

7.4Significant Mineralized Zones

Local and regional geologic mapping, geologic drillhole logs, and the dome-shaped geometry of the deposit suggest the mineralization is hosted in a broad anticline structure. Florida Canyon is the collective name of the deposits in the Project area in Florida Canyon, and includes the Karen-Milagros, San Jorge, Sam Fault zones and similar mineralized strata between these areas.

Modeled manto zones are between 1 m and 9 m thick and occur over an area of about 1 km x 3 km and are open in all directions. Unmineralized gaps exist within the mineralized manto zones, as is typical for hydrothermal replacement deposits. Irregular steeply dipping replacement bodies also occur, frequently at the intersection of vein-like feeder structures and in karst-controlled mineralization.

Mineralization outcrops locally in a number of areas, and have been drilled at depths of up to about 450 m below ground surface. Figure 7-4 is a west-facing cross section of the geologic model in the mineralized zone. Zinc mineralization occurs as massive sphalerite (ZnS), and is locally oxidized to smithsonite (ZnCO3) and hemimorphite (Zn4Si2O7 (OH)2). Lead occurs in galena (PbS), cerussite (PbCO3) and anglesite (PbSO4).

 

 

 

Source: Votorantim, 2013b

Figure 7-4: Cross Section of the Project Geologic Model

 57 

 

8Deposit Type

MVT deposits are hosted in carbonate rocks, and show cavity-filling or replacement-style mineralization. The characteristic minerals are sphalerite, galena, fluorite, and barite. The host rock may be silicified, and common alteration minerals include dolomite, calcite, jasperoid and silica. MVT deposits are typically spatially extensive, but limited by the permeability of the host rock units. This control makes them appear stratabound. Chemical and structural preparation are the main controls on permeability, and therefore, the extent of fluid migration and metal precipitation (Guilbert and Park, 1986).

 

8.1Mineral Deposit

An area of 20 km x 100 km extending from Mina Grande to north to 80 km south of the Florida Canyon deposit has become the focus of what is an emerging Mississippi-Valley Type (MVT) zinc and lead province, with many surface occurrences and stream sediment anomalies distributed throughout the Pucará Group. The main host rock of zinc and lead occurrences in the mineral district and Project area is dolomitized limestone, which may show karst or collapse breccia textures.

 

8.2Geological Model

The current genetic model for Florida Canyon consists of mineralization being classified as syn-to post tectonic. Specifically, upwelling mineralizing fluids entered the Chambara Formation and precipitated in porous and reactive dolomites with interaction of sulfide and organic ions (H2S and CH4) resulting from reaction with overlying evaporitic and bituminous sequences, all channeled by axial planar faults. The schematic mineralization model is presented in Figure 8-1.

 58 

 

 

 

 

 

Source: Votorantim, 2014a

Figure 8-1: Mississippi Valley-Type Deposit Schematic Model

 59 

 

9Exploration
9.1Relevant Exploration Work

The Florida Canyon Project has identified and delineated mineral resources in the San Jorge, Sam and Karen-Milagros areas. The results and methodology are described below.

In earlier years Cominco and then Votorantim executed detailed surface mapping programs, mineralized outcrop clearing and mapping and sampling of the areas near the reported resource. Stream sediment and soil samples were collected and analyzed as described in Section 6.2. An extensive regional reconnaissance exploration program was also conducted over a large area throughout the Mesozoic carbonate belt to the north and south of the Property. Geochemical samples were collected of stream sediments, soils and rocks.

During development of the San Jorge adit, Votorantim completed geologic mapping and chip sampling of the underground workings. Results were applied to the Project geologic model in support of resource estimation and continued exploration drillhole planning.

Future exploration work will focus on infill drilling between the Karen-Milagros, San Jorge and Sam areas. Mineralization is open to the north and south and remains largely untested to the east of the Tesoro Fault and west of the Sam Fault where greater target depths have lowered the near-term drilling priority. As discussed in Section 9.4 prospective targets for grass roots exploration exist further north on the Project Property

 

9.2Surveys and Investigations

Solitario, Votorantim and Cominco have not completed any additional surveys or other investigations outside of drilling, mapping and sampling surface and underground workings as described.

 

9.3Sampling Methods and Sample Quality

Sampling of drill core is described in detail in Section 11. The regional stream sediment program collected sediments that were screened to -80 mesh, ashed and analyzed for a multielment suite by ICP. Soil samples collected were composites of B horizon soils and C horizon when accessible.

Rock sample methodology varied according to location. Grab samples were taken where outcrops were found that showed evidence of dolomitization of carbonate beds. Mineralized outcrops were cleared manually with machetes and shovels and systematically chip channeled. Channels were oriented perpendicular to bedding to most accurately represent stratigraphic thickness. Channel samples were limited to 2 m in length by Cominco and 1 m by Votorantim. Most of the chip channel sampling of higher grade mineralization has been conducted in the Karen Milagros zone and other areas in the central part of the Property where outcrops of mineralization are most common, as illustrated in Figure 9-1.

 

9.4Significant Results and Interpretation

Exploration strategy for MVT deposits at the Florida Canyon project has been strongly influenced by the interpreted favorability of specific units of the stratigraphy of the region. Numerous occurrences of alteration and mineralization occur throughout the Pucara Group but economic deposits have only been thus far located within the Triassic Chambara formation (Stratigraphic Section, Figure 7.1).

 60 

 

More specifically the middle member of the Chambara Formation (Chambara 2) has been found to host the most persistent and highest grade manto deposits due to its higher permeability and susceptibility to altering and mineralizing fluids. Synsedimentary structures, formed during or slightly after sedimentation, controlled the flow of basinal brines that dolomitized and subsequently mineralized the carbonates. The mineral rich fluids migrated from these “feeders” laterally into the stratigraphic column to form mantos.

Economic resources have been delineated in both the stratigraphically controlled mantos as well as the feeders, such as the San Jorge and Sam mineralized bodies. The higher angle structures have also been subject to karst formation that further enhanced fluid flow and are themselves often well mineralized with higher grade wider mineralization e.g. San Jorge.

Particularly prospective locations to explore for these high grade, high tonnage deposits exist along the northeast trending lineaments (drainages) immediately north and south of Karen Milagros where outcropping massive mineralization may be expressions of breakthrough structures. These locations have not been adequately tested to date due to the difficult access for helicopter supported drilling. The completion of road access will facilitate testing of these targets.

 61 

 

 

 

 

 

Figure 9-1: Florida Canyon Area Prospect and Geochemistry Map

 62 

 

 

These steeply dipping bodies occur over stratigraphic intervals that extend upwards into the Chambara 3, Aramachay and Condorsinga formations. The depth extent of mineralization in the feeders is currently unknown. These conduits enabled metal rich fluids to enrich the overlying stratigraphy and provide potentially important evidence for exploration.

Geochemical prospecting is very effective in locating the leakage halos in overlying stratigraphy around these structures. Initially stream sediments were used to identify geochemically enriched drainages and were followed up with prospecting and soil surveys to pinpoint mineralized centers. Although no detailed mapping has been done over much of the property, geologists made observations of the stratigraphic location within areas of high geochemical response.

Figure 9-2 shows the results of the regional geochemistry program. The area in the immediate vicinity of the Florida Canyon resource exhibits very high base metal content in stream sediment, soils and rocks. Only a small area of Chambara 2 crops out in this area as shown in orange color on the geologic map of the Florida/Tesoro vicinity (Figure 9-3). Outcropping high grade mineralization in this window of Chambara led to the initial discovery of the known Florida Canyon deposits.

Nearby, there are significant soil anomalies in higher stratigraphy that warrant future exploration drilling. These anomalies occur in undrilled areas within the horst that hosts the current resources as well as to the west of the Sam Fault and East of the Tesoro Fault.

 

Further to the north two very large and strong soil anomalies have been defined by the regional geochemical sampling program (Figure 9-2). The San Jose soil anomaly is of similar size and grade to that at Florida Cayon. It is, as yet, untested with drilling. Based on the clear relationship between surface geochemistry and subsurface mineralization at Florida Canyon, drilling is warranted in the San Jose and Naranjitos areas.

 63 

 

 

 

 

 

Figure 9-2: Regional Geochemical Results

 64 

 

 

 

 

 

Figure 9-3: Florida Canyon Area Simplified Geology, Resource and Drillhole Map

 65 

 

 

10Drilling

The database used for modeling and estimation of mineral resources has not been augmented since August 15, 2013 and includes 486 diamond drillholes, with a total of 117,280.25 m drilled length. There has been no new drilling on the project since the 2014 Technical Report (SRK, 2014b).

 

10.1Type and Extent

All drillholes completed in the Project area are HQ-diameter core (63.5 mm). If poor ground conditions necessitated, the core diameter was reduced to NQ (47.6 mm). Cominco completed a total of 82 drillholes from the current ground surface in the Karen-Milagros and Sam deposit areas, and the San Jorge structural corridor. Votorantim completed 404 drillholes between 2006 and 2013, from surface or from the San Jorge Adit. The Votorantim drilling is distributed throughout the Project area. All holes mentioned above are included in the geologic modeling and resource estimation database, and shown in Figure 10-1.

The combined Cominco and Votorantim drilling for the project totals 117,260 m. Figure 10-2 shows drilled length by program, including 4,047 m of oriented core geotechnical drilling in 13 drillholes.

 

 

 

Source: Votorantim, 2013b

Figure 10-1: Project Drilling History

 66 

 

 

 

 

 

Source: Solitario, 2014

Figure 10-2: Geologic Map with Drillhole Locations

 67 

 

 

10.2Procedures

All drilling contracted by Votorantim was completed with triple-tube HQ tooling and followed industry standard procedures to ensure sample quality. Surface drilling was executed with a helicopter- supported LD-250 diamond core rig operated by Bradley Bros. Limited. Sermin completed the underground development and also completed drilling from the San Jorge adit with a LM-70 electric diamond core rig.

Drilling was performed on two 12-hour shifts with full 24-hour geological supervision by a Votorantim geologist. The rig geologist role included:

·Coordination and communication between the drilling contractor and Votorantim;
·Monitoring drilling procedures and inspecting the core extraction for sample quality;
·Boxing the core;
·Measuring and recording core recovery and Rock Quality Designation (RQD); and
·Completing a preliminary geological log.

Downhole surveys were completed with a Reflex EZ-Shot survey tool by the drillers at varying spacing, as summarized in Table 10-1. The survey records are stored digitally at the core facility and SRK reviewed them during the 2014 site visit. Drillhole collar locations were surveyed by Votorantim with a GPS- based instrument.

Table 10-1: Downhole Survey Data Point Spacing

 

Drilling Program (Year)

Survey Spacing

(m)

2010 100
2011 50
2012 to 2013 20

Source: SRK, 2014

 

 

 

Votorantim completed 13 oriented geotechnical drillholes, totaling 4,046.70 m. In these holes, the recovery was excellent (90% to 100%) with RQD results greater than 75%.

From the drill site, filled core boxes were transported in batches of 14 via helicopter to the drill core logging facility in Shipasbamba. These were photographed and fully logged by Votorantim geologists in natural light. During the 2012 to 2013 program, many of the core photographs were taken after the core had been cut for sampling, due to the large quantity of core produced.

 

10.3Interpretation and Relevant Results

The geologic logging and analytical data were added to the Project database after validation and applied to modeling and resource estimation. Due to the large number of drillholes in the database, and because the modeling and resource estimation are discussed in detail, in Section 14 (Mineral Resources), the drilling results by interval are not presented here. The true thickness of the mineralized intercepts is about 80% of the drilled length, and varies with the orientation of the drillhole.

Votorantim’s documentation of drilling procedures and SRK’s observation of the program indicate that there is little or negligible sampling bias introduced during drilling.

 68 

 

 

SRK considers the drilling procedures to be appropriate for the geology, conducted according to industry best practice and standards, and the relevant results are sufficient for use in resource estimation.

 69 

 

 

11Sample Preparation, Analysis and Security
11.1Sampling Methods

Sampling procedures for core drilled on behalf of Cominco are not well-documented. Cominco included assay quality control samples in the analytical programs, but the results were not available to review. The resource classification from these samples is limited because the location and analytical data was not obtained according to current industry standard protocol.

Most of the information in this section pertains to the sampling completed by Votorantim. Available information about sampling completed by Cominco is included if available, and is specified as such. About 20% of the holes in the current drillhole database were drilled by Cominco.

 

11.1.1 Sampling for Geochemical Analysis

After photographing the core and completing geotechnical and geologic logging, a geologist marked the core for sample intervals that averaged 100 cm long. Samples had a minimum length of 30 cm and a maximum of 150 cm, but were defined so that 100 cm samples were maintained as much as possible. Cut lines parallel to the core axis were drawn by the logging geologist, to ensure nearly symmetrical halves and minimal sampling bias relative to any visible mineralization. The core was cut on a rock saw with a 40 cm blade, under supervision of a Project geologist. After the core was cut, both halves were replaced in the core box.

Samples were always taken from the left side of the saw-cut core, double bagged and marked with sample numbers in two places. These were transported in larger bags containing seven samples each by Mobiltours freight company to the ALS Minerals laboratory in Trujillo or Lima, operated by ALS Minerals. Prior to 2012, analysis was completed in Trujillo. Since then, it has been done in Lima.

Cominco also split the core samples and sampled half for geochemical analysis. Sample breaks were determined by geologic criteria. Cominco core samples were analyzed by Acme Labs, in Lima, Peru.

 

11.1.2 Sampling for Density Measurement

Specific gravity (SG) measurements were completed on site by Votorantim on every sample from the 2013 drilling program. For previous drilling programs, SG measurements were completed on all mineralized intervals. Three SG measurement methods were used:

·Volume displacement;
·Hydrostatic; and
·A mesh method for broken material.

These techniques were designed and implemented by Inspectorate Services Peru SAC. Votorantim has also performed some density measurements on older Cominco core.

 

11.2Security Measures

During the SRK site visit, the observed sample storage was secure, and provided adequate protection from rainfall. Sample security and chain of custody was maintained while the samples were transported from the core shed in Shipasbamba to Lima. Assay certificates are retained in the Votorantim office in Lima.

 70 

 

 

Analytical data is loaded directly from the laboratory results files to the drillhole database, to minimize the risk of accidental or intentional edits.

 

11.3Sample Preparation for Analysis

ALS Minerals (ALS) in Trujillo or Lima, Peru, completed sample preparation and analysis for all Votorantim core samples. ALS is an independent, global analytical company recognized for quality, and is used by many exploration and mining companies for geochemical analysis. Current certifications and credentials include ISO 17025:2005 Accredited Methods & ISO 9001:2008 Registration in Peru, Brazil, Chile and Argentina (ALS Minerals, 2014a).

Upon delivery at the lab, bar coded sample identification labels were scanned and the samples were registered to the Laboratory Information Management System (LIMS). Samples were weighed, and then air-dried in ambient conditions. Excessively wet samples were dried in an oven at a maximum 120°C. The sample preparation and analysis procedures used are summarized in Table 11-1. Specific analytical procedures and method detection limits for elements in the suite are reported in Table 11-2.

After analysis is complete, the remaining coarse reject and pulp samples are returned to the Florida Canyon core shed for storage.

Cominco analyzed samples with visible zinc or lead mineralization by atomic absorption spectrophotometry. All samples containing greater than 10,000 ppm zinc + lead were then analyzed by wet chemistry and the latter results were recorded in the data base.

Table 11-1: Analytical Codes and Methods

 

Procedure Code Description
Sample Prep
CRU-31 Crush to 70% less than 2 mm.
SPL-21 Riffle split off 1kg and retain the coarse reject.
PUL-32 Pulverize split to better than 85% passing 75 microns.
Multi-Element Methods
ME-ICP61, -a Multi-element Inductively-Coupled Plasma method with Atomic Emission Spectroscopy analysis. Includes 4-acid, "near-total" digestion of 0.5 g sample.
(+)-AA62 HF, HNO3, HClO4 digestion, HCl leach and Atomic Absorption Spectroscopy analysis.
(+)-VOL70 Volumetric titration for very high grade samples.
XRF10 X-Ray fluorescence on fused pellet, 5 g sample.
Element-Specific Methods
Au-AA23 Gold by fire assay and Atomic Absorption Spectrometry, 30 g sample.
Au-AA25 Ore-grade gold by fire assay and Atomic Absorption Spectrometry, 30 g sample.
Au-GRA21 Gold by fire assay and gravimetric finish, 30 g sample.
Hg-CV41 Trace level mercury by aqua regia and cold vapor/AAS.
Hg-ICP42 High grade mercury by aqua regia and ICP-AES.
In-MS61 Multi-element Inductively-Coupled Plasma method with Mass Spectrometry detection. Includes 4-acid, "near-total" digestion of 0.5 g sample.
S-IR08 Total sulfur by Leco furnace.

Source: ALS Minerals, 2014b, compiled by SRK, 2014

 71 

 

SRK Consulting (U.S.), Inc.

NI 43-101 Technical Report, Preliminary Economic AssessmentFlorida Canyon Zinc Project Page 72

 

 

Table 11-2: Analyzed Elements and Method Detection Limits

 

Element Symbol Method Unit Lower MDL Upper MDL Overlimit Method Unit Lower MDL Upper MDL Overlimit Method Unit Lower MDL Upper MDL
Silver Ag ME-ICP61 ppm 0.5 100 Ag-AA62 ppm 1 1,500        
Aluminum Al ME-ICP61 % 0.01 50                
Arsenic As ME-ICP61 ppm 5 10,000                
Barium Ba ME-ICP61 ppm 10 10,000 ME-ICP61a ppm 50 50,000 XRF10 % 0.01 50
Beryllium Be ME-ICP61 ppm 0.5 1,000                
Bismuth Bi ME-ICP61 ppm 2 10,000                
Calcium Ca ME-ICP61 % 0.01 50                
Cadmium Cd ME-ICP61 ppm 0.5 1,000 Cd-AA62 % 0.0005 10        
Cobalt Co ME-ICP61 ppm 1 10,000                
Chromium Cr ME-ICP61 ppm 1 10,000                
Copper Cu ME-ICP61 ppm 1 10,000                
Iron Fe ME-ICP61 % 0.01 50                
Gallium Ga ME-ICP61 ppm 10 10,000                
Potassium K ME-ICP61 % 0.01 10                
Lanthanum La ME-ICP61 ppm 10 10,000                
Magnesium Mg ME-ICP61 % 0.01 50                
Manganese Mn ME-ICP61 ppm 5 100,000                
Molybdenum Mo ME-ICP61 ppm 1 10,000                
Sodium Na ME-ICP61 % 0.01 10                
Nickel Ni ME-ICP61 ppm 1 10,000                
Phosphate P ME-ICP61 ppm 10 10,000                
Lead Pb ME-ICP61 ppm 2 10,000 Pb-AA62 % 0.001 20 Pb-VOL70 % 0.01 100
Sulfur S ME-ICP61 % 0.01 10 S-IR08 % 0.01 50        
Antimony Sb ME-ICP61 ppm 5 10,000                
Scandium Sc ME-ICP61 ppm 1 10,000                
Strontium Sr ME-ICP61 ppm 1 10,000                
Thorium Th ME-ICP61 ppm 20 10,000                
Titanium Ti ME-ICP61 % 0.01 10                
Thallium Tl ME-ICP61 ppm 10 10,000                
Uranium U ME-ICP61 ppm 10 10,000                
Vanadium V ME-ICP61 ppm 1 10,000                
Tungsten W ME-ICP61 ppm 10 10,000                
Zinc Zn ME-ICP61 ppm 2 10,000 Pb-AA62 % 0.001 30 Zn-VOL70 % 0.01 100
Gold Au Au-AA23 ppm 0.005 10 Au-AA25 ppm 0.01 100 Au-GRA21 ppm 0.05 1,000
Indium In In-MS61 ppm 0.005 500                
Mercury Hg Hg-CV41 ppm 0.01 100 Hg-ICP42 % 0.1 10        

Source: Votorantim (2014b), translated by SRK

 

 

 72 

 

 

  

 

11.4QA/QC Procedures

Votorantim’s Technical Report (Votorantim, 2014b) includes assay quality assurance/ quality control (QA/QC) results available through June 15, 2013. Sample dates in the QA/QC data files are between 2011 and 2013, and no information for prior samples was available. For the 2011 to 2013 drilling programs, assay QC samples were 10.9% of the total samples analyzed. Some programs included duplicate core or coarse reject samples, and/or duplicate analysis of fine pulp samples. Votorantim compiled and analyzed the results from 2011 to 2013 drilling programs, which SRK has reviewed and summarized below. Assay QC results from drilling programs prior to 2011 were not available to include in this report.

 

11.4.1 Standards

Summaries of the Standard Reference Material (SRM) certified values and analytical results for lead and zinc are shown in Table 11-3 and Table 11-4, respectively. The certified Standard Reference Material, ST800044B, was included in the core sample suite, and is highlighted with bold text in the tables. Other, lower-grade reference materials made from Florida Canyon core were also included.

Table 11-3: Summary of SRM Statistics for Lead

 

Pb SRM Mean (ppm)

Standard Deviation

(ppm)

Samples Outliers Percent Outliers Bias
STD_RK1 13.4 2.35 127 1 1% -4.3%
STD_RK2 439.18 17.26 154 2 1% 2.6%
STD_RK3 3149.47 113.00 134 0 0% -2.9%
ST800044B 18100 500 80 0 0% 0.3%

Source: Votorantim (2014b), formatted and translated by SRK

 

 

 

Table 11-4: Summary of SRM Statistics for Zinc

 

Zn SRM Mean (ppm)

Standard Deviation

(ppm)

Samples Outliers Percent Outliers Bias
STD_RK1 22.93 4.32 125 3 2.4% -4.5%
STD_RK2 452.5 18.62 154 3 2% 2.8%
STD_RK3 2688.13 86.32 134 2 1.5% -0.4%
ST800044B 33400 1000 80 0 0% 1.8%

Source: Votorantim (2014b), formatted and translated by SRK

 

 

 

Low-grade standards STD_RK1, -2 and -3 are less than economic grade for both zinc and lead. However, the results provide important information on the quality of analytical data across a range of values. The lowest-grade standard, RK1, shows consistent low bias for both lead and zinc (about 4.5% lower than the mean), while RK2 has consistent, but minor, high bias for both elements (about 2.8% higher). Although lead values for RK3 have slightly low bias (-2.9%), zinc values average very close to the mean.

All results for ST800044B were within three standard deviations of the certified value for lead and zinc; all results but two for lead and four for zinc were within two standard deviations of the respective certified values. On average, results were greater than the certified value by 1.8% for zinc and 0.3% for lead, indicating unbiased analytical data.

 73 

 

 

11.4.2 Blanks

Two types of blank samples were included in the sample suite:

·Fine-grained BLK_RK1 (n = 223); and
·Coarse-grained BLK_RK1_GR (n = 229).

The fine-grained blank material served as a control on analytical quality, and was not subjected to any stage of the sample preparation process. The coarse blank material was included to identify possibly cross-contamination during sample preparation. Between August 2011 and June 2013, 452 blank samples were analyzed with drill samples. All blank samples but one were less than 7 times the lower method detection limit for zinc, and all were less than 4 times the method detection limit for lead. One sample was greater than 10 times the method detection limit for zinc. The accepted tolerance range for blank samples is up to 10 times the lower method detection limit. Blank sample results from the 2011 and 2012 drilling programs indicate that there was no cross-contamination during sample preparation.

Statistical and graphic analysis of blank sample and previous sample pairs showed that some blank sample results were outside of acceptable limits, caused by “drag” in the ICP instrument. However, the percentage of samples outside of tolerance is less than 5%, and indicates acceptable analytical data quality.

 

11.4.3 Duplicates

Several types of duplicate samples were included in the 2013 drilling program:

·Quartered core samples, to assess the quality of the sampling procedure and identify sample mix-ups;
·Coarse rejects (sample preparation);
·Pulps (analysis); and
·Pulps from previous drilling as blind duplicates (analysis).

A summary of all duplicate sample pairs is shown in Table 11-5. In the 2011 to 2012 drilling programs, only quartered-core sample duplicates were included.

Table 11-5: Summary of Duplicate Samples

 

Type Program Pairs (n)
Quarter-core 2011 to 2013 811
Coarse rejects 2013 38
Pulps 2013 76
Blind Pulps 2013 33

Source: SRK, 2014

 

 

 

Votorantim collected a duplicate core sample approximately every 50th sample interval, on average. These intervals were halved, and then the halves were halved again. Two opposing quadrants of core were sampled separately as the original and duplicate sample. The remaining two quarters of core were retained in the core box.

 74 

 

Starting in 2013, Votorantim included additional types of duplicate samples to assess the quality of each step of sample preparation and analysis. Coarse reject duplicates were collected by the laboratory, by taking a second 1,000 g split from the crushed sample, and pulverizing it separately to create a second pulp sample. Pulp duplicates are re-analysis of the prepared original pulp. Votorantim specified the pulp duplicate sample intervals and the lab prepared them. Votorantim also included blind duplicate samples of prepared pulps of recent drilling programs, to test the repeatability of analytical results without the lab’s knowledge.

Votorantim analyzed zinc, lead and silver results for all duplicate pair types. The results from each type of duplicate sample showed repeatable results at all stages of sample preparation and analysis.

 

11.4.4 Actions

Standard and blank sample results indicate accurate lab data free of analytical bias. Duplicate sample results show that sample quality is adequate and the reported results were free of sample mix-ups.

Some improvements, fixes and deployments in the assay QC program were identified in 2013 and are already underway. Votorantim has recently changed assay QC protocols so that:

·Each hole starts with a coarse blank and has a blank for every 50 drill samples;
·A SRM is inserted for every 20 drill intervals;
·A type of duplicate is included for every 20 drill samples, as ¼ core, coarse rejects, pulps, or blind pulps; and
·Check analysis at a second independent laboratory was completed for 2010 to 2012 samples at SGS Labs and for 2013 samples at BVI (Inspectorate) labs.

Additional planned quality control measures include:

·Generate new standards from Florida Canyon core, and continue using the high grade standard ST800044B; and
·Separate about 200 kg of unmineralized material from the Project to create a certified blank.

One or two additional SRM with zinc, lead and silver grades in the range of economic interest should be included in future drilling programs. If possible, these should be matrix-matched to the Project. Coarse blank samples should be adopted in favor of prepared blank samples, to test all phases of sample preparation and analysis.

 

11.5Opinion on Adequacy

The assay QC database is organized well and free of errors in the cells that SRK checked. Votorantim maintains the assay QC data well, and analyzes it in real time to address any issues promptly. There were no systematic issues apparent in the results available to review.

SRK considers the sample preparation and analysis procedures, and the QA/QC methods and results to adequately verify the analytical database as sufficient for use in resource estimation.

 75 

 

 

12Data Verification
12.1Procedures

All analytical data is checked by the on-site and Lima-based geologists before it is added to the database. This includes review of standard, blank and duplicate sample results for outliers, and requesting re-analysis if necessary. Final analytical data is appended to the database by the Sao Paulo office staff after additional verification.

During the site visit by SRK, the geologic database was checked for its consistency to a) logged core,

b) logging sheets and sample records and c) database provided to SRK. All aspects of the data capture and storage were seen to be in good order. The core sample library in the core shed (Figure 12-1) helps to make the logged geology consistent.

 

 

 

Source: SRK, 2014

Figure 12-1: Photograph of Project Core Lithology Reference Sample Library

 

 

Drillhole collar locations are verified against topography, and compared with the survey reports. Downhole survey data are reviewed by an on-site geologist to verify the results.

 

12.2Limitations

SRK did not verify the analytical values in the database with reported values on assay certificates. An additional means to verify analytical zinc and lead grades in the drillhole database could be comparison to visual estimations of sphalerite and galena abundance or to measured specific gravity.

 76 

 

 

12.3Opinion on Data Adequacy

The Project geologists and support staff were diligent about data verification and the quality of the drillhole database. Database validation in preparation for resource estimation has been done by Votorantim. Although SRK did not verify the analytical values in the database with reported values from assay certificates, there were no indicators of erroneous data. SRK believes the degree of organization of the data base and the measures in place to minimize errors in data ensure a high-quality database.

 77 

 

 

13Mineral Processing and Metallurgical Testing

Votorantim retained a metallurgical consultant, Smallvill S.A.C. of Lima, Peru (Smallvill) to perform metallurgical studies on Florida Canyon mineralization types in 2010, 2011 and 2014. All the metallurgical testing programs aimed to produce commercial quality concentrates from a polymetallic lead-zinc mineralization. The tested samples show heads grades significantly higher when compared to other known mineral deposits in the region. SRK has relied heavily on these studies for recovery and cost forecasting to develop cut-off grades for resource reporting.

The Florida Canyon sulfide resource consists of zinc and lead sulfides in a limestone matrix where zinc is in higher proportions than lead. There are no deleterious elements present in concentrates in high enough levels to trigger smelter penalties.

 

13.1Testing and Procedures

A total of eight metallurgical testing documents addressing the metallurgical development for Florida Canyon Project were made available to SRK. All of the metallurgical testwork to date have been executed between 2011 and 2014 (Table 13-1) by Smalvill S.A.C., an independent commercial laboratory based in Lima, Peru.

Table 13-1: Summary of Florida Canyon Metallurgical Test Work

 

Report Date Laboratory Sample Sample Type Test Type
2010 Apr Smallvill, Lima, Peru Core composite Sulfide Batch scale
2010 May Smallvill, Lima, Peru Bulk sample, pilot testing 1 t ox, 1 t mx, 1 t sul, 1 t of vein and surface material from Shalipayco Pilot plant
2011 Jul Smallvill, Lima, Peru Core composite Oxide Batch scale
2011 Aug Smallvill, Lima, Peru Core composite Mixed Batch scale
2011 Aug Smallvill, Lima, Peru Core composite Sulfide Batch scale
2011 Aug Smallvill, Lima, Peru Core composite Mixed Batch scale
2014 Feb Smallvill, Lima, Peru San Jorge Sulfide Batch scale
2014 Feb Smallvill, Lima, Peru Karen Milagros Sulfide Batch scale

Source: SRK, 2017

 

 

 

13.2Relevant Results

 

13.2.1 Mineralogy

Mineralogical analysis of a sulfide composite was conducted on the head sample by X-ray diffraction. The results are provided in Table 13-2. The majority of the sample (80%) consists of calcium and magnesium carbonates from the dolomite matrix, with low iron sulfide content as pyrite, arsenopyrite, and pyrrhotite.

 78 

 

 

Table 13-2: Mineralogy of Sulfide Composite

 

Mineral Weight %
Dolomite 76.7
Quartz 4.8
Calcite 3
Smithsonite 2
Hemimorphite 0.2
Pyrite 3.5
Sphalerite 7.9
Galena 1.5
Cerussite 0.3
Total 100

Source: Smallvill, 2011

 

A mineralogical analysis by X-ray diffraction was conducted on an oxide composite and the results are provided in Table 13-3.

Table 13-3: Mineralogy of Oxide Composite

 

Mineral Weight %
Dolomite 45.83
Smithsonite 27.16
Hemimorphite 10.05
Calcite 9.1
Quartz 6.3
Barite 0.88
Sphalerite 0.67
Total 100

Source: Smallvill, 2011

 

 

 

Approximately 60% (by volume) of the material is gangue comprised of dolomite, calcite and quartz. These minerals have specific gravities between 2.70 and 2.85 g/cm3. XRD analysis also confirmed the presence of zinc oxides, predominantly as smithsonite, and to a lesser extent, hemimorphite.

 

13.2.2 Recovery and Concentrate Grades

All the metallurgical testing programs aimed to produce commercial quality concentrates from a polymetallic lead-zinc mineralization. The tested samples show head grades significantly higher when compared to other known mineral deposits in the region. Grades for the eight metallurgical tests for Florida Canyon are shown in Table 13-4 and Figure 13-1.

Head grade in the tested samples ranged from 5.7% Zn total up to 31.7% Zn total. Meanwhile, the oxide zinc ranged from 0% up to 18.4%. Lead grades for the same samples was significantly lower than those of zinc, but still higher than typical mill feed grades in the other MVT deposits in the region ranging 0.5% up to 3.9%.

 79 

 

 

 

 

 

Source: SRK, 2017

Figure 13-1: Metallurgical Sample Results – Zinc and Lead Head Grades

 80 

 

 

 

Table 13-4: Metallurgical Tests – Selected Results

 

Report Date

 

Sample

 

Sample Type

Head Grade

 

Grinding

Pb Concentrate Zn Concentrate

 

Comments

Zn Total ZnOx ZnS ZnOx/ZnT Pb Total Pb S Pb Ox Ag g/t Rec. Pb Grade Pb Rec. Zn Rec. ZnT Rec. ZnS Grade ZnT Grade Ag oz/t
2010 Apr Core composite Sulfide 7.52% 1.4% 6.1% 0.19 1.72% 1.26% 0.46% 11.6 65%-74 mm 61.20% 52.60% 30.00% 93.10%   50.60% 0.95  

 

 

2010 May

 

bulk sample, pilot testing

1 t ox, 1 t mx, 1 t sul, 1 t of vein and

material from Shalipayco

 

 

Results reported below for individual samples

2011 Jul Core composite Oxide 18.36% 18.4% 0.0% 1.00 0.47%     7.8         92.40%   50.00%  

DMS-

Flot+Calcine

2011 Aug Core composite Mixed 31.25% 13.2% 18.1% 0.42 2.38%     26.5   80.90%     82.30%       DMS-Flot
2011 Aug Core composite Sulfide 31.68% 0.98% 30.7% 0.03 3.88%     56.19                  
2011 Aug Core composite Mixed 31.25% 13.2% 18.1% 0.42 2.38%     26.5   75.00%   50.00% 75.00%   50.00%   Projected flotation only
2014 Feb San Jorge Sulfide 7.63% 0.41% 7.22% 0.05 0.65%       62%-44 mm 60.00% 50.00%   90.10% 83.50% 55.00%    
2014 Feb Karen Milagros Sulfide 5.70% 0.00% 5.7% 0.00 1.12%       80%-44 mm 72.00% 50.00%   80.00%   49.00%    

Source: SRK, 2017

 

 

 81 

 

 

Based on the characteristics of the samples tested, SRK is of the opinion that Florida Canyon is best classified as a polymetallic deposit of mixed rock types. It is defined as a polymetallic deposit because all tested samples have varying levels of Zn, Pb, and Ag with good potential of producing a commercial quality zinc concentrate, and lead concentrate. It is defined as mixed rock, because all tested samples